UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
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 31, 2020
OR
   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
 
Commission file number: 1-14445

HAVERTY FURNITURE COMPANIES, INC.

Maryland
58-0281900
(State of Incorporation)
(IRS Employer Identification Number)
   
780 Johnson Ferry Road, Suite 800,Atlanta, Georgia 30342
(Address of principal executive offices)
   
(404) 443-2900
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934

Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock
HVT
NYSE
Class A Common Stock
HVTA
NYSE

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

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes   No 
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes   No 
 
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   No
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes   No
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer
Accelerated filer 
Non-accelerated filer
Smaller reporting company
 
Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
 
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes   No
 
As of June 30, 2020, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was $291,882,249 (based on the closing sale prices of the registrant’s two classes of common stock as reported by the New York Stock Exchange).
 
There were 16,744,079 shares of common stock and 1,467,580 shares of Class A common stock, each with a par value of $1.00 per share outstanding at February 28, 2021.
 
DOCUMENTS INCORPORATED BY REFERENCE
 
Portions of the registrant’s Proxy Statement for the Annual Meeting of Stockholders to be held May 10, 2021 are incorporated by reference into Part III of this Annual Report on Form 10-K.

HAVERTY FURNITURE COMPANIES, INC.
Annual Report on Form 10-K for the year ended December 31, 2020

     
PART I
 
       
Item 1.
 
Business
1
Item 1A.
 
Risk Factors
5
Item 1B.
 
Unresolved Staff Comments
9
Item 2.
 
Properties
9
Item 3.
 
Legal Proceedings
10
Item 4.
 
Mine Safety Disclosures
10
       
Information about our Executive Officers
10
       
PART II
       
Item 5.
 
Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
12
Item 6.
 
Selected Financial Data
14
Item 7.
 
Management’s Discussion and Analysis of Financial Condition and Results of Operations
15
Item 7A.
 
Quantitative and Qualitative Disclosures about Market Risk
22
Item 8.
 
Financial Statements and Supplementary Data
23
Item 9.
 
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
23
Item 9A.
 
Controls and Procedures
23
Item 9B.
 
Other Information
25
       
PART III
       
Item 10.
 
Directors, Executive Officers and Corporate Governance
25
Item 11.
 
Executive Compensation
25
Item 12.
 
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
25
Item 13.
 
Certain Relationships and Related Transactions, and Director Independence
25
Item 14.
 
Principal Accounting Fees and Services
25
       
PART IV
       
Item 15.
 
Exhibits, Financial Statement Schedules
26
Item 16.
 
Form 10-K Summary
29



FORWARD-LOOKING STATEMENTS
In addition to historical information, this document contains “forward-looking statements” – that is, statements related to future, not past, events. In this context, forward-looking statements often address our expected future business and financial performance and financial condition and the anticipated impact on our business of the COVID-19 pandemic. These statements are within the meaning of Section 27A of the Securities Act of 1933 and Section 21F of the Securities Exchange Act of 1934.

Forward-looking statements include, but are not limited to:

projections of sales or comparable store sales, gross profit, SG&A expenses, capital expenditures or other financial measures;
descriptions of anticipated plans or objectives of our management for operations or products;
forecasts of performance; and
assumptions regarding any of the foregoing.

Because these statements involve anticipated events or conditions, forward-looking statements often include words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “project,” “target,” “can,” “could,” “may,” “should,” “will,” “would,” or similar expressions.

These forward-looking statements are based upon assessments and assumptions of management in light of historical results and trends, current conditions and potential future developments that often involve judgment, estimates, assumptions and projections. Forward-looking statements reflect current views about our plans, strategies and prospects, which are based on information currently available.

Although we believe that our plans, intentions and expectations as reflected in or suggested by any forward-looking statements are reasonable, they are not guarantees. Actual results may differ materially from our anticipated results described or implied in our forward-looking statements, and such differences may be due to a variety of factors. Our business could also be affected by additional factors that are presently unknown to us or that we currently believe to be immaterial to our business. Important factors which could cause our actual results to differ materially from the forward-looking statements in this report include, but are not limited to, the following items, in addition to those matters described in Risk Factors and Management’s Discussion and Analysis of Financial Condition and Results of Operations:

The COVID-19 pandemic and its effect on our businesses and results of operations;
Competition from national, regional and local retailers of home furnishings;
Our failure to anticipate changes in consumer preferences;
Importing a substantial portion of our merchandise from foreign sources;
Significant fluctuations and volatility in the cost of raw materials and components;
Our dependence on third-party producers to meet our requirements;
A failure by our vendors to meet our quality control standards or comply with changes to the legislative or regulatory framework regarding product safety;
Risks in our supply chain;
The rise of oil and gasoline prices;
Increased transportation costs;
Damage to one of our distribution centers;
The vulnerability of our information technology infrastructure;
Changes in economic conditions; and
Other risks and uncertainties as may be detailed from time to time in our public announcements and Securities and Exchange Commission filings.
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Discussed elsewhere in further detail in this report are some important risks, uncertainties and contingencies which could cause our actual results, performance or achievements to be materially different from any forward-looking statements made or implied in this report.

Forward-looking statements are only as of the date they are made and they might not be updated to reflect changes as they occur after the forward-looking statements are made. We assume no obligations to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. In evaluating forward-looking statements, you should consider these risks and uncertainties, together with the other risks described from time to time in our other reports and documents filed with the Securities and Exchange Commission, or SEC, and you should not place undue reliance on those statements.

We intend for any forward-looking statements to be covered by, and we claim the protection under, the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.


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ITEM 1.          BUSINESS
Unless otherwise indicated by the context, we use the terms “Havertys," "we," "our," or "us" when referring to the consolidated operations of Haverty Furniture Companies, Inc. and subsidiary.

Overview

Havertys is a specialty retailer of residential furniture and accessories. Our founder, J.J. Haverty began the business in 1885 in Atlanta, Georgia with one store and made deliveries using horse-drawn wagons. The Company grew to 18 stores and was incorporated in September 1929. Anticipating further growth, the Company accessed additional capital through its initial public offering in October 1929.

Havertys has grown to 120 stores in 16 states in the Southern and Midwest regions. All of our retail locations are operated using the Havertys name and we do not franchise our stores. Our customers are generally college educated women in middle to upper-middle income households. Our brand recognition is very high in the markets we serve, and consumer surveys indicate Havertys is associated with a high level of quality, fashion, value, and service.

Merchandise and Revenues

We develop our merchandise selection with the tastes of the diverse “on trend” consumer in mind. A wide range of styles from traditional to contemporary are in our core assortment and virtually all of the furniture merchandise we carry bears the Havertys brand. We also tailor our product offerings to the needs and tastes of the local markets we serve emphasizing more “coastal,” “western” or “urban” looks as appropriate. Our custom upholstery programs and eclectic looks are an important part of our product mix and allow the on-trend consumer more self-expression.

We have avoided offering lower quality, promotional price-driven merchandise favored by many regional and national chains, which we believe would devalue the Havertys brand with the consumer. We carry nationally well-known mattress product lines such as Tempur-Pedic®, Serta® and Sealy® in addition to our private label SkyeTM.

Our customers use varying methods to purchase or finance their sales. As an added convenience to our customers, we offer financing by third-party finance companies. Sales financed by the third-party providers are not Havertys’ receivables; accordingly, we do not have any credit risk or servicing responsibility for these accounts, and there is no credit or collection recourse to Havertys. Slightly less than one-third of our sales are third-party financed. The fees we pay to the third-party are included in our selling, general, and expenses (“SG&A”) as a selling expense.

Stores

As of December 31, 2020, we operated 120 stores serving 84 cities in 16 states with approximately 4.4 million retail square feet. Our stores range in size from 19,000 to 60,000 selling square feet with the average being approximately 35,000 square feet. We strive to have our stores reflect the distinctive style and comfort consumers expect to find when purchasing their home furnishings. The store’s location and curb appeal are important to the middle to upper-middle income consumer that we target, and attractive facades complement the quality and style of our merchandise. Interior details are also important for a pleasant and inviting shopping experience. We are very intentional in having open shopping spaces and our disciplined merchandise display ensures uniformity of presentations in-store, online and in our advertising.

We currently have no plans to expand outside our distribution footprint and there are a limited number of markets that we do not currently serve that are expansion candidates.  We are evaluating certain existing stores for relocation or closure. We do not expect a significant increase in our retail square footage in 2021.

1

Online Presence

We consider our website an extension of our brick-and-mortar locations and not a separate segment of our business. Most customers will use the internet for inspiration and as a start to their shopping process to view products and prices. Our website features a variety of helpful tools including a design center with room planners, upholstery customization, and inspired accessories to create shareable “Idea Boards.” A large number of product reviews written by our customers are also provided, which some consumers find important in the decision-making process.

The next stop in the purchase journey for most consumers is a visit to a store to touch, sit, and see merchandise in person. Our sales consultants also use havertys.com as a tool to further engage our customers while they are in the store. They may make their purchase in the store or opt to return home and finalize their decisions, place their orders online and set delivery. We limit online sales of our furniture to within our delivery network, and accessories to the continental United States.

Our website traffic, as expected, increased dramatically due to the COVID-19 pandemic as people spent more time in their homes and were reluctant or not able to shop in our stores. During April when our stores were closed, we reassigned a number of our store personnel to serve as online chat agents and our in-home designers shifted to virtual visits. Once our stores reopened, we continued to see a rise in the completion of the sales process online. Our total sales completed online for 2020 increased 65% over 2019 and were approximately 4.4% of our total 2020 sales. This level of sales makes our website our highest performing “store.”

We believe offering a direct-to-customer business complements our retail store operations as we serve the customer in the method of their choosing and leverage the power of high touch service and online capabilities.

Competition

The retail sale of home furnishings is a highly fragmented and competitive business. There has been growth in the e‑commerce channel both from internet only retailers and those with a brick-and-mortar presence. The degree and sources of brick-and-mortar retail competition varies by geographic area. We compete with numerous individual retail furniture stores as well as national and regional chains. Retail stores opened or operated by furniture manufacturers in an effort to control and protect the distribution prospects of their branded merchandise compete with us in certain markets.  Mass merchants, certain department stores, and some electronics and appliance retailers also have limited furniture product offerings.

We believe Havertys is uniquely positioned in the marketplace, with a targeted mix of merchandise that appeals to customers who are somewhat more affluent than those of promotional price-oriented furniture stores. Our online presence provides most elements of a seamless, omni-channel approach that many of our competitors do not have or cannot replicate. We consider the expansion of our custom order capabilities, free in-home design service, the tailoring of merchandise on a local market basis, and the ability to make prompt delivery of orders through maintenance of inventory, significant competitive advantages.

Suppliers and Supply Chain

We buy our merchandise from numerous foreign and domestic manufacturers and importers, the largest ten of which accounted for approximately 45% of our product purchases during 2020. Most of our wood products, or “case goods,” are imported from Asia. Upholstered items are largely produced domestically, with the exception of our leather products which are primarily imported from Asia or Mexico.

We purchase our furniture merchandise produced in Asia through sourcing companies and also buy direct from manufacturers. We have dedicated quality control specialists on-site during production to ensure the items meet our specifications. Our direct import team works with industry designers and manufacturers in some of the best factories throughout Asia. Approximately 17% of our case goods sales and 8% of our upholstery sales in 2020 were generated by our direct imports.

2

The longer lead times required for deliveries from overseas factories and the production of merchandise exclusively for Havertys makes it imperative for us to have both warehousing capabilities and end-to-end supply chain visibility. Our merchandising team provides input to the automated procurement process in an effort to maintain overall inventory levels within an appropriate range and reduce the number of written sales awaiting product delivery. We use real-time information to closely follow our import orders from the manufacturing plant through each stage of transit and using this data can more accurately set customer delivery dates prior to receipt of product.

