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 SeptemberJune 30, 20212022
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

hvt-20220630_g1.jpg

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

Maryland58-0281900
Maryland58-0281900
(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 ⌧x No ◻o

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 ⌧x No ◻o

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☐xAccelerated filer☒oNon-accelerated filer☐o
Smaller reporting company☐oEmerging growth company☐o

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. ◻o

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

The numbers of shares outstanding of the registrant’s two classes of $1 par value common stock as of October 28, 2021,August 1, 2022, were: Common Stock – 15,051,761;16,532,392; Class A Common Stock – 1,283,260.
1,287,142.


HAVERTY FURNITURE COMPANIES, INC.
INDEX

Page No.
Page No.
Condensed Consolidated Balance Sheets –
SeptemberJune 30, 20212022 (unaudited) and December 31, 20202021
1
Condensed Consolidated Statements of Comprehensive Income–
Threeand NineSix Months Ended SeptemberJune 30, 20212022 and 20202021 (unaudited)
2
Condensed Consolidated Statements of Cash Flows –
NineSix Months Ended SeptemberJune 30, 20212022 and 20202021 (unaudited)
3
Notes to Condensed Consolidated Financial Statements (unaudited)
4
12
11
17
14
17
14
18
15
18
15
1815
1916

INDEX

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements

HAVERTY FURNITURE COMPANIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

(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 

(In thousands)June 30,
2022		December 31,
2021
(Unaudited)
Assets
Current assets
Cash and cash equivalents$143,454 $166,146 
Restricted cash and cash equivalents6,722 6,716 
Inventories134,053 112,031 
Prepaid expenses10,523 12,418 
Other current assets14,653 11,746 
Total current assets309,405 309,057 
Property and equipment, net131,230 126,099 
Right-of-use lease assets222,702 222,356 
Deferred income taxes18,769 16,375 
Other assets12,190 12,403 
Total assets$694,296 $686,290 
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable$35,093 $31,235 
Customer deposits90,762 98,897 
Accrued liabilities48,122 46,664 
Current lease liabilities34,539 33,581 
Total current liabilities208,516 210,377 
Noncurrent lease liabilities198,338 196,771 
Other liabilities20,716 23,172 
Total liabilities427,570 430,320 
Stockholders’ equity
Capital Stock, par value $1 per share
Preferred Stock, Authorized – 1,000 shares; Issued: None00
Common Stock, Authorized – 50,000 shares; Issued: 2022 – 30,006; 2021 – 29,90730,006 29,907 
Convertible Class A Common Stock, Authorized – 15,000 shares; Issued: 2022 – 1,806; 2021 – 1,8091,806 1,809 
Additional paid-in capital105,674 102,572 
Retained earnings375,234 342,983 
Accumulated other comprehensive loss(2,212)(2,293)
Less treasury stock at cost – Common Stock (2022 – 14,954 and 2021 – 14,069 shares) and Convertible Class A Common Stock (2022 and 2021 – 522 shares)(243,782)(219,008)
Total stockholders’ equity266,726 255,970 
Total liabilities and stockholders’ equity$694,296 $686,290 
See notes to these condensed consolidated financial statements.

