LADD FURNITURE INC, DEF 14A, 1996-04-01

LADD FURNITURE INC
DEF 14A, 1996-04-01
HOUSEHOLD FURNITURE

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<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )

Filed by the Registrant [X]

Filed by a Party other than the Registrant [ ]

Check the appropriate box:

[ ] Preliminary Proxy Statement

[ ] Definitive Proxy Statement

[ ] Definitive Additional Materials

[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12

LADD FURNITURE, INC.
(Name of Registrant as Specified in Its Charter)

(Name of Person(s) Filing Proxy Statement)

PAYMENT OF FILING FEE (Check the appropriate box): $125.00 FILING FEE PAID BY
WIRE TRANSFER

[X] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).

[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

(1) Title of each class of securities to which transaction applies:

(2) Aggregate number of securities to which transaction applies:

(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange
Act rule 0-11:

(4) Proposed maximum aggregate value of transaction:

[ ] Check box if any part of the fee is offset as provided by Exchange Act rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.

(1) Amount Previously Paid:

(2) Form, Schedule or Registration Statement No.:

(3) Filing Party:

(4) Date Filed:

<PAGE>
Notice of

1996

Annual

Meeting

Proxy Statement

Annual Report on Form 10-K

(Ladd Furniture, Inc. Logo)
<PAGE>

(Ladd Furniture, Inc. Logo) ONE PLAZA CENTER BOX HP 3
HIGH POINT, NORTH CAROLINA
27261-1500 USA
TEL 910-889-0333 FAX 910-888-6344

April 1, 1996

Dear Shareholder:

The Board of Directors cordially invites you to attend LADD's Annual
Meeting of Shareholders to be held on Tuesday, May 2, 1996, in High Point, NC.
In the following pages, you will find information about the meeting plus a Proxy
Statement.

During the business session, we will review LADD's past year and look at
our plans and prospects for the future. Shareholders will also have the
opportunity to discuss their company with the directors and officers of LADD.

Please also note that enclosed with the Proxy Statement as Appendix A is
LADD's 1995 Annual Report on Form 10-K as filed with the Securities and Exchange
Commission which contains, among other information, LADD's annual financial
statements and review of operations. We have adopted this new format for this
year's proxy statement with the goal of providing more cost effective disclosure
of information about LADD to our shareholders.

If you cannot be with us in person, please be sure to vote your shares by
proxy. Just mark, sign and date the enclosed proxy card and return it in the
postage-paid envelope. Your prompt return of the card will help LADD avoid
additional solicitation costs. In person or by proxy, your vote is important.

I hope you can join us at the Annual Meeting.

Sincerely,
(Signature of Fred L. Schuermann, Jr.)
FRED L. SCHUERMANN, JR.
PRESIDENT AND CHIEF EXECUTIVE
OFFICER

<PAGE>
TABLE OF CONTENTS

<TABLE>
<S> <C>
Notice of Annual Meeting.............................................................................................. 1
Proxy Statement
General............................................................................................................. 2
Voting Securities................................................................................................... 2
Security Ownership of Certain Beneficial Owners and Management...................................................... 2
Nominees for Election of Directors.................................................................................. 4
Executive Cash Compensation and Related Information................................................................. 5
Long-Term Incentive Plan -- Awards in 1995.......................................................................... 11
Defined Benefit Plans............................................................................................... 11
Other Compensation.................................................................................................. 13
Comparative Company Performance..................................................................................... 14
The Board of Directors Committees and Meetings...................................................................... 15
Approval of Amendment of LADD Furniture, Inc. 1994 Incentive Stock Option Plan...................................... 15
Ratification of Independent Public Accountants...................................................................... 19
Date for the Receipt of Shareholder Proposals....................................................................... 20
Other Business...................................................................................................... 20
Form 10-K........................................................................................................... 20
Solicitation of Proxies............................................................................................. 20
Appendix A:
Annual Report on Form 10-K
PART I
Item 1. Business............................................................................................... A-2
Item 2. Properties............................................................................................. A-6
Item 3. Legal Proceedings...................................................................................... A-7
Item 4. Submission of Matters to a Vote of Security Holders.................................................... A-7
PART II
Item 5. Market for the Registrant's Common Stock and Related Security Holder Matters........................... A-8
Item 6. Selected Financial Data................................................................................ A-9
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.................. A-10
Item 8. Financial Statements and Supplementary Data............................................................ A-14
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure................... A-33
PART III
Item 10. Directors and Executive Officers of the Registrant..................................................... A-33
Item 11. Executive Compensation................................................................................. A-33
Item 12. Security Ownership of Certain Beneficial Owners and Management......................................... A-33
Item 13. Certain Relationships and Related Transactions......................................................... A-33
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K....................................... A-34
</TABLE>

<PAGE>
LADD FURNITURE, INC.

NOTICE OF 1996 ANNUAL MEETING OF SHAREHOLDERS

TO THE SHAREHOLDERS OF
LADD FURNITURE, INC.

The annual meeting of the shareholders of LADD Furniture, Inc. will be held
at the Radisson Hotel, 135 S. Main Street, High Point, North Carolina, on May 2,
1996, at 10:00 a.m., for the purpose of considering and acting upon the
following:

1. The election of eight directors;

2. Approval of an Amendment to the Company's 1994 Incentive Stock Option
Plan;

3. Ratification of the appointment of KPMG Peat Marwick LLP as independent
public accountants for the 1996 fiscal year; and

4. All other business as may properly come before the meeting.

Only shareholders of record as of the close of business on March 5, 1996,
will be entitled to notice of, and to vote at, this meeting or at any
adjournment thereof.

The Company's Annual Report on Form 10-K for the fiscal year ended December
30, 1995, is enclosed as Appendix A. It is not to be considered part of the
proxy soliciting material.

Shareholders are requested to date, sign and return the enclosed proxy. An
envelope is provided requiring no postage for mailing in the United States. Your
prompt response will be appreciated.

WILLIAM S. CREEKMUIR
SECRETARY

April 1, 1996
LADD Furniture, Inc.
One Plaza Center, Box HP-3
High Point, North Carolina 27261-1500

<PAGE>
LADD FURNITURE, INC.
One Plaza Center, Box HP-3
High Point, North Carolina 27261-1500

PROXY STATEMENT

GENERAL

This Proxy Statement and form of proxy (the "Proxy") is solicited by and on
behalf of the Board of Directors of LADD Furniture, Inc. (the "Company") for use
at the 1996 Annual Meeting of Shareholders to be held at the Radisson Hotel, 135
S. Main Street, High Point, North Carolina, on May 2, 1996, at 10:00 a.m. and at
any subsequent time which may be made necessary by its adjournment. This Proxy
Statement and Proxy were mailed to shareholders on or about April 1, 1996.

Only shareholders of record at the close of business on March 5, 1996, will
be entitled to notice of, and to vote at the meeting. There were 7,724,259
shares of Common Stock outstanding on March 5, 1996.

If the accompanying Proxy is properly signed and returned, the shares
represented thereby will be voted. Where a choice is specified on any Proxy as
to the vote on any matter to come before the meeting, the Proxy will be voted in
accordance with such specification. If no choice is specified in a Proxy that is
properly executed and returned, the Proxy will be voted FOR the nominees for
directors named herein and FOR Items 2 and 3 of the accompanying Notice. Any
shareholder giving the solicited Proxy may revoke it at any time before it is
exercised, and any shareholder who has executed a Proxy and attends the meeting
may elect to vote in person rather than by proxy. The Proxy may be revoked by
the shareholder filing with the Secretary of the Company either a written
instrument of revocation or a duly executed proxy bearing a later date.

VOTING SECURITIES

The laws of North Carolina under which the Company is incorporated provide
that each shareholder present or represented and entitled to vote on a matter at
the meeting or any adjournment thereof, including with respect to the election
of directors, will be entitled to one vote on such matter for each share held by
him at the close of business on the record date. Other than the election of
directors, which requires a plurality of the votes cast, each matter to be
submitted to the shareholders requires the affirmative vote of a majority of the
votes cast at the meeting. For purposes of determining the numbers of votes cast
with respect to any voting matter, only those cast "for" or "against" are
included. Abstentions and broker non-votes are counted only for purposes of
determining whether a quorum is present at the meeting.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Set forth in the table below are all persons known by management to own
beneficially five percent or more of the Company's outstanding Common Stock as
of December 30, 1995, except for Mr. Allen whose beneficial ownership has been
determined as of March 5, 1996. The persons have sole voting and investment
power except as noted:

<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF SHARES OUTSTANDING
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED SHARES
<S> <C> <C>
Richard R. Allen.......................................................... 843,355(1) 10.9%
One Plaza Center, Box HP-3
High Point, NC 27261
Pioneering Management Corporation......................................... 625,598(2) 8.1%
60 State Street
Boston, Mass. 02109
FLB Investment Advisory Services, Inc..................................... 478,996(3) 6.2%
5400 University Avenue
West Des Moines, IA 50266
The Capital Group Companies, Inc.......................................... 438,790(4) 5.6%
333 South Hope Street
Los Angeles, CA 90071
</TABLE>

(1) Does not include 13,334 shares owned by Mr. Allen's wife and 11,865 shares
held by Mr. Allen's wife as custodian or trustee for their children, as to
such shares Mr. Allen disclaims beneficial ownership.

<PAGE>
(2) Pioneering Management Corporation is an investment advisor that holds sole
voting power over the shares but has shared disposition power.

(3) All such shares are held on behalf of various investment advisory clients of
FLB Investment Advisory Services, Inc. ("FLB"), which have the right to
receive or the power to direct receipt of dividends from or the proceeds
from a sale of the shares. FLB has the sole power to vote and dispose of the
shares.

(4) Capital Research and Management Company, a registered investment adviser and
an operating subsidiary of The Capital Group Companies, Inc., exercised as
of December 29, 1995 investment discretion with respect to 438,790 shares,
or 5.60% of outstanding shares of the class, which were owned by various
institutional investors. Said subsidiary has no power to direct the vote of
the above shares.

The following table shows the number of shares of the Company's Common
Stock beneficially owned at March 5, 1996 by each director and each nominee for
election to the Board of Directors of the Company and all named executive
officers of the Company in addition to Mr. Richard R. Allen named in the table
above who is a director. Also shown is information as to the beneficial
ownership of all directors and executive officers as a group. The persons have
sole voting and investment power except as noted:

<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF SHARES OUTSTANDING
NAME BENEFICIALLY OWNED SHARES
<S> <C> <C>
Daryl B. Adams................................................ 834(1) --(10)
William B. Cash............................................... 7,042(2) --(10)
James H. Corrigan, Jr......................................... 7,742(3) --(10)
William S. Creekmuir.......................................... 6,280(4) --(10)
O. William Fenn, Jr........................................... 323,623(5) 4.2%
Don A. Hunziker............................................... 241,711(6) 3.1%
Thomas F. Keller.............................................. 7,476(7) --(10)
L. Glenn Orr, Jr.............................................. 1,000 --(10)
Fred L. Schuermann, Jr........................................ 17,046(8) --(10)
All executive officers and directors as a group 1,456,110(9) 18.8%
(10 persons)(11)............................................
</TABLE>

(1) Includes currently exercisable options as to 834 shares.

(2) Includes currently exercisable options as to 1,709 shares. Excludes 441
shares owned by Mr. Cash's wife, as to such shares Mr. Cash disclaims
beneficial ownership.

(3) Includes 76 shares owned jointly by Mr. and Mrs. Corrigan and currently
exercisable options as to 1,709 shares.

(4) Includes currently exercisable options as to 3,364 shares and 2,549 shares
of restricted stock.

(5) Does not include 8,889 shares held by Mr. Fenn's wife, as to such shares
Mr. Fenn disclaims beneficial ownership. Includes currently exercisable
options as to 250 shares.

(6) Does not include 19,556 shares held by Mr. Hunziker's wife, as to such
shares Mr. Hunziker disclaims beneficial ownership. Includes currently
exercisable options as to 250 shares.

(7) Includes currently exercisable options as to 1,709 shares.

(8) Includes currently exercisable options as to 9,197 shares and 5,550 shares
of restricted stock.

(9) Includes currently exercisable options as to 19,022 shares and 10,795
shares of restricted stock.

(10) Less than 1%.

(11) Effective December 30, 1995, Mr. Allen retired as Chief Executive Officer
of the Company but remained as Chairman of the Board. As of that date, Mr.
Allen ceased being an executive officer of the Company but is included in
the group total because he was an executive officer as of fiscal year ended
December 30, 1995 and continued as a director of the Company.

<PAGE>
NOMINEES FOR ELECTION OF DIRECTORS
(PROPOSAL NUMBERED (1) IN THE ACCOMPANYING NOTICE)

At the 1996 Annual Meeting, eight directors will be elected to hold office
until the 1997 Annual Meeting or until their successors have been elected and
qualified. It is proposed to nominate the eight persons listed below with brief
statements of their principal occupations and other biographical information.
All of the nominees are current directors. It is intended that the Proxyholders
named in the Proxy will vote for the persons listed in the table below. Should
any nominee named become unable to serve as a director, the shares represented
by valid proxies will be voted for the election of such other person as the
Board of Directors may recommend in his place, or the Board may recommend the
nomination of only the remaining nominees.

<TABLE>
<CAPTION>
DIRECTOR BUSINESS EXPERIENCE DURING PAST FIVE YEARS, DIRECTORSHIPS
NAME AGE SINCE IN PUBLIC COMPANIES AND FAMILY RELATIONS
<S> <C> <C> <C>
Richard R. Allen.................... 55 1981 Chairman of the Board of Directors since October 1991; Chief Executive
Officer from October 1991 to December 1995; President from October
1991 to January 1995; Vice Chairman of the Board of Directors from
January 1990 to October 1991; currently a director of Lighthouse
Financial Corporation and the American Furniture Manufacturers
Association.
William B. Cash(2)(3)............... 80 1983 Retired; chairman of board of directors of Turnpike Properties, Inc.
from 1980 to June 1985.
James H. Corrigan, Jr.(1)(3)........ 70 1984 Chairman of the Board of Directors of Mebane Packaging Corporation
since 1980 and chairman, president and chief executive officer from
1980 to 1995; currently chairman of Piedmont BancShares Corp. and
director of Old North State Bank and Norelli & Company.
O. William Fenn, Jr.(1)............. 69 1982 Vice Chairman of the Board of Directors from January 1990 to March
1992; President and Chief Operating Officer of the Company from 1982
to January 1990; chairman of North Carolina Home Furnishings Export
Council, N.C. Department of Commerce; currently a director of the
American Furniture Hall of Fame, and Southern National Corporation.
Don A. Hunziker(2).................. 68 1981 Chairman Emeritus of the Board of Directors from October 1991 to
September 1992; Chairman of the Board of Directors and Chief
Executive Officer of the Company from 1982 to October 1991.
Thomas F. Keller(2)(3).............. 64 1983 Dean and R. J. Reynolds Industries Professor, Fuqua School of Business,
Duke University, from 1974 to present; currently a director of
Hatteras Income Securities, Inc., Nations Funds, Inc., Nations
Government Income Term Trust 2003, Inc., Nations Government Income
Term Trust, 2004, Inc., Nations Balanced Target Maturity Fund, Inc.,
American Business Products, Wendy's International, Inc., Mentor Funds
Trust, DIMON International, and Mebane Packaging Corporation.
L. Glenn Orr, Jr.(2)................ 55 1996 President and chief executive officer of Orr Management Company since
February 1995; chairman, president and chief executive officer of
Southern National Corporation from October 1990 to February 1995;
currently a director of Highwoods Properties and Southern National
Corporation.
Fred L. Schuermann, Jr.............. 50 1991 President and Chief Executive Officer since January 1996; President and
Chief Operating Officer from January 1995 to January 1996; Executive
Vice President from October 1991 to January 1995; Chief Financial
Officer, Secretary and Treasurer from January 1990 to July 1992;
Senior Vice President from January 1990 to October 1991.
</TABLE>

(1) Member of the Audit Committee

(2) Member of the Compensation Committee

(3) Member of the Corporate Governance Committee

<PAGE>
In addition to Fred L. Schuermann, Jr., listed above under "Nominees for
Election of Directors," the Company currently has the following executive
officers:

<TABLE>
<CAPTION>
NAME AGE POSITION HELD
<S> <C> <C>
Daryl B. Adams............................................. 49 Vice President since January 1994; Corporate Controller,
Assistant Secretary, and Assistant Treasurer of the
Company since January 1988.
Kenneth E. Church.......................................... 44 Executive Vice President and president of the Company's
Upholstery Group since January 1996; vice president of
the Company from April 1994 to January 1996; president of
Clayton-Marcus Company, Inc., a subsidiary of the
Company, since February 1991.
William S. Creekmuir....................................... 40 Executive Vice President since January 1996 and Chief
Financial Officer, Secretary and Treasurer since July
1992; Senior Vice President from July 1992 to December
1995; partner with KPMG Peat Marwick from July 1987 to
July 1992; currently a director of the American Furniture
Manufacturers Association -- Finance Division and vice
chairman of the Advisory Council to the John A. Walker
College of Business at Appalachian State University.
Michael P. Haley........................................... 45 Executive Vice President since March 1996; president of
American Furniture Company, Incorporated and LADD
Contract Sales Corporation, subsidiaries of the Company,
since May 1994; president and chief executive officer of
Lowenstein Furniture Group from November 1988 to May
1994.
Donald L. Mitchell......................................... 52 Executive Vice President and president of the Company's
Casegoods Group since January 1996; president of
Universal Furniture, Inc. from 1992 to 1995; executive
vice president of Universal Furniture from 1990 to 1992.
</TABLE>

COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934.
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, executive officers, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file with the Securities
and Exchange Commission (the "SEC") initial reports of ownership (Form 3) and
reports of changes in ownership (Forms 4 and 5) of Common Stock of the Company.
Officers, directors and greater than ten-percent shareholders are required by
SEC regulation to furnish the Company with copies of all Section 16(a) forms
they file.

To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 30, 1995, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten-percent beneficial owners were met.

EXECUTIVE CASH COMPENSATION AND RELATED INFORMATION

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

Decisions on compensation of the Company's executives generally are made by
the four-member Compensation Committee of the Board. Each member of the
Compensation Committee is a non-employee director. Recommendations on
compensation for the Company's Senior Executives (as defined below) are made to
the Compensation Committee by the Chief Executive Officer. All decisions by the
Compensation Committee relating to the compensation of the Company's executive
officers are reviewed by the full Board, except for decisions about awards under
the Company's incentive stock option plan, which must be made solely by the
Committee in order for the grants under such plan to satisfy Exchange Act Rule
16b-3. Set forth below is a report prepared by Messrs. Cash, Hunziker, and Orr
and Dr. Keller in their capacity as the Board's Compensation Committee
addressing the Company's compensation policies for 1995 as they affected Mr.
Richard R. Allen, Chairman of the Board and Chief Executive Officer, and Messrs.
Schuermann and Creekmuir and Ms. Adams, the three executive officers other than
Mr. Allen who, for 1995, were the Company's most highly paid executive officers
(collectively with Mr. Allen, the "Senior Executives").

<PAGE>
Effective December 30, 1995, Mr. Allen retired as Chief Executive Officer
of the Company. Effective January 1, 1996, Mr. Schuermann became Chief Executive
Officer. The following report describes the Company's compensation plans and
policies as they existed and were applied during 1995. The compensation plans of
the Company have been adjusted for 1996 by the Compensation Committee following
consultations with Mr. Schuermann to provide for replacement of grants of
restricted stock with an increased emphasis on the granting of stock options in
order to provide further incentives to executives to increase shareholder value.

COMPENSATION POLICIES TOWARD EXECUTIVE OFFICERS

The Compensation Committee's executive policies are designed to provide
competitive levels of compensation that integrate pay with the Company's annual
and long-term performance goals, reward above average corporate performance,
recognize individual initiative and achievements, and assist the Company in
attracting and retaining qualified executives. In that regard, the Compensation
Committee has adopted, as revised in 1996, the following Policy on Executive
Compensation:

IT SHALL BE THE POLICY OF LADD FURNITURE, INC. TO MAINTAIN AN
EXECUTIVE COMPENSATION PROGRAM THAT WILL:

(BULLET) SUPPORT A PAY-FOR-PERFORMANCE POLICY THAT DIFFERENTIATES THE
AMOUNT OF COMPENSATION ON THE BASIS OF CORPORATE, BUSINESS
UNIT AND INDIVIDUAL PERFORMANCE;

(BULLET) MOTIVATE SENIOR OFFICERS TO ACHIEVE STRATEGIC BUSINESS
INITIATIVES AND GOALS AND REWARD THEM FOR THEIR ACHIEVEMENT;

(BULLET) PROVIDE COMPENSATION OPPORTUNITIES WHICH ARE COMPARABLE TO
THOSE OFFERED BY OTHER LEADING COMPANIES, THUS ALLOWING THE
COMPANY TO COMPETE FOR AND RETAIN TALENTED EXECUTIVES WHO ARE
CRITICAL TO THE COMPANY'S LONG-TERM SUCCESS; AND

(BULLET) ALIGN THE INTERESTS OF EXECUTIVES WITH THE LONG-TERM
INTERESTS OF SHAREHOLDERS THROUGH AWARD OPPORTUNITIES THAT
CAN RESULT IN OWNERSHIP OF LADD COMMON STOCK.

THE LADD EXECUTIVE COMPENSATION PROGRAM SHALL BE COMPRISED OF BASE
SALARY, ANNUAL CASH INCENTIVE OPPORTUNITIES, LONG-TERM INCENTIVE
OPPORTUNITIES IN THE FORM OF STOCK OPTIONS AND CASH INCENTIVES, AND OTHER
BENEFITS TYPICALLY OFFERED TO EXECUTIVES BY MAJOR CORPORATIONS.

AS AN EXECUTIVE'S LEVEL OF RESPONSIBILITY INCREASES, A GREATER PORTION
OF HIS OR HER POTENTIAL TOTAL COMPENSATION OPPORTUNITY SHALL BE BASED ON
PERFORMANCE INCENTIVES AND LESS ON SALARY AND EMPLOYEE BENEFITS, CAUSING
GREATER VARIABILITY IN THE INDIVIDUAL'S ABSOLUTE COMPENSATION LEVEL FROM
YEAR-TO-YEAR. IN ADDITION, THE HIGHER ONE RISES IN THE LADD FURNITURE
ORGANIZATION, THE GREATER THE COMPENSATION MIX SHIFTS TO RELY ON THE VALUE
OF LADD'S COMMON STOCK THROUGH STOCK-BASED AWARDS.

