FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter Ended April 1, 1995 Commission File No. 0-11577
LADD FURNITURE, INC.
(Exact name of registrant as specified in charter)
North Carolina 56-1311320
(State or other juris- (I.R.S. Employer
diction of incorpora- Identification No.)
tion or organization)
One Plaza Center, Box HP-3, High Point, North Carolina 27261-1500
(Address of principal executive offices) (Zip Code)
Registrants' telephone number, including area code: (910) 889-0333
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes x No
As of May 10, 1995 there were 23,171,799 shares of Common Stock ($.10
par value) of the registrant outstanding.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
LADD FURNITURE, INC. AND SUBSIDIARIES
Consolidated Statements of Earnings
For the thirteen weeks ended April 1, 1995 and April 2, 1994
(Amounts in thousands, except share data)
(Unaudited)
13 Weeks Ended
April 1, April 2,
1995 1994
Net sales $ 153,388 139,039
Cost of sales 126,560 113,455
Gross profit 26,828 25,584
Selling, general and
administrative expenses 23,816 21,569
Operating income 3,012 4,015
Other deductions (income):
Interest expense 2,803 1,634
Other, net 174 (48)
2,977 1,586
Earnings before income taxes 35 2,429
Income tax expense 11 774
Net earnings $ 24 1,655
Net earnings per common share $ 0.00 0.07
Weighted average number of
common shares outstanding 23,111,471 23,066,506
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LADD FURNITURE, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
April 1, 1995 and December 31, 1994
(Amounts in thousands, except share data)
ASSETS
April 1,
1995 December 3
(Unaudited) 1994 *
Current assets:
Cash $ 1,787 576
Trade accounts receivable, less allowances
for doubtful receivables, discounts,
returns and allowances of $4,174 and $4,294,
respectively 59,767 52,735
Inventories (Note 2) 124,181 122,083
Prepaid expenses and other current assets 10,515 10,053
Total current assets 196,250 185,447
Property, plant and equipment, net 109,014 109,522
Intangible and other assets, net 83,792 83,847
$ 389,056 378,816
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt $ 657 687
Short-term bank borrowings 5,025 5,000
Trade accounts payable 25,041 28,360
Accrued expenses and other current liabilities 32,267 27,715
Total current liabilities 62,990 61,762
Long-term debt, excluding current installments 153,102 143,584
Deferred compensation and other liabilities 6,402 6,316
Deferred income taxes 15,386 15,248
Total liabilities 237,880 226,910
Shareholders' equity:
Preferred stock of $100 par value. Authorized
500,000 shares; no shares issued - -
Common stock of $.10 par value. Authorized
50,000,000 shares; issued 23,171,799 and
23,096,557 shares, respectively 2,317 2,310
Additional paid-in capital 49,883 49,516
Currency translation adjustment (318) (208)
Retained earnings 100,434 101,105
152,316 152,723
Less unamortized value of restricted stock (1,140) (817)
Total shareholders' equity 151,176 151,906
$ 389,056 378,816
* Derived from the Company's 1994 Annual Report.
