<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 3, 1995
Commission File Number 1-10226
ROWE FURNITURE CORPORATION
(Exact name of registrant as specified in its charter)
Nevada 54-0458563
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
Registrant's telephone number, including area code: (540) 389-8671
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on which Registered
------------------- -----------------------------------------
Common Stock, $1.00 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 20-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the voting stock held by nonaffiliates of the
registrant as of February 9, 1996 (the exclusion from such amount of the market
value of the shares owned by any person shall not be deemed to be an admission
by the registrant that such person is an affiliate of the registrant) was
$35,103,338.
As of February 9, 1996, there were issued and outstanding 13,421,079 shares
of the registrant's Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
DOCUMENT WHERE INCORPORATED
-------- ------------------
Portions of Annual Report for the year ended December 3, 1995 Parts II and IV
Portions of the Annual Proxy Statement for the year ended
December 3, 1995 Part III
<PAGE>
PART I
ITEM 1. BUSINESS.
GENERAL
The Company is a designer and manufacturer of upholstered furniture consisting
of sofas, sleeper sofas, loveseats, chairs and motion furniture. The Company's
products are sold primarily in the middle to upper-middle price range, with
sofas customarily retailing at $599 to $1,099.
The Company sells its products nationwide through an exclusive sales force of
commissioned employees to over 1,000 national, regional and local retailers
consisting of furniture chains, independent furniture retailers, warehouse
showrooms, and 102 Rowe ShowPlace locations. Eight of the Rowe ShowPlace
locations are operated by the Company. A Rowe ShowPlace is either a dedicated
gallery area within a retail furniture store or a freestanding retail furniture
store where the Company's products are displayed on an exclusive basis. The
Company's manufacturing facilities consist of four plants, two in Missouri and
two in Virginia. In addition to manufacturing its own line of furniture, the
Company manufactures furniture frames and kiln-dries hardwood and pine lumber
for outside customers.
The Company was founded as a furniture manufacturer in June 1946, and its
original manufacturing facilities are located at Salem, Virginia. In 1968, the
Company expanded its operations to the Midwest with the addition of its first
facility in Missouri.
The Company is incorporated under the laws of Nevada. Its principal
administrative offices are located at 239 Rowan Street, Salem, Virginia 24153,
and its telephone number is (540) 389-8671. Unless the context indicates
otherwise, references herein to the "Company" include Rowe Furniture
Corporation, its predecessors, and its subsidiaries.
Effective with the start of fiscal 1996, the Company merged its four
manufacturing subsidiaries (Rowe Furniture Corporation-Virginia, Rowe Furniture
Corporation-Missouri, Salem Frame Company, Inc. and Himmelberger-Harrison
Company, Inc.) into a wholly owned subsidiary, Rowe Manufacturing, Inc. This
reorganization was effected to simplify the organizational structure and improve
internal reporting for the manufacturing process.
Management believes that recent consolidation in the retail furniture industry
has increased the importance of maintaining strong relationships with customers
and responding effectively to their demands. The Company's objective is to
provide enhanced service and value to its customers through quick delivery of
high quality furniture at competitive prices. A lifetime warranty applicable to
all the Company's products covering frames, springs, cushions and mechanisms
reflects its commitment to high quality. In recent years, the Company took a
number of steps to reduce costs
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and improve quality while generally maintaining constant price levels. These
steps included: (i) implementing an innovative employee involvement and
compensation program, (ii) using more efficient manufacturing techniques, (iii)
accelerating deliveries, and (iv) expanding the Company's computerized
management information system.
In addition, the Company has enhanced its marketing efforts to existing
retailers, while identifying and adding new retailers in existing markets and in
regions where its products are not widely distributed. When adding retailers,
the Company targets what management believes to be financially sound retailers
committed to progressive marketing techniques. The Company also has implemented
plans to increase foreign sales and to add new Rowe ShowPlace locations.
STRATEGY
Management believes that recent consolidation in the retail furniture industry
has increased the importance of maintaining strong relationships with customers
and responding effectively to their demands. The Company's objective is to
provide enhanced service and value to its customers through quick delivery of
high quality furniture at competitive prices. The key elements of the Company's
strategy to achieve this objective include:
Product Quality and Value. The Company is committed to providing high quality,
- -------------------------
value oriented furniture products at competitive prices. Management believes
the Company adheres to strict quality standards in all aspects of design and
production, including material selection, frame design and construction,
workmanship, and appearance. Product quality improvements in recent years
include better undercarriage construction, the use of higher quality cushioning
materials and improved fabric matching. A lifetime warranty applicable to all
the Company's productions covering the frames, springs, cushions, and mechanisms
reflects the Company's commitment to high quality. The Company has been
successful in providing this quality while generally holding prices constant in
recent years.
Employee Involvement and Compensation. A critical component of the Company's
- -------------------------------------
strategy has been the implementation of what management believes to be an
innovative employee involvement program. The furniture industry has
traditionally compensated manufacturing employees on a piecework basis.
Management believes that piecework compensation, which rewards employees based
upon the number of units produced by the individual employee or production line,
emphasizes quantity. A focus on quantity is often at the expense of quality,
and does not provide incentive for employees to produce high quality products
and to generate ideas that will contribute to facility-wide efficiency
improvements. In contrast, the Company encourages all employees to participate
in decision-making, and compensates employees based on hourly rates plus monthly
bonuses for productivity improvements and cost reductions on a facility-wide
basis. Management believes that this approach provides incentives for employees
to contribute to facility-wide efficiency, quality improvements and cost
reductions, and that it has also reduced supervisory expense. Since
implementation of
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the program in 1989, the Company has experienced a significant increase in
employee suggestions leading to quality improvements and cost reductions.
Management believes that the employee involvement and compensation program has
contributed significantly to improvements in operating efficiencies, labor
productivity, employee morale, product quality and customer service.
Dedication to Customer Service. The Company is dedicated to providing a high
- ------------------------------
level of service to all its customers. The Company maintains close contact and
communicates frequently with its customers in order to better identify,
understand and meet their needs. Management believes the utilization of
Company-employed sales persons enables it to better communicate with its
customers than the utilization of nonexclusive sales representatives, a frequent
industry practice.
Management believes that important aspects of the Company's service to certain
customers include its automated order entry, bar coding and electronic data
interchange systems. These systems give customers the ability to place orders
directly, and allow the Company to monitor the status of orders and track
inventory and sales activity. The Company is in the process of enhancing the
capabilities of these systems and increasing the number of customers who utilize
them. In addition, the Company has introduced point-of-sale computer systems
into Rowe ShowPlace and other dealer locations that allow retailers to display
for consumer's full-color pictures of various combinations of furniture styles
and fabric patterns and to enter consumer's orders directly with the Company.
The Company has established regional repair service centers to that it can
respond quickly to consumers' needs.
Another special emphasis of the Company's customer service is the prompt
delivery of its products, a significant portion of which is manufactured and
shipped within 30 days of receipt of an order. The Company's order entry,
credit approval, manufacturing and shipping systems are all designed to provide
prompt delivery to its customers.
Manufacturing Efficiencies. Management has taken a number of steps to improve
- --------------------------
the Company's manufacturing efficiencies, including the implementation of the
computerized systems in its manufacturing facilities to manage more effectively
its inventories, purchasing, labor and manufacturing processes; the development
of its employee involvement program; and the establishment of new internal
systems to control overhead and material usage. In addition, the Company has
added modern equipment, such as computerized routers utilized in its milling
operations and new computerized cover cutting machines that enhance
efficiencies. Management believes through a combination of increased
efficiencies, improved product quality, accelerated deliveries and stable
pricing, the Company will maintain a competitive advantage in marketing its
products.
Expanding Retail Distribution. Despite the recent consolidation in the retail
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furniture industry, management believes there are ample opportunities to expand
the Company's retail distribution network. The Company strives to maintain
strong relationships with, and increase sales to, its existing retailers. It
also attempts to increase sales by adding
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new retailers, particularly in geographic regions where its products currently
are not widely distributed, such as the Southwest and the West. When adding
retailers, the Company targets what it believes to be financially sound
retailers committed to progressive marketing approaches and the desire to carry
a significant portion of the Company's product line. The Company also intends to
increase the number of Rowe ShowPlace locations in selected markets. In
addition, the Company has implemented plans to increase foreign sales, and has
affiliated with nonexclusive commissioned sales representatives in Canada,
Mexico, Scandinavia, the Caribbean, the Middle East, Japan and other regions.
THE INDUSTRY
As reported by the American Furniture Manufacturers Association in December,
1995, the following table sets forth estimated factory shipments for the
domestic furniture industry in general, and the upholstered furniture segment in
particular, during each of the four years ended December 31, 1995
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1992 1993 1994 1995
---- ---- ---- ----
(in billions)
<S> <C> <C> <C> <C>
Industry shipments $16.2 $17.2 $19.0 $19.5
Upholstered furniture shipments 5.8 6.2 6.9 7.2
</TABLE>
The principal categories of furniture products include wood, upholstered and
metal furniture products. Of these categories, wood is the largest representing
approximately half of total industry sales, while upholstered furniture
represents approximately one third and metal and other products account for the
balance. Within each category, furniture manufacturers generally focus on
particular price ranges and styles. Stationary upholstery includes sofas,
sectional sofa pieces, loveseats, and stationary chairs. Motion upholstery
includes swivel chairs, rockers, reclining chairs, and other adjustable
furniture.
