Furniture Brands to Sun Capital: Back off!

Furniture Brands International Inc. is “disappointed” that a major shareholder is considering pursuing what the Clayton-based importer and manufacturer calls a “costly and disruptive” proxy contest.

Last week, SCSF Equities LLC, a division of Sun Capital Partners of Boca Raton, Fl., sent a letter to Furniture Brands demanding a list of shareholders. At issue: the upcoming selection of directors.

Earlier this year, Sun Capital, a private investment group, tried to start discussions with Furniture Brands about taking over the company. Furniture Brands had a rough 2007, losing money and weathering shrinking sales.

Furniture Brands — the parent company of Lane, Broyhill, Thomasville, Drexel Heritage, Henredon and other nameplates – rebuffed the Sun Capital proposal, noting that there was no offer price. Now, the group – Furniture Brands’ No. 2 shareholder — appears to be pushing for a presence on the company’s board.

On Monday, the company responded to the latest incursion from Sun Capital. ”A proxy context can only serve as a distraction to the company when attention and resources would be better used in creating value for stockholders by implementing our strategic plan,” said W.G. ”Mickey” Holliman, the company’s chairman, in a statement.

Ralph Scozzafava, the company’s chief executive, said recent actions were helping it build momentum “in a challenging operating environment.” The company noted that it had slashed inventories, paid down debt and completed a $75 million sell-off of an office furniture unit.

The country’s largest publicly traded furniture manufacturer, long beset by turnover near the top of the organizational chart, also noted that it has revamped its corner offices with a dramatic round of hirings. Since May 2007, the company has added a new CEO, chief financial officer, chief marketing officer, general counsel, and presidents of its four major brand groups.

The company also tried to trace Sun Capital to a conflict of interest, noting that Sun Capital has “significant” positions in several furniture manufacturers and retailers that compete with Furniture Brands, as well as a “mixed record of performance” in the home furnishings industry.

“Granting Sun Capital access to proprietary and confidential information” about Furniture Brands’ strategy and operations could impair the company’s competitive position, Furniture Brands said in a press release. The company also said one of Sun Capital’s entities is bankrupt and owes Furniture Brands more than $2 million.

Also on Monday, Furniture Brands disclosed how much it paid its top executives in 2007. Transitioning into the CEO’s office, Scozzafava made $1.07 million in total compensation, according a document filed with the Securities and Exchange Commission. That total included a $377,000 salary, a bonus of $350,000 and “all other compensation” totaling about $342,000 — mostly relocation assistance.

Phasing into retirement, Holliman made about $1.3 million in total compensation, up from $1.08 a year ago, despite taking a voluntary cut in salary in April as the company’s business deteriorated. Holliman’s compensation included $756,000 in salary, $392,000 in change in pension value and nonqualified deferred compensation, and $153,000 in other compensation, including $71,000 for personal use of a company aircraft and $5,000 in club dues. (The numbers above have been rounded to the nearest thousand).

The Post-Dispatch method of calculation excludes unvested stock awards and unexercised stock options in order to more closely track actual compensation rather than potential compensation.