SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended January 1, 1994 Commission file
Number 0-11577
LADD FURNITURE, INC.
(Exact name of registrant as specified in its charter)
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<S> <C>
North Carolina 56-1311320
(State or other jurisdiction of incorporation) (I.R.S. Employer Identification No.)
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One Plaza Center, Box HP-3
High Point, North Carolina 27261-1500
(Address of Principal executive offices) (Zip Code)
Registrant's telephone number, including area code 910-889-0333
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock - $.10 par value
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes X No
___.
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K [ ]
Market value of 18,720,472 shares held by nonaffiliates as of
March 4, 1994 was $173,164,366.
Indicate the number of shares outstanding of each of the
registrant's classes of common stock, as of the latest practicable date.
23,082,996 shares outstanding as of March 4, 1994
DOCUMENTS INCORPORATED BY REFERENCE
The definitive Proxy Statement for the 1994 Annual Shareholders
Meeting is incorporated by reference into Part III hereof. The registrant's
Annual Report to Shareholders for the year ended January 1, 1994 is
incorporated by reference into Part II and Part IV, Item 14, hereof.
PART I
ITEM 1. Business
General
LADD Furniture, Inc. is a vertically integrated manufacturer
that is primarily engaged in the design, manufacture and sale of
wood, metal, and upholstered furniture in various price ranges
through its operating entities consisting of wholly owned
subsidiaries and operating divisions. Unless the context
otherwise indicates, "LADD" and "Company" refer to LADD
Furniture, Inc., its divisions, and consolidated subsidiaries.
Significant Developments in 1993
Acquisition of Pilliod Furniture -- On January 31, 1994, the
Company acquired the furniture operations of The Pilliod Cabinet
Company through the purchase of all of the outstanding stock of
its parent company, Pilliod Holding Company. The Company's new
wholly-owned subsidiary, Pilliod Furniture, Inc. ("Pilliod") is a
major U.S. manufacturer of promotionally-priced, residential wood
furniture. Pilliod's master bedroom and other furniture lines
compliment products made and marketed by LADD's nine other
furniture companies.
Manufacturing Realignment -- In August 1993, the Company
decided to discontinue much of its American of Martinsville
Residential Casegoods ("Residential Casegoods") product lines
which were unprofitable and to merge certain profitable lines
into its American Drew operating division. As a result of this
decision, manufacturing capacity in Residential Casegoods'
Martinsville, Virginia facility became available for other
purposes. To utilize the capacity, the Company shifted
manufacturing production of American of Martinsville-Contract
("Contract") from Chilhowie, Virginia and Marion, Virginia to
Martinsville, Virginia, the location of Contract's upholstery
manufacturing and executive offices. Finally, to accommodate
current and anticipated growth of the Company's Lea Industries
division ("Lea"), production in Chilhowie, Virginia was realigned
to Lea in the fourth quarter for its Charter House product line
and production in Marion, Virginia was realigned to Lea for its
Design Horizons product line. The Company believes that the
realigned production better utilizes its manufacturing capacity.
LADD's Businesses
Lea Industries manufactures and sells wood furniture for the
youth and adult bedroom markets. Lea Industries' products
include beds, dressers, night stands, mirrors, desks,
bookshelves, hutches, armoires, and correlated modular furniture
in a variety of styles, including traditional, contemporary and
colonial. The products are priced in the medium to low-medium
price ranges and are considered high volume, promotional products
to major furniture retailers. The products are marketed under
the "Lea Industries," "Charter House,"
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and "Design Horizons"
brand names primarily to national and regional chains,
independent furniture retailers, national general retailers and
department stores. Lea Industries products are manufactured in
five plants located in Waynesville, NC, Marion, VA, Chilhowie,
VA, and Morristown, TN.
American Drew manufactures and sells medium to high-medium
priced wood furniture. The products include various types of
wood bedroom furniture (beds, dressers, night stands, mirrors,
armoires, and dressing tables), wood dining room furniture
(tables, chairs, buffets, chinas, and serving pieces), and wood
living room occasional pieces (desks, end tables, coffee tables,
entertainment units, wall units, and secretaries). American Drew
products are manufactured in three plants located in North
Wilkesboro, NC and are sold primarily to major independent
furniture retailers, department stores, and regional furniture
chains.
Daystrom Furniture manufactures and sells kitchen, dinette,
dining room, and bar furniture for the home furnishings market.
Daystrom products are priced in the medium price range and
include tables, chairs, bars and bar stools in contemporary
styles that incorporate the use of metal, glass, wicker, and wood
construction. Daystrom sells its products primarily to retail
furniture chains, independent furniture retailers, department
stores, and specialty retail stores. Daystrom operates one
manufacturing plant located in South Boston, VA.
Clayton-Marcus manufactures and sells a full line of
upholstered household furniture, including sofas, loveseats,
chairs, sleepers, rockers, and other upholstered living room
furniture, which sells in the medium and high-medium price
ranges. The products are marketed under the "Clayton-Marcus,"
"American of Martinsville," "Clayton House," and "Marclay Manor"
brand names primarily to retail furniture chains, independent
furniture retailers and department stores. Clayton-Marcus
currently has established galleries with approximately 90
independent furniture stores in the United States, Canada, and
Mexico. Clayton-Marcus operates three manufacturing plants in
Hickory, NC.
Barclay Furniture manufactures and sells moderately priced
upholstered furniture, including sofas, loveseats, chairs,
sleepers, and motion furniture styled in contemporary and
traditional patterns. The products are considered high volume,
promotional items and are sold under the Barclay Furniture name
and various private label names. Barclay sells its products
primarily to retail furniture chains, department stores, and
national general merchandisers. Barclay operates two
manufacturing plants located in Sherman, MS and Myrtle, MS.
American of Martinsville-Contract is a leading supplier of
guest room furniture to the U.S. hotel/motel industry, and has an
expanding contract business overseas. American of Martinsville-
Contract has also expanded its business into the health care
furniture market for retirement homes and extended care
facilities. Additionally, American of Martinsville-Contract
sells to certain agencies of the U.S. government and university
and college markets.
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American of Martinsville-Contract operates
two manufacturing plants located in Martinsville, VA.
Pennsylvania House is one of the nation's leading
manufacturers of American traditional and country residential
furniture solid wood furniture and upholstery. The Pennsylvania
House product line is priced in the upper-medium price range.
Pennsylvania House created and introduced the in-store gallery
concept to the furniture retailing industry in 1975, and
currently has established galleries with approximately 270
independent furniture retailers in the U.S., Japan and Mexico.
To enhance its product lines and galleries, Pennsylvania House
also offers its gallery retailers an accessory line of over 3,000
items for sale to their customers. In addition, Pennsylvania
House has opened approximately 35 independently owned dedicated
showcase stores which offer exclusively Pennsylvania House
furniture and accessories. Pennsylvania House operates three
manufacturing plants located in Lewisburg, PA, Monroe, NC, and
White Deer, PA.
Brown Jordan is a leading manufacturer of high quality,
high-priced leisure and outdoor furniture. To expand its market
presence, Brown Jordan has begun selling a line of high-medium
priced products in the casual furniture market. Brown Jordan's
products are designed in wrought aluminum, extruded aluminum,
cast aluminum, and wrought iron and include chairs, tables,
chaises and outdoor accessories. Brown Jordan sells its products
to the residential and hospitality markets primarily through the
following distribution channels: quality department stores,
specialty stores (such as pool and patio shops), interior design-
ers, and the commercial contract and hospitality industry both in
the United States and overseas. Brown Jordan's products are
manufactured in facilities located in El Monte, CA, Newport, AR,
and Juarez, Mexico. On March 1, 1994, a fire destroyed the
wrought iron manufacturing operations located in Brown Jordan's
manufacturing facility in Juarez, Mexico. The aluminum frame
operations located in the same facility were not materially
affected by the fire. The Company believes that the fire will
not have a material financial impact as the Juarez facility was
insured for both property and business interruption losses. A new
facility for wrought iron manufacturing has been leased and is
expected to be in operation during the second quarter of 1994.
Fournier Furniture manufactures and markets a complete line
of ready-to-assemble ("RTA") furniture including home office and
home electronics furniture, kitchen and bedroom furniture, closet
organization products, kitchen cabinets and other storage
products. The company's products are priced in the lower price
ranges and are sold throughout the United States and Canada
principally to mass merchandisers, department stores, warehouse
clubs, and mail order catalog merchandisers. Fournier Furniture
operates one manufacturing facility in St. Paul, VA and has a
distribution facility located in Ajax, Ontario, Canada.
Pilliod Furniture, acquired by LADD on January 31, 1994,
manufactures and markets a wide range of promotionally priced
contemporary and traditional residential furniture, including
master bedroom products, occasional tables, entertainment
centers, wall systems,
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and dining room chinas. Pilliod
Furniture's products are marketed under the Pilliod and Symmetry
brand names. The majority of Pilliod Furniture's products
incorporate simulated wood, stone or other, often high gloss
decorative surfaces applied to medium density fiber board or
particle board. The Company's products are sold throughout the
United States through large volume customers, mainly large
furniture chains and outlets. Pilliod Furniture operates three
manufacturing facilities in Nichols, SC, Selma, AL, and Swanton,
OH.
Lea Lumber & Plywood Co. manufactures cut-to-size plywood,
veneer, and wood laminated parts in one plant located in Windsor,
NC. Lea Lumber and Plywood's products are sold to furniture
manufacturers and manufacturers of pianos, recreational vehicles,
kitchen cabinets, and other products requiring laminated wood
parts and veneers.
LADD Transportation, Inc. operates a modern fleet of over-
the-road tractors and trailers that are primarily used to provide
transportation services to LADD operating companies and to meet
the special needs of LADD's customers. Together with fleets
operated by other LADD operating companies, LADD Transportation
provides approximately 30% of LADD's out-bound shipping
requirements for finished products and also hauls a portion of
the Company's in-bound raw materials and supplies. LADD
Transportation has received certain contract carrier rights from
the Interstate Commerce Commission and markets its transportation
services to independent customers.
Marketing and Major Customers
The Company's operating entities generally market under
their own trade names. The general marketing practice followed
in the furniture industry and by the Company is to exhibit
products at national and regional furniture markets.
Internationally, the Company markets its products primarily
through LADD International, a corporate marketing unit formed to
coordinate the worldwide marketing efforts of LADD's operating
companies.
The Company also sells its furniture products directly and
through approximately 425 independent sales representatives to a
broad variety of customers, including retail furniture chains,
national general retailers, department stores, independent
furniture retailers, mail order catalog merchandisers, major
hotel chains, and various specialty stores and rental companies.
The Company currently sells to more than 11,000 furniture
customers. No single customer accounted for more than 5% of net
sales in 1993. The Company's business is not dependent upon a
single customer, the loss of which would have a material effect
on the Company.
Product Design and Development
Each operating entity develops and manages its own product
lines. New product groups are introduced at the national or
regional furniture markets, and, based upon their acceptance at
the markets, the products are either placed into production or
withdrawn from
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the market. Consistent with industry practice,
the Company designs and develops new product groups each year,
replacing collections or items that are discontinued.
Raw Materials
The most important raw materials used by the Company are
hardwood lumber, veneers, upholstery fabrics, plywood, particle
board, hardware, finishing materials, glass, steel, steel
springs, aluminum, and high pressure laminates. The wood species
include cherry, oak, maple, white pine, poplar, and other
American species, and imports such as rattan, guatambue and
mahogany. The Company believes that its sources of supply for
these materials are adequate and that it is not dependent on any
one supplier. However, in 1992 and 1993, dramatic escalation of
costs of certain lumber species such as cherry and maple
negatively impacted the Company's gross margins.
The Company's plants are heated by furnaces using gas, fuel
oil, wood waste, and other scrap material as energy sources. The
furnaces located at a majority of the wood manufacturing plants
have been adapted so that they can use alternate energy sources,
and the Company has been able to fuel these furnaces principally
by wood wastes. The Company's plants use electrical energy
purchased from local utilities. The Company has not experienced
a shortage of energy sources and believes that adequate energy
supplies will be available for the foreseeable future.
Patents and Trade Names
The trade names of the Company's divisions and subsidiaries
represent many years of continued business, and the Company
believes such names are well recognized and associated with
quality in the industry. The Company owns a number of patents
and licenses which are considered to be important to the
business, which intellectual properties do not have a limited
duration. The Company also has various patents, licenses, and
trademarks none of which are considered material to the Company's
business. In January 1994, the Company began the transfer of
tradenames and certain other intellectual property to a wholly
owned subsidiary, Cherry Grove, Inc., to better manage those
intellectual properties.
Inventory Practices, Order Backlog and Credit Practices
The Company generally schedules production of its various
groups based upon orders on hand. Manufacturing efficiencies and
investment in inventories are, therefore, directly related to the
current volume of orders. The Company, and the industry
generally, honors cancellation of orders made prior to shipment.
The Company's backlog of unshipped orders believed to be firm at
1993 fiscal year end was approximately $80.6 million, as compared
to $80.2 million at 1992 fiscal year end. Generally, orders in
the backlog are shipped during the following 12 months. The
Company's businesses as a whole are not subject to significant
seasonal variations. The business of Brown Jordan, however, is
heavily seasonal with
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inventories being built in the winter
months and sales concentrated in the March - June time frame.
Competition
The residential furniture market is highly competitive and
includes a large number of manufacturers, none of which dominate
the market. Industry estimates indicate that there are over
1,500 manufacturers of all types of furniture in the United
States. Competition within the market for wood, metal and
upholstered furniture occurs principally in the areas of style or
design, quality, price, and service. Some of these include
manufacturers of furniture types not manufactured by the Company.
According to industry data, the Company believes it is the
fourth largest manufacturer of residential furniture in the
United States.
In recent years, foreign imports of finished furniture and
component parts have increased. Although some of the imported
products compete with products manufactured and marketed by the
Company, other than in its Daystrom Furniture operating division,
the Company has not experienced any significant negative impact.
Where appropriate, the Company has capitalized upon the cost
advantages of importing selected component parts and a limited
number of finished products but is not dependent upon any foreign
sources. The Company currently (including the operations of
Pilliod Furniture) imports approximately $17.2 million of
finished furniture and unfinished furniture parts.
In addition, Brown Jordan operates a manufacturing facility
in Juarez, Mexico. The Company estimates production in its
Mexican facility costs 25% to 40% less than comparable domestic
production principally because of lower labor and overhead costs
at the Mexican facility.
Governmental Regulations
The Company's operations must meet extensive federal, state,
and local regulatory standards in the areas of safety, health,
and environmental pollution controls. Historically, these
standard's have not had any material adverse effect on the Com-
pany's sales or operations. The Company believes that its plants
are in compliance in all material respects with all applicable
federal, state, and local laws and regulations concerned with
environmental protection. See "Legal Proceedings" regarding the
status of environmental proceedings in which the Company is
involved.
The furniture industry anticipates increased federal and
state regulation, particularly for emissions from furniture paint
and finishing operations and wood dust levels in manufacturing
operations. The industry and its suppliers are attempting to
develop water-based finishing materials to replace commonly used
organic-based finishes which are a major source of regulated
emissions. The Company cannot at this time estimate the impact
of compliance with these new standards on the Company's opera-
tions or costs of compliance.
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Employees
The Company employed approximately 7,700 persons as of
March 1, 1994. Substantially all of the employees were employed
on a full-time basis.
Employees at six Company plants are represented by various
labor unions. The Company is not aware of any organizing
activity at any of its other plants. The Company considers its
relations with its employees to be good.
Export Sales
In 1993, the Company's export sales increased to $40.6
million (approximately 7.8% of 1993 net sales), an increase of
39% from export sales in 1992 of $29.3 million (approximately
5.9% of 1992 net sales). The Company's export sales in 1991 were
$12.5 million, or approximately 2.9% of 1991 net sales. None of
the Company's assets are dedicated solely to export sales.
ITEM 2. Properties
LADD and its operating companies operate 27 manufacturing
facilities, of which 26 facilities, approximately 6,900,000
square feet, are owned, and one facility, approximating 125,000
square feet is leased. These facilities range in size from
approximately 20,000 square feet to approximately 785,000 square
feet. Five of the manufacturing facilities (approximately 1.8
million aggregate square feet) are subject to encumbrances
associated with industrial revenue bond financings, the
outstanding balances of which aggregated approximately $8.0
million at January 1, 1994. The Company believes that each of
the current manufacturing plants are suitable and adequate for
the particular production conducted at that plant. During fiscal
1993, the Company estimates that its plants operated at
approximately 80% of total capacity on an aggregate basis. In
addition, the Company owns three warehouse facilities aggregating
approximately 340,000 square feet and leases seven warehouse
facilities aggregating approximately 840,000 square feet. The
Company has one idle manufacturing facility located in Kenbridge,
VA which is held for sale. The Company's manufacturing
facilities are located in North Carolina, Alabama, Arkansas,
California, Mississippi, Pennsylvania, Ohio, South Carolina,
Tennessee, Virginia and Mexico. The Company leases its corporate
offices, which aggregate approximately 38,000 square feet, in
High Point, North Carolina.
The Company believes that its manufacturing, warehouse and
office space is well maintained for its intended purposes.
Although the closure of any particular Company facility may be
disruptive to that particular operating entity's business, it
would not be materially adverse to the Company's operations.
The Company normally operates all of its furniture manu-
facturing facilities from a one shift per day, five-day week
basis. Increasingly, certain departments and facilities are
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operated on a multi-shift basis. The plywood and ready-to-
assemble manufacturing facilities are typically operated on a
three shifts per day and two shifts per day, five-day week basis,
respectively.
The Company also leases and maintains showrooms in High
Point, NC, Dallas, TX, Atlanta, GA, Chicago, IL, Miami, FL,
Washington, DC, Los Angeles and San Francisco, CA, New York, NY,
and Ontario, Canada, and retail stores in Topeka and Shawnee, KS.
The Company owns rights to cut timber on approximately 526
acres of undeveloped timberland in eastern North Carolina.
The Company owns substantial quantities of woodworking,
sewing and metalworking equipment located in its various plants.
The Company considers its present equipment to be adequate, well-
maintained, and generally modern.
The Company currently owns 16 tractors and 26 trailers and
leases an additional 97 tractors and 307 trailers.
ITEM 3. Legal Proceedings
The Company is involved in routine litigation from time to
time in the regular course of its business. In the opinion of
the Company, there are no material legal proceedings pending or
known to be contemplated to which the Company is a party or of
which any of its property is subject.
The Company and its operating entities presently are
involved in the following environmental proceedings:
1. Brown Jordan's California manufacturing facility is
located in El Monte, California in the San Gabriel Valley Ground-
water Basin. The Basin has been designated by the United States
Environmental Protection Agency ("EPA") and the State of
California as a Superfund Site. Although no administrative or
judicial enforcement action has been taken by the EPA or
applicable California authorities, the State of California is
seeking to identify potentially responsible parties ("PRPs") and
has ordered certain tests to be conducted by Brown Jordan in
connection with their investigation. Such tests have been
completed and no future activities are currently scheduled. The
Company is currently negotiating with applicable authorities in
the State of California to settle Brown Jordan's involvement in
this matter. Under the terms of the Asset Purchase Agreement
with Maytag Corporation ("Maytag"), dated June 1, 1989 ("the
Maytag Agreement"), the Company's liabilities in the matter are
limited to the first $200,000 of costs for off-site liabilities
and $1,000,000 of costs for on-site liabilities.
2. American Drew, a division of the Company, has been
identified as a PRP by the EPA in connection with the EPA's
clean-up efforts at the Caldwell Systems Incinerator
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("CSI") in
Lenoir, North Carolina. American Drew is one of several hundred
companies thus far identified in connection with the site and it
is anticipated that several hundred more PRPs will eventually
become involved. While the preliminary clean-up costs are
estimated to be as high as $3,000,000, American Drew's share of
clean-up costs is estimated to be less than $50,000 because of
the large number of PRPs, the relative amount of waste apparently
sent to the CSI facility by American Drew, and the information
thus far available. The PRPs have organized themselves and are
negotiating with the EPA with respect to the site. No litigation
has been commenced, and at the present time none is anticipated.
Given the inherent uncertainties in such matters, it is
nevertheless possible that American Drew's ultimate share could
exceed the estimated $50,000.
3. Plants 1 and 4 of Clayton-Marcus Company, Inc., a
wholly-owned subsidiary of the Company ("Clayton-Marcus"), have
been identified as PRPs by the EPA in connection with the EPA's
clean-up efforts at the Caldwell Systems Incinerator in Lenoir,
North Carolina. Clayton-Marcus is one of several hundred
companies thus far identified in connection with the site. As
discussed in paragraph 2 above, the PRPs have organized
themselves and are negotiating with the EPA with respect to the
site. No litigation has been commenced, and at the present time,
none is anticipated.
4. The Company's former subsidiary, The Gunlocke Company
("Gunlocke"), has been named as a PRP by the New York Department
of Environmental Conservation ("NYDEC") with respect to the
Prattsburg Landfill in Tonawanda, New York. NYDEC has to date
not pursued Gunlocke concerning this matter. Instead, the NYDEC
has obtained from Steuben County a signed Consent Order for a
remedial investigation and feasibility study and a remedy for the
landfill. Nevertheless, this action does not preclude the
possibility that the NYDEC, Steuben County or other third parties
may subsequently make claims against Gunlocke and other PRPs
regarding this matter. Under the terms of the Maytag Agreement,
the Company's liabilities are limited to $200,000 for all off-
site liabilities in the aggregate.
5. Manifest show that No. 2 diesel fuel impacted soil was
sent by the Redd Level, Virginia plant of American of
Martinsville, a division of a subsidiary of the Company, to the
Seaboard Chemical Corporation treatment, storage and disposal
facility in Jamestown, North Carolina. The Seaboard Chemical
site is currently subject to remedial action under the
jurisdiction of the State of North Carolina. The Company has
been named as one of over 100 PRPs for this site. The group
representing the PRPs was contacted with regard to participation
by American of Martinsville as a de minimis buyout participant
for the removal phase of the work at the site. On February 8,
1993, the Company participated in the de minimis buyout by
signing the appropriate documents and paying its buyout share of
approximately $2,300. It is not known at this time if additional
phases will be involved.
6. The former facility of Pilliod Furniture, Inc., a
subsidiary of the Company acquired in January 1994 ("Pilliod"),
located in Meridian, Mississippi was identified as a PRP with
respect to the Diaz Refinery disposal site in Diaz, Arkansas.
This site is currently
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subject to remedial action under the
jurisdiction of the State of Arkansas. Over 700 PRPs have been
identified in connection with this site. A trust fund for
remediation of the site has been established by the PRP
Committee, and PRPs have been assessed based on the volume of
waste they sent to the site. As of October 1992, Pilliod had
been assessed a total of approximately $15,000. No additional
monetary assessments were collected from the PRPs during 1993.
Although a major portion of the site remediation and
environmental assessment has already been completed and paid for
by the PRPs, additional assessment and possible long-term
monitoring or corrective action measures may be required. Since
Pilliod sent a relatively small volume of waste to the site, its
future contributions for remediation are expected to be relative
to this volume.
7. In July 1993, Pilliod's Swanton, Ohio facility was
served with a Complaint and Notice of Opportunity for Hearing
from the EPA, Region 5 alleging several reporting and record
keeping violations of Title III of the Superfund Amendments and
Reauthorization Act, also known as the Emergency Planning and
Community Right-To-Know Act of 1986 ("EPCRA"). The total
proposed civil penalty for the alleged violations is
approximately $68,000. The settlement of this matter continues
to be negotiated with the EPA by counsel for Pilliod.
8. With respect to all expenses incurred by the Company
arising in connection with the following items in excess of
$50,000 in the aggregate, the Company will claim indemnification
from Maytag pursuant to the terms of the Maytag Agreement:
(i) In December 1991, Gunlocke was served with a
Complaint and Notice of Opportunity for Hearing from
the EPA, Region II alleging several record keeping
violations with respect to PCBs for various periods
between July 2, 1978 through December 31, 1978, and the
years 1979 through 1988. The total proposed civil
penalty for the alleged violations is $54,600. Counsel
has been retained to negotiate a possible settlement
with the EPA. The settlement of this matter continues
to be negotiated with the EPA. A recent federal
guideline regarding recordkeeping and reporting has
resulted in a re-evaluation by the EPA of the
situation. The EPA has not yet responded to this
penalty reduction effort.
(ii) Gunlocke has been identified by the NYDEC as
a generator of wastes which may have been disposed of
at the Bath Landfill in Bath, New York. The NYDEC is
currently gathering information from waste generators
and transporters which may have sent wastes to the
landfill, and on February 12, 1993, Gunlocke responded
to an information request letter from the NYDEC.
(iii) Gunlocke has been named as a PRP at the
Rose Chemicals Superfund Site in Missouri. Gunlocke
has participated as a member of the de minimis buyout
group of PRPs. On September 2, 1992, the EPA signed an
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Unilateral Order. The PRP group Steering Committee
subsequently entered into negotiations with the EPA and
an Amended Order was issued on December 3, 1992. On
December 24, 1992, the PRP group Steering Committee
entered into an Affirmative Response stating that the
group would comply with the Amended Order and complete
the remediation. During 1993, a final work plan was
submitted to the EPA for approval and the PRP Group
anticipates that final remediation will begin in the
spring of 1994.
