Havertys Reports Earnings for Third Quarter 2020


ATLANTA, Oct. 28, 2020 (GLOBE NEWSWIRE) -- HAVERTYS (NYSE: HVT and HVT.A) reported today its operating results for the 2020 third quarter ended September 30, 2020.

Financial Highlights

Third Quarter ended September 30, 2020 Compared to Same Period of 2019

  • EPS of $0.97 per share in 2020 compared to $0.31 in 2019.
  • As previously reported, sales of $217.5 million for 2020 compared to $209.3 million for 2019.

Clarence H. Smith, chairman, president and CEO, said, “Our written business since reopening in May has been at a record pace. We had increases in all sales and key financial metrics in the third quarter compared to last year. The surge in demand for home furnishings and the impact of coronavirus on production, when coupled with shipping complications, has generated supply chain challenges. We believe our vendor relationships and system capabilities are a competitive advantage in accelerating receipt of product and setting delivery dates with customers. Increasing our staffing to appropriately serve our customer is a key near term focus and we continue to enhance our online shopping and buying experience.

The impact of COVID-19 on sectors that are aligned with the home is in stark contrast with those connected to travel and entertainment. I am very proud of the commitment of our team members to meet the current challenges and opportunities. We cannot predict the duration of this dynamic business shift or its long-term impact on our industry, but we are confident in our seasoned teams and have the resources to capitalize on the changing retail landscape.”

Financial Summary

Third Quarter ended September 30, 2020 Compared to Same Period of 2019

  • Sales rose 3.9% and comparable store sales increased 4.0%. Total written sales were up 22.8% and written comparable store sales rose 22.6%.
  • Gross profit margins increased 270 basis points to 56.2% in 2020 from 53.5% for the same period of 2019.
  • SG&A expenses decreased $4.1 million in 2020 compared to the same period in 2019 and fell to 46.0% of sales from 49.8%. The primary drivers of this change are:
    • reduction in advertising spend of $2.5 million in 2020.
    • reduction in salaries, wages, payroll taxes and benefits of $5.6 million given the workforce reduction in the second quarter of 2020.
    • reduction in travel, meetings and related expenses of $1.8 million.
    • increase in commissions and incentive compensation of $5.6 million.
  • Inventories are down $13.9 million from December 31, 2019 levels.
  • Customer deposits are up $58.3 million or 193.5% from December 31, 2019. We are not experiencing any appreciable increase in cancelled sales.
  • We repurchased 0.6 million shares of Havertys common stock in the open market at an average price of $21.00 for a total of $12.9 million. The remaining authorization under the share repurchase program is $16.8 million.
  • We paid $3.7 million in quarterly dividends.

Expectations and Other

  • We expect gross profit margins for the fourth quarter of 2020 as a percent of sales will be comparable to the third quarter 2020 level based on current estimates of product and freight costs and changes in our LIFO reserve.
  • The variable type costs within our SG&A for the fourth quarter of 2020 are expected to be 17.8% compared to 18.2% in the same period of 2019. Our estimate for fixed and discretionary type SG&A expenses for the fourth quarter of 2020 is in the $67.0 to $69.0 million range versus $69.6 million for these same costs in the fourth quarter of 2019. 
  • We expect to open a location in a new market, Myrtle Beach, SC in early March 2021. Total capital expenditures are estimated to be approximately $11.4 million in 2020.
HAVERTY FURNITURE COMPANIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data – Unaudited)


  Three Months Ended
September 30,
  Nine Months Ended
September 30,
 
  2020 2019 2020 2019 
              
Net sales $217,513 $209,320 $506,913 $588,455 
Cost of goods sold  95,336  97,301  225,537  269,796 
 Gross profit  122,177  112,019  281,376  318,659 
Credit service charges  15  19  53  60 
 Gross profit and other revenue  122,192  112,038  281,429  318,719 
              
Expenses:             
 Selling, general and administrative  100,097  104,161  270,281  298,824 
 Provision for doubtful accounts  20  42  56  66 
 Other (income) expense, net  (2,406) (42) (34,301) (323)
 Total expenses  97,711  104,161  236,036  298,567 
              
Income before interest and income taxes  24,481  7,877  45,393  20,152 
Interest (income) expense, net  (51) (292) (64) (980)
               
Income before income taxes  24,532  8,169  45,457  21,132 
Income tax expense  6,271  2,072  11,737  5,367 
 Net income $18,261 $6,097 $33,720  15,765 
              