Demand created by the "nesting" response generated by COVID-19 is outpacing product availability in certain categories. Manufacturers are challenged to ensure safe work environments and have encountered some raw material shortages. Product manufactured in Asia is also impacted by shipping capacity. We believe that the current volatility in our supply chain will improve by the third quarter of 2021.

Distribution

We believe that our distribution and delivery system is one of the best in the retail furniture industry and provides us with a significant competitive advantage. Our distribution system uses a combination of three distribution centers (“DCs”) and four home delivery centers (“HDCs”). The DCs receive both domestic product and containers of imported merchandise. A warehousing management system using radio frequency scanners tracks each piece of inventory in real time and allows for random storage in the warehouse and efficient scheduling and changing of the workflow. The DCs are also designed to shuttle prepped merchandise up to 250 miles for next day home deliveries and serve HDCs within a 500-mile radius. The HDCs provide service to markets within an additional 200 miles. We use a third-party to handle over-the-road delivery of product from the DCs to the HDCs and market areas. We use Havertys team members for executing home delivery, and have branded this service “Top Drawer Delivery,” an important function serving as the last contact with our customers in the purchase process. Operating standards in our warehouse and delivery functions provide measurements for determining staffing needs and increasing productivity.

When we restarted our operations after a six-week pause we had reduced delivery capacity due to fewer personnel. Time between purchase and delivery moved from our normal 3 to 5 days to as much as 3 to 5 weeks when inventory and associate shortages were most acute. Purchases made at the end of 2020 of in-stock product were delivered within 1 to 2 weeks as we have added additional team members, but for certain merchandise, delivery times can be up to 12 weeks.

graphic
 
3

Seasonality

Our business is affected by traditional retail seasonality, advertising and promotion programs, and general economic trends.  We typically achieve our smallest quarter by revenues in the second quarter and the largest in the fourth quarter. The “nesting” response generated by COVID-19 created outsized demand beginning in the second quarter of 2020. In 2018, our fourth quarter sales did not match historical patterns as business surrounding the traditional holiday shopping periods around Thanksgiving and Christmas was significantly lower than in the prior years.

Human Capital Resources

As of December 31, 2020, Havertys’ total workforce was 2,766: 1,534 in our retail store operations, 992 in our warehouse and delivery points, 173 in our corporate operations, and 67 in our customer-service call centers. None of our team members is a party to a union contract. See Management’s Discussion & Analysis – Impact of COVID-19 for more information.

Health and Safety
We were a leader in our industry as we closed our retail stores and paused distribution operations in mid-March to help protect the health and safety of our team members. Since reopening in May, we are carefully following CDC guidelines and have established a number of safety protocols, including face covering and physical distance requirements, enhanced cleaning, encouraging daily self-health checks, voluntary temperature screening stations, and access to virtual primary care physicians at no cost. We also have a multi-disciplinary team coordinating responses to COVID-19 tests due to illness or exposure and positive COVID-19 tests. As part of that process, we have developed a robust contact tracing program to identify team members who were in close contact with an ill colleague in the workplace.

We care about our teammates, customers, and the communities we serve. We have a strong safety program that focuses on implementing policies and training programs to ensure our team members can leave their job and return home safely, every day. This focus has resulted in a reduction of our frequency of injury claims of 43.4% over five years (2016 – 2020) and our self-insured loss rates are down 38.2% over the same period. This commitment and focus have enabled us to restart our business operations without sacrificing the safety of our teammates and customers.

Diversity
Integrity and teamwork are two of our core values. These drive our approach in our everyday operations with our customers, suppliers and teammates and we believe that the best results happen when we work together. At Havertys, we see strength in America's many faces, cultures, and colors. Each person offers a unique point of view and presents a fresh perspective. We are committed to diverse representation across all levels of our workforce to reflect the vibrant and thriving diversity of the communities in which we live and work.

Retention
Our compensation programs are designed to attract, retain, and motivate team members to achieve superior results. Havertys’ total compensation for teammates includes a variety of components including competitive pay consistent with positions, skill levels, experience, and knowledge. We also offer competitive benefits, including access to healthcare plans, financial and physical wellness programs, paid time off, parental leave and retirement benefits.

We are committed to supporting our teammates’ continuous development of professional, technical and leadership skills through corporate training programs, access to digital learning resources and through partnerships with local technical learning institutions. In 2020, Havertys team members consumed approximately 119,000 hours of learning. We also offer the ability for team members to pursue degree programs, professional certificates, and individual courses in strategic fields of study through our tuition reimbursement program.

4

Trademarks and Domain Names

We have registered our various logos, trademarks and service marks. We believe that our trademark position is adequately protected in all markets in which we do business. In addition, we have registered and maintain numerous internet domain names including “havertys.com.” Collectively, the logos, trademarks, service marks and domain names that we hold are of material importance to us.

Available Information

Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports are available free of charge on our website at www.havertys.com as soon as reasonably practicable after such material is electronically filed with, or furnished to, the Securities and Exchange Commission ("SEC"). The SEC also maintains a website that contains our SEC filings at www.sec.gov.

ITEM 1A. RISK FACTORS

The following discussion of risk factors contains forward-looking statements. These risk factors may be important to understanding any statement in this annual report on Form 10-K or elsewhere. The following information should be read in conjunction with Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (MD&A), and the consolidated financial statements and related notes in Part II, Item 8. “Financial Statements and Supplementary Data” of this annual report on Form 10-K.

We routinely encounter and address risks, some of which may cause our future results to be different – sometimes materially different – than we presently anticipate. The following factors, as well as others described elsewhere in this report or in our other filings with the SEC, that could materially affect our business, financial condition or operating results should be carefully considered. Below, we describe certain important operational and strategic risks and uncertainties, but they are not the only risks we face. Our reactions to material future developments, as well as our competitors’ reactions to those developments, may also impact our business operations or financial results. If any of the following risks actually occur, our business, financial condition or operating results may be adversely affected.

Risks Related to the COVID-19 Pandemic

The COVID-19 pandemic has had, and will likely continue to have, a material effect on our business and results of operations.

The impacts of COVID-19 and measures to prevent its spread across the globe have affected businesses in a number of ways. When we extended the pause on our operations at the end of March 2020, there was significant uncertainty as to when we could resume business. As part of our business continuity plan, we made a permanent reduction in our workforce, and raised capital via a sale-leaseback of our distribution facilities. Since we restarted our operations, business has been very strong. The trend of “nesting” spending has generated additional consumer activity in our industry and strained inventory production and supply chains.  Additionally, the COVID-19 pandemic has caused us to require all team members to follow health guidelines including the wearing of masks and practicing social distancing, and for some team members increased the use of remote work and video meetings, all which could negatively impact our business and harm productivity and collaboration.

The impact of COVID-19 on our business also generally depends on the extent of restrictive governmental measures taken that affect day-to-day life and the length of time that such measures remain in place to respond to COVID-19, further deterioration of the global economy and the rollout and widespread availability of the vaccine. Consumers, once “freed” from COVID-19 restrictions, may shift their spending to other discretionary purchases. At this point, it is impossible to predict the extent and duration and the degree to which our results of operations will continue to be affected.

COVID-19 may also have the effect of heightening many of the other risks set forth below.

5

Risks Related to Our Business

We face significant competition from national, regional and local retailers of home furnishings.

The retail market for home furnishings is highly fragmented and intensely competitive. We currently compete against a diverse group of retailers, including internet only retailers, regional or independent specialty stores, dedicated franchises of furniture manufacturers and national department stores. National mass merchants and electronics and appliance retailers also have limited product offerings. In addition, there are few barriers to entry into our current and contemplated markets, and new competitors may enter our current or future markets at any time. Our existing competitors or new entrants into our industry may use a number of different strategies to compete against us, including aggressive advertising, pricing and marketing, and extension of credit to customers on terms more favorable than we offer.

Competition from any of these sources could cause us to lose market share, revenues and customers, increase expenditures or reduce prices, any of which could have a material adverse effect on our results of operations.

If we fail to anticipate changes in consumer preferences, our sales may decline.

Our products must appeal to our target consumers whose preferences cannot be predicted with certainty and are subject to change. Our success depends upon our ability to anticipate and respond in a timely manner to fashion trends relating to home furnishings. If we fail to identify and respond to these changes, our sales may decline.

We import a substantial portion of our merchandise from foreign sources. This exposes us to certain risks that include political and economic conditions. Changes in exchange rates or tariffs could impact the price we pay for these goods, resulting in potentially higher retail prices and/or lower gross profit on these goods.

Based on product costs, approximately 55% of our total furniture purchases (which exclude accessories and mattresses) in 2020 were for goods not produced domestically. All our purchases are denominated in U.S. dollars. As exchange rates between the U.S. dollar and certain other currencies become unfavorable, the likelihood of price increases from our vendors increases. Some of the products we purchase are also subject to tariffs. If tariffs are imposed on additional products or the tariff rates are increased our vendors may increase their prices. Such changes, if they occur, could have one or more of the following impacts:

we could be forced to raise retail prices so high that we are unable to sell the products at current unit volumes;
if we are unable to raise retail prices commensurately with the cost increases, gross profit as recognized under our LIFO inventory accounting method could be negatively impacted; or
we may be forced to find alternative sources of comparable product, which may be more expensive than the current product, of lower quality, or the vendor may be unable to meet our requirements for quality, quantities, delivery schedules or other key terms.

We are dependent upon the ability of our third-party producers to meet our requirements; any failures by these producers, or the unavailability of suitable suppliers at reasonable prices or limitations on our ability to source from third-party producers may negatively impact our ability to deliver quality merchandise to our customers on a timely basis or result in higher costs or reduced net sales.

We source substantially all of our products from non-exclusive, third-party producers, many of which are located in foreign countries. Although we have long-term relationships with many of our suppliers, we must compete with other companies for the production capacity of these independent manufacturers. We regularly depend upon the ability of third-party producers to secure a sufficient supply of raw materials, a skilled workforce, adequately finance the production of goods ordered and maintain sufficient manufacturing and shipping capacity. Although we monitor production and quality in many third-party manufacturing locations, we cannot be certain that we will not experience operational difficulties with our manufacturers, such as the reduction of availability of production capacity, errors in complying with product specifications, insufficient quality control, failures to meet production deadlines or increases in manufacturing costs. Such difficulties may negatively impact our ability to deliver quality products to our customers on a timely basis, which may, in turn, have a negative impact on our customer relationships and result in lower net sales.
6

We also require third-party producers to meet certain standards in terms of working conditions, environmental protection and other matters before placing business with them. As a result of costs relating to compliance with these standards, we may pay higher prices than some of our competitors for products. In addition, failure by our independent manufacturers to adhere to labor or other laws or business practices accepted as ethical, and the potential litigation, negative publicity and political pressure relating to any of these events, could disrupt our operations or harm our reputation.

Our vendors might fail in meeting our quality control standards or reacting to changes to the legislative or regulatory framework regarding product safety.

All of our vendors must comply with applicable product safety laws and regulations, and we are dependent on them to ensure that the products we buy comply with all safety standards. Any actual, potential or perceived product safety concerns could expose us to government enforcement action or private litigation and result in recalls and other liabilities. These could harm our brand's image and negatively affect our business and operating results.

Significant fluctuations and volatility in the cost of raw materials and components could adversely affect our profits.

The primary materials our vendors use to produce and manufacture our products are various woods and wood products, resin, steel, leather, cotton, and certain oil-based products. On a global and regional basis, the sources and prices of those materials and components are susceptible to significant price fluctuations due to supply/demand trends, transportation costs, government regulations and tariffs, changes in currency exchange rates, price controls, the economic and political climate, and other unforeseen circumstances. Significant increases in these and other costs in the future could materially affect our vendors’ costs and our profits as discussed above.