(iv) Pennsylvania House and a former subsidiary,
The Kittinger Company ("Kittinger"), have been named as
PRPs by the EPA for the Envirotek II Superfund Site in
Tonawanda, New York according to a notice issued by the
EPA on January 9, 1990. Pennsylvania House and
Kittinger were operated as a single entity during the
late 1980's. Both Pennsylvania House and Kittinger
shipped hazardous materials to the site during the
period in question, which materials were to be properly
disposed of by an independent contractor. Pennsylvania
House and Kittinger are represented on the PRP Steering
Committee. The EPA and the PRPs have entered into a
consent order and the removal action under the
supervision of the EPA has been substantially completed
pursuant to the order. Pennsylvania House's de minimis
involvement in this stage of the matter has been
settled. The Company remains involved on behalf of
Kittinger and Pennsylvania House as to possible future
remedial action not covered by the de minimis
settlement. The final allocation financial
responsibility for the initial phase of the clean up
within the PRP group has been decided with the
allocation for Kittinger determined to be approximately
$2,100. Removal activities are substantially complete
at the site, but it is not known at this time if the
EPA or NYDEC will require further remediation.
(v) The NYDEC has notified the PRP Group for the
Envirotek II matter of an investigation of the Roblin
Steel complex within which the Envirotek II site is
located. The second PRP group, made up primarily of
PRPs in Envirotek II, including Pennsylvania House and
Kittinger, has been formed to respond. It is
anticipated that the Roblin Steel PRP group will
undertake a limited remedial investigation in an effort
to demonstrate there is relatively limited impact on
the overall site as a result of conditions at Envirotek
II.
(vi) The EPA has alleged that the operators at the
Envirotek II site transported waste to the second site,
known as Envirotek I. A PRP group, including Kittinger
and Pennsylvania House, has been formed and is
preparing a response for the EPA.
(vii) The EPA is currently investigating a
site at York Haven, York County, Pennsylvania. A PRP
group has organized to respond to the EPA,
-12-
and Pennsylvania House has been identified by the PRP group
as a de minimis party having shipped 0.01506% of the
total quantity of hazardous waste to the site on June
18, 1984. Pennsylvania House's de minimis involvement
for the clean up of the site will be settled with
payment of its allocated share of approximately
$11,100. The first payment of approximately $5,600 was
paid on December 29, 1993, and the remaining balance
will be due in 12 months from this date. This is a
final settlement for de minimis settlors with the
remaining PRPs conditionally indemnifying de minimis
settlors. The EPA is continuing to remove tanks and
drums from the site. A remedial investigation
feasibility study report has not been prepared at this
time.
The Company is cooperating fully with government authorities
in each of these matters.
ITEM 4. Submission of Matters to a Vote of Security Holders
No such matters were submitted to security holders of the
Company in the fourth quarter of fiscal year 1993.
PART II
ITEM 5. Market for the Registrant's Common Stock and Related
Security Holder Matters
The stock price data and common dividends per share and the
Stock Listing Information which appear on pages 26 and 31,
respectively, of the LADD Furniture, Inc. Annual Report to Share-
holders for 1993, are incorporated by reference in this Form 10-K
Annual Report.
There were approximately 885 security holders of record of
the Company's common stock as of March 4, 1994.
ITEM 6. Selected Financial Data
The summary of selected financial data for each of the
periods in the five-year period ended January 1, 1994, which
appears on page 26 of the LADD Furniture, Inc. Annual Report to
Shareholders for 1993, is incorporated by reference in this Form
10-K Annual Report.
ITEM 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Management's discussion and analysis of financial condition
and results of operations for the years ended January 1, 1994,
January 2, 1993, and December 28, 1991, which appears
-13-
on pages 27
to 30 of the LADD Furniture, Inc. Annual Report to Shareholders
for 1993, is incorporated by reference in this Form 10-K Annual
Report.
ITEM 8. Financial Statements and Supplementary Data
The consolidated financial statements, together with the
independent auditors' report thereon of KPMG Peat Marwick dated
February 11, 1994, and the selected quarterly data, appearing on
pages 9 to 25 and page 31, respectively, of the accompanying LADD
Furniture, Inc. Annual Report to Shareholders for 1993 are
incorporated by reference in this Form 10-K Annual Report.
With the exception of the aforementioned information and the
information incorporated in Items 5, 6, 7, and 8, the LADD
Furniture, Inc. Annual Report to Shareholders for 1993 is not to
be deemed filed as part of this report.
ITEM 9. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure
No changes in accountants or disagreements with accountants
on accounting or financial disclosure occurred in fiscal years
1993 and 1992.
PART III
Part III is omitted as the Company intends to file with the
Commission within 120 days after the end of the Company's fiscal
year a definitive proxy statement pursuant to Regulation 14A
which will involve the election of directors.
ITEM 10. Directors and Executive Officers of the Registrant
See reference to definitive proxy statement under Part III.
ITEM 11. Executive Compensation
See reference to definitive proxy statement under Part III.
ITEM 12. Security Ownership of Certain Beneficial Owners and
Management
See reference to definitive proxy statement under Part III.
ITEM 13. Certain Relationships and Related Transactions
See reference to definitive proxy statement under Part III.
-14-
PART IV
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K
Page in
Annual Report*
(a) The following documents are filed as part of this
report:
(1) Financial Statements
Consolidated Statements of Operations for the
years ended January 1, 1994, January 2, 1993,
and December 28, 1991 . . . . . . . . . . . . . . 10
Consolidated Balance Sheets as of January 1,
1994 and January 2, 1993 . . . . . . . . . . . 11
Consolidated Statements of Cash Flows for the
years ended January 1, 1994, January 2, 1993,
and December 28, 1991 . . . . . . . . . . . . . . 12
Consolidated Statements of Shareholders'
Equity for the years ended January 1, 1994,
January 2, 1993, and December 28, 1991 . . . . . 13
Notes to Consolidated Financial Statements . 14-25
Independent Auditors' Report . . . . . . . . . . 9
*Incorporated by reference from the indicated pages of
the LADD Furniture,
Inc. Annual Report to Shareholders for 1993.
(2) Index to Financial Statement Schedules:
Independent Auditors' Report . . . . . . . . . . . F-1
For the years ended January 1, 1994, January
2, 1993, and December 28, 1991
V - Property, Plant and Equipment . . . . . . . F-2
VI - Accumulated Depreciation
of Property, Plant and Equipment . . . . . F-3
VIII - Valuation and Qualifying Accounts and Reserves F-4
X - Supplementary Earnings Statement Information F-5
-15-
All other schedules are omitted because they
are not applicable or the required
information is shown in the financial
statements or notes thereto.
(3) List of Executive Compensation Plans
LADD Furniture, Inc. 1994 Incentive Stock
Option Plan
Employee Restricted Stock Purchase Agreements
for all directors and the named executive
officers of the registrant as required by
Item 402(a)(2) of Regulation S-K
LADD Furniture, Inc. Supplemental Retirement
Income Plan
LADD Furniture, Inc. Long-Term Incentive Plan
LADD Furniture, Inc. 1994 Management
Incentive Plan
(b) No reports on Form 8-K were filed in the last quarter of
fiscal 1993.
(c) Exhibits
3. Articles of Incorporation and Amendments.
(Previously filed as Exhibit 10 to Item 14 of
the Company's Annual Report on Form 10-K for
the year ended December 29, 1990, filed with
the Commission on March 28, 1991)
Bylaws (as amended February 25, 1993)
(Previously filed as Exhibit 3 to Item 14 of
the Company's Annual Report on Form 10-K for
the year ended January 2, 1993, filed with
the Commission on March 30, 1993)
10. LADD Furniture, Inc. 1994 Incentive
Stock Option Plan
Employee Restricted Stock Purchase
Agreement between the Company and
Don A. Hunziker dated February 28,
1991
-16-
Employee Restricted Stock Purchase
Agreement between the Company and
O. William Fenn, Jr. dated February
28, 1991
Employee Restricted Stock Purchase
Agreement between the Company and
Richard R. Allen dated February 28,
1991
Employee Restricted Stock Purchase
Agreement between the Company and
Fred L. Schuermann, Jr. dated
February 28, 1991
Employee Restricted Stock Purchase
Agreement between the Company and
Gerald R. Grubbs, dated February
28, 1991
(Previously filed as Exhibit 10 to Item 14 of
the Company's Annual Report on Form 10-K for
the year ended December 29, 1990, filed with
the Commission on March 28, 1991)
Employee Restricted Stock Purchase
Agreement between the Company and
Don A. Hunziker dated June 20, 1991
(Previously filed as Exhibit 10 to Item 14 of
the Company's Annual Report on Form 10-K for
the year ended December 28, 1991, filed with
the Commission on March 26, 1992)
Employee Restricted Stock Purchase
Agreement between the Company and
Richard R. Allen dated February 25,
1993
Employee Restricted Stock Purchase
Agreement between the Company and
Gerald R. Grubbs dated February 25,
1993
Employee Restricted Stock Purchase
Agreement between the Company and
Fred L. Schuermann, Jr. dated
February 25, 1993
-17-
Employee Restricted Stock Purchase
Agreement between the Company and
William S. Creekmuir dated
February 25, 1993
(Previously filed as Exhibit 10 to Item 14 to
the Company's Annual Report on Form 10-K for
the year ended January 2, 1993, filed with
the Commission on March 30, 1993)
Enclosed as Exhibits 10.1 - 10.4 to this
Annual Report on Form 10-K for the year ended
January 1, 1994.
10.1 Employee Restricted Stock Purchase
Agreement between the Company and
Richard R. Allen dated February 24,
1994
10.2 Employee Restricted Stock Purchase
Agreement between the Company and
Gerald R. Grubbs dated February 24,
1994
10.3 Employee Restricted Stock Purchase
Agreement between the Company and
Fred L. Schuermann, Jr. dated
February 24, 1994
10.4 Employee Restricted Stock Purchase
Agreement between the Company and
William S. Creekmuir dated
February 24, 1994
Asset Purchase Agreement, dated as
of June 1, 1989, among the Company,
Maytag Corporation, The BJC Company
and The Gunlocke Company
(Previously filed as Exhibit 10(a) to the
Company's Current Report on Form 8-K, dated
as of June 1, 1989, filed with the Securities
and Exchange Commission on June 2, 1989)
-18-
First Amendment and Waiver to Asset
Purchase Agreement, dated as of
July 7, 1989, by and among the
Company, Pennsylvania House, Inc.,
The McGuire Furniture Company, The
Kittinger Company, Charter
Furniture, Inc., Brown Jordan
Company and The Gunlocke Company, a
North Carolina corporation, and
Maytag Corporation, The Gunlocke
Company, a Delaware corporation,
and The BJC Company
(Previously filed as Exhibit 10 to the
Company's Current Report on Form 8-K, filed
with the Commission on July 21, 1989, as
amended by Form 8 filed with the Commission
on September 18, 1989.)
Agreement of Purchase and Sale,
dated as of September 30, 1989,
together with the First Amendment,
among the Company, The Gunlocke
Company and HON Industries, Inc.
Agreement of Purchase and Sale,
dated as of November 7, 1989, among
the Company, The McGuire Furniture
Company and Kohler Interiors Group,
Ltd.
LADD Furniture, Inc. Supplemental
Retirement Income Plan
(Previously filed as Exhibit 10 to the
Company's Annual Report on Form 10-K, for the
year ended December 30, 1989, filed with the
Commission on March 30, 1990.)
Agreement of Purchase and Sale
dated as of June 22, 1990, together
with the first Amendment, among the
Company, The Kittinger Company, and
USC Industries, Inc.
(Previously filed as Exhibit 10 to the
Company's Annual Report on Form 10-K, for the
year ended December 30, 1989, filed with the
Commission on March 30, 1990.)
-19-
LADD Furniture, Inc. Long-Term
Incentive Plan
(Previously filed as Exhibit 10 to the
Company's Annual Report on Form 10-K, for the
year ended December 29, 1990, filed with the
Commission on March 28, 1991.)
Credit Agreement, dated as of
January 15, 1993, between the
Company, The Chase Manhattan Bank
(National Association) as agent,
and each of the banks signatory to
the Credit Agreement
Form of Term Loan Note of the
Company in the aggregate principal
amount of $45,000,000
Form of Revolving Credit Loan Note
of the Company issued in the
aggregate principal amount of
$85,000,000
(All previously filed as Exhibit 10 to the
Company's Annual Report on Form 10-K, for the
year ended January 2, 1993, filed with the
Commission on March 30, 1993.)
Transfer and Administrative
Agreement dated January 28, 1994
between Enterprise Funding
Corporation, LADD Furniture, Inc.,
and Clayton-Marcus Company, Inc.,
Barclay Furniture Co. and LADD
Transportation, Inc., as designated
subsidiaries.
Receivables Purchase Agreement
dated January 28, 1994, between
Clayton-Marcus Company, Inc.,
Barclay Furniture Co. and LADD
Transportation, Inc.
Letter Agreement, dated January 28,
1994, between the Company and The
Chase Manhattan Bank, N.A.
-20-
Form of Promissory Note of the
Company dated January 28, 1994 to
The Chase Manhattan Bank, N.A. in
the aggregate principal amount of
$20,000,000.
(Previously filed as Exhibits 99.1, 99.2,
99.3 and 99.4 to the Company's Current Report
on Form 8-K dated January 31, 1994, filed
with the Commission on February 14, 1994.)
Enclosed as Exhibits 10.5 - 10.8 to this
Annual Report on Form 10-K for this year
ended January 1, 1994
10.5 Letter Agreement dated February 28,
1994 between the Company and PNC
Bank, National Association
10.6 Form of Line of Credit Note of the
Company dated February 28, 1994 to
PNC Bank, National Association in
the aggregate principal amount of
$15,000,000
10.7 Form of Guaranty and Suretyship
Agreement dated February 28, 1994
between PNC Bank, National
Association and Pennsylvania House,
Inc., Brown Jordan Company,
Clayton-Marcus Company, Inc., LADD
Contract Sales Corporation,
Fournier Furniture, Inc., Barclay
Furniture Co., American Furniture
Company, Incorporated, Pilliod
Furniture, Inc. and Lea Industries,
Inc. (a North Carolina corporation)
10.8 1994 Management Incentive Plan
Enclosed as Exhibit 13.1 to this Annual
Report on Form 10-K for the year ended
January 1, 1994.
13.1 1993 Annual Report to Shareholders
-21-
22. Subsidiaries of Registrant
American Drew, Inc., a North Carolina corporation
American Furniture Company, Incorporated, a
Virginia corporation
Barclay Furniture Co., a Mississippi corporation
Brown Jordan Company, a North Carolina corporation
Cherry Grove, Inc., a Delaware
corporation
Clayton-Marcus Company, Inc., a North Carolina
corporation
Fournier Furniture, Inc., a North Carolina
corporation
Kenbridge Furniture, Inc., a North Carolina
corporation
LFI Capital Management, Inc., a Delaware
corporation
LADD Transportation, Inc., a North Carolina
corporation
Lea Industries, Inc., a North Carolina corporation
Lea Industries, Inc., a Tennessee corporation
Lea Industries, Inc., a Virginia corporation
Lea Lumber and Plywood Co., a Virginia corporation
LADD Contract Sales Corporation, a North Carolina
corporation
LADD International Sales Corp., a U.S. Virgin
Islands corporation
Pennsylvania House, Inc., a North Carolina
corporation
Pilliod Furniture, Inc., a North Carolina
corporation
Enclosed as Exhibit 24.1 to this Annual
Report on Form 10-K for the year ended
January 1, 1994.
24.1 Consent of KPMG Peat Marwick
-22-
SIGNATURES
Pursuant to the requirement of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned, there-
unto duly authorized.
LADD FURNITURE, INC.
(Registrant)
By s/William S. Creekmuir 3/31/94
William S. Creekmuir (Date)
Senior Vice President, Chief
Financial Officer, Secretary, and
Treasurer (Principal Financial
Officer)
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities and on
the dated indicated.
<TABLE>
<S> <C>
s/Don A. Hunziker 3/31/94 s/Richard R. Allen 3/31/94
Don A. Hunziker (Date) Richard R. Allen (Date)
Director Chairman of the Board, President and
Chief Executive Officer and Director
s/O. William Fenn, Jr. 3/31/94 s/Daryl B. Adams 3/31/94
O. William Fenn, Jr. (Date) Daryl B. Adams (Date)
Director Vice President, Corporate Controller,
Assistant Secretary, and Assistant
Treasurer (Principal Accounting Officer)
s/Thomas F. Keller 3/31/94 s/Gerald R. Grubbs 3/31/94
Thomas F. Keller (Date) Gerald R. Grubbs (Date)
Director Vice Chairman of the Board and
Director
s/William B. Cash 3/31/94 s/James H. Corrigan, Jr. 3/31/94
William B. Cash (Date) James H. Corrigan, Jr. (Date)
Director Director
s/Fred L. Schuermann, Jr. 3/31/94 s/William S. Creekmuir 3/31/94
Fred L. Schuermann, Jr. (Date) William S. Creekmuir (Date)
Executive Vice President, Senior Vice President, Chief
Assistant Secretary and Financial Officer, Secretary, and
Director Treasurer (Principal Financial Officer)
-23-
</TABLE>
<TABLE>
<CAPTION>
Schedule V
LADD FURNITURE, INC. AND SUBSIDIARIES
Property, Plant and Equipment
(dollar amounts in thousands)
Balance at Additions in Other Balance at
beginning of acquisition of additions at Transfers end of
Description year business cost Retirements (b) year
<S> <C> <C> <C> <C> <C> <C>
Year ended January 1, 1994:
Land and improvements $ 5,717 - 235 (60) - 5,892
Buildings and improvements 60,689 - 5,373 (212) - 65,850
Machinery and equipment 62,276 - 12,379 (1,658) - 72,997
Construction in progress 5,587 - 6,679 (a) - - 12,266
$134,269 - 24,666 (1,930) - 157,005
Year ended January 2, 1993:
Land and improvements $ 5,231 383 169 (66) - 5,717
Buildings and improvements 58,686 1,164 1,247 (408) - 60,689
Machinery and equipment 56,262 1,036 5,455 (506) 29 62,276
Construction in progress 3,432 - 2,155 (a) - - 5,587
$123,611 2,583 9,026 (980) 29 134,269
Year ended December 28, 1991:
Land and improvements $ 5,254 - 4 (34) 7 5,231
Buildings and improvements 55,895 - 2,670 (172) 293 58,686
Machinery and equipment 52,908 - 5,031 (2,376) 699 56,262
Construction in progress 3,588 - (156)(a) - - 3,432
$117,645 - 7,549 (2,582) 999 123,611
Notes:
(a) Represents net increase (decrease) in construction in progress.
(b) Represents cost of property, plant and equipment transferred from (to) property, plant and
equipment held for sale.
</TABLE>
<TABLE>
<CAPTION>
Schedule VI
LADD FURNITURE, INC. AND SUBSIDIARIES
Accumulated Depreciation of Property, Plant, and Equipment
(dollar amounts in thousands)
Additions
Balance at charged to Balance at
beginning of cost and Transfers end of
Description year expense Retirements (a) year
<S> <C> <C> <C> <C> <C>
Year ended January 1, 1994:
Land and improvements $ 426 72 - - 498
Buildings and improvements 17,542 3,314 (213) - 20,643
Machinery and equipment 32,692 7,122 (1,447) - 38,367
$50,660 10,508 (1,660) - 59,508
Year ended January 2, 1993:
Land and improvements $ 362 64 - - 426
Buildings and improvements 14,903 2,793 (154) - 17,542
Machinery and equipment 26,687 6,294 (317) 28 32,692
$41,952 9,151 (471) 28 50,660
Year ended December 28, 1991:
Land and improvements $ 262 63 - 37 362
Buildings and improvements 12,213 2,725 (152) 117 14,903
Machinery and equipment 22,411 5,995 (1,373) (346) 26,687
$34,886 8,783 (1,525) (192) 41,952
Note:
(a) Represents accumulated depreciation on property, plant and equipment transferred from (to)
property,plant and equipment held for sale.
</TABLE>
<TABLE>
<CAPTION>
Schedule VIII
LADD FURNITURE, INC. AND SUBSIDIARIES
Valuation and Qualifying Accounts and Reserves
(dollar amounts in thousands)
Charged
Balance at (credited) Charged to Balance at
beginning of to costs and other accounts Deductions end of
Description year expenses (a) (b) year
<S> <C> <C> <C> <C> <C>
Year ended January 1, 1994:
Doubtful receivables $2,763 2,056 - (1,503) 3,316
Discounts 23 - (c) - (23) 0
Returns and allowances 731 131 (c) - - 862
$3,517 2,187 - (1,526) 4,178
Year ended January 2, 1993:
Doubtful receivables $4,937 3,309 408 (5,891) 2,763
Discounts 23 - (c) - - 23
Returns and allowances 914 (183)(c) - - 731
$5,874 3,126 408 (5,891) 3,517
Year ended December 28, 1991:
Doubtful receivables $2,344 6,989 - (4,396) 4,937
Discounts 18 5 (c) - - 23
Returns and allowances 552 362 (c) - - 914
$2,914 7,356 - (4,396) 5,874
Notes:
(a) Represents initial reserves of acquired business.
(b) Represents uncollectible receivables written-off, net of recoveries.
(c) Represents net increase (decrease) in required reserve.
</TABLE>
Schedule X
LADD FURNITURE, INC. AND SUBSIDIARIES
Supplementary Earnings Statement Information
(dollar amounts in thousands)
Year ended January 1, 1994
Maintenance and repairs $7,634
Advertising costs $9,869
Year ended January 2, 1993
Maintenance and repairs $6,844
Advertising costs $8,732
Year ended December 28, 1991
Maintenance and repairs $6,330
Advertising costs $7,357
Amortization expense $4,407
Other items required in this schedule are not shown since they
did not exceed one percent of net sales.
Exhibit 10.1
EMPLOYEE RESTRICTED STOCK
PURCHASE AGREEMENT
Agreement, made this 24th day of February, 1994, between
LADD Furniture, Inc., a North Carolina corporation (the
"Company"), and Richard R. Allen (the "Employee").
For valuable consideration, receipt of which is
acknowledged, the parties agree as follows:
1. Purchase of Shares. The Employee subscribes for and,
upon acceptance, shall purchase, subject to the terms and
conditions set forth in this Agreement, 6,871 shares (the
"Shares") of common stock ("common stock"), $.10 par value, of
the Company at a purchase price of $.10 per share. The aggregate
purchase price of the Shares shall be paid by the Employee by
check, payable to the order of the Company, or such other method
as may be acceptable to the Company. Upon the Company's receipt
of payment for the Shares, the Company shall issue to the
Employee one or more certificates in the name of the Employee for
that number of Shares purchased by the Employee. The Employee
agrees that the Shares shall be subject to the Re-purchase Option
set forth in Section 2 of this Agreement and the restrictions on
transfer set forth in Section 4 of this Agreement.
2. Re-purchase Option.
(a) If the Employee ceases to be employed by the
Company for any reason other than death or disability or ceases
to be employed by the Company in an appropriate executive
capacity (as determined by the Company in its sole discretion),
prior to January 1, 1999, the Company shall have the right and
option (the
-1-
"Re-purchase Option") to purchase any or all of the
Shares from the Employee at the same price as the Employee paid
for the Shares.
(b) For purposes of this Agreement, employment with
the Company shall include employment with a parent or subsidiary
of the Company.
3. Exercise of Re-purchase Option and Closing.
(a) The Company may exercise the Re-purchase Option by
delivering or mailing to the Employee in accordance with Section
14, written notice of exercise within 60 days after the
termination of the employment of the Employee with the Company or
the date upon which the Employee ceases to be employed in an
appropriate executive capacity (as determined by the Company in
its sole discretion). This notice shall specify the number of
Shares to be purchased. If and to the extend the Re-purchase
Option is not exercised within the 60-day period, the Re-purchase
Option shall automatically expire, effective upon the expiration
of the 60-day period.
(b) Within 10 days after his receipt of the Company's
notice of the exercise of the Re-purchase Option pursuant to
Subsection 3(a), the Employee shall tender to the Company at its
principal offices the certificate or certificates representing
the Shares that the Company has elected to purchase, duly
endorsed in blank by the Employee or with duly endorsed stock
powers attached, all in form suitable for the transfer of the
Shares of the Company. Upon its receipt of these Shares, the
Company shall deliver or mail to the Employee a check in the
amount of the aggregate Option Price.
(c) After the time when any Shares are required to be
delivered to the Company for transfer to it pursuant to
Subsection 3(b), the Company shall not pay any dividend to the
Employee on
-2-
account of those Shares, or permit the employee to
exercise any of the privileges or rights of a stockholder with
respect to those shares, but shall, insofar as permitted by law,
treat the Company as the owner of the Shares.
(d) The Option Price may be payable, at the discretion
of the company, in cancellation of all or a portion of any
outstanding indebtedness of the Employee to the Company, or in
cash (by check), or both.
