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Havertys Reports Earnings for Third Quarter 2018

ATLANTA, Oct. 30, 2018 (GLOBE NEWSWIRE) -- HAVERTYS (NYSE:  HVT and HVT.A) reports earnings per share of $0.39 for the third quarter of 2018, compared to $0.28 for the third quarter in 2017.  The earnings per share for the nine months ended September 30, 2018 is $0.98, compared to $0.84 for the same period of 2017.

Clarence H. Smith, chairman, president and chief executive officer, said, “We had a solid third quarter and made strides in key operational areas of distribution and store count right-sizing. Our sales for the period were good and we had improved gross margins for the quarter. The performance of several of our new product lines is very encouraging as we enter the fourth quarter. 

“The 10% tariff on furniture, accessories, and related components imported into the U.S. from China went into effect for goods received at U.S. ports on September 25, 2018. This new tariff is scheduled to increase to 25% on January 1, 2019. We have been working closely with our vendor partners to find workable solutions related to this new cost. We do not believe that the tariffs will have a significant impact on our results from operations for the fourth quarter of 2018. The result of an increase to 25% is less clear and more pessimistic for the start of next year. We are currently talking with our suppliers on 2019 pricing and possible options for movement of production to other countries and we are evaluating retail price increases and merchandise selection. We anticipate having better visibility on resolution on many of these variables by the end of the year.”

Financial Highlights

Third Quarter 2018 Compared to Third Quarter 2017

  • As previously announced, net sales increased 1.4% to $210.5 million.  Comparable store sales increased 2.6%.
  • Total written sales were up 1.8% and written comparable store sales rose 2.6%.
  • Average written ticket increased 5.9% and custom upholstery written business grew 10.6%.
  • Gross profit margins increased 90 basis points to 54.8%. Merchandise pricing and product mix and reduced product markdowns contributed to the improvement with a smaller negative LIFO impact.
  • SG&A costs as a percent of sales were 49.0% in 2018 and 49.2% in 2017. Total SG&A dollars were up $1.1 million as higher labor and fuel costs drove increases in warehouse and delivery expenses and administrative costs rose due to increased compensation expense. These increases were partly offset by decreased occupancy expense.
  • Other expense (income), net is composed primarily of a $0.8 million loss on disposal of property used as a delivery truck drop-site.

Nine Months ended September 30, 2018 Compared to Same Period of 2017

  • Net sales increased 0.6% to $608.8 million.  Comparable store sales increased 0.9%.
  • Average written ticket rose 3.7% and custom upholstery sales increased 9.6%.
  • Gross profit margins were 54.6% versus 54.3% as a percent of sales.
  • SG&A costs as a percent of sales were 49.8% for 2018 versus 49.5% for 2017. Total SG&A dollars rose $3.6 million due to increased warehouse and delivery costs, administrative expenses, and selling costs.
  • Other expense (income), net is primarily from the disposal of assets.

Expectations and Other

  • Total delivered sales for the fourth quarter to date of 2018 are up approximately 0.2% and comparable store sales are up 0.6% over the same period last year.  Total written sales for the fourth quarter to date of 2018 are approximately 2.3% below the same period last year and written comparable store sales are down 1.8%.
  • We expect that gross profit margins for the full year 2018 will be approximately 54.5%.
  • Our estimate for fixed and discretionary type SG&A expenses for 2018 is $257.0 to $259.0 million compared to $257.0 million for these same costs in 2017. The variable type costs within SG&A for the full year of 2018 are expected to be 18.5% percent of sales compared to 18.2% in 2017.
  • We plan to enter the Chattanooga, TN market with a store at the end of 2018 and are closing stores in Raleigh, NC and Monroe, LA during the fourth quarter.
  • Our standard selling square footage should decrease approximately 2.2% in 2018 and the expansion of the western distribution center increased warehouse square footage by 156,000. Total capital expenditures are estimated to be approximately $20.0 million in 2018.

