HAVERTY FURNITURE COMPANIES INC
10-Ks and 10-Qs
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| ☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2019
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OR
| ☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period fromto
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Commission file number:
1-14445
HAVERTY FURNITURE COMPANIES, INC.
(Exact name of registrant as specified in its charter)
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Maryland
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58-0281900
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(State of incorporation)
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(I.R.S. Employer Identification No.)
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780 Johnson Ferry Road, Suite 800
Atlanta, Georgia
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30342
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(Address of principal executive office)
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(Zip Code)
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(404) 443-2900
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||
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(Registrant’s telephone number, including area code)
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||
Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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Common Stock
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HVT
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NYSE
|
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Class A Common Stock
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HVTA
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NYSE
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes
☒
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 an 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.
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Large accelerated filer
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☐
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Accelerated filer
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☒
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Non-accelerated filer
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☐
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||
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Smaller reporting company
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☐
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Emerging growth company
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☐
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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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
☐
No
☒
The numbers of shares outstanding of the registrant’s two classes of $1 par value common stock as of July 31, 2019, were:
Common Stock – 18,168,134; Class A Common Stock – 1,535,654.
HAVERTY FURNITURE COMPANIES, INC.
INDEX
|
Page No.
|
||
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PART I.
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FINANCIAL INFORMATION
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|
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Item 1. Financial Statements
|
||
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Condensed Consolidated Balance Sheets –
June 30, 2019 (unaudited) and December 31, 2018
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1
|
|
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Condensed Consolidated Statements of Comprehensive Income –
Six Months Ended June 30, 2019 and 2018 (unaudited)
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2
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|
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Condensed Consolidated Statements of Cash Flows –
Six Months Ended June 30, 2019 and 2018 (unaudited)
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3
|
|
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Notes to Condensed Consolidated Financial Statements (unaudited)
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4
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Item 2. Management’s Discussion and Analysis of Financial Condition
and Results of Operations
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12
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Item 3. Quantitative and Qualitative Disclosures about Market Risk
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15
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Item 4. Controls and Procedures
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15
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PART II.
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OTHER INFORMATION
|
|
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Item 1.
Legal
Proceedings
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16
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|
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Item 1A. Risk Factors
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16
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|
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Item 2.
Unregistered
Sales of Equity Securities and Use of Proceeds
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16
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|
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Item 6.
Exhibits
|
17
|
|
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
HAVERTY FURNITURE COMPANIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
|
June 30,
2019
|
December 31,
2018
|
|||||||
|
(Unaudited)
|
||||||||
|
Assets
|
||||||||
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Current assets
|
||||||||
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Cash and cash equivalents
|
$
|
56,094
|
$
|
71,537
|
||||
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Restricted cash and cash equivalents
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6,591
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8,272
|
||||||
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Accounts receivable, net
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1,578
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1,833
|
||||||
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Inventories
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109,213
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105,840
|
||||||
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Prepaid expenses
|
9,876
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8,106
|
||||||
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Other current assets
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10,489
|
6,262
|
||||||
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Total current assets
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193,841
|
201,850
|
||||||
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Accounts receivable, long-term, net
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221
|
226
|
||||||
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Property and equipment, net
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157,551
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216,852
|
||||||
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Right-of-use lease assets
|
187,178
|
—
|
||||||
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Deferred income taxes
|
12,175
|
12,544
|
||||||
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Other assets
|
9,810
|
8,707
|
||||||
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Total assets
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$
|
560,776
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$
|
440,179
|
||||
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Liabilities and Stockholders’ Equity
|
||||||||
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Current liabilities
|
||||||||
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Accounts payable
|
$
|
20,910
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$
|
19,840
|
||||
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Customer deposits
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29,098
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24,465
|
||||||
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Accrued liabilities
|
33,318
|
39,903
|
||||||
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Current lease liabilities
|
28,768
|
—
|
||||||
|
Current portion of lease obligations
|
—
|
4,018
|
||||||
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Total current liabilities
|
112,094
|
88,226
|
||||||
|
Noncurrent lease liabilities
|
158,782
|
—
|
||||||
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Lease obligations, less current portion
|
—
|
46,785
|
||||||
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Other liabilities
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22,640
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30,539
|
||||||
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Total liabilities
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293,516
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165,550
|
||||||
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Stockholders’ equity
|
||||||||
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Capital Stock, par value $1 per share
|
||||||||
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Preferred Stock, Authorized – 1,000 shares; Issued: None
|
||||||||
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Common Stock, Authorized – 50,000 shares; Issued: 2019 – 29,418; 2018 -
29,079
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29,418
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29,079
|
||||||
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Convertible Class A Common Stock, Authorized – 15,000 shares; Issued: 2019 –
2,058; 2018 – 2,280
|
2,058
|
2,280
|
||||||
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Additional paid-in capital
|
91,847
|
91,394
|
||||||
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Retained earnings
|
291,573
|
282,366
|
||||||
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Accumulated other comprehensive loss
|
(1,448
|
)
|
(1,465
|
)
|
||||
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Less treasury stock at cost – Common Stock (2019 – 11,250; 2018 – 10,300
shares) and Convertible Class A Common Stock (2019 and 2018 – 522 shares)
|
(146,188
|
)
|
(129,025
|
)
|
||||
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Total stockholders’ equity
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267,260
|
274,629
|
||||||
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Total liabilities and stockholders’ equity
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$
|
560,776
|
$
|
440,179
|
||||
See notes to these condensed consolidated financial statements.
