Havertys Reports Earnings for Third Quarter 2017

ATLANTA, Oct. 31, 2017 (GLOBE NEWSWIRE) -- HAVERTYS (NYSE:HVT) (NYSE:HVT.A) reports earnings per share of $0.28 for the third quarter of 2017, compared to $0.34 for the third quarter in 2016. The earnings per share for the nine months ended September 30, 2017 is $0.84, compared to $0.79 for the same period of 2016.

Clarence H. Smith, chairman, president and chief executive officer, said, “The third quarter was a challenging period for Havertys as well as others in our industry. Our earnings reflect the previously released softer sales results that were impacted by Hurricane Irma. We achieved increased profit margins, with pricing discipline, quality control, and operational focus, even as ocean freight rates increased. The lower sales results made it difficult to leverage fixed costs and discretionary expenses which were well controlled.

“We look forward to the remainder of 2017 and the seasonally strongest sales events of the year. We remain passionate about serving the on-trend furniture customer and confident in our ability to innovate and grow our business, despite strains from the current housing and competitive landscape.

“The expansion of our western distribution facility in Coppell, Texas began in September and, in mid-October, we opened a replacement store in the heart of the best retail shopping area in Columbia, South Carolina. These investments are part of our strategic growth and store rationalization plan. We continue to generate strong cash flow and in August increased the quarterly dividend 25% to our common stockholders. We remain committed to improving our business, maintaining strong cash flow, and returning value to our stockholders.”

Financial Highlights

Third Quarter 2017 Compared to Third Quarter 2016

  • As previously announced, net sales decreased 1.9% to $207.6 million. Comparable store sales were down 2.9%.
  • Total written sales were down 3.5% and written comparable store sales decreased 4.2%. During September 2017, 55 stores were closed for one or more days due to Hurricane Irma. The negative impact on third quarter total written sales and written comparable store sales because of these closures is estimated at 1.2%.
  • Hurricane Irma caused only minor property damage but caused us to halt deliveries and close two distribution centers and our corporate offices.
  • Average written ticket was up 0.5% and custom upholstery written business increased 2.6%.
  • Gross profit margins increased 20 basis points to 53.9%. Execution on pricing and product mix and reduced product markdowns offset the higher freight and negative LIFO impact. There was a $0.5 million increase in the LIFO reserve in 2017 versus a $0.7 million decrease in 2016, a negative change of $1.2 million or 59 basis points.
  • SG&A costs as a percent of sales were 49.2% in 2017 and 48.1% in 2016. Total SG&A dollars was relatively flat for the periods. The planned increases in advertising and marketing of $2.1 million and higher occupancy costs of $1.0 million due to greater depreciation and other store costs in 2017 were offset by $1.4 million lower administrative expenses for incentive compensation and health benefit costs and reduced warehouse and delivery expenses of $1.1 million.
  • Other income includes a $0.4 million gain from insurance recovery related to our Wichita, Kansas and Lubbock, Texas locations in 2017 and $0.5 million for Lubbock in 2016.

Nine Months ended September 30, 2017 Compared to Same Period of 2016

  • Net sales increased 0.7% to $604.9 million. Comparable store sales were down 0.6%.
  • Average written ticket increased 2.0% and custom upholstery written business was up 4.0%.
  • Gross profit margins were 54.3% versus 53.6% as a percent of sales. The LIFO reserve year-over-year negative change was $1.3 million or 21 basis points.
  • SG&A costs as a percent of sales were 49.5% for 2017 versus 49.1% for 2016. Total SG&A dollars increased $4.5 million primarily due to rising occupancy costs of $2.9 million and greater advertising and marketing spending of $2.0 million partly offset by a $1.0 million reduction in administrative costs.
  • Other income includes a $1.5 million gain from insurance recovery in 2017 and $2.5 million in 2016.

Expectations and Other

  • Total written sales for the fourth quarter to date of 2017 are up approximately 0.4% over the same period last year and written comparable store sales are down 0.7%. Total delivered sales for the fourth quarter to date of 2017 are down 2.9% and comparable store sales decreased 3.7% over the same period last year.
  • We expect that gross profit margins for the full year 2017 will be approximately 54.2%.
  • Our estimate for fixed and discretionary type SG&A expenses for 2017 is $257.0 million compared to $249.9 million for these same costs in 2016. This is a change from our previous estimate of $259.0 primarily from reductions in group medical insurance and incentive compensation. The variable type costs within SG&A for the full year of 2017 are expected to be 18.2% percent of sales, the same rate in 2016.
  • We opened a new store in Columbia, South Carolina in mid-October and closed a location in Birmingham, Alabama.
  • We expect to increase standard selling square footage approximately 0.3% in 2017. Total capital expenditures are estimated to be approximately $28.0 million in 2017 and $18.0 million in 2018.

