Havertys Reports Earnings for Third Quarter 2018
October 30 2018 - 6:12PM
HAVERTYS (NYSE: HVT and HVT.A) reports earnings per share of
$0.39 for the third quarter of 2018, compared to $0.28 for the
third quarter in 2017. The earnings per share for the nine
months ended September 30, 2018 is $0.98, compared to $0.84 for the
same period of 2017.
Clarence H. Smith, chairman, president and chief
executive officer, said, “We had a solid third quarter and made
strides in key operational areas of distribution and store count
right-sizing. Our sales for the period were good and we had
improved gross margins for the quarter. The performance of several
of our new product lines is very encouraging as we enter the fourth
quarter.
“The 10% tariff on furniture, accessories, and
related components imported into the U.S. from China went into
effect for goods received at U.S. ports on September 25, 2018. This
new tariff is scheduled to increase to 25% on January 1, 2019. We
have been working closely with our vendor partners to find workable
solutions related to this new cost. We do not believe that the
tariffs will have a significant impact on our results from
operations for the fourth quarter of 2018. The result of an
increase to 25% is less clear and more pessimistic for the start of
next year. We are currently talking with our suppliers on 2019
pricing and possible options for movement of production to other
countries and we are evaluating retail price increases and
merchandise selection. We anticipate having better visibility on
resolution on many of these variables by the end of the year.”
Financial Highlights
Third Quarter 2018 Compared to Third
Quarter 2017
- As previously announced, net sales increased 1.4% to $210.5
million. Comparable store sales increased 2.6%.
- Total written sales were up 1.8% and written comparable store
sales rose 2.6%.
- Average written ticket increased 5.9% and custom upholstery
written business grew 10.6%.
- Gross profit margins increased 90 basis points to 54.8%.
Merchandise pricing and product mix and reduced product markdowns
contributed to the improvement with a smaller negative LIFO
impact.
- SG&A costs as a percent of sales were 49.0% in 2018 and
49.2% in 2017. Total SG&A dollars were up $1.1 million as
higher labor and fuel costs drove increases in warehouse and
delivery expenses and administrative costs rose due to increased
compensation expense. These increases were partly offset by
decreased occupancy expense.
- Other expense (income), net is composed primarily of a $0.8
million loss on disposal of property used as a delivery truck
drop-site.
Nine Months ended September 30, 2018
Compared to Same Period of 2017
- Net sales increased 0.6% to $608.8 million. Comparable
store sales increased 0.9%.
- Average written ticket rose 3.7% and custom upholstery sales
increased 9.6%.
- Gross profit margins were 54.6% versus 54.3% as a percent of
sales.
- SG&A costs as a percent of sales were 49.8% for 2018
versus 49.5% for 2017. Total SG&A dollars rose $3.6
million due to increased warehouse and delivery costs,
administrative expenses, and selling costs.
- Other expense (income), net is primarily from the disposal of
assets.
Expectations and Other
- Total delivered sales for the fourth quarter to date of
2018 are up approximately 0.2% and comparable store sales are
up 0.6% over the same period last year. Total
written sales for the fourth quarter to date of 2018 are
approximately 2.3% below the same period last year and
written comparable store sales are down 1.8%.
- We expect that gross profit margins for the full year 2018 will
be approximately 54.5%.
- Our estimate for fixed and discretionary type SG&A expenses
for 2018 is $257.0 to $259.0 million compared to $257.0 million for
these same costs in 2017. The variable type costs within SG&A
for the full year of 2018 are expected to be 18.5% percent of sales
compared to 18.2% in 2017.
- We plan to enter the Chattanooga, TN market with a store at the
end of 2018 and are closing stores in Raleigh, NC and Monroe, LA
during the fourth quarter.
- Our standard selling square footage should decrease
approximately 2.2% in 2018 and the expansion of the western
distribution center increased warehouse square footage by 156,000.
Total capital expenditures are estimated to be approximately $20.0
million in 2018.
