10-K

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

(Mark one)
ý	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2007
or
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                                to

Commission file number 001-00091

Furniture Brands International, Inc.
(Exact Name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)	43-0337683 (I.R.S. Employer Identification No.)
101 South Hanley Road, St. Louis, Missouri (Address of principal executive offices)	63105 (Zip Code)

Registrant's telephone number, including area code (314) 863-1100

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

Title of each class	Name of each exchange on which registered
Common Stock—$1.00 Stated Value with Preferred Stock Purchase Rights	New York Stock Exchange

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

None
(Title of Class)

         Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ý Yes    o No

         Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. o    Yes    ý No

         Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ý Yes    o No

         Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý

         Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer ý Accelerated Filer o Non-Accelerated Filer o
(Do not check if a smaller reporting company) Smaller reporting company o

         Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act.). o Yes    ý No

         The aggregate market value of the voting stock held by non-affiliates of the registrant as of June 30, 2007, the last business day of the registrant's most recently completed second fiscal quarter, was approximately $682,535,000.

         Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date.

48,498,171 shares as of January 31, 2008

DOCUMENTS INCORPORATED BY REFERENCE

Portions of Definitive Proxy Statement for Annual Meeting of Stockholders to be held on May 1, 2008 Part III

PART I

Item 1.    Business

BRANDS AND PRODUCTS

        Furniture Brands is a vertically integrated operating company that is one of the nation's leading designers, manufacturers, sourcers, and retailers of home furnishings. We market through a wide range of retail channels, from mass merchant stores to single-branded and independent dealers to specialized interior designers. We serve customers through some of the best known and most respected brands in the furniture industry, including Broyhill, Lane, Thomasville, Drexel Heritage, Henredon, Pearson, Hickory Chair, Laneventure, and Maitland-Smith (the "Brands").

        Through these Brands, we design, manufacture, source, market and distribute (i) case goods, consisting of bedroom, dining room and living room furniture, (ii) stationary upholstery products, consisting of sofas, loveseats, sectionals and chairs, (iii) occasional furniture, consisting of wood, metal and glass tables, accent pieces, home entertainment centers and home office furniture, (iv) recliners, motion furniture and sleep sofas, and (v) decorative accessories and accent pieces. Our Brands are featured in nearly every price and product category in the residential furniture industry.

        Each Brand designs, manufactures, sources and markets home furnishings, targeting a specific segment of the market in terms of style and price point.

•

Broyhill has collections of mid-priced furniture, including both wood furniture and upholstered products, in a wide range of styles.



•

Lane focuses primarily on mid-priced upholstered furniture, reclining chairs, motion furniture, and stationary upholstered furniture and mid-priced wood furniture.



•

Laneventure markets a premium-priced indoor/outdoor line of wicker, rattan, bamboo, exposed aluminum and teak furniture.



•

Thomasville has both wood furniture and upholstered products in the mid- to upper-price ranges. Thomasville's Virginia Operations division manufactures and markets promotional-priced case goods and RTA (ready-to-assemble) furniture.



•

Henredon specializes in both wood furniture and upholstered products in the premium-price category.



•

Drexel Heritage has a "tri-branding" strategy, marketing both case goods and upholstered furniture under the three distinct brands of Heritage, Drexel and dh, in categories ranging from mid- to premium-priced.



•

Maitland-Smith designs and manufactures premium hand crafted, antique-inspired furniture, accessories and lighting, utilizing a wide range of unique materials. Maitland-Smith markets under both the Maitland-Smith and LaBarge brand names.



•

Hickory Chair manufactures a premium-priced brand of wood and upholstered furniture, offering traditional and modern styles.



•

Pearson offers contemporary and traditional styles of finely tailored upholstered furniture in the premium-price category.

        On October 16, 2007, we announced our intent to divest Hickory Business Furniture (HBF), a wholly-owned subsidiary that designs and manufactures business furniture in the mid- to upper-price range. We believe this transaction will be completed by the end of the first quarter of 2008; therefore, this business unit is reflected as a discontinued operation.

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DISTRIBUTION

        Our breadth of product and national scope of distribution enable us to service retailers ranging in size from small, independently-owned furniture stores to national and regional department stores and chains. The residential furniture retail industry has consolidated in recent years, displacing many small local and regional furniture retailers with larger chains and specialty stores. This consolidation has made access to distribution channels more difficult, and we believe our relative size and the strength of our brand names offers us an important competitive advantage.

        We have a three-tiered approach to our distribution efforts. Our primary avenue of distribution continues to be through a diverse network of independently owned, full-line furniture retailers. Although a number of these retailers have been displaced in recent years, this network remains an important part of our distribution base.

        At the same time, as the second element of our distribution strategy, we have developed dedicated distribution channels by expanding our gallery programs. In this approach, retailers employ a consistent concept where products are displayed in complete and fully accessorized room settings instead of as individual pieces. This presentation format encourages consumers to purchase an entire room of furniture instead of individual pieces from different manufacturers. Each of our Brands offer services to retailers to support their marketing efforts, including coordinated national advertising, merchandising and display programs and dealer training.

        Lastly, we have further developed our dedicated distribution channel of single-brand retail stores, such as Thomasville Home Furnishings Stores and Drexel Heritage Home Inspiration Stores, and, to a lesser extent, Henredon Stores. These stores are primarily dealer-owned retail locations that exclusively feature a single brand. We believe distributing our products through dedicated, single-brand stores strengthens brand awareness, provides well-informed and focused sales personnel and encourages the purchase of multiple items per visit. While most of these stores are independently-owned, as of the end of 2007 we owned and operated 28 of these single-brand stores and 6 designer showrooms. We believe this ownership brings us closer to the consumer, gives us greater line of sight into developing tastes and trends in the marketplace, and helps us better understand the challenges facing the independent retailers with whom we do the majority of our business.

        Our strategy of targeting these diverse distribution channels is supported by dedicated sales forces covering each of these distribution channels. We also continue to explore opportunities to expand international sales and to distribute through non-traditional channels such as wholesale clubs, catalog retailers, and the Internet.

        Trade showrooms are located in Thomasville and High Point, North Carolina; Chicago, Illinois; Las Vegas, Nevada; and Tupelo, Mississippi.

MANUFACTURING AND SOURCING

        There has been a significant change in recent years in the manner by which we bring products to market. Where we have traditionally been a domestic furniture manufacturer, we have shifted to a blended strategy, mixing domestic production with products sourced from offshore.

        We operate 21 case goods, upholstery and component manufacturing facilities, located in North Carolina, Mississippi, Virginia, the Philippines and Indonesia totaling approximately 8.0 million square feet. (See Item 2—Properties for a listing of our principal facilities.)

        An increasing percentage of our products are being sourced from manufacturers located offshore, primarily in China, the Philippines, Indonesia, and Vietnam. We design and engineer these products, and then have them manufactured to our specifications by independent offshore manufacturers. We have informal strategic relationships with several of the larger foreign manufacturers whereby we have

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the ability to purchase, on a coordinated basis, a significant portion of the foreign manufacturers' capacity, subject to quality control and delivery standards. Two of these manufacturers represented 20% and 17% of imported product during 2007 and four other manufacturers represented in excess of 5% each.

        We have an agreement with an independently-owned company that provides sourcing assistance, product quality control and other import-related services for us in Asia. This agreement has been terminated, effective June 30, 2008, at which time these functions will be assumed internally.

RAW MATERIALS AND SUPPLIERS

        The raw materials used in manufacturing our products include lumber, veneers, plywood, fiberboard, particleboard, steel, paper, hardware, adhesives, finishing materials, glass, mirrored glass, fabrics, leathers, metals, stone, synthetics and upholstered filling material (such as synthetic fibers, foam padding and polyurethane cushioning). The various types of wood used in our products include cherry, oak, maple, pine, pecan, mahogany, alder, ash, poplar, and teak which are purchased both domestically and abroad. We purchase fabrics, leathers and other raw materials both domestically and abroad. We believe our supply sources for these materials are adequate.

        We have no long-term supply contracts and we have experienced no significant problems in supplying our operations. Although we have strategically selected our suppliers of raw materials, we believe there are a number of other sources available, contributing to our ability to obtain competitive pricing. Prices fluctuate over time depending upon factors such as supply, demand and weather. Increases in prices may have a short-term impact on our profit margins.

        We purchase the majority of raw materials for promotional and RTA products domestically, although we purchase paper and certain hardware abroad. We believe our proximity to and relationship with suppliers is advantageous for the sourcing of such materials. In addition, by consolidating our purchasing of various raw materials (such as foam, cartons, springs and fabric) and services, we have been able to realize cost savings.

MARKETING AND ADVERTISING

        We use advertising to increase consumer awareness of our brand names and motivate purchases of our products. Our advertising is targeted to specific consumer segments through national and regional television as well as leading shelter and other popular magazines such as Better Homes and Gardens, House Beautiful and Architectural Digest. Each of our Brands uses focused advertising in major markets to create buying urgency around specific sale events and to provide dealer location information, enabling retailers to be listed jointly in advertisements for maximum advertising efficiency and shared costs. Each of our Brands seeks to increase consumer buying and strengthen relationships with retailers through cooperative advertising and selective promotional programs, and focuses its marketing efforts on prime potential customers utilizing information from databases and from callers to each Brand's toll-free telephone number. Each of our Brands maintains consumer websites to promote their products and drive consumers to retail stores.

USES OF CASH

        Our preferred use of free cash is reinvestment in the business. In recent years, as free cash has exceeded the needs of funding the business, we have made dividend payments, repaid debt and repurchased our Common Stock. Going forward we expect to continue to pay dividends and will consider debt repayments and the repurchase of our Common Stock as authorized and as free cash is available. Our revolving credit facility contains restrictions on dividend payments and common stock repurchases if the excess availability falls below certain thresholds.

4

MANAGEMENT AND EMPLOYEES

        As of December 31, 2007, we employed approximately 11,900 full-time employees. None of our employees is represented by a union.

        During the past three years, we made a number of changes to our senior management team, attracting talent from outside the furniture industry to further strengthen our organization, to introduce new ideas, new cultures and new attitudes, and to help us both reflect and understand our consumer base. We are also establishing a more comprehensive management development program within the Company to help develop our future leaders.

        Through regular interaction, sharing of best practices, and cooperative efforts to reduce costs and drive value, our senior leadership team across all of our Brands operates as a single unit. Our goal is to gain the full leverage of our size, while at the same time retaining the entrepreneurial spirit vital to the success of our Brands.

ENVIRONMENTAL MATTERS

        We are subject to a wide range of federal, state and local laws and regulations relating to protection of the environment, worker health and safety and the emission, discharge, storage, treatment and disposal of hazardous materials. These laws include the Clean Air Act of 1970, as amended, the Resource Conservation and Recovery Act, the Federal Water Pollution Control Act and the Comprehensive Environmental, Response, Compensation and Liability Act ("Superfund"). Certain of our operations use glues and coating materials that contain chemicals that are considered hazardous under various environmental laws. Accordingly, we closely monitor environmental performance at all of our facilities. We believe we are in substantial compliance with all environmental laws. In our opinion, our ultimate liability, if any, under all such laws is not reasonably likely to have a material adverse effect upon our consolidated financial position or results of operations other than potential exposures with respect to which monitoring or cleanup requirements may change over time.

COMPETITION

        The residential furniture industry is highly competitive. Our products compete against domestic manufacturers, importers and foreign manufacturers entering the United States market; as well as increased direct importing by some larger retailers. Our competitors include: Ashley Furniture Industries, Inc.; La-Z-Boy Incorporated; Ethan Allen Interiors Inc. and many other home furnishings retailers and manufacturers. The elements of competition include price, style, quality, service and marketing.

BACKLOG

        The combined backlog of our operating companies as of December 31, 2007 was approximately $236 million compared to approximately $248 million as of December 31, 2006. Backlog consists of orders believed to be firm for which a customer purchase order has been received. Since orders may be rescheduled or canceled, backlog does not necessarily reflect future sales levels.

TRADEMARKS AND TRADE NAMES

        We utilize trademarks and trade names extensively to promote brand loyalty among consumers. We view such trademarks and trade names as valuable assets and we aggressively protect our trademarks and trade names by taking appropriate legal action against anyone who infringes upon or misuses them.

        Our principle trademarks and trade names are: Broyhill, Lane, Laneventure, Thomasville, Henredon, Drexel Heritage, Maitland-Smith, Hickory Chair, Pearson, HBF, Vignettes, and Creative Interiors.

5

WORKING CAPITAL

        For information regarding working capital items, see the description of "Financial Condition and Liquidity—Liquidity" in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, on Page 14.

INTERNET ACCESS

        Forms 10-K, 10-Q, 8-K and all amendments to those reports are available without charge through our website as soon as reasonably practicable after being electronically filed with, or furnished to, the Securities and Exchange Commission. Our website can be accessed at www.furniturebrands.com. Information on our website does not constitute part of this Annual Report on Form 10-K.

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Item 1A.    Risk Factors

        Our operating results are subject to quarterly and annual fluctuations as a result of a number of factors. Such factors are set forth below. We may amend or supplement these risk factors from time to time in other reports we file with the Securities and Exchange Commission in the future.

An economic downturn could result in a decrease in our sales and earnings.

        The residential furniture industry is subject to cyclical variations in the general economy and to uncertainty regarding future economic prospects. Economic downturns could affect consumer spending habits by decreasing the overall demand for home furnishings. Such events would also impact retailers, our primary customers, resulting in a decrease in our sales and earnings.

Loss of market share due to competition would result in a decrease in our future sales and earnings.

        The residential furniture industry is highly competitive and fragmented. We compete with many other manufacturers and retailers some of which offer widely-advertised, well-known, branded products, and large retail furniture dealers who offer their own store-branded products. The highly competitive nature of the industry means we are constantly subject to the risk of losing market share. As a result, we may not be able to maintain or to raise the prices of our products in response to such inflationary pressures as increasing costs. Also due to the large number of competitors and their wide range of product offerings, we may not be able to differentiate our products (through styling, finish and other construction techniques) from those of our competitors. Large retail furniture dealers have the ability to obtain offshore sourcing on their own.

Failure to forecast demand or respond to changes in consumer tastes and fashion trends in a timely manner could result in a decrease in our future sales and earnings.

        Residential furniture is a highly styled product subject to fashion trends and geographic consumer tastes. Consumer tastes and fashion trends can change rapidly. If we are unable to anticipate or respond to changes in consumer tastes and fashion trends in a timely manner or to otherwise forecast demand accurately, we may lose sales and face excess inventory (both raw materials and finished goods). Disposal of excess inventory may result in a decrease in sales and earnings.

Failure to achieve our projected mix of product sales could result in a decrease in our future sales and earnings.

        Some of our products are sold for a higher profit than other of our products. An increase in the sales of our lower profit products at the expense of the sales of our higher profit products could result in a decrease in our earnings.

Business failures of large dealers and customers could result in a decrease in our future sales and earnings.

        Although we have no customers who individually represent 10% or more of our total annual sales, the possibility of business failures of large customers could result in a decrease in our future sales and earnings. Also, we are either lessee on or guarantor of many leases of Company-brand stores operated by independent furniture dealers. Defaults by any of these dealers would result in our becoming responsible for payments under these leases and could reduce our future earnings.

Distribution realignments and cost savings programs can result in a decrease in our near-term sales and earnings.

        At times it is necessary that we discontinue certain relationships with customers (retailers) who do not meet our growth and profitability standards. Until realignment is established, there can be a

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decrease in near-term sales and earnings. We continually review relationships with our customers (retailers) and future realignments are possible based upon such ongoing reviews.

Manufacturing realignments could result in a decrease in our near-term earnings.

        We continually review our domestic manufacturing operations and offshore (import) sourcing capabilities. Effects of periodic manufacturing realignments and cost savings programs could result in a decrease in our near-term earnings until the expected cost reductions are achieved. Such programs can include the consolidation and integration of facilities, functions, systems and procedures. Certain products may also be shifted from domestic manufacturing to offshore sourcing. Such actions may not be accomplished as quickly as anticipated and the expected cost reductions may not be achieved in full.

Increased reliance on offshore sourcing of our products subject us to changes in local government regulations and currency fluctuations which could result in a decrease in our earnings.

        During recent years, we have been increasing our offshore capabilities to provide flexibility in product programs and pricing to meet competitive pressures. The mix of product lines has been moving from domestically manufactured to offshore sourced. Risks include changes in local government regulations and policies, including those related to tariffs and trade barriers, investments, taxation, exchange controls and repatriation of earnings. Changes in the relative values of currencies could increase our costs and decrease our earnings.

Our operations depend increasingly on production facilities located outside the United States which are subject to increased risks of disrupted production which could cause delays in shipments, loss of customers and decreases in sales and earnings.

        We have placed more production in emerging markets to capitalize on market opportunities and to minimize our costs. Our international production operations could be disrupted by a natural disaster, labor strike, war, political unrest, terrorist activity or public health concerns, particularly in emerging countries that are not well-equipped to handle such occurrences. Our production abroad may also be more susceptible to changes in laws and policies in host countries and economic and political upheaval than our domestic production. Any such disruption could cause delays in shipments of products, the loss of customers and decreases in sales and earnings.

Fluctuations in the price, availability and quality of raw materials could cause delay which could result in a decrease in our sales and increase costs which would result in a decrease in our earnings.

        Fluctuations in the price, availability and quality of the raw materials we use in manufacturing residential furniture could have a negative effect on our cost of sales and ability to meet the demands of our customers (retailers). Inability to meet the demands of our customers could result in the loss of future sales. We use various types of wood, fabrics, leathers, glass, upholstered filling material, steel, and other raw materials in manufacturing furniture. The costs to manufacture furniture depend in part on the market prices of the raw materials used to produce the furniture. We may not be able to pass along to our customers all or a portion of the costs of higher raw materials due to competitive and marketing pressures.

