BJI restructures, settles legal dispute
January 14, 2005-- Casual Living,
Near the end of 2004, Brown Jordan International warned of worse-than-expected financial results and probable failure to make two loan payments; a major corporate restructuring omitted 17 jobs and a final settlement with former employee Dale Boles ended a two-year legal battle.
Operations results for the fourth quarter ending Dec. 31, 2004 were expected to fall significantly below the comparable period in 2003. For the third quarter ended Sept. 24, 2004, BJI reported a net loss of about $11.3 million, net sales of about $54.4 million and operating loss of about $3.4 million, which included a restructuring charge of about $2.6 million. BJI reported to the Securities and Exchange Commission it may not be able to make a $3.6 million payment due Dec. 31, 2004 or a $6.7 million payment due Feb. 15, and had started negotiations with its lender to modify and ease financial covenants.
"Everybody in running their business clearly looks at their debt service as it's in front of them, and you wouldn't be doing your job if you didn't think about how to mitigate potential problems," Vice Chairman, President and CEO James R. Malone said. "We're extra sensitive to it, and clearly people in the trade are sensitive to it. We're dealing with it in a straight-forward way and we believe our solutions are in place."
In late November 2004, BJI dismissed Ernst & Young as its independent certified public accountant. Grant Thornton was later hired as its independent CPA.
Malone, who joined BJI Sept. 29, 2004, acknowledged the impact of one-time legal and severance costs but said BJI's primary concern is its ongoing business costs. BJI's strategy, policy and execution must be directed further out than quarterly reports, he said. "We are clearly focused on '05 exceeding current and past levels of profitability," said Malone, the 62-year-old founder and managing partner of Qorval, a financial, business restructuring and consulting firm.
In an attempt to better align the BJI corporate structure and resources with customers' needs by market channel, a company-wide reorganization went into effect in mid-November. The outcome is a less centralized organization with less corporate structure, in which each business unit has financial and customer service accountability.
As part of executive level realignment, Bill Echols was named president Specialty Retail and Outdoor Contract Division; Chris Carmicle, president National Accounts and Direct Imports Division; Jim Pepping, chairman Contract Division with Dave Biancofiore as president and COO Contract Division, and Jerry Shilling, president Wabash Valley. Each reports directly to Malone. Arnold Bertram, former president of BJI's Charter contract division, retired. Outdoor contract brands Brown Jordan, Pompeii, Texacraft and Tropic Craft were grouped together under Echols leadership. And Wabash Valley, the manufacturer of benches and seating for parks and recreational facilities, became a standalone brand under Shilling's guide.
The reorganization reduced a total of 17 people in the corporate office. For example, Malone and Chief Accounting Officer Vince A. Tortorici absorbed the financial and administrative duties of John Frederick, former executive vice president and chief administrative officer.
BJI also settled its lawsuit with Dale Boles, former president of BJI's national accounts division and previous owner of Casual Living Worldwide, in regard to his competitive activities since leaving the company in 2002. Although terms of the agreement are confidential, BJI agreed Boles' company Pacific Casual can continue to market gazebos and/or canopies to certain customers. Boles agreed to honor contractual obligations he entered into as part of the Stock Purchase Agreement he signed as a selling shareholder in connection with the sale of Casual Living Worldwide in May 2001 until those obligations expire in April 2006.
"We are pleased to have come to a mutually acceptable full and final resolution with Mr. Boles that allows both parties to focus on more productive ventures," Malone said. "At the same time, we remain committed to our policy of vigorously protecting our other legal rights and interests currently pending with others or that may arise with others in the future."
The lawn and garden categories Boles and his wife Shae tapped through their company were not intended to hurt BJI, Boles said. "The non-furniture categories that our company has created through Pacific Casual, in our opinion were never genuine business categories BJI had been in prior to May 2001 at the time of the sale," Boles said. He and Shae are glad "bright new management is now in place at BJI and all our previous matters are now settled. BJI has some great people and deserves to continue to be an industry leader in its core business categories."
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