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 March 31,September 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

graphic

HAVERTY FURNITURE COMPANIES, INC.
(Exact name of registrant as specified in its charter)

Maryland 58-0281900
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
780 Johnson Ferry Road, Suite 800
Atlanta, Georgia
 
 
30342
(Address of principal executive offices) (Zip Code)
(404) 443-2900
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934

Title of each classTrading Symbol(s)Name of each exchange on which registered
Common StockHVTNYSE
Class A Common StockHVTANYSE

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ⌧  No ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes ⌧  No ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non‑accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer☐ Accelerated filer☒ Non-accelerated filer☐
Smaller reporting company☐ Emerging growth company☐   

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ☐  No ⌧

The numbers of shares outstanding of the registrant’s two classes of $1 par value common stock as of April 27,October 28, 2021, were:  Common Stock – 16,926,77116,532,392; Class A Common Stock – 1,319,3191,287,142.

HAVERTY FURNITURE COMPANIES, INC.
INDEX


 Page No.
   
PART I.
FINANCIAL INFORMATION
Item 1.  Financial Statements 
   
 
Item 1.  Financial Statements
Condensed Consolidated Balance Sheets –
March 31,September 30, 2021 (unaudited) and December 31, 2020
1
   
 
Condensed Consolidated Statements of Comprehensive Income –
Three and Nine Months Ended March 31,September 30, 2021 and 2020 (unaudited)
2
   
 
Condensed Consolidated Statements of Cash Flows –
ThreeNine Months Ended March 31,September 30, 2021 and 2020 (unaudited)
3
   
 
 Notes to Condensed Consolidated Financial Statements (unaudited)
4
   
 
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
1112
   
 
Item 3. Quantitative and Qualitative Disclosures about Market Risk
1517
   
 
Item 4. Controls and Procedures
1517
   
PART II.
OTHER INFORMATION
 
   
 
Item 1. Legal Proceedings
1618
   
 
Item 1A. Risk Factors
1618
   
 
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
18
Item 6. Exhibits
1619


INDEX

PART I.  FINANCIAL INFORMATION
 
Item 1.  Financial Statements

HAVERTY FURNITURE COMPANIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands) 
March 31,
2021
  
December 31,
2020
 
  (Unaudited)    
Assets      
Current assets      
Cash and cash equivalents $210,124  $200,058 
Restricted cash and cash equivalents  6,715   6,713 
Inventories  103,569   89,908 
Prepaid expenses  12,335   9,580 
Other current assets  9,957   9,985 
Total current assets  342,700   316,244 
Property and equipment, net  108,836   108,366 
Right-of-use lease assets  228,089   228,749 
Deferred income taxes  16,713   15,814 
Other assets  11,934   11,199 
Total assets $708,272  $680,372 
Liabilities and Stockholders’ Equity        
Current liabilities        
Accounts payable $25,031  $31,429 
Customer deposits  104,728   86,183 
Accrued liabilities  51,409   52,963 
Current lease liabilities  33,760   33,466 
Total current liabilities  214,928   204,041 
Noncurrent lease liabilities  199,344   200,200 
Other liabilities  23,686   23,164 
Total liabilities  437,958   427,405 
         
Stockholders’ equity        
Capital Stock, par value $1 per share
        
Preferred Stock, Authorized – 1,000 shares; Issued:  NaN
  0   0 
Common Stock, Authorized – 50,000 shares; Issued: 2021 – 29,789; 2020 – 29,600
  29,789   29,600 
Convertible Class A Common Stock, Authorized – 15,000 shares; Issued: 2021 –1,842; 2020 – 1,996
  1,842   1,996 
Additional paid-in capital  98,694   96,850 
Retained earnings  320,045   304,626 
Accumulated other comprehensive loss  (2,511)  (2,560)
Less treasury stock at cost – Common Stock (2021 and 2020 – 12,862 shares) and Convertible Class A Common Stock (2021 and 2020 – 522 shares)
  (177,545)  (177,545)
Total stockholders’ equity  270,314   252,967 
Total liabilities and stockholders’ equity $708,272  $680,372 

See notes to these condensed consolidated financial statements.
1

HAVERTY FURNITURE COMPANIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 
Three Months Ended
March 31,
 
(In thousands, except per share data - unaudited) 2021  2020 
       
Net sales $236,491  $179,432 
Cost of goods sold  101,457   79,879 
Gross profit  135,034   99,553 
         
Expenses:        
Selling, general and administrative  109,762   97,535 
Other (income) expense, net  (36)  (68)
Total expenses  109,726   97,467 
         
Income before interest and income taxes  25,308   2,086 
Interest income, net  56   214 
         
Income before income taxes  25,364   2,300 
Income tax expense  5,958   481 
Net income $19,406  $1,819 
         
Other comprehensive income        
Adjustments related to retirement plans; net of tax expense of $16 in 2021 and $10 in 2020 $49  $31 
         
Comprehensive income $19,455  $1,850 
         
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 
         
Cash dividends per share:        
Common Stock $0.22  $0.20 
Class A Common Stock $0.20  $0.19 

See notes to these condensed consolidated financial statements.
2


HAVERTY FURNITURE COMPANIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands - unaudited) 
Three Months Ended
March 31,
 
  2021  2020 
Cash Flows from Operating Activities:      
Net income $19,406  $1,819 
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation and amortization  3,992   5,124 
Share-based compensation expense  2,679   972 
Other  (915)  1,241 
Changes in operating assets and liabilities:        
Inventories  (13,661)  (5,731)
Customer deposits  18,545   (3,947)
Other assets and liabilities  (2,777)  (826)
Accounts payable and accrued liabilities  (7,668)  (20,231)
Net cash provided by (used in) operating activities  19,601   (21,579)
         
Cash Flows from Investing Activities:        
Capital expenditures  (4,745)  (2,480)
Proceeds from sale of land, property and equipment  0   4 
Net cash used in investing activities  (4,745)  (2,476)
         
Cash Flows from Financing Activities:        
Proceeds from borrowings under revolving credit facility  0   43,800 
Payments of borrowings under revolving credit facility  0   0 
Net change in borrowings under revolving credit facility  0   43,800 
         
Dividends paid  (3,987)  (3,750)
Common stock repurchased  0   (6,810)
Other  (801)  (318)
Net cash (used in) provided by financing activities  (4,788)  32,922 
         
Increase in cash, cash equivalents and restricted cash equivalents during the period  10,068   8,867 
Cash, cash equivalents and restricted cash equivalents at beginning of period  206,771   82,402 
Cash, cash equivalents and restricted cash equivalents at end of period $216,839  $91,269 
(In thousands) 
September 30,
2021
  
December 31,
2020
 
  (Unaudited)    
Assets      
Current assets      
Cash and cash equivalents $225,674  $200,058 
Restricted cash and cash equivalents  6,716   6,713 
Inventories  118,961   89,908 
Prepaid expenses  13,729   9,580 
Other current assets  13,441   9,985 
Total current assets  378,521   316,244 
         
