10-K405
1
LADD FURNITURE INC. 10-K405
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994 Commission file
Number 0-11577
LADD FURNITURE, INC.
(Exact name of registrant as specified in its charter)
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)
Registrant's telephone number, including area code 910-889-0333
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock - $.10 par value
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes X No
___.
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K [X]
Market value of 18,801,855 shares held by nonaffiliates as of
March 27, 1995, was $91,659,043.
Indicate the number of shares outstanding of each of the
registrant's classes of common stock, as of the latest practicable date.
23,171,799 shares outstanding as of March 27, 1995
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive Proxy Statement for the 1994 Annual
Shareholders Meeting are incorporated by reference into Part III hereof.
Portions of the registrant's Annual Report to Shareholders for the year ended
December 31, 1994 are incorporated by reference into Part II and Part IV,
Item 14, hereof.
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PART I
ITEM 1. Business
General
LADD Furniture, Inc. is a vertically integrated manufacturer
that is primarily engaged in the design, manufacture and sale of
wood, metal, and upholstered furniture in various price ranges
through its operating entities consisting of wholly owned
subsidiaries and operating divisions. Unless the context
otherwise indicates, "LADD" and "Company" refer to LADD
Furniture, Inc., its divisions, and consolidated subsidiaries.
Significant Developments in 1994
Acquisition of Pilliod Furniture -- On January 31, 1994, the
Company acquired the furniture operations of The Pilliod Cabinet
Company through the purchase of all of the outstanding stock of
its parent company, Pilliod Holding Company. The Company's new
wholly-owned subsidiary, Pilliod Furniture, Inc. ("Pilliod") is a
major U.S. manufacturer of promotionally-priced, residential wood
furniture. Pilliod's master bedroom and other furniture lines
compliment products made and marketed by LADD's nine other
furniture companies.
Debt Financing -- On October 19, 1994, the Company completed
a refinancing of its long-term and short-term bank debt. The new
credit facility consists of a $75 million, five-year term loan
and a $115 million, five-year revolving credit facility. The new
credit facility is unsecured, reduces the Company's borrowing
rate, extends the amortization of the Company's term debt, and
provides expanded capacity to fund current and future needs.
LADD's Businesses
Lea Industries manufactures and sells wood furniture for the
youth and adult bedroom markets. Lea Industries' products
include beds, dressers, night stands, mirrors, desks,
bookshelves, hutches, armoires, and correlated modular furniture
in a variety of styles, including traditional, contemporary and
colonial. The products are priced in the medium to low-medium
price ranges and are considered high volume, promotional products
to major furniture retailers. The products are marketed under
the "Lea Industries," "Charter House," and "Design Horizons"
brand names primarily to national and regional chains,
independent furniture retailers, national general retailers and
department stores. Lea Industries' products are manufactured in
five plants located in Waynesville, NC, Marion, VA, Chilhowie,
VA, and Morristown, TN.
American Drew manufactures and sells medium to high-medium
priced wood furniture. The products include various types of
wood bedroom furniture (beds, dressers, night stands, mirrors,
armoires, and dressing tables), wood dining room furniture
(tables,
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chairs, buffets, chinas, and serving pieces), and wood living
room occasional pieces (desks, end tables, coffee tables,
entertainment units, wall units, and secretaries). American Drew
products are manufactured in three plants located in North
Wilkesboro, NC and are sold primarily to major independent
furniture retailers, department stores, and regional furniture
chains.
Daystrom Furniture manufactures and sells kitchen, dinette,
dining room, and bar furniture for the home furnishings market.
Daystrom products are priced in the medium price range and
include tables, chairs, bars and bar stools in contemporary
styles that incorporate the use of metal, glass, wicker, and wood
construction. Daystrom sells its products primarily to retail
furniture chains, independent furniture retailers, department
stores, and specialty retail stores. Daystrom operates one
manufacturing plant located in South Boston, VA.
Clayton-Marcus manufactures and sells a full line of
upholstered household furniture, including sofas, loveseats,
chairs, sleepers, rockers, and other upholstered living room
furniture, which sells in the medium and high-medium price
ranges. The products are marketed under the "Clayton-Marcus,"
"American of Martinsville," "Clayton House," and "Marclay Manor"
brand names primarily to retail furniture chains, independent
furniture retailers and department stores. Clayton-Marcus
currently has established galleries with approximately 95
independent furniture stores in the United States, Canada, and
Mexico. Clayton-Marcus operates three manufacturing plants in
Hickory, NC.
Barclay Furniture manufactures and sells moderately priced
upholstered furniture, including sofas, loveseats, chairs,
sleepers, and motion furniture styled in contemporary and
traditional patterns. The products are considered high volume,
promotional items and are sold under the Barclay Furniture name
and various private label names. Barclay sells its products
primarily to retail furniture chains, department stores, and
national general merchandisers. Barclay operates two
manufacturing plants located in Sherman, MS and Myrtle, MS.
American of Martinsville is a leading supplier of guest room
furniture to the U.S. hotel/motel industry, and has an expanding
contract business overseas. American of Martinsville has also
expanded its business into the health care furniture market for
retirement homes and extended care facilities. Additionally,
American of Martinsville sells to certain agencies of the U.S.
government and university and college markets. American of
Martinsville operates a manufacturing plant located in
Martinsville, VA.
Pennsylvania House is one of the nation's leading
manufacturers of American traditional and country residential
furniture, solid wood furniture and upholstery. The Pennsylvania
House product line is priced in the upper-medium price range.
Pennsylvania House created and introduced the in-store gallery
concept to the furniture retailing industry in 1975, and
currently has established galleries with approximately 270
independent furniture retailers in the U.S., Japan and Mexico.
To enhance its product lines and galleries,
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Pennsylvania House also offers its gallery retailers an accessory
line of over 3,000 items for sale to their customers. In addition,
Pennsylvania House has opened approximately 25 independently owned
dedicated showcase stores which offer exclusively Pennsylvania House
furniture and accessories and also owns four retail stores.
Pennsylvania House operates three manufacturing plants located in
Lewisburg, PA, Monroe, NC, and White Deer, PA.
Brown Jordan is a leading manufacturer of high quality,
high-priced leisure and outdoor furniture. To expand its market
presence, Brown Jordan has begun selling a line of high-medium
priced products in the casual furniture market. Brown Jordan's
products are designed in wrought aluminum, extruded aluminum,
cast aluminum, and wrought iron and include chairs, tables,
chaises and outdoor accessories. Brown Jordan sells its products
to the residential and hospitality markets primarily through the
following distribution channels: quality department stores,
specialty stores (such as pool and patio shops), interior design-
ers, and the commercial contract and hospitality industry both in
the United States and overseas. Brown Jordan's products are
manufactured in facilities located in El Monte, CA, Newport, AR,
and Juarez, Mexico. On March 1, 1994, a fire destroyed the
wrought iron manufacturing operations located in Brown Jordan's
manufacturing facility in Juarez, Mexico. The aluminum frame
operations located in the same facility were not materially
affected by the fire. The fire did not have a financial impact
as the Juarez facility was insured for both property and business
interruption losses. A new facility for wrought iron
manufacturing was leased and began operation during the fourth
quarter of 1994.
Fournier Furniture manufactures and markets a complete line
of ready-to-assemble ("RTA") furniture including home office and
home electronics furniture, kitchen and bedroom furniture, closet
organization products, kitchen cabinets and other storage
products. The company's products are priced in the lower price
ranges and are sold throughout the United States and Canada
principally to mass merchandisers, department stores, warehouse
clubs, and mail order catalog merchandisers. Fournier Furniture
operates one manufacturing facility in St. Paul, VA and has a
distribution facility located in Ajax, Ontario, Canada.
Pilliod Furniture, acquired by LADD on January 31, 1994,
manufactures and markets a wide range of promotionally priced
contemporary and traditional residential furniture, including
master bedroom products, occasional tables, entertainment
centers, wall systems, and dining room chinas. Pilliod
Furniture's products are marketed under the Pilliod and Symmetry
brand names. The majority of Pilliod Furniture's products
incorporate simulated wood, stone or other, often high gloss
decorative surfaces applied to medium density fiber board or
particle board. The company's products are sold throughout the
United States through large volume customers, mainly large
furniture chains and outlets. Pilliod Furniture operates three
manufacturing facilities in Nichols, SC, Selma, AL, and Swanton,
OH.
Lea Lumber & Plywood Co. manufactures cut-to-size plywood,
veneer, and wood laminated parts in one plant located in Windsor,
NC. Lea Lumber and Plywood's products
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are sold to furniture manufacturers and manufacturers of pianos,
recreational vehicles, kitchen cabinets, and other products
requiring laminated wood parts and veneers.
LADD Transportation, Inc. operates a modern fleet of over-
the-road tractors and trailers that are primarily used to provide
transportation services to LADD operating companies and to meet
the special needs of LADD's customers. Together with fleets
operated by other LADD operating companies, LADD Transportation
provides approximately 21% 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 415 independent sales representatives to a
broad variety of customers, including retail furniture chains,
national general retailers, department stores, independent
furniture retailers, mail order catalog merchandisers, major
hotel chains, and various specialty stores and rental companies.
The Company currently sells to more than 8,500 furniture
customers. No single customer accounted for more than 5% of net
sales in 1994. 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, plywood, particle
board, hardware, finishing materials, glass, steel, steel
springs, aluminum, and high pressure laminates. The wood species
include cherry, oak, maple, white pine, poplar, and other
American species, and imports such as rattan, guatambue and
mahogany. The Company believes that its sources of supply for
these
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materials are adequate and that it is not dependent on any
one supplier. However, dramatic escalation of costs of certain
lumber species such as cherry and maple in 1993 and the costs of
certain other raw materials such as particle board, multi-density
fiber board, aluminum, glass and cartons in 1994 negatively
impacted the Company's gross margins.
The Company's plants are heated by furnaces using gas, fuel
oil, wood waste, and other scrap material as energy sources. The
furnaces located at a majority of the wood manufacturing plants
have been adapted so that they can use alternate energy sources,
and the Company has been able to fuel these furnaces principally
by wood wastes. The Company's plants use electrical energy
purchased from local utilities. The Company has not experienced
a shortage of energy sources and believes that adequate energy
supplies will be available for the foreseeable future.
Patents and Trade Names
The trade names of the Company's divisions and subsidiaries
represent many years of continued business, and the Company
believes such names are well recognized and associated with
quality in the industry. The Company owns licenses which are
considered to be important to the business, which intellectual
properties do not have a limited duration. The Company also has
various licenses and trademarks, none of which are considered
material to the Company's business. In the first quarter of
1994, the Company transferred patents, trade names and certain
other intellectual property to a wholly owned subsidiary, Cherry
Grove, Inc., to better manage those intellectual properties. In
the fourth quarter of 1994, Cherry Grove, Inc. sold and leased
back certain of the patents.
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
1994 fiscal year end was approximately $85.2 million, as compared
to $80.6 million at 1993 fiscal year end. Generally, orders in
the backlog are shipped during the following 12 months. The
Company's businesses as a whole are not subject to significant
seasonal variations. The business of Brown Jordan, however, is
heavily seasonal with inventories being built in the winter
months and sales concentrated in the March - June time frame.
Competition
The residential furniture market is highly competitive and
includes a large number of manufacturers, none of which dominate
the market. Industry estimates indicate that there are over
1,500 manufacturers of all types of furniture in the United
States. Competition within the market for wood, metal and
upholstered furniture occurs principally
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in the areas of style or design, quality, price, and service. Some
of these include manufacturers of furniture types not manufactured
by the Company.
According to industry data, the Company believes it is the
fourth largest manufacturer of residential furniture in the
United States.
In recent years, foreign imports of finished furniture and
component parts have increased. Although some of the imported
products compete with products manufactured and marketed by the
Company, other than in its Daystrom Furniture operating division,
the Company has not experienced any significant negative impact.
Where appropriate, the Company has capitalized upon the cost
advantages of importing selected component parts and a limited
number of finished products but is not dependent upon any foreign
sources. The Company currently imports approximately $23.9
million of finished furniture and unfinished furniture parts.
In addition, Brown Jordan operates a manufacturing facility
in Juarez, Mexico. The Company estimates production in its
Mexican facility costs 25% to 40% less than comparable domestic
production principally because of lower labor and overhead costs
at the Mexican facility.
Governmental Regulations
The Company's operations must meet extensive federal, state,
and local regulatory standards in the areas of safety, health,
and environmental pollution controls. Historically, these
standard's have not had any material adverse effect on the Com-
pany's sales or operations. The Company believes that its plants
are in compliance in all material respects with all applicable
federal, state, and local laws and regulations concerned with
environmental protection. See "Legal Proceedings" regarding the
status of environmental proceedings in which the Company is
involved.
The furniture industry anticipates increased federal and
state regulation, particularly for emissions from furniture paint
and finishing operations and wood dust levels in manufacturing
operations. The industry and its suppliers are attempting to
develop water-based finishing materials to replace commonly used
organic-based finishes which are a major source of regulated
emissions. The Company cannot at this time estimate the impact
of compliance with these new standards on the Company's opera-
tions or costs of compliance.
Employees
The Company employed approximately 7,900 persons as of
December 31, 1994. Substantially all of the employees were
employed on a full-time basis.
Employees at six Company plants are represented by various
labor unions. The union contracts at Brown Jordan's Newport,
Arkansas facility and at Pennsylvania House's White Deer and
Lewisburg, Pennsylvania facilities expire in March and October
1995, respectively.
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The Company has been notified that a union election has been
scheduled for April 1995 at the St. Paul, Virginia facility of
Fournier Furniture, Inc. The Company considers its relations with
its employees to be good.
Export Sales
In 1994, the Company's export sales decreased to $33.8
million (approximately 5.7% of 1994 net sales), a decrease of
16.7% from export sales in 1993 of $40.6 million (approximately
7.8% of 1993 net sales). The Company's export sales in 1992 were
$29.3 million, or approximately 5.9% of 1992 net sales. None of
the Company's assets are dedicated solely to export sales.
ITEM 2. Properties
LADD and its operating companies operate 26 manufacturing
facilities, of which 25 facilities, approximately 7,100,000
square feet, are owned, and one facility, approximating 125,000
square feet is leased. These facilities range in size from
approximately 80,000 square feet to approximately 800,000 square
feet. Five of the manufacturing facilities (approximately 1.8
million aggregate square feet) are subject to encumbrances
associated with industrial revenue bond financings, the
outstanding balances of which aggregated approximately $7.5
million at December 31, 1994. The Company believes that each of
the current manufacturing plants are suitable and adequate for
the particular production conducted at that plant. During fiscal
1994, the Company estimates that its plants operated at
approximately 80% of total capacity on an aggregate basis. In
addition, the Company owns three warehouse facilities aggregating
approximately 290,000 square feet and leases five separate
warehouse facilities aggregating approximately 665,000 square
feet. The Company's manufacturing facilities are located in
North Carolina, Alabama, Arkansas, California, Mississippi,
Pennsylvania, Ohio, South Carolina, Tennessee, Virginia and
Mexico. The Company leases its corporate offices, which
aggregate approximately 38,000 square feet, in High Point, North
Carolina.
The Company believes that its manufacturing, warehouse and
office space is well maintained for its intended purposes.
Although the closure of any particular Company facility may be
disruptive to that particular operating entity's business, it
would not be materially adverse to the Company's operations.
The Company normally operates all of its furniture manu-
facturing facilities on a one shift per day, five-day week
basis. Increasingly, certain departments and facilities are
operated on a multi-shift basis. The plywood and ready-to-
assemble manufacturing facilities are typically operated on a two
shifts per day, five-day week basis.
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The Company also maintains showrooms, the majority of which
are leased, in High Point, NC, Dallas, TX, Chicago, IL, Miami,
FL, Washington, DC, Los Angeles and San Francisco, CA, Sherman
and Tupelo, MS, New York, NY, Edina, MN, Martinsville, VA,
Lewisburg, PA, and Ontario, Canada, and retail stores in Houston,
TX and Topeka and Shawnee, KS.
The Company owns rights to cut timber on approximately 300
acres of undeveloped timberland in eastern North Carolina.
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, and generally modern.
The Company currently owns and leases approximately 125
tractors and 335 trailers.
ITEM 3. Legal Proceedings
The Company is involved in routine litigation from time to
time in the regular course of its business. In the opinion of
the Company, there are no material legal proceedings pending or
known to be contemplated to which the Company is a party or of
which any of its property is subject.
The Company presently is involved in the following
environmental proceedings:
1. Brown Jordan's California manufacturing facility is
located in El Monte, California in the San Gabriel Valley Ground-
water Basin. The Basin has been designated by the United States
Environmental Protection Agency ("EPA") and the State of
California as a Superfund Site. Although no administrative or
judicial enforcement action has been taken by the EPA or
applicable California authorities, the State of California is
seeking to identify potentially responsible parties ("PRPs") and
has ordered certain tests to be conducted by Brown Jordan in
connection with their investigation. Such tests have been
completed and no future activities are currently scheduled. In
May 1994, the Company joined the Northwest El Monte Community
Task Force, a PRP Group formed to respond to the EPA. Efforts to
negotiate an Administrative Order on Consent with the EPA are
ongoing. Under the terms of the Asset Purchase Agreement with
Maytag Corporation ("Maytag"), dated June 1, 1989 ("the Maytag
Agreement"), the Company's liabilities in the matter are limited
to the first $200,000 of costs for off-site liabilities and
$1,000,000 of costs for on-site liabilities. Through fiscal
1994, approximately $250,000 has been expended by the Company on
the El Monte site.
2. The Company's former subsidiary, The Gunlocke Company
("Gunlocke"), has been named as a PRP by the New York Department
of Environmental Conservation ("NYDEC") with respect to the
Prattsburg Landfill in Tonawanda, New York. NYDEC has
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to date not pursued Gunlocke concerning this matter. Instead, the
NYDEC has obtained from Steuben County a signed Consent Order for a
remedial investigation and feasibility study ("RI/FS") and a
remedy for the landfill. Steuben County subsequently submitted
its proposed RI/FS to the NYDEC for approval. The NYDEC approved
the RI/FS in February 1995. The NYDEC is currently preparing a
Remedial Action Plan based on the actions evaluated in the RI/FS.
Nevertheless, this action does not preclude the possibility that
the NYDEC, Steuben County or other third parties may subsequently
make claims against Gunlocke and other PRPs regarding this
matter. Under the terms of the Maytag Agreement, the Company's
liabilities are limited to $200,000 for all off-site liabilities
in the aggregate.
