HAVERTY FURNITURE COMPANIES INC
10-K, 1999-03-26
FURNITURE STORES
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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------
 
                                   FORM 10-K
 
<TABLE>
<C>          <S>
(MARK ONE)   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
    [X]      SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
 
                      FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
 
                                          OR
 
    [ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
             SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
 
                     FOR THE TRANSITION PERIOD FROM             TO
 
                            COMMISSION FILE NUMBER: 0-8498
</TABLE>
 
                            ------------------------
 
                       HAVERTY FURNITURE COMPANIES, INC.
 
             (Exact name of registrant as specified in its charter)
 
<TABLE>
<S>                                            <C>
                  MARYLAND                        58-0281900
       (State or other jurisdiction of         (I.R.S. Employer
       incorporation or organization)           Identification
                                                     No.)
 
  866 WEST PEACHTREE STREET, N.W., ATLANTA,          30308
                   GEORGIA
  (Address of principal executive officers)       (Zip Code)
</TABLE>
 
Registrant's telephone number, including area code:  (404) 881-1911
 
Securities registered pursuant to Section 12(b) of the Act:
 
<TABLE>
<CAPTION>
                                                          NAME OF EACH EXCHANGE
                  TITLE OF EACH CLASS                      ON WHICH REGISTERED
- --------------------------------------------------------  ---------------------
<S>                                                       <C>
             COMMON STOCK ($1.00 PAR VALUE)                  NEW YORK STOCK
         CLASS A COMMON STOCK ($1.00 PAR VALUE)                 EXCHANGE
</TABLE>
 
    Securities registered pursuant to Section 12(g) of the Act: None
 
    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 _
 
    Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Paragraph 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K. _
 
    The aggregate market value of the voting stock of the registrant held by
non-affiliates of the registrant as of February 28, 1999, was $165,927,983. The
aggregate market value was computed by reference to the last transaction prices
of the registrant's two classes of common stock on such date. For the purpose of
this response only, executive officers, directors and holders of 5% or more of
common stock are affiliates of the registrant.
 
    As of March 17, 1999, the number of shares outstanding of the registrant's
two classes of $1.00 par value common stock were: Common Stock--8,635,228; Class
A Common Stock--2,441,622.
 
                      DOCUMENTS INCORPORATED BY REFERENCE
 
    Portions of the registrant's proxy statement dated March 23, 1999, for the
1999 annual meeting of stockholders are incorporated by reference herein in
response to Item 5 -- 8 of Part II and to Part III of this report, except
information on executive officers, which is included in Part I of this report.
 
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<PAGE>
                                     PART I
 
ITEM 1. BUSINESS
 
FORWARD-LOOKING INFORMATION
 
    Certain information included in this Annual Report on Form 10-K 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, the consumer spending environment
for large ticket items, competition in the retail furniture industry 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.
 
GENERAL
 
    Haverty Furniture Companies, Inc. (the "Company" or "Havertys") is a
full-service home furnishings retailer. The Company operates 100 showrooms in 14
contiguous southern and central states. Havertys provides its customers with a
wide selection of furniture and accessories primarily in the middle to upper-
middle price ranges. As an added convenience to its customers, the Company
offers financing through a revolving charge credit plan. The Company originated
as a family business in 1885 in Atlanta, Georgia. Havertys has been a publicly
held company since 1929, incorporated under the laws of the State of Maryland.
The Company's corporate headquarters are located at 866 West Peachtree Street,
N. W., Atlanta, Georgia, 30308.
 
BUSINESS STRATEGY
 
    The Company serves a target customer in the middle to upper-middle income
ranges. Havertys has attracted this discriminating and demanding consumer by
focusing on what it believes are the key elements of furniture retailing:
stores, merchandise value and selection, advertising, and customer service. The
Company has made investments in technology to improve operating efficiencies and
in new retail stores. Havertys plans to continue to expand into new markets and
strengthen its position in its current market areas utilizing existing
distribution infrastructure.
 
STORES
 
    As of December 31, 1998, the Company operated 100 stores serving 65 cities
in 14 states. Havertys has executed a program of remodeling and expanding
showrooms and replacing older smaller stores in growth markets with new larger
stores. Accordingly, the number of retail locations has increased by only ten
since the year ended 1994, but total square footage has increased 40%. Havertys
entered five new cities during 1998: Birmingham, Alabama; Bowling Green,
Kentucky; Fredericksburg and Roanoke, Virginia; and Springfield, Missouri (a new
state for Havertys). This additional retail space was gained primarily by
leasing and remodeling facilities from retailers exiting their businesses.
During 1999, the Company will open five stores leased or purchased from former
retailers and remodeled to Havertys' specifications. The Company will also add
three newly constructed stores, including a unique mall location in Atlanta,
 
                                       2
<PAGE>
Georgia, and expand three current locations. Store closings for 1999 include one
large clearance center and two small retail showrooms.
 
MERCHANDISING
 
    The Company is able to tailor its merchandise presentation to the needs and
tastes of the local market. Havertys offers many well-known brand names of
furniture, such as Broyhill, Thomasville, Lane/ Action, La-Z-Boy, and Clayton
Marcus. The Company prefers to carry multiple lines of furniture in order to
offer the consumer broad product choices at good values. These include many key
items and groups from well known, quality suppliers who have established
somewhat less consumer brand awareness. All five regional managers are included
in Havertys' buying team, and their input allows each store to present a product
mix that is roughly 20 to 25 percent regionalized. Each local market manager can
select from region specific items that are attractive to consumers in their
particular metropolitan area. These managers are also responsible for pricing in
their respective markets, with the exception of specific items that are
advertised chain-wide. Havertys can therefore be competitively priced in each
market while maintaining attractive gross margins.
 
    The merchandising team develops a broad selection of merchandise for its
customers at values targeted to their income levels. Management has avoided
utilizing lower, promotional price-driven merchandise favored by many national
chains, which management believes gives Havertys a unique position for a large
retailer. The Company purchases approximately 59% of its merchandise from ten
vendors and believes that adequate merchandise sources are available to the
Company. Combined with the movement to regional merchandising and warehousing
and the implementation of a centralized information system, this provides
significant purchasing power with the Company's vendors.
 
    Although it has only an estimated 1% national market share of the
highly-fragmented furniture retailing market, Havertys is becoming an important
customer to the largest furniture manufacturers due to its consistent track
record of profitable, controlled growth and reputable customer service.
 
    In February 1998, the Company and Furniture Brands International ("Furniture
Brands") announced a strategic alliance whereby the Company will allocate up to
50% of its retail square footage to the display of products supplied by
Furniture Brands. Furniture Brands' lines, which include widely recognized
brands such as Broyhill, Lane, and Thomasville, currently account for
approximately 30% of the retail square footage in Havertys' stores. Because of
the alliance, the Company has received increased service support to each of its
five regional or metropolitan area distribution centers and is allowed certain
priorities in selecting new products. The program, which began implementation in
the second quarter of 1998, is expected to reach the targeted increase in
display square footage in the second half of 1999.
 
                                       3
<PAGE>
REVENUES
 
    The following table sets forth the approximate percentage contributions by
product or service to the Company's gross revenues for the past three years:
 
<TABLE>
<CAPTION>
                                                                                           YEAR ENDED DECEMBER 31,
                                                                                       -------------------------------
<S>                                                                                    <C>        <C>        <C>
                                                                                         1998       1997       1996
                                                                                       ---------  ---------  ---------
    Merchandise:
        Living Room Furniture........................................................       48.5%      51.0%      52.2%
        Bedroom Furniture............................................................       23.4       23.1       22.6
        Dining Room Furniture........................................................       11.9       12.3       12.6
        Bedding......................................................................        7.6        7.4        6.6
    Accessories and Other............................................................        5.6        3.4        3.5
    Credit Service Charges...........................................................        3.0        2.8        2.5
                                                                                       ---------  ---------  ---------
                                                                                           100.0%     100.0%     100.0%
                                                                                       ---------  ---------  ---------
                                                                                       ---------  ---------  ---------
</TABLE>
 
DISTRIBUTION
 
    The Company uses a regional warehouse distribution network to provide
central receiving points from vendors and distribution of product to local
market warehouses. Havertys has three regional warehouses operating in
Charlotte, North Carolina; Jackson, Mississippi; and Ocala, Florida. The
regional warehouses serve all of the Company's local markets except for Dallas,
Texas, and Atlanta, Georgia, which each have a metropolitan area warehouse. The
combination of enhanced information systems, just-in-time delivery practices and
close coordination with vendors has substantially reduced the need to carry
inventory in local market warehouses. The ratio of warehouse space to selling
space has decreased over the last five years. This reduction has allowed local
management to convert space previously used for warehousing into additional
selling space, prepping centers and cross-dock locations for local deliveries.
 
    The distribution system currently in place will facilitate the
implementation of additional distribution improvements. Havertys is implementing
EDI and just-in-time delivery systems with its major vendors, and the Company
has purchased and is starting to roll out a new software system which will allow
management to forecast inventory requirements and reorder merchandise in a more
efficient manner.
 
CREDIT OPERATIONS
 
    As a service to its customers, Havertys offers a revolving charge credit
plan with credit limits determined through its on-line credit approval system.
Havertys Credit Services, Inc. ("Havertys Credit"), a wholly-owned subsidiary of
Haverty Furniture Companies, Inc., was formed in 1996 to consolidate this
function. Management believes that Havertys gains certain advantages over its
primary competitors by controlling credit approval and the quality of customer
relations rather than outsourcing these functions. Havertys Credit currently
maintains a receivables portfolio of approximately $195 million, before
deducting reserves.
 
    Prior to 1996, Havertys' internal credit program was handled in 45
individual markets, with each having its own credit department, manager, support
personnel and overhead. However, beginning in April 1996, Havertys' credit
operations were centralized into a single credit processing and collections
office in Chattanooga, Tennessee. By July 1996, 31 mid- to large markets
accounting for approximately 90% of receivables had been transitioned to this
office. The remaining smaller cities were phased in through June 1997 concurrent
with the roll-out of the company's automated store computer system. During the
transition period, Havertys did experience an increase in delinquencies.
However, this coincided with increases in delinquencies throughout the credit
industry. Management believes that over
 
                                       4
<PAGE>
the long-term, this move will allow the Company to realize significant cost
savings and improvements in collection efforts while maintaining its high level
of service.
 
    Havertys Credit typically requires a 15% down payment and offers financing
over 12 to 48 months, with an average term of 18 months. The standard
(non-promotional) credit service charge rate currently ranges from 18% to 21%
per annum (except for 10% in Arkansas), but will vary in the future depending on
market conditions and state laws. Havertys Credit offers a lower credit service
charge rate for individual purchases of over $3,000, and the Company also
routinely offers various interest-free periods (typically five to 12 months) as
part of promotional campaigns. About 44% of financed 1998 sales allow for
deferred payment periods with most financed sales allowing for 3 months to 12
months of free interest. In January 1998, the deferred payment period was
shortened from six months to five months from the month of purchase. The Company
has not offered payment deferrals beyond six months although many competitor
programs include deferrals and free interest for up to 18 months. Management
believes that its credit offers are a reasonable response to similar or more
aggressive promotions advertised by competitors, which therefore reduces the
need to emphasize off-price promotions to stimulate sales. Unlike many of its
competitors, Havertys Credit does not charge retroactive interest to customers
who do not completely pay off the balance during a free-interest or deferred
payment period in part because such periods are not as long as competitive
offers. The amount financed under the Company's credit programs as a percent of
net sales continued to decline in 1998 to 49% from 55% in 1997 as customers
increased their usage of third party credit cards and cash. These combined
factors resulted in an average interest yield of approximately 8.7% for 1998.
 
COMPETITION
 
    The retail sale of home furnishings is a highly fragmented and competitive
business. The Company believes that the primary elements of competition in its
industry are customer service, merchandise (quality, style, selection, price,
and display) advertising and store location and design. The degree and source of
competition varies by geographic area. The Company competes with numerous
individual retail furniture stores as well as chains and the better department
stores. Department stores benefit competitively from more established name
recognition in specific markets, a larger customer base due to their
non-furnishings product lines and proprietary credit cards.
 
    The Company believes it has uniquely positioned itself in the marketplace
with merchandise that appeals to customers who are somewhat more affluent than
those of most other competitive furniture store chains. Management believes that
this customer segment responds more cautiously to typical discount promotions
and focuses on the real value and customer service offered by a retailer. The
Company regards its experienced sales personnel and personalized customer
service as important factors in its competitive success. Lastly, management
believes its ability to make prompt delivery of orders through maintenance of
inventory and to tailor the inventory to a store's local market conditions
provides additional competitive advantages. The Company currently ranks among
the top five in sales for full-service retail home furnishings store chains in
the United States, based on available industry data for 1997.
 
EMPLOYEES
 
    As of December 31, 1998, the Company employed approximately 3,286 employees:
2,976 in individual retail store operations, 136 in its corporate offices, 84 in
its credit operations and 90 in its regional warehouses. No employee of the
Company is a party to any union contract and the Company considers its employee
relations to be good.
 
                                       5
<PAGE>
EXECUTIVE OFFICERS
 
    The following table sets forth certain information with respect to the
executive officers of the Company:
 
<TABLE>
<CAPTION>
                                                                                  POSITION WITH THE COMPANY
NAME                                                       AGE                      AND OTHER INFORMATION
- -----------------------------------------------------      ---      -----------------------------------------------------
<S>                                                    <C>          <C>
Rawson Haverty.......................................          78   Chairman of the Board since 1984. President from 1955
                                                                      to 1984. Chief Executive Officer from 1955 to 1990.
                                                                      Director since 1947.
 
