<PAGE>
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-K
 
[(check mark)] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES 
    EXCHANGE ACT
    OF 1934
 
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
    ACT OF 1934
 
For the fiscal year ended December 30, 1995
 
COMMISSION FILE NUMBER 0-11577
 
                              LADD FURNITURE, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 
<TABLE>
<S>                                                            <C>
                       North Carolina                                                   56-1311320
       (STATE OR OTHER JURISDICTION OF INCORPORATION)                      (I.R.S. EMPLOYER IDENTIFICATION NO.)
 
   One Plaza Center, Box HP-3, High Point, North Carolina                               27261-1500
          (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                                      (ZIP CODE)
</TABLE>
 
Registrant's telephone number, including area code: 910-889-0333
 
Securities registered pursuant to Section 12(b) of the Act:
 
                                      None
 
Securities registered pursuant to Section 12(g) of the Act:
 
                         Common Stock -- $.30 par value
                                (TITLE OF CLASS)
 
     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  (check mark)      No
 
     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [(check mark)]
 
     Market value of 6,278,354 shares held by nonaffiliates as of March 5, 1996,
was $75,340,248.
 
     Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
 
                7,724,259 shares outstanding as of March 5, 1996
 
                      DOCUMENTS INCORPORATED BY REFERENCE
 
     Portions of the definitive Proxy Statement for the 1995 Annual Shareholders
Meeting are incorporated by reference into Part III hereof.
 
                                      1
 
<PAGE>
                                     PART I
 
ITEM 1. BUSINESS
 
GENERAL
 
     LADD Furniture, Inc., incorporated in 1981 under the laws of the State of
North Carolina, is a leading residential furniture manufacturer which sells its
products through diverse retail distribution channels as well as to the
hospitality and health care industries. The Company produces a wide range of
furniture designed to appeal to a spectrum of customers seeking quality, style,
and value. The Company markets its furniture under various brand names,
including American Drew, American of Martinsville, Barclay, Clayton Marcus, Lea,
Pennsylvania House and Pilliod. Based upon industry data published in the trade
publication FURNITURE/TODAY, LADD is currently the fifth largest U.S.
manufacturer of residential furniture. Unless the context otherwise indicates,
"LADD" and "Company" refer to LADD Furniture, Inc., its divisions, and
consolidated subsidiaries. The executive offices of LADD are located in High
Point, North Carolina.
 
INDUSTRY SEGMENTS
 
     In accordance with the instructions for this item, LADD is deemed to have
been engaged in only one business segment, manufacture and sale of furniture,
for the three years ended December 30, 1995.
 
SIGNIFICANT DEVELOPMENTS IN 1995
 
     DIVESTITURE OF FOUR OPERATING UNITS -- In order to concentrate on its core
residential casegoods (wood furniture), residential upholstery and contract
sales businesses, the Company recently divested three non-strategic and/or
nonperforming businesses: (i) Brown Jordan, a manufacturer of leisure and
outdoor furniture, which was sold in December 1995 for $26.2 million, (ii) Lea
Lumber & Plywood, a provider of wood materials, which was sold in December 1995
for $5 million, and (iii) Fournier Furniture, a manufacturer of
ready-to-assemble furniture, which was sold in February 1996 for $12 million.
The Company used the net cash proceeds from these sales to reduce debt. In
addition, the Company has entered into a contract to sell Daystrom Furniture, a
kitchen and dinette furniture manufacturer, for $4 million. The transaction is
scheduled to close by the end of March 1996, subject to the purchaser finalizing
financing. Should the sale transaction not close and another purchaser not be
identified, the Company intends to liquidate the Daystrom business.
Collectively, these four businesses, while representing approximately $110
million of sales in 1995 (approximately 18% of 1995 net sales), generated a loss
before interest and income taxes of approximately $2.2 million in 1995.
 
     MANAGEMENT RESTRUCTURING -- In December 1995, the Company completed the
second phase of its restructuring plan by realigning its senior management team
effective January 1, 1996 into three groups consistent with its product and
customer base -- casegoods, upholstery and contract sales. At the same time,
Richard R. Allen, one of LADD's founders and Chairman and Chief Executive
Officer, announced his retirement as Chief Executive Officer. Fred L.
Schuermann, Jr., formerly President and Chief Operating Officer, assumed the
duties of President and Chief Executive Officer, effective January 1, 1996. At
the same time, Kenneth E. Church, president of the Company's Clayton-Marcus
subsidiary, was appointed president of the LADD Upholstery Group; Donald L.
Mitchell, formerly president of a competitor company, was hired to become the
president of the LADD Casegoods Group; and Michael P. Haley continued in his
role as president of LADD Contract Sales. William S. Creekmuir, LADD's Chief
Financial Officer, was promoted to Executive Vice President and assumed
responsibility for the Company's international, corporate marketing and
transportation business. Following the management realignment, the Company
intends to continue to market its products under individually distinct brand
names, but to reduce its administrative overhead structure through better
utilization of existing synergies among its operating companies.
 
LADD'S BUSINESS GROUPS
 
     The Company has three primary operating groups: (i) residential casegoods,
consisting primarily of bedroom, dining room and living room furniture, wall
units and occasional tables, (ii) residential upholstery, consisting primarily
of sofas, loveseats, recliners and chairs, and (iii) contract sales, consisting
of casegoods and upholstery sold to the hospitality and health care industries,
the U.S. government and educational institutions (collectively, contract sales).
The Company distributes its casegoods and upholstery products directly and
through approximately 300 independent sales representatives to more than 8,000
customers, including leading department stores, furniture retailers, mass
merchandisers, catalog merchandisers, major hotel chains, and various specialty
stores and retail companies. The Company also markets its furniture
internationally to buyers in over 50 countries.
 
                                      2
 
<PAGE>
  LADD'S CASEGOODS GROUP
 
     American Drew manufactures and sells medium priced wood residential
furniture. The products include various types of bedroom furniture (beds,
dressers, night stands, mirrors, armoires, and dressing tables), dining room
furniture (tables, chairs, buffets, chinas, and serving pieces), and 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.
 
     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 four plants located in
Waynesville, NC, Marion, VA, and Morristown, TN.
 
     Pennsylvania House manufactures solid wood residential furniture in
American traditional, country and transitional styles. 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 230
independent furniture retailers in the U.S., Japan and Mexico. Pennsylvania
House-Casegoods operates two manufacturing plants located in Lewisburg and White
Deer, PA.
 
     Pilliod Furniture, acquired by LADD on January 31, 1994, manufactures and
markets a wide range of promotionally priced contemporary and traditional wood
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 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.
 
  LADD UPHOLSTERY GROUP
 
     Barclay Furniture manufactures and sells moderately priced upholstered
residential 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, membership clubs,
rent-to-own stores, catalog retailers, and national general merchandisers.
Barclay operates two manufacturing plants located in Sherman and Myrtle, MS.
 
     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 upper-medium
price ranges. The products are marketed under the "Clayton-Marcus,"
"HickoryMark," "American of Martinsville," and "Clayton House," brand names
primarily to retail furniture chains, independent furniture retailers and
department stores. Clayton-Marcus currently has established galleries with
approximately 150 independent furniture stores in the United States, Canada, and
Mexico. Clayton-Marcus operates three manufacturing plants in Hickory, NC.
 
     Kenbridge Furniture, formed in 1995, manufactures and sells promotionally
priced upholstered residential furniture, including sofas, loveseats, chairs in
leather and leather/vinyl covers. The company's products are sold under the
Kenbridge Furniture brandname throughout the United States through large volume
customers, mainly large retail furniture chains. Kenbridge Furniture's products
are manufactured in one facility in Mississippi.
 
     Pennsylvania House also manufactures a full line of upholstered residential
furniture which sells in the upper-medium price range. Pennsylvania
House-Upholstery operates one manufacturing plant located in Monroe, NC.
 
  LADD CONTRACT SALES
 
     American of Martinsville is a manufacturer of wood and upholstered
commercial furniture which is marketed worldwide to the guest room (hotel/motel)
industry through LADD Contract Sales Corporation. The Contract Sales Group also
sells to the health care furniture market for retirement homes and extended care
facilities, certain agencies of the U.S. government, and university and college
markets. American of Martinsville operates two manufacturing plants located in
Chilhowie and Martinsville, VA and utilizes other LADD manufacturing facilities
to meet capacity constraints.
 
                                      3
 
<PAGE>
  OTHER
 
     LADD Transportation, Inc. operates a modern fleet of over-the-road tractors
and trailers that are used to provide transportation services to LADD operating
companies to meet the special needs of LADD's customers. Together with fleets
operated by other LADD operating companies, LADD Transportation provides
approximately 19% 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 300 independent sales representatives to a broad variety of
customers, including department stores, furniture retailers, mass merchandisers,
catalog merchandisers, major hotel chains, and various specialty stores and
rental companies. The Company currently sells to more than 8,000 furniture
customers. No single customer accounted for more than 5% of net sales in 1995.
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, leather, plywood, particle board, hardware,
finishing materials, glass, steel, steel springs, and high pressure laminates.
The wood species include cherry, oak, maple, white pine, poplar, and other
American species, and imports such as rubberwood, 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.
 
     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
casegoods manufacturing plants have been adapted so that they 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
intellectual properties which are considered to be important to the business and
which do not have a limited duration.
 
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 1995 fiscal
year end was approximately $83.1 million, as compared to $85.2 million at 1994
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, the Company's
subsidiary sold in December 1995, however, was heavily seasonal with inventories
being built in the winter months and sales concentrated in the March-June time
frame.
 
                                      4
 
<PAGE>
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 600 manufacturers of residential furniture in the
United States. Competition within the market for wood, upholstered and metal
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.
 
     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, the Company's Daystrom Furniture
operating division, which is being held for sale, and its Pilliod Furniture
subsidiary are the only operations to have 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 in 1995 imported
approximately $18.4 million of finished furniture and unfinished furniture
parts. Following the above discussed divestitures, the Company anticipates its
import business to decline by approximately 38%.
 
     Following the sale of its Brown Jordan and Fournier subsidiaries, the
Company has no facilities located outside the continental United States.
 
GOVERNMENTAL REGULATIONS
 
     The Company is subject to a wide-range of federal, state and local laws and
regulations relating to protection of the environment, worker health and safety
and the emission, discharge, storage, treatment and disposal of hazardous
materials. These laws include the Clean Air Act of 1970, as amended, the
Resource Conservation and Recovery Act, the Federal Water Pollution Control Act
and the Comprehensive Environmental, Response, Compensation and Liability Act.
Certain of the Company's operations use glues and coating materials that contain
chemicals that are considered hazardous under various environmental laws.
Accordingly, management closely monitors the Company's environmental performance
at all of its facilities. Management believes that the Company is in substantial
compliance with all environmental laws.
 
     Under the provisions of the Clean Air Act Amendments of 1990, in December
1995, the Environmental Protection Agency (the "EPA") promulgated air emission
standards for the wood furniture industry. These regulations, known as National
Emission Standards for Hazardous Air Pollutants ("NESHAPs"), govern the levels
of emission of certain designated chemicals into the air and will require that
the Company reduce emissions of certain volatile hazardous air pollutants 
("VHAPs") by November 1997. Management is investigating and evaluating 
techniques to meet these standards at all facilities to which the NESHAPs 
standards will apply. While the Company may be required to make capital 
investments at some of its facilities to ensure compliance, the Company 
believes that it will meet all applicable requirements in a timely fashion and 
that the amount of money required to meet the NESHAP requirements will not 
materially affect its financial condition or its results of operations.
 
     See "Legal Proceedings" regarding the status of environmental proceedings
in which the Company is involved.
 
EMPLOYEES
 
     The Company employed approximately 6,600 persons as of March 1, 1996, of
which approximately 300 are employed at the Daystrom Furniture operating
division which is being held for sale. Substantially all of the employees were
employed on a full-time basis.
 
     Employees at five Company plants are represented by various labor unions.
The Company considers its relations with its employees to be good. The union
contract at Daystrom Furniture's South Boston, VA facility expires in April
1996.
 
EXPORT SALES
 
     In 1995, the Company's export sales decreased to $28.4 million
(approximately 4.6% of 1995 net sales), a decrease of approximately 16.0% from
export sales in 1994 of $33.8 million (approximately 5.7% of 1994 net sales).
The Company's export sales in 1993 were $40.6 million, or approximately 7.8% of
1993 net sales. Excluding the operating companies sold or being held for sale,
1995 export sales would have been 3.7% of net sales. None of the Company's
assets are dedicated solely to export sales.
 
                                      5
 
<PAGE>
ITEM 2. PROPERTIES
 
     The following table summarizes the real estate, both owned and leased, used
in the primary business operations of the Company as of March 1, 1996.
 
                                LADD FACILITIES
 
<TABLE>
<CAPTION>
                                                                                       APPROX.       OWNED      LEASE
                                                                                    FACILITY SIZE     OR      EXPIRATION
        OPERATING GROUP               LOCATION                    USE               (SQUARE FEET)    LEASED      DATE
<S>                               <C>                  <C>                          <C>              <C>      <C>
Casegoods......................   N. Wilkesboro, NC    Manufacturing                   335,300       Owned
                                  N. Wilkesboro, NC    Manufacturing                   398,500       Owned
                                  N. Wilkesboro, NC    Manufacturing                   122,500       Owned
                                  N. Wilkesboro, NC    Warehouse/Office                109,500       Owned
                                  Morristown, TN       Warehouse                       108,000       Leased    10/31/97
                                  Morristown, TN       Manufacturing                   285,380       Owned
                                  Morristown, TN       Manufacturing/Office            139,200       Owned
                                  Waynesville, NC      Manufacturing/Office            448,400       Owned
                                  Morristown, TN       Distribution                    160,000       Leased    04/01/99
                                  Morristown, TN       Distribution                     97,500       Leased    10/31/96
                                  Marion, VA           Manufacturing                   204,900       Owned
                                  Lewisburg, PA        Manufacturing/Office/Dist.      676,800       Owned
                                  White Deer, PA       Manufacturing                   128,000       Owned
                                  Milton, PA           Warehouse                       120,000       Leased   Mo. to Mo.
                                  Selma, AL            Manufacturing                   277,000       Owned
                                  Nichols, SC          Manufacturing                   344,000       Owned
                                  Swanton, OH          Manufacturing                   289,000       Owned
                                  Dillon, SC           Warehouse                        45,000       Leased   Mo. to Mo.
                                  High Point, NC       Office                           11,100       Leased    04/30/98
Upholstery.....................   Sherman, MS          Manufacturing/Office            302,650       Owned
                                  Myrtle, MS           Manufacturing                    81,250       Owned
                                  Pontotoc, MS         Warehouse                        12,400       Leased    09/15/96
                                  Hickory, NC          Manufacturing/Office/Dist.      369,600       Owned
                                  Hickory, NC          Manufacturing                   121,800       Owned
                                  Hickory, NC          Manufacturing                   152,900       Owned
                                  Monroe, NC           Manufacturing                   258,000       Owned
Contract Sales.................   Chilhowie, VA        Manufacturing/Office            493,625       Owned
                                  Martinsville, VA     Manufacturing                   801,885       Owned
                                  Martinsville, VA     Office                           50,000       Leased    05/31/02
                                  Martinsville, VA     Warehouse                       135,000       Leased    09/30/98
Corporate......................   High Point, NC       Office                           38,000       Leased    08/31/97
Daystrom Furniture                South Boston, VA     Manufacturing/Office            463,980       Owned
  (held for sale)..............   South Boston, VA     Warehouse                        33,520       Leased   Mo. to Mo.
</TABLE>
 
     The Company believes that its manufacturing, warehouse and office space is
well maintained for its intended purposes and adequately insured. 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 manufacturing facilities
on a one shift per day, five-day week basis. Increasingly, certain departments
and facilities are operated on a multi-shift basis.
 
