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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 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 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
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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 10-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 14, 1997 (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 $72,181,576.
As of February 14, 1997, there were issued and outstanding 13,166,189
shares of the registrant's Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
DOCUMENT WHERE INCORPORATED
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Portions of Annual Report for the year ended Parts II and IV
December 1, 1996
Portions of the Annual Proxy Statement for the year Part III
ended December 1, 1996
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PART I
ITEM 1. BUSINESS.
GENERAL
The Company is a designer and manufacturer of upholstered furniture, consisting
of sofas, sleeper sofas, loveseats and chairs. The Company's products are sold
primarily in the middle to upper-middle price range, with sofas customarily
retailing between $600 and $1,400.
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. Ten 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 of which are
located in Missouri and two of which are located 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 December 3, 1995, 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 upholstered furniture at competitive prices. A lifetime limited
warranty applicable to all the Company's products covering frames, springs,
mechanisms and selected cushions reflects its commitment to high quality. In
recent years, the Company took a number of steps to
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reduce costs 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 in 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 upholstered 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,
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value oriented furniture 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 limited warranty applicable to all the
Company's products covering the frames, springs, mechanisms and selected
cushions, 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
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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
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reductions, and that it has also reduced supervisory expense. 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
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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 allows 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 consumers full-color pictures of various combinations of furniture styles
and fabric patterns and to enter consumers' orders directly with the Company.
The Company has established regional repair service centers so 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 are 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
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the Company's manufacturing efficiencies, including implementation of
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, the Far East, Australia and
other regions.
THE INDUSTRY
As reported by the American Furniture Manufacturers Association in December,
1996, 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, 1996.
Year Ended December 31,
-----------------------
1993 1994 1995 1996
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(in billions)
Industry shipments $17.2 $18.6 $19.0 $20.0
Upholstered furniture shipments 6.2 7.1 7.4 7.8
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 39% and metal and other products account for the
balance. Within each category, furniture manufacturers generally focus on
particular price ranges and styles.
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 including
sofas, sleeper sofas, loveseats, and 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
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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, Leath, Jordan's Furniture, Star Furniture
and Sears Homelife. During 1996, Levitz accounted for approximately 17% of the
Company's 1996 shipments, and its ten largest customers (including Levitz)
accounted for approximately 35% of 1996 shipments. Other than Levitz, no
customer accounted for more than 3% of the 1996 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.
Approximately 5% of 1996 sales were to customers located outside of the United
States.
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
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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 86 are dedicated galleries located within
stores operated by retailers that also sell other manufacturers' products, six
are freestanding independently owned retail locations, and ten 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 1996 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 expanded in 1996 its owned locations to ten free-
standing stores. The expansion of Company-owned ShowPlace stores is supported
by the 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. 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 and sales personnel. In addition, because the
Rowe ShowPlace program accounted for more than 20% of fiscal 1996 shipments, a
material reduction in sales at such stores may have an adverse effect on the
Company's results.
MANUFACTURING AND DISTRIBUTION
The Company's manufacturing operations are conducted in four facilities, two
located in Virginia and two located 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.
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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, foam cutting and filling,
upholstery and final assembly of the upholstered product. The Company
manufactures and assembles all of the frames used in its upholstered furniture.
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
experienced a significant increase in employee suggestions leading to such
improvements and reductions. On a facility-wide basis, 1996 incentive bonuses
ranged up to approximately 20% of 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.
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, partial second shifts
are in operation at all its facilities. Management believes that the Company
could increase production without substantial capital expenditures by expanding
the number of personnel 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
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future shipments. The Company's backlog of unshipped orders was approximately
$10.4 million as of December 1, 1996 as compared to $15.0 million as of December
3, 1995. The Company anticipates that 100% of the backlog as of December 1, 1996
will be shipped in 1997.
Distribution. The Company has contracted with a truck leasing company to
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provide 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 third party motor carriers. For international shipments,
upholstered furniture is shipped primarily in full containers utilizing third-
party freight forwarders. Approximately 90% of the Company's fiscal year 1996
upholstered shipments were delivered under these arrangements.
RAW MATERIALS
The raw materials used by the Company include fabrics, hardwood lumber, 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-intensive, and in many respects more
structurally sound than hardwood construction, this method 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, compliance with these standards has not had a material
adverse effect on the Company's operations. Management believes that the
Company's plants are in
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compliance in all material respects with applicable federal, state and local
laws and regulations concerned with safety, health, and environmental
protection.
The Company currently anticipates increased federal and state environmental and
health and safety regulation affecting the furniture industry, 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 1, 1996, the Company employed approximately 1,525 full-time
employees, of which 125 are in management, supervisory, and sales positions.
Approximately 105 employees employed at a single plant, 17 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", "The Rowe ShowMe Machine", "Limited
Editions" and "The ShowPlace" trademarks with the United States Patent and
Trademark Office. Management believes that its trademark 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.
