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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, 1995
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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
- ------------------------------------------------- ---------
(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 1, 1995 were: Common Stock -- 8,537,798;
Class A Common Stock -- 3,014,807.
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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.
<S> <C> <C>
Part I. Financial Information:
Condensed Balance Sheets -
June 30, 1995 and December 31, 1994 1
Condensed Statements of Income -
Quarter and six months ended
June 30, 1995 and 1994 3
Condensed Statements of Cash Flows -
Six months ended June 30, 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>
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PART I. FINANCIAL INFORMATION
HAVERTY FURNITURE COMPANIES, INC.
CONDENSED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
June 30 December 31
1995 1994
(Unaudited) (Note)
----------- -----------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 1,382 $ 1,925
Accounts receivable 164,797 167,510
Less allowance for doubtful accounts 7,105 7,105
-------- --------
157,692 160,405
Inventories, at LIFO 73,707 64,582
Other current assets 5,071 2,686
Deferred income taxes 3,396 3,396
-------- --------
TOTAL CURRENT ASSETS 241,248 232,994
Property and equipment 145,124 129,418
Less accumulated depreciation and amortization 51,531 49,220
-------- --------
93,593 80,198
Other assets 1,823 1,911
-------- --------
$336,664 $315,103
======== ========
</TABLE>
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HAVERTY FURNITURE COMPANIES, INC.
CONDENSED BALANCE SHEETS
(Continued)
<TABLE>
<CAPTION>
June 30 December 31
1995 1994
(Unaudited) (Note)
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<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes payable to banks $ 49,300 $ 49,200
Accounts payable and accrued expenses 28,048 32,809
Income taxes ---- 3,332
Current portion of long-term debt and
capital lease obligations 7,960 7,958
-------- --------
TOTAL CURRENT LIABILITIES 85,308 93,299
Long-term debt and capital lease obligations,
less current portion 113,161 87,164
Deferred income taxes 1,347 1,347
Other liabilities 2,267 2,238
Stockholders' Equity
Capital stock, par value $1 per share --
Preferred Stock, Authorized: 1,000,000 shares;
Issued: None
Common Stock, Authorized: 1995 -- 50,000,000 shares;
1994 -- 15,000,000 shares; Issued: 1995 -- 9,007,734 shares;
1994 -- 8,928,532 shares (including shares in treasury:
1995 and 1994 -- 498,948) 9,008 8,929
Convertible Class A Common Stock, Authorized:
1995 -- 15,000,000 shares; 1994 -- 5,000,000 shares;
Issued: 1995 -- 3,280,120 shares; 1994 -- 3,313,606 shares
(including shares in treasury: 1995 and 1994 -- 249,055) 3,280 3,314
Additional paid-in capital 31,853 31,500
Retained earnings 96,017 92,889
-------- --------
140,158 136,632
Less cost of Common Stock and
Convertible Class A Common Stock in treasury 5,577 5,577
-------- --------
134,581 131,055
-------- --------
$336,664 $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.
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HAVERTY FURNITURE COMPANIES, INC.
CONDENSED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 30 June 30
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1995 1994 1995 1994
------- ------- -------- --------
<S> <C> <C> <C> <C>
Net sales $88,678 $84,747 $183,061 $172,763
Cost of goods sold 47,010 44,915 96,925 91,422
------- ------- -------- --------
Gross profit 41,668 39,832 86,136 81,341
Credit service charges 3,021 2,892 6,084 5,775
------- ------- -------- --------
44,689 42,724 92,220 87,116
Costs and expenses:
Selling, general and administrative 39,473 36,938 79,571 74,244
Interest 2,772 1,808 5,268 3,833
Provision for doubtful accounts 667 655 1,300 1,286
------- ------- -------- --------
42,912 39,401 86,139 79,363
------- ------- -------- --------
1,777 3,323 6,081 7,753
Other income (expense), net 1,605 ( 2) 1,703 ( 34)
------- ------- -------- --------
INCOME BEFORE INCOME TAXES 3,382 3,321 7,784 7,719
Income taxes 1,285 1,261 2,958 2,933
------- ------- -------- --------
NET INCOME $ 2,097 $ 2,060 $ 4,826 $ 4,786
======= ======= ======== ========
Average number of common and common
equivalent shares outstanding 11,540 11,535 11,519 11,510
======= ======= ======== ========
Earnings per share $ 0.18 $ 0.18 $ 0.42 $ 0.42
======= ======= ======== ========
Cash dividends per common share:
Common Stock $ .0750 $ .0675 $ .1500 $ .1350
Class A Common Stock .0700 .0625 .1400 .1250
</TABLE>
See notes to condensed financial statements.