/EIN News/ --

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


    Three Months Ended
September 30,
  Nine Months Ended
September 30,
 
    2018   2017   2018   2017  
                           
Net Sales    $ 210,547    $ 207,647    $ 608,765    $ 604,904  
Cost of goods sold     95,175     95,632     276,689     276,175  
Gross Profit     115,372     112,015     332,076     328,729  
Credit service charges     24     38     81     126  
   Gross profit and other revenue     115,396     112,053     332,157     328,855  
                           
Expenses:                          
Selling, general and administrative     103,185     102,099     302,942     299,310  
Provision for doubtful accounts     34     18     58     181  
Other expense (income), net     713     (276 )   (98 )   (1,430 )
   Total expenses     103,932     101,841     302,902     298,061  
                           
Income before interest and income taxes     11,464     10,212     29,255     30,794  
Interest expense, net     260     493     1,184     1,641  
                           
Income before income taxes     11,204     9,719     28,071     29,153  
Income tax expense     2,852     3,736     7,192     10,999  
   Net income    $ 8,352    $ 5,983    $ 20,879    $ 18,154  
                           
Diluted earnings per share:                          
Common Stock    $ 0.39    $ 0.28    $ 0.98    $ 0.84  
Class A Common Stock    $ 0.38    $ 0.27    $ 0.94    $ 0.81  
                           
Diluted weighted average shares outstanding:                          
Common Stock     21,230     21,610     21,408     21,582  
Class A Common Stock     1,765     1,798     1,766     1,804  
                           
Cash dividends per share:                          
Common Stock    $ 0.1800    $ 0.1500    $ 0.5400    $ 0.3900  
Class A Common Stock    $ 0.1700    $ 0.1425    $ 0.5100    $ 0.3675  
                           


HAVERTY FURNITURE COMPANIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands – Unaudited)


    September 30,
2018
  December 31,
2017
  September 30,
2017
 
    (Unaudited)       (Unaudited)  
                     
ASSETS                    
Current assets                    
Cash and cash equivalents    $ 96,269   $ 79,491    $ 86,903  
Restricted cash and cash equivalents     8,226     8,115     8,089  
Accounts receivable, net     1,827     2,408     2,706  
Inventories     108,344     103,437     99,664  
Prepaid expenses     9,818     11,314     8,910  
Other current assets     6,291     5,922     6,973  
  Total current assets     230,775     210,687     213,245  
                     
Accounts receivable, long-term, net     227     254     311  
Property and equipment, net     220,286     229,215     226,693  
Deferred income taxes     12,896     12,375     21,339  
Other assets     9,400     8,798     8,611  
  Total assets    $ 473,584   $ 461,329    $ 470,199  
                     
LIABILITIES AND STOCKHOLDERS’ EQUITY                    
Current liabilities                    
Accounts payable    $ 24,926   $ 20,501    $ 26,550  
Customer deposits     30,541     27,813     29,454  
Accrued liabilities     41,713     37,582     38,418  
Current portion of lease obligations     3,938     3,788     3,733  
  Total current liabilities     101,118     89,684     98,155  
                     
Lease obligations, less current portion     47,829     50,803     51,523  
Other liabilities     32,214     26,700     26,549  
  Total liabilities     181,161     167,187     176,227  
                     
Stockholders’ equity     292,423     294,142     293,972  
  Total liabilities and stockholders’ equity    $ 473,584   $ 461,329    $ 470,199  



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


    Nine Months Ended
September 30,
 
    2018   2017  
               
CASH FLOWS FROM OPERATING ACTIVITIES:              
Net income   $ 20,879   $ 18,154  
Adjustments to reconcile net income to net
     cash provided by operating activities:
             
Depreciation and amortization     22,650     22,819  
Stock-based compensation expense     3,781     3,045  
Deferred income taxes     (592 )   (2,990 )
Gain on insurance recovery     (307 )   (1,531 )
Proceeds from insurance recovery     266     916  
Provision for doubtful accounts     58     181  
Other     866     626  
Changes in operating assets and liabilities:              
  Accounts receivable     550     1,508  
  Inventories     (4,907 )   2,356  
  Customer deposits     2,728     4,531  
  Other assets and liabilities     6,534     1,977  
  Accounts payable and accrued liabilities     9,988     (2,844 )
  Net cash provided by operating activities     62,494     48,748  
               
