Liz Claiborne Reduces Outlook and Other Financially Challenged U.S. Companies for February 19

The items below are taken from the Credit Manager’s Weekly Summary of Financially Challenged Companies. A full issue contains information on more than 200 companies. Please visit the insideARM bookstore for information on subscribing to the Summary.

Buffets Holdings Inc., Eden Prairie, Minn., closed fifty-one of its restaurants and laid off as many as 2,300 workers as part of its restructuring. The closings will result in extra charges of $10.5 million. Also, the company’s creditors will delay a hearing on bankruptcy financing after objecting to the firm’s request to borrow $385 million. Buffets Holdings has 626 restaurants in thirty-nine states, including more than 600 that operate under the Old Country Buffet name. The company filed Chapter 11 about a month ago.

Build-A-Bear Workshop Inc., a St. Louis, Mo. chain of stores where customers can build their own teddy bears, reported its fourth quarter net income declined 36%–to $9.9 million. Sales rose 3%–to $147 million. For the year, net income fell 24%–to $22.5 million, on a sales increase of 8.5%–to $474 million.

Career Education Corp., a Hoffman Estates, Ill. for-profit education company, will phase out nine more of its unprofitable colleges, after failing to find a buyer for them. The company said that it hopes to close those campuses by the end of next year, including locations in California, Pennsylvania, Rhode Island, Massachusetts, New York, Connecticut and New Jersey.

Century Aluminum Co., Monterey, Calif., reported a fourth quarter net loss of $112 million. Revenue edged up 2%–to $432 million. For the year, the firm lost $101 million on a 15% revenue increase–to $1.8 billion.

Ernst & Young LLP agreed to pay $300 million more to settle litigation that was filed against it by Cendant Corp., which had charged the New York accounting firm with being negligent in failing to uncover a large fraud at Cendant’s CUC International Inc. subsidiary. Eight years ago, Ernst paid $335 million to Cendant’s shareholders as a result of the fraud.

Ferris Baker Watts, a privately-held Washington, D.C. brokerage and investment bank, is being acquired by RBC Dain Rauscher. Terms of the acquisition weren’t revealed, but RBC is said to have been offering $200 million to purchase Ferris Baker. RBC is a unit of Royal Bank of Canada.

Financial Guaranty Insurance Co., the third-biggest bond insurer in the U.S., told regulators in New York State that it wants to effectively split itself in half. According to a plan, Financial Guaranty would split off a business that focuses on the relatively safe business of insuring municipal bonds, while the rest of the business would continue dealing with more risky debt securities, including those connected to the housing market.

Kirkland’s Inc., a Jackson, Tenn.-based retailer of home decor, got a warning that its shares could be delisted from the Nasdaq Global Market for failing to maintain a minimum listing value. The company has six months to regain compliance by getting its shares above a $1 value for thirty days. Kirkland’s has nearly 330 stores in thirty-five states.

Liz Claiborne Inc.’s shares fell 18% after the New York apparel company reduced its outlook for earnings. The firm has been hurt by more markdowns, cancellations by retailers and liquidation of surplus inventory. The company, which is reviewing its product lines after having sold off some of them, added that it will sell its Ellen Tracy line for $42.3 million. The firm also warned that it will end up in the red for fiscal 2007.

Merge Technologies Inc., a West Allis, Wis. medical imaging software and technology company, is laying off 160 employees, or about 30% of its workforce, as part of a strategy to shave $12 million from its annual expenses. Part of the cost-cutting plan was implemented thorough downsizing last fall, which led to $3 million in annual savings. Merge’s costs are not its only problems. In the past several months the firm has had to make two financial restatements as a result of an accounting probe by the Securities and Exchange Commission. Also, a number of class-action lawsuits have been filed against the company.

NetSuite Inc.’s stock price sank 10% after it issued a forecast for slower sales growth in 2008. The company added that it will remain unprofitable for the year. Also, in its fourth quarter, the San Mateo, Calif. on-demand business software trimmed its net loss to $3.3 million, down from an $8.1 million loss in the year-earlier quarter. Revenue jumped 57%–to $31.7 million. Not including extra items, NetSuite lost $842,000 in the quarter.

New York Times Co., the Manhattan, N.Y. newspaper publisher, will trim its newsroom payroll by 100 jobs over the next year as it tries to address financial pressures. The company, with more than 1,300 newsroom workers at its flagship New York Times newspaper, has already trimmed staff at some of its other assets, such as the Boston Globe.