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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-K



ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934



For the Fiscal Year Ended December 1, 2002



Commission File Number 1-10226



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THE ROWE COMPANIES

(Exact name of registrant as specified in its charter)



|Nevada                                                         |  | 54-0458563                             
|-------------------------------------------------------------- |  | ---------------------------------------
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification Number)



|1650 Tysons Boulevard, Suite 710, McLean, Virginia |  | 22102     
|-------------------------------------------------- |  | ----------
|(Address of principal executive offices)           |  | (Zip Code)



Registrants telephone number, including area code: (703) 847-8670



Securities registered pursuant to Section 12(b) of the Act:



|Title of Each Class           |  | Name of Each Exchange on which Registered
|----------------------------- |  | -----------------------------------------
|Common Stock, $1.00 par value |  | New York Stock Exchange                  



Securities registered pursuant to Section 12(g) of the Act: None



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Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.  YES  x  NO ̈.



Indicate by check mark if disclosure of
delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. ̈



Indicate by check mark whether Registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).
YES ̈NO  x.



The aggregate market value of the voting stock held by
nonaffiliates of the registrant as of June 2, 2002 (the exclusion from such amount of the market value of the shares owned by any person shall not be deemed to be an admission by the registrant that such person is an affiliate of the registrant) was
$29,816,956.



As of February 14, 2003, there were
issued and outstanding 13,165,206 shares of the registrants Common Stock.



DOCUMENTS INCORPORATED BY REFERENCE



|Document                                                                   |  | Where Incorporated
|-------------------------------------------------------------------------- |  | ------------------
|Portions of the Annual Report for the year ended December 1, 2002          |  | Parts I, II and IV
|Portions of the Annual Proxy Statement for the year ended December 1,
2002 |  | Part III          



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PART I



Item 1.Business.



General



The Rowe Companies (the Company) is a synergistic collection of manufacturing and retailing
companies in the home furnishings industry. Originally founded in 1946 as Rowe Furniture Corporation, the Company changed its name in March 1999 to more appropriately reflect the expanded scope of the Companys operations.



In January 1998, the Company created a new subsidiary, The
Wexford Collection, Inc., (Wexford), to acquire the assets and liabilities of J&M Designs, Ltd. In October 1998, the Company acquired The Mitchell Gold Co., (Mitchell Gold). In August 1999, the Company acquired
Storehouse, Inc., (Storehouse). These companies joined Rowe Furniture, Inc., (Rowe), our core upholstered furniture subsidiary, and Home Elements, Inc., (Home Elements), the Companys internally grown retail
furniture chain. On November 10, 2000, the Company announced its intention to discontinue operations at Wexford. The transaction was completed and all assets were sold in January 2001.



During 2002, the Company combined the operations of the Storehouse and Home Elements chains. The combined
entity operates under the Storehouse name. The merger is expected to result in reduced administrative costs, through the elimination of duplicate functions, advertising and delivery efficiencies and improved purchasing power with certain vendors.



The Company operates in two segments of the home
furnishings industry, the wholesale (manufacturing) home furnishings segment and the retail home furnishings segment. The wholesale home furnishings segment includes the design and manufacture of upholstered and leather furniture. Upholstered and
leather furniture includes sofas, loveseats and chairs, covered in fabric or leather. The retail home furnishings segment sells upholstered and leather furniture (primarily obtained from the wholesale segment), case goods, dining sets, rugs and
other home furnishing accessories through Company-owned stores located primarily throughout the mid-Atlantic, northeastern, southeastern, and southwestern United States. The information on pages 28 to 29 in the Annual Report to Stockholders for the
fiscal year ended December 1, 2002, is included in Exhibit 13 hereto and incorporated herein by reference.



The Company is incorporated under the laws of Nevada. Its principal executive offices are located at 1650 Tysons Boulevard, McLean,
Virginia 22102, and its telephone number is (703) 847-8670. The Companys Internet address is www.therowecompanies.com. Unless the context indicates otherwise, references herein to the Company include The Rowe Companies, its
predecessors, and its subsidiaries.



Executive Officers Who
Are Not Directors



Barry A. Birnbach has
been in the service of the Company since 1968. He has served as the Companys Vice President of Corporate Development since March 1999. Prior to becoming Vice President of Corporate Development, he was Vice President  Special Account
Sales at Rowe. He is the brother of Gerald M. Birnbach, the Companys President and Chairman of the Board.



Timothy J. Fortune has been in the service of the Company since 1997. He has served as the Companys Vice President of Human
Resources and Strategy since March 1999. Prior to joining the Company, Mr. Fortune was Human Resources Administrator of the Virginia Department of Transportation from 1993 until August 1997.



Gene S. Morphis has been in the service of the Company since
July 30, 2002. He has served as the Companys Secretary/Treasurer, CFO since joining the Company. Prior to joining the Company, Mr. Morphis was Chief Financial Officer of ClientLogic from April, 1999 to June of 2001 and Chief Financial Officer
of Modus Media International from April 1995 to April 1999.



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The Industry



As reported by the American Furniture
Manufacturers Association in December 2002, the following table sets forth estimated factory shipments for the domestic furniture industry in general, and the upholstered furniture segment in particular, during each of the four years ended December
31, 2002.



|                                |  | 1999          |      | 2000 |   | 2001 |  | 2002*
|------------------------------- |  | ------------- | ---- | ---- | - | ---- |  | -----
|                                |  | (in billions)
|Industry shipments              |  | $             | 25.0 |      | $ | 25.6 |  | $    
|Upholstered furniture shipments |  |               | 10.6 |      |   | 10.9 |  |      

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|* |  | Estimated
|- |  | ---------



The principal categories of furniture products include wood, upholstered and metal furniture products. Of these categories, wood is the
largest, representing approximately half of total industry sales, while upholstered furniture represents approximately 40% and metal and other products account for the balance. Within each category, furniture manufacturers generally focus on
particular price ranges and styles.



