HAVERTY FURNITURE COMPANIES INC - Quarter Report: 2020 September (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

OR

Commission file number:    1-14445

HAVERTY FURNITURE COMPANIES, INC.

(Exact name of registrant as specified in its charter)

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934

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 ⌧     No ◻

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 ⌧   No ◻

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.

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. ◻

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  ☐     No ⌧

The numbers of shares outstanding of the registrant’s two classes of $1 par value common stock as of October 29, 2020, were:  Common Stock – 16,699,704; Class A Common Stock – 1,511,955.

HAVERTY FURNITURE COMPANIES, INC.

INDEX

 

PART I.  FINANCIAL INFORMATION

 

 

 

Item 1.  Financial Statements

HAVERTY FURNITURE COMPANIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

See notes to these condensed consolidated financial statements.

HAVERTY FURNITURE COMPANIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

See notes to these condensed consolidated financial statements.

HAVERTY FURNITURE COMPANIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

See notes to these condensed consolidated financial statements.

(in thousands)		Common Stock				Class A Common Stock				Additional Paid-In Capital				Retained Earnings				Accumulated Other Comprehensive Loss				Treasury Stock				Total
Balances at June 30, 2020		$	29,538			$	2,054			$	94,581			$	304,900			$	(2,027	)		$	(164,668	)		$	264,378
Net income															18,261												18,261
Dividends declared:
Common Stock, $0.20 per share															(3,423	)											(3,423	)
Class A Common Stock, $0.19 per share															(290	)											(290	)
Class A conversion			17				(17	)																			—
Acquisition of treasury stock																							(12,899	)			(12,899	)
Amortization of restricted stock											1,325																1,325
Directors’ Compensation Plan											(5	)															(5	)
Other comprehensive income																			30								30
Balances at September 30, 2020		$	29,555			$	2,037			$	95,901			$	319,448			$	(1,997	)		$	(177,567	)		$	267,377

(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, 2019		$	29,431			$	2,054			$	93,208			$	295,999			$	(2,087	)		$	(158,102	)		$	260,503
Net income															33,720												33,720
Dividends declared:
Common Stock, $0.55 per share															(9,475	)											(9,475	)
Class A Common Stock, $0.52 per share															(796	)											(796	)
Acquisition of treasury stock																							(19,708	)			(19,708	)
Restricted stock issuances			107								(983	)															(876	)
Class A Conversion			17				(17	)																			—
Amortization of restricted stock											3,362																3,362
Directors’ Compensation Plan											314												243				557
Other comprehensive income																			90								90
Balances at September 30, 2020		$	29,555			$	2,037			$	95,901			$	319,448			$	(1,997	)		$	(177,567	)		$	267,377

(in thousands)		Common Stock				Class A Common Stock				Additional Paid-In Capital				Retained Earnings				Accumulated Other Comprehensive Loss				Treasury Stock				Total
Balances at June 30, 2019		$	29,418			$	2,058			$	91,847			$	291,573			$	(1,448	)		$	(146,188	)		$	267,260
Net income															6,097												6,097
Dividends declared:
Common Stock, $0.20 per share															(3,617	)											(3,617	)
Class A Common Stock, $0.19 per share															(292	)											(292	)
Acquisition of treasury stock																							(1,473	)			(1,473	)
Amortization of restricted stock											739																739
Directors’ Compensation Plan
Other comprehensive income																			8								8
Balances at September 30, 2019		$	29,418			$	2,058			$	92,586			$	293,761			$	(1,440	)		$	(147,661	)		$	268,722

(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, 2018		$	29,079			$	2,280			$	91,394			$	282,366			$	(1,465	)		$	(129,025	)		$	274,629
Net income															15,765												15,765
Dividends declared:
Common Stock, $0.56 per share															(10,342	)											(10,342	)
Class A Common Stock, $0.53per share															(852	)											(852	)
Acquisition of treasury stock																							(19,316	)			(19,316	)
Restricted stock issuances			117								(1,445	)															(1,328	)
Class A conversion			222				(222	)																			—
Amortization of restricted stock											2,690																2,690
Directors’ Compensation Plan											(53	)											680				627
Other comprehensive income																			25								25
Cumulative effect adjustment															6,824												6,824
Balances at September 30, 2019		$	29,418			$	2,058			$	92,586			$	293,761			$	(1,440	)		$	(147,661	)		$	268,722