We are subject to litigation and environmental regulations that could adversely impact our sales and earnings.

        We are, and may in the future be, a party to legal proceedings and claims, including those involving product liability and environmental matters, some of which claim significant damages. We face the business risk of exposure to product liability claims in the event that the use of any of our products results in personal injury or property damage. In the event any of our products prove to be defective,

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we may be required to recall or redesign such products. We maintain insurance against product liability claims, but there can be no assurance such coverage will continue to be available on terms acceptable to us or such coverage will be adequate for liabilities actually incurred. We also are, and may in the future be, a party to legal proceedings and claims arising out of certain dealer terminations as we continue to re-examine and realign our retail distribution strategy. Given the inherent uncertainty of litigation, we can offer no assurance future litigation will not have a material adverse impact. We are also subject to various laws and regulations relating to environmental protection and the discharge of materials into the environment and we could incur substantial costs as a result of the noncompliance with or liability for cleanup or other costs or damages under environmental laws.

Future acquisitions and investments could result in dilution to our earnings per share and a decrease in the valuation of our Common Stock.

        As part of our business strategy, we may make acquisitions and investments in businesses that offer complementary products. Risks commonly encountered in acquisitions include the possibility that we pay more than the acquired company or assets are worth, the difficulty of assimilating the operations and personnel of the acquired business, the potential disruption of our ongoing business and the distraction of our management from ongoing business. Consideration paid for future acquisitions could be in the form of cash or stock or a combination thereof. Dilution to existing stockholders and to earnings per share may result in connection with any such future acquisition.

Impairment of long-lived assets, goodwill and intangibles would result in a decrease in our earnings.

        Accounting rules require that long-lived assets, goodwill and intangible assets be evaluated for impairment at least annually. We have substantial long-lived assets, goodwill and trademarks, which based upon the outcome of such evaluations has resulted and could in the future result in the write-down of all or a portion of these assets and a corresponding reduction in our earnings and net worth.

Certain anti-takeover provisions and preferred stock issuances could result in a decrease in a potential acquirer's valuation of our Common Stock.

        Certain provisions of our Certificate of Incorporation could make it more difficult for a third party to acquire control of us, even if such change in control would be beneficial to our stockholders. Also, our Certificate of Incorporation allows us to issue preferred stock without stockholder approval. Such issuances could also make it more difficult for a third party to acquire us. In addition, we have a shareholders' rights plan which could make it more difficult for a third party to acquire us.

Our growth strategy includes the development of new stores each year. If we and our dealers are not able to open new stores or effectively manage the growth of these stores, our ability to grow and our profitability could be adversely affected.

        Our growth in part depends on our ability and the ability of our dealers to open and operate new stores successfully. We have in the past and will likely continue to purchase or otherwise assume operation of Company-brand stores from independent dealers. Our ability and the ability of our dealers to identify and open new stores in desirable locations and operate such stores profitably is a factor in our ability to grow successfully. Increased demands on our operational, managerial and administrative resources could cause us to operate our business less effectively, which in turn could cause deterioration in our profitability.

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Loss of funding sources would adversely impact our business.

        Access to funding through the financial markets is important to our business operations and if we are unable to maintain such access we could experience an adverse effect on our business and financial results. Failure to maintain satisfactory financial performance could adversely affect our access to the financial markets or increase our financing costs. See discussion of financial covenants included in Financing Arrangements section of Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations on page 16.

Reduced trade credit terms could impact our cash flow.

        Part of our short term funding is from vendors who extend us payment terms. If industry fundamentals or practices cause a shortening or elimination of these terms the upfront need for cash would reduce our cash position.

Item 1B.    Unresolved Staff Comments

        None.

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Item 2.    Properties

        We own or lease the following principal plants, offices and distribution centers:

Location	Type of Facility	Floor Space (Sq. ft.)	Owned or Leased
St. Louis, MO	Headquarters	32,978	Leased
Lenoir, NC	Offices	136,000	Owned
Lenoir, NC	Upholstery plant/distribution center	262,878	Owned
Taylorsville, NC	Upholstery plant/distribution center	212,754	Owned
Rutherfordton, NC	Distribution center	1,009,253	Owned
Lenoir, NC	Distribution center	502,420	Leased
Lenoir, NC	Distribution center	205,964	Leased
Rialto, CA	Distribution center	703,176	Leased
Tupelo, MS	Offices/upholstery plant/distribution center	715,951	Owned
Saltillo, MS	Upholstery plant/distribution center	830,200	Owned
Verona, MS	Upholstery plant/distribution center	423,392	Owned
Pontotoc, MS	Upholstery plant/distribution center	358,652	Owned
Wren, MS	Distribution center	494,813	Leased
High Point, NC	Component plant	187,162	Owned
Conover, NC	Upholstery plant	351,015	Owned
Conover, NC	Upholstery plant/distribution center	347,500	Owned
Thomasville, NC	Offices/showroom	256,000	Owned
Thomasville, NC	Case goods plant	325,000	Owned
Lenoir, NC	Case goods plant/distribution center	828,000	Owned
Conover, NC	Upholstery plant	123,200	Owned
Hickory, NC	Upholstery plant/distribution center	209,800	Leased
Thomasville, NC	Distribution center	731,000	Owned
Appomattox, VA	Case goods plant/distribution center	829,800	Owned
High Point, NC	Offices/showroom	100,000	Owned
High Point, NC	Upholstery plant	280,650	Owned
Morganton, NC	Distribution center	513,800	Owned
Longview, NC	Upholstery plant	260,060	Leased
Mt. Airy, NC	Upholstery plant	102,500	Owned
Hickory, NC	Case goods plant/upholstery plant/distribution center	519,011	Owned
High Point, NC	Upholstery plant/distribution center	178,500	Owned
Marion, NC	Distribution center	400,000	Leased
High Point, NC	Offices/distribution center	220,000	Leased
Cebu, Philippines	Case goods plant	480,338	Owned
Semarang, Indonesia	Plant/distribution center	176,413	Leased

        The Tupelo, Mississippi facility is encumbered by a mortgage and first lien securing revenue bonds.

        We believe our properties are generally well-maintained, suitable for our present operations and adequate for current production requirements. Productive capacity and extent of utilization of our facilities are difficult to quantify with certainty because in any one facility maximum capacity and utilization varies periodically depending upon the product being manufactured, the degree of automation and the utilization of the labor force in the facility. In this context, we estimate the overall production capacity, in conjunction with our import capabilities, is sufficient to meet anticipated demand.

        In 2001 we began implementing a plan to reduce our domestic manufacturing capacity. As of December 31, 2007, this plan included the closing, consolidation or reconfiguration of 38 domestic

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manufacturing facilities. Restructuring activity included the closing of five domestic manufacturing facilities in 2007, the closing or the realignment of three domestic manufacturing facilities in 2006, the closing of eight manufacturing facilities in 2005.

Item 3.    Legal Proceedings

        We are or may become a defendant in a number of pending or threatened legal proceedings in the ordinary course of business. In our opinion, our ultimate liability, if any, from all such proceedings is not reasonably likely to have a material adverse effect upon our consolidated financial position or results of operations or those of our subsidiaries.

        We are also subject to regulation regarding environmental matters, and are a party to certain actions related thereto. For information regarding environmental matters, see "Item 1. Business—Environmental Matters."

Item 4.    Submission of Matters to a Vote of Security Holders

        Not applicable.

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PART II

Item 5.    Market For Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

(a)

Market Information

        Shares of our Common Stock are traded on the New York Stock Exchange. The reported high and low sale prices for our Common Stock on the New York Stock Exchange are included in Note 18 to the consolidated financial statements of the Company.

Holders

        As of January 31, 2008, there were approximately 1,400 holders of record of Common Stock.

Dividends

        We paid dividends at the rate of $0.16 per share per quarter during 2006 and 2007. On January 30, 2008 we declared a quarterly dividend of $0.04 per share to be paid on February 29, 2008.

        Our revolving credit facility contains restrictions on dividend payments if the excess availability falls below certain thresholds. Additional information concerning dividends may be found in the following sections of this Form 10-K, which are incorporated into this Item 5. by reference: "Consolidated Statement of Cash Flows," "Consolidated Statement of Shareholders' Equity and Comprehensive Income," and Note 19, "Quarterly Financial Information (Unaudited)" in Item 8. Financial Statements and Supplementary Data.

Equity Compensation Plan Information

        The following table sets forth aggregate information regarding the Company's equity compensation plans as of December 31, 2007:

Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted-average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
	(a)	(b)		(c)
Equity compensation plans approved by security holders(1)	3,460,484	$	23.25	985,391
Equity compensation plans not approved by security holders	—		—	—
Total	3,460,484	$	23.25	985,391

(1)

Includes the Company's 1992 Stock Option Plan and 1999 Long-Term Incentive Plan. Included in column (a) are 197,867 shares of restricted Common Stock that have been awarded and that vest over a period from 1 to 16 years. These shares of restricted Common Stock were disregarded for purposes of computing the weighted-average exercise price in column (b).

        Annually, the Board of Directors determines the amount of fees to be paid to non-employee Directors, including an award of restricted shares of Company Common Stock, as described under "Compensation of Board of Directors" in the 2008 Proxy Statement, hereby incorporated by reference. These shares are purchased in open-market transactions.

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        Annually, Lane Furniture Industries, Inc., a subsidiary of the Company, awards a limited number of shares of Company Common Stock to a few of its truck drivers as safety awards. 1,222 shares of the Company's Common Stock were issued as safety awards in 2007. These shares are purchased in open-market transactions.

        Information regarding the 1992 Stock Option Plan and 1999 Long-Term Incentive Plan set forth in Note 8 of Notes to Consolidated Financial Statements is hereby incorporated by reference.

(c)

Repurchase of Equity Securities

        On January 26, 2006 the Board of Directors authorized the repurchase of $50 million of Common Stock over the next 12 month period. On January 26, 2007 this authorization expired with no shares having been purchased.

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Item 6.    Selected Financial Data

FIVE-YEAR CONSOLIDATED FINANCIAL REVIEW

				Year Ended December 31,
(Dollars in thousands except per share data)
				2007			2006		2005		2004		2003
Summary of operations(1):
	Net sales			$	2,082,056		$	2,361,680	$	2,342,526	$	2,412,341	$	2,403,240
	Gross profit				416,095			507,875		523,088		566,707		554,222
	Interest expense				37,388			17,665		11,877		15,314		19,384
	Earnings (loss) from continuing operations before income tax expense				(80,478	)		72,699		86,804		139,708		147,370
	Income tax expense (benefit)				(29,261	)		22,784		28,781		49,983		53,935
	Net earnings (loss) from continuing operations				(51,217	)		49,915		58,023		89,725		93,435
	Net earnings from discontinued operations				5,568			5,140		3,413		1,841		1,138
	Net earnings (loss)			$	(45,649	)	$	55,055	$	61,436	$	91,567	$	94,573
	Per share of common stock:
		Net earning (loss)—diluted:
			Continuing operations	$	(1.06	)	$	1.02	$	1.11	$	1.62	$	1.66
			Discontinued operations		0.12		$	0.11	$	0.07		0.03		0.02
			Total	$	(0.94	)	$	1.13	$	1.18	$	1.66	$	1.68
		Dividends		$	0.64		$	0.64	$	0.60	$	0.525	$	0.125
Weighted average common shares—diluted (in thousands)					48,446			48,753		52,104		55,220		56,256
Other information(1):
	Working capital			$	712,455		$	752,618	$	718,183	$	711,115	$	703,233
	Property, plant and equipment, net				178,564			221,398		250,817		284,973		310,563
	Capital expenditures				14,374			24,713		28,541		30,593		41,451
	Total assets				1,463,078			1,558,203		1,582,224		1,587,759		1,578,259
	Long-term debt				280,000			300,800		301,600		302,400		303,200
	Shareholders' equity			$	844,766		$	910,715	$	903,952	$	957,483	$	966,902

(1)

Results of operations for all periods presented have been restated to reflect the classification of HBF as a discontinued operation. Other information data reflects HBF classified as a discontinued operation in the current year only.

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Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

Overview

        Furniture Brands is a vertically integrated operating company that is one of the nation's leading designers, manufacturers, sourcers, and retailers of home furnishings. We market through a wide range of retail channels, from mass merchant stores to single-branded and independent dealers to specialized interior designers. We serve customers through some of the best known and most respected brands in the furniture industry, including Broyhill, Lane, Thomasville, Drexel Heritage, Henredon, Pearson, Hickory Chair, Laneventure, and Maitland-Smith (the "Brands").

        Through these Brands, we design, manufacture, source, market and distribute (i) case goods, consisting of bedroom, dining room and living room furniture, (ii) stationary upholstery products, consisting of sofas, loveseats, sectionals and chairs, (iii) occasional furniture, consisting of wood, metal and glass tables, accent pieces, home entertainment centers and home office furniture, (iv) recliners, motion furniture and sleep sofas, and (v) decorative accessories and accent pieces. These Brand names cover nearly every price and product category in the residential furniture industry.

        Our breadth of product and national scope of distribution enable us to service retailers ranging in size from small, independently-owned furniture stores to national and regional department stores and chains. The residential furniture retail industry has consolidated in recent years, displacing many small local and regional furniture retailers with larger chains and specialty stores. This consolidation has made access to distribution channels more difficult, and we believe our relative size and the strength of our Brand names offer us an important competitive advantage.

        We have a three-tiered approach to our distribution efforts. Our primary avenue of distribution continues to be through a diverse network of independently owned, full-line furniture retailers. The second element of our retail approach is dedicated distribution channels in the form of gallery programs. In this approach retailers employ a concept where products are displayed in complete and fully accessorized room settings. This presentation format encourages consumers to purchase an entire room of furniture instead of individual pieces from different manufacturers. Lastly, we have further developed our dedicated distribution channels with an expanding network of single-brand retail stores. These stores are primarily dealer-owned retail locations that exclusively feature a single brand, such as Thomasville, Drexel Heritage or Henredon. We believe distributing our products through dedicated, single-brand stores strengthens brand awareness, provides well-informed and focused sales personnel and encourages the purchase of multiple items per visit.

        There has been a significant change in recent years in the manner by which we bring products to market. Where we have traditionally been a domestic furniture manufacturer, we have shifted to a blended strategy, mixing domestic production with products sourced from offshore.

        We have closed or announced the closing of 38 domestic case goods and upholstery manufacturing facilities since the start of 2001, though we still own and operate 21 such facilities, located in North Carolina, Mississippi, and Virginia.

        An increasing percentage of our products are being sourced from manufacturers located offshore, primarily in China, the Philippines, Indonesia, and Vietnam. We design and engineer these products, and then have them manufactured to our specifications by independent offshore manufacturers. We also own and operate 2 offshore manufacturing facilities located in the Philippines and Indonesia.

        On October 16, 2007 we announced our intent to divest Hickory Business Furniture (HBF) a wholly owned subsidiary that designs and manufactures business furniture in the mid- to upper-price range. We believe this transaction will be completed by the end of the first quarter of 2008; therefore this business unit is reflected as a discontinued operation.

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Results of Operations

        As an aid to understanding our results of operations on a comparative basis, the following table has been prepared to set forth certain statement of operations and other data for continuing operations for 2007, 2006, and 2005:

	Year Ended December 31,
	2007					2006				2005
(Dollars in millions)	Dollars			% of Net Sales		Dollars		% of Net Sales		Dollars		% of Net Sales
Net sales	$	2,082.1		100.0	%	$	2,361.7	100.0	%	$	2,342.5	100.0	%
Cost of sales		1,666.0		80.0			1,853.8	78.5			1,819.4	77.7
Gross Profit		416.1		20.0			507.9	21.5			523.1	22.3
Selling, general and administrative expenses		469.4		22.6			432.3	18.3			428.9	18.3
Earnings (loss) from operations		(53.3	)	(2.6	)		75.5	3.2			94.2	4.0
Interest expense		37.4		1.8			17.7	0.7			11.9	0.5
Other income, net		10.2		0.5			14.9	0.6			4.5	0.2
Earnings (loss) from continuing operations before income tax expense		(80.5	)	(3.9	)		72.7	3.1			86.8	3.7
Income tax expense (benefit)		(29.3	)	(1.4	)		22.8	1.0			28.8	1.2
Net earnings (loss) from continuing operations	$	(51.2	)	(2.5	)%	$	49.9	2.1	%	$	58.0	2.5	%
Earnings per common share—diluted:
Earning (loss) from continuing operations	$	(1.06	)			$	1.02			$	1.11

Year Ended December 31, 2007 Compared to Year Ended December 31, 2006

        Net sales for 2007 were $2,082.1 million compared to $2,361.7 million in 2006, a decrease of $279.6 million or 11.8%. The decrease in net sales was driven by weak retail conditions for all brands resulting in higher price discounts and lower sales volume, partially offset by the sales impact of additional Company-owned stores in 2007. The number of Company-owned stores reached 46 in 2007 prior to the closure of 18 stores in December 2007. Company-owned stores totaled 28 at December 31, 2007 versus 21 stores at December 31, 2006.

        Gross profit for 2007 was $416.1 million compared to $507.9 million in 2006. Gross margin decreased from 21.5% in 2006 to 20.0% in 2007. The decline in gross profit is attributable to the lower sales volume, increased price discounting, reduced capacity utilization and increased costs associated with the higher inventory levels, partially offset by higher gross profits at retail and cost savings within our supply chain. Restructuring, asset impairment and severance charges included in cost of sales were $5.8 million in 2007 and $5.3 million in 2006.

        Selling, general and administrative expenses increased to $469.4 million in 2007 from $432.3 million in 2006. As a percentage of net sales selling, general and administrative expenses increased from 18.3% in 2006 to 22.6% in 2007. Included in selling, general and administrative expenses were restructuring, asset impairment and severance charges of $29.2 million in 2007 and $2.1 million in 2006. Also contributing to the increase in selling, general and administrative expenses were costs associated with the operations of the additional Company-owned retail stores ($17.4 million) and an increase in bad debt expense ($13.6 million) partially offset by decreases in stock option expense ($2.8 million), retirement costs ($2.6 million) and advertising costs ($1.7 million).

