OREANDA-NEWS. August 02, 2016. HAVERTYS (NYSE:HVT) (NYSE:HVT.A) reports earnings per share of \\$0.24 for the second quarter ended June 30, 2016 compared to \\$0.21 for the same period of 2015.  The earnings per share for the six months ended June 30, 2016 is \\$0.45 compared to \\$0.48 for the same period in 2015.

Clarence H. Smith, chairman, president and chief executive officer, said, “We are pleased with our solid sales increases in the second quarter following the soft results in the first quarter and encouraged by third quarter results to date. Our second quarter earnings are up compared to the prior year even with higher fixed costs, primarily from our new locations still in their market share development stage.  We are also experiencing higher personnel investments for health benefits costs and wages.

We are focused on reducing costs and improving operations, measured store growth and returns to shareholders.  We recently completed the expansion of our Florida Distribution Center in Lakeland which will allow us to more efficiently service its markets while reducing handling and inbound freight costs. Our College Station, Texas store will open later this month and a Charlottesville, Virginia location in early October, both new markets for Havertys.  We are also closing an older location in Florida where customers can be served by newer stores.  During the first half of the year, we generated \\$10.6 million in operating cash flow and returned \\$25.7 million to shareholders via dividend and share repurchases.

The macro environment for new and existing home sales remains positive but slower economic growth and shocks from political and world events remain a concern.  We believe our position and plans will garner market share gains, improve profitability and returns to shareholders.”

Financial Highlights

Second Quarter 2016 Compared to Second Quarter 2015

  • As previously announced, net sales increased 3.8% to \\$194.8 million.  Comparable store sales rose 3.8%.
  • Written total and comparable store sales both rose 6.0%.  Havertys’ stores are closed for Easter and the positive impact on the second quarter written sales from the holiday occurring in March this year versus April last year is estimated at 1.5%.
  • Average written ticket was up 2.2% and custom upholstery written business rose 7.1%. 
  • Gross profit margins increased 10 basis points to 53.5%.
  • SG&A costs as a percent of sales were 49.6% in 2016 and 49.4% in 2015. Total SG&A dollars increased \\$4.0 million due to increases in administrative costs of \\$2.1 million largely due to health benefits costs, selling expense of \\$1.2 million, occupancy costs of \\$0.7 million and a decrease in advertising expense of \\$0.3 million.
  • Other income includes a \\$1.9 million gain from the insurance recovery for inventory and the minimum liquidated value of the building destroyed by a storm at our Lubbock, Texas location.  Additional gains for the building’s full replacement cost will be recognized in future quarters.
  • We repurchased 1,149,042 shares of common stock for \\$21.0 million.

Six Months ended June 30, 2016 Compared to Same Period of 2015

  • Net sales were up 2.7% to \\$389.3 million. Comparable store sales were up 2.3%.
  • Average ticket rose 1.7% and custom upholstery orders increased 5.5%.
  • Gross profit margins were up 10 basis points to 53.6% compared to 53.5%.
  • SG&A costs as a percent of sales increased to 49.6% compared to 48.8%.  Total SG&A dollars increased \\$8.0 million as a result of rising administrative expenses of \\$2.7 million mostly due to health benefits costs, increases in selling expenses of \\$2.0 million, occupancy costs of \\$1.5 million, warehouse and delivery expenses of \\$0.9 million, and \\$0.9 million for advertising because of higher spending in the first quarter.

Expectations and Other

  • Total delivered sales for the third quarter to date of 2016 are up approximately 3.8% over the same period last year and comparable store sales are up 3.9%. Total written sales for the third quarter to date of 2016 are up approximately 3.8% over the same period last year and written comparable store sales are up 3.6%.
  • Our previous guidance on gross profit margins for the full year 2016 is unchanged at 53.5%.
  • We expect our fixed and discretionary type expenses for the full year of 2016 will be \\$252 million, the high end of our previous estimated range due to increased group medical costs.  The \\$252.0 million compares to \\$240.9 million for the same expenses in 2015.  The estimated variable type costs within SG&A for the full year of 2016 remains at 17.9%, the same as 2015.
  • We expect to increase 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 STATEMENTS OF INCOME 
(In Thousands, except per share data – Unaudited) 
  
  Three Months Ended
June 30,		 Six Months Ended
June 30,		 
  2016 2015 2016 2015 
              
Net sales \\$194,774 \\$187,732 \\$389,285 \\$379,063 
Cost of goods sold  90,614  87,550  180,706  176,234 
Gross profit  104,160  100,182  208,579  202,829 
Credit service charges  54  69  119  142 
Gross profit and other revenue  104,214  100,251  208,698  202,971 
              
Expenses:             
Selling, general and administrative  96,711  92,744  193,064  185,048 
Provision for doubtful accounts  111  61  215  84 
Other income, net  (1,911) (921) (2,093) (947)
Total expenses  94,911  91,884  191,186  184,185 
              
Income before interest and income taxes  9,303  8,367  17,512  18,786 
Interest expense, net  541  528  1,163  1,019 
               
Income before income taxes  8,762  7,839  16,349  17,767 
Income tax expense  3,388  3,006  6,306  6,815 
Net income \\$5,374 \\$4,833 \\$10,043 \\$10,952 
              