Our revenue can be adversely affected by risks in our supply chain.

Optimal product flow is dependent on demand planning and forecasting, production to plan by suppliers, and timely transportation. We often make commitments to purchase products from our vendors in advance of proposed production dates. Significant deviation from the projected demand for products that we sell may have an adverse effect on our results of operations and financial condition, either from lost sales or lower margins due to the need to reduce prices to dispose of excess inventory. Disruptions to our supply chain could result in late arrivals of product. This could negatively affect sales due to increased levels of out-of-stock merchandise and loss of confidence by customers in our ability to deliver goods as promised.

We face risks associated with our overseas suppliers including, but not limited to, political or economic instability, geopolitical events, environmental events, widespread health emergencies, such as the novel coronavirus, natural disasters, or social and labor unrest.

In addition, there is a risk that compliance lapses by our foreign manufacturers could occur which could lead to investigations by U.S. government agencies responsible for international trade compliance. Resulting penalties or enforcement actions could delay future imports or otherwise negatively impact our business. There also remains a risk that one or more of our foreign manufacturers will not adhere to applicable legal requirements or our compliance standards such as fair labor standards, the prohibition on child labor and other product safety or manufacturing safety standards. The violation of applicable legal requirements, including labor, manufacturing and safety laws, by any of our manufacturers, the failure of any of our manufacturers to adhere to our global compliance standards or the divergence of the labor practices followed by any of our manufacturers from those generally accepted in the U.S., could disrupt our supply of products from our manufacturers, result in potential liability to us and harm our reputation and brand, any of which could negatively affect our business and operating results.

7

The rise of oil and gasoline prices could affect our profitability.

A significant increase in oil and gasoline prices could adversely affect our profitability. In addition, governmental efforts to combat climate change through reduction of greenhouse gases may result in higher fuel costs through taxation or other means. We deliver substantially all of our customers’ purchases to their homes. Our distribution system, which utilizes three DCs and multiple home delivery centers is very transportation dependent to reach the 22 states we deliver to from our stores across 16 Southern and Midwestern states.

If transportation costs exceed amounts we are able to effectively pass on to the consumer, either by higher prices and/or higher delivery charges, then our profitability will suffer.

Because of our limited number of distribution centers, should one become damaged, our operating results could suffer.

We utilize three large distribution centers to flow our merchandise from the vendor to the consumer. This system is very efficient for reducing inventory requirements but makes us operationally vulnerable should one of these facilities become damaged.

Our information technology infrastructure is vulnerable to challenges that could harm our business.

Our ability to operate our business from day to day, in particular our ability to manage our point-of-sale, distribution system and payment information, largely depends on the efficient operation of our computer hardware and software systems. We use management information systems to communicate customer information, provide real-time inventory information, and to handle all facets of our distribution system from receipt of goods in the DCs to delivery to our customers’ homes.

The failure of these systems to operate effectively, problems with integrating various data sources, challenges in transitioning to upgraded or replacement systems, difficulty in integrating new systems, or a breach in security of these systems could adversely impact the operations of our business.

Cyber threats are rapidly evolving and those threats and the means for obtaining access to information in digital and other storage media are becoming increasingly sophisticated. Cyber threats and cyber-attackers, including ransomware attacks, can be sponsored by countries or sophisticated criminal organizations or be the work of single "hackers" or small groups of "hackers."

We invest in industry standard security technology to protect the Company’s data and business processes against risk of data security breach and cyber-attack. Our data security management program includes identity, trust, vulnerability and threat management business processes as well as adoption of standard data protection policies. We measure our data security effectiveness through industry accepted methods.  We are continuously installing new and upgrading existing information technology systems. We use employee awareness training around phishing, malware, and other cyber risks to ensure that the Company is protected, to the greatest extent possible, against cyber risks and security breaches. We are regularly the target of attempted cyber and other security threats and must continuously monitor and develop our information technology networks and infrastructure to prevent, detect, address and mitigate the risk of unauthorized access, misuse, computer viruses and other events that could have a security impact. Insider or employee cyber and security threats are increasingly a concern for all companies, including ours. Additionally, we certify our major technology suppliers and any outsourced services through accepted security certification standards.

Nevertheless, as cyber threats evolve, change and become more difficult to detect and successfully defend against, one or more cyber-attacks might defeat our or a third-party service provider's security measures in the future and obtain the personal information of customers or employees. Employee error or other irregularities may also result in a failure of security measures and a breach of information systems. Moreover, hardware, software or applications we use may have inherent defects of design, manufacture or operations or could be inadvertently or intentionally implemented or used in a manner that could compromise information security.     A security breach and loss of information may not be discovered for a significant period of time after it occurs. While we have no knowledge of a material security breach to date, any compromise of data security could result in a violation of applicable privacy and other laws or standards, the loss of valuable business data, or a disruption of our business. A security breach involving the misappropriation, loss or other unauthorized disclosure of sensitive or confidential information could give rise to unwanted media attention, materially damage our customer relationships and reputation, and result in fines, fees, or liabilities, which may not be covered by our insurance policies.

8

Risks Related to Our Industry

Changes in economic conditions could adversely affect demand for our products.

A large portion of our sales represents discretionary spending by our customers. Demand for our products is generally affected by a number of economic factors including, but not limited to: interest rates, housing starts, sales of new and existing homes, housing values, the level of mortgage refinancing, consumer confidence, debt levels and retail trends. Declining stock market values, rising food and energy costs, and higher personal taxes adversely affect demand. A decline in economic activity and conditions in the markets in which we operate would adversely affect our financial condition and results of operations.

ITEM 1B.    UNRESOLVED STAFF COMMENTS
 
None.

ITEM 2.          PROPERTIES
 
Stores
Our retail store space at December 31, 2020 totaled approximately 4.4 million square feet for 120 stores.  The following table sets forth the number of stores we operated at December 31, 2020 by state:

State
Number of Stores
 
State
Number of Stores
Florida
29
 
Maryland
4
Texas
22
 
Arkansas
3
Georgia
17
 
Louisiana
3
North Carolina
8
 
Kentucky
2
Virginia
8
 
Missouri
2
South Carolina
6
 
Ohio
2
Alabama
6
 
Indiana
1
Tennessee
6
 
Kansas
1

The 38 retail locations which we owned at December 31, 2020 had a net book value for land and buildings of $68.8 million. The remaining 82 locations are leased by us with various termination dates through 2035 plus renewal options.

Distribution Facilities
We lease our regional distribution facilities in the following locations:
 
Location
Approximate Square Footage
Braselton, Georgia
808,000
Coppell, Texas
394,000
Lakeland, Florida
335,000
Colonial Heights, Virginia
129,000
Fairfield, Ohio
50,000
Theodore, Alabama
42,000
Memphis, Tennessee
30,000

9

Corporate Facilities
We lease approximately 48,000 square feet on two floors of a suburban mid-rise office building located at 780 Johnson Ferry Road, Suite 800, Atlanta, Georgia.

We believe that our facilities are suitable and adequate for present purposes, and that the productive capacity in such facilities is substantially being utilized. For additional information, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in this report under Item 7 of Part II.

ITEM 3.  LEGAL PROCEEDINGS
 
There are no material pending legal proceedings to which we are a party or of which any of our properties is the subject.

ITEM 4.  MINE SAFETY DISCLOSURES
 
Not applicable.
 

INFORMATION ABOUT OUR EXECUTIVE OFFICERS

The following are the names, ages and current positions of our executive officers and, if they have not held those positions for the past five years, their former positions during that period with Havertys or other companies.

Name, age and office (as of March 1, 2021) and year elected to office
 
Principal occupation during last five years other than office of the Company currently held
Clarence H. Smith
70
Chairman of the Board
Chief Executive Officer
 
Director
2012
2002
 
1989
 
President and Chief Executive Officer, 2002-March 1, 2021
Steven G. Burdette
59
President
 
2021
 
Executive Vice President, Operations 2017-March 1, 2021
Executive Vice President, Stores, 2008-2017
J. Edward Clary
60
Executive Vice President,
  and Chief Information Officer
2015
 
Senior Vice President, Distribution and Chief Information Officer
2008-2015
John L. Gill
57
Executive Vice President, Merchandising
2019
 
Senior Vice President, Merchandising 2018-2019;
Vice President, Merchandising 2017-2018; Vice President, Operations 2015-2017; Eastern Regional Manager 2016-2018.
Richard B. Hare
54
Executive Vice President and
  Chief Financial Officer
2017
 
Senior Vice President,
Finance, Treasurer and Chief Financial Officer of Carmike Cinemas, Inc., 2006-2016
10


Name, age and office (as of March 1, 2021) and year elected to office
 
Principal occupation during last five years other than office of the Company currently held
Helen B. Bautista
54
Senior Vice President, Marketing
2021
 
Vice President, Marketing for Havertys, 2019-March 1, 2021;
Senior Vice President Group Account Director, 2018-2019, Vice President Group Account Director 2016-2018, Group Account Director, 2013-2016 all for Fitzco, a McCann World Group Agency.
Kelley A. Fladger
51
Senior Vice President and
  Chief Human Resources Officer
2019
 
Vice President, Human Resource Services, 2016-2019 and Chief Diversity and Inclusion Officer, 2017-2019 for Perdue Farms, Inc.;
Vice President, People Strategy and Corporate Human Resources 2014-2016 for Belk, Inc.
Rawson Haverty, Jr.
64
Senior Vice President, Real
  Estate and Development
Director
1988
 
1992
 
Has held this position for the last five years
Jenny Hill Parker
62
Senior Vice President, Finance,
  and Corporate Secretary
2019
 
Senior Vice President, Finance, Treasurer and Corporate Secretary
2010-2019
Janet E. Taylor
59
Senior Vice President,
  General Counsel
2010
 
Has held this position for the last five years
 
Rawson Haverty, Jr. and Clarence H. Smith are first cousins.

Our executive officers are elected or appointed annually by the Board of Directors for terms of one year or until their successors are elected and qualified, subject to removal by the Board at any time.

11

PART II

ITEM 5.
MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Our two classes of common stock trade on The New York Stock Exchange (“NYSE”). The trading symbol for the common stock is HVT and for Class A common stock is HVT.A.

Stockholders

Based on the number of individual participants represented by security position listings, there are approximately 6,503 holders of our common stock and 166 holders of our Class A common stock as of February 23, 2021.

Dividends

We have historically paid and expect to continue to pay for the foreseeable future, quarterly cash dividends on our Common Stock and Class A Common Stock. The payment of dividends and the amount are determined by the Board of Directors and depend upon, among other factors, our earnings, operations, financial condition, capital requirements and general business outlook at the time such dividend is considered. We have paid a cash dividend in each year since 1935. Our credit agreement includes covenants that may restrict our ability to pay dividends. For more information, see Note 5, “Credit Arrangement,” and Note 9, “Stockholders’ Equity,” in the Notes to Consolidated Financial Statements.

Equity Compensation Plans

For information regarding securities authorized for issuance under our equity compensation plans, see Part III, Item 12, “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.”

Issuer Purchases of Equity Securities
We did not repurchase any shares of our outstanding common stock during the three months ended December 31, 2020.