SUMMARY OF INCENTIVE COMPENSATION PLANS

While not required by the SEC disclosure rules, the Compensation Committee
believes a brief description of each of the Company's incentive compensation
plans as applicable for years 1993 through 1995 will enable shareholders to
understand better the information presented below.

MANAGEMENT INCENTIVE PLAN. The Company maintains a Management Incentive
Plan designed to compensate officers and key managers for accomplishment of
divisional and Company annual profit plans, subject to the Company achieving
certain specified after-tax earnings levels and the participant achieving
specific individual performance objectives. All amounts earned for fiscal 1993,
1994 and 1995 to the Senior Executives have been included in the "Bonus" column
in the Summary Compensation Table. For fiscal 1996, depending upon an
individual's assigned incentive category, participants can earn incentive
compensation payments up to a maximum of 10% to 100% of their annual salaries.
Payments under the plan, if any, will be made following completion of the annual
audit and after evaluation of the Company's and participants' performances. The
awards will be paid in cash.

LONG-TERM INCENTIVE PLAN. The Company's Long-Term Incentive Plan was
designed to compensate officers for accomplishment of divisional and Company
long-range (3-year) objectives of specified levels of return on average
shareholders' equity, return on average divisional invested capital, and sales
growth. The weighting of each factor was 55% for return on average shareholders'
equity or return on average divisional invested capital (depending on whether
the participant is a corporate or divisional officer) and 45% for sales growth.
For the first three year (1991-1993) plan, depending on an individual's assigned
incentive category, participants could earn cash compensation incentive payments
up to a

<PAGE>
maximum of 56% to 75% of beginning base salary for the three year performance
cycle, payable in two equal annual installments. No cash incentive payments were
earned for 1993 and 1994 by the Senior Executives. Cash incentive payments for
1995 are included in the "Bonus" column in the Summary Compensation Table. For
the three year plans (1993-1995, 1994-1996 and 1995-1997) pursuant to which
grants were made in 1993, 1994 and 1995, depending upon an individual's assigned
incentive category, participants could earn cash compensation incentive payments
up to a maximum of 28% to 38% of beginning base salary. In conjunction with such
plans, restricted stock has been issued and stock option grants under the
Company's incentive stock option plan have been made to certain participants,
including the Senior Executives. The restricted stock agreements provide that if
the employee should cease 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 prior to five years from the date of the
agreement, the Company may repurchase the shares for $.30 per share. The
employee may not sell, assign, or transfer the shares in any way (except to a
spouse or child, and then the shares are still subject to the Company's right of
repurchase) so long as the shares are subject to the Company's right of
repurchase. All issuances of restricted stock and stock options to the Senior
Executives during 1993, 1994 and 1995 have been shown under the "Restricted
Stock Award" and "Option" columns in the Summary Compensation Table. Awards made
in 1995 with respect to the cash portion of the Long Term Incentive Plan to the
Senior Executives are shown in the Long Term Incentive Plan -- Awards in 1995
Table.

1994 INCENTIVE STOCK OPTION PLAN. On February 24, 1994, the Company adopted
the LADD Furniture, Inc. 1994 Incentive Stock Option Plan (the "Plan"). Pursuant
to the Plan, 400,000 shares (as adjusted for the one-for-three reverse stock
split in 1995) of the Company's Common Stock have been reserved for the issuance
of stock options under the Plan. As discussed in more detail in the section of
this Proxy Statement entitled "Approval of Amendment of LADD Furniture, Inc.
1994 Incentive Stock Option Plan," it is proposed that the total number of
shares reserved for issuance under the Plan be increased to 800,000 shares.
Incentive stock options are issued by the Administrative Committee of the Plan
(the Compensation Committee of the Board of Directors) at current fair market
prices (based upon the closing price of the Company's Common Stock on the Nasdaq
Stock Market on the date of grant). Only key employees (as determined by the
Administrative Committee) are eligible to receive options. The Committee does
not consider a participant's current stock ownership or prior stock option or
restricted stock grants when making new stock option grants. The Committee has
considered in the past, however, beneficial ownership of Company Common Stock
when setting the price of incentive stock options for optionees, such as Mr.
Allen, who own more than 10% of the Company's Common Stock. For these
individuals, the option price is 110% of fair market value on the date of grant.
The Plan also provides for the granting of nonqualified stock options as to 667
shares of the Company's Common Stock to nonemployee directors of the Company
upon their initial election to the Board and additional nonqualified stock
options as to 500 shares each year thereafter so long as the nonemployee
director remains eligible under the terms of the Plan. The Plan also provides
for the granting of nonqualified stock options to eligible employees at option
prices less than fair market value. In order to comply with the terms of the
Plan and federal income tax regulations, a portion of the 1995 option grants to
Mr. Allen were granted as nonqualified stock options at an option price equal to
fair market value of the Company's common stock on date of grant. Options
granted under the Plan are typically for a term of ten years, first becoming
exercisable in 25% increments over a four year period beginning one year after
the date of grant.

RELATIONSHIP OF COMPANY PERFORMANCE TO SENIOR EXECUTIVE 1995 COMPENSATION

Compensation paid the Company's executive officers in 1995, as reflected in
the following tables as to the Senior Executives, consisted of the following
elements: base salary, long-term bonus payout for 1995, and various payments
associated with employee benefits provided to Senior Executives. The
Compensation Committee's emphasis on tying pay to performance criteria is
demonstrated by the fact that no amounts were paid to the Senior Executives for
1994 from performance-based compensation arrangements reflecting the Company's
performance being below annual performance targets in 1994, in comparison to
incentive payments comprising five percent of Senior Executive compensation for
1995 based on the Company's sales growth over the then ended three year period
exceeding that of the furniture industry.

The measures of performance that were utilized under the Company's
compensation plans for 1995 were as follows: (1) actual versus targeted annual
profit performance, (2) return on average shareholders' equity, both annually
and over a three-year period, and (3) sales growth over a three-year period. A
portion of the annual incentive opportunity was also based on specific
individual performance objectives established for each Senior Executive.
Subjective considerations of individual performance were considered only in
establishing base salaries.

ACTUAL VERSUS TARGETED PROFIT PERFORMANCE. Actual versus targeted profit
performance and, with the exception of Mr. Allen, performance against specific
individual objectives were the criteria utilized to determine the extent to
which targeted annual bonuses were paid to the Company's Senior Executives. The
actual versus target profit performance bonus

<PAGE>
opportunity represented 25% to 50% of the Senior Executives' beginning base
salary for 1995. Target annual profits utilized for purposes of evaluating
annual bonuses were based on business plans developed by the management teams of
the individual operating companies and the senior management team of the
Company, and were approved by the Company's Board of Directors.

RETURN ON AVERAGE SHAREHOLDERS' EQUITY. Return on average shareholders'
equity was an important component of the annual bonus for all Senior Executives
(with the exception of Ms. Adams) and was also a performance measurement
criterion under the Company's Long-Term Incentive Plan. For 1995, the Company's
average return on shareholders' equity was below the established bonus threshold
and, therefore, there were no payouts based upon this performance criterion. The
return on average equity target is set such that if it is achieved, the Company
would be recognized as a top performer in the furniture industry. The return on
average equity component of the 1995 bonus opportunity represented 25% to 50% of
the Senior Executives' beginning base salary for 1995 under the Management
Incentive Plan.

Under the cash portion of the Long-Term Incentive Plan (as amended in
1993), Senior Executives participating in the plan at the beginning of each
three-year performance cycle can earn a maximum of 15% to 21% of their beginning
base salary for the three-year performance cycle by exceeding target goals tied
to the Company's three-year average return on shareholders' equity. The second
three-year performance cycle under the Long-Term Incentive Plan was completed in
1994. No payouts based upon return on average shareholders' equity were made to
Senior Executives with respect to 1995 under the Long-Term Incentive Plan
because the Company's performance was below the return on average shareholders'
equity target. Awards with respect to the cash portion of the Long Term
Incentive Plan made in 1995 to Senior Executives are shown in the Long Term
Incentive Plan -- Awards in 1995 Table.

SALES GROWTH. Under the cash portion of the Long-Term Incentive Plan (as
amended in 1993), Senior Executives participating in the plan at the beginning
of each three-year performance cycle can earn a maximum of 13% to 17% of their
beginning base salary for the three-year performance cycle by exceeding target
goals tied to the Company's sales growth relative to the furniture industry as
measured by the U.S. Commerce Department Furniture Growth Index. No bonuses
based upon sales growth will be paid unless the Company's sales growth rate is
at least equal to the industry growth rate. The second three-year performance
cycle under the Long-Term Incentive Plan was completed in 1995. Payouts based
upon three year sales growth were made with respect to 1995 under the Long-Term
Incentive Plan because the Company's sales growth was in excess of the furniture
industry growth rate. All such payments are included in the "LTIP Payouts"
column in the Summary Compensation Table. Awards with respect to the cash
portion of the Long Term Incentive Plan made in 1995 to Senior Executives are
shown in the Long Term Incentive Plan -- Awards in 1995 Table.

INDIVIDUAL PERFORMANCE OBJECTIVES. Under the 1995 Management Incentive Plan
a bonus opportunity of 10% of beginning base salary was also based on specific
individual performance objectives ("IPOs") established for each Senior
Executive, with the exception of Mr. Allen. Mr. Allen's incentive compensation
under the Management Incentive Plan was based entirely upon attaining
profitability and return on average shareholders' equity objectives. At the
beginning of each year, IPOs specific to each Senior Executives' areas of
responsibility are established in consultation with the Chief Executive Officer.
Such IPOs may include sales growth, cost control, balance sheet management, and
quality improvement. The Senior Executives' satisfaction of their respective
IPOs during 1995 was evaluated by Mr. Schuermann and were approved by the
Compensation Committee. No payouts for 1995 based upon attaining IPOs were
earned by Senior Executives because the Company's overall performance did not
meet the plan's requirements.

OTHER COMPENSATION PLANS. At various times in the past, the Company has
adopted certain broad-based employee benefit plans in which Senior Executives,
once eligible, have been permitted to participate and has adopted certain
executive officer retirement, life and health insurance plans. The benefits
under these plans are not directly or indirectly tied to a company performance.

CHIEF EXECUTIVE OFFICER'S 1995 COMPENSATION

Mr. Richard R. Allen, currently Chairman of the Board and who served as
Chief Executive Officer in 1995 but retired in December 1995 from that position,
was eligible to participate in the same executive compensation plans available
to other Senior Executives. The Compensation Committee's general approach to
setting Mr. Allen's target annual compensation was to seek to be competitive
with other companies in the furniture industry, but have a large percentage of
his target compensation based upon objective short-term and long-term
performance criteria. While this may have resulted in some fluctuations in the
actual level of Mr. Allen's annual compensation, the Compensation Committee
believes its objectives appropriately motivate the Company's chief executive
officer toward clearly defined long-term goals, while acknowledging the
importance to the chief executive officer of his having some certainty in the
level of his compensation through its non-

<PAGE>
performance based elements. Mr. Allen's base salary was designed to be
competitive with base salaries paid other chief executive officers of public
companies in the furniture industry and other corporations of similar size.

In December 1994, the Compensation Committee established Mr. Allen's target
annual bonus for 1995 after giving consideration to the Company's performance in
1994, the then present furniture manufacturing and retail sales environment, as
well as emphasis which the Compensation Committee places on compensation being
paid under the long-term incentive arrangements provided by the Long-Term
Incentive Plan. Fifty percent of Mr. Allen's incentive opportunity under the
annual bonus program was based upon net profit performance and the other 50% is
based upon return on average shareholders' equity of the Company -- both based
upon incentive target ranges. In 1995, Mr. Allen did not qualify for a bonus
under the annual bonus program as the Company did not satisfy either of the
performance criteria.

In the first quarter of 1993, 1994 and 1995, the Compensation Committee
established target payout levels and target performance levels for the 1993
through 1995, 1994 through 1996, and 1995 through 1997 performance cycles,
respectively, under the Company's Long-Term Incentive Plan following a review of
Mr. Allen's pay relative to others in similar corporations, expected trends in
executive pay, and the Company's performance goals. The performance criteria
utilized by the Committee as criteria for Mr. Allen under the Long-Term
Incentive Plan -- sales growth and return on average shareholders'
equity -- were designed to strike a reasonable balance between measuring
performance based upon growth of the Company and upon the performance of the
Company in terms of return on average shareholders' equity. Mr. Allen did
qualify for a bonus under the Long-Term Incentive Plan for 1995 and such amounts
are shown in the "LTIP Payouts" column of the Summary Compensation Table. The
Compensation Committee believes these criteria were consistent with the
financial objectives of the Company, the primary goal of which is to
significantly increase the value of shareholders' investment in the Company. The
Compensation Committee believes that Company performance at these levels will
indicate that the Company is an industry leader.

SUBMITTED BY THE COMPENSATION COMMITTEE OF THE COMPANY'S BOARD OF DIRECTORS:

William B. Cash Thomas F. Keller Don A. Hunziker L. Glenn Orr, Jr.

SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION

The Summary Compensation Table below indicates the Cash Compensation paid
by the Company, as well as other compensation paid or accrued to the Chief
Executive Officer and the executive officers at the end of fiscal 1995 (the
"Senior Executives") for services rendered in all capacities during fiscal years
1995, 1994, and 1993, respectively.

SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
ANNUAL COMPENSATION AWARDS PAYOUTS
OTHER RESTRICTED SECURITIES
ANNUAL STOCK UNDERLYING LTIP
SALARY BONUS COMPENSATION AWARD(S) OPTIONS PAYOUTS
NAME AND PRINCIPAL POSITION(1) YEAR ($) ($) ($)(2) ($)(3) (#)(4) ($)
<S> <C> <C> <C> <C> <C> <C> <C>
Richard R. Allen 1995 $365,500 $ -0- $-0- $ 65,848 6,801 $20,650
Chairman of the Board 1994 365,500 -0- -0- 68,023 10,322 -0-
1993 361,624 -0- -0- 48,253 2,593 -0-
Fred L. Schuermann, Jr. 1995 $259,583 $ -0- $-0- $ 46,844 4,838 $13,230
President and 1994 235,000 -0- -0- 43,738 7,350 -0-
Chief Executive Officer 1993 232,500 11,250 -0- 31,017 1,667 -0-
William S. Creekmuir 1995 $183,083 $ -0- $-0- $ 22,155 1,434 $11,830
Executive Vice President, 1994 161,250 -0- -0- 19,364 3,986 -0-
Chief Financial Officer, 1993 153,250 37,350 -0- 13,752 463 -0-
Secretary and Treasurer
Daryl B. Adams 1995 $ 97,150 $ -0- $-0- $ -0- -0- $ -0-
Vice President, Corporate 1994 93,000 -0- -0- -0- 800 -0-
Controller, Asst. Secretary 1993 88,150 14,868 -0- -0- 400 -0-
and Asst. Treasurer

<CAPTION>
ALL OTHER
COMPENSATION
NAME AND PRINCIPAL POSITION(1) ($)(5)
<S> <C>
Richard R. Allen $736,884(6)
Chairman of the Board 1,840
2,497
Fred L. Schuermann, Jr. $ 1,200
President and 896
Chief Executive Officer 974
William S. Creekmuir $ 2,706
Executive Vice President, 2,553
Chief Financial Officer, 532
Secretary and Treasurer
Daryl B. Adams $ 553
Vice President, Corporate 553
Controller, Asst. Secretary 539
and Asst. Treasurer
</TABLE>

(1) Effective December 30, 1995, Mr. Allen retired as Chief Executive Officer.
As of that date, Mr. Allen ceased being an executive officer of the Company.
Effective January 1, 1996, Mr. Schuermann, formerly President and Chief
Operating Officer, became President and Chief Executive Officer, and Mr.
Creekmuir, formerly Senior Vice President, became Executive Vice President.

<PAGE>
(2) Perquisites and other personal benefits paid to each of the named executive
officers were less than 10% of the total of their respective annual salary
and bonus in each of 1993, 1994, and 1995.

(3) Dividends are paid on restricted stock awards at the same rate as paid to
all shareholders. See the discussion under "Long-Term Incentive Plan"
included in the preceding Compensation Committee Report on Executive
Compensation for the general terms and conditions of the restricted stock
grants. On December 30, 1995, the above named executive officers held the
number of restricted shares having a then current market value as follows:
Allen (12,163/$155,990); Schuermann (8,246/$105,755); Creekmuir
(2,549/$32,691); and Adams (0/$0). Following his retirement on December 30,
1995, Mr. Allen's restricted stock vested and became free of restrictions.

(4) All share amounts for 1993 and 1994 have been restated for the one-for-three
reverse stock split effective May 16, 1995.

(5) The Company has made a $400 annual contribution on behalf of each of the
named executives to match pre-tax elective deferral contributions (included
under Salary) made by each under the Company's 401(k) Savings Plan for
Salaried Employees. Mr. Creekmuir's totals for 1994 and 1995 include $2,000
of director fees for subsidiary corporations. The balance of each of the
named executive officer's "all other compensation" represents premiums paid
by the Company on group term life insurance equal to one year's salary (up
to $300,000). The Company provides this benefit for all salaried employees
at the Company's headquarters.

(6) Amounts paid or accrued in 1995 with respect to Mr. Allen include retirement
benefits payable to him in 1996 and 1997 pursuant to the terms of his
employment agreement totalling $731,000 (see "Employment Contracts and
Change of Control Arrangements") and amounts paid in 1995 with respect to
group term life insurance premiums ($2,844) and, country club dues ($2,640).

STOCK OPTIONS

The following table sets forth information with regard to grants of stock
options during the fiscal year ended December 30, 1995, to each of the named
Senior Executives. All such grants were made under the Company's 1994 Incentive
Stock Option Plan. Additionally, the values assigned to each reported option are
shown assuming five percent and ten percent compounded annual growth rates in
the market value of the Company's Common Stock. In assessing these values it
should be kept in mind that no matter what theoretical value is placed on a
stock option on the date of grant, its ultimate value will be dependent on the
market value of the Company's stock at a future date.

STOCK OPTION GRANTS IN 1995
<TABLE>
<CAPTION>

POTENTIAL
REALIZABLE
VALUE
AT
ASSUMED
ANNUAL
RATES
OF
INDIVIDUAL GRANTS STOCK
% OF TOTAL PRICE
NUMBER OF OPTIONS APPRECIATION
SECURITIES GRANTED TO EXERCISE FOR
UNDERLYING EMPLOYEES OR BASE OPTION
OPTIONS IN FISCAL PRICE TERM(3)
NAME (#)(1) YEAR(2) ($/SH) EXPIRATION DATE 5%($)
<S> <C> <C> <C> <C> <C>
Richard R. Allen(4)................................. 5,334 13.0% $17.34 03/02/2000 $44,432
1,467 3.6% 15.75 03/02/2005 14,553
Fred L. Schuermann, Jr.............................. 4,838 11.8% 15.75 03/02/2005 47,993
William S. Creekmuir................................ 1,434 3.5% 15.75 03/02/2005 14,225
Daryl B. Adams...................................... -0- -0- -0- n/a n/a

<CAPTION>
POTENTIAL
REALIZABLE
VALUE
AT
ASSUMED
ANNUAL
RATES
OF
STOCK
PRICE
APPRECIATION
FOR
OPTION
TERM(3)
NAME 10%($)
<S> <C>
Richard R. Allen(4)................................. $125,562
36,866
Fred L. Schuermann, Jr.............................. 121,579
William S. Creekmuir................................ 36,036
Daryl B. Adams...................................... n/a
</TABLE>

(1) The options are for a term of ten years (except for grants to Mr. Allen
which are for a term of five years other than the one ten year grant of
nonqualified stock options for 1,467 shares at an option price equal to fair
market value on date of grant), first becoming exercisable in 25% increments
over a four-year period beginning one year after the date of grant.

(2) In fiscal 1995, 40,882 options were granted to all employees as a group.

(3) Potential realizable value is based on an assumption that the stock price of
the Common Stock appreciates at the annual rate shown (compounded annually)
from the date of grant until the end of the option term. These numbers are
calculated based on the requirements promulgated by the Securities and
Exchange Commission and do not reflect the Company's estimate of future
stock price growth.

(4) Following his retirement on December 30, 1995, under the terms of the Plan,
all of Mr. Allen's option grants were cancelled.

<PAGE>
The following table sets forth information with regard to exercises of
stock options during the fiscal year ended December 30, 1995, by each of the
named Senior Executives and the 1995 fiscal year end value of all unexercised
options held by such individuals.

AGGREGATED OPTION EXERCISES IN FISCAL 1995
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED
NUMBER OF SECURITIES IN-THE-MONEY
SHARES UNDERLYING UNEXERCISED OPTIONS AT
ACQUIRED ON VALUE OPTIONS AT FY-END(#) FY-END($)(1)
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE
<S> <C> <C> <C> <C> <C>
Richard R. Allen(2)......................... -0- -0- 11,251 14,841 $ -0-
Fred L. Schuermann, Jr...................... -0- -0- 6,983 11,185 -0-
William S. Creekmuir........................ -0- -0- 2,727 5,156 -0-
Daryl B. Adams.............................. -0- -0- 734 800 -0-

<CAPTION>
VALUE OF
UNEXERCISED
IN-THE-MONEY
OPTIONS AT
FY-END($)(1)
NAME UNEXERCISABLE
<S> <C>
Richard R. Allen(2)......................... $ -0-
Fred L. Schuermann, Jr...................... -0-
William S. Creekmuir........................ -0-
Daryl B. Adams.............................. -0-
</TABLE>

(1) Closing price of Company Common Stock at December 30, 1995 was $13.13.

(2) Following his retirement on December 30, 1995, under the terms of the Plan,
all of Mr. Allen's option grants were cancelled.

LONG TERM INCENTIVE PLAN -- AWARDS IN 1995

In February 1995, the Compensation Committee made awards to the Senior
Executives with respect to the cash portion of the Company's Long Term Incentive
Plan for the 1995-1997 performance cycle and are shown in the following table.
All issuances of restricted stock and incentive stock options to the Senior
Executives during 1995 under the Long Term Incentive Plan have been shown under
the "Restricted Stock Award" and "Option" columns in the Summary Compensation
Table.

