ITEM 1. Business
General
LADD Furniture, Inc. is a vertically integrated manufacturer that is primarily engaged in the design, manufacture and sale of wood, metal, and upholstered furniture in various price ranges through its operating entities consisting of wholly owned subsidiaries and operating divisions. Unless the context otherwise indicates, "LADD" and "Company" refer to LADD Furniture, Inc., its divisions, and consolidated subsidiaries.
Significant Developments in 1993
Acquisition of Pilliod Furniture -- On January 31, 1994, the Company acquired the furniture operations of The Pilliod Cabinet Company through the purchase of all of the outstanding stock of its parent company, Pilliod Holding Company. The Company's new wholly-owned subsidiary, Pilliod Furniture, Inc. ("Pilliod") is a major U.S. manufacturer of promotionally-priced, residential wood furniture. Pilliod's master bedroom and other furniture lines compliment products made and marketed by LADD's nine other furniture companies.
Manufacturing Realignment -- In August 1993, the Company decided to discontinue much of its American of Martinsville Residential Casegoods ("Residential Casegoods") product lines which were unprofitable and to merge certain profitable lines into its American Drew operating division. As a result of this decision, manufacturing capacity in Residential Casegoods' Martinsville, Virginia facility became available for other purposes. To utilize the capacity, the Company shifted manufacturing production of American of Martinsville-Contract ("Contract") from Chilhowie, Virginia and Marion, Virginia to Martinsville, Virginia, the location of Contract's upholstery manufacturing and executive offices. Finally, to accommodate current and anticipated growth of the Company's Lea Industries division ("Lea"), production in Chilhowie, Virginia was realigned to Lea in the fourth quarter for its Charter House product line and production in Marion, Virginia was realigned to Lea for its Design Horizons product line. The Company believes that the realigned production better utilizes its manufacturing capacity.
LADD's Businesses
Lea Industries manufactures and sells wood furniture for the youth and adult bedroom markets. Lea Industries' products include beds, dressers, night stands, mirrors, desks, bookshelves, hutches, armoires, and correlated modular furniture in a variety of styles, including traditional, contemporary and colonial. The products are priced in the medium to low-medium price ranges and are considered high volume, promotional products to major furniture retailers. The products are marketed under the "Lea Industries," "Charter House,"
and "Design Horizons" brand names primarily to national and regional chains, independent furniture retailers, national general retailers and department stores. Lea Industries products are manufactured in five plants located in Waynesville, NC, Marion, VA, Chilhowie, VA, and Morristown, TN.
American Drew manufactures and sells medium to high-medium priced wood furniture. The products include various types of wood bedroom furniture (beds, dressers, night stands, mirrors, armoires, and dressing tables), wood dining room furniture (tables, chairs, buffets, chinas, and serving pieces), and wood living room occasional pieces (desks, end tables, coffee tables, entertainment units, wall units, and secretaries). American Drew products are manufactured in three plants located in North Wilkesboro, NC and are sold primarily to major independent furniture retailers, department stores, and regional furniture chains.
Daystrom Furniture manufactures and sells kitchen, dinette, dining room, and bar furniture for the home furnishings market. Daystrom products are priced in the medium price range and include tables, chairs, bars and bar stools in contemporary styles that incorporate the use of metal, glass, wicker, and wood construction. Daystrom sells its products primarily to retail furniture chains, independent furniture retailers, department stores, and specialty retail stores. Daystrom operates one manufacturing plant located in South Boston, VA.
Clayton-Marcus manufactures and sells a full line of upholstered household furniture, including sofas, loveseats, chairs, sleepers, rockers, and other upholstered living room furniture, which sells in the medium and high-medium price ranges. The products are marketed under the "Clayton-Marcus," "American of Martinsville," "Clayton House," and "Marclay Manor" brand names primarily to retail furniture chains, independent furniture retailers and department stores. Clayton-Marcus currently has established galleries with approximately 90 independent furniture stores in the United States, Canada, and Mexico. Clayton-Marcus operates three manufacturing plants in Hickory, NC.
Barclay Furniture manufactures and sells moderately priced upholstered furniture, including sofas, loveseats, chairs, sleepers, and motion furniture styled in contemporary and traditional patterns. The products are considered high volume, promotional items and are sold under the Barclay Furniture name and various private label names. Barclay sells its products primarily to retail furniture chains, department stores, and national general merchandisers. Barclay operates two manufacturing plants located in Sherman, MS and Myrtle, MS.
American of Martinsville-Contract is a leading supplier of guest room furniture to the U.S. hotel/motel industry, and has an expanding contract business overseas. American of Martinsville- Contract has also expanded its business into the health care furniture market for retirement homes and extended care facilities. Additionally, American of Martinsville-Contract sells to certain agencies of the U.S. government and university and college markets.
American of Martinsville-Contract operates two manufacturing plants located in Martinsville, VA.
