Havertys - 10-Q quarterly report FY2023 Q2

false12-312023Q20000216085100002160852023-01-012023-06-300000216085us-gaap:CommonStockMember2023-01-012023-06-300000216085us-gaap:CommonClassAMember2023-01-012023-06-300000216085us-gaap:CommonStockMember2023-08-01xbrli:shares0000216085us-gaap:CommonClassAMember2023-08-0100002160852023-06-30iso4217:USD00002160852022-12-31iso4217:USDxbrli:shares0000216085us-gaap:CommonStockMember2023-06-300000216085us-gaap:CommonStockMember2022-12-310000216085us-gaap:CommonClassAMember2023-06-300000216085us-gaap:CommonClassAMember2022-12-3100002160852023-04-012023-06-3000002160852022-04-012022-06-3000002160852022-01-012022-06-300000216085us-gaap:CommonStockMember2023-04-012023-06-300000216085us-gaap:CommonStockMember2022-04-012022-06-300000216085us-gaap:CommonStockMember2022-01-012022-06-300000216085us-gaap:CommonClassAMember2023-04-012023-06-300000216085us-gaap:CommonClassAMember2022-04-012022-06-300000216085us-gaap:CommonClassAMember2022-01-012022-06-3000002160852021-12-3100002160852022-06-30hvt:Segment0000216085us-gaap:CommonStockMemberus-gaap:CommonStockMember2023-03-310000216085us-gaap:CommonStockMemberus-gaap:CommonClassAMember2023-03-310000216085us-gaap:AdditionalPaidInCapitalMember2023-03-310000216085us-gaap:RetainedEarningsMember2023-03-310000216085us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-03-310000216085us-gaap:TreasuryStockCommonMember2023-03-3100002160852023-03-310000216085us-gaap:RetainedEarningsMember2023-04-012023-06-300000216085us-gaap:CommonStockMemberus-gaap:RetainedEarningsMember2023-04-012023-06-300000216085us-gaap:CommonClassAMemberus-gaap:RetainedEarningsMember2023-04-012023-06-300000216085us-gaap:CommonStockMemberus-gaap:CommonStockMember2023-04-012023-06-300000216085us-gaap:AdditionalPaidInCapitalMember2023-04-012023-06-300000216085us-gaap:TreasuryStockCommonMember2023-04-012023-06-300000216085us-gaap:CommonStockMemberus-gaap:CommonStockMember2023-06-300000216085us-gaap:CommonStockMemberus-gaap:CommonClassAMember2023-06-300000216085us-gaap:AdditionalPaidInCapitalMember2023-06-300000216085us-gaap:RetainedEarningsMember2023-06-300000216085us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-06-300000216085us-gaap:TreasuryStockCommonMember2023-06-300000216085us-gaap:CommonStockMemberus-gaap:CommonStockMember2022-12-310000216085us-gaap:CommonStockMemberus-gaap:CommonClassAMember2022-12-310000216085us-gaap:AdditionalPaidInCapitalMember2022-12-310000216085us-gaap:RetainedEarningsMember2022-12-310000216085us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-12-310000216085us-gaap:TreasuryStockCommonMember2022-12-310000216085us-gaap:RetainedEarningsMember2023-01-012023-06-300000216085us-gaap:CommonStockMemberus-gaap:RetainedEarningsMember2023-01-012023-06-300000216085us-gaap:CommonClassAMemberus-gaap:RetainedEarningsMember2023-01-012023-06-300000216085us-gaap:CommonStockMemberus-gaap:CommonStockMember2023-01-012023-06-300000216085us-gaap:AdditionalPaidInCapitalMember2023-01-012023-06-300000216085us-gaap:TreasuryStockCommonMember2023-01-012023-06-300000216085us-gaap:CommonStockMemberus-gaap:CommonStockMember2022-03-310000216085us-gaap:CommonStockMemberus-gaap:CommonClassAMember2022-03-310000216085us-gaap:AdditionalPaidInCapitalMember2022-03-310000216085us-gaap:RetainedEarningsMember2022-03-310000216085us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-03-310000216085us-gaap:TreasuryStockCommonMember2022-03-3100002160852022-03-310000216085us-gaap:RetainedEarningsMember2022-04-012022-06-300000216085us-gaap:CommonStockMemberus-gaap:RetainedEarningsMember2022-04-012022-06-300000216085us-gaap:CommonClassAMemberus-gaap:RetainedEarningsMember2022-04-012022-06-300000216085us-gaap:CommonStockMemberus-gaap:CommonStockMember2022-04-012022-06-300000216085us-gaap:CommonStockMemberus-gaap:CommonClassAMember2022-04-012022-06-300000216085us-gaap:TreasuryStockCommonMember2022-04-012022-06-300000216085us-gaap:AdditionalPaidInCapitalMember2022-04-012022-06-300000216085us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-04-012