Havertys - 10-Q quarterly report FY2023 Q1

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___ to ___

Commission file number: 1-14445

HAVERTY FURNITURE COMPANIES, INC.

(Exact name of registrant as specified in its charter)


Maryland			58-0281900
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
780 Johnson Ferry Road, Suite 800 Atlanta, Georgia			30342
(Address of principal executive offices)			(Zip Code)
(404) 443-2900
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	HVT	NYSE
Class A Common Stock	HVTA	NYSE

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non‑accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

The numbers of shares outstanding of the registrant’s two classes of $1 par value common stock as of May 1, 2023, were: Common Stock – 14,981,347; Class A Common Stock – 1,283,260.

HAVERTY FURNITURE COMPANIES, INC.

INDEX

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

HAVERTY FURNITURE COMPANIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


(In thousands)	March 31, 2023		December 31, 2022

Assets
Current assets
Cash and cash equivalents	$	120,170	$	123,126
Restricted cash and cash equivalents	6,876		6,804
Inventories	114,254		118,333
Prepaid expenses	11,430		9,707
Other current assets	19,590		18,283
Total current assets	272,320		276,253
Property and equipment, net	139,212		137,475
Right-of-use lease assets	207,673		207,390
Deferred income taxes	16,332		15,501
Other assets	12,878		12,430
Total assets	$	648,415	$	649,049
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	15,632	$	23,345
Customer deposits	46,382		47,969
Accrued liabilities	40,372		48,676
Current lease liabilities	36,180		34,442
Total current liabilities	138,566		154,432
Noncurrent lease liabilities	185,866		186,845
Other liabilities	27,571		18,373
Total liabilities	352,003		359,650

Stockholders’ equity
Capital Stock, par value $1 per share
Preferred Stock, Authorized – 1,000 shares; Issued: None
Common Stock, Authorized – 50,000 shares; Issued: 2023 – 30,122; 2022 – 30,006	30,122		30,006
Convertible Class A Common Stock, Authorized – 15,000 shares; Issued: 2023 – 1,806; 2022 – 1,806	1,806		1,806
Additional paid-in capital	107,759		108,706
Retained earnings	406,237		398,393
Accumulated other comprehensive loss	(756)		(756)
Less treasury stock at cost – Common Stock (2023 – 15,140 and 2022 – 15,140 shares) and Convertible Class A Common Stock (2023 and 2022 – 522 shares)	(248,756)		(248,756)
Total stockholders’ equity	296,412		289,399
Total liabilities and stockholders’ equity	$	648,415	$	649,049

See notes to these condensed consolidated financial statements.

INDEX

HAVERTY FURNITURE COMPANIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


(In thousands, except per share data)	Three Months Ended March 31,
	2023		2022

Net sales	$	224,754	$	238,946
Cost of goods sold	91,969		97,985
Gross profit	132,785		140,961

Expenses:
Selling, general and administrative	118,361		115,154
Other (income) expense, net	(4)		161
Total expenses	118,357		115,315

Income before interest and income taxes	14,428		25,646
Interest income, net	1,010		74

Income before income taxes	15,438		25,720
Income tax expense	3,066		6,359
Net income	$	12,372	$	19,361

Other comprehensive income
Adjustments related to retirement plans; net of tax expense of $14 in 2022	$	—	$	40

Comprehensive income	$	12,372	$	19,401

Basic earnings per share:
Common Stock	$	0.77	$	1.14
Class A Common Stock	$	0.72	$	1.08

Diluted earnings per share:
Common Stock	$	0.74	$	1.11
Class A Common Stock	$	0.71	$	1.05

Cash dividends per share:
Common Stock	$	0.28	$	0.25
Class A Common Stock	$	0.26	$	0.23

See notes to these condensed consolidated financial statements.

