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| 8-K - HAVERTY FURNITURE COMPANIES INC | hvt8k110117.htm |
EXHIBIT 99.1
Havertys Reports Earnings for Third Quarter 2017
Atlanta, Georgia, October 31, 2017 – HAVERTYS (NYSE: HVT and HVT.A) reports earnings per share of $0.28 for the third quarter of 2017, compared to $0.34 for the third quarter in 2016. The earnings per share for the nine months ended September 30, 2017 is $0.84, compared to $0.79 for the same period of 2016.
Clarence H. Smith, chairman, president and chief executive officer, said, "The third quarter was a challenging period for Havertys as well as others in our industry. Our earnings reflect the previously released softer sales results that were impacted by Hurricane Irma. We achieved increased profit margins, with pricing discipline, quality control, and operational focus, even as ocean freight rates increased. The lower sales results made it difficult to leverage fixed costs and discretionary expenses which were well controlled.
"We look forward to the remainder of 2017 and the seasonally strongest sales events of the year. We remain passionate about serving the on-trend furniture customer and confident in our ability to innovate and grow our business, despite strains from the current housing and competitive landscape.
"The expansion of our western distribution facility in Coppell, Texas began in September and, in mid-October, we opened a replacement store in the heart of the best retail shopping area in Columbia, South Carolina. These investments are part of our strategic growth and store rationalization plan. We continue to generate strong cash flow and in August increased the quarterly dividend 25% to our common stockholders. We remain committed to improving our business, maintaining strong cash flow, and returning value to our stockholders."
Financial Highlights
Third Quarter 2017 Compared to Third Quarter 2016
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·
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As previously announced, net sales decreased 1.9% to $207.6 million. Comparable store sales were down 2.9%.
|
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·
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Total written sales were down 3.5% and written comparable store sales decreased 4.2%. During September 2017, 55 stores were closed for one or more days due to Hurricane Irma. The negative impact on third quarter total written sales and written comparable store sales because of these closures is estimated at 1.2%.
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·
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Hurricane Irma caused only minor property damage but caused us to halt deliveries and close two distribution centers and our corporate offices.
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·
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Average written ticket was up 0.5% and custom upholstery written business increased 2.6%.
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·
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Gross profit margins increased 20 basis points to 53.9%. Execution on pricing and product mix and reduced product markdowns offset the higher freight and negative LIFO impact. There was a $0.5 million increase in the LIFO reserve in 2017 versus a $0.7 million decrease in 2016, a negative change of $1.2 million or 59 basis points.
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NEWS RELEASE – OCTOBER 31, 2017
PAGE 2
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·
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SG&A costs as a percent of sales were 49.2% in 2017 and 48.1% in 2016. Total SG&A dollars was relatively flat for the periods. The planned increases in advertising and marketing of $2.1 million and higher occupancy costs of $1.0 million due to greater depreciation and other store costs in 2017 were offset by $1.4 million lower administrative expenses for incentive compensation and health benefit costs and reduced warehouse and delivery expenses of $1.1 million.
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·
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Other income includes a $0.4 million gain from insurance recovery related to our Wichita, Kansas and Lubbock, Texas locations in 2017 and $0.5 million for Lubbock in 2016.
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Nine Months ended September 30, 2017 Compared to Same Period of 2016
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·
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Net sales increased 0.7% to $604.9 million. Comparable store sales were down 0.6%.
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·
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Average written ticket increased 2.0% and custom upholstery written business was up 4.0%.
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·
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Gross profit margins were 54.3% versus 53.6% as a percent of sales. The LIFO reserve year-over-year negative change was $1.3 million or 21 basis points.
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·
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SG&A costs as a percent of sales were 49.5% for 2017 versus 49.1% for 2016. Total SG&A dollars increased $4.5 million primarily due to rising occupancy costs of $2.9 million and greater advertising and marketing spending of $2.0 million partly offset by a $1.0 million reduction in administrative costs.