022-06-300000216085us-gaap:CommonStockMemberus-gaap:CommonStockMember2022-06-300000216085us-gaap:CommonStockMemberus-gaap:CommonClassAMember2022-06-300000216085us-gaap:AdditionalPaidInCapitalMember2022-06-300000216085us-gaap:RetainedEarningsMember2022-06-300000216085us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-06-300000216085us-gaap:TreasuryStockCommonMember2022-06-300000216085us-gaap:CommonStockMemberus-gaap:CommonStockMember2021-12-310000216085us-gaap:CommonStockMemberus-gaap:CommonClassAMember2021-12-310000216085us-gaap:AdditionalPaidInCapitalMember2021-12-310000216085us-gaap:RetainedEarningsMember2021-12-310000216085us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-12-310000216085us-gaap:TreasuryStockCommonMember2021-12-310000216085us-gaap:RetainedEarningsMember2022-01-012022-06-300000216085us-gaap:CommonStockMemberus-gaap:RetainedEarningsMember2022-01-012022-06-300000216085us-gaap:CommonClassAMemberus-gaap:RetainedEarningsMember2022-01-012022-06-300000216085us-gaap:CommonStockMemberus-gaap:CommonStockMember2022-01-012022-06-300000216085us-gaap:CommonStockMemberus-gaap:CommonClassAMember2022-01-012022-06-300000216085us-gaap:TreasuryStockCommonMember2022-01-012022-06-300000216085us-gaap:AdditionalPaidInCapitalMember2022-01-012022-06-300000216085us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-01-012022-06-300000216085us-gaap:RevolvingCreditFacilityMember2023-06-300000216085us-gaap:RevolvingCreditFacilityMember2023-01-012023-06-300000216085us-gaap:RevolvingCreditFacilityMember2022-12-310000216085hvt:BedroomFurnitureMember2023-04-012023-06-30xbrli:pure0000216085hvt:BedroomFurnitureMember2022-04-012022-06-300000216085hvt:BedroomFurnitureMember2023-01-012023-06-300000216085hvt:BedroomFurnitureMember2022-01-012022-06-300000216085hvt:DiningRoomFurnitureMember2023-04-012023-06-300000216085hvt:DiningRoomFurnitureMember2022-04-012022-06-300000216085hvt:DiningRoomFurnitureMember2023-01-012023-06-300000216085hvt:DiningRoomFurnitureMember2022-01-012022-06-300000216085hvt:OccasionalMember2023-04-012023-06-300000216085hvt:OccasionalMember2022-04-012022-06-300000216085hvt:OccasionalMember2023-01-012023-06-300000216085hvt:OccasionalMember2022-01-012022-06-300000216085hvt:CaseGoodsMember2023-04-012023-06-300000216085hvt:CaseGoodsMember2022-04-012022-06-300000216085hvt:CaseGoodsMember2023-01-012023-06-300000216085hvt:CaseGoodsMember2022-01-012022-06-300000216085hvt:UpholsteryMember2023-04-012023-06-300000216085hvt:UpholsteryMember2022-04-012022-06-300000216085hvt:UpholsteryMember2023-01-012023-06-300000216085hvt:UpholsteryMember2022-01-012022-06-300000216085hvt:MattressesMember2023-04-012023-06-300000216085hvt:MattressesMember2022-04-012022-06-300000216085hvt:MattressesMember2023-01-012023-06-300000216085hvt:MattressesMember2022-01-012022-06-300000216085hvt:AccessoriesAndOtherMember2023-04-012023-06-300000216085hvt:AccessoriesAndOtherMember2022-04-012022-06-300000216085hvt:AccessoriesAndOtherMember2023-01-012023-06-300000216085hvt:AccessoriesAndOtherMember2022-01-012022-06-300000216085srt:MinimumMember2023-06-300000216085srt:MaximumMember2023-06-30hvt:lease0000216085stpr:FL2023-05-012023-05-310000216085stpr:FL2023-05-310000216085hvt:ServiceBasedRestrictedStockAwardsMember2022-12-310000216085hvt:PerformanceBasedRestrictedStockAwardsMember2022-12-310000216085hvt:ServiceBasedRestrictedStockAwardsMember2023-01-012023-06-300000216085hvt:PerformanceBasedRestrictedStockAwardsMember2023-01-012023-06-300000216085hvt:ServiceBasedRestrictedStockAwardsMember2023-06-300000216085hvt:PerformanceBasedRestrictedStockAwardsMember2023-06-300000216085srt:MinimumMemberhvt:ServiceBasedRestrictedStockAwardsMember2023-01-012023-06-300000216085hvt:ServiceBasedRestrictedStockAwardsMembersrt:MaximumMember2023-01-012023-06-300000216085us-gaap:SellingGeneralAndAdministrativeExpensesMember2023-01-012023-06-300000216085us-gaap:SellingGeneralAndAdministrativeExpensesMember2022-01-012022-06-300000216085srt:MaximumMember2023-01-012023-06-300000216085srt:MinimumMember2023-01-012023-06-30hvt:Vote

