PeopLoungers in Ch. 11
By Gary Evans -- Furniture Today, May 21, 2007
Nettleton, Miss. — Motion furniture manufacturer Peop-Loungers said last week it expects to emerge from Chapter 11 bankruptcy, and that a court had granted it permission to obtain debtor-in-possession financing to continue production and shipping.
The 28-year-old company filed for Chapter 11 protection last Tuesday, saying it owed more than $5.7 million to its 20 largest unsecured creditors.
"With customer support, we should be able to ship in a timely manner," said Jimmy Green, chairman and president. "We will have a few hiccups on the front end, but long term we're going to be here."
Green said last week that the 450-employee company has a four-week order backlog and is working 37- to 40-hour weeks in what is usually a slow time for Mississippi upholstery producers.
Green said the company's restructuring plan depends on the financing it received last week and the continuing support of key customers, vendors and its workforce.
This will be the second time that Green, a former commercial banker, will have to bring PeopLoungers, a pioneer in motion furniture, through difficult times. He said that when he bought the company 10 years ago from Jim Muffi, the business was $4 million in the red, had unpaid bills of $3 million and had $2 million worth of obsolete covers.
With a lofty goal of hitting $150 million in sales and employing 1,000 people, Green streamlined the product line and focused on the styles and covers that consumers wanted. Annual sales, however, peaked at about $90 million three years ago and are now at about $50 million, he said.
In the past three years, Green said prices of raw materials have risen dramatically, while retailers have hung on to old price points, forcing manufacturers like PeopLoungers to absorb the cost. He added that imported goods also are causing price deflation. "We've been getting pressure from both sides," he said.
Industry sources speculated that undercapitalization, high overhead and reduced margins contributed to the company's troubles, as did its efforts — later abandoned — to add stationary upholstery and imported bedroom programs.
Green said that after restructuring, the company will "be more efficient and run a better type operation from the SKU standpoint. And we'll be focused on certain key customers who do business with us."
He added, "I think most people will stay with us. If we don't perform and we don't ship (on schedule) over a period of several months, I can't blame them for not doing business with us."
According to documents filed in U.S. Bankruptcy Court in Aberdeen, Miss., Hickory Springs is the largest unsecured creditor at $1.97 million. The next two largest are Chinese furniture companies, Haining Mengnu Group and Haining Jinzheng Furniture, which are owed $1.1 million and $658,127, respectively.
Other industry suppliers listed as creditors include mechanism producer Omega, which is owed $393,210; foam producer Foamex, $256,794; and components supplier Leggett & Platt, $122,888. Also on the list are three fabric producers, Culp at $86,584, Global Textiles at $62,633 and Hanes Converting at $40,682.
In its bankruptcy petition, PeopLoungers said it believes there will be funds available for distribution to unsecured creditors.