John E. Slater, Jr...................................          64   President and Chief Executive Officer since 1994.
                                                                      Executive Vice President from 1993 to 1994. Chief
                                                                      Operating Officer from 1992 to 1994. Senior Vice
                                                                      President from 1987 to 1993. General Manager,
                                                                      Stores, from 1990 to 1992. Director since 1983.
 
Dan C. Bryant........................................          56   Vice President since 1998 and Controller since 1985.
 
Dennis L. Fink.......................................          47   Executive Vice President since 1996 and Chief
                                                                      Financial Officer since 1993. Senior Vice President
                                                                      from 1993 to 1996. Senior Vice President, Treasurer
                                                                      and Chief Financial Officer and a director of
                                                                      Horizon Industries, Inc., a publicly held carpet
                                                                      manufacturer, from 1985 to 1992.
 
Rawson Haverty, Jr...................................          42   Senior Vice President, Real Estate and Development
                                                                      since 1998. Vice President, Real Estate and
                                                                      Insurance Division from 1992 to 1998.
 
Jenny Hill Parker....................................          40   Treasurer since 1998 and Corporate Secretary since
                                                                      1997. Vice President, Finance from 1996 to 1998 and
                                                                      financial officer since 1994. Senior Manager at
                                                                      KPMG Peat Marwick LLP from 1988 to 1994 and other
                                                                      positions within that firm since 1981.
 
Clarence H. Smith....................................          48   Senior Vice President and General Manager, Stores,
                                                                      since 1996. Vice President, Operations and
                                                                      Development, from 1994 to 1996. Vice President from
                                                                      1984 to 1994. Regional Manager and General Manager
                                                                      of Atlanta, Georgia, retail operations from 1986 to
                                                                      1994. Director since 1989.
 
M. Tony Wilkerson....................................          53   Senior Vice President, Marketing since 1994. Vice
                                                                      President, Merchandising, from 1990 to 1994.
</TABLE>
 
    Rawson Haverty is the father of Rawson Haverty, Jr., and uncle of Clarence
H. Smith and Clarence H. Ridley. Rawson Haverty, Jr. is the son of Rawson
Haverty and the first cousin of Clarence H. Ridley and Clarence H. Smith.
Clarence H. Smith is the nephew of Rawson Haverty and the first cousin of
Clarence
 
                                       6
<PAGE>
H. Ridley and Rawson Haverty, Jr. (directors of the Company). Clarence H. Ridley
is the nephew of Rawson Haverty and first cousin of Clarence H. Smith and Rawson
Haverty, Jr.
 
ITEM 2. PROPERTIES
 
    The Company's executive and administrative offices are located at 866 West
Peachtree Street, N.W., Atlanta, Georgia and occupy a two-story brick building
purchased in 1971 and an adjacent, one-story brick building purchased in 1986.
These facilities contain approximately 29,000 and 15,000 square feet of working
area, respectively. Havertys Credit Services, Inc., a subsidiary, leases 15,000
square feet of office space in Chattanooga, Tennessee.
 
    The following table sets forth information concerning the operating
facilities of the Company as of December 31, 1998.
 
<TABLE>
<CAPTION>
                                                           RETAIL          MARKET AREA         REGIONAL
                                                        LOCATIONS(C)       WAREHOUSES         WAREHOUSES
                                                       ---------------  -----------------  -----------------
<S>                                                    <C>              <C>                <C>
Owned (a)............................................            48                 9                  3
Leased (b)...........................................            52                16                  0
                                                                                   --                  -
                                                                ---
    Total............................................           100                25                  3
                                                                                   --                  -
                                                                                   --                  -
                                                                ---
                                                                ---
</TABLE>
 
- ------------------------
 
    (a) Includes capital leases on 10 facilities and three retail stores built
       on sites under land leases.
 
    (b) The leases have various termination dates through 2010 plus renewal
       options.
 
    (c) 26 of the retail locations have attached warehouse space.
 
    In addition, as of December 31, 1998, the Company has entered into an
agreement for the lease of one retail facility.
 
<TABLE>
<CAPTION>
                                                                                   1998       1997       1996
                                                                                 ---------  ---------  ---------
<S>                                                                              <C>        <C>        <C>
Retail square footage at December 31 (in thousands)............................      3,295      3,167      2,960
% Change in retail square footage..............................................        4.0%       7.0%       7.1%
Annual Net Sales per Square Foot...............................................  $     168  $     158  $     159
</TABLE>
 
    For additional information, see "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included in this report under
Item 7 of Part II.
 
ITEM 3. LEGAL PROCEEDINGS
 
    There are no material pending legal proceedings, other than routine
litigation incidental to the business of the Company, to which the Company is a
party or of which any of its properties is the subject.
 
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
    No matter was submitted to a vote of security holders during the fourth
quarter of fiscal 1998.
 
                                       7
<PAGE>
                                    PART II
 
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
        MATTERS
 
    The information under the heading "Market Prices and Dividend Information"
on page 12 of the Company's annual report to stockholders for the year ended
December 31, 1998, is incorporated herein by reference in response to this item.
 
ITEM 6. SELECTED FINANCIAL DATA
 
    Selected 5-Year Financial Data on page 13 of the Company's annual report to
stockholders for the year ended December 31, 1998, is incorporated herein by
reference in response to this item.
 
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS
 
    The information under the heading "Management's Discussion and Analysis of
Financial Condition and Results of Operations" on pages 14 through 19 of the
Company's annual report to stockholders for the year ended December 31, 1998, is
incorporated herein by reference in response to this item.
 
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
    The information under the heading "Management's Discussion and Analysis of
Financial Condition and Results of Operations" on pages 14 through 19, and
contained in Note 7--Long-term Debt and Capital Lease Obligations on pages 28
and 29 of the Company's annual report to stockholders for the year ended
December 31, 1998, is incorporated herein by reference in response to this item.
 
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
    The report of the independent auditors and the financial statements on pages
20 through 38 of the Company's annual report to stockholders for the year ended
December 31, 1998, are incorporated herein by reference.
 
    Selected Quarterly Financial Data on page 37 of the Company's annual report
to stockholders for the year ended December 31, 1998, is incorporated herein by
reference.
 
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE
 
    Not Applicable.
 
                                       8
<PAGE>
                                    PART III
 
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
 
    The information relating to directors of the Company contained on pages 6
through 8 of the Company's proxy statement for the 1999 annual meeting of
stockholders, dated March 23, 1999, is incorporated herein by reference.
Information relating to executive officers of the Company is included in this
report under Item 1 of Part I.
 
ITEM 11. EXECUTIVE COMPENSATION
 
    The information relating to executive compensation contained on pages 10
through 19 of the Company's proxy statement for the 1999 annual meeting of
stockholders, dated March 23, 1999, is incorporated herein by reference.
 
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
    The information relating to security ownership of certain beneficial owners
contained on pages 2 and 3 of the Company's proxy statement for the 1999 annual
meeting of stockholders, dated March 23, 1999, is incorporated herein by
reference.
 
    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 February 28, 1999, by (i) an executive officer who is not a director or
nominee and is 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
                                                                 Owned and       Owned and
                     Name or Number of                            Percent         Percent
                      Persons in Group                           of Class         of Class
- ------------------------------------------------------------  ---------------  --------------
<S>                                                           <C>              <C>
Dennis L. Fink..............................................        78,545(a)        --
                                                                     *
15 Executive Officers and Directors as a Group..............       953,084(b)     1,129,429(c)
                                                                    10.54%           46.26%
</TABLE>
 
- ------------------------
 
*   Less than 1% of outstanding shares of class.
 
- ------------------------
 
(a) This amount includes unexercised options to purchase 58,808 shares which may
    be acquired upon the exercise of options which are presently exercisable or
    which will become exercisable on or before April 30, 1999.
 
(b) Of this amount, the persons included in this group have shared voting and
    investment power with respect to 140,855 shares (which includes 34,119
    shares held in the Company's Retirement Plan and Trust) and shared voting
    power with respect to 145,064 shares which represent the shares held in the
    Company's 401(k) Plan. This amount also includes 311,769 shares which may be
    acquired upon the exercise of options which are presently exercisable or
    which will become exercisable on or before April 30, 1999.
 
(c) Of this amount, the persons included in this group have shared voting and
    investment power with respect to 367,006 shares (which includes 143,375
    shares held in the Company's Retirement Plan and Trust) and sole voting
    power with respect to 24,630 shares.
 
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
    The information relating to certain relationships and related transactions
contained on page 17 of the Company's proxy statement for the 1999 annual
meeting of stockholders, dated March 23, 1999, is incorporated herein by
reference.
 
                                       9
<PAGE>
                                    PART IV
 
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
 
    The following exhibits, financial statements and financial statement
schedule are filed as a part of this report:
 
    (a)(1) and (2). LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT
                    SCHEDULE
 
    The following consolidated financial statements of Haverty Furniture
Companies, Inc., included in the annual report of the registrant to its
stockholders for the year ended December 31, 1998, are incorporated by reference
in Item 8:
 
    Consolidated Balance Sheets--December 31, 1998 and 1997
 
    Consolidated Statements of Income--Fiscal Years ended December 31, 1998,
    1997 and 1996
 
    Consolidated Statements of Stockholders' Equity--Fiscal Years ended December
    31, 1998, 1997 and 1996
 
    Consolidated Statements of Cash Flows--Fiscal Years ended December 31, 1998,
    1997 and 1996
 
    Notes to Consolidated Financial Statements
 
    The following financial statement schedule of Haverty Furniture Companies,
Inc. is included in Item 14(d):
 
    Schedule II -- Valuation and Qualifying Accounts
 
    All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.
 
    (3) Exhibits
 
    The exhibits listed below are filed with or incorporated by reference into
this Report (denoted by an asterisk). Unless otherwise indicated, the exhibit
number of documents incorporated by reference corresponds to the exhibit number
in the referenced document. Exhibits 10.1 through 10.15 represent compensatory
plans.
 
<TABLE>
<CAPTION>
 EXHIBIT
 NUMBER                                                     DESCRIPTION OF EXHIBIT
- ---------             --------------------------------------------------------------------------------------------------
<C>        <C>        <S>
    *3.1      --      Articles of Incorporation of Haverty Furniture Companies, Inc. as amended and restated on March 6,
                      1973, and amended on April 24, 1979, and as amended on April 24, 1985. (10-Q for the quarter ended
                      June 30, 1985)
 
   *3.1.1     --      Articles of Incorporation of Haverty Furniture Companies, Inc. as amended on April 25,1986. (10-Q
                      for the quarter ended March 31, 1986)
 
   *3.1.2     --      Amendment to Articles of Incorporation of Haverty Furniture Companies, Inc. as amended on April
                      28, 1989. (10-Q for the quarter ended June 30, 1989)
 
   *3.1.3     --      Amendment to Articles of Incorporation of Haverty Furniture Companies, Inc. as amended on April
                      28, 1995. (10-K for the year ended December 31, 1996)
 
   *3.2.1     --      Amended and Restated By-Laws of Haverty Furniture Companies, Inc. as amended on August 5, 1987.
                      (10-K for the year ended December 31, 1987)
 
   *3.2.2     --      Amendment to By-Laws of Haverty Furniture Companies, Inc. as amended on November 4, 1988. (10-Q
                      for the quarter ended March 31, 1989)
</TABLE>
 
                                       10
<PAGE>
<TABLE>
<CAPTION>
 EXHIBIT
 NUMBER                                                     DESCRIPTION OF EXHIBIT
- ---------             --------------------------------------------------------------------------------------------------
<C>        <C>        <S>
   *3.2.3     --      Amendment to By-laws of Haverty Furniture Companies, Inc. as amended on October 30, 1998.
 
    *4.1      --      Note Agreement between Haverty Furniture Companies, Inc. and The Prudential Purchasers (The
                      Prudential Insurance Company of America) c/o Prudential Capital Group, dated December 29, 1993.
                      (10-K for the year ended December 31, 1993)
 
   *4.1.1     --      First Amendment to Note Agreement effective March 31, 1994, between Haverty Furniture Companies,
                      Inc. and The Prudential Insurance Company of America. (10-K for the year ended December 31, 1994)
 
   *4.1.2     --      Second Amendment to Note Agreement dated July 19, 1996, between Haverty Furniture Companies, Inc.
                      and The Prudential Insurance Company of America, as previously amended. (10-K for the year ended
                      December 31, 1996)
 
    *4.2      --      Credit Agreements dated March 31, 1998, among Haverty Furniture Companies, Inc., Havertys Credit
                      Services, Inc. and the Lenders Listed Therein, Agented by SunTrust Bank, Atlanta. (10-Q for the
                      quarter ended March 31, 1998)
 
                      No other instrument authorizes long-term debt securities in an amount in excess of ten percent
                      (10%) of the total assets of the Company. The Company agrees to furnish copies of instruments and
                      agreement authorizing long-term debts of less than ten percent (10%) of its total assets to the
                      Commission upon request.
 