3. The current owner of the Baker Brothers Scrap Yard
Superfund Site in East Buffalo township, Pennsylvania identified
Pennsylvania House as a PRP in connection with this site.
Investigation is continuing to determine to what extent, if any,
Pennsylvania House transported hazardous waste material to this
site. The Company has notified Maytag regarding this matter.
Under the terms of the Agreement and Release as to Environmental
Claims dated March 31, 1994, between LADD and Maytag, the
Company's exposure is limited to the first $10,000 of costs and
expenses.
4. Gunlocke has been named as a PRP at the Rose Chemicals
Superfund Site in Missouri. Gunlocke has participated as a
member of the de minimis buyout group of PRPs. On September 2,
1992, the EPA signed an Unilateral Order. The PRP group Steering
Committee subsequently entered into negotiations with the EPA and
an Amended Order was issued on December 3, 1992. On December 24,
1992, the PRP group Steering Committee entered into an
Affirmative Response stating that the group would comply with the
Amended Order and complete the remediation. During 1993, a final
work plan was submitted to the EPA for approval and the PRP Group
anticipates that final remediation will be completed by April 1995.
Under the terms of the Maytag Agreement, the Company's
liabilities are limited to $200,000 for all off-site liabilities
in the aggregate.
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.
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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 1994.
PART II
ITEM 5. Market for the Registrant's Common Stock and Related
Security Holder Matters
The stock price data and common dividends per share and the
Stock Listing Information which appear on pages 31 and 32,
respectively, of the LADD Furniture, Inc. Annual Report to Share-
holders for 1994, are incorporated by reference in this Form 10-K
Annual Report.
There were approximately 925 security holders of record of
the Company's common stock as of March 20, 1995.
ITEM 6. Selected Financial Data
The summary of selected financial data for each of the
periods in the five-year period ended December 31, 1994, which
appears on page 26 of the LADD Furniture, Inc. Annual Report to
Shareholders for 1994, is incorporated by reference in this Form
10-K Annual Report.
ITEM 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Management's discussion and analysis of financial condition
and results of operations for the years ended December 31, 1994,
January 1, 1994, and January 2, 1993, which appears on pages 27 to
30 of the LADD Furniture, Inc. Annual Report to Shareholders for
1994, is incorporated by reference in this Form 10-K Annual
Report.
ITEM 8. Financial Statements and Supplementary Data
The consolidated financial statements, together with the
independent auditors' report thereon of KPMG Peat Marwick LLP
dated February 16, 1995, and the selected quarterly data,
appearing on pages 8 to 25 and page 31, respectively, of the
accompanying LADD Furniture, Inc. Annual Report to Shareholders
for 1994 are incorporated by reference in this Form 10-K Annual
Report.
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With the exception of the aforementioned information and the
information incorporated in Items 5, 6, 7, and 8, the LADD
Furniture, Inc. Annual Report to Shareholders for 1994 is not to
be deemed filed as part of this report.
ITEM 9. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure
No changes in accountants or disagreements with accountants
on accounting or financial disclosure occurred in fiscal years
1994 and 1993.
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.
ITEM 11. Executive Compensation
See reference to definitive proxy statement under Part III.
ITEM 12. Security Ownership of Certain Beneficial Owners and
Management
See reference to definitive proxy statement under Part III.
ITEM 13. Certain Relationships and Related Transactions
See reference to definitive proxy statement under Part III.
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PART IV
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K
Page in
Annual Report*
(a) The following documents are filed as part of this
report:
(1) Financial Statements
Consolidated Statements of Earnings for the
years ended December 31, 1994, January 1,
1994, and January 2, 1993 . . . . . . . . . . . . 9
Consolidated Balance Sheets as of December
31, 1994 and January 1, 1994 . . . . . . . . . 10
Consolidated Statements of Cash Flows for the
years ended December 31, 1994, January 1,
1994, and January 2, 1993 . . . . . . . . . . . . 11
Consolidated Statements of Shareholders'
Equity for the years ended December 31, 1994,
January 1, 1994, and January 2, 1993 . . . . . . 12
Notes to Consolidated Financial Statements . 13-25
Independent Auditors' Report . . . . . . . . . . 8
*Incorporated by reference from the indicated pages of
the LADD Furniture,
Inc. Annual Report to Shareholders for 1994.
(2) Index to Financial Statement Schedule:
Independent Auditors' Report . . . . . . . . . . . F-1
For the years ended December 31, 1994,
January 1, 1994, and January 2, 1993
VIII - 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.
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(3) List of Executive Compensation Plans
LADD Furniture, Inc. 1994 Incentive Stock
Option Plan
Employee Restricted Stock Purchase Agreements
for all directors and the named executive
officers of the registrant as required by
Item 402(a)(2) of Regulation S-K
Executive Employment Agreements with each of
Richard R. Allen, Fred L. Schuermann, Jr.,
and Gerald R. Grubbs
LADD Furniture, Inc. Supplemental Retirement
Income Plan
LADD Furniture, Inc. Long-Term Incentive Plan
LADD Furniture, Inc. 1995 Management
Incentive Plan
(b) A Current Report on Form 8-K dated October 19, 1994 was
filed on November 14, 1994 reporting completion of the $190
million term and revolving loan financing with NationsBank
of North Carolina, N.A., as Agent.
(c) Exhibits
3. Articles of Incorporation and Amendments.
(Previously filed as Exhibit 10 to Item 14 of
the Company's Annual Report on Form 10-K for
the year ended December 29, 1990, filed with
the Commission on March 28, 1991)
Bylaws (as amended February 25, 1993)
(Previously filed as Exhibit 3 to Item 14 of
the Company's Annual Report on Form 10-K for
the year ended January 2, 1993, filed with
the Commission on March 30, 1993)
10. LADD Furniture, Inc. 1994 Incentive
Stock Option Plan
-14-
(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)
Employee Restricted Stock Purchase
Agreement between the Company and
Don A. Hunziker dated February 28,
1991
Employee Restricted Stock Purchase
Agreement between the Company and
O. William Fenn, Jr. dated February
28, 1991
Employee Restricted Stock Purchase
Agreement between the Company and
Richard R. Allen dated February 28,
1991
Employee Restricted Stock Purchase
Agreement between the Company and
Fred L. Schuermann, Jr. dated
February 28, 1991
Employee Restricted Stock Purchase
Agreement between the Company and
Gerald R. Grubbs, dated February
28, 1991
(Previously filed as Exhibit 10 to Item 14 of
the Company's Annual Report on Form 10-K for
the year ended December 29, 1990, filed with
the Commission on March 28, 1991)
Employee Restricted Stock Purchase
Agreement between the Company and
Don A. Hunziker dated June 20, 1991
(Previously filed as Exhibit 10 to Item 14 of
the Company's Annual Report on Form 10-K for
the year ended December 28, 1991, filed with
the Commission on March 26, 1992)
Employee Restricted Stock Purchase
Agreement between the Company and
Richard R. Allen dated February 25,
1993
-15-
Employee Restricted Stock Purchase
Agreement between the Company and
Gerald R. Grubbs dated February 25,
1993
Employee Restricted Stock Purchase
Agreement between the Company and
Fred L. Schuermann, Jr. dated
February 25, 1993
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
Richard R. Allen dated February 24,
1994
Employee Restricted Stock Purchase
Agreement between the Company and
Gerald R. Grubbs dated February 24,
1994
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 10.1 - 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)
Enclosed as Exhibits 10.1 - 10.3 to this
Annual Report on Form 10-K for the year ended
December 31, 1994
10.1 Employee Restricted Stock Purchase
Agreement between the Company and
Richard R. Allen dated March 2, 1995
-16-
10.2 Employee Restricted Stock Purchase
Agreement between the Company and Fred
L. Schuermann, Jr. dated March 2, 1995
10.3 Employee Restricted Stock Purchase
Agreement between the Company and
William S. Creekmuir dated March 2, 1995
Executive Employment Agreement
between the Company and Richard R.
Allen dated October 28, 1994
Executive Employment Agreement
between the Company and Fred L.
Schuermann, Jr. dated October 28,
1994
Executive Employment Agreement
between the Company and Gerald R.
Grubbs dated October 28, 1994
(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 October 1,
1994, filed with the Commission on November
15, 1994)
Asset Purchase Agreement, dated as
of June 1, 1989, among the Company,
Maytag Corporation, The BJC Company
and The Gunlocke Company
(Previously filed as Exhibit 10(a) to the
Company's Current Report on Form 8-K, dated
as of June 1, 1989, filed with the Commission
on June 2, 1989)
-17-
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)
LADD Furniture, Inc. Long-Term
Incentive Plan
(Previously filed as Exhibit 10 to the
Company's Annual Report on Form 10-K, for the
year ended December 29, 1990, filed with the
Commission on March 28, 1991)
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)
Enclosed as Exhibit 10.4 to this Annual
Report on Form 10-K for the year ended
December 31, 1994
-18-
10.4 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.
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)
Enclosed as Exhibit 10.5 to this Annual
Report on Form 10-K for the year ended
January 1, 1994
10.5 1995 Management Incentive Plan
Enclosed as Exhibit 13.1 to this Annual
Report on Form 10-K for the year ended
December 31, 1994
13.1 1994 Annual Report to Shareholders
-19-
22. Subsidiaries of Registrant
American Drew, Inc., a North Carolina corporation
American Furniture Company, Incorporated, a
Virginia corporation
Barclay Furniture Co., a Mississippi corporation
Brown Jordan Company, a North Carolina corporation
Cherry Grove, Inc., a Delaware
corporation
Clayton-Marcus Company, Inc., a North Carolina
corporation
Fournier Furniture, Inc., a North Carolina
corporation
Kenbridge Furniture, Inc., a North Carolina
corporation
LFI Capital Management, Inc., a Delaware
corporation
LADD Transportation, Inc., a North Carolina
corporation
Lea Industries, Inc., a North Carolina corporation
Lea Industries, Inc., a Tennessee corporation
Lea Industries, Inc., a Virginia corporation
Lea Lumber and Plywood Co., a Virginia corporation
LADD Contract Sales Corporation, a North Carolina
corporation
LADD Funding Corp., a Delaware corporation
LADD International Sales Corp., a Barbados
corporation
-20-
Pennsylvania House, Inc., a North Carolina
corporation
Pilliod Furniture, Inc., a North Carolina
corporation
Enclosed as Exhibit 24.1 to this Annual
Report on Form 10-K for the year ended
December 31, 1994
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 31, 1994
27.1 Financial Data Schedule (EDGAR version only)
-21-
SIGNATURES
Pursuant to the requirement of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned, there-
unto duly authorized.
LADD FURNITURE, INC.
(Registrant)
By s/William S. Creekmuir 3/30/95
William S. Creekmuir (Date)
Senior Vice President, Chief
Financial Officer, Secretary, and
Treasurer (Principal Financial
Officer)
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities and on
the dates indicated.
s/Don A. Hunziker 3/30/95 s/Richard R. Allen 3/30/95
Don A. Hunziker (Date) Richard R. Allen (Date)
Director Chairman of the Board and
Chief Executive Officer and
Director
s/O. William Fenn, Jr. 3/30/95 s/Daryl B. Adams 3/30/95
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 3/30/95 s/James H. Corrigan, Jr. 3/30/95
Thomas F. Keller (Date) James H. Corrigan, Jr. (Date)
Director Director
s/William B. Cash 3/30/95 s/William S. Creekmuir 3/30/95
William B. Cash (Date) William S. Creekmuir (Date)
Director Senior Vice President, Chief
Financial Officer, Secretary,
and Treasurer (Principal
Financial Officer)
s/Fred L. Schuermann, Jr. 3/30/95
Fred L. Schuermann, Jr. (Date)
President, Chief Operating Officer and
Director
-22-
INDEPENDENT AUDITORS' REPORT
The Board of Directors
LADD Furniture, Inc.:
Under date of February 16, 1995, we reported on the
consolidated balance sheets of LADD Furniture, Inc. and
subsidiaries as of December 31, 1994 and January 1, 1994 and
the related consolidated statements of earnings,
shareholders' equity and cash flows for each of the years in
the three-year period ended December 31, 1994, as contained
in the 1994 annual report to shareholders. These
consolidated financial statements and our report thereon are
incorporated by reference in the annual report on Form 10-K
for the year ended December 31, 1994. In connection with
our audits of the aforementioned consolidated financial
statements, we also have audited the related financial
statement schedule as listed in the accompanying index.
This financial statement schedule is the responsibility of
the Company's management. Our responsibility is to express
an opinion on this financial statement schedule based on our
audits.
In our opinion, such financial statement schedule, when
considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
As discussed in notes 1 and 11 to the consolidated financial
statements, the Company adopted the provisions of the
Financial Accounting Standards Board's Statement of
Financial Accounting Standards No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions,"
in 1993.
KPMG PEAT MARWICK LLP
Greensboro, North Carolina
February 16, 1995
Schedule VIII
LADD FURNITURE, INC. AND SUBSIDIARIES
Valuation and Qualifying Accounts and Reserves
(dollar amounts in thousands)
Charged
Balance at (credited) Charged to Balance at
beginning of to costs and other accounts Deductions end of
Description year expenses (a) (b) year
Year ended December 31, 1994:
Doubtful receivables $3,316 1,521 338 (2,344) 2,831
Returns and allowances 862 294 (c) 306 - 1,462
$4,178 1,815 644 (2,344) 4,293
Year ended January 1, 1994:
Doubtful receivables $2,763 2,056 - (1,503) 3,316
Discounts 23 - (c) - (23) 0
Returns and allowances 731 131 (c) - - 862
$3,517 2,187 - (1,526) 4,178
Year ended January 2, 1993:
Doubtful receivables $4,937 3,309 408 (5,891) 2,763
Discounts 23 - (c) - - 23
Returns and allowances 914 (183)(c) - - 731
$5,874 3,126 408 (5,891) 3,517
Notes:
(a) Represents initial reserves of acquired business.
(b) Represents uncollectible receivables written-off, net of recoveries.
(c) Represents net increase (decrease) in required reserve.
EX-10
2
EXHIBIT 10.1
EXHIBIT 10.1
EMPLOYEE RESTRICTED STOCK
PURCHASE AGREEMENT
Agreement, made this 2nd day of March, 1995, between LADD
Furniture, Inc., a North Carolina corporation (the "Company"),
and Richard R. Allen (the "Employee").
For valuable consideration, receipt of which is
acknowledged, the parties agree as follows:
1. Purchase of Shares. The Employee subscribes for and,
upon acceptance, shall purchase, subject to the terms and
conditions set forth in this Agreement, 12,784 shares (the
"Shares") of common stock ("common stock"), $.10 par value, of
the Company at a purchase price of $.10 per share. The aggregate
purchase price of the Shares shall be paid by the Employee by
check, payable to the order of the Company, or such other method
as may be acceptable to the Company. Upon the Company's receipt
of payment for the Shares, the Company shall issue to the
Employee one or more certificates in the name of the Employee for
that number of Shares purchased by the Employee. The Employee
agrees that the Shares shall be subject to the Re purchase Option
set forth in Section 2 of this Agreement and the restrictions on
transfer set forth in Section 4 of this Agreement.
2. Re purchase Option.
(a) If the Employee ceases to be employed by the
Company for any reason other than death or disability or ceases
to be employed by the Company in an appropriate executive
capacity (as determined by the Company in its sole discretion),
prior to March 1, 2000, the Company shall have the right and
option (the "Re purchase Option") to purchase any or all of the
Shares from the Employee at the same price as the Employee paid
for the Shares.
1
(b) For purposes of this Agreement, employment with
the Company shall include employment with a parent or subsidiary
of the Company.
3. Exercise of Re purchase Option and Closing.
(a) The Company may exercise the Re purchase Option by
delivering or mailing to the Employee in accordance with Section
14, written notice of exercise within 60 days after the
termination of the employment of the Employee with the Company or
the date upon which the Employee ceases to be employed in an
appropriate executive capacity (as determined by the Company in
its sole discretion). This notice shall specify the number of
Shares to be purchased. If and to the extent the Re purchase
Option is not exercised within the 60 day period, the Re
purchase Option shall automatically expire, effective upon the
expiration of the 60 day period.
(b) Within 10 days after his receipt of the Company's
notice of the exercise of the Re purchase Option pursuant to
Subsection 3(a), the Employee shall tender to the Company at its
principal offices the certificate or certificates representing
the Shares that the Company has elected to purchase, duly
endorsed in blank by the Employee or with duly endorsed stock
powers attached, all in form suitable for the transfer of the
Shares of the Company. Upon its receipt of these Shares, the
Company shall deliver or mail to the Employee a check in the
amount of the aggregate Option Price.
(c) After the time when any Shares are required to be
delivered to the Company for transfer to it pursuant to
Subsection 3(b), the Company shall not pay any dividend to the
Employee on account of those Shares, or permit the employee to
exercise any of the privileges or rights of a stockholder with
respect to those shares, but shall, insofar as permitted by law,
treat the Company as the owner of the Shares.
2
(d) The Option Price may be payable, at the discretion
of the company, in cancellation of all or a portion of any
outstanding indebtedness of the Employee to the Company, or in
cash (by check), or both.
4. Restrictions on Transfer:
(a) Except as otherwise provided in Subsection 4(b),
the Employee shall not, during the term of the Re purchase
Option, sell, assign, transfer, pledge, hypothecate, or otherwise
dispose of, by operation of law or otherwise (collectively
"transfer"), any of the Shares, or any interest therein, unless
the Shares are no longer subject to the Re purchase Option.
(b) Notwithstanding the foregoing, the Employee may
transfer Shares to or for the benefit of any spouse, child or
grandchild, or to a trust for their benefit, provided that those
Shares shall remain subject to this Agreement, including without
limitation the restrictions on transfer set forth in this Section
4 and the Re purchase Option, and the permitted transferee shall,
as a condition to the transfer, deliver to the Company a written
instruction confirming that the transferee shall be bound by all
of the terms and conditions of this Agreement.
5. Effect of Prohibited Transfer. The Company shall not
be required:
(a) To transfer on its books any of the Shares that
shall have been sold or transferred in violation of any of the
provisions set forth in this Agreement; or
(b) To treat as owner of those Shares or to pay
dividend to any transferee to whom any of those Shares shall have
been sold or transferred.
6. Restricted Legend. All certificates representing
Shares shall have affixed thereto a legend in substantially the
following form, in addition to any other legends that may be
required under federal or state securities laws:
3
The shares of stock represented by this
certificate are subject to restrictions on
transfer and an option to purchase set forth
in a Stock Restriction Agreement between the
corporation and the registered owner of this
certificate (or his predecessor in interest).