1
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 

(In thousands, except per share data - unaudited)Three Months Ended
June 30,		Six Months Ended
June 30,
2022202120222021
Net sales$253,216 $249,989 $492,162 $486,480 
Cost of goods sold106,608 108,488 204,593 209,945 
Gross profit146,608 141,501 287,569 276,535 
Expenses:
Selling, general and administrative118,129 112,397 233,283 222,159 
Other expense (income), net(45)(6)115 (43)
Total expenses118,084 112,391 233,398 222,116 
Income before interest and income taxes28,524 29,110 54,171 54,419 
Interest income, net144 59 218 114 
Income before income taxes28,668 29,169 54,389 54,533 
Income tax expense6,960 6,311 13,319 12,269 
Net income$21,708 $22,858 $41,070 $42,264 
Other comprehensive income
Adjustments related to retirement plans; net of tax expense of $13 and $27 in 2022 and $16 and $32 in 2021$41 $49 $81 $98 
Comprehensive income$21,749 $22,907 $41,151 $42,362 
Basic earnings per share:
Common Stock$1.31 $1.25 $2.45 $2.32 
Class A Common Stock$1.25 $1.18 $2.33 $2.18 
Diluted earnings per share:
Common Stock$1.27 $1.21 $2.37 $2.25 
Class A Common Stock$1.22 $1.16 $2.27 $2.13 
Cash dividends per share:
Common Stock$0.28 $0.25 $0.53 $0.47 
Class A Common Stock$0.26 $0.23 $0.49 $0.43 
See notes to these condensed consolidated financial statements.

2
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 

(In thousands - unaudited)Six Months Ended
June 30,
20222021
Cash Flows from Operating Activities:
Net income$41,070 $42,264 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization8,664 7,932 
Share-based compensation expense4,196 4,656 
Other(1,444)157 
Changes in operating assets and liabilities:
Inventories(22,022)(25,148)
Customer deposits(8,135)29,896 
Other assets and liabilities(966)(1,841)
Accounts payable and accrued liabilities4,942 (277)
Net cash provided by operating activities26,305 57,639 
Cash Flows from Investing Activities:
Capital expenditures(13,548)(10,939)
Proceeds from sale of land, property and equipment52 33 
Net cash used in investing activities(13,496)(10,906)
Cash Flows from Financing Activities:
Dividends paid(8,819)(8,550)
Common stock repurchased(25,001)— 
Other(1,675)(2,894)
Net cash used in financing activities(35,495)(11,444)
(Decrease) increase in cash, cash equivalents and restricted cash equivalents during the period(22,686)35,289 
Cash, cash equivalents and restricted cash equivalents at beginning of period172,862 206,771 
Cash, cash equivalents and restricted cash equivalents at end of period$150,176 $242,060 
See notes to these condensed consolidated financial statements.

3
HAVERTY FURNITURE COMPANIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (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, including with respect to product liability and personal injury claims, that arise in the ordinary course of its business activities. We currently have no pending claims or legal proceedings that we believe that any liability that may ultimately result from the resolution of these matters will notwould be reasonably likely to have a material adverse effect on our financial condition, results of operations or cash flows. However, there can be no assurance that either future litigation or an unfavorable outcome in existing claims will not have a material impact on our business, reputation, financial position, cash flows or results of operations.

Note B – COVID-19

In December 2019, aThe novel strain of coronavirus subsequently named COVID-19, emerged from China and spread worldwide. The World Health Organization declared COVID-19 adisease (“COVID-19”) pandemic and a national health emergency was declared byits contributory effects on the United States beginning on March 1, 2020. In response, many stateseconomy continue to impact our business and local governments began a seriesresults of restrictions on public gatherings, retail store closures, stay at home ordersoperations. During the six months ended June 30, 2022, we experienced, among other things, rising product prices, volatile transportation costs, 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 we and many other businesses are open, some businesses and industries have only recently reopened or are operating on a reduced scale. Our businesssupply chain disruptions. Furthermore, discretionary consumer spending has been very strong since reopening. Consumers not negativelyadversely impacted financially are spending more money on furnitureby rising inflation, including fuel costs, and accessories as they spend more time at home. However, many manufacturers are struggling to meetinterest rates. Many of these factors impacted our business in the increased consumer demand,second quarter of 2022. The extent and duration of any future impact resulting in product shortages and delays in a number of merchandise categories. In addition to experiencing supply chain disruptions and delays we have encountered difficulties in increasing our distribution and delivery capacity due to staffing shortages.