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·
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Other income includes a $1.5 million gain from insurance recovery in 2017 and $2.5 million in 2016.
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Expectations and Other
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·
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Total written sales for the fourth quarter to date of 2017 are up approximately 0.4% over the same period last year and written comparable store sales are down 0.7%. Total delivered sales for the fourth quarter to date of 2017 are down 2.9% and comparable store sales decreased 3.7% over the same period last year.
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·
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We expect that gross profit margins for the full year 2017 will be approximately 54.2%.
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·
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Our estimate for fixed and discretionary type SG&A expenses for 2017 is $257.0 million compared to $249.9 million for these same costs in 2016. This is a change from our previous estimate of $259.0 primarily from reductions in group medical insurance and incentive compensation. The variable type costs within SG&A for the full year of 2017 are expected to be 18.2% percent of sales, the same rate in 2016.
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·
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We opened a new store in Columbia, South Carolina in mid-October and closed a location in Birmingham, Alabama.
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·
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We expect to increase standard selling square footage approximately 0.3% in 2017. Total capital expenditures are estimated to be approximately $28.0 million in 2017 and $18.0 million in 2018.
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NEWS RELEASE – OCTOBER 31, 2017
PAGE 3
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HAVERTY FURNITURE COMPANIES, INC.
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CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
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(In thousands, except per share data – Unaudited)
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Three Months Ended
September 30,
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Nine Months Ended
September 30,
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|||||||||||||||
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2017
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2016
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2017
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2016
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|||||||||||||
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Net Sales
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$
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207,647
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$
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211,690
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$
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604,904
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$
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600,976
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||||||||
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Cost of goods sold
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95,632
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97,953
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276,175
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278,660
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||||||||||||
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Gross Profit
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112,015
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113,737
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328,729
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322,316
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||||||||||||
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Credit service charges
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38
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54
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126
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173
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||||||||||||
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Gross profit and other revenue
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112,053
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113,791
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328,855
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322.489
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Expenses:
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||||||||||||||||
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Selling, general and administrative
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102,099
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101,745
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299,310
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294,809
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||||||||||||
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Provision for doubtful accounts
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18
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70
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181
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286
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||||||||||||
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Other (income) expense, net
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(276
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)
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(705
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)
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(1,430
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)
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(2,799
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)
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||||||||
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Total expenses
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101,841
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101,110
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298,061
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292,296
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||||||||||||
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Income before interest and income taxes
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10,212
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12,681
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30,794
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30,193
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Interest expense, net
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493
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556
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1,641
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1,719
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Income before income taxes
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9,719
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12,125
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29,153
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28,474
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Income tax expense
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3,736
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4,759
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10,999
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11,065
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||||||||||||
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Net income
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$
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5,983
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$
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7,366
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$
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18,154
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$
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17,409
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||||||||
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Other comprehensive income
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||||||||||||||||
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Adjustments related to retirement plan; net of tax expense of $9 and $27 in 2017 and $12 and $34 in 2016
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$
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13
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$
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18
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$
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40
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$
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56
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Comprehensive income
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$
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5,996
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$
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7,384
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$
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18,194
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$
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17,465
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Basic earnings per share:
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Common Stock
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$
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0.28
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$
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0.35
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$
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0.86
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$
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0.81
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Class A Common Stock
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$
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0.27
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$
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0.33
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$
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0.82
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$
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0.77
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Diluted earnings per share:
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||||||||||||||||
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Common Stock
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$
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0.28
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$
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0.34
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$
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0.84