This Agreement is available for inspection
without charge at the office of the Secretary
of the corporation.
7. Investment Representations. The Employee represents,
warrants, and covenants as follows:
(a) The Employee is purchasing the Shares for his own
account for investment only, and not with a view to, or for sale
in connection with, any distribution of the Shares in violation
of the Securities Act of 1933 (the "Securities Act"), or any rule
or regulation under the Securities Act.
(b) He has had an opportunity he deems adequate to
obtain from representatives of the Company the information
necessary to permit him to evaluate the merits and risks of his
investment in the Company.
(c) He has sufficient experience in business,
financial and investment matters to be able to evaluate the risks
involved in the purchase of the Shares and to make an informed
investment decision with respect to that purchase.
(d) He can afford a complete loss of the value of the
Shares and is able to bear the economic risk of holding the
Shares for an indefinite period.
(e) He understands that:
(i) The Shares have not been registered
under the Securities Act and are "restricted
securities" within the meaning of Rule 144
under the Securities Act;
(ii) The Shares cannot be sold,
transferred, or otherwise disposed of unless
they are subsequently registered under the
Securities Act or an exemption from
registration is then available;
4
(iii) In any event, the exemption from
registration under Rule 144 will not be
available for at least two years and even
then will not be available unless a public
market then exists for the Common Stock,
adequate information concerning the Company
is then available to the public, and other
terms and conditions of Rule 144 are complied
with; and
(iv) The Company has no obligation or
current intention to register the Shares
under the Securities Act.
(f) A legend substantially in the following
form will be placed on the certificate representing the
Shares:
The shares represented by this certificate
have not been registered under the Securities
Act of 1933, as amended, and may not be sold,
transferred or otherwise disposed of in the
absence of an effective registration
statement under the Act or an opinion of
counsel satisfactory to the corporation to
the effect that registration is not required.
8. Adjustments. If from time to time during the term of
the Re purchase Option there is any stock split, stock dividend,
stock distribution, or other reclassification of the Common Stock
of the Company, or any merger, consolidation, or sale of
substantially all of the assets of the Company, any and all new,
substituted, or additional securities to which the Employee is
entitled by reason of his ownership of the Shares shall be
subject immediately to: The Re purchase Option (and be included
as "Shares"), the restrictions on transfer, and other provisions
of this Agreement in the same manner and to the same extent as
the Shares, and the Option Price shall be adjusted appropriately.
9. Withholding Taxes.
(a) The Employee acknowledges and agrees that the
Company has the right to deduct from payments of any kind
otherwise due to the Employee any federal, state or local
5
taxes of any kind required by law to be withheld with respect to the
purchase of the Shares by the Employee.
(b) If the Employee elects, in accordance with Section
83(b) of the Internal Revenue Code of 1954, as amended, to
recognize ordinary income in the year of acquisition of the
Shares, the Company will require at the time of that election an
additional payment for withholding tax purposes based on the
difference, if any between the purchase price for the Shares and
the fair market value of the Shares as of the day immediately
preceding the date of the purchase of the Shares by the Employee.
10. Severability. The invalidity or unenforceability of
any provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, and each
other provision of this Agreement shall be severable and
enforceable to the extent permitted by law.
11. Waiver. Any provision contained in this Agreement may
be waived, either generally or in any particular instance, by the
Board of Directors of the Company.
12. Binding Effect. This Agreement shall be binding upon,
and inure to the benefit of, the Company and the Employee and
their respective heirs, executors, administrators, legal
representatives, successors, and assigns, subject to the
restrictions on transfer set forth in Section 4 of this
Agreement.
13. No Rights to Employment. Nothing contained in this
Agreement shall be construed as giving the Employee any right to
be retained, in any position, as an employee of the Company.
14. Notice. All notices required or permitted hereunder
shall be in writing and deemed effectively given upon personal
delivery or upon deposit in the United States Post Office, by
registered or certified mail, postage prepaid, addressed to the
other party at the
6
address shown beneath his or its respective signature to this
Agreement, or at such other address or addresses as either
party shall designate to the other in accordance with this
Section 14.
15. Pronouns. Whenever the context may require, any
pronouns used in this Agreement shall include the corresponding
masculine, feminine, or neuter forms. The singular form of nouns
and pronouns shall included the plural, and the plural form of
nouns and pronouns shall include the singular.
16. Entire Agreement. This Agreement constitutes the
entire agreement between the parties, and supersedes all prior
agreements and understandings relating to the subject matter of
this Agreement.
17. Amendment. This Agreement may be amended or modified
only by a written instrument executed by both the Company and the
Employee.
18. Governing Law. This Agreement shall be construed,
interpreted, and enforced in accordance with the laws of North
Carolina.
7
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first above written.
COMPANY
LADD FURNITURE, INC.
By:____________________________________
Chairman and Chief Executive Officer
Address: P. O. Box HP-3
High Point, NC 27261
EMPLOYEE
_______________________________________
Address:________________________________
________________________________
Social Sec. No.___________________________
8
EX-10
3
EXHIBIT 10.2
EXHIBIT 10.2
EMPLOYEE RESTRICTED STOCK
PURCHASE AGREEMENT
Agreement, made this 2nd day of March, 1995, between LADD
Furniture, Inc., a North Carolina corporation (the "Company"), and
Fred L. Schuermann, Jr. (the "Employee").
For valuable consideration, receipt of which is acknowledged,
the parties agree as follows:
1. Purchase of Shares. The Employee subscribes for and,
upon acceptance, shall purchase, subject to the terms and
conditions set forth in this Agreement, 9,094 shares (the
"Shares") of common stock ("common stock"), $.10 par value, of the
Company at a purchase price of $.10 per share. The aggregate
purchase price of the Shares shall be paid by the Employee by
check, payable to the order of the Company, or such other method as
may be acceptable to the Company. Upon the Company's receipt of
payment for the Shares, the Company shall issue to the Employee one
or more certificates in the name of the Employee for that number of
Shares purchased by the Employee. The Employee agrees that the
Shares shall be subject to the Re purchase Option set forth in
Section 2 of this Agreement and the restrictions on transfer set
forth in Section 4 of this Agreement.
2. Re purchase Option.
(a) If the Employee ceases to be employed by the Company
for any reason other than death or disability or ceases to be
employed by the Company in an appropriate executive capacity (as
determined by the Company in its sole discretion), prior to March
1, 2000, the Company shall have the right and option (the
"Re purchase Option") to purchase any or all of the Shares from the
Employee at the same price as the Employee paid for the Shares.
(b) For purposes of this Agreement, employment with the
Company shall include employment with a parent or subsidiary of the
Company.
1
3. Exercise of Re purchase Option and Closing.
(a) The Company may exercise the Re purchase Option by
delivering or mailing to the Employee in accordance with Section
14, written notice of exercise within 60 days after the termination
of the employment of the Employee with the Company or the date upon
which the Employee ceases to be employed in an appropriate
executive capacity (as determined by the Company in its sole
discretion). This notice shall specify the number of Shares to be
purchased. If and to the extent the Re purchase Option is not
exercised within the 60 day period, the Re purchase Option shall
automatically expire, effective upon the expiration of the 60 day
period.
(b) Within 10 days after his receipt of the Company's
notice of the exercise of the Re purchase Option pursuant to
Subsection 3(a), the Employee shall tender to the Company at its
principal offices the certificate or certificates representing the
Shares that the Company has elected to purchase, duly endorsed in
blank by the Employee or with duly endorsed stock powers attached,
all in form suitable for the transfer of the Shares of the Company.
Upon its receipt of these Shares, the Company shall deliver or mail
to the Employee a check in the amount of the aggregate Option
Price.
(c) After the time when any Shares are required to be
delivered to the Company for transfer to it pursuant to Subsection
3(b), the Company shall not pay any dividend to the Employee on
account of those Shares, or permit the employee to exercise any of
the privileges or rights of a stockholder with respect to those
shares, but shall, insofar as permitted by law, treat the Company
as the owner of the Shares.
(d) The Option Price may be payable, at the discretion
of the company, in cancellation of all or a portion of any
outstanding indebtedness of the Employee to the Company, or in cash
(by check), or both.
4. Restrictions on Transfer:
(a) Except as otherwise provided in Subsection 4(b), the
Employee shall not, during the term of the Re purchase Option,
sell, assign, transfer, pledge, hypothecate, or otherwise dispose
of, by operation of law or otherwise (collectively "transfer"), any
of the Shares, or any interest therein, unless the Shares are no
longer subject to the Re purchase Option.
(b) Notwithstanding the foregoing, the Employee may
transfer Shares to or for the benefit of any spouse, child or
grandchild, or to a trust for their benefit, provided that those
Shares shall remain subject to this Agreement, including without
limitation the restrictions on transfer set forth in this Section 4
and the Repurchase Option, and the permitted transferee shall, as
a condition to the transfer, deliver to the Company a written
instruction confirming that the transferee shall be bound by all of
the terms and conditions of this Agreement.
5. Effect of Prohibited Transfer. The Company shall not be
required:
(a) To transfer on its books any of the Shares that
shall have been sold or transferred in violation of any of the
provisions set forth in this Agreement; or
(b) To treat as owner of those Shares or to pay dividend
to any transferee to whom any of those Shares shall have been sold
or transferred.
6. Restricted Legend. All certificates representing Shares
shall have affixed thereto a legend in substantially the following
form, in addition to any other legends that may be required under
federal or state securities laws:
The shares of stock represented by this
certificate are subject to restrictions on
transfer and an option to purchase set forth
in a Stock Restriction Agreement between the
corporation and the registered owner of this
certificate (or his predecessor in interest).
This Agreement is available for inspection
without charge at the office of the Secretary
of the corporation.
3
7. Investment Representations. The Employee represents,
warrants, and covenants as follows:
(a) The Employee is purchasing the Shares for his own
account for investment only, and not with a view to, or for sale
in connection with, any distribution of the Shares in violation
of the Securities Act of 1933 (the "Securities Act"), or any rule
or regulation under the Securities Act.
(b) He has had an opportunity he deems adequate to
obtain from representatives of the Company the information
necessary to permit him to evaluate the merits and risks of his
investment in the Company.
(c) He has sufficient experience in business,
financial and investment matters to be able to evaluate the risks
involved in the purchase of the Shares and to make an informed
investment decision with respect to that purchase.
(d) He can afford a complete loss of the value of the
Shares and is able to bear the economic risk of holding the
Shares for an indefinite period.
(e) He understands that:
(i) The Shares have not been registered
under the Securities Act and are "restricted
securities" within the meaning of Rule 144
under the Securities Act;
(ii) The Shares cannot be sold,
transferred, or otherwise disposed of unless
they are subsequently registered under the
Securities Act or an exemption from
registration is then available;
(iii) In any event, the exemption from
registration under Rule 144 will not be
available for at least two years and even
then will not be available unless a public
market then exists for the Common Stock,
adequate information concerning the Company
is then available to the public, and other
terms and conditions of Rule 144 are complied
with; and
4
(iv) The Company has no obligation or
current intention to register the Shares
under the Securities Act.
(f) A legend substantially in the following
form will be placed on the certificate representing the
Shares:
The shares represented by this certificate
have not been registered under the Securities
Act of 1933, as amended, and may not be sold,
transferred or otherwise disposed of in the
absence of an effective registration
statement under the Act or an opinion of
counsel satisfactory to the corporation to
the effect that registration is not required.
8. Adjustments. If from time to time during the term of
the Re purchase Option there is any stock split, stock dividend,
stock distribution, or other reclassification of the Common Stock
of the Company, or any merger, consolidation, or sale of
substantially all of the assets of the Company, any and all new,
substituted, or additional securities to which the Employee is
entitled by reason of his ownership of the Shares shall be
subject immediately to: The Re purchase Option (and be included
as "Shares"), the restrictions on transfer, and other provisions
of this Agreement in the same manner and to the same extent as
the Shares, and the Option Price shall be adjusted appropriately.
9. Withholding Taxes.
(a) The Employee acknowledges and agrees that the
Company has the right to deduct from payments of any kind
otherwise due to the Employee any federal, state or local taxes
of any kind required by law to be withheld with respect to the
purchase of the Shares by the Employee.
(b) If the Employee elects, in accordance with Section
83(b) of the Internal Revenue Code of 1954, as amended, to
recognize ordinary income in the year of acquisition of the
Shares, the Company will require at the time of that election an
additional payment for
5
withholding tax purposes based on the difference, if any between
the purchase price for the Shares and the fair market value of the
Shares as of the day immediately preceding the date of the purchase
of the Shares by the Employee.
10. Severability. The invalidity or unenforceability of
any provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, and each
other provision of this Agreement shall be severable and
enforceable to the extent permitted by law.
11. Waiver. Any provision contained in this Agreement may
be waived, either generally or in any particular instance, by the
Board of Directors of the Company.
12. Binding Effect. This Agreement shall be binding upon,
and inure to the benefit of, the Company and the Employee and
their respective heirs, executors, administrators, legal
representatives, successors, and assigns, subject to the
restrictions on transfer set forth in Section 4 of this
Agreement.
13. No Rights to Employment. Nothing contained in this
Agreement shall be construed as giving the Employee any right to
be retained, in any position, as an employee of the Company.
14. Notice. All notices required or permitted hereunder
shall be in writing and deemed effectively given upon personal
delivery or upon deposit in the United States Post Office, by
registered or certified mail, postage prepaid, addressed to the
other party at the address shown beneath his or its respective
signature to this Agreement, or at such other address or
addresses as either party shall designate to the other in
accordance with this Section 14.
15. Pronouns. Whenever the context may require, any
pronouns used in this Agreement shall include the corresponding
masculine, feminine, or neuter forms. The singular
6
form of nouns and pronouns shall included the plural, and the plural
form of nouns and pronouns shall include the singular.
16. Entire Agreement. This Agreement constitutes the
entire agreement between the parties, and supersedes all prior
agreements and understandings relating to the subject matter of
this Agreement.
17. Amendment. This Agreement may be amended or modified
only by a written instrument executed by both the Company and the
Employee.
18. Governing Law. This Agreement shall be construed,
interpreted, and enforced in accordance with the laws of North
Carolina.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first above written.
COMPANY
LADD FURNITURE, INC.
By:____________________________________
Chairman and Chief Executive Officer
Address: P. O. Box HP 3
High Point, NC 27261
EMPLOYEE
_______________________________________
Address:________________________________
________________________________
Social Sec. No.___________________________
7
EX-10
4
EXHIBIT 10.3
EXHIBIT 10.3
EMPLOYEE RESTRICTED STOCK
PURCHASE AGREEMENT
Agreement, made this 2nd day of March, 1995, between LADD
Furniture, Inc., a North Carolina corporation (the "Company"), and
William S. Creekmuir (the "Employee").
For valuable consideration, receipt of which is acknowledged,
the parties agree as follows:
1. Purchase of Shares. The Employee subscribes for and,
upon acceptance, shall purchase, subject to the terms and
conditions set forth in this Agreement, 4,302 shares (the
"Shares") of common stock ("common stock"), $.10 par value, of the
Company at a purchase price of $.10 per share. The aggregate
purchase price of the Shares shall be paid by the Employee by
check, payable to the order of the Company, or such other method as
may be acceptable to the Company. Upon the Company's receipt of
payment for the Shares, the Company shall issue to the Employee one
or more certificates in the name of the Employee for that number of
Shares purchased by the Employee. The Employee agrees that the
Shares shall be subject to the Re purchase Option set forth in
Section 2 of this Agreement and the restrictions on transfer set
forth in Section 4 of this Agreement.
2. Re purchase Option.
(a) If the Employee ceases to be employed by the Company
for any reason other than death or disability or ceases to be
employed by the Company in an appropriate executive capacity (as
determined by the Company in its sole discretion), prior to March
1, 2000, the Company shall have the right and option (the
"Re purchase Option") to purchase any or all of the Shares from the
Employee at the same price as the Employee paid for the Shares.
(b) For purposes of this Agreement, employment with the
Company shall include employment with a parent or subsidiary of the
Company.
1
3. Exercise of Re purchase Option and Closing.
(a) The Company may exercise the Re purchase Option by
delivering or mailing to the Employee in accordance with Section
14, written notice of exercise within 60 days after the termination
of the employment of the Employee with the Company or the date upon
which the Employee ceases to be employed in an appropriate
executive capacity (as determined by the Company in its sole
discretion). This notice shall specify the number of Shares to be
purchased. If and to the extent the Re purchase Option is not
exercised within the 60 day period, the Re purchase Option shall
automatically expire, effective upon the expiration of the 60 day
period.
(b) Within 10 days after his receipt of the Company's
notice of the exercise of the Re purchase Option pursuant to
Subsection 3(a), the Employee shall tender to the Company at its
principal offices the certificate or certificates representing the
Shares that the Company has elected to purchase, duly endorsed in
blank by the Employee or with duly endorsed stock powers attached,
all in form suitable for the transfer of the Shares of the Company.
Upon its receipt of these Shares, the Company shall deliver or mail
to the Employee a check in the amount of the aggregate Option
Price.
(c) After the time when any Shares are required to be
delivered to the Company for transfer to it pursuant to Subsection
3(b), the Company shall not pay any dividend to the Employee on
account of those Shares, or permit the employee to exercise any of
the privileges or rights of a stockholder with respect to those
shares, but shall, insofar as permitted by law, treat the Company
as the owner of the Shares.
(d) The Option Price may be payable, at the discretion
of the company, in cancellation of all or a portion of any
outstanding indebtedness of the Employee to the Company, or in cash
(by check), or both.
2
4. Restrictions on Transfer:
(a) Except as otherwise provided in Subsection 4(b), the
Employee shall not, during the term of the Re purchase Option,
sell, assign, transfer, pledge, hypothecate, or otherwise dispose
of, by operation of law or otherwise (collectively "transfer"), any
of the Shares, or any interest therein, unless the Shares are no
longer subject to the Re purchase Option.
(b) Notwithstanding the foregoing, the Employee may
transfer Shares to or for the benefit of any spouse, child or
grandchild, or to a trust for their benefit, provided that those
Shares shall remain subject to this Agreement, including without
limitation the restrictions on transfer set forth in this Section 4
and the Re purchase Option, and the permitted transferee shall, as
a condition to the transfer, deliver to the Company a written
instruction confirming that the transferee shall be bound by all of
the terms and conditions of this Agreement.