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        Interest expense for 2007 totaled $37.4 million compared to $17.7 million in 2006. The increase in interest expense resulted from increased interest rates, amortization of waiver fees for amendments to our prior debt facilities, the payment of a make-whole premium related to the refinancing of the prior debt facilities and the write off of deferred financing fees associated with the prior debt facilities. (See "Financial Condition—Financing Arrangements" for further discussion of our debt refinancing).

	Year Ended December 31,
	2007		2006
Interest expense	$	21.1	$	17.7
Waiver fees and write off of deferred financing fees		2.1		—
Make whole premium, net of swap gain		14.2		—
	$	37.4	$	17.7

        Other income, net consists of the following (in millions):

	Year Ended December 31,
	2007		2006
Interest income	$	3.7	$	2.6
Gain on termination of hedge accounting		4.1		8.9
Other		2.4		3.4
	$	10.2	$	14.9

        The increase in interest income is due to the increase in short-term investments and notes receivable in 2007. In the second quarter of 2007, in anticipation of refinancing the Note Purchase Agreement, we discontinued hedge accounting treatment on a treasury lock agreement and recorded a gain of $4.1 million. In the second quarter of 2006, in anticipation of refinancing our revolving credit facility, we discontinued hedge accounting treatment on an interest rate swap agreement and recorded a gain of $8.9 million.

        Income tax benefit for 2007 totaled $29.3 million, producing an effective tax rate of 36.4%. Income tax expense for 2006 totaled $22.8 million, producing an effective tax rate of 31.3%. The increase in the effective tax rate for 2007 resulted from a lower proportion of income subject to tax in lower marginal rate foreign tax jurisdictions in 2007, a higher proportion of domestic income (loss) in states with higher marginal rates, reduced federal benefits due to the expiration of extra-territorial income exclusion and the non-availability of the domestic manufacturing deduction due to domestic losses.

        Earnings (loss) from continuing operations per common share on a diluted basis were ($1.06) in 2007 and $1.02 in 2006. Weighted average shares outstanding used in the calculation of earnings per common share on a diluted basis were 48.4 million in 2007 and 48.8 million in 2006. The reduction in weighted average shares was due to the full year impact of stock repurchases during the first six months of 2006.

        Net sales from discontinued operations were $63.6 million in 2007 compared with $56.5 million in 2006. Net earnings were $5.6 million in 2007 compared with $5.1 million in 2006.

Year Ended December 31, 2006 Compared to Year Ended December 31, 2005

        Net sales for 2006 were $2,361.7 million compared to $2,342.5 million in 2005, an increase of $19.2 million or 0.8%. Thomasville and Lane experienced strong sales growth early in the year; however, slower traffic at retail and competitive pressures resulted in a weak second half of the year for all Brands. Broyhill case goods were negatively impacted in each quarter due to the transition from

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domestic production to an imported product. The increase in Company-owned stores from 14 to 21 provided a modest addition to net sales.

        Gross profit for 2006 was $507.9 million compared to $523.1 million in 2005. Gross margin decreased from 22.3% in 2005 to 21.5% in 2006. The majority of the decline in gross margin is attributable to increased discounting in an attempt to stimulate sales in the second half of the year. Increases in gross margin attributable to the additional retail stores (which operate at significantly higher gross margins) and reduced restructuring charges were offset by increases in raw material prices.

        Selling, general and administrative expenses increased to $432.3 million in 2006 from $428.9 million in 2005; however, as a percentage of net sales remained flat at 18.3%. The increase in selling, general and administrative expenses was due to the expensing of stock options ($5.7 million), increased expenses for Company-owned stores ($8.0 million), additional bad debt expenses ($4.4 million) and additional retirement costs ($3.0 million), partially offset by a decline in restructuring charges ($11.9 million) and reduced advertising expenses ($3.4 million).

        Interest expense for 2006 totaled $17.7 million compared to $11.9 million in 2005. The increase in interest expense resulted from the refinancing of the credit facility, issuance of term notes with higher interest rates and the termination of hedge accounting on the interest rate swaps.

        Other income, net for 2006 totaled $14.9 million compared to $4.5 million for 2005. For 2006, other income consisted of interest on short-term investments and notes receivable of $2.6 million, a gain realized from the termination of hedge accounting on interest rate swaps of $8.9 million and other miscellaneous income and expenses of $3.4 million. This compares with interest income of $2.6 million and other miscellaneous income and expense items totaling $1.9 million in 2005.

        Income tax expense for 2006 totaled $22.8 million, producing an effective tax rate of 31.3% compared with an effective tax rate of 33.2% for 2005. The decrease in the effective tax rate for 2006 was primarily the result of a higher proportion of income subject to tax in lower rate foreign tax jurisdictions. As in the past, the rate has been reduced by the Federal Domestic Manufacturing deductions enacted under the American Job Creations Act and federal and state income tax credits.

        Earnings from continuing operations per common share on a diluted basis were $1.02 in 2006 and $1.11 in 2005. Weighted average shares outstanding used in the calculation of earnings per common share on a diluted basis were 48.8 million in 2006 and 52.1 million in 2005. The reduction in average shares outstanding was due to the repurchase of 1.7 million shares in 2006 and the full year impact of the repurchase of 4.1 million shares in 2005.

Financial Condition and Liquidity

Liquidity

        Cash and cash equivalents at December 31, 2007 totaled $118.8 million compared to $26.6 million at December 31, 2006. Net cash provided by operating activities totaled $152.9 million in 2007 compared with net cash used by operating activities of $26.9 million in 2006. This increase in cash flow from operations in 2007 is attributable to the reduction in working capital particularly the reduction in inventory resulting from management's targeted efforts to reduce inventory to more normal levels following the substantial increase in inventory levels in 2006 and reduction in accounts receivable resulting from reduced sales partially offset by the impact of the decline in net earnings. Net cash provided by operating activities in 2006 decreased to a net use of cash of $26.9 million from net cash provided of $189.0 million in 2005. The decrease was principally the result of substantially higher levels of working capital investment, particularly higher levels of inventory and accounts receivable and lower levels of accounts payable. Net cash provided by investing activities totaled $4.5 million in 2007 compared with net cash used of $14.8 million in 2006 and $18.7 million in 2005. The decrease in cash used in investing activities is the result of asset sales proceeds of $23.2 million in 2007 compared with $9.9 million in 2006 and 9.8 million in 2005 and from reduced purchases of property, plant and

19

equipment totaling $14.4 million in 2007, $24.7 million in 2006 and $28.5 million in 2005. Net cash used in financing activities totaled $65.2 million in 2007 compared with $46.1 in 2006 and $107.2 million in 2005. Net cash used by financing activities in 2007 consisted primarily of payment of long-term debt ($10.8 million), cash deposited in a restricted account for the payment of long-term debt ($20.0 million) and cash dividends ($31.0 million). Net cash used by financing activities in 2006 consisted primarily of payment of cash dividends ($31.3 million) and the purchase of treasury stock ($40.1 million) partially offset by additions to long-term debt ($9.2 million). The decrease in cash used by financing activities in 2006 compared with 2005 was principally due to a reduction in purchases of treasury stock of $42.6 million.

        Working capital was $712.5 million at December 31, 2007 compared to $752.6 million at December 31, 2006. The current ratio was 4.8-to-1 at December 31, 2007 compared to 5.0-to-1 at December 31, 2006. The decrease in working capital primarily resulted from reductions in accounts receivable and inventory, and an increase in current maturities of long-term debt partially offset by a decrease in accrued expenses and an increase in cash and cash equivalents and restricted cash. We expect to continue reducing working capital; however, the December 31, 2007 balance is comparable with historical balances (see Five-Year Consolidated Financial Review) and future reductions are expected to be modest.

Financing Arrangements

        As of December 31, 2007, long-term debt consisted of the following (in millions):

Revolving credit facility—secured	$	300.0
Other		0.8
		300.8
Less: current maturities		20.8
Long-term debt	$	280.0

        On August 9, 2007, we refinanced our revolving credit facility with a group of financial institutions. The new facility is a 5-year secured revolving credit facility with a commitment of $550.0 million subject to a borrowing base of certain eligible accounts receivable and inventory. The new facility allows for the issuance of letters of credit and cash borrowings. Letters of credit are limited to no more than $100.0 million, with cash borrowings limited by the facilities borrowing base amount less letters of credit outstanding. As of December 31, 2007, there were $300.0 million of cash borrowings and $28.9 million in letters of credit outstanding. In December 2007, we deposited $20.0 million in a cash collateral account at the lead bank of our revolving credit facility. This $20.0 million, which was classified as restricted cash as of December 31, 2007 was used to repay a portion of our long-term debt on January 14, 2008. The portion of the long-term debt related to this payment was reclassified to current maturities as of December 31, 2007. Based upon our borrrowing base as of December 31, 2007 we could have borrowed an additional $4.5 million. An additional $75.0 million would have been available had we been able to meet certain financial covenants including a fixed charge coverage ratio. On February 15, 2008, we repaid an additional $30.0 million of our long-term debt.

        Cash borrowings under the secured revolving credit facility will be at either (i) a base rate (the greater of the prime rate and the Federal Funds Effective Rate plus ¹/2%) or (ii) an adjusted Eurodollar rate plus an applicable margin, depending upon the type of loan selected. The applicable margin over the adjusted Eurodollar rate is 1.25% for the first six months of the facility and thereafter will fluctuate with excess availability. As of December 31, 2007, loans outstanding under the secured revolving credit facility consisted of $300.0 million based on the adjusted Eurodollar rate at a weighted average interest rate of 6.3%.

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        The revolving credit facility is guaranteed by all of our domestic subsidiaries and is secured primarily by all of our accounts receivable, inventory and cash. Availability under the facility will fluctuate based upon a borrowing base calculation consisting of eligible accounts receivable and inventory. Certain covenants and restrictions, including a fixed charge coverage ratio, will become effective if excess availability falls below certain thresholds. We currently would not comply with the fixed charge coverage ratio; however, we do not expect to fall below the required excess availability threshold in 2008. We believe that the revolving credit facility along with our current cash position will be adequate to meet our liquidity requirements for the foreseeable future.

        Funds borrowed under the secured revolving credit facility were used to repay in full the existing indebtedness in the amount of $150.0 million owed pursuant to the terms of the unsecured revolving credit facility dated April 21, 2006, which terminated upon payment. We also repaid in full the $150.0 million of senior notes issued under the Note Purchase Agreement dated May 17, 2006. In connection with the termination of the Note Purchase Agreement, we paid and charged to interest expense a make-whole premium of $17.0 million. In order to mitigate the risk associated with the make-whole premium we entered into a financial hedging agreement to offset changes in the interest rate and recognized a gain of $2.8 million. This gain was recorded as a reduction of interest expense. In addition, due to the extinguishment of these two credit facilities, deferred financing fees of $1.0 million were charged to interest expense. The impact of these items related to the refinancing of the prior debt facilities was to increase interest expense by $15.2 million for the twelve months December 31, 2007.

        The following table summarizes the payments related to our outstanding contractual obligations as of December 31, 2007:

		Less than 1 year		1-3 years		4-5 years		More than 5 years		Total
Long-term debt obligations:
	Revolving Credit Facility	$	20.0	$	—	$	280.0	$	—	$	300.0
	Other		0.8		—		—		—		0.8
	Interest expense(1)		17.7		35.3		28.4		—		81.4
Operating lease obligations (net of subleases)			41.2		70.6		52.1		52.9		216.8
Purchase obligations(2)			—		—		—		—		—
		$	79.7	$	105.9	$	360.5	$	52.9	$	599.0

(1)

Interest payments calculated at rates in effect at December 31, 2007.

(2)

We are not a party to any long-term supply contracts. We do, in the normal course of business, initiate purchase orders for the procurement of finished goods, raw materials and other services. All purchase orders are based upon current requirements and are fulfilled within a short period of time.

Other

Market Risk

        We have exposure to market risk from changes in interest rates. Our exposure to interest rate risk consists of interest expense on our floating rate revolving credit facility and interest income on our cash equivalents. A 10% interest rate increase would result in additional interest expense of $1.9 million annually.

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Funded Status of the Defined Benefit Pension Plan

        As of December 31, 2007, the projected benefit obligation of our defined benefit pension plan exceeded the fair value of the plan's assets. As a result, a pension liability of $50.1 million was recorded at December 31, 2007, a decrease from the $61.4 million liability at December 31, 2006. This decrease resulted from a $12.0 million contribution in 2007.

Critical Accounting Policies

        The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates.

        We have chosen accounting policies we believe are appropriate to report accurately and fairly our operating results and financial position and we apply these policies in a consistent manner. We consider the following policies to be critical in the preparation of our consolidated financial statements.

Revenue Recognition

        Revenues (sales) are recognized when the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) there is a fixed or determinable price; (3) delivery has occurred; and (4) collectibility is reasonably assured. These criteria are satisfied and revenue recognized primarily upon shipment of product. Appropriate provisions for customer returns and discounts are recorded based upon historical results.

Allowance for Doubtful Accounts

        We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. The allowance for doubtful accounts is based upon the review of specific customer account balances, historical experience and an overall aging of the accounts receivable.

Inventories

        Inventories are stated at the lower of cost (first-in, first-out) or market. Inventories are regularly reviewed for excess quantities and obsolescence based upon historical experience, specific identification of discontinued items, future demand and market conditions and appropriate adjustments are recorded. If actual demand or market conditions are less favorable than estimated then additional inventory write-downs would be required.

Long-lived Assets

        Long-lived assets, which consist primarily of goodwill, trademarks and property, plant and equipment, are reviewed for impairment annually or whenever events or changes in business circumstances indicate the carrying values of the assets may not be recoverable. If we determine the carrying value of the long-lived asset may not be recoverable, a permanent impairment charge would be recorded in the amount by which the long-lived asset exceeds fair value.

Retirement Plans

        Defined benefit plan expense and obligation calculations are dependent on various assumptions. These assumptions include discount rate, expected return on plan assets and rate of compensation increase. The discount rate used to calculate the retirement obligations at December 31, 2007 was 6.25% and was determined using Moody's Aa bond index customized to the plan's projected benefit

22

cash flow. In 2007, retirement plan expense was calculated using an expected return on plan assets of 7.5% and the rate of compensation increases of 3.5%. The expected return on plan assets was developed through analysis of historical market returns by asset class, current market conditions and the trust funds past experience. The rate of compensation increases was based upon historical experience. We believe these assumptions to be reasonable; however, differences in assumptions would impact the calculated obligation and future expense. For example, a 0.25% change in the discount rate would result in a $14 million change in the pension obligation and a 0.25% change in the expected return on plan assets would result in a $0.9 million change in pension expense.

        On December 31, 2005, the defined benefit plans were amended, freezing and ceasing future benefit accruals as of that date. Certain transition benefits will be provided to participants who had attained age 50 and had completed 10 years of services as of December 31, 2005. We currently provide benefits to our employees through an increased match in the defined contribution plan.

Recently Issued Statements of Financial Accounting Standards

        In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157 ("SFAS 157"), Fair Value Measurements. SFAS 157 defines fair value, establishes a framework for measuring fair value in U. S. GAAP, and expands the disclosure requirements regarding fair value measurements. The rule does not introduce new requirements mandating the use of fair value. SFAS 157 defines fair value as "the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date." The definition is based on an exit price rather than an entry price, regardless of whether the entity plans to hold or sell the asset. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The effective date for SFAS 157 has been delayed until fiscal years beginning after November 15, 2008 for non-financial assets and liabilities except those that are recognized or disclosed at fair value in the financial statements on a recurring basis. We are currently assessing the impact, if any, of SFAS 157 on our consolidated financial statements.

        In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141 (Revised 2007) ("SFAS 141R"), Business Combinations. SFAS 141R requires an acquiring entity to recognize all the assets acquired and liabilities assumed in a transaction at the acquisition-date fair value with limited exceptions. SFAS 141R applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. Earlier adoption is prohibited. We are currently assessing the impact of SFAS 141R on our consolidated financial statements; however, the impact will be limited to business combinations occurring on or after January 1, 2009.

        In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159 ("SFAS 159"), The Fair Value Option for Financial Assets and Financial Liabilities—Including an Amendment of FASB Statement No. 115. SFAS 159 permits entities to choose, at specified election dates, to measure many financial instruments and certain other items at fair value that are not currently measured at fair value. Unrealized gains and losses on items for which the fair value option has been elected would be reported in earnings at each subsequent reporting date. SFAS 159 also establishes presentation and disclosure requirements in order to facilitate comparisons between entities choosing different measurement attributes for similar types of assets and liabilities. SFAS 159 does not affect existing accounting requirements for certain assets and liabilities to be carried at fair value. SFAS 159 is effective as of the beginning of a reporting entity's first fiscal year that begins after November 15, 2007. We are currently assessing the impact, if any, of SFAS 159 on our consolidated financial statements.

        In December 2007, the FASB issued Statement of Financial Accounting Standards No. 160 (SFAS 160"), Noncontrolling Interests in Consolidated Financial Statements—An Amendment of ARB

23

No. 51. SFAS 160 establishes new accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. Earlier adoption is prohibited. We are currently assessing the impact, if any, of SFAS 160 on our consolidated financial statements.

