<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 August 27, 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 shorted 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 August 27, 1995
- --------------------------------------- ------------------------------
Common stock, par value $1.00 per share 13,537,795 shares
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ROWE FURNITURE CORPORATION
INDEX
Part I. Financial Information Page
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Consolidated Balance Sheets - August 27, 1995 and
November 27, 1994 3
Consolidated Statement of Income - Three Months and Nine
Months ended August 27, 1995 and August 28, 1994 4
Consolidated Statement of Cash Flows - Nine Months
Ended August 27, 1995 and August 28, 1994 5
Notes to Consolidated Financial Statements 7
Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
Part II. Other Information 10
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PART I -- FINANCIAL INFORMATION
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ROWE FURNITURE CORPORATION AND WHOLLY-OWNED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
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<TABLE>
<CAPTION>
August 27 November 27,
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1995 1994
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(Unaudited) (Audited)
($ Thousands)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,412 $ 471
Marketable securities 42 179
Accounts receivable, net 18,572 16,921
Inventories:
Finished goods 2,549 2,472
Work-in-process 2,635 2,502
Raw materials 6,630 6,345
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Total inventories 11,814 11,319
Deferred income tax asset 100 100
Prepaid expenses 552 793
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Total current assets 32,492 29,783
PROPERTY AND EQUIPMENT, net 12,207 11,300
OTHER NONCURRENT ASSETS (Note 5) 12,384 7,015
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$57,083 $48,098
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LIABILITIES
CURRENT LIABILITIES
Current maturities of long-term liabilities $ 485 $ 445
Short term bank borrowings 4,851 2,736
Accounts payable and accrued liabilities 11,894 9,986
Income taxes payable 333 11
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Total current liabilities 17,563 13,178
LONG-TERM AND DEFERRED LIABILITIES 4,520 2,581
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Total liabilities 22,083 15,759
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COMMITMENTS AND CONTINGENCIES (Note 4)
STOCKHOLDERS' EQUITY
COMMON STOCK, par value $1 per share (Note 3):
August 27 November 27
1995 1994
========================
Authorized shares 20,000,000 20,000,000
Issued shares 14,408,208 14,304,177 14,408 14,304
Outstanding shares 13,537,795 13,925,934
CAPITAL IN EXCESS OF PAR VALUE 8,247 8,238
RETAINED EARNINGS 16,878 11,939
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39,533 34,481
Less treasury stock 870,413 shares in 1995 and
378,243 shares in 1994, at cost (4,533) (2,142)
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Total stockholders' equity 35,000 32,339
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$57,083 $48,098
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</TABLE>
See notes to consolidated financial statements
3
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ROWE FURNITURE CORPORATION AND WHOLLY-OWNED SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
FOR THE THREE MONTHS AND NINE MONTHS ENDED AUGUST 27, 1995 AND AUGUST 28, 1994
UNAUDITED
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<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
Aug. 27, Aug. 28, Aug. 27, Aug. 28,
1995 1994 1995 1994
-------- -------- -------- --------
($ in thousands - except per share amounts)
<S> <C> <C> <C> <C>
Net shipments $29,533 $27,001 $88,633 $80,503
Cost of shipments 22,299 20,039 66,885 59,926
------- ------- ------- -------
Gross profit 7,234 6,962 21,748 20,577
Selling and administrative
expenses 5,857 4,759 17,653 14,238
Restructuring charge - - 425 -
------- ------- ------- -------
Operating income 1,377 2,203 3,670 6,339
Interest expense (107) (41) (300) (138)
Other income, including gain
on sale of investment
property (Note 5) 280 337 5,963 1,086
------- ------- ------- -------
Earnings before taxes 1,550 2,499 9,333 7,287
Taxes on income 536 922 3,575 2,685
------- ------- ------- -------
Net earnings $ 1,014 $ 1,577 $ 5,758 $ 4,602
======= ======= ======= =======
Earnings per share $ 0.07 $ 0.11 $ 0.42 $ 0.32
======= ======= ======= =======
Weighted average shares
outstanding 13,569 14,647 13,639 14,600
Dividends declared and paid
per share (Note 3)
Quarter Ended 1995 1994
