HNI Corporation Reports Strong Earnings Growth For Fourth Quarter And Fiscal Year 2015

Fourth Quarter Highlights

- Non-GAAP net income per share increased 40 percent to $0.91 on a sales decrease of 7.7 percent; GAAP net income per share $0.71

- Non-GAAP gross profit increased 220 basis points; GAAP gross profit increased 240 basis points

Fiscal Year Highlights

- Non-GAAP net income per share increased 31 percent to $2.58 on a sales increase of 3.7 percent; GAAP net income per share $2.32

- Non-GAAP gross profit increased 130 basis points; GAAP gross profit increased 150 basis points

Feb 10, 2016, 17:43 ET from HNI Corporation

MUSCATINE, Iowa, Feb. 10, 2016 /PRNewswire/ -- HNI Corporation (NYSE: HNI) today announced sales for the fourth quarter ended January 2, 2016, of $596.9 million and net income of $32.2 million, or  $0.71 per diluted share.  Non-GAAP net income per diluted share improved 40 percent from the prior year quarter to $0.91, which excludes restructuring, goodwill and intangible impairment and transition costs.

Fourth Quarter and Year End Summary Comments

"We delivered double digit earnings growth in the fourth quarter despite a challenging economic environment.  I'm pleased with our results in 2015 and the strong profit growth we've delivered over the last several years of modest economic recovery.  We continue to compete well in our markets.  We remain focused on executing operational performance improvements and reducing structural costs to drive long-term shareholder value," said Stan Askren, HNI Corporation Chairman, President and Chief Executive Officer.

Fourth Quarter - Financial Performance

(Dollars in millions, except per share data)

Three Months Ended

1/2/2016

1/3/2015

Change

GAAP

Net Sales

$596.9

$646.7

-7.7%

Gross Profit %

37.7%

35.3%

240bps

SG&A %

27.8%

28.2%

-40bps

(Gain) loss on sale of assets %

0.0%

-0.2%

20bps

Restructuring and impairment charges %

2.0%

3.4%

-140bps

Operating Income

$47.8

$24.8

92.4%

Operating Income %

8.0%

3.8%

420bps

Net Income %

5.4%

1.1%

430bps

EPS – diluted

$0.71

$0.16

343.8%

Non-GAAP

Gross Profit %

37.9%

35.7%

220bps

Operating Income

$60.5

$48.4

25.1%

Operating Income %

10.1%

7.5%

260bps

EPS – diluted

$0.91

$0.65

40.0%

Fourth Quarter Summary Comments

  • Consolidated net sales decreased $49.8 million or 7.7 percent to $596.9 million.
  • Non-GAAP gross margin increased 220 basis points compared to prior year driven by strong operational performance, structural cost reductions, favorable material costs and price realization, partially offset by lower volume.
  • Selling and administrative expenses, as a percentage of sales, decreased 40 basis points due to cost  reductions and lower incentive based compensation.
  • The Corporation recorded $12.7 million of restructuring and impairment charges and transition costs.  These costs included goodwill and intangible impairment charges of $11.2 million related to a small office furniture business and $1.5 million of restructuring and transition costs in connection with previously announced closures, acquisition integration and structural realignment.  Fourth quarter 2014 included $24.5 million of restructuring and impairment charges and transition costs.

Full Year - Financial Performance

(Dollars in millions, except per share data)

Twelve Months Ended

1/2/2016

1/3/2015

Change

GAAP

Net Sales

$2,304.4

$2,222.7

3.7%

Gross Profit %

36.8%

35.3%

150bps

SG&A %

29.2%

29.2%

(Gain) loss on sale of assets %

0.0%

-0.5%

50bps

Restructuring and impairment charges %

0.5%

1.5%

-100bps

Operating Income

$163.7

$112.8

45.0%

Operating Income %

7.1%

5.1%

200bps

Net Income %

4.6%

2.8%

180bps

EPS – diluted

$2.32

$1.35

71.9%

Non-GAAP

Gross Profit %

37.0%

35.7%

130bps

Operating Income

$180.9

$145.3

24.6%

Operating Income %

7.9%

6.5%

140bps

EPS – diluted

$2.58

$1.97

31.0%

Full Year Summary Comments

  • Consolidated net sales increased $81.7 million or 3.7 percent to $2.3 billion.  Compared to prior year, the Vermont Castings Group acquisition increased sales $62.7 million.  On an organic basis, sales increased 0.9 percent. 
  • Non-GAAP gross margin increased 130 basis points compared to prior year driven by strong operational performance, structural cost reductions, favorable material costs and price realization, partially offset by lower volume and unfavorable product mix.
  • Selling and administrative expenses, as a percentage of sales, were flat to the prior year.  Higher freight costs, strategic investments and acquisition impact were offset by lower incentive based compensation and cost reductions.
  • The Corporation recorded $17.3 million of restructuring and impairment charges and transition costs.  These costs included goodwill and intangible impairment charges of $11.2 million related to a small office furniture business and $6.1 million of restructuring and transition costs in connection with previously announced closures, acquisition integration and structural realignment.  2014 included $43.1 million of restructuring and impairment charges and transition costs.

