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Previous: DVL INC /DE/, 10-Q, 1995-05-12 |
Next: NEW PARAHO CORP, 10-Q, 1995-05-12 |
<PAGE> 1
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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 March 31, 1995
--------------
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
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HAVERTY FURNITURE COMPANIES, INC.
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(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Maryland 58-0281900
------------------------------- -------------------
(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)
</TABLE>
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 April 30, 1995 were: Common Stock -- 8,498,286;
Class A Common Stock -- 3,041,565.
<PAGE> 2
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.
<S> <C> <C>
Part I. Financial Information:
Condensed Balance Sheets -
March 31, 1995 and December 31, 1994 1
Condensed Statements of Income -
Three months ended March 31, 1995 and 1994 3
Condensed Statements of Cash Flows -
Three months ended March 31, 1995 and 1994 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>
<PAGE> 3
PART I. FINANCIAL INFORMATION
HAVERTY FURNITURE COMPANIES, INC.
CONDENSED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
March 31 December 31
1995 1994
(Unaudited) (Note)
----------- -----------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 1,456 $ 1,925
Accounts receivable 167,175 167,510
Less allowance for doubtful accounts 7,105 7,105
--------- ---------
160,070 160,405
Inventories, at LIFO 71,332 64,582
Other current assets 3,170 2,686
Deferred income taxes 3,396 3,396
--------- ---------
TOTAL CURRENT ASSETS 239,424 232,994
Property and equipment 137,978 129,418
Less accumulated depreciation and amortization 50,375 49,220
--------- ---------
87,603 80,198
Other assets 1,896 1,911
--------- ---------
$ 328,923 $ 315,103
========= =========
</TABLE>
-1-
<PAGE> 4
HAVERTY FURNITURE COMPANIES, INC.
CONDENSED BALANCE SHEETS
(Continued)
<TABLE>
<CAPTION>
March 31 December 31
1995 1994
(Unaudited) (Note)
----------- -----------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes payable to banks $ 49,300 $ 49,200
Accounts payable and accrued expenses 30,523 32,809
Income taxes 2,803 3,332
Current portion of long-term debt and
capital lease obligations 7,959 7,958
--------- ---------
TOTAL CURRENT LIABILITIES 90,585 93,299
Long-term debt and capital lease obligations,
less current portion 101,391 87,164
Deferred income taxes 1,347 1,347
Other liabilities 2,265 2,238
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: 1995 -- 8,995,434 shares; 1994 -- 8,928,532
shares (including shares in treasury:
1995 and 1994 -- 498,948) 8,996 8,929
Convertible Class A Common Stock, Authorized --
5,000,000 shares; Issued: 1995 -- 3,292,420 shares;
1994 -- 3,313,606 shares (including shares
in treasury: 1995 and 1994 -- 249,055) 3,292 3,314
Additional paid-in capital 31,853 31,500
Retained earnings 94,771 92,889
--------- ---------
138,912 136,632
Less cost of Common Stock and
Convertible Class A Common Stock in treasury 5,577 5,577
--------- ---------
133,335 131,055
--------- ---------
$ 328,923 $ 315,103
========= =========
</TABLE>
Note: The condensed financial statements as of December 31, 1994 were derived
from the audited financial statements at that date.
See notes to condensed financial statements.
-2-
<PAGE> 5
HAVERTY FURNITURE COMPANIES, INC.
CONDENSED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31
----------------------------
1995 1994
----------- ----------
<S> <C> <C>
Net sales $ 94,383 $ 88,016
Cost of goods sold 49,915 46,507
---------- ----------
Gross profit 44,468 41,509
Credit service charges 3,063 2,883
---------- ----------
47,531 44,392
Costs and expenses:
Selling, general and administrative 40,098 37,306
Interest 2,496 2,025
Provision for doubtful accounts 633 631
---------- ----------
43,227 39,962
---------- ----------
4,304 4,430
Other income (expense), net 98 ( 32)
---------- ----------
INCOME BEFORE INCOME TAXES 4,402 4,398
Income taxes 1,673 1,672
---------- ----------
NET INCOME $ 2,729 $ 2,726
========== ==========
Average number of common and common
equivalent shares outstanding 11,498 11,567
========== ==========
Earnings per share $ 0.24 $ 0.24
========== ==========
Cash dividends per common share:
Common Stock $ .0750 $ .0675
Class A Common Stock .0700 .0625
</TABLE>
See notes to condensed financial statements.
