<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 August 29, 1999 Commission File Number 1-10226
--------------- ----------
THE ROWE COMPANIES
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
NEVADA 54-0458563
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1650 Tysons Boulevard, Suite 710, McLean, Virginia 22102
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 703-847-8670
- --------------------------------------------------------------------------------
None
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last
report.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorted period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X No _____
---------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the close of the period covered by this report.
Class Outstanding at August 29, 1999
- --------------------------------------- ------------------------------
Common stock, par value $1.00 per share 12,173,420 shares
<PAGE>
THE ROWE COMPANIES
INDEX
Part I. Financial Information Page
----
Consolidated Balance Sheets - August 29,1999 and
November 29, 1998 4
Consolidated Statements of Income - Three Months and Nine Months
Ended August 29,1999 and August 30,1998 5
Consolidated Statements of Cash Flows - Nine Months
Ended August 29,1999 and August 30,1998 6
Notes to Consolidated Financial Statements 8
Management's Discussion and Analysis of Financial Condition
and Results of Operations 10
Quantitative and Qualitative Disclosures about Market Risk 13
Forward Looking Statements 13
Part II. Other Information 14
2
<PAGE>
PART I - - FINANCIAL INFORMATION
3
<PAGE>
THE ROWE COMPANIES AND WHOLLY -OWNED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
August 29, November 29,
1999 1998
----------------- --------------------
(Unaudited) (Audited)
($ in thousands)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 4,713 $ 2,480
Accounts receivable, net 35,170 29,631
Inventories (Note 4) 37,365 22,666
Deferred income tax asset, current 181 181
Prepaid expenses 2,175 1,060
----------------- --------------------
Total current assets 79,604 56,018
PROPERTY AND EQUIPMENT, net 35,579 26,530
GOODWILL, net (Notes 5 and 6) 27,204 12,612
DEFERRED INCOME TAX ASSET, NON-CURRENT 1,229 0
OTHER NONCURRENT ASSETS 16,758 15,302
----------------- --------------------
$ 160,374 $ 110,462
================= ====================
LIABILITIES
CURRENT LIABILITIES
Current maturities of long-term debt $ 487 $ 487
Short term bank borrowings 2,399 2,093
Accounts payable 18,608 16,928
Accrued liabilities 21,941 5,104
Income taxes payable 679 933
----------------- --------------------
Total current liabilities 44,114 25,545
LONG-TERM DEBT (Note 6) 58,658 33,796
DEFERRED LIABILITIES 6,189 5,885
----------------- --------------------
Total liabilities 108,961 65,226
----------------- --------------------
</TABLE>
STOCKHOLDERS' EQUITY
COMMON STOCK, par value $1 per share:
<TABLE>
<CAPTION>
August 29, November 29,
1999 1998
------------------------------
<S> <C> <C> <C> <C>
Authorized shares 50,000,000 20,000,000
Issued shares 15,009,199 14,905,795 15,009 14,906
Outstanding shares 12,173,420 12,264,576
CAPITAL IN EXCESS OF PAR VALUE 9,704 9,363
RETAINED EARNINGS 46,483 38,713
----------------- --------------------
71,196 62,982
Less treasury stock 2,835,779 shares in 1999 and
2,641,219 shares in 1998, at cost (19,783) (17,746)
----------------- --------------------
Total stockholders' equity 51,413 45,236
----------------- --------------------
$ 160,374 $ 110,462
================= ====================
</TABLE>
See notes to consolidated financial statements
4
<PAGE>
THE ROWE COMPANIES AND WHOLLY - OWNED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME FOR
THE THREE AND NINE MONTHS ENDED
AUGUST 29,1999 AND AUGUST 30,1998
UNAUDITED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
August 29, August 30, August 29, August 30,
1999 1998 1999 1998
-------------- ------------ --------------- ------------
($ in thousands - except per share amounts)
<S> <C> <C> <C> <C>
Net shipments $70,234 $47,972 $194,095 $138,920
Cost of shipments 48,956 35,331 138,469 102,269
------- ------- -------- --------
Gross profit 21,278 12,641 55,626 36,651
Selling and administrative
Expenses 17,019 9,241 41,056 25,262
------- ------- -------- --------
Operating income 4,259 3,400 14,570 11,389
Interest expense (662) (111) (1,803) (384)
Other income 1,070 338 1,677 774
------- ------- -------- --------
Earnings before taxes 4,667 3,627 14,444 11,779
Taxes on income 1,744 1,395 5,387 4,520
------- ------- -------- --------
Net earnings $ 2,923 $ 2,232 $ 9,057 $ 7,259