Diluted earnings per share:             
 Common Stock $0.97 $0.31 $1.77 $0.77 
 Class A Common Stock $0.93 $0.30 $1.70 $0.73 
              
Diluted weighted average shares outstanding:             
 Common Stock  18,864  19,893  19,038  20,444 
 Class A Common Stock  1,526  1,536  1,530  1,637 
              
Cash dividends per share:             
 Common Stock $0.20 $0.20 $0.55 $0.56 
 Class A Common Stock $0.19 $0.19 $0.52 $0.53 

Note: Diluted earnings per share for the nine months ended September 30, 2020 includes $1.24 for gain on sale-leaseback transaction in May 2020.

HAVERTY FURNITURE COMPANIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands - Unaudited)


     September 30,
2020
 December 31,
2019
 September 30,
2019
 
     (Unaudited)   (Unaudited) 
ASSETS        
Current assets          
 Cash and cash equivalents $211,849 $75,739 $89,528 
 Restricted cash and cash equivalents  6,713  6,663  6,632 
 Accounts receivable, net  1,521  1,527  1,570 
 Inventories  90,943  104,817  99,958 
 Prepaid expenses  9,996  7,652  10,476 
 Other current assets  9,954  8,125  6,449 
  Total current assets  330,976  204,523  214,613 
           
Accounts receivable, long-term, net  161  195  204 
Property and equipment, net  109,663  156,534  158,087 
Right of-use lease assets  235,778  175,474  183,524 
Deferred income taxes  12,523  13,198  12,202 
Other assets  10,324  10,148  9,873 
  Total assets $699,425 $560,072 $578,503 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY          
Current liabilities          
 Accounts payable $27,110 $27,830 $27,495 
 Customer deposits  88,408  30,121  34,852 
 Accrued liabilities  53,866  39,654  41,163 
 Current lease liabilities  32,685  29,411  29,283 
  Total current liabilities  202,069  127,016  132,793 
           
Noncurrent lease liabilities  207,780  149,594  155,046 
Other liabilities  22,199  22,959  21,942 
  Total liabilities  432,048  299,569  309,781 
           
Stockholders’ equity  267,377  260,503  268,722 
  Total liabilities and stockholders’ equity $699,425 $560,072 $578,503 
             


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


    Nine Months Ended
September 30,
 
  2020    2019 
CASH FLOWS FROM OPERATING ACTIVITIES:       
    Net income $33,720 $15,765 
    Adjustments to reconcile net income to net
  cash provided by operating activities:
       
        Depreciation and amortization  13,959  15,412 
  Share-based compensation expense  3,362  2,690 
  Gain from sale of land, property, and equipment  (34,202) (12)
        Other  1,259  (1,249)
    Changes in operating assets and liabilities:       
        Inventories  13,873  5,882 
        Customer deposits  58,287  10,387 
        Operating lease assets and liabilities, net  1,156  3,296 
        Other assets and liabilities  (4,997) (2,761)
        Accounts payable and accrued liabilities  13,404  8,957 
            Net cash provided by operating activities  99,821  58,367 
           
CASH FLOWS FROM INVESTING ACTIVITIES:       
    Capital expenditures  (7,205) (12,446)
    Proceeds from sale of property and equipment  74,399  2,268 
            Net cash provided by (used in) investing activities  67,194  (10,178)
           
CASH FLOWS FROM FINANCING ACTIVITIES:       
 Proceeds from borrowing under revolving credit facility  43,800   
 Payments of borrowings under revolving credit facility  (43,800)  
   Net change in borrowings under revolving credit facility     
         
   Dividends paid  (10,271) (11,194)
 Common stock repurchased  (19,708) (19,316)
 Other  (876) (1,328)
            Net cash used in financing activities  (30,855) (31,838)
Increase in cash, cash equivalents and restricted cash
  equivalents during the period
  136,160  16,351 
Cash, cash equivalents and restricted cash equivalents at beginning
  of period
  82,402  79,809 
Cash, cash equivalents and restricted cash equivalents at end of period $218,562 $96,160 
        

Adjusted EPS 
Earnings per share is a financial measure under generally accepted accounting principles (“GAAP”). Adjusted diluted earnings per share (“Adjusted EPS”) is considered a non-GAAP financial measure under the rules because it excludes certain amounts which are included when diluted earnings per share (“EPS”) are calculated in accordance with U.S. GAAP (EPS), the most directly comparable financial measure calculated in accordance with U.S. GAAP. Management believes that Adjusted EPS is a meaningful measure to share with investors because it best allows comparison of the performance for the comparable period. In addition, Adjusted EPS affords investors a view of what management considers Havertys’ earnings performance, and provides investors the ability to make a more informed assessment of such earnings performance.

