HNI Corporation Announces Third Quarter Fiscal 2012 Results In Line With Revised Guidance PR Newswire MUSCATINE, Iowa, Oct. 17, 2012 MUSCATINE, Iowa, Oct. 17, 2012 /PRNewswire/ --HNI Corporation (NYSE: HNI) today announced sales of $550.9 million and net income of $24.5 million for the third quarter ended September 29, 2012. Net income per diluted share for the quarter was $0.53 or $0.55 on a non-GAAP basis when excluding restructuring and transition costs. Third Quarter Summary Comments "We continue to compete well in our markets. Growth in our supplies-driven and contract office furniture businesses softened versus our expectations and first half results as U.S. economic and market uncertainty appear to be constraining near-term growth. Office furniture profits were negatively impacted by lower than expected sales and operational inefficiencies caused by extreme summer heat during our peak demand season. We are making operational improvements to ensure consistent, flawless execution during future periods of peak production. Continued strong profit growth in our hearth business was driven by outstanding operational performance and growth in the new construction channel. We continue to make good progress on our core strategies, improving our competitive position and investing for long-term value creation," said Stan Askren, HNI Corporation Chairman, President and Chief Executive Officer. Third Quarter – GAAP Financial Measures Dollars in millions Three Months Ended Percent except per share data 09/29/2012 10/01/2011 Change Net sales $550.9 $504.2 9.2% Gross profit $191.3 $179.4 6.7% Gross margin % 34.7% 35.6% SG&A $149.6 $138.9 7.7% SG&A % 27.2% 27.6% Operating income $41.7 $40.4 3.2% Operating income % 7.6% 8.0% Net income attributable to HNI Corporation $24.5 $24.9 -1.8% Earnings per share attributable to HNI $0.53 $0.55 -3.6% Corporation – diluted oConsolidated net sales increased $46.6 million or 9.2 percent to $550.9 million. Acquisitions contributed $42.6 million of sales, or 8.5 percent sales growth. oGross margins were 0.9 percentage points lower than prior year primarily due to unfavorable mix, seasonal ramp up inefficiencies and the impact of acquisitions offset partially by better price realization and lower material costs. oTotal selling and administrative expenses, including restructuring charges, increased 7.7 percent due to investments in growth initiatives and the impact of acquisitions. oThe Corporation's third quarter results included $0.8 million of restructuring and transition charges of which $0.2 million were included in cost of sales. These included costs associated with previously announced shutdown and consolidation of office furniture manufacturing locations. Included in the third quarter of 2011 were $0.5 million of restructuring and transition costs. Third Quarter – Non-GAAP Financial Measures (Reconciled with most comparable GAAP financial measures) Three Months Ended Three Months Ended Dollars in millions 09/29/2012 10/01/2011 except per share data Gross Operating Gross Operating Profit Income EPS Profit Income EPS As reported (GAAP) $191.3 $41.7 $0.53 $179.4 $40.4 $0.55 % of net sales 34.7% 7.6% 35.6% 8.0% Restructuring and impairment - $0.2 $0.00 $0.2 $0.4 $0.00 Transition costs $0.2 $0.6 $0.01 $0.1 $0.1 $0.00 Results (non-GAAP) $191.5 $42.5 $0.55 $179.7 $41.0 $0.55 % of net sales 34.8% 7.7% 35.6% 8.1% Office Furniture – GAAP Financial Measures Three Months Ended Percent Dollars in millions 09/29/2012 10/01/2011 Change Net sales $467.8 $421.9 10.9% Operating profit $38.4 $41.5 -7.4% Operating profit % 8.2% 9.8% Third Quarter – Non-GAAP Financial Measures (Reconciled with most comparable GAAP financial measures) Three Months Ended Percent Dollars in millions 09/29/2012 10/01/2011 Change Operating profit as reported (GAAP) $38.4 $41.5 -7.4% % of Net Sales 8.2% 9.8% Restructuring and impairment $0.2 $0.4 Transition costs $0.6 $0.1 Operating profit (non-GAAP) $39.2 $42.0 -6.7% % of Net Sales 8.4% 10.0% oThird quarter net sales for the office furniture segment increased $45.9 million or 10.9 percent to $467.8 million. Acquisitions contributed $42.6 million of sales, or 10.1 percent sales growth. Organic growth was effectively flat across all channels of the office furniture segment. oThird quarter GAAP operating profit decreased $3.1 million. Operating profit was negatively impacted by unfavorable mix, seasonal ramp up inefficiencies and investments in growth initiatives. These were partially offset by better price realization