<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
HAVERTY FURNITURE COMPANIES INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
HAVERTY FURNITURE COMPANIES, INC.
866 West Peachtree Street, N.W.
Atlanta, Georgia 30308-1123
ANNUAL MEETING OF STOCKHOLDERS
APRIL 25, 1997
TO THE STOCKHOLDERS:
Notice is hereby given that the Annual Meeting of Stockholders of
Haverty Furniture Companies, Inc., a Maryland corporation (the "Company"), will
be held at 11:00 A.M., on Friday, April 25, 1997, at the Harbor Court Hotel, 550
Light Street, Baltimore, Maryland 21202, for the following purposes:
1. To elect thirteen directors for terms of one year and until
their successors are elected and qualified, four of whom shall
be elected by holders of Common Stock and nine of whom shall
be elected by holders of Class A Common Stock.
2. To transact such other business as may properly be brought
before the meeting or any adjournment thereof.
Only stockholders of record at the close of business on March 7, 1997,
are entitled to notice of, and to vote at, the meeting.
Attached to this Notice of Annual Meeting and Proxy Statement is an
appendix which includes audited consolidated financial statements of the Company
and accompanying notes, quarterly financial information, selected financial
data, management's discussion and analysis of financial condition and results of
operations, and market price and dividend information. Also enclosed is a new
Summary Annual Report that features the Company's business strategies and
includes financial highlights and other corporate information which you may use
as a reference throughout the year.
By order of the Board of Directors
/s/
Christine M. Jones
Vice President and Secretary
Atlanta, Georgia
March 19, 1997
PLEASE FILL IN, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY. IF YOU ATTEND THE
MEETING IN PERSON, YOU MAY WITHDRAW YOUR PROXY AND VOTE YOUR OWN SHARES.
<PAGE> 3
HAVERTY FURNITURE COMPANIES, INC.
866 West Peachtree Street, N.W.
Atlanta, Georgia 30308-1123
Annual Meeting of Stockholders
April 25, 1997
PROXY STATEMENT
SOLICITATION OF PROXIES
The enclosed proxy is solicited by the Board of Directors of Haverty
Furniture Companies, Inc., in connection with the Annual Meeting of Stockholders
to be held at the time and place and for the purposes set forth in the
accompanying notice. All shares represented by duly furnished proxies will be
voted in accordance with the instructions given therein.
Any proxy given pursuant to this solicitation may be revoked by any
stockholder who attends the meeting and gives oral notice of his election to
vote in person, without compliance with any other formalities. In addition, any
proxy given pursuant to this solicitation may be revoked prior to the meeting by
delivering to the Secretary of the Company an instrument revoking it or a duly
executed proxy for the same shares bearing a later date. Proxies which are
returned properly executed and not revoked will be voted in accordance with the
stockholder's directions specified thereon. Where no direction is specified,
proxies will be voted FOR each of the matters set forth in the Notice
accompanying this proxy statement. Abstentions and broker non-votes will not be
counted as votes either in favor of or against the matter with respect to which
the abstention or broker non-vote relates; however, with respect to any proposal
other than the election of directors, abstentions and broker non-votes would
have the effect of a vote against the proposal. All costs of this solicitation
will be borne by the Company.
Only stockholders of record at the close of business on March 7, 1997,
are entitled to notice of, and to vote at, the meeting. The Summary Annual
Report to Stockholders, Notice of Annual Meeting of Stockholders, this Proxy
Statement and form of Proxy were first mailed to stockholders of the Company on
or about March 19, 1997.
OUTSTANDING CAPITAL STOCK
As of the close of business on March 7, 1997, there were outstanding
and entitled to vote at the 1997 Annual Meeting of Stockholders 8,731,701 shares
of the Company's $1.00 par value Common Stock and 2,933,696 shares of the
Company's $1.00 par value Class A Common Stock, the Company's only outstanding
classes of voting securities.
With respect to all stockholder matters, holders of Common Stock are
entitled to one vote for each share held. With respect to the election of
directors, holders of Class A Common Stock are entitled to one vote for each
share held; on all other matters, holders of Class A Common Stock are entitled
to ten votes for each share held.
The holders of Common Stock and Class A Common Stock vote as separate
classes in the election of directors. The holders of Common Stock are entitled
to elect 25% of the members of the Board of Directors, or the nearest higher
whole number that is at least 25% of the total number of directors standing for
election; and holders of Class A Common Stock are entitled to elect 75% of the
members of the Board of Directors, or the remaining number of directors standing
for election. The Common Stock carries a dividend preference over the Class A
Common Stock.
<PAGE> 4
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following information is provided with respect to all persons known
to the Company to be the beneficial owners of more than five percent (5%) of the
Company's Common Stock and/or Class A Common Stock as of March 7, 1997. Unless
otherwise indicated, the person or entity shown possesses sole voting and
investment powers with respect to the amounts shown.
<TABLE>
<CAPTION>
Class A
Common Stock Common Stock
Beneficially Beneficially
Owned and Owned and
Name and Address of Percent Percent
Beneficial Owner of Class of Class
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Rawson Haverty * 752,627 (a)
866 West Peachtree Street, N.W. 25.65%
Atlanta, Georgia 30308-1123
Clarence H. Ridley * 254,205 (b)
191 Peachtree Street 8.67%
Atlanta, Georgia 30303
Mrs. Betty Haverty Smith * 245,589 (c)
158 West Wesley Road, N.W. 8.37%
Atlanta, Georgia 30305
John Rhodes Haverty, M.D. * 241,011
3359 Woodhaven Road, N.W. 8.22%
Atlanta, Georgia 30305
Frank S. McGaughey, Jr. * 204,255
3180 Lemons Ridge 6.96%
Atlanta, Georgia 30339
The Prudential Insurance Company of America 1,071,300 (d) *
751 Broad Street 12.27%
Newark, New Jersey 07102-3777
Dimensional Fund Advisors, Inc. 551,950 (e) *
1299 Ocean Avenue - 11th Floor 6.32%
Santa Monica, California 90401
Palisade Capital Management, L.L.C. 517,100 (f) *
One Bridge Plaza, Suite 695 5.92%
Fort Lee, New Jersey 07024
T. Rowe Price Associates, Inc. 450,000 (g) *
100 East Pratt Street 5.15%
Baltimore, Maryland 21202
</TABLE>
- -------------------------------
* Less than 5% of outstanding shares of class.
- -------------------------------
-2-
<PAGE> 5
(a) Of this amount, Mr. Haverty has sole voting and investment
power with respect to 385,823 shares, sole investment power
with respect to 4,662 shares, shared voting and investment
power with respect to 218,767 shares, and shared voting power
with respect to 143,375 shares.
(b) Of this amount, Mr. Ridley has sole voting and investment
power with respect to 191,726 shares, shared voting and
investment power with respect to 1,327 shares, and sole voting
power with respect to 61,152 shares.
(c) Of this amount, Mrs. Smith has sole voting and investment
power with respect to 238,229 shares and shared voting and
investment power with respect to 7,360 shares.
(d) The shares shown were reported to be held beneficially as of
12/31/96 by The Prudential Insurance Company of America in a
Schedule 13G filed with the Securities and Exchange
Commission. The Prudential Insurance Company of America (a
mutual insurance company organized under the laws of the State
of New Jersey) is an Insurance Company as defined in Section
3(a)(19) of the Securities Exchange Act of 1934 and an
Investment Adviser registered under Section 203 of the
Investment Advisers Act of 1940.
Of this amount, the Prudential Insurance Company of America
has sole voting and dispositive power with respect to
1,025,000 shares and shared voting and dispositive power with
respect to 46,300 shares.
(e) The shares shown were reported to be held beneficially as of
12/31/96 by Dimensional Fund Advisors, Inc. in a Schedule 13G
filed with the Securities and Exchange Commission. Dimensional
Fund Advisors, Inc. ("Dimensional"), a registered investment
advisor, is deemed to have beneficial ownership of the shares
shown, all of which shares are held in portfolios of DFA
Investment Dimensions Group, Inc., a registered open-end
investment company, or in series of the DFA Investment Trust
Company, a Delaware business trust, or the DFA Group Trust and
DFA Participation Group Trust, investment vehicles for
qualified employee benefit plans, all of which Dimensional
Fund Advisors Inc. serves as investment manager. Dimensional
disclaims beneficial ownership of all such shares.
Of the shares shown, Dimensional Fund Advisors, Inc., has sole
power to dispose of or to direct disposition of 551,950 shares
and sole voting power with respect to 368,450 shares. Persons
who are officers of Dimensional Fund Advisors, Inc., and who
also serve as officers of DFA Investment Dimensions Group,
Inc. (the "Fund") and The DFA Investment Trust Company (the
"Trust"), each an open-end management investment company
registered under the Investment Company Act of 1940, in their
capacities as officers of the Fund and the Trust, vote an
additional 74,900 shares owned by the Fund and an additional
108,600 shares owned by the Trust.
(f) The shares shown were reported to be held beneficially as of
12/31/96 by Palisade Capital Management, L.L.C., in a Schedule
13G filed with the Securities and Exchange Commission.
Palisade Capital Management, L.L.C., is an Investment Adviser
registered under Section 203 of the Investment Advisers Act of
1940. Palisade Capital Management, L.L.C., has sole voting and
dispositive power with respect to the shares shown.
(g) The shares shown were reported to be held beneficially as of
12/31/96 by T. Rowe Price Associates, Inc. (an Investment
Adviser registered under Section 203 of the Investment
Advisers Act of 1940) and T. Rowe Price Small CAP Value Fund,
Inc. (an Investment Company registered under Section 8 of the
Investment Company Act of 1940) in a joint filing of Schedule
13G with the Securities and Exchange Commission.
T. Rowe Price Associates, Inc., has sole dispositive power and
T. Rowe Price Small Cap Value Fund, Inc., has sole voting
power with respect to the 450,000 shares shown.
For purposes of the reporting requirements of the Securities
Exchange Act of 1934, T. Rowe Price Associates, Inc. (Price
Associates), is deemed to be a beneficial owner of such
securities; however, Price Associates expressly disclaims that
it is, in fact, the beneficial owner of such securities.
-3-
<PAGE> 6
The following information is provided with respect to the number of
shares of the Company's Common Stock and/or Class A Common Stock beneficially
owned as of March 7, 1997, by (i) two executive officers who are not directors
and are named in the Summary Compensation Table and (ii) all executive officers
and directors as a group. Unless otherwise indicated, the person or entity shown
possesses sole voting and investment powers with respect to the amounts shown.
<TABLE>
<CAPTION>
Class A
Common Stock Common Stock
Beneficially Beneficially
Name or Number of Owned and Owned and
Persons in Group Percent Percent
of Class of Class
- --------------------------------------------------------------------------------------------------------------------
<C> <C> <C>
Dennis L. Fink 97,899 (a) --
1.12%
M. Tony Wilkerson 45,432 (b) 7,477 (c)
.52% .25%
24 Executive Officers and 1,260,299 (d) 1,454,423 (e)
Directors as a Group 14.43% 49.58%
</TABLE>
- --------------------------------------------------
(a) This amount includes unexercised options to purchase 90,172
shares.
(b) This amount includes unexercised options to purchase 36,162
shares.
(c) Mr. Wilkerson has sole voting and investment power with
respect to 7,357 shares and shared voting and investment power
with respect to 120 shares.
(d) Of this amount, the persons included in this group have sole
voting and investment power with respect to 897,319 shares,
shared voting and investment power with respect to 149,238
shares, sole investment power with respect to 1,750 shares,
and shared voting power with respect to 211,992 shares. This
amount includes unexercised options to purchase 684,778
shares.
(e) Of this amount, the persons included in this group have sole
voting and investment power with respect to 1,006,910 shares,
shared voting and investment power with respect to 238,324
shares, sole investment power with respect to 4,662 shares,
sole voting power with respect to 61,152 shares, and shared
voting power with respect to 143,375 shares.
-4-
<PAGE> 7
AGENDA ITEM ONE
ELECTION OF DIRECTORS
The Board of Directors is presently comprised of thirteen members. All
directors of the Company are to be elected annually, with stockholders of each
of the two classes of common stock voting separately by class as provided in the
Articles of Incorporation. The holders of Common Stock of the Company are
entitled to elect 25% of the members of the Board of Directors, or the nearest
higher whole number that is at least 25% of the total number of directors
standing for election; and the holders of Class A Common Stock of the Company
are entitled to elect 75% of the members of the Board of Directors, or the
remaining number of directors standing for election.