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 June 30, 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 August 1, 2023, were: Common Stock – 15,091,349; Class A Common Stock – 1,281,395.

HAVERTY FURNITURE COMPANIES, INC.

INDEX


		Page No.

PART I.	FINANCIAL INFORMATION

	Item 1. Financial Statements

	Condensed Consolidated Balance Sheets – June 30, 2023 (unaudited) and December 31, 2022	1

	Condensed Consolidated Statements of Comprehensive Income – Three and Six Months Ended June 30, 2023 and 2022 (unaudited)	2

	Condensed Consolidated Statements of Cash Flows – Six Months Ended June 30, 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	11

	Item 3. Quantitative and Qualitative Disclosures about Market Risk	14

	Item 4. Controls and Procedures	14

PART II.	OTHER INFORMATION

	Item 1. Legal Proceedings	15

	Item 1A. Risk Factors	15

	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	15

	Item 5 . Other Information	15

	Item 6. Exhibits	16

INDEX

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

HAVERTY FURNITURE COMPANIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


(In thousands)	June 30, 2023		December 31, 2022

Assets
Current assets
Cash and cash equivalents	$	109,143	$	123,126
Restricted cash and cash equivalents	6,959		6,804
Inventories	114,722		118,333
Prepaid expenses	11,734		9,707
Other current assets	14,914		18,283
Total current assets	257,472		276,253
Property and equipment, net	169,091		137,475
Right-of-use lease assets	199,698		207,390
Deferred income taxes	16,829		15,501
Other assets	13,100		12,430
Total assets	$	656,190	$	649,049
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	20,289	$	23,345
Customer deposits	45,589		47,969
Accrued liabilities	41,798		48,676
Current lease liabilities	36,799		34,442
Total current liabilities	144,475		154,432
Noncurrent lease liabilities	178,835		186,845
Other liabilities	27,297		18,373
Total liabilities	350,607		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 – 30,218; 2022 – 30,006	30,218		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	109,731		108,706
Retained earnings	413,143		398,393
Accumulated other comprehensive loss	(756)		(756)
Less treasury stock at cost – Common Stock (2023 – 15,128 and 2022 – 15,140 shares) and Convertible Class A Common Stock (2023 and 2022 – 522 shares)	(248,559)		(248,756)
Total stockholders’ equity	305,583		289,399
Total liabilities and stockholders’ equity	$	656,190	$	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 June 30,				Six Months Ended June 30,
	2023		2022		2023		2022

