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| 8-K - HAVERTY FURNITURE COMPANIES INC | hvt8k1132011.htm |
Exhibit 99.1
HAVERTYS REPORTS RESULTS FOR THIRD QUARTER 2011
ATLANTA, GEORGIA, November 2, 2011 – HAVERTY FURNITURE COMPANIES, INC. (NYSE: HVT and HVT.A) reports third quarter 2011 operating results of earnings per share of $0.01 compared to $0.05 for the same period of 2010. The loss per share for the nine months ended September 30, 2011 is ($0.07) compared to earnings per share of $.13 for the same period of 2010.
As previously reported, net sales for the third quarter of 2011 were 1.1% lower than in the same period of 2010 and down 1.2% for the nine months ended September 30, 2011. Written sales for the third quarter of 2011 increased 2.6% over the same quarter of last year.
Clarence H. Smith, president and chief executive officer, said, “The retail home furniture business remains challenging but we are committed to connecting with our customers by having great showrooms, excellent service and exciting new products. Our program for enhancing store interiors is complete in 33 stores and will continue through early 2013. We are working with a new marketing agency to develop a consumer segmentation model which will aid in more efficiently reaching our target customers with a resonating message. The review of manufacturers’ new products is ongoing as we develop a merchandise assortment that embraces the Havertys brand of style, quality and value.
There are numerous opportunities for store expansion that we evaluate. Our new Boca Raton, Florida store introduced customers in that market to Havertys in late October and a relocated Asheville, North Carolina store will open later this month. We have slated for opening in 2012 a new store in Baltimore, Maryland and a replacement store in the Atlanta market as well as two new stores in other markets.
The housing market, to which home furnishings sales are naturally linked, continues to be a persistent and significant drag on the economy. Given this fragility, it is important for us to maintain our strong balance sheet and cash position and we are careful in the deployment of capital. Our middle to upper-middle income target customer is also likely to remain cautious in spending until overall economic growth shows signs of sustainability accompanied by improvements in the housing market.
Financial Highlights
Third Quarter 2011 Compared to Third Quarter 2010
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Net income of $0.1 million in 2011 compared to $1.2 million in 2010.
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Net sales decreased 1.1% to $155.4 million and comparable store sales decreased 0.6%.
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Bedding sales continue to show year over year growth with strength at the higher price points.
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Gross profit margins were up slightly at 51.8% as a percent of sales compared to 51.3% and better than our expectations.
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Selling, general and administrative costs increased $1.2 million. Lower sales made leveraging the costs more difficult, and accordingly, total SG&A rose 1.3% as a percent of net sales. Our advertising and marketing expenditures for the third quarter were up $0.4 million due in part to new initiatives. Higher fuel prices increased our delivery expenses and rising group insurance costs impacted our SG&A.
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NEWS RELEASE – NOVEMBER 2, 2011 Page 2
Nine Months ended September 30, 2011 Compared to Same Period of 2010
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Net loss of $1.5 million in 2011 compared to earnings of $2.9 million in 2010.
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Net sales decreased 1.2% to $452.6 million and comparable store sales decreased 0.9%.
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Gross profit margins were 51.4% as a percent of sales compared to 51.5%.
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Selling, general and administrative expense increased $1.3 million and with lower sales rose 0.9% as a percent of sales.
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Income tax expense for the nine months ended September 30, 2011 includes approximately $0.2 million related to a non-cash adjustment to our recorded income tax receivables. For the 2010 period the income tax expense that would otherwise have been recognized was virtually offset by a reduction in the allowance for deferred taxes.
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Expectations and Other
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Gross profit margins for the fourth quarter are expected to be approximately 1.0% higher than the 51.0% recorded in the fourth quarter of 2010.
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Advertising and marketing expense are planned to be approximately 0.8% as a percent of sales greater in the fourth quarter of 2011 than in the comparable prior year period.
