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Text: Actual results may differ materially from those made or implied in such statements, which speak only of date they are made and which we undertake no obligation to publicly update or revise.
Our Chairman and CEO, Clarence Smith will now give you an update on our results.
And then, our President, Steve Burdette will provide additional commentary about our business.
We're very pleased with the record results for the second quarter with sales of $250 million.
We've done a good job in our expense controls across the board, and combined with pricing disciplines from the merchandising teams and stores, we achieved solid gross margins and 11.7% pre-tax operating profits.
Our ongoing objectives are to grow market share in our existing distribution footprint and maintain double-digit operating margins.
We believe that the increased importance of home that was jump-started with the impact of COVID last spring is a longer-term trend.
While we don't expect the rush that impacted our industry to be at the elevated levels we experienced in recent quarters, we do believe that home is a priority and a sustainable trend for the near future.
The strong desire for homeownership, combined with Havertys strong positioning in Florida, Texas and the Southeast, puts us in an ideal position for today and for the future.
Our supply merchandising and distribution teams are working with our factories and shippers to bring in product to fill orders and reduce our record backlog.
The shipping challenges that home-related industries are experiencing have caused major delays for furniture, which we believe will be problems until the spring of 2022.
We are working to increase our inventories as the production and product flow improves.
We're investing in our distribution capacity to support growth over $1 billion over our regions.
We just completed additional racking to our mothership, the Eastern Distribution Center in Braselton, Georgia, which adds 20% more storage capacity.
We will evaluate potential expansions to our network to better serve our planned growth.
Our current focus is on building market share in our key markets with store positioning and target marketing to our core customer and new homeowners.
Examples of this were the opening of Myrtle Beach earlier this year, the opening of a third store in Austin, in the fast-growing Pflugerville, Round Rock markets and a store opening tomorrow in the villages in Central Florida.
We're in a deep dive reviewing potential locations in our best markets, which will reach the fastest-growing areas and leverage our existing infrastructure.
We expect to announce several new fill-in locations for the 2022 openings.
We're very excited about the rollout of the WE FURNISH HAPPINESS marketing campaign, which we believe more clearly separates Havertys from our competitors and continues to raise the bar on service, quality, furniture and design.
We continue to be focused on our front door, havertys.com.
We've committed to significant investments in IT and state-of-the-art systems to better reach and appeal to our customers.
We've contracted with Adobe to bring on a collection of applications and services that will lay the foundation for unmatched customer experience.
The new foundation will improve functionality, help us create content easier and faster, provide better personalizations using AI-driven automation and enhance our analytics and reporting.
Our goal is to have the best-in-class website experience.
I'm very excited with our results for the second quarter.
This performance was due to the commitment, passion and determination of the store, distribution, home delivery, service and home office teams, whom I want to congratulate personally for their efforts.
Our supply chain network has been able to increase the flow of products into our warehouses over the second quarter even with all the headwinds.
Container capacity continues to be under pressure with the continued increase in demand across all of retail.
We expect this to continue to be an issue for the remainder of the year, even if there is a softening in demand.
Also, container prices on the spot market continue to increase with prices varying between $12,000 and $22,000 a container.
We have been able to balance our shipping mix, so that no more than 20% to 30% is on the water at one-time at these increased rates.
As I stated last quarter, we finalized our contracts on May 1, which are significantly below the spot market rates.
Foam continues to be an issue for some of our domestic vendors, however, their production has increased during the second quarter, but still not at 100%.
Our import vendors are not having any foam issues.
The recent closures in Vietnam due to the increased spread of the Delta variant are not expected to have an impact on our customers, if the closures remain at the projected two weeks.
They are expected to open back up beginning the week of 8/2.
However, if the closures are prolonged four to six weeks then there may be an impact to our customers, who already bought and future customer lead times.
Also, we are seeing port congestion in Vietnam and China, along with continued issues at the LA port and railyards.
Our merchandising and supply chain teams are monitoring the situation very closely with our vendors.
Our pool is now approximately 2 times larger than last year, with the average pool age stretching to approximately eight weeks from six weeks over the last 90 days.
Our special order lead times have increased to 12 weeks to 20 weeks, depending on the vendor, causing some softening in our special order business.
Our distribution, home delivery service network delivered a record quarter.
