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Haverty Furniture(HVT) - 2021 Q4 - Annual Report
2022-03-01 19:58
UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____ to _____ Commission file number: 1-14445 HAVERTY FURNITURE COMPANIES, INC. Maryland 58-0281900 (State of Incorporation) (IRS Employer Identification Number) 780 Johnson ...
Haverty Furniture(HVT) - 2021 Q4 - Earnings Call Transcript
2022-02-16 18:56
Financial Data and Key Metrics Changes - The company reported record fourth quarter and full year performance, achieving $1 billion in net sales for the first time, with earnings per share of $4.90 compared to $3.12 the previous year [5] - In Q4 2021, net sales were $265.9 million, a 10.2% increase year-over-year, while comparable store sales rose by 9.2% [26] - Gross profit margin decreased by 60 basis points from 57% to 56.4% due to increased freight and product costs [26] - Net income for Q4 2021 was $24.3 million or $1.35 per diluted share, compared to $25.4 million or $1.37 per share in the same quarter last year [29] Business Line Data and Key Metrics Changes - The company is focusing on enhancing its e-commerce business, with pure Internet sales transactions currently in the mid-single digits percentage of sales, aiming to reach the 10% range post-relaunch [14] - The company plans to triple its third-party curated collections this year, indicating a strong focus on expanding product offerings [15] Market Data and Key Metrics Changes - The company is positioned in 9 out of the top 10 hottest housing markets in the U.S., with plans to open stores in key regions such as Northern Virginia, Austin, and Indianapolis [9] - The company added capacity to its main distribution center, allowing for 20% more storage, and is investing in regional facilities to support growth in the Mid-Atlantic and Mid-American regions [11] Company Strategy and Development Direction - The company plans to open 5 new stores per year for the next three years starting in 2023, focusing on its distribution footprint [10][44] - Capital expenditures for 2022 are expected to be approximately $37 million, with key investments in stores, distribution, and IT enhancements [13][36] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the sustainability of demand, noting a healthy backlog and no significant order cancellations [39][42] - The company anticipates a return to normalized receiving levels by February and March 2022, following supply chain disruptions [19] - Management expects gross profit margins for 2022 to be between 56.7% and 57%, with improvements anticipated over the course of the year [34] Other Important Information - The company has no funded debt on its balance sheet and ended Q4 2021 with $166.1 million in cash and cash equivalents [31] - The company purchased $22.3 million of common shares in Q4 2021, totaling $41.8 million for the year, representing approximately 8% of its current market capitalization [32] Q&A Session Summary Question: Sustainability of demand versus pre-pandemic levels and notable order cancellations - Management has not seen notable cancellations and reports a healthy backlog, which is up over last year [39][42] Question: Store growth and geographic footprint - New store openings will primarily be within the current distribution footprint, with potential expansion into other states [44] Question: Demand trends throughout the quarter - Written trends were soft in October and November but showed positive trends in December [49] Question: Promotions and competitive environment - The company has not changed its promotion cadence and continues to focus on digital marketing efforts [52] Question: Expectations for freight and product costs - Management noted some leveling out of container rates but still expects elevated costs to impact margins [53]
Haverty Furniture(HVT) - 2021 Q3 - Quarterly Report
2021-11-02 15:36
PART I. FINANCIAL INFORMATION This section provides the unaudited condensed consolidated financial information for Haverty Furniture Companies, Inc., covering financial statements and management's analysis [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements, including balance sheets, income statements, and cash flows, with detailed explanatory notes [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheet Highlights | Metric | Sep 30, 2021 (in thousands) | Dec 31, 2020 (in thousands) | Change (in thousands) | % Change | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------- | :------- | | Cash and cash equivalents | $225,674 | $200,058 | $25,616 | 12.8% | | Inventories | $118,961 | $89,908 | $29,053 | 32.3% | | Total current assets | $378,521 | $316,244 | $62,277 | 19.7% | | Total assets | $763,760 | $680,372 | $83,388 | 12.3% | | Customer deposits | $120,149 | $86,183 | $33,966 | 39.4% | | Total current liabilities | $245,800 | $204,041 | $41,759 | 20.5% | | Total liabilities | $472,219 | $427,405 | $44,814 | 10.5% | | Total stockholders' equity | $291,541 | $252,967 | $38,574 | 15.2% | [Condensed Consolidated Statements of Comprehensive Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) Condensed Consolidated Statements of Comprehensive Income Highlights | Metric | 3 Months Ended Sep 30, 2021 (in thousands) | 3 Months Ended Sep 30, 2020 (in thousands) | YoY Change (in thousands) | % YoY Change | | :------------------------------------------- | :----------------------------------------- | :----------------------------------------- | :------------------------ | :----------- | | Net sales | $260,378 | $217,513 | $42,865 | 19.7% | | Gross profit | $148,003 | $122,177 | $25,826 | 21.1% | | Net income | $24,233 | $18,261 | $5,972 | 32.7% | | Basic EPS (Common Stock) | $1.35 | $0.98 | $0.37 | 37.8% | | Diluted EPS (Common Stock) | $1.31 | $0.97 | $0.34 | 35.1% | | Cash dividends per share (Common Stock) | $0.25 | $0.20 | $0.05 | 25.0% | | Metric | 9 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2020 (in thousands) | YoY Change (in thousands) | % YoY Change | | :------------------------------------------- | :----------------------------------------- | :----------------------------------------- | :------------------------ | :----------- | | Net sales | $746,858 | $506,913 | $239,945 | 47.3% | | Gross profit | $424,538 | $281,376 | $143,162 | 50.9% | | Net income | $66,497 | $33,720 | $32,777 | 97.2% | | Basic EPS (Common Stock) | $3.67 | $1.80 | $1.87 | 103.9% | | Diluted EPS (Common Stock) | $3.55 | $1.77 | $1.78 | 100.6% | | Cash dividends per share (Common Stock) | $0.72 | $0.55 | $0.17 | 30.9% | [Condensed Consolidated Statements of Cash Flows](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows Highlights | Cash Flow Activity | 9 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2020 (in thousands) | Change (in thousands) | | :-------------------------------- | :----------------------------------------- | :----------------------------------------- | :-------------------- | | Net cash provided by operating activities | $88,998 | $99,821 | $(10,823) | | Net cash (used in) provided by investing activities | $(27,982) | $67,194 | $(95,176) | | Net cash used in financing activities | $(35,397) | $(30,855) | $(4,542) | | Increase in cash, cash equivalents and restricted cash equivalents | $25,619 | $136,160 | $(110,531) | [Notes to Condensed Consolidated Financial Statements](index=6&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) [NOTE A – Business and Basis of Presentation](index=6&type=section&id=NOTE%20A%20%E2%80%93%20Business%20and%20Basis%20of%20Presentation) - Havertys operates as a retailer of residential furniture in the middle to upper-middle price ranges, exclusively under the Havertys brand, within a single reportable segment[12](index=12&type=chunk) - Interim financial statements are prepared in accordance with Form 10-Q instructions and U.S. GAAP, involving management estimates and assumptions that may differ from actual results[12](index=12&type=chunk)[13](index=13&type=chunk) - The Company is subject to various legal claims but believes any resulting liability will not materially adversely affect its financial condition, results of operations, or cash flows[14](index=14&type=chunk) [Note B – COVID-19](index=6&type=section&id=Note%20B%20%E2%80%93%20COVID-19) - Havertys closed all stores and halted deliveries in mid-March 2020 due to COVID-19, reopening 103 locations by May 1, 2020, and the remaining 17 by June 20, 2020, with deliveries restarting May 5, 2020[15](index=15&type=chunk) - Since reopening, business has been strong due to increased consumer spending on home furnishings, but the company faces product shortages, supply chain disruptions, and difficulties in increasing distribution and delivery capacity due to staffing shortages[16](index=16&type=chunk) - The duration and extent of the pandemic's influence on consumers and the business remain uncertain, and estimates and assumptions could change significantly in future reports[17](index=17&type=chunk) [NOTE C – Stockholders' Equity](index=7&type=section&id=NOTE%20C%20%E2%80%93%20Stockholders%27%20Equity) Stockholders' Equity Summary | Metric | Sep 30, 2021 (in thousands) | Dec 31, 2020 (in thousands) | Change (in thousands) | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------- | | Common Stock | $29,906 | $29,600 | $306 | | Class A Common Stock | $1,810 | $1,996 | $(186) | | Additional paid-in capital | $100,816 | $96,850 | $3,966 | | Retained earnings | $358,113 | $304,626 | $53,487 | | Treasury stock | $(196,692) | $(177,545) | $(19,147) | | Total stockholders' equity | $291,541 | $252,967 | $38,574 | - For the nine months ended September 30, 2021, net income contributed **$66.5 million** to retained earnings, while dividends declared for Common Stock and Class A Common Stock totaled **$12.1 million** and **$0.9 million**, respectively[19](index=19&type=chunk) - Treasury stock acquisitions amounted to **$19.5 million** for the nine months ended September 30, 2021, contributing to the decrease in total stockholders' equity[19](index=19&type=chunk) [NOTE D – Interim LIFO Calculations](index=9&type=section&id=NOTE%20D%20%E2%80%93%20Interim%20LIFO%20Calculations) - Interim LIFO calculations are based on management's estimates of inventory