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Havertys Reports Earnings for Third Quarter 2016

/EIN News/ -- ATLANTA, Oct. 31, 2016 (GLOBE NEWSWIRE) -- HAVERTYS (NYSE:HVT) (NYSE:HVT.A) reports earnings per share of $0.34 for the third quarter of 2016, the same earnings per share results as the comparable period in 2015.  The earnings per share for the nine months ended September 30, 2016 is $0.79 compared to $0.81 for the same period of 2015.

Clarence H. Smith, chairman, president and chief executive officer, said, “Our third quarter earnings were flat with the prior year as modest sales increases and improved gross margins were offset by expanded operating costs.  Sales gains were made across most product categories and our average ticket grew 3.2%. Our efforts to control fixed costs continue but were negatively impacted by rising health care benefit expenses which were $1 million higher in the third quarter compared to the prior year. As expected, opening and ongoing additional overhead expenses were incurred for two new stores and expansion of our Florida Distribution Center. Operating inventory levels have been trimmed as our supply chain team works closely with vendor partners and refines product flow and forecasts. We increased the quarterly cash dividend 20% to our common stockholders and year to date have made $21.3 million in stock repurchases and are confident of our ability to generate sufficient cash to grow our business and stockholder value.

“Given the potential negative impact to our associates and customers by Hurricane Matthew, we are relieved that the destruction was not greater.  Our business was impacted in several markets with 23 of our locations closed for one or more days over the Columbus Day holiday weekend but no stores suffered significant physical damage. As we move into the important selling months of November and December, we will be executing the merchandising and marketing strategies geared for our target customer and believe we are in a good position to make market share gains.”

Financial Highlights

Third Quarter 2016 Compared to Third Quarter 2015

  • As previously announced, net sales increased 0.8% to $211.7 million.  Comparable store sales were up 1.2%.
  • Total written sales increased 2.6% and written comparable store sales rose 3.0%.
  • Average written ticket was up 3.2% and custom upholstery written business rose 3.0%.  
  • Gross profit margins increased 50 basis points to 53.7%.  There was a $0.7 million decrease in the LIFO reserve in 2016 versus a $0.2 million increase in 2015, a positive change of $0.9 million or 41 basis points.
  • SG&A costs as a percent of sales were 48.1% in 2016 and 47.0% in 2015. Total SG&A dollars increased $3.0 million due to increases in administrative costs of $1.7 million (largely due to health benefits costs), warehouse and delivery expenses of $1.2 million, selling expense of $0.8 million, occupancy costs of $0.4 million and a decrease in advertising expense of $1.0 million.
  • Other income includes a $0.5 million gain from the insurance recovery related to the destruction of our Lubbock, Texas location at the end of 2015.
  • We did not make any share repurchases in 2016 and bought 524,464 shares of our common stock in 2015 at an average price of $23.00.

Nine Months ended September 30, 2016 Compared to Same Period of 2015

  • Net sales increased 2.0% to $601.0 million.  Comparable store sales were up 1.9%.
  • Average written ticket rose 2.2% and custom upholstery written business was up 5.0%.
  • Gross profit margins were 53.6% versus 53.4% as a percent of sales. The LIFO year-over-year positive change was $0.9 million or 15 basis points.
  • SG&A costs as a percent of sales were 49.1% for 2016 versus 48.2% for 2015. Total SG&A dollars increased $11.0 million due to increases in administrative costs of $4.4 million (driven by health benefits costs and inflation), selling costs of $2.8 million, warehouse and delivery expenses of $2.1 million, and occupancy costs of $1.8 million. Part of these increases were due to a full nine months of costs for the four new stores added during 2015 and third quarter costs of two stores opening in 2016 along with the expansion of the Florida Distribution Center.
  • Other income includes a $2.5 million gain from the insurance recovery for inventory, building reconstruction, and business interruption claims related to the loss of our Lubbock, Texas location.  Additional gains will be recognized in future quarters.     
  • For the nine months, the operating loss on the Lubbock store in 2016 versus the profit in 2015 is a negative impact of approximately $1.2 million. 
  • We purchased 1,160,539 shares of our common stock for $21.3 million in 2016 and 617,021 shares for $14.0 million in 2015.

