Furniture Brands International Inc. (FBN, Financial) filed Quarterly Report for the period ended 2010-03-31.
Furniture Brands International Inc. has a market cap of $385.9 million; its shares were traded at around $7.96 with and P/S ratio of 0.3. FBN is in the portfolios of Chuck Royce of Royce& Associates, Jim Simons of Renaissance Technologies LLC.
Cash and cash equivalents at March 31, 2010 totaled $60.5 million, compared to $83.9 million at December 31, 2009. Net cash used in operating activities totaled $0.7 million in the three months ended March 31, 2010 compared with $9.3 million in the three months ended March 31, 2009. Increased earnings from operations and lower payments of long-term incentive compensation contributed increased cash flow from operations in the three months ended March 31, 2010 as compared to the three months ended March 31, 2009, partially offset by lower cash generated from working capital. Net cash used in investing activities for the three months ended March 31, 2010 totaled $5.6 million compared with $4.2 million in the three months ended March 31, 2009. The increase in cash used in investing activities is primarily the result of greater additions to purchased software, partially offset by fewer additions to property, plant, and equipment. Net cash used in financing activities totaled $17.0 million in the three months ended March 31, 2010 compared with $45.0 million in the three months ended March 31, 2009. Net cash used in financing activities in both periods consisted of payment of long-term debt.
At March 31, 2010, we had $60.5 million of cash and cash equivalents, $78.0 million of debt outstanding, and excess availability to borrow up to an additional $20.5 million subject to certain provisions, including those provisions described in Financing Arrangements below. The breach of any of these provisions could result in a default under the ABL and could trigger acceleration of repayment, which could have a significant adverse impact on our liquidity and our business. While we expect to comply with the provisions of the agreement throughout 2010, deterioration in the economy and our results could cause us to not be in compliance with our ABL agreement. While we would attempt to obtain waivers for noncompliance, we may not be able to obtain waivers, which could have a significant adverse impact to our liquidity and our business.
As described in Financing Arrangements below, we obtained a waiver from our requirement to provide a representation concerning our pension underfunded status to the financial institutions from which we obtained the ABL. Absent this waiver, we would not have been able to satisfy this requirement at March 31, 2010. The waiver expires upon the earlier of January 1, 2011 or such date that the pension relief, under the Worker, Retiree, and Employer Recovery Act of 2008, signed into law on December 23, 2008, ceases to be applicable to our plan. Because the waiver expires within a period less than one year from the balance sheet date and as the debt will become callable at the discretion of the financial institutions if this covenant is not satisfied in January 2011, we have reclassified all amounts outstanding under the ABL to current maturities as of March 31, 2010. The classification of our outstanding debt will likely remain current until the pension underfunded status, which was $115.5 million at December 31, 2009, is reduced to an amount less than $50.0 million; the waiver is extended to a period greater than one year from the balance sheet date; the terms of the ABL are modified to remove the representation requirement; or the outstanding debt of $78.0 million is repaid. Our future pension underfunded status may change significantly and is dependent on several factors including contributions to the plan, which may be in the form of cash, company common stock, or a combination of both; changes in bond yields and the resulting effect on the discount rate used to measure the pension obligation; and changes in the market value of plan assets. For example, at our December 31, 2009 measurement date, we used a discount rate of 6% to measure the projected benefit obligation. If we had used a discount rate of 6.25% or 5.75%, the projected benefit obligation and underfunded status of our pension plan would have decreased or increased by approximately $13.3 million, respectively. For additional information regarding the waiver and the classification of our long-term debt, see Financing Arrangements below. For information regarding the funded status of our pension plan and required future contributions, see Funded Status of Qualified Defined Benefit Pension Plan below.
The excess of the borrowing base over the current level of letters of credit and cash borrowings outstanding represents the additional borrowing availability under the ABL. Certain covenants and restrictions, including cash dominion, weekly borrowing base reporting, and a fixed charge coverage ratio, would become effective if excess availability fell below various thresholds. If we fall below $75.0 million of availability, we are subject to cash dominion and weekly borrowing base reporting. If we fall below $62.5 million of availability, we are also subject to the fixed charge coverage ratio, which we currently do not meet. As of March 31, 2010, excess availability was $83.0 million. Therefore, we have $8.0 million of availability without being subject to the cash dominion and weekly reporting covenants of the agreement and $20.5 million of availability before we would be subject to the fixed charge coverage ratio.
At the December 31, 2009 measurement date, the underfunded status of our qualified pension plan was $115.5 million, which exceeds the $50.0 million threshold by $65.5 million. We considered the underfunded status of our qualified pension plan in determining the classification of amounts outstanding under the ABL. Because the waiver from our requirement to produce the representation regarding our pension underfunded status now expires within a period less than one year from the balance sheet date and as the debt will become callable at the discretion of the financial institutions if this covenant is not satisfied in January 2011, we have reclassified all amounts outstanding under the ABL to current maturities as of March 31, 2010. The classification of our outstanding debt will likely remain current until the pension underfunded status, which was $115.5 million at December 31, 2009, is reduced to an amount less than $50.0 million; the waiver is extended
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Furniture Brands International Inc. has a market cap of $385.9 million; its shares were traded at around $7.96 with and P/S ratio of 0.3. FBN is in the portfolios of Chuck Royce of Royce& Associates, Jim Simons of Renaissance Technologies LLC.