4. Restrictions on Transfer:
(a) Except as otherwise provided in Subsection 4(b),
the Employee shall not, during the term of the Re-purchase
Option, sell, assign, transfer, pledge, hypothecate, or otherwise
dispose of, by operation of law or otherwise (collectively
"transfer"), any of the Shares, or any interest therein, unless
the Shares are no longer subject to the Re-purchase Option.
(b) Notwithstanding the foregoing, the Employee may
transfer Shares to or for the benefit of any spouse, child or
grandchild, or to a trust for their benefit, provided that those
Shares shall remain subject to this Agreement, including without
limitation the restrictions on transfer set forth in this Section
4 and the Re-purchase Option, and the permitted transferee shall,
as a condition to the transfer, deliver to the Company a written
instruction confirming that the transferee shall be bound by all
of the terms and conditions of this Agreement.
5. Effect of Prohibited Transfer. The Company shall not
be required:
(a) To transfer on its books any of the Shares that
shall have been sold or transferred in violation of any of the
provisions set forth in this Agreement; or
-3-
(b) To treat as owner of those Shares or to pay
dividend to any transferee to whom any of those Shares shall have
been sold or transferred.
6. Restricted Legend. All certificates representing
Shares shall have affixed thereto a legend in substantially the
following form, in addition to any other legends that may be
required under federal or state securities laws:
The shares of stock represented by this
certificate are subject to restrictions on
transfer and an option to purchase set forth
in a Stock Restriction Agreement between the
corporation and the registered owner of this
certificate (or his predecessor in interest).
This Agreement is available for inspection
without charge at the office of the Secretary
of the corporation.
7. Investment Representations. The Employee represents,
warrants, and covenants as follows:
(a) The Employee is purchasing the Shares for his own
account for investment only, and not with a view to, or for sale
in connection with, any distribution of the Shares in violation
of the Securities Act of 1933 (the "Securities Act"), or any rule
or regulation under the Securities Act.
(b) He has had an opportunity he deems adequate to
obtain from representatives of the Company the information
necessary to permit him to evaluate the merits and risks of his
investment in the Company.
(c) He has sufficient experience in business,
financial and investment matters to be able to evaluate the risks
involved in the purchase of the Shares and to make an informed
investment decision with respect to that purchase.
-4-
(d) He can afford a complete loss of the value of the
Shares and is able to bear the economic risk of holding the
Shares for an indefinite period.
(e) He understands that:
(i) The Shares have not been registered
under the Securities Act and are "restricted
securities" within the meaning of Rule 144
under the Securities Act;
(ii) The Shares cannot be sold,
transferred, or otherwise disposed of unless
they are subsequently registered under the
Securities Act or an exemption from
registration is then available;
(iii) In any event, the exemption from
registration under Rule 144 will not be
available for at least two years and even
then will not be available unless a public
market then exists for the Common Stock,
adequate information concerning the Company
is then available to the public, and other
terms and conditions of Rule 144 are complied
with; and
(iv) The Company has no obligation or
current intention to register the Shares
under
the Securities Act.
(f) A legend substantially in the following form will be
placed on the certificate representing the Shares:
The shares represented by this certificate
have not been registered under the Securities
Act of 1933, as amended, and may not be sold,
transferred or otherwise disposed of in the
absence of an effective registration
statement under the Act or an opinion of
counsel satisfactory to the corporation to
the effect that registration is not required.
8. Adjustments. If from time to time during the term of
the Re-purchase Option there is any stock split, stock dividend,
stock distribution, or other reclassification of the Common Stock
of the Company, or any merger, consolidation, or sale of
substantially all
-5-
of the assets of the Company, any and all new,
substituted, or additional securities to which the Employee is
entitled by reason of his ownership of the Shares shall be
subject immediately to: The Re-purchase Option (and be included
as "Shares"), the restrictions on transfer, and other provisions
of this Agreement in the same manner and to the same extent as
the Shares, and the Option Price shall be adjusted appropriately.
9. Withholding Taxes.
(a) The Employee acknowledges and agrees that the
Company has the right to deduct from payments of any kind
otherwise due to the Employee any federal, state or local taxes
of any kind required by law to be withheld with respect to the
purchase of the Shares by the Employee.
(b) If the Employee elects, in accordance with Section
83(b) of the Internal Revenue Code of 1954, as amended, to
recognize ordinary income in the year of acquisition of the
Shares, the Company will require at the time of that election an
additional payment for withholding tax purposes based on the
difference, if any between the purchase price for the Shares and
the fair market value of the Shares as of the day immediately
preceding the date of the purchase of the Shares by the Employee.
10. Severability. The invalidity or unenforceability of
any provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, and each
other provision of this Agreement shall be severable and
enforceable to the extent permitted by law.
11. Waiver. Any provision contained in this Agreement may
be waived, either generally or in any particular instance, by the
Board of Directors of the Company.
-6-
12. Binding Effect. This Agreement shall be binding upon,
and inure to the benefit of, the Company and the Employee and
their respective heirs, executors, administrators, legal
representatives, successors, and assigns, subject to the
restrictions on transfer set forth in Section 4 of this
Agreement.
13. No Rights to Employment. Nothing contained in this
Agreement shall be construed as giving the Employee any right to
be retained, in any position, as an employee of the Company.
14. Notice. All notices required or permitted hereunder
shall be in writing and deemed effectively given upon personal
delivery or upon deposit in the United States Post Office, by
registered or certified mail, postage prepaid, addressed to the
other party at the address shown beneath his or its respective
signature to this Agreement, or at such other address or
addresses as either party shall designate to the other in
accordance with this Section 14.
15. Pronouns. Whenever the context may require, any
pronouns used in this Agreement shall include the corresponding
masculine, feminine, or neuter forms. The singular form of nouns
and pronouns shall included the plural, and the plural form of
nouns and pronouns shall include the singular.
16. Entire Agreement. This Agreement constitutes the
entire agreement between the parties, and supersedes all prior
agreements and understandings relating to the subject matter of
this Agreement.
17. Amendment. This Agreement may be amended or modified
only by a written instrument executed by both the Company and the
Employee.
-7-
18. Governing Law. This Agreement shall be construed,
interpreted, and enforced in accordance with the laws of North
Carolina.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first above written.
COMPANY
LADD FURNITURE, INC.
By:____________________________________
Chairman and Chief Executive Officer
Address: P. O. Box HP-3
High Point, NC 27261
EMPLOYEE
_______________________________________
Address: _____________________________
_____________________________
Social Sec. No.________________________
-8-
Exhibit 10.2
EMPLOYEE RESTRICTED STOCK
PURCHASE AGREEMENT
Agreement, made this 24th day of February, 1994, between
LADD Furniture, Inc., a North Carolina corporation (the
"Company"), and Gerald R. Grubbs (the "Employee").
For valuable consideration, receipt of which is
acknowledged, the parties agree as follows:
1. Purchase of Shares. The Employee subscribes for and,
upon acceptance, shall purchase, subject to the terms and
conditions set forth in this Agreement, 4,418 shares (the
"Shares") of common stock ("common stock"), $.10 par value, of
the Company at a purchase price of $.10 per share. The aggregate
purchase price of the Shares shall be paid by the Employee by
check, payable to the order of the Company, or such other method
as may be acceptable to the Company. Upon the Company's receipt
of payment for the Shares, the Company shall issue to the
Employee one or more certificates in the name of the Employee for
that number of Shares purchased by the Employee. The Employee
agrees that the Shares shall be subject to the Re-purchase Option
set forth in Section 2 of this Agreement and the restrictions on
transfer set forth in Section 4 of this Agreement.
2. Re-purchase Option.
(a) If the Employee ceases to be employed by the
Company for any reason other than death or disability or ceases
to be employed by the Company in an appropriate executive
capacity (as determined by the Company in its sole discretion),
prior to January 1, 1999, the Company shall have the right and
option (the
-1-
"Re-purchase Option") to purchase any or all of the
Shares from the Employee at the same price as the Employee paid
for the Shares.
(b) For purposes of this Agreement, employment with
the Company shall include employment with a parent or subsidiary
of the Company.
3. Exercise of Re-purchase Option and Closing.
(a) The Company may exercise the Re-purchase Option by
delivering or mailing to the Employee in accordance with Section
14, written notice of exercise within 60 days after the
termination of the employment of the Employee with the Company or
the date upon which the Employee ceases to be employed in an
appropriate executive capacity (as determined by the Company in
its sole discretion). This notice shall specify the number of
Shares to be purchased. If and to the extend the Re-purchase
Option is not exercised within the 60-day period, the Re-purchase
Option shall automatically expire, effective upon the expiration
of the 60-day period.
(b) Within 10 days after his receipt of the Company's
notice of the exercise of the Re-purchase Option pursuant to
Subsection 3(a), the Employee shall tender to the Company at its
principal offices the certificate or certificates representing
the Shares that the Company has elected to purchase, duly
endorsed in blank by the Employee or with duly endorsed stock
powers attached, all in form suitable for the transfer of the
Shares of the Company. Upon its receipt of these Shares, the
Company shall deliver or mail to the Employee a check in the
amount of the aggregate Option Price.
(c) After the time when any Shares are required to be
delivered to the Company for transfer to it pursuant to
Subsection 3(b), the Company shall not pay any dividend to the
Employee on
-2-
account of those Shares, or permit the employee to
exercise any of the privileges or rights of a stockholder with
respect to those shares, but shall, insofar as permitted by law,
treat the Company as the owner of the Shares.
(d) The Option Price may be payable, at the discretion
of the company, in cancellation of all or a portion of any
outstanding indebtedness of the Employee to the Company, or in
cash (by check), or both.
4. Restrictions on Transfer:
(a) Except as otherwise provided in Subsection 4(b),
the Employee shall not, during the term of the Re-purchase
Option, sell, assign, transfer, pledge, hypothecate, or otherwise
dispose of, by operation of law or otherwise (collectively
"transfer"), any of the Shares, or any interest therein, unless
the Shares are no longer subject to the Re-purchase Option.
(b) Notwithstanding the foregoing, the Employee may
transfer Shares to or for the benefit of any spouse, child or
grandchild, or to a trust for their benefit, provided that those
Shares shall remain subject to this Agreement, including without
limitation the restrictions on transfer set forth in this Section
4 and the Re-purchase Option, and the permitted transferee shall,
as a condition to the transfer, deliver to the Company a written
instruction confirming that the transferee shall be bound by all
of the terms and conditions of this Agreement.
5. Effect of Prohibited Transfer. The Company shall not
be required:
(a) To transfer on its books any of the Shares that
shall have been sold or transferred in violation of any of the
provisions set forth in this Agreement; or
-3-
(b) To treat as owner of those Shares or to pay
dividend to any transferee to whom any of those Shares shall have
been sold or transferred.
6. Restricted Legend. All certificates representing
Shares shall have affixed thereto a legend in substantially the
following form, in addition to any other legends that may be
required under federal or state securities laws:
The shares of stock represented by this
certificate are subject to restrictions on
transfer and an option to purchase set forth
in a Stock Restriction Agreement between the
corporation and the registered owner of this
certificate (or his predecessor in interest).
This Agreement is available for inspection
without charge at the office of the Secretary
of the corporation.
7. Investment Representations. The Employee represents,
warrants, and covenants as follows:
(a) The Employee is purchasing the Shares for his own
account for investment only, and not with a view to, or for sale
in connection with, any distribution of the Shares in violation
of the Securities Act of 1933 (the "Securities Act"), or any rule
or regulation under the Securities Act.
(b) He has had an opportunity he deems adequate to
obtain from representatives of the Company the information
necessary to permit him to evaluate the merits and risks of his
investment in the Company.
(c) He has sufficient experience in business,
financial and investment matters to be able to evaluate the risks
involved in the purchase of the Shares and to make an informed
investment decision with respect to that purchase.
-4-
(d) He can afford a complete loss of the value of the
Shares and is able to bear the economic risk of holding the
Shares for an indefinite period.
(e) He understands that:
(i) The Shares have not been registered
under the Securities Act and are "restricted
securities" within the meaning of Rule 144
under the Securities Act;
(ii) The Shares cannot be sold,
transferred, or otherwise disposed of unless
they are subsequently registered under the
Securities Act or an exemption from
registration is then available;
(iii) In any event, the exemption from
registration under Rule 144 will not be
available for at least two years and even
then will not be available unless a public
market then exists for the Common Stock,
adequate information concerning the Company
is then available to the public, and other
terms and conditions of Rule 144 are complied
with; and
(iv) The Company has no obligation or
current intention to register the Shares
under
the Securities Act.
(f) A legend substantially in the following form will be
placed on the certificate representing the Shares:
The shares represented by this certificate
have not been registered under the Securities
Act of 1933, as amended, and may not be sold,
transferred or otherwise disposed of in the
absence of an effective registration
statement under the Act or an opinion of
counsel satisfactory to the corporation to
the effect that registration is not required.
8. Adjustments. If from time to time during the term of
the Re-purchase Option there is any stock split, stock dividend,
stock distribution, or other reclassification of the Common Stock
of the Company, or any merger, consolidation, or sale of
substantially all
-5-
of the assets of the Company, any and all new,
substituted, or additional securities to which the Employee is
entitled by reason of his ownership of the Shares shall be
subject immediately to: The Re-purchase Option (and be included
as "Shares"), the restrictions on transfer, and other provisions
of this Agreement in the same manner and to the same extent as
the Shares, and the Option Price shall be adjusted appropriately.
9. Withholding Taxes.
(a) The Employee acknowledges and agrees that the
Company has the right to deduct from payments of any kind
otherwise due to the Employee any federal, state or local taxes
of any kind required by law to be withheld with respect to the
purchase of the Shares by the Employee.
(b) If the Employee elects, in accordance with Section
83(b) of the Internal Revenue Code of 1954, as amended, to
recognize ordinary income in the year of acquisition of the
Shares, the Company will require at the time of that election an
additional payment for withholding tax purposes based on the
difference, if any between the purchase price for the Shares and
the fair market value of the Shares as of the day immediately
preceding the date of the purchase of the Shares by the Employee.
10. Severability. The invalidity or unenforceability of
any provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, and each
other provision of this Agreement shall be severable and
enforceable to the extent permitted by law.
11. Waiver. Any provision contained in this Agreement may
be waived, either generally or in any particular instance, by the
Board of Directors of the Company.
-6-
12. Binding Effect. This Agreement shall be binding upon,
and inure to the benefit of, the Company and the Employee and
their respective heirs, executors, administrators, legal
representatives, successors, and assigns, subject to the
restrictions on transfer set forth in Section 4 of this
Agreement.
13. No Rights to Employment. Nothing contained in this
Agreement shall be construed as giving the Employee any right to
be retained, in any position, as an employee of the Company.
14. Notice. All notices required or permitted hereunder
shall be in writing and deemed effectively given upon personal
delivery or upon deposit in the United States Post Office, by
registered or certified mail, postage prepaid, addressed to the
other party at the address shown beneath his or its respective
signature to this Agreement, or at such other address or
addresses as either party shall designate to the other in
accordance with this Section 14.
15. Pronouns. Whenever the context may require, any
pronouns used in this Agreement shall include the corresponding
masculine, feminine, or neuter forms. The singular form of nouns
and pronouns shall included the plural, and the plural form of
nouns and pronouns shall include the singular.
16. Entire Agreement. This Agreement constitutes the
entire agreement between the parties, and supersedes all prior
agreements and understandings relating to the subject matter of
this Agreement.
17. Amendment. This Agreement may be amended or modified
only by a written instrument executed by both the Company and the
Employee.
-7-
18. Governing Law. This Agreement shall be construed,
interpreted, and enforced in accordance with the laws of North
Carolina.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first above written.
COMPANY
LADD FURNITURE, INC.
By:____________________________________
Chairman and Chief Executive Officer
Address: P. O. Box HP-3
High Point, NC 27261
EMPLOYEE
_______________________________________
Address: _____________________________
_____________________________
Social Sec. No.________________________
-8-
Exhibit 10.3
EMPLOYEE RESTRICTED STOCK
PURCHASE AGREEMENT
Agreement, made this 24th day of February, 1994, between
LADD Furniture, Inc., a North Carolina corporation (the
"Company"), and Fred L. Schuermann, Jr. (the "Employee").
For valuable consideration, receipt of which is
acknowledged, the parties agree as follows:
1. Purchase of Shares. The Employee subscribes for and,
upon acceptance, shall purchase, subject to the terms and
conditions set forth in this Agreement, 4,418 shares (the
"Shares") of common stock ("common stock"), $.10 par value, of
the Company at a purchase price of $.10 per share. The aggregate
purchase price of the Shares shall be paid by the Employee by
check, payable to the order of the Company, or such other method
as may be acceptable to the Company. Upon the Company's receipt
of payment for the Shares, the Company shall issue to the
Employee one or more certificates in the name of the Employee for
that number of Shares purchased by the Employee. The Employee
agrees that the Shares shall be subject to the Re-purchase Option
set forth in Section 2 of this Agreement and the restrictions on
transfer set forth in Section 4 of this Agreement.
2. Re-purchase Option.
(a) If the Employee ceases to be employed by the
Company for any reason other than death or disability or ceases
to be employed by the Company in an appropriate executive
capacity (as determined by the Company in its sole discretion),
prior to January 1, 1999, the Company shall have the right and
option (the
-1-
"Re-purchase Option") to purchase any or all of the
Shares from the Employee at the same price as the Employee paid
for the Shares.
(b) For purposes of this Agreement, employment with
the Company shall include employment with a parent or subsidiary
of the Company.
3. Exercise of Re-purchase Option and Closing.
(a) The Company may exercise the Re-purchase Option by
delivering or mailing to the Employee in accordance with Section
14, written notice of exercise within 60 days after the
termination of the employment of the Employee with the Company or
the date upon which the Employee ceases to be employed in an
appropriate executive capacity (as determined by the Company in
its sole discretion). This notice shall specify the number of
Shares to be purchased. If and to the extend the Re-purchase
Option is not exercised within the 60-day period, the Re-purchase
Option shall automatically expire, effective upon the expiration
of the 60-day period.
(b) Within 10 days after his receipt of the Company's
notice of the exercise of the Re-purchase Option pursuant to
Subsection 3(a), the Employee shall tender to the Company at its
principal offices the certificate or certificates representing
the Shares that the Company has elected to purchase, duly
endorsed in blank by the Employee or with duly endorsed stock
powers attached, all in form suitable for the transfer of the
Shares of the Company. Upon its receipt of these Shares, the
Company shall deliver or mail to the Employee a check in the
amount of the aggregate Option Price.
(c) After the time when any Shares are required to be
delivered to the Company for transfer to it pursuant to
Subsection 3(b), the Company shall not pay any dividend to the
Employee on
-2-
account of those Shares, or permit the employee to
exercise any of the privileges or rights of a stockholder with
respect to those shares, but shall, insofar as permitted by law,
treat the Company as the owner of the Shares.
(d) The Option Price may be payable, at the discretion
of the company, in cancellation of all or a portion of any
outstanding indebtedness of the Employee to the Company, or in
cash (by check), or both.
4. Restrictions on Transfer:
(a) Except as otherwise provided in Subsection 4(b),
the Employee shall not, during the term of the Re-purchase
Option, sell, assign, transfer, pledge, hypothecate, or otherwise
dispose of, by operation of law or otherwise (collectively
"transfer"), any of the Shares, or any interest therein, unless
the Shares are no longer subject to the Re-purchase Option.
(b) Notwithstanding the foregoing, the Employee may
transfer Shares to or for the benefit of any spouse, child or
grandchild, or to a trust for their benefit, provided that those
Shares shall remain subject to this Agreement, including without
limitation the restrictions on transfer set forth in this Section
4 and the Re-purchase Option, and the permitted transferee shall,
as a condition to the transfer, deliver to the Company a written
instruction confirming that the transferee shall be bound by all
of the terms and conditions of this Agreement.
5. Effect of Prohibited Transfer. The Company shall not
be required:
(a) To transfer on its books any of the Shares that
shall have been sold or transferred in violation of any of the
provisions set forth in this Agreement; or
-3-
(b) To treat as owner of those Shares or to pay
dividend to any transferee to whom any of those Shares shall have
been sold or transferred.
6. Restricted Legend. All certificates representing
Shares shall have affixed thereto a legend in substantially the
following form, in addition to any other legends that may be
required under federal or state securities laws:
The shares of stock represented by this
certificate are subject to restrictions on
transfer and an option to purchase set forth
in a Stock Restriction Agreement between the
corporation and the registered owner of this
certificate (or his predecessor in interest).
This Agreement is available for inspection
without charge at the office of the Secretary
of the corporation.
7. Investment Representations. The Employee represents,
warrants, and covenants as follows:
(a) The Employee is purchasing the Shares for his own
account for investment only, and not with a view to, or for sale
in connection with, any distribution of the Shares in violation
of the Securities Act of 1933 (the "Securities Act"), or any rule
or regulation under the Securities Act.
(b) He has had an opportunity he deems adequate to
obtain from representatives of the Company the information
necessary to permit him to evaluate the merits and risks of his
investment in the Company.
(c) He has sufficient experience in business,
financial and investment matters to be able to evaluate the risks
involved in the purchase of the Shares and to make an informed
investment decision with respect to that purchase.
-4-
(d) He can afford a complete loss of the value of the
Shares and is able to bear the economic risk of holding the
Shares for an indefinite period.
(e) He understands that:
(i) The Shares have not been registered
under the Securities Act and are "restricted
securities" within the meaning of Rule 144
under the Securities Act;
(ii) The Shares cannot be sold,
transferred, or otherwise disposed of unless
they are subsequently registered under the
Securities Act or an exemption from
registration is then available;
(iii) In any event, the exemption from
registration under Rule 144 will not be
available for at least two years and even
then will not be available unless a public
market then exists for the Common Stock,
adequate information concerning the Company
is then available to the public, and other
terms and conditions of Rule 144 are complied
with; and
(iv) The Company has no obligation or
current intention to register the Shares
under
the Securities Act.
(f) A legend substantially in the following form will be
placed on the certificate representing the Shares:
The shares represented by this certificate
have not been registered under the Securities
Act of 1933, as amended, and may not be sold,
transferred or otherwise disposed of in the
absence of an effective registration
statement under the Act or an opinion of
counsel satisfactory to the corporation to
the effect that registration is not required.
8. Adjustments. If from time to time during the term of
the Re-purchase Option there is any stock split, stock dividend,
stock distribution, or other reclassification of the Common Stock
of the Company, or any merger, consolidation, or sale of
substantially all
-5-
of the assets of the Company, any and all new,
substituted, or additional securities to which the Employee is
entitled by reason of his ownership of the Shares shall be
subject immediately to: The Re-purchase Option (and be included
as "Shares"), the restrictions on transfer, and other provisions
of this Agreement in the same manner and to the same extent as
the Shares, and the Option Price shall be adjusted appropriately.
9. Withholding Taxes.
(a) The Employee acknowledges and agrees that the
Company has the right to deduct from payments of any kind
otherwise due to the Employee any federal, state or local taxes
of any kind required by law to be withheld with respect to the
purchase of the Shares by the Employee.
(b) If the Employee elects, in accordance with Section
83(b) of the Internal Revenue Code of 1954, as amended, to
recognize ordinary income in the year of acquisition of the
Shares, the Company will require at the time of that election an
additional payment for withholding tax purposes based on the
difference, if any between the purchase price for the Shares and
the fair market value of the Shares as of the day immediately
preceding the date of the purchase of the Shares by the Employee.
10. Severability. The invalidity or unenforceability of
any provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, and each
other provision of this Agreement shall be severable and
enforceable to the extent permitted by law.
11. Waiver. Any provision contained in this Agreement may
be waived, either generally or in any particular instance, by the
Board of Directors of the Company.
-6-
12. Binding Effect. This Agreement shall be binding upon,
and inure to the benefit of, the Company and the Employee and
their respective heirs, executors, administrators, legal
representatives, successors, and assigns, subject to the
restrictions on transfer set forth in Section 4 of this
Agreement.
13. No Rights to Employment. Nothing contained in this
Agreement shall be construed as giving the Employee any right to
be retained, in any position, as an employee of the Company.
14. Notice. All notices required or permitted hereunder
shall be in writing and deemed effectively given upon personal
delivery or upon deposit in the United States Post Office, by
registered or certified mail, postage prepaid, addressed to the
other party at the address shown beneath his or its respective
signature to this Agreement, or at such other address or
addresses as either party shall designate to the other in
accordance with this Section 14.
15. Pronouns. Whenever the context may require, any
pronouns used in this Agreement shall include the corresponding
masculine, feminine, or neuter forms. The singular form of nouns
and pronouns shall included the plural, and the plural form of
nouns and pronouns shall include the singular.
16. Entire Agreement. This Agreement constitutes the
entire agreement between the parties, and supersedes all prior
agreements and understandings relating to the subject matter of
this Agreement.
17. Amendment. This Agreement may be amended or modified
only by a written instrument executed by both the Company and the
Employee.
-7-
18. Governing Law. This Agreement shall be construed,
interpreted, and enforced in accordance with the laws of North
Carolina.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first above written.
COMPANY
LADD FURNITURE, INC.
