EX-99.1 2 hvtex99.htm
Exhibit 99.1


Havertys Reports Earnings for Third Quarter 2019


ATLANTA, GEORGIA, October 30, 2019 -- HAVERTYS (NYSE: HVT and HVT.A) reports earnings per share of $0.31 for the third quarter ended September 30, 2019 compared to $0.39 for the same period of 2018. The earnings per share for the nine months ended September 30, 2019 is $0.77 compared to $0.98 for the same period in 2018.

Clarence H. Smith, chairman, president and chief executive officer, said, “The third quarter continued to challenge our teams with product flow disruption and merchandise pricing. Our vendors are working closely with us to ensure that our supply chain information is timely as manufacturing locales shift. The changes in costs have tested our retail pricing strategies and pressured gross profit margins. 

Our written business for the third quarter was positive compared to last year’s third quarter and we continue to generate good cash flow. The low interest rate and unemployment environment and recent uptick in housing are positive indicators for future home furnishings sales. We believe our focus on merchandising, stores, and operational plans will enable us to profitably grow our business in the future.”


Financial Highlights

Third Quarter 2019 Compared to Third Quarter 2018

·
Net sales decreased 0.6% to $209.3 million. Comparable store sales decreased 0.4%. 
·
Total written sales for the third quarter of 2019 were up 1.6% and written  comparable store sales rose 1.5%. 
·
Average written ticket increased 4.7% and custom upholstery business was up 13.9%. 
·
Gross profit margins fell 130 basis points to 53.5% in 2019 versus 54.8% in 2018. Most of the decline is due to merchandise pricing and mix as we used slightly more aggressive promotions and incurred higher product and freight costs.
·
SG&A costs increased $1.0 million and as a percent of sales increased 80 basis points to 49.8% from 49.0%. Fixed and discretionary expenses were up approximately $0.5 million primarily from higher employee benefits costs and additional costs for two new locations. Variable expenses were 18.2% as a percent of sales in 2019 compared to 17.9% in 2018. This increase is due in part to higher third‑party credit costs.
·
We repurchased 83,348 shares of common stock for $1.5 million during the third quarter of 2019.
·
We adopted the new lease accounting standard on January 1, 2019 which significantly impacted our balance sheet. See the notes after the following financial statements.


NEWS RELEASE - OCTOBER 30, 2019
PAGE 2

Nine Months ended September 30, 2019 Compared to Same Period of 2018

·
Net sales decreased 3.3% to $588.5 million. Comparable store sales decreased 2.4%. 
·
Average ticket increased 5.7% and custom upholstery business rose 10.0%. 
·
Gross profit margins were 54.2% compared to 54.6%.
·
SG&A costs as a percent of sales was 50.8% in 2019 and 49.8% in 2018. Total SG&A dollars decreased $4.1 million. Fixed and discretionary expenses were $190.4 million in 2019 versus $191.2 million in 2018. The variable type costs were 18.4% of sales in 2019 and 2018.

Expectations and Other

·
We expect that gross profit margins for the full year 2019 will be approximately 54.1%.
·
Our estimate for fixed and discretionary type SG&A expenses for 2019 is in the $257.0 to $258.0 million range, compared to $254.9 million for these same costs in 2018. The variable type costs within SG&A for the full year of 2019 are expected to be 18.4% compared to 18.3% in 2018.
·
We expect selling square footage will increase approximately 1.4% in 2019. We opened a location in a new market in St. Louis, MO in August, an additional store in the Atlanta market in Newnan, GA in September, and will complete a store relocation in Baton Rouge, LA in November. Total capital expenditures are estimated to be approximately $18.5 million in 2019.
·
We have approximately $16.9 million remaining in current board authorization for common stock repurchases.

