<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
-------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
------- -------
COMMISSION FILE NUMBER: 0-8498
------
HAVERTY FURNITURE COMPANIES, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
MARYLAND 58-0281900
------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
866 WEST PEACHTREE STREET, N.W., ATLANTA, GEORGIA 30308
------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (404) 881-1911
--------------
------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
The number of shares outstanding of the registrant's two classes of $1
par value common stock as of August 12, 1997 were: Common Stock -- 8,701,599;
Class A Common Stock -- 2,929,222.
<PAGE> 2
HAVERTY FURNITURE COMPANIES, INC.
INDEX
<TABLE>
<CAPTION>
Page No.
<S> <C> <C>
Part I. Financial Information:
Condensed Consolidated Balance Sheets -
June 30, 1997 and December 31, 1996 1
Condensed Consolidated Statements of Income -
Quarter and six months ended June 30, 1997 and 1996 3
Condensed Consolidated Statements of Cash Flows -
Six months ended June 30, 1997 and 1996 4
Notes to Condensed Consolidated Financial Statements 5
Management's Discussion and Analysis of Financial
Condition and Results of Operations 6
Part II. Other Information 8
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
--------------------------------------
HAVERTY FURNITURE COMPANIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
June 30 December 31
1997 1996
-------- -----------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 944 $ 414
Accounts receivable 198,803 208,014
Less allowance for doubtful accounts 7,105 7,105
-------- --------
191,698 200,909
Inventories, at LIFO 81,143 77,385
Other current assets 6,533 4,422
-------- --------
TOTAL CURRENT ASSETS 279,450 283,130
Property and equipment 188,719 178,791
Less accumulated depreciation and amortization 69,169 64,441
-------- --------
119,550 114,350
Other assets 2,022 2,395
-------- --------
$401,890 $399,875
======== ========
</TABLE>
-1-
<PAGE> 4
HAVERTY FURNITURE COMPANIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Continued)
<TABLE>
<CAPTION>
June 30 December 31
1997 1996
--------- -----------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes payable to banks $ 86,300 $ 80,500
Accounts payable and accrued expenses 37,007 35,412
Income taxes -- 1,622
Current portion of long-term debt and
capital lease obligations 8,425 7,906
--------- -----------
TOTAL CURRENT LIABILITIES 131,732 125,440
Long-term debt and capital lease obligations,
less current portion 115,925 120,434
Deferred income taxes 826 826
Other liabilities 2,320 2,259
Stockholders' Equity
Capital stock, par value $1 per share --
Preferred Stock, Authorized: 1,000,000 shares;
Issued: None
Common Stock, Authorized: 1997 and 1996 --
50,000,000 shares; Issued: 1997 -- 9,376,218 shares;
1996 -- 9,306,114 shares (including shares in treasury:
1997 -- 716,133; 1996 -- 494,328) 9,376 9,306
Convertible Class A Common Stock, Authorized:
1997 and 1996 -- 15,000,000 shares; Issued: 1997--
3,182,751 shares; 1996 -- 3,191,804 shares (including
shares in treasury: 1997 and 1996 -- 249,055) 3,183 3,192
Additional paid-in capital 34,059 33,556
Retained earnings 112,603 110,405
--------- -----------
159,221 156,459
Less cost of Common Stock and
Convertible Class A Common Stock in treasury 8,134 5,543
--------- -----------
151,087 150,916
--------- -----------
$ 401,890 $ 399,875
========= ===========
</TABLE>
See notes to condensed consolidated financial statements.
