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PULASKI FURNITURE CORPORATION

1995 ANNUAL REPORT

OFFICERS

BERNARD C. WAMPLER
Chairman of the Board and
Chief Executive Officer

JOHN G. WAMPLER
President and Chief Operating
Officer

IRA S. CRAWFORD
Vice President-
Administration; Secretary

RANDOLPH V. CHRISLEY
Vice President-
Sales

JAMES H. KELLY
Vice President-
Product Development

JASON A. GIBBS
Treasurer, Controller and
Assistant Secretary

JAMES W. PEELE
Vice President-
Manufacturing

DIRECTORS

BERNARD C. WAMPLER
Chairman of the Board and
Chief Executive Officer

CLIFFORD A. CUTCHINS, III*
Retired Chairman of the Board of
Sovran Financial Corporation,
Norfolk, Va.

JOHN D. MUNFORD*
Retired Vice Chairman of Union
Camp Corporation, Franklin, Va.

JOHN W. STANLEY
Retired Chairman of the Board of Blue
Ridge Transfer Company, Inc.,
Roanoke, Va.

JOHN G. WAMPLER
President and Chief Operating Officer
of Pulaski Furniture Corporation

HARRY H. WARNER*
Financial Consultant, Lexington, Va.

HUGH V. WHITE, JR.
Partner of Hunton & Williams-
Attorneys, Richmond, Va.
- -----------
*Member of Audit Committee

TABLE OF CONTENTS

Message to Stockholders..................................... 1
General Information ........................................ 2
Selected Financial Data .................................... 3
Management's Discussion and Analysis ....................... 4
Consolidated Balance Sheets.................................. 6
Consolidated Statements of Income and
Retained Earnings........................................ 8
Consolidated Statements of Cash Flows........................ 9
Notes to Consolidated Financial Statements...................10
Report of Independent Auditors................Inside Back Cover

CORPORATE DATA

CORPORATE OFFICES
Pulaski Furniture Corporation
One Pulaski Square
P.O. Box 1371
Pulaski, Virginia 24301
(540) 980-7330

STOCK TRANSFER AGENT AND
DIVIDEND DISBURSING AGENT
First Union National Bank
of North Carolina
Two First Union Center, M-12
Charlotte, NC 28288
(800) 829-8432

STOCK LISTING
Traded Over-The-Counter
NASDAQ Symbol-PLFC

LEGAL COUNSEL
Hunton & Williams
Richmond, Virginia

ANNUAL MEETING
The Annual Meeting of Stockholders of Pulaski Furniture Corporation will be
held on Friday, February 9, 1996 at 10 a.m. at the Roanoke Airport Marriott,
Roanoke, Virginia.

ADDITIONAL INFORMATION
A copy of Form 10-K, the Annual Report filed with the Securities and Exchange
Commission, is available without charge to stockholders upon written request
directed to the Corporation, attention Secretary.

[PHOTO GOES HERE]

This piece was selected by Home Magazine to receive a 1995 American Furniture
award. The award recognizes and honors excellence and creativity in American
design. The Croquet Information Center was chosen because its design so clearly
responds to the demands for form and function required by today's lifestyles.
The Croquet Information Center acknowledges that the kitchen is family
central. This practical desk holds family files, messages, and cookbooks in
one functional piece. It's sized to fit even a nook or cranny.

MESSAGE TO STOCKHOLDERS

In Megatrends, a well-read book published in 1983, John Naisbitt
encouraged us to think globally and act locally. When reflecting on 1995, and
thinking about the challenges facing our industry and your Corporation, it is
obvious that just thinking globally and acting locally is not enough. We must
excel in both arenas. The world has gotten smaller, and it has effected major
changes in our industry. Your Corporation is prepared to perform well in this
new environment.

Nineteen ninety-five was a challenging year for furniture manufacturers
because of limited growth. Business for the industry as a whole increased less
than 3 percent and actually saw a decline in shipped units. In addition to this
challenge, consumers shopped for furniture intermittently throughout the year,
which resulted in significant peaks and valleys of demand. Given this
background, we are pleased to report that your Corporation outperformed the
industry. Sales increased to $172,842,000 from $148,698,000 in 1994. Net Income
increased to $4,475,000 compared to $3,168,000 for 1994.

The improved performance required significant contributions from the many
stakeholders of your Corporation. It started with our employees and sales
representatives, at all levels of the Corporation, who worked together as a team
to produce quality products and to place those products with the right
retailers. It continued with our suppliers, who helped us to control inflation
and to provide well-made components and appropriate services. Of course, it was
all made possible by our customers, who represent the best retailers in our
industry. Their vast command of market share allowed us to grow this year.

Your Corporation worked in all 50 states, several territories, and over 30
foreign countries in 1995. We need a worldwide network of customers, employees,
suppliers, and partners to meet the challenges of the future. A great deal of
the Corporation's resources have been employed in recent years to help establish
the right network. We are starting to reap more of the benefits of this network.
Our export sales grew in 1995 and remained at 6 percent of total sales. Our
import business showed another year of gains and will continue to grow as we use
it to augment our domestic production and to increase our market share with
American retailers.

We divested ourselves of the Corporation's holdings in Triwood. The
changes in our product line have resulted in decreased demand for this
facility's product so it made sense to deploy company assets elsewhere. We sold
our share of Triwood above its value on our books which resulted in a one time
gain of $327,986.

When we think about 1996, we anticipate a business climate that will be
very similar to 1995. Influences such as lower interest rates and continued
strong housing starts will be positive for our industry; however, high consumer
debt could have a negative impact. Your Corporation will strive to make 1996 a
more successful year.

The Board of Directors increased the first quarter dividend to $.16 per
share in 1996 from $.15 per share for the first quarter of 1995.

