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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 February 26, 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 _____
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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 February 26, 1995
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Common stock, par value $1.00 per share 13,621,882 shares
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ROWE FURNITURE CORPORATION
INDEX
<TABLE>
<CAPTION>
Page
<S> <C>
Part I. Financial Information
Consolidated Balance Sheets - February 26, 1995 and
November 27, 1994 3
Statements of Consolidated Income - Three Months
Ended February 26, 1995 and February 27, 1994 4
Statements of Consolidated Cash Flows - Three Months
Ended February 26, 1995 and February 27, 1994 5
Notes to Consolidated Financial Statements 7
Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
Part II. Other Information 10
</TABLE>
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PART I - - FINANCIAL INFORMATION
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ROWE FURNITURE CORPORATION AND WHOLLY-OWNED SUBSIDIARIES
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CONSOLIDATED BALANCE SHEETS
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<TABLE>
<CAPTION>
February 26, November 27,
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1995 1994
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ASSETS (Unaudited) (Audited)
CURRENT ASSETS ($ Thousands)
<S> <C> <C>
Cash and cash equivalents $ 6,740 $ 471
Marketable securities 45 179
Accounts receivable, net 16,457 16,921
Inventories:
Finished goods 2,736 2,472
Work-in-process 2,659 2,502
Raw materials 6,122 6,345
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Total inventories 11,517 11,319
Deferred income tax asset 100 100
Prepaid expenses 828 793
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Total current assets 35,687 29,783
PROPERTY AND EQUIPMENT, net 11,669 11,300
OTHER NONCURRENT ASSETS (Note 5) 5,662 7,015
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$ 53,018 $48,098
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LIABILITIES
CURRENT LIABILITIES
Current maturities of long-term liabilities $ 445 $ 445
Short term bank borrowings 4,153 2,736
Accounts payable and accrued liabilities 8,656 9,986
Income taxes payable 594 11
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Total current liabilities 13,848 13,178
LONG-TERM AND DEFERRED LIABILITIES 4,545 2,581
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Total liabilities 18,393 15,759
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COMMITMENTS AND CONTINGENCIES (Note 4)
</TABLE>
STOCKHOLDERS' EQUITY
COMMON STOCK, par value $1 per share:
<TABLE>
<CAPTION>
February 26, November 27,
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1995 1994
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<S> <C> <C> <C> <C>
Authorized shares 20,000,000 20,000,000
Issued shares 14,315,551 14,304,177 14,316 14,304
Outstanding shares 13,621,882 13,925,934
CAPITAL IN EXCESS OF PAR VALUE 8,237 8,238
RETAINED EARNINGS 15,797 11,939
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38,350 34,481
LESS TREASURY STOCK - 693,669 shares in 1995 and
378,243 shares in 1994, at cost (3,725) (2,142)
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Total stockholders' equity 34,625 32,339
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$ 53,018 $48,098
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</TABLE>
See notes to consolidated financial statements. -3-
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ROWE FURNITURE CORPORATION AND WHOLLY OWNED SUBSIDIARIES
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STATEMENTS OF CONSOLIDATED INCOME
FOR THE THREE MONTHS ENDED FEBRUARY 26, 1995 AND February 27, 1994
UNAUDITED
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<TABLE>
<CAPTION>
1995 1994
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($ in thousands - except
per share amounts)
<S> <C> <C>
Net shipments $28,747 $27,047
Cost of shipments 21,725 20,169
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Gross profit 7,022 6,878
Selling and administrative expenses 5,528 4,525
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Operating income 1,494 2,353
Interest expense (90) (50)
Other income, including gain on sale of
investment property (Note 5) 5,442 355
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Earnings before taxes 6,846 2,658
Taxes on income 2,711 979
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Net earnings $ 4,135 $ 1,679
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Earnings per share $0.30 $0.12
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Weighted average shares outstanding 13,682 14,455
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Dividends declared and paid per share (Note 3) $0.020 $0.013
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</TABLE>
See notes to consolidated financial statements. -4-
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ROWE FURNITURE CORPORATION AND WHOLLY-OWNED SUBSIDIARIES
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STATEMENTS OF CONSOLIDATED CASH FLOWS FOR THE THREE MONTHS ENDED FEBRUARY 26,
1995 AND February 27, 1994
UNAUDITED
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<TABLE>
<CAPTION>
1995 1994