12

Stock Performance Graph

The following graph compares the performance of Havertys’ common stock and Class A common stock against the cumulative return of the NYSE/AMEX/Nasdaq Home Furnishings & Equipment Stores Index (SIC Codes 5700 – 5799) and the S&P Smallcap 600 Index for the period of five years commencing December 31, 2015 and ended December 31, 2020. The graph assumes an initial investment of $100 on January 1, 2015 and reinvestment of dividends.

graphic

 
2015
   
2016
   
2017
   
2018
   
2019
   
2020
 
                                     
HVT
 
$
100.00
   
$
118.25
   
$
114.92
   
$
103.42
   
$
115.40
   
$
176.36
 
HVT-A
 
$
100.00
   
$
116.70
   
$
118.00
   
$
100.12
   
$
113.97
   
$
181.20
 
S&P SmallCap 600 Index
 
$
100.00
   
$
126.56
   
$
143.30
   
$
131.15
   
$
161.03
   
$
179.20
 
SIC Codes 5700-5799
 
$
100.00
   
$
99.39
   
$
123.98
   
$
98.42
   
$
144.67
   
$
192.23
 

13

ITEM 6.   SELECTED FINANCIAL DATA

The following selected financial data and non-GAAP financial measures should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Item 7 below and the “Consolidated Financial Statements and the Notes to Consolidated Financial Statements” included in Item 8 below.

 
Year ended December 31,
 
(Dollars in thousands, except per share data)
 
2020
   
2019
   
2018
   
2017
   
2016
 
Results of Operations
                             
Net sales
 
$
748,252
   
$
802,291
   
$
817,733
   
$
819,866
   
$
821,571
 
Net sales change over prior year
   
(6.7
)%
   
(1.9
)%
   
(0.3
)%
   
(0.2
)%
   
2.1
%
Comp-store sales change over prior year
   
5.0
%
   
(1.4
)%
   
0.3
%
   
(1.3
)%
   
2.1
%
Gross profit
   
418,994
     
434,488
     
446,542
     
444,923
     
443,337
 
Percent of net sales
   
56.0
%
   
54.2
%
   
54.6
%
   
54.3
%
   
54.0
%
Selling, general and administrative expenses(1)
   
377,288
     
407,456
     
404,856
     
402,884
     
399,236
 
Percent of net sales
   
50.4
%
   
50.8
%
   
49.5
%
   
49.1
%
   
48.6
%
Income before income taxes(1)(2)
   
76,731
     
28,724
     
40,408
     
43,223
     
45,821
 
Net income(1)(2)
   
59,148
     
21,865
     
30,307
     
21,075
     
28,356
 
Share Data
                                       
Diluted earnings per share
                                       
Common Stock(1)(2)
 
$
3.12
   
$
1.08
   
$
1.42
   
$
0.98
   
$
1.300
 
Class A Common Stock
   
3.04
     
1.03
     
1.39
     
0.94
     
1.270
 
Cash dividends – amount per share:
                                       
Common Stock(3)
 
$
2.77
   
$
0.76
   
$
1.72
   
$
0.54
   
$
1.440
 
Class A Common Stock(3)
 
$
2.62
   
$
0.72
   
$
1.63
   
$
0.51
   
$
1.365
 
Shares outstanding (in thousands):
                                       
Common Stock
   
16,738
     
17,581
     
18,780
     
19,452
     
19,287
 
Class A Common Stock
   
1,474
     
1,531
     
1,757
     
1,767
     
1,818
 
       Total shares
   
18,212
     
19,112
     
20,537
     
21,219
     
21,104
 
Financial Position
                                       
Inventories
 
$
89,908
   
$
104,817
   
$
105,840
   
$
103,437
   
$
102,020
 
Capital expenditures
 
$
10,927
   
$
16,841
   
$
21,473
   
$
24,465
   
$
29,838
 
Depreciation/amortization expense
   
18,207
     
20,596
     
29,806
     
30,516
     
29,045
 
Total assets
 
$
680,372
   
$
560,072
   
$
440,179
   
$
461,329
   
$
454,505
 
Total debt(4)
   
     
     
50,803
     
54,591
     
55,474
 
Stockholders’ equity
   
252,967
     
260,503
     
274,629
     
294,142
     
281,871
 
Debt to total capital
   
N/A
     
N/A
     
15.6
%
   
15.7
%
   
16.4
%
Net cash provided by operating activities(2)
   
130,191
     
63,419
     
70,392
     
52,457
     
60,054
 
Other Supplemental Data:
                                       
Employees
   
2,766
     
3,425
     
3,418
     
3,551
     
3,656
 
Retail sq. ft. (in thousands) at year end
   
4,352
     
4,426
     
4,417
     
4,517
     
4,494
 
Annual sales per weighted average sq. ft.(5)
 
$
173
   
$
183
   
$
185
   
$
185
   
$
188
 

Due to rounding amounts may not add to totals.
(1)
Includes impairment loss of $2.4 million, or $1.8 million after tax, on a retail store in the fourth quarter of 2019 which impacted diluted earnings per share $0.09.
(2)
Includes gain of $31.6 million on a sale-leaseback transaction in the second quarter of 2020 which impacted diluted earnings per share $1.24.
(3)
Includes special dividends of $2.00 for Common Stock and $1.90 for Class A Common Stock paid in the fourth quarter of 2020 and $1.00 for Common Stock and $0.95 for Class A Common Stock paid in the fourth quarter of 2018 and 2016.
(4)
Debt is comprised completely of lease obligations accounted for under ASC 840, prior to adoption of ASU 2016-02.
(5)
Stores were closed and delivery operations were paused for approximately six weeks due to COVID-19.

14

ITEM 7.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

Industry
The retail residential furniture industry's results are influenced by the overall strength of the economy, new and existing housing sales, consumer confidence, spending on large ticket items, interest rates, and availability of credit. These factors remain tempered by rising consumer debt, home inventory constraints, and tight access to home mortgage credit, all of which provide impediments to industry growth.

Our Business
We sell home furnishings in our retail stores and via our website and record revenue when the products are delivered to our customer. Our products are selected to appeal to a middle to upper-middle income consumer across a variety of styles. Our commissioned sales team members receive a high level of product training and are provided a number of tools with which to serve our customers. We also have over 120 in‑home designers serving most of our stores. These individuals work with our sales team members to provide customers additional confidence and inspiration in their furniture purchase journey. We do not outsource the delivery function, something common in the industry, but instead ensure that the “last contact” is handled by a customer-oriented Havertys delivery team. We are recognized as a provider of high-quality fashionable products and exceptional service in the markets we serve.

Impact of COVID-19
The COVID-19 pandemic has resulted in significant economic disruption and impacted our business. We closed our stores and ceased delivery operations in the second half of March 2020. Affected team members were paid during this period and most corporate personnel transitioned to working remotely. On April 1, we extended our store closure for another 30 days and furloughed 3,033 team members or approximately 87% of our workforce. During this period, we paid the cost of enrolled health benefits of those furloughed. Given the dramatic shock to the economy caused by the pandemic and uncertainty of the ongoing impact, we made a permanent reduction in our workforce of approximately 1,200 team members effective April 30 and extended the furlough of approximately 730 team members until June 1. We reopened 103 of our stores on May 1 and the remaining 17 were opened by June 20 and deliveries restarted on May 5.

We took several steps in April and May to strengthen our financial position and maintain financial flexibility by reviewing operating expenses, evaluating merchandise purchases, reducing capital expenditures, temporarily borrowing $43.8 million on our credit facility (which has since been repaid), and completing a $70.0 million sale‑leaseback transaction in May.

Our business has been very strong since reopening. Consumers not negatively impacted financially are spending on their homes. Our online shopping and chat surged during the second quarter and continues to outpace our first quarter activity. Store traffic has increased as customers shop online but want to touch, see, and comfort test before purchasing. Consumers are also favoring quality over price and our average ticket has risen. We continue to work closely with local authorities and follow the guidance of the Centers for Disease Control and Prevention (“CDC”), implementing enhanced cleaning measures, social distancing, and the utilization of face masks for the safety of our team members, customers, and communities.

Demand is outpacing product availability in many categories. Manufacturers are challenged to ensure safe work environments and have encountered raw material shortages and transportation capacity issues. Our supply chain and sales teams, supported by a strong IT infrastructure, are working to communicate with customers and manage delivery expectations.

The COVID-19 pandemic is complex and continues to evolve with the vaccine rollout. At this point, we cannot reasonably estimate the duration of the pandemic’s influence on consumers and the “nesting” economy.

15

Management Objectives
Management is focused on capturing more market share and increasing sales per square foot of showroom space. This organic growth will be driven by concentrating our efforts on our customers with improved interactions highlighted by new products, high touch service and better technology. The Company’s strategies for profitability include gross margin focus, targeted marketing initiatives, productivity and process improvements, and efficiency and cost-saving measures. Our focus is to serve our customers better and distinguish ourselves in the marketplace.

Key Performance Indicators
We evaluate our performance based on several key metrics which include net sales, comparable store sales, written comparable store sales, sales per square foot, gross profit, operating costs as a percentage of sales, EBITDA, cash flow, and earnings per share. The goal of utilizing these measurements is to provide tools in economic decision-making such as store growth, capital allocation and product pricing. We also employ metrics that are customer focused (customer satisfaction score, on-time-delivery and quality), and internal effectiveness and efficiency metrics (average sale per ticket, closing ratios per customer store visit, inventory out-of-stock, exceptions per deliveries, and lost time incident rate).  These measurements aid us in determining areas of our operations that are in need of additional attention but are not evaluated in isolation from others, so as not to conflict with our company goals.

Comparable-store or “comp-store” sales is a measure which indicates the performance of our existing stores and website by comparing the growth in sales in store and online for a particular month over the corresponding month in the prior year. Stores are considered non-comparable if they were not open during the corresponding month in the prior year or if the selling square footage has been changed significantly. Large clearance sales events from warehouses or temporary locations are also excluded from comparable store sales. Stores closed during March, April, May and June were excluded from comp-store sales. The method we use to compute comp-store sales may not be the same method used by other retailers. We record our sales when the merchandise is delivered to the customer. We also track “written sales” and “written comp-store sales” which represents customer orders prior to delivery. The lag time between customers placing orders and delivery has grown in 2020 due to demand outpacing merchandise supply. As a retailer, comp‑store sales and written comp‑store sales are an indicator of relative customer spending and store performance. Comp-store sales, total written sales and written comp-store sales is intended only as supplemental information and is not a substitute for net sales presented in accordance with US GAAP.

Net Sales

The following outlines our sales and comp-store sales increases and decreases for the periods indicated. (Amounts and percentages may not always add to totals due to rounding.)

 
December 31,
 
   
2020
   
2019
   
2018
 
   
Net Sales
   
Comp-Store Sales
   
Net Sales
   
Comp-Store Sales
   
Net Sales
   
Comp-Store Sales
 
Period
Ended
 
Dollars
in millions
   
% Increase
(decrease)
over prior
period
   
% Increase
(decrease)
over prior
period
   
Dollars
in millions
   
% Increase
(decrease)
over prior
period
   
% Increase
(decrease)
over prior
period
   
Dollars
in millions
   
% Increase
(decrease)
over prior
period
   
% Increase
(decrease)
over prior
period
 
_Q1
 
$
179.4
     
(4.2
)%
   
11.6
%
 
$
187.2
     
(6.1
)%
   
(4.7
)%
 
$
199.4
     
(0.5
)%
   
(1.1
)%
_Q2
   
110.0
     
(42.7
)
   
(15.2
)
   
191.9
     
(3.5
)
   
(2.3
)
   
198.8
     
1.0
     
1.3
 
_Q3
   
217.5
     
3.9
     
4.0
     
209.3
     
(0.6
)
   
(0.4
)
   
210.5
     
1.4
     
2.6
 
_Q4
   
241.3
     
12.9
     
13.7
     
213.8
     
2.3
     
1.4
     
209.0
     
(2.8
)
   
(1.6
)
Year
 
$
748.3
     
(6.7
)%
   
5.0
%
 
$
802.3
     
(1.9
)%
   
(1.4
)%
 
$
817.7
     
(0.3
)%
   
0.3
%

Sales in 2020 were impacted by COVID-19. Our written sales suffered during the first weeks of March as information and news coverage concerning the pandemic increased. We closed our stores and paused operations mid-March. We enacted our business continuity plan in April which anticipated continued low levels of sales. Most stores reopened on May 1 with approximately 76% of their original staff, store hours were reduced 17%, and delivery capacity was also reduced. Our business was very strong upon reopening, total written sales for the two months ended June 30, 2020 were up 13.9% and written comparable store sales were up 17.5% compared to the same two-month period in 2019. Our written sales remained strong during the third quarter of 2020 with total written sales up 22.8% and written comparable store sales rose 22.6% over the same period in 2019. Our written sales in the fourth quarter were up 16.7% and written comp-store sales rose 17.5%.