The furniture industry historically has been cyclical, fluctuating with the
general economy. Management believes that the industry is significantly
influenced by consumer behavior and confidence, personal disposable income,
demographics, housing activity, interest rates, and credit availability. The
upholstered segment of the furniture industry generally has followed the same
trends as the rest of the furniture industry. There can be no assurance that an
economic downturn would not have a material adverse effect on the Company.
PRODUCT LINES
The Company's products encompass a full line of upholstered furniture. The
Company's stationary furniture consists of sofas, sleeper sofas, loveseats, and
chairs, and its motion furniture includes reclining sofas and loveseats and
reclining, swivel, and
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tilt-back chairs. The Company's products are available in approximately 500
different fabrics. Styles offered include traditional, contemporary, and
country. The Company also markets under the Rowe name a limited line of leather
furniture purchased from another manufacturer. In addition, the Company-owned
Rowe ShowPlace locations offer complementary accessory items such as lamps,
rugs, and tables from other manufacturers.
The Company's product strategy is to provide a wide choice of furniture styles
and fabrics while providing high quality at competitive prices. The Company
continually reviews and evaluates its designs, and annually adds and
discontinues designs as it deems appropriate. The Company identifies trends in
styles, colors, and patterns through independent research, contacts with the
Company's customers and the occasional use of independent designers. Management
also solicits opinions from its customers, and manufacturing and marketing
employees prior to final design selection.
MARKETING AND SALES
The Company has developed a broad and diverse national customer base. The
Company sells its products through commissioned sales personnel who are
employees of the Company dedicated to marketing the Company's products
exclusively. Management believes that this gives the Company a competitive
advantage over many of its competitors which sell their products through
independent sales representatives who represent more than one manufacturer. The
Company's products are sold to over 1,000 national, regional, and local
furniture retailers, including Levitz (including Homemakers), Leath, Jordan's
Furniture, Star Furniture and Sears Homelife. During 1995, Levitz accounted for
approximately 16% of the Company's 1995 shipments, and its ten largest customers
(including Levitz) accounted for approximately 32% of 1995 shipments. Other
than Levitz, no customer accounted for more than 3% of the 1995 shipments.
While the loss of Levitz or other large customers could have a material adverse
effect on its business, management believes that dependence on any one customer
will diminish as the Company diversifies its customer base and the markets
served.
While the Company sells its products throughout the United Sales, management
believes that there are opportunities for greater penetration in the regions
where the Company's products are not currently widely distributed. The Company
has targeted key retailers in these markets as opportunities for further growth.
The general marketing practice in the furniture industry is to exhibit products
at international and regional furniture markets. The Company displays its
product lines and introduces new products in April and October of each year at
an eight day furniture market held in High Point, North Carolina. The Company
maintains a 28,000 square foot showroom at the High Point market. In addition,
the Company has developed plans to increase sales in foreign markets. It has
affiliated with independent sales representatives in Canada, Mexico,
Scandinavia, the Caribbean, the Middle East, and
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other regions and it plans to increase its international marketing efforts.
Approximately 3% of 1995 sales were to foreign markets.
ROWE SHOWPLACE PROGRAM
A Rowe ShowPlace is either a dedicated gallery area within an independent retail
furniture store or a freestanding retail furniture store where the Company's
products are displayed on an exclusive basis together with other manufacturers'
complementary furniture accessories. The Company has implemented the Rowe
ShowPlace program featuring the Company's furniture in order to increase its
market penetration and name recognition among customers. There are currently
102 Rowe ShowPlace locations in operation, of which 88 are dedicated galleries
located within stores operated by retailers that also sell other manufacturers'
products, six are freestanding independently owned retail locations, and eight
are freestanding Company-owned retail locations. In-store locations are
situated on a separate, generally prominent part of the sales floor dedicated to
displaying the Company's products and marketing materials. The Rowe ShowPlace
program accounted for more than 20% of the Company's fiscal 1995 shipments.
A Rowe ShowPlace offers the retail customer a choice of a wide variety of
contemporary and traditional upholstered furniture styles, as well as
approximately 500 different fabrics. By choosing various combinations of style
and fabric, the consumer is able to customize his or her selection.
Many Rowe ShowPlace locations, including all freestanding locations, have a
point of sale computer system that displays any fabric on any style, allowing
the consumer to combine fabrics and styles and have an immediate picture of the
finished product before making a selection. The computer system also is used to
enter consumers' orders directly with the Company.
The Company's emphasis will continue to be on opening additional Rowe ShowPlace
galleries in retail furniture stores and freestanding Company-owned Rowe
ShowPlace stores. The Company opened its eighth Company-owned freestanding
location in 1995 and anticipates opening additional locations during fiscal
1996. The expansion of Company-owned ShowPlace stores is supported by the
recent addition of personnel with furniture retailing experience. The Company
is expanding the program of national advertising intended to increase
recognition of the Rowe name and to complement the development of the Rowe
ShowPlace program. Certain freestanding locations not operated by the Company
have not been successful and have been closed. In 1995, one company-owned,
freestanding location was closed concurrent with the conclusion of the lease for
this property. The freestanding Rowe ShowPlace locations are subject to all of
the risks generally associated with operating a retail establishment, including
suitable site selection, competition for retail customers, and the need for
qualified management personnel. In addition, because the Rowe ShowPlace program
accounted for more than 20% of fiscal 1995 shipments, a material reduction in
sales at such stores may have an adverse effect on the Company's results.
7
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MANUFACTURING AND DISTRIBUTION
The Company's manufacturing operations are conducted in four facilities, two in
Virginia and two in Missouri, comprising an aggregate of approximately one
million square feet. In addition to manufacturing its own lines of furniture,
the Company manufacturers furniture frames and kiln dries hardwood and pine
lumber for outside customers.
Manufacturing Process. The Company utilizes a vertically integrated
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manufacturing process which includes kiln-drying of hardwood, wood milling,
frame construction, fabric cutting and sewing, upholstery, foam cutting and
filling, and final assembly of the upholstered product. The Company
manufacturers and assembles all of the frames used in its upholstered furniture.
All mechanical parts contained in motion furniture are purchased and assembled
by the Company. The Company utilizes computer-aided design patterns and
specialized machines in the fabric cutting process which facilitate design work,
help maximize fabric yield, and increase the efficiency of the assembly process.
Upholstered furniture is assembled in manufacturing cells consisting of teams of
people including sewers, frame builders and upholsterers. The completed pieces
are then inspected and packed for shipping.
Employee Involvement and Compensation. A key aspect of the Company's
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manufacturing process is its employee involvement and compensation program.
This program involves all of the Company's workers in the improvement of the
manufacturing process by providing incentives to increase productivity, to
reduce costs, and to improve quality. The Company encourages all employees to
participate in decision-making, and compensates employees based on hourly rates
plus bonuses for productivity improvements and cost reductions on a facility-
wide basis. The Company believes that this program provides incentive for
employees to contribute to facility-wide efficiency, quality improvements and
cost reductions. Since implementation of the program, the Company has
experiences a significant increase in employee suggestions leading to such
improvements and reductions. On a facility-wide basis, 1995 incentive bonuses
ranged up to approximately 20% of employees' hourly compensation. Salaried
employees also participate in this program, however, their bonuses cannot exceed
the highest amount paid to an hourly employee.
Computer Systems. The Company makes extensive use of a computerized management
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information system (MIS) in the manufacturing process. The MIS, which includes
software developed by the Company, helps the Company manage order entry,
purchasing, labor, inventories, receivables, and product shipping. Management
believes that its MIS is advanced by furniture industry standards, however, the
Company intends to continue to upgrade the system by developing and/or
purchasing new software to handle new applications and additional demands of
anticipated future growth.
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Manufacturing Capacity. While the Company primarily operates its manufacturing
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facilities on a one-shift, five or six day per week basis, second shifts are in
operation at three facilities and plans are being made to possibly add a second
shift in the fourth facility during 1996. Management believes that the Company
could increase production without substantial capital expenditures by expanding
the number of manufacturing cells on both first and second shifts.
Backlog. The Company generally manufactures its products in response to actual
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customer orders and typically ships the finished product within 30 days
following receipt of the related order, depending upon fabric availability.
Accordingly, the level of backlog at any particular time is limited, and is not
necessarily indicative of the level of future shipments. The Company's backlog
of unshipped orders was approximately $15.0 million as of December 3, 1995 as
compared to approximately $10.8 million as of November 27, 1994.
Distribution. The Company contracts with a truck leasing company to provide
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dedicated carriage services of its products. Under the agreement, the Company's
products are delivered in accordance with the Company's specifications on a
modern fleet of over-the-road tractors and trailers that prominently display the
Company's name. Management believes that the arrangement offers the Company
favorable terms, allows it to meet its delivery deadlines, and improves the
Company's name recognition. For West Coast shipments, the Company has what
management believes to be a favorable arrangement for carriage of the Company's
products with a third party motor carrier and is increasingly utilizing
intermodal freight services. Approximately 95% of the Company's fiscal year
1995 upholstered shipments were delivered under these arrangements.
RAW MATERIALS
The raw materials used by the Company include fabrics, lumber, hardwood,
plywood, polyurethane foam, metal components, mattresses and finishing
materials. Other than lumber and fabric, all raw materials used by the Company
are generally available on an "as needed" basis. The Company maintains what it
believes to be an adequate supply of raw materials in inventory.
The Company currently obtains its raw materials from a limited number of
suppliers, and in the case of hardwood plywood, a single supplier. Management
believes that its sources of supply of raw materials are adequate and that it
forms strong relationships with its suppliers and negotiates favorable prices
for its raw materials. However, management does not believe the Company is
dependent upon a single supplier for any of its materials, as substitute
suppliers are available.
