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EXHIBIT 13.1
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated certain items
from the Company's consolidated statements of income as a percentage of net
sales.
Year Ended December 31
--------------------------
1995 1994 1993
----- ----- -----
Net sales ............................ 100.0% 100.0% 100.0%
Gross profit ......................... 47.2 47.4 47.2
Credit service charges ............... 3.1 3.2 3.3
Selling, general and administrative .. 42.4 41.7 42.3
Interest expense ..................... 2.8 2.3 2.2
Provision for doubtful accounts ...... 0.7 0.8 1.0
Other income (expense), net .......... 0.5 (0.3) (0.1)
Income before income taxes ........... 4.9 5.5 4.8
Net income ........................... 3.1 3.4 3.0
Effective tax rate ................... 37.3% 38.2% 37.9%
===== ===== =====
For an understanding of the significant factors that influenced the
Company's performance during the past three years, the following discussion
should be read in conjunction with the consolidated financial statements
appearing elsewhere in this annual report.
1995 COMPARED TO 1994
Net sales for 1995 increased 6.8% from $370,132,000 to $395,470,000. This
increase was attributable to a 3.1% comparable-store sales increase, a 14.4%
increase in sales from stores expanded within the last year and from seven new
stores.
Gross profit as a percent of net sales was 47.2% for 1995 as compared with
47.4% in 1994. This slight erosion is attributable to the Company's substantial
presence in several highly competitive markets. The LIFO reserve also increased
in 1995 impacting the gross profit margin negatively by 0.2% versus 0.1% in
1994.
Selling, general and administrative expenses as a percent of sales
increased to 42.4% in 1995 compared to 41.7% in 1994. This increase was the
result of several factors including higher depreciation costs associated with
new and expanded stores. Additionally, five of the seven new retail locations in
1995 were open on average less than two months. This short period does not
provide the time necessary to reach a sales level to adequately cover the
stores' higher initial operating costs. Also included in selling, general and
administrative expenses are the planned store pre-opening costs, which are
expensed as incurred, of approximately $656,000. These expenses were only
approximately $25,000 in 1994 as new store openings were at a very low level.
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MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
Credit service charges declined to 3.1% of net sales in 1995 from 3.2%
in 1994 as customer financing at lower promotional rates continued at a rate
comparable to the prior year. Management believes that responding to the terms
of advertised financing promotions offered by many of its competitors reduces
the need to emphasize off-price promotional activity and can stimulate sales.
The Company's credit programs do not require retroactive interest to be charged
to customers who do not fully comply with the terms of these promotions, as do
many of the credit programs offered by its competitors.
A provision for doubtful accounts of 0.7% and 0.8% of net sales was made
in 1995 and 1994, respectively. The Company's accounts receivable growth
continued to reflect the level of credit versus cash sales of approximately 80%
in 1995 and 1994.
The Company is consolidating its credit operations from 45 market-area
locations to one corporate site. Management believes the transition will be
completed during the third quarter of 1996 and the related personnel and other
operational efficiencies will save general and administrative costs on a going
forward basis.
Interest expense increased 0.5% as a percent of net sales due to an
increase of 30.1% in average debt levels to support increased capital
expenditures. The Company's effective interest rate increased 53 basis points
reflecting the higher rates associated with the long-term debt incurred during
1995. The Company has entered into interest rate swap agreements to reduce the
impact of changes in interest rates on its bank line-of-credit arrangements and
floating-rate notes payable. Interest expense is adjusted for the differential
to be paid or received as interest rates change. The effect of such adjustments
on interest expense was not significant during 1995.
Other income in 1995 of $2,124,000 consists primarily of a $1,189,000 gain
from the tornado destruction of a retail location and $932,000 in gains from
the sale of certain real estate.
1994 COMPARED TO 1993
Net sales increased 14.6% as comparable-store sales (sales from stores
opened or expanded for one year or more) increased 10.0%. Management attributes
the improvement to several factors including a favorable general economic
climate. The program of remodeling and expanding stores in certain markets,
coupled with the success of upgraded merchandise lines, enabled sales to grow
at a faster pace than the home furnishings industry's estimated average of
6.5%, according to the American Furniture Manufacturers Association.
Gross profit as a percent of net sales improved 0.2% primarily due to the
effect of improved merchandise purchasing and lower inflation under the LIFO
accounting method which was partially offset by strong sales growth in large
metropolitan markets which have greater price competition. The increase in
sales of higher-price point furniture lines, which typically yield slightly
lower gross margins, was also a factor.
The LIFO provision was 0.1% of net sales in 1994 versus 0.5% in 1993.
During the fourth quarter of 1994, the Company changed its method of accounting
for LIFO inventories from applying U.S. Bureau of Labor Statistics (BLS)
indices to internally developed indices. The Company believes the internally
developed indices more accurately measure increases and decreases in the
Company's cost of merchandise and produce a better matching of current costs
and revenues. The LIFO provision would have been 0.3% of net sales in 1994 had
the BLS indices been used. The cumulative effect of such change at the
beginning of 1994 and proforma amounts for prior years are not determinable.
Credit service charges declined to 3.2% of net sales from 3.3% in 1993 as
customer financing at lower promotional interest rates increased slightly.
Free-interest promotions for specified periods up to one year were available on
a periodic basis to stimulate sales and meet competition.
Selling, general and administrative expenses decreased 0.6% as a percent
of net sales in 1994 reflecting the fixed cost nature of many expenses in this
category as well as improvements in cost control by the Company. General
insurance costs declined 0.3% as a percent of net sales due to more favorable
claims experience and improved safety programs. Advertising expense decreased
0.2% as a percent of net sales as the Company continued to perform more
production work in-house. In absolute dollars, advertising expenses increased
12.3% as the Company moved to reinforce the quality merchandise and service
themes which management uses to differentiate the Company.
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MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
Interest expense increased 0.1% as a percent of net sales due to an
increase of 18.8% in average debt levels to support higher accounts receivable
and capital expenditures. Also, the Company's effective interest rate increased
17 basis points reflecting increased short-term rates.