NEWS RELEASE - OCTOBER 30, 2019
PAGE 3

HAVERTY FURNITURE COMPANIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data – Unaudited)

   
Three Months Ended
September 30,
    
Nine Months Ended
September 30,
  
   
2019
    
2018
    
2019
    
2018
  
                         
Net sales
  
$
209,320
    
$
210,547
    
$
588,455
    
$
608,765
  
Cost of goods sold
    
97,301
      
95,175
      
269,796
      
276,689
  
Gross profit
    
112,019
      
115,372
      
318,659
      
332,076
  
Credit service charges
    
19
      
24
      
60
      
81
  
Gross profit and other revenue
    
112,038
      
115,396
      
318,719
      
332,157
  
 
                                
Expenses:
                                
Selling, general and administrative
    
104,161
      
103,185
      
298,824
      
302,942
  
Provision for doubtful accounts
    
42
      
34
      
66
      
58
  
Other (income) expense, net
    
(42
)
    
713
      
(323
)
    
(98
)
            Total expenses
    
104,161
      
103,932
      
298,567
      
302,902
  
 
                                
Income before interest and income taxes
    
7,877
      
11,464
      
20,152
      
29,255
  
Interest (income) expense, net
    
(292
)
    
260
      
(980
)
    
1,184
  
                                 
Income before income taxes
    
8,169
      
11,204
      
21,132
      
28,071
  
Income tax expense
    
2,072
      
2,852
      
5,367
      
7,192
  
Net income
  
$
6,097
    
$
8,352
    
$
15,765
    
$
20,879
  
                                 
Diluted earnings per share:
                                
Common Stock
  
$
0.31
    
$
0.39
    
$
0.77
    
$
0.98
  
Class A Common Stock
  
$
0.30
    
$
0.38
    
$
0.73
    
$
0.94
  
 
                                
Diluted weighted average shares outstanding:
                                
Common Stock
    
19,893
      
21,230
      
20,444
      
21,408
  
Class A Common Stock
    
1,536
      
1,765
      
1,637
      
1,766
  
                                 
Cash dividends per share:
                                
Common Stock
  
$
0.20
    
$
0.18
    
$
0.56
    
$
0.54
  
Class A Common Stock
  
$
0.19
    
$
0.17
    
$
0.53
    
$
0.51
  
NEWS RELEASE - OCTOBER 30, 2019
PAGE 4

HAVERTY FURNITURE COMPANIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands - Unaudited)

   
  
September 30,
2019
    
December 31,
2018
    
September 30,
2018
  
    
  
(Unaudited)
          
(Unaudited)
  
ASSETS
                  
Current assets
                  
Cash and cash equivalents
  
$
89,528
    
$
71,537
    
$
96,269
  
Restricted cash and cash equivalents
    
6,632
      
8,272
      
8,226
  
Accounts receivable, net
    
1,570
      
1,833
      
1,827
  
Inventories
    
99,958
      
105,840
      
108,344
  
Prepaid expenses
    
10,476
      
8,106
      
9,818
  
Other current assets
    
6,449
      
6,262
      
6,291
  
Total current assets
    
214,613
      
201,850
      
230,775
  
 
                        
Accounts receivable, long-term, net
    
204
      
226
      
227
  
Property and equipment, net
    
158,087
      
216,852
      
220,286
  
Right of-use lease assets
    
183,524
      
—
      
—
  
Deferred income taxes
    
12,202
      
12,544
      
12,896
  
Other assets
    
9,873
      
8,707
      
9,400
  
Total assets
  
$
578,503
    
$
440,179
    
$
473,584
  
 
                        
LIABILITIES AND STOCKHOLDERS’ EQUITY
                        
Current liabilities
                        
Accounts payable
  
$
27,495
    
$
19,840
    
$
24,926
  
Customer deposits
    
34,852
      
24,465
      
30,541
  
Accrued liabilities
    
41,163
      
39,903
      
41,713
  
Current lease liabilities
    
29,283
      
—
      
—
  
Current portion of lease obligations
    
—
      
4,018
      
3,938
  
Total current liabilities
    
132,793
      
88,226
      
101,118
  
 
                        