Property and equipment, net  124,795   108,366 
Right-of-use lease assets  229,975   228,749 
Deferred income taxes  18,120   15,814 
Other assets  12,349   11,199 
Total assets $763,760  $680,372 
Liabilities and Stockholders’ Equity        
Current liabilities        
Accounts payable $34,663  $31,429 
Customer deposits  120,149   86,183 
Accrued liabilities  56,880   52,963 
Current lease liabilities  34,108   33,466 
Total current liabilities  245,800   204,041 
Noncurrent lease liabilities  203,935   200,200 
Other liabilities  22,484   23,164 
Total liabilities  472,219   427,405 
         
Stockholders’ equity        
Capital Stock, par value $1 per share
        
Preferred Stock, Authorized – 1,000 shares; Issued:  NaN
  0   0 
Common Stock, Authorized – 50,000 shares; Issued: 2021 – 29,906; 2020 – 29,600
  29,906   29,600 
Convertible Class A Common Stock, Authorized – 15,000 shares; Issued: 2021 – 1,810; 2020 – 1,996
  1,810   1,996 
Additional paid-in capital  100,816   96,850 
Retained earnings  358,113   304,626 
Accumulated other comprehensive loss  (2,412)  (2,560)
Less treasury stock at cost – Common Stock (2021 – 13,374; and 2020 – 12,862 shares) and Convertible Class A Common Stock (2021 and 2020 – 522 shares)
  (196,692)  (177,545)
Total stockholders’ equity  291,541   252,967 
Total liabilities and stockholders’ equity $763,760  $680,372 

See notes to these condensed consolidated financial statements.

3
1
INDEX

HAVERTY FURNITURE COMPANIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 
Three Months Ended
September 30,
  
Nine Months Ended
September 30,
 
(In thousands, except per share data - unaudited) 2021  2020  2021  2020 
             
Net sales $260,378  $217,513  $746,858  $506,913 
Cost of goods sold  112,375   95,336   322,320   225,537 
Gross profit  148,003   122,177   424,538   281,376 
                 
Expenses:                
Selling, general and administrative  116,156   100,097   338,315   270,281 
Other expense (income), net  2  (2,401)  (40)  (34,298)
Total expenses  116,158   97,696   338,275   235,983 
                 
Income before interest and income taxes  31,845   24,481   86,263   45,393 
Interest income, net  58  51   173  64
                 
Income before income taxes  31,903   24,532   86,436   45,457 
Income tax expense  7,670   6,271   19,939   11,737 
Net income $24,233  $18,261  $66,497  $33,720 
                 
Other comprehensive income                
Adjustments related to retirement plans; net of tax expense of $16 and $48 in 2021 and $10 and $30 in 2020
 $50  $30  $148  $90 
                 
Comprehensive income $24,283  $18,291  $66,645  $33,810 
                 
Basic earnings per share:                
Common Stock $1.35  $0.98  $3.67  $1.80 
Class A Common Stock $1.28  $0.94  $3.45  $1.71 
                 
Diluted earnings per share:                
Common Stock $1.31  $0.97  $3.55  $1.77 
Class A Common Stock $1.25  $0.93  $3.38  $1.70 
                 
Cash dividends per share:                
Common Stock $0.25  $0.20  $0.72  $0.55 
Class A Common Stock $0.23  $0.19  $0.65  $0.52 

See notes to these condensed consolidated financial statements.

2
INDEX

HAVERTY FURNITURE COMPANIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands - unaudited) 
Nine Months Ended
September 30,
 
  2021  2020 
Cash Flows from Operating Activities:      
Net income $66,497  $33,720 
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation and amortization  12,099   13,959 
Share-based compensation expense  6,456   3,362 
Gain from sale of land, property and equipment  (74)  (34,202)
Other  (1,484)  1,259 
Changes in operating assets and liabilities:        
Inventories  (29,053)  13,873 
Customer deposits  33,966   58,287 
Operating lease assets and liabilities, net  3,151   1,156 
Other assets and liabilities  (9,239)  (4,997)
Accounts payable and accrued liabilities  6,679   13,404 
Net cash provided by operating activities  88,998   99,821 
         
Cash Flows from Investing Activities:        
Capital expenditures  (28,060)  (7,205)
Proceeds from sale of land, property and equipment  78   74,399 
Net cash (used in) provided by investing activities  (27,982)  67,194 
         
Cash Flows from Financing Activities:        
Proceeds from borrowings under revolving credit facility  0   43,800 
Payments of borrowings under revolving credit facility  0   (43,800)
Net change in borrowings under revolving credit facility  0   0 
         
Dividends paid  (13,010)  (10,271)
Common stock repurchased  (19,493)  (19,708)
Other  (2,894)  (876)
Net cash used in financing activities  (35,397)  (30,855)
         
Increase in cash, cash equivalents and restricted cash equivalents during the period  25,619   136,160 
Cash, cash equivalents and restricted cash equivalents at beginning of period  206,771   82,402 
Cash, cash equivalents and restricted cash equivalents at end of period $232,390  $218,562 

See notes to these condensed consolidated financial statements.

3
INDEX

HAVERTY FURNITURE COMPANIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Unaudited)



NOTE A – Business and Basis of Presentation

Haverty Furniture Companies, Inc. (“Havertys,” “the Company,” “we,” “our,” or “us”) is a retailer of a broad line of residential furniture in the middle to upper-middle price ranges. We operate all of our stores using the Havertys brand and do not franchise our concept. We operate within a single reportable segment. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all information and footnotes required by United States of America generally accepted accounting principles (“U.S. GAAP”) for complete financial statements. The Company believes that the disclosures made are adequate to make the information not misleading. The financial statements include the accounts of the Company and its wholly owned subsidiary. All significant intercompany accounts and transactions have been eliminated in consolidation. We believe all adjustments, normal and recurring in nature, considered necessary for a fair presentation have been included. We suggest that these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying footnotes included in our latest Annual Report on Form 10-K.

The preparation of interim condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities, and reported amounts of revenue and expenses. Actual results could differ from those estimates.

The Company is subject to various claims and legal proceedings covering a wide range of matters that arise in the ordinary course of its business activities. We believe that any liability that may ultimately result from the resolution of these matters will not have a material adverse effect on our financial condition, results of operations or cash flows.

Note B – COVID-19

In December 2019, a novel strain of coronavirus, subsequently named COVID-19, emerged from China and spread worldwide. The World Health Organization declared COVID-19 a pandemic and a national health emergency was declared by the United States beginning on March 1, 2020. In response, many states and local governments began a series of restrictions on public gatherings, retail store closures, stay at home orders and advisories and quarantining of people who may have been exposed to the virus. In an effort to mitigate the spread of COVID-19 and protect our team members, customers, and communities, Havertys closed all of its stores and halted deliveries in mid-March 2020, with the expectation at that time of reopening stores on April 2, 2020. Our stores remained closed during April and we reopened 103 locations on May 1, 2020 and the remaining 17 stores were reopened by June 20, 2020. We restarted our delivery operations on May 5, 2020.

