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.

Contact: Havertys 404-443-2900 Dennis L. Fink EVP & CFO Jenny Hill Parker SVP, finance, secretary and treasurer

Source:Haverty Furniture Companies, Inc.