5. Effect of Prohibited Transfer. The Company shall not be
required:
(a) To transfer on its books any of the Shares that
shall have been sold or transferred in violation of any of the
provisions set forth in this Agreement; or
(b) To treat as owner of those Shares or to pay dividend
to any transferee to whom any of those Shares shall have been sold
or transferred.
6. Restricted Legend. All certificates representing Shares
shall have affixed thereto a legend in substantially the following
form, in addition to any other legends that may be required under
federal or state securities laws:
The shares of stock represented by this
certificate are subject to restrictions on
transfer and an option to purchase set forth
in a Stock Restriction Agreement between the
corporation and the registered owner of this
certificate (or his predecessor in interest).
This Agreement is available for inspection
without charge at the office of the Secretary
of the corporation.
3
7. Investment Representations. The Employee represents,
warrants, and covenants as follows:
(a) The Employee is purchasing the Shares for his own
account for investment only, and not with a view to, or for sale
in connection with, any distribution of the Shares in violation
of the Securities Act of 1933 (the "Securities Act"), or any rule
or regulation under the Securities Act.
(b) He has had an opportunity he deems adequate to
obtain from representatives of the Company the information
necessary to permit him to evaluate the merits and risks of his
investment in the Company.
(c) He has sufficient experience in business,
financial and investment matters to be able to evaluate the risks
involved in the purchase of the Shares and to make an informed
investment decision with respect to that purchase.
(d) He can afford a complete loss of the value of the
Shares and is able to bear the economic risk of holding the
Shares for an indefinite period.
(e) He understands that:
(i) The Shares have not been registered
under the Securities Act and are "restricted
securities" within the meaning of Rule 144
under the Securities Act;
(ii) The Shares cannot be sold,
transferred, or otherwise disposed of unless
they are subsequently registered under the
Securities Act or an exemption from
registration is then available;
(iii) In any event, the exemption from
registration under Rule 144 will not be
available for at least two years and even
then will not be available unless a public
market then exists for the Common Stock,
adequate information concerning the Company
is then available to the public, and other
terms and conditions of Rule 144 are complied
with; and
4
(iv) The Company has no obligation or
current intention to register the Shares
under the Securities Act.
(f) A legend substantially in the following
form will be placed on the certificate representing the
Shares:
The shares represented by this certificate
have not been registered under the Securities
Act of 1933, as amended, and may not be sold,
transferred or otherwise disposed of in the
absence of an effective registration
statement under the Act or an opinion of
counsel satisfactory to the corporation to
the effect that registration is not required.
8. Adjustments. If from time to time during the term of
the Re purchase Option there is any stock split, stock dividend,
stock distribution, or other reclassification of the Common Stock
of the Company, or any merger, consolidation, or sale of
substantially all of the assets of the Company, any and all new,
substituted, or additional securities to which the Employee is
entitled by reason of his ownership of the Shares shall be
subject immediately to: The Re purchase Option (and be included
as "Shares"), the restrictions on transfer, and other provisions
of this Agreement in the same manner and to the same extent as
the Shares, and the Option Price shall be adjusted appropriately.
9. Withholding Taxes.
(a) The Employee acknowledges and agrees that the
Company has the right to deduct from payments of any kind
otherwise due to the Employee any federal, state or local taxes
of any kind required by law to be withheld with respect to the
purchase of the Shares by the Employee.
(b) If the Employee elects, in accordance with Section
83(b) of the Internal Revenue Code of 1954, as amended, to
recognize ordinary income in the year of acquisition of the
Shares, the Company will require at the time of that election an
additional payment for
5
withholding tax purposes based on the difference, if any between
the purchase price for the Shares and the fair market value of the
Shares as of the day immediately preceding the date of the
purchase of the Shares by the Employee.
10. Severability. The invalidity or unenforceability of
any provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, and each
other provision of this Agreement shall be severable and
enforceable to the extent permitted by law.
11. Waiver. Any provision contained in this Agreement may
be waived, either generally or in any particular instance, by the
Board of Directors of the Company.
12. Binding Effect. This Agreement shall be binding upon,
and inure to the benefit of, the Company and the Employee and
their respective heirs, executors, administrators, legal
representatives, successors, and assigns, subject to the
restrictions on transfer set forth in Section 4 of this
Agreement.
13. No Rights to Employment. Nothing contained in this
Agreement shall be construed as giving the Employee any right to
be retained, in any position, as an employee of the Company.
14. Notice. All notices required or permitted hereunder
shall be in writing and deemed effectively given upon personal
delivery or upon deposit in the United States Post Office, by
registered or certified mail, postage prepaid, addressed to the
other party at the address shown beneath his or its respective
signature to this Agreement, or at such other address or
addresses as either party shall designate to the other in
accordance with this Section 14.
15. Pronouns. Whenever the context may require, any
pronouns used in this Agreement shall include the corresponding
masculine, feminine, or neuter forms. The singular
6
form of nouns and pronouns shall included the plural, and the plural
form of nouns and pronouns shall include the singular.
16. Entire Agreement. This Agreement constitutes the
entire agreement between the parties, and supersedes all prior
agreements and understandings relating to the subject matter of
this Agreement.
17. Amendment. This Agreement may be amended or modified
only by a written instrument executed by both the Company and the
Employee.
18. Governing Law. This Agreement shall be construed,
interpreted, and enforced in accordance with the laws of North
Carolina.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first above written.
COMPANY
LADD FURNITURE, INC.
By:____________________________________
Chairman and Chief Executive Officer
Address: P. O. Box HP 3
High Point, NC 27261
EMPLOYEE
_______________________________________
Address:________________________________
________________________________
Social Sec. No.___________________________
7
EX-10
5
EXHIBIT 10.4
EXHIBIT 10.4
FIRST AMENDMENT TO AMENDED AND RESTATED
CREDIT AGREEMENT
This First Amendment to Amended and Restated Credit Agreement
(this "First Amendment"), dated as of February 16, 1995, is entered
into by and among LADD FURNITURE, INC. (the "Company"), the
guarantors identified as such on the signature pages attached
hereto (the "Guarantors"), the banks identified as such on the
signature pages attached hereto (the "Banks") and NATIONSBANK, N.A.
(Carolinas) f/k/a NATIONSBANK OF NORTH CAROLINA, N.A., as agent for
the Banks (in such capacity, the "Agent"). All capitalized terms
used herein and not otherwise defined shall have the meanings
ascribed to such terms in the Credit Agreement (as defined below).
RECITALS
A. The Company, the Guarantors, the Banks and the Agent
entered into that certain Amended and Restated Credit Agreement
dated as of October 19, 1994 (the "Credit Agreement").
B. The Company has requested that the Credit Agreement be
amended to (i) modify the Debt Service Coverage Ratio financial
covenant contained therein and (ii) to add a Swing Line
Subfacility.
C. The Banks have agreed to such modifications pursuant to
the terms set forth below.
AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. New Definitions. The following definitions shall be added to
Section 1.01 of the Credit Agreement as follows:
(a) "NationsBank" shall mean NationsBank, N.A. (Carolinas)
f/k/a NationsBank of North Carolina, N.A.
(b) "Swing Line Loans" shall mean the loans provided for by
Section 2.01(e) hereof.
(c) "Swing Line Loan Commitment" shall mean Five Million
Dollars ($5,000,000).
(d) "Swing Line Loan Request" shall mean a request by the
Company for a Swing Line Loan in a form agreed to between
the Company and NationsBank.
(e) "Swing Line Loan Note" shall have the meaning described
thereto in Section 2.07(e).
2. Amendment to Existing Definitions. The following definitions
set forth in Section 1.01 of the Credit Agreement shall be
modified as follows:
(a) The definition of Commitment shall be amended in its
entirety to read as follows:
"Commitment" shall mean, collectively, the Revolving
Credit Commitment, the Term Loan Commitment and the Swing
Line Loan Commitment.
(b) The definition of Loans shall be amended in its entirety
to read as follows:
"Loans" shall mean the loans provided for by Section 2.01
hereof and shall include Revolving Credit Loans, the Term
Loan, Competitive Bid Loans and the Swing Line Loans.
3. Section 2.01(a). Section 2.01(a) of the Credit Agreement is
amended in its entirety to read as follows:
(a) Revolving Credit Loans. Each Bank severally agrees, on
the terms of this Agreement, to make revolving loans to the Company
in Dollars, at any time and from time to time during the period
from and including the Effective Date to but not including the
Revolving Credit Commitment Termination Date (each a "Revolving
Loan and collectively the "Revolving Loans"); provided, however,
that (i) the sum of the aggregate amount of Revolving Loans
outstanding plus the aggregate amount of Competitive Bid Loans
outstanding plus the aggregate amount of Swing Line Loans
outstanding shall not exceed the Revolving Credit Commitment and
(ii) with respect to each individual Bank, the Bank's pro rata
share of outstanding Revolving Loans shall not exceed such Bank's
Revolving Credit Commitment Percentage of the Revolving Credit
Commitment. Subject to the terms of this Agreement, the Company
may borrow, repay and reborrow the amount of the Revolving Credit
Commitment.
4. Section 2.01(b)(i). Section 2.01(b)(i) of the Credit
Agreement is amended in its entirety to read as follows:
(i) Competitive Bid Loans. Subject to the terms and
conditions hereof, the Company may, from time to time during
the period from and including the Effective Date to but not
including the Revolving Credit Commitment Termination Date,
request and each Bank may, in its sole discretion, agree to
make Competitive Bid Loans to the Company; provided, however,
that (x) the sum of the aggregate amount of Revolving Credit
Loans outstanding plus the aggregate amount of Competitive Bid
Loans outstanding plus the aggregate amount of the Swing Line
Loans outstanding shall not exceed the Revolving Credit
Commitment and (y) if a Bank does make a Competitive Bid Loan
it shall not reduce such Bank's obligation to make its pro
rata share of any Revolving Credit Loan or its obligation to
purchase a pro rata participation in any Swing Line Loan.
-2-
5. Section 2.01(e). A new subsection (e) is added to Section
2.01 of the Credit Agreement to read as follows:
(e) Swing Line Loans Subfacility.
(i) Swing Line Loans. NationsBank hereby
agrees, on the terms of this Agreement and only if the
Company is in compliance with all the conditions set
forth in Section 6, to make revolving loans to the
Company in Dollars, at any time and from time to time
during the period from and including the Effective Date
to but not including the Revolving Credit Commitment
Termination Date (each a "Swing Line Loan" and
collectively, the "Swing Line Loans"); provided , however
that (i) the sum of the aggregate amount of Swing Line
Loans outstanding at any one time shall not exceed the
Swing Line Loan Commitment and (ii) the sum of the
aggregate amount of Swing Line Loans outstanding plus the
aggregate principal amount of Revolving Loans outstanding
plus the aggregate amount of Competitive Bid Loans
outstanding shall not exceed the Revolving Credit
Commitment. Subject to the terms of this Agreement, the
Company may borrow, repay and reborrow the amount of the
Revolving Credit Commitment.
(ii) Swing Line Borrowings. By no later than
11:00 a.m. (Charlotte, North Carolina time), on the date
of the request, the Company shall submit a Swing Line
Loan Request to NationsBank setting forth the amount of
the requested Swing Line Loan and complying in all
respects with Section 6.
(iii) Additional Swing Line Loan Provisions.
The Company agrees to repay all Swing Line Loans then
outstanding within one Business Day of demand therefor by
NationsBank. Each repayment of a Swing Line Loan may be
accomplished by requesting Revolving Credit Loans. In
the event that the Company shall fail to repay any Swing
Line Loan within three Business Days after demand
therefor by NationsBank, and in any event upon (A) a
request by NationsBank, (B) the occurrence of an Event of
Default described in Section 9 or (C) the acceleration of
any Loan or termination of any Commitment pursuant to
Section 9, each other Bank shall, within three (3)
Business Days after demand therefore by NationsBank,
irrevocably and unconditionally purchase from
NationsBank, without recourse or warranty, an undivided
interest and participation in such Swing Line Loan in an
amount equal to such other Bank's Revolving Credit
Commitment Percentage thereof, by directly purchasing a
participation in such Swing Line Loan in such amount
(regardless of whether the conditions precedent thereto
set forth in Section 6.02 hereof are then satisfied,
whether or not the Borrower has made an Advance Request
and whether or not the Revolving Credit Commitments are
then in effect, any Event of Default exists or all the
Loans have been accelerated) and paying the proceeds
thereof to NationsBank at the address provided in Section
12.02, or at such other address as NationsBank may
designate, in Dollars and in immediately available funds.
NationsBank agrees to notify each Bank that is obligated
to purchase a participation
-3-
in Swing Line Loans hereunder of the occurrence of any
event described in clause (B) or (C) above promptly after
NationsBank becomes aware thereof, but the failure to give
such notice will not affect the obligation of any such Bank
to purchase any such participation. If such amount is not
in fact made available to NationsBank by any Bank,
NationsBank shall be entitled to recover such amount on
demand from such Bank, together with accrued interest
thereon for each day from the date of demand thereof, at
the Federal Funds Rate. If such Bank does not pay such
amount forthwith upon NationsBank's demand therefor, and
until such time as such Bank makes the required payment,
NationsBank shall be deemed to continue to have outstanding
Swing Line Loans in the amount of such unpaid participation
obligation for all purposes of the Basic Documents other
than those provisions requiring the other Banks to
purchase a participation therein. Further, such Bank
shall be deemed to have assigned any and all payments
made of principal and interest on its Loans, and any
other amounts due to it hereunder to NationsBank to fund
Swing Line Loans in the amount of the participation in
Swing Line Loans that such Bank failed to purchase
pursuant to this Section 2.01(e) until such amount has
been purchased (as a result of such assignment or
otherwise). Upon the purchase of a participation in
respect of such Swing Line Loan by a Bank pursuant to
this Section 2.01(e), the amount so funded shall become a
Revolving Credit Loan by the purchasing Bank hereunder
and shall no longer be a Swing Line Loan. On the date
that the Banks are required to purchase participations in
Swing Line Loans under this Section 2.01(e),
NationsBank's pro rata share of such Swing Line Loans
shall no longer be a Swing Line Loan hereunder but shall
be a Revolving Credit Loan.
6. Section 2.04. The second sentence of Section 2.04 of the
Credit Agreement is amended in its entirety to read as
follows:
For the purpose of calculating the Commitment Fee, the amount
outstanding as Competitive Bid Loans and as Swing Line Loans
shall not be included in the amount used under the Revolving
Credit Commitment (notwithstanding the fact that the amount of
Competitive Bid Loans and Swing Line Loans outstanding reduces
availability under the Revolving Credit Commitment).
7. Section 2.07(e). A new subsection (e) is added to Section
2.07 of Credit Agreement to read as follows:
(e) Swing Line Loan Notes. The Swing Line Loan Notes made by
NationsBank shall be evidenced by a single promissory note of the
Company to NationsBank in substantially the form of Exhibit A-4
hereto (the "Swing Line Loan Note"), dated the Effective Date,
payable to NationsBank in a principal amount equal to the amount of
its Swing Line Loan Commitment and otherwise duly completed. The
date and amount of each Swing Line Loan made by NationsBank to the
Company, and each payment made on account of the principal thereof,
shall be recorded by NationsBank on its books and, prior to any
transfer of the Swing Line Loan Note held by it, endorsed by
NationsBank on the schedule attached to such Note or any
continuation thereof;
-4-
provided that the failure of NationsBank to make any such recordation
or endorsement shall not effect the obligations of the Company to make
a payment when due of any amount owing hereunder or under such Note in
respect of the Swing Line Loans to be evidenced by such Note, and each
such recordation or endorsement shall be conclusive and binding absent
manifest error.
8. Section 2.08(b)(ii). Section 2.08(b)(ii) of the Credit
Agreement is amended in its entirety to read as follows:
(ii) Overadvance. If, at any time, the sum of Revolving
Credit Loans outstanding plus Competitive Bid Loans
outstanding plus Swing Line Loans outstanding exceeds the
Revolving Credit Commitment, then the Company shall
immediately make a payment in the amount of the deficiency.
9. Section 2.08. The last paragraph of Section 2.08 of the
Credit Agreement is amended in its entirety to read as
follows:
Mandatory prepayments shall be applied: first, (A) if
pursuant to subsection (i) above, pro rata to the remaining
installments of the Term Loan on the basis provided in Section
2.08(a) hereof, or (B) if pursuant to Subsection (iii) above,
to the remaining installments of the Term Loan in the inverse
order of maturity; second, to the Revolving Credit Loans;
provided that, upon any such prepayment of the Revolving
Credit Loans under Subsection (i) or (iii) above, the
Revolving Credit Commitment shall automatically be reduced on
such date by the amount of such prepayment and, if the amount
available for prepayment as aforesaid exceeds the amount of
Revolving Credit Loans outstanding plus Competitive Bid Loans
outstanding plus Swing Line Loans outstanding on such date,
the Revolving Credit Commitment shall be further reduced on
such date by such excess amount; and third, if the Term Loan
is paid in full and the Revolving Credit Loans have been paid
in full, then to the Swing Line Loans and then to the
Competitive Bid Loans on a pro rata basis to each Bank holding
Competitive Bid Loans.
10. Section 3.01(a). Section 3.01(a) of the Credit Agreement is
amended in its entirety to read as follows:
(a) Revolving Loans and Competitive Bid Loans. On the
Revolving Credit Commitment Termination Date, the entire
outstanding principal balance of Revolving Loans, Competitive Bid
Loans and Swing Line Loans, together with accrued but unpaid
interest and all other sums owing thereon, shall be due and payable
in full.
11. Section 3.02(a)(iv). A new subsection (iv) is added to
Section 3.02 of the Credit Agreement to read as follows:
(iv) Swing Line Loans. All Swing Line Loans shall
accrue interest at the Base Rate (as in effect from time to
time) or at such other rate as agreed to between the Company
and
-5-
NationsBank. All interest accrued on Swing Line Loans
shall be solely for the benefit of NationsBank unless and
until the other Banks purchase a participation therein.
12. Section 3.02(b)(i). Section 3.02(b)(i) of the Credit
Agreement is amended in its entirety to read as follows:
(i) In the case of a Base Rate Loan (other than a Swing
Line Loan), quarterly on the first Business Day following each
Quarterly Date, and in the case of a Swing Line Loan on the
last Business Day of each month.