Pennsylvania House is one of the nation's leading manufacturers of American traditional and country residential furniture solid wood furniture and upholstery. The Pennsylvania House product line is priced in the upper-medium price range. Pennsylvania House created and introduced the in-store gallery concept to the furniture retailing industry in 1975, and currently has established galleries with approximately 270 independent furniture retailers in the U.S., Japan and Mexico. To enhance its product lines and galleries, Pennsylvania House also offers its gallery retailers an accessory line of over 3,000 items for sale to their customers. In addition, Pennsylvania House has opened approximately 35 independently owned dedicated showcase stores which offer exclusively Pennsylvania House furniture and accessories. Pennsylvania House operates three manufacturing plants located in Lewisburg, PA, Monroe, NC, and White Deer, PA.
Brown Jordan is a leading manufacturer of high quality, high-priced leisure and outdoor furniture. To expand its market presence, Brown Jordan has begun selling a line of high-medium priced products in the casual furniture market. Brown Jordan's products are designed in wrought aluminum, extruded aluminum, cast aluminum, and wrought iron and include chairs, tables, chaises and outdoor accessories. Brown Jordan sells its products to the residential and hospitality markets primarily through the following distribution channels: quality department stores, specialty stores (such as pool and patio shops), interior design- ers, and the commercial contract and hospitality industry both in the United States and overseas. Brown Jordan's products are manufactured in facilities located in El Monte, CA, Newport, AR, and Juarez, Mexico. On March 1, 1994, a fire destroyed the wrought iron manufacturing operations located in Brown Jordan's manufacturing facility in Juarez, Mexico. The aluminum frame operations located in the same facility were not materially affected by the fire. The Company believes that the fire will not have a material financial impact as the Juarez facility was insured for both property and business interruption losses. A new facility for wrought iron manufacturing has been leased and is expected to be in operation during the second quarter of 1994.
Fournier Furniture manufactures and markets a complete line of ready-to-assemble ("RTA") furniture including home office and home electronics furniture, kitchen and bedroom furniture, closet organization products, kitchen cabinets and other storage products. The company's products are priced in the lower price ranges and are sold throughout the United States and Canada principally to mass merchandisers, department stores, warehouse clubs, and mail order catalog merchandisers. Fournier Furniture operates one manufacturing facility in St. Paul, VA and has a distribution facility located in Ajax, Ontario, Canada.
Pilliod Furniture, acquired by LADD on January 31, 1994, manufactures and markets a wide range of promotionally priced contemporary and traditional residential furniture, including master bedroom products, occasional tables, entertainment centers, wall systems,
and dining room chinas. Pilliod Furniture's products are marketed under the Pilliod and Symmetry brand names. The majority of Pilliod Furniture's products incorporate simulated wood, stone or other, often high gloss decorative surfaces applied to medium density fiber board or particle board. The Company's products are sold throughout the United States through large volume customers, mainly large furniture chains and outlets. Pilliod Furniture operates three manufacturing facilities in Nichols, SC, Selma, AL, and Swanton, OH.
Lea Lumber & Plywood Co. manufactures cut-to-size plywood, veneer, and wood laminated parts in one plant located in Windsor, NC. Lea Lumber and Plywood's products are sold to furniture manufacturers and manufacturers of pianos, recreational vehicles, kitchen cabinets, and other products requiring laminated wood parts and veneers.
LADD Transportation, Inc. operates a modern fleet of over- the-road tractors and trailers that are primarily used to provide transportation services to LADD operating companies and to meet the special needs of LADD's customers. Together with fleets operated by other LADD operating companies, LADD Transportation provides approximately 30% of LADD's out-bound shipping requirements for finished products and also hauls a portion of the Company's in-bound raw materials and supplies. LADD Transportation has received certain contract carrier rights from the Interstate Commerce Commission and markets its transportation services to independent customers.
Marketing and Major Customers
The Company's operating entities generally market under their own trade names. The general marketing practice followed in the furniture industry and by the Company is to exhibit products at national and regional furniture markets. Internationally, the Company markets its products primarily through LADD International, a corporate marketing unit formed to coordinate the worldwide marketing efforts of LADD's operating companies.
The Company also sells its furniture products directly and through approximately 425 independent sales representatives to a broad variety of customers, including retail furniture chains, national general retailers, department stores, independent furniture retailers, mail order catalog merchandisers, major hotel chains, and various specialty stores and rental companies. The Company currently sells to more than 11,000 furniture customers. No single customer accounted for more than 5% of net sales in 1993. The Company's business is not dependent upon a single customer, the loss of which would have a material effect on the Company.
Product Design and Development
Each operating entity develops and manages its own product lines. New product groups are introduced at the national or regional furniture markets, and, based upon their acceptance at the markets, the products are either placed into production or withdrawn from
the market. Consistent with industry practice, the Company designs and develops new product groups each year, replacing collections or items that are discontinued.
