Havertys Reports Earnings for Third Quarter 2016


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).


            

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