We thank our stockholders and Board of Directors for their continued
support.
Sincerely,

/s/ Bernard C. Wampler
Bernard C. Wampler
Chairman and CEO

/s/ John G. Wampler
John G. Wampler
President and COO

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PULASKI FURNITURE CORPORATION AND SUBSIDIARIES

GENERAL INFORMATION

Organized in Virginia in 1955, the Corporation manufactures and sells
medium-priced wooden bedroom, dining room and occasional furniture produced in
its manufacturing plants located in Pulaski, Dublin, and Martinsville, Virginia.
The Corporation also has a veneer plant located in Dublin, Virginia, which
produces veneer used at all manufacturing plants. The Corporation's Ridgeway
Clock Company plant manufactures grandfather, mantel and wall clocks and is
located in Ridgeway, Virginia. The Corporation's Craftique plant in Mebane,
North Carolina produces solid mahogany bedroom, dining room and occasional
furniture. The Corporation leases a building of approximately 100,000 square
feet in Christianburg, Virginia to house the Corporation's upholstery
operations.

At the end of 1995 fiscal year, 2,827,882 shares of the Corporation's
10 million authorized shares of Common Stock were outstanding. In addition, the
Corporation has authorized one million shares of Cumulative Preferred stock of
which no shares were outstanding.

MARKET AND DIVIDEND INFORMATION

Pulaski Furniture Corporation's stock is listed on the NASDAQ National
Market System, which is the most active listing of over-the-counter quotations.
During the fiscal year 1995, the Corporation believes that Wheat First
Securities, Inc., of Richmond, Virginia, was the most active market-maker for
the stock. The Corporation had approximately 875 stockholders of record as of
October 29, 1995. The range of closing sales prices as reported by the NASDAQ
and cash dividends for the last two fiscal years are listed in the following
chart. The market quotations reflect interdealer prices, without retail mark-up,
mark-down or commissions and may not necessarily represent actual transactions.

SALES PRICES OF COMMON STOCK
1995 1994 DIVIDENDS
FISCAL DECLARED
QUARTER HIGH LOW HIGH LOW 1995 1994

First... 20.50 16.00 27.00 18.625 $0.15 $0.14
Second.. 21.375 17.50 26.75 22.75 $0.15 $0.14
Third... 20.00 17.00 23.50 18.00 $0.15 $0.14
Fourth.. 18.50 16.00 21.00 17.50 $0.15 $0.14

[PHOTO GOES HERE]

Pulaski's Collector Curios are available in a variety of styles and finishes
featuring mirrored backs and canister lighting that create the ultimate
showcase.

SELECTED FINANCIAL DATA

YEARS ENDED
OCTOBER 29, OCTOBER 30, OCTOBER 31, NOVEMBER 1, NOVEMBER 3,
1995 1994 1993 1992 1991

Net Sales .................. $172,842,105 $148,698,029 $137,650,721 $123,918,019 $120,575,933
Net Income ................. 4,475,171 3,168,494 4,352,176 2,599,059 1,800,066
Earnings Per Share ......... 1.56 1.10 1.53 0.91 0.63
Total Assets................ 118,675,813 112,750,099 99,336,183 91,075,577 92,074,129
Long-Term Debt.............. 29,354,804 31,398,173 20,357,425 22,369,346 23,878,691
Cash Dividends Per Share.... 0.60 0.56 0.52 0.52 0.52
Book Value Per Share........ 19.78 18.69 18.29 17.38 16.98
Net Working Capital......... 51,787,988 47,203,234 44,291,637 43,682,801 43,317,362
Current Ratio............... 2.9 3.1 3.1 3.9 4.0

QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

The following is a tabulation of the unaudited quarterly results of
operations for the fiscal years ended October 29, 1995 and October 30, 1994.
(dollars in thousands, except earnings per share).

FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL
(12 WEEKS IN (12 WEEKS IN (12 WEEKS IN (16 WEEKS IN (52 WEEKS IN
1995 AND 1994 1995 AND 1994 1995 AND 1994 1995 AND 1994 1995 AND 1994

October 29, 1995
Net Sales............. $41,270 $38,989 $30,236 $62,347 $172,842
Gross Profit.......... 8,238 7,390 7,390 $10,978 33,996
Net Income............ 1,373 1,094 (602) $2,610 4,475
Earnings per share.... 0.48 0.38 (0.21) 0.91 1.56

October 30, 1994
Net Sales............. $32,150 $32,901 $27,691 $55,956 $148,698
Gross Profit.......... 6,410 6,685 5,085 9,121 27,301
Net Income............ 1,125(1) 877 319 847 3,168(1)
Earnings per share.... 0.39(1) 0.30 0.11 0.30 1.10(1)

(1) Net income includes the cumulative effect of accounting change for income
taxes. The cumulative effect of the accounting change increased net income
by $396,092 or $0.14 per share.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION

1995 COMPARED TO 1994

The improvement in earnings from 1994 to 1995 and particularly the fourth
quarter of 1995 was primarily attributable to the increase in sales, and to the
lower cost of products sold as a percentage of sales.

Net sales increased 16.2% or $24,144,076 from 1994 to 1995. The
Corporation shipped approximately 29% more units in 1995 at an average unit
price of approximately 7.5% less. The large increase in units shipped and the
lower unit price was attributable primarily to products produced in the new
factory. The new factory in Pulaski began operations in May, 1994, and produces
occasional furniture. Export sales for fiscal 1994 and 1995 were approximately
6% of net sales.

Cost of products sold decreased from 81.64% of net sales in fiscal 1994 to
80.33% of net sales in fiscal 1995. The percentage decreases were primarily in
factory labor, factory supplies, fuel and insurance.

