Nine years ago, Interco was perilously close to becoming a casualty of the late-1980s takeover craze.

Now, not even the corporate name is the same: Interco is now Furniture Brands International, the nation's second-largest furniture maker. The new company is financially healthy, one of the Piedmont Triad's largest employers, and the No. 2 company in the News & Record's 1997 Triad Top 50.

Its 1996 revenues were up 58 percent over 1995 levels; profits were up 65 percent; and Furniture Brands returned a whopping 107 percent to investors who held the stock from the beginning of 1995 to the end of 1996.

What happened? In 1988, corporate raiders Steven and Mitchell Rales of Washington attempted a hostile takeover of Interco, a 100-year-old conglomerate with interests in furniture, shoe and clothing manufacturing, and retailing.

To fend off the takeover, the board gave shareholders a dividend of $38-a-share plus junk bonds at a time when shares were trading at $40. This move had several effects.

First, it made Interco shares almost worthless. The accumulated equity of the company was essentially being paid out to shareholders in the form of cash and bonds.

Second, the board's move made Interco an unattractive takeover target. The company had borrowed $1.9 billion to pay the dividend and issue the junk bonds. Corporate raiders would want no part of a debt-laden company like this.

Finally, the move left the company with problems staying afloat. Management had hoped to reduce interest payments to a manageable level by selling off companies, but that plan was less successful than they had hoped.

Units like Ethan Allen furniture and London Fog outerwear were sold for lower-than-expected prices. By 1991, management was almost out of companies to sell but still hadn't paid down enough debt. The result was a large, but unusually short and orderly, bankruptcy.

During the bankruptcy, Apollo Investment Fund Ltd., a New York investment firm, bought much of Interco's bank debt.

A deal was struck to convert Apollo's debt into equity. That freed Interco of its crushing debt and gave Apollo a 67 percent stake in the company when it emerged from bankruptcy in 1992.

But Interco's financial wheeling and dealing still wasn't over. The newly recovered company was ignored by Wall Street analysts, a fact that didn't help its stock price. Analysts tend to follow single industries, and Interco was still a conglomerate in two industries: furniture and shoes. To get analyst coverage -- and attention to its stock -- the company had to choose a focus.

So Interco became a furniture company. In 1994, management spun off Converse and Florsheim, its last two nonfurniture units. It was left with Broyhill and Lane, two of the best known furniture brands in the industry. Furniture analysts began following the company and the stock price appreciated.

In late 1995, the company bought Thomasville Furniture Industries from Armstrong World Industries for $339 million. In early '96, Interco changed its name to Furniture Brands International, signaling the fact that the company was now totally dedicated to making furniture.

Thomasville gave Furniture Brands a high-end manufacturer with brand recognition comparable to what Broyhill enjoys in the middle of the price spectrum.

Thomasville is one of the Triad's leading employers, with 3,400 people at 17 plants in Davidson County.

The company's biggest business challenge right now is increasing sales volumes.

Increased volumes are important if Thomasville is going to make better use of its factories. The company was running at 70 percent of capacity until it closed a plant in Brookneal, Va., this month. Now the company is at 80 percent and hopes increased volumes will bring it to the Furniture Brands average of 90 percent.

Running at or near capacity is important because of the high fixed costs in the furniture industry. In other words, the more pieces of furniture a company makes, the lower the cost of making each piece.

Closing the Brookneal plant cost the company more than 300 jobs, but the company says that was the beginning and the end of the layoffs. Furniture Brands president Mickey Holliman says the company will reach its next round of goals through increased sales volumes, not plant closings.

To increase sales volumes, the company has lined up dozens of independent furniture dealers willing to open free-standing furniture stores dedicated to selling only Thomasville products. About 80 such stores are now open, with 25 more set to come on board this year, and another 60 to 80 by 2001. Each store will buy at least $2 million worth of furniture from Thomasville per year, according to the company.

"We're set for growth," says Thomasville president Fred Starr. "All our strategies are based upon significant and rapid sales growth."

Thomasville was able to entice retailers to open the dedicated stores by imposing minimum prices on its products. The minimum prices made retailers feel confident that they could make a profit selling Thomasville products without fear of being undercut by competitors -- especially North Carolina discount retailers.

Thomasville also cracked down last year on North Carolina dealers who violated a company policy against telephone sales. Dealers who were caught selling Thomasville products by phone were cut off.

Despite the expense of buying Thomasville, Furniture Brands ended 1996 with less debt than it had at the end of 1995. The company paid back $85 million of the cost of Thomasville through a secondary stock offering in early '96. The company paid down an additional $65 million in debt using operating cash flows.

The final chapter in the company's decade-long financial saga closed last month. Apollo sold its stake in the company in two stages. First, Furniture Brands bought back 10.8 million shares from Apollo. The company paid for the shares by borrowing $175 million.

Then, on June 24, Furniture Brands sold off Apollo's remaining 11 million shares in a secondary offering. Response to the offering was so strong that it pushed Apollo's stock up as high as $19-3/8, up from a pre-offering price of $17.