		Three Months Ended September 30,																Nine Months Ended September 30,
		2020								2019								2020								2019
(In thousands)		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		$	29,725				13.7	%		$	33,564				16.0	%		$	76,638				15.1	%		$	95,501				16.2	%
Dining Room Furniture			22,994				10.6				22,836				10.9				54,067				10.7				62,698				10.7
Occasional			19,220				8.8				16,125				7.7				46,665				9.2				47,070				8.0
			71,939				33.1				72,525				34.6				177,371				35.0				205,269				34.9
Upholstery			95,554				43.9				83,619				39.9				213,656				42.1				233,797				39.7
Mattresses			21,431				9.9				25,721				12.4				50,625				10.0				68,956				11.7
Accessories and Other (1)			28,590				13.1				27,455				13.1				65,261				12.9				80,433				13.7
		$	217,513				100.0	%		$	209,320				100.0	%		$	506,913				100.0	%		$	588,455				100.0	%

(1)	Includes delivery charges and product protection.

		Three Months Ended September 30,								Nine Months Ended September 30,
		2020				2019				2020				2019
Operating lease cost		$	11,596			$	10,478			$	33,111			$	31,171
Short-term lease cost			—				30				—				70
Variable lease cost			1,627				1,572				3,825				4,384
Total lease expense		$	13,223			$	12,080			$	36,936			$	35,625

		Nine Months Ended September 30,
		2020				2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases		$	25,099			$	30,130
Right-of-use assets obtained in exchange for lease obligations:
New operating leases		$	83,550			$	25,664

		Service-Based Restricted Stock Awards								Performance-Based Restricted Stock Awards								Stock-Settled Appreciation Rights
		Shares or Units (#)				Weighted-Average Award Price ($)				Shares or Units (#)				Weighted-Average Award Price ($)				Rights (#)				Weighted-Average Award Price ($)
Outstanding at December 31, 2019			234,810				20.93				214,809				21.38				7,500				18.14
Granted/Issued			145,375				20.42				120,727				20.42				—
Awards vested or rights exercised(1)			(122,114	)			20.62				(44,875	)			22.12				(7,500	)			18.14
Forfeited			(7,670	)			20.40				(76,766	)			20.29				—				—
Outstanding at September 30, 2020			250,401				20.80				213,895				21.08				—				—
Restricted Units expected to vest			250,401				20.80				288,303				20.90				—				—

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

		Three Months Ended September 30,								Nine Months Ended September 30,
		2020				2019				2020				2019
Numerator:
Common:
Distributed earnings		$	3,423			$	3,617			$	9,475			$	10,342
Undistributed earnings			13,408				2,025				21,624				4,216
Basic			16,831				5,642				31,099				14,558
Class A Common earnings			1,430				455				2,621				1,207
Diluted		$	18,261			$	6,097			$	33,720			$	15,765
Class A Common:
Distributed earnings		$	290			$	292			$	796			$	852
Undistributed earnings			1,140				163				1,825				355
		$	1,430			$	455			$	2,621			$	1,207
Denominator:
Common:
Weighted average shares outstanding - basic			17,098				18,116				17,267				18,514
Assumed conversion of Class A Common Stock			1,526				1,536				1,530				1,637
Dilutive options, awards and common stock equivalents			240				241				241				293
Total weighted-average diluted Common Stock			18,864				19,893				19,038				20,444
Class A Common:
Weighted average shares outstanding			1,526				1,536				1,530				1,637
Basic earnings per share:
Common Stock		$	0.98			$	0.31			$	1.80			$	0.79
Class A Common Stock		$	0.94			$	0.30			$	1.71			$	0.74
Diluted earnings per share:
Common Stock		$	0.97			$	0.31			$	1.77			$	0.77
Class A Common Stock		$	0.93			$	0.30			$	1.70			$	0.73

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, 2019.