16

Our delivery capacity was reduced as part of our business continuity plan. Deliveries resumed on May 5 with reduced personnel and capacity and total sales from May 5 through June 30, 2020 were down 13.4% compared with the same period of 2019. Demand quickly began to outpace supply and we worked during the third quarter to increase our inventory levels and delivery capacity. We adjusted our operations during the third quarter, adding additional personnel and worked with our vendors to accelerate orders. Total sales for the third quarter of 2020 were up 3.9% and comparable-store sales were up 4.0% over the same period in 2019. Manufacturers remain challenged by raw material shortages, production changes to meet safety needs, and transportation logistics. Sales for the fourth quarter were up 12.9% and comp-store sales rose 13.7%.

Revenues by product category as a percentage of net sales in 2020 increased over 2019 by 220 basis points in upholstery sales and by 60 basis points in home office due to “nesting” buying, and our mattress business declined 160 basis points due to supply-chain disruption caused by COVID-19. Our in-home designer sales were hampered during 2020 but were 22.8% of our total sales compared to 25.3% in 2019. Total sales for 2020 decreased $54.0 million or 6.7% compared to 2019. Our comp-store sales, which includes online sales, increased 5.0% or $32.7 million in 2020 compared to 2019. The remaining $86.8 million of the change was primarily from our store closures in March through April and from new, closed and otherwise non-comparable stores.

Sales in 2019 declined for the year due to severe supply-chain disruptions as we moved several product lines out of China due to the increased tariffs. Although these changes were not fully resolved until the first quarter of 2020, we did see improvement late in the third quarter of 2019.  Revenues by product category reflected the supply-chain disruption with a drop in case goods sales. Our mattress business saw an increase of 6.5% over 2018 due to customer purchases of new higher price point offerings. We offer a number of custom upholstery items and sales in this category rose 6.8% in 2019 over 2018. Total sales for 2019 decreased $15.4 million or 1.9% compared to 2018. Comp-store sales decreased 1.4% or $11.6 million in 2019 compared to 2018 and the remaining $3.8 million of the change was from closed, new and otherwise non-comparable stores.

Sales in 2018 declined for the year as business slowed markedly in the last half of the fourth quarter.  Our revenues by category remained relatively consistent with prior years with increases in our accessories sales and delivery revenue. Our average ticket increased 4.4% which helped offset the decline in the number of transactions. Our in-home designers were part of 21.5% of our sales and their average ticket was double the average.

2021 Outlook
We cannot predict the impact of consumer spending on home furnishings post-pandemic. We believe the strengthening housing market will benefit our business as our footprint covers many of the fastest growing markets. We have an appealing online presence and well positioned stores, and we offer on-trend merchandise, knowledgeable salespeople, free in-home design service, and special-order capabilities.

Gross Profit

Our cost of goods sold consists primarily of the purchase price of the merchandise together with inbound freight, handling within our distribution centers and transportation costs to the local markets we serve.  Our gross profit is primarily dependent upon vendor pricing, the mix of products sold and promotional pricing activity. Substantially all of our occupancy and home delivery costs are included in selling, general and administrative expenses as is a portion of our warehousing expenses. Accordingly, our gross profit may not be comparable to those entities that include some of these expenses in cost of goods sold.

Year-to-Year Comparisons
Gross profit as a percentage of net sales was 56.0% in 2020 compared to 54.2% in 2019. The increase was primarily due to less discounting and sales promotions and product mix. The use of the LIFO method generated a $0.6 million charge in 2020 versus $1.8 million in 2019. The impact of changes in reserves, including LIFO, contributed approximately 23 basis points to the total gross profit improvement.

17

Gross profit as a percentage of net sales was 54.2% in 2019 compared to 54.6% in 2018. This decrease was driven by higher product and freight costs. Tariffs on products imported from China began in September 2018 and increased to 25% in March 2019. The use of the LIFO method generated a $1.8 million charge in 2019 versus $0.8 million in 2018. These negative impacts were partly offset by the increasing sales generated by our in‑home designers. These sales generally have a higher margin driven by custom upholstery and accessories sales.

2021 Outlook
Our expectations for 2021 are for annual gross profit margins of approximately 55.3% to 55.8%. This assumes changes in merchandise and freight costs and its impact on the LIFO reserve.

Selling, General and Administrative Expenses

SG&A expenses are comprised of five categories: selling, occupancy, delivery and certain warehousing costs, advertising, and administrative. Selling expenses primarily are comprised of compensation of sales team members and sales support staff, and fees paid to credit card and third-party finance companies. Occupancy costs include rents, depreciation charges, insurance and property taxes, repairs and maintenance expense and utility costs. Delivery costs include personnel, fuel costs, and depreciation and rental charges for rolling stock. Warehouse costs include supplies, depreciation, and rental charges for equipment. Advertising expenses are primarily media production and space, direct mail costs, market research expenses and agency fees. Administrative expenses are comprised of compensation costs for store personnel exclusive of sales team members, information systems, executive, accounting, merchandising, advertising, supply chain, real estate and human resource departments.

We classify our SG&A expenses as either variable or fixed and discretionary. Our variable expenses include the costs in the selling and delivery categories and certain warehouse expenses as these amounts will generally move in tandem with our level of sales. The remaining categories and expenses are classified as fixed and discretionary because these costs do not fluctuate with sales. The following table outlines our SG&A expenses by classification:

 
2020
   
2019
   
2018
 
(In thousands)
       
% of
Net Sales
         
% of
Net Sales
         
% of
Net Sales
 
Variable
 
$
135,286
     
18.1
%
 
$
147,415
     
18.4
%
 
$
149,973
     
18.3
%
Fixed and discretionary
   
242,002
     
32.3
     
260,041
     
32.4
     
254,883
     
31.2
 
   
$
377,288
     
50.4
%
 
$
407,456
     
50.8
%
 
$
404,856
     
49.5
%

Year-to-Year Comparisons
Our SG&A dollars as a percent of sales decreased 40 basis points to 50.4% in 2020 from 50.8% in 2019. Our fixed and discretionary expenses fell $18.0 million or 6.9% in 2020 over 2019. This drop was due to actions taken as part of our business continuity plan. Advertising expenditures decreased approximately $9.4 million. Our occupancy costs were down $5.4 million in 2020 versus 2019 due to rent abatements in 2020 and a $2.4 million impairment charge in 2019. The workforce reduction in April also contributed to the reduction in our fixed and discretionary costs. Our variable expenses decreased 30 basis points as a percent of sales due to reduced third-party financing costs.

Our SG&A dollars as a percent of sales increased 130 basis points to 50.8% in 2019 from 49.5% in 2018. Our fixed and discretionary expenses increased $5.2 million or 2% in 2019 over 2018. This change was primarily due to an impairment loss of $2.4 million for a retail store and increases in our advertising and marketing expenses of $1.5 million. Our administrative costs rose $1.4 million driven primarily by increases in benefit costs including group medical expenses partly offset by lower incentive compensation. Our variable expenses increased slightly as a percent of sales due to higher selling costs.

18

2021 Outlook
Fixed and discretionary type expenses within SG&A are expected to be in the $261.0 to $263.0 million range for 2021. We anticipate higher advertising and marketing costs in 2021, increased compensation and incentive expense, and additional costs associated with new stores. Fixed and discretionary type expenses are expected to be at similar quarterly levels in 2021 as in 2020, as adjusted for the overall increases.

Variable costs within SG&A for 2021 are expected to be between 18.2% and 18.4% as a percent of sales.

Interest (Income) Expense, Net

We earned $0.9 million less interest income in 2020 than in 2019 due to lower rates and incurred $0.02 million more interest expense under our credit agreement.

Our interest expense for the year 2018 is primarily driven by amounts related to our lease obligations. For leases accounted for as capital and financing lease obligations under prior lease guidance, we recorded straight‑line rent expense for the land portion in occupancy costs in SG&A along with amortization on the additional asset recorded. Rental payments were recognized as a reduction of the obligations and as interest expense during 2018.

Provision for Income Taxes

Our effective tax rate was 22.9% in 2020, 23.9% in 2019 and 25.0% in 2018. The rates vary from the U.S. federal statutory rate primarily due to state income taxes. The rate in 2020 also benefitted from the recognition of state quality jobs credits of $1,527,000.  See Note 7, “Income Taxes” of the Notes to Consolidated Financial Statements for further information about our income taxes.

Liquidity and Capital Resources

Cash and Cash Equivalents at End of Year
At December 31, 2020, we had $200.1 million in cash and cash equivalents, and $6.7 million in restricted cash equivalents. See Note 1 to our consolidated financial statements for further discussion of our restricted cash equivalents. We believe that our current cash position, cash flow generated from operations, funds available from our credit agreement, and access to the long-term debt capital markets should be sufficient for our operating requirements and to enable us to fund our capital expenditures, dividend payments, and lease obligations through the next several years. In addition, we believe we have the ability to obtain alternative sources of financing. We expect capital expenditures of approximately $23.0 million in 2021. Given the current uncertainty related to the COVID-19 pandemic, we may adjust our capital expenditures as necessary or appropriate to support the operations of the business.

Long-Term Debt
In May 2020, we entered into the Third Amendment to our Amended and Restated Credit Agreement (as amended, the “Credit Agreement”) with a bank.  The Credit Agreement, which matures September 27, 2024, provides for a $60.0 million revolving credit facility. See Note 5, “Credit Arrangement” of the Notes to Consolidated Financial Statements for information about our Credit Agreement.

Leases
We use operating leases to fund a portion of our real estate, including our stores, distribution centers, and store support space.

On May 18, 2020, we completed a sale and leaseback transaction of three facilities which we initiated in April as part of our business continuity plan. The total sales price for these properties, excluding costs and taxes, was $70.0 million and their net book value was approximately $37.9 million. See Note 8, “Leases” of the Notes to Consolidated Financial Statements for further discussion of our operating leases.

19

Share Repurchases
In February 2020, our Board of Directors authorized an additional $30.0 million to the $5.4 million remaining under a share repurchase program. We suspended the program between March and August of 2020. We made cash payments of $19.7 million for repurchases of our common stock through open market purchases during 2020 and there is approximately $16.8 million at December 31, 2020 that may yet be purchased under the existing authorization.

Cash Flows Summary

graphic

Operating Activities. Cash flow generated from operations provides us with a significant source of liquidity. Our operating cash flows result primarily from cash received from our customers, offset by cash payments we make for products and services, employee compensation, operations, and occupancy costs.

Cash provided by or used in operating activities is also subject to changes in working capital. Working capital at any specific point in time is subject to many variables, including seasonality, inventory selection, the timing of cash receipts and payments, and vendor payment terms.