<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS UNDER
NUMBER OF SHARES, PERFORMANCE PERIOD OR NON-STOCK PRICE-BASED PLANS
UNITS OR OTHER OTHER PERIOD UNTIL THRESHOLD TARGET MAXIMUM
NAME RIGHTS MATURATION OR PAYMENT $ $ $
<S> <C> <C> <C> <C> <C>
Richard R. Allen................................ 684 units 1995-1997 $34,175 $68,350 $102,525
Fred L. Schuermann, Jr.......................... 489 units 1995-1997 24,450 48,900 73,350
William S. Creekmuir............................ 462 units 1995-1997 23,125 46,250 69,375
Daryl B. Adams.................................. -0- n/a n/a n/a n/a
</TABLE>

DEFINED BENEFIT PLANS

SALARIED PLAN

The Salaried Plan covers eligible exempt and nonexempt employees who
receive compensation from the Company and certain subsidiaries on a salaried
basis. The benefit formula for the Salaried Plan, as amended effective January
1, 1989, is .65% of "Average Final Compensation" for each year of service, plus
.65% of Average Final Compensation in excess of Covered Compensation for each of
the first 35 Years of Service; provided, however, no participant will receive
benefits under the amended plan less than the sum of the benefits that would
have been payable under the plan prior to its amendment, plus benefits accrued
after December 31, 1988 under the new formula. Average Final Compensation under
the amended plan is defined as the average of annual compensation during the
five consecutive years of service which produces the highest average.

<PAGE>
The following table shows estimated annual benefits payable upon retirement
at age 65 to salaried employees at the specified remuneration and in various
years of service classifications:

<TABLE>
<CAPTION>
YEARS OF SERVICE
AVERAGE FINAL COMPENSATION 15 20 25 30 35
<S> <C> <C> <C> <C> <C>
$ 50,000................................... $ 7,061 $ 9,415 $11,769 $14,123 $16,476
100,000................................... 16,811 22,415 28,019 33,623 39,226
200,000................................... 26,561 35,415 44,269 53,123 61,976
300,000................................... 26,561 35,415 44,269 53,123 61,976
400,000................................... 26,561 35,415 44,269 53,123 61,976
500,000................................... 26,561 35,415 44,269 53,123 61,976
</TABLE>

* Maximum compensation taken into account was $150,000 in 1995 and 1996. The
estimated annual benefits in the foregoing table assumes retirement on
December 30, 1995.

The years of credited service as of December 30, 1995 and Average Final
Compensation under the Salaried Plan for each of Messrs. Allen, Schuermann, and
Creekmuir and Ms. Adams are as follows:

<TABLE>
<CAPTION>
AVERAGE
YEARS OF FINAL
OFFICER/DIRECTOR SERVICE COMPENSATION
<S> <C> <C>
Richard R. Allen*......................................... 15.17 $230,398
Fred L. Schuermann, Jr.................................... 8.00 191,353
William S. Creekmuir...................................... 3.52 129,912
Daryl B. Adams............................................ 7.99 97,143
</TABLE>

* Mr. Allen retired as an officer of the Company on December 30, 1995.

NONQUALIFIED SUPPLEMENTAL RETIREMENT PLAN

Effective January 1, 1990, the Company established a nonqualified
supplemental retirement plan known as the LADD Furniture, Inc. Supplemental
Retirement Income Plan (the "SERP") for certain of its salaried employees. The
SERP has a three-fold purpose: (1) to provide "make-up" benefits to certain
salaried employees whose benefits under the Salaried Plan were reduced as a
result of bringing the Salaried Plan into compliance with the Tax Reform Act of
1986 ("Category One Participants"); (2) to provide supplemental retirement
income for key executive officers ("Category Two Participants"); and (3) to
provide the Company with the necessary flexibility for designing an effective
compensation package to attract new executives ("Category Three Participants").
The SERP also provides supplemental survivor benefits for the designated
beneficiary of each participant. Messrs. Allen, Schuermann, and Creekmuir are
Category Two Participants under the SERP. Ms. Adams is not currently a
participant under the SERP. The supplemental retirement benefit payable to a
Category Two Participant in the form of a 10-year certain annuity is a monthly
amount equal to the difference between (a) and (b) below:

(a) Two percent (2%) of Average Final Compensation (defined as the
average of annual compensation during the three consecutive years of
service which produces the highest average), multiplied by a Participant's
Years of Service (subject to maximum of 25);

LESS

(b) The sum of a Participant's:

(i) Qualified Plan Retirement Benefit;

(ii) Primary Social Security Benefit;

(iii) Nonqualified Deferred Compensation Agreement Benefit; and

(iv) Category One Benefit received under the SERP.

<PAGE>
The following table shows estimated annual benefits payable, after offsets
for the Salaried Plan benefit and Social Security, upon retirement to Category
Two Participants in the SERP at the specified remuneration in the various Years
of Service classifications:

EXECUTIVE CASH COMPENSATION

<TABLE>
<CAPTION>
YEARS OF SERVICE
AVERAGE FINAL COMPENSATION 15 20 25 30 35
<S> <C> <C> <C> <C> <C>
$100,000............................. $ 0 $ 4,650 $ 9,551 $ 4,451 $ 0
200,000............................. 20,877 32,820 44,763 36,706 28,649
300,000............................. 50,877 72,820 94,763 86,706 78,649
400,000............................. 80,877 112,820 144,763 136,706 128,649
500,000............................. 110,877 152,820 194,763 186,706 178,649
</TABLE>

The years of credited service and Average Final Compensation as of December
30, 1995 for Messrs. Allen, Schuermann, and Creekmuir are as follows:

<TABLE>
<CAPTION>
AVERAGE
YEARS OF FINAL
EXECUTIVE OFFICER SERVICE COMPENSATION
<S> <C> <C>
Richard R. Allen*......................................... 15.17 $390,121
Fred L. Schuermann, Jr.................................... 18.56 264,863
William S. Creekmuir...................................... 3.52 189,547
</TABLE>

* Mr. Allen retired as an officer of the Company on December 30, 1995.

Since the SERP is a nonqualified deferred compensation plan, it is not
subject to the discrimination requirements or the annual benefit limits of the
Internal Revenue Code and the Employee Retirement Income Security Act of 1974.
Although the SERP is, technically speaking, an unfunded plan, the Company has
established a "Rabbi Trust" to provide participants with increased security with
respect to benefits due them from the SERP. Contributions by the Company to fund
the Rabbi Trust during 1993, 1994 and 1995 were $100,000, $60,000, and $160,000,
respectively.

OTHER COMPENSATION

COMPENSATION OF DIRECTORS

The Company compensates each nonemployee director with an annual fee of
$14,000, plus $800 for each meeting of the Board and $400 for each committee
meeting which he attends on the same day as a Board meeting or $800 for each
committee meeting he attends if it is held on a day other than a day of a Board
meeting. Directors are compensated $200 for telephonic meetings. In addition to
such fees, the Company reimburses each director for travel and other related
expenses incurred by him in attending the meetings.

EMPLOYMENT CONTRACTS AND CHANGE IN CONTROL ARRANGEMENTS

The Company has entered into executive employment agreements (the
"Executive Agreements") with each of Messrs. Allen, Schuermann and Creekmuir
(collectively the "Executives"). The Executive Agreements (all of which are
substantially similar) have an initial term of two years which is automatically
extended for successive one-year periods until terminated by either party. The
Executive Agreements provide that if the Executive's employment with the Company
is terminated at any time during the term of the Executive Agreement for any
reason other than "for cause" (as defined in the Executive Agreement), the
Executive shall be entitled to receive in 24 equal monthly payments an amount
equal to two times the sum of (i) his then current base salary and (ii) the
average annual incentive payments to the Executive during the preceding three
years, less earned income received by him during the 24-month severance period.
The Executive shall also be deemed to be 100% vested with respect to the SERP.

Upon his retirement effective December 30, 1995, Mr. Allen became entitled
to receive the benefits payable under his Executive Agreement. Such benefits
include 24 equal monthly payments totalling $731,000, payment of benefits
accrued under the Company's incentive compensation programs, and his remaining
eligible to participate in various employee benefit programs such as health
insurance, life insurance, and retirement programs. Additionally, Mr. Allen
became 100% vested with respect to his SERP benefit.

<PAGE>
The Executive Agreements are intended to encourage the Executives to remain
in the employ of the Company during periods of uncertainty in the event that the
Company undergoes a change in control. For the purposes of the Executive
Agreements, a "change in control" shall be deemed to have occurred when (i) any
person, corporation, or group of associated persons, excluding affiliates of the
Company, acquires a beneficial ownership of an aggregate of more than 50% of the
then outstanding shares of voting stock of the Company or (ii) a merger or
consolidation to which the Company is a party and where the Company is not a
surviving or continuing entity has been completed. The Executive Agreements
provide for the payment of severance benefits to the Executive if he terminates
his employment for "Good Reason" (as such term is defined in the Executive
Agreement) during the 12 months immediately preceding or following the effective
date of a change in control of the Company. If the Executive terminates his
employment for Good Reason, then the Company shall pay him a lump sum severance
payment in an amount equal to two times the sum of (i) his then current base
salary and (ii) the average annual incentive payments to the Executive during
the preceding three years. Further, the Executive shall immediately become 100%
vested in the SERP, all outstanding stock options shall become immediately
exercisable, and all restrictions under restricted stock agreements shall be
eliminated.

The Company's 1994 Incentive Stock Option Plan also has a change in control
provision similar to that discussed above. In the event of a change of control,
all awards of options become immediately exercisable for all option holders,
including the Executives, if provision is not made in the change of control
transaction for continuance of the option plan and the assumption of options
previously granted under the Plan.

COMPARATIVE COMPANY PERFORMANCE

The following line graph compares cumulative total shareholder return for
the Company with a performance indicator of the overall stock market, the Nasdaq
Composite Index, and an industry index, the Household Furniture Index, for the
preceding five fiscal years.

COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG LADD FURNITURE, INC.
NASDAQ COMPOSITE INDEX AND PEER INDUSTRY INDEX

(Comparison Chart appears here. Plot points are below)

CRSP NASDAQ MARKET INDEX 100.00 160.56 186.87 214.51 209.69 296.30
PEER INDEX 100.00 140.25 193.25 255.51 185.46 231.97
LADD FURNITURE, INC. 100.00 123.16 172.43 166.04 109.64 74.91
</TABLE>

ASSUMES $100 INVESTED ON DECEMBER 29, 1990 IN COMPANY
COMMON STOCK, NASDAQ COMPOSITE INDEX1, and HOUSEHOLD FURNITURE INDUSTRY INDEX2

ASSUMES REINVESTMENT OF DIVIDENDS

(1) Nasdaq Total Return Index for U.S. Companies prepared for Nasdaq by the
Center for Research in Securities Prices at the University of Chicago.

<PAGE>
(2) SIC Code 251 Household Furniture Index as prepared by Media General
Financial Services, Inc., which index includes Ameriwood Industries, Bassett
Furniture, Bush Industries, Chromcraft Revington, DMI Furniture, Ethan Allen
Interiors, Flexsteel Industries, Industrie Natuzzi, Interco, Krause's
Furniture, La-Z-Boy Chair, LADD Furniture, Leggett & Platt, MASCO Corp.,
O'Sullivan Industries, Pulaski Furniture, River Oaks Furniture, Rowe
Furniture, Stanley Furniture, and Wellington Hall. The returns of each
company have been weighted according to each company's market
capitalization.

THE BOARD OF DIRECTORS
COMMITTEES AND MEETINGS

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Board of Directors has established a Compensation Committee currently
consisting of Messrs. Cash, Hunziker and Orr and Dr. Keller. Mr. Hunziker was
Chairman Emeritus of the Board of Directors of the Company from October 1991 to
September 1992, and was Chairman of the Board of Directors and Chief Executive
Officer of the Company from 1982 to October 1991. The Compensation Committee
acts to review and recommend major changes in policy of various compensation or
benefits programs and salary levels for top management positions. During 1995,
the Compensation Committee met four times.

AUDIT COMMITTEE

The Board of Directors has also established an Audit Committee. It provides
general oversight of financial reporting and of the adequacy of the internal
controls of the Company. The Audit Committee functions by meeting with the
independent auditors and by informal meetings and contact with members of
management concerned with financial and control functions and the Company's
internal auditors. The Audit Committee met three times in 1995. The current
members of the Audit Committee are Messrs. Fenn and Corrigan.

CORPORATE GOVERNANCE COMMITTEE

In 1995 the Board of Directors established a Corporate Governance
Committee. It acts to review and address governance policy issues such as
management succession planning; composition of the Board of Directors to assure
diversity of business experience, age and background; assessment of Board
performance; and composition of Board committees. The Corporate Governance
Committee met two times in 1995. The current members of the Corporate Governance
Committee are Messrs. Cash and Corrigan and Dr. Keller.

BOARD ATTENDANCE

The Board of Directors held seven meetings in person and six telephonic
meeting during 1995. All directors attended at least 75% of the Board and
committee meetings they were responsible for attending. The Board has not
established a nominating committee.

APPROVAL OF AMENDMENT OF LADD FURNITURE, INC.
1994 INCENTIVE STOCK OPTION PLAN
(PROPOSAL NUMBERED (2) IN THE ACCOMPANYING NOTICE)

GENERAL

At a special meeting of the Board of Directors held on February 24, 1994,
the Board of Directors adopted and shareholders subsequently approved at the
1994 annual meeting, the LADD Furniture, Inc. 1994 Incentive Stock Option Plan
(the "Plan"), pursuant to which 400,000 shares of common stock of the Company
(as adjusted for the one-for-three reserve stock split in 1995) have been
reserved for issuance of stock options under the Plan. For the reasons more
fully discussed below, the Board of Directors is recommending to the
shareholders the adoption and approval of an amendment to the Plan to increase
the number of shares authorized for issuance under the Plan to 800,000 shares.
Management and the members of the Board of Directors intend to vote FOR the
Plan.

Since 1983, the Company has utilized the grant of stock options pursuant to
various stock option plans, including the current Plan, to promote the growth
and profitability of the Company and its subsidiaries and to provide officers
and key employees of the Company and its subsidiaries with an incentive to
achieve long-term corporate objectives, to attract and retain key employees of
outstanding competence, and to provide such key employees with an opportunity to
acquire an

<PAGE>
equity interest in the Company. Further, the Compensation Committee has decided
in 1996 to replace the granting of restricted stock grants with the granting of
larger grants of stock options as a means of further emphasizing the long-term
equity performance of the Company. After a careful review of the needs of the
Company for additional stock-based compensation awards, the Board of Directors
voted on March 5, 1996 to amend the Plan, subject to shareholder approval, to
increase the authorized shares from 400,000 to 800,000 shares. This increase
will ensure that sufficient shares are available to support decisions by the
Compensation Committee for more stock-based compensation awards, continuing
its trend to more closely tie compensation to performance factors and
shareholder value. Without amendment of the Plan to increase the number of
shares reserved for issuance of options, there will not be sufficient shares
available for the option grants approved by the Board at its March 5, 1996
meeting which were granted subject to shareholder approval of the amendment.
Based on the closing price of the Company's common stock on March 5, 1996, the
aggregate market value of the 800,000 shares subject to the Plan (representing
10.4% of the Company's issued and outstanding common stock as of such date)
is $9,600,000.

SUMMARY OF THE PLAN

The Plan is briefly described below. Copies of the Plan may be obtained
from the Company and will also be available for inspection at the Annual
Meeting.

PURPOSES. The Plan is designed to encourage and create significant
ownership of common stock by key officers, employees and directors of the
Company. Additional purposes of the Plan include providing a meaningful
incentive to participants to make substantial contributions to the Company's
future success, enhancing the Company's ability to attract and retain persons
who will make such contributions, and ensuring that the Company has competitive
compensation opportunities for its key officers and employees. By meeting these
objectives, the Plan is intended to benefit the interests of shareholders.

ADMINISTRATION. The Plan is administered by a committee of the Board of
Directors composed of nonemployee, independent directors (the "Administrative
Committee"). The Compensation Committee of the Board of Directors, currently
consisting of Messrs. Cash, Orr and Hunziker and Dr. Keller, serves as the
Administrative Committee. Except as described below, the Administrative
Committee will have full authority to determine the specific individuals to whom
awards may be made under the Plan, to determine the provisions of such awards
(including the number of shares of common stock subject to each award), to
interpret the terms of the Plan and awards made under the Plan, and to adopt,
amend and rescind rules and guidelines for the administration of the Plan. In
making awards under the Plan, the Administrative Committee will consider the
participant's level of responsibility and past contributions to the Company and
the participant's contributions to the future success of the Company. No
determination has been made as to the persons to whom awards may be made in the
future or the number of shares which may be covered by any such awards.

ELIGIBILITY. Eligibility to receive awards under the Plan will be limited
to officers and employees of the Company who, in the opinion of the
Administrative Committee, are in a position to have a significant effect upon
the Company's business and operations. It is estimated that approximately 100
individuals are currently eligible to participate in the Plan. In addition,
nonemployee directors will be entitled to receive automatic annual grants of
options under the terms of the Plan so long as they are directors.

SHARES SUBJECT TO THE AMENDED PLAN. Assuming shareholder approval of the
proposed amendment, the maximum number of shares of common stock which may be
issued under the Plan is 800,000 shares, subject to adjustment in the event of a
stock dividend, stock split or other change in corporate structure or
capitalization affecting the common stock. If any award made pursuant to the
Plan terminates, expires or is forfeited for any reason, any shares of common
stock subject to the award so surrendered will remain available for issuance
under the Plan.

EFFECTIVE DATE AND TERM. The Plan became effective upon its approval by
shareholders at the 1994 annual meeting. The proposed amendment would become
effective upon approval of shareholders at the 1996 annual meeting. No awards
may be made under the Plan after February 24, 2004, but awards granted before
then may extend beyond that date.

OPTIONS. Options granted to employees under the Plan may be either
incentive stock options (within the meaning of Section 422 of the Code) or
nonqualified stock options. The Administrative Committee will determine the
frequency of granting options and the number of shares of Common Stock subject
to options granted under the Plan. The aggregate fair market value (determined
as of date of grant) of common stock with respect to which incentive stock
options are exercisable for the first time by an employee during any calendar
year cannot exceed $100,000.

GRANTS TO NONEMPLOYEE DIRECTORS. The Plan provides for the grant of
nonqualified stock options to acquire common stock to each person who is a
member of the Board of Directors but is not also an employee of the Company or
its

<PAGE>
subsidiaries (an "Eligible Director"). Each Eligible Director will automatically
receive on the date of the annual meeting of shareholders a grant of
nonqualified options to purchase 500 shares of Common Stock at an exercise price
equal to fair market value on the date of grant ("Director Options"). Eligible
Directors shall automatically receive a grant of Director Options as to 500
shares of Common Stock each year following their election of the Board of
Directors. Upon a nonemployee director's initial election or appointment to the
Board of Directors, such director shall receive a grant of nonqualified options
to purchase 667 shares of common stock at an exercise price equal to the fair
market value of the common stock on the date of grant. The Administrative
Committee shall have no discretion with respect to the number of shares subject
to Director Options, the date of grant of Director Options, or the exercise
price thereof.

TERM OF OPTION. Options granted under the Plan will not be exercisable
after the expiration of ten years from the date of grant, except that any
incentive stock option granted to an employee who owns more than 10% of the
outstanding common stock will be for a term not in excess of five years from
date of grant. Each option will generally become exercisable in cumulative
installments as established by the Administrative Committee at the time of
grant. Such installments are subject to acceleration at any time by the
Administrative Committee as well as under certain circumstances described in the
Plan, including the purchase of common stock pursuant to a tender offer or
exchange offer, or a merger in which the Company does not survive as an
independent corporation.

PRICE. Shares of common stock purchased on the exercise of an option will
be paid for by the participant at the time of such exercise in cash or, to the
extent permitted by the Administrative Committee, by delivery of shares of
common stock or such other lawful consideration as the Administrative Committee
may determine. The proceeds received by the Company upon the exercise of options
granted under the Plan will be used for general corporate purposes. The exercise
price of any incentive stock option granted to an employee will be equal to the
fair market value of the common stock at the date of grant, except the exercise
price of any incentive stock option granted to an employee who owns more than
10% of the outstanding common stock must be at least 110% of the fair market
value of the common stock at the time the incentive stock option is granted.
With respect to nonqualified stock options, the option price may be less than
the fair market value of the common stock on the date of grant. The exercise
price of any Director Option will be equal to the fair market value of the
common stock on the date of grant.

EXERCISABILITY. If a participant's employment terminates by reason of
death, retirement or disability, certain post-termination exercise periods
generally will apply. If a participant's employment terminates for any other
reason, options will be exercisable only to the extent, if any, approved by the
Administrative Committee and will cause them to be treated as nonstatutory stock
options.

CASHLESS EXERCISE. Under the Plan, an option may provide for a "cashless
exercise" by allowing the optionee to direct an immediate market sale or margin
loan respecting the shares under the option pursuant to an extension of credit
by the Company. Pursuant to this procedure, the optionee would direct the
delivery of the shares under the option from the Company to a brokerage firm and
the delivery of the option price from the sale or margin loan proceeds from the
brokerage firm to the Company.

TRANSFERABILITY OF AWARDS. No option awarded under the Plan may be
transferred by a participant otherwise than by will or by the laws of descent
and distribution, and during the participant's lifetime, such awards may be
exercised only by the participant or by his or her guardian or legal
representative.

AMENDMENT OR TERMINATION. The Plan may be amended or terminated at any time
by the Board of Directors. The Administrative Committee may make non-material
amendments to the Plan. The Administrative Committee may amend, modify,
terminate or waive any condition or provision of any outstanding award under the
Plan, except that it generally may not increase the number of shares subject to
any outstanding award or decrease the option or exercise price of the award. The
participant's consent to any such action may be required to the extent provided
in the Plan.

FEDERAL INCOME TAX CONSEQUENCES

The following is a summary of the principal Federal income tax consequences
associated with awards under the Plan. It does not describe all Federal income
tax consequences under the Plan, nor does it describe foreign, state or local
income tax consequences.

INCENTIVE STOCK OPTIONS. The grant of an incentive stock option does not
produce ordinary income to the recipient or a deduction to the Company.
Generally a participant will not recognize ordinary taxable income at the time
of exercise of an incentive stock option, and no deduction will be available to
the participant's employer, provided the option is exercised while the
participant is an employee or within certain time periods in the case of
termination of employment by reason of

<PAGE>
disability or death. If an incentive stock option granted under the Plan is
exercised after these periods, the exercise will be treated for tax purposes as
the exercise of a nonstatutory stock option. Also, incentive stock options
granted under the Plan will be treated as nonstatutory stock options to the
extent they first become exercisable in any calendar year for shares having a
fair market value, determined as the date of grant, in excess of $100,000.

