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| 8-K - HAVERTY FURNITURE COMPANIES INC | hvt8k22812.htm |
EXHIBIT 99.1
Havertys Reports Results for Fourth Quarter and Full Year 2011
ATLANTA, GEORGIA, February 27, 2012 -- HAVERTY FURNITURE COMPANIES, INC. (NYSE: HVT and HVT.A) reports fourth quarter and full year 2011 operating results. The earnings per share for the fourth quarter of 2011 were $0.76 compared to $0.25 for the same period of 2010. The earnings per share for the full year 2011 were $0.70 compared to $0.38 for 2010. The results for both periods of 2011 included a favorable, non-cash special item of $14.1 million for the release of almost all of the valuation allowance against the company’s net deferred tax assets.
As previously reported, net sales for the fourth quarter were 3.8% higher than in the same period of 2010 and 0.1% ahead for the full year 2011. Written sales for the fourth quarter of 2011 increased 1.5% over the same quarter of 2010.
Clarence H. Smith, president and chief executive officer, said, “We are pleased to report a strong fourth quarter resulting in a profitable year for Havertys. Our pre-tax profits for the fourth quarter of 2011 were $6.1 million compared to $5.7 million in 2010 which had included $2.0 million of other income. The initiatives we have begun with our store improvements, renewed focus on higher price point products and emphasizing Havertys’ complete array of fashionable quality merchandise helped drive our increase in fourth quarter sales. For the year we produced an improvement in gross profit, yet virtually flat sales growth did not allow us to leverage our increased expenditures in advertising, compensation and group medical insurance or the rising costs of fuel. We managed our cash flow and working capital requirements and did not use our credit facility, ending December 31, 2011 with $49.6 million in cash, no funded debt and a total debt to capital ratio of 4.7%.
The appeal of our higher price point products resulted in a higher average ticket for 2011. We expanded our very successful upholstery program, “Custom Choice” to include a broader mix of options in fabrics, colors and configurations. This program provides exceptional value to our customer and differentiates us from many competitors. Bedding sales continue to be a solid contributor to our business and were almost 12% of our total sales in 2011. Our latest bedroom and casual dining room products have been well received by consumers but the family room continues to be the focus of many of our customers.
The business environment for home furnishings continues to be difficult. Our merchandising and store improvements are focused on serving our customers better, distinguishing ourselves in the marketplace and giving Havertys an edge over our competitors. We are implementing new ways to serve our customer and bringing out exciting new products during 2012 aimed at increasing our sales and strengthening our brand.
Financial Highlights
Fourth Quarter 2011 Compared to Fourth Quarter 2010
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Net sales were up at $168.3 million and comparable store sales increased 3.5%.
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Gross profit margins were 52.3% as a percent of sales compared to 51.0%. The increase was slightly better than expected and is due primarily to our merchandise pricing and sales mix. The increase in the LIFO reserve was negligible in 2011 compared to the negative impact of a $0.5 million (0.3% of sales) increase in the reserve in 2010.
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NEWS RELEASE – FEBRUARY 27, 2012 Page 2
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Selling, general and administrative costs increased $2.7 million and declined 0.2% of sales. Our expenditures on advertising and marketing increased in 2011 by approximately $1.0 million as we engaged a new agency and incurred additional advertising expense.
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Occupancy costs were higher due to expenditures related to our “Bright Inspirations” store refreshing project, increased depreciation expense and the costs of the new store opened during the quarter.
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Other income in 2010 included $1.5 million in gains from the sale of a warehouse closed in a prior year.
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Income tax expense includes a decrease in our valuation allowance on deferred tax assets of $14.1 million, resulting in an increase of $0.64 in per share earnings compared to the prior period decrease in the allowance of $2.1 million, resulting in an increase of $0.09 in per share earnings.
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Our retail store count at December 31, 2011 was 119 versus 118 at the end of 2010.
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Twelve Months ended December 31, 2011 Compared to Same Period of 2010
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Net sales were relatively flat at $620.9 million and comparable store sales increased 0.3%.