By:____________________________________
Chairman and Chief Executive Officer
Address: P. O. Box HP-3
High Point, NC 27261
EMPLOYEE
_______________________________________
Address: _____________________________
_____________________________
Social Sec. No.________________________
-8-
Exhibit 10.4
EMPLOYEE RESTRICTED STOCK
PURCHASE AGREEMENT
Agreement, made this 24th day of February, 1994, between
LADD Furniture, Inc., a North Carolina corporation (the
"Company"), and William S. Creekmuir (the "Employee").
For valuable consideration, receipt of which is
acknowledged, the parties agree as follows:
1. Purchase of Shares. The Employee subscribes for and,
upon acceptance, shall purchase, subject to the terms and
conditions set forth in this Agreement, 1,956 shares (the
"Shares") of common stock ("common stock"), $.10 par value, of
the Company at a purchase price of $.10 per share. The aggregate
purchase price of the Shares shall be paid by the Employee by
check, payable to the order of the Company, or such other method
as may be acceptable to the Company. Upon the Company's receipt
of payment for the Shares, the Company shall issue to the
Employee one or more certificates in the name of the Employee for
that number of Shares purchased by the Employee. The Employee
agrees that the Shares shall be subject to the Re-purchase Option
set forth in Section 2 of this Agreement and the restrictions on
transfer set forth in Section 4 of this Agreement.
2. Re-purchase Option.
(a) If the Employee ceases to be employed by the
Company for any reason other than death or disability or ceases
to be employed by the Company in an appropriate executive
capacity (as determined by the Company in its sole discretion),
prior to January 1, 1999, the Company shall have the right and
option (the
-1-
"Re-purchase Option") to purchase any or all of the
Shares from the Employee at the same price as the Employee paid
for the Shares.
(b) For purposes of this Agreement, employment with
the Company shall include employment with a parent or subsidiary
of the Company.
3. Exercise of Re-purchase Option and Closing.
(a) The Company may exercise the Re-purchase Option by
delivering or mailing to the Employee in accordance with Section
14, written notice of exercise within 60 days after the
termination of the employment of the Employee with the Company or
the date upon which the Employee ceases to be employed in an
appropriate executive capacity (as determined by the Company in
its sole discretion). This notice shall specify the number of
Shares to be purchased. If and to the extend the Re-purchase
Option is not exercised within the 60-day period, the Re-purchase
Option shall automatically expire, effective upon the expiration
of the 60-day period.
(b) Within 10 days after his receipt of the Company's
notice of the exercise of the Re-purchase Option pursuant to
Subsection 3(a), the Employee shall tender to the Company at its
principal offices the certificate or certificates representing
the Shares that the Company has elected to purchase, duly
endorsed in blank by the Employee or with duly endorsed stock
powers attached, all in form suitable for the transfer of the
Shares of the Company. Upon its receipt of these Shares, the
Company shall deliver or mail to the Employee a check in the
amount of the aggregate Option Price.
(c) After the time when any Shares are required to be
delivered to the Company for transfer to it pursuant to
Subsection 3(b), the Company shall not pay any dividend to the
Employee on
-2-
account of those Shares, or permit the employee to
exercise any of the privileges or rights of a stockholder with
respect to those shares, but shall, insofar as permitted by law,
treat the Company as the owner of the Shares.
(d) The Option Price may be payable, at the discretion
of the company, in cancellation of all or a portion of any
outstanding indebtedness of the Employee to the Company, or in
cash (by check), or both.
4. Restrictions on Transfer:
(a) Except as otherwise provided in Subsection 4(b),
the Employee shall not, during the term of the Re-purchase
Option, sell, assign, transfer, pledge, hypothecate, or otherwise
dispose of, by operation of law or otherwise (collectively
"transfer"), any of the Shares, or any interest therein, unless
the Shares are no longer subject to the Re-purchase Option.
(b) Notwithstanding the foregoing, the Employee may
transfer Shares to or for the benefit of any spouse, child or
grandchild, or to a trust for their benefit, provided that those
Shares shall remain subject to this Agreement, including without
limitation the restrictions on transfer set forth in this Section
4 and the Re-purchase Option, and the permitted transferee shall,
as a condition to the transfer, deliver to the Company a written
instruction confirming that the transferee shall be bound by all
of the terms and conditions of this Agreement.
5. Effect of Prohibited Transfer. The Company shall not
be required:
(a) To transfer on its books any of the Shares that
shall have been sold or transferred in violation of any of the
provisions set forth in this Agreement; or
-3-
(b) To treat as owner of those Shares or to pay
dividend to any transferee to whom any of those Shares shall have
been sold or transferred.
6. Restricted Legend. All certificates representing
Shares shall have affixed thereto a legend in substantially the
following form, in addition to any other legends that may be
required under federal or state securities laws:
The shares of stock represented by this
certificate are subject to restrictions on
transfer and an option to purchase set forth
in a Stock Restriction Agreement between the
corporation and the registered owner of this
certificate (or his predecessor in interest).
This Agreement is available for inspection
without charge at the office of the Secretary
of the corporation.
7. Investment Representations. The Employee represents,
warrants, and covenants as follows:
(a) The Employee is purchasing the Shares for his own
account for investment only, and not with a view to, or for sale
in connection with, any distribution of the Shares in violation
of the Securities Act of 1933 (the "Securities Act"), or any rule
or regulation under the Securities Act.
(b) He has had an opportunity he deems adequate to
obtain from representatives of the Company the information
necessary to permit him to evaluate the merits and risks of his
investment in the Company.
(c) He has sufficient experience in business,
financial and investment matters to be able to evaluate the risks
involved in the purchase of the Shares and to make an informed
investment decision with respect to that purchase.
-4-
(d) He can afford a complete loss of the value of the
Shares and is able to bear the economic risk of holding the
Shares for an indefinite period.
(e) He understands that:
(i) The Shares have not been registered
under the Securities Act and are "restricted
securities" within the meaning of Rule 144
under the Securities Act;
(ii) The Shares cannot be sold,
transferred, or otherwise disposed of unless
they are subsequently registered under the
Securities Act or an exemption from
registration is then available;
(iii) In any event, the exemption from
registration under Rule 144 will not be
available for at least two years and even
then will not be available unless a public
market then exists for the Common Stock,
adequate information concerning the Company
is then available to the public, and other
terms and conditions of Rule 144 are complied
with; and
(iv) The Company has no obligation or
current intention to register the Shares
under
the Securities Act.
(f) A legend substantially in the following form will be
placed on the certificate representing the Shares:
The shares represented by this certificate
have not been registered under the Securities
Act of 1933, as amended, and may not be sold,
transferred or otherwise disposed of in the
absence of an effective registration
statement under the Act or an opinion of
counsel satisfactory to the corporation to
the effect that registration is not required.
8. Adjustments. If from time to time during the term of
the Re-purchase Option there is any stock split, stock dividend,
stock distribution, or other reclassification of the Common Stock
of the Company, or any merger, consolidation, or sale of
substantially all
-5-
of the assets of the Company, any and all new,
substituted, or additional securities to which the Employee is
entitled by reason of his ownership of the Shares shall be
subject immediately to: The Re-purchase Option (and be included
as "Shares"), the restrictions on transfer, and other provisions
of this Agreement in the same manner and to the same extent as
the Shares, and the Option Price shall be adjusted appropriately.
9. Withholding Taxes.
(a) The Employee acknowledges and agrees that the
Company has the right to deduct from payments of any kind
otherwise due to the Employee any federal, state or local taxes
of any kind required by law to be withheld with respect to the
purchase of the Shares by the Employee.
(b) If the Employee elects, in accordance with Section
83(b) of the Internal Revenue Code of 1954, as amended, to
recognize ordinary income in the year of acquisition of the
Shares, the Company will require at the time of that election an
additional payment for withholding tax purposes based on the
difference, if any between the purchase price for the Shares and
the fair market value of the Shares as of the day immediately
preceding the date of the purchase of the Shares by the Employee.
10. Severability. The invalidity or unenforceability of
any provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, and each
other provision of this Agreement shall be severable and
enforceable to the extent permitted by law.
11. Waiver. Any provision contained in this Agreement may
be waived, either generally or in any particular instance, by the
Board of Directors of the Company.
-6-
12. Binding Effect. This Agreement shall be binding upon,
and inure to the benefit of, the Company and the Employee and
their respective heirs, executors, administrators, legal
representatives, successors, and assigns, subject to the
restrictions on transfer set forth in Section 4 of this
Agreement.
13. No Rights to Employment. Nothing contained in this
Agreement shall be construed as giving the Employee any right to
be retained, in any position, as an employee of the Company.
14. Notice. All notices required or permitted hereunder
shall be in writing and deemed effectively given upon personal
delivery or upon deposit in the United States Post Office, by
registered or certified mail, postage prepaid, addressed to the
other party at the address shown beneath his or its respective
signature to this Agreement, or at such other address or
addresses as either party shall designate to the other in
accordance with this Section 14.
15. Pronouns. Whenever the context may require, any
pronouns used in this Agreement shall include the corresponding
masculine, feminine, or neuter forms. The singular form of nouns
and pronouns shall included the plural, and the plural form of
nouns and pronouns shall include the singular.
16. Entire Agreement. This Agreement constitutes the
entire agreement between the parties, and supersedes all prior
agreements and understandings relating to the subject matter of
this Agreement.
17. Amendment. This Agreement may be amended or modified
only by a written instrument executed by both the Company and the
Employee.
-7-
18. Governing Law. This Agreement shall be construed,
interpreted, and enforced in accordance with the laws of North
Carolina.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first above written.
COMPANY
LADD FURNITURE, INC.
By:____________________________________
Chairman and Chief Executive Officer
Address: P. O. Box HP-3
High Point, NC 27261
EMPLOYEE
_______________________________________
Address: _____________________________
_____________________________
Social Sec. No.________________________
-8-
Exhibit 10.5
February 28, 1994
LADD Furniture, Inc.
One Plaza Center - Box HP3
High Point, NC 27261-1500
Attention: William S. Creekmuir, Senior Vice
President and Chief Financial Officer
RE: $15 Million Committed Line of Credit
Ladies/Gentlemen:
LADD Furniture, Inc., a North Carolina corporation (the
"Borrower"), has requested that PNC Bank, National Association
(the "Bank") make available to it a $15,000,000 unsecured,
committed line of credit (the "Line of Credit"). The Bank is
willing to establish the Line of Credit upon the following terms
and conditions:
1. The Line of Credit shall be available for a period of one
year from the date hereof to February 28, 1995 (the "Termination
Date"). During the period of the Line of Credit, the Borrower
shall have the right to borrow, repay and reborrow amounts
hereunder; provided that principal amounts outstanding and all
accrued unpaid interest under the Line of Credit shall be repaid
in full on or before the Termination Date.
2. The maximum aggregate principal amount outstanding under the
Line of Credit shall at no time exceed $15,000,000. The
Borrower's obligation to repay shall be evidenced by a Line of
Credit Note substantially in the form of Exhibit "A" hereto (the
"Line of Credit Note"). Repayment of the Line of Credit Note
shall be guaranteed by the companies listed on Schedule 1 hereto
and by any other company which may become a "Material Subsidiary"
as defined in the Credit Agreement dated as of January 15, 1993
among the Borrower, The Chase Manhattan Bank (National
Association) as Agent, the Banks parties thereto (the "Existing
Banks") and the Guarantors (the "Existing Credit Agreement"),
pursuant to a Guaranty and Suretyship Agreement substantially in
the form of Exhibit "B" hereto (the "Guaranty Agreement"). This
Letter Agreement, the Line of Credit Note and the Guaranty
Agreement are collectively referred to as the "Loan Documents".
3. Upon the Borrower's application and subject to the Borrower's
compliance with all of the provisions of this letter agreement
(the "Agreement"), the Bank will make an advance to the Borrower
under the Line of Credit in such an amount or amounts as the
Borrower may request (the "Line of Credit Loans").
4. The proceeds of the Line of Credit Loans shall be used by the
Borrower as direct extensions of credit from the Bank to fund
working capital needs of the Borrower and other general corporate
purposes.
5. All amounts outstanding under the Line of Credit shall bear
interest at a rate per annum selected by the Borrower from the
interest rate options set forth below; it being understood that
the Borrower may select different options to apply simultaneously
to different portions of the Line of Credit Loans and may select
up to four (4) different interest periods to apply simultaneously
to different portions of the Line of Credit Loans bearing
interest at the As Offered Rate or Euro-Rate as set forth below.
(i) As Offered Rate. A rate per annum (computed on the
basis of a year of 360 days and the actual number of
days elapsed), determined in the Bank's sole
discretion, as offered from time to time by the Bank to
the Borrower as the rate at which the Bank would
advance funds to the Borrower in the principal amount
requested for the interest period requested (the "As
Offered Rate").
(ii) Prime Rate. A rate per annum (computed on the
basis of a year of 365 or 366 days, as the case may be,
and the actual number of days elapsed) equal to the
rate of interest announced from time to time by the
Bank at its principal office as its prime rate, which
rate may not be the lowest interest rate then being
charged commercial borrowers by the Bank (the "Prime
Rate").
(iii) Euro-Rate. A rate of interest per annum (computed
on the basis of a year of 360 days and the actual
number of days elapsed) equal to the sum of (A) the
rate at which deposits in U.S. dollars are offered to
the Bank in the London Interbank Market plus (B) the
Applicable Margin for Eurodollar Loans defined and
determined as set forth in Section 1.01 of the Existing
Credit Agreement, for the Interest Period (as
hereinafter defined) in an amount equal to the advance
and having a comparable maturity as determined at or
about 11 a.m. (London time) two Business Days prior to
the commencement of the Interest Period (the "Euro-
Rate"). For the purpose hereof, the following terms
shall have the following meanings: (x) "Business Day"
shall mean a day on which banks are open for business
in Pittsburgh, Pennsylvania and on which transactions
are conducted in the London Interbank Market; and (y)
"Interest Period" shall mean the period of one, two or
three months selected by the Borrower commencing on the
date of disbursement of an advance and each successive
period selected by the Borrower thereafter; provided,
that if an Interest Period would end on a day which is
not a Business Day, it shall end on the next succeeding
Business Day, unless such day falls in the succeeding
calendar month in which case the
-2-
Interest Period shall
end on the next preceding Business Day. In no event
shall any Interest Period end on a day after the
Expiration Date.
The Borrower shall pay accrued interest on the unpaid principal
balance of the Note in arrears: (i) for the portion of Line of
Credit Loans bearing interest at the Prime Rate on the last
Business Day of each December, March, June and September of each
year during the term hereof, (ii) for the portion of Line of
Credit Loans bearing interest at the Euro-Rate or As Offered
Rate, on the last day of each Interest Period, and (iii) for all
Line of Credit Loans, at maturity, whether by acceleration or
otherwise of the Note, and after maturity, on demand until paid
in full.
6. The Borrower shall notify the Bank of each election of an
interest rate option, each conversion from one interest rate
option to another, the amount of the Loans then outstanding to be
allocated to each interest option and where relevant the Interest
Periods. Any such communication may be oral or written and if
oral, it shall be followed immediately by written confirmation of
such interest rate option election executed by an authorized
officer of the Borrower.
7. After the principal amount of all or any part of the Line of
Credit Loans shall have become due and payable, whether by
acceleration or otherwise, all the Loans shall bear interest at a
rate per annum which shall be 200 basis points (2%) per annum
above the rate otherwise in effect under the Prime Rate option,
Euro-Rate option or As-Offered Rate option, as applicable.
8. Notwithstanding anything to the contrary herein:
(a) On written demand, together with the written evidence
of the justification therefor, the Borrower agrees to pay the
Bank all direct costs incurred and any losses suffered or
payments made by the Bank as a consequence of making the Line of
Credit Loans by reason of any change in law or regulation or its
interpretation imposing any reserve, deposit, allocation of
capital or similar requirement (including without limitation,
Regulation D of the Board of Governors of the Federal Reserve
System) on the Bank, its holding company or any of their
respective assets.
(b) The Borrower agrees to indemnify the Bank against any
loss or expense which the Bank, as a consequence of either (i)
the Borrower's failure to make a payment on the due date thereof
or (ii) the Borrower's payment, prepayment or conversion of any
As Offered Rate portion or any Euro-Rate portion of the Loans on
a day other than the last day of the applicable Interest Period,
may sustain or incur in liquidating or employing deposits from
third parties acquired to effect, fund or maintain such As
Offered Rate portion or Euro-Rate portion or any part thereof.
The Bank's determination of an amount payable under this
subparagraph (b) shall, in the absence of manifest error, be
conclusive and shall be payable on demand.
-3-
9. Beginning on March 31, 1994 and continuing on the last day of
each calendar quarter thereafter until the Termination Date, the
Borrower shall pay a facility fee to the Bank, in arrears, at the
rate of twenty-five (25) basis points per annum on the average
daily unused portion of the Line of Credit during the calendar
quarter then ending. The facility fee shall be computed on the
basis of a year of 365 or 366 days, as the case may be, and paid
on the actual number of days elapsed.
10. Each request for an advance under the Line of Credit shall
constitute, as of the time made, a certification by the Borrower
that the Borrower shall have performed and complied with all
agreements and conditions herein required under this Letter
Agreement, and at the time of the advance, no condition or event
shall exist which constitutes an Event of Default.
11. As conditions to the establishment of the Line of Credit,
the Borrower shall provide to the Bank the following:
(a) this Agreement and the Line of Credit Note, duly executed
by the Borrower;
(b) The Guaranty Agreement, executed by the Guarantors; and
(c) evidence of the due authorization by the Borrower of this
Agreement and the Line of Credit Note and by the Guarantors of
the Guaranty Agreement, an opinion of counsel to the Borrower and
the Guarantors and such other instruments as the Bank shall
reasonably require in form and substance satisfactory to the
Bank.
12. The Bank shall open and maintain on its books a loan account
in the name of the Borrower with respect to advances, payments
and the computation and payment of interest, fees and other
amounts due hereunder. Such loan account shall be conclusive and
binding on the Borrower as to the amount at any time due to the
Bank from the Borrower except in the case of error in
computation.
13. Covenants. Unless waived in writing by the Bank or until
payment in full and termination of the Line of Credit:
(a) The Borrower will promptly submit to Bank such
information relating to the Borrower or any Guarantor as the Bank
may reasonably request.
(b) The Borrower will comply with the financial covenants
set forth in Sections 8.10, 8.11, 8.12, 8.13 and 8.16 of the
Existing Credit Agreement. In the event that the Existing Banks
approve any amendment to or waiver of any of these covenants that
the Bank does not approve, then the Bank at its option may
terminate this Line of Credit 90 days after notice to the
Borrower and any and all advances will be due and payable on such
early termination date.
-4-
(c) The Borrower will provide to Bank with copies of all
financial reports and notices provided to the Banks under
Sections 8.01 or 8.02 of the Existing Credit Agreement at the
same time sent to the Banks.
14. Representations, Warranties and Other Agreements. The
Borrower represents and warrants to the Bank as follows:
(a) It has the power to make and carry out the terms of
this Agreement and has taken all necessary corporate action to
authorize the execution, delivery and performance of this
Agreement.
(b) This Agreement constitutes the legally binding
obligation of the Borrower enforceable in accordance with its
terms.
(c) The making and performance of this Agreement does not
and will not violate in any respect any provisions of (i) any
federal, state or local law or regulation or any order or decree
of any federal, state or local governmental authority, agency or
court, or (ii) the organizational documents of the Borrower or of
any of its subsidiaries, or (iii) any mortgage, contract or other
undertaking to which the Borrower is a party or which is binding
upon the Borrower or any of its subsidiaries or any of their
respective assets, and does not and will not result in the
creation or imposition of any security interest, lien, charge or
other encumbrance on any of their respective assets pursuant to
the provisions of any such mortgage, contract or other
undertaking.
(d) No Default or Event of Default as defined in the
Existing Credit Agreement has occurred and is continuing. The
Borrower further represents and warrants that none of the
exceptions described in Schedule II to the Existing Credit
Agreement has any material adverse effect on the consolidated
financial condition, operations, business or prospects of the
Borrower and its consolidated subsidiaries taken as a whole.
15. Events of Default and Remedies. The occurrence of any of the
following described events will constitute an "Event of Default"
hereunder:
(a) Any failure of the Borrower to make any payment
of principal, interest or other amounts when due under
this Line of Credit or under any other obligations of
the Borrower to the Bank;
(b) Any failure of the Borrower or any Guarantor to
comply fully with all of the terms, covenants and
conditions of the Loan Documents, or any breach of any
representation or warranty under the Loan Documents; or
(c) Any Event of Default under the Existing Credit
Agreement.
-5-
Upon the occurrence of an Event of Default: (i) the Bank
shall be under no further obligation to make advances hereunder;
(ii) if an Event of Default specified in clause (f) or (g) of
Section 9 of the Existing Credit Agreement shall occur, the
outstanding principal balance or the Line of Credit Loans and
accrued interest together with any additional amounts payable
hereunder shall be immediately due and payable without demand or
notice of any kind; (c) if any other Event of Default shall
occur, the outstanding principal balance and accrued interest
together with any additional amounts payable hereunder, at the
option of the Bank and without demand or notice of any kind, may
be accelerated and become immediately due and payable; (d) at the
option of the Bank, the Note will bear interest at the applicable
default rate specified herein from the date of the occurrence of
the Event of Default; and (e) the Bank may exercise from time to
time any of the rights and remedies available to the Bank under
the Loan Documents or under applicable law.
16. The Borrower agrees to pay or cause to be paid and to save
the Bank harmless against liability for the payment of all
reasonable out-of-pocket expenses (including but not limited to
reasonable attorney's fees and expenses of the Bank's counsel)
incurred by the Bank in connection with the enforcement of the
Loan Documents.
17. All notices required to be sent to the parties hereto shall
be sent to the following addresses, by hand delivery, overnight
courier, facsimile transmission (with confirmation of receipt) or
other means of electronic data communication or by the United
States mail, first class postage prepaid:
(a) Bank
PNC Bank, National Association
One PNC Plaza
Pittsburgh, PA 15265
Attn: Southeast Group
Facsimile: (412) 762-6484
Telephone: (412) 762-8746
(b) Borrower
LADD Furniture, Inc.
One Plaza Center - Box HP3
High Point, NC 27261-1500
Attn: William S. Creekmuir
Facsimile: (910) 888-6050
Telephone: (910) 889-0333
18. The Borrower agrees that any action or proceeding arising
out of or relating to this Agreement and the Line of Credit Note
may be commenced in the United States District Court for the
Western District of Pennsylvania or in the Court of Common Pleas
of Allegheny County, Pennsylvania and the Borrower agrees that a
summons and complaint commencing an action or proceeding in
either of such courts shall be properly served and shall confer
personal jurisdiction if served personally or by certified mail
to the Borrower
-6-
at the Borrower's address as provided herein or
as otherwise provided under the laws of the Commonwealth of
Pennsylvania. The Borrower hereby waives any claim that either
Pittsburgh, Pennsylvania or the Western District of Pennsylvania
is an inconvenient forum or that either of the aforementioned
courts lacks proper venue for any action arising out of any
transaction involving this Letter Agreement and the Line of
Credit Note. The Borrower also waives any and all rights it may
have to a trial by jury in any action, proceeding or claim it may
have relating to Loan Documents.
19. This Agreement and the Line of Credit Note shall be governed
by the laws of the Commonwealth of Pennsylvania, except conflict
of law rules. This Letter Agreement may be executed in
counterparts, each of which when executed by the Borrower and the
Bank shall be regarded as an original.
If the foregoing accurately reflects the understanding of the
parties, please execute the duplicate original of this Letter
Agreement and return it to me.
Very truly yours,
PNC BANK, NATIONAL ASSOCIATION
By________________________
James A. Fink, Vice President
Southeast Group
Accepted this 28th day of
February, 1994
LADD FURNITURE, INC.
By________________________________
Title_____________________________
-7-
Exhibit 10.6
LINE OF CREDIT NOTE
$15,000,000 Pittsburgh, Pennsylvania
February 28, 1994
This Line of Credit Note is executed and delivered under and
pursuant to the terms of that certain Letter Agreement dated as
of February 28, 1994 (the Letter Agreement and all extensions,
renewals, amendments, substitutions or replacements referred to
herein as the "Letter Agreement") by and between PNC BANK,
NATIONAL ASSOCIATION (the "Bank") and LADD FURNITURE, INC. (the
"Borrower").
FOR VALUE RECEIVED the Borrower promises to pay to the order of
the Bank at the office of the Bank at Fifth Avenue and Wood
Street, Pittsburgh, Pennsylvania 15265 on or before the
Termination Date the lesser of the principal sum of FIFTEEN
MILLION AND NO/100 DOLLARS ($15,000,000) or the aggregate unpaid
principal amount of all outstanding advances made by the Bank to
the Borrower pursuant to the Letter Agreement and reflected on
the loan account maintained by the Bank pursuant to Paragraph 12
of the Letter Agreement.
Interest on the unpaid principal balance hereof shall be due and
payable at the rates and the times set forth in the Letter
Agreement.
This Line of Credit Note is the Line of Credit Note referred to
in the Letter Agreement. Reference is made to the Letter
Agreement for provisions for the prepayment hereof and for the
acceleration of the maturity hereof. All of the terms, including
defined terms, conditions, covenants, representations and
warranties, in the Letter Agreement are incorporated herein by
reference as if same were fully set forth herein.