-3-
<PAGE> 6
HAVERTY FURNITURE COMPANIES, INC.
STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three months Ended March 31
---------------------------
1995 1994
---------- ----------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 2,729 $ 2,726
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 2,451 1,973
(Gain) Loss on sale of property and equipment (53) 18
Provision for doubtful accounts 633 631
----------- ----------
Subtotal 5,760 5,348
Changes in operating assets and liabilities:
Accounts receivable (298) (3,975)
Inventories (6,750) (3,445)
Other current assets (484) (909)
Accounts payable and accrued expenses (2,286) 500
Income taxes (529) 1,620
----------- ----------
NET CASH USED IN OPERATING ACTIVITIES (4,587) (861)
INVESTING ACTIVITIES
Purchases of property and equipment (10,067) (3,201)
Proceeds from sale of property and equipment 270 50
Other investing activities 9 (292)
----------- ----------
NET CASH USED IN INVESTING ACTIVITIES (9,788) (3,443)
FINANCING ACTIVITIES
Net increase in short-term borrowings 100 5,400
Proceeds from issuance of long-term debt 15,000 --
Payment of long-term debt and capital lease obligations (772) (763)
Exercise of stock options 398 411
Dividends paid (847) (753)
Other financing activities 27 32
----------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 13,906 4,327
----------- ----------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (469) 23
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,925 614
----------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,456 $ 637
=========== ==========
</TABLE>
See notes to condensed financial statements.
-4-
<PAGE> 7
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 cash payments for interest (including capitalized
interest) of approximately $2,807,000 and $1,671,000 for the three months ended
March 31, 1995 and 1994, respectively.
The Company made total income tax payments of $2,202,000 and $51,000 for the
three months ended March 31, 1995 and 1994, respectively.
-5-
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net sales for the quarter increased 7.2% over the same period for 1994.
Comparable-store sales (sales from stores in operation or expanded for a full
year or more) increased 4.3% over the year-earlier period. Management believes
that its overall marketing strategy has allowed the Company to attract more
middle- to upper-middle income consumers which has continued to provide modest
sales gains during the slower overall economic growth prevalent at this stage
of the business cycle. Ongoing Company programs contributing to the appeal to
these consumers 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.
Gross margin as a percentage of net sales was 47.1% for the first quarter of
1995 as compared to 47.2% in 1994. This decline was due to a more competitive
environment in the Company's metropolitan markets and the lower margins
associated with higher price-point merchandise. During the fourth quarter of
1994, the Company changed its method of accounting for LIFO inventories from
applying U.S. Bureau of Labor Statistics (BLS) indices to internally developed
indices. The Company believes the internally developed indices more accurately
measure increases and decreases in the Company's cost of merchandise and
produce better matching of current costs and revenues. The cumulative effect
of such change at the beginning of 1994 and proforma amounts for prior years
are not determinable. The LIFO reserve was increased 0.5% of net sales and
required no adjustment during the first quarters of 1994 and 1995,
respectively.
Credit service charges increased 6.2% in absolute dollars and the level of
charge sales increased 0.1% when compared to the year-ago period.
Interest-free promotions throughout 1994 generated a higher percentage of
non-interest bearing receivable dollars to gross receivable dollars at quarter
end 1995 as compared to 1994. The Company plans to continue to offer
interest-free financing promotions such that this percentage is not expected to
decline during 1995. The Company raised its standard credit service charge
rate to a more industry-comparable 21% (where allowed by law) from 16.9% for
regular accounts opened beginning in March 1995. The provision for doubtful
accounts was unchanged at 0.7% of net sales as the level of bad debt write-offs
was as expected.
