ROW Rowe

The Rowe Companies Announces Fourth Quarter and Fiscal 2004 Operating Results MCLEAN, Va., Jan. 25 /PRNewswire-FirstCall/ -- The Rowe Companies (AMEX:ROW), a leading furniture manufacturer and home furnishings retailer, today reported operating results for its fourth quarter and fiscal year ended November 28, 2004. Net shipments for the fourth fiscal quarter totaled $73,072,000 compared to the prior year quarter's net shipments of $77,321,000. Gross margin was $25,173,000, which was below the prior year quarter's result of $29,246,000. This decline in gross margin was largely attributable to an increase in manufacturing costs as a percentage of net shipments as process changes associated with the implementation of an Enterprise Resource Planning ("ERP") system reduced productivity. Sales and administrative expenses for the quarter were $25,443,000, compared to $23,995,000 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. Interest expense for the quarter declined to $427,000 from $830,000 for the prior year period, principally as a result of the expiration of an interest rate swap agreement. Net loss from continuing operations for the fourth quarter totaled $(354,000) or $(.03) per diluted share compared to a profit in the prior year period of $2,586,000 or $.20 per diluted share. During the year, the Company made the decision to dispose of two real estate investment properties. Therefore, the results of operations of these properties, consisting of rental revenue less operating costs and related interest expense, have been reclassified to discontinued operations. Net earnings from discontinued operations were $119,000 for the current year quarter, compared to $46,000 in the same quarter last year. Net loss for the quarter including the results of discontinued items was $(235,000) or $(.02) per share compared to net earnings in the prior year of $2,632,000 or $.20 per share For the full year ended November 28, 2004, net shipments increased 6% overall to $295,203,000 from $278,373,000 in the prior year, led by a 14.3% increase in retail sales. Gross margin improved to $103,559,000 from the prior year amount of $100,125,000. Selling and administrative expenses increased from $94,501,000 in 2003 to $100,161,000 in 2004, principally due to higher retail selling expenses and store occupancy costs associated with higher volume and new store openings. Interest expense for 2004 declined to $2,611,000 from $3,723,000 for 2003 also as a result of the expiration of an interest rate swap agreement as well as lower average outstanding loan balances. Net earnings from continuing operations were $960,000, or $0.07 per diluted share, in 2004 compared to $957,000 or $.07 per diluted share in 2003. Net earnings were $1,032,000, or $0.08 per diluted share, in 2004 compared to $2,546,000 or $0.19 per diluted share in the comparable 2003 period. Net earnings for 2004 included the results of investment real estate held for sale while the 2003 results include gains of $43,000 from investment real estate held for sale, as well as the $1,084,000 gain from discontinued operations and the $462,000 gain on the sale of The Mitchell Gold Co. in April, 2003. Gerald M. Birnbach, Chairman and President stated, "Demand for our products -- both in Rowe Furniture and at Storehouse -- met my expectations for the Company. Indeed, at the end of November we had a manufacturing backlog of $17.7 million, up from $12.0 million in 2003, and Storehouse had a 5% same store sales increase for the quarter. However, Rowe Furniture continued to experience a decline in manufacturing productivity that restricted our ability to produce at full capacity, and thereby hurt our profit performance. The principal cause of this decline was changes in manufacturing processes associated with our new ERP implementation." "Our Storehouse subsidiary continued the strong turnaround performance from previous quarters, completing the year with record revenue in the fourth quarter and for the full year," Mr. Birnbach added. Subsequent to the end of the year, the Company completed the sale of an investment property previously included in discontinued operations. The Company will record a gain on sale of $2.6 million, or $.20 per share in the first fiscal quarter of 2005. 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 61 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 fourth quarter and full year performance Wednesday, January 26th at 11:00 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 AND TWELVE MONTHS ENDED NOVEMBER 28, 2004 AND NOVEMBER 30, 2003 UNAUDITED Three Months Ended Twelve Months Ended November November November November 28, 30, 28, 30, 2004 2003 2004 2003 (in thousands -- except per share amounts) Net shipments $73,072 $77,321 $295,203 $278,373 Cost of shipments 47,899 48,075 191,644 178,248 Gross profit 25,173 29,246 103,559 100,125 Selling and administrative expenses 25,443 23,995 100,161 94,501 Retail restructuring and other charges - 100 - 225 Operating income (loss) (270) 5,151 3,398 5,399 Interest expense (427) (830) (2,611) (3,723) Other income 156 61 742 358 Earnings (loss) from continuing operations before taxes (541) 4,382 1,529 2,034 Tax expense (benefit) (187) 1,796 569 1,077 Net earnings (loss) from continuing operations (354) 2,586 960 957 Earnings from discontinued operations, net of tax expense of $41, $36, $45 and $691, respectively 119 46 72 1,127 Gain on sale of Mitchell Gold, net of tax benefit of $1,473 - - - 462 Net earnings (loss) $(235) $2,632 $1,032 $2,546 Net earnings (loss) from continuing operations per common share $(0.03) $0.20 $0.07 $0.07 Net earnings (loss) per common share $(0.02) $0.20 $0.08 $0.19 Weighted average common shares 13,228 13,167 13,198 13,167 Net earnings (loss) from continuing operations per common share assuming dilution $(0.03) $0.20 $0.07 $0.07 Net earnings (loss) per common share assuming dilution $(0.02) $0.20 $0.08 $0.19 Weighted average common shares and equivalents 13,228 13,232 13,546 13,205 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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