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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 in leased offices in
McLean, 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 02-28-00* Industrial 79,000
Jessup, Maryland Various thru Office/
12-31-04 Industrial 180,000
Leesburg, Florida 06-30-99 Retail 15,000
Sylmar, California 03-31-04 Industrial 115,000
</TABLE>
*Lease covers 6,000 sq. ft.
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. 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 realized by leasing them to third
parties. In February, 1995, the Company
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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. The retail property located in
Leesburg, Florida was acquired in 1984. Aggregate rental income from investment
properties, net of commissions, was $1,470,000, $1,005,000 and $1,442,000 in
1994, 1995 and 1996, respectively.
ITEM 3. LEGAL PROCEEDINGS.
There are no pending legal proceedings, other than routine litigation incidental
to the business of the Company. While the outcome of these routine legal
proceedings cannot be predicted with certainty, it is the opinion of management
that the resolution of these legal proceeds should not have a material adverse
effect on the Company's financial position.
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 1, 1996.
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Part II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
(a) The information contained under the caption "Stock Price and Dividend
Data" in the Annual Report to Stockholders for the fiscal year ended December 1,
1996 is included in Exhibit 13 hereto and incorporated herein by reference.
(b) Approximate Number of Equity Security Holders.
Approximate Number of Record
Title of Class Holders as of December 20, 1996
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Common Stock, par value 1,200
$1.00 per share
ITEM 6. SELECTED FINANCIAL DATA.
The information contained under the caption "Five-year Summary" in the Annual
Report to Stockholders for the fiscal year ended December 1, 1996 is included in
Exhibit 13 hereto and incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The management's discussion and analysis of financial condition and results of
operations section of the Annual Report to Stockholders for the fiscal year
ended December 1, 1996 is included in Exhibit 13 hereto and incorporated herein
by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The following information in the Annual Report to Stockholders of the fiscal
year ended December 1, 1996 is included in Exhibit 13 hereto and incorporated
herein by reference:
Consolidated Balance Sheets - - December 1, 1996 and December 3, 1995
Consolidated Statements of Income --
Years Ended December 1, 1996, December 3, 1995, and November 27, 1994
Consolidated Statements of Stockholders' Equity --
Years Ended December 1, 1996, December 3, 1995 and November 27, 1994
Consolidated Statements of Cash Flows --
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Years Ended December 1, 1996, December 3, 1995 and November 27, 1994
Notes to Consolidated Financial Statements (includes selected quarterly
financial data)
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 12
through 14 of the Company's 1997 Annual Meeting Proxy Statement are not
incorporated by reference in this Form 10-K.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS.
The information required by Item 10 is contained in the Company's 1997 Annual
Meeting 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 1997 Annual
Meeting 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 1997 Annual
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 1997 Annual
Meeting 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 1, 1996 and December
3, 1995 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
1, 1996 together with the report of BDO Seidman, LLP dated January
8, 1997 appearing in the 1996 Annual Report to Stockholders are
incorporated herein by reference. The following additional financial
data should be read in conjunction with the consolidated financial
statements in such 1996 Annual Report to Stockholders.
2. Financial Statement Schedule:
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 in the
consolidated financial statements and notes thereto.
3. Exhibits:
Exhibit
Number Exhibit
- ------- -------
3.1 Articles of Incorporation of the Company (incorporate 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 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)
4 Specimen Stock Certificate (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 Stock Option and Incentive Plan
(incorporated by reference to the Company's Registration Statement
on
16
<PAGE>
10.2 Form S-1 No. 33-74504 filed with the Securities and Exchange
Commission on January 27, 1994)
10.3 Rowe Furniture Corporation Merged 401(k) and Employee Stock
Ownership Plan dated December 1, 1991 (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)
10.4 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 field
with the Securities and Exchange Commission on January 27, 1994)
10.6 Employment Agreement dated December 5, 185 between the Company and
Mr. Arthur H. Dunkin (incorporated by reference to the Company's
Registration Statement on Form S-1 No. 33-74504 field 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. 33-74504 filed
with the Securities and Exchange Commission on January 27, 1994)
10.8 Rowe Furniture Corporation Cash-or-Deferred 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 1, 1996
21 List of Subsidiaries
23 Consent of BDO Seidman, LLP
27 Financial Data Schedule
17
<PAGE>
(b) Reports on Form 8-K.
One report on Form 8-K was filed in the fourth quarter of the Company's
fiscal year. On November 11, 1996 a Form 8-K was filed reporting that (i) on
October 24, 1996, Rowe Furniture Corporation announced the completion of the
500,000 share buy-back program which was approved by the Board of Directors on
January 12, 1995 and (ii) on November 6, 1996, Rowe Furniture Corporation
announced that the Board of Directors approved the purchase of an additional
500,000 shares of its common stock in open market transactions.
18
<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
---------------------------------
February 28, 1997 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.