There was no appreciable difference in selling, general and administrative
expenses as a percentage of net sales between fiscal 1995 and fiscal 1994.

The increase in interest expense in fiscal 1995 from fiscal 1994 reflected
the increase in average outstanding debt and higher interest rates. The
Corporation's average amount of outstanding indebtedness for borrowed money was
$41,675,218 in fiscal 1995 and $37,919,172 in fiscal 1994. The weighted average
borrowing rates for the three fiscal years of 1993, 1994 and 1995 were 5.13%,
4.77% and 6.44% respectively. The weighted averages excluding the interest rate
swap costs would have been 3.26%, 3.74% and 5.94%. The interest rate swap costs
increased interest expense by $439,932, $389,925 and $206,595 in 1993, 1994 and
1995 respectively.

Net income was reduced by approximately $63,000 for fiscal 1995 and
$10,000 for fiscal 1994, as a result of the Corporation's proportionate share of
the losses incurred by the Triwood, Inc. joint venture. On October 6, 1995, the
Corporation sold its proportionate share of the investment in Triwood, and
recorded a gain of $327,986, which is included in other income.

1994 COMPARED TO 1993

The decrease in income before cumulative effect of accounting change of
$1,579,774 from 1993 to 1994 was attributed mostly to increases in manufacturing
costs and selling and administrative costs, not adequately absorbed by price
increases, and also attributed to start up costs of approximately $780,000
related to a new plant.

Net sales increased 8.0% or $11,047,308 from 1993 to 1994. The Corporation
shipped approximately 4% more units in 1994 at an average unit price of
approximately 3.0% more. Export sales for fiscal 1993 and 1994 were
approximately 6% of net sales.

The increase in cost of products sold as a percentage of net sales in
fiscal 1994 compared with fiscal 1993 was primarily due to increases in factory
labor, factory supplies, and the cost of employee insurance. The increase in
factory labor was caused by an overall increase in the number of employees,
primarily relating to the new plant, and to rate increases.

The increase in selling, general and administrative expenses as a
percentage of net sales in fiscal 1994 from fiscal 1993, was due primarily to
increases in expenses related to marketing, information systems and the cost of
employee insurance. The increase in marketing expenses was caused by increased
emphasis on the promotion and marketing of the Corporation's products. The
increase in information systems expenses was caused primarily by improvements in
the manufacturing and administrative systems.

The increase in interest expense in fiscal 1994 from fiscal 1993 reflected
the increase in average outstanding debt partially offset by lower interest
rates. The Corporation's average amount of outstanding indebtedness for borrowed
money was $37,919,172 in fiscal 1994 and $23,545,048 in fiscal 1993. The
weighted average borrowing rates for the three fiscal years of 1992, 1993 and
1994 were 5.36%, 5.13% and 4.77% respectively. The weighted averages excluding
the interest rate swap costs would have been 4.03%, 3.26% and 3.74%. The
interest rate swap costs increased interest expense by $330,020, $439,932 and
$389,925 in 1992, 1993 and 1994 respectively.

The increase in miscellaneous other income reflects a gain of $691,000
from insurance proceeds related to storm damage of the contents of a finished
goods warehouse.

Net income was reduced by approximately $10,000 for fiscal 1994 and
$65,000 for fiscal 1993, as a result of the Corporation's proportionate share of
the losses incurred by the Triwood, Inc. joint venture.

The cumulative effect of accounting change in 1994 was a net addition to
income of $396,092, and is described in Note 7 of the Consolidated Financial
Statements.

The Financial Accounting Standards Board released the Statement of
Financial Accounting Standards No. 119 "Disclosure about Derivative Financial
Instruments and Fair Value". and No. 123 "Accounting for Stock-based
Compensation". The Company is required to adopt these standards in fiscal years
1995 and 1996. The adoption will not have any material impact on the Company's
operations or financial position.

CAPITAL RESOURCES, LIQUIDITY AND EFFECTS OF INFLATION

Net Cash from Operating Activities for the year totaled approximately
$2,080,000. Accounts receivable increased approximately $2,246,000, and
inventories increased approximately $6,466,000. These increases were the primary
reasons for the short-term borrowings during the year.

The Corporation has short-term lines of credit totaling $16,000,000 with
interest not to exceed prime rates. At October 29, 1995, which was approximately
the middle of the Corporation's heaviest shipping season, the Corporation had
$12,000,000 outstanding under these credit lines.

Because of the available lines of credit, the strong working capital
position, and its ability to generate cash through operations, the Corporation
believes it has adequate liquidity to meet its short-term and long-term debt
obligations, cover its capital expenditures, pay cash dividends and to continue
controlled growth indefinitely. The Corporation has no plans to borrow any
additional long-term debt or to sell additional equity securities.

The Corporation uses the LIFO method of accounting for its inventories.
Under this method, the cost of products sold reported in the financial
statements approximates current costs and thus reduces distortion in reported
income due to increasing costs. Under the LIFO method, the Corporation increased
its inventory reserve in 1995 by approximately $1,075,000, the effect of which
decreased net income by approximately $726,000 or 25 cents per share.

The charges to operations for depreciation represent the allocation of
historical costs incurred over past years and are significantly less than if
they were based on current cost of productive capacity being consumed.
Construction of the Corporation's Dublin, Virginia plant was completed in 1973,
the Martinsville plant was renovated in 1974, and the renovation and expansion
of the Pulaski facilities were completed in 1986, with further expansions in
1988 and 1994. The Ridgeway division was acquired in 1985, and the Craftique
division was acquired in 1988. The Accentrics division began operations in
leased facilities in November 1989.