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First quarter $ 0.02 $ 0.013
Second quarter 0.02 0.013
Third quarter 0.02 0.013
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Total for the nine months
ended August 27, 1995
and August 28, 1994 $ 0.06 $ 0.039
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</TABLE>
See notes to consolidated financial statements
4
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ROWE FURNITURE CORPORATION AND WHOLLY-OWNED SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS FOR THE NINE MONTHS
ENDED AUGUST 27, 1995 AND AUGUST 28, 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 $86,835 $78,352
Cash paid to suppliers and employees (81,428) (76,343)
Income taxes paid, net of refunds (1,150) (2,718)
Interest paid (300) (138)
Interest received 149 135
Other receipts - net 561 951
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Net cash and cash equivalents provided by
operating activities 4,667 239
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Cash flows from investing activities:
Proceeds from sale of property and equipment 6,572 -
Capital expenditures (9,255) (4,192)
Sale of marketable securities 137 171
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Net cash used in investing activities (2,546) (4,021)
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Cash flows from financing activities:
Net borrowings under line of credit 2,115 2,515
Proceeds from issuance of long term debt 200 200
Payments to reduce long-term debt (398) (2,317)
Proceeds from issuance of common stock 113 3,607
Dividends paid (819) (562)
Purchase of treasury stock (2,391) (1,063)
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Net cash provided by (used in) financing activities (1,180) 2,380
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Net increase (decrease) in cash and cash equivalents 941 (1,402)
Cash and cash equivalents at beginning of period 471 1,803
Cash and cash equivalents at end of period $ 1,412 $ 401
======= =======
</TABLE>
See notes to consolidated financial statements
5
<PAGE>
ROWE FURNITURE CORPORATION AND WHOLLY-OWNED SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS FOR THE NINE MONTHS
ENDED AUGUST 27, 1995 AND AUGUST 28, 1994
UNAUDITED
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Reconciliation of Net Earnings to Net Cash
Provided By Operating Activities:
<TABLE>
<CAPTION>
1995 1994
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($ Thousands)
<S> <C> <C>
Net earnings $ 5,758 $ 4,602
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Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 1,620 1,334
Provision for deferred compensation 400 414
Payments made for deferred compensation (326) (254)
Provision for losses on accounts receivable 147 150
Loss (gain) on disposition of assets (5,253) -
Change in operating assets and liabilities:
Decrease (increase) in accounts receivable (1,798) (2,152)
Decrease (increase) in inventories (495) (778)
Decrease (increase) in prepaid expenses 241 (136)
Decrease (increase) in cash value of
life insurance (100) (89)
Decrease (increase) in other assets 139 334
Increase (decrease) in accounts payable 729 (1,204)
Increase (decrease) in accrued expenses 1,180 (1,950)
Increase (decrease) in income taxes payable 322 (32)
Increase (decrease) in deferred income taxes 2,103 -
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Total adjustments (1,091) (4,363)
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Net cash provided by operating activities $ 4,667 $ 239
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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 August 27, 1995 and the results of
operations and cash flows for the nine-months ended August 27, 1995 and
August 28, 1994.
Note 2 - The results of operations for the nine-months ended August 27, 1995 and
August 28, 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 did 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 purchased other rental income-producing property to
permit a "tax-deferred" exchange with the proceeds realized from this
transaction.
Note 6 - The Company 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
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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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Nine Months ended August 27, 1995 Compared to Nine Months ended August 28, 1994.
Net shipments during the first nine months of 1995 increased by $8,130,000 or
10.1% to $88,633,000 from $80,503,000 in 1994. Management believes that
shipments increased primarily from the addition of new dealers, increased
purchases by existing customers, from new company-owned Rowe ShowPlace locations
and favorable product mix.