INDEX

HAVERTY FURNITURE COMPANIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


(In thousands)	Three Months Ended March 31,
	2023		2022
Cash Flows from Operating Activities:
Net income	$	12,372	$	19,361
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	4,362		4,272
Share-based compensation expense	1,957		2,307
Other	(840)		(1,877)
Changes in operating assets and liabilities:
Inventories	4,079		(7,826)
Customer deposits	(1,587)		(369)
Other assets and liabilities	5,721		1,120
Accounts payable and accrued liabilities	(14,990)		3,590
Net cash provided by operating activities	11,074		20,578

Cash Flows from Investing Activities:
Capital expenditures	(6,655)		(7,107)
Proceeds from sale of land, property and equipment	13		—
Net cash used in investing activities	(6,642)		(7,107)

Cash Flows from Financing Activities:




Dividends paid	(4,528)		(4,260)
Common stock repurchased	—		(12,501)
Other	(2,788)		(517)
Net cash used in financing activities	(7,316)		(17,278)

Decrease in cash, cash equivalents and restricted cash equivalents during the period	(2,884)		(3,807)
Cash, cash equivalents and restricted cash equivalents at beginning of period	129,930		172,862
Cash, cash equivalents and restricted cash equivalents at end of period	$	127,046	$	169,055

See notes to these condensed consolidated financial statements.

INDEX

HAVERTY FURNITURE COMPANIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

NOTE A - Business and Basis of Presentation

Haverty Furniture Companies, Inc. (“Havertys,” “the Company,” “we,” “our,” or “us”) is a retailer of a broad line of residential furniture in the middle to upper-middle price ranges. We operate all of our stores using the Havertys brand and do not franchise our concept. We operate within a single reportable segment. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all information and footnotes required by United States of America generally accepted accounting principles (“U.S. GAAP”) for complete financial statements. The Company believes that the disclosures made are adequate to make the information not misleading. The financial statements include the accounts of the Company and its wholly owned subsidiary. All significant intercompany accounts and transactions have been eliminated in consolidation. We believe all adjustments, normal and recurring in nature, considered necessary for a fair presentation have been included. We suggest that these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying footnotes included in our latest Annual Report on Form 10-K.

The preparation of interim condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities, and reported amounts of revenue and expenses. Actual results could differ from those estimates.

The Company is subject to various claims and legal proceedings covering a wide range of matters, including with respect to product liability and personal injury claims, that arise in the ordinary course of its business activities. We currently have no pending claims or legal proceedings that we believe would be reasonably likely to have a material adverse effect on our financial condition, results of operations or cash flows. However, there can be no assurance that either future litigation or an unfavorable outcome in existing claims will not have a material impact on our business, reputation, financial position, cash flows or results of operations.

NOTE B – Stockholders’ Equity

The following outlines the changes in each caption of stockholders’ equity for the current and comparative periods and the dividends per share for each class of shares.

For the three months ended March 31, 2023:


(in thousands)	Common Stock		Class A Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Total
Balances at December 31, 2022	$	30,006	$	1,806	$	108,706	$	398,393	$	(756)	$	(248,756)	$	289,399
Net income							12,372						12,372
Dividends declared:
Common Stock, $0.28 per share							(4,194)						(4,194)
Class A Common Stock, $0.26 per share							(334)						(334)



Restricted stock issuances	116				(2,904)								(2,788)
Amortization of restricted stock					1,957								1,957


Balances at March 31, 2023	$	30,122	$	1,806	$	107,759	$	406,237	$	(756)	$	(248,756)	$	296,412

INDEX

For the three months ended March 31, 2022:


(in thousands)	Common Stock		Class A Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Total
Balances at December 31, 2021	$	29,907	$	1,809	$	102,572	$	342,983	$	(2,293)	$	(219,008)	$	255,970
Net income							19,361						19,361
Dividends declared:
Common Stock, $0.25 per share							(3,964)						(3,964)
Class A Common Stock, $0.23 per share							(296)						(296)

Acquisition of treasury stock											(12,501)		(12,501)

Restricted stock issuances	17				(534)								(517)
Amortization of restricted stock					2,307								2,307

Other comprehensive income									40				40
Balances at March 31, 2022	$	29,924	$	1,809	$	104,345	$	358,084	$	(2,253)	$	(231,509)	$	260,400

NOTE C – Interim LIFO Calculations

Inventories are measured using the last-in, first-out (LIFO) method of valuation using an annual LIFO index. Accordingly, interim LIFO calculations must necessarily be based on management’s estimates of inventory levels and inflation rates. Since these estimates may be affected by factors beyond management’s control, interim results are subject to change based upon the final year-end LIFO inventory valuations.

NOTE D – Fair Value of Financial Instruments

The fair values of our cash and cash equivalents, restricted cash and cash equivalents, accounts payable and customer deposits approximate their carrying values due to their short-term nature. The assets related to our self-directed, non-qualified deferred compensation plans for certain executives and employees are valued using quoted market prices multiplied by the number of shares held, a Level 1 valuation technique.