Thefrom the COVID-19 pandemic is complexnot fully known, and continues to evolve with sporadic resurgences, new shutdowns andwe may experience additional significant COVID-19 related disruptions of vendor operations, new virus variants, andin 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).future as a result.
4

4

HAVERTY FURNITURE COMPANIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (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 SeptemberJune 30, 2021:2022:

(in thousands) Common Stock  
Class A
Common Stock
  
Additional
Paid-In Capital
  
Retained
Earnings
  
Accumulated Other
Comprehensive Loss
  
Treasury
Stock
  Total 
Balances at June 30, 2021 $29,903  $1,813  $99,016  $338,341  $(2,462) $(177,199) $289,412 
Net income              24,233           24,233 
Dividends declared:                            
Common Stock, $0.25 per share              (4,164)          (4,164)
Class A Common Stock, $0.23 per share              (297)          (297)
Class A conversion  3   (3)                  0 
Acquisition of treasury stock                      (19,493)  (19,493)
Amortization of restricted stock          1,800               1,800 
Other comprehensive income                  50       50 
Balances at September 30, 2021 $29,906  $1,810  $100,816  $358,113  $(2,412) $(196,692) $291,541 

(in thousands)Common StockClass A
Common Stock		Additional
Paid-In Capital		Retained
Earnings		Accumulated Other
Comprehensive Loss		Treasury
Stock		Total
Balances at March 31, 2022$29,924 $1,809 $104,345 $358,084 $(2,253)$(231,509)$260,400 
Net income21,708 21,708 
Dividends declared:
Common Stock, $0.28 per share(4,225)(4,225)
Class A Common Stock, $0.26 per share(333)(333)
Class A conversion3 (3)— 
Acquisition of treasury stock(12,500)(12,500)
Restricted stock issuances79 (1,244)(1,165)
Amortization of restricted stock1,889 1,889 
Directors' Compensation Plan684 227 911 
Other comprehensive income41 41 
Balances at June 30, 2022$30,006 $1,806 $105,674 $375,234 $(2,212)$(243,782)$266,726 
For the ninesix months ended SeptemberJune 30, 2021:2022:

(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 

(in thousands)Common StockClass A
Common Stock		Additional
Paid-In Capital		Retained
Earnings		 Accumulated Other
Comprehensive Loss		Treasury
Stock		Total
Balances at December 31, 2021$29,907 $1,809 $102,572 $342,983 $(2,293)$(219,008)$255,970 
Net income41,070 41,070 
Dividends declared:
Common Stock, $0.53 per share(8,189)(8,189)
Class A Common Stock, $0.49 per share(630)(630)
Class A conversion3 (3)— 
Acquisition of treasury stock(25,001)(25,001)
Restricted stock issuances96 (1,778)(1,682)
Amortization of restricted stock4,196 4,196 
Directors' Compensation Plan684 227 911 
Other comprehensive income81 81 
Balances at June 30, 2022$30,006 $1,806 $105,674 $375,234 $(2,212)$(243,782)$266,726 
5

HAVERTY FURNITURE COMPANIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
For the three months ended SeptemberJune 30, 2020:2021:

(in thousands) Common Stock  
Class A
Common Stock
  
Additional
Paid-In Capital
  
Retained
Earnings
  
Accumulated Other
Comprehensive Loss
  
Treasury
Stock
  Total 
Balances at June 30, 2020 $29,538  $2,054  $94,581  $304,900  $(2,027) $(164,668) $264,378 
Net income              18,261           18,261 
Dividends declared:                            
Common Stock, $0.20 per share              (3,423)          (3,423)
Class A Common Stock, $0.19 per share              (290)          (290)
Class A conversion  17   (17)                  0 
Acquisition of treasury stock                      (12,899)  (12,899)
Amortization of restricted stock          1,325               1,325 
Directors’ Compensation Plan          (5)              (5)
Other comprehensive income                  30       30 
Balances at September 30, 2020 $29,555  $2,037  $95,901  $319,448  $(1,997) $(177,567) $267,377 