levels and inflation rates, which are subject to change based on final year-end LIFO inventory valuations[21](index=21&type=chunk) [NOTE E – Fair Value of Financial Instruments](index=9&type=section&id=NOTE%20E%20%E2%80%93%20Fair%20Value%20of%20Financial%20Instruments) - The fair values of cash, restricted cash, accounts receivable, accounts payable, and customer deposits approximate their carrying values due to their short-term nature[22](index=22&type=chunk) - Assets related to self-directed, non-qualified deferred compensation plans were approximately **$9.2 million** at September 30, 2021, and **$7.9 million** at December 31, 2020, valued using Level 1 valuation techniques (quoted market prices)[22](index=22&type=chunk) [NOTE F – Credit Agreement](index=9&type=section&id=NOTE%20F%20%E2%80%93%20Credit%20Agreement) - The Company has a **$60.0 million** revolving credit facility, secured by inventory, accounts receivable, cash, and other personal property, maturing on September 27, 2024[24](index=24&type=chunk) - Borrowings under the facility were **$43.8 million** in March 2020, repaid in June 2020, with total interest paid of **$0.4 million** for the nine months ended September 30, 2020[25](index=25&type=chunk) - As of September 30, 2021, the borrowing base was **$15.7 million**, with no outstanding letters of credit, resulting in a net availability of **$15.7 million**[26](index=26&type=chunk) [Note G – Revenues](index=9&type=section&id=Note%20G%20%E2%80%93%20Revenues) - Revenue from merchandise sales and related service fees is recognized upon delivery to the customer, net of expected returns and sales tax[27](index=27&type=chunk) - Customer deposits, recorded when payments are received in advance of delivery, totaled **$120.1 million** at September 30, 2021, an increase from **$86.2 million** at December 31, 2020[27](index=27&type=chunk) Net Sales by Product Category | Product Category | 3 Months Ended Sep 30, 2021 Net Sales (in thousands) | % of Net Sales | 9 Months Ended Sep 30, 2021 Net Sales (in thousands) | % of Net Sales | | :------------------------------ | :----------------------------------------- | :------------- | :----------------------------------------- | :------------- | | Case Goods | $92,440 | 35.5% | $272,941 | 36.5% | | Upholstery | $109,375 | 42.0% | $305,842 | 41.0% | | Mattresses | $23,616 | 9.1% | $68,257 | 9.1% | | Accessories and Other | $34,948 | 13.4% | $99,818 | 13.4% | | Total | $260,378 | 100.0% | $746,858 | 100.0% | [NOTE H – Leases](index=10&type=section&id=NOTE%20H%20%E2%80%93%20Leases) - The Company has operating leases for retail stores, offices, warehouses, and equipment, with terms ranging from 1 to 14 years and options to extend up to 20 years[30](index=30&type=chunk) Lease Expense Summary | Lease Expense | 3 Months Ended Sep 30, 2021 (in thousands) | 3 Months Ended Sep 30, 2020 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2020 (in thousands) | | :--------------------------- | :----------------------------------------- | :----------------------------------------- | :----------------------------------------- | :----------------------------------------- | | Operating lease cost | $11,440 | $11,596 | $35,140 | $33,111 | | Variable lease cost | $1,739 | $1,627 | $4,856 | $3,825 | | Total lease expense | $13,179 | $13,223 | $39,996 | $36,936 | - In June 2021, the Company renewed leases for ten retail locations, increasing right-of-use assets by **$17.6 million** and lease liabilities by **$20.6 million**; in August 2021, it purchased a distribution center and a retail location, decreasing right-of-use assets and lease liabilities by approximately **$5.3 million**[34](index=34&type=chunk) - A sale and leaseback transaction of three distribution facilities in May 2020 generated **$70.0 million** in proceeds and a **$31.6 million** gain, with the properties leased back under 15-year operating agreements[36](index=36&type=chunk) [NOTE I – Income Taxes](index=11&type=section&id=NOTE%20I%20%E2%80%93%20Income%20Taxes) - The effective tax rate for the nine months ended September 30, 2021, was **23.1%**, down from **25.8%** in the prior year, primarily due to state income taxes and the tax impact from vested stock awards[37](index=37&type=chunk) [NOTE J – Stock Based Compensation Plan](index=12&type=section&id=NOTE%20J%20%E2%80%93%20Stock%20Based%20Compensation%20Plan) - Shareholders approved the 2021 Long-Term Incentive Plan (LTIP) with **1,500,000 shares** reserved, replacing the 2014 LTIP Plan for new grants[40](index=40&type=chunk) Stock-Based Compensation Award Activity | Award Activity (9 Months Ended Sep 30, 2021) | Service-Based Restricted Stock Awards (shares) | Performance-Based Restricted Stock Awards (shares) | | :------------------------------------------- | :--------------------------------------------- | :------------------------------------------------- | | Outstanding at December 31, 2020 | 239,281 | 213,895 | | Granted/Issued | 119,921 | 93,685 | | Awards vested or rights exercised | (130,323) | (56,578) | | Additional units earned due to performance | — | 77,265 | | Outstanding at September 30, 2021 | 223,258 | 328,267 | - Total compensation cost for unvested equity awards was approximately **$8.6 million** as of September 30, 2021, expected to be recognized over a weighted-average period of two years[43](index=43&type=chunk) [NOTE K – Earnings Per Share](index=13&type=section&id=NOTE%20K%20%E2%80%93%20Earnings%20Per%20Share) - The Company reports earnings per share using the two-class method, assuming 100% of earnings are distributed as dividends based on contractual rights[45](index=45&type=chunk) - Common Stock has a preferential dividend rate of at least **105%** of the dividend paid on Class A Common Stock, which is convertible one-for-one into Common Stock[46](index=46&type=chunk) Earnings Per Share Summary | EPS (Common Stock) | 3 Months Ended Sep 30, 2021 ($) | 3 Months Ended Sep 30, 2020 ($) | 9 Months Ended Sep 30, 2021 ($) | 9 Months Ended Sep 30, 2020 ($) | | :----------------- | :------------------------------ | :------------------------------ | :------------------------------ | :------------------------------ | | Basic | $1.35 | $0.98 | $3.67 | $1.80 | | Diluted | $1.31 | $0.97 | $3.55 | $1.77 | | EPS (Class A Common Stock) | 3 Months Ended Sep 30, 2021 ($) | 3 Months Ended Sep 30, 2020 ($) | 9 Months Ended Sep 30, 2021 ($) | 9 Months Ended Sep 30, 2020 ($) | | :------------------------- | :------------------------------ | :------------------------------ | :------------------------------ | :------------------------------ | | Basic | $1.28 | $0.94 | $3.45 | $1.71 | | Diluted | $1.25 | $0.93 | $3.38 | $1.70 | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=14&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial performance, condition, and operational results, detailing the impact of COVID-19 and key financial metrics [Forward-Looking Statements](index=14&type=section&id=Forward-Looking%20Statements) - Statements in this Form 10-Q that are not historical facts are considered "forward-looking statements" and involve risks and uncertainties that could cause actual results to differ materially from expectations[49](index=49&type=chunk) - The Company undertakes no obligation to publicly update or revise any forward-looking statements, except as required by law[49](index=49&type=chunk) [Impact of COVID-19 on Our Business](index=14&type=section&id=Impact%20of%20COVID-19%20on%20Our%20Business) - In response to COVID-19, Havertys closed stores, furloughed approximately **87%** of its workforce (**3,033 team members**), and permanently reduced its workforce by about **1,200 team members** in April 2020[50](index=50&type=chunk) - The Company strengthened its financial position by reviewing operating expenses, reducing capital expenditures, temporarily borrowing **$43.8 million** (repaid within 96 days), and completing a **$70.0 million** sale-leaseback transaction[51](index=51&type=chunk) - Despite strong business since reopening, the Company faces product shortages, supply chain disruptions, and labor shortages impacting distribution and delivery capacity, with manufacturers in Vietnam and Indonesia experiencing COVID-19 related shutdowns[52](index=52&type=chunk)[56](index=56&type=chunk) [Net Sales](index=15&type=section&id=Net%20Sales) - Net sales are recognized upon delivery to the customer, and the Company tracks 'written sales' and 'written comp-store sales' as indicators of customer orders prior to delivery[55](index=55&type=chunk) Net Sales and Comp-Store Sales Performance | Period | Net Sales (in millions) | % Change (YoY) | Comp-Store Sales (in millions) | % Change (YoY) | | :----- | :---------------------- | :------------- | :----------------------------- | :------------- | | Q1 2021 | $236.5 | 31.8% | $15.4 | 11.5% | | Q2 2021 | $250.0 | 127.3% | $48.8 | 46.9% | | Q3 2021 | $260.4 | 19.7% | $38.4 | 17.7% | | YTD Q3 2021 | $746.9 | 47.3% | $102.6 | 22.5% | - Long production lead times for custom upholstery orders (averaging **16 weeks**, up from **4-6 weeks** pre-pandemic) have negatively impacted sales in this category, with custom upholstery orders falling from **29.8%** of total written upholstery sales in Q3 2020 to **20.0%** in Q3 2021[58](index=58&type=chunk) [Gross Profit](index=16&type=section&id=Gross%20Profit) - Gross profit margin for Q3 2021 was **56.8%**, up **60 basis points** from **56.2%** in Q3 2020, driven by pricing adjustments in response to product price increases and higher inbound freight costs[60](index=60&type=chunk) - For the first nine months of 2021, gross profit margin was **56.8%**, an increase of **130 basis points** from **55.5%** in the same period of 2020, with retail pricing and sales mix offsetting negative impacts from LIFO reserve increases[60](index=60&type=chunk) - The Company estimates full-year 2021 gross profit margins to be between **56.5%** and **56.8%**[61](index=61&type=chunk) [Selling, General and Administrative Expenses](index=16&type=section&id=Selling%20General%20and%20Administrative%20Expenses) - SG&A costs as a percentage of sales decreased to **44.6%** in Q3 2021 from **46.0%** in Q3 2020, reflecting cost leveraging on increased sales and operational