Havertys Reports Earnings for Second Quarter 2020, Third Quarter Cash Dividend and Resumption of Stock Repurchase Program

Rhea-AI Summary

HAVERTYS (NYSE: HVT, HVT-A) reported its Q2 2020 results, revealing a net income of $13.6 million, or $0.72 per share, up from $6.0 million, or $0.29 per share, in Q2 2019. Despite this, sales declined to $110 million from $191.9 million year-over-year. The company increased its Q3 dividend by 25% and resumed its stock repurchase program. However, challenges remain with inventory stress and vendor workforce issues. Future growth opportunities are emphasized with store openings planned in Dallas/Ft. Worth and Myrtle Beach.

Positive

• Net income of $13.6 million in Q2 2020, compared to $6.0 million in Q2 2019.
• Increased Q3 dividend by 25%, restoring it to pre-closure levels.
• Resumed stock repurchase program with approximately $29.7 million available.
• Written business up 13.9% in the last two months of the quarter.

Negative

• Sales decreased to $110 million from $191.9 million YoY.
• Adjusted EPS of ($0.52), accounting for $1.24 from sale-leaseback.
• Inventory position stressed with potential supply issues.
• Challenges in staffing and delivery capacity due to workforce issues.

ATLANTA, Aug. 10, 2020 (GLOBE NEWSWIRE) -- HAVERTYS (NYSE: HVT and HVT.A) reported today its operating results for the 2020 second quarter ended June 30, 2020.

Financial Highlights

Quarter ended June 30, 2020 Compared to Same Period of 2019

• EPS of $0.72 per share in 2020 compared to $0.29 in 2019.
• Adjusted EPS of ($0.52) in 2020 excludes $1.24 for gain on sale-leaseback.
• As previously reported, sales were $110.0 million for 2020 compared with $191.9 million for 2019.

Clarence H. Smith, chairman, president and CEO, said, “The second quarter was like no other in our country’s or Havertys’ history, but optimism for our future and the opportunities for growth endure. We reopened our stores in May with team members ready to serve customers eager to refresh their homes. Our written business for the last two months of the quarter was up 13.9% and written comparable store business was up 17.5% compared to the same periods in 2019. Our customers want their homes to reflect their style and be a comfortable, happy place. Our wide merchandise selection, custom options, and free design service assists them in that endeavor.

We are analyzing our personnel needs and are currently challenged to accelerate staffing and increase our delivery capacity. Many of our vendor partners are also facing workforce issues as they restart their operations and seek to meet product demand. Our inventory position in certain products could be stressed during the coming months as availability lags demand.

Given the sustained pace of our business since reopening and our liquidity position, the board approved important shareholder actions related to dividends and the stock repurchase program. The per share dividend for the third quarter was increased 25%, restoring it to the first quarter’s amount, and the resumption of the stock repurchase program was approved. The board will continue to evaluate returning value to stockholders given the ongoing uncertainty caused by COVID-19.
  
The opening of our new store in the Dallas/Ft. Worth, TX market is on schedule for late August and as previously planned, we closed a store in that market in July. We have also set a new opening date in the first quarter of 2021 for entering the Myrtle Beach, SC market. Our expected capital expenditures for 2020 are $9.2 million as we invest in stores and technology.

The commitment of our team members and strong balance sheet give us the flexibility to shift our focus and resources to meet changing circumstances, benefit from new opportunities, and capitalize on our competitive advantages.

Financial Summary

Quarter ended June 30, 2020 Compared to Same Period of 2019

• Stores were closed March 19 and 103 stores reopened on May 1 and the remaining 17 by June 20. Deliveries were halted on March 21 and restarted on May 5 with less capacity.
• Gross profit margins increased 20 basis points to 54.2% from 54.0%.
• SG&A expenses reflect the closure of our stores in April and the measures taken as part of our business continuity plan.
  • Reduction in salaries and wages of $9.9 million associated with 3,033 furloughed team members for the month of April 2020.
  • Severance costs of $1.7 million for approximately 35% reduction in workforce effective April 30, 2020.
  • Reduction in advertising spend of $3.5 million in 2020.