     The Company also currently maintains showrooms, the majority of which are
leased, in High Point, NC, San Francisco, CA, Sherman and Tupelo, MS,
Minneapolis, MN, Martinsville, VA, and Lewisburg, PA.
 
     The Company owns and leases substantial quantities of woodworking, sewing
and metalworking equipment located in its various plants. The Company considers
its present equipment to be adequate, well-maintained, generally modern, and
adequately insured.
 
     The Company currently owns and leases approximately 130 tractors and 320
trailers.
 
                                      6
 
<PAGE>
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 presently is involved in the following environmental
proceedings:
 
          1. The California manufacturing facility of Brown Jordan Company
     ("Brown Jordan"), a former subsidiary of the Company, is located in El
     Monte, California in the San Gabriel Valley Groundwater 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. In May 1994, the Company joined the Northwest El Monte
     Community Task Force, a PRP Group formed to respond to the EPA. In March
     1995, the Task Force and the EPA finalized an Administrative Consent Order
     pursuant to which the Task Force has begun a remedial investigation and
     feasibility study at an approximate cost of $1.3 million. Pursuant to an
     interim allocation agreement, Brown Jordan is responsible for 4.86% of all
     shared assets of the Task Force.
 
          2. In September 1995, Brown Jordan received a request from the
     California Regional Water Quality Board with respect to further assessment
     of two areas at the El Monte facility, the Leach Pit Area and the Clarifier
     Area. Both of these areas have been the subject of significant previous
     investigations (undertaken 1988-1993) which had concluded that it was
     unlikely that Brown Jordan was contributing significantly to groundwater
     contamination in the area. The Board's investigation program is separate
     from the El Monte Superfund group, although both are concerned with whether
     Brown Jordan is a source of groundwater contamination. There is some basis
     at this time for believing that the Leach Pit and Clarifier Area problems
     are limited to soil contamination.
 
     Under the terms of the Asset Purchase Agreement with Maytag Corporation
("Maytag") dated June 1, 1989 ("the Maytag Agreement") under which the Company
acquired Brown Jordan, the Company's liabilities in El Monte matters are limited
to the first $200,000 of costs for off-site liabilities and $1,000,000 of costs
for on-site liabilities. Pursuant to the terms of the Stock Purchase Agreement
between the Company and BJCL, Inc. ("BJCL") dated as of November 7, 1995 under
which BJCL acquired Brown Jordan from the Company, BJCL may assume up to
$400,000 of certain post closing costs relating to Brown Jordan, including
environmental costs relating to the El Monte site. Through fiscal 1995,
approximately $300,000 had been expended by the Company on the El Monte site.
Accordingly, if no other claims are made by BJCL under the Brown Jordan
Agreement, the next $400,000 of costs associated with Brown Jordan environmental
claims will be paid by BJCL.
 
     The Company has also been named as a PRP, along with numerous parties, at
various hazardous waste sites undergoing cleanup or investigation for cleanup.
The Company believes that at each of these sites, it has been improperly named
or will be considered a "de minimis" party. Although the Company believes
adequate accruals have been provided for environmental contingencies, it is
possible, due to uncertainties previously noted, that additional accruals could
be required in the future. However, the ultimate resolution of these
contingencies, to the extent not previously provided for, should not have a
material adverse effect on the Company's financial position.
 
     The Company is cooperating fully with government authorities in each of
these matters.
 
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 1995.
 
                                      7
 
<PAGE>
                                    PART II
 
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS
 
     STOCK TRANSFER AGENT:
 
     Wachovia Bank & Trust Company, N.A.
     Winston-Salem, NC
     Shareholder Account Information: 1-800-635-4236
 
     STOCK LISTING:
 
     The Company's common stock is traded on the Nasdaq Stock Market under the
Nasdaq symbol: LADF. At year end 1995, the Company had approximately 5,000
shareholders based upon approximately 700 shareholders of record at that date
and an estimate of the number of individual shareholders represented by broker
and nominee position listings.
 
     MAJOR MARKET MAKERS:
 
<TABLE>
<S>                                                             <C>
     Dillon, Read & Co.                                         Nash Weiss
     Herzog, Heine, Geduld                                      Raymond, James & Associates
     Huntleigh Securities Corp.                                 Robinson Humphrey
     Interstate/Johnson Lane                                    Sherwood Securities Corp.
     Jefferies & Company                                        Scott & Stringfellow
     Kirkpatrick, Pettis, Smith                                 Southeast Research Partners
     Legg Mason Wood Walker                                     Southwest Securities
     Mayer & Schweitzer                                         Troster Singer Corp.
     Merrill Lynch                                              Wheat First Butcher Singer
</TABLE>
 
     See Item 6, Selected Financial Data, for market and dividend information
     regarding the Company's Common Stock.
 
                                      8
 
<PAGE>
     ITEM 6. SELECTED FINANCIAL DATA
 
                        LADD FURNITURE, INC. AND SUBSIDIARIES
 
                                SELECTED ANNUAL DATA
 
            DOLLAR AND SHARE DATA IN THOUSANDS, EXCEPT PER SHARE AMOUNTS
<TABLE>
<CAPTION>
                                                                                                             FIVE-YEAR
                                          FISCAL     FISCAL     FISCAL     FISCAL     FISCAL     FISCAL       COMPOUND
                                           1990       1991       1992       1993       1994       1995      GROWTH RATES
<S>                                      <C>         <C>        <C>        <C>        <C>        <C>        <C>
     OPERATING STATEMENT DATA
       Net sales......................   $511,911    429,110    496,679    521,200    591,575    614,502          3.7%
       Cost of sales..................    406,039    356,025    401,250    426,921    481,994    515,980          4.9
         Gross profit.................    105,872     73,085     95,429     94,279    109,581     98,522         (1.4)
       Selling, general and
         administrative expenses......     80,617     79,322     78,493     81,953     93,911    101,345          4.7
       Restructuring expense..........      8,268         --         --         --         --     25,120          N/M
       Operating income (loss)........     16,987     (6,237)    16,936     12,326     15,670    (27,943)         N/M
       Other deductions:
         Interest expense.............     14,799     10,413      7,502      5,542      8,939     11,798         (4.4)
         Other (net)..................      1,584      2,594      1,164        377      1,714      3,685         18.4
       Earnings (loss) before income
         taxes........................        604    (19,244)     8,270      6,407      5,017    (43,426)         N/M
       Income tax expense (benefit)...       (426)    (6,041)     3,725      2,561        709    (18,236)       112.0
       Net earnings (loss)............   $  1,030    (13,203)     4,545      3,846      4,308    (25,190)         N/M
       Depreciation...................   $  9,138      8,783      9,151     10,508     14,143     12,671          6.8
       Amortization...................      2,952      5,081      2,848      2,554      3,669      3,758          5.0
       Cash dividends paid............      5,274      4,545         --      2,767      2,771      2,086        (16.9)
       Weighted average shares
         outstanding..................      6,279      6,316      7,148      7,686      7,697      7,721          4.2
     PER SHARE DATA
       Net sales......................   $  81.53      67.94      69.49      67.81      76.86      79.59         (0.5)
       Net earnings (loss)............       0.16      (2.09)      0.64       0.50       0.56      (3.26)         N/M
       Cash dividends.................       0.84       0.72         --       0.36       0.36       0.27        (20.3)
       Year-end book value............      20.28      17.37      19.38      19.52      19.73      16.20         (4.4)
     BALANCE SHEET DATA
       Net working capital............   $115,960    111,583    117,693    123,004    123,685     79,528         (7.3)
       Net property, plant and
         equipment....................     82,758     81,660     83,609     97,497    109,522     82,586          0.0
       Total assets...................    320,539    308,980    315,649    335,737    378,816    312,986         (0.5)
       Long-term debt.................    124,462    125,304     91,503    105,257    143,584    112,598         (2.0)
       Shareholders' equity...........    127,331    110,001    148,724    150,103    151,906    125,197         (0.3)
     RATIOS, OTHER
       Gross profit margin............       20.7%      17.0       19.2       18.1       18.5       16.0
       Operating profit (loss)
         margin.......................        3.3       (1.5)       3.4        2.4        2.6       (4.6)
       Return (loss) on sales.........        0.2       (3.1)       0.9        0.7        0.7       (4.1)
       Effective income tax rate......        N/M       31.4       45.0       40.0       14.1       42.0
       Dividend payout ratio..........        N/M        N/M         --       71.9       64.3        N/M
       Return (loss) on beginning
         assets.......................        0.3       (4.1)       1.5        1.2        1.3       (6.6)
       Return (loss) on beginning
         equity.......................        0.8      (10.4)       4.1        2.6        2.9      (16.6)
       Current ratio..................        3.2x       3.1        3.1        3.1        3.0        2.3
       Inventory turnover.............        4.2        4.0        4.4        4.4        4.3        4.9
       Asset turnover.................        1.4        1.4        1.6        1.6        1.7        1.8
       Long-term debt to
         capitalization...............       46.3%      49.1       35.2       37.9       45.3       45.1
       Year-end employees (actual
         number)......................      6,880      6,340      6,940      6,670      7,860      6,880
       Sales per employee (000's).....   $   67.7       66.1       75.4       77.0       77.9       79.0
     STOCK DATA
         High.........................   $  39.00      38.25      36.00      44.25      35.25      19.88
         Low..........................      12.75      17.25      18.75      22.50      14.63      12.25
         Close........................      18.75      22.50      31.50      30.00      19.50      13.13
         P/E ratios:
            High......................        N/M        N/M       56.3       88.5       62.9        N/M
            Low.......................        N/M        N/M       29.3       45.0       26.1        N/M
         Trading volume (shares)......      4,080      3,873      6,586      8,260      6,473      9,599
 
<CAPTION>
                                        ONE-YEAR CHANGES
                                         1995 VS. 1994
<S>                                      <C>
     OPERATING STATEMENT DATA
       Net sales......................          3.9%
       Cost of sales..................          7.1
         Gross profit.................        (10.1)
       Selling, general and
         administrative expenses......          7.9
       Restructuring expense..........          N/M
       Operating income (loss)........          N/M
       Other deductions:
         Interest expense.............         32.0
         Other (net)..................        115.0
       Earnings (loss) before income
         taxes........................          N/M
       Income tax expense (benefit)...          N/M
       Net earnings (loss)............          N/M
       Depreciation...................        (10.4)
       Amortization...................          2.4
       Cash dividends paid............        (24.7)
       Weighted average shares
         outstanding..................          0.3
     PER SHARE DATA
       Net sales......................          3.6
       Net earnings (loss)............          N/M
       Cash dividends.................        (25.0)
       Year-end book value............        (17.9)
     BALANCE SHEET DATA
       Net working capital............        (35.7)
       Net property, plant and
         equipment....................        (24.6)
       Total assets...................        (17.4)
       Long-term debt.................        (21.6)
       Shareholders' equity...........        (17.6)
</TABLE>
 
     NOTES: Long-term debt excludes current installments. Capitalization defined
            as net working capital plus noncurrent assets. Fiscal year 1992
            comprised 53 weeks; all other years comprised 52 weeks. P/E ratios
            based on yearly net earnings per share. Stock price data for
            calendar years. N/M = Not meaningful. Sales per employee based on
            monthly employee average. All stock data has been adjusted to
            reflect the 1 for 3 reverse stock split effective May 16, 1995.
            Fournier Furniture is included in consolidated results from its
            acquisition date of July 2, 1992, and Pilliod Furniture from its
            acquisition date of January 31, 1994.
 
                                      9
 
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
 
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
 
     The following discussion should be read in conjunction with the
Consolidated Financial Statements and Notes thereto.
 
RESULTS OF OPERATIONS
 
     The table below sets forth the percentage relationship of net sales to
certain items included in the consolidated statements of operations in each of
the last three fiscal years.
 
<TABLE>
<CAPTION>
                                                                                                        1993     1994     1995
<S>                                                                                                     <C>      <C>      <C>
Net sales............................................................................................   100.0%   100.0%   100.0%
Cost of sales........................................................................................    81.9     81.5     84.0
  Gross profit.......................................................................................    18.1     18.5     16.0
Selling, general and administrative expenses.........................................................    15.7     15.9     16.5
Restructuring expense................................................................................    --       --        4.1
  Operating income (loss)............................................................................     2.4      2.6     (4.6)
Other deductions, net................................................................................     1.2      1.8      2.5
  Earnings (loss) before income taxes................................................................     1.2      0.8     (7.1)
Income tax expense (benefit).........................................................................     0.5      0.1     (3.0)
  Net earnings (loss)................................................................................     0.7%     0.7%    (4.1)%
</TABLE>
 
     The following paragraphs provide an analysis of the changes in net sales,
selected cost and expense items, and net earnings (loss) over the three-year
period ended December 30, 1995.
 
FISCAL 1995 RESTRUCTURING OF THE COMPANY
 
     During the second quarter of 1995, the Company recorded a $25,696,000
non-cash restructuring charge as a result of the Company's plan to divest four
operating companies (Brown Jordan Company, Fournier Furniture, Daystrom
Furniture and Lea Lumber & Plywood), close four company-owned retail stores, and
reorganize the remaining companies to improve operating performance. During the
fourth quarter of 1995, the Company recorded a $2,121,000 net decrease in
restructuring expense as a result of finalizing sales of two of the operating
companies and the revision of the fair value of the remaining two operating
companies. Also, during the fourth quarter of 1995, the Company recorded
additional charges of $1,264,000 for executive severance resulting from the
Company's decision to realign management for its casegoods, upholstery and
contract operations and $281,000 of other miscellaneous expenses. As part of the
1995 restructuring, the Company was reorganized along its three principal
product lines: (i) the Casegoods Group; (ii) the Upholstery Group; and (iii) the
Contract Sales Group.
 
     The net restructuring charge of $25,120,000 for the year ended December 30,
1995 consisted of: (a) $17,379,000 to write-down businesses sold or held for
sale to the estimated fair value, net of disposition expenses; (b) $3,699,000 to
increase reserves for costs associated with closing four retail stores; (c)
$2,614,000 to provide for severance expense and other costs; and (d) $1,428,000
to write-down selected machinery to estimated fair value because of changes in
manufacturing processes.
 