changes[62](index=62&type=chunk) Selling, General and Administrative Expenses Breakdown | SG&A Classification | 3 Months Ended Sep 30, 2021 (in thousands) | % of Net Sales | 9 Months Ended Sep 30, 2021 (in thousands) | % of Net Sales | | :--------------------------------- | :----------------------------------------- | :------------- | :----------------------------------------- | :------------- | | Variable | $43,708 | 16.8% | $126,374 | 16.9% | | Fixed and discretionary | $72,448 | 27.8% | $211,941 | 28.4% | | Total | $116,156 | 44.6% | $338,315 | 45.3% | - Fixed and discretionary expenses in Q3 2021 increased due to higher compensation, benefits, payroll, labor costs (**$3.8 million**), warehouse expense (**$2.8 million**), and marketing spend (**$1.7 million**) compared to Q3 2020[66](index=66&type=chunk) - Full-year 2021 variable SG&A expenses are anticipated to be **17.0% to 17.3%**, while fixed and discretionary expenses are expected to be approximately **$278.0 million to $281.0 million**[67](index=67&type=chunk) [Liquidity and Capital Resources](index=17&type=section&id=Liquidity%20and%20Capital%20Resources) - As of September 30, 2021, the Company had **$225.7 million** in cash and cash equivalents and **$6.7 million** in restricted cash equivalents, believed sufficient for operating requirements, capital expenditures, dividends, and lease obligations for the next several years[68](index=68&type=chunk) - The **$60.0 million** revolving credit facility had **$15.7 million** available at September 30, 2021, with no outstanding amounts[69](index=69&type=chunk) - The Board authorized an additional **$25.0 million** for the share repurchase program in August 2021, with approximately **$22.3 million** remaining under authorization as of September 30, 2021[71](index=71&type=chunk) - Net cash provided by operating activities was **$89.0 million** for the first nine months of 2021, primarily from net income and customer deposits, partially offset by inventory outflows[74](index=74&type=chunk) - Net cash used in investing activities was **$28.0 million** in the first nine months of 2021, a significant change from **$67.2 million** provided in 2020, mainly due to **$74.4 million** in proceeds from asset sales in 2020[77](index=77&type=chunk) - Net cash used in financing activities was **$35.4 million** in the first nine months of 2021, primarily for **$19.5 million** in share repurchases and **$13.0 million** in cash dividends[78](index=78&type=chunk) [Store Plans and Capital Expenditures](index=18&type=section&id=Store%20Plans%20and%20Capital%20Expenditures) - New store openings include Myrtle Beach, SC (Q1-21) and The Villages, FL (Q3-21), with a closure in Dallas, TX (Q3-21) and a planned opening in Austin, TX (Q1-22)[79](index=79&type=chunk) - Net selling space in 2021 is expected to remain flat compared to 2020[79](index=79&type=chunk) - Total capital expenditures are estimated to be approximately **$37.0 million** in 2021, including purchases of a Virginia home delivery center and a retail location, as well as investments in information technology and website enhancements[80](index=80&type=chunk) [Critical Accounting Estimates](index=18&type=section&id=Critical%20Accounting%20Estimates) - The Company's critical accounting estimates involve significant judgment and inherent uncertainties, but no significant changes were deemed critical for the accounting periods presented since the last annual report[81](index=81&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=19&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section refers to the company's Form 10-K for detailed disclosures on market risk, confirming no material changes since December 31, 2020 - The Company's exposure to market risk has not materially changed since December 31, 2020[83](index=83&type=chunk) [Item 4. Controls and Procedures](index=19&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of disclosure controls and procedures as of September 30, 2021, with no material changes to internal control over financial reporting - Management, including the CEO and CFO, concluded that the Company's disclosure controls and procedures were effective as of September 30, 2021, providing reasonable assurance for timely and accurate financial reporting[84](index=84&type=chunk) - No material changes in internal control over financial reporting were identified during the quarter ended September 30, 2021[85](index=85&type=chunk) - The Company continues to evaluate the impact of COVID-19 related changes, such as a rotating work-from-home environment, on its internal control over financial reporting[85](index=85&type=chunk) PART II. OTHER INFORMATION This section provides additional information beyond the financial statements, including legal proceedings, risk factors, equity sales, and a list of exhibits [Item 1. Legal Proceedings](index=20&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to Note A of the Condensed Consolidated Financial Statements for information regarding legal proceedings - Information regarding legal proceedings is described in Note A of the Notes to the Condensed Consolidated Financial Statements[88](index=88&type=chunk) [Item 1A. Risk Factors](index=20&type=section&id=Item%201A.%20Risk%20Factors) This section directs readers to the company's Form 10-K for a discussion of material risk factors and confirms no material changes since its filing - There have been no material changes from the risk factors described in the Company's Form 10-K[89](index=89&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=20&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the Company's share repurchase program, including additional authorization and repurchase activity during the third quarter of 2021 - The Board of Directors authorized an additional **$25.0 million** for the share repurchase program on August 6, 2021, bringing the total available authorization to approximately **$33.1 million** at that time[90](index=90&type=chunk) - The share repurchase program has no expiration date and may be terminated by the board at any time, with approximately **$22.3 million** remaining under authorization as of September 30, 2021[90](index=90&type=chunk) Share Repurchase Program Activity | Period (2021) | Total Number of Shares Purchased (shares) | Average Price Paid Per Share ($) | Approximate Dollar Value of Shares That May Yet be Purchased ($) | | :------------ | :---------------------------------------- | :------------------------------- | :--------------------------------------------------------------- | | July 1 – July 31 | 44,579 | $36.17 | $15,202,200 | | August 1 – August 31 | 412,617 | $36.60 | $25,100,700 | | September 1 – September 30 | 80,000 | $34.74 | $22,321,200 | | Total | 537,196 | | | [Item 6. Exhibits](index=21&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with or incorporated by reference into the Form 10-Q, including the 2021 Long-Term Incentive Plan and certifications - Key exhibits include the 2021 Long-Term Incentive Plan, certifications from the Chief Executive Officer and Chief Financial Officer, and financial statements formatted in inline XBRL[93](index=93&type=chunk)
Haverty Furniture(HVT) - 2021 Q3 - Earnings Call Transcript
2021-10-29 18:11
Financial Data and Key Metrics Changes - The company reported record sales of $260.4 million for Q3 2021, a 19.7% increase compared to the prior year [4][25] - Net income for Q3 2021 was $24.2 million, or $1.31 per diluted share, compared to $18.3 million, or $0.97 per share in the same quarter last year [30] - Gross profit margin increased by 60 basis points to 56.8% due to better merchandise pricing and less promotional activity [26] - Selling, general and administrative expenses rose by $16.1 million, or 16%, to $116.2 million, but as a percentage of sales, these costs declined to 44.6% from 46% [27] Business Line Data and Key Metrics Changes - Comparable store sales increased by 17.7% over the prior year period [25] - The company added over 500 online exclusive products, which received a positive response [7] - Warehouse inventory levels rose over 8% during Q3 2021, indicating improved supply chain management [16] Market Data and Key Metrics Changes - The company expects to end 2021 with 121 stores, one more than last year, and plans to open five new stores in 2022 [9] - Customer deposits increased to $120.1 million, up $34 million from December 31, 2020 [31] Company Strategy and Development Direction - The company is focused on reducing backlogs and improving customer service by bringing in sole merchandise [6] - Investments in IT and marketing are aimed at upgrading the website to enhance customer experience [12] - The expansion of the Virginia distribution center is a key investment to improve logistics and reduce costs [11] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for Q4 2021 despite challenges in supply chain and staffing [23][21] - The company anticipates a slowdown in imports from Vietnam but expects improved shipping times from domestic suppliers [23] - Management believes the importance of home furnishings will continue to grow due to changing consumer behaviors post-COVID [38] Other Important Information - The company incurred significant demurrage costs of approximately $2.3 million due to port congestion [28] - Capital expenditures for the first nine months of 2021 were $28.1 million, with plans to maintain a similar range for 2022 [32] Q&A Session Summary Question: What is the size of the backlog and its potential impact on sales? - The backlog is up over 40% from last year, indicating a healthy backlog going into Q4 [43] Question: What factors are affecting written sales? - Out-of-stocks have impacted sales, particularly for best-selling items, leading to delays in customer orders [46][49] Question: How is the company managing special orders? - Special order lead times have stabilized, but delays still affect customer purchasing behavior [48]
Haverty Furniture(HVT) - 2021 Q2 - Quarterly Report
2021-08-02 16:39
UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___ to ___ Commission file number: 1-14445 HAVERTY FURNITURE COMPANIES, INC. (Exact name of registrant as specified in its charter) (State or other jurisdictio ...