The replacement costs for assets acquired in prior years will likely
exceed the original costs of the replaced assets. However, increased costs of
replacement assets will result in higher depreciation charges which will be
taken into consideration in setting pricing policies. Provision for depreciation
for fiscal 1995 was approximately $5,243,000.

The Corporation's financial statements are prepared in accordance with
generally accepted accounting principles using historical costs, which are
not adjusted to reflect changes in purchasing power. However, use of the LIFO
method of valuing inventories in the Corporation's financial statements
compensates for some of the effects of inflation.

DISCUSSION-FOURTH QUARTER

The increase in sales in the fourth quarter ended October 29, 1995, was
due primarily to the increased demand for the Corporation's furniture. The
increase in earnings was due primarily to the increase in sales.

The Board of Directors at its December 8, 1995, meeting increased the
dividend to 16 cents per common share payable on January 2, 1996 to stockholders
of record December 15, 1995, and authorized the purchase by the Corporation of
up to 200,000 shares of its common stock presently outstanding.

[PHOTO GOES HERE]

HOME OFFICE

The new Home Office/Library Collection is targeted for the customer that is
seeking unparalleled elegance, distinctive styling and functionally engineered
cases to accommodate the latest computer equipment. This Armoire features file
drawer, pull-out keyboard and printer shelves, bulletin board, CD and disk
storage, surge protected control center and faux book doors.

[PHOTO GOES HERE]

Consolidated Balance Sheets

October 29 October 30
1995 1994

ASSETS
CURRENT ASSETS:
Cash and cash equivalents............................................... $ 1,721,546 $ 1,088,322
Short-term investments.................................................. 14,615 64,615
Trade receivables, less allowance of
$1,000,000 in 1995 and 1994........................................ 35,674,329 33,427,941
Inventories:
Finished furniture................................................. 22,936,830 18,084,326
Furniture in process............................................... 4,422,309 4,302,708
Lumber and purchased veneers....................................... 5,260,981 4,290,592
Manufacturing supplies............................................. 7,788,751 7,265,510
40,408,871 33,943,136
Prepaid expenses........................................................ 407,186 465,309
Deferred income taxes................................................... 578,727 493,064
TOTAL CURRENT ASSETS 78,805,274 69,482,387

PROPERTY, PLANT AND EQUIPMENT:
Land.................................................................... 640,979 640,979
Buildings............................................................... 31,179,684 30,903,196
Machinery and equipment................................................. 49,029,973 46,896,444
Furniture, fixtures and office equipment................................ 3,510,526 3,096,041
Vehicles................................................................ 651,732 660,439
85,012,894 82,197,099
Less allowances for depreciation........................................ 46,118,654 41,128,037
38,894,240 41,069,062
OTHER ASSETS:
Investment in and advances to investee company.......................... 1,235,170
Cash surrender value of life insurance,
less loans of $728,408 in 1995 and $625,445 in 1994................ 976,299 963,480
976,299 2,198,650
$118,675,813 $112,750,099

OCTOBER 29 OCTOBER 30
1995 1994

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses:
Accounts payable....................................... $ 9,764,380 $ 8,543,642
Wages and commissions.................................. 2,213,933 2,395,963
Payroll taxes and taxes withheld from employees........ 733,928 578,601
12,712,241 11,518,206
Notes Payable............................................ 12,000,00 8,000,000
Current portion of long-term debt........................ 2,047,618 2,004,249
Federal and state income taxes...................... 257,427 756,693
TOTAL CURRENT LIABILITIES 27,017,286 22,279,148

DEFERRED COMPENSATION....................................... 2,268,749 1,937,923
DEFERRED INCOME TAXES....................................... 4,094,245 3,871,331
LONG-TERM DEBT.............................................. 29,354,804 31,398,173
STOCKHOLDERS' EQUITY:
Common Stock (authorized 10,000,000 shares, issued
shares, 2,827,882 in 1995 and 2,849,159 in 1994)........ 5,827,093 6,084,210
Retained earnings......................................... 50,296,885 47,529,123
Unamortized restricted stock.............................. (183,249) (349,809)
Total stockholders' equity................................ 55,940,729 53,263,524

$118,675,813 $112,750,099

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

CONSOLIDATED STATEMENTS OF INCOME AND
RETAINED EARNINGS

Years Ended
OCTOBER 29 OCTOBER 30 OCTOBER 31
1995 1994 1993

Net sales.................................................. $172,842,105 $148,698,029 $137,650,721
Cost of products sold...................................... 138,845,650 121,397,370 109,369,585
33,996,455 27,300,659 28,281,136
Selling, general and administrative expenses............... 25,122,493 22,223,313 20,302,921

8,873,962 5,077,346 7,978,215
Other income:
Interest........................................... 27,940 134,866 146,570
Miscellaneous...................................... 600,559 698,291 62,917

628,499 833,157 209,487
9,502,461 5,910,503 8,187,702

Other deductions
Interest expense................................... 2,738,021 1,748,330 1,296,464
Miscellaneous...................................... 68,613 39,693 59,310
Proportionate share of loss in investee company.... 63,156 10,078 64,752

2,869,790 1,798,101 1,420,526

Income before income taxes and cumulative effect
of accounting change..................................... 6,632,671 4,112,402 6,767,176
Income taxes............................................... 2,157,500 1,340,000 2,415,000
Income before cumulative effect of accounting change....... 4,475,171 2,772,402 4,352,176
Cumulative effect of accounting change..................... 396,092
Net income................................................. 4,475,171 3,168,494 4,352,176
Retained earnings at beginning of year..................... 47,529,123 45,959,916 43,074,546
Cash dividends (per share: 1995-$.60
1994 - $.56; 1993 - $.52)................................ (1,707,409) (1,599,287) (1,466,806)
Retained earnings at end of year........................... $ 50,296,885 $ 47,529,123 $ 45,959,916
EARNINGS PER SHARE
Income before cumulative effect of accounting change....... $1.56 $0.96 $1.53
Cumulative effect of accounting change..................... 0.14
Net income................................................. $1.56 $1.10 $1.53

