Haverty Furniture(HVT_A) - 2025 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements This section presents the company's unaudited condensed consolidated financial statements and accompanying notes for the relevant periods Condensed Consolidated Balance Sheets | (In thousands) | March 31, 2025 | December 31, 2024 | | :--------------- | :------------- | :---------------- | | Total assets | $642,690 | $648,747 | | Total liabilities | $337,329 | $341,186 | | Total stockholders' equity | $305,361 | $307,561 | | Cash and cash equivalents | $111,941 | $120,034 | | Inventories | $88,704 | $83,419 | Condensed Consolidated Statements of Comprehensive Income | (In thousands, except per share data) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | Net sales | $181,567 | $183,997 | | Gross profit | $111,083 | $111,019 | | Income before income taxes | $5,293 | $3,195 | | Net income | $3,778 | $2,393 | | Basic earnings per share: Common Stock | $0.24 | $0.15 | | Cash dividends per share: Common Stock | $0.32 | $0.30 | Condensed Consolidated Statements of Cash Flows | (In thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :------------- | :-------------------------------- | :-------------------------------- | | Net cash provided by operating activities | $6,154 | $3,135 | | Net cash used in investing activities | $(6,122) | $(6,351) | | Net cash used in financing activities | $(8,058) | $(6,698) | | Common stock repurchased | $(2,000) | — | | Dividends paid | $(5,173) | $(4,845) | Notes to Condensed Consolidated Financial Statements Note A - Business and Basis of Presentation - Haverty Furniture Companies, Inc operates as a retailer of residential furniture in the middle to upper-middle price ranges, exclusively under the Havertys brand without franchising[12] - The unaudited condensed consolidated financial statements are prepared in accordance with Form 10-Q instructions and rely on management's estimates and assumptions, which may differ from actual results[12][13] Note B – Stockholders' Equity | (in thousands) | Balances at Dec 31, 2024 | Net income | Dividends declared (Common Stock) | Dividends declared (Class A Common Stock) | Acquisition of treasury stock | Balances at Mar 31, 2025 | | :------------- | :----------------------- | :--------- | :-------------------------------- | :---------------------------------------- | :---------------------------- | :----------------------- | | Total Stockholders' Equity | $307,561 | $3,778 | $(4,799) | $(374) | $(2,000) | $305,361 | Note C – Interim LIFO Calculations - Inventories are valued using the last-in, first-out (LIFO) method with an annual LIFO index[17] - Interim LIFO calculations are based on management's estimates of year-end inventory levels and expected inflation/deflation rates, making interim results subject to change based on the final year-end valuation[17] Note D – Fair Value of Financial Instruments - The fair values of cash, restricted cash, accounts payable, and customer deposits approximate their carrying values due to their short-term nature[18] - Assets related to self-directed, non-qualified deferred compensation plans are valued using Level 1 quoted market prices[18] Note E – Credit Agreement - The company has an $80.0 million revolving credit facility, secured primarily by inventory, maturing on October 24, 2027[19] - As of March 31, 2025, and December 31, 2024, there were no outstanding borrowings under the Credit Agreement, with a net availability of $80.0 million at March 31, 2025[20] Note F – Revenues and Segment Reporting - Revenue from merchandise sales and related service fees is recognized upon delivery to the customer[21] - The company operates within a single reportable segment, with an executive committee serving as the chief operating decision maker (CODM) and evaluating performance based on income before income taxes[23][24] | (In thousands) | Net Sales (2025) | % of Net Sales (2025) | Net Sales (2024) | % of Net Sales (2024) | | :------------- | :--------------- | :-------------------- | :--------------- | :-------------------- | | Case Goods | $58,052 | 32.0 % | $59,085 | 32.1 % | | Upholstery | $81,415 | 44.8 % | $82,935 | 45.1 % | | Mattresses | $15,804 | 8.7 % | $16,600 | 9.0 % | | Accessories and Other | $26,296 | 14.5 % | $25,377 | 13.8 % | | Total | $181,567 | 100.0 % | $183,997 | 100.0 % | Note G – Leases - The company holds operating leases for retail stores, offices, warehouses, and equipment, with remaining terms of 1 to 12 years and options to extend up to 20 years[27] - Variable lease payments, based on sales volume or asset usage, are