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LADD FURNITURE, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the thirteen weeks ended April 1, 1995 and April 2, 1994
(Amounts in thousands)
(Unaudited)
13 Weeks Ended
April 1, April 2,
1995 1994
Cash flows from operating activities:
Net earnings $ 24 1,655
Adjustments to reconcile net earnings to net
cash used in operating activities:
Depreciation of property, plant and equipment 3,659 3,145
Amortization 895 707
Provision for losses on trade accounts receivable 315 797
Gain on sales of assets (141) (180)
Provision for deferred income taxes 138 (92)
Increase (decrease) in deferred compensation and
other liabilities 227 (683)
Change in assets and liabilities, net of effects
from purchase of Pilliod Furniture in 1994
Increase in trade accounts receivable (8,677) (4,440)
Increase in inventories (2,098) (3,524)
Increase in prepaid expenses and other
current assets (462) (3,455)
Decrease in trade accounts payable (3,319) (1,518)
Increase in accrued expenses and other
current liabilities 4,552 4,589
Total adjustments (4,911) (4,654)
Net cash used in operating activities (4,887) (2,999)
Cash flows from investing activities:
Acquisition of Pilliod Furniture, net of cash
acquired - (23,847)
Additions to property, plant and equipment (3,158) (10,096)
Proceeds from sales of property, plant and equipment 7 207
Additions to other assets (796) (158)
Net cash used in investing activities (3,947) (33,894)
Cash flows from financing activities:
Proceeds from long-term borrowings 9,731 27,217
Proceeds from short-term bank borrowings 25 17,450
Proceeds from sales of trade accounts receivable 1,330 24,000
Principal payments of long-term debt (243) (30,064)
Proceeds from common stock issued 7 22
Dividends paid (695) (693)
Net cash provided by financing activites 10,155 37,932
Effect of exchange rate changes on cash (110) -
Net increase in cash 1,211 1,039
Cash at beginning of period 576 1,350
Cash at end of period $ 1,787 2,389
Supplemental disclosures of cash flow information:
Cash paid during the period for interest $ 2,512 1,473
Cash paid during the period for income taxes 163 377
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LADD FURNITURE, INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity
(Amounts in thousands, except share data)
Currency Unamortized
Number Additional trans- value of Total
of shares Common paid-in lation Retained restricted shareholders
issued stock capital adjustment earnings stock equity
BALANCE AT JANUARY 1, 1994 23,062,262 $ 2,306 49,186 (170) 99,568 (787) 150,103
Shares issued in connection
with incentive stock
option plan 2,344 - 19 - - - 19
Repurchase of restricted
stock (18,424) (1) (170) - - 170 (1)
Shares issued in connection
with and amortization of
employee restricted
stock awards 50,375 5 481 - - (200) 286
Currency translation
adjustment - - - (38) - - (38)
Net earnings - - - - 4,308 - 4,308
Dividends paid - - - - (2,771) - (2,771)
BALANCE AT DECEMBER 31, 1994 23,096,557 2,310 49,516 (208) 101,105 (817) 151,906
Repurchase of restricted
stock (7,355) (1) (68) - - 68 (1)
Shares issued in connection
with and amortization of
employee restricted
stock awards 82,597 8 435 - - (391) 52
Currency translation
adjustment - - - (110) - - (110)
Net earnings - - - - 24 - 24
Dividends paid - - - - (695) - (695)
BALANCE AT APRIL 1, 1995
(UNAUDITED) 23,171,799 $ 2,317 49,883 (318) 100,434 (1,140) 151,176
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Notes:
(1) Quarterly Financial Data
The quarterly consolidated financial data are unaudited but
include, in the opinion of management, all adjustments necessary
for a fair statement of the operating results for the interim
periods indicated. All such adjustments are of a normal recurring
nature.
(2) Inventories
A summary of inventories follows (in thousands):
April 1, December 31,
1995 1994
Inventories on the FIFO
cost method:
Finished goods $ 66,200 65,046
Work in process 24,102 23,084
Raw materials and supplies 47,923 47,997
Total inventories on
the FIFO cost method 138,225 136,127
Less adjustments of certain inven-
tories to the LIFO cost method (14,044) (14,044)
$ 124,181 122,083
(3) Proposed Reverse Stock Split
On March 2, 1995, the Board of Directors authorized, subject to
shareholder approval, a one-for-three reverse split of the
Company's common stock. If this proposed split is approved by the
shareholders on May 12, 1995 and upon filing of the amendment to
the Company's articles of incorporation, the par value of the
common stock will increase to $0.30 per share. Additionally, the
number of common shares outstanding will decrease by two-thirds
and per share data for all periods presented will increase
accordingly.
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Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
The following table sets forth the percentage relationship of net
sales to certain items included in the Consolidated Statements of
Earnings:
13 Weeks Ended
Apr. 1, Apr. 2,
1995 1994
Net sales 100.0% 100.0%
Cost of sales 82.5 81.6
Gross profit 17.5 18.4
Selling, general and
administrative expenses 15.5 15.5
Operating income 2.0 2.9
Other deductions
Interest expense 1.9 1.2
Other, net .1 (0.1)
2.0 1.1
Earnings before income taxes 0.0 1.8
Income tax expense - .6
Net earnings 0.0% 1.2%
Net sales for the first quarter of 1995 increased 10.4% to $153.4
million from $139.0 million during the first quarter of 1994, with the
increase partially attributable to the acquisition of Pilliod
Furniture, Inc. (Pilliod) on January 31, 1994. On a pro forma basis,
assuming the Pilliod acquisition had occurred at the beginning of
fiscal 1994, 1995 first quarter net sales would have increased from
prior year levels by 4.6%. The increase in 1995 net sales over 1994
pro forma amounts was due to higher sales of upholstery, contract and
higher-priced metal furniture.
