HAVERTY FURNITURE COMPANIES INC (Form: 10-Q, Received: 05/03/2013 15:26:20)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2013

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to

Commission file number: 1-14445

HAVERTY FURNITURE COMPANIES, INC.

(Exact name of registrant as specified in its charter)

Maryland		58-0281900
(State of incorporation)		(I.R.S. Employer Identification No.)

780 Johnson Ferry Road, Suite 800 Atlanta, Georgia		30342
(Address of principal executive office)		(Zip Code)
(404) 443-2900
(Registrant’s telephone number, including area code)

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 x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	¨		Accelerated filer	x
Non-accelerated filer	¨		Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No x

The numbers of shares outstanding of the registrant’s two classes of $1 par value common stock as of April 30, 2013, were: Common Stock – 19,627,157; Class A Common Stock – 2,718,823.

HAVERTY FURNITURE COMPANIES, INC.

INDEX

		Page No.

PART I.	FINANCIAL INFORMATION

	Item 1. Financial Statements

	Condensed Consolidated Balance Sheets – March 31, 2013 (unaudited) and December 31, 2012	1

	Condensed Consolidated Statements of Income – Three Months ended March 31, 2013 and 2012 (unaudited)	2

	Condensed Consolidated Statements of Comprehensive Income – Three months ended March 31, 2013 and 2012 (unaudited)	3

	Condensed Consolidated Statements of Cash Flows – Three Months ended March 31, 2013 and 2012 (unaudited)	4

	Notes to Condensed Consolidated Financial Statements (unaudited)	5

	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	10

	Item 3. Quantitative and Qualitative Disclosures about Market Risk	12

	Item 4. Controls and Procedures	12

PART II.	OTHER INFORMATION

	Item 1A. Risk Factors	13

	Item 6. Exhibits	13

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

HAVERTY FURNITURE COMPANIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

	March 31, 2013			December 31, 2012
Assets
Current assets
Cash and cash equivalents	$	53,869		$	53,550
Restricted cash and cash equivalents		7,014			7,013
Accounts receivable		9,102			9,710
Inventories		97,567			96,902
Prepaid expenses		7,545			9,532
Other current assets		4,886			3,187
Total current assets		179,983			179,894
Accounts receivable, long-term		823			814
Property and equipment		190,812			193,085
Deferred income taxes		24,184			24,366
Other assets		4,112			3,937
Total assets	$	399,914		$	402,096
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	20,780		$	28,178
Customer deposits		20,859			20,963
Accrued liabilities		33,494			33,272
Deferred income taxes		6,595			6,595
Current portion of lease obligations		908			881
Total current liabilities		82,636			89,889
Lease obligations, less current portion		17,229			18,473
Other liabilities		32,261			34,306
Commitments		—			—
Total liabilities		132,126			142,668
Stockholders’ equity
Capital Stock, par value $1 per share
Preferred Stock, Authorized – 1,000 shares; Issued: None
Common Stock, Authorized – 50,000 shares; Issued: 2013 – 27,282, 2012 – 27,212		27,282			27,212
Convertible Class A Common Stock, Authorized – 15,000 shares; Issued: 2013 – 3,241; 2012 – 3,297		3,241			3,297
Additional paid-in capital		74,474			73,803
Retained earnings		261,687			254,310
Accumulated other comprehensive loss		(23,080	)		(23,378	)
Less treasury stock at cost – Common Stock (2013 and 2012 – 7,741) and Convertible Class A Common Stock (2013 and 2012 – 522 shares)		(75,816	)		(75,816	)
Total stockholders’ equity		267,788			259,428
Total liabilities and stockholders’ equity	$	399,914		$	402,096

See notes to these condensed consolidated financial statements.

HAVERTY FURNITURE COMPANIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

( In thousands, except per share data – Unaudited )

	Three Months Ended March 31,
	2013			2012

Net sales	$	186,090		$	163,569
Cost of goods sold		85,781			78,228
Gross profit		100,309			85,341
Credit service charges		86			76
Gross profit and other revenue		100,395			85,417

Expenses:
Selling, general and administrative		86,662			81,237
Interest, net		278			161
Provision for doubtful accounts		13			66
Other income, net		(8	)		(68	)
		86,945			81,396

Income before income taxes		13,450			4,021
Income tax expense		5,190			1,564
Net income	$	8,260		$	2,457

Basic earnings per share:
Common Stock	$	0.37		$	0.11
Class A Common Stock	$	0.35		$	0.11

Diluted earnings per share:
Common Stock	$	0.36		$	0.11
Class A Common Stock	$	0.34		$	0.11

Basic weighted average common shares outstanding:
Common Stock		19,717			18,865
Class A Common Stock		2,781			3,084

Diluted weighted average common shares outstanding:
Common Stock		22,955			22,272
Class A Common Stock		2,781			3,084

Cash dividends per share:
Common Stock	$	0.0400		$	—
Class A Common Stock	$	0.0375		$	—

See notes to these condensed consolidated financial statements.