A provision for doubtful accounts of 0.8% and 1.0% of net sales was made
in 1994 and 1993, respectively. The Company's accounts receivable rose from the
strong sales volume and the increase in credit versus cash sales to 80% of net
sales versus 78% in 1993. The Company continued to experience bad debt
write-offs consistent with its expectations.
Other expenses increased from 0.1% to 0.3% of net sales. During the fourth
quarter of 1994, the Company determined that land originally purchased in 1987,
for warehouse expansion in its Dallas market was no longer suitable, in size or
location given the growth of that market and lack of improvements in the
immediate vicinity's infrastructure. In connection with plans to sell these
properties, the Company made a write-down of $1.1 million which was charged to
other expenses. The Company sold one property and obtained an offer to purchase
the other resulting in an additional loss or write-down of $196,000, during
1995.
LIQUIDITY AND SOURCES OF CAPITAL
The Company has used internally generated funds and bank borrowings to
finance its continuing operations and growth. Net cash used in operating
activities was $1.4 million in 1995, $1.9 million in 1994 and $15.2 million in
1993. The Company carries its own customer accounts receivable and thus
increasing credit sales negatively impact cash flows from operations. Accounts
receivable increased $15.3 million in 1995, $25.5 million in 1994 and $31.5
million in 1993.
The ratio of current assets to current liabilities was 2.6 at the end of
1995, compared to 2.5 and 4.1 at the end of 1994 and 1993, respectively. The
increase in current assets continues to be attributable to higher accounts
receivable and inventory levels. Inventory levels were 14% higher in 1995 as
the Company added 17% more retail square footage during the year. Inventory
turnover for 1995 was impacted negatively as over half of the increase in the
inventory level was due to new square footage which was open, on average, less
than two months.
Investing activities used $42.5 million of cash in 1995 compared to $24.6
million in 1994 and $12.3 million in 1993. During 1995, the Company completed
the construction of seven new stores and the expansion of eight existing
stores. Capital expenditures of approximately $14.6 million were also made for
projects which will be completed in 1996.
Financing activities provided $44.1 million of cash during 1995 primarily
from $50 million in unsecured term notes maturing at various dates through 2008.
The Company has arrangements with eight banks under line-of-credit
agreements to borrow up to $104 million. At December 31, 1995, of this amount,
$74 million were committed lines ($17.8 million unused) and $30 million were
uncommitted lines ($17.8 million unused). Borrowings accrue interest at
competitive money-market rates and all lines are reviewed annually for renewal.
The Company has a revolving credit/term loan agreement with a commercial bank
providing for borrowings of $15 million through 1998, at which time it converts
to a term loan, maturing in 1998. If utilized, this facility would replace a
$15 million short-term committed line. The Company's financial covenants under
various loan agreements allow for securitization of up to approximately
one-half of the outstanding balances of accounts receivable. The Company plans
to enter into a financing transaction of this type in 1996, the proceeds of
which would reduce accounts receivable and notes payable to banks.
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MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
In addition to cash flow from operations, the Company uses bank lines of
credit on an interim basis to finance capital expenditures and repay long-term
debt. Longer-term transactions such as sale/lease-backs, private placements and
mortgage financing are used periodically to reduce short-term borrowings and
manage interest-rate risk. The Company pursues a diversified approach to its
financing requirements and balances its overall capital structure with
fixed-rate or capped-rate debt as determined by the interest rate environment
(79% of total debt was interest-rate protected at December 31, 1995). The
Company's average effective interest rates on all borrowings (excluding capital
leases) were 7.2%, 7.3% and 7.0% in 1995, 1994 and 1993, respectively.
Capital expenditures are presently expected to include for 1996 the
addition of 5 new stores and the remodeling and expansion of 7 existing
locations. The preliminary estimate of capital expenditures for 1996 is $22
million. In addition, the Company has committed to lease 3 stores and a
distribution center commencing in 1996 under operating lease agreements.
Minimum lease commitments, including guaranteed residual values, are expected
to aggregate $31 million for the initial five-year term. Funds available from
operations, bank lines of credit and other possible financing transactions are
expected to be adequate to finance the Company's planned expenditures.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In March 1995, the FASB issued Statement No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,"
which requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. Statement 121 also addresses the accounting for long-lived
assets that are expected to be disposed of. The Company will adopt Statement
121 in the first quarter of 1996 and, based on current circumstances, does not
believe the effect of adoption will be material.
SEASONALITY
Although the Company does not consider its business to be seasonal, sales
are somewhat higher in the second half of the year, particularly in the fourth
quarter.
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SELECTED 5-YEAR FINANCIAL DATA
(In thousands, except per share data)
1995 1994 1993 1992 1991
- ----------------------------------------------------------------------------------------------------------------
Net Sales ...................... $ 395,470 $ 370,132 $ 322,859 $ 282,022 $ 246,390
- ----------------------------------------------------------------------------------------------------------------
Cost of Goods Sold ............. 209,000 194,688 170,348 150,725 129,581
Credit Service Charges ......... 12,376 11,664 10,500 10,489 11,566
Depreciation and Amortization... 10,634 8,602 6,875 6,069 5,479
Interest Expense ............... 11,158 8,470 7,240 7,518 8,190
- ----------------------------------------------------------------------------------------------------------------
Income Before Income Taxes ..... $ 19,444 $ 20,279 $ 15,650 $ 7,188 $ 3,555
Income Taxes ................... 7,261 7,741 5,934 2,656 1,315
----------------------------------------------------------------------------
Net Income ..................... $ 12,183 $ 12,538 $ 9,716 $ 4,532 $ 2,240
- ----------------------------------------------------------------------------------------------------------------
Income Before Income Taxes
as a % of Net Sales........... 4.9% 5.5% 4.8% 2.5% 1.4%
Net Income as a % of Net Sales.. 3.1% 3.4% 3.0% 1.6% 0.9%
================================================================================================================
Earnings Per Share (a) ......... $ 1.05 $ 1.10 $ .91 $ .53 $ .26
================================================================================================================
Cash Dividends-
Amount........................ $ 3,406 $ 3,082 $ 2,772 $ 2,120 $ 2,102
Per Share:
Common Stock (a)............ .3000 .2750 .2650 .2550 .2533
Class A Common Stock (a).... .2800 .2550 .2490 .2417 .2400
================================================================================================================
Capital Expenditures ........... $ 44,896 $ 24,387 $ 13,721 $ 9,701 $ 8,353
Additional Capitalized Leases .. -- -- -- -- 2,100
================================================================================================================
Working Capital ................ $ 159,937 $ 139,695 $ 147,733 $ 103,467 $ 99,190
Current Ratio .................. 2.64 TO 1 2.50 to 1 4.11 to 1 2.66 to 1 3.02 to 1
================================================================================================================
Accounts Receivable, Net ....... $ 172,877 $ 160,405 $ 137,630 $ 109,301 $ 92,931
================================================================================================================
Inventories .................... $ 73,597 $ 64,582 $ 54,739 $ 50,573 $ 49,483
================================================================================================================
Property and Equipment,
Net Carrying Value............ $ 112,405 $ 80,198 $ 67,439 $ 61,296 $ 57,899
================================================================================================================
Total Assets ................... $ 371,778 $ 315,103 $ 264,353 $ 229,184 $ 208,653
================================================================================================================
Long-term Debt and Capital
Lease Obligations............. $ 129,233 $ 87,164 $ 94,197 $ 79,630 $ 74,406
================================================================================================================
Stockholders' Equity ........... $ 140,955 $ 131,055 $ 120,418 $ 83,567 $ 80,804
Equity Per Common Share (a) .... 12.13 11.40 10.59 9.77 9.54
================================================================================================================
Number of Retail Stores:
Open at beginning of period... 90 89 88 86 86
Opened during period.......... 7 1 3 5 --
Closed/relocated
during period............... 3 -- 2 3 --
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Open at end of period......... 94 90 89 88 86
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Remodeled and/or
expanded during period...... 8 13 16 12 4
================================================================================================================
(a) Adjusted for all stock dividends and splits.
