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'Chainsaw' Al at it again
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May 11, 1998: 5:19 p.m. ET
Sunbeam's tough CEO will cut 6,400 jobs as company digests acquisitions
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NEW YORK (CNNfn) - 'Chainsaw' Al Dunlap, Sunbeam Corp.'s maverick chairman and chief executive officer, is on the cusp of another corporate shakeup that will slash 6,400 jobs, or more than a third of its work force, as the company strives to integrate three recent acquisitions.
In an address to shareholders in New York Monday, Dunlap laid out a bare-knuckles strategy of massive layoffs and factory closings intended to help Sunbeam absorb the newcomers - Coleman Co., Signature USA Inc. and First Alert Inc.
Sunbeam bought the three durable-goods makers, which include the manufacturer of Mr. Coffee makers and First Alert smoke alarms, in November 1997 for $2.5 billion.
Earlier that year, Dunlap had heralded his arrival at Sunbeam by cutting nearly 6,000 jobs, or half the work force.
The news fell with a thud on Wall Street, where investors drove Sunbeam's (SOC) already battered stock down 1-7/8 to 25-15/16.
Sunbeam unveiled its plans on a day when the company posted disappointing earnings. The company reported a first-quarter net loss of $44.6 million, or 52 cents a diluted share, down from a profit of $6.9 million, or 8 cents a diluted share in the year-ago period.
Net sales declined 4 percent over the period, from $253.5 million to $244.3 million.
Excluding one-time charges of $37 million for debt retirement and executive compensation, losses from continuing operations totaled $8 million.
Dunlap goes on the defensive
Dunlap came under a barrage of heavy-hitting questions about his company's weak sales performance at Monday's shareholder meeting. Dunlap grew defensive when Andrew Shore, an analyst with Paine Webber, asked whether the Sunbeam chief would consider forfeiting his bonus in light of the weak stock price, which is skirting a 52-week low.
"No, I'm not willing to give back my bonus," Dunlap shot back. "I accomplished what I accomplished last year."
Under the revamping announced Monday, the Delray Beach, Fla.-based Sunbeam will close five plants in Mexico and three others in Latin America. It will also spin-off Coleman's East Pak backpack unit and hot tub business which, the company said in a statement, "do not fit its strategic focus."
Sunbeam will cut 2,300 jobs in addition to 2,800 slated for elimination through the closure of two factories in Mexico. An additional 1,300 layoffs are expected to come from the divestiture of the Coleman businesses. The company said it anticipates annual cost savings of $250 million.
After the cuts, the workforce will be reduced to about 9,500 workers.
As part of the overhaul, the company will combine 10 existing headquarters in the four companies into new headquarters to be based in Boca Raton, Fla.
It's El Nino, of course
Sunbeam said it anticipates a one-time charge of $380 million from the revamping, including a $100 million charge in the second quarter for the early retirement of existing Coleman debt.
The company expects $265 million in additional revenues once the integration is complete, in about a year. Full-year earnings for 1998 are likely to fall in the range of $1 a share, excluding costs for the one-time integration of the three companies and the closure of the two Mexican plants.
On Monday, Dunlap blamed El Nino-spurred storms for slow sales of outdoor gas grills that depressed sales and earnings in the first quarter.
The validity of that assertion is at the heart of two purported class-action lawsuits filed against Sunbeam April 28. The plaintiffs in one suit alleged that certain Sunbeam directors and officers deliberately made false statements about sales and earnings. That suit was filed on behalf of buyers of Sunbeam stock from Oct. 22, 1997 to April 3.
The other suit alleged that Sunbeam and Dunlap artificially inflated the company's stock price in order to help the company complete a $2 billion financing.
On April 3, Sunbeam also warned that it expected losses in the first quarter, triggering a sell-off that drove its stock price down 25 percent.
Dunlap, who has cultivated a rough-hewn corporate image since his days at the helm of Scott Paper Co., has railed in the past against those who question his tactics.
On Monday, Dunlap stressed he believed Sunbeam had passed a critical juncture.
"The Sunbeam turnaround is real, and we now have the right organizational structure in place to take full advantage or our power brands and unique strategic position in durable household goods and leisure products," he said.
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