LADD Furniture Reports 19% Sales Increase:

Furniture World Magazine

Letter from Fred L Schuermann, Jr. Chairman, President & CEO to shareholders: I am pleased to report that LADD Furniture, Inc. achieved a 19 percent increase in its 1998 first quarter net sales compared to the first quarter of 1997 and a 350 percent earnings increase. For the three months ended April 4, 1998, net sales totaled $147.4 million, up from $123.4 million in the first quarter of 1997. Net earnings for 1998's initial quarter were $2.4 million, or $0.30 per share, compared to $520,000, or $0.07 per share, in the first quarter of fiscal 1997. This year has started out very well for our industry, with retail furniture sales around the country showing excellent year-over-year gains. LADD participated fully in this strength during the first quarter. We were especially pleased with the acceleration in our residential furniture sales, particularly casegoods (wood furniture), where first quarter sales rose nearly 18 percent compared to the same period of 1997. Residential upholstery sales for the first quarter also increased nicely, and were 8 percent higher than in the 1997 quarter. These sales gains resulted from a combination of attractive new LADD product lines, an expanded market presence by LADD's various brand names and the general improvement experienced by the industry. It was especially gratifying that our residential furniture orders increased more than 25 percent in the first quarter. Reflecting this strong order inflow, our residential order backlog ended the quarter 35 percent ahead of its year-earlier level. In addition, our contract furniture sales group - which accounts for 22 percent of total LADD sales - continues to do extremely well, with first quarter sales rising 41 percent over the year earlier period. LADD's total debt declined to $120.9 million at April 4, 1998 from $125.4 million three months earlier and $129.4 million at the end of 1997's first quarter. We are continuing to make steady progress toward reducing the company's financial leverage. Debt reduction is one of management's key objectives, along with the achievement of profitable top line sales growth and wider operating margins. Due to the lower debt level and reduced interest rates, LADD's first quarter interest expense declined by $42 1,000, or 14 percent, compared to the first quarter of 1997. The April International Home Furnishings Market, which ended this week in High Point, NC, was a successful one for both the industry in general and LADD in particular. We were very pleased with our market results in both the casegoods group - American Drew, Lea, Pennsylvania House Casegoods and Pilliod - and the upholstery group, consisting of Barclay, Clayton Marcus and Pennsylvania House Upholstery. Residential casegoods together account for about 55 percent of our total sales, while residential upholstery makes up another 23 percent of the total. If the initial dealer enthusiasm for our new residential market introductions holds up and the industry environment remains positive, this will have a continuing beneficial impact on LADD's sales momentum in the second half of 1998 and on into 1999. While we are pleased with the strong earnings gain achieved in the first quarter, LADD's profitability margins remain below management's long-term goals. We are continuing to work hard on strengthening our profitability moving forward, and we expect to see improvement in this regard over the remainder of 1998.