Furniture Brands International (FBN) announced today its financial results for the first quarter of 2003.

Net sales for the first quarter of 2003 were $613.8 million, compared with $634.4 million in the first quarter of 2002, a decrease of 3.2%. Net earnings for the first quarter were $29.0 million as compared to $32.8 million in the first quarter of last year, a decrease of 11.4%. Diluted net earnings per common share for the first quarter were $0.52 as compared to $0.58 in the first quarter of last year, a decrease of 10.3%. The company's previous guidance had been in the $0.50 to $0.55 range for the quarter.

W.G. (Mickey) Holliman
Chairman, President and Chief Executive Officer
"As expected, business conditions in the first quarter of 2003 continued to be challenging. The soft business environment was exacerbated by the adverse weather conditions that negatively affected both manufacturing and retailing efforts. Once again, the performance of our Broyhill and Lane operations in the middle-price point category exceeded those of our high-end companies, Thomasville, Henredon, Drexel Heritage and Maitland-Smith."

Mr. Holliman added, "Our cost of operations in the first quarter was down 80 basis points, reflecting the beneficial results of our cost control efforts and the positive impact of our sourcing programs. However, our operating expenses were up about 120 basis points in the same quarter. A large portion of this increase was the result of higher pension expense of $2.0 million in the quarter, arising out of the change in certain defined benefit plan pension assumptions year-over-year. We expect to see a similar increase in each quarter for the remainder of the year.

"We remain an industry leader in offshore sourcing," Mr. Holliman continued, "with an increasing percentage of our sales being represented by imported products. Because of recent concerns about SARS, we have postponed any travel to the Far East by our operating company personnel. Nevertheless, our quality control infrastructure based in the Far East, Furniture Brands Import Services Organization, gives us a distinct competitive advantage over those manufacturers and retailers who import products without a similar ability to exercise adequate quality control oversight."

Outlook

Mr. Holliman continued, "Our planning for this year was conservative, but we still had some growth built into the second half. Based on incoming order trends and discussions with our retail partners, we see no signs of improvement yet in the current business climate for the near term. We heard spotty reports of good business in certain areas in March, and we had generally favorable reports from all of our companies at the April International Home Furnishings Market in High Point, North Carolina. However, order patterns throughout April to date do not support a conclusion that a positive trend is developing.

"We have revisited our full year guidance and have elected to remove the sales growth assumptions for the balance of the year. Our new full-year earnings per share guidance of $2.00 to $2.05 (which also contemplates $0.47 to $0.50 for the second quarter) assumes flat year-over-year sales in the last two quarters of the year. Our hope is that business conditions will improve and we will be in a position to move that guidance up as appropriate. We consider our new full-year guidance to be conservative but still realistic. As always, we will be honest with our investors and will tell them if and when we see positive changes that would justify upward revision. We will update this guidance, as is our usual custom, in early June."