EXHIBIT 99.1
N E W S R E L E A S E
SUBJECT: HAVERTY FURNITURE
LEASE ACCOUNTING AND IMPACT OF CHANGE ON PRIOR PERIODS
ATLANTA, GEORGIA, MAY 2, 2005 -- HAVERTY FURNITURE COMPANIES,
INC. (NYSE: HVT and HVT.A) today announced that it had finalized
a subsequent review of its lease accounting practices. Based on
the analysis and in consultation with its independent external
auditors, and with the concurrence of its Audit Committee, the
Company has determined it will restate previously issued
historical financial statements to properly account for leases.
The Company estimates that the effects of such restatements are
reductions in net income of approximately $0.1 million for 2004
and $0.5 million for 2003. The impact is negligible for 2002.
The adjustments are anticipated to reduce previously reported
diluted earnings per common share by $0.01 for 2004 and $0.02 for
2003. The cumulative effect of the restatement for prior periods
is a reduction in retained earnings of $1.1 million as of
December 31, 2001. The necessary restatement adjustments will
correct the Company's historical accounting for leases and will
have no impact on previously reported revenues, cash balances,
inventory, or compliance with any of the Company's debt
covenants. The change has no effect on historical or future cash
flows or the timing of payments under leases.
Similar to many other companies in the retail and restaurant
businesses, the Company began analyzing its lease accounting
practices in light of the communication issued by the office of
the Chief Accountant of the Securities and Exchange Commission
("SEC") in its February 7, 2005 letter (the "SEC Letter") to the
American Institute of Certified Public Accountants. As noted in
our fourth quarter earnings press release on March 1, 2005, we
reviewed our methodology and recorded a negative adjustment of
$0.4 million. That adjustment related primarily to leases on
five stores previously operated by other furniture retailers that
we assumed in 2001 and corrected the accounting for straight line
rents to include certain option periods where failure to exercise
such options would result in an economic penalty.
During the past few weeks, management became aware that the term
"rent holiday" referred to in the SEC Letter was more inclusive
than management's understanding of the phrase. The term, as more
recently applied, also refers to the period of time between the
Company's taking control and possession (generally the beginning
of construction) of a leased site and the commencement of the
lease payments. Historically, the Company had begun its
computation of straight line rent at the earlier of the
commencement of the lease payments or when the lease site opened.
There has been additional clarification from the SEC concerning
the acceptable accounting methods for these types of rent
holidays following the issuance of the SEC Letter and discussion
by the larger public accounting firms as to the application of
these interpretations in certain circumstances.
Based on the most recent views expressed by the SEC, the Company,
in consultation with its registered independent public
accountants, has determined that its "rent holidays" may not be
capitalized given the Company's specific circumstances and the
calculation of straight line rent should begin on the date the
Company takes control of the site. Thus, the effect of this
adjustment will be to increase the period over which rent is
expensed beginning with a period of time prior to the opening of
a leased site. The correction of this accounting treatment will
result in the Company's restating its historical financial
statements. The Company will include in the restatement the
adjustment made in the fourth quarter of 2004 discussed above.
All estimates contained in this release are subject to change as
the Company completes the restatement of its financial
statements. Due to the time and effort involved in determining
the effect of these adjustments on the Company's historical
financial statements, the Company intends to file a Form 12b-25
and to delay the filing of its Quarterly Report on Form 10-Q for
the three months ended March 31, 2005, which the Company expects
to file as soon as possible but no later than the extended filing
deadline of May 15, 2005. The Company will file a Form 10-K/A
amending its Annual Report on Form 10-K for the fiscal year ended
December 31, 2004 with restated consolidated financial statements
no later than May 31, 2005. For a detailed discussion of the
lease accounting matters noted above, please see the Company's
current report on Form 8-K as filed with the SEC on May 2, 2005,
a copy of which is available at www.havertys.com.
The Company will announce first quarter 2005 earnings results as
previously scheduled on May 3, 2005, and all results reported
will reflect the necessary adjustments for the quarter then
ended. The Company's management will be available to discuss the
restatement at the conclusion of its quarterly earnings
conference call and simultaneous webcast on Tuesday, May 3, 2005,
at 9:00 a.m., Eastern Daylight Time. Interested parties may
listen to the call at streetevents.com (Individual Investor
Center) or the Company's web site at www.havertys.com (For
Investors) and may access a replay of this call through Tuesday,
May 10, 2005 at the same web site addresses.
This release includes 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.
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Contact for Information: Dennis L. Fink, EVP & CFO or
Jenny Hill Parker, VP, Secretary & Treasurer
(404) 443-2900