Annual Report — Form 10-K
Filing Table of Contents
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1: 10-K Ladd Furniture 10-K 3/31/94 #89209.1 27± 108K
2: EX-10 Exhibit 10.1 7± 26K
3: EX-10 Exhibit 10.2 7± 26K
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LADD is North America's fourth largest residential furniture
manufacturer, with annualized net sales in excess of $600 million, 26
manufacturing facilities in ten states and Mexico, and nearly 8,000
employees. LADD markets its broad line of residential
and contract furniture products under the major brand names American
Drew, American of Martinsville, Barclay, Brown Jordan, Clayton Marcus,
Daystrom, Fournier, Lea Industries, Pennsylvania House and Pilliod,
and distributes these products domestically and worldwide through LADD
International.
Financial Highlights
In thousands, except per share data and ratios
Percent
1993 1992* Change
Operations Statement
Net sales $521,200 496,679 + 4.9%
Gross profit 94,279 95,429 -- 1.2
Operating income 12,326 16,936 --27.2
Net earnings 3,846 4,545 --15.4
Weighted average shares outstanding 23,054 21,442 + 7.5
Per Share
Net earnings $ 0.17 0.21 --19.0%
Cash dividends 0.12 ---- ----
Year-end book value 6.51 6.46 + 0.8
Closing stock price 10.00 10.50 -- 4.8
Balance Sheet
Net working capital $123,004 117,693 + 4.5%
Total assets 335,737 315,649 + 6.4
Long-term debt** 105,257 91,503 +15.0
Shareholders' equity 150,103 148,724 + 0.9
Ratios
Gross margin 18.1% 19.2
Operating profit margin 2.4 3.4
Net return on sales 0.7 0.9
Return on beginning equity 2.6 4.1
Long-term debt** to capitalization 37.9 35.2
Current ratio 3.1x 3.1
*1992 contained 53 weeks and has been restated to reflect LADD's
adoption of SFAS No. 109.
**Excluding current installments.
(AMERICAN, LADD Furniture, Inc., Lea Lumber & Plywood Co., AMERICAN DREW,
LADD TRANSPORTATION, INC. and Pilliod Logos)
Letter to Shareholders
Strong housing activity and low interest rates during 1993
produced a second year of recovery for the U.S. residential
furniture industry. In this environment, LADD achieved
record net sales of $521 million during its 52-week 1993
fiscal year, an increase of 5 percent over the (Photo,
$497 million recorded in fiscal 1992's 53 weeks. While see
sales hit a record level, net earnings for the year declined appendix)
to $3.8 million, or $.17 per share, from $4.5 million, or $.21
per share in 1992. During 1993, LADD was required to adopt a
new accounting standard for postretirement benefits (SFAS No. 106)
which reduced 1993 net earnings by $1.3 million, or $.05 per
share. Excluding SFAS No. 106, net earnings rose 13 percent
and net earnings per share were up 5 percent
on an 8 percent increase in average shares outstanding.
Factors affecting 1993 performance
Several major strategic actions were initiated in 1993 to improve
LADD's longer-term profitability and return on investment. While
painful in the short-term, we believe these actions will generate
significant future returns for LADD shareholders. They include:
(bullet) the discontinuation of unprofitable American of Martinsville
("AOM") Residential Casegoods product lines and the merger of the
remaining AOM lines into our American Drew business;
(bullet) the reallocation of certain Virginia-based manufacturing
assets among two LADD operating companies; and
(bullet) the initiation of a major capital investment program designed
to increase productivity, improve product quality and reduce operating
costs. In 1993, LADD's capital spending exceeded $24 million, compared
to the previous yearly high of $9 million.
These strategic actions had a significant negative impact on 1993's
second half results. In total, we discontinued AOM product lines
representing approximately $12 million in annualized sales.
Discontinuing this unprofitable business produced operating losses in
excess of $1 million in each of 1993's last two quarters and reduced
fourth quarter sales by almost $3 million.
1
(AMERICAN, LADD Furniture, Inc., Lea Lumber & Plywood Co., AMERICAN DREW,
LADD TRANSPORTATION, INC. and Pilliod Logos)
In addition, production capacity reallocations and major capital
investment projects initiated during 1993 at LADD's Martinsville,
(Photo, Chilhowie, Marion and St. Paul, VA manufacturing facilities caused
see short-term manufacturing disruptions during the second half of the
appendix) year. As a result, LADD's profitability was adversely impacted
during the third and fourth quarters of 1993. We expect these
projects to be completed by mid-1994.
Finally, sales weakness in higher-priced product lines, primarily
AOM Residential Casegoods and the casegoods (wood furniture)
products of Pennsylvania House, reduced LADD's overall 1993 sales
gains and profitability. The AOM Residential Casegoods product mix
was thinned out and refocused as previously mentioned, while Pennsylvania House
began aggressively introducing new products at somewhat lower price
points during 1993. Featuring more casual styling, these products are
designed to provide increased value to the Pennsylvania House dealers
and customers, a process which will continue in 1994.
Pilliod acquisition
On January 31, 1994, LADD invested $54 million to acquire Pilliod
Furniture, a major U.S. manufacturer of promotional bedroom and
occasional furniture. Headquartered in High Point, NC, Pilliod has
annual sales in excess of $85 million and employs over 1,100 people in
its headquarters and its three plants in Ohio, Alabama and South
Carolina. The acquisition was financed with
available bank credit lines and the sale of (International
selected trade accounts receivable in an asset Sales Graph
securitization transaction. Following the appears here,
acquisition, LADD's long-term debt-to-capitalization see appendix)
ratio was approximately 42%, which remains
within our goal of having no more than 45% of
capitalization in the form of long-term debt.
International market development
One of LADD's key strategies is the identification
and development of new markets around the world. LADD
International, formed in 1992, facilitates the
international cross-marketing of products from all the
LADD operating companies. LADD further increased its international
business last year, making shipments to 51 countries totaling more
than $40 million. An additional and ongoing part of our international
thrust is the investigation and development of possible joint ventures
with various overseas partners. We believe being an experienced
international company will be a distinct competitive advantage in the
latter half of the 1990's.
2
(PENNSYLVANIA HOUSE, Clayton Marcus, BARCLAY, Daystrom,
LADD INTERNATIONAL, Brown Jordan and Fournier Logos)
Operating company management changes
Early in 1994, four new LADD operating company presidents were
appointed. These executives each have extensive general management
experience and demonstrated leadership capabilities that we feel will
lead their respective operating companies to significant future growth
in sales and profits.
(bullet) Craig M. Shoemaker (44) was appointed president of
Pennsylvania House. Craig worked for Pennsylvania House in various
managerial positions for 14 years early in his career and has served
since that time as president of two other furniture companies.
(bullet) Robert J. Maricich (43) was appointed president of American
Drew. Bob has served as president of our AOM Contract business since
1989 and brings strong leadership skills to his new assignment.
(bullet) Lee H. Houston, Jr. (49) was appointed president of Daystrom.
Lee's experience includes service as a consultant to numerous
furniture manufacturers and general management experience in the
industry.
(bullet) D. Fredric ("Fritz") Myers (58) was appointed president of
Fournier. A strong marketing and operating executive, Fritz has over
30 years of senior management experience with a variety of
manufacturing companies.
I am pleased to welcome these four men to their new LADD
responsibilities.
Outlook
At this point in early 1994, the outlook for the U.S. furniture
industry remains positive. Consumer confidence, a major factor
influencing retail furniture sales, has strengthened appreciably from
previously depressed levels. Recent strong housing activity also
suggests substantial future demand for a wide variety of residential
consumer durables, including home furnishings.
We believe LADD is well-positioned to capitalize on this favorable
industry outlook. We have the size, diversity and financial resources
necessary to compete effectively. We have a strong commitment to
excellence and to meeting the needs of our customers and consumers.
Further, we are dedicated to aggressively investing financial and
human resources for the future benefit of our customers, employees and
shareholders.
On behalf of LADD's 7,800 employees, I want to thank you for your
continuing support and confidence.
Sincerely,
(Signature, see appendix)
Richard R. Allen
Chairman and Chief Executive Officer
3
(LADD INTERNATIONAL, Daystrom, PENNSYLVANIA HOUSE, AMERICAN,
Clayton Marcus, BARCLAY and FOURNIER Logos)
Investing for the Future
As discussed in the 1992 Annual Report, LADD is committed
to making strategically-driven investments in all areas of
its business that will enable it to be a world-class
(Capital manufacturer and marketer of products known for their quality
Investment and value. In the manufacturing area, new automation
Graph, technologies continue to emerge which can shorten cycle
see appendix) lead times for LADD's retailers and consumers, reduce
manufacturing costs, increase productivity and improve
product quality. In 1993, capital investment totaled a record
$24.7 million, more than double the year's depreciation. A
similar level of investment is anticipated for 1994.
LADD is also committed to making strategic investments aimed at
improving its information systems and developing new products
and markets. In the market development category, LADD
invested $54 million in early 1994 to acquire Pilliod
Furniture, a leader in the fast growing promotional
casegoods sector. The following paragraphs outline several of
the major investments LADD has initiated.
Virginia manufacturing realignment
During 1993, a strategic decision was made to reallocate
(Photo, certain Virginia-based manufacturing capacity among two
see LADD business units in order to consolidate the operations
appendix) of one company while providing additional production
capability to meet the current and anticipated sales
growth of the other. In this process, more than $15
million will have been invested during 1993 and 1994 in
realigning the production capabilities of LADD's
Martinsville, Chilhowie and Marion manufacturing plants.
These moves accomplished two objectives. First, the American
of Martinsville ("AOM") contract manufacturing operations
were concentrated into one larger, more efficient facility in
Martinsville. Second, the former AOM plants in Chilhowie and
Marion were transferred to Lea Industries ("Lea"), which has
significantly expanded its already broad line of youth
bedroom furniture to accommodate the strong demographics of
this market segment. Although these plant realignments
disrupted production and hurt profit margins during the third
and fourth quarters of 1993 and early 1994, the
reconfigured facilities will substantially improve the future
business prospects of both AOM and Lea.
4
(Brown Jordan, LADD TRANSPORTATION, AMERICAN DREW, Lea Lumber & Plywood, Co.,
PILLIOD and LADD Furniture, Inc. Logos)
American of Martinsville investment
As part of AOM's manufacturing consolidation, a 100,000 (Photo,
square foot expansion of the Martinsville plant was completed see
in late 1993 and the facility was substantially reconfigured. appendix)
During 1994, a new highly-
automated panel manufacturing (Photo,
line which uses construction see
techniques new to AOM will be appendix)
installed at Martinsville. This
new line has the flexibility to efficiently manufacture parts in
smaller quantities with reduced labor. When fully operational in
mid-1994, it will broaden Martinsville's production capabilities,
enabling AOM to target the faster growing "budget" sector of the
hospitality (hotel/motel) market with high value lower-priced wood
furniture. Buyers in this market segment generally seek casegoods at
price points lower than traditionally manufactured by AOM.