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HAVERTY FURNITURE COMPANIES, INC.
STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30
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1995 1994
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<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 4,826 $ 4,786
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 5,027 4,096
Provision for doubtful accounts 1,300 1,286
(Gain) loss on sale of property and equipment (450) 6
Gain from destruction of a retail location (1,177) ----
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Subtotal 9,526 10,174
Changes in operating assets and liabilities:
Accounts receivable 1,413 (8,018)
Inventories (9,582) (6,665)
Other current assets (549) (24)
Accounts payable and accrued expenses (4,811) 413
Income taxes (3,332) 75
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NET CASH USED IN OPERATING ACTIVITIES (7,335) (4,045)
-------- -------
INVESTING ACTIVITIES
Purchases of property and equipment (20,301) (7,427)
Proceeds from sale of property and equipment 1,971 70
Insurance proceeds 206 ----
Other investing activities 88 (303)
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NET CASH USED IN INVESTING ACTIVITIES (18,036) (7,660)
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FINANCING ACTIVITIES
Net increase in short-term borrowings 100 18,400
Proceeds from issuance of long-term debt 30,000 ----
Payment of long-term debt and capital lease obligations (4,001) (4,532)
Exercise of stock options 398 464
Dividends paid (1,698) (1,509)
Other financing activities 29 27
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NET CASH PROVIDED BY FINANCING ACTIVITIES 24,828 12,850
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(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (543) 1,145
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,925 614
-------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,382 $ 1,759
======== =======
</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 cash payments for interest (including capitalized
interest) of $6,005,000 and $3,481,000 for the six months ended June 30, 1995
and 1994, respectively.
The Company made total income tax payments of $6,290,000 and $2,858,000 for the
six months ended June 30, 1995 and 1994, 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, 1995 increased
4.6% and 6.0% over the same periods for 1994, respectively. Comparable-store
sales (sales from stores in operation or expanded for a full year or more)
increased 2.7 % and 3.6% over the year-earlier periods, respectively.
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 flat compared to the prior year
periods at 47.0% for the second quarter and 47.1% for the six-month period.
The 1995 LIFO reserve impact declined 0.3% and 0.4% as a percentage of net
sales for the quarter and six-month period, as compared to the same periods in
1994, respectively.
Credit service charges increased 4.5% and 5.3% in absolute dollars for the
quarter and six-month period, respectively. The level of charge sales remained
relatively flat when compared to the year-ago periods at approximately 80%.
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 beginning in March 1995 to a more industry-comparable 21% (where allowed
by law) from 16.9% for newly-opened regular accounts. The provision for
doubtful accounts was unchanged at 0.8% of net sales for the quarter and
decreased 0.1% as a percentage of net sales for the six-month period, as
compared to the same periods in 1994.
Selling, general and administrative expenses increased 1.1% and 0.5% as a
percentage of net sales, or 6.9% and 7.2% in absolute dollars, for the quarter
and the six-month period, respectively. 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 1.0% and 0.7% as a percentage of net sales, or 53.3%
and 37.4% in absolute dollars, for the quarter and the six-month period,
respectively. During the second quarter last year, the Company terminated
certain derivative instruments used to manage interest rate risk on short-term
debt and credited the gain to interest expense. Without considering this gain,
the Company's effective interest rate increased 88 basis points to 7.5% for the
quarter and increased 62 basis points to 7.4% for the six-month period. The
average debt levels increased 32.4% and 30.3% for the quarter and six-month
period, respectively, to fund higher inventories and physical expansions.
On May 18, 1995 a tornado destroyed a retail location in Nashville, Tennessee.
Management estimates that the current year second quarter sales are lower by
approximately $575,000 as compared to the prior year due to the destruction of
this location, which was the second largest store in that metropolitan market.
Insurance proceeds for replacement value of the facility, inventory and other
coverages are expected to be approximately $3 million. The estimated gain
resulting from this event is approximately $1.2 million and is included in
other income.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(continued)
Other income also includes a net gain of approximately $370,000 from the sales
and writedown of real estate during the second quarter of 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company used $7.3 million in cash for operating activities in the first
six months of 1995 principally due to increased inventories of $9.1 million.
