Havertys Reports Earnings for Fourth Quarter and Full Year 2016


ATLANTA, Feb. 21, 2017 (GLOBE NEWSWIRE) -- HAVERTYS (NYSE:HVT) (NYSE:HVT.A) reports earnings for the quarter ended December 31, 2016 of $0.51 per share compared to $0.41 per share for the same period of 2015.  The earnings per share for the full year 2016 were $1.30 compared to $1.22 per share for 2015.

Clarence H. Smith, chairman, president and CEO, said, “We are pleased with our strong finish to the quarter.  Gaining greater productivity from our existing store base is a primary focus and average ticket increased over its prior year comparable period for the ninth consecutive quarter.  Generating store and site visits remains challenging and expensive for retailers as methods for reaching the consumer continue to change and fragment.  The Havertys brand merchandise, pricing discipline, and tight control of inventory were factors in our gross profit margin expansion.

“The payment of the $21.0 million special dividend in the fourth quarter and $21.3 million in share repurchases during the year reflect our commitment to provide returns to our shareholders and manage our capital as we work to improve operating margins within our current distribution network.

“We remain confident in our ability to serve the on-trend furniture customer and grow our business, despite challenges in the current economic and political climate.”

Financial Highlights

Fourth Quarter 2016 Compared to Fourth Quarter 2015

  • As previously reported, net sales increased 2.2% to $220.6 million.  On a comparable store basis, sales rose 2.5%.  Total written sales increased 5.3% and written comparable store sales rose 5.2% over the same period last year.
  • Average written ticket was up 2.6% and custom upholstery written business rose 1.9%.   
  • Gross profit margin increased 100 basis points to 54.9%.  There was a $0.8 million decrease in the LIFO reserve in 2016 versus a $0.2 million increase in 2015, a positive change of $1.0 million or 44 basis points. 
  • Selling, general and administrative costs as a percent of sales increased 50 basis points to 47.3% from 46.8%. Fixed and discretionary expenses increased $1.5 million.  We incurred additional administrative costs of $1.8 million largely from compensation expense and $0.6 million of increased operating insurance claims costs. New locations and improvements also generated increases in depreciation of $0.7 million which was partially offset by $0.4 million in lower rent costs.  Advertising expense was also $0.5 million lower in 2016. Variable expenses were 18.2% as a percent of sales in 2016 compared to 17.8% in 2015 as sales from our in-home design program increased 27.4% and delivery costs increased 20 basis points.
  • Other income includes a $0.9 million gain from the insurance recovery related to the destruction by a storm of our Lubbock, Texas location at the end of 2015 and a $0.7 million gain from the sale of a former retail location.
  • We paid $21.0 million in a special dividend of $1.00 to holders of common stock and $0.95 to holders of Class A common stock. 
  • A dedicated clearance center in Atlanta, Georgia, was opened in mid-December.

Twelve Months ended December 31, 2016 Compared to Same Period of 2015

  • As previously reported, net sales totaled $821.6 million, compared with $804.9 million in 2015, representing an increase of 2.1%.  Comparable store sales increased 2.1%.
  • Average written ticket was up 2.3% and custom upholstery written business rose 4.0%.
  • Gross profit margin increased 50 basis points to 54.0% from 53.5%.  Our LIFO inventory valuation method generated a $1.9 million positive impact in 2016.
  • Selling, general and administrative costs increased 80 basis points to 48.6% from 47.8%. Fixed and discretionary expenses increased $9.0 million to $249.9 million.  We had $6.1 million in additional administrative costs primarily from greater benefits and compensation expense, $3.1 million of which related to increases in medical benefit costs. Depreciation and other occupancy costs from new stores and improvements increased expenses $3.3 million.  Variable expenses as a percent of sales were 18.2% in 2016 versus 17.9% in 2015 as our in-home design business grew and due to higher delivery costs.
  • Other income includes a $3.3 million gain from the insurance recovery related to the destruction by a storm of our Lubbock, Texas location at the end of 2015 and a $0.7 million gain from the sale of a former retail location. 
  • We returned to stockholders via stock repurchases and dividends $51.7 million in 2016 and $22.1 million in 2015.
  • Our retail store count increased to 124, with a net 3 new stores in 2016 as we opened a temporary location to serve Lubbock, Texas, opened two stores, each in a new market, closed a store in Florida, and opened a clearance center in the Atlanta market.

