<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 June 2, 1996 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: 540-389-8671
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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
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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 June 2, 1996
- --------------------------------------- ---------------------------
Common stock, par value $1.00 per share 13,437,235 shares
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ROWE FURNITURE CORPORATION
INDEX
<TABLE>
<CAPTION>
Part I. Financial Information Page
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<S> <C>
Consolidated Balance Sheets - June 2, 1996 and
December 3, 1995 4
Statements of Consolidated Earnings - Three Months and Six Months
Ended June 2, 1996 and May 28, 1995 5
Statements of Consolidated Cash Flows - Three Months and Six Months
Ended June 2, 1996 and May 28, 1995 6
Notes to Consolidated Financial Statements 8
Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
Part II. Other Information 11
</TABLE>
2
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PART I -- FINANCIAL INFORMATION
3
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ROWE FURNITURE CORPORATION AND WHOLLY-OWNED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
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<TABLE>
<CAPTION>
June 2 December 3
1996 1995
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(Unaudited) (Audited)
($ Thousands)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 371 $ 323
Marketable securities 45 42
Accounts receivable, net 19,717 18,763
Inventories:
Finished goods 2,615 3,444
Work-in-process 2,718 2,808
Raw materials 5,972 6,194
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Total inventories 11,305 12,446
Deferred income tax asset 70 70
Prepaid expenses 746 1,086
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Total current assets 32,254 32,730
PROPERTY AND EQUIPMENT, net 13,543 13,095
OTHER NONCURRENT ASSETS (Note 3) 12,147 12,210
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$57,944 $58,035
========= ==========
LIABILITIES
CURRENT LIABILITIES
Current maturities of long-term liabilities $ 485 $ 485
Short term bank borrowings 1,981 2,135
Accounts payable and accrued liabilities 13,375 14,857
Income taxes payable 493 346
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Total current liabilities 16,334 17,823
LONG-TERM AND DEFERRED LIABILITIES 4,507 4,591
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Total liabilities 20,841 22,414
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</TABLE>
<TABLE>
<CAPTION>
STOCKHOLDERS' EQUITY
COMMON STOCK, par value $1 per share:
June 2 December 3
1996 1995
=======================
<S> <C> <C> <C> <C>
Authorized shares 20,000,000 20,000,000
Issued shares 14,488,481 14,416,104 14,488 14,416
Outstanding shares 13,437,235 13,410,533
CAPITAL IN EXCESS OF PAR VALUE 8,257 8,248
RETAINED EARNINGS 19,679 18,056
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42,424 40,720
Less treasury stock 1,051,246 shares in 1996 and
1,005,571 shares in 1995, at cost (5,321) (5,099)
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Total stockholders' equity 37,103 35,621
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$57,944 $58,035
========= ==========
</TABLE>
See notes to consolidated financial statements
4
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ROWE FURNITURE CORPORATION AND WHOLLY-OWNED SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
FOR THE THREE AND SIX MONTHS ENDED JUNE 2, 1996 AND MAY 28, 1995
UNAUDITED
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<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 2, May 28, June 2, May 28,
1996 1995 1996 1995
-------- -------- -------- --------
($ in thousands - except per share amounts)
<S> <C> <C> <C> <C>
Net shipments $35,080 $30,353 $69,873 $59,100
Cost of shipments 26,274 22,861 53,509 44,586
-------- -------- -------- --------
Gross profit 8,806 7,492 16,364 14,514
Selling and administrative expenses 6,877 6,268 13,297 11,796
Restructuring charge - 425 - 425
-------- -------- -------- --------
Operating income 1,929 799 3,067 2,293
Interest expense (88) (103) (199) (193)
Other income, including gain on sale
of investment property (Note 3) 369 241 712 5,683
-------- -------- -------- --------
Earnings before taxes 2,210 937 3,580 7,783
Taxes on income 878 328 1,417 3,039
-------- -------- -------- --------
Net earnings $ 1,332 $ 609 $ 2,163 $ 4,744
======== ======== ======== ========