If shares acquired upon exercise of an incentive stock option are sold or
exchanged more than one year after the date of exercise and more than two years
from the date of grant of the option, any gain or loss will be a long-term
capital gain or loss. If shares acquired upon exercise of an incentive stock
option are disposed of prior to the expiration of these one-year or two-year
holding periods (a "disqualifying disposition"), the participant will recognize
ordinary income at time of disposition, and the employer will be able to claim a
deduction, in an amount equal to the excess of the fair market value of the
shares at date of exercise over the exercise price. Any additional gain will be
treated as capital gain, long-term or short-term depending on how long the
shares have been held. Where shares are sold or exchanged (other than in certain
related party transactions) for an amount less than their fair market value at
date of exercise, any ordinary income recognized in connection with the
disqualifying disposition will be limited to the amount of gain, if any,
recognized in the sale or exchange, and any loss will be a long-term or
short-term capital loss, depending on how long the shares have been held.

Although the exercise of an incentive stock option as described above will
not produce ordinary taxable income to the participant, it may produce an
increase in the participant's alternative minimum taxable income and may result
in an alternative minimum tax liability. The excess of the fair market value of
the shares at the date of exercise over the exercise price is included in the
calculation of the participant's alternative minimum taxable income.

NONSTATUTORY STOCK OPTIONS. Upon the exercise of a nonstatutory stock
option (including Director Options) the participant will recognize ordinary
taxable income equal to the excess of the fair market value of the shares at the
time over the exercise price. The employer will be able to claim a deduction in
an equivalent amount provided it satisfies withholding requirements. Any gain or
loss upon a subsequent sale or exchange of the shares will be a capital gain or
loss, long-term or short-term depending on the holding period for the shares.

PAYMENT OF WITHHOLDING TAXES. The Company may withhold, or require a
participant to remit to the Company, an amount sufficient to satisfy any
federal, state, or local withholding tax requirements associated with awards
under the Plan.

IN GENERAL. Where already owned shares are used to exercise a stock option,
special rules will apply in determining the tax basis of the shares received
upon exercise.

FEDERAL SECURITIES LAW

The 400,000 shares currently reserved for issuance under the Plan have been
registered with the Securities and Exchange Commission pursuant to Registration
Statement on Form S-8 (No. 33-53341). It is the Board of Director's intention to
register the proposed 400,000 additional shares reserved for issuance under the
Plan with the Securities and Exchange Commission on Form S-8 immediately
following shareholder approval of the Plan. Accordingly, upon effectiveness of
the registration statement, all shares acquired through the exercise of the
options granted pursuant to the Plan will be registered shares within the
meaning of the Securities Act of 1933 (the "Act").

PROPOSED AWARDS UNDER THE PLAN

On March 5, 1996, the Administrative Committee granted incentive stock
options and nonqualified stock options to purchase an aggregate of 341,290
shares of common stock under the Plan, subject to shareholder approval of
amendment of the Plan. The exercise price for all such options is $12.00 per
share (fair market value on March 5, 1996), and each option will expire 10 years
after the date of grant. Such options generally first become exercisable in 25%
increments over a four-year period beginning one year after date of grant. All
such options are subject to the exercisability requirements of the Plan, all as
generally described above.

As discussed in the preceding paragraphs of this section, the terms and
conditions of future option grants are subject to the discretion of the
Administrative Committee and need not be identical to those option agreements
described above.

The benefits or amounts that will be received or allocated in the future
under the Plan are not determinable at this time. The table below shows options
granted under the Plan on March 5, 1996, subject to shareholder approval of the
proposed amendment of the Plan, to the individuals and groups indicated.

<PAGE>
PLAN BENEFITS
1994 INCENTIVE STOCK OPTION PLAN

<TABLE>
<CAPTION>
NUMBER OF
NAME DOLLAR VALUE(1) OPTIONS GRANTED
<S> <C> <C>
Fred L. Schuermann, Jr......................................... $ 1,026,720 85,560(3)
Daryl B. Adams................................................. -0- -0-
Kenneth E. Church.............................................. 699,000 58,250(3)
William S. Creekmuir........................................... 689,040 57,420(3)
Michael P. Haley............................................... 655,680 54,640(3)
Donald L. Mitchell............................................. 708,840 59,070(3)
All Executive Officers as a Group(2)........................... 3,779,280 314,940(3)
All Directors who are not executive officers as a group........ -0- -0-
All employees as a group (excluding executive officers)........ 348,840 29,070
</TABLE>

(1) Based on the fair market value of the Company's common stock on March 5,
1996.

(2) The executive officers of the Company on March 5, 1996 were Messrs.
Schuermann, Church, Creekmuir, Haley and Mitchell and Ms. Adams.

(3) The proposed grants include grants of nonqualified stock options for each of
Messrs. Schuermann, Church, Mitchell, Haley and Creekmuir in the following
amounts, with the balance in incentive stock options: Schuermann (77,760);
Church (50,000); Creekmuir (50,000); Haley (50,000); and Mitchell (50,000).

SHAREHOLDER VOTE

While North Carolina corporate law does not require shareholder approval of
the Plan, shareholder approval of the proposed amendment is necessary under the
terms of the Plan, Federal tax law, and the Federal securities regulations in
order to preserve the Plan's exemption from the Section 16(b) insider trading
provisions of the Act for the granting of options to officers, directors, and
10% shareholders. Accordingly, the Board of Directors submits the proposed
amendment of the Plan to shareholders for their approval. An affirmative vote of
a majority of the shares present, or represented, and entitled to vote at the
meeting is necessary for shareholders approval of the amendment of the LADD
Furniture, Inc. 1994 Incentive Stock Option Plan to increase the number of
shares reserved for issuance thereunder to 800,000 shares.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE AMENDMENT
OF THE LADD FURNITURE, INC. 1994 INCENTIVE STOCK OPTION PLAN.

RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
(PROPOSAL NUMBERED (3) IN THE ACCOMPANYING NOTICE)

The appointment of auditors is approved annually by the Board of Directors
and subsequently submitted to the shareholders for ratification. In recommending
the ratification by the shareholders of the appointment of KPMG Peat Marwick
LLP, the Board of Directors is acting upon the recommendation of the Audit
Committee, which is composed entirely of non-employee Directors and which has
satisfied itself as to the firm's professional competence and standing. In
making its recommendation, the Audit Committee has taken into consideration the
audit scope and audit fees associated with such retention. A representative of
KPMG Peat Marwick LLP will attend the 1996 Annual Meeting of Shareholders to
answer appropriate questions and to make any statement that such representative
may desire to make.

The Board of Directors unanimously recommends a vote "FOR" the ratification
of the selection of KPMG Peat Marwick LLP as independent public accountants to
audit the books and accounts of the Company for the 1996 fiscal year. A
favorable vote by the holders of a majority of the Company's outstanding shares
of Common Stock represented at the meeting is required for ratification of
independent auditors. It is intended that, unless otherwise specified by the
shareholders, votes will be cast pursuant to the proxies hereby solicited in
favor of the approval of the selection of KPMG Peat Marwick LLP as independent
public accountants to audit the books and accounts of the Company for the 1996
fiscal year.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
INDEPENDENT PUBLIC ACCOUNTANTS.

<PAGE>
DATE FOR THE RECEIPT OF SHAREHOLDER PROPOSALS

In order for shareholder proposals to be included in the proxy materials
for the 1997 Annual Meeting, any such proposal must be received by the Company
at its executive offices not later than January 3, 1997 and meet all other
applicable requirements for inclusion therein.

OTHER BUSINESS

The Company does not intend to bring any business before the meeting other
than that stated above in this Proxy Statement. However, if any other matters
properly come before the meeting, the Proxyholders named in the enclosed Proxy
will vote on such matters pursuant to the Proxy in accordance with their best
judgment or as instructed by the Board of Directors.

FORM 10-K

SECURITIES AND EXCHANGE COMMISSION FORM 10-K ANNUAL REPORT WILL BE PROVIDED
FREE OF CHARGE TO SHAREHOLDERS UPON WRITTEN REQUEST DIRECTED TO: LADD FURNITURE,
INC., ONE PLAZA CENTER, BOX HP-3, HIGH POINT, NORTH CAROLINA 27261-1500,
ATTENTION: WILLIAM S. CREEKMUIR, EXECUTIVE VICE PRESIDENT, CHIEF FINANCIAL
OFFICER, SECRETARY AND TREASURER.

A copy of the Company's Summary Annual Report to Shareholders for the year
ended December 30, 1995 accompanies this Proxy Statement. Appendix A to this
Proxy Statement, which contains the Company's Annual Report on Form 10-K, and
the Summary Annual Report are not part of the Company's solicitation materials.

SOLICITATION OF PROXIES

The Company expects to solicit proxies primarily by mail. Proxies may be
solicited personally and by telephone by regular employees of the Company. The
only expenses anticipated are those which are ordinarily incurred in connection
with preparing, assembling and mailing the proxy material, including charges and
expenses of communicating with shareholders. The total amount of such expenses
will be borne by the Company.

If you cannot be present at the meeting, you are requested to SIGN, DATE,
and RETURN the accompanying Proxy in the enclosed envelope.

WILLIAM S. CREEKMUIR
SECRETARY

*******************************************************************************

<PAGE>
LADD FURNITURE, INC.
P R O X Y

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.

The undersigned hereby appoints Richard R. Allen and Fred L. Schuermann,
Jr., or either of them, as Proxyholders, each with the power to appoint his
substitute, and hereby authorizes them to represent and to vote, as designated
below, all the shares of Common Stock of LADD Furniture, Inc. held of record by
the undersigned on March 5, 1996, at the annual meeting of shareholders to be
held on May 2, 1996 at 10:00 a.m. at the Radisson Hotel, 135 S. Main Street,
High Point, N.C. or any adjournment thereof.

1. ELECTION OF DIRECTORS

<TABLE>
<S> <C>
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY to vote
(except as marked to the contrary below) for all nominees listed below
</TABLE>

Richard R. Allen, William B. Cash, James H. Corrigan, Jr., O. William Fenn, Jr.,
Don A. Hunziker, Thomas F. Keller, L. Glenn Orr, Jr. and Fred L. Schuermann, Jr.

(INSTRUCTION -- TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEES WRITE
THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW).

2. APPROVAL OF AMENDMENT OF THE COMPANY'S 1994 INCENTIVE STOCK OPTION PLAN
TO INCREASE THE NUMBER OF SHARES RESERVED FOR ISSUANCE THEREUNDER TO
800,000 SHARES.

[ ] FOR [ ] AGAINST [ ] ABSTAIN

3. RATIFICATION OF THE APPOINTMENT OF KPMG PEAT MARWICK LLP AS THE
INDEPENDENT PUBLIC ACCOUNTANTS FOR THE 1996 FISCAL YEAR.

[ ] FOR [ ] AGAINST [ ] ABSTAIN

<PAGE>
4. In their discretion, the Proxyholders are authorized to vote upon such
other business as may properly come before the meeting.

This proxy when properly executed will be voted in the manner directed
herein by the undersigned shareholder.

IF NO DIRECTION IS MADE, THIS PROXY, IF EXECUTED AND RETURNED, WILL BE VOTED
FOR PROPOSALS 1, 2 AND 3.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by president or other authorized officers. If a
partnership, please sign in partnership name by authorized person.
Dated , 1996
(Be sure to date Proxy)

Signature

Signature if held jointly

PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY IN THE ENCLOSED
ENVELOPE

<PAGE>

APPENDIX A

LADD Furniture, Inc. Annual Report on Form 10-K for fiscal year ended
December 30, 1995.
<PAGE>

<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

[(check mark)] 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 December 30, 1995

COMMISSION FILE NUMBER 0-11577

LADD FURNITURE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S> <C>
North Carolina 56-1311320
(STATE OR OTHER JURISDICTION OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)

One Plaza Center, Box HP-3, High Point, North Carolina 27261-1500
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>

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 -- $.30 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 (check mark) 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 [(check mark)]

Market value of 6,278,354 shares held by nonaffiliates as of March 5, 1996,
was $75,340,248.

Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.

7,724,259 shares outstanding as of March 5, 1996

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive Proxy Statement for the 1995 Annual Shareholders
Meeting are incorporated by reference into Part III hereof.

A-1

<PAGE>
PART I

ITEM 1. BUSINESS

GENERAL

LADD Furniture, Inc., incorporated in 1981 under the laws of the State of
North Carolina, is a leading residential furniture manufacturer which sells its
products through diverse retail distribution channels as well as to the
hospitality and health care industries. The Company produces a wide range of
furniture designed to appeal to a spectrum of customers seeking quality, style,
and value. The Company markets its furniture under various brand names,
including American Drew, American of Martinsville, Barclay, Clayton Marcus, Lea,
Pennsylvania House and Pilliod. Based upon industry data published in the trade
publication FURNITURE/TODAY, LADD is currently the fifth largest U.S.
manufacturer of residential furniture. Unless the context otherwise indicates,
"LADD" and "Company" refer to LADD Furniture, Inc., its divisions, and
consolidated subsidiaries. The executive offices of LADD are located in High
Point, North Carolina.

INDUSTRY SEGMENTS

In accordance with the instructions for this item, LADD is deemed to have
been engaged in only one business segment, manufacture and sale of furniture,
for the three years ended December 30, 1995.

SIGNIFICANT DEVELOPMENTS IN 1995

DIVESTITURE OF FOUR OPERATING UNITS -- In order to concentrate on its core
residential casegoods (wood furniture), residential upholstery and contract
sales businesses, the Company recently divested three non-strategic and/or
nonperforming businesses: (i) Brown Jordan, a manufacturer of leisure and
outdoor furniture, which was sold in December 1995 for $26.2 million, (ii) Lea
Lumber & Plywood, a provider of wood materials, which was sold in December 1995
for $5 million, and (iii) Fournier Furniture, a manufacturer of
ready-to-assemble furniture, which was sold in February 1996 for $12 million.
The Company used the net cash proceeds from these sales to reduce debt. In
addition, the Company has entered into a contract to sell Daystrom Furniture, a
kitchen and dinette furniture manufacturer, for $4 million. The transaction is
scheduled to close by the end of March 1996, subject to the purchaser finalizing
financing. Should the sale transaction not close and another purchaser not be
identified, the Company intends to liquidate the Daystrom business.
Collectively, these four businesses, while representing approximately $110
million of sales in 1995 (approximately 18% of 1995 net sales), generated a loss
before interest and income taxes of approximately $2.2 million in 1995.

MANAGEMENT RESTRUCTURING -- In December 1995, the Company completed the
second phase of its restructuring plan by realigning its senior management team
effective January 1, 1996 into three groups consistent with its product and
customer base -- casegoods, upholstery and contract sales. At the same time,
Richard R. Allen, one of LADD's founders and Chairman and Chief Executive
Officer, announced his retirement as Chief Executive Officer. Fred L.
Schuermann, Jr., formerly President and Chief Operating Officer, assumed the
duties of President and Chief Executive Officer, effective January 1, 1996. At
the same time, Kenneth E. Church, president of the Company's Clayton-Marcus
subsidiary, was appointed president of the LADD Upholstery Group; Donald L.
Mitchell, formerly president of a competitor company, was hired to become the
president of the LADD Casegoods Group; and Michael P. Haley continued in his
role as president of LADD Contract Sales. William S. Creekmuir, LADD's Chief
Financial Officer, was promoted to Executive Vice President and assumed
responsibility for the Company's international, corporate marketing and
transportation business. Following the management realignment, the Company
intends to continue to market its products under individually distinct brand
names, but to reduce its administrative overhead structure through better
utilization of existing synergies among its operating companies.

LADD'S BUSINESS GROUPS

The Company has three primary operating groups: (i) residential casegoods,
consisting primarily of bedroom, dining room and living room furniture, wall
units and occasional tables, (ii) residential upholstery, consisting primarily
of sofas, loveseats, recliners and chairs, and (iii) contract sales, consisting
of casegoods and upholstery sold to the hospitality and health care industries,
the U.S. government and educational institutions (collectively, contract sales).
The Company distributes its casegoods and upholstery products directly and
through approximately 300 independent sales representatives to more than 8,000
customers, including leading department stores, furniture retailers, mass
merchandisers, catalog merchandisers, major hotel chains, and various specialty
stores and retail companies. The Company also markets its furniture
internationally to buyers in over 50 countries.

A-2

<PAGE>
LADD'S CASEGOODS GROUP

American Drew manufactures and sells medium priced wood residential
furniture. The products include various types of bedroom furniture (beds,
dressers, night stands, mirrors, armoires, and dressing tables), dining room
furniture (tables, chairs, buffets, chinas, and serving pieces), and 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.

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," 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 four plants located in
Waynesville, NC, Marion, VA, and Morristown, TN.

Pennsylvania House manufactures solid wood residential furniture in
American traditional, country and transitional styles. 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 230
independent furniture retailers in the U.S., Japan and Mexico. Pennsylvania
House-Casegoods operates two manufacturing plants located in Lewisburg and White
Deer, PA.

Pilliod Furniture, acquired by LADD on January 31, 1994, manufactures and
markets a wide range of promotionally priced contemporary and traditional wood
residential furniture, including master bedroom products, occasional tables,
entertainment centers, wall systems, and dining room chinas. Pilliod Furniture's
products are marketed under the Pilliod and Symmetry brand names. 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.

LADD UPHOLSTERY GROUP

Barclay Furniture manufactures and sells moderately priced upholstered
residential 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, membership clubs,
rent-to-own stores, catalog retailers, and national general merchandisers.
Barclay operates two manufacturing plants located in Sherman and Myrtle, MS.

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 upper-medium
price ranges. The products are marketed under the "Clayton-Marcus,"
"HickoryMark," "American of Martinsville," and "Clayton House," brand names
primarily to retail furniture chains, independent furniture retailers and
department stores. Clayton-Marcus currently has established galleries with
approximately 150 independent furniture stores in the United States, Canada, and
Mexico. Clayton-Marcus operates three manufacturing plants in Hickory, NC.

Kenbridge Furniture, formed in 1995, manufactures and sells promotionally
priced upholstered residential furniture, including sofas, loveseats, chairs in
leather and leather/vinyl covers. The company's products are sold under the
Kenbridge Furniture brandname throughout the United States through large volume
customers, mainly large retail furniture chains. Kenbridge Furniture's products
are manufactured in one facility in Mississippi.

Pennsylvania House also manufactures a full line of upholstered residential
furniture which sells in the upper-medium price range. Pennsylvania
House-Upholstery operates one manufacturing plant located in Monroe, NC.

LADD CONTRACT SALES

American of Martinsville is a manufacturer of wood and upholstered
commercial furniture which is marketed worldwide to the guest room (hotel/motel)
industry through LADD Contract Sales Corporation. The Contract Sales Group also
sells to the health care furniture market for retirement homes and extended care
facilities, certain agencies of the U.S. government, and university and college
markets. American of Martinsville operates two manufacturing plants located in
Chilhowie and Martinsville, VA and utilizes other LADD manufacturing facilities
to meet capacity constraints.

A-3

<PAGE>
OTHER

LADD Transportation, Inc. operates a modern fleet of over-the-road tractors
and trailers that are used to provide transportation services to LADD operating
companies to meet the special needs of LADD's customers. Together with fleets
operated by other LADD operating companies, LADD Transportation provides
approximately 19% 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 300 independent sales representatives to a broad variety of
customers, including department stores, furniture retailers, mass merchandisers,
catalog merchandisers, major hotel chains, and various specialty stores and
rental companies. The Company currently sells to more than 8,000 furniture
customers. No single customer accounted for more than 5% of net sales in 1995.
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 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, leather, plywood, particle board, hardware,
finishing materials, glass, steel, steel springs, and high pressure laminates.
The wood species include cherry, oak, maple, white pine, poplar, and other
American species, and imports such as rubberwood, 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.

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
casegoods manufacturing plants have been adapted so that they 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
intellectual properties which are considered to be important to the business and
which do not have a limited duration.

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 1995 fiscal
year end was approximately $83.1 million, as compared to $85.2 million at 1994
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, the Company's
subsidiary sold in December 1995, however, was heavily seasonal with inventories
being built in the winter months and sales concentrated in the March-June time
frame.

A-4

<PAGE>
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 600 manufacturers of residential furniture in the
United States. Competition within the market for wood, upholstered and metal
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.

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, the Company's Daystrom Furniture
operating division, which is being held for sale, and its Pilliod Furniture
subsidiary are the only operations to have 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 in 1995 imported
approximately $18.4 million of finished furniture and unfinished furniture
parts. Following the above discussed divestitures, the Company anticipates its
import business to decline by approximately 38%.

Following the sale of its Brown Jordan and Fournier subsidiaries, the
Company has no facilities located outside the continental United States.

GOVERNMENTAL REGULATIONS

The Company is subject to a wide-range of federal, state and local laws and
regulations relating to protection of the environment, worker health and safety
and the emission, discharge, storage, treatment and disposal of hazardous
materials. These laws include the Clean Air Act of 1970, as amended, the
Resource Conservation and Recovery Act, the Federal Water Pollution Control Act
and the Comprehensive Environmental, Response, Compensation and Liability Act.
Certain of the Company's operations use glues and coating materials that contain
chemicals that are considered hazardous under various environmental laws.
Accordingly, management closely monitors the Company's environmental performance
at all of its facilities. Management believes that the Company is in substantial
compliance with all environmental laws.

Under the provisions of the Clean Air Act Amendments of 1990, in December
1995, the Environmental Protection Agency (the "EPA") promulgated air emission
standards for the wood furniture industry. These regulations, known as National
Emission Standards for Hazardous Air Pollutants ("NESHAPs"), govern the levels
of emission of certain designated chemicals into the air and will require that
the Company reduce emissions of certain volatile hazardous air pollutants
("VHAPs") by November 1997. Management is investigating and evaluating
techniques to meet these standards at all facilities to which the NESHAPs
standards will apply. While the Company may be required to make capital
investments at some of its facilities to ensure compliance, the Company
believes that it will meet all applicable requirements in a timely fashion
and that the amount of money required to meet the NESHAP requirements will not
materially affect its financial condition or its results of operations.

See "Legal Proceedings" regarding the status of environmental proceedings
in which the Company is involved.

EMPLOYEES

The Company employed approximately 6,600 persons as of March 1, 1996, of
which approximately 300 are employed at the Daystrom Furniture operating
division which is being held for sale. Substantially all of the employees were
employed on a full-time basis.

Employees at five Company plants are represented by various labor unions.
The Company considers its relations with its employees to be good. The union
contract at Daystrom Furniture's South Boston, VA facility expires in April
1996.

EXPORT SALES

In 1995, the Company's export sales decreased to $28.4 million
(approximately 4.6% of 1995 net sales), a decrease of approximately 16.0% from
export sales in 1994 of $33.8 million (approximately 5.7% of 1994 net sales).
The Company's export sales in 1993 were $40.6 million, or approximately 7.8% of
1993 net sales. Excluding the operating companies sold or being held for sale,
1995 export sales would have been 3.7% of net sales. None of the Company's
assets are dedicated solely to export sales.