13. Section 4.03. Section 4.03 of the Credit Agreement is amended
in its entirety to read as follows:
4.03 Computations. (a) Interest on Eurodollar Loans,
Competitive Bid Loans, the Commitment Fee and on all other amounts
owing by the Company (other than Base Rate Loans and Swing Line
Loans) shall be computed on the basis of a year of 360 days and
actual days elapsed (including the first day but excluding the last
day) occurring in the period for which payable and (b) interest on
Base Rate Loans and Swing Line Loans shall be computed on the basis
of a year of 365 or 366 days, as the case may be, and actual days
elapsed (including the first day but excluding the last day)
occurring in the period for which payable.
14. Section 4.04. A new subsection (d) to Section 4.04 of the
Credit Agreement is added to the Credit Agreement to read as
follows:
(d) In the case of Swing Line Loans, $250,000 and in integral
multiples of $100,000 in excess of such amount.
15. Section 8.12. Section 8.12 of the Credit Agreement is hereby
amended in its entirety to read as follows:
8.12 Debt Service Coverage Ratio. The Company will not permit
the Debt Service Coverage Ratio to be less than (a) for the
rolling four Quarterly Periods ending on the Quarterly Date
nearest December 31, 1994, 1.4 to 1.0; (b) for the rolling
four Quarterly Periods ending on the Quarterly Date nearest
March 31, 1995, 1.25 to 1.0; (c) for the rolling four
Quarterly Periods ending on the Quarterly Date nearest June
30, 1995, 1.30 to 1.00; (d) for the rolling four Quarterly
Periods ending on the Quarterly Date nearest September 30,
1995, 1.45 to 1.0; and (e) for each rolling four Quarterly
Periods ending on any Quarterly Date thereafter, 2.0 to 1.0.
16. Exhibit A-4. A new Exhibit A-4 is added to the Credit
Agreement in the form attached to this First Amendment.
-6-
17. Swing Line Loan Note. Simultaneously with the execution and
delivery of this First Amendment, the Company shall deliver a
Swing Line Loan Note in favor of NationsBank in the original
principal amount of $5 million.
18. Fees. In consideration of the Banks entering into this First
Amendment, the Company shall pay to each Bank a fee equal to
.05% of such Bank's pro rata share of the Commitment.
19. Liens. The Company and the Guarantors, as applicable, affirm
the liens and security interests created and granted in the
Credit Agreement and the Basic Documents and agree that this
First Amendment shall in no manner adversely affect or impair
such liens and security interests.
20. Representations and Warranties. The Company hereby represents
and warrants to the Banks and the Agent that (a) no Event of
Default exists and is continuing under the Credit Agreement;
(b) the Company has no claims, counterclaims, offsets, credits
or defenses to the Basic Documents and the performance of its
obligations thereunder, or if the Company has any such claims,
counterclaims, offsets, credits or defenses to the Basic
Documents or any transaction related to the Basic Documents,
same are hereby waived, relinquished and released in
consideration of the Banks' execution and delivery of this
First Amendment; and (c) since the date of the last financial
statements of the Company delivered to Banks, no material
adverse change has occurred in the business, financial
condition or prospects of the Company other than as previously
disclosed to the Banks.
21. Acknowledgment of Guarantors. The Guarantors acknowledge and
consent to all of the terms and conditions of this First
Amendment and agree that this First Amendment and all
documents executed in connection herewith do not operate to
reduce or discharge the Guarantors' obligations under the
Credit Agreement or the other Basic Documents. The Guarantors
acknowledge and agree that the Guarantors have no claims,
counterclaims, offsets, credits or defenses to the Basic
Documents and the performance of the Guarantors' obligations
thereunder, or if Guarantors did have any such claims,
counterclaims, offsets, credits or defenses to the Basic
Documents or any transaction related to the Basic Documents,
the same are hereby waived, relinquished and released in
consideration of the Banks' execution and delivery of this
First Amendment.
22. No Other Changes. Except as expressly modified and amended in
this First Amendment, all of the terms, provisions and
conditions of the Basic Documents shall remain unchanged.
23. Counterparts. This First Amendment may be executed in any
number of counterparts and by the parties hereto in separate
counterparts, each of which when so executed and delivered
shall be deemed to be an original and all of which taken
together shall constitute one and the same instrument.
24. ENTIRETY. THIS FIRST AMENDMENT AND THE OTHER BASIC DOCUMENTS
EMBODY THE ENTIRE AGREEMENT BETWEEN THE PARTIES AND SUPERSEDE
-7-
ALL PRIOR AGREEMENTS AND UNDERSTANDINGS, IF ANY, RELATING TO
THE SUBJECT MATTER HEREOF. THESE BASIC DOCUMENTS REPRESENT
THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
-8-
This First Amendment is executed as of the day and year first
written above.
BORROWER
ATTEST: LADD FURNITURE, INC.
By:____________________ By:_____________________________
Assistant Secretary William S. Creekmuir
Senior Vice President and
Chief Financial Officer
(corporate seal)
GUARANTORS
ATTEST: PENNSYLVANIA HOUSE, INC.
By:_____________________ By:________________________________
Assistant Secretary William S. Creekmuir
Vice President
(corporate seal)
ATTEST: BROWN JORDAN COMPANY
By:_____________________ By:________________________________
Assistant Secretary William S. Creekmuir
Vice President
(corporate seal)
ATTEST: CLAYTON-MARCUS COMPANY, INC.
By:____________________ By:________________________________
Assistant Secretary William S. Creekmuir
Vice President
(corporate seal)
[signatures continued]
ATTEST: LADD CONTRACT SALES CORPORATION
By:_____________________ By:_______________________________
Assistant Secretary William S. Creekmuir
Vice President
(corporate seal)
ATTEST: FOURNIER FURNITURE, INC.
By:_____________________ By:_________________________________
Assistant Secretary William S. Creekmuir
Vice President
(corporate seal)
ATTEST: BARCLAY FURNITURE CO.
By:______________________ By:_________________________________
Assistant Secretary William S. Creekmuir
Vice President
(corporate seal)
ATTEST: AMERICAN FURNITURE COMPANY,
INCORPORATED
By:_____________________ By:_________________________________
Assistant Secretary William S. Creekmuir
Vice President
(corporate seal)
[signature continued]
ATTEST: PILLIOD FURNITURE, INC.
By:_____________________ By:_________________________________
Assistant Secretary William S. Creekmuir
Vice President
(corporate seal)
ATTEST: LEA INDUSTRIES, INC.
(a North Carolina corporation)
By:_____________________ By:_________________________________
Assistant Secretary William S. Creekmuir
Vice President
(corporate seal)
BANKS
NATIONSBANK, N.A. (CAROLINAS) f/k/a
NATIONSBANK BANK OF NORTH CAROLINA, N.A.
as Agent and as a Bank
By:_____________________________
Gregory W. Powell
Senior Vice President
CIBC INC.
By:_____________________________
Name:___________________________
Title:__________________________
CREDITANSTALT CORPORATE FINANCE, INC.
By:_____________________________
Name:___________________________
Title:__________________________
[signatures continued]
WACHOVIA BANK OF NORTH CAROLINA, N.A.
By:_____________________________
Name:___________________________
Title:__________________________
ABN AMRO BANK N.A.
By:_____________________________
Name:___________________________
Title:__________________________
BRANCH BANK AND TRUST COMPANY
By:_____________________________
Name:___________________________
Title:__________________________
COMMONWEALTH BANK, a division of
MERIDIAN BANK
By:_____________________________
Name:___________________________
Title:__________________________
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA
By:_____________________________
Name:___________________________
Title:__________________________
PNC BANK, NATIONAL ASSOCIATION
By:_____________________________
Name:___________________________
Title:__________________________
[signatures continued]
NBD BANK f/k/a NBD BANK, N.A.
By:_____________________________
Name:___________________________
Title:__________________________
EX-10
6
EXHIBIT 10.5
EXHIBIT 10.5
LADD FURNITURE, INC.
1995 MANAGEMENT INCENTIVE PLAN
PLAN HIGHLIGHTS
1. Incentive payments based on financial performance and
individual performance as follows:
For Corporate Participants
(bullet) achievement of PAT target
(bullet) achievement of ROAE target (selected management)
(bullet) achievement of individual objectives
For Operating Company Participants
(bullet) achievement of PBT targets
(bullet) achievement of ROIC targets (presidents only)
(bullet) achievement of individual objectives
2. No incentive payments will be made to any individual if the
operating unit to which the individual is assigned does not earn
6.5% return on beginning invested capital (except 6 executives
in Barclay and Daystrom under special "turn around" incentive.
Incentive payment expense will be accrued in results before
calculation of profit.
3. Total of 237 officers and key managers to participate in the
plan (Exhibit I). Maximum incentives range from 10% to 100% of
January 1, 1995 base salary. Incentive payments are based on
achieving performance criteria established by senior management.
4. Program includes $50,000 discretionary incentive pool for
extraordinary performance by LADD employees not covered by the
Management Incentive Plan and a $131,500 special "turn around"
incentive for six Barclay and Daystrom executives.
5. Estimated incentive payout at planned performance levels is
$2.7 million.
6. Incentives earned in 1995 will be paid in cash after completion
of annual audit (not later than March 31, 1996).
7. In the event of a transfer of a participant during the fiscal
year to an operating unit other than the unit in which originally
a Plan participant, an appropriate adjustment will be made in
Incentive Plan eligibility pro rata for the time worked in each
unit.
8. In the event of a promotion of a participant within the same
operating unit, an appropriate adjustment will be made in
Incentive Plan eligibility pro rata. In the event of a demotion
which would place participants in a position substantially
different from that in which they were nominated as a
participant, an appropriate adjustment may be made as to the
amount of incentive payment for which they are eligible as
determined by the Compensation Committee of the Board of
Directors.
9. Participants will forfeit all income from plan if employment is
terminated prior to January 1, 1996 for any reason other than
death, disability or retirement (over 55).
10. The 1995 Management Incentive Plan only applies to fiscal
year 1995.
EX-13
7
EXHIBIT 13.1
1994 ANNUAL REPORT
(Five photos of various furniture groupings appear here.)
LADD FURNITURE, INC.
ONE FOCUS. A BROADER VISION
(Four photos of various furniture groupings and a photo of a map appear here .)
LADD's ten U.S.-based furniture companies manufacture and market a broad
assortment of residential furniture for every room of every home. During 1994,
these products were shipped to customers located throughout the United States
and, through LADD International, in 53 foreign countries (map at left).
LADD is one of North America's largest residential furniture manufacturers,
with 1994 net sales of $592 million, 26 manufacturing facilities in ten states
and Mexico, and approximately 7,900 employees. LADD markets its broad line of
residential and contract furniture under the major brand names American
Drew, American of Martinsville, Barclay, Brown Jordan, Clayton Marcus, Daystrom,
Design Horizons, Fournier, LADD Home Theatre, Lea, Pennsylvania House and
Pilliod; and distributes these products both domestically and, through LADD
International, worldwide. LADD also owns and operates two support companies, Lea
Lumber & Plywood and LADD Transportation. The company's common stock trades on
the Nasdaq Stock Market under the symbol: LADF.
Financial Highlights
Dollar amounts in thousands, except per share data
PERCENT
1994* 1993 CHANGE
INCOME STATEMENT
Net sales $ 591,575 521,200 +13.5%
Gross profit 109,581 94,279 16.2
Operating income 15,670 12,326 27.1
Net earnings 4,308 3,846 12.0
Weighted average shares outstanding 23,086 23,054 0.1
PER SHARE
Net sales $ 25.62 22.61 +13.3%
Net earnings 0.19 0.17 11.8
Cash dividends 0.12 0.12 0.0
Year-end book value 6.58 6.51 1.1
BALANCE SHEET
Net working capital $ 123,685 123,004 + 0.6%
Total assets 378,816 335,737 12.8
Long-term debt** 143,584 105,257 36.4
Shareholders' equity 151,906 150,103 1.2
RATIOS
Gross margin 18.5% 18.1
Operating profit margin 2.6 2.4
Return on sales 0.7 0.7
Return on beginning equity 2.9 2.6
Long-term debt** to capitalization 45.3 37.9
Current ratio 3.0X 3.1
OTHER
Capital spending $ 31,825 24,666 +29.0%
Depreciation and amortization 17,812 13,062 36.4
Year-end employees 7,860 6,670 17.8
Year-end shareholders 5,500 4,500 22.2
*1994 data reflect the acquisition of Pilliod Furniture as of January 31, 1994.
**Excluding current installments.
1
Dear Shareholder
LADD achieved record sales in 1994, with total volume increasing 13%
to $592 million. Operating profit for the year increased 27% and net earnings
rose 12% to $4.3 million or $.19 per share. During the year, we continued to
take strategic actions designed to improve LADD's profitability and
return on investment.
In January 1994, we successfully completed the $54 million acquisition of
Pilliod Furniture. This acquisition increased LADD's position in the fast
growing promotional casegoods segment of the industry. With
annualized sales in excess of $90 million, Pilliod was a significant
contributor to our earnings in its first year as a LADD company.
During 1994, LADD's operating companies significantly increased their new
product development and marketing efforts. Our casegoods and upholstery
companies successfully introduced a variety of new product groups, several of
which are pictured in this annual report. We believe successful new
introductions, coupled with innovative marketing programs, are critical
elements for LADD's growth and profitability in the future.
Investment in technology continues to be a key LADD strategy. Capital
spending in 1994 was a record $32 million. Over the last two years, over $56
million has been invested in our operating companies. While this
aggressive capital spending program has disrupted earnings in the short-term,
these investments will lead to improved product quality, more favorable raw
material yields, and higher productivity levels.
We also continued our strategic efforts to develop and expand our
international business during 1994. Although international sales declined in
1994 due to lower sales in Canada and the Mid-East, we increased to 53
the number of countries to which we sell and expanded our sales representation
in a number of key international markets. Recent currency
(Logos of American Drew, American of Martinsville, Barclay, Brown Jordan,
Clayton Marcus, Daystrom, Fournier, LADD Home Theatre and Home Design Horizons
appear in a reversed strip around this page)
2
exchange rate fluctuations will most likely reduce our exports to Canada and
Mexico this year, but we continue to believe our international focus provides a
significant growth opportunity for LADD.
While 1994 was a year of overall growth and improved earnings for LADD,
bottom line results were below our expectations. We are satisfied with the
recent sales growth and earnings performance of half our operating companies.
The balance are receiving intense management attention aimed at improving their
operating results.
With this in mind, LADD's corporate management team was realigned in January
1995 with the promotion of Fred Schuermann to the position of president and
chief operating officer. With over 18 years of industry experience, a successful
managerial track record, and newly-broadened management responsibilities, we are
confident that Fred's leadership skills and experience will positively impact
our future operating results.
LADD continues to maintain a strong financial position. During 1994, we
refinanced our short and long-term bank debt with a new $190 million credit
facility which reduced LADD's interest rate, extended long-term debt maturities,
and increased financial flexibility. At year-end, the company's long-term debt
ratio of 45% was consistent with our long-term financial objectives.
We believe 1995 will be another year of improvement for LADD, even if the
industry's growth rate slows from its 1994 level, as most forecasters are
currently predicting. Our extensive new product introductions, increased
marketing emphasis, and substantial capital investment during the past two
years should generate additional returns during 1995. On behalf of LADD's
7,900 employees, I want to thank you, our shareholders, along with our
customers and suppliers, for your continuing support.
(Signature of Richard R. Allen appears here)
Richard R. Allen,
Chairman and Chief Executive Officer
...NEW PRODUCT
INTRODUCTIONS,
INCREASED MARKETING
EMPHASIS, AND
SUBSTANTIAL CAPITAL
INVESTMENT...SHOULD
GENERATE ADDITIONAL
RETURNS DURING 1995.
3
(Logos of American Drew, American of Martinsville, Barclay, Brown Jordan,
Clayton Marcus, Daystrom, Fournier, LADD Home Theatre and Home Design Horizons
appear in a reversed strip around this page)
Marketing Focus...
LADD's corporate and operating company managers continue to focus on the
company's overall marketing process; from initial product conception through
manufacturing, distribution, delivery and follow-up. These efforts are targeted
at enhancing the design, quality, utility and value of LADD's products, and
delivering them to customers more quickly and efficiently. We remain strongly
committed to improving LADD's sales and market share by providing appealing,
high value products and services to our customers.
The LADD operating companies rely on focus group interviews with consumers
and retailers to help design and develop successful new products. This
market-derived information is equally helpful in refining and improving
existing products and services. For example, Lea Industries is innovatively
using groups of elementary school children to suggest improvements
in the design and functionality of the company's existing lines of youth
bedroom furniture. Customer tests and retailer feedback have also been major
contributors to the development of American Drew's new American
Traveler series, which features product groups with styling traceable to
various geographic regions of America. The well-received Magnolia's Secret
group, with its French New Orleans look, owes much of its success to such market
research.
Computer technology also plays an important role in LADD's marketing
efforts. Clayton Marcus, winner of the LADD Chairman's Award in both 1993 and
1994, utilizes an in-store computer system which allows participating furniture
retailers in the U.S., Mexico and Canada to visually show consumers exactly how
any of the more than 900 Clayton Marcus fabric alternatives will look on any of
the company's custom-made upholstery frames. Clayton Marcus is also one of
several LADD companies employing around-the-clock computerized voice response
systems to assist its retailers in checking product availability and order
status.
WE REMAIN STRONGLY
COMMITTED TO
GROWING LADD'S
SALES AND MARKET
SHARE BY PROVIDING
APPEALING, HIGH
VALUE PRODUCTS...
(Logos of American Drew, American of Martinsville, Barclay, Brown Jordan,
Clayton Marcus, Daystrom, Fournier, LADD Home Theatre and Home Design Horizons
appear in a reversed strip around this page)
4
(Four photos of various furniture groupings appear here.)
LADD's broad assortment of wood, upholstered, and metal furniture, with a
wide range of price points, is marketed to consumers throughout the United
States and abroad, as well as to leading hotels and motels around the world.
(Logos of American Drew, American of Martinsville, Barclay, Brown Jordan,
Clayton Marcus, Daystrom, Fournier, LADD Home Theatre and Home Design Horizons
appear in a reversed strip around this page)
5
Brown Jordan, known principally as an award-winning designer and premier
supplier of outdoor pool and patio furniture, introduced an "in-home collection"
during 1994 designed to meet increasing consumer demand for high fashion indoor
metal furniture. Brown Jordan's furniture was recently featured on the cover of
Home Magazine as part of national publicity received for a home decorated
entirely with LADD company products and accessories.