Office Furniture – Financial Performance

(Dollars in millions)

Three Months Ended

Twelve Months Ended

1/2/2016

1/3/2015

Change

1/2/2016

1/3/2015

Change

GAAP

Net Sales

$443.8

$468.6

-5.3%

$1,777.8

$1,739.0

2.2%

Operating Profit

$28.3

$9.6

195.5%

$136.6

$87.1

56.9%

Operating Profit %

6.4%

2.0%

440bps

7.7%

5.0%

270bps

Non-GAAP

Operating Profit

$40.9

$33.1

23.4%

$151.6

$120.8

25.5%

Operating Profit %

9.2%

7.1%

210bps

8.5%

6.9%

160bps

  • Fourth quarter sales decreased $24.8 million or 5.3 percent to $443.8 million.  Sales for the quarter decreased in both our supplies-driven and contract channels.     
  • Fourth quarter non-GAAP operating profit increased $7.8 million or 23.4 percent.  Strong operational performance, structural cost reductions, favorable material costs and price realization were partially offset by lower volume.

Hearth Products – Financial Performance

(Dollars in millions)

Three Months Ended

Twelve Months Ended

1/2/2016

1/3/2015

Change

1/2/2016

1/3/2015

Change

GAAP

Net Sales

$153.1

$178.0

-14.0%

$526.6

$483.6

8.9%

Operating Profit

$31.0

$33.1

-6.3%

$78.2

$77.1

1.4%

Operating Profit %

20.3%

18.6%

170bps

14.8%

15.9%

-110bps

Non-GAAP

Operating Profit

$31.1

$33.1

-6.0%

$80.4

$77.1

4.4%

Operating Profit %

20.3%

18.6%

170bps

15.3%

15.9%

-60bps

  • Fourth quarter sales decreased $24.9 million or 14.0 percent to $153.1 million.  Significantly lower biomass sales in the remodel/retrofit channel were partially offset by continued growth in the new construction channel.
  • For the quarter, non-GAAP operating profit decreased $2.0 million or 6.0 percent due to lower volume partially offset by cost reductions, favorable material costs and price realization.

Outlook

"I am pleased with our performance and believe we are competing well.  Our markets have slowed and we are aggressively moving to reduce structural costs while continuing to invest for long-term profitable growth.  I remain confident in our ability to create long-term shareholder value," said Mr. Askren.

The Corporation estimates sales to be down 3 to 7 percent in the first quarter over the same period in the prior year.  Non-GAAP earnings per share are anticipated to be in the range of $0.16 to $0.21 for the first quarter and $2.20 to $2.60 for the full year, which excludes restructuring and transition costs.

Conference Call

HNI Corporation will host a conference call on Thursday, February 11, 2016 at 10:00 a.m. (Central) to discuss fourth quarter and fiscal year 2015 results.  To participate, call 1-877-512-9166 – conference ID number 28682457.  A live webcast of the call will be available on HNI Corporation's website at http://www.hnicorp.com (under Investors – News Releases & Events).  A replay of the webcast will be made available at this website address.  An audio replay of the call will be available until Thursday, February 18, 2016, 10:59 p.m. (Central) by dialing 1-855-859-2056 or 1-404-537-3406 – Conference ID number 28682457.

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 a leading global office furniture manufacturer and is the nation's leading manufacturer of hearth products.  The Corporation's strong brands have leading positions in their markets.  More information can be found on the Corporation's website at www.hnicorp.com.

Forward-looking Statements

This release contains "forward-looking" statements based on current expectations regarding future plans, events, outlook, objectives and financial performance, expectations for future sales growth and earnings per diluted share (GAAP and non-GAAP) for the first quarter and full year fiscal 2016.  Forward-looking statements can be identified by words including "expect," "believe," "anticipate," "estimate," "may," "will," "would," "could," "confident" or other similar words, phrases or expressions.  Forward-looking statements involve known and unknown risks and uncertainties, which may cause the Corporation's actual future results and performance to differ materially from expected results.  These risks include but are not limited to:  general economic conditions in the United States and internationally; unfavorable changes in the United States housing market; industry and competitive conditions; a decline in corporate spending on office furniture; changes in raw material, component or commodity pricing; future acquisitions, divestitures or investments; the cost of energy; changing legal, regulatory, environmental and healthcare conditions; the Corporation's ability to successfully complete its business software system implementation; the Corporation's ability to implement price increases; changes in the sales mix of products; and force majeure events outside the Corporation's control.   A description of these risks and additional risks can be found 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: Kurt A. Tjaden, Senior Vice President and Chief Financial Officer (563) 272-7400

 

HNI CORPORATION

Unaudited Condensed Consolidated Statement of Operations

 

(Dollars in thousands, except per share data)

Three Months Ended

Twelve Months Ended

1/2/2016

1/3/2015

1/2/2016

1/3/2015

Net sales

$596,866

$646,661

$2,304,419

$2,222,695

Cost of products sold

371,723

418,698

1,457,021

1,438,495

Gross profit

225,143

227,963

847,398

784,200

Selling and administrative expenses

165,772

182,341

672,125

649,055

(Gain) loss on sale of assets

(195)

(977)

(195)

(10,723)

Restructuring and impairment charges

11,803

21,778

11,792

33,019

Operating income

47,763

24,821

163,676

112,849

Interest income

76

92

395

418

Interest expense

1,211

1,976

6,901

8,336

Income before income taxes

46,628

22,937

157,170

104,931

Income taxes

14,397

15,959

51,764

43,776

Net income

32,231

6,978

105,406

61,155

Less:  Net (loss) attributable to the noncontrolling interest

0

(104)

(30)

(316)

Net income attributable to HNI Corporation

$32,231

$7,082

$105,436

$61,471

Net income attributable to HNI Corporation common shareholders – basic

$0.73

$0.16

$2.38

$1.37

Average number of common shares outstanding – basic

44,158,369

44,324,249

44,285,298

44,759,716