Haverty Furniture(HVT) - 2021 Q2 - Earnings Call Transcript
2021-07-28 19:07
Financial Data and Key Metrics Changes - The company reported record sales of $250 million for Q2 2021, representing a 127.3% increase over the prior quarter [5][20] - Written sales for Q2 2021 were up 67.5% year-over-year, while comparable store sales increased by 46.9% [21] - Gross profit margin improved by 240 basis points from 54.2% to 56.6% due to better merchandising and pricing [22] - Selling, general, and administrative expenses rose by $39.8 million or 54.7% to $112.4 million, but as a percentage of sales, these costs declined to 45% from 66.1% [23] - Net income for Q2 2021 was $22.9 million or $1.21 per diluted share, compared to $13.6 million or $0.72 per share in the same period last year [26] Business Line Data and Key Metrics Changes - The case goods business showed stronger growth compared to upholstery, which faced delays in customization and special orders [37] - The average pool age for special orders increased to approximately eight weeks, impacting the special order business [18] Market Data and Key Metrics Changes - The company is focusing on building market share in key markets, with new store openings in Myrtle Beach, Austin, and Central Florida [9][10] - The company is investing over $1 billion in distribution capacity to support growth, including a 20% increase in storage capacity at its eastern distribution center [8] Company Strategy and Development Direction - The company aims to grow market share and maintain double-digit operating margins while investing in IT and distribution networks [5][11] - The "We Furnish Happiness" marketing campaign is designed to differentiate the company from competitors and enhance customer service [10] Management's Comments on Operating Environment and Future Outlook - Management believes the increased importance of home, accelerated by COVID-19, is a sustainable trend for the near future [6] - Shipping challenges are expected to persist until spring 2022, impacting inventory levels and order fulfillment [7][15] - Staffing remains a concern, but management is optimistic about improvements in the third quarter [19] Other Important Information - The company ended Q2 2021 with $235.3 million in cash and no funded debt [28] - Planned capital expenditures for 2021 have increased from $23 million to $37 million, with significant investments in distribution and IT [32][33] Q&A Session Summary Question: Changes in consumer purchasing behavior - Management noted improvements in case goods sales, while upholstery sales were impacted by delays in customization [37] Question: Future gross margin potential - Management expressed confidence in maintaining gross margins within the guidance of 56.5% to 56.8% for the remainder of the year [39] Question: Usage of excess cash flow - The company is considering various options for excess cash, including buybacks, dividends, and investments in distribution centers [40] Question: Written sales growth comparisons - Management indicated that the back half of the year would present more challenging comparisons for written sales growth [45] Question: Impact of product and freight cost changes - Management stated that they are actively addressing changes in product and freight costs and passing those along to customers [51] Question: Changes in consumer behavior due to COVID-19 resurgence - Management reported no significant changes in consumer behavior despite the resurgence of COVID-19 [52]
Haverty Furniture(HVT) - 2021 Q1 - Earnings Call Transcript
2021-05-02 07:18
Financial Data and Key Metrics Changes - In Q1 2021, delivered sales were $236.5 million, a 31.8% increase compared to the prior year quarter [20] - Total written sales for Q1 2021 were up 54.5% over the prior year period [20] - Comparable store sales increased by 11.5% over the prior year period [20] - Gross profit margin increased by 160 basis points from 55.5% to 57.1% [21] - Selling, general and administrative expenses increased by $12.2 million or 12.5% to $109.8 million, but as a percentage of sales, these costs declined to 46.4% from 54.4% [22] - Net income for Q1 2021 was $19.4 million or $1.04 per diluted share, compared to $1.8 million or $0.09 per share in the comparable quarter of last year [24] Business Line Data and Key Metrics Changes - Case goods saw the strongest sales increases, with their percentage of sales rising from 34.6% to 37.6% [35][36] - Upholstery remains a key driver, but case goods are showing significant growth [35] Market Data and Key Metrics Changes - The company reported a significant increase in customer deposits, which were $104.7 million, up $18.5 million from the previous quarter and up $78.6 million from Q1 2020 [25] - The undelivered backlog is up almost four times compared to last year, indicating strong demand [7] Company Strategy and Development Direction - The company plans to increase inventories and invest in additional warehouse capacities to manage the backlog [9] - A new multimedia marketing campaign is set to launch in May to differentiate the company from competitors [11] - The company is actively pursuing new store opportunities, with plans to open additional locations in Myrtle Beach, Central Florida, and Northeast Austin [10] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the sustained importance of home furnishings due to the strong housing market and government cash subsidies [8] - Supply chain challenges were acknowledged, including shipping delays and increased freight costs, but management is working to stabilize these issues [13][14] - Staffing remains a concern due to extended unemployment benefits affecting talent acquisition [17] Other Important Information - The company ended Q1 2021 with $210 million in cash and cash equivalents and no funded debt [25] - Planned capital expenditures for 2021 remain at $23 million, with significant investments in store remodels and distribution network improvements [29] Q&A Session Summary Question: Revenue impact from the winter storm - Management indicated that while there was some impact from the winter storm, the overall strong business performance may have mitigated its effect on total quarterly revenue [33] Question: Sales increases by product segment - The strongest sales increases were seen in case goods, with management noting that the availability of product contributed to this growth [35] Question: Supply chain constraints - Management highlighted that staffing issues and container capacity remain significant challenges, but they are optimistic about resolving these by the end of the year [38][39] Question: Sales modeling and future guidance - Management refrained from providing specific revenue guidance but noted that the strong backlog and customer deposits position the company well for future quarters [44][47] Question: Consumer spending trends - Management observed strong growth in key markets like Florida and Texas, with confidence in the sustainability of demand for home furnishings [48]
Haverty Furniture(HVT) - 2021 Q1 - Quarterly Report
2021-04-30 15:54
[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section provides the unaudited condensed consolidated financial statements and management's discussion and analysis for Haverty Furniture Companies, Inc. [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for Haverty Furniture Companies, Inc., including the balance sheets, statements of comprehensive income, and cash flows, along with detailed notes explaining the company's business, accounting policies, and specific financial items [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This statement provides a snapshot of the company's financial position, detailing assets, liabilities, and stockholders' equity at specific points in time | Item | March 31, 2021 (Unaudited, In thousands) | December 31, 2020 (In thousands) | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $210,124 | $200,058 | | Inventories | $103,569 | $89,908 | | Total current assets | $342,700 | $316,244 | | Total assets | $708,272 | $680,372 | | **Liabilities** | | | | Customer deposits | $104,728 | $86,183 | | Total current liabilities | $214,928 | $204,041 | | Total liabilities | $437,958 | $427,405 | | **Stockholders' Equity** | | | | Total stockholders' equity | $270,314 | $252,967 | - Total assets increased by **$27.9 million** from December 31, 2020, to March 31, 2021, driven primarily by increases in cash and cash equivalents and inventories[8](index=8&type=chunk) - Customer deposits, a current liability, significantly increased by **$18.5 million**, reflecting higher advance payments from customers[8](index=8&type=chunk) [Condensed Consolidated Statements of Comprehensive Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) This statement outlines the company's financial performance over a period, showing net sales, gross profit, and net income | Item | Three Months Ended March 31, 2021 (In thousands, except per share data) | Three Months Ended March 31, 2020 (In thousands, except per share data) | | :--- | :--- | :--- | | Net sales | $236,491 | $179,432 | | Gross profit | $135,034 | $99,553 | | Income before interest and income taxes | $25,308 | $2,086 | | Net income | $19,406 | $1,819 | | Basic earnings per share (Common Stock) | $1.07 | $0.10 | | Diluted earnings per share (Common Stock) | $1.04 | $0.09 | | Cash dividends per share (Common Stock) | $0.22 | $0.20 | - Net sales increased by **31.8%** to **$236.5 million** in Q1 2021 compared to **$179.4 million** in Q1 2020[9](index=9&type=chunk) - Net income saw a substantial increase from **$1.8 million** in Q1 2020 to **$19.4 million** in Q1 2021[9](index=9&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This statement details the cash inflows and outflows from operating, investing, and financing activities over a period | Item | Three Months Ended March 31, 2021 (In thousands) | Three Months Ended March 31, 2020 (In thousands) | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $19,601 | $(21,579) | | Net cash used in investing activities | $(4,745) | $(2,476) | | Net cash (used in) provided by financing activities | $(4,788) | $32,922 | | Increase in cash, cash equivalents and restricted cash equivalents | $10,068 | $8,867 | | Cash, cash equivalents and restricted cash equivalents at end of period | $216,839 | $91,269 | - Operating activities generated **$19.6 million** in cash in Q1 2021, a significant improvement from a **$21.6 million** cash usage in Q1 2020[11](index=11&type=chunk) - Cash used in investing activities increased to **$4.7 million** in Q1 2021, primarily due to higher capital expenditures[11](index=11&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=6&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and additional information supporting the condensed consolidated financial statements [NOTE A – Business and Basis of Presentation](index=6&type=section&id=NOTE%20A%20%E2%80%93%20Business%20and%20Basis%20of%20Presentation) Haverty Furniture Companies, Inc. operates as a retailer of residential furniture within a single reportable segment. The unaudited interim financial statements are prepared in accordance with Form 10-Q, relying on management estimates, and the company believes any potential liabilities from ordinary course legal proceedings will not materially impact its financial condition - The Company operates as a retailer of residential furniture in the middle to upper-middle price ranges, exclusively under the Havertys brand, and reports within a single segment[13](index=13&type=chunk) - Interim financial statements are unaudited and prepared in accordance with Form 10-Q, requiring management estimates and