Haverty Furniture(HVT) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements, including balance sheets, income statements, and cash flow statements, along with detailed notes Condensed Consolidated Balance Sheets This section provides a snapshot of the company's assets, liabilities, and equity at specific points in time Condensed Consolidated Balance Sheets (In thousands): | Item | June 30, 2025 | December 31, 2024 | Change | % Change | | :-------------------------------- | :------------ | :---------------- | :----- | :------- | | Assets | | | | | | Cash and cash equivalents | $107,357 | $120,034 | $(12,677) | -10.6% | | Inventories | $93,270 | $83,419 | $9,851 | 11.8% | | Total current assets | $236,148 | $238,896 | $(2,748) | -1.1% | | Total assets | $642,672 | $648,747 | $(6,075) | -0.9% | | Liabilities | | | | | | Total current liabilities | $130,514 | $131,565 | $(1,051) | -0.8% | | Total liabilities | $337,801 | $341,186 | $(3,385) | -1.0% | | Stockholders' Equity | | | | | | Total stockholders' equity | $304,871 | $307,561 | $(2,690) | -0.9% | Condensed Consolidated Statements of Comprehensive Income This section details the company's revenues, expenses, and net income over specific periods Condensed Consolidated Statements of Comprehensive Income (In thousands, except per share data): | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net sales | $181,025 | $178,636 | $362,592 | $362,633 | | Gross profit | $110,102 | $107,984 | $221,185 | $219,003 | | Income before interest and income taxes | $2,834 | $4,986 | $6,873 | $6,626 | | Net income | $2,689 | $4,438 | $6,467 | $6,831 | | Basic earnings per share (Common Stock) | $0.17 | $0.27 | $0.40 | $0.42 | | Diluted earnings per share (Common Stock) | $0.16 | $0.27 | $0.39 | $0.41 | | Cash dividends per share (Common Stock) | $0.32 | $0.32 | $0.64 | $0.62 | - Net sales for the three months ended June 30, 2025, increased by $2.4 million (1.3%) compared to the same period in 2024, reaching $181.0 million. However, net sales for the six months ended June 30, 2025, were comparable to the prior year period[7] - Net income decreased for both the three-month period (from $4.4 million to $2.7 million) and the six-month period (from $6.8 million to $6.5 million) year-over-year[7] Condensed Consolidated Statements of Cash Flows This section outlines the cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (In thousands): | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change | | :-------------------------------- | :----------------------------- | :----------------------------- | :----- | | Net cash provided by operating activities | $13,377 | $17,542 | $(4,165) | | Net cash used in investing activities | $(11,683) | $(15,900) | $4,217 | | Net cash used in financing activities | $(14,237) | $(13,352) | $(885) | | Decrease in cash, cash equivalents, and restricted cash equivalents | $(12,543) | $(11,710) | $(833) | | Cash, cash equivalents, and restricted cash equivalents at end of period | $113,771 | $116,067 | $(2,296) | - Net cash provided by operating activities decreased by $4.2 million in the first six months of 2025, primarily due to changes in working capital, including increased inventories and reduced customer deposits[65] - Cash used in investing activities decreased by $4.2 million, driven by lower capital expenditures[66] Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements Note A - Business and Basis of Presentation This note describes the company's business operations and the accounting principles used in preparing the financial statements - Haverty Furniture Companies, Inc. operates as a retailer of residential furniture in the middle to upper-middle price ranges, exclusively under the Havertys brand[9] - The financial statements are unaudited and prepared in accordance with Form 10-Q instructions and U.S. GAAP, requiring management estimates and assumptions[9][10] Note B – Stockholders' Equity This note details changes in the company's equity accounts, including net income, dividends, and stock transactions Changes in Stockholders' Equity (Six Months Ended June 30, 2025, in thousands): | Item | Common Stock | Class A Common Stock | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Treasury Stock | Total | | :-------------------------------- | :----------- | :------------------- | :------------------------- | :---------------- | :----------------------------------- | :------------- | :------ | | Balances at Dec 31, 2024 | $30,419 | $1,793 | $117,257 | $418,960 | $(869) | $(259,999) | $307,561 | | Net income | — | — | — | $6,467 | — | — | $6,467 | | Dividends declared (Common Stock) | — | — | — | $(9,606) | — | — | $(9,606) | | Dividends declared (Class A Common Stock) | — | — | — | $(747) | — | — | $(747) | | Acquisition of treasury stock | — | — | — | — | — | $(2,000) | $(2,000) | | Balances at Jun 30, 2025 | $30,633 | $1,732 | $120,074 | $415,074 | $(869) | $(261,773) | $304,871 | - Common Stock dividends declared were $0.64 per share for the six months ended June 30, 2025, and Class A Common Stock dividends were $0.60 per share[13] - The company repurchased $2.0 million of common stock during the first six months of 2025, with no repurchases in the comparable 2024 period[13][67] Note C – Interim LIFO Calculations This note explains the interim valuation method for inventories using the LIFO method and its inherent estimates - Inventories are valued using the last-in, first-out (LIFO) method with an annual LIFO index[15] - Interim LIFO calculations rely on management's estimates of year-end inventory and inflation/deflation rates, making them subject to change based on final year-end valuation[15] Note D – Fair Value of Financial Instruments This note discusses the fair value measurements for various financial instruments, primarily short-term assets and liabilities - Fair values of cash, restricted cash, accounts payable, and customer deposits approximate their carrying values due to their short-term nature[16] - Assets for self-directed, non-qualified deferred compensation plans are valued using Level 1 quoted market prices[16] Note E – Credit Agreement This note outlines the terms of the company's revolving credit facility, including its availability and maturity - The company has an $80.0 million revolving credit facility, secured primarily by inventory, maturing on October 24, 2027[17][61] - As of June 30, 2025, there were no outstanding borrowings, and the net availability under the credit agreement was $80.0 million[18][61] Note F – Revenues and Segment Reporting This note details revenue recognition policies, customer deposits, and the company's single reportable segment structure - Revenue from merchandise sales and related service fees is recognized upon delivery to the customer, net of expected returns and sales tax[19] - Customer deposits were $39.4 million at June 30, 2025, a decrease from $40.7 million at December 31, 2024[19] Net Sales Disaggregated by Product Category (In thousands): | Product Category | Three Months Ended June 30, 2025 (Net Sales) | Three Months Ended June 30, 2024 (Net Sales) | Six Months Ended June 30, 2025 (Net Sales) | Six Months Ended June 30, 2024 (Net Sales) | | :----------------------- | :------------------------------------------- | :------------------------------------------- | :----------------------------------------- | :----------------------------------------- | | Case Goods | $57,561 | $58,408 | $115,613 | $117,493 | | Upholstery | $80,884 | $78,273 | $162,300 | $161,208 | | Mattresses | $16,525 | $16,640 | $32,329 | $33,240 | | Accessories and Other | $26,055 | $25,315 | $52,350 | $50,692 | | Total Net Sales | $181,025 | $178,636 | $362,592 | $362,633 | - The company operates within a single reportable segment, with an executive committee serving as the chief operating decision maker (CODM) and assessing performance based on income before income taxes[21][22] Note G – Leases This note describes the company's operating lease arrangements, including terms, payments, and related expenses - The company holds operating leases for various real estate and equipment, with remaining terms of 1 to 15 years and options to extend up to 20 years[25] - Variable lease payments, typically based on sales volume or asset usage, are not included in the initial measurement of right-of-use assets or lease liabilities and are expensed when incurred[26][27] Lease Expense (In thousands): | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Operating lease cost | $12,550 | $12,092 | $24,884 | $24,338 | | Variable lease cost | $1,311 | $1,388 | $2,613 | $2,762 | | Total