1
HAVERTY FURNITURE COMPANIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(
In thousands, except per share data – Unaudited
)
|
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
|||||||||||||||
|
2019
|
2018
|
2019
|
2018
|
|||||||||||||
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Net sales
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$
|
191,893
|
$
|
198,775
|
$
|
379,134
|
$
|
398,218
|
||||||||
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Cost of goods sold
|
88,336
|
90,978
|
172,494
|
181,514
|
||||||||||||
|
Gross profit
|
103,557
|
107,797
|
206,640
|
216,704
|
||||||||||||
|
Credit service charges
|
19
|
25
|
41
|
57
|
||||||||||||
|
Gross profit and other revenue
|
103,576
|
107,822
|
206,681
|
216,761
|
||||||||||||
|
Expenses:
|
||||||||||||||||
|
Selling, general and administrative
|
95,784
|
98,753
|
194,663
|
199,756
|
||||||||||||
|
Provision for doubtful accounts
|
20
|
22
|
23
|
24
|
||||||||||||
|
Other (income) expense, net
|
(126
|
)
|
183
|
(280
|
)
|
(811
|
)
|
|||||||||
|
Total expenses
|
95,678
|
98,958
|
194,406
|
198,969
|
||||||||||||
|
Income before interest and income taxes
|
7,898
|
8,864
|
12,275
|
17,792
|
||||||||||||
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Interest (income) expense, net
|
(339
|
)
|
454
|
(688
|
)
|
925
|
||||||||||
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Income before income taxes
|
8,237
|
8,410
|
12,963
|
16,867
|
||||||||||||
|
Income tax expense
|
2,191
|
2,196
|
3,295
|
4,340
|
||||||||||||
|
Net income
|
$
|
6,046
|
$
|
6,214
|
$
|
9,668
|
$
|
12,527
|
||||||||
|
Other comprehensive income
|
||||||||||||||||
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Adjustments related to retirement plan; net of tax expense of $3 and $6 in 2019 and $9 and $18 in
2018
|
$
|
8
|
$
|
25
|
$
|
17
|
$
|
50
|
||||||||
|
Comprehensive income
|
$
|
6,054
|
$
|
6,239
|
$
|
9,685
|
$
|
12,577
|
||||||||
|
Basic earnings per share:
|
||||||||||||||||
|
Common Stock
|
$
|
0.30
|
$
|
0.30
|
$
|
0.48
|
$
|
0.60
|
||||||||
|
Class A Common Stock
|
$
|
0.28
|
$
|
0.28
|
$
|
0.44
|
$
|
0.56
|
||||||||
|
Diluted earnings per share:
|
||||||||||||||||
|
Common Stock
|
$
|
0.29
|
$
|
0.29
|
$
|
0.47
|
$
|
0.58
|
||||||||
|
Class A Common Stock
|
$
|
0.27
|
$
|
0.28
|
$
|
0.44
|
$
|
0.56
|
||||||||
|
Cash dividends per share:
|
||||||||||||||||
|
Common Stock
|
$
|
0.18
|
$
|
0.18
|
$
|
0.36
|
$
|
0.36
|
||||||||
|
Class A Common Stock
|
$
|
0.17
|
$
|
0.17
|
$
|
0.34
|
$
|
0.34
|
||||||||
See notes to these condensed consolidated financial statements.
2
HAVERTY FURNITURE COMPANIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands – Unaudited)
|
Six Months Ended
June 30,
|
||||||||
|
2019
|
2018
|
|||||||
|
Cash Flows from Operating Activities:
|
||||||||
|
Net income
|
$
|
9,668
|
$
|
12,527
|
||||
|
Adjustments to reconcile net income to net cash
provided by (used in) operating activities: |
||||||||
|
Depreciation and amortization
|
10,276
|
15,061
|
||||||
|
Share-based compensation expense
|
1,951
|
2,557
|
||||||
|
Deferred income taxes
|
(1,912
|
)
|
(335
|
)
|
||||
|
Provision for doubtful accounts
|
23
|
24
|
||||||
|
Other
|
623
|
(23
|
)
|
|||||
|
Changes in operating assets and liabilities:
|
||||||||
|
Accounts receivable
|
237
|
510
|
||||||
|
Inventories
|
(3,373
|
)
|
(4,044
|
)
|
||||
|
Customer deposits
|
4,633
|
1,539
|
||||||
|
Other assets and liabilities
|
(2,805
|
)
|
(484
|
)
|
||||
|
Accounts payable and accrued liabilities
|
(4,481
|
)
|
1,525
|
|||||
|
Net cash provided by operating activities
|
14,840
|
28,857
|
||||||
|
Cash Flows from Investing Activities:
|
||||||||
|
Capital expenditures
|
(7,768
|
)
|
(14,642
|
)
|
||||
|
Proceeds from sale of land, property and equipment
|
2,260
|
846
|
||||||
|
Other
|
—
|
55
|
||||||
|
Net cash used in investing activities
|
(5,508
|
)
|
(13,741
|
)
|
||||
|
Cash Flows from Financing Activities:
|
||||||||
|
Payments on lease obligations
|
—
|
(1,872
|
)
|
|||||
|
Taxes on vested restricted shares
|
(1,328
|
)
|
(1,162
|
)
|
||||
|
Dividends paid
|
(7,285
|
)
|
(7,585
|
)
|
||||
|
Common stock repurchased
|
(17,843
|
)
|
(9,281
|
)
|
||||
|
Net cash used in financing activities
|
(26,456
|
)
|
(19,900
|
)
|
||||
|
Decrease in cash, cash equivalents and restricted equivalents during the period
|
(17,124
|
)
|
(4,784
|
)
|
||||
|
Cash, cash equivalents and restricted cash equivalents at beginning of period
|
79,809
|
87,606
|
||||||
|
Cash, cash equivalents and restricted cash equivalents at end of period
|
$
|
62,685
|
$
|
82,822
|
||||
See notes to these condensed consolidated financial statements.
3
HAVERTY FURNITURE COMPANIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
NOTE A – Business and Reporting Policies
Haverty Furniture Companies, Inc. (“Havertys,” “the Company,” “we,” “our,” or “us”) is a retailer of a broad line of residential furniture in the
middle to upper-middle price ranges. We operate all of our stores using the Havertys brand and do not franchise our concept. We operate within a single reportable segment. The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all information and footnotes required by United States of America generally accepted accounting principles (“U.S. GAAP”) for complete financial statements.
The Company believes that the disclosures made are adequate to make the information not misleading. The financial statements include the accounts of the Company and its wholly-owned subsidiary. All significant intercompany accounts and transactions
have been eliminated in consolidation. We believe all adjustments, normal and recurring in nature, considered necessary for a fair presentation have been included. We suggest that these condensed consolidated financial statements be read in
conjunction with the consolidated financial statements and accompanying footnotes included in our latest Annual Report on Form 10-K.
The preparation of interim condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities, and reported amounts of revenue and expenses. Actual results could differ from those estimates.
The Company is subject to various claims and legal proceedings covering a wide range of matters that arise in the ordinary course of its business
activities. We believe that any liability that may ultimately result from the resolution of these matters will not have a material adverse effect on our financial condition, results of operations or cash flows.
NOTE B - Recently Issued and Adopted Accounting
Pronouncements
Recently Issued Accounting Pronouncements:
Changes to U.S. GAAP are established by the Financial Accounting Standards Board (“FASB”) in the form of accounting standards updates (“ASUs”) to
the FASB’s Accounting Standards Codification (“ASC”). We considered the applicability and impact of all ASUs. ASUs not listed below were assessed and determined to be either not applicable or are expected to have minimal impact on our consolidated
financial position or results of operations.
Leases.