The pandemic continues to disrupt several segments of the economy. Although our storeswe and many other businesses are open, some businesses and industries remain closedhave only recently reopened or are operating on a reduced scale. Our business has been very strong since reopening. Consumers not negatively impacted financially are spending more money on their homesfurniture and accessories as they spend more time at home. ManufacturersHowever, many manufacturers are challengedstruggling to meet the increased consumer demand, resulting in product shortages and delays in a number of merchandise categories. WeIn addition to experiencing supply chain disruptions and delays we have encountered difficulties in increasing our distribution and delivery capacity due to staffing shortages.shortages.

The COVID-19 pandemic is complex and continues to evolve with sporadic resurgences, new shutdowns and disruptions of vendor operations, new virus variants, and the vaccine rollout. At this point, we cannot reasonably estimate the duration and extent of the pandemic’s influence on consumers, the “nesting” economy, and our business. Accordingly, our estimates and assumptions could change in subsequent interim reports, and it is reasonably possible that such changes could be significant (although the potential effects cannot be estimated at this time).

4
INDEX

HAVERTY FURNITURE COMPANIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Unaudited)

NOTE C – Stockholders’ Equity

The following outlines the changes in each caption of stockholders’ equity for the current and comparative periods and the dividends per share for each class of shares.

For the three months ended March 31,September 30, 2021:

(in thousands) Common Stock  
Class A
Common Stock
  
Additional
Paid-In Capital
  
Retained
Earnings
  
Accumulated Other
Comprehensive Loss
  
Treasury
Stock
  Total  Common Stock  
Class A
Common Stock
  
Additional
Paid-In Capital
  
Retained
Earnings
  
Accumulated Other
Comprehensive Loss
  
Treasury
Stock
  Total 
Balances at December 31, 2020 $29,600  $1,996  $96,850  $304,626  $(2,560) $(177,545) $252,967 
Balances at June 30, 2021 $29,903  $1,813  $99,016  $338,341  $(2,462) $(177,199) $289,412 
Net income              19,406           19,406               24,233           24,233 
Dividends declared:                                                        
Common Stock, $0.22 per share              (3,717)          (3,717)
Class A Common Stock, $0.20 per share              (270)          (270)
Common Stock, $0.25 per share              (4,164)          (4,164)
Class A Common Stock, $0.23 per share              (297)          (297)
Class A conversion  154   (154)                  0   3   (3)                  0 
Restricted stock issuances  35       (835)              (800)
Acquisition of treasury stock                      (19,493)  (19,493)
Amortization of restricted stock          2,679               2,679           1,800               1,800 
Other comprehensive income                  49       49                   50       50 
Balances at March 31, 2021 $29,789  $1,842  $98,694  $320,045  $(2,511) $(177,545) $270,314 
Balances at September 30, 2021 $29,906  $1,810  $100,816  $358,113  $(2,412) $(196,692) $291,541 

For the nine months ended September 30, 2021:

(in thousands) Common Stock  
Class A
Common Stock
  
Additional
Paid-In Capital
  
Retained
Earnings
  
Accumulated Other
Comprehensive Loss
  
Treasury
Stock
  Total 
Balances at December 31, 2020 $29,600  $1,996  $96,850  $304,626  $(2,560) $(177,545) $252,967 
Net income              66,497           66,497 
Dividends declared:                            
Common Stock, $0.72 per share              (12,142)          (12,142)
Class A Common Stock, $0.65 per share              (868)          (868)
Class A conversion  186   (186)                  0 
Acquisition of treasury stock                      (19,493)  (19,493)
Restricted stock issuances  120       (3,014)              (2,894)
Amortization of restricted stock          6,456               6,456 
Directors’ Compensation Plan          524           346   870 
Other comprehensive income                  148       148 
Balances at September 30, 2021 $29,906  $1,810  $100,816  $358,113  $(2,412) $(196,692) $291,541 

5
INDEX

HAVERTY FURNITURE COMPANIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
For the three months ended March 31,September 30, 2020:

(in thousands) Common Stock  
Class A
Common Stock
  
Additional
Paid-In Capital
  
Retained
Earnings
  
Accumulated Other
Comprehensive Loss
  
Treasury
Stock
  Total  Common Stock  
Class A
Common Stock
  
Additional
Paid-In Capital
  
Retained
Earnings
  
Accumulated Other
Comprehensive Loss
  
Treasury
Stock
  Total 
Balances at December 31, 2019 $29,431  $2,054  $93,208  $295,999  $(2,087) $(158,102) $260,503 
Balances at June 30, 2020 $29,538  $2,054  $94,581  $304,900  $(2,027) $(164,668) $264,378 
Net income              1,819           1,819               18,261           18,261 
Dividends declared:                                                        
Common Stock, $0.20 per share              (3,459)          (3,459)              (3,423)          (3,423)
Class A Common Stock, $0.19 per share              (291)          (291)              (290)          (290)
Class A conversion  17   (17)                  0 
Acquisition of treasury stock                      (6,810)  (6,810)                      (12,899)  (12,899)
Restricted stock issuances  27       (345)              (318)
Amortization of restricted stock          972               972           1,325               1,325 
Directors’ Compensation Plan          (5)              (5)
Other comprehensive income                  31       31                   30       30 
Balances at March 31, 2020 $29,458  $2,054  $93,835  $294,068  $(2,056) $(164,912) $252,447 
Balances at September 30, 2020 $29,555  $2,037  $95,901  $319,448  $(1,997) $(177,567) $267,377 

For the nine months ended September 30, 2020:

(in thousands) Common Stock  
Class A
Common Stock
  
Additional
Paid-In Capital
  
Retained
Earnings
  
Accumulated Other
Comprehensive Loss
  
Treasury
Stock
  Total 
Balances at December 31, 2019 $29,431  $2,054  $93,208  $295,999  $(2,087) $(158,102) $260,503 
Net income              33,720           33,720 
Dividends declared:                            
Common Stock, $0.55 per share              (9,475)          (9,475)
Class A Common Stock, $0.52 per share              (796)          (796)
Class A conversion  17
   (17)                  0
 
Acquisition of treasury stock                      (19,708)  (19,708)
Restricted stock issuances  
107
       (983)              (876)
Amortization of restricted stock          3,362               3,362 
Directors’ Compensation Plan          314           243   557 
Other comprehensive income                  90       90 
Balances at September 30, 2020 $29,555  $2,037  $95,901  $319,448  $(1,997) $(177,567) $267,377 

5
6
INDEX

HAVERTY FURNITURE COMPANIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Unaudited)

NOTE D – Interim LIFO Calculations

We calculate the LIFO index annually. Accordingly, interim LIFO calculations must necessarily be based on management’s estimates of inventory levels and inflation rates. Since these estimates may be affected by factors beyond management’s control, interim results are subject to change based upon the final year-end LIFO inventory valuations.

