<PAGE> 1
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, 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
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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 April 30, 1996 were: Common Stock -- 8,732,339;
Class A Common Stock -- 2,954,484.
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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 Consolidated Balance Sheets -
March 31, 1996 and December 31, 1995 1
Condensed Consolidated Statements of Income -
Three months ended March 31, 1996 and 1995 3
Condensed Consolidated Statements of Cash Flows -
Three months ended March 31, 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>
March 31 December 31
1996 1995
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<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 3,272 $ 2,146
Accounts receivable 186,707 179,982
Less allowance for doubtful accounts 7,105 7,105
--------- ---------
179,602 172,877
Inventories, at LIFO 83,388 73,597
Other current assets 6,547 5,852
Deferred income taxes 2,938 2,938
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TOTAL CURRENT ASSETS 275,747 257,410
Property and equipment 175,042 168,151
Less accumulated depreciation and amortization 58,522 55,746
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116,520 112,405
Other assets 2,190 1,963
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$ 394,457 $ 371,778
========= =========
</TABLE>
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<PAGE> 4
HAVERTY FURNITURE COMPANIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Continued)
<TABLE>
<CAPTION>
March 31 December 31
1996 1995
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<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes payable to banks $ 64,800 $ 53,400
Accounts payable and accrued expenses 45,354 35,988
Income taxes 687 112
Current portion of long-term debt and
capital lease obligations 8,023 7,973
--------- ---------
TOTAL CURRENT LIABILITIES 118,864 97,473
Long-term debt and capital lease obligations,
less current portion 128,409 129,233
Deferred income taxes 1,786 1,786
Other liabilities 2,291 2,331
Stockholders' Equity
Capital stock, par value $1 per share --
Preferred Stock, Authorized: 1,000,000 shares;
Issued: None
Common Stock, Authorized: 1996 -- 50,000,000 shares;
1995 -- 15,000,000 shares; Issued: 1996 -- 9,228,488 shares;
1995 -- 9,154,780 shares (including shares in treasury:
1996 and 1995 -- 498,948) 9,228 9,155
Convertible Class A Common Stock, Authorized:
1996 -- 15,000,000 shares; 1995 -- 5,000,000 shares;
Issued: 1996 -- 3,197,363 shares; 1995 -- 3,217,411 shares
(including shares in treasury: 1996 and 1995 -- 249,055) 3,197 3,217
Additional paid-in capital 32,930 32,494
Retained earnings 103,329 101,666
--------- ---------
148,684 146,532
Less cost of Common Stock and
Convertible Class A Common Stock in treasury 5,577 5,577
--------- ---------
143,107 140,955
--------- ---------
$ 394,457 $ 371,778
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
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<PAGE> 5
HAVERTY FURNITURE COMPANIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
March 31
----------------------------------
1996 1995
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<S> <C> <C>
Net sales $ 110,750 $ 94,383
Cost of goods sold 58,090 49,915
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Gross profit 52,660 44,468
Credit service charges 3,295 3,063
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55,955 47,531
Costs and expenses:
Selling, general and administrative 47,717 40,098
Interest 3,358 2,496
Provision for doubtful accounts 898 633
--------- --------
51,973 43,227
Other income, net 19 98
--------- --------
INCOME BEFORE INCOME TAXES 4,001 4,402
Income taxes 1,480 1,673
--------- --------
NET INCOME $ 2,521 $ 2,729
========= ========
Average number of common and common
equivalent shares outstanding 11,637 11,498
========= ========
Earnings per share $ 0.22 $ 0.24
========= ========
Cash dividends per common share:
Common Stock $ .0750 $ .0750
Class A Common Stock .0700 .0700
</TABLE>
See notes to condensed consolidated financial statements.
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<PAGE> 6
HAVERTY FURNITURE COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended March 31
---------------------------------
1996 1995
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<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 2,521 $ 2,729
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 3,075 2,451
Loss (Gain) on sale of property and equipment 3 (53)
Provision for doubtful accounts 898 633
-------- --------
Subtotal 6,497 5,760
Changes in operating assets and liabilities:
Accounts receivable (7,623) (298)
Inventories (9,791) (6,750)
Other current assets (721) (484)
Accounts payable and accrued expenses 9,366 (2,286)
Income taxes 575 (529)
-------- --------
NET CASH USED IN OPERATING ACTIVITIES (1,697) (4,587)
-------- --------
INVESTING ACTIVITIES
Purchases of property and equipment (7,176) (10,067)
Proceeds from sale of property and equipment 9 270
Other investing activities (227) 9
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (7,394) (9,788)
-------- --------
FINANCING ACTIVITIES
Net increase in short-term borrowings 11,400 100
Proceeds from issuance of long-term debt --- 15,000
Payment of long-term debt and capital lease obligations (774) (772)
Exercise of stock options 489 398
Dividends paid (858) (847)
Other financing activities (40) 27
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 10,217 13,906
-------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,126 (469)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 2,146 1,925
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,272 $ 1,456
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
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<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 $3,308,000 and $2,807,000 for the three months ended
March 31, 1996 and 1995, respectively.