In February
2016, the FASB issued ASU 2016-02 which amended various aspects of existing guidance for leases. ASU 2016-02 requires an entity to recognize assets and liabilities arising from a lease for both financing and operating leases, along with additional
qualitative and quantitative disclosures. The main difference between ASU 2016-02 and previous U.S. GAAP is the recognition of lease assets and lease liabilities by lessees on the balance sheet for those leases classified as operating leases under
previous U.S. GAAP. As a result, we have recognized a liability representing our lease payments and a right-of-use asset representing our right to use the underlying asset for the lease term on the balance sheet. We adopted the requirements of the
new lease standard effective January 1, 2019 using the modified retrospective method and have not restated comparative periods.
We elected the transition package of three
practical expedients permitted within the standard, which eliminates the requirements to reassess prior conclusions about lease identification, lease classification, and initial direct costs. We did not elect the hindsight practical expedient,
which permits the use of hindsight when determining lease term and impairment of right-of-use assets. Further, we elected a short-term lease exception policy, permitting us to not apply the recognition requirements of this standard to short-term
leases (i.e. leases with terms of 12 months or less). For our real property leases, we did not elect the accounting policy to account for lease and non-lease components as a single component
.
4
HAVERTY FURNITURE COMPANIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
As part of the adjustment for ASU 2016-02 effective January 1, 2019, we derecognized certain assets and liabilities associated
with legacy build-to-suit arrangements and the deferred gain on previous sale leaseback transactions. Accordingly, $53.5 million of net property and equipment, $50.8 million of financing obligations, $9.3 of other net liabilities, and $2.3 million of
deferred tax assets recorded on the balance sheet as of December 31, 2018 were removed as part of our transition adjustment. Effective January 1, 2019, we recognized right-of-use lease assets totaling $177.9 million and recorded lease liabilities
totaling $175.4 million. The net adjustment recorded to equity as of January 1, 2019 was a credit of $6.8 million.
Since we are not restating prior periods as part of adopting this guidance, our results in 2019 will not be directly
comparable to our results for periods before 2019. Specifically, for those leases that were previously recognized on our balance sheet prior to 2019, their associated depreciation and interest expense will be characterized as rent expense. The
adoption of ASU 2016-02 had an immaterial impact on our consolidated statement of income and our consolidated statement of cash flows for the six-month period ended June 30, 2019.
NOTE C – Stockholders’ Equity
The following outlines the changes in each caption of stockholders’ equity for the current and comparative periods and the dividends per share for
each class of shares.
For the three months ended June 30, 2019:
|
(in thousands)
|
Common Stock
|
Class A Common Stock
|
Additional Paid-In Capital
|
Retained Earnings
|
Accumulated Other Comprehensive Income
|
Treasury Stock
|
Total
|
|||||||||||||||||||||
|
Balances at
March 31, 2019
|
$
|
29,113
|
$
|
2,280
|
$
|
91,888
|
$
|
289,126
|
$
|
(1,456
|
)
|
$
|
(129,025
|
)
|
$
|
281,926
|
||||||||||||
|
Net income
|
6,046
|
6,046
|
||||||||||||||||||||||||||
|
Dividends declared:
|
||||||||||||||||||||||||||||
|
Common Stock,
$0.18 per share
|
(3,338
|
)
|
(3,338
|
)
|
||||||||||||||||||||||||
|
Class A Common Stock,
$0.17 per share
|
(261
|
)
|
(261
|
)
|
||||||||||||||||||||||||
|
Acquisition of treasury stock
|
(17,843
|
)
|
(17,843
|
)
|
||||||||||||||||||||||||
|
Restricted stock issuances
|
83
|
(878
|
)
|
(795
|
)
|
|||||||||||||||||||||||
|
Class A conversion
|
222
|
(222
|
)
|
—
|
||||||||||||||||||||||||
|
Amortization of restricted stock
|
890
|
890
|
||||||||||||||||||||||||||
|
Director’s compensation plan
|
(53
|
)
|
680
|
627
|
||||||||||||||||||||||||
|
Other comprehensive income
|
8
|
8
|
||||||||||||||||||||||||||
|
Balances at June 30, 2019
|
$
|
29,418
|
$
|
2,058
|
$
|
91,847
|
$
|
291,573
|
$
|
(1,448
|
)
|
$
|
(146,188
|
)
|
$
|
267,260
|
||||||||||||
5
HAVERTY FURNITURE COMPANIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
For the six months ended June 30, 2019:
|
(in thousands)
|
Common Stock
|
Class A Common Stock
|
Additional Paid-In Capital
|
Retained Earnings
|
Accumulated Other Comprehensive Income
|
Treasury Stock
|
Total
|
|||||||||||||||||||||
|
Balances at
December 31, 2018
|
$
|
29,079
|
$
|
2,280
|
$
|
91,394
|
$
|
282,366
|
$
|
(1,465
|
)
|
$
|
(129,025
|
)
|
$
|
274,629
|
||||||||||||
|
Net income
|
9,668
|
9,668
|
||||||||||||||||||||||||||
|
Dividends declared:
|
||||||||||||||||||||||||||||
|
Common Stock,
$0.36 per share
|
(6,725
|
)
|
(6,725
|
)
|
||||||||||||||||||||||||
|
Class A Common Stock,
$0.34 per share
|
(560
|
)
|
(560
|
)
|
||||||||||||||||||||||||
|
Acquisition of treasury stock
|
(17,843
|
)
|
(17,843
|
)
|
||||||||||||||||||||||||
|
Restricted stock issuances
|
117
|
(1,445
|
)
|
(1,328
|
)
|
|||||||||||||||||||||||
|
Class A conversion
|
222
|
(222
|
)
|
—
|
||||||||||||||||||||||||
|
Amortization of restricted stock
|
1,951
|
1,951
|
||||||||||||||||||||||||||
|
Director’s compensation plan
|
(53
|
)
|
680
|
627
|
||||||||||||||||||||||||
|
Other comprehensive income
|
17
|
17
|
||||||||||||||||||||||||||
|
Cumulative effect adjustment
|
6,824
|
6,824
|
||||||||||||||||||||||||||
|
Balances at June 30, 2019
|
$
|
29,418
|
$
|
2,058
|
$
|
91,847
|
$
|
291,573
|
$
|
(1,448
|
)
|
$
|
(146,188
|
)
|
$
|
267,260
|
||||||||||||
For the three months ended June 30, 2018:
|
(in thousands)
|
Common Stock
|
Class A Common Stock
|
Additional Paid-In Capital
|
Retained Earnings
|
Accumulated Other Comprehensive Income
|
Treasury Stock
|
Total
|
|||||||||||||||||||||
|
Balances at
March 31, 2018
|
$
|
28,979
|
$
|
2,290
|
$
|
90,174
|
$
|
290,044
|
$
|
(2,119
|
)
|
$
|
(114,846
|
)
|
$
|
294,522
|
||||||||||||
|
Net income
|
6,214
|
6,214
|
||||||||||||||||||||||||||
|
Dividends declared:
|
||||||||||||||||||||||||||||
|
Common Stock,
$0.18 per share
|
(3,493
|
)
|
(3,493
|
)
|
||||||||||||||||||||||||
|
Class A Common Stock,
$0.17 per share
|
(300
|
)
|
(300
|
)
|
||||||||||||||||||||||||
|
Acquisition of treasury stock
|
(5,757
|
)
|
(5,757
|
)
|
||||||||||||||||||||||||
|
Restricted Stock issuances
|
85
|
(901
|
)
|
(816
|
)
|
|||||||||||||||||||||||
|
Class A conversion
|
1
|
(1
|
)
|
—
|
||||||||||||||||||||||||
|
Amortization of restricted stock
|
986
|
986
|
||||||||||||||||||||||||||
|
Director’s compensation plan
|
(609
|
)
|
1,006
|
397
|
||||||||||||||||||||||||
|
Other comprehensive income
|
25
|
25
|
||||||||||||||||||||||||||
|
Balances at
June 30, 2018
|
$
|
29,065
|
$
|
2,289
|
$
|
89,650
|
$
|
292,465
|
$
|
(2,094
|
)
|
$
|
(119,597
|
)
|
$
|
291,778
|
||||||||||||
6
HAVERTY FURNITURE COMPANIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
For the six months ended June 30, 2018:
|
(in thousands)
|
Common Stock
|
Class A Common Stock
|
Additional Paid-In Capital
|
Retained Earnings
|
Accumulated Other Comprehensive Income
|
Treasury Stock
|
Total
|
|||||||||||||||||||||
|
Balances at
December 31, 2017
|
$
|
28,950
|
$
|
2,290
|
$
|
88,978
|
$
|
287,390
|
$
|
(2,144
|
)
|
$
|
(111,322
|
)
|
$
|
294,142
|
||||||||||||
|
Net income
|
12,527
|
12,527
|
||||||||||||||||||||||||||
|
Dividends declared:
|
||||||||||||||||||||||||||||
|
Common Stock,
$0.36 per share
|
(6,984
|
)
|
(6,984
|
)
|
||||||||||||||||||||||||
|
Class A Common Stock,
$0.34 per share
|
(601
|
)
|
(601
|
)
|
||||||||||||||||||||||||
|
Acquisition of treasury stock
|
(9,281
|
)
|
(9,281
|
)
|
||||||||||||||||||||||||
|
Restricted Stock issuances
|
114
|
(1,276
|
)
|
(1,162
|
)
|
|||||||||||||||||||||||
|
Class A conversion
|
1
|
(1
|
)
|
—
|
||||||||||||||||||||||||
|
Amortization of restricted stock
|
2,557
|
2,557
|
||||||||||||||||||||||||||
|
Director’s compensation plan
|
(609
|
)
|
1,006
|
397
|
||||||||||||||||||||||||
|
Other comprehensive income
|
50
|
50
|
||||||||||||||||||||||||||
|
Cumulative effect adjustment
|
133
|
133
|
||||||||||||||||||||||||||
|
Balances at
June 30, 2018
|
$
|
29,065
|
$
|
2,289
|
$
|
89,650
|
$
|
292,465
|
$
|
(2,094
|
)
|
$
|
(119,597
|
)
|
$
|
291,778
|
||||||||||||
NOTE D – Interim LIFO Calculations
We calculate the LIFO index annually. Accordingly, interim LIFO calculations must necessarily be based on management’s estimates of inventory
levels and inflation rates. Since these estimates may be affected by factors beyond management’s control, interim results are subject to change based upon the final year-end LIFO inventory valuations.
NOTE E – Fair Value of Financial Instruments
The fair values of our cash and cash equivalents, restricted cash and cash equivalents, accounts receivable, accounts payable and customer
deposits approximate their carrying values due to their short-term nature. The assets related to our self-directed, non-qualified deferred compensation plans for certain executives and employees are valued using quoted market prices multiplied by the
number of shares held, a Level 1 valuation technique. The assets related to our deferred compensation plans totaled approximately $7.2 million at June 30, 2019 and $6.0 million at December 31, 2018 and are included in other assets. The related
liabilities of the same amounts are included in other liabilities.
NOTE F – Credit Arrangement
We have a $60.0 million revolving credit facility secured by our inventory, accounts receivable, cash, and certain other personal
property. Availability fluctuates based on a borrowing base calculation reduced by outstanding letters of credit. Amounts available to borrow are based on the lesser of the borrowing base or the $60.0 million-line amount, reduced by $6.0 million if
a fixed charge coverage ratio test for the immediately preceding 12 months is not met. The credit facility contains covenants that, among other things, limit our ability to incur certain types of debt or liens, enter into mergers and consolidations
or use proceeds of borrowing for other than permitted uses. The covenants also limit our ability to pay dividends if unused availability is less than $16.5 million.
The borrowing base was $55.6 million at June 30, 2019, there were no outstanding letters of credit, and the net availability was $49.6
million. The facility, which has not been used since its origination, matures March 31, 2021.
7
HAVERTY FURNITURE COMPANIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note G – Revenues
We recognize revenue at delivery. Havertys does not have a loyalty program or sell gift certificates. We also do not offer coupons for redemption
for future purchases, such as those other retailers might issue for general marketing purposes or for those issued based in conjunction with prior purchases.
The following table presents our revenues disaggregated by each major product category and service (dollars in thousands, amounts and percentages
may not always add due to rounding):
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||||||||||||||||||
|
2019
|
2018
|
2019
|
2018
|
|||||||||||||||||||||||||||||
|
(In thousands)
|
Net
Sales
|
% of
Net Sales
|
Net Sales
|
% of
Net
Sales
|
Net
Sales
|
% of Net Sales
|
Net
Sales
|
% of
Net Sales
|
||||||||||||||||||||||||
|
Merchandise:
|
||||||||||||||||||||||||||||||||
|
Case Goods
|
||||||||||||||||||||||||||||||||
|
Bedroom Furniture
|
$
|
31,417
|
16.4
|
%
|
$
|
33,550
|
16.9
|
%
|
61,937
|
16.3
|
%
|
$
|
64,665
|
16.2
|
%
|
|||||||||||||||||
|
Dining Room Furniture
|
20,265
|
10.6
|
22,121
|
11.1
|
39,862
|
10.5
|
43,755
|
11.0
|
||||||||||||||||||||||||
|
Occasional
|
14,568
|
7.6
|
17,044
|
8.6
|
30,945
|
8.2
|
35,502
|
8.9
|
||||||||||||||||||||||||
|
66,251
|
34.5
|
72,715
|
36.6
|
132,744
|
35.0
|
143,922
|
36.1
|
|||||||||||||||||||||||||
|
Upholstery
|
77,146
|
40.2
|
78,472
|
39.5
|
150,178
|
39.6
|
160,269
|
40.3
|
||||||||||||||||||||||||
|
Mattresses
|
21,976
|
11.5
|
21,350
|
10.7
|
43,234
|
11.4
|
41,029
|
10.3
|
||||||||||||||||||||||||
|
Accessories and Other
(1)
|
26,520
|
13.8
|
26,238
|
13.2
|
52,978
|
14.1
|
52,998
|
13.3
|
||||||||||||||||||||||||
|
$
|
191,893
|
100.0
|
%
|
$
|
198,775
|
100.0
|
%
|
379,134
|
100.0
|
%
|
$
|
398,218
|
100.0
|
%
|
||||||||||||||||||
|
(1)
|
Includes delivery charges and product protection.