Demand, presentation, protest, notice of dishonor and notice of
default are hereby waived.
WITNESS the due execution hereof with the intent to be legally
bound hereby.
ATTEST: LADD FURNITURE, INC. (SEAL)
By_____________________ By____________________________
Title__________________ Title_________________________
Exhibit 10.7
GUARANTY AND SURETYSHIP AGREEMENT
1. FOR VALUE RECEIVED, the undersigned hereby absolutely and
unconditionally guarantees, and becomes surety for, the prompt
and punctual payment at maturity, whether by acceleration or
otherwise, of the principal of, interest on, and other sums
payable in connection with, all indebtedness and obligations of
LADD FURNITURE, INC. ("Borrower") to PNC BANK, NATIONAL
ASSOCIATION, ("Bank"), pursuant to the Letter Agreement dated
February 28, 1994 and $15,000,000 Line of Credit Note dated on or
about that date (hereinafter such indebtedness and obligations
are referred to as "Indebtedness").
2. This is a guaranty of performance or payment and not merely
of collection and Bank shall not be required, as a condition of
the liability of the undersigned, to make any demand upon, or to
pursue any of its rights against, Borrower, or to pursue any
rights which may be available to it with respect to any other
person who may be liable for the payment of the Indebtedness and
this Agreement shall survive and continue in full force
notwithstanding the dissolution or liquidation of, or the
insolvency or bankruptcy of, or any corporate change or other
occurrence whatsoever affecting Borrower or the obligations and
liabilities of Borrower, including without limitation any
amendment to, renewal of or waiver of default under the
Indebtedness, regardless of when any obligations or liabilities
to Bank may accrue or be deemed to accrue.
3. The undersigned hereby unconditionally and irrevocably
waives, to the extent permitted by applicable law: (a) notice of
acceptance of this Agreement and any notice regarding the
performance or non-performance of the Borrower with respect to
the Indebtedness; (b) presentment for payment, notice of non-
payment or non-performance, demand, protest, notice of protest
and notice of dishonor or default to anyone; (c) defenses to
payment or performance based upon the Indebtedness not being a
valid and binding obligation of the Borrower enforceable in
accordance with its terms for any reason whatsoever; (d) all
other notices to which the undersigned may be entitled but which
may be legally waived; (e) any disability of Borrower or defense
available to Borrower (other than payment in full) including
absence or cessation of liability for any reason whatsoever; and
(f) any defense or circumstance which might otherwise constitute
a legal or equitable discharge of a guarantor or surety.
4. Without notice to the undersigned, Bank shall have the right,
at any time and from time to time, to: (a) deal in any manner it
shall see fit with the Indebtedness and with any security for the
Indebtedness; (b) accept partial payments on account of the
Indebtedness; (c) grant extensions or renewals of all or any part
of the Indebtedness; (d) demand or receive additional security
for the Indebtedness; and (e) accept substitutes for, or release,
all or any security which it holds or may hold for the
Indebtedness.
5. If Borrower shall at any time fail to pay to Bank (a) the
principal of, interest on, or other sums payable in connection
with, the Indebtedness, when the same shall be due; and (b) all
amounts that would be due under (a) if effect were not given to
the bankruptcy, insolvency or other similar laws of general
application relating to the enforcement of creditors' rights or
to general principles of equity, the undersigned promises to pay
such amount to Bank forthwith.
6. The undersigned hereby agrees to reimburse Bank for all cost
and expense, including reasonable attorney's fees and expenses
incurred in connection with the enforcement of Bank's rights
hereunder or which would otherwise not have been incurred but for
the Indebtedness.
7. This Agreement shall continue in force in any event for so
long as Borrower shall be indebted to Bank pursuant to the
Indebtedness, and thereafter until Bank shall have actually
received written notice of the termination hereof from the
undersigned, it being contemplated that Borrower may borrow,
repay and subsequently borrow money from, or become indebted to,
Bank from time to time pursuant to the Indebtedness, and the
undersigned, not having given notice of the termination hereof,
as herein provided for, shall be deemed to have permitted this
Agreement to remain in full force and effect for the purpose of
inducing Bank to make further loans to Borrower pursuant to the
Indebtedness, provided, however, no notice of termination of this
Agreement shall affect in any manner the rights of Bank arising
under this Agreement with respect to indebtedness incurred by
Borrower prior to receipt by Bank of written notice of
termination or indebtedness incurred after receipt of such
written notice pursuant to an agreement entered into by Bank
prior to receipt of such notice; provided, further, however, that
if at any time all or any part of any payment previously applied
by Bank to the Indebtedness or the proceeds of any enforcement of
any security interest of Bank or any exercise of the right of
set-off by Bank is invalidated, declared to be fraudulent or
preferential, set aside, recovered from, disgorged by, or, is or
must be rescinded or returned by Bank for any reason whatsoever
(including, without limitation, the insolvency, bankruptcy or
reorganization of Borrower) the Indebtedness shall be deemed to
have continued in existence for the purpose of this Agreement,
and to the extent that such payment is or must be rescinded or
returned, this Agreement shall continue in force or be
reinstated, as the case may be, as though such application by
Bank had not been made.
8. Without notice to the undersigned, and without prejudice to
this Agreement, Bank may release and discharge from liability to
it any of the undersigned, or any other guarantor of, or surety
for, the payment of the Indebtedness, any of the undersigned not
so discharged agreeing to remain bound hereby notwithstanding.
9. THE UNDERSIGNED HEREBY EXPRESSLY AND IRREVOCABLY WAIVES ANY
AND ALL RIGHTS WHICH THE UNDERSIGNED MAY HAVE AT ANY TIME
(WHETHER ARISING DIRECTLY OR INDIRECTLY, BY OPERATION OF LAW, BY
CONTRACT OR OTHERWISE) TO (1) ASSERT ANY CLAIM AGAINST THE
BORROWER ON ACCOUNT OF PAYMENTS MADE UNDER THIS AGREEMENT,
INCLUDING BUT NOT LIMITED TO ANY AND ALL RIGHTS OF SUBROGATION,
-2-
REIMBURSEMENT, EXONERATION, CONTRIBUTION OR INDEMNITY, AND (2)
ANY REALIZATION ON ANY PROPERTY OF THE BORROWER, INCLUDING
PARTICIPATION IN ANY MARSHALLING OF ASSETS OF THE BORROWER.
10. The undersigned hereby makes the following representations
and warranties for the benefit of the Bank and covenants with the
Bank as follows:
(a) It is a corporation duly incorporated and validly
existing under the laws of the place of its incorporation and has
the corporate power and authority to own its property and assets
and carry on its business as it is now being conducted.
(b) It has the power to make and carry out the terms of this
Agreement and has taken all necessary corporate action to
authorize the execution, delivery and performance of this
Agreement.
(c) This Agreement constitutes the legally binding
obligation of the undersigned enforceable in accordance with its
terms except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or similar laws or equitable principles relating to or
affecting the rights of creditors generally.
(d) The making and performance of this Agreement does not
and will not violate in any respect any provision of (i) any
federal, state or local law or regulation or any order or decree
of any federal, state or local governmental authority, agency or
court, or (ii) the organizational documents of the undersigned or
of any of its subsidiaries, or (iii) any mortgage, contract or
other undertaking to which the undersigned is a party or which is
binding upon the undersigned or any of its subsidiaries or any of
their respective assets, and does not and will not result in the
creation or imposition of any security interest, lien, charge or
other encumbrance on any of their respective assets pursuant to
the provisions of any such mortgage, contract or other
undertaking.
(e) It has received or obtained every consent of, license
from or exemption by any governmental or administrative body or
authority required to authorize or required in connection with
the performance, validity or enforceability of this Agreement and
the payments by it in accordance with the provisions of this
Agreement and the same are valid and subsisting.
(f) It is not in default under any agreement to which it is
a party or by which it may be bound, and no litigation or
administrative proceeding is presently pending or, to its
knowledge threatened, which default, litigation or proceeding
would have a material adverse effect on its business, assets or
financial condition.
11. All demands, communications and notices to be served
hereunder by the Bank shall be effective when received and shall
be addressed to the undersigned at the address shown on
-3-
the
signature pages or at such other address as shall be designated
by the undersigned in a written notice to the Bank.
12. No postponement or delay on the part of Bank in the
enforcement of any right hereunder shall constitute a waiver of
such right.
13. This Agreement is fully assignable and transferable by Bank;
however, the duties and obligations of the undersigned may not be
delegated or transferred by the undersigned without the prior
written consent of Bank, the rights and privileges of Bank
hereunder shall inure to the benefit of Bank's successors and
assigns and the duties and obligations of the undersigned shall
bind the undersigned's successors and assigns.
14. No invalidity, irregularity or unenforceability of all or
any part of the Indebtedness hereby guaranteed or of any security
therefor shall affect, impair, or be a defense to this Agreement,
and this Agreement is a primary obligation of the undersigned.
Any provisions of this Agreement which are held to be invalid or
unenforceable by any court will not affect the validity or
enforceability of any other provision thereof or hereof.
15. This Agreement constitutes the entire agreement by the
undersigned and supersedes all previous agreements and
negotiations, written or oral, respecting the obligations of the
undersigned set forth herein. The undersigned warrants that no
representations, promises or understandings, except as are
contained herein, have been made to the undersigned in connection
herewith.
16. This Agreement has been executed, delivered and accepted at
and shall be deemed to have been made at Pittsburgh, Pennsylvania
and shall be interpreted, and the rights and liabilities of the
parties hereto determined in accordance with the laws of the
Commonwealth of Pennsylvania without application of any statute
relating to conflicts of law. The undersigned hereby agrees to
the jurisdiction of any state or federal court located within
Allegheny County, Pennsylvania, or such other venue as shall be
selected by Bank, and the undersigned further agrees that all
service of process may be made by certified mail directed to the
undersigned at its address set forth on Bank's records and
service so made will be deemed to be completed five (5) business
days after the same has been deposited in U.S. mails, postage
prepaid; provided that nothing contained herein will prevent Bank
from bringing any action or exercising any rights against any
security or against the undersigned individually, or against the
property of the undersigned within any other state or nation to
enforce any award or judgment obtained in the federal or state
court located within Allegheny County, Pennsylvania, or such
other venue as shall be selected by Bank. The undersigned waives
any objection based on forum non conveniens and any objection to
venue of any action instituted hereunder.
17. As used herein "undersigned", if there are more than one,
shall mean, "all of the undersigned, or each or any of them," and
in such case they are jointly and severally bound, and "Bank"
shall mean "Bank, its successors and assigns".
-4-
18. THE UNDERSIGNED WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY
ACTION OR PROCEEDING RELATING TO THIS AGREEMENT, ANY DOCUMENTS
EXECUTED IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED IN ANY SUCH AGREEMENTS; IN EACH CASE WHETHER
SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND THE UNDERSIGNED
HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY,
AND THAT BANK MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS
SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE
UNDERSIGNED TO THE WAIVER OF THE RIGHT TO TRIAL BY JURY. THE
UNDERSIGNED AGREES THAT THE FOREGOING WAIVER IS KNOWING AND
VOLUNTARY.
WITNESS the due execution and sealing hereof with the intent of
being legally bound this 28th day of February, 1994.
PENNSYLVANIA HOUSE, INC.
By___________________________________
Title_________________________________
BROWN JORDAN COMPANY
By_____________________________________
Title________________________________
CLAYTON-MARCUS COMPANY, INC.
By___________________________________
Title________________________________
LADD CONTRACT SALES CORPORATION
By__________________________________
Title________________________________
-5-
FOURNIER FURNITURE, INC.
By____________________________________
Title_________________________________
BARCLAY FURNITURE CO.
By___________________________________
Title_________________________________
AMERICAN FURNITURE COMPANY,
INCORPORATED
By___________________________________
Title_________________________________
PILLIOD FURNITURE, INC.
By____________________________________
Title_________________________________
LEA INDUSTRIES, INC. (a North Carolina
corporation)
By:____________________________________
Title:_________________________________
Address for all Guarantors:
c/o LADD Furniture, Inc.
One Plaza Center - Box HP3
High Point, NC 27261-1500
-6-
Exhibit 10.8
PROPOSED
LADD FURNITURE, INC.
1994 ANNUAL MANAGEMENT INCENTIVE PLAN
PLAN HIGHLIGHTS
1. Incentive payments based on financial performance and individual
performance as follows:
For Corporate Participants
(bullet) achievement of PAT target
(bullet) achievement of ROAE target (selected management)
(bullet) achievement of individual objectives
For Operating Company Participants
(bullet) achievement of PBT targets
(bullet) achievement of ROIC targets (presidents only)
(bullet) achievement of individual objectives
2. No incentive payments will be made to any individual if the operating
unit to which the individual is assigned does not earn 6 1/2% return on
beginning invested capital. Incentive payment expense will be accrued in
results before calculation of profit.
3. Total of 222 officers and key managers to participate in the plan
(Exhibit I) vs 231 in 1993. Maximum incentives range from 10% to 100% of
January 1, 1994 base salary. Incentive payments are based on achieving
performance criteria established by senior management.
4. Program includes $50,000 discretionary incentive pool for extraordinary
performance by LADD employees not covered by the Management Incentive
Plan.
5. Estimated incentive payout at planned performance levels is $3.2 million.
6. Incentives earned in 1994 will be paid after completion of annual audit
(not later than March 31, 1995).
7. In the event of a transfer of a participant during the fiscal year to an
operating unit other than the unit in which originally a Plan
participant, an appropriate adjustment will be made in Incentive Plan
eligibility pro-rata for the time worked in each unit.
8. In the event of a promotion of a participant within the same operating
unit, an appropriate adjustment will be made in Incentive Plan
eligibility pro-rata. In the event of a demotion which would place
participants in a position substantially different from that in which
they were nominated as a participant, an appropriate adjustment may be
made as to the amount of incentive payment for which they are eligible as
determined by the Compensation Committee of the Board of Directors.
9. Participants will forfeit all income from plan if employment is
terminated prior to January 1, 1995 for any reason other than death,
disability or retirement (over 55).
10. 1994 Management Incentive Plan approved only for fiscal year 1994.
-1-
LADD is North America's fourth largest residential furniture
manufacturer, with annualized net sales in excess of $600 million, 26
manufacturing facilities in ten states and Mexico, and nearly 8,000
employees. LADD markets its broad line of residential
and contract furniture products under the major brand names American
Drew, American of Martinsville, Barclay, Brown Jordan, Clayton Marcus,
Daystrom, Fournier, Lea Industries, Pennsylvania House and Pilliod,
and distributes these products domestically and worldwide through LADD
International.
Financial Highlights
In thousands, except per share data and ratios
Percent
1993 1992* Change
Operations Statement
Net sales $521,200 496,679 + 4.9%
Gross profit 94,279 95,429 -- 1.2
Operating income 12,326 16,936 --27.2
Net earnings 3,846 4,545 --15.4
Weighted average shares outstanding 23,054 21,442 + 7.5
Per Share
Net earnings $ 0.17 0.21 --19.0%
Cash dividends 0.12 ---- ----
Year-end book value 6.51 6.46 + 0.8
Closing stock price 10.00 10.50 -- 4.8
Balance Sheet
Net working capital $123,004 117,693 + 4.5%
Total assets 335,737 315,649 + 6.4
Long-term debt** 105,257 91,503 +15.0
Shareholders' equity 150,103 148,724 + 0.9
Ratios
Gross margin 18.1% 19.2
Operating profit margin 2.4 3.4
Net return on sales 0.7 0.9
Return on beginning equity 2.6 4.1
Long-term debt** to capitalization 37.9 35.2
Current ratio 3.1x 3.1
*1992 contained 53 weeks and has been restated to reflect LADD's
adoption of SFAS No. 109.
**Excluding current installments.
<PAGE>
(AMERICAN, LADD Furniture, Inc., Lea Lumber & Plywood Co., AMERICAN DREW,
LADD TRANSPORTATION, INC. and Pilliod Logos)
Letter to Shareholders
Strong housing activity and low interest rates during 1993
produced a second year of recovery for the U.S. residential
furniture industry. In this environment, LADD achieved
record net sales of $521 million during its 52-week 1993
fiscal year, an increase of 5 percent over the (Photo,
$497 million recorded in fiscal 1992's 53 weeks. While see
sales hit a record level, net earnings for the year declined appendix)
to $3.8 million, or $.17 per share, from $4.5 million, or $.21
per share in 1992. During 1993, LADD was required to adopt a
new accounting standard for postretirement benefits (SFAS No. 106)
which reduced 1993 net earnings by $1.3 million, or $.05 per
share. Excluding SFAS No. 106, net earnings rose 13 percent
and net earnings per share were up 5 percent
on an 8 percent increase in average shares outstanding.
Factors affecting 1993 performance
Several major strategic actions were initiated in 1993 to improve
LADD's longer-term profitability and return on investment. While
painful in the short-term, we believe these actions will generate
significant future returns for LADD shareholders. They include:
(bullet) the discontinuation of unprofitable American of Martinsville
("AOM") Residential Casegoods product lines and the merger of the
remaining AOM lines into our American Drew business;
(bullet) the reallocation of certain Virginia-based manufacturing
assets among two LADD operating companies; and
(bullet) the initiation of a major capital investment program designed
to increase productivity, improve product quality and reduce operating
costs. In 1993, LADD's capital spending exceeded $24 million, compared
to the previous yearly high of $9 million.
These strategic actions had a significant negative impact on 1993's
second half results. In total, we discontinued AOM product lines
representing approximately $12 million in annualized sales.
Discontinuing this unprofitable business produced operating losses in
excess of $1 million in each of 1993's last two quarters and reduced
fourth quarter sales by almost $3 million.
1
<PAGE>
(AMERICAN, LADD Furniture, Inc., Lea Lumber & Plywood Co., AMERICAN DREW,
LADD TRANSPORTATION, INC. and Pilliod Logos)
In addition, production capacity reallocations and major capital
investment projects initiated during 1993 at LADD's Martinsville,
(Photo, Chilhowie, Marion and St. Paul, VA manufacturing facilities caused
see short-term manufacturing disruptions during the second half of the
appendix) year. As a result, LADD's profitability was adversely impacted
during the third and fourth quarters of 1993. We expect these
projects to be completed by mid-1994.
Finally, sales weakness in higher-priced product lines, primarily
AOM Residential Casegoods and the casegoods (wood furniture)
products of Pennsylvania House, reduced LADD's overall 1993 sales
gains and profitability. The AOM Residential Casegoods product mix
was thinned out and refocused as previously mentioned, while Pennsylvania House
began aggressively introducing new products at somewhat lower price
points during 1993. Featuring more casual styling, these products are
designed to provide increased value to the Pennsylvania House dealers
and customers, a process which will continue in 1994.
Pilliod acquisition
On January 31, 1994, LADD invested $54 million to acquire Pilliod
Furniture, a major U.S. manufacturer of promotional bedroom and
occasional furniture. Headquartered in High Point, NC, Pilliod has
annual sales in excess of $85 million and employs over 1,100 people in
its headquarters and its three plants in Ohio, Alabama and South
Carolina. The acquisition was financed with
available bank credit lines and the sale of (International
selected trade accounts receivable in an asset Sales Graph
securitization transaction. Following the appears here,
acquisition, LADD's long-term debt-to-capitalization see appendix)
ratio was approximately 42%, which remains
within our goal of having no more than 45% of
capitalization in the form of long-term debt.
International market development
One of LADD's key strategies is the identification
and development of new markets around the world. LADD
International, formed in 1992, facilitates the
international cross-marketing of products from all the
LADD operating companies. LADD further increased its international
business last year, making shipments to 51 countries totaling more
than $40 million. An additional and ongoing part of our international
thrust is the investigation and development of possible joint ventures
with various overseas partners. We believe being an experienced
international company will be a distinct competitive advantage in the
latter half of the 1990's.
2
<PAGE>
(PENNSYLVANIA HOUSE, Clayton Marcus, BARCLAY, Daystrom,
LADD INTERNATIONAL, Brown Jordan and Fournier Logos)
Operating company management changes
Early in 1994, four new LADD operating company presidents were
appointed. These executives each have extensive general management
experience and demonstrated leadership capabilities that we feel will
lead their respective operating companies to significant future growth
in sales and profits.
(bullet) Craig M. Shoemaker (44) was appointed president of
Pennsylvania House. Craig worked for Pennsylvania House in various
managerial positions for 14 years early in his career and has served
since that time as president of two other furniture companies.
(bullet) Robert J. Maricich (43) was appointed president of American
Drew. Bob has served as president of our AOM Contract business since
1989 and brings strong leadership skills to his new assignment.
(bullet) Lee H. Houston, Jr. (49) was appointed president of Daystrom.
Lee's experience includes service as a consultant to numerous
furniture manufacturers and general management experience in the
industry.
(bullet) D. Fredric ("Fritz") Myers (58) was appointed president of
Fournier. A strong marketing and operating executive, Fritz has over
30 years of senior management experience with a variety of
manufacturing companies.
I am pleased to welcome these four men to their new LADD
responsibilities.
Outlook
At this point in early 1994, the outlook for the U.S. furniture
industry remains positive. Consumer confidence, a major factor
influencing retail furniture sales, has strengthened appreciably from
previously depressed levels. Recent strong housing activity also
suggests substantial future demand for a wide variety of residential
consumer durables, including home furnishings.
We believe LADD is well-positioned to capitalize on this favorable
industry outlook. We have the size, diversity and financial resources
necessary to compete effectively. We have a strong commitment to
excellence and to meeting the needs of our customers and consumers.
Further, we are dedicated to aggressively investing financial and
human resources for the future benefit of our customers, employees and
shareholders.
On behalf of LADD's 7,800 employees, I want to thank you for your
continuing support and confidence.
Sincerely,
(Signature, see appendix)
Richard R. Allen
Chairman and Chief Executive Officer
3
<PAGE>
(LADD INTERNATIONAL, Daystrom, PENNSYLVANIA HOUSE, AMERICAN,
Clayton Marcus, BARCLAY and FOURNIER Logos)
Investing for the Future
As discussed in the 1992 Annual Report, LADD is committed
to making strategically-driven investments in all areas of
its business that will enable it to be a world-class
(Capital manufacturer and marketer of products known for their quality
Investment and value. In the manufacturing area, new automation
Graph, technologies continue to emerge which can shorten cycle
see appendix) lead times for LADD's retailers and consumers, reduce
manufacturing costs, increase productivity and improve
product quality. In 1993, capital investment totaled a record
$24.7 million, more than double the year's depreciation. A
similar level of investment is anticipated for 1994.
LADD is also committed to making strategic investments aimed at
improving its information systems and developing new products
and markets. In the market development category, LADD
invested $54 million in early 1994 to acquire Pilliod
Furniture, a leader in the fast growing promotional
casegoods sector. The following paragraphs outline several of
the major investments LADD has initiated.
Virginia manufacturing realignment
During 1993, a strategic decision was made to reallocate
(Photo, certain Virginia-based manufacturing capacity among two
see LADD business units in order to consolidate the operations
appendix) of one company while providing additional production
capability to meet the current and anticipated sales
growth of the other. In this process, more than $15
million will have been invested during 1993 and 1994 in
realigning the production capabilities of LADD's
Martinsville, Chilhowie and Marion manufacturing plants.
These moves accomplished two objectives. First, the American
of Martinsville ("AOM") contract manufacturing operations
were concentrated into one larger, more efficient facility in
Martinsville. Second, the former AOM plants in Chilhowie and
Marion were transferred to Lea Industries ("Lea"), which has
significantly expanded its already broad line of youth
bedroom furniture to accommodate the strong demographics of
this market segment. Although these plant realignments
disrupted production and hurt profit margins during the third
and fourth quarters of 1993 and early 1994, the
reconfigured facilities will substantially improve the future
business prospects of both AOM and Lea.
4
<PAGE>
(Brown Jordan, LADD TRANSPORTATION, AMERICAN DREW, Lea Lumber & Plywood, Co.,
PILLIOD and LADD Furniture, Inc. Logos)
American of Martinsville investment
As part of AOM's manufacturing consolidation, a 100,000 (Photo,
square foot expansion of the Martinsville plant was completed see
in late 1993 and the facility was substantially reconfigured. appendix)
During 1994, a new highly-
automated panel manufacturing (Photo,
line which uses construction see
techniques new to AOM will be appendix)
installed at Martinsville. This
new line has the flexibility to efficiently manufacture parts in
smaller quantities with reduced labor. When fully operational in
mid-1994, it will broaden Martinsville's production capabilities,
enabling AOM to target the faster growing "budget" sector of the
hospitality (hotel/motel) market with high value lower-priced wood
furniture. Buyers in this market segment generally seek casegoods at
price points lower than traditionally manufactured by AOM.
Lea Industries investment
The Chilhowie plant began manufacturing Lea's residential bedroom
furniture in late 1993, following a 112,000 square foot expansion of
the facility. A major new base coat and print line being installed in
the Chilhowie facility is expected to become operational around mid-
1994. This highly automated line will efficiently provide the large
quantities of printed end and top panels required for Lea's lower-
medium to medium-priced youth bedroom and correlate furniture. During
1993, several other major pieces of sophisticated new equipment which
lower unit costs and improve product quality were also installed at
Chilhowie. In total, the investments at the Chilhowie location
significantly increase Lea's capability to efficiently produce its
growing medium-priced Charter House product line.
