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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 June 30, 1994
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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 from to
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Commission file number: 0-8498
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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
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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
----- -----
The number of shares outstanding of the registrant's two classes of $1
par value common stock as of August 10, 1994 were: Common Stock -- 8,376,316;
Class A Common Stock -- 3,036,632.
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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
<TABLE>
<CAPTION>
Page No.
Part I. Financial Information:
<S> <C> <C>
Condensed Balance Sheets -
June 30, 1994 and December 31, 1993 1
Condensed Statements of Income -
Six months ended June 30, 1994 and 1993 3
Condensed Statements of Cash Flows -
Six months ended June 30, 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
</TABLE>
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PART I. FINANCIAL INFORMATION
HAVERTY FURNITURE COMPANIES, INC.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30 December 31
1994 1993
(Unaudited) (Note)
-------------- -----------
(Thousands of dollars)
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 1,759 $ 614
Accounts receivable 151,157 144,115
Less allowance for doubtful accounts 6,795 6,485
--------- ---------
144,362 137,630
Inventories, at LIFO 61,404 54,739
Other current accounts 1,022 998
Deferred income taxes 1,193 1,193
--------- ---------
TOTAL CURRENT ASSETS 209,740 195,174
PROPERTY AND EQUIPMENT 118,505 112,374
Less accumulated depreciation
and amortization 47,798 44,935
--------- ---------
70,707 67,439
DEFERRED INCOME TAXES 158 158
OTHER ASSETS 1,872 1,582
--------- ---------
$ 282,477 $ 264,353
========= =========
</TABLE>
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HAVERTY FURNITURE COMPANIES, INC.
CONDENSED BALANCE SHEETS
(Continued)
<TABLE>
<CAPTION>
June 30 December 31
1994 1993
(Unaudited) (Note)
-------------- -------------
(Thousands of dollars)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
<S> <C> <C>
Accounts payable and accrued expenses $ 27,475 $ 27,062
Notes payable to banks 30,300 11,900
Income taxes payable 75 0
Current portion of long-term debt and
capital lease obligations 7,948 8,479
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TOTAL CURRENT LIABILITIES 65,798 47,441
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, less
current portion 90,196 94,197
OTHER LIABILITIES 2,324 2,297
STOCKHOLDERS' EQUITY
Capital stock, par value $1 per share:
Preferred Stock, Authorized -- 1,000,000 shares
Issued: None
Common Stock, Authorized -- 15,000,000 shares
Issued: 1994 -- 8,875,264 shares; 1993 -- 8,765,231
shares (including shares in treasury:
1994 and 1993 -- 498,948) 8,875 8,765
Convertible Class A Common Stock, Authorized --
5,000,000 shares, Issued: 1994 -- 3,285,687 shares;
1993 -- 3,354,475 shares (including shares
in treasury: 1994 and 1993 -- 249,055) 3,286 3,354
Additional paid-in capital 30,865 30,443
Retained earnings 86,710 83,433
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129,736 125,995
Less cost of Common Stock and
Convertible Class A Stock in treasury (5,577) (5,577)
--------- ---------
124,159 120,418
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$ 282,477 $ 264,353
========= =========
</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>
Quarter Ended Six Months Ended
June 30 June 30
------------------------- -------------------------
1994 1993 1994 1993
--------- ---------- ---------- ----------
(Thousands of dollars, except per share data)
<S> <C> <C> <C> <C>
Net sales $ 84,747 $ 71,876 $ 172,763 $ 149,610
Cost of goods sold 44,915 37,712 91,422 79,059
-------- -------- --------- ---------
Gross profit 39,832 34,164 81,341 70,551
Credit service charges 2,892 2,595 5,775 5,167
-------- -------- --------- ---------
42,724 36,759 87,116 75,718
Costs and expenses:
Selling, general and administrative 36,938 31,844 74,244 65,158
Interest 1,808 1,811 3,833 3,700
Provision for doubtful accounts 655 496 1,286 1,218
-------- -------- --------- ---------
39,401 34,151 79,363 70,076
-------- -------- --------- ---------
3,323 2,608 7,753 5,642
Other expense, net (2) (173) (34) (188)
-------- -------- --------- ---------
INCOME BEFORE INCOME TAXES 3,321 2,435 7,719 5,454
Income taxes 1,261 901 2,933 2,018
-------- -------- --------- ---------
NET INCOME $ 2,060 $ 1,534 $ 4,786 $ 3,436
======== ======== ========= =========
Average number of common and common
equivalent shares outstanding 11,535 11,340 11,510 10,216
======== ======== ========= =========
Earnings per share $ 0.18 $ 0.14 $ 0.42 $ 0.34
======== ======== ========= =========
Dividends per common share:
Common Stock $ .0675 $ .065 $ .135 $ .13
Class A Common Stock .0625 .0617 .125 .1234
</TABLE>
See notes to condensed financial statements.
