FBI to Eliminate 1,400 Positions

December 10, 2008  by in UnCategorized   

By Home Furnishings Business in economic news on December 11, 2008  Furniture Brands International, St. Louis, announced on Thursday that the company will eliminate around 1,400 management, professional and hourly positions across all functions in reaction to ongoing soft conditions in the market for furniture.

The move represents a decrease of approximately 15 percent 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," he continued. "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."

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 Oct. 30.