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Havertys Reports Earnings for Third Quarter 2017

ATLANTA, Oct. 31, 2017 (GLOBE NEWSWIRE) -- HAVERTYS (NYSE:HVT) (NYSE:HVT.A) reports earnings per share of $0.28 for the third quarter of 2017, compared to $0.34 for the third quarter in 2016.  The earnings per share for the nine months ended September 30, 2017 is $0.84, compared to $0.79 for the same period of 2016.

Clarence H. Smith, chairman, president and chief executive officer, said, “The third quarter was a challenging period for Havertys as well as others in our industry. Our earnings reflect the previously released softer sales results that were impacted by Hurricane Irma. We achieved increased profit margins, with pricing discipline, quality control, and operational focus, even as ocean freight rates increased. The lower sales results made it difficult to leverage fixed costs and discretionary expenses which were well controlled.

“We look forward to the remainder of 2017 and the seasonally strongest sales events of the year. We remain passionate about serving the on-trend furniture customer and confident in our ability to innovate and grow our business, despite strains from the current housing and competitive landscape.

“The expansion of our western distribution facility in Coppell, Texas began in September and, in mid-October, we opened a replacement store in the heart of the best retail shopping area in Columbia, South Carolina.  These investments are part of our strategic growth and store rationalization plan. We continue to generate strong cash flow and in August increased the quarterly dividend 25% to our common stockholders.  We remain committed to improving our business, maintaining strong cash flow, and returning value to our stockholders.”

Financial Highlights

Third Quarter 2017 Compared to Third Quarter 2016

  • As previously announced, net sales decreased 1.9% to $207.6 million.  Comparable store sales were down 2.9%.
  • Total written sales were down 3.5% and written comparable store sales decreased 4.2%. During September 2017, 55 stores were closed for one or more days due to Hurricane Irma.  The negative impact on third quarter total written sales and written comparable store sales because of these closures is estimated at 1.2%.
  • Hurricane Irma caused only minor property damage but caused us to halt deliveries and close two distribution centers and our corporate offices.
  • Average written ticket was up 0.5% and custom upholstery written business increased 2.6%.
  • Gross profit margins increased 20 basis points to 53.9%. Execution on pricing and product mix and reduced product markdowns offset the higher freight and negative LIFO impact. There was a $0.5 million increase in the LIFO reserve in 2017 versus a $0.7 million decrease in 2016, a negative change of $1.2 million or 59 basis points.
  • SG&A costs as a percent of sales were 49.2% in 2017 and 48.1% in 2016. Total SG&A dollars was relatively flat for the periods. The planned increases in advertising and marketing of $2.1 million and higher occupancy costs of $1.0 million due to greater depreciation and other store costs in 2017 were offset by $1.4 million lower administrative expenses for incentive compensation and health benefit costs and reduced warehouse and delivery expenses of $1.1 million.
  • Other income includes a $0.4 million gain from insurance recovery related to our Wichita, Kansas and Lubbock, Texas locations in 2017 and $0.5 million for Lubbock in 2016.

Nine Months ended September 30, 2017 Compared to Same Period of 2016

  • Net sales increased 0.7% to $604.9 million.  Comparable store sales were down 0.6%.
  • Average written ticket increased 2.0% and custom upholstery written business was up 4.0%.
  • Gross profit margins were 54.3% versus 53.6% as a percent of sales. The LIFO reserve year-over-year negative change was $1.3 million or 21 basis points.
  • SG&A costs as a percent of sales were 49.5% for 2017 versus 49.1% for 2016. Total SG&A dollars increased $4.5 million primarily due to rising occupancy costs of $2.9 million and greater advertising and marketing spending of $2.0 million partly offset by a $1.0 million reduction in administrative costs.
  • Other income includes a $1.5 million gain from insurance recovery in 2017 and $2.5 million in 2016.

Expectations and Other

  • Total written sales for the fourth quarter to date of 2017 are up approximately 0.4% over the same period last year and written comparable store sales are down 0.7%. Total delivered sales for the fourth quarter to date of 2017 are down 2.9% and comparable store sales decreased 3.7% over the same period last year.
  • We expect that gross profit margins for the full year 2017 will be approximately 54.2%.
  • Our estimate for fixed and discretionary type SG&A expenses for 2017 is $257.0 million compared to $249.9 million for these same costs in 2016. This is a change from our previous estimate of $259.0 primarily from reductions in group medical insurance and incentive compensation. The variable type costs within SG&A for the full year of 2017 are expected to be 18.2% percent of sales, the same rate in 2016. 
  • We opened a new store in Columbia, South Carolina in mid-October and closed a location in Birmingham, Alabama.
  • We expect to increase standard selling square footage approximately 0.3% in 2017. Total capital expenditures are estimated to be approximately $28.0 million in 2017 and $18.0 million in 2018.