HAVERTY FURNITURE COMPANIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

( In thousands – Unaudited )

	Three Months Ended March 31,
	2013		2012

Net income	$	8,260	$	2,457
Other comprehensive income
Defined benefit pension plans:
Amortization of prior service cost		32		52
Amortization of net loss		266		490
Other		—		50
Total other comprehensive income		298		592
Comprehensive income	$	8,558	$	3,049

See notes to these condensed consolidated financial statements.

HAVERTY FURNITURE COMPANIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands – Unaudited)

	Three Months Ended March 31,
	2013			2012
Cash Flows from Operating Activities:
Net income	$	8,260		$	2,457
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		5,342			4,644
Share-based compensation expense		803			666
Provision for doubtful accounts		13			66
Other		(216	)		89
Changes in operating assets and liabilities:
Accounts receivable		586			788
Inventories		(665	)		1,801
Customer deposits		(104	)		3,604
Other assets and liabilities		(1,454	)		1,934
Accounts payable and accrued liabilities		(7,176	)		(4,857	)
Net cash provided by operating activities		5,389			11,192

Cash Flows from Investing Activities:
Capital expenditures		(3,972	)		(3,707	)
Restricted cash and cash equivalents		(1	)		(193	)
Other investing activities		2			4
Net cash used in investing activities		(3,971	)		(3,896	)

Cash Flows from Financing Activities:
Payments on lease obligations		(216	)		(185	)
Dividends paid		(883	)		—
Net cash used in financing activities		(1,099	)		(185	)

Increase in cash and cash equivalents during the period		319			7,111
Cash and cash equivalents at beginning of period		53,550			49,585
Cash and cash equivalents at end of period	$	53,869		$	56,696

See notes to these condensed consolidated financial statements.

HAVERTY FURNITURE COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE A – Business and Reporting Policies

Haverty Furniture Companies, Inc. (“Havertys,” “the Company,” “we,” “our,” or “us”) is a retailer of a broad line of residential furniture in the middle to upper-middle price ranges. We operate all of our stores using the Havertys brand and do not franchise our concept. We operate in one reportable segment, home furnishings retailing. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all information and footnotes required by U.S. generally accepted accounting principles (“U.S. GAAP”) for complete financial statements. The financial statements include the accounts of the Company and its wholly-owned subsidiary. All significant intercompany accounts and transactions have been eliminated in consolidation. We believe all adjustments, normal and recurring in nature, considered necessary for a fair presentation have been included.

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities, and reported amounts of revenue and expenses. Actual results could differ from those estimates.

The Company is subject to various claims and legal proceedings covering a wide range of matters that arise in the ordinary course of its business activities. We believe that any liability that may ultimately result from the resolution of these matters will not have a material adverse effect on our financial condition, results of operations or cash flows.

Changes to U.S. GAAP are established by the Financial Accounting Standards Board (FASB) in the form of accounting standards updates (ASU’s) to the FASB’s Accounting Standards Codification. The Company considers the applicability and impact of all ASU’s. Newly effective ASU’s not noted herein were assessed and determined to be either not applicable or are expected to have minimal impact on our consolidated financial position or results of operations.

Effective January 1, 2013, the Company adopted ASU No. 2013-02, “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income.” The adoption of ASU 2013-02 concerns presentation and disclosure only and did not have an impact on the Company’s consolidated financial position or results of operations.

In the first quarter of 2013, we recorded an out-of-period adjustment related to our historical accrual process for certain vendors' pricing allowances. The non-cash adjustment increased gross profit by $0.8 million or $0.02 per diluted share after tax. After evaluating the quantitative and qualitative aspects of this correction, management has determined that our previously issued quarterly and annual consolidated financial statements were not materially misstated and that the out-of-period adjustment is immaterial to our estimated full year 2013 results and to our earnings’ trends.

For further information, refer to the consolidated financial statements and footnotes thereto included in Havertys’ Annual Report on Form 10-K for the year ended December 31, 2012.

NOTE B – Restricted Cash and Cash Equivalents

Our insurance carrier requires us to collateralize a portion of our workers' compensation obligations. These escrowed funds are shown as restricted cash and cash equivalents on our consolidated balance sheet and are investments in money market funds held by an agent. The annual agreement with our carrier governing these funds expires on December 31, 2013.

HAVERTY FURNITURE COMPANIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE C – Accounts Receivable

Amounts financed under our in-house credit programs were, as a percent of net sales, approximately 4.0% and 5.0% during the first three months of 2013 and 2012, respectively. The credit program selected most often by our customers is “12 months no interest with equal monthly payments.” The terms of the other programs vary as to payment terms (30 days to three years) and interest rates (0% to 21%). The receivables are collateralized by the merchandise sold.

