Haverty Furniture Reports Earnings for 2004 ATLANTA, March 1
/PRNewswire-FirstCall/ -- HAVERTY FURNITURE COMPANIES, INC.
(NYSE:HVTNYSE:andNYSE:HVT.A) today reported earnings for the fourth
quarter and the year ended December 31, 2004. Earnings for the
fourth quarter were $8.6 million, or $0.37 per diluted share,
compared with $9.8 million, or $0.43 per diluted share, before the
cumulative effect of a change in accounting principle in the fourth
quarter of 2003, a 13.1% and 13.3% decrease, respectively. Earnings
for the 2004 year were $22.8 million, or $0.99 per diluted share,
compared with $24.3 million, or $1.08 per diluted share for 2003,
before the cumulative effect of a change in accounting principle, a
6.4% and 9.0% decrease, respectively. As previously reported, sales
for the fourth quarter were $216.8 million, or 5.6% greater than
the sales in the corresponding quarter in 2003. Sales for the year
increased 5.3% to $784.2 million from $744.6 million in 2003.
Comparable-store sales in 2004 increased 3.0% for the fourth
quarter and 2.1% for the year. Clarence H. Smith, president and
chief executive officer, said, "The earnings for the fourth quarter
of 2004 reflect the impact of several strategic activities to
improve our distribution capabilities, enhance our competitive
service position and expand our presence into new markets. These
activities did impact our earnings more than planned and we also
had some unusual adjustments during the quarter. "Although we are
disappointed with these earnings, we completed several major tasks
related to our transition to fewer distribution centers and
warehouses. We closed our regional warehouse in Mississippi that
had served the mid-south states and also vacated two local market
warehouses. The service responsibility for this area is now handled
by our Western Distribution Center in Dallas, Texas. In preparation
for the January opening of our new Florida Distribution Center in
Lakeland, we readied our Florida regional warehouse and five local
market warehouses for their closures during the first quarter. This
process generated higher than normal inventory mark downs which
impacted margins by approximately 20 basis points and increased
Selling, General and Administrative costs by approximately $1.0
million. We expect that the first quarter of 2005 will also be
similarly impacted as we complete our distribution transition. The
fourth quarter results also include approximately $3.3 million in
gains from the sale of our regional warehouse in Mississippi. "We
opened stores in two new markets for Havertys - Cincinnati, Ohio
and Baton Rouge, Louisiana during the fourth quarter of 2004. The
start-up expense for entry into new markets is more costly than
adding additional locations in existing markets. The S,G&A for
the fourth quarter of 2004 includes approximately $600,000 in
start-up costs for these two new markets. "Earnings for the fourth
quarter of 2004 include an adjustment of $418,000 increasing
S,G&A which is related to our accounting for leases. Like many
other companies, we have reviewed our methodology due to recent
questions about the correct interpretation of generally accepted
accounting principles (GAAP) as applied to leases or leasehold
improvements. Although our policies were substantially in
compliance with GAAP, the adjustment relates primarily to leases on
five stores previously operated by other furniture retailers that
we assumed in 2001. During the fourth quarter, we also had an
unfavorable adjustment totaling $1.1 million related to our group
medical costs in conjunction with a change in our carrier. "We are
excited to announce the planned openings of stores in Columbus,
Ohio and Ft. Lauderdale, Florida, both in great new markets for
Havertys. We are also expanding our retail footprint into Indiana
with a new store in Indianapolis. All of these locations are
expected to open in the fourth quarter of 2005. Three of our best
stores are also being physically expanded during 2005 as we seek to
gain more share in these excellent locations. We plan to open
approximately six stores in 2006. These include a location near
Stonecrest Mall, east of Atlanta, a relocated store in south Dallas
in the Cedar Hill area, a new store in Boca Raton, Florida and
three additional stores in Florida. We are aggressively evaluating
other possible new locations which we believe will become available
in existing retail sites in the near term. Our strategy is to
pursue opportunities in denser markets which we can serve using our
existing distribution," Smith concluded. In November 2002, the
Emerging Issues Task Force issued EITF 02-16, "Accounting by a
Customer for Cash Consideration Received from a Vendor." This EITF
places certain restrictions on the treatment of advertising
allowances and requires vendor rebates to be treated as a reduction