assumptions[13](index=13&type=chunk)[14](index=14&type=chunk) - The Company believes that liabilities from ordinary course legal proceedings will not have a material adverse effect on its financial condition, results of operations, or cash flows[15](index=15&type=chunk) [Note B – COVID-19](index=6&type=section&id=Note%20B%20%E2%80%93%20COVID-19) The COVID-19 pandemic led to store closures and delivery halts in March 2020, with phased reopenings by June 2020. Post-reopening, business has been strong due to increased consumer spending on homes, but the company faces challenges with product shortages, supply chain delays, and staffing issues, with the pandemic's long-term influence remaining uncertain - Havertys closed all stores and halted deliveries in mid-March 2020, reopening 103 locations by May 1, 2020, and the remaining 17 by June 20, 2020[16](index=16&type=chunk) - Since reopening, business has been strong, with consumers spending more on homes, but manufacturers face demand challenges, product shortages, and distribution/delivery capacity issues due to staffing[17](index=17&type=chunk) - The duration of the pandemic's influence on consumers, the 'nesting' economy, and the business cannot be reasonably estimated, and future estimates and assumptions could change significantly[18](index=18&type=chunk) [NOTE C – Stockholders' Equity](index=7&type=section&id=NOTE%20C%20%E2%80%93%20Stockholders%27%20Equity) Stockholders' equity increased from $252.967 million at December 31, 2020, to $270.314 million at March 31, 2021, primarily driven by net income of $19.406 million, partially offset by dividends declared | Item | Balances at Dec 31, 2020 (In thousands) | Net income (In thousands) | Dividends declared (In thousands) | Balances at Mar 31, 2021 (In thousands) | | :--- | :--- | :--- | :--- | :--- | | Total Stockholders' Equity | $252,967 | $19,406 | $(3,987) | $270,314 | | Common Stock | $29,600 | - | - | $29,789 | | Class A Common Stock | $1,996 | - | - | $1,842 | | Retained Earnings | $304,626 | $19,406 | $(3,987) | $320,045 | - Net income contributed **$19.406 million** to retained earnings for the three months ended March 31, 2021[19](index=19&type=chunk) - Dividends declared for Common Stock were **$0.22 per share** (**$3.717 million** total) and for Class A Common Stock were **$0.20 per share** (**$0.270 million** total) in Q1 2021[19](index=19&type=chunk) [NOTE D – Interim LIFO Calculations](index=9&type=section&id=NOTE%20D%20%E2%80%93%20Interim%20LIFO%20Calculations) The company's interim LIFO calculations are based on management's estimates of inventory levels and inflation rates, which are subject to change upon final year-end inventory valuations - Interim LIFO calculations are based on management's estimates of inventory levels and inflation rates[21](index=21&type=chunk) - These interim results are subject to change based on final year-end LIFO inventory valuations[21](index=21&type=chunk) [NOTE E – Fair Value of Financial Instruments](index=9&type=section&id=NOTE%20E%20%E2%80%93%20Fair%20Value%20of%20Financial%20Instruments) The fair values of short-term financial instruments like cash, receivables, and payables approximate their carrying values. Assets and liabilities related to self-directed, non-qualified deferred compensation plans are valued using Level 1 quoted market prices - Fair values of cash, cash equivalents, restricted cash, accounts receivable, accounts payable, and customer deposits approximate their carrying values due to their short-term nature[22](index=22&type=chunk) - Assets for deferred compensation plans were approximately **$8.8 million** at March 31, 2021, and **$7.9 million** at December 31, 2020, valued using Level 1 quoted market prices[22](index=22&type=chunk) - Related liabilities for deferred compensation plans were approximately **$8.9 million** at March 31, 2021, and **$8.1 million** at December 31, 2020[22](index=22&type=chunk) [NOTE F – Credit Agreement](index=9&type=section&id=NOTE%20F%20%E2%80%93%20Credit%20Agreement) The company has a $60.0 million revolving credit facility, maturing September 27, 2024, secured by various assets. Borrowings of $43.8 million in March 2020 were repaid by June 2020, and as of March 31, 2021, there were no outstanding amounts with $15.5 million net availability - The Credit Agreement is a **$60.0 million** revolving credit facility, secured by inventory, accounts receivable, cash, and other personal property, maturing on **September 27, 2024**[24](index=24&type=chunk) - The company borrowed **$43.8 million** in March 2020 and repaid it in June 2020[25](index=25&type=chunk) - As of March 31, 2021, the borrowing base was **$15.5 million**, with no outstanding letters of credit, resulting in **$15.5 million** net availability[25](index=25&type=chunk) [Note G – Revenues](index=10&type=section&id=Note%20G%20%E2%80%93%20Revenues) Revenue from merchandise sales and service fees is recognized upon delivery, net of returns and sales tax. Customer deposits, recorded upon receipt, totaled $104.7 million at March 31, 2021. The company disaggregates revenue by major product categories, showing Upholstery as the largest segment - Revenue is recognized from merchandise sales and related service fees, net of expected returns and sales tax, at the time of delivery to the customer[27](index=27&type=chunk) - Customer deposits increased to **$104.7 million** at March 31, 2021, from **$86.2 million** at December 31, 2020[27](index=27&type=chunk) | Product Category | Q1 2021 Net Sales (in thousands) | % of Net Sales (Q1 2021) | Q1 2020 Net Sales (in thousands) | % of Net Sales (Q1 2020) | | :--- | :--- | :--- | :--- | :--- | | Case Goods | $88,841 | 37.6% | $62,106 | 34.6% | | Upholstery | $95,626 | 40.4% | $73,629 | 41.0% | | Mattresses | $20,481 | 8.7% | $18,821 | 10.5% | | Accessories and Other | $31,543 | 13.3% | $24,876 | 13.9% | | Total | $236,491 | 100.0% | $179,432 | 100.0% | [NOTE H – Leases](index=10&type=section&id=NOTE%20H%20%E2%80%93%20Leases) The company utilizes operating leases for retail stores, offices, warehouses, and equipment, with terms ranging from 1 to 14 years and extension options. Variable lease payments, based on sales or usage, are expensed as incurred. Total lease expense for Q1 2021 was $13.3 million, with $13.1 million in operating cash flows from operating leases - The company has operating leases for retail stores, offices, warehouses, and equipment, with remaining terms of **1 to 14 years** and options to extend up to **20 years**[29](index=29&type=chunk) - Variable lease payments, based on sales volume or asset usage, are not included in the initial measurement of right-of-use assets or lease liabilities and are recorded as lease expense when incurred[30](index=30&type=chunk) | Item | Three Months Ended March 31, 2021 (In thousands) | Three Months Ended March 31, 2020 (In thousands) | | :--- | :--- | :--- | | Operating lease cost | $11,806 | $10,431 | | Variable lease cost | $1,508 | $1,615 | | Total lease expense | $13,314 | $12,046 | | Operating cash flows from operating leases | $13,093 | $9,996 | [NOTE I – Income Taxes](index=11&type=section&id=NOTE%20I%20%E2%80%93%20Income%20Taxes) The effective tax rate for the three months ended March 31, 2021, was 23.5%, an increase from 20.9% in the prior year, primarily due to state income taxes and additional tax expense from vested stock awards - The effective tax rate was **23.5%** for Q1 2021, up from **20.9%** for Q1 2020[34](index=34&type=chunk) - The primary difference from the statutory rate was due to state income taxes and additional tax expense from vested stock awards[34](index=34&type=chunk) [NOTE J – Stock Based Compensation Plan](index=12&type=section&id=NOTE%20J%20%E2%80%93%20Stock%20Based%20Compensation%20Plan) The company's stock-based compensation plan includes service-based and performance-based restricted stock awards. For Q1 2021, 114,368 service-based and 91,485 performance-based awards were granted/issued. Total compensation expense recognized was $2.7 million, with $12.2 million in unvested costs expected to be recognized over 2.1 years | Award Type | Outstanding at Dec 31, 2020 (Number of Awards) | Granted/Issued (Q1 2021, Number of Awards) | Awards vested or rights exercised (Q1 2021, Number of Awards) | Outstanding at Mar 31, 2021 (Number of Awards) | | :--- | :--- | :--- | :--- | :--- | | Service-Based Restricted Stock Awards | 239,281 | 114,368 | — | 352,424 | | Performance-Based Restricted Stock Awards | 213,895 | 91,485 | (56,578) | 326,067 | - The total fair value of performance-based restricted stock awards that vested during Q1 2021 was approximately **$2.0 million**[37](index=37&type=chunk) - Compensation expense for all awards was approximately **$2.7 million** for Q1 2021, up from **$1.0 million** in Q1 2020, with **$12.2 million** in unvested costs remaining[38](index=38&type=chunk) [NOTE K – Earnings Per Share](index=13&type=section&id=NOTE%20K%20%E2%80%93%20Earnings%20Per%20Share) The company reports earnings per share using the two-class method, reflecting the preferential dividend rate of Common Stock over Class A Common Stock. For Q1 2021, basic EPS for Common Stock was $1.07 and for Class A Common Stock was $1.00 - Earnings per share are reported using the two-class method, assuming 100% of earnings are distributed as dividends based on contractual rights[40](index=40&type=chunk) - Common Stock has a preferential dividend rate of at least **105%** of the dividend paid on Class A Common Stock[41](index=41&type=chunk) | Earnings Per Share | Three Months Ended March 31, 2021 (Dollars per Share) | Three Months Ended March 31, 2020 (Dollars per Share) | | :--- | :--- | :--- | | Basic earnings per share: | | | | Common Stock | $1.07 | $0.10 | | Class A Common Stock | $1.00 | $0.09 | | Diluted earnings per share: | | | | Common Stock | $1.04 | $0.09 | | Class A Common Stock | $0.98 | $0.09 | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=14&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial performance and condition, discussing the impact of COVID-19, sales trends, profitability, expenses, liquidity, and capital resources for the three months ended March 31, 2021 [Forward-Looking Statements](index=14&type=section&id=Forward-Looking%20Statements) This subsection includes a cautionary statement regarding forward-looking statements, noting that they involve risks and uncertainties that could cause actual results to differ materially from expectations, and the company undertakes no obligation to update them - Statements in the Form 10-Q that are not historical facts are considered 'forward-looking statements' and involve risks and uncertainties[44](index=44&type=chunk) - Known material risk factors are described in 'Item 1A. Risk Factors' of the company's Form 10-K[44](index=44&type=chunk) - The company undertakes no obligation to publicly update or revise any forward-looking statements unless required by law[44](index=44&type=chunk) [Impact of COVID-19 on Our Business](index=14&type=section&id=Impact%20of%20COVID-19%20on%20Our%20Business) The COVID-19 pandemic caused significant disruption, leading to store closures, furloughs, and workforce reductions in early 2020. The company implemented financial strengthening measures. Since reopening, business has been strong due to increased home spending, but challenges persist with product shortages, supply chain issues, and staffing difficulties, making the pandemic's future impact uncertain - The company closed stores and ceased delivery in mid-March 2020, furloughed **87%** of its workforce, and made permanent reductions of approximately **1,200 team members**[45](index=45&type=chunk) - Financial strengthening steps included reviewing operating expenses, reducing