Broyhill had lowest margins in Furniture Brands

Oct. 20, 2013 @ 08:39 AM

Broyhill Furniture Industries had the lowest gross margin dollars among the manufacturing divisions of Furniture Brands International the past few years, according to documents the company filed earlier this month in U.S. Bankruptcy Court.

But that isn't necessarily an indicator of what will happen to Broyhill plants once the bankruptcy process is completed, said Edwin Allman III, a Winston-Salem-based lawyer who specializes in consumer and business bankruptcy law.

"Obviously, it doesn't behoove well for those brands as being prime brands to acquire," Allman said. "It could be that an acquisition company looks at brands having more potential based on reputation for quality."

The documents filed by Furniture Brands in U.S. Bankruptcy Court show gross margins since 2011 by each division. Gross margins are net sales minus cost of goods sold.

When it comes to what parts of Furniture Brands may be closed or restructured by a new owner, gross margins may be a minor factor or a large one, Allman said – it all depends on the buyer,

If the entity that buys Furniture Brands is a financial buyer -- one interested only in maximizing its return on investment -- the chances of closures or layoffs may be greater than if the buyer is a strategic buyer, one who may already have a furniture or related business that could make use of Furniture Brands' existing operations, Allman said.

In the court filing, Furniture Brands reported that its high-end HDM division -- which includes Henredon, Drexel Heritage, Maitland-Smith, Hickory Chair and Pearson -- generated gross margins of $67.5 million in 2011, $66.6 million in 2012 and $37.5 million through Aug. 23 this year.

At Lane Furniture Industries, the gross margins were $62.6 million in 2011, $42.4 million in 2012 and $14 million in 2013.

At Thomasville Furniture Industries, the gross margins were $36.5 million in 2011, $36.6 million in 2012 and $18.9 million in 2013.

For Broyhill, the gross margins listed were $27.9 million in 2011, $23.4 million in 2012 and $9.5 million in 2013.

In the company's retail divisions, HDM Retail reported gross margins of $11.2 million in 2011, $11.2 million in 2012 and $5.9 million in 2013.

At Thomasville Home Furnishings, gross margins were $4.5 million in 2011, $4.7 million in 2012 and $3.5 million to date in 2013.

Broyhill Retail listed $1.2 million of gross margins in 2011, $1.1 million in 2012 and $547,325 in 2013.

Lane Home Furnishings Retail listed $641,819 in gross margins for 2011.