<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 1, 1997 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
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the close of the period covered by this report.
Class Outstanding at June 1, 1997
--------------------------------------- ---------------------------
Common stock, par value $1.00 per share 13,021,733 shares
<PAGE>
ROWE FURNITURE CORPORATION
INDEX
Part I. Financial Information Page
----
Consolidated Balance Sheets - June 1, 1997 and
December 1, 1996 4
Consolidated Statements of Income - Three Months and Six Months
Ended June 1, 1997 and June 2, 1996 5
Consolidated Statements of Cash Flows - Three Months and Six Months
Ended June 1, 1997 and June 2, 1996 6
Notes to Consolidated Financial Statements 8
Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
Part II. Other Information 11
2
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PART I - - FINANCIAL INFORMATION
3
<PAGE>
ROWE FURNITURE CORPORATION AND WHOLLY-OWNED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
June 1, December 1,
1997 1996
----------- -----------
(Unaudited) (Audited)
($ Thousands)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 498 $ 1,897
Accounts receivable, net 20,860 22,726
Inventories:
Finished goods 3,129 3,037
Work-in-process 2,597 2,636
Raw materials 6,243 6,710
-------- --------
Total inventories 11,969 12,383
Deferred income tax asset 284 284
Prepaid expenses 397 492
-------- --------
TOTAL CURRENT ASSETS 34,008 37,782
PROPERTY AND EQUIPMENT, net 14,151 14,390
OTHER NONCURRENT ASSETS 12,073 12,108
-------- --------
$ 60,232 $ 64,280
======== ========
LIABILITIES
CURRENT LIABILITIES
Current maturities of long-term debt $ 327 $ 420
Short term bank borrowings 1,572 3,610
Accounts payable and accrued liabilities 12,764 14,782
Income taxes payable - 988
-------- --------
TOTAL CURRENT LIABILITIES 14,663 19,800
LONG-TERM AND DEFERRED LIABILITIES 4,560 4,292
-------- --------
TOTAL LIABILITIES 19,223 24,092
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</TABLE>
<TABLE>
<CAPTION>
STOCKHOLDERS' EQUITY
COMMON STOCK, par value $1 per share:
June 1 December 1
1997 1996
---------- ----------
<S> <C> <C> <C> <C>
Authorized shares 20,000,000 20,000,000
Issued shares 14,640,258 14,564,103 14,640 14,564
Outstanding shares 13,021,733 13,254,858
CAPITAL IN EXCESS OF PAR VALUE 8,512 8,349
RETAINED EARNINGS 27,174 24,033
-------- --------
50,326 46,946
Less treasury stock 1,618,525 shares in 1997 and
1,309,245 shares in 1996, at cost (9,317) (6,758)
-------- --------
TOTAL STOCKHOLDERS' EQUITY 41,009 40,188
-------- --------
$ 60,232 $ 64,280
======== ========
</TABLE>
See notes to consolidated financial statements
4
<PAGE>
ROWE FURNITURE CORPORATION AND WHOLLY-OWNED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND SIX MONTHS ENDED JUNE 1, 1997 AND JUNE 2, 1996
UNAUDITED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 1, June 2, June 1, June 2,
1997 1996 1997 1996
-------- -------- -------- --------
($ in thousands - except per share amounts)
<S> <C> <C> <C> <C>
Net shipments $ 32,912 $ 35,080 $ 68,328 $ 69,873
Cost of shipments 24,232 26,335 49,855 53,624
-------- -------- -------- --------
Gross profit 8,680 8,745 18,473 16,249
Selling and administrative
expenses 6,579 6,816 13,056 13,182
-------- -------- -------- --------
Operating income 2,101 1,929 5,417 3,067
Interest expense (70) (88) (150) (199)
Other income 509 369 786 712
-------- -------- -------- --------
Earnings before taxes 2,540 2,210 6,053 3,580
Taxes on income 847 878 2,250 1,417
-------- -------- -------- --------
Net earnings $ 1,693 $ 1,332 $ 3,803 $ 2,163
======== ======== ======== ========
Earnings per share - primary
and fully diluted $ 0.13 $ 0.10 $ 0.28 $ 0.16
======== ======== ======== ========
Weighted average shares
outstanding 13,432 13,452 13,543 13,435
</TABLE>
<TABLE>
<CAPTION>
Dividends declared and paid
per share
Quarter Ended 1997 1996
------------- ------ ------
<S> <C> <C>
First quarter $ 0.025 $ 0.02
Second quarter 0.025 0.02
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Total for the six months
ended June 1, 1997
and June 2, 1996 $ 0.05 $0.04
====== =====
</TABLE>