Highlight of Business Operations:
Net sales for the three months ended March 31, 2010 were $322.4 million compared to $356.9 million in the three months ended March 31, 2009, a decrease of $34.5 million, or 9.7%. The decrease in net sales was primarily the result of continued weak retail conditions and decisions to abandon unprofitable products, customers, and programs, resulting in lower sales volume, and was partially offset by lower price discounts.Cash and cash equivalents at March 31, 2010 totaled $60.5 million, compared to $83.9 million at December 31, 2009. Net cash used in operating activities totaled $0.7 million in the three months ended March 31, 2010 compared with $9.3 million in the three months ended March 31, 2009. Increased earnings from operations and lower payments of long-term incentive compensation contributed increased cash flow from operations in the three months ended March 31, 2010 as compared to the three months ended March 31, 2009, partially offset by lower cash generated from working capital. Net cash used in investing activities for the three months ended March 31, 2010 totaled $5.6 million compared with $4.2 million in the three months ended March 31, 2009. The increase in cash used in investing activities is primarily the result of greater additions to purchased software, partially offset by fewer additions to property, plant, and equipment. Net cash used in financing activities totaled $17.0 million in the three months ended March 31, 2010 compared with $45.0 million in the three months ended March 31, 2009. Net cash used in financing activities in both periods consisted of payment of long-term debt.
At March 31, 2010, we had $60.5 million of cash and cash equivalents, $78.0 million of debt outstanding, and excess availability to borrow up to an additional $20.5 million subject to certain provisions, including those provisions described in Financing Arrangements below. The breach of any of these provisions could result in a default under the ABL and could trigger acceleration of repayment, which could have a significant adverse impact on our liquidity and our business. While we expect to comply with the provisions of the agreement throughout 2010, deterioration in the economy and our results could cause us to not be in compliance with our ABL agreement. While we would attempt to obtain waivers for noncompliance, we may not be able to obtain waivers, which could have a significant adverse impact to our liquidity and our business.
As described in Financing Arrangements below, we obtained a waiver from our requirement to provide a representation concerning our pension underfunded status to the financial institutions from which we obtained the ABL. Absent this waiver, we would not have been able to satisfy this requirement at March 31, 2010. The waiver expires upon the earlier of January 1, 2011 or such date that the pension relief, under the Worker, Retiree, and Employer Recovery Act of 2008, signed into law on December 23, 2008, ceases to be applicable to our plan. Because the waiver expires within a period less than one year from the balance sheet date and as the debt will become callable at the discretion of the financial institutions if this covenant is not satisfied in January 2011, we have reclassified all amounts outstanding under the ABL to current maturities as of March 31, 2010. The classification of our outstanding debt will likely remain current until the pension underfunded status, which was $115.5 million at December 31, 2009, is reduced to an amount less than $50.0 million; the waiver is extended to a period greater than one year from the balance sheet date; the terms of the ABL are modified to remove the representation requirement; or the outstanding debt of $78.0 million is repaid. Our future pension underfunded status may change significantly and is dependent on several factors including contributions to the plan, which may be in the form of cash, company common stock, or a combination of both; changes in bond yields and the resulting effect on the discount rate used to measure the pension obligation; and changes in the market value of plan assets. For example, at our December 31, 2009 measurement date, we used a discount rate of 6% to measure the projected benefit obligation. If we had used a discount rate of 6.25% or 5.75%, the projected benefit obligation and underfunded status of our pension plan would have decreased or increased by approximately $13.3 million, respectively. For additional information regarding the waiver and the classification of our long-term debt, see Financing Arrangements below. For information regarding the funded status of our pension plan and required future contributions, see Funded Status of Qualified Defined Benefit Pension Plan below.
The excess of the borrowing base over the current level of letters of credit and cash borrowings outstanding represents the additional borrowing availability under the ABL. Certain covenants and restrictions, including cash dominion, weekly borrowing base reporting, and a fixed charge coverage ratio, would become effective if excess availability fell below various thresholds. If we fall below $75.0 million of availability, we are subject to cash dominion and weekly borrowing base reporting. If we fall below $62.5 million of availability, we are also subject to the fixed charge coverage ratio, which we currently do not meet. As of March 31, 2010, excess availability was $83.0 million. Therefore, we have $8.0 million of availability without being subject to the cash dominion and weekly reporting covenants of the agreement and $20.5 million of availability before we would be subject to the fixed charge coverage ratio.
At the December 31, 2009 measurement date, the underfunded status of our qualified pension plan was $115.5 million, which exceeds the $50.0 million threshold by $65.5 million. We considered the underfunded status of our qualified pension plan in determining the classification of amounts outstanding under the ABL. Because the waiver from our requirement to produce the representation regarding our pension underfunded status now expires within a period less than one year from the balance sheet date and as the debt will become callable at the discretion of the financial institutions if this covenant is not satisfied in January 2011, we have reclassified all amounts outstanding under the ABL to current maturities as of March 31, 2010. The classification of our outstanding debt will likely remain current until the pension underfunded status, which was $115.5 million at December 31, 2009, is reduced to an amount less than $50.0 million; the waiver is extended
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