NOTE E – Fair Value of Financial Instruments

The fair values of our cash and cash equivalents, restricted cash and cash equivalents, accounts receivable, accounts payable and customer deposits approximate their carrying values due to their short-term nature. The assets related to our self-directed, non-qualified deferred compensation plans for certain executives and employees are valued using quoted market prices multiplied by the number of shares held, a Level 1 valuation technique. The assets related to our deferred compensation plans totaled approximately $8.89.2 million at March 31,September 30, 2021 and $7.9 million at December 31, 2020 and are included in other assets. Amounts for the related liabilities are included in other liabilities and totaled approximately $8.9$9.2 million at March 31,September 30, 2021 and $8.1 million at December 31, 2020.


NOTE F – Credit Agreement

On May 15, 2020 we entered into the Third Amendment to Amended and Restated Credit Agreement (as amended, the “Credit Agreement”) with a bank.bank to permit certain sale-leaseback transactions as described in Note H. Our first borrowings under the facility, since its origination in 2008, were in March 2020.

The Credit Agreement is a $60.0 million revolving credit facility secured by our inventory, accounts receivable, cash, and certain other personal property and matures on September 27, 2024. Availability fluctuates based on a borrowing base calculation reduced by outstanding letters of credit. Amounts available to borrow are based on the lesser of the borrowing base or the $60.0 million-line amount. The credit facility contains covenants that, among other things, limit our ability to incur certain types of debt or liens, enter into mergers and consolidations or use proceeds of borrowing for other than permitted uses. The covenants also limit our ability to pay dividends if unused availability is less than $12.5 million.

We borrowed $43.8 million under the Credit Agreement in March 2020 and repaid the borrowings in June 2020. The interest ratesrate on the outstanding balance werewas based on the three-month Euro dollar LIBOR rate plus 1.25% and on a weighted average basis was approximately 2.37% at March 31,. Total interest paid under the Credit Agreement was $0.4 million for the nine months ended September 30, 2020.

The borrowing base was $15.5$15.7 million at March 31,September 30, 2021, there were 0 outstanding letters of credit, and the net availability was $15.5$15.7 million.

6
HAVERTY FURNITURE COMPANIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note G – Revenues

We recognize revenue from merchandise sales and related service fees, net of expected returns and sales tax, at the time the merchandise is delivered to the customer. We record customer deposits when payments are received in advance of the delivery of merchandise, which totaled $104.7$120.1 million and $86.2 million at March 31,September 30, 2021 and December 31, 2020, respectively. Of the customer deposit liabilities at December 31, 2020, approximately $9.5$0.5 million has not been recognized through net sales in the threenine months ended March 31, 2021.September 30, 2021.

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INDEX

HAVERTY FURNITURE COMPANIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
The following table presents our revenues disaggregated by each major product category and service (dollars in thousands, amounts and percentages may not always add due to rounding):

 Three Months Ended March 31, 
  2021  2020 
(In thousands) 
Net
Sales
  
% of
Net Sales
  
Net
Sales
  
% of
Net Sales
 
Merchandise:            
Case Goods            
Bedroom Furniture $39,178   16.6% $27,639   15.4%
Dining Room Furniture  27,599   11.7   18,219   10.2 
Occasional  22,064   9.3   16,248   9.1 
   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 (1)
  31,543   13.3   24,876   13.9 
  $236,491   100.0% $179,432   100.0%
 Three Months Ended September 30,  Nine Months Ended September 30, 
  2021  2020  2021  2020 
(In thousands) 
Net
Sales
  
% of
Net Sales
  
Net
Sales
  
% of
Net Sales
  
Net
Sales
  
% of
Net Sales
  
Net
Sales
  
% of
Net Sales
 
Merchandise:                        
Case Goods                        
Bedroom Furniture $41,438   15.9% $29,725   13.7% $121,848   16.3% $76,638   15.1%
Dining Room Furniture  29,047   11.2   22,994   10.6   84,965   11.4   54,067   10.7 
Occasional  21,955   8.4   19,220   8.8   66,128   8.8   46,665   9.2 
   92,440   35.5   71,939   33.1   272,941   36.5   177,371   35.0 
Upholstery  109,375   42.0   95,554   43.9   305,842   41.0   213,656   42.1 
Mattresses  23,616   9.1   21,431   9.9   68,257   9.1   50,625   10.0 
Accessories and Other (1)
  34,948   13.4   28,590   13.1   99,818   13.4   65,261   12.9 
  $260,378   100.0% $217,513   100.0% $746,858   100.0% $506,913   100.0%

(1)
 Includes delivery charges and product protection.

NOTE H – Leases

We have operating leases for retail stores, offices, warehouses, and certain equipment. Our leases have remaining lease terms of 1 year to 14 years, some of which include options to extend the leases for up to 20 years. We determine if an arrangement is or contains a lease at lease inception. Our leases do not have any residual value guarantees or any restrictions or covenants imposed by lessors. We have lease agreements for real estate with lease and non-lease components, which are accounted for separately.

Certain of our lease agreements for retail stores include variable lease payments, generally based on sales volume. The variable portion of payments are not included in the initial measurement of the right-of-use asset or lease liability due to uncertainty of the payment amount and are recorded as lease expense in the period incurred. Certain of our equipment lease agreements include variable lease costs, generally based on usage of the underlying asset (mileage, fuel, etc.). The variable portion of payments are not included in the initial measurement of the right-of-use asset or lease liability due to uncertainty of the payment amount and are recorded in the period incurred.

As of March 31,September 30, 2021, we had entered into 1 lease for an additional retail location which had not yet commenced and was under construction.

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INDEX

HAVERTY FURNITURE COMPANIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Unaudited)

Lease expense is charged to selling, general and administrative expenses. Components of lease expense were as follows (in thousands):

 Three Months Ended March 31,  Three Months Ended September 30,  Nine Months Ended September 30, 
 2021  2020  2021  2020  2021  2020 
Operating lease cost $11,806  $10,431  $11,440  $11,596  $35,140  $33,111 
Variable lease cost  1,508   1,615   1,739   1,627   4,856   3,825 
Total lease expense $13,314  $12,046  $13,179  $13,223  $39,996  $36,936 

In June 2021, we renewed the lease covering 10 retail locations. This increased our right-of-use assets approximately $17.6 million and lease liability $20.6 million, and we recorded $3.0 million in tenant incentives. In August 2021, we purchased a distribution center which was part of the sale and leaseback transaction which occurred in May 2020 and which is described below. We also purchased a retail location at the end of its lease term. These purchases decreased our right of use assets and lease liabilities approximately $5.3 million.

Supplemental cash flow information related to leases is as follows (in thousands):

 Three Months Ended March 31,  Nine Months Ended September 30, 
 2021  2020  2021  2020 
Cash paid for amounts included in the measurement of lease liabilities:            
Operating cash flows from operating leases $13,093  $9,996  $35,428  $25,099 
Right-of-use assets obtained in exchange for lease obligations:                
Operating leases $4,125  $12,043  $24,213  $83,550 

Sale and Leaseback Transaction
On May 18, 2020, we completed a sale and leaseback transaction of 3 of our distribution facilities. The total purchase price for the 3 properties, excluding costs and taxes, was $70.0 million and the net book value was $37.9 million. We recorded a gain of $31.6 million in May 2020 which is included in other income.


