Heritage Home Group
|Traded as||OTC Pink: FBNIQ|
|Key people||Ira Glazer, President & CEO|
|Revenue||$1.743 billion (2008)|
Heritage Home Group LLC, formerly Furniture Brands International, Inc., is a Clayton, Missouri-based home furnishings company. Some of the brands it owns in the furniture industry include Broyhill, Lane, Thomasville, Drexel Heritage, Henredon, Hickory Chair, Pearson, Laneventure, and Maitland-Smith. In 2013, the company filed for Chapter 11 bankruptcy and announced plans to sell most of its divisions. New owner KPS Capital Partners announced the name change to Heritage Home Group on November 25 of that year.
The company began in 1911 as International Shoe Company with the merger of Roberts, Johnson & Rand Shoe Company and Peters Shoe Company. In 1966 the company changed its name to Interco as the result of diversification, and once the company exited the shoe business, adopted the name Furniture Brands International.
International Shoe Company
At age 16 in the 1870s, Henry W. Peters went to work for Claflin, Allen & Company, at a time when St. Louis, Missouri had wholesale distributors of shoes rather than manufacturers. As Peters moved up in the company, the city's production of shoes increased from a half-million in 1883 to nine times that, and Claflin, Allen & Company was one of the largest shoe makers. Peters became president and then left in 1891 to form his own company, Peters Shoe Company, with help from relatives. Peters Shoe Company started with $200,000 in capital and almost doubled in size in its first decade, requiring a move from 7th Street and Washington Avenue to a larger building at 11th Street and Washington. Isaac S. Taylor designed the eight-story headquarters built in 1901 at 13th Street and Washington, which was named to the National Register of Historic Places in 1984.
Brothers Jack and Oscar Johnson, and their cousin Frank C. Rand, moved from Mississippi to Memphis, Tennessee in 1892 and started the Johnson, Carruthers & Rand Shoe Company. Henry O. Rand, father of Frank, and John C. Roberts were financial backers. In 1898, the Johnsons sold their company and moved to St. Louis to start Roberts, Johnson & Rand Shoe Company. Frank Rand, a graduate of Vanderbilt University, became a stock clerk and advanced to become vice-president. A headquarters building went up at 15th Street and Washington in 1909.
By 1905, St. Louis had moved from ninth to third in the country in shoe production. Peters Shoe Company had continued significant growth, and its products sold all over the United States and even in Mexico and Europe. The two largest shoe companies in the city, Roberts, Johnson & Rand and Peters Shoe Company, merged in 1911 to form International Shoe Company, but each company kept its own identity. Peters Shoe remained in its own building, with Weatherbird Shoes on display, until 1930, when the company moved into what had become the International Shoe Building. Washington Avenue became known as "Shoe Street U.S.A." because it "claimed more shoe trade than any other street in the world".
Jackson Johnson became president of International Shoe Company, succeeded in 1915 by his brother Oscar, who died in 1916. Frank Rand took over as president. Jackson Johnson remained chairman until he died in 1929. The company became known for quality shoes at low to moderate prices. World War I resulted in significant demand for military footwear.
International Shoe Company incorporated in Delaware March 16, 1921. At the time the company had 32 factories in Missouri, Illinois, and Kentucky and had just bought a tannery business, Kistler, Lesh & Co. Also that year, the company bought W.H. McElwaine Company of Boston, with about 5,000 workers and numerous operations in New Hampshire. The company was doing well but was unionized, while International Shoe was not. A recession caused McElwaine to propose wage cuts, which caused United Shoe Workers to call for a strike. The sale, intended as a solution to this problem, resulted in a Federal Trade Commission challenge under the Clayton Antitrust Act. The Supreme Court ruled in 1930 that the merger could take place. Without a union, workers had to grudgingly accept the inevitable layoffs and wage reductions which kept the company profitable.
In addition to Weatherbird, International Shoe Company made Red Goose shoes, and in 1922 the company added Poll Parrot, named for Paul Parrot, who had a parrot in his shoe store. The Hannibal, Missouri plant, that started in 1898 with a million pairs a year by 1908, made Poll Parrot and Star shoes.
Frank Rand led International Shoe through a time of major growth and through the difficulties created by the Great Depression. With Jackson Johnson's death, Rand moved into the chairman's slot and served in that position until his death in 1949. William H. Moulton, who had joined Roberts, Johnson & Rand in 1908, took over as president, serving until his 1939 retirement. International Shoe not only endured the Depression but thrived, due to lower prices increasing demand for shoes, and the lack of labor trouble. Eventually, most International Shoe plants organized because the New Deal outlawed the company's strategies to prevent unionization. The National Labor Relations Board had to act to allow workers in Hannibal to organize. Byron Gray, an employee since 1909, became president in 1939.