Accounts receivable balances resulting from certain credit promotions have scheduled payment amounts which extend beyond one year. These receivable balances have been historically collected earlier than the scheduled dates. The amounts due per the scheduled payment dates approximate as follows: $9.3 million in one year, $0.7 million in two years, $0.3 million beyond two years for receivables outstanding at March 31, 2013.

Accounts receivable are shown net of the allowance for doubtful accounts of $0.4 million at March 31, 2013 and December 31, 2012. We provide an allowance utilizing a methodology which considers the balances in problem and delinquent categories of accounts, historical write-offs, existing economic conditions and management judgment. Interest assessments are continued on past-due accounts but no “interest on interest” is recorded. Delinquent accounts are generally written off automatically after the passage of nine months without receiving a full scheduled monthly payment. Accounts are written off sooner in the event of a discharged bankruptcy or other circumstances that make further collections unlikely.

We believe that the carrying value of existing customer receivables, net of allowances, approximates fair value because of their short average maturity. Concentrations of credit risk with respect to customer receivables are limited due to the large number of customers comprising our account base and their dispersion across 17 states.

NOTE D – Interim LIFO Calculations

An actual valuation of inventory under the LIFO method can be made only at the end of each year based on actual inventory levels. Accordingly, interim LIFO calculations must necessarily be based on management’s estimates. Since these estimates may be affected by factors beyond management’s control, interim results are subject to change based upon the final year-end LIFO inventory valuations.

NOTE E – Accumulated Other Comprehensive Loss

The following summarizes the change in balance and the reclassification from Accumulated Other Comprehensive Loss to the Condensed Consolidated Statement of Income for the three months ended March 31, 2013 (amounts in thousands):

Beginning balance	$	(23,378	)
Amortization of defined benefit pension items:
Prior service costs		52
Actuarial loss		428
		480
Tax		(182	)
Total amount reclassified from accumulated other comprehensive loss		298
Ending balance	$	(23,080	)

The pension items noted above are included in the components of net periodic cost for pension plans (see Note H).

HAVERTY FURNITURE COMPANIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE F – Income Taxes

Our tax provision for interim periods is determined using an estimate of our annual effective tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter we update our estimate of the annual effective tax rate, and if our estimated tax rate changes we make a year to date adjustment.

Our effective tax rate for the three months ended March 31, 2013 and 2012 was 38.6% and 38.9%, respectively.

NOTE G – Fair Value of Financial Instruments

The fair values of our cash and cash equivalents, restricted cash and cash equivalents, accounts receivable, accounts payable and customer deposits approximate their carrying values due to their short-term nature. The assets related to our self-directed, non-qualified deferred compensation plans for certain executives and employees are valued using quoted market prices multiplied by the number of shares held, a Level 1 valuation technique. The assets related to our deferred compensation plans totaled approximately $1.7 million at March 31, 2013 and $1.5 million at December 31, 2012 and are included in other assets. The related liability of the same amount is included in other liabilities.

NOTE H – Pension Plans

We have a defined benefit pension plan covering substantially all employees hired on or before December 31, 2005. The pension plan was closed to any employee hired after that date. The benefits are based on years of service and the employee’s final average compensation. Effective January 1, 2007, no new benefits are earned under this plan for additional years of service after December 31, 2006.

We also have a non-qualified, non-contributory supplemental executive retirement plan (SERP) for employees whose retirement benefits are reduced due to their annual compensation levels. The SERP limits the total amount of annual retirement benefits that may be paid to a participant in the SERP from all sources (Retirement Plan, Social Security and the SERP) to $125,000. The SERP is not funded so we pay benefits directly to participants.

Net pension costs included the following components (in thousands):

	Three Months Ended March 31,
	2013			2012

Service cost-benefits earned during period	$	27		$	31
Interest cost on projected benefit obligations		877			943
Expected return on plan assets		(1,243	)		(1,118	)
Amortization of prior service costs		52			52
Amortization of actuarial loss		428			490

Net pension costs	$	141		$	398

HAVERTY FURNITURE COMPANIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE I – Stock Based Compensation Plans :

As more fully discussed in Note 11 of the notes to the consolidated financial statements in our 2012 Annual Report on Form 10-K, we have options and awards outstanding for Common Stock under two stock-based employee compensation plans.

The following table summarizes our share option and award activity during the three months ended March, 2013:

	Restricted Stock Awards					Stock-Settled Appreciation Rights					Options
	Shares or Units			Weighted-Average Award Price		Rights			Weighted-Average Award Price		Shares			Weighted-Average Exercise Price
Outstanding at December 31, 2012		555,925		$	12.28		121,749		$	8.85		50,000		$	20.56
Granted		161,150			18.13		112,000			18.14		—			—
Exercised or restrictions lapsed		—			—		(38,150	)		8.86		(2,000	)		15.90
Forfeited or expired (options)		(1,150	)		13.35		—			—		—			—
Outstanding at March 31, 2013		715,925		$	13.59		195,599		$	14.17		48,000		$	20.75
Exercisable at March 31, 2013		—			—		58,074		$	8.90		48,000		$	20.75

Grants of restricted common stock and stock-settled appreciation rights are made to certain officers and key employees under the 2004 LTIP Plan. The restrictions on the awards generally lapse annually, primarily over four year periods. The compensation is being charged to selling, general and administrative expense over the respective grants’ vesting periods, primarily on a straight-line basis. Stock based compensation expense for the three months ended March 31 was approximately $0.8 million in 2013 and $0.7 million in 2012. The aggregate intrinsic value of outstanding restricted common stock grants was $14.7 million at March 31, 2013. The aggregate intrinsic value of vested and outstanding stock-settled appreciation rights at March 31, 2013 was approximately $0.7 million and $1.3 million, respectively.