of inventory costs for agreements entered into or significantly
modified after November 30, 2002, unless they represent a
reimbursement of specific, incremental, identifiable costs incurred
by the customer to sell the vendor's product. The adoption of EITF
02-16 did not have a material impact on the Company's 2003
financial statements as most contracts were in place prior to the
effective date or allowances were tracked and identified with
specific incremental advertising costs. Beginning in 2004, the
Company elected to treat all cooperative advertising funds received
from vendors as a reduction in the cost of inventory. The change in
the classification of the co-operative advertising funds and
rebates in accordance with GAAP makes reconciliation necessary to
compare the current year periods to prior-year periods. The
following table adjusts the gross profit and S,G&A line items
to a comparable basis (in millions): Quarter Ended December 31 %
Net Sales 2004 2003 2004 2003 Change Gross profit, as reported
$109.6 $103.3 50.57% 50.31% 0.26% Co-op advertising funds and
rebates - 3.2 - 1.55% -1.55% Gross profit on a comparable basis (1)
$109.6 $106.5 50.57% 51.86% -1.29% S,G&A, as reported $99.9
$88.8 46.09% 43.25% 2.84% Co-op advertising funds and rebates - 3.2
- 1.55% -1.55% S,G&A on a comparable basis (1) $99.9 $92.0
46.09% 44.80% 1.29% Year Ended December 31 % Net Sales 2004 2003
2004 2003 Change Gross profit, as reported $397.4 $365.7 50.67%
49.10% 1.57% Co-op advertising funds and rebates - 13.1 - 1.76%
-1.76% Gross profit on a comparable basis (1) $397.4 $378.8 50.67%
50.86% -0.19% S,G&A, as reported $367.1 $329.6 46.81% 44.27%
2.54% Co-op advertising funds and rebates - 13.1 - 1.76% -1.76%
S,G&A on a comparable basis (1) $367.1 $342.7 46.81% 46.03%
0.78% (1) The adjusted 2003 amounts for the periods presented are
for informational purposes only and are non-GAAP as defined by
Regulation G. On December 31, 2003, Havertys adopted FASB
Interpretation No. 46 (FIN 46) that requires the consolidation of
the entity that holds the lease on a distribution center and four
retail locations used by the Company. Upon adoption of the new
standard, Havertys consolidated $22.1 million of assets, $19.5
million of long-term debt, $1.6 million of long-term liabilities
and recorded a positive non-cash adjustment to earnings for the
cumulative effect of a change in accounting principle of $1.0
million, or $0.05 per share for the year. Accordingly, net income
for 2003 was $25.3 million or $1.13 per share. Havertys is a
full-service home furnishings retailer with 118 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 at http://www.havertys.com/. This release
includes 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. The company will sponsor a conference
call Wednesday, March 2, 2005 at 9:00 a.m. Eastern Time to review
the fourth quarter and year end. Listen-only access to the call is
available via the web at havertys.com (For Investors) and at
streetevents.com (Individual Investor Center), both live and for a
limited time, on a replay basis. Condensed Consolidated Statements
of Income (Amounts in thousands except per share data) (Unaudited)
Quarter Ended Year Ended December 31, December 31, 2004 2003 2004
2003 Net sales $216,803 $205,269 $784,162 $744,635 Cost of goods
sold 107,163 101,994 386,789 378,985 Gross profit 109,640 103,275
397,373 365,650 Credit service charges 1,042 1,380 4,502 6,392
Gross profit and other revenue 110,682 104,655 401,875 372,042
Expenses: Selling, general and administrative 99,915 88,772 367,058
329,621 Interest 653 689 3,483 3,872 Provision for doubtful
accounts 113 248 558 1,979 Other (income) expense, net (3,557)
(688) (5,398) (2,155) Total expenses 97,124 89,021 365,701 333,317
Income before income taxes and cumulative effect of a change in
accounting principle 13,558 15,634 36,174 38,725 Income taxes 4,983
5,785 13,420 14,444 Income before cumulative effect of a change in
accounting principle 8,575 9,849 22,754 24,281 Cumulative effect of
a change in accounting principle - 1,050 - 1,050 Net income $8,575
$10,899 $22,754 $25,331 Basic earnings per share, net income (1):
Common Stock $0.38 $0.50 $1.02 $1.17 Class A Common Stock $0.36
$0.47 $0.96 $1.10 Diluted earnings per share, net income (1):
Common Stock $0.37 $0.48 $0.99 $1.13 Class A Common Stock $0.36
$0.45 $0.95 $1.08 Weighted average shares - basic: Common Stock
18,347 17,877 18,227 17,505 Class A Common Stock 4,326 4,411 4,343
4,487 Weighted average shares - assuming dilution (1): Common Stock
23,132 23,080 23,083 22,437 Class A Common Stock 4,326 4,411 4,343
4,487 Cash dividends per common share: Common Stock $0.0625 $0.0625
$0.250 $0.235 Class A Common Stock $0.0575 $0.0575 $0.230 $0.215
(1) See additional details at the end of this release. Condensed