The
furniture industry historically has been cyclical, fluctuating with the general economy. Management believes that the industry is significantly influenced by consumer behavior and confidence, personal disposable income, demographics, housing
activity, interest rates, and credit availability. The upholstered segment of the furniture industry generally has followed the same trends as the rest of the furniture industry. There can be no assurance that an economic downturn would not have a
material adverse effect on the Company.



As can
be seen from the table above, a significant economic downturn was encountered in 2001. Starting early in the year, the Federal Reserve began cutting interest rates, with short-term rates finishing the year 475 basis points below where they started.
Incoming orders were significantly impacted, particularly in the first half of 2001, and simultaneously, Rowe ceased doing business with two major customers, one of whom filed for bankruptcy that summer. In response, production capacity was reduced,
followed by reduced workweeks for the remaining production employees as the summer shutdown approached. Just as conditions appeared to be improving in the late summer of 2001, the events of September 11thunfolded, at best substantially delaying a return to normal business conditions.



However, the need to withstand the weak conditions of 2001 generated some positive results in 2002. Efforts
to improve production efficiency and reduce service costs began to produce positive results. Significant improvements in service costs, overhead and labor efficiencies made substantial contributions to profit margins during 2002. Successful product
introductions also contributed to improved results with higher volumes of business.



While we believe that these events have positioned the Company well to benefit from improved business conditions, it is not yet clear that overall business conditions are truly improving. As such, the
Company continues to strive to identify opportunities to capture market share at good margins, and will continue to be vigilant in monitoring market conditions and quickly take steps as conditions require.



Wholesale Home Furnishings Segment



Product Lines



The wholesale home furnishings segments products
encompass a full line of upholstered furniture including sofas, loveseats, occasional and dining chairs, beds, ottomans, recliners and sleep sofas, covered in



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fabric or leather. The wholesale segments products are available in over 750 different fabrics. Styles offered include traditional,
contemporary and transitional designs.



The
wholesale segments product strategy is to provide a wide choice of furniture styles, fabrics and leathers while providing high quality at competitive prices. The wholesale segment continually reviews and evaluates its designs, and primarily on
a semi-annual basis, adds and discontinues designs as it deems appropriate. The wholesale segment identifies trends in styles, colors and patterns through independent research, contacts with the wholesale segments customers and the occasional
use of independent designers. Management also solicits opinions from its customers and manufacturing and marketing employees prior to final design selection.



Marketing and Sales



The wholesale segment has developed a broad and diverse national customer base. The wholesale segment sells its manufactured products
primarily through commissioned sales personnel who are employees of the wholesale segment, dedicated to marketing the wholesale segments products exclusively. Management believes that this arrangement gives the wholesale segment a competitive
advantage over many of its competitors, which sell their products through independent sales representatives who represent more than one manufacturer. The wholesale segments products are sold to over 1,100 national, regional and local furniture
retailers, including Jordans Furniture, Crate & Barrel, Pottery Barn, Restoration Hardware and the Companys wholly-owned subsidiary, Storehouse.



While the wholesale segment sells its products throughout the United States, management believes that there
are opportunities for greater penetration in the regions where the wholesale segments products are not widely distributed. The wholesale segment has targeted key retailers in these markets as opportunities for growth.



The general marketing practice in the furniture industry is to
exhibit products at international and regional furniture markets. The wholesale segment displays its product lines and introduces new products in April and October of each year at an eight-day furniture market held in High Point, North Carolina. The
wholesale segment maintains two showrooms totaling 67,400 square feet at the High Point market. In addition, the wholesale segment has developed plans to increase sales in foreign markets, primarily in North America and Europe. Approximately 3.3% of
2002 segment sales were to customers located outside of the United States.



Retail Distribution



Management believes there are ample opportunities to expand the wholesale segments retail distribution network. The wholesale segment strives to maintain strong relationships with, and increase sales to its existing
retailers. It also attempts to increase sales by adding new retailers, particularly in geographic regions where its products are not widely distributed, such as the Southwest and the West. When adding retailers, the wholesale segment targets what it
believes to be financially sound retailers committed to progressive marketing approaches and the desire to carry a broad selection within the wholesale segments product line.



Key Customers.    The wholesale segment sells its products to over 1,100 accounts
with normal credit terms being net 30 days. Shipments to the wholesale segments top three customers as a percentage of net shipments were 15% in 2002, 16% in 2001 and 15% in 2000. Shipments to the wholesale segments top ten customers as
a percent of net shipments amounted to 25% in 2002, 26% in 2001 and 28% in 2000. Combined shipments to the Companys retail segment were $24,876,000 in 2002, $23,775,000 in 2001 and $25,958,000 in 2000.



Manufacturing and Distribution



The wholesale segment manufactures its products in six
production facilities, of which five are owned and one is leased. Two facilities manufacture upholstered furniture; one facility manufactures upholstered and leather



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furniture and one facility is used for frame storage and assembly. The remaining two facilities manufacture upholstered frames and wood
components in addition to kiln-drying lumber for outside customers. Total manufacturing space is approximately 1.4 million square feet.



Manufacturing Process.    The wholesale segment primarily utilizes a vertically integrated manufacturing
process which includes kiln-drying of hardwood, wood milling, frame construction, fabric and leather cutting, sewing, foam cutting and filling, upholstery and final assembly of the upholstered product. Rowe utilizes computer-aided design patterns
and CNC Routers to manufacture frames for upholstered furniture and both Rowe and Mitchell Gold utilize specialized machines in the fabric and leather cutting process which facilitate design work, help maximize fabric yield, and increase the
efficiency of the assembly process. The completed pieces of upholstered furniture are then cleaned, inspected and packed for shipping.