Raw Materials
The most important raw materials used by the Company are hardwood lumber, veneers, upholstery fabrics, plywood, particle board, hardware, finishing materials, glass, steel, steel springs, aluminum, and high pressure laminates. The wood species include cherry, oak, maple, white pine, poplar, and other American species, and imports such as rattan, guatambue and mahogany. The Company believes that its sources of supply for these materials are adequate and that it is not dependent on any one supplier. However, in 1992 and 1993, dramatic escalation of costs of certain lumber species such as cherry and maple negatively impacted the Company's gross margins.
The Company's plants are heated by furnaces using gas, fuel oil, wood waste, and other scrap material as energy sources. The furnaces located at a majority of the wood manufacturing plants have been adapted so that they can use alternate energy sources, and the Company has been able to fuel these furnaces principally by wood wastes. The Company's plants use electrical energy purchased from local utilities. The Company has not experienced a shortage of energy sources and believes that adequate energy supplies will be available for the foreseeable future.
Patents and Trade Names
The trade names of the Company's divisions and subsidiaries represent many years of continued business, and the Company believes such names are well recognized and associated with quality in the industry. The Company owns a number of patents and licenses which are considered to be important to the business, which intellectual properties do not have a limited duration. The Company also has various patents, licenses, and trademarks none of which are considered material to the Company's business. In January 1994, the Company began the transfer of tradenames and certain other intellectual property to a wholly owned subsidiary, Cherry Grove, Inc., to better manage those intellectual properties.
Inventory Practices, Order Backlog and Credit Practices
The Company generally schedules production of its various groups based upon orders on hand. Manufacturing efficiencies and investment in inventories are, therefore, directly related to the current volume of orders. The Company, and the industry generally, honors cancellation of orders made prior to shipment. The Company's backlog of unshipped orders believed to be firm at 1993 fiscal year end was approximately $80.6 million, as compared to $80.2 million at 1992 fiscal year end. Generally, orders in the backlog are shipped during the following 12 months. The Company's businesses as a whole are not subject to significant seasonal variations. The business of Brown Jordan, however, is heavily seasonal with
inventories being built in the winter months and sales concentrated in the March - June time frame.
Competition
The residential furniture market is highly competitive and includes a large number of manufacturers, none of which dominate the market. Industry estimates indicate that there are over 1,500 manufacturers of all types of furniture in the United States. Competition within the market for wood, metal and upholstered furniture occurs principally in the areas of style or design, quality, price, and service. Some of these include manufacturers of furniture types not manufactured by the Company. According to industry data, the Company believes it is the fourth largest manufacturer of residential furniture in the United States.
In recent years, foreign imports of finished furniture and component parts have increased. Although some of the imported products compete with products manufactured and marketed by the Company, other than in its Daystrom Furniture operating division, the Company has not experienced any significant negative impact. Where appropriate, the Company has capitalized upon the cost advantages of importing selected component parts and a limited number of finished products but is not dependent upon any foreign sources. The Company currently (including the operations of Pilliod Furniture) imports approximately $17.2 million of finished furniture and unfinished furniture parts.
In addition, Brown Jordan operates a manufacturing facility in Juarez, Mexico. The Company estimates production in its Mexican facility costs 25% to 40% less than comparable domestic production principally because of lower labor and overhead costs at the Mexican facility.
Governmental Regulations
The Company's operations must meet extensive federal, state, and local regulatory standards in the areas of safety, health, and environmental pollution controls. Historically, these standard's have not had any material adverse effect on the Com- pany's sales or operations. The Company believes that its plants are in compliance in all material respects with all applicable federal, state, and local laws and regulations concerned with environmental protection. See "Legal Proceedings" regarding the status of environmental proceedings in which the Company is involved.
The furniture industry anticipates increased federal and state regulation, particularly for emissions from furniture paint and finishing operations and wood dust levels in manufacturing operations. The industry and its suppliers are attempting to develop water-based finishing materials to replace commonly used organic-based finishes which are a major source of regulated emissions. The Company cannot at this time estimate the impact of compliance with these new standards on the Company's opera- tions or costs of compliance.
Employees
The Company employed approximately 7,700 persons as of March 1, 1994. Substantially all of the employees were employed on a full-time basis.
Employees at six Company plants are represented by various labor unions. The Company is not aware of any organizing activity at any of its other plants. The Company considers its relations with its employees to be good.
Export Sales
In 1993, the Company's export sales increased to $40.6 million (approximately 7.8% of 1993 net sales), an increase of 39% from export sales in 1992 of $29.3 million (approximately 5.9% of 1992 net sales). The Company's export sales in 1991 were $12.5 million, or approximately 2.9% of 1991 net sales. None of the Company's assets are dedicated solely to export sales.
ITEM 2.
