<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 March 3, 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 March 3, 1996
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Common stock, par value $1.00 per share 13,421,079 shares
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ROWE FURNITURE CORPORATION
INDEX
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<CAPTION>
Page
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<S> <C>
Part I. Financial Information
Consolidated Balance Sheets - March 3, 1996 and
December 3, 1995 4
Statements of Consolidated Earnings - Three Months
Ended March 3, 1996 and February 26, 1995 5
Statements of Consolidated Cash Flows - Three Months
Ended March 3, 1996 and February 26, 1995 6
Notes to Consolidated Financial Statements 8
Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
Part II. Other Information 11
</TABLE>
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PART I - - FINANCIAL INFORMATION
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ROWE FURNITURE CORPORATION AND WHOLLY-OWNED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
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<TABLE>
<CAPTION>
March 3 December 3
1996 1995
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(Unaudited) (Audited)
($ Thousands)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,523 $ 323
Marketable securities 45 42
Accounts receivable, net 21,240 18,763
Inventories:
Finished goods 2,988 3,444
Work-in-process 2,886 2,808
Raw materials 6,565 6,194
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Total inventories 12,439 12,446
Deferred income tax asset 70 70
Prepaid expenses 766 1,086
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Total Current assets 36,083 32,730
PROPERTY AND EQUIPMENT, net 13,383 13,095
OTHER NONCURRENT ASSETS (Note 3) 12,201 12,210
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$61,667 $58,035
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LIABILITIES
CURRENT LIABILITIES
Current maturities of long-term liabilities $ 485 $ 485
Short term bank borrowings 7,710 2,135
Accounts payable and accrued liabilities 12,192 14,857
Income taxes payable 665 346
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Total current liabilities 21,052 17,823
LONG-TERM AND DEFERRED LIABILITIES 4,429 4,591
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Total liabilities 25,481 22,414
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STOCKHOLDERS' EQUITY
COMMON STOCK, par value $1 per share
March 3 December 3
1996 1995
------------------------
Authorized shares 20,000,000 20,000,000
Issued shares 14,428,381 14,416,104 14,428 14,416
Outstanding shares 13,421,079 13,410,533
CAPITAL IN EXCESS OF PAR VALUE 8,250 8,248
RETAINED EARNINGS 18,615 18,056
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41,293 40,720
Less treasury stock 1,007,302 shares in 1996 and
1,005,571 shares in 1995, at cost (5,107) (5,099)
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Total stockholders' equity 36,186 35,621
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$61,667 $58,035
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</TABLE>
See notes to consolidated financial statements
4
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ROWE FURNITURE CORPORATION AND WHOLLY-OWNED SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
FOR THE THREE MONTHS ENDED MARCH 3, 1996 AND FEBRUARY 26, 1995
UNAUDITED
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<TABLE>
<CAPTION>
1996 1995
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($ in thousands - except per share amounts)
<S> <C> <C>
Net shipments $34,793 $28,747
Cost of shipments 27,235 21,725
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Gross profit 7,558 7,022
Selling and administrative
expenses 6,419 5,528
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Operating income 1,139 1,494
Interest expense (111) (90)
Other income, including gain
on sale of investment
property (Note 3) 341 5,442
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Earnings before taxes 1,369 6,846
Taxes on income 539 2,711
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Net earnings $ 830 $ 4,135
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Earnings per share $ 0.06 $ 0.30
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Weighted average shares
outstanding 13,419 13,682
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Dividends declared and paid
per share $ 0.02 $ 0.02
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</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 THREE MONTHS
ENDED MARCH 3, 1996 AND FEBRUARY 26, 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 $ 32,232 $ 29,164
Cash paid to suppliers and employees (35,504) (28,348)
Income taxes paid, net of refunds (220) (4)
Interest paid (111) (90)
Interest received 73 14
Other receipts - net 268 154
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Net cash and cash equivalents provided by
(used in) operating activities (3,262) 890
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Cash flows from investing activities:
Proceeds from sale of property and equipment - 6,594
Capital expenditures (789) (871)
Sale of marketable securities - 134
Purchase of marketable securities (3) -
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Net cash provided by (used in) investing activities (792) 5,857
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Cash flows from financing activities:
Net borrowings under line of credit 5,575 1,417
Payments to reduce long-term debt (56) (46)
Proceeds from issuance of common stock 14 11
Dividends paid (271) (277)
Purchase of treasury stock (8) (1,583)
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Net cash provided by (used in) financing activities 5,254 (478)
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Net increase in cash and cash equivalents 1,200 6,269
Cash and cash equivalents at beginning of period 323 471
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Cash and cash equivalents at end of period $ 1,523 $ 6,740
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</TABLE>
See notes to consolidated financial statements
6
<PAGE>
ROWE FURNITURE CORPORATION AND WHOLLY-OWNED SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS FOR THE THREE MONTHS
ENDED MARCH 3, 1996 AND FEBRUARY 26, 1995
UNAUDITED
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Reconsiliation of Net Earnings to Net Cash
Provided By (Used In) Operating Activities:
<TABLE>
<CAPTION>
1996 1995
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($ Thousands)
<S> <C> <C>
Net earnings $ 830 $ 4,135
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Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 567 534
Provision for deferred compensation 154 128
Payments made for deferred compensation (260) (242)
Provision for losses on accounts receivable 84 47
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 (2,561) 417
Decrease (increase) in inventories 7 (198)
Decrease (increase) in prepaid expenses 320 (35)
Decrease (increase) in cash value of
life insurance (27) (25)
Decrease (increase) in other assets (30) 27
Increase (decrease) in accounts payable (2,864) (332)
Increase (decrease) in accrued expenses 199 (998)
Increase (decrease) in income taxes payable 319 583
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Total adjustments (4,092) (3,245)
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Net cash provided by (used in) operating activities $(3,262) $ 890
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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 March 3, 1996 and the results of
operations and cash flows for the three months ended March 3, 1996
and February 26, 1995.