|
NOTE H
– Leases
We have operating leases for offices, warehouses,
and certain equipment. Our leases have remaining lease terms of 1 year to 14 years, some of which include options to extend the leases for up to 20 years. We determine if an arrangement is or contains a lease at lease inception.
Our leases
do not have any residual value guarantees or any restrictions or covenants imposed by leases. We have lease agreements for real estate with lease and non-lease components, which are accounted for separately.
The table below presents the operating lease assets and liabilities recognized on the condensed consolidated balance sheets as of June 30, 2019
(in thousands):
|
June 30, 2019
|
||||
|
Operating Lease Assets:
|
||||
|
Right-of use lease assets
|
$
|
187,178
|
||
|
Operating Lease Liabilities:
|
||||
|
Current lease liabilities
|
28,768
|
|||
|
Non-current lease liabilities
|
158,782
|
|||
|
Total operating lease
liabilities
|
$
|
187,550
|
||
Our leases generally do not provide an implicit rate, and therefore we used our incremental borrowing rate
as the discount rate when measuring operating lease liabilities. The incremental borrowing rate represents an estimate of the interest rate we would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis
over the term of the lease. We used incremental borrowing rates as of January 1, 2019 for operating leases that commenced prior to that date.
8
HAVERTY FURNITURE COMPANIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
The weighted average remaining lease term and weighted average discount rate for operating leases as of June 30, 2019 are:
|
June 30, 2019
|
||||
|
Weighted Average Remaining Lease Term
|
||||
|
Operating leases
|
7.5 years
|
|||
|
Weighted Average Discount Rate
|
||||
|
Operating leases
|
6.71
|
%
|
||
The table below reconciles the undiscounted future minimum lease payments (displayed by year and in the
aggregate) under noncancelable leases with terms of more than one year to the total lease liabilities recognized on the condensed consolidated balance sheets as of June 30, 2019 (in thousands):
|
Operating Leases
|
||||
|
July 1, 2019 thru December 31, 2019
|
20,205
|
|||
|
2020
|
39,095
|
|||
|
2021
|
36,696
|
|||
|
2022
|
31,300
|
|||
|
2023
|
24,749
|
|||
|
Thereafter
|
89,818
|
|||
|
Total undiscounted future minimum lease payments
|
241,863
|
|||
|
Less: difference between undiscounted lease payments and discounted operating lease liabilities
|
(54,313
|
)
|
||
|
Total operating lease
liabilities
|
187,550
|
|||
Certain of our lease agreements for retail stores include variable lease payments, generally based on sales
volume. The variable portion of payments are not included in the initial measurement of the right-of-use asset or lease liability due to uncertainty of the payment amount and are recorded as lease expense in the period incurred.
Certain of our equipment lease agreements include variable lease costs, generally based on usage of the underlying asset (mileage, fuel, etc.). The variable portion of payments
are not included in the initial measurement of the right-of-use asset or lease liability due to uncertainty of the payment amount and are recorded as lease expense in the period incurred.
Components of lease expense were as follows (in thousands):
|
Three months ended
June 30, 2019
|
Six months ended
June 30, 2019
|
|||||||
|
Operating lease cost
|
$
|
10,465
|
$
|
20,693
|
||||
|
Short-term lease cost
|
30
|
40
|
||||||
|
Variable lease cost
|
1,281
|
2,812
|
||||||
|
Total lease expense
|
$
|
11,776
|
$
|
23,545
|
||||
During
the first quarter of 2019, we entered into a non-cancellable lease for real property that had not commenced as of June 30, 2019. The initial terms are approximately 10 years, with options to extend for up to an additional 20 years. Upon lease
commencement, the right-of-use asset and lease liability will be determined and recorded.
9
HAVERTY FURNITURE COMPANIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Supplemental cash flow information related to leases is as follows (in thousands):
|
Six months ended
June 30, 2019
|
||||
|
Cash paid for amounts included in the measurement of lease liabilities:
|
||||
|
Operating cash flows from operating leases
|
$
|
20,085
|
||
|
Right-of-use assets obtained in exchange for lease obligations:
|
||||
|
Operating leases
|
$
|
22,519
|
||
NOTE I – Other Income, net
Other income, net includes gains and losses related to fixed assets. We had gains from real estate sales
and insurance recoveries on stores damaged or destroyed of approximately $0.7 million for the six months ended June 30, 2018.
NOTE J – Income Taxes
Our effective tax rate for the six months ended June 30, 2019 and 2018 was 25.4% and 25.7%, respectively. The primary difference in the effective
rate and the statutory rate is due to state income taxes and additional tax expense from vested stock awards.
NOTE K
–
Stock Based Compensation Plan
As more fully discussed in Note 12 of the notes to the consolidated financial statements in our 2018 Annual Report on Form 10-K, we have awards
outstanding for Common Stock under stock-based employee compensation plans.
The following table summarizes our award activity during the six months ended June 30, 2019:
|
Service-Based
Restricted Stock Awards
|
Performance-Based
Restricted Stock Awards
|
Stock-Settled
Appreciation Rights
|
||||||||||||||||||||||
|
|
Shares or Units
|
Weighted-Average
Award Price
|
Shares or Units
|
Weighted-Average
Award Price
|
Rights
|
Weighted-Average
Award Price
|
||||||||||||||||||
|
Outstanding at December 31, 2018
|
249,142
|
$
|
22.05
|
209,754
|
$
|
21.56
|
57,000
|
$
|
18.14
|
|||||||||||||||
|
Granted/Issued
|
133,770
|
20.30
|
111,780
|
20.33
|
—
|
—
|
||||||||||||||||||
|
Awards vested or rights exercised
(1)
|
(124,544
|
)
|
22.32
|
(57,351
|
)
|
18.93
|
—
|
—
|
||||||||||||||||
|
Forfeited
|
(11,368
|
)
|
21.37
|
(51,116
|
)
|
22.45
|
—
|
—
|
||||||||||||||||
|
Outstanding at June 30, 2019
|
247,000
|
$
|
21.00
|
213,067
|
$
|
21.41
|
57,000
|
$
|
18.14
|
|||||||||||||||
|
Exercisable at June 30, 2019
|
—
|
—
|
—
|
—
|
57,000
|
$
|
18.14
|
|||||||||||||||||
|
Awards expected to vest
|
247,000
|
$
|
21.00
|
159,551
|
$
|
21.76
|
—
|
—
|
||||||||||||||||
|
(1)
|
Includes shares repurchased from employees for employee’s tax liability.
|
The aggregate intrinsic value of outstanding restricted stock awards was $4,206,000 at June 30, 2019. The restrictions on the service-based awards
generally lapse or vest annually, primarily over four-year periods.
