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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1994
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 0-8498
HAVERTY FURNITURE COMPANIES, INC.
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(Exact name of registrant as specified in its charter)
Maryland 58-0281900
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
866 West Peachtree Street, N.W., Atlanta, Georgia 30308-1123
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (404) 881-1911
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Former name, former address and former fiscal year, if changed since last
report.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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The number of shares outstanding of the registrant's two classes of $1 par
value common stock as of April 22, 1994 were: Common Stock -- 8,340,336;
Class A Common Stock --3,072,353.
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H A V E R T Y F U R N I T U R E C O M P A N I E S , I N C .
I N D E X
Page No.
Part I. Financial Information:
Condensed Balance Sheets -
March 31, 1994 and December 31, 1993 1
Condensed Statements of Income -
Three months ended
March 31, 1994 and 1993 3
Condensed Statements of Cash Flows -
Three months ended
March 31, 1994 and 1993 4
Notes to Condensed Financial Statements 5
Management's Discussion and Analysis
of Financial Condition and Results
of Operations 6
Part II. Other Information 8
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PART I. FINANCIAL INFORMATION
HAVERTY FURNITURE COMPANIES, INC.
CONDENSED BALANCE SHEETS
March 31 December 31
1994 1993
(Unaudited) (Note)
----------- -----------
(Dollars in thousands)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 637 $ 614
Accounts receivable 147,619 144,115
Less allowance for doubtful accounts 6,645 6,485
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140,974 137,630
Inventories, at LIFO 58,184 54,739
Other current accounts 1,907 998
Deferred income taxes 1,193 1,193
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TOTAL CURRENT ASSETS 202,895 195,174
PROPERTY AND EQUIPMENT 114,890 112,374
Less accumulated depreciation
and amortization 46,284 44,935
-------- --------
68,606 67,439
DEFERRED INCOME TAXES 158 158
OTHER ASSETS 1,867 1,582
-------- --------
$273,526 $264,353
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HAVERTY FURNITURE COMPANIES, INC.
CONDENSED BALANCE SHEETS
(Continued)
<TABLE>
<CAPTION>
March 31 December 31
1994 1993
(Unaudited) (Note)
----------- -----------
(Dollars in thousands)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 27,562 $ 27,062
Notes payable to banks 17,300 11,900
Income taxes payable 1,620 0
Current portion of long-term debt and
capital lease obligations 8,488 8,479
-------- --------
TOTAL CURRENT LIABILITIES 54,970 47,441
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS--less
current portion 93,425 94,197
OTHER LIABILITIES 2,329 2,297
STOCKHOLDERS' EQUITY
Capital stock, par value $1 per share:
Preferred Stock, Authorized -- 1,000,000 shares
Issued: None
Common Stock, Authorized--15,000,000 shares
Issued: 1994 -- 8,838,534 shares; 1993 -- 8,765,231
shares (including shares in treasury:
1994 and 1993 -- 498,948) 8,839 8,765
Convertible Class A Common Stock, Authorized --
5,000,000 shares, Issued: 1994 -- 3,321,408 shares;
1993 -- 3,354,475 shares (including shares
in treasury: 1994 and 1993 -- 249,055) 3,321 3,354
Additional paid-in capital 30,813 30,443
Retained earnings 85,406 83,433
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128,379 125,995
Less cost of Common Stock and
Convertible Class A Stock in treasury 5,577 5,577
-------- --------
122,802 120,418
-------- --------
$273,526 $264,353
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</TABLE>
Note: The condensed financial statements as of December 31, 1993 were derived
from the audited financial statements at that date.
See notes to condensed financial statements.
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HAVERTY FURNITURE COMPANIES, INC.
CONDENSED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31
---------------------------
1994 1993
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(In thousands, except per share data)
<S> <C> <C>
Net sales $88,016 $77,734
Cost of goods sold 46,507 41,347
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Gross profit 41,509 36,387
Credit service charges 2,883 2,572
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44,392 38,959
Costs and expenses:
Selling, general and administrative 37,306 33,314
Interest 2,025 1,889
Provision for doubtful accounts 631 722
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39,962 35,925
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4,430 3,034
Other expense, net (32) (15)
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INCOME BEFORE INCOME TAXES 4,398 3,019
Income taxes 1,672 1,117
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NET INCOME $ 2,726 $ 1,902
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Average number of common and common
equivalent shares outstanding 11,567 9,038
======= =======
Earnings per share $.24 $.21
===== =====
Dividends per common share:
Common Stock $ .0675 $ .0650
Class A Common Stock .0625 .0617
</TABLE>
See notes to condensed financial statements.