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$
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0.79
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||||||||
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Class A Common Stock
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$
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0.27
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$
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0.33
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$
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0.81
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$
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0.76
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||||||||
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Basic weighted average shares outstanding:
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||||||||||||||||
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Common Stock
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19,421
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19,083
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19,365
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19,615
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||||||||||||
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Class A Common Stock
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1,798
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2,021
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1,804
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2,026
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||||||||||||
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Diluted weighted average shares outstanding:
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||||||||||||||||
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Common Stock
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21,610
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21,436
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21,582
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21,972
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||||||||||||
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Class A Common Stock
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1,798
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2,021
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1,804
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2,026
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||||||||||||
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Cash dividends per share:
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||||||||||||||||
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Common Stock
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$
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0.1500
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$
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0.1200
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$
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0.3900
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$
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0.3200
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||||||||
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Class A Common Stock
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$
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0.1425
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$
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0.1125
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$
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0.3675
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$
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0.3025
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NEWS RELEASE – OCTOBER 31, 2017
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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|
September 30,
2017 |
December 31,
2016 |
September 30,
2016 |
||||||||||
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(Unaudited)
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(Unaudited)
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|||||||||||
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ASSETS
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||||||||||||
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Current assets
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||||||||||||
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Cash and cash equivalents
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$
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86,903
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$
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63,481
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$
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75,567
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||||||
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Restricted cash and cash equivalents
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8,089
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8,034
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8,025
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|||||||||
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Accounts receivable
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2,706
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4,244
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4,478
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|||||||||
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Inventories
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99,664
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102,020
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99,075
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|||||||||
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Prepaid expenses
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8,910
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8,836
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9,019
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|||||||||
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Other current assets
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6,973
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7,500
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6,409
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|||||||||
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Total current assets
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213,245
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194,115
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202,573
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|||||||||
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Accounts receivable, long-term
|
311
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462
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509
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|||||||||
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Property and equipment
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226,693
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233,667
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237,197
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|||||||||
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Deferred income taxes
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21,339
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18,376
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20,241
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|||||||||
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Other assets
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8,611
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7,885
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7,976
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|||||||||
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Total assets
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$
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470,199
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$
|
454,505
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$
|
468,496
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||||||
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LIABILITIES AND STOCKHOLDERS' EQUITY
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||||||||||||
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Current liabilities
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||||||||||||
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Accounts payable
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$
|
26,550
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$
|
25,662
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$
|
24,085
|
||||||
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Customer deposits
|
29,454
|
24,923
|
30,454
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|||||||||
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Accrued liabilities
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38,418
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41,904
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38,381
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|||||||||
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Current portion of lease obligations
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3,733
|
3,461
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3,389
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|||||||||
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Total current liabilities
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98,155
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95,950
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96,309
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|||||||||
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Lease obligations, less current portion
|
51,523
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52,013
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52,915
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|||||||||
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Other liabilities
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26,549
|
24,671
|
25,635
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|||||||||
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Total liabilities
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176,227
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172,634
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174,859
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|||||||||
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Stockholders' equity
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293,972
|
281,871
|
293,637
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|||||||||
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Total liabilities and stockholders' equity
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$
|
470,199
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$
|
454,505
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$
|
468,496
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||||||
NEWS RELEASE – OCTOBER 31, 2017
PAGE 5
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HAVERTY FURNITURE COMPANIES, INC.