     On December 29, 1995, the Company sold its wholly-owned subsidiary Brown
Jordan Company (Brown Jordan) and certain related intellectual property rights
for $24,000,000 in cash and a 12% interest, on a fully diluted basis, in the
purchaser. The 12% interest in the purchaser is valued at $2,200,000. On
December 29, 1995, the Company also sold substantially all of the assets of its
Lea Lumber & Plywood (LL&P) division for cash of approximately $4,004,000 and a
$1,000,000 subordinated note. The Company used the net cash proceeds from the
above divestitures to pay down its long-term debt. For the businesses held for
sale at December 30, 1995, the estimated fair value of their aggregate net
assets was reported as a separate line item in the Company's consolidated
balance sheet, while their 1995 operating results were consolidated with those
of the Company in the consolidated statement of operations.
 
     During January 1996, definitive sale agreements were signed for Fournier
Furniture and Daystrom Furniture. On February 26, 1996, the Company completed
the sale of Fournier Furniture for cash and a subordinated note totalling
approximately $10.0 million and the purchaser's assumption of approximately $1.9
million of Industrial Revenue Bonds. The amount of the subordinated note is
subject to finalization of a post-closing working capital adjustment.
 
                                      10
 
<PAGE>
     In addition to the restructuring charge, the Company also recorded a $10.2
million non-cash charge during 1995's second quarter. This charge was incurred
to write off unamortized bank financing fees and, in light of furniture industry
conditions, to increase reserves for slow-moving and discontinued inventories,
provide for potential bad debts and recognize other liabilities.
 
     These 1995 pretax non-cash charges resulted in a substantial loss for the
entire year, on both a pretax and an after-tax basis. Management believes the
actions represented by these charges will reposition the Company to achieve
improved long-term operating performance within the U.S. residential furniture
manufacturing industry.
 
FISCAL 1995 COMPARED TO 1994
 
     Consolidated net sales for fiscal 1995 rose $22.9 million, or 3.9%, to a
record $614.5 million. On a pro forma basis, assuming Pilliod Furniture had been
acquired at the beginning of fiscal 1994, the fiscal 1995 consolidated net sales
increase would have been 2.5%. The reported increase of $22.9 million consisted
of a $25.5 million, or 5.3%, increase in net sales of the ongoing businesses,
partially offset by a cumulative decline of $2.6 million, or 2.4%, in net sales
of the businesses sold or being held for sale.
 
     Of the $498.7 million in net sales recorded during fiscal 1995 by the
ongoing businesses, approximately $284.4 million represented residential
casegoods volume, approximately $124.5 million represented residential
upholstery volume, and contract volume represented approximately $68.5 million.
The balance of 1995 sales, totalling approximately $21.3 million, represented
"other" business, primarily revenues from the Company's trucking operations and
from the sale of home furnishings accessories. The Company's 1995 sales trends
were in line with the general industry pattern of stronger upholstery sales than
casegoods sales. The Company's total residential upholstery sales for fiscal
1995 rose by $18.1 million, or 17.0%, while total residential casegoods sales
for the year decreased $14.1 million, or 4.7%, from fiscal 1994's level. Total
fiscal 1995 net sales of the Company's contract business, including the sale of
accessories, rose by $13.0 million, or 23.4%, compared to the prior year.
Aggregate international net sales fell by $5.4 million, or 16.0%, from fiscal
1994 levels, primarily due to reduced 1995 exports to Canada and, following the
devaluation of the peso in late 1994, Mexico.
 
     Cost of goods sold increased by $34.0 million, or 7.1%, in fiscal 1995 and
represented 84.0% of net sales in the most recent year, up from 81.5% in fiscal
1994. Materials, labor and overhead costs all increased as a percentage of net
sales in 1995, with the labor component showing the largest year-over-year
growth. The labor increase resulted largely from the casegoods companies
manufacturing parts they had previously purchased and machine setup times not
being fully absorbed due to smaller cut quantities. Materials price increases,
which had been a major negative factor in 1994, moderated to a degree during
1995, particularly in the areas of hardwood lumber and particleboard, although
these costs remain at fairly high levels on a historical basis. Further
negatively impacting 1995 margins was a 7.5% decrease in production to reduce
inventory levels of the casegoods group resulting in unusually high amounts of
unabsorbed fixed overhead costs. An additional depressant on the 1995 gross
margin was the non-cash charge (totalling $5.3 million) taken in the second
quarter to increase reserves for slow-moving and discontinued inventories. As a
result of these factors, the Company's fiscal 1995 gross margin declined to a
historical yearly low of 16.0%, compared to fiscal 1994's 18.5% gross margin.
 
     Selling, general and administrative (SG&A) expenses rose to 16.5% of net
sales, compared to 15.9% in fiscal 1994. This increase was primarily
attributable to the second quarter non-cash charge (totalling $2.3 million) to
increase the Company's bad debt reserves and provide for other miscellaneous
expenses, as well as higher costs associated with the Company's accounts
receivables securitization program, which was in place for all of 1995 and
carried larger average balances and discount rates than in fiscal 1994.
 
     Other deductions increased in the aggregate to 2.5% of fiscal 1995's net
sales from 1.8% of prior year's net sales. Interest expense rose $2.9 million,
despite average outstanding borrowings for fiscal 1995 remaining approximately
the same as in the prior year, due to increases in short-term interest rates and
an amendment to the Company's long-term credit facility (discussed below), which
resulted in a significantly higher borrowing rate for the Company beginning in
August 1995. All other deductions rose to 0.6% of net sales from 0.3% in fiscal
1994, primarily due to establishment of a reserve for a note receivable relating
to a prior divestiture and the write-off of unamortized bank fees.
 
     The principal reasons for the increase in the Company's fiscal 1995
effective tax rate to 42.0% from 14.1% in the previous year were tax benefits
realized from the utilization of capital loss carryforwards during the year (see
note 13) and various beneficial tax credits. The Company's effective income tax
rate for 1996 is expected to approximate the Federal tax rate of 34.0%.
 
                                      11
 
<PAGE>
FOURTH QUARTER 1995 RESULTS
 
     Net sales for the fourth quarter of 1995 rose in the aggregate by 4.7% from
1994's fourth quarter level. This overall increase consisted of a 3.8% rise in
net sales of the "ongoing" LADD business units and an 8.5% increase in combined
net sales of the four businesses sold or being held for sale. The fourth quarter
gross profit margin rose to 18.0% in 1995, from 16.4% in 1994. This increase was
primary due to the fact that the 1994 quarter gross margin was depressed by high
materials costs and unabsorbed overhead, and a favorable LIFO adjustment in the
1995 quarter resulting from a lower-than-anticipated rate of inflation and a
significant decrease in 1995 year-end inventory quantities.
 
     SG&A expenses represented 16.9% of 1995's fourth quarter net sales, as
compared to 17.0% a year earlier. Management continues to closely monitor and
control the Company's SG&A expense.
 
     A restructuring credit amounting to 0.4% of 1995 net sales was recorded in
1995's final three months relating to the sale at quarter-end of two of the four
businesses held for sale and the adjustment to fair value of the net assets of
the remaining two businesses, on which definitive sale agreements were executed
during January 1996. This adjustment was offset by expenses representing 0.3% of
net sales, attributable primarily to severance expenses accrued in conjunction
with the further restructuring of the Company's ongoing business units, which
was announced in June 1995 and continued into the year's final quarter.
 
     Total other deductions represented 2.5% of net sales in the fiscal 1995
fourth quarter, compared to 2.4% in the same quarter a year earlier. The
increase was entirely due to higher interest expense incurred in the 1995 period
resulting from an increased bank borrowing rate.
 
     These factors produced a pretax loss of $1.4 million, or 0.9%, of net sales
in 1995's final three months, compared to a $4.4 million pretax net loss (3.0%
of net sales) in the year-earlier quarter. Both periods were adversely affected
by relatively low gross margins, generally weak furniture industry conditions,
competitive pricing pressures and, in the case of the 1994 quarter, the
write-off of unamortized bank fees.
 
     The high 1995 fourth quarter effective tax rate resulted primarily from the
utilization during the quarter of capital loss carryforwards.
 
FISCAL 1994 COMPARED TO 1993
 
     Net sales increased $70.4 million, or 13.5%, to a record $591.6 million in
1994, compared to $521.2 million in 1993, largely as a result of the January 31,
1994 acquisition of Pilliod Furniture. On a pro forma basis, assuming the
acquisition of Pilliod Furniture had occurred at the beginning of fiscal year
1993, 1994 net sales decreased from prior year levels by 1.4%. The decrease in
the pro forma 1994 net sales was primarily due to the discontinuance of certain
American of Martinsville residential casegoods product lines, a reduction in
export shipments, and a decline in sales of lower-priced upholstery and
higher-priced casegoods products compared to 1993.
 
     Cost of sales as a percentage of net sales decreased to 81.5% in 1994, from
81.9% in 1993, resulting in an increase in the 1994 gross profit margin to 18.5%
from 18.1% in 1993. The 1994 gross margin was positively impacted by Pilliod
Furniture's gross margin and operating efficiencies generated by the Company's
capital investment program, and negatively affected by higher raw material
costs, including particleboard, medium-density fiberboard, cartons and aluminum.
Additionally, 1994's gross margin was reduced by manufacturing disruptions
associated with the Company's Virginia manufacturing realignment started in
1993's second half and plant disruptions resulting from other capital projects
initiated during 1994. Further, selected plant downtime taken in the fourth
quarter to control inventory levels increased 1994's fourth quarter cost of
sales, negatively impacting gross margins.
 
     Selling, general and administrative (SG&A) expenses were 15.9% of net sales
in 1994, compared to 15.7% in 1993. The increase was due to the costs associated
with the Company's accounts receivable securitization program which was
initiated in February 1994.
 
     Other deductions totaled 1.8% of net sales in 1994, compared with 1.2% in
1993. The increase was primarily attributable to higher interest expense
reflecting the use of long-term debt to partially fund the Company's $31.8
million capital spending program and its $54.4 million Pilliod Furniture
acquisition (see note 3) coupled with rising interest rates. Additionally,
amortization expense increased in 1994 as a result of the Pilliod Furniture
acquisition.
 
     The decrease in the Company's effective income tax rate from 40.0% in 1993
to 14.1% in 1994 resulted principally from reductions in income taxes derived
from state tax planning strategies and the utilization of capital loss
carryforwards.
                                       12

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

 
     Effective August 14, 1995, the Company's $190.0 million long-term credit
facility with a syndicate of banks was amended (the Amended Facility - see note
9). At December 30, 1995, the Company had $110.1 million outstanding under the
Amended Facility, comprised of a $48.1 million term loan, and short-term and 
long-term borrowings totalling $62.0 million under a $115.0 million revolving 
credit  line. Additionally, the Company had other long-term indebtedness 
outstanding at the same date, primarily fixed-rate industrial revenue bonds, 
aggregating $5.8 million. In total, long-term and short-term debt (funded
debt) represented 45.8% of the Company's total capitalization at the end of
1995, compared to 46.3% a year earlier. On December 30, 1995, net working
capital totaled $79.5 million and the current ratio was 2.3:1. Both of these
financial measures were significantly below their year-earlier levels, due to
the current assets and liabilities of the two remaining businesses held for sale
being reported as a noncurrent asset in the December 30, 1995 consolidated
balance sheet (see note 2), and the sale of Brown Jordan Company and Lea Lumber
& Plywood effective December 29, 1995, which generated cash in excess of $28.0
million that was used to repay debt.
 
     The Company's Amended Facility provides for the payment of a higher rate of
interest than the original facility and, based on current borrowing levels and
interest rates, would increase the Company's interest cost by approximately
$700,000 in 1996 compared to 1995 borrowing rates. In connection with the
amendment of the credit facility, the Company expensed approximately $525,000 of
unamortized fees from its original bank facility. Borrowings on the Amended
Facility are currently unsecured but will become subject to a lien on
substantially all the personal property assets of the Company effective March
31, 1996.
 
     At December 30, 1995, $36.0 million of cash had been generated through the
Company's trade accounts receivable securitization program (see note 4). The
existing trade accounts receivable securitization program expires on March 30,
1996 and will not be renewed. The cash currently provided by this program will
be replaced by borrowings under the revolving credit line of the Company's
long-term credit facility. Management believes the Company's existing borrowing
capacity under its revolving credit facility ($53.0 million at December 30,
1995) is sufficient to refinance the additional working capital requirement.
 
     During fiscal 1995, the Company generated net cash from operating
activities of $11.1 million, an increase of $8.3 million compared to the prior
year. The $11.1 million net cash from operating activities was generated
partially by cash flows from earnings after adding back depreciation,
amortization and restructuring expense, offset by a decrease in the net deferred
tax liability, which in the aggregate totalled $2.9 million. Additionally, a
decrease in working capital of $4.3 million positively impacted cash flows.
 
     During fiscal 1995, capital spending totaled $11.6 million, down sharply
from the prior year's $31.8 million, as the major capital projects initiated
during fiscal years 1993 and 1994 were completed in early 1995 and a reduced
capital spending program was initiated by management. Capital expenditures
during 1995 and 1994 were funded largely from the operations of the Company and
borrowings under the Company's existing long-term credit facility. The Company
anticipates spending less than $12.0 million for capital improvements during
1996, and believes that the unused long-term credit lines available under its
banking arrangements, as well as cash generated from operations, will be
adequate to fund these planned investments.
 
     Because of the Company's recent operating performance and in light of
current short-term and medium-term interest rates, the Company plans to
refinance its long-term and short-term bank credit facilities and its accounts
receivable securitization program. The Company anticipates that the refinancing
will be in the form of a term loan and revolving credit facility secured by
substantially all of the Company's assets. Borrowings under such a facility will
likely bear interest at rates above the Company's borrowing rate at December 30,
1995. In anticipation of such a refinancing, approximately $750,000 of
unamortized fees will be charged to operations during 1996's first quarter. The
Company anticipates the planned refinancing will be finalized during the second
quarter of 1996.
 
IMPACT OF INFLATION
 
     Although the effects of inflation on the Company cannot be accurately
determined, in 1995 the impact of inflation affected the Company's manufacturing
costs in the areas of manufacturing overhead and raw materials other than
lumber. The price of lumber, like the prices of other commodities, is affected
more by the interaction of supply and demand than by inflation. Although 1995
margins were impacted by inflation, the Company's gross profit margins during
the past several years have, in general, been impacted more by promotional
selling discounts and plant downtime taken to curtail production
 
                                      13
 
<PAGE>
than by inflation. The Company believes it will be able to largely offset the
effects of inflation by improving its manufacturing efficiency, increasing
employee productivity, substituting raw materials, and increasing the selling
prices of its products.
 