======= ======= ======== ========
Earnings per common share $ 0.24 $ 0.18 $ 0.74 $ 0.58
======= ======= ======== ========
Weighted average common shares 12,173 12,377 12,222 12,478
======= ======= ======== ========
Earnings per common share
Assuming dilution $ 0.23 $ 0.17 $ 0.70 $ 0.56
======= ======= ======== ========
Weighted average common shares
and equivalents 12,992 12,817 13,140 12,937
======= ======= ======== ========
</TABLE>
Dividends declared and paid
per share
<TABLE>
<CAPTION>
Quarter Ended 1999 1998
------------- ---- ----
<S> <C> <C>
First quarter $ 0.035 $ 0.03
Second quarter 0.035 0.03
Third quarter 0.035 0.03
-------- --------
Total for the nine months
Ended August 29, 1999
And August 30, 1998 $ 0.105 $ 0.09
======== ========
</TABLE>
See notes to consolidated financial statements
5
<PAGE>
THE ROWE COMPANIES AND WHOLLY - OWNED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED
AUGUST 29,1999 AND AUGUST 30, 1998
UNAUDITED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
---- ----
($ in thousands)
<S> <C> <C>
INCREASE (DECREASE) IN CASH:
Cash flows from operating activities:
Cash received from customers $ 188,493 $ 135,965
Cash paid to suppliers and employees (174,032) (131,187)
Income taxes paid, net of refunds (5,641) (5,081)
Interest paid (1,803) (384)
Interest received 241 330
Other receipts - net 702 444
--------- ---------
Net cash and cash equivalents provided by
(used in) operating activities 7,960 87
--------- ---------
Cash flows from investing activities:
Proceeds from sales of fixed assets 19 -
Capital expenditures (6,147) (4,485)
Payments to acquire business (11,684) (2,900)
--------- ---------
Net cash used in investing activities (17,812) (7,385)
--------- ---------
Cash flows from financing activities:
Net borrowings (repayments) under line of credit 305 10,985
Proceeds from issuance of long-term debt 25,000 -
Payments to reduce long-term debt (10,339) -
Proceeds from issuance of common stock 443 840
Dividends paid (1,287) (1,128)
Purchase of treasury stock (2,037) (4,164)
--------- ---------
Net cash provided by (used in) financing activities 12,085 6,533
--------- ---------
Net increase (decrease) in cash and cash equivalents 2,233 (765)
Cash and cash equivalents at beginning of period 2,480 850
--------- ---------
Cash and cash equivalents at end of period $ 4,713 $ 85
========= =========
</TABLE>
6
<PAGE>
THE ROWE COMPANIES AND WHOLLY - OWNED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED
AUGUST 29,1999 AND AUGUST 30,1998
UNAUDITED
- --------------------------------------------------------------------------------
Reconciliation of Net Earnings to Net Cash
Provided By Operating Activities:
<TABLE>
<CAPTION>
1999 1998
---- ----
($ in thousands)
<S> <C> <C>
Net earnings $ 9,057 $ 7,259
-------- -------
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Depreciation and amortization 4,110 2,775
Provision for deferred compensation 602 440
Payments made for deferred compensation (319) (400)
Provision for losses on accounts receivable (194) (1,186)
Loss (gain) on disposition of assets 4 -
Change in operating assets and liabilities net of effect
of acquisition of business:
Decrease (increase) in accounts receivable (5,602) (2,955)
Decrease (increase) in inventories (1,676) (727)
Decrease (increase) in prepaid expenses 138 (133)
Decrease (increase) in cash surrender value of
life insurance (90) (89)
Decrease (increase) in other assets 1,298 (193)
Increase (decrease) in accounts payable (5,998) (3,576)
Increase (decrease) in accrued expenses 6,884 (567)
Increase (decrease) in income taxes payable (254) (561)
-------- -------
Total adjustments (1,097) (7,172)
-------- -------
Net cash provided by (used in) operating activities $ 7,960 $ 87
======== =======
Supplemental schedule of non-cash investment activities:
Fair value of assets acquired, other
than cash and cash equivalents $ 39,246 $ 7,490
Liabilities assumed (30,354) (6,490)
Amounts due to sellers - (782)
-------- -------
Cash payments made $ 8,892 $ 218
======== =======
</TABLE>
See notes to consolidated financial statements
7
<PAGE>
THE ROWE COMPANIES AND WHOLLY-OWNED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
- --------------------------------------------------------------------------------
Note 1 - At the annual meeting of shareholders held March 30, 1999, the
shareholders approved changing the name of the Company from Rowe
Furniture Corporation to The Rowe Companies (the "Company"). The name
change reflects the Company's expansion of its manufacturing
operations through acquisitions and growth of its retail operations.