Net sales	$	206,289	$	253,216	$	431,042	$	492,162
Cost of goods sold	81,394		106,608		173,363		204,593
Gross profit	124,895		146,608		257,679		287,569

Expenses:
Selling, general and administrative	110,016		118,129		228,377		233,283
Other (income) expense, net	14		(45)		9		115
Total expenses	110,030		118,084		228,386		233,398

Income before interest and income taxes	14,865		28,524		29,293		54,171
Interest income, net	973		144		1,983		218

Income before income taxes	15,838		28,668		31,276		54,389
Income tax expense	4,046		6,960		7,112		13,319
Net income	$	11,792	$	21,708	$	24,164	$	41,070

Other comprehensive income
Adjustments related to retirement plans; net of tax expense of $13 and $27 in 2022	$	—	$	41	$	—	$	81

Comprehensive income	$	11,792	$	21,749	$	24,164	$	41,151

Basic earnings per share:
Common Stock	$	0.73	$	1.31	$	1.49	$	2.45
Class A Common Stock	$	0.68	$	1.25	$	1.41	$	2.33

Diluted earnings per share:
Common Stock	$	0.70	$	1.27	$	1.44	$	2.37
Class A Common Stock	$	0.67	$	1.22	$	1.38	$	2.27

Cash dividends per share:
Common Stock	$	0.30	$	0.28	$	0.58	$	0.53
Class A Common Stock	$	0.28	$	0.26	$	0.54	$	0.49

See notes to these condensed consolidated financial statements.

INDEX

HAVERTY FURNITURE COMPANIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


(In thousands)	Six Months Ended June 30,
	2023		2022
Cash Flows from Operating Activities:
Net income	$	24,164	$	41,070
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	9,017		8,664
Share-based compensation expense	4,439		4,196
Other	(256)		(1,444)
Changes in operating assets and liabilities:
Inventories	3,611		(22,022)
Customer deposits	(2,380)		(8,135)
Other assets and liabilities	11,637		(966)
Accounts payable and accrued liabilities	(10,104)		4,942
Net cash provided by operating activities	40,128		26,305

Cash Flows from Investing Activities:
Capital expenditures	(40,482)		(13,548)
Proceeds from sale of land, property and equipment	23		52
Net cash used in investing activities	(40,459)		(13,496)

Cash Flows from Financing Activities:




Dividends paid	(9,414)		(8,819)
Common stock repurchased	—		(25,001)
Taxes on vested restricted shares	(4,083)		(1,675)
Net cash used in financing activities	(13,497)		(35,495)

Decrease in cash, cash equivalents and restricted cash equivalents during the period	(13,828)		(22,686)
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	$	116,102	$	150,176

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.

INDEX

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 June 30, 2023:


(in thousands)	Common Stock		Class A Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Total
Balances at March 31, 2023	$	30,122	$	1,806	$	107,759	$	406,237	$	(756)	$	(248,756)	$	296,412
Net income							11,792						11,792
Dividends declared:
Common Stock, $0.30 per share							(4,527)						(4,527)
Class A Common Stock, $0.28 per share							(359)						(359)


Restricted stock issuances	96				(1,390)								(1,294)
Amortization of restricted stock					2,482								2,482
Directors' Compensation Plan					880						197		1,077

Balances at June 30, 2023	$	30,218	$	1,806	$	109,731	$	413,143	$	(756)	$	(248,559)	$	305,583