Note 2 - The results of operations for the three-months ended March 3, 1996
and February 26, 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, net of lost rents during the disposition
period. In June 1995, the Company secured other rental
income-producing property to permit a "tax-deferred" exchange with
the proceeds realized from this transaction.
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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Three Months ended March 3, 1996 Compared to Three Months ended February 26,
1995.
Net shipments during the first three months of 1996 increased by $6,046,000 or
21.0% to $34,793,000 from $28,747,000 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 three months of 1996 increased by $536,000 or 7.6%
to $7,558,000 from $7,022,000 in 1995. Gross profit as a percentage of net
shipments during the first three months in 1996 decreased to 21.7% from 24.4% 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 three months of 1996
increased by $891,000 or 16.1% to $6,419,000 from $5,528,000 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
three months of 1996 decreased to 18.4% from 19.2% in 1995. The percent decrease
in selling and administrative expenses was the result of increased shipments.
Operating income was $1,139,000 versus $1,494,000 in the prior year. The
decrease related to increases in the cost of sales and selling and
administrative expenses, partially offset by increased sales volume.
Net interest expense during the first three months of 1996 increased by $21,000
or 23% to $111,000 from $90,000 in 1995. The increase in net interest expense
resulted from additional short-term borrowings.
Other income during the first three months of 1996 decreased by $5,101,000 to
$341,000 from $5,442,000 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 three months of 1996 decreased by $3,305,000 to
$830,000 from $4,135,000 in 1995. Net earnings for 1995 included the gain on the
sale of investment property of approximately $3,000,000 which was non
recurring.
9
<PAGE>
ROWE FURNITURE CORPORATION AND WHOLLY-OWNED SUBSIDIARIES
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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(UNAUDITED) - CONTINUED
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Liquidity and Source of Capital:
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The Company has historically financed its operations and capital requirements
with internally generated funds and bank or other financing. The Company has
controlled its capital requirements by improving operating efficiencies in
various aspects of its business, including inventory and receivable management,
labor productivity and product distribution.
Net cash used in operating activities was $3,262,000 during the first three
months of 1996 versus $890,000 net cash provided 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 $789,000 during the first three months of 1996 and
$871,000 in 1995. These expenditures were incurred primarily in connection with
maintaining the Company's production capacity, new ShowPlace locations and
certain additions of equipment and systems.
Net cash provided by financing activities during the first three months of 1996
was $5,254,000 versus $478,000 net cash used in 1995. In 1996, these activities
related primarily to the increase in short-term borrowings.
As of March 3, 1996, the Company had outstanding long-term debt of $513,000
primarily consisting of industrial revenue bonds bearing interest at rates
ranging from 3.5% to 6.0%.
The Company has unsecured short-term bank lines of credit totaling $11 million.
The interest rates on those lines of credit do not exceed the prime rate. The
amount outstanding under the lines of credit as of March 3, 1996 was
approximately $7.7 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 first quarter of
1996.
b. Reports on Form 8-K: None.
11
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ROWE FURNITURE CORPORATION
--------------------------
Registrant
Date: ___________________ _____________________________
Arthur H. Dunkin
Secretary-Treasurer
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-30-1995
<PERIOD-END> MAR-03-1996
<CASH> 1,523
<SECURITIES> 45
<RECEIVABLES> 21,240
<ALLOWANCES> 0
<INVENTORY> 12,439
<CURRENT-ASSETS> 36,083
<PP&E> 133,833
<DEPRECIATION> 0
<TOTAL-ASSETS> 61,667
<CURRENT-LIABILITIES> 485
<BONDS> 0
0
0
<COMMON> 14,428
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 61,667
<SALES> 34,793
<TOTAL-REVENUES> 0
<CGS> 27,235
<TOTAL-COSTS> 27,235
<OTHER-EXPENSES> 6,419
<LOSS-PROVISION> 84
<INTEREST-EXPENSE> 111
<INCOME-PRETAX> 1,369
<INCOME-TAX> 539
<INCOME-CONTINUING> 830
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 830
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
</TABLE>
