Moving furniture makes Ladd look a lot better.

• Author: Gibson, Dale
• Position: Ladd Furniture Inc.

Fred Schuermann gets a lot more shut-eye these days than when he took over as president of Ladd Furniture Inc. Now he has a stock that looks appetizing. "It's in great shape relative to 1995," he says. "I'm sleeping extremely soundly."

Even Schuermann concedes it's too early for investors to take a big bite of Greensboro-based Ladd (LADF-NASDAQ), but they might want to nibble. Though still in turnaround, the furniture maker has already been heavily refurbished. "I like what Fred's doing," analyst John Baugh of Wheat First Union says. "He inherited a tough situation, and he's done a good job of shrinking the business to a core portfolio of companies."

When the board promoted him to president and COO four years ago, Schuermann was like an upholsterer beckoned to mend a tattered heirloom. Ladd, created in a 1981 management buyout from The Sperry & Hutchinson Co. in New York, was an eclectic collection of clashing companies. Most bothersome was the resulting color scheme - red, with a debt load dripping straight onto the balance sheet.

"The company had grown very rapidly through acquisitions," Schuermann says. "Some of those pieces either weren't making money or strategically were just not good fits." Net income had plummeted from $17 million in 1989 to $4 million in 1994. More alarming, Ladd had taken on a staggering $185 million in debt. It had stopped paying its dividend, as high as 93 cents in 1989, and investors were getting antsy. The stock, near $75 in 1987, had descended into the teens.

Schuermann sold three divisions and liquidated another. He also reorganized Ladd into three segments: residential "case goods," or wooden furniture; residential upholstered furniture; and institutional furniture. He became CEO in late 1995, replacing retiring Richard Allen, then chairman in 1998.

After losing $25 million in 1995 and $2 million in 1996, much of it due to restructuring, Ladd earned $6 million in 1997 and $12 million, $1.53 per share, in 1998. Baugh projects earnings of $1.93 per share for 1999. Ladd's debt is still high, but Schuermann has cut it to $110 million. He is entering the fourth year of a five-year plan to reduce the debt ratio from 48% in 1997 to 30%. He wants to boost return on...