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HAVERTY FURNITURE COMPANIES, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30
1994 1993
-------- --------
(In thousands)
OPERATING ACTIVITIES
<S> <C> <C>
Net Income $ 4,786 $ 3,436
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 4,096 3,312
Provision for deferred income taxes 0 360
Loss on sale of property and equipment 6 17
-------- --------
Subtotal 8,888 7,125
Changes in operating assets and liabilities
which (decrease) increase cash:
Accounts receivable (6,732) (6,548)
Inventories (6,665) (4,030)
Other current accounts (24) 154
Accounts payable and accrued expenses 413 (3,738)
Income taxes payable 75 (1,192)
-------- --------
NET CASH USED IN OPERATING ACTIVITIES (4,045) (8,229)
INVESTING ACTIVITIES
Purchases of property and equipment (7,427) (5,967)
Proceeds from sale of property and equipment 70 428
Other investing activities (303) 326
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (7,660) (5,213)
FINANCING ACTIVITIES
Proceeds from (repayment of) short-term borrowings 18,400 (8,100)
Principal payments on long-term debt and
capital lease obligations (4,532) (5,354)
Exercise of stock options 464 2,373
Dividends paid (1,509) (1,280)
Other financing activities 27 21
Sale of Common Stock 0 25,016
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NET CASH PROVIDED BY FINANCING ACTIVITIES 12,850 12,676
-------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,145 (766)
Cash and cash equivalents at beginning of year 614 1,189
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,759 $ 423
======== =========
</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. 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
$3,481,000 and $3,716,000 for the six months ended June 30, 1994 and 1993,
respectively.
The Company made total income tax payments of $2,858,000 and $2,850,000 for the
six months ended June 30, 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 second quarter and six months ended June 30, 1994 increased
17.9% and 15.5% from the prior year periods, respectively. Comparable-store
sales (sales from stores in operation or expanded for a full year or more)
increased 12.0% and 11.6% for the same comparison periods, respectively.
Management attributes the higher level of sales to the success of ongoing
marketing programs which include interior remodeling and showroom expansion of
existing stores along with the upscaling of merchandise lines and offering of
wider product selections. The Company believes these programs combined with
the fully accessorized room setting presentation and refined advertising
attracts a broader customer base. By June 30, 1994 the Company had
incorporated the enhanced appearance and upscale interiors format in 47 stores
and expanded the showroom floor in 20 of those stores.
Credit service charges declined 0.2% as a percentage of net sales for both the
quarter and six-month period as customer financing at lower promotional
interest rates increased slightly. In absolute dollars credit service charges
increased 11.4% and 11.8%, respectively, for the quarter and the six-month
period. Promotions involving free-interest and delayed payments are expected
to continue in the future at a pace similar to 1993.
Gross margin as a percentage of net sales decreased 0.5% for the quarter and
0.1% for the six-month period due in part to additional closeout sales to make
room for new inventory. The increase in sales of well-known,
higher-price-point furniture lines, which typically yield slightly lower gross
margins, was also a factor.
Selling, general and administrative expenses declined 0.7% and 0.6% as a
percentage of net sales for the quarter and six-month period, respectively. In
dollars, such expenses increased 16.0% and 13.9% for the same periods due
principally to higher personnel costs associated with strong sales growth.
Selling expenses and occupancy costs decreased as a percentage of net sales due
to a broader sales base and cost control practices.
Interest expense as a percentage of sales decreased 0.4% and 0.3% for the
quarter and six-month period, respectively. In absolute dollars interest
expense was virtually unchanged for the quarter and increased 3.6% for the
six-month period. During the quarter, the Company terminated three fixed-rate
interest swaps or caps primarily related to short-term floating-rate debt and
credited the gain to interest expense, allowing interest expense to remain flat
with last year's quarter.