Signature Title Date
- --------- ----- ----
Chairman of the Board
/s/ GERALD M. BIRNBACH President, Director February 28, 1997
- ----------------------- (Principal Executive Officer)
G. M. Birnbach
/s/ RICHARD E. CHENEY Director February 28, 1997
- -----------------------
R. E. Cheney
/s/ W. PATRICK DOLAN Director February 28, 1997
- -----------------------
W. P. Dolan
Secretary-Treasurer, Director
/s/ ARTHUR H. DUNKIN (Principal Financial and February 28, 1997
- ----------------------- Accounting Officer)
A. H. Dunkin
Senior Vice President and
/s/ HARVEY I. PTASHEK Director February 28, 1997
- -----------------------
H. I. Ptashek
19
<PAGE>
/s/ CHARLES T. ROSEN Director February 28, 1997
- -----------------------
C. T. Rosen
/s/ KEITH J. ROWE Director February 28, 1997
- -----------------------
K. J. Rowe
/s/ SIDNEY J. SILVER Director February 28, 1997
- -----------------------
S. J. Silver
/s/ GERALD O. WOODLIEF Director February 28, 1997
- -----------------------
G. O. Woodlief
20
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
Rowe Furniture Corporation
Salem, Virginia
The audits referred to in our report dated January 8, 1997 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 1,
1996) included the audit of the financial statement schedule listed in the
accompanying index. The financial statement schedule is the responsibility of
the Company's management. Our responsibility is to express an opinion on the
financial statement schedule based upon our audits.
In our opinion such financial statement schedule presents fairly, in all
material respects, the information set forth therein.
High Point, North Carolina /s/ BDO SEIDMAN, LLP
January 8, 1997 --------------------
BDO SEIDMAN, LLP
21
<PAGE>
ROWE FURNITURE CORPORATION
AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 1, 1996, DECEMBER 3, 1995 AND NOVEMBER 27, 1994
(Thousands of Dollars)
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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
- ----------------------------------------------------------------------------------------
Allowance for doubtful
accounts - 1996 $ 300 $ 490 $ - $ 490(A) $ 300
Allowance for doubtful
accounts - 1995 $ 300 $ 179 $ - $ 179(B) $ 300
Allowance for doubtful
accounts - 1994 $ 300 $ 68 $ - $ 68(C) $ 300
</TABLE>
(A) Accounts charged off less bad debt recoveries of $69,000
(B) Accounts charged off less bad debt recoveries of $55,000
(C) Accounts charged off less bad debt recoveries of $51,000
<PAGE>
EXHIBIT 13
PORTIONS OF THE ANNUAL REPORT TO
STOCKHOLDERS FOR THE YEAR ENDED
DECEMBER 1, 1996
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
(Fiscal Year Ended) 12/1/96 12/3/95
(52 Weeks) (53 Weeks)
<S> <C> <C>
Net shipments $142,723 $124,939
Gross profit 37,593 30,496
Operating income 10,248 5,706
Net earnings (1) 7,052 7,207
Net earnings per share - primary (1) 0.53 0.53
Stockholders' equity 40,188 35,621
Book value per share 3.03 2.66
Dividends paid per share 0.08 0.08
Closing market price 7.75 4.875
</TABLE>
(1) The results of operations for 1995 include an after-tax gain on sale of
property of approximately $3.0 million, or $0.22 per share, and an after-tax
restructuring charge of $265,000, or $0.02.
<TABLE>
<CAPTION>
STOCK PRICE AND DIVIDEND DATA
- -----------------------------
Market Price Dividends
Quarter Ended High Low Paid Per Share
<S> <C> <C> <C> <C>
1996 March 3 5 1/8 3 7/8 $0.02
June 2 5 5/8 4 1/8 0.02
September 1 5 7/8 4 3/4 0.02
December 1 9 5 0.02
-----
$0.08
=====
1995 February 26 6 1/8 4 1/2 $0.02
May 28 5 7/8 3 7/8 0.02
August 27 4 7/8 4 1/4 0.02
December 3 5 1/2 3 7/8 0.02
-----
$0.08
=====
</TABLE>
The Company's shares are traded on the New York Stock Exchange under the symbol
ROW. On December 1, 1996 the Company had 1,255 stockholders of record.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Results Of Operations
Year Ended December 1, 1996
Compared to Year Ended December 3, 1995
Net shipments in 1996 increased by $17,784,000, or 14.2%, to $142,723,000 from
$124,939,000 in 1995. The addition of new dealers and increased market share
from existing customers in combination with changes in the product mix enabled
the Company to reach the 1996 shipment level.
Gross profit in 1996 increased by $7,097,000, or 23.3%, to $37,593,000 from
$30,496,000 in 1995. Gross profit, as a percentage of shipments, in 1996
increased to 26.3% from 24.4% in 1995. Management believes that the percentage
increase was due primarily to higher volume, favorable product mix and
improvements in manufacturing efficiencies from less hiring and training
expenses and overtime requirements associated with expanding production capacity
in 1995.