and lower material costs. Hearth Products – GAAP Financial Measures Three Months Ended Percent 09/29/2012 10/01/2011 Dollars in millions Change Net sales $83.1 $82.3 0.9% Operating profit $9.1 $6.9 32.0% Operating profit % 10.9% 8.3% oThird quarter net sales for the hearth products segment increased $0.7 million or 0.9 percent to $83.1 million driven by an increase in the new construction channel partially offset by a decline in the remodel/retrofit channel. oThird quarter operating profit increased $2.2 million. Operating profit was positively impacted by higher price realization and lower material costs offset partially by investments in selling and growth initiatives. Year-to-Date Results Consolidated net sales for the first nine months of 2012 increased $143.3 million, or 10.7 percent, to $1.5 billion compared to $1.3 billion in 2011. Acquisitions contributed $83.0 million of sales, or 6.2 percent sales growth. Gross margin decreased to 34.1 percent compared to 34.6 percent for the same period last year. Net income attributable to HNI Corporation was $31.4 million compared to $27.8 million in 2011. Earnings per share increased to $0.68 per diluted share compared to $0.61 per diluted share for the first nine months of 2011. Cash flow from operations for the first nine months of 2012 was $80.8 million compared to $67.0 million last year. Capital expenditures during the first nine months were $44.7 million in 2012 compared to $20.2 million in 2011. The Corporation completed the acquisition of BP Ergo, a leading manufacturer and marketer of office furniture in India, during the third quarter of 2012. Outlook "Despite near-term economic and political uncertainties, I remain positive about our markets and prospects for long-term profitable growth. We remain confident in our strategies and will continue to closely monitor our markets, aggressively manage operating expenses, and invest in long-term growth. Our businesses are agile and well positioned for the future," said Mr. Askren. The Corporation estimates sales growth between 2 to 6 percent in the fourth quarter over the same period in the prior year. For the full year, the Company is revising its estimate of non-GAAP earnings per diluted share to the range of $1.13 to $1.19 excluding restructuring charges and transition costs. The Corporation remains focused on creating long-term shareholder value by growing its business through investment in building brands, product solutions and selling models, enhancing its strong member-owner culture and remaining focused on its long-standing rapid continuous improvement programs to build best total cost and a lean enterprise. Conference Call and Presentation HNI Corporation will host a conference call on Thursday, October 18, 2012 at 10:00 a.m. (Central) to discuss third quarter 2012 results. To participate, call 1-877-512-9166 - conference ID number 34711184. A live webcast of the call and a presentation intended to accompany the call will be available on HNI Corporation's website at http://www.hnicorp.com (under Investor Information – Webcasts). A replay of the webcast will be made available at the website address above. An audio replay of the call will be available until Thursday, October 25, 10:59 p.m. (Central) by dialing 1-855-859-2056 or 1-404-537-3406 – Conference ID: 34711184. About HNI Corporation HNI Corporation is a NYSE traded company (ticker symbol: HNI) providing products and solutions for the home and workplace environments. HNI Corporation is the second largest office furniture manufacturer in the world and is also the nation's leading manufacturer and marketer of gas- and wood-burning fireplaces. The Corporation's strong brands, including HON^®, Allsteel^®, Gunlocke^®, Paoli^®, Maxon^®, Lamex^®, HBF^® , Artco-Bell^TM, Midwest Folding Products^TM, LSI Corporation of America^TM, ERGO^®, Heatilator^®, Heat & Glo^®, Quadra-Fire^® and Harman Stove^TM have leading positions in their markets. HNI Corporation is committed to maintaining its long-standing corporate values of integrity, financial soundness and a culture of service and responsiveness. More information can be found on the Corporation's website at www.hnicorp.com. Non-GAAP Financial Measures This earnings release contains certain non-GAAP financial measures. A "non-GAAP financial measure" is a numerical measure of a company's financial performance that excludes or includes amounts different than the most directly comparable measure calculated and presented in accordance with GAAP in the