Without considering this gain, the second quarter's effective interest rate was
29 basis points lower than last year's quarter and the six-month rate was the
same as last year's six-month period. The average debt levels increased 20.0%
and 11.0% for the same periods, respectively. The increased debt level in 1994
was incurred to fund higher inventory and accounts receivable, as well as the
remodeling and expansion programs.
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 a $4,045,000 use of cash in operating
activities in the first six months of 1994 as sales increases led to a $6.7
million increase in accounts receivable and an increase in inventories of $6.7
million in response to the greater demand. Stronger earnings and higher
depreciation charges offset most of these increases.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(continued)
Non-interest-bearing receivables remained consistent with the prior year as a
percentage of total accounts receivable. Inventory turnover was improved over
the first six months of 1993. It was enhanced by further refinements 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 often filled from special orders.
Investing activities in the first six months of 1994 used $7.7 million of cash,
primarily for progress payments on planned capital expenditures. Financing
activities provided $12.9 million during the six-month period, mostly from
short-term bank borrowings, net of other activity.
At June 30, 1994, the Company had arrangements with eight banks under
line-of-credit agreements to borrow up to $99 million. Of this amount, $44
million were committed lines ($14.2 million unused) and $55 million were
uncommitted lines ($44.5 million unused). As of July 1, 1994, bank lines were
renewed with committed and total lines increased by $5.0 million. 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 is considering 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.
Long-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 presently balances its overall capital structure with approximately equal
amounts of fixed-rate and variable-rate debt.
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 current estimate of expenditures
over this two-year period is $50 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 4. Submission of Matters to a Vote of Security Holders.
The 1994 Annual Meeting of Stockholders of the Company was held on April 29,
1994.
At the meeting the following persons were elected by the holders of Common
Stock to serve for a term of one year and until their successors are elected:
Dr. Kenneth Black, Jr.
William A. Parker, Jr.
Robert R. Woodson
L. Phillip Humann
The number of votes cast for Dr. Black and Mr. Humann was as follows: For --
7,261,013; Withheld -- 119,700; for Mr. Parker as follows: For -- 6,717,243;
Withheld -- 663,470; for Mr. Woodson as follows: For -- 7,261,033; Withheld --
119,680.
The holders of Class A Common Stock elected the following persons to serve for
a term of one year and until their successors are elected:
Rawson Haverty Fred J. Bates
Frank S. McGaughey, Jr. John E. Slater, Jr.
Alex W. Smith, Esq. Lynn H. Johnston
John Rhodes Haverty, M.D. Clarence H. Smith
Clarence H. Ridley, Esq. Rawson Haverty, Jr.
The number of votes cast for each of the above was as follows: For --
3,003,938; Withheld -- 14,972.
A proposal to amend the 1988 Incentive Stock Option Plan was approved by a
93.9% affirmative vote of the 37,569,813 total votes represented at the
meeting, as follows:
<TABLE>
<CAPTION>
Abstentions
and Broker Total Votes
Class For Against Non-Votes Represented
---------------------------- ------------- ------- ------------- -----------
<S> <C> <C> <C> <C>
Class A Common Stock 28,774,600 253,930 1,160,570 30,189,100
(ten votes per share)
Common Stock 6,519,653 196,704 664,356 7,380,713
(one vote per share) ---------- ------- --------- ----------
Total combined vote 35,294,253 450,634 1,824,926 37,569,813
========== ======= ========= ==========
</TABLE>
A proposal to amend the 1993 Non-Qualified Stock Option Plan was approved by a
92.4% affirmative vote of the 37,569,813 total votes represented at the
meeting, as follows:
<TABLE>
<CAPTION>
Abstentions
and Broker Total Votes
Class For Against Non-Votes Represented
---------------------------- ------------- ------- ------------- -----------
<S> <C> <C> <C> <C>
Class A Common Stock 28,249,900 363,020 1,576,180 30,189,100
(ten votes per share)
Common Stock 6,468,618 252,255 659,840 7,380,713
(one vote per share) ---------- ------- --------- ----------
Total combined vote 34,718,518 615,275 2,236,020 37,569,813
========== ======= ========= ==========
</TABLE>
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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 August 12, 1994 By /s/ Dennis L. Fink
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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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