        In September 2006, the Emerging Issues Task Force issued EITF 06-4, Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements. This consensus concludes that for a split-dollar life insurance arrangement within the scope of this Issue, an employer should recognize a liability for future benefits in accordance with FASB Statement No. 106 (if, in substance, a postretirement benefit plan exists) or APB 12 (if, the arrangement is, in substance an individual deferred compensation contract) based upon the substantive agreement with the employee. The consensus is effective for fiscal years beginning after December 15, 2007. The effects of applying this consensus should be recognized through either (a) a change in accounting principle through a cumulative-effect adjustment to retained earnings or to other components of equity or net assets in the statement of financial position as of the beginning of the year of adoption or (b) a change in accounting principle through retrospective application to all prior periods. We anticipate the adoption of this consensus in 2008 will result in a cumulative-effect adjustment of $0.8 million before income tax.

Forward-Looking Statements

        Matters discussed in this filing and in our public disclosures, whether written or oral, relating to future events or our future performance, including any discussion, express or implied, of our anticipated growth, operating results, future earnings per share, plans and objectives, contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934." These statements are often identified by the words "will", "believe", "positioned", "estimate", "project", "target", "continue", "intend", "expect", "future", "anticipates", and similar expressions that are not statements of historical fact. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. Our actual results and timing of certain events could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including, but not limited to, those set forth under "Risk Factors" in this Annual Report on Form 10-K for the year ended December 31, 2007, our quarterly reports on Form 10-Q, and in our other public filings with the Securities and Exchange Commission. Such factors include, but are not limited to: risks associated with the execution of our strategic plan; changes in economic conditions; loss of market share due to competition; failure to forecast demand or anticipate or respond to changes in consumer tastes and fashion trends; failure to achieve projected mix of product sales; business failures of large customers; distribution and cost savings programs; manufacturing realignments; increased reliance on offshore (import) sourcing of various products; fluctuations in the cost, availability and quality of raw materials; product liability uncertainty; environmental regulations; future acquisitions; impairment of goodwill and other intangible assets; anti-takeover provisions which could result in a decreased valuation of our common stock; loss of funding sources; and our ability to open and operate new retail stores successfully. It is routine for internal projections and expectations to change as the year or each quarter in the year progresses, and therefore it should be clearly understood that all forward-looking statements and the internal projections and beliefs upon which we base our expectations included in this report or other periodic reports are made only as of the date made and may change. While we may elect to update forward-looking statements at some point in the future, we do not undertake any obligation to update any forward-looking statements whether as a result of new information, future events or otherwise.

Item 7A.    Quantitative and Qualitative Disclosures About Market Risk

        We have exposure to market risk from changes in interest rates. Our exposure to interest rate risk consists of interest expense on our floating rate revolving credit facility and interest income on our cash equivalents. We periodically enter into swap agreements to manage our fluctuating interest rates. However, we did not have any interest rate swap agreements at December 31, 2007. A 10% interest rate increase would result in additional interest expense of $1.9 million annually. All derivative instruments at December 31, 2007, which are primarily currency hedges, are entered into for other than trading purposes and are not material to our financial position and results of operations.

24

Item 8.    Financial Statements and Supplementary Data

FURNITURE BRANDS INTERNATIONAL, INC. AND SUBSIDIARIES

Index to Consolidated Financial Statements and Schedules

			Page No.
Report of Independent Registered Public Accounting Firm			26
Consolidated Financial Statements:
	Consolidated Balance Sheets as of December 31, 2007 and 2006		27
	Consolidated Statements of Operations for each of the years in the three-year period ended December 31, 2007		28
	Consolidated Statements of Cash Flows for each of the years in the three-year period ended December 31, 2007		29
	Consolidated Statements of Shareholders' Equity and Comprehensive Income (loss) for each of the years in the three-year period ended December 31, 2007		30
	Notes to Consolidated Financial Statements		31
	Consolidated Financial Statement Schedules:
		Schedule II
	Valuation and qualifying accounts		62

25

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders
Furniture Brands International, Inc.:

        We have audited the accompanying consolidated balance sheets of Furniture Brands International, Inc. and subsidiaries as of December 31, 2007 and 2006, and the related consolidated statements of operations, shareholders' equity and comprehensive income (loss), and cash flows for each of the years in the three-year period ended December 31, 2007. In connection with our audits of the consolidated financial statements, we have also audited the accompanying financial statement schedule. These consolidated financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.

        We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Furniture Brands International, Inc. and subsidiaries as of December 31, 2007 and 2006, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2007, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

        As discussed in Note 10 to the consolidated financial statements, the Company adopted FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes", effective January 1, 2007. As discussed in Note 2 to the consolidated financial statements, the Company adopted Statement of Financial Accounting Standard No. 123 (Revised 2004), "Share Based Payments", effective January 1, 2006. As discussed in Note 11 to the consolidated financial statements, the Company adopted Statement of Financial Accounting Standards No. 158, "Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans", effective December 31, 2006.

        We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Furniture Brands International, Inc.'s internal control over financial reporting as of December 31, 2007, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 29, 2008 expressed an unqualified opinion on the effectiveness of the Company's internal control over financial reporting.

/s/ KPMG LLP

St. Louis, Missouri

February 29, 2008

26

FURNITURE BRANDS INTERNATIONAL, INC.

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)			December 31, 2007			December 31, 2006
Assets
Current assets:
	Cash and cash equivalents		$	118,764		$	26,565
	Cash—restricted			20,000			—
	Receivables, less allowances of $45,467 ($29,025 at December 31, 2006)			292,694			362,557
	Inventories (Note 4)			401,302			502,070
	Deferred income taxes			36,978			31,600
	Prepaid expenses and other current assets			17,880			18,382
	Current assets of discontinued operations			12,236			—
		Total current assets		899,854			941,174
Property, plant and equipment, net (Note 5)				178,564			221,398
Goodwill (Note 6)				167,356			182,652
Other intangible assets (Note 6)				162,571			169,671
Other assets				36,770			43,308
Noncurrent assets of discontinued operations				17,963			—
		Total assets	$	1,463,078		$	1,558,203
Liabilities and Shareholders' Equity
Current liabilities:
	Current maturities of long-term debt		$	20,800		$	10,800
	Accounts payable			93,557			94,515
	Accrued employee compensation			21,633			27,462
	Other accrued expenses			46,102			55,779
	Current liabilities of discontinued operations			5,307			—
		Total current liabilities		187,399			188,556
Long-term debt (Note 7)				280,000			300,800
Deferred income taxes				28,859			44,637
Other long-term liabilities				121,913			113,495
Noncurrent liabilities of discontinued operations				141			—
Shareholders' equity:
	Preferred stock, 10,000,000 shares authorized, no par value—none issued			—			—
	Common stock, 200,000,000 shares authorized, $1.00 stated value—56,482,541 shares issued at December 31, 2007 and December 31, 2006 (Note 9)			56,483			56,483
	Paid-in capital			226,773			227,520
	Retained earnings			768,731			843,811
	Accumulated other comprehensive expense (Note 13)			(26,965	)		(33,188	)
	Treasury stock at cost (7,984,370 shares at December 31, 2007 and 8,146,289 shares at December 31, 2006)			(180,256	)		(183,911	)
		Total shareholders' equity		844,766			910,715
		Total liabilities and shareholders' equity	$	1,463,078		$	1,558,203

See accompanying notes to consolidated financial statements.

27

FURNITURE BRANDS INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

		Year Ended December 31,
(In thousands except per share data)		2007			2006		2005
Net sales		$	2,082,056		$	2,361,680	$	2,342,526
Cost of sales			1,665,961			1,853,805		1,819,438
Gross profit			416,095			507,875		523,088
Selling, general and administrative expenses			469,434			432,336		428,930
Operating earnings (loss)			(53,339	)		75,539		94,158
Interest expense			37,388			17,665		11,877
Other income, net (Note 16)			10,249			14,825		4,523
Earnings (loss) from continuing operations before income tax expense			(80,478	)		72,699		86,804
Income tax expense (benefit) (Note 10)			(29,261	)		22,784		28,781
Net earnings (loss) from continuing operations			(51,217	)	$	49,915	$	58,023
Net earnings from discontinued operations			5,568			5,140		3,413
Net earnings (loss)		$	(45,649	)	$	55,055	$	61,436
Earnings per common share—basic and diluted:
	Earnings (loss) from continuing operations	$	(1.06	)	$	1.02	$	1.11
	Earnings from discontinued operations		0.12			0.11		0.07
	Net earnings (loss)	$	(0.94	)	$	1.13	$	1.18
Weighted average shares of common stock outstanding:
	Basic		48,446			48,753		51,976
	Diluted		48,446			48,753		52,104

See accompanying notes to consolidated financial statements.

28

FURNITURE BRANDS INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

				Year Ended December 31,
(Dollars in thousands)				2007			2006			2005
Cash flows from operating activities:
	Net earnings (loss)			$	(45,649	)	$	55,055		$	61,436
	Adjustments to reconcile net earnings (loss) to net cash provided by (used in)operating activities:
		Depreciation and amortization			29,982			36,670			45,240
		Compensation expense related to stock option grants and restricted stock awards			3,251			6,142			253
		Tax benefit from the exercise of stock options			—			411			—
		Provision (benefit) for deferred income taxes			(20,080	)		(15,384	)		(11,989	)
		Other, net			15,304			(5,915	)		10,084
		Changes in operating assets and liabilities:
			Accounts receivable		63,627			(13,355	)		25,531
			Inventories		100,019			(69,256	)		12,014
			Prepaid expenses and other assets		2,659			(2,795	)		(6,903	)
			Accounts payable and other accrued expenses		(12,482	)		(31,971	)		28,872
			Other long-term liabilities		16,258			13,525			24,445
	Net cash provided by (used in) operating activities				152,889			(26,873	)		188,983
Cash flows from investing activities:
	Acquisition of stores, net of cash acquired				(4,241	)		—			—
	Proceeds from the disposal of assets				23,161			9,941			9,829
	Additions to property, plant and equipment				(14,374	)		(24,713	)		(28,541	)
	Net cash provided by (used in) investing activities				4,546			(14,772	)		(18,712	)
Cash flows from financing activities:
	Proceeds from termination of cash flow hedges				—			8,623			—
	Payments for debt issuance costs				(3,424	)		(1,307	)		—
	Additions to long-term debt				325,401			470,000			—
	Payments of long-term debt				(336,201	)		(460,800	)		(800	)
	Funding of restricted cash account for payment of current maturities of long-term debt				(20,000	)		—			—
	Proceeds from exercise of stock options				—			8,305			7,552
	Tax benefit from the exercise of stock options				—			411			—
	Payments of cash dividends				(31,012	)		(31,269	)		(31,267	)
	Payments for the purchase of treasury stock				—			(40,075	)		(82,682	)
	Net cash used in financing activities				(65,236	)		(46,112	)		(107,197	)
Net increase (decrease) in cash and cash equivalents					92,199			(87,757	)		63,074
Cash and cash equivalents at beginning of period					26,565			114,322			51,248
Cash and cash equivalents at end of period				$	118,764		$	26,565		$	114,322
Supplemental Disclosure:
	Cash payments for income taxes, net			$	1,776		$	59,447		$	40,570
	Cash payments for interest expense			$	34,689		$	15,581		$	11,954

See accompanying notes to consolidated financial statements.

29

FURNITURE BRANDS INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND
COMPREHENSIVE INCOME (LOSS)

			Year Ended December 31,
(Dollars in thousands)			2007			2006			2005
Common Stock:
	Beginning balance		$	56,483		$	56,483		$	56,483
	Stock plans activity (Note 8)			—			—			—
	Ending balance		$	56,483		$	56,483		$	56,483
Paid-In Capital:
	Beginning balance		$	227,520		$	221,754		$	226,602
	Stock plans activity (Note8)			(747	)		5,766			(4,848	)
	Ending balance		$	226,773		$	227,520		$	221,754
Retained Earnings:
	Beginning balance		$	843,811		$	820,025		$	789,856
	Net earnings (loss)			(45,649	)		55,055			61,436
	Adjustment to adopt FIN 48			1,581			—			—
	Cash dividends (per share 2007-$0.64, 2006-$0.64, 2005-$0.60)			(31,012	)		(31,269	)		(31,267	)
	Ending balance		$	768,731		$	843,811		$	820,025
Accumulated Other Comprehensive Income (Expense): (Note 13)
	Beginning balance		$	(33,188	)	$	(41,382	)	$	(31,076	)
	Other comprehensive income (expense)			6,223			13,244			(10,306	)
	Adjustment to initially apply SFAS No. 158, net of income tax benefit of $3,031			—			(5,050	)		—
	Ending balance		$	(26,965	)	$	(33,188	)	$	(41,382	)
Treasury Stock:
	Beginning balance		$	(183,911	)	$	(152,928	)	$	(84,382	)
	Stock plans activity (Note 8)			3,655			9,092			14,136
	Purchase of treasury stock (1,734,951 shares in 2006 and 4,125,588 shares in 2005)			—			(40,075	)		(82,682	)
	Ending balance		$	(180,256	)	$	(183,911	)	$	(152,928	)
Total Shareholders' Equity			$	844,766		$	910,715		$	903,952
Comprehensive income (loss):
	Net earnings		$	(45,649	)	$	55,055		$	61,436
	Other comprehensive income, net of tax:
		Pension liability		2,784			17,736			(12,516	)
		Foreign currency translation		3,439			1,171			555
		Financial instruments accounted for as hedges		—			(5,663	)		1,655
		Other comprehensive income (expense)		6,223			13,244			(10,306	)
			$	(39,426	)	$	68,299		$	51,130

See accompanying notes to consolidated financial statements.

30

FURNITURE BRANDS INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except per share data)

1. THE COMPANY

        Furniture Brands is a vertically integrated operating company that is one of the nation's leading designers, manufacturers, and retailers of home furnishings. We market through a wide range of retail channels, from mass merchant stores to single-branded and independent dealers to specialized interior designers. We serve customers through some of the best known and most respected brands in the furniture industry, including Broyhill, Lane, Thomasville, Drexel Heritage, Henredon, Pearson, Hickory Chair, Laneventure, and Maitland-Smith. Through these brands, we design, manufacture, source, market and distribute a full-line of branded products consisting of both wood and upholstered furniture.

        Substantially all of our sales are made to unaffiliated furniture retailers. We have a diversified customer base with no one customer accounting for 10% or more of consolidated net sales and other than the retail furniture industry no particular concentration of credit risk in one economic sector. Foreign operations and foreign net sales are not material.

2. SIGNIFICANT ACCOUNTING POLICIES

        Our significant accounting policies are set forth below.

Use of Estimates

        The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of sales and expenses during the reported period. Actual results could differ from those estimates.

Principles of Consolidation

        The consolidated financial statements include the Furniture Brands accounts and those of our subsidiaries. All material intercompany transactions are eliminated in consolidation. The Company's fiscal year ends on December 31. The subsidiaries included in the consolidated financial statements report their results of operations as of the Saturday closest to December 31. Accordingly, the results of operations will periodically include a 53-week fiscal year. Fiscal years 2007, 2006 and 2005 were all 52-week years. Fiscal year 2008 will be a 53-week year.

Cash and Cash Equivalents

        We consider all short-term investments with an original maturity of three months or less to be cash equivalents.

Inventories

        Inventories are stated at the lower of cost (first-in, first-out) or market. Inventories are regularly reviewed for excess quantities and obsolescence based upon historical experience, specific identification of discontinued items, future demand and market conditions and appropriate adjustments are recorded.

31

FURNITURE BRANDS INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands except per share data)

2. SIGNIFICANT ACCOUNTING POLICIES (Continued)

Property, Plant and Equipment

        Property, plant and equipment are recorded at cost when acquired. Depreciation is calculated using the straight-line method based on the estimated useful lives of the respective assets, which generally range from 3 to 45 years for buildings and improvements and from 3 to 12 years for machinery and equipment. Long-lived assets are reviewed for impairment whenever events or changes in business circumstances indicate the carrying value of the assets may not be recoverable. Impairment losses are recognized if expected future cash flows of the related assets are less than their carrying value.

Intangible Assets

        Intangible assets consist of goodwill and trademarks. In accordance with Statement of Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible Assets," goodwill and intangible assets with indefinite lives are no longer amortized, but instead tested for impairment. Intangible assets are reviewed for impairment annually or whenever events or changes in business circumstances indicate the carrying value of the assets may not be recoverable.

        Goodwill is tested by estimating the fair value of each reporting unit using a discounted cash flow model with an appropriate risk adjusted discount rate. The fair value of each reporting unit is then compared with the carrying value to determine if any impairment exists.

        The fair value of trademarks is calculated using a "relief from royalty payments" methodology. This approach involves two steps: (i) estimating reasonable royalty rates for each trademark and (ii) applying these royalty rates to a net sales stream and discounting the resulting cash flows to determine fair value. This fair value is then compared with the carrying value of each trademark.

Fair Value of Financial Instruments

        We consider the carrying amounts of cash and cash equivalents, receivables, and accounts payable to approximate fair value because of the short maturity of these financial instruments.

        Amounts outstanding under the revolving credit agreement are considered to be carried in the financial statements at their estimated fair values because they accrue interest at rates which generally fluctuate with interest rate trends.

        We periodically use interest rate swap agreements (derivative financial instruments) to hedge risk associated with our floating rate long-term debt. Each derivative instrument designated as a hedge is recorded on the balance sheet at fair value as an asset or liability with any gain or loss recorded as a component of accumulated other comprehensive income (expense) until recognized in earnings. The fair value of the swap agreements is based upon quoted market prices. The net amount to be paid or received under the interest rate swap agreements is recorded as a component of interest expense. As of December 31, 2007 we had no interest rate swap agreements.

Revenue Recognition

        Revenues (sales) are recognized when the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) there is a fixed or determinable price; (3) delivery has occurred; and

32

FURNITURE BRANDS INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands except per share data)

2. SIGNIFICANT ACCOUNTING POLICIES (Continued)

(4) collectibility is reasonably assured. These criteria are satisfied and revenue recognized primarily upon shipment of product. Appropriate provisions for customer returns and discounts are recorded based upon historical experience.