statements of income, balance sheets or statements of cash flow of the company. We have provided a reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measure. The non-GAAP financial measures used within this earnings release are: gross profit, operating income, operating profit and net income per diluted share (i.e., EPS), excluding restructuring and impairment charges and transition costs. Non-GAAP EPS is calculated using the Corporation's overall effective tax rate for the period. We present these measures because management uses this information to monitor and evaluate financial results and trends. Management believes this information is also useful for investors. This earnings release also contains a forward-looking estimate of non-GAAP earnings per diluted share for the full fiscal year. We provide such non-GAAP measures to investors on a prospective basis for the same reasons we provide them to investors on a historical basis. We are unable to provide a reconciliation of our forward-looking estimate of non-GAAP earnings per diluted share to a forward-looking estimate of GAAP earnings per diluted share because certain information needed to make a reasonable forward-looking estimate of GAAP earnings per diluted share for the full fiscal year is difficult to predict and estimate and is often dependent on future events which may be uncertain or outside of our control. These may include unanticipated charges related to asset impairments (fixed assets, intangibles or goodwill), unanticipated acquisition related costs and other unanticipated non-recurring items not reflective of ongoing operations. Forward Looking Statements This release contains "forward-looking" statements that refer to future events and expectations. These statements address future plans, outlook, objectives and financial performance including expectations for future sales growth and earnings per diluted share (GAAP and non-GAAP) for the fourth quarter of fiscal 2012 and for fiscal 2012. In addition, forward looking statements may be identified by words such as "anticipate," "believe," "could," "confident," "estimate," "expect," "forecast," "hope," "intend," "likely," "may," "plan," "possible," "potential," "predict," "project," "should," "will," "would" and variations of such words and similar expressions. Forward-looking statements involve known and unknown risks, which may cause the Corporation's actual future results to differ materially from expected results. These risks include, without limitation: the Corporation's ability to realize financial benefits from its (a) price increases, (b) cost containment and business simplification initiatives, (c) investments in strategic acquisitions, new products and brand building, (d) investments in distribution and rapid continuous improvement, (e) ability to maintain its effective tax rate, (f) repurchases of common stock and (g) consolidation and logistical realignment initiatives; uncertainty related to the availability of cash and credit, and the terms and interest rates on which credit would be available, to fund operations and future growth; lower than expected demand for the Corporation's products due to uncertain political and economic conditions; slow or negative growth rates in global and domestic economies and the protracted decline in the domestic housing market; lower industry growth than expected; major disruptions at key facilities or in the supply of any key raw materials, components or finished goods; competitive pricing pressure from foreign and domestic competitors; higher than expected costs and lower than expected supplies of materials; higher costs for energy and fuel; changes in the mix of products sold and of customers purchasing; relationships with distribution channel partners, including the financial viability of distributors and dealers; restrictions imposed by the terms of the Corporation's revolving credit facility and note purchase agreement; currency fluctuations and other factors described in the Corporation's annual and quarterly reports filed with the Securities and Exchange Commission on Forms 10-K and 10-Q. The Corporation undertakes no obligation to update, amend or clarify forward-looking statements. HNI CORPORATION Unaudited Condensed Consolidated Statements of Operations Three Months Ended Nine Months Ended Oct. 1, Oct. 1, (Dollars in thousands, Sep. 29, 2012 Sep. 29, 2012 except per share data) 2011 2011 Net Sales $ 550,855 $ 504,220 $1,476,467 $1,333,181 Cost of products sold 359,519 324,825 973,191 