For the six months ended June 30, 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							24,164						24,164
Dividends declared:
Common Stock, $0.58 per share							(8,721)						(8,721)
Class A Common Stock, $0.54 per share							(693)						(693)


Restricted stock issuances	212				(4,294)								(4,082)
Amortization of restricted stock					4,439								4,439
Directors' Compensation Plan					880						197		1,077

Balances at June 30, 2023	$	30,218	$	1,806	$	109,731	$	413,143	$	(756)	$	(248,559)	$	305,583

INDEX

For the three months ended June 30, 2022:


(in thousands)	Common Stock		Class A Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Total
Balances at March 31, 2022	$	29,924	$	1,809	$	104,345	$	358,084	$	(2,253)	$	(231,509)	$	260,400
Net income							21,708						21,708
Dividends declared:
Common Stock, $0.28 per share							(4,225)						(4,225)
Class A Common Stock, $0.26 per share							(333)						(333)
Class A conversion	3		(3)										—
Acquisition of treasury stock											(12,500)		(12,500)

Restricted stock issuances	79				(1,244)								(1,165)
Amortization of restricted stock					1,889								1,889
Directors' Compensation Plan					684						227		911
Other comprehensive income									41				41
Balances at June 30, 2022	$	30,006	$	1,806	$	105,674	$	375,234	$	(2,212)	$	(243,782)	$	266,726

For the six months ended June 30, 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							41,070						41,070
Dividends declared:
Common Stock, $0.53 per share							(8,189)						(8,189)
Class A Common Stock, $0.49 per share							(630)						(630)
Class A conversion	3		(3)										—
Acquisition of treasury stock											(25,001)		(25,001)
Restricted stock issuances	96				(1,778)								(1,682)
Amortization of restricted stock					4,196								4,196
Directors' Compensation Plan					684						227		911
Other comprehensive income									81				81
Balances at June 30, 2022	$	30,006	$	1,806	$	105,674	$	375,234	$	(2,212)	$	(243,782)	$	266,726

INDEX

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 June 30, 2023 and December 31, 2022, there were no outstanding borrowings under the Credit Agreement. The borrowing base was $141.4 million at June 30, 2023 and there were no outstanding letters of credit, accordingly, net availability was $80.0 million.

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 $45.6 million and $48.0 million at June 30, 2023 and December 31, 2022, respectively. Of the customer deposit liabilities at December 31, 2022, approximately $1.1 million have not been recognized through net sales in the six months ended June 30, 2023.

The following table presents our revenues disaggregated by each major product category and service:


(In thousands)	Three Months Ended June 30,								Six Months Ended June 30,
	2023				2022				2023				2022
	Net Sales		% of Net Sales		Net Sales		% of Net Sales		Net Sales		% of Net Sales		Net Sales		% of Net Sales
Merchandise:
Case Goods
Bedroom Furniture	$	33,935	16.5	%	$	41,535	16.4	%	$	68,483	15.9	%	$	72,885	14.8	%
Dining Room Furniture	22,952		11.1		25,156		9.9		48,537		11.3		51,178		10.4
Occasional	16,301		7.9		20,188		8.0		35,510		8.2		37,007		7.5
	73,188		35.5		86,879		34.3		152,530		35.4		161,070		32.7
Upholstery	86,574		42.0		109,641		43.3		182,420		42.3		220,825		44.9
Mattresses	18,985		9.2		22,010		8.7		37,397		8.7		41,743		8.5
Accessories and Other (1)	27,542		13.4		34,686		13.7		58,695		13.6		68,524		13.9
	$	206,289	100.0	%	$	253,216	100.0	%	$	431,042	100.0	%	$	492,162	100.0	%


(1)			Includes delivery charges and product protection.

INDEX

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 June 30, 2023, there were no leases for additional retail locations which had not yet commenced.

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Operating lease cost	$	12,310	$	11,973	$	24,098	$	23,712
Variable lease cost	978		1,783		2,674		3,478
Total lease expense	$	13,288	$	13,756	$	26,772	$	27,190

In May 2023, we purchased our Florida distribution center for approximately $28.0 million and entered into an early termination agreement of a lease on a retail location in exchange for approximately $3.0 million. This purchase and lease modification decreased our right of use assets and lease liabilities approximately $16.0 million.