ITEM 2. Properties
LADD and its operating companies operate 27 manufacturing facilities, of which 26 facilities, approximately 6,900,000 square feet, are owned, and one facility, approximating 125,000 square feet is leased. These facilities range in size from approximately 20,000 square feet to approximately 785,000 square feet. Five of the manufacturing facilities (approximately 1.8 million aggregate square feet) are subject to encumbrances associated with industrial revenue bond financings, the outstanding balances of which aggregated approximately $8.0 million at January 1, 1994. The Company believes that each of the current manufacturing plants are suitable and adequate for the particular production conducted at that plant. During fiscal 1993, the Company estimates that its plants operated at approximately 80% of total capacity on an aggregate basis. In addition, the Company owns three warehouse facilities aggregating approximately 340,000 square feet and leases seven warehouse facilities aggregating approximately 840,000 square feet. The Company has one idle manufacturing facility located in Kenbridge, VA which is held for sale. The Company's manufacturing facilities are located in North Carolina, Alabama, Arkansas, California, Mississippi, Pennsylvania, Ohio, South Carolina, Tennessee, Virginia and Mexico. The Company leases its corporate offices, which aggregate approximately 38,000 square feet, in High Point, North Carolina.
The Company believes that its manufacturing, warehouse and office space is well maintained for its intended purposes. Although the closure of any particular Company facility may be disruptive to that particular operating entity's business, it would not be materially adverse to the Company's operations.
The Company normally operates all of its furniture manu- facturing facilities from a one shift per day, five-day week basis. Increasingly, certain departments and facilities are
operated on a multi-shift basis. The plywood and ready-to- assemble manufacturing facilities are typically operated on a three shifts per day and two shifts per day, five-day week basis, respectively.
The Company also leases and maintains showrooms in High Point, NC, Dallas, TX, Atlanta, GA, Chicago, IL, Miami, FL, Washington, DC, Los Angeles and San Francisco, CA, New York, NY, and Ontario, Canada, and retail stores in Topeka and Shawnee, KS.
The Company owns rights to cut timber on approximately 526 acres of undeveloped timberland in eastern North Carolina.
The Company owns substantial quantities of woodworking, sewing and metalworking equipment located in its various plants. The Company considers its present equipment to be adequate, well- maintained, and generally modern.
The Company currently owns 16 tractors and 26 trailers and leases an additional 97 tractors and 307 trailers.
ITEM 3.
ITEM 3. Legal Proceedings
The Company is involved in routine litigation from time to time in the regular course of its business. In the opinion of the Company, there are no material legal proceedings pending or known to be contemplated to which the Company is a party or of which any of its property is subject.
The Company and its operating entities presently are involved in the following environmental proceedings:
1. Brown Jordan's California manufacturing facility is located in El Monte, California in the San Gabriel Valley Ground- water Basin. The Basin has been designated by the United States Environmental Protection Agency ("EPA") and the State of California as a Superfund Site. Although no administrative or judicial enforcement action has been taken by the EPA or applicable California authorities, the State of California is seeking to identify potentially responsible parties ("PRPs") and has ordered certain tests to be conducted by Brown Jordan in connection with their investigation. Such tests have been completed and no future activities are currently scheduled. The Company is currently negotiating with applicable authorities in the State of California to settle Brown Jordan's involvement in this matter. Under the terms of the Asset Purchase Agreement with Maytag Corporation ("Maytag"), dated June 1, 1989 ("the Maytag Agreement"), the Company's liabilities in the matter are limited to the first $200,000 of costs for off-site liabilities and $1,000,000 of costs for on-site liabilities.
2. American Drew, a division of the Company, has been identified as a PRP by the EPA in connection with the EPA's clean-up efforts at the Caldwell Systems Incinerator
("CSI") in Lenoir, North Carolina. American Drew is one of several hundred companies thus far identified in connection with the site and it is anticipated that several hundred more PRPs will eventually become involved. While the preliminary clean-up costs are estimated to be as high as $3,000,000, American Drew's share of clean-up costs is estimated to be less than $50,000 because of the large number of PRPs, the relative amount of waste apparently sent to the CSI facility by American Drew, and the information
thus far available. The PRPs have organized themselves and are negotiating with the EPA with respect to the site. No litigation has been commenced, and at the present time none is anticipated. Given the inherent uncertainties in such matters, it is nevertheless possible that American Drew's ultimate share could exceed the estimated $50,000.
3. Plants 1 and 4 of Clayton-Marcus Company, Inc., a wholly-owned subsidiary of the Company ("Clayton-Marcus"), have been identified as PRPs by the EPA in connection with the EPA's clean-up efforts at the Caldwell Systems Incinerator in Lenoir, North Carolina. Clayton-Marcus is one of several hundred companies thus far identified in connection with the site. As discussed in paragraph 2 above, the PRPs have organized themselves and are negotiating with the EPA with respect to the site. No litigation has been commenced, and at the present time, none is anticipated.
