Haverty Furniture Reports Results for Second Quarter 2005

Haverty Furniture Reports Results for Second Quarter 2005 


ATLANTA, Aug. 1  /PRNewswire-FirstCall/ -- HAVERTY FURNITURE COMPANIES, INC. (NYSE: HVT; HVT.A) today reported earnings for the second quarter ended June 30, 2005.  Net income for the second quarter was $1.3 million or $0.06 per diluted share of Common Stock, as compared to the second quarter 2004 net income of $3.6 million or $0.16 per diluted share of Common Stock.

For the six months ended June 30, 2005, net income was $4.5 million or $0.20 per diluted share of Common Stock versus net income of $9.7 million or $0.42 per diluted share of Common Stock for the same period in 2004.

Net sales for the second quarter of 2005 were $192.4 million, an increase of 7.1% over sales of $179.6 million for the corresponding quarter in 2004. As previously reported, comparable-store sales increased 2.3% for the quarter.

Clarence H. Smith, president and chief executive officer, said, "We noted in our June sales release that our second quarter earnings would be significantly below the prior year's quarter. These disappointing results were due to weak sales during May and June and exacerbated by the increased fixed costs associated with our distribution system.  We believe that sales for big- ticket furniture items have been hampered by a number of factors including: rising fuel costs, continued negative impressions concerning the economy in the media, and heavy promotional activity by the automobile industry.  Our marketing and merchandising teams have developed a slightly more promotional strategy for implementation in the second half of the year to more aggressively compete for our customers' dollars.  We believe that we will have improvement in our gross profit margins during the third and fourth quarters as all of the planned closures of local market warehouses and related inventory liquidations have been completed.

"Our second quarter total SG&A costs have risen sharply compared to last year but decreased 4.6% from the first quarter level.  Second quarter sales, normally the seasonally weakest of the year, fell 7.3% on a sequential quarter basis, more than is typical.  The distribution system that we now operate is effective but the fixed costs are higher.  To properly leverage these costs we must generate greater sales volume and not fall short of the sales we are staffed and scheduled to serve.  Our operations team is now able to assess the fully functional consolidated distribution system, and we expect to make certain refinements, reducing costs where possible.  We anticipate that our total SG&A expenses for the second half will be at or slightly below last year's second half costs as a percent of sales if we can achieve a total sales increase of approximately seven percent.

"We are pleased to announce that Steven Langer has joined our team as Assistant Vice President, Supply Chain.  He has developed considerable expertise in this field during his career working with global companies such as Georgia Pacific and Delta Airlines.  Product flow is a key area of importance to us as we source from Asia and other parts of the world and expand to new markets. Steven fills the vacancy left by the retirement of a senior member of our team.

"Actual net sales for July 2005 will be announced on Thursday, August 4th. Preliminary figures show sales of approximately $66.6 million, 5.5% below July last year in total and 8.8% lower on a comparable-store basis.  Written orders in July were up approximately 3.2% in total versus last year with comps off 1%.  The July 4th holiday weekend was disappointing, but written orders on a comp basis were modestly positive for the remainder of July.

"There was one less delivery day in July this year as compared to last year which impacted total sales by an estimated 4%.  Comp-store sales for July last year were up 9.9%, so the comparison was difficult.  Comp-store sales for August and September last year were down 4.1% and 8.4% respectively, largely due to disruptions from four hurricanes, so the comparisons should be much easier.

"During the fourth quarter we will be opening stores near Castleton Mall in Indianapolis, IN and by the Polaris Mall in Columbus, OH, both new markets for Havertys.  Two older stores in Shreveport, LA will be replaced with a single, better-located showroom, and we will be expanding our Woodbridge, VA store in our growing presence in the Washington, DC metro market.  We have decided to close our older, underperforming store on Airport Boulevard in Austin, TX in October and have a contract to sell the property for a profit. We are looking for a second store in Austin in the growing southwestern suburbs to compliment our beautiful store in the Lakeline Mall shopping district north of the city.  The opening of our Ft. Lauderdale, FL store in the Sawgrass Mall area has been moved to early 2006.

"Other new stores planned for 2006 include:  Port Charlotte, FL, another new city for Havertys in the first quarter; a new store in the southeastern suburbs of Atlanta, GA near Stonecrest Mall in the second quarter; and in the third quarter, a new showroom in the Cedar Hill shopping area south of Dallas, TX," Smith concluded.

Havertys is a full-service home furnishings retailer with 118 showrooms in 16 southern and central states 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 htp://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 Tuesday, August 2, 2005 at 10:00 a.m. Eastern Daylight Time to review the second quarter.  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       Six Months Ended
                                    June 30,             June 30,
                                           2004                  2004
                                 2005 (as restated(1)) 2005 (as restated(1))

  Net sales                   $192,394   $179,614   $400,027   $369,915
  Cost of goods sold            95,310     88,960    198,334    181,299
    Gross profit                97,084     90,654    201,693    188,616

  Credit service charges           875      1,163      1,865      2,467
    Gross profit and other
     revenue                    97,959     91,817    203,558    191,083

  Expenses:
    Selling, general and
     administrative             95,249     85,149    195,138    174,151
    Interest, net                  397        964      1,298      2,089
    Provision for doubtful
     accounts                      311        198        517        329
    Other expense (income), net     20       (264)      (439)      (853)
      Total expenses            95,977     86,047    196,514    175,716