   *10.1      --      Second Amendment and Restatement of Directors' Deferred Compensation Plan. (10-Q for the quarter
                      ended June 30, 1996, Exhibit 10.1.2)
 
   *10.2      --      Supplemental Executive Retirement Plan, effective January 1, 1983. (10-K for the year ended
                      December 31, 1984, Exhibit 10.3)
 
   *10.3      --      Thrift Plan and Trust, as amended and restated, effective January 1, 1987. (Exhibit 4.1 to
                      Registration Statement on Form S-8, File No. 33-44285)
 
  *10.3.1     --      Amendment No. One to Thrift Plan and Trust, as previously amended and restated, effective July 1,
                      1994. (10-K for the year ended December 31, 1996)
 
  *10.3.2     --      Amendment No. Two to Thrift Plan and Trust, as previously amended and restated, effective January
                      1, 1989. (10-K for the year ended December 31, 1996)
 
  *10.3.3     --      Amendment No. Three to Thrift Plan and Trust, as previously amended and restated, effective
                      January 1, 1997. (10-K for the year ended December 31, 1996)
 
   *10.4      --      1986 Non-Qualified Stock Option Plan. (10-K for the year ended December 31, 1987, Exhibit 10.7)
 
   *10.5      --      1988 Incentive Stock Option Plan, as amended. (Exhibit 4.1 to Registration Statement on Form S-8,
                      File No. 33-53609)
 
   *10.6      --      1988 Non-Qualified Stock Option Plan. (10-Q for the quarter ended June 30, 1989, Exhibit 10.2)
 
  *10.6.1     --      Amendment Number One to 1988 Non-Qualified Stock Option Plan. (Registration Statement on Form S-2,
                      File No. 33-59400, Exhibit 10.9.1)
 
   *10.7      --      Haverty Furniture Companies, Inc. Employee Stock Purchase Plan, as amended and restated as of
                      February 7, 1995. (10-K for the year ended December 31, 1994)
</TABLE>
 
                                       11
<PAGE>
<TABLE>
<CAPTION>
 EXHIBIT
 NUMBER                                                     DESCRIPTION OF EXHIBIT
- ---------             --------------------------------------------------------------------------------------------------
<C>        <C>        <S>
   *10.8      --      Deferred Compensation Agreement between Haverty Furniture Companies, Inc. and Rawson Haverty, Sr.,
                      dated December 21, 1992. (10-K for the year ended December 31, 1993, Exhibit 10.9)
 
   *10.9      --      1993 Non-Qualified Stock Option Plan. (Registration Statement on Form S-8, File No. 33-53607,
                      Exhibit 5.1)
 
   *10.10     --      Supplemental Executive Retirement Plan, effective January 1, 1996. (10-K for the year ended
                      December 31, 1995)
 
   *10.11     --      Directors' Compensation Plan as of April 26, 1996. (10-Q for quarter ended June 30, 1996, Exhibit
                      10.11)
 
   *10.12     --      Form of Agreement dated January 1, 1997, Regarding change in Control with the following Names
                      Executive Officers: John E. Slater, Jr., Dennis L. Fink, Clarence H. Smith and M. Tony Wilkerson.
                      (10-K for the year ended December 31, 1996)
 
   *10.13     --      Form of Agreement dated January 1, 1997, Regarding Change in Control with the following employee
                      directors: Rawson Haverty, Jr. (a Named Executive Officer) and Fred J. Bates. (10-K for the year
                      ended December 31, 1996)
 
   *10.14     --      Haverty Furniture Companies, Inc. 1998 Stock Option Plan, effective as of December 18, 1997.
                      (Registration Statement on Form S-8, File No. 333-53215, Exhibit 10.1)
 
    10.15     --      Haverty Furniture Companies, Inc. Top Hat Mutual Fund Option Plan, effective as of January 15,
                      1999.
 
    13.1      --      Annual Report to Stockholders for the year ended December 31, 1998.
 
    21.1      --      Subsidiaries of the Registrant.
 
    23.1      --      Consent of Ernst & Young LLP.
 
    27        --      Financial Data Schedule. (Filed electronically with SEC only)
</TABLE>
 
- ------------------------
 
*   Incorporated by reference.
 
    (b) No reports on Form 8-K were filed during the quarter ended December 31,
       1998.
 
    (c) Exhibits--The response to this portion of Item 14 is as submitted in
       Item 14(a)(3).
 
    (d) Financial Statement Schedules--The response to this portion of Item 14
       is submitted as a separate section of this report.
 
                                       12
<PAGE>
                                   SIGNATURES
 
    Pursuant to the requirements of Section 13 or 15(d) 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.
 
Date: March 25, 1999            By:           /s/ JOHN E. SLATER, JR.
                                     ------------------------------------------
                                                John E. Slater, Jr.
                                       PRESIDENT AND CHIEF EXECUTIVE OFFICER
                                           (PRINCIPAL EXECUTIVE OFFICER)
 
Dated: March 25, 1999           By:              /s/ DENNIS L. FINK
                                     ------------------------------------------
                                                   Dennis L. Fink
                                         EXECUTIVE VICE PRESIDENT AND CHIEF
                                       FINANCIAL OFFICER (PRINCIPAL FINANCIAL
                                                      OFFICER)
 
Dated: March 25, 1999           By:              /s/ DAN C. BRYANT
                                     ------------------------------------------
                                                   Dan C. Bryant
                                             VICE PRESIDENT, CONTROLLER
                                           (PRINCIPAL ACCOUNTING OFFICER)
 
    Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed by the following persons in the capacities and on the
dates indicated.
 
          SIGNATURE                        TITLE                    DATE
- ------------------------------  ---------------------------  -------------------
 
      /s/ RAWSON HAVERTY        Chairman of the Board
- ------------------------------                                 March 25, 1999
        Rawson Haverty
 
   /s/ JOHN E. SLATER, JR.      President and Chief
- ------------------------------    Executive Officer,           March 25, 1999
     John E. Slater, Jr.          Director
 
      /s/ FRED J. BATES         Regional Manager and
- ------------------------------    Director                     March 25, 1999
        Fred J. Bates
 
      /s/ JOHN T. GLOVER        Director
- ------------------------------                                 March 25, 1999
        John T. Glover
 
   /s/ RAWSON HAVERTY, JR.      Senior Vice President and
- ------------------------------    Director                     March 25, 1999
     Rawson Haverty, Jr.
 
    /s/ L. PHILLIP HUMANN       Director
- ------------------------------                                 March 25, 1999
      L. Phillip Humann
 
                                       13
<PAGE>
 
          SIGNATURE                        TITLE                    DATE
- ------------------------------  ---------------------------  -------------------
 
     /s/ LYNN H. JOHNSTON       Director
- ------------------------------                                 March 25, 1999
       Lynn H. Johnston
 
 /s/ FRANK S. MCGAUGHEY, III    Director
- ------------------------------                                 March 25, 1999
   Frank S. McGaughey, III
 
    /s/ CLARENCE H. RIDLEY      Vice Chairman and Director
- ------------------------------                                 March 25, 1999
      Clarence H. Ridley
 
    /s/ CLARENCE H. SMITH       Senior Vice President and
- ------------------------------    Director                     March 25, 1999
      Clarence H. Smith
 
    /s/ ROBERT R. WOODSON       Director
- ------------------------------                                 March 25, 1999
      Robert R. Woodson
 
                                       14
<PAGE>
                 SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
 
               HAVERTY FURNITURE COMPANIES, INC. AND SUBSIDIARIES
 
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
COLUMN A                                         COLUMN B    COLUMN C-1    COLUMN C-2      COLUMN D      COLUMN E
<S>                                             <C>          <C>          <C>            <C>            <C>
- -------------------------------------------------------------------------------------------------------------------
 
<CAPTION>
                                                              ADDITIONS
                                                BALANCE AT     CHARGED
                                                 BEGINNING    TO COSTS                                  BALANCE AT
                                                    OF           AND                     DEDUCTIONS--     END OF
                                                  PERIOD      EXPENSES      OTHER (1)    DESCRIBE (2)     PERIOD
<S>                                             <C>          <C>          <C>            <C>            <C>
                                                -------------------------------------------------------------------
Year ended December 31, 1998:
  Allowance for doubtful accounts.............   $   8,500    $   6,456            --      $   6,656     $   8,300
                                                -------------------------------------------------------------------
                                                -------------------------------------------------------------------
Year ended December 31, 1997:
  Allowance for doubtful accounts.............   $   7,105    $   7,648     $     795      $   7,048     $   8,500
                                                -------------------------------------------------------------------
                                                -------------------------------------------------------------------
Year ended December 31, 1996:
  Allowance for doubtful accounts.............   $   7,105    $   4,416            --      $   4,416     $   7,105
                                                -------------------------------------------------------------------
                                                -------------------------------------------------------------------
</TABLE>
 
- ------------------------
 
(1) Represents a reclassification of amounts related to past due accounts
    receivable previously included in accrued liabilities.
 
(2) Uncollectible accounts written off, net of recoveries and the disposal value
    of repossessions.
 
                                       15


<PAGE>

EXHIBIT 3.2.3

                              ARTICLES OF AMENDMENT
                                  OF BY-LAWS OF
                        HAVERTY FURNITURE COMPANIES, INC.

Haverty Furniture Companies, Inc., a Maryland corporation (the "Corporation"),
hereby amends its By-Laws as follows:

The existing Seventh Article of the By-Laws is amended in the following
respects:

           Article VII.  Section 2.

           The Corporation shall indemnify any Director made a party to any
           proceeding by reason of service in that capacity unless it is 
           established that:

                (1)  The act or omission of the Director was material to the
                     matter giving rise to the proceeding and (a) was committed
                     in bad faith or (b) was the result of active and deliberate
                     dishonesty; or

IN WITNESS WHEREOF, these Articles of Amendment have been executed by the
Corporation through its duly authorized officers this 30th day of October, 1998.

                          HAVERTY FURNITURE COMPANIES, INC.

                          By: /s/ John E. Slater, Jr.
                          -----------------------------------
                          John E. Slater, Jr.  President & CEO
Attest:

/s/ Jenny Hill Parker
- -----------------------
Jenny Hill Parker
Vice President, Secretary and Treasurer




ex
<PAGE>





Exhibit 10.15

               HAVERTY FURNITURE COMPANIES , INC. AND SUBSIDIARIES

                    HAVERTYS TOP HAT MUTUAL FUND OPTION PLAN


         1.  PURPOSE OF THE PLAN. This plan shall be known as Havertys Top
             Hat Mutual Fund Option Plan. The purpose of the Plan is to
             attract and retain the highest quality employees for positions
             of substantial responsibility and to provide additional
             incentives to a select group of management or highly
             compensated employees of Haverty Furniture Companies, Inc. and
             its subsidiaries so as to promote the success of the Company.

         2. DEFINITIONS. As used herein, the following definitions shall apply:

            (a)   "Administrator" shall mean the Board, or the person or persons
                  appointed by Board to serve under paragraph 16, below.

            (b)   "Award Date" shall mean the effective date of the
                  Participant's Option Agreement.

            (c)   "Board" shall mean the either the Board of Directors of
                  Haverty Furniture Companies, Inc. and/or the Board of
                  Directors of Havertys Credit Services, Inc., where applicable,
                  and/or the Executive Committee(s) thereof.

            (d)   "Code" shall mean the Internal Revenue Code of 1986, as
                  amended.

            (e)   "Employee" shall mean any employee of the Company.

            (f)   "Option" shall mean an option granted pursuant to this Plan to
                  purchase one or more Shares; "Options" shall mean the plural
                  thereof.

            (g)   "Option Agreement" means a written agreement evidencing the
                  award of an Option under the Plan.

            (f)   "Company" shall mean Haverty Furniture Companies, Inc. or any
                  of its subsidiaries.

            (g)   "Participant" shall mean any Employee who receives an Option
                  under the Plan, as evidenced by an Option Agreement entered
                  into between such Employee and the Company.


                                                                               
<PAGE>

            (h)   "Plan" shall mean the Havertys Top Hat Mutual Fund Option
                  Plan, as amended from time to time.

            (i)   "Shares" shall mean the shares of mutual funds, shares of
                  common or preferred stock of a corporation listed or reported
                  on a national securities exchange or quotation system, or
                  shares of a regulated investment company, as designated and
                  amended by the Board and referenced in Appendix A. In no way,
                  however, may Shares include units of any money market funds or
                  other cash equivalents. Shares subject to purchase pursuant to
                  any Option shall also include any earnings on such shares
                  subsequent to the Award Date.

            (j)   "Termination of Employment" shall mean the date on which the
                  employee ceases to perform services as an employee of the
                  Company.

         3.   TERM OF PLAN. The Plan shall become effective on the date it is
              adopted by the Board and shall continue in effect until terminated
              pursuant to paragraph 18.

         4.   SHARES SUBJECT TO THE PLAN. The aggregate number and type of
              Shares subject to Options will be fully described in each Option
              Agreement.

         5.   ELIGIBILITY. All Employees who are both in the group of
              Employees determined to be part of the select group of management
              or highly compensated Employees and designated as eligible by the
              Board are eligible to receive Options under the Plan.

         6.   GRANT OF OPTIONS. The Board shall determine the number of
              Shares to be offered from time to time and grant Options under the
              Plan. The grant of Options shall be evidenced by written Option
              Agreements containing such terms and provisions as are approved by
              the Board. The Administrator shall execute the Option Agreements
              on behalf of the Company upon instructions from the Board.

         7.   TIME OF GRANT OF OPTIONS. The date of grant of an Option under
              the Plan shall, for all purposes, be the date on which the Board
              awards the Option, as evidenced by the execution of an Option
              Agreement.