Manufacturing Efficiencies.    Management has taken a number of steps to improve manufacturing efficiencies,
including implementation of computerized systems in its manufacturing facilities to more effectively manage its inventories, purchasing, labor and manufacturing processes; changes in its employee compensation program; and the establishment of new
internal systems to control overhead and material usage. Management believes through a combination of increased efficiencies, improved product quality, accelerated deliveries and stable pricing, the wholesale segment will maintain a competitive
advantage in marketing its products.



Product
Quality and Value.    The wholesale segment is committed to providing high quality, value oriented furniture at competitive prices. Management believes the wholesale segment adheres to strict quality standards in all aspects
of design and production, including material selection, frame design and construction, workmanship, and appearance. Product quality improvements in recent years include better undercarriage construction, the use of higher quality cushioning
materials and improved fabric matching. A lifetime, limited warranty applicable to most of the wholesale segments products covering the frames, springs, mechanisms and selected cushions reflects the wholesale segments commitment to high
quality. The wholesale segment has been successful in providing this quality while generally holding prices constant in recent years.



Dedication to Customer Service.    The wholesale segment is dedicated to providing a high level of service to
all its customers. The wholesale segment maintains close contact and communicates frequently with its customers in order to better identify, understand and meet their needs. Management believes the utilization of wholesale segment-employed sales
persons enables it to better communicate with its customers.



Important aspects of the wholesale segments service to certain customers include its automated order entry, bar coding and electronic data interchange systems. These systems give customers the ability to place orders directly,
and allows the wholesale segment to monitor the status of orders and track inventory and sales activity. The wholesale segment is in the process of enhancing the capabilities of these systems and increasing the number of customers who utilize them.
In addition, the wholesale segment has introduced point-of-sale computer systems into Storehouse stores and other dealer locations that allow retailers to display for consumers full-color pictures of various combinations of furniture styles and
fabric patterns. The wholesale segment has established regional repair service centers so that it can respond quickly to consumers needs.



Another special emphasis of the wholesale segments customer service is the prompt delivery of its products, a significant portion of
which are manufactured and shipped generally within 30 days of receipt of an order. The wholesale segments order entry, credit approval, manufacturing and shipping systems are all designed to provide prompt delivery to its customers.



Employee
Compensation.    At Rowe, employees are compensated primarily on hourly rates plus bonuses for productivity improvements and cost reductions on a facility-wide basis. Management believes that this program provides incentive
for employees to contribute to facility-wide efficiency, quality improvements and cost reductions.



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On a facility-wide basis, 2002 monthly incentive bonuses ranged from 0% to approximately 6% of hourly compensation. Salaried employees also
participate in this program; however, their bonuses cannot exceed the highest amount paid to an hourly employee. At Mitchell Gold, a piecework system is the primary method of compensation for production employees.



Computer Systems.    The wholesale
segment makes extensive use of a computerized management information system (MIS) in the manufacturing process. The MIS, which includes software developed by Rowe, helps manage order entry, purchasing, labor, inventories, receivables and product
shipments.



During 2003, Rowe anticipates
developing and implementing new ERP software and hardware to replace its MIS. The process is expected to take approximately eighteen months and cost approximately $5 million. The new software is expected to reduce future operating costs, provide
increased flexibility to respond to changing market conditions and allow for faster production cycles through the plant.



Manufacturing Capacity.    The wholesale segment primarily operates its manufacturing facilities on a
one-shift, five-or-six-day per week basis, although partial second shifts are used in some facilities. Management believes that the wholesale segment could expand production within existing facilities without substantial capital expenditures by
increasing personnel on first and second shifts. At this time, the Company has no plans to construct additional manufacturing facilities.



Backlog.    The wholesale segment generally manufactures its products in response to actual customer orders and
typically ships the finished product within 30 days following receipt of the related order, depending upon fabric availability. Accordingly, the level of backlog at any particular time is limited, and is not necessarily indicative of the level of
future shipments. The wholesale segments backlog of unshipped orders was approximately $19 million as of December 1, 2002, compared to $17 million as of December 2, 2001. The wholesale segment anticipates that 100% of the backlog as of
December 1, 2002 will be shipped in 2003.



Distribution.    Rowes products are primarily shipped to its customers through a dedicated carriage service with a nationally recognized truck leasing company. Under this agreement, Rowes
products are delivered in accordance with Rowes specifications on a modern fleet of over-the-road tractors and trailers that prominently display the Rowe Furniture name. Management believes that this agreement offers favorable terms, allows it
to meet its delivery deadlines and improves Rowes name recognition. This agreement was renewed in 1999 for an additional six years. West Coast shipments are provided by what management believes to be a favorable arrangement for carriage of
Rowes products utilizing third-party distribution services. Transportation services are a combination of contract carrier agreements and intermodal transportation/distribution operations. Mode selection is based on the volume of delivery into
a geographic area as well as the required level of delivery service. International shipments of upholstered furniture are primarily shipped in full containers utilizing third-party freight forwarders. Mitchell Gold primarily ships product via common
carriers utilizing either full or partial loads.



Raw Materials



The raw
materials used by the wholesale segment include fabrics, leather, lumber, plywood, assembled frames, polyurethane foam, metal components, mattresses and finishing materials. Other than lumber, fabric and leather, all raw materials used by the
wholesale segment are generally available on an as needed basis. The wholesale segment maintains what it believes to be an adequate supply of raw materials in inventory.



The wholesale segment currently obtains its raw materials from a limited number of suppliers, and in the case
of hardwood plywood, primarily from a single supplier. However, management does not believe the wholesale segment is dependent upon a single supplier for any of its materials, as substitute suppliers are available. Management believes that its
sources of raw materials are adequate. Management forms strong relationships with its suppliers and negotiates favorable prices for its raw materials.