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
MANAGEMENT'S STATEMENT OF RESPONSIBILITY
 
     The management of LADD Furniture, Inc. is responsible for the integrity of
the financial statements of the Company and for ascertaining that the financial
statements accurately reflect the financial position and results of operations
of the Company. The financial statements were prepared in conformity with
generally accepted accounting principles, applying estimates and management's
best judgment, as required. Information presented elsewhere in the Company's
Annual Report on Form 10-K is consistent with the financial statements.
 
     LADD has established and maintains a system of internal controls designed
to provide reasonable assurance, at an appropriate cost, that the Company's
assets are adequately safeguarded and that the accounting records reflect the
transactions of the Company accurately, fairly and in reasonable detail. The
internal control system provides for careful selection and training of
personnel, the delegation of management authority and responsibility, the
dissemination of management control policies and procedures and an internal
audit program.
 
     The board of directors, through its Audit Committee consisting of two
directors who are not officers or employees of the Company, is responsible for
reviewing and monitoring the financial statements and accounting practices of
the Company. The Audit Committee meets periodically, either separately or
jointly, with the independent auditors, representatives of management and the
Company's internal auditors to discuss auditing, accounting and financial
statement matters. To ensure complete independence, representatives of KPMG Peat
Marwick LLP, certified public accountants retained by the Company to audit the
financial statements, have full and free access to meet with the Audit Committee
with or without the presence of management representatives.
 
<TABLE>
<S>                                     <C>
Fred L. Schuermann, Jr.                 William S. Creekmuir
President & Chief Executive Officer     Executive Vice President & CFO
February 16, 1996                       February 16, 1996
</TABLE>
 
                                      14
 
<PAGE>
                          INDEPENDENT AUDITORS' REPORT
 
THE BOARD OF DIRECTORS AND SHAREHOLDERS
LADD FURNITURE, INC.:
 
     We have audited the accompanying consolidated balance sheets of LADD
Furniture, Inc. and subsidiaries as of December 31, 1994 and December 30, 1995,
and the related consolidated statements of operations, shareholders' equity and
cash flows for each of the years in the three-year period ended December 30,
1995. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of LADD
Furniture, Inc. and subsidiaries as of December 31, 1994 and December 30, 1995,
and the results of their operations and their cash flows for each of the years
in the three-year period ended December 30, 1995 in conformity with generally
accepted accounting principles.
 
KPMG PEAT MARWICK LLP
 
Greensboro, North Carolina
February 16, 1996, except for paragraph 4 of Note 2,
  which is as of February 26, 1996
 
                                      15
 
<PAGE>
                     LADD FURNITURE, INC. AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
 
      YEARS ENDED JANUARY 1, 1994, DECEMBER 31, 1994 AND DECEMBER 30, 1995
 
<TABLE>
<CAPTION>
                                                                                                 1993       1994       1995
<S>                                                                                            <C>         <C>        <C>
                                                                                                DOLLAR AMOUNTS IN THOUSANDS,
                                                                                                     EXCEPT SHARE DATA
Net sales...................................................................................   $521,200    591,575    614,502
Cost of sales...............................................................................    426,921    481,994    515,980
     Gross profit...........................................................................     94,279    109,581     98,522
Selling, general and administrative expenses................................................     81,953     93,911    101,345
Restructuring expense -- NOTE 2.............................................................         --         --     25,120
     Operating income (loss)................................................................     12,326     15,670    (27,943)
Other deductions:
  Interest expense -- NOTE 9................................................................      5,542      8,939     11,798
  Other, net -- NOTE 9......................................................................        377      1,714      3,685
                                                                                                  5,919     10,653     15,483
     Earnings (loss) before income taxes....................................................      6,407      5,017    (43,426)
Income tax expense (benefit) -- NOTE 13.....................................................      2,561        709    (18,236)
     Net earnings (loss)....................................................................   $  3,846      4,308    (25,190)
Net earnings (loss) per common share........................................................   $   0.50       0.56      (3.26)
Cash dividends per common share.............................................................   $   0.36       0.36       0.27
Weighted average number of common shares outstanding........................................   7,685,751   7,696,689  7,720,783
</TABLE>
 
          See accompanying notes to consolidated financial statements.
 
                                      16
 
<PAGE>
                     LADD FURNITURE, INC. AND SUBSIDIARIES
 
                          CONSOLIDATED BALANCE SHEETS
 
<TABLE>
<CAPTION>
                                                                                                    DECEMBER 31,    DECEMBER 30,
                                                                                                        1994            1995
<S>                                                                                                 <C>             <C>
                                                                                                    DOLLAR AMOUNTS IN THOUSANDS,
                                                                                                         EXCEPT SHARE DATA
ASSETS
Current assets:
  Cash...........................................................................................     $    576           1,272
  Trade accounts receivable, less allowances for doubtful receivables, discounts, returns
     and allowances of $4,294 and $4,057, respectively -- NOTES 4 AND 15.........................       52,735          38,288
  Inventories -- NOTE 5..........................................................................      122,083          89,466
  Prepaid expenses and other current assets -- NOTE 13...........................................       10,053          13,663
       Total current assets......................................................................      185,447         142,689
Property, plant and equipment, net -- NOTES 6 AND 14.............................................      109,522          82,586
Businesses held for sale, net -- NOTE 2..........................................................           --           8,052
Intangible and other assets, net -- NOTES 2 AND 7................................................       83,847          79,659
                                                                                                      $378,816         312,986
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
  Current installments of long-term debt -- NOTE 9...............................................     $    687             309
  Short-term bank borrowings -- NOTE 9...........................................................        5,000           3,037
  Trade accounts payable.........................................................................       28,360          28,419
  Accrued expenses and other current liabilities -- NOTES 2, 8 AND 13............................       27,715          31,396
       Total current liabilities.................................................................       61,762          63,161
Long-term debt, excluding current installments -- NOTE 9.........................................      143,584         112,598
Deferred compensation and other liabilities -- NOTES 11, 12 AND 14...............................        6,316           6,593
Deferred income taxes -- NOTE 13.................................................................       15,248           5,437
       Total liabilities.........................................................................      226,910         187,789
Shareholders' equity -- NOTE 10:
  Preferred stock of $100 par value. Authorized 500,000 shares; no shares issued.................           --              --
  Common stock of $.30 par value. Authorized 50,000,000 shares; issued 7,700,151 shares and
     7,726,993 shares, respectively..............................................................        2,310           2,318
  Additional paid-in capital.....................................................................       49,516          49,905
  Currency translation adjustment................................................................         (208)             --
  Retained earnings..............................................................................      101,105          73,829
                                                                                                       152,723         126,052
  Less unamortized value of restricted stock.....................................................         (817)           (855)
       Total shareholders' equity................................................................      151,906         125,197
Commitments and contingencies -- NOTES 14 AND 15
                                                                                                      $378,816         312,986
</TABLE>
 
          See accompanying notes to consolidated financial statements.
 
                                      17
 
<PAGE>
                     LADD FURNITURE, INC. AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
 
      YEARS ENDED JANUARY 1, 1994, DECEMBER 31, 1994 AND DECEMBER 30, 1995
 
<TABLE>
<CAPTION>
                                                                                                 1993        1994       1995
<S>                                                                                            <C>         <C>         <C>
                                                                                                 DOLLAR AMOUNTS IN THOUSANDS
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss).........................................................................   $  3,846       4,308    (25,190)
Adjustments to reconcile net earnings (loss) to net cash provided by operating
  activities:
  Depreciation of property, plant and equipment.............................................     10,508      14,143     12,671
  Amortization..............................................................................      2,554       3,669      3,758
  Restructuring expense.....................................................................         --          --     25,120
  Provision for losses on trade accounts receivable.........................................      2,056       1,521      2,898
  Gain on sales of property, plant and equipment............................................       (155)        (89)      (314)
  Provision for deferred income taxes.......................................................        214      (1,204)   (13,419)
  Increase in deferred compensation and other liabilities...................................      1,840       1,388      1,297
  Change in assets and liabilities, net of effects from acquisition and divestures and
     classification of businesses held for sale:
     Increase in trade accounts receivable..................................................     (5,188)     (2,517)    (7,988)
     (Increase) decrease in inventories.....................................................     (5,063)    (10,709)     8,126
     (Increase) decrease in prepaid expenses and other current assets.......................         61      (1,886)    (2,084)
     Increase (decrease) in trade accounts payable..........................................        310      (2,496)     3,608
     Increase (decrease) in accrued expenses and other current liabilities..................     (2,239)     (3,313)     2,607
  Total adjustments.........................................................................      4,898      (1,493)    36,280
     Net cash provided by operating activities..............................................      8,744       2,815     11,090
CASH FLOWS FROM INVESTING ACTIVITIES:
  Acquisition of Pilliod Furniture, net of cash acquired -- NOTE 3..........................         --     (23,847)        --
  Additions to property, plant and equipment................................................    (24,666)    (31,825)   (11,560)
  Proceeds from sales of property, plant and equipment......................................        425         962        191
  Proceeds from sales of businesses -- NOTE 2...............................................         --          --     28,004
  Additions to intangible and other assets..................................................       (724)     (1,150)    (3,715)
     Net cash provided by (used in) investing activities....................................    (24,965)    (55,860)    12,920
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from long-term borrowings........................................................     19,654     136,666        330
  Proceeds from (repayments of) short-term bank borrowings..................................         --       5,000     (1,963)
  Proceeds from sales of trade accounts receivable..........................................         --      32,485      3,515
  Proceeds from sale leaseback of equipment.................................................         --      14,566      6,691
  Proceeds from sale leaseback of other assets..............................................         --       1,360         --
  Principal payments of long-term debt......................................................     (1,155)   (135,020)   (29,743)
  Proceeds from common stock issued.........................................................         94          23          8
  Dividends paid............................................................................     (2,767)     (2,771)    (2,086)
     Net cash provided by (used in) financing activities....................................     15,826      52,309    (23,248)
EFFECT OF EXCHANGE RATE CHANGES ON CASH.....................................................        (81)        (38)       (66)
  Net increase (decrease) in cash...........................................................       (476)       (774)       696
Cash at beginning of year...................................................................      1,826       1,350        576
Cash at end of year.........................................................................   $  1,350         576      1,272
</TABLE>
 
          See accompanying notes to consolidated financial statements.
 
                                      18
 
<PAGE>
                     LADD FURNITURE, INC. AND SUBSIDIARIES
 
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
 
      YEARS ENDED JANUARY 1, 1994, DECEMBER 31, 1994 AND DECEMBER 30, 1995
<TABLE>
<CAPTION>
                                                                                                            UNAMORTIZED
                                                   NUMBER              ADDITIONAL    CURRENCY                VALUE OF
                                                  OF SHARES   COMMON    PAID-IN     TRANSLATION  RETAINED   RESTRICTED
                                                   ISSUED     STOCK     CAPITAL     ADJUSTMENT   EARNINGS      STOCK
<S>                                               <C>         <C>      <C>          <C>          <C>        <C>
                                                             DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA
BALANCE AT JANUARY 2, 1993......................  7,674,508   $2,302     48,681         (89)       98,489       (659)
  Shares issued in connection with incentive
     stock option plan..........................      3,890       1          90       --            --         --
  Shares issued in connection with and
     amortization of employee restricted
     stock awards...............................     10,321       3         415       --            --          (128)
  Currency translation adjustment...............     --        --         --            (81)        --         --
  Net earnings..................................     --        --         --          --            3,846      --
  Dividends paid................................     --        --         --          --           (2,767)     --
BALANCE AT JANUARY 1, 1994......................  7,688,719   2,306      49,186        (170)       99,568       (787)
  Shares issued in connection with incentive
     stock option plan..........................        782    --            19       --            --         --
  Repurchase of restricted stock................     (6,142)     (1 )      (170)      --            --           170
  Shares issued in connection with and
     amortization of employee restricted
     stock awards...............................     16,792       5         481       --            --          (200)
  Currency translation adjustment...............     --        --         --            (38)        --         --
  Net earnings..................................     --        --         --          --            4,308      --
  Dividends paid................................     --        --         --          --           (2,771)     --
BALANCE AT DECEMBER 31, 1994....................  7,700,151   2,310      49,516        (208)      101,105       (817)
  Repurchase of restricted stock................     (2,452)     (1 )       (68)      --            --            68
  Shares issued in connection with and
     amortization of employee restricted
     stock awards...............................     29,294       9         457       --            --          (106)
  Currency translation adjustment...............     --        --         --            (66)        --         --
  Reclassification to businesses held for
     sale.......................................     --        --         --            274         --         --
  Net loss......................................     --        --         --          --          (25,190)     --
  Dividends paid................................     --        --         --          --           (2,086)     --
BALANCE AT DECEMBER 30, 1995....................  7,726,993   $2,318     49,905       --           73,829       (855)
 
<CAPTION>
                                                      TOTAL
                                                  SHAREHOLDERS'
                                                     EQUITY
                                                    (NOTE 10)
<S>                                               <C>
BALANCE AT JANUARY 2, 1993......................     148,724
  Shares issued in connection with incentive
     stock option plan..........................          91
  Shares issued in connection with and
     amortization of employee restricted
     stock awards...............................         290
  Currency translation adjustment...............         (81)
  Net earnings..................................       3,846
  Dividends paid................................      (2,767)
BALANCE AT JANUARY 1, 1994......................     150,103
  Shares issued in connection with incentive
     stock option plan..........................          19
  Repurchase of restricted stock................          (1)
  Shares issued in connection with and
     amortization of employee restricted
     stock awards...............................         286
  Currency translation adjustment...............         (38)
  Net earnings..................................       4,308
  Dividends paid................................      (2,771)
BALANCE AT DECEMBER 31, 1994....................     151,906
  Repurchase of restricted stock................          (1)
  Shares issued in connection with and
     amortization of employee restricted
     stock awards...............................         360
  Currency translation adjustment...............         (66)
  Reclassification to businesses held for
     sale.......................................         274
  Net loss......................................     (25,190)
  Dividends paid................................      (2,086)
BALANCE AT DECEMBER 30, 1995....................     125,197
</TABLE>
 
          See accompanying notes to consolidated financial statements.
 
                                      19
 
<PAGE>
                              LADD FURNITURE INC.
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
  DESCRIPTION OF BUSINESS
 
     Following the completion of the restructuring described in note 2, the
Company continues to be one of the largest residential furniture manufacturers
in the United States with 20 manufacturing facilities in eight states. The
Company's products consist principally of casegoods and upholstery furniture in
a wide range of styles for bedrooms, family rooms, dining rooms and living rooms
in the low-medium to high-medium price ranges for the residential and contract
(principally hotel/motel) markets. Residential casegoods, residential upholstery
and contract products comprised approximately 46%, 20% and 11%, respectively, of
the Company's 1995 net sales. The Company currently sells to more than 8,000
customers, including retail furniture chains, national general retailers,
department stores, independent furniture retailers, major hotel chains and
others located throughout the United States and overseas.
 
  PRINCIPLES OF CONSOLIDATION
 
     The consolidated financial statements include the accounts of LADD
Furniture, Inc. and its subsidiaries, all of which are wholly-owned. All
significant intercompany balances and transactions have been eliminated in
consolidation.
 