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($ Thousands)
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS:
Cash flows from operating activities:
Cash received from customers $29,164 $25,602
Cash paid to suppliers and employees (28,348) (26,879)
Income taxes paid, net of refunds (4) (298)
Interest paid (90) (50)
Interest received 14 45
Other receipts - net 154 310
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Net cash and cash equivalents provided by (used in)
operating activities 890 (1,270)
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Cash flows from investing activities:
Proceeds from sale of property and equipment 6,594 -
Capital expenditures (871) (605)
Sale of marketable securities 134 175
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Net cash and cash equivalents provided by (used in)
investing activities 5,857 (430)
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Cash flows from financing activities:
Net borrowings under line of credit 1,417 2,658
Proceeds from issuance of long term debt - 276
Payments to reduce long-term debt (46) (1,964)
Proceeds from issuance of common stock 11 30
Dividends paid (277) (183)
Purchase of treasury stock (1,583) (40)
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Net cash and cash equivalents provided by (used in)
financing activities (478) 777
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Net increase (decrease) in cash and cash equivalents 6,269 (923)
Cash and cash equivalents at beginning of period 471 1,803
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Cash and cash equivalents at end of period $ 6,740 $ 880
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</TABLE>
See notes to consolidated financial statements. -5-
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ROWE FURNITURE CORPORATION AND WHOLLY-OWNED SUBSIDIARIES
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STATEMENTS OF CONSOLIDATED CASH FLOWS FOR THE THREE MONTHS ENDED FEBRUARY 26,
1995 AND February 27, 1994
UNAUDITED
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Reconciliation of Net Earnings to Net Cash
Provided by (Used in) Operating Activities:
<TABLE>
<CAPTION>
1995 1994
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($ Thousands)
<S> <C> <C>
Net earnings $4,135 $1,679
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Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 534 435
Provision for deferred compensation 128 133
Payments made for deferred compensation (242) (1,503)
Provision for losses on accounts receivable 47 60
Loss (gain) on disposition of assets (5,275) -
Change in operating assets and liabilities:
Decrease (increase) in accounts receivable 417 (1,444)
Decrease (increase) in inventories (198) 101
Decrease (increase) in prepaid expenses (35) 355
Decrease (increase) in cash surrender value of
officer's life insurance (25) (29)
Decrease (increase) in other assets 27 254
Increase (decrease) in accounts payable (332) (1,552)
Increase (decrease) in accrued expenses (998) (440)
Increase (decrease) in income taxes payable 583 681
Increase (decrease) in deferred income taxes 2,124 -
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Total adjustments (3,245) (2,949)
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Net cash provided by (used in) operating activities $ 890 $(1,270)
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</TABLE>
See notes to consolidated financial statements.
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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 February 26, 1995 and the results
of operations and cash flows for the three-months ended February 26,
1995 and February 27, 1994.
Note 2 - The results of operations for the three-months ended February 26, 1995
and February 27, 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 - The Company is in litigation with a former dealer who alleges breach of
certain contractual duties and other violations which purportedly
caused the dealer damages from $800,000 to $1,600,000. Management
denies that it breached any obligations or duties to this dealer, and
asserts that any losses the dealer suffered resulted from circumstances
unrelated to the Company's action. Management is vigorously contesting
this litigation, and has filed a counter-claim seeking recovery of
amounts it believes are owed to it by the plaintiff. Management
believes that it is unlikely that the outcome of this case will have a
material impact on the financial condition 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. The
Company intends to secure other rental income-producing property to
permit a "tax-deferred" exchange with the proceeds realized from this
transaction.
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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:
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Three Months ended February 26, 1995 Compared to Three Months Ended February 27,
1994.
Net shipments during the first three months of 1995 increased by $1,700,000 or
6.3% to $28,747,000 from $27,047,000 in 1994. Management believes that shipments
increased primarily from the addition of new dealers and increased purchases by
existing customers. Furthermore, management believes that overall marketing of
the Company's products benefited from enhanced product quality and customer
service coupled with stable selling prices.