Lea Industries investment
The Chilhowie plant began manufacturing Lea's residential bedroom
furniture in late 1993, following a 112,000 square foot expansion of
the facility. A major new base coat and print line being installed in
the Chilhowie facility is expected to become operational around mid-
1994. This highly automated line will efficiently provide the large
quantities of printed end and top panels required for Lea's lower-
medium to medium-priced youth bedroom and correlate furniture. During
1993, several other major pieces of sophisticated new equipment which
lower unit costs and improve product quality were also installed at
Chilhowie. In total, the investments at the Chilhowie location
significantly increase Lea's capability to efficiently produce its
growing medium-priced Charter House product line.
The Marion plant is being converted during 1994 for the manufacture of
Lea's lower-priced Design Horizons product line, targeted at the
relatively fast-growing low-priced youth bedroom furniture segment of
the market. By internally manufacturing Design Horizons products which
were previously assembled from purchased parts, Lea will be able to
improve quality levels while at the same time
5
(Lea, PILLIOD, LADD TRANSPORTATION, AMERICAN DREW, Lea Lumber & Plywood Co.,
LADD Furniture, Inc. and AMERICAN Logos)
(Photo, lowering production costs. The investment in Marion includes
see computer-controlled saws and boring machinery, edge banding and
appendix) edge foiling equipment and materials handling equipment, all
designed to make Design Horizons a low cost, high value product.
Fournier investment
Shortly after its acquisition by LADD in mid-1992, Fournier
Furniture significantly increased the size of its St. Paul, VA
ready-to-assemble ("RTA") furniture manufacturing facility. Since that
time, Fournier has made major additional capital investments in the
St. Paul facility to increase capacity, improve production efficiency
and enhance product quality.
Over $8 million has been invested in Fournier since its 1992
acquisition, including a fully-automated production line
(Photo, which began operating during 1993's third quarter. This
see new line substantially increased Fournier's production
appendix) capacity, improved the quality of its products and reduced
unit costs. A second automated line is scheduled to begin
operating at St. Paul in mid-1994. This second line will
have the capability of manufacturing Fournier products with
contoured edges, a growing design feature of RTA furniture.
Another major 1994 investment at Fournier is the
(Photo, installation of equipment which will allow the company
see to laminate its own particleboard, as opposed to
appendix) purchasing laminated board from outside suppliers. The
laminating equipment will also furnish panels for
Lea's Design Horizons plant in nearby Marion, VA.
6
(FOURNIER, Brown Jordan, LADD INTERNATIONAL, Daystrom, BARCLAY,
Clayton Marcus and PENNSYLVANIA HOUSE Logos)
American Drew investment
Major investments are also being made at
American Drew's North Wilkesboro, NC facilities (Photo,
to improve production efficiencies, substantially see
increase material yields and otherwise add value to the appendix)
company's line of medium-priced wood bedroom, dining
room and occasional furniture products.
The installation of a flat line finishing system has (Photo,
increased American Drew's manufacturing productivity, see
while at the same time allowing the company to meet appendix)
increasingly stringent regulations governing permissible levels of volatile
organic compound ("VOC") emissions. New computer-controlled molding equipment
now produces all of American Drew's visible critical drawer parts, reducing
machine set-up times, accelerating production run rates and virtually
eliminating subsequent sanding and rough trim operations on these parts.
Another major current capital investment project (Photo,
at American Drew's North Wilkesboro facilities is see
the pending automation during 1994 of the company's appendix)
rough mill operation. This investment will significantly
increase American Drew's lumber yields - an extremely
important consideration given recent increases in U.S.
hardwood lumber prices and the importance of lumber as a
raw material component in American Drew's products.
Other investments
In addition to the capital projects discussed above, investments which
improve LADD's marketing, product development, information systems and
human resource capabilities are also deemed to be equally critical to
the company's future success. Some examples are:
(bullet) Significant joint marketing investments were initiated last year
with an international electronics manufacturer and a large national
retailer to market
7
(FOURNIER, BARCLAY, Clayton Marcus, AMERICAN, PENNSYLVANIA HOUSE,
Daystrom, and LADD INTERNATIONAL Logos)
(Photo, LADD's home theatre products and Lea's youth
see furniture, respectively.
appendix)
(bullet) LADD continued its strong emphasis on
product development, as Pennsylvania House
(Photo, introduced exciting new products targeted at a lower
see price point and Lea introduced a record number of new
appendix) products at the October International Home Furnishings
Market. Brown Jordan continued to win national design
recognition for new product additions to its metal
casual and outdoor furniture line.
(bullet) A major new information system enhancement initiated at
(Photo, the High Point data center takes advantage of new data base and
see client server technologies and will give LADD and its operating
appendix) companies improved marketing information, as well as increased
capabilities for serving customers with electronic data
interchange ("EDI") and voice response.
(bullet) LADD completed its first comprehensive company wide
employee survey during 1993 which has led to, among other things,
an accelerated employee training initiative throughout the
organization. LADD will continue to increase its investments in
its people with training designed to improve their skills and
abilities to deal with an increasingly complex business
environment, to ensure that LADD remains a leader in the
furniture industry.
(Photo, The future
see The rate of change in the U.S. furniture industry has
appendix) increased and will likely accelerate further in the years
ahead. LADD has the resources, commitment and vision to
capitalize on change and turn it into a competitive
(Photo, advantage. Through intelligent, aggressive investment
see in new technologies, new products, new domestic and
appendix) global market opportunities and the development of
LADD's human resources, continued growth and improved
profitability will be achieved.
8
(Fournier, Brown Jordan, LADD INTERNATIONAL, Daystrom, Barclay,
Clayton Marcus, Pennsylvania House logos)
Management's Statement of Responsibility
The management of LADD Furniture, Inc. is responsible for the
integrity of the financial statements of the Company and for
ascertaining that the financial statements accurately reflect the
financial position and results of operations of the Company. The
financial statements were prepared in conformity with generally
accepted accounting principles, applying estimates and
management's best judgment, as required. Information presented
elsewhere in this Annual Report is consistent with the financial
statements.
LADD has established and maintains a system of internal controls
designed to provide reasonable assurance, at an appropriate cost,
that the Company's assets are adequately safeguarded and that the
accounting records reflect the transactions of the Company
accurately, fairly and in reasonable detail. The internal control
system provides for careful selection and training of personnel,
the delegation of management authority and responsibility, the
dissemination of management control policies and procedures and an
internal audit program.
The board of directors, through its Audit Committee consisting of
three directors who are not officers or employees of the Company,
is responsible for reviewing and monitoring the financial
statements and accounting practices of the Company. The Audit
Committee meets periodically, either separately or jointly, with
the independent auditors, representatives of management and the
Company's internal auditors to discuss auditing, accounting and
financial statement matters. To ensure complete independence,
representatives of KPMG Peat Marwick, certified public accountants
retained by the Company to audit the financial statements, have
full and free access to meet with the Audit Committee with or
without the presence of management representatives.
[Download Table]
(Signature of Richard R. Allen) (Signature of William S. Creekmuir)
Richard R. Allen William S. Creekmuir
Chairman & Chief Executive Officer Senior Vice President & Chief Financial Officer
February 11, 1994 February 11, 1994
Independent Auditors' Report
The Board of Directors and Shareholders
LADD Furniture, Inc.:
We have audited the accompanying consolidated balance sheets of
LADD Furniture, Inc. and subsidiaries as of January 1, 1994 and
January 2, 1993, and the related consolidated statements of
operations, shareholders' equity and cash flows for each of the
years in the three-year period ended January 1, 1994. These
consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion
on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of LADD Furniture, Inc. and subsidiaries as of January 1,
1994 and January 2, 1993, and the results of their operations and
their cash flows for each of the years in the three-year period
ended January 1, 1994 in conformity with generally accepted
accounting principles.
As discussed in notes 1, 10 and 11 to the consolidated financial
statements, the Company adopted the provisions of the Financial
Accounting Standards Board's Statement of Financial Accounting
Standards (SFAS) No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," and SFAS No. 109,
"Accounting for Income Taxes," in 1993.
(Signature of KPMG Peat Marwick)
Greensboro, North Carolina
February 11, 1994
9
(American, LADD Furniture, Inc., Lea Lumber & Plywood Co., AMERICAN DREW
LADD TRANSPORTATION, INC., PILLIOD, Lea logos)
LADD Furniture, Inc. and Subsidiaries
Consolidated Statements of Operations
Years ended January 1, 1994, January 2, 1993 and December 28, 1991
Dollar amounts in thousands, except share data
[Download Table]
1993 1992 1991
Net sales $ 521,200 496,679 429,110
Cost of sales 426,921 401,250 356,025
Gross profit 94,279 95,429 73,085
Selling, general and administrative expenses 81,953 78,493 79,322
Operating income (loss) 12,326 16,936 (6,237)
Other deductions:
Interest expense -- Note 7 5,542 7,502 10,413
Other, net 377 1,164 2,594
5,919 8,666 13,007
Earnings (loss) before income taxes 6,407 8,270 (19,244)
Income tax expense (benefit) -- Note 11 2,561 3,725 (6,041)
Net earnings (loss) $ 3,846 4,545 (13,203)
Net earnings (loss) per common share $ 0.17 0.21 (0.70)
Cash dividends per common share $ 0.12 ---- 0.24
Weighted average number of common
shares outstanding 23,053,654 21,441,616 18,945,763
See accompanying notes to consolidated financial statements.