The 3 properties were leased back to us under 15-year operating lease agreements with renewal options.

NOTE I – Income Taxes

Our effective tax rate for the threenine months ended March 31,September 30, 2021 and 2020 was 23.5%23.1% and 20.9%25.8%, respectively. The primary difference in the effective rate and the statutory rate was due to state income taxes and additionalthe tax expenseimpact from vested stock awards.

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INDEX

HAVERTY FURNITURE COMPANIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Unaudited)

NOTE J – Stock Based Compensation Plan

As more fully discussed in Note 12 of the notes to the consolidated financial statements in our 2020 Annual Report on Form 10-K, we have awards outstanding for Common Stock under stock-based employee compensation plans.

Our shareholders approved a new stock-based compensation plan, the 2021 Long-Term Incentive Plan (the “2021 LTIP Plan”) and the 1,500,000 shares reserved for issuance under the 2021 LTIP Plan were registered with the SEC in August 2021. The 2021 LTIP Plan is substantially the same as our 2014 Long-Term Incentive Plan (the “2014 LTIP Plan”). No new grants may be awarded under the 2014 LTIP Plan.

The following table summarizes our award activity during the threenine months ended March 31,September 30, 2021:

 
Service-Based
Restricted Stock Awards
  
Performance-Based
Restricted Stock Awards
  
Service-Based
Restricted Stock Awards
  
Performance-Based
Restricted Stock Awards
 
 Shares or Units (#)  
Weighted-Average
Award Price ($)
  Shares or Units (#)  
Weighted-Average
Award Price ($)
  Shares or Units (#)  
Weighted-Average
Award Price ($)
  Shares or Units (#)  
Weighted-Average
Award Price ($)
 
Outstanding at December 31, 2020
  239,281   20.77   213,895   21.08   239,281   20.77   213,895   21.08 
Granted/Issued  114,368   32.96   91,485   32.75   119,921   33.29   93,685   32.83 
Awards vested or rights exercised (1)
  0   0   (56,578)  22.95   (130,323)  21.28   (56,578)  22.95 
Forfeited  (1,225)  23.94   0   0   (5,621)  24.74   0   0 
Additional units earned due to performance  —   —   77,265   20.42   —   —   77,265   20.42 
Outstanding at March 31, 2021
  352,424   24.71   326,067   23.87 
Outstanding at September 30, 2021
  223,258   27.10   328,267   23.96 
Restricted units expected to vest  352,424   24.71   383,882   25.26   223,258   27.10   387,512   25.36 

(1)
Includes shares repurchased from employees for employee’s tax liability.

The total fair value of service-based restricted stock awards that vested during the nine months ended September 30, 2021 was $6.1 million. The aggregate intrinsic value of outstanding service-based restricted stock awards was approximately $13.1$7.5 million at March 31,September 30, 2021. The restrictions on the service-based awards generally lapse or vest annually, primarily over four-year and three-year and four-year periods.

The total fair value of performance-based restricted stock awards that vested during the threenine months ended March 31,September 30, 2021 was approximately $2.0 million. The aggregate intrinsic value of outstanding performance awards at March 31,September 30, 2021 expected to vest was approximately $14.3$13.1 million. The performance awards are based on one-year performance periods but cliff vest in approximately three years from grant date.

The compensation for all awards is charged to selling, general and administrative expense over the respective grants’ vesting periods, primarily on a straight-line basis. The amount charged was approximately $2.7 million and $1.0$6.5 million for the threenine months ended March 31,September 30, 2021 and 2020, respectively.$3.4 million for the same period in 2020. Forfeitures are recognized as they occur. As of March 31,September 30, 2021, the total compensation cost related to unvested equity awards was approximately $12.2$8.6 million and is expected to be recognized over a weighted-average period of 2.1two years.

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INDEX

HAVERTY FURNITURE COMPANIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Unaudited)

NOTE K – Earnings Per Share

We report our earnings per share using the two-class method.  The income per share for each class of common stock is calculated assuming 100% of our earnings are distributed as dividends to each class of common stock based on their contractual rights.

The Common Stock of the Company has a preferential dividend rate of at least 105% of the dividend paid on the Class A Common Stock. The Class A Common Stock, which has 10 votes per share as opposed to 1 vote per share for the Common Stock (on all matters other than the election of directors), may be converted at any time on a one-for-one basis into Common Stock at the option of the holder of the Class A Common Stock.

 
Three Months Ended
March 31,
 
  2021  2019 
Numerator:      
Common:      
Distributed earnings $3,717  $3,459 
Undistributed earnings  14,262   (1,782)
Basic  17,979   1,677 
Class A Common earnings  1,427   142 
Diluted $19,406  $1,819 
         
Class A Common:        
Distributed earnings $270  $291 
Undistributed earnings  1,157   (149)
  $1,427  $142 
Denominator:        
Common:        
Weighted average shares outstanding - basic  16,793   17,460 
Assumed conversion of Class A Common Stock  1,431   1,532 
Dilutive options, awards and common stock equivalents  507   274 
         
Total weighted-average diluted Common Stock  18,731   19,266 
         
Class A Common:        
Weighted average shares outstanding  1,431   1,532 
         
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 


 
Three Months Ended
September 30,
  
Nine Months Ended
September 30,
 
  2021  2020  2021  2020 
Numerator:            
Common:            
Distributed earnings $4,164  $3,423  $12,142  $9,475 
Undistributed earnings  18,424   13,408   49,713   21,624 
Basic  22,588   16,831   61,855   31,099 
Class A Common earnings  1,645   1,430   4,642   2,621 
Diluted $24,233  $18,261  $66,497  $33,720 
                 
Class A Common:                
Distributed earnings $297  $290  $868  $796 
Undistributed earnings  1,348   1,140   3,774   1,825 
  $1,645  $1,430  $4,642  $2,621 
Denominator:                
Common:                
Weighted average shares outstanding - basic  16,794   17,098   16,862   17,267 
Assumed conversion of Class A Common Stock  1,290   1,526   1,344   1,530 
Dilutive options, awards and common stock equivalents  478   240   506   241 
                 
Total weighted-average diluted Common Stock  18,562   18,864   18,712   19,038 
                 
Class A Common:                
Weighted average shares outstanding  1,290   1,526   1,344   1,530 
                 
Basic earnings per share:                
Common Stock $1.35  $0.98  $3.67  $1.80 
Class A Common Stock $1.28  $0.94  $3.45  $1.71 
                 
Diluted earnings per share:                
Common Stock $1.31  $0.97  $3.55  $1.77 
Class A Common Stock $1.25  $0.93  $3.38  $1.70 

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INDEX


Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and accompanying notes contained herein and with the audited consolidated financial statements, accompanying notes, related information and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2020 (“Form(the “Form 10-K”).

Forward-Looking Statements

Statements in this Form 10-Q that are not historical facts, including statements about our estimates, expectations, beliefs, intentions, projections or strategies for the future, may be "forward-looking statements"“forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from historical experience or our present expectations. Known material risk factors applicable to us that could cause our actual results to differ from these forward-looking statements are described in "Item“Item 1A. Risk Factors"Factors” of our Form 10-K and in the subsequent reports we file with the SEC. All forward‑looking statements speak only as of the date made, and we undertake no obligation to publicly update or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this report except as required by law.