-2-
<PAGE> 5
HAVERTY FURNITURE COMPANIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 30 June 30
-------------------- --------------------
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales $ 113,006 $ 103,341 $ 227,755 $ 214,091
Cost of goods sold 60,143 54,279 120,423 112,369
--------- --------- --------- ---------
Gross profit 52,863 49,062 107,332 101,722
Credit service charges 4,032 3,150 7,836 6,445
--------- --------- --------- ---------
56,895 52,212 115,168 108,167
Costs and expenses:
Selling, general and administrative 49,542 46,132 98,747 93,849
Interest 3,702 3,734 7,319 7,092
Provision for doubtful accounts 1,547 981 2,914 1,879
--------- --------- --------- ---------
54,791 50,847 108,980 102,820
--------- --------- --------- ---------
Other income, net 47 40 119 59
--------- --------- --------- ---------
INCOME BEFORE INCOME TAXES 2,151 1,405 6,307 5,406
Income taxes 774 520 2,270 2,000
--------- --------- --------- ---------
NET INCOME $ 1,377 $ 885 $ 4,037 $ 3,406
========= ========= ========= =========
Average number of common and common
equivalent shares outstanding 11,678 11,689 11,678 11,663
========= ========= ========= =========
Earnings per share $ 0.12 $ 0.08 $ 0.35 $ 0.29
========= ========= ========= =========
Cash dividends per common share:
Common Stock $ .0800 $ .0750 $ .1600 $ .1500
Class A Common Stock .0750 .0700 .1500 .1400
</TABLE>
See notes to condensed consolidated financial statements.
-3-
<PAGE> 6
HAVERTY FURNITURE COMPANIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Six Months Ended June 30
------------------------
1997 1996
------- -------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 4,037 $ 3,406
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 6,787 6,276
Provision for doubtful accounts 2,914 1,879
Loss on sale of property and equipment -- 24
------- -------
Subtotal 13,738 11,585
Changes in operating assets and liabilities:
Accounts receivable 6,297 (9,268)
Inventories (3,758) (9,560)
Other current assets (1,243) 1,015
Accounts payable and accrued expenses 1,595 (4,269)
Income taxes (2,490) (2,008)
------- -------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 14,139 (12,505)
------- -------
INVESTING ACTIVITIES
Purchases of property and equipment (12,068) (10,839)
Proceeds from sale of property and equipment 81 74
Other investing activities 373 (70)
------- -------
NET CASH USED IN INVESTING ACTIVITIES (11,614) (10,835)
------- -------
FINANCING ACTIVITIES
Net increase in short-term borrowings 5,800 27,800
Payment of long-term debt and capital lease obligations (3,990) (4,004)
Purchase of treasury shares (2,591) --
Exercise of stock options 564 568
Dividends paid (1,839) (1,720)
Other financing activities 61 36
------- -------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (1,995) 22,680
------- -------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 530 (660)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 414 2,146
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 944 $ 1,486
======= =======
</TABLE>
See notes to condensed consolidated financial statements.
-4-
<PAGE> 7
HAVERTY FURNITURE COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and, therefore, do not
include all information and footnotes required by generally accepted accounting
principles for complete financial statements. The financial statements include
the accounts of the Company and its wholly owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated in consolidation. In
the opinion of management, all adjustments considered necessary for a fair
presentation have been included and all such adjustments are of a normal
recurring nature.
NOTE B - Interim LIFO Calculations
An actual valuation of inventory under the LIFO method can be made only at the
end of each year based on the inventory levels and costs at that time.
Accordingly, interim LIFO calculations must necessarily be based on management's
estimates of expected year-end inventory levels and costs. Since these are
affected by factors beyond management's control, interim results are subject to
the final year-end LIFO inventory valuation.
NOTE C - Supplementary Cash Flow Information
The Company made total cash payments for interest (including capitalized
interest) of approximately $7,230,000 and $6,800,000 for the six months ended
June 30, 1997 and 1996, respectively.
The Company made total income tax payments of $4,940,000 and $3,930,000 for the
six months ended June 30, 1997 and 1996, respectively.