Forward-Looking Statements

Some statements in this quarterly report on Form 10-Q constitute forward-looking statements that are subject to the safe harbor provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements in the future tense and all statements accompanied by words such as “expect,” “likely,” “outlook,” “forecast,” “preliminary,” “would,” “could,” “should,” “position,” “will,” “project,” “intend,” “plan,” “on track,” “anticipate,” “to come,” “may,” “possible,” “assume,” and variations of such words and similar expressions are intended to identify such forward-looking statements. Senior officers may also make verbal statements to analysts, investors, the media and others that are forward-looking. These forward-looking statements include, without limitation, our expected ability to operate and protect our team members and customers during the COVID-19 pandemic, the execution and effect of our cost savings initiatives, our efforts and initiatives to help us emerge from the pandemic well-positioned, and our liquidity position to continue to operate during these highly uncertain times.

We caution that our forward-looking statements involve risks and uncertainties, and while we believe that our expectations for the future are reasonable in view of currently available information, you are cautioned not to place undue reliance on our forward-looking statements. Actual results or events may differ materially from those indicated as a result of various important factors. Such factors may include, among other things, the extent and duration of the disruption to our business operations caused by the health crisis associated with the COVID-19 pandemic, including the effects on the financial health of our business partners and customers, on supply chains and our suppliers, and on access to capital and liquidity provided by the financial and capital markets; our ability to maintain compliance with debt covenants and amend such credit facilities as necessary; disruptions in our suppliers' operations, including due to the impact of COVID-19, including potential problems with inventory availability and the potential result of the volatility or higher cost of product and international freight due to the high demand of products and low supply for an unpredictable period of time; disruptions in our third-party producers’ operations in foreign countries; changes in national and international legislation or government regulations or policies, including COVID-19 related orders and restrictions and changes to import tariffs and the unpredictability of such changes; failure of vendors to meet our quality control standards or to react to changes in legislative or regulatory frameworks; disruptions in our distribution centers; changes in general economic conditions, including unemployment, inflation (including the impact of tariffs); labor shortages and the Company's ability to successfully attract and retain employees in the current labor market; uncertain credit markets and other macroeconomic conditions; competitive product, service and pricing pressures; failure or weakness in our disclosure controls and procedures and internal controls over financial reporting; disruptions caused by a failure or breach of the Company's information systems and information technology infrastructure, as well as other risks and uncertainties discussed herein and in the Company's Annual Report on Form 10-K for 2019 (all of which risks may be amplified by the COVID-19 pandemic) and Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2020 and June 30, 2020 and from time to time in the Company's subsequent filings with the SEC.

Forward-looking statements describe our expectations only as of the date they are made, and the Company undertakes no duty to update its forward-looking statements except as required by law. You are advised, however, to review any further disclosures we make on related subjects in our subsequent Forms 10-K, 10-Q, 8-K and other reports filed with the SEC.

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

Impact of COVID-19 on Our Business

The COVID-19 pandemic has resulted in significant economic disruption and adversely impacted our business. We closed our stores and ceased delivery operations in the second half of March 2020. Affected team members were paid during this period and most corporate personnel transitioned to working remotely. On April 1, we extended our store closure for another 30 days and furloughed 3,033 team members or approximately 87% of our workforce. During this period, we paid the cost of enrolled health benefits of those furloughed. Given the dramatic shock to the economy caused by the pandemic and uncertainty of the ongoing impact, we made a permanent reduction in our workforce of approximately 1,200 team members effective April 30 and extended the furlough of approximately 730 team members until June 1. We reopened 103 of our stores on May 1 and the remaining 17 were opened by June 20 and deliveries restarted on May 5.

Our business has been very strong since reopening.  Consumers not negatively impacted financially are spending on their homes.  Our online shopping and chat surged during the second quarter and continues to outpace our first quarter activity. Store traffic has increased as customers shop online but want to touch, see, and comfort test before purchasing. Consumers are also favoring quality over price and our average ticket has risen. We continue to work closely with local authorities and follow the guidance of the Centers for Disease Control and Prevention (“CDC”), implementing enhanced cleaning measures, social distancing, and the utilization of face masks for the safety of team members, customers, and communities.