4. The Company's former subsidiary, The Gunlocke Company ("Gunlocke"), has been named as a PRP by the New York Department of Environmental Conservation ("NYDEC") with respect to the Prattsburg Landfill in Tonawanda, New York. NYDEC has to date not pursued Gunlocke concerning this matter. Instead, the NYDEC has obtained from Steuben County a signed Consent Order for a remedial investigation and feasibility study and a remedy for the landfill. Nevertheless, this action does not preclude the possibility that the NYDEC, Steuben County or other third parties may subsequently make claims against Gunlocke and other PRPs regarding this matter. Under the terms of the Maytag Agreement, the Company's liabilities are limited to $200,000 for all off- site liabilities in the aggregate.
5. Manifest show that No. 2 diesel fuel impacted soil was sent by the Redd Level, Virginia plant of American of Martinsville, a division of a subsidiary of the Company, to the Seaboard Chemical Corporation treatment, storage and disposal facility in Jamestown, North Carolina. The Seaboard Chemical site is currently subject to remedial action under the jurisdiction of the State of North Carolina. The Company has been named as one of over 100 PRPs for this site. The group representing the PRPs was contacted with regard to participation by American of Martinsville as a de minimis buyout participant for the removal phase of the work at the site. On February 8, 1993, the Company participated in the de minimis buyout by signing the appropriate documents and paying its buyout share of approximately $2,300. It is not known at this time if additional phases will be involved.
6. The former facility of Pilliod Furniture, Inc., a subsidiary of the Company acquired in January 1994 ("Pilliod"), located in Meridian, Mississippi was identified as a PRP with respect to the Diaz Refinery disposal site in Diaz, Arkansas. This site is currently
subject to remedial action under the jurisdiction of the State of Arkansas. Over 700 PRPs have been identified in connection with this site. A trust fund for remediation of the site has been established by the PRP Committee, and PRPs have been assessed based on the volume of waste they sent to the site. As of October 1992, Pilliod had been assessed a total of approximately $15,000. No additional monetary assessments were collected from the PRPs during 1993. Although a major portion of the site remediation and environmental assessment has already been completed and paid for by the PRPs, additional assessment and possible long-term monitoring or corrective action measures may be required. Since Pilliod sent a relatively small volume of waste to the site, its future contributions for remediation are expected to be relative to this volume.
7. In July 1993, Pilliod's Swanton, Ohio facility was served with a Complaint and Notice of Opportunity for Hearing from the EPA, Region 5 alleging several reporting and record keeping violations of Title III of the Superfund Amendments and Reauthorization Act, also known as the Emergency Planning and Community Right-To-Know Act of 1986 ("EPCRA"). The total proposed civil penalty for the alleged violations is approximately $68,000. The settlement of this matter continues to be negotiated with the EPA by counsel for Pilliod.
8. With respect to all expenses incurred by the Company arising in connection with the following items in excess of $50,000 in the aggregate, the Company will claim indemnification from Maytag pursuant to the terms of the Maytag Agreement:
(i) In December 1991, Gunlocke was served with a Complaint and Notice of Opportunity for Hearing from the EPA, Region II alleging several record keeping violations with respect to PCBs for various periods between July 2, 1978 through December 31, 1978, and the years 1979 through 1988. The total proposed civil penalty for the alleged violations is $54,600. Counsel has been retained to negotiate a possible settlement with the EPA. The settlement of this matter continues to be negotiated with the EPA. A recent federal guideline regarding recordkeeping and reporting has resulted in a re-evaluation by the EPA of the situation. The EPA has not yet responded to this penalty reduction effort.
(ii) Gunlocke has been identified by the NYDEC as a generator of wastes which may have been disposed of at the Bath Landfill in Bath, New York. The NYDEC is currently gathering information from waste generators and transporters which may have sent wastes to the landfill, and on February 12, 1993, Gunlocke responded to an information request letter from the NYDEC.
(iii) Gunlocke has been named as a PRP at the Rose Chemicals Superfund Site in Missouri. Gunlocke has participated as a member of the de minimis buyout group of PRPs. On September 2, 1992, the EPA signed an
Unilateral Order. The PRP group Steering Committee subsequently entered into negotiations with the EPA and an Amended Order was issued on December 3, 1992. On December 24, 1992, the PRP group Steering Committee entered into an Affirmative Response stating that the group would comply with the Amended Order and complete the remediation. During 1993, a final work plan was submitted to the EPA for approval and the PRP Group anticipates that final remediation will begin in the spring of 1994.