(in thousands)Common StockClass A
Common Stock		Additional
Paid-In Capital		Retained
Earnings		Accumulated Other
Comprehensive Loss		Treasury
Stock		Total
Balances at March 31, 2021$29,789 $1,842 $98,694 $320,045 $(2,511)$(177,545)$270,314 
Net income22,858 22,858 
Dividends declared:
Common Stock, $0.25 per share(4,261)(4,261)
Class A Common Stock, $0.23 per share(301)(301)
Class A conversion29 (29)— 
Acquisition of treasury stock0— 
Restricted stock issuances85 (2,179)(2,094)
Amortization of restricted stock1,977 1,977 
Directors' Compensation Plan524 346 870 
Other comprehensive income49 49 
Balances at June 30, 2021$29,903 $1,813 $99,016 $338,341 $(2,462)$(177,199)$289,412 
For the ninesix months ended SeptemberJune 30, 2020:2021:
(in thousands)Common StockClass 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 income42,264 42,264 
Dividends declared:
Common Stock, $0.47 per share(7,978)(7,978)
Class A Common Stock, $0.43 per share(571)(571)
Class A conversion183 (183)— 
Restricted stock issuances120 (3,014)(2,894)
Amortization of restricted stock4,656 4,656 
Directors' Compensation Plan524 346 870 
Other comprehensive income98 98 
Balances at June 30, 2021$29,903 $1,813 $99,016 $338,341 $(2,462)$(177,199)$289,412 

(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 

6
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HAVERTY FURNITURE COMPANIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
NOTE D – Interim LIFO Calculations

We calculateInventories are measured using the last-in, first-out (LIFO) method of valuation using an annual LIFO index annually.index. 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 $9.2 million at 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 $9.2 million at 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 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 isWe have a $60.0 million revolving credit facility secured by our inventory, accounts receivable, cash, and certain other personal property and(the “Credit Agreement”) which matures on September 27, 2024.2024 and is secured primarily by our inventory. 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
At June 30, 2022 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 millionDecember 31, 2021, there were no outstanding borrowings under the Credit Agreement in March 2020 and repaid the borrowings in June 2020. The interest rate on the outstanding balance was based on the three-month Euro dollar LIBOR rate plus 1.25% and on a weighted average basis was approximately 2.37%. Total interest paid under the Credit Agreement was $0.4 million for the nine months ended September 30, 2020.

Agreement. The borrowing base was $15.7 million at September 30, 2021, there were 0 outstanding letters of credit, and the net availability was $15.7 million.$47.1 million at June 30, 2022.

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, whichmerchandise. Such deposits totaled $120.1$90.8 million and $86.2$98.9 million at SeptemberJune 30, 20212022 and December 31, 2020,2021, respectively. Of the customer deposit liabilities at December 31, 2020,2021, approximately $0.5$4.0 million hashave not been recognized through net sales in the ninesix months ended SeptemberJune 30, 2021.

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INDEX

HAVERTY FURNITURE COMPANIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
2022.
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 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%

(In thousands)Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
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$41,535 16.4 %$41,232 16.5 %$72,885 14.8 %$80,410 16.5 %
Dining Room Furniture25,156 9.9 28,320 11.3 51,178 10.4 55,919 11.5 
Occasional20,188 8.0 22,110 8.8 37,007 7.5 44,174 9.1 
86,879 34.3 91,662 36.7 161,070 32.7 180,503 37.1 
Upholstery109,641 43.3 100,841 40.3 220,825 44.9 196,467 40.4 
Mattresses22,010 8.7 24,159 9.7 41,743 8.5 44,640 9.2 
Accessories and Other (1)
34,686 13.7 33,327 13.3 68,525 13.9 64,870 13.3 
$253,216 100.0 %$249,989 100.0 %$492,162 100.0 %$486,480 100.0 %
(1)
(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 1413 years, some of which include options to extend the leases for up to 20
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INDEX
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 SeptemberJune 30, 2021,2022, we had entered into 1 lease for an additional retail location which had not yet commenced and was under construction.