To improve quality, maximize the opportunities to implement labor saving
technology, hedge against the potential of rising wood costs and free up kiln
capacity, the Company has increased the substitution of hardwood plywood for
hardwood in certain aspects of the construction of its furniture frames.
Because plywood construction is less labor-
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intensive, and in many respects more structurally sound than hardwood
construction, this change has improved product quality while helping to reduce
overall cost.
GOVERNMENTAL REGULATIONS AND ENVIRONMENTAL CONSIDERATIONS
The Company's operations are required to meet federal, state and local
regulatory standards in the areas of safety, health, and environmental pollution
controls. Historically, these standards have not had a material adverse effect
on the Company's operations. Management believes that the Company's plants are
in compliance in all material respects with applicable federal, state and local
laws and regulations concerned with safety, health, and environmental
protection.
The furniture industry currently anticipates increased federal and state
environmental and health and safety regulation, particularly regarding emissions
from paint and finishing operations and wood dust levels in the manufacturing
process. Any such additional regulations could affect the Company's wood
milling and finishing operations. The industry and its suppliers are attempting
to develop water-based finishing materials to replace commonly used organic-
based finishes which are a major source of regulated emissions. The Company
cannot at this time estimate the impact of any new regulations on the Company's
operations or the costs of compliance.
COMPETITION
The furniture industry is highly competitive and includes a large number of
manufacturers. The market in which the Company competes includes a large number
of manufacturers of upholstered furniture. Certain of the Company's competitors
have greater financial resources than the Company. Management believes that the
high quality, design, and competitive pricing of the Company's products, the
Company's reputation among retailers, and the Company's commitment to customer
service have enabled the Company to compete successfully in this market.
EMPLOYEES
As of December 3, 1995, the Company employed approximately 1,500 full-time
employees, of which 136 are in management, supervisory, and sales positions.
Approximately 105 employees at a single plant, 40 of whom are members of a labor
union, are covered by a collective bargaining agreement. No other employees are
covered by such an arrangement, and the Company considers its employee relations
to be excellent.
TRADEMARKS
The Company has registered its "Rowe", "A Whole New Way to Buy Furniture", "The
Rowe ShowPlace", "The ShowPlace Coordinated Home Furnishings by Rowe", "Rowe,
First in Fashion", "Regency Manor" and "Rowe ShowMe Machine" trademarks with the
United States Patent and Trademark Office. Management believes that its
trademark
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position is adequately protected in all markets in which the Company does
business. Management also believes that the Company's trade names are recognized
by dealers and distributors and are associated with a high level of quality and
value. In addition, the Company holds certain design and utility patents.
INSURANCE
The Company maintains what management believes is a complete liability and
property insurance program. Additionally, the Company maintains a self-
insurance program for that portion of health care costs not covered by
insurance.
ITEM 2. PROPERTIES.
The following table sets forth certain information concerning the Company's
manufacturing facilities:
<TABLE>
<CAPTION>
Approximate
Size in
Location Description Square Feet
- -------- ----------- -----------
<S> <C> <C>
Salem, Virginia Administrative Office
and Manufacturing 335,000
Salem, Virginia Manufacturing 241,000
Poplar Bluff, Missouri Manufacturing 300,000
Morehouse, Missouri Manufacturing 135,612
</TABLE>
In addition, the Company maintains executive offices and a subsidiary office in
leased offices in Arlington and Tysons Corner, Virginia. The Company considers
its equipment and its manufacturing and office facilities to be adequate and
well-maintained.
In addition to its manufacturing and office facilities, the Company owns the
following properties that are held for investment and are leased on a net basis:
<TABLE>
<CAPTION>
Approximate
Lease Size in
Location Expires Description Square Feet
- -------- ------- ----------- -----------
<S> <C> <C> <C>
Christiansburg, Virginia 05-31-96 Industrial 79,000
Leesburg, Florida 06-30-96 Retail 15,000
Sylmar, California 03-31-04 Industrial 115,000
Jessup, Maryland Various thru
12-31-04 Industrial 180,000
</TABLE>
The investment properties located in Christiansburg, Virginia and Sylmar,
California were originally acquired by the Company between 1972 and 1988 for
utilization as Company manufacturing facilities. The retail property located
in Leesburg, Florida was acquired in 1984. In past years, the Company ceased to
utilize these facilities for its own operations and determined that the best
return on these properties could be
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realized by leasing them to third parties. In February, 1995, the Company
completed the sale of a 175,000 square foot 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 of 1995, the Company purchased other rental income-producing
property in Jessup, Maryland to permit a "tax-deferred" exchange with the
proceeds realized from this transaction. Aggregate rental income from investment
properties, net of commissions, was $1,400,000, $1,470,000 and $1,005,000 in
1993, 1994 and 1995, respectively.
ITEM 3. LEGAL PROCEEDINGS.
The Company is, from time to time, a party to litigation which arises in the
normal course of its business. The Company was in litigation with a former
dealer who alleged breach of certain contractual and other violations which
purportedly caused the dealer damages. This case was settled in 1995 with no
significant impact on the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders, through the solicitation
of proxies, or otherwise, during the quarter ended December 3, 1995.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
(a) "Stock Price and Dividend Data" in the Annual Report to Shareholders
for the fiscal year ended December 3, 1995 is incorporated herein by reference.
(b) Approximate Number of Equity Security Holders.
<TABLE>
<CAPTION>
Approximate Number of Record
Title of Class Holders as of December 22, 1995
-------------- -------------------------------
<S> <C>
Common Stock, par value 1,400
$1.00 per share
</TABLE>
ITEM 6. SELECTED FINANCIAL DATA.
The five-year summary section of the Annual Report to Shareholders for the
fiscal year ended December 3, 1995 is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The management's discussion and analysis section of the Annual Report to
Shareholders for the fiscal year ended December 3, 1995 is incorporated herein
by reference.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The following information included in the Annual Report to Shareholders of the
fiscal year ended December 3, 1995 are incorporated herein by reference:
Consolidated Balance Sheets - - December 3, 1995 and November 27, 1994
Consolidated Statements of income --
Years Ended December 3, 1995, November 27, 1994 and November 28, 1993
Consolidated Statements of Stockholders' Equity --
Years Ended December 3, 1995, November 27, 1994 and November 28, 1993
Consolidated Statements of Cash Flows --
Years Ended December 3, 1995, November 27, 1994 and November 28, 1993
Notes to Consolidated Financial Statements
Report of Independent Certified Public Accountants
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable
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PART III
Notwithstanding anything below to the contrary, the Report of the Compensation
and Stock Option Committees and the Performance Graph contained on pages 11
through 14 of the Company's 1996 Proxy Statement are not incorporated by
reference in this Form 10-K.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS.
The information required by Item is 10 contained in the Company's 1996 Proxy
Statement and is incorporated herein by reference. Such Proxy Statement will be
filed with the Securities and Exchange Commission not later than 120 days after
the Company's fiscal year end.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by Item 11 is contained in the Company's 1996 Proxy
Statement and is incorporated herein by reference. Such Proxy Statement will be
filed with the Securities and Exchange Commission not later than 120 days after
the Company's fiscal year end.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by Item 12 is contained in the Company's 1996 Proxy
Statement and is incorporated herein by reference. Such Proxy Statement will be
filed with the Securities and Exchange Commission not later than 120 days after
the Company's fiscal year end.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by Item 13 is contained in the Company's 1996 Proxy
Statement and is incorporated herein by reference. Such Proxy Statement will be
filed with the Securities and Exchange Commission not later than 120 days after
the Company's fiscal year end.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) 1. Financial Statements:
The consolidated balance sheets as of December 3, 1995 and November
27, 1994 and the related consolidated statements of income,
stockholders' equity, cash flows and notes to consolidated
financial statements for each of the three years in the period
ended December 3, 1995 together with the report of BDO Seidman, LLP
dated January 5, 1996 appearing in the 1995 annual report to
shareholders are incorporated herein by reference. The following
additional financial data should be read in conjunction with the
consolidated financial statements in such 1995 Annual Report to
Shareholders.
2. Financial Statement Schedules:
Report of Independent Certified Public Accountants on Financial
Statement Schedule
II Valuation and Qualifying Accounts.
Schedules other than those listed above are omitted for the reason that they are
not required or are not applicable, or the required information is shown the
consolidated financial statements and notes thereto.
