The Rowe Companies Announces First Quarter 2005 Operating Results
MCLEAN, Va., March 30 /PRNewswire-FirstCall/ -- The Rowe Companies (AMEX:ROW),
a leading furniture manufacturer and home furnishings retailer, today reported
operating results for its first quarter ended February 27, 2005.
As announced on March 28, 2005, the Company has revised its accounting for
leases as a result of recent views expressed by the Office of the Chief
Accountant of the Securities and Exchange Commission (SEC). All prior period
amounts have been restated to reflect that accounting treatment.
Net shipments for the first fiscal quarter totaled $65,705,000 compared to the
prior year quarter's net shipments of $70,422,000. Shipments were adversely
affected as changes in manufacturing processes associated with the
implementation of an Enterprise Resource Planning ("ERP") system reduced
production below the level required to meet demand. Gross margin was
$20,465,000, which was below the prior year quarter's result of $24,778,000. This decline in gross margin was attributable to an increase in manufacturing
costs as a percentage of net shipments due to lower fixed cost absorption at
lower production and shipping levels and to lower manufacturing productivity. Included in cost of shipments was a one-time, pretax benefit of $460,000 from
settlement of litigation. Cost of shipments in the previous year period
included $847,000 of accelerated depreciation expense associated with the
elimination of legacy software replaced by the ERP system. Sales and
administrative expenses for the quarter were $25,322,000, compared to
$23,858,000 in the prior year quarter, principally due to higher retail
warehouse, delivery and occupancy expenses associated with new store growth and
increased selling expense in manufacturing operations. Interest expense for the
quarter declined to $522,000 from $711,000 for the prior year period,
principally as a result of the expiration of an interest rate swap agreement. Other income of $786,000 in the current quarter also included a benefit from
the settlement of litigation of $680,000. Net loss from continuing operations
for the first quarter totaled $(2,903,000) or $(0.22) per share compared to a
profit in the prior year period of $180,000 or $0.01 per share.
As announced earlier, during the quarter the Company completed the sale of one
of two investment properties previously included in discontinued operations.
The Company recorded an after-tax gain on disposition of $2,683,000 or $0.20
per share.
Net loss for the quarter including the results of discontinued operations and
the gain on disposition of investment property was $(149,000) or $(0.01) per
share compared to net earnings in the prior year of $72,000 or $0.01 per share.
Gerald M. Birnbach, Chairman and President stated, "While I am disappointed in
our financial performance this quarter, we did make gradual progress towards
stabilizing our manufacturing operations. We continued to add to our
manufacturing backlog, which reached record levels during the quarter. Our
retail open orders also increased during the quarter. Our plans are to reduce
these backlogs in an orderly way over the next two quarters." The Rowe Companies operates two subsidiaries in the home furnishings industry:
Rowe Furniture, Inc., a major manufacturer of quality upholstered furniture
serving the middle and upper middle market throughout the U.S.; and Storehouse,
Inc., a multi-channel, lifestyle home furnishings business including 64 retail
home furnishings stores. Storehouse makes good design accessible by selling an
edited assortment of casual, contemporary home furnishings through its stores
located in the Southeast, Southwest and Mid- Atlantic markets, its catalog and
over the Internet.
The Rowe Companies will conduct a conference call and webcast to discuss first
quarter performance Thursday, March 31st at 10:00 a.m. EST. Further
information on this call can be obtained on our website at
http://www.therowecompanies.com/.
Statements in this press release concerning Rowe's business outlook or future
economic performance, anticipated profitability, revenues, expenses or other
financial items; together with other statements that are not historical facts,
are "forward-looking statements" as that term is defined under Federal
Securities Laws. "Forward-looking statements" are subject to risks,
uncertainties and other factors which could cause actual results to differ
materially from those stated in such statements. Such risks, uncertainties and
factors include, but are not limited to, industry cyclicality, fluctuations in
customer demand and order patterns, the seasonal nature of the business,
changes in pricing, and general economic conditions, as well as other risks
detailed in Rowe's filings with the Securities and Exchange Commission.
THE ROWE COMPANIES AND WHOLLY-OWNED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED FEBRUARY 27, 2005 AND FEBRUARY 29, 2004
UNAUDITED Three Months Ended
February 27, February 29,
2005 2004
(in thousands, except per share amounts)
Restated Net shipments $65,705 $70,422
Cost of shipments 45,240 45,644
Gross profit 20,465 24,778
Selling and administrative expenses 25,322 23,858
Operating income (loss) (4,857) 920
Interest expense (522) (711)
Other income, net 786 169
Earnings (loss) from continuing
operations before taxes (4,593) 378
Tax expense (benefit) (1,690) 198 Net earnings (loss) from continuing
operations (2,903) 180 Discontinued operations:
Loss on contingencies associated with
operations discontinued in prior
years, net of tax benefit of $65 - (105)
Gain (loss) from discontinued real
estate operations, net of tax
expense (benefit) of $44 and $(2),
respectively 71 (3)
Gain on disposal of Sylmar
investment property, net of tax
expense of $1,680 2,683 - Net earnings (loss) $(149) $72 Net earnings (loss) from continuing
operations per common share $(0.22) $0.01 Net earnings (loss) per common
share $(0.01) $0.01 Weighted average common shares 13,274 13,176 Net earnings (loss) from continuing
operations per common share
assuming dilution $(0.22) $0.01 Net earnings (loss) per common
share assuming dilution $(0.01) $0.01 Weighted average common shares
and equivalents 13,274 13,476
DATASOURCE: Rowe Companies CONTACT: Gene S. Morphis, Chief Financial Officer of The Rowe Companies, +1-703-847-8670 Web site: http://www.therowecompanies.com/
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