-5-
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FORWARD-LOOKING INFORMATION
Certain information included in this Quarterly Report on Form 10-Q
contains, and other reports or materials filed or to be filed by the Company
with the Securities and Exchange Commission (as well as information included in
oral statements or other written statements made or to be made by the Company or
its management) contain or will contain, "forward-looking statements" within the
meaning of Section 21E of the Securities and Exchange Act of 1934, as amended,
Section 27A of the Securities Act of 1933, as amended, and pursuant to the
Private Securities Litigation Reform Act of 1995. Such forward-looking
statements may relate to financial results and plans for future business
activities, and are thus prospective. Such forward looking statements are
subject to risks, uncertainties and other factors which could cause actual
results to differ materially from future results expressed or implied by such
forward-looking statements. Potential risks and uncertainties include, but are
not limited to, general economic conditions, competition and other uncertainties
detailed in this report and detailed from time to time in other filings by the
Company with the Securities and Exchange Commission. Any forward-looking
statements are made pursuant to the Private Securities Litigation Reform Act of
1995 and, as such, speak only as of the date made.
RESULTS OF OPERATIONS
Net sales for the second quarter and six months ended June 30, 1997
increased 9.4% and 6.4% over the same periods for 1996, respectively.
Comparable-store sales increased 1.7% and decreased 0.4% over the year-earlier
periods, respectively. A new store's results are included in the
comparable-store sales computation on the one-year anniversary of its opening.
Gross margin as a percent of net sales decreased to 46.8% from 47.5% and
47.1% from 47.5% for the quarter and six months ended June 30, 1997,
respectively. The transition to the Company's new Dallas warehouse facility
accelerated the merchandise close out process and resulted in lower gross
margins as excess inventory was sold.
Credit sales continued at approximately the same rate as in the prior year
periods with similar levels of interest promotions. The pace of sales increases
has slowed and free-interest periods have expired on many promotions originated
in 1996. Accordingly, credit service charges as a percent of net sales increased
to 3.5% from 3.0% for the quarter and six months ended June 30, 1997. 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 provision for doubtful accounts increased to 1.4% from 0.9% and 1.3%
from 0.9% for the quarter and six months ended June 30, 1997, respectively. This
higher level reflects the increased delinquencies and bankruptcies experienced
in the consumer lending industry. Management believes that, given the current
consumer credit environment, the dollar level of write-offs will increase for
the remainder of the year.
Selling, general and administrative expenses as a percent of net sales
decreased to 43.8% from 44.6% and 43.4% from 43.8% for the quarter and six
months ended June 30, 1997, respectively. The implementation of the on-line
inventory and automated store system in all locations was completed during the
second quarter of 1997. The centralized advertising production and purchasing
and the completion of the on-line systems have improved these processes and
reduced their related costs.
-6-
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(continued)
Interest expense decreased 0.3% and 0.2% as a percent of net sales for the
quarter and six-month period, respectively. The Company's effective interest
rate was unchanged from the prior periods at 7.2% for the quarter and 7.1% for
the six-month period. The average debt levels decreased 0.7% and increased 2.6%
for the quarter and six-month period, respectively.
LIQUIDITY AND SOURCES OF CAPITAL
The Company has used internally generated funds and bank borrowings to
finance its continuing operations and growth. Net cash provided by activities
was $14.1 million during the first six months of 1997. The Company carries its
own customer accounts receivables which provided positive cash flows as
receivables decreased $6.3 million.
Investing activities used $11.6 million of cash during the six months ended
June 30, 1997. The Company opened two replacement stores and three new stores in
addition to relocating one of its major distribution centers during this period.
Capital expenditures were $12.1 million for improvements of these leased
properties and other locations which are scheduled to open in the last half of
1997.
Financing activities used $2.0 million of cash during the six months ended
June 30, 1997. The Company used $2.6 million during the period for the
acquisition of treasury stock.