Selling and administrative expenses in 1996 increased by $2,980,000, or 12.2%,
to $27,345,000 from $24,365,000 in 1995. As a percentage of shipments, selling
and administrative expenses in 1996 decreased to 19.2% from 19.5% in 1995. The
aggregate increase in selling and administrative expenses resulted primarily
from additional commissions, salaries, and costs associated with the expansion
of the Company-owned Rowe ShowPlace program.
Operating income in 1996 increased by $4,542,000, or 79.6%, to $10,248,000 from
$5,706,000 in 1995. The increase in operating income was primarily attributable
to increases in shipments, reductions in costs of shipments, selling and
administrative expenses as a percentage of shipments and the restructuring
charge taken in 1995.
Net interest expense in 1996 decreased by $45,000, or 11.6%, to $343,000 from
$388,000 in 1995. The decrease in net interest expense resulted from a
reduction in the amount of long-term debt and lower interest rates on short-term
borrowings offset in part by an increase in short-term borrowings.
Other income in 1996 decreased by $4,803,000 to $1,482,000 from $6,285,000 in
1995. The decrease in other income was due primarily to the gain on the sale of
<PAGE>
investment property that occurred in 1995, offset partially by increased rents
received from the replacement property.
Net earnings decreased by $155,000, or 2.2%, to $7,052,000 in 1996 from
$7,207,000 in 1995. The decrease in net earnings was due primarily to the gain
in 1995 on the sale of investment property, offset in part by a restructuring
charge. Excluding the previously indicated items, net earnings increased by 58%
reflecting primarily higher operating income.
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
1995. 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
<PAGE>
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.
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.
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 and purchases under the Company's stock repurchase program
necessitated additional use of short-term bank financing throughout most of
1996.
Net cash provided by operating activities was $7,042,000, $8,588,000 and
$2,179,000 in 1996, 1995, and 1994, 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 1996, accounts receivable
increased as a result of increased sales levels.
Capital expenditures were $3,856,000, $10,686,000 and $4,961,000 for 1996, 1995,
and 1994, 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 $1,644,000 in 1996 and $4,781,000 in
1995. Financing activities provided net cash of $1,257,000 in 1994. In fiscal
year 1996, these activities primarily consisted of repurchase of the Company's
common stock and dividends paid to stockholders, offset partially by increased
levels of short-term borrowings.
<PAGE>
Management anticipates that the Company's capital expenditures for 1997 will be
approximately $4.0 million. These expenditures will primarily be used to
purchase capital equipment at both frame and upholstery facilities for
efficiency improvements and capacity expansions, along with additions and
upgrades to computerized systems.
The Company has current maturities only, on long-term debt of $420,000. This
debt consists of industrial revenue bonds bearing interest at rates ranging from
5.5% to 6.5%. The amount outstanding under the lines of credit was $3,610,000.
The Company has a total of $13,000,000 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 1997.
Changes in Accounting Standards
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>
FIVE YEAR SUMMARY
1996 1995 1994 1993 1992
(52 weeks) (53 weeks) (52 weeks) (52 weeks) (52 weeks)
---------- ---------- ---------- ---------- ----------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Net shipments $142,723 $124,939 $111,201 $88,961 $73,488
Gross profit 37,593 30,496 28,687 22,401 16,569
Operating income 10,248 5,706 9,458 6,098 1,455
Earnings before
cumulative effect of change
in accounting principle 7,052 7,207 6,782 4,600 1,405
Net earnings* $ 7,052 $ 7,207 $ 6,782 $ 5,090 $ 1,405
Working capital $ 18,027 $14,907 $ 16,605 $14,112 $10,854
Total assets 64,280 58,035 48,098 43,185 37,013
Long-term debt - 569 864 2,712 3,871
Stockholders' equity $ 40,188 $35,621 $ 32,339 $24,873 $20,204
Earnings per share before cumulative effect
of change in accounting principle - primary $ 0.53 $ 0.53 $ 0.47 $ 0.34 $ 0.11
Net earnings per share - primary $ 0.53 $ 0.53 $ 0.47 $ 0.37 $ 0.11
Weighted average shares outstanding - primary 13,370 13,607 14,563 13,689 12,984
Earnings per share before cumulative effect
of change in accounting principle - fully diluted $ 0.51 $ 0.53 $ 0.47 $ 0.33 $ 0.11
Net earnings per share - fully diluted $ 0.51 $ 0.53 $ 0.47 $ 0.36 $ 0.11
Weighted average shares outstanding and
share equivilents - fully diluted 13,803 13,607 14,563 14,197 12,984
Cash dividends paid per share $ 0.08 $ 0.08 $ 0.06 $ 0.04 $ 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.
*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
$265,000.