(iv) Pennsylvania House and a former subsidiary, The Kittinger Company ("Kittinger"), have been named as PRPs by the EPA for the Envirotek II Superfund Site in Tonawanda, New York according to a notice issued by the EPA on January 9, 1990. Pennsylvania House and Kittinger were operated as a single entity during the late 1980's. Both Pennsylvania House and Kittinger shipped hazardous materials to the site during the period in question, which materials were to be properly disposed of by an independent contractor. Pennsylvania House and Kittinger are represented on the PRP Steering Committee. The EPA and the PRPs have entered into a consent order and the removal action under the supervision of the EPA has been substantially completed pursuant to the order. Pennsylvania House's de minimis involvement in this stage of the matter has been settled. The Company remains involved on behalf of Kittinger and Pennsylvania House as to possible future remedial action not covered by the de minimis settlement. The final allocation financial responsibility for the initial phase of the clean up within the PRP group has been decided with the allocation for Kittinger determined to be approximately $2,100. Removal activities are substantially complete at the site, but it is not known at this time if the EPA or NYDEC will require further remediation.
(v) The NYDEC has notified the PRP Group for the Envirotek II matter of an investigation of the Roblin Steel complex within which the Envirotek II site is located. The second PRP group, made up primarily of PRPs in Envirotek II, including Pennsylvania House and Kittinger, has been formed to respond. It is anticipated that the Roblin Steel PRP group will undertake a limited remedial investigation in an effort to demonstrate there is relatively limited impact on the overall site as a result of conditions at Envirotek II.
(vi) The EPA has alleged that the operators at the Envirotek II site transported waste to the second site, known as Envirotek I. A PRP group, including Kittinger and Pennsylvania House, has been formed and is preparing a response for the EPA.
(vii) The EPA is currently investigating a site at York Haven, York County, Pennsylvania. A PRP group has organized to respond to the EPA,
and Pennsylvania House has been identified by the PRP group as a de minimis party having shipped 0.01506% of the total quantity of hazardous waste to the site on June 18, 1984. Pennsylvania House's de minimis involvement for the clean up of the site will be settled with payment of its allocated share of approximately $11,100. The first payment of approximately $5,600 was paid on December 29, 1993, and the remaining balance will be due in 12 months from this date. This is a final settlement for de minimis settlors with the remaining PRPs conditionally indemnifying de minimis settlors. The EPA is continuing to remove tanks and drums from the site. A remedial investigation feasibility study report has not been prepared at this time.
The Company is cooperating fully with government authorities in each of these matters.
ITEM 4.
ITEM 4. Submission of Matters to a Vote of Security Holders
No such matters were submitted to security holders of the Company in the fourth quarter of fiscal year 1993.
PART II
ITEM 5.
ITEM 5. Market for the Registrant's Common Stock and Related Security Holder Matters
The stock price data and common dividends per share and the Stock Listing Information which appear on pages 26 and 31, respectively, of the LADD Furniture, Inc. Annual Report to Share- holders for 1993, are incorporated by reference in this Form 10-K Annual Report.
There were approximately 885 security holders of record of the Company's common stock as of March 4, 1994.
ITEM 6.
ITEM 6. Selected Financial Data
The summary of selected financial data for each of the periods in the five-year period ended January 1, 1994, which appears on page 26 of the LADD Furniture, Inc. Annual Report to Shareholders for 1993, is incorporated by reference in this Form 10-K Annual Report.
ITEM 7.
ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Management's discussion and analysis of financial condition and results of operations for the years ended January 1, 1994, January 2, 1993, and December 28, 1991, which appears
on pages 27 to 30 of the LADD Furniture, Inc. Annual Report to Shareholders for 1993, is incorporated by reference in this Form 10-K Annual Report.
ITEM 8.
ITEM 8. Financial Statements and Supplementary Data
The consolidated financial statements, together with the independent auditors' report thereon of KPMG Peat Marwick dated February 11, 1994, and the selected quarterly data, appearing on pages 9 to 25 and page 31, respectively, of the accompanying LADD Furniture, Inc. Annual Report to Shareholders for 1993 are incorporated by reference in this Form 10-K Annual Report.
With the exception of the aforementioned information and the information incorporated in Items 5, 6, 7, and 8, the LADD Furniture, Inc. Annual Report to Shareholders for 1993 is not to be deemed filed as part of this report.
ITEM 9.
ITEM 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
No changes in accountants or disagreements with accountants on accounting or financial disclosure occurred in fiscal years 1993 and 1992.
PART III
Part III is omitted as the Company intends to file with the Commission within 120 days after the end of the Company's fiscal year a definitive proxy statement pursuant to Regulation 14A which will involve the election of directors.
ITEM 10.
ITEM 10. Directors and Executive Officers of the Registrant
See reference to definitive proxy statement under Part III.
ITEM 11.
ITEM 11. Executive Compensation
See reference to definitive proxy statement under Part III.
ITEM 12.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
See reference to definitive proxy statement under Part III.
ITEM 13.