Advertising Costs

        Advertising production costs are expensed when advertisements are first aired or distributed. Total advertising costs were $70,308 for 2007, $71,958 for 2006, and $75,309 for 2005.

Stock-Based Compensation

        Effective January 1, 2006 we adopted Statement of Financial Accounting Standard No. 123 (Revised 2004)—Share-Based Payment (SFAS No. 123R) using the modified prospective application transition method. Under the modified prospective approach, the provisions of SFAS No. 123R are applied to new awards and to awards modified, repurchased or cancelled after the effective date. Additionally, compensation cost is also recognized for the unvested portion of awards granted prior to adoption. Prior year financial statements are not restated.

        Prior to the adoption of SFAS No. 123R, we accounted for stock based compensation plans under APB Opinion No. 25 "Accounting for Stock Issued to Employees". The following table illustrates the impact on net earnings and earnings per common share if the fair value method had been applied.

		Year Ended December 31, 2005
Net earnings		$	61,436
Deduct: Stock-based employee compensation expense determined under fair value based method, net of income tax benefits			4,212
Net earnings—pro forma		$	57,224
Earnings per share—basic:
	As reported	$	1.18
	Pro forma	$	1.10
Earnings per share—diluted:
	As reported	$	1.18
	Pro forma	$	1.10

Income Taxes

        Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized as income tax expense (benefit) in the period that includes the enactment date.

33

FURNITURE BRANDS INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands except per share data)

2. SIGNIFICANT ACCOUNTING POLICIES (Continued)

Reclassifications

        Certain amounts in the consolidated financial statements have been reclassified to conform to the 2007 presentation. These reclassifications have no effect on net earnings or stockholders' equity as previously reported. On October 16, 2007 we announced our intent to divest Hickory Business Furniture (HBF) a wholly owned subsidiary that designs and manufactures business furniture in the mid- to upper-price range. We believe it is likely this transaction will be completed by the end of the first quarter of 2008. This business unit is reflected as a discontinued operation, pursuant to the provisions of Statement of Financial Accounting Standard No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets.

3. RESTRUCTURING AND ASSET IMPAIRMENT CHARGES

        In 2001 we began implementing a plan to reduce our domestic manufacturing capacity. As of December 31, 2007, this plan included the closing, consolidation or reconfiguration of 38 domestic manufacturing facilities. Restructuring activity included the closing of five manufacturing facilities and 18 retail stores in 2007, the closing or the realignment of three manufacturing facilities in 2006, and the closing of eight manufacturing facilities in 2005.

        Asset impairment charges were recorded to reduce the carrying value of all idle facilities and related machinery and equipment to their net realizable value. The determination of the impairment charges were based primarily upon (i) consultations with real estate brokers, (ii) proceeds from recent sales of Company facilities and (iii) the market prices being obtained for similar long-lived assets.

        Restructuring and asset impairment charges were as follows:

		Year Ended December 31,
		2007		2006		2005
Restructuring charges:
	Costs to shutdown, cleanup and vacate facilities	$	681	$	1,675	$	3,793
	One-time termination benefits		8,475		2,873		7,628
	Lease termination costs		7,217		—		—
	Inventory write-downs		—		713		—
			16,373		5,261		11,421
Impairment charges			11,502		2,142		9,988
			27,875	$	7,403	$	21,409
Statement of Operations classification:
	Cost of sales	$	5,784	$	5,280	$	7,427
	Selling, general and administrative expenses		22,091		2,123		13,982
		$	27,875	$	7,403	$	21,409

        Real estate held for sale with a carrying value of $1,054 and $5,007 was included in other assets as of December 31, 2007 and 2006, respectively. The accrual for lease termination costs of $7,217 is included in other long-term liabilities at December 31, 2007.

34

FURNITURE BRANDS INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands except per share data)

4. INVENTORIES

        Inventories are summarized as follows:

	December 31, 2007		December 31, 2006
Finished products	$	283,236	$	360,442
Work-in-process		24,005		35,411
Raw materials		94,061		106,217
	$	401,302	$	502,070

5. PROPERTY, PLANT AND EQUIPMENT

        Major classes of property, plant and equipment consist of the following:

	December 31, 2007		December 31, 2006
Land	$	16,964	$	17,701
Buildings and improvements		225,352		244,629
Machinery and equipment		268,862		347,661
		511,178		609,991
Less accumulated depreciation		332,614		388,593
	$	178,564	$	221,398

6. GOODWILL AND OTHER INTANGIBLE ASSETS

        Goodwill and other intangible assets include the following:

	December 31, 2007			December 31, 2006
Goodwill
Beginning balance	$	182,652		$	182,507
Income tax benefit of deductible goodwill		(676	)		(716	)
Goodwill associated with discontinued operation		(14,276	)		—
Other		(344	)		861
Ending balance	$	167,356		$	182,652
Trademarks and trade names
Beginning balance	$	169,671		$	169,671
Trade name impairment		(7,100	)		—
Ending balance	$	162,571		$	169,671

        Our other intangible assets consist of trademarks and trade names all having indefinite lives. Goodwill and other intangible assets with indefinite lives are tested annually for impairment or whenever events or changes in business circumstances indicate the carrying value of the assets may not

35

FURNITURE BRANDS INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands except per share data)

6. GOODWILL AND OTHER INTANGIBLE ASSETS (Continued)

be recoverable. During 2007, we tested for impairment and the fair value of certain trade names were lower than their carrying value. Therefore, a non-cash pretax charge of $7,100 was recorded to reduce the carrying value of those trade names to their estimated fair value. This charge is reflected in selling, general and administrative expenses in the statement of operations.No impairment was recorded in 2006 and 2005.

7. LONG-TERM DEBT

        Long-term debt consists of the following:

	December 31, 2007		December 31, 2006
Revolving credit facility—secured	$	300,000	$	—
Revolving credit facility—unsecured		—		160,000
6.83% Senior Notes		—		150,000
Other		800		1,600
		300,800		311,600
Less: current maturities		20,800		10,800
Long-term debt	$	280,000	$	300,800

        On August 9, 2007, we refinanced our revolving credit facility with a group of financial institutions. The new facility is a 5-year secured revolving credit facility with a commitment of $550,000 subject to a borrowing base of certain eligible accounts receivable and inventory. The new facility allows for the issuance of letters of credit and cash borrowings. Letters of credit are limited to no more than $100,000, with cash borrowings limited by the facilities borrowing base amount less letters of credit outstanding. As of December 31, 2007, there were $300,000 of cash borrowings and $28,873 million in letters of credit outstanding. In December 2007, we deposited $20,000 in a cash collateral account at the lead bank of our revolving credit facility. This $20,000, which was classified as restricted cash as of December 31, 2007 was used to repay a portion of our long-term debt on January 14, 2008. The portion of the long-term debt related to this payment was reclassified to current maturities as of December 31, 2007. Based upon our borrrowing base as of December 31, 2007 we could have borrowed an additional $4,500. On February 15, 2008, we repaid an additional $30,000 of our long-term debt.

        Cash borrowings under the secured revolving credit facility will be at either (i) a base rate (the greater of the prime rate and the Federal Funds Effective Rate plus ¹/2%) or (ii) an adjusted Eurodollar rate plus an applicable margin, depending upon the type of loan selected. The applicable margin over the adjusted Eurodollar rate is 1.25% for the first six months of the facility and thereafter will fluctuate with excess availability. As of December 31, 2007, loans outstanding under the secured revolving credit facility consisted of $300,000 based on the adjusted Eurodollar rate at a weighted average interest rate of 6.3%.

        The revolving credit facility is guaranteed by all of our domestic subsidiaries and is secured primarily by all of our accounts receivable, inventory and cash. Availability under the facility will fluctuate based upon a borrowing base calculation consisting of eligible accounts receivable and inventory. Certain covenants and restrictions, including a fixed charge coverage ratio, will become

36

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands except per share data)

7. LONG-TERM DEBT (Continued)

effective if excess availability falls below certain thresholds. We currently would not comply with the fixed charge coverage ratio; however, we do not expect to fall below the required excess availability thresholds in 2008.

        Funds borrowed under the secured revolving credit facility were used to repay in full the existing indebtedness in the amount of $150,000 owed pursuant to the terms of the unsecured revolving credit facility dated April 21, 2006, which terminated upon payment. We also repaid in full the $150,000 of senior notes issued under the Note Purchase Agreement dated May 17, 2006. In connection with the termination of the Note Purchase Agreement, we paid and charged to interest expense a make-whole premium of $16,985. In order to mitigate the risk associated with the make-whole premium we entered into a financial hedging agreement to offset changes in the interest rate and recognized a gain of $2,798. This gain was recorded as a reduction of interest expense. In addition, due to the extinguishment of these two credit facilities, deferred financing fees of $1.0 million were charged to interest expense. The impact of these items related to the refinancing of the prior debt facilities was to increase interest expense by $15,190 for the twelve months December 31, 2007.

8. STOCK OPTIONS AND RESTRICTED STOCK AWARDS

        We have outstanding option grants pursuant to the 1992 Stock Option Plan and the 1999 Long-Term Incentive Plan. These plans are administered by the Human Resources Committee of the Board of Directors and permit certain key employees to be granted nonqualified options, performance-based options, restricted stock, or combinations thereof. Options must be issued at market value on the date of grant and expire in a maximum of ten years. As of December 31, 2007 there were 985,391 shares available for grant. Shares issued upon exercise of stock options or issuance of restricted shares may be from new shares or from treasury stock. The compensation cost that has been charged against income for stock incentive plans were $2,866 ($1,824 net of income tax benefit) and $5,734 ($3,647 net of income tax benefit) for the twelve months ended December 31, 2007 and 2006, respectively.

        The fair value of the award is recognized as compensation expense on a straight-line basis over the vesting period, generally four years for stock options and various terms ranging from one to seventeen years for the restricted stock and restricted stock units.

        The fair value of each stock option is estimated on the date of grant using the Black-Scholes option pricing model. The following weighted-average assumptions were used to determine the fair value of options granted in the periods indicated.

	2007		2006		2005
Risk-free interest rate	4.9	%	4.4	%	3.8	%
Expected dividend yield	4.2	%	2.5	%	2.6	%
Expected life (in years)	6.0		5.6		6.0
Expected volatility	36.5	%	39.8	%	42.6	%

        The risk-free interest rate is based upon U.S. Treasury Securities with a term similar to the expected life of the option grant. The dividend yield is calculated based upon the dividend rate on the date of the grant. The expected term of the option grant is based upon historical exercise results.

37

FURNITURE BRANDS INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands except per share data)

8. STOCK OPTIONS AND RESTRICTED STOCK AWARDS (Continued)

Expected volatility is calculated based upon the historical volatility over a period equal to the expected term of the option grant.

        Other information pertaining to option activity during the years ended December 31, 2007, 2006 and 2005 is as follows:

	2007		2006		2005
Weighted average fair value per share of options granted	$	4.25	$	8.37	$	8.19
Total intrinsic value of stock options exercised	$	—	$	1,481	$	4,361

        A summary of option activity is presented below:

	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
Outstanding at December 31, 2006	3,861,300		$	24.28
Granted	324,192			15.21
Exercised	—			—
Forfeited or expired	(922,875	)		24.72
Outstanding at December 31, 2007	3,262,617		$	23.25	4.0	$	—
Exercisable at December 31, 2007	2,423,825		$	24.10	3.8	$	—

        The aggregate intrinsic value was calculated using the difference between the market price at year end and the exercise price for only those options that have an exercise price that is less than the market price.

        Non-vested restricted stock and restricted stock unit activity is presented below.

	Shares		Weighted Average Grant-Date Fair Value
Outstanding at December 31, 2006	84,081		$	25.24
Granted	205,419			14.88
Vested	(14,332	)		31.27
Forfeited	(77,301	)		18.65
Outstanding at December 31, 2007	197,867		$	16.63

        As of December 31, 2007 there was $6,581 of total unrecognized compensation cost related to non-vested share-based compensation arrangements under the plan. This cost is expected to be recognized over a weighted-average period of 1.9 years.

38

FURNITURE BRANDS INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands except per share data)

9. COMMON STOCK

        The Company's restated certificate of incorporation includes authorization to issue up to 200 million shares of Common Stock with a $1.00 per share stated value. As of December 31, 2007, 56,482,541 shares of Common Stock had been issued.

        The Company has periodically been authorized by its Board of Directors to repurchase our Common Stock in open market or privately negotiated transactions. Common Stock repurchases are recorded as treasury stock and may be used for general corporate purposes. On January 26, 2006 an authorization of $50,000 was approved. This authorization expired on January 26, 2007 with no shares having been purchased.

        Weighted average shares used in the computation of basic and diluted earnings per common share for 2007, 2006, and 2005 are as follows:

		Year Ended December 31,
		2007	2006	2005
Weighted average shares used for basic earnings per common share		48,445,948	48,753,006	51,976,417
Effect of dilutive securities:
	Stock options	—	—	127,558
Weighted average shares used for diluted earnings per common share		48,445,948	48,753,006	52,103,975

        Excluded from the computation of diluted earnings per common share for 2007, 2006 and 2005 were options to purchase 3,262,617, 3,309,850 and 3,008,825 shares, respectively, at an average price of $23.25, $25.47 and $25.30 per share, respectively. These options have been excluded from the diluted earnings per share calculation because their inclusion would be antidilutive.

        Approximately 2 million preferred shares are reserved for issuance under a Preferred Stock Purchase Rights Plan. Under certain conditions involving the acquisition of or an offer for 15 percent or more of the Company's common stock, all holders of Rights except an acquiring entity, would be entitled (i) to purchase, at an exercise price of $135, common stock of the Company, or an acquiring entity with a value twice the exercise price, or (ii) at the option of the Board, to exchange each Right for one share of common stock. The Rights remain in existence until July 30, 2008, unless earlier redeemed (at one cent per Right exercised, or exchanged under the terms of the Plan.

10. INCOME TAXES

		Year Ended December 31,
		2007			2006		2005
Income (loss) from continuing operations before income tax expense:
	United States operations	$	(80,074	)	$	67,185	$	72,897
	Foreign operations		(404	)		5,514		13,907
		$	(80,478	)	$	72,699	$	86,804

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FURNITURE BRANDS INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands except per share data)

10. INCOME TAXES (Continued)

        Income tax expense (benefit) from continuing operations is comprised of the following:

		Year Ended December 31,
		2007			2006			2005
Current:
	Federal	$	(11,742	)	$	34,242		$	37,859
	State and local		1,487			2,170			2,252
	Foreign		1,074			1,345			659
			(9,181	)		37,757			40,770
Deferred			(20,080	)		(14,973	)		(11,989	)
Income tax expense (benefit):		$	(29,261	)	$	22,784		$	28,781

        The following table reconciles the differences between the federal corporate statutory rate and our effective income tax rate for continuing operations.

	Year Ended December 31,
	2007		2006		2005
Federal corporate statutory rate	(35.0	)%	35.0	%	35.0	%
State and local income taxes, net of federal tax benefit	(3.7	)	1.6		1.2
Foreign rate differential	0.8		(1.9	)	—
Non-taxable income	0.1		(1.2	)	(1.5	)
Other	1.4		(2.2	)	(1.5	)
Effective income tax rate	(36.4	)%	31.3	%	33.2	%

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FURNITURE BRANDS INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands except per share data)

10. INCOME TAXES (Continued)

        The sources of the tax effects for temporary differences that give rise to the deferred tax assets and liabilities were as follows:

		December 31, 2007			December 31, 2006
Deferred tax assets attributable to:
	Expense accruals	$	63,667		$	46,799
	Employee pension and other benefit plans		19,976			22,728
	Asset impairment charges		1,879			2,569
	Net operating loss carryforward		9,313			5,638
	Depreciation		680			—
	Other		2,678			909
	Total deferred tax assets		98,193			78,643
Deferred tax liabilities attributable to:
	Fair value adjustments		(45,555	)		(45,764	)
	Other intangible assets		(34,972	)		(34,534	)
	Depreciation		—			(3,584	)
	Inventory costs capitalized		(2,888	)		(2,393	)
	Qualifying prepaid expenses		(1,805	)		(1,322	)
	Total deferred tax liabilities		(85,220	)		(87,597	)
Valuation allowance—NOL carryforward			(4,854	)		(4,083	)
Net deferred tax assets (liabilities)		$	8,119		$	(13,037	)

        The undistributed cumulative earnings of foreign subsidiaries of $22.5 million are considered permanently reinvested outside the United States. It is impractible to determine the amount of federal income taxes payable if these earnings were repatriated.

        We have incurred certain state net operating losses which we are carrying forward. The value of theses losses is $9,313 before any valuation allowance. We have placed a valuation allowance of $4,854 on some of these losses based on an assessment of anticipated taxable income. Generally these losses will start to expire in the year 2021. Based upon this analysis, we believe that it is more likely than not that the results of future operations will generate sufficient taxable income to realize the remaining deferred tax assets.

        The Company or one of its subsidiaries files income tax returns in the United States federal jurisdiction and various state and foreign jurisdictions. With few exceptions, we are no longer subject to United States federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2003. The Internal Revenue Service commenced an examination of our United States income tax return for 2005 in the first quarter of 2007 that is anticipated to be completed by the end of 2008.

        Effective January 1, 2007 we adopted the provisions of FASB Interpretation No. 48 (FIN 48), "Accounting for Uncertainty in Income Taxes" resulting in a decrease of $1,581 in the liability for unrecognized tax benefits and an increase to the January 1, 2007 retained earnings balance.