/EIN News/ -- 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,
 
    2017     2016   2017     2016  
                           
Net Sales    $ 207,647      $ 211,690    $ 604,904      $ 600,976    
Cost of goods sold     95,632       97,953     276,175       278,660    
Gross Profit     112,015       113,737     328,729       322,316    
Credit service charges     38       54     126       173    
  Gross profit and other revenue     112,053       113,791     328,855       322.489    
                             
Expenses:                            
Selling, general and administrative     102,099       101,745     299,310       294,809    
Provision for doubtful accounts     18       70     181       286    
Other (income) expense, net     (276 )     (705 )   (1,430 )     (2,799 )  
  Total expenses     101,841       101,110     298,061       292,296    
                             
Income before interest and income taxes     10,212       12,681     30,794       30,193    
Interest expense, net     493       556     1,641       1,719    
                             
Income before income taxes     9,719       12,125     29,153       28,474    
Income tax expense     3,736       4,759     10,999       11,065    
  Net income    $ 5,983      $ 7,366    $ 18,154      $ 17,409    
                             
Other comprehensive income                            
Adjustments related to retirement plan; net of tax expense of $9 and $27 in 2017 and $12 and $34 in 2016    $ 13      $ 18    $ 40      $ 56    
                             
  Comprehensive income    $ 5,996      $ 7,384    $ 18,194      $ 17,465    
                             
Basic earnings per share:                            
Common Stock    $ 0.28      $ 0.35    $ 0.86      $ 0.81    
Class A Common Stock    $ 0.27      $ 0.33    $ 0.82      $ 0.77    
                             
Diluted earnings per share:                            
Common Stock    $ 0.28      $ 0.34    $ 0.84      $ 0.79    
Class A Common Stock    $ 0.27      $ 0.33    $ 0.81      $ 0.76    
                             
Basic weighted average shares outstanding:                            
Common Stock     19,421       19,083     19,365       19,615    
Class A Common Stock     1,798       2,021     1,804       2,026    
                             
Diluted weighted average shares outstanding:                            
Common Stock     21,610       21,436     21,582       21,972    
Class A Common Stock     1,798       2,021     1,804       2,026    
                             
Cash dividends per share:                            
Common Stock    $ 0.1500      $ 0.1200    $ 0.3900      $ 0.3200    
Class A Common Stock    $ 0.1425      $ 0.1125    $ 0.3675      $ 0.3025    
                             


HAVERTY FURNITURE COMPANIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands – Unaudited)

    September 30,
 2017
  December 31,
2016
  September 30,
 2016
 
    (Unaudited)       (Unaudited)  
                     
ASSETS                    
Current assets                    
Cash and cash equivalents    $ 86,903   $ 63,481    $ 75,567  
Restricted cash and cash equivalents     8,089     8,034     8,025  
Accounts receivable     2,706     4,244     4,478  
Inventories     99,664     102,020     99,075  
Prepaid expenses     8,910     8,836     9,019  
Other current assets     6,973     7,500     6,409  
  Total current assets     213,245     194,115     202,573  
                     
Accounts receivable, long-term     311     462     509  
Property and equipment     226,693     233,667     237,197  
Deferred income taxes     21,339     18,376     20,241  
Other assets     8,611     7,885     7,976  
  Total assets    $ 470,199   $ 454,505    $ 468,496  
                     
LIABILITIES AND STOCKHOLDERS’ EQUITY                    
Current liabilities                    
Accounts payable    $ 26,550   $ 25,662    $ 24,085  
Customer deposits     29,454     24,923     30,454  
Accrued liabilities     38,418     41,904     38,381  
Current portion of lease obligations     3,733     3,461     3,389  
  Total current liabilities     98,155     95,950     96,309  
                     
Lease obligations, less current portion     51,523     52,013     52,915  
Other liabilities     26,549     24,671     25,635  
  Total liabilities     176,227     172,634     174,859  
                     
Stockholders’ equity     293,972     281,871     293,637  
  Total liabilities and stockholders’ equity    $ 470,199   $ 454,505    $ 468,496  
                     