ITEM 13. Certain Relationships and Related Transactions
See reference to definitive proxy statement under Part III.
PART IV
ITEM 14.
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
Page in Annual Report*
(a) The following documents are filed as part of this report:
(1) Financial Statements
Consolidated Statements of Operations for the years ended January 1, 1994, January 2, 1993, and December 28, 1991 . . . . . . . . . . . . . . 10
Consolidated Balance Sheets as of January 1, 1994 and January 2, 1993 . . . . . . . . . . . 11
Consolidated Statements of Cash Flows for the years ended January 1, 1994, January 2, 1993, and December 28, 1991 . . . . . . . . . . . . . . 12
Consolidated Statements of Shareholders' Equity for the years ended January 1, 1994, January 2, 1993, and December 28, 1991 . . . . . 13
Notes to Consolidated Financial Statements . 14-25
Independent Auditors' Report . . . . . . . . . . 9
*Incorporated by reference from the indicated pages of the LADD Furniture, Inc. Annual Report to Shareholders for 1993.
(2) Index to Financial Statement Schedules:
Independent Auditors' Report . . . . . . . . . . .
For the years ended January 1, 1994, January 2, 1993, and December 28, 1991
V - Property, Plant and Equipment . . . . . . . VI - Accumulated Depreciation of Property, Plant and Equipment . . . . . VIII - Valuation and Qualifying Accounts and Reserves X - Supplementary Earnings Statement Information
All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.
(3) List of Executive Compensation Plans
LADD Furniture, Inc. 1994 Incentive Stock Option Plan
Employee Restricted Stock Purchase Agreements for all directors and the named executive officers of the registrant as required by Item 402(a)(2) of Regulation S-K
LADD Furniture, Inc. Supplemental Retirement Income Plan
LADD Furniture, Inc. Long-Term Incentive Plan
LADD Furniture, Inc. 1994 Management Incentive Plan
(b) No reports on Form 8-K were filed in the last quarter of fiscal 1993.
(c) Exhibits
3. Articles of Incorporation and Amendments.
(Previously filed as Exhibit 10 to Item 14 of the Company's Annual Report on Form 10-K for the year ended December 29, 1990, filed with the Commission on March 28, 1991)
Bylaws (as amended February 25, 1993)
(Previously filed as Exhibit 3 to Item 14 of the Company's Annual Report on Form 10-K for the year ended January 2, 1993, filed with the Commission on March 30, 1993)
10. LADD Furniture, Inc. 1994 Incentive Stock Option Plan
Employee Restricted Stock Purchase Agreement between the Company and Don A. Hunziker dated February 28,
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,
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,
Employee Restricted Stock Purchase Agreement between the Company and Gerald R. Grubbs dated February 25,
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)
Enclosed as Exhibits 10.1 - 10.4 to this Annual Report on Form 10-K for the year ended January 1, 1994.
10.1 Employee Restricted Stock Purchase Agreement between the Company and Richard R. Allen dated February 24,
10.2 Employee Restricted Stock Purchase Agreement between the Company and Gerald R. Grubbs dated February 24,
10.3 Employee Restricted Stock Purchase Agreement between the Company and Fred L. Schuermann, Jr. dated February 24, 1994
10.4 Employee Restricted Stock Purchase Agreement between the Company and William S. Creekmuir dated February 24, 1994
Asset Purchase Agreement, dated as of June 1, 1989, among the Company, Maytag Corporation, The BJC Company and The Gunlocke Company
(Previously filed as Exhibit 10(a) to the Company's Current Report on Form 8-K, dated as of June 1, 1989, filed with the Securities and Exchange Commission on June 2, 1989)
First Amendment and Waiver to Asset Purchase Agreement, dated as of July 7, 1989, by and among the Company, Pennsylvania House, Inc., The McGuire Furniture Company, The Kittinger Company, Charter Furniture, Inc., Brown Jordan Company and The Gunlocke Company, a North Carolina corporation, and Maytag Corporation, The Gunlocke Company, a Delaware corporation, and The BJC Company
(Previously filed as Exhibit 10 to the Company's Current Report on Form 8-K, filed with the Commission on July 21, 1989, as amended by Form 8 filed with the Commission on September 18, 1989.)
Agreement of Purchase and Sale, dated as of September 30, 1989, together with the First Amendment, among the Company, The Gunlocke Company and HON Industries, Inc.
Agreement of Purchase and Sale, dated as of November 7, 1989, among the Company, The McGuire Furniture Company and Kohler Interiors Group, Ltd.
LADD Furniture, Inc. Supplemental Retirement Income Plan
(Previously filed as Exhibit 10 to the Company's Annual Report on Form 10-K, for the year ended December 30, 1989, filed with the Commission on March 30, 1990.)
Agreement of Purchase and Sale dated as of June 22, 1990, together with the first Amendment, among the Company, The Kittinger Company, and USC Industries, Inc.