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CONSOLIDATED STATEMENTS OF INCOME
HAVERTY FURNITURE COMPANIES, INC. AND SUBSIDIARIES
(In thousands, except per share data)
Year Ended December 31
---------------------------------------
1995 1994 1993
-------- -------- --------
Net sales .............................. $395,470 $370,132 $322,859
Cost of goods sold ..................... 209,000 194,688 170,348
-------- -------- --------
Gross profit .......................... 186,470 175,444 152,511
Credit service charges ................. 12,376 11,664 10,500
-------- -------- --------
198,846 187,108 163,011
Costs and expenses:
Selling, general and administrative... 167,514 154,491 136,551
Interest ............................. 11,158 8,470 7,240
Provision for doubtful accounts ...... 2,854 2,773 3,154
-------- -------- --------
181,526 165,734 146,945
-------- -------- --------
17,320 21,374 16,066
Other income (expense), net ............ 2,124 (1,095) (416)
-------- -------- --------
INCOME BEFORE INCOME TAXES 19,444 20,279 15,650
Income taxes (Note 8) .................. 7,261 7,741 5,934
-------- -------- --------
NET INCOME $ 12,183 $ 12,538 $ 9,716
======== ======== ========
Average number of common and common
equivalent shares outstanding ........ 11,555 11,425 10,733
======== ======== ========
Earnings per share ..................... $ 1.05 $ 1.10 $ .91
======== ======== ========
See notes to consolidated financial statements.
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CONSOLIDATED BALANCE SHEETS
HAVERTY FURNITURE COMPANIES, INC. AND SUBSIDIARIES
(In thousands, except share data)
December 31
----------------------
ASSETS 1995 1994
-------- -------
Current Assets
Cash and cash equivalents .................................................... $ 2,146 $ 1,925
Accounts receivable (Note 2) ................................................. 172,877 160,405
Inventories (Note 3) ......................................................... 73,597 64,582
Other current assets ......................................................... 5,852 2,686
Deferred income taxes (Note 8) ............................................... 2,938 3,396
-------- --------
TOTAL CURRENT ASSETS 257,410 232,994
Property and equipment (Notes 4 and 7) ......................................... 112,405 80,198
Other assets ................................................................... 1,963 1,911
-------- --------
$371,778 $315,103
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes payable to banks (Note 5) .............................................. $ 53,400 $ 49,200
Accounts payable and accrued expenses (Note 6) ............................... 35,988 32,809
Income taxes (Note 8) ........................................................ 112 3,332
Current portion of long-term debt and capital lease obligations
(Notes 7 and 12)............................................................ 7,973 7,958
-------- --------
TOTAL CURRENT LIABILITIES 97,473 93,299
Long-term debt and capital lease obligations, less current portion (Notes 7
and 12)..................................................................... 129,233 87,164
Deferred income taxes (Note 8) ................................................. 1,786 1,347
Other liabilities .............................................................. 2,331 2,238
Commitments (Note 12)
Stockholders' Equity (Notes 9 and 11):
Capital Stock, par value $1 per share -
Preferred Stock, Authorized - 1,000,000 shares; Issued: None
Common Stock, Authorized - 15,000,000 shares;
Issued: 1995 - 9,154,780 shares; 1994 - 8,928,532 shares
(including shares in treasury: 1995 and 1994 - 498,948) ................. 9,155 8,929
Convertible Class A Common Stock, Authorized - 5,000,000 shares;
Issued: 1995 - 3,217,411 shares; 1994 - 3,313,606 shares
(including shares in treasury: 1995 and 1994 - 249,055) ................. 3,217 3,314
Additional paid-in capital .................................................... 32,494 31,500
Retained earnings ............................................................. 101,666 92,889
-------- --------
146,532 136,632
Less cost of Common Stock and Convertible
Class A Common Stock in treasury ............................................ 5,577 5,577
-------- --------
TOTAL STOCKHOLDERS' EQUITY 140,955 131,055
-------- --------
$371,778 $315,103
======== ========
See notes to consolidated financial statements.
