<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 September 1, 1996 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 No.)
239 Rowan Street - Salem, Virginia 24153
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 540-389-8671
- --------------------------------------------------------------------------------
None
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year,
if changed since last report.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorted period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X No
------- ------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the close of the period covered by this report.
Class Outstanding at September 1, 1996
- --------------------------- --------------------------------
Common stock, par value 13,290,613 shares
$1.00 per share
<PAGE>
ROWE FURNITURE CORPORATION
INDEX
<TABLE>
<S> <C> <C>
Part I. Financial Information Page
----
Consolidated Balance Sheets - September 1, 1996 and
December 3, 1995 4
Statements of Consolidated Income - Three Months and Nine Months
Ended September 1, 1996 and August 27, 1995 5
Statements of Consolidated Cash Flows - Three Months and Nine Months
Ended September 1, 1996 and August 27, 1995 6
Notes to Consolidated Financial Statements 8
Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
Part II. Other Information 11
</TABLE>
2
<PAGE>
PART I - - FINANCIAL INFORMATION
3
<PAGE>
ROWE FURNITURE CORPORATION AND WHOLLY-OWNED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
September 1 December 3
----------- ----------
1996 1995
----------- ----------
(Unaudited) (Audited)
($ Thousands)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 979 $ 323
Marketable securities 45 42
Accounts receivable, net 21,227 18,763
Inventories:
Finished goods 2,782 3,444
Work-in-process 2,805 2,808
Raw materials 6,061 6,194
-------- --------
Total inventories 11,648 12,446
Deferred income tax asset 70 70
Prepaid expenses 536 1,086
-------- --------
Total current assets 34,505 32,730
PROPERTY AND EQUIPMENT, net 14,478 13,095
OTHER NONCURRENT ASSETS (Note 3) 12,081 12,210
-------- --------
$ 61,064 $ 58,035
======== ========
LIABILITIES
CURRENT LIABILITIES
Current maturities of long-term liabilities $ 500 $ 485
Short term bank borrowings 3,041 2,135
Accounts payable and accrued liabilities 14,514 14,857
Income taxes payable 824 346
-------- --------
Total current liabilities 18,879 17,823
LONG-TERM AND DEFERRED LIABILITIES 4,300 4,591
-------- --------
Total liabilities 23,179 22,414
-------- --------
STOCKHOLDERS' EQUITY
COMMON STOCK, par value $1 per share:
September 1 December 3
1996 1995
-----------------------------
Authorized shares 20,000,000 20,000,000
Issued shares 14,515,606 14,416,104 14,516 14,416
Outstanding shares 13,290,613 13,410,533
CAPITAL IN EXCESS OF PAR VALUE 8,288 8,248
RETAINED EARNINGS 21,317 18,056
-------- --------
44,121 40,720
Less treasury stock 1,224,993 shares in 1996 and
1,005,571 shares in 1995, at cost (6,236) (5,099)
-------- --------
Total stockholders' equity 37,885 35,621
-------- --------
$ 61,064 $ 58,035
======== ========
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
ROWE FURNITURE CORPORATION AND WHOLLY-OWNED SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 1, 1996 AND
AUGUST 27, 1995
UNAUDITED
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
Sept. 1 Aug. 27, Sept. 1 Aug. 27,
1996 1995 1996 1995
-------- -------- --------- --------
($ in thousands - except per share amounts)
<S> <C> <C> <C> <C>
Net shipments $ 34,768 $ 29,533 $ 104,641 $ 88,633
Cost of shipments 25,076 22,299 78,585 66,885
-------- -------- --------- --------
Gross profit 9,692 7,234 26,056 21,748
Selling and administrative
expenses 6,904 5,857 20,201 17,653
Restructuring charge - - - 425
-------- -------- --------- --------
Operating income 2,788 1,377 5,855 3,670
Interest expense (47) (107) (246) (300)
Other income, including gain on sale of
investment property (Note 3) 343 280 1,055 5,963
-------- -------- --------- --------
Earnings before taxes 3,084 1,550 6,664 9,333
Taxes on income 1,177 536 2,594 3,575
-------- -------- --------- --------
Net earnings $ 1,907 $ 1,014 $ 4,070 $ 5,758
======== ======== ========= ========
Earnings per share $ 0.14 $ 0.07 $ 0.30 $ 0.42
======== ======== ========= ========
Weighted average shares outstanding 13,358 13,569 13,409 13,639
Dividends declared and paid per share
Quarter Ended 1996 1995
------------- ---- ----
First quarter $ 0.02 $ 0.02
Second quarter 0.02 0.02
Third quarter 0.02 0.02
Total for the nine months -------- --------
ended September 1, 1996
and August 27, 1995 $ 0.06 $ 0.06
======== ========
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
ROWE FURNITURE CORPORATION AND WHOLLY-OWNED SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS FOR THE NINE MONTHS
ENDED SEPTEMBER 1, 1996 AND AUGUST 27, 1995