The Company made total income tax payments of $951,000 and $2,202,000 for the
three months ended March 31, 1996 and 1995, respectively.
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<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net sales for the quarter increased 17.3% over the same period for 1995.
Comparable-store sales (sales from stores in operation or expanded for a full
year or more) increased 5.6% over the year-earlier period. An accelerated
rollout of new stores in late 1995, as well as expansion of existing locations,
also contributed to the increase in sales. Management believes that its
overall marketing strategy has allowed the Company to attract more middle- to
upper-middle income consumers through its ongoing programs of upscaling the
store format and merchandise lines and the use of fully accessorized room
settings.
Gross margin as a percentage of net sales was 47.5% for the first quarter of
1996 as compared to 47.1% in 1995. This increase is attributed to the
Company's ability to differentiate its products and improvement in the
Company's pricing discipline in certain markets.
Credit service charge revenue increased 7.6% in absolute dollars and the level
of charge sales decreased approximately 2% from approximately 80% in the
year-ago period. The provision for doubtful accounts increased 0.1% of net
sales as the level of bad debt write-offs was as expected. Management believes
that this percentage will remain at this slightly higher level during the
phase-in and early periods of the consolidation of the Company's credit
operations.
Selling, general and administrative expenses increased 0.6% as a percentage of
net sales. This increase was primarily related to advertising expenditures
which were 1.0% of net sales greater than in the prior-year period. Occupancy
costs also increased 0.5% as a percentage of net sales compared to the year ago
quarter reflecting the increased depreciation and insurance costs associated
with eight new and ten expanded stores. Pre-opening expenses were also higher
than in the prior-year period. These increases were partially offset by
decreases as a percentage of net sales in warehousing and administrative
expenses.
Interest expense increased 0.4% as a percentage of net sales as a result of an
increase in average borrowings. The Company's effective interest rate
decreased 12 basis points compared to the year ago period.
LIQUIDITY AND SOURCES OF CAPITAL
The Company has used internally generated funds and bank borrowings to finance
its continuing operations and growth. Net cash used in operations was $1.7
million in the first quarter of 1996. The accounts receivable increase of $7.6
million during the quarter was partially offset by depreciation and
amortization of $3.1 million.
Investing activities used $7.4 million in cash, $7.2 million of which was used
for planned capital expenditures. During the quarter, the Company completed
the construction of two new stores and the expansion of three existing stores.
Financing activities provided $10.2 million of cash during the first quarter
primarily from $11.4 million in short-term borrowings.
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<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(continued)
The Company has arrangements with banks under line-of-credit agreements. At
March 31, 1996, of these agreements, $74 million were committed lines ($12.4
million unused) and $30 million were uncommitted lines ($11.8 million unused).
Borrowings accrue interest at competitive money-market rates and all lines are
reviewed annually for renewal. The Company increased an existing committed
line-of-credit agreement $20 million in April 1996. The Company has a
revolving credit/term loan agreement with a commercial bank providing for
borrowings of $15 million through 1998, at which time it converts to a term
loan, maturing in 1998. If utilized, this facility would replace a $15 million
short-term committed line. 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 plans to enter into a
financing transaction of this type in 1996, the proceeds 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 sale/lease-backs, 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
(75% of total debt was interest-rate protected at March 31, 1996). The
Company's average effective interest rate on all borrowings (excluding capital
leases) was 7.0%.
Capital expenditures are presently expected to include for the remainder of
1996 the completion of four new stores and the remodeling and expansion of six
existing locations. The preliminary estimate of capital expenditures remaining
for these projects and projects which will be started in 1996 and completed in
later years is approximately $25.0 million. In addition, the Company has
committed to lease three 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.
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<PAGE> 10
PART II. OTHER INFORMATION
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.
-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 14, 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)
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF HAVERTY FURNITURE COS., INC. AND
SUBSIDIARIES AS OF MARCH 31, 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 3,272
<SECURITIES> 0
<RECEIVABLES> 186,707
<ALLOWANCES> 7,105
<INVENTORY> 83,388
<CURRENT-ASSETS> 275,747
<PP&E> 175,042
<DEPRECIATION> 58,522
<TOTAL-ASSETS> 394,457
<CURRENT-LIABILITIES> 118,864
<BONDS> 136,432
0
0
<COMMON> 12,425
<OTHER-SE> 130,682
<TOTAL-LIABILITY-AND-EQUITY> 394,457
<SALES> 110,750
<TOTAL-REVENUES> 114,045
<CGS> 58,090
<TOTAL-COSTS> 58,090
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 898
<INTEREST-EXPENSE> 3,358
<INCOME-PRETAX> 4,001
<INCOME-TAX> 1,480
<INCOME-CONTINUING> 2,521
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,521
<EPS-PRIMARY> .22
<EPS-DILUTED> .22
</TABLE>