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CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
HAVERTY FURNITURE COMPANIES, INC. AND SUBSIDIARIES
(In thousands, except per share data)
Common Class A Additional
Stock Common Stock Paid-in Retained Treasury
($1 Par Value) ($1 Par Value) Capital Earnings Stock Total
-------------------------------------------------------------------------------------------
BALANCE AT JANUARY 1, 1993 $ 5,583 $ 3,718 $ 3,354 $ 76,489 $ (5,577) $ 83,567
Net income ......................... -- -- -- 9,716 -- 9,716
Cash dividends on common stock:
Amount ........................... -- -- -- (2,772) -- (2,772)
Per share:
Common - $.265
Class A Common - $.249
Conversion of Class A Common Stock.. 359 (359) -- -- -- --
Stock option transactions, net ..... 470 100 4,321 -- -- 4,891
Sale of Common Stock ............... 1,391 -- 23,625 -- -- 25,016
Stock split (3 for 2) .............. 962 (105) (857) -- -- --
--------- --------- --------- ---------- --------- ----------
BALANCE AT DECEMBER 31, 1993 8,765 3,354 30,443 83,433 (5,577) 120,418
Net income ......................... -- -- -- 12,538 -- 12,538
Cash dividends on common stock:
Amount ........................... -- -- -- (3,082) -- (3,082)
Per share:
Common - $.275
Class A Common - $.255
Conversion of Class A Common Stock.. 80 (80) -- -- -- --
Stock option transactions, net ..... 84 40 1,057 -- -- 1,181
--------- --------- --------- ---------- --------- ----------
BALANCE AT DECEMBER 31, 1994 8,929 3,314 31,500 92,889 (5,577) 131,055
Net income ......................... -- -- -- 12,183 -- 12,183
Cash dividends on common stock:
Amount ........................... -- -- -- (3,406) -- (3,406)
Per share:
Common - $.30
Class A Common - $.28
Conversion of Class A Common Stock.. 100 (100) -- -- -- --
Stock option transactions, net ..... 126 3 994 -- -- 1,123
--------- --------- --------- ---------- --------- ----------
BALANCE AT DECEMBER 31, 1995 ....... $ 9,155 $ 3,217 $ 32,494 $ 101,666 $ (5,577) $ 140,955
========= ========= ========= ========== ========= ==========
See notes to consolidated financial statements.
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CONSOLIDATED STATEMENTS OF CASH FLOWS
HAVERTY FURNITURE COMPANIES, INC. AND SUBSIDIARIES
(In thousands)
Year Ended December 31
-------------------------------
1995 1994 1993
-------- -------- --------
OPERATING ACTIVITIES
Net income............................................................... $ 12,183 $ 12,538 $ 9,716
Adjustments to reconcile net income to net cash used in operating
activities:
Depreciation and amortization...................................... 10,634 8,602 6,875
Provision for doubtful accounts.................................... 2,854 2,773 3,154
Reduction of cost to market value of property held for sale ....... 140 1,100 --
Deferred income taxes ............................................. 897 (698) 456
(Gain) loss on sale or involuntary conversion of property and
equipment........................................................ (2,121) 86 (85)
-------- -------- --------
Subtotal 24,587 24,401 20,116
Changes in operating assets and liabilities:
Accounts receivable................................................ (15,326) (25,548) (31,483)
Inventories........................................................ (9,472) (9,843) (4,166)
Other current assets............................................... (1,161) 24 375
Accounts payable and accrued expenses.............................. 3,179 5,747 1,769
Income taxes....................................................... (3,220) 3,332 (1,789)
-------- -------- --------
NET CASH USED IN OPERATING ACTIVITIES (1,413) (1,887) (15,178)
-------- -------- --------
INVESTING ACTIVITIES
Purchases of property and equipment.................................... (44,896) (24,387) (13,721)
Proceeds from sale of property and equipment .......................... 2,407 128 822
Other investing activities ............................................ (2,893) (329) 635
Insurance proceeds .................................................... 2,922 -- --
-------- -------- --------
NET CASH USED IN INVESTING ACTIVITIES (42,460) (24,588) (12,264)
-------- -------- --------
FINANCING ACTIVITIES
Net increase (decrease) in short-term borrowings....................... 4,200 37,300 (14,900)
Proceeds from issuance of long-term debt............................... 50,044 925 30,000
Payment of long-term debt and capital lease obligations................ (7,960) (8,479) (15,242)
Exercise of stock options.............................................. 1,123 1,181 4,891
Dividends paid......................................................... (3,406) (3,082) (2,772)
Sale of Common Stock................................................... -- -- 25,016
Other financing activities............................................. 93 (59) (126)
-------- -------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 44,094 27,786 26,867
-------- -------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS......................... 221 1,311 (575)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR........................... 1,925 614 1,189
-------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR................................. $ 2,146 $ 1,925 $ 614
======== ======== ========
See notes to consolidated financial statements.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization: The Company is a full-service home furnishings retailer with
94 showrooms in 11 southern states, selling a broad line of middle to high-end
furniture. The middle to upper-middle income households earning in excess of
$35,000 annually are the Company's predominant target market.
Principles of Consolidation: The consolidated financial statements include
the accounts of the Company and its wholly owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates: The preparation of the financial statements in
conformity with generally accepted accounting principles 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.
Inventories: Inventories are stated at the lower of cost or market. Cost
is determined using the last-in, first-out (LIFO) method. As discussed in Note
3, the Company changed its method of accounting for LIFO inventories in 1994.
Property and Equipment and Depreciation: 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. Investments in property
under capital leases are amortized over the related lease term.
Cash Equivalents: The Company considers all liquid investments with a
maturity of three months or less when purchased to be cash equivalents. Cash
equivalents are stated at cost, which approximates fair market value.
Fair Values of Financial Instruments: The Company's financial instruments
consist of cash, accounts receivable, accounts payable and long-term debt.
Cash, accounts receivable and accounts payable are stated at fair market value;
the carrying amount of long-term debt approximates fair market value based on
current interest rates. Interest rate swap agreements are valued based on the
estimated amount the Company would pay to terminate the agreements at the
reporting date, taking into account current interest rates and the credit
worthiness of the swap counterparties.
Interest Rate Swap Agreements: These agreements involve the receipt of
fixed-rate amounts in exchange for floating-rate interest payments over the
life of the agreements without an exchange of the underlying principal amount.
The differential to be paid or received is accrued as interest rates change and
recognized as an adjustment to interest expense related to the debt. The
related amount payable to or receivable from counterparties is included in
other liabilities or assets. The fair values of the swap agreements are not
recognized in the financial statements.