The Board of Directors has nominated thirteen persons for election as
directors at the 1997 Annual Meeting of Stockholders, four of whom will be
elected by the holders of Common Stock and nine of whom will be elected by the
holders of Class A Common Stock.
Unless otherwise instructed, it is intended that proxies will be voted
FOR the election of the thirteen nominees named below. The affirmative vote of a
majority of all votes cast at the meeting by the holders of Class A Common Stock
is required for the election of the nine nominees standing for election by the
holders of that class. The affirmative vote of a majority of all votes cast at
the meeting by the holders of Common Stock is required for the election of the
four nominees standing for election by the holders of that class.
NOMINEES FOR ELECTION BY HOLDERS OF CLASS A COMMON STOCK
The names of, and certain information relating to, the nine nominees to
be elected by the holders of Class A Common Stock are as follows:
<TABLE>
<CAPTION>
Security Ownership
as of 3-7-97
and Percent of Class*
---------------------------
Class A
Name and Year Age Common Common
First Became a Director (3-7-97) Principal Occupation Stock Stock
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Rawson Haverty (a) 76 Chairman of the Board of 268,440 (b) 752,627 (c)
1947 Company since 1984; 3.07% 25.65%
President (1955-1984) and
Chief Executive Officer
(1955-1990)
John Rhodes Haverty, M.D.(d) 70 Retired (Former Dean, 21,010 (e) 241,011
1974 College of Health Sciences, .24% 8.22%
Georgia State University)
(1968-1991)
Clarence H. Ridley (f) 54 Partner of King & Spalding, 16,555 (g) 254,205 (h)
1979 Attorneys, since 1977 .19% 8.67%
Fred J. Bates 61 Regional Manager and 47,414 (i) 39,823
1981 General Manager of .54% 1.36%
Company's Dallas, Texas,
operations since 1979
</TABLE>
-5-
<PAGE> 8
<TABLE>
<CAPTION>
Security Ownership
as of 3-7-97
and Percent of Class*
---------------------------
Class A
Name and Year Age Common Common
First Became a Director (3-7-97) Principal Occupation Stock Stock
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
John E. Slater, Jr. 62 President and Chief Executive 126,401 (j) 15,960 (k)
1983 Officer of Company since 1.45% .54%
1994; Executive Vice President
(1993-1994) and Chief Operating
Officer (1992-1994); Senior Vice
President (1987-1993)
Lynn H. Johnston 65 Retired; Chairman of the Board 207,323 (l) 300
1986 of ING America Life Corporation 2.37% .01%
[formerly the GeorgiaUS
Corporation, renamed in 1993]
(1983-1994); Chairman of the Board
and Chief Executive Officer of
Life Insurance Company of Georgia
(1983-1994)
Clarence H. Smith (m) 46 Senior Vice President and General 56,742 (n) 42,396 (o)
1989 Manager, Stores, of Company since .65% 1.45%
1996; Vice President, Operations
and Development (1994-1996); Vice
President (1984-1994); Regional
Manager and General Manager of
Company's Atlanta, Georgia,
operations (1986-1994)
Rawson Haverty, Jr. (p) 40 Vice President, Real Estate and 43,838 (q) 84,012 (r)
1992 Insurance Divisions of Company .50% 2.86%
since 1992; Assistant Secretary
(1985-1993)
Frank S. McGaughey, III 48 Partner of Powell, Goldstein, 14,860 (s) --
1995 Frazer & Murphy, Attorneys, .17%
since 1980
</TABLE>
- ------------------------------
* Unless otherwise indicated, the amounts shown in the columns
represent the number of shares over which the nominee has sole
voting and investment power and include, where applicable,
shares subject to unexercised options.
- ------------------------------
(a) Rawson Haverty is first cousin of John Rhodes Haverty, M.D.,
father of Rawson Haverty, Jr., and uncle of Clarence H. Ridley
and Clarence H. Smith.
-6-
<PAGE> 9
(b) Of this amount, Mr. Haverty has sole voting and investment
power with respect to 154,263 shares, sole investment power
with respect to 1,750 shares, shared voting and investment
power with respect to 78,308 shares, and shared voting power
with respect to 34,119 shares. This amount includes
unexercised options to purchase 98,875 shares.
(c) Of this amount, Mr. Haverty has sole voting and investment
power with respect to 385,823 shares, sole investment power
with respect to 4,662 shares, shared voting and investment
power with respect to 218,767 shares, and shared voting power
with respect to 143,375 shares.
(d) John Rhodes Haverty, M.D., is first cousin of Rawson Haverty.
(e) This amount includes unexercised options to purchase 13,500
shares.
(f) Mr. Ridley is the nephew of Rawson Haverty and first cousin of
Clarence H. Smith and Rawson Haverty, Jr.
(g) Of this amount, Mr. Ridley has sole voting and investment
power with respect to 15,228 shares and shared voting and
investment power with respect to 1,327 shares. This amount
includes unexercised options to purchase 13,500 shares.
(h) Of this amount, Mr. Ridley has sole voting and investment
power with respect to 191,726 shares, shared voting and
investment power with respect to 1,327 shares, and sole voting
power with respect to 61,152 shares.
(i) This amount includes unexercised options to purchase 20,566
shares.
(j) Of this amount, Mr. Slater has sole voting and investment
power with respect to 86,852 shares, and shared voting and
investment power with respect to 39,549 shares. This amount
includes unexercised options to purchase 86,702 shares.
(k) Of this amount, Mr. Slater has sole voting and investment
power with respect to 150 shares and shared voting and
investment power with respect to 15,810 shares.
(l) Of this amount, Mr. Johnston has sole voting and investment
power with respect to 29,450 shares and shared voting power
with respect to 177,873 shares. This amount includes
unexercised options to purchase 18,000 shares.
(m) Clarence H. Smith is the nephew of Rawson Haverty and first
cousin of Clarence H. Ridley and Rawson Haverty, Jr.
(n) Of this amount, Mr. Smith has sole voting and investment power
with respect to 56,392 shares and shared voting and investment
power with respect to 350 shares. This amount includes
unexercised options to purchase 39,480 shares.
(o) Of this amount, Mr. Smith has sole voting and investment power
with respect to 41,671 shares and shared voting and investment
power with respect to 725 shares.
(p) Rawson Haverty, Jr., is the son of Rawson Haverty and first
cousin of Clarence H. Ridley and Clarence H. Smith.
(q) This amount includes unexercised options to purchase 43,590
shares.
(r) Of this amount, Mr. Haverty has sole voting and investment
power with respect to 83,037 shares and shared voting and
investment power with respect to 975 shares.
(s) Of this amount, Mr. McGaughey has sole voting and investment
power with respect to 6,550 shares and shared voting and
investment power with respect to 8,310 shares. This amount
includes unexercised options to purchase 6,000 shares.
-7-
<PAGE> 10
NOMINEES FOR ELECTION BY HOLDERS OF COMMON STOCK
The names of, and certain information relating to, the four nominees to
be elected by the holders of Common Stock are as follows:
<TABLE>
<CAPTION>
Security Ownership
as of 3-7-97
and Percent of Class*
--------------------------
Class A
Name and Year Age Common Common
First Became a Director (3-7-97) Principal Occupation Stock Stock
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
William A. Parker, Jr. (a) 69 Chairman of the Board of 30,550 (b) 3,000
1987 Seminole Investment Company, .35% .10%
L.L.C., since 1994; Chairman of
the Board of Cherokee Investment
Co. (1978-1994)
Robert R. Woodson (c) 64 Chairman of the Board of 35,050 (d) 9,000
1987 John H. Harland Company since .40% .31%
1992; President (1984-1995);
Chief Executive Officer
(1990-1995)
L. Phillip Humann (e) 51 President, SunTrust Banks, Inc., 24,050 (f) --
1992 since 1991 .28%
John T. Glover (g) 50 President, Post Properties, Inc., 5,550 (h) --
1996 since 1984 .06%
</TABLE>
- ------------------------------
* Unless otherwise indicated, the amounts shown in the
columns represent the number of shares over which the
nominee has sole voting and investment power and
include, where applicable, shares subject to unexercised
options.
- ------------------------------
(a) Mr. Parker is a director of Genuine Parts Co., The Southern
Company, Georgia Power Company, and Post Properties, Inc.
(b) This amount includes unexercised options to purchase 18,000
shares.
(c) Mr. Woodson is a director of Allied Holdings, Inc.
(d) This amount includes unexercised options to purchase 18,000
shares.
(e) Mr. Humann is a director of SunTrust Banks, Inc., Coca-Cola
Enterprises, Inc., and Equifax, Inc.
(f) This amount includes unexercised options to purchase 18,000
shares.
(g) Mr. Glover is a director of Post Properties, Inc.
(h) This amount includes unexercised options to purchase 3,000
shares.
-8-
<PAGE> 11
BOARD COMMITTEES AND ATTENDANCE
The Company has a standing Audit Committee composed of Robert R.
Woodson, Chairman, William A. Parker, Jr., and John T. Glover. The Audit
Committee, which held two meetings during fiscal 1996, performs the following
functions: recommends independent certified public accountants to be engaged as
auditors of the Company; approves the fees of the Company's auditors; reviews
with the independent auditors the plan and results of the auditing engagement;
reviews the scope and results of the Company's procedures for internal auditing;
and reviews the adequacy of the Company's system of internal accounting
controls.
The Executive Committee is composed of Rawson Haverty, Chairman, John
E. Slater, Jr., Clarence H. Ridley, John Rhodes Haverty, M.D., and L. Phillip
Humann. The Executive Committee held six meetings during fiscal 1996.
The Company has no standing compensation committee; however, the
Executive Committee determines salary and bonus arrangements for certain
personnel. See "Report of Executive Committee on Executive Compensation."
The Company has a Stock Option Committee, composed of non-employee
directors appointed by the Board, which serves to administer the Company's
qualified and non-qualified stock option plans and the employee stock purchase
plan. Present members of the Stock Option Committee are John Rhodes Haverty,
M.D., Chairman, William A. Parker, Jr., and Robert R. Woodson. The Stock Option
Committee held one meeting during fiscal 1996.
The Company has a standing Employee Benefits Committee composed of Lynn
H. Johnston, Chairman, Frank S. McGaughey, III, and John T. Glover. The Employee
Benefits Committee serves as Administrator for all formal employee benefit plans
of the Company and also oversees and gives guidance for all other employee
benefit programs and policies of the Company. The Employee Benefits Committee
held one meeting during fiscal 1996.
The Company has no standing nominating or other standing committee
performing similar functions.
The Board of Directors held a total of five meetings during fiscal
1996. Each incumbent director, except John T. Glover, William A. Parker, Jr.,
and Clarence H. Ridley attended at least 75% of the aggregate of all meetings
held by the Board of Directors and by committees of the Board on which the
director served during the director's period of service.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors, certain officers and persons who own more than 10% of the
outstanding Class A Common Stock or Common Stock of the Company, to file with
the Securities and Exchange Commission reports of changes in ownership of the
Class A Common Stock or Common Stock of the Company held by such persons.
Officers, directors and greater than 10% stockholders are also required to
furnish the Company with copies of all forms they file under this regulation. To
the Company's knowledge, based solely on a review of the copies of such reports
furnished to the Company and representations that no other reports were required
during the fiscal year ended December 31, 1996, the Company's officers,
directors and 10% stockholders complied with all Section 16(a) filing
requirements applicable to them, except as follows:
-9-
<PAGE> 12
A commercial bank, acting as Trustee of the Trust Fund of the Company's
Retirement Plan and Trust, made purchases in 1996 (two in October and two in
December, each for less than 1,000 shares) of the Company's two classes of
common stock. Two Form 4 filings to the Securities and Exchange Commission to
report such purchases of shares held beneficially by Rawson Haverty in his
capacity as Chairman of the Board were inadvertently not made within the
required time limit.