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
December 1, December 3,
1996 1995
----------- -----------
($ Thousands)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,897 $ 323
Marketable securities 45 42
Accounts receivable (net of allowance
for losses of $300,000 in 1996 and 1995) (Note 9) 22,726 18,763
Inventories (Note 1)
Finished goods 3,037 3,444
Work in process 2,636 2,808
Raw materials and supplies 6,710 6,194
------- -------
12,383 12,446
Deferred income tax asset (Note 8) 284 70
Prepaid expenses 492 1,086
------- -------
TOTAL CURRENT ASSETS 37,827 32,730
------- -------
PROPERTY AND EQUIPMENT (Notes 1 and 3)
Land 249 249
Buildings and leasehold improvements 16,606 16,185
Machinery and equipment 24,522 21,688
------- -------
41,377 38,122
Less accumulated depreciation 26,987 25,027
------- -------
NET PROPERTY AND EQUIPMENT 14,390 13,095
------- -------
OTHER ASSETS
Cash value of life insurance (Note 4) 3,518 3,402
Investment property (net of accumulated
depreciation of $1,895,000 in 1996 and
$1,631,000 in 1995) (Note 6) 8,402 8,650
Miscellaneous 143 158
------- -------
TOTAL OTHER ASSETS 12,063 12,210
------- -------
$64,280 $58,035
LIABILITIES
CURRENT LIABILITIES
Current maturities of long-term debt (Note 3) $ 420 $ 485
Short term bank borrowings (Note 2) 3,610 2,135
Accounts payable 11,212 11,678
Accrued expenses:
Compensation 1,341 1,434
Income taxes 988 346
Other 1,808 1,289
Deferred compensation - current portion (Note 4) 421 456
------- -------
TOTAL CURRENT LIABILITIES 19,800 17,823
LONG-TERM DEBT (Note 3) - 569
DEFERRED COMPENSATION (Note 4) 2,228 1,852
DEFERRED INCOME TAX LIABILITY (Note 8) 2,064 2,170
------- -------
TOTAL LIABILITIES 24,092 22,414
COMMITMENTS AND CONTINGENCIES (Notes 4,5 and 6)
STOCKHOLDERS' EQUITY (Note 7)
COMMON STOCK, par value $1 per share:
1996 1995
Authorized shares 20,000,000 20,000,000
Issued shares 14,564,103 14,416,104 14,564 14,416
Outstanding shares 13,254,858 13,410,533
CAPITAL IN EXCESS OF PAR VALUE 8,349 8,248
RETAINED EARNINGS 24,033 18,056
------- -------
46,946 40,720
LESS TREASURY STOCK - 1,309,245 shares in
1996 and 1,005,571 shares in 1995, at cost (6,758) (5,099)
------- -------
Total stockholders' equity 40,188 35,621
------- -------
$64,280 $58,035
======= =======
Ratio of current assets to current liabilities 1.9 to 1 1.8 to 1
Ratio of cash, marketable securities and receivables
to current liabilities 1.2 to 1 1.1 to 1
See notes to consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
- -------------------------------------------------------------------------------------------
Year Ended
12-01-96 12-03-95 11-27-94
---------- ---------- ----------
(52 weeks) (53 weeks) (52 weeks)
(in thousands)
<S> <C> <C> <C>
INCREASE (DECREASE) IN CASH
Cash flows from operating activities:
Cash received from customers $ 138,270 $ 122,918 $ 109,369
Cash paid to suppliers and employees (128,641) (113,063) (104,533)
Income taxes paid, net of refunds (4,013) (1,911) (3,876)
Interest paid (343) (388) (208)
Interest received 479 232 188
Other receipts - net 1,290 800 1,239
--------- --------- ---------
Net cash and cash equivalents provided by
operating activities 7,042 8,588 2,179
--------- --------- ---------
Cash flows from investing activities:
Proceeds from sale of property and equipment 35 6,594 2
Capital expenditures (3,856) (10,686) (4,961)
Sale (acquisitions) of marketable securities (3) 137 191
--------- --------- ---------
Net cash used in investing activities (3,824) (3,955) (4,768)
--------- --------- ---------
Cash flows from financing activities:
Net borrowings (payments) under line of credit 1,475 (601) 2,736
Proceeds from issuance of long term debt - 200 200
Payments to reduce long-term debt (634) (455) (2,363)
Proceeds from issuance of common stock 249 122 3,578
Dividends paid (1,075) (1,090) (798)
Purchase of treasury stock (1,659) (2,957) (2,096)
--------- --------- ---------
Net cash provided by (used in) financing activiti (1,644) (4,781) 1,257
Net increase (decrease) in cash and cash equivale 1,574 (148) (1,332)
Cash at beginning of year 323 471 1,803
--------- --------- ---------
Cash at end of year $ 1,897 $ 323 $ 471
========= ========= =========
- -------------------------------------------------------------------------------------------
<CAPTION>
RECONCILIATION OF NET EARNINGS TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net earnings $7,052 $7,207 $6,782
--------- --------- ---------
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 2,487 2,175 1,888
Provision for deferred compensation 767 634 554
Payments made for deferred compensation (426) (449) (1,730)
Deferred income taxes (320) 2,150 404
Provision for losses on accounts receivable 490 179 68
Loss (gain) on disposition of assets (Note 6) 287 (5,253) (2)
Loss (gain) on sale of marketable securities - - (18)
Change in operating assets and liabilities:
Decrease (increase) in accounts receivable (4,453) (2,021) (1,832)
Decrease (increase) in inventories 63 (1,127) (2,008)
Decrease (increase) in prepaid expenses 594 (293) (78)
