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<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 2, 1997 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 March 2, 1997
- --------------------------------------- ----------------------------
Common stock, par value $1.00 per share 13,153,876 shares
<PAGE>
<TABLE>
<CAPTION>
ROWE FURNITURE CORPORATION
INDEX
Part I. Financial Information Page
----
<S> <C> <C>
Consolidated Balance Sheets - March 2, 1997 and
December 1, 1996 4
Consolidated Statements of Income - Three Months
Ended March 2, 1997 and March 3, 1996 5
Consolidated Statements of Cash Flows - Three Months
Ended March 2, 1997 and March 3, 1996 6
Notes to Consolidated Financial Statements 8
Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
Part II. Other Information 11
</TABLE>
2
<PAGE>
PART I--FINANCIAL INFORMATION
3
<PAGE>
ROWE FURNITURE CORPORATION AND WHOLLY-OWNED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
March 2 December 1
------- ----------
1997 1996
-------------- ---------------
ASSETS (Unaudited) (Audited)
CURRENT ASSETS ($ Thousands)
Cash and cash equivalents
Accounts receivable, net
Inventories: $ 1,413 $ 1,897
Finished goods 22,291 22,726
Work-in-process
Raw materials 3,091 3,037
2,660 2,636
Total inventories 6,389 6,710
Deferred income tax asset ------- -------
Prepaid expenses 12,140 12,383
284 284
Total current assets 401 492
------- -------
PROPERTY AND EQUIPMENT, net 36,529 37,782
OTHER NONCURRENT ASSETS 14,069 14,390
12,226 12,108
------- -------
$ 62,824 $ 64,280
LIABILITIES ======= =======
CURRENT LIABILITIES
Current maturities of long-term debt
Short term bank borrowings
Accounts payable and accrued liabilities $ 389 $ 420
Income taxes payable 2,675 3,610
13,594 14,782
970 988
Total current liabilities ------- -------
LONG-TERM AND DEFERRED LIABILITIES 17,628 19,800
4,443 4,292
Total liabilities ------- -------
<CAPTION> 22,071 24,092
------- -------
STOCKHOLDERS' EQUITY
COMMON STOCK, par value $1 per share:
March 2 December 1
1997 1996
-----------------------------------
<S> <C> <C>
Authorized shares 20,000,000 20,000,000
Issued shares 14,636,516 14,564,103 14,637 14,564
Outstanding shares 13,153,876 13,254,858
CAPITAL IN EXCESS OF PAR VALUE 8,510 8,349
RETAINED EARNINGS 25,810 24,033
-------- --------
48,957 46,946
Less treasury stock 1,482,640 shares in 1997 and
1,309,245 shares in 1996, at cost (8,204) (6,758)
-------- --------
Total stockholders' equity 40,753 40,188
-------- --------
$ 62,824 $ 64,280
======== ========
</TABLE>
See notes to consolidated financial statements
<PAGE>
ROWE FURNITURE CORPORATION AND WHOLLY-OWNED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 2, 1997 AND MARCH 3, 1996
UNAUDITED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996
--------- --------
($ in thousands - except per share amounts)
<S> <C> <C>
Net shipments $ 35,416 $ 34,793
Cost of shipments 25,623 27,289
-------- --------
Gross profit 9,793 7,504
Selling and administrative expenses 6,477 6,365
-------- --------
Operating income 3,316 1,139
Interest expense (80) (111)
Other income, including gain 277 341
-------- --------
Earnings before taxes 3,513 1,369
Taxes on income 1,403 539
-------- --------
Net earnings $ 2,110 $ 830
======== ========
Earnings per share - primary and fully diluted $ 0.15 $ 0.06
======== ========
Weighted average shares
outstanding 13,653 13,419
======== ========
Dividends declared and paid
per share $ 0.025 $ 0.020
======== ========
</TABLE>
See notes to consolidated financial statements
5
<PAGE>
ROWE FURNITURE CORPORATION AND WHOLLY-OWNED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS
ENDED MARCH 2, 1997 AND MARCH 3, 1996
UNAUDITED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996
--------------- ---------------
($ Thousands)
<S> <C> <C>
INCREASE (DECREASE) IN CASH:
Cash flows from operating activities:
Cash received from customers $ 35,780 $ 32,232
