2014

HNI Corporation Announces Increased Sales And Earnings For Second Quarter Fiscal 2012

MUSCATINE, Iowa, July 18, 2012 /PRNewswire/ -- HNI Corporation (NYSE: HNI) today announced sales for the second quarter ended June 30, 2012, of $480.4 million, an 11 percent increase from the prior year quarter, and net income of $7.0 million, a 51 percent increase from prior year quarter.  Net income per diluted share for the quarter was $0.15 or $0.17 on a non-GAAP basis when excluding restructuring and transition costs. 

Second Quarter Summary Comments

"We executed well and delivered solid results for the second quarter.  Strong operational performance combined with growth investments drove sales increases and margin expansion across both segments.  Office furniture sales growth was led by continued double-digit increases in our supplies-driven business.  Our market leadership and strong performance in the new construction channel drove growth in our hearth business," said Stan Askren, HNI Corporation Chairman, President and Chief Executive Officer.

Second Quarter

Three Months Ended

Percent

Change


Dollars in millions

except per share data


6/30/2012

7/02/2011







Net sales

$480.4

$432.8

11.0%


Gross margin

$165.1

$146.9

12.4%


Gross margin %

34.4%

33.9%



SG&A

$151.7

$136.7

11.0%


SG&A %

31.6%

31.6%



Operating income

$13.4

$10.3

30.1%


Operating income %

2.8%

2.4%



Net income attributable to HNI Corporation

$7.0

$4.7

50.8%







Earnings per share attributable to HNI Corporation – diluted

$0.15

$0.10

50.0%


Second Quarter Results

  • Consolidated net sales increased $47.6 million or 11.0 percent to $480.4 million.  The acquisition of Sagus contributed $25.1 million of sales, or 5.8 percent of sales growth. 
  • Gross margin was 0.5 percentage points higher than prior year quarter primarily due to higher volume, better price realization and lower material costs offset partially by unfavorable mix, impact of the acquisition of Sagus and higher restructuring and transition costs.
  • Total selling and administrative expenses, including restructuring charges, increased 11.0 percent due to volume related expenses, investments in growth initiatives, higher incentive-based compensation and impact of the acquisition of Sagus.
  • The Corporation's second quarter results included $1.0 million of restructuring and transition charges of which $0.3 million were included in cost of sales.  These included costs associated with previously announced shutdown and consolidation of office furniture manufacturing locations.  The second quarter of 2011 included $0.5 million of restructuring costs.

Second Quarter – Non-GAAP Financial Measures

(Reconciled with most comparable GAAP financial measures)





Dollars in millions

except per share data

Three Months Ended

6/30/2012


Three Months Ended

7/02/2011


Gross

Profit

Operating

Income

 

EPS


Gross

Profit

Operating

Income

 

EPS

As reported (GAAP)

$165.1

$13.4

$0.15


$146.9

$10.3

$0.10

 % of net sales

34.4%

2.8%



33.9%

2.4%










Restructuring and impairment

$0.2

$0.4

$0.01


-

$0.5

$0.01

Transition costs

$0.1

$0.6

$0.01


-

-

-









Results (non-GAAP)

$165.4

$14.4

$0.17


$146.9

$10.7

$0.11

 % of net sales

34.4%

3.0%



33.9%

2.5%


Year-to-Date Results

Consolidated net sales for the first six months of 2012 increased $96.7 million, or 11.7 percent, to $925.6 million compared to $829.0 million in 2011.  The acquisition of Sagus contributed $40.4 million of sales, or 4.9 percent of sales growth.  Gross margin decreased to 33.7 percent compared to 34.0 percent last year.  Net income was $6.9 million compared to $2.9 million in 2011.  Earnings per share from continuing operations increased to $0.15 per diluted share compared to $0.06 per diluted share for the first six months of 2011.

Operating activities generated $5.7 million of cash during the first six months of 2012 compared to using $8.4 million of cash in the same period last year.  Capital expenditures during the first six months of 2012 were $25.1 million compared to $14.6 million during the same period in 2011. 

