2014

HNI Corporation Announces Third Quarter Fiscal 2012 Results In Line With Revised Guidance

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

 

    Three Months Ended

 

Percent

Change


Dollars in millions

except per share data


09/29/2012

10/01/2011







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 Corporation – diluted

$0.53

$0.55

-3.6%


  • Consolidated 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.
  • Gross 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.
  • Total selling and administrative expenses, including restructuring charges, increased 7.7 percent due to investments in growth initiatives and the impact of acquisitions.
  • The 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)

Dollars in millions

except per share data

Three Months Ended

09/29/2012


Three Months Ended

10/01/2011

Gross

Profit

Operating

Income

 

EPS


Gross

Profit

Operating

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

 

Dollars in millions

Three Months Ended

Percent

Change

09/29/2012

10/01/2011





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)

Dollars in millions

Three Months Ended

Percent

Change

09/29/2012

10/01/2011





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%


 

  • Third 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. 
  • Third 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


 

Dollars in millions


Percent

Change

09/29/2012

10/01/2011





Net sales

$83.1

$82.3

0.9%

Operating profit

$9.1

$6.9

32.0%

Operating profit %

10.9%

8.3%


 

  • Third 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. 
  • Third 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-BellTM, Midwest Folding ProductsTM, LSI Corporation of AmericaTM, ERGO®, Heatilator®, Heat & Glo®, Quadra-Fire® and Harman StoveTM 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




 

(Dollars in thousands, except per share data)

Three Months Ended

Nine Months Ended

Sep. 29, 2012

Oct. 1,

2011

Sep. 29, 2012

Oct. 1,

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 expenses

149,421

138,671

444,610

407,281

Restructuring and impairment charges

172

277

1,361

2,130

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 noncontrolling interest

(286)

(31)

(425)

(127)

Net income attributable to HNI Corporation

$  24,490

$  24,947

$  31,374

$   27,849

Net income attributable to HNI Corporation per common share – basic

$0.54

$0.56

$0.69

$0.62

Average number of common shares outstanding – basic

45,224,059

44,787,437

45,265,050

44,795,155

Net income attributable to HNI Corporation per common share – diluted

$0.53

$0.55

$0.68

$0.61

Average number of common shares outstanding – diluted

45,820,422

45,637,042

45,839,917

45,683,520

 

 

Unaudited Condensed Consolidated Balance Sheet



Assets

Liabilities and Shareholders' Equity


As of


As of

 

(Dollars in thousands)

Sep. 29, 2012

Dec. 31, 2011


Sep. 29, 2012

Dec. 31, 2011

Cash and cash equivalents

$    49,265

$    72,812

Accounts payable and



Short-term investments

7,250

9,157

     accrued expenses

$  401,122

$  358,290

Receivables

247,297

204,036

Note payable and current



Inventories

104,879

101,873

   maturities of long-term debt

43,877

30,345

Deferred income taxes

19,500

18,797

Current maturities of other



Prepaid expenses and



   long-term obligations

266

275

   other current assets

27,986

27,365




      Current assets

456,177

434,040

      Current liabilities

445,265

388,910










Long-term debt

150,159

150,200




Capital lease obligations

259

340




Other long-term liabilities

56,814

52,716

Property and equipment – net

238,300

229,727

Deferred income taxes

49,602

42,770

Goodwill

293,359

270,761




Other assets

134,946

119,730

Parent Company shareholders'






   equity

420,042

419,057




Noncontrolling interest

641

265




Shareholders' equity

420,683

419,322




      Total liabilities and



Total assets

$1,122,782

$1,054,258

        shareholders' equity

$1,122,782

$1,054,258

 

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 equivalents

(23,547)

2,437

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




(Dollars in thousands)

Three Months Ended

Nine Months Ended

Sep. 29,
2012

Oct. 1,
2011

Sep. 29,
2012

Oct. 1,
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 charges

$ 38,605

$  41,776

$ 69,707

$  69,161

    Restructuring and impairment charges

(172)

(277)

(1,361)

(1,711)

       Office furniture – net

38,433

41,499

68,346

67,450

  Hearth products





    Operations before restructuring and impairment charges

9,077

6,875

11,066

5,749

    Restructuring and impairment charges

-

-

-

(419)

       Hearth products – net

9,077

6,875

11,066

5,330

  Total operating profit

47,510

48,374

79,412

72,780

       Unallocated corporate expense

(8,270)

(10,272)

(29,678)

(29,866)

  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

Sep. 29, 2012

As of

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



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