The Rowe Companies is comprised primarily of Rowe Furniture, Inc., its
core upholstered furniture subsidiary; The Mitchell Gold Co., a
producer of upholstered and leather furniture; The Wexford Collection,
Inc., a producer of solid wood furniture; Home Elements, Inc., a chain
of retail specialty home furnishings stores, and, effective August 1,
1999, Storehouse, Inc., which operates a 43 store retail furniture
chain in the Northeast, Southeast, and Southwest.
Note 2 - In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments necessary to present
fairly the financial position as of August 29,1999 and the results of
operations and cash flows for the nine months ended August 29,1999 and
August 30,1998.
Note 3 - The results of operations for the nine months ended August 29,1999 and
August 30,1998 are not necessarily indicative of the results to be
expected for the full year.
Note 4 - Inventory components are as follows:
<TABLE>
<CAPTION>
August 29, November 29,
1999 1998
--------- -----------
($ in thousands)
<S> <C> <C>
Finished Goods $19,265 $ 5,325
Work-in-Process 4,174 4,494
Raw Materials 13,926 12,847
------- -------
$37,365 $22,666
======= =======
</TABLE>
Note 5 - On January 1, 1998, through a newly created subsidiary, The Wexford
Collection, Inc. ("Wexford"), the Company acquired the assets and
assumed certain liabilities of J & M Designs Ltd. Carson, California.
On October 31, 1998, the Company acquired all of the issued and
outstanding common stock of The Mitchell Gold Co. ("Mitchell Gold").
The nine months ended August 29,1999 include nine months of activity
for both Wexford and Mitchell Gold, while the period ended August
30,1998 includes eight months activity for Wexford only.
Note 6 - On June 16, 1999, the Company announced that it had reached final
agreement for the acquisition of Storehouse, Inc. ("Storehouse"), of
Atlanta, Georgia, a 43 store chain of retail furniture stores. The
acquisition was completed effective August 1, 1999. The Company
utilized a $25 million unsecured revolving credit facility to fund the
approximately $11.7 million cash purchase price and retire $12.7
million in long-term debt of Storehouse, including $2.5 million
previously loaned by the Company in the form of a subordinated note.
The nine months ended August 29, 1999 include one month of activity
for Storehouse.
The $25 million unsecured revolving credit facility was executed in
July, 1999, and is fully payable on July 31, 2002. The agreement
requires quarterly interest payments at Libor plus a spread ranging
from .35% to 1.30%.
8
<PAGE>
The following unaudited pro forma information has been prepared by the
Company's management based upon historical financial statements of the
Company, Storehouse, and for 1998 periods, Mitchell Gold, and give
effect to the acquisitions as if they had occurred at the beginning of
the periods presented. This unaudited pro forma information may not be
indicative of the results that actually would have occurred if the
combinations had been in effect on the date indicated or which may be
obtained in the future.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
August 29, August 30, August 29, August 30,
1999 1998 1999 1998
---- ---- ---- ----
(unaudited) ($ in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Net shipments $80,773 $72,841 $237,915 $212,631
Net earnings $ 2,904 $ 1,195 $ 8,477 $ 4,760
Earnings per common share $ 0.24 $ 0.10 $ 0.69 $ 0.38
Earnings per common share
Assuming dilution $ 0.23 $ 0.10 $ 0.65 $ 0.37
</TABLE>
Note 7 - The Company's operations are classified into two business segments;
wholesale and retail home furnishings. Prior to the acquisition of
Storehouse at July 31, 1999, the Company reported its operations as
one segment, wholesale home furnishings.
The wholesale home furnishings segment is comprised of three operating
subsidiaries. Rowe Furniture, Inc. and The Mitchell Gold Company
manufacture and sell upholstered furniture to dealers. Upholstered
furniture includes sofas, loveseats, occasional chairs and sleep
sofas, covered with fabric or leather. The Wexford Collection, Inc.
manufactures and sells casegoods to dealers. Casegoods consist of
solid wood furniture such as beds, chests and dressers, dining sets
and related products.
