<PAGE>
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
 
                                   FORM 10-K
 
[X] 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 28, 1996
 
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 [X]      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   [X]
 
     Market value of 6,337,385 shares held by nonaffiliates as of March 6, 1997,
was $99,021,640.
 
     Indicate the number of shares outstanding of each of the registrant's
classes of Common Stock, as of the latest practicable date.
 
                7,719,567 shares outstanding as of March 6, 1997
 
                      DOCUMENTS INCORPORATED BY REFERENCE
 
     Portions of the definitive Proxy Statement for the 1997 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 wide range of residential wood and
upholstered furniture domestically under the major brand names American Drew,
Barclay, Clayton Marcus, Lea, Pennsylvania House and Pilliod, and exports these
same brand name products worldwide through LADD International. Under the
American of Martinsville brand name, LADD is also one of the world's leading
suppliers of guest room furniture to the hotel/motel industry, as well as to
health care facilities, retirement homes and governmental and university
dormitory markets. Based upon industry data published in the trade publication
FURNITURE DESIGN AND MANUFACTURING, LADD is currently the seventh 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 28, 1996.
 
SIGNIFICANT DEVELOPMENTS IN 1996
 
     COMPLETION OF REFINANCING -- On July 12, 1996, the Company completed a new
$190 million secured financing facility underwritten by a bank group led by
NationsBank, N.A. (South). The credit facility originally consisted of a $125
million three-year revolving credit facility and a $65 million term loan and is
secured by a first priority lien on substantially all of the assets of the
Company and its subsidiaries. The credit facility was used to refinance the
Company's existing credit facility and provide additional liquidity. On January
1, 1997, the Company reduced the availability of the revolving credit portion of
the facility to $110 million.
 
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, love seats, 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 sold its furniture in 1996
internationally to customers in over 50 countries.
 
  CASEGOODS GROUP
 
     American Drew manufactures and sells medium-priced wood residential
furniture. The products include various types of bedroom furniture (beds,
dressers, nightstands, mirrors, armoires, and dressing tables), dining room
furniture (tables, chairs, buffets, chinas, and serving pieces), living room and
family room occasional pieces (desks, end tables, coffee tables, entertainment
units, wall units, and secretaries), and computer furniture for the home (desks,
files and bookshelves). 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,
nightstands, mirrors, desks, bookshelves, hutches, armoires, and correlated
modular furniture in a variety of styles, including traditional, transitional
and contemporary. 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" brand name primarily to
national and regional furniture 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.
 
                                       2
 
<PAGE>
     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 220
independent furniture retailers in the United States, Japan and Mexico. In 1996,
the distribution of Pennsylvania House products was expanded to include
furniture retailers without galleries. Pennsylvania House - Casegoods operates
two manufacturing plants located in Lewisburg and White Deer, PA.
 
     Pilliod Furniture manufactures and markets a wide range of
promotionally-priced contemporary and traditional wood residential furniture,
including master bedroom products, occasional tables, home office products,
entertainment centers, wall systems, and casual dining room products. 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.
 
  UPHOLSTERY GROUP
 
     Barclay Furniture manufactures and sells moderately-priced upholstered
residential furniture, including sofas, love seats, 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, love seats, 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.
 
     Pennsylvania House also manufactures a full line of upholstered residential
furniture which sells in the upper-medium price range. Pennsylvania House -
Upholstery operates one leased manufacturing plant located in Monroe, NC.
 
  CONTRACT SALES
 
     American of Martinsville manufactures wood and upholstered residential
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.
 
  OTHER
 
     LADD Transportation, Inc. operates a modern fleet of over-the-road tractors
and trailers that are used to provide transportation services to LADD's
casegoods companies to meet the special needs of LADD's customers. LADD
Transportation, together with fleets operated by LADD's Upholstery Group,
provides approximately 30% 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
 
                                       3
 
<PAGE>
furniture customers. No single customer accounted for more than 8% of net sales
in 1996. 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, particleboard, 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 1996 fiscal
year end was approximately $75.1 million, as compared to $83.1 million at 1995
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.
 
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 800 manufacturers of residential furniture in the
United States, some of which include furniture types not manufactured by the
Company. Competition within the market for wood, upholstered and metal furniture
occurs principally in the areas of style or design, quality, price, and service.
 
     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, its Pilliod Furniture subsidiary is
the only operation 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. In 1996, the Company imported approximately
$16.4 million of finished furniture and unfinished furniture parts.
 
     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, the Resource Conservation and
Recovery Act, the Federal Water Pollution Control Act
 
                                       4
 
<PAGE>
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, 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 has investigated and evaluated 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 had approximately 5,900 employees as of March 1, 1997.
Substantially all of the employees were employed on a full-time basis.
 
     Employees at four Company plants are represented by various labor unions.
The Company considers its relations with its employees to be good.
 
EXPORT SALES
 
     In 1996, the Company's export sales decreased to $28.4 million
(approximately 5.7% of 1996 net sales), from $37.5 million in 1995
(approximately 6.3% of 1995 net sales). The Company's export sales in 1994 were
$33.8 million, or approximately 5.7% of 1994 net sales. Excluding the operating
companies divested in 1995 and 1996, export sales were 5.7% of net sales in each
year. 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 21, 1997.
 
                                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                    409,000       Owned
                                    N. Wilkesboro, NC    Manufacturing                    414,000       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                    286,380       Owned
                                    Morristown, TN       Manufacturing/Office             139,200       Owned
                                    Morristown, TN       Distribution                     160,000       Leased    4/01/99
                                    Morristown, TN       Distribution                      97,500       Leased    10/31/98
                                    Waynesville, NC      Manufacturing/Office             447,400       Owned
                                    Marion, VA           Manufacturing/Office             204,900       Owned
                                    Lewisburg, PA        Manufacturing/Office/Dist.       614,100       Owned
                                    White Deer, PA       Manufacturing/Dist.              128,000       Owned
                                    Selma, AL            Manufacturing                    310,000       Owned
                                    Nichols, SC          Manufacturing                    350,000       Owned
                                    Swanton, OH          Manufacturing                    290,000       Owned
                                    Mullins, SC          Warehouse                         20,000       Leased    mo-to-mo
                                    High Point, NC       Office                            11,100       Leased    4/30/98
Upholstery.......................   Sherman, MS          Manufacturing/Office             302,650       Owned
                                    Myrtle, MS           Manufacturing                    152,600       Owned
                                    Hickory, NC          Manufacturing/Office/Dist.       359,600       Owned
                                    Hickory, NC          Manufacturing                    121,800       Owned
                                    Hickory, NC          Manufacturing                    152,900       Owned
                                    Monroe, NC           Manufacturing                    258,000       Leased    3/31/04
Contract Sales...................   Chilhowie, VA        Manufacturing/Office             530,000       Owned
                                    Martinsville, VA     Manufacturing                    850,000       Owned
                                    Martinsville, VA     Office                            50,000       Leased    5/31/97
                                    Martinsville, VA     Warehouse                        135,000       Leased    9/30/97
Corporate........................   High Point, NC       Office                            38,000       Leased    11/30/97
</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, Sherman and Tupelo, MS, and Martinsville, VA.
 
     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 120 tractors and 270
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. (now known as Brown Jordan International,
Inc.) ("BJII") dated as of November 7, 1995 under which BJII acquired Brown
Jordan from the Company, BJII 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 March 1997, approximately $300,000 had been expended by the
Company on the El Monte site and approximately $60,000 of other contractual
indemnification claims had been incurred. Accordingly, if no other claims are
made by BJII under the Brown Jordan Agreement, the next $340,000 of costs
associated with Brown Jordan environmental claims will be paid by BJII.
 
     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 1996.
 
                                       7
 
<PAGE>
                                    PART II
 
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS
 
     STOCK TRANSFER AGENT:
 
     Wachovia Bank of North Carolina, 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 1996, the Company had approximately 4,000
shareholders based upon approximately 640 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>
     Cantor, Fitzgerald & Co.                                   Mayer & Schweitzer
     Dillon, Read & Co.                                         Raymond, James & Associates
     Herzog, Heine, Geduld                                      Robinson Humphrey
     Huntleigh Securities Corp.                                 Sherwood Securities Corp.
     Interstate/Johnson Lane                                    Southwest Securities, Inc.
     Jefferies & Company, Inc.                                  Troster Singer Corp.
     Legg Mason Wood Walker                                     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>
                                                                        FISCAL      FISCAL      FISCAL      FISCAL      FISCAL
                                                                         1992        1993        1994        1995        1996
<S>                                                                    <C>          <C>         <C>         <C>         <C>
     OPERATING STATEMENT DATA
       Net sales....................................................   $483,480     507,586     576,549     599,203     497,457
       Cost of sales................................................    388,937     414,730     468,881     502,999     411,697
         Gross profit...............................................     94,543      92,856     107,668      96,204      85,760
       Selling, general and administrative expenses.................     78,493      81,953      93,911     101,345      74,363
       Restructuring expense........................................         --          --          --      25,120       3,431
       Operating income (loss)......................................     16,050      10,903      13,757     (30,261)      7,966
       Other (income) deductions:
         Interest expense...........................................      7,502       5,542       8,939      11,798      12,069
         Other (net)................................................        278      (1,046)       (199)      1,367         399
       Earnings (loss) before income taxes..........................      8,270       6,407       5,017     (43,426)     (4,502)
       Income tax expense (benefit).................................      3,725       2,561         709     (18,236)     (2,032)
       Net earnings (loss)..........................................   $  4,545       3,846       4,308     (25,190)     (2,470)
       Depreciation.................................................   $  9,151      10,508      14,143      12,671      10,887
       Amortization.................................................      2,848       2,554       3,669       3,758       4,444
       Cash dividends paid..........................................         --       2,767       2,771       2,086          --
       Weighted average shares outstanding..........................      7,148       7,686       7,697       7,721       7,722
     PER SHARE DATA
       Net sales....................................................   $  67.64       66.04       74.91       77.61       64.42
       Net earnings (loss)..........................................       0.64        0.50        0.56       (3.26)      (0.32)
       Cash dividends...............................................         --        0.36        0.36        0.27          --
       Year-end book value..........................................      19.38       19.52       19.73       16.20       15.94
     BALANCE SHEET DATA
       Net working capital..........................................   $117,693     123,004     123,685      79,528      97,916
       Net property, plant and equipment............................     83,609      97,497     109,522      82,586      74,729
       Total assets.................................................    315,649     335,737     378,816     312,986     313,595
       Total debt...................................................     92,573     111,072     149,271     115,944     130,952
       Shareholders' equity.........................................    148,724     150,103     151,906     125,197     123,076
     RATIOS, OTHER
       Gross profit margin..........................................       19.6%       18.3        18.7        16.1        17.2
       Operating profit (loss) margin...............................        3.3%        2.1         2.4        (5.0)        1.6
       Return (loss) on sales.......................................        0.9%        0.8         0.8        (4.2)       (0.5)
       Effective income tax rate....................................       45.0%       40.0        14.1        42.0        45.1
       Dividend payout ratio........................................         --        71.9        64.3         N/M          --
       Return (loss) on beginning assets............................        1.5%        1.2         1.3        (6.6)       (0.8)
       Return (loss) on beginning equity............................        4.1%        2.6         2.9       (16.6)       (2.0)
       Total debt ratio.............................................       38.4%       42.5        49.6        48.1        51.6
       Current ratio................................................        3.1x        3.1         3.0         2.3         2.6
       Inventory turnover ratio.....................................        4.6x        4.2         4.2         4.8         4.7
       Asset turnover ratio.........................................        1.5x        1.6         1.6         1.7         1.6
       Year-end employees (actual number)...........................      6,940       6,670       7,860       6,880       5,800
       Sales per employee (000's)...................................   $   73.4        75.0        75.9        77.0        79.8
     STOCK DATA
       High.........................................................   $  36.00       44.25       35.25       19.88       15.75
       Low..........................................................      18.75       22.50       14.63       12.25        9.50
       Close........................................................      31.50       30.00       19.50       13.13       14.63
       Trading volume (shares)......................................      6,586       8,260       6,473       9,599       8,000
</TABLE>
 