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED
OCTOBER 29 OCTOBER 30 OCTOBER 31
1995 1994 1993

OPERATING ACTIVITIES
Net income.............................................. $ 4,475,171 $ 3,168,494 $4,352,176
Adjustments to reconcile net income to
net cash provided by operating activities:
Provision for depreciation and amortization........... 5,242,754 4,495,436 3,724,465
Provision for deferred income taxes................... 137,251 (196,084) (462,000)
Provision for deferred compensation................... 330,826 139,470 276,714
Proportionate share of loss in investee company....... 63,156 10,078 64,752
Gain on sale of investee company...................... (327,986)
Loss on sale of property, plant and equipment......... 28,370 13,636 59,296
Cumulative effect of accounting change................ (396,092)
Changes in operating assets and liabilities:
Increase in trade receivables......................... (2,246,388) (2,597,950) (3,044,925)
Increase in inventories....................... (6,465,735) (3,165,285) (4,693,333)
Increase (decrease) in accounts payable
and accrued expenses....................... 1,194,035 661,436 (224,393)
Increase (decrease) in federal income taxes
payable.................................... (499,266) (618,516) 540,601
Other......................................... 148,267 (54,636) (167,496)
NET CASH PROVIDED BY OPERATING ACTIVITIES 2,080,455 1,459,987 425,857
INVESTING ACTIVITIES
Purchases of property, plant and equipment.............. (2,950,513) (13,554,857) (5,036,788)
Proceeds from sale of property, plant and equipment..... 20,772 27,246 48,375
Proceeds from sale of investee stock and
collection of advances........................ 1,500,000
Purchases of investments................................ (2,240,000)
Sales of investments.................................... 50,000 142,000 2,431,200
NET CASH USED IN INVESTING ACTIVITIES (1,379,741) (13,385,611) (4,797,213)

FINANCING ACTIVITIES
Issuance of common stock................................ 422,632 590,278 716,166
Repurchase of common stock.............................. (679,750) (656,891) (541,144)
Payment of dividends.................................... (1,707,409) (1,599,287) (1,466,806)
Proceeds from long-term debt............................ 13,000,000
Payments on long-term debt.............................. (2,000,000) (2,001,203) (1,500,002)
Increase in notes payable............................... 4,000,000 1,000,000 7,000,000
Other................................................... (102,963) (16,658) (27,417)
NET CASH PROVIDED BY FINANCING ACTIVITIES (67,490) 10,316,239 4,180,797
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 633,224 (1,609,385) (190,559)
Cash and cash equivalents at beginning of year.......... 1,088,322 2,697,707 2,888,266
CASH AND CASH EQUIVALENTS AT END OF YEAR $1,721,546 $ 1,088,322 $2,697,707

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. SIGNIFICANT ACCOUNTING POLICIES

BUSINESS: The Corporation is engaged exclusively in the production and
sale of furniture products.

FISCAL YEAR: The Corporation uses a 52-53 week year. All fiscal years
presented include 52 weeks.

PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include
the accounts of the Corporation and its wholly-owned subsidiaries, Craftique,
Inc., and Pulaski Foreign Sales Corporation, Inc. Significant intercompany
accounts and transactions have been eliminated. The Corporation owned until
October, 1995 a 25% interest in Triwood, Inc. which is accounted for under the
equity method.

CASH EQUIVALENTS: The Corporation considers all highly liquid
investments with a maturity of three months or less when purchased to be cash
equivalents.

INVESTMENTS: Investments, which consist principally of tax exempt
bonds, are stated at cost which approximates market.

INVENTORIES: Inventories are stated at the lower of LIFO (last-in,
first-out) cost or market.

PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment are stated
at cost. Depreciation has been computed on a straight-line basis over the
estimated useful lives of the related assets.

EARNINGS PER SHARE: Earnings per share are computed based on the weighted
average number of common and common equivalent shares (stock options)
outstanding during each year.

RECLASSIFICATION: Certain reclassifications were made in prior years'
financial statements to conform to the 1995 presentation.

NOTE 2. INVENTORIES

Current cost of the LIFO inventories exceeded the carrying amount by
approximately $14,852,000 and $13,777,000 at October 29, 1995 and October 30,
1994, respectively.

NOTE 3. FINANCING ARRANGEMENTS AND COMMITMENTS

Long-term debt consists of the following:

OCTOBER 29 OCTOBER 30
1995 1994
Industrial Development Revenue Notes,
due in installments of $5,000,000
in 2004 and 2009.............. $10,000,000 $10,000,000
Notes payable under revolving credit facility 9,000,000 9,000,000
Notes payable to bank, due in quarterly
installments of $428,572 beginning
December, 1995 through December, 2002 12,000,000 13,000,000
Notes payable to banks, due in varying
quarterly installments through
October, 2000................. 402,422 1,245,268
Notes payable at 3% interest to the Town of
Pulaski, Virginia, due in quarterly
installments through April 30, 1995 157,154
31,402,422 33,402,422
Less current maturities............. 2,047,618 2,004,249
$29,354,804 $31,398,173

Future maturities of long-term debt at October 29, 1995 are as follows:

1996..................................... $ 2,047,618
1997..................................... 10,783,375*
1998..................................... 1,714,286
1999..................................... 1,714,286
2000..................................... 1,714,286
2001 and thereafter...................... 13,428,571
$31,402,422

* Of this amount, $9,000,000 is extended automatically unless the bank
providing the revolving credit facility gives notice of termination as described
below.