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HAVERTY FURNITURE COMPANIES, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three months Ended March 31
1994 1993
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(In thousands)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 2,726 $ 1,902
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 1,973 1,615
Provision for deferred income taxes 0 360
Loss on sale of property and equipment 18 2
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Subtotal 4,717 3,879
Changes in operating assets and liabilities
which (decrease) increase cash:
Accounts receivable (3,344) (4,085)
Inventories (3,445) (1,952)
Other current accounts (909) (24)
Accounts payable and accrued expenses 500 (292)
Income taxes payable 1,620 416
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NET CASH USED IN OPERATING ACTIVITIES (861) (2,058)
INVESTING ACTIVITIES
Purchases of property and equipment (3,201) (3,374)
Proceeds from sale of property and equipment 50 398
Other investing activities (292) 15
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NET CASH USED IN INVESTING ACTIVITIES (3,443) (2,961)
FINANCING ACTIVITIES
Proceeds from short-term borrowings 5,400 5,700
Principal payments on long-term debt and
capital lease obligations (763) (1,385)
Exercise of stock options 411 1,908
Dividends paid (753) (567)
Other financing activities 32 3
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NET CASH PROVIDED BY FINANCING ACTIVITIES 4,327 5,659
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INCREASE IN CASH AND CASH EQUIVALENTS 23 640
Cash and cash equivalents at beginning of year 614 1,189
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 637 $ 1,829
======= =======
</TABLE>
See notes to condensed financial statements.
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HAVERTY FURNITURE COMPANIES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
NOTE A - Basis of Presentation
The accompanying unaudited condensed 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 generally accepted accounting
principles for complete financial statements. All share and per share amounts
in the financial statements have been adjusted for a 3-for-2 stock split
effected in the form of a 50% stock dividend, paid in June 1993. In the
opinion of management, all adjustments considered necessary for a fair
presentation have been included and all such adjustments are of a normal
recurring nature.
NOTE B - Interim LIFO Calculations
An actual valuation of inventory under the LIFO method can be made only at the
end of each year based on the inventory levels and costs at that time.
Accordingly, interim LIFO calculations must necessarily be based on
management's estimates of expected year-end inventory levels and costs. Since
these are affected by factors beyond management's control, interim results are
subject to the final year-end LIFO inventory valuation.
NOTE C - Supplementary Cash Flow Information
The Company made total interest payments (including capitalized interest) of
$1,671,000 and $1,887,000 for the three months ended March 31, 1994 and 1993,
respectively.
The Company made total income tax payments of $51,000 and $341,000 for the
three months ended March 31, 1994 and 1993, respectively.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS
Net sales for the quarter increased 13.2% over the same period for 1993.
Comparable-store sales (sales from stores in operation or expanded for a full
year or more) increased 11.2% during this quarter. Ongoing Company programs
contributing to the continuing sales gains include the interior remodeling and
showroom expansion of existing stores and the upscaling of merchandise lines
enhanced by the use of fully accessorized room settings. Customer demand was
also influenced by the improved general economy. The Company continues to
believe that its actions have attracted more middle- to upper-middle income
consumers who have purchased merchandise at relatively higher price points. As
of March 31, 1994, 17 stores have received expanded showrooms and 44 stores
have the enhanced appearance and upscale interiors format.
Credit service charges were unchanged at 3.3% of net sales when compared to the
same year-earlier period since interest rates offered to customers on
installment debt remained unchanged. Interest-free promotions have been used
selectively by the Company for major sales events consistent with the first
quarter of 1993. In absolute dollars credit service charges increased 12.1%.
Gross margin as a percentage of net sales increased by 0.4% primarily due to a
slightly lower LIFO provision of 0.5% of net sales as compared to 0.8% for the
first quarter of 1993.