The Marion plant is being converted during 1994 for the manufacture of
Lea's lower-priced Design Horizons product line, targeted at the
relatively fast-growing low-priced youth bedroom furniture segment of
the market. By internally manufacturing Design Horizons products which
were previously assembled from purchased parts, Lea will be able to
improve quality levels while at the same time
5
<PAGE>
(Lea, PILLIOD, LADD TRANSPORTATION, AMERICAN DREW, Lea Lumber & Plywood Co.,
LADD Furniture, Inc. and AMERICAN Logos)
(Photo, lowering production costs. The investment in Marion includes
see computer-controlled saws and boring machinery, edge banding and
appendix) edge foiling equipment and materials handling equipment, all
designed to make Design Horizons a low cost, high value product.
Fournier investment
Shortly after its acquisition by LADD in mid-1992, Fournier
Furniture significantly increased the size of its St. Paul, VA
ready-to-assemble ("RTA") furniture manufacturing facility. Since that
time, Fournier has made major additional capital investments in the
St. Paul facility to increase capacity, improve production efficiency
and enhance product quality.
Over $8 million has been invested in Fournier since its 1992
acquisition, including a fully-automated production line
(Photo, which began operating during 1993's third quarter. This
see new line substantially increased Fournier's production
appendix) capacity, improved the quality of its products and reduced
unit costs. A second automated line is scheduled to begin
operating at St. Paul in mid-1994. This second line will
have the capability of manufacturing Fournier products with
contoured edges, a growing design feature of RTA furniture.
Another major 1994 investment at Fournier is the
(Photo, installation of equipment which will allow the company
see to laminate its own particleboard, as opposed to
appendix) purchasing laminated board from outside suppliers. The
laminating equipment will also furnish panels for
Lea's Design Horizons plant in nearby Marion, VA.
6
<PAGE>
(FOURNIER, Brown Jordan, LADD INTERNATIONAL, Daystrom, BARCLAY,
Clayton Marcus and PENNSYLVANIA HOUSE Logos)
American Drew investment
Major investments are also being made at
American Drew's North Wilkesboro, NC facilities (Photo,
to improve production efficiencies, substantially see
increase material yields and otherwise add value to the appendix)
company's line of medium-priced wood bedroom, dining
room and occasional furniture products.
The installation of a flat line finishing system has (Photo,
increased American Drew's manufacturing productivity, see
while at the same time allowing the company to meet appendix)
increasingly stringent regulations governing permissible levels of volatile
organic compound ("VOC") emissions. New computer-controlled molding equipment
now produces all of American Drew's visible critical drawer parts, reducing
machine set-up times, accelerating production run rates and virtually
eliminating subsequent sanding and rough trim operations on these parts.
Another major current capital investment project (Photo,
at American Drew's North Wilkesboro facilities is see
the pending automation during 1994 of the company's appendix)
rough mill operation. This investment will significantly
increase American Drew's lumber yields - an extremely
important consideration given recent increases in U.S.
hardwood lumber prices and the importance of lumber as a
raw material component in American Drew's products.
Other investments
In addition to the capital projects discussed above, investments which
improve LADD's marketing, product development, information systems and
human resource capabilities are also deemed to be equally critical to
the company's future success. Some examples are:
(bullet) Significant joint marketing investments were initiated last year
with an international electronics manufacturer and a large national
retailer to market
7
<PAGE>
(FOURNIER, BARCLAY, Clayton Marcus, AMERICAN, PENNSYLVANIA HOUSE,
Daystrom, and LADD INTERNATIONAL Logos)
(Photo, LADD's home theatre products and Lea's youth
see furniture, respectively.
appendix)
(bullet) LADD continued its strong emphasis on
product development, as Pennsylvania House
(Photo, introduced exciting new products targeted at a lower
see price point and Lea introduced a record number of new
appendix) products at the October International Home Furnishings
Market. Brown Jordan continued to win national design
recognition for new product additions to its metal
casual and outdoor furniture line.
(bullet) A major new information system enhancement initiated at
(Photo, the High Point data center takes advantage of new data base and
see client server technologies and will give LADD and its operating
appendix) companies improved marketing information, as well as increased
capabilities for serving customers with electronic data
interchange ("EDI") and voice response.
(bullet) LADD completed its first comprehensive company wide
employee survey during 1993 which has led to, among other things,
an accelerated employee training initiative throughout the
organization. LADD will continue to increase its investments in
its people with training designed to improve their skills and
abilities to deal with an increasingly complex business
environment, to ensure that LADD remains a leader in the
furniture industry.
(Photo, The future
see The rate of change in the U.S. furniture industry has
appendix) increased and will likely accelerate further in the years
ahead. LADD has the resources, commitment and vision to
capitalize on change and turn it into a competitive
(Photo, advantage. Through intelligent, aggressive investment
see in new technologies, new products, new domestic and
appendix) global market opportunities and the development of
LADD's human resources, continued growth and improved
profitability will be achieved.
8
<PAGE>
(Fournier, Brown Jordan, LADD INTERNATIONAL, Daystrom, Barclay,
Clayton Marcus, Pennsylvania House logos)
Management's Statement of Responsibility
The management of LADD Furniture, Inc. is responsible for the
integrity of the financial statements of the Company and for
ascertaining that the financial statements accurately reflect the
financial position and results of operations of the Company. The
financial statements were prepared in conformity with generally
accepted accounting principles, applying estimates and
management's best judgment, as required. Information presented
elsewhere in this Annual Report is consistent with the financial
statements.
LADD has established and maintains a system of internal controls
designed to provide reasonable assurance, at an appropriate cost,
that the Company's assets are adequately safeguarded and that the
accounting records reflect the transactions of the Company
accurately, fairly and in reasonable detail. The internal control
system provides for careful selection and training of personnel,
the delegation of management authority and responsibility, the
dissemination of management control policies and procedures and an
internal audit program.
The board of directors, through its Audit Committee consisting of
three directors who are not officers or employees of the Company,
is responsible for reviewing and monitoring the financial
statements and accounting practices of the Company. The Audit
Committee meets periodically, either separately or jointly, with
the independent auditors, representatives of management and the
Company's internal auditors to discuss auditing, accounting and
financial statement matters. To ensure complete independence,
representatives of KPMG Peat Marwick, certified public accountants
retained by the Company to audit the financial statements, have
full and free access to meet with the Audit Committee with or
without the presence of management representatives.
<TABLE>
<S> <C>
(Signature of Richard R. Allen) (Signature of William S. Creekmuir)
Richard R. Allen William S. Creekmuir
Chairman & Chief Executive Officer Senior Vice President & Chief Financial Officer
February 11, 1994 February 11, 1994
</TABLE>
Independent Auditors' Report
The Board of Directors and Shareholders
LADD Furniture, Inc.:
We have audited the accompanying consolidated balance sheets of
LADD Furniture, Inc. and subsidiaries as of January 1, 1994 and
January 2, 1993, and the related consolidated statements of
operations, shareholders' equity and cash flows for each of the
years in the three-year period ended January 1, 1994. These
consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion
on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of LADD Furniture, Inc. and subsidiaries as of January 1,
1994 and January 2, 1993, and the results of their operations and
their cash flows for each of the years in the three-year period
ended January 1, 1994 in conformity with generally accepted
accounting principles.
As discussed in notes 1, 10 and 11 to the consolidated financial
statements, the Company adopted the provisions of the Financial
Accounting Standards Board's Statement of Financial Accounting
Standards (SFAS) No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," and SFAS No. 109,
"Accounting for Income Taxes," in 1993.
(Signature of KPMG Peat Marwick)
Greensboro, North Carolina
February 11, 1994
9
<PAGE>
(American, LADD Furniture, Inc., Lea Lumber & Plywood Co., AMERICAN DREW
LADD TRANSPORTATION, INC., PILLIOD, Lea logos)
LADD Furniture, Inc. and Subsidiaries
Consolidated Statements of Operations
Years ended January 1, 1994, January 2, 1993 and December 28, 1991
Dollar amounts in thousands, except share data
<TABLE>
1993 1992 1991
<S> <C> <C> <C>
Net sales $ 521,200 496,679 429,110
Cost of sales 426,921 401,250 356,025
Gross profit 94,279 95,429 73,085
Selling, general and administrative expenses 81,953 78,493 79,322
Operating income (loss) 12,326 16,936 (6,237)
Other deductions:
Interest expense -- Note 7 5,542 7,502 10,413
Other, net 377 1,164 2,594
5,919 8,666 13,007
Earnings (loss) before income taxes 6,407 8,270 (19,244)
Income tax expense (benefit) -- Note 11 2,561 3,725 (6,041)
Net earnings (loss) $ 3,846 4,545 (13,203)
Net earnings (loss) per common share $ 0.17 0.21 (0.70)
Cash dividends per common share $ 0.12 ---- 0.24
Weighted average number of common
shares outstanding 23,053,654 21,441,616 18,945,763
</TABLE>
See accompanying notes to consolidated financial statements.
10
<PAGE>
(PENNSYLVANIA HOUSE, Clayton Marcus, Barclay, Daystrom, LADD INTERNATIONAL,
Brown Jordan, FOURNIER logos)
LADD Furniture, Inc. and Subsidiaries
Consolidated Balance Sheets
Dollar amounts in thousands, except share data
<TABLE>
January 1, January 2,
1994 1993
<S> <C> <C>
Assets
Current assets:
Cash $ 1,350 1,826
Trade accounts receivable, less allowances for doubtful
receivables, discounts, returns and allowances of
$4,178 and $3,517, respectively -- Note 13 72,975 69,843
Inventories -- Note 3 100,639 95,576
Prepaid expenses and other current assets - Note 9 6,110 6,171
Total current assets 181,074 173,416
Property, plant and equipment, net -- Note 4 97,497 83,609
Intangible and other assets, net -- Notes 5 and 9 57,166 58,624
$ 335,737 315,649
Liabilities and Shareholders' Equity
Current liabilities:
Current installments of long-term debt -- Note 7 $ 5,815 1,070
Trade accounts payable 23,414 23,104
Accrued expenses and other current
liabilities - Notes 6, 11 and 13 28,841 31,549
Total current liabilities 58,070 55,723
Long-term debt, excluding current installments -- Note 7 105,257 91,503
Deferred compensation and other liabilities -- Notes 9 and 10 3,405 1,477
Deferred income taxes - Note 11 18,902 18,222
Total liabilities 185,634 166,925
Shareholders' equity -- Notes 8 and 14:
Preferred stock of $100 par value. Authorized
500,000 shares; no shares issued ---- ----
Common stock of $.10 par value. Authorized
50,000,000 shares; issued 23,062,262 shares and
23,019,631 shares, respectively 2,306 2,302
Additional paid-in capital 49,186 48,681
Currency translation adjustment (170) (89)
Retained earnings 99,568 98,489
150,890 149,383
Less unamortized value of restricted stock (787) (659)
Total shareholders' equity 150,103 148,724
Commitments and contingencies -- Notes 12 and 13
$ 335,737 315,649
</TABLE>
See accompanying notes to consolidated financial statements.
11
<PAGE>
(LADD INTERNATIONAL, Daystrom, PENNSYLVANIA HOUSE, AMERICAN, Clayton
Marcus, BARCLAY, FOURNIER logos)
LADD Furniture, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Years ended January 1, 1994, January 2, 1993 and December 28, 1991
Dollar amounts in thousands
<TABLE>
1993 1992 1991
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net earnings (loss) $ 3,846 4,545 (13,203)
Adjustments to reconcile net earnings (loss) to net
cash provided by operating activities:
Depreciation of property, plant and equipment 10,508 9,151 8,783
Amortization 2,554 2,848 5,081
Provision for losses on trade accounts receivable 2,056 3,126 7,356
Gain on sales of property, plant and equipment (155) (127) (1,280)
Provision for deferred income taxes 214 802 3,456
Increase (decrease) in deferred compensation and
other liabilities 1,840 (144) 696
Change in assets and liabilities, net of effects
from the acquisition of a business in 1992:
Increase in trade accounts receivable (5,188) (6,407) (1,613)
(Increase) decrease in inventories (5,063) (5,633) 6,207
(Increase) decrease in refundable income taxes ---- 7,264 (5,050)
Decrease in prepaid expenses and other
current assets 61 2,132 1,128
Increase in trade accounts payable 310 3,031 5,734
Increase (decrease) in accrued expenses and
other current liabilities (2,239) 5,750 (11,505)
Total adjustments 4,898 21,793 18,993
Net cash provided by operating activities 8,744 26,338 5,790
Cash Flows From Investing Activities:
Acquisition of a business - Note 2 ---- (4,720) ----
Additions to property, plant and equipment (24,666) (8,988) (7,549)
Proceeds from sales of property, plant and
equipment 425 1,161 6,035
Additions to intangible and other assets (724) (420) (2,598)
Net cash used in investing activities (24,965) (12,967) (4,112)
Cash Flows From Financing Activities:
Proceeds from long-term borrowings 19,654 ---- 13,590
Principal payments of long-term debt (1,155) (49,010) (7,695)
Proceeds from common stock issued 94 34,049 218
Dividends paid (2,767) ---- (4,545)
Net cash provided by (used in)
financing activities 15,826 (14,961) 1,568
Effect of Exchange Rate Changes on Cash (81) (89) ----
Net increase (decrease) in cash (476) (1,679) 3,246
Cash at beginning of year 1,826 3,505 259
Cash at end of year $ 1,350 1,826 3,505
</TABLE>
See accompanying notes to consolidated financial statements.
12
<PAGE>
(Brown Jordan, LADD TRANSPORTATION, INC., AMERICAN DREW, Lea Lumber &
Plywood Co., PILLIOD, LADD Furniture, Inc., Lea logos)
LADD Furniture, Inc. and Subsidiaries
Consolidated Statements of Shareholders' Equity
Years ended January 1, 1994, January 2, 1993 and December 28, 1991
Dollar amounts in thousands, except share data
<TABLE>
Unamortized Total
Number Additional Currency value of shareholders'
of shares Common paid-in translation Retained restricted equity
issued stock capital adjustment earnings stock (Notes 8 and 14)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 29, 1990,
restated (Notes 1 and 11) 18,840,526 $1,884 13,912 ---- 111,692 (157) 127,331
Shares issued in connection
with incentive stock
option plan 30,928 3 204 ---- ---- ---- 207
Shares issued in connection
with and amortization
of employee restricted
stock awards 112,998 11 920 ---- ---- (720) 211
Net loss ---- ---- ---- ---- (13,203) ---- (13,203)
Dividends paid ---- ---- ---- ---- (4,545) ---- (4,545)
Balance at December 28, 1991, restated 18,984,452 1,898 15,036 ---- 93,944 (877) 110,001
Shares issued in connection
with incentive stock
option plan 10,179 1 29 ---- ---- ---- 30
Proceeds from public offering
of 4,025,000 shares 4,025,000 403 33,616 34,019
Currency translation
adjustment ---- ---- ---- (89) ---- ---- (89)
Amortization of employee
restricted stock awards 218 218
Net earnings ---- ---- ---- ---- 4,545 ---- 4,545
Balance at January 2, 1993, restated 23,019,631 2,302 48,681 (89) 98,489 (659) 148,724
Shares issued in connection
with incentive stock
option plan 11,668 1 90 ---- ---- ---- 91
Shares issued in connection
with and amortization
of employee restricted
stock awards 30,963 3 415 ---- ---- (128) 290
Currency translation
adjustment ---- ---- ---- (81) ---- ---- (81)
Net earnings ---- ---- ---- ---- 3,846 ---- 3,846
Dividends paid ---- ---- ---- ---- (2,767) ---- (2,767)
Balance at January 1, 1994 23,062,262 $2,306 49,186 (170) 99,568 (787) 150,103
</TABLE>
See accompanying notes to consolidated financial statements.
13
<PAGE>
(Lea, PILLIOD, LADD TRANSPORTATION, INC., AMERICAN DREW, Lea Lumber &
Plywood Co., LADD Furniture, Inc., AMERICAN logos)
Notes to Consolidated Financial Statements
Note 1: Summary of Significant Accounting Policies
PRINCIPLES OF CONSOLIDATION The consolidated financial statements
include the accounts of LADD Furniture, Inc. and its subsidiaries,
all of which are wholly-owned. All significant intercompany
balances and transactions have been eliminated in consolidation.
FISCAL YEAR The Company's fiscal year ends on the Saturday
nearest the end of December. Fiscal year 1993 ended January 1,
1994; fiscal year 1992 ended January 2, 1993; and fiscal year 1991
ended December 28, 1991. Fiscal years 1993 and 1991 comprised 52
weeks; fiscal year 1992 comprised 53 weeks.
INVENTORIES In both 1993 and 1992, approximately 64% of the
Company's inventories are valued using the last-in, first-out
(LIFO) cost method, which is not in excess of market. All other
inventories in 1993 and 1992 are valued at the lower of first-in,
first-out (FIFO) cost or market (net realizable value).
PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are
stated at cost. Depreciation of plant and equipment is provided
over the estimated useful lives of the respective assets on the
straight-line method. Estimated useful lives are 10 to 35 years
for buildings and improvements and 3 to 13 years for machinery and
equipment.
REVENUE RECOGNITION The Company's only line of business is the
manufacture and sale of furniture, related components and
accessories. Sales are recognized when products are shipped and
invoiced to customers. Monthly provision is made for doubtful
receivables, discounts, returns and allowances.
Substantially all of the Company's accounts receivable are due
from retailers of residential furniture. Management periodically
performs credit evaluations of its customers and generally does
not require collateral. The Company has no concentrated credit
risk with any individual customer.
FOREIGN CURRENCY TRANSLATION Assets and liabilities of a foreign
subsidiary are translated at year-end rates of exchange, and
revenues and expenses are translated at the average rates of
exchange for the year. Gains and losses resulting from translation
are accumulated in a separate component of shareholders' equity.
Gains and losses resulting from foreign currency transactions are
included in net income.
INCOME TAXES The Company adopted Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes
(Statement No. 109), effective January 3, 1993 and has applied the
provisions of the statement retroactively to January 1, 1989. The
adoption of the statement resulted in an increase to retained
earnings at December 29, 1990 of approximately $226,000. Under the
asset and liability method of Statement No. 109, deferred tax
assets and liabilities are recognized for the temporary
differences between the financial statement carrying amounts and
the tax bases of the Company's assets and liabilities at income
tax rates expected to be in effect when such amounts are realized
or settled. Under Statement No. 109, the effect on deferred tax
assets and liabilities of a change in tax rates is recognized in
earnings in the period that includes the enactment date.
EARNINGS PER SHARE Earnings per share are calculated based upon
the weighted average number of common shares outstanding during
each fiscal year. The effect of dilutive stock options on the
calculation is insignificant in each of the fiscal years
presented.
INTANGIBLE ASSETS Intangible assets consist principally of values
assigned to patents, furniture designs, trade names and the excess
of cost over the assigned value of net assets acquired. These
assets are being amortized using the straight-line method over
periods of 15 to 40 years. The Company assesses the recoverability
of the excess of cost over the assigned value of net assets by
determining whether the amortization of the balance over its
remaining life can be recovered through undiscounted future
operating cash flows of the acquired operations.
14
<PAGE>
(FOURNIER, Brown Jordan, LADD INTERNATIONAL, Daystrom, BARCLAY,
Clayton Marcus, PENNSYLVANIA HOUSE)
Note 1: Summary of Significant Accounting Policies (continued)
POSTRETIREMENT BENEFITS In addition to providing pension
benefits, the Company provides certain health care benefits for
certain retired employees. The Company's policy had been to
expense retiree health costs as they were incurred (i.e., the "pay
as you go" method). Effective January 3, 1993, the Company adopted
Statement of Financial Accounting Standards No. 106, Employers'
Accounting for Postretirement Benefits Other than Pensions, which
was issued in December 1990. The provisions of this statement
require the Company to accrue for the expected costs of retiree
health care benefits, for which substantially all employees are
eligible if they reach normal retirement, during the active period
when such benefits are earned. Additionally, the new standard
requires the recognition of a transition obligation which
represents that portion of future retiree benefit costs related to
the service already rendered by both active and retired employees
up to the date of adoption. The Company has elected to amortize
the transition obligation of $20,618,000 at January 3, 1993 over a
period of 20 years.
POSTEMPLOYMENT BENEFITS Statement of Financial Accounting
Standards No. 112, Employers' Accounting for Postemployment
Benefits, which was issued in November 1992, establishes new
financial accounting and reporting standards for postemployment
benefits for fiscal years beginning after December 15, 1993. The
Company plans to adopt the provisions of Statement No. 112 in
fiscal year 1994 and believes, based upon analyses performed to
date, that the impact of adoption will not be material.
RECLASSIFICATION Certain items in the 1992 and 1991 consolidated
financial statements have been reclassified to conform with the
presentation adopted in the current year. The reclassifications
did not impact the results from operations as previously reported.
Note 2: Acquisitions
On January 31, 1994, the Company acquired The Pilliod Cabinet
Company (Pilliod), a manufacturer of promotional priced casegoods
furniture, by purchasing all of the common stock of its parent
company, Pilliod Holding Company, for $24,257,000 cash (including
acquisition expenses), the repayment of Pilliod debt of
$29,893,000, and the assumption of other long-term debt of
$247,000. The excess of cost over fair value of the net assets
acquired was approximately $31,134,000 and will be amortized on a
straight-line basis over 40 years. The acquisition will be
accounted for as a purchase and accordingly, the net assets and
operations of Pilliod will be included in the Company's
consolidated financial statements beginning in fiscal 1994.
The following unaudited pro forma data presents the combined 1993
results of operations of the Company and Pilliod as though the
acquisition had occurred on January 3, 1993, giving effect to
depreciation and amortization of assets on the accounting basis
recognized in recording the purchase, the interest on the funds
used to effect the purchase, and excluding certain non-recurring
expenses of Pilliod during 1993. Valuations assigned are
preliminary and subject to change.
In thousands, except per share data 1993
Net sales $ 607,845
Net earnings 7,000
Net earnings per common share $ 0.30
15
<PAGE>
(FOURNIER, BARCLAY, Clayton Marcus, AMERICAN, PENNSYLVANIA HOUSE,
Daystrom, LADD INTERNATIONAL logos)
Notes to Consolidated Financial Statements
(continued)
Note 2: Acquisitions (continued)
An unaudited pro forma combined balance sheet follows:
January 1,
In thousands 1994
Assets
Current assets $ 186,689
Property, plant and equipment, net 106,747
Intangible and other assets, net 88,322
$ 381,758
Liabilities and Shareholders' Equity
Current liabilities $ 89,160
Long-term debt 119,509
Deferred items and other liabilities 22,986
Shareholders' equity 150,103
$ 381,758
On July 2, 1992, the Company acquired substantially all of the
assets and assumed certain liabilities of Fournier Furniture
Corporation and subsidiary for an aggregate purchase price of
approximately $11,000,000, including acquisition accounting
adjustments. The purchase price consisted of approximately
$4,720,000 in cash and the assumption of a $3,500,000 Industrial
Development Authority obligation and certain other liabilities.
The acquisition was accounted for as a purchase, and the net
assets and results of operations of Fournier are included in the
Company's consolidated financial statements from the acquisition
date.
Note 3: Inventories
A summary of inventories follows:
January 1, January 2,
In thousands 1994 1993
Inventories on the FIFO cost method:
Finished goods $ 55,881 52,823
Work in process 19,277 19,014
Raw materials and supplies 37,183 32,431
Total inventories on the FIFO cost method 112,341 104,268
Less adjustments of certain inventories
to the LIFO cost method (11,702) (8,692)
$100,639 95,576
16
<PAGE>
(Lea, LADD Furniture, Inc., PILLIOD, Lea Lumber & Plywood Co., AMERICAN
DREW, LADD TRANSPORTAION, INC., Brown Jordan logos)
Note 4: Property, Plant and Equipment
A summary of property, plant and equipment follows:
January 1, January 2,
In thousands 1994 1993
Land and improvements $ 5,892 5,717
Buildings and improvements 65,850 60,689
Machinery and equipment 72,997 62,276
Construction in progress 12,266 5,587
157,005 134,269
Less accumulated depreciation (59,508) (50,660)
$97,497 83,609
Note 5: Intangible and Other Assets
A summary of intangible and other assets follows:
<TABLE>
January 1, January 2,
In thousands 1994 1993
<S> <C> <C>
Trade names $26,031 26,031
Excess of cost over assigned value of net assets acquired 27,289 27,289
Furniture designs and patents 10,570 10,570
Other 3,095 2,287
66,985 66,177
Less accumulated amortization (9,819) (7,553)
$57,166 58,624
</TABLE>
Note 6: Accrued Expenses and Other Current Liabilities
A summary of accrued expenses and other current liabilities follows:
<TABLE>
January 1, January 2,
In thousands 1994 1993
<S> <C> <C>
Payrolls, commissions and employee benefits $ 13,637 15,715
Other 15,204 15,834
$ 28,841 31,549
</TABLE>
17
<PAGE>
(AMERICAN, LADD Furniture, Inc., Lea Lumber & Plywood Co., AMERICAN DREW,
LADD TRANSPORTATION, INC., PILLIOD, Lea logos)
Notes to Consolidated Financial Statements
(continued)
Note 7: Long-term Debt
Long-term debt consists of the following:
<TABLE>
January 1, January 2,
In thousands 1994 1993
<S> <C> <C>
Term loan due at various dates through January 15, 1999 $ 45,000 45,000
Revolving credit loan, due January 15, 1996 58,000 38,350
Other indebtedness, primarily fixed-rate
industrial revenue bonds, due through 2001 8,072 9,223
Total long-term debt 111,072 92,573
Less current installments of long-term debt 5,815 1,070
Long-term debt, excluding current installments $105,257 91,503
</TABLE>
At January 1, 1994, the Company had outstanding under a term and
revolving credit loan agreement (the Facility) provided by a
syndicate of banks a term loan of $45,000,000 and borrowings of
$58,000,000 under an $85,000,000 revolving credit loan. Borrowings
under the Facility are unsecured. The term loan is payable in
quarterly installments commencing April 15, 1994 ranging from
$1,750,000 to $2,375,000. Borrowings under the Facility bear
interest at rates selected by the Company of LIBOR (3.35% at
January 1, 1994) plus 1 1/8% or prime (6.0% at January 1, 1994).