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


	Six Months Ended June 30,
	2023		2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	21,519	$	21,533
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	29,334	$	15,763

NOTE H – Income Taxes

Our effective tax rate for the six months ended June 30, 2023 and 2022 was 22.7% and 24.5%, 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.

INDEX

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 six months ended June 30, 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)	(146,610)	27.07		(188,980)	20.42
Forfeited	(10,446)	30.26
Additional units earned due to performance				3,752	28.86
Outstanding at June 30, 2023	255,244	$	32.07	357,976	$	31.76
Restricted units expected to vest	255,244	$	32.07	330,485	$	31.66


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

The total fair value of service-based restricted stock awards that vested during the six months ended June 30, 2023 was approximately $3.7 million. The aggregate intrinsic value of outstanding service-based restricted stock awards was approximately $7.7 million at June 30, 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 six months ended June 30, 2023 was approximately $7.1 million. The aggregate intrinsic value of outstanding performance awards at June 30, 2023 expected to vest was approximately $10.0 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 $4.4 million and $4.2 million for the six months ended June 30, 2023 and 2022, respectively. Forfeitures are recognized as they occur. As of June 30, 2023, the total compensation cost related to unvested equity awards was approximately $9.8 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. Holders of the Class A Common Stock have greater voting rights which include voting as a separate class for the election of up to 75% of the total number of directors whereas holders of the Common Stock vote as a separate class for the election of at least 25% of the total number of directors. On all other matters subject to shareholder vote, holders of the Class A Common Stock have ten votes per share as opposed to holders of the Common Stock receiving one vote per share. 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 June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Numerator:
Common:
Distributed earnings	$	4,527	$	4,225	$	8,721	$	8,189
Undistributed earnings	6,387		15,884		13,637		29,893
Basic	10,914		20,109		22,358		38,082
Class A Common earnings	878		1,599		1,806		2,988
Diluted	$	11,792	$	21,708	$	24,164	$	41,070

Class A Common:
Distributed earnings	$	359	$	333	$	693	$	630
Undistributed earnings	519		1,266		1,113		2,358
	$	878	$	1,599	$	1,806	$	2,988
Denominator:
Common:
Weighted average shares outstanding - basic	15,046		15,327		14,977		15,516
Assumed conversion of Class A Common Stock	1,283		1,283		1,283		1,285
Dilutive options, awards and common stock equivalents	417		482		506		501
Total weighted-average diluted Common Stock	16,746		17,092		16,766		17,302

Class A Common:
Weighted average shares outstanding	1,283		1,283		1,283		1,285

Basic earnings per share:
Common Stock	$	0.73	$	1.31	$	1.49	$	2.45
Class A Common Stock	$	0.68	$	1.25	$	1.41	$	2.33

Diluted earnings per share:
Common Stock	$	0.70	$	1.27	$	1.44	$	2.37
Class A Common Stock	$	0.67	$	1.22	$	1.38	$	2.27

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. 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
Q2	$	206.3	(18.5)	%	$	(46.9)	(19.1)	%	$	(48.0)	$	253.2	1.3	%	$	3.2	1.1	%	$	2.7
YTD Q2	$	431.0	(12.4)	%	$	(61.1)	(13.1)	%	$	(64.0)	$	492.1	1.2	%	$	5.7	0.7	%	$	3.2

Total sales for the second quarter of 2023 decreased $46.9 million, or 18.5%, compared to 2022. Our comp-store sales decreased 19.1% or $48 million, in the second 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 effect on discretionary spending. Written business for the second quarter of 2023 compared to the second quarter of 2022 was down 14.7% and written comp-store sales were down 15.2%.