LADD International's team of professionals continues to increase the
worldwide awareness of our broad product line. During 1994, LADD shipped $34
million of its products to a record 53 foreign countries. Retail distribution
breakthroughs were achieved in several countries, including Turkey, Ecuador,
Guatemala, Panama, and Peru. Pennsylvania House recently established its first
dealer in Saudi Arabia. In addition, significant marketing activities were
initiated in Europe, the Middle East and the Far East. We remain convinced that
LADD's overall international sales base will represent an important complement
to our domestic business in the years ahead.
The number of furniture distribution channels continues to increase, and
LADD's broad product line uniquely positions us to capitalize on this trend.
Last year, consumers purchased LADD products from such diverse places as home
shopping networks, mail order catalogs, mass merchandisers, and consumer
electronics stores.
Furniture for home theatre is one of the rapidly growing new market niches
LADD has identified and targeted for future growth. LADD is one of only a few
manufacturers who can offer a broad assortment of home theatre furniture styles
at a wide range of price points. We have begun to enjoy considerable success
with major home theatre retailers, who are attracted to the LADD home theatre
program by our ability to offer a "good, better, best" product assortment
through our Fournier, Pilliod, Lea and American Drew brand names.
Each of these examples illustrates how LADD innovatively creates and
markets its broad range of products. An
intensified focus on marketing will continue throughout 1995.
...INTERNATIONAL
SALES, WILL
REPRESENT AN
IMPORTANT
COMPLEMENT TO
OUR DOMESTIC
BUSINESS...
(Logos of American Drew, American of Martinsville, Barclay, Brown Jordan,
Clayton Marcus, Daystrom, Fournier, LADD Home Theatre and Home Design Horizons
appear in a reversed strip around this page)
6
LADD's product offerings--ranging from inexpensive RTA occasional pieces
through high fashion metal furniture, stylish upholstery and richly-
finished wood casegoods--can be used in every room of every home and
appealingly combined within the same room.
(Logos of American Drew, American of Martinsville, Barclay, Brown Jordan,
Clayton Marcus, Daystrom, Fournier, LADD Home Theatre and Home Design Horizons
appear in a reversed strip around this page)
7
MANAGEMENT'S STATEMENT OF RESPONSIBILITY
The management of LADD Furniture, Inc. is responsible for the integrity of
the financial statements of the Company and for ascertaining that the financial
statements accurately reflect the financial position and results of operations
of the Company. The financial statements were prepared in conformity with
generally accepted accounting principles, applying estimates and management's
best judgment, as required. Information presented elsewhere in this Annual
Report is consistent with the financial statements.
LADD has established and maintains a system of internal controls designed to
provide reasonable assurance, at an appropriate cost, that the Company's assets
are adequately safeguarded and that the accounting records reflect the
transactions of the Company accurately, fairly and in reasonable detail. The
internal control system provides for careful selection and training of
personnel, the delegation of management authority and responsibility, the
dissemination of management control policies and procedures and an internal
audit program.
The board of directors, through its Audit Committee consisting of 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.
(Signature of Richard A. Allen) (Signature of William S. Creekmuir)
Richard R. Allen William S. Creekmuir
Chairman & Chief Executive Officer Senior Vice President & Chief Financial Officer
February 16, 1995 February 16, 1995
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 January 1, 1994,
and the related consolidated statements of earnings, shareholders' equity and
cash flows for each of the years in the three-year period ended December 31,
1994. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of LADD
Furniture, Inc. and subsidiaries as of December 31, 1994 and January 1, 1994,
and the results of their operations and their cash flows for each of the years
in the three-year period ended December 31, 1994 in conformity with generally
accepted accounting principles.
As discussed in notes 1 and 11 to the consolidated financial statements, the
Company adopted the provisions of the Financial Accounting Standards Board's
Statement of Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," in 1993.
(Signature of KPMG Peat Marwick LLP)
Greensboro, North Carolina
February 16, 1995
8
LADD Furniture, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF EARNINGS
Years ended December 31, 1994, January 1, 1994 and January 2, 1993
Dollar amounts in thousands, except share data
1994 1993 1992
Net sales $ 591,575 521,200 496,679
Cost of sales 481,994 426,921 401,250
Gross profit 109,581 94,279 95,429
Selling, general and administrative expenses 93,911 81,953 78,493
Operating income 15,670 12,326 16,936
Other deductions:
Interest expense - Note 8 8,939 5,542 7,502
Other, net - Note 8 1,714 377 1,164
10,653 5,919 8,666
Earnings before income taxes 5,017 6,407 8,270
Income tax expense - Note 12 709 2,561 3,725
Net earnings $ 4,308 3,846 4,545
Net earnings per common share $ 0.19 0.17 0.21
Cash dividends per common share $ 0.12 0.12 --
Weighted average number of common
shares outstanding 23,086,467 23,053,654 21,441,616
See accompanying notes to consolidated financial statements.
9
LADD Furniture, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
Dollar amounts in thousands, except share data
DECEMBER 31, January 1,
1994 1994
ASSETS
Current assets:
Cash $ 576 1,350
Trade accounts receivable, less allowances for
doubtful
receivables, discounts, returns and allowances
of
$4,294 and $4,178, respectively - Notes 3 and 14 52,735 72,975
Inventories - Note 4 122,083 100,639
Prepaid expenses and other current assets - Note 10 10,053 6,110
Total current assets 185,447 181,074
Property, plant and equipment, net - Notes 5 and 13 109,522 97,497
Intangible and other assets, net - Note 6 83,847 57,166
$ 378,816 335,737
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt - Note 8 $ 687 5,815
Short-term bank borrowings - Note 8 5,000 --
Trade accounts payable 28,360 23,414
Accrued expenses and other current
liabilities - Notes 7 and 12 27,715 28,841
Total current liabilities 61,762 58,070
Long-term debt, excluding current installments - Note 8 143,584 105,257
Deferred compensation and other liabilities - Notes 10, 11
and 13 6,316 3,405
Deferred income taxes - Note 12 15,248 18,902
Total liabilities 226,910 185,634
Shareholders' equity - Notes 9 and 15:
Preferred stock of $100 par value. Authorized
500,000 shares; no shares issued -- --
Common stock of $.10 par value. Authorized
50,000,000 shares; issued 23,096,557 shares and
23,062,262 shares, respectively 2,310 2,306
Additional paid-in capital 49,516 49,186
Currency translation adjustment (208) (170)
Retained earnings 101,105 99,568
152,723 150,890
Less unamortized value of restricted stock (817) (787)
Total shareholders' equity 151,906 150,103
Commitments and contingencies - Notes 13 and 14
$ 378,816 335,737
See accompanying notes to consolidated financial statements.
10
LADD Furniture, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 1994, January 1, 1994 and January 2, 1993
Dollar amounts in thousands, except share data
1994 1993 1992
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 4,308 3,846 4,545
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation of property, plant and equipment 14,143 10,508 9,151
Amortization 3,669 2,554 2,848
Provision for losses on trade accounts receivable 1,521 2,056 3,126
Gain on sales of property, plant and equipment (89) (155) (127)
Provision for deferred income taxes (1,204) 214 802
Increase (decrease) in deferred compensation
and other liabilities 1,388 1,840 (144)
Change in assets and liabilities, net of effects
from the acquisition of businesses:
Increase in trade accounts receivable (2,517) (5,188) (6,407)
Increase in inventories (10,709) (5,063) (5,633)
Decrease in refundable income taxes -- -- 7,264
(Increase) decrease in prepaid expenses
and other current assets (1,886) 61 2,132
Increase (decrease) in trade accounts payable (2,496) 310 3,031
Increase (decrease) in accrued expenses
and other current liabilities (3,313) (2,239) 5,750
Total adjustments (1,493) 4,898 21,793
Net cash provided by operating activities 2,815 8,744 26,338
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of businesses, net of cash
acquired - Note 2 (23,847) -- (4,720)
Additions to property, plant and equipment (31,825) (24,666) (8,988)
Proceeds from sales of property, plant
and equipment 962 425 1,161
Additions to intangible and other assets (1,150) (724) (420)
Net cash used in investing activities (55,860) (24,965) (12,967)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings 136,666 19,654 --
Proceeds from short-term bank borrowings 5,000 -- --
Proceeds from sales of trade accounts receivable 32,485 -- --
Proceeds from sale leaseback of equipment 14,566 -- --
Proceeds from sale leaseback of other assets 1,360 -- --
Principal payments of long-term debt (135,020) (1,155) (49,010)
Proceeds from common stock issued 23 94 34,049
Dividends paid (2,771) (2,767) --
Net cash provided by (used in)
financing activities 52,309 15,826 (14,961)
EFFECT OF EXCHANGE RATE CHANGES ON CASH (38) (81) (89)
Net decrease in cash (774) (476) (1,679)
Cash at beginning of year 1,350 1,826 3,505
Cash at end of year $ 576 1,350 1,826
See accompanying notes to consolidated financial statements.
11
LADD Furniture, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Years ended December 31, 1994, January 1, 1994 and January 2, 1993
Dollar amounts in thousands, except share data
UNAMORTIZED TOTAL
NUMBER ADDITIONAL CURRENCY VALUE OF SHAREHOLDERS'
OF SHARES COMMON PAID-IN TRANSLATION RETAINED RESTRICTED EQUITY
ISSUED STOCK CAPITAL ADJUSTMENT EARNINGS STOCK (NOTES 9 AND 15)
Balance at December 28, 1991 18,984,452 $ 1,898 15,036 -- 93,944 (877) 110,001
Shares issued in connection
with incentive stock
option plan 10,179 1 29 -- -- -- 30
Proceeds from public offering
of 4,025,000 shares 4,025,000 403 33,616 -- -- -- 34,019
Currency translation
adjustment -- -- -- (89) -- -- (89)
Amortization of employee
restricted stock awards -- -- -- -- -- 218 218
Net earnings -- -- -- -- 4,545 -- 4,545
Balance at January 2, 1993 23,019,631 2,302 48,681 (89) 98,489 (659) 148,724
Shares issued in connection
with incentive stock
option plan 11,668 1 90 -- -- -- 91
Shares issued in connection
with and amortization
of employee restricted
stock awards 30,963 3 415 -- -- (128) 290
Currency translation
adjustment -- -- -- (81) -- -- (81)
Net earnings -- -- -- -- 3,846 -- 3,846
Dividends paid -- -- -- -- (2,767) -- (2,767)
Balance at January 1, 1994 23,062,262 2,306 49,186 (170) 99,568 (787) 150,103
Shares issued in connection
with incentive stock
option plan 2,344 -- 19 -- -- -- 19
Repurchase of restricted
stock (18,424) (1) (170) -- -- 170 (1)
Shares issued in connection
with and amortization
of employee restricted
stock awards 50,375 5 481 -- -- (200) 286
Currency translation
adjustment -- -- -- (38) -- -- (38)
Net earnings -- -- -- -- 4,308 -- 4,308
Dividends paid -- -- -- -- (2,771) -- (2,771)
BALANCE AT DECEMBER 31, 1994 23,096,557 $ 2,310 49,516 (208) 101,105 (817) 151,906
See accompanying notes to consolidated financial statements.
12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION The consolidated financial statements include
the accounts of LADD Furniture, Inc. and its subsidiaries, all of which are
wholly-owned. All significant intercompany balances and transactions have been
eliminated in consolidation.
FISCAL YEAR The Company's fiscal year ends on the Saturday nearest the end
of December. Fiscal year 1994 ended December 31, 1994; fiscal year 1993 ended
January 1, 1994; and fiscal year 1992 ended January 2, 1993. Fiscal years 1994
and 1993 comprised 52 weeks; fiscal year 1992 comprised 53 weeks.
INVENTORIES Approximately 66% in 1994 and 64% in 1993 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 1993 are valued at
the lower of first-in, first-out (FIFO) cost or market (net realizable value).
PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated at
cost. Depreciation of plant and equipment is provided over the estimated useful
lives of the respective assets on the straight-line method. Estimated useful
lives are 10 to 35 years for buildings and improvements and 3 to 13 years for
machinery and equipment.
REVENUE RECOGNITION The Company's only line of business is the manufacture
and sale of furniture, related components and accessories. Sales are recognized
when products are shipped and invoiced to customers. Monthly provision is made
for doubtful receivables, discounts, returns and allowances.
Substantially all of the Company's accounts receivable are due from
retailers of residential furniture. Management periodically performs credit
evaluations of its customers and generally does not require collateral. The
Company has no concentrated credit risk with any individual customer.
FOREIGN CURRENCY TRANSLATION Assets and liabilities of a foreign subsidiary
are translated at year-end rates of exchange, and revenues and expenses are
translated at the average rates of exchange for the year. Gains and losses
resulting from translation are accumulated in a separate component of
shareholders' equity. Gains and losses resulting from foreign currency
transactions are included in net earnings.
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 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 Earnings per share are calculated based upon the
weighted average number of common shares outstanding during each fiscal year.
The effect of dilutive stock options on the calculation is insignificant in each
of the fiscal years presented.
INTANGIBLE ASSETS Intangible assets consist principally of values assigned
to patents, furniture designs, trade names and the excess of cost over the
assigned value of net assets acquired. These assets are being amortized using
the straight-line method over periods of 15 to 40 years. The Company assesses
the recoverability of the excess of cost over the assigned value of net assets
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.
13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
POSTRETIREMENT BENEFITS In addition to providing pension benefits, the
Company provides certain health care benefits for eligible retired employees.
Effective January 3, 1993, the Company adopted Statement of Financial Accounting
Standards No. 106, Employers' Accounting for Postretirement Benefits Other than
Pensions. The provisions of this statement require the Company to accrue for the
expected costs of retiree health care benefits, for which substantially all
employees are eligible if they reach normal retirement, during the active period
when such benefits are earned. Additionally, the standard requires the
recognition of a transition obligation which represents that portion of future
retiree benefit costs related to the service already rendered by both active and
retired employees up to the date of adoption. The Company has elected to
amortize the transition obligation of $20,618,000 at January 3, 1993 over a
period of 20 years. Prior to 1993, the Company's policy had been to expense
retiree health costs as they were incurred (i.e., the "pay as you go" method).
In 1992, the Company paid approximately $791,000, before the effect of income
taxes, for retiree health care benefits which were charged to earnings under the
"pay as you go" method.
RECLASSIFICATION Certain items in the 1993 and 1992 consolidated financial
statements have been reclassified to conform with the presentation adopted in
the current year. The reclassifications did not impact the results from
operations as previously reported.
NOTE 2: ACQUISITIONS
On January 31, 1994, the Company acquired The Pilliod Cabinet Company, a
manufacturer of promotional 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 on 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.
The following unaudited pro forma data presents the combined 1994 and 1993
results of operations of the Company and Pilliod as though the acquisition had
occurred on January 3, 1993, giving effect to depreciation and amortization of
assets on the accounting basis recognized in recording the purchase, the
interest on the funds used to effect the purchase, and excluding certain non-
recurring expenses of Pilliod during 1993.
In thousands, except per share data 1994 1993
Net sales $599,235 607,845
Net earnings 4,550 6,560
Net earnings per common share $ 0.20 0.28
On July 2, 1992, the Company acquired substantially all of the assets and
assumed certain liabilities of Fournier Furniture Corporation and subsidiary for
an aggregate purchase price of approximately $11,000,000, including acquisition
accounting adjustments. The purchase price consisted of approximately $4,720,000
in cash and the assumption of a $3,500,000 Industrial Development Authority
obligation and certain other liabilities. The acquisition was accounted for as a
purchase, and the net assets and results of operations of Fournier are included
in the Company's consolidated financial statements from the acquisition date.
14
NOTE 3: ACCOUNTS RECEIVABLE SECURITIZATION PROGRAM
On January 31, 1994, the Company sold ownership interest in a defined pool
of trade accounts receivable for $20,000,000, the proceeds of which were used to
partially finance the Pilliod acquisition - see Note 2. Under the agreement, as
revised in March 1995 and 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, the defined pool of trade accounts receivable totaled approximately
$42,848,000 and the purchaser's investment totaled $32,485,000. The purchaser's
investment is reflected as a reduction of trade accounts receivables in the
accompanying December 31, 1994 consolidated balance sheet. At December 31, 1994,
the Company retained an ownership interest in the receivables pool of
approximately $10,363,000, of which approximately $8,090,000 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 in 1994, is included in selling, general and administrative expenses
in the accompanying 1994 consolidated statement of earnings.
NOTE 4: INVENTORIES
A summary of inventories follows:
DECEMBER 31, January 1,
In thousands 1994 1994
Inventories on the FIFO cost method:
Finished goods $ 65,046 55,881
Work in process 23,084 21,513
Raw materials and supplies 47,997 34,947
Total inventories on FIFO cost method 136,127 112,341
Less adjustments of certain inventories
to the LIFO cost method (14,044) (11,702)
$122,083 100,639
NOTE 5: PROPERTY, PLANT AND EQUIPMENT
A summary of property, plant and equipment follows:
DECEMBER 31, January 1,
In thousands 1994 1994
Land and improvements $ 6,592 5,892
Buildings and improvements 78,381 65,850
Machinery and equipment 87,480 72,997
Construction in progress 8,343 12,266
180,796 157,005
Less accumulated depreciation (71,274) (59,508)
$109,522 97,497
15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6: INTANGIBLE AND OTHER ASSETS
A summary of intangible and other assets follows:
DECEMBER 31, January 1,
In thousands 1994 1994
Excess of cost over the assigned value of net assets
acquired $ 57,038 27,289
Trade names 26,031 26,031
Furniture designs and patents 9,750 10,570
Other 3,041 3,095
95,860 66,985
Less accumulated amortization (12,013) (9,819)
$ 83,847 57,166
NOTE 7: ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
A summary of accrued expenses and other current liabilities follows:
DECEMBER 31, January 1,
In thousands 1994 1994
Payrolls, commissions and employee benefits $ 15,291 13,637
Other 12,424 15,204
$ 27,715 28,841
NOTE 8: SHORT-TERM BANK BORROWINGS AND LONG-TERM DEBT
Short-term bank borrowings under a revolving credit facility with a bank
totaled $5,000,000 at December 31, 1994. Borrowings under the facility bear
interest at a rate based on the availability of bank funds.