         8.   OPTION PRICE.  The Option Price for each Share shall be expressed 
              in each Option Agreement, provided, however, the Option Price
              shall be no lower than 25 percent of the fair market value of a
              Share on the date of grant of the Option. Fair market value on any
              day of reference shall be the closing price of the Share on such
              date, unless the Board, in its sole discretion 




                                                                               2
<PAGE>

              shall determine otherwise in a fair and uniform manner. For this
              purpose, the closing price of the Share on any business day shall
              be (i) if the Share is listed or admitted for trading on any
              United States national securities exchange, the last reported sale
              price of the Share on such exchange, as reported in any newspaper
              of general circulation, (ii) if the Share is not listed or
              admitted for trading on any United States national securities
              exchange, the average of the high and low sale prices of the Share
              for such day reported on The Nasdaq SmallCap Market or a
              comparable consolidated transaction reporting system, or if no
              sales are reported for such day, such average for the most recent
              business day within five business days before such day which sales
              are reported, or (iii) if neither clause (i) or (ii) is
              applicable, the average between the lowest bid and highest asked
              quotations for the Share on such day as reported by The Nasdaq
              SmallCap Market or the National Quotation Bureau, Incorporated, if
              at least two securities dealers have inserted both bid and asked
              quotations for the Share on at least 5 of the 10 preceding
              business days.

         9.   EXERCISE. Except as otherwise provided in an Option Agreement,
              all Options granted under the Plan will be vested at grant and
              therefore may be exercisable immediately.

              The Option may be exercised in full or in part as determined by
              the Option Agreement.

              Reinvested dividends shall be attributed proportionally to the
              property subject to the Option awards and Options in such
              reinvested dividends will be deemed exercised when the underlying
              Option award is exercised. For example, if an original grant of an
              Option to purchase 500 shares generated 100 shares from reinvested
              dividends, an exercise of one-fourth of the originally granted
              Options will result in the exercise of Options in 150 shares in
              order to proportionally include the resulting reinvested
              dividends.

              In addition, all Options granted under the Plan may only be
              exercised subject to any other terms specified in the Option
              Agreement and if such terms conflict with the terms of this Plan,
              the terms of the Option Agreement control.

         10.  LIMITATIONS ON OPTION DISPOSITION. Any Option granted under
              the Plan and the rights and privileges conferred therewith shall
              not be sold, transferred, encumbered, hypothecated or otherwise
              anticipated by the Participant other than by will or the laws of
              descent and distribution. Options shall not be subject to, in
              whole or in part, the debts, contracts, liabilities, or torts of


                                                                               3
<PAGE>

              the Participant, nor shall they be subject to garnishment,
              attachment, execution, levy or other legal or equitable process.

         11.  LIMITATIONS ON OPTION EXERCISE AND  DISTRIBUTION.  In the event 
              that the listing, registration or qualification of an Option or
              Shares on any securities exchange or under any state or federal
              law, or the consent of approval of any governmental regulatory
              body, or the availability of any exemption therefrom, is necessary
              as a condition of, or in connection with, the exercise of an
              Option, then the Option shall not be exercised in whole or in part
              until such listing, registration, qualification, consent or
              approval has been effected or obtained. Notwithstanding any
              provision of the Plan to the contrary, the Company shall have no
              obligation or liability to deliver any Shares under the Plan
              unless such delivery would comply with all applicable laws and all
              applicable requirements of any securities exchange or similar
              entity.

         12.  OPTION FINANCING. Upon the exercise of any Option granted
              under the Plan, the Participant may instruct the Company to sell
              or deem to sell a number of Shares otherwise deliverable to the
              Participant and attributable to the exercise of the Option in
              order to pay the exercise price of the Option. The Board or
              Administrator may, in its sole discretion, make financing
              available to the Participant to facilitate the exercise of the
              Option, subject to such terms as the Board may specify.

         13.  WITHHOLDING OF TAXES. The Board may make such provisions and
              take such steps as it may deem necessary or appropriate for the
              withholding of any taxes which the Company is required by any law
              or regulation of any governmental authority, whether federal,
              state or local, domestic or foreign, to withhold in connection
              with any Option including, but not limited to, the withholding of
              the issuance of all or any portion of such Shares until the
              Participant reimburses the Company for the amount the Company is
              required to withhold with respect to such taxes, canceling any
              portion of such issuance in an amount sufficient to reimburse
              itself for the amount it is required to so withhold, or taking any
              other action reasonably required to satisfy the Company's
              withholding obligation.

         14.  MODIFICATION OF OPTION OR PLAN. At any time and from time to
              time, the Board may execute an instrument providing for the
              modification, extension, or renewal of any outstanding Option
              and/or the Plan.

         15.  SUBSTITUTION  OF OPTION.  If a Participant  has been granted an 
              Option to purchase Shares under an Option Agreement, then except
              as limited by the terms of the Option Agreement, the Participant
              may direct that the Option be converted into an Option to purchase
              other Shares as permitted by the 



                                                                               4
<PAGE>

              Option Agreement. Such substitution shall only be allowed to the
              extent that, immediately following the substitution, the
              difference between the fair market value of the Shares subject to
              the substituted Option and the exercise price of the substituted
              Option is no greater than the difference which existed immediately
              prior to the substitution between the fair market value of the
              Shares subject to the original Option and the exercise price of
              the original Option. In no event shall a Participant be permitted
              to make substitutions more often than as prescribed under the
              Option Agreement.

         16.  ADMINISTRATION OF THE PLAN. The Board, in its sole discretion,  
              is authorized to select the Employees who will receive Options and
              to determine the number of Options and the number of Shares
              underlying each Option. The Board, or the person or persons
              appointed by the Board to serve as Administrator, shall be the
              Administrator of the Plan. The Administrator, in its sole
              discretion, is authorized to interpret the Plan, to prescribe,
              amend and rescind rules and regulations relating to the Plan and
              to the Options granted under the Plan, to determine the form and
              content of Options to be issued under the Plan, and to make such
              other determinations and exercise such other power and authority
              as may be necessary or advisable for the administration of the
              Plan. No fee or compensation shall be paid to any person for
              services as the Administrator. The Administrator in its sole
              discretion may delegate and pay compensation for services rendered
              relating to the ministerial duties of plan administration
              including, but not limited to, selection of investments available
              under the Plan. Any determination made by the Administrator
              pursuant to the powers set forth herein are final, binding and
              conclusive upon each Participant and upon any other person
              affected by such decision, subject to the claims procedure
              hereinafter set forth. The Administrator shall decide any question
              which may arise regarding the rights of employees, Participants
              and beneficiaries, and the amounts of their respective interests,
              adopt such rules and exercise such powers as the Administrator may
              deem necessary for the administration of the Plan, and exercise
              any other rights, powers or privileges granted to the
              Administrator by the terms of the Plan. The Administrator shall
              maintain full and complete records of its decisions. Its records
              shall contain all relevant data pertaining to the Participant and
              his or her rights and duties under the Plan. The Administrator
              shall have the duty to maintain account records for all
              Participants. The Administrator shall cause the principal
              provisions of the Plan to be communicated to the Participants, and
              a copy of the Plan and other documents shall be available at the
              principal office of Haverty Furniture Companies, Inc. for
              inspection by the Participants at reasonable times determined by
              the Administrator.


                                                                               5
<PAGE>

         17.      CONTINUED EMPLOYMENT NOT PRESUMED. Nothing in the Plan or any
                  document describing it, nor the grant of an Option via an
                  Option Agreement, shall give any Participant the right to
                  continue in employment with the Company or affect the right of
                  the Company to terminate the employment of any such person
                  with or without cause.

         18.      AMENDMENT AND TERMINATION OF THE PLAN OR OPTION AGREEMENT The
                  Board, in its sole discretion, may amend, suspend or
                  discontinue the Plan or Option Agreement. No amendment,
                  suspension, or discontinuance shall impair the rights of any
                  Participant except to the extent necessary to comply with any
                  provision of federal or applicable state laws or except to the
                  extent necessary to prevent detriment to the Company as so
                  determined by the Board.

         19.      GOVERNING LAW. The Plan shall be governed by and construed in
                  accordance with the laws of the State of Georgia.

         20.      SEVERABILITY OF PROVISIONS. Should any provision of the Plan
                  be determined to be invalid, illegal or unenforceable, such
                  invalidity, illegality or unenforceability shall not affect
                  the remaining provisions of the Plan, but shall be fully
                  severable, and the Plan shall be construed and enforced as if
                  such provision had never been inserted herein.

         21.      HEDGE OF LIABILITY CREATED BY THE OPTION PLAN. At the sole
                  discretion of the Board, the liability created by the exercise
                  of the Options issued pursuant to the Option Plan may be
                  offset by the Company entering into a hedging transaction. The
                  hedging transaction may consist of the Company purchasing all
                  or part of the Shares subject to the Options issued pursuant
                  to the Plan, at date of grant of the Options or at any time
                  during the Option exercise period.

         22.      CLAIMS PROCEDURE. In general, any claim for benefits under the
                  Plan shall be filed with the Administrator by the Participant
                  or beneficiary ("claimant") on the form prescribed for such
                  purpose. If a claim for benefits under the Plan is wholly or
                  partially denied, notice of the decision shall be furnished to
                  the claimant by the Administrator within a reasonable period
                  of time after receipt of the claim by the Administrator. The
                  claims procedure shall be as follows:

                               (a)   Any claimant who is denied a claim for 
                                     benefits shall be furnished written notice
                                     setting forth:

                                    (i) the specific reason or reasons for the
                                        denial; 



                                                                               6
<PAGE>
 
                                    (ii) specific reference to the pertinent
                                         provision of the Plan upon which the 
                                         denial is based; 

                                    (iii) a description of any additional
                                          material or information necessary for
                                          the claimant to perfect the claim; and
                                    (iv) an explanation of the claim review
                                         procedure under the Plan.

                               (b)  In order that a claimant may appeal a denial
                                    of a claim, the claimant or the claimant's
                                    duly authorized representative may:

                                    (i) request a review by written application
                                        to the Administrator, or its designate, 
                                        no later than sixty (60) days after 
                                        receipt by the claimant of written 
                                        notification of denial of a claim; 
                                   (ii) review pertinent documents; and 
                                   (iii) submit issues and comments in 
                                        writing.

                               (c)   A decision on review of a denied claim 
                                     shall be made not later than sixty (60)
                                     days after receipt of a request for
                                     review, unless special circumstances
                                     require an extension of time for
                                     processing, in which case a decision
                                     shall be rendered within a reasonable
                                     period of time, but not later than one
                                     hundred and twenty (120) days after
                                     receipt of a request for review. The
                                     decision on a review shall be in writing
                                     and shall include the specific reason(s)
                                     for the decision and the specific
                                     reference(s) to the pertinent provisions
                                     of the Plan on which the decision is
                                     based.

         23.      DESIGNATION OF BENEFICIARY. A Participant, by filing the
                  prescribed form (See Exhibit B) with the Administrator, may
                  designate one or more beneficiaries and successor
                  beneficiaries who shall be given the right to exercise Options
                  in accordance with the terms of the Plan in the event of the
                  Participant's death. In the event the Participant does not
                  file a form designating one or more beneficiaries, or no
                  designated beneficiary survives the Participant, the Option
                  shall be exercisable by the individual to whom such right
                  passes by will or the laws or descent and distribution.

         24.      INTENT. The Plan is intended to be unfunded and maintained by
                  the Company solely to provide options to a select group of
                  management or highly compensated employees as such group is
                  described under Sections 201(2), 301(a)(3), and 401(a)(1) of
                  the Employee Retirement Income Security Act of 1974 ("ERISA")
                  as interpreted by the U.S. Department of Labor. The Plan is
                  not intended to be a plan described in Sections 401(a) 



                                                                               7
<PAGE>

                  or 457 of the Code. The obligation of the Company to deliver
                  Shares subject to the Options granted under this Plan
                  constitutes nothing more than an unsecured promise of the
                  Company to fulfill such obligations and any property of the
                  Company that may be set aside to permit it to fulfill such
                  obligations under the Plan shall, in the event of the
                  Company's bankruptcy or insolvency, remain subject to the
                  claims of the Company's general creditors until such Options
                  are exercised.


                               ******************



         As evidence of its adoption of the Plan, Haverty Furniture Companies,
Inc. and its subsidiaries have caused this instrument to be signed by officers
of representative duly authorized on this 15th day of January, 1999.


    Haverty Furniture Companies, Inc.          Havertys Credit Services, Inc.

    By: /s/ John E. Slater, Jr.                By:  /s/ Ben F. Koonce
       ------------------------------             ------------------------
    Its: President                             Its: President
       ------------------------------             ------------------------







                                                                               8
<PAGE>


                                                                      APPENDIX A



            SHARES AVAILABLE TO THE COMPANY FOR GRANT OR SUBSTITUTION


DESCRIPTION
- -----------


STI CLASSIC FUNDS:
                        BALANCED FUND (SBATX)
                        CAPITAL GROWTH FUND (STCAX)
                        INVESTMENT GRADE BOND FUND (STIGX)


<PAGE>


                                   APPENDIX B





                BENEFICIARY DESIGNATION FOR EXECUTIVE OPTION PLAN



         To: Administrator of Havertys Top Hat Mutual Fund Option Plan

         From: 
               ----------------------


         Pursuant to Article 23 of the Haverty Furniture Companies, Inc. and
Subsidiaries Option Agreement made as of ____________, 19__, I hereby
designate the following person(s) as beneficiar(ies) who on my death shall be
entitled to receive amounts under the Option Plan and Agreement:

         Primary Beneficiary Name: 
                                   -------------------------
 
         Secondary Beneficiary Name: 
                                     -----------------------

         In making the above designation, the participant reserves the right to
revoke this beneficiary designation or change the beneficiary(ies) designated at
any time or times and without the consent of any beneficiary.