Our free in-home design service is being used by more customers and accordingly, our average ticket has increased. Designers helped drive 28.6% of our total written business for the second quarter of 2023 compared to 24.8% for 2022 and average ticket increased 3.2% for the respective periods.

Gross Profit

Gross profit for the second quarter of 2023 was 60.5%, up 260 basis points compared to the prior year period of 57.9%. The increase is primarily due to reductions in freight and product costs. In 2023, the

INDEX

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

change in the LIFO reserve generated a positive impact on gross profit of $3.4 million compared to a negative impact of $2.5 million in 2022.

We expect annual gross profit margins for 2023 will be 59.5% to 60.0%. 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 second quarter of 2023 were 53.3% versus 46.7% for 2022. SG&A dollars decreased $8.1 million, or 6.9%, for the second quarter of 2023 compared to the same prior year period. The change is driven by lower costs associated with advertising expense of $1.1 million, selling expense of $3.0 million, occupancy costs of $1.4 million, and a decrease in warehouse and delivery costs of $1.9 million. Occupancy costs were reduced by $1.8 million as a result of incentives to vacate a leased property before the end of the lease term.

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 June 30,								Six Months Ended June 30,
	2023				2022				2023				2022
	$		% of Net Sales		$		% of Net Sales		$		% of Net Sales		$		% of Net Sales
Variable	$	40,996	19.9	%	$	45,955	18.2	%	$	85,865	19.9	%	$	90,339	18.4	%
Fixed and discretionary	69,020		33.5	%	72,174		28.5	%	142,512		33.1	%	142,944		29.0	%
	$	110,016	53.3	%	$	118,129	46.7	%	$	228,377	53.0	%	$	233,283	47.4	%

The variable expenses in dollars were higher in the second 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 second quarter of 2023 primarily by decreases 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 $286.0 to $289.0 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 June 30, 2023, we had $109.1 million in cash and cash equivalents, and $7.0 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.

INDEX

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 base at June 30, 2023 was $141.4 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 six months ended June 30, 2023. There is approximately $20.0 million at June 30, 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 $40.1 million in the first six months of 2023 compared to $26.3 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.

Investing Activities. Cash used in investing activities increased by $27.0 million in the first six months of 2023 compared to the first six months of 2022, due to higher capital expenditure spend, including the purchase of our Lakeland, Florida distribution facility.

Financing Activities. Cash used in financing activities decreased by $22.0 million in the first six months of 2023 compared to the first six months of 2022, primarily due to 25.0 million of share repurchases in 2022 and none in 2023.

Store Plans and Capital Expenditures


Location or Market	Opening Quarter Actual or Planned	Category
Durham, NC	Q-1-23	Open
Atlanta, GA	Q-3-23	Closure - Outlet
Charlotte, NC	Q-4-23	Open
Dayton, OH	Q-4-23	Open
Richmond, VA	Q-4-23	Open - Outlet
Memphis, TN	Q-1 to Q-2-24	Open
Destin, FL	Q-1 to Q-2-24	Open
Miami, FL	Q-1 to Q-2-24	Open
Tampa, FL	Q-1 to Q-2-24	Open

INDEX

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

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. In July 2023, we secured the leases for four locations from the bankruptcy of Bed Bath & Beyond and we expect these stores will open in the first half of 2024.

We acquired our Lakeland, Florida distribution facility for approximately $28.2 million in May 2023. We previously owned the facility prior to selling it to the landlord in May 2020 in a sale leaseback transaction. Total capital expenditures for the full year of 2023 are estimated to be $57.0 million depending on the timing of spending for our capital 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 June 30, 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.

INDEX

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 June 30, 2023. There is approximately $20.0 million at June 30, 2023 that may be purchased under the existing authorization.

Item 5. Other Information

During the three months ended June 30, 2023, none of our directors or officers adopted, modified or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement," as each term is defined in Item 408(a) of Regulation S-K.

INDEX

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).
*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 June 30, 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.

INDEX

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: August 7, 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 Q2

What is the market capitalization of a company?

DISCLAIMER

Contact

Links