Decrease (increase) in cash value of
life insurance (116) (140) (120)
Decrease (increase) in other assets 15 320 135
Increase (decrease) in accounts payable (466) 4,080 (1,633)
Increase (decrease) in accrued expenses 1,068 1,126 (231)
--------- --------- ---------
Total adjustments (10) 1,381 (4,603)
--------- --------- ---------
Net cash provided by operating activities $ 7,042 $ 8,588 $ 2,179
========= ========= =========
</TABLE>
See notes to consolidated financial statements
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
- -----------------------------------------------------------------------------------------
Year Ended
12/1/96 12/3/95 11/27/94
(52 weeks) (53 weeks) (52 weeks)
--------- --------- ---------
(in thousands, except per share amounts)
<S> <C> <C> <C>
Net shipments (Note 9) $142,723 $124,939 $111,201
Cost of shipments 105,130 94,443 82,514
-------- -------- --------
Gross profit 37,593 30,496 28,687
Selling and administrative expenses 27,345 24,365 19,229
Restructuring charge (Note 10) - 425 -
-------- -------- --------
Operating income 10,248 5,706 9,458
Interest expense (343) (388) (208)
Other income, net (Note 6) 1,482 6,285 1,447
-------- -------- --------
Earnings before taxes 11,387 11,603 10,697
Taxes on income 4,335 4,396 3,915
-------- -------- --------
NET EARNINGS $ 7,052 $ 7,207 $ 6,782
======== ======== ========
NET EARNINGS PER SHARE - PRIMARY (Note 1) $ 0.53 $ 0.53 $ 0.47
======== ======== ========
Weighted average shares outstanding -
primary* 13,370 13,607 14,563
======== ======== ========
NET EARNINGS PER SHARE - FULLY DILUTED
(Note 1) $ 0.51 $ 0.53 $ 0.47
======== ======== ========
Weighted average shares outstanding and
share equivalents - fully diluted 13,803 13,607 14,563
======== ======== ========
</TABLE>
See notes to consolidated financial statements
*Weighted average shares and per share amounts have been adjusted to give
retroactive effect to a three-for-two stock split declared November 10, 1994.
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Year Ended
December 1, 1996, December 3, 1995 and November 27, 1994
(in thousands, except share and per share amounts)
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 28, 1993 $ 9,157,206 $ 9,157 $5,039 $10,723 $ 9,258 $ 46
Acquisition of treasury stock 242,904 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
Acquisition of treasury stock 303,674 1,659
Cash dividends paid, $0.08 per share (1,075)
Exercise of stock options 147,999 148 101
Net earnings for the year ended
December 1, 1996 7,052
----------- ------- ------ ------- ---------- ------
Balance at December 1, 1996 14,564,103 $14,564 $8,349 $24,033 1,309,245 $6,758
=========== ======== ====== ======= ========== ======
</TABLE>
See notes to consolidated financial statements
*Per share amount has been adjusted to give retroactive effect to a three-for-
two stock split declared 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. Management
periodically performs credit evaluations of its customers and generally does not
require collateral. 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 its 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.
Use of Estimates- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
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).
Fair Value of Financial Instruments- Financial instruments of the Company
include long-term debt and line of credit agreements. Based upon the current
borrowing rates
<PAGE>
available to the Company, estimated fair values of these financial instruments
approximate their recorded carrying amounts.
Income Taxes-Income taxes are calculated using the liability method specified by
Statement of Financial Accounting Standards No. 109, "Accounting For Income
Taxes."
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 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 $2,876,000,
$3,086,000 and $2,560,000 in 1996, 1995 and 1994, 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 1, 1996, December 3,
1995 and November 27, 1994 were comprised of 52, 53 and 52 weeks, respectively.
NOTE 2-SHORT-TERM BORROWINGS
The Company has unsecured short-term lines of credit of $13,000,000 with banks
at rates not to exceed the prime interest rate. The following summarizes
aggregate short-term borrowings in 1996, 1995 and 1994:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Amount outstanding at year end $3,610,000 $2,135,000 $2,736,000
Maximum amount outstanding at
any month end $7,710,000 $4,685,000 $2,900,000
Average borrowings (based on
weighted daily balances) $4,256,000 $4,015,000 $1,110,000
Weighted average interest rate
during the year 6.5% 7.0% 5.5%
Weighted average interest rate
at year end 6.3% 6.5% 6.3%
</TABLE>
<PAGE>
NOTE 3-LONG TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Industrial Revenue Bonds $420,000 $ 864,000
Other - 190,000
-------- ----------
420,000 1,054,000
Less current maturities 420,000 485,000
-------- ----------
Total long-term debt $ - $ 569,000
======== ==========
</TABLE>
The industrial revenue bonds require principal payments of $420,000 in 1997.