Cash paid to suppliers and employees (32,052) (35,504)
Income taxes paid, net of refunds (1,421) (220)
Interest paid (79) (111)
Interest received 74 73
Other receipts - net 201 268
---------- ----------
Net cash and cash equivalents provided by
(used in) operating activities 2,503 (3,262)
---------- ----------
Cash flows from investing activities:
Capital expenditures (476) (789)
Purchase of marketable securities - (3)
------------ ----------
Net cash provided by (used in) investing activities (476) (792)
---------- ----------
Cash flows from financing activities:
Net borrowings under line of credit (935) 5,575
Payments to reduce long-term debt (31) (56)
Proceeds from issuance of common stock 234 14
Dividends paid (333) (271)
Purchase of treasury stock (1,446) (8)
---------- ----------
Net cash provided by (used in) financing activities (2,511) 5,254
---------- ----------
Net increase in cash and cash equivalents (484) 1,200
Cash and cash equivalents at beginning of period 1,897 323
---------- ----------
Cash and cash equivalents at end of period $ 1,413 $ 1,523
========== =========
</TABLE>
See notes to consolidated financial statements
6
<PAGE>
ROWE FURNITURE CORPORATION AND WHOLLY-OWNED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS
ENDED MARCH 2, 1997 AND MARCH 3, 1996
UNAUDITED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Reconciliation of Net Earnings to Net Cash
Provided By Operating Activities:
1997 1996
------------- --------------
($ Thousands)
<S> <C> <C>
Net earnings $ 2,110 $ 830
--------- ----------
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 700 567
Provision for deferred compensation 426 154
Payments made for deferred compensation (275) (260)
Provision for losses on accounts receivable 71 84
Change in operating assets and liabilities:
Decrease (increase) in accounts receivable 364 (2,561)
Decrease (increase) in inventories 243 7
Decrease (increase) in prepaid expenses 91 320
Decrease (increase) in cash value of
life insurance (28) (27)
Decrease (increase) in other assets 7 (30)
Increase (decrease) in accounts payable (1,336) (2,864)
Increase (decrease) in accrued expenses 148 199
Increase (decrease) in income taxes payable (18) 319
--------- ----------
Increase (decrease) in deferred income taxes
Total adjustments 393 (4,092)
--------- ----------
Net cash provided by operating activities $ 2,503 $(3,262)
========= ==========
</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 March 2, 1997 and the results of
operations and cash flows for the three months ended March 2, 1997 and
March 3, 1996.
Note 2 - The results of operations for the three-months ended March 2, 1997 and
March 3, 1996 are not necessarily indicative of the results to be
expected for the full year.
Note 3 In February 1997, the Financial Accounting Standards Board issued FAS
No. 128, "Earnings per Share", which establishes new standards for
computations of earnings per share. Statement No. 128 will be effective
for periods ending after December 15, 1997 and will require
presentation of: (1) "Basic Earnings per Share", computed by dividing
income available to common stockholders by the weighted average number
of common shares outstanding during the period and (2) "Diluted
Earnings per Share", which gives effect to all dilutive potential
common shares that were outstanding during the period, by increasing
the denominator to include the number of additional common shares that
would have been outstanding if the dilutive potential common shares had
been issued. Had FAS 128 been effective for the three months ended
March 2, 1997 and March 3, 1996, basic and diluted earnings per share
would have been as follows:
1997 1996
---- ----
Basic earnings per share $0.16 $0.06
Diluted earnings per share $0.15 $0.06
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:
- ---------------------
Three Months ended March 2, 1997 Compared to Three Months ended March 3, 1996.