Consolidated Balance Sheets (Amounts in thousands) (Unaudited) Year
Ended December 31, 2004 2003 Assets Cash and cash equivalents
$10,122 $31,591 Auction rate securities 5,000 - Accounts
receivable, net of allowance 81,132 94,855 Inventories, at LIFO
cost 110,812 106,264 Other current assets 23,355 15,026 Total
Current Assets 230,421 247,736 Accounts receivable, long-term 9,396
10,945 Property and equipment, net 205,037 171,546 Other assets
12,711 11,569 $457,565 $441,796 Liabilities and Stockholders'
Equity Accounts payable and accrued expenses $105,403 $96,364
Current portion of long-term debt 13,177 13,528 Total Current
Liabilities 118,580 109,892 Long-term debt and capital lease
obligations 51,321 65,402 Other liabilities 13,708 13,766
Stockholders' equity 273,956 252,736 $457,565 $441,796 Note:
Certain prior-year amounts have been reclassified to conform to the
2004 financial statement presentation. Condensed Consolidated
Statements of Cash Flows (Amounts in thousands) (Unaudited) Year
Ended December 31, 2004 2003 Operating Activities Net Income
$22,754 $25,331 Adjustments to reconcile net income to net cash
provided by operating activities: Cumulative effect of a change in
accounting principle - (1,050) Depreciation and amortization 19,145
17,199 Provision for doubtful accounts 558 1,979 Tax benefit from
stock option exercises 434 1,143 Deferred income taxes 810 851
(Gain) loss on sale of property and equipment (3,831) (316) Other
92 - Changes in operating assets and liabilities 9,391 36,856 Net
cash provided by operating activities 49,353 81,993 Investing
Activities Capital expenditures (45,264) (21,203) Purchases of
properties previously under leases (12,766) (6,688) Purchases of
auction rate securities (20,000) - Proceeds from sale of auction
rate securities 15,000 - Proceeds from sale of property and
equipment 6,840 2,895 Other investing activities 2,598 (14) Net
cash used in investing activities (53,592) (25,010) Financing
Activities Decrease in borrowings under revolving credit facilities
- (15,900) Payments on long-term debt and capital lease obligations
(14,431) (14,217) Treasury stock acquired - (155) Proceeds from
exercise of stock options 2,751 6,104 Dividends paid (5,550)
(5,076) Other financing activities - 88 Net cash used in financing
activities (17,230) (29,156) (Decrease) increase in cash and cash
equivalents (21,469) 27,827 Cash and cash equivalents at beginning
of year 31,591 3,764 Cash and cash equivalents at end of year
$10,122 $31,591 (1) The Company adopted the provisions of FIN 46 as
of December 31, 2003, and recorded a cumulative effect of an
accounting change of $1,050,000 (net of income tax expense of
$600,000). The following also details how the number of shares in
calculating the diluted earnings per share for Common Stock are
derived under SFAS 128 and EITF 03-6 (shares in thousands): Quarter
Ended Year Ended December 31 December 31 2004 2003 2004 2003 Basic
earnings per share: Common Stock: Income before cumulative effect
of a change in accounting principle $0.38 $0.45 $1.02 $1.12
Cumulative effect of a change in accounting principle - 0.05 - 0.05
Net income $0.38 $0.50 $1.02 $1.17 Class A Common Income before
Stock: cumulative effect of a change in accounting principle $0.36
$0.42 $0.96 $1.05 Cumulative effect of a change in accounting
principle - 0.05 - 0.05 Net income $0.36 $0.47 $0.96 $1.10 Diluted
earnings per share: Common Stock: Income before cumulative effect
of a change in accounting principle $0.37 $0.43 $0.99 $1.08
Cumulative effect of a change in accounting principle - 0.05 - 0.05
Net income $0.37 $0.48 $0.99 $1.13 Class A Common Income before
Stock: cumulative effect of a change in accounting principle $0.36
$0.41 $0.95 $1.04 Cumulative effect of a change in accounting
principle - 0.04 - 0.04 Net income $0.36 $0.45 $0.95 $1.08 Common
Stock: Weighted average shares outstanding 18,347 17,877 18,227
17,505 Assumed conversion of Class A Common shares 4,326 4,411
4,343 4,487 Dilutive options 459 792 513 445 Total weighted-average
diluted common shares 23,132 23,080 23,083 22,437 The amount of
earnings used in calculating diluted earnings per share of Common
Stock is equal to net income since the Class A shares are assumed
to be converted. Diluted earnings per share of Class A Common Stock
includes the effect of dilutive common stock options which reduces
the amount of undistributed earnings allocated to the Class A
Common Stock. Contact: Dennis L. Fink, EVP & CFO, or Jenny Hill
Parker, VP, Secretary & Treasurer 404-443-2900 DATASOURCE:
Haverty Furniture Companies, Inc. CONTACT: Dennis L. Fink, EVP
& CFO, or Jenny Hill Parker, VP, Secretary & Treasurer,
both of Haverty Furniture Companies, Inc., +1-404-443-2900 Web
site: http://www.havertys.com/
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