As of March 31, 2013, the remaining unamortized compensation cost related to unvested equity awards was approximately $6.9 million and scheduled to be recognized over a weighted-average period of 2.9 years.

The accelerated vesting goals for 128,800 of the restricted stock units in the above table were met in April. This will result in a net increase of 86,015 shares outstanding and a $0.5 million increase in the expense for the quarter ended June 30, 2013.

NOTE J – Earnings Per Share

We report our earnings per share using the two-class method. The income per share for each class of common stock is calculated assuming 100% of our earnings 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.

HAVERTY FURNITURE COMPANIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following is a reconciliation of the earnings and number of shares used in calculating the diluted earnings per share for Common Stock and Class A Common Stock (in thousands):

	Three Months Ended March 31,
	2013		2012
Numerator:
Common:
Distributed earnings	$	780	$	—
Undistributed earnings		6,503		2,126
Basic		7,283		2,126
Class A Common earnings		977		331
Diluted	$	8,260	$	2,457

Class A Common:
Distributed earnings	$	103	$	—
Undistributed earnings		874		331
	$	977	$	331
Denominator:
Common:
Weighted average shares outstanding - basic		19,717		18,865
Assumed conversion of Class A Common Stock		2,781		3,084
Dilutive options, awards and common stock equivalents		457		323

Total weighted-average diluted Common Stock		22,955		22,272

Class A Common:
Weighted average shares outstanding		2,781		3,084

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

Net Sales

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

The following outlines our sales and 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):

	2013												2012
	Net Sales							Comp-Store Sales					Net Sales							Comp-Store Sales
Period	Total Dollars		% Increase (decrease) over prior period			$ Increase (decrease) over prior period		% Increase (decrease) over prior period			$ Increase (decrease) over prior period		Total Dollars		% Increase (decrease) over prior period			$ Increase (decrease) over prior period		% Increase (decrease) over prior period			$ Increase (decrease) over prior period
Q1	$	186.1		13.8	%	$	22.5		11.5	%	$	18.7	$	163.6		6.1	%	$	9.4		5.7	%	$	8.7

Stores are non-comparable if open for less than one year or if the selling square footage has been changed significantly during the past 12 full months. Large clearance sales events from warehouse or temporary locations are excluded from comparable store sales as are periods when stores are closed.

Our average ticket is up approximately 12.3% for the first quarter as our customers respond to the value offered in our better quality merchandise. Sales in the upholstery and casual dining product categories continued to show strength in the first quarter 2013 increasing 18% and 23%, respectively, over the prior year corresponding period.

Gross Profit

Gross profit for the first quarter of 2013 was $100.3 million which included an additional $0.8 million from an out-of-period adjustment. Excluding the 45 basis point impact of the adjustment, gross profit was 53.5%, up 130 basis points compared to 52.2% in the prior year period. The primary factors in generating this gross profit improvement were: our expansion of upper-middle price point products in our assortment, an abnormally high level of accessory close outs in the prior year, our focus on pricing discipline, and reduced inbound ocean freight costs.

We plan to remain competitive, but not overly aggressive with our pricing structure. Gross profit margins for 2013 are expected to be modestly better than our 2012 annual rate of 52.5% but below our first quarter adjusted rate of 53.5%.

Substantially all of our occupancy and home delivery costs are included in selling, general and administrative expenses 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

Selling, general and administrative (“SG&A”) expenses are comprised of five categories: selling; occupancy; delivery and certain warehousing costs; advertising and marketing; and administrative.

Total SG&A expenses as a percent of sales for the three months ended March 31, 2013 decreased 3.1% to 46.6% from 49.7% in the prior year period. Total SG&A dollars for the first quarter of 2013 increased $5.4 million compared to the prior year period. Selling expenses increased $2.4 million as commissions and customers usage of free interest credit promotions offered by our third party financing provider rose in line with sales. Occupancy expense increased $0.8 million as new stores and leasehold improvements generated higher depreciation. Our administrative expenses included increased accruals of $0.5 million for incentive compensation, increased expense of $0.5 million for non-management wages, and $0.5 million for increased expense related to employee group health benefit costs.