NOTE E – Credit Agreement

We have an $80.0 million revolving credit facility (the “Credit Agreement”) secured primarily by our inventory and maturing on October 24, 2027. Availability fluctuates based on a borrowing base calculation reduced by outstanding letters of credit.

At March 31, 2023 and December 31, 2022, there were no outstanding borrowings under the Credit Agreement. The borrowing base was $125.7 million and net availability was $80.0 million at March 31, 2023.

INDEX

NOTE F – Revenues

We recognize revenue from merchandise sales and related service fees, net of expected returns and sales tax, at the time the merchandise is delivered to the customer. We record customer deposits when payments are received in advance of the delivery of merchandise. Such deposits totaled $46.4 million and $48.0 million at March 31, 2023 and December 31, 2022, respectively. Of the customer deposit liabilities at December 31, 2022, approximately $3.1 million have not been recognized through net sales in the three months ended March 31, 2023.

The following table presents our revenues disaggregated by each major product category and service (dollars in thousands, amounts and percentages may not always add due to rounding):


(In thousands)	Three Months Ended March 31,
	2023				2022
	Net Sales		% of Net Sales		Net Sales		% of Net Sales
Merchandise:
Case Goods
Bedroom Furniture	$	34,546	15.4	%	$	31,348	13.1	%
Dining Room Furniture	25,586		11.4		26,022		10.9
Occasional	19,210		8.5		16,818		7.0
	79,342		35.3		74,188		31.0
Upholstery	95,846		42.6		111,186		46.5
Mattresses	18,411		8.2		19,733		8.3
Accessories and Other (1)	31,155		13.9		33,839		14.2
	$	224,754	100.0	%	$	238,946	100.0	%


(1)			Includes delivery charges and product protection.

NOTE G – Leases

We have operating leases for retail stores, offices, warehouses, and certain equipment. Our leases have remaining lease terms of 1 year to 12 years, some of which include options to extend the leases for up to 20 years. We determine if an arrangement is or contains a lease at lease inception. Our leases do not have any residual value guarantees or any restrictions or covenants imposed by lessors. We have lease agreements for real estate with lease and non-lease components, which are accounted for separately.

Certain of our lease agreements for retail stores include variable lease payments, generally based on sales volume. The variable portion of payments are not included in the initial measurement of the right-of-use asset or lease liability due to uncertainty of the payment amount and are recorded as lease expense in the period incurred. Certain of our equipment lease agreements include variable lease costs, generally based on usage of the underlying asset (mileage, fuel, etc.). The variable portions of payments are not included in the initial measurement of the right-of-use asset or lease liability due to uncertainty of the payment amount and are recorded in the period incurred.

As of March 31, 2023, we had entered into two leases for additional retail locations which had not yet commenced.

INDEX

Lease expense is charged to selling, general and administrative expenses. Components of lease expense were as follows (in thousands):


	Three Months Ended March 31,
	2023		2022
Operating lease cost	$	11,787	$	11,739
Variable lease cost	1,696		1,695
Total lease expense	$	13,483	$	13,434

Supplemental cash flow information related to leases is as follows (in thousands):


	Three Months Ended March 31,
	2023		2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	11,311	$	9,629
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	9,048	$	8,382

NOTE H – Income Taxes

Our effective tax rate for the three months ended March 31, 2023 and 2022 was 19.9% and 24.7%, respectively. The primary difference in the effective rate and the statutory rate was due to state income taxes and the impact from vested stock awards.

NOTE I – Stock Based Compensation Plans

As more fully discussed in Note 12 of the notes to the consolidated financial statements in our 2022 Annual Report on Form 10-K, we have awards outstanding for Common Stock under stock-based employee compensation plans.

The following table summarizes our award activity during the three months ended March 31, 2023:


	Service-Based Restricted Stock Awards			Performance-Based Restricted Stock Awards
	Shares or Units (#)	Weighted-Average Award Price ($)		Shares or Units (#)	Weighted-Average Award Price ($)
Outstanding at December 31, 2022	237,302	$	28.16	436,647	$	26.56
Granted/Issued	174,998	33.06		106,557	33.08
Awards vested or rights exercised(1)				(188,980)	20.42
Forfeited	(6,836)	29.32
Additional units earned due to performance				3,752	28.86
Outstanding at March 31, 2023	405,464	$	30.26	357,976	$	31.76
Restricted units expected to vest	405,464	$	30.26	338,796	$	31.69


(1)			Includes shares repurchased from employees for employee’s tax liability.