Over 90% of our markets are delivering within a week to the customer's home once we have the product in our warehouses.
Staffing continues to be our #1 concern in both distribution and home delivery.
The extra unemployment moneys that have stopped in most of the states we operate our warehouses, but there is still not enough people looking for work to fill the jobs available.
However, we remain optimistic that we will see this improve during the third quarter.
In the second quarter of 2021, delivered sales were $250 million, a 127.3% increase over the prior year quarter.
If you recall, our retail operations were closed due to the pandemic in the month of April in 2020.
103 stores reopened on May 1, 2020, and the remaining stores reopened by June 20th.
Total written sales for the second quarter of 2021 were up 67.5% over the prior year period.
Comparable store sales were up 46.9% over the prior year period.
This only include stores that were open for a full month in both periods.
Our gross profit margin increased 240 basis points from 54.2% to 56.6% due to better merchandising, pricing and mix and less promotional activity during the quarter.
These improvements were partially offset by an increase in our LIFO reserve as we continue to see increased freight and product cost.
Selling, general and administrative expenses increased $39.8 million or 54.7% to $112.4 million, primarily due to increased sales activity.
However, as a percentage of sales, these costs declined over 2,000 basis points to 45% from 66.1%.
As demonstrated in the past three quarters, our financial model has substantial operating leverage at these sales levels.
Other income in the second quarter of 2020 was $31.8 million, which included the gain on the sale-leaseback transaction of three distribution facilities in 2020.
If you recall, the gross proceeds from the sale was approximately $70 million.
Income before income taxes increased $10.5 million to $29.2 million.
Our tax expense was $6.3 million during the second quarter of 2021, which resulted in an effective tax rate of 21.6%.
The primary difference in the effective rate and statutory rate is due to the state income taxes and the tax benefit from vested stock awards.
Net income for the second quarter of 2021 was $22.9 million or $1.21 per diluted share on our common stock compared to net income of $13.6 million or $0.72 per share in the comparable period last year.
Excluding the gain on the sale of our distribution assets in 2020, our adjusted earnings per share in the second quarter of last year was a $0.52 loss.
Now, turning to our balance sheet.
At the end of the second quarter, our inventories were $115 million, which was up $25 million from the December 31, 2020 balance, and up $10.2 million versus the second quarter of 2020.
At the end of the second quarter, our customer deposits were $116.1 million, which was up $29.9 million from the December 31st balance and up $58.5 million versus Q2 of 2020.
We ended the quarter with $235.3 million of cash, cash equivalents.
We have no funded debt on our balance sheet at the end of the second quarter of 2021.
Looking at some of our uses of cash flow, capital expenditures were $10.9 million for the first half of 2021, and we paid $8.6 million of regular dividends during the first half of 2021.
During the second quarter, we did not purchase any common shares in our buyback program, and we have $16.8 million remaining under current authorization for this buyback program.
We expect our gross margins for 2021 to be 56.5% to 56.8%.
We anticipate gross profit margins will be impacted by our current estimates of product and freight cost and changes in our LIFO reserve.
Our fixed and discretionary type SG&A expenses for 2021 are expected to be in the $275 million to $278 million range.
This is an increase over our previous estimate, primarily due to rising warehouse compensation and benefit cost.
The variable type costs within SG&A for 2021 are expected to be in the range of 17.3% to 17.5%, a slight decrease over our previous guidance.
Our planned capex for 2021 has increased from $23 million to $37 million.
Anticipated new or replacement stores, remodels and expansions account for $18.7 million.
Investments in our distribution network are expected to be $15.2 million, and investments in our information technology are expected to be approximately $3.1 million.
The largest increase in our planned capex for 2021 is in our distribution network.
In the third quarter of this year, we will be buying back our Virginia warehouse, which we sold and leased back last year.
This is a key distribution asset that may be expanded in the upcoming years.
Owning this asset gives us more flexibility as we evaluate our future growth plans.
Our anticipated effective tax rate in 2021 is expected to be 24%.
This projection excludes the impact from vesting of stock awards and any potential new tax legislation.
This completes our commentary on the second quarter financial results.

user
compname reports q2 earnings per share $1.21.
q2 earnings per share $1.21.
q2 same store sales rose 46.9 percent.
q2 sales $250 million.
qtrly diluted earnings per common share of $1.21.

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