The total fair value of performance-based restricted stock awards that vested during the six months ended June 30, 2019 was approximately
$1,389,000. The aggregate intrinsic value of outstanding performance awards at June 30, 2019 expected to vest was $2,717,000. The performance awards are based on one-year performance periods but cliff vest in approximately three years from grant
date.
The fair value for stock-settled appreciation rights were estimated at the date of grant using a BlackScholes pricing model. The aggregate
intrinsic value of vested and outstanding stock-settled appreciation rights at June 30, 2019 was approximately $36,000.
10
HAVERTY FURNITURE COMPANIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
The compensation for all awards is being charged to selling, general and administrative expense over the respective grants’ vesting periods,
primarily on a straight-line basis, and for the six months ended June 30, 2019 and 2018 was approximately $1,951,000 and $2,557,000, respectively. Forfeitures are recognized as they occur. As of June 30, 2019, the total compensation cost related to
unvested equity awards was approximately $5,783,000 and is expected to be recognized over a weighted-average period of 2.3 years.
NOTE L – Earnings Per Share
We report our earnings per share using the two-class method. The income per share for each class of common stock is calculated
assuming 100% of our earnings are distributed as dividends to each class of common stock based on their contractual rights.
The Common Stock of the Company has a preferential dividend rate of at least 105% of the dividend paid on the Class A Common Stock. The Class A
Common Stock, which has ten votes per share as opposed to one vote per share for the Common Stock (on all matters other than the election of directors), may be converted at any time on a one-for-one basis into Common Stock at the option of the holder
of the Class A Common Stock.
|
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
|||||||||||||||
|
2019
|
2018
|
2019
|
2018
|
|||||||||||||
|
Numerator:
|
||||||||||||||||
|
Common:
|
||||||||||||||||
|
Distributed earnings
|
$
|
3,338
|
$
|
3,494
|
$
|
6,725
|
$
|
6,984
|
||||||||
|
Undistributed earnings
|
2,260
|
2,226
|
2,194
|
4,547
|
||||||||||||
|
Basic
|
5,598
|
5,720
|
8,919
|
11,531
|
||||||||||||
|
Class A Common earnings
|
448
|
494
|
749
|
996
|
||||||||||||
|
Diluted
|
$
|
6,046
|
$
|
6,214
|
$
|
9,668
|
$
|
12,527
|
||||||||
|
Class A Common:
|
||||||||||||||||
|
Distributed earnings
|
$
|
261
|
$
|
300
|
$
|
560
|
$
|
601
|
||||||||
|
Undistributed earnings
|
187
|
194
|
189
|
395
|
||||||||||||
|
$
|
448
|
$
|
494
|
$
|
749
|
$
|
996
|
|||||||||
|
Denominator:
|
||||||||||||||||
|
Common:
|
||||||||||||||||
|
Weighted average shares outstanding - basic
|
18,642
|
19,312
|
18,716
|
19,364
|
||||||||||||
|
Assumed conversion of Class A Common Stock
|
1,621
|
1,766
|
1,689
|
1,767
|
||||||||||||
|
Dilutive options, awards and common stock equivalents
|
279
|
313
|
318
|
367
|
||||||||||||
|
Total weighted-average diluted Common Stock
|
20,542
|
21,391
|
20,723
|
21,498
|
||||||||||||
|
Class A Common:
|
||||||||||||||||
|
Weighted average shares outstanding
|
1,621
|
1,766
|
1,689
|
1,767
|
||||||||||||
|
Basic earnings per share:
|
||||||||||||||||
|
Common Stock
|
$
|
0.30
|
$
|
0.30
|
$
|
0.48
|
$
|
0.60
|
||||||||
|
Class A Common Stock
|
$
|
0.28
|
$
|
0.28
|
$
|
0.44
|
$
|
0.56
|
||||||||
|
Diluted earnings per share:
|
||||||||||||||||
|
Common Stock
|
$
|
0.29
|
$
|
0.29
|
$
|
0.47
|
$
|
0.58
|
||||||||
|
Class A Common Stock
|
$
|
0.27
|
$
|
0.28
|
$
|
0.44
|
$
|
0.56
|
||||||||
11
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Net Sales
Our sales are generated by customer purchases of home furnishings. Revenue is recognized upon delivery to the customer.
Comparable-store or “comp-store” sales for the periods presented are sales made on our website and from stores open throughout the period and the corresponding prior year period. If a store
expansion results in a 10% or greater increase in selling square footage, its sales are removed from the comparable store sales base until it has been open a full 12 months. Accordingly, our comp-store sales may not be comparable to other entities.
The following outlines our sales and comp-store sales increases and decreases for the periods indicated (dollars in millions, amounts and
percentages may not always add to totals due to rounding):
|
2019
|
2018
|
||||||||||||||||||||||||||||||||||||||||
|
Net Sales
|
Comp-Store Sales
|
Net Sales
|
Comp-Store Sales
|
||||||||||||||||||||||||||||||||||||||
|
Period
|
Total Dollars
|
%
Change
|
$
Change
|
%
Change
|
$
Change
|
Total Dollars
|
%
Change
|
$
Change
|
%
Change
|
$
Change
|
|||||||||||||||||||||||||||||||
|
Q1
|
$
|
187.2
|
(6.1
|
)%
|
$
|
(12.2
|
)
|
(4.7
|
)%
|
$
|
(9.2
|
)
|
$
|
199.4
|
(0.5
|
)%
|
$
|
(1.0
|
)
|
(1.1
|
)%
|
$
|
(2.1
|
)
|
|||||||||||||||||
|
Q2
|
191.9
|
(3.5
|
)
|
(6.9
|
)
|
(2.3
|
)
|
(4.5
|
)
|
198.8
|
1.0
|
1.9
|
1.3
|
2.4
|
|||||||||||||||||||||||||||
|
First Half
|
$
|
379.1
|
(4.8
|
)%
|
$
|
(19.1
|
)
|
(3.5
|
)%
|
$
|
13.7
|
$
|
398.2
|
0.2
|
%
|
$
|
1.0
|
0.1
|
%
|
$
|
0.4
|
||||||||||||||||||||
Sales for the second quarter of 2019 increased over the first quarter of 2019 as our supply chain began to recover from the disruption caused by
tariffs. Our average written ticket was up 5.3% and our custom order upholstery business grew 7.6% for the second quarter compared to the 2018 period.