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

Our expectations for SG&A costs for the full year 2013 are unchanged from those discussed in our Form 10-K for the year ended December 31, 2012

Liquidity and Capital Resources

Our primary cash requirements include working capital needs, contractual obligations, benefit plan contributions, income tax obligations and capital expenditures. We have funded these requirements primarily through cash generated from operations. We have no funded debt and our lease obligations are primarily due to arrangements that are not considered capital leases but must be recorded on our balance sheets. We believe funds generated from our expected results of operations and available cash and cash equivalents will be sufficient to fund our primary obligations, dividends, stock repurchases and complete capital projects that we have underway or currently contemplate.

We also have a $50.0 million revolving credit facility. Availability fluctuates under a borrowing base calculation and is reduced by outstanding letters of credit. The borrowing base was $53.7 million and there were no outstanding letters of credit at March 31, 2013. Amounts available are based on the lesser of the borrowing base or the $50.0 million line amount and reduced by $6.2 million since a fixed charge coverage ratio test was not met for the immediately preceding twelve months, resulting in a net availability of $43.8 million. There were no borrowed amounts outstanding under the facility at March 31, 2013.

Summary of Cash Activities

Our cash flows provided by operating activities totaled $5.4 million in the first three months of 2013 compared to $11.2 million for the same period of 2012. This decrease was primarily due to smaller changes in inventories and customer deposits and a more significant reduction in accounts payable and other liabilities partially offset by increased earnings in 2013. For additional information about the changes in our assets and liabilities refer to our Balance Sheet Changes discussion.

Our cash flows used in investing activities totaled $4.0 million in the first three months of 2013 versus $3.9 million for the same period of 2012. This increase was primarily due to greater capital expenditures in 2013.

Financing activities used cash of $1.1 million in the first three months of 2013 compared to $0.2 million for the same period of 2012. We did not pay dividends in the first quarter of 2012 and $0.9 million were paid in 2013.

Balance Sheet Changes for the three Months Ended March 31, 2013

Our balance sheet as of March 31, 2013, as compared to our balance sheet as of December 31, 2012, changed as follows:

decrease in prepaid expenses of $2.0 million primarily due to the reduction in prepaid income taxes;
increase in other current assets of $1.7 million due in part to timing of payments from third party financing company;
decrease in property and equipment of $2.3 million as depreciation expense outpaced capital expenditures; and
decrease in accounts payable of $7.4 million due to timing of payments and receipt of inventory.

Store Plans and Capital Expenditures

Store plans for 2013 include the expansion of three showrooms and 18 of our Bright Inspiration store refreshes. We are also closing three stores reaching the end of their lease term: Clearwater, Florida closed in the first quarter, and Jackson, Mississippi and Roanoke, Virginia will be closed in the second quarter. These changes should decrease net selling square footage by approximately 1.0% to 2.0% in 2013 assuming they occur as scheduled.

Our planned capital expenditures for 2013 are $20.0 million including $15.6 million for new stores and store improvements and $2.2 million for information technology.

Off-Balance Sheet Arrangements

As of March 31, 2013 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, 2012. We had no significant changes in those critical accounting estimates since our last annual report.

Forward-Looking Information

Certain of the statements in this Form 10-Q, particularly those anticipating future performance, business prospects, growth and operating strategies and similar matters, and those that include the words “believes,” “anticipates,” “estimates” or similar expressions constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. For those statements, Havertys claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. There can be no assurance that the forward-looking statements will be accurate because they are based on many assumptions, which involve risks and uncertainties. The following important factors could cause future results to differ: changes in the economic environment; changes in the housing market; changes in industry conditions; competition; merchandise costs; energy costs; timing and level of capital expenditures; introduction of new products; rationalization of operations; and other risks identified in Havertys’ SEC reports and public announcements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

There have been no material changes with respect to our financial instruments and their related market risks since the date of the Company’s most recent annual report.

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 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.

PART II. OTHER INFORMATION

Item 1A. Risk Factors

In addition to the other information set forth in this report, 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, 2012, which could materially affect our business, financial condition or future results. The risks described in this report and in our Annual Report on Form 10-K are not the only risks facing the Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results.

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.

Exhibit Number		Description of Exhibit (Commission File No. 1-14445)

3.1		Articles of Amendment and Restatement of the Charter of Haverty Furniture Companies, Inc. effective May 26, 2006 (Exhibit 3.1 to our Second Quarter 2006 Form 10-Q).
3.2		By-laws of Haverty Furniture Companies, Inc. as amended effective May 12, 2010 (Exhibit 3.2 to our First Quarter 2010 Form 10-Q).
*10.1		Haverty Furniture Companies, Inc., Class A Shareholders Agreement, made as of June 5, 2012, by and among, Haverty Furniture Companies, Inc., Villa Clare Partners, L.P., Clarence H. Smith, H5, L.P., Rawson Haverty, Jr., Ridge Partners, L.P. and Frank S. McGaughey; Parties added to the Agreement and Revised Annex I as of November 1, 2012 – Marital Trust FOB Margaret M. Haverty and Marital Trust B FOB Margaret M. Haverty; Parties added to the Agreement as of December 11, 2012 – Margaret Munnerlyn Haverty Revocable Trust.
*31.1		Certification of Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as amended.
*31.2		Certification of Chief Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as amended.
*32.1		Certification pursuant to 18 U.S.C. Section 1350.