         This beneficiary designation cancels and supersedes any beneficiary
designation previously made with respect to this Agreement.

 
                                             Signed:


                                            ----------------
                                             Participant

                                            ----------------
                                             Date



<PAGE>

Market Prices and Dividend Information

On August 28, 1998, the Company's two classes of common stock began trading on
The New York Stock Exchange ("NYSE"). The trading symbol for the Common Stock is
HVT and for Class A Common Stock is HVT.A. Prior to trading on the NYSE, the
Company's stock was listed on the Nasdaq National Market ("NNM") under the
symbols HAVT and HAVTA. The table below sets forth the high and low sales prices
per share as reported on either the NYSE or NNM, as applicable, and the
dividends paid for the last two years:

<TABLE>
<CAPTION>
                         1998
                     Common Stock                   Class A Common Stock
- ------------------------------------------------------------------------------
Quarter                           Dividend                           Dividend
Ended       High         Low      Declared      High        Low      Declared
<S>       <C>         <C>       <C>          <C>         <C>       <C>

March 31  $20          $13-1/4     $0.080     $20         $12-3/4     $0.075
June 30    24           18-1/4      0.080      25-7/16     19-3/4      0.075
Sept. 30   22-3/8       18-7/16     0.085      20          19-1/2      0.080
Dec. 31    22-7/16      17-3/8      0.085      21          19-1/8      0.080


<CAPTION>
                         1997
                     Common Stock                   Class A Common Stock
- ------------------------------------------------------------------------------
Quarter                           Dividend                           Dividend
Ended       High         Low      Declared      High        Low      Declared
<S>       <C>         <C>       <C>          <C>         <C>       <C>

March 31  $13-1/2      $11         $0.080     $13-1/8     $11-1/4     $0.075
June 30    13           10-7/8      0.080      12-3/4      10-5/8      0.075 
Sept. 30   14-3/4       12          0.080      14-1/2      12-1/4      0.075
Dec. 31    14-3/4       11-3/4      0.080      14-3/8      11-7/8      0.075
</TABLE>


BASED ON THE NUMBER OF INDIVIDUAL PARTICIPANTS REPRESENTED BY SECURITY POSITION
LISTINGS, THERE ARE APPROXIMATELY 3,400 HOLDERS OF THE COMMON STOCK AND 200
HOLDERS OF THE CLASS A COMMON STOCK.


<PAGE>

SELECTED 5-YEAR 
FINANCIAL DATA 
(In thousands, except per share data)


<TABLE>
<CAPTION>
                                      1998         1997         1996         1995         1994
                                    --------     --------     --------     --------     --------
<S>                                 <C>          <C>          <C>          <C>          <C>     

Net sales                           $540,298     $490,007     $456,860     $395,470     $370,132
                                    --------     --------     --------     --------     --------
Cost of goods sold                   285,749      259,203      239,976      209,000      194,688
Income before income taxes            26,295       20,787       19,132       19,444       20,279
Income taxes                           9,460        7,400        6,885        7,261        7,741
Net income                            16,835       13,387       12,247       12,183       12,538
                                    --------     --------     --------     --------     --------

Earnings per Common Share           $   1.47     $   1.15     $   1.05     $   1.05     $   1.10
                                    --------     --------     --------     --------     --------
Diluted earnings per
     Common Share                   $   1.44     $   1.14     $   1.04     $   1.05     $   1.10
                                    --------     --------     --------     --------     --------

Cash dividends:
     Amount                         $  3,745     $  3,675     $  3,508     $  3,406     $  3,082
     Per share: Common Stock           0.330        0.320        0.305        0.300       0.275
        Class A Common Stock           0.310        0.300        0.285        0.280        0.255
                                    --------     --------     --------     --------     --------

Accounts receivable, net            $186,172     $202,763     $200,909     $172,877     $160,405
Credit service charges                16,960       16,111       13,390       12,376       11,664
Provision for doubtful accounts        6,456        7,648        4,416        2,854        2,773
                                    --------     --------     --------     --------     --------

Inventories                         $ 82,084     $ 80,713     $ 77,385     $ 73,597     $ 64,582
                                    --------     --------     --------     --------     --------

Capital expenditures                $ 11,144     $ 14,528     $ 16,463     $ 44,896     $ 24,387
Depreciation/amortization
expense                               14,272       13,792       12,644       10,634        8,602
Property and equipment, net          111,333      114,618      114,350      112,405       80,918
                                    --------     --------     --------     --------     --------

Total assets                        $392,901     $406,514     $399,875     $371,778     $315,103
                                    --------     --------     --------     --------     --------

Long-term debt                      $171,489     $120,434     $128,340     $137,206     $ 95,122
Total debt                           177,889      202,934      208,840      190,606      144,322
Interest expense                      13,183       14,330       14,463       11,158        8,470
                                    --------     --------     --------     --------     --------

Stockholders' equity                $158,058     $159,554     $150,916     $140,955     $131,055
Book value per share                   14.16        13.64        12.84        12.13        11.40
                                    --------     --------     --------     --------     --------
</TABLE>



                                       1
<PAGE>


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 elsewhere in this annual report, for a full
understanding of Havertys' financial position and results of operations.

     Certain information included in the following discussion contains
"forward-looking statements" which 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. Potential risks and uncertainties include, but are not limited to,
general economic conditions, the consumer spending environment for large ticket
items, competition in the retail furniture industry and other uncertainties
detailed in this Annual 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.

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>
                                           1998       1997       1996
                                          ------     ------     ------
<S>                                       <C>        <C>        <C>   
Net sales                                 100.0%     100.0%     100.0%
Gross profit                               47.1       47.1       47.5
Credit service charges                      3.1        3.3        2.9
Selling, general and administrative        41.6       41.7       42.1
Interest expense                            2.4        2.9        3.2
Provision for doubtful accounts             1.2        1.6        1.0
Other expense (income), net                 0.1        0.0       (0.1)
Income before income taxes                  4.9        4.2        4.2
Net income                                  3.1        2.7        2.7
Effective tax rate                         36.0%      35.6%      36.0%
</TABLE>



1998 COMPARED TO 1997

Record earnings were achieved in 1998 as net income increased 25.8% over the
previous record year of 1997 and 37.5% over 1996. This increase represents
continued progress in the Company's efforts to improve earnings by increasing
sales, better management of inventories and receivables, and share repurchases
to improve earnings per share.

     Net sales for 1998 increased 10.3% to $540.3 million from $490.0 million.
This increase was primarily attributable to comparable-store sales which
increased 7.1%. A store's results are included in the comparable-store sales
computation on the anniversary of its opening. The Company entered five new
markets in 1998 leasing five existing retail sites and opened ten stores in
1997, seven of which replaced eight smaller stores.



                                       2
<PAGE>


The Company closed two stores in 1998, including a clearance center in its
largest market. Net selling space increased 4% in 1998 to 3,295,000 square feet.

     Management believes that sales increases during the year were attributable
to the favorable economic environment, the Company's more centralized
advertising with a focus on brand name product and accessory items, effective
merchandising in its stores, and the disarray of financially pressured
competitors. The strong housing sales and lower interest rates experienced
during 1998 were positive for the industry and were particularly evident in the
Company's regions of operations. The Company's focused advertising approach
provides a consistent and effective message at a more favorable cost. Management
believes that the advertising and merchandising of brand name product and
accessory items selected to appeal its customer base have improved sales for
all of the Company's merchandise.

     Gross profit as a percent of net sales was 47.1% for 1998 which is
unchanged from the 1997 level. The Company was able to maintain its margins
despite increased pricing pressure from the promotional activity of its
competitors and the inventory close-out sales in connection with the closure of
its largest clearance centers. The LIFO charge was 0.05% of net sales in 1998
and 0.1% in 1997.

     Credit service charges as a percent of sales decreased to 3.1% for 1998,
down from 3.3% in 1997. The amount financed under the Company's credit programs
as a percent of net sales continued to decline in 1998 to 49% from 55% in 1997
as customers increased their usage of third party credit cards and cash.

     The provision for doubtful accounts as a percent of net sales was 1.2% in
1998, down from 1.6% in 1997 and trending back to the 1.0% level recorded in
1996. Management believes this decline is attributable to the Company's
tightening of its credit approval criteria slightly in the third quarter of
1997, the moderation in the rate of bankruptcy filings by its customers, and
managerial and systems improvements in the Company's credit operations. The
provision for doubtful accounts includes a $200,000 reduction in the allowance
in 1998, bringing the balance to $8,300,000 compared to $8,500,000 in 1997. Such
reduction principally relates to lower levels of problem and delinquent
accounts. Based on the current environment and credit programs offered,
management expects the provision in 1999 to return to the 1.0% of net sales
recorded during 1996.

     Selling, general and administrative expenses as a percent of net sales were
41.6% for 1998, which is essentially unchanged from the 1997 level and down from
42.1% in 1996. Additional resources were used during 1998 to more effectively
manage the Company's inventories and credit operations. Working inventory levels
are being reduced as demonstrated by the approximately $3.2 million dollars in
new floor samples inventory required for the retail selling square footage added
in 1998 and the $50 million increase in annual sales. Inventories of $82.1
million at the end of 1998 were up slightly over the 1997 level of $80.7
million. Management believes that it can continue to increase its retail square
footage and comparable-store sales without increasing its working inventory
requirements.

     Interest expense for 1998 declined to 2.4% of net sales from 2.9% in 1997,
with an 8.0% decrease in the total dollar amount of interest expense. Average
borrowings decreased 11.3% and the effective interest rate increased 20 basis
points to 7.2%.

     The Company manages its exposure to changes in short-term interest rates,
particularly to reduce the impact on its floating-rate term notes, by entering
into interest rate swap agreements. The counterparties to



                                       3
<PAGE>

MANAGEMENT'S DISCUSSION AND 
ANALYSIS OF FINANCIAL CONDITION 
AND RESULTS OF OPERATIONS


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 have
not been significant. The level of floating-rate debt not fixed by swap
agreements was not significant during the year and management does not expect a
significant increase in these amounts in 1999. Accordingly, the Company does not
presently believe it has material exposure to potential, near-term losses in
future earnings and/or cash flows from reasonably possible near-term changes in
market rates.

     Other expense (income), net included expenses totaling $1,184,000, to
recognize the future net lease expense for locations in which the Company has
ceased operations, of which $940,000 was recorded in the fourth quarter.
Management has determined that the future rent expense of these properties will
not be fully offset by future sublease income given the short duration of the
remaining lease periods and/or the location of the properties.

     For information concerning the provision for income taxes, as well as
information regarding differences between effective tax rates and statutory
rates, see Note 8 of the Notes to the Consolidated Financial Statements.

1997 COMPARED TO 1996
Net sales for 1997 increased 7.3% from $456.9 million to $490.0 million. This
increase was attributable to sales from new and relocated stores and a modest
0.7% comparable-store sales increase. Selling space increased 7.0% in 1997 to
3,167,000 square feet. There were ten stores added in 1997, seven of which
replaced eight smaller stores and six new stores, were opened in 1996.

     Gross profit as a percent of net sales was 47.1% in 1997 as compared to
47.5% in 1996. This decline was the result of inventory close-out sales as part
of several store relocations and the transition to the Company's new Dallas
warehouse facility. The LIFO charge was 0.1% of net sales in both 1997 and 1996.

     Credit service charges as a percent of net sales increased to 3.3% in 1997,
up from 2.9% in 1996. The percentage of customer purchases using credit programs
in 1997 was slightly lower than in 1996, with similar levels of free-interest
promotions. However, free-interest periods from promotions run in 1996 expired
and the remaining balances generated higher service charge income in 1997.

     The provision for doubtful accounts as a percent of sales continued to
increase, up from 1.0% in 1996 to 1.6% in 1997. In response to increased
delinquencies and bankruptcies affecting the entire consumer credit industry,
the Company tightened its credit approval criteria slightly in the third quarter
of 1997.

     Selling, general and administrative expenses as a percent of sales declined
to 41.7% in 1997 from 42.1% in 1996. Efficiencies gained from further
centralization of production and purchasing of advertising contributed to the
improvement, as did lower overhead due to consolidation of the credit function.
During the second quarter of 1997, the Company completed the roll-out of its
on-line inventory and automated store system to all of its locations, which led
to improvements in warehouse and delivery processes and reductions in their
related costs.

     Interest expense in 1997 declined to 2.9% of net sales from 3.2% in 1996,
with a slight decrease in the total dollar amount of interest expense. Average
borrowings increased only slightly and the effective interest



                                       4
<PAGE>

rate dropped approximately 10 basis points to 7.0%. The effect of adjustments to
interest expense for the differential arising from the Company's interest rate
swap agreements was not significant during 1997.

LIQUIDITY AND SOURCES OF CAPITAL
The Company has historically used internally generated funds, bank borrowings
and private placements with institutions to finance its operations and growth.
Net cash provided by operating activities was $55.4 million in 1998. The Company
carries its own customer accounts receivable which provided positive cash flows
during 1998 as receivables decreased $10.1 million. Such decrease was due to
less customer usage of credit promotions offered and by more customers using
third party national credit cards. Also, customer payoffs on accounts were
accelerated by the shortening of free-interest periods under one program.