Demand is outpacing product availability in certain categories. Manufacturers are challenged to ensure safe work environments and have encountered some raw material shortages. We are continuing to assess our staffing needs and have encountered difficulties in increasing our distribution and delivery capacity.

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We have taken several steps to strengtaahen our financial position and maintain financial flexibility by reviewing operating expenses, evaluating merchandise purchases, reducing capital expenditures,  temporarily borrowing $43.8 million on our credit facility (which has since been repaid), and completing a $70.0 million sale-leaseback transaction in May.

As the COVID-19 pandemic is complex and rapidly evolving, the Company's plans as described in this report may change. At this point, we cannot reasonably estimate the duration and severity of this pandemic and its impact on our business, results of operations, financial position and cash flows.

Net Sales

Our sales are generated by customer purchases of home furnishings. Revenue is recognized upon delivery to the customer.

We closed our stores on March 19 and ceased delivery operations on March 21. Most stores reopened on May 1 and total written sales for the two months ended June 30, 2020 were up 13.9% and written comparable store sales were up 17.5% compared to the same two-month period in 2019.  Our written business remained strong during the third quarter of 2020.  Total written sales were up 22.8% and written comparable store sales rose 22.6% over the same period last year.

Our delivery capacity was reduced as part of our business continuity plan. Deliveries resumed on May 5 with reduced personnel and capacity and total sales from May 5 through June 30, 2020 were down 13.4% compared with the same period of 2019. We adjusted our operations during the third quarter in an effort to restore our previous delivery capacity. We are also working with our vendors to accelerate orders as demand is outpacing product availability in certain categories. Total sales for the third quarter of 2020 were up 3.9% and comparable-store sales were up 4.0% over the same period in 2019.

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

The following outlines our sales and comparable store or “comp-store” sales increases and decreases for the periods indicated (dollars in millions, amounts and percentages may not always add to totals due to rounding. NM = not meaningful):

Comp-store sales for the periods presented are sales made on our website and from stores open throughout the period and the corresponding prior year period.  If a store expansion results in a 10% or greater increase in selling square footage, its sales are removed from the comparable store sales base until it has been open a full 12 months. Accordingly, our comp-store sales may not be comparable to similar measures presented by other companies. The computation of comp-store sales for the first and second quarters of 2020 and nine months ended September 30, 2020 is not meaningful since all stores were closed for a period of time during these periods.

Gross Profit

Gross profit for the third quarter of 2020 was 56.2%, up 270 basis points compared to the prior year period of 53.5%. The increase is primarily due to merchandise pricing and mix, and reductions in inventory markdowns and a smaller negative LIFO impact. Gross profit for the first nine months of 2020 was 55.5% compared to 54.2% for the same period of 2019.

We expect gross profit margins for the fourth quarter of 2020 as a percentage of sales will be comparable to the third quarter of 2020 level based on current estimates of product and freight costs and changes in 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 for the nine months ended September 30, 2020 reflect the impact of our stores being closed from the last half of March through April and the operational changes implemented under our business continuity plan. SG&A dollars decreased $28.5 million for the nine months ended September 30, 2020 compared to the same prior year period. 

During April, virtually all team members in our store and distribution operations were furloughed and warehouse and corporate office personnel were furloughed to a minimum level for necessary operations. We covered the health benefits premiums for those furloughed which totaled approximately $2.1 million. Salaries and wages for the furloughed team members was approximately $9.9 million. We reduced our workforce by approximately 35% effective April 30 and paid severance costs of approximately $1.7 million.

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

SG&A dollars decreased $4.1 million for the third quarter of 2020 compared to the same prior year period. The reduction is primarily from lower advertising spend of $2.5 million and the

impact of restrictions on travel, meetings and related expenses of $1.8 million. The reduction in workforce contributed to lower salaries, wages, payroll taxes and benefits of $5.6 million which was completely offset by higher commission expense and incentive compensation.

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 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. 