• As previously reported, completed a sale-leaseback transaction of three warehouse facilities in May. This transaction generated $69.5 million in net proceeds and a gain of $31.6 million.
• Repayment of $43.8 million of borrowings under credit facility. No amounts outstanding at June 30, 2020.
• Reinstatement of salaries, 401(k) benefits, and vendor terms.
• We are not providing guidance on our gross margin and SG&A expense expectations  for the remainder of 2020 at this time given the uncertainty caused by the pandemic. 

Dividends and Stock Repurchase Program

The company also reported today that, on August 7, 2020, its board of directors declared a cash dividend to be paid on the outstanding shares of the company's two classes of common stock at a rate of $0.20 per share on the common stock and $0.19 per share on the Class A common stock. This restores the rates to the amounts declared prior to the store closures. The dividend is payable on Wednesday, September 9, 2020, to stockholders of record at the close of business on Monday, August 24, 2020. Havertys has paid a cash dividend in each year since 1935.

The board also approved resumption of the company’s stock repurchase program which was halted in March. The balance of the current authorization for repurchases is approximately $29.7 million. Shares may be repurchased, at the company’s discretion, from time-to-time in the open market or in privately negotiated transactions.

HAVERTY FURNITURE COMPANIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share data – Unaudited)

			Three Months Ended June 30,							Six Months Ended June 30,
			2020			2019				2020			2019
Net sales			$	109,968		$	191,893			$	289,400		$	379,134
Cost of goods sold				50,322			88,336				130,201			172,494
	Gross profit			59,646			103,557				159,199			206,640
Credit service charges				19			19				38			41
	Gross profit and other revenue			59,665			103,576				159,237			206,681
Expenses:
	Selling, general and administrative			72,649			95,784				170,184			194,663
	Provision for doubtful accounts			3			20				36			23
	Other (income) expense, net			(31,812	)		(126	)			(31,895	)		(280	)
Total expenses				40,840			95,678				138,325			194,406
Income before interest and income taxes				18,825			7,898				20,912			12,275
Interest (income) expense, net				200			(339	)			(13	)		(688	)
Income before income taxes				18,625			8,237				20,925			12,963
Income tax expense				4,985			2,191				5,466			3,295
	Net income		$	13,640		$	6,046			$	15,459			9,668
Diluted earnings per share:
	Common Stock		$	0.72		$	0.29			$	0.81		$	0.47
	Class A Common Stock		$	0.69		$	0.27			$	0.78		$	0.44
Diluted weighted average shares outstanding:
	Common Stock			18,985			20,542				19,126			20,723
	Class A Common Stock			1,532			1,621				1,532			1,689
Cash dividends per share:
	Common Stock		$	0.15		$	0.18			$	0.35		$	0.36
	Class A Common Stock		$	0.14		$	0.17			$	0.33		$	0.34

HAVERTY FURNITURE COMPANIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands - Unaudited)

				June 30, 2020			December 31, 2019			June 30, 2019
				(Unaudited)						(Unaudited)
ASSETS
Current assets
	Cash and cash equivalents			$	151,055		$	75,739		$	56,094
	Restricted cash and cash equivalents				6,709			6,663			6,591
	Accounts receivable, net				1,141			1,527			1,578
	Inventories				104,840			104,817			109,213
	Prepaid expenses				10,302			7,652			9,876
	Other current assets				8,960			8,125			10,489
		Total current assets			283,007			204,523			193,841
Accounts receivable, long-term, net					128			195			221
Property and equipment, net					112,253			156,534			157,551
Right of-use lease assets					234,046			175,474			187,178
Deferred income taxes					11,640			13,198			12,175
Other assets					10,035			10,148			9,810
		Total assets		$	651,109		$	560,072		$	560,776
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
	Accounts payable			$	22,803		$	27,830		$	20,910
	Customer deposits				57,538			30,121			29,098
	Accrued liabilities				45,733			39,654			33,318
	Current lease liabilities				31,289			29,411			28,768
		Total current liabilities			157,363			127,016			112,094
Noncurrent lease liabilities					206,918			149,594			158,782
Other liabilities					22,450			22,959			22,640
		Total liabilities			386,731			299,569			293,516
Stockholders’ equity					264,378			260,503			267,260
		Total liabilities and stockholders’ equity		$	651,109		$	560,072		$	560,776