     Investing activities used $10.8 million of cash in 1998. During 1998,
capital expenditures of $11.1 million included the improvements to five
additional leased store locations which opened in 1998. Expenditures were also
made for projects which will be completed in 1999.

     Financing activities used $43.1 million of cash during 1998. The Company
made $25.0 million in debt repayments and used $20.0 million for stock
repurchases of 995,000 shares. There are approximately 325,000 shares remaining
under the Board of Directors' most recent authorization.

     In March 1998, the Company arranged two five-year revolving credit
facilities totaling $105 million which were syndicated with five commercial
banks. These facilities provide a multi-year commitment for the Company's
capital requirements and replaced existing one-year bank line-of-credit
agreements. The Company also has uncommitted line-of-credit agreements with two
banks to borrow up to $25 million, which were unused at December 31, 1998.
Borrowings under the revolving credit facilities were $66.4 million ($38.6
million unused), of which $60 million was classified as long-term debt because
the Company expects that at least such amount will remain outstanding under
these facilities for an uninterrupted period through 1999. Borrowings under all
of these agreements are unsecured and accrue interest at competitive
money-market rates.

     In addition to cash flows from operations, the Company uses bank lines of
credit on an interim basis to finance capital expenditures, share repurchases
and repay long-term debt. Longer-term transactions such as private placements of
senior notes and sale/leasebacks 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 (90% of total debt was interest-rate protected at December 31,
1998). The Company's average effective interest rate on all borrowings
(excluding capital leases) was 7.2% at December 31, 1998.

     Capital expenditures in 1999 are presently expected to include the purchase
and remodeling of three new Company store locations in existing retail space,
the improvements of two new leased locations in existing retail space,
construction of a new replacement store, leasehold improvements for two newly
built stores including a new unique mall location, and the expansion and
remodeling of three existing Company store locations. The preliminary estimate
of capital expenditures for real estate in 1999 is approximately $30.0 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.



                                       5
<PAGE>

MANAGEMENT'S DISCUSSION AND 
ANALYSIS OF FINANCIAL CONDITION 
AND RESULTS OF OPERATIONS


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.

YEAR 2000
Many existing computer programs use only two digits to identify a year in the
date field. Such systems, if not changed, may interpret "00" as "1900" instead
of the year "2000." This "Year 2000" issue is believed to affect virtually all
companies and organizations, including the Company.

     The Company relies on computer-based technology and utilizes a variety of
third-party hardware and proprietary and third-party software. The Company's
retail functions (store systems software), such as merchandise procurement and
distribution, inventory control, sales transactions and credit approval and
account servicing, generally use proprietary software. The Company's
administrative functions, such as accounting, also use proprietary software and
to a more limited extent, third-party software for areas such as human resource
management. In addition to such information technology ("IT") systems, the
Company's operations rely on various non-IT equipment and systems that contain
embedded computer technology, such as elevators and energy management systems.
Third parties with whom the Company has relationships, including merchandise
vendors and service providers used by the Company in its operations (such as
banking and financial services, data processing services, telecommunications
services and utilities), are also highly reliant on computer-based technology.

     In 1997, the Company's Management Information Services (MIS) department
developed a plan to modify the Company's proprietary systems for Year 2000
compliance. In 1998, a cross-departmental task force was formed to provide
guidance to the Company's operating and support functions and to monitor the
progress of Company-wide efforts to address Year 2000 issues. The Company has
also consulted with various third parties, including, but not limited to,
outside consultants, outside service providers, merchandise suppliers, industry
groups, and other retail companies. The task force has divided the compliance
project into five broad categories: store systems software, corporate office
systems software, hardware, facilities, and vendors.

     Beginning in January 1998, substantially all of the MIS development
resources began programming modification efforts on the proprietary systems. The
first phase focused on store systems. Each program and file has been reviewed,
remediated if necessary and then tested. The store systems software phase was
completed and testing was finished in May 1998. In the second half of 1998, the
corporate office systems were reviewed and all identified programming changes
have been made by MIS development personnel with testing scheduled to be
complete by February 1999. The Company presently anticipates that all of its
software and IT systems (including third-party and proprietary hardware,
software, network components and interfaces) will be compliant with all Year
2000 issues by June 1999.

     The Company has requested a report from all of its suppliers as to their
Year 2000 preparedness. The Company has migrated all of its electronic data
interchange (EDI) transactions with its trading partners to compliant software
systems.


                                       6
<PAGE>

     Despite the significant efforts to address Year 2000 concerns, the Company
could potentially experience disruptions to some of its operations, including
those resulting from noncompliant systems used by third-party business and
governmental entities. The Company is developing contingency plans to address
potential Year 2000 disruptions. These plans will address accessibility and
functionality of Company facilities as well as interim steps to be taken if an
event causes failure of a system critical to the Company's core business
activities. The Company's contingency plans are expected to be complete by
September 1999.

     Through December 31, 1998, the Company has incurred approximately $0.8
million of expenses to achieve Year 2000 compliance. The Company's projected
remaining cost for Year 2000 remediation is currently estimated to be $0.1
million. These expenses are not incremental costs but represent the MIS and
managerial time dedicated to this issue rather than being used for new projects
which have been postponed. Upgrade or replacement expenditures for IT hardware,
operating systems and third-party software have not been included in these
amounts as most of the items purchased met new Company requirements with respect
to additional capacity, speed or functionality in addition to compliance with
Year 2000 issues.

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
The Accounting Standards Executive Committee (AcSEC) issued Statement of
Position 98-1, "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use," (SOP) 98-1, during 1998, which is effective for
1999. The SOP requires that companies capitalize qualifying costs incurred
during the application development stage. All other costs incurred in connection
with an internal use software project are to be expensed as incurred. The
Company will adopt the new SOP in the first quarter of 1999. Management does not
expect the adoption of this SOP to have a material impact on the Company's
financial position or results of operations.

     In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" (FAS 133), which is effective for 2000. FAS 133
establishes standards for the recognition and measurement of derivatives and
hedging activities. FAS 133 requires all derivatives to be recorded on the
balance sheet at fair value and establishes the accounting for the changes in
the fair value of the derivatives. Management expects to adopt the new
requirements effective January 1, 2000, and does not anticipate that the
adoption of this Statement will have a significant effect on the Company's
financial position or results of operations.



                                       7
<PAGE>

CONSOLIDATED
BALANCE SHEETS


<TABLE>
<CAPTION>
                                                                                          DECEMBER 31
(In thousands, except per share data)                                               1998           1997
                                                                               ---------    -----------
<S>                                                                            <C>          <C>     
ASSETS
Current assets
     Cash and cash equivalents                                                 $  1,874     $    390
     Accounts receivable (Note 2)                                               186,172      202,763
     Inventories (Note 3)                                                        82,084       80,713
     Other current assets                                                         8,047        5,763
                                                                                -------      -------
              TOTAL CURRENT ASSETS                                              278,177      289,629
                                                                                -------      -------
Property and equipment (Notes 4 and 7)                                          111,333      114,618
Deferred income taxes (Note 8)                                                    1,264         --
Other assets                                                                      2,127        2,267
                                                                                -------      -------
                                                                               $392,901     $406,514
                                                                                -------      -------
                                                                                -------      -------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
     Notes payable to banks (Note 5)                                           $  6,400     $ 82,500
     Accounts payable and accrued expenses (Note 6)                              52,500       41,298
     Deferred income taxes (Note 8)                                               1,856          165
     Current portion of long-term debt and capital lease obligations
       (Notes 7 and 12)                                                           9,711        8,945
                                                                                -------      -------
              TOTAL CURRENT LIABILITIES                                          70,467      132,908
                                                                                -------      -------
Long-term debt and capital lease obligations, less current
     portion (Notes 7 and 12)                                                   161,778      111,489
Deferred income taxes (Note 8)                                                     --            199
Other liabilities                                                                 2,598        2,364
                                                                                -------      -------
              TOTAL LIABILITIES                                                 234,843      246,960
                                                                                -------      -------
Commitments (Note 12)
Stockholders' equity (Notes 9 and 11)
     Preferred Stock, par value $1 per share,
       Authorized - 1,000 shares;  Issued: None
     Common Stock, Authorized - 50,000 shares; Issued: 1998 - 10,393
       shares; 1997 - 9,604 shares (including shares in treasury: 1998 and
       1997 - 1,739 and 756, respectively)                                       10,393        9,604
     Convertible Class A Common Stock, Authorized - 15,000 shares;
       Issued: 1998 - 2,772 shares; 1997 - 3,096 shares (including
       shares in treasury: 1998 and 1997 - 261 and 249, respectively)             2,772        3,096
     Additional paid-in capital                                                  40,338       35,363
     Retained earnings                                                          133,207      120,117
                                                                                -------      -------
                                                                                186,710      168,180
     Less cost of Common Stock and Convertible
         Class A Common Stock in treasury                                        28,652        8,626
                                                                                -------      -------
              TOTAL STOCKHOLDERS' EQUITY                                        158,058      159,554
                                                                                -------      -------
                                                                               $392,901     $406,514
                                                                                -------      -------
                                                                                -------      -------
</TABLE>

See accompanying notes to consolidated financial statements.



                                       8
<PAGE>

CONSOLIDATED STATEMENTS 
OF INCOME

<TABLE>
<CAPTION>
                                                    YEAR ENDED DECEMBER 31
(In thousands, except per share data)          1998           1997          1996
                                             --------     ---------      ---------
<S>                                          <C>          <C>            <C>      

Net sales                                    $540,298     $ 490,007      $ 456,860
Cost of goods sold                            285,749       259,203        239,976
                                             --------     ---------      ---------
     Gross profit                             254,549       230,804        216,884
Credit service charges                         16,960        16,111         13,390
                                             --------     ---------      ---------
                                              271,509       246,915        230,274
Expenses:
     Selling, general and administrative      224,951       204,239        192,445
     Interest                                  13,183        14,330         14,463
     Provision for doubtful accounts            6,456         7,648          4,416
     Other expense (income), net                  624           (89)          (182)
                                             --------     ---------      ---------
                                              245,214       226,128        211,142
                                             --------     ---------      ---------
Income before income taxes                     26,295        20,787         19,132
Income taxes (Note 8)                           9,460         7,400          6,885
                                             --------     ---------      ---------
     Net Income                              $ 16,835     $  13,387      $  12,247
                                             --------     ---------      ---------
                                             --------     ---------      ---------

Earnings per Common Share                    $   1.47     $    1.15      $    1.05
Diluted Earnings per Common Share            $   1.44     $    1.14      $    1.04
Weighted average common shares                 11,456        11,670         11,694
</TABLE>

See accompanying notes to consolidated financial statements.



                                       9
<PAGE>

CONSOLIDATED STATEMENTS 
OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                            COMMON       CLASS A       ADDITIONAL
                                            STOCK      COMMON STOCK     PAID-IN        RETAINED        TREASURY
                                       ($1 PAR VALUE) ($1 PAR VALUE)    CAPITAL        EARNINGS          STOCK          TOTAL
                                       -------------- --------------   ----------      --------        --------         -----
(In thousands, except per share data)
<S>                                     <C>             <C>            <C>           <C>              <C>             <C>

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 - $.305
      Class A Common - $.285
  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
  Net income                                  --            --             --            13,387            --             13,387
  Cash dividends on common stock:
    Amount                                    --            --             --            (3,675)           --             (3,675)
    Per share:
      Common - $0.32
      Class A Common - $0.30
  Conversion of Class A Common Stock            96           (96)          --              --              --               --
  Stock option transactions, net               202          --            1,807            --              --              2,009
  Treasury stock transactions, net            --            --             --              --            (3,083)          (3,083)
                                           -------       -------        -------       ---------        --------        ---------

BALANCE AT DECEMBER 31, 1997                 9,604         3,096         35,363         120,117          (8,626)         159,554
  Net income                                  --            --             --            16,835            --             16,835
  Cash dividends on common stock:
    Amount                                    --            --             --            (3,745)           --             (3,745)
    Per share:
      Common - $0.33
      Class A Common - $0.31
  Conversion of Class A Common Stock           291          (291)          --              --              --               --
  Stock option transactions, net               498           (33)         4,975            --              --              5,440
  Treasury stock transactions, net            --            --             --              --           (20,026)         (20,026)
                                           -------       -------        -------       ---------        --------        ---------
BALANCE AT DECEMBER 31, 1998               $10,393       $ 2,772        $40,338       $ 133,207        $(28,652)       $ 158,058
                                           -------       -------        -------       ---------        --------        ---------
                                           -------       -------        -------       ---------        --------        ---------

</TABLE>

See accompanying notes to consolidated financial statements.