Net cash provided by operating activities in 2020 was $130.2 million driven primarily by net income of $59.1 million and non-cash adjustments to net income of $14.0 million, consisting of gains from sales of property and equipment, depreciation and amortization, stock-based compensation expense and changes in deferred income taxes, and by working capital inflows driven primarily by customer deposits, inventory turnover and timing of inventory purchases.

Net cash provided by operating activities in 2019 was $63.4 million driven primarily by net income of $21.9 million and non-cash adjustments to net income of $24.4 million, consisting of depreciation and amortization, stock-based compensation, impairment loss and changes in deferred income taxes, partially offset by net cash inflows associated with changes in working capital driven primarily by customer deposits and timing of inventory purchases.

Investing Activities. Cash provided by investing activities in 2020 reflects $76.3 million of proceeds from sale of property and equipment, primarily from the sale-leaseback transaction, net of $10.9 million of capital expenditures.

Cash used in investing activities in 2019 primarily reflected $16.8 million in capital expenditures.

20

Financing Activities. Cash used in financing activities in 2020 primarily reflected $50.5 million of cash dividends paid and $19.7 million of share repurchases.

Cash used in financing activities in 2019 primarily reflected $29.8 million of share repurchases and $15.1 million of cash dividends paid.

Off-Balance Sheet Arrangements
We have not entered into agreements which meet the SEC’s definition of an off-balance sheet arrangement other than operating leases and have made no financial commitments to or guarantees with respect to any unconsolidated entities or financial partnerships or special purpose entities.

Contractual Obligations
The following summarizes our contractual obligations and commercial commitments as of
December 31, 2020 (in thousands):

 
Payments Due or Expected by Period
 
   
Total
   
Less than
1 Year
   
1-3
Years
   
3-5
Years
   
After 5
Years
 
Operating leases(1)
 
$
305,243
   
$
46,398
   
$
77,416
   
$
57,676
   
$
123,753
 
Rent deferrals(2)
   
4,464
     
3,972
     
     
252
     
240
 
Purchase orders
   
201,520
     
201,520
     
     
     
 
Total contractual obligations (3)
 
$
511,227
   
$
251,890
   
$
77,416
   
$
57,928
   
$
123,993
 

(1)
These amounts are for our undiscounted lease obligations recorded in our consolidated balance sheets, as lease liabilities. For additional information about our leases, refer to Note 8, “Leases” of the Notes to the Consolidated Financial Statements.
(2)
Lease concessions related to the impact of COVID-19. For additional information about our leases, refer to Note 8, “Leases” of the Notes to the Consolidated Financial Statements.
(3)
The contractual obligations do not include any amounts related to retirement benefits. For additional information about our plans, refer to Note 10, “Benefit Plans” of the Notes to the Consolidated Financial Statements.

Store Expansion and Capital Expenditures
We have entered new markets and made continued improvements and relocations of our store base. The following outlines the change in our selling square footage for each of the three years ended December 31 (square footage in thousands):

 
2020
   
2019
   
2018
 
Store Activity:
 
#
of Stores
   
Square
Footage
   
#
of Stores
   
Square
Footage
   
#
of Stores
   
Square
Footage
 
Opened
   
1
     
28
     
3
     
98
     
1
     
29
 
Closed
   
2
     
102
     
2
     
88
     
5
     
143
 
Year end balances
   
120
     
4,352
     
121
     
4,426
     
120
     
4,418
 

The following table summarizes our store activity in 2020 and plans for 2021.

Location
Opening (Closing) Quarter
Actual or Planned
Category
Atlanta, GA
Q-1-20
Closure
Dallas/Ft. Worth, TX
Q-3-20
Open
Dallas, TX
Q-3-20
Closure
Myrtle Beach, SC
Q-1-21
Open-New Market
The Villages, FL
Q-2-21
Open
Dallas, TX
Q-3-21
Closure
To be announced
Q-4-21
Open

These plans and other changes should increase net selling space in 2021 approximately 1% over 2020 assuming the new stores open and existing stores close as planned.

21

Our investing activities in stores and operations in 2020, 2019 and 2018 and planned outlays for 2021 are categorized in the table below. Capital expenditures for stores in the years noted do not necessarily coincide with the years in which the stores open.

(Approximate in thousands)
 
Proposed 2021
   
2020
   
2019
   
2018
 
Stores:
                       
New or replacement stores
 
$
4,000
   
$
1,000
   
$
5,700
   
$
600
 
Remodels/expansions
   
4,000
     
600
     
500
     
2,300
 
Other improvements
   
4,900
     
3,200
     
4,100
     
3,300
 
Total stores
   
12,900
     
4,800
     
10,300
     
6,200
 
Distribution
   
6,400
     
3,600
     
2,700
     
12,800
 
Information technology
   
3,700
     
2,500
     
3,800
     
2,500
 
Total
 
$
23,000
   
$
10,900
   
$
16,800
   
$
21,500
 

Critical Accounting Estimates and Assumptions

Our discussion and analysis is based upon our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, and evaluate our estimates and judgments required by our policies on an ongoing basis and update them as appropriate based on changing conditions.

Accounting estimates are considered critical if both of the following conditions are met: (a) the nature of the estimates or assumptions is material because of the levels of subjectivity and judgment needed to account for matters that are highly uncertain and susceptible to change and (2) the effect of the estimates and assumptions is material to the financial statements.

We have reviewed our accounting estimates, and none were deemed to be considered critical for the accounting periods presented.

ITEM 7A.          QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk represents the potential loss arising from adverse changes in the value of financial instruments.  The risk of loss is assessed based on the likelihood of adverse changes in fair values, cash flows or future earnings.

In the ordinary course of business, we are exposed to various market risks, including fluctuations in interest rates. To manage the exposure related to this risk, we may use various derivative transactions. As a matter of policy, we do not engage in derivatives trading or other speculative activities. Moreover, we enter into financial instruments transactions with either major financial institutions or high credit-rated counterparties, thereby limiting exposure to credit and performance-related risks.

We borrowed $43.8 million under our Credit Agreement in March 2020 and repaid the borrowings in June 2020. We have exposure to floating interest rates through our Credit Agreement as interest expense related to any borrowings will fluctuate with changes in LIBOR and other benchmark rates. We do not believe a 100-basis point change in interest rates would have a significant adverse impact on our operating results or financial position.

LIBOR is the subject of recent national, international and other regulatory guidance and proposals for reform. These reforms and other pressure may cause LIBOR to disappear entirely or to perform differently than in the past. The consequences of these developments cannot be entirely predicted but, as noted above, could impact the interest earned on our investments and our interest expense. If LIBOR is no longer widely available, or otherwise at our option, we will pursue alternative interest rate calculations in our Credit Agreement and other financial instruments.

22

ITEM 8.          FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The report of our independent registered public accounting firm, the Consolidated Financial Statements of Havertys and the Notes to Consolidated Financial Statements, and the supplementary financial information called for by this Item 8, are set forth on pages F-1 to F-22 of this report.  Specific financial statements and supplementary data can be found at the pages listed in the following index:

Index
Page
Financial Statements
 
Report of Independent Registered Public Accounting Firm on the Consolidated Financial Statements
F-1
Consolidated Balance Sheets
F-2
Consolidated Statements of Comprehensive Income
F-3
Consolidated Statements of Stockholders’ Equity
F-4
Consolidated Statements of Cash Flows
F-5
Notes to Consolidated Financial Statements
F-6
Schedule II – Valuation and Qualifying Accounts
F-22

ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A.          CONTROLS AND PROCEDURES

(a) Disclosure Controls and Procedures.  Our management has evaluated, with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), the effectiveness of the design and operation of the Company’s “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based on that evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective for the purpose of providing reasonable assurance that the information we must disclose in reports that we file or submit under the Securities Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) is accumulated and communicated to the Company’s management, including its CEO and CFO, as appropriate to allow timely decisions regarding required disclosures.

(b) Management’s Annual Report on Internal Control over Financial Reporting. Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) of the Exchange Act. Under the supervision and with the participation of our management, including our CEO and CFO, we conducted an evaluation of the effectiveness of our internal control over financial reporting based upon the framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on that evaluation, our management concluded that our internal control over financial reporting is effective as of December 31, 2020.

Attestation Report of the Independent Registered Public Accounting Firm. Grant Thornton LLP, an independent registered public accounting firm, has audited the consolidated financial statements included in this annual report on Form 10-K and, as part of their audit, has issued their report, included herein, on the effectiveness of our internal control over financial reporting.

(c) Changes in Internal Control over Financial Reporting.  During the fourth quarter of 2020, there were no changes in our internal control over financial reporting that have affected, or are reasonably likely to materially affect, our internal control over financial reporting.

23

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders
Haverty Furniture Companies, Inc.

Opinion on internal control over financial reporting
We have audited the internal control over financial reporting of Haverty Furniture Companies, Inc. (a Maryland Corporation) and subsidiary (the “Company”) as of December 31, 2020, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended December 31, 2020, and our report dated March 9, 2021 expressed an unqualified opinion on those financial statements.

Basis for opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and limitations of internal control over financial reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ GRANT THORNTON LLP

Atlanta, Georgia
March 9, 2021

24

ITEM 9B.          OTHER INFORMATION

None

PART III

ITEM 10.          DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

We have adopted a Code of Conduct (the “Code”) for our directors, officers (including our principal executive officer, and principal financial and accounting officer) and team members. The Code is available on our website at www.havertys.com. In the event we amend or waive any provisions of the Code applicable to our principal executive officer or principal financial and accounting officer, we will disclose the same by filing a Form 8-K. The information contained on or connected to our Internet website is not incorporated by reference into this annual report on Form 10-K and should not be considered part of this or any other report that we file or furnish to the SEC.

We provide some information about our executive officers in Part I of this report under the heading “Information about our Executive Officers.” The remaining information called for by this item is incorporated by reference to “Proposal 1: Nominees for Election by Holders of Class A Common Stock and Nominees for Election by Holders of Common Stock,” “Corporate Governance,” “Committees of the Board” and “Certain Relationships and Related Transactions – Delinquent Section 16(a) Reports” in our 2021 Proxy Statement.

ITEM 11.          EXECUTIVE COMPENSATION

The information contained in our 2021 Proxy Statement with respect to executive compensation and transactions under the heading “Compensation Discussion and Analysis” is incorporated herein by reference in response to this item.

ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information contained in our 2021 Proxy Statement with respect to the ownership of common stock and Class A common stock by certain beneficial owners and management, and with respect to our compensation plans under which equity securities are authorized for issuance under the headings “Ownership by our Directors and Management” and “Equity Compensation Plan Information,” is incorporated herein by reference in response to this item.

For purposes of determining the aggregate market value of our common stock and Class A common stock held by non-affiliates, shares held by all directors and executive officers have been excluded. The exclusion of such shares is not intended to, and shall not, constitute a determination as to which persons or entities may be “affiliates” as defined under the Securities Exchange Act of 1934.

ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information contained in our 2021 Proxy Statement with respect to certain relationships, related party transactions and director independence under the headings “Certain Relationships and Related Transactions” and “Corporate Governance – Governance Guidelines and Policies – Director Independence” is incorporated herein by reference in response to this item.

ITEM 14.
PRINCIPAL ACCOUNTING FEES AND SERVICES

The information under the heading “Audit Matters” in our 2021 Proxy Statement is incorporated herein by reference to this item.

25

PART IV

ITEM 15.          EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a)
The following documents are filed as part of this report:

(1)
Financial Statements.
Consolidated Balance Sheets – December 31, 2020 and 2019
Consolidated Statements of Comprehensive Income – Years ended December 31, 2020, 2019 and 2018
Consolidated Statements of Stockholders’ Equity – Years ended December 31, 2020, 2019 and 2018
Consolidated Statements of Cash Flows – Years ended December 31, 2020, 2019 and 2018.
Notes to Consolidated Financial Statements

(2)
Financial Statement Schedule.