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.

			HAVERTY FURNITURE COMPANIES, INC. (Registrant)


Date:	May 3, 2013	By:	/s/ Clarence H. Smith
			Clarence H. Smith
			Chairman of the Board, President and Chief Executive Officer
			(principal executive officer)


		By:	/s/ Dennis L. Fink
			Dennis L. Fink
			Executive Vice President and Chief Financial Officer (principal financial and accounting officer)

EXHIBIT 10.1

HAVERTY FURNITURE COMPANIES, INC.

CLASS A SHAREHOLDERS AGREEMENT

HAVERTY FURNITURE COMPANIES, INC.

CLASS A SHAREHOLDERS AGREEMENT

THIS CLASS A SHAREHOLDERS AGREEMENT (this “Agreement”) is made as of June 5, 2012 by and among Haverty Furniture Companies, Inc., a Maryland corporation (the ‘Company”) and the holders of Class A Common Stock, par value $1.00 per share (the “Class A Stock”) of the Company set forth on Annex I hereto (collectively, the “Shareholders,” and individually, a “Shareholder”).

BACKGROUND

Each of the Shareholders holds the number of shares of Class A Stock set forth opposite their name Annex I hereto. The Shareholders desire to enter into this Agreement with the Company to memorialize in writing the historical practices followed by holders of the Class A Stock in connection with disposition of their Class A Stock holdings. The shares of Class A Stock set forth opposite the names of each Shareholder on Annex I hereto, together with any shares of Class A Stock hereinafter acquired by a Shareholder are collectively referred to herein as the “Shares.”

The parties agree as follows:

1. Restriction on Transfer .

(a) Except pursuant to Section 1(b) or Section 1(c) of this Agreement, each Shareholder shall not sell, assign, transfer, pledge, hypothecate, mortgage, encumber or otherwise dispose of, including transfers pursuant to the laws of testate or intestate succession, marital dissolution, legal separation or otherwise by operation of law (collectively, “Transfer”) any of the Shares, without the prior written consent of the Company.

(b) Notwithstanding Section 1(a) of this Agreement, each Shareholder shall be permitted to Transfer Shares to a Permitted Transferee, provided, as a condition to the effectiveness of any such Transfer, the Permitted Transferee executes a counterpart to this Agreement, thereby agreeing to be bound by all of the terms and conditions of this Agreement as a Shareholder hereunder. For purposes of this Agreement, a “Permitted Transferee” of a Shareholder shall mean: (1) such Shareholder’s spouse, children, parents or siblings (“Family Members”); (2) such Shareholder’s estate; (3) any trust established solely for the benefit of such Shareholder and/or any of such Shareholder’s Family Member(s); (4) any partnership, corporation, limited liability company or other entity that is wholly owned and controlled by such Shareholder and/or any such Shareholder’s Family Member(s); (5) to the extent a Shareholder is a partnership, limited liability company, corporation, trust or estate as of the date of this Agreement, any existing partner, member, shareholder or beneficiary of such Shareholder as of the date hereof; (6) any charitable foundation or organization; and (7) the Company.

(c) Notwithstanding Section 1(a) of this Agreement, nothing herein shall limit, restrict or otherwise prohibit or call into question: (1) Any pledge, hypothecation, mortgage or encumbrance placed by or on behalf of any Shareholder on any Shares on or prior to the date hereof (“Pre-existing Arrangements”) or, subject to compliance by such Shareholder with the obligations set forth in Section 2(b) hereof, any subsequent disposition of such Shares by the counter party thereto; (2) Any bona-fide pledge, hypothecation, mortgage or encumbrance by or on behalf of any Shareholder on any Shares on or after the date hereof (“Subsequent Arrangement”), provided such Shareholder enters into documentation reasonably acceptable to the Company with the counter party to such Subsequent Arrangement confirming that such Shares will be converted into Common Stock in accordance with the Company’s Charter prior to disposition of any such collateral by the counterparty to such Subsequent Arrangement to any person other than a Permitted Transferee; or (3) Any transfer of Shares by a Shareholder in connection with a merger, tender offer or business combination involving the Company, provided, such merger, tender offer or business combination has been approved by at least three-quarters (3/4s) of the members of the Board of Directors of the Company.

2. Agreement to Convert .

(a) To the extent a Shareholder desires to Transfer any Shares to someone other than a Permitted Transferee, such Shareholders shall first convert such Shares into shares of Common Stock in accordance with the Company’s Charter and shall be free thereafter to Transfer such shares of Common Stock to any such party without restriction or limitation hereunder.