(Previously filed as Exhibit 10 to the Company's Annual Report on Form 10-K, for the year ended December 30, 1989, filed with the Commission on March 30, 1990.)
LADD Furniture, Inc. Long-Term Incentive Plan
(Previously filed as Exhibit 10 to the Company's Annual Report on Form 10-K, for the year ended December 29, 1990, filed with the Commission on March 28, 1991.)
Credit Agreement, dated as of January 15, 1993, between the Company, The Chase Manhattan Bank (National Association) as agent, and each of the banks signatory to the Credit Agreement
Form of Term Loan Note of the Company in the aggregate principal amount of $45,000,000
Form of Revolving Credit Loan Note of the Company issued in the aggregate principal amount of $85,000,000
(All previously filed as Exhibit 10 to the Company's Annual Report on Form 10-K, for the year ended January 2, 1993, filed with the Commission on March 30, 1993.)
Transfer and Administrative Agreement dated January 28, 1994 between Enterprise Funding Corporation, LADD Furniture, Inc., and Clayton-Marcus Company, Inc., Barclay Furniture Co. and LADD Transportation, Inc., as designated subsidiaries.
Receivables Purchase Agreement dated January 28, 1994, between Clayton-Marcus Company, Inc., Barclay Furniture Co. and LADD Transportation, Inc.
Letter Agreement, dated January 28, 1994, between the Company and The Chase Manhattan Bank, N.A.
Form of Promissory Note of the Company dated January 28, 1994 to The Chase Manhattan Bank, N.A. in the aggregate principal amount of $20,000,000.
(Previously filed as Exhibits 99.1, 99.2, 99.3 and 99.4 to the Company's Current Report on Form 8-K dated January 31, 1994, filed with the Commission on February 14, 1994.)
Enclosed as Exhibits 10.5 - 10.8 to this Annual Report on Form 10-K for this year ended January 1, 1994
10.5 Letter Agreement dated February 28, 1994 between the Company and PNC Bank, National Association
10.6 Form of Line of Credit Note of the Company dated February 28, 1994 to PNC Bank, National Association in the aggregate principal amount of $15,000,000
10.7 Form of Guaranty and Suretyship Agreement dated February 28, 1994 between PNC Bank, National Association and Pennsylvania House, Inc., Brown Jordan Company, Clayton-Marcus Company, Inc., LADD Contract Sales Corporation, Fournier Furniture, Inc., Barclay Furniture Co., American Furniture Company, Incorporated, Pilliod Furniture, Inc. and Lea Industries, Inc. (a North Carolina corporation)
10.8 1994 Management Incentive Plan
Enclosed as Exhibit 13.1 to this Annual Report on Form 10-K for the year ended January 1, 1994.
13.1 1993 Annual Report to Shareholders
22. Subsidiaries of Registrant
American Drew, Inc., a North Carolina corporation
American Furniture Company, Incorporated, a Virginia corporation
Barclay Furniture Co., a Mississippi corporation
Brown Jordan Company, a North Carolina corporation
Cherry Grove, Inc., a Delaware corporation
Clayton-Marcus Company, Inc., a North Carolina corporation
Fournier Furniture, Inc., a North Carolina corporation
Kenbridge Furniture, Inc., a North Carolina corporation
LFI Capital Management, Inc., a Delaware corporation
LADD Transportation, Inc., a North Carolina corporation
Lea Industries, Inc., a North Carolina corporation
Lea Industries, Inc., a Tennessee corporation
Lea Industries, Inc., a Virginia corporation
Lea Lumber and Plywood Co., a Virginia corporation
LADD Contract Sales Corporation, a North Carolina corporation
LADD International Sales Corp., a U.S. Virgin Islands corporation
Pennsylvania House, Inc., a North Carolina corporation
Pilliod Furniture, Inc., a North Carolina corporation
Enclosed as Exhibit 24.1 to this Annual Report on Form 10-K for the year ended January 1, 1994.
24.1 Consent of KPMG Peat Marwick
SIGNATURES
Pursuant to the requirement of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, there- unto duly authorized. LADD FURNITURE, INC.
(Registrant)
By s/William S. Creekmuir 3/31/94 William S. Creekmuir (Date) Senior Vice President, Chief Financial Officer, Secretary, and Treasurer (Principal Financial Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dated indicated.
Schedule X
LADD FURNITURE, INC. AND SUBSIDIARIES
Supplementary Earnings Statement Information (dollar amounts in thousands)
Year ended January 1, 1994 Maintenance and repairs $7,634
Advertising costs $9,869
Year ended January 2, 1993 Maintenance and repairs $6,844
Advertising costs $8,732
Year ended December 28, 1991 Maintenance and repairs $6,330
Advertising costs $7,357 Amortization expense $4,407
Other items required in this schedule are not shown since they did not exceed one percent of net sales.