The following financial statement schedule of Haverty Furniture Companies, Inc. is filed as part of this Report and should be read in conjunction with the Consolidated Financial Statements:

Schedule II – Valuation and Qualifying Accounts

All other schedules have been omitted because they are inapplicable, or the required information is included in the Consolidated Financial Statements or notes thereto.

(3)
Exhibits:

Our SEC File Number is 1-14445 for all exhibits filed with the Securities Exchange Act reports.

Exhibit No.
 
Exhibit
3.1
 
Articles of Amendment and Restatement of the Charter of Haverty Furniture Companies, Inc. effective May 2006 (Incorporated by reference to Exhibit 3.1 to our 2006 Second Quarter Form 10-Q).
3.2
 
By-Laws of Haverty Furniture Companies, Inc., as amended and restated effective May 8, 2018 (Incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K dated May 10, 2018).
4.1
 
Description of Securities of the Registrant. (Incorporated by reference to Exhibit 4.1 to our Annual Report on Form 10-K for the fiscal year ended December 31, 2019).
10.1
 
Amended and Restated Credit Agreement by and among Haverty Furniture Companies, Inc. and Havertys Credit Services, Inc., as the Borrowers, SunTrust Bank, as the Issuing Bank and Administrative Agent and SunTrust Robinson Humphrey, Inc. as Lead Arranger, dated September 1, 2011 (Incorporated by reference to Exhibit 10.1 to our 2011 Third Quarter Form 10-Q). First Amendment to Amended and Restated Credit Agreement, dated March 31, 2016 (Incorporated by reference to Exhibit 10.1 to our 2016 First Quarter Form 10‑Q); Second Amendment to Amended and Restated Credit Agreement by and among Haverty Furniture Companies, Inc. and Havertys Credit Services, Inc., as the Borrowers, and SunTrust Bank, as the Issuing Bank and Administrative Agent (Incorporated by reference to Exhibit 10.1 to our 2019 Third Quarter Form 10-Q). Third Amendment to Amended and Restated Credit Agreement by and among Haverty Furniture Companies, Inc. and Havertys Credit Services, Inc. as Borrowers, and Truist Bank (successor by merger to SunTrust Bank) as the Issuing Bank and Administrative Agent (Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K dated May 20, 2020).
26


Exhibit No.
 
Exhibit
10.2
 
Haverty Furniture Companies, Inc., Class A Shareholders Agreement (the “Agreement”), made as of June 5, 2012, by and among, Haverty Furniture Companies, Inc., Villa Clare Partners, L.P., Clarence H. Smith, H5, L.P., Rawson Haverty, Jr., Ridge Partners, L.P. and Frank S. McGaughey (Incorporated by reference to Exhibit 10.1 to our Form 8-K filed June 8, 2012); Parties added to the Agreement and Revised Annex I as of November 1, 2012 – Marital Trust FOB Margaret M. Haverty and Marital Trust B FOB Margaret M. Haverty; Parties added to the Agreement as of December 11, 2012 – Margaret Munnerlyn Haverty Revocable Trust (Incorporated by reference to Exhibit 10.1 to our First Quarter 2013 Form 10-Q); Parties added to the Agreement as of July 5, 2013 – Richard McGaughey (Incorporated by reference to Exhibit 10.1 to our Second Quarter 2013 Form 10-Q). Amendment to Class A Shareholders Agreement, as of December 30, 2016 removing Ridge Partners, L.P. and Frank S. McGaughey (Incorporated by reference to Exhibit 10.2.1 to our 2016 Form 10-K); Parties added to the Agreement as of May 1, 2019 – H5-MHG, LLC, H5-JMH, LLC, H5-JRH, LLC, H5-MEH, LLC, H5-BMH, LLC (Incorporated by reference to Exhibit 99.1 to H5, L.P.’s Schedule 13 D/A filed May 22, 2019).
+10.3
 
2004 Long-Term Incentive Plan effective as of May 10, 2004 (Incorporated by reference to Exhibit 10.1 to our Registration Statement on Form S-8, File No. 333-120352); Amendment No. One to our 2004 Long-Term Incentive Plan effective as of May 9, 2011 (Incorporated by reference to Exhibit 4.1 to our Registration Statement on Form S-8, File No. 333-176100).
+10.4
 
2014 Long-Term Incentive Plan effective as of May 12, 2014 (Incorporated by reference to Exhibit 10.1 to our Registration Statement on Form S-8, File No. 333-197969); Amendment No. One to our 2014 Long-Term Incentive Plan effective June 1, 2018 (Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K dated April 10, 2018).
+10.5
 
Amended and Restated Non-Employee Director Compensation Plan, effective as of May 17, 2019 (Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K dated May 17, 2019).
+10.6
 
Amended and Restated Directors’ Deferred Compensation Plan, effective as of May 17, 2019 (Incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K dated May 17, 2019.
+10.7
 
Amended and Restated Supplemental Executive Retirement Plan, effective January 1, 2009 (Incorporated by reference to Exhibit 10.9 to our 2008 Form 10-K). Amendment Number One to the Amended and Restated Supplemental Executive Retirement Plan, effective as of January 1, 2009 and Amendment Number Two effective as of December 31, 2015 (Incorporated by reference to Exhibit 10.7 to our 2015 Form 10-K). Amendment Number Three to the Amended and Restated Supplemental Executive Retirement Plan, effective December 21, 2016 (Incorporated by reference to Exhibit 10.7.1 to our 2016 Form 10-K).
+10.8
 
Form of Agreement dated February 27, 2018 regarding Change in Control with the Named Executive Officers and a Management Director (Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K dated March 5, 2018).
+10.8.1
 
Form of Agreement dated February 27, 2018, regarding Change in Control with Executive Officers who are not Named Executive Officers or Management Directors (Incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K dated March 5, 2018).
+10.9
 
Amended and Restated Non-Qualified Deferred Compensation Plan, effective as of August 9, 2016 (Incorporated by reference to Exhibit 10.9 to our 2016 Form 10-K).
+10.10
 
Top Hat Mutual Fund Option Plan, effective as of January 15, 1999 (Incorporated by reference to Exhibit 10.15 to our 1999 Form 10-K).
+10.11
 
Form of Restricted Stock Units Award Notice, Form of Performance Restricted Stock Units (EBITDA) Award Notice and Form of Performance Restricted Units (Sales) Award Notice in connection with the 2014 Long-Term Incentive Compensation Plan. (Incorporated by reference to Exhibits 10.1, 10.2 and 10.3 to our Current Report on Form 8-K dated February 3, 2017).
27


Exhibit No.
 
Exhibit
+10.12
 
Form of Restricted Stock Units Award Notice, Form of Performance Restricted Stock Units (EBITDA) Award Notice and Form of Performance Restricted Units (Sales) Award Notice in connection with the 2014 Long-Term Incentive Compensation Plan. (Incorporated by reference to Exhibits 10.1, 10.2 and 10.3 to our Current Report on Form 8-K dated February 2, 2018).
+10.13
 
Form of Employee Agreement dated September 19, 2018 (Incorporated by reference to Exhibit 10.1 to our 2018 Third Quarter Form 10-Q)
+10.14
 
Restricted Stock Agreement dated September 19, 2018 (Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K dated September 21, 2018). 
+10.15
 
Form of Restricted Stock Units Award Notice, Form of Performance Restricted Stock Units (EBITDA) Award Notice and Form of Performance Restricted Units (Sales) Award Notice in connection with the 2014 Long-Term Incentive Compensation Plan. (Incorporated by reference to Exhibits 10.1, 10.2 and 10.3 to our Current Report on Form 8-K dated January 29, 2020). 
+10.16
 
Form of Restrictive Covenant Agreement (Incorporated by reference to Exhibit 10.4 to our Current Report on Form 8-K dated January 29, 2020). 
+10.17
 
Form of Restricted Stock Units Award Notice, Form of Performance Restricted Stock Units (EBITDA) Award Notice and Form of Performance Restricted Units (Sales) Award Notice in connection with the 2014 Long-Term Incentive Compensation Plan. (Incorporated by reference to Exhibits 10.1, 10.2 and 10.3 to our Current Report on Form 8-K dated January 27, 2021). 
10.18
 
Lease Agreement dated July 26, 2001; Amendment No. 1 dated November 2001 and Amendment No. 2 dated July 29, 2002 between Haverty Furniture Companies, Inc. as Tenant and John W. Rooker, LLC as Landlord (Incorporated by reference to Exhibit 10.1 to our 2002 Third Quarter Form 10-Q).  Amendment No. 3 dated July 29, 2005 and Amendment No. 4 dated January 22, 2006 between Haverty Furniture Companies, Inc. as Tenant and ELFP Jackson, LLC as successor in interest to John W. Rooker, LLC as Landlord (Incorporated by reference to Exhibit 10.15.1 to our 2006 Form 10-K). Fifth Amendment entered into as of December 3, 2018 to Lease Agreement dated July 26, 2001, as amended by and between 1090 Broadway Avenue Distribution Investors, LLC, as successor in interest to ELFP Jackson, LLC as Landlord and Haverty Furniture Companies, Inc., as Tenant. (Incorporated by reference to Exhibit 10.21.1 to our 2018 Form 10-K). 
10.19
 
Contract of Sale dated August 6, 2002, between Haverty Furniture Companies, Inc. as Seller and HAVERTACQII LLC, as Landlord (Incorporated by reference to Exhibit 10.2 to our 2002 Third Quarter Form 10-Q). 
10.20
 
Lease Agreement dated August 6, 2002, between Haverty Furniture Companies, Inc. as Tenant and HAVERTACQII LLC, as Landlord (Incorporated by reference to Exhibit 10.3 to our 2002 Third Quarter Form 10-Q). 
10.21
 
Amended and Restated Retailer Program Agreement dated November 5, 2013, between Haverty Furniture companies, Inc. and GE Capital Retail Bank (formerly known as GE Money Bank). Portions of this document have been redacted pursuant to a request for confidential treatment filed pursuant to the Freedom of Information Act. (Incorporated by reference to Exhibit 10.13 to our 2013 Form 10-K/A); First Amendment to the Amended and Restated Retailer Program Agreement between Haverty Furniture Companies, Inc. and Synchrony Bank (formerly GE Capital Retail Bank).  Portions of this document have been redacted pursuant to a request for confidential treatment filed pursuant to the Freedom of Information Act. (Incorporated by reference to Exhibit 10.1 to our 2018 Second Quarter Form 10-Q).
10.22
 
Purchase Agreement, dated as of May 18, 2020 between Haverty Furniture Companies, Inc. (“Seller”), and HF Coppel TX Landlord, LLC, HF Lakeland FL Landlord, LLC and HF Colonial Heights VA Landlord, LLC (each a “Buyer” and collectively, the “Buyers”) (Incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K dated May 20, 2020).
10.23
 
Lease Agreement dated May 18, 2020 between Haverty Furniture Companies, Inc. as Tenant and HF Coppel TX Landlord, LLC as Landlord (Incorporated by reference to Exhibit 10.3 to our Current Report on Form 8-K dated May 20, 2020).
28


Exhibit No.
 