10
(PENNSYLVANIA HOUSE, Clayton Marcus, Barclay, Daystrom, LADD INTERNATIONAL,
Brown Jordan, FOURNIER logos)
LADD Furniture, Inc. and Subsidiaries
Consolidated Balance Sheets
Dollar amounts in thousands, except share data
[Enlarge/Download Table]
January 1, January 2,
1994 1993
Assets
Current assets:
Cash $ 1,350 1,826
Trade accounts receivable, less allowances for doubtful
receivables, discounts, returns and allowances of
$4,178 and $3,517, respectively -- Note 13 72,975 69,843
Inventories -- Note 3 100,639 95,576
Prepaid expenses and other current assets - Note 9 6,110 6,171
Total current assets 181,074 173,416
Property, plant and equipment, net -- Note 4 97,497 83,609
Intangible and other assets, net -- Notes 5 and 9 57,166 58,624
$ 335,737 315,649
Liabilities and Shareholders' Equity
Current liabilities:
Current installments of long-term debt -- Note 7 $ 5,815 1,070
Trade accounts payable 23,414 23,104
Accrued expenses and other current
liabilities - Notes 6, 11 and 13 28,841 31,549
Total current liabilities 58,070 55,723
Long-term debt, excluding current installments -- Note 7 105,257 91,503
Deferred compensation and other liabilities -- Notes 9 and 10 3,405 1,477
Deferred income taxes - Note 11 18,902 18,222
Total liabilities 185,634 166,925
Shareholders' equity -- Notes 8 and 14:
Preferred stock of $100 par value. Authorized
500,000 shares; no shares issued ---- ----
Common stock of $.10 par value. Authorized
50,000,000 shares; issued 23,062,262 shares and
23,019,631 shares, respectively 2,306 2,302
Additional paid-in capital 49,186 48,681
Currency translation adjustment (170) (89)
Retained earnings 99,568 98,489
150,890 149,383
Less unamortized value of restricted stock (787) (659)
Total shareholders' equity 150,103 148,724
Commitments and contingencies -- Notes 12 and 13
$ 335,737 315,649
See accompanying notes to consolidated financial statements.
11
(LADD INTERNATIONAL, Daystrom, PENNSYLVANIA HOUSE, AMERICAN, Clayton
Marcus, BARCLAY, FOURNIER logos)
LADD Furniture, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Years ended January 1, 1994, January 2, 1993 and December 28, 1991
Dollar amounts in thousands
[Enlarge/Download Table]
1993 1992 1991
Cash Flows from Operating Activities:
Net earnings (loss) $ 3,846 4,545 (13,203)
Adjustments to reconcile net earnings (loss) to net
cash provided by operating activities:
Depreciation of property, plant and equipment 10,508 9,151 8,783
Amortization 2,554 2,848 5,081
Provision for losses on trade accounts receivable 2,056 3,126 7,356
Gain on sales of property, plant and equipment (155) (127) (1,280)
Provision for deferred income taxes 214 802 3,456
Increase (decrease) in deferred compensation and
other liabilities 1,840 (144) 696
Change in assets and liabilities, net of effects
from the acquisition of a business in 1992:
Increase in trade accounts receivable (5,188) (6,407) (1,613)
(Increase) decrease in inventories (5,063) (5,633) 6,207
(Increase) decrease in refundable income taxes ---- 7,264 (5,050)
Decrease in prepaid expenses and other
current assets 61 2,132 1,128
Increase in trade accounts payable 310 3,031 5,734
Increase (decrease) in accrued expenses and
other current liabilities (2,239) 5,750 (11,505)
Total adjustments 4,898 21,793 18,993
Net cash provided by operating activities 8,744 26,338 5,790
Cash Flows From Investing Activities:
Acquisition of a business - Note 2 ---- (4,720) ----
Additions to property, plant and equipment (24,666) (8,988) (7,549)
Proceeds from sales of property, plant and
equipment 425 1,161 6,035
Additions to intangible and other assets (724) (420) (2,598)
Net cash used in investing activities (24,965) (12,967) (4,112)
Cash Flows From Financing Activities:
Proceeds from long-term borrowings 19,654 ---- 13,590
Principal payments of long-term debt (1,155) (49,010) (7,695)
Proceeds from common stock issued 94 34,049 218
Dividends paid (2,767) ---- (4,545)
Net cash provided by (used in)
financing activities 15,826 (14,961) 1,568
Effect of Exchange Rate Changes on Cash (81) (89) ----
Net increase (decrease) in cash (476) (1,679) 3,246
Cash at beginning of year 1,826 3,505 259
Cash at end of year $ 1,350 1,826 3,505
See accompanying notes to consolidated financial statements.
12
(Brown Jordan, LADD TRANSPORTATION, INC., AMERICAN DREW, Lea Lumber &
Plywood Co., PILLIOD, LADD Furniture, Inc., Lea logos)
LADD Furniture, Inc. and Subsidiaries
Consolidated Statements of Shareholders' Equity
Years ended January 1, 1994, January 2, 1993 and December 28, 1991
Dollar amounts in thousands, except share data
[Enlarge/Download Table]
Unamortized Total
Number Additional Currency value of shareholders'
of shares Common paid-in translation Retained restricted equity
issued stock capital adjustment earnings stock (Notes 8 and 14)
Balance at December 29, 1990,
restated (Notes 1 and 11) 18,840,526 $1,884 13,912 ---- 111,692 (157) 127,331
Shares issued in connection
with incentive stock
option plan 30,928 3 204 ---- ---- ---- 207
Shares issued in connection
with and amortization
of employee restricted
stock awards 112,998 11 920 ---- ---- (720) 211
Net loss ---- ---- ---- ---- (13,203) ---- (13,203)
Dividends paid ---- ---- ---- ---- (4,545) ---- (4,545)
Balance at December 28, 1991, restated 18,984,452 1,898 15,036 ---- 93,944 (877) 110,001
Shares issued in connection
with incentive stock
option plan 10,179 1 29 ---- ---- ---- 30
Proceeds from public offering
of 4,025,000 shares 4,025,000 403 33,616 34,019
Currency translation
adjustment ---- ---- ---- (89) ---- ---- (89)
Amortization of employee
restricted stock awards 218 218
Net earnings ---- ---- ---- ---- 4,545 ---- 4,545
Balance at January 2, 1993, restated 23,019,631 2,302 48,681 (89) 98,489 (659) 148,724
Shares issued in connection
with incentive stock
option plan 11,668 1 90 ---- ---- ---- 91
Shares issued in connection
with and amortization
of employee restricted
stock awards 30,963 3 415 ---- ---- (128) 290
Currency translation
adjustment ---- ---- ---- (81) ---- ---- (81)
Net earnings ---- ---- ---- ---- 3,846 ---- 3,846
Dividends paid ---- ---- ---- ---- (2,767) ---- (2,767)
Balance at January 1, 1994 23,062,262 $2,306 49,186 (170) 99,568 (787) 150,103
See accompanying notes to consolidated financial statements.
13
(Lea, PILLIOD, LADD TRANSPORTATION, INC., AMERICAN DREW, Lea Lumber &
Plywood Co., LADD Furniture, Inc., AMERICAN logos)
Notes to Consolidated Financial Statements
Note 1: Summary of Significant Accounting Policies
PRINCIPLES OF CONSOLIDATION The consolidated financial statements
include the accounts of LADD Furniture, Inc. and its subsidiaries,
all of which are wholly-owned. All significant intercompany
balances and transactions have been eliminated in consolidation.
FISCAL YEAR The Company's fiscal year ends on the Saturday
nearest the end of December. Fiscal year 1993 ended January 1,
1994; fiscal year 1992 ended January 2, 1993; and fiscal year 1991
ended December 28, 1991. Fiscal years 1993 and 1991 comprised 52
weeks; fiscal year 1992 comprised 53 weeks.
INVENTORIES In both 1993 and 1992, approximately 64% of the
Company's inventories are valued using the last-in, first-out
(LIFO) cost method, which is not in excess of market. All other
inventories in 1993 and 1992 are valued at the lower of first-in,
first-out (FIFO) cost or market (net realizable value).
PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are
stated at cost. Depreciation of plant and equipment is provided
over the estimated useful lives of the respective assets on the
straight-line method. Estimated useful lives are 10 to 35 years
for buildings and improvements and 3 to 13 years for machinery and
equipment.
REVENUE RECOGNITION The Company's only line of business is the
manufacture and sale of furniture, related components and
accessories. Sales are recognized when products are shipped and
invoiced to customers. Monthly provision is made for doubtful
receivables, discounts, returns and allowances.
Substantially all of the Company's accounts receivable are due
from retailers of residential furniture. Management periodically
performs credit evaluations of its customers and generally does
not require collateral. The Company has no concentrated credit
risk with any individual customer.
FOREIGN CURRENCY TRANSLATION Assets and liabilities of a foreign
subsidiary are translated at year-end rates of exchange, and
revenues and expenses are translated at the average rates of
exchange for the year. Gains and losses resulting from translation
are accumulated in a separate component of shareholders' equity.
Gains and losses resulting from foreign currency transactions are
included in net income.
INCOME TAXES The Company adopted Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes
(Statement No. 109), effective January 3, 1993 and has applied the
provisions of the statement retroactively to January 1, 1989. The
adoption of the statement resulted in an increase to retained
earnings at December 29, 1990 of approximately $226,000. Under the
asset and liability method of Statement No. 109, deferred tax
assets and liabilities are recognized for the temporary
differences between the financial statement carrying amounts and
the tax bases of the Company's assets and liabilities at income
tax rates expected to be in effect when such amounts are realized
or settled. Under Statement No. 109, the effect on deferred tax
assets and liabilities of a change in tax rates is recognized in
earnings in the period that includes the enactment date.
EARNINGS PER SHARE Earnings per share are calculated based upon
the weighted average number of common shares outstanding during
each fiscal year. The effect of dilutive stock options on the
calculation is insignificant in each of the fiscal years
presented.
INTANGIBLE ASSETS Intangible assets consist principally of values
assigned to patents, furniture designs, trade names and the excess
of cost over the assigned value of net assets acquired. These
assets are being amortized using the straight-line method over
periods of 15 to 40 years. The Company assesses the recoverability
of the excess of cost over the assigned value of net assets by
determining whether the amortization of the balance over its
remaining life can be recovered through undiscounted future
operating cash flows of the acquired operations.
14
(FOURNIER, Brown Jordan, LADD INTERNATIONAL, Daystrom, BARCLAY,
Clayton Marcus, PENNSYLVANIA HOUSE)
Note 1: Summary of Significant Accounting Policies (continued)
POSTRETIREMENT BENEFITS In addition to providing pension
benefits, the Company provides certain health care benefits for
certain retired employees. The Company's policy had been to
expense retiree health costs as they were incurred (i.e., the "pay
as you go" method). Effective January 3, 1993, the Company adopted
Statement of Financial Accounting Standards No. 106, Employers'
Accounting for Postretirement Benefits Other than Pensions, which
was issued in December 1990. The provisions of this statement
require the Company to accrue for the expected costs of retiree
health care benefits, for which substantially all employees are
eligible if they reach normal retirement, during the active period
when such benefits are earned. Additionally, the new standard
requires the recognition of a transition obligation which
represents that portion of future retiree benefit costs related to
the service already rendered by both active and retired employees
up to the date of adoption. The Company has elected to amortize
the transition obligation of $20,618,000 at January 3, 1993 over a
period of 20 years.
POSTEMPLOYMENT BENEFITS Statement of Financial Accounting
Standards No. 112, Employers' Accounting for Postemployment
Benefits, which was issued in November 1992, establishes new
financial accounting and reporting standards for postemployment
benefits for fiscal years beginning after December 15, 1993. The
Company plans to adopt the provisions of Statement No. 112 in
fiscal year 1994 and believes, based upon analyses performed to
date, that the impact of adoption will not be material.