     NOTES: Total debt ratio is defined as total debt to total debt plus
            shareholders' equity. Fiscal year 1992 comprised 53 weeks; all other
            years comprised 52 weeks. Stock price data is for calendar years.
            N/M = Not meaningful. Sales per employee based on monthly employee
            average. 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. Fiscal year 1995 reflects the
            sale of Brown Jordan Company and Lea Lumber & Plywood-effective
            December 29, 1995. Fiscal 1996 reflects the sale of Fournier
            Furniture-effective February 26, 1996; and the liquidation of
            Daystrom Furniture beginning June 28, 1996. Fiscal 1994 and 1995
            reflect the Company's accounts receivable securitization program
            which commenced January 31, 1994 and terminated on March 28, 1996.
 
                                       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>
                                                                                                        1994     1995     1996
<S>                                                                                                     <C>      <C>      <C>
Net sales............................................................................................   100.0%   100.0%   100.0%
Cost of sales........................................................................................    81.3     83.9     82.8
  Gross profit.......................................................................................    18.7     16.1     17.2
Selling, general and administrative expenses.........................................................    16.3     16.9     14.9
Restructuring expense................................................................................    --        4.2      0.7
  Operating income (loss)............................................................................     2.4     (5.0)     1.6
Other deductions, net................................................................................     1.5      2.2      2.5
  Earnings (loss) before income taxes................................................................     0.9     (7.2)    (0.9)
Income tax expense (benefit).........................................................................     0.1     (3.0)    (0.4)
  Net earnings (loss)................................................................................     0.8%    (4.2)%   (0.5)%
</TABLE>
 
     Statements included in Management's Discussion and Analysis of Financial
Condition and Results of Operations which are not historical in nature, are
intended to be, and are hereby identified as, "forward looking statements" for
purposes of the safe harbor provided by Section 21E of the Securities Exchange
Act of 1934, as amended. The Company cautions readers that forward looking
statements, including without limitation, those relating to sales, operating
costs, working capital, liquidity, capital needs and interest costs, are subject
to certain risks and uncertainties that could cause actual results to differ
materially from those indicated in the forward looking statements, due to
several important factors herein identified, principally anticipated growth in
sales and decreased interest expense, and other risks and factors identified
from time to time in the Company's reports filed with the Securities Exchange
Commission.
 
     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 28, 1996.
 
FISCAL 1995 AND 1996 RESTRUCTURING OF THE COMPANY
 
     During 1995, the Company recorded a net $25.1 million non-cash
restructuring charge. The restructuring charge resulted from the Company's
decision to divest four operating companies (businesses held for sale -- the
"divestiture companies"), close four Company-owned retail stores, and reorganize
the remaining companies to improve operating performance. The net restructuring
charge consisted of: (a) $17.4 million to write-down businesses sold or held for
sale to their estimated fair value, net of disposition expenses; (b) $3.7
million to increase reserves associated with closing the four retail stores; (c)
$2.6 million to provide for severance and other expenses; and (d) $1.4 million
to write-down selected machinery to estimated fair value because of changes in
manufacturing processes. In December 1995, the Company sold two of the
businesses held for sale for a combination of cash proceeds aggregating $28.0
million, a 12% interest (valued at $2.2 million) in the purchaser of one of the
businesses, and a $1.0 million subordinated note. As part of the 1995
restructuring, the Company's operations were reorganized along its three product
lines: (i) the Casegoods Group; (ii) the Upholstery Group; and (iii) the
Contract Sales Group.
 
     In 1996, the Company recorded aggregate non-cash restructuring charges
(net) of $3.4 million which consisted of: (i) $4.2 million in the first quarter
due to the necessity to liquidate versus sell one of the remaining businesses
and a shortfall in anticipated proceeds on the other business; (ii) $0.9 million
in the first quarter for severance related to continued restructuring of the
Company (of which $130,000 related to restricted stock awards was credited to
shareholders' equity); and (iii) $1.7 million aggregate credits recorded in the
second, third and fourth quarters as a result of proceeds from the liquidation
of idle assets held for sale exceeding earlier estimates. In February 1996, the
Company sold one of its divestiture companies for a combination of approximately
$8.9 million in cash, a subordinated note totalling $1.1 million, and the
purchaser's assumption of $1.9 million of Industrial Revenue Bonds. Effective
June 1996, the Company closed its last
 
                                       10
 
<PAGE>
divestiture company and subsequently liquidated for cash substantially all the
inventory, machinery and equipment. In December 1996, the Company sold the
manufacturing plant of the business for cash and a note receivable.
 
     Management believes the actions represented by these charges have
repositioned the Company to achieve improved operating performance within the
U.S. residential furniture manufacturing industry.
 
FISCAL 1996 COMPARED TO 1995
 
     Consolidated net sales for fiscal 1996 decreased $101.7 million, or 17.0%,
to $497.5 million from $599.2 million in 1995. On a pro forma basis, excluding
the four divestiture companies and the company-owned retail stores closed in
1995, fiscal 1996 consolidated net sales would have decreased by 0.3%. Of the
$481.9 million in net sales recorded during fiscal 1996 by the ongoing
businesses, residential casegoods totalled approximately $277.4 million,
residential upholstery totalled approximately $124.3 million, and contract sales
totalled approximately $80.2 million. The Company's total residential upholstery
sales for fiscal 1996 were flat with fiscal 1995, while total residential
casegoods sales for the year decreased $7.0 million, or 2.5 %, from fiscal
1995's level. Net sales of the Company's contract sales business, including the
sale of accessories, rose $11.7 million in 1996, or 17.1%, compared to the prior
year. The Company's residential casegoods and upholstery sales trends in 1996
were below those estimated for the industry, largely due to the Company's
decision to discontinue selling to certain accounts with unsatisfactory margins.
The 1996 sales growth in the contract business exceeded sales trends estimated
in the hospitality sector, where hotels/motels continue to refurbish rooms at an
accelerated pace. The Company anticipates that the 1997 sales growth rate for
its casegoods and upholstery businesses will be more in line with that of the
industry, and that the sales growth rate for its contract business will exceed
that of casegoods and upholstery.
 
     In 1996, the Company's export sales decreased to $28.4 million (5.7% of net
sales), from $37.5 million in 1995 (6.3% of net sales). Excluding the
divestiture companies and the four company-owned retail stores, export sales
would have been 5.7% of net sales in both 1995 and 1996. Export sales will
continue to be a focus of the Company and are expected to increase generally at
a faster rate than domestic sales.
 
     Cost of sales decreased by $91.3 million, or 18.2%, in fiscal 1996 and
represented 82.8% of net sales, down from 83.9% of net sales in fiscal 1995. On
a pro forma basis, excluding the divestiture companies and the company-owned
retail stores, cost of sales decreased to 82.1% of net sales in 1996, from 84.2%
of net sales in 1995. Cost of sales in 1996 was positively impacted by the
Company's decision to curtail health care benefits to retirees and to terminate
its qualified defined benefit pension plan. As more fully discussed in notes 10
and 11 to the consolidated financial statements, these two actions in the
aggregate resulted in a $4.4 million decrease in cost of sales. The Company
estimates that, on an ongoing basis, the elimination of these two employee
benefits will save the Company over $3.0 million annually. Excluding the
divestiture companies and the company-owned retail stores, the above mentioned
nonrecurring 1996 transactions, and non-cash charges totalling $5.3 million
recorded in 1995, cost of sales was 83.1% of net sales in both 1996 and 1995.
Negatively impacting margins in 1996 and 1995 were production decreases of 5.8%
and 7.5%, respectively, to reduce inventory levels of the casegoods group,
resulting in high amounts of unabsorbed fixed overhead costs. The Company
believes that 1997 gross margins will improve over the 1996 pro forma gross
margin of 16.9% as a result of new product introductions, increased sales and
increased production levels.
 