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Gross profit margins increased by 0.3% to 51.7% as a percent of sales due to merchandising and the positive impact of a $0.3 million (0.05% of sales) increase in our LIFO reserve compared to a $1.5 million (0.2% of sales) increase in the reserve in 2010.
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Selling, general and administrative costs increased $4.0 million or 0.6% of sales for 2011.
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Income tax expense includes a reduction in our valuation allowance on deferred tax assets of $14.1 million, resulting in an increase of $0.64 in per share earnings compared to the prior period decrease of $3.1 million, resulting in an increase of $0.14 in per share earnings.
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Expectations and Other
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Sales for 2011 reverted closer to their historical quarterly pattern. Total written business for the first quarter to date of 2012 is up approximately 5.0% over the same period last year.
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We anticipate that merchandise costs for 2012 will be pressured by labor rates and increasing freight costs. However, we expect continued soft demand and over capacity will help moderate vendor increases and provide sources for production of substitute merchandise to meet our pricing needs. We believe our annual gross profit margin for 2012 will be similar to the annual 2011 level.
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SG&A expenses in 2012 should be leveraged at a higher rate given our expected sales growth. Our expanded retail square footage will increase our fixed costs and, together with other budgeted increases, we expect our fixed/discretionary costs will be approximately $213 to $214 million, or approximately a 3% increase in those same costs compared to 2011. Variable SG&A expenses should continue to be in the 17.0% to 17.5% range as a percent of sales for 2012.
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Our effective tax rate for 2012 is expected to be 38.3%.
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Planned capital expenditures for 2012 are $21.0 million. We expect to open two stores in new markets; in the Towson area of metro Baltimore and in Midland, Texas. Our plans also include a new store serving the Dallas market in Allen, Texas and the relocation of a store in metro Atlanta. These are all scheduled to open in the second half of 2012 and will result in a 2.4% increase in total retail square footage over 2011.
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NEWS RELEASE – FEBRUARY 27, 2012 Page 3
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HAVERTY FURNITURE COMPANIES, INC.
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
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(In Thousands, except per share data – Unaudited)
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Three Months Ended
December 31,
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Year Ended
December 31,
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2011
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2010
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2011
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2010
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Net sales
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$ | 168,259 | $ | 162,083 | $ | 620,903 | $ | 620,331 | ||||||||
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Cost of goods sold
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80,338 | 79,435 | 300,187 | 301,564 | ||||||||||||
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Gross profit
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87,921 | 82,648 | 320,716 | 318,767 | ||||||||||||
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Credit service charges
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98 | 152 | 460 | 717 | ||||||||||||
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Gross profit and other revenue
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88,019 | 82,800 | 321,176 | 319,484 | ||||||||||||
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Expenses:
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Selling, general and administrative
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81,583 | 78,872 | 315,865 | 311,897 | ||||||||||||
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Interest, net
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160 | 199 | 737 | 815 | ||||||||||||
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Provision for doubtful accounts
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43 | 103 | 167 | 380 | ||||||||||||
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Other income, net
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172 | (2,026 | ) | (196 | ) | (2,281 | ) | |||||||||
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81,958 | 77,148 | 316,573 | 310,811 | ||||||||||||
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Income before income taxes
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6,061 | 5,652 | 4,603 | 8,673 | ||||||||||||
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Income tax expense (benefit)
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(10,897 | ) | 143 | (10,860 | ) | 229 | ||||||||||
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Net income
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$ | 16,958 | $ | 5,509 | $ | 15,463 | $ | 8,444 | ||||||||
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Basic earnings per share:
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Common Stock
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$ | 0.78 | $ | 0.25 | $ | 0.71 | $ | 0.39 | ||||||||
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Class A Common Stock
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$ | 0.74 | $ | 0.24 | $ | 0.67 | $ | 0.37 | ||||||||
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Diluted earnings per share:
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Common Stock
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$ | 0.76 | $ | 0.25 | $ | 0.70 | $ | 0.38 | ||||||||
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Class A Common Stock
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$ | 0.73 | $ | 0.24 | $ | 0.67 | $ | 0.36 | ||||||||
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Basic weighted average shares outstanding:
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Common Stock
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18,731 | 18,500 | 18,633 | 18,156 | ||||||||||||
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Class A Common Stock
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3,218 | 3,343 | 3,287 | 3,563 | ||||||||||||
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Diluted weighted average shares outstanding:
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Common Stock
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22,213 | 22,062 | 22,153 | 21,970 | ||||||||||||
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Class A Common Stock
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3,218 | 3,343 | 3,287 | 3,563 | ||||||||||||
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Cash dividend per common share:
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Common Stock
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$ | 0.1200 | $ | 0.1000 | $ | 0.1200 | $ | 0.1000 | ||||||||
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Class A Common Stock
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$ | 0.1125 | $ | 0.0950 | $ | 0.1125 | $ | 0.0950 | ||||||||
NEWS RELEASE – FEBRUARY 27, 2012 Page 4
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HAVERTY FURNITURE COMPANIES, INC.