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To improve
quality, maximize the opportunities to implement labor saving technology, hedge against the potential of rising wood costs and free up kiln capacity, Rowe has increased the substitution of hardwood plywood for hardwood in certain aspects of the
construction of its furniture frames. Because plywood construction is less labor-intensive, and in many respects more structurally sound than hardwood construction, this method has improved product quality while helping to reduce overall cost.



Retail Operations



Retail Home Furnishings Segment



The retail home furnishings segment operates under the
Storehouse brand name and consists of the combination of the Storehouse chain and the Home Elements chain (see below). The retail segment is the largest customer of the wholesale segment, and would be included in the top ten customer list if the
retail segment was an unaffiliated customer.



During 2002, the Company combined the operations of the Storehouse and Home Elements chains. The combined entity operates under the Storehouse name. During the second quarter of 2002, the Company recorded charges totaling $2.3
million to effect the combination. Such costs included charges to shut down two stores, sublease Home Elements administrative office space, terminate employees in duplicate positions, write-off certain assets without future value (such as Home
Elements store signage and their computer system), and transition the Home Elements stores to the Storehouse computer system. In the fourth quarter of 2002, the cost to sublease two stores and the administrative offices was adjusted upward to
reflect current sublease market conditions. For the year, total costs of $2.6 million, before taxes, were recorded in conjunction with the combination of the two entities. Other costs, totaling $1.1 million, were incurred for systems and signage to
convert Home Elements to Storehouse.



Benefits
expected from the merger include reduced administrative costs (through the elimination of duplicated functions); increased efficiency of advertising efforts (through the elimination of essentially duplicate ads, and the ability to spread dollars
spent in certain markets over an increased number of stores); improved purchasing power through the increased size of the combined entity; and the implementation of a best of the best program to take the best sellers from each chain and
add them to the other stores, dropping off similar but weaker selling product in those stores.



Management was pleased to see improvements in the combined entity once the operational aspects and distractions of the combination were completed. Same store sales improved by 3.5% during the fourth
quarter of the Companys fiscal year, the first sustained positive growth in two years.



The retail segment operates 60 retail stores ranging in size from 4,000 to 18,000 square feet and three distribution centers averaging approximately 75,000 square feet each. All retail store locations
and distribution centers are leased. The stores are located throughout the mid-Atlantic, northeastern, southeastern, and southwestern United States, particularly in Atlanta, Georgia, Florida, Texas and the Washington, DC/Baltimore metropolitan area.
These stores sell upholstered and leather furniture, virtually all of which is provided by the wholesale segment; case goods, such as tables, bedroom furniture, chairs and entertainment centers; and lamps, rugs and other accessories.



The retail segment added two new stores in
fiscal year 2002, while closing six smaller, unprofitable stores. In 2003, one store has opened since December 1, 2002 and perhaps as many as five new stores are possible for the second half of the year, while a limited number of possible store
closings are anticipated in weaker markets, depending upon market conditions.



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Governmental Regulations
and Environmental Considerations



The
Companys operations are required to meet federal, state and local regulatory standards in the areas of safety, health and environmental pollution controls. Historically, compliance with these standards has not had a material adverse effect on
the Companys operations. Management believes that the wholesale segments plants are in compliance, in all material respects, with applicable federal, state and local laws and regulations concerned with safety, health and environmental
protection.



The Company currently anticipates
increased federal and state environmental and health and safety regulations affecting the furniture industry, particularly regarding flammability standards, emissions from paint and finishing operations and wood dust levels in the manufacturing
process. Any such additional regulations could affect the wholesale segments upholstery, wood milling and finishing operations. The industry and its suppliers are attempting to develop water-based finishing materials to replace commonly used
organic-based finishes, which are a major source of regulated emissions. The Company cannot at this time estimate the impact of any new regulations on the Companys operations or the costs of compliance.



Competition



The furniture industry is highly competitive and includes a
large number of manufacturers and retailers. The market in which the Company competes includes a large number of manufacturers of upholstered and wood furniture as well as a growing base of specialty furniture retailers. Certain of the
Companys competitors have greater financial resources than the Company. Management believes that the high quality, design and competitive pricing of the Companys products, the Companys unique retail format, the Companys
reputation among retailers and customers and the Companys commitment to customer service have enabled the Company to compete successfully in this market.



Employees



As of December 1, 2002, the Company employed approximately 3,000 full-time employees, of whom approximately 630 are in management,
supervisory and sales positions. None of the Companys employees are covered under a collective bargaining agreement. The Company considers its employee relations to be good.



Trademarks



The Company, through a wholly-owned intellectual property holding company, has registered its Rowe, Rowe First in
Fashion, Regency Manor, Cover Ups, Comfortable Stuff, Comfortable Stuff by Rowe, Home Wear, Robin Bruce, MG, Mitchell Gold, Room
Scenes, Room Sense and Rowe Furniture Rowe trademarks with the United States Patent and Trademark Office. The Company, through a wholly-owned operating subsidiary, has also registered with the United States Patent and
Trademark Office the Storehouse trademark. Applications for registration of the Companys Home Elements, J. L. D. Jami L. Designs Really Smart Furniture and Jami L. Designs trademarks are pending before
the United States Patent and Trademark Office. In addition, the Company has certain of its trademarks registered in Australia, Canada, Chile, the European Community, Germany and Mexico, and applications for registration of certain of the
Companys trademarks are pending in Australia, Brazil, Canada, the European Community and Mexico. Management believes that its trademark position is adequately protected in all markets in which the Company does business. Management also
believes that the Companys trade names are recognized by dealers and distributors and are associated with a high level of quality and value.



Insurance



The Company maintains what management believes is a complete liability and property insurance program. Additionally, the Company maintains
self-insurance programs for that portion of health care costs not covered by insurance.