capital expenditures, temporary borrowing (**$43.8 million** repaid), and a **$70.0 million** sale-leaseback transaction[46](index=46&type=chunk) - Post-reopening, business has been strong due to increased consumer spending on homes, but product shortages, supply chain delays, and distribution/delivery staffing issues persist[47](index=47&type=chunk) [Net Sales](index=15&type=section&id=Net%20Sales) Net sales for Q1 2021 increased by 31.8% to $236.5 million compared to Q1 2020, with comparable-store sales (excluding March 2020) up 11.5%. Written business for the first two months of 2021 grew by 24.9%, indicating strong customer demand despite supply chain disruptions affecting mattress sales | Period | Net Sales Total Dollars (2021, In millions) | Net Sales % Change (2021) | Comp-Store Sales % Change (2021) | Net Sales Total Dollars (2020, In millions) | Net Sales % Change (2020) | Comp-Store Sales % Change (2020) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Q1 | $236.5 | 31.8% | 11.5% | $179.4 | (4.2)% | 11.6% | - Total sales for Q1 2021 increased by **$57.1 million** or **31.8%** compared to 2020[52](index=52&type=chunk) - Written business for the first two months of 2021 was up **24.9%** compared to the same period in 2020, with mattress business declining **180 basis points** due to supply-chain disruption[52](index=52&type=chunk)[53](index=53&type=chunk) [Gross Profit](index=15&type=section&id=Gross%20Profit) Gross profit margin for Q1 2021 improved to 57.1%, a 160 basis point increase from 55.5% in the prior year, primarily due to merchandise pricing and mix, partially offset by a larger negative LIFO impact. The company anticipates annual gross profit margins for 2021 to be between 56.5% and 57.0% - Gross profit for Q1 2021 was **57.1%**, an increase of **160 basis points** from **55.5%** in Q1 2020[54](index=54&type=chunk) - The increase in gross profit is primarily attributed to merchandise pricing and mix, partially offset by a larger negative LIFO impact[54](index=54&type=chunk) - Annual gross profit margins for 2021 are expected to be in the range of **56.5% to 57.0%**[54](index=54&type=chunk) [Selling, General and Administrative Expenses](index=16&type=section&id=Selling%2C%20General%20and%20Administrative%20Expenses) SG&A costs as a percentage of sales decreased to 46.4% in Q1 2021 from 54.4% in Q1 2020, despite a $12.2 million dollar increase. This increase was driven by higher selling expenses, delivery costs, and incentive compensation, partially offset by reduced travel and occupancy costs. Variable expenses leveraged with sales growth, while fixed and discretionary expenses rose due to incentive compensation, health insurance, and advertising - SG&A costs as a percent of sales decreased to **46.4%** in Q1 2021 from **54.4%** in Q1 2020[56](index=56&type=chunk) - SG&A dollars increased by **$12.2 million** in Q1 2021, driven by higher selling expense (**$3.7 million**), delivery costs (**$1.4 million**), and incentive compensation (**$4.9 million**)[56](index=56&type=chunk) | Item | Q1 2021 (In thousands) | % of Net Sales (Q1 2021) | Q1 2020 (In thousands) | % of Net Sales (Q1 2020) | | :--- | :--- | :--- | :--- | :--- | | Variable | $40,707 | 17.2% | $35,337 | 19.7% | | Fixed and discretionary | $69,055 | 29.2% | $62,198 | 34.7% | | Total | $109,762 | 46.4% | $97,535 | 54.4% | [Liquidity and Capital Resources](index=17&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains a strong liquidity position with $210.1 million in cash and cash equivalents at March 31, 2021, supplemented by a $60.0 million revolving credit facility with $15.5 million available. Cash flow from operations significantly improved, and the company expects sufficient funds for operating requirements, capital expenditures, dividends, and lease obligations - At March 31, 2021, the company had **$210.1 million** in cash and cash equivalents and **$6.7 million** in restricted cash equivalents[62](index=62&type=chunk) - The company believes its current cash position, operating cash flow, credit agreement funds, and access to debt markets are sufficient for operating requirements, capital expenditures, dividend payments, and lease obligations for the next several years[62](index=62&type=chunk) - Net cash provided by operating activities was **$19.6 million** in Q1 2021, a significant improvement from a **$21.6 million** use of cash in Q1 2020[68](index=68&type=chunk) [Cash and Cash Equivalents at End of Year](index=17&type=section&id=Cash%20and%20Cash%20Equivalents%20at%20End%20of%20Year) As of March 31, 2021, the company held $210.1 million in cash and cash equivalents, along with $6.7 million in restricted cash. Management believes these resources, combined with operating cash flow and credit facilities, are sufficient to meet future financial obligations and capital expenditures - Cash and cash equivalents totaled **$210.1 million**, with restricted cash and cash equivalents at **$6.7 million**, as of March 31, 2021[62](index=62&type=chunk) - The company expects its current cash position, operating cash flow, credit agreement, and access to debt markets to be sufficient for operating requirements, capital expenditures, dividend payments, and lease obligations for the next several years[62](index=62&type=chunk) [Long-Term Debt](index=17&type=section&id=Long-Term%20Debt) The company has a $60.0 million revolving credit facility, maturing September 27, 2024. As of March 31, 2021, there were no outstanding amounts, and $15.5 million was available to borrow - The company has a **$60.0 million** revolving credit facility, maturing **September 27, 2024**[63](index=63&type=chunk) - As of March 31, 2021, there were no outstanding amounts under the facility, and **$15.5 million** was available to borrow[63](index=63&type=chunk) [Leases](index=17&type=section&id=Leases) The company utilizes operating leases to finance a portion of its real estate, including retail stores, distribution centers, and support spaces - Operating leases are used to fund a portion of the company's real estate, including stores, distribution centers, and store support space[64](index=64&type=chunk) [Share Repurchases](index=17&type=section&id=Share%20Repurchases) In February 2020, the Board authorized an additional $30.0 million for the share repurchase program. The program was suspended between March and August 2020, with approximately $16.8 million remaining under the authorization as of March 31, 2021 - An additional **$30.0 million** was authorized for the share repurchase program in February 2020[65](index=65&type=chunk) - The program was suspended from March to August 2020[65](index=65&type=chunk) - Approximately **$16.8 million** remained available for repurchases under the existing authorization as of March 31, 2021[65](index=65&type=chunk) [Cash Flows Summary](index=17&type=section&id=Cash%20Flows%20Summary) The company experienced a significant shift in cash flows, with operating activities providing $19.6 million in Q1 2021 compared to a $21.6 million use in Q1 2020. Investing activities used $4.7 million, primarily for capital expenditures, while financing activities used $4.8 million, mainly for dividends - Net cash provided by operating activities was **$19.6 million** in Q1 2021, a substantial improvement from a **$21.6 million** use of cash in Q1 2020[68](index=68&type=chunk) - Cash used in investing activities increased by **$2.3 million** in Q1 2021, primarily due to capital expenditures[69](index=69&type=chunk) - Cash used in financing activities was **$4.8 million** in Q1 2021, mainly reflecting **$4.0 million** in cash dividends paid[69](index=69&type=chunk) [Operating Activities](index=17&type=section&id=Operating%20Activities) Operating activities generated **$19.6 million** in cash in Q1 2021, a significant improvement from a **$21.6 million** cash usage in Q1 2020, driven by increased net income and favorable changes in working capital - Net cash provided by operating activities was **$19.6 million** in Q1 2021, compared to a use of cash of **$21.6 million** in Q1 2020[68](index=68&type=chunk) - This improvement was primarily driven by an increase in net income and favorable changes in customer deposits, accounts payable, and inventories[68](index=68&type=chunk) [Investing Activities](index=17&type=section&id=Investing%20Activities) Cash used in investing activities increased by **$2.3 million** in Q1 2021 compared to Q1 2020, primarily due to higher capital expenditures - Cash used in investing activities increased by **$2.3 million** in Q1 2021 compared to Q1 2020, primarily due to higher capital expenditures[69](index=69&type=chunk) [Financing Activities](index=17&type=section&id=Financing%20Activities) Cash used in financing activities was **$4.8 million** in Q1 2021, mainly reflecting **$4.0 million** of cash dividends paid, contrasting with cash provided in Q1 2020 from credit facility proceeds - Cash used in financing activities was **$4.8 million** in Q1 2021, primarily reflecting **$4.0 million** of cash dividends paid[69](index=69&type=chunk) - In Q1 2020, cash provided by financing activities was **$32.9 million**, mainly from **$43.8 million** in revolving credit facility proceeds, partially offset by **$6.8 million** in share repurchases and **$3.8 million** in dividends[70](index=70&type=chunk) [Store Plans and Capital Expenditures](index=18&type=section&id=Store%20Plans%20and%20Capital%20Expenditures) The company plans to open new stores in Myrtle Beach, SC (Q1 2021), The Villages, FL (Q3 2021), and Austin, TX (Q4 2021), while closing a store in Dallas, TX (Q3 2021). Net selling space is expected to slightly increase in 2021, with total capital expenditures estimated at $23.0 million | Location | Actual or Planned Opening Quarter | Category | | :--- | :--- | :--- | | Myrtle Beach, SC | Q-1-21 | Open-New Market | | The Villages, FL | Q-3-21 | Open | | Dallas, TX | Q-3-21 | Closure | | Austin, TX | Q-4-21 | Open | - Net selling space in 2021 is expected to be slightly up compared to 2020[71](index=71&type=chunk) - Total capital expenditures are estimated to be **$23.0 million** for the full year 2021[71](index=71&type=chunk) [Off-Balance Sheet Arrangements](index=18&type=section&id=Off-Balance%20Sheet%20Arrangements) As of March 31, 2021, Haverty Furniture Companies, Inc. reported no off-balance sheet arrangements or obligations - As of March 31, 2021, the company had no off-balance sheet arrangements or obligations[72](index=72&type=chunk) [Critical Accounting Estimates](index=18&type=section&id=Critical%20Accounting%20Estimates) The company defines critical accounting estimates as those requiring significant, subjective judgments due to inherent uncertainties. Management reviewed its estimates and found none to be critical for the periods presented in the 10-K, with no significant changes since the last annual report - Critical accounting estimates are defined as those requiring difficult, subjective, or complex judgments due to inherently uncertain matters[73](index=73&type=chunk) - Management reviewed its accounting estimates and deemed none to be critical for the periods presented in the Form 10-K[73](index=73&type=chunk) - There have been no significant changes in accounting estimates since the last annual report[73](index=73&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=18&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section refers to the company's Form 10-K for detailed quantitative and qualitative disclosures about market risk, stating that there have been no material changes to its market risk exposure since December 31, 2020 - For market risk disclosures, refer to Item 7A, 'Quantitative and Qualitative Disclosures About Market Risk,' of the company's Form 10-K[74](index=74&type=chunk) - The company's exposure to market risk has not changed materially since December 31, 2020[74](index=74&type=chunk) [Item 4. Controls and Procedures](index=18&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of March 31, 2021. No material changes to internal control over financial reporting were identified, although the company continues to evaluate the impact of the COVID-19 pandemic's shift to remote work on its financial reporting processes - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of **March 31, 2021**[75](index=75&type=chunk) - No changes in internal control over financial reporting materially affected, or are reasonably likely to materially affect, the company's internal control during Q1 2021[76](index=76&type=chunk) - The company continues to evaluate the impact of the COVID-19 pandemic's shift to a rotating work-from-home environment on its internal control over financial reporting[76](index=76&type=chunk) [PART II. OTHER INFORMATION](index=19&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section covers other information including legal proceedings, risk factors, and a list of exhibits filed with the Form 10-Q [Item 1. Legal Proceedings](index=19&type=section&id=Item%201.