We have calculated Adjusted EPS for the nine months ended September 30, 2020 by adjusting EPS for a sale-leaseback transaction in the quarter ended June 30, 2020. There were no such adjustments in the comparable period of 2019.

  Nine months ended
September 30, 2020
 
Diluted earnings per share:    
 Reported EPS $1.77  
      
 Adjustments:    
  Gain from sale-leaseback transaction: pre-tax  1.66  
  Tax impact of gain(1)  (0.42) 
   Net adjustment  1.24  
       
 Adjusted EPS $0.53  
       

(1)   Calculated based on nature of item and rates applied.

Conference Call Information
The company invites interested parties to listen to the live audiocast of the conference call on October 29, 2020 at 10:00 a.m. ET 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 November 11, 2020. The number to access the telephone playback is 1-888-203-1112 (access code: 9286660).

About Havertys  
Havertys (NYSE: HVT and HVT.A), established in 1885, is a full-service home furnishings retailer with 120 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.  

Safe Harbor  
This press release contains, and the conference call may contain forward-looking statements subject to the safe harbor provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Act of 1934. These forward-looking statements are subject to risks and uncertainties and change based on various important factors, many of which are beyond our control.

All statements in the future tense and all statements accompanied by words such as “expect,” “likely,” “outlook,” “forecast,” “preliminary,” “would,” “could,” “should,” “position,” “will,” “project,” “intend,” “plan,” “on track,” “anticipate,” “to come,” “may,” “possible,” “assume,” and variations of such words and similar expressions are intended to identify such forward-looking statements. These forward-looking statements include, without limitation, our expected ability to operate and protect our team members and customers during the COVID-19 pandemic, the execution and effect of our cost savings initiatives, the use of proceeds from our sale-leaseback transaction, our expectations for selling square footage and capital expenditures for 2020, our liquidity position to continue to operate during these highly uncertain times, and our efforts and initiatives to help us emerge from the pandemic well-positioned.

We caution that our 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 and they should not be relied upon as a prediction of actual results. Factors that could cause actual results to differ materially from those expressed or implied in any forward-looking statements include, but are not limited to: the extent and duration of the disruption to our business operations caused by the health crisis associated with the COVID-19 pandemic, including the effects on the financial health of our business partners and customers, on supply chains and our suppliers, and on access to capital and liquidity provided by the financial and capital markets; our ability to maintain compliance with debt covenants and amend such credit facilities as necessary; disruptions in our suppliers' operations, including from the impact of COVID-19, including potential problems with inventory availability and the potential result of the volatility or higher cost of product and international freight due to the high demand of products and low supply for an unpredictable period of time; disruptions in our third-party producers’ operations in foreign countries; changes in national and international legislation or government regulations or policies, including changes to import tariffs and the unpredictability of such changes; failure of vendors to meet our quality control standards or to react to changes in legislative or regulatory frameworks; disruptions in our distribution centers; changes in general economic conditions, including unemployment, inflation (including the impact of tariffs); labor shortages and the Company's ability to successfully attract and retain employees in the current labor market; uncertain credit markets and other macroeconomic conditions; competitive product, service and pricing pressures; failure or weakness in our disclosure controls and procedures and internal controls over financial reporting; disruptions caused by a failure or breach of the Company's information systems and information technology infrastructure, as well as other risks and uncertainties discussed in the Company's Annual Report on Form 10-K for 2019 (all of which risks may be amplified by the COVID-19 pandemic) and Quarterly Report on Form 10-Q for the quarterly periods ended March 31, 2020 and June 30, 2020, and from time to time in the Company's subsequent filings with the SEC.

Forward-looking statements describe our expectations only as of the date they are made, and the Company undertakes no duty to update its forward-looking statements except as required by law. You are advised, however, to review any further disclosures we make on related subjects in our subsequent Forms 10-K, 10-Q, 8-K, and other reports filed with the SEC. 

Contact: 
Havertys 404-443-2900 
Jenny Hill Parker 
SVP, Finance, and Corporate Secretary 

SOURCE:  Havertys