Furniture Brands stock suffering

Aug. 23, 2013 @ 07:24 AM

Beleaguered Furniture Brands International Inc. gained a brief respite earlier this week as investors reacted to a Wall Street Journal story saying the company's management has hired restructuring lawyers and advisers to deal with its debt load.

Its share price rose 11.3 percent Tuesday, or by 8 cents to 79 cents. But it dropped back Wednesday, and on Thursday it closed at 68 cents, lower than it started before the news of restructuring advisers.

Ralph Scozzafava, the company's chairman and chief executive, told analysts during a conference call earlier this month that "we've recently conducted a thorough review of our portfolio of assets with our board, and outside advisers are in the process of executing on specific initiatives that were the output of this review.

"These include possible sales of non-core or underperforming assets."

In May, the company conducted a 7-for-1 reverse stock split, raising the share price to $6.93 at that time and reducing the number of outstanding shares from 56.4 million to about 8.06 million. It took that action in an attempt to avoid being delisted by the New York Stock Exchange for its stock being under $1 a share.

But Furniture Brands' dismal financial performance, punctuated by a $40 million loss in the second quarter, relentlessly drove down the share price. The stock started Tuesday at 71 cents, or the equivalent of 10 cents before the reverse stock split.

The company's struggles led John Baugh, an analyst with Stifel Nicolaus, to predict earlier this month that it is headed for liquidation or bankruptcy, possibly by the end of the year.

"The equity is worth nothing, in our opinion," Baugh told the Winston-Salem Journal Aug. 7.

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.

The company, based in St. Louis, was in the early 2000s the largest U.S. furniture manufacturer at $2.2 billion in annual sales, primarily from divisions based in North Carolina -- Broyhill Furniture Industries Inc., HDM Furniture Industries Inc. and Thomasville Furniture Industries Inc.

Over the past 12 years, Furniture Brands eliminated at least 8,860 jobs in North Carolina, including at least 2,874 in the Triad, in pursuit of lower labor costs in Asia, but at the same time did not see increased sales.