lease expense | $13,861 | $13,480 | $27,497 | $27,100 | Note H – Income Taxes This note explains the effective tax rate, its drivers, and the expected impact of recent tax legislation - The effective tax rate for the six months ended June 30, 2025, was 32.8%, an increase from 29.2% in the prior year, mainly due to nondeductible items and tax expense from vested stock awards[29] - The One Big Beautiful Bill Act (OBBBA), enacted on July 4, 2025, is not expected to have a material impact on the consolidated financial statements[30] Note I – Stock-Based Compensation Plans This note summarizes activity for service-based and performance-based restricted stock awards and related compensation costs Stock Award Activity (Six Months Ended June 30, 2025): | Item | Service-Based Restricted Stock Awards (Shares or Units) | Performance-Based Restricted Stock Awards (Shares or Units) | | :-------------------------------- | :---------------------------------------------------- | :------------------------------------------------------ | | Outstanding at December 31, 2024 | 250,575 | 276,098 | | Granted/Issued | 213,750 | 153,948 | | Awards vested or rights exercised | (151,938) | (91,804) | | Forfeited | (10,102) | (4,577) | | Adjustment of units based on performance | — | (65,364) | | Outstanding at June 30, 2025 | 302,285 | 268,301 | - The total fair value of service-based restricted stock awards that vested was approximately $2.9 million, and performance-based awards was approximately $2.1 million, for the six months ended June 30, 2025[32][33] - Total compensation cost related to unvested equity awards was approximately $9.8 million as of June 30, 2025, to be recognized over a weighted-average period of two years[34] Note J – Earnings Per Share This note details the calculation of earnings per share using the two-class method, considering different stock classes - Earnings per share are reported using the two-class method, assuming 100% of earnings are distributed as dividends based on contractual rights[36] - Common Stock has a preferential dividend rate of at least 105% of the dividend paid on Class A Common Stock. Class A Common Stock holders have greater voting rights and can convert to Common Stock on a one-for-one basis[37] Earnings Per Share (Common Stock): | EPS Type | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Basic EPS (Common Stock) | $0.17 | $0.27 | $0.40 | $0.42 | | Diluted EPS (Common Stock) | $0.16 | $0.27 | $0.39 | $0.41 | | Basic EPS (Class A Common Stock) | $0.15 | $0.25 | $0.37 | $0.39 | | Diluted EPS (Class A Common Stock) | $0.15 | $0.25 | $0.37 | $0.39 | Note K – Contingencies This note addresses the company's involvement in legal proceedings and their potential financial impact - The company is involved in various claims and legal proceedings arising in the ordinary course of business[39] - No pending claims or legal proceedings are currently believed to be reasonably likely to have a material adverse effect on the company's financial condition, results of operations, or cash flows[39] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial performance, condition, liquidity, and capital resources Forward-Looking Statements and Risk Factors This subsection outlines the nature of forward-looking statements and lists various risks that could affect future results - Statements about future estimates, expectations, beliefs, intentions, projections, or strategies are considered forward-looking statements, subject to inherent uncertainties and risks[41][42] - - Competition from national, regional, and local retailers[44] - Ability to anticipate changes in consumer preferences and implement growth strategies[44] - Risks in the supply chain, including cost volatility of raw materials, dependence on third-party producers, and transportation[44] - Impact of labor disruptions, shortages, and ability to attract/retain key employees[44] - Vulnerability of information technology infrastructure to cyber-attacks[44] - Changes in general domestic and international economic conditions (inflation, interest rates, recessions)[44] - Pending or unforeseen litigation[44] Impact of tariffs imposed by the U.S government This subsection discusses the new U.S. tariffs on imported goods and the company's assessment of their impact - New U.S. tariff