              
Basic earnings per share:             
Common Stock \\$0.25 \\$0.21 \\$0.46 \\$0.49 
Class A Common Stock \\$0.24 \\$0.20 \\$0.44 \\$0.46 
              
Diluted earnings per share:             
Common Stock \\$0.24 \\$0.21 \\$0.45 \\$0.48 
Class A Common Stock \\$0.23 \\$0.20 \\$0.43 \\$0.46 
              
Basic weighted average shares outstanding:             
Common Stock  19,645  20,600  19,883  20,585 
Class A Common Stock  2,027  2,079  2,029  2,080 
              
Diluted weighted average shares outstanding:             
Common Stock  21,989  22,955  22,243  22,967 
Class A Common Stock  2,027  2,079  2,029  2,080 
              
Cash dividends per share:             
Common Stock \\$0.100 \\$0.080 \\$0.200 \\$0.160 
Class A Common Stock \\$0.095 \\$0.075 \\$0.190 \\$0.150 
  
HAVERTY FURNITURE COMPANIES, INC. 
CONDENSED CONSOLIDATED BALANCE SHEETS 
(In Thousands - Unaudited) 
  
  June 30,
2016		 December 31,
2015		 June 30,
2015		 
  (Unaudited)    (Unaudited) 
ASSETS        
Current assets          
 Cash and cash equivalents  \\$48,525  \\$70,659  \\$66,701 
 Investments  1,250  12,725  6,500 
 Restricted cash and cash equivalents  8,017  8,005  8,002 
 Accounts receivable  4,572  5,948  6,107 
 Inventories  109,942  108,896  112,345 
 Prepaid expenses  15,912  6,137  9,434 
 Other current assets  5,601  6,341  6,761 
  Total current assets  193,819  218,711  215,850 
           
Accounts receivable, long-term  511  655  678 
Property and equipment  238,014  229,283  231,486 
Deferred income taxes  18,423  17,245  17,897 
Other assets  6,184  5,357  7,082 
  Total assets  \\$456,951  \\$471,251  \\$472,993 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY          
Current liabilities          
 Accounts payable  \\$25,375  \\$27,815  \\$23,769 
 Customer deposits  27,809  21,036  30,038 
 Accrued liabilities  34,531  42,060  34,504 
 Deferred income taxes  —  —  5,689 
 Current portion of lease obligations  3,341  3,051  2,928 
  Total current liabilities  91,056  93,962  96,928 
           
Lease obligations, less current portion  52,179  50,074  50,712 
Other liabilities  25,776  25,476  26,129 
  Total liabilities  169,011  169,512  173,769 
           
Stockholders’ equity  287,940  301,739  299,224 
  Total liabilities and stockholders’ equity  \\$456,951  \\$471,251  \\$472,993 
HAVERTY FURNITURE COMPANIES, INC. 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 
(In Thousands – Unaudited) 
  
  Six Months Ended
June 30,		 
  2016 2015 
CASH FLOWS FROM OPERATING ACTIVITIES:       
 Net income \\$10,043 \\$10,952 
 Adjustments to reconcile net income to net
 cash provided by operating activities:		       
  Depreciation and amortization  13,992  12,503 
  Share-based compensation expense  2,163  2,160 
  Gain on insurance recovery  (1,914) — 
  Proceeds from insurance recovery for destroyed inventory  1,041  — 
  Provision for doubtful accounts  215  84 
  Other  (747) 621 
 Changes in operating assets and liabilities:       
  Accounts receivable  1,305  1,008 
  Inventories  (1,046) (5,206)
  Customer deposits  6,773  6,351 
  Other assets and liabilities  (10,927) (3,022)
  Accounts payable and accrued liabilities  (10,269) (7,350)
   Net cash provided by operating activities  10,629  18,101 
        
CASH FLOWS FROM INVESTING ACTIVITIES:       
 Capital expenditures  (18,523) (14,521)
 Maturities of investments  11,500  2,250 
 Proceeds from insurance recovery for destroyed property  2,297  — 
 Other  1  33 
   Net cash used in investing activities  (4,725) (12,238)
        
CASH FLOWS FROM FINANCING ACTIVITIES:       
 Construction allowance receipts  —  3,286 
 Payments on lease obligations  (1,505) (1,226)
 Taxes on vested restricted shares  (883) (1,152)
 Dividends paid  (4,368) (3,609)
 Common stock purchased  (21,282) (1,942)
   Net cash used in financing activities  (28,038) (4,643)
(Decrease) increase in cash and cash equivalents during the period  (22,134) 1,220 
Cash and cash equivalents at beginning of period  70,659  65,481 
Cash and cash equivalents at end of period \\$48,525 \\$66,701 
        

About Havertys

Havertys (NYSE:HVT) (NYSE:HVT.A), established in 1885, is a full-service home furnishings retailer with 122 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.

Conference Call Information

The company invites interested parties to listen to the live audiocast of the conference call on Tuesday, August 2, 2016 at 10:00 a.m. ET 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 Tuesday, August 9, 2016. The number to access the telephone playback is 1(888)?203-1112 (replay passcode:  8276743).