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CONDENSED CONSOLIDATED BALANCE SHEETS
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(In Thousands - Unaudited)
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December 31,
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2011
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2010
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ASSETS
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Current assets
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Cash and cash equivalents
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$ | 49,585 | $ | 58,045 | ||||
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Restricted cash and cash equivalents
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6,813 | — | ||||||
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Accounts receivable
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11,451 | 13,778 | ||||||
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Inventories
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93,713 | 91,938 | ||||||
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Prepaid expenses
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11,195 | 7,685 | ||||||
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Other current assets
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4,918 | 5,489 | ||||||
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Total current assets
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177,675 | 176,935 | ||||||
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Accounts receivable, long-term
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449 | 588 | ||||||
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Property and equipment
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179,333 | 175,511 | ||||||
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Deferred income taxes
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22,681 | 11,524 | ||||||
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Other assets
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4,962 | 5,681 | ||||||
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Total assets
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$ | 385,100 | 370,239 | |||||
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LIABILITIES AND STOCKHOLDERS’ EQUITY
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Current liabilities
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Accounts payable
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$ | 18,233 | $ | 18,088 | ||||
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Customer deposits
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14,572 | 13,585 | ||||||
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Accrued liabilities
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32,171 | 31,357 | ||||||
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Deferred income taxes
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6,635 | 7,052 | ||||||
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Current portion of lease obligations
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762 | 525 | ||||||
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Total current liabilities
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72,373 | 70,607 | ||||||
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Lease obligations, less current portion
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12,284 | 8,574 | ||||||
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Other liabilities
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37,774 | 37,876 | ||||||
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Total liabilities
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122,431 | 117,057 | ||||||
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Stockholders’ equity
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262,669 | 253,182 | ||||||
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$ | 385,100 | $ | 370,239 | ||||
NEWS RELEASE – FEBRUARY 27, 2012 Page 5
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HAVERTY FURNITURE COMPANIES, INC.
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
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(In Thousands – Unaudited)
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Year Ended December 31,
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2011
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2010
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2009
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CASH FLOW FROM OPERATING ACTIVITIES
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Net income (loss)
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$ | 15,463 | $ | 8,444 | $ | (4,179 | ) | |||||
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Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
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Depreciation and amortization
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18,242 | 16,859 | 19,346 | |||||||||
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Deferred income taxes
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(7,947 | ) | (2,953 | ) | (2,200 | ) | ||||||
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Share-based compensation expense
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2,060 | 1,716 | 1,668 | |||||||||
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Provision for doubtful accounts
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167 | 380 | 978 | |||||||||
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Net gain on sale of property and equipment
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94 | (1,653 | ) | (21 | ) | |||||||
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Other
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237 | (628 | ) | 707 | ||||||||
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Changes in operating assets and liabilities:
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Accounts receivable
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2,299 | 1,397 | 9,263 | |||||||||
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Inventories
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(1,775 | ) | 1,363 | 10,442 | ||||||||
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Customer deposits
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987 | (417 | ) | 1,222 | ||||||||
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Other assets and liabilities
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(11,714 | ) | (462 | ) | 3,620 | |||||||
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Accounts payable and accrued liabilities
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959 | 155 | (2,351 | ) | ||||||||