     Selling, general and administrative (SG&A) expenses were 14.9% of net sales
in 1996, compared to 16.9% of net sales in fiscal 1995. On a pro forma basis,
excluding the divestiture companies and the company-owned retail stores, SG&A
expenses were 14.8% of net sales in 1996, compared to 16.2% of net sales in
1995. This decrease was primarily attributable to the second quarter 1995
non-cash charge (totalling $2.3 million) to increase the Company's bad debt
reserves and provide for other miscellaneous expenses, as well as to higher
costs in 1995 associated with the Company's accounts receivable securitization
program, which was in place for all of 1995 and terminated at the end of 1996's
first quarter. SG&A expenses also declined during 1996 as a result of an
approximate 10.0% reduction in the Company's salaried work force, consolidation
of certain administrative functions, and cutbacks in advertising. The Company
anticipates that 1997 SG&A expenses will be in the range of 14.0%-14.5% of net
sales.
 
     Other deductions increased in the aggregate to 2.5% of fiscal 1996's net
sales from 2.2% in the prior year. Interest expense, as a percent of net sales,
was 2.4% in 1996 compared to 2.0% in 1995 due to higher interest rates. Other
deductions in 1996 were positively impacted by a $1.7 million insurance
settlement. Other deductions in 1996 and 1995 included non-cash charges
totalling $0.9 million and $2.2 million, respectively, attributable to the
write-off of unamortized financing costs and other noncurrent assets, and the
recognition of other liabilities. The Company believes its 1997 interest expense
will decrease due to lower outstanding average borrowings and an anticipated
decrease in the Company's effective interest rate, both of which are directly
dependent upon improved profitability and cash flow.
 
                                       11
 
<PAGE>
     The principal reason for the increase in the Company's effective tax
benefit rate to 45.1% in fiscal 1996 from 42.0% in the previous year was the
realization of tax benefits from the utilization of research and experimentation
tax credits. The Company's combined effective Federal and state tax rate for
1997 is expected to approximate 39.0%.
 
FISCAL 1995 COMPARED TO 1994
 
     Consolidated net sales for fiscal 1995 rose $22.7 million, or 3.9%, to a
record $599.2 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 $22.7 million consisted
of a $22.9 million, or 5.0%, increase in net sales of the ongoing businesses,
partially offset by a cumulative decline of $0.2 million, or 0.2%, in net sales
of the businesses sold or being held for sale in 1995.
 
     Of the $483.4 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 $6.0 million, represented
"other" business, primarily revenues 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.
 
     Cost of sales increased by $34.1 million, or 7.3%, in fiscal 1995 and
represented 83.9% of net sales in the most recent year, up from 81.3% 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 that had previously been 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 remained 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) incurred 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 16.1%, compared to fiscal 1994's
18.7% gross margin.
 
     Selling, general and administrative (SG&A) expenses rose to 16.9% of net
sales, compared to 16.3% 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
receivable 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 2.2% of fiscal 1995's net
sales from 1.5% 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, which resulted in a
significantly higher borrowing rate for the Company beginning in August 1995.
 
     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 and
various beneficial tax credits.
 
LIQUIDITY AND CAPITAL RESOURCES
 
     In July 1996, the Company refinanced its long-term and short-term bank
credit facility with a new credit facility (the "Facility") which consisted of a
$125.0 million three-year revolving credit loan and a $65.0 million term loan.
On January 1, 1997, the Facility was amended to reduce the revolving credit loan
to $110.0 million. The Facility is secured by substantially all the assets of
the Company, including equipment, inventory, receivables and real property.
Borrowings under the Facility bear interest at rates selected periodically by
the Company of LIBOR plus 2.75%, or prime plus 1.75%, for the revolving credit
loan, and LIBOR plus 3.00%, or prime plus 2.00%, for the term loan. The interest
rate margin over LIBOR and prime can be reduced upon the Company meeting a
financial ratio related to operating cash flow and debt levels. The term loan is
to be repaid in forty quarterly installments of $1,625,000, of which the first
installment was paid in December 1996. The
 
                                       12
 
<PAGE>
Facility restricts the amount of the Company's capital spending, lease
obligations, borrowings, and the payment of dividends. Due to the refinancing,
unamortized financing costs of $890,000 were charged to operations in 1996. In
connection with the refinancing, the Company incurred fees and expenses
aggregating approximately $4.0 million which will be amortized over the terms of
the Facility.
 
     Effective March 28, 1996, the Company's trade accounts receivable
securitization program was terminated in anticipation of the above mentioned
refinancing. At December 30, 1995, the Company had generated cash of $36.0
million from the securitization program which was subsequently replaced with
borrowings under the Company's long-term credit facility.
 
     On December 28, 1996, net working capital totalled $97.9 million and the
current ratio was 2.6:1. Both of these financial measures increased over the
prior year primarily due to the above mentioned termination of the accounts
receivable securitization program, offset somewhat by a decrease in inventories
and prepaid expenses aggregating approximately $12.9 million.
 
     During 1996, the Company generated net cash from operating activities of
$25.5 million, an increase of $14.4 million compared to the prior year. During
1996, capital spending totalled $8.3 million (excluding the purchase of leased
equipment relating to a divestiture company) down from the prior year's $11.6
million, as major capital projects initiated during years 1994 and 1995 were
completed in early 1996, and a reduced capital spending program was initiated by
management. Capital expenditures during 1996 and 1995 were funded from the
operations of the Company and borrowings under the Company's existing long-term
credit facility.
 
     Total debt as a percentage of total debt plus shareholders' equity (total
debt ratio) was 51.6% at the end of 1996, compared to 48.1% a year earlier. The
increase was due to termination of the previously mentioned trade accounts
receivable securitization program in March 1996, offset by debt repayments in
the aggregate in the second, third and fourth quarters of 1996 totalling $26.3
million. The Company anticipates spending less than $10.0 million for capital
improvements during 1997, and believes that the unused revolving credit line
available under the Facility ($31.0 million at December 28, 1996) and cash
generated from operations, will be adequate to fund these planned investments,
as well as its lease commitments. The Company anticipates that its cash flow
from operations will exceed its capital expenditures in 1997, enabling the
Company to further reduce its outstanding borrowings and accordingly, its total
debt ratio.
 
IMPACT OF INFLATION
 
     Although the effects of inflation on the Company cannot be accurately
determined, in 1996 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 1996
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 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.
 
                                       13
 
<PAGE>
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 three
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 7, 1997                        February 7, 1997
</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 30, 1995 and December 28, 1996,
and the related consolidated statements of operations, shareholders' equity and
cash flows for each of the years in the three-year period ended December 28,
1996. 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 30, 1995 and December 28, 1996,
and the results of their operations and their cash flows for each of the years
in the three-year period ended December 28, 1996 in conformity with generally
accepted accounting principles.
 
KPMG PEAT MARWICK LLP
Greensboro, North Carolina
February 7, 1997
 
                                       15
 
<PAGE>
                     LADD FURNITURE, INC. AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
 
    YEARS ENDED DECEMBER 31, 1994, DECEMBER 30, 1995, AND DECEMBER 28, 1996
 
<TABLE>
<CAPTION>
                                                                                            1994         1995         1996
<S>                                                                                       <C>          <C>          <C>
                                                                                             DOLLAR AMOUNTS IN THOUSANDS,
                                                                                                   EXCEPT SHARE DATA
Net sales..............................................................................   $576,549      599,203      497,457
Cost of sales..........................................................................    468,881      502,999      411,697
     Gross profit......................................................................    107,668       96,204       85,760
Selling, general and administrative expenses...........................................     93,911      101,345       74,363
Restructuring expense..................................................................         --       25,120        3,431
     Operating income (loss)...........................................................     13,757      (30,261)       7,966
Other deductions:
  Interest expense.....................................................................      8,939       11,798       12,069
  Other deductions (income), net.......................................................       (199 )      1,367          399
                                                                                             8,740       13,165       12,468
     Earnings (loss) before income taxes...............................................      5,017      (43,426)      (4,502)
Income tax expense (benefit)...........................................................        709      (18,236)      (2,032)
     Net earnings (loss)...............................................................   $  4,308      (25,190)      (2,470)
Net earnings (loss) per common share...................................................   $   0.56        (3.26)       (0.32)
Cash dividends per common share........................................................   $   0.36         0.27         0.00
Weighted average number of common shares outstanding...................................   7,696,689    7,720,783    7,722,085
</TABLE>
 
          See accompanying notes to consolidated financial statements.
 
                                       16
 
<PAGE>
                     LADD FURNITURE, INC. AND SUBSIDIARIES
 
                          CONSOLIDATED BALANCE SHEETS
 
<TABLE>
<CAPTION>
                                                                                                    DECEMBER 30,    DECEMBER 28,
                                                                                                        1995            1996
<S>                                                                                                 <C>             <C>
                                                                                                    DOLLAR AMOUNTS IN THOUSANDS,
                                                                                                         EXCEPT SHARE DATA
ASSETS
Current assets:
  Cash...........................................................................................     $  1,272             469
  Trade accounts receivable, less allowances for doubtful receivables, discounts, returns
     and allowances of $4,057 and $3,005, respectively...........................................       38,288          66,730
  Inventories....................................................................................       89,466          84,484
  Prepaid expenses and other current assets......................................................       13,663           5,768
       Total current assets......................................................................      142,689         157,451
Property, plant and equipment, net...............................................................       82,586          74,729
Businesses held for sale, net....................................................................        8,052              --
Intangible and other assets, net.................................................................       79,659          81,415
                                                                                                      $312,986         313,595
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
  Current installments of long-term debt.........................................................     $    309           5,093
  Short-term bank borrowings.....................................................................        3,037              --
  Trade accounts payable.........................................................................       28,419          24,358
  Accrued expenses and other current liabilities.................................................       31,396          30,084
       Total current liabilities.................................................................       63,161          59,535
Long-term debt, excluding current installments...................................................      112,598         125,859
Deferred and other liabilities...................................................................       12,030           5,125
       Total liabilities.........................................................................      187,789         190,519
Shareholders' equity
  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 7,726,993 shares and
     7,719,567 shares, respectively..............................................................        2,318           2,316
  Additional paid-in capital.....................................................................       49,905          49,736
  Retained earnings..............................................................................       73,829          71,359
                                                                                                       126,052         123,411
  Less unamortized value of restricted stock.....................................................         (855)           (335)
       Total shareholders' equity................................................................      125,197         123,076
Commitments and contingencies -- NOTE 13
                                                                                                      $312,986         313,595
</TABLE>
 
          See accompanying notes to consolidated financial statements.
 