Gross profit during the first nine months of 1995 increased by $1,171,000 or
5.7% to $21,748,000 from $20,577,000 in 1994. Gross profit as a percentage of
net shipments during the first nine months of 1995 decreased to 24.5% from 25.6%
in 1994. Management believes that the percentage decrease was due primarily to
costs associated with hiring and training expenses and additional overtime
requirements associated with expanding production capacity.
Selling and administrative expenses during the first nine months of 1995
increased by $3,415,000 or 24.0% to $17,653,000 from $14,238,000 in 1994.
Selling and administrative expenses as a percentage of net shipments during the
first nine months of 1995 increased to 19.9% 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 nine months of 1995 increased by $162,000
or 117% to $300,000 from $138,000 in 1994. The increase in net interest expense
resulted from additional short-term borrowings at higher interest rates.
Restructuring costs during the first nine months of 1995 consisted primarily of
accrued termination benefits from a corporate reorganization of the
manufacturing process.
Other income during the first nine months of 1995 increased by $4,877,000 to
$5,963,000 from $1,086,000 in 1994. The increase in other income was due
primarily to the sale of investment property.
Operating income before the restructuring charge was $4,095,000 versus
$6,339,000 in the prior year. The decrease related primarily to increased cost
of sales and higher selling and administrative expenses, partially offset by
increased sales volume.
Net earnings during the first nine months of 1995 increased by $1,156,000 or
25.1% to $5,758,000 from $4,602,000 in 1994. The increase in net earnings
reflects the gain on the sale of investment property, offset by the
restructuring costs.
8
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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:
- -------------------------------
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 $4,667,000 during the first nine
months of 1995 versus $239,000 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 $9,255,000 during the first nine months of 1995 and
$4,192,000 in 1994. These expenditures were incurred primarily in connection
with the purchase of rental income-producing property as a part of a tax-free
exchange, establishing new ShowPlace locations, and to a lesser extent, the
purchase of production and computer equipment.
Net cash used in financing activities during the first nine months of 1995 was
$1,180,000 versus $2,380,000 cash provided 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 August 27, 1995, the Company had outstanding long-term debt of $626,000
primarily consisting 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 August 27, 1995 was
approximately $5.0 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.
9
<PAGE>
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings.
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None
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: Exhibit 27 - Financial Data Schedule for the third quarter of
1995.
b. Reports on Form 8-K: One report on Form 8-K was filed on June 15, 1995 to
announce the completion of the 750,000 share stock buy-back program (adjusted
for a three-for-two stock split) which was approved by the Board of Directors on
July 29, 1994.
10
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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
--------------------------
Registrant
Date: /s/ Arthur H. Dunkin
------------------- -----------------------------
Arthur H. Dunkin
Secretary-Treasurer
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> NOV-30-1995
<PERIOD-END> AUG-27-1995
<CASH> 1,412
<SECURITIES> 42
<RECEIVABLES> 18,951
<ALLOWANCES> 379
<INVENTORY> 11,814
<CURRENT-ASSETS> 32,492
<PP&E> 36,845
<DEPRECIATION> 24,638
<TOTAL-ASSETS> 57,083
<CURRENT-LIABILITIES> 17,563
<BONDS> 466
<COMMON> 14,408
0
0
<OTHER-SE> 20,592
<TOTAL-LIABILITY-AND-EQUITY> 57,083
<SALES> 88,633
<TOTAL-REVENUES> 8,633
<CGS> 66,885
<TOTAL-COSTS> 66,885
<OTHER-EXPENSES> 18,078
<LOSS-PROVISION> 147
<INTEREST-EXPENSE> 300
<INCOME-PRETAX> 9,333
<INCOME-TAX> 3,575
<INCOME-CONTINUING> 5,758
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,758
<EPS-PRIMARY> 0.42
<EPS-DILUTED> 0.42
</TABLE>