Expectations and Other

  • Total delivered sales for the fourth quarter to date of 2016 are 0.6% below the same day of week period last year and comparable store sales are flat. Total written sales for the fourth quarter to date of 2016 are up approximately 1.2% over the same day of week period last year and written comparable store sales also increased approximately 1.2%. For the fourth quarter to date, excluding those locations closed due to Hurricane Matthew, comparable delivered sales increased 1.3% and written comparable sales were up 3.3% over the same day of week period last year. Undelivered written sales are approximately $3.5 million higher at the end of October this year than one year ago.
  • We expect that gross profit margins for the full year 2016 will be approximately 53.7%, increased from the 53.5% prior guidance due to positive LIFO reserve adjustments in the third quarter and anticipated for the fourth quarter.  Given the current economic environment we do not expect a positive LIFO reserve adjustment in 2017.
  • Our estimate for fixed and discretionary type SG&A expenses for 2016 are now $251.0 million, a $1.0 million reduction of our previous estimate, and compared to $240.9 million for these same costs in 2015. The variable type costs within SG&A for the full year of 2016 are expected to be 18.0% percent of sales compared to the 17.9% rate in 2015.
  • We opened a store in Charlottesville, Virginia in mid-October.
  • We expect to increase standard selling square footage approximately 1.4% in 2016. Total capital expenditures are estimated to be approximately $32.0 million in 2016.


HAVERTY FURNITURE COMPANIES, INC.  
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME  
 (In thousands, except per share data – Unaudited)  
           
    Three Months Ended
September 30,
  Nine Months Ended
September 30,
 
    2016
    2015     2016
    2015
 
                                 
Net Sales   $ 211,690     $ 209,921     $ 600,976     $ 588,984  
Cost of goods sold     97,953       98,179       278,660       274,413  
Gross Profit     113,737       111,742       322,316       314,571  
Credit service charges     54       71       173       213  
Gross profit and other revenue     113,791       111,813       322,489       314,784  
                                 
Expenses:                                
Selling, general and administrative     101,745       98,720       294,809       283,767  
Provision for doubtful accounts     70       83       286       167  
Other (income) expense, net     (705 )     2       (2,799 )     (945 )
Total expenses     101,110       98,805       292,296       282,989  
                                 
Income before interest and income taxes     12,681       13,008       30,193       31,795  
Interest expense, net     556       594       1,719       1,614  
                                 
Income before income taxes     12,125       12,414       28,474       30,181  
Income tax expense     4,759       4,759       11,065       11,574  
Net income   $ 7,366     $ 7,655     $ 17,409     $ 18,607  
                               
Other comprehensive income                              
Adjustments related to retirement   $ 18   $ 59   $ 56     $ 175  
                                 
Comprehensive income   $ 7,384     $ 7,714     $ 17,465     $ 18,782  
                                 
Basic earnings per share:                                
Common Stock   $ 0.35     $ 0.34     $ 0.81     $ 0.83  
Class A Common Stock   $ 0.33     $ 0.32     $ 0.77     $ 0.78  
                                 
Diluted earnings per share:                                
Common Stock   $ 0.34     $ 0.34     $ 0.79     $ 0.81  
Class A Common Stock   $ 0.33     $ 0.32     $ 0.76     $ 0.78  
                                 
Basic weighted average shares outstanding:                                
Common Stock     19,083       20,448       19,615       20,538  
Class A Common Stock     2,021       2,061       2,026       2,074  
                                 
Diluted weighted average shares outstanding:                                
Common Stock     21,436       22,791       21,972       22,907  
Class A Common Stock     2,021       2,061       2,026       2,074  
                                 
Cash dividends per share:                                
Common Stock   $ 0.1200     $ 0.100     $ 0.3200     $ 0.260  
Class A Common Stock   $ 0.1125     $ 0.095     $ 0.3025     $ 0.245  
                                 


HAVERTY FURNITURE COMPANIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands – Unaudited)
                   
    September 30,
 2016
    December 31,
2015
    September 30,
 2015
 
    (Unaudited)           (Unaudited)  
                       
ASSETS                      
Current assets                      
Cash and cash equivalents   $ 75,567     $ 70,659   $ 73,287  
Investments     750       12,725     6,750  
Restricted cash and cash equivalents     8,025       8,005     8,003  
Accounts receivable     4,478       5,948     6,113  
Inventories     99,075       108,896     105,165  
Prepaid expenses     9,019       6,137     6,991  
Other current assets     5,659       6,341     7,459  
Total current assets     202,573       218,711     213,768  
                       