Expectations and Other

  • Total written sales for the past eight weeks, including our full New Year’s weekend sales event, are 3.5% higher than the same period last year and written comparable store sales are up 1.9%.
  • Total delivered sales for the first quarter to date are 5.0% lower than the same day of week last year and comparable store sales are 6.7% less.  The Presidents’ Day sales event ended yesterday, a week later than in 2016.  On average we deliver merchandise to customers within two to four weeks after a holiday sales event and should routinely make up this delivered sales differential versus last year.
  • Our gross profit margin for the full year of 2017 is expected to be 53.6% compared to 54.0% in 2016.  The reduction is primarily due to the impact of the estimated increase to the LIFO reserve.  First half gross profit margin is projected to be 20 basis points higher than the average for 2017, with the second half running approximately 20 basis points lower.
  • Fixed and discretionary type expenses within SG&A are expected to be approximately $260.0 million for 2017, up $10.1 million or 4.0% over those same costs in 2016.  The increase is largely due to an expanded advertising budget, higher occupancy costs from new and relocated stores, and inflation.  Fixed and discretionary type expenses in total should average $64.0 million per quarter in the first half of 2017 and $66.0 million per quarter in the second half.  For 2016, these expenses averaged $61.2 million per quarter in the first half and $63.7 million in the second half.  Variable SG&A expenses for 2017 are anticipated to be at a 18.1% rate, somewhat higher in the first half and lower in the second half due to efficiencies from the typical higher volume in the third and fourth quarters.  Other non-SG&A costs, net of credit revenues, are expected to be $1.0 million for the year.
  • Our effective tax rate for 2017 is expected to be in the 38.4% to 38.5% range.
  • Planned capital expenditures for 2017 are $26.9 million.  Our current 2017 plans include opening one store in a new market, two relocations, one store closure and starting on the expansion of our western distribution center.  These changes will increase selling square footage approximately 0.3% and our store count is planned to remain at 124.
 
 
HAVERTY FURNITURE COMPANIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND
 COMPREHENSIVE INCOME
(In thousands, except per share data – Unaudited)


  Three Months Ended
December 31,
 Year Ended
December 31,
 
  2016 2015 2016 2015 
              
Net sales  $220,595  $215,886  $821,571  $804,870 
Cost of goods sold  99,575  99,681  378,234  374,094 
 Gross profit  121,020  116,205  443,337  430,776 
Credit service charges  56  73  229  286 
  Gross profit and other revenue  121,076  116,278  443,566  431,062 
              
Expenses:             
 Selling, general and administrative  104,427  101,034  399,236  384,801 
 Provision for doubtful accounts  97  147  383  314 
 Other income, net  (1,308) (671) (4,107) (1,617)
  Total expenses  103,216  100,510  395,512  383,498 
              
Income before interest and income taxes  17,860  15,768  48,054  47,564 
Interest expense, net  513  675  2,233  2,289 
              
Income before income taxes  17,347  15,093  45,821  45,275 
Income tax expense  6,400  5,912  17,465  17,486 
  Net income  $10,947  $9,181  $28,356  $27,789 
              
Other comprehensive income, net of tax:             
 Defined benefit pension plan adjustments:  $51  $55  $108  230 
              
  Comprehensive income  $10,998  $9,236  $28,464 $28,019 
              
Basic earnings per share:             
 Common Stock  $0.52  $0.42  $1.32  $1.24 
 Class A Common Stock  $0.50  $0.40  $1.27  $1.18 
              
Diluted earnings per share:             
 Common Stock  $0.51  $0.41  $1.30  $1.22 
 Class A Common Stock  $0.51  $0.39  $1.27  $1.17 
              
Basic weighted average shares outstanding:             
 Common Stock  19,127  20,109  19,492  20,430 
 Class A Common Stock  1,977  2,045  2,014  2,067 
              