                                       17
 
<PAGE>
                     LADD FURNITURE, INC. AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
 
    YEARS ENDED DECEMBER 31, 1994, DECEMBER 30, 1995, AND DECEMBER 28, 1996
 
<TABLE>
<CAPTION>
                                                                                                1994        1995        1996
<S>                                                                                           <C>          <C>        <C>
                                                                                                DOLLAR AMOUNTS IN THOUSANDS
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss)........................................................................   $   4,308    (25,190)     (2,470)
Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:
  Depreciation of property, plant and equipment............................................      14,143     12,671      10,887
  Amortization.............................................................................       3,669      3,758       4,444
  Restructuring expense....................................................................          --     25,120       3,431
  Provision for losses on trade accounts receivable........................................       1,521      2,898       3,308
  Gain on sales of property, plant and equipment...........................................         (89)      (314)       (147)
  Provision for deferred income taxes......................................................      (1,204)   (13,419)      1,873
  Increase (decrease) in deferred and other liabilities....................................       1,388      1,297      (2,564)
  Change in assets and liabilities, net of effects from acquisition, divestitures and
     classification of businesses held for sale:
     (Increase) decrease in trade accounts receivable......................................      (2,517)    (7,988)      5,736
     (Increase) decrease in inventories....................................................     (10,709)     8,126       5,417
     (Increase) decrease in prepaid expenses and other current assets......................      (1,886)    (2,084)      5,648
     Increase (decrease) in trade accounts payable.........................................      (2,496)     3,608      (3,738)
     Increase (decrease) in accrued expenses and other current liabilities.................      (3,313)     2,607      (6,320)
  Total adjustments........................................................................      (1,493)    36,280      27,975
     Net cash provided by operating activities.............................................       2,815     11,090      25,505
CASH FLOWS FROM INVESTING ACTIVITIES:
  Acquisition of Pilliod Furniture, net of cash acquired...................................     (23,847)        --          --
  Additions to property, plant and equipment...............................................     (31,825)   (11,560)     (8,347)
  Purchase leased manufacturing equipment..................................................          --         --      (4,648)
  Proceeds from sales of property, plant and equipment.....................................         962        191         246
  Proceeds from sales of idle assets.......................................................          --         --       1,570
  Proceeds from sales of businesses........................................................          --     28,004       5,284
  Additions to intangible and other assets.................................................      (1,150)    (3,715)     (2,759)
     Net cash provided by (used in) investing activities...................................     (55,860)    12,920      (8,654)
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from borrowings.................................................................     136,666        330     127,092
  Proceeds from (repayments of) sales of trade accounts receivable.........................      32,485      3,515     (36,000)
  Proceeds from sale leaseback of equipment................................................      14,566      6,691       3,538
  Principal payments on borrowings.........................................................    (130,020)   (31,706)   (112,103)
  Dividends paid...........................................................................      (2,771)    (2,086)         --
  Other....................................................................................       1,383          8        (171)
     Net cash provided by (used in) financing activities...................................      52,309    (23,248)    (17,644)
EFFECT OF EXCHANGE RATE CHANGES ON CASH                                                             (38)       (66)        (10)
  Net increase (decrease) in cash..........................................................        (774)       696        (803)
Cash at beginning of year..................................................................       1,350        576       1,272
Cash at end of year........................................................................   $     576      1,272         469
</TABLE>
 
          See accompanying notes to consolidated financial statements.
 
                                       18
 
<PAGE>
                     LADD FURNITURE, INC. AND SUBSIDIARIES
 
                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
 
    YEARS ENDED DECEMBER 31, 1994, DECEMBER 30, 1995, AND DECEMBER 28, 1996
<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 1, 1994......................  7,688,719   $2,306     49,186          (170)     99,568        (787)
  Shares issued in connection with incentive
     stock option plan..........................        782      --          19            --          --          --
  Purchase 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)
  Purchase 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)
  Purchase of restricted stock..................     (7,426)     (2 )      (169)           --          --         169
  Amortization of employee restricted stock
     awards.....................................         --      --          --            --          --         351
  Net loss......................................         --      --          --            --      (2,470)         --
BALANCE AT DECEMBER 28, 1996....................  7,719,567   $2,316     49,736            --      71,359        (335)
 
<CAPTION>
                                                      TOTAL
                                                  SHAREHOLDERS'
                                                     EQUITY
<S>                                               <C>
BALANCE AT JANUARY 1, 1994......................     150,103
  Shares issued in connection with incentive
     stock option plan..........................          19
  Purchase 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
  Purchase 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
  Purchase of restricted stock..................          (2)
  Amortization of employee restricted stock
     awards.....................................         351
  Net loss......................................      (2,470)
BALANCE AT DECEMBER 28, 1996....................     123,076
</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
 
     The Company is one of the largest residential furniture manufacturers in
the United States with 20 manufacturing facilities in eight states. Following a
restructuring of its businesses in 1995, 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 56%, 25% and 16%, respectively, of the
Company's 1996 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 1994 ended December 31, 1994; fiscal year 1995 ended December 30,
1995; and fiscal year 1996 ended December 28, 1996.
 
  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
customers 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.
 
  INVENTORIES
 
     Approximately 71% in 1995 and 74% in 1996 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 1995 and 1996 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 ("SFAS") 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.
 
  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 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 operations in the period that includes the enactment
date.
 
                                       20
 
<PAGE>
                              LADD FURNITURE INC.
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
 
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED
  EARNINGS PER SHARE
 
     Earnings per share are calculated based upon the weighted average number of
common shares outstanding during each fiscal year. 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 are participants in a defined
benefit pension plan covering qualified salaried and hourly employees. The
benefits are based on years of service or the employee's final average
compensation before retirement. The defined benefit plan was amended on December
13, 1996 to provide that no additional benefits would accrue after December 31,
1996. The Company intends to terminate the defined benefit plan upon receiving
required regulatory approvals.
 
     The Company provided certain health care benefits for certain retired
employees through June 1, 1996, when these benefits were curtailed. Prior to
curtailment, the Company provided for the cost of its obligation over the period
the employees rendered the services necessary to earn the postretirement
benefits.
 
     Prior to their termination, the cost of the above benefit plans was funded
currently.
 
  FAIR VALUE OF FINANCIAL INSTRUMENTS
 
     The carrying amount of cash, trade accounts receivable, prepaid expenses
and other current assets, 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 28, 1996.
 
  STOCK OPTION PLAN
 
     Prior to January 1, 1996, the Company accounted for its stock option plan
in accordance with the provisions of Accounting Principles Board ("APB") Opinion
No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, and related interpretations.
As such, compensation expense was recorded on the date of grant only if the
current market price of the underlying stock exceeded the exercise price. On
January 1, 1996, the Company adopted SFAS No. 123, ACCOUNTING FOR STOCK-BASED
COMPENSATION, which permits entities to recognize as expense over the vesting
period the fair value of all stock-based awards on the date of grant.
Alternatively, SFAS No. 123 also allows entities to continue to apply the
provisions of APB Opinion No. 25 and provide pro forma net income and pro forma
earnings per share disclosures for employee stock option grants made in 1995 and
future years as if the fair-value-based method defined in SFAS No. 123 had been
applied. The Company has elected to continue to apply the provisions of APB
Opinion No. 25 and provide the pro forma disclosure provisions of SFAS No. 123.
 
  TRANSPORTATION OPERATIONS
 
     The Company operates trucking fleets for its casegoods and upholstery
operations for the delivery of products to customers and inbound raw materials.
Beginning in the fourth quarter of 1996, the Company began accounting for the
 
                                       21
 
<PAGE>
                              LADD FURNITURE INC.
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
 
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED
revenues and direct operating expenses of the transportation operations as other
income (net). Accordingly, revenues and direct operating expenses of $14,288,000
and $12,950,000, respectively, previously accounted for as net sales and cost of
sales, were reclassified in 1996. All transportation revenues and direct
operating expenses have similarly been reclassified for all prior periods
included in the consolidated financial statements.
 
  FOREIGN CURRENCY TRANSLATION
 
     Assets and liabilities of a foreign subsidiary sold in February 1996 were
translated at year-end rates of exchange, and revenues and expenses were
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).
 
  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 DIVESTITURES
 
     In June 1995, the Company recorded a $25,696,000 non-cash restructuring
charge. The restructuring charge resulted from the Company's decision to divest
four operating companies (businesses held for sale), 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 $576,000
net decrease in restructuring expense as a result of: (i) finalizing sales of
two operating companies; (ii) revising the fair value of the remaining two
operating companies; (iii) recording additional charges for executive severance;
and (iv) 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 their 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.
In December 1995, the Company sold two of the businesses held for sale for cash
proceeds aggregating $28,004,000, a 12% interest in the purchaser of one of the
businesses valued at $2,200,000, and a $1,000,000 subordinated note.
 
     In 1996, the Company recorded aggregate non-cash restructuring charges of
$3,431,000 which consisted of: (i) $4,200,000 charge in the first quarter due to
the necessity to liquidate versus sell one of the remaining businesses and a
shortfall in anticipated proceeds on the other business; (ii) $945,000 in the
first quarter 1996 for severance related to continuing restructuring of the
Company ($130,000 related to restricted stock awards was credited to
shareholders' equity); and (iii) $1,714,000 aggregate credits recorded in the
second, third and fourth quarters as a result of proceeds from the liquidation
of idle assets held for sale exceeding earlier estimates. In February 1996, the
Company sold one of its businesses for cash and a subordinated note totalling
approximately $10,000,000 and the purchaser's assumption of approximately
$1,900,000 of Industrial Revenue Bonds. The amount of the subordinated note
totalled $1,082,000. Effective June 1996, the Company closed its last business
held for sale and subsequently liquidated for cash substantially all the
inventory, machinery and equipment. In December 1996, the Company sold the
manufacturing plant of the business for cash and a note receivable.
 