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We completed the relocation of a store in Austin, TX during the second quarter and during the fourth quarter, opened a store in the Boca Raton, FL market and will also relocate our Asheville, NC, store. During 2012 we plan to open a store in Baltimore, MD in the second quarter and in the second half of the year a replacement store in Atlanta, GA and two new stores in other markets.
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Cash flow from operations for the nine months ended September 30, 2011 was $30.1 million.
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Cash at the end of the third quarter of 2011 totaled $66.5 million. We have no funded debt and did not use our $50.0 million credit facility.
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Our capital expenditures for the third quarter included $4.8 million for the purchase of four existing Havertys stores previously under lease. Total capital expenditures are expected to be $19.0 million for 2011 and $18.5 million for 2012.
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For the fourth quarter to date delivered sales are up 4.9% and written sales are down 1.4% compared to the same period last year.
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NEWS RELEASE – NOVEMBER 2, 2011 Page 3
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HAVERTY FURNITURE COMPANIES, INC.
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
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(In Thousands, except per share data – Unaudited)
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Three Months Ended September 30,
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Nine Months Ended September 30,
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2011
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2010
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2011
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2010
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Net sales
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$ | 155,379 | $ | 157,137 | $ | 452,644 | $ | 458,248 | ||||||||
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Cost of goods sold
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74,941 | 76,558 | 219,849 | 222,130 | ||||||||||||
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Gross profit
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80,438 | 80,579 | 232,795 | 236,118 | ||||||||||||
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Credit service charges
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109 | 167 | 362 | 566 | ||||||||||||
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Gross profit and other revenue
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80,547 | 80,746 | 233,157 | 236,684 | ||||||||||||
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Expenses:
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Selling, general and administrative
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80,445 | 79,272 | 234,282 | 233,025 | ||||||||||||
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Interest, net
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177 | 202 | 576 | 616 | ||||||||||||
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Provision for doubtful accounts
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23 | 71 | 124 | 277 | ||||||||||||
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Other (income) expense, net
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(185 | ) | (45 | ) | (368 | ) | (255 | ) | ||||||||
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80,460 | 79,500 | 234,614 | 233,663 | ||||||||||||
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Income (loss) before income taxes
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87 | 1,246 | (1,457 | ) | 3,021 | |||||||||||
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Income tax expense (benefit)
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(31 | ) | 59 | 37 | 86 | |||||||||||
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Net income (loss)
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$ | 118 | $ | 1,187 | $ | (1,494 | ) | $ | 2,935 | |||||||
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Basic earnings (loss) per share:
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Common Stock
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$ | 0.01 | $ | 0.05 | $ | (0.07 | ) | $ | 0.14 | |||||||
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Class A Common Stock
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$ | 0.01 | $ | 0.05 | $ | (0.07 | ) | $ | 0.13 | |||||||
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Diluted earnings (loss) per share:
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Common Stock
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$ | 0.01 | $ | 0.05 | $ | (0.07 | ) | $ | 0.13 | |||||||
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Class A Common Stock
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$ | 0.01 | $ | 0.05 | $ | (0.07 | ) | $ | 0.13 | |||||||
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Basic weighted average shares outstanding:
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Common Stock
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18,666 | 18,472 | 18,600 | 18,040 | ||||||||||||
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Class A Common Stock
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3,283 | 3,371 | 3,309 | 3,637 | ||||||||||||
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Diluted weighted average shares outstanding:
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Common Stock
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22,162 | 22,013 | 18,600 | 21,955 | ||||||||||||
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Class A Common Stock
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3,283 | 3,371 | 3,309 | 3,637 | ||||||||||||
NEWS RELEASE – NOVEMBER 2, 2011 Page 4
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HAVERTY FURNITURE COMPANIES, INC.