INDEX

The aggregate intrinsic value of outstanding service-based restricted stock awards was approximately $12.9 million at March 31, 2023. The restrictions on the service-based awards generally lapse or vest annually, primarily over one-year and three-year periods.

The total fair value of performance-based restricted stock awards that vested during the three months ended March 31, 2023 was approximately $7.1 million. The aggregate intrinsic value of outstanding performance awards at March 31, 2023 expected to vest was approximately $11.4 million. The performance awards are based on one-year performance periods but cliff vest in approximately three years from grant date.

The compensation for all awards is charged to selling, general and administrative expenses over the respective grants’ vesting periods, primarily on a straight-line basis. The amount charged was approximately $2.0 million and $2.3 million for the three months ended March 31, 2023 and 2022, respectively. Forfeitures are recognized as they occur. As of March 31, 2023, the total compensation cost related to unvested equity awards was approximately $12.7 million and is expected to be recognized over a weighted-average period of two years.

INDEX

NOTE J – Earnings Per Share

We report our earnings per share using the two-class method. The income per share for each class of common stock is calculated assuming 100% of our earnings are distributed as dividends to each class of common stock based on the contractual rights of the classes.

The Common Stock of the Company has a preferential dividend rate of at least 105% of the dividend paid on the Class A Common Stock. The Class A Common Stock has greater voting rights which include: voting as a separate class for the election of 75% of the total number of directors and on all other matters subject to shareholder vote has ten votes per share as opposed to one vote per share for the Common Stock. Class A Common Stock may be converted at any time on a one-for-one basis into Common Stock at the option of the holder of the Class A Common Stock.


	Three Months Ended March 31,
	2023		2022
Numerator:
Common:
Distributed earnings	$	4,195	$	3,964
Undistributed earnings	7,250		14,008
Basic	11,445		17,972
Class A Common earnings	927		1,389
Diluted	$	12,372	$	19,361

Class A Common:
Distributed earnings	$	333	$	296
Undistributed earnings	594		1,093
	$	927	$	1,389
Denominator:
Common:
Weighted average shares outstanding - basic	14,907		15,706
Assumed conversion of Class A Common Stock	1,283		1,287
Dilutive options, awards and common stock equivalents	594		520
Total weighted-average diluted Common Stock	16,784		17,513

Class A Common:
Weighted average shares outstanding	1,283		1,287

Basic earnings per share:
Common Stock	$	0.77	$	1.14
Class A Common Stock	$	0.72	$	1.08

Diluted earnings per share:
Common Stock	$	0.74	$	1.11
Class A Common Stock	$	0.71	$	1.05

INDEX

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and accompanying notes contained herein and with the audited consolidated financial statements, accompanying notes, related information and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2022 (“Form 10-K”).

Forward-Looking Statements

Statements in this Form 10-Q that are not historical facts, including statements about our estimates, expectations, beliefs, intentions, projections or strategies for the future, may be "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from historical experience or our present expectations. Known material risk factors applicable to us that could cause our actual results to differ from these forward-looking statements are described in "Item 1A. Risk Factors" of our Form 10-K and in the subsequent reports we file with the SEC. All forward‑looking statements speak only as of the date made, and we undertake no obligation to publicly update or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this report except as required by law.

Net Sales

Our sales are generated by customer purchases of home furnishings. Revenue is recognized upon delivery to the customer. Comparable-store or “comp-store” sales is a measure which indicates the performance of our existing stores and website by comparing the growth in sales in store and online for a particular month over the corresponding month in the prior year. Stores are considered non-comparable if they were not open during the corresponding month in the prior year or if the selling square footage has been changed significantly. The method we use to compute comp-store sales may not be the same method used by other retailers. We record our sales when the merchandise is delivered to the customer. We also track “written sales” and “written comp-store sales,” which represent customer orders prior to delivery. The disruptions to our supply chain have resulted in lower inventory in certain categories, and out-of-stock merchandise delivery times can be 8 to 12 weeks. As a retailer, comp-store sales and written comp-store sales are an indicator of relative customer spending and store performance. Comp-store sales, total written sales and written comp-store sales are intended only as supplemental information and none are substitutes for net sales presented in accordance with US GAAP.