                                       10
<PAGE>

CONSOLIDATED STATEMENTS 
OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                       YEAR ENDED DECEMBER 31
                                                                 1998            1997            1996
                                                               --------        --------        --------
(In thousands)
<S>                                                            <C>             <C>             <C>     

OPERATING ACTIVITIES
Net income                                                     $ 16,835        $ 13,387        $ 12,247
Adjustments to reconcile net income to net cash
   provided by (used in) operating activities:
     Depreciation and amortization                               14,272          13,792          12,644
     Provision for doubtful accounts                              6,456           7,648           4,416
     Deferred income taxes                                          228            (768)          2,497
     (Gain) loss on sale of property and equipment                  (57)            294            (510)
                                                               --------        --------        --------
         SUBTOTAL                                                37,734          34,353          31,294
Changes in operating assets and liabilities:
   Accounts receivable                                           10,135          (9,502)        (32,448)
   Inventories                                                   (1,371)         (3,328)         (3,788)
   Other current assets                                          (2,284)         (1,341)          1,430
   Accounts payable and accrued expenses                         11,202           4,570             415
                                                               --------        --------        --------
     NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES         55,416          24,752          (3,097)
                                                               --------        --------        --------

INVESTING ACTIVITIES
Purchases of property and equipment                             (11,144)        (14,528)        (16,463)
Proceeds from sale of property and equipment                        214             174           2,384
Other investing activities                                          140             128            (432)
                                                               --------        --------        --------
     NET CASH USED IN INVESTING ACTIVITIES                      (10,790)        (14,226)        (14,511)
                                                               --------        --------        --------

FINANCING ACTIVITIES
Net (decrease) increase in short-term borrowings                (76,100)          2,000          12,100
Proceeds from issuance of long-term debt                         60,000            --            15,000
Payment of long-term debt and capital lease obligations          (8,945)         (7,906)         (8,866)
Treasury stock acquired                                         (20,056)         (3,130)           --
Exercise of stock options                                         5,440           2,009           1,188
Dividends paid                                                   (3,745)         (3,675)         (3,508)
Other financing activities                                          264             152             (38)
                                                               --------        --------        --------
     NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES        (43,142)        (10,550)         15,876
                                                               --------        --------        --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                  1,484             (24)         (1,732)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                      390             414           2,146
                                                               --------        --------        --------
CASH AND CASH EQUIVALENTS AT END OF YEAR                       $  1,874        $    390        $    414
                                                               --------        --------        --------
                                                               --------        --------        --------
</TABLE>

See accompanying notes to consolidated financial statements.



                                       11
<PAGE>

NOTES TO CONSOLIDATED 
FINANCIAL STATEMENTS


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION:
The Company is a full-service home furnishings retailer with 100 showrooms in 14
states. The Company sells a broad line of furniture in the middle to
upper-middle price points range selected to appeal to its predominant target
market. As an added convenience to its customers, the Company offers financing
through a revolving charge credit plan.

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
borrowing 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.


                                       12
<PAGE>

INTEREST RATE SWAP AGREEMENTS:
These agreements involve the exchange of fixed-rate amounts for floating-rate
amounts 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 upon first showing. The Company incurred
approximately $35,500,000, $31,800,000, and $33,100,000 in advertising costs
during 1998, 1997, and 1996, 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 common share are computed based on the weighted average number of
common shares. The dilutive effect of the Company's stock options is included in
diluted earnings per common share and had the effect of increasing the weighted
average shares outstanding assuming dilution by 246,000, 96,000 and 45,000 in
1998, 1997 and 1996, respectively.

     Certain options outstanding during each of the following years and their
related exercise prices were not included in the computation of diluted earnings
per common share because their exercise price was greater than the average
market price of the shares and, therefore, the effect would be antidulitive:
1998 - 258,400 shares at a price of $20.25; 1997 - 182,000 shares at prices
ranging from $13.75 to $17.13; and 1996 - 452,000 shares at prices ranging from
$12.00 to $17.13.

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS:
The Accounting Standards Executive Committee (AcSEC) issued Statement of
Position 98-1, "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use," (SOP) 98-1, during 1998, which is effective for
1999. The SOP requires that companies capitalize qualifying costs incurred
during the application development stage. All other costs incurred in connection
with an internal use software project are to be expensed as incurred. The
Company will adopt the new SOP in the first quarter of 1999. The adoption of
this SOP is not expected to have a material impact on the Company's financial
position or results of operations.



                                       13
<PAGE>

NOTES TO CONSOLIDATED 
FINANCIAL STATEMENTS


     In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" (FAS 133), which is effective for 2000. FAS 133
establishes standards for the recognition and measurement of derivatives and
hedging activities. FAS 133 requires all derivatives to be recorded on the
balance sheet at fair value and establishes the accounting for the changes in
the fair value of the derivatives. The Company expects to adopt the new
requirements effective January 1, 2000, and does not anticipate that the
adoption of this Statement will have a significant effect on its financial
position or results of operations.

NOTE 2 - ACCOUNTS RECEIVABLE

Amounts financed under Company credit programs were, as a percent of net sales,
approximately 49% in 1998, 55% in 1997 and 60% in 1996. Accounts receivable are
shown net of the allowance for doubtful accounts of $8,300,000 and $8,500,000 at
December 31, 1998 and 1997, respectively. Accounts receivable terms vary as to
payment terms (30 days to four years) and interest rates (0% to 21%) and are
generally collateralized by the merchandise sold. Accounts receivable balances
due after one year at December 31, 1998 and 1997 were approximately $73,956,000
and $94,969,000, respectively, and have been included in current assets in
accordance with trade practice.

     The Company provides an allowance for doubtful accounts utilizing a
methodology which considers the balances in problem and delinquent categories of
accounts, historical write-offs and management judgment. Delinquent accounts are
generally written off automatically after the passage of nine months without
receiving a full scheduled monthly payment. Accounts are written off sooner in
the event of a discharged bankruptcy or other circumstances that make further
collections unlikely.

     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 fourteen states.

NOTE 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
$14,770,000 and $14,520,000 at December 31, 1998 and 1997, respectively. A
number of the Company's competitors use the first-in, first-out (FIFO) basis of
inventory valuation which approximates


                                       14
<PAGE>

current costs. The use of the LIFO valuation method as compared to the FIFO
method had the effect of decreasing earnings per common share by $.01, $.03 and
$.03 in 1998, 1997 and 1996, respectively, assuming the Company's effective tax
rates were applied to changes in income resulting therefrom, and no other
changes in income were made.

NOTE 4 - PROPERTY AND EQUIPMENT

Property and equipment is summarized as follows (in thousands):

<TABLE>
<CAPTION>
                                                               1998             1997
                                                             -------           ------
<S>                                                          <C>               <C>   

         Land                                              $  20,986        $  21,058
         Buildings and improvements                          103,029           98,566
         Equipment                                            64,318           58,900
         Capital leases                                        8,276            8,276
         Construction in progress                                205              313
                                                             -------           ------
                                                             196,814          187,113

         Less accumulated depreciation                       (79,060)         (66,453)
         Less accumulated capital lease amortization          (6,421)          (6,042)
                                                             -------           ------
         Property and equipment, net                       $ 111,333        $ 114,618
                                                             -------           ------
                                                             -------           ------
</TABLE>

NOTE 5 - CREDIT ARRANGEMENTS

At December 31, 1998, the Company owed $66,400,000 in short-term loans to banks,
of which $60,000,000 was classified as long-term debt as described in Note 7.
The Company also has uncommitted line-of-credit arrangements with banks to
borrow up to $25,000,000, which were unused at December 31, 1998.

     The weighted average stated interest rates for these outstanding borrowings
at December 31, 1998 and 1997 were 5.9% and 6.2%, respectively.



                                       15
<PAGE>

NOTES TO CONSOLIDATED 
FINANCIAL STATEMENTS


NOTE 6 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES

The components of accounts payable and accrued expenses are as follows (in
thousands):

<TABLE>
<CAPTION>
                                                               1998             1997
                                                             -------          -------
<S>                                                          <C>              <C>    

         Accounts payable, trade                             $25,920          $22,926
         Accrued compensation                                  8,283            6,678
         Taxes other than income taxes                         6,931            4,273
         Other                                                11,366            7,421
                                                             -------          -------
                                                             $52,500          $41,298
                                                             -------          -------
                                                             -------          -------
</TABLE>

NOTE 7 - LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS

Long-term debt and capital lease obligations are summarized as follows (in
thousands):

<TABLE>
<CAPTION>
                                                  1998          1997
                                               --------       --------
<S>                                              <C>         <C>   

Revolving credit notes (a)                     $ 60,000       $   --
Unsecured term note (b)                          29,000         30,000
7.95% unsecured term note (c)                    15,000         15,000
7.44% unsecured term note (d)                    15,000         15,000
7.16% unsecured term note (e)                    30,000         30,000
10.1% unsecured term note (f)                     7,500         12,500
Secured debt (g)                                 12,494         14,830
6.3% to 10.5% capital lease obligations,
    due through 2016                              2,495          3,104
                                               --------       --------
                                                171,489        120,434
Less portion classified as current                9,711          8,945
                                               --------       --------
                                               $161,778       $111,489
                                               --------       --------
                                               --------       --------
</TABLE>

(a) The Company has two five-year revolving credit facilities totaling
$105,000,000 under which $66,400,000 had been borrowed at December 31, 1998. The
amount of $60,000,000 has been excluded from current liabilities because the
Company expects that at least such amount will remain outstanding under these
facilities for an uninterrupted period through 1999. Borrowings under these
facilities have either a bid rate option or floating rate of interest of LIBOR
plus a varying amount.



                                       16
<PAGE>

(b) The note is payable in quarterly installments of $250,000, increasing to
$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 of LIBOR
plus 0.7%.

(c) The note is payable in semi-annual installments of $500,000 commencing in
February 2000, increasing to $2,000,000 commencing in February 2007. The note
matures in August 2008 and interest is payable quarterly.

(d) 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.

(e) 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.

(f) The note is payable in semi-annual installments of $2,500,000 plus interest
payable quarterly and matures in April 2000.

(g) 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
5.1% at December 31, 1998) 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, 1998 of approximately
$28,021,000 is pledged as collateral on secured debt.

     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 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, 1998.

     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, 1998, the Company had six
outstanding interest rate swap agreements, having notional amounts aggregating
$80,153,000. Two of the agreements effectively fix the average interest rate on
the Company's $29,000,000 floating-rate term note at 8.2% through 2006. The
remaining agreements are at rates ranging from 5.74% to 5.95% maturing in 2000,
2002 and 2008. 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 $3,946,000 and $1,717,000 at December 31, 1998 and 1997,
respectively.

     The aggregate maturities of long-term debt and capital lease obligations
during the five years subsequent to December 31, 1998 are as follows: 1999 -
$9,711,000; 2000 - $12,091,000; 2001 - $11,259,000; 2002 - $11,179,000; and 2003
- - $12,812,000.

     Cash payments for interest were approximately $12,933,000, $14,321,000 and
$14,594,000 in 1998, 1997 and 1996, respectively.


                                       17
<PAGE>

NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS


NOTE 8 - INCOME TAXES

Income tax expense (benefit) consists of the following (in thousands):

<TABLE>
<CAPTION>
                    1998           1997          1996
                  -------        ------         ------
<S>               <C>            <C>           <C> 

Current
    Federal       $ 8,936        $8,027         $4,244
    State             296           141            144
                  -------        ------         ------
                    9,232         8,168          4,388
                  -------        ------         ------

Deferred
    Federal           220          (756)         2,423
    State               8           (12)            74
                  -------        ------         ------
                      228          (768)         2,497
                  -------        ------         ------
                  $ 9,460        $7,400         $6,885
                  -------        ------         ------
                  -------        ------         ------
</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>
                                         1998         1997         1996
                                        ------       ------       ------
<S>                                     <C>          <C>          <C>   

Statutory rates applied to income
    before income taxes                 $9,203 $      7,275       $6,696
State income taxes, net of
    federal tax benefit                    192           92           94
Other                                       65           33           95
                                        ------       ------       ------
                                        $9,460       $7,400       $6,885
                                        ------       ------       ------
                                        ------       ------       ------
</TABLE>





                                       18
<PAGE>

Deferred tax assets and liabilities as of December 31, 1998 and 1997 were as
follows (in thousands):

<TABLE>
<CAPTION>
                                              1998           1997
                                             ------         ------
<S>                                           <C>            <C>  

Deferred tax assets:
   Accrued liabilities                      $ 2,146        $ 1,666
   Capitalized leases                           402            412
   Net property and equipment                   467           --   
   Operating leases                             740            289
   Alternative minimum tax credits              114            407
   Net operating loss carry forward            --            1,035
                                              -----          -----
       TOTAL DEFERRED TAX ASSETS              3,869          3,809
                                              -----          -----

Deferred tax liabilities:
   Accounts receivable related                3,434          3,037
   Inventory related                            571           --
   Net property and equipment                  --              807
   Other                                        456            329
                                              -----          -----
       TOTAL DEFERRED TAX LIABILITIES         4,461          4,173
                                              -----          -----
NET DEFERRED TAX LIABILITIES                $  (592)       $  (364)
                                              -----          -----
                                              -----          -----
</TABLE>

     The Company made income tax payments of $8,033,000, $11,084,000 and
$4,976,000 in 1998, 1997 and 1996, respectively.

NOTE 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.

NOTE 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.