Such increases largely resulted from stocking certain inventory into its
regional distribution system and lower than expected sales growth.
Additionally, accounts payable and income taxes were reduced $8.1 million.
Higher depreciation charges offset some of these increases.
Cash used in investing activities of $18.0 million for the first six months of
1995 was primarily attributable to $20.3 million in planned capital
expenditures, $12.9 million above the year-ago period. The Company presently
estimates additional capital expenditures to be approximately $55.0 million
through the end of 1996 for the addition of 8 new stores, the rebuilding and
expansion of the destroyed Nashville store and the expansion and/or remodeling
of 12 existing locations. The expenditures for an additional 3 new stores and
a new warehouse in Dallas will be arranged under operating leases.
The Company has arrangements with nine banks under line-of-credit agreements to
borrow up to $109 million. At June 30, 1995, of this amount, $64 million were
committed lines ($17 million unused) and $45 million were uncommitted lines
($32.7 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
six months of 1995 of $24.8 million is related to $30 million unsecured
long-term debt transactions at a fixed-average interest rate of 8.1% 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 (64% of total debt was
interest-rate protected at June 30, 1995).
The Company anticipates that its cash requirements 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.
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PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
The 1995 Annual Meeting of Stockholders of the Company was held on April 28,
1995.
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 was as follows: For -- 7,208,675;
Withheld --363,545; for Messrs. Parker, Woodson and Humann as follows: For --
7,208,678; Withheld -- 363,542.
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 Lynn H. Johnston
John E. Slater, Jr. Clarence H. Smith
John Rhodes Haverty, M.D. Rawson Haverty, Jr.
Clarence H. Ridley, Esq. Frank S. McGaughey, III
Fred J. Bates
The number of votes cast for Messrs. Haverty, Ridley, Bates, Rawson Haverty,
Jr. and Dr. Haverty was as follows: For -- 2,537,938; Withheld -- 294; for
Messrs. Slater, Johnston, Smith and McGaughey was: For -- 2,537,736; Withheld
- -- 496.
A proposal to amend the Company's Articles of Incorporation to increase the
number of authorized shares of Common Stock from 15,000,000 to 50,000,000 and
to increase the number of authorized shares of Class A Common Stock from
5,000,000 to 15,000,000 was approved by a 74.6% affirmative vote of the
39,032,194 total votes entitled to be cast at the meeting, as follows:
<TABLE>
<CAPTION>
Total Votes Abstentions
Entitled to Votes Votes and Broker Total Votes
Class Be Cast For Against Non-Votes Represented
------------------------ ----------- ------------ --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Class A Common Stock 30,589,510 24,594,290 787,810 220 25,382,320
(ten votes per share)
Common Stock
(one vote per share) 8,442,684 4,517,686 2,979,673 74,861 7,572,220
---------- ---------- --------- ------ ----------
Total combined vote 39,032,194 29,111,976 3,767,483 75,081 32,954,540
========== ========== ========= ====== ==========
</TABLE>
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Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits filed with this report.
Exhibit 27 - Financial Data Schedule (for SEC use only).
(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 3, 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
and Treasurer
By s/ Dan C. Bryant
------------------------------
Dan C. Bryant, Controller
(principal accounting officer)
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF HAVERTY FURNITURE COS., INC. FOR THE SIX MONTHS ENDED
JUNE 30, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 1,382
<SECURITIES> 0
<RECEIVABLES> 164,797
<ALLOWANCES> 7,105
<INVENTORY> 73,707
<CURRENT-ASSETS> 241,248
<PP&E> 145,124
<DEPRECIATION> 51,531
<TOTAL-ASSETS> 336,664
<CURRENT-LIABILITIES> 85,308
<BONDS> 113,161
<COMMON> 9,008
0
3,280
<OTHER-SE> 122,293
<TOTAL-LIABILITY-AND-EQUITY> 336,664
<SALES> 183,061
<TOTAL-REVENUES> 189,145
<CGS> 96,925
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,300
<INTEREST-EXPENSE> 5,268
<INCOME-PRETAX> 7,784
<INCOME-TAX> 2,958
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,826
<EPS-PRIMARY> .42
<EPS-DILUTED> 0
</TABLE>