Net shipments during the first three months of 1997 increased by $623,000 or
1.8% to $35,416,000 from $34,793,000 in 1996 Management believes that shipments
increased primarily from the addition of new dealers, increased purchases by
existing customers and favorable product mix. Partially offsetting was the
elimination of some lower margined product lines in the second half of last year
and the continuation of a lackluster retail environment.
Gross profit during the first three months of 1997 increased by $2,289,000 or
30.5% to $9,793,000 from $7,504,000 in 1996 Gross profit as a percentage of net
shipments during the first three months in 1997 increased to 27.7% from 21.6% in
1996. Positively impacting gross margins were improvement in product mix and
benefits from the manufacturing restructuring that took place during late 1995
and early 1996. Margins in the second, third and fourth quarters of 1996
improved significantly over the first quarter of 1996.
Selling and administrative expenses during the first three months of 1997
increased by $112,000 or 1.8% to $6,477,000 from $6,365,000 in 1996 Selling and
administrative expenses as a percentage of net shipments during the first three
months of 1997 and 1996 were 18.3%.
Operating income was $3,316,000 versus $1,139,000 in the prior year. The
increase related primarily to higher shipments and improved margins.
Net interest expense during the first three months of 1997 decreased by $31,000
or 28% to $80,000 from $111,000 in 1996. The decrease in net interest expense
resulted from elimination of long-term debt and reduction in short-term
borrowings.
Other income during the first three months of 1997 decreased by $64,000 to
$277,000 from $341,000 in 1996. The decrease in other income was due primarily
to reduced rental income from a vacancy in property located in Christiansburg,
Virginia.
Net earnings during the first three months of 1997 increased by $1,280,000 to
$2,110,000 from $830,000 in 1996 reflecting higher net shipments and lower cost
of shipments
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
minimized its working capital requirements by improving operating efficiencies
in various aspects of its business, including inventory and receivable
management, labor productivity and product distribution.
Net cash provided by operating activities was $2,503,000 during the first three
months of 1997 versus $3,262,000 net cash used in 1996. 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 $476,000 during the first three months of 1997 and
$789,000 in 1996. These expenditures were incurred primarily in connection with
maintaining the Company's production capacity and certain additions of equipment
and systems.
Net cash used by financing activities during the first three months of 1997 was
$2,511,000 versus $5,254,000 cash provided in 1996. In 1997, these activities
related primarily to the decrease in short-term borrowings, cash dividends and
purchase of treasury stock.
As of March 2, 1997, the Company has current maturities only on long-term debt
of $389,000.
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 March 2, 1997 was
approximately $2.7 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 1997.
Changes in accounting standards. In February, 1997, the Financial Accounting
Standards Board issued FAS No. 128, "Earnings per Share". See note 3 of Notes to
Consolidated Financial Statements. This statement is not expected to have a
material impact on the Company's reporting of Earnings per Share.
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 first quarter of
1997.
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: April 15, 1997 /s/ Arthur H. Dunkin
------------------- -----------------------------
Arthur H. Dunkin
Secretary-Treasurer
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-1-1997
<PERIOD-END> MAR-2-1997
<CASH> 1,413
<SECURITIES> 0
<RECEIVABLES> 22,291
<ALLOWANCES> 0
<INVENTORY> 12,140
<CURRENT-ASSETS> 36,529
<PP&E> 41,681
<DEPRECIATION> 27,615
<TOTAL-ASSETS> 62,824
<CURRENT-LIABILITIES> 17,628
<BONDS> 0
0
0
<COMMON> 14,637
<OTHER-SE> 26,116
<TOTAL-LIABILITY-AND-EQUITY> 62,824
<SALES> 35,416
<TOTAL-REVENUES> 35,416
<CGS> 25,623
<TOTAL-COSTS> 25,623
<OTHER-EXPENSES> 6,200
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 80
<INCOME-PRETAX> 3,513
<INCOME-TAX> 1,403
<INCOME-CONTINUING> 2,110
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,110
<EPS-PRIMARY> 0.15
<EPS-DILUTED> 0.15
</TABLE>
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