World War II gave International Shoe a major opportunity, as it was the only shoe company large enough to bid for all the business of the U.S. Army. The company had 30,000 employees and became by far the U.S. government's largest supplier of footwear during the war, despite opposition by labor unions. Consumer demand also increased, and in 1944 International Shoe once again reached its 1929 production levels.
By 1950, International Shoe had the capability to make 70 million pairs of shoes a year; its businesses also included tanneries, rubber heels, cement, containers, and material for shoe linings. Rand's death the previous year began a change in the company's outlook as the Rand family influence began to decrease. Frank Rand's sons Edgar E. Rand and Henry H. Rand both served as president, but the company began a period of diversification due to the influence of Maurice R. Chambers even before he became president in 1962. Major acquisitions included high-end shoe maker Florsheim in 1952, Canada's largest shoe maker Savage Shoes, Ltd. in 1954, and Caribe Shoe Corporation of Puerto Rico in 1958. That last deal led to the closing of a plant in Chester, Illinois that had operated since 1916 and was making 5,000 shoes a day. A retail division began in 1959, and International Shoe began buying companies in other countries and even in businesses other than shoes.
International Shoe Company became Interco Inc. on March 1, 1966. The new name reflected the company strategy of buying businesses in many different areas. Interco had three major divisions—apparel, footwear, and retailing. From 1964 to 1978, the company bought 20 other manufacturers or retailers as well as Central Hardware. Under Chambers plants started closing and some shoes were imported from such places as Italy. Overall, by the mid-1970s, 44 percent of shoes in the U.S. came from other countries. But Chambers' strategies kept Interco successful, reaching a billion dollars with consistent growth in sales and earnings. Chambers moved to the chairman's job in 1976, with William H. Edwards Jr. taking over as president, but continuing Chambers' policies.
In 1980, Interco added furniture as a major division. That year the company bought Ethan Allen Inc. for $150 million. Interco also took over Broyhill Furniture, a North Carolina company that was the world's largest privately owned furniture maker. In 1987, under new president Harvey Saleigman, Interco bought Lane Company of Altavista, Virginia, which increased furniture and home furnishings to about one-third of Interco's total sales.
Also under Saligman, Interco bought Converse in 1986. Footwear and furniture were the company's most profitable areas, and the goal was to sell other businesses. Unfortunately, due to the costs of buying Converse and Lane, Interco itself appeared by this time to be a takeover target, more profitable as a group of separate companies to be sold than as a single unit. In 1988, Steven M. Rales and his brother Mitchell led a group that offered $2.47 billion, but that bid ran into trouble when the SEC charged Drexel Burnham Lambert with insider trading, making financing of the bid more difficult. Interco took on debt to discourage other offers, and the Rales group eventually backed off. But Interco could not make enough money by selling its unprofitable operations; For example, selling Ethan Allen brought in $388 million rather than the expected $550 million. The company's debt had jumped from $300 million in 1988 to $2.6 billion in 1989, and operations were not producing enough income to cover the payments. On July 31, 1990, an agreement with creditors to extend loan maturities to 1997 was intended to avoid bankruptcy.
In 1989, Richard Loynd, Converse's chairman and the leader of his company's buyout effort, became Interco president. Interco filed for Chapter 11 in January 1991 and sold all of its operations except Broyhill, Lane, Converse, and Florsheim. Apollo Investment Fund, Ltd., led by Drexel Burnham Lambert's Leon Black, took a controlling interest in the reorganized Interco, which emerged from bankruptcy in August 1992. In 1994, Interco exited the shoe business, selling Converse and Florsheim. Brown Shoe Company took over the rights to Red Goose. A former International Shoe Company warehouse became the City Museum.
Furniture Brands International
Interco became Furniture Brands International on March 1, 1996. That same year, Mickey Holliman of the Action Industries subsidiary succeeded Loynd as president. Holliman had made his company into the leader in the motion furniture segment. His strategy of focusing on furniture proved successful, and by 1999 Furniture Brands International had fifteen straight quarters of increased earnings. Thomasville Furniture, the third manufacturer, and a deal with retailer Haverty's to devote significant space to Furniture Brands, contributed to the company's positive outlook.