rates, ranging from 10% to 41%, will be imposed on imports from over 67 countries, effective August 7, 2025[47] - Tariffs for Chinese goods remain at 55% and are part of ongoing discussions. Canada faces increased tariffs on certain non-compliant goods[47] - The company is actively monitoring developments and evaluating mitigation strategies to assess the impact on its supply chain and cost structure[47] Net Sales This subsection analyzes the company's net sales performance, including total and comparable-store sales, for recent periods Net Sales and Comp-Store Sales Performance (In millions): | Period | Net Sales (Total) 2025 | Net Sales (Total) 2024 | Comp-Store Sales 2025 | Comp-Store Sales 2024 | | :----- | :--------------------- | :--------------------- | :-------------------- | :-------------------- | | Q1 | $181.6 | $184.0 | (4.8)% | (18.5)% | | Q2 | $181.0 | $178.6 | (2.3)% | (13.6)% | | YTD Q2 | $362.6 | $362.6 | (3.5)% | (16.2)% | - Net sales for Q2 2025 increased by $2.4 million (1.3%) compared to Q2 2024, while comp-store sales decreased by $4.0 million (2.3%)[49] - For the first six months of 2025, net sales were comparable to 2024, but comp-store sales decreased by $12.8 million (3.5%)[50] - Design consultants contributed 33.4% of total written sales in Q2 2025 (down from 36.0% in Q2 2024), with a higher average written ticket of $7,631 (up from $7,260)[51] Gross Profit This subsection examines the company's gross profit and margin, highlighting factors influencing changes - Gross profit margin for Q2 2025 was 60.8%, up 40 basis points from 60.4% in Q2 2024[53] - For the first six months of 2025, gross profit margin was 61.0%, up 60 basis points from 60.4% in the same period of 2024[53] - The increase in gross profit margin is primarily attributed to product selection, merchandise pricing, and mix[53] Selling, General and Administrative Expenses This subsection details the trends and components of SG&A expenses and their impact on profitability - SG&A expenses as a percentage of sales increased to 59.3% for Q2 2025 (up from 57.7% in Q2 2024) and 59.2% for the first six months of 2025 (up from 58.6% in 2024)[55][56] - - Q2 2025 SG&A increased by $4.2 million (4.1%), driven by administrative ($3.4 million), occupancy ($1.5 million), and advertising ($1.1 million) costs, partially offset by decreased warehouse and delivery costs ($1.1 million)[55] - First six months of 2025 SG&A increased by $2.1 million (1.0%), driven by administrative ($4.5 million) and occupancy ($3.1 million) costs, offset by decreased warehouse and delivery ($2.8 million) and selling expenses ($2.7 million)[56] SG&A Expenses by Classification (In thousands): | Classification | Three Months Ended June 30, 2025 | % of Net Sales 2025 | Three Months Ended June 30, 2024 | % of Net Sales 2024 | Six Months Ended June 30, 2025 | % of Net Sales 2025 | Six Months Ended June 30, 2024 | % of Net Sales 2024 | | :----------------------- | :------------------------------- | :------------------ | :------------------------------- | :------------------ | :----------------------------- | :------------------ | :----------------------------- | :------------------ | | Variable | $33,353 | 18.4% | $34,746 | 19.4% | $67,000 | 18.5% | $71,732 | 19.8% | | Fixed and discretionary | $73,980 | 40.9% | $68,353 | 38.3% | $147,535 | 40.7% | $140,723 | 38.8% | | Total SG&A | $107,333 | 59.3% | $103,099 | 57.7% | $214,535 | 59.2% | $212,455 | 58.6% | Liquidity and Capital Resources This subsection assesses the company's cash position, credit facilities, and ability to meet financial obligations - As of June 30, 2025, the company had $107.4 million in cash and cash equivalents and $6.4 million in restricted cash equivalents[60] - The company believes its current cash, operating cash flow, credit agreement, and access to debt markets are sufficient for operating requirements, capital expenditures, dividends, and lease obligations[60] - Net cash provided by operating activities decreased by $4.2 million to $13.4 million in the first six months of 2025, primarily due to increased inventories and reduced customer deposits[65] - Cash used in investing activities decreased by $4.2 million due to lower capital expenditures, and cash used in financing activities increased by $0.9 million due to $2.0 