Selling, general and administrative expenses increased 0.1% as a percentage of
net sales, or 7.5% in absolute dollars. This increase was primarily related to
depreciation and amortization charges reflecting the Company's increased
investment in property and equipment and other costs associated with a new
regional warehouse facility for Florida, two new stores and seven expanded
store showrooms. These increases were partially offset by a slight decrease in
overall personnel costs as a percentage of net sales.
Interest expense increased 0.3% as a percentage of net sales, or 23.2% in
absolute dollars as a result of an increase in the Company's effective interest
rate of 28 basis points and increased average borrowings under line-of-credit
agreements.
FINANCIAL POSITION
The Company used $4.6 million in cash for operating activities in the first
quarter of 1995 as inventories increased $6.8 million to support greater demand
and continued stocking of the regional warehouses as the Company transitions
certain inventory into its regional distribution system. Additionally,
accounts payable were reduced $2.3 million. Higher depreciation charges offset
some of these increases.
-6-
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(continued)
Net property and equipment, at $87.6 million, was $7.4 million above the level
of the preceding quarter. Cash used in investing activities of $9.8 million
for the first quarter of 1995 was primarily used on $10 million of planned
capital expenditures, $6.8 million above the year-ago period. The Company
presently estimates capital expenditures to be approximately $45 million
through the end of 1996 for the addition of 12 new stores and the expansion
and/or remodeling of 12 existing locations. The estimated expenditures will be
reduced by any new properties which are financed off the balance sheet with
operating leases.
The Company has arrangements with nine banks under line-of-credit agreements to
borrow up to $109 million. At March 31, 1995, of this amount, $64 million were
committed lines ($18 million unused) and $45 million were uncommitted lines
($31.7 million unused). Borrowings accrue interest at competitive short-term
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 utilized, this facility would replace a $10 million
short-term committed line. The Company's financial covenants under various
loan agreements allow for securitization of up to approximately 55% of the
outstanding balances of accounts receivable. The Company plans to enter into a
financing transaction of this type in 1995, the proceeds of which would reduce
accounts receivable and notes payable to banks while improving cash flow from
operating activities. Cash provided from financing activities for the first
quarter of 1995 of $13.9 million is related to a $15 million unsecured
long-term debt transaction at a fixed interest rate of 8.26% which was used to
reduce short-term borrowings. The Company pursues a diversified approach to
its financing requirements and balances its overall capital structure with
appropriate amounts of fixed-rate or capped-rate debt as determined by the
interest rate environment (50% of total debt was interest-rate protected at
March 31, 1995).
The Company anticipates that its cash requirements during the next few years to
finance its operations, open new stores and complete its remodeling/expansion
plans will be adequately generated from operations, bank lines of credit and
other possible financing transactions. The Company will continue to review all
expenditures to maximize financial returns and maintain financial flexibility.
-7-
<PAGE> 10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits filed with this report.
27 Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K.
None.
-8-
<PAGE> 11
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 12, 1995 By /s/ Dennis L. Fink
--------------------------- -----------------------------------
Dennis L. Fink,
Senior Vice President and
Chief Financial Officer
(principal financial officer)
By /s/ Hugh G. Wells
-----------------------------------
Hugh G. Wells, Vice President
& Treasurer
By /s/ Dan C. Bryant
-----------------------------------
Dan C. Bryant, Controller
(principal accounting officer)
-9-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 1,456
<SECURITIES> 0
<RECEIVABLES> 167,175
<ALLOWANCES> 7,105
<INVENTORY> 71,332
<CURRENT-ASSETS> 239,424
<PP&E> 137,978
<DEPRECIATION> 50,375
<TOTAL-ASSETS> 328,923
<CURRENT-LIABILITIES> 90,585
<BONDS> 101,391
<COMMON> 12,288
0
0
<OTHER-SE> 121,047
<TOTAL-LIABILITY-AND-EQUITY> 328,923
<SALES> 94,383
<TOTAL-REVENUES> 97,446
<CGS> 49,915
<TOTAL-COSTS> 49,915
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 633
<INTEREST-EXPENSE> 2,496
<INCOME-PRETAX> 4,402
<INCOME-TAX> 1,673
<INCOME-CONTINUING> 2,729
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,729
<EPS-PRIMARY> .24
<EPS-DILUTED> 0
</TABLE>
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