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HAVERTY FURNITURE COMPANIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
commenced.
Lease expense is charged to selling, general and administrative expenses. Components of lease expense were as follows (in thousands):

 Three Months Ended September 30,  Nine Months Ended September 30, 
  2021  2020  2021  2020 
Operating lease cost $11,440  $11,596  $35,140  $33,111 
Variable lease cost  1,739   1,627   4,856   3,825 
Total lease expense $13,179  $13,223  $39,996  $36,936 

In June 2021, 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.

Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Operating lease cost$11,973 $11,873 $23,712 $23,700 
Variable lease cost1,783 1,609 3,478 3,117 
Total lease expense$13,756 $13,482 $27,190 $26,817 

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

 Nine Months Ended September 30, 
  2021  2020 
Cash paid for amounts included in the measurement of lease liabilities:      
Operating cash flows from operating leases $35,428  $25,099 
Right-of-use assets obtained in exchange for lease obligations:        
Operating leases $24,213  $83,550 

Six Months Ended June 30,
20222021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$21,533 $22,876 
Right-of-use assets obtained in exchange for lease obligations:
Operating leases$15,763 $25,063 
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 ninesix months ended SeptemberJune 30, 2022 and 2021 was 24.5% and 2020 was 23.1% and 25.8%22.5%, respectively. The primary difference in the effective rate and the statutory rate was due to state income taxes and the tax impact from vested stock awards.
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9

HAVERTY FURNITURE COMPANIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
NOTE J – Stock Based Compensation Plan

Plans
As more fully discussed in Note 12 of the notes to the consolidated financial statements in our 20202021 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 ninesix months ended SeptemberJune 30, 2021:2022:

Service-Based
Restricted Stock Awards		Performance-Based
Restricted Stock Awards
Shares or Units (#)Weighted-Average
Award Price ($)		Shares or Units (#)Weighted-Average
Award Price ($)
Outstanding at December 31, 2021219,082 $27.10 328,267 $23.96 
Granted/Issued153,681 28.86 103,104 28.86 
Awards vested or rights exercised(1)
(121,518)27.12 (34,940)20.28 
Forfeited(3,900)31.86 — — 
Additional units earned due to performance— — 59,249 31.39 
Outstanding at June 30, 2022247,345 $28.11 455,680 $26.54 
Restricted units expected to vest247,345 $28.11 455,680 $26.54 
 
Service-Based
Restricted Stock Awards
  
Performance-Based
Restricted Stock Awards
 
  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 
Granted/Issued  119,921   33.29   93,685   32.83 
Awards vested or rights exercised(1)
  (130,323)  21.28   (56,578)  22.95 
Forfeited  (5,621)  24.74   0   0 
Additional units earned due to performance  —   —   77,265   20.42 
Outstanding at September 30, 2021
  223,258   27.10   328,267   23.96 
Restricted units expected to vest  223,258   27.10   387,512   25.36 

(1)
(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 ninesix months ended SeptemberJune 30, 20212022 was $6.1approximately $3.3 million. The aggregate intrinsic value of outstanding service-based restricted stock awards was $7.5approximately $5.7 million at SeptemberJune 30, 2021.2022. The restrictions on the service-based awards generally lapse or vest annually, primarily over four-yearone-year and three-year periods.

The total fair value of performance-based restricted stock awards that vested during the ninesix months ended SeptemberJune 30, 20212022 was $2.0approximately $1.0 million. The aggregate intrinsic value of outstanding performance awards at SeptemberJune 30, 20212022 expected to vest was $13.1approximately $10.6 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 $6.5$4.2 million and $4.7 million for the ninesix months ended SeptemberJune 30, 2022 and 2021, and $3.4 million for the same period in 2020.respectively. Forfeitures are recognized as they occur. As of SeptemberJune 30, 2021,2022, the total compensation cost related to unvested equity awards was approximately $8.6$9.9 million and is expected to be recognized over a weighted-average period of two years.