Accounts receivable, long-term     509       655     714  
Property and equipment     237,197       229,283     231,699  
Deferred income taxes     20,241       17,245     19,964  
Other assets     7,976       5,357     6,336  
Total assets   $ 468,496     $ 471,251   $ 472,481  
                       
LIABILITIES AND STOCKHOLDERS’ EQUITY                      
Current liabilities                      
Accounts payable   $ 24,085     $ 27,815   $ 25,486  
Customer deposits     30,454       21,036     30,265  
Accrued liabilities     38,381       42,060     37,759  
Deferred income taxes     -       -     5,701  
Current portion of lease obligations     3,389       3,051     3,007  
Total current liabilities     96,309       93,962     102,218  
                       
Lease obligations, less current portion     52,915       50,074     50,909  
Other liabilities     25,635       25,476     25,741  
Total liabilities     174,859       169,512     178,868  
                       
Stockholders’ equity     293,637       301,739     293,613  
Total liabilities and stockholders’ equity   $ 468,496     $ 471,251   $ 472,481  
                       


HAVERTY FURNITURE COMPANIES, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands – Unaudited)
 
    Nine Months Ended
September 30,
    2016   2015
CASH FLOWS FROM OPERATING ACTIVITIES:                
Net income   $ 17,409     $ 18,607  
Adjustments to reconcile net income to net cash provided by operating activities:                
Depreciation and amortization     21,472       18,967  
Gain on insurance recovery     (2,460 )     -  
Proceeds from insurance recovery received for business interruption and destroyed inventory     2,327       -  
Share-based compensation expense     2,992       3,142  
Deferred income taxes     (3,030 )     -  
Provision for doubtful accounts     286       167  
Other     450       618  
Changes in operating assets and liabilities:                
Accounts receivable     1,330       883  
Inventories     9,821       1,974  
Customer deposits     9,418       6,578  
Other assets and liabilities     (5,176 )     (1,078 )
Accounts payable and accrued liabilities     (7,603 )     (4,027 )
Net cash provided by operating activities     47,236       45,831  
                 
CASH FLOWS FROM INVESTING ACTIVITIES:                
Capital expenditures     (25,292 )     (22,523 )
Maturities of investments     12,000       2,500  
Proceeds from insurance for destroyed property and equipment     2,312       -  
Other     (3 )     35  
Net cash used in investing activities     (10,983 )     (19,988 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES:                
Construction allowance receipts     -       4,773  
Payments on lease obligations     (2,295 )     (1,801 )
Taxes on vested restricted shares     (883 )     (1,152 )
Dividends paid     (6,885 )     (5,855 )
Common stock purchased     (21,282 )     (14,002 )
Net cash used in financing activities     (31,345 )     (18,037 )
                 
Increase in cash and cash equivalents during the period     4,908       7,806  
                 
Cash and cash equivalents at beginning of period     70,659       65,481  
                 
Cash and cash equivalent at end of period   $ 75,567     $ 73,287  
                 

About Havertys

Havertys (NYSE:HVT) (NYSE:HVT.A), established in 1885, is a full-service home furnishing retailer with 123 showrooms in 16 states in the Southern and Midwestern regions providing its customers with a wide selection of quality merchandise in middle to upper middle price ranges.  Additional information is available on the company’s website, havertys.com.

News releases include forward-looking statements, which are subject to risks and uncertainties.  Factors that might cause actual results to differ materially from future results expressed or implied by such forward-looking statements 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 detail from time to time in the company’s reports filed with the SEC.

Conference Call Information

The company invites interested parties to listen to the live audiocast of the conference call on Tuesday, November 1, 2016 at its website, havertys.com under the investor relations section.  If you can not listen live, a replay will be available on the day of the conference call at the website or via telephone at approximately 1:00 p.m. ET through Tuesday, November 8, 2016.  The number to access the telephone playback is 1-888-203-1112 (access code:  2987391).

Contact:
Haverty Furniture Companies, Inc. (404) 443-2900
Dennis L. Fink
EVP & CFO
Jenny Hill Parker
SVP, Finance, Secretary and Treasurer

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