EXECUTIVE COMPENSATION
The following table provides certain summary information concerning
compensation paid or accrued by the Company to or on behalf of the Company's
Chief Executive Officer and each of the four other most highly compensated
executive officers of the Company (determined as of the end of the last fiscal
year) (hereinafter referred to as the "Named Executive Officers") for the fiscal
years ended December 31, 1996, 1995 and 1994.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Compensation
--------------------------------------------
Annual Compensation Awards
--------------------------------------------
Other Securities All
Annual Underlying Other
Name and Salary Bonus Compensation Options Compensation
Principal Position Year ($) ($) ($)(a) (#) ($)(b)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
John E. Slater, Jr 1996 $225,000 $230,000 $3,000 25,000 $3,000
President and Chief 1995 200,000 250,000 3,000 35,000 3,000
Executive Officer 1994 166,875 250,000(c) 3,000 20,000 3,030
(since 4/1/94)
Dennis L. Fink 1996 180,000 105,000 -- 15,000 3,000
Executive Vice President 1995 170,000 110,000 -- 33,750 3,000
and Chief Financial 1994 129,792 100,000 -- 30,000 3,080
Officer
M. Tony Wilkerson 1996 150,000 95,000 -- 25,000 3,000
Senior Vice President, 1995 140,000 100,000 -- 10,000 3,000
Marketing 1994 123,333 100,000 -- 20,000 3,151
Clarence H. Smith 1996 140,000 95,000 3,000 10,000 3,000
Senior Vice President 1995 120,000 90,000 3,000 10,000 2,311
and General Manager, 1994 100,000 75,000 3,000 17,000 2,963
Stores
Rawson Haverty, Jr 1996 115,000 85,000 3,000 10,000 3,000
Vice President, Real 1995 100,000 90,000 3,000 10,000 3,000
Estate & Insurance 1994 85,000 75,000 3,000 20,000 2,596
Divisions
</TABLE>
- -------------------------------------------
(a) The amounts shown represent the annual retainer fees paid to
those named Executive Officers who are also directors for
their services on the Company's Board of Directors. For fiscal
year 1996, one-half of the amount shown was paid in shares of
the Company's Common Stock equal to one-half of the annual
retainer fee as required by the Directors' Compensation Plan
adopted by the Board of Directors and approved by stockholders
in fiscal year 1996.
(b) The amounts shown represent Company contributions to the
account of the Named Executive Officer pursuant to the
Company's 401(k) Plan.
-10-
<PAGE> 13
(c) Of this amount, $50,000 was awarded for services performed as
Chief Operating Officer during first quarter 1994 and $200,000
was awarded for services performed as Chief Executive Officer
for the remainder of fiscal year 1994.
STOCK OPTION PLANS
The following table provides certain information concerning individual
grants of stock options made under the Company's 1993 Non-Qualified Stock Option
Plan during the fiscal year ended December 31, 1996, to each of the Named
Executive Officers:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Alternative
Grant Date
Individual Grants Value (a)
- -----------------------------------------------------------------------------------------------------
% of Total Grant Date
Number of Options Present Value
Securities Granted to (Using Black-
Underlying Employees Exercise or Scholes Option
Options in Fiscal Base Price Expiration Pricing Model)
Name Granted (#) Year ($ Per Share) Date ($)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
John E. Slater, Jr 25,000 4.5% $10.75 10-4-01 $71,750
Dennis L. Fink 15,000 2.7% 10.75 10-4-01 43,050
M. Tony Wilkerson 25,000 4.5% 10.75 10-4-01 71,750
Clarence H. Smith 10,000 1.8% 10.75 10-4-01 28,700
Rawson Haverty, Jr 10,000 1.8% 10.75 10-4-01 28,700
</TABLE>
- ------------------------------
(a) The dollar amounts under this column are the result of
calculations based upon the Black-Scholes pricing model and
are not intended to forecast possible future appreciation of
the market value of the Company's Common Stock.
Assumptions Used for Black-Scholes Model:
Grant Date: 10/4/96
Risk-Free Rate (i): 6.3%
Exercise Price: $10.75
Share Price on Grant Date: $10.75
Volatility (ii): 37%
Contractual Term (Years): 5
Expected Life (Years): 3
Dividend Yield: 2.7%
Black-Scholes Option Value: $2.87
(i) Based on US Stripped Treasury Securities with similar
maturities to the expected life of the option terms.
(ii) Based on 166 consecutive beginning of week stock prices.
-11-
<PAGE> 14
OPTION GRANTS IN LAST FISCAL YEAR NOT IMMEDIATELY EXERCISABLE
The terms of the 1993 Non-Qualified Stock Option Plan generally provide
that options granted are immediately exercisable and are exercisable for a
period of five years from the date of grant; however, due to exercise
restrictions placed on certain non-qualified stock options granted to employees
in fiscal year 1996, the following portions of the non-qualified stock options
granted in 1996 to the Named Executive Officers were not immediately
exercisable. The schedules for first exercise of those specific portions that
were not immediately exercisable are as follows:
<TABLE>
<CAPTION>
Options Granted in 1996 Not Immediately Exercisable
-----------------------------------------------------------
Number Date When
Date Exercise of Non- Options
of Price Qualified First
Name Grant ($ Per Share) Options Exercisable
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
M. Tony Wilkerson 10/4/96 $10.75 10,000 10/4/97
10/4/96 10.75 7,500 10/4/98
10/4/96 10.75 7,500 10/4/99
</TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table provides certain information concerning the
exercise of stock options during the fiscal year ended December 31, 1996, by the
Named Executive Officers and the fiscal year end value of unexercised options
held by such persons under the Company's 1988 Incentive Stock Option Plan and
1993 Non-Qualified Stock Option Plan:
<TABLE>
<CAPTION>
Options Exercised in 1996 All Outstanding Options
----------------------------------------------------------------------------------------------
Number of Securities
Shares Value Underlying Unexercised Value of Unexercised In-the-
Acquired on Realized Options at Fiscal Money Options at Fiscal
Name Exercise (#) ($) Year End (#) Year End ($) (a)
=======================================================================================================================
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John E. Slater, Jr. -0- $ -0- 79,064 23,436 $20,313 $ -0-
Dennis L. Fink -0- -0- 82,914 25,836 15,782 -0-
Tony Wilkerson -0- -0- 34,677 41,323 52,313 20,313
Clarence H. Smith -0- -0- 33,573 12,427 8,125 -0-
Rawson Haverty, Jr. -0- -0- 40,427 14,573 8,125 -0-
</TABLE>
- ------------------------------
(a) Dollar values were calculated by determining the difference
between the fair market value of the underlying securities at
year end and the exercise price of the options.
-12-
<PAGE> 15
RETIREMENT PLAN
The Company maintains a tax-qualified, non-contributory defined benefit
retirement plan (the "Retirement Plan"). All employees of the Company are
eligible to participate upon completion of one year of service and reaching age
21. Officers are eligible to participate in the Retirement Plan, but directors
are not eligible unless they are also full-time employees. Annual contributions
to the Retirement Plan are made in amounts determined by the Retirement Plan's
actuaries to be sufficient to fund the benefits to be paid and to meet
regulatory requirements.
The Retirement Plan provides for the payment of fixed monthly benefits
upon an employee's normal retirement at age 65. Benefits may also be paid upon
early retirement as provided in the Retirement Plan. Benefits upon retirement
are based upon years of service (up to a maximum of 40 years for calculating
such benefits) and final average earnings. "Final average earnings" means the
average annual earnings for the five consecutive years in which a participant
had the highest earnings during the last ten years of employment. Compensation
for purposes of computing annual benefits under the Retirement Plan includes
basic salary, wages, overtime pay, bonuses, commissions, amounts contributed to
the 401(k) plan by the employee and other direct compensation included in the
IRS Form W-2.
The table below illustrates the estimated annual benefits payable upon
retirement under the Retirement Plan to persons in specified years of service
and compensation categories. The benefits shown are straight-life annuities and
are based upon an assumed retirement during 1997. The compensation amounts shown
are compensation in the final year of employment. For purposes of determining
final average earnings, a 5% per year increase in earnings was used for prior
years.
<TABLE>
<CAPTION>
Years of Service
1996 ----------------------------------------------------------------------
Compensation 15 20 25 30 35 40 or More
------------ -------- -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
$ 50,000 $ 5,303 $ 7,071 $ 8,838 $ 10,606 $ 12,374 $ 14,141
100,000 12,804 17,072 21,340 25,608 29,876 34,144
150,000 20,305 27,073 33,841 40,609 47,378 54,146
200,000 * 27,805 37,074 46,342 55,611 64,879 74,148
250,000 * 35,306 47,075 58,844 70,613 82,381 94,150
300,000 * 42,807 57,076 71,345 85,614 99,883 114,152
350,000 * 50,308 67,077 83,847 100,616 117,385 134,154 *
400,000 * 57,809 77,078 96,348 115,617 134,887 * 154,157 *
450,000 * 65,310 87,079 108,849 130,619 * 152,389 * 174,159 *
500,000 * 72,810 97,081 121,351 * 145,621 * 169,891 * 194,161 *
550,000 * 80,311 107,082 133,852 * 160,622 * 187,393 * 214,163 *
</TABLE>
- ------------------------------
* Under existing federal laws, earnings used to calculate
benefits under the Retirement Plan may not exceed $150,000 for
1996 and $160,000 for 1997. Also, annual benefits under the
Retirement Plan may not exceed $120,000 for 1996 and $125,000
for 1997, regardless of the benefit amount otherwise produced
by the Retirement Plan formula. These limits are subject to
future adjustments for cost of living increases. Annual
benefits in the above table do not reflect either of these
limits, and are in addition to any amounts payable from Social
Security.
- ------------------------------
The years of service accrued to the Named Executive Officers are as
follows:
<TABLE>
<CAPTION>
Employee Years of Service Accrued as of 12/31/96
-------- ---------------------------------------
<S> <C>
John E. Slater, Jr. 40
Dennis L. Fink 4
M. Tony Wilkerson 20
Clarence H. Smith 23
Rawson Haverty, Jr. 13
</TABLE>
-13-
<PAGE> 16
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
On November 3, 1995, the Board of Directors adopted a non-qualified
Supplemental Executive Retirement Plan (the "Plan"), effective January 1, 1996,
for the benefit of those employees whose retirement benefits would otherwise be
reduced by the limitation imposed by federal pension law and I.R.S. regulations
on the amount of compensation that may be taken into account in computing
benefits under a defined benefit retirement plan. Federal pension law and I.R.S.
regulations currently prohibit providing benefits on annual compensation above
$150,000 for 1996 and $160,000 for 1997. Under the provisions of the 1996
Supplemental Plan, participation in the Plan will be automatic for any employee
who has pay that cannot be included in computing benefits under the Company's
defined benefit Retirement Plan because it exceeds the I.R.S. limit; however,
the total amount of annual retirement benefits that may be paid to an eligible
participant in the Plan from all sources (Retirement Plan, Social Security and
the 1996 Supplemental Plan) may not exceed $125,000. [See "Retirement Plan" (p.
13) for information on the amount of benefits which the Named Executive Officers
are eligible to receive upon retirement.]
AGREEMENTS WITH EXECUTIVES REGARDING: CHANGE IN CONTROL
On February 7, 1997, the Board of Directors approved an agreement (the
"Agreement" or "Agreements") between the Company and certain executive officers
of the Company, including each of the Named Executive Officers. These Agreements
provide for certain cash payments and continuation of benefits in the event of a
Change in Control or Potential Change in Control of the Company, as defined in
the Agreement. Generally, a "Change in Control" shall be deemed to have occurred
if (i) any person becomes a beneficial owner of 20% or more of the combined
voting power of the Company's outstanding securities (other than Rawson Haverty,
Mrs. Betty Haverty Smith, Clarence H. Ridley, John Rhodes Haverty, M.D., and
Frank S. McGaughey, Jr., and their spouses, lineal descendants, heirs,
administrators or representatives), or (ii) during any period of two consecutive
years, individuals who at the beginning of such period constitute the Board and
any new director approved by two-thirds of the directors then in office cease
for any reason to constitute a majority of the Board of Directors, or (iii) the
stockholders of the Company approve a merger or statutory share exchange with
any other corporation (other than a transaction which results in the Company's
outstanding voting securities prior thereto continuing to represent at least 75%
of the combined voting power of the Company's outstanding securities, or a
transaction in which no person acquires more than 50% of the combined voting
power of the Company's outstanding securities), or (iv) the shareholders of the
Company approve a plan of complete liquidation or an agreement for the sale or
disposition of all or substantially all of the Company's assets. Messrs. John E.