A-5

<PAGE>
ITEM 2. PROPERTIES

The following table summarizes the real estate, both owned and leased, used
in the primary business operations of the Company as of March 1, 1996.

LADD FACILITIES

<TABLE>
<CAPTION>
APPROX. OWNED LEASE
FACILITY SIZE OR EXPIRATION
OPERATING GROUP LOCATION USE (SQUARE FEET) LEASED DATE
<S> <C> <C> <C> <C> <C>
Casegoods...................... N. Wilkesboro, NC Manufacturing 335,300 Owned
N. Wilkesboro, NC Manufacturing 398,500 Owned
N. Wilkesboro, NC Manufacturing 122,500 Owned
N. Wilkesboro, NC Warehouse/Office 109,500 Owned
Morristown, TN Warehouse 108,000 Leased 10/31/97
Morristown, TN Manufacturing 285,380 Owned
Morristown, TN Manufacturing/Office 139,200 Owned
Waynesville, NC Manufacturing/Office 448,400 Owned
Morristown, TN Distribution 160,000 Leased 04/01/99
Morristown, TN Distribution 97,500 Leased 10/31/96
Marion, VA Manufacturing 204,900 Owned
Lewisburg, PA Manufacturing/Office/Dist. 676,800 Owned
White Deer, PA Manufacturing 128,000 Owned
Milton, PA Warehouse 120,000 Leased Mo. to Mo.
Selma, AL Manufacturing 277,000 Owned
Nichols, SC Manufacturing 344,000 Owned
Swanton, OH Manufacturing 289,000 Owned
Dillon, SC Warehouse 45,000 Leased Mo. to Mo.
High Point, NC Office 11,100 Leased 04/30/98
Upholstery..................... Sherman, MS Manufacturing/Office 302,650 Owned
Myrtle, MS Manufacturing 81,250 Owned
Pontotoc, MS Warehouse 12,400 Leased 09/15/96
Hickory, NC Manufacturing/Office/Dist. 369,600 Owned
Hickory, NC Manufacturing 121,800 Owned
Hickory, NC Manufacturing 152,900 Owned
Monroe, NC Manufacturing 258,000 Owned
Contract Sales................. Chilhowie, VA Manufacturing/Office 493,625 Owned
Martinsville, VA Manufacturing 801,885 Owned
Martinsville, VA Office 50,000 Leased 05/31/02
Martinsville, VA Warehouse 135,000 Leased 09/30/98
Corporate...................... High Point, NC Office 38,000 Leased 08/31/97
Daystrom Furniture South Boston, VA Manufacturing/Office 463,980 Owned
(held for sale).............. South Boston, VA Warehouse 33,520 Leased Mo. to Mo.
</TABLE>

The Company believes that its manufacturing, warehouse and office space is
well maintained for its intended purposes and adequately insured. 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 manufacturing facilities
on a one shift per day, five-day week basis. Increasingly, certain departments
and facilities are operated on a multi-shift basis.

The Company also currently maintains showrooms, the majority of which are
leased, in High Point, NC, San Francisco, CA, Sherman and Tupelo, MS,
Minneapolis, MN, Martinsville, VA, and Lewisburg, PA.

The Company owns and leases substantial quantities of woodworking, sewing
and metalworking equipment located in its various plants. The Company considers
its present equipment to be adequate, well-maintained, generally modern, and
adequately insured.

The Company currently owns and leases approximately 130 tractors and 320
trailers.

A-6

<PAGE>
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 presently is involved in the following environmental
proceedings:

1. The California manufacturing facility of Brown Jordan Company
("Brown Jordan"), a former subsidiary of the Company, is located in El
Monte, California in the San Gabriel Valley Groundwater 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. In May 1994, the Company joined the Northwest El Monte
Community Task Force, a PRP Group formed to respond to the EPA. In March
1995, the Task Force and the EPA finalized an Administrative Consent Order
pursuant to which the Task Force has begun a remedial investigation and
feasibility study at an approximate cost of $1.3 million. Pursuant to an
interim allocation agreement, Brown Jordan is responsible for 4.86% of all
shared assets of the Task Force.

2. In September 1995, Brown Jordan received a request from the
California Regional Water Quality Board with respect to further assessment
of two areas at the El Monte facility, the Leach Pit Area and the Clarifier
Area. Both of these areas have been the subject of significant previous
investigations (undertaken 1988-1993) which had concluded that it was
unlikely that Brown Jordan was contributing significantly to groundwater
contamination in the area. The Board's investigation program is separate
from the El Monte Superfund group, although both are concerned with whether
Brown Jordan is a source of groundwater contamination. There is some basis
at this time for believing that the Leach Pit and Clarifier Area problems
are limited to soil contamination.

Under the terms of the Asset Purchase Agreement with Maytag Corporation
("Maytag") dated June 1, 1989 ("the Maytag Agreement") under which the Company
acquired Brown Jordan, the Company's liabilities in El Monte matters are limited
to the first $200,000 of costs for off-site liabilities and $1,000,000 of costs
for on-site liabilities. Pursuant to the terms of the Stock Purchase Agreement
between the Company and BJCL, Inc. ("BJCL") dated as of November 7, 1995 under
which BJCL acquired Brown Jordan from the Company, BJCL may assume up to
$400,000 of certain post closing costs relating to Brown Jordan, including
environmental costs relating to the El Monte site. Through fiscal 1995,
approximately $300,000 had been expended by the Company on the El Monte site.
Accordingly, if no other claims are made by BJCL under the Brown Jordan
Agreement, the next $400,000 of costs associated with Brown Jordan environmental
claims will be paid by BJCL.

The Company has also been named as a PRP, along with numerous parties, at
various hazardous waste sites undergoing cleanup or investigation for cleanup.
The Company believes that at each of these sites, it has been improperly named
or will be considered a "de minimis" party. Although the Company believes
adequate accruals have been provided for environmental contingencies, it is
possible, due to uncertainties previously noted, that additional accruals could
be required in the future. However, the ultimate resolution of these
contingencies, to the extent not previously provided for, should not have a
material adverse effect on the Company's financial position.

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 1995.

A-7

<PAGE>
PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS

STOCK TRANSFER AGENT:

Wachovia Bank & Trust Company, N.A.
Winston-Salem, NC
Shareholder Account Information: 1-800-635-4236

STOCK LISTING:

The Company's common stock is traded on the Nasdaq Stock Market under the
Nasdaq symbol: LADF. At year end 1995, the Company had approximately 5,000
shareholders based upon approximately 700 shareholders of record at that date
and an estimate of the number of individual shareholders represented by broker
and nominee position listings.

MAJOR MARKET MAKERS:

<TABLE>
<S> <C>
Dillon, Read & Co. Nash Weiss
Herzog, Heine, Geduld Raymond, James & Associates
Huntleigh Securities Corp. Robinson Humphrey
Interstate/Johnson Lane Sherwood Securities Corp.
Jefferies & Company Scott & Stringfellow
Kirkpatrick, Pettis, Smith Southeast Research Partners
Legg Mason Wood Walker Southwest Securities
Mayer & Schweitzer Troster Singer Corp.
Merrill Lynch Wheat First Butcher Singer
</TABLE>

See Item 6, Selected Financial Data, for market and dividend information
regarding the Company's Common Stock.

A-8

<PAGE>
ITEM 6. SELECTED FINANCIAL DATA

LADD FURNITURE, INC. AND SUBSIDIARIES

SELECTED ANNUAL DATA

DOLLAR AND SHARE DATA IN THOUSANDS, EXCEPT PER SHARE AMOUNTS
<TABLE>
<CAPTION>
FIVE-YEAR
FISCAL FISCAL FISCAL FISCAL FISCAL FISCAL COMPOUND
1990 1991 1992 1993 1994 1995 GROWTH RATES
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING STATEMENT DATA
Net sales...................... $511,911 429,110 496,679 521,200 591,575 614,502 3.7%
Cost of sales.................. 406,039 356,025 401,250 426,921 481,994 515,980 4.9
Gross profit................. 105,872 73,085 95,429 94,279 109,581 98,522 (1.4)
Selling, general and
administrative expenses...... 80,617 79,322 78,493 81,953 93,911 101,345 4.7
Restructuring expense.......... 8,268 -- -- -- -- 25,120 N/M
Operating income (loss)........ 16,987 (6,237) 16,936 12,326 15,670 (27,943) N/M
Other deductions:
Interest expense............. 14,799 10,413 7,502 5,542 8,939 11,798 (4.4)
Other (net).................. 1,584 2,594 1,164 377 1,714 3,685 18.4
Earnings (loss) before income
taxes........................ 604 (19,244) 8,270 6,407 5,017 (43,426) N/M
Income tax expense (benefit)... (426) (6,041) 3,725 2,561 709 (18,236) 112.0
Net earnings (loss)............ $ 1,030 (13,203) 4,545 3,846 4,308 (25,190) N/M
Depreciation................... $ 9,138 8,783 9,151 10,508 14,143 12,671 6.8
Amortization................... 2,952 5,081 2,848 2,554 3,669 3,758 5.0
Cash dividends paid............ 5,274 4,545 -- 2,767 2,771 2,086 (16.9)
Weighted average shares
outstanding.................. 6,279 6,316 7,148 7,686 7,697 7,721 4.2
PER SHARE DATA
Net sales...................... $ 81.53 67.94 69.49 67.81 76.86 79.59 (0.5)
Net earnings (loss)............ 0.16 (2.09) 0.64 0.50 0.56 (3.26) N/M
Cash dividends................. 0.84 0.72 -- 0.36 0.36 0.27 (20.3)
Year-end book value............ 20.28 17.37 19.38 19.52 19.73 16.20 (4.4)
BALANCE SHEET DATA
Net working capital............ $115,960 111,583 117,693 123,004 123,685 79,528 (7.3)
Net property, plant and
equipment.................... 82,758 81,660 83,609 97,497 109,522 82,586 0.0
Total assets................... 320,539 308,980 315,649 335,737 378,816 312,986 (0.5)
Long-term debt................. 124,462 125,304 91,503 105,257 143,584 112,598 (2.0)
Shareholders' equity........... 127,331 110,001 148,724 150,103 151,906 125,197 (0.3)
RATIOS, OTHER
Gross profit margin............ 20.7% 17.0 19.2 18.1 18.5 16.0
Operating profit (loss)
margin....................... 3.3 (1.5) 3.4 2.4 2.6 (4.6)
Return (loss) on sales......... 0.2 (3.1) 0.9 0.7 0.7 (4.1)
Effective income tax rate...... N/M 31.4 45.0 40.0 14.1 42.0
Dividend payout ratio.......... N/M N/M -- 71.9 64.3 N/M
Return (loss) on beginning
assets....................... 0.3 (4.1) 1.5 1.2 1.3 (6.6)
Return (loss) on beginning
equity....................... 0.8 (10.4) 4.1 2.6 2.9 (16.6)
Current ratio.................. 3.2x 3.1 3.1 3.1 3.0 2.3
Inventory turnover............. 4.2 4.0 4.4 4.4 4.3 4.9
Asset turnover................. 1.4 1.4 1.6 1.6 1.7 1.8
Long-term debt to
capitalization............... 46.3% 49.1 35.2 37.9 45.3 45.1
Year-end employees (actual
number)...................... 6,880 6,340 6,940 6,670 7,860 6,880
Sales per employee (000's)..... $ 67.7 66.1 75.4 77.0 77.9 79.0
STOCK DATA
High......................... $ 39.00 38.25 36.00 44.25 35.25 19.88
Low.......................... 12.75 17.25 18.75 22.50 14.63 12.25
Close........................ 18.75 22.50 31.50 30.00 19.50 13.13
P/E ratios:
High......................... N/M N/M 56.3 88.5 62.9 N/M
Low.......................... N/M N/M 29.3 45.0 26.1 N/M
Trading volume (shares)...... 4,080 3,873 6,586 8,260 6,473 9,599

<CAPTION>
ONE-YEAR CHANGES
1995 VS. 1994
<S> <C>
OPERATING STATEMENT DATA
Net sales...................... 3.9%
Cost of sales.................. 7.1
Gross profit................. (10.1)
Selling, general and
administrative expenses...... 7.9
Restructuring expense.......... N/M
Operating income (loss)........ N/M
Other deductions:
Interest expense............. 32.0
Other (net).................. 115.0
Earnings (loss) before income
taxes........................ N/M
Income tax expense (benefit)... N/M
Net earnings (loss)............ N/M
Depreciation................... (10.4)
Amortization................... 2.4
Cash dividends paid............ (24.7)
Weighted average shares
outstanding.................. 0.3
PER SHARE DATA
Net sales...................... 3.6
Net earnings (loss)............ N/M
Cash dividends................. (25.0)
Year-end book value............ (17.9)
BALANCE SHEET DATA
Net working capital............ (35.7)
Net property, plant and
equipment.................... (24.6)
Total assets................... (17.4)
Long-term debt................. (21.6)
Shareholders' equity........... (17.6)
RATIOS, OTHER
Gross profit margin............
Operating profit (loss)
margin.......................
Return (loss) on sales.........
Effective income tax rate......
Dividend payout ratio..........
Return (loss) on beginning
assets.......................
Return (loss) on beginning
equity.......................
Current ratio..................
Inventory turnover.............
Asset turnover.................
Long-term debt to
capitalization...............
Year-end employees (actual
number)......................
Sales per employee (000's).....
STOCK DATA
High.........................
Low..........................
Close........................
P/E ratios:
High.........................
Low..........................
Trading volume (shares)......
</TABLE>

NOTES: Long-term debt excludes current installments. Capitalization defined
as net working capital plus noncurrent assets. Fiscal year 1992
comprised 53 weeks; all other years comprised 52 weeks. P/E ratios
based on yearly net earnings per share. Stock price data for
calendar years. N/M = Not meaningful. Sales per employee based on
monthly employee average. All stock data has been adjusted to
reflect the 1 for 3 reverse stock split effective May 16, 1995.
Fournier Furniture is included in consolidated results from its
acquisition date of July 2, 1992, and Pilliod Furniture from its
acquisition date of January 31, 1994.

A-9

<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

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.

<TABLE>
<CAPTION>
1993 1994 1995
<S> <C> <C> <C>
Net sales............................................................................................ 100.0% 100.0% 100.0%
Cost of sales........................................................................................ 81.9 81.5 84.0
Gross profit....................................................................................... 18.1 18.5 16.0
Selling, general and administrative expenses......................................................... 15.7 15.9 16.5
Restructuring expense................................................................................ -- -- 4.1
Operating income (loss)............................................................................ 2.4 2.6 (4.6)
Other deductions, net................................................................................ 1.2 1.8 2.5
Earnings (loss) before income taxes................................................................ 1.2 0.8 (7.1)
Income tax expense (benefit)......................................................................... 0.5 0.1 (3.0)
Net earnings (loss)................................................................................ 0.7% 0.7% (4.1)%
</TABLE>

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 December 30, 1995.

FISCAL 1995 RESTRUCTURING OF THE COMPANY

During the second quarter of 1995, the Company recorded a $25,696,000
non-cash restructuring charge as a result of the Company's plan to divest four
operating companies (Brown Jordan Company, Fournier Furniture, Daystrom
Furniture and Lea Lumber & Plywood), close four company-owned retail stores, and
reorganize the remaining companies to improve operating performance. During the
fourth quarter of 1995, the Company recorded a $2,121,000 net decrease in
restructuring expense as a result of finalizing sales of two of the operating
companies and the revision of the fair value of the remaining two operating
companies. Also, during the fourth quarter of 1995, the Company recorded
additional charges of $1,264,000 for executive severance resulting from the
Company's decision to realign management for its casegoods, upholstery and
contract operations and $281,000 of other miscellaneous expenses. As part of the
1995 restructuring, the Company was reorganized along its three principal
product lines: (i) the Casegoods Group; (ii) the Upholstery Group; and (iii) the
Contract Sales Group.

The net restructuring charge of $25,120,000 for the year ended December 30,
1995 consisted of: (a) $17,379,000 to write-down businesses sold or held for
sale to the estimated fair value, net of disposition expenses; (b) $3,699,000 to
increase reserves for costs associated with closing four retail stores; (c)
$2,614,000 to provide for severance expense and other costs; and (d) $1,428,000
to write-down selected machinery to estimated fair value because of changes in
manufacturing processes.

On December 29, 1995, the Company sold its wholly-owned subsidiary Brown
Jordan Company (Brown Jordan) and certain related intellectual property rights
for $24,000,000 in cash and a 12% interest, on a fully diluted basis, in the
purchaser. The 12% interest in the purchaser is valued at $2,200,000. On
December 29, 1995, the Company also sold substantially all of the assets of its
Lea Lumber & Plywood (LL&P) division for cash of approximately $4,004,000 and a
$1,000,000 subordinated note. The Company used the net cash proceeds from the
above divestitures to pay down its long-term debt. For the businesses held for
sale at December 30, 1995, the estimated fair value of their aggregate net
assets was reported as a separate line item in the Company's consolidated
balance sheet, while their 1995 operating results were consolidated with those
of the Company in the consolidated statement of operations.

During January 1996, definitive sale agreements were signed for Fournier
Furniture and Daystrom Furniture. On February 26, 1996, the Company completed
the sale of Fournier Furniture for cash and a subordinated note totalling
approximately $10.0 million and the purchaser's assumption of approximately $1.9
million of Industrial Revenue Bonds. The amount of the subordinated note is
subject to finalization of a post-closing working capital adjustment.

A-10

<PAGE>
In addition to the restructuring charge, the Company also recorded a $10.2
million non-cash charge during 1995's second quarter. This charge was incurred
to write off unamortized bank financing fees and, in light of furniture industry
conditions, to increase reserves for slow-moving and discontinued inventories,
provide for potential bad debts and recognize other liabilities.

These 1995 pretax non-cash charges resulted in a substantial loss for the
entire year, on both a pretax and an after-tax basis. Management believes the
actions represented by these charges will reposition the Company to achieve
improved long-term operating performance within the U.S. residential furniture
manufacturing industry.

FISCAL 1995 COMPARED TO 1994

Consolidated net sales for fiscal 1995 rose $22.9 million, or 3.9%, to a
record $614.5 million. On a pro forma basis, assuming Pilliod Furniture had been
acquired at the beginning of fiscal 1994, the fiscal 1995 consolidated net sales
increase would have been 2.5%. The reported increase of $22.9 million consisted
of a $25.5 million, or 5.3%, increase in net sales of the ongoing businesses,
partially offset by a cumulative decline of $2.6 million, or 2.4%, in net sales
of the businesses sold or being held for sale.

Of the $498.7 million in net sales recorded during fiscal 1995 by the
ongoing businesses, approximately $284.4 million represented residential
casegoods volume, approximately $124.5 million represented residential
upholstery volume, and contract volume represented approximately $68.5 million.
The balance of 1995 sales, totalling approximately $21.3 million, represented
"other" business, primarily revenues from the Company's trucking operations and
from the sale of home furnishings accessories. The Company's 1995 sales trends
were in line with the general industry pattern of stronger upholstery sales than
casegoods sales. The Company's total residential upholstery sales for fiscal
1995 rose by $18.1 million, or 17.0%, while total residential casegoods sales
for the year decreased $14.1 million, or 4.7%, from fiscal 1994's level. Total
fiscal 1995 net sales of the Company's contract business, including the sale of
accessories, rose by $13.0 million, or 23.4%, compared to the prior year.
Aggregate international net sales fell by $5.4 million, or 16.0%, from fiscal
1994 levels, primarily due to reduced 1995 exports to Canada and, following the
devaluation of the peso in late 1994, Mexico.

Cost of goods sold increased by $34.0 million, or 7.1%, in fiscal 1995 and
represented 84.0% of net sales in the most recent year, up from 81.5% in fiscal
1994. Materials, labor and overhead costs all increased as a percentage of net
sales in 1995, with the labor component showing the largest year-over-year
growth. The labor increase resulted largely from the casegoods companies
manufacturing parts they had previously purchased and machine setup times not
being fully absorbed due to smaller cut quantities. Materials price increases,
which had been a major negative factor in 1994, moderated to a degree during
1995, particularly in the areas of hardwood lumber and particleboard, although
these costs remain at fairly high levels on a historical basis. Further
negatively impacting 1995 margins was a 7.5% decrease in production to reduce
inventory levels of the casegoods group resulting in unusually high amounts of
unabsorbed fixed overhead costs. An additional depressant on the 1995 gross
margin was the non-cash charge (totalling $5.3 million) taken in the second
quarter to increase reserves for slow-moving and discontinued inventories. As a
result of these factors, the Company's fiscal 1995 gross margin declined to a
historical yearly low of 16.0%, compared to fiscal 1994's 18.5% gross margin.

Selling, general and administrative (SG&A) expenses rose to 16.5% of net
sales, compared to 15.9% in fiscal 1994. This increase was primarily
attributable to the second quarter non-cash charge (totalling $2.3 million) to
increase the Company's bad debt reserves and provide for other miscellaneous
expenses, as well as higher costs associated with the Company's accounts
receivables securitization program, which was in place for all of 1995 and
carried larger average balances and discount rates than in fiscal 1994.

Other deductions increased in the aggregate to 2.5% of fiscal 1995's net
sales from 1.8% of prior year's net sales. Interest expense rose $2.9 million,
despite average outstanding borrowings for fiscal 1995 remaining approximately
the same as in the prior year, due to increases in short-term interest rates and
an amendment to the Company's long-term credit facility (discussed below), which
resulted in a significantly higher borrowing rate for the Company beginning in
August 1995. All other deductions rose to 0.6% of net sales from 0.3% in fiscal
1994, primarily due to establishment of a reserve for a note receivable relating
to a prior divestiture and the write-off of unamortized bank fees.

The principal reasons for the increase in the Company's fiscal 1995
effective tax rate to 42.0% from 14.1% in the previous year were tax benefits
realized from the utilization of capital loss carryforwards during the year (see
note 13) and various beneficial tax credits. The Company's effective income tax
rate for 1996 is expected to approximate the Federal tax rate of 34.0%.

A-11

<PAGE>
FOURTH QUARTER 1995 RESULTS

Net sales for the fourth quarter of 1995 rose in the aggregate by 4.7% from
1994's fourth quarter level. This overall increase consisted of a 3.8% rise in
net sales of the "ongoing" LADD business units and an 8.5% increase in combined
net sales of the four businesses sold or being held for sale. The fourth quarter
gross profit margin rose to 18.0% in 1995, from 16.4% in 1994. This increase was
primary due to the fact that the 1994 quarter gross margin was depressed by high
materials costs and unabsorbed overhead, and a favorable LIFO adjustment in the
1995 quarter resulting from a lower-than-anticipated rate of inflation and a
significant decrease in 1995 year-end inventory quantities.