                                       22
 
<PAGE>
                              LADD FURNITURE INC.
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
 
NOTE 2: RESTRUCTURING AND DIVESTITURES -- CONTINUED
     The costs charged against restructuring reserves associated with the items
in the footnote above include the following:
 
<TABLE>
<CAPTION>
                                                                                                    DECEMBER 30,    DECEMBER 28,
                                                                                                        1995            1996
<S>                                                                                                 <C>             <C>
                                                                                                            IN THOUSANDS
Restructuring reserve, beginning balance.........................................................     $ --              3,964
Additions........................................................................................        6,313            815
Reclassification from businesses held for sale...................................................       --              2,390
Write-off of excess of cost over the assigned value of net assets acquired.......................       (1,037)        --
Payments:
  Lease termination costs........................................................................         (406)          (758)
  Severance......................................................................................         (184)        (2,528)
  Other..........................................................................................         (722)        (1,542)
Adjustments......................................................................................       --               (666)
Restructuring reserve, ending balance............................................................     $  3,964          1,675
</TABLE>
 
     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 the four company-owned retail stores as of
January 1, 1994, excluding the restructuring expense recorded during 1995 and
1996:
 
<TABLE>
<CAPTION>
                                                                                            1994       1995       1996
<S>                                                                                       <C>         <C>        <C>
                                                                                             IN THOUSANDS (UNAUDITED)
Net sales..............................................................................   $460,579    483,449    481,911
Earnings (loss) before interest and income taxes.......................................     11,486     (3,973)    14,476
</TABLE>
 
NOTE 3: ACCOUNTS RECEIVABLE SECURITIZATION PROGRAM
 
     During fiscal year 1994 through March 28, 1996, the Company participated in
a revolving accounts receivable facility which provided for the sale of a
defined pool of trade accounts receivable through a wholly-owned subsidiary to a
third-party purchaser. The Company and the third-party purchaser terminated the
facility on March 28, 1996 in anticipation of the Company's refinancing of its
then existing bank credit facility. The total cost of the program, which
aggregated $1,458,000, $2,585,000 and $454,000 in 1994, 1995 and 1996,
respectively, is included in selling, general and administrative expenses in the
accompanying consolidated statements of operations.
 
     At December 30, 1995, the defined pool of trade accounts receivable
totalled approximately $46,430,000 and the purchaser's investment totalled
$36,000,000, and the Company retained an ownership interest of approximately
$10,430,000, of which approximately $9,065,000 was subordinate to that of the
purchaser. The purchaser's average investment for 1994, 1995 and 1996, through
termination of the facility, was approximately $28,969,000, $35,011,000 and
$27,675,000, respectively. The purchaser's investment is reflected as a
reduction of trade accounts receivables in the December 30, 1995 consolidated
balance sheet.
 
                                       23
 
<PAGE>
                              LADD FURNITURE INC.
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
 
NOTE 4: INVENTORIES
 
     A summary of inventories follows:
 
<TABLE>
<CAPTION>
                                                                                        DECEMBER 30,    DECEMBER 28,
                                                                                            1995            1996
<S>                                                                                     <C>             <C>
                                                                                                IN THOUSANDS
Inventories on the FIFO cost method:
  Finished goods.....................................................................     $ 50,847          45,459
  Work in process....................................................................       17,165          14,093
  Raw materials and supplies.........................................................       33,140          35,613
     Total inventories on FIFO cost method...........................................      101,152          95,165
Less adjustments of certain inventories to the LIFO cost method......................      (11,686)        (10,681)
                                                                                          $ 89,466          84,484
</TABLE>
 
NOTE 5: PROPERTY, PLANT AND EQUIPMENT
 
     A summary of property, plant and equipment follows:
 
<TABLE>
<CAPTION>
                                                                                        DECEMBER 30,    DECEMBER 28,
                                                                                            1995            1996
<S>                                                                                     <C>             <C>
                                                                                                IN THOUSANDS
Land and improvements................................................................     $  4,356           4,888
Buildings and improvements...........................................................       70,780          73,690
Machinery and equipment..............................................................       69,389          72,923
Construction in progress.............................................................        5,173           1,793
                                                                                           149,698         153,294
Less accumulated depreciation........................................................      (67,112)        (78,565)
                                                                                          $ 82,586          74,729
</TABLE>
 
NOTE 6: INTANGIBLE AND OTHER ASSETS
 
     A summary of intangible and other assets follows:
 
<TABLE>
<CAPTION>
                                                                                        DECEMBER 30,    DECEMBER 28,
                                                                                            1995            1996
<S>                                                                                     <C>             <C>
                                                                                                IN THOUSANDS
Excess of cost over the assigned value of net assets acquired........................     $ 54,879          54,879
Trade names..........................................................................       21,700          21,700
Furniture designs and patents........................................................        8,815           8,815
Other................................................................................        7,460          12,385
                                                                                            92,854          97,779
Less accumulated amortization........................................................      (13,195)        (16,364)
                                                                                          $ 79,659          81,415
</TABLE>
 
                                       24
 
<PAGE>
                              LADD FURNITURE INC.
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
 
NOTE 7: ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
 
     A summary of accrued expenses and other current liabilities follows:
 
<TABLE>
<CAPTION>
                                                                                        DECEMBER 30,    DECEMBER 28,
                                                                                            1995            1996
<S>                                                                                     <C>             <C>
                                                                                                IN THOUSANDS
Payrolls, commissions and employee benefits..........................................     $ 16,775         14,281
Other................................................................................       14,621         15,803
                                                                                          $ 31,396         30,084
</TABLE>
 
NOTE 8: LONG-TERM DEBT AND SHORT-TERM BANK BORROWINGS
 
     Long-term debt consists of the following:
 
<TABLE>
<CAPTION>
                                                                                        DECEMBER 30,    DECEMBER 28,
                                                                                            1995            1996
<S>                                                                                     <C>             <C>
                                                                                                IN THOUSANDS
Term loan, due at various dates......................................................     $ --              63,375
Revolving credit loan, due July 12, 1999.............................................       --              60,336
Term loan, repaid in 1996............................................................       48,100          --
Revolving credit loan, repaid in 1996................................................       59,000          --
Other indebtedness, primarily fixed-rate industrial revenue bonds, due through
  2009...............................................................................        5,807           7,241
  Total long-term debt...............................................................      112,907         130,952
Less current installments of long-term debt..........................................          309           5,093
  Long-term debt, excluding current installments.....................................     $112,598         125,859
</TABLE>
 
     On July 12, 1996, the Company entered into a $190,000,000 long-term secured
credit facility (the "Facility") which consisted of a $125,000,000 three-year
revolving credit loan and a $65,000,000 term loan. The term loan portion of the
Facility will be repaid in forty quarterly installments of $1,625,000 commencing
January 1, 1997 of which the first installment was paid in December 1996. On
January 1, 1997, the Company reduced the revolving credit loan to $110,000,000.
 
     Borrowings under the revolving credit loan and the term loan bear interest
at rates selected periodically by the Company of LIBOR plus 2.75% and 3.00%,
respectively, or prime plus 1.75% and 2.00%, respectively. At December 28, 1996,
LIBOR was 5.6172% and the prime rate was 8.25%. Under the Facility, the Company
pays a commitment fee of 1/2% per annum on the unused portion of the revolving
credit facility. In connection with the refinancing, the Company incurred fees
and expenses aggregating approximately $4,000,000 which will be amortized over
the terms of the Facility. The interest rate margin over LIBOR and prime and the
commitment fee can be reduced upon the Company meeting a financial ratio related
to operating cash flow and debt levels.
 
     The Facility is secured by substantially all the existing and hereafter
acquired assets of the Company. Availability on the revolving credit loan is
determined by levels of eligible inventory and eligible trade accounts
receivable of the Company. The Facility contains customary covenants for asset
based loans which restrict future borrowings, dividends and capital spending;
require maintenance of a minimum net worth; and include financial covenant
ratios related to cash flow, earnings and debt. At December 28, 1996, the
Company's availability for future borrowings under its revolving credit loan was
approximately $31,000,000. At December 28, 1996, the Company was in compliance
with all covenants under the Facility.
 
     In connection with amending in 1995 and refinancing in 1996 the Company's
long and short-term bank loans, approximately $525,000 in 1995 and $890,000 in
1996 of unamortized financing fees were charged to operations. At December 30,
1995, borrowings under the previous bank term loan and bank revolving credit
loan bore interest at LIBOR (5.625%) plus 2 1/8%, or prime (8.50%) plus 1 1/8%.
 
                                       25
 
<PAGE>
                              LADD FURNITURE INC.
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
 
NOTE 8: LONG-TERM DEBT AND SHORT-TERM BANK BORROWINGS -- CONTINUED
     Short-term bank borrowings totalled $3,037,000 at December 30, 1995. The
average short-term borrowing rate in 1995 and 1996 was 6.70% and 7.62%,
respectively. The facility was repaid in July 1996 in connection with
refinancing the Company's then existing bank credit facility.
 
     The aggregate annual maturities of long-term debt during each of the five
fiscal years subsequent to December 28, 1996 are approximately as follows:
$5,093,000 in 1997; $6,826,000 in 1998; $66,926,000 in 1999; $6,590,000 in 2000;
$11,267,000 in 2001; and $34,250,000 thereafter.
 
     Interest paid by the Company in 1994, 1995 and 1996 amounted to
approximately $8,014,000, $12,218,000 and $12,241,000, respectively.
 