Interest rates are variable and range from 5.5% to 6.5%. Certain real
properties and equipment with a net book value of approximately $1,600,000 are
pledged as collateral.
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 $488,000 in 1996, $402,000 in 1995 and
$405,000 in 1994.
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 $174,000 in 1996, $150,000 for 1995 and $149,000 for 1994.
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 $105,000 in 1996 and $82,000 in 1995.
NOTE 5- EMPLOYEE BENEFIT PLANS
The Company contributed $124,000 in 1996, $141,000 in 1995 and $154,000 in 1994
to the Merged 401(k) and Employee Stock Ownership Plan (401(k) Plan).
<PAGE>
The Company made contributions to the Merged Thrift and Employee Stock Ownership
Plan (Thrift Plan) in the amount of $208,000 in 1996, $213,000 in 1995 and
$178,000 in 1994.
Substantially all employees are covered under the 401(k) Plan or the Thrift
Plan.
NOTE 6-COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company is obligated under long-term real estate leases for offices,
showroom and retail locations expiring at various dates through 2007 with
certain renewal options. Rental payments charged to expense were $1,399,000 in
1996, $1,130,000 in 1995 and $920,000 in 1994.
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 $1,442,000 in 1996,
$1,005,000 in 1995 and $1,470,000 in 1994 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 were recorded as "Basis of
investment property" (Note 8).
Minimum lease commitments at December 1, 1996 under long-term operating real
estate leases are as follows:
<TABLE>
<CAPTION>
Lease Lease
Expense Receipts
----------- -----------
<S> <C> <C>
1997 $ 1,829,000 $1,265,000
1998 1,850,000 1,178,000
1999 1,766,000 1,136,000
2000 1,549,000 1,049,000
2001 1,324,000 1,003,000
Thereafter 4,508,000 2,933,000
----------- ----------
$12,826,000 $8,564,000
=========== ==========
</TABLE>
<PAGE>
In addition, the Company is obligated through a dedicated contract carriage
agreement for delivery services for periods ranging from 2 to 8 years. Current
monthly expense is $190,000 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 $4,300,000 in 1996 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.
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>
December 16, 1993 January 3, 1994
November 10, 1994 November 21, 1994
</TABLE>
All 1994 weighted average shares and per share amounts have been adjusted to
give retroactive effect to the above listed stock splits. In addition, retained
earnings were charged for the par value of the 4,768,059 shares issued.
<PAGE>
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.
<PAGE>
The following is a summary of these plans:
<TABLE>
<CAPTION>
Option Price
$ Per Share Shares
------------ ----------
<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)
--------
At December 3, 1995 0.79-11.75 884,398
Granted 4.25- 7.63 390,200
Expired or terminated 5.00- 5.50 (42,375)
Exercised 0.79- 5.50 (147,999)
--------
Outstanding and
exercisable at
December 1, 1996 0.79-11.75 1,084,224
=========
Shares available for grant
at December 1, 1996 434,025
=========
</TABLE>
NOTE 8-TAXES ON INCOME
Provisions for income taxes in the consolidated statements of income consisted
of the following components:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Current $4,655,000 $2,246,000 $3,511,000
Deferred (320,000) 2,150,000 404,000
---------- ---------- ----------
Total taxes on income $4,335,000 $4,396,000 $3,915,000
========== ========== ==========
</TABLE>
<PAGE>
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>
1996 1995
------ ------
<S> <C> <C>
Bad debt reserve $ 111,000 $ 110,000
Deferred compensation 1,138,000 900,000
Other 87,000 -
----------- -----------
Gross deferred tax assets 1,336,000 1,010,000
----------- -----------
Basis of investment property (Note 6) 2,065,000 2,100,000
Depreciation 967,000 800,000
Prepaid expenses 84,000 210,000
----------- -----------
Gross deferred tax liabilities 3,116,000 3,110,000
----------- -----------
Net deferred tax asset (liability) $(1,780,000) $(2,100,000)
=========== ===========
Included in the balance sheet:
Deferred income tax asset - current $ 284,000 $ 70,000
Deferred income tax liabilities - non-current (2,064,000) (2,170,000)
----------- -----------
Net deferred tax asset (liability) $(1,780,000) $(2,100,000)
=========== ===========
</TABLE>
The following summary reconciles taxes at the federal statutory tax rate with
the actual taxes:
<TABLE>
<CAPTION>
1996 1995 1994
------- -------- --------
<S> <C> <C> <C>
Income tax expense
computed at the statutory rate $3,885,000 $3,945,000 $3,635,000
State income taxes net of federal
income tax benefit 325,000 450,000 280,000
Life insurance transactions (26,000) (45,000) (35,000)
Other items, net 151,000 46,000 35,000
---------- ---------- ----------
Total taxes on income $4,335,000 $4,396,000 $3,915,000
========== ========== ==========
</TABLE>
NOTE 9-MAJOR CUSTOMER INFORMATION
<PAGE>
Shipments to one customer (Levitz Furniture, including Homemakers as of June,
1994), as a percent of net shipments, amounted to 17% in 1996, 16% in 1995 and
20% in 1994. Receivables from this customer as a percent of year-end
receivables amounted to 22% in 1996 and 21% in 1995. Shipments to the Company's
top ten customers, as a percent of net shipments, amounted to 35% in 1996, 32%
in 1995 and 35% in 1994.