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Financing



In May 2002, the Company completed the refinancing of its
existing bank debt. As part of this, the Company entered into a new working capital revolving credit facility with $40 million of availability; a $5 million term loan; and two mortgage loans totaling $9.3 million. The Company utilized $14.1
million of cash on hand and from operations, as well as the proceeds from the above loans (including $25.1 million drawn down initially under the working capital revolving credit facility) to pay down the existing bank debt. Approximately $9.6
million remained outstanding under one portion of the Companys existing revolving debt. In addition, the lease signed in August 1999 relating to the Elliston manufacturing facility was converted from an operating lease to a capital lease due
to changes in its terms, with a remaining principal balance of approximately $23.5 million. The above balances are included in long-term debt on the Companys consolidated balance sheets, along with the Industrial Revenue Bond assumed as part
of the Mitchell Gold acquisition in 1998.



The
working capital revolving credit facility matures in May 2007; the term loan requires twenty quarterly payments of $250,000; the mortgage loans require monthly payments of approximately $70,000 for ten years, with the balance then due; and the
remaining prior existing debt (revolving and Elliston facility lease debt) requires monthly payments of $100,000 through November 2003, plus additional quarterly payments if cash flow, as defined, exceeds certain ratios, with the remaining unpaid
balances due in December 2003. The Company anticipates paying down enough of these balances during 2003 to be able to refinance the remaining amounts when they come due.



The above agreements restrict the Companys ability to pay dividends, repurchase stock and are
collateralized by substantially all assets of the Company and its subsidiaries. Each of these facilities contain, among other things, covenants with respect to a fixed charge coverage ratio, minimum excess borrowing availability, minimum
consolidated tangible net worth, maximum consolidated leverage ratio and maximum capital expenditures. As of December 1, 2002, the Company is in compliance with the provisions of these agreements.



During the fourth quarter of fiscal 2000, the Company entered
into two interest rate derivative contracts for the purpose of hedging the Companys exposure to rising interest rates under the lease for the Elliston facility. The Company executed a contract to swap variable rates (based on 30 day LIBOR) for
fixed rates on $20 million notional principal through August 2004. The contract locked in a fixed rate of 6.805% (plus a spread based upon financial performance of the Company). The Company also executed an interest rate collar contract on $5
million notional principal with a floor of 5.75% and a cap of 8.25% (both plus a spread based upon financial performance). As of December 1, 2002, 30 day LIBOR was 1.44%. The Company has recorded a liability for the present value of the excess of
payments under the swap contract. The fair value of the swap is reflected in other comprehensive income, net of taxes, as the Company has designated this contract as a cash flow hedge.



Goodwill



The Company recorded approximately $28 million in goodwill from the acquisition of Mitchell Gold, including $5 million paid during fiscal
year 2000 under the interim earn-out provisions and $12.8 million accrued during fiscal year 2002 under the long-term earn-out provisions of the purchase agreement. The Company recognized approximately $16 million in goodwill from the acquisition of
Storehouse.



The purchase agreement under which
the Company acquired Mitchell Gold contains an earn-out provision that allows for a maximum payment of up to $14 million if certain earnings targets are attained over a four or five year period. As of December 1, 2002, the sellers of Mitchell Gold
may elect to exercise their right to base their earn-out payment on the five-year period ending November 30, 2003. Unless the sellers so elect, the Company would be obligated to pay an amount of approximately $12.8 million during the second quarter
of fiscal year 2003.



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In accordance
with FAS 142, Goodwill and Other Intangible Assets, the Company is evaluating its goodwill for impairment. Impairment losses, if required, will be recorded in the first quarter of fiscal 2003.



Item 2.Properties.



The following table sets forth certain
information concerning the wholesale segments manufacturing facilities:



|Location                  |  | Description                             |  | Approximate Size in Square Feet |  | Owned or Leased
|------------------------- |  | --------------------------------------- |  | ------------------------------- |  | ---------------
|Salem, Virginia.          |  | Manufacturing                           |  | 241,000                         |  | Owned          
|Elliston, Virginia        |  | Administrative Office and Manufacturing |  | 435,000                         |  | Leased         
|Poplar Bluff, Missouri    |  | Manufacturing                           |  | 300,000                         |  | Owned          
|Morehouse, Missouri.      |  | Manufacturing                           |  | 136,000                         |  | Owned          
|Taylorsville, N. Carolina |  | Administrative Office and Manufacturing |  | 265,000                         |  | Owned          
|Taylorsville, N. Carolina |  | Manufacturing                           |  | 50,000                          |  | Owned          



In
addition, the Company leases executive and administrative offices in McLean, Virginia, administrative offices in Atlanta, Georgia, 60 retail store locations, 3 retail distribution centers and 2 showrooms. The Company considers these facilities to be
adequate and well maintained.



In
addition, the Company owns the following properties that are held for investment and are leased on a net basis:



|Location                  |  | Lease Expires         |  | Description       |  | Approximate Size in Square Feet |  
|------------------------- |  | --------------------- |  | ----------------- |  | ------------------------------- | -
|Christiansburg, Virginia. |  | Various thru 07-31-03 |  | Industrial        |  | 79,000                          | *
|Salem, Virginia           |  | Various thru 03-31-05 |  | Industrial        |  | 335,000                         | *
|Jessup, Maryland.         |  | Various thru 10-31-07 |  | Office/Industrial |  | 180,000                         |  
|Sylmar, California.       |  | 03-31-04              |  | Industrial        |  | 115,000                         |  

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|* |  | 25% of these properties are currently leased
|- |  | --------------------------------------------