NOTE 9: EMPLOYEE STOCK PLANS
 
  STOCK OPTION PLAN
 
     Under an incentive stock option plan, the Company grants nontransferable
stock options to officers, key management employees and non-employee directors.
Options are generally granted at fair market value on the dates of the 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. The Company applies APB Opinion No. 25, and related
interpretations in accounting for the plan. Accordingly, no compensation expense
has been recognized for its stock-based compensation plans other than for the
restricted stock awards discussed below. Had compensation cost for the Company's
stock option plan been determined based upon the fair value at the grant date
for awards under this plan consistent with the methodology prescribed under SFAS
No. 123, the Company's net losses and loss per share would have increased by
approximately $38,300 or $0.00 per share, for 1995 and $378,000, or $0.05 per
share, for 1996. The weighted average fair value of the options granted during
1995 is estimated as $6.32 and during 1996 is estimated as $4.90 on the date of
grant using the Black-Scholes option-pricing model with the following
assumptions: no dividend yield, volatility of 30.5%, risk-free interest rate of
5.5%, assumed forfeiture rate of 17.8%, and an expected life of 6 years.
 
     A total of 1,188,889 shares were reserved for option under the previous and
current plans. At December 28, 1996, approximately 247,000 shares are available
for future option. 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 generally 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 1994, 1995 and 1996 follows:
 
<TABLE>
<CAPTION>
                                                                                                          WEIGHTED
                                                                                          NUMBER OF        AVERAGE
                                                                                           SHARES      EXERCISE PRICE
<S>                                                                                       <C>          <C>
Outstanding at January 1, 1994.........................................................    197,461         $ 33.70
Granted in 1994........................................................................    188,645         $ 19.46
Exercised in 1994......................................................................       (782)        $ 24.00
Cancelled in 1994......................................................................    (46,670)        $ 34.63
Outstanding at December 31, 1994.......................................................    338,654         $ 25.58
Granted in 1995........................................................................     40,882         $ 15.49
Cancelled in 1995......................................................................   (127,358)        $ 29.07
Outstanding at December 30, 1995.......................................................    252,178         $ 21.90
Granted in 1996........................................................................    442,510         $ 11.86
Cancelled in 1996......................................................................    (98,533)        $ 21.76
Outstanding at December 28, 1996.......................................................    596,155         $ 14.63
Exercisable at December 28, 1996.......................................................     92,943         $ 23.71
</TABLE>
 
     The Company had 111,251 and 98,871 shares exercisable at December 31, 1994
and December 30, 1995, respectively, with a weighted average exercise price
totalling $32.46 and $26.31, respectively.
 
                                       26
 
<PAGE>
                              LADD FURNITURE INC.
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
 
NOTE 9: EMPLOYEE STOCK PLANS -- CONTINUED
     The following table summarizes information concerning currently outstanding
and exercisable options:
 
<TABLE>
<CAPTION>
                                  OPTIONS OUTSTANDING                        OPTIONS EXERCISABLE
                      NUMBER        WEIGHTED-AVG.                         NUMBER
                    OUTSTANDING       REMAINING       WEIGHTED-AVG.     EXERCISABLE     WEIGHTED-AVG.
   RANGE OF         AT DEC. 28,      CONTRACTUAL        EXERCISE        AT DEC. 28,       EXERCISE
EXERCISE PRICES        1996             LIFE              PRICE            1996             PRICE
<S>                 <C>             <C>               <C>               <C>             <C>
 $ 10.75-$15.75       455,876         9.2   years        $ 12.04            5,847          $ 15.13
 $ 17.25-$24.75        95,611         7.3                $ 18.40           55,000          $ 19.11
 $ 26.25-$40.50        44,668         6.0                $ 33.03           32,096          $ 33.15
                      596,155         8.7                $ 14.63           92,943          $ 23.71
</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. During 1994 and 1995, the Board of Directors awarded and
issued 16,792 and 29,294 shares, respectively. No shares were awarded during
1996.
 
NOTE 10: EMPLOYEE BENEFIT PLANS
 
  DEFINED BENEFIT PENSION PLAN
 
     The Company and several of its subsidiaries had noncontributory defined
benefit pension plans covering qualified salaried and hourly employees which
were merged into a common plan on December 31, 1996. The merged plan provides
pension benefits to qualified employees based on the participant's final average
salary before retirement or based on years of service. The Company's policy has
been to fund normal costs and amortization of prior service costs. The defined
benefit plan was amended on December 13, 1996 to provide that no additional
benefits would accrue after December 31, 1996. The Company intends to terminate
the defined benefit plan upon receiving required regulatory approvals.
 
     In addition to the qualified defined benefit plan, the Company has a
nonqualified retirement plan covering certain salaried employees. At December
30, 1995 and December 28, 1996, the Company had approximately $538,000 and
$675,000, 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 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.
 
                                       27
 
<PAGE>
                              LADD FURNITURE INC.
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
 
NOTE 10: EMPLOYEE BENEFIT PLANS -- CONTINUED
     The following sets forth the funded status of the plans:
 
<TABLE>
<CAPTION>
                                                                              DECEMBER 30, 1995             DECEMBER 28, 1996
                                                                          ASSETS        ACCUMULATED       ASSETS      ACCUMULATED
                                                                          EXCEED         BENEFITS          EQUAL       BENEFITS
                                                                        ACCUMULATED       EXCEED        ACCUMULATED     EXCEED
                                                                         BENEFITS         ASSETS         BENEFITS       ASSETS
<S>                                                                     <C>           <C>               <C>           <C>
                                                                                              IN THOUSANDS
Actuarial present value of benefit obligations:
  Vested benefit obligation...........................................   $ (21,463)       (18,623)        (49,280)       (1,562)
  Accumulated benefit obligation......................................   $ (21,797)       (19,037)        (49,280)       (1,794)
Projected benefit obligation for service rendered to date.............   $ (27,958)       (20,901)        (49,280)       (2,393)
Less plan assets at fair value, primarily equity and fixed income
  investment funds in 1995 and money market equivalents in 1996.......      25,921         17,384          49,280        --
Projected benefit obligation in excess of plan assets.................      (2,037)        (3,517)         --            (2,393)
Unrecognized net obligation (asset) at transition being amortized over
  15 years............................................................          73           (568)         --            --
Unrecognized net (gain) loss..........................................      (1,214)         2,315          --               (25)
Unrecognized prior service cost.......................................       1,396            644          --               593
Adjustment required to recognize minimum liability....................      --               (527)         --            --
Pension liability recognized in the consolidated balance sheets.......   $  (1,782)        (1,653)         --            (1,825)
</TABLE>
 
     The accumulated benefit obligation at December 28, 1996 reflects the
expected increase in benefits under the defined benefit plan to fully utilize
all plan assets.
 
     Net pension expense for the plans for 1994, 1995 and 1996 included the
following components:
 
<TABLE>
<CAPTION>
                                                                                                     1994       1995      1996
<S>                                                                                                 <C>        <C>       <C>
                                                                                                           IN THOUSANDS
Service costs -- benefits earned during the period...............................................   $ 2,374     2,047     2,119
Interest cost on projected obligation............................................................     3,101     3,186     3,440
Return on assets.................................................................................      (121)   (9,036)   (6,133)
Amortization of unrecognized net obligation (asset) at transition and net deferrals..............    (2,522)    6,038     3,032
Curtailment gain.................................................................................        --        --      (738)
Net pension expense..............................................................................   $ 2,832     2,235     1,720
</TABLE>
 
     The Company also recorded in 1995 a net curtailment gain resulting from the
Brown Jordan and Lea Lumber & Plywood divestitures totalling approximately
$692,000, and in 1996 a net curtailment gain resulting from the closing of
Daystrom Furniture totalling approximately $279,000. These curtailment gains
were included in determining restructuring expense in the 1995 and 1996
consolidated statements of operations.
 
     The projected benefit obligation at December 30, 1995 and December 28, 1996
was determined using an assumed discount rate of 7.25% and 7.50%, respectively.
The plan assumes a long-term rate of salary increases of 4.50% to age 60, and
3.00% thereafter. The assumed long-term rate of return on plan assets was 8.50%
for 1994, 1995 and 1996.
 
  DEFINED CONTRIBUTION PLANS
 
     The Company has savings plans for 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 $635,000 in 1994, $549,000 in 1995 and
$485,000 in 1996. Effective January 1, 1997, the Company amended its defined
contribution
 
                                       28
 
<PAGE>
                              LADD FURNITURE INC.
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
 
NOTE 10: EMPLOYEE BENEFIT PLANS -- CONTINUED
plans. The effect of the plan amendment is to increase base Company matching
contributions by approximately $900,000 annually. Further, such contributions
will be in the form of the Company's Common Stock.
 
NOTE 11: POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
 
     Prior to 1996, the Company had plans which provided postretirement health
care benefits for certain employees. These benefits included major medical
insurance with deductible and coinsurance provisions. The Company paid all
benefits on a current basis and the plans were not funded.
 
     On May 10, 1996, the Company curtailed the postretirement features of its
health care benefit program, effective July 1, 1996. As a result of this
curtailment, the Company had an aggregate credit of approximately $4,200,000
recognized in 1996's operating income ($3,700,000 in cost of sales and $500,000
in selling, general and administrative expenses).
 
     The components of the net postretirement benefit cost (credit) for 1994,
1995 and 1996 are as follows:
 
<TABLE>
<CAPTION>
                                                                                                       1994     1995      1996
<S>                                                                                                   <C>       <C>      <C>
                                                                                                            IN THOUSANDS
Service costs......................................................................................   $  286      232        77
Interest costs of benefit obligation...............................................................    1,132    1,252       417
Amortization of transition obligation..............................................................      759      759       253
Curtailment gain...................................................................................       --       --    (4,947)
                                                                                                      $2,177    2,243    (4,200)
</TABLE>
 
     The plan's funded status as of December 31, 1995 was as follows:
 
<TABLE>
<CAPTION>
                                                                                                                   IN THOUSANDS
<S>                                                                                                                <C>
Accumulated postretirement benefit obligation:
  Retirees......................................................................................................     $(10,329)
  Active participants eligible to retire........................................................................       (4,191)
  Other active participants.....................................................................................       (2,480)
                                                                                                                      (17,000)
Unrecognized net loss...........................................................................................          338
Unrecognized transition obligation being amortized over 20 years................................................       12,906
Accrued postretirement benefit cost.............................................................................     $ (3,756)
</TABLE>
 
     The postretirement benefit obligation was determined by application of the
terms of the various plans using relevant actuarial assumptions. Health care
costs were projected to increase at annual rates ranging from 8.00% in 1995 down
to 5.50% in 1997 and thereafter. 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.
 