Our SG&A costs for the third quarter of 2020 as a percent of sales was 46.0% and 49.8% for the same period in 2019.

The following table outlines our SG&A expenses by classification:

The variable expenses in dollars were lower in the third quarter of 2020 compared to 2019 primarily due to a $1.0 million reduction in warehouse and transportation costs resulting in part from wages for positions eliminated in April that we are working to replace.

The variable expenses for the nine months ended September 30, 2020 include payment of approximately $4.3 million in wages during the last weeks of March when stores were closed and deliveries were halted and the payment of health benefits for furloughed team members. We have offset a portion of the wages and health benefits costs with an expected recovery via the CARES Act as described in Note B of the Notes to the Condensed Consolidated Financial Statements.

Fixed and discretionary expenses were impacted in the third quarter of 2020 primarily by reductions in advertising spending and travel and meeting expenses compared to the prior year quarter. Changes in these categories were the primary drivers of the reductions in dollars for the nine months ended September 30, 2020.

Our variable type expenses within SG&A for the fourth quarter of 2020 are anticipated to be 17.8% versus 18.2% for the same period in 2019. Fixed and discretionary expenses are expected to be approximately $67.0 to $69.0 million for the fourth quarter of 2020 compared to $69.6 million for the same costs in the fourth quarter of 2019.

Liquidity and Capital Resources

 

Historically, our primary cash requirements were for working capital needs, contractual obligations, income tax liabilities, capital expenditures, payment of dividends, and share repurchases and were funded primarily through cash generated from operations.

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

As business slowed and we closed our stores in March, we proactively implemented several actions to reduce cash outlays and expenses and enhance our liquidity position and financial flexibility. We drew $43.8 million on our $60.0 million credit facility in late March as a proactive measure given the uncertain environment and repaid these borrowings in late June. Refer to Note F of the Notes to the Condensed Consolidated Financial Statements. We worked with our landlords on rent deferrals and we delayed non-essential capital projects and new store openings where possible.

On May 18, 2020 we entered into a sale-leaseback transaction which provided an additional $70.0 million in gross proceeds. Refer to Note L of the Notes to the Condensed Consolidated Financial Statements for additional information concerning this transaction.

We believe that we have sufficient liquidity to finance our operations and expected capital requirements for at least 12 months should we need to reinstitute our business continuity plan. We will continue to monitor our liquidity closely given the volatility created by the COVID-19 pandemic.

Summary of Cash Activities

Our cash flows provided by operations was $99.8 million in the first nine months of 2020 compared to $58.4 million for the same period of 2019. This increase was primarily due to larger decreases in inventories in 2020 versus 2019 and larger increases in customer deposits in 2020 versus 2019. For additional information about the changes in our assets and liabilities refer to our Balance Sheet Changes discussion below.

Our cash flows provided by investing activities totaled $67.2 million in the first nine months of 2020 versus $10.2 million used in investing activities for the same period of 2019. This increase in 2020 was primarily due to $69.5 million in net proceeds from our sale-leaseback transaction in 2020 partly offset by higher capital expenditures in 2019 compared to 2020.

Financing activities used cash of $30.9 million in the first nine months of 2020 compared to $31.8 million for the same period of 2019.

Balance Sheet Changes for the Nine Months Ended September 30, 2020

Our balance sheet as of September 30, 2020, as compared to our balance sheet as of December 31, 2019, changed as follows:

•	increase in cash and cash equivalents of $136.1 million, primarily due to the $69.5 million of net proceeds from the sale-leaseback transaction and the $58.3 million increase in customer deposits;

•	decrease in inventories of $13.9 million as sales have grown;

•	decrease in property and equipment, net of $46.9 million, primarily due to the sale-leaseback of three warehouse facilities;

•	increase in right-of-use lease assets of $60.3 million primarily due to the sale-leaseback of three warehouse facilities;

•	increase in customer deposits of $58.3 million due to an increase in undelivered sales; and

•	increase of $61.5 million of lease liabilities primarily due to the sale-leaseback transaction.