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FURNITURE BRANDS INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands except per share data)

10. INCOME TAXES (Continued)

        A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

Beginning balance—January 1, 2007		$	12,697
Tax positions related to prior years
	Additions		964
	Reductions		—
Tax positions related to current year
	Additions		396
	Reductions		—
Settlements			(2,761	)
Lapses in statute of limitations			(1,737	)
Ending balance—December 31, 2007		$	9,559

        We recognize interest and penalties related to unrecognized tax benefits as a component of income tax expense. As of January 1, 2007 and December 31, 2007 the liability for unrecognized tax benefits included accrued interest of $3,491 and $2,670, respectively and accrued penalties of $251 and $619, respectively. We recognized interest benefits of $311 and penalty expense of $369 related to unrecognized tax benefits in the statement of operations for the year ended December 31, 2007. The total amount of unrecognized tax benefits at December 31, 2007 that, if recognized, would affect the effective tax rate is $9,210 ($7,000 net of income tax expense), with the balance reducing goodwill.

11. EMPLOYEE BENEFITS

        We sponsor or contribute to retirement plans covering substantially all employees. The total costs of these plans were as follows:

	Year Ended December 31,
	2007		2006		2005
Defined benefit plan	$	8,065	$	11,409	$	19,867
Defined contribution plan (401k plan)		10,348		11,662		793
Other		1,019		453		898
	$	19,432	$	23,524	$	21,558

Company-Sponsored Defined Benefit Plans

        Through 2005, employees were covered primarily by noncontributory plans, funded by Company contributions to trust funds, which are held for the sole benefit of employees. In 2007 we made a cash contribution of $12,000 to the trust fund. No contributions were made to the trust fund in 2005 or

42

FURNITURE BRANDS INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands except per share data)

11. EMPLOYEE BENEFITS (Continued)

2006. Future contributions will be made in accordance with ERISA requirements. At December 31, 2007 expected benefit payments to retirees and/or beneficiaries are as follows.

Year	Amount
2007	$	23,878
2008		24,701
2009		25,546
2010		26,512
2011		27,784
2001-2016	$	154,414

        As of December 31, 2005 we amended the defined benefit plans, freezing and ceasing future benefit accruals as of that date. Certain transition benefits are being provided to participants who had attained age 50 and had completed 10 years of service as of December 31, 2005. We currently provide retirement benefits to our employees through a defined contribution plan.

        The investment objective of the trust funds is to ensure, over the long-term life of the trusts, an adequate asset balance to support the benefit obligations to participants, retirees and beneficiaries. In meeting this objective, we seek to achieve investment returns at or above selected benchmarks consistent with a prudent level of diversification. We retain registered investment advisors to manage specific asset classes. Investment advisors are selected from established and financially sound organizations with proven records in managing funds in the appropriate asset class. Investment advisors are given strict investment guidelines and performance benchmarks. The assets of the various plans include corporate equities, government securities, corporate debt securities and investment grade mortgage contracts.

        Annual cost for defined benefit plans is determined using the projected unit credit actuarial method. Prior service cost is amortized on a straight-line basis over the average remaining service period of employees expected to receive benefits.

        It is our practice to fund pension costs to the extent such costs are tax deductible and in accordance with ERISA. The assets of the various plans include corporate equities, government

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FURNITURE BRANDS INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands except per share data)

11. EMPLOYEE BENEFITS (Continued)

securities, corporate debt securities and insurance contracts. The table below summarizes the funded status of our sponsored defined benefit plans.

			December 31, 2007						December 31, 2006
			Qualified Plan			Non-Qualified Plan			Qualified Plan			Non-Qualified Plan
Change in projected benefit obligation:
	Beginning of year		$	402,202		$	27,782		$	403,780		$	26,695
	Service cost			4,158			340			4,893			388
	Interest cost			23,721			1,506			23,051			1,548
	Actuarial (gain) loss			(5,379	)		(1,415	)		(9,171	)		523
	Benefits paid			(20,708	)		(1,403	)		(20,351	)		(1,372	)
		End of year	$	403,994		$	26,810		$	402,202		$	27,782
Change in fair value of plan assets:
	Beginning of year		$	368,629		$	—		$	348,480		$	—
	Actual return on plan assets			20,822			—			40,500			—
	Employer contributions			12,000			1,403			—			1,372
	Benefits paid			(20,708	)		(1,403	)		(20,351	)		(1,372	)
		End of year	$	380,743		$	—		$	368,629		$	—
													—
Accrued pension cost			$	(23,251	)	$	(26,810	)	$	(33,573	)	$	(27,782	)
Accumulated benefit obligation			$	398,895		$	26,249		$	395,361		$	27,035

        The asset allocations for our defined benefit plans are as follows:

	Percentage of Plan Assets
	Target		December 31, 2007		December 31, 2006
Equity securities	55	%	55	%	56	%
Debt securities	45	%	45	%	44	%
	100	%	100	%	100	%

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FURNITURE BRANDS INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands except per share data)

11. EMPLOYEE BENEFITS (Continued)

        Net periodic pension expense for 2007, 2006, and 2005 included the following components:

	Year Ended December 31,
	2007			2006			2005
Service cost-benefits earned during the period	$	4,498		$	5,281		$	12,969
Interest cost on the projected benefit obligation		25,228			24,600			25,057
Expected return on plan assets		(26,265	)		(25,499	)		(26,007	)
Net amortization and deferral		4,604			7,027			6,503
Curtailment charge		—			—			1,345
Net periodic pension expense	$	8,065		$	11,409		$	19,867

        The estimated amount that will be amortized from accumulated other comprehensive income into net periodic benefits cost in 2008 is $3,687.

        Actuarial assumptions used to determine costs and benefit obligations are as follows:

		2007		2006		2005
Assumptions used to determine net pension expense:
	Expected long-term rate of return on plan assets	7.50	%	7.50	%	7.50	%
	Average discount rate	6.00	%	5.75	%	6.00	%
	Long-term rate of compensation increase	3.50	%	3.50	%	3.50	%
Assumptions used to determine benefit obligation as of December 31:
	Average discount rates	6.25	%	6.00	%	5.75	%
	Long-term rate of compensation increase	3.50	%	3.50	%	3.50	%

        The expected long-term rate of return assumption was developed through analysis of historical market returns by asset class, current market conditions and the trust funds past experience.

        The adoption of SFAS No. 158 resulted in the following adjustments to individual line items on our statement of financial position as of December 31, 2006:

	Before Application of SFAS No. 158		Adjustments		After Application of SFAS No. 158
Other long-term liabilities (accrued pension expense)	105,414		8,081		113,495
Deferred income taxes	47,668		(3,031	)	44,637
Accumulated other comprehensive income	(28,138	)	(5,050	)	(33,188	)

Defined Contribution Plan

        We sponsor a defined contribution plan which covers all domestic employees. Participating employees may contribute a percentage of their compensation to the plan, subject to limitations imposed by the Internal Revenue Service. We match a portion of the employee's contribution and

45

FURNITURE BRANDS INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands except per share data)

11. EMPLOYEE BENEFITS (Continued)

employees vest immediately in the company match. Effectively January 1, 2006 the company matching formula was increased when the defined benefit plan was frozen as previously discussed.

12. OTHER LONG-TERM LIABILITIES

        Other long-term liabilities consist of the following:

	December 31, 2007		December 31, 2006
Pension liability	$	50,899	$	61,935
Other		71,014		51,560
	$	121,913	$	113,495

        We made a contribution of $12,000 to the pension plan in the third quarter of 2007 and expect to make future contributions as required by funding regulations.

        Other long-term liabilities includes the non-current portion of accrued workers compensation, accrued rent associated with leases with escalating payments, liabilities for unrecognized tax benefits, deferred compensation and long-term incentive plans and various other non-current liabilities.

13. OTHER COMPREHENSIVE INCOME (EXPENSE)

        Other comprehensive income (expense) consists of the following:

	Year Ended December 31,
	2007		2006			2005
Pension liability	$	4,456	$	27,787		$	(19,348	)
Foreign currency translation		3,439		1,171			555
Change in fair value of financial instruments accounted for as hedges		—		(8,714	)		2,547
		7,895		20,244			(16,246	)
Income tax expense (benefit)		1,672		7,000			(5,940	)
	$	6,223	$	13,244		$	(10,306	)

        The components of accumulated other comprehensive income (expense), each presented net of tax, are as follows:

	December 31, 2007			December 31, 2006
Pension liability	$	(31,138	)		(33,922	)
Foreign currency translation		4,173			734
	$	(26,965	)	$	(33,188	)

46

FURNITURE BRANDS INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands except per share data)

14. LEASES

        Certain of our real properties and equipment are operated under lease agreements. Rental expense under operating leases was as follows:

	Year Ended December 31,
	2007			2006			2005
Rent expense	$	71,046		$	57,396		$	51,660
Sublease income		(13,707	)		(16,912	)		(11,882	)
Net rent expense	$	57,339		$	40,484		$	39,778

        Included in rent expense for 2007 was the lease termination charge of $7,217 associated with the closing of 18 company-owned retail stores.

        Annual minimum payments under operating leases are as follows:

Year	Minimum Lease Payments		Sublease Income		Net Minimum Lease Payments
2008	$	54,696	$	13,491	$	41,205
2009		51,196		13,323		37,873
2010		46,610		13,897		32,713
2011		41,669		14,156		27,513
2012		38,074		13,508		24,566
thereafter		84,696		31,799		52,897
	$	316,941	$	100,174	$	216,767

        We have provided guarantees related to store leases for certain independent dealers opening Company-brand stores (e.g., Thomasville Home Furnishings Stores). The guarantees range from rolling 5-year guarantees to full-term guarantees (usually 10 years) and generally require us to make lease payments in the event of default by the dealer. In the event of default, we have the right to assign or assume the lease. The total future lease payments guaranteed at December 31, 2007 were $65,155. We consider the estimated loss on these guarantees to be insignificant; therefore, as of December 31, 2007 we have not recorded any contingent liability for lease guarantees.

15. CONTINGENT LIABILITIES

        We are or may become a defendant in a number of pending or threatened legal proceedings and are or may become a potentially responsible party in certain environmental matters in the ordinary course of business. In our opinion, our ultimate liability, if any, from all such proceedings is not reasonably likely to have a material adverse effect on our consolidated financial position or results of operations other than potential environmental exposures with respect to which monitoring or cleanup requirements may change over time.

        We offer limited warranties on certain products. In addition, we accept returns of defective product. Our accounting policy is to accrue an estimated liability for these returns at the time revenue is recognized. This estimate is based upon historical returns and adjusted for any warranty or return

47

FURNITURE BRANDS INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands except per share data)

15. CONTINGENT LIABILITIES (Continued)

issues at period end. The warranty reserve is included partially as a valuation allowance against accounts receivable and partially as an accrued expense. The following table summarizes reserve for returns activity:

	2007		2006		2005
Beginning balance	$	10,334	$	9,351	$	7,651
Additions charged to cost and expenses		26,797		28,474		25,130
Deductions from reserves		26,107		27,491		23,430
Ending balance	$	11,024	$	10,334	$	9,351

16. OTHER INCOME, NET

        Other income, net consists of the following:

	2007		2006		2005
Interest income	$	3,686	$	2,594	$	2,562
Gain on termination of hedge accounting		4,094		8,916		—
Other, net		2,469		3,315		1,961
	$	10,249	$	14,825	$	4,523

17. DISCONTINUED OPERATIONS

        On October 16, 2007, we announced our intent to divest Hickory Business Furniture (HBF) a wholly owned subsidiary that designs and manufactures business furniture in the mid- to upper-price range. We believe it is likely this transaction will be completed by the end of the first quarter of 2008. This business unit is reflected as a discontinued operation pursuant to the provisions of Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets.

        Assets and liabilities of discontinued operations are as follows:

		December 31, 2007
Accounts receivable		$	4,824
Inventories			7,191
Prepaid expenses and other current assets			221
	Total current assets		12,236
Property, plant and equipment, net			2,944
Goodwill			14,276
Other assets			743
	Total assets of discontinued operations	$	30,199
Accounts payable		$	3,662
Accrued expenses			1,645
Other non-current liabilities			141
	Total liabilities of discontinued operations	$	5,448

48

FURNITURE BRANDS INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands except per share data)

17. DISCONTINUED OPERATIONS (Continued)

        Operating results for the discontinued operations are as follows:

	2007		2006		2005
Net sales	$	63,606	$	56,495	$	44,248
Earnings before income tax expense		9,086		8,223		5,190
Net earnings	$	5,568	$	5,140	$	3,413

18. RECENTLY ISSUED STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS

        In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157 ("SFAS 157"), Fair Value Measurements. SFAS 157 defines fair value, establishes a framework for measuring fair value in U. S. GAAP, and expands the disclosure requirements regarding fair value measurements. The rule does not introduce new requirements mandating the use of fair value. SFAS 157 defines fair value as "the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date." The definition is based on an exit price rather than an entry price, regardless of whether the entity plans to hold or sell the asset. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The effective date for SFAS 157 has been delayed until fiscal years beginning after November 15, 2008 for non-financial assets and liabilities except those that are recognized or disclosed at fair value in the financial statements on a recurring basis. We are currently assessing the impact, if any, of SFAS 157 on our consolidated financial statements.

        In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141 (Revised 2007) ("SFAS 141R"), Business Combinations. SFAS 141R requires an acquiring entity to recognize all the assets acquired and liabilities assumed in a transaction at the acquisition-date fair value with limited exceptions. SFAS 141R applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. Earlier adoption is prohibited. We are currently assessing the impact of SFAS 141R on our consolidated financial statements; however, the impact will be limited to business combinations occurring on or after January 1, 2009.

        In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159 ("SFAS 159"), The Fair Value Option for Financial Assets and Financial Liabilities—Including an Amendment of FASB Statement No. 115. SFAS 159 permits entities to choose, at specified election dates, to measure many financial instruments and certain other items at fair value that are not currently measured at fair value. Unrealized gains and losses on items for which the fair value option has been elected would be reported in earnings at each subsequent reporting date. SFAS 159 also establishes presentation and disclosure requirements in order to facilitate comparisons between entities choosing different measurement attributes for similar types of assets and liabilities. SFAS 159 does not affect existing accounting requirements for certain assets and liabilities to be carried at fair value. SFAS 159 is effective as of the beginning of a reporting entity's first fiscal year that begins after November 15, 2007. We are currently assessing the impact, if any, of SFAS 159 on our consolidated financial statements.

49

FURNITURE BRANDS INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands except per share data)

18. RECENTLY ISSUED STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS (Continued)

        In December 2007, the FASB issued Statement of Financial Accounting Standards No. 160 (SFAS 160"), Noncontrolling Interests in Consolidated Financial Statements—An Amendment of ARB No. 51. SFAS 160 establishes new accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. Earlier adoption is prohibited. We are currently assessing the impact, if any, of SFAS 160 on our consolidated financial statements.

        In September 2006, the Emerging Issues Task Force issued EITF 06-4, Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements. This consensus concludes that for a split-dollar life insurance arrangement within the scope of this Issue, an employer should recognize a liability for future benefits in accordance with FASB Statement No. 106 (if, in substance, a postretirement benefit plan exists) or APB 12 (if, the arrangement is, in substance an individual deferred compensation contract) based upon the substantive agreement with the employee. The consensus is effective for fiscal years beginning after December 15, 2007. The effects of applying this consensus should be recognized through either (a) a change in accounting principle through a cumulative-effect adjustment to retained earnings or to other components of equity or net assets in the statement of financial position as of the beginning of the year of adoption or (b) a change in accounting principle through retrospective application to all prior periods. We anticipate the adoption of this consensus in 2008 will result in a cumulative-effect adjustment of $800 before income tax benefits.

50

FURNITURE BRANDS INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands except per share data)

19. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

        Following is a summary of unaudited quarterly information:

			Fourth Quarter			Third Quarter			Second Quarter		First Quarter
Year ended December 31, 2007:
	Net sales		$	504,786		$	500,840		$	519,471	$	556,959
	Gross profit			85,302			103,048			109,870		117,875
	Net earnings:
		Continuing operations	$	(41,809	)	$	(15,132	)	$	4,421	$	1,303
		Discontinued operations		1,131			1,476			1,387		1,574
		Total	$	(40,678	)	$	(13,656	)	$	5,808	$	2,877
	Earnings per common share—Diluted:
		Continuing operations	$	(0.86	)	$	(0.31	)	$	0.09	$	0.03
		Discontinued operations		0.02			0.03			0.03		0.03
		Total	$	(0.84	)	$	(0.28	)	$	0.12	$	0.06
	Dividends declared per common share		$	0.16		$	0.16		$	0.16	$	0.16
	Common stock price range:
		High	$	14.96		$	14.33		$	16.56	$	17.94
		Low	$	9.60		$	9.26		$	13.49	$	15.04
Year ended December 31, 2006:
	Net sales		$	572,844		$	555,212		$	587,059	$	646,565
	Gross profit			112,130			117,432			130,304		148,009
	Net earnings
		Continuing operations	$	1,027		$	4,586		$	15,578	$	28,724
		Discontinued operations		1,031			1,211			1,400		1,498
		Total	$	2,058		$	5,797		$	16,978	$	30,222
	Earnings per common share—Diluted:
		Continuing operations	$	0.02		$	0.09		$	0.32	$	0.58
		Discontinued operations		0.02			0.03			0.03		0.03
		Total	$	0.04		$	0.12		$	0.35	$	0.61
	Dividends declared per common share		$	0.16		$	0.16		$	0.16	$	0.16
	Common stock price range:
		High	$	20.96		$	22.21		$	25.00	$	25.34
		Low	$	15.90		$	18.10		$	18.79	$	21.20

        Earnings per common share were computed independently for each of the quarters presented. The sum of the quarters may not equal the total year amount due to the impact of computing average quarterly shares outstanding for each period.

        The closing market price of the Common Stock on December 31, 2007 was $10.06 per share.