SG&A expenses represented 16.9% of 1995's fourth quarter net sales, as
compared to 17.0% a year earlier. Management continues to closely monitor and
control the Company's SG&A expense.

A restructuring credit amounting to 0.4% of 1995 net sales was recorded in
1995's final three months relating to the sale at quarter-end of two of the four
businesses held for sale and the adjustment to fair value of the net assets of
the remaining two businesses, on which definitive sale agreements were executed
during January 1996. This adjustment was offset by expenses representing 0.3% of
net sales, attributable primarily to severance expenses accrued in conjunction
with the further restructuring of the Company's ongoing business units, which
was announced in June 1995 and continued into the year's final quarter.

Total other deductions represented 2.5% of net sales in the fiscal 1995
fourth quarter, compared to 2.4% in the same quarter a year earlier. The
increase was entirely due to higher interest expense incurred in the 1995 period
resulting from an increased bank borrowing rate.

These factors produced a pretax loss of $1.4 million, or 0.9%, of net sales
in 1995's final three months, compared to a $4.4 million pretax net loss (3.0%
of net sales) in the year-earlier quarter. Both periods were adversely affected
by relatively low gross margins, generally weak furniture industry conditions,
competitive pricing pressures and, in the case of the 1994 quarter, the
write-off of unamortized bank fees.

The high 1995 fourth quarter effective tax rate resulted primarily from the
utilization during the quarter of capital loss carryforwards.

FISCAL 1994 COMPARED TO 1993

Net sales increased $70.4 million, or 13.5%, to a record $591.6 million in
1994, compared to $521.2 million in 1993, largely as a result of the January 31,
1994 acquisition of Pilliod Furniture. On a pro forma basis, assuming the
acquisition of Pilliod Furniture had occurred at the beginning of fiscal year
1993, 1994 net sales decreased from prior year levels by 1.4%. The decrease in
the pro forma 1994 net sales was primarily due to the discontinuance of certain
American of Martinsville residential casegoods product lines, a reduction in
export shipments, and a decline in sales of lower-priced upholstery and
higher-priced casegoods products compared to 1993.

Cost of sales as a percentage of net sales decreased to 81.5% in 1994, from
81.9% in 1993, resulting in an increase in the 1994 gross profit margin to 18.5%
from 18.1% in 1993. The 1994 gross margin was positively impacted by Pilliod
Furniture's gross margin and operating efficiencies generated by the Company's
capital investment program, and negatively affected by higher raw material
costs, including particleboard, medium-density fiberboard, cartons and aluminum.
Additionally, 1994's gross margin was reduced by manufacturing disruptions
associated with the Company's Virginia manufacturing realignment started in
1993's second half and plant disruptions resulting from other capital projects
initiated during 1994. Further, selected plant downtime taken in the fourth
quarter to control inventory levels increased 1994's fourth quarter cost of
sales, negatively impacting gross margins.

Selling, general and administrative (SG&A) expenses were 15.9% of net sales
in 1994, compared to 15.7% in 1993. The increase was due to the costs associated
with the Company's accounts receivable securitization program which was
initiated in February 1994.

Other deductions totaled 1.8% of net sales in 1994, compared with 1.2% in
1993. The increase was primarily attributable to higher interest expense
reflecting the use of long-term debt to partially fund the Company's $31.8
million capital spending program and its $54.4 million Pilliod Furniture
acquisition (see note 3) coupled with rising interest rates. Additionally,
amortization expense increased in 1994 as a result of the Pilliod Furniture
acquisition.

The decrease in the Company's effective income tax rate from 40.0% in 1993
to 14.1% in 1994 resulted principally from reductions in income taxes derived
from state tax planning strategies and the utilization of capital loss
carryforwards.

A-12

<PAGE>
LIQUIDITY AND CAPITAL RESOURCES

Effective August 14, 1995, the Company's $190.0 million long-term
credit facility with a syndicate of banks was amended (the Amended
Facility - see note 9). At December 30, 1995, the Company had $110.1
million outstanding under the Amended Facility, comprised of a $48.1
million term loan, and short-term and long-term borrowings totalling
$62.0 million under a $115.0 million revolving credit line.
Additionally, the Company had other long-term indebtedness outstanding
at the same date, primarily fixed-rate industrial revenue bonds,
aggregating $5.8 million. In total, long-term and short-term debt
(funded debt) represented 45.8% of the Company's total capitalization at
the end of 1995, compared to 46.3% a year earlier. On December 30, 1995,
net working capital totaled $79.5 million and the current ratio was
2.3:1. Both of these financial measures were significantly below their
year-earlier levels, due to the current assets and liabilities of the
two remaining businesses held for sale being reported as a noncurrent
asset in the December 30, 1995 consolidated balance sheet (see note 2),
and the sale of Brown Jordan Company and Lea Lumber & Plywood effective
December 29, 1995, which generated cash in excess of $28.0 million that
was used to repay debt.

The Company's Amended Facility provides for the payment of a higher rate of
interest than the original facility and, based on current borrowing levels and
interest rates, would increase the Company's interest cost by approximately
$700,000 in 1996 compared to 1995 borrowing rates. In connection with the
amendment of the credit facility, the Company expensed approximately $525,000 of
unamortized fees from its original bank facility. Borrowings on the Amended
Facility are currently unsecured but will become subject to a lien on
substantially all the personal property assets of the Company effective March
31, 1996.

At December 30, 1995, $36.0 million of cash had been generated through the
Company's trade accounts receivable securitization program (see note 4). The
existing trade accounts receivable securitization program expires on March 30,
1996 and will not be renewed. The cash currently provided by this program will
be replaced by borrowings under the revolving credit line of the Company's
long-term credit facility. Management believes the Company's existing borrowing
capacity under its revolving credit facility ($53.0 million at December 30,
1995) is sufficient to refinance the additional working capital requirement.

During fiscal 1995, the Company generated net cash from operating
activities of $11.1 million, an increase of $8.3 million compared to the prior
year. The $11.1 million net cash from operating activities was generated
partially by cash flows from earnings after adding back depreciation,
amortization and restructuring expense, offset by a decrease in the net deferred
tax liability, which in the aggregate totalled $2.9 million. Additionally, a
decrease in working capital of $4.3 million positively impacted cash flows.

During fiscal 1995, capital spending totaled $11.6 million, down sharply
from the prior year's $31.8 million, as the major capital projects initiated
during fiscal years 1993 and 1994 were completed in early 1995 and a reduced
capital spending program was initiated by management. Capital expenditures
during 1995 and 1994 were funded largely from the operations of the Company and
borrowings under the Company's existing long-term credit facility. The Company
anticipates spending less than $12.0 million for capital improvements during
1996, and believes that the unused long-term credit lines available under its
banking arrangements, as well as cash generated from operations, will be
adequate to fund these planned investments.

Because of the Company's recent operating performance and in light of
current short-term and medium-term interest rates, the Company plans to
refinance its long-term and short-term bank credit facilities and its accounts
receivable securitization program. The Company anticipates that the refinancing
will be in the form of a term loan and revolving credit facility secured by
substantially all of the Company's assets. Borrowings under such a facility will
likely bear interest at rates above the Company's borrowing rate at December 30,
1995. In anticipation of such a refinancing, approximately $750,000 of
unamortized fees will be charged to operations during 1996's first quarter. The
Company anticipates the planned refinancing will be finalized during the second
quarter of 1996.

IMPACT OF INFLATION

Although the effects of inflation on the Company cannot be accurately
determined, in 1995 the impact of inflation affected the Company's manufacturing
costs in the areas of 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. Although 1995
margins were impacted by inflation, the Company's gross profit margins during
the past several years have, in general, been impacted more by promotional
selling discounts and plant downtime taken to curtail production

A-13

<PAGE>
than by inflation. The Company believes it will be able to largely offset the
effects of inflation by improving its manufacturing efficiency, increasing
employee productivity, substituting raw materials, and increasing the selling
prices of its products.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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 the Company's
Annual Report on Form 10-K 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 two
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 LLP, 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>
Fred L. Schuermann, Jr. William S. Creekmuir
President & Chief Executive Officer Executive Vice President & CFO
February 16, 1996 February 16, 1996
</TABLE>

A-14

<PAGE>
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 December 31, 1994 and December 30, 1995,
and the related consolidated statements of operations, shareholders' equity and
cash flows for each of the years in the three-year period ended December 30,
1995. 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 December 31, 1994 and December 30, 1995,
and the results of their operations and their cash flows for each of the years
in the three-year period ended December 30, 1995 in conformity with generally
accepted accounting principles.

KPMG PEAT MARWICK LLP

Greensboro, North Carolina
February 16, 1996, except for paragraph 4 of Note 2,
which is as of February 26, 1996

A-15

<PAGE>
LADD FURNITURE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

YEARS ENDED JANUARY 1, 1994, DECEMBER 31, 1994 AND DECEMBER 30, 1995

<TABLE>
<CAPTION>
1993 1994 1995
<S> <C> <C> <C>
DOLLAR AMOUNTS IN THOUSANDS,
EXCEPT SHARE DATA
Net sales................................................................................... $521,200 591,575 614,502
Cost of sales............................................................................... 426,921 481,994 515,980
Gross profit........................................................................... 94,279 109,581 98,522
Selling, general and administrative expenses................................................ 81,953 93,911 101,345
Restructuring expense -- NOTE 2............................................................. -- -- 25,120
Operating income (loss)................................................................ 12,326 15,670 (27,943)
Other deductions:
Interest expense -- NOTE 9................................................................ 5,542 8,939 11,798
Other, net -- NOTE 9...................................................................... 377 1,714 3,685
5,919 10,653 15,483
Earnings (loss) before income taxes.................................................... 6,407 5,017 (43,426)
Income tax expense (benefit) -- NOTE 13..................................................... 2,561 709 (18,236)
Net earnings (loss).................................................................... $ 3,846 4,308 (25,190)
Net earnings (loss) per common share........................................................ $ 0.50 0.56 (3.26)
Cash dividends per common share............................................................. $ 0.36 0.36 0.27
Weighted average number of common shares outstanding........................................ 7,685,751 7,696,689 7,720,783
</TABLE>

See accompanying notes to consolidated financial statements.

A-16

<PAGE>
LADD FURNITURE, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 30,
1994 1995
<S> <C> <C>
DOLLAR AMOUNTS IN THOUSANDS,
EXCEPT SHARE DATA
ASSETS
Current assets:
Cash........................................................................................... $ 576 1,272
Trade accounts receivable, less allowances for doubtful receivables, discounts, returns
and allowances of $4,294 and $4,057, respectively -- NOTES 4 AND 15......................... 52,735 38,288
Inventories -- NOTE 5.......................................................................... 122,083 89,466
Prepaid expenses and other current assets -- NOTE 13........................................... 10,053 13,663
Total current assets...................................................................... 185,447 142,689
Property, plant and equipment, net -- NOTES 6 AND 14............................................. 109,522 82,586
Businesses held for sale, net -- NOTE 2.......................................................... -- 8,052
Intangible and other assets, net -- NOTES 2 AND 7................................................ 83,847 79,659
$378,816 312,986
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt -- NOTE 9............................................... $ 687 309
Short-term bank borrowings -- NOTE 9........................................................... 5,000 3,037
Trade accounts payable......................................................................... 28,360 28,419
Accrued expenses and other current liabilities -- NOTES 2, 8 AND 13............................ 27,715 31,396
Total current liabilities................................................................. 61,762 63,161
Long-term debt, excluding current installments -- NOTE 9......................................... 143,584 112,598
Deferred compensation and other liabilities -- NOTES 11, 12 AND 14............................... 6,316 6,593
Deferred income taxes -- NOTE 13................................................................. 15,248 5,437
Total liabilities......................................................................... 226,910 187,789
Shareholders' equity -- NOTE 10:
Preferred stock of $100 par value. Authorized 500,000 shares; no shares issued................. -- --
Common stock of $.30 par value. Authorized 50,000,000 shares; issued 7,700,151 shares and
7,726,993 shares, respectively.............................................................. 2,310 2,318
Additional paid-in capital..................................................................... 49,516 49,905
Currency translation adjustment................................................................ (208) --
Retained earnings.............................................................................. 101,105 73,829
152,723 126,052
Less unamortized value of restricted stock..................................................... (817) (855)
Total shareholders' equity................................................................ 151,906 125,197
Commitments and contingencies -- NOTES 14 AND 15
$378,816 312,986
</TABLE>

See accompanying notes to consolidated financial statements.

A-17

<PAGE>
LADD FURNITURE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED JANUARY 1, 1994, DECEMBER 31, 1994 AND DECEMBER 30, 1995

<TABLE>
<CAPTION>
1993 1994 1995
<S> <C> <C> <C>
DOLLAR AMOUNTS IN THOUSANDS
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss)......................................................................... $ 3,846 4,308 (25,190)
Adjustments to reconcile net earnings (loss) to net cash provided by operating
activities:
Depreciation of property, plant and equipment............................................. 10,508 14,143 12,671
Amortization.............................................................................. 2,554 3,669 3,758
Restructuring expense..................................................................... -- -- 25,120
Provision for losses on trade accounts receivable......................................... 2,056 1,521 2,898
Gain on sales of property, plant and equipment............................................ (155) (89) (314)
Provision for deferred income taxes....................................................... 214 (1,204) (13,419)
Increase in deferred compensation and other liabilities................................... 1,840 1,388 1,297
Change in assets and liabilities, net of effects from acquisition and divestures and
classification of businesses held for sale:
Increase in trade accounts receivable.................................................. (5,188) (2,517) (7,988)
(Increase) decrease in inventories..................................................... (5,063) (10,709) 8,126
(Increase) decrease in prepaid expenses and other current assets....................... 61 (1,886) (2,084)
Increase (decrease) in trade accounts payable.......................................... 310 (2,496) 3,608
Increase (decrease) in accrued expenses and other current liabilities.................. (2,239) (3,313) 2,607
Total adjustments......................................................................... 4,898 (1,493) 36,280
Net cash provided by operating activities.............................................. 8,744 2,815 11,090
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Pilliod Furniture, net of cash acquired -- NOTE 3.......................... -- (23,847) --
Additions to property, plant and equipment................................................ (24,666) (31,825) (11,560)
Proceeds from sales of property, plant and equipment...................................... 425 962 191
Proceeds from sales of businesses -- NOTE 2............................................... -- -- 28,004
Additions to intangible and other assets.................................................. (724) (1,150) (3,715)
Net cash provided by (used in) investing activities.................................... (24,965) (55,860) 12,920
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings........................................................ 19,654 136,666 330
Proceeds from (repayments of) short-term bank borrowings.................................. -- 5,000 (1,963)
Proceeds from sales of trade accounts receivable.......................................... -- 32,485 3,515
Proceeds from sale leaseback of equipment................................................. -- 14,566 6,691
Proceeds from sale leaseback of other assets.............................................. -- 1,360 --
Principal payments of long-term debt...................................................... (1,155) (135,020) (29,743)
Proceeds from common stock issued......................................................... 94 23 8
Dividends paid............................................................................ (2,767) (2,771) (2,086)
Net cash provided by (used in) financing activities.................................... 15,826 52,309 (23,248)
EFFECT OF EXCHANGE RATE CHANGES ON CASH..................................................... (81) (38) (66)
Net increase (decrease) in cash........................................................... (476) (774) 696
Cash at beginning of year................................................................... 1,826 1,350 576
Cash at end of year......................................................................... $ 1,350 576 1,272
</TABLE>

See accompanying notes to consolidated financial statements.

A-18

<PAGE>
LADD FURNITURE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

YEARS ENDED JANUARY 1, 1994, DECEMBER 31, 1994 AND DECEMBER 30, 1995
<TABLE>
<CAPTION>
UNAMORTIZED
NUMBER ADDITIONAL CURRENCY VALUE OF
OF SHARES COMMON PAID-IN TRANSLATION RETAINED RESTRICTED
ISSUED STOCK CAPITAL ADJUSTMENT EARNINGS STOCK
<S> <C> <C> <C> <C> <C> <C>
DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA
BALANCE AT JANUARY 2, 1993...................... 7,674,508 $2,302 48,681 (89) 98,489 (659)
Shares issued in connection with incentive
stock option plan.......................... 3,890 1 90 -- -- --
Shares issued in connection with and
amortization of employee restricted
stock awards............................... 10,321 3 415 -- -- (128)
Currency translation adjustment............... -- -- -- (81) -- --
Net earnings.................................. -- -- -- -- 3,846 --
Dividends paid................................ -- -- -- -- (2,767) --
BALANCE AT JANUARY 1, 1994...................... 7,688,719 2,306 49,186 (170) 99,568 (787)
Shares issued in connection with incentive
stock option plan.......................... 782 -- 19 -- -- --
Repurchase of restricted stock................ (6,142) (1 ) (170) -- -- 170
Shares issued in connection with and
amortization of employee restricted
stock awards............................... 16,792 5 481 -- -- (200)
Currency translation adjustment............... -- -- -- (38) -- --
Net earnings.................................. -- -- -- -- 4,308 --
Dividends paid................................ -- -- -- -- (2,771) --
BALANCE AT DECEMBER 31, 1994.................... 7,700,151 2,310 49,516 (208) 101,105 (817)
Repurchase of restricted stock................ (2,452) (1 ) (68) -- -- 68
Shares issued in connection with and
amortization of employee restricted
stock awards............................... 29,294 9 457 -- -- (106)
Currency translation adjustment............... -- -- -- (66) -- --
Reclassification to businesses held for
sale....................................... -- -- -- 274 -- --
Net loss...................................... -- -- -- -- (25,190) --
Dividends paid................................ -- -- -- -- (2,086) --
BALANCE AT DECEMBER 30, 1995.................... 7,726,993 $2,318 49,905 -- 73,829 (855)

<CAPTION>
TOTAL
SHAREHOLDERS'
EQUITY
(NOTE 10)
<S> <C>
BALANCE AT JANUARY 2, 1993...................... 148,724
Shares issued in connection with incentive
stock option plan.......................... 91
Shares issued in connection with and
amortization of employee restricted
stock awards............................... 290
Currency translation adjustment............... (81)
Net earnings.................................. 3,846
Dividends paid................................ (2,767)
BALANCE AT JANUARY 1, 1994...................... 150,103
Shares issued in connection with incentive
stock option plan.......................... 19
Repurchase of restricted stock................ (1)
Shares issued in connection with and
amortization of employee restricted
stock awards............................... 286
Currency translation adjustment............... (38)
Net earnings.................................. 4,308
Dividends paid................................ (2,771)
BALANCE AT DECEMBER 31, 1994.................... 151,906
Repurchase of restricted stock................ (1)
Shares issued in connection with and
amortization of employee restricted
stock awards............................... 360
Currency translation adjustment............... (66)
Reclassification to businesses held for
sale....................................... 274
Net loss...................................... (25,190)
Dividends paid................................ (2,086)
BALANCE AT DECEMBER 30, 1995.................... 125,197
</TABLE>

See accompanying notes to consolidated financial statements.

A-19

<PAGE>
LADD FURNITURE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS

Following the completion of the restructuring described in note 2, the
Company continues to be one of the largest residential furniture manufacturers
in the United States with 20 manufacturing facilities in eight states. The
Company's products consist principally of casegoods and upholstery furniture in
a wide range of styles for bedrooms, family rooms, dining rooms and living rooms
in the low-medium to high-medium price ranges for the residential and contract
(principally hotel/motel) markets. Residential casegoods, residential upholstery
and contract products comprised approximately 46%, 20% and 11%, respectively, of
the Company's 1995 net sales. The Company currently sells to more than 8,000
customers, including retail furniture chains, national general retailers,
department stores, independent furniture retailers, major hotel chains and
others located throughout the United States and overseas.

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 1994 ended December 31,
1994; and fiscal year 1995 ended December 30, 1995.

INVENTORIES

Approximately 66% in 1994 and 71% in 1995 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 1994 and 1995 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.

The Company accounts for any impairment of property, plant and equipment
under the provisions of Statement of Financial Accounting Standards No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of. This statement requires that long-lived assets be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of those assets may not be recoverable.

REVENUE RECOGNITION

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 described above. 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 being held for sale 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 were accumulated in a separate component of
shareholders' equity until June 1995, at which time the balance was transferred
to businesses held for sale. Gains and losses resulting from foreign currency
transactions are included in net earnings (loss).

INCOME TAXES

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, liabilities, and loss and tax credit carryforwards at
income tax rates

A-20

<PAGE>
LADD FURNITURE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED
expected to be in effect when such amounts are realized or settled. 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

On May 12, 1995, shareholders approved a one-for-three reverse split of the
Company's common stock which became effective May 16, 1995. All share and per
share data presented in the accompanying consolidated financial statements have
been restated for this one-for-three stock split. Earnings per share are
calculated based upon the weighted average number of common shares outstanding
during each fiscal year, as restated for the reverse stock split. 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 acquired 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. The assessment of the recoverability of the excess of cost over the
assigned value of net assets acquired will be impacted if estimated future
operating cash flows are not achieved.

PENSION AND OTHER POSTRETIREMENT PLANS

The Company and several of its subsidiaries have defined benefit pension
plans covering qualified salaried and hourly employees. The benefits are based
on years of service and the employee's final average compensation before
retirement. The cost of these programs is being funded currently.

The Company also provides certain health care benefits for certain retired
employees. The Company measures the costs of its obligation based on its best
estimate. The net periodic costs are recognized as employees render the services
necessary to earn the postretirement benefits.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amount of cash, trade accounts receivable, prepaids and other
current assets, short-term bank borrowings, trade accounts payable and accrued
expenses and other current liabilities approximates fair value because of the
short maturity of these financial instruments.

The fair value of the Company's long-term debt is estimated by discounting
the future cash flows at rates currently offered to the Company for similar debt
instruments of comparable maturities. The fair value of the Company's long-term
debt approximates the face value of the debt due to the variable interest rates
on the majority of long-term debt at December 30, 1995.

USE OF ESTIMATES

Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these consolidated financial
statements in conformity with generally accepted accounting principles. Actual
results could differ from those estimates.

NOTE 2: RESTRUCTURING AND PLANNED DIVESTITURES

A-21

<PAGE>
LADD FURNITURE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 2: RESTRUCTURING AND PLANNED DIVESTITURES -- CONTINUED
for executive severance resulting from the Company's decision to realign
management for its casegoods, upholstery and contract operations and $281,000 of
other miscellaneous expenses. The net restructuring charge of $25,120,000 for
the year ended December 30, 1995 consisted of: (a) $17,379,000 to write-down
businesses sold or held for sale to the estimated fair value, net of disposition
expenses; (b) $3,699,000 to increase reserves for costs associated with closing
four retail stores; (c) $2,614,000 to provide for severance expense and other
costs; and (d) $1,428,000 to write-down selected machinery to estimated fair
value because of changes in manufacturing processes.