RECLASSIFICATION Certain items in the 1992 and 1991 consolidated
financial statements have been reclassified to conform with the
presentation adopted in the current year. The reclassifications
did not impact the results from operations as previously reported.
Note 2: Acquisitions
On January 31, 1994, the Company acquired The Pilliod Cabinet
Company (Pilliod), a manufacturer of promotional priced casegoods
furniture, by purchasing all of the common stock of its parent
company, Pilliod Holding Company, for $24,257,000 cash (including
acquisition expenses), the repayment of Pilliod debt of
$29,893,000, and the assumption of other long-term debt of
$247,000. The excess of cost over fair value of the net assets
acquired was approximately $31,134,000 and will be amortized on a
straight-line basis over 40 years. The acquisition will be
accounted for as a purchase and accordingly, the net assets and
operations of Pilliod will be included in the Company's
consolidated financial statements beginning in fiscal 1994.
The following unaudited pro forma data presents the combined 1993
results of operations of the Company and Pilliod as though the
acquisition had occurred on January 3, 1993, giving effect to
depreciation and amortization of assets on the accounting basis
recognized in recording the purchase, the interest on the funds
used to effect the purchase, and excluding certain non-recurring
expenses of Pilliod during 1993. Valuations assigned are
preliminary and subject to change.
In thousands, except per share data 1993
Net sales $ 607,845
Net earnings 7,000
Net earnings per common share $ 0.30
15
(FOURNIER, BARCLAY, Clayton Marcus, AMERICAN, PENNSYLVANIA HOUSE,
Daystrom, LADD INTERNATIONAL logos)
Notes to Consolidated Financial Statements
(continued)
Note 2: Acquisitions (continued)
An unaudited pro forma combined balance sheet follows:
January 1,
In thousands 1994
Assets
Current assets $ 186,689
Property, plant and equipment, net 106,747
Intangible and other assets, net 88,322
$ 381,758
Liabilities and Shareholders' Equity
Current liabilities $ 89,160
Long-term debt 119,509
Deferred items and other liabilities 22,986
Shareholders' equity 150,103
$ 381,758
On July 2, 1992, the Company acquired substantially all of the
assets and assumed certain liabilities of Fournier Furniture
Corporation and subsidiary for an aggregate purchase price of
approximately $11,000,000, including acquisition accounting
adjustments. The purchase price consisted of approximately
$4,720,000 in cash and the assumption of a $3,500,000 Industrial
Development Authority obligation and certain other liabilities.
The acquisition was accounted for as a purchase, and the net
assets and results of operations of Fournier are included in the
Company's consolidated financial statements from the acquisition
date.
Note 3: Inventories
A summary of inventories follows:
January 1, January 2,
In thousands 1994 1993
Inventories on the FIFO cost method:
Finished goods $ 55,881 52,823
Work in process 19,277 19,014
Raw materials and supplies 37,183 32,431
Total inventories on the FIFO cost method 112,341 104,268
Less adjustments of certain inventories
to the LIFO cost method (11,702) (8,692)
$100,639 95,576
16
(Lea, LADD Furniture, Inc., PILLIOD, Lea Lumber & Plywood Co., AMERICAN
DREW, LADD TRANSPORTAION, INC., Brown Jordan logos)
Note 4: Property, Plant and Equipment
A summary of property, plant and equipment follows:
January 1, January 2,
In thousands 1994 1993
Land and improvements $ 5,892 5,717
Buildings and improvements 65,850 60,689
Machinery and equipment 72,997 62,276
Construction in progress 12,266 5,587
157,005 134,269
Less accumulated depreciation (59,508) (50,660)
$97,497 83,609
Note 5: Intangible and Other Assets
A summary of intangible and other assets follows:
[Download Table]
January 1, January 2,
In thousands 1994 1993
Trade names $26,031 26,031
Excess of cost over assigned value of net assets acquired 27,289 27,289
Furniture designs and patents 10,570 10,570
Other 3,095 2,287
66,985 66,177
Less accumulated amortization (9,819) (7,553)
$57,166 58,624
Note 6: Accrued Expenses and Other Current Liabilities
A summary of accrued expenses and other current liabilities follows:
[Download Table]
January 1, January 2,
In thousands 1994 1993
Payrolls, commissions and employee benefits $ 13,637 15,715
Other 15,204 15,834
$ 28,841 31,549
17
(AMERICAN, LADD Furniture, Inc., Lea Lumber & Plywood Co., AMERICAN DREW,
LADD TRANSPORTATION, INC., PILLIOD, Lea logos)
Notes to Consolidated Financial Statements
(continued)
Note 7: Long-term Debt
Long-term debt consists of the following:
[Download Table]
January 1, January 2,
In thousands 1994 1993
Term loan due at various dates through January 15, 1999 $ 45,000 45,000
Revolving credit loan, due January 15, 1996 58,000 38,350
Other indebtedness, primarily fixed-rate
industrial revenue bonds, due through 2001 8,072 9,223
Total long-term debt 111,072 92,573
Less current installments of long-term debt 5,815 1,070
Long-term debt, excluding current installments $105,257 91,503
At January 1, 1994, the Company had outstanding under a term and
revolving credit loan agreement (the Facility) provided by a
syndicate of banks a term loan of $45,000,000 and borrowings of
$58,000,000 under an $85,000,000 revolving credit loan. Borrowings
under the Facility are unsecured. The term loan is payable in
quarterly installments commencing April 15, 1994 ranging from
$1,750,000 to $2,375,000. Borrowings under the Facility bear
interest at rates selected by the Company of LIBOR (3.35% at
January 1, 1994) plus 1 1/8% or prime (6.0% at January 1, 1994).
The Company pays a commitment fee of 3/8% per annum on the unused
portion of the revolving credit loan.
The Facility contains restrictions relating to the maintenance of
certain ratios pertaining to shareholders' equity, working
capital, cash flow and operating earnings. Additionally, the
Facility contains restrictions which relate to future borrowings,
liens on assets, specified amounts of consolidated net worth and
include covenants relating to the operations of the Company. The
Company was in compliance with all such restrictions at January 1,
1994.
The industrial revenue bonds are secured by property, plant and
equipment with a depreciated cost of approximately $4,349,000 at
January 1, 1994.
The aggregate annual maturities of long-term debt during each of
the five fiscal years subsequent to January 1, 1994 are
approximately as follows: $5,815,000 in 1994; $9,401,000 in 1995;
$67,943,000 in 1996; $9,872,000 in 1997; and $9,716,000 in 1998.
Interest paid by the Company in 1993, 1992 and 1991 amounted to
approximately $4,995,000, $7,338,000 and $10,629,000,
respectively.
Note 8: Employee Stock Plans
STOCK OPTION PLAN Under an Incentive Stock Option Plan which
expired in June 1993, the Company granted nontransferable stock
options to officers, key management employees and nonemployee
directors. Although options were generally granted at fair market
value on the dates of grant, nonqualified options could have been
granted at less than fair market value at the discretion of the
Plan's Administrative Committee. Incentive stock options and
director options were granted at not less than fair market value
on the date of grant. All optionees were employees or directors of
the Company on the date of grant and throughout the term
18
(PENNSYLVANIA HOUSE, Clayton Marcus, BARCLAY, Daystrom, LADD INTERNATIONAL,
Brown Jordan, FOURNIER logos)
Note 8: Employee Stock Plans (continued)
of the option except in the case of death, retirement, or
disability. In February 1994, the board of directors, subject to
shareholder approval, adopted a new Incentive Stock Option Plan
substantially similar in nature to the prior plan.
A total of 1,166,666 shares were reserved for option under the
Plan. Options granted prior to 1991 are generally exercisable at
the cumulative rate of 20% per year after one year from the date
of grant. Options granted subsequent to 1990 are exercisable at
the cumulative rate of 25% per year after one year from the date
of grant. Options expire over a period not to exceed ten years
from the date of grant. Stock option activity during 1993, 1992
and 1991 follows:
[Download Table]
Number of Option price
shares per share
Outstanding at December 29, 1990 501,818 $ 6.00 - $22.76
Granted in 1991 247,201 $ 7.25 - $ 9.75
Exercised in 1991 (30,928) $ 6.56 - $ 6.96
Cancelled in 1991 (43,466) $ 9.75 - $20.69
Outstanding at December 28, 1991 674,625 $ 6.00 - $22.76
Granted in 1992 16,000 $ 8.25
Exercised in 1992 (10,179) $ 6.00 - $ 9.75
Cancelled in 1992 (131,295) $ 6.00 - $20.69
Outstanding at January 2, 1993 549,151 $ 6.00 - $22.76
Granted in 1993 136,101 $11.50 - $14.85
Exercised in 1993 (11,668) $ 6.00 - $11.63
Cancelled in 1993 (81,700) $ 6.00 - $22.76
Outstanding at January 1, 1994 591,884 $ 7.25 - $16.13
Exercisable at January 1, 1994 304,092 $ 7.25 - $16.13
RESTRICTED STOCK AWARDS The board of directors periodically
awards restricted common stock to key executives. Vesting of such
awards is subject to future service requirements of five years
from the date of each award. The difference between cash paid by
the employee for the awarded shares, generally par value, and the
market value of the shares as of the award date is amortized over
the five-year service requirement periods. During 1993 and 1991,
the board of directors awarded and issued 30,963 and 112,998
shares, respectively. During 1992, there were no shares awarded or
issued.
Note 9: Employee Benefit Plans
DEFINED BENEFIT PENSION PLANS The Company and several of its
subsidiaries have noncontributory defined benefit pension plans
covering qualified salaried and hourly employees. The plans
covering qualified salaried employees provide pension benefits
based on the participant's final average salary before retirement.
The plans covering qualified hourly employees provide pension
benefits based on years of service. The Company's policy is to
fund normal costs and amortization of prior service costs.
19
(LADD INTERNATIONAL, Daystrom, PENNSYLVANIA HOUSE, AMERICAN, Clayton
Marcus, BARCLAY, FOURNIER logos)
Notes to Consolidated Financial Statements
(continued)
Note 9: Employee Benefit Plans (continued)
In addition to the qualified plans, the Company has a nonqualified
retirement plan covering certain salaried employees. At January 1,
1994 and January 2, 1993, the Company had approximately $471,000
and $469,000, respectively, of assets available to fund future
obligations of the nonqualified plan. These assets are included in
intangible and other assets, and the related liability is included
in deferred compensation and other liabilities in the accompanying
consolidated balance sheets. The liability for the nonqualified
retirement plan is reflected in the reconciliation of the funded
status of the plans below.