UNAUDITED
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
1996 1995
------------ ------------
<S> <C> <C>
($ Thousands)
INCREASE (DECREASE) IN CASH:
Cash flows from operating activities:
Cash received from customers $ 101,928 $ 86,835
Cash paid to suppliers and employees (95,613) (81,428)
Income taxes paid, net of refunds (2,116) (1,150)
Interest paid (246) (300)
Interest received 273 149
Other receipts - net 782 561
------------ ------------
Net cash and cash equivalents provided by
operating activities 5,008 4,667
------------ ------------
Cash flows from investing activities:
Proceeds from sale of property and equipment 0 6,572
Capital expenditures (3,021) (9,255)
Purchase of marketable securities (3) 137
------------ ------------
Net cash used in investing activities (3,024) (2,546)
------------- ------------
Cash flows from financing activities:
Net borrowings under line of credit 906 2,115
Proceeds from issuance of long term debt - 200
Payments to reduce long-term debt (429) (398)
Proceeds from issuance of common stock 141 113
Dividends paid (809) (819)
Purchase of treasury stock (1,137) (2,391)
-------------- -----------
Net cash used in financing activities (1,328) (1,180)
-------------- -----------
Net increase in cash and cash equivalents 656 941
Cash and cash equivalents at beginning of period 323 471
--------------- ------------
Cash and cash equivalents at end of period $ 979 $ 1,412
=============== ===========
</TABLE>
See notes to consolidated financial statements.
6
<PAGE>
ROWE FURNITURE CORPORATION AND WHOLLY-OWNED SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS FOR THE NINE MONTHS
ENDED SEPTEMBER 1, 1996 AND AUGUST 27, 1995
UNAUDITED
- --------------------------------------------------------------------------------
Reconciliation of Net Earnings to Net Cash
Provided By Operating Activities:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
($ Thousands)
Net earnings $4,070 $5,758
------ ------
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 1,837 1,620
Provision for deferred compensation 491 400
Payments made for deferred compensation (340) (326)
Provision for losses on accounts receivable 249 147
Loss (gain) on disposition of assets - (5,253)
Increase (decrease) in deferred income taxes - 2,103
Change in operating assets and liabilities:
Decrease (increase) in accounts receivable (2,713) (1,798)
Decrease (increase) in inventories 798 (495)
Decrease (increase) in prepaid expenses 550 241
Decrease (increase) in cash value of
life insurance (86) (100)
Decrease (increase) in other assets 18 139
Increase (decrease) in accounts payable (2,001) 729
Increase (decrease) in accrued expenses 1,657 1,180
Increase (decrease) in income taxes payable 478 322
------- -------
Total adjustments 938 (1,091)
------- -------
Net cash provided by operating activities $ 5,008 $ 4,667
======= =======
</TABLE>
See notes to consolidated financial statements.
7
<PAGE>
ROWE FURNITURE CORPORATION AND WHOLLY-OWNED SUBSIDIARIES
- --------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
- --------------------------------------------------------------------------------
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 September 1, 1996 and the results
of operations and cash flows for the nine-months ended September 1,
1996 and August 27, 1995
Note 2 - The results of operations for the nine months ended September 1, 1996
and August 27, 1995 are not necessarily indicative of the results to be
expected for the full year.
Note 3 - On February 16, 1995, the Company completed the sale of its 175,000 sq.
ft. warehouse in Sylmar, California. The warehouse had been held by the
Company as investment property. The after-tax gain was approximately
$3.0 million, or $0.22 per share. In June 1995, the Company secured
other rental income-producing property to permit a "tax- deferred"
exchange with the proceeds realized from this transaction.
8
<PAGE>
ROWE FURNITURE CORPORATION AND WHOLLY-OWNED SUBSIDIARIES
- --------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- ------------------------------------------------
UNAUDITED
- --------------------------------------------------------------------
Results of Operations:
- ---------------------
Nine months ended September 1, 1996 Compared to Nine Months ended August 27,
1995.
Net shipments during the first nine months of 1996 increased by $16,008,000 or
18.1% to $104,641,000 from $88,633,000 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 nine months of 1996 increased by $4,308,000 or
19.8% to $26,056,000 from $21,748,000 in 1995. Gross profit as a percentage of
net shipments during the first nine months in 1996 increased to 24.9% from 24.5%
in 1995. Management believes that the percentage increase was due primarily to
benefits realized through manufacturing restructuring, additional volume and
favorable product mix.