Gross Profit
Gross profit for the second quarter of 2019 was 54.0%, down 20 basis points compared to the prior year period. The reduction is a result of
merchandise pricing and mix as we used slightly more aggressive promotions and higher product, freight, and warehouse and handling costs. These increased costs also have a negative impact on the changes to our LIFO reserve. Gross profit for the first
half of 2019 was 54.5% compared to 54.4% for the same period of 2018.
Our expectation for annual gross profit margins for 2019 is approximately 54.1%, down from 54.6% in 2018. This reduction is primarily due to
increased costs, the impact of LIFO, and increased promotions.
Substantially all of our occupancy and home delivery costs are included in selling, general and administrative expenses (“SG&A”) as are a
portion of our warehousing expenses. Accordingly, our gross profit may not be comparable to those entities that include these costs in cost of goods sold.
Selling, General and Administrative Expenses
Our SG&A costs as a percent of sales was 49.9% for the second quarter and 49.7% for the same period in 2018. Total SG&A dollars decreased
$3.0 million for the three months ended June 30, 2019 compared to the prior year period.
Our SG&A costs as a percent of sales for the first half of the year were 51.3% and 50.2% for 2018. Total SG&A dollars decreased $5.1
million for the six months ended June 30, 2019 compared to the prior year period.
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.
12
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
The following table outlines our SG&A expenses by classification:
|
Three months ended June 30,
|
Six Months ended June 30,
|
|||||||||||||||||||||||||||||||
|
|
2019
|
2018
|
2019
|
2018
|
||||||||||||||||||||||||||||
|
(In thousands)
|
% of
Net Sales
|
% of
Net Sales
|
% of Net Sales
|
% of Net Sales
|
||||||||||||||||||||||||||||
|
Variable
|
$
|
35,224
|
18.4
|
%
|
$
|
37,279
|
18.8
|
%
|
$
|
70,306
|
18.5
|
%
|
$
|
74,073
|
18.6
|
%
|
||||||||||||||||
|
Fixed and discretionary
|
60,560
|
31.6
|
61,474
|
30.9
|
124,357
|
32.8
|
125,683
|
31.6
|
||||||||||||||||||||||||
|
|
$
|
95,784
|
49.9
|
%
|
$
|
98,753
|
49.7
|
%
|
194,663
|
51.3
|
%
|
$
|
199,756
|
50.2
|
%
|
|||||||||||||||||
The fixed and discretionary expenses declined slightly for the second
quarter and first six months of 2019 versus 2018. Our normal fixed and discretionary type expenses within SG&A costs are expected to be approximately $256.0 to $258.0 million for the full year 2019 versus $254.9 million for the same costs in
2018. The increase is largely due to inflation and higher employee compensation and benefits costs. The variable type costs within SG&A for the full year of 2019 are anticipated to be 18.0% compared to 18.3% in 2018 as a percent of sales
.
Liquidity and Capital Resources
Our primary cash requirements include working capital needs, contractual obligations, income tax obligations and capital expenditures. We have
funded these requirements primarily through cash generated from operations. We have no funded debt and our lease obligations are primarily due to arrangements that are not considered capital leases but must be recorded on our balance sheets. We
believe funds generated from our expected results of operations and available cash and cash equivalents will be sufficient to fund our primary obligations, dividends, stock repurchases and complete capital projects that we have underway or currently
contemplate.
We also have a $60.0 million revolving credit facility. Refer to Note F to the Notes to the Condensed Consolidated Financial Statements for
additional information on our credit facility. The availability at June 30, 2019 was $49.6 million and there were no borrowed amounts outstanding.
Summary of Cash Activities
Our cash flows provided by operating activities totaled $14.8 million in the first six months of 2019 compared to $28.9 million for the same
period of 2018. This decrease was due to less net income and decreases in accounts payable and accrued liabilities in 2019 versus 2018 and larger increases in other assets and liabilities in 2019 versus 2018; partly offset by larger increases in
customer deposits in 2019 compared to 2018. For additional information about the changes in our assets and liabilities, refer to our Balance Sheet Changes discussion.
Our cash flows used in investing activities totaled $5.5 million in the first six months of 2019 versus $13.7 million for the same period of 2018.
This decrease was primarily due to smaller capital expenditures in 2019.
Financing activities used cash of $26.5 million in the first six months of 2019 compared to $19.9 million for the same period of 2018. This
increase was primarily due to $8.5 million in greater common stock purchases in 2019.
13
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
Balance Sheet Changes for the Six Months Ended June 30, 2019
Our balance sheet as of June 30, 2019, as compared to our balance sheet as of December 31, 2018, changed as follows:
|
·
|
increase in inventories of $3.4 million to meet demand for holiday sales event at the end of quarter;
|
|
·
|
increase in other current assets of $4.2 million from increase in receivables from third party financing of $2.2
million and from tenant incentive receivables of $2.2 million;
|
|
·
|
decrease in property and equipment, net of $59.3 million primarily due to transition adjustment for ASU 2016-02 of
$53.5 million;
|
|
·
|
increase in right-of-use lease assets of $187.2 million primarily due to transition adjustment of $177.9 million
for ASU 2016-02;
|
|
·
|
increase in customer deposits of $4.6 million due to increase in undelivered sales;
|
|
·
|
decrease in accrued liabilities of $6.6 million due to typical payments for year-end accruals and reduction in reserves;
|
|
·
|
increase of $28.8 million of current and $158.8 million of noncurrent lease liabilities primarily due to adoption of ASU 2016-02;
|
|
·
|
decrease of $4.0 million of current and $46.8 million of noncurrent lease obligations primarily due to adoption of ASU 2016-02; and
|
|
·
|
decrease of $7.9 million of other liabilities primarily due to transition adjustment of $9.5 million for ASU 2016-02.
|
Store Plans and Capital Expenditures
|
Location
|
Opening (Closing) Quarter
Actual or Planned
|
Category
|
|
Newnan, GA
|
Q-3-19
|
Opening
|
|
St. Louis, MO
|
Q-3-19
|
New Market
|
|
Baton Rouge, LA
|
Q-4-19
|
Relocation
|
These plans combined with other changes should increase net selling space in 2019 by approximately 1.4%. Total capital expenditures are estimated
to be $19.0 million in 2019 depending on the timing of spending for new projects.