On December 29, 1995, the Company sold its wholly-owned subsidiary Brown
Jordan Company (Brown Jordan) and certain related intellectual property rights,
for $24,000,000 in cash and a 12% interest, on a fully diluted basis, in the
purchaser. The 12% interest in the purchaser, valued at $2,200,000, is recorded
at the lower of cost or market and is included in intangible and other assets in
the accompanying December 30, 1995 consolidated balance sheet. On December 29,
1995, the Company also sold substantially all of the assets of its Lea Lumber &
Plywood (LL&P) division, for cash of approximately $4,004,000 and a $1,000,000
subordinated note, which is included in intangible and other assets in the
accompanying December 30, 1995 consolidated balance sheet. The Company used the
net cash proceeds from the above divestitures to pay down its long-term debt.
The noncash proceeds were pledged by the Company as partial collateral for
long-term debt payable to its syndicate of banks.

The Company has signed sales contracts for the remaining two operating
companies held for sale which are scheduled to close during the first quarter of
1996. The following information shows the components included in businesses held
for sale:

<TABLE>
<CAPTION>
DECEMBER 30,
1995
<S> <C>
IN THOUSANDS
Trade accounts receivable, net.......................................................... $ 9,114
Inventories, net........................................................................ 10,400
Other current assets.................................................................... 413
Property, plant and equipment, net...................................................... 9,186
Current liabilities..................................................................... (4,454)
Long-term debt.......................................................................... (1,951)
Currency translation adjustment......................................................... 274
Total assets, net....................................................................... 22,982
Less adjustment to write-down businesses held for sale to the estimated fair value...... (14,930)
$ 8,052
</TABLE>

On February 26, 1996, the Company sold its wholly-owned subsidiary Fournier
Furniture, Inc. for cash and a subordinated note totalling approximately $10.0
million and the purchaser's assumption of approximately $1.9 million of
Industrial Revenue Bonds. The amount of the subordinated note is subject to
finalization of a post-closing working capital adjustment.

Businesses held for sale are valued using management's best estimate of the
amounts expected to be realized on the sale of the two operating companies.
However, the amount the Company will ultimately realize could differ materially
from the amounts assumed in arriving at the loss on the write-down to the
estimated fair value.

The following unaudited pro forma information shows consolidated operating
results for the periods presented as though the Company had divested the four
operating companies and closed four company-owned retail stores as of January 2,
1993, excluding the restructuring expense recorded during 1995:

<TABLE>
<CAPTION>
1993 1994 1995
<S> <C> <C> <C>
IN THOUSANDS (UNAUDITED)
Net sales....................................................................... $413,955 475,605 498,747
Earnings (loss) before interest and income taxes................................ 10,331 11,486 (3,973)
</TABLE>

A-22

<PAGE>
LADD FURNITURE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 2: RESTRUCTURING AND PLANNED DIVESTITURES -- CONTINUED
The costs charged against restructuring reserves associated with items (b)
and (c) in the first paragraph of the footnote above include the following:

<TABLE>
<CAPTION>
1995
<S> <C>
IN THOUSANDS
Restructuring reserve, beginning.................................................................... $ 6,313
Write-off of excess of cost over the assigned value of net assets acquired.......................... (1,037)
Write-off of leasehold improvements................................................................. (215)
Lease termination costs............................................................................. (406)
Write-down of equipment............................................................................. (90)
Severance........................................................................................... (184)
Other............................................................................................... (417)
Restructuring reserve, December 30, 1995............................................................ $ 3,964
</TABLE>

NOTE 3: ACQUISITION

On January 31, 1994, the Company acquired The Pilliod Cabinet Company, a
manufacturer of promotionally priced casegoods furniture, by purchasing all of
the common stock of its parent company, Pilliod Holding Company (Pilliod), for
$24,259,000 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 the assigned value of net assets acquired was approximately
$32,826,000 and is being amortized using the straight-line method over 40 years.
The acquisition was accounted for as a purchase and accordingly, the net assets
and operations of Pilliod have been included in the Company's consolidated
financial statements beginning on the acquisition date.

NOTE 4: ACCOUNTS RECEIVABLE SECURITIZATION PROGRAM

During fiscal year 1994, the Company entered into a revolving accounts
receivable facility. The facility was revised in March 1995 and provides for the
true sale of a defined pool of trade accounts receivable through a wholly-owned
subsidiary to a third-party purchaser. Under the revised agreement, which
expires in March 1996, the maximum amount of the purchaser's investment can be
$40,000,000 and is subject to change based on the level of eligible receivables
and concentrations of receivables.

At December 31, 1994 and December 30, 1995, the defined pool of trade
accounts receivable totaled approximately $42,848,000 and $46,430,000,
respectively, and the purchaser's investment totaled $32,485,000 and
$36,000,000, respectively. The purchaser's average investment for 1994 and 1995
was approximately $28,969,000 and $35,011,000, respectively. The net cash
proceeds from the sales of trade accounts receivable are reported as financing
activities in the accompanying consolidated statements of cash flows for the
years ended December 31, 1994 and December 30, 1995. The purchaser's investment
is reflected as a reduction of trade accounts receivables in the accompanying
consolidated balance sheets. At December 31, 1994 and December 30, 1995, the
Company retained an ownership interest in the receivables pool of approximately
$10,363,000 and $10,430,000, respectively, of which approximately $8,090,000 and
$9,065,000, respectively, was subordinate to that of the purchaser. The Company
maintains reserves which approximate the risk of loss relating to its interest
in the receivables. The Company's ongoing obligations with respect to the
receivables pool are limited to the subordinated portion of its ownership
interest.

A portion of the cost of the accounts receivable securitization program is
based on the purchaser's level of investment and borrowing costs. The total cost
of the program, which aggregated $1,458,000 and $2,585,000 in 1994 and 1995,
respectively, is included in selling, general and administrative expenses in the
accompanying 1994 and 1995 consolidated statements of operations.

A-23

<PAGE>
LADD FURNITURE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 5: INVENTORIES

A summary of inventories follows:

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 30,
1994 1995
<S> <C> <C>
IN THOUSANDS
Inventories on the FIFO cost method:
Finished goods..................................................................... $ 65,046 50,847
Work in process.................................................................... 23,084 17,165
Raw materials and supplies......................................................... 47,997 33,140
Total inventories on FIFO cost method......................................... 136,127 101,152
Less adjustments of certain inventories to the LIFO cost method...................... (14,044) (11,686)
$122,083 89,466
</TABLE>

NOTE 6: PROPERTY, PLANT AND EQUIPMENT

A summary of property, plant and equipment follows:

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 30,
1994 1995
<S> <C> <C>
IN THOUSANDS
Land and improvements................................................................ $ 6,592 4,356
Buildings and improvements........................................................... 78,381 70,780
Machinery and equipment.............................................................. 87,480 69,389
Construction in progress............................................................. 8,343 5,173
180,796 149,698
Less accumulated depreciation........................................................ (71,274) (67,112)
$109,522 82,586
</TABLE>

NOTE 7: INTANGIBLE AND OTHER ASSETS

A summary of intangible and other assets follows:

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 30,
1994 1995
<S> <C> <C>
IN THOUSANDS
Excess of cost over the assigned value of net assets acquired........................ $ 57,038 54,879
Trade names.......................................................................... 26,031 21,700
Furniture designs and patents........................................................ 9,750 8,815
Other................................................................................ 3,041 7,460
95,860 92,854
Less accumulated amortization........................................................ (12,013) (13,195)
$ 83,847 79,659
</TABLE>

A-24

<PAGE>
LADD FURNITURE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 8: ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

A summary of accrued expenses and other current liabilities follows:

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 30,
1994 1995
<S> <C> <C>
IN THOUSANDS
Payrolls, commissions and employee benefits.......................................... $ 15,291 16,775
Other................................................................................ 12,424 14,621
$ 27,715 31,396
</TABLE>

NOTE 9: SHORT-TERM BANK BORROWINGS AND LONG-TERM DEBT

Short-term bank borrowings under a revolving credit facility with a bank
totaled $5,000,000 and $3,037,000 at December 31, 1994 and December 30, 1995,
respectively. Borrowings under the facility bear interest at a rate based on the
availability of bank funds, and the average borrowing rate in 1994 and 1995 was
4.85% and 6.70%, respectively.

Long-term debt consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 30,
1994 1995
<S> <C> <C>
IN THOUSANDS
Term loan due at various dates through October 19, 1999.............................. $ 75,000 48,100
Revolving credit loan, due October 19, 1999.......................................... 61,100 59,000
Other indebtedness, primarily fixed-rate industrial revenue bonds, due through
2009............................................................................... 8,171 5,807
Total long-term debt............................................................ 144,271 112,907
Less current installments of long-term debt.......................................... 687 309
Long-term debt, excluding current installments.................................. $143,584 112,598
</TABLE>

On October 19, 1994, the Company entered into an amended and
restated credit agreement with a syndicate of banks which provided a
$75,000,000 five-year term loan and a $115,000,000 five-year revolving
credit loan. At December 30, 1995, the Company had available
approximately $53,000,000 for future borrowings under the revolving
credit loan. Effective August 14, 1995, the credit agreement was further
amended (the Amended Facility). The term loan portion of the Amended
Facility requires quarterly repayment of $3,607,500 commencing March
1997, with a final payment of the outstanding balance on October 19,
1999. In connection with amending the credit agreement, the Company in
1995 charged to operations approximately $525,000 in unamortized
financing fees.

The pricing of the Amended Facility is determined by a ratio of debt levels
to cash flows, as specified. At December 30, 1995, borrowings under the Amended
Facility bear interest at LIBOR (5.625%) plus 2 1/8%, prime (8.50%) plus 1 1/8%,
or at a lesser rate based on the availability of bank funds, and the Company
pays a commitment fee of 1/2% per annum on the unused portion of the revolving
credit loan. However, if prior to April 1, 1996 the Company reduces its term
loan balance by an additional $13,100,000, the interest rate on the Amended
Facility will be reduced by 1/8%. Borrowings under the Amended Facility are
unsecured but will become subject to a lien on substantially all the assets of
the Company effective March 30, 1996 if the term loan component of the facility
has not been reduced to $35,000,000 by that date. The Amended Facility requires
the maintenance of certain ratios pertaining to shareholders' equity and
operating earnings and contains covenants which relate to future borrowings,
liens on assets, specified amounts of consolidated net worth and capital
spending, and the operations of the Company. At December 30, 1995, the Company
was in compliance with all covenants under the Amended Facility.

The industrial revenue bonds are secured by property, plant and equipment
with a depreciated cost of approximately $4,923,000 at December 30, 1995.

A-25

<PAGE>
LADD FURNITURE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 9: SHORT-TERM BANK BORROWINGS AND LONG-TERM DEBT -- CONTINUED
The aggregate annual maturities of long-term debt during each of the five
fiscal years subsequent to December 30, 1995 are approximately as follows:
$309,000 in 1996; $14,678,000 in 1997; $14,742,000 in 1998; $78,330,000 in 1999;
and $4,763,000 in 2000.

Interest paid by the Company in 1993, 1994 and 1995 amounted to
approximately $4,995,000, $8,014,000 and $12,218,000, respectively.

NOTE 10: EMPLOYEE STOCK PLANS

STOCK OPTION PLAN

Under incentive stock option plans, the Company grants nontransferable
stock options to officers, key management employees and nonemployee directors.
Options are generally granted at fair market value on the dates of grant. All
optionees were employees or directors of the Company on the date of grant and
throughout the term of the option except in the case of death, retirement, or
disability.

A total of 788,889 shares were reserved for option under the previous and
current plans. 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, 1994
and 1995 follows:

<TABLE>
<CAPTION>
NUMBER OF OPTION PRICE
SHARES PER SHARE
<S> <C> <C>
Outstanding at January 2, 1993..................................................... 183,218 $18.00 - $68.28
Granted in 1993.................................................................... 45,367 $34.50 - $44.55
Exercised in 1993.................................................................. (3,890 ) $18.00 - $34.89
Cancelled in 1993.................................................................. (27,234 ) $18.00 - $68.28
Outstanding at January 1, 1994..................................................... 197,461 $21.75 - $48.39
Granted in 1994.................................................................... 188,645 $17.25 - $33.00
Exercised in 1994.................................................................. (782 ) $ 24.00
Cancelled in 1994.................................................................. (46,670 ) $17.25 - $43.14
Outstanding at December 31, 1994................................................... 338,654 $17.25 - $48.39
Granted in 1995.................................................................... 40,882 $13.25 - $17.34
Cancelled in 1995.................................................................. (127,358 ) $17.25 - $48.39
Outstanding at December 30, 1995................................................... 252,178 $13.25 - $44.55
Exercisable at December 30, 1995................................................... 98,871 $17.25 - $44.55
</TABLE>

RESTRICTED STOCK AWARDS

The board of directors periodically awards restricted common stock to key
management employees. 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, 1994 and 1995, the board of directors
awarded and issued 10,321, 16,792 and 29,294 shares, respectively.

NOTE 11: 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.

A-26

<PAGE>
LADD FURNITURE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 11: EMPLOYEE BENEFIT PLANS -- CONTINUED
In addition to the qualified plans, the Company has a nonqualified
retirement plan covering certain salaried employees. At December 31, 1994 and
December 30, 1995, the Company had approximately $450,000 and $538,000,
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>
<CAPTION>
DECEMBER 30,
DECEMBER 31, 1994 1995
ASSETS EXCEED ACCUMULATED ASSETS EXCEED
ACCUMULATED BENEFITS EXCEED ACCUMULATED
BENEFITS ASSETS BENEFITS
<S> <C> <C> <C>
IN THOUSANDS
Actuarial present value of benefit obligations:
Vested benefit obligation.......................................... $ (30,247) (973) (21,463)
Accumulated benefit obligation..................................... $ (30,819) (1,442) (21,797)
Projected benefit obligation for service rendered to date.......... (36,968) (2,384) (27,958)
Less plan assets at fair value, primarily equity and fixed
income investment funds.......................................... 35,798 -- 25,921
Projected benefit obligation in excess of plan assets.............. (1,170) (2,384) (2,037)
Unrecognized net obligation (asset) at transition being amortized
over 15 years.................................................... (572) -- 73
Unrecognized net (gain) loss....................................... (1,023) 589 (1,214)
Unrecognized prior service cost.................................... 1,933 534 1,396
Adjustment required to recognize minimum liability................. -- (181) --
Pension liability recognized in the consolidated balance
sheets........................................................... $ (832) (1,442) (1,782)

<CAPTION>
ACCUMULATED
BENEFITS EXCEED
ASSETS
<S> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation.......................................... (18,623)
Accumulated benefit obligation..................................... (19,037)
Projected benefit obligation for service rendered to date.......... (20,901)
Less plan assets at fair value, primarily equity and fixed
income investment funds.......................................... 17,384
Projected benefit obligation in excess of plan assets.............. (3,517)
Unrecognized net obligation (asset) at transition being amortized
over 15 years.................................................... (568)
Unrecognized net (gain) loss....................................... 2,315
Unrecognized prior service cost.................................... 644
Adjustment required to recognize minimum liability................. (527)
Pension liability recognized in the consolidated balance
sheets........................................................... (1,653)
</TABLE>

Net pension expense for the plans for 1993, 1994 and 1995 included the
following components:

<TABLE>
<CAPTION>
1993 1994 1995
<S> <C> <C> <C>
IN THOUSANDS
Service costs-benefits earned during the period.................................................. $ 1,915 2,374 2,047
Interest cost on projected obligation............................................................ 2,644 3,101 3,186
Return on assets................................................................................. (4,737) (121) (9,036)
Amortization of unrecognized net obligation (asset) at transition and net deferrals.............. 2,166 (2,522) 6,038
Net pension expense.............................................................................. $ 1,988 2,832 2,235
</TABLE>

The Company also recorded in 1995 a net curtailment gain resulting from the
Brown Jordan and LL&P divestitures totalling approximately $692,000. This
curtailment gain was included in determining the restructuring expense in the
1995 consolidated statement of operations.

The projected benefit obligation at December 31, 1994 and December 30, 1995
was determined using an assumed discount rate of 8.50% and 7.25%, respectively.
The salary plans assume a long-term rate of increase in compensation of 4.50% 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, $635,000 in 1994, and
$549,000 in 1995.

A-27

<PAGE>
LADD FURNITURE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 12: 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 1993, 1994 and
1995 are as follows:

<TABLE>
<CAPTION>
1993 1994 1995
<S> <C> <C> <C>
IN THOUSANDS
Service costs...................................................................................... $ 439 286 232
Interest costs of benefit obligation............................................................... 1,611 1,132 1,252
Amortization of transition obligation.............................................................. 1,031 759 759
$3,081 2,177 2,243
</TABLE>

The plans' funded status as of December 31, 1994 and 1995 was as follows:

<TABLE>
<CAPTION>
1994 1995
<S> <C> <C>
IN THOUSANDS
Accumulated postretirement benefit obligation:
Retirees.................................................................................. $ (9,758) (10,329)
Active participants eligible to retire.................................................... (3,739) (4,191)
Other active participants................................................................. (1,921) (2,480)
(15,418) (17,000)
Unrecognized net (gain) loss................................................................ (1,078) 338
Unrecognized transition obligation being amortized over 20 years............................ 13,665 12,906
Accrued postretirement benefit cost......................................................... $ (2,831) (3,756)
</TABLE>

During 1994, the Company amended its retiree health care plan to limit the
Company's contributions and to eliminate benefits for certain employees. The
effect of these amendments was to reduce the December 31, 1994 accumulated
postretirement benefit obligation and the unrecognized transition obligation by
approximately $5,163,000. Additionally, the effect of the change was to reduce
the net postretirement cost by approximately $801,000 in both 1994 and 1995.

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 8.00% in 1995 down
to 5.50% in 1997 and thereafter. A one percent annual increase in these assumed
cost trend rates would increase the accumulated postretirement benefit
obligation at December 30, 1995 by approximately $788,000 and the service and
interest cost components of the net postretirement benefit cost for 1995 would
be approximately the same. The assumed discount rate used in determining the
accumulated postretirement benefit obligation at December 31, 1994 and December
30, 1995 was 8.50% and 7.25%, respectively.

A-28

<PAGE>
LADD FURNITURE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 13: INCOME TAXES

Components of income tax expense (benefit) for 1993, 1994 and 1995 are as
follows:

<TABLE>
<CAPTION>
1993 1994 1995
<S> <C> <C> <C>
IN THOUSANDS
Current:
Federal......................................................................................... $1,855 1,769 (4,650)
State........................................................................................... 492 144 (167)
2,347 1,913 (4,817)
Deferred:
Federal......................................................................................... 199 (1,034) (11,521)
State........................................................................................... 15 (170) (1,898)
214 (1,204) (13,419)
$2,561 709 (18,236)
</TABLE>

The effective income tax rate on earnings (loss) before income taxes for
the years ended January 1, 1994, December 31, 1994 and December 30, 1995 was
40.0%, 14.1% and 42.0%, respectively. The actual income tax expense (benefit)
differs from the "expected" income tax expense (benefit) computed by applying
the Federal income tax rate of 34% to earnings (loss) before income taxes for
the years ended January 1, 1994, December 31, 1994 and December 30, 1995 as
follows:

<TABLE>
<CAPTION>
1993 1994 1995
<S> <C> <C> <C>
IN THOUSANDS
Computed "expected" income tax expense (benefit)................................................. $2,178 1,706 (14,765)
Increases (reductions) due to:
Restructuring and reorganization charges....................................................... -- -- (1,664)
State income taxes, net of Federal income tax benefit.......................................... 335 28 53
Amortization of the excess of cost over the assigned value of net assets acquired.............. 250 463 587
Expenses subject to percentage limitations..................................................... 45 130 117
Utilization of capital loss carryforwards to offset income tax expense of realized
capital gains............................................................................... -- (913) (1,655)
Tax credits, net............................................................................... (92) (230) (571)
Donation of appreciated property............................................................... -- (170) --
Foreign trade income exemptions................................................................ (99) (154) (193)
Other.......................................................................................... (56) (151) (145)
Actual income tax expense (benefit).............................................................. $2,561 709 (18,236)
</TABLE>

During 1993, the effect of enacted changes in tax rates was to increase
deferred income tax expense by approximately $469,000.

During the years ended January 1, 1994 and December 31, 1994, the Company
paid income taxes (net of refunds received) amounting to approximately
$1,863,000 and $2,030,000, respectively. During the year ended December 30,
1995, the Company received refunds (net of taxes paid) of approximately
$188,000. The Company expects to receive refunds of income taxes paid in the
three prior years as a result of the allowable carryback of the net operating
loss sustained in 1995.

A-29

<PAGE>
LADD FURNITURE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 13: INCOME TAXES -- CONTINUED
The tax effects of temporary differences and tax loss carryforwards that
give rise to significant portions of deferred tax assets and liabilities consist
of the following:

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 30,
1994 1995
<S> <C> <C>
IN THOUSANDS
Deferred tax liabilities:
Inventories........................................................................ $ (7,226) (7,092)
Property, plant and equipment...................................................... (8,315) (10,304)
Intangible and other assets........................................................ (8,420) (7,201)
Other.............................................................................. (2,428) (2,249)
Total deferred tax liabilities.................................................. (26,389) (26,846)
Deferred tax assets:
Accounts receivable................................................................ 1,727 1,854
Inventories........................................................................ 668 3,145
Liabilities and reserves........................................................... 7,212 10,465
Restructuring and reorganization................................................... -- 8,064
Capital loss carryforwards......................................................... 1,674 --
Net operating loss carryforwards................................................... 1,885 1,885
Other.............................................................................. 435 409
Gross deferred tax assets....................................................... 13,601 25,822
Valuation allowances............................................................... (3,540) (1,885)
Total deferred tax assets....................................................... 10,061 23,937
Net deferred tax liability........................................................... $(16,328) (2,909)
</TABLE>

Deferred taxes are classified in the accompanying consolidated balance
sheets as follows:

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 30,
1994 1995
<S> <C> <C>
IN THOUSANDS
Prepaid expenses and other current assets............................................ $ -- 2,528
Accrued expenses and other current liabilities....................................... (1,080) --
Deferred income taxes................................................................ (15,248) (5,437)
$(16,328) (2,909)
</TABLE>

A valuation allowance was provided for the deferred tax assets related to
capital loss carryforwards existing as of December 31, 1994. At that date, the
Company had approximately $4,225,000 of capital loss carryforwards available to
offset future capital gains, for which there was a $1,655,000 valuation
allowance. The full amount of the capital loss carryforwards were utilized in
1995 to offset a like amount of realized capital gains, and the full valuation
allowance of $1,655,000 was reduced accordingly.