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Net cash provided by operating activities
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19,072 | 24,201 | 38,495 | |||||||||
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CASH FLOWS FROM INVESTING ACTIVITIES
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Capital expenditures
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(17,566 | ) | (14,053 | ) | (3,259 | ) | ||||||
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Restricted cash and cash equivalents
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(6,813 | ) | — | — | ||||||||
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Proceeds from sale-leaseback transaction
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— | — | 6,625 | |||||||||
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Proceeds from sale of property and equipment
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157 | 2,856 | 31 | |||||||||
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Other investing activities
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— | — | 43 | |||||||||
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Net cash provided by (used in) investing activities
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(24,222 | ) | (11,197 | ) | 3,440 | |||||||
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CASH FLOWS FROM FINANCING ACTIVITIES
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Proceeds from borrowing under revolving credit facilities
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— | — | 5,800 | |||||||||
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Payments of borrowings under revolving credit facilities
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— | — | (5,800 | ) | ||||||||
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Net change in borrowings under revolving credit facilities
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— | — | — | |||||||||
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Payments on long-term debt and lease obligations
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(588 | ) | (385 | ) | (311 | ) | ||||||
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Proceeds from exercise of stock options
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285 | 3,319 | 92 | |||||||||
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Dividends paid
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(2,609 | ) | (2,168 | ) | (473 | ) | ||||||
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Other financing activities
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(398 | ) | (191 | ) | (474 | ) | ||||||
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Net cash provided by (used in) financing activities
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(3,310 | ) | 575 | (1,166 | ) | |||||||
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Increase (decrease) in cash and cash equivalents
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(8,460 | ) | 13,579 | 40,769 | ||||||||
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Cash and cash equivalent at beginning of year
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58,045 | 44,466 | 3,697 | |||||||||
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Cash and cash equivalent at end of year
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$ | 49,585 | $ | 58,045 | $ | 44,466 | ||||||
NEWS RELEASE – FEBRUARY 27, 2012 Page 6
The following table summarizes the impact of various items on our tax expense (in thousands):
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2011
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2010
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Statutory rates applied to income (loss) before income taxes
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$ | 1,565 | $ | 3,036 | ||||
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State income taxes, net of Federal tax benefit
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143 | 302 | ||||||
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Net non-deductible permanent differences
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33 | (25 | ) | |||||
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1,741 | 3,313 | ||||||
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Change in deferred tax asset valuation allowance
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(14,121 | ) | (3,133 | ) | ||||
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Change in state credits
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717 | — | ||||||
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Change for net operating loss carrybacks, amended returns and related receivables
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422 | — | ||||||
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Change in deferred tax rate
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274 | — | ||||||
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Change in reserve for uncertain tax positions
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42 | 16 | ||||||
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Other
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65 | 33 | ||||||
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(12,601 | ) | (3,084 | ) | ||||
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Income tax expense (benefit)
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$ | (10,860 | ) | $ | 229 | |||
About Havertys
Havertys, established in 1885, is a full-service home furnishings retailer with 119 showrooms in 17 states in the Southern and Midwestern regions providing its customers with a wide selection of quality merchandise in middle to upper-middle price ranges. Additional information is available on the company’s website at www.havertys.com
News releases include forward-looking statements, which are subject to risks and uncertainties. Factors that might cause actual results to differ materially from future results expressed or implied by such forward-looking statements include, but are not limited to, general economic conditions, the consumer spending environment for large ticket items, competition in the retail furniture industry and other uncertainties detailed from time to time in the company’s reports filed with the SEC.
Conference Call Information
The company will sponsor a conference call Tuesday, February 28, 2012 at 10:00 a.m. Eastern Standard Time to review its results. Listen-only access to the call is available via the web at www.havertys.com (For Investors) and at www.streetevents.com (Individual Investor Center), both live and for a limited time, on a replay basis.
Contact:
Haverty Furniture Companies, Inc., 404-443-2900
Dennis L. Fink
EVP & CFO
Jenny Hill Parker
SVP, Finance, Secretary and Treasurer
SOURCE: Haverty Furniture Companies, Inc.