The following sets forth the funded status of the plans:
[Enlarge/Download Table]
In thousands January 1, 1994 January 2, 1993
Assets exceed Accumulated Assets exceed Accumulated
accumulated benefits accumulated benefits
benefits exceed assets benefits exceed assets
Actuarial present value of
benefit obligations:
Vested benefit obligation $(32,113) (875) (26,597) (709)
Accumulated benefit obligation (32,781) (1,042) (27,179) (863)
Projected benefit obligation
for service rendered to date (40,778) (1,370) (34,179) (1,080)
Less plan assets at fair value,
primarily equity, fixed income
and short-term investment funds 36,445 ---- 31,669 ----
Projected benefit obligation in
excess of plan assets (4,333) (1,370) (2,510) (1,080)
Unrecognized net asset at transition
being amortized over 15 years (651) ---- (730) ----
Unrecognized net (gain) loss 3,124 227 1,511 (20)
Unrecognized prior service cost 2,375 270 2,577 320
Adjustment required to recognize
minimum liability ---- (169) ---- (83)
Pension asset (liability)
recognized in the consolidated
balance sheets $ 515 (1,042) 848 (863)
Net pension expense for the plans for 1993, 1992 and 1991 included the following components:
In thousands 1993 1992 1991
Service costs - benefits earned during the period $ 1,915 1,698 1,818
Interest cost on projected obligation 2,644 2,517 2,152
Return on assets (4,737) (1,358) (4,508)
Amortization of unrecognized net obligation
(asset) at transition and net deferrals 2,166 (872) 3,007
Net pension expense $ 1,988 1,985 2,469
20
(Brown Jordan, LADD TRANSPORTATION, INC., AMERICAN DREW, Lea Lumber &
Plywood Co., PILLIOD, LADD Furniture, Inc., Lea logos)
Note 9: Employee Benefit Plans (continued)
The projected benefit obligation at January 1, 1994 and January 2,
1993 was determined using an assumed discount rate of 7.25% and
8.00%, respectively. The salary plans assume a long-term rate of
increase in compensation of 5% to age 60, and 3% thereafter. The
assumed long-term rate of return on plan assets is 8.5%.
DEFINED CONTRIBUTION PLANS The Company has savings plans for
certain employees which qualify under Section 401(k) of the
Internal Revenue Code. The plans allow eligible employees to
contribute up to a fixed percentage of their compensation, with
the Company matching a portion of each employee's contributions.
Company contributions under the plans aggregated approximately
$687,000 in 1993, $422,000 in 1992 and $525,000 in 1991.
Note 10: Postretirement Benefits Other than Pensions
The Company has plans which provide for postretirement health care
benefits for certain employees. These benefits include major
medical insurance with deductible and coinsurance provisions. The
Company pays all benefits on a current basis, and the plans are
not funded.
The components of the net postretirement benefit cost for the year
ended January 1, 1994 are as follows:
In thousands 1993
Service costs $ 439
Interest costs of benefit obligation 1,611
Amortization of transition obligation 1,031
$ 3,081
The plan's funded status as of January 1, 1994 was as follows:
In thousands 1993
Accumulated postretirement benefit obligation:
Retirees $(11,985)
Active participants eligible to retire (6,285)
Other active participants (4,472)
(22,742)
Unrecognized net loss 1,104
Unrecognized transition obligation 19,587
Accrued postretirement benefit cost $ (2,051)
The postretirement benefit obligation was determined by
application of the terms of the various plans using relevant
actuarial assumptions. Health care costs are projected to increase
at annual rates ranging from 9.25% in 1993 down to 5.25% in 1997
and thereafter. A one percent annual increase in these assumed
cost trend rates would increase the accumulated postretirement
benefit obligation at January 1, 1994 by approximately $1,372,000
and the service and interest cost components of the net
postretirement benefit cost for 1994 by approximately $100,000.
The assumed discount rate used in determining the accumulated
postretirement benefit obligation was 7.25%.
21
(Lea, PILLIOD, LADD TRANSPORTATION, INC., AMERICAN DREW, Lea Lumber &
Plywood Co., LADD Furniture, Inc., AMERICAN logos)
Notes to Consolidated Financial Statements
(continued)
Note 10: Postretirement Benefits Other than Pensions (continued)
For the year ended January 1, 1994, the effect of adopting
Statement No. 106 was to increase the net postretirement benefit
cost by approximately $2,100,000, to decrease net earnings by
approximately $1,260,000 and to decrease net earnings per share by
$0.05.
Note 11: Income Taxes
The consolidated financial statements for the years ended January
2, 1993 and December 31, 1991 have been restated to comply with
the provisions of Statement No. 109, Accounting for Income Taxes.
The following summarizes the impact on net earnings (loss) and net
earnings (loss) per share of applying Statement No. 109 for the
years ended January 2, 1993 and December 28, 1991:
In thousands 1992 1991
Net earnings (loss) as
previously reported $ 5,176 (12,749)
Effect of Statement No. 109 (631) (454)
Net earnings (loss) as restated $ 4,545 (13,203)
Per share amounts as
previously reported $ 0.24 (0.67)
Effect of Statement No. 109 (0.03) (0.03)
Net earnings (loss) per share as restated $ 0.21 (0.70)
Components of income tax expense (benefit) are as follows:
In thousands 1993 1992 1991
Current:
Federal $ 1,855 2,394 (9,497)
State 492 529 __
2,347 2,923 (9,497)
Deferred:
Federal 199 657 2,833
State 15 145 623
214 802 3,456
$ 2,561 3,725 (6,041)
22
(FOURNIER, Brown Jordan, LADD INTERNATIONAL, Daystrom, BARCLAY,
Clayton Marcus, PENNSYLVANIA HOUSE logos)
Note 11: Income Taxes (continued)
The effective income tax rate on earnings (loss) before income
taxes for the years ended January 1, 1994, January 2, 1993 and
December 28, 1991 was 40.0%, 45.0% and 31.4%, respectively. The
actual income tax expense (benefit) differs from the "expected"
income tax expense (benefit) computed by applying the applicable
Federal corporate income tax rate (34% for each year) to earnings
(loss) before income taxes for the years ended January 1, 1994,
January 2, 1993 and December 28, 1991 as follows:
In thousands 1993 1992 1991
Computed "expected" income
tax expense (benefit) $ 2,178 2,812 (6,543)
Increase (reduction) in income
taxes resulting from:
State income taxes, net of
Federal income tax benefit 335 445 ----
Amortization of the excess of
cost over the assigned value
of net assets acquired 250 250 250
Other (202) 218 252
Actual income tax expense (benefit) $ 2,561 3,725 (6,041)
During 1993, the effect of enacted changes in tax rates was to
increase deferred tax expense by approximately $469,000.
The tax effects of temporary differences and carryforwards that
give rise to significant portions of deferred tax assets and
liabilities consist of the following:
January 1, January 2,
In thousands 1994 1993
Deferred tax liabilities:
Inventories $ (6,226) (7,815)
Property, plant and equipment (7,975) (7,593)
Intangible and other assets (10,938) (10,686)
Other (2,174) (2,164)
Total deferred tax liabilities (27,313) (28,258)
Deferred tax assets:
Accounts receivable 1,655 1,590
Liabilities and reserves 3,730 4,487
Capital loss carryforwards 2,614 2,552
Other 728 1,257
Gross deferred tax assets 8,727 9,886
Valuation allowance (2,600) (2,600)
Total deferred tax assets 6,127 7,286
Net deferred tax liability $ (21,186) (20,972)
23
(FOURNIER, BARCLAY, Clayton Marcus, AMERICAN, PENNSYLVANIA HOUSE,
Daystrom, LADD INTERNATIONAL logos)
Notes to Consolidated Financial Statements
(continued)
Note 11: Income Taxes (continued)
Deferred taxes are classified in the accompanying consolidated
balance sheet captions as follows:
January 1, January 2,
In thousands 1994 1993
Accrued expenses and other current liabilities $ 2,284 2,750
Deferred income taxes 18,902 18,222
$21,186 20,972
The Company has approximately $6,600,000 of capital loss
carryforwards available to offset future capital gains. These
carryforwards will expire in 1994 and 1995 if not utilized and
total approximately $2,375,000 and $4,225,000, respectively. A
valuation allowance has been provided for the deferred tax assets
related to these loss carryforwards. There was no change in the
valuation allowance for any of the years reported. The Company
believes that it is more likely than not that the results of
future operations will generate sufficient taxable income to
realize the remaining deferred tax assets.
Note 12: Leases
The Company leases manufacturing facilities, various warehouses,
sales offices and showrooms, as well as manufacturing,
transportation and data processing equipment under operating
leases which expire at various dates through 2026. Future minimum
lease payments under noncancelable operating leases as of January
1, 1994 are:
In thousands
Fiscal year:
1994 $ 5,862
1995 5,694
1996 4,423
1997 2,732
1998 865
Thereafter 3,573
Total $23,149
Rental expense for cancelable and noncancelable operating leases
charged to operations was as follows:
In thousands
Fiscal year:
1993 $ 10,275
1992 9,337
1991 8,891
Rental expense includes contingent rentals based upon usage of
transportation equipment under cancelable and noncancelable
operating leases which totaled approximately $650,000 in 1993,
$786,000 in 1992 and $868,000 in 1991.
24
(Lea, LADD Furniture, PILLIOD, Lea Lumber & Plywood Co., AMERICAN DREW,
LADD TRANSPORTATION, INC., Brown Jordan logos)
Note 13: Dealer Financing Arrangement
The Company has a cancelable financing arrangement whereby certain
notes receivable from furniture dealers are assigned with recourse
to a bank. The terms of the notes receivable, which are
collateralized by inventories held by the furniture dealers, range
from 12 to 48 months with interest rates ranging from 6% to prime
plus 1 1/4%. Upon cancelation of the financing arrangement, the
bank retains the previously assigned notes receivable and, as
such, the notes receivable and related obligations under the
dealer financing arrangement are not recorded in the January 1,
1994 and January 2, 1993 consolidated balance sheets. Total notes
receivable assigned during fiscal 1993, 1992 and 1991 were
approximately $7,503,000, $5,304,000 and $9,464,000, respectively.
During 1992, the Company assumed approximately $2,300,000 in notes
previously assigned to the bank, and such amount is included in
accrued expenses and other current liabilities at January 2, 1993.
At January 1, 1994, the Company was contingently liable for
approximately $8,855,000 of receivables transferred with recourse
to the bank under the dealer financing arrangement for which the
Company maintains a $4,000,000 letter of credit agreement to fund
any liabilities which might arise under the program. In the
opinion of management, adequate provision for potential losses
under the dealer financing arrangement has been included in the
allowances for doubtful receivables, discounts, returns and
allowances in the accompanying consolidated balance sheets.