3. Exhibits:
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
- ------ -------
<S> <C>
3.1 Articles of Incorporation of the Company (incorporated by reference
to the Company's Registration Statement on Form S-1 No. 33-74504
filed with the Securities and Exchange Commission on January 27,
1994)
3.2 By-laws of the Company (incorporated by Company's Registration
Statement on Form S-1 No. 33-74504 filed with the Securities
and Exchange Commission on January 27, 1994)
4 Specimen Stock (incorporated by reference to the Company's
Registration Statement on Form 8-A filed with the Securities
and Exchange Commission on January 5, 1994)
10.1 Rowe Furniture Corporation 1983 Stovk Option and Incentive Plan
(incorporated by reference to the Company's Registration Statement
on
</TABLE>
15
<PAGE>
<TABLE>
<S> <C>
Form S-1 No. 33-74504 filed with the Securities and Exchange
Commission on January 27, 1994)
10.2 Rowe Furniture Corporation 1993 Stock Option and Incentive Plan
(incorporated by reference to the Comapny's registration Statement
on Form S-8 filed with the Securities and Exchange Commission on
October 18, 1993)
10.3 Rowe furniture Corporation Merged 401(k) and Employee Stock
Ownership Plan dated December 1, 1991 (incorporated by referenced
to the Company's Registration Statement on Form S-1 No. 33-74504
filed with the Securities and Exchange Commission on January 27,
1994)
10. 4 Rowe Furniture Corporation Amended and Restated Supplemental
Executive Retirement Plan II (incorporated by reference to the
Company's Registration Statement on form S-1 No. 33-74504 filed
with the Securities and Exchange Commission on January 27, 1994)
10.5 Employment Agreement dated December 6, 1984 between the Company and
Mr. Harvey I. Ptashek (incorporated by reference to the Company's
Registration Statement on Form S-1 No. 33-74504 filed with the
Securities and Exchange Commission on January 27, 1994)
10.6 Employment Agreement dated December 5, 1985 between the Company and
Mr. Arthur H. Dunkin (incorporated by reference to the Company's
Registration Statement on Form S-1 No. 33-74504 filed with the
Securities and Exchange Commission on January 27, 1994)
10.7 Employment Agreement dated December 1, 1993 between the Company and
Mr. Gerald M. Birnbach (incorporated by reference to the Company's
Registration Statement on Form S-1 No. 33-74505 filed with the
Securities and Exchange Commission on January 27, 1994)
10.8 Rowe Furniture Corporation Cash-or-Defferred Non-Qualified
Executive Retirement Plan (incorporated by reference to the
Company's Form, 10-K filed with the Securities and Exchange
Commission on February 27, 1995)
13 Portions of the Annual Report for the year ended December 3, 1995
21 List of Subsidiaries
23 Consent of BDO Seidman, LLP
27 Financial Data Schedules
</TABLE>
16
<PAGE>
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during any of the months included in
the fourth quarter of the Company's fiscal year.
17
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
ROWE FURNITURE CORPORATION
By: /s/ ARTHUR H. DUNKIN
---------------------------------
March 1, 1996 A. H. Dunkin, Secretary-Treasurer
Pursuant to the requirements of the Securities Act of 1933, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
Chairman of the Board
/s/ GERALD M. BIRNBACH President, Director and March 1, 1996
- ----------------------
G. M. Birnbach Principal Executive Officer
/s/ RICHARD E. CHENEY Director March 1, 1996
- -----------------------
R. E. Cheney
/s/ W. PATRICK DOLAN Director March 1, 1996
- -----------------------
W. P. Dolan
Secretary-Treasurer, Director
/s/ ARTHUR H. DUNKIN and Principal Financial and March 1, 1996
- -----------------------
A. H. Dunkin Accounting Officer
Senior Vice President and
/s/ HARVEY I. PTASHEK Director March 1, 1996
- -----------------------
H. I. Ptashek
</TABLE>
18
<PAGE>
<TABLE>
<S> <C> <C>
/s/ CHARLES T. ROSEN Director March 1, 1996
- -----------------------
C. T. Rosen
/s/ KEITH J. ROWE Director March 1, 1996
- ------------------------
K. J. Rowe
/s/ SIDNEY J. SILVER Director March 1, 1996
- -------------------------
S. J. Silver
/s/ GERALD O. WOODLIEF Director March 1, 1996
- -------------------------
G. O. Woodlief
</TABLE>
19
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULES
Rowe Furniture Corporation
Salem, Virginia
The audits referred to in our report dated January 5, 1996 relating to the
consolidated financial statements of Rowe Furniture Corporation, which is
contained in Item 8 of this Form 10-K (incorporated in Item 8 of the Form 10-K
by reference to the annual report of stockholders for the year ended December 3,
1995) included the audit of the financial statement schedules listed in the
accompanying index. These financial statement schedules are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statement schedules based upon our audits.
In our opinion such financial statement schedules present fairly, in all
material respects, the information set forth therein.
High Point, North Carolina /s/ BDO SEIDMAN, LLP
--------------------
January 5, 1996 BDO SEIDMAN, LLP
20
<PAGE>
ROWE FURNITURE CORPORATION
AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 3, 1995, NOVEMBER 27, 1994 AND NOVEMBER 28, 1993
(Thousands of Dollars)
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
- ---------------------------------------------------------------------------------------------
ADDITIONS
----------------------------
(1) (2)
CHARGED TO
BALANCE AT CHARGED TO OTHER BALANCE AT
BEGINNING COSTS AND ACCOUNTS DEDUCTIONS - END OF
DESCRIPTION OF PERIOD EXPENSES DESCRIBE DESCRIBE PERIOD
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful
accounts - 1995 $ 300 $ 179 $ - $ 179(A) $ 300
Allowance for doubtful
accounts - 1994 $ 300 $ 68 $ - $ 68(B) $ 300
Allowance for doubtful
accounts - 1993 $ 300 $ 127 $ - $ 127(C) $ 300
</TABLE>
(A) Accounts charged off less bad debt recoveries of $55,000.
(B) Accounts charged off less bad debt recoveries of $51,000.
(C) Accounts charged off less bad debt recoveries of $38,000.
21
<PAGE>
EXHIBIT 13
PORTIONS OF THE ANNUAL REPORT TO
SHAREHOLDERS FOR THE YEAR ENDED
DECEMBER 3, 1995
<PAGE>
<TABLE>
<CAPTION>
================================================================================
FINANCIAL HIGHLIGHTS
- --------------------
<S> <C> <C>
(Fiscal Year Ended) 12/3/95 11/27/94
(53 Weeks) (52 Weeks)
Net shipments $124,939,000 $111,201,000
Net earnings(1) 7,207,000 6,782,000
Net earnings per share 0.53 0.47
Stockholders' equity 35,621,000 32,339,000
Book value per share 2.66 2.32
Dividends paid per share* 0.08 0.06
Current ratio 1.8 to 1 2.3 to 1
</TABLE>
*Round to nearest cent
(1) The results of operations for 1995 include an after-tax gain on sale of
property of approximately $3.0 million and an after-tax restructuring
charge of $265,000.
<TABLE>
<CAPTION>
STOCK PRICE AND DIVIDEND DATA
- -----------------------------
Market Price Dividends
Quarter Ended High Low Paid Per Share
<S> <C> <C> <C> <C>
1995 February 26 6 1/8 4 1/2 $0.020
May 28 5 7/8 3 7/8 0.020
August 27 4 7/8 4 1/4 0.020
December 3 5 1/2 3 7/8 0.020
-----
$0.080
=====
1994 February 27 12 7/8 4 7/8 $0.013
May 29 11 5 5/8 0.013
August 28 6 7/8 4 7/8 0.013
November 27 7 3/8 5 1/8 0.017
-----
$0.056
=====
</TABLE>
Per share amounts have been adjusted to give retroactive effect to a three-for-
two stock split declared November 10, 1994.
The Company's shares are traded on the New York Stock Exchange under the symbol
ROW. On December 3, 1995, the Company had 1,410 stockholders of record.
- --------------------------------------------------------------------------------
DESCRIPTION OF BUSINESS ANNUAL MEETING
- ----------------------- --------------
Rowe Furniture Corporation is one of The annual meeting of stockholders
the nation's leading manufacturers of will be held at 10:00 a.m. on Tuesday,
medium priced upholstered living room April 2, 1996 at the Roanoke Airport
furniture. Marriott, Roanoke, Virginia. Copies of
the Company's Annual Report to the
SEC on Form 10-K will be available in
early March. If you would like a copy
without charge, please write A. H.
Dunkin, Secretary-Treasurer
239 Rowan Street, Salem, Virginia
24153.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Results Of Operations
Year Ended December 3, 1995
Compared to Year Ended November 27, 1994
Net shipments in 1995 increased by $13,738,000 or 12.4% to $ 124,939,000 from
$111,201,000 in 1994. The addition of new dealers and increased market share
from existing customers helped the Company reach the 1995 shipment level. The
increase was due primarily to higher unit volume, favorable product mix,
expansion of the Company-owned Rowe ShowPlace program and an additional week in
this fiscal year. Management believes that the growth in shipments was
accomplished in a generally soft retail furniture environment.
Gross profit in 1995 increased by $1,809,000 or 6.3% to $30,496,000 from
$28,687,000 in 1994. Gross profit as a percentage of shipments in 1995
decreased to 24.4% from 25.8% in 1994. Management believes that the percentage
decrease was due primarily to hiring and training expenses and additional
overtime requirements associated with expanding production capacity.
Selling and administrative expenses in 1995 increased by $5,136,000 or 26.7% to
$24,365,000 from $19,229,000 in 1994. As a percentage of shipments, selling and
administrative expenses in 1995 increased to 19.5% from 17.3% in 1994. The
aggregate increase in selling and administrative expenses primarily resulted
from additional advertising, commissions, salaries, and costs associated with
the operation of the expanded Company-owned Rowe ShowPlace program.
The Company also recorded a restructuring charge of $425,000 in 1995 primarily
for termination benefits for certain administrative/manufacturing employees
resulting from a corporate reorganization of the manufacturing process.
Operating income in 1995 decreased by $3,752,000 or 39.7% to $5,706,000 from
$9,458,000 in 1994. The decrease in operating income was primarily attributable
to increases in costs of shipments and selling and administrative expenses as a
percentage of shipments and the restructuring charge of $425,000.
Net interest expense in 1995 increased by $180,000 or 86.5% to $388,000 from
$208,000 in 1994. The increase in net interest expense resulted from additional
short-term borrowings and higher interest rates in effect throughout 1995
compared to 1994.
<PAGE>
Other income in 1995 increased by $4,838,000 to $6,285,000 from $1,447,000 in
1994. The increase in other income was due primarily to the gain on the sale of
investment property.
Net earnings increased by $425,000 or 6.3% to $7,207,000 in 1995 from $6,782,000
in 1994. The increase in net earnings reflects the gain on sale of investment
property, partially offset by lower operating income and additional interest
expense.