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 was included in the accompanying consolidated
balance sheet as of December 3, 1995 for payments made during fiscal year 1996.
NOTE 11-QUARTERLY FINANCIAL INFORMATION (UNAUDITED, $THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
<TABLE>
<CAPTION>
Quarter First Second Third Fourth
- ------- ------ -------- ------- --------
<S> <C> <C> <C> <C>
1996
Net shipments $34,793 $35,080 $34,768 $38,082
Gross profit 7,558 8,806 9,692 11,537
Net earnings 830 1,332 1,907 2,983
Net earnings per share - primary(1) 0.06 0.10 0.14 0.23
Net earnings per share - fully
diluted(1) 0.06 0.10 0.14 0.22
1995
Net shipments $28,747 $30,353 $29,533 $36,306
Gross profit 7,022 7,492 7,234 8,748
Net earnings 4,135 609 1,014 1,449
Net earnings per share -
primary and fully diluted(1)(2) 0.30 0.05 0.07 0.11
</TABLE>
(1) 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.
<PAGE>
(2) The results of operations for the first quarter of 1995 includes an
after-tax gain on sale of property of approximately $3.0 million (See Note 6).
The second quarter of 1995 includes an after-tax restructuring charge of
$265,000 (See Note 10).
NOTE 12-RECENT ACCOUNTING PRONOUNCEMENTS
In March, 1995, the Financial Accounting Standards Board issued SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of." This statement was adopted in 1996 and had no effect.
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.
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS
The management of Rowe Furniture Corporation is responsible for the accuracy and
consistency of all the information contained in the annual report, including all
accompanying consolidated financial statements. The statements have been
prepared to conform with the generally accepted accounting principles and
include amounts based on management's estimates and judgments.
Rowe Furniture Corporation maintains a system of internal accounting controls
designed to provide reasonable assurance that financial records are accurate,
Company assets are safeguarded, and financial statements present fairly the
consolidated financial position of the Company.
The Audit Committee of the Board of Directors, composed solely of outside
directors, reviews the scope of audits and the findings of the independent
certified public accountants. The auditors meet regularly with the Audit
Committee to discuss audit and financial issues.
<PAGE>
BDO Seidman, LLP, the Company's independent certified public accountants has
audited the financial statements prepared by management. Their opinion on the
financial statements is presented as follows.
Gerald M. Birnbach Arthur H. Dunkin
Chairman of the Board and President Secretary-Treasurer
<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 1, 1996 and December 3, 1995 and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the three years in the period ended December 1, 1996. 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 1, 1996 and December 3, 1995 and the
results of their operations and their cash flows for each of the three years in
the period ended December 1, 1996 in conformity with generally accepted
accounting principles.
High Point, North Carolina BDO SEIDMAN, LLP
January 8, 1997
<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 8, 1997, 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 1, 1996 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 25, 1997 --------------------
BDO SEIDMAN, LLP
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-1-1996
<PERIOD-END> DEC-1-1996
<CASH> 1,897
<SECURITIES> 45
<RECEIVABLES> 22,726
<ALLOWANCES> 300
<INVENTORY> 12,383
<CURRENT-ASSETS> 37,827
<PP&E> 41,377
<DEPRECIATION> 26,987
<TOTAL-ASSETS> 64,280
<CURRENT-LIABILITIES> 19,800
<BONDS> 0
0
0
<COMMON> 14,564
<OTHER-SE> 25,624
<TOTAL-LIABILITY-AND-EQUITY> 64,280
<SALES> 142,723
<TOTAL-REVENUES> 142,723
<CGS> 105,130
<TOTAL-COSTS> 105,130
<OTHER-EXPENSES> 27,345
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 343
<INCOME-PRETAX> 11,387
<INCOME-TAX> 4,335
<INCOME-CONTINUING> 7,052
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,052
<EPS-PRIMARY> 0.53
<EPS-DILUTED> 0.51
</TABLE>