Note 14: Stock Offering
In May 1992, the Company sold 4,025,000 shares of common stock,
realizing net proceeds of $34,019,000. The net proceeds from the
offering were used to reduce outstanding borrowings under the
Company's revolving credit loan.
Note 15: Subsequent Event
On January 31, 1994, the Company sold ownership interest in a
defined pool of trade accounts receivable for $20,000,000, the
proceeds of which were used to partially finance the Pilliod
acquisition -- see Note 2. The sold accounts receivable will be
reflected as a reduction of trade accounts receivable in the 1994
consolidated balance sheet. Under the agreement, which expires in
January 1995, the maximum amount of the purchaser's investment
will be $30,000,000 and is subject to change based on the level of
eligible receivables and concentrations of receivables. The
Company will retain substantially the same risk of credit loss as
if the receivables had not been sold. A portion of the cost of the
accounts receivable sale program will be based on the purchaser's
level of investment and borrowing costs.
25
(AMERICAN, LADD Furniture, Inc., Lea Lumber & Plywood Co., AMERICAN DREW,
LADD TRANSPORTATION, INC., PILLIOD, Lea logos)
LADD Furniture, Inc. and Subsidiaries
Selected Annual Data
Dollar and share data in thousands, except per share amounts
[Enlarge/Download Table]
Five-Year One-Year
Compound Changes
Growth Rates (1993 vs. 1992)
Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal
1993 1992 1991 1990 1989 1988
Operating Statement Data
Net sales $ 521,200 496,679 429,110 511,911 453,002 379,904 + 6.5% +4.9%
Cost of sales 426,921 401,250 356,025 406,039 352,660 289,751 8.1 6.4
Gross profit 94,279 95,429 73,085 105,872 100,342 90,153 0.9 (1.2)
Selling, general and
administrative expenses 81,953 78,493 79,322 80,617 64,639 48,956 10.9 4.4
Manufacturing restructuring charge ---- ---- ---- 8,268 ---- ---- ---- ----
Operating income (loss) 12,326 16,936 (6,237) 16,987 35,703 41,197 (21.4) (27.2)
Other deductions (income):
Interest expense 5,542 7,502 10,413 14,799 8,860 3,980 6.8 (26.1)
Other (net) 377 1,164 2,594 1,584 1,038 (946) N/M (67.6)
Earnings (loss) before income taxes 6,407 8,270 (19,244) 604 25,805 38,163 (30.0) (22.5)
Income tax expense (benefit) 2,561 3,725 (6,041) (426) 9,383 13,558 (28.3) (31.2)
Net earnings (loss) $ 3,846 4,545 (13,203) 1,030 16,422 24,605 (31.0) (15.4)
Depreciation $ 10,508 9,151 8,783 9,138 8,018 5,681 + 13.1% + 14.8%
Amortization 2,554 2,848 5,081 2,952 1,244 274 56.3 (10.3)
Cash dividends paid 2,767 ---- 4,545 5,274 5,814 4,704 (10.1) N/M
Weighted average shares outstanding 23,054 21,442 18,946 18,833 18,759 18,694 4.3 7.5
Per Share Data
Net sales $ 22.61 23.16 22.65 27.18 24.15 20.32 + 2.2% (2.4%)
Net earnings (loss) 0.17 0.21 (0.70) 0.05 0.88 1.32 (33.6) (19.0)
Cash dividends 0.12 ---- 0.24 0.28 0.31 0.25 (13.7) N/M
Year-end book value 6.51 6.46 5.79 6.76 6.99 6.43 0.2 0.8
Balance Sheet Data
Net working capital $ 123,004 117,693 111,583 115,960 123,968 84,724 +7.7% +4.5%
Net property, plant and equipment 97,497 83,609 81,660 82,758 106,838 50,601 14.0 16.6
Total assets 335,737 315,649 308,980 320,539 407,136 172,923 14.2 6.4
Long-term debt 105,257 91,503 125,304 124,462 145,997 21,146 37.8 15.0
Shareholders' equity 150,103 148,724 110,001 127,331 131,399 120,201 4.5 0.9
Ratios, Other
Gross profit margin 18.1% 19.2 17.0 20.7 22.2 23.7
Operating profit (loss) margin 2.4 3.4 (1.5) 3.3 7.9 10.8
Return (loss) on sales 0.7 0.9 (3.1) 0.2 3.6 6.5
Effective income tax rate 40.0 45.0 31.4 N/M 36.4 35.5
Dividend payout ratio 71.9 ---- N/M N/M 35.4 19.1
Return (loss) on beginning assets 1.2 1.5 (4.1) 0.3 9.5 13.5
Return (loss) on beginning equity 2.6 4.1 (10.4) 0.8 13.7 23.6
Current ratio 3.1 3.1 3.1 3.2 2.1 4.2
Inventory turnover 4.4x 4.4 4.0 4.2 4.6 5.7
Asset turnover 1.6 1.6 1.4 1.4 1.6 2.1
Long-term debt to capitalization 37.9% 35.2 49.1 46.3 49.0 14.4
Year-end employees 6,670 6,940 6,340 6,880 8,020 5,990
Sales per employee (000's) $ 77.0 75.4 66.1 67.7 62.1 62.4
Stock Data
High $ 14.750 12.000 12.750 13.000 17.750 17.000
Low 7.500 6.250 5.750 4.250 11.000 11.250
Close 10.000 10.500 7.500 6.250 11.375 13.750
P/E ratios:
High 86.8x 57.1 N/M N/M 20.2 12.9
Low 44.1 29.8 N/M N/M 12.5 8.5
Trading volume (shares) 24,781 19,758 11,619 12,240 11,834 10,322
NOTES: Fiscal year 1992 comprised 53 weeks; all other years
comprised 52 weeks. Fiscal years 1989 - 1992 have been restated to
reflect the adoption of SFAS No. 109 effective January 1, 1989.
Long-term debt excludes current installments. Capitalization
defined as net working capital plus noncurrent assets. Share and
per share data adjusted for stock splits. P/E ratios based on
yearly net earnings per share. Stock price data is for calendar
years. N/M = Not meaningful. Sales per employee based on monthly
employee averages.
26
(PENNSYLVANIA HOUSE, Clayton Marcus, BARCLAY, Daystrom, LADD INTERNATIONAL,
Brown Jordan, FOURNIER logos)
Management's Discussion and Analysis
The following discussion should be read in conjunction with the
Consolidated Financial Statements and Notes thereto.
Results of Operations
The table below sets forth the percentage relationship of net
sales to certain items included in the consolidated statements of
operations in each of the last three fiscal years.
1993 1992 1991
Net sales 100.0% 100.0% 100.0%
Cost of sales 81.9 80.8 83.0
Gross profit 18.1 19.2 17.0
Selling, general and administrative expenses 15.7 15.8 18.5
Operating income (loss) 2.4 3.4 (1.5)
Other deductions, net 1.2 1.7 3.0
Earnings (loss) before income taxes 1.2 1.7 (4.5)
Income tax expense (benefit) 0.5 0.8 (1.4)
Net earnings (loss) 0.7% 0.9% (3.1)%
The following paragraphs provide an analysis of the changes in net
sales, selected cost and expense items, and net earnings (loss)
over the three-year period ended January 1, 1994.
Fiscal 1993 Compared to 1992
Net sales increased $24.5 million, or 4.9%, to a record $521.2
million in 1993's 52-week fiscal year, compared to $496.7 million
in 1992's 53-week year. Sales growth in 1993 occurred within a
competitive selling environment which limited the Company's
ability to increase product prices. The increase in net sales was
primarily attributable to growth in shipments of medium and lower-
priced casegoods products, upholstery products and the Company's
contract business. Additionally, sales of Fournier Furniture were
$15.0 million higher for the full year 1993 than for the six-month
period following Fournier's acquisition by the Company in July
1992. Net sales for 1993 were negatively impacted by $11.9 million
due to the non-renewal of a government contract which expired
during 1992, as well as by a decrease in sales of higher-priced
casegoods products. Further, as a result of a decision in the
third quarter of 1993 to discontinue certain unprofitable product
lines of American of Martinsville Residential Casegoods (AOM
Casegoods) and merge profitable products with American Drew's
product lines, 1993 sales were reduced by $2.7 million compared to
1992. The Company believes that the loss of sales volume in 1994
from the discontinuance of AOM Casegoods products totaling
approximately $12.0 million will be more than offset by internal
sales growth and by sales of Pilliod Furniture, which was acquired
January 31, 1994 (see note 2 to the consolidated financial
statements).
Cost of sales as a percentage of net sales increased to 81.9% in
1993, from 80.8% in 1992. This increase was largely due to
increased raw material costs, principally lumber, as well as the
cost associated with the implementation of Statement of Financial
Accounting Standards No. 106, Employers' Accounting for
Postretirement Benefits Other than Pensions (see note 10 to the
consolidated financial statements). The impact of higher lumber
prices in 1993, which was as much as 35% for cherry lumber, was
somewhat countered through selective purchasing, improved yield
management and species substitution, as well as by lumber
substitution in general. Additionally, as a result of the above-
mentioned decision to discontinue certain products of AOM
Casegoods, manufacturing capacity became available for
redeployment to other operating
27
(LADD INTERNATIONAL, Daystrom, PENNSYLVANIA HOUSE, AMERICAN, Clayton
Marcus, BARCLAY, FOURNIER logos)
Management's Discussion and Analysis
(continued)
companies. Virginia manufacturing capacity of AOM Casegoods,
American of Martinsville Contract (AOM Contract) and Lea
Industries was realigned such that AOM Contract operations were
consolidated from three plants into one expanded plant and two
plants were transferred to and are being upfitted by Lea
Industries to accommodate its current and anticipated sales
growth. Initial inefficiencies associated with these significant
manufacturing changes increased 1993 cost of sales, particularly
during the fourth quarter. In addition, manufacturing disruptions
associated with the implementation of certain capital projects
increased 1993 cost of sales. Although 1994 cost of sales will
likely continue to reflect high lumber costs, the manufacturing
disruptions associated with the Virginia manufacturing realignment
should end by mid-year and the Company should also begin to
benefit from returns generated by 1993 capital expenditures.
The gross profit margin decreased from 19.2% of net sales in 1992
to 18.1% in 1993. The decline in the gross margin was primarily
attributable to the above factors which increased 1993 cost of
sales, as well as discounting of selling prices due to the highly
competitive industry conditions and due to the liquidation of
certain AOM Casegoods products.
Selling, general and administrative (SG&A) expenses were 15.7% of
net sales in 1993, comparable to 1992's 15.8%.