The retail home furnishings segment is comprised of two operating
subsidiaries. Storehouse, Inc. and Home Elements, Inc. sell home
furnishings and accessories to customers through networks of company-
owned stores. These products consist of upholstered furniture
(primarily obtained from related companies), casegoods and home
accessories.
The other category is comprised of additional subsidiaries reviewed by
management including parent company expenses. In late 1998, the
Company created a parent company organization that moved the
investments in subsidiaries from Rowe Furniture, Inc. to the parent,
included in Other below.
<TABLE>
<CAPTION>
Wholesale Retail
Home Home
Furnishings Furnishings Inter-segment
Segment Segment Eliminations Other Consolidated
------- ------- ------------- ----- ------------
<S> <C> <C> <C> <C> <C>
1999
----
Revenue $180,350 $20,272 $ (6,527) $ - $194,095
Pre-tax net earnings(loss) 14,223 (948) (153) 1,322 14,444
Total assets 108,201 48,264 (90,887) 94,796 160,374
1998
----
Revenue $133,397 $ 9,661 $ (4,138) $ - $138,920
Pre-tax net earnings(loss) 11,525 (124) (67) 445 11,779
Total assets 107,193 3,943 (39,835) 8,105 79,406
</TABLE>
9
<PAGE>
THE ROWE COMPANIES AND WHOLLY-OWNED SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
UNAUDITED
- --------------------------------------------------------------------------------
Results of Operations:
- ---------------------
Nine Months Ended August 29, 1999 Compared to Nine Months Ended August 30, 1998.
Net shipments during the first nine months of 1999 increased by $55,175,000, or
39.7%, to $194,095,000 from $138,920,000 in 1998. Approximately $34,700,000 of
this increase results from the inclusion of nine months of Mitchell Gold
shipments in 1999 (see Note 5), while approximately $6,700,000 ($5.6 million net
of intercompany eliminations) results from the inclusion of Storehouse for one
month (see Note 6).
Gross profit during the first nine months of 1999 increased by $18,975,000, or
51.8%, to $55,626,000 from $36,651,000 in 1998. Gross profit as a percentage of
net shipments during the first nine months in 1999 increased to 28.7% from 26.4%
in 1998. Management believes that the percentage increase was due to the
inclusion of Storehouse for one month, improved product mix, manufacturing
efficiencies and higher volume. Management anticipates that the addition of
Storehouse will cause gross profit as a percentage of shipments to increase in
future periods.
Selling and administrative expenses during the first nine months of 1999
increased by $15,794,000, or 62.5%, to $41,056,000 from $25,262,000 in 1998.
Selling and administrative expenses as a percentage of net shipments during the
first nine months of 1999 increased to 21.2% from 18.2% in 1998. The increase
in selling and administrative expenses reflects the additional costs for
Mitchell Gold and Storehouse, expansion of the Home Elements program, and
additional salaries and benefits. The percentage increase in selling and
administrative expenses reflects the addition of Storehouse in 1999 and a gain
on the sale of a previously written off Levitz Furniture receivable, recorded in
the second quarter of 1998.
Operating income was $14,570,000 versus $11,389,000 in the prior year. The
increase related to higher shipments and gross profit percentage, partially
offset by increased selling and administrative expenses, net of the Levitz
recovery in 1998.
Net interest expense during the first nine months of 1999 increased by
$1,419,000 to $1,803,000 from $384,000 in 1998. The increase in net interest
expense resulted from additional short-term borrowings associated with working-
capital requirements, borrowings used to fund the acquisitions of Mitchell Gold
and Storehouse, and the assumption of the Industrial Revenue Bond used to
finance the construction of Mitchell Gold's new production facility.
Other income during the first nine months of 1999 increased by $903,000 to
$1,677,000 from $774,000 in 1998. Commission income of approximately $720,000
on consignment sales at Storehouse are reflected here in 1999, while 1998
results were reduced by a write-down of investment property of approximately
$288,000, pre-tax, to reflect estimated value. Management is revising contracts
with consignment vendors, which will result in recording these sales with net
shipments in future periods.
Net earnings during the first nine months of 1999 increased by $1,798,000 to
$9,057,000 from $7,259,000 in 1998, reflecting higher net shipments and lower
cost of shipments (as a percent to shipments), partially offset by higher
selling and administrative expenses and interest on borrowed funds. Included in
net earnings for 1998 was approximately $0.02 per share after tax from a gain on
sale of a Levitz Furniture receivable, partially offset by an increase in
reserve for bad debts, write-down of investment property and other unusual
charges.