%20Legal%20Proceedings) Information regarding legal proceedings is incorporated by reference from the 'Business and Basis of Presentation' section in Note A of the Notes to the Condensed Consolidated Financial Statements within this Form 10-Q - Information regarding legal proceedings is described under the subheading 'Business and Basis of Presentation' in Note A of the Notes to the Condensed Consolidated Financial Statements[78](index=78&type=chunk) [Item 1A. Risk Factors](index=19&type=section&id=Item%201A.%20Risk%20Factors) This section refers to the company's Form 10-K for a discussion of known material risk factors, noting that there have been no material changes to these risk factors since the filing of the 10-K - 'Item 1A. Risk Factors' in the company's Form 10-K includes a discussion of known material risk factors[79](index=79&type=chunk) - There have been no material changes from the risk factors described in the Form 10-K[79](index=79&type=chunk) [Item 6. Exhibits](index=19&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with or incorporated by reference into the Form 10-Q, including organizational documents, certifications from the CEO and CFO, and the financial statements formatted in inline XBRL - Exhibits include Articles of Amendment and Restatement of the Charter, By-laws, Certifications of CEO and CFO (pursuant to Rules 13a-14(a), 15d-14(a), and 18 U.S.C. Section 1350), and financial statements in inline XBRL[81](index=81&type=chunk) - The financial statements formatted in inline XBRL include the Condensed Consolidated Balance Sheets, Statements of Comprehensive Income, Statements of Cash Flows, and Notes to Condensed Consolidated Financial Statements[81](index=81&type=chunk)
Haverty Furniture(HVT) - 2020 Q4 - Annual Report
2021-03-09 21:52
PART I [Business](index=5&type=section&id=Item%201.%20Business) Havertys is a specialty retailer of residential furniture and accessories, operating 120 stores across 16 states, targeting middle to upper-middle-income consumers with a quality and value brand [Overview and Operations](index=5&type=section&id=Overview%20and%20Operations) - Founded in 1885, Havertys has grown to **120 stores** in **16 states**, primarily in the Southern and Midwest regions, and does not franchise its locations[23](index=23&type=chunk)[24](index=24&type=chunk) - The company targets college-educated women in middle to upper-middle-income households, with a brand recognized for quality, fashion, and value[24](index=24&type=chunk) [Merchandise, Stores, and Online Presence](index=5&type=section&id=Merchandise%20%2C%20Stores%2C%20and%20Online%20Presence) - The merchandise assortment ranges from traditional to contemporary styles, with nearly all furniture bearing the Havertys brand, avoiding lower-quality, promotional merchandise[25](index=25&type=chunk)[26](index=26&type=chunk) - As of year-end 2020, the company operated **120 stores** with an average size of **35,000 square feet** and does not expect significant retail square footage expansion in 2021[28](index=28&type=chunk)[29](index=29&type=chunk) - Total online sales increased by **65% in 2020** compared to 2019, accounting for approximately **4.4% of total sales**, making the website the company's highest-performing 'store'[33](index=33&type=chunk) [Competition, Supply Chain, and Distribution](index=6&type=section&id=Competition%2C%20Supply%20Chain%2C%20and%20Distribution) - The home furnishings market is highly fragmented, with Havertys competing with online retailers, specialty stores, and national chains through a targeted merchandise mix, custom order capabilities, and in-home design services[34](index=34&type=chunk)[35](index=35&type=chunk) - The company sources from numerous foreign and domestic suppliers, with the top ten accounting for about **45% of product purchases in 2020**, primarily importing wood products from Asia and producing upholstered items domestically[36](index=36&type=chunk) - The distribution system utilizes three distribution centers (DCs) and four home delivery centers (HDCs) to manage inventory and facilitate its branded 'Top Drawer Delivery' service[41](index=41&type=chunk) - Due to COVID-19 related demand and supply chain constraints, delivery times for some merchandise extended up to **12 weeks** by the end of 2020[42](index=42&type=chunk) [Human Capital Resources](index=8&type=section&id=Human%20Capital%20Resources) - As of December 31, 2020, Havertys employed **2,766 team members**, with none being part of a union contract[45](index=45&type=chunk) - In response to COVID-19, the company implemented extensive health and safety protocols, including following CDC guidelines, enhanced cleaning, and establishing a contact tracing program[46](index=46&type=chunk) - The company focuses on diversity, competitive compensation and benefits, and professional development, providing approximately **119,000 hours of learning** to team members in 2020[48](index=48&type=chunk)[49](index=49&type=chunk)[50](index=50&type=chunk) [Risk Factors](index=9&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks from the COVID-19 pandemic, intense competition, reliance on foreign suppliers, supply chain disruptions, IT vulnerabilities, and economic downturns - The COVID-19 pandemic is a major risk, with uncertainty around its duration, its effect on consumer spending habits (e.g., a potential shift away from home goods post-pandemic), and its impact on supply chains[56](index=56&type=chunk)[57](index=57&type=chunk) - Approximately **55% of the company's total furniture purchases in 2020** were for goods not produced domestically, exposing it to risks from exchange rates, tariffs, and political/economic instability in foreign countries[63](index=63&type=chunk) - The business is dependent on third-party producers, and any failure on their part to meet quality standards, secure raw materials, or adhere to labor laws could negatively impact operations and reputation[64](index=64&type=chunk)[65](index=65&type=chunk) - The company's IT infrastructure is vulnerable to cyber threats, which could disrupt point-of-sale, distribution, and payment systems, potentially leading to data breaches and reputational damage[75](index=75&type=chunk)[77](index=77&type=chunk)[78](index=78&type=chunk) - Demand for products is tied to discretionary spending and economic factors such as interest rates, housing sales, and consumer confidence, making the business susceptible to economic downturns[79](index=79&type=chunk) [Properties](index=13&type=section&id=Item%202.%20Properties) As of December 31, 2020, Havertys operated 120 retail stores totaling approximately 4.4 million square feet, with 38 owned and 82 leased, alongside leased distribution facilities and corporate headquarters Store Count by State (as of Dec 31, 2020) | State | Number of Stores | | :--- | :--- | | Florida | 29 | | Texas | 22 | | Georgia | 17 | | North Carolina | 8 | | Virginia | 8 | | South Carolina | 6 | | Alabama | 6 | | Tennessee | 6 | | Other (8 states) | 18 | - The company owns **38 of its 120 retail locations**, with the remaining **82 being leased**[81](index=81&type=chunk) - Key leased distribution facilities are located in Braselton, GA (**808,000 sq ft**), Coppell, TX (**394,000 sq ft**), and Lakeland, FL (**335,000 sq ft**)[82](index=82&type=chunk) [Information about our Executive Officers](index=14&type=section&id=Information%20about%20our%20Executive%20Officers) This section lists the company's executive officers as of March 1, 2021, including their names, ages, current positions, and principal occupations, with key executives being Clarence H. Smith (Chairman & CEO) and Steven G. Burdette (President) Key Executive Officers (as of March 1, 2021) | Name | Age | Position | | :--- | :--- | :--- | | Clarence H. Smith | 70 | Chairman of the Board, Chief Executive Officer | | Steven G. Burdette | 59 | President | | Richard B. Hare | 54 | Executive Vice President and Chief Financial Officer | - Executive officers are elected annually by the Board of Directors[90](index=90&type=chunk) PART II [Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=16&type=section&id=Item%205.%20Market%20for%20the%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's two classes of common stock, HVT (Common) and HVT.A (Class A), are traded on the New York Stock Exchange, with a history of quarterly cash dividends since 1935, and no common stock repurchases in Q4 2020 - The company has paid a cash dividend every year since **1935** and expects to continue this practice[95](index=95&type=chunk) - No shares of outstanding common stock were repurchased during the three months ended December 31, 2020[96](index=96&type=chunk) [Selected Financial Data](index=18&type=section&id=Item%206.