Office Furniture

 

 

Dollars in millions

Three Months Ended

Percent

Change

6/30/2012

7/02/2011

Sales

$418.6

$372.6

12.3%

Operating profit

$22.1

$17.9

23.5%

Operating profit %

5.3%

4.8%


 

Second Quarter – Non-GAAP Financial Measures

(Reconciled with most comparable GAAP financial measures)

 


Three Months Ended

Percent

Dollars in millions

6/30/2012

7/02/2011

Change





Operating profit as reported (GAAP)

$22.1

$17.9

23.5%

% of Net Sales

5.3%

4.8%






Restructuring and impairment

$0.4

$0.4


Transition costs

$0.6

-






Operating profit (non-GAAP)

$23.1

$18.3

26.5%

% of Net Sales

5.5%

4.9%


  • Second quarter sales for the office furniture segment increased $45.9 million or 12.3 percent to $418.6 million driven by an increase in the supplies-driven channel.  The acquisition of Sagus contributed $25.1 million of sales, or 6.7 percent of sales growth. 
  • Second quarter operating profit increased $4.2 million.  Operating profit was positively impacted by better price realization and lower input costs.  These were partially offset by unfavorable mix, investments in growth initiatives, higher incentive based compensation and increased restructuring and impairment costs.

Hearth Products

 

 

Dollars in millions

Three Months Ended

Percent

Change

6/30/2012

7/02/2011

Sales

$61.8

$60.2

2.8%

Operating profit (loss)

$0.9

$(1.0)

190.3%

Operating profit (loss) %

1.4%

-1.6%


 

Second Quarter – Non-GAAP Financial Measures

(Reconciled with most comparable GAAP financial measures)

 


Three Months Ended

Percent

Dollars in millions

6/30/2012

7/02/2011

Change





Operating profit (loss) as reported (GAAP)

$0.9

$(1.0)

190.3%

% of Net Sales

1.4%

-1.6%






Restructuring and impairment

-

$0.1






Operating profit (loss) (non-GAAP)

$0.9

$(0.9)

195.2%

% of net sales

1.4%

-1.5%


  • Second quarter sales for the hearth products segment increased $1.7 million or 2.8 percent to $61.8 million driven by an increase in the new construction channel partially offset by a decline in the remodel/retrofit channel. 
  • Second quarter operating profit increased $1.8 million.  Operating profit was positively impacted by increased volume, better price realization and lower material costs partially offset by investments in selling and growth initiatives.

Outlook

"I remain positive about our markets and our ability to grow sales and increase profits in 2012.  We continue to aggressively invest for long-term profitable growth, and I remain confident our investments are delivering long-term shareholder value.  Our businesses are strong, competitive, and well-positioned in their markets, and the prospects for our businesses are encouraging," said Mr. Askren.

The Corporation estimates sales growth between 11 to 14 percent in the third quarter over the same period in the prior year.  Non-GAAP earnings per diluted share are anticipated in the range of $0.65 to $0.70 for the third quarter, which excludes restructuring charges and transition costs.  For the full year, the Company is narrowing its estimate of non-GAAP earnings per diluted share to the range of $1.35 to $1.45, which excludes 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

HNI Corporation will host a conference call on Thursday, July 19, 2012 at 10:00 a.m. (Central) to discuss second quarter 2012 results.  To participate, call 1-877-512-9166 – conference ID number 95367967.  A live webcast of 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, July 26, 2012, 10:59 p.m. (Central) by dialing 1-855-859-2056 or 1-404-537-3406 – Conference ID number 95367967. 

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. 

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), 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.

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 third 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.

For Information Contact:
Derek P. Schmidt, Treasurer and Vice President, Corporate Finance (563) 272-7344
Kurt A. Tjaden, Vice President and Chief Financial Officer (563) 272-7400

 

HNI CORPORATION

Unaudited Condensed Consolidated Statements of Operations




 

(Dollars in thousands, except per share data)

Three Months Ended

Six Months Ended

June 30, 2012

July 2, 2011

June 30, 2012

July 2, 2011

Net Sales

$480,400

$432,810

$925,612

$828,961

Cost of products sold

315,287

285,880

613,672

547,307

Gross profit

165,113

146,930

311,940

281,654

Selling and administrative expenses

151,455

136,197

295,189

268,610

Restructuring and impairment charges

292

463

1,189

1,853

Operating income

13,366

10,270

15,562

11,191

Interest income

276

110

455

243

Interest expense

2,909

3,033

5,523

6,622

Income before income taxes

10,733

7,347

10,494

4,812

Income taxes

3,835

2,744

3,749

2,006

Net income  

6,898

4,603

6,745

2,806

Less:  Net income (loss) attributable to the noncontrolling interest

(127)