Impact of COVID-19 on Our Business

The COVID-19 pandemic has resulted in significant economic disruption and impacted our business. We closed our stores and ceased delivery operations in the second half of March 2020. Affected team members were paid during this period and most corporate personnel transitioned to working remotely. On April 1, 2020, we extended our store closure for another 30 days and furloughed 3,033 team members or approximately 87% of our workforce. Given the dramatic shock to the economy caused by the pandemic and uncertainty of the ongoing impact, we made a permanent reduction in our workforce of approximately 1,200 team members effective April 30, 2020 and extended the furlough of approximately 730 team members until June 1, 2020. We reopened 103 of our stores on May 1, 2020 and the remaining 17 were opened by June 20, 2020 and deliveries restarted on May 5, 2020.

We took several steps to strengthen our financial position and maintain financial flexibility by reviewing operating expenses, evaluating merchandise purchases, reducing capital expenditures,  temporarily borrowing $43.8 million on our credit facility (which has since been repaid)was repaid within 96 days), and completing a $70.0 million sale-leaseback transaction in May 2020.

Our business has been very strong since reopening.  Consumers not negatively impacted financially are spending more money on their homesfurniture and accessories as they spend more time at home. Demand is outpacing product availability in certain categories. Manufacturers are challenged to ensure safe work environments and have encountered some raw material shortages and transportation capacity issues, resulting in product shortages and delays in a number of product categories. We are continuing to assess our staffing needs and have encountered difficulties in increasing our distribution and delivery capacity.capacity due to labor shortages in some of our markets.

The COVID-19 pandemic is complex and continues to evolve with sporadic resurgences, new shutdowns and disruptions of vendor operations, new virus variants, and the vaccine rollout. At this point, we cannot reasonably estimate the duration of the pandemic’s influence on consumers, the “nesting” economy, and our business.  

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INDEX


Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations

Net Sales

Our sales are generated by customer purchases of home furnishings. Revenue is recognized upon delivery to the customer. Comparable-store or “comp-store” sales is a measure which indicates the performance of our existing stores and website by comparing the growth in sales in store and online for a particular month over the corresponding month in the prior year. Stores are considered non-comparable if they were not open during the corresponding month in the prior year or if the selling square footage has been changed significantly. Stores closed due to COVID-19 were excluded from comp-store sales. The method we use to compute comp-store sales may not be the same method used by other retailers. We record our sales when the merchandise is delivered to the customer. We also track “written sales” and “written comp-store sales” which represent customer orders prior to delivery. The lag time between customers placing orders and delivery has grown in 2021 due to demand outpacing merchandise supply. As a retailer, comp-store sales and written comp-store sales are an indicator of relative customer spending and store performance. Comp-store sales, total written sales and written comp-store sales are intended only as supplemental information and isare not a substitutesubstitutes for net sales presented in accordance with US GAAP.

The following outlines our sales and comp-store sales increases and decreases for the periods indicated:

 2021  2020 
  Net Sales  Comp-Store Sales  Net Sales  Comp-Store Sales 
Period Total Dollars  
%
Change
  
$
Change
  
%
Change
  
$
Change
  Total Dollars  
%
Change
  
$
Change
  
%
Change
  
$
Change
 
Q1_
 $236.5   31.8% $57.1   11.5% $15.4  $179.4   (4.2)% $(7.8)  11.6% $13.8 

Our sales in the first quarter of 2020 were good until the first weeks of March as information and news coverage concerning the pandemic increased. We
   2021  2020 
   Net Sales  Comp-Store Sales  Net Sales  Comp-Store Sales 
Period
  Total Dollars  
%
Change
  
$
Change
  
%
Change
  
$
Change
  Total Dollars  
%
Change
  
$
Change
  
%
Change
  
$
Change
 
Q1  $236.5   31.8% $57.1   11.5% $15.4  $179.4   (4.2)% $(7.8)  11.6% $13.8 
Q2  $250.0   127.3% $140.0   46.9% $48.8  $110.0   (42.7)% $(81.9)  (15.2)% $(18.4)
Q3  $260.4   19.7% $42.9   17.7% $38.4  $217.5   3.9% $8.2   4.0% $8.4 
YTD Q3  $746.9   47.3% $240.0   22.5% $102.6  $506.9   (13.9)% $(81.5)  0.8% $3.8 

Although we closed our stores and paused our operations in mid-March. Ourmid-March of last year, our business has been strong since reopening in May 2020. Our stores are operating with a smaller staff and are open fewer hours. Our delivery capacity is improving but remains slightly behind our prior year pre-pandemicpre‑pandemic level due to labor shortages and supply chain disruptions. Manufacturers remainMany manufacturers continue to be challenged by raw material shortages, production changestransportation logistics, labor shortages,  and lingering health and safety issues. Many of the manufacturers in Vietnam and Indonesia that produce our products paused their operations in July due to meet safety needs,a resurgence of COVID‑19. Fortunately, most began reopening in mid-October and transportation logistics.are operating at various levels of capacity. However, these shutdowns may impact our merchandise available for delivery in future quarters.

Total
The above chart outlines our sales for the first quarter of 2021 increased $57.1 million or 31.8% comparedquarters and year to date. Our stores were closed and we did not make any deliveries in April 2020. Our comp-storewritten sales which exclude March, increased 11.5% or $15.4 million in 2021 compared to 2020. The remaining $41.7 million of the change was primarily from stores closed in March 2020 and therefore considered non-comparable.  Written business for the first two months ofquarter ended September 30, 2021 were up 2.0% compared to the same period ofin 2020 which was up 24.9%.22.8% over 2019.
 
Store and website traffic continue to be strong. Revenues
Ours sales by merchandise category are impacted by product category as a percentageavailability. Long production lead times for our custom upholstery orders, which were four to six weeks pre‑pandemic and are currently averaging 16 weeks, have negatively impacted our business in this category. Consumers’ desire for faster fulfillment has overtaken their “pandemic patience” and are shifting to purchases of net sales in 2021 increased over 2020 by 120 basis points in bedroom furniture sales and our mattress business declined 180 basis points due to supply-chain disruption. Our in-home designer sales are beginning to rebound andavailable merchandise. Custom upholstery orders were 23.6%28.0% of our total written businessupholstery sales for the first two months of 2021 compared to 24.9% for 2020 and custom order upholstery written business grew 18.1% for the first two months of 2021 compared to the 2020 level.

Gross Profit

Gross profit for thepre-pandemic first quarter of 2021 was 57.1%, up 160 basis points compared2020 and a high of 29.8% in the third quarter of 2020 but have steadily fallen to 20.0% in the prior year periodthird quarter of 55.5%. The increase is primarily due to merchandise pricing and mix, partially offset by a larger negative LIFO impact.2021.

We expect annual gross profit margins for 2021 will be 56.5% to 57.0%.


