Lenoir, N.C., Sept. 3, 2013 - (News-Topic.net)The recent economic woes and uncertain future of Furniture Brands International means many company employees in Caldwell County have uncertain futures as well.
Furniture Brands has struggled more than other manufacturers to recover from the recession and reported a $40 million loss in the second quarter of 2013, prompting analyst John Baugh of the firm Stifel Nicolaus to predict that the company could soon start selling off pieces or file for bankruptcy protection, and investment firm Raymond James released a report on the company Aug. 7 titled “Oh My! Circling the Drain – Faster and Faster.”
Furniture Brands has 10 separate brands, including Broyhill Furniture and Thomasville Furniture. Certain of them, including Thomasville, have strong, positive recognition among consumers that could entice potential buyers even if Furniture Brands as a whole can't survive, said Natalie Everett, a furniture industry analyst with IBIS World, an independent publisher of U.S. industry research.
She cited the example of Twinkies, a popular product with strong brand recognition made by Hostess Brands, which closed in November and filed for bankruptcy protection. The Twinkies brand was bought by private equity firms Apollo Global Management and Metropoulos & Co. and made a strong comeback.
“It could be positive and it could be negative,” Everett said. “It depends on the buying company and what their interests are.”
But even if there are buyers interested in one or more of the company's brands, there's no telling whether new owners would maintain, downsize or close existing facilities, Everett said.
Apollo Global and Metropoulos, for instance, do not use the unionized workers that Hostess employed, reducing manufacturing costs.
Everett said the process of bankruptcy and selling, if Furniture Brands goes that route, could take anywhere from a few weeks to several months. What happens to the company's operations during that time would depend on proceedings in bankruptcy court, which she described as complex and difficult to predict.
Generally when companies are bought, with or without a bankruptcy declaration, downsizing follows, said Gerald T. Fox, a professor of economics at High Point University who has studied the economic impacts of the furniture manufacturing industry in North Carolina.
Fox said that usually companies establish a plan to become more competitive, which could include laying off workers or upgrading technology.
Furniture manufacturing has declined at an average of 4.9 percent annually since 2008, Everett said, adding that current estimates for the industry are for $24.5 million in revenue for the whole industry this year and a continued decline of 1.1 percent annually through 2018.
Furniture Brands, based in St. Louis, was the largest U.S. furniture manufacturer at $2.2 billion in annual sales in the early 2000s, primarily from divisions based in North Carolina — Broyhill, Thomasville and HDM Furniture Industries. But it now represents only 3 percent of the household furniture manufacturing industry, an industry populated by a large number of small companies, the biggest player of which is Ashley Furniture.
A couple of weeks ago, the company’s management hired restructuring lawyers and advisers to deal with its debt load, including "possible sales of non-core or underperforming assets." That resulted in a short-lived rally for Furniture Brands' stock, but it soon resumed sinking.
At least six law firms are seeking shareholders to participate in a class-action lawsuit against the company. The common accusation: The company has violated federal securities law, particularly overstating the value of its brands. The company said Aug. 6 it took a $10.8 million charge related to trade name impairments.
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