The Company pays a commitment fee of 3/8% per annum on the unused
portion of the revolving credit loan.
The Facility contains restrictions relating to the maintenance of
certain ratios pertaining to shareholders' equity, working
capital, cash flow and operating earnings. Additionally, the
Facility contains restrictions which relate to future borrowings,
liens on assets, specified amounts of consolidated net worth and
include covenants relating to the operations of the Company. The
Company was in compliance with all such restrictions at January 1,
1994.
The industrial revenue bonds are secured by property, plant and
equipment with a depreciated cost of approximately $4,349,000 at
January 1, 1994.
The aggregate annual maturities of long-term debt during each of
the five fiscal years subsequent to January 1, 1994 are
approximately as follows: $5,815,000 in 1994; $9,401,000 in 1995;
$67,943,000 in 1996; $9,872,000 in 1997; and $9,716,000 in 1998.
Interest paid by the Company in 1993, 1992 and 1991 amounted to
approximately $4,995,000, $7,338,000 and $10,629,000,
respectively.
Note 8: Employee Stock Plans
STOCK OPTION PLAN Under an Incentive Stock Option Plan which
expired in June 1993, the Company granted nontransferable stock
options to officers, key management employees and nonemployee
directors. Although options were generally granted at fair market
value on the dates of grant, nonqualified options could have been
granted at less than fair market value at the discretion of the
Plan's Administrative Committee. Incentive stock options and
director options were granted at not less than fair market value
on the date of grant. All optionees were employees or directors of
the Company on the date of grant and throughout the term
18
<PAGE>
(PENNSYLVANIA HOUSE, Clayton Marcus, BARCLAY, Daystrom, LADD INTERNATIONAL,
Brown Jordan, FOURNIER logos)
Note 8: Employee Stock Plans (continued)
of the option except in the case of death, retirement, or
disability. In February 1994, the board of directors, subject to
shareholder approval, adopted a new Incentive Stock Option Plan
substantially similar in nature to the prior plan.
A total of 1,166,666 shares were reserved for option under the
Plan. Options granted prior to 1991 are generally exercisable at
the cumulative rate of 20% per year after one year from the date
of grant. Options granted subsequent to 1990 are exercisable at
the cumulative rate of 25% per year after one year from the date
of grant. Options expire over a period not to exceed ten years
from the date of grant. Stock option activity during 1993, 1992
and 1991 follows:
<TABLE>
Number of Option price
shares per share
<S> <C> <C>
Outstanding at December 29, 1990 501,818 $ 6.00 - $22.76
Granted in 1991 247,201 $ 7.25 - $ 9.75
Exercised in 1991 (30,928) $ 6.56 - $ 6.96
Cancelled in 1991 (43,466) $ 9.75 - $20.69
Outstanding at December 28, 1991 674,625 $ 6.00 - $22.76
Granted in 1992 16,000 $ 8.25
Exercised in 1992 (10,179) $ 6.00 - $ 9.75
Cancelled in 1992 (131,295) $ 6.00 - $20.69
Outstanding at January 2, 1993 549,151 $ 6.00 - $22.76
Granted in 1993 136,101 $11.50 - $14.85
Exercised in 1993 (11,668) $ 6.00 - $11.63
Cancelled in 1993 (81,700) $ 6.00 - $22.76
Outstanding at January 1, 1994 591,884 $ 7.25 - $16.13
Exercisable at January 1, 1994 304,092 $ 7.25 - $16.13
</TABLE>
RESTRICTED STOCK AWARDS The board of directors periodically
awards restricted common stock to key executives. Vesting of such
awards is subject to future service requirements of five years
from the date of each award. The difference between cash paid by
the employee for the awarded shares, generally par value, and the
market value of the shares as of the award date is amortized over
the five-year service requirement periods. During 1993 and 1991,
the board of directors awarded and issued 30,963 and 112,998
shares, respectively. During 1992, there were no shares awarded or
issued.
Note 9: Employee Benefit Plans
DEFINED BENEFIT PENSION PLANS The Company and several of its
subsidiaries have noncontributory defined benefit pension plans
covering qualified salaried and hourly employees. The plans
covering qualified salaried employees provide pension benefits
based on the participant's final average salary before retirement.
The plans covering qualified hourly employees provide pension
benefits based on years of service. The Company's policy is to
fund normal costs and amortization of prior service costs.
19
<PAGE>
(LADD INTERNATIONAL, Daystrom, PENNSYLVANIA HOUSE, AMERICAN, Clayton
Marcus, BARCLAY, FOURNIER logos)
Notes to Consolidated Financial Statements
(continued)
Note 9: Employee Benefit Plans (continued)
In addition to the qualified plans, the Company has a nonqualified
retirement plan covering certain salaried employees. At January 1,
1994 and January 2, 1993, the Company had approximately $471,000
and $469,000, respectively, of assets available to fund future
obligations of the nonqualified plan. These assets are included in
intangible and other assets, and the related liability is included
in deferred compensation and other liabilities in the accompanying
consolidated balance sheets. The liability for the nonqualified
retirement plan is reflected in the reconciliation of the funded
status of the plans below.
The following sets forth the funded status of the plans:
<TABLE>
In thousands January 1, 1994 January 2, 1993
Assets exceed Accumulated Assets exceed Accumulated
accumulated benefits accumulated benefits
benefits exceed assets benefits exceed assets
<S> <C> <C> <C> <C>
Actuarial present value of
benefit obligations:
Vested benefit obligation $(32,113) (875) (26,597) (709)
Accumulated benefit obligation (32,781) (1,042) (27,179) (863)
Projected benefit obligation
for service rendered to date (40,778) (1,370) (34,179) (1,080)
Less plan assets at fair value,
primarily equity, fixed income
and short-term investment funds 36,445 ---- 31,669 ----
Projected benefit obligation in
excess of plan assets (4,333) (1,370) (2,510) (1,080)
Unrecognized net asset at transition
being amortized over 15 years (651) ---- (730) ----
Unrecognized net (gain) loss 3,124 227 1,511 (20)
Unrecognized prior service cost 2,375 270 2,577 320
Adjustment required to recognize
minimum liability ---- (169) ---- (83)
Pension asset (liability)
recognized in the consolidated
balance sheets $ 515 (1,042) 848 (863)
Net pension expense for the plans for 1993, 1992 and 1991 included the following components:
In thousands 1993 1992 1991
Service costs - benefits earned during the period $ 1,915 1,698 1,818
Interest cost on projected obligation 2,644 2,517 2,152
Return on assets (4,737) (1,358) (4,508)
Amortization of unrecognized net obligation
(asset) at transition and net deferrals 2,166 (872) 3,007
Net pension expense $ 1,988 1,985 2,469
</TABLE>
20
<PAGE>
(Brown Jordan, LADD TRANSPORTATION, INC., AMERICAN DREW, Lea Lumber &
Plywood Co., PILLIOD, LADD Furniture, Inc., Lea logos)
Note 9: Employee Benefit Plans (continued)
The projected benefit obligation at January 1, 1994 and January 2,
1993 was determined using an assumed discount rate of 7.25% and
8.00%, respectively. The salary plans assume a long-term rate of
increase in compensation of 5% to age 60, and 3% thereafter. The
assumed long-term rate of return on plan assets is 8.5%.
DEFINED CONTRIBUTION PLANS The Company has savings plans for
certain employees which qualify under Section 401(k) of the
Internal Revenue Code. The plans allow eligible employees to
contribute up to a fixed percentage of their compensation, with
the Company matching a portion of each employee's contributions.
Company contributions under the plans aggregated approximately
$687,000 in 1993, $422,000 in 1992 and $525,000 in 1991.
Note 10: Postretirement Benefits Other than Pensions
The Company has plans which provide for postretirement health care
benefits for certain employees. These benefits include major
medical insurance with deductible and coinsurance provisions. The
Company pays all benefits on a current basis, and the plans are
not funded.
The components of the net postretirement benefit cost for the year
ended January 1, 1994 are as follows:
In thousands 1993
Service costs $ 439
Interest costs of benefit obligation 1,611
Amortization of transition obligation 1,031
$ 3,081
The plan's funded status as of January 1, 1994 was as follows:
In thousands 1993
Accumulated postretirement benefit obligation:
Retirees $(11,985)
Active participants eligible to retire (6,285)
Other active participants (4,472)
(22,742)
Unrecognized net loss 1,104
Unrecognized transition obligation 19,587
Accrued postretirement benefit cost $ (2,051)
The postretirement benefit obligation was determined by
application of the terms of the various plans using relevant
actuarial assumptions. Health care costs are projected to increase
at annual rates ranging from 9.25% in 1993 down to 5.25% in 1997
and thereafter. A one percent annual increase in these assumed
cost trend rates would increase the accumulated postretirement
benefit obligation at January 1, 1994 by approximately $1,372,000
and the service and interest cost components of the net
postretirement benefit cost for 1994 by approximately $100,000.
The assumed discount rate used in determining the accumulated
postretirement benefit obligation was 7.25%.
21
<PAGE>
(Lea, PILLIOD, LADD TRANSPORTATION, INC., AMERICAN DREW, Lea Lumber &
Plywood Co., LADD Furniture, Inc., AMERICAN logos)
Notes to Consolidated Financial Statements
(continued)
Note 10: Postretirement Benefits Other than Pensions (continued)
For the year ended January 1, 1994, the effect of adopting
Statement No. 106 was to increase the net postretirement benefit
cost by approximately $2,100,000, to decrease net earnings by
approximately $1,260,000 and to decrease net earnings per share by
$0.05.
Note 11: Income Taxes
The consolidated financial statements for the years ended January
2, 1993 and December 31, 1991 have been restated to comply with
the provisions of Statement No. 109, Accounting for Income Taxes.
The following summarizes the impact on net earnings (loss) and net
earnings (loss) per share of applying Statement No. 109 for the
years ended January 2, 1993 and December 28, 1991:
In thousands 1992 1991
Net earnings (loss) as
previously reported $ 5,176 (12,749)
Effect of Statement No. 109 (631) (454)
Net earnings (loss) as restated $ 4,545 (13,203)
Per share amounts as
previously reported $ 0.24 (0.67)
Effect of Statement No. 109 (0.03) (0.03)
Net earnings (loss) per share as restated $ 0.21 (0.70)
Components of income tax expense (benefit) are as follows:
In thousands 1993 1992 1991
Current:
Federal $ 1,855 2,394 (9,497)
State 492 529 __
2,347 2,923 (9,497)
Deferred:
Federal 199 657 2,833
State 15 145 623
214 802 3,456
$ 2,561 3,725 (6,041)
22
<PAGE>
(FOURNIER, Brown Jordan, LADD INTERNATIONAL, Daystrom, BARCLAY,
Clayton Marcus, PENNSYLVANIA HOUSE logos)
Note 11: Income Taxes (continued)
The effective income tax rate on earnings (loss) before income
taxes for the years ended January 1, 1994, January 2, 1993 and
December 28, 1991 was 40.0%, 45.0% and 31.4%, respectively. The
actual income tax expense (benefit) differs from the "expected"
income tax expense (benefit) computed by applying the applicable
Federal corporate income tax rate (34% for each year) to earnings
(loss) before income taxes for the years ended January 1, 1994,
January 2, 1993 and December 28, 1991 as follows:
In thousands 1993 1992 1991
Computed "expected" income
tax expense (benefit) $ 2,178 2,812 (6,543)
Increase (reduction) in income
taxes resulting from:
State income taxes, net of
Federal income tax benefit 335 445 ----
Amortization of the excess of
cost over the assigned value
of net assets acquired 250 250 250
Other (202) 218 252
Actual income tax expense (benefit) $ 2,561 3,725 (6,041)
During 1993, the effect of enacted changes in tax rates was to
increase deferred tax expense by approximately $469,000.
The tax effects of temporary differences and carryforwards that
give rise to significant portions of deferred tax assets and
liabilities consist of the following:
January 1, January 2,
In thousands 1994 1993
Deferred tax liabilities:
Inventories $ (6,226) (7,815)
Property, plant and equipment (7,975) (7,593)
Intangible and other assets (10,938) (10,686)
Other (2,174) (2,164)
Total deferred tax liabilities (27,313) (28,258)
Deferred tax assets:
Accounts receivable 1,655 1,590
Liabilities and reserves 3,730 4,487
Capital loss carryforwards 2,614 2,552
Other 728 1,257
Gross deferred tax assets 8,727 9,886
Valuation allowance (2,600) (2,600)
Total deferred tax assets 6,127 7,286
Net deferred tax liability $ (21,186) (20,972)
23
<PAGE>
(FOURNIER, BARCLAY, Clayton Marcus, AMERICAN, PENNSYLVANIA HOUSE,
Daystrom, LADD INTERNATIONAL logos)
Notes to Consolidated Financial Statements
(continued)
Note 11: Income Taxes (continued)
Deferred taxes are classified in the accompanying consolidated
balance sheet captions as follows:
January 1, January 2,
In thousands 1994 1993
Accrued expenses and other current liabilities $ 2,284 2,750
Deferred income taxes 18,902 18,222
$21,186 20,972
The Company has approximately $6,600,000 of capital loss
carryforwards available to offset future capital gains. These
carryforwards will expire in 1994 and 1995 if not utilized and
total approximately $2,375,000 and $4,225,000, respectively. A
valuation allowance has been provided for the deferred tax assets
related to these loss carryforwards. There was no change in the
valuation allowance for any of the years reported. The Company
believes that it is more likely than not that the results of
future operations will generate sufficient taxable income to
realize the remaining deferred tax assets.
Note 12: Leases
The Company leases manufacturing facilities, various warehouses,
sales offices and showrooms, as well as manufacturing,
transportation and data processing equipment under operating
leases which expire at various dates through 2026. Future minimum
lease payments under noncancelable operating leases as of January
1, 1994 are:
In thousands
Fiscal year:
1994 $ 5,862
1995 5,694
1996 4,423
1997 2,732
1998 865
Thereafter 3,573
Total $23,149
Rental expense for cancelable and noncancelable operating leases
charged to operations was as follows:
In thousands
Fiscal year:
1993 $ 10,275
1992 9,337
1991 8,891
Rental expense includes contingent rentals based upon usage of
transportation equipment under cancelable and noncancelable
operating leases which totaled approximately $650,000 in 1993,
$786,000 in 1992 and $868,000 in 1991.
24
<PAGE>
(Lea, LADD Furniture, PILLIOD, Lea Lumber & Plywood Co., AMERICAN DREW,
LADD TRANSPORTATION, INC., Brown Jordan logos)
Note 13: Dealer Financing Arrangement
The Company has a cancelable financing arrangement whereby certain
notes receivable from furniture dealers are assigned with recourse
to a bank. The terms of the notes receivable, which are
collateralized by inventories held by the furniture dealers, range
from 12 to 48 months with interest rates ranging from 6% to prime
plus 1 1/4%. Upon cancelation of the financing arrangement, the
bank retains the previously assigned notes receivable and, as
such, the notes receivable and related obligations under the
dealer financing arrangement are not recorded in the January 1,
1994 and January 2, 1993 consolidated balance sheets. Total notes
receivable assigned during fiscal 1993, 1992 and 1991 were
approximately $7,503,000, $5,304,000 and $9,464,000, respectively.
During 1992, the Company assumed approximately $2,300,000 in notes
previously assigned to the bank, and such amount is included in
accrued expenses and other current liabilities at January 2, 1993.
At January 1, 1994, the Company was contingently liable for
approximately $8,855,000 of receivables transferred with recourse
to the bank under the dealer financing arrangement for which the
Company maintains a $4,000,000 letter of credit agreement to fund
any liabilities which might arise under the program. In the
opinion of management, adequate provision for potential losses
under the dealer financing arrangement has been included in the
allowances for doubtful receivables, discounts, returns and
allowances in the accompanying consolidated balance sheets.
Note 14: Stock Offering
In May 1992, the Company sold 4,025,000 shares of common stock,
realizing net proceeds of $34,019,000. The net proceeds from the
offering were used to reduce outstanding borrowings under the
Company's revolving credit loan.
Note 15: Subsequent Event
On January 31, 1994, the Company sold ownership interest in a
defined pool of trade accounts receivable for $20,000,000, the
proceeds of which were used to partially finance the Pilliod
acquisition -- see Note 2. The sold accounts receivable will be
reflected as a reduction of trade accounts receivable in the 1994
consolidated balance sheet. Under the agreement, which expires in
January 1995, the maximum amount of the purchaser's investment
will be $30,000,000 and is subject to change based on the level of
eligible receivables and concentrations of receivables. The
Company will retain substantially the same risk of credit loss as
if the receivables had not been sold. A portion of the cost of the
accounts receivable sale program will be based on the purchaser's
level of investment and borrowing costs.
25
<PAGE>
(AMERICAN, LADD Furniture, Inc., Lea Lumber & Plywood Co., AMERICAN DREW,
LADD TRANSPORTATION, INC., PILLIOD, Lea logos)
LADD Furniture, Inc. and Subsidiaries
Selected Annual Data
Dollar and share data in thousands, except per share amounts
<TABLE>
<CAPTION>
Five-Year One-Year
Compound Changes
Growth Rates (1993 vs. 1992)
Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal
1993 1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Statement Data
Net sales $ 521,200 496,679 429,110 511,911 453,002 379,904 + 6.5% +4.9%
Cost of sales 426,921 401,250 356,025 406,039 352,660 289,751 8.1 6.4
Gross profit 94,279 95,429 73,085 105,872 100,342 90,153 0.9 (1.2)
Selling, general and
administrative expenses 81,953 78,493 79,322 80,617 64,639 48,956 10.9 4.4
Manufacturing restructuring charge ---- ---- ---- 8,268 ---- ---- ---- ----
Operating income (loss) 12,326 16,936 (6,237) 16,987 35,703 41,197 (21.4) (27.2)
Other deductions (income):
Interest expense 5,542 7,502 10,413 14,799 8,860 3,980 6.8 (26.1)
Other (net) 377 1,164 2,594 1,584 1,038 (946) N/M (67.6)
Earnings (loss) before income taxes 6,407 8,270 (19,244) 604 25,805 38,163 (30.0) (22.5)
Income tax expense (benefit) 2,561 3,725 (6,041) (426) 9,383 13,558 (28.3) (31.2)
Net earnings (loss) $ 3,846 4,545 (13,203) 1,030 16,422 24,605 (31.0) (15.4)
Depreciation $ 10,508 9,151 8,783 9,138 8,018 5,681 + 13.1% + 14.8%
Amortization 2,554 2,848 5,081 2,952 1,244 274 56.3 (10.3)
Cash dividends paid 2,767 ---- 4,545 5,274 5,814 4,704 (10.1) N/M
Weighted average shares outstanding 23,054 21,442 18,946 18,833 18,759 18,694 4.3 7.5
Per Share Data
Net sales $ 22.61 23.16 22.65 27.18 24.15 20.32 + 2.2% (2.4%)
Net earnings (loss) 0.17 0.21 (0.70) 0.05 0.88 1.32 (33.6) (19.0)
Cash dividends 0.12 ---- 0.24 0.28 0.31 0.25 (13.7) N/M
Year-end book value 6.51 6.46 5.79 6.76 6.99 6.43 0.2 0.8
Balance Sheet Data
Net working capital $ 123,004 117,693 111,583 115,960 123,968 84,724 +7.7% +4.5%
Net property, plant and equipment 97,497 83,609 81,660 82,758 106,838 50,601 14.0 16.6
Total assets 335,737 315,649 308,980 320,539 407,136 172,923 14.2 6.4
Long-term debt 105,257 91,503 125,304 124,462 145,997 21,146 37.8 15.0
Shareholders' equity 150,103 148,724 110,001 127,331 131,399 120,201 4.5 0.9
Ratios, Other
Gross profit margin 18.1% 19.2 17.0 20.7 22.2 23.7
Operating profit (loss) margin 2.4 3.4 (1.5) 3.3 7.9 10.8
Return (loss) on sales 0.7 0.9 (3.1) 0.2 3.6 6.5
Effective income tax rate 40.0 45.0 31.4 N/M 36.4 35.5
Dividend payout ratio 71.9 ---- N/M N/M 35.4 19.1
Return (loss) on beginning assets 1.2 1.5 (4.1) 0.3 9.5 13.5
Return (loss) on beginning equity 2.6 4.1 (10.4) 0.8 13.7 23.6
Current ratio 3.1 3.1 3.1 3.2 2.1 4.2
Inventory turnover 4.4x 4.4 4.0 4.2 4.6 5.7
Asset turnover 1.6 1.6 1.4 1.4 1.6 2.1
Long-term debt to capitalization 37.9% 35.2 49.1 46.3 49.0 14.4
Year-end employees 6,670 6,940 6,340 6,880 8,020 5,990
Sales per employee (000's) $ 77.0 75.4 66.1 67.7 62.1 62.4
Stock Data
High $ 14.750 12.000 12.750 13.000 17.750 17.000
Low 7.500 6.250 5.750 4.250 11.000 11.250
Close 10.000 10.500 7.500 6.250 11.375 13.750
P/E ratios:
High 86.8x 57.1 N/M N/M 20.2 12.9
Low 44.1 29.8 N/M N/M 12.5 8.5
Trading volume (shares) 24,781 19,758 11,619 12,240 11,834 10,322
</TABLE>
NOTES: Fiscal year 1992 comprised 53 weeks; all other years
comprised 52 weeks. Fiscal years 1989 - 1992 have been restated to
reflect the adoption of SFAS No. 109 effective January 1, 1989.
Long-term debt excludes current installments. Capitalization
defined as net working capital plus noncurrent assets. Share and
per share data adjusted for stock splits. P/E ratios based on
yearly net earnings per share. Stock price data is for calendar
years. N/M = Not meaningful. Sales per employee based on monthly
employee averages.
26
<PAGE>
(PENNSYLVANIA HOUSE, Clayton Marcus, BARCLAY, Daystrom, LADD INTERNATIONAL,
Brown Jordan, FOURNIER logos)
Management's Discussion and Analysis
The following discussion should be read in conjunction with the
Consolidated Financial Statements and Notes thereto.
Results of Operations
The table below sets forth the percentage relationship of net
sales to certain items included in the consolidated statements of
operations in each of the last three fiscal years.
1993 1992 1991
Net sales 100.0% 100.0% 100.0%
Cost of sales 81.9 80.8 83.0
Gross profit 18.1 19.2 17.0
Selling, general and administrative expenses 15.7 15.8 18.5
Operating income (loss) 2.4 3.4 (1.5)
Other deductions, net 1.2 1.7 3.0
Earnings (loss) before income taxes 1.2 1.7 (4.5)
Income tax expense (benefit) 0.5 0.8 (1.4)
Net earnings (loss) 0.7% 0.9% (3.1)%
The following paragraphs provide an analysis of the changes in net
sales, selected cost and expense items, and net earnings (loss)
over the three-year period ended January 1, 1994.
Fiscal 1993 Compared to 1992
Net sales increased $24.5 million, or 4.9%, to a record $521.2
million in 1993's 52-week fiscal year, compared to $496.7 million
in 1992's 53-week year. Sales growth in 1993 occurred within a
competitive selling environment which limited the Company's
ability to increase product prices. The increase in net sales was
primarily attributable to growth in shipments of medium and lower-
priced casegoods products, upholstery products and the Company's
contract business. Additionally, sales of Fournier Furniture were
$15.0 million higher for the full year 1993 than for the six-month
period following Fournier's acquisition by the Company in July
1992. Net sales for 1993 were negatively impacted by $11.9 million
due to the non-renewal of a government contract which expired
during 1992, as well as by a decrease in sales of higher-priced
casegoods products. Further, as a result of a decision in the
third quarter of 1993 to discontinue certain unprofitable product
lines of American of Martinsville Residential Casegoods (AOM
Casegoods) and merge profitable products with American Drew's
product lines, 1993 sales were reduced by $2.7 million compared to
1992. The Company believes that the loss of sales volume in 1994
from the discontinuance of AOM Casegoods products totaling
approximately $12.0 million will be more than offset by internal
sales growth and by sales of Pilliod Furniture, which was acquired
January 31, 1994 (see note 2 to the consolidated financial
statements).