Late in 2001, Masco announced Furniture Brands International would buy Henredon, Drexel Heritage and Maitland-Smith for $275 million, in a deal expected to return Furniture Brands to the number one U.S. furniture manufacturer, a title lost to La-Z-Boy when that company bought LADD in 2000. The three companies, which gave Furniture Brands a top position in premium furniture, became the High Point, North Carolina-based subsidiary HDM Furniture Industries, Inc. in 2005. Drexel Heritage CEO Jeff Young became the CEO. Also that year, HDM announced plans to move upholstery manufacturing in High Point to the Drexel Heritage location, closing the Henredon plant and moving some operations to Mount Airy, North Carolina.
Prior to their acquisition, Drexel Heritage had successfully challenged a child labor law before the Supreme Court in 1922. In Bailey v. Drexel Furniture Co., the court found that a tax on child labor really amounted to a fine without trial.
Despite a decline in the industry as a whole, Furniture Brands continued to be successful and expanded into retail. In 2007, Furniture Brands announced that Thomasville and Drexel Heritage would increase the number of company-owned stores for their products, but that Broyhill and Lane would close their St. Louis-area stores and focus on selling through furniture stores that sold other brands. At the time, the Designer Brands group included Henredon, Hickory Chair, Laneventure, Maitland-Smith, and Pearson.
In 2008, intending to focus on homes rather than businesses, Furniture Brands announced the sale of Hickory Business Furniture to HNI Corporation for $75 million. Also that year, Henredon moved its headquarters to one of its High Point plants that year, and Drexel Heritage moved in with Thomasville Furniture. And with Henredon's 15-year contract to manufacture Ralph Lauren furniture ending, the company dropped the position of Henredon Furniture president, with the Designer Group president taking over that role. This was part of a companywide strategy to consolidate back office departments in what had been separate companies.
Also in 2008, the Drexel Heritage/Henredon plant in High Point closed. This left the company with two High Point plants, and one each in Thomasville and Mt. Airy. This brought the total number of N.C. jobs cut by Furniture Brands to 8726, 2740 of those in the Triad, since 2000, during which time the company had also closed 39 of 57 U.S. plants.
On July 10, 2008, Furniture Brands said it would move its headquarters to Clayton, Missouri. The number of employees at the new site would increase from about 75 to about 225. At the same time, the company was changing from a holding company to an operating company; certain departments would move from the company's divisions to headquarters, but any job related to a specific brand would remain at the appropriate division. State and county incentives worth $4 million played a role in the decision. The company completed its 52,000 square feet (4,800 m2) headquarters in two stories of 14-story Shaw Park Plaza in October.
Furniture Brands' market capitalization (or total value of its shares) fell from $1.8 billion in 2004 to $31 million in 2013. The company has lost money every year since 2007 and was delisted from the New York Stock Exchange twice in less than a year. Analyst Budd Bugatch of Raymond James & Associates compared Furniture Brands board members to the pigs in George Orwell's Animal Farm.
On September 9, 2013, Furniture Brands filed for Chapter 11 bankruptcy. The company planned to sell all businesses other than Lane Furniture to a group managed by Oaktree Capital Management LP. On October 2, a judge approved a $280 million stalking horse offer by KPS Capital Partners. On November 4, Samson Holding Ltd., the largest stockholder, announced its intention to bid but that bid never took place, and on November 22, a judge approved the KPS bid. KPS announced a name change to Heritage Home Group LLC on November 25, along with the resignation of chairman and CEO Ralph Scozzafava. Ira Glazer became president and CEO.
Heritage Home Group
On January 21, 2014, Heritage announced the closing of Thomasville Furniture's operations in Thomasville, North Carolina as of March 21, with 84 jobs cut. A Saltillo, Mississippi plant making Lane Furniture would close at the same time, meaning 480 jobs lost, though other plants in the Tupelo, Mississippi area would remain open, despite earlier plans to close all the plants.
In March 2014 Heritage said the Pearson Company plant in High Point, started by the Pearson family in 1942, was closing by August, affecting 86 employees.
Late in April 2014, Heritage announced it would close its Clayton headquarters June 25. The most likely location for the new headquarters was High Point, North Carolina. The company also said the Ballwin, Missouri office would close by the end of 2014.
In June 2014 it was reported that the last Drexel Heritage Plant, on Hogan Street in Morganton, North Carolina, was closing July 31, with 87 people losing their jobs. The company was started by the Huffman and Mull families, but in recent years, decisions to move manufacturing to other countries hurt the Morganton area.
- Charleston Forge
- Columbia Manufacturing Inc.
- Maine Cottage
- England Furniture Incorporated
- Modus Furniture
- American Home Furnishings Alliance
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