HAVERTY FURNITURE COMPANIES, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands – Unaudited)

      Nine Months Ended  
      September 30,  
      2017     2016  
               
CASH FLOWS FROM OPERATING ACTIVITIES:              
Net income   $ 18,154   $ 17,409  
Adjustments to reconcile net income to net cash provided by operating activities:              
Depreciation and amortization     22,819     21,472  
Stock-based compensation expense     3,045     2,992  
Deferred income taxes     (2,990 )   (3,030 )
Gain on insurance recovery     (1,531 )   (2,460 )
Proceeds from insurance recovery     916     2,327  
Provision for doubtful accounts     181     286  
Other     626     450  
Changes in operating assets and liabilities:              
  Accounts receivable     1,508     1,330  
  Inventories     2,356     9,821  
  Customer deposits     4,531     9,418  
  Other assets and liabilities     1,977     (5,176 )
  Accounts payable and accrued liabilities     (2,844 )   (7,603 )
  Net cash provided by operating activities     48,748     47,236  
               
CASH FLOWS FROM INVESTING ACTIVITIES:              
Capital expenditures     (15,394 )   (25,292 )
Maturities of investments     -     12,000  
Proceeds from insurance recovery for destroyed property and equipment      1,045     2,312  
Other     28     (3 )
    Net cash used in investing activities     (14,321 )   (10,983 )
               
CASH FLOWS FROM FINANCING ACTIVITIES:              
Payments on lease obligations     (2,577 )   (2,295 )
Taxes on vested restricted shares     (1,555 )   (883 )
Dividends paid     (8,223 )   (6,885 )
Common stock purchased     -     (21,282 )
Construction allowance receipts     1,350     -  
  Net cash used in financing activities     (11,005 )   (31,345 )
               
Increase in cash and cash equivalents during the period     23,422     4,908  
               
Cash and cash equivalents at beginning of period     63,481     70,659  
               
Cash and cash equivalent at end of period   $ 86,903   $ 75,567  
               

SG&A Expense Classification

We classify our SG&A expenses as either variable or fixed and discretionary.  Our variable expenses are comprised of selling and delivery costs.  Selling expenses are primarily compensation and related benefits for our commission based sales associates, the discount we pay for third party financing of customer sales and transaction fees for credit card usage.  We do not outsource delivery so these costs include personnel, fuel, and other expenses related to this function.  Fixed and discretionary expenses are comprised of rent, depreciation and amortization and other occupancy costs for stores, warehouses and offices, and all advertising and administrative costs.

Conference Call Information

The company invites interested parties to listen to the live audiocast of the conference call on Wednesday, November 1, 2017 at its website, havertys.com under the investor relations section.  If you cannot 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 Wednesday, November 8, 2017.  The number to access the telephone playback is 1-888-203-1112 (access code: 2246359).

Safe Harbor

This press release includes statements that constitute forward-looking statements within the meaning of the federal securities laws.  Generally, the words "believe," "expect," "intend," "estimate," "anticipate," "project," "will" and similar expressions identify forward-looking statements, which are not historical in nature. We intend for all forward-looking statements contained herein or on our website, and all subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf, to be covered by the safe harbor provisions for forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and the provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (which Sections were adopted as part of the Private Securities Litigation Reform Act of 1995). Forward-looking statements may relate to, for example, future operations, financial condition, economic performance (including gross profit margins and expenses), capital expenditures, and demand for our products.  The Company cautions that its forward-looking statements involve risks and uncertainties, and while we believe that our expectations for the future are reasonable in view of currently available information, you are cautioned not to place undue reliance on our forward-looking statements.  Actual results or events may differ materially from those indicated as a result of various important factors.  Such factors may include, among other things, the state of the economy; state of the residential construction and housing markets; the consumer spending environment for big ticket items; effects of competition; management of relationships with our suppliers and vendors and disruptions in their operations; new regulations or taxation plans, as well as other risks and uncertainties discussed in the Company's Annual Report on Form 10-K and from time to time in the Company's filings with the SEC.

About Havertys

Havertys (NYSE:HVT) (NYSE:HVT.A), established in 1885, is a full-service home furnishing retailer with 125 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 detailed from time to time in the company’s reports filed with the SEC.

Contact:
Havertys (404) 443-2900
Richard B. Hare
EVP & CFO
Jenny Hill Parker
SVP, Finance, Secretary and Treasurer

SOURCE:  Havertys