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10

HAVERTY FURNITURE COMPANIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (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 theirthe contractual rights.

rights of the classes.
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
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 

Three Months Ended
June 30,		Six Months Ended
June 30,
2022202120222021
Numerator:
Common:
Distributed earnings$4,225 $4,261 $8,189 $7,978 
Undistributed earnings15,884 17,042 29,893 31,295 
Basic20,109 21,303 38,082 39,273 
Class A Common earnings1,599 1,555 2,988 2,991 
Diluted$21,708 $22,858 $41,070 $42,264 
Class A Common:
Distributed earnings$333 $301 $630 $571 
Undistributed earnings1,266 1,254 2,358 2,420 
$1,599 $1,555 $2,988 $2,991 
Denominator:
Common:
Weighted average shares outstanding - basic15,327 16,997 15,516 16,895 
Assumed conversion of Class A Common Stock1,283 1,313 1,285 1,372 
Dilutive options, awards and common stock equivalents482 532 501 520 
Total weighted-average diluted Common Stock17,092 18,842 17,302 18,787 
Class A Common:
Weighted average shares outstanding1,283 1,313 1,285 1,372 
Basic earnings per share:
Common Stock$1.31 $1.25 $2.45 $2.32 
Class A Common Stock$1.25 $1.18 $2.33 $2.18 
Diluted earnings per share:
Common Stock$1.27 $1.21 $2.37 $2.25 
Class A Common Stock$1.22 $1.16 $2.27 $2.13 
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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 (the “Form2021 (“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 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 furniture 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 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 ordersdisruptions to our supply chain have resulted in lower inventory in certain categories and for out-of-stock merchandise delivery has grown in 2021 duetimes can be 8 to demand outpacing merchandise supply.12 weeks. 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 none are not substitutes for net sales presented in accordance with US GAAP.

The following table outlines our sales and comp-store sales increases and decreases for the periods indicated:
20222021
Net SalesComp-Store SalesNet SalesComp-Store Sales
PeriodTotal
 Dollars		%
 Change		$
Change		%
 Change		$
Change		Total
 Dollars		%
 Change		$
Change		%
 Change		$
Change
Q1$238.9 1.0 %$2.5 0.2 %$0.4 $236.5 31.8 %$57.1 11.5 %$15.4 
Q2$253.2 1.3 %$3.2 1.1 %$2.7 $250.0 127.3 %$140.0 46.9 %$48.8 
YTD Q2$492.1 1.2 %$5.7 0.7 %$3.2 $486.5 68.1 %$197.1 27.0 %$64.2 

   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 mid-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‑pandemic level due to labor shortages and supply chain disruptions. Many manufacturers continue to be challenged by raw material shortages, transportation 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 a resurgence of COVID‑19. Fortunately, most began reopening in mid-October and are operating at various levels of capacity. However, these shutdowns may impact our merchandise available for delivery in future quarters.

The above chart outlines ourTotal sales for the quarterssecond quarter of 2022 increased $3.2 million, or 1.3%, compared to 2021. Our comp-store sales increased 1.1%, or $2.7 million, in the second quarter of 2022 compared to 2021.
Our free in-home design service continues to grow as COVID-19 concerns abate, and yeardesigner sales were 24.8% of our total written business for the second quarter of 2022 compared to date. Our stores24.6% for 2021. COVID-19 continues to impact our supply chain, and ongoing delays in our case goods inventory impacted our business. Sales in this category as a percent of our total sales were closed34.3% in the second quarter of 2022 compared to 36.7% in 2021. We did begin to receive and we did not make any deliveriesrestore case goods and other items to a more normal operating inventory level during the second quarter which allowed us to deliver customer orders.
The declines in April 2020.in-store traffic and written business which began in March 2022 continued through June 2022. Written business for the second quarter of 2022 was down 13.3% compared to 2021. We continued to experience a return to increased consumer interest around traditional shopping events and had very strong business for the Fourth of July holiday. Our written salesbusiness for the second quarter ended September 30, 2021 were up 2.0%of 2022 compared to the same period in 2020 which was up 22.8% over 2019.
Ours sales by merchandise category are impacted by product availability. 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 available merchandise. Custom upholstery orders were 28.0% of total written upholstery sales for the pre-pandemic first quarter of 2020 and a high of 29.8% in the third quarter of 2020 but have steadily fallen to 20.0% in the third quarter of 2021.

