<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended May 28, 1995 Commission File Number 1-10226
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ROWE FURNITURE CORPORATION
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(Exact name of registrant as specified in its charter)
NEVADA 54-0458563
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
239 Rowan Street, Salem, Virginia 24153
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (703) 389-8671
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None
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Former name, former address and former fiscal year, if changed since last
report.
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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the period covered by this report.
Class Outstanding at May 28, 1995
- ---------------------------------------- ---------------------------
Common stock, par value $1.00 per share 13,708,612 shares
<PAGE>
ROWE FURNITURE CORPORATION
INDEX
Page
Part I. Financial Information
Consolidated Balance Sheets - May 28, 1995 and
November 27, 1994 3
Statements of Consolidated Earnings - Three Months and Six Months
Ended May 28, 1995 and May 29, 1994 4
Statements of Consolidated Cash Flows - Six Months
Ended May 28, 1995 and May 29, 1994 5
Notes to Consolidated Financial Statements 7
Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
Part II. Other Information 10
<PAGE>
PART I - - FINANCIAL INFORMATION
<PAGE>
ROWE FURNITURE CORPORATION AND WHOLLY-OWNED SUBSIDIARIES
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CONSOLIDATED BALANCE SHEETS
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<TABLE>
<CAPTION>
May 28, November 27,
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1995 1994
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ASSETS (Unaudited) (Audited)
CURRENT ASSETS ($ Thousands)
<S> <C> <C>
Cash and cash equivalents $ 8,179 $ 471
Marketable securities 45 179
Accounts receivable, net 18,018 16,921
Inventories:
Finished goods 2,354 2,472
Work-in-process 2,533 2,502
Raw materials 5,497 6,345
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Total inventories 10,384 11,319
Deferred income tax asset 100 100
Prepaid expenses 846 793
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Total current assets 37,572 29,783
PROPERTY AND EQUIPMENT, net 11,919 11,300
OTHER NONCURRENT ASSETS (Note 5) 5,694 7,015
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$55,185 $48,098
======= =======
LIABILITIES
CURRENT LIABILITIES:
Current maturities of long-term liabilities $ 445 $ 445
Short term bank borrowings 4,525 2,736
Accounts payable and accrued liabilities 10,561 9,986
Income taxes payable - 11
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Total current liabilities 15,531 13,178
LONG-TERM AND DEFERRED LIABILITIES 4,600 2,581
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Total liabilities 20,131 15,759
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COMMITMENTS AND CONTINGENCIES (Note 4)
STOCKHOLDERS' EQUITY
COMMON STOCK, par value $1 per share (Note 3):
<CAPTION>
May 28, November 27,
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1995 1994
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<S> <C> <C> <C> <C>
Authorized shares 20,000,000 20,000,000
Issued shares 14,403,046 14,304,177 14,403 14,304
Outstanding shares 13,708,612 13,925,934
CAPITAL IN EXCESS OF PAR VALUE 8,246 8,238
RETAINED EARNINGS 16,135 11,939
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38,784 34,481
Less treasury stock - 694,434 shares in 1995 and
378,243 shares in 1994, at cost (3,730) (2,142)
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Total stockholders' equity 35,054 32,339
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$55,185 $48,098
======= =======
</TABLE>
See notes to consolidated financial statements. -3-
<PAGE>
ROWE FURNITURE CORPORATION AND WHOLLY-OWNED SUBSIDIARIES
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STATEMENTS OF CONSOLIDATED INCOME
FOR THE THREE AND SIX MONTHS ENDED MAY 28, 1995 AND MAY 29, 1994
UNAUDITED
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<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
May 28, May 29, May 28, May 29,
1995 1994 1995 1994
------- ------- ------- -------
($ in thousands - except per share amounts)
<S> <C> <C> <C> <C>
Net shipments $30,353 $26,455 $59,100 $53,502
Cost of shipments 22,861 19,718 44,586 39,887
------- ------- ------- -------
Gross profit 7,492 6,737 14,514 13,615
Selling and administrative expenses 6,268 4,954 11,796 9,479
Restructuring charge 425 - 425 -
------- ------- ------- -------
Operating income 799 1,783 2,293 4,136
Interest expense (103) (47) (193) (97)
