<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 SEPTEMBER 30, 1996
------------------
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.
----------------------------------------------------
(Exact name of registrant as specified in its charter)
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
- ------------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (404) 881-1911
--------------
--------------------------------------------------------------------------
(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 November 7, 1996 were: Common Stock -- 8,801,435;
Class A Common Stock -- 2,950,749.
<PAGE> 2
HAVERTY FURNITURE COMPANIES, INC.
INDEX
<TABLE>
<CAPTION>
Page No.
<S> <C>
Part I. Financial Information:
Condensed Consolidated Balance Sheets -
September 30, 1996 and December 31, 1995 1
Condensed Consolidated Statements of Income -
Quarter and nine months ended September 30, 1996 and 1995 3
Condensed Consolidated Statements of Cash Flows -
Nine months ended September 30, 1996 and 1995 4
Notes to Condensed Consolidated 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. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
September 30 December 31
1996 1995
-------------- ---------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 1,696 $ 2,146
Accounts receivable 193,616 179,982
Less allowance for doubtful accounts 7,105 7,105
-------- --------
186,511 172,877
Inventories, at LIFO 80,736 73,597
Other current assets 6,372 5,852
Deferred income taxes 2,826 2,938
-------- --------
TOTAL CURRENT ASSETS 278,141 257,410
Property and equipment 178,585 168,151
Less accumulated depreciation and amortization 62,598 55,746
-------- --------
115,987 112,405
Other assets 2,069 1,963
-------- --------
$396,197 $371,778
======== ========
</TABLE>
-1-
<PAGE> 4
HAVERTY FURNITURE COMPANIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Continued)
<TABLE>
<CAPTION>
September 30 December 31
1996 1995
-------------- ---------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes payable to banks $ 70,700 $ 53,400
Accounts payable and accrued expenses 43,439 36,100
Current portion of long-term debt and
capital lease obligations 7,956 7,973
-------- --------
TOTAL CURRENT LIABILITIES 122,095 97,473
Long-term debt and capital lease obligations,
less current portion 123,717 129,233
Deferred income taxes 1,766 1,786
Other liabilities 2,216 2,331
Stockholders' Equity
Capital stock, par value $1 per share --
Preferred Stock, Authorized: 1,000,000 shares;
Issued: None
Common Stock, Authorized: 1996 and 1995 --
50,000,000 shares; Issued: 1996 -- 9,283,763 shares;
1995 -- 9,154,780 shares (including shares in treasury:
1996 -- 494,328; 1995 -- 498,948) 9,284 9,155
Convertible Class A Common Stock, Authorized:
1996 and 1995 -- 15,000,000 shares; Issued: 1996 --
3,193,804 shares; 1995 -- 3,217,411 shares (including
shares in treasury: 1996 and 1995 -- 249,055) 3,194 3,217
Additional paid-in capital 33,319 32,494
Retained earnings 106,149 101,666
-------- --------
151,946 146,532
Less cost of Common Stock and
Convertible Class A Common Stock in treasury 5,543 5,577
-------- --------
146,403 140,955
-------- --------
$396,197 $371,778
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
-2-
<PAGE> 5
HAVERTY FURNITURE COMPANIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
September 30 September 30
----------------------------- ---------------------------
1996 1995 1996 1995
----------- ----------- --------- ---------
<S> <C> <C> <C> <C>
Net sales $ 117,079 $ 100,970 $ 331,170 $ 284,031
Cost of goods sold 61,460 53,307 173,829 150,232
--------- --------- --------- ---------
Gross profit 55,619 47,663 157,341 133,799
Credit service charges 3,403 3,014 9,848 9,098
--------- --------- --------- ---------
59,022 50,677 167,189 142,897
Costs and expenses:
Selling, general and administrative 48,637 42,234 142,486 121,805
Interest 3,669 2,845 10,761 8,115
Provision for doubtful accounts 1,072 736 2,951 2,036
--------- --------- --------- ---------
53,378 45,815 156,198 131,956
--------- --------- --------- ---------
5,644 4,862 10,991 10,941
Other (expense) income, net ( 14) 132 45 1,837
--------- --------- --------- ---------
INCOME BEFORE INCOME TAXES 5,630 4,994 11,036 12,778
Income taxes 1,970 1,899 3,970 4,857
--------- --------- --------- ---------
NET INCOME $ 3,660 $ 3,095 $ 7,066 $ 7,921
========= ========= ========= =========
Average number of common and common
equivalent shares outstanding 11,697 11,559 11,674 11,533
========= ========= ========= =========
Earnings per share $ 0.31 $ 0.27 $ 0.61 $ 0.69
========= ========= ========= =========
Cash dividends per common share:
Common Stock $ .0750 $ .0750 $ .2250 $ .2250
Class A Common Stock .0700 .0700 .2100 .2100
</TABLE>
See notes to condensed consolidated financial statements.