10
<PAGE>
THE ROWE COMPANIES AND WHOLLY-OWNED SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
UNAUDITED
- --------------------------------------------------------------------------------
Liquidity and Source of Capital:
- -------------------------------
The Company utilizes internally generated funds and bank or other financing to
fund its operating and capital requirements. The Company has minimized its
working capital requirements by improving operating efficiencies in various
aspects of its business, including inventory and receivable management and
product distribution.
Net cash provided by operating activities was $7,960,000 during the first nine
months of 1999 versus $87,000 provided in 1998. Fluctuations in net cash
provided by operating activities are primarily the result of changes in
operating income and changes in working capital accounts, including reduction of
current liabilities for Wexford during 1998.
Capital expenditures were $6,147,000 during the first nine months of 1999 and
$4,485,000 in 1998. These expenditures were incurred primarily in connection
with maintaining the Company's production capacity, final construction costs at
Mitchell Gold's new facility, installation of a new mainframe system for
expansion, Year 2000 compliance and to improve efficiency, and certain other
additions of equipment and systems. The Company also utilized $11,684,000 to
acquire Storehouse in 1999, while in 1998, a $2.5 million investment was made in
Storehouse.
Net cash provided by financing activities during the first nine months of 1999
was $12,085,000 versus $6,533,000 provided by financing activities in 1998. In
1999, these activities related primarily to a long-term borrowing used to fund
the acquisition price for Storehouse and to pay off Storehouse's higher cost
long-term debt, offset by cash dividends and the purchase of treasury stock. In
1998, these activities related primarily to the increase in short-term
borrowings for the acquisition of Wexford and its working capital needs,
partially offset by cash dividends and the purchase of treasury stock.
The Company has unsecured short-term bank lines of credit totaling $31 million.
The interest rates on these lines of credit do not exceed the prime rate. The
amount outstanding under the lines of credit as of August 29,1999 was
approximately $2.4 million.
In May 1999, the Company broke ground on the construction of a new manufacturing
facility and administrative offices in Montgomery County, Virginia, to replace
its Salem, Virginia, upholstery facility. This project will be funded by off-
balance sheet financing. Costs to complete this project by the middle of 2000
are estimated at approximately $25 million.
Management believes that net cash provided by operating activities and available
bank lines of credit and other bank financing options will be sufficient to fund
anticipated growth and to meet the Company's anticipated capital requirements
and operating needs through 1999.
11
<PAGE>
THE ROWE COMPANIES AND WHOLLY-OWNED SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
UNAUDITED
- --------------------------------------------------------------------------------
Year 2000:
- ----------
The Year 2000 issue is the result of computer systems that used two digits
rather than four to define the applicable year, which may prevent such systems
from accurately processing dates ending in the year 2000 and after. This could
result in system failures or in miscalculations causing disruption of
operations, including, but not limited to, an inability to process transactions,
to send and receive electronic data, or to engage in routine business activities
and operations.
In 1997, the Company established a Year 2000 task force to develop and implement
a Year 2000 compliance plan for Rowe Furniture, Inc., and Home Elements, Inc.
Year 2000 task forces at newly acquired subsidiaries were incorporated into this
plan upon acquisition. The following comments apply to all subsidiaries except
Storehouse, Inc.
The Company has completed an assessment of the impact on its operations and
compiled an inventory of computer programs and equipment potentially subject to
change. New software has been installed in connection with a more fully
integrated system that has addressed a portion of the Company's Year 2000
issues. The Company has replaced and/or modified core computer system programs
and equipment. Management believes that it is essentially complete in its Year
2000 compliance.
In addition, the Company has communicated with its business partners to
determine the extent of their efforts to remedy their Year 2000 issues. The
Company has conducted follow-up surveys with those business partners who did not
have a positive response from initial communications.
Management believes at this time that costs associated with replacing these
systems and equipment have not had a material adverse effect on the Company. In
1998, expenses were approximately $150,000 with additional expenditures of
$450,000 in 1999, excluding the replacement of integrated and core systems.
Although management expects internal systems are Year 2000 compliant as
described above, contingency plans have been developed to address any areas that
fail to achieve Year 2000 compliance through the above methods.