CASH FLOWS FROM INVESTING ACTIVITIES:              
  Capital expenditures     (18,231 )   (15,394 )
Proceeds from sale of property and equipment     2,421     -  
Proceeds from insurance for destroyed property and equipment     55     1,045  
Other     -     83  
  Net cash used in investing activities     (15,755 )   (14,266 )
               
CASH FLOWS FROM FINANCING ACTIVITIES:              
  Payments on lease obligations     (2,824 )   (2,577 )
Taxes on vested restricted shares     (1,233 )   (1,555 )
Dividends paid     (11,337 )   (8,223 )
Common stock purchased     (14,456 )   -  
Construction allowance receipts     -     1,350  
    Net cash used in financing activities     (29,850 )   (11,005 )
               
Increase in cash, cash equivalents and restricted cash equivalents
     during the period
    16,889     23,477  
               
Cash, cash equivalents and restricted cash equivalents at beginning
     of period
    87,606     71,515  
               
Cash, cash equivalents and restricted cash equivalents at end of
     period
  $ 104,495   $ 94,992  
 

SG&A Expense Classification

We classify our SG&A expenses as either variable or fixed and discretionary.  Our variable expenses are comprised of selling and delivery costs.  Selling expenses are primarily compensation and related benefits for our commission-based sales associates, the discount we pay for third party financing of customer sales and transaction fees for credit card usage.  We do not outsource delivery so these costs include personnel, fuel, and other expenses related to this function.  Fixed and discretionary expenses are comprised of rent, depreciation and amortization and other occupancy costs for stores, warehouses and offices, and all advertising and administrative costs.

Conference Call Information

The company invites interested parties to listen to the live audiocast of the conference call on Wednesday, October 31 at its website, havertys.com under the investor relations section.  If you cannot listen live, a replay will be available on the day of the conference call at the website or via telephone at approximately 1:00 p.m. ET through Wednesday, November 7.  The number to access the telephone playback is 1‑888-203-1112 (access code:  8583097).

About Havertys

Havertys (NYSE:  HVT and HVT.A), established in 1885, is a full-service home furnishing retailer with 120 showrooms in 16 states in the Southern and Midwestern regions providing its customers with a wide selection of quality merchandise in middle to upper middle price ranges.  Additional information is available on the company’s website, havertys.com.

Safe Harbor

This press release includes statements that constitute forward-looking statements within the meaning of the federal securities laws.  Generally, the words "believe," "expect," "intend," "estimate," "anticipate," "project," "will" and similar expressions identify forward-looking statements, which are not historical in nature. We intend for all forward-looking statements contained herein or on our website, and all subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf, to be covered by the safe harbor provisions for forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and the provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (which Sections were adopted as part of the Private Securities Litigation Reform Act of 1995). Forward-looking statements may relate to, for example, future operations, financial condition, economic performance (including gross profit margins and expenses), capital expenditures, and demand for our products.  The Company cautions that its forward-looking statements involve risks and uncertainties, and while we believe that our expectations for the future are reasonable in view of currently available information, you are cautioned not to place undue reliance on our forward-looking statements.  Actual results or events may differ materially from those indicated as a result of various important factors.  Such factors may include, among other things, the state of the economy; state of the residential construction and housing markets; the consumer spending environment for big ticket items; effects of competition; management of relationships with our suppliers and vendors and disruptions in their operations; the imposition of tariffs and other trade barriers and the effect of retaliatory trade measures; new regulations or taxation plans, as well as other risks and uncertainties discussed in the Company's Annual Report on Form 10-K and from time to time in the Company's filings with the SEC.

Contact:
Havertys (404) 443-2900
Richard B. Hare
  EVP & CFO
Jenny Hill Parker
  SVP, Finance, Secretary and Treasurer

SOURCE:  Havertys

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