(54)

(139)

(96)

Net income attributable to HNI Corporation

$7,025

$  4,657

$6,884

$  2,902

Net income attributable to HNI Corporation common shareholders – basic

$0.15

$0.10

$0.15

$0.06

Average number of common shares outstanding – basic

45,419,564

44,745,474

45,285,545

44,799,013

Net income attributable to HNI Corporation common shareholders – diluted

$0.15

$0.10

$0.15

$0.06

Average number of common shares outstanding – diluted

45,944,815

45,667,453

45,814,296

45,732,598

 

Unaudited Condensed Consolidated Balance Sheet



Assets

Liabilities and Shareholders' Equity


As of


As of

 

(Dollars in thousands)

June 30,

2012

Dec. 31, 2011


June 30, 2012

Dec. 31, 2011

Cash and cash equivalents

$  55,058

$    72,812

Accounts payable and



Short-term investments

7,250

9,157

   accrued expenses

$354,648

$  358,290

Receivables

219,822

204,036

Note payable and current



Inventories

113,651

101,873

   maturities of long-term debt

60,345

30,345

Deferred income taxes

18,226

18,797

Current maturities of other



Prepaid expenses and



   long-term obligations

341

275

   other current assets

34,218

27,365




      Current assets

448,225

434,040

      Current liabilities

415,334

388,910










Long-term debt

150,173

150,200




Capital lease obligations

286

340




Other long-term liabilities

57,260

52,716

Property and equipment – net

227,641

229,727

Deferred income taxes

43,771

42,770

Goodwill

272,481

270,761




Other assets

127,291

119,730

Parent Company shareholders'






   equity

408,688

419,057




Noncontrolling interest

126

265




Shareholders' equity

408,814

419,322




      Total liabilities and



Total assets

$1,075,638

$1,054,258

        shareholders' equity

$1,075,638

$1,054,258

 

Unaudited Condensed Consolidated Statement of Cash Flows




Six Months Ended

(Dollars in thousands)

June 30, 2012

July 2, 2011

Net cash flows from (to) operating activities

$   5,684

$ (8,359)

Net cash flows from (to) investing activities:



   Capital expenditures

(25,066)

(14,572)

   Other

(651)

(1,533)

Net cash flows from (to) financing activities

2,279

(27,869)

Net increase (decrease) in cash and cash equivalents

(17,754)

(52,333)

Cash and cash equivalents at beginning of period

72,812

99,096

Cash and cash equivalents at end of period

$ 55,058

$ 46,763

 

Business Segment Data





Three Months Ended

Six Months Ended

(Dollars in thousands)

June 30, 2012

July 2, 2011

June 30, 2012

July 2,
2011

Net sales:





  Office furniture

$418,562

$372,643

$797,166

$703,770

  Hearth products

61,838

60,167

128,446

125,191


$480,400

$432,810

$925,612

$828,961






Operating profit (loss):





  Office furniture





    Operations before restructuring and impairment charges

$ 22,350

$ 18,270

$ 31,102

$ 27,385

    Restructuring and impairment charges

(292)

(412)

(1,189)

(1,434)

       Office furniture – net

22,058

17,858

29,913

25,951

  Hearth products





    Operations before restructuring and impairment charges

857

(899)

1,989

(1,126)

    Restructuring and impairment charges

-

(51)

-

(419)

       Hearth products – net

857

(950)

1,989

(1,545)

  Total operating profit

22,915

16,908

31,902

24,406

       Unallocated corporate expense

(12,182)

(9,561)

(21,408)

(19,594)

  Income before income taxes

$ 10,733

$   7,347

$10,494

$   4,812






Depreciation and amortization expense:





  Office furniture

$8,320

$9,023

$16,881

$18,453

  Hearth products

1,500

1,954

3,065

4,107

  General corporate

716

637

1,411

1,202


$10,536

$11,614

$21,357

$23,762






Capital expenditures:





  Office furniture

$ 5,809

$7,599

$15,000

$11,234

  Hearth products

577

541

953

1,005

  General corporate

5,862

1,834

9,113

2,333


$12,248

$9,974

$25,066

$14,572









As of

June 30, 2012

As of
July 2,
2011

Identifiable assets:





  Office furniture



$692,732

$629,014

  Hearth products



263,380

270,126

  General corporate



119,526

104,733




$1,075,638

$1,003,873

 

SOURCE HNI Corporation



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