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INDEX


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

"normal" pre-pandemic second quarter of 2019 was up 23.2% as customers are still investing in their homes. In the second half of 2022, we expect that our business will continue to be affected as rising inflation, including fuel costs, stock market volatility, higher interest rates and concerns regarding a recession impact discretionary consumer spending.
Gross Profit

Gross profit for the thirdsecond quarter of 20212022 was 56.8%57.9%, up 60130 basis points compared to the prior year period of 56.2%56.6%. We have judiciously adjusted ourThe increase is primarily due to pricing in response to product price increasesdiscipline 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 retailmerchandise pricing and our sales mix have offset the negative impact to gross profit from increases in our LIFO reserve.

mix.
We estimateexpect annual gross profit margins for the full year of 20212022 will be 56.5%57.7% to 56.8%58.0%.

Gross profit margins fluctuate quarter to quarter in relation to our promotional cadence. Our estimated gross profit margins are based on anticipated changes in product and freight costs and their impact on our LIFO reserve.
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 thirdsecond quarter of 20212022 were 44.6%46.7% versus 46.0%45.0% 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.2021. SG&A dollars increased $16.1$5.7 million, or 5.1%, for the thirdsecond quarter of 2021 and increased $68.0 million for the nine months ended September 30, 20212022 compared to the same prior year periods. 

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 health benefits premiums for those furloughed which totaled approximately $2.1 million. Salaries and wagesperiod. The increase is driven by higher costs associated with the furloughed team members was approximately $9.9 million. We reduced our workforce by approximately 35% effective April 30, 2020selling expense of $2.3 million, distribution and paid severancedelivery costs of approximately $1.7$2.6 million, and occupancy expenses of $0.6 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 and distribution 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 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%

(In thousands)Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
$% of
Net Sales		$% of
Net Sales		$% of
Net Sales		$% of
Net Sales
Variable$45,955 18.2 %$41,958 16.8 %$90,339 18.4 %$82,665 17.0 %
Fixed and discretionary72,174 28.5 %70,439 28.2 %142,944 29.0 %139,494 28.7 %
$118,129 46.7 %$112,397 45.0 %$233,283 47.4 %$222,159 45.7 %
The variable expenses in dollars were higher in the thirdsecond quarter and first nine months of 20212022 compared to the same periods in 20202021 due to the increase in sales.

The variable expensescompensation costs for the three months ended September 30, 2021 as a percent of sales compared to the prior year period reflect additional leveraging of certain selling and delivery expenses. The variable expenses for the nine months ended September 30, 2020 include payment of severance costspersonnel and health benefits for furloughed team members.
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Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations

rising fuel costs.
Fixed and discretionary expenses were impacted in the thirdsecond quarter of 20212022 primarily by increases in generalwarehouse and administrative expense for compensation, benefits, and related payroll and laborother occupancy costs of $3.8 million, warehouse expense of $2.8 million, and marketing spend of $1.7 million, compared to the same period of 2020.

prior year quarter.
Our variable type expenses within SG&A for the full year of 20212022 are anticipated to be 17.0%18.2% to 17.3%.18.4%, an increase from our previous estimate based on increases in selling and delivery costs. Fixed and discretionary expenses are expected to be approximately $278.0$293.0 to $281.0$295.0 million for the full year of 2021.