Cost of sales as a percentage of net sales increased to 82.5% in
the first quarter of 1995 from 81.6% in the first quarter of 1994,
decreasing the quarter's gross profit margin to 17.5% from 18.4% in
1994. The 1995 first quarter gross margin was negatively impacted by
increases in raw material costs during the prior 12 months,
particularly particleboard, medium-density fiberboard, packaging
materials, glass and aluminum. Selective sales price increases,
material substitutions and overhead reductions initiated in late 1994
and early 1995 did not produce benefits sufficient enough to offset the
raw material cost increases. The Company believes that the higher raw
material costs will continue to pressure the gross margins in 1995.
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Selling, general and administrative (SG&A) expenses were 15.5% of
net sales for both the first quarter of 1995 and 1994.
Other deductions were 2.0% of net sales for the first quarter of
1995, compared to 1.1% for the same period in 1994. The increase was
primarily attributable to an increase in interest expense due to
increased average outstanding borrowings, as well as an increase of
over 2% in the average quarterly interest rate compared to the year
earlier period.
The Company's effective income tax rate of 31.4% in 1995's first
quarter was comparable to 31.9% in the first quarter of 1994.
For the first quarter of 1995, the Company's net earnings were
$24,000, compared with $1.7 million, or $.07 per share, in the year-
earlier period. On a pro forma basis, assuming the acquisition of
Pilliod had occurred at the beginning of fiscal 1994, 1994 first
quarter net earnings would have been $.08 per share.
Liquidity and Capital Resources
The Company's current ratio at April 1, 1995 was 3.1 to 1 compared
to 3.0 to 1 at December 31, 1994. Net working capital totaled $133.3
million at April 1, 1995, compared to $123.7 million at December 31,
1994. The increase in working capital and the current ratio were
primarily attributable to an increase in trade accounts receivable and
inventories.
During the first three months of 1995, the Company generated cash
from net earnings plus depreciation and amortization of $4.6 million,
compared to $5.5 million in the 1994 period. The cash generated in the
first quarter of 1995 and 1994 was utilized to partially fund increases
in working capital.
During the first three months of 1995, capital spending totaled
$3.2 million, compared to $10.1 million during the same period in 1994.
The Company's 1995 capital expenditures is expected to approximate the
current annual depreciation and amortization level of almost $18.0
million. The majority of the capital spending during the first
quarters of both 1994 and 1995 was to complete capital projects
initiated in the prior fiscal years.
During the first quarter of 1995, the Company increased its long-
term borrowings by $9.5 million, principally to fund working capital
increases and capital expenditures. At April 1, 1995, the Company had
outstanding long-term borrowings of $153.1 million, representing 47.0%
of total capitalization, compared to $143.6 million or 45.3% of total
capitalization at December 31, 1994. At April 1, 1995, the Company had
$39.4 million in unused and available long-term revolving bank credit
lines to meet future cash requirements.
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PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Transfer and Administration Agreement dated as of
March 30, 1995, between Enterprise Funding
Corporation, LADD Funding Corp., and LADD
Furniture, Inc.
10.2 Receivables Purchase Agreement dated as of March
30, 1995, between LADD Funding Corp. and LADD
Furniture, Inc.
10.3 Receivables Purchase Agreement dated as of March
30, 1995, between LADD Furniture, Inc., Clayton-
Marcus Company, Inc., Barclay Furniture Co., and
Pilliod Furniture, Inc.
10.4 Second Amendment to Amended and Restated Credit
Agreement dated as of March 30, 1995, between the
Company, Nationsbank, N.A., as agent and each of
the banks signatory thereto.
(b) Reports on Form 8-K
None
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
LADD Furniture, Inc.
Date: May 10, 1995 By: s/William S. Creekmuir
William S. Creekmuir
Senior Vice President
and Chief Financial Officer
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