Other income, including gain
on sale of investment
property (Note 5) 241 394 5,683 749
------- ------- ------- -------
Earnings before taxes 937 2,130 7,783 4,788
Taxes on income 328 784 3,039 1,763
------- ------- ------- -------
Net earnings $ 609 $ 1,346 $ 4,744 $ 3,025
======= ======= ======= =======
Earnings per share $ 0.05 $ 0.09 $ 0.35 $ 0.21
======= ======= ======= =======
Weighted average shares
outstanding 13,666 14,700 13,674 14,575
Dividends declared and paid
per share (Note 3)
<CAPTION>
Quarter Ended 1995 1994
---- ----
<S> <C> <C>
First Quarter $0.02 $0.013
Second Quarter 0.02 0.013
---- -----
Total for the Six Months
Ended May 28, 1995
and May 29, 1994 $0.04 $0.026
===== ======
</TABLE>
See accompanying notes to consolidated financial statements. -4-
<PAGE>
ROWE FURNITURE CORPORATION AND WHOLLY-OWNED SUBSIDIARIES
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STATEMENTS OF CONSOLIDATED CASH FLOWS FOR THE SIX MONTHS ENDED MAY 28, 1995 AND
MAY 29, 1994
UNAUDITED
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<TABLE>
<CAPTION>
1995 1994
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($ Thousands)
<S> <C> <C>
INCREASE (DECREASE) IN CASH:
Cash flows from operating activities:
Cash received from customers $57,902 $54,139
Cash paid to suppliers and employees (54,197) (52,325)
Income taxes paid, net of refunds (925) (2,040)
Interest paid (193) (96)
Interest received 76 93
Other receipts - net 332 656
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Net cash and cash equivalents provided by
operating activities 2,995 427
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Cash flows from investing activities:
Proceeds from sale of property and equipment 6,594 -
Capital expenditures (1,683) (3,525)
Sale of marketable securities 134 176
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Net cash provided by (used in) investing activities 5,045 (3,349)
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Cash flows from financing activities:
Net borrowings under line of credit 1,789 875
Proceeds from issuance of long term debt - 200
Payments to reduce long-term debt (92) (2,011)
Proceeds from issuance of common stock 107 3,558
Dividends paid (548) (371)
Purchase of treasury stock (1,588) (63)
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Net cash provided by (used in) financing activities (332) 2,188
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Net increase (decrease) in cash and cash equivalents 7,708 (734)
Cash and cash equivalents at beginning of period 471 1,803
------- -------
Cash and cash equivalents at end of period $ 8,179 $ 1,069
======= =======
</TABLE>
See notes to consolidated financial statements. -5-
<PAGE>
ROWE FURNITURE CORPORATION AND WHOLLY-OWNED SUBSIDIARIES
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STATEMENTS OF CONSOLIDATED CASH FLOWS FOR THE SIX MONTHS ENDED MAY 28, 1995 AND
MAY 29, 1994
UNAUDITED
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Reconciliation of Net Earnings to Net Cash
Used in Operating Activities:
<TABLE>
<CAPTION>
1995 1994
---- ----
($ Thousands)
<S> <C> <C>
Net earnings $4,744 $3,024
------ ------
Adjustment to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 1,125 921
Provision for deferred compensation 273 236
Payments made for deferred compensation (285) (1,533)
Provision for losses on accounts receivable 100 102
Loss (gain) on disposition of assets (5,275) -
Change in operating assets and liabilities:
Decrease (increase) in accounts receivable (1,197) 634
Decrease (increase) in inventories 935 (461)
Decrease (increase) in prepaid expenses (53) 208
Decrease (increase) in cash value of
life insurance (65) (61)
Decrease (increase) in other assets 6 296
Increase (decrease) in accounts payable (278) (2,271)
Increase (decrease) in accrued expenses 852 (390)
Increase (decrease) in income taxes payable (11) (278)
Increase (decrease) in deferred income taxes 2,124 -
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Total adjustments (1,749) (2,597)
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Net cash provided by operating activities $ 2,995 $ 427
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</TABLE>
See notes to consolidated financial statements. -6-
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ROWE FURNITURE CORPORATION AND WHOLLY-OWNED SUBSIDIARIES
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
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Note 1 - In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments necessary to present
fairly the financial position as of May 28, 1995 and the results of
operations and cash flows for the six-months ended May 28, 1995 and May
29, 1994.
