FBI consolidating U.S. plants, expanding overseas
By Jay McIntosh -- Furniture Today, July 20, 2008
ST. LOUIS — Furniture Brands International will consolidate plants in North Carolina and Mississippi and will expand a company-owned factory in Indonesia as part of an accelerated effort to reduce costs and improve efficiencies, the company announced last week.
The manufacturer and importer also slashed its sales and earnings forecasts, citing the costs of the faster changes, advisory fees associated with a proxy battle, and the weak economy.
Furniture Brands said the moves would increase the cost savings from its ongoing restructuring plan to between $55 million and $70 million a year. Earlier, it had predicted savings of $40 million to $50 million.
The company earlier specified two U.S. plants for closing, a Lane facility in Pontotoc, Miss., and a Henredon and Drexel Heritage plant in High Point. A spokesman said more may be identified later. The company said that as it consolidates plants it will expand or implement multiple work shifts to “leverage the existing work force and provide greater resiliency to changing demand conditions.”
Furniture Brands also said it has acquired property for a five-fold increase in the capacity of its Semarang, Indonesia plant, which makes case goods for its high-end brands. Currently, the plant is 200,000 square feet.
The company, whose brands include Broyhill, Lane, Thomasville, Drexel Heritage, Henredon and Maitland-Smith, revised its 2008 earnings guidance to net sales of $1.75 billion to $1.8 billion and a loss from continuing operations of 49 cents to 55 cents per share.
In April, it had predicted sales of $1.9 billion to $2 billion and earnings per share from continuing operations of 40 cents to 60 cents.
Included in the new forecast were charges of 88 cents to $1.04 per share related to the cost-saving moves and the proxy contest. In May, private equity firm Sun Capital captured three board seats at the company after a proxy fight.
In addition to the manufacturing changes, the company also will speed up its exit from unprofitable retail locations. It closed some Lane and Broyhill branded stores in late 2007 and continues to hold lease obligations, and will record pre-tax charges and a cash outlay of $13 million to $15 million in the second half to exit them.
The manufacturing changes are expected to result in $9 million to $10 million in pre-tax charges with a cash impact of $3 million to $5 million. The company also said it will increase its accounts receivable reserves by $13 million to $15 million, and will record $4 million in severance costs.
“We made the decision to take these actions to address weak economic conditions and to achieve the benefits of our plan sooner,” Ralph Scozzafava, Furniture Brands' chairman and CEO, said in a press release. “We still expect that the company's strategic plan will generate previously announced annualized cost savings of $40 million to $50 million when fully implemented in the first half of next year.
“The accelerated actions announced today are expected to increase that level of savings to a range of $55 million to $70 million on an ongoing basis and will provide greater resiliency to negative market conditions,” he said.
The company said it can afford to accelerate the changes because of its strong balance sheet, with $131.8 million in cash and long-term debt of $200 million on June 30.
“We're building capabilities while driving down our break-even point,” said Scozzafava. “We are choosing to be proactive and not to merely stand behind our strong balance sheet and wait for better times to remake Furniture Brands. We believe these are the right actions to take for our stockholders and will make Furniture Brands a much better company.”
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