HAVERTY FURNITURE COMPANIES, INC. |
CONDENSED CONSOLIDATED STATEMENTS OF INCOME |
(In thousands, except per share data –
Unaudited) |
|
|
Three Months EndedSeptember 30, |
|
Nine Months EndedSeptember 30, |
|
|
|
2018 |
|
2017 |
|
2018 |
|
2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales |
|
$ |
210,547 |
|
$ |
207,647 |
|
$ |
608,765 |
|
$ |
604,904 |
|
Cost of goods sold |
|
|
95,175 |
|
|
95,632 |
|
|
276,689 |
|
|
276,175 |
|
Gross
Profit |
|
|
115,372 |
|
|
112,015 |
|
|
332,076 |
|
|
328,729 |
|
Credit service
charges |
|
|
24 |
|
|
38 |
|
|
81 |
|
|
126 |
|
Gross profit and other revenue |
|
|
115,396 |
|
|
112,053 |
|
|
332,157 |
|
|
328,855 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative |
|
|
103,185 |
|
|
102,099 |
|
|
302,942 |
|
|
299,310 |
|
Provision
for doubtful accounts |
|
|
34 |
|
|
18 |
|
|
58 |
|
|
181 |
|
Other
expense (income), net |
|
|
713 |
|
|
(276 |
) |
|
(98 |
) |
|
(1,430 |
) |
Total expenses |
|
|
103,932 |
|
|
101,841 |
|
|
302,902 |
|
|
298,061 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before interest
and income taxes |
|
|
11,464 |
|
|
10,212 |
|
|
29,255 |
|
|
30,794 |
|
Interest expense,
net |
|
|
260 |
|
|
493 |
|
|
1,184 |
|
|
1,641 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income
taxes |
|
|
11,204 |
|
|
9,719 |
|
|
28,071 |
|
|
29,153 |
|
Income tax expense |
|
|
2,852 |
|
|
3,736 |
|
|
7,192 |
|
|
10,999 |
|
Net income |
|
$ |
8,352 |
|
$ |
5,983 |
|
$ |
20,879 |
|
$ |
18,154 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per
share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock |
|
$ |
0.39 |
|
$ |
0.28 |
|
$ |
0.98 |
|
$ |
0.84 |
|
Class A
Common Stock |
|
$ |
0.38 |
|
$ |
0.27 |
|
$ |
0.94 |
|
$ |
0.81 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted
average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock |
|
|
21,230 |
|
|
21,610 |
|
|
21,408 |
|
|
21,582 |
|
Class A
Common Stock |
|
|
1,765 |
|
|
1,798 |
|
|
1,766 |
|
|
1,804 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends per
share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock |
|
$ |
0.1800 |
|
$ |
0.1500 |
|
$ |
0.5400 |
|
$ |
0.3900 |
|
Class A
Common Stock |
|
$ |
0.1700 |
|
$ |
0.1425 |
|
$ |
0.5100 |
|
$ |
0.3675 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HAVERTY FURNITURE COMPANIES, INC. |
CONDENSED CONSOLIDATED BALANCE SHEETS |
(In thousands – Unaudited) |
|
|
September
30,2018 |
|
December 31,
2017 |
|
September
30,2017 |
|
|
|
(Unaudited) |
|
|
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
|
|
Cash and
cash equivalents |
|
$ |
96,269 |
|
$ |
79,491 |
|
$ |
86,903 |
|
Restricted cash and cash equivalents |
|
|
8,226 |
|
|
8,115 |
|
|
8,089 |
|
Accounts
receivable, net |
|
|
1,827 |
|
|
2,408 |
|
|
2,706 |
|
Inventories |
|
|
108,344 |
|
|
103,437 |
|
|
99,664 |
|
Prepaid
expenses |
|
|
9,818 |
|
|
11,314 |
|
|
8,910 |
|
Other
current assets |
|
|
6,291 |
|
|
5,922 |
|
|
6,973 |
|
Total current assets |
|
|
230,775 |
|
|
210,687 |
|
|
213,245 |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable,
long-term, net |
|
|
227 |
|
|
254 |
|
|
311 |
|
Property and equipment,
net |
|
|
220,286 |
|
|
229,215 |
|
|
226,693 |
|
Deferred income
taxes |
|
|
12,896 |
|
|
12,375 |
|
|
21,339 |
|
Other assets |
|
|
9,400 |
|
|
8,798 |
|
|
8,611 |
|
Total assets |
|
$ |
473,584 |
|
$ |
461,329 |
|
$ |
470,199 |
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
Current
liabilities |
|
|
|
|
|
|
|
|
|
|
Accounts
payable |
|
$ |
24,926 |
|
$ |
20,501 |
|
$ |
26,550 |
|
Customer
deposits |
|
|
30,541 |
|
|
27,813 |
|
|
29,454 |
|
Accrued
liabilities |
|
|
41,713 |
|
|
37,582 |
|
|
38,418 |
|
Current
portion of lease obligations |
|
|
3,938 |
|
|
3,788 |
|
|