Operating income in 1993 was $2.4 million versus $3.4 million in
1992. The costs associated with the Virginia manufacturing plant
realignment, the operating loss of approximately $2.5 million
incurred by AOM Casegoods after the decision to discontinue its
unprofitable products, and the additional $2.1 million cost in
1993 for post-retirement benefits, were factors negatively
impacting 1993 operating margins.
Net other deductions declined to 1.2% of net sales in 1993 from
1.7% in 1992. The decrease was largely attributable to a decline
in interest expense of $2.0 million in 1993, related to a year-to-
year reduction in average outstanding borrowings and lower
interest rates which resulted from a new credit agreement entered
into by the Company in January 1993.
The difference between the Company's actual effective income tax
rate for 1993 of 40.0% compared to the expected income tax rate of
34% was largely due to state income taxes net of the federal
income tax benefit, as well as the non-deductibility of the
amortization of intangible assets. Additionally, Congress enacted
new tax legislation during the year which increased the top
Federal income tax rate retroactive to January 1, 1993. The
adjustment of the Company's net deferred tax liability to reflect
the revised Federal income tax rate lowered net earnings by
approximately $469,000, or $.02 per share, during 1993. Tax
planning strategies implemented late in 1993 are expected to
reduce the Company's state income taxes in the future.
Fiscal 1992 Compared to 1991
Net sales increased $67.6 million, or 15.8%, to $496.7 million in
1992. The increase in net sales was primarily attributable to an
increase in the volume of furniture shipments and the purchase of
the assets of Fournier Furniture in July 1992. Excluding the
Fournier acquisition, net sales increased approximately 11.6% over
prior year levels. The extremely competitive sales environment in
1992 limited the Company's ability to increase net sales prices.
Cost of sales as a percentage of net sales declined to 80.8% in
1992, from 83.0% in 1991. The reduction in the cost of sales
percentage was the result of an increase in production volume
resulting in better absorption of manufacturing overhead costs in
1992. Additionally, cost reduction programs begun in the fourth
quarter of
28
(Brown Jordan, LADD TRANSPORTATION, INC., AMERICAN DREW, Lea Lumber &
Plywood Co., PILLIOD, LADD Furniture, Inc., Lea logos)
1991 to reduce personnel impacted 1992 results. The impact of
rising lumber prices in 1992 was minimized through selective
purchasing, yield management and species substitution, as well as
by lumber substitution in general. Further, lumber price increases
were also offset by decreases in other raw material prices.
The gross profit margin increased from 17.0% of net sales in 1991
to 19.2% in 1992. The improvement in the gross profit margin
resulted from increased production volume and the cost reduction
programs implemented by the Company. Gross profit margins in both
years were negatively impacted by promotional discounting of
selling prices, especially in the "hospitality" (hotel/motel)
category.
Selling, general and administrative (SG&A) expenses declined to
15.8% of net sales, from 18.5% in 1991. While total SG&A expense
was comparable in dollar amount to 1991, the percentage decreased
as a result of increased sales. Included in SG&A for 1992 was a
$3.1 million provision for losses on doubtful accounts receivable,
a decrease of $4.3 million from the record levels recorded in 1991
when the impact of the recession on white collar workers hit
several of the Company's furniture retailers. The decrease in the
provision for losses on doubtful accounts receivable in 1992 was
offset by an increase in SG&A expenses associated with the
Fournier acquisition.
Net other deductions declined from 3.0% of net sales in 1991 to
1.7% in 1992. The decrease was largely attributable to a decline
in interest expense of $2.9 million principally related to a year-
to-year reduction in outstanding borrowings. Additionally, 1991
net other deductions included a one-time write-off of $1.9 million
of loan fees in connection with the term and revolving credit
agreement signed in January 1992.
The difference between the Company's effective income tax rate for
1992 of 45.0% compared to the expected income tax rate of 34% was
primarily attributable to the non-deductibility of the
amortization of intangible assets and state income taxes net of
the federal income tax benefit. The increased effective income tax
rate for the third and fourth quarters of 1992 arose as it became
apparent that net operating losses recorded in Pennsylvania during
1991 would not be available to offset 1992 taxable income due to
tax law changes enacted in that state.
Liquidity and Capital Resources
On January 1, 1994, the Company had $103.0 million outstanding
under a long-term bank credit facility, comprised of a $45.0
million term loan and borrowings of $58.0 million under an $85.0
million revolving credit line. Additionally, the Company had other
long-term indebtedness outstanding at the same date, primarily
fixed-rate industrial revenue bonds, aggregating $8.1 million.
Excluding current installments, total long-term debt represented
37.9% of the Company's total capitalization at the end of 1993,
below management's internal financial goal of keeping long-term
debt to capitalization at or below 45%. Additionally, on January
1, 1994, net working capital totaled $123.0 million, $5.3 million
higher than at the end of the prior year, and the Company's
current ratio was 3.1:1, the same as a year earlier. On January 1,
1994, the Company had $27.0 million of unused lines of credit
available under its bank credit lines.
During 1993, the Company generated cash from operating activities
of $8.7 million, a decrease of $17.6 million compared to 1992.
Cash flows from net earnings plus depreciation and amortization of
$16.9 million in 1993 were up slightly over $16.5 million in 1992.
However, increases in trade accounts receivable associated with
higher 1993 sales, increases in inventory levels (principally raw
materials and lower-priced casegoods products) and a decrease in
accrued expenses and other current liabilities, in the aggregate,
used $12.5 million of cash. Operating cash flows in 1992 were
positively impacted by the nonrecurring collection of $7.3 million
of refundable income taxes.
29
(Lea, PILLIOD, LADD TRANSPORTATION, INC., AMERICAN DREW, Lea Lumber &
Plywood Co., LADD Furniture, Inc., AMERICAN logos)
Management's Discussion and Analysis
(concluded)
During 1993, capital spending totaled $24.7 million compared to
$9.0 million during 1992. Capital expenditures were principally
directed to new computerized manufacturing equipment designed to
automate production, reduce manufacturing costs and improve
quality. Capital expenditures during 1993 were funded largely from
the operations of the Company and borrowings under the Company's
existing long-term credit facility. The Company anticipates
spending in excess of $25.0 million for capital improvements
during 1994. The Company believes that unused short-term and long-
term credit lines available under banking arrangements, as well as
cash generated from operations, will be adequate to fund planned
capital expenditures.
As more fully discussed in note 2 to the consolidated financial
statements, the Company acquired Pilliod Furniture on January 31,
1994 for $54.0 million, by retiring $29.9 million of Pilliod's
debt, assuming $0.2 million of debt, and paying $23.9 million to
Pilliod's shareholders. The purchase price was financed with funds
from available long-term and short-term revolving bank credit
lines and $20.0 million generated from the sale of trade accounts
receivable (see note 15 to the consolidated financial statements).
On January 28, 1994 and February 28, 1994, the Company entered
into unsecured one-year revolving lines of credit with two banks
of $20.0 million and $15.0 million, respectively, both of which
bear interest at rates at or below the Company's long-term credit
facility. The facilities are intended to provide debt capacity for
the Pilliod Furniture acquisition and seasonal working capital
needs. The Company intends to refinance borrowings under the
short-term lines through long-term financing during 1994.
New Accounting Standards
In November 1992, the Financial Accounting Standards Board
established new accounting standards for Postemployment Benefits
(SFAS 112) that require accrual of these costs over an employee's
active service rather than being accounted for on a "pay as you
go" basis. Although the Company does not have severance agreements
for employees at most of its companies, certain workers
compensation and disability benefits are provided. The Company
plans to adopt the provisions of SFAS 112 in fiscal year 1994 and
believes, based upon analyses performed to date, that the impact
of adoption will not be material.
Impact of Inflation
Although the effects of inflation on the Company cannot be
accurately determined, inflation in recent years has been modest
and has primarily affected the Company's manufacturing costs in
the areas of labor, manufacturing overhead, and raw materials
other than lumber. The price of lumber, like the prices of other
commodities, is affected more by the interaction of supply and
demand than by inflation. The Company's gross profit margins
during the past several years have been impacted more by higher
promotional selling discounts, lumber price increases, and plant
downtime taken to curtail production and inventory levels rather
than by inflation. Historically, the Company believes it has been
able to offset the effects of inflation by improving manufacturing
efficiency, increasing employee productivity, substituting raw
materials and, to a lesser degree, by increasing product selling
prices.
30
(FOURNIER, Brown Jordan, LADD INTERNATIONAL, Daystrom, BARCLAY, Clayton
Marcus, PENNSYLVANIA HOUSE logos)
LADD Furniture, Inc. and Subsidiaries
Selected Quarterly Data
Dollar and share data in thousands, except per share amounts
[Enlarge/Download Table]
Fiscal 1993 Fiscal 1992
4th 3rd 2nd 1st 4th 3rd 2nd 1st
Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
Operating Statement Data
Net sales $123,935 127,297 133,840 136,128 129,016 124,610 125,062 117,991
Cost of sales 103,444 104,905 107,328 111,244 103,552 102,124 100,011 95,563
Gross profit 20,491 22,392 26,512 24,884 25,464 22,486 25,051 22,428
Selling, general and
admininstrative expenses 20,188 19,907 21,252 20,606 20,895 19,275 19,921 18,402
Operating income (loss) 303 2,485 5,260 4,278 4,569 3,211 5,130 4,026
Other deductions (income):
Interest expense 1,398 1,379 1,374 1,391 1,631 1,543 2,033 2,295
Other (net) 562 (34) (79) (72) 116 169 597 282
Earnings (loss) before income taxes (1,657) 1,140 3,965 2,959 2,822 1,499 2,500 1,449
Income tax expense (benefit) (972) 709 1,615 1,209 1,477 722 930 596
Net earnings (loss) $ (685) 431 2,350 1,750 1,345 777 1,570 853
Depreciation $ 2,905 2,722 2,474 2,407 2,468 2,299 2,197 2,187
Amortization 655 636 638 625 545 580 1016 707
Cash dividends paid 692 692 691 692 ---- -------- ----
Weighted average shares outstanding 23,061 23,060 23,060 23,034 23,019 23,016 20,623 18,987
Per Share Data
Net sales $ 5.37 5.52 5.80 5.91 5.60 5.41 6.06 6.21
Net earnings (loss) (0.03) 0.02 0.10 0.08 0.06 0.03 0.08 0.04
Cash dividends 0.03 0.03 0.03 0.03 ---- ---- ---- ----
Quarter-end book value 6.51 6.57 6.58 6.50 6.46 6.40 6.37 5.84
Balance Sheet Data
Net working capital $ 123,004 129,995 135,277 135,903 117,693 105,886 101,415 101,978
Net property, plant and equipment 97,497 92,435 90,020 85,525 83,609 81,815 78,968 79,891
Total assets 335,737 334,541 337,546 335,317 315,649 312,993 302,781 303,792
Long-term debt 105,257 107,453 111,009 109,916 91,503 80,332 74,320 112,724
Shareholders' equity 150,103 151,416 151,671 149,942 148,724 147,427 146,553 110,909
Ratios
Gross profit margin 16.5% 17.6 19.8 18.3 19.7 18.0 20.0 19.0
Operating profit margin 0.2 2.0 3.9 3.1 3.5 2.6 4.1 3.4
Return (loss) on sales (0.6) 0.3 1.8 1.3 1.0 0.6 1.3 0.7
Effective income tax rate 58.7 62.2 40.7 40.9 52.3 48.2 37.2 41.1
Long-term debt to capitalization 37.9 38.3 39.2 39.3 35.2 32.5 30.9 46.4
Stock Data
High $ 11.000 11.250 12.000 14.750 11.250 8.750 11.250 12.000
Low 7.500 8.000 8.750 11.250 6.500 7.000 7.000 6.250
Close 10.000 8.375 9.000 11.750 10.500 7.250 7.875 11.250
Trading volume (shares) 3,980 4,955 4,925 10,921 7,358 3,602 6,232 2,566
NOTES: 1992 fourth quarter contained 14 weeks; all other quarters
contained 13 weeks. The fiscal 1992 quarterly data has been
restated to reflect the adoption of SFAS
No. 109 effective January 1, 1989. Long-term debt excludes current
installments. Fournier Furniture included in consolidated results
from its July 2, 1992 acquisition by LADD. Stock price and volume
data is for calendar quarters.
