Haverty Furniture(HVT) - 2022 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the company's unaudited financial statements, management's discussion, and disclosures on market risk and controls Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements for Haverty Furniture Companies, Inc., including balance sheets, income statements, cash flows, and detailed notes Condensed Consolidated Balance Sheets As of March 31, 2022, total assets increased slightly to $693.9 million from $686.3 million at year-end 2021, driven by a rise in inventories, while total liabilities also saw a minor increase to $433.5 million, and stockholders' equity grew to $260.4 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Total Assets | $693,885 | $686,290 | | Cash and cash equivalents | $162,340 | $166,146 | | Inventories | $119,857 | $112,031 | | Total Liabilities | $433,485 | $430,320 | | Customer deposits | $98,528 | $98,897 | | Total Stockholders' Equity | $260,400 | $255,970 | Condensed Consolidated Statements of Comprehensive Income For the three months ended March 31, 2022, net sales saw a slight increase of 1.0% year-over-year to $238.9 million, gross profit grew by 4.4% to $141.0 million, while net income remained nearly flat at $19.4 million, and diluted EPS for Common Stock increased to $1.11 from $1.04 in the prior-year period Q1 Financial Performance (in thousands, except per share data) | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net Sales | $238,946 | $236,491 | | Gross Profit | $140,961 | $135,034 | | Net Income | $19,361 | $19,406 | | Diluted EPS (Common Stock) | $1.11 | $1.04 | | Cash Dividends per Share (Common Stock) | $0.25 | $0.22 | Condensed Consolidated Statements of Cash Flows Net cash from operating activities was $20.6 million for the first three months of 2022, a slight increase from $19.6 million in the prior year, while cash used in investing activities increased due to higher capital expenditures, and financing activities used significantly more cash ($17.3 million vs. $4.8 million) primarily due to $12.5 million in common stock repurchases Cash Flow Summary (in thousands) | Activity | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $20,578 | $19,601 | | Net cash used in investing activities | ($7,107) | ($4,745) | | Net cash used in financing activities | ($17,278) | ($4,788) | | (Decrease) increase in cash | ($3,807) | $10,068 | Notes to Condensed Consolidated Financial Statements These notes detail the company's single-segment retail operations, the ongoing impact of COVID-19 on supply chains and costs, and disaggregated revenue by product category - The company operates as a retailer of residential furniture in the middle to upper-middle price ranges under the single brand 'Havertys' and does not franchise[10] - During Q1 2022, the business continued to be impacted by COVID-19 related effects, including rising product prices, volatile transportation costs, supply chain disruptions, and adverse impacts on consumer spending from inflation[13] Revenues by Product Category (in thousands) | Category | Q1 2022 Net Sales | % of Total | Q1 2021 Net Sales | % of Total | | :--- | :--- | :--- | :--- | :--- | | Case Goods | $74,188 | 31.0% | $88,841 | 37.6% | | Upholstery | $111,186 | 46.5% | $95,626 | 40.4% | | Mattresses | $19,733 | 8.3% | $20,481 | 8.7% | | Accessories and Other | $33,839 | 14.2% | $31,543 | 13.3% | | Total | $238,946 | 100.0% | $236,491 | 100.0% | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2022 sales trends, including a decline in written comparable-store sales, improved gross profit margin, increased SG&A expenses, and the company's strong liquidity position Net Sales Total net sales for Q1 2022 increased by 1.0% to $238.9 million, with comparable-store sales up 0.2%, however, written business, an indicator of future deliveries, declined by 8.8% (9.6% on a comp-store basis) compared to Q1 2021, with management noting a significant decline in traffic and written business in March due to macroeconomic pressures Q1 Sales Performance vs. Prior Year | Metric | Q1 2022 Change | | :--- | :--- | | Net Sales | +1.0% | | Comp-Store Sales | +0.2% | | Written Business | -8.8% | | Written Comp-Store Sales | -9.6% | - Supply chain delays impacted the case goods category, with its share of total sales decreasing from 37.6% in Q1 2021 to 31.0% in Q1 2022[39] - Management attributes a significant decline in in-store traffic and written business in March to rising inflation, fuel costs, stock market volatility, higher interest rates, and geopolitical instability[40] Gross Profit Gross profit margin for Q1 2022 increased by 190 