-3-
<PAGE> 6
HAVERTY FURNITURE COMPANIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended September 30
------------------------------
1996 1995
-------- ---------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 7,066 $ 7,921
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 9,408 7,706
Provision for doubtful accounts 2,951 2,036
Loss (gain) on sale of property and equipment 7 (597)
Gain from destruction of a retail location -- (1,235)
-------- --------
Subtotal 19,432 15,831
Changes in operating assets and liabilities:
Accounts receivable (16,585) (4,141)
Inventories (7,139) (5,271)
Other current assets (520) (578)
Accounts payable and accrued expenses 8,435 2,153
Income taxes (1,004) (2,388)
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 2,619 5,606
-------- --------
INVESTING ACTIVITIES
Purchases of property and equipment (13,504) (32,632)
Proceeds from sale of property and equipment 507 2,346
Insurance proceeds -- 713
Other investing activities (106) (4)
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (13,103) (29,577)
-------- --------
FINANCING ACTIVITIES
Net increase (decrease) in short-term borrowings 2,300 (200)
Proceeds from issuance of long-term debt 15,000 30,000
Payment of long-term debt and capital lease obligations (5,533) (4,692)
Exercise of stock options 931 900
Dividends paid (2,583) (2,551)
Other financing activities (81) (19)
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 10,034 23,438
-------- --------
DECREASE IN CASH AND CASH EQUIVALENTS (450) (533)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 2,146 1,925
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,696 $ 1,392
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
-4-
<PAGE> 7
HAVERTY FURNITURE COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - Basis of Presentation
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 generally accepted accounting
principles for complete financial statements. The financial statements include
the accounts of the Company and its wholly-owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated in consolidation. 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 $10,734,000 and $8,987,000 for the nine months ended
September 30, 1996 and 1995, respectively.
The Company made total income tax payments of $4,843,000 and $7,239,000 for the
nine months ended September 30, 1996 and 1995, respectively.
-5-
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net sales for the third quarter and nine months ended September 30, 1996
increased 16.0% and 16.6% over the same periods for 1995, respectively.
Comparable-store sales (sales from stores in operation or expanded for a full
year or more) increased 3.4% and 4.3% over the year-earlier periods,
respectively.
Gross margin as a percentage of net sales increased to 47.5 % from 47.2 % and
increased to 47.5% from 47.1% for the quarter and nine months ended September
30, 1996, respectively. This increase results from better pricing discipline and
a more favorable product mix during the current year periods. The LIFO provision
impact, as a percentage of net sales, was flat compared to the prior year
periods at 0.2% for the third quarter and 0.1% for the nine-month period.
Credit service charges increased 12.9% and 8.2% in absolute dollars for the
quarter and nine-month period, respectively. The provision for doubtful accounts
increased 0.2% as a percentage of net sales to 0.9% for both the quarter and the
nine-month periods. Management believes that given the current consumer credit
environment, write-offs will continue at this higher level during the coming
year.
Selling, general and administrative expenses decreased 0.3% and increased 0.1%
as a percentage of net sales for the quarter and nine months, respectively. The
increase for the nine months was primarily related to depreciation and
amortization charges and other costs such as advertising, pre-opening and
operating expenses associated with the ten new stores opened since September 30,
1995. The decrease for the quarter is attributable to leveraged general and
administrative expenses offsetting the higher occupancy costs associated with a
newer store base.
Interest expense increased 0.4% as a percentage of net sales, or 29.0% and
32.6% in absolute dollars, for the quarter and nine-month period, respectively.
