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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 March 31, 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
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HAVERTY FURNITURE COMPANIES, INC.
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(Exact name of registrant as specified in its charter)
Maryland 58-0281900
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
866 West Peachtree Street, N.W., Atlanta, Georgia 30308
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (404) 881-1911
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(Former name, former address and former fiscal year, if
changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
The number of shares outstanding of the registrant's two classes of $1
par value common stock as of April 20, 1997 were: Common Stock -- 8,758,536;
Class A Common Stock -- 2,933,696.
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HAVERTY FURNITURE COMPANIES, INC.
INDEX
<TABLE>
<CAPTION>
Page No.
<S> <C> <C>
Part I. Financial Information:
Condensed Consolidated Balance Sheets -
March 31, 1997 and December 31, 1996 1
Condensed Consolidated Statements of Income -
Three months ended March 31, 1997 and 1996 3
Condensed Consolidated Statements of Cash Flows -
Three months ended March 31, 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>
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PART I. FINANCIAL INFORMATION
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HAVERTY FURNITURE COMPANIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
March 31 December 31
1997 1996
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<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 218 $ 414
Accounts receivable 203,658 208,014
Less allowance for doubtful accounts 7,105 7,105
-------- --------
196,553 200,909
Inventories, at LIFO 80,540 77,385
Other current assets 4,472 4,422
-------- --------
TOTAL CURRENT ASSETS 281,783 283,130
Property and equipment 185,259 178,791
Less accumulated depreciation and amortization 67,423 64,441
-------- --------
117,836 114,350
Other assets 2,348 2,395
-------- --------
$401,967 $399,875
======== ========
</TABLE>
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HAVERTY FURNITURE COMPANIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Continued)
<TABLE>
<CAPTION>
March 31 December 31
1997 1996
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<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes payable to banks $ 80,200 $ 80,500
Accounts payable and accrued expenses 37,174 35,412
Income taxes 1,337 1,103
Deferred income taxes 519 519
Current portion of long-term debt and
capital lease obligations 8,165 7,906
-------- --------
TOTAL CURRENT LIABILITIES 127,395 125,440
Long-term debt and capital lease obligations,
less current portion 119,389 120,434
Deferred income taxes 826 826
Other liabilities 2,285 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 -- 9,375,464 shares;
1996 -- 9,306,114 shares (including shares in treasury:
1997 -- 594,328; 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 34,047 33,556
Retained earnings 112,147 110,405
-------- --------
158,753 156,459
Less cost of Common Stock and
Convertible Class A Common Stock in treasury 6,681 5,543
-------- --------
152,072 150,916
-------- --------
$401,967 $399,875
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
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HAVERTY FURNITURE COMPANIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
March 31
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1997 1996
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<S> <C> <C>
Net sales $114,749 $110,750
Cost of goods sold 60,280 58,090
-------- --------
Gross profit 54,469 52,660
Credit service charges 3,804 3,295
-------- --------
58,273 55,955
Costs and expenses:
Selling, general and administrative 49,205 47,717
Interest 3,617 3,358
Provision for doubtful accounts 1,367 898
-------- --------
54,189 51,973
Other income, net 72 19
-------- --------
INCOME BEFORE INCOME TAXES 4,156 4,001
Income taxes 1,496 1,480
-------- --------
NET INCOME $ 2,660 $ 2,521
======== ========
Average number of common and common
equivalent shares outstanding 11,678 11,637
======== ========
Earnings per share $ 0.23 $ 0.22
======== ========
Cash dividends per common share:
Common Stock $ .0800 $ .0750
Class A Common Stock .0750 .0700
</TABLE>
See notes to condensed consolidated financial statements.
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HAVERTY FURNITURE COMPANIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended March 31
---------------------------------------
1997 1996
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<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 2,660 $ 2,521
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 3,326 3,075
(Gain) Loss on sale of property and equipment (19) 3
Provision for doubtful accounts 1,367 898
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Subtotal 7,334 6,497
Changes in operating assets and liabilities:
Accounts receivable 2,989 (7,623)
Inventories (3,155) (9,791)
Other current assets (50) (721)
Accounts payable and accrued expenses 1,762 9,366
Income taxes 234 575
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NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 9,114 (1,697)
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INVESTING ACTIVITIES
Purchases of property and equipment (6,827) (7,176)
Proceeds from sale of property and equipment 34 9
Other investing activities 47 (227)
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NET CASH USED IN INVESTING ACTIVITIES (6,746) (7,394)
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FINANCING ACTIVITIES
Net (decrease) increase in short-term borrowings (300) 11,400
Payment of long-term debt and capital lease obligations (786) (774)
Treasury stock acquired (1,138) ---
Exercise of stock options 552 489
Dividends paid (918) (858)
Other financing activities 26 (40)
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NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES $(2,564) 10,217
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(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (196) 1,126
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 414 2,146
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 218 $ 3,272
======= =======
</TABLE>
See notes to condensed consolidated financial statements.
