By: Dylan Sikes - AllPennyStocks.com News

Tuesday, August 20, 2013

Growing profits has been tough for many companies since the Great Recession began six years ago. The wheat has been separated from the chaff in many instances, however, with plenty of companies ascending to new all-time highs while other household name companies descending into darkness. Furniture Brands, International Inc. (NYSE:FBN), one of the largest residential furniture makers in the U.S., certainly falls into the latter category. Furniture Brands, which has the brands Broyhill, Thomasville, Lane, Hickory, La Barge, Maitland-Smith, Pearson and Drexel Heritage under its umbrella, has seen shares plunge from a high of $11.06 in January all the way down to 54 cents in trading on Tuesday. That’s a loss of 95 percent from top to bottom.

The company is the subject of many discussions of a possible bankruptcy as losses continue to mount year after year. In 2012, Furniture Brands reported revenue of $1.07 billion, down a tad from $1.11 billion in 2011, and a net loss of $47.27 million, or 86 cents per share, compared to a net loss of $43.75 million, or 80 cents per share, the year earlier. The company hasn’t notched a profitable year since 2006.

Things haven’t gotten much better in 2013. Net sales in the first quarter were down to $254.7 million from $287.3 million in the year earlier quarter. The company swung to a net loss of $21.2 million, or 38 cents per share, from a net profit of $379,000, or 1 cent per share, in Q1 2012. In the second quarter, net sales declined 4 percent year-over-year to $255.0 million. Net loss widened to $40.82 million, or $5.15 per share, from $6.77 million, or 86 cents per share, as one-time charges soared.

The second quarter ended with Furniture Brands having $8.8 million in cash and $117.7 million in debt. Ralph Scozzafava, chairman and chief executive of Furniture Brands, said that the company had hired outside advisors to help them address the challenges that they faced, in spite of improving sales and order trends at Thomasville stores. Today, the Wall Street Journal reported that the company has hired restructuring advisors to help it deal with its debt problems.

Recently, Stifel analyst John Baugh downgraded FBN to a sell, saying that bankruptcy or liquidation could be imminent, although the Wall Street Journal reported sources close to the matter that said the “situation is still fluid.” On Monday, the company confirmed that Greg Roy resigned his position as vice president of business development at Furniture Brands.

On May 28, Furniture Brands effected a 1-for-7 reverse stock split to try and salvage a low stock price and meet continued listing requirements for the New York Stock Exchange. That didn’t help as shares moved like the Niagara River heading towards Niagara Falls with the bottom falling out in mid-July around $4.00 per share.

The question at hand is: Is it too late for Furniture Brands or will it become another Hostess or AMR Corp (Pink Sheets:AAMRQ)? With a market capitalization now of only a paltry $5 million, it’s likely the least valuable company on the NYSE (although it may not be there much longer). If it does file the dreaded bankruptcy, this is a company with a long lineage as a great brand, so look for investors to trade it after an inevitable nosedive. Notice the recovery of AAMRQ as people didn’t forget about American Airlines or merger potential. While not an apples-for-apples comparison, Furniture Brands still seems to have some options in front of it, so while shares have been eviscerated in the last six weeks, it will be interesting to see what the company comes up with in the next few. Proper due diligence is, as always, advised.

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