Noncurrent lease liabilities
    
155,046
      
—
      
—
  
Lease obligations, less current portion
    
—
      
46,785
      
47,829
  
Other liabilities
    
21,942
      
30,539
      
32,214
  
Total liabilities
    
309,781
      
165,550
      
181,161
  
 
                        
Stockholders’ equity
    
268,722
      
274,629
      
292,423
  
Total liabilities and stockholders’ equity
  
$
578,503
    
$
440,179
    
$
473,584
  




NEWS RELEASE - OCTOBER 30, 2019
PAGE 5

HAVERTY FURNITURE COMPANIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands – Unaudited)

   
Nine Months Ended
September 30,
  
   
2019
    
2018
  
CASH FLOWS FROM OPERATING ACTIVITIES:
            
Net income
  
$
15,765
    
$
20,879
  
Adjustments to reconcile net income to net
  cash provided by (used in) operating activities:
                
Depreciation and amortization
    
15,412
      
22,650
  
Share-based compensation expense
    
2,690
      
3,781
  
Deferred income taxes
    
(1,942
)
    
(592
)
Provision for doubtful accounts
    
66
      
58
  
Other
    
615
      
825
  
Changes in operating assets and liabilities:
                
Accounts receivable
    
219
      
550
  
Inventories
    
5,882
      
(4,907
)
Customer deposits
    
10,387
      
2,728
  
Other assets and liabilities
    
316
      
6,534
  
Accounts payable and accrued liabilities
    
8,957
      
9,988
  
Net cash provided by operating activities
    
58,367
      
62,494
  
 
                
CASH FLOWS FROM INVESTING ACTIVITIES:
                
Capital expenditures
    
(12,446
)
    
(18,231
)
Proceeds from sale of property and equipment
    
2,268
      
2,421
  
Other
    
—
      
55
  
Net cash used in investing activities
    
(10,178
)
    
(15,755
)
 
                
CASH FLOWS FROM FINANCING ACTIVITIES:
                
Payments on lease obligations
    
—
      
(2,824
)
Taxes on vested restricted shares
    
(1,328
)
    
(1,233
)
Dividends paid
    
(11,194
)
    
(11,337
)
Common stock repurchased
    
(19,316
)
    
(14,456
)
Net cash used in financing activities
    
(31,838
)
    
(29,850
)
Increase in cash, cash equivalents and restricted cash equivalents during the period
    
16,351
      
16,889
  
Cash, cash equivalents and restricted cash equivalents at beginning of period
    
79,809
      
87,606
  
Cash, cash equivalents and restricted cash equivalents at end of period
  
$
96,160
    
$
104,495
  



NEWS RELEASE - OCTOBER 30, 2019
PAGE 6

Comparable Store Sales 
Comparable store sales include those made on our website and in stores, and excludes locations opened, closed or otherwise non-comparable during the last 12 months. 

Cost of Goods Sold and SG&A Expense 
We include substantially all our occupancy and home delivery costs in SG&A expense as well as a portion of our warehousing expenses.  Accordingly, our gross profit may not be comparable to those entities that include these costs in cost of goods sold. 
 
We classify our SG&A expenses as either variable or fixed and discretionary.  Our variable expenses are comprised of selling and delivery costs.  Selling expenses are primarily compensation and related benefits for our commission-based sales associates, the discount we pay for third party financing of customer sales and transaction fees for credit card usage.  We do not outsource delivery, so these costs include personnel, fuel, and other expenses related to this function.  Fixed and discretionary expenses are comprised of rent, depreciation and amortization and other occupancy costs for stores, warehouses and offices, and all advertising and administrative costs. 
 