3,733 |
|
Total current liabilities |
|
|
101,118 |
|
|
89,684 |
|
|
98,155 |
|
|
|
|
|
|
|
|
|
|
|
|
Lease obligations, less
current portion |
|
|
47,829 |
|
|
50,803 |
|
|
51,523 |
|
Other liabilities |
|
|
32,214 |
|
|
26,700 |
|
|
26,549 |
|
Total liabilities |
|
|
181,161 |
|
|
167,187 |
|
|
176,227 |
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’
equity |
|
|
292,423 |
|
|
294,142 |
|
|
293,972 |
|
Total liabilities and stockholders’ equity |
|
$ |
473,584 |
|
$ |
461,329 |
|
$ |
470,199 |
|
HAVERTY FURNITURE COMPANIES, INC. |
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS |
(In thousands – Unaudited) |
|
|
Nine Months Ended September
30, |
|
|
|
2018 |
|
2017 |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM
OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
Net
income |
|
$ |
20,879 |
|
$ |
18,154 |
|
Adjustments to reconcile net income to net cash
provided by operating activities: |
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
22,650 |
|
|
22,819 |
|
Stock-based compensation expense |
|
|
3,781 |
|
|
3,045 |
|
Deferred
income taxes |
|
|
(592 |
) |
|
(2,990 |
) |
Gain on
insurance recovery |
|
|
(307 |
) |
|
(1,531 |
) |
Proceeds
from insurance recovery |
|
|
266 |
|
|
916 |
|
Provision
for doubtful accounts |
|
|
58 |
|
|
181 |
|
Other |
|
|
866 |
|
|
626 |
|
Changes in operating
assets and liabilities: |
|
|
|
|
|
|
|
Accounts
receivable |
|
|
550 |
|
|
1,508 |
|
Inventories |
|
|
(4,907 |
) |
|
2,356 |
|
Customer
deposits |
|
|
2,728 |
|
|
4,531 |
|
Other assets and
liabilities |
|
|
6,534 |
|
|
1,977 |
|
Accounts payable
and accrued liabilities |
|
|
9,988 |
|
|
(2,844 |
) |
Net cash provided by operating activities |
|
|
62,494 |
|
|
48,748 |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM
INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
Capital
expenditures |
|
|
(18,231 |
) |
|
(15,394 |
) |
Proceeds
from sale of property and equipment |
|
|
2,421 |
|
|
- |
|
Proceeds
from insurance for destroyed property and equipment |
|
|
55 |
|
|
1,045 |
|
Other |
|
|
- |
|
|
83 |
|
Net cash used in investing activities |
|
|
(15,755 |
) |
|
(14,266 |
) |
|
|
|
|
|
|
|
|
CASH FLOWS FROM
FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
Payments on
lease obligations |
|
|
(2,824 |
) |
|
(2,577 |
) |
Taxes on
vested restricted shares |
|
|
(1,233 |
) |
|
(1,555 |
) |
Dividends
paid |
|
|
(11,337 |
) |
|
(8,223 |
) |
Common
stock purchased |
|
|
(14,456 |
) |
|
- |
|
Construction allowance receipts |
|
|
- |
|
|
1,350 |
|
Net cash used in financing activities |
|
|
(29,850 |
) |
|
(11,005 |
) |
|
|
|
|
|
|
|
|
Increase in cash, cash
equivalents and restricted cash equivalents
during the period |
|
|
16,889 |
|
|
23,477 |
|
|
|
|
|
|
|
|
|
Cash, cash equivalents
and restricted cash equivalents at beginning of
period |
|
|
87,606 |
|
|
71,515 |
|
|
|
|
|
|
|
|
|
Cash, cash equivalents
and restricted cash equivalents at end of
period |
|
$ |
104,495 |
|
$ |
94,992 |
|
|
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, October
31 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
7. The number to access the telephone playback is
1‑888-203-1112 (access code: 8583097).
About Havertys
Havertys (NYSE: HVT and HVT.A),
established in 1885, is a full-service home furnishing 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 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; the imposition of tariffs and other trade
barriers and the effect of retaliatory trade measures; 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.
Contact:Havertys (404) 443-2900Richard B. Hare EVP &
CFOJenny Hill Parker SVP, Finance, Secretary and
Treasurer
SOURCE: Havertys
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