The Industrial Development Revenue Notes, which may be called prior to
maturity, bear interest at tax-exempt market rates. Interest cost (including
related letter of credit and servicing fees) averaged 4.78% during 1995. At the
option of the Corporation, or if called prior to maturity, the notes may be
placed with a bank under a letter of credit arrangement. In this event, the
notes would bear interest at two-thirds of the prime rate.

The Corporation has a note and revolving credit agreement with a bank
which provides for $10 million in notes supported by a revolving credit
facility. The notes bear interest at current market rates (averaged 6.04% in
1995) and are renewable on an annual basis subject to minimum annual reductions
of long term debt. The agreement requires annual commitment fees of one quarter
of one percent of the total amount of the revolving credit facility. At the
option of the bank, the revolving credit facility may be terminated on February
28 of any year if the bank gives notice of termination not later than 60 days
before March 1 of the preceding year.

The Corporation has a term loan agreement with a bank that had an
outstanding amount of $12 million at October 29, 1995. The note bears interest
at a variable rate not to exceed LIBOR plus 3/8% (averaged 6.36% in 1995). The
agreement requires annual commitment fees of one eighth of one percent of the
unused commitment.

Notes payable to banks bear interest at variable rates not to exceed the
London Interbank Offered Rate (LIBOR) plus five-eighths of one percent.
The average interest rate for the year was 6.92%.

To manage the interest rate exposure under its long-term obligations, the
Corporation has entered into a swap agreement with a major financial institution
in the notional amount of $8 million. Under the terms of the agreement, the
Corporation makes payments at a fixed rate (8.87%) and receives payments at
variable rates based on LIBOR, the net of which is included as an adjustment to
interest expense. The weighted average variable rate received by the Corporation
was 2.58%, 4.00%, and 3.37% for 1995, 1994 and 1993, respectively. The increase
to interest expense totaled $206,595, $389,925 and $439,932 for 1995, 1994 and
1993, respectively.

The agreements contain various conditions which provide, among other
things, restrictions relating to the maintenance of working capital, payment of
dividends and additional indebtedness. The Corporation was in compliance with
these conditions at October 29, 1995. At October 29, 1995, retained earnings
available for payment of dividends amounted to approximately $21,934,000.

Under short term line of credit arrangements, the Corporation may borrow
up to $16 million at October 29, 1995 which would bear interest at rates not to
exceed the prime rate. At October 29, 1995, the Corporation had $12 million
outstanding under these arrangements.

In connection with the purchase of inventory from foreign suppliers,
the Corporation has available letters of credit of approximately $11 million,
with $8.1 million outstanding at October 29, 1995.

Interest paid in 1995, 1994, and 1993 was $2,715,441, $1,691,686, and
$1,316,104, respectively. Of these amounts, $104,399 was capitalized during
1994.

NOTE 4. COMMON STOCK

Changes in Common Stock for the two years in the period ended 1995 were as
follows:

COMMON STOCK
SHARES AMOUNT
BALANCE AT OCTOBER 31, 1993....................... 2,814,776 $5,645,373
Shares issued under Salaried Employee
Stock Purchase Plan....................... 20,914 388,163
Common Stock acquired and retired........... (27,331) (656,891)
Shares issued under Stock Incentive
Plan for Non-Employee Directors........... 800 20,800
Shares issued under Stock Incentive Plan.... 12,500 181,315
Restricted shares issued under Stock
Incentive Plan............................ 27,500 505,450
BALANCE AT OCTOBER 30, 1994....................... 2,849,159 $6,084,210
Shares issued under Salaried
Employee Stock Purchase Plan.............. 19,923 405,632
Common Stock acquired and retired........... (42,000) (679,750)
Shares issued under Stock Incentive Plan
for Non-Employee Directors................ 800 17,000
BALANCE AT OCTOBER 29, 1995....................... 2,827,882 $5,827,092

In 1988, as part of a shareholder rights plan, the Board of Directors
declared a dividend distribution of one preferred share purchase right for each
outstanding share of common stock.

Each right entitles its holder to buy one one-hundredth of a share of the
Corporation's Series A Cumulative Preferred Stock at an exercise price currently
in excess of market value. The rights will become exercisable only if a person
or group acquires or obtains the right to acquire, 20% or more of the
Corporation's common stock (an "Acquiring Person") or commences a tender offer
that would result in the offeror owning 30% or more of the Corporation's
outstanding common stock ("Triggering Events"). If an Acquiring Person acquires
30% or more of the Corporation's common stock or engages in certain other
transactions with the Corporation, each right will entitle the holder, other
than an Acquiring Person, to acquire the Corporation's Series A Preferred Stock
or, at the option of the Corporation, other securities or property, having a
value equal to twice the right's exercise price. Likewise, if the Corporation is
acquired in a merger or other business combination, or the Corporation sells
more than 50% of its earnings power or assets, each right will entitle the
holder, other than an Acquiring Person, to purchase securities of the acquiring
entity with a market value equal to twice the right's exercise price. The rights
expire December 15, 1997, and are subject to redemption at the discretion of the
Corporation's Board of Directors at a price of $0.01 per right within 10 days
following the occurrence of a Triggering Event, subject to extension of
the period by the Board of Directors. The Corporation has authorized one
million shares of cumulative preferred stock, of which 500,000 shares have
been designated as Series A Cumulative Preferred Stock reserved for issuance
upon exercise of such rights.

