The Rowe Companies Announces Third Quarter Operating Results
MCLEAN, Va., Sept. 22 /PRNewswire-FirstCall/ -- The Rowe Companies (AMEX:ROW),
a leading furniture manufacturer and home furnishings retailer, today reported
operating results for the third quarter ended August 29, 2004.
Led by strong sales in its Storehouse retail unit, net shipments for the third
fiscal quarter increased $6,433,000 or 9.2% to $76,585,000 from the prior year
quarter's net shipments of $70,152,000. Gross margin increased to $26,991,000
from $25,451,000, but decreased as a percentage of sales from 36.3% to 35.2%.
The decline in gross profit percentage is largely attributable to reduced
manufacturing productivity exacerbated by higher workers' compensation and
health care costs. Sales and administrative expenses for the quarter were
$25,789,000, compared to $24,431,000 in the prior year quarter, principally due
to higher retail selling expenses associated with higher volume and increased
store occupancy expense from new store growth. Net earnings from continuing
operations for the third quarter totaled $489,000 or $0.04 per diluted share
compared to a loss in the prior year period of $(107,000) or $(0.01) per
diluted share.
During the third quarter, the Company made the decision to dispose of certain
investment real estate property, however there are no pending contracts for
sale. Therefore, the results of operations of this property, consisting of
rental revenue less operating costs, has been reclassified to discontinued
operations. Net earnings from discontinued operations were $18,000 for the
current year quarter, compared to a loss of $(70,000) in the same quarter last
year.
For the nine months ended August 31, 2004, sales increased 10.6% overall to
$223.3 million from $201.9 million in the prior year, led by a 16.8% increase
in retail sales. Gross profit improved to $79.5 million from the comparable
prior year period amount of $71.8 million, while remaining essentially
unchanged at 35.6% in the current year compared to 35.5% in the prior year
period. Selling and administrative expenses increased from $71.4 million in
the first nine months of 2003 to $75.8 million in 2004, principally due to
higher retail selling expenses and store occupancy costs associated with higher
volume. Net earnings from continuing operations improved to $1,406,000, or
$0.10 per diluted share, in 2004 compared to a loss of $(1,618,000), or $(0.12)
per diluted share in 2003. Net earnings improved to $1,267,000, or $0.09 per
diluted share, in 2004 from $(86,000), or $(0.01) per diluted share in the
comparable 2003 period.
The 2003 results included discontinued operations and gain on the sale of
Mitchell Gold in April, 2003.
"We are pleased with our ongoing revenue strength," said Gerald M. Birnbach,
Chairman and President. "Same store sales growth at our Storehouse unit for
the quarter was 9%. Total sales increased 13.6% in our retail unit, and 5.1%
in our manufacturing unit. However, Rowe Furniture has experienced a decline
in manufacturing productivity that hurt our profit performance this quarter.
Causes of this decline include continued involvement of operating management in
our ERP suite implementation, the learning curve as we convert to lean
manufacturing, increased health care and workers' compensation costs, as well
as some effect from fabric inventory below optimum level. While we expect
near-term improvement in some of those factors, some of these will likely
extend into next year." 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 60 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.
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 AND NINE MONTHS ENDED AUGUST 29, 2004 AND AUGUST 31, 2003
UNAUDITED Three Months Ended Nine Months Ended
August 29, August 31, August 29, August 31,
2004 2003 2004 2003
(in thousands - except per share amounts) Net shipments $ 76,585 $ 70,152 $ 223,254 $ 201,930 Cost of shipments 49,594 44,701 143,745 130,173 Gross profit 26,991 25,451 79,509 71,757 Selling and administrative
expenses 25,789 24,431 75,841 71,385
Retail restructuring and
other charges - - - 125 Operating income 1,202 1,020 3,668 247 Interest expense (876) (1,010) (2,537) (3,250)
Other income 416 91 1,088 673 Earnings (loss) from
continuing operations
before taxes 742 101 2,219 (2,330) Tax expense (benefit) 253 208 813 (712) Net earnings (loss) from
continuing operations 489 (107) 1,406 (1,618) Earnings (loss) from
discontinued operations,
net of tax expense
(benefit) of $11,
$(44), $(86)
and $655, respectively 18 (70) (139) 1,070
Gain on sale of Mitchell
Gold, net of tax benefit
of $1,473 - - - 462 Net earnings (loss) $ 507 $ (177) $ 1,267 $ (86) Net earnings (loss) from
continuing operations per
common share $ 0.04 $ (0.01) $ 0.11 $ (0.12) Net earnings (loss) per
common share $ 0.04 $ (0.01) $ 0.10 $ (0.01) Weighted average common
shares 13,201 13,168 13,188 13,166 Net earnings (loss) from
continuing operations
per common share
assuming dilution $ 0.04 $ (0.01) $ 0.10 $ (0.12) Net earnings (loss) per
common share assuming
dilution $ 0.04 $ (0.01) $ 0.09 $ (0.01) Weighted average common
shares and equivalents 13,591 13,168 13,531 13,166 THE ROWE COMPANIES AND WHOLLY-OWNED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS August 29, November 30,
2004 2003
(Unaudited) (Audited)
($ in thousands)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 2,239 $ 3,708
Restricted cash 4,964 4,034
Accounts receivable, net 20,421 19,529
Notes receivable - 100
Inventories 34,240 32,387
Deferred income tax asset 567 880
Prepaid expenses and other 2,850 2,711
Total current assets 65,281 63,349 PROPERTY AND EQUIPMENT, net 39,318 41,624
GOODWILL, net 14,224 14,224
INVESTMENT PROPERTY HELD FOR SALE, net 810 -
OTHER NONCURRENT ASSETS 10,380 10,871 $ 130,013 $ 130,068 LIABILITIES
CURRENT LIABILITIES
Current maturities of long-term debt 1,964 3,314
Accounts payable and accrued liabilities 23,549 21,683
Income taxes payable 744 1,061
Customer deposits 12,948 13,512
Total current liabilities 39,205 39,570 LONG-TERM DEBT 29,624 34,312
DEBT ASSOCIATED WITH INVESTMENT
PROPERTY HELD FOR SALE 3,198 -
DEFERRED LIABILITIES 4,211 4,269 Total liabilities 76,238 78,151 Total stockholders' equity 53,775 51,917
$ 130,013 $ 130,068
DATASOURCE: The 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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