Haverty Furniture Reports Earings For 2003

Furniture World Magazine

Haverty Furniture Companies, Inc. reported earnings for the fourth quarter and the year ended December 31, 2003. Earnings for the fourth quarter, before the cumulative effect of a change in accounting principle, were $9.8 million, or $0.43 per share, compared with $7.9 million, or $0.36 per share in the fourth quarter of 2002, a 24.1% and 19.4% increase, respectively. Earnings before the cumulative effect of a change in accounting principle for the 2003 year were $24.3 million, or $1.08 per share, compared with $24.3 million, or $1.10 per share for 2002. 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. As previously reported, sales for the fourth quarter were $205.3 million, or 8.9% greater than the sales in the corresponding quarter in 2002. Sales for the year increased 5.8% to $744.6 million from $704.0 million in 2002. Comparable-store sales in 2003 increased 5.7% for the fourth quarter and 1.0% for the year. The income statement for the fourth quarter contains a reclassification between selling, general and administrative expenses (SG&A) and cost of goods sold, as a result of Emerging Issues Task Force (EITF) Issue 02-16. Vendor rebates of $0.8 million earned based on sales of certain products were reclassifed out of advertising (an increase in net advertising) and into cost of sales. This reclassification increased both gross profit margins and SG&A expenses for the quarter by 0.40% of sales. There is not a corresponding entry for the prior-year periods, so readers must bear this in mind as they compare the cost of sales, gross profit and SG&A line items between periods. Clarence H. Smith, president and chief executive officer said, "The continued success of Havertys(R) Collections and greater emphasis on consistent pricing yielded better than expected gross profit margins. We used more promotional credit offers in the fourth quarter as a competitive tool, and reduced the level of percentage-off price promotions during sales events. "As we commented in our December sales release, SG&A costs were below last year as a percent of sales, but higher than originally anticipated. In addition to the cost of the additional credit promotions, we had not gained all of the savings anticipated from our new distribution methods. Our quick delivery capabilities are a competitive strength and better efficiencies will be achieved as we refine the process for optimal frequency of deliveries tolocal markets and the most economical routing of home deliveries. "Inventories have been reduced by $7.1 million, or 6.2% compared to last year largely due to the consolidation of local market warehouses and improved supply chain management. The outsourcing of the additional and more promotional credit offers resulted in a continued reduction in our own accounts receivable and further contributed to the $80.9 million of cash provided by operating activities. "We paid down $30.1 million of debt during 2003, employed $21.2 million in capital expenditures and purchased $6.7 million in assets that were previously leased. Our cash and cash equivalents increased $27.8 million for the year. "We expect to begin construction of our new Florida Distribution Center in Lakeland later this month and expect to open this new hub in October. We have been growing our Florida store base in recent years and are excited to have this additional infrastructure coming on line to more efficiently serve our customers in this important region." Havertys is a full-service home furnishings retailer with 113 showrooms in 15 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 http://www.havertys.com.