HAVERTY FURNITURE COMPANIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands – Unaudited)

					Six Months Ended June 30,
					2020			2019
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net income				$	15,459		$	9,668
	Adjustments to reconcile net income to net  cash provided by operating activities:
		Depreciation and amortization				9,791			10,276
		Share-based compensation expense				2,037			1,951
		Gain from sale of land, property and equipment				(31,607	)		(4	)
		Other				2,223			(1,282	)
	Changes in operating assets and liabilities:
		Inventories				(23	)		(3,373	)
		Customer deposits				27,417			4,633
		Operating lease assets and liabilities, net				629			2,863
		Other assets and liabilities				(3,609	)		(5,431	)
		Accounts payable and accrued liabilities				2,149			(4,481	)
			Net cash provided by operating activities			24,466			14,840
CASH FLOWS FROM INVESTING ACTIVITIES:
	Capital expenditures					(4,331	)		(7,768	)
	Proceeds from sale of property and equipment					69,468			2,260
			Net cash provided by (used in) investing activities			65,137			(5,508	)
CASH FLOWS FROM FINANCING ACTIVITIES:
	Proceeds from borrowing under revolving credit facility					43,800			—
	Payments of borrowings under revolving credit facility					(43,800	)		—
			Net change in borrowings under revolving credit facility			—			—
	Dividends paid					(6,558	)		(7,285	)
	Common stock repurchased					(6,810	)		(17,843	)
	Other					(873	)		(1,328	)
			Net cash used in financing activities			(14,241	)		(26,456	)
Increase (decrease) in cash, cash equivalents and restricted cash during the period						75,362			(17,124	)
Cash, cash equivalents and restricted cash at beginning of period						82,402			79,809
Cash, cash equivalents and restricted cash at end of period					$	157,764		$	62,685

Adjusted EPS
Adjusted diluted earnings per share (“Adjusted EPS”) is considered a non-GAAP financial measure under the rules because it excludes certain amounts which are included when diluted earnings per share (“EPS”) are calculated in accordance with U.S. GAAP (EPS), the most directly comparable financial measure calculated in accordance with U.S. GAAP. Management believes that Adjusted EPS is a meaningful measure to share with investors because it best allows comparison of the performance for the comparable period. In addition, Adjusted EPS affords investors a view of what management considers Havertys’ earnings performance and the ability to make a more informed assessment of such earnings performance.

We have calculated Adjusted EPS for the three months ended June 30, 2020 by adjusting EPS for a sale-leaseback transaction. There were no such adjustments in the comparable period of 2019.

					Q2 2020
Diluted earnings per share:
	Reported EPS				$	0.72
	Adjustments:
		Gain from sale-leaseback transaction: pre-tax				1.66
		Tax impact of gain(1)				(0.42	)
			Net adjustment			1.24
	Adjusted EPS				$	(0.52	)

⁽¹⁾ Calculated based on nature of item and rates applied.

Conference Call Information
The company invites interested parties to listen to the live audiocast of the conference call on August 11, 2020 at 10:00 a.m. ET at its website, havertys.com under the investor relations section. If you cannot listen live, a replay will be available on the day of the conference call at the website or via telephone at approximately 1:00 p.m. ET through August 21, 2020. The number to access the telephone playback is 1-888-203-1112 (access code: 7729578).