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CONDENSED CONSOLIDATED BALANCE SHEETS
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(In Thousands, except per share data)
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September 30,
2011
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December 31,
2010
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September 30,
2010
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(Unaudited)
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(Unaudited)
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ASSETS
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Current assets
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Cash and cash equivalents
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$ | 66,485 | $ | 58,045 | $ | 67,084 | ||||||
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Restricted cash and cash equivalents
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6,812 | — | — | |||||||||
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Accounts receivable
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11,082 | 13,778 | 13,682 | |||||||||
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Inventories
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81,637 | 91,938 | 88,184 | |||||||||
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Prepaid expenses
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9,210 | 7,685 | 8,804 | |||||||||
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Other current assets
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3,718 | 5,489 | 6,304 | |||||||||
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Total current assets
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178,944 | 176,935 | 184,058 | |||||||||
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Accounts receivable, long-term
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478 | 588 | 632 | |||||||||
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Property and equipment
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176,448 | 175,511 | 172,547 | |||||||||
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Deferred income taxes
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11,672 | 11,524 | 11,249 | |||||||||
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Other assets
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5,239 | 5,681 | 5,674 | |||||||||
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$ | 372,781 | $ | 370,239 | $ | 374,160 | ||||||
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LIABILITIES AND STOCKHOLDERS’ EQUITY
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Current liabilities
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Accounts payable
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$ | 17,707 | $ | 18,088 | $ | 21,179 | ||||||
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Customer deposits
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19,921 | 13,585 | 17,849 | |||||||||
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Accrued liabilities
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30,351 | 31,357 | 32,166 | |||||||||
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Deferred income taxes
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6,976 | 7,052 | 7,450 | |||||||||
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Current portion of lease obligations
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550 | 525 | 501 | |||||||||
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Total current liabilities
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75,505 | 70,607 | 79,145 | |||||||||
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Lease obligations, less current portion
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8,158 | 8,574 | 8,727 | |||||||||
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Other liabilities
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34,693 | 37,876 | 33,938 | |||||||||
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Total liabilities
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118,356 | 117,057 | 121,810 | |||||||||
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Stockholders’ equity
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254,425 | 253,182 | 252,350 | |||||||||
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$ | 372,781 | $ | 370,239 | $ | 374,160 | ||||||
NEWS RELEASE – NOVEMBER 2, 2011 Page 5
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HAVERTY FURNITURE COMPANIES, INC.
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
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(In Thousands – Unaudited)
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Nine Months Ended September 30,
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2011
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2010
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Cash Flows from Operating Activities:
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Net income (loss)
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$ | (1,494 | ) | $ | 2,935 | |||
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Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
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Depreciation and amortization
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13,542 | 12,689 | ||||||
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Share-based compensation expense
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1,569 | 1,373 | ||||||
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Provision for doubtful accounts
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124 | 277 | ||||||
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Deferred income taxes
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— | (2,322 | ) | |||||
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Net gain on sale of property and equipment
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(142 | ) | (107 | ) | ||||
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Other
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258 | (212 | ) | |||||
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Changes in operating assets and liabilities:
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Accounts receivable
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2,682 | 1,552 | ||||||
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Inventories
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10,301 | 5,117 | ||||||
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Customer deposits
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6,336 | 3,847 | ||||||
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Other assets and liabilities
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(1,679 | ) | (2,358 | ) | ||||
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Accounts payable and accrued liabilities
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(1,387 | ) | 4,055 | |||||
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Net cash provided by operating activities
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30,110 | 26,846 | ||||||
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Cash Flows from Investing Activities:
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Capital expenditures
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(14,480 | ) | (6,906 | ) | ||||
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Restricted cash and cash equivalents
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(6,812 | ) | — | |||||
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Proceeds from sale of property and equipment
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155 | 207 | ||||||
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Net cash used in investing activities
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(21,137 | ) | (6,699 | ) | ||||
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Cash Flows from Financing Activities:
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Payments on lease obligations
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(391 | ) | (255 | ) | ||||
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Proceeds from exercise of stock options
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270 | 3,319 | ||||||
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Other financing activities
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(412 | ) | (593 | ) | ||||
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Net cash provided by (used in) financing activities
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(533 | ) | 2,471 | |||||
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Increase in cash and cash equivalents during the period
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8,440 | 22,618 | ||||||
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Cash and cash equivalents at beginning of period
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58,045 | 44,466 | ||||||
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Cash and cash equivalents at end of period
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$ | 66,485 | $ | 67,084 | ||||
Calculation of Earnings Per Share
We report our earnings per share using the two-class method. The income or loss per share for each class of common stock is calculated assuming 100% of our earnings or losses are distributed as dividends to each class of common stock based on their contractual rights.
