LADD Announces Quarterly Results:

Furniture World Magazine

Text of Letter To Shareholders From Fred L. Schuermann, Jr., July 28, 1999: Dear Fellow Shareholder: I am very pleased to report that net earnings for the second quarter of fiscal 1999 hit a ten-year high. The last time LADD's quarterly net income was higher than the $4.3 million we reported for the three months ended July 3, 1999 was the second quarter of 1989. In addition to it being LADD's best earnings quarter in a decade, this year's second quarter also represented a 50 percent increase over the year-earlier quarter's net earnings of $2.9 million. On a per share basis, diluted second quarter earnings rose 54 percent, to $0.54 from $0.35 in the same three months of 1998. Residential furniture sales for the second quarter increased 10 percent on a year-over-year basis, while contract furniture sales rose 21 percent, producing a gain in total sales for the quarter of 13 percent -to $153.0 million this year, from $135.5 million in 1998. For the year's first half, profits also rose more than 50 percent - both in dollar amount and on a per share basis. Net earnings for the first six months of 1999 jumped to $7.9 million, or $0.99 per diluted share, from $5.2 million, or $0.65 per diluted share, a year earlier. First half net sales increased 10 percent, to $310.2 million, with residential volume up 7 percent and contract sales rising 19 percent. I believe that the strong second quarter profit performance represents just one more milestone on the road back to the position of industry prominence LADD enjoyed in the 1980's. Every bit as gratifying as the profit improvement was the strong top line sales growth our various furniture brands achieved in the latest quarter. In the 13 years I have been associated with LADD, I can honestly say I have never seen a more exciting assortment of products than we have right now. This is a tremendous tribute to the outstanding team of sales, marketing and manufacturing executives we currently have in place throughout the company and, for that matter, to all of our 6,500-plus employees. The first half gross margin improved to 19.7% this year from 19.1% in 1998, and further progress was also made during the first six months of the year in strengthening LADD's balance sheet and improving our financial position. Total debt has been reduced by $9.5 million since the end of 1998, to $101.7 million at mid-year 1999, close to the $100 million target we set as one of our goals at the beginning of 1996. And this first half reduction occurred despite our open market repurchase of 27,000 shares of LADD stock - 17,000 shares in the first quarter and 10,000 shares in the second quarter. Coupled with continuing growth in LADD's shareholders' equity, the debt reduction produced a total debt ratio at July 3, 1999 of 40.0%. This leverage ratio is heading down steadily toward management's 30% goal. In short, LADD's financial strength has improved remarkably since 1995. The excellent housing and economic environment of the past three years is finally beginning to show up in retail sales of furniture, and our industry is currently in the midst of one of its better historical growth periods. I fully expect to see these positive trends extend well into next year.