  FISCAL YEAR
 
     The Company's fiscal year ends on the Saturday nearest the end of December.
Fiscal year 1993 ended January 1, 1994; fiscal year 1994 ended December 31,
1994; and fiscal year 1995 ended December 30, 1995.
 
  INVENTORIES
 
     Approximately 66% in 1994 and 71% in 1995 of the Company's inventories are
valued using the last-in, first-out (LIFO) cost method, which is not in excess
of market. All other inventories in 1994 and 1995 are valued at the lower of
first-in, first-out (FIFO) cost or market (net realizable value).
 
  PROPERTY, PLANT AND EQUIPMENT
 
     Property, plant and equipment are stated at cost. Depreciation of plant and
equipment is provided over the estimated useful lives of the respective assets
on the straight-line method. Estimated useful lives are 10 to 35 years for
buildings and improvements and 3 to 13 years for machinery and equipment.
 
     The Company accounts for any impairment of property, plant and equipment
under the provisions of Statement of Financial Accounting Standards No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of. This statement requires that long-lived assets be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of those assets may not be recoverable.
 
  REVENUE RECOGNITION
 
     Sales are recognized when products are shipped and invoiced to customers.
Monthly provision is made for doubtful receivables, discounts, returns and
allowances.
 
     Substantially all of the Company's accounts receivable are due from
retailers described above. Management periodically performs credit evaluations
of its customers and generally does not require collateral. The Company has no
concentrated credit risk with any individual customer.
 
  FOREIGN CURRENCY TRANSLATION
 
     Assets and liabilities of a foreign subsidiary being held for sale are
translated at year-end rates of exchange, and revenues and expenses are
translated at the average rates of exchange for the year. Gains and losses
resulting from translation were accumulated in a separate component of
shareholders' equity until June 1995, at which time the balance was transferred
to businesses held for sale. Gains and losses resulting from foreign currency
transactions are included in net earnings (loss).
 
  INCOME TAXES
 
     Deferred tax assets and liabilities are recognized for the temporary
differences between the financial statement carrying amounts and the tax bases
of the Company's assets, liabilities, and loss and tax credit carryforwards at
income tax rates
 
                                      20
 
<PAGE>
                              LADD FURNITURE INC.
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
 
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED
expected to be in effect when such amounts are realized or settled. The effect
on deferred tax assets and liabilities of a change in tax rates is recognized in
earnings in the period that includes the enactment date.
 
  EARNINGS PER SHARE
 
     On May 12, 1995, shareholders approved a one-for-three reverse split of the
Company's common stock which became effective May 16, 1995. All share and per
share data presented in the accompanying consolidated financial statements have
been restated for this one-for-three stock split. Earnings per share are
calculated based upon the weighted average number of common shares outstanding
during each fiscal year, as restated for the reverse stock split. The effect of
dilutive stock options on the calculation is insignificant in each of the fiscal
years presented.
 
  INTANGIBLE ASSETS
 
     Intangible assets consist principally of values assigned to patents,
furniture designs, trade names and the excess of cost over the assigned value of
net assets acquired. These assets are being amortized using the straight-line
method over periods of 15 to 40 years. The Company assesses the recoverability
of the excess of cost over the assigned value of net assets acquired by
determining whether the amortization of the balance over its remaining life can
be recovered through undiscounted future operating cash flows of the acquired
operations. The assessment of the recoverability of the excess of cost over the
assigned value of net assets acquired will be impacted if estimated future
operating cash flows are not achieved.
 
  PENSION AND OTHER POSTRETIREMENT PLANS
 
     The Company and several of its subsidiaries have defined benefit pension
plans covering qualified salaried and hourly employees. The benefits are based
on years of service and the employee's final average compensation before
retirement. The cost of these programs is being funded currently.
 
     The Company also provides certain health care benefits for certain retired
employees. The Company measures the costs of its obligation based on its best
estimate. The net periodic costs are recognized as employees render the services
necessary to earn the postretirement benefits.
 
  FAIR VALUE OF FINANCIAL INSTRUMENTS
 
     The carrying amount of cash, trade accounts receivable, prepaids and other
current assets, short-term bank borrowings, trade accounts payable and accrued
expenses and other current liabilities approximates fair value because of the
short maturity of these financial instruments.
 
     The fair value of the Company's long-term debt is estimated by discounting
the future cash flows at rates currently offered to the Company for similar debt
instruments of comparable maturities. The fair value of the Company's long-term
debt approximates the face value of the debt due to the variable interest rates
on the majority of long-term debt at December 30, 1995.
 
  USE OF ESTIMATES
 
     Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these consolidated financial
statements in conformity with generally accepted accounting principles. Actual
results could differ from those estimates.
 
NOTE 2: RESTRUCTURING AND PLANNED DIVESTITURES
 
     During the second quarter of 1995, the Company recorded a $25,696,000
non-cash restructuring charge as a result of the Company's plan to divest four
operating companies (Brown Jordan Company, Fournier Furniture, Daystrom
Furniture and Lea Lumber & Plywood), close four Company-owned retail stores, and
reorganize the remaining companies to improve operating performance. During the
fourth quarter of 1995, the Company recorded a $2,121,000 net decrease in
restructuring expense as a result of finalizing sales of two of the operating
companies and the revision of the fair value of the remaining two operating
companies. Also, during the fourth quarter of 1995, the Company recorded
additional charges of $1,264,000
 
                                      21
 
<PAGE>
                              LADD FURNITURE INC.
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
 
NOTE 2: RESTRUCTURING AND PLANNED DIVESTITURES -- CONTINUED
for executive severance resulting from the Company's decision to realign
management for its casegoods, upholstery and contract operations and $281,000 of
other miscellaneous expenses. The net restructuring charge of $25,120,000 for
the year ended December 30, 1995 consisted of: (a) $17,379,000 to write-down
businesses sold or held for sale to the estimated fair value, net of disposition
expenses; (b) $3,699,000 to increase reserves for costs associated with closing
four retail stores; (c) $2,614,000 to provide for severance expense and other
costs; and (d) $1,428,000 to write-down selected machinery to estimated fair
value because of changes in manufacturing processes.
 
     On December 29, 1995, the Company sold its wholly-owned subsidiary Brown
Jordan Company (Brown Jordan) and certain related intellectual property rights,
for $24,000,000 in cash and a 12% interest, on a fully diluted basis, in the
purchaser. The 12% interest in the purchaser, valued at $2,200,000, is recorded
at the lower of cost or market and is included in intangible and other assets in
the accompanying December 30, 1995 consolidated balance sheet. On December 29,
1995, the Company also sold substantially all of the assets of its Lea Lumber &
Plywood (LL&P) division, for cash of approximately $4,004,000 and a $1,000,000
subordinated note, which is included in intangible and other assets in the
accompanying December 30, 1995 consolidated balance sheet. The Company used the
net cash proceeds from the above divestitures to pay down its long-term debt.
The noncash proceeds were pledged by the Company as partial collateral for
long-term debt payable to its syndicate of banks.
 
     The Company has signed sales contracts for the remaining two operating
companies held for sale which are scheduled to close during the first quarter of
1996. The following information shows the components included in businesses held
for sale:
 
<TABLE>
<CAPTION>
                                                                                           DECEMBER 30,
                                                                                               1995
<S>                                                                                        <C>
                                                                                           IN THOUSANDS
Trade accounts receivable, net..........................................................     $  9,114
Inventories, net........................................................................       10,400
Other current assets....................................................................          413
Property, plant and equipment, net......................................................        9,186
Current liabilities.....................................................................       (4,454)
Long-term debt..........................................................................       (1,951)
Currency translation adjustment.........................................................          274
Total assets, net.......................................................................       22,982
Less adjustment to write-down businesses held for sale to the estimated fair value......      (14,930)
                                                                                             $  8,052
</TABLE>
 
     On February 26, 1996, the Company sold its wholly-owned subsidiary Fournier
Furniture, Inc. for cash and a subordinated note totalling approximately $10.0
million and the purchaser's assumption of approximately $1.9 million of
Industrial Revenue Bonds. The amount of the subordinated note is subject to
finalization of a post-closing working capital adjustment.
 
     Businesses held for sale are valued using management's best estimate of the
amounts expected to be realized on the sale of the two operating companies.
However, the amount the Company will ultimately realize could differ materially
from the amounts assumed in arriving at the loss on the write-down to the
estimated fair value.
 
     The following unaudited pro forma information shows consolidated operating
results for the periods presented as though the Company had divested the four
operating companies and closed four company-owned retail stores as of January 2,
1993, excluding the restructuring expense recorded during 1995:
 
<TABLE>
<CAPTION>
                                                                                     1993       1994       1995
<S>                                                                                <C>         <C>        <C>
                                                                                      IN THOUSANDS (UNAUDITED)
Net sales.......................................................................   $413,955    475,605    498,747
Earnings (loss) before interest and income taxes................................     10,331     11,486     (3,973)
</TABLE>
 
                                      22
 
<PAGE>
                              LADD FURNITURE INC.
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
 
NOTE 2: RESTRUCTURING AND PLANNED DIVESTITURES -- CONTINUED
     The costs charged against restructuring reserves associated with items (b)
and (c) in the first paragraph of the footnote above include the following:
 
<TABLE>
<CAPTION>
                                                                                                           1995
<S>                                                                                                    <C>
                                                                                                       IN THOUSANDS
Restructuring reserve, beginning....................................................................     $  6,313
Write-off of excess of cost over the assigned value of net assets acquired..........................       (1,037)
Write-off of leasehold improvements.................................................................         (215)
Lease termination costs.............................................................................         (406)
Write-down of equipment.............................................................................          (90)
Severance...........................................................................................         (184)
Other...............................................................................................         (417)
Restructuring reserve, December 30, 1995............................................................     $  3,964
</TABLE>
 
NOTE 3: ACQUISITION
 
     On January 31, 1994, the Company acquired The Pilliod Cabinet Company, a
manufacturer of promotionally priced casegoods furniture, by purchasing all of
the common stock of its parent company, Pilliod Holding Company (Pilliod), for
$24,259,000 cash (including acquisition expenses), the repayment of Pilliod debt
of $29,893,000, and the assumption of other long-term debt of $247,000. The
excess of cost over the assigned value of net assets acquired was approximately
$32,826,000 and is being amortized using the straight-line method over 40 years.
The acquisition was accounted for as a purchase and accordingly, the net assets
and operations of Pilliod have been included in the Company's consolidated
financial statements beginning on the acquisition date.
 
NOTE 4: ACCOUNTS RECEIVABLE SECURITIZATION PROGRAM
 
     During fiscal year 1994, the Company entered into a revolving accounts
receivable facility. The facility was revised in March 1995 and provides for the
true sale of a defined pool of trade accounts receivable through a wholly-owned
subsidiary to a third-party purchaser. Under the revised agreement, which
expires in March 1996, the maximum amount of the purchaser's investment can be
$40,000,000 and is subject to change based on the level of eligible receivables
and concentrations of receivables.
 
     At December 31, 1994 and December 30, 1995, the defined pool of trade
accounts receivable totaled approximately $42,848,000 and $46,430,000,
respectively, and the purchaser's investment totaled $32,485,000 and
$36,000,000, respectively. The purchaser's average investment for 1994 and 1995
was approximately $28,969,000 and $35,011,000, respectively. The net cash
proceeds from the sales of trade accounts receivable are reported as financing
activities in the accompanying consolidated statements of cash flows for the
years ended December 31, 1994 and December 30, 1995. The purchaser's investment
is reflected as a reduction of trade accounts receivables in the accompanying
consolidated balance sheets. At December 31, 1994 and December 30, 1995, the
Company retained an ownership interest in the receivables pool of approximately
$10,363,000 and $10,430,000, respectively, of which approximately $8,090,000 and
$9,065,000, respectively, was subordinate to that of the purchaser. The Company
maintains reserves which approximate the risk of loss relating to its interest
in the receivables. The Company's ongoing obligations with respect to the
receivables pool are limited to the subordinated portion of its ownership
interest.
 
     A portion of the cost of the accounts receivable securitization program is
based on the purchaser's level of investment and borrowing costs. The total cost
of the program, which aggregated $1,458,000 and $2,585,000 in 1994 and 1995,
respectively, is included in selling, general and administrative expenses in the
accompanying 1994 and 1995 consolidated statements of operations.
 
                                      23
 
<PAGE>
                              LADD FURNITURE INC.
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
 
NOTE 5: INVENTORIES
 
     A summary of inventories follows:
 
<TABLE>
<CAPTION>
                                                                                        DECEMBER 31,    DECEMBER 30,
                                                                                            1994            1995
<S>                                                                                     <C>             <C>
                                                                                                IN THOUSANDS
Inventories on the FIFO cost method:
  Finished goods.....................................................................     $ 65,046          50,847
  Work in process....................................................................       23,084          17,165
  Raw materials and supplies.........................................................       47,997          33,140
       Total inventories on FIFO cost method.........................................      136,127         101,152
Less adjustments of certain inventories to the LIFO cost method......................      (14,044)        (11,686)
                                                                                          $122,083          89,466
</TABLE>
 
NOTE 6: PROPERTY, PLANT AND EQUIPMENT
 
     A summary of property, plant and equipment follows:
 
<TABLE>
<CAPTION>
                                                                                        DECEMBER 31,    DECEMBER 30,
                                                                                            1994            1995
<S>                                                                                     <C>             <C>
                                                                                                IN THOUSANDS
Land and improvements................................................................     $  6,592           4,356
Buildings and improvements...........................................................       78,381          70,780
Machinery and equipment..............................................................       87,480          69,389
Construction in progress.............................................................        8,343           5,173
                                                                                           180,796         149,698
Less accumulated depreciation........................................................      (71,274)        (67,112)
                                                                                          $109,522          82,586
</TABLE>
 
NOTE 7: INTANGIBLE AND OTHER ASSETS
 
     A summary of intangible and other assets follows:
 
<TABLE>
<CAPTION>
                                                                                        DECEMBER 31,    DECEMBER 30,
                                                                                            1994            1995
<S>                                                                                     <C>             <C>
                                                                                                IN THOUSANDS
Excess of cost over the assigned value of net assets acquired........................     $ 57,038          54,879
Trade names..........................................................................       26,031          21,700
Furniture designs and patents........................................................        9,750           8,815
Other................................................................................        3,041           7,460
                                                                                            95,860          92,854
Less accumulated amortization........................................................      (12,013)        (13,195)
                                                                                          $ 83,847          79,659
</TABLE>
 
                                      24
 
<PAGE>
                              LADD FURNITURE INC.
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
 
NOTE 8: ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
 
     A summary of accrued expenses and other current liabilities follows:
 
<TABLE>
<CAPTION>
                                                                                        DECEMBER 31,    DECEMBER 30,
                                                                                            1994            1995
<S>                                                                                     <C>             <C>
                                                                                                IN THOUSANDS
Payrolls, commissions and employee benefits..........................................     $ 15,291         16,775
Other................................................................................       12,424         14,621
                                                                                          $ 27,715         31,396
</TABLE>
 
NOTE 9: SHORT-TERM BANK BORROWINGS AND LONG-TERM DEBT
 
     Short-term bank borrowings under a revolving credit facility with a bank
totaled $5,000,000 and $3,037,000 at December 31, 1994 and December 30, 1995,
respectively. Borrowings under the facility bear interest at a rate based on the
availability of bank funds, and the average borrowing rate in 1994 and 1995 was
4.85% and 6.70%, respectively.
 