Long-term debt consists of the following:
DECEMBER 31, January 1,
In thousands 1994 1994
Term loan due at various dates through October 19, 1999 $ 75,000 --
Revolving credit loan, due October 19, 1999 61,100 --
Term loan, repaid October 24, 1994 -- 45,000
Revolving credit loan, repaid October 24, 1994 -- 58,000
Other indebtedness, primarily fixed-rate
industrial revenue bonds, due through 2009 8,171 8,072
Total long-term debt 144,271 111,072
Less current installments of long-term debt 687 5,815
Long-term debt, excluding current installments $ 143,584 105,257
At January 1, 1994, the Company had outstanding under a term and revolving
credit loan agreement (the Facility) provided by a syndicate of banks a term
loan of $45,000,000 and borrowings of $58,000,000 under an $85,000,000 revolving
credit loan. Borrowings under the Facility were unsecured. Interest under the
Facility during 1994 accrued at rates selected by the Company of LIBOR plus 1
1/8% to 1 3/8% or prime.
16
NOTE 8: SHORT-TERM BANK BORROWINGS AND LONG-TERM DEBT (continued)
On October 19, 1994, the Company entered into an amended and restated credit
agreement (the New Facility) with a syndicate of banks which provides a
$75,000,000 five-year term loan and an $115,000,000 five-year revolving credit
loan. At December 31, 1994, the Company had $75,000,000 outstanding under the
term loan and $61,100,000 outstanding under the revolving credit loan.
Borrowings under the New Facility are unsecured. The term loan is payable in
quarterly installments commencing March 1997 of $3,750,000 each with a final
payment of the outstanding balance on October 19, 1999. Borrowings under the New
Facility bear interest at rates selected periodically by the Company of LIBOR
(6.50% at December 31, 1994) plus 7/8%, prime (8.50% at December 31, 1994) or at
a lesser rate based on the availability of bank funds. Under the New Facility,
the Company pays a commitment fee of 1/4% per annum on the unused portion of the
revolving credit loan. In connection with obtaining the New Facility, the
Company in 1994 charged to earnings approximately $304,000 in unamortized
financing fees under the Facility.
The New Facility, as amended February 16, 1995, 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 the operations of the Company. At
December 31, 1994, the Company was in compliance with all such covenants under
the New Facility, as amended.
The industrial revenue bonds are secured by property, plant and equipment
with a depreciated cost of approximately $5,532,000 at December 31, 1994.
The aggregate annual maturities of long-term debt during each of the five
fiscal years subsequent to December 31, 1994 are approximately as follows:
$687,000 in 1995; $765,000 in 1996; $15,477,000 in 1997; $15,245,000 in 1998;
and $106,325,000 in 1999.
Interest paid by the Company in 1994, 1993 and 1992 amounted to
approximately $8,014,000, $4,995,000 and $7,338,000, respectively.
NOTE 9: EMPLOYEE STOCK PLANS
STOCK OPTION PLAN Under an Incentive Stock Option Plan which expired in June
1993, the Company granted nontransferable stock options to officers, key
management employees and nonemployee directors. In April 1994, shareholders
approved a 1994 Incentive Stock Option Plan substantially similar in nature to
the prior plan. Although options are generally granted at fair market value on
the dates of grant, nonqualified options can be granted at less than
fair market value at the discretion of the Plan's Administrative Committee.
Incentive stock options and director options are granted at not less than
fair market value on the date of grant. All optionees were employees or
directors of the Company on the date of grant and throughout the term of the
option except in the case of death, retirement, or disability.
A total of 1,166,666 shares were reserved for option under the Plan that
expired in June 1993. Under the option 1994 Plan, a total of 1,200,000 shares
are reserved for option. 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
17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9: EMPLOYEE STOCK PLANS (continued)
grant. Options expire over a period not to exceed ten years from the date of
grant. Stock option activity during 1994, 1993 and 1992 follows:
Number of Option price
shares per share
Outstanding at December 28, 1991 674,625 $ 6.00 -$22.76
Granted in 1992 16,000 $ 8.25
Exercised in 1992 (10,179) $ 6.00 -$9.75
Cancelled in 1992 (131,295) $ 6.00 -$20.69
Outstanding at January 2, 1993 549,151 $ 6.00 -$22.76
Granted in 1993 136,101 $11.50 -$14.85
Exercised in 1993 (11,668) $ 6.00 -$11.63
Cancelled in 1993 (81,700) $ 6.00 -$22.76
Outstanding at January 1, 1994 591,884 $ 7.25 -$16.13
Granted in 1994 565,933 $ 5.75 -$11.00
Exercised in 1994 (2,344) $ 8.00
Cancelled in 1994 (140,011) $ 5.75 -$14.38
Outstanding at December 31, 1994 1,015,462 $ 5.75 -$16.13
Exercisable at December 31, 1994 333,753 $ 6.29 -$16.13
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 1994 and 1993,
the board of directors awarded and issued 50,375 and 30,963 shares,
respectively. During 1992, there were no shares awarded or issued.
NOTE 10: 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.
In addition to the qualified plans, the Company has a nonqualified
retirement plan covering certain salaried employees. At December 31, 1994 and
January 1, 1994, the Company had approximately $450,000 and $471,000,
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 on the following page.
18
NOTE 10: EMPLOYEE BENEFIT PLANS (continued)
The following sets forth the funded status of the plans:
In thousands December 31, 1994 January 1, 1994
Assets exceed Accumulated Assets exceed Accumulated
accumulated benefits accumulated benefits
benefits exceed assets benefits exceed assets
Actuarial present value of
benefit obligations:
Vested benefit obligation $ (30,247) (973) (32,113) (875)
Accumulated benefit
obligation (30,819) (1,442) (32,781) (1,042)
Projected benefit obligation
for service rendered to date (36,968) (2,384) (40,778) (1,370)
Less plan assets at fair value,
primarily equity and fixed
income investment funds 35,798 -- 36,445 --
Projected benefit obligation
in excess of plan assets (1,170) (2,384) (4,333) (1,370)
Unrecognized net asset at
transition being amortized
over 15 years (572) -- (651) --
Unrecognized net (gain) loss (1,023) 589 3,124 227
Unrecognized prior service cost 1,933 534 2,375 270
Adjustment required to
recognize minimum liability -- (181) -- (169)
Pension asset (liability)
recognized in the consolidated
balance sheets $ (832) (1,442) 515 (1,042)
Net pension expense for the plans for 1994, 1993 and 1992 included the
following components:
In thousands 1994 1993 1992
Service costs-benefits earned during the period $ 2,374 1,915 1,698
Interest cost on projected obligation 3,101 2,644 2,517
Return on assets (121) (4,737) (1,358)
Amortization of unrecognized net obligation
(asset) at transition and net deferrals (2,522) 2,166 (872)
Net pension expense $ 2,832 1,988 1,985
The projected benefit obligation at December 31, 1994 and January 1, 1994
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 5% to
age 60, and 3% thereafter. The assumed long-term rate of return on plan assets
is 8.5%.
19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10: EMPLOYEE BENEFIT PLANS (continued)
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
$635,000 in 1994, $687,000 in 1993 and $422,000 in 1992.
NOTE 11: POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company has plans which provide for postretirement health care benefits
for certain employees. These benefits include major medical insurance with
deductible and coinsurance provisions. The Company pays all benefits on a
current basis and the plans are not funded.
The components of the net postretirement benefit cost for the years ended
December 31, 1994 and January 1, 1994 are as follows:
In thousands 1994 1993
Service costs $ 286 439
Interest costs of benefit obligation 1,132 1,611
Amortization of transition obligation 759 1,031
$ 2,177 3,081
The plans' funded status as of December 31, 1994 and 1993 was as follows:
In thousands 1994 1993
Accumulated postretirement benefit obligation:
Retirees $ (9,758) (11,985)
Active participants eligible to retire (3,739) (6,285)
Other active participants (1,921) (4,472)
(15,418) (22,742)
Unrecognized net (gain) or loss (1,078) 1,104
Unrecognized transition obligation 13,665 19,587
Accrued postretirement benefit cost $ (2,831) (2,051)
During 1994, the Company amended its retiree health care plan to limit the
Company's contributions and to eliminate benefits for certain employees of its
divisions. 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 1994.
The postretirement benefit obligation was determined by application of the
terms of the various plans using relevant actuarial assumptions. Health care
costs are projected to increase at annual rates ranging from 9.25% in 1993 down
to 5.25% in 1997 and thereafter. A one percent annual increase in these assumed
cost trend rates would increase the accumulated postretirement benefit
obligation at December 31, 1994 by approximately $716,000 and the service and
interest cost components of the net postretirement benefit cost for 1994 would
be approximately the same. The assumed discount rate used in determining the
accumulated postretirement benefit obligation at December 31, 1994 and January
1, 1994 was 8.50% and 7.25%, respectively.
20
NOTE 12: INCOME TAXES
Components of income tax expense are as follows:
In thousands 1994 1993 1992
Current:
Federal $ 1,769 1,855 2,394
State 144 492 529
1,913 2,347 2,923
Deferred:
Federal (1,034) 199 657
State (170) 15 145
(1,204) 214 802
$ 709 2,561 3,725
The effective income tax rate on earnings before income taxes for the years
ended December 31, 1994, January 1, 1994 and January 2, 1993 was 14.1%, 40.0%
and 45.0%, respectively. The actual income tax expense differs from the
"expected" income tax expense computed by applying the applicable Federal
income tax rate (34% for each year) to earnings before income taxes
for the years ended December 31, 1994, January 1, 1994 and January 2, 1993 as
follows:
In thousands 1994 1993 1992
Computed "expected" Federal
income tax expense $ 1,706 2,178 2,812
Increases (reductions) due to:
State income taxes, net of
Federal income tax benefit 28 335 445
Amortization of the excess of
cost over the assigned value
of net assets acquired 463 250 250
Expenses subject to percentage
limitations 130 45 47
Change in valuation allowance for
deferred tax assets allocated to
income tax expense (913) -- --
Jobs, fuels and other credits, net (230) (92) (32)
Donation of appreciated property (170) -- --
Foreign trade income exemptions (154) (99) (81)
Other (151) (56) 284
Actual income tax expense $ 709 2,561 3,725
21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12: INCOME TAXES (continued)
During 1993, the effect of enacted changes in tax rates was to increase
deferred tax expense by approximately $469,000.
During the years ended December 31, 1994 and January 1, 1994, the Company
paid income taxes (net of refunds received) amounting to approximately
$2,030,000 and $1,863,000, respectively. During the year ended January 2, 1993,
the Company received net refunds of income taxes amounting to approximately
$5,991,000.
The tax effects of temporary differences and carryforwards that give rise to
significant portions of deferred tax assets and liabilities consist of the
following:
DECEMBER 31, January 1,
In thousands 1994 1994
Deferred tax liabilities:
Inventories $ (7,226) (6,226)
Property, plant and equipment (8,315) (7,975)
Intangible and other assets (8,420) (10,938)
Other (2,428) (2,174)
Total deferred tax liabilities (26,389) (27,313)
Deferred tax assets:
Accounts receivable 1,727 1,655
Inventories 668 --
Liabilities and reserves 7,212 3,730
Capital loss carryforwards 1,674 2,614
Net operating loss carryforwards 1,885 --
Other 435 728
Gross deferred tax assets 13,601 8,727
Valuation allowances (3,540) (2,600)
Total deferred tax assets 10,061 6,127
Net deferred tax liability $ (16,328) (21,186)
Deferred taxes are classified in the accompanying consolidated balance sheet
as follows:
DECEMBER 31, January 1,
In thousands 1994 1994
Accrued expenses and other current liabilities $ 1,080 2,284
Deferred income taxes 15,248 18,902
$ 16,328 21,186
22
NOTE 12: INCOME TAXES (continued)
A valuation allowance has been fully provided for the deferred tax assets
related to capital loss carryforwards. As of January 1, 1994, the Company had
approximately $6,600,000 of capital loss carryforwards available to offset
future capital gains, for which there was a $2,600,000 valuation allowance.
Capital losses of $2,305,000 were utilized in 1994 to offset a like amount of
capital gains, and the valuation allowance was reduced accordingly by
approximately $945,000. The remaining capital loss carryforward of $4,225,000
will expire in 1995 if not utilized. A valuation allowance of approximately
$1,655,000 remains in deferred taxes for the unexpired capital losses.
A valuation allowance has also been fully provided for the deferred tax
assets related to 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
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 14 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 1994 relating to the valuation
allowances for deferred tax assets at December 31, 1994 will be reflected as
follows:
In thousands
Reported in the consolidated statement of earnings $ 1,655
Reduce the excess of cost over the assigned value of
net assets acquired 1,885
$ 3,540
The Company believes that it is more likely than not that the results of
future operations will generate sufficient taxable income to realize the
remaining deferred tax assets.
23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13: LEASES
The Company leases manufacturing facilities, various warehouses, sales
offices and showrooms, as well as manufacturing, transportation, data processing
equipment and certain patents under operating leases which expire at various
dates through 2026. Future minimum lease payments under noncancelable operating
leases as of December 31, 1994 are:
In thousands
Fiscal year:
1995 $11,075
1996 10,301
1997 8,277
1998 5,377
1999 4,644
Thereafter 5,566
Total $45,240
In December 1994, the Company entered into a sale leaseback agreement for
certain manufacturing equipment located at several of its manufacturing
facilities. The transaction has been recorded as a sale. The cash proceeds from
the sale of approximately $14,566,000 were used to repay long-term debt. The
gain from the sale of approximately $683,000 has been recorded in the
accompanying 1994 consolidated balance sheet as deferred income and will be
amortized into earnings over the term of the lease. Under the agreement, the
Company has agreed to lease the equipment over 69 months. The Company has the
option to purchase the equipment at the end of the lease term.
Rental expense for cancelable and noncancelable operating leases charged to
operations was as follows:
In thousands
Fiscal year:
1994 $11,459
1993 10,275
1992 9,337
Rental expense includes contingent rentals based upon usage of
transportation equipment under cancelable and noncancelable operating leases
which totaled approximately $762,000 in 1994, $650,000 in 1993 and $786,000 in
1992.
24
NOTE 14: DEALER FINANCING ARRANGEMENT
The Company has a cancelable financing arrangement whereby certain notes
receivable from furniture dealers are assigned with recourse to a bank. The
terms of the notes receivable, which are collateralized by inventories held by
the furniture dealers, range from 12 to 48 months with interest rates ranging
from 6% to prime plus 1 1/4%. Upon cancelation of the financing arrangement,
the bank retains the previously assigned notes receivable and, as such, the
notes receivable and related obligations under the dealer financing arrangement
are not recorded in the December 31, 1994 and January 1, 1994 consolidated
balance sheets. Total notes receivable assigned during fiscal 1994, 1993 and
1992 were approximately $4,286,000, $7,503,000 and $5,304,000, respectively.
At December 31, 1994, the Company was contingently liable for approximately
$6,224,000 of receivables transferred with recourse to the bank under the dealer
financing arrangement for which the Company maintains a $3,200,000 letter of
credit agreement to fund any liabilities which might arise under the program. In
the opinion of management, adequate provision for potential losses under the
dealer financing arrangement has been included in the allowances for doubtful
receivables, discounts, returns and allowances in the accompanying consolidated
balance sheets.
NOTE 15: STOCK OFFERING
In May 1992, the Company sold 4,025,000 shares of common stock realizing net
proceeds of $34,019,000. The net proceeds from the offering were used to reduce
outstanding borrowings under the Company's revolving credit loan.
NOTE 16: SUBSEQUENT EVENT
On March 2, 1995, the Board of Directors authorized, subject to shareholder
approval, a one-for-three reverse split of the Company's common stock. If this
proposed split is approved by the shareholders on May 12, 1995, the par value of
the common stock will increase to $0.30 per share. Additionally, the number of
common shares outstanding will decrease by two-thirds and per share data for all
periods presented will increase accordingly.
25
LADD Furniture, Inc. and Subsidiaries
SELECTED ANNUAL DATA
Dollar and share data in thousands, except per share amounts
FIVE-YEAR ONE-YEAR
FISCAL FISCAL FISCAL FISCAL FISCAL FISCAL COMPOUND CHANGES
1994 1993 1992 1991 1990 1989 GROWTH RATES (1994 VS. 1993)
OPERATING STATEMENT DATA
Net sales $591,575 521,200 496,679 429,110 511,911 453,002 + 5.5% + 13.5%
Cost of sales 481,994 426,921 401,250 356,025 406,039 352,660 6.4 12.9
Gross profit 109,581 94,279 95,429 73,085 105,872 100,342 1.8 16.2
Selling, general and
administrative expenses 93,911 81,953 78,493 79,322 80,617 64,639 7.8 14.6
Manufacturing restructuring
charge -- -- -- -- 8,268 -- -- --
Operating income (loss) 15,670 12,326 16,936 (6,237) 16,987 35,703 (15.2) 27.1
Other deductions:
Interest expense 8,939 5,542 7,502 10,413 14,799 8,860 0.2 61.3
Other (net) 1,714 377 1,164 2,594 1,584 1,038 10.6 N/M
Earnings (loss) before income 5,017 6,407 8,270 (19,244) 604 25,805 (27.9) (21.7)
Income tax expense (benefit) 709 2,561 3,725 (6,041) (426) 9,383 (40.9) (72.3)
Net earnings (loss) $ 4,308 3,846 4,545 (13,203) 1,030 16,422 (23.5) 12.0
Depreciation $ 14,143 10,508 9,151 8,783 9,138 8,018 + 12.0% + 34.6%
Amortization 3,669 2,554 2,848 5,081 2,952 1,244 24.1 43.7
Cash dividends paid 2,771 2,767 -- 4,545 5,274 5,814 (13.8) 0.0
Weighted average shares
outstanding 23,086 23,054 21,442 18,946 18,833 18,759 4.2 0.1
PER SHARE DATA
Net sales $ 25.62 22.61 23.16 22.65 27.18 24.15 + 1.2% 13.3%
Net earnings (loss) 0.19 0.17 0.21 (0.70) 0.05 0.88 (26.4) 11.8
Cash dividends 0.12 0.12 -- 0.24 0.28 0.31 (17.3) 0.0
Year-end book value 6.58 6.51 6.46 5.79 6.76 6.99 (1.2) 1.1
BALANCE SHEET DATA
Net working capital $123,685 123,004 117,693 111,583 115,960 123,968 + 0.0% + 0.6%
Net property, plant and
equipment 109,522 97,497 83,609 81,660 82,758 106,838 0.5 12.3
Total assets 378,816 335,737 315,649 308,980 320,539 407,136 (1.4) 12.8%
Long-term debt 143,584 105,257 91,503 125,304 124,462 145,997 (0.3) 36.4
Shareholders' equity 151,906 150,103 148,724 110,001 127,331 131,399 2.9 1.2
RATIOS, OTHER
Gross profit margin 18.5% 18.1 19.2 17.0 20.7 22.2
Operating profit (loss)
margin 2.6 2.4 3.4 (1.5) 3.3 7.9
Return (loss) on sales 0.7 0.7 0.9 (3.1) 0.2 3.6
Effective income tax rate 14.1 40.0 45.0 31.4 N/M 36.4
Dividend payout ratio 64.3 71.9 -- N/M N/M 35.4
Return (loss) on beginning
assets 1.3 1.2 1.5 (4.1) 0.3 9.5
Return (loss) on beginning
equity 2.9 2.6 4.1 (10.4) 0.8 13.7
Current ratio 3.0X 3.1 3.1 3.1 3.2 2.1
Inventory turnover 4.3 4.4 4.4 4.0 4.2 4.6
Asset turnover 1.7 1.6 1.6 1.4 1.4 1.6
Long-term debt to
capitalization 45.3% 37.9 35.2 49.1 46.3 49.0
Year-end employees 7,860 6,670 6,940 6,340 6,880 8,020
Sales per employee (000's) $ 77.9 77.0 75.4 66.1 67.7 62.1
STOCK DATA
High $ 11.75 14.75 12.00 12.75 13.00 17.75
Low 4.88 7.50 6.25 5.75 4.25 11.00
Close 6.50 10.00 10.50 7.50 6.25 11.38
P/E ratios:
High 61.8 86.8 57.1 N/M N/M 20.2
Low 25.7 44.1 29.8 N/M N/M 12.5
Trading volume (shares) 19,419 24,781 19,758 11,619 12,240 11,834
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 averages.