NOTE 5. STOCK PURCHASE AND INCENTIVE PLANS

The Salaried Employees Stock Purchase Plan provides for the sale of Common
Stock annually based on payroll deductions of up to 8% of employee compensation
at a price equal to 70.7% of market price on the date of purchase. Compensation
expense recognized in 1995, 1994, and 1993 related to the Plan was $179,003,
$171,554, and $164,075, respectively. At October 29, 1995, 25,297 shares are to
be issued pursuant to the Plan's provisions, after which there will remain
36,166 shares available for purchase in the future.

Under the Stock Incentive Plan, as amended in 1989, key employees were
granted options to purchase Common Stock at a price determined by a committee
appointed by the Board of Directors or determined pursuant to a formula approved
by the committee. The committee was also able to grant stock appreciation rights
(SARs) in relation to the grants of stock options. The stock options and SARs
expire ten years after the date of grant.

At October 29, 1995, outstanding options and SARs under the Stock
Incentive Plan were as follows:

NUMBER OF SHARES OPTION PRICE OR
DATE AND SARS UNDER FAIR MARKET VALUE AT GRANT
GRANTED OPTION PER SHARE

December 6, 1986....... 5,000 18.75
December 3, 1987....... 5,000 15.00
December 8, 1988....... 22,500 17.375
December 8, 1989....... 22,500 18.75
December 7, 1990....... 22,500 16.125
December 6, 1991....... 20,000 14.75

All shares under option at October 29, 1995 are exercisable. All shares
issued upon exercise of options during the three years ended October 29, 1995
related to options granted between December 5, 1985 and December 6, 1991.

The Stock Incentive Plan, as amended in 1991, permits the committee of the
Board of Directors to make awards of the Corporation's common stock upon such
terms and conditions as may be established by the committee. Restrictions on
shares issued under the plan lapse at the rate of 20% of the stock per year.
Upon issuance of restricted stock under the plan, unearned compensation
equivalent to the market value at the date of grant is charged to stockholders'
equity and subsequently amortized on the ratable vesting period method.
Amortization of $166,560 and $291,321 was recorded in fiscal 1995 and 1994
respectively. At October 29, 1995, there were 156,000 shares available for
future issuance.

In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based
Compensation," which established accounting and reporting standards for
stock-based employee compensation plans. The new standard encourages companies
to adopt a fair value method of accounting for an employee stock compensation
plan. However, it also allows companies to continue to measure compensation cost
using the intrinsic value based method prescribed by APB Opinion No. 25 so long
as certain pro forma disclosures are made in the footnotes. SFAS No. 123 is
effective for fiscal years beginning after December 15, 1995, the Corporation's
1997 fiscal year. The Corporation has not determined the method it will use, and
the precise future effect of these rules on the Corporation's reported operating
results will depend upon the method adopted.

NOTE 6. PENSION PLAN

The Corporation has a defined benefit pension plan covering substantially
all of its employees. The benefits are based on years of service and the
employee's highest five year average compensation. The Corporation's funding
policy is to contribute annually the amount required to fund current service
cost plus an amortization of prior service cost and actuarial gains and losses
over approximately 30 years to the extent such amounts are currently deductible
for federal income tax purposes. Contributions are intended to provide not only
for benefits attributed to service to date but also for those expected to be
earned in the future.

The following table sets forth the plan's funded status and amounts
recognized in the consolidated balance sheets:

OCTOBER 29 OCTOBER 30
1995 1994
Actuarial present value of benefit obligation:
Accumulated benefit obligation, including
vested benefits of $8,689,660 and
$7,947,566 in 1995 and 1994, respectively. $ 8,852,453 $ 8,093,025
Projected benefit obligation for service
rendered to date.............. $11,964,876 $11,069,551
Plan assets at fair value........... 11,801,453 9,884,534
Projected benefit obligation (greater) than
plan assets................... (163,423) (1,185,017)
Unrecognized net loss from past experience
different from that assumed... 190,308 1,388,507
Unrecognized net asset at
November 2, 1987.............. (350,639) (400,730)
Net pension liability recognized
in balance sheet.............. $(323,754) $ (197,240)

Net pension cost included the following components:

1995 1994 1993
Service cost.................... $ 513,188 $ 458,138 $ 395,793
Interest cost on projected
benefit obligation........ 814,413 690,469 629,933
Actual gain on plan assets...... (1,948,326) (86,444) (737,221)
Net amortization and deferral... 1,104,832 (699,131) 16,067
Net periodic pension cost....... $ 484,107 $ 363,032 $ 304,572

Assumptions used in accounting for the pension plan were:

1995 1994 1993

Weighted average discount rate................ 7.50% 7.50% 7.50%
Rate of increase in compensation level....... 6.0% 6.0% 6.0%
Expected long term rate of return on assets.. 8.0% 8.0% 8.0%

Approximately 99.7% of plan assets at October 29, 1995 are invested in
listed stocks and bonds, and the remaining plan assets are held in interest
bearing investments, primarily a common trust fund.

The Corporation also sponsors an unfunded Supplemental Executive
Retirement Program (SERP), which is a nonqualified plan that provides additional
retirement benefits to certain key employees. Pension expense recognized in
1995, 1994 and 1993 related to the SERP was $305,652, $247,173 and $321,563,
respectively. At October 29, 1995, the projected benefit obligation for this
plan totaled $2,438,763, of which an unrecognized net obligation of $67,411 and
unamortized prior service cost of $380,106 are subject to later amortization.
The remaining $1,991,246 is an additional pension liability recognized in the
balance sheet at October 29, 1995.

NOTE 7. INCOME TAXES

Effective November 1, 1993, the Corporation adopted Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS
109). Under SFAS 109, the liability method is used in accounting for income
taxes. Under this method, deferred tax assets and liabilities are determined
based on differences between financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse. Prior to the adoption of
SFAS 109, income tax expense was determined using the deferred method. Deferred
tax expense was based on the items of income and expense that were reported in
different years in the financial statements and tax returns and were measured at
the tax rate in effect in the year the difference originated.