At Storehouse, Inc., Year 2000 issues continue to be addressed. Storehouse has
completed an assessment of the impact on its operations, including
communications with its business partners, and compiled inventories of computer
programs and equipment subject to change. New software has been installed for
several applications, with additional hardware and software installations and
upgrades planned for the fourth quarter of fiscal year 1999. Testing to verify
Year 2000 compliance will be required after installation for several of these
applications. While schedules have been established to accomplish all identified
installations, upgrades and testing before the change of the century, there is
no guarantee that all scheduled work will be completed on time, or that
additional issues will not materialize subsequent to such installations,
upgrades and testing. Storehouse has incurred approximately $130,000 on Year
2000 compliance, with additional expenditures of up to $100,000 expected.
Although resources have been and continue to be directed towards reducing
interruptions caused by the Year 2000 issue, there is no guarantee that the
Company's systems, or the internal systems of the Company's business partners,
have ultimately been corrected and that there would be no material adverse
impact on the Company's operations.
12
<PAGE>
THE ROWE COMPANIES AND WHOLLY-OWNED SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
UNAUDITED
- --------------------------------------------------------------------------------
Interest Risk Disclosures:
- --------------------------
Because the Company's obligations under its term loans, revolving loans, lines
of credit and Industrial Revenue Bonds bear interest at variable rates, the
Company is sensitive to changes in prevailing interest rates. A 10% fluctuation
in market interest rates would not have a material impact on earnings during the
1999 fiscal year.
Forward Looking Statements:
Certain portions of this report, particularly the Notes to the Consolidated
Financial Statements and the Management's Discussion and Analysis of Financial
Condition and Results of Operations in Part I of this report, contain forward
looking statements. These statements can be identified by the use of future
tense or dates or terms such as "believe," "expect," "anticipate," or "plan."
Important factors could cause actual results to differ materially from those
anticipated by some of the statements made in this report. Some of the factors
include, among other things, changes from anticipated levels of sales, whether
due to future national or regional economic and competitive conditions, customer
acceptance of existing and new products, or otherwise; pending or future
litigation; pricing pressures due to excess capacity; raw material cost
increases; transportation cost increases; the inability of a major customer to
meet its obligations; loss of significant customers in connection with a merger
or acquisition, bankruptcy or otherwise; actions of current or new competitors;
increased advertising costs associated with promotional efforts; change of tax
rates; change of interest rates; future business decisions and other
uncertainties, all of which are difficult to predict and many of which are
beyond the control of the Company.
13
<PAGE>
PART II - OTHER INFORMATION
- --------------------------------------------------------------------------------
Item 1. Legal Proceedings.
- --------------------------
None
Item 2. Changes in Securities.
- ------------------------------
None
Item 3. Defaults Upon Senior Securities.
- ----------------------------------------
None
Item 4. Submission of Matters to a Vote of Security Holders.
- ------------------------------------------------------------
None
Item 5. Other Information.
- --------------------------
None
Item 6. Exhibits and Reports on Form 8-K.
- -----------------------------------------
a. Exhibits: Exhibit 27 - Financial Data Schedule for the third quarter of
1999.
b. Reports on Form 8-K: A report on Form 8-K was filed on August 13, 1999 to
announce that The Rowe Companies (the "Company") completed its acquisition of
Storehouse, Inc. ("Storehouse") pursuant to the Stock Purchase Agreement, dated
August 25, 1998, among the Company and the shareholders of Storehouse (the
"Agreement"). The acquisition was effected through the purchase by the Company
of all the issued and outstanding shares of the capital stock of Storehouse from
the shareholders in exchange for a purchase price of $11.7 million. In
addition, on August 2, 1999, the Company refinanced $12.7 million in Storehouse
long-term debt. The Agreement was included as an exhibit to the Company's
Current Report on Form 8-K filed on August 26, 1998. The Company funded the
transaction through the utilization of a $25 million revolving credit facility
from Bank of America. Storehouse, a retail furniture store chain, is now
operated as a wholly-owned subsidiary of the Company.
14
<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.
THE ROWE COMPANIES
------------------
Registrant
October 13, 1999 /s/ Arthur H. Dunkin
Date: ___________________ --------------------------------
Arthur H. Dunkin
Secretary-Treasurer
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> NOV-28-1999
<PERIOD-END> AUG-29-1999
<CASH> 4,713
<SECURITIES> 0
<RECEIVABLES> 35,170
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<PP&E> 35,579
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0
0
<COMMON> 15,009
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<TOTAL-REVENUES> 194,095
<CGS> 138,469
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<INCOME-TAX> 5,387
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<CHANGES> 0
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<EPS-BASIC> 0.74
<EPS-DILUTED> 0.70
</TABLE>