Year Ended November 27, 1994
Compared to Year Ended November 28, 1993
Net shipments in 1994 increased by $22,240,000 or 25.0% to $111,201,000 from
$88,961,000 in 1993. The increase was due principally to higher unit volume, as
average unit selling prices did not change significantly. Management believes
that shipments increased because of the general improvement in the retail
environment, greater consumer demand for moderately priced furniture, the
addition of new dealers and increased market share from existing customers.
Furthermore, overall marketing of Company products benefited from improved
product quality, delivery, and improved customer service.
Gross profit in 1994 increased by $6,286,000 or 28.1% to $28,687,000 from
$22,401,000 in 1993. Gross profit as a percentage of shipments in 1994
increased to 25.8% from 25.2% in 1993. Management believes that the improvement
was primarily due to efficiencies obtained through volume increases.
Selling and administrative expenses in 1994 increased by $2,926,000 or 17.9% to
$19,229,000 from $16,303,000 in 1993. As a percentage of shipments, selling and
administrative expenses in 1994 decreased to 17.3% from 18.3% in 1993. The
aggregate increase in selling and administrative expenses was the result of
increased advertising expense, salaries, costs associated with opening of
additional Company-owned Rowe ShowPlace locations and increases in selling
commissions due to higher unit volume.
Operating income in 1994 increased by $3,360,000 or 55.1% to $9,458,000 from
$6,098,000 in 1993. The growth in operating income was primarily attributable
to increases in shipments and reductions in costs of shipments and selling and
administrative expenses as a percentage of shipments.
Net interest expense in 1994 decreased by $108,000 or 34.2% to $208,000 from
$316,000 in 1993. The decrease in net interest expense resulted from a
reduction in the amount of long-term debt as a result of the sale of Company
common stock in March 1994.
<PAGE>
Other income in 1994 increased by $99,000 or 7.3% to $1,447,000 from $1,348,000
in 1993. The increase in other income was due primarily to contractual rent
increases on the Company's investment properties.
Earnings, before change in accounting principle, increased by $2,182,000 or
47.4% to $6,782,000 in 1994 from $4,600,000 in 1993. The increase in earnings
reflects primarily the increase in shipments and the reduction in the cost of
shipments and selling and administrative expenses as a percentage of shipments.
Liquidity and Capital Resources
The Company has historically financed its operations and capital requirements
with internally generated funds. Additional working capital needs along with
capital expenditures plus purchases under the Company's stock repurchase program
necessitated additional use of short-term bank financing throughout most of
1995. Additionally, the Company borrowed $200,000 in 1995 under a long-term
note to assist in the purchase of investment property.
Net cash provided by operating activities was $8,588,000, $2,179,000 and
$2,458,000 in 1995, 1994, and 1993, respectively. Fluctuations in net cash
provided by operating activities are primarily the result of changes in net
income and changes in working capital accounts. In 1995, levels of inventories
and accounts receivable increased as a result of increased sales levels.
Capital expenditures were $10,686,000, $4,961,000 and $870,000 for 1995, 1994,
and 1993, respectively. In fiscal 1995, capital expenditures increased
substantially due to the reinvesting of proceeds from the sale of rental
property into other income-producing property with a cost of $6,883,000.
Financing activities utilized net cash of $4,781,000 in 1995 and provided net
cash of $1,257,000 in 1994. Financing activities utilized net cash of
$1,902,000 in 1993. In fiscal year 1995, these activities primarily consisted
of repurchase of the Company's common stock and dividends paid to stockholders.
In 1994, $3,578,000 was derived from the sale of the Company's common stock.
Management anticipates that the Company's capital expenditures for 1996 will be
approximately $4.0 million. These expenditures will primarily be used to
purchase equipment at the frame and upholstery facilities for efficiency
improvements and capacity expansions, new computerized systems and additional
funding to expand the number of Company-owned Rowe ShowPlace locations.
The Company has long-term debt outstanding at year end of $569,000, plus current
maturities of $485,000. This debt consists of industrial revenue bonds
<PAGE>
bearing interest at rates ranging from 5.5% to 6.5%. The amount outstanding
under the lines of credit was $2,135,000. The Company has a total of $11,000,000
available under existing lines of credit.
The Company 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 foreseeable capital requirements and operating needs
through 1996.
Changes in Accounting Standards
The Financial Accounting Standards Board has issued SFAS No. 121, "Accounting
for the Impairment of Long-Lived Assets and Long-Lived Assets Being Disposed
of," which provides guidance on how and when impairment losses are recognized on
long-lived assets. This statement, when adopted, is not expected to have a
material impact on the Company.
The Financial Accounting Standards Board has issued SFAS No. 123, "Accounting
for Stock-Based Compensation," which establishes a fair value based method of
accounting for stock-based compensation plans. This statement provides a choice
to either adopt the fair value based method of accounting or continue to apply
APB Opinion No. 25, which would require only disclosure of the pro forma net
income and earnings per share, determined as if the fair value based method had
been applied. The Company plans to continue to apply APB Opinion No. 25 when
adopting this statement, and accordingly, this statement is not expected to have
a material impact on the Company.
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CORPORATE OFFICERS DIRECTORS
<S> <C> <C>
GERALD M. BIRNBACH GERALD M. BIRNBACH CHARLES T. ROSEN
Chairman of the Board and President Chairman of the Board and President President of CTR Funding, Inc.
ARTHUR H. DUNKIN RICHARD E. CHENEY KEITH J. ROWE
Secretary-Treasurer Former Chairman Emeritus of the Private Investor
Board of Hill and Knowlton, Inc.
MARLENE M. JOHNSON SIDNEY J. SILVER
Vice President - People and Strategy W. PATRICK DOLAN Partner - Silver, Freedman &
President of W. P. Dolan and Taff, LLP
CHARLENE A. PEDROLIE Associates
Vice President - Manufacturing Systems GERALD O. WOODLIEF
ARTHUR H. DUNKIN Retired - Senior Vice President
HARVEY I. PTASHEK Secretary-Treasurer
Senior Vice President
HARVEY I. PTASHEK
Senior Vice President
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SUBSIDIARY OFFICERS:
ROWE MANUFACTURING, INC.
<S> <C> <C>
WILDON H. ADKINS, JR. RAYMOND W. CRAMPTON BRUCE A. ROTRAMEL
Vice President - Upholstery Design Vice President- Management Assistant Secretary
Information Systems
GARRY W. ANGLE J. STEVE SHELOR
Assistant Treasurer JACK G. HEATON Vice President
Assistant Vice President
KENNETH E. BENTZ JOHN W. SISSON
Vice President MARK S. MOSELEY Vice President and General
Vice President - Rowe ShowPlace Manager
BARRY A. BIRNBACH & Advertising
Vice President - Special Account Sales
D. WAYNE OWENS
BRUCE M. BIRNBACH Assistant Vice President -
Vice President - Merchandising - Corporate Safety
New Product Development -
Marketing
ROWE SHOWPLACE, INC.
ROBERT M. O'MALLEY
Executive Vice President
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
CORPORATE HEADQUARTERS SHOWROOM TRANSFER AND DIVIDEND
1725 Jefferson Davis Highway High Point, North Carolina DISBURSING AGENT
Arlington, Virginia 22202 Wachovia Bank of North
GENERAL COUNSEL Carolina, N.A.
UPHOLSTERY MANUFACTURING PLANTS Silver, Freedman & Taff, LLP Winston-Salem, NC 27102
Poplar Bluff, Missouri Washington, D.C. 20005 800-633-4236
Salem, Virginia
AUDITORS
WOODWORKING PLANTS BDO Seidman, LLP
Morehouse, Missouri High Point, North Carolina 27260
Salem, Virginia
</TABLE>
<PAGE>
FIVE YEAR SUMMARY
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
(53 weeks) (52 weeks) (52 weeks) (52 weeks) (52 weeks)
(in thousands, except per share information)
<S> <C> <C> <C> <C> <C>
Net shipments $ 124,939 $ 111,201 $ 88,961 $ 73,488 $ 63,753
Gross profit 30,496 28,687 22,401 16,569 12,174
Operating income (loss) 5,706 9,458 6,098 1,455 (1,276)
Earnings (loss) before
cumulative effect of change
in accounting principle 7,207 6,782 4,600 1,405 (474)
Net earnings (loss)* $ 7,207 $ 6,782 $ 5,090 $ 1,405 $ (474)
Working capital $ 14,907 $ 16,605 $ 14,112 $ 10,854 $ 9,953
Total assets 58,035 48,098 43,185 37,013 34,958
Long-term debt 569 864 2,712 3,871 4,923
Stockholders' equity $ 35,621 $ 32,339 $ 24,873 $ 20,204 $ 19,190
Earnings (loss) per share before cumulative
effect of change in accounting principle - primary $ 0.53 $ 0.47 $ 0.34 $ 0.11 $ (0.03)
Net earnings (loss) per share - primary $ 0.53 $ 0.47 $ 0.37 $ 0.11 $ (0.03)
Weighted average shares outstanding - primary 13,607 14,563 13,689 12,984 12,991
Cash dividends paid per share $ 0.08 $ 0.06 $ 0.04 $ 0.03 $ 0.03
</TABLE>
Weighted average shares and per share amounts have been adjusted to give
retroactive effect to three-for-two stock splits declared December 8, 1992,
September 9, 1993, December 16, 1993 and November 10, 1994. On a fully diluted
basis, earnings per share before cumulative effect of change in accounting
principle, net earnings per share, and the weighted average number of shares
outstanding for fiscal 1993 were $0.33, $0.36 and 14,197,000, respectively.