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, which has ten votes per share as opposed to one vote per share for the Common Stock (on all matters other than the election of directors), 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.
NEWS RELEASE – NOVEMBER 2, 2011 Page 6
The following is a reconciliation of the earnings (loss) and number of shares used in calculating the diluted earnings (loss) per share for Common Stock and Class A Common Stock (amounts in thousands):
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Three Months Ended September 30,
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Nine Months Ended September 30,
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2011
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2010
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2011
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2010
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Numerator:
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Common:
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Distributed earnings
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$ | — | $ | — | $ | — | $ | — | ||||||||
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Undistributed earnings (loss)
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101 | 1,011 | (1,277 | ) | 2,462 | |||||||||||
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Basic
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101 | 1,011 | (1,277 | ) | 2,462 | |||||||||||
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Class A Common earnings (loss)
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17 | 176 | — | 473 | ||||||||||||
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Diluted
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$ | 118 | $ | 1,187 | $ | (1,277 | ) | $ | 2,935 | |||||||
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Class A Common:
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Distributed earnings
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$ | — | $ | — | $ | — | $ | — | ||||||||
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Undistributed earnings (loss)
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17 | 176 | (217 | ) | 473 | |||||||||||
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$ | 17 | $ | 176 | $ | (217 | ) | $ | 473 | |||||||
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Denominator:
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Common:
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Weighted average shares outstanding - basic
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18,666 | 18,472 | 18,600 | 18,040 | ||||||||||||
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Assumed conversion of Class A Common Stock
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3,283 | 3,371 | — | 3,637 | ||||||||||||
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Dilutive options, awards and common stock equivalents
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213 | 170 | — | 278 | ||||||||||||
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Total weighted-average diluted Common Stock
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22,162 | 22,013 | 18,600 | 21,955 | ||||||||||||
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Class A Common:
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Weighted average shares outstanding
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3,283 | 3,371 | 3,309 | 3,637 | ||||||||||||
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Antidilutive shares excluded from the denominator:
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Excluded due to the options’ exercise prices being
greater than the average market price
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788 | 1,203 | 797 | 882 | ||||||||||||
Also excluded from the denominator for the nine months ended September 30, 2011, because of the net loss for that period, is the assumed conversion of the Class A Common Stock, dilutive options, awards and common stock equivalents totaling approximately 3,536,000 shares.
About Havertys
Havertys, established in 1885, is a full-service home furnishings retailer with 119 showrooms in 17 states in the Southern and Midwestern regions providing its customers with a wide selection of quality merchandise in middle to upper-middle price ranges. Additional information is available on the company’s website at www.havertys.com
News releases include forward-looking statements, which are subject to risks and uncertainties. Factors that might cause actual results to differ materially from future results expressed or implied by such forward-looking statements include, but are not limited to, general economic conditions, the consumer spending environment for large ticket items, competition in the retail furniture industry and other uncertainties detailed from time to time in the company’s reports filed with the SEC.
NEWS RELEASE – NOVEMBER 2, 2011 Page 7
Conference Call Information
The company will sponsor a conference call Thursday, November 3, 2011 at 10:00 a.m. Eastern Daylight Time to review the results. Listen-only access to the call is available via the web at www.havertys.com (For Investors) and at www.streetevents.com (Individual Investor Center), both live and for a limited time, on a replay basis.
Contact:
Haverty Furniture Companies, Inc., 404-443-2900
Dennis L. Fink
EVP & CFO
Jenny Hill Parker
SVP, Finance, Secretary and Treasurer
SOURCE: Haverty Furniture Companies, Inc.