The following table outlines our sales and comp-store sales increases and decreases for the periods and from the prior year indicated:


	2023										2022
	Net Sales						Comp-Store Sales				Net Sales						Comp-Store Sales
Period	Total Dollars		% Change		$ Change		% Change		$ Change		Total Dollars		% Change		$ Change		% Change		$ Change
Q1	$	224.8	(5.9)	%	$	(14.2)	(6.7)	%	$	(16.0)	$	238.9	1.0	%	$	2.5	0.2	%	$	0.4

Total sales for the first quarter of 2023 decreased $14.2 million, or 5.9%, compared to 2022. Our comp-store sales decreased 6.7%, or $16.0 million, in the first quarter of 2023 compared to 2022.

Impacting sales were continued inflationary pressures, stock market volatility, and rising interest rates, all of which had a negative affect on discretionary spending. Written business for the first quarter of 2023 was down 11.7% compared to 2022. Our written business for the first quarter of 2023 compared to the "normal" pre-pandemic first quarter of 2019 was up 10.9% and written comp-store sales were up 6.9%.

Our free in-home design service continues to grow, and designer sales were 26.0% of our total written business for the first quarter of 2023 compared to 23% for 2022. Average ticket increased 4.1% for the first quarter of 2023 compared to the first quarter of 2022 largely due to the increase in in-home design sales.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Gross Profit

Gross profit for the first quarter of 2023 was 59.1%, up 10 basis points compared to the prior year period of 59.0%. The increase is primarily due to pricing discipline and merchandise mix.

We expect annual gross profit margins for 2023 will be 58.5% to 59.0%. Gross profit margins fluctuate quarter to quarter in relation to our promotional cadence. Our estimated gross profit margins are based on anticipated changes in product and freight costs and their impact on our LIFO reserve.

Substantially all of our occupancy and home delivery costs are included in selling, general and administrative expenses (“SG&A”), as are a portion of our warehousing expenses. Accordingly, our gross profit may not be comparable to those entities that include these costs in cost of goods sold.

Selling, General and Administrative Expenses

Our SG&A costs as a percent of sales for the first quarter of 2023 were 52.7% versus 48.2% for 2022. SG&A dollars increased $3.2 million, or 2.8%, for the first quarter of 2023 compared to the same prior year period. The change is driven by higher costs associated with selling expense of $1.4 million, higher occupancy costs of $2.0 million, increase in administrative expenses of $1.3 million, and a decrease in warehouse and delivery costs of $1.4 million.

We classify our SG&A expenses as either variable or fixed and discretionary. Our variable expenses include the costs in the selling and delivery categories and certain warehouse and distribution expenses, as these amounts will generally move in tandem with our level of sales. The remaining categories and expenses for occupancy, advertising, and administrative costs are classified as fixed and discretionary because these costs do not fluctuate with sales.

The following table outlines our SG&A expenses by classification:


(In thousands)	Three Months Ended March 31,
	2023				2022
	$		% of Net Sales		$		% of Net Sales
Variable	$	44,867	20.0	%	$	44,384	18.6	%
Fixed and discretionary	73,494		32.7	%	70,770		29.6	%
	$	118,361	52.7	%	$	115,154	48.2	%

The variable expenses in dollars were higher in the first quarter of 2023 compared to 2022 primarily due to the increase in third-party credit costs partly offset by a reduction in warehouse temporary labor.

Fixed and discretionary expenses were impacted in the first quarter of 2023 primarily by increases in occupancy costs and administrative expenses compared to the prior year quarter.

Our variable expenses within SG&A for the full year of 2023 are anticipated to be 19.5% to 19.7%. Fixed and discretionary expenses are expected to be approximately $289.0 to $292.0 million for the full year of 2023, a decrease from our previous guidance based on changes in our marketing spend and warehouse and delivery costs.