                                       19
<PAGE>

NOTES TO CONSOLIDATED 
FINANCIAL STATEMENTS


     The following table sets forth the plan's funded status and amounts
recognized in the Company's balance sheets at December 31 (in thousands):

<TABLE>
<CAPTION>
                                                                1998            1997
                                                               ------          ------
<S>                                                          <C>             <C>     
Change in benefit obligation:
    Benefit obligation at beginning of year                  $ 33,041        $ 27,981
    Service cost                                                1,985           1,655
    Interest cost                                               2,361           2,157
    Actuarial losses                                            3,109           2,761
    Benefits paid                                              (1,673)         (1,513)
                                                               ------          ------
    Benefit obligation at end of year                          38,823          33,041
                                                               ------          ------

Change in plan assets:
    Fair value of plan assets at beginning of year             33,616           27,51
    Actual return on plan assets                                6,615           5,483
    Company contributions                                         283           2,129
    Benefits paid                                              (1,673)         (1,513)
                                                               ------          ------
    Fair value of plan assets at end of year                   38,841          33,616
                                                               ------          ------

Plan assets in excess of projected benefit obligations             18             575
    Unrecognized actuarial gain                                (1,414)           (707)
    Unrecognized prior service cost                               729             860
    Unrecognized net asset                                       (341)           (543)
                                                               ------          ------
    (Accrued pension expense) prepaid asset
       included in the balance sheet                         $ (1,008)       $    185
                                                               ------          ------
                                                               ------          ------
</TABLE>


Net pension cost included the following components (in thousands):

<TABLE>
<CAPTION>
                                           1998           1997          1996
                                         -------        -------        -------
<S>                                      <C>            <C>            <C>    

Service cost-benefits earned
   during the period                     $ 1,985        $ 1,655        $ 1,599
Interest cost on projected
   benefit obligations                     2,361          2,157          1,972
Expected return on plan assets            (2,799)        (2,364)        (1,890)
Amortization of prior service cost           131            131            131
Amortization of transition asset            (202)          (202)          (202)
                                         -------        -------        -------
Net pension cost                         $ 1,476        $ 1,376        $ 1,610
                                         -------        -------        -------
                                         -------        -------        -------
</TABLE>


                                       20
<PAGE>

     The weighted-average discount rates used in determining the actuarial
present value of benefit obligations were 6.75%, 7.25% and 7.75% at December 31,
1998, 1997 and 1996, respectively. The annual rate of increase for future
compensation was 6.0% for 1998, 1997 and 1996. The expected long-term rate of
return on plan assets was 8.5% for 1998, 1997 and 1996.

     The plan's assets consist primarily of U.S. Government securities and
listed stocks and bonds. Included in the plan assets at December 31, 1998, were
34,000 shares of the Company's Common Stock and 143,000 shares of the Company's
Class A Common Stock with an aggregate fair value of $3,449,000. The plan
received $56,000 as dividends on Company shares in 1998.

     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,
1998, the projected benefit obligation for these plans totaled $2,778,000 of
which $1,842,000 is included in the accompanying balance sheet. Pension expense
recorded under the SERPs amounted to approximately $431,000, $320,000 and
$307,000 for 1998, 1997 and 1996, 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 $927,000
in 1998, $842,000 in 1997 and $811,000 in 1996 in matching employer
contributions to this plan.

     The Company offers no post-retirement benefits other than pensions and no
significant post-employment benefits.

NOTE 11 - STOCK OPTION PLANS

The Stock Option Committee of the Board of Directors serves as Administrator for
the Company's stock option plans. Options are granted by the Committee under
stock plans to officers and non-officer employees. In accordance with certain
provisions, 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, 1998, the maximum number of options which may be granted under the stock
option plans was 507,900.



                                       21
<PAGE>

NOTES TO CONSOLIDATED 
FINANCIAL STATEMENTS


The table below summarizes options activity for the past three years under the
Company's stock option plans.

<TABLE>
<CAPTION>
                                          OPTION            AVERAGE
                                          SHARES             PRICE
                                        ---------           -------
<S>                                     <C>              <C>  

Outstanding at December 31, 1995          955,750        $   12.37
       Granted                            578,854            10.77
       Exercised                          (65,754)            6.48
       Canceled or expired               (388,404)           12.33
                                        ---------           -------

Outstanding at December 31, 1996        1,080,446            11.85
       Granted                            424,000            13.76
       Exercised                         (101,371)            8.80
       Canceled or expired                 (6,250)           10.91
                                        ---------           -------

Outstanding at December 31, 1997        1,396,825            12.66
       Granted                            276,400            20.19
       Exercised                         (584,102)           12.57
       Canceled or expired                (11,950)           15.04
                                        ---------           -------
Outstanding at December 31, 1998        1,077,173        $   14.61
                                        ---------           -------
                                        ---------           -------
Exercisable at end of year                556,740        $   12.59
                                        ---------           -------
                                        ---------           -------
</TABLE>


All of the options outstanding at December 31, 1998 were for Common Stock.
Exercise prices for options outstanding as of December 31, 1998 ranged from
$10.75 to $22.28. The weighted-average remaining contractual life of those
options is six years. Options granted prior to 1997 generally vest on the grant
date; the remaining options vest over periods from within one year of grant date
increasing to four years as the number of options granted to an individual
increases.

     In addition, the Company had shares available for future purchases under
the Employee Stock Purchase Plan at December 31, 1998. This Plan 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 non-compensatory
plan. The Plan enables the Company to grant options to purchase up to 750,000
shares of Common Stock, of which 489,242 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.



                                       22
<PAGE>

     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 1998, options for 104,010 shares were exercised at an
average price of $13.66 per share. At December 31, 1998, options for 74,096
shares were outstanding at an option price of $16.15 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 granted subsequent to December 31, 1994 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 1998, 1997 and 1996,
respectively: risk-free interest rate of 7.4%, 5.8% and 6.0%; dividend yield of
2.0%, 2.5% and 2.7%; volatility factors of the expected market price of the
Company's Common Stock of 34.6%, 34.9%, and 36.7%, and a weighted-average
expected life of the options of 5.5 years, except for those issued under the
Employee Stock Purchase Plan which is six months. The weighted-average fair
value of options granted under the Company's stock option plan was $7.69, $4.45
and $2.05 for the years 1998, 1997 and 1996, respectively. The weighted-average
fair value of options granted under the Employee Stock Purchase Plan was $3.71,
$2.49 and $2.90 for the years 1998, 1997 and 1996, 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.



                                       23
<PAGE>

NOTES TO CONSOLIDATED 
FINANCIAL STATEMENTS


     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>
                                     1998             1997             1996
                                ----------       ----------       ----------
<S>                             <C>              <C>              <C>       
Net income
    As reported                 $   16,835       $   13,387       $   12,247
    Pro forma                       15,762           12,771           10,850

Earnings per common share
    As reported                       1.47             1.15             1.05
    Pro forma                         1.38             1.09              .93
</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.


NOTE 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.

     At December 31, 1998, aggregate future minimum payments under capital
leases and non-cancelable operating leases, including guaranteed residual values
of $25,000,000, 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>    

1999                                      $     668        $15,252
2000                                            491         14,462
2001                                            353         13,613
2002                                            288         12,992
2003                                            198         11,670
Subsequent to 2003                            2,033         61,320
Less total minimum sublease rentals                         (4,914)
                                                          --------
Net minimum lease payments                                $124,395
                                          ---------       --------
Total minimum lease amounts                   4,031
Amounts representing interest                (1,536)
                                          ----------
Present value of future minimum
lease payments                            $   2,495
                                          ---------
                                          ---------
</TABLE>




                                       24
<PAGE>

Rental expense applicable to operating leases consisted of the following (in
thousands):

<TABLE>
<CAPTION>
                                             1998            1997            1996
                                           --------        --------        --------
<S>                                        <C>             <C>            <C>

Property
   Minimum                                 $ 15,786        $13,315         $ 11,102
   Additional rentals based on sales            995             588             550
   Sublease income                           (1,626)         (1,049)         (1,025)
                                           --------        --------        --------
                                             15,155          12,854          10,627
Equipment                                     3,878           3,793           3,209
                                           --------        --------        --------
                                           $ 19,033        $ 16,647        $ 13,836
                                           --------        --------        --------
                                           --------        --------        --------
</TABLE>

     The Company leases four store properties from unaffiliated groups under an
operating lease agreement with five optional one year terms remaining. Minimum
commitments, including guaranteed residuals, for such leased properties
aggregate approximately $15,800,000.

NOTE 13 - SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

The following is a summary of the unaudited quarterly results of operations for
the years ended December 31, 1998 and 1997 (in thousands, except per share
data):


<TABLE>
<CAPTION>
                                                         1998 QUARTER ENDED
                                        MARCH 31        JUNE 30       SEPT. 30       DEC. 31
                                        --------       --------       --------       --------
<S>                                     <C>            <C>            <C>            <C>     

Net sales                               $129,368       $121,996       $139,004       $149,930
Gross profit                              60,931         57,155         65,477         70,986
Credit service charges                     4,298          4,301          4,300          4,061
Income before income taxes                 5,241          3,180          7,297         10,577
Net income                                 3,354          2,035          4,706          6,740
Earnings per common share                    .29            .17            .41            .60
Diluted earnings per common share            .28            .17            .41            .59

</TABLE>

<TABLE>
<CAPTION>
                                                         1997 QUARTER ENDED
                                        MARCH 31        JUNE 30       SEPT. 30       DEC. 31
                                        --------       --------       --------       --------
<S>                                     <C>            <C>            <C>            <C>     

Net sales                               $114,749       $113,006       $128,160       $134,092
Gross profit                              54,469         52,863         60,123         63,349
Credit service charges                     3,804          4,032          4,098          4,177
Income before income taxes                 4,156          2,151          6,133          8,347
Net income                                 2,660          1,377          3,925          5,425
Earnings per common share                    .23            .12            .34            .46
Diluted earnings per common share            .23            .12            .33            .46
</TABLE>

     The quarter ended December 31, 1998 includes a $940,000 charge to recognize
the future net lease expense for locations in which the Company has ceased
operations.




                                       25
<PAGE>

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, 1998 and 1997, and
the related consolidated statements of income, stock-holders' equity, and cash
flows for each of the three years in the period ended December 31, 1998. 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, 1998 and 1997, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1998, in conformity with generally
accepted accounting principles.


/s/ Ernst & Young LLP


Atlanta, Georgia
February 1, 1999




<PAGE>


EXHIBIT 21.1
                         SUBSIDIARIES OF THE REGISTRANT

          NAME                                   STATE OF INCORPORATION
          -------------------------------        ------------------------------

          Havertys Capital, Inc.                 Nevada

          Havertys Credit Services, Inc.         Tennessee

          Havertys Enterprises, Inc.             Nevada




<PAGE>


EXHIBIT 23.1

CONSENT OF INDEPENDENT AUDITORS


We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Haverty Furniture Companies, Inc. of our report dated February 1, 1999
included in the 1998 Annual Report to Stockholders of Haverty Furniture
Companies, Inc.

Our audits also included the financial statement schedule of Haverty Furniture
Companies, Inc. listed in Item 14(a). This schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits. In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.

We also consent to the incorporation by reference in the Company's 
Registration Statement (Form S-8 No. 333-53215) pertaining to the 1998 Stock 
Option Plan of Haverty Furniture Companies, Inc., Registration Statement 
(Form S-8 No. 33-53607) pertaining to the 1993 Non-Qualified Stock Option 
Plan of Haverty Furniture Companies, Inc., the Registration Statement 
(Form S-8 No. 33-28560) pertaining to the 1988 Non-Qualified Stock Option
Plan of Haverty Furniture Companies, Inc., the Registration Statement 
(Form S-8 No. 33-13755) pertaining to the 1986 Non-Qualified Stock Option 
Plan of Haverty Furniture Companies, Inc., the Registration Statement 
(Form S-8 No. 33-53609) pertaining to the 1988 Incentive Stock Option Plan
of Haverty Furniture Companies, Inc. and the Registration Statement 
(Form S-8 No. 33-45724) pertaining to the Employee Stock Purchase Plan of 
Haverty Furniture Companies, Inc. of our report dated February 1,1999 with 
respect to the financial statements incorporated herein by reference, and our
report included in the preceding paragraph with respect to the financial 
statement schedule included in this Annual Report (Form 10-K) of Haverty 
Furniture Companies, Inc.


                                   /s/ Ernst & Young LLP
                                   -------------------------

Atlanta, Georgia
March 25, 1999





<TABLE> <S> <C>

<PAGE>
<ARTICLE> 5
<LEGEND>
THIS FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED 
FROM THE CONSOLIDATED FINANCIAL STATEMENTS OF HAVERTY FURNITURE COMPANIES, COS.
INC. AND SUBSIDIARIES AS OF DECEMBER 31, 1998 AND FOR THE YEAR THEN ENDED AND 
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
       
<S>                             <C>
<PERIOD-TYPE>                   YEAR
<FISCAL-YEAR-END>                          DEC-31-1998
<PERIOD-START>                             JAN-01-1998
<PERIOD-END>                               DEC-31-1998
<CASH>                                           1,874
<SECURITIES>                                         0
<RECEIVABLES>                                  194,472
<ALLOWANCES>                                     8,300
<INVENTORY>                                     82,084
<CURRENT-ASSETS>                               278,177
<PP&E>                                         196,814
<DEPRECIATION>                                  85,481
<TOTAL-ASSETS>                                 111,333
<CURRENT-LIABILITIES>                           70,467
<BONDS>                                        171,489
                                0
                                          0
<COMMON>                                        13,165
<OTHER-SE>                                     144,893
<TOTAL-LIABILITY-AND-EQUITY>                   392,901
<SALES>                                        540,298
<TOTAL-REVENUES>                               557,258
<CGS>                                          285,749
<TOTAL-COSTS>                                        0
<OTHER-EXPENSES>                                     0
<LOSS-PROVISION>                                 6,456
<INTEREST-EXPENSE>                              13,183
<INCOME-PRETAX>                                 26,295
<INCOME-TAX>                                     9,460
<INCOME-CONTINUING>                             16,835
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                    16,835
<EPS-PRIMARY>                                     1.47
<EPS-DILUTED>                                     1.44
        

</TABLE>


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