As permitted by SFAS 109, the Corporation has elected not to restate
the financial statements of any prior years. The cumulative effect of the change
increased net income for 1994 by $396,092 (or $.14 per share).

The provisions for income taxes consisted of the following:

DEFERRED
LIABILITY METHOD METHOD
1995 1994 1993
Current:
Federal.......... $1,871,828 $1,495,441 $2,741,186
Tax credits...... (86,583) (97,467) (144,186)
1,785,245 1,397,974 2,597,000
State.................. 235,004 138,110 280,000
2,020,249 1,536,084 2,877,000
Deferred:
Federal.......... 108,755 (175,974) (409,369)
State............ 28,496 (20,110) (52,631)
137,251 (196,084) (462,000)
$2,157,500 $1,340,000 $2,415,000

The total provision for income taxes varied from the U.S. federal
statutory rate for the following reasons:

1995 1994 1993
Statutory federal income tax rate... 34.0% 34.0% 34.0%
Tax credits......................... (1.3) (1.6) (1.4)
State income tax, net of federal tax benefit 2.6 1.9 2.2
Change in valuation allowance....... (3.8)
Other............................... 1.0 (1.7) .9
Effective tax rate.................. 32.5% 32.6% 35.7%

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the deferred tax liabilities and assets are as follows:

OCTOBER 29, OCTOBER 30,
1995 1994
Deferred tax liabilities:
Depreciation............................... $(4,914,903) $(4,584,441)
Inventory valuation........................ (15,103) (31,487)
Total deferred tax liabilities.......... (4,930,006) (4,615,928)

Deferred tax assets:
Deferred compensation......... 835,761 744,597
Receivable allowance.......... 368,380 368,380
Investment and advances to investee company.. 250,442
Net operating loss carryforwards............. 132,522 166,944
Other........................................ 210,347 124,684
Total deferred tax assets.................... 1,547,010 1,655,047
Valuation allowance for deferred tax assets.. (132,522) (417,386)
Net deferred tax assets...................... 1,414,488 1,237,661
Net deferred liabilities.....................$(3,515,518) $(3,378,267)
Deferred tax liability.......................$(4,094,245) $(3,871,331)
Deferred tax assets.......................... 578,727 493,064
Net deferred tax liability...................$(3,515,518) $(3,378,267)

The valuation allowance was reduced in 1995 by $250,442 as a result of
the collection of advances to and sale of investment in the investee company.

At October 29, 1995, the Corporation has net operating tax loss
carryforwards of approximately $2,600,000 for state income tax purposes that
expire in years 1996 through 2000.

Deferred income taxes result from timing differences in the recognition of
income and expenses for financial reporting and tax purposes. The sources of
these differences and the net tax provisions for the year ended October 31, 1993
are:
DEFERRED METHOD
1993
Depreciation........................ $ (311,126)
Pension Expense..................... 40,058
Deferred Compensation............... (167,789)
Other............................... (23,143)
$ (462,000)

The Corporation made income tax payments of $2,520,000, $2,155,000, and
$2,324,000, in 1995, 1994, and 1993, respectively.

NOTE 8. CONCENTRATION OF CREDIT RISK

Pulaski Furniture manufactures medium-priced bedroom, dining room and
occasional furniture for a variety of customers in the retail furniture
industry. Ridgeway Clock manufactures grandfather, mantel and wall clocks.
Craftique produces solid mahogany bedroom, dining room and occasional
furniture. Substantially all of the Corporation's accounts receivable are due
from companies in the retail furniture industry. Management periodically
performs credit evaluations of its customers and generally does not require
collateral.

NOTE 9. OTHER INCOME

Other income for 1995 includes a gain of $327,986 for the sale of the
Corporation's investment in the investee company on October 6, 1995.

In August, 1994, the contents of one of the Corporation's finished goods
warehouses was damaged by a storm. The Corporation has received insurance
proceeds equal to the wholesale value of the inventory destroyed. Accordingly, a
gain of $691,000 on the insurance settlement is included in other income on the
1994 Consolidated Statements of Income.

REPORT OF ERNST & YOUNG LLP
INDEPENDENT AUDITORS

Board of Directors and Stockholders
Pulaski Furniture Corporation

We have audited the accompanying consolidated balance sheets of Pulaski
Furniture Corporation and Subsidiaries as of October 29, 1995 and October 30,
1994, and the related consolidated statements of income and retained earnings
and cash flows for each of the three years in the period ended October 29, 1995.
These financial statements are the responsibility of the Corporation's
management. Our responsibility is to express an opinion on these 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 financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Pulaski
Furniture Corporation and Subsidiaries at October 29, 1995 and October 30, 1994,
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended October 29, 1995 in conformity with
generally accepted accounting principles.

As discussed in Note 7 to the financial statements, effective November 1,
1993, the Corporation changed its method of accounting for income taxes.

/s/ Ernest & Young LLP
Ernest & Young LLP

Winston-Salem, North Carolina
November 22, 1995

[Inside Back Cover]

[PULASKI LOGO]

[ACCENTRICS LOGO]

[CRAFTIQUE LOGO]

[RIDGEWAY LOGO]

PLANTS LOCATED AT PULASKI, MARTINSVILLE, DUBLIN, RIDGEWAY AND CHRISTIANSBURG,
VIRGINIA AND MEBANE, NORTH CAROLINA

[PHOTO]

Ridgeway's Croquet Floor Clock features a triple chime movement, brass finish
dial with blue moon, Croquet emblem embossed on a polished brass bob and beveled
glass. Beautifully carved foliate posts accent the Newport Cherry finish.