872,132 Gross profit 191,336 179,395 503,276 461,049 Selling and administrative 149,421 138,671 444,610 407,281 expenses Restructuring and impairment 172 277 1,361 2,130 charges Operating income 41,743 40,447 57,305 51,638 Interest income 155 222 610 465 Interest expense 2,658 2,567 8,181 9,189 Income before income taxes 39,240 38,102 49,734 42,914 Income taxes 15,036 13,186 18,785 15,192 Net income 24,204 24,916 30,949 27,722 Less: Net income (loss) attributable to the (286) (31) (425) (127) noncontrolling interest Net income attributable to $ 24,490 $ 24,947 $ 31,374 $ 27,849 HNI Corporation Net income attributable to HNI Corporation per common $0.54 $0.56 $0.69 $0.62 share – basic Average number of common 45,224,059 44,787,437 45,265,050 44,795,155 shares outstanding – basic Net income attributable to HNI Corporation per common $0.53 $0.55 $0.68 $0.61 share – diluted Average number of common 45,820,422 45,637,042 45,839,917 45,683,520 shares outstanding – diluted Unaudited Condensed Consolidated Balance Sheet Assets Liabilities and Shareholders' Equity As of As of Sep. 29, Dec. 31, Sep. 29, Dec. 31, (Dollars in 2012 2011 2012 2011 thousands) Cash and cash $ 49,265 $ 72,812 Accounts payable equivalents and Short-term 7,250 9,157 accrued $ 401,122 $ 358,290 investments expenses Receivables 247,297 204,036 Note payable and current Inventories 104,879 101,873 maturities of 43,877 30,345 long-term debt Deferred 19,500 18,797 Current maturities income taxes of other Prepaid long-term 266 275 expenses and obligations other current 27,986 27,365 assets Current 456,177 434,040 Current 445,265 388,910 assets liabilities Long-term debt 150,159 150,200 Capital lease 259 340 obligations Other long-term 56,814 52,716 liabilities Property and Deferred income equipment – 238,300 229,727 taxes 49,602 42,770 net Goodwill 293,359 270,761 Other assets 134,946 119,730 Parent Company shareholders' equity 420,042 419,057 Noncontrolling 641 265 interest Shareholders' 420,683 419,322 equity Total liabilities and Total assets $1,122,782 $1,054,258 shareholders' $1,122,782 $1,054,258 equity Unaudited Condensed Consolidated Statement of Cash Flows (Dollars in thousands) Nine Months Ended Sep. 29, 2012 Oct. 1, 2011 Net cash flows from (to) operating activities $ 80,836 $ 66,972 Net cash flows from (to) investing activities: Capital expenditures (44,659) (20,194) Other (27,048) (5,588) Net cash flows from (to) financing activities (32,676) (38,753) Net increase (decrease) in cash and cash (23,547) 2,437 equivalents Cash and cash equivalents at beginning of period 72,812 99,096 Cash and cash equivalents at end of period $ 49,265 $101,533 Business Segment Data Three Months Ended Nine Months Ended (Dollars in thousands) Sep. 29, Oct. 1, Sep. 29, Oct. 1, 2012 2011 2012 2011 Net sales: Office furniture $ 467,787 $ 421,873 $1,264,953 $1,125,643 Hearth products 83,068 82,347 211,514 207,538 $ 550,855 $ 504,220 $1,476,467 $1,333,181 Operating profit: Office furniture Operations before restructuring and impairment $ 38,605 $ 41,776 $ 69,707 $ 69,161 charges Restructuring and (172) (277) (1,361) (1,711) impairment charges Office furniture – net 38,433 41,499 68,346 67,450 Hearth products Operations before restructuring and impairment 9,077 6,875 11,066 5,749 charges Restructuring and - - - (419) impairment charges Hearth products – net 9,077 6,875 11,066 5,330 Total operating profit 47,510 48,374 79,412 72,780 Unallocated corporate (8,270) (10,272) (29,678) (29,866) expense Income before income taxes $ 39,240 $ 38,102 $ 49,734 $ 42,914 Depreciation and amortization expense: Office furniture $ 8,542 $ 8,855 $ 25,423 $ 27,308 Hearth products 1,454 1,818 4,519 5,925 General corporate 751 700 2,162 1,902 $ 10,747 $ 11,373 $ 32,104 $ 35,135 Capital expenditures (including capitalized software): Office furniture $ 10,206 $ 4,578 $ 25,206 $ 15,812 Hearth products 519 975 1,472 1,980 General corporate 8,868 69 17,981 2,402 $ 19,593 $ 5,622 $ 44,659 $ 20,194 As of As of Sep. 29, 2012 Oct. 1, 2011 Identifiable assets: Office furniture $ 725,763 $ 618,588 Hearth products 272,951 282,168 General corporate 124,068 154,428 $1,122,782 $1,055,184 For Information Contact: Derek P. Schmidt, Vice President, Corporate Finance (563) 272-7344 Kurt A. Tjaden, Vice President and Chief Financial Officer (563) 272-7400 SOURCE HNI Corporation Website: http://www.hnicorp.com
HNI Corporation Announces Third Quarter Fiscal 2012 Results In Line With Revised Guidance
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