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HAVERTY FURNITURE COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with the instructions to Form 10-Q and, therefore,
do not include all information and footnotes required by generally accepted
accounting principles for complete financial statements. The financial
statements include the accounts of the Company and its wholly owned
subsidiaries. All significant intercompany accounts and transactions have been
eliminated in consolidation. In the opinion of management, all adjustments
considered necessary for a fair presentation have been included and all such
adjustments are of a normal recurring nature.
NOTE B - Interim LIFO Calculations
An actual valuation of inventory under the LIFO method can be made only at the
end of each year based on the inventory levels and costs at that time.
Accordingly, interim LIFO calculations must necessarily be based on
management's estimates of expected year-end inventory levels and costs. Since
these are affected by factors beyond management's control, interim results are
subject to the final year-end LIFO inventory valuation.
NOTE C - Supplementary Cash Flow Information
The Company made total cash payments for interest (including capitalized
interest) of approximately $3,600,000 and $3,300,000 for the three months ended
March 31, 1997 and 1996, respectively.
The Company made total income tax payments of $1,337,000 and $951,000 for the
three months ended March 31, 1997 and 1996, respectively.
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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 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 quarter increased 3.6% from $110,750,000 to
$114,749,000. Comparable-store sales decreased 2.4%. A store's results are
included in the comparable-store sales computation in its thirteenth month of
operation.
Gross profit as a percent of net sales was 47.5% for the first quarter
of both 1997 and 1996. The Company has not utilized discount promotions to
increase sales levels.
Credit sales continued at approximately the same rate as in the prior
year period with similar levels of interest promotions. Credit service charges
increased to 3.3% of net sales in the first quarter of 1997 from 3.0% in the
first quarter of 1996 as the pace of sales increases slowed and free-interest
periods have expired on many promotions originated in 1996. 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 as a percent of net sales
increased to 1.2% for the first quarter of 1997 from 0.8% in the first quarter
of 1996. This higher level reflects the increased delinquencies and
bankruptcies experienced in the consumer lending industry. Management believes
that write-offs will continue at the current approximate dollar level for the
remainder of the year.
Selling, general and administrative expenses as a percent of sales
decreased to 42.9% for the first quarter of 1997 compared with 43.1% in the
year-ago period. Expenditures for advertising were well above historical
averages in the first quarter of 1996. Advertising expense decreased as a
percent of sales 1.3% in the first quarter of 1997 as compared to the 1996
period. This decrease was offset by higher occupancy costs and the expenses
related to the relocation of the Dallas, Texas distribution center.
Interest expense increased 0.1% as a percent of net sales as average
debt levels increased 6.2% to support capital expenditures. The impact on
expense from increased debt levels was lessened by a 16- basis points decrease
in the Company's effective interest rate for the first quarter of 1997 as
compared to the same period of 1996.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(continued)
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 operating
activities was $9.1 million in the first quarter of 1997. The Company carries
its own customer accounts receivable which provided positive cash flows as
receivables decreased $3.0 million during the quarter.
Investing activities used $6.7 million of cash in the first quarter of
1997 compared to $7.4 million in the year-ago period. During the first quarter
of 1997, capital expenditures of $6.8 million included improvements for two new
locations which opened during the second quarter. Expenditures were also made
for additional projects which will be completed during 1997 and 1998.
Financing activities used $2.6 million of cash during the first
quarter of 1997 including $1.1 million for the acquisition of treasury stock.
The Company has arrangements with eight banks under line-of-credit
agreements to borrow up to $119 million. At March 31, 1997, of this amount,
$84 million were committed lines ($16.2 million unused) and $35 million were
uncommitted lines ($22.6 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
March 31, 1997). The Company's average effective interest rates on all
borrowings (excluding capital leases) was 7.1% at March 31, 1997.
The preliminary estimate of capital expenditures for the remainder of
1997 is approximately $4.0 million. This estimate includes the completion
costs for one new store and improvements for two leased locations and projects
which will be started in 1997 and completed in later years. In addition, the
Company has committed to lease eight 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.
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PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits filed with this report.
Exhibit 27 - Financial Data Schedule.
(b) Reports on Form 8-K.
None.
-8-
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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 May 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)
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<PAGE> 12
EXHIBIT INDEX
HAVERTY FURNITURE COMPANIES, INC.
10-Q FOR THE QUARTER ENDED MARCH 31, 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 MARCH 31, 1997 AND FOR THE PERIOD THEN ENDED AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 218
<SECURITIES> 0
<RECEIVABLES> 203,658
<ALLOWANCES> 7,105
<INVENTORY> 80,540
<CURRENT-ASSETS> 281,783
<PP&E> 185,259
<DEPRECIATION> 67,423
<TOTAL-ASSETS> 401,967
<CURRENT-LIABILITIES> 127,395
<BONDS> 119,389
0
0
<COMMON> 12,559
<OTHER-SE> 139,513
<TOTAL-LIABILITY-AND-EQUITY> 401,967
<SALES> 114,749
<TOTAL-REVENUES> 118,553
<CGS> 60,280
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,367
<INTEREST-EXPENSE> 3,617
<INCOME-PRETAX> 4,156
<INCOME-TAX> 1,496
<INCOME-CONTINUING> 2,660
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,660
<EPS-PRIMARY> .23
<EPS-DILUTED> .23
</TABLE>