Investment properties located in Christiansburg, Virginia and Sylmar, California were originally acquired by the Company between 1972 and
1985 for utilization as manufacturing facilities. The Salem, Virginia property was Rowe Furnitures main administrative offices and manufacturing facility for many years. In past years (fiscal 2000 for the Salem, Virginia property), the Company
ceased utilizing these facilities for its own operations and determined that the best return on these properties could be realized by leasing them to third parties. In February 1995, the Company completed the sale of a 175,000 square foot warehouse
in Sylmar, California. The warehouse had been held by the Company as investment property. The after-tax gain was approximately $3.0 million, net of lost rents during the disposition period. In June of 1995, the Company purchased other rental
income-producing property in Jessup, Maryland to permit a tax-deferred exchange with the proceeds realized from this transaction. In 1998, the value of the investment property in Christiansburg, Virginia was written down by $288,000 to
more appropriately reflect current value, as new tenants had not been secured to occupy leasable space. Aggregate rental income from investment properties, net of commissions, was $1,570,000, $1,902,000 and $1,947,000 in 2000, 2001 and 2002,
respectively.



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The Company
also holds a leasehold interest in one other property (in Carson, California) through its discontinued Wexford subsidiary. The Company subleased this property on a pass through basis in January 2001.



Item 3.Legal Proceedings.



There are no pending legal proceedings,
other than routine litigation incidental to the business of the Company. While the outcome of these routine legal proceedings cannot be predicted with certainty, it is the opinion of management that the resolution of these legal proceedings should
not have a material adverse effect on the Companys financial position.



Item 4.Submission of Matters to a Vote of Security Holders



No matter was submitted to a vote of security holders, through the solicitation of proxies, or otherwise, during the quarter ended
December 1, 2002.



11



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PART II



Item 5.Market for Registrants Common Equity and Related Stockholder
Matters.



(a)  The
information contained under the caption Stock Price and Dividend Data on page 32 in the Annual Report to Stockholders for the fiscal year ended December 1, 2002 is included in Exhibit 13 hereto and incorporated herein by reference.



(b)  Approximate Number of Equity
Security Holders.



|Title of Class                           |  | Approximate Number of Record Holders as of December 1, 2002
|---------------------------------------- |  | -----------------------------------------------------------
|Common Stock, par value $1.00 per share. |  | 1,000                                                      



(c)  The information contained under the caption Stock Price and Dividend Data on page 32 in the Annual Report to Stockholders for the fiscal year ended December 1, 2002 is included in Exhibit 13 hereto and
incorporated herein by reference. Further, the Companys current credit facilities prohibit payment of dividends so the Company is not currently contemplating a dividend declaration.



(d)  The following table sets forth securities authorized for issuance under equity compensation
plans as of December 1, 2002. All applicable equity compensation plans were previously approved by security holders.



Equity Compensation Plan Information



|Plan category                                              |  | Number of securities to be issued upon exercise of outstanding options, warrants and
rights |  | Weighted average exercise price of outstanding options, warrants and
rights |      | Number of securities remaining available for future
issuances under equity compensation plans (excluding securities reflected in column (a))
|---------------------------------------------------------- |  | ------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------- | ---- | --------------------------------------------------------------------------------------------------------------------------------------------
|                                                           |  | (a)                                                                                         |  | (b)                                                                         |      | (c)                                                                                                                                         
|Equity compensation plans approved by security holders     |  | 1,845,202                                                                                   |  | $                                                                           | 6.62 |                                                                                                                                             
|Equity compensation plans not approved by security holders |  | 0                                                                                           |  |                                                                             | 0    |                                                                                                                                             
|Total                                                      |  | 1,845,202                                                                                   |  | $                                                                           | 6.62 |                                                                                                                                             



Item
6.Selected Financial Data.



The information contained under the caption Five-year Summary on page 9 in the Annual Report to Stockholders for the fiscal year ended December 1, 2002 is included in Exhibit 13 hereto and
incorporated herein by reference.



Item
7.Managements Discussion and Analysis of Financial Condition and Results of Operations.



The managements discussion and analysis of financial condition and results of operations section on pages 10 to 15 of the Annual
Report to Stockholders for the fiscal year ended December 1, 2002 is included in Exhibit 13 hereto and incorporated herein by reference.



Item 7A.Quantitative and Qualitative Disclosures About Market Risk.



Interest Risk Disclosures



Because the Companys obligations under its term loans,
revolving loans, lines of credit and industrial revenue bonds bear interest at variable rates, the Company is sensitive to changes in prevailing interest rates. A



12



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10% fluctuation in market interest rates would not result in a material change in interest expense during the 2003 fiscal year.



Forward Looking Information



Certain portions of this report contain forward looking
statements. These statements can be identified by the use of future tense or dates or terms such as believe, expect, anticipate or plan. Important factors could cause actual results to differ
materially from those anticipated by some of the statements made in this report. Some of the factors include, among other things, changes from anticipated levels of sales, whether due to future national or regional economic and competitive
conditions, customer acceptance of existing and new products, or otherwise; pending or future litigation; pricing pressures due to excess capacity; raw material cost increases; transportation cost increases; the inability of a major customer to meet
its obligations; loss of significant customers in connection with a merger or acquisition, bankruptcy or otherwise; actions of current or new competitors; increased advertising costs associated with promotional efforts; change of tax rates; change
of interest rates; future business decisions and other uncertainties, all of which are difficult to predict and many of which are beyond the control of the Company.



