ROW Rowe

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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