Gross profit during the first three months of 1995 increased by $144,000 or 2.1%
to $7,022,000 from $6,878,000 in 1994. Gross profit as a percentage of net
shipments during the first three months in 1995 decreased to 24.4% 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 and an
increase in health and medical expenses.
Selling and administrative expenses during the first three months of 1995
increased by $1,003,000 or 22.2% to $5,528,000 from $4,525,000 in 1994. Selling
and administrative expenses as a percentage of net shipments during the first
three months of 1995 increased to 19.2% from 16.7% in 1994. The aggregate
increase in selling and administrative expenses was the result of increased
advertising expense, wages and benefits, costs associated with opening
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 three months of 1995 increased by $40,000
or 80% to $90,000 from $50,000 in 1994. The increase in net interest expense
resulted from additional short-term borrowings at higher interest rates.
Other income during the first three months of 1995 increased by $5,087,000 to
$5,442,000 from $355,000 in 1994. The increase in other income was due primarily
to sale of investment property.
Net earnings during the first three months of 1995 increased by $2,456,000 or
146.3% to $4,135,000 from $1,679,000 in 1994. The increase in net earnings
reflects the gain on the sale of investment property, offset by increases in
cost of sales and selling and administrative expenses.
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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) - CONTINUED
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Liquidity and Source of Capital:
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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 $890,000 during the first three
months of 1995 versus $1,270,000 used 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 $871,000 during the first three months of 1995 and
$605,000 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.
Net cash used in financing activities during the first three months of 1995 was
$479,000 versus cash provided of $777,000 in 1994. In 1995, these activities
related primarily to the purchase of company stock, partially offset by
borrowings under a line of credit.
As of February 26, 1995, the Company had outstanding long-term debt of $818,000,
consisting of industrial revenue bonds bearing interest at rates ranging from 5%
to 7%.
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 February 26, 1995 was
approximately $4.2 million.
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.
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PART II -- OTHER INFORMATION
Item 1. Legal Proceedings.
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The Company is, from time to time, a party to litigation which arises in the
normal course of its business. The Company is presently the defendant in a
civil action titled Charles E. Sklar, el al. v. Rowe Furniture Corporation,
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filed in October 1992 and currently pending the United States District Court for
the District of Minnesota. The plaintiff is a former dealer of the Company's
products who alleges breach of certain contractual duties, fraud and
misrepresentation by the Company in connection with both furniture and support
services provided by the Company which purportedly caused the dealer damaged
from $800,000 to $1,600,000. Management denies that it breached any obligations
or duties to this dealer, and asserts that any losses the dealer suffered
resulted from circumstances unrelated to the Company's actions. Management
believes that the plaintiff's claims are without merit and the Company is
vigorously contesting this litigation and has filed a counterclaim seeking
recovery of amounts it believes are owed to it by the Plaintiff.
Item 2. Changes in Securities.
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None
Item 3. Defaults Upon Senior Securities.
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None
Item 4. Submission of Matters to a Vote of Security Holders.
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None
Item 5. Other Information
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None
Item 6. Exhibits and Reports on Form 8-K
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a. Exhibits: None
b. Reports on Form 8-K: Three reports on Form 8-K were filed. On December 15,
1994, an 8-K was filed to announced that Rowe Properties, Inc., a 100% owned
subsidiary of Rowe Furniture Corporation entered into an agreement for the sale
of its 175,000 sq. ft. warehouse located in Sylmar, California. On January 27,
1995, an 8-K was filed to announce the Board of Directors approval of the
purchase of an additional 500,000 shares of Rowe Furniture Corporation common
stock in open market transactions. On March 3, 1995, an 8-K was filed to
announce that Rowe Properties, Inc., a 100% wholly owned subsidiary of Rowe
Furniture Corporation closed on the sale of its 175,000 sq. ft. warehouse
located in Sylmar, California.
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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
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Registrant
/s/ Arthur H. Dunkin
Date: April 11, 1995 --------------------------
Arthur H. Dunkin
Secretary-Treasurer
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