Additional Risks Include:



| |  |  | We may be unable to meet ongoing stock exchange listing requirements.
| | - |  | ---------------------------------------------------------------------



The New York Stock Exchange maintains rules for, among other items, minimum market capitalization and minimum
stockholders equity. The Company is currently not in compliance with such requirements and is subject to an eighteen-month timeframe within which it must achieve compliance with these requirements. This timeframe expires in February 2003. The
Company may be unable to achieve such values in compliance with exchange rules, resulting in the Company listing its shares on a different exchange or becoming delisted.



| |  |  | The furniture industry is highly competitive at both the manufacturing and the retail levels; loss of market share could adversely impact sales, earnings and cash
flow.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Our manufacturing and our
retailing subsidiaries face significant competition from numerous competitors many of which are larger and better capitalized. Our subsidiaries may be at a competitive disadvantage as a result. If our subsidiaries lose market share to competitors,
our financial performance could be adversely affected.



| |  |  | Our retail operations may not become profitable.
| | - |  | ------------------------------------------------



Our retail operations are currently unprofitable, and there can be no assurance that profitability will be achieved.



Item 8.Financial Statements and
Supplementary Data.



The
following information on pages 16 to 31 in the Annual Report to Stockholders of the fiscal year ended December 1, 2002 is included in Exhibit 13 hereto and incorporated herein by reference:



Consolidated Balance SheetsDecember 1, 2002 and December
2, 2001



Consolidated Statements of Operations
and Comprehensive Income (Loss)Years Ended December 1, 2002, December 2, 2001 and December 3, 2000



Consolidated Statements of Stockholders EquityYears Ended December 1, 2002, December 2, 2001 and December 3, 2000



13



---



Consolidated
Statements of Cash FlowsYears Ended December 1, 2002, December 2, 2001 and December 3, 2000



Notes to Consolidated Financial Statements (includes selected quarterly financial data)



Report of Independent Certified Public Accountants



Item 9.Changes in and
Disagreements with Accountants on Accounting and Financial Disclosure.



None



14



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PART III



Notwithstanding anything below to the
contrary, the Report of the Compensation and Stock Option Committees and the Performance Graph contained on pages 11 through 14 of the Companys 2003 Annual Meeting Proxy Statement are not incorporated by reference in this Form 10-K.



Item 10.Directors and
Executive Officers.



The
information required by Item 10 is contained in the Companys 2003 Annual Meeting Proxy Statement and is incorporated herein by reference. Such Proxy Statement will be filed with the Securities and Exchange Commission not later than 120 days
after the Companys fiscal year end.



Item
11.Executive Compensation.



The information required by Item 11 is contained in the Companys 2003 Annual Meeting Proxy Statement and is incorporated herein by reference. Such Proxy Statement will be filed with the
Securities and Exchange Commission not later than 120 days after the Companys fiscal year end.



Item 12.Security Ownership of Certain Beneficial Owners and Management.



The information required by Item 12 is contained in the Companys 2003 Annual Meeting Proxy Statement
and is incorporated herein by reference. Such Proxy Statement will be filed with the Securities and Exchange Commission not later than 120 days after the Companys fiscal year end.



Item 13.Certain Relationships and Related Transactions.



The information required by Item 13 is contained in the
Companys 2003 Annual Meeting Proxy Statement and is incorporated herein by reference. Such Proxy Statement will be filed with the Securities and Exchange Commission not later than 120 days after the Companys fiscal year end.



PART IV



Item 14.Controls and
Procedures.



a.  Evaluation of disclosure controls and procedures. Our chief executive officer and our chief financial officer, after evaluating the effectiveness of our Disclosure controls and procedures (as defined
in the Securities Exchange Act of 1934 Rules (13(a)-14(c) and 15-d-14(c)) as of a date (the Evaluation Date) within 90 days before the filing date of this annual report, have concluded that, as of the Evaluation Date, our disclosure
controls and procedures were adequate and designed to ensure that the information required to be disclosed in the reports filed or submitted by us under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the
required time periods.



b.  Changes in
internal controls. There were no significant changes in our internal controls or in other factors that could significantly affect our internal controls subsequent to the date of their evaluation.



Item 15.Exhibits, Financial Statement
Schedules and Reports on Form 8-K.



(a)  1.  Financial Statements:



The consolidated balance sheets as of December 1, 2002 and December 2, 2001 and the related consolidated statements of operations and comprehensive income (loss), stockholders equity, cash flows and notes to



15



---

consolidated financial statements for each of the three years in the period ended December 1, 2002, together with the report of BDO Seidman,
LLP dated January 8, 2003 appearing in the 2002 Annual Report to Stockholders are incorporated herein by reference. The following additional financial data should be read in conjunction with the consolidated financial statements in such 2002 Annual
Report to Stockholders.



2.  Financial
Statement Schedules:



Report of Independent
Certified Public Accountants on Financial Statement Schedule.

Schedule IIValuation and Qualifying Accounts.



Schedules other than those listed above are
omitted for the reason that they are not required or are not applicable, or the required information is shown in the consolidated financial statements and notes thereto.