     Long-term debt consists of the following:
 
<TABLE>
<CAPTION>
                                                                                        DECEMBER 31,    DECEMBER 30,
                                                                                            1994            1995
<S>                                                                                     <C>             <C>
                                                                                                IN THOUSANDS
Term loan due at various dates through October 19, 1999..............................     $ 75,000          48,100
Revolving credit loan, due October 19, 1999..........................................       61,100          59,000
Other indebtedness, primarily fixed-rate industrial revenue bonds, due through
  2009...............................................................................        8,171           5,807
     Total long-term debt............................................................      144,271         112,907
Less current installments of long-term debt..........................................          687             309
     Long-term debt, excluding current installments..................................     $143,584         112,598
</TABLE>
 
     On October 19, 1994, the Company entered into an amended and restated
credit agreement with a syndicate of banks which provided a $75,000,000
five-year term loan and a $115,000,000 five-year revolving credit loan. At
December 30, 1995, the Company had available approximately $53,000,000 for 
future borrowings under the revolving credit loan. Effective August 14, 1995, 
the credit agreement was further amended (the Amended Facility). The term loan 
portion of the Amended Facility requires quarterly repayment of $3,607,500 
commencing March 1997, with a final payment of the outstanding balance on 
October 19, 1999. In connection with amending the credit agreement, the 
Company in 1995 charged to operations approximately $525,000 in unamortized 
financing fees.
 
     The pricing of the Amended Facility is determined by a ratio of debt levels
to cash flows, as specified. At December 30, 1995, borrowings under the Amended
Facility bear interest at LIBOR (5.625%) plus 2 1/8%, prime (8.50%) plus 1 1/8%,
or at a lesser rate based on the availability of bank funds, and the Company
pays a commitment fee of 1/2% per annum on the unused portion of the revolving
credit loan. However, if prior to April 1, 1996 the Company reduces its term
loan balance by an additional $13,100,000, the interest rate on the Amended
Facility will be reduced by 1/8%. Borrowings under the Amended Facility are
unsecured but will become subject to a lien on substantially all the assets of
the Company effective March 30, 1996 if the term loan component of the facility
has not been reduced to $35,000,000 by that date. The Amended Facility requires
the maintenance of certain ratios pertaining to shareholders' equity and
operating earnings and contains covenants which relate to future borrowings,
liens on assets, specified amounts of consolidated net worth and capital
spending, and the operations of the Company. At December 30, 1995, the Company
was in compliance with all covenants under the Amended Facility.
 
     The industrial revenue bonds are secured by property, plant and equipment
with a depreciated cost of approximately $4,923,000 at December 30, 1995.
 
                                      25
 
<PAGE>
                              LADD FURNITURE INC.
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
 
NOTE 9: SHORT-TERM BANK BORROWINGS AND LONG-TERM DEBT -- CONTINUED
     The aggregate annual maturities of long-term debt during each of the five
fiscal years subsequent to December 30, 1995 are approximately as follows:
$309,000 in 1996; $14,678,000 in 1997; $14,742,000 in 1998; $78,330,000 in 1999;
and $4,763,000 in 2000.
 
     Interest paid by the Company in 1993, 1994 and 1995 amounted to
approximately $4,995,000, $8,014,000 and $12,218,000, respectively.
 
NOTE 10: EMPLOYEE STOCK PLANS
 
  STOCK OPTION PLAN
 
     Under incentive stock option plans, the Company grants nontransferable
stock options to officers, key management employees and nonemployee directors.
Options are generally granted at fair market value on the dates of grant. All
optionees were employees or directors of the Company on the date of grant and
throughout the term of the option except in the case of death, retirement, or
disability.
 
     A total of 788,889 shares were reserved for option under the previous and
current plans. Options granted prior to 1991 are generally exercisable at the
cumulative rate of 20% per year after one year from the date of grant. Options
granted subsequent to 1990 are exercisable at the cumulative rate of 25% per
year after one year from the date of grant. Options expire over a period not to
exceed ten years from the date of grant. Stock option activity during 1993, 1994
and 1995 follows:
 
<TABLE>
<CAPTION>
                                                                                      NUMBER OF     OPTION PRICE
                                                                                       SHARES         PER SHARE
<S>                                                                                   <C>          <C>
Outstanding at January 2, 1993.....................................................    183,218     $18.00 - $68.28
Granted in 1993....................................................................     45,367     $34.50 - $44.55
Exercised in 1993..................................................................     (3,890 )   $18.00 - $34.89
Cancelled in 1993..................................................................    (27,234 )   $18.00 - $68.28
Outstanding at January 1, 1994.....................................................    197,461     $21.75 - $48.39
Granted in 1994....................................................................    188,645     $17.25 - $33.00
Exercised in 1994..................................................................       (782 )   $         24.00
Cancelled in 1994..................................................................    (46,670 )   $17.25 - $43.14
Outstanding at December 31, 1994...................................................    338,654     $17.25 - $48.39
Granted in 1995....................................................................     40,882     $13.25 - $17.34
Cancelled in 1995..................................................................   (127,358 )   $17.25 - $48.39
Outstanding at December 30, 1995...................................................    252,178     $13.25 - $44.55
Exercisable at December 30, 1995...................................................     98,871     $17.25 - $44.55
</TABLE>
 
  RESTRICTED STOCK AWARDS
 
     The board of directors periodically awards restricted common stock to key
management employees. Vesting of such awards is subject to future service
requirements of five years from the date of each award. The difference between
cash paid by the employee for the awarded shares, generally par value, and the
market value of the shares as of the award date is amortized over the five-year
service requirement periods. During 1993, 1994 and 1995, the board of directors
awarded and issued 10,321, 16,792 and 29,294 shares, respectively.
 
NOTE 11: EMPLOYEE BENEFIT PLANS
 
  DEFINED BENEFIT PENSION PLANS
 
     The Company and several of its subsidiaries have noncontributory defined
benefit pension plans covering qualified salaried and hourly employees. The
plans covering qualified salaried employees provide pension benefits based on
the participant's final average salary before retirement. The plans covering
qualified hourly employees provide pension benefits based on years of service.
The Company's policy is to fund normal costs and amortization of prior service
costs.
 
                                      26
 
<PAGE>
                              LADD FURNITURE INC.
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
 
NOTE 11: EMPLOYEE BENEFIT PLANS -- CONTINUED
     In addition to the qualified plans, the Company has a nonqualified
retirement plan covering certain salaried employees. At December 31, 1994 and
December 30, 1995, the Company had approximately $450,000 and $538,000,
respectively, of assets available to fund future obligations of the nonqualified
plan. These assets are included in intangible and other assets, and the related
liability is included in deferred compensation and other liabilities in the
accompanying consolidated balance sheets. The liability for the nonqualified
retirement plan is reflected in the reconciliation of the funded status of the
plans below.
 
     The following sets forth the funded status of the plans:
<TABLE>
<CAPTION>
                                                                                                       DECEMBER 30,
                                                                            DECEMBER 31, 1994              1995
                                                                     ASSETS EXCEED     ACCUMULATED     ASSETS EXCEED
                                                                      ACCUMULATED    BENEFITS EXCEED    ACCUMULATED
                                                                       BENEFITS          ASSETS          BENEFITS
<S>                                                                  <C>             <C>               <C>
                                                                                      IN THOUSANDS
Actuarial present value of benefit obligations:
Vested benefit obligation..........................................    $ (30,247)           (973)         (21,463)
Accumulated benefit obligation.....................................    $ (30,819)         (1,442)         (21,797)
Projected benefit obligation for service rendered to date..........      (36,968)         (2,384)         (27,958)
Less plan assets at fair value, primarily equity and fixed
  income investment funds..........................................       35,798              --           25,921
Projected benefit obligation in excess of plan assets..............       (1,170)         (2,384)          (2,037)
Unrecognized net obligation (asset) at transition being amortized
  over 15 years....................................................         (572)             --               73
Unrecognized net (gain) loss.......................................       (1,023)            589           (1,214)
Unrecognized prior service cost....................................        1,933             534            1,396
Adjustment required to recognize minimum liability.................           --            (181)              --
Pension liability recognized in the consolidated balance
  sheets...........................................................    $    (832)         (1,442)          (1,782)
 
<CAPTION>
                                                                       ACCUMULATED
                                                                     BENEFITS EXCEED
                                                                         ASSETS
<S>                                                                  <C>
Actuarial present value of benefit obligations:
Vested benefit obligation..........................................      (18,623)
Accumulated benefit obligation.....................................      (19,037)
Projected benefit obligation for service rendered to date..........      (20,901)
Less plan assets at fair value, primarily equity and fixed
  income investment funds..........................................       17,384
Projected benefit obligation in excess of plan assets..............       (3,517)
Unrecognized net obligation (asset) at transition being amortized
  over 15 years....................................................         (568)
Unrecognized net (gain) loss.......................................        2,315
Unrecognized prior service cost....................................          644
Adjustment required to recognize minimum liability.................         (527)
Pension liability recognized in the consolidated balance
  sheets...........................................................       (1,653)
</TABLE>
 
     Net pension expense for the plans for 1993, 1994 and 1995 included the
following components:
 
<TABLE>
<CAPTION>
                                                                                                     1993       1994      1995
<S>                                                                                                 <C>        <C>       <C>
                                                                                                           IN THOUSANDS
Service costs-benefits earned during the period..................................................   $ 1,915     2,374     2,047
Interest cost on projected obligation............................................................     2,644     3,101     3,186
Return on assets.................................................................................    (4,737)     (121)   (9,036)
Amortization of unrecognized net obligation (asset) at transition and net deferrals..............     2,166    (2,522)    6,038
Net pension expense..............................................................................   $ 1,988     2,832     2,235
</TABLE>
 
     The Company also recorded in 1995 a net curtailment gain resulting from the
Brown Jordan and LL&P divestitures totalling approximately $692,000. This
curtailment gain was included in determining the restructuring expense in the
1995 consolidated statement of operations.
 
     The projected benefit obligation at December 31, 1994 and December 30, 1995
was determined using an assumed discount rate of 8.50% and 7.25%, respectively.
The salary plans assume a long-term rate of increase in compensation of 4.50% to
age 60, and 3% thereafter. The assumed long-term rate of return on plan assets
is 8.5%.
 
  DEFINED CONTRIBUTION PLANS
 
     The Company has savings plans for certain employees which qualify under
Section 401(k) of the Internal Revenue Code. The plans allow eligible employees
to contribute up to a fixed percentage of their compensation, with the Company
matching a portion of each employee's contributions. Company contributions under
the plans aggregated approximately $687,000 in 1993, $635,000 in 1994, and
$549,000 in 1995.
 
                                      27
 
<PAGE>
                              LADD FURNITURE INC.
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
 
NOTE 12: POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
 
     The Company has plans which provide for postretirement health care benefits
for certain employees. These benefits include major medical insurance with
deductible and coinsurance provisions. The Company pays all benefits on a
current basis and the plans are not funded.
 
     The components of the net postretirement benefit cost for 1993, 1994 and
1995 are as follows:
 
<TABLE>
<CAPTION>
                                                                                                       1993     1994     1995
<S>                                                                                                   <C>       <C>      <C>
                                                                                                            IN THOUSANDS
Service costs......................................................................................   $  439      286      232
Interest costs of benefit obligation...............................................................    1,611    1,132    1,252
Amortization of transition obligation..............................................................    1,031      759      759
                                                                                                      $3,081    2,177    2,243
</TABLE>
 
     The plans' funded status as of December 31, 1994 and 1995 was as follows:
 
<TABLE>
<CAPTION>
                                                                                                 1994       1995
<S>                                                                                            <C>         <C>
                                                                                                  IN THOUSANDS
Accumulated postretirement benefit obligation:
  Retirees..................................................................................   $ (9,758)   (10,329)
  Active participants eligible to retire....................................................     (3,739)    (4,191)
  Other active participants.................................................................     (1,921)    (2,480)
                                                                                                (15,418)   (17,000)
Unrecognized net (gain) loss................................................................     (1,078)       338
Unrecognized transition obligation being amortized over 20 years............................     13,665     12,906
Accrued postretirement benefit cost.........................................................   $ (2,831)    (3,756)
</TABLE>
 
     During 1994, the Company amended its retiree health care plan to limit the
Company's contributions and to eliminate benefits for certain employees. The
effect of these amendments was to reduce the December 31, 1994 accumulated
postretirement benefit obligation and the unrecognized transition obligation by
approximately $5,163,000. Additionally, the effect of the change was to reduce
the net postretirement cost by approximately $801,000 in both 1994 and 1995.
 
     The postretirement benefit obligation was determined by application of the
terms of the various plans using relevant actuarial assumptions. Health care
costs are projected to increase at annual rates ranging from 8.00% in 1995 down
to 5.50% in 1997 and thereafter. A one percent annual increase in these assumed
cost trend rates would increase the accumulated postretirement benefit
obligation at December 30, 1995 by approximately $788,000 and the service and
interest cost components of the net postretirement benefit cost for 1995 would
be approximately the same. The assumed discount rate used in determining the
accumulated postretirement benefit obligation at December 31, 1994 and December
30, 1995 was 8.50% and 7.25%, respectively.
 
                                      28
 
<PAGE>
                              LADD FURNITURE INC.
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
 
NOTE 13: INCOME TAXES
 
     Components of income tax expense (benefit) for 1993, 1994 and 1995 are as
follows:
 
<TABLE>
<CAPTION>
                                                                                                    1993      1994      1995
<S>                                                                                                <C>       <C>       <C>
                                                                                                          IN THOUSANDS
Current:
Federal.........................................................................................   $1,855     1,769     (4,650)
State...........................................................................................      492       144       (167)
                                                                                                    2,347     1,913     (4,817)
Deferred:
Federal.........................................................................................      199    (1,034)   (11,521)
State...........................................................................................       15      (170)    (1,898)
                                                                                                      214    (1,204)   (13,419)
                                                                                                   $2,561       709    (18,236)
</TABLE>
 
     The effective income tax rate on earnings (loss) before income taxes for
the years ended January 1, 1994, December 31, 1994 and December 30, 1995 was
40.0%, 14.1% and 42.0%, respectively. The actual income tax expense (benefit)
differs from the "expected" income tax expense (benefit) computed by applying
the Federal income tax rate of 34% to earnings (loss) before income taxes for
the years ended January 1, 1994, December 31, 1994 and December 30, 1995 as
follows:
 
<TABLE>
<CAPTION>
                                                                                                     1993     1994      1995
<S>                                                                                                 <C>       <C>      <C>
                                                                                                           IN THOUSANDS
Computed "expected" income tax expense (benefit).................................................   $2,178    1,706    (14,765)
Increases (reductions) due to:
  Restructuring and reorganization charges.......................................................       --       --     (1,664)
  State income taxes, net of Federal income tax benefit..........................................      335       28         53
  Amortization of the excess of cost over the assigned value of net assets acquired..............      250      463        587
  Expenses subject to percentage limitations.....................................................       45      130        117
  Utilization of capital loss carryforwards to offset income tax expense of realized
     capital gains...............................................................................       --     (913)    (1,655)
  Tax credits, net...............................................................................      (92)    (230)      (571)
  Donation of appreciated property...............................................................       --     (170)        --
  Foreign trade income exemptions................................................................      (99)    (154)      (193)
  Other..........................................................................................      (56)    (151)      (145)
Actual income tax expense (benefit)..............................................................   $2,561      709    (18,236)
</TABLE>
 
     During 1993, the effect of enacted changes in tax rates was to increase
deferred income tax expense by approximately $469,000.
 