  Income before income taxes     1,982      5,770      7,044     15,367

  Income taxes                     673      2,124      2,561      5,675

    Net income                  $1,309     $3,646     $4,483     $9,692

  Basic earnings per share, net
   income(1):
    Common Stock                 $0.06      $0.16      $0.20      $0.44
    Class A Common Stock         $0.05      $0.15      $0.19      $0.41
  Diluted earnings per share,
   net income(1):
    Common Stock                 $0.06      $0.16      $0.20      $0.42
    Class A Common Stock         $0.05      $0.15      $0.19      $0.40

  Weighted average shares -
   basic
    Common Stock                18,431     18,221     18,403     18,154
    Class A Common Stock         4,311      4,343      4,314      4,354
  Weighted average shares -
   assuming dilution:
    Common Stock                22,913     23,048     22,956     23,116
    Class A Common Stock         4,311      4,343      4,314      4,354

  Cash dividends per common
   share:
    Common Stock               $0.0625    $0.0625     $0.125     $0.125
    Class A Common Stock       $0.0575    $0.0575     $0.115     $0.115

    (1) See additional details at the end of this release.



                  Condensed Consolidated Balance Sheets
                          (Amounts in thousands)
                               (Unaudited)

                                                       December 31,
                                           June 30,       2004
                                             2005    (as restated(1))

  Assets
    Cash and cash equivalents                $861        $10,122
    Auction rate securities                   --           5,000
    Accounts receivable,
      net of allowance                     86,754         81,132
    Inventories, at LIFO cost             110,359        110,812
    Other current assets                   16,663         23,356
      Total Current Assets                214,637        230,422

    Accounts receivable, long-term          9,220          9,396
    Property and equipment, net           210,322        205,037
    Other assets                           11,700         12,711

                                         $445,879       $457,566


  Liabilities and Stockholders' Equity
    Notes payable to banks                $11,350           $--
    Accounts payable and
     accrued expenses                      88,558        100,702
    Current portion of long-term debt
     and capital lease obligations         12,816         20,270
        Total Current Liabilities         112,724        120,972

    Long-term debt and capital
     lease obligations                     37,982         44,228
    Other liabilities                      19,662         20,108
    Stockholders' equity                  275,511        272,258

                                         $445,879       $457,566

    (1) See additional details at the end of this release.



             Condensed Consolidated Statements of Cash Flows
                          (Amounts in thousands)
                               (Unaudited)

                                               Six Months Ended June 30,
                                                                2004
                                               2005         (as restated(1))

  Operating Activities
  Net Income                                  $4,483             $9,692
  Adjustments to reconcile net income
   to net cash provided by operating
   activities:
      Depreciation and amortization           10,524              9,452
      Provision for doubtful accounts            517                329
      Loss on sale of property and equipment      32                 94
      Other                                      830                126

  Changes in operating assets and
   liabilities                               (11,443)           (14,095)

   Net cash provided by operating activities   4,943              5,598

  Investing Activities
  Capital expenditures                       (15,937)           (10,835)
  Purchases of auction rate securities            --            (15,000)
  Proceeds from sale of auction rate
   securities                                  5,000                --
  Proceeds from sale of property and
   equipment                                      96                911
  Other investing activities                   1,209              2,196

       Net cash used in investing activities  (9,632)           (22,728)

  Financing Activities
  Net increase in borrowings under
   revolving credit facilities                11,350                --
  Payments on long-term debt and
   capital lease obligations                 (13,700)            (6,650)
  Proceeds from exercise of stock options        576              1,792
  Dividends paid                              (2,798)            (2,768)

       Net cash used in financing activities  (4,572)            (7,626)

  Decrease in cash and cash equivalents       (9,261)           (24,756)

  Cash and cash equivalents at
   beginning of period                        10,122             31,591

  Cash and cash equivalents at end of period    $861             $6,835

  (1) See additional details at the end of this release.



  Restatement

  Results for the six months ended June 30, 2005 and the Condensed
  Consolidated Balance Sheets as of December 31, 2004, included
  herein, have been restated in connection with the Company's review of its
  lease accounting as reported in its Form 10-K/A filed on
  June 27, 2005.  The impact of the adjustments is outlined below for the
  periods noted (in thousands, except per share data):


                                   Quarter Ended        Six Months Ended
                                   June 30, 2004         June 30, 2004
                               as previously   as    as previously   as
     Income statement data       reported   restated    reported  restated

       Selling, general and
        administrative            $84,946   $85,149    $173,737  $174,151
       Income before income taxes   5,973     5,770      15,781    15,367
       Income taxes                 2,228     2,124       5,886     5,675
       Net income                   3,745     3,646       9,895     9,692
       Diluted earnings per
        share - Common Stock        $0.16     $0.16       $0.43     $0.42


                              As of December 31, 2004
                               as previously   as
     Balance sheet data          reported   restated

       Accounts payable and
        accrued expenses,
        including customer
        deposits                 $105,826   $100,702
       Other liabilities (long
        term)                      13,286     20,108
       Stockholders' equity       273,956    272,258


  The liability for accrued straight-line rent has been reclassified from
  current to long-term in connection with the restatement in recognition
  of the portion which will be realized in periods beyond one year.



  Earnings per Share

  The following 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    Six Months Ended
                                             June 30           June 30
                                          2005     2004     2005     2004

      Common Stock:
        Weighted-average shares
         outstanding                      18,431   18,221   18,403   18,154

        Assumed conversion of Class A
         Common shares                     4,311    4,343    4,314    4,354

        Dilutive options and awards          171      484      239      608

        Total weighted-average
         diluted common shares            22,913   23,048   22,956   23,116


  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, of [phone]



Web site:  http://www.havertys.com/

Copyright