3.  Exhibits:



|Exhibit Number |  | Exhibit                                                                                                                                                                                                                                                                 
|-------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|              
|3.1            |  | Articles of Incorporation of the Company (incorporated by reference to the
Companys Registration Statement on Form S-1 No. 33-74504 filed with the Securities and Exchange Commission on January 27, 1994)                                                             
|              
|3.2            |  | Certificate of Amendment dated March 30, 1999, of Articles of Incorporation of The
Rowe Companies (incorporated by reference to the Companys Registration Statement on Form S-8 No. 333-82571 filed with the Securities and Exchange Commission on July 9, 1999)       
|              
|3.3            |  | By-laws of the Company (incorporated by reference to the Companys form 10-K
files with the Securities and Exchange Commission on February 26, 2001)                                                                                                                    
|              
|4              |  | Specimen Stock Certificate (incorporated by reference to the Companys
Registration Statement on Form 8-A filed with the Securities and Exchange Commission on January 5, 1994)                                                                                         
|              
|10.2           |  | Rowe Furniture Corporation Amended and Restated Supplemental Executive Retirement
Plan II (incorporated by reference to the Companys Registration Statement on Form S-1 No. 33-74504 filed with the Securities and Exchange Commission on January 27, 1994)            
|              
|10.5           |  | Employment Agreement dated December 6, 1984 between the Company and Mr. Barry A.
Birnbach (incorporated by reference to the Companys Form 10-K filed with the Securities and Exchange Commission on February 25, 2000)                                                 
|              
|10.6           |  | First Amendment to the Salary Continuation Agreement By and Between Rowe Furniture
Corporation and Barry A. Birnbach dated August 28, 1995 (incorporated by reference to the Companys Form 10-K filed with the Securities and Exchange Commission on February 25, 2000)
|              
|10.7           |  | Amended and Restated The Rowe Companies Cash-or-Deferred Non-Qualified Executive
Retirement Plan effective March 28, 2000 (incorporated by reference to the Companys Form 10-K filed with the Securities and Exchange Commission on February 26, 2001)                 
|              
|10.10          |  | Employment Agreement dated February 2, 1998 between the Company and Mr. Gerald M.
Birnbach (incorporated by reference to the Companys Form 10-K filed with the Securities and Exchange Commission on February 12, 1998)                                                
|              
|13             |  | Portions of the Annual Report for the year ended December 1,
2002                                                                                                                                                                                                       
|              
|21             |  | List of Subsidiaries                                                                                                                                                                                                                                                    
|              
|23             |  | Consent of BDO Seidman, LLP                                                                                                                                                                                                                                             
|              
|               |  | (b) Reports on Form 8-K.: None                                                                                                                                                                                                                                          
|              
|99.1           |  | Certifications                                                                                                                                                                                                                                                          
|              
|99.A           |  | Certifications                                                                                                                                                                                                                                                          



16



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SIGNATURES



Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



THE ROWE COMPANIESBy:

/s/ G. S. MORPHISG. S. Morphis, Chief Financial Officer,Secretary-Treasurer




February 26, 2003



Pursuant to the requirements of the
Securities Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.



|Signature          |  | Title                 |  | Date             
|------------------ |  | --------------------- |  | -----------------
|                  
|/s/ G. M. BIRNBACH |  | Chairman of the Board |  | February 26, 2003
|G. M. Birnbach     |  | President, Director   |  |                  
|                   |  | (Principal Executive  |  |                  
|                   |  | Officer)              |  |                  
|                  
|/s/ R.E. CHENEY    |  | Director              |  | February 26, 2003
|R. E. Cheney       |  |                       |  |                  
|                  
|/s/ M. S. GOLD     |  | Director              |  | February 26, 2003
|M. S. Gold         |  |                       |  |                  
|                  
|/s/ H. I. PTASHEK  |  | Director              |  | February 26, 2003
|H. I. Ptashek      |  |                       |  |                  
|                  
|/s/ C. T. ROSEN    |  | Director              |  | February 26, 2003
|C. T. Rosen        |  |                       |  |                  
|                  
|/s/ K. J. ROWE     |  | Director              |  | February 26, 2003
|K. J. Rowe         |  |                       |  |                  
|                  
|/s/ S. J. SILVER   |  | Director              |  | February 26, 2003
|S. J. Silver       |  |                       |  |                  
|                  
|/s/ ALLAN TOFIAS   |  | Director              |  | February 26, 2003
|Allan Tofias       |  |                       |  |                  
|                  
|/s/ G. O. WOODLIEF |  | Director              |  | February 26, 2003
|G. O. Woodlief     |  |                       |  |                  





17



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REPORT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

ON FINANCIAL STATEMENT SCHEDULE



The Rowe Companies

McLean, Virginia



The audits referred to in our report dated January 8, 2003, relating to the consolidated financial statements of The Rowe Companies, which
is contained in Item 8 of this Form 10-K (incorporated in Item 8 of the Form 10-K by reference to the annual report of stockholders for the year ended December 1, 2002) included the audit of the financial statement schedule listed in the
accompanying index. The financial statement schedule is the responsibility of the Companys management. Our responsibility is to express an opinion on the financial statement schedule based upon our audits.



In our opinion such financial statement schedule presents
fairly, in all material respects, the information set forth therein.



/s/    BDO SEIDMAN, LLPBDO Seidman, LLP




High Point, North Carolina

January 8, 2003



18



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THE ROWE COMPANIES

AND WHOLLY-OWNED SUBSIDIARIES



SCHEDULE IIVALUATION AND QUALIFYING ACCOUNTS



For the Years Ended December 1, 2002, December 2, 2001 and December 3, 2000

(Thousands of Dollars)



|COL. A                               |  | COL. B                         |       | COL. C                        |   | COL. D                               |  |                        | COL. E
|------------------------------------ |  | ------------------------------ | ----- | ----------------------------- | - | ------------------------------------ |  | ---------------------- | ------
|                                     |  |                                |       | Additions                     |   |                                      |  |                        |       
|                                     |  |                                |       | (1)                           |   | (2)                                  |  |                        |       
|Description                          |  | Balance at Beginning of Period |       | Charged to Costs and Expenses |   | Charged to Other Accounts (Describe) |  | Deductions (Describe) |       
|Allowance for doubtful Accounts2002 |  | $                              | 1,057 |                               | $ | 262                                  |  | $                      |      
|Allowance for doubtful Accounts2001 |  | $                              | 1,856 |                               | $ | 4,421                                |  | $                      |      
|Allowance for doubtful Accounts2000 |  | $                              | 864   |                               | $ | 1,884                                |  | $                      |      

---

|(A) |  | Accounts charged off less bad debt recoveries of $71,000
|--- |  | --------------------------------------------------------

|(B) |  | Accounts charged off less bad debt recoveries of $69,000
|--- |  | --------------------------------------------------------

|(C) |  | Accounts charged off less bad debt recoveries of $132,000
|--- |  | ---------------------------------------------------------



19