The Company has arrangements with seven banks under line-of-credit
agreements to borrow up to $131 million. At June 30, 1997, of this amount $96
million were committed lines ($38.6 million unused) and $35 million were
uncommitted lines ($6.1 million unused). Borrowings accrue interest at
competitive money-market rates and all lines are reviewed annually for renewal.
In addition to cash flows 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 and capped-rate debt as determined by the
interest rate environment (72% of total debt was interest-rate protected at June
30, 1997). The Company's average effective interest rates on all borrowings
(excluding capital leases) was 7.0% at June 30, 1997.
Four replacement stores are scheduled to open in the second half of 1997.
One of these new facilities will be owned with the others held under operating
leases. Capital expenditures for the remainder of 1997 to support this expansion
as well as 1997 costs for improvements on projects which will be completed in
1998 are estimated to be $6.0 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
-7-
<PAGE> 10
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
The 1997 Annual Meeting of Stockholders of the Company was held on April 25,
1997.
At the meeting the following persons were elected by the holders of Common Stock
to serve for a term of one year and until their successors are elected:
William A. Parker, Jr.
Robert R. Woodson
L. Phillip Humann
John T. Glover
The number of votes cast "for" or "withheld" was as follows: Mr. Parker = For --
7,884,786, Withheld -- 254,771; Mr. Woodson = For -- 8,119,275, Withheld --
20,282; Mr. Humann = For -- 8,118,611, Withheld -- 20,946; Mr. Glover = For
7,891,538, Withheld -- 248,019.
The holders of Class A Common Stock elected the following persons to serve for a
term of one year and until their successors are elected:
Rawson Haverty Lynn H. Johnston
John E. Slater, Jr. Clarence H. Smith
John Rhodes Haverty, M.D. Rawson Haverty, Jr.
Clarence H. Ridley Frank S. McGaughey, III
Fred J. Bates
The number of votes cast by the holders of Class A Common Stock was as follows:
for each of the above nominees, except Rawson Haverty, For -- 2,882,783;
Withheld -- 22; Mr. Haverty = For -- 2,882,534; Withheld -- 271.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits filed with this report.
27 -- Financial Data Schedule.
(b) Reports on Form 8-K.
None.
-8-
<PAGE> 11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HAVERTY FURNITURE COMPANIES, INC.
(Registrant)
Date August 14, 1997 By /s/ Dennis L. Fink
---------------------------- --------------------------------
Dennis L. Fink,
Executive Vice President and
Chief Financial Officer
(principal financial officer)
By /s/ Hugh G. Wells
--------------------------------
Hugh G. Wells, Vice President
& Treasurer
By /s/ Dan C. Bryant
--------------------------------
Dan C. Bryant, Controller
(principal accounting officer)
-9-
<PAGE> 12
EXHIBIT INDEX
HAVERTY FURNITURE COMPANIES, INC.
10-Q FOR THE QUARTER ENDED JUNE 30, 1997
27 -- Financial Data Schedule.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF HAVERTY FURNITURE COS., INC. AND
SUBSIDIARIES AS OF JUNE 30, 1997 AND FOR THE PERIOD THEN ENDED AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 944
<SECURITIES> 0
<RECEIVABLES> 198,803
<ALLOWANCES> 7,105
<INVENTORY> 81,143
<CURRENT-ASSETS> 279,450
<PP&E> 188,719
<DEPRECIATION> 69,169
<TOTAL-ASSETS> 401,890
<CURRENT-LIABILITIES> 131,732
<BONDS> 115,925
12,559
0
<COMMON> 0
<OTHER-SE> 138,528
<TOTAL-LIABILITY-AND-EQUITY> 401,890
<SALES> 227,755
<TOTAL-REVENUES> 235,591
<CGS> 120,423
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,914
<INTEREST-EXPENSE> 7,319
<INCOME-PRETAX> 6,307
<INCOME-TAX> 2,270
<INCOME-CONTINUING> 4,037
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,037
<EPS-PRIMARY> .35
<EPS-DILUTED> .35
</TABLE>