Earnings per share $ 0.10 $ 0.05 $ 0.16 $ 0.35
======== ======== ======== ========
Weighted average shares outstanding 13,452 13,666 13,435 13,674
Dividends declared and paid per share
Quarter Ended 1996 1995
------------- -------- --------
First quarter $ 0.02 $ 0.02
Second quarter $ 0.02 $ 0.02
======== ========
Total for the six months ended
June 2, 1996 and May 28, 1995 $ 0.04 $ 0.04
======== ========
</TABLE>
See notes to consolidated financial statements
5
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ROWE FURNITURE CORPORATION AND WHOLLY-OWNED SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS FOR THE SIX MONTHS
ENDED JUNE 2, 1996 AND MAY 28, 1995
UNAUDITED
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<TABLE>
<CAPTION>
1996 1995
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($ Thousands)
<S> <C> <C>
INCREASE (DECREASE) IN CASH:
Cash flows from operating activities:
Cash received from customers $ 68,731 $ 57,902
Cash paid to suppliers and employees (65,464) (54,197)
Income taxes paid, net of refunds (1,270) (925)
Interest paid (199) (193)
Interest received 162 76
Other receipts - net 550 332
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Net cash and cash equivalents provided by
operating activities 2,510 2,995
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Cash flows from investing activities:
Proceeds from sale of property and equipment 0 6,954
Capital expenditures (1,512) 1,683
Sale (purchase) of marketable securities (3) 134
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Net cash used in investing activities (1,515) 5,045
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Cash flows from financing activities:
Net borrowings (repayments) under line of credit (154) 1,789
Proceeds from issuance of long term debt - -
Payments to reduce long-term debt (112) (92)
Proceeds from issuance of common stock 81 107
Dividends paid (540) (548)
Purchase of treasury stock (222) (1,588)
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Net cash used in financing activities (947) (332)
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Net increase in cash and cash equivalents 48 7,708
Cash and cash equivalents at beginning of period 323 471
-------- --------
Cash and cash equivalents at end of period $ 371 $ 8,179
======== ========
</TABLE>
See notes to consolidated financial statements
<PAGE>
ROWE FURNITURE CORPORATION AND WHOLLY-OWNED SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS FOR THE SIX MONTHS
ENDED JUNE 2, 1996 AND MAY 28, 1995
UNAUDITED
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<TABLE>
<CAPTION>
Reconciliation of Net Earnings to Net Cash
Provided By Operating Activities:
1996 1995
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($ Thousands)
<S> <C> <C>
Net earnings $ 2,163 $ 4,744
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Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 1,194 1,125
Provision for deferred compensation 326 273
Payments made for deferred compensation (298) (285)
Provision for losses on accounts receivable 188 100
Loss (gain) on disposition of assets -- (5,275)
Increase (decrease) in deferred income taxes -- 2,124
Change in operating assets and liabilities:
Decrease (increase) in accounts receivable (1,142) (1,197)
Decrease (increase) in inventories 1,141 935
Decrease (increase) in prepaid expenses 340 (53)
Decrease (increase) in cash value of
life insurance (58) (65)
Decrease (increase) in other assets (9) 6
Increase (decrease) in accounts payable (2,248) (278)
Increase (decrease) in accrued expenses 766 852
Increase (decrease) in income taxes payable 147 (11)
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Total adjustments 347 (1,749)
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Net cash provided by operating activites $2,510 $2,995
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</TABLE>
See notes to consolidated financial statements
7
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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 June 2, 1996 and the results of
operations and cash flows for the six-months ended June 2, 1996 and
May 28, 1995.
Note 2 - The results of operations for the six months ended June 2, 1996 and
May 28, 1995 are not necessarily indicative of the results to be
expected for the full year.
Note 3 - 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, or $0.22 per share. In June 1995, the
Company secured other rental income-producing property to permit a
"tax-deferred" exchange with the proceeds realized from this
transaction.