26
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 earnings in each of the
last three fiscal years.
1994 1993 1992
Net sales 100.0% 100.0% 100.0%
Cost of sales 81.5 81.9 80.8
Gross profit 18.5 18.1 19.2
Selling, general and administrative expenses 15.9 15.7 15.8
Operating income 2.6 2.4 3.4
Other deductions, net 1.8 1.2 1.7
Earnings before income taxes 0.8 1.2 1.7
Income tax expense 0.1 0.5 0.8
Net earnings 0.7% 0.7% 0.9%
The following paragraphs provide an analysis of the changes in net sales,
selected cost and expense items, and net earnings over the three-year period
ended December 31, 1994.
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. Although 1995's cost of sales will
likely continue to reflect high material costs, the Company has initiated
selective price increases and material substitutions aimed at offsetting
these cost increases and improving gross margins.
27
MANAGEMENT'S DISCUSSION AND ANALYSIS
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 2) 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 (see note 12). The effective income tax rate for 1995 should
approximate the Federal tax rate of 34.0% unless the Company is able to further
utilize its capital loss carryforwards.
FOURTH QUARTER 1994 RESULTS
The 1994 fourth quarter loss was largely attributable to manufacturing
downtime taken in the fourth quarter to control finished goods inventories,
increased raw material costs, customer deferrals of planned fourth quarter
shipments, and a write-off of unamortized bank fees in connection with the
refinancing of the Company's bank debt. The low fourth quarter income tax rate
resulted from the utilization of capital loss carryforwards during the quarter.
FISCAL 1993 COMPARED TO 1992
Net sales increased $24.5 million, or 4.9%, to $521.2 million in 1993's 52-
week fiscal year, compared to $496.7 million in 1992's 53-week year. Sales
growth in 1993 occurred within a competitive selling environment which limited
the Company's ability to increase product prices. The increase in net sales was
primarily attributable to growth in shipments of medium and lower-priced
casegoods products, upholstery products and the Company's contract business.
Additionally, sales of Fournier Furniture were $15.0 million higher for the full
year 1993 than for the six-month period following Fournier's acquisition by the
Company in July 1992. Net sales for 1993 were negatively impacted by $11.9
million due to the non-renewal of a government contract which expired during
1992 and a decrease in sales of higher-priced casegoods products. Additionally,
selling prices were impacted by discounting due to the highly competitive
industry conditions and the liquidation of certain American of Martinsville
Residential Casegoods (AOM Casegoods) products. Further, as a result of a
decision in the third quarter of 1993 to discontinue certain unprofitable
product lines of AOM Casegoods and merge profitable products with American
Drew's product lines, 1993 sales were reduced by $2.7 million compared to 1992.
Cost of sales as a percentage of net sales rose to 81.9% in 1993, from
80.8% in 1992, resulting in a decrease in the gross profit margin
to 18.1% in 1993 from 19.2% in 1992. The increase in the cost of sales was
largely due to increased raw material costs, principally lumber, as well as
retiree health care costs resulting from the implementation of Statement of
Financial Accounting Standards No. 106. Additionally, as a result of the
decision to discontinue certain products of AOM Casegoods, manufacturing
capacity became available for redeployment to other operating companies.
The Virginia manufacturing plants of AOM Casegoods, American of
Martinsville Contract (AOM Contract) and Lea Industries were realigned.
Initial inefficiencies
28
associated with these significant manufacturing changes increased 1993
cost of sales, particularly during the fourth quarter. In addition,
manufacturing disruptions associated with the implementation of certain capital
projects increased 1993 cost of sales.
Selling, general and administrative (SG&A) expenses were 15.7% of net sales
in 1993, which was comparable to 15.8% in 1992.
Net other deductions declined to 1.2% of net sales in 1993 from 1.7% in
1992. The decrease was largely attributable to a $2.0 million decline in
interest expense in 1993 resulting from reduced borrowing levels and lower
interest rates.
The difference between the Company's actual effective income tax rate for
1993 of 40.0% compared to the expected Federal income tax rate of 34.0% was
largely due to state income taxes and the non-deductibility of the amortization
of intangible assets. Further, the Company's earnings were negatively impacted
by new tax legislation enacted by Congress during the year which increased the
top Federal income tax rate retroactive to January 1, 1993. The adjustment of
the Company's net deferred tax liability to reflect the revised Federal income
tax rate lowered net earnings by approximately $469,000, or $.02 per share,
during 1993.
LIQUIDITY AND CAPITAL RESOURCES
On October 19, 1994, the Company entered into an amended and restated credit
facility with a syndicate of banks (the New Facility - see note 8). On December
31, 1994, the Company had $136.1 million outstanding under the New Facility,
comprised of a $75.0 million term loan and borrowings of $61.1 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 $8.2 million, and short-term bank borrowings of $5.0
million. Excluding current installments, total long-term debt represented 45.3%
of the Company's total capitalization at the end of 1994. On December 31, 1994,
net working capital totaled $123.7 million and the current ratio was 3.0:1, both
of which were comparable to year-earlier levels.
The New Facility extended maturities of short and long-term debt and
provides the Company with increased financial flexibility. Additionally, the New
Facility provides a lower rate of interest, which based on current borrowing
levels, reduces annual interest cost by approximately $750,000. In connection
with the refinancing, the Company expensed approximately $304,000 of unamortized
fees from its prior bank facility.
During 1994, the Company generated cash from operating activities of $2.8
million, a decrease of $5.9 million from 1993. Cash flows from net earnings plus
depreciation and amortization increased $5.2 million to $22.1 million in 1994.
However, increased working capital requirements used $20.9 million of cash in
the aggregate. The working capital increase resulted principally from higher
inventories, largely raw materials, and a decrease in current liabilities.
During 1994, capital spending totaled $31.8 million compared to $24.7
million in the prior year. Capital expenditures were principally directed to new
manufacturing equipment designed to automate production, reduce manufacturing
costs and improve product quality. Capital expenditures during 1994 and 1993
were funded largely from the operations of the Company and borrowings under the
Company's existing long-term credit facility. Further, in December 1994, the
Company generated $14.6 million from a sale/leaseback of selected new machinery
and equipment. The Company anticipates spending in excess
29
MANAGEMENT'S DISCUSSION AND ANALYSIS
of $15.0 million for capital improvements during 1995, 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.
As more fully discussed in note 2 to the consolidated financial statements,
the Company acquired Pilliod Furniture on January 31, 1994 for $54.4 million by
retiring $29.9 million of Pilliod's debt, assuming $0.2 million of debt, and
paying $23.9 million to Pilliod's shareholders. The purchase was financed from
available long-term and short-term revolving bank credit lines and funds
generated from the sale of trade accounts receivable. At December 31, 1994,
$32.5 million of cash had been generated from the $40.0 million trade accounts
receivable securitization program (see note 3).
IMPACT OF INFLATION
Although the effects of inflation on the Company cannot be accurately
determined, in 1994 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 1994
margin was 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 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.
30
LADD Furniture, Inc. and Subsidiaries
SELECTED QUARTERLY DATA
Dollar and share data in thousands, except per share amounts
FISCAL 1994 FISCAL 1993
4TH 3RD 2ND 1ST 4TH 3RD 2ND 1ST
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
OPERATING STATEMENT DATA
Net sales $ 146,172 153,182 153,182 139,039 123,935 127,297 133,840 136,128
Cost of sales 122,242 123,640 122,657 113,455 103,444 104,905 107,328 111,244
Gross profit 23,930 29,542 30,525 25,584 20,491 22,392 26,512 24,884
Selling, general and
administrative expenses 24,784 23,562 23,996 21,569 20,188 19,907 21,252 20,606
Operating income (loss) (854) 5,980 6,529 4,015 303 2,485 5,260 4,278
Other deductions (income):
Interest expense 2,771 2,328 2,206 1,634 1,398 1,379 1,374 1,391
Other (net) 793 445 524 (48) 562 (34) (79) (72)
Earnings (loss) before income
taxes (4,418) 3,207 3,799 2,429 (1,657) 1,140 3,965 2,959
Income tax expense (benefit) (2,121) 962 1,094 774 (972) 709 1,615 1,209
Net earnings (loss) $ (2,297) 2,245 2,705 1,655 (685) 431 2,350 1,750
Depreciation $ 3,896 3,626 3,476 3,145 2,905 2,722 2,474 2,407
Amortization 1,205 864 893 707 655 636 638 625
Cash dividends paid 693 693 692 693 692 692 691 692
Weighted average
shares outstanding 23,097 23,096 23,087 23,066 23,061 23,060 23,060 23,034
PER SHARE DATA
Net sales $ 6.33 6.63 6.63 6.03 5.37 5.52 5.80 5.91
Net earnings (loss) (0.10) 0.10 0.12 0.07 (0.03) 0.02 0.10 0.08
Cash dividends 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03
Quarter-end book value 6.58 6.70 6.63 6.54 6.51 6.57 6.58 6.50
BALANCE SHEET DATA
Net working capital $ 123,685 92,421 96,349 104,454 123,004 129,995 135,277 135,903
Net property, plant and equipment 109,522 121,364 117,780 113,580 97,497 92,435 90,020 85,525
Total assets 378,816 402,213 394,373 390,716 335,737 334,541 337,546 335,317
Long-term debt 143,584 125,782 126,967 130,635 105,257 107,453 111,009 109,916
Shareholders' equity 151,906 154,821 153,138 151,104 150,103 151,416 151,671 149,942
RATIOS
Gross profit margin 16.4% 19.3 19.9 18.4 16.5 17.6 19.8 18.3
Operating profit (loss) margin (0.6) 3.9 4.3 2.9 0.2 2.0 3.9 3.1
Return (loss) on sales (1.6) 1.5 1.8 1.2 (0.6) 0.3 1.8 1.3
Effective income tax rate 48.0 30.0 28.8 31.9 58.7 62.2 40.7 40.9
Long-term debt to capitalization 45.3 42.1 42.5 43.4 37.9 38.3 39.2 39.3
STOCK DATA
High $ 6.50 8.00 9.25 11.75 11.00 11.25 12.00 14.75
Low 4.88 5.88 6.00 8.25 7.50 8.00 8.75 11.25
Close 6.50 6.00 7.00 8.75 10.00 8.38 9.00 11.75
Trading volume (shares) 8,578 4,839 2,334 3,668 3,980 4,955 4,925 10,921
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.
31
OFFICERS, DIRECTORS, CORPORATE DATA
BOARD OF DIRECTORS
Richard R. Allen
Chairman and Chief Executive Officer
William B. Cash 2
Former Chairman, Turnpike Properties, Inc.
James H. Corrigan, Jr. 1
Chairman and Chief Executive Officer,
Mebane Packaging Corporation
O. William Fenn, Jr. 1
Retired Vice Chairman, LADD
Don A. Hunziker 2
Retired Chairman, LADD
Thomas F. Keller, Ph.D. 2
Dean and R.J. Reynolds Industries Professor
Fuqua School of Business, Duke University
Fred L. Schuermann, Jr.
President and Chief Operating Officer
1 Audit Committee. 2 Compensation Committee.
CORPORATE OFFICERS, OPERATING
COMPANY EXECUTIVES
Daryl B. Adams
Vice President, Corporate Controller and
Chief Accounting Officer, LADD
Richard R. Allen
Chairman and Chief Executive Officer, LADD
William S. Creekmuir
Senior Vice President, Chief Financial Officer,
Secretary and Treasurer, LADD
Kenneth E. Church
Vice President, LADD; President, Clayton Marcus
Beverly C. Davis
President, LADD Transportation
William M. Duncan, Jr.
President, Pilliod Furniture
Victor D. Dyer
Vice President, Human Resources, LADD
John N. Foster, Jr.
Vice President, LADD; President, Lea Industries
Gerald R. Grubbs
President, Daystrom Furniture
Michael P. Haley
President, American of Martinsville
Lee H. Houston, Jr.
Vice President, Manufacturing Services, LADD
Robert J. Maricich
Vice President, LADD; President, American Drew
D. Fredric Myers
President, Fournier Furniture
James Mueller
President, Brown Jordan
David C. Ogren
Vice President, Market Development, LADD
William B. Pirtle
President, Barclay Furniture
Craig M. Shoemaker
President, Pennsylvania House
Fred L. Schuermann, Jr.
President and Chief Operating Officer, LADD
Bradly A. Upfield
President, Lea Lumber & Plywood
CORPORATE HEADQUARTERS
One Plaza Center, Box HP-3
High Point, NC 27261-1500
Phone: (910) 889-0333
U.S. FAX: (910) 888-6446 International FAX: (910) 888-6445
TRANSFER AGENT
Wachovia Bank & Trust Company, N.A.
Winston-Salem, NC
LEGAL COUNSEL
Petree Stockton, L.L.P.
Winston-Salem, NC
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
Greensboro, NC
FORM 10-K, OTHER INFORMATION
For a copy of LADD's Form 10-K (annual report filed with the Securities and
Exchange Commission) or other information on LADD, please contact:
John J. Ong, CFA
Director, Corporate Communications
STOCK LISTING
LADD's common stock is traded on the Nasdaq Stock Market under the Nasdaq
symbol: LADF. At year-end 1994, LADD had 890 shareholders of record,
representing an estimated 5,500 beneficial owners.
MARKET MAKERS
Davenport & Co. of Virginia MLPF&S
Dean Witter Reynolds, Inc. Morgan, Keegan & Co.
Dillon, Read & Co., Inc. Nash Weiss
Ferris Baker Watts Inc. Raymond, James & Associates
Herzog, Heine, Geduld, Inc. Robinson Humphrey Company, Inc.
Huntleigh Securities Corp. Sherwood Securities Corp.
Interstate/Johnson Lane Scott & Stringfellow
Jefferies & Company, Inc. Southeast Research Partners
C.L. King & Associates Southwest Securities Inc.
Kirkpatrick, Pettis, Smith Troster Singer Corp.
Legg Mason Wood Walker Inc. Wheat First Butcher Singer
Mayer & Schweitzer, Inc.
ANNUAL MEETING
Stockholders are cordially invited to attend LADD's 1995 Annual Meeting, to be
held Friday, May 12th, at 10:00 a.m. at the Radisson Hotel in High Point, NC.
32
We at LADD are proud of the fine residential furniture manufactured
by our family of companies and we invite you to see them at your nearest dealer.
Ask for them by name: American Drew, American of Martinsville, Barclay, Brown
Jordan, Clayton Marcus, Daystrom, Design Horizons, Fournier, LADD Home Theatre,
Lea, Pennsylvania House and Pilliod.
(Photo of a map appears here)
LADD MANUFACTURING FACILITIES
NORTH CAROLINA
Hickory (3)
Monroe (1)
North Wilkesboro (3)
Waynesville (1)
Windsor (1)
VIRGINIA
Chilhowie (1)
Marion (1)
Martinsville (1)
South Boston (1)
St. Paul (1)
TENNESSEE
Morristown (2)
SOUTH CAROLINA
Nichols (1)
MISSISSIPPI
Myrtle (1)
Sherman (1)
PENNSYLVANIA
Lewisburg (1)
White Deer (1)
ALABAMA
Selma (1)
ARKANSAS
Newport (1)
CALIFORNIA
El Monte (1)
MEXICO
Juarez (1)
OHIO
Swanton (1)
DESIGN
Trone Advertising, Greensboro, NC
PHOTOGRAPHY
Marshall Marvelli; Jeff McNamara
and the LADD Furniture companies;
PRINTING
Washburn Graphics, Inc., Charlotte, NC
TYPOGRAPHY
LADD Graphic Services, High Point, NC
(LADD FURNITURE, INC. LOGO APPEARS HERE)
LADD Furniture, Inc.
One Plaza Center--Box HP3
High Point, NC 27261-1500
U.S. Fax (910) 888-6446
International Fax (910) 888-6445
EX-24
8
EXHIBIT 24.1
EXHIBIT 24.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
LADD Furniture, Inc.:
We consent to incorporation by reference in the Registration
Statement (No. 33-53341) on Form S-8 of LADD Furniture, Inc.
of our reports dated February 16, 1995, relating to the
consolidated balance sheets of LADD Furniture, Inc. and
subsidiaries as of December 31, 1994 and January 1, 1994,
and the related consolidated statements of earnings,
shareholders' equity and cash flows and related schedule for
each of the years in the three-year period ended December
31, 1994 which reports appear or are incorporated by
reference in the December 31, 1994 annual report on Form
10-K of LADD Furniture, Inc.
Our report refers to the adoption of the provisions of the
Financial Accounting Standards Board's Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," in 1993.
KPMG PEAT MARWICK LLP
Greensboro, North Carolina
March 30, 1995
EX-27
9
EXHIBIT 27
5
12-MOS
DEC-31-1994
DEC-31-1994
576
0
52,735
4,294
122,083
185,447
109,522
71,274
378,816
61,762
143,584
2,310
0
0
149,596
378,816
591,575
591,575
481,994
481,994
104,564
1,521
8,939
5,017
709
4,308
0
0
0
4,308
0.19
0.19