million in common stock repurchases[66][67] Store Plans and Capital Expenditures This subsection outlines the company's plans for new store openings, relocations, closures, and related capital spending Store Plans (Actual or Planned Opening Quarter): | Location or Market | Opening Quarter | Category | | :----------------- | :-------------- | :--------- | | Houston, TX | Q1-25 | Open | | Daytona, FL | Q2-25 | Relocation | | Atlanta, GA | Q2-25 | Closure | | Waco, TX | Q3-25 | Closure | | Houston, TX | Q4-25 | Open | | St. Louis, MO | Q1-26 | Open | | Nashville, TN | Q2-26 | Open | | Houston, TX | Q3-26 | Open | | Houston, TX | Q4-26 | Open | - The company anticipates ending 2025 with a total of 129 stores, assuming new store openings proceed as planned[68] Critical Accounting Estimates This subsection discusses accounting estimates requiring significant judgment and their potential impact on financial reporting - Critical accounting estimates require significant, subjective, or complex judgments, often involving inherently uncertain matters[69] - Management concluded that no accounting estimates were deemed critical for the periods presented, and there have been no significant changes since the 2024 Annual Report on Form 10-K[69] Item 3. Quantitative and Qualitative Disclosures about Market Risk This section refers to the annual report for market risk disclosures, confirming no material changes since the last fiscal year-end - The company's exposure to market risk has not materially changed since December 31, 2024[70] - Detailed disclosures about market risk are available in 'Item 7A. Quantitative and Qualitative Disclosures About Market Risk' of the company's Form 10-K[70] Item 4. Controls and Procedures This section confirms the effectiveness of disclosure controls and procedures and the absence of 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 June 30, 2025[71] - No changes in the company's internal control over financial reporting occurred during the fiscal quarter ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting[72] PART II. OTHER INFORMATION This section provides additional information not covered in the financial statements, including legal matters and equity transactions Item 1. Legal Proceedings This section cross-references legal proceedings information to the relevant note in the financial statements - Information regarding legal proceedings is provided in Note K - Contingencies of the Notes to the Condensed Consolidated Financial Statements[74] Item 1A. Risk Factors This section refers to the annual report for a discussion of material risk factors, confirming no material changes - There have been no material changes from the risk factors described in the company's Form 10-K[75] - A discussion of known material risk factors is available in 'Item 1A. Risk Factors' of the company's Form 10-K[75] Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities This section details the company's stock repurchase program and recent repurchase activity - The Board of Directors has authorized a stock repurchase program for Common Stock and Class A Common Stock, with no expiration date[76] - No repurchases of common stock occurred during the second quarter of 2025[77] - As of June 30, 2025, approximately $6.1 million remained authorized for repurchase under the program[77] Item 5. Other Information This section confirms that no directors or officers adopted, modified, or terminated Rule 10b5-1 trading arrangements - 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 June 30, 2025[78] Item 6. Exhibits This section lists all exhibits filed with or incorporated by reference into the report, including certifications and agreements - - Exhibit 3.1: Articles of Amendment and Restatement of the Charter[80] - Exhibit 3.2: By-laws of Haverty Furniture Companies, Inc.[80] - Exhibit 10.1: Amendment and Waiver to the Amended and Restated Credit Agreement[80] - Exhibit 31.1: Certification of Chief Executive Officer pursuant to Rules 13a-14(a) and 15d‑14(a)[80] - Exhibit 31.2: Certification of Chief Financial Officer pursuant to Rules 13a-14(a) and 15d‑14(a)[80] - Exhibit 32.1: Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350[80] - Exhibit 101: Inline XBRL financial statements[80] - Exhibit 104: Cover Page Interactive Data File[80]