In 1994, a valuation allowance was also provided for the deferred tax
assets related to acquired subsidiary net operating loss (NOL) carryforwards.
With the purchase of the Pilliod stock in January 1994, the Company recorded a
deferred tax asset of approximately $2,339,000 for Pilliod's NOL carryforwards
along with a valuation allowance of a like amount. NOL carryforwards of
approximately $1,150,000 were utilized later in 1994, and the valuation
allowance was reduced accordingly. The excess of cost over the assigned value of
net assets acquired decreased in 1994 approximately $453,000 in recognition of
the tax benefits resulting from the utilization of the NOL carryforwards. The
remaining NOL's of approximately $4,761,000 may be carried forward up to 13 more
years to offset future earnings, subject to normal annual limitations prescribed
by tax law. A valuation allowance of $1,885,000 remains in deferred taxes for
these unexpired NOL carryforwards. Tax benefits recognized subsequent to 1995
relating to the valuation allowance for deferred tax assets at December 30, 1995
will be applied to reduce the excess of cost over the assigned value of
Pilliod's net assets acquired.

A-30

<PAGE>
LADD FURNITURE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 13: INCOME TAXES -- CONTINUED
The Company believes that it is more likely than not the results of future
operations will generate sufficient taxable income to realize the remaining
deferred tax assets.

NOTE 14: 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 December 30, 1995 are:

<TABLE>
<CAPTION>
IN THOUSANDS
<S> <C>
Fiscal year:
1996.................................................................................... $ 10,489
1997.................................................................................... 9,298
1998.................................................................................... 7,602
1999.................................................................................... 6,752
2000.................................................................................... 4,474
Thereafter.............................................................................. 3,028
Total.............................................................................. $ 41,643
</TABLE>

In 1994 and 1995, the Company entered into sale leaseback agreements for
certain manufacturing equipment located at several of its manufacturing
facilities. These transactions have been recorded as sales. The cash proceeds
from the sales of approximately $14,566,000 and $6,691,000, respectively, were
used to repay long-term debt. The gains from the sales of approximately $683,000
and $323,000, respectively, have been recorded in the accompanying consolidated
balance sheets as deferred income and are being amortized into operations over
the term of the leases. Under the agreements, the Company will lease the
equipment over 69 months. The Company has the option to purchase the equipment
at the end of the lease terms.

In February 1996, the Company repurchased $4,648,000 of leased equipment
utilizing long-term debt in connection with the divestiture of Fournier
Furniture.

Rental expense for cancelable and noncancelable operating leases charged to
operations was as follows:

<TABLE>
<CAPTION>
IN THOUSANDS
<S> <C>
Fiscal year:
1993.................................................................................... $ 10,275
1994.................................................................................... 11,459
1995.................................................................................... 14,870
</TABLE>

Rental expense includes contingent rentals based upon usage of
transportation equipment under cancelable and noncancelable operating leases
which totaled approximately $650,000 in 1993, $762,000 in 1994, and $618,000 in
1995.

NOTE 15: 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 cancellation 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 December 31, 1994 and December 30, 1995 consolidated
balance sheets. Total notes receivable assigned during fiscal 1993, 1994 and
1995 were approximately $7,503,000, $4,286,000 and $2,703,000, respectively.

At December 30, 1995, the Company was contingently liable for approximately
$4,336,000 of receivables transferred with recourse to the bank under the dealer
financing arrangement for which the Company maintains a $2,800,000 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.

A-31

<PAGE>
LADD FURNITURE, INC. AND SUBSIDIARIES

SELECTED QUARTERLY DATA

DOLLAR AND SHARE DATA IN THOUSANDS, EXCEPT PER SHARE AMOUNTS
<TABLE>
<CAPTION>
FISCAL 1994 FISCAL 1995
4TH 3RD 2ND 1ST 4TH 3RD 2ND
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING STATEMENT DATA
Net sales................................... $146,172 153,182 153,182 139,039 152,981 159,144 148,989
Cost of sales............................... 122,242 123,640 122,657 113,455 125,379 130,549 133,492
Gross profit.............................. 23,930 29,542 30,525 25,584 27,602 28,595 15,497
Selling, general and administrative
expenses.................................. 24,784 23,562 23,996 21,569 25,792 23,402 28,335
Restructuring expense....................... -- -- -- -- (576 ) -- 25,696
Operating income (loss)................... (854) 5,980 6,529 4,015 2,386 5,193 (38,534)
Other deductions (income):
Interest expense.......................... 2,771 2,328 2,206 1,634 3,152 2,997 2,846
Other (net)............................... 793 445 524 (48 ) 661 163 2,687
Earnings (loss) before income taxes......... (4,418) 3,207 3,799 2,429 (1,427 ) 2,033 (44,067)
Income tax expense (benefit)................ (2,121) 962 1,094 774 (1,645 ) 142 (16,744)
Net earnings (loss)....................... $ (2,297) 2,245 2,705 1,655 218 1,891 (27,323)
Depreciation................................ $ 3,896 3,626 3,476 3,145 2,780 2,677 3,555
Amortization................................ 1,205 864 893 707 804 755 1,304
Cash dividends paid......................... 693 693 692 693 348 348 695
Weighted average shares outstanding......... 7,700 7,700 7,697 7,690 7,729 7,726 7,725
PER SHARE DATA
Net sales................................... $ 18.98 19.89 19.90 18.08 19.79 20.60 19.29
Net earnings (loss)......................... (0.30) 0.29 0.35 0.22 0.03 0.24 (3.54)
Cash dividends.............................. 0.09 0.09 0.09 0.09 0.05 0.05 0.09
Quarter-end book value...................... 19.73 20.11 19.89 19.63 16.20 16.21 16.00
BALANCE SHEET DATA
Net working capital......................... $123,685 92,421 96,349 104,454 79,528 84,929 89,109
Net property, plant and equipment........... 109,522 121,364 117,780 113,580 82,586 82,567 83,826
Total assets................................ 378,816 402,213 394,373 390,716 312,986 336,868 337,075
Long-term debt.............................. 143,584 125,782 126,967 130,635 112,598 140,182 145,287
Shareholders' equity........................ 151,906 154,821 153,138 151,104 125,197 125,224 123,578
RATIOS
Gross profit margin......................... 16.4% 19.3 19.9 18.4 18.0 18.0 10.4
Operating profit (loss) margin.............. (0.6) 3.9 4.3 2.9 1.6 3.3 (25.9)
Return (loss) on sales...................... (1.6) 1.5 1.8 1.2 0.1 1.2 (18.3)
Effective income tax rate................... 48.0 30.0 28.8 31.9 N/M N/M 38.0
Long-term debt to capitalization............ 45.3 42.1 42.5 43.4 45.1 50.7 51.8
STOCK DATA
High........................................ $ 19.50 24.00 27.75 35.25 13.63 14.13 16.88
Low......................................... 14.63 17.63 18.00 24.75 12.88 12.88 12.25
Close....................................... 19.50 18.00 21.00 26.25 13.13 13.00 13.00
Trading volume (shares)..................... 2,859 1,613 778 1,223 1,203 1,423 2,523

<CAPTION>
1ST
QUARTER
<S> <C>
OPERATING STATEMENT DATA
Net sales................................... 153,388
Cost of sales............................... 126,560
Gross profit.............................. 26,828
Selling, general and administrative
expenses.................................. 23,816
Restructuring expense....................... --
Operating income (loss)................... 3,012
Other deductions (income):
Interest expense.......................... 2,803
Other (net)............................... 174
Earnings (loss) before income taxes......... 35
Income tax expense (benefit)................ 11
Net earnings (loss)....................... 24
Depreciation................................ 3,659
Amortization................................ 895
Cash dividends paid......................... 695
Weighted average shares outstanding......... 7,705
PER SHARE DATA
Net sales................................... 19.91
Net earnings (loss)......................... 0.00
Cash dividends.............................. 0.09
Quarter-end book value...................... 19.57
BALANCE SHEET DATA
Net working capital......................... 133,260
Net property, plant and equipment........... 109,014
Total assets................................ 389,056
Long-term debt.............................. 153,102
Shareholders' equity........................ 151,176
RATIOS
Gross profit margin......................... 17.5
Operating profit (loss) margin.............. 2.0
Return (loss) on sales...................... 0.0
Effective income tax rate................... 31.4
Long-term debt to capitalization............ 47.0
STOCK DATA
High........................................ 19.88
Low......................................... 13.88
Close....................................... 14.63
Trading volume (shares)..................... 4,450
</TABLE>

NOTES: Long-term debt excludes current installments. Pilliod Furniture included
in consolidated results from its January 31, 1994 acquisition by LADD.
Stock price and volume data for calendar quarters. N/M = Not Meaningful.
All stock data has been adjusted to reflect the 1 for 3 reverse stock
split effective May 16, 1995.

A-32

<PAGE>
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 1995 and 1994.

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. With the exception of the information specifically required by Items
10, 11, 12 and 13 of this Part III contained in the Company's proxy statement,
the Company's proxy statement is not incorporated by reference nor deemed to be
filed as a part of this report, including without limitation the Board
Compensation Committee Report on Executive Compensation required by Item 402(k)
of Regulation S-K and the Performance Graph required by Item 402(l) of
Regulation S-K.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

See reference to definitive proxy statement under Part III. See pages 4-5;
15 in the Company's definitive proxy statement.

ITEM 11. EXECUTIVE COMPENSATION

See reference to definitive proxy statement under Part III. See pages 9-14
in the Company's definitive proxy statement.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

See reference to definitive proxy statement under Part III. See pages 2-3
in the Company's definitive proxy statement.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

See reference to definitive proxy statement under Part III. See pages 13-14
in the Company's definitive proxy statement.

A-33

<PAGE>
PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

<TABLE>
<CAPTION>
PAGE(S) IN THIS
FORM 10-K

<S> <C> <C> <C>
(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, December 31, 1994, and
December 30, 1995.................................................................................. 16

Consolidated Balance Sheets as of December 31, 1994 and December 30, 1995.......................... 17

Consolidated Statements of Cash Flows for the years ended January 1, 1994, December 31, 1994, and
December 30, 1995.................................................................................. 18

Consolidated Statements of Shareholders' Equity for the years ended January 1, 1994, December 31,
1994, and December 30, 1995........................................................................ 19

Notes to Consolidated Financial Statements......................................................... 20-31

Independent Auditors' Report....................................................................... 15

(2) Index to Financial Statement Schedule:

Independent Auditors' Report For the years ended January 1, 1994, December 31, 1994, and December
30, 1995........................................................................................... (F-1)

II -- Valuation and Qualifying Accounts and Reserves............................................... (F-2)

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 the named executive officers of the registrant as
required by Item 402(a)(2) of Regulation S-K

Executive Employment Agreements with each of Richard R. Allen, Fred L. Schuermann, Jr., William S.
Creekmuir, Kenneth E. Church, Donald L. Mitchell, and Michael P. Haley

LADD Furniture, Inc. Supplemental Retirement Income Plan

LADD Furniture, Inc. Long-Term Incentive Plan (1994)

LADD Furniture, Inc. Long-Term Incentive Plan (1995)

LADD Furniture, Inc. Long-Term Incentive Plan (1996)

LADD Furniture, Inc. 1996 Management Incentive Plan

(b) No reports on Form 8-K were filed in the last quarter of fiscal 1995.

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 and as Exhibit 10.1 to Item 6
of the Company's Quarterly Report on Form 10-Q for the quarter ended July 1, 1995, filed with the
Commission on August 15, 1995)

Enclosed as Exhibit 3.1 to this Annual Report on Form 10-K for the year ended December 30, 1995

3.1 Bylaws (as amended March 5, 1996)

10. LADD Furniture, Inc. 1994 Incentive Stock Option Plan

(Previously filed as Exhibit 10.1 to Item 6 of the Company's Quarterly Report on Form 10-Q for the
quarter ended July 2, 1994, filed with the Commission on August 16, 1994)
</TABLE>

A-34

<PAGE>
<TABLE>
<S> <C> <C> <C>
Employee Restricted Stock Purchase Agreement between the Company and Fred L. Schuermann, Jr. dated
February 25, 1993

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)

Employee Restricted Stock Purchase Agreement between the Company and Fred L. Schuermann, Jr. dated
February 24, 1994

Employee Restricted Stock Purchase Agreement between the Company and William S. Creekmuir dated
February 24, 1994

(Previously filed as Exhibits 10.3 and 10.4 to the Company's Annual Report on Form 10-K for the
year ended January 1, 1994, filed with the Commission on March 31, 1994)

Employee Restricted Stock Purchase Agreement between the Company and Fred L. Schuermann, Jr. dated
March 2, 1995

Employee Restricted Stock Purchase Agreement between the Company and William S. Creekmuir dated
March 2, 1995

(Previously filed as Exhibits 10.2 and 10.3 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1994, filed with the Commission on March 30, 1995.)

Enclosed as Exhibits 10.1 - 10.6 to this Annual Report on Form 10-K for the year ended December 30,
1995

10.1 Employee Restricted Stock Purchase Agreement between the Company and Kenneth E. Church dated
February 28, 1991.

10.2 Employee Restricted Stock Purchase Agreement between the Company and Kenneth E. Church dated
February 25, 1993.

10.3 Employee Restricted Stock Purchase Agreement between the Company and Kenneth E. Church dated
February 24, 1994.

10.4 Employee Restricted Stock Purchase Agreement between the Company and Kenneth E. Church dated
March 2, 1995.

10.5 Employee Restricted Stock Purchase Agreement between the Company and Michael P. Haley dated
June 23, 1994.

10.6 Employee Restricted Stock Purchase Agreement between the Company and Michael P. Haley dated
March 2, 1995.

Executive Employment Agreement between the Company and Fred L. Schuermann, Jr. dated October 28,
1994

(Previously filed as Exhibit 10.2 to Item 6 of the Company's Quarterly Report on Form 10-Q for the
quarter ended October 1, 1994, filed with the Commission on November 15, 1994)

Enclosed as Exhibits 10.7 - 10.10 to this Annual Report on Form 10-K for the year ended December
30, 1995

10.7 Executive Employment Agreement between the Company and William S. Creekmuir dated December 1,
1995.

10.8 Executive Employment Agreement between the Company and Kenneth E. Church dated May 22, 1995.

10.9 Executive Employment Agreement between the Company and Donald L. Mitchell dated January 1,
1996.

10.10 Executive Employment Agreement between the Company and Michael P. Haley dated March 5, 1996.

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 Commission on June 2, 1989)
</TABLE>

A-35

<PAGE>
<TABLE>
<S> <C> <C> <C>
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)

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)

Enclosed as Exhibit 10.11 - 10.13 to this Annual Report on Form 10-K for the year ended December
30, 1995

10.11 LADD Furniture, Inc. Long-Term Incentive Plan (1994)

10.12 LADD Furniture, Inc. Long-Term Incentive Plan (1995)

10.13 LADD Furniture, Inc. Long-Term Incentive Plan (1996)

Amended and Restated Credit Agreement, dated as of October 19, 1994, between the Company,
NationsBank of North Carolina, N.A. as agent, and each of the banks signatory to the Credit
Agreement

(Previously filed as Exhibit 10.1 to the Company's Current Report on Form 8-K, dated October 19,
1994, filed with the Commission on November 14, 1994)

First Amendment to Amended and Restated Credit Agreement dated as of February 16, 1995, between the
Company, NationsBank, N.A., as agent and each of the banks signatory thereto.

(Previously filed as Exhibit 10.4 to the Company's Report on Form 10-K for the year ended December
31, 1994, filed with the Commission on March 30, 1995).

Second Amendment to Amended and Restated Credit Agreement dated as of March 30, 1995, between the
Company, NationsBank, N.A., as agent, and each of the banks signatory thereto.

(Previously filed as Exhibit 10.4 to Item 6 of the Company's Quarterly Report on Form 10-Q for the
quarter ended April 1, 1995, filed with the Commission on May 10, 1995)

Third Amendment to Amended and Restated Credit Agreement dated as of August 14, 1995, between the
Company, NationsBank, N.A., as agent, and each of the banks signatory thereto.

(Previously filed as Exhibit 10.4 of Item 6 of the Company's Quarterly Report on Form 10-Q for the
quarter ended July 1, 1995, filed with the Commission on August 15, 1995.)

Equipment Leasing Agreement dated as of December 15, 1994 between BOT Financial Corporation and the
Company

Equipment Leasing Agreement dated as of December 15, 1994 between UnionBanc Leasing Corporation and
the Company

(Previously filed as Exhibits 10.1 and 10.2 to Item 7 of the Company's Current Report on Form 8-K,
dated December 28, 1994, filed with the Commission on January 15, 1995)

Amendment No. 1 dated as of June 7, 1995 to the Equipment Leasing Agreement dated as of December
15, 1994 between Unionbanc Leasing Corporation and the Company.

Amendment No. 1 dated as of June 7, 1995 to the Equipment Leasing Agreement dated as of December
15, 1994 between BOT Financial Corporation and the Company.

Amendment No. 1 dated as of June 15, 1995 amending Lease Supplement No. One to the Equipment
Leasing Agreement dated as of December 15, 1994 between BOT Financial Corporation and the Company.

(Previously filed as Exhibits 10.2 - 10.4 to Item 6 of the Company's Quarterly Report on Form 10-Q
for the quarter ended July 1, 1995, filed with the Commission on August 15, 1995)

Transfer and Administration Agreement dated as of March 30, 1995, between Enterprise Funding
Corporation, LADD Funding Corp., and LADD Furniture, Inc.
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<PAGE>
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<S> <C> <C> <C>
Receivables Purchase Agreement dated as of March 30, 1995, between LADD Funding Corp. and LADD
Furniture, Inc.

Receivables Purchase Agreement dated as of March 30, 1995, between LADD Furniture, Inc.,
Clayton-Marcus Company, Inc., Barclay Furniture Co., and Pilliod Furniture, Inc.

(Previously filed as Exhibits 10.1 - 10.3 to Item 6 of the Company's Quarterly Report on Form 10-Q
for the quarter ended April 1, 1995, filed with the Commission on May 10, 1995)

Stock Purchase Agreement dated November 7, 1995 between LADD Furniture, Inc. and BJCL, Inc.

First Amendment to Stock Purchase Agreement dated December 29, 1995 among LADD Furniture, Inc.,
BJCL, Inc. and BJ Acquisition Corp.

Agreement of Sale between BJIP, Inc. and Cherry Grove, Inc. dated December 29, 1995.

Asset Purchase Agreement dated November 6, 1995 between LADD Furniture, Inc. and Lea Lumber &
Plywood, L.L.C.

First Amendment to Asset Purchase Agreement dated December 29, 1995 between LADD Furniture, Inc.
and Lea Lumber & Plywood, L.L.C.

(Previously filed as Exhibits 2.1 - 2.5 to the Company's Current Report on Form 8-K dated December
29, 1995 filed with the Commission on January 16, 1996)

Stock Purchase Agreement dated January 5, 1996 among LADD Furniture, Inc., Fournier Furniture, Inc.
and Fournier Acquisition Co.

First Amendment to Stock Purchase Agreement dated February 26, 1996 among LADD Furniture, Inc.,
Fournier Furniture, Inc., Fournier Acquisition Co., and Furniture Acquisition Co.

(Previously filed as Exhibits 2.1 and 2.2 to the Company's Current Report on Form 8-K dated
February 26, 1996, filed with the Commission on March 12, 1996.)

Enclosed as Exhibit 10.14 to this Annual Report on Form 10-K for the year ended December 30, 1995

10.14 1996 Management Incentive Plan

22. Subsidiaries of Registrant

American Drew, Inc., a North Carolina corporation

American Furniture Company, Incorporated, a Virginia corporation

Barclay Furniture Co., a Mississippi corporation

Cherry Grove, Inc., a Delaware corporation (in process of being dissolved)

Clayton-Marcus Company, Inc., a North Carolina corporation

Kenbridge Furniture, Inc., a North Carolina corporation

LFI Capital Management, Inc., a Delaware corporation

LADD Contract Sales Corporation, a North Carolina corporation

LADD Funding Corp., a Delaware corporation

LADD International Sales Corp., a Barbados corporation

LADD Transportation, Inc., a North Carolina corporation

Lea Industries, Inc., a North Carolina corporation

Lea Industries, Inc., a Tennessee corporation

Lea Industries of Virginia, Inc., a Virginia corporation

Lea Lumber and Plywood Co., a Virginia corporation

Pennsylvania House, Inc., a North Carolina corporation

Pilliod Furniture, Inc., a North Carolina corporation
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A-37

<PAGE>
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<S> <C> <C> <C>
Enclosed as Exhibit 24.1 to this Annual Report on Form 10-K for the year ended December 30, 1995

24.1 Consent of KPMG Peat Marwick LLP

Enclosed as Exhibit 27.1 to this Annual Report on Form 10-K for the year ended December

27.1 Financial Data Schedule (EDGAR version only)
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<PAGE>
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, thereunto duly authorized.

LADD FURNITURE, INC.
(Registrant)

By: /s/ WILLIAM S. CREEKMUIR 3/28/96
WILLIAM S. CREEKMUIR (DATE)
EXECUTIVE 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 dates indicated.

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<S> <C>
/S/ DON A. HUNZIKER 3/28/96 /S/ RICHARD R. ALLEN 3/28/96
DON A. HUNZIKER (DATE) RICHARD R. ALLEN (DATE)
DIRECTOR DIRECTOR

/S/ O. WILLIAM FENN, JR. 3/28/96 /S/ DARYL B. ADAMS 3/28/96
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 3/28/96 /S/ JAMES H. CORRIGAN, JR. 3/28/96
THOMAS F. KELLER (DATE) JAMES H. CORRIGAN, JR. (DATE)
DIRECTOR DIRECTOR

/S/ WILLIAM B. CASH 3/28/96 /S/ L. GLENN ORR, JR. 3/28/96
WILLIAM B. CASH (DATE) L. GLENN ORR, JR. (DATE)
DIRECTOR DIRECTOR

/S/ FRED L. SCHUERMANN, JR. 3/28/96 /S/ WILLIAM S. CREEKMUIR 3/28/96
FRED L. SCHUERMANN, JR. (DATE) WILLIAM S. CREEKMUIR (DATE)
PRESIDENT, CHIEF EXECUTIVE OFFICER AND EXECUTIVE VICE PRESIDENT, CHIEF
DIRECTOR FINANCIAL OFFICER, SECRETARY, AND TREASURER
(PRINCIPAL FINANCIAL OFFICER)
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