51

Item 9.    Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

        None

Item 9A.    Controls and Procedures

Disclosure controls and procedures

        The Company's management, with the participation of the Company's Chief Executive Officer and the Company's Controller and Chief Accounting Officer, in his capacity as principal financial officer, evaluated the effectiveness of the Company's disclosure controls and procedures as of December 31, 2007. The term "disclosure controls and procedures" as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company's management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of the Company's disclosure controls and procedures as of December 31, 2007, the Company's Chief Executive Officer and its Controller and Chief Accounting Officer, in his capacity as principal financial officer, concluded that, as of such date, the Company's disclosure controls and procedures were effective at the reasonable assurance level.

        No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the three months ended December 31, 2007 that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

Management's Report on Internal Control over Financial Reporting

        Management of Furniture Brands International, Inc. is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in the Securities Exchange Act of 1934 Rule 13a-15(f). Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of the Company's internal control over financial reporting as of December 31, 2007 as required by the Securities Exchange Act of 1934 Rule 13a-15(c). In making this assessment, we used the criteria set forth in the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control—Integrated Framework our management concluded that our internal control over financial reporting was effective as of December 31, 2007.

Furniture Brands International, Inc.

St. Louis, Missouri
February 29, 2008

52

Report of the Independent Registered Public Accounting Firm

The Board of Directors and Shareholders
Furniture Brands International, Inc.:

        We have audited Furniture Brands International, Inc.'s internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Furniture Brands International, Inc.'s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.

        We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

        A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

        Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

        In our opinion, Furniture Brands International, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

        We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Furniture Brands International, Inc. as of December 31, 2007 and 2006, and the related consolidated statements of operations, shareholders' equity and comprehensive income (loss), and cash flows for each of the years in the three-year period ended December 31, 2007, and our report dated February 29, 2008 expressed an unqualified opinion on those consolidated financial statements.

/s/ KPMG LLP

St. Louis, Missouri
February 29, 2008

Item 9B.    Other Information

        None

53

PART III

Item 10.    Directors, Executive Officers and Corporate Governance

        The sections entitled "Nominees" and "Section 16(a) Beneficial Ownership Reporting Compliance" of our Definitive Proxy Statement for the Annual Meeting of Stockholders on May 1, 2008 are incorporated herein by reference.

Executive Officers of the Registrant

Name	Age	Position	Current Positions	Appointed or Elected
*Wilbert G. Holliman	70	President of the Subsidiary— Action Industries, Inc. Chief Executive Officer of the Subsidiary— Action Industries, Inc. Director President Chief Executive Officer Chairman of the Board	X X	1989 1994 1996 1996 1996 1998
Ralph P. Scozzafava	48	Vice-Chairman of the Board Chief Executive Office Designate Director Chief Executive Officer	X X X	2007 2007 2007 2008
Jon D. Botsford	53	Senior Vice President General Counsel Secretary	X X X	2008 2008 2008
Mary E. Sweetman	44	Vice President, Human Resources Senior Vice President, Human Resources	X	2006 2007
Richard R. Isaak	40	Controller Principle Financial Officer Principle Accounting Officer	X X X	2007 2007 2007
Jeffrey L. Cook	52	President, Broyhill	X	2007
William G.Holliman	43	Vice President, Marketing—Lane Executive Vice President, Sales and Marketing—Lane Executive Vice President, Purchasing/Wood Operations—Lane President, Lane	X	1997 2004 2005 2007
Edward Teplitz	46	President, Thomasville	X	2007
Dan Bradley	51	President, Designer Group	X	2007

*

Member of the Executive Committee

        William G. Holliman is the son of Wilbert G. Holliman.

        The executive officers are elected at the organizational meeting of the Board of Directors which follows the annual meeting of stockholders and serve for one year or until their successors are elected and qualified.

54

        Each of the executive officers has held the same position or other positions with the same employer during the past five years, except for the following:

Executive	Company	Position
Ralph P. Scozzafava	Wm. Wrigley Jr. Company	Vice President—Worldwide Commerical Operations Vice President and Managing Director—North America/Pacific Vice President and General Manager, U.S Vice president—Sales and Customer Marketing, U.S
Jon D. Botsford	Steelcase, Inc.	Senior Vice President and Chief Legal Officer
Mary E. Sweetman	Monsanto Company	Vice President, International Vice President, Human Resources, North America & Latin America; Vice President, Human Resources, North America
Jeffrey L. Cook	Magnussen Home Furnishings Inc.	President and Chief Executive Officer
Edward Teplitz	Ethan Allen, Inc.	Executive Vice President Vice President, Finance and Chief Financial Officer
Dan Bradley	Ferguson Copeland LTD Baker Knapp & Tubbs	President, Chief Executive Officer President

Code of Corporate Conduct

        We have adopted a code of business conduct for directors, officers (including the Company's principal executive officer, principal financial officer, principal accounting officer and controller) and employees, known as the Code of Corporate Conduct. Any person may request a free copy of the Code of Corporate Conduct from:

Furniture Brands International, Inc.
101 S. Hanley Road
St. Louis, MO 63105


Attn: Corporate Secretary
314-863-1100

        The Code of Corporate Conduct is available on our website: furniturebrands.com (Investor Information, Corporate Governance). We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K by posting any amendment or waiver to our Code of Corporate Conduct, within four business days, on our website for at least a 12 month period. Our website does not constitute part of this Annual Report on Form 10-K.

55

Audit Committee and Audit Committee Financial Expert

        The sections entitled "Board of Directors and Committees" and "Audit Committee Disclosure" of our Proxy Statement for the Annual Meeting of Stockholders on May 1, 2008 are incorporated herein by reference.

Item 11.    Executive Compensation

        The sections entitled "Executive Compensation" and "Compensation of Board of Directors" of our Definitive Proxy Statement for the Annual Meeting of Stockholders on May 1, 2008 are incorporated herein by reference.

Item 12.    Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters

        The section entitled "Security Ownership" of our Definitive Proxy Statement for the Annual Meeting of Stockholders on May 1, 2008 is incorporated herein by reference.

Item 13.    Certain Relationships and Related Transactions, and Director Independence

        The sections entitled "Board of Directors and Committees" and "Certain Relationships and Related Transactions" of our Definitive Proxy Statement for the Annual Meeting of Stockholders on May 1, 2008 are incorporated herein by reference.

Item 14.    Principal Accountant Fees and Services

        The section "Audit Committee Disclosure" of our Definitive Proxy Statement for the Annual Meeting of Stockholders on May 1, 2008 is incorporated herein by reference.

56

PART IV

Item 15.    Exhibits and Financial Statement Schedules

(a)

List of documents filed as part of this report:

1.

Financial Statements:

Consolidated balance sheets, December 31, 2007 and 2006

Consolidated statements of operations for each of the years in the three-year period ended December 31, 2007

Consolidated statements of cash flows for each of the years in the three-year period ended December 31, 2007

Consolidated statements of shareholders' equity and comprehensive income (expense) for each of the years in the three-year period ended December 31, 2007

Notes to consolidated financial statements

Report of Independent Registered Public Accounting Firm

2.

Financial Statement Schedules:

Valuation and qualifying accounts (Schedule II).

All other schedules are omitted as the required information is presented in the consolidated financial statements or related notes or are not applicable.

3.

Exhibits:

The following exhibits are filed herewith or are incorporated by reference to exhibits previously filed with the SEC (SEC File No. 001-00091). We shall furnish copies of exhibits for a reasonable fee (covering the expense of furnishing copies) upon request.

3(a)	Restated Certificate of Incorporation of the Company, as amended. (Incorporated by reference to Exhibit 3(a) to Furniture Brands International, Inc.'s Quarterly Report on Form 10-Q for the quarter ended March 31, 2002)
3(b)	By-Laws of the Company revised and amended to May 6, 1998. (Incorporated by reference to Exhibit 3(a) to Furniture Brands International, Inc.'s Quarterly Report on Form 10-Q for the quarter ended March 31, 1998)
3(c)	Rights Agreement, dated as of July 30, 1998, between the Company and Bank of New York, as Rights Agent. (Incorporated by reference to Exhibit 4(b) to Furniture Brands International, Inc.'s Report on Form 10-Q for the quarter ended June 30, 1998)
3(d)	Certificate of Designations, Preferences and Rights of Series A Junior Participating Preferred Stock of the Company. (Incorporated by reference to Exhibit 4(c) to Furniture Brands International, Inc.'s Report on Form 10-Q for the quarter ended June 30, 1998)

57

4(a)	Note Purchase Agreement dated May 17, 2006, for $150,000,000 6.83% Senior Notes due May 17, 2018 among Furniture Brands International, Inc., Broyhill Furniture Industries, Inc., HDM Furniture Industries, Inc., Lane Furniture Industries, Inc., and Thomasville Furniture Industries, Inc., and various institutional investors, and J.P. Morgan Securities Inc., Mitsubishi Securities (USA), Inc., Wachovia Capital Markets, LLC and Wells Fargo Capital Markets as agents. (Incorporated by reference to Exhibit 10 to Furniture Brands International, Inc.'s Current Report on Form 8-K, May 23, 2006)
4(b)	First Amendment dated April 16, 2007 to Note Purchase Agreement dated May 17, 2006, by and among Furniture Brands International, Inc., Broyhill Furniture Industries, Inc., HDM Furniture Industries, Inc., Lane Furniture Industries, Inc., and Thomasville Furniture Industries, Inc., and various institutional investors. (Incorporated by reference to Exhibit 10(a) to the Company's Current Report on Form 8-K, dated April 16, 2007 and filed on April 19, 2007)
4(c)	Second Amendment dated June 29, 2007 to Note Purchase Agreement dated May 17, 2006, by and among Furniture Brands International, Inc., Broyhill Furniture Industries, Inc., HDM Furniture Industries, Inc., Lane Furniture Industries, Inc., and Thomasville Furniture Industries, Inc., and various institutional investors. (Incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K dated on June 29, 2007 and filed on July 3, 2007)
10(a)	Furniture Brands International, Inc. 1992 Stock Option Plan, as amended. (Incorporated by reference to Exhibit 10(a) to Furniture Brands International, Inc.'s Form 10-Q for the quarter ended March 31, 2000)*
10(b)	Furniture Brands International, Inc. 1999 Long-Term Incentive Plan, as amended. (Incorporated by reference to Exhibit 4(f) to Furniture Brands International, Inc.'s Registration Statement on Form S-8, File No. 333-100133) *
10(c)	Furniture Brands Internal, Inc. 2005 Long-Term Performance Bonus Plan (Incorporated by reference to Exhibit 10(a) to Furniture Brands International, Inc.'s Current Report on Form 8-K, dated May 3, 2005)
10(d)	Form of Stock Option Grant Letter (Incorporated by reference to Exhibit 10(b) to Furniture Brands International, Inc.'s Current Report on Form 8-K, dated February 2, 2005)*
10(e)	Form of Restricted Stock Grant Letter (Incorporated by reference to Exhibit 10(c) to Furniture Brands International, Inc's. Current Report on Form 8-K, dated February 11, 2005)*
10(f)	Form of Indemnification Agreement between the Company and the Company's directors. (Incorporated by reference to Exhibit 10(c) to Furniture Brands International Inc.'s Annual Report on Form 10-K for the year ended December 31, 2001)*
10(g)	Furniture Brands International, Inc. Amended and Restated Restricted Stock Plan for Outside Directors, dated as of January 27, 2005. (Incorporated by reference to Exhibit 10(b) to Furniture Brands International, Inc.'s current Report on Form 8-K, dated May 3, 2005)*
10(h)	Retirement Plan for Directors. (Incorporated by reference to Exhibit 10(g) to Furniture Brands International, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1994)*

58

10(i)	First Amendment to Retirement Plan for Directors. (Incorporated by reference to Exhibit 10(e) to Furniture Brands International, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1994)*
10(j)	Furniture Brands International, Inc. Executive Incentive Plan, as amended on October 25, 2001. (Incorporated by reference to Exhibit 10(g) to Furniture Brands International Inc.'s Annual Report on Form 10-K for the year ended December 31, 2001)*
10(k)	Thomasville Furniture Industries, Inc. Executive Incentive Plan, as amended on January 24, 2002. (Incorporated by reference to Exhibit 10(i) to Furniture Brands International Inc.'s Annual Report on Form 10-K for the year ended December 31, 2001)*
10(l)	Drexel Heritage Furniture Industries, Inc. Executive Incentive Plan, dated January 24, 2002. (Incorporated by reference to Exhibit 10(k) to Furniture Brands International Inc.'s Annual Report on Form 10-K for the year ended December 31, 2001)*
10(m)	Form of Executive Incentive Plan Grant Letter to Company Executives (Incorporated by reference to Exhibit 10(a) to Furniture Brands International, Inc.'s Current Report on Form 8-K, dated February 2, 2005)*
10(n)	Form of Executive Incentive Plan Grant Letter to Operating Company Executives. (Incorporated by reference to Exhibit 10(q) to Furniture Brands International, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2004)*
10(o)	Employment Agreement, dated as of January 1, 2000, between the Company and Wilbert G. Holliman. (Incorporated by reference to Exhibit 10(j) to Furniture Brands International, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1998)*
10(p)	Employment Agreement, dated as of February 10, 2004, between the Company and John T. Foy. (Incorporated by reference to Exhibit 10(o), to Furniture Brands International, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2003)*
10(q)	Employment Agreement, dated as of February 7, 2005, between the Company and Denise L. Ramos (Incorporated by reference to Exhibit 10(a) to Furniture Brands International, Inc.'s Current Report On Form 8-K, dated February 11, 2005)*
10(r)	Employment Agreement, dated as of August 1, 1996, between the Company and Lynn Chipperfield. (Incorporated by reference to Exhibit 10(c) to Furniture Brands International, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1996)*
10(s)	Employment agreement dated as of September 6, 2005, between Thomasville Furniture Industries, Inc. and Nancy W. Webster (Incorporated by reference to Exhibit 10(s) to Furniture Brands International, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2006)*
10(t)	Employment Agreement dated June 14, 2007 between Ralph Scozzafava and the Company (Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K dated on June 14, 2007 and filed on June 18, 2007)*

59

10(u)	Form of Change of Control Agreement (Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K dated on June 19, 2007 and filed on June 26, 2007)*
10(v)	Executive Severance Plan of the Company (Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K dated on June 19, 2007 and filed on June 27, 2007)*
10(w)	Form of Agreement Not To Compete between the Company and Wilbert G. Holliman, John T. Foy, and Lynn Chipperfield (Incorporated by reference to Exhibit 10(r) to Furniture Brands International, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1998)*
10(x)	Furniture Brands Supplemental Executive Retirement Plan, dated as of January 1, 2002. (Incorporated by reference to Exhibit 10(v) to Furniture Brands International, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2002)*
10(y)	Form of Deferred Executive Compensation Agreement (Incorporated by reference to Exhibit 10(a) to Furniture Brands International, Inc.'s Current Report on Form 8-K, dated December 9, 2004)*
10(z)	Form of Cash Option Deferred Executive Compensation Agreement (Incorporated by reference to Exhibit 10(b) to Furniture Brands International, Inc.'s Current Report on Form 8-K, dated December 9, 2004)*
10(aa)	Furniture Brands International, Inc. Deferred Compensation Plan, effective January 1, 2006 (Incorporated by reference to Furniture Brands International, Inc.'s Registration Statement on Form S-8, File No. 333-130322)
10(bb)	Form of Long-Term Performance Cash Bonus Letter (Incorporated by reference to Exhibit 10(c) to Furniture Brands International, Inc.'s Current Report on Form 8-K, dated February 2, 2005)*
10(cc)	Credit Agreement dated June 21, 2007, among the Company, Broyhill Furniture Industries, Inc., HDM Furniture Industries, Inc., and Thomasville Furniture Industries, Inc. as Borrowers, Various Lenders, The Bank of Tokyo-Mitsubishi, UFJ, LTD., PNC Bank, National Association, Wachovia Bank, National Association and Wells Fargo Bank, NA, as Co-Syndication Agents, JP Morgan Chase Bank, N.A. as Administrative Agent, and J.P. Morgan Securities, Inc., as Sole Bookrunner and Sole Lead Arranger. (Incorporated by reference to Exhibit 10 to Furniture Brands International, Inc.'s Current Report on Form 8-K, dated April 26, 2006)
10(dd)	First Amendment, dated April 16, 2007, to the Credit Agreement, dated April 21, 2006, among the Company, Broyhill Furniture Industries, Inc., HDM Furniture Industries, Inc., Lane Furniture Industries, Inc., and Thomasville Furniture Industries, Inc., the Other Loan Parties named therein, the Lenders Party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, J.P. Morgan Securities Inc., as Sole Bookrunner and Joint Lead Arranger and Banc of America Securities LLC, as Joint Lead Arranger (Incorporated by reference to Exhibit 10(a) to the Company's Current Report on Form 8-K dated April 19, 2007 and filed on April 19, 2007)

60

10(ee)	Waiver and Amendment dated June 29, 2007 to the Credit Agreement dated April 21, 2006, by and among the Company, Broyhill Furniture Industries, Inc., HDM Furniture Industries, Inc., Lane Furniture Industries, Inc., and Thomasville Furniture Industries, Inc. and various lenders, The Bank of Tokyo-Mitsubishi UFJ, LTD., PNC Bank, National Association, Wachovia Bank, National Association, as Co-Syndication Agents and JPMorgan Chase Bank, N.A., as Administrative Agent (Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K dated on June 29, 2007 and filed on July 3, 2007)
10(ff)	Credit Agreement, dated August 9, 2007, among the Company, Broyhill Furniture Industries, Inc., HDM Furniture Industries, Inc., Lane Furniture Industries, Inc., and Thomasville Furniture Industries, Inc, the Loan Parties named therein, the Lenders Parties thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, J.P.Morgan Securities Inc., as Sole Bookrunner and Joint Lead Arranger and Banc of America Securities LLC, as Joint Lead Arranger. (Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K dated on August 9, 2007 and filed on August 10, 2007)
14	Code of Corporate Conduct
21	List of Subsidiaries of the Company
23	Consent of Independent Registered Public Accounting Firm
31.1	Certification of Ralph P. Scozzafava, Vice Chairman of the Board and Chief Executive Officer of the Company, Pursuant to Rule 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Richard R. Isaak, Controller and Chief Accounting Officer (Principal Financial Officer) of the Company, Pursuant to Rule 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Ralph P. Scozzafava, Vice Chairman of the Board and Chief Executive Officer of the Company, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Richard R. Isaak, Controller and Chief Accounting Officer (Principal Financial Officer) of the Company, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*

Indicates management contact or compensatory plan, contract or arrangement

61

Schedule II

FURNITURE BRANDS INTERNATIONAL, INC. AND SUBSIDIARIES

Valuation and Qualifying Accounts

			(Dollars in Thousands)
Description			Balance at Beginning of Period		Additions Charged to Costs and Expenses		Deductions From Reserves			Balance at End of Period
Year Ended December 31, 2007
	Allowances deducted from receivables on balance sheet:
		Allowance for doubtful accounts	$	21,595	$	24,994	$	(9,844	)(a)	$	36,645
		Allowance for cash discounts/chargebacks/other		7,430		26,715		(25,323	)(b)		8,822
			$	29,025	$	51,709	$	35,267		$	45,467
Year Ended December 31, 2006
	Allowances deducted from receivables on balance sheet:
		Allowance for doubtful accounts	$	16,053	$	13,410	$	(7,869	)(a)	$	21,595
		Allowance for cash discounts/chargebacks/other		7,315		30,052		(29,937	)(b)		7,430
			$	23,368	$	43,462	$	(37,806	)	$	29,025
Year Ended December 31, 2005
	Allowances deducted from receivables on balance sheet:
		Allowance for doubtful accounts	$	15,390		9,047		(8,384	)(a)		16,053
		Allowance for cash discounts/chargebacks/other		5,529		26,108		(24,322	)(b)		7,315
			$	20,919	$	35,155	$	(32,706	)	$	23,368

(a)

Uncollectible accounts written off, net of recoveries.