Note 2 - The results of operations for the six-months ended May 28, 1995 and May
29, 1994 are not necessarily indicative of the results to be expected
for the full year.
Note 3 - All share and per share amounts have been restated to retroactively
reflect the three-for-two stock split declared November 10, 1994.
Note 4 - In June, 1995, the company settled litigation with a former dealer. The
settlement will not have a material impact on the financial condition
or operating results of the Company.
Note 5 - On February 16, 1995, the Company completed the sale of its 175,000 sq.
ft. warehouse in Sylmar, California. The warehouse had been held by the
Company as investment property. The after-tax gain was approximately
$3.0 million, net of lost rents during the disposition period. In June
1995, the Company secured other rental income-producing property to
permit a "tax-deferred" exchange with the proceeds realized from this
transaction.
Note 6 - The Company has accrued restructuring costs in May 1995 of
approximately $400,000 or $265,000, after tax. These costs consist
primarily of termination benefits from a corporate reorganization of
the manufacturing process.
-7-
<PAGE>
ROWE FURNITURE CORPORATION AND WHOLLY-OWNED SUBSIDIARIES
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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(UNAUDITED)
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Results of Operations:
- ---------------------
Six Months ended May 28, 1995 Compared to Six Months Ended May 29, 1994.
Net shipments during the first six months of 1995 increased by $5,598,000 or
10.5% to $59,100,000 from $53,502,000 in 1994. Management believes that
shipments increased primarily from the addition of new dealers, increased
purchases by existing customers and additional sales from four new company-owned
Rowe ShowPlace locations. Furthermore, management believes that overall
marketing of the Company's products benefited from the enhanced product quality
and customer service coupled with stable selling prices.
Gross profit during the first six months of 1995 increased by $899,000 or 6.6%
to $14,514,000 from $13,615,000 in 1994. Gross profit as a percentage of net
shipments during the first six months in 1995 decreased to 24.6% from 25.4% in
1994. Management believes that the percentage decrease was due primarily to
costs associated with hiring and training expenses for new employees, additional
overtime requirement and an increase in health and medical costs.
Selling and administrative expenses during the first six months of 1995
increased by $2,317,000 or 24.4% to $11,796,000 from $9,479,000 in 1994. Selling
and administrative expenses as a percentage of net shipments during the first
six months of 1995 increased to 20.0% from 17.7% in 1994. The aggregate dollar
increase in selling and administrative expenses was the result of increased
advertising expense, wages and benefits, operating expenses of additional
company-owned Rowe ShowPlace locations and increases in selling commissions.
Most other costs remained at or near prior year levels.
Net interest expense during the first six months of 1995 increased by $96,000 or
99.0% to $193,000 from $97,000 in 1994. The increase in net interest expense
resulted from additional short-term borrowings and higher interest rates.
Restructuring costs during the first six months of 1995 consisted primarily of
accrued termination benefits from a corporate reoganization of the manufacturing
process.
Other income during the first six months of 1995 increased by $4,934,000 to
$5,683,000 from $749,000 in 1994. The increase in other income was due primarily
to the sale of investment property.
Net earnings during the first six months of 1995 increased by $1,719,000 or
56.8% to $4,744,000 from $3,025,000 in 1994. The increase in net earnings
reflects the gain on sale of investment property, offset by the restructuring
costs.
Operating income before the restructuring charge was $2,718,000 versus
$4,136,000 in the prior year. The decrease related primarily to increased cost
of sales, selling and administrative expenses and interest, partially offset by
increased sales volume.
-8-
<PAGE>
ROWE FURNITURE CORPORATION AND WHOLLY-OWNED SUBSIDIARIES
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- ------------------------------------------------
UNAUDITED) - CONTINUED
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Liquidity and Source of Capital:
- -------------------------------
The Company has historically financed its operations and capital requirements
with internally generated funds and bank or other financing. The Company has
controlled its capital requirements by improving operating efficiencies in
various aspects of its business, including inventory and receivable management,
labor productivity, and product distribution.