Selling and administrative expenses during the first nine months of 1996
increased by $2,548,000 or 14.4% to $20,201,000 from $17,653,000 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 nine months of 1996 decreased to 19.3% from 19.9% in 1995. The
percentage decrease in selling and administrative expenses was the result of
increased shipments.
Operating income was $5,855,000 versus $3,670,000 in the prior year. The
increase reflects higher sales volume and improved margins in 1996 and a
restructuring charge in 1995.
Net interest expense during the first nine months of 1996 decreased by $54,000
or 18% to $246,000 from $300,000 in 1995. The decrease in net interest expense
resulted from a decrease in average borrowings.
Other income during the first nine months of 1996 decreased by $4,908,000 to
$1,055,000 from $5,963,000 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 nine months of 1996 decreased by $1,688,000 to
$4,070,000 from $5,758,000 in 1995. Net earnings for 1995 included the after-tax
gain on the sale of investment property of approximately $3,000,000, offset in
part by the restructuring charge.
9
<PAGE>
ROWE FURNITURE CORPORATION AND WHOLLY-OWNED SUBSIDIARIES
- --------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- ------------------------------------------------
(UNAUDITED) - CONTINUED
- --------------------------------------------------------------------------------
Liquidity and Source of Capital:
- -------------------------------
The Company has historically financed its operations and capital requirements
with internally generated funds and bank or other financing. The Company has
controlled its capital requirements by improving operating efficiencies in
various aspects of its business, including inventory and receivable management,
labor productivity and product distribution.
Net cash provided by operating activities was $5,008,000 during the first nine
months of 1996 versus $4,667,000 in 1995. Fluctuations in net cash provided by
operating activities are primarily the result of changes in operating income and
changes in working capital accounts.
Capital expenditures were $3,021,000 during the first nine months of 1996 and
$9,255,000 in 1995. These expenditures were incurred primarily in connection
with maintaining the Company's production capacity, new Rowe ShowPlace locations
and certain additions of equipment and systems. The 1995 expenditures include
the purchase of investment property of approximately $6.8 million. (See note 3
of consolidated notes to financial statements.)
Net cash used in financing activities during the first nine months of 1996 was
$1,328,000 versus $1,180,000 in 1995. In 1996 and 1995, purchases of treasury
stock were $1,137,000 and $2,391,000, respectively.
As of September 1, 1996, the Company had outstanding long-term debt of $626,000
primarily consisting of industrial revenue bonds bearing interest at rates
ranging from 3.5% to 6.0%.
The Company has unsecured short-term bank lines of credit totaling $15 million.
The interest rates on those lines of credit do not exceed the prime rate. The
amount outstanding under the lines of credit as of September 1, 1996 was
approximately $3.0 million.
Management believes that net cash provided by operating activities and available
bank lines of credit will be sufficient to fund anticipated growth and to meet
the Company's anticipated capital requirements and operating needs through 1996.
10
<PAGE>
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings.
- --------------------------
None
Item 2. Changes in Securities.
- ------------------------------
None
Item 3. Defaults Upon Senior Securities.
- ----------------------------------------
None
Item 4 Submission of Matters to a Vote of Security Holders.
- ------------------------------------------------------------
None
Item 5 Other Information.
- -------------------------
None
Item 6 Exhibits and Reports on Form 8-K.
- ---------------------------------------
a. Exhibits: Exhibit 27 - Financial Data Schedule for the third quarter of
1996.
b. Reports on Form 8-K: None.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ROWE FURNITURE CORPORATION
--------------------------
Registrant
Date: October 15, 1996 /s/ Arthur H. Dunkin
----------------------------- ----------------------------------
Arthur H. Dunkin
Secretary-Treasurer
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-END> SEP-01-1996
<CASH> 979
<SECURITIES> 45
<RECEIVABLES> 21,227
<ALLOWANCES> 0
<INVENTORY> 11,648
<CURRENT-ASSETS> 34,505
<PP&E> 41,139
<DEPRECIATION> 26,661
<TOTAL-ASSETS> 61,064
<CURRENT-LIABILITIES> 18,879
<BONDS> 126
0
0
<COMMON> 14,516
<OTHER-SE> 23,369
<TOTAL-LIABILITY-AND-EQUITY> 61,064
<SALES> 104,641
<TOTAL-REVENUES> 104,641
<CGS> 78,585
<TOTAL-COSTS> 78,585
<OTHER-EXPENSES> 19,146
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 246
<INCOME-PRETAX> 6,664
<INCOME-TAX> 2,594
<INCOME-CONTINUING> 4,070
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,070
<EPS-PRIMARY> 0.30
<EPS-DILUTED> 0.30
</TABLE>