(b) To the extent a Shareholder has entered into a Pre-Existing Arrangement prior to the date of this Agreement, such Shareholder agrees to exercise reasonable good faith efforts to cause any such Shares subject to such Pre-Existing Arrangement to be converted into Common Stock in accordance with the Company’s Charter prior to disposition of any such collateral by the counter party to such Pre-Existing Arrangement to any person other than a Permitted Transferee.

3. Common Stock .

(a) Nothing in this Agreement shall operate to restrict or otherwise limit the sale, assignment, transfer, pledge, hypothecation, mortgage, encumbrance or disposition of any shares of Common Stock owned by a Shareholder.

4. Stock Certificate Legends . The certificates evidencing the Shares shall be endorsed with the following legend:

“THE SALE, ASSIGNMENT, TRANSFER, PLEDGE, HYPOTHICATION, MORTGAGE, ENCUMBERANCE OR OTHER DISPOSITION (COLLECTIVELY, A “TRANSFER”) OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE CONDITIONS AND RESTRICTIONS SPECIFIED IN THE CLASS A SHAREHOLDERS AGREEMENT, DATED AS OF JUNE 5, 2012, AMONG THE COMPANY AND CERTAIN SHAREHOLDERS THEREOF, AND THE COMPANY RESERVES THE RIGHT TO REFUSE THE TRANSFER OF SUCH SECURITIES UNTIL SUCH CONDITIONS AND RESTRICTIONS HAVE BEEN FULFILLED OR SATISFIED WITH RESPECT TO SUCH TRANSFER. A COPY OF THE CONDITIONS OR AGREEMENTS REFERENCED ABOVE MAY BE OBTAINED BY THE HOLDER HEREOF UPON WRITTEN REQUEST TO THE SECRETARY OF THE COMPANY.”

5. Term/Termination . This Agreement will terminate on the twentieth (20 th ) anniversary of the date hereof.

6. General Provisions .

(a) Each of the Company and the Shareholders represent and warrant to each other that each has appropriate authority and/or capacity to enter into this Agreement, each has duly executed and delivered this Agreement and that this Agreement constitutes a legal, valid and binding obligation of such party, enforceable in accordance with its terms. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of which, when taken together, shall constitute one and the same instrument.

(b) This Agreement shall be governed by the laws of the State of Maryland. This Agreement represents the entire agreement between the parties with respect to the subject matter hereof and may only be modified or amended in a writing signed by all parties.

(c) Any notice, demand or request required or permitted to be given by either the Company or any Shareholder pursuant to the terms of this Agreement must be in writing and shall be deemed given when delivered personally or deposited in the U.S. mail, first class with postage prepaid, and addressed to the parties at the addresses of the parties set forth on Annex I hereto or such other address as a party may request by notifying the other parties in writing.

(d) A party’s failure to enforce any provision or provisions of this Agreement shall not in any way be construed as a waiver of any such provision or provisions, nor prevent that party thereafter from enforcing each and every other provision of this Agreement. The rights granted the parties under this Agreement are cumulative and shall not constitute a waiver of a party’s right to assert all other legal remedies available to it under the circumstances including, but not limited to, any and all equitable remedies, including specific performance and injunctive remedies.

(e) Each of the Shareholders agrees upon reasonable request of the Company to execute any further documents or instruments and/or to take such further action as may be necessary, desirable or appropriate to carry out the purposes or intent of this Agreement.

(f) Each of the Shareholders has reviewed this Agreement in its entirety, has had an opportunity to obtain the appropriate advice and counsel prior to executing this Agreement and fully understands all provisions of this Agreement.

(g) As used in this Agreement, the word “including” means “including, without limitation” in each instance.

IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the day and year first set forth above.

COMPANY

HAVERTY FURNITURE COMPANIES, INC

By: /s/ Dennis L. FInk

Name: Dennis L. Fink

Title: EVP & CFO

Address: 780 Johnson Ferry Road, Suite 800

Atlanta, Georgia 30342

SHAREHOLDERS

H5, L.P

By: /s/ Rawson Haverty, Jr.

Name: Rawson Haverty, Jr.

Its: General Partner

VILLA CLARE PARTNERS, L.P.

By: /s/ Clarence H. Smith

Name: Clarence H. Smith

Its: Managing Partner

RIDGE PARTNERS, L.P.

By: /s/ Frank S. McGaughey, III

Name: Frank S. McGaughey, III

Its: General Partner

RAWSON HAVERTY, JR.

By: /s/ Rawson Haverty, Jr.

Name: Rawson Haverty, Jr.

CLARENCE H. SMITH

By: /s/ Clarence H. Smith

Name: Clarence H. Smith

FRANK S. MCGAUGHEY, III

By: /s/ Frank S. McGaughey, III

Name: Frank S. McGaughey, III

ANNEX I

As of June 5, 2013

Holders of Class A Stock - Shareholders

Name		Shares of Class A Stock

H5, L.P.		854,453

Villa Clare Partners, L.P.		603,497

Ridge Partners L.P.		108,510

Rawson Haverty, Jr.		100,451

Clarence H. Smith		65,130

Frank S. McGaughey, III		65,985

IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the 31st day of October, 2012 and the Company acknowledges and consents hereto.