Off-Balance Sheet Arrangements
As of June 30, 2019, we had no off-balance sheet arrangements or obligations.
Critical Accounting Estimates
Critical accounting estimates are those that we believe are both significant and that require us to make difficult, subjective or complex
judgments, often because we need to estimate the effect of inherently uncertain matters. We base our estimates and judgments on historical experiences and various other factors that we believe to be appropriate under the circumstances. Actual results
may differ from these estimates, and we might obtain different estimates if we used different assumptions or conditions. Our critical accounting estimates are identified and described in our annual report on Form 10-K for the year ended December 31,
2018. We had no significant changes in those critical accounting estimates since our last annual report.
14
Forward-Looking Information
Certain of the statements in this Form 10-Q, particularly those anticipating future performance, business
prospects, growth and operating strategies and similar matters, and those that include the words “believes,” “anticipates,” “estimates” or similar expressions constitute “forward-looking statements” within the meaning of Section 27A of the Securities
Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. For those statements, Havertys claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform
Act of 1995. There can be no assurance that the forward-looking statements will be accurate because they are based on many assumptions, which involve risks and uncertainties. The following important factors could cause future results to differ:
changes in the economic environment; changes in the housing market; changes in industry conditions; competition; changes in consumer preferences and spending patterns; merchandise costs; energy costs; management of relationships with our suppliers
and vendors and disruptions in their operations; the imposition of tariffs and the effect of retaliatory trade measures; timing and level of capital expenditures; introduction of new products; rationalization of operations; and other risks identified
in Havertys’ SEC reports and public announcements.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
There have been no material changes with respect to our financial instruments and their related market risks since the date of the Company’s most
recent annual report.
Item 4. Controls and Procedures
As of the end of the period covered by this report, an evaluation was performed under the supervision and with the participation of our
management, including the Chief Executive Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on that evaluation, our management, including the
CEO and CFO, concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report to provide reasonable assurance that information required to be disclosed in the reports the Company files
or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and
communicated to our management, including the CEO and CFO, as appropriate, to allow timely decisions regarding disclosure.
There were no changes in our internal control over financial reporting that occurred during the quarter ended June 30, 2019 that have materially
affected, or are reasonably likely to materially affect, our internal control over financial reporting.
15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Information regarding legal proceedings is described under the subheading “Business and Reporting Policies” in Note A to the unaudited
condensed consolidated financial statements set forth in this Form 10-Q.
Item 1A. Risk Factors
In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk
Factors” in our Annual Report on Form 10-K for the year ended December 31, 2018, which could materially affect our business, financial condition or future results. The risks described in this report and in our Annual Report on Form 10-K are not the
only risks facing the Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The board of directors has authorized management, at its discretion, to repurchase limited amounts of our common stock and Class A common stock. A
program was initially approved by the board on November 3, 1986 with subsequent authorizations made as to the number of shares to be repurchased or amount to be repurchased in total dollars. On May 17, 2019, the board authorized management to
repurchase up to $1
0
.0 million of common and Class A common stock in addition to the amount remaining from a previous authorization.
The following table presents information with respect to our repurchase of Havertys’ common stock during the second quarter of 2019:
|
(a)
Total Number of Shares Purchased
|
(b)
Average Price Paid Per Share
|
(c)
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
|
(d)
Approximate Dollar Value of Shares That
May Yet be Purchased Under the Plans or Programs
|
|||||||||||||
|
April 1 – April 30
|
—
|
—
|
—
|
$
|
16,279,813
|
|||||||||||
|
May 1 – May 31
|
626,366
|
$
|
18.28
|
626,366
|
$ |
14,830,694
|
||||||||||
|
June 1 – June 30
|
378,860
|
$
|
16.88
|
378,860
|
$ |
8,437,021
|
||||||||||
16
Item 6.
Exhibits
(a) Exhibits
The exhibits listed below are filed with or incorporated by reference into this report (those filed with this report are
denoted by an asterisk). Unless otherwise indicated, the exhibit number of documents incorporated by reference corresponds to the exhibit number in the referenced documents.
|
Exhibit Number
|
Description of Exhibit (Commission File No. 1-14445)
|
|
|
3.1
|
Articles of Amendment and Restatement of the
Charter of Haverty Furniture Companies, Inc. effective May 26, 2006
(Exhibit 3.1 to our Second Quarter 2006 Form 10-Q).
|
|
|
3.2
|
By-laws of Haverty Furniture Companies, Inc. as
amended effective May 8, 2018
(Exhibit 3.1 to our Current Report on Form 8-K dated May 10, 2018).
|
|
|
10.1
|
Amended and Restated Non-Employee Director
Compensation Plan, effective as of May 17, 2019
(Exhibit 10.1 to our Current Report on Form 8-K dated May 17, 2019).
|
|
|
10.2
|
Amended and Restated Directors’ Deferred
Compensation Plan, effective as of May 17, 2019
(Exhibit 10.2 to our Current Report on Form 8-K dated May 17, 2019).
|
|
|
*31.1
|
||
|
*31.2
|
||
|
*32.1
|
||
|
*101
|
The following financial information from Haverty Furniture Companies, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30,
2019, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets at June 30, 2019, and December 31, 2018, (ii) Condensed Consolidated Statements of Comprehensive Income for the three months ended
June 30, 2019 and 2018, (iii) Condensed Consolidated Statements of Cash Flows for the three months ended June 30, 2019 and 2018, and (iv) the Notes to Condensed Consolidated Financial Statements.
|
17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by
the undersigned, thereunto duly authorized.
|
HAVERTY FURNITURE COMPANIES, INC.
(Registrant)
|
||||
|
Date:
|
August 2, 2019
|
By:
|
/s/ Clarence H. Smith
|
|
|
Clarence H. Smith
|
||||
|
Chairman of the Board, President
and Chief Executive Officer
|
||||
|
(principal executive officer)
|
||||
|
By:
|
/s/ Richard B. Hare
|
|||
|
Richard B. Hare
|
||||
|
Executive Vice President and
Chief Financial Officer
(principal financial and accounting officer)
|
18
TABLE OF CONTENTS
Part I. Financial InformationItem 1. Financial StatementsItem 2. Management S Discussion and Analysis Of Financial Condition and Results Of OperationsItem 2. Management S Discussion and Analysis Of Financial Condition and Results Of Operations (continued)Item 3. Quantitative and Qualitative Disclosures About Market RiskItem 4. Controls and ProceduresPart II. Other InformationItem 1. Legal ProceedingsItem 1A. Risk FactorsItem 2. Unregistered Sales Of Equity Securities and Use Of ProceedsItem 6. Exhibits