Selling, general and administrative expenses decreased 0.5% as a percentage of
net sales. In absolute dollars the expenses increased 12.0%. The decrease, as
a percentage of net sales, was primarily related to selling, occupancy and
collection expenses being spread over a broader sales base. The Company's
focus on cost containment and better utilization of the corporate advertising
department to coordinate major sales events contributed to the improvement.
Interest expense increased 0.2% as a percentage of net sales, or 7.2% in
absolute dollars as a result of an increase in the Company's effective interest
rate by 49 basis points. The effective interest rate reflected a higher
portion of fixed rate debt during 1994 due to the $30 million issuance of 7.16%
unsecured senior notes in December 1993 which replaced lower rate short-term
debt.
LIQUIDITY AND SOURCES OF CAPITAL
Although the Company is a retail furniture store chain, it has certain
characteristics of a finance company as a result of carrying its own customer
accounts receivable. There was an $861,000 use of cash in operating activities
in the first quarter of 1994 as sales increases led to a $3.3 million increase
in accounts receivable and inventories were increased $3.4 million in response
to the greater demand. Stronger earnings and higher depreciation charges
offset most of these increases.
Slightly less use of free-interest and delayed-payment promotions led to a 1.7%
decrease in non-interest-bearing receivables as a percentage of total accounts
receivable. Such promotions are expected to continue at a similar pace in the
near future. Inventory turnover was improved over the first quarter of 1993.
It was enhanced by further improvements to the Company's computerized inventory
management system, more reliance on the two regional distribution centers and
increases in sales of certain upscale merchandise which are filled from special
orders.
Investing activities used $3.4 million of cash, primarily for progress payments
on planned capital expenditures. Financing activities provided $4.3 million
during the quarter, mostly from short-term bank lines, net of other activity.
The Company has arrangements with eight banks under line-of-credit agreements
to borrow up to $99 million. At March 31, 1994, of this amount, $44 million
were committed lines ($26.9
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
(continued)
million unused) and $55 million were uncommitted lines ($44.8 million unused).
Borrowings accrue interest at competitive money- market rates and all lines are
reviewed annually for renewal. The Company has a revolving credit/term loan
agreement with a commercial bank providing for borrowings of $10 million
through 1997, at which time it converts to a term loan, maturing in 1999. If
activated, this facility would replace a $10 million short-term committed
line. The Company's financial covenants under various loan agreements were
modified in late 1993 to allow for securitization of up to approximately 50% of
the outstanding balances of accounts receivable. The Company plans to consider
a financing transaction of this type in 1994 or 1995, the proceeds of which
would reduce accounts receivable and improve cash flow from operating
activities.
In addition to cash flow from operations, the Company uses bank lines of credit
on an interim basis to finance capital expenditures and repay long-term debt.
Longer-term debt transactions such as private placements and mortgage financing
are used periodically to reduce short-term borrowings and manage interest rate
risk. The Company pursues a diversified approach to its financing requirements
and balances its overall capital structure with a substantial amount of
fixed-rate or capped-rate debt (81% of total debt was interest-rate protected
at March 31, 1994).
Capital expenditures are presently expected to include, for the two-year period
of 1994 and 1995, the remodeling of 16 existing locations (with eight of those
also being expanded), the addition of eight new stores, the expansion of seven
stores which already have the new upscale format, and the construction of a new
regional warehouse in Florida. Although the preliminary estimate of
expenditures over this two-year period is $40 million, this amount will be
reduced by any new properties which are financed off the balance sheet with
operating leases. Funds available from operations, bank lines of credit and
other possible financing transactions are expected to be adequate to finance
the Company's planned expenditures.
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PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits filed with this report.
None.
(b) Reports on Form 8-K.
None.
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S I G N A T U R E S
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 May 3, 1994 By s/ Dennis L. Fink
------------------------ ------------------------------
Dennis L. Fink,
Senior Vice President and
Chief Financial Officer
(principal financial officer)
By s/ Hugh G. Wells
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Hugh G. Wells, Vice President
& Treasurer
By s/ Dan C. Bryant
------------------------------
Dan C. Bryant, Controller
(principal accounting officer)
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