| REPORTS RESULTS FOR THIRD QUARTER 2008 |
ATLANTA, GEORGIA, NOVEMBER 5, 2008 ( HAVERTY FURNITURE COMPANIES, INC. (NYSE: HVT and HVT.A) today reported a loss for the third quarter ended September 30, 2008. The net loss for the third quarter of 2008 was $1.5 million or $0.07 per diluted share of Common Stock, as compared to the third quarter 2007 net earnings of $643,000 or $0.03 per diluted share of Common Stock.
For the nine months ended September 30, 2008, the net loss was $2.8 million or $0.13 per diluted share of Common Stock versus net income of $123,000 or $0.01 per diluted share of Common Stock for the same period in 2007.
As previously reported, net sales for the third quarter of 2008 were $175.6 million, a decrease of 12.5% compared to sales of $200.7 million for the corresponding quarter in 2007. Comparable-store sales declined 14.9% for the quarter.
Clarence H. Smith, president and chief executive officer, said, “We have seen more deterioration in consumer spending for big-ticket purchases and the current outlook for the near term continues to be difficult. Our strategy to maintain a strong balance sheet and contain costs has proven to be particularly prudent. Subsequent to the end of the third quarter, all of our borrowings were repaid and we are closely managing our inventories. During the third quarter, we continued to adjust all aspects of our operations to business conditions and reduced our SG&A costs while improving our gross margins.
“Gross margins for the third quarter increased from 49.6% in 2007 to 51.5% this year. Reductions in markdowns and our cessation of in-house free financing for terms greater than one year were the primary contributors to the improvement in gross margins. Total SG&A expenses in the third quarter were $6.9 million lower in 2008 than in the prior year as we adjusted our advertising spending and corporate office, store, and distribution operations. The $8.0 million of reductions in these areas were partially offset by an increase of $1.1 million in our reserve for store closing costs, which includes amounts for potential defaults by our sub-tenants. All of our fixed costs are currently being analyzed for additional reductions. We are evaluating locations with leases reaching renewal for potential renegotiations of option terms or possible closures.
“Inventory levels are currently lower than those throughout the first half of the year. We no longer offer in-house free financing greater than one year and accounts receivable balances have continued to come down and serve as a source of cash. In early October we made the final scheduled payments on two unsecured notes and prepaid the remaining obligations associated with certain properties. Our capital expenditure plans are being curtailed as we spend on normal store maintenance but forego any additional new store activity. We expect to close on a $7.0 million sale-leaseback of one of our stores during the fourth quarter.
“Our total written business in the fourth quarter to date is down approximately 23% versus the same period last year. We cannot predict the depth or length of the current negative business cycle. Our attention is on tightly managing our business during this period, gaining market share from weaker and defunct competitors, and emerging from this historic down cycle as the most prominent furniture retailer in our markets.”
Havertys is a full-service home furnishings retailer with 123 showrooms in 17 states in the Southern and Midwestern regions providing its customers with a wide selection of quality merchandise in middle- to upper-middle price ranges. Additional information is available on the Company’s website at www.havertys.com.
News releases include forward-looking statements, which are subject to risks and uncertainties. Factors that might cause actual results to differ materially from future results expressed or implied by such forward-looking statements include, but are not limited to, general economic conditions, the consumer spending environment for large ticket items, competition in the retail furniture industry and other uncertainties detailed from time to time in the Company’s reports filed with the SEC.
The company will sponsor a conference call Thursday, November 6, 2008 at 8:00 a.m. Eastern Standard Time to review the third quarter. Listen-only access to the call is available via the web at www.havertys.com (About Us) and at www.streetevents.com (Individual Investor Center), both live and for a limited time, on a replay basis.
NEWS RELEASE – November 5, 2008
HAVERTY FURNITURE COMPANIES, INC. and SUBSIDIARIES | Page 3 |
Condensed Consolidated Statements of Income (Amounts in thousands except per share data) (Unaudited) |
| Quarter Ended September 30, | | | Nine Months Ended September 30, | |
| 2008 | | | 2007 | | | | 2008 | | | 2007 | |
| | | | | | | | | | | | | |
Net sales | $ | 175,579 | | $ | 200,666 | | | $ | 529,243 | | $ | 578,843 | |
Cost of goods sold | | 85,104 | | | 101,141 | | | | 256,079 | | | 292,980 | |
Gross profit | | 90,475 | | | 99,525 | | | | 273,164 | | | 285,863 | |
| | | | | | | | | | | | | |
Credit service charges | | 468 | | | 591 | | | | 1,530 | | | 1,853 | |
Gross profit and other revenue | | 90,943 | | | 100,116 | | | | 274,694 | | | 287,716 | |
| | | | | | | | | | | | | |
Expenses: | | | | | | | | | | | | | |
Selling, general and administrative | | 92,879 | | | 99,798 | | | | 278,139 | | | 288,638 | |
Interest, net | | 273 | | | (571 | ) | | | 348 | | | (723 | ) |
Provision for doubtful accounts | | 432 | | | 407 | | | | 1,044 | | | 786 | |
Other (income) expense, net | | (359 | ) | | (77 | ) | | | (479 | ) | | (728 | ) |
Total expenses | | 93,225 | | | 99,557 | | | | 279,052 | | | 287,973 | |
| | | | | | | | | | | | | |
Income (loss) before income taxes | | (2,282 | ) | | 559 | | | | (4,358 | ) | | (257 | ) |
| | | | | | | | | | | | | |
Income tax benefit | | (767 | ) | | (84 | ) | | | (1,566 | ) | | (380 | ) |
| | | | | | | | | | | | | |
Net income (loss) | $ | (1,515 | ) | $ | 643 | | | $ | (2,792 | ) | $ | 123 | |
| | | | | | | | | | | | | |
Basic and diluted earnings (loss) per share: | | | | | | | | | | | | | |
Common Stock | $ | (0.07 | ) | $ | 0.03 | | | $ | (0.13 | ) | $ | 0.01 | |
Class A Common Stock | $ | (0.07 | ) | $ | 0.03 | | | $ | (0.13 | ) | $ | 0.00 | |
| | | | | | | | | | | | | |
Weighted average shares - basic: | | | | | | | | | | | | | |
Common Stock | | 17,213 | | | 18,460 | | | | 17,163 | | | 18,501 | |
Class A Common Stock | | 4,090 | | | 4,146 | | | | 4,107 | | | 4,174 | |
Weighted average shares - assuming dilution1: | | | | | | | | | | | | | |
Common Stock | | 21,303 | | | 22,725 | | | | 21,270 | | | 22,827 | |
Class A Common Stock | | 4,090 | | | 4,146 | | | | 4,107 | | | 4,174 | |
| | | | | | | | | | | | | |
Cash dividends per common share: | | | | | | | | | | | | | |
Common Stock | $ | 0.0675 | | $ | 0.0675 | | | $ | 0.2025 | | $ | 0.2025 | |
Class A Common Stock | $ | 0.0625 | | $ | 0.0625 | | | $ | 0.1875 | | $ | 0.1875 | |
| | | | | | | | | | | | | |
1 See additional details at the end of this release. |
more.....
NEWS RELEASE – November 5, 2008
HAVERTY FURNITURE COMPANIES, INC. and SUBSIDIARIES | Page 4 |
Condensed Consolidated Balance Sheets (Amounts in thousands) (Unaudited) |
|
| September 30, 2008 | | December 31, 2007 | | September 30, 2007 | |
| | | | | | | | | | |
Assets | | | | | | | | | | |
Cash and cash equivalents | | $ | 18,724 | | $ | 167 | | $ | 17,823 | |
Accounts receivable, net of allowance | | | 31,773 | | | 58,748 | | | 64,708 | |
Inventories, at LIFO cost | | | 99,830 | | | 102,452 | | | 93,757 | |
Other current assets | | | 19,214 | | | 17,569 | | | 27,380 | |
Total current assets | | | 169,541 | | | 178,936 | | | 203,668 | |
| | | | | | | | | | |
Accounts receivable, long-term | | | 2,536 | | | 8,003 | | | 10,275 | |
Property and equipment, net | | | 201,565 | | | 209,912 | | | 214,700 | |
Other assets | | | 23,562 | | | 25,086 | | | 13,102 | |
| | | | | | | | | | |
| | $ | 397,204 | | $ | 421,937 | | $ | 441,745 | |
| | | | | | | | | | |
Liabilities and Stockholders' Equity | | | | | | | | | | |
Notes payable to banks | | $ | — | | $ | — | | $ | — | |
Accounts payable and accrued liabilities | | | 73,652 | | | 84,527 | | | 98,472 | |
Current portion of long-term debt and lease obligations | | | 15,191 | | | 8,353 | | | 8,289 | |
Total current liabilities | | | 88,843 | | | 92,880 | | | 106,761 | |
| | | | | | | | | | |
Long-term debt and lease obligations, less current portion | | | 7,265 | | | 20,331 | | | 22,457 | |
Other liabilities | | | 29,546 | | | 29,881 | | | 27,527 | |
Stockholders' equity | | | 271,550 | | | 278,845 | | | 285,000 | |
| | | | | | | | | | |
| | $ | 397,204 | | $ | 421,937 | | $ | 441,745 | |
more. . .
NEWS RELEASE – November 5, 2008
HAVERTY FURNITURE COMPANIES, INC. and SUBSIDIARIES | Page 5 |
Condensed Consolidated Statements of Cash Flows (Amounts in thousands) (Unaudited) |
|
| Nine Months Ended September 30, |
| | | 2008 | | | 2007 | |
| | | | | | | |
Operating Activities | | | | | | | |
Net income (loss) | | $ | (2,792 | ) | $ | 123 | |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | | | | | | | |
Depreciation and amortization | | | 16,217 | | | 16,889 | |
Provision for doubtful accounts | | | 1,044 | | | 786 | |
Loss (gain) on sale of property and equipment | | | 8 | | | (219 | ) |
Other | | | 794 | | | 1,588 | |
| | | | | | | |
Changes in operating assets and liabilities | | | 23,290 | | | 26,023 | |
| | | | | | | |
Net cash provided by operating activities | | | 38,561 | | | 45,190 | |
| | | | | | | |
Investing Activities | | | | | | | |
Capital expenditures | | | (8,307 | ) | | (10,173 | ) |
Proceeds from sale of land, property and equipment | | | 256 | | | 888 | |
Other investing activities | | | 141 | | | 110 | |
| | | | | | | |
Net cash used in investing activities | | | (7,910 | ) | | (9,175 | ) |
| | | | | | | |
Financing Activities | | | | | | | |
Proceeds from borrowings under revolving credit facilities | | | 128,365 | | | 362,525 | |
Payments of borrowings under revolving credit facilities | | | (128,365 | ) | | (375,125 | ) |
| | | | | | | |
Net decrease in borrowings under revolving credit facilities | | | — | | | (12,600 | ) |
Payments on long-term debt and capital lease obligations | | | (6,228 | ) | | (8,306 | ) |
Treasury stock acquired | | | (1,806 | ) | | (5,213 | ) |
Proceeds from exercise of stock options | | | 186 | | | 319 | |
Dividends paid | | | (4,246 | ) | | (4,531 | ) |
| | | | | | | |
Net cash used in financing activities | | | (12,094 | ) | | (30,331 | ) |
| | | | | | | |
Increase in cash and cash equivalents | | | 18,557 | | | 5,684 | |
| | | | | | | |
Cash and cash equivalents at beginning of period | | | 167 | | | 12,139 | |
| | | | | | | |
Cash and cash equivalents at end of period | | $ | 18,724 | | $ | 17,823 | |
more. . .
NEWS RELEASE – November 5, 2008
HAVERTY FURNITURE COMPANIES, INC. and SUBSIDIARIES Page 6
Reclassifications
Certain reclassifications have been made to the prior period financial statements to conform to the current period presentation.
Income Taxes
During the nine months ended September 30, 2008 and 2007, the Company settled certain state tax audits and revised its assessments related to state taxation issues resulting in a $0.3 million recognition of tax benefits and reduction in its FIN 48 reserve
Earnings per Share
The following details how the number of shares in calculating the diluted earnings per share for Common Stock are derived under SFAS 128 and EITF 03-6 (shares in thousands):
| | Quarter Ended September 30 | | Nine Months Ended September 30 | |
| | 2008 | | 2007 | | 2008 | | 2007 | |
| | | | | | | | | |
Common Stock: | | | | | | | | | |
Weighted-average shares outstanding | | 17,213 | | 18,460 | | 17,163 | | 18,501 | |
| | | | | | | | | |
Assumed conversion of Class A Common shares | | 4,090 | | 4,146 | | 4,107 | | 4,174 | |
| | | | | | | | | |
Dilutive options and stock awards | | — | | 119 | | — | | 152 | |
| | | | | | | | | |
Total weighted-average diluted Common shares | | 21,303 | | 22,725 | | 21,270 | | 22,827 | |
| | | | | | | | | |
# # # # # Contact for information: Dennis L. Fink, EVP & CFO or Jenny Hill Parker, VP, Secretary & Treasurer 404-443-2900 | |