Cost of sales as a percentage of net sales increased to 81.9% in
1993, from 80.8% in 1992. This increase was largely due to
increased raw material costs, principally lumber, as well as the
cost associated with the implementation of Statement of Financial
Accounting Standards No. 106, Employers' Accounting for
Postretirement Benefits Other than Pensions (see note 10 to the
consolidated financial statements). The impact of higher lumber
prices in 1993, which was as much as 35% for cherry lumber, was
somewhat countered through selective purchasing, improved yield
management and species substitution, as well as by lumber
substitution in general. Additionally, as a result of the above-
mentioned decision to discontinue certain products of AOM
Casegoods, manufacturing capacity became available for
redeployment to other operating
27
<PAGE>
(LADD INTERNATIONAL, Daystrom, PENNSYLVANIA HOUSE, AMERICAN, Clayton
Marcus, BARCLAY, FOURNIER logos)
Management's Discussion and Analysis
(continued)
companies. Virginia manufacturing capacity of AOM Casegoods,
American of Martinsville Contract (AOM Contract) and Lea
Industries was realigned such that AOM Contract operations were
consolidated from three plants into one expanded plant and two
plants were transferred to and are being upfitted by Lea
Industries to accommodate its current and anticipated sales
growth. Initial inefficiencies associated with these significant
manufacturing changes increased 1993 cost of sales, particularly
during the fourth quarter. In addition, manufacturing disruptions
associated with the implementation of certain capital projects
increased 1993 cost of sales. Although 1994 cost of sales will
likely continue to reflect high lumber costs, the manufacturing
disruptions associated with the Virginia manufacturing realignment
should end by mid-year and the Company should also begin to
benefit from returns generated by 1993 capital expenditures.
The gross profit margin decreased from 19.2% of net sales in 1992
to 18.1% in 1993. The decline in the gross margin was primarily
attributable to the above factors which increased 1993 cost of
sales, as well as discounting of selling prices due to the highly
competitive industry conditions and due to the liquidation of
certain AOM Casegoods products.
Selling, general and administrative (SG&A) expenses were 15.7% of
net sales in 1993, comparable to 1992's 15.8%.
Operating income in 1993 was $2.4 million versus $3.4 million in
1992. The costs associated with the Virginia manufacturing plant
realignment, the operating loss of approximately $2.5 million
incurred by AOM Casegoods after the decision to discontinue its
unprofitable products, and the additional $2.1 million cost in
1993 for post-retirement benefits, were factors negatively
impacting 1993 operating margins.
Net other deductions declined to 1.2% of net sales in 1993 from
1.7% in 1992. The decrease was largely attributable to a decline
in interest expense of $2.0 million in 1993, related to a year-to-
year reduction in average outstanding borrowings and lower
interest rates which resulted from a new credit agreement entered
into by the Company in January 1993.
The difference between the Company's actual effective income tax
rate for 1993 of 40.0% compared to the expected income tax rate of
34% was largely due to state income taxes net of the federal
income tax benefit, as well as the non-deductibility of the
amortization of intangible assets. Additionally, Congress enacted
new tax legislation during the year which increased the top
Federal income tax rate retroactive to January 1, 1993. The
adjustment of the Company's net deferred tax liability to reflect
the revised Federal income tax rate lowered net earnings by
approximately $469,000, or $.02 per share, during 1993. Tax
planning strategies implemented late in 1993 are expected to
reduce the Company's state income taxes in the future.
Fiscal 1992 Compared to 1991
Net sales increased $67.6 million, or 15.8%, to $496.7 million in
1992. The increase in net sales was primarily attributable to an
increase in the volume of furniture shipments and the purchase of
the assets of Fournier Furniture in July 1992. Excluding the
Fournier acquisition, net sales increased approximately 11.6% over
prior year levels. The extremely competitive sales environment in
1992 limited the Company's ability to increase net sales prices.
Cost of sales as a percentage of net sales declined to 80.8% in
1992, from 83.0% in 1991. The reduction in the cost of sales
percentage was the result of an increase in production volume
resulting in better absorption of manufacturing overhead costs in
1992. Additionally, cost reduction programs begun in the fourth
quarter of
28
<PAGE>
(Brown Jordan, LADD TRANSPORTATION, INC., AMERICAN DREW, Lea Lumber &
Plywood Co., PILLIOD, LADD Furniture, Inc., Lea logos)
1991 to reduce personnel impacted 1992 results. The impact of
rising lumber prices in 1992 was minimized through selective
purchasing, yield management and species substitution, as well as
by lumber substitution in general. Further, lumber price increases
were also offset by decreases in other raw material prices.
The gross profit margin increased from 17.0% of net sales in 1991
to 19.2% in 1992. The improvement in the gross profit margin
resulted from increased production volume and the cost reduction
programs implemented by the Company. Gross profit margins in both
years were negatively impacted by promotional discounting of
selling prices, especially in the "hospitality" (hotel/motel)
category.
Selling, general and administrative (SG&A) expenses declined to
15.8% of net sales, from 18.5% in 1991. While total SG&A expense
was comparable in dollar amount to 1991, the percentage decreased
as a result of increased sales. Included in SG&A for 1992 was a
$3.1 million provision for losses on doubtful accounts receivable,
a decrease of $4.3 million from the record levels recorded in 1991
when the impact of the recession on white collar workers hit
several of the Company's furniture retailers. The decrease in the
provision for losses on doubtful accounts receivable in 1992 was
offset by an increase in SG&A expenses associated with the
Fournier acquisition.
Net other deductions declined from 3.0% of net sales in 1991 to
1.7% in 1992. The decrease was largely attributable to a decline
in interest expense of $2.9 million principally related to a year-
to-year reduction in outstanding borrowings. Additionally, 1991
net other deductions included a one-time write-off of $1.9 million
of loan fees in connection with the term and revolving credit
agreement signed in January 1992.
The difference between the Company's effective income tax rate for
1992 of 45.0% compared to the expected income tax rate of 34% was
primarily attributable to the non-deductibility of the
amortization of intangible assets and state income taxes net of
the federal income tax benefit. The increased effective income tax
rate for the third and fourth quarters of 1992 arose as it became
apparent that net operating losses recorded in Pennsylvania during
1991 would not be available to offset 1992 taxable income due to
tax law changes enacted in that state.
Liquidity and Capital Resources
On January 1, 1994, the Company had $103.0 million outstanding
under a long-term bank credit facility, comprised of a $45.0
million term loan and borrowings of $58.0 million under an $85.0
million revolving credit line. Additionally, the Company had other
long-term indebtedness outstanding at the same date, primarily
fixed-rate industrial revenue bonds, aggregating $8.1 million.
Excluding current installments, total long-term debt represented
37.9% of the Company's total capitalization at the end of 1993,
below management's internal financial goal of keeping long-term
debt to capitalization at or below 45%. Additionally, on January
1, 1994, net working capital totaled $123.0 million, $5.3 million
higher than at the end of the prior year, and the Company's
current ratio was 3.1:1, the same as a year earlier. On January 1,
1994, the Company had $27.0 million of unused lines of credit
available under its bank credit lines.
During 1993, the Company generated cash from operating activities
of $8.7 million, a decrease of $17.6 million compared to 1992.
Cash flows from net earnings plus depreciation and amortization of
$16.9 million in 1993 were up slightly over $16.5 million in 1992.
However, increases in trade accounts receivable associated with
higher 1993 sales, increases in inventory levels (principally raw
materials and lower-priced casegoods products) and a decrease in
accrued expenses and other current liabilities, in the aggregate,
used $12.5 million of cash. Operating cash flows in 1992 were
positively impacted by the nonrecurring collection of $7.3 million
of refundable income taxes.
29
<PAGE>
(Lea, PILLIOD, LADD TRANSPORTATION, INC., AMERICAN DREW, Lea Lumber &
Plywood Co., LADD Furniture, Inc., AMERICAN logos)
Management's Discussion and Analysis
(concluded)
During 1993, capital spending totaled $24.7 million compared to
$9.0 million during 1992. Capital expenditures were principally
directed to new computerized manufacturing equipment designed to
automate production, reduce manufacturing costs and improve
quality. Capital expenditures during 1993 were funded largely from
the operations of the Company and borrowings under the Company's
existing long-term credit facility. The Company anticipates
spending in excess of $25.0 million for capital improvements
during 1994. The Company believes that unused short-term and long-
term credit lines available under banking arrangements, as well as
cash generated from operations, will be adequate to fund planned
capital expenditures.
As more fully discussed in note 2 to the consolidated financial
statements, the Company acquired Pilliod Furniture on January 31,
1994 for $54.0 million, by retiring $29.9 million of Pilliod's
debt, assuming $0.2 million of debt, and paying $23.9 million to
Pilliod's shareholders. The purchase price was financed with funds
from available long-term and short-term revolving bank credit
lines and $20.0 million generated from the sale of trade accounts
receivable (see note 15 to the consolidated financial statements).
On January 28, 1994 and February 28, 1994, the Company entered
into unsecured one-year revolving lines of credit with two banks
of $20.0 million and $15.0 million, respectively, both of which
bear interest at rates at or below the Company's long-term credit
facility. The facilities are intended to provide debt capacity for
the Pilliod Furniture acquisition and seasonal working capital
needs. The Company intends to refinance borrowings under the
short-term lines through long-term financing during 1994.
New Accounting Standards
In November 1992, the Financial Accounting Standards Board
established new accounting standards for Postemployment Benefits
(SFAS 112) that require accrual of these costs over an employee's
active service rather than being accounted for on a "pay as you
go" basis. Although the Company does not have severance agreements
for employees at most of its companies, certain workers
compensation and disability benefits are provided. The Company
plans to adopt the provisions of SFAS 112 in fiscal year 1994 and
believes, based upon analyses performed to date, that the impact
of adoption will not be material.
Impact of Inflation
Although the effects of inflation on the Company cannot be
accurately determined, inflation in recent years has been modest
and has primarily affected the Company's manufacturing costs in
the areas of labor, manufacturing overhead, and raw materials
other than lumber. The price of lumber, like the prices of other
commodities, is affected more by the interaction of supply and
demand than by inflation. The Company's gross profit margins
during the past several years have been impacted more by higher
promotional selling discounts, lumber price increases, and plant
downtime taken to curtail production and inventory levels rather
than by inflation. Historically, the Company believes it has been
able to offset the effects of inflation by improving manufacturing
efficiency, increasing employee productivity, substituting raw
materials and, to a lesser degree, by increasing product selling
prices.
30
<PAGE>
(FOURNIER, Brown Jordan, LADD INTERNATIONAL, Daystrom, BARCLAY, Clayton
Marcus, PENNSYLVANIA HOUSE logos)
LADD Furniture, Inc. and Subsidiaries
Selected Quarterly Data
Dollar and share data in thousands, except per share amounts
<TABLE>
<CAPTION>
Fiscal 1993 Fiscal 1992
4th 3rd 2nd 1st 4th 3rd 2nd 1st
Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Statement Data
Net sales $123,935 127,297 133,840 136,128 129,016 124,610 125,062 117,991
Cost of sales 103,444 104,905 107,328 111,244 103,552 102,124 100,011 95,563
Gross profit 20,491 22,392 26,512 24,884 25,464 22,486 25,051 22,428
Selling, general and
admininstrative expenses 20,188 19,907 21,252 20,606 20,895 19,275 19,921 18,402
Operating income (loss) 303 2,485 5,260 4,278 4,569 3,211 5,130 4,026
Other deductions (income):
Interest expense 1,398 1,379 1,374 1,391 1,631 1,543 2,033 2,295
Other (net) 562 (34) (79) (72) 116 169 597 282
Earnings (loss) before income taxes (1,657) 1,140 3,965 2,959 2,822 1,499 2,500 1,449
Income tax expense (benefit) (972) 709 1,615 1,209 1,477 722 930 596
Net earnings (loss) $ (685) 431 2,350 1,750 1,345 777 1,570 853
Depreciation $ 2,905 2,722 2,474 2,407 2,468 2,299 2,197 2,187
Amortization 655 636 638 625 545 580 1016 707
Cash dividends paid 692 692 691 692 ---- -------- ----
Weighted average shares outstanding 23,061 23,060 23,060 23,034 23,019 23,016 20,623 18,987
Per Share Data
Net sales $ 5.37 5.52 5.80 5.91 5.60 5.41 6.06 6.21
Net earnings (loss) (0.03) 0.02 0.10 0.08 0.06 0.03 0.08 0.04
Cash dividends 0.03 0.03 0.03 0.03 ---- ---- ---- ----
Quarter-end book value 6.51 6.57 6.58 6.50 6.46 6.40 6.37 5.84
Balance Sheet Data
Net working capital $ 123,004 129,995 135,277 135,903 117,693 105,886 101,415 101,978
Net property, plant and equipment 97,497 92,435 90,020 85,525 83,609 81,815 78,968 79,891
Total assets 335,737 334,541 337,546 335,317 315,649 312,993 302,781 303,792
Long-term debt 105,257 107,453 111,009 109,916 91,503 80,332 74,320 112,724
Shareholders' equity 150,103 151,416 151,671 149,942 148,724 147,427 146,553 110,909
Ratios
Gross profit margin 16.5% 17.6 19.8 18.3 19.7 18.0 20.0 19.0
Operating profit margin 0.2 2.0 3.9 3.1 3.5 2.6 4.1 3.4
Return (loss) on sales (0.6) 0.3 1.8 1.3 1.0 0.6 1.3 0.7
Effective income tax rate 58.7 62.2 40.7 40.9 52.3 48.2 37.2 41.1
Long-term debt to capitalization 37.9 38.3 39.2 39.3 35.2 32.5 30.9 46.4
Stock Data
High $ 11.000 11.250 12.000 14.750 11.250 8.750 11.250 12.000
Low 7.500 8.000 8.750 11.250 6.500 7.000 7.000 6.250
Close 10.000 8.375 9.000 11.750 10.500 7.250 7.875 11.250
Trading volume (shares) 3,980 4,955 4,925 10,921 7,358 3,602 6,232 2,566
NOTES: 1992 fourth quarter contained 14 weeks; all other quarters
contained 13 weeks. The fiscal 1992 quarterly data has been
restated to reflect the adoption of SFAS
No. 109 effective January 1, 1989. Long-term debt excludes current
installments. Fournier Furniture included in consolidated results
from its July 2, 1992 acquisition by LADD. Stock price and volume
data is for calendar quarters.
</TABLE>
31
<PAGE>
(Brown Jordan, LADD TRANSPORTATION, INC., AMERICAN DREW, Lea Lumber &
Plywood Co., PILLIOD, LADD Furniture, Inc., Lea logos)
Officers, Directors, Corporate Data
Board of Directors
Richard R. Allen
Chairman, President and Chief Executive Officer
William B. Cash 2
Former Chairman, Turnpike Properties, Inc.
James H. Corrigan, Jr. 1
Chairman and Chief Executive Officer,
Mebane Packaging Corporation
O. William Fenn, Jr. 1
Retired Vice Chairman, LADD
Don A. Hunziker 2
Retired Chairman, LADD
Gerald R. Grubbs
Vice Chairman
Thomas F. Keller, Ph.D. 1,2
Dean and R.J. Reynolds Industries Professor
Fuqua School of Business, Duke University
Fred L. Schuermann, Jr.
Executive Vice President
1 Audit Committee. 2 Compensation Committee.
Corporate Officers and Operating
Company Executives
Daryl B. Adams
Vice President and Corporate Controller-Chief Accounting
Officer, LADD
Richard R. Allen
Chairman, President and Chief Executive Officer, LADD
Kenneth E. Church
Vice President, LADD; President, Clayton Marcus
William S. Creekmuir
Senior Vice President, Chief Financial Officer,
Secretary and Treasurer, LADD
Beverly C. Davis
President, LADD Transportation
Victor D. Dyer
Vice President, Human Resources, LADD
John N. Foster, Jr.
Vice President, LADD; President, Lea Industries
Gerald R. Grubbs
Vice Chairman, LADD
Lee H. Houston, Jr.
President, Daystrom Furniture
Robert J. Maricich
Vice President, LADD; President, American Drew
D. Fredric Myers
President, Fournier Furniture
Thomas L. Millner
President, Pilliod Furniture
James Mueller
President, Brown Jordan Company
David C. Ogren
Vice President, Market Development, LADD
William B. Pirtle
President, Barclay Furniture
Fred L. Schuermann, Jr.
Executive Vice President, LADD
Acting President, American of Martinsville
Craig M. Shoemaker
President, Pennsylvania House
Bradly A. Upfield
President, Lea Lumber & Plywood
Corporate Headquarters
One Plaza Center, Box HP-3
High Point, NC 27261-1500
Phone: (910) 889-0333
U.S. FAX: (910) 888-6344 International FAX: (910) 888-6445
Transfer Agent
Wachovia Bank & Trust Company, N.A.
Winston-Salem, NC
Legal Counsel
Petree Stockton, L.L.P.
Winston-Salem, NC
Independent Auditors
KPMG Peat Marwick
Greensboro, NC
Form 10-K, Other Information
For a copy of LADD's Form 10-K (annual report filed with the
Securities and Exchange Commission) or other information about
LADD, please contact:
John J. Ong, CFA
Director, Corporate Communications
Stock Listing
LADD's common stock is traded on the O-T-C National Market System,
under the NASDAQ symbol LADF. At year-end 1993, LADD had 885
shareholders of record, representing an estimated 4,500 beneficial
owners.
Market Makers
Bear, Stearns & Co.
Cantor, Fitzgerald & Co.
Davenport & Co. of Virginia
Dean Witter Reynolds
Dillon, Read & Co.
Fechtor, Detwiler & Co., Inc.
Ferris Baker Watts Inc.
Herzog, Heine, Geduld, Inc.
Interstate/Johnson Lane
Jeffries & Company, Inc.
C.L. King & Associates
Kirkpatrick, Pettis, Smith
Mayer & Schweitzer, Inc.
MLPF&S
Morgan, Keegan & Co.
Nash Weiss
Raymond, James & Associates
Robinson Humphrey Company, Inc.
Sherwood Securities Corp.
Scott & Stringfellow
Troster Singer Corp.
Wheat, First Securities, Inc.
Annual Meeting
Shareholders are cordially invited to attend LADD's 1994 Annual
Meeting, to be held Thursday, April 28th at 10:00 a.m. at the
Radisson Hotel in
High Point, NC.
32
<PAGE>
We at LADD are proud of the fine
residential furniture products manufactured
by our family of companies and we invite you
to see them at your nearest dealer.
Ask for them by name: American Drew,
American of Martinsville, Barclay,
Brown Jordan, Clayton Marcus,
Daystrom, Fournier, Lea Industries,
Pennsylvania House and Pilliod.
LADD Manufacturing
Facilities (26 Total)
North Carolina (9) Tennessee (2)
Hickory (3) Morristown (2)
Monroe (1)
North Wilkesboro (3) Alabama (1)
Waynesville (1) Selma (1)
Windsor (1) Arkansas (1)
Newport (1)
Virginia (5)
Chilhowie (1) California (1)
Marion (1) El Monte (1)
Martinsville (1)
South Boston (1) Ohio (1)
St. Paul (1) Swanton (1)
Mississippi (2) South Carolina (1)
Myrtle (1) Nichols (1)
Sherman (1) Mexico (1)
Pennsylvania (2) Juarez (1)
Lewisburg (1)
White Deer (1)
Cover Design: E-Design, Winston-Salem, NC
Photography: Bernard Carpenter, Rural Hall, NC (except as noted below)
The LADD companies (OFC, IFC, IBC, pp. 2, 6, 7, 8);
Fisher & R(umlaut)ckle, Brugg, Switzerland (p. 4);
Meaux Thornton, High Point, NC (p. 7); Hix Studio, Hickory, NC (p. 8)
Printing and Design: Washburn Graphics, Inc., Charlotte, NC
Typography: LADD Graphic Services, High Point, NC
*******************************************************************************
APPENDIX
At the top of each page of exhibit 13 there appears a reversed-out strip
of logos for each company that is listed on each separate page.
On page 1 of exhibit 13 a photo appears with the following caption:
LADD executives (left to right): vice chairman Gerald R. Grubbs,
senior vice president and CFO William S. Creekmuir, chairman and CEO
Richard R. Allen (seated) and executive vice president Fred L.
Schuermann, Jr.
On page 2 of exhibit 13 a photo appears with the following caption:
Pilliod's extensive line of promotionally-priced master bedroom and
occasional furniture broadens LADD's product offering at the lower
price points and strengthens our position with retailers in this fast-
growing market segment.
Also on page 2 of exhibit 13 a graph appears with the following plot points:
International Sales
1990 1991 1992 1993
Sales ($ Millions) $10.6 $12.5 $29.3 $40.6
# of Countries 16 32 41 51
On page 3 of exhibit 13 a signature of Richard R. Allen appears
where indicated.
On page 4 of exhibit 13 a graph appears with the following plot points:
Capital Investment
1988 1989 1990 1991 1992 1993
Capital Spending
($ Millions) $4.69 $5.37 $6.54 $7.55 $8.99 $24.67
Capital Spending
to Depreciation 82.6% 67.0% 71.5% 86.0% 98.2% 234.7%
Also on page 4 of exhibit 13 a photo appears with the following caption:
During 1993, LADD's Lea Lumber & Plywood business
installed a new veneer jointing and splicing system which
greatly improved the productivity of its hardwood
veneer plywood manufacturing operations.
On page 5 of exhibit 13 two photos appear with the following captions:
(1) Computer-aided-design ("CAD") technology
is being increasingly used throughout
LADD's manufacturing operations.
(2) During 1993, LADD's operating companies as
a group invested over $5 million selectively expanding their
manufacturing facilities.
On page 6 of exhibit 13 three photos appear with the two following captions:
(1) State-of-the-art high speed equipment is being installed throughout
the LADD manufacturing organization to reduce production costs
and enhance production flexibility.
(2) Since Fournier's acquisition, increased automation has substantially
expanded the capacity of its St. Paul plant to efficiently produce RTA
furniture (lower photo).
On page 7 of exhibit 13 three photos appear with the following captions:
(1) American Drew's high value medium-priced line of wood bedroom, dining
room and occasional furniture has been successfully broadened into new
style categories in the last several years, including this striking
contemporary
bedroom suite.
(2) Computer numerically controlled ("CNC") woodworking equipment such as
this Weinig molder significantly reduces machine set-up times while
improving quality.
(3) "Flat line" finishing of panels and drawer components is being used by
a number of LADD's casegoods companies to improve productivity and
sharply reduce the emission
of volatile organic compounds ("VOCs").
On page 8 of exhibit 13 five photos appear with the following 3 captions:
(1) Clayton Marcus and Barclay are making use of new computer-based
technology to aid the consumer product selection process, monitor
manufacturing progress and inventory levels and efficiently design new
product offerings.
(2) Interactive manufacturing information systems are
an important ingredient
in LADD's overall investment program.
(3) The Clayton Marcus line of fine quality, medium-priced, eight-way hand
tied residential upholstery is popular with dealers and consumers
alike. Through judicious investment in areas such as innovative
manufacturing techniques and information systems, Clayton Marcus has
improved its efficiency, product quality and customer satisfaction
levels, earning it the 1993 Chairman's Award as LADD's outstanding
operating unit.
Exhibit 24.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
LADD Furniture, Inc.:
We consent to incorporation by reference in the Registration
Statements (Nos. 33-2838 and 33-21816) on Form S-8 of LADD
Furniture, Inc. of our reports dated February 11, 1994, relating
to the consolidated balance sheets of LADD Furniture, Inc. and
subsidiaries as of January 1, 1994 and January 2, 1993, and the
related consolidated statements of operations, shareholders'
equity and cash flows and related schedules for each of the years
in the three-year period ended January 1, 1994 which reports
appear or are incorporated by reference in the January 1, 1994
annual report on Form 10-K of LADD Furniture, Inc.
KPMG PEAT MARWICK
Greensboro, North Carolina
March 31, 1994
INDEPENDENT AUDITORS' REPORT
The Board of Directors
LADD Furniture, Inc.:
Under date of February 11, 1994, we reported on the consolidated
balance sheets of LADD Furniture, Inc. and subsidiaries as of
January 1, 1994 and January 2, 1993 and the related consolidated
statements of operations, shareholders' equity and cash flows for
each of the years in the three-year period ended January 1, 1994,
as contained in the 1993 annual report to shareholders. These
consolidated financial statements and our report thereon are
incorporated by reference in the annual report on Form 10-K for
the year ended January 1, 1994. In connection with our audits of
the aforementioned consolidated financial statements, we also
have audited the related financial statement schedules as listed
in the accompanying index. These financial statement schedules
are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statement schedules based on our audits.
In our opinion, such financial statement schedules, when
considered in relation to the basic consolidated financial
statements taken as a whole, present fairly, in all material
respects, the information set forth therein.
As discussed in notes 1, 10 and 11 to the consolidated financial
statements, the Company adopted the provisions of the Financial
Accounting Standards Board's Statement of Financial Accounting
Standards (SFAS) No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," and SFAS No. 109,
"Accounting for Income Taxes," in 1993.
KPMG PEAT MARWICK
Greensboro, North Carolina
February 11, 1994