Slater, Jr., Dennis L. Fink, M. Tony Wilkerson and Clarence H. Smith have
entered into agreements providing for the following:
Upon termination of the Executive's employment following a Change in
Control and during the term of the Agreement, unless termination is for cause,
by reason of death, disability or retirement, or by the Executive without "Good
Reason" as defined in the Agreement, or if termination occurs prior to a Change
in Control but following a Potential Change in Control in which the Company has
entered into an agreement the consummation of which will constitute a Change in
Control, the Company will:
(a) pay to the Executive a lump sum severance payment in cash
equal to the sum of (1) the higher of two times the
Executive's annual base salary in effect immediately prior to
the event upon which the notice of termination is based or two
times the average of the Executive's annual base salary for
the three years immediately prior to the event upon which the
notice of termination is based, and (2) the higher of two
times the amount paid to the Executive as an annual
discretionary bonus in the year preceding the year in which
-14-
<PAGE> 17
the date of termination occurs or two times the average amount
paid in the three years preceding that in which the date of
termination occurs;
(b) pay to the Executive a lump sum amount in cash equal to the
sum of any annual discretionary bonus which has been allocated
or awarded to the Executive for a completed fiscal year
preceding the date of termination but has not yet been paid
and a pro rata portion of an annual discretionary bonus for
the fiscal year in which the date of termination occurs (based
upon the discretionary bonus paid or awarded in the most
recently completed fiscal year);
(c) at the option of the Executive, repurchase all options held by
the Executive for a lump sum amount in cash equal to the
product of the spread (the value of one share of stock less
the per share exercise price) times the number of shares
covered by each option. The value of the stock for purposes of
determining the spread shall be the higher of the current
market value per share or the highest per share price paid for
shares within the six months preceding or after any Change in
Control;
(d) for 24 months after the date of termination, arrange to
provide the Executive with life, disability, accident and
health insurance benefits substantially similar to those which
the Executive is receiving immediately prior to the notice of
termination.
In addition, following a Change in Control and during the term of the
Agreement, during any period that the Executive fails to perform full-time
duties as a result of incapacity due to physical or mental illness, the Company
will pay the Executive's full salary together with all compensation and benefits
payable to the Executive until the Executive's employment is terminated by the
Company for disability. If the Executive's employment is terminated for any
reason following a Change in Control and during the term of the Agreement, the
Company will pay the Executive's full salary through the date of termination
together with all compensation and benefits payable through the date of
termination, and will pay the Executive's normal post-termination compensation
and benefits as such payments become due in accordance with the Company's
retirement, insurance and other compensation or benefit plans or programs.
Rawson Haverty, Jr., has also entered into an Agreement with the
Company on identical terms and conditions described above, except that the
severance payments with respect to annual base salary and bonus shall be with
respect to one year's base salary and one year's annual bonus (or the average of
the annual salary and the annual bonus over the previous three years, whichever
is higher) as opposed to twice such amounts, and post-termination insurance
benefits shall be provided for 12 months after termination as opposed to 24
months.
The Company may reduce payments under any Agreement in accordance with
provisions of the Agreement in order to insure that the total payments to an
Executive will be deductible pursuant to Section 280G of the Internal Revenue
Code of 1986, as amended. The term of each Agreement commenced on January 1,
1997, and will continue in effect through December 31, 1997, renewing on January
1, 1998, and each January 1 thereafter for a period of one year unless earlier
terminated under the Agreement or in the event a Change of Control occurs prior
to such January 1. If a Change in Control occurs during the term of the
Agreement, the Agreement will continue in effect for a period of not less than
36 months beyond the month in which the Change in Control occurred.
-15-
<PAGE> 18
COMPENSATION OF DIRECTORS
Annual retainer fees to directors, paid semi-annually each year on May
1 and November 1, total $3,000 for employee directors and $15,000 for
non-employee directors. Pursuant to the Directors' Compensation Plan adopted by
the Board of Directors and approved by stockholders in 1996, the semi-annual
portion of the annual retainer fee to be paid on May 1 each year shall be paid
in shares of the Company's $1 par value Common Stock equal to the fair market
value of such stock at the close of the market on that day. At the election of
the director, the remaining portion of the annual retainer fee may be paid in
shares of Common Stock. In addition to the annual retainer, each non-employee
director receives a fee of $600 for attendance at each Board meeting and each
meeting of a Board committee on which he serves, except that a non-employee
director who serves as chairman of a Board committee receives $700 for
attendance at each meeting of the committee which he chairs.
The Company maintains a Directors' Deferred Compensation Plan that
permits all directors who choose participation in the Plan to defer to a future
date receipt of payment of retainer fees in the form of cash or in shares of
Common Stock and/or meeting fees (meeting fees being applicable only to
non-employee directors) which would otherwise be paid in cash or in shares of
Common Stock for their services as directors and members of committees of the
Board of Directors. Under the Plan, such deferred fees (to be accrued in a
director's account in the form of an equivalent number of shares of Common Stock
and/or cash), plus accrued interest (at a rate determined annually by the
Executive Committee in accordance with the Plan), shall be distributed in the
future to a director in one lump sum or in no more than ten equal annual
installments on the date or dates that had been pre-determined and elected by
such director upon his initial election to participate in the Plan, or in
accordance with the terms of the Plan. Five directors will participate in the
Plan in 1997.
Pursuant to an automatic grant provision under the Company's 1993
Non-Qualified Stock Option Plan, the Plan authorizes that each non-employee
director of the Company be granted, on a pre-determined date annually, an option
to purchase 3,000 shares of Common Stock at an exercise price equal to 100% of
the fair market value of such stock on the date of grant. On October 31, 1996,
options were granted to the then eight non-employee directors of the Company
covering an aggregate of 24,000 shares of Common Stock at an exercise price per
share of $11.25. Such options were granted to John T. Glover, John Rhodes
Haverty, M.D., L. Phillip Humann, Lynn H. Johnston, Frank S. McGaughey, III,
William A. Parker, Jr., Clarence H. Ridley and Robert R. Woodson.
ADDITIONAL INFORMATION WITH RESPECT TO COMPENSATION COMMITTEE INTERLOCKS AND
INSIDER PARTICIPATION IN COMPENSATION DECISIONS
Although the Company does not have a Compensation Committee of the
Board of Directors, the Executive Committee has performed the function of
determining executive officer compensation. During the fiscal year ended
December 31, 1996, the Executive Committee was comprised of five members: Rawson
Haverty, Chairman of the Board; John E. Slater, Jr., President and Chief
Executive Officer, Clarence H. Ridley, John Rhodes Haverty, M.D., and L. Phillip
Humann.
In March 1995, SunTrust Bank, Atlanta, and the Company closed a
$30-million term loan from SunTrust Bank, Atlanta, to the Company, which loan is
for a term of 12 years (with an average life of 8 years). This loan bears
interest at a floating rated based on LIBOR, which effectively costs the Company
an average fixed rate of 8.16% per annum based on interest swap agreements with
such bank. L. Phillip Humann, a director of the Company and a member of the
Executive Committee of the Board
-16-
<PAGE> 19
of Directors, is the President of SunTrust Banks, Inc., the parent of SunTrust
Banks of Georgia, Inc., and its subsidiary SunTrust Bank, Atlanta.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See "Additional Information with Respect to Compensation Committee
Interlocks and Insider Participation in Compensation Decisions" above, which
describes certain business relationships between the Company and certain of its
directors.
Notwithstanding anything to the contrary set forth in any of the
Company's previous filings under the Securities Act of 1933, as amended, or the
Exchange Act that might incorporate future filings, including this Proxy
Statement, in whole or in part, the following Report of Executive Committee on
Executive Compensation and the Stockholder Return Performance Graph shall not be
incorporated by reference into any such filings.
REPORT OF EXECUTIVE COMMITTEE ON EXECUTIVE COMPENSATION
The Company has no standing compensation committee; however, the
Executive Committee of the Board of Directors determines salary and bonus
arrangements for all executive officers of the Company, including the Chief
Executive Officer, subject to approval by the full Board. The Executive
Committee is composed of Rawson Haverty, Chairman of the Board, John E. Slater,
Jr., President and Chief Executive Officer, Clarence H. Ridley, John Rhodes
Haverty, M.D., and L. Phillip Humann.
Compensation of market area and regional managers consists of a base
salary, which is related to the size of the metropolitan market managed, plus a
bonus based on a pre-set formula related to annual profits produced in such area
or region. Compensation of other officers, including executive officers and
department heads (approximately 31 persons, including the five most highly
compensated officers), consists of a base salary, which is related to the duties
and responsibilities of the position, plus a bonus related to the profits of the
Company and assessment of individual contribution. Bonuses are determined
subjectively by the Executive Committee, subject to approval by the full Board
of Directors.
Based on profits before bonuses and income taxes, a pool is created for
payment of executive and key-person bonuses. Determination of actual executive
and key-person bonuses is made only after all area and regional manager bonuses
have been computed. Total bonuses earned and paid for fiscal year 1996 to 88
individuals amounted to $2,504,000, an increase of $64,000, or 2.6%, as compared
to the 1995 bonuses. Of this amount, 24.4% was paid to the five executive
officers holding the five most highly compensated positions during fiscal year
1996.
The Chief Executive Officer's compensation, as well as that of the
other executive officers, is comprised of a base salary which is directly
related to the responsibilities of the position and a bonus which is related
primarily to the Company's performance. The principal burden of corporate
management decisions is carried by a Management Committee that is appointed by
the Chief Executive Officer and which is currently comprised of those executive
officers holding the positions of Chief Executive Officer, Chief Financial
Officer, Senior Vice President of Marketing, Senior Vice President and General
Manager, Stores, and Vice President of the Real Estate and Insurance Divisions,
with the Chairman of the Board serving in an advisory capacity; however, the
Chief Executive Officer bears final responsibility for such management
decisions. Thus, the executive officers serving as the Management Committee
participate more heavily in the division of bonus awards.
Traditionally, the compensation of the Chief Executive Officer and
other executive officers has increased or decreased in relation to the
profitability of the Company, as well as its market position and in light of
competitive compensation levels. In 1993, corporate profits (on which bonuses
were
-17-
<PAGE> 20
computed) increased 86.8% from the prior year, and actual net income of the
Company increased 114.4%; while the bonus of the Chief Executive Officer
increased a more modest 40%, and overall bonuses increased 35.3%. In 1994,
corporate profits (on which bonuses were computed) increased 20.4% from the
prior year, and actual net income of the Company increased 29.0%, as compared to
an overall increase in bonuses of 27.1%.
In 1995, corporate profits (on which bonuses were computed) decreased
2.8% from the prior year, and actual net income of the Company also decreased
2.8%; while actual total bonuses paid decreased 4.2% compared to the prior year.
In 1996, corporate profits (on which bonuses were computed) decreased 1.6% from
the prior year and net income of the Company increased .5%; while actual total
bonuses paid increased 2.6% compared to the prior year.
Based upon a review of available information on public companies
reporting comparable amounts of annual gross revenues, the Executive Committee
believes that the cash compensation (salary and bonus) paid to the Chief
Executive Officer of the Company is moderate, as compared to the compensation of
chief executive officers of other such companies.
The Company has been in business for 112 years. Throughout its long
history it has maintained employee compensation programs designed to encourage
its employees to become owners of the business in which they are employed. Stock
options for officers and other key employees are awarded in the discretion of
the Stock Option Committee of the Board of Directors, which is comprised of
non-employee directors. A non-qualified stock option plan is in place for
non-employee directors; and, in 1992, an employee stock purchase plan was
established for all eligible employees. As a result of this long established
policy, a substantial number of shares of Company Common Stock and Class A
Common Stock are held by those currently employed in the business and by former
Haverty Furniture Companies, Inc., employees.
It is the Company's intention that the compensation to be paid to its
executive officers will not exceed the present maximum allowable amount for
purposes of deductibility set forth in the Internal Revenue Code.
Executive Committee, Board of Directors
Rawson Haverty, Chairman John E. Slater, Jr., President and C.E.O.
Clarence H. Ridley John Rhodes Haverty, M.D. L. Phillip Humann
-18-
<PAGE> 21
STOCKHOLDER RETURN PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly percentage change
in the cumulative total stockholder return on the Company's Common Stock and
Class A Common Stock against the cumulative total return of the Nasdaq Home
Furnishings Stores Index and the Nasdaq U.S. Companies Index for the period of
five years commencing December 31, 1991, and ending December 31, 1996.
The Nasdaq Home Furnishings Stores Index includes the 30 active Nasdaq
U.S. issues as of December 31, 1996, which carry the Standard Industrial
Classification (SIC) Code of 5700-5799, defined as home furniture, furnishings
and equipment stores.
The graph below assumes that the value of the investment in the
Company's Common Stock or Class A Common Stock and each index was $100 on
December 31, 1991, and that all dividends were reinvested.
COMPARISON OF FIVE YEAR TOTAL RETURN AMONG
HAVERTY FURNITURE COMPANIES, INC.