Exhibit
10.24
 
Lease Agreement dated May 18, 2020 between Haverty Furniture Companies, Inc. as Tenant and HF Lakeland FL Landlord, LLC as Landlord (Incorporated by reference to Exhibit 10.4 to our Current Report on Form 8-K dated May 20, 2020).
10.25
 
Lease Agreement dated May 18, 2020 between Haverty Furniture Companies, Inc. as Tenant and HF Colonial Heights VA Landlord, LLC as Landlord (Incorporated by reference to Exhibit 10.5 to our Current Report on Form 8-K dated May 20, 2020).
*21.1
 
Subsidiaries of Haverty Furniture Companies, Inc.
*23.1
 
Consent of Grant Thornton LLP, Independent Registered Public Accounting Firm.
*31.1
 
Certification pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as amended.
*31.2
 
Certification pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as amended.
#32.1
 
Certifications pursuant to 18 U.S.C. Section 1350.
101
 
The following financial information from our Report on Form 10-K for the year ended December 31, 2020, formatted in inline XBRL: (i) Consolidated Balance Sheets ended  December 31, 2020 and 2019, (ii) Consolidated Statements of Comprehensive Income for the years ended December 31, 2020, 2019 and 2018, (iii) Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2020, 2019 and 2018, (iv) Consolidated Statements of Cash Flow for the years ended December 31, 2020, 2019 and 2018, and (v) the Notes to Consolidated Financial Statements.
104
 
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

*
Filed herewith.
+
Indicates a management contract or compensatory plan or arrangement required to be filed as exhibits pursuant to Item 15(b) of Form 10-K.
#
Furnished herewith.

Item 16.  Form 10-K Summary

None.

29


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders
Haverty Furniture Companies, Inc.

Opinion on the financial statements
We have audited the accompanying consolidated balance sheets of Haverty Furniture Companies, Inc. (a Maryland corporation) and subsidiary (the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2020, and the related notes and financial statement schedule included under Item 15(a) (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated March 9, 2021 expressed an unqualified opinion.

Basis for opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical audit matters
Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.

/s/ GRANT THORNTON LLP

We have served as the Company’s auditor since 2016.

Atlanta, Georgia
March 9, 2021

F-1



HAVERTY FURNITURE COMPANIES, INC.
CONSOLIDATED BALANCE SHEETS

 
December 31,
 
(In thousands, except per share data)
 
2020
   
2019
 
Assets
           
Current assets
           
Cash and cash equivalents
 
$
200,058
   
$
75,739
 
Restricted cash equivalents
   
6,713
     
6,663
 
Inventories
   
89,908
     
104,817
 
Prepaid expenses
   
9,580
     
7,652
 
Other current assets
   
9,985
     
9,652
 
Total current assets
   
316,244
     
204,523
 
Property and equipment, net
   
108,366
     
156,534
 
Right-of-use lease assets
   
228,749
     
175,474
 
Deferred income taxes
   
15,814
     
13,198
 
Other assets
   
11,199
     
10,343
 
Total assets
 
$
680,372
   
$
560,072
 
                 
Liabilities and Stockholders’ Equity
               
Current liabilities
               
Accounts payable
 
$
31,429
   
$
27,830
 
Customer deposits
   
86,183
     
30,121
 
Accrued liabilities
   
52,963
     
39,654
 
Current lease liabilities
   
33,466
     
29,411
 
Total current liabilities
   
204,041
     
127,016
 
Noncurrent lease liabilities
   
200,200
     
149,594
 
Other liabilities
   
23,164
     
22,959
 
Total liabilities
   
427,405
     
299,569
 
Stockholders’ equity
               
Capital Stock, par value $1 per share
               
Preferred Stock, Authorized – 1,000 shares; Issued:  None
   
     
 
Common Stock, Authorized – 50,000 shares; Issued: 2020 – 29,600; 2019 – 29,431
   
29,600
     
29,431
 
Convertible Class A Common Stock, Authorized – 15,000 shares; Issued: 2020 – 1,996; 2019 – 2,054
   
1,996
     
2,054
 
Additional paid-in capital
   
96,850
     
93,208
 
Retained earnings
   
304,626
     
295,999
 
Accumulated other comprehensive loss
   
(2,560
)
   
(2,087
)
Treasury stock at cost – Common Stock (2020 – 12,862; 2019 – 11,850) and Convertible Class A Common Stock (2020 and 2019 – 522)
   
(177,545
)
   
(158,102
)
Total stockholders’ equity
   
252,967
     
260,503
 
Total liabilities and stockholders’ equity
 
$
680,372
   
$
560,072
 

The accompanying notes are an integral part of these consolidated financial statements.

F-2


HAVERTY FURNITURE COMPANIES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 
Year Ended December 31,
 
(In thousands, except per share data)
 
2020
   
2019
   
2018
 
Net sales
 
$
748,252
   
$
802,291
   
$
817,733
 
Cost of goods sold
   
329,258
     
367,803
     
371,191
 
Gross profit
   
418,994
     
434,488
     
446,542
 
                         
Expenses:
                       
Selling, general and administrative
   
377,288
     
407,456
     
404,856
 
Other income, net
   
(34,899
)
   
(405
)
   
(145
)
Total expenses
   
342,389
     
407,051
     
404,711
 
                         
Income before interest and income taxes
   
76,605
     
27,437
     
41,831
 
Interest (income) expense, net
   
(126
)
   
(1,287
)
   
1,423
 
Income before income taxes
   
76,731
     
28,724
     
40,408
 
Income tax expense
   
17,583
     
6,859
     
10,101
 
Net income
 
$
59,148
   
$
21,865
   
$
30,307
 
Other comprehensive (loss) income, net of tax:
                       
Defined benefit pension plan adjustments; net of          tax expense (benefit) of $(159), $(238) and $226
 
$
(473
)
 
$
(622
)
 
$
679
 
                         
Comprehensive income
 
$
58,675
   
$
21,243
   
$
30,986
 
                         
Basic earnings per share:
                       
Common Stock
 
$
3.18
   
$
1.10
   
$
1.45
 
Class A Common Stock
 
$
3.04
   
$
1.04
   
$
1.39
 
                         
Diluted earnings per share:
                       
Common Stock
 
$
3.12
   
$
1.08
   
$
1.42
 
Class A Common Stock
 
$
3.04
   
$
1.03
   
$
1.39
 

The accompanying notes are an integral part of these consolidated financial statements.

F-3



HAVERTY FURNITURE COMPANIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

 
Year Ended December 31,
 
   
2020
   
2019
   
2018
 
(In thousands, except per share data)
 
Shares
   
Dollars
   
Shares
   
Dollars
   
Shares
   
Dollars
 
Common Stock:
                                   
Beginning balance
   
29,431
   
$
29,431
     
29,079
   
$
29,079
     
28,950
   
$
28,950
 
Conversion of Class A Common Stock
   
58
     
58
     
226
     
226
     
10
     
10
 
Stock compensation transactions, net
   
111
     
111
     
126
     
126
     
119
     
119
 
Ending balance
   
29,600
     
29,600
     
29,431
     
29,431
     
29,079
     
29,079
 
Class A Common Stock:
                                               
Beginning balance
   
2,054
     
2,054
     
2,280
     
2,280
     
2,290
     
2,290
 
Conversion to Common Stock
   
(58
)
   
(58
)
   
(226
)
   
(226
)
   
(10
)
   
(10
)
Ending balance
   
1,996
     
1,996
     
2,054
     
2,054
     
2,280
     
2,280
 
Treasury Stock:
                                               
Beginning balance (includes 522 shares Class A Stock for each of the years presented; remainder are Common Stock)
   
(12,372
)
   
(158,102
)
   
(10,822
)
   
(129,025
)
   
(10,020
)
   
(111,322
)
Directors’ Compensation Plan
   
21
     
265
     
55
     
680
     
88
     
1,029
 
Purchases
   
(1,033
)
   
(19,708
)
   
(1,605
)
   
(29,757
)
   
(890
)
   
(18,732
)
Ending balance
   
(13,384
)
   
(177,545
)
   
(12,372
)
   
(158,102
)
   
(10,822
)
   
(129,025
)
Additional Paid-In Capital:
                                               
Beginning balance
           
93,208
             
91,394
             
88,978
 
Stock option and restricted stock issuances
           
(1,063
)
           
(1,568
)
           
(1,352
)
Directors’ Compensation Plan
           
330
             
(53
)
           
(590
)
Stock-based compensation
           
4,375
             
3,435
             
4,358
 
Ending balance
           
96,850
             
93,208
             
91,394
 
Retained Earnings:
                                               
Beginning balance
           
295,999
             
282,366
             
287,390
 
Impact of adoption of new accounting pronouncement
           
             
6,824
             
133
 
Net income
           
59,148
             
21,865
             
30,307
 
Cash dividends
(Common Stock: 2020 – $2.77; 2019 - $0.76; and 2018 – $1.72 per share
 Class A Common Stock: 2020 - $2.62; 2019 - $0.72; and 2018 – $1.63 per share)
           
(50,521
)
           
(15,056
)
           
(35,464
)
Ending balance
           
304,626
             
295,999
             
282,366
 
                                                 
Accumulated Other Comprehensive Loss:
                                               
Beginning balance
           
(2,087
)
           
(1,465
)
           
(2,144
)
Pension liabilities adjustment, net of taxes
           
(473
)
           
(622
)
           
679
 
Ending balance
           
(2,560
)
           
(2,087
)
           
(1,465
)
Total Stockholders’ Equity
         
$
252,967
           
$
260,503
           
$
274,629
 

The accompanying notes are an integral part of these consolidated financial statements.

F-4


 
HAVERTY FURNITURE COMPANIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

 
Year ended December 31,
 
(In thousands)
 
2020
   
2019
   
2018
 
Cash Flows from Operating Activities
                 
Net income
 
$
59,148
   
$
21,865
   
$
30,307
 
Adjustments to reconcile net income to net cash
provided by operating activities:
                       
Depreciation and amortization
   
18,207
     
20,596
     
29,806
 
Net loss on asset impairment
   
     
2,415
     
 
Stock-based compensation
   
4,375
     
3,435
     
4,358
 
Deferred income taxes
   
(2,458
)
   
(2,691
)
   
(439
)
Net (gain) loss on sale of land, property and equipment
   
(34,746
)
   
(13
)
   
425
 
Other
   
595
     
719
     
465
 
Changes in operating assets and liabilities:
                       
Inventories
   
14,909
     
1,023
     
(2,403
)
Customer deposits
   
56,062
     
5,656
     
(3,348
)
Other assets and liabilities
   
(3,250
)
   
1,833
     
9,731
 
Accounts payable and accrued liabilities
   
17,349
     
8,581
     
1,490
 
Net cash provided by operating activities
   
130,191
     
63,419
     
70,392
 
Cash Flows from Investing Activities
                       
Capital expenditures
   
(10,927
)
   
(16,841
)
   
(21,473
)
Proceeds from sale of property and equipment
   
76,285
     
2,270
     
2,446
 
Other
   
     
     
55
 
Net cash used in investing activities
   
65,358
     
(14,571
)
   
(18,972
)
Cash Flows from Financing Activities
                       
Proceeds from borrowings under revolving credit facilities
   
43,800
     
     
 
Payments of borrowings under revolving credit facilities
   
(43,800
)
   
     
 
Net change in borrowings under revolving credit facilities
   
     
     
 
Payments on lease obligations
   
     
     
(3,788
)
Dividends paid
   
(50,521
)
   
(15,056
)
   
(35,464
)
Common stock repurchased
   
(19,708
)
   
(29,757
)
   
(18,732
)
Taxes on vested restricted shares
   
(951
)
   
(1,442
)
   
(1,233
)
Net cash used in financing activities
   
(71,180
)
   
(46,255
)
   
(59,217
)
Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash Equivalents
   
124,369
     
2,593
     
(7,797
)
Cash, Cash Equivalents and Restricted Cash Equivalents at Beginning of Year
   
82,402
     
79,809
     
87,606
 
Cash and Cash Equivalents and Restricted Cash Equivalents at End of Year
 
$
206,771
   
$
82,402
   
$
79,809
 
                         
Supplemental Disclosures