(b)

Cash discounts taken by customers and claims allowed to customers.

        See accompanying Report of Independent Registered Public Accounting Firm.

62

SIGNATURES

        Pursuant to the requirements of Section 13 of 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Furniture Brands International, Inc. (Registrant)
By:	/s/  RALPH P. SCOZZAFAVAVice-Chairman of the Board and Chief Executive Officer

Date: February 29, 2008

        Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on the date indicated.

Signature	Title	Date
/s/  WILBERT G. HOLLIMAN Wilbert G. Holliman	Chairman of the Board	February 29, 2008
/s/  RALPH P. SCOZZAFAVA Ralph P. Scozzafava	Vice-Chairman of the Board and CEO (Principal Executive Officer)	February 29, 2008
/s/  KATHERINE BUTTON BELL Katherine Button Bell	Director	February 29, 2008
/s/  JOHN R. JORDAN, JR. John R. Jordan, Jr.	Director	February 29, 2008
/s/  LEE M. LIBERMAN Lee M. Liberman	Director	February 29, 2008
/s/  RICHARD B. LOYND Richard B. Loynd	Director	February 29, 2008
/s/  BOB L. MARTIN Bob L. Martin	Director	February 29, 2008
/s/  AUBREY B. PATTERSON Aubrey B. Patterson	Director	February 29, 2008
/s/  MATTHEW E. RUBEL Matthew E. Rubel	Director	February 29, 2008
/s/  ALBERT E. SUTER Albert E. Suter	Director	February 29, 2008
/s/  RICHARD R. ISAAK Richard R. Isaak	Controller (Principal Financial Officer)	February 29, 2008

63

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PART I

Item 1. Business

Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments

Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders

PART II

Item 5. Market For Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Item 6. Selected Financial Data

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Item 8. Financial Statements and Supplementary Data

FURNITURE BRANDS INTERNATIONAL, INC. AND SUBSIDIARIES Index to Consolidated Financial Statements and Schedules
Report of Independent Registered Public Accounting Firm
FURNITURE BRANDS INTERNATIONAL, INC. CONSOLIDATED BALANCE SHEETS
FURNITURE BRANDS INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF OPERATIONS
FURNITURE BRANDS INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
FURNITURE BRANDS INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME (LOSS)
FURNITURE BRANDS INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands except per share data)

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information

PART III

Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accountant Fees and Services

PART IV

Item 15. Exhibits and Financial Statement Schedules

FURNITURE BRANDS INTERNATIONAL, INC. AND SUBSIDIARIES Valuation and Qualifying Accounts
SIGNATURES

EX-14

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Exhibit 14

FURNITURE BRANDS INTERNATIONAL, INC.

CODE OF CORPORATE CONDUCT

        The following are principles of conduct to which each director, officer and employee (employee) of Furniture Brands International, Inc. and subsidiaries (the Company) is expected to adhere in order to assure that the Company conducts itself in a manner consistent with its obligations to the stockholders and to society:

GENERAL INTEGRITY

        The Company values its reputation for integrity. We believe that honesty is not subject to criticism anywhere. Accordingly, even though standards of ethics may vary in different business environments, honesty and integrity should characterize our business activity everywhere.

COMPLIANCE WITH LAWS AND REGULATIONS

        The Company must compete vigorously in order to maximize profits, but must at the same time do so in strict compliance with all laws and regulations applicable to our activities. No employee should at any time take any action on behalf of the Company which he or she knows or reasonably should know violates any applicable law or regulation. In some instances, laws and regulations may be ambiguous and difficult to interpret. Management should seek legal advice from the Law Department when necessary in complying with this policy of observance of all laws and regulations.

POLITICAL CONTRIBUTIONS

        Except as may be authorized by the Company's Board of Directors, direct or indirect political contributions by the Company of money, goods or services are not to be made. While individual participation in the political process is proper and is encouraged by the Company, an employee's contribution must not be made, or even appear to be made, directly or indirectly with Company funds, or be reimbursed from Company funds. Nor should an employee's selection of a candidate or of a party be or seem to be, coerced by the Company.

BUSINESS RECORDS

        Employees must act to ensure clear, concise, timely, truthful and accurate reporting of Company information. No undisclosed or unrecorded fund or asset of the Company shall be established for any purpose. No false or artificial entries shall be made in the books and records of the Company for any reason, and no employee shall engage in any arrangement that results in such prohibited acts. No payment on behalf of the Company shall be approved or made with the intention or understanding that any part of such payment is to be used for a purpose other than that described by the documents supporting the payment.

        All employees must comply with Company policies, procedures and controls. Accounting and financial reporting of actual transactions and forecasts must follow the Company's accounting policies as well as all applicable generally accepted accounting principles and laws.

IMPROPER PAYMENTS AND PROTECTION AND USE OF COMPANY ASSETS

        All employees shall protect the Company's assets and ensure their efficient use. All Company assets shall be used for legitimate business purposes. The unauthorized use of any funds or property of the Company for any unlawful or improper purpose or for personal gain or benefit is prohibited.

        Bribery or the improper giving of money or anything else of value in an attempt to influence the action of a public official is prohibited. No employee is authorized to pay or receive any bribe or to make or receive any other illegal payment on behalf of the Company. This prohibition extends to

payments to or from consultants, agents or intermediaries when the employee has reason to believe that some part of the payment or "fee" will be used for a bribe or to influence government action.

        Payments (other than for the legitimate purchase of a product) or the giving or receiving of a gift of other than token or nominal value to or from suppliers or customers or their agents, employees or fiduciaries may constitute a commercial bribe, which may also be a violation of the law. Commercial bribery is prohibited and no employee may engage in such bribery on behalf of the Company.

CONFLICTS OF INTEREST

        An employee's primary duty is to act at all times in the best interests of the Company to the best of his or her ability. To avoid conflicts of interest, the following general rules are to be observed:

1.     OWNERSHIP OR FINANCIAL INTEREST IN OTHER BUSINESSES

        No employee or employee's relative or in-law shall compete with the Company. In addition, employees' business dealings on behalf of the Company shall not be influenced, or appear to be influenced, by personal or family interests. All potential conflict of interest situations must be disclosed by employees and resolved by the Company, including, without limitation, situations in which an employee or their close relative:

•

directly or indirectly receives a benefit from or has a financial interest in a competitor, supplier or customer of the Company;



•

has an individual or family interest in a transaction with the Company;

regardless of whether the relationship is regarded by the employee as fair or unfair to the Company and regardless of whether the employee acts in good faith or bad faith (Ownership of 1% or less of the outstanding shares of capital stock of any corporation whose shares are traded on a national exchange would ordinarily not be considered a conflict of interest.)

2.     CORPORATE OPPORTUNITIES

        No employee shall (a) benefit personally from opportunities that are discovered through the use of corporate property, information or position; (b) use corporate property, information or position for personal gain; or (c) compete with the Company. Employees owe a duty to the Company to advance its legitimate interests when the opportunity to do so arises.

3.     USE OF INSIDE INFORMATION

        The Company obeys all laws designed to protect the investing public with respect to disclosure of material information. Information is considered material if it would be expected to affect a reasonable investor's decision to buy, sell or hold Furniture Brands stock. Examples would be a significant upward or downward revision of earnings forecasts, a significant restructuring change, a major management change, or a significant acquisition or divestiture. Employees should not effect any transaction in the securities of the Company (including exercising stock options) or another company involved with Furniture Brands while they have material nonpublic information about Furniture Brands or the other company.

        Employees should not disclose material nonpublic information to anyone (including family members and other employees of the Company), except where disclosure is needed to enable the Company to carry on its business, and there is no reason to believe - because of an agreement or otherwise - that the information will be misused or improperly disclosed by the recipient. Within Furniture Brands, employees should only discuss or disclose material nonpublic information in the ordinary course of business and when they have no reason to believe that the information will be misused or improperly disclosed by the recipient.

        No employee should purchase or sell securities, or advise or in any way encourage anyone else to purchase or sell securities, on the basis of material nonpublic information. If an employee transmits

material nonpublic information to any other person who acts upon it, both the employee and the Corporation, or either of them, could be liable for the action of such other person.

4.     ACCEPTANCE OF GIFTS AND ENTERTAINMENT

        No employee shall accept any gift, favor, loan, payment or other special benefit or treatment of any kind having a value in excess of $100 (per maximum allowable IRS tax deduction) or excessive entertainment from any existing or potential supplier or customer of the Company. Mature discretion should be exercised.

        Any questions or requests for a waiver concerning specific situations of possible conflicts of interest shall be submitted in writing to the office of the Corporate Secretary for determination by the Audit Committee of the Board of Directors of the Company.

CONFIDENTIAL INFORMATION

        Employees shall maintain the confidentiality of information entrusted to them by the Company, its business partners, suppliers, customers or others related to the Company's business. Employees must not disclose to others (except when disclosure is authorized by the Company or legally mandated) or use (except pursuant to their employment duties) any confidential information, knowledge, or data whether during or after employment. Confidential information includes all non-public information that might be of use to competitors or harmful to the Company or its customers, if disclosed. Failure to adequately protect this corporate information could lead to the loss of highly confidential data that may place the Company at a disadvantage in the marketplace.

FAIR DEALING

        Each employee shall endeavor to deal fairly and in good faith with the Company's customers, shareholders, employees, suppliers, regulators, business partners and competitors. No employee shall take unfair advantage of anyone through manipulation, concealment, abuse of privileged or confidential information, misrepresentation, fraudulent behavior or any other unfair dealing practice.

DISCOVERY OF VIOLATIONS OF POLICY CONCERNING CORPORATE RESPONSIBILITY AND INTEGRITY

        Discovery of events of questionable or fraudulent or illegal nature which are in violation of Company policy should be reported to the office of the Corporate Secretary. The Company maintains a Code of Corporate Conduct hotline (1-888-899-4999) that can be used to report suspected violations of the Code. Reports to the Code hotline may be made anonymously. Confidentiality for those who report will be maintained to the extent possible. The Company forbids retaliation against employees who report violations of this Code of Corporate Conduct. If such instances are identified with persons at high levels within the Company, the matter should be reported to the Chairman of the Audit Committee of the Board of Directors. Any waiver of this Code for executive officers or directors may be made only by the Audit Committee of the Board of Directors and must be promptly disclosed to shareholders. The Company will investigate any matter so reported and may take appropriate disciplinary and corrective action, up to and including termination.

REPORTING COMPLIANCE WITH POLICY

        Each member of management of the Company and of each operating division and subsidiary shall prepare a letter annually for submission to the Audit Committee of the Board of Directors of the Company, which shall affirm a knowledge and understanding of the foregoing policy and shall report any transactions or events where it might appear to an outsider that this policy has not been observed. These statements will be reviewed by the Audit Committee and any deviations from policy shall be reported to the Chairman of the Board of Directors.

January, 2007

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Exhibit 14

FURNITURE BRANDS INTERNATIONAL, INC. CODE OF CORPORATE CONDUCT

EX-21

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Exhibit 21

LIST OF SUBSIDIARIES
OF
FURNITURE BRANDS INTERNATIONAL, INC.

Name of Subsidiary	Jurisdiction of Incorporation
Action Transport, Inc.	Delaware
Broyhill Furniture Industries, Inc.	North Carolina
Broyhill Home Furnishings, Inc.	Delaware
Broyhill Retail, Inc.	Delaware
Broyhill Transport, Inc.	North Carolina
Decorative Hardware Solutions (L) Bhd.	Malaysia
Fayette Enterprises, Inc.	Mississippi
HDM Furniture Industries, Inc.	Delaware
HDM Transport, Inc.	North Carolina
HDM Retail, Inc.	Delaware
Henredon Designer Showrooms, Inc.	Delaware
Hickory Business Furniture, Inc.	North Carolina
Lane Furniture Industries, Inc.	Mississippi
Lane Home Furnishings Retail, Inc.	Delaware
Laneventure, Inc.	Delaware
Maitland-Smith Asia Holdings Limited	Vanuatu
Maitland-Smith Cebu, Inc.	Philippines
Maitland-Smith Furniture Industries, Inc.	Delaware
Maitland-Smith Limited	Hong Kong
P.T. Maitland-Smith Indonesia	Indonesia
Maitland-Smith Export (L) Bhd.	Malaysia
The Lane Company, Incorporated	Virginia
Thomasville Furniture Industries, Inc.	Delaware
Thomasville Home Furnishings, Inc.	Delaware
Thomasville Retail, Inc.	Virginia

        Lane Furniture Industries, Inc. also does business as Laneventure.

        Thomasville Furniture Industries, Inc. also does business as HBF, Founders, Creative Interiors and Vignettes. HDM Furniture Industries, Inc. also does business as Hickory Chair Company and The Pearson Company.

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Exhibit 21

LIST OF SUBSIDIARIES OF FURNITURE BRANDS INTERNATIONAL, INC.

EX-23

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Exhibit 23

Consent of Independent Registered Public Accounting Firm

The Board of Directors
Furniture Brands International, Inc.:

        We consent to the incorporation by reference in the registration statements (Nos. 33-65714, 333-6990, 333-39355, 333-80189, 333-100133 and 333-130322) on Form S-8 of Furniture Brands International, Inc. of our reports dated February 29, 2008, with respect to the consolidated balance sheets of Furniture Brands International, Inc. as of December 31, 2007 and 2006, the related consolidated statements of operations, shareholders' equity and comprehensive income (loss) and cash flows for each of the years in the three-year period ended December 31, 2007, the related financial statement schedule, and the effectiveness of the internal control over financial reporting as of December 31, 2007, which reports appear in the December 31, 2007 annual report on Form 10-K of Furniture Brands International, Inc..

        As discussed in Note 10 to the consolidated financial statements, the Company adopted FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes", effective January 1, 2007. As discussed in Note 2 to the consolidated financial statements, the Company adopted Statement of Financial Accounting Standard No. 123 (Revised 2004), "Share Based Payments", effective January 1, 2006. As discussed in Note 11 to the consolidated financial statements, the Company adopted Statement of Financial Accounting Standards No. 158, "Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans", effective December 31, 2006.

/s/ KPMG LLP

St. Louis, Missouri
February 29, 2008

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Exhibit 23

EX-31.1

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Exhibit 31.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Ralph P. Scozzafava, certify that:

1.

I have reviewed this annual report on Form 10-K of Furniture Brands International, Inc.;

2.

Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3.

Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4.

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this annual report based on such evaluation; and

d)

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

February 29, 2008

Signature: /s/ Ralph P. Scozzafava Ralph P. Scozzafava
Chief Executive Officer

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Exhibit 31.1

EX-31.2

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Exhibit 31.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Richard R. Isaak, certify that:

1.

I have reviewed this annual report on Form 10-K of Furniture Brands International, Inc.;

2.

Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3.

Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4.

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this annual report based on such evaluation; and

d)

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

February 29, 2008

Signature:  /s/ Richard R. Isaak Richard R. Isaak
Controller and Chief Accounting Officer
(Principal Financial Officer)

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Exhibit 31.2

EX-32.1

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Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

        In connection with the annual report of Furniture Brands International, Inc. (the "Company") on Form 10-K for the fiscal year ending December 31, 2007 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Ralph P. Scozzafava, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and



(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Ralph P. Scozzafava Ralph P. Scozzafava
Title: Chief Executive Officer
Furniture Brands International, Inc.
February 29, 2008

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Exhibit 32.1

EX-32.2

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Exhibit 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

        In connection with the annual report of Furniture Brands International, Inc. (the "Company") on Form 10-K for the fiscal year ending December 31, 2007 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Richard R. Isaak, Controller and Chief Accounting Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and



(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Richard R. Isaak Richard R. Isaak
Title: Controller and Chief Accounting Officer
(Principal Financial Officer)
Furniture Brands International, Inc.
February 29, 2008

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Exhibit 32.2