                                       29
 
<PAGE>
                              LADD FURNITURE INC.
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
 
NOTE 12: INCOME TAXES
 
     Components of income tax expense (benefit) for 1994, 1995 and 1996 are as
follows:
 
<TABLE>
<CAPTION>
                                                                                                    1994       1995       1996
<S>                                                                                                <C>        <C>        <C>
                                                                                                           IN THOUSANDS
Current:
Federal.........................................................................................   $ 1,769     (4,650)   (4,054)
State...........................................................................................       144       (167)      149
                                                                                                     1,913     (4,817)   (3,905)
Deferred:
Federal.........................................................................................    (1,034)   (11,521)    1,309
State...........................................................................................      (170)    (1,898)      564
                                                                                                    (1,204)   (13,419)    1,873
                                                                                                   $   709    (18,236)   (2,032)
</TABLE>
 
     The effective income tax rate on earnings (loss) before income taxes for
1994, 1995 and 1996 was 14.1%, 42.0% and 45.1%, 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 1994, 1995 and 1996 as follows:
 
<TABLE>
<CAPTION>
                                                                                                    1994       1995       1996
<S>                                                                                                <C>        <C>        <C>
                                                                                                           IN THOUSANDS
Computed "expected" income tax expense (benefit)................................................   $ 1,706    (14,765)   (1,531)
Increases (reductions) due to:
  Restructuring and reorganization charges......................................................        --     (1,664)    1,060
  State income taxes, net of Federal income tax benefit.........................................        28         53        99
  Amortization of the excess of cost over the assigned value of net assets acquired.............       463        587       451
  Expenses subject to percentage limitations....................................................       130        117        81
  Utilization of capital loss carryforwards to offset income tax expense of realized
     capital gains..............................................................................      (913)    (1,655)       --
  Tax credits, net..............................................................................      (230)      (571)   (1,316)
  Foreign trade income exemptions...............................................................      (154)      (193)     (375)
  Restricted stock compensation.................................................................        --         --      (204)
  Other.........................................................................................      (321)      (145)     (297)
Actual income tax expense (benefit).............................................................   $   709    (18,236)   (2,032)
</TABLE>
 
     During 1994, the Company paid income taxes (net of refunds received)
amounting to approximately $2,030,000. During 1995 and 1996, the Company
received refunds (net of taxes paid) of approximately $188,000 and $8,360,000,
respectively.
 
                                       30
 
<PAGE>
                              LADD FURNITURE INC.
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
 
NOTE 12: INCOME TAXES -- CONTINUED
     The tax effects of temporary differences and net operating loss
carryforwards that give rise to significant portions of deferred tax assets and
liabilities consist of the following:
 
<TABLE>
<CAPTION>
                                                                                                    DECEMBER 30,    DECEMBER 28,
                                                                                                        1995            1996
<S>                                                                                                 <C>             <C>
                                                                                                            IN THOUSANDS
Deferred tax liabilities:
  Inventories....................................................................................     $ (7,092)         (6,463)
  Property, plant and equipment..................................................................       (1,882)         (3,013)
  Intangible and other assets....................................................................       (7,201)         (6,351)
  Lease obligations..............................................................................       (8,422)         (5,372)
  Other..........................................................................................       (2,249)           (159)
     Total deferred tax liabilities..............................................................      (26,846)        (21,358)
Deferred tax assets:
  Accounts receivable............................................................................        1,854           1,081
  Inventories....................................................................................        3,145             998
  Liabilities and reserves.......................................................................       10,465           6,601
  Restructuring and reorganization...............................................................        8,064             337
  Tax credit carryforwards.......................................................................           --             604
  Net operating loss carryforwards...............................................................        1,885           8,468
  Other..........................................................................................          409             372
     Gross deferred tax assets...................................................................       25,822          18,461
  Valuation allowances...........................................................................       (1,885)         (1,885)
     Total deferred tax assets...................................................................       23,937          16,576
Net deferred tax liability.......................................................................     $ (2,909)         (4,782)
</TABLE>
 
     Deferred taxes are classified in the accompanying consolidated balance
sheets as follows:
 
<TABLE>
<CAPTION>
                                                                                                    DECEMBER 30,    DECEMBER 28,
                                                                                                        1995            1996
<S>                                                                                                 <C>             <C>
                                                                                                            IN THOUSANDS
Prepaid expenses and other current assets........................................................     $  2,528             --
Accrued expenses and other current liabilities...................................................           --         (2,478)
Deferred income taxes............................................................................       (5,437)        (2,304)
                                                                                                      $ (2,909)        (4,782)
</TABLE>
 
     In January 1994, a valuation allowance was provided for the deferred tax
assets related to acquired subsidiary carryforward net operating loss (NOL)
deductions from the stock purchase of Pilliod Furniture. The remaining NOL
carryforward deductions of approximately $4,761,000 were not utilized in 1995 or
1996 and the NOL deductions can be carried forward up to 12 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
future deductions. Tax benefits recognized subsequent to 1996 relating to the
valuation allowance for deferred tax assets at December 28, 1996 will be applied
to reduce the excess cost over the assigned value of Pilliod's net assets
acquired.
 
     The Company believes that it is more likely than not that the results of
future operations will generate sufficient taxable income to realize the
remaining deferred tax assets.
 
                                       31
 
<PAGE>
                              LADD FURNITURE INC.
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
 
NOTE 13: LEASES AND CONTINGENCIES
 
     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 28, 1996 are:
 
<TABLE>
<CAPTION>
                                                                                           IN THOUSANDS
<S>                                                                                        <C>
Fiscal year:
1997....................................................................................     $  7,983
1998....................................................................................        8,241
1999....................................................................................        7,333
2000....................................................................................        5,467
2001....................................................................................        2,344
Thereafter..............................................................................        7,991
Total...................................................................................     $ 39,359
</TABLE>
 
     In 1994, 1995 and 1996, the Company entered into sale leaseback agreements
for certain manufacturing equipment located at several of its manufacturing
facilities. These transactions have been recorded as asset sales. The cash
proceeds from the sales of approximately $14,566,000, $6,691,000 and $3,538,000,
respectively, were used to repay long-term debt. The gains from the sales of
approximately $683,000, $323,000 and $150,000, 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. Accordingly, approximately $325,000 of the previously mentioned
deferred income was recognized in the 1996 consolidated statement of operations.
 
     Rental expense for cancelable and noncancelable operating leases charged to
operations was as follows:
 
<TABLE>
<CAPTION>
                                                                                           IN THOUSANDS
<S>                                                                                        <C>
Fiscal year:
1994....................................................................................     $ 11,459
1995....................................................................................       14,870
1996....................................................................................       12,203
</TABLE>
 
     Rental expense includes contingent rentals based upon usage of
transportation equipment under cancelable and noncancelable operating leases
which totalled approximately $762,000 in 1994, $618,000 in 1995, and $719,000 in
1996.
 
     At December 28, 1996, the Company was contingently liable for approximately
$2,490,000 of receivables transferred with recourse under financing arrangements
with two financial institutions. The Company maintains a $704,000 letter of
credit agreement to fund any liabilities which might arise under one of the
arrangements.
 
NOTE 14: 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.
 
                                       32
 
<PAGE>
                      LADD FURNITURE INC. AND SUBSIDIARIES
 
                            SELECTED QUARTERLY DATA
 
          DOLLAR AND SHARE DATA IN THOUSANDS, EXCEPT PER SHARE AMOUNTS
                                  (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                          FISCAL 1995                                    FISCAL 1996
                                             1ST         2ND        3RD        4TH           1ST        2ND        3RD        4TH
                                           QUARTER     QUARTER    QUARTER    QUARTER       QUARTER    QUARTER    QUARTER    QUARTER
<S>                                        <C>         <C>        <C>        <C>           <C>        <C>        <C>        <C>
OPERATING STATEMENT DATA
  Net sales.............................   $149,386    145,168    155,313    149,336       135,260    123,483    120,447    118,267
  Cost of sales.........................    123,251    130,229    127,449    122,070       116,038    100,220     99,369     96,070
    Gross profit........................     26,135     14,939     27,864     27,266        19,222     23,263     21,078     22,197
  Selling, general and administrative
    expenses............................     23,816     28,335     23,402     25,792        21,788     19,110     16,852     16,613
  Restructuring expense.................         --     25,696         --       (576)        5,149       (279)      (892)      (547)
    Operating income (loss).............      2,319    (39,092)     4,462      2,050        (7,715)     4,432      5,118      6,131
  Other (income) deductions:
    Interest expense....................      2,803      2,846      2,997      3,152         2,660      3,058      3,182      3,169
    Other (net).........................       (519)     2,129       (568)       325         1,284        317     (1,343)       141
  Earnings (loss) before income taxes...         35    (44,067)     2,033     (1,427)      (11,659)     1,057      3,279      2,821
  Income tax expense (benefit)..........         11    (16,744)       142     (1,645)       (4,664)      (108)     1,477      1,263
    Net earnings (loss).................   $     24    (27,323)     1,891        218        (6,995)     1,165      1,802      1,558
  Depreciation..........................   $  3,659      3,555      2,677      2,780         2,837      2,609      2,691      2,750
  Amortization..........................        895      1,304        755        804         1,607        751      1,005      1,081
  Cash dividends paid...................        695        695        348        348            --         --         --         --
  Weighted average shares outstanding...      7,705      7,725      7,726      7,727         7,725      7,723      7,721      7,720
PER SHARE DATA
  Net sales.............................   $  19.39      18.79      20.10      19.33         17.51      15.99      15.60      15.32
  Net earnings (loss)...................       0.00      (3.54)      0.24       0.03         (0.91)      0.15       0.23       0.20
  Cash dividends........................       0.09       0.09       0.05       0.05            --         --         --         --
  Quarter-end book value................      19.57      16.00      16.21      16.20         15.33      15.49      15.73      15.94
BALANCE SHEET DATA
  Net working capital...................   $133,260     89,109     84,929     79,528       123,110    116,690    110,347     97,916
  Net property, plant and equipment.....    109,014     83,826     82,567     82,586        82,652     82,633     78,543     74,729
  Total assets..........................    389,056    337,075    336,868    312,986       351,829    347,061    331,845    313,595
  Total debt............................    158,784    147,855    143,190    115,944       157,250    153,148    143,370    130,952
  Shareholders' equity..................    151,176    123,578    125,224    125,197       118,426    119,637    121,486    123,076
RATIOS
  Gross profit margin...................       17.5%      10.3       17.9       18.3          14.2       18.8       17.5       18.8
  Operating profit (loss) margin........        1.6      (26.9)       2.9        1.4          (5.7)       3.6        4.2        5.2
  Return (loss) on sales................        0.0      (18.8)       1.2        0.1          (5.2)       0.9        1.5        1.3
  Effective income tax rate.............       31.4       38.0        N/M        N/M          40.0       10.2       45.0       44.8
  Total debt ratio......................       51.2       54.5       53.3       48.1          57.0       56.1       54.1       51.6
STOCK DATA
  High..................................   $  19.88      16.88      14.13      13.63         14.25      12.00      13.75      15.75
  Low...................................      13.88      12.25      12.88      12.88         10.88       9.50       9.75      11.50
  Close.................................      14.63      13.00      13.00      13.13         10.88      10.00      13.50      14.63
  Trading volume (shares)...............      4,450      2,523      1,423      1,203         2,081      3,012      1,288      1,619
</TABLE>
 