%20Selected%20Financial%20Data) This section presents a five-year summary of key financial data, showing 2020 net sales of $748.3 million (a 6.7% decrease), but net income significantly increased to $59.1 million due to a $31.6 million sale-leaseback gain, resulting in diluted EPS of $3.12 Selected Financial Data (in thousands, except per share data) | Metric | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | **Net sales** | $748,252 | $802,291 | $817,733 | | Net sales change over prior year | (6.7)% | (1.9)% | (0.3)% | | **Gross profit** | $418,994 | $434,488 | $446,542 | | Gross profit % of net sales | 56.0% | 54.2% | 54.6% | | **Net income** | $59,148 | $21,865 | $30,307 | | **Diluted EPS (Common Stock)** | $3.12 | $1.08 | $1.42 | | **Net cash provided by operating activities** | $130,191 | $63,419 | $70,392 | - Net income in 2020 includes a gain of **$31.6 million** from a sale-leaseback transaction, which impacted diluted EPS by **$1.24**[103](index=103&type=chunk) - The company paid a special dividend of **$2.00 per Common Stock share** in the fourth quarter of 2020[103](index=103&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the significant impact of the COVID-19 pandemic, leading to store closures and workforce reductions, followed by a strong demand rebound, improved gross profit margin, strengthened liquidity via a $70.0 million sale-leaseback, and a strong cash position of $200.1 million, with anticipated 2021 capital expenditures of $23.0 million [Impact of COVID-19 and Management Objectives](index=19&type=section&id=Impact%20of%20COVID-19%20and%20Management%20Objectives) - In response to COVID-19, the company closed stores in March 2020, furloughed **87% of its workforce**, and later made a permanent reduction of approximately **1,200 team members**[107](index=107&type=chunk) - To maintain financial flexibility, the company completed a **$70.0 million sale-leaseback transaction** in May 2020[108](index=108&type=chunk) - Business was very strong after reopening, driven by a consumer 'nesting' trend, leading to increased online shopping and a higher average ticket[109](index=109&type=chunk) [Results of Operations](index=20&type=section&id=Results%20of%20Operations) Net Sales and Comp-Store Sales Growth | Year | Net Sales (M$) | % Change | Comp-Store Sales % Change | | :--- | :--- | :--- | :--- | | 2020 | $748.3 | (6.7)% | 5.0% | | 2019 | $802.3 | (1.9)% | (1.4)% | | 2018 | $817.7 | (0.3)% | 0.3% | - Gross profit as a percentage of net sales increased to **56.0% in 2020** from 54.2% in 2019, primarily due to less discounting and favorable product mix[124](index=124&type=chunk) - SG&A expenses decreased to **50.4% of sales in 2020** from 50.8% in 2019, driven by reduced advertising, rent abatements, and workforce reductions[129](index=129&type=chunk)[130](index=130&type=chunk) - The effective tax rate was **22.9% in 2020**, down from 23.9% in 2019, benefiting from state quality jobs credits[137](index=137&type=chunk) [Liquidity and Capital Resources](index=23&type=section&id=Liquidity%20and%20Capital%20Resources) - The company ended 2020 with **$200.1 million in cash and cash equivalents**, a significant increase from $75.7 million at the end of 2019[138](index=138&type=chunk)[204](index=204&type=chunk) - Net cash provided by operating activities was **$130.2 million in 2020**, compared to $63.4 million in 2019, driven by net income and favorable changes in working capital like customer deposits[147](index=147&type=chunk)[148](index=148&type=chunk) - Investing activities provided **$65.4 million in cash**, primarily from **$76.3 million in proceeds** from the sale-leaseback transaction, offset by **$10.9 million in capital expenditures**[149](index=149&type=chunk) - Financing activities used **$71.2 million**, consisting mainly of **$50.5 million in dividend payments** and **$19.7 million in share repurchases**[151](index=151&type=chunk) [Store Expansion and Capital Expenditures](index=25&type=section&id=Store%20Expansion%20and%20Capital%20Expenditures) - In 2020, the company opened one store and closed two, resulting in a net decrease in store count to **120**[154](index=154&type=chunk) Capital Expenditures (Approximate in thousands) | Category | Proposed 2021 (in thousands) | 2020 (in thousands) | 2019 (in thousands) | | :--- | :--- | :--- | :--- | | Total stores | $12,900 | $4,800 | $10,300 | | Distribution | $6,400 | $3,600 | $2,700 | | Information technology | $3,700 | $2,500 | $3,800 | | **Total** | **$23,000** | **$10,900** | **$16,800** | [Quantitative and Qualitative Disclosures about Market Risk](index=26&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's primary market risk exposure stems from fluctuations in interest rates, specifically LIBOR, related to its Credit Agreement, with management stating that a 100-basis point change would not have a significant adverse impact, and the company does not use derivative instruments for speculative purposes while monitoring LIBOR's potential phase-out - The main market risk is exposure to floating interest rates through the company's Credit Agreement[162](index=162&type=chunk) - The company does not engage in derivatives trading or other speculative activities[161](index=161&type=chunk) [Controls and Procedures](index=27&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of December 31, 2020, and its internal control over financial reporting was also effective, a finding supported by an unqualified audit opinion from Grant Thornton LLP - Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of the end of the period[166](index=166&type=chunk) - Management concluded that internal control over financial reporting was effective as of December 31, 2020, based on the COSO framework (2013)[167](index=167&type=chunk) - The independent auditor, Grant Thornton LLP, issued an unqualified opinion on the effectiveness of the company's internal control over financial reporting[168](index=168&type=chunk)[172](index=172&type=chunk) PART III [Directors, Compensation, Security Ownership, and Principal Accounting Fees](index=29&type=section&id=Items%2010-14) This section, covering directors, executive compensation, security ownership, related transactions, and principal accounting fees, incorporates information by reference from the company's definitive Proxy Statement for its 2021 Annual Meeting of Stockholders - Information required for Items 10, 11, 12, 13, and 14 is incorporated by reference from the company's 2021 Proxy Statement[181](index=181&type=chunk)[182](index=182&type=chunk)[183](index=183&type=chunk)[185](index=185&type=chunk)[186](index=186&type=chunk) PART IV [Exhibits, Financial Statement Schedules](index=30&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists the documents filed as part of the Form 10-K report, including consolidated financial statements, financial statement schedules (specifically Schedule II – Valuation and Qualifying Accounts), and a comprehensive list of exhibits such as the company's charter, bylaws, credit agreements, and various compensation plans - This section provides a complete list of all financial statements, schedules, and exhibits filed with the annual report[188](index=188&type=chunk)[189](index=189&type=chunk) Financial Statements and Notes [Consolidated Financial Statements](index=35&type=section&id=Consolidated%20Financial%20Statements) The audited consolidated financial statements present the company's financial position as of December 31, 2020 and 2019, and its results of operations and cash flows for the three years ended December 31, 2020, with key 2020 figures including total assets of $680.4 million, total liabilities of $427.4 million, total stockholders' equity of $253.0 million, and net income of $59.1 million on net sales of $748.3 million Consolidated Balance Sheet Highlights (in thousands) | Metric | Dec 31, 2020 (in thousands) | Dec 31, 2019 (in thousands) | | :--- | :--- | :--- | | Cash and cash equivalents | $200,058 | $75,739 | | Inventories | $89,908 | $104,817 | | Total assets | $680,372 | $560,072 | | Customer deposits | $86,183 | $30,121 | | Total liabilities | $427,405 | $299,569 | | Total stockholders' equity | $252,967 | $260,503 | Consolidated Statement of Income Highlights (in thousands) | Metric | 2020 (in thousands) | 2019 (in thousands) | 2018 (in thousands) | | :--- | :--- | :--- | :--- | | Net sales | $748,252 | $802,291 | $817,733 | | Gross profit | $418,994 | $434,488 | $446,542 | | Net income | $59,148 | $21,865 | $30,307 | [Notes to Consolidated Financial Statements](index=39&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes provide detailed explanations of the company's accounting policies and financial results, including the significant impact of COVID-19, revenue breakdown, LIFO inventory method, credit facility details, a major sale-leaseback transaction, income taxes, benefit plans, and stock-based compensation - In response to COVID-19, the company closed all stores on March 19, 2020, and reopened them starting May 1, 2020, also making a permanent workforce reduction of approximately **1,200 team members**[213](index=213&type=chunk) - The company completed a sale-leaseback of three facilities on May 18, 2020, for a total price of **$70.0 million**, resulting in a recognized gain of **$31.6 million**[236](index=236&type=chunk)[271](index=271&type=chunk) - Under the CARES Act, the company deferred **$1.6 million of employer-paid social security taxes** and recorded **$2.3 million in refundable employee retention credits** in 2020[261](index=261&type=chunk) - The company has a **$60.0 million revolving credit facility** secured by inventory and receivables, under which it borrowed and repaid **$43.8 million** in 2020[254](index=254&type=chunk)[255](index=255&type=chunk)[256](index=256&type=chunk) Selected Quarterly Net Sales (Unaudited, in thousands) | 2020 Quarter | Net Sales (in thousands) | | :--- | :--- | | March 31 | $179,432 | | June 30 | $109,968 | | September 30 | $217,513 | | December 31 | $241,339 |
Haverty Furniture(HVT) - 2020 Q4 - Earnings Call Transcript
2021-02-18 21:43
Financial Data and Key Metrics Changes - In Q4 2020, delivered sales reached $241.3 million, a 12.9% increase compared to the same quarter in 2019 [5][15] - Earnings per share for Q4 2020 were $1.37, up from $0.31 in the same period last year [5][18] - Gross profit margin increased by 280 basis points from 54.2% to 57% due to better pricing discipline and reduced promotional activity [6][15] - Selling, general and administrative expenses decreased by $1.6 million or 1.5% to $107 million, representing 44.3% of sales compared to 50.8% in the previous year [6][16] Business Line Data and Key Metrics Changes - Internet sales accounted for 4.3% of total sales since reopening, with "buy online, pick up in store" increasing to 16%, tripling from previous years [6] - Total written sales for Q4 2020 were up 16.7%, with written comparable store sales increasing by 17.5% [15] Market Data and Key Metrics Changes - The largest markets produced record levels and were significant profit contributors [6] - Customer deposits at the end of Q4 2020 were $86.2 million, up $56.1 million from the previous year [19] Company Strategy and Development Direction - The company plans to open new stores in Myrtle Beach, South Carolina, and Central Florida, while closing one store, ending the year with 122 stores [7] - Investments in the website are planned to enhance customer interaction and improve service levels [11][12] - The company aims to exceed long-term productivity goals of sales over $200 per square foot in 2021 [8] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about overcoming supply chain challenges and improving service levels compared to competitors [10] - The company anticipates gross margins for 2021 to be between 55.3% and 55.8%, impacted by product and freight costs [22] - Management acknowledged the ongoing supply chain issues but noted improvements in inventory positions for best-selling products [34] Other Important Information - The company returned approximately $70 million to shareholders in 2020 through dividends and share repurchases [21] - Capital expenditures for Q4 2020 were $3.7 million, with planned expenditures for 2021 around $23 million [20][24] Q&A Session Summary Question: How did same-store sales progress in Q4? - Management noted that delivered sales were up over 20% in October, down mid-single digits in November, and back up over 20% in December [29] Question: What product categories are facing inventory issues? - Management indicated challenges in domestic upholstery due to labor and supply issues, as well as import container shortages [34] Question: Will price increases offset higher delivery costs? - Management confirmed that they are increasing prices to recover costs, with expectations that freight costs will decrease later in the year [37] Question: Can you quantify the backlog? - Management stated that the backlog is at a record high but did not provide a specific dollar amount, indicating it is several multiples higher than last year [39] Question: How long will supply chain issues persist? - Management expects supply chain challenges to continue through the summer, with improvements anticipated by fall [42] Question: How has the recent weather impacted operations? - Management reported that about 30% of stores were down for several days due to severe weather, impacting deliveries significantly [51]