NASDAQ HOME FURNISHINGS STORES AND
NASDAQ U.S. COMPANIES INDICES
<TABLE>
<CAPTION>
$100 Value 1991 1992 1993 1994 1995 1996
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Haverty Furniture Companies, Inc. - Common Stock $100.00 $168.44 $255.46 $178.63 $216.41 $182.01
Haverty Furniture Companies, Inc. - Class A Common 100.00 161.54 265.76 168.51 224.66 197.24
Nasdaq (SIC Code 57) Home Furnishings Stores Index 100.00 119.33 115.97 88.20 70.27 60.43
Nasdaq U.S. Companies Index 100.00 116.38 133.59 130.59 184.67 227.16
</TABLE>
<TABLE>
<CAPTION>
Annual Return 1991 1992 1993 1994 1995 1996
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Haverty Furniture Companies, Inc. - Common Stock N/A 68% 52 % (30)% 21 % (16)%
Haverty Furniture Companies, Inc. - Class A Common N/A 62% 65 % (37)% 33 % (12)%
Nasdaq (SIC Code 57) Home Furnishings Stores Index N/A 19% (3)% (24)% (20)% 14 %
Nasdaq U.S. Companies, Index N/A 16% 15 % (2)% 41 % 23 %
</TABLE>
-19-
<PAGE> 22
INDEPENDENT AUDITORS
Ernst & Young were the independent auditors for the Company during the
year ended December 31, 1996. The Company has been advised that no
representative of Ernst & Young will be present at the Annual Meeting. Although
the Board of Directors has not yet selected independent auditors for the Company
for the fiscal year ended December 31, 1997, it is expected that Ernst & Young
will be chosen.
FINANCIAL STATEMENTS AND ANNUAL REPORT ON FORM 10-K
Additional information concerning the Company, including the
consolidated financial statements for the year ended December 31, 1996, is set
forth in the appendix attached to this Proxy Statement. The Company's Annual
Report on Form 10-K for the year ended December 31, 1996, as filed with the
Securities and Exchange Commission, is available to stockholders who make a
written request therefor to the Secretary of the Company, Christine M. Jones, at
the offices of the Company, 866 West Peachtree Street, N.W., Atlanta, Georgia
30308-1123. Copies of exhibits filed with that report or referenced therein will
be furnished to stockholders of record upon request and payment of the Company's
expenses in furnishing such documents.
PROPOSALS OF STOCKHOLDERS
Proposals of stockholders intended to be presented at the 1997 Annual
Meeting of Stockholders of the Company must be received by the Secretary of the
Company, P. O. Box 54678, Civic Center Station, Atlanta, Georgia 30308-0678, no
later than November 19, 1997.
OTHER MATTERS
At the date hereof, there are no other matters management intends to
present or has reason to believe others will present to the meeting. If other
matters now unknown to management come before this meeting, those who shall act
as proxies will vote in accordance with their judgment.
By Order of the Board of Directors
/s/
Christine M. Jones
Vice President and Secretary
March 19, 1997
Atlanta, Georgia
-20-
<PAGE> 23
APPENDIX A
MANAGEMENT'S
DISCUSSION AND ANALYSIS F1
------------------------------
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This commentary should be read in conjunction with the Consolidated
Financial Statements and Notes, presented on pages F-4 - F-16 of this Proxy
Statement, for a full understanding of Haverty's financial position and results
of operations.
In accordance with Rule 14a-3(c) under the Securities Exchange Act of 1934
(the "Exchange Act"), as adapted to the "Summary Annual Report" procedure, the
information contained in the following commentary and consolidated financial
statements and notes are provided solely for the information of stockholders and
of the Securities and Exchange Commission. Such information shall not be deemed
to be "soliciting material" or to be "filed" with the Commission or subject to
Regulation 14A under the Exchange Act (except as provided in Rule 14a-3) or to
the liabilities of Section 18 of the Exchange Act, unless, and only to the
extent that, it is expressly incorporated by reference into the Form 10-K of
Haverty Furniture Companies, Inc. for its year ended December 31, 1996.
FINANCIAL HIGHLIGHTS
The following table sets forth for the periods indicated certain items from
the Company's consolidated statements of income as a percentage of net sales.
<TABLE>
<CAPTION>
- --------------------------------------------------
1996 1995 1994
- --------------------------------------------------
<S> <C> <C> <C>
Net sales 100.0% 100.0% 100.0%
Gross profit 47.5 47.2 47.4
Credit service charges 2.9 3.1 3.2
Selling, general and
administrative 42.1 42.4 41.7
Interest expense 3.2 2.8 2.3
Provision for doubtful
accounts 1.0 0.7 0.8
Other income (expense),
net 0.1 0.5 (0.3)
Income before income
taxes 4.2 4.9 5.5
Net income 2.7 3.1 3.4
Effective tax rate 36.0% 37.3% 38.2%
==================================================
</TABLE>
1996 COMPARED TO 1995
Net sales for 1996 increased 15.5% from $395,470,000 to $456,800,000. This
increase was attributable to a 4.9% comparable-store sales increase, a 15.1%
increase in sales from stores expanded in the last year, and new stores. A
store's results are included in the comparable-store sales computation in its
thirteenth month of operation. There were seven new stores opened in 1995, of
which four opened in the last quarter, and six stores were opened in 1996.
Gross profit as a percent of net sales was 47.5% for 1996 as compared to
47.2% in 1995. This improvement is attributable to improved merchandising and
changes in the sales mix. The LIFO charge also decreased to 0.1% of net sales in
1996 from 0.2% in 1995.
Credit service charges declined to 2.9% of net sales in 1996 from 3.1% in
1995 as customer usage of finance promotions involving free interest periods
increased. Management believes that responding to the terms of advertised
financing promotions offered by many of its competitors reduces the need to
emphasize off-price promotional activity and can stimulate sales. Under the
Company's credit programs, retroactive interest is not charged to customers who
do not completely pay off the balance during the free interest or deferred
payment period unlike many competitors' credit programs.
The amount expensed for the provision for doubtful accounts as a percent of
net sales increased to 1.0% for 1996 from 0.7% in 1995. This higher level
reflects the increased delinquencies and bankruptcies experienced in the
consumer lending industry. During 1996, the Company consolidated its credit
operations from 45 market-area locations to one corporate site. Management
believes that this consolidation, while accretive to earnings in the long-term
via savings in general and administrative expenses, contributed to higher
delinquencies during the transition year.
Selling, general and administrative expenses as a percent of sales
decreased to 42.1% in 1996 compared with 42.4% in 1995. The reduction is
primarily the result of leveraged fixed costs and reduced pre-opening costs
offsetting higher depreciation charges in the 1996 period.
Interest expense increased 0.4% as a percent of net sales due to an
increase of 23.7% in average debt levels to support increased accounts
receivable and capital expenditures. The impact on expense from increased debt
levels was lessened by a 30 basis points decrease in the Company's effective
interest rate for 1996. The Company has entered into interest rate swap
agreements to reduce the impact of changes in interest rates on its
floating-rate notes payable. The counterparties to these contracts are high
credit quality commercial banks. Consequently, credit risk, which is inherent in
all swaps, has been minimized to a large extent. Interest expense is adjusted
for the differential to be paid or received as interest rates change. The effect
of such adjustments on interest expense was not significant during 1996.
<PAGE> 24
MANAGEMENT'S
F-2 DISCUSSION AND ANALYSIS
------------------------------------------
1995 COMPARED TO 1994
Net sales for 1995 increased 6.8% from $370,132,000 to $395,470,000. This
increase was attributable to a 3.1% comparable-store increase, a 14.4% increase
in sales from stores expanded in the last year and seven new stores.
Gross profit as a percent of net sales was 47.2% for 1995 as compared with
47.4% in 1994. This slight erosion is attributable to the Company's presence in
several highly competitive markets. The LIFO charge also increased in 1995
impacting the gross profit margin negatively by 0.2% versus 0.1% in 1994.
Selling, general and administrative expenses as a percent of sales
increased to 42.4% in 1995 compared to 41.7% in 1994. This increase was the
result of several factors including higher depreciation costs associated with
new and expanded stores. Additionally, five of the new seven retail locations in
1995 were open on average less than two months. This short period does not
provide the time necessary to reach a sales level to adequately cover the
stores' higher initial operating costs. Also included in selling, general and
administrative expenses are the planned store-opening costs, which are expensed
as incurred, of approximately $656,000. These expenses were only approximately
$25,000 in 1994 as new store openings were at a very low level.
Credit service charges declined to 3.1% of net sales in 1995 from 3.2% in
1994 as customer financing at lower promotional rates continued at a rate
comparable to the prior year. Free-interest promotions for specified periods up
to one year were available on a periodic basis to stimulate sales and meet
competition.
A provision for doubtful accounts of 0.7% and 0.8% of net sales was made in
1995 and 1994, respectively. The Company's accounts receivable growth continued
to reflect the level of credit versus cash sales of approximately 80% in 1995
and 1994.
Interest expense increased 0.5% as a percent of net sales due to an
increase of 30.1% in average debt levels to support increased capital
expenditures. The Company's effective interest rate increased 53 basis points
reflecting the higher rates associated with the long-term debt incurred during
1995. The effect of adjustments to interest expense for the differential arising
from the Company's interest rate swap agreements was not significant during
1995.
Other income in 1995 of $2,124,000 consists primarily of a $1,189,000 gain
from the tornado destruction of a retail location and $932,000 in gains from the
sale of certain real estate.
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 operating
activities was $3.1 million in 1996, $1.4 million in 1995 and $1.9 million in
1994. The Company carries its own customer accounts receivable and, thus,
increasing credit sales offset other positive cash flows from operations.
Accounts receivable increased $32.4 million in 1996, $15.3 million in 1995 and
$25.5 million in 1994.
The ratio of current assets to current liabilities was 2.3 at the end of
1996, compared to 2.6 and 2.5 at the end of 1995 and 1994, respectively. The
increase in current assets continues to be attributable to higher accounts
receivable and to a lesser extent in 1996, inventory levels. Inventory levels
were 5% higher in 1996 as the Company added 7.1% more retail square footage
during the year.
Investing activities used $14.5 million of cash in 1996 compared to $42.5
million in 1995 and $24.6 million in 1994. During 1996, capital expenditures of
$16.5 million include the completion and construction of three new stores and
the remodeling and/or expansion of four stores. Expenditures were also made for
projects which will be completed in 1997.
Financing activities provided $15.9 million of cash during 1996 primarily
from $15.0 million in unsecured term notes maturing in 2008 and $12.1 million in
short-term borrowings, reduced by debt repayments and dividends.
The Company has arrangements with eight banks under line-of-credit
agreements to borrow up to $119 million. At December 31, 1996, of this amount,
$84 million were committed lines ($22.5 million unused) and $35 million were
uncommitted lines ($16.0 million unused). Borrowings accrue interest at
competitive money-market rates and all lines are reviewed annually for renewal.
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 private placements of senior notes,
sale/leasebacks and mortgage financings are used periodically 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
December 31, 1996). The Company's average effective interest rates on all
borrowings (excluding
<PAGE> 25
MANAGEMENT'S
DISCUSSION AND ANALYSIS F-3
------------------------------
capital leases) were 7.1%, 7.2% and 7.3% in 1996, 1995 and 1994 respectively.
Capital expenditures are presently expected to include for 1997 the
completion of one new store and the remodeling and/or expansion of 5 locations.
The preliminary estimate of capital expenditures for real estate in 1997 is
approximately $10.0 million. In addition, the Company has committed to lease 8
stores and a distribution center under operating lease agreements with initial
five-year and three-year terms. Minimum commitments, including residual values,
for such properties to be leased aggregate $46.0 million. 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.
SEASONALITY
Although the Company does not consider its business to be seasonal, sales
are somewhat higher in the second half of the year, particularly in the fourth
quarter.
<PAGE> 26
REPORT OF
F-4 INDEPENDENT AUDITORS
------------------------------------------
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Haverty Furniture Companies, Inc.
We have audited the accompanying consolidated balance sheets of Haverty
Furniture Companies, Inc. and subsidiaries as of December 31, 1996 and 1995, and
the related consolidated statements of income, stockholders' equity, and cash
flows for each of the three years in the period ended December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Haverty
Furniture Companies, Inc. and subsidiaries at December 31, 1996 and 1995, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles.