Diluted weighted average shares outstanding:             
 Common Stock  21,476  22,473  21,506  22.798 
 Class A Common Stock  1,977  2,045  2,014  2,067 
              
Cash dividends per share:             
 Common Stock  $1.1200  $0.100  $1.440  $0.36 
 Class A Common Stock  $1.0625  $0.095  $1.365  $0.34 
               


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


 December 31, 
 2016  2015 
ASSETS      
Current assets      
 Cash and cash equivalents $63,481  $70,659 
 Investments   12,725 
 Restricted cash and cash equivalents 8,034  8,005 
 Accounts receivable 4,244  5,948 
 Inventories 102,020  108,896 
 Prepaid expenses 8,836  6,137 
 Other current assets 7,500  6,341 
  Total current assets 194,115  218,711 
       
Accounts receivable, long-term 462  655 
Property and equipment 233,667  229,283 
Deferred income tax 18,376  17,245 
Other assets 7,885  5,357 
  Total assets $454,505  $471,251 
       
LIABILITIES AND STOCKHOLDERS’ EQUITY      
Current liabilities      
 Accounts payable $25,662  $27,815 
 Customer deposits 24,923  21,036 
 Accrued liabilities 41,904  42,060 
 Current portion of lease obligations 3,461  3,051 
  Total current liabilities 95,950  93,962 
       
Lease obligations, less current portion 52,013  50,074 
Other liabilities 24,671  25,476 
  Total liabilities 172,634  169,512 
       
Stockholders’ equity 281,871  301,739 
  Total liabilities and stockholders’ equity $454,505  $471,251 
         


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


  Year Ended December 31, 
  2016 2015 
Cash Flows from Operating Activities:       
 Net income $28,356 $27,789 
 Adjustments to reconcile net income to net cash
 provided by operating activities:
       
  Depreciation and amortization  29,045  25,756 
  Gain on insurance recovery  (3,338)  
  Proceeds from insurance recovery received for business
 interruption and destroyed inventory
  2,599   

 
  Stock-based compensation expense  3,872  4,033 
  Excess tax benefit from stock-based plans  (80) (397)
  Deferred income taxes  (1,120) (3,019)
  Provision for doubtful accounts  383  314 
  Other  (400) (160)
 Changes in operating assets and liabilities:       
  Accounts receivable  1,514  960 
  Inventories  6,876  (2,305)
  Customer deposits  3,887  (2,650)
  Other assets and liabilities  (9,508) (590)
  Accounts payable and accrued liabilities  (2,032) 2,501 
   Net cash provided by operating activities  60,054  52,232 
        
Cash Flows from Investing Activities:       
 Capital expenditures  (29,838) (27,143)
 Maturities of certificates of deposit  12,725  7,250 
 Purchase of commercial paper and certificates of deposit    (9,975)
 Proceeds from insurance for destroyed property and equipment  3,011   
 Restricted cash and cash equivalents  (29) 12 
 Other investing activities  944  1,501 
   Net cash used in investing activities  (13,187) (28,355)
        
Cash Flows from Financing Activities:       
 Construction allowance receipts  1,574  6,701 
 Payments on lease obligations  (3,125) (2,534)
 Excess tax benefit from stock-based plans  80  397 
 Dividend paid  (30,409) (8,060)
 Common stock repurchased and retired  (21,282) (14,002)
 Taxes on vested restricted shares  (883) (1,201)
   Net cash used in financing activities  (54,045) (18,699)
(Decrease) increase in cash and cash equivalents  (7,178) 5,178 
Cash and cash equivalents at beginning of year  70,659  65,481 
Cash and cash equivalents at end of year $63,481 $70,659 
        

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 February 22 at 10:00 a.m. ET 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 March 1. The number to access the telephone playback is 1-888-203-1112 (access code: 3952498).

About Havertys

Havertys (NYSE:HVT) (NYSE:HVT.A), established in 1885, is a full-service home furnishings retailer with 124 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 includes statements that constitute forward-looking statement 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.


            

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