Advertising Expense: The cost of advertising is expensed as incurred. The
Company incurred approximately $28,000,000, $26,800,000 and $23,900,000 in
advertising costs during 1995, 1994 and 1993, respectively.
Stock Based Compensation: The Company grants stock options for a fixed
number of shares to employees with an exercise price equal to the fair value of
the shares at the date of grant. The Company accounts for stock option grants
in accordance with APB Opinion No. 25, "Accounting for Stock Issued to
Employees," and, accordingly, recognizes no compensation expense for the stock
option grants.
Earnings Per Share: Earnings per share are computed based on the weighted
average number of common shares plus significant dilutive common stock
equivalents related to stock options.
Impact of Recently Issued Accounting Standards: In March 1995, the FASB
issued Statement No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of," which requires impairment losses
to be recorded on long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows estimated to be
generated by those assets are less than the assets' carrying amount. Statement
121 also addresses the accounting for long-lived assets that are expected to be
disposed of. The Company will adopt Statement 121 in the first quarter of 1996
and, based on current circumstances, does not believe the effect of adoption
will be material.
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NOTE 2 - ACCOUNTS RECEIVABLE
Credit sales under Company credit programs were, as a percent of sales,
approximately 80% in 1995 and 1994 and 78% in 1993. Accounts receivable are
shown net of the allowance for doubtful accounts of $7,105,000 at December 31,
1995 and 1994, respectively. Accounts receivable terms vary as to payment terms
(30 days to four years) and interest rates (0% to 21%) and are generally
collateralized by the merchandise sold. Accounts receivable balances due after
one year at December 31, 1995 and 1994 were approximately $57,194,000 and
$46,368,000, respectively, and have been included in current assets in
accordance with trade practice.
The Company believes that the carrying value of existing customer
receivables is the best estimate of fair value because of their short average
maturity and estimated bad debt losses have been reserved. Concentrations of
credit risk with respect to customer receivables are limited due to the large
number of customers comprising the Company's account base and their
dispersion across eleven states.
NOTE 3 - INVENTORIES
Inventories are measured using the last-in, first-out (LIFO) method of
inventory valuation. The excess of current cost over the value of inventories
based upon the LIFO method was approximately $13,416,000 and $12,698,000 at
December 31, 1995 and 1994, respectively. A number of the Company's competitors
use the first-in, first-out (FIFO) basis of inventory valuation which
approximates current costs. The use of the LIFO valuation method as compared to
the FIFO method had the effect of decreasing net income by $.04, $.02 and $.09
per share for the years ended 1995, 1994 and 1993, respectively, had the
Company's effective tax rate been applied to changes in income resulting
therefrom, and had no other assumptions been made as to changes in income.
During the fourth quarter of 1994, the Company changed its method of
accounting for LIFO inventories from applying U.S. Bureau of Labor Statistics
indices to internally developed indices. The Company believes the internally
developed indices more accurately measure increases and decreases in the
Company's cost of merchandise and produce a better matching of current costs
and revenues. The effect of the change in the accounting for LIFO inventories
was to increase net income by approximately $330,000 or $.03 per share in the
year ended December 31, 1994. The cumulative effect of such change at the
beginning of 1994 and proforma income amounts for prior years are not
determinable.
NOTE 4 - PROPERTY AND EQUIPMENT
Property and equipment is summarized as follows (in thousands):
1995 1994
------------ ------------
Land ............................................. $ 22,480 $ 17,552
Buildings and improvements ....................... 79,020 60,368
Equipment ........................................ 48,722 40,159
Capital leases ................................... 9,989 9,989
Construction in progress ......................... 7,940 1,350
------------- ------------
168,151 129,418
Less accumulated depreciation .................... (49,193) (43,103)
Less accumulated capital lease amortization ...... (6,553) (6,117)
------------- ------------
Property and equipment, net ...................... $ 112,405 $ 80,198
============ ============
Interest cost capitalized amounted to $1,209,000 in 1995, $85,000 in 1994
and $3,000 in 1993.
19
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Note 5 - Credit Arrangements
Under short-term line-of-credit arrangements with banks, the Company may
borrow up to $104,000,000 upon such terms as the Company and the banks mutually
agree. These arrangements are reviewed annually for renewal.
Committed lines of credit totaled $74,000,000 with customary fees payable
on the unused portion ($17,800,000 unused at December 31, 1995). No fees or
compensating balances are required for the remaining $30,000,000 uncommitted
lines of credit ($17,800,000 unused at December 31, 1995).
At December 31, 1995, the Company owed $68,400,000 in short-term loans to
banks, of which $15,000,000 was classified as long-term debt as described in
Note 7. The weighted average stated interest rate for these borrowings
outstanding at December 31, 1995 and 1994 was 6.1% and 6.3%, respectively. The
Company has interest-rate swap agreements as described in Note 7
covering approximately $16,900,000 of short-term debt.
NOTE 6 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES
The components of accounts payable and accrued expenses are as follows (in
thousands):
1995 1994
-------- -------
Accounts payable, trade ................... $ 13,313 $12,495
Accrued compensation ...................... 7,144 7,043
Taxes other than income taxes ............. 6,547 5,866
Other ..................................... 8,984 7,405
-------- -------
$ 35,988 $32,809
======== =======
NOTE 7 - LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS
Long-term debt and capital lease obligations are summarized as follows (in
thousands):
1995 1994
-------- -------
Unsecured term note (a) ....................... $ 30,000 $ --
7.44% unsecured note payable (b) .............. 15,000 --
7.16% unsecured note payable (c) .............. 30,000 30,000
10.1% unsecured note payable (d) .............. 22,500 27,500
Secured debt (e) .............................. 19,678 22,056
6.3% to 10.5% capital lease obligations,
due through 2016............................. 5,028 5,566
Unsecured notes (f) ........................... 15,000 10,000
-------- -------
137,206 95,122
Less portion classified as current liability .. 7,973 7,958
-------- -------
$129,233 $87,164
======== =======
20
13
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NOTE 7 - LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS (CONTINUED)
(a) The term note is payable in quarterly installments initially of
$250,000 commencing in February 1998 and then $1,000,000
commencing in February 2000. The note matures in November 2006 and
interest is payable quarterly. The note has a floating rate of
interest at LIBOR plus 0.7%
(b) The note is payable in semi-annual installments of $1,250,000
commencing in January 2003 and matures in October 2008. Interest is
payable quarterly.