/s/ Ernst & Young LLP
Atlanta, Georgia
January 31, 1997
<PAGE> 27
CONSOLIDATED
BALANCE SHEETS F-5
------------------------------
HAVERTY FURNITURE COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31
-------------------
(In thousands) 1996 1995
- ---------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 414 $ 2,146
Accounts receivable (Note 2) 200,909 172,877
Inventories (Note 3) 77,385 73,597
Other current assets 4,422 5,852
Deferred income taxes (Note 8) -- 2,938
-------------------
Total current assets 283,130 257,410
-------------------
Property and equipment (Notes 4 and 7) 114,350 112,405
Other assets 2,395 1,963
-------------------
TOTAL ASSETS $399,875 $371,778
=================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to banks (Note 5) $ 80,500 $ 53,400
Accounts payable and accrued expenses (Note 6) 35,412 35,988
Income taxes (Note 8) 1,103 112
Deferred income taxes (Note 8) 519 --
Current portion of long-term debt and capital lease
obligations (Notes 7 and 12) 7,906 7,973
-------------------
Total current liabilities 125,440 97,473
-------- --------
Long-term debt and capital lease obligations, less current
portion (Notes 7 and 12) 120,434 129,233
Deferred income taxes (Note 8) 826 1,786
Other liabilities 2,259 2,331
-------- --------
Commitments (Note 12)
Stockholders' equity (Notes 9 and 11):
Capital Stock, par value $1 per share -- Preferred Stock,
authorized -- 1,000 shares;
Issued: None
Common Stock, authorized -- 15,000 shares; Issued:
1996 -- 9,306 shares; 1995 -- 9,155 shares (including
shares in treasury: 1996 and 1995 -- 494 and 499,
respectively) 9,306 9,155
Convertible Class A Common Stock, authorized -- 5,000
shares; Issued: 1996 -- 3,192 shares; 1995 -- 3,217
(including shares in treasury: 1996 and 1995 -- 249) 3,192 3,217
Additional paid-in capital 33,556 32,494
Retained earnings 110,405 101,666
-------------------
156,459 146,532
Less cost of Common Stock and Convertible
Class A Common Stock in treasury 5,543 5,577
-------------------
Total stockholders' equity 150,916 140,955
-------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $399,875 $371,778
=================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 28
CONSOLIDATED
F-6 STATEMENTS OF INCOME
------------------------------------------
HAVERTY FURNITURE COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Years ended December 31,
------------------------------
(In thousands, except per share data) 1996 1995 1994
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $456,860 $395,470 $370,132
Cost of goods sold 239,976 209,000 194,688
------------------------------
Gross profit 216,884 186,470 175,444
Credit service charges 13,390 12,376 11,664
------------------------------
230,274 198,846 187,108
Costs and expenses:
Selling, general and administrative 192,445 167,514 154,491
Interest 14,463 11,158 8,470
Provision for doubtful accounts 4,416 2,854 2,773
------------------------------
211,324 181,526 165,734
------------------------------
18,950 17,320 21,374
Other income (expense), net 182 2,124 (1,095)
------------------------------
Income before income taxes 19,132 19,444 20,279
Income taxes (Note 8) 6,885 7,261 7,741
------------------------------
Net income $ 12,247 $ 12,183 $ 12,538
============================================================================================
Average number of common and common equivalent shares
outstanding 11,694 11,555 11,425
============================================================================================
Earnings per share $ 1.05 $ 1.05 $ 1.10
============================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 29
CONSOLIDATED STATEMENTS
OF STOCKHOLDERS' EQUITY F-7
------------------------------
HAVERTY FURNITURE COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Class A
Common Common
Stock Stock Additional
($1 Par ($1 Par Paid-in Retained Treasury
(In thousands, except per share data) Value) Value) Capital Earnings Stock Total
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1993 $8,765 $3,354 $30,443 $ 83,433 $(5,577) $120,418
Net income -- -- -- 12,538 -- 12,538
Cash dividends on common stock:
Amount -- -- -- (3,082) -- (3,082)
Per share:
Common -- $.275
Class A Common -- $.255
Conversion of Class A Common Stock 80 (80) -- -- -- --
Stock option transactions, net 84 40 1,057 -- -- 1,181
- ----------------------------------------------------------------------------------------------------------
Balance at December 31, 1994 8,929 3,314 31,500 92,889 (5,577) 131,055
Net income -- -- -- 12,183 -- 12,183
Cash dividends on common stock:
Amount -- -- -- (3,406) -- (3,406)
Per share:
Common -- $.30
Class A Common -- $.28
Conversion of Class A Common Stock 100 (100) -- -- -- --
Stock option transactions, net 126 3 994 -- -- 1,123
- ----------------------------------------------------------------------------------------------------------
Balance at December 31, 1995 9,155 3,217 32,494 101,666 (5,577) 140,955
Net income 12,247 12,247
Cash dividends on common stock:
Amount (3,508) (3,508)
Per share:
Common -- $.3050
Class A Common -- $.2850
Conversion of Class A Common Stock 49 (49) --
Stock option transactions, net 102 24 1,062 1,188
Treasury stock issued 34 34
- ----------------------------------------------------------------------------------------------------------
Balance at December 31, 1996 $9,306 $3,192 $33,556 $110,405 $(5,543) $150,916
==========================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 30
CONSOLIDATED STATEMENTS
F-8 OF CASH FLOWS
------------------------------------------
HAVERTY FURNITURE COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years ended December 31
------------------------------
(In thousands) 1996 1995 1994
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 12,247 $ 12,183 $ 12,538
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation and amortization 12,644 10,634 8,602
Provision for doubtful accounts 4,416 2,854 2,773
Reduction of cost to market value of property held for
sale -- 140 1,100
Deferred income taxes 2,497 897 (698)
(Gain) loss on sale or involuntary conversion of property
and equipment (510) (2,121) 86
------------------------------
Subtotal 31,294 24,587 24,401
Changes in operating assets and liabilities:
Accounts receivable (32,448) (15,326) (25,548)
Inventories (3,788) (9,472) (9,843)
Other current assets 1,430 (1,161) 24
Accounts payable and accrued expenses (576) 3,179 5,747
Income taxes 991 (3,220) 3,332
------------------------------
Net cash used in operating activities (3,097) (1,413) (1,887)
- --------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Purchases of property and equipment (16,463) (44,896) (24,387)
Proceeds from sale of property and equipment 2,384 2,407 128
Other investing activities (432) (2,893) (329)
Insurance proceeds -- 2,922 --
------------------------------
Net cash used in investing activities (14,511) (42,460) (24,588)
- --------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Net increase in short-term borrowings 12,100 4,200 37,300
Proceeds from issuance of long-term debt 15,000 50,044 925
Payment of long-term debt and capital lease obligations (8,866) (7,960) (8,479)
Exercise of stock options 1,188 1,123 1,181
Dividends paid (3,508) (3,406) (3,082)
Other financing activities (38) 93 (59)
------------------------------
Net cash provided by financing activities 15,876 44,094 27,786
- --------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $ (1,732) $ 221 $ 1,311
- --------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR $ 2,146 $ 1,925 $ 614
- --------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 414 $ 2,146 $ 1,925
============================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 31
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS F-9
------------------------------
HAVERTY FURNITURE COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
The Company is a full-service home furnishings retailer with 95 showrooms
in 12 states, selling a broad line of middle to high-end furniture. The middle
to upper-middle income households are the Company's predominant target market.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined
using the last-in, first-out (LIFO) method.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation is provided over the estimated useful lives of the
assets using the straight-line method. Leasehold improvements are amortized over
the shorter of the estimated useful life or the lease term of the related asset.
Investments in property under capital leases are amortized over the related
lease term.
CASH EQUIVALENTS
The Company considers all liquid investments with a maturity of three
months or less when purchased to be cash equivalents. Cash equivalents are
stated at cost, which approximates fair market value.
FAIR VALUES OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash, accounts receivable,
accounts payable and long-term debt. The carrying value of cash, accounts
receivable and accounts payable approximates fair market value; the carrying
amount of long-term debt approximates fair market value based on current
interest rates. The fair value of interest rate swap agreements is based on the
estimated amount the Company would pay to terminate the agreements at the
reporting date, taking into account current interest rates and the credit
worthiness of the swap counterparties.
INTEREST RATE SWAP AGREEMENTS
These agreements involve the receipt of fixed-rate amounts in exchange for
floating-rate interest payments over the life of the agreements without an
exchange of the underlying principal amount. The differential to be paid or
received is accrued as interest rates change and recognized as an adjustment to
interest expense related to the debt. The related amount payable to or
receivable from counterparties is included in other liabilities or assets. The
fair values of the swap agreements are not recognized in the financial
statements.
ADVERTISING EXPENSE
The cost of advertising is expensed as incurred. The Company incurred
approximately $33,100,000, $28,000,000 and $26,800,000 in advertising costs
during 1996, 1995 and 1994, respectively.
STOCK BASED COMPENSATION
The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB 25) and related
Interpretations in accounting for its employee stock options and adopted the
disclosure-only provisions of Statement of Financial Accounting Standards No.
123, "Accounting for Stock Based Compensation" (FAS 123). The Company grants
stock options for a fixed number of shares to employees with an exercise price
equal to the fair value of the shares at the date of grant and, accordingly,
recognizes no compensation expense for the stock option grants.
EARNINGS PER SHARE
Earnings per share are computed based on the weighted average number of
common shares plus significant dilutive common stock equivalents related to
stock options.
2. ACCOUNTS RECEIVABLE
Credit sales under Company credit programs were, as a percent of sales,
approximately 77% in 1996 and 80% in 1995 and 1994. Accounts receivable are
shown net of the allowance for doubtful accounts of $7,105,000 at December 31,
1996 and 1995. Accounts receivable terms vary as to payment terms (30 days to
four years) and interest rates (0% to 21%) and are
<PAGE> 32
NOTES TO CONSOLIDATED
F-10 FINANCIAL STATEMENTS
------------------------------------------
generally collateralized by the merchandise sold. Accounts receivable balances
due after one year at December 31, 1996 and 1995 were approximately $96,040,000
and $57,194,000, respectively, and have been included in current assets in
accordance with trade practice.
The Company believes that the carrying value of existing customer
receivables is the best estimate of fair value because of their short average
maturity and estimated bad debt losses have been reserved. Concentrations of
credit risk with respect to customer receivables are limited due to the large
number of customers comprising the Company's account base and their dispersion
across twelve states.
3. INVENTORIES
Inventories are measured using the last-in, first-out (LIFO) method of
inventory valuation because it results in a better matching of costs and
revenues. The excess of current cost over such carrying value of inventories was
approximately $14,020,000 and $13,416,000 at December 31, 1996 and 1995,
respectively. A number of the Company's competitors use the first-in, first-out
(FIFO) basis of inventory valuation which approximates current costs. The use of
the LIFO valuation method as compared to the FIFO method had the effect of
decreasing net income by $.03, $.04 and $.02 per share for the years ended 1996,
1995 and 1994, respectively, had the Company's effective tax rate been applied
to changes in income resulting therefrom, and had no other assumptions been made
as to changes in income.
4. PROPERTY AND EQUIPMENT
Property and equipment is summarized as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995
- --------------------------------------------------
<S> <C> <C>
Land $ 22,366 $ 22,480
Buildings and improvements 92,123 79,020
Equipment 54,514 48,722
Capital leases 8,276 9,989
Construction in progress 1,512 7,940
-------------------
178,791 168,151
Less accumulated depreciation (58,777) (49,193)
Less accumulated capital
lease amortization (5,664) (6,553)
-------------------
Property and equipment, net $114,350 $112,405
==================================================
</TABLE>
Interest cost capitalized amounted to $158,000 in 1996, $1,209,000 in 1995,
and $85,000 in 1994.
5. CREDIT ARRANGEMENTS
Under short-term line-of-credit arrangements with banks, the Company may
borrow up to $119,000,000 upon such terms as the Company and the banks mutually
agree. These arrangements are reviewed annually for renewal. Of such line of
credit arrangements, committed lines of credit totaled $84,000,000 with
customary fees payable on the unused portion ($22,500,000 unused at December 31,
1996). No fees or compensating balances are required for the remaining
$35,000,000 uncommitted lines of credit ($16,000,000 unused at December 31,
1996).
The weighted average stated interest rate for these borrowings outstanding
at December 31, 1996 and 1995 was 5.9% and 6.1%, respectively.
6. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
The components of accounts payable and accrued expenses are as follows (in
thousands):
<TABLE>
<CAPTION>
1996 1995
- --------------------------------------------------
<S> <C> <C>
Accounts payable, trade $12,376 $13,313
Accrued compensation 7,520 7,144
Taxes other than income taxes 5,459 6,547
Other 10,057 8,984
-----------------
$35,412 $35,988
=================
</TABLE>
7. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS
Long-term debt and capital lease obligations are summarized as follows (in
thousands):
<TABLE>
<CAPTION>
1996 1995
-------------------
<S> <C> <C>
Unsecured term note (a) $ 30,000 $ 30,000
7.95% unsecured note payable
(b) 15,000 --
7.44% unsecured note payable
(c) 15,000 15,000
7.16% unsecured note payable
(d) 30,000 30,000
10.1% unsecured note payable
(e) 17,500 22,500
Secured debt (f) 17,165 19,678
6.3% to 10.5% capital lease
obligations, due through
2016 3,675 5,028
Unsecured notes (g) -- 15,000
-------------------
128,340 137,206
Less portion classified as
current 7,906 7,973
-------------------
$120,434 $129,233
===================
</TABLE>
- ---------------
(a) The term note is payable in quarterly installments initially of
$250,000 commencing in February 1998 and then $1,000,000 commencing in
February 2000. The note matures in November 2006 and interest is
payable quarterly. The note has a floating rate of interest at LIBOR plus
0.7%.