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

Store Plans and Capital Expenditures

 

Net selling space in 2020 is expected to be slightly down compared to 2019.  Total capital expenditures are estimated to be $11.4 million in 2020 depending on the timing of spending for new projects.

 

Off-Balance Sheet Arrangements

 

As of September 30, 2020, we had no off-balance sheet arrangements or obligations.

 

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. Our critical accounting estimates are identified and described in our annual report on Form 10-K for the year ended December 31, 2019. We had no significant changes in those critical accounting estimates since our last annual report.

Item 3.  Quantitative and Qualitative Disclosures about Market Risk

 

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 to 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 September 30, 2020 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. As a result of the COVID-19 pandemic, team members have shifted to a rotating work from home and office environment. 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.

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

In addition to the other information set forth in this report, including the risk factors set forth below, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019, which could materially affect our business, financial condition or future results.

In December 2019, a novel strain of coronavirus, now labelled COVID-19 was detected in China and has now spread globally. The COVID-19 outbreak was declared a national health emergency by the United States effective March 1, 2020. Federal, state and local governments, and businesses have implemented significant actions in an effort to mitigate this public health crisis. Although the ultimate severity of the COVID-19 pandemic is uncertain at this time, the pandemic has had, and will continue to have, adverse impacts on the Company's financial condition and results of operations, including, but not limited to: 

•	We closed all of our 120 stores on March 19 in response to the COVID-19 pandemic with the expectation to reopen on April 1.

•

On April 1, we extended our store closure for another 30 days and furloughed 3,033 team members or approximately 87% of our workforce. Given the dramatic shock to the economy caused by the pandemic and uncertainty of the ongoing impact, we made a permanent reduction in our workforce of approximately 1,200 team members effective April 30 and extended the furlough of approximately 730 team members until June 1.

•	We reopened 103 stores on May 1 and the remaining 17 were reopened by June 20.

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Health concerns, social distancing measures or changes in consumer spending behaviors due to COVID-19 may continue to impact traffic in our stores as they resume operations  and if customers do not perceive our response to be adequate or appropriate, we could suffer damage to our reputation and brand, which could adversely affect our business in the future. These items could have a material impact on our sales and profits and could lead to higher third-party financing costs and asset impairment charges, among other things.

•	We may incur significant additional costs to ensure we meet the needs of our team members and customers, including additional cleanings of our stores and other facilities.

•	The demand by our customers is likely to be volatile due to their concerns over their actual or perceived financial condition.

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We have experienced temporary or long-term disruptions in our supply chain, as the pandemic has resulted in travel disruptions and has impacted manufacturing and distribution throughout the world. The receipt of merchandise sourced from impacted areas has been slowed or disrupted and our merchandise suppliers are expected to face similar challenges in receiving materials and fulfilling our orders. Furthermore, transportation delays and cost increases, more extensive travel restrictions, closures or disruptions of businesses and facilities or social, economic, political or labor instability in the affected areas, may impact our or our suppliers' operations.

•

We may be required to change our plans for inventory receipts which would place financial pressure on our merchandise suppliers. Such actions may negatively impact our relationships with our merchandise suppliers or adversely impact their financial performance and position. If this occurs, our current merchandise suppliers’ ability to meet their obligations to us may be impacted or we may also be required to establish new relationships with new merchandise suppliers.

•

Our liquidity has been negatively impacted and will be subject to further negative impact if our stores are not able to sustain normal operations. We may be required to pursue additional sources of financing to meet our financial obligations. Obtaining such financing is not guaranteed and is largely dependent upon market conditions and other factors.

•	The extent of the impact of the COVID-19 pandemic on our operations and financial results depends on future developments and is highly uncertain due to the unknown duration and severity of the pandemic. The situation is changing rapidly, and future impacts may materialize that are not yet known.

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 February 26, 2020, the board approved an additional repurchase amount of $30.0 million to bring the total available share repurchase authorization to approximately $34.9 million. The stock repurchase program has no expiration date, but may be terminated by our board at any time. The balance of the current authorization for purchases was approximately $16.8 million at September 30, 2020.

The following table presents information with respect to our repurchase of Havertys’ common stock during the third quarter of 2020:

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.

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.