MARITAL TRUST FOB MARGARET M. HAVERTY

U/W 7-21-03

By: /s/ J. Rawson Haverty, Jr.

Name: J. Rawson Haverty, Jr.

Its: Trustee

By: /s/ Jane M. Haverty

Name: Jane M. Haverty

Its: Trustee

By: /s/ Ben M. Haverty

Name: Ben M. Haverty

Its: Trustee

COMPANY

HAVERTY FURNITURE COMPANIES, INC.

By: /s/ Jenny H. Parker

Name: Jenny H. Parker

Title: Senior Vice President, Finance, Secretary and Treasurer

Address: 780 Johnson Ferry Road, NE, Suite 800

Atlanta, GA 30157

IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the 1st day of November, 2012 and the Company acknowledges and consents hereto.

MARITAL TRUST B FOB MARGARET M. HAVERTY U/W 7-21-03

By: /s/ J. Rawson Haverty, Jr.

Name: J. Rawson Haverty, Jr.

Its: Trustee

By: /s/ Jane M. Haverty

Name: Jane M. Haverty

Its: Trustee

By: /s/ Ben M. Haverty

Name: Ben M. Haverty

Its: Trustee

COMPANY

HAVERTY FURNITURE COMPANIES, INC.

By: /s/ Jenny H. Parker

Name: Jenny H. Parker

Title: Senior Vice President, Finance, Secretary and Treasurer

Address: 780 Johnson Ferry Road, NE, Suite 800

Atlanta, GA 30157

ANNEX I

As of November 1, 2012

Holders of Class A Stock - Shareholders

Name		Shares of Class A Stock

H5, L.P.		665,823

Villa Clare Partners, L.P.		603,497

Ridge Partners L.P.		108,510

Rawson Haverty, Jr.		100,451

Clarence H. Smith		65,130

Frank S. McGaughey, III		65,985

Marital Trust FOB Margaret M. Haverty U/W 7-21-03		120,930

Marital Trust B FOB Margaret M. Haverty U/W 7-21-03		67,700

IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the 11th day of December, 2012 and the Company acknowledges and consents hereto.

MARGARET MUNNERLYN HAVERTY REVOCABLE TRUST DATED AUGUST 15, 2007

By: /s/ J. Rawson Haverty, Jr.

Name: J. Rawson Haverty, Jr.

Its: Trustee

By: /s/ Jane M. Haverty

Name: Jane M. Haverty

Its: Trustee

By: /s/ Ben M. Haverty

Name: Ben M. Haverty

Its: Trustee

COMPANY

HAVERTY FURNITURE COMPANIES, INC.

By: /s/ Jenny H. Parker

Name: Jenny H. Parker

Title: Senior Vice President, Finance, Secretary and Treasurer

Address: 780 Johnson Ferry Road, NE, Suite 800

Atlanta, GA 30157

ANNEX I

As of December 11, 2012

Holders of Class A Stock - Shareholders

Name		Shares of Class A Stock

H5, L.P.		665,823

Villa Clare Partners, L.P.		603,497

Ridge Partners L.P.		108,510

Rawson Haverty, Jr.		100,451

Clarence H. Smith		65,130

Frank S. McGaughey, III		65,985

Marital Trust FOB Margaret M. Haverty U/W 7-21-03		0

Marital Trust B FOB Margaret M. Haverty U/W 7-21-03		0

Margaret Munnerlyn Haverty Revocable Trust Dated August 15, 2007		120,930

Exhibit 31.1

I, Clarence H. Smith, certify that:

1.	I have reviewed this quarterly report on Form 10-Q for the quarter ended March 31, 2013 of Haverty Furniture Companies, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fiscal fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 3, 2013		/s/ Clarence H. Smith
		Clarence H. Smith Chairman of the Board, President and Chief Executive Officer

Exhibit 31.2

I, Dennis L. Fink, certify that:

1.	I have reviewed this quarterly report on Form 10-Q for the quarter ended March 31, 2013 of Haverty Furniture Companies, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

(a)

(b)

(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 3, 2013		/s/ Dennis L. Fink
		Dennis L. Fink Executive Vice President and Chief Financial Officer

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Haverty Furniture Companies, Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2013 (the “Report”), I, Clarence H. Smith, President and Chief Executive Officer of the Company, and I, Dennis L. Fink, Executive Vice President and Chief Financial Officer of the Company, each certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 3, 2013		/s/ Clarence H. Smith
		Clarence H. Smith Chairman of the Board, President and Chief Executive Officer


		/s/ Dennis L. Fink
		Dennis L. Fink Executive Vice President and Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to Haverty Furniture Companies, Inc. and will be retained by Haverty Furniture Companies, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.