<PAGE> 33
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS F-11
------------------------------
(b) The note is payable in semi-annual installments initially of $500,000
commencing in February 2000 and then $2,000,000 commencing in February
2007. The note matures in August 2008 and interest is payable quarterly.
(c) The note is payable in semi-annual installments of $1,250,000 commencing
in January 2003 and matures in October 2008. Interest is payable quarterly.
(d) The note is payable in semi-annual principal payments of $2,143,000
commencing in October 2000 and matures in April 2007. Interest is payable
quarterly.
(e) The note is payable in semi-annual installments of $2,500,000 plus
interest payable quarterly and matures in April 2000.
(f) Secured debt is comprised of various first mortgage notes and first
deeds of trust including some with fixed rates of interest ranging
from 5.7% to 7.9% and some with floating rates of interest ranging
from LIBOR plus 0.5% (note rate of 6.09% at December 31, 1996) to 70% of
prime rate due through 2007. The Company may prepay the floating-rate
notes at any time without penalty. Property and equipment with a net book
value at December 31, 1996 of $29,878,000 is pledged as collateral on
secured debt.
(g) The Company canceled in October 1996 a revolving credit/term loan
agreement with a commercial bank providing for borrowings of $15,000,000
revolving through 1998. If utilized, this facility would replace a
$15,000,000 short-term committed line. Under the terms of this 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 debt agreements require, among other things, that the
Company: (a) meet certain working capital requirements; (b) limit the type and
amount of indebtedness incurred; (c) limit the operating lease rentals; and (d)
grant certain lenders identical security for any liens placed upon the
Company's assets, other than those liens specifically permitted in the loan
agreements. The Company is in compliance with these covenants at December 31,
1996.
The Company has entered into interest rate swap agreements to reduce the
impact of changes in interest rates on its bank line-of-credit arrangements and
floating-rate notes payable. At December 31, 1996, the Company had six
outstanding interest rate swap agreements, having notional amounts aggregating
$75,598,000. Two of the agreements effectively fix the average interest rate on
the Company's $30 million floating-rate note at 8.2% through 2006. The remaining
agreements are at rates ranging from 5.29% to 5.95% maturing in 1998, 2000 and
2002. Under the terms of the agreements, the Company makes payments at fixed
rates and receives payments at variable rates which are based on LIBOR adjusted
quarterly. The Company had net unrealized losses relating to such instruments of
$929,000 and $3,400,000 at December 31, 1996 and 1995, respectively.
The aggregate maturities of long-term debt and capital lease obligations
during the five years subsequent to December 31, 1996 are as follows:
1997-$7,906,000; 1998-$8,945,000; 1999-$9,711,000; 2000-$12,091,000;
2001-$11,259,000.
Cash payments for interest were approximately $14,594,000, $11,754,000, and
$8,543,000 in 1996, 1995 and 1994, respectively.
8. INCOME TAXES
Income tax expense (benefit) consists of the following (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
------------------------
<S> <C> <C> <C>
Current:
Federal $4,244 $5,653 $7,269
State 144 711 1,170
------------------------
4,388 6,364 8,439
Deferred:
Federal 2,423 787 (607)
State 74 110 (91)
------------------------
2,497 897 (698)
------------------------
$6,885 $7,261 $7,741
========================
</TABLE>
Income tax expense differs from the amount computed by applying the
statutory Federal income tax rate. The differences are summarized as follows (in
thousands):
<TABLE>
<CAPTION>
1996 1995 1994
------------------------
<S> <C> <C> <C>
Statutory rates applied
to income before income
taxes $6,696 $6,805 $7,097
State income taxes, net
of federal tax benefit 94 462 761
Other 95 (6) (117)
------------------------
$6,885 $7,261 $7,741
========================
</TABLE>
<PAGE> 34
NOTES TO CONSOLIDATED
F-12 FINANCIAL STATEMENTS
------------------------------------------
Deferred tax assets and liabilities as of December 31, 1996 and 1995 were
as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995
- --------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Retirement and compensation
obligations $ 1,045 $1,142
Retrospective and
self-insurance accruals 565 568
Capitalized leases 412 448
Inventory related 284 82
Accounts receivable related -- 1,039
Other 226 243
----------------
Total deferred tax assets 2,532 3,522
Deferred tax liabilities:
Net property and equipment 1,836 2,246
Accounts receivable related 2,041 --
Other -- 124
----------------
Total deferred tax liabilities 3,877 2,370
----------------
Net deferred tax (liabilities)
assets $(1,345) $1,152
==================================================
</TABLE>
The Company made income tax payments of $4,976,000, $9,403,000 and
$5,107,000 in 1996, 1995 and 1994, respectively.
9. STOCKHOLDERS' EQUITY
Common Stock has a preferential dividend rate, while Class A Common Stock
has greater voting rights (including the ability to elect a majority of the
Board of Directors). Class A Common Stock is convertible at the holder's option
at any time into Common Stock on a 1-for-1 basis; Common Stock is not
convertible into Class A Common Stock. There is no present plan for issuance of
Preferred Stock.
10. BENEFIT PLANS
The Company has a defined benefit pension plan covering substantially all
employees. The benefits are based on years of service and the employee's final
average compensation. The Company's funding policy is to contribute annually an
amount which is within the range of the minimum required contribution and the
maximum amount that can be deducted for federal income tax purposes.
Contributions are intended to provide not only for benefits attributed to
service to date but also for those expected to be earned in the future.
The following table sets forth the plan's funded status and amounts
recognized in the Company's balance sheet at December 31 (in thousands):
<TABLE>
<CAPTION>
1996 1995
- --------------------------------------------------
<S> <C> <C>
Actuarial present value of
projected benefit
obligations:
Accumulated benefit
obligations, including
vested benefits of $19,937
in 1996 and $19,217 in
1995 $20,886 $20,143
Increase for projected salary
increases 7,095 6,690
-----------------
Projected benefit obligations
for service rendered to
date 27,981 26,833
Plan assets at fair value 27,517 22,421
-----------------
Plan assets less than
projected benefit
obligations (464) (4,412)
Unrecognized net (gain) loss
from past experience
different from that
assumed and effects of
changes in assumptions (349) 2,488
Unrecognized prior service
cost 991 1,005
Unrecognized net asset (746) (948)
-----------------
Accrued pension expense
included in the balance
sheet $ (568) $(1,867)
=================
</TABLE>
Net pension cost included the following components (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
- ---------------------------------------------------
<S> <C> <C> <C>
Service cost-benefits
earned during the
period.............. $ 1,599 $ 1,041 $ 1,130
Interest cost on
projected benefit
obligations......... 1,972 1,903 1,676
Actual (return) loss
on plan assets...... (3,628) (4,293) 1,292
Net amortization and
deferral............ 1,667 2,599 (3,173)
---------------------------
Net pension cost...... $ 1,610 $ 1,250 $ 925
===========================
</TABLE>
The weighted-average discount rates used in determining the actuarial
present value of benefit obligations were 7.75% and 7.50% at December 31, 1996
and 1995, respectively. The annual rate of increase for future compensation was
6.0% for 1996 and 1995. The expected long-term rate of return on plan assets was
8.5% for 1996, 1995, and 1994.
The plan's assets consist primarily of U.S. Government securities and
listed stocks and bonds. Included in the plan assets at December 31, 1996 were
34,000 shares of the Company's Common Stock and 143,000 shares
<PAGE> 35
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS F-13
------------------------------
of the Company's Class A Common Stock with an aggregate fair value of
$2,037,000.
The Company has a non-qualified, non-contributory Supplemental Executive
Retirement Plan (SERP) which covers five retired executive officers. The plan
provides annual supplemental retirement benefits to the executives amounting to
55% of final average earnings less benefits payable from the Company's defined
benefit pension plan and Social Security benefits. The Company also has a
non-qualified, non-contributory SERP for employees whose retirement benefits are
reduced due to their annual compensation levels. The total amount of annual
retirement benefits that may be paid to an eligible participant in the Plan from
all sources (Retirement Plan, Social Security and the SERP) may not exceed
$125,000. Under the plans, which are not funded, the Company pays benefits
directly to covered participants beginning at their retirement. At December 31,
1996, the projected benefit obligation for these plans totaled $2,611,000, of
which $1,658,000 is included in the accompanying balance sheet. Pension expense
recorded under the SERPs amounted to $307,000, $204,000 and $246,000 for 1996,
1995 and 1994, respectively.
The Company has an employee savings/retirement (401k) plan to which
substantially all employees may contribute. The Company matches employee
contributions to the extent of 50% of the first 2% of earnings and 25% of the
next 4% contributed by participants. The Company expensed approximately $811,000
in 1996, $801,000 in 1995 and $744,000 in 1994 in matching employer
contributions to this plan.
The Company offers no postretirement benefits other than pensions and no
significant postemployment benefits.
11. STOCK OPTION PLANS
The Stock Option Committee of the Board of Directors serves as
Administrator for the Company's incentive and non-qualified stock option plans.
Options are granted by the Committee under both stock plans to officers and
non-officer employees. In accordance with certain provisions of the
non-qualified plan, options granted to non-employee directors of the Company are
automatic annual grants on a pre-determined date to purchase a specific number
of shares at the fair market value of the shares on such date. As of December
31, 1996, the maximum number of options which may be granted under incentive and
non-qualified stock option plans were 848 and 208,000, respectively.
The table below summarizes options activity for the past three years under
the Company's stock option plans.
<TABLE>
<CAPTION>
Incentive Stock Non-Qualified
Option Plans Stock Option Plans
------------------- ------------------
Option Average Option Average
Shares Price Shares Price
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Outstanding at December 31, 1993 336,845 $10.55 219,500 $ 8.74
Granted 287,500 14.17 88,000 15.29
Exercised (68,447) 8.67 (39,000) 6.99
Canceled or expired (24,698) 12.06 (7,000) 8.45
-------------------------------------------------
Outstanding at December 31, 1994 531,200 12.68 261,500 11.22
Granted 324,750 12.33 89,000 12.65
Exercised (24,200) 6.46 (76,000) 10.75
Canceled or expired (137,500) 14.13 (13,000) 5.15
-------------------------------------------------
Outstanding at December 31, 1995 694,250 12.45 261,500 12.14
Granted 429,854 10.75 149,000 10.83
Exercised (14,754) 6.88 (51,000) 6.36
Canceled or expired (380,604) 12.34 (7,800) 12.03
-------------------------------------------------
Outstanding at December 31, 1996 728,746 $11.61 351,700 $12.36
Exercisable at end of year 481,641 $11.30 316,700 $12.36
</TABLE>
<PAGE> 36
NOTES TO CONSOLIDATED
F-14 FINANCIAL STATEMENTS
------------------------------------------
All of the options outstanding at December 31, 1996 were for Common Stock.
Exercise prices for options outstanding as of December 31, 1996 ranged from
$5.75 to $17.12. The weighted-average remaining contractual life of those
options is three years.
In addition, the Company had shares available for future purchases under
the Employee Stock Purchase Plan at December 31, 1996. This plan, approved by
the stockholders in 1992, promotes broad-based employee ownership and provides
employees a convenient way to acquire company stock. The Plan is a qualified
plan under Section 423 of the Internal Revenue Code and meets the requirements
of APB 25 as a noncompensatory plan. The Plan enables the Company to grant
options to purchase up to 750,000 shares of common stock, of which 252,058
shares have been exercised from inception of the plan, at a price equal to the
lesser of (a) 85% of the stock's fair market value at the date of grant, or (b)
85% of the stock's fair market value at the exercise date.
Shares purchased may not exceed 10% of the employee's annual compensation,
as defined, or $25,000 of common stock at its fair market value (determined at
the time such option is granted) for any one calendar year. Employees pay for
the shares ratably over a period of six months (the purchase period) through
payroll deductions or lump sum payments, and cannot exercise their option to
purchase any of the shares until the conclusion of the purchase period. In the
event an employee elects not to exercise such options, the full amount withheld
is refundable. During 1996, options for 64,276 shares were exercised at an
average price of $10.39 per share. At December 31, 1996, 70,223 options were
outstanding at an option price of $9.03 per share.