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CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
|
|
(In thousands – Unaudited)
|
|
Nine Months Ended
September 30, |
||||||||
|
2017
|
2016
|
|||||||
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CASH FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
|
Net income
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$
|
18,154
|
$
|
17,409
|
||||
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Adjustments to reconcile net income to net
cash provided by operating activities: |
||||||||
|
Depreciation and amortization
|
22,819
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21,472
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||||||
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Stock-based compensation expense
|
3,045
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2,992
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||||||
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Deferred income taxes
|
(2,990
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)
|
(3,030
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)
|
||||
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Gain on insurance recovery
|
(1,531
|
)
|
(2,460
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)
|
||||
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Proceeds from insurance recovery
|
916
|
2,327
|
||||||
|
Provision for doubtful accounts
|
181
|
286
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||||||
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Other
|
626
|
450
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||||||
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Changes in operating assets and liabilities:
|
||||||||
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Accounts receivable
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1,508
|
1,330
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||||||
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Inventories
|
2,356
|
9,821
|
||||||
|
Customer deposits
|
4,531
|
9,418
|
||||||
|
Other assets and liabilities
|
1,977
|
(5,176
|
)
|
|||||
|
Accounts payable and accrued liabilities
|
(2,844
|
)
|
(7,603
|
)
|
||||
|
Net cash provided by operating activities
|
48,748
|
47,236
|
||||||
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
|
Capital expenditures
|
(15,394
|
)
|
(25,292
|
)
|
||||
|
Maturities of investments
|
-
|
12,000
|
||||||
|
Proceeds from insurance recovery for destroyed property and equipment
|
1,045
|
2,312
|
||||||
|
Other
|
28
|
(3
|
)
|
|||||
|
Net cash used in investing activities
|
(14,321
|
)
|
(10,983
|
)
|
||||
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
|
Payments on lease obligations
|
(2,577
|
)
|
(2,295
|
)
|
||||
|
Taxes on vested restricted shares
|
(1,555
|
)
|
(883
|
)
|
||||
|
Dividends paid
|
(8,223
|
)
|
(6,885
|
)
|
||||
|
Common stock purchased
|
-
|
(21,282
|
)
|
|||||
|
Construction allowance receipts
|
1,350
|
-
|
||||||
|
Net cash used in financing activities
|
(11,005
|
)
|
(31,345
|
)
|
||||
|
Increase in cash and cash equivalents during the period
|
23,422
|
4,908
|
||||||
|
Cash and cash equivalents at beginning of period
|
63,481
|
70,659
|
||||||
|
Cash and cash equivalent at end of period
|
$
|
86,903
|
$
|
75,567
|
||||
NEWS RELEASE – OCTOBER 31, 2017
PAGE 6
SG&A Expense Classification
We classify our SG&A expenses as either variable or fixed and discretionary. Our variable expenses are comprised of selling and delivery costs. Selling expenses are primarily compensation and related benefits for our commission based sales associates, the discount we pay for third party financing of customer sales and transaction fees for credit card usage. We do not outsource delivery so these costs include personnel, fuel, and other expenses related to this function. Fixed and discretionary expenses are comprised of rent, depreciation and amortization and other occupancy costs for stores, warehouses and offices, and all advertising and administrative costs.
Conference Call Information
The company invites interested parties to listen to the live audiocast of the conference call on Wednesday, November 1, 2017 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 Wednesday, November 8, 2017. The number to access the telephone playback is 1-888-203-1112 (access code: 2246359).
Safe Harbor
This press release includes statements that constitute forward-looking statements within the meaning of the federal securities laws. Generally, the words "believe," "expect," "intend," "estimate," "anticipate," "project," "will" and similar expressions identify forward-looking statements, which are not historical in nature. We intend for all forward-looking statements contained herein or on our website, and all subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf, to be covered by the safe harbor provisions for forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and the provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (which Sections were adopted as part of the Private Securities Litigation Reform Act of 1995). Forward-looking statements may relate to, for example, future operations, financial condition, economic performance (including gross profit margins and expenses), capital expenditures, and demand for our products. The Company cautions that its 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. Actual results or events may differ materially from those indicated as a result of various important factors. Such factors may include, among other things, the state of the economy; state of the residential construction and housing markets; the consumer spending environment for big ticket items; effects of competition; management of relationships with our suppliers and vendors and disruptions in their operations; new regulations or taxation plans, as well as other risks and uncertainties discussed in the Company's Annual Report on Form 10-K and from time to time in the Company's filings with the SEC.
About Havertys
Havertys (NYSE: HVT and HVT.A), established in 1885, is a full-service home furnishing retailer with 125 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.
NEWS RELEASE – OCTOBER 31, 2017
PAGE 7
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.
Contact:
Havertys (404) 443-2900
Richard B. Hare
EVP & CFO
Jenny Hill Parker
SVP, Finance, Secretary and Treasurer
SOURCE: Havertys