The Company's effective interest rate decreased 43 basis points to 7.1% for the
quarter and decreased 31 basis points to 7.1% for the nine-month period. The
average debt levels increased 22.2% and 26.2% for the quarter and nine-month
period, respectively, to fund physical expansions.
Other income in the nine-month period for 1995 included gains of $1.2 million
for insurance recoveries on the loss of a retail location destroyed by a tornado
and $.4 million in gains from other real estate transactions.
LIQUIDITY AND SOURCES OF CAPITAL
The Company has used internally generated funds and bank borrowings to finance
its continuing operations and growth. Net cash provided by operations was $2.6
million during the first nine months of 1996. The accounts receivable and
inventories increases of $16.6 million and $7.1 million, respectively, were
partially offset by depreciation and amortization of $9.4 million.
Investing activities using $13.1 million in cash included $13.5 million of
planned capital expenditures. During the nine months, the Company completed the
construction of three new stores, the expansion of three existing stores, and
the remodeling of an acquired store.
-6-
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(continued)
Financing activities provided a net $10.0 million of cash during the first nine
months primarily from $15.0 million in unsecured long-term borrowings under an
existing facility. This note payable bears interest at 7.95% and matures in
August 2008.
The Company has arrangements with banks under line-of-credit agreements. At
September 30, 1996, of these agreements, $99 million were committed lines ($45
unused) and $35 million were uncommitted lines ($18.3 million unused).
Borrowings accrue interest at competitive money-market rates and all lines are
reviewed annually for renewal. In early October 1996, the Company cancelled a
committed $15 million bank revolving line because it is expected that the
remaining arrangements will be adequate for future needs. Under the terms of the
cancelled agreement, the Company had the option to refinance short-term notes
and, accordingly, $15,000,000 was classified as long-term debt at December 31,
1995. The Company's financial covenants under various loan agreements allow for
securitization of up to approximately one-half of the outstanding balances of
accounts receivable. The Company is in the process of arranging a financing
transaction of this type, the effect of which would reduce accounts receivable
and notes payable to banks.
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 transactions such as leases, private placements and mortgage
financing may be used 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 fixed-rate or capped-rate debt
as determined by the interest rate environment (79.2 % of total debt was
interest-rate protected at September 30, 1996). The Company's average effective
interest rate on all borrowings (excluding capital leases) was 7.2%.
Planned capital expenditures presently include the remodeling of an acquired
retail location to open in 1996 and additional store remodelings of existing and
two acquired locations to be completed in 1997. The preliminary estimate of
capital expenditures for these projects is $8.5 million. In addition, the
Company has committed to lease four stores and a distribution center commencing
in 1996 under operating lease agreements. Minimum lease commitments, including
guaranteed residual values, are expected to aggregate $31 million for the
initial five-year term. 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.
-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
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 November 13, 1996 By /s/ Dennis L. Fink
------------------------------ --------------------------------
Dennis L. Fink,
Executive 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-
<PAGE> 12
EXHIBIT INDEX
HAVERTY FURNITURE COMPANIES, INC.
10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1996
27 -- Financial Data Schedule (for SEC use only).
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF HAVERTY FURNITURE COMPANIES, INC. AND
SUBSIDIARIES AS OF SEPTEMBER 30, 1996 AND FOR THE PERIOD THEN ENDED AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 1,696
<SECURITIES> 0
<RECEIVABLES> 193,616
<ALLOWANCES> 7,105
<INVENTORY> 80,736
<CURRENT-ASSETS> 278,141
<PP&E> 178,585
<DEPRECIATION> 62,598
<TOTAL-ASSETS> 396,197
<CURRENT-LIABILITIES> 122,095
<BONDS> 123,717
0
0
<COMMON> 12,478
<OTHER-SE> 133,925
<TOTAL-LIABILITY-AND-EQUITY> 396,197
<SALES> 331,170
<TOTAL-REVENUES> 341,018
<CGS> 173,829
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,951
<INTEREST-EXPENSE> 10,761
<INCOME-PRETAX> 11,036
<INCOME-TAX> 3,970
<INCOME-CONTINUING> 7,066
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,066
<EPS-PRIMARY> .61
<EPS-DILUTED> 0
</TABLE>