Net cash provided by operating activities was $2,995,000 during the first six
months of 1995 versus $427,000 in 1994. Fluctuations in net cash provided by
operating activities are primarily the result of changes in operating income and
changes in working capital accounts.
Capital expenditures were $1,683,000 during the first six months of 1995 and
$3,525,000 in 1994. These expenditures were incurred primarily in connection
with maintaining the Company's production capacity, new ShowPlace locations and
certain additions of equipment and systems.
Financing activities utilized net cash during the first six months of 1995 of
$333,000 and provided $2,188,000 in 1994. These activities primarily involved
borrowings under a line of credit, payments of dividends and the repurchase of
Company common stock.
As of May 28, 1995, the Company had outstanding long-term debt of $772,000,
consisting primarily of industrial revenue bonds bearing interest at rates
ranging from 3.5% to 6.0%.
The Company has unsecured short-term bank lines of credit totaling $11 million.
The interest rates on those lines of credit do not exceed the prime rate. The
amount outstanding under the lines of credit as of May 28, 1995 was
approximately $4,525,000.
Management believes that net cash provided by operating activities and available
bank lines of credit will be sufficient to fund anticipated growth and to meet
the Company's anticipated capital requirements and operating needs through 1995.
-9-
<PAGE>
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings.
- --------------------------
None
Item 2. Changes in Securities.
- ------------------------------
None
Item 3. Defaults Upon Senior Securities.
- ----------------------------------------
None
Item 4. Submission of Matters to a Vote of Security Holders.
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None
Item 5. Other Information
- --------------------------
None
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
a. Exhibits: Exhibit 27 - Financial Data Schedules for the first and
second quarters of 1995.
b. Reports on Form 8-K: None
-10-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ROWE FURNITURE CORPORATION
Registrant
Date: July 13, 1995 /s/ Arthur H. Dunkin
-------------- --------------------------
Arthur H. Dunkin
Secretary-Treasurer
-11-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-30-1995
<PERIOD-END> FEB-26-1995
<CASH> 6,740
<SECURITIES> 45
<RECEIVABLES> 16,790
<ALLOWANCES> 333
<INVENTORY> 11,517
<CURRENT-ASSETS> 35,687
<PP&E> 37,063
<DEPRECIATION> 25,394
<TOTAL-ASSETS> 53,018
<CURRENT-LIABILITIES> 13,848
<BONDS> 818
<COMMON> 14,316
0
0
<OTHER-SE> 20,309
<TOTAL-LIABILITY-AND-EQUITY> 53,018
<SALES> 28,747
<TOTAL-REVENUES> 28,747
<CGS> 21,725
<TOTAL-COSTS> 21,725
<OTHER-EXPENSES> 5,528
<LOSS-PROVISION> 47
<INTEREST-EXPENSE> 90
<INCOME-PRETAX> 6,846
<INCOME-TAX> 2,711
<INCOME-CONTINUING> 4,135
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,135
<EPS-PRIMARY> 0.30
<EPS-DILUTED> 0.30
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1995
<PERIOD-END> MAY-28-1995
<CASH> 8,179
<SECURITIES> 45
<RECEIVABLES> 18,376
<ALLOWANCES> 358
<INVENTORY> 10,384
<CURRENT-ASSETS> 37,572
<PP&E> 36,130
<DEPRECIATION> 24,211
<TOTAL-ASSETS> 55,185
<CURRENT-LIABILITIES> 15,531
<BONDS> 772
<COMMON> 14,403
0
0
<OTHER-SE> 20,651
<TOTAL-LIABILITY-AND-EQUITY> 55,185
<SALES> 59,100
<TOTAL-REVENUES> 59,100
<CGS> 44,586
<TOTAL-COSTS> 44,586
<OTHER-EXPENSES> 12,121
<LOSS-PROVISION> 100
<INTEREST-EXPENSE> 193
<INCOME-PRETAX> 7,783
<INCOME-TAX> 3,039
<INCOME-CONTINUING> 4,744
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,744
<EPS-PRIMARY> 0.35
<EPS-DILUTED> 0.35
</TABLE>