Liquidity and Capital Resources

Cash and Cash Equivalents at End of Year

At March 31, 2023, we had $120.2 million in cash and cash equivalents, and $6.9 million in restricted cash equivalents. We believe that our current cash position, cash flow generated from operations, funds available from our credit agreement, and access to the long-term debt capital markets should be sufficient for our operating requirements and to enable us to fund our capital expenditures, dividend payments, and lease obligations through the next several years. In addition, we believe we have the ability to obtain alternative sources of financing.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Long-Term Debt

In October 2022, we entered into the Fourth Amendment to our Amended and Restated Credit Agreement (as amended, the “Credit Agreement”) with a bank. The Credit Agreement, which matures October 24, 2027, provides for a $80.0 million revolving credit facility. The borrowing based at March 31, 2023 was $125.7 million and the net availability was $80.0 million.

Leases

We lease a portion of our real estate, including our stores, distribution centers, and store support space, pursuant to operating leases.

Share Repurchases

In August 2022, our board of directors authorized $25.0 million under a share repurchase program. No shares of common stock were purchased during the three months ended March 31, 2023. There is approximately $20.0 million at March 31, 2023 that may be purchased under the existing authorization.

The timing, manner and number of shares repurchased in future periods will depend on a variety of factors, including, but not limited to, the level of cash balances, credit availability, financial performance, general business conditions, the market price of the Company’s stock and the availability of alternative investment opportunities.

Cash Flows Summary

Operating Activities. Cash flow generated from operations provides us with a significant source of liquidity. Our operating cash flows result primarily from cash received from our customers, offset by cash payments we make for products and services, employee compensation, operations, and occupancy costs.

Cash provided by or used in operating activities is also subject to changes in working capital. Working capital at any specific point in time is subject to many variables, including seasonality, inventory selection, the timing of cash receipts and payments, and vendor payment terms.

Net cash provided by operating activities was $11.1 million in the first three months of 2023 compared to $20.6 million during the same period in 2022. This difference resulted primarily from changes in working capital and a decrease in net income. Working capital was impacted by a reduction in customer deposits as the backlog was reduced in 2023 and the timing of vendor payments, compared against higher inventories in 2022 due to the receipt of delayed product and merchandise and freight cost inflation.

Investing Activities. Cash used in investing activities decreased by $0.5 million in the first three months of 2023 compared to the first three months of 2022, due to lower capital expenditure spend.

Financing Activities. Cash used in financing activities of decreased by $10.0 million in the first three months of 2023 compared to the first three months of 2022, primarily due to $12.5 million of share repurchases in 2022 and none in 2023.

Store Plans and Capital Expenditures


Location	Opening Quarter Actual or Planned	Category
Durham, NC	Q-1-23	Open
Atlanta, GA	Q-3-23	Closure - Outlet
Charlotte, NC	Q-3-23	Open
Dayton, OH	Q-4-23	Open
Richmond, VA	Q-4-23	Open - Outlet

Assuming the new stores open and existing stores close as planned, the above activity and other changes should increase net selling space in 2023 approximately 1.6% over net selling space in 2022. We entered into a purchase agreement March 31, 2023 to acquire our Lakeland, Florida distribution facility for approximately $28.2 million. We previously owned the facility prior to selling it to the landlord in May 2020 in a sale leaseback transaction. We expect this property acquisition to close in the second quarter of 2023.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Total capital expenditures are estimated to be $53.1 million (inclusive of the $28.2 million for the property acquisition described above) in 2023 depending on the timing of spending for these projects.

Critical Accounting Estimates

Critical accounting estimates are those that we believe are both significant and that require us to make difficult, subjective or complex judgments, often because we need to estimate the effect of inherently uncertain matters. We base our estimates and judgments on historical experiences and various other factors that we believe to be appropriate under the circumstances. Actual results may differ from these estimates, and we might obtain different estimates if we used different assumptions or conditions. We reviewed our accounting estimates, and none were deemed to be considered critical for the accounting periods presented in our Form 10-K. We had no significant changes in those accounting estimates since our last annual report.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

For quantitative and qualitative disclosures about market risk, see Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” of our Form 10-K. Our exposure to market risk has not changed materially since December 31, 2022.

Item 4. Controls and Procedures

As of the end of the period covered by this report, an evaluation was performed under the supervision and with the participation of our management, including the Chief Executive Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on that evaluation, our management, including the CEO and CFO, concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report and provide reasonable assurance that information required to be disclosed in the reports the Company files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our management, including the CEO and CFO, as appropriate, to allow timely decisions regarding disclosure.

