2. Scozzafava's Swan Song
What can we say? Ralph Scozzafava did it his way.
Our friends at the Wall Street Journal alerted the markets late Monday that the end is indeed here for Furniture Brands International (FBN). Shares of the furniture maker sank to a 52-week low of 54 cents on Tuesday after the WSJ cited sources that the company's CEO Ralph Scozzafava is tapping bankruptcy advisers to deal with its debt load. The company's stock bounced back above 70 cents late Tuesday most likely due to shortsellers covering their positions.
FBN cumulatively lost more than $91 million in its last two fiscal years, and the market is expecting another loss in 2013. The company hasn't posted a profit since 2006.Wow. We've been saying for months that Scozzafava was driving this company into the ground, yet it's still shocking to see it face the final curtain. In April we chastised the company for signing Ralph to yet another fat contract to keep him in charge through the spring of 2016 even though the company was in a tailspin. Sorry Ralph, but we don't think you are going to make it that far. Wait a second! Forget months, come to think of it, we've been watching Ralph rip this company apart for years! Back in March 2009, for example, we wrote about Ralph's grandiose $3.8 million pay package, which included a 7% salary bump, despite FBN posting a double digit sales decline and a net loss of $415.8 million the previous year. At the time FBN blamed its compensation consultant for Ralph's lavish pay in the face of disastrous results. Of course, the consultants were hired by the company's board of directors of which Ralph was, of course, the chairman. So even then we could clearly see how it all comes back to Ralph's pocketbook in the end. And now, like we and Frank Sinatra -- the real chairman of the board -- said, the end is here. The company, which has $118 million in long term debt and $9 million in rapidly dwindling cash at last check, has retained the law firm of Paul, Hastings, Janofsky and Walker LLP, investment bank Miller Buckfire & Co. and restructuring expert Alvarez & Marsal to prepare it for the seemingly inevitable march to Chapter 11. In its second-quarter earnings report earlier this month the company said it was "exploring options with our lenders to modify our credit facilities to improve our liquidity." As for those lenders, the WSJ reports that some of the creditors are being counseled by FTI Consulting and the law firm of Kirkland & Ellis. (Kirkland, if you remember, is where Robert Khuzami landed a $5 million per year gig after leaving the SEC. Now he can really put his feet up in style. On a Thomasville, Lane or Broyhill chair perhaps.) The company also said in its earnings report it is following a number of cost-cutting strategies, including "facility consolidation, reductions in force and reductions in controllable costs." We know a facile force they can cut and it would go a long way to helping them control costs. His name is Ralph Scozzafava. And as the record shows he took the dough and did it his way.
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