basis points to 59.0% from 57.1% in the prior year, primarily due to merchandise pricing and product mix, leading the company to raise its full-year 2022 gross profit margin guidance to a range of 57.7% to 58.0% - Gross profit margin rose to 59.0% in Q1 2022, an increase of 190 basis points from 57.1% in Q1 2021[41] - Full-year 2022 gross profit margin is expected to be between 57.7% and 58.0%, an increase over previous guidance but lower than Q1 results due to promotional cadence[42] Selling, General and Administrative Expenses SG&A expenses increased by $5.4 million (4.9%) in Q1 2022, representing 48.2% of sales compared to 46.4% in Q1 2021, driven by higher selling, distribution, delivery, and occupancy costs, with variable expenses growing as a percentage of sales due to higher compensation and fuel costs SG&A Expense Breakdown (in thousands) | Expense Type | Q1 2022 | % of Sales | Q1 2021 | % of Sales | | :--- | :--- | :--- | :--- | :--- | | Variable | $44,384 | 18.6% | $40,707 | 17.2% | | Fixed and discretionary | $70,770 | 29.6% | $69,055 | 29.2% | | Total SG&A | $115,154 | 48.2% | $109,762 | 46.4% | - The company anticipates full-year 2022 variable SG&A expenses to be 18.0% to 18.2% of sales, and fixed/discretionary expenses to be between $295.0 million and $298.0 million[48] Liquidity and Capital Resources The company maintained a strong liquidity position with $162.3 million in cash and cash equivalents as of March 31, 2022, has a $60.0 million revolving credit facility with no outstanding borrowings and $34.7 million available, repurchased $12.5 million of its common stock during the quarter, with $12.5 million remaining under authorization, and projects full-year 2022 capital expenditures of approximately $37.0 million - As of March 31, 2022, the company had $162.3 million in cash and cash equivalents and no outstanding borrowings under its credit facility[49] - The company repurchased 438,499 shares of common stock for approximately $12.5 million during Q1 2022[52] - Capital expenditures for the full year of 2022 are expected to be approximately $37.0 million[49] Item 3. Quantitative and Qualitative Disclosures about Market Risk The company reports no material changes in its market risk exposure since December 31, 2021, referring to its Annual Report on Form 10-K for details - There have been no material changes in the company's exposure to market risk since December 31, 2021[59] Item 4. Controls and Procedures Management concluded the company's disclosure controls and procedures were effective as of March 31, 2022, with no material changes to internal control over financial reporting - Based on an evaluation, the CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the quarter[60] - No changes in internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the company's internal controls were identified during the quarter[61] PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, and a list of exhibits Item 1. Legal Proceedings The company reports that it has no pending claims or legal proceedings that are reasonably likely to have a material adverse effect on its financial condition, results of operations, or cash flows - The company states it has no pending legal proceedings that would be reasonably likely to have a material adverse effect on its financial condition or results of operations[12][63] Item 1A. Risk Factors There have been no material changes from the risk factors previously described in the company's Annual Report on Form 10-K - No material changes have occurred in the risk factors described in the company's Form 10-K[64] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During the first quarter of 2022, the company repurchased 438,499 shares of its common stock for approximately $12.5 million, with approximately $12.5 million remaining available for future purchases under the board-authorized stock repurchase program as of March 31, 2022 Common Stock Repurchases in Q1 2022 | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | January 2022 | — | — | | February 2022 | 180,000 | $27.47 | | March 2022 | 258,499 | $29.23 | | Total Q1 | 438,499 | N/A | - As of March 31, 2022, the remaining authorized amount for the stock repurchase program was approximately $12.5 million[65][66] Item 6. Exhibits This section lists the exhibits filed with or incorporated by reference into the Form 10-Q report, including charter documents, bylaws, compensation agreements, and CEO/CFO certifications - The report includes a list of exhibits filed, such as CEO and CFO certifications (31.1, 31.2, 32.1) and financial data formatted in inline XBRL (101)[68]