(c) The note is payable in semi-annual principal payments of $2,143,000
commencing in October 2000 and matures in April 2007. Interest is
payable quarterly.
(d) The note is payable in semi-annual installments of $2,500,000 plus
interest payable quarterly and matures in April 2000.
(e) Secured debt is comprised of various first mortgage notes and first
deeds of trust including some with fixed rates of interest ranging
from 5.7% to 7.9% and some with floating rates of interest ranging
from LIBOR plus 0.5% (note rate of 6.18% at December 31, 1995) to 70%
of prime rate due through 2007. The Company may prepay the
floating-rate notes at any time without penalty. Property and
equipment with a net book value at December 31, 1995 of $31,670,000
is pledged as collateral on secured debt.
(f) The Company has a revolving credit/term loan agreement with a
commercial bank providing for borrowings of $15,000,000 revolving
through 1998. If utilized, this facility would replace a $15,000,000
short-term committed line. Interest is charged at the bank's prime
rate, or LIBOR plus 0.375%, or any fixed rate as offered at that time
acceptable to the Company. The Company may prepay the loan at any
interest payment date without penalty. Under the terms of this
agreement, the Company has the option to refinance short-term notes
and accordingly, $15,000,000 was classified as long-term debt at
December 31, 1995.
The Company's debt agreements require, among other things, that the
Company: (a) meet certain working capital requirements; (b) limit the type and
amount of indebtedness incurred; (c) limit the operating lease rentals; and (d)
grant certain lenders identical security for any liens placed upon the
Company's assets, other than those liens specifically permitted in the loan
agreements. The Company is in compliance with these covenants at December 31,
1995.
The note agreement which governs the 10.1%, 7.16% and 7.44% unsecured
notes payable allows for the issuance of additional notes of up to $15 million
in the aggregate at any time in 1996 if requested by the Company. This
uncommitted "shelf" facility would be funded at prevailing market interest
rates for similar credit-rated borrowers and would mature in no more than
12 years with an average life of 10 years or less.
The Company has entered into interest rate swap agreements to reduce the
impact of changes in interest rates on its bank line-of-credit arrangements and
floating-rate notes payable. At December 31, 1995, the Company had six
outstanding interest rate swap agreements, having a notional amount of
$78,076,000. Two of the agreements effectively fix the average interest rate on
the Company's $30 million floating-rate note at 8.2% through 2006. The
remaining agreements are at rates ranging from 5.29% to 5.95% maturing in 1998,
2000 and 2002. Under the terms of the agreements, the Company makes payments at
fixed rates and receives payments at variable rates which are based on LIBOR
adjusted quarterly. The fair values of these agreements at December 31, 1995,
are approximately $3,400,000.
The aggregate maturities of long-term debt and capital lease obligations
during the five years subsequent to December 31, 1995 are as follows:
1996--$7,973,000; 1997--$8,056,000; 1998--$24,102,000; 1999--$9,817,000;
2000--$11,205,000. Such scheduled maturities assume that the short-term notes
are refinanced under the maximum term available under the related $15,000,000
revolving credit/term loan agreement.
Cash payments for interest were approximately $11,308,000, $8,156,000 and
$7,325,000 in 1995, 1994 and 1993, respectively.
21
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NOTE 8 - INCOME TAXES
Income tax expense (benefit) consists of the following (in thousands):
1995 1994 1993
------ ------ ------
Current:
Federal................................ $5,653 $7,269 $4,721
State ................................. 711 1,170 757
------ ------ ------
6,364 8,439 5,478
------ ------ ------
Deferred:
Federal................................ 787 (607) 444
State ................................. 110 (91) 12
------ ------ ------
897 (698) 456
------ ------ ------
$7,261 $7,741 $5,934
====== ====== ======
Income tax expense differs from the amount computed by applying the
statutory Federal income tax rate. The differences are summarized as
follows (in thousands):
1995 1994 1993
------- ------- ---------
Statutory rates applied to income
before income taxes ................... $ 6,805 $ 7,097 $ 5,376
State income taxes, net of federal
tax benefit............................ 462 761 497
Other.................................... (6) (117) 61
------- ------- ---------
$ 7,261 $ 7,741 $ 5,934
======= ======= =========
Deferred tax assets and liabilities as of December 31, 1995 and 1994
were as follows (in thousands):
1995 1994
------ ------
Deferred tax assets:
Allowance for doubtful accounts ........................... $1,039 $1,628
Retirement and compensation obligations.................... 1,142 1,028
Inventory related ......................................... 82 645
Retrospective and self-insurance accruals.................. 568 593
Capitalized leases ........................................ 448 501
Loss on property write-down ............................... 432 429
Other ..................................................... 243 --
------ ------
Total deferred tax assets 3,954 4,824
------ ------
Deferred tax liabilities:
Net property and equipment ................................ 2,288 2,667
Other ..................................................... 124 108
Gain on involuntary conversion ............................ 390 --
------ ------
Total deferred tax liabilities 2,802 2,775
------ ------
Net deferred tax assets ..................................... $1,152 $2,049
====== ======
22
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NOTE 8 - INCOME TAXES (CONTINUED)
The current federal and state tax provisions do not reflect the tax
savings resulting from deductions associated with the Company's various stock
option plans. These savings were $190,000, $156,000 and $1,331,000 in 1995,
1994 and 1993, respectively, and were credited to stockholders' equity.
The Company made income tax payments of $9,403,000, $5,107,000 and
$5,895,000 in 1995, 1994 and 1993, respectively.
NOTE 9 - STOCKHOLDERS' EQUITY
Common Stock has a preferential dividend rate, while Class A Common Stock
has greater voting rights (including the ability to elect a majority of the
Board of Directors). Class A Common Stock is convertible at the holder's option
at any time into Common Stock on a 1-for-1 basis; Common Stock is not
convertible into Class A Common Stock. There is no present plan for issuance of
Preferred Stock.