There have been no changes in the Company’s internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rule 13a-15 that occurred during the Company’s fiscal quarter ended March 31, 2023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. We have reviewed our financial reporting process to provide reasonable assurance that we could report our financial results accurately and timely, and we will continue to evaluate the impact of any related changes to our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Information regarding legal proceedings is described under the subheading “Business and Basis of Presentation” in Note A of the Notes to the Condensed Consolidated Financial Statements set forth in this Form 10-Q.

Item 1A. Risk Factors

"Item 1A. Risk Factors” in our Form 10-K includes a discussion of our known material risk factors. There have been no material changes from the risk factors described in our Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The board of directors has authorized management, at its discretion, to purchase and retire limited amounts of our Common Stock and Class A Common Stock. A program was initially approved by the board on November 3, 1986. On August 5, 2022, the board authorized additional amounts under such stock repurchase program. The stock repurchase program has no expiration date but may be terminated by our board at any time. No shares of common stock were purchased during the three months ended March 31, 2023. There is approximately $20.0 million at March 31, 2023 that may be purchased under the existing authorization.

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Item 6. Exhibits

(a)Exhibits

The exhibits listed below are filed with or incorporated by reference into this report (those filed with this report are denoted by an asterisk). Unless otherwise indicated, the exhibit number of documents incorporated by reference corresponds to the exhibit number in the referenced documents.


Exhibit Number						Description of Exhibit (Commission File No. 1-14445)
3.1						Articles of Amendment and Restatement of the Charter of Haverty Furniture Companies, Inc. effective May 26, 2006 (Exhibit 3.1 to our Second Quarter 2006 Form 10-Q).
3.2						By-laws of Haverty Furniture Companies, Inc. as amended and restated effective February 24, 2023 (Exhibit 3.2 to our Annual Report on Form 10-K for the fiscal year ended December 31, 2022).
10.1						Purchase Agreement, dated as of March 31, 2023, by and between HF Lakeland FL Landlord, LLC and Haverty Furniture Companies, Inc. (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K dated April 5, 2023).
*^10.2						Second Amendment to the Amended and Restated Retailer Program Agreement between Haverty Furniture Companies, Inc. and Synchrony Bank (formerly GE Capital Retail Bank).
*31.1						Certification of Chief Executive Officer pursuant to Rules 13a-14(a) and 15d‑14(a) under the Securities Exchange Act of 1934, as amended.
*31.2						Certification of Chief Financial Officer pursuant to Rules 13a-14(a) and 15d‑14(a) under the Securities Exchange Act of 1934, as amended.
**32.1						Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350.
101						The following financial statements from Haverty Furniture Companies, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, formatted in inline XBRL, include: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Comprehensive Income, (iii) Condensed Consolidated Statements of Cash Flows and (iv) the Notes to Condensed Consolidated Financial Statements.
104						Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).

* Filed herewith.

** Furnished herewith.

^ Portions of this exhibit identified by brackets [***] is confidential and has been excluded pursuant to Item 601(b)(10)(iv) of Regulation S-K because it is both (i) not material and (ii) the type Havertys treats as private or confidential.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.


		HAVERTY FURNITURE COMPANIES, INC. (Registrant)

Date: May 5, 2023	By:	/s/ Clarence H. Smith
		Clarence H. Smith Chairman of the Board and Chief Executive Officer (principal executive officer)

	By:	/s/ Richard B. Hare
		Richard B. Hare Executive Vice President and Chief Financial Officer (principal financial and accounting officer)

Havertys - 10-Q quarterly report FY2023 Q1

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		Page No.

PART I.	FINANCIAL INFORMATION

	Item 1. Financial Statements

	Condensed Consolidated Balance Sheets – March 31, 2023 (unaudited) and December 31, 2022	1

	Condensed Consolidated Statements of Comprehensive Income – Three Months Ended March 31, 2023 and 2022 (unaudited)	2

	Condensed Consolidated Statements of Cash Flows – Three Months Ended March 31, 2023 and 2022 (unaudited)	3

	Notes to Condensed Consolidated Financial Statements (unaudited)	4

	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	10

	Item 3. Quantitative and Qualitative Disclosures about Market Risk	13

	Item 4. Controls and Procedures	13

PART II.	OTHER INFORMATION

	Item 1. Legal Proceedings	14

	Item 1A. Risk Factors	14

	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	14

	Item 6. Exhibits	15