*The results of operations for 1995 include an after-tax gain on the sale of
property of approximately $3.0 million and an after-tax restructuring charge of
$265,000.
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended
12-03-95 11-27-94 11-28-93
----------------------------------------------
(53 weeks) (52 weeks) (52 weeks)
(in thousands)
<S> <C> <C> <C>
INCREASE (DECREASE) IN CASH
Cash flows from operating activities:
Cash received from customers $122,918 $109,369 $ 84,327
Cash paid to suppliers and employees (113,063) (104,533) (80,209)
Income taxes paid, net of refunds (1,911) (3,876) (2,694)
Interest paid (388) (208) (315)
Interest received 232 188 224
Other receipts - net 800 1,239 1,125
-------- -------- --------
Net cash and cash equivalents provided by
operating activities 8,588 2,179 2,458
-------- -------- --------
Cash flows from investing activities:
Proceeds from sale of property and equipment 6,594 2 17
Capital expenditures (10,686) (4,961) (870)
Sale (acquisitions) of marketable securities 137 191 (24)
-------- -------- --------
Net cash used in investing activities (3,955) (4,768) (877)
-------- -------- --------
Cash flows from financing activities:
Net borrowings (payments) under line of credit (601) 2,736 -
Proceeds from issuance of long term debt 200 200 -
Payments to reduce long-term debt (455) (2,363) (1,481)
Proceeds from issuance of common stock 122 3,578 913
Dividends paid (1,090) (798) (518)
Purchase of treasury stock ( 2,957) (2,096) (816)
-------- -------- --------
Net cash provided by (used in) financing activities (4,781) 1,257 (1,902)
-------- -------- --------
Net increase (decrease) in cash and cash equivalents (148) (1,332) (321)
Cash at beginning of year 471 1,803 2,124
-------- -------- --------
Cash at end of year $ 323 $ 471 $ 1,803
======== ======== ========
- --------------------------------------------------------------------------------------------------------------------
RECONCILIATION OF NET EARNINGS TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Net earnings $ 7,207 $ 6,782 $ 5,090
-------- -------- --------
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Cumulative effect of change in accounting
for income taxes - - (490)
Depreciation and amortization 2,175 1,888 1,722
Provision for deferred compensation 634 554 627
Payments made for deferred compensation (449) (1,730) (371)
Deferred income taxes 2,150 404 (160)
Provision for losses on accounts receivable 179 68 127
Loss (gain) on disposition of assets (Note 6) (5,253) (2) 2
Loss (gain) on sale of marketable securities - (18) -
Change in operating assets and liabilities:
Decrease (increase) in accounts receivable (2,021) (1,832) (4,634)
Decrease (increase) in inventories (1,127) (2,008) (2,551)
Decrease (increase) in prepaid expenses (293) (78) 150
Decrease (increase) in cash value of
life insurance (140) (120) 1
Decrease (increase) in other assets 320 135 157
Increase (decrease) in accounts payable 4,080 (1,633) 2,368
Increase (decrease) in accrued expenses 1,126 (231) 420
-------- -------- --------
Total adjustments 1,381 (4,603) (2,632)
-------- -------- --------
Net cash provided by operating activities $ 8,588 $ 2,179 $ 2,458
======== ======== ========
See notes to consolidated financial statements
</TABLE>
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
- --------------------------------------------------------------------------------
================================================================================
<TABLE>
<CAPTION>
Year Ended
12/3/95 11/27/94 11/28/93
(53 weeks) (52 weeks) (52 weeks)
(in thousands except per share amounts)
<S> <C> <C> <C>
Net shipments (Note 9) $ 124,939 $ 111,201 $ 88,961
Cost of shipments 94,443 82,514 66,560
--------- --------- --------
Gross profit 30,496 28,687 22,401
Selling and administrative expenses 24,365 19,229 16,303
Restructuring charge (Note 10) 425 - -
--------- --------- --------
Operating income 5,706 9,458 6,098
Interest expense (388) (208) (316)
Other income, net (Note 6) 6,285 1,447 1,348
--------- --------- --------
Earnings before taxes 11,603 10,697 7,130
Taxes on income 4,396 3,915 2,530
--------- --------- --------
EARNINGS BEFORE CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING PRINCIPLE 7,207 6,782 4,600
Cumulative effect of change in accounting
for income taxes (Notes 1 and 8) - - 490
--------- --------- --------
NET EARNINGS $ 7,207 $ 6,782 $ 5,090
========= ========= ========
EARNINGS PER SHARE - PRIMARY (NOTE 1)*
Before cumulative effect of change in accounting principle $ 0.53 $ 0.47 $ 0.34
Cumulative effect of change in accounting for income taxes - - 0.03
--------- --------- --------
Net earnings per share - primary $ 0.53 $ 0.47 $ 0.37
========= ========= ========
Weighted average shares outstanding - primary* 13,607 14,563 13,689
========= ========= ========
See notes to consolidated financial statements
</TABLE>
*Weighted average shares and per share amounts have been adjusted to give
retroactive effect to three-for-two stock splits declared September 9, 1993,
December 16, 1993 and November 10, 1994. On a fully diluted basis, earnings per
share before cumulative effect of change in accounting principle, net earnings
per share, and the weighted average number of shares outstanding for fiscal 1993
were $0.33, $0.36 and 14,197,000, respectively.
<PAGE>
Consolidated Statements of Stockholders' Equity
Year Ended
December 3, 1995, November 27, 1994, November 28, 1993
(in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
Common Stock Treasury Stock
--------------------------------------- ---------------------------
Capital in
Shares $1 Par Excess of Par Retained Number of
Issued Value Value Earnings Shares Cost
--------------------------------------- -------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at November 29, 1992 3,927,491 $ 3,927 $ 4,321 $ 12,210 51,009 $ 254
Acquisition of treasury stock 89,195 816
Cash dividends paid, $0.04 per share* (518)
Exercise of stock options 280,096 281 718 (86)
Cancellation of treasury stock (135,684) (136) (888) (135,694) (1,024)
Three-for-two stock split declared
September 1993 (Note 7) 2,032,911 2,033 (2,033) 1,662
Three-for-two stock split declared
December 1993 (Note 7) 3,052,402 3,052 (3,052) 3,086
Net earnings for the year ended
November 28, 1993 5,090
--------------------------------------- -------------------------------------
Balance at November 28, 1993 9,157,206 9,157 5,039 10,723 9,258 46
Acquisition of treasury stock 242,094 2,096
Cash dividends paid, $0.06 per share* (798)
Exercise of stock options 128,912 129 119
Sale of common stock 250,000 250 3,080
Three-for-two stock split declared
November 1994 (Note 7) 4,768,059 4,768 (4,768) 126,081
Net earnings for the year ended
November 27, 1994 6,782
--------------------------------------- -------------------------------------
Balance at November 27, 1994 14,304,177 14,304 8,238 11,939 378,243 2,142
Acquisition of treasury stock 627,328 2,957
Cash dividends paid, $0.08 per share (1,090)
Exercise of stock options 111,927 112 10
Net earnings for the year ended
December 3, 1995 7,207
-------------------------------------- -------------------------------------
Balance at December 3, 1995 14,416,104 $ 14,416 $ 8,248 $ 18,056 1,005,571 $ 5,099
====================================== =====================================
</TABLE>
See notes to consolidated financial statements
*Per share amounts have been adjusted to give retroactive effect to three-for-
two stock splits declared December 8, 1992, September 9, 1993, December 16,
1993 and November 10, 1994.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business-The Company is primarily a manufacturer of upholstered
household furniture, selling throughout the United States and in some
international markets. Sales are recognized when products are shipped and
invoiced to customers. Substantially all of the Company's trade accounts
receivable are from companies in the retail furniture industry. The Company
uses credit insurance to minimize the risk on certain accounts. The Company has
no concentrated credit risk with any individual customer except as described in
Note 9.
Principles of Consolidation-The Consolidated financial statements include the
accounts of the Company and subsidiaries. All material intercompany
transactions and balances have been eliminated. Effective December 3, 1995, the
Company's operating subsidiaries, Rowe Furniture Corporation - Virginia, Rowe
Furniture Corporation - Missouri, Salem Frame Company, Inc. and Himmelberger-
Harrison Company, Inc. were merged into one operating company, Rowe
Manufacturing, Inc., a subsidiary of Rowe Furniture Corporation.
Inventories-Inventories are valued at the lower of cost (first-in, first-out) or
market.
Property, Equipment and Depreciation-Property and equipment are stated at cost.
For financial reporting purposes, depreciation is computed over the estimated
useful lives of the assets using accelerated methods on substantially all
property acquired prior to December 1, 1984. The straight-line method is used
for all property acquired after November 30, 1984. Accelerated methods are used
for income tax purposes. Assets are depreciated for financial reporting
purposes based on estimated useful lives as follows: building and improvements
(5 to 45 years); machinery and equipment (3 to 10 years); leasehold improvements
(terms of leases).
Income Taxes-The Company adopted Statement of Financial Accounting Standards
(SFAS) 109 "Accounting for Income Taxes" in 1993. The adoption of SFAS 109
changed the Company's method of accounting for income taxes from the deferred
method to an asset and liability method (See Note 8).
Earnings Per Share-The computations of primary earnings per share are based on
the weighted average number of common shares outstanding during the period plus,
in periods in which they have a dilutive effect, the effect of common shares
contingently issuable from stock options. The fully diluted per share
computations reflect additional dilution related to the stock options due to the
use
<PAGE>
of the market price at the end of each period, when higher than the average
price for such period.
