Furniture Brands To Lay Off 15 Percent Of Domestic Workforce

Furniture World Magazine

Furniture Brands International announced that the company is reducing its workforce to reflect continuing soft retail market conditions. The staffing reduction will eliminate approximately 1,400 management, professional and hourly positions across all functions, a decrease of approximately 15% in Furniture Brands' domestic workforce. Severance costs associated with this reduction are expected to total between $8 million and $9 million, most of which will be reflected in the company's fourth quarter 2008 reported financial results. The cash impact of the severance will be incurred in the first quarter of 2009. The elimination of management and professional positions not related to direct production costs is expected to result in annual, run-rate cost savings in excess of $20 million beginning in early 2009. The elimination of direct production positions matches anticipated lower sales volumes stemming from soft market conditions and is expected to lessen the company's exposure to factory down days. Through the first nine months of 2008, factory down day costs totaled $14 million. "These reductions are an inevitable response to the recessionary environment and are necessary to strengthen Furniture Brands for the future," said Chairman and Chief Executive Officer Ralph P. Scozzafava. "By aligning our costs with anticipated lower sales volumes, we are positioning the company for 2009 and beyond. With the eventual return of historical consumer spending patterns, Furniture Brands will be well positioned to leverage our more efficient cost base into improved profitability. "Our efforts at delivering value for Furniture Brands' shareholders go beyond cost reductions. Our new product introductions and consumer testing initiatives are leading the industry, and retailers are seeing the value that this process delivers. We are also targeting a greater portion of our consolidated advertising budget to working media in order to maximize the power of our brand portfolio. These programs are in addition to established operational efficiency initiatives such as the Pacemaker plant consolidation at Broyhill, the near completion of a centralized shared services organization, and the creation of FBN Asia," Mr. Scozzafava said. "We remain focused on managing our strong balance sheet during this challenging period. As a result of our stringent efforts to manage cash, we are able to allocate resources between those strategic plan initiatives, capital spending projects, and debt repayment opportunities that provide the greatest benefit," Mr. Scozzafava concluded. The severance costs are a component of the $56 million to $72 million in estimated fourth quarter 2008 pre-tax charges that were projected in the company's third-quarter 2008 earnings announcement of October 30, 2008. As indicated in that announcement, fourth-quarter 2008 reported financial results will include non-cash charges against the book value of intangible assets. In addition, the company anticipates recording a non-cash tax asset impairment. The tax assets under impairment can still be used to offset future taxable income. The amount of these additional non-cash charges will be determined in early 2009. About Furniture Brands: Furniture Brands International is a vertically integrated operating company that is one of the nation's leading designers, manufacturers, and retailers of home furnishings. It markets through a wide range of retail channels, from mass merchant stores to single-brand and independent dealers to specialized interior designers. Furniture Brands serves its customers through some of the best known and most respected brands in the furniture industry, including Broyhill, Lane, Thomasville, Drexel Heritage, Henredon, Pearson, Hickory Chair, Laneventure, and Maitland-Smith.