The Rowe Companies Reports Net Loss From Continuing Operations

Furniture World Magazine

The Rowe Companies (AMEX:ROW) , a leading furniture manufacturer and home furnishings retailer, today reported operating results for its fourth fiscal quarter and fiscal year ended November 27, 2005. Net shipments for the quarter increased 1.9% to $74.5 million, compared to $73.1 million for the comparable prior year period. Gross profit declined to 31.7% of net shipments, compared to 34.4% of net shipments for the fourth quarter of 2004, as manufacturing productivity continued below historical levels and the Company experienced price increases in a number of raw materials. Selling and administrative expenses for the quarter were $28.5 million, compared to $25.7 million in the prior year quarter, principally due to higher retail selling expenses associated with increased sales volume and higher store occupancy expense from the addition of ten net Storehouse locations opened since August 2004. Interest and other income, net, increased from net expense of $275,000 in 2004 to $919,000 in 2005, due to higher interest rates on higher outstanding loan balances and reduced rental income in 2005. Net loss from continuing operations was $(2.7) million or $(0.21) per share, compared to a net loss in the prior year period of $(522,000) or $(0.04) per share. Net loss for the quarter was $(2.7) million or $(0.21) per share, compared to a net loss of $(401,000) or $(0.03) per share in the same period of the prior year. For the fiscal year ended November 27, 2005, net shipments were $299.4 million, an increase of $4.2 million or 1.4% from the prior year amount of $295.2 million. Gross profit declined to 31.4% of net shipments, from 35.1% for the 2004 comparable period, as a result of reduced manufacturing productivity, higher raw material costs and unfavorable transportation costs. Selling and administrative expenses increased from $100.4 million in 2004 to $109.1 million in 2005, due to higher expenses in the retail segment including selling and store occupancy costs associated with higher sales volume and eight net new stores opened in 2005. Interest and other income, net, increased slightly from net expense of $1,873,000 in 2004 to $1,888,000 in 2005. Net loss from continuing operations declined to $(9.8) million, or $(0.74) per diluted share, in 2005 compared to net earnings of $816,000, or $0.06 per diluted share in 2004. Net loss, including gains on the sale of investment property recorded in the first and third quarters, was $(5.3) million or $(0.40) per diluted share in 2005 compared to net earnings of $890,000, or $0.07 per diluted share in 2004. "We have taken steps intended to improve our manufacturing operation's results, including the reassignment of staff and the hiring of outside experts to assist us in making the necessary changes," stated Gerald M. Birnbach, Chairman and President. "We plan to cut costs through an overall reduction in staff and through other initiatives currently under consideration. We also want to thank GE Commercial Finance for their support in completing our debt restructuring." 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 69 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.