31
(Brown Jordan, LADD TRANSPORTATION, INC., AMERICAN DREW, Lea Lumber &
Plywood Co., PILLIOD, LADD Furniture, Inc., Lea logos)
Officers, Directors, Corporate Data
Board of Directors
Richard R. Allen
Chairman, President and Chief Executive Officer
William B. Cash 2
Former Chairman, Turnpike Properties, Inc.
James H. Corrigan, Jr. 1
Chairman and Chief Executive Officer,
Mebane Packaging Corporation
O. William Fenn, Jr. 1
Retired Vice Chairman, LADD
Don A. Hunziker 2
Retired Chairman, LADD
Gerald R. Grubbs
Vice Chairman
Thomas F. Keller, Ph.D. 1,2
Dean and R.J. Reynolds Industries Professor
Fuqua School of Business, Duke University
Fred L. Schuermann, Jr.
Executive Vice President
1 Audit Committee. 2 Compensation Committee.
Corporate Officers and Operating
Company Executives
Daryl B. Adams
Vice President and Corporate Controller-Chief Accounting
Officer, LADD
Richard R. Allen
Chairman, President and Chief Executive Officer, LADD
Kenneth E. Church
Vice President, LADD; President, Clayton Marcus
William S. Creekmuir
Senior Vice President, Chief Financial Officer,
Secretary and Treasurer, LADD
Beverly C. Davis
President, LADD Transportation
Victor D. Dyer
Vice President, Human Resources, LADD
John N. Foster, Jr.
Vice President, LADD; President, Lea Industries
Gerald R. Grubbs
Vice Chairman, LADD
Lee H. Houston, Jr.
President, Daystrom Furniture
Robert J. Maricich
Vice President, LADD; President, American Drew
D. Fredric Myers
President, Fournier Furniture
Thomas L. Millner
President, Pilliod Furniture
James Mueller
President, Brown Jordan Company
David C. Ogren
Vice President, Market Development, LADD
William B. Pirtle
President, Barclay Furniture
Fred L. Schuermann, Jr.
Executive Vice President, LADD
Acting President, American of Martinsville
Craig M. Shoemaker
President, Pennsylvania House
Bradly A. Upfield
President, Lea Lumber & Plywood
Corporate Headquarters
One Plaza Center, Box HP-3
High Point, NC 27261-1500
Phone: (910) 889-0333
U.S. FAX: (910) 888-6344 International FAX: (910) 888-6445
Transfer Agent
Wachovia Bank & Trust Company, N.A.
Winston-Salem, NC
Legal Counsel
Petree Stockton, L.L.P.
Winston-Salem, NC
Independent Auditors
KPMG Peat Marwick
Greensboro, NC
Form 10-K, Other Information
For a copy of LADD's Form 10-K (annual report filed with the
Securities and Exchange Commission) or other information about
LADD, please contact:
John J. Ong, CFA
Director, Corporate Communications
Stock Listing
LADD's common stock is traded on the O-T-C National Market System,
under the NASDAQ symbol LADF. At year-end 1993, LADD had 885
shareholders of record, representing an estimated 4,500 beneficial
owners.
Market Makers
Bear, Stearns & Co.
Cantor, Fitzgerald & Co.
Davenport & Co. of Virginia
Dean Witter Reynolds
Dillon, Read & Co.
Fechtor, Detwiler & Co., Inc.
Ferris Baker Watts Inc.
Herzog, Heine, Geduld, Inc.
Interstate/Johnson Lane
Jeffries & Company, Inc.
C.L. King & Associates
Kirkpatrick, Pettis, Smith
Mayer & Schweitzer, Inc.
MLPF&S
Morgan, Keegan & Co.
Nash Weiss
Raymond, James & Associates
Robinson Humphrey Company, Inc.
Sherwood Securities Corp.
Scott & Stringfellow
Troster Singer Corp.
Wheat, First Securities, Inc.
Annual Meeting
Shareholders are cordially invited to attend LADD's 1994 Annual
Meeting, to be held Thursday, April 28th at 10:00 a.m. at the
Radisson Hotel in
High Point, NC.
32
We at LADD are proud of the fine
residential furniture products manufactured
by our family of companies and we invite you
to see them at your nearest dealer.
Ask for them by name: American Drew,
American of Martinsville, Barclay,
Brown Jordan, Clayton Marcus,
Daystrom, Fournier, Lea Industries,
Pennsylvania House and Pilliod.
LADD Manufacturing
Facilities (26 Total)
North Carolina (9) Tennessee (2)
Hickory (3) Morristown (2)
Monroe (1)
North Wilkesboro (3) Alabama (1)
Waynesville (1) Selma (1)
Windsor (1) Arkansas (1)
Newport (1)
Virginia (5)
Chilhowie (1) California (1)
Marion (1) El Monte (1)
Martinsville (1)
South Boston (1) Ohio (1)
St. Paul (1) Swanton (1)
Mississippi (2) South Carolina (1)
Myrtle (1) Nichols (1)
Sherman (1) Mexico (1)
Pennsylvania (2) Juarez (1)
Lewisburg (1)
White Deer (1)
Cover Design: E-Design, Winston-Salem, NC
Photography: Bernard Carpenter, Rural Hall, NC (except as noted below)
The LADD companies (OFC, IFC, IBC, pp. 2, 6, 7, 8);
Fisher & R(umlaut)ckle, Brugg, Switzerland (p. 4);
Meaux Thornton, High Point, NC (p. 7); Hix Studio, Hickory, NC (p. 8)
Printing and Design: Washburn Graphics, Inc., Charlotte, NC
Typography: LADD Graphic Services, High Point, NC
*******************************************************************************
APPENDIX
At the top of each page of exhibit 13 there appears a reversed-out strip
of logos for each company that is listed on each separate page.
On page 1 of exhibit 13 a photo appears with the following caption:
LADD executives (left to right): vice chairman Gerald R. Grubbs,
senior vice president and CFO William S. Creekmuir, chairman and CEO
Richard R. Allen (seated) and executive vice president Fred L.
Schuermann, Jr.
On page 2 of exhibit 13 a photo appears with the following caption:
Pilliod's extensive line of promotionally-priced master bedroom and
occasional furniture broadens LADD's product offering at the lower
price points and strengthens our position with retailers in this fast-
growing market segment.
Also on page 2 of exhibit 13 a graph appears with the following plot points:
International Sales
1990 1991 1992 1993
Sales ($ Millions) $10.6 $12.5 $29.3 $40.6
# of Countries 16 32 41 51
On page 3 of exhibit 13 a signature of Richard R. Allen appears
where indicated.
On page 4 of exhibit 13 a graph appears with the following plot points:
Capital Investment
1988 1989 1990 1991 1992 1993
Capital Spending
($ Millions) $4.69 $5.37 $6.54 $7.55 $8.99 $24.67
Capital Spending
to Depreciation 82.6% 67.0% 71.5% 86.0% 98.2% 234.7%
Also on page 4 of exhibit 13 a photo appears with the following caption:
During 1993, LADD's Lea Lumber & Plywood business
installed a new veneer jointing and splicing system which
greatly improved the productivity of its hardwood
veneer plywood manufacturing operations.
On page 5 of exhibit 13 two photos appear with the following captions:
(1) Computer-aided-design ("CAD") technology
is being increasingly used throughout
LADD's manufacturing operations.
(2) During 1993, LADD's operating companies as
a group invested over $5 million selectively expanding their
manufacturing facilities.
On page 6 of exhibit 13 three photos appear with the two following captions:
(1) State-of-the-art high speed equipment is being installed throughout
the LADD manufacturing organization to reduce production costs
and enhance production flexibility.
(2) Since Fournier's acquisition, increased automation has substantially
expanded the capacity of its St. Paul plant to efficiently produce RTA
furniture (lower photo).
On page 7 of exhibit 13 three photos appear with the following captions:
(1) American Drew's high value medium-priced line of wood bedroom, dining
room and occasional furniture has been successfully broadened into new
style categories in the last several years, including this striking
contemporary
bedroom suite.
(2) Computer numerically controlled ("CNC") woodworking equipment such as
this Weinig molder significantly reduces machine set-up times while
improving quality.
(3) "Flat line" finishing of panels and drawer components is being used by
a number of LADD's casegoods companies to improve productivity and
sharply reduce the emission
of volatile organic compounds ("VOCs").
On page 8 of exhibit 13 five photos appear with the following 3 captions:
(1) Clayton Marcus and Barclay are making use of new computer-based
technology to aid the consumer product selection process, monitor
manufacturing progress and inventory levels and efficiently design new
product offerings.
(2) Interactive manufacturing information systems are
an important ingredient
in LADD's overall investment program.
(3) The Clayton Marcus line of fine quality, medium-priced, eight-way hand
tied residential upholstery is popular with dealers and consumers
alike. Through judicious investment in areas such as innovative
manufacturing techniques and information systems, Clayton Marcus has
improved its efficiency, product quality and customer satisfaction
levels, earning it the 1993 Chairman's Award as LADD's outstanding
operating unit.
Dates Referenced Herein and Documents Incorporated by Reference
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