NOTE 10 - BENEFIT PLANS
The Company has a defined benefit pension plan covering substantially all
employees. The benefits are based on years of service and the employee's final
average compensation. The Company's funding policy is to contribute annually an
amount which is within the range of the minimum required contribution and the
maximum amount that can be deducted for federal income tax purposes.
Contributions are intended to provide not only for benefits attributed to
service to date but also for those expected to be earned in the future.
The following table sets forth the plan's funded status and amounts
recognized in the Company's balance sheet at December 31 (in thousands):
1995 1994
---------- ---------
Actuarial present value of projected benefit obligations:
Accumulated benefit obligations, including vested benefits
of $19,217 in 1995 and $17,360 in 1994 ................................ $ 20,143 $ 17,989
Increase for projected salary increases .................................. 6,690 4,543
Projected benefit obligations for service rendered to date................ 26,833 22,532
Plan assets at fair value ................................................. 22,421 19,391
---------- ---------
Plan assets less than projected benefit obligations ....................... (4,412) (3,141)
Unrecognized net loss from past experience different
from that assumed and effects of changes in assumptions................ 2,488 2,314
Unrecognized prior service cost ........................................... 1,005 1,127
Unrecognized net asset..................................................... (948) (1,150)
---------- ---------
Accrued pension expense included in the balance sheet...................... $ (1,867) $ (850)
========== =========
Net pension cost included the following components (in thousands):
1995 1994 1993
---------- ----------- --------
Service cost-benefits earned
during the period ................................... $ 1,041 $ 1,130 $ 763
Interest cost on projected benefit obligations ........... 1,903 1,676 1,547
Actual loss (return) on plan assets ...................... (4,293) 1,292 (2,747)
Net amortization and deferral ............................ 2,599 (3,173) 1,133
---------- ---------- --------
Net pension cost ......................................... $ 1,250 $ 925 $ 696
========== ========== ========
23
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NOTE 10 - BENEFIT PLANS (CONTINUED)
The weighted-average discount rates used in determining the actuarial
present value of benefit obligations were 7.5% and 8.5% at December 31, 1995
and 1994, respectively. The annual rate of increase for future compensation was
6.0% for 1995 and 1994. The expected long-term rate of return on plan assets
was 8.5% for 1995, 1994 and 1993.
The plan's assets consist primarily of U.S. Government securities and
listed stocks and bonds. Included in the plan assets at December 31, 1995 were
34,000 shares of the Company's Common Stock and 142,000 shares of the Company's
Class A Common Stock with an aggregate fair value of $2,380,000.
The Company has a non-qualified, non-contributory Supplemental Executive
Retirement Plan (SERP) which covers five retired executive officers. The plan
provides annual supplemental retirement benefits to the executives amounting to
55% of final average earnings less benefits payable from the Company's defined
benefit pension plan and Social Security benefits. Under the plan, which is not
funded, the Company pays benefits directly to covered executives beginning at
their retirement. At December 31, 1995, the projected benefit obligation for
this plan totaled $2,031,000, of which $1,628,000 is included in the
accompanying balance sheet. Pension expense recorded under the SERP amounted to
$204,000, $246,000 and $196,000 for 1995, 1994 and 1993, respectively.
The Company has an employee savings/retirement (401k) plan to which
substantially all employees may contribute. The Company matches employee
contributions to the extent of 50% of the first 2% of earnings and 25% of the
next 4% contributed by participants. The Company expensed approximately
$801,000 in 1995, $744,000 in 1994 and $561,000 in 1993 in matching employer
contributions to this plan.
The Company offers no postretirement benefits other than pensions and no
significant postemployment benefits.
NOTE 11 - STOCK OPTION PLANS
The Stock Option Committee of the Board of Directors serves as
Administrator for the Company's incentive and non-qualified stock option plans.
Options are granted by the Committee under both stock plans to officers and
non-officer employees. In accordance with certain provisions of the
non-qualified plan, options granted to non-employee directors of the Company
are automatic annual grants on a pre-determined date to purchase a specific
number of shares at the fair market value of the shares on such date. As of
December 31, 1995, the maximum number of options which may be granted under
incentive and non-qualified stock option plans were 50,098 and 354,000,
respectively.
The table below summarizes options activity for the past three years under
the Company's stock option plans.
Incentive Stock Non-Qualified
Option Plans Stock Option Plans
------------------ --------------------
Option Average Option Average
Shares Price Shares Price
-------- ------- -------- --------
Outstanding at January 1, 1993 ...... 881,513 $ 6.44 268,500 $ 6.23
Granted ........................... 234,375 12.65 57,000 16.13
Exercised ......................... (778,818) 6.54 (106,000) 6.35
Cancelled or expired .............. (225) 7.00 -- --
-------- ------ -------- -------
Outstanding at December 31, 1993 .... 336,845 10.55 219,500 8.74
Granted ........................... 287,500 14.17 88,000 15.29
Exercised ......................... (68,447) 8.67 (39,000) 6.99
Cancelled or expired .............. (24,698) 12.06 (7,000) 8.45
-------- ------ -------- -------
Outstanding at December 31, 1994 .... 531,200 12.68 261,500 11.22
Granted ........................... 324,750 12.33 89,000 12.65
Exercised ......................... (24,200) 6.46 (76,000) 10.75
Cancelled or expired .............. (137,500) 14.13 (13,000) 5.15
-------- ------ -------- -------
Outstanding at December 31, 1995 .... 694,250 $12.45 261,500 $ 12.14
======== ====== ======== =======
24
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NOTE 11 - STOCK OPTION PLANS (CONTINUED)
Of the options outstanding at December 31, 1995, 930,250 shares were for
Common Stock and 25,500 shares were for Class A Common Stock. All non-qualified
options outstanding were exercisable and 490,414 shares of options under the
incentive plans were exercisable at December 31, 1995.