See notes to consolidated financial statements
5
<PAGE>
ROWE FURNITURE CORPORATION AND WHOLLY-OWNED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS
ENDED JUNE 1, 1997 AND JUNE 2, 1996
UNAUDITED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996
-------- --------
($ Thousands)
<S> <C> <C>
INCREASE (DECREASE) IN CASH:
Cash flows from operating activities:
Cash received from customers $ 70,234 $ 68,731
Cash paid to suppliers and employees (62,749) (65,464)
Income taxes paid, net of refunds (3,279) (1,270)
Interest paid (150) (199)
Interest received 202 162
Other receipts - net 460 550
-------- --------
Net cash and cash equivalents provided by
operating activities 4,718 2,510
-------- --------
Cash flows from investing activities:
Proceeds from sale of property and equipment 338 0
Capital expenditures (1,342) (1,512)
Sale (purchase) of marketable securities - (3)
-------- --------
Net cash used in investing activities (1,004) (1,515)
-------- --------
Cash flows from financing activities:
Net borrowings (repayments) under line of credit (2,038) (154)
Payments to reduce long-term debt (93) (112)
Proceeds from issuance of common stock 239 81
Dividends paid (662) (540)
Purchase of treasury stock (2,559) (222)
-------- --------
Net cash used in financing activities (5,113) (947)
-------- --------
Net increase (decrease) in cash and cash equivalents (1,399) 48
Cash and cash equivalents at beginning of period 1,897 323
Cash and cash equivalents at end of period $ 498 $ 371
======== ========
</TABLE>
See notes to consolidated financial statements
6
<PAGE>
ROWE FURNITURE CORPORATION AND WHOLLY-OWNED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS
ENDED JUNE 1, 1997 AND JUNE 2, 1996
UNAUDITED
- --------------------------------------------------------------------------------
Reconciliation of Net Earnings to Net Cash
Provided By Operating Activities:
<TABLE>
<CAPTION>
1997 1996
------- -------
($ Thousands)
<S> <C> <C>
Net earnings $ 3,803 $ 2,163
------- -------
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 1,472 1,194
Provision for deferred compensation 361 376
Payments made for deferred compensation (343) (298)
Provision for losses on accounts receivable 1 188
Loss (gain) on disposition of assets (124) -
Change in operating assets and liabilities
Decrease (increase) in accounts receivable 1,865 (1,142)
Decrease (increase) in inventories 414 1,141
Decrease (increase) in prepaid expenses 95 340
Decrease (increase) in cash value of
life insurance (60) (58)
Decrease (increase) in other assets (10) (9)
Increase (decrease) in accounts payable (2,777) (2,248)
Increase (decrease) in accrued expenses 1,009 716
Increase (decrease) in income taxes payable (988) 147
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Total adjustments 915 347
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Net cash provided by operating activities $ 4,718 $ 2,510
======= =======
</TABLE>
See notes to consolidated financial statements
7
<PAGE>
ROWE FURNITURE CORPORATION AND WHOLLY-OWNED SUBSIDIARIES
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
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Note 1 - In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments necessary to present
fairly the financial position as of June 1, 1997 and the results of
operations and cash flows for the six-months ended June 1, 1997 and
June 2, 1996.
Note 2 - The results of operations for the six months ended June 1, 1997 and
June 2, 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 established 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 six months ended June
1, 1997 and June 2, 1996, basic and diluted earnings per share would
have been as follows:
<TABLE>
<CAPTION>
1997 1996
----- -----
<S> <C> <C>
Basic earnings per share $0.29 $0.16
Diluted earnings per share $0.28 $0.16
</TABLE>
8
<PAGE>
ROWE FURNITURE CORPORATION AND WHOLLY-OWNED SUBSIDIARIES
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- ------------------------------------------------
UNAUDITED
- --------------------------------------------------------------------------------
Results of Operations:
- ---------------------
Six Months ended June 1, 1997 Compared to Six Months ended June 2, 1996.