Leases 
In February 2016, the Financial Accounting Standards Board (FASB) issued an accounting standards update (ASU 2016-02), which amended various aspects of existing guidance for leases. ASU 2016-02 requires an entity to recognize assets and liabilities arising from a lease for both financing and operating leases, along with additional qualitative and quantitative disclosures. The main difference between ASU 2016-02 and previous U.S. GAAP is the recognition of lease assets and lease liabilities by lessees on the balance sheet for those leases classified as operating leases under previous U.S. GAAP. As a result, we have recognized a liability representing our lease payments and a right-of-use asset representing our right to use the underlying asset for the lease term on the balance sheet. We adopted the requirements of the new lease standard effective January 1, 2019 using the modified retrospective method and have not restated comparative periods.  

As part of the adjustment for ASU 2016-02 effective January 1, 2019, we derecognized certain assets and liabilities associated with certain legacy build-to-suit arrangements and the deferred gain on previous sale leaseback transactions. Accordingly, $53.5 million of net property and equipment, $50.8  million of financing obligations, $9.3 of other net liabilities, and $2.3 million of deferred tax assets recorded on the balance sheet as of December 31, 2018 were removed as part of our transition adjustment. Effective January 1, 2019, we recognized right-of-use lease assets totaling $177.9 million and recorded lease liabilities totaling $175.4 million. The net adjustment recorded to equity as of January 1, 2019 was a credit of $6.8 million.  

Since we are not restating prior periods as part of adopting this guidance, our results in 2019 will not be directly comparable to our results for periods before 2019. Specifically, for those leases that were previously recognized on our balance sheet prior to 2019, their associated depreciation and interest expense will be replaced by rent expense. For these properties in our lease portfolio for 2019, the amount of rent expense is less than the associated depreciation and interest expense by approximately $2.0 million. The adoption of ASU 2016-02 had an immaterial impact on our consolidated statement of cash flows for the nine-month period ended September 30, 2019.


NEWS RELEASE - OCTOBER 30, 2019
PAGE 7

Conference Call Information
The company invites interested parties to listen to the live audiocast of the conference call on October 31, 2019 at 10:00 a.m. ET at its website, havertys.com under the investor relations section. If you cannot listen live, a replay will be available on the day of the conference call at the website or via telephone at approximately 1:00 p.m. ET through, November 7. The number to access the telephone playback is 1‑888‑203‑1112 (replay passcode: 6331827).
About Havertys
Havertys (NYSE: HVT and HVT.A), established in 1885, is a full-service home furnishings retailer with 122 showrooms in 16 states in the Southern and Midwestern regions providing its customers with a wide selection of quality merchandise in middle to upper-middle price ranges. Additional information is available on the company’s website, havertys.com.
Safe Harbor 
This press release includes statements that constitute forward-looking statement within the meaning of the federal securities laws.  Generally, the words "believe," "expect," "intend," "estimate," "anticipate," "project," "will" and similar expressions identify forward-looking statements, which are not historical in nature. We intend for all forward-looking statements contained herein or on our website, and all subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf, to be covered by the safe harbor provisions for forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and the provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (which Sections were adopted as part of the Private Securities Litigation Reform Act of 1995). Forward-looking statements may relate to, for example, future operations, financial condition, economic performance (including gross profit margins and expenses), capital expenditures, and demand for our products.  The Company cautions that its forward-looking statements involve risks and uncertainties, and while we believe that our expectations for the future are reasonable in view of currently available information, you are cautioned not to place undue reliance on our forward-looking statements.  Actual results or events may differ materially from those indicated as a result of various important factors.  Such factors may include, among other things, the state of the economy; state of the residential construction and housing markets; the consumer spending environment for big ticket items; effects of competition; management of relationships with our suppliers and vendors and disruptions in their operations; the imposition of tariffs and the effect of retaliatory trade measures; new regulations or taxation plans, as well as other risks and uncertainties discussed in the company's reports filed from time to time with the Securities and Exchange Commission.  You are urged to consider such factors.  The Company assumes no obligation for updating any such forward-looking statements. 


Contact:
Haverty Furniture Companies, Inc., 404-443-2900
Richard B. Hare
EVP & CFO
Jenny Hill Parker
SVP, Finance and Corporate Secretary
SOURCE:  Havertys