Advertising Costs - Costs incurred for advertising are expensed when incurred.
Costs incurred under cooperative advertising programs are recognized when the
related revenues are recognized. The charges to expense were $3,086,000,
$2,560,000 and $2,266,000 in 1995, 1994 and 1993, respectively.
Statement of Cash Flows-For purposes of the statement of cash flows, the Company
considers all highly liquid debt instruments purchased with an original maturity
of three months or less to be cash equivalents.
Fiscal Year-The Company's accounting fiscal year end is the Sunday of each year
closest to November 30. The fiscal years ended December 3, 1995, November 27,
1994 and November 28, 1993 were comprised of 53, 52 and 52 weeks, respectively.
NOTE 2-SHORT-TERM BORROWINGS
The Company has unsecured short-term lines of credit of $11,000,000 with banks
at rates not to exceed the prime interest rate. The following summarizes
aggregate short-term borrowings in 1995, 1994 and 1993:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Amount outstanding at year end $2,135,000 $2,736,000 $ -
Maximum amount outstanding at
any month end $4,685,000 $2,900,000 $ 115,000
Average borrowings (based on
weighted daily balances) $4,015,000 $1,110,000 $ 6,000
Weighted average interest rate
during the year 7.0% 5.5% 4.9%
Weighted average interest rate
at year end 6.5% 6.3% -
</TABLE>
NOTE 3-LONG TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Industrial Revenue Bonds $ 864,000 $1,309,000
Other 190,000 -
------- ---------
1,054,000 1,309,000
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Less current maturities 485,000 445,000
--------- ---------
Total long-term debt $ 569,000 $ 864,000
========= =========
</TABLE>
The industrial revenue bonds require annual principal payments of $445,000 in
1996 and $419,000 in 1997. Interest rates on the industrial revenue bonds are
variable and range from 5.5% to 6.5%. Certain real properties and equipment
with a net book value of approximately $1,800,000 are pledged as collateral.
Other long-term debt consists of an unsecured loan obtained in 1995 with annual
principal payments of $40,000 for five years at a variable interest rate based
on the 90 day Federal Funds Index plus 1%, adjusted quarterly.
NOTE 4-DEFERRED COMPENSATION PLANS
Effective December 1, 1986, as amended in 1991, the Company established
deferred compensation contracts for certain officers of the Company. The
contracts fixed a minimum level for retirement benefits to be paid to
participants based on age at retirement with the Company. The contracts are
not funded. Charges to expense were $402,000 in 1995, $405,000 in 1994 and
$469,000 in 1993.
The Company also has deferred compensation agreements with key employees.
Vesting is based upon age and years of service. Life insurance contracts have
been purchased which may be used to fund these agreements. The charges to
expense were $150,000 in 1995, $149,000 for 1994 and $158,000 for 1993.
Effective December 1, 1994, the Company established a Cash-Or-Deferred Non-
Qualified Executive Retirement Plan for certain officers and employees of the
Company. The Plan enables participants to defer income on a pre-tax basis and
is not funded. The charge to expense was $82,000 for 1995.
NOTE 5- EMPLOYEE BENEFIT PLANS
The Company contributed $141,000 in 1995, $154,000 in 1994 and $135,000 in 1993
to the Merged 401(k) and Employee Stock Ownership Plan (401(k) Plan).
The Company made contributions to the Merged Thrift and Employee Stock Ownership
Plan (Thrift Plan) in the amount of $213,000 in 1995, $178,000 in 1994 and
$142,000 in 1993.
Substantially all employees are covered under the 401(k) Plan or the Thrift
Plan.
NOTE 6-COMMITMENTS AND CONTINGENCIES
Operating Leases
<PAGE>
The Company is obligated under long-term real estate leases for offices,
showroom and retail locations expiring at various dates through 2004 with
certain renewal options. Rental payments charged to expense were $1,130,000 in
1995, $920,000 in 1994 and $770,000 in 1993.
The Company is a lessor of its investment properties primarily under long-term
operating leases. The lease arrangements have initial terms of three to twelve
years and some contain provisions to increase the monthly rentals at specific
intervals. Rental income, net of commissions, was $1,005,000 in 1995 $1,470,000
in 1994 and $1,400,000 in 1993 and is included in other income in the
accompanying statements of income.
In February, 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 of 1995, the Company
purchased other rental income-producing property to permit a "tax-deferred"
exchange with the proceeds realized from this transaction. Accordingly,
deferred income taxes payable of $2.1 million have been recorded as "Basis of
investment property" (Note 8).
Minimum lease commitments at December 3, 1995 under long-term operating real
estate leases are as follows:
<TABLE>
<CAPTION>
Lease Lease
Expense Receipts
------- --------
<S> <C> <C>
1996 $1,250,000 $1,345,000
1997 1,090,000 1,200,000
1998 1,115,000 1,115,000
1999 1,010,000 1,100,000
2000 730,000 1,050,000
Thereafter 770,000 3,935,000
--------- ---------
$5,965,000 $9,745,000
========= =========
</TABLE>
In addition, the Company is obligated through a dedicated contract carriage
agreement for delivery services for periods ranging from 5 to 8 years. Current
monthly expense is $195,000 plus a variable mileage charge.
Health Insurance Plan
The Company maintains a self-insurance program for that portion of health care
costs not covered by insurance. The Company is liable for claims up to $100,000
per family annually, and aggregate claims up to $3,400,000 in 1995. Self-
insurance costs are accrued based upon the aggregate of the liability for
reported claims and an estimated liability for claims incurred but not reported.
<PAGE>
Employment Agreements
The Company has employment agreements with certain key officers of the Company
which provide for salary continuation of two years in the event of termination
of employment without cause. In addition, the Company entered into an agreement
with an officer in December, 1993 which provides annual compensation of
$725,000, adjusted for changes in the consumer price index, through November 30,
2001.
NOTE 7-COMMON STOCK
The Board of Directors approved three-for-two stock splits as follows:
<TABLE>
<CAPTION>
Date Approved Record Date
- ------------- -----------
<S> <C>
September 9, 1993 September 22, 1993
December 16, 1993 January 3, 1994
November 10, 1994 November 21, 1994
</TABLE>
All 1994 and 1993 weighted average shares and per share data have been adjusted
to give retroactive effect to the above listed stock splits. In addition,
retained earnings were retroactively charged for the par value of the 3,052,911
shares (November 28, 1993) and 4,768,059 shares (November 27, 1994 ) issued.
Under the 1993 incentive stock option plan, 1,468,125 (adjusted for the stock
splits) shares of unissued common stock or treasury stock have been made
available for grants. These options are exercisable for a term of ten years
from the date of grant. The options are granted at market value on the date of
grant and have been adjusted for the stock splits.
Under the 1983 incentive stock option plan (as amended), 2,847,655 (adjusted for
the stock splits) shares of unissued common stock or treasury stock were
available for grants. These options are exercisable for a term of ten years
from the date of grant. The options were granted at market value on the date of
grant and have been adjusted for the stock splits. Effective January 28, 1993,
no further options may be granted under this plan.
The following is a summary of these plans:
<TABLE>
<CAPTION>
Option Price
$ Per Share Shares
------------- ------
<S> <C> <C>
At November 29, 1992 0.79 - 1.15 1,507,639
Granted 2.71 - 3.07 175,500
Expired or terminated - -
Exercised 0.79 - 1.15 (938,502)
--------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
At November 28, 1993 0.79 - 3.07 744,637
Granted 5.22 -11.75 408,900
Expired or terminated 5.22 (3,384)
Exercised 0.83 - 5.22 (193,368)
--------
At November 27, 1994 0.79 -11.75 956,785
Granted 4.13 - 5.00 59,500
Expired or terminated 1.11 - 5.50 (19,960)
Exercised 0.79 - 5.22 (111,927)
--------
Outstanding and
exercisable at
December 3, 1995 0.79 -11.75 884,398
=======
Shares available for grant
at December 3, 1995 824,225
=======
</TABLE>
NOTE 8-TAXES ON INCOME
Effective November 30, 1992, the Company adopted the provisions of SFAS 109
"Accounting for Income Taxes". Under the provisions of SFAS 109, the Company
elected not to restate prior years consolidated financial statements. The
cumulative effect of this accounting change on years prior to 1993 was to
increase net earnings by $490,000 or $0.03 per share. The effect of the change
on 1993 net earnings, excluding the cumulative effect upon adoption, was not
material.
Provisions for income taxes in the consolidated statements of operations
consisted of the following components:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Current $2,246,000 $3,511,000 $2,690,000
Deferred 2,150,000 404,000 (160,000)
---------- ---------- -----------
Total taxes on income $4,396,000 $3,915,000 $2,530,000
========== ========== ==========
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of the assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. The sources of
the temporary differences and their effects on deferred taxes are as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Bad debt reserve $ 110,000 $110,000
Deferred compensation 900,000 790,000
------- -------
Gross deferred tax assets 1,010,000 900,000
--------- -------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Basis of investment property (Note 6) 2,100,000 -
Depreciation 800,000 680,000
Prepaid expenses 210,000 140,000
Other - 30,000
--------- --------
Gross deferred tax liabilities 3,110,000 850,000
--------- --------
Net deferred tax asset (liability) $(2,100,000) $ 50,000
========= ========
Included in the balance sheet:
Deferred income tax asset - current $ 70,000 $ 100,000
Deferred income tax liabilities - non-current (2,170,000) (50,000)
---------- ---------
Net deferred tax asset (liability) $(2,100,000) $ 50,000
========== ========
</TABLE>
The following summary reconciles taxes at the federal statutory tax rate with
the actual taxes:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Income tax expense
computed at the statutory rate $3,945,000 $3,635,000 $2,425,000
State income taxes net of federal
income tax benefit 450,000 280,000 190,000
Life insurance transactions (45,000) (35,000) (40,000)
Other items, net 46,000 35,000 (45,000)
---------- ---------- ----------
Total taxes on income $4,396,000 $3,915,000 $2,530,000
========= ========= =========
</TABLE>
NOTE 9-MAJOR CUSTOMER INFORMATION
Shipments to one customer (Levitz Furniture, including Homemakers as of June,
1994), as a percent of net shipments, amounted to 16% in 1995, 20% in 1994 and
19% in 1993. Receivables from this customer as a percent of year-end
receivables amounted to 21% in both 1995 and 1994. Shipments to the Company's
top ten customers, as a percent of net shipments, amounted to 32% in 1995, 35%
in 1994 and 36% in 1993.