(In thousands, except per share data – Unaudited)

Three Months Ended
September 30,
Nine Months Ended
September 30,
2017 2016 2017 2016
Net Sales $207,647 $211,690 $604,904 $600,976
Cost of goods sold 95,632 97,953 276,175 278,660
Gross Profit 112,015 113,737 328,729 322,316
Credit service charges 38 54 126 173
Gross profit and other revenue 112,053 113,791 328,855 322.489
Selling, general and administrative 102,099 101,745 299,310 294,809
Provision for doubtful accounts 18 70 181 286
Other (income) expense, net (276) (705) (1,430) (2,799)
Total expenses 101,841 101,110 298,061 292,296
Income before interest and income taxes 10,212 12,681 30,794 30,193
Interest expense, net 493 556 1,641 1,719
Income before income taxes 9,719 12,125 29,153 28,474
Income tax expense 3,736 4,759 10,999 11,065
Net income $5,983 $7,366 $18,154 $17,409
Other comprehensive income
Adjustments related to retirement plan; net of tax expense of $9 and $27 in 2017 and $12 and $34 in 2016 $13 $18 $40 $56
Comprehensive income $5,996 $7,384 $18,194 $17,465
Basic earnings per share:
Common Stock $0.28 $0.35 $0.86 $0.81
Class A Common Stock $0.27 $0.33 $0.82 $0.77
Diluted earnings per share:
Common Stock $0.28 $0.34 $0.84 $0.79
Class A Common Stock $0.27 $0.33 $0.81 $0.76
Basic weighted average shares outstanding:
Common Stock 19,421 19,083 19,365 19,615
Class A Common Stock 1,798 2,021 1,804 2,026
Diluted weighted average shares outstanding:
Common Stock 21,610 21,436 21,582 21,972
Class A Common Stock 1,798 2,021 1,804 2,026
Cash dividends per share:
Common Stock $0.1500 $0.1200 $0.3900 $0.3200
Class A Common Stock $0.1425 $0.1125 $0.3675 $0.3025

(In thousands – Unaudited)

September 30,
December 31,
September 30,
(Unaudited) (Unaudited)
Current assets
Cash and cash equivalents $86,903 $63,481 $75,567
Restricted cash and cash equivalents 8,089 8,034 8,025
Accounts receivable 2,706 4,244 4,478
Inventories 99,664 102,020 99,075
Prepaid expenses 8,910 8,836 9,019
Other current assets 6,973 7,500 6,409
Total current assets 213,245 194,115 202,573
Accounts receivable, long-term 311 462 509
Property and equipment 226,693 233,667 237,197
Deferred income taxes 21,339 18,376 20,241
Other assets 8,611 7,885 7,976
Total assets $470,199 $454,505 $468,496
Current liabilities
Accounts payable $26,550 $25,662 $24,085
Customer deposits 29,454 24,923 30,454
Accrued liabilities 38,418 41,904 38,381
Current portion of lease obligations 3,733 3,461 3,389
Total current liabilities 98,155 95,950 96,309
Lease obligations, less current portion 51,523 52,013 52,915
Other liabilities 26,549 24,671 25,635
Total liabilities 176,227 172,634 174,859
Stockholders’ equity 293,972 281,871 293,637
Total liabilities and stockholders’ equity $470,199 $454,505 $468,496

(In thousands – Unaudited)

Nine Months Ended
September 30,
2017 2016
Net income $18,154 $17,409
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 22,819 21,472
Stock-based compensation expense 3,045 2,992
Deferred income taxes (2,990) (3,030)
Gain on insurance recovery (1,531) (2,460)
Proceeds from insurance recovery 916 2,327
Provision for doubtful accounts 181 286
Other 626 450
Changes in operating assets and liabilities:
Accounts receivable 1,508 1,330
Inventories 2,356 9,821
Customer deposits 4,531 9,418
Other assets and liabilities 1,977 (5,176)
Accounts payable and accrued liabilities (2,844) (7,603)
Net cash provided by operating activities 48,748 47,236
Capital expenditures (15,394) (25,292)
Maturities of investments - 12,000
Proceeds from insurance recovery for destroyed property and equipment 1,045 2,312
Other 28 (3)
Net cash used in investing activities (14,321) (10,983)
Payments on lease obligations (2,577) (2,295)
Taxes on vested restricted shares (1,555) (883)
Dividends paid (8,223) (6,885)
Common stock purchased - (21,282)
Construction allowance receipts 1,350 -
Net cash used in financing activities (11,005) (31,345)
Increase in cash and cash equivalents during the period 23,422 4,908
Cash and cash equivalents at beginning of period 63,481 70,659
Cash and cash equivalent at end of period $86,903 $75,567

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, November 1, 2017 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 8, 2017. The number to access the telephone playback is 1-888-203-1112 (access code: 2246359).

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; 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.

About Havertys

Havertys (NYSE:HVT) (NYSE:HVT.A), established in 1885, is a full-service home furnishing retailer with 125 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 detailed from time to time in the company’s reports filed with the SEC.

Havertys (404) 443-2900
Richard B. Hare
Jenny Hill Parker
SVP, Finance, Secretary and Treasurer

SOURCE: Havertys

Source:Haverty Furniture Companies, Inc.