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INDEX


Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations

Gross Profit

Gross profit for the third quarter of 2021 was 56.8%, up 60 basis points compared to the prior year period of 56.2%. We have judiciously adjusted our pricing in response to product price increases and higher inbound freight costs. Gross profit for the first nine months of 2021 was 56.8%, up 130 basis points compared to 55.5% for the same period of 2020. Our focus on retail pricing and our sales mix have offset the negative impact to gross profit from increases in our LIFO reserve.

We estimate gross profit margins for the full year of 2021 will be 56.5% to 56.8%.

Substantially all of our occupancy and home delivery costs are included in selling, general and administrative expenses (“SG&A”) as are a portion of our warehousing expenses. Accordingly, our gross profit may not be comparable to those entities that include these costs in cost of goods sold.

Selling, General and Administrative Expenses

Our SG&A costs as a percent of sales for the first three monthsthird quarter of 2021 were 46.4%44.6% versus 54.4%46.0% for the same period in 2020. This change reflects the leveraging of costs on increased sales and the impact of the operational changes implemented in 2020 under our business continuity plan. SG&A dollars increased $12.2$16.1 million for the firstthird quarter of 2021 and increased $68.0 million for the nine months ended September 30, 2021 compared to the same prior year period. The increase is driven byperiods. 

During April 2020, virtually all team members in our store and distribution operations were furloughed and warehouse and corporate office personnel were furloughed to a minimum level for necessary operations. We covered the costshealth benefits premiums for those furloughed which totaled approximately $2.1 million. Salaries and wages associated with the furloughed team members was approximately $9.9 million. We reduced our sales growth, primarily higher selling expense of $3.7 million, deliveryworkforce by approximately 35% effective April 30, 2020 and paid severance costs of $1.4 million, and incentive compensation of $4.9approximately $1.7 million.

We classify our SG&A expenses as either variable or fixed and discretionary.  Our variable expenses include the costs in the selling and delivery categories and certain warehouse expenses as these amounts will generally move in tandem with our level of sales. The remaining categories and expenses for occupancy, advertising, and administrative costs are classified as fixed and discretionary because these costs do not fluctuate with sales. 

The following table outlines our SG&A expenses by classification:

  Three Months Ended March 31, 
  2021  2020 
(In thousands)    % of Net Sales     % of Net Sales 
Variable $40,707   17.2% $35,337   19.7%
Fixed and discretionary  69,055   29.2%  62,198   34.7%
  $109,762   46.4% $97,535   54.4%
  Three months ended September 30,  Nine Months ended September 30, 
  2021  2020  2021  2020 
(In thousands)    
% of
Net Sales
     
% of
Net Sales
     % of Net Sales     % of Net Sales 
Variable $43,708   16.8% $37,678   17.3% $126,374   16.9% $93,685   18.5%
Fixed and discretionary  72,448   27.8   62,419   28.7   211,941   28.4   176,596   34.8 
  $116,156   44.6% $100,097   46.0% $338,315   45.3% $270,281   53.3%

The variable expenses in dollars were higher in the third quarter and first quarternine months of 2021 compared to the same periods in 2020 due to the increase in sales.

The variable expenses for the three months ended March 31,September 30, 2021 as a percent of sales compared to the prior year period reflect additional leveraging of ourcertain selling and delivery expenses. The variable expenses for the threenine months ended March 31,September 30, 2020 include payment of approximately $4.3 million in wages during the last weeksseverance costs and health benefits for furloughed team members.
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Item 2.   Management’s Discussion and Analysis of March when stores were closedFinancial Condition and deliveries were halted.Results of Operations

Fixed and discretionary expenses were impacted in the firstthird quarter of 2021 primarily by increases in incentivegeneral and administrative expense for compensation, of $4.9 million as incentive compensation in the first quarter of 2020 was reduced to its lowest level given the store closuresbenefits, and outlook for the year. We also had increases in the first quarter of 2021 in health insurancerelated payroll and labor costs of $2.3$3.8 million, warehouse expense of $2.8 million, and advertising spendingmarketing spend of $1.0$1.7 million, compared to the prior year quarter, partially offset by reduced travel and occupancy costs.same period of 2020.

Our variable type expenses within SG&A for the full year of 2021 are anticipated to be 17.5%17.0% to 17.8%17.3%. Fixed and discretionary expenses are expected to be approximately $265.0$278.0 to $269.0$281.0 million for the full year of 2021.

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Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations

Liquidity and Capital Resources
Cash and Cash Equivalents at End of Year
At March 31,September 30, 2021, we had $210.1$225.7 million in cash and cash equivalents, and $6.7 million in restricted cash equivalents. We believe that our current cash position, cash flow generated from operations, funds available from our credit agreement, and access to the long-term debt capital markets should be sufficient for our operating requirements and to enable us to fund our capital expenditures, dividend payments, and lease obligations through the next several years. In addition, we believe we have the ability to obtain alternative sources of financing. We expect capital expenditures of approximately $23.0$37.0 million for the full year of 2021.

Long-Term Debt
In May 2020, we entered into the Third Amendment to our Amended and Restated Credit Agreement (as amended, the “Credit Agreement”) with a bank. The Credit Agreement, which matures September 27, 2024, provides for a $60.0 million revolving credit facility. Amounts available to borrow fluctuate and availability at March 31,September 30, 2021 was $15.5$15.7 million and we had no amounts outstanding.

Leases
We use operating leases to fund a portion of our real estate, including our stores, distribution centers, and store support space.

Share Repurchases 
In February 2020,August 2021, our Board of Directors authorized an additional $30.0$25.0 million for our to the $5.4 million remaining under a share repurchase program. We suspendedDuring the program between Marchthree months ended September 30, 2021 we purchased 537,196 shares of common stock for approximately $19.5 million under previous and August of 2020.current authorizations. There is approximately $16.8$22.3 million at March 31,September 30, 2021 that may yet be purchasedused for purchases under the existingcurrent authorization. 

Cash Flows Summary
Operating Activities. Cash flow generated from operations provides us with a significant source of liquidity. Our operating cash flows result primarily from cash received from our customers, offset by cash payments we make for products and services, employee compensation, operations, and occupancy costs.

Cash provided by or used in operating activities is also subject to changes in working capital. Working capital at any specific point in time is subject to many variables, including seasonality, inventory selection, the timing of cash receipts and payments, and vendor payment terms.

Net cash provided by operating activities was $19.6approximately $89.0 million in the first threenine months of 2021 compared to a use of cash of $21.6 million during the same period in 2020. This difference wasdriven primarily driven by an increase in net income of $66.5 million and non-cash adjustments of $17.0 million, consisting of depreciation and amortization and stock-based compensation, and by changes associated within working capital inflows. The primary working capital inflows were from customer deposits accounts payable, and inventories.

Investing Activities. Cash used in investing activities increased by $2.3of approximately $34.0 million in the first three months of 2021 compared to the first three months of 2020, primarily as the result of capital expenditures.