NOTE 10-RESTRUCTURING CHARGE
In May 1995, the Company accrued $425,000 in restructuring charges from a
corporate reorganization of the manufacturing process. These costs consisted
primarily of termination benefits for 21 administrative/manufacturing employees.
A remaining liability of $131,000 is included in the accompanying consolidated
balance sheet as of December 3, 1995 for payments which will be made during
fiscal year 1996.
<PAGE>
NOTE 11-QUARTERLY FINANCIAL INFORMATION (UNAUDITED, $THOUSANDS)
<TABLE>
<CAPTION>
Quarter First Second Third Fourth
- ------- ----- ------ ----- ------
<S> <C> <C> <C> <C>
1995
Net shipments $28,747 $30,353 $29,533 $36,306
Gross profit 7,022 7,492 7,234 8,748
Net earnings(1) 4,135 609 1,014 1,449
Net earnings per share(1)(2) 0.30 0.05 0.07 0.11
1994
Net shipments $27,047 $26,455 $27,001 $30,698
Gross profit 6,878 6,737 6,962 8,110
Net earnings 1,679 1,346 1,577 2,180
Net earnings per share (2)(3) 0.12 0.09 0.11 0.16
</TABLE>
(1) The results of operations for the first quarter of 1995 includes an
after-tax gain on sale of property of approxiamately $3.0 million (See Note
6). The second quarter of 1995 includes an after-tax restructing charge of
$265,000. (See Note 10).
(2) Earnings per share calculations for each of the quarters are based on the
weighted average shares outstanding for each period. The sum of the quarters
may not necessarily be equal to the full year earnings per share amounts.
(3) Per share amounts have been adjusted to give retroactive effect to a
three-for-two stock split declared November 10, 1994.
NOTE 12-RECENT ACCOUNTING PRONOUCEMENTS
The Financial Accounting Standards Board issued SFAS No. 121, "Accounting for
the Impairment of Long-Lived Assets and Long-Lived Assets Being Disposed of,"
which provides guidance on how and when impairment losses are recognized on
long-lived assets. This statement, when adopted, is not expected to have a
material impact on the Company.
The Financial Accounting Standards Board issued SFAS No. 123, "Accounting for
Stock-Based Compensation," which establishes a fair value based method of
accounting for stock-based compensation plans. This statement provides a choice
to either adopt the fair value based method of accounting or continue to apply
APB Opinion No. 25, which would require only disclosure of the pro forma net
income and earnings per share, determined as if the fair value based method had
been applied. The Company plans to continue to apply APB Opinion No. 25 when
adopting this statement, and accordingly, this statement is not expected to have
a material impact on the Company.
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Rowe Furniture Corporation
Salem, Virginia
We have audited the accompanying consolidated balance sheets of Rowe Furniture
Corporation and subsidiaries as of December 3, 1995 and November 27, 1994 and
the related consolidated statements of income, stockholders' equity and cash
flows for each of the three years in the period ended December 3, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Rowe Furniture
Corporation and subsidiaries at December 3, 1995 and November 27, 1994 and the
results of their operations and their cash flows for each of the three years in
the period ended December 3, 1995 in conformity with generally accepted
accounting principles.
As discussed in Note 8, effective November 30, 1992, the Company changed its
method of accounting for income taxes.
High Point, North Carolina BDO SEIDMAN, LLP
January 5, 1996
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 3, November 27,
1995 1994
($ Thousands)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 323 $ 471
Marketable securities 42 179
Accounts receivable (net of allowance 18,763 16,921
for losses of $300,000 in 1995 and 1994) (Note 9)
Inventories (Note 1)
Finished goods 3,444 2,472
Work in process 2,808 2,502
Raw materials and supplies 6,194 6,345
---------- ---------
12,446 11,319
Deferred income tax asset (Note 8) 70 100
Prepaid expenses 1,086 793
---------- ---------
TOTAL CURRENT ASSETS 32,730 29,783
---------- ---------
PROPERTY AND EQUIPMENT (Notes 1 and 3)
Land 249 249
Buildings and leasehold improvements 16,185 15,170
Machinery and equipment 21,688 20,775
---------- ---------
38,122 36,194
Less accumulated depreciation 25,027 24,894
---------- ---------
NET PROPERTY AND EQUIPMENT 13,095 11,300
---------- ---------
OTHER ASSETS
Cash value of life insurance (Note 4) 3,402 3,262
Investment property (net of accumulated
depreciation of $1,631,000 in 1995 and
$2,441,000 in 1994) (Note 6) 8,650 3,275
Miscellaneous 158 478
---------- ---------
TOTAL OTHER ASSETS 12,210 7,015
---------- ---------
$ 58,035 $ 48,098
========== =========
LIABILITIES
CURRENT LIABILITIES
Current maturities of long-term debt (Note 3) $ 485 $ 445
Short term bank borrowings (Note 2) 2,135 2,736
Accounts payable 11,678 7,598
Accrued expenses:
Compensaton 1,434 1,214
Income taxes 346 11
Other 1,289 737
Deferred compensation - current portion (Note 4) 456 437
---------- ---------
TOTAL CURRENT LIABILITIES 17,823 13,178
LONG-TERM DEBT (Note 3) 569 864
DEFERRED COMPENSATION (Note 4) 1,852 1,667
DEFERRED INCOME TAX LIABILITY (Note 8) 2,170 50
---------- ---------
TOTAL LIABILITIES 22,414 15,759
---------- ---------
COMMITMENTS AND CONTINGENCIES (Notes 4,5 and 6)
STOCKHOLDERS' EQUITY (Note 7)
COMMON STOCK, par value $1 per share:
1995 1994
Authorized shares 20,000,000 20,000,000
Issued shares 14,416,104 14,304,177 14,416 14,304
Outstanding shares 13,410,533 13,925,934
CAPITAL IN EXCESS OF PAR VALUE 8,248 8,238
RETAINED EARNINGS 18,056 11,939
---------- ---------
40,720 34,481
LESS TREASURY STOCK - 1,005,571 shares in
1995 and 378,243 shares in 1994, at cost (5,099) (2,142)
---------- ---------
TOTAL STOCKHOLDERS' EQUITY 35,621 32,339
---------- ---------
$ 58,035 $ 48,098
========== =========
Ratio of current assets to current liabilities 1.8 to 1 2.3 to 1
Ratio of cash, marketable securities and receivables
to current liabilities 1.1 to 1 1.3 to 1
</TABLE>
See notes to consolidated financial statements
<PAGE>
EXHIBIT 21
LIST OF SUBSIDIARIES
<PAGE>
Exhibit (21)
ROWE FURNITURE CORPORATION
AND WHOLLY-OWNED SUBSIDIARIES
LIST OF SUBSIDIARIES
--------------------
The Company has four wholly-owned subsidiaries:
(1) Rowe Manufacturing, Inc., a Virginia Corporation
(2) Rowe Properties, Inc., a California Corporation
(3) Rowe ShowPlace, Inc., a Virginia Corporation
(4) Rowe Worldwide, Inc., a US Virgin Islands Corporation
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
<PAGE>
Exhibit (23)
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
Rowe Furniture Corporation
Salem, Virginia
We hereby consent to the incorporation by reference of our reports dated
January 5, 1996, relating to the consolidated financial statement and schedules
of Rowe Furniture Corporation appearing in the Company's Annual Report on form
10-K for the year ended December 3, 1995 into the Company's previously filed
registration statements file numbers 2-94943, 33-90486, 33-77766, and 33-77768.
High Point, North Carolina /s/ BDO SEIDMAN, LLP
--------------------
February 23, 1996 BDO SEIDMAN, LLP
27
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-3-1995
<PERIOD-END> DEC-3-1995
<CASH> 323
<SECURITIES> 42
<RECEIVABLES> 18,763
<ALLOWANCES> 300
<INVENTORY> 12,446
<CURRENT-ASSETS> 32,730
<PP&E> 38,122
<DEPRECIATION> 25,027
<TOTAL-ASSETS> 58,035
<CURRENT-LIABILITIES> 17,823
<BONDS> 419
0
0
<COMMON> 14,416
<OTHER-SE> 21,205
<TOTAL-LIABILITY-AND-EQUITY> 58,035
<SALES> 124,939
<TOTAL-REVENUES> 124,939
<CGS> 94,443
<TOTAL-COSTS> 94,443
<OTHER-EXPENSES> 18,078
<LOSS-PROVISION> 147
<INTEREST-EXPENSE> 388
<INCOME-PRETAX> 11,603
<INCOME-TAX> 4,396
<INCOME-CONTINUING> 7,207
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,207
<EPS-PRIMARY> 0.53
<EPS-DILUTED> 0.53
</TABLE>