In addition, the Company had shares available for future purchases under
the Employee Stock Purchase Plan at December 31, 1995. This plan, approved by
the stockholders in 1992, enables the Company to grant substantially all
employees options to purchase up to 750,000 shares of common stock, of which
187,782 shares have been exercised from inception of the plan, at a price equal
to the lesser of (a) 85% of the stock's fair market value at the date of grant,
or (b) 85% of the stock's fair market value at the exercise date. Shares
purchased may not exceed 10% of the employee's annual compensation, as defined,
or $25,000 of common stock at its fair market value (determined at the time
such option is granted) for any one calendar year. Employees pay for the shares
ratably over a period of six months (the purchase period) through payroll
deductions or lump sum payments, and cannot exercise their option to purchase
any of the shares until the conclusion of the purchase period. In the event an
employee elects not to exercise such options, the full amount withheld is
refundable. During 1995, options for 82,346 shares were exercised at an average
price of $9.88 per share. At December 31, 1995, 48,946 options were outstanding
at an average price of $11.58 per share.
NOTE 12 - COMMITMENTS
The Company leases certain property and equipment. Initial lease terms
range from 5 years to 30 years and certain leases contain renewal options
ranging from 1 to 25 years or provide for options to purchase the related
property at fair market value. The leases generally require the Company to pay
all maintenance, property taxes and insurance costs.
At December 31, 1995, aggregate future minimum payments under capital
leases and non-cancelable operating leases with initial or remaining terms in
excess of one year consisted of the following (in thousands):
Capital Operating
Leases Leases
------- --------
1996 ............................................ $ 979 $ 9,775
1997 ............................................ 1,011 9,152
1998 ............................................ 1,002 8,938
1999 ............................................ 797 8,468
2000 ............................................ 637 7,820
Subsequent to 2000 .............................. 3,282 45,738
Less total minimum sublease rentals ............. -- (2,409)
------ --------
Net minimum lease payments ...................... $ 87,482
========
Total minimum lease amounts ..................... 7,708
Amounts representing interest ................... 2,680
------
Present value of future minimum lease payments .. $5,028
======
25
18
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NOTE 12 - COMMITMENTS (CONTINUED)
Rental expense applicable to operating leases consisted of the
following (in thousands):
1995 1994 1993
---------- --------- ----------
Property
Minimum ....................................... $ 10,343 $ 9,477 $ 8,390
Additional rentals based on sales ............. 560 689 508
Sublease income ............................... (952) (858) (753)
---------- --------- ----------
9,951 9,308 8,145
Equipment ...................................... 2,360 1,584 1,235
---------- --------- ----------
$ 12,311 $ 10,892 $ 9,380
========== ========= ==========
At December 31, 1995, the Company had committed to lease certain
properties beginning in 1996 under operating lease agreements. Minimum lease
commitments, including guaranteed residual values, under the leases are expected
to be $31 million for the initial five-year term.
NOTE 13 - SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
The following is a summary of the unaudited quarterly results of
operations for the years ended December 31, 1995 and 1994:
1995 Quarter Ended
---------------------------------------------------------------
March 31 June 30 Sept. 30 Dec. 31
--------- ------- -------- -------
(In thousands, except per share data)
Net sales ................... $ 94,383 $ 88,678 $100,970 $111,439
Gross profit ................ 44,468 41,668 47,663 52,671
Credit service charges ...... 3,063 3,021 3,014 3,278
Income before income taxes .. 4,402 3,382 4,994 6,666
Net income .................. 2,729 2,097 3,095 4,262
Earnings per share .......... .24 .18 .27 .37
1994 Quarter Ended
--------------------------------------------------------------
March 31 June 30 Sept. 30 Dec. 31
-------- ------- -------- -------
(In thousands, except per share data)
Net sales ................... $ 88,016 $ 84,747 $ 94,529 $102,840
Gross profit ................ 41,509 39,832 44,391 49,712
Credit service charges ...... 2,883 2,892 2,902 2,987
Income before income taxes .. 4,398 3,321 4,754 7,806
Net income .................. 2,726 2,060 2,947 4,805
Earnings per share .......... .24 .18 .26 .42(a)
(a) Reflects fourth quarter adjustments including a write-down of
property to fair value which reduced net income by approximately
$680,000 or $.06 per share and the effect of a change in
accounting for LIFO inventories (Note 3) which increased net income
by approximately $330,000 or $.03 per share.
26
19
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REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Board of Directors
Haverty Furniture Companies, Inc.
We have audited the accompanying consolidated balance sheets of Haverty
Furniture Companies, Inc. and subsidiaries as of December 31, 1995 and 1994,
and the related consolidated statements of income, stockholders' equity, and
cash flows for each of the three years in the period ended December 31, 1995.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Haverty Furniture Companies, Inc. and subsidiaries at December 31, 1995 and
1994, and the consolidated results of their operations and their cash flows for
each of the three years in the period ended December 31, 1995, in conformity
with generally accepted accounting principles.
Atlanta, Georgia /s/ Ernst & Young LLP
January 30, 1996
27
20
MARKET PRICES AND DIVIDEND INFORMATION
The Company's two classes of common stock are quoted on The Nasdaq Stock Market
(National Market). The trading symbol for the Common Stock is HAVT and for
Class A Common Stock is HAVTA. Based on the number of holders of record and an
estimate of the number of individual participants represented by security
position listings, there are approximately 4,000 holders of Common Stock and
500 holders of the Class A Common Stock. High and low sales prices reported by
The Nasdaq National Market and dividends for the last two years were (in
dollars):
1995
- ---------------------------------------------------------------------------
Common Stock Class A Common Stock
---------------------------- -----------------------------
Quarter Dividend Dividend
Ended High Low Declared High Low Declared
- ---------------------------------------------------------------------------
March 31 13 1/4 10 3/8 .0750 13 1/2 10 1/2 .0700
June 30 13 9 5/8 .0750 12 3/4 9 1/2 .0700
Sept. 30 13 7/8 9 3/4 .0750 12 1/2 10 3/4 .0700
Dec. 31 15 13 .0750 14 3/4 13 1/2 .0700
1994
- ---------------------------------------------------------------------------
Common Stock Class A Common Stock
---------------------------- -----------------------------
Quarter Dividend Dividend
Ended High Low Declared High Low Declared
- ---------------------------------------------------------------------------
March 31 19 1/4 14 1/4 .0675 19 1/4 14 1/4 .0625
June 30 16 12 .0675 15 3/4 11 3/4 .0625
Sept. 30 14 1/2 10 3/4 .0700 15 11 1/4 .0650
Dec. 31 14 10 7/8 .0700 14 1/4 10 3/4 .0650
28