2022, a decrease from our previous guidance based on changes in our marketing spend.
Liquidity and Capital Resources
Cash and Cash Equivalents at End of Year
At SeptemberJune 30, 2021,2022, we had $225.7$143.5 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
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Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations
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 $37.0$32.0 million for the full year of 2021.2022.
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 SeptemberJune 30, 20212022 was $15.7$47.1 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 AugustNovember 2021, our Board of Directors authorized an additional $25.0 million for our share repurchase program. During the three months ended SeptemberJune 30, 20212022 we purchased 537,196461,391 shares of common stock for approximately $19.5 million under previous and current authorizations. There is$12.5 million. During the six months ended June 30, 2022 we purchased 899,890 shares of common stock for approximately $22.3 million at September 30, 2021 that may yet be used for purchases$25.0 million. Substantially all funds under the current authorization.

authorization have been used as of June 30, 2022.
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 approximately $89.0$26.3 million in the first ninesix months of 2022 compared to $57.6 million during the same period in 2021. This difference was primarily driven by changes associated with customer deposits, accounts payable, and inventories.
Investing Activities. Cash used in investing activities increased by $2.6 million in the first six months of 2022 compared to the first six months of 2021, drivenas the result of greater capital expenditures.
Financing Activities.Cash used in financing activities increased by $24.1 million in the first six months of 2022 compared to the first six months of 2021, primarily by net incomedue to the $25.0 million of $66.5share repurchases in 2022.
Store Plans and Capital Expenditures
LocationOpening Quarter
Actual or Planned		Category
Austin, TXQ-1-22Open
Atlanta, GAQ-2-22Closure
Metro DCQ-3-22Open
Indianapoli, INQ-4-22Relocation
Allen, TXQ-4-22Closure
Durham, NCQ-1-23Open
Net selling space in 2022 is expected to be flat compared to 2021. Total capital expenditures are estimated to be $32.0 million and non-cash adjustmentsin 2022 depending on the timing of $17.0 million, consisting of depreciation and amortization and stock-based compensation, and by changes in working capital inflows. The primary working capital inflows were from customer deposits of approximately $34.0 million partially offset by outflowsspending for inventory of $29.1 million.new projects.
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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 market
The Villages, FLQ-3-21Open
Dallas, TXQ-3-21Closure
Austin, TXQ-1-22Open

Net selling space in 2021 is expected to be flat 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 approximately $37.0 million in 2021 depending on the timing of spending for new projects.

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. 

2021.
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 toand 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 SeptemberJune 30, 20212022 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 stockCommon Stock and Class A common stock.Common Stock. A program was initially approved by the board on November 3, 1986. On August 6,November 5, 2021, the board approvedauthorized an additional amount under such stock repurchase amount of $25.0 million to bring the total available share repurchase authorization at such time to approximately $33.1 million.program. 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 thirdsecond quarter of 2021:2022:
(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
April 1 - April 30— — — $12,504,000 
May 1 - May 31159,700 $27.47 159,700 $8,482,700 
June 1 - June 30301,691 $26.89 301,691 $4,700 
Total461,391 461,391 
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(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 NumberDescription 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 formForm 8-K dated May 10, 2018).
*10.131.1
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.
101The following financial statements from Haverty Furniture Companies, Inc.’s Quarterly Report on Form 10-Q for the quarter ended SeptemberJune 30, 2021,2022, 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.
104Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).

*    Filed herewith.
*Filed herewith.
****    Furnished herewith.

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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: August 5, 2022November 2, 2021By:By:/s/ Clarence H. Smith
Clarence H. Smith

Chairman of the Board
and
Chief Executive Officer

(principal executive officer)
By:
By:/s/ Richard B. Hare
Richard B. Hare

Executive Vice President and

Chief Financial Officer

(principal financial and accounting officer)




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