not included in the initial measurement of lease liabilities and are recorded as lease expense in the period incurred[28][29] | (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :------------- | :-------------------------------- | :-------------------------------- | | Operating lease cost | $12,334 | $12,244 | | Variable lease cost | $1,302 | $1,374 | | Total lease expense | $13,636 | $13,618 | Note H – Income Taxes - The effective tax rate for the three months ended March 31, 2025, was 28.6%, an increase from 25.1% in the prior year, primarily due to nondeductible items and state income taxes[31] Note I – Stock-Based Compensation Plans - Total compensation cost related to unvested equity awards was approximately $11.9 million as of March 31, 2025, expected to be recognized over a weighted-average period of two years[35] - Compensation charged to selling, general and administrative expenses was approximately $2.1 million for Q1 2025, down from $2.6 million for Q1 2024[35] - The total fair value of performance-based restricted stock awards that vested during Q1 2025 was approximately $2.1 million[34] Note J – Earnings Per Share - The company reports earnings per share using the two-class method, reflecting Common Stock's preferential dividend rate and Class A Common Stock's greater voting rights[37][38] | Earnings Per Share | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :----------------- | :-------------------------------- | :-------------------------------- | | Basic EPS: Common Stock | $0.24 | $0.15 | | Diluted EPS: Common Stock | $0.23 | $0.14 | Note K – Contingencies - The company is subject to various claims and legal proceedings in the ordinary course of business, but currently has no pending claims reasonably likely to have a material adverse effect on its financial condition, results of operations, or cash flows[40] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance, operational trends, liquidity, and capital resources for the first quarter of 2025 Forward-Looking Statements - Statements in the report that are not purely historical facts or depend on future events are considered forward-looking statements, subject to risks and uncertainties[42] - Readers are cautioned not to place undue reliance on forward-looking statements, as actual results could differ materially due to factors like competition, consumer preferences, supply chain issues, and economic conditions[42] Impact of tariffs imposed by the U.S government - The U.S government imposed additional tariffs on imported goods starting in Q1 2025, with a 90-day pause for most trading partners (excluding China) implemented in April 2025[44] - The company is actively monitoring negotiations and evaluating the impact of these tariffs to minimize their effect on its business[44] Net Sales - Net sales decreased by $2.4 million (1.3%) and comparable-store sales decreased by $8.8 million (4.8%) in Q1 2025 compared to Q1 2024, attributed to a weak housing market, inflationary pressures, cautious consumer spending, and atypical winter weather[47] - Design consultants drove 33.2% of total written sales in Q1 2025, with an average written ticket of $7,422, an increase from 32.4% and $6,782 in Q1 2024[48] | Period | Net Sales Total $ (2025) | % Change (2025) | Comp-Store Sales % Change (2025) | Net Sales Total $ (2024) | % Change (2024) | Comp-Store Sales % Change (2024) | | :----- | :----------------------- | :-------------- | :------------------------------- | :----------------------- | :-------------- | :------------------------------- | | Q1 | $181.6 | (1.3)% | (4.8)% | $184.0 | (18.1)% | (18.5)% | Gross Profit - Gross profit margin for Q1 2025 increased by 90 basis points to 61.2% compared to 60.3% in the prior year, primarily due to product selection and merchandising mix[49] Selling, General and Administrative Expenses - SG&A costs as a percentage of sales decreased to 59.0% in Q1 2025 from 59.4% in Q1 2024, with total SG&A dollars decreasing by $2.2 million (2.0%)[50] - The decrease in SG&A dollars was driven by lower selling expense ($2.0 million), warehouse and delivery costs ($1.7 million), and advertising and marketing costs ($1.1 million), partially offset by higher occupancy costs ($1.6 million) and administrative expenses ($1.0 million)[50] | (In thousands) | 2025 $ | % of Net Sales (2025) | 2024 $ | % of Net Sales (2024) | | :------------- | :----- | :-------------------- | :----- | :-------------------- | | Variable | $33,647 | 18.5 % | $36,986 | 20.1 % | | Fixed and discretionary | $73,555 | 40.5 % | $72,370 | 39.3 % | | Total | $107,202 | 59.0 % | $109,356 | 59.4 % | Liquidity and Capital Resources - The company believes its current cash position, cash flow from operations, available credit, and access to debt capital markets are sufficient for operating requirements, capital expenditures, dividend payments, and lease obligations for the next several years[54] Cash and Cash Equivalents - As of March 31, 2025, the company had $111.9 million in cash and cash equivalents and $6.3 million in restricted cash equivalents[54] Long-Term Debt - The company maintains an $80.0 million revolving credit facility, maturing October 24, 2027, with no outstanding borrowings and $80.0 million net availability as of March 31, 2025[55] Leases - The company leases a portion of its real estate, including stores, distribution centers, and store support space, through operating leases[56] Cash Flows Summary - Net cash provided by operating activities increased to $6.2 million in Q1 2025 from $3.1 million in Q1 2024, driven by higher net income and changes in working capital, including increased inventories[59] - Cash used in investing activities decreased by $0.2 million in Q1 2025 due to lower capital expenditures[60] - Cash used in financing activities increased by $1.4 million in Q1 2025, primarily due to $2.0 million in common stock repurchases (compared to none in Q1 2024)[61] Store Plans and Capital Expenditures - The company is reevaluating its store plans and capital expenditures for 2025 to minimize the impact of increased tariffs[62] - Assuming new stores open as planned, the company expects to end 2025 with 129 stores, including planned openings in Houston (Q1, Q3 2025) and a relocation in Daytona (Q2 2025), alongside closures in Atlanta (Q2 2025) and Waco (Q3 2025)[62] Critical Accounting Estimates - Critical accounting estimates involve significant, subjective, or complex judgments due to inherent uncertainties, but no significant changes were identified since the last annual report[63] Item 3. Quantitative and Qualitative Disclosures about Market Risk This section confirms no material changes in market risk exposure since the year-end 2024 report - The company's exposure to market risk has not materially changed since December 31, 2024[64] Item 4. Controls and Procedures Management confirms the effectiveness of disclosure controls and procedures as of March 31, 2025, with no material changes to internal controls - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of March 31, 2025[65] - No material changes in the company's internal control over financial reporting were identified during the fiscal quarter ended March 31, 2025[66] PART II. OTHER INFORMATION Item 1. Legal Proceedings This section refers to the financial statement notes for information on legal proceedings, with no material adverse effects anticipated - Information regarding legal proceedings is described in Note A of the Notes to the Condensed Consolidated Financial Statements[68] Item 1A. Risk Factors This section confirms no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K - There have been no material changes from the risk factors described in the company's 2024 Annual Report on Form 10-K[69] Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities The company details its Q1 2025 common stock repurchases and the remaining authorization under its buyback program - The board of directors has authorized a stock repurchase program with no expiration date[70] | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Approximate Dollar Value of Shares That May Yet be Purchased | | :----- | :------------------------------- | :--------------------------- | :----------------------------------------------------------- | | March 1 - March 31 | 93,741 | $21.34 | $6,121,000 | | Total | 93,741 | | | Item 5. Other Information This section confirms no directors or officers adopted, modified, or terminated any Rule 10b5-1 trading arrangements during Q1 2025 - No directors or officers adopted, modified, or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement" during the three months ended March 31, 2025[72] Item 6. Exhibits This section lists all exhibits filed with the report, including CEO/CFO certifications and XBRL-formatted financial statements - Exhibits include certifications of the Chief Executive Officer and Chief Financial Officer (31.1, 31.2, 32.1) and financial statements formatted in inline XBRL (101)[74] SIGNATURES - The report was signed on May 2, 2025, by Steven G Burdette, President, Chief Executive Officer, and Director, and Richard B Hare, Executive Vice President, Chief Financial Officer, and Corporate Secretary[80]