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
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Results of Operations:
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Six Months ended June 2, 1996 Compared to Six Months ended May 28, 1995.
Net shipments during the first six months of 1996 increased by $10,773,000 or
18.2% to $69,873,000 from $59,100,000 in 1995. Management believes that
shipments increased primarily from the addition of new dealers, increased
purchases by existing customers, sales from new company-owned Rowe ShowPlace
locations and favorable product mix. Furthermore, management believes that
overall marketing of the Company's products benefited from the enhanced product
quality and customer service.
Gross profit during the first six months of 1996 increased by $1,850,000 or
12.7% to $16,364,000 from $14,514,000 in 1995. Gross profit as a percentage of
net shipments during the first six months in 1996 decreased to 23.4% from 24.6%
in 1995. Management believes that the percentage decrease was due primarily to
costs associated with hiring and training expenses for new employees, additional
overtime requirements and a wage increase.
Selling and administrative expenses during the first six months of 1996
increased by $1,501,000 or 12.7% to $13,297,000 from $11,796,000 in 1995. The
year to year increase reflects the opening of additional Rowe ShowPlace
locations, salary increases and direct costs associated with higher sales
volume. Selling and administrative expenses as a percentage of net shipments
during the first six months of 1996 decreased to 19.0% from 20.0% in 1995. The
percentage decrease in selling and administrative expenses was the result of
increased shipments.
Operating income was $3,067,000 versus $2,293,000 in the prior year. The
increase reflects higher sales volume in 1996 and a restructuring charge in
1995.
Net interest expense during the first six months of 1996 increased by $6,000 or
3.1% to $199,000 from $193,000 in 1995. The increase in net interest expense
resulted from additional short-term borrowings.
Other income during the first six months of 1996 decreased by $4,971.000 to
$712,000 from $5,683,000 in 1995. The decrease in other income was due
primarily to the gain on the sale of investment property in 1995.
Net earnings during the first six months of 1996 decreased by $2,581,000 to
$2,163,000 from $4,744,000 in 1995. Net earnings for 1995 included the after-tax
gain on the sale of investment property of approximately $3,000,000, offset in
part by the restructuring charge.
9
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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 $2,510,000 during the first six
months of 1996 versus $2,995,000 in 1995. 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 $1,512,000 during the first six months of 1996 and
$1,683,000 in 1995. These expenditures were incurred primarily in connection
with maintaining the Company's production capacity, new Rowe ShowPlace locations
and certain additions of equipment and systems.
Net cash used in financing activities during the first six months of 1996 was
$947,000 versus $332,000 in 1995. In 1996, these activities related primarily
to the increase in short-term borrowings.
As of June 2, 1996, the Company had outstanding long-term debt of $942,000
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 $15 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 June 2, 1996 was
approximately $2.0 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 1996.
10
<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 second quarter of 1996.
b. Reports on Form 8-K: None.
11
<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: 7/15/96 /s/ Arthur H. Dunkin
------------------- --------------------------
Arthur H. Dunkin
Secretary-Treasurer
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-END> JUN-02-1996
<CASH> 371
<SECURITIES> 45
<RECEIVABLES> 19,717
<ALLOWANCES> 0
<INVENTORY> 11,305
<CURRENT-ASSETS> 32,254
<PP&E> 13,543
<DEPRECIATION> 0
<TOTAL-ASSETS> 57,944
<CURRENT-LIABILITIES> 16,334
<BONDS> 457
0
0
<COMMON> 14,448
<OTHER-SE> 22,615
<TOTAL-LIABILITY-AND-EQUITY> 57,944
<SALES> 69,873
<TOTAL-REVENUES> 0
<CGS> 53,509
<TOTAL-COSTS> 53,509
<OTHER-EXPENSES> 13,297
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 199
<INCOME-PRETAX> 3,580
<INCOME-TAX> 1,417
<INCOME-CONTINUING> 2,163
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,163
<EPS-PRIMARY> 0.16
<EPS-DILUTED> 0.16
</TABLE>