     During the years ended January 1, 1994 and December 31, 1994, the Company
paid income taxes (net of refunds received) amounting to approximately
$1,863,000 and $2,030,000, respectively. During the year ended December 30,
1995, the Company received refunds (net of taxes paid) of approximately
$188,000. The Company expects to receive refunds of income taxes paid in the
three prior years as a result of the allowable carryback of the net operating
loss sustained in 1995.
 
                                      29
 
<PAGE>
                              LADD FURNITURE INC.
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
 
NOTE 13: INCOME TAXES -- CONTINUED
     The tax effects of temporary differences and tax loss carryforwards that
give rise to significant portions of deferred tax assets and liabilities consist
of the following:
 
<TABLE>
<CAPTION>
                                                                                        DECEMBER 31,    DECEMBER 30,
                                                                                            1994            1995
<S>                                                                                     <C>             <C>
                                                                                                IN THOUSANDS
Deferred tax liabilities:
  Inventories........................................................................     $ (7,226)         (7,092)
  Property, plant and equipment......................................................       (8,315)        (10,304)
  Intangible and other assets........................................................       (8,420)         (7,201)
  Other..............................................................................       (2,428)         (2,249)
     Total deferred tax liabilities..................................................      (26,389)        (26,846)
Deferred tax assets:
  Accounts receivable................................................................        1,727           1,854
  Inventories........................................................................          668           3,145
  Liabilities and reserves...........................................................        7,212          10,465
  Restructuring and reorganization...................................................           --           8,064
  Capital loss carryforwards.........................................................        1,674              --
  Net operating loss carryforwards...................................................        1,885           1,885
  Other..............................................................................          435             409
     Gross deferred tax assets.......................................................       13,601          25,822
  Valuation allowances...............................................................       (3,540)         (1,885)
     Total deferred tax assets.......................................................       10,061          23,937
Net deferred tax liability...........................................................     $(16,328)         (2,909)
</TABLE>
 
     Deferred taxes are classified in the accompanying consolidated balance
sheets as follows:
 
<TABLE>
<CAPTION>
                                                                                        DECEMBER 31,    DECEMBER 30,
                                                                                            1994            1995
<S>                                                                                     <C>             <C>
                                                                                                IN THOUSANDS
Prepaid expenses and other current assets............................................     $     --          2,528
Accrued expenses and other current liabilities.......................................       (1,080)            --
Deferred income taxes................................................................      (15,248)        (5,437)
                                                                                          $(16,328)        (2,909)
</TABLE>
 
     A valuation allowance was provided for the deferred tax assets related to
capital loss carryforwards existing as of December 31, 1994. At that date, the
Company had approximately $4,225,000 of capital loss carryforwards available to
offset future capital gains, for which there was a $1,655,000 valuation
allowance. The full amount of the capital loss carryforwards were utilized in
1995 to offset a like amount of realized capital gains, and the full valuation
allowance of $1,655,000 was reduced accordingly.
 
     In 1994, a valuation allowance was also provided for the deferred tax
assets related to acquired subsidiary net operating loss (NOL) carryforwards.
With the purchase of the Pilliod stock in January 1994, the Company recorded a
deferred tax asset of approximately $2,339,000 for Pilliod's NOL carryforwards
along with a valuation allowance of a like amount. NOL carryforwards of
approximately $1,150,000 were utilized later in 1994, and the valuation
allowance was reduced accordingly. The excess of cost over the assigned value of
net assets acquired decreased in 1994 approximately $453,000 in recognition of
the tax benefits resulting from the utilization of the NOL carryforwards. The
remaining NOL's of approximately $4,761,000 may be carried forward up to 13 more
years to offset future earnings, subject to normal annual limitations prescribed
by tax law. A valuation allowance of $1,885,000 remains in deferred taxes for
these unexpired NOL carryforwards. Tax benefits recognized subsequent to 1995
relating to the valuation allowance for deferred tax assets at December 30, 1995
will be applied to reduce the excess of cost over the assigned value of
Pilliod's net assets acquired.
 
                                      30
 
<PAGE>
                              LADD FURNITURE INC.
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
 
NOTE 13: INCOME TAXES -- CONTINUED
     The Company believes that it is more likely than not the results of future
operations will generate sufficient taxable income to realize the remaining
deferred tax assets.
 
NOTE 14: LEASES
 
     The Company leases manufacturing facilities, various warehouses, sales
offices and showrooms, as well as manufacturing, transportation and data
processing equipment under operating leases which expire at various dates
through 2026. Future minimum lease payments under noncancelable operating leases
as of December 30, 1995 are:
 
<TABLE>
<CAPTION>
                                                                                           IN THOUSANDS
<S>                                                                                        <C>
Fiscal year:
1996....................................................................................     $ 10,489
1997....................................................................................        9,298
1998....................................................................................        7,602
1999....................................................................................        6,752
2000....................................................................................        4,474
Thereafter..............................................................................        3,028
     Total..............................................................................     $ 41,643
</TABLE>
 
     In 1994 and 1995, the Company entered into sale leaseback agreements for
certain manufacturing equipment located at several of its manufacturing
facilities. These transactions have been recorded as sales. The cash proceeds
from the sales of approximately $14,566,000 and $6,691,000, respectively, were
used to repay long-term debt. The gains from the sales of approximately $683,000
and $323,000, respectively, have been recorded in the accompanying consolidated
balance sheets as deferred income and are being amortized into operations over
the term of the leases. Under the agreements, the Company will lease the
equipment over 69 months. The Company has the option to purchase the equipment
at the end of the lease terms.
 
     In February 1996, the Company repurchased $4,648,000 of leased equipment
utilizing long-term debt in connection with the divestiture of Fournier
Furniture.
 
     Rental expense for cancelable and noncancelable operating leases charged to
operations was as follows:
 
<TABLE>
<CAPTION>
                                                                                           IN THOUSANDS
<S>                                                                                        <C>
Fiscal year:
1993....................................................................................     $ 10,275
1994....................................................................................       11,459
1995....................................................................................       14,870
</TABLE>
 
     Rental expense includes contingent rentals based upon usage of
transportation equipment under cancelable and noncancelable operating leases
which totaled approximately $650,000 in 1993, $762,000 in 1994, and $618,000 in
1995.
 
NOTE 15: DEALER FINANCING ARRANGEMENT
 
     The Company has a cancelable financing arrangement whereby certain notes
receivable from furniture dealers are assigned with recourse to a bank. The
terms of the notes receivable, which are collateralized by inventories held by
the furniture dealers, range from 12 to 48 months with interest rates ranging
from 6% to prime plus 1 1/4%. Upon cancellation of the financing arrangement,
the bank retains the previously assigned notes receivable and, as such, the
notes receivable and related obligations under the dealer financing arrangement
are not recorded in the December 31, 1994 and December 30, 1995 consolidated
balance sheets. Total notes receivable assigned during fiscal 1993, 1994 and
1995 were approximately $7,503,000, $4,286,000 and $2,703,000, respectively.
 
     At December 30, 1995, the Company was contingently liable for approximately
$4,336,000 of receivables transferred with recourse to the bank under the dealer
financing arrangement for which the Company maintains a $2,800,000 letter of
credit agreement to fund any liabilities which might arise under the program. In
the opinion of management, adequate provision for potential losses under the
dealer financing arrangement has been included in the allowances for doubtful
receivables, discounts, returns and allowances in the accompanying consolidated
balance sheets.
 
                                      31
 
<PAGE>
                     LADD FURNITURE, INC. AND SUBSIDIARIES
 
                            SELECTED QUARTERLY DATA
 
          DOLLAR AND SHARE DATA IN THOUSANDS, EXCEPT PER SHARE AMOUNTS
<TABLE>
<CAPTION>
                                                                FISCAL 1994                            FISCAL 1995
                                                   4TH         3RD        2ND        1ST        4TH        3RD        2ND
                                                 QUARTER     QUARTER    QUARTER    QUARTER    QUARTER    QUARTER    QUARTER
<S>                                              <C>         <C>        <C>        <C>        <C>        <C>        <C>
OPERATING STATEMENT DATA
  Net sales...................................   $146,172    153,182    153,182    139,039    152,981    159,144    148,989
  Cost of sales...............................    122,242    123,640    122,657    113,455    125,379    130,549    133,492
    Gross profit..............................     23,930    29,542     30,525     25,584     27,602     28,595     15,497
  Selling, general and administrative
    expenses..................................     24,784    23,562     23,996     21,569     25,792     23,402     28,335
  Restructuring expense.......................         --        --         --         --       (576 )       --     25,696
    Operating income (loss)...................       (854)    5,980      6,529      4,015      2,386      5,193     (38,534)
  Other deductions (income):
    Interest expense..........................      2,771     2,328      2,206      1,634      3,152      2,997      2,846
    Other (net)...............................        793       445        524        (48 )      661        163      2,687
  Earnings (loss) before income taxes.........     (4,418)    3,207      3,799      2,429     (1,427 )    2,033     (44,067)
  Income tax expense (benefit)................     (2,121)      962      1,094        774     (1,645 )      142     (16,744)
    Net earnings (loss).......................   $ (2,297)    2,245      2,705      1,655        218      1,891     (27,323)
  Depreciation................................   $  3,896     3,626      3,476      3,145      2,780      2,677      3,555
  Amortization................................      1,205       864        893        707        804        755      1,304
  Cash dividends paid.........................        693       693        692        693        348        348        695
  Weighted average shares outstanding.........      7,700     7,700      7,697      7,690      7,729      7,726      7,725
PER SHARE DATA
  Net sales...................................   $  18.98     19.89      19.90      18.08      19.79      20.60      19.29
  Net earnings (loss).........................      (0.30)     0.29       0.35       0.22       0.03       0.24      (3.54)
  Cash dividends..............................       0.09      0.09       0.09       0.09       0.05       0.05       0.09
  Quarter-end book value......................      19.73     20.11      19.89      19.63      16.20      16.21      16.00
BALANCE SHEET DATA
  Net working capital.........................   $123,685    92,421     96,349     104,454    79,528     84,929     89,109
  Net property, plant and equipment...........    109,522    121,364    117,780    113,580    82,586     82,567     83,826
  Total assets................................    378,816    402,213    394,373    390,716    312,986    336,868    337,075
  Long-term debt..............................    143,584    125,782    126,967    130,635    112,598    140,182    145,287
  Shareholders' equity........................    151,906    154,821    153,138    151,104    125,197    125,224    123,578
RATIOS
  Gross profit margin.........................       16.4%     19.3       19.9       18.4       18.0       18.0       10.4
  Operating profit (loss) margin..............       (0.6)      3.9        4.3        2.9        1.6        3.3      (25.9)
  Return (loss) on sales......................       (1.6)      1.5        1.8        1.2        0.1        1.2      (18.3)
  Effective income tax rate...................       48.0      30.0       28.8       31.9        N/M        N/M       38.0
  Long-term debt to capitalization............       45.3      42.1       42.5       43.4       45.1       50.7       51.8
STOCK DATA
  High........................................   $  19.50     24.00      27.75      35.25      13.63      14.13      16.88
  Low.........................................      14.63     17.63      18.00      24.75      12.88      12.88      12.25
  Close.......................................      19.50     18.00      21.00      26.25      13.13      13.00      13.00
  Trading volume (shares).....................      2,859     1,613        778      1,223      1,203      1,423      2,523
 
<CAPTION>
                                                  1ST
                                                QUARTER
<S>                                              <C>
OPERATING STATEMENT DATA
  Net sales...................................  153,388
  Cost of sales...............................  126,560
    Gross profit..............................  26,828
  Selling, general and administrative
    expenses..................................  23,816
  Restructuring expense.......................      --
    Operating income (loss)...................   3,012
  Other deductions (income):
    Interest expense..........................   2,803
    Other (net)...............................     174
  Earnings (loss) before income taxes.........      35
  Income tax expense (benefit)................      11
    Net earnings (loss).......................      24
  Depreciation................................   3,659
  Amortization................................     895
  Cash dividends paid.........................     695
  Weighted average shares outstanding.........   7,705
PER SHARE DATA
  Net sales...................................   19.91
  Net earnings (loss).........................    0.00
  Cash dividends..............................    0.09
  Quarter-end book value......................   19.57
BALANCE SHEET DATA
  Net working capital.........................  133,260
  Net property, plant and equipment...........  109,014
  Total assets................................  389,056
  Long-term debt..............................  153,102
  Shareholders' equity........................  151,176
RATIOS
  Gross profit margin.........................    17.5
  Operating profit (loss) margin..............     2.0
  Return (loss) on sales......................     0.0
  Effective income tax rate...................    31.4
  Long-term debt to capitalization............    47.0
STOCK DATA
  High........................................   19.88
  Low.........................................   13.88
  Close.......................................   14.63
  Trading volume (shares).....................   4,450
</TABLE>
 
NOTES: Long-term debt excludes current installments. Pilliod Furniture included
       in consolidated results from its January 31, 1994 acquisition by LADD.
       Stock price and volume data for calendar quarters. N/M = Not Meaningful.
       All stock data has been adjusted to reflect the 1 for 3 reverse stock
       split effective May 16, 1995.
 
                                      32
 
<PAGE>
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 1995 and 1994.
 
                                    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. With the exception of the information specifically required by Items
10, 11, 12 and 13 of this Part III contained in the Company's proxy statement,
the Company's proxy statement is not incorporated by reference nor deemed to be
filed as a part of this report, including without limitation the Board
Compensation Committee Report on Executive Compensation required by Item 402(k)
of Regulation S-K and the Performance Graph required by Item 402(l) of
Regulation S-K.
 
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
 
     See reference to definitive proxy statement under Part III. See pages 4-5;
15 in the Company's definitive proxy statement.
 
ITEM 11. EXECUTIVE COMPENSATION
 
     See reference to definitive proxy statement under Part III. See pages 9-14
in the Company's definitive proxy statement.
 