The Company has elected to follow APB 25 and related Interpretations in
accounting for its employee stock options because, as discussed below, the
alternative fair value accounting provided for under FAS 123, requires use of
option valuation models that were not developed for use in valuing employee
stock options. Under APB 25, because the exercise price of the Company's
employee stock options equals the market price of the underlying stock on the
date of grant, no compensation expense is recognized.
Pro forma information regarding net income and earnings per share is
required by FAS 123, and has been determined as if the Company had accounted for
its employee stock options under the fair value method of that Statement. The
fair value for these options was estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted-average
assumptions for 1996 and 1995, respectively: risk-free interest rate of 6%;
dividend yield of 2.7%; volatility factors of the expected market price of the
Company's common stock of 36.7% and 41.4%; and a weighted average expected life
of the options of 2.8 years, excepting for those issued under the Employee Stock
Purchase Plan which is 6 months. The weighted-average fair value of options
granted under the Company's stock option plans was $2.05 and $3.60 for the years
1996 and 1995, respectively. The weighted-average fair value of options granted
under the Employee Stock Purchase Plan was $2.90 and $2.60 for the years 1996
and 1995, respectively.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information follows:
<TABLE>
<CAPTION>
1996 1995
- --------------------------------------------------
<S> <C> <C>
Net income
As reported $12,247 $12,183
Pro forma 10,850 11,216
Earnings per share
As reported 1.05 1.05
Pro forma .93 .97
- --------------------------------------------------
</TABLE>
The pro forma disclosures above are not likely to be representative of the
effects on net income and earnings per share in future years because of the
variability in the number of options granted and the amortization to expense
over the options' vesting period.
12. COMMITMENTS
The Company leases certain property and equipment. Initial lease terms
range from 5 years to 30 years and certain leases contain renewal options
ranging from 1 to 25 years or provide for options to purchase the related
property at fair market value or at predetermined purchase prices which do not
represent bargain purchase options. The leases generally require the Company to
pay all maintenance, property taxes and insurance costs.
<PAGE> 37
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS F-15
------------------------------
At December 31, 1996 aggregate future minimum payments under capital leases
and non-cancelable operating leases with initial or remaining terms in excess of
one year consisted of the following (in thousands):
<TABLE>
<CAPTION>
Capital Operating
Leases Leases
------- ---------
<S> <C> <C>
1997 $ 865 $10,650
1998 856 10,423
1999 652 9,929
2000 491 9,262
2001 353 8,423
Subsequent to 2001 2,523 49,782
Less total minimum sublease
rentals (3,078)
-------
Net minimum lease payments $95,391
------ =======
Total minimum lease amounts 5,740
Amounts representing interest (2,065)
------
Present value of future
minimum lease payments $3,675
======
</TABLE>
Rental expense applicable to operating leases consisted of the following
(in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Property
Minimum $11,102 $10,343 $ 9,477
Additional rentals
based on sales 550 560 689
Sublease income (1,025) (952) (858)
---------------------------
10,627 9,951 9,308
Equipment 3,209 2,360 1,584
---------------------------
$13,836 $12,311 $10,892
===========================
</TABLE>
The Company has committed to lease certain properties beginning in 1997
under operating lease agreements with unaffiliated groups. These groups have
committed to make available remaining amounts of $19 million for the development
of properties to be leased by the Company. The agreements have initial five-year
and three-year terms. Minimum commitments, including guaranteed residuals, for
such properties to be leased aggregate $46.0 million.
13. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
The following is a summary of the unaudited quarterly results of operations
for the years ended December 31, 1996 and 1995:
<TABLE>
<CAPTION>
1996 Quarter Ended
---------------------------------------------------------------
March 31 June 30 September 30 December 31
-------- -------- ------------ -----------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Net sales $110,750 $103,341 $117,079 $125,690
Gross profit 52,660 49,062 55,619 59,543
Credit service charges 3,295 3,150 3,403 3,542
Income before income taxes 4,001 1,405 5,630 8,096
Net income 2,521 885 3,660 5,181
Earnings per share .22 .08 .31 .44
</TABLE>
<TABLE>
<CAPTION>
1995 Quarter Ended
--------------------------------------------------------------
March 31 June 30 September 30 December 31
-------- ------- ------------ -----------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Net sales $94,383 $88,678 $100,970 $111,439
Gross profit 44,468 41,668 47,663 52,671
Credit service charges 3,063 3,021 3,014 3,278
Income before income taxes 4,402 3,382 4,994 6,666
Net income 2,729 2,097 3,095 4,262
Earnings per share .24 .18 .27 .37
</TABLE>
<PAGE> 38
SELECTED
F-16 FINANCIAL DATA
------------------------------------------
SELECTED 5-YEAR FINANCIAL DATA
<TABLE>
<CAPTION>
(In thousands, except per share data) 1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Sales $456,860 $395,470 $370,132 $322,859 $282,022
Net Income 12,247 12,183 12,538 9,716 4,532
======================================================================================================
Cash Dividends--
Amount 3,508 3,406 3,082 2,772 2,120
Per Share:
Common Stock .3050 .3000 .2750 .2650 .2550
Class A Common Stock . .2850 .2800 .2550 .2490 .2417
======================================================================================================
Total Assets 399,875 371,778 315,103 264,353 229,184
======================================================================================================
Property and Equipment, Net 114,350 112,405 80,198 67,439 61,296
Capital Expenditures 16,493 44,896 24,387 13,721 9,701
Depreciation/Amortization Expense 12,644 10,634 8,602 6,875 6,069
======================================================================================================
Long Term Debt and Capital Lease Obligations 128,340 137,206 95,122 102,676 87,918
Interest Expense 14,463 11,158 8,470 7,240 7,518
======================================================================================================
Book Value Per Share 12.84 12.13 11.40 10.59 9.77
Earnings Per Share 1.05 1.05 1.10 .91 .53
</TABLE>
MARKET PRICES AND DIVIDEND INFORMATION
The Company's two classes of common stock are quoted on The Nasdaq Stock
Market (National Market). The trading symbol for the Common Stock is HAVT and
for Class A Common Stock is HAVTA. Based on the number of individual
participants represented by security position listings, there are approximately
4,100 holders of the Common Stock and 450 holders of the Class A Common Stock.
High and low sales prices reported by The Nasdaq National Market and dividends
for the last two years were (in dollars):
<TABLE>
<CAPTION>
1996
- -------------------------------------------------------------------
Common Stock Class A Common Stock
------------------------ ------------------------
Dividend Dividend
Quarter Ended High Low Declared High Low Declared
- -------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
March 31 14 5/8 12 .075 14 12 1/4 .070
June 30 14 1/4 9 1/2 .075 14 10 .070
September 30 11 1/2 9 1/4 .075 11 1/2 9 3/8 .070
December 31 14 1/8 10 5/8 .080 14 10 1/4 .075
</TABLE>
<TABLE>
<CAPTION>
1995
- -------------------------------------------------------------------
Common Stock Class A Common Stock
------------------------ ------------------------
Dividend Dividend
Quarter Ended High Low Declared High Low Declared
- -------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
March 31 13 1/4 10 3/8 .075 13 1/2 10 1/2 .070
June 30 13 9 5/8 .075 12 3/4 9 1/2 .070
September 30 13 7/8 9 3/4 .075 12 1/2 10 3/4 .070
December 31 15 13 .075 14 3/4 13 1/2 .070
</TABLE>
<PAGE> 39
APPENDIX B
THIS PROXY TO BE VOTED ONLY BY HOLDERS OF CLASS A COMMON STOCK
PROXY - SOLICITED BY BOARD OF DIRECTORS
HAVERTY FURNITURE COMPANIES, INC.
1997 ANNUAL MEETING OF STOCKHOLDERS
The undersigned stockholder(s) in HAVERTY FURNITURE COMPANIES, INC., hereby
appoints and constitutes CHRISTINE M. JONES, JENNY H. PARKER, MICHAEL J. BARBERA
and LAWRENCE W. BLOOM, or any one of them, but if more than one present, a
majority of them present, to act as lawful attorney and proxy of the
undersigned, with the power of substitution for and in the name, place and stead
of the undersigned, to vote at the annual meeting of stockholders of the Company
to be held on April 25, 1997, at the Harbor Court Hotel, 550 Light Street,
Baltimore, Maryland 21202, at 11:00 A.M., or any adjournment thereof, for the
following purposes and upon any other matters that may come before the meeting
or any adjournment thereof, with all the powers the undersigned would possess if
personally present, hereby revoking all previous proxies:
<TABLE>
<S> <C>
1. To elect nine directors of the Company for terms of one year, and until their successors are elected and qualified:
[ ] FOR all nominees listed (except as marked to the contrary) [ ] WITHHOLD AUTHORITY to vote for all nominees listed
Rawson Haverty John E. Slater, Jr. John Rhodes Haverty, M.D. Clarence H. Smith Fred J. Bates
Lynn H. Johnston Clarence H. Ridley Rawson Haverty, Jr. Frank S. McGaughey, III
(INSTRUCTION: To withhold authority to vote for any individual nominee, write that nominee's name on the space provided below.)
- -----------------------------------------------------------------------------------------------------------------------------------
2. In their discretion, the Proxies are authorized to vote upon such other business as may properly be brought before
the meeting or any adjournment thereof.
</TABLE>
(Continued and to be signed and dated on the reverse side)
<PAGE> 40
PROXY - SOLICITED BY BOARD OF DIRECTORS
(Continued from other side)
1997 ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER(S). THE BOARD OF DIRECTORS RECOMMENDS A VOTE
"FOR" PROPOSAL 1. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED "FOR"
PROPOSAL 1.
Please date and sign exactly as name(s)
appears on this Proxy. When signing as an
attorney, administrator, trustee or
guardian, please give full title as such. If
a corporation, please sign in full corporate
name by President or other authorized
officer. If a partnership, please sign in
partnership name by authorized person. For
joint accounts, each joint owner should
sign.
--------------------------------------------
Signature
--------------------------------------------
Signature
Date
----------------------------------------
<PAGE> 41
APPENDIX C
THIS PROXY TO BE VOTED ONLY BY HOLDERS OF COMMON STOCK
PROXY - SOLICITED BY BOARD OF DIRECTORS
HAVERTY FURNITURE COMPANIES, INC.
1997 ANNUAL MEETING OF STOCKHOLDERS
The undersigned stockholder(s) in HAVERTY FURNITURE COMPANIES, INC., hereby
appoints and constitutes CHRISTINE M. JONES, JENNY H. PARKER, MICHAEL J. BARBERA
and LAWRENCE W. BLOOM, or any one of them, but if more than one present, a
majority of them present, to act as lawful attorney and proxy of the
undersigned, with the power of substitution for and in the name, place and stead
of the undersigned, to vote at the annual meeting of stockholders of the Company
to be held on April 25, 1997, at the Harbor Court Hotel, 550 Light Street,
Baltimore, Maryland 21202, at 11:00 A.M., or any adjournment thereof, for the
following purposes and upon any other matters that may come before the meeting
or any adjournment thereof, with all the powers the undersigned would possess if
personally present, hereby revoking all previous proxies:
<TABLE>
<S> <C>
1. To elect four directors of the Company for terms of one year, and until their successors are elected and qualified:
[ ] FOR all nominees listed (except as marked to the contrary) [ ] WITHHOLD AUTHORITY to vote for all nominees listed
William A. Parker, Jr. Robert R. Woodson L. Phillip Humann John T. Glover
(INSTRUCTION: To withhold authority to vote for any individual nominee, write that nominee's name on the space provided below.)
- -----------------------------------------------------------------------------------------------------------------------------------
2. In their discretion, the Proxies are authorized to vote upon such other business as may properly be brought before
the meeting or any adjournment thereof.
</TABLE>
(Continued and to be signed and dated on the reverse side)
<PAGE> 42
PROXY - SOLICITED BY BOARD OF DIRECTORS
(Continued from other side)
1997 ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER(S). THE BOARD OF DIRECTORS RECOMMENDS A VOTE
"FOR" PROPOSAL 1. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED "FOR"
PROPOSAL 1.
Please date and sign exactly as name(s)
appears on this Proxy. When signing as an
attorney, administrator, trustee or
guardian, please give full title as such. If
a corporation, please sign in full corporate
name by President or other authorized
officer. If a partnership, please sign in
partnership name by authorized person. For
joint accounts, each joint owner should
sign.
--------------------------------------------
Signature
--------------------------------------------
Signature
Date
----------------------------------------