About Havertys  
Havertys (NYSE: HVT and HVT.A), established in 1885, is a full-service home furnishings retailer with 119 showrooms in 16 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 havertys.com.  

Safe Harbor  
This press release contains, and the conference call may contain forward-looking statements subject to the safe harbor provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Act of 1934. These forward-looking statements are subject to risks and uncertainties and change based on various important factors, many of which are beyond our control.

All statements in the future tense and all statements accompanied by words such as “expect,” “likely,” “outlook,” “forecast,” “preliminary,” “would,” “could,” “should,” “position,” “will,” “project,” “intend,” “plan,” “on track,” “anticipate,” “to come,” “may,” “possible,” “assume,” and variations of such words and similar expressions are intended to identify such forward-looking statements. These forward-looking statements include, without limitation, our expected ability to operate and protect our team members and customers during the COVID-19 pandemic, the execution and effect of our cost savings initiatives, the use of proceeds from our sale-leaseback transaction, our expectations for selling square footage and capital expenditures for 2020, our liquidity position to continue to operate during these highly uncertain times, and our efforts and initiatives to help us emerge from the pandemic well-positioned.

We caution that our forward-looking statements involve risks and uncertainties, and while we believe that our expectations for the future are reasonable in view of currently available information you are cautioned not to place undue reliance on our forward-looking statements and they should not be relied upon as a prediction of actual results. Factors that could cause actual results to differ materially from those expressed or implied in any forward-looking statements include, but are not limited to: the extent and duration of the disruption to our business operations caused by the health crisis associated with the COVID-19 pandemic, including the effects on the financial health of our business partners and customers, on supply chains and our suppliers, and on access to capital and liquidity provided by the financial and capital markets; our ability to maintain compliance with debt covenants and amend such credit facilities as necessary; disruptions in our suppliers' operations, including from the impact of COVID-19, including potential problems with inventory availability and the potential result of the volatility or higher cost of product and international freight due to the high demand of products and low supply for an unpredictable period of time; disruptions in our third-party producers’ operations in foreign countries; changes in national and international legislation or government regulations or policies, including changes to import tariffs and the unpredictability of such changes; failure of vendors to meet our quality control standards or to react to changes in legislative or regulatory frameworks; disruptions in our distribution centers; changes in general economic conditions, including unemployment, inflation (including the impact of tariffs); labor shortages and the Company's ability to successfully attract and retain employees in the current labor market; uncertain credit markets and other macroeconomic conditions; competitive product, service and pricing pressures; failure or weakness in our disclosure controls and procedures and internal controls over financial reporting; disruptions caused by a failure or breach of the Company's information systems and information technology infrastructure, as well as other risks and uncertainties discussed in the Company's Annual Report on Form 10-K for 2019 (all of which risks may be amplified by the COVID-19 pandemic) and Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2020 and from time to time in the Company's subsequent filings with the SEC.

Forward-looking statements describe our expectations only as of the date they are made, and the Company undertakes no duty to update its forward-looking statements except as required by law. You are advised, however, to review any further disclosures we make on related subjects in our subsequent Forms 10-K, 10-Q, 8-K and other reports filed with the SEC. 

SOURCE:  Havertys 

 

FAQ

What are the earnings results for HAVERTYS in Q2 2020?

HAVERTYS reported a net income of $13.6 million or $0.72 per share in Q2 2020.

How did HAVERTYS' sales perform in Q2 2020 compared to 2019?

Sales decreased to $110 million in Q2 2020 from $191.9 million in Q2 2019.

What dividend changes were announced by HAVERTYS for Q3 2020?

HAVERTYS increased its Q3 dividend by 25%, restoring it to pre-closure levels.

Are there any significant growth plans for HAVERTYS in 2021?

HAVERTYS plans to open new stores in Dallas/Ft. Worth and Myrtle Beach in 2021.