Net shipments during the first six months of 1997 decreased by $1,545,000, or
2.2%, to $68,328,000 from $69,873,000 in 1996. Management believes that
shipments decreased primarily from the decision in 1996 to eliminate or de-
emphasize certain unprofitable product categories and recent softness at retail
in the furniture industry.
Gross profit during the first six months of 1997 increased by $2,224,000, or
13.7%, to $18,473,000 from $16,249,000 in 1996. Gross profit as a percentage of
net shipments during the first six months in 1997 increased to 27.0% from 23.3%
in 1996. Positively impacting gross margins were improvements in product mix ,
manufacturing efficiency improvements and in the second quarter, favorable
adjustments to accruals for health and medical expenditures.
Selling and administrative expenses during the first six months of 1997
decreased by $126,000, or 1.0%, to $13,056,000 from $13,182,000 in 1996. Selling
and administrative expenses as a percentage of net shipments during the first
six months of 1997 were 19.1% versus 18.9% in 1996.
Operating income was $5,417,000 versus $3,067,000 in the prior year. The
increase primarily reflects higher gross margins in 1997.
Net interest expense during the first six months of 1997 decreased by $49,000,
or 24.6%, to $150,000 from $199,000 in 1996. The decrease in net interest
expense resulted from reduced long-term debt and reduction in short-term
borrowings.
Other income during the first six months of 1997 increased by $74,000 to
$786,000 from $712,000 in 1996. The increase in other income was due primarily
to a gain from sale of rental property located in Leesburg, Florida partially
offset by reduced rental income from a vacancy in rental property located in
Christiansburg, VA.
The effective tax rate for the first half of 1997 was 37.2% versus 39.6% in
1996, primarily reflecting the favorable settlement of a state tax litigation.
Net earnings during the first six months of 1997 increased by $1,640,000 to
$3,803,000 from $2,163,000 in 1996 primarily reflecting an increase in gross
profit percentage, lower operating expenses and a reduction in the effective tax
rate.
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 $4,718,000 during the first six
months of 1997 versus $2,510,000 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 $1,342,000 during the first six months of 1997 and
$1,512,000 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 in financing activities during the first six months of 1997 was
$5,113,000 versus $947,000 in 1996. In 1997, these activities related
primarily to the decrease in short-term borrowings, cash dividends and purchase
of treasury stock.
The Company had current maturities only on long-term debt of $327,000 at June 1,
1997.
The Company has unsecured short-term bank lines of credit totaling $22 million.
The interest rates on those lines of credit do not exceed the prime rate. The
amount outstanding under the lines of credit as of June 1, 1997 was
approximately $1.6 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.
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 second 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: July 11, 1997 /s/ Arthur H. Dunkin
------------- --------------------------
Arthur H. Dunkin
Secretary-Treasurer
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-01-1997
<PERIOD-END> JUN-01-1997
<CASH> 498
<SECURITIES> 0
<RECEIVABLES> 20,860
<ALLOWANCES> 0
<INVENTORY> 11,969
<CURRENT-ASSETS> 34,008
<PP&E> 42,469
<DEPRECIATION> 28,318
<TOTAL-ASSETS> 60,232
<CURRENT-LIABILITIES> 14,663
<BONDS> 327
0
0
<COMMON> 14,640
<OTHER-SE> 26,369
<TOTAL-LIABILITY-AND-EQUITY> 60,232
<SALES> 68,328
<TOTAL-REVENUES> 68,328
<CGS> 49,855
<TOTAL-COSTS> 49,855
<OTHER-EXPENSES> 13,056
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 150
<INCOME-PRETAX> 6,053
<INCOME-TAX> 2,250
<INCOME-CONTINUING> 3,803
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,803
<EPS-PRIMARY> 0.28
<EPS-DILUTED> 0.28
</TABLE>