NOTES: Stock price and volume data for calendar quarters. N/M = Not Meaningful.
       Fourth Quarter 1995 and First Quarter 1996 reflect the sale of Brown
       Jordan Company and Lea Lumber & Plywood-effective December 29, 1995; the
       sale of Fournier Furniture-effective February 26, 1996; Third Quarter
       1996 reflects the liquidation of Daystrom Furniture beginning June 28,
       1996. Fiscal 1995 and First Quarter 1996 reflect the Company's accounts
       receivable securitization program which was terminated on March 28, 1996.
 
                                       33
 
<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 1994, 1995 and 1996.
 
                                    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
and 20 in the Company's definitive proxy statement.
 
ITEM 11. EXECUTIVE COMPENSATION
 
     See reference to definitive proxy statement under Part III. See pages 5-14
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.
 
                                       34
 
<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 December 31, 1994, December 30, 1995, and
             December 28, 1996..................................................................................           16
 
             Consolidated Balance Sheets as of December 30, 1995 and December 28, 1996..........................           17
 
             Consolidated Statements of Cash Flows for the years ended December 31, 1994, December 30, 1995, and
             December 28, 1996..................................................................................           18
 
             Consolidated Statements of Shareholders' Equity for the years ended December 31, 1994, December 30,
             1995, and December 28, 1996........................................................................           19
 
             Notes to Consolidated Financial Statements.........................................................        20-32
 
             Independent Auditors' Report.......................................................................           15
 
       (2)   Index to Financial Statement Schedule:
 
             Independent Auditors' Report.......................................................................          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 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. Long-Term Incentive Plan (1997)
 
             LADD Furniture, Inc. 1997 Management Incentive Plan
 
(b)    Reports on Form 8-K filed in the last quarter of fiscal 1996:
 
             Current Report on Form 8-K dated October 17, 1996, filed with the Commission on November 1, 1996
             reporting the Company's results of operations for the third fiscal quarter of 1996.
 
(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)
 
             3.1  Bylaws (as amended March 5, 1996)
 
             (Previously filed as Exhibit 3.1 to Item 14 of the Company's Annual Report on Form 10-K for the
             year ended December 30, 1995, filed with the Commission on March 28, 1996)
</TABLE>
 
                                       35
 
<PAGE>
<TABLE>
<S>    <C>   <C>                                                                                                   <C>
             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)
 
             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.)
 
             Employee Restricted Stock Purchase Agreement between the Company and Kenneth E. Church dated
             February 25, 1993
 
             Employee Restricted Stock Purchase Agreement between the Company and Kenneth E. Church dated
             February 24, 1994.
 
             Employee Restricted Stock Purchase Agreement between the Company and Kenneth E. Church dated March
             2, 1995.
 
             Employee Restricted Stock Purchase Agreement between the Company and Michael P. Haley dated June
             23, 1994.
 
             Employee Restricted Stock Purchase Agreement between the Company and Michael P. Haley dated March
             2, 1995.
 
             (Previously filed as Exhibits 10.2-10.6 to Item 14 of the Company's Annual Report on Form 10-K for
             the year ended December 30, 1995, filed with the Commission on March 28, 1996)
 
             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)
 
             Executive Employment Agreement between the Company and William S. Creekmuir dated December 1, 1995.
 
             Executive Employment Agreement between the Company and Kenneth E. Church dated May 22, 1995.
 
             Executive Employment Agreement between the Company and Donald L. Mitchell dated January 1, 1996.
 
             Executive Employment Agreement between the Company and Michael P. Haley dated March 5, 1996.
 
             (Previously filed as Exhibits 10.7-10.10 to Item 14 of the Company's Annual Report on Form 10-K for
             the year ended December 30, 1995, filed with the Commission on March 28, 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>
 
                                       36
 
<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)
 
             Enclosed as Exhibit 10.1 to this Annual Report on Form 10-K for the year ended December 28, 1996
 
             10.1 LADD Furniture, Inc. Supplemental Retirement Income Plan, as amended and restated effective
                  January 1, 1994, and as further amended effective January 1, 1997
 
             LADD Furniture, Inc. Long-Term Incentive Plan (1994)
 
             LADD Furniture, Inc. Long-Term Incentive Plan (1995)
 
             LADD Furniture, Inc. Long-Term Incentive Plan (1996)
 
             (Previously filed as Exhibits 10.11-10.13 to the Company's Annual Report on Form 10-K for the year
             ended December 30, 1995, filed with Commission on March 28, 1996)
 
             Enclosed as Exhibit 10.2 to this Annual Report on Form 10-K for the year ended December 28, 1996
 
             10.2 LADD Furniture, Inc. Long-Term Incentive Plan (1997)
 
             Loan and Security Agreement dated as of July 12, 1996, between the Company, NationsBank, N.A.
             (South) as Agent, and each of the bank's signatory to the Loan and Security Agreement.
 
             (Previously filed as an Exhibit to the Company's Current Report on Form 8-K, dated July 18, 1996,
             filed with the Commission on July 24, 1996)
 
             Amendment No. 1 (dated as of August 15, 1996) to Loan and Security Agreement dated as of July 12,
             1996 among the Company, NationsBank, N.A. (South) as Agent and each of the bank's signatory
             thereto.
 
             Amendment No. 2 (dated as of October 10, 1996) to Loan and Security Agreement dated as of July 12,
             1996 among the Company, NationsBank, N.A. (South) as Agent, and each of the bank's signatory
             thereto.
 
             Equipment Leasing Agreement dated as of September 19, 1996 between BTM Financial & Leasing
             Corporation B-4 and the Company
 
             (Previously filed as Exhibits 10.1-10.3 to the Company's Quarterly Report on Form 10-Q for the
             quarter ended September 28, 1996, filed with the Commission on November 12, 1996)
 
             Enclosed as Exhibit 10.3 to this Annual Report on Form 10-K for the year ended December 28, 1996
 
             10.3 Amendment No. 3 (dated December 23, 1996) to Loan and Security Agreement dated as of July 12,
                  1996 among the Company, NationsBank, N.A. (South), as Agent and each of the bank's signatory
                  thereto.
 
             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.
</TABLE>
 
                                       37
 
<PAGE>
<TABLE>
<S>    <C>   <C>                                                                                                   <C>
             (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)
 
             Stock Purchase Agreement dated January 5, 1996 among LADD Furniture, Inc., Fournier Furniture, Inc.
             and Fournier Acquisition Co.
 
             (Previously filed as Exhibit 10.14 to the Company's Annual Report on Form 10-K for the year ended
             December 30, 1995, filed with the Commission on March 28, 1996)
 
             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 Exhibit 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)
 
             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)
 
             Enclosed as Exhibit 10.4 to this Annual Report on Form 10-K for the year ended December 28, 1996
 
             10.4 1997 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
 
             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 International Sales Corp., a Barbados corporation
 
             LADD Transportation, Inc., a North Carolina corporation
 
             Lea Industries, Inc., a Tennessee corporation
 
             Lea Industries of Virginia, Inc., a Virginia corporation
 
             Pennsylvania House, Inc., a North Carolina corporation
 
             Pilliod Furniture, Inc., a North Carolina corporation
 
             Enclosed as Exhibit 24.1 to this Annual Report on Form 10-K for the year ended December 28, 1996
 
             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 28, 1996
 
             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    3/26/97
                                           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                              3/26/97      /S/ RICHARD R. ALLEN                             3/26/97
DON A. HUNZIKER                                       (DATE)  RICHARD R. ALLEN                                      (DATE)
DIRECTOR                                                      CHAIRMAN OF THE BOARD AND DIRECTOR
 
/S/ O. WILLIAM FENN, JR.                          3/26/97     /S/ DARYL B. ADAMS                               3/26/97
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                             3/26/97      /S/ JAMES H. CORRIGAN, JR.                        3/26/97
THOMAS F. KELLER                                      (DATE)  JAMES H. CORRIGAN, JR.                                (DATE)
DIRECTOR                                                      DIRECTOR
 
/S/ WILLIAM B. CASH                              3/26/97      /S/ L. GLENN ORR, JR.                              3/26/97
WILLIAM B. CASH                                       (DATE)  L. GLENN ORR, JR.                                     (DATE)
DIRECTOR                                                      DIRECTOR
 
/S/ FRED L. SCHUERMANN, JR.                      3/26/97      /S/ WILLIAM S. CREEKMUIR                        3/26/97
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>
 
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