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
     See reference to definitive proxy statement under Part III. See pages 2-3
in the Company's definitive proxy statement.
 
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
     See reference to definitive proxy statement under Part III. See pages 13-14
in the Company's definitive proxy statement.
 
                                      33
 
<PAGE>
                                    PART IV
 
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
 
<TABLE>
<CAPTION>
                                                                                                                   PAGE(S) IN THIS
                                                                                                                      FORM 10-K
 
<S>    <C>   <C>                                                                                                   <C>
(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, December 31, 1994, and
             December 30, 1995..................................................................................           16
 
             Consolidated Balance Sheets as of December 31, 1994 and December 30, 1995..........................           17
 
             Consolidated Statements of Cash Flows for the years ended January 1, 1994, December 31, 1994, and
             December 30, 1995..................................................................................           18
 
             Consolidated Statements of Shareholders' Equity for the years ended January 1, 1994, December 31,
             1994, and December 30, 1995........................................................................           19
 
             Notes to Consolidated Financial Statements.........................................................        20-31
 
             Independent Auditors' Report.......................................................................           15
 
       (2)   Index to Financial Statement Schedule:
 
             Independent Auditors' Report For the years ended January 1, 1994, December 31, 1994, and December
             30, 1995...........................................................................................         (F-1)
 
             II -- Valuation and Qualifying Accounts and Reserves...............................................         (F-2)
 
             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 the named executive officers of the registrant as
             required by Item 402(a)(2) of Regulation S-K
 
             Executive Employment Agreements with each of Richard R. Allen, Fred L. Schuermann, Jr., William S.
             Creekmuir, Kenneth E. Church, Donald L. Mitchell, and Michael P. Haley
 
             LADD Furniture, Inc. Supplemental Retirement Income Plan
 
             LADD Furniture, Inc. Long-Term Incentive Plan (1994)
 
             LADD Furniture, Inc. Long-Term Incentive Plan (1995)
 
             LADD Furniture, Inc. Long-Term Incentive Plan (1996)
 
             LADD Furniture, Inc. 1996 Management Incentive Plan
 
(b)    No reports on Form 8-K were filed in the last quarter of fiscal 1995.
 
(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 and as Exhibit 10.1 to Item 6
             of the Company's Quarterly Report on Form 10-Q for the quarter ended July 1, 1995, filed with the
             Commission on August 15, 1995)
 
             Enclosed as Exhibit 3.1 to this Annual Report on Form 10-K for the year ended December 30, 1995
 
             3.1 Bylaws (as amended March 5, 1996)
 
             10.  LADD Furniture, Inc. 1994 Incentive Stock Option Plan
 
             (Previously filed as Exhibit 10.1 to Item 6 of the Company's Quarterly Report on Form 10-Q for the
             quarter ended July 2, 1994, filed with the Commission on August 16, 1994)
</TABLE>
 
                                      34
 
<PAGE>
<TABLE>
<S>    <C>   <C>                                                                                                   <C>
             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)
 
             Employee Restricted Stock Purchase Agreement between the Company and Fred L. Schuermann, Jr. dated
             February 24, 1994
 
             Employee Restricted Stock Purchase Agreement between the Company and William S. Creekmuir dated
             February 24, 1994
 
             (Previously filed as Exhibits 10.3 and 10.4 to the Company's Annual Report on Form 10-K for the
             year ended January 1, 1994, filed with the Commission on March 31, 1994)
 
             Employee Restricted Stock Purchase Agreement between the Company and Fred L. Schuermann, Jr. dated
             March 2, 1995
 
             Employee Restricted Stock Purchase Agreement between the Company and William S. Creekmuir dated
             March 2, 1995
 
             (Previously filed as Exhibits 10.2 and 10.3 to the Company's Annual Report on Form 10-K for the
             year ended December 31, 1994, filed with the Commission on March 30, 1995.)
 
             Enclosed as Exhibits 10.1 - 10.6 to this Annual Report on Form 10-K for the year ended December 30,
             1995
 
             10.1 Employee Restricted Stock Purchase Agreement between the Company and Kenneth E. Church dated
                  February 28, 1991.
 
             10.2 Employee Restricted Stock Purchase Agreement between the Company and Kenneth E. Church dated
                  February 25, 1993.
 
             10.3 Employee Restricted Stock Purchase Agreement between the Company and Kenneth E. Church dated
                  February 24, 1994.
 
             10.4 Employee Restricted Stock Purchase Agreement between the Company and Kenneth E. Church dated
                  March 2, 1995.
 
             10.5 Employee Restricted Stock Purchase Agreement between the Company and Michael P. Haley dated
                  June 23, 1994.
 
             10.6 Employee Restricted Stock Purchase Agreement between the Company and Michael P. Haley dated
                  March 2, 1995.
 
             Executive Employment Agreement between the Company and Fred L. Schuermann, Jr. dated October 28,
             1994
 
             (Previously filed as Exhibit 10.2 to Item 6 of the Company's Quarterly Report on Form 10-Q for the
             quarter ended October 1, 1994, filed with the Commission on November 15, 1994)
 
             Enclosed as Exhibits 10.7 - 10.10 to this Annual Report on Form 10-K for the year ended December
             30, 1995
 
             10.7 Executive Employment Agreement between the Company and William S. Creekmuir dated December 1,
                  1995.
 
             10.8 Executive Employment Agreement between the Company and Kenneth E. Church dated May 22, 1995.
 
             10.9 Executive Employment Agreement between the Company and Donald L. Mitchell dated January 1,
                  1996.
 
             10.10 Executive Employment Agreement between the Company and Michael P. Haley dated March 5, 1996.
 
             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 Commission on June 2, 1989)
</TABLE>
 
                                      35
 
<PAGE>
<TABLE>
<S>    <C>   <C>                                                                                                   <C>
             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)
 
             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)
 
             Enclosed as Exhibit 10.11 - 10.13 to this Annual Report on Form 10-K for the year ended December
             30, 1995
 
             10.11 LADD Furniture, Inc. Long-Term Incentive Plan (1994)
 
             10.12 LADD Furniture, Inc. Long-Term Incentive Plan (1995)
 
             10.13 LADD Furniture, Inc. Long-Term Incentive Plan (1996)
 
             Amended and Restated Credit Agreement, dated as of October 19, 1994, between the Company,
             NationsBank of North Carolina, N.A. as agent, and each of the banks signatory to the Credit
             Agreement
 
             (Previously filed as Exhibit 10.1 to the Company's Current Report on Form 8-K, dated October 19,
             1994, filed with the Commission on November 14, 1994)
 
             First Amendment to Amended and Restated Credit Agreement dated as of February 16, 1995, between the
             Company, NationsBank, N.A., as agent and each of the banks signatory thereto.
 
             (Previously filed as Exhibit 10.4 to the Company's Report on Form 10-K for the year ended December
             31, 1994, filed with the Commission on March 30, 1995).
 
             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.
 
             (Previously filed as Exhibit 10.4 to Item 6 of the Company's Quarterly Report on Form 10-Q for the
             quarter ended April 1, 1995, filed with the Commission on May 10, 1995)
 
             Third Amendment to Amended and Restated Credit Agreement dated as of August 14, 1995, between the
             Company, NationsBank, N.A., as agent, and each of the banks signatory thereto.
 
             (Previously filed as Exhibit 10.4 of Item 6 of the Company's Quarterly Report on Form 10-Q for the
             quarter ended July 1, 1995, filed with the Commission on August 15, 1995.)
 
             Equipment Leasing Agreement dated as of December 15, 1994 between BOT Financial Corporation and the
             Company
 
             Equipment Leasing Agreement dated as of December 15, 1994 between UnionBanc Leasing Corporation and
             the Company
 
             (Previously filed as Exhibits 10.1 and 10.2 to Item 7 of the Company's Current Report on Form 8-K,
             dated December 28, 1994, filed with the Commission on January 15, 1995)
 
             Amendment No. 1 dated as of June 7, 1995 to the Equipment Leasing Agreement dated as of December
             15, 1994 between Unionbanc Leasing Corporation and the Company.
 
             Amendment No. 1 dated as of June 7, 1995 to the Equipment Leasing Agreement dated as of December
             15, 1994 between BOT Financial Corporation and the Company.
 
             Amendment No. 1 dated as of June 15, 1995 amending Lease Supplement No. One to the Equipment
             Leasing Agreement dated as of December 15, 1994 between BOT Financial Corporation and the Company.
 
             (Previously filed as Exhibits 10.2 - 10.4 to Item 6 of the Company's Quarterly Report on Form 10-Q
             for the quarter ended July 1, 1995, filed with the Commission on August 15, 1995)
 
             Transfer and Administration Agreement dated as of March 30, 1995, between Enterprise Funding
             Corporation, LADD Funding Corp., and LADD Furniture, Inc.
</TABLE>
 
                                      36
 
<PAGE>
<TABLE>
<S>    <C>   <C>                                                                                                   <C>
             Receivables Purchase Agreement dated as of March 30, 1995, between LADD Funding Corp. and LADD
             Furniture, Inc.
 
             Receivables Purchase Agreement dated as of March 30, 1995, between LADD Furniture, Inc.,
             Clayton-Marcus Company, Inc., Barclay Furniture Co., and Pilliod Furniture, Inc.
 
             (Previously filed as Exhibits 10.1 - 10.3 to Item 6 of the Company's Quarterly Report on Form 10-Q
             for the quarter ended April 1, 1995, filed with the Commission on May 10, 1995)
 
             Stock Purchase Agreement dated November 7, 1995 between LADD Furniture, Inc. and BJCL, Inc.
 
             First Amendment to Stock Purchase Agreement dated December 29, 1995 among LADD Furniture, Inc.,
             BJCL, Inc. and BJ Acquisition Corp.
 
             Agreement of Sale between BJIP, Inc. and Cherry Grove, Inc. dated December 29, 1995.
 
             Asset Purchase Agreement dated November 6, 1995 between LADD Furniture, Inc. and Lea Lumber &
             Plywood, L.L.C.
 
             First Amendment to Asset Purchase Agreement dated December 29, 1995 between LADD Furniture, Inc.
             and Lea Lumber & Plywood, L.L.C.
 
             (Previously filed as Exhibits 2.1 - 2.5 to the Company's Current Report on Form 8-K dated December
             29, 1995 filed with the Commission on January 16, 1996)
 
             Stock Purchase Agreement dated January 5, 1996 among LADD Furniture, Inc., Fournier Furniture, Inc.
             and Fournier Acquisition Co.
 
             First Amendment to Stock Purchase Agreement dated February 26, 1996 among LADD Furniture, Inc.,
             Fournier Furniture, Inc., Fournier Acquisition Co., and Furniture Acquisition Co.
 
             (Previously filed as Exhibits 2.1 and 2.2 to the Company's Current Report on Form 8-K dated
             February 26, 1996, filed with the Commission on March 12, 1996.)
 
             Enclosed as Exhibit 10.14 to this Annual Report on Form 10-K for the year ended December 30, 1995
 
             10.14 1996 Management Incentive Plan
 
             22.  Subsidiaries of Registrant
 
             American Drew, Inc., a North Carolina corporation
 
             American Furniture Company, Incorporated, a Virginia corporation
 
             Barclay Furniture Co., a Mississippi corporation
 
             Cherry Grove, Inc., a Delaware corporation (in process of being dissolved)
 
             Clayton-Marcus Company, Inc., a North Carolina corporation
 
             Kenbridge Furniture, Inc., a North Carolina corporation
 
             LFI Capital Management, Inc., a Delaware corporation
 
             LADD Contract Sales Corporation, a North Carolina corporation
 
             LADD Funding Corp., a Delaware corporation
 
             LADD International Sales Corp., a Barbados corporation
 
             LADD Transportation, Inc., a North Carolina corporation
 
             Lea Industries, Inc., a North Carolina corporation
 
             Lea Industries, Inc., a Tennessee corporation
 
             Lea Industries of Virginia, Inc., a Virginia corporation
 
             Lea Lumber and Plywood Co., a Virginia corporation
 
             Pennsylvania House, Inc., a North Carolina corporation
 
             Pilliod Furniture, Inc., a North Carolina corporation
</TABLE>
 
                                      37
 
<PAGE>
<TABLE>
<S>    <C>   <C>                                                                                                   <C>
             Enclosed as Exhibit 24.1 to this Annual Report on Form 10-K for the year ended December 30, 1995
 
             24.1 Consent of KPMG Peat Marwick LLP
 
             Enclosed as Exhibit 27.1 to this Annual Report on Form 10-K for the year ended December
 
             27.1 Financial Data Schedule (EDGAR version only)
</TABLE>
 
                                      38
 
<PAGE>
                                   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, thereunto duly authorized.
 
                                         LADD FURNITURE, INC.
                                         (Registrant)
 
                                         By: /s/ WILLIAM S. CREEKMUIR    3/28/96
                                           WILLIAM S. CREEKMUIR           (DATE)
                                           EXECUTIVE 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 dates indicated.
 
<TABLE>
<S>                                                           <C>
/S/ DON A. HUNZIKER                              3/28/96      /S/ RICHARD R. ALLEN                             3/28/96
DON A. HUNZIKER                                       (DATE)  RICHARD R. ALLEN                                      (DATE)
DIRECTOR                                                      DIRECTOR
 
/S/ O. WILLIAM FENN, JR.                          3/28/96     /S/ DARYL B. ADAMS                               3/28/96
O. WILLIAM FENN, JR.                                  (DATE)  DARYL B. ADAMS                                        (DATE)
DIRECTOR                                                      VICE PRESIDENT, CORPORATE CONTROLLER,
                                                              ASSISTANT SECRETARY, AND ASSISTANT
                                                              TREASURER (PRINCIPAL ACCOUNTING OFFICER)
 
/S/ THOMAS F. KELLER                             3/28/96      /S/ JAMES H. CORRIGAN, JR.                        3/28/96
THOMAS F. KELLER                                      (DATE)  JAMES H. CORRIGAN, JR.                                (DATE)
DIRECTOR                                                      DIRECTOR
 
/S/ WILLIAM B. CASH                              3/28/96      /S/ L. GLENN ORR, JR.                              3/28/96
WILLIAM B. CASH                                       (DATE)  L. GLENN ORR, JR.                                     (DATE)
DIRECTOR                                                      DIRECTOR
 
/S/ FRED L. SCHUERMANN, JR.                      3/28/96      /S/ WILLIAM S. CREEKMUIR                        3/28/96
FRED L. SCHUERMANN, JR.                               (DATE)  WILLIAM S. CREEKMUIR                                  (DATE)
PRESIDENT, CHIEF EXECUTIVE OFFICER AND                        EXECUTIVE VICE PRESIDENT, CHIEF
DIRECTOR                                                      FINANCIAL OFFICER, SECRETARY, AND TREASURER
                                                              (PRINCIPAL FINANCIAL OFFICER)
</TABLE>
 
                                      39