| Description of Business and Summary of Significant Accounting Policies | Note 1, Description of Business and Summary of Significant Accounting Policies: Business: Haverty Furniture Companies, Inc. (“Havertys,” “we,” “our,” or “us”) is a retailer of a broad line of residential furniture in the middle to
upper-middle price ranges. We have 121 showrooms in 16 states at December 31, 2021. All of our stores are operated using the Havertys name and we do not franchise our stores. We also have an online presence through which our customers can make
purchases. We offer financing through third-party finance companies as well as an internal revolving charge credit plan. COVID-19: In an effort to mitigate the spread of COVID‑19 and protect our team members, customers, and communities, in 2020 Havertys closed all of its
stores on March 19 and halted deliveries on March 21, with the expectation at that time of reopening stores on April 2. Affected team members were paid during this period and most corporate personnel transitioned to working remotely. On April 1, we
extended our store closure for another 30 days and furloughed 3,033 team members or approximately 87% of our workforce. During this period,
we paid the cost of enrolled health benefits of those furloughed. 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 and extended the furlough of approximately 730 team members until June 1. We reopened 103 of our stores on May 1 and the
remaining 17 were opened by June 20 and deliveries restarted on May 5. The pandemic continues to disrupt several segments of the economy. Although our stores and other businesses are open, some business sectors
are operating on a reduced scale. Our business has been very strong since reopening. Consumers not negatively impacted financially are spending on their homes. The COVID-19 pandemic is complex and continues to evolve
w Basis of Presentation: The consolidated financial statements include the accounts of Havertys
and its wholly-owned subsidiary. All significant intercompany accounts and transactions have been eliminated in consolidation. Use of Estimates: The preparation of financial statements in conformity with United States of America generally accepted accounting principles (“U.S. GAAP”)
requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Cash and Cash Equivalents: Cash and cash equivalents include all liquid investments with a maturity date of less than
three months when purchased. Cash equivalents also include amounts due from third-party financial institutions for credit and debit card transactions which typically settle within five days. Restricted Cash Equivalents: Our insurance carrier requires us to collateralize a portion of our workers’ compensation obligations. These funds are investments in money
market funds held by an agent. The agreement with our carrier governing these funds is on an annual basis expiring on December 31. Inventories: Inventories are stated at the lower of cost or market. Cost is determined using the last-in, first-out (LIFO) method. Property and Equipment: Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is provided over the estimated useful
lives of the assets using the straight-line method. Leasehold improvements are amortized over the shorter of the estimated useful life or the lease term of the related asset. See Leases below. Estimated useful lives for financial reporting purposes are as follows:
Buildings
25 – 33 years
Improvements
5 – 15 years
Furniture and Fixtures
3 – 15 years
Equipment
3 – 15 years Customer Deposits: Customer deposits consist of cash collections on sales of undelivered merchandise, customer advance payments, and deposits on credit sales for
undelivered merchandise. Revenue Recognition: 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. The liability for sales returns, including the impact on gross profit, is estimated based on historical return levels and recognized at the transaction price. We also recognize a return asset, and corresponding adjustment
to cost of sales, for our right to recover the goods returned by the customer, measured at the former carrying amount of the goods, less any expected recovery cost. At each financial reporting date, we assess our estimates of expected returns, refund
liabilities, and return assets. When we receive payment from customers before delivery of merchandise, the amount received is recorded as a customer deposit. Net sales also include amounts generated by product protection plans. We act as an agent for these sales and the service is provided by a
third-party. Revenue, net of related costs, is recognized at the time the covered merchandise is delivered to the customer. We do not sell gift cards or have a loyalty program. We internally finance less than 2%
of sales. We do not adjust the promised consideration for the effects of a significant financing component since receivables from internally financed sales are typically paid within one year of delivery. We expense sales commissions within SG&A at the time revenue is recognized because the amortization period would be one year or less. We
do not disclose the value of unsatisfied performance obligations because delivery is made within one year of the customer purchase.
Cost of Goods Sold: Our cost of goods sold includes the direct costs of products sold, warehouse handling and transportation costs. Selling, General and Administrative Expenses: Our selling, general and administrative (“SG&A”) expenses are comprised of advertising, selling, occupancy, delivery, administrative costs,
and certain warehouse and transportation related expenses including accessorial and demurrage fees. The costs associated with our purchasing, warehousing, delivery and other distribution costs included in SG&A expense were approximately $94,239,000, $71,838,000 and $77,668,000 in 2021, 2020 and 2019, respectively. Leases: On January 1, 2019 we adopted Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842), using the modified retrospective method and did
not restate prior periods. The adoption of ASU 2016-02 had an immaterial impact on our consolidated statement of income and our consolidated statement of cash flows for the year ended December 31, 2019. We determine if an arrangement contains a lease in whole or in part at the inception of the contract. Right‑of-use (ROU) assets represent our
right to use an underlying asset for the lease term while lease liabilities represent our obligation to make lease payments arising from the lease. All leases greater than 12 months result in the recognition of a ROU asset and a liability at the
lease commencement date based on the present value of the lease payments over the lease term. As most of our leases do not provide the information required to determine the implicit rate, we use our incremental borrowing rate in determining the
present value of lease payments. Our incremental borrowing rate approximates the rate we would get if borrowing on a collateralized basis based on information available at commencement date. We use the implicit rate when readily determinable. Our lease terms include all non-cancelable periods and may include options to extend (or to not terminate) the lease when it is reasonably
certain that we will exercise that option. Leases that have a term of 12 months or less at the commencement date are expensed on a straight-line basis over the lease term and do not result in the recognition of an asset or a liability. Lease expense for operating leases is recognized on a straight-line basis over the lease term. We have lease agreements with lease and
non-lease components, primarily related to real estate and we account for the lease and non-lease components as a single lease component. See Note 8, “Leases,” for additional information. Advertising Expense: Advertising costs, which include television, radio, newspaper, digital, and other media advertising, are expensed upon first showing. The total
amount of prepaid advertising costs included in other current assets was approximately $88,000 and $327,000 at December 31, 2021 and 2020, respectively. We incurred approximately $49,338,000, $39,862,000 and $49,724,000 in advertising expense during 2021, 2020 and 2019, respectively. Interest Income, net: We report interest income net of interest expense. Interest income is generated by our cash equivalents and restricted cash equivalents.
Interest expense is comprised of charges incurred related to our credit facility. The total amount of interest expense was approximately $152,000,
$391,000 and $152,000 during
2021, 2020 and 2019, respectively. Other Income, net: Other income, net includes any gains or losses on sales of property and equipment and other income or expense items outside of core operations.
On May 18, 2020, Havertys completed a sale and leaseback transaction which generated a gain of $31,600,000 and is included in other income.
See Note 8, “Leases,” for additional information. The sale of former retail locations and other operating assets generated additional gains of $3,500,000
in 2020 and minor
Self-Insurance: We are self-insured, for amounts up to a deductible per occurrence, for losses related to general liability, workers’ compensation and vehicle
claims. We are primarily self-insured for employee group health care claims. We have purchased insurance coverage in order to establish certain limits to our exposure on a per claim basis. We maintain an accrual for these costs based on claims filed
and an estimate of claims incurred but not reported or paid, based on historical data and actuarial estimates. The current portion of these self-insurance reserves is included in accrued liabilities and the non-current portion is included in other
liabilities. These reserves totaled $8,306,000 and $7,810,000 at December 31, 2021 and 2020, respectively. Fair Values 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 amounts due to their short-term nature. The assets that are related to our self-directed, non-qualified deferred compensation plans for certain executives and employees are valued using quoted market prices, a
Level 1 valuation technique. Impairment of Long-Lived Assets: We review long-lived assets for impairment when circumstances indicate the carrying amount of an asset may not be recoverable. If an indicator
of impairment is identified, we evaluate the long-lived assets at the individual property or store level, which is the lowest level at which individual cash flows can be identified. We evaluate right-of-use assets at the same level and exclude
operating lease liabilities when evaluating for impairment. When evaluating assets for potential impairment, we first compare the carrying amount of the asset to the store’s estimated future cash flows (undiscounted and without interest charges). If
the estimated future cash flows are less than the carrying amount of the asset, an impairment loss calculation is prepared. The impairment loss calculation compares the carrying amount of the asset to the estimated fair value of the store’s assets,
which is determined on the basis of fair value for similar assets or discounted future cash flows. If required, an impairment loss is recorded in SG&A expense for the difference in the asset’s carrying value and the asset’s estimated fair value.
An impairment loss of $2,415,000 for a retail store was recorded in 2019 and no impairment losses were recorded in 2021 and 2020. The economic disruption due to COVID-19 was determined to be a triggering event during the second quarter of 2020, and as a result, management
assessed its long-term assets, including right-of-use assets for impairment. No impairment loss was required to be recorded. 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. See Note 13 for the computational
components of basic and diluted earnings per share. Accumulated Other Comprehensive Income (Loss): Accumulated other comprehensive income (loss) (“AOCI”), net of income taxes, was comprised of unrecognized retirement
liabilities totaling approximately $2,293,000 and $2,560,000 at December 31, 2021 and 2020, respectively. See Note 11 for the amounts reclassified out of AOCI to SG&A expense related to our supplemental executive retirement plan. Recently Issued Accounting Pronouncements: Changes to U.S. GAAP are established by the Financial Accounting Standards Board (“FASB”) in the form of ASUs to the
FASB’s Accounting Standards Codification. We considered the applicability and impact of all ASUs. We assessed and determined none were either applicable or are expected to have minimal impact on our consolidated financial position or results of
operations. |