Financing Activities.Cash used in financing activities of $4.8 million in the first three months of 2021 primarily reflected $4.0 million of cash dividends paid.
Cash provided by financing activities in the first three months of 2020 primarily reflected $43.8 million of proceeds from revolving credit facility, partially offset by $6.8 millionoutflows for inventory of share repurchases, and $3.8 million of cash dividends paid.$29.1 million.
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Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations

Net cash provided by operating activities in the first nine months of 2020 was $99.8 million driven primarily by changes in working capital. For calculation of cash provided by operating activities the gain from sale of land, property, and equipment of $34.2 million is excluded, partially offsetting net income of $33.7 million and non‑cash adjustments of $18.6 million. The primary working capital inflows were from increases in customer deposits of $58.3 million and accounts payable and accrued liabilities of $13.4 million and a decrease in inventories of $13.9 million.

Investing Activities. Cash used in investing activities was approximately $28.0 million in the first nine months of 2021 compared to cash provided by investing activities of $67.2 million during the first nine months of 2020. The difference primarily is from $74.4 million of proceeds from sale of land, property, and equipment in 2020.

Financing Activities.Cash used in financing activities of $35.4 million in the first nine months of 2021 primarily reflected $19.5 million of share repurchases and $13.0 million of cash dividends paid.
Cash used in financing activities of $30.9 million in the first nine months of 2020 primarily reflected $19.7 million of share repurchases and $10.3 million of cash dividends paid.

Store Plans and Capital Expenditures

Location
Opening Quarter
Actual or Planned
Category
Myrtle Beach, SCQ-1-21Open-New MarketOpen – New market
The Villages, FLQ-3-21Open
Dallas, TXQ-3-21Closure
Austin, TXQ-4-21Q-1-22Open

Net selling space in 2021 is expected to be slightly upflat compared to 2020.

We purchased our Virginia home delivery center which was part of our May 2020 sale leaseback and acquired a retail location at the end of its lease term during the third quarter of 2021. Our capital expenditures also include amounts for information technology for operations and website enhancements. Total capital expenditures are estimated to be $23.0approximately $37.0 million in 2021 depending on the timing of spending for new projects.

Off-Balance Sheet Arrangements
As of March 31, 2021, we had no off-balance sheet arrangements or obligations.

Critical Accounting Estimates
Critical accounting estimates are those that we believe are both significant and that require us to make difficult, subjective or complex judgments, often because we need to estimate the effect of inherently uncertain matters. We base our estimates and judgments on historical experiences and various other factors that we believe to be appropriate under the circumstances. Actual results may differ from these estimates, and we might obtain different estimates if we used different assumptions or conditions. We reviewed our accounting estimates, and none were deemed to be considered critical for the accounting periods presented in our Form 10-K. We had no significant changes in those accounting estimates since our last annual report.

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Item 3.  Quantitative and Qualitative Disclosures about Market Risk
For quantitative and qualitative disclosures about market risk, see Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” of our Form 10-K. Our exposure to market risk has not changed materially since December 31, 2020.

Item 4.  Controls and Procedures
As of the end of the period covered by this report, an evaluation was performed under the supervision and with the participation of our management, including the Chief Executive Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on that evaluation, our management, including the CEO and CFO, concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report to provide reasonable assurance that information required to be disclosed in the reports the Company files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our management, including the CEO and CFO, as appropriate, to allow timely decisions regarding disclosure.

There have been no changes in the Company’s internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rule 13a-15 that occurred during the Company’s fiscal quarter ended March 31,September 30, 2021 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. As a result of the COVID-19 pandemic, some team members have shifted to a rotating work from home and office environment. We have reviewed our financial reporting process to provide reasonable assurance that we could report our financial results accurately and timely, and we will continue to evaluate the impact of any related changes to our internal control over financial reporting.

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PART II.  OTHER INFORMATION


Item 1.  Legal Proceedings

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 set forth in this Form 10-Q.



Item 1A.  Risk Factors

"“Item 1A. Risk Factors” in our Form 10-K includes a discussion of our known material risk factors. There have been no material changes from the risk factors described in our Form 10-K.


Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

The board of directors has authorized management, at its discretion, to purchase and retire limited amounts of our common stock and Class A common stock. A program was initially approved by the board on November 3, 1986. On August 6, 2021, the board approved an additional repurchase amount of $25.0 million to bring the total available share repurchase authorization at such time to approximately $33.1 million. The stock repurchase program has no expiration date but may be terminated by our board at any time. The balance of the current authorization for purchases was approximately $22.3 million at September 30, 2021.

The following table presents information with respect to our repurchase of Havertys’ common stock during the third quarter of 2021:

  
(a)
Total Number of
Shares Purchased
  
(b)
Average Price
Paid Per Share
  
(c)
Total Number of
Shares Purchased
as Part of Publicly
Announced Plans or
Programs
  
(d)
Approximate Dollar
Value of Shares That
May Yet be Purchased
Under the Plans or
Programs
 
July 1 – July 31  44,579  $36.17   44,579  $15,202,200 
August 1 – August 31  412,617  $36.60   412,617  $25,100,700 
September 1 – September 30  80,000  $34.74   80,000  $22,321,200 
Total  537,196       537,196     

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Item 6.   Exhibits


(a)  Exhibits

The exhibits listed below are filed with or incorporated by reference into this report (those filed with this report are denoted by an asterisk). Unless otherwise indicated, the exhibit number of documents incorporated by reference corresponds to the exhibit number in the referenced documents.

Exhibit Number Description of Exhibit (Commission File No. 1-14445)
3.1 
Articles of Amendment and Restatement of the Charter of Haverty Furniture Companies, Inc. effective May 26, 2006 (Exhibit 3.1 to our Second Quarter 2006 Form 10-Q).
3.2 
By-laws of Haverty Furniture Companies, Inc. as amended and restated effective May 8, 2018 (Exhibit 3.1 to our Current Report on form 8-K dated May 10, 2018).
*31.110.1
 2021 Long-Term Incentive Plan, effective as of May 10, 2021.
*31.1
Certification of Chief Executive Officer pursuant to Rules 13a-14(a) and 15d‑14(a) under the Securities Exchange Act of 1934, as amended.
*31.2
 
Certification of Chief Financial Officer pursuant to Rules 13a-14(a) and 15d‑14(a) under the Securities Exchange Act of 1934, as amended.
**32.1
 
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350.
101 The following financial statements from Haverty Furniture Companies, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31,September 30, 2021, formatted in inline XBRL, include: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Comprehensive Income, (iii) Condensed Consolidated Statements of Cash Flows and (iv) the Notes to Condensed Consolidated Financial Statements.
104 Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).


*Filed herewith.
**Furnished herewith.

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SIGNATURES


SIGNATURES



Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.



   
HAVERTY FURNITURE COMPANIES, INC.
(Registrant)
    
    
Date: April 30,November 2, 2021 By:/s/ Clarence H. Smith
   Clarence H. Smith
   
Chairman of the Board and
and Chief Executive Officer
   (principal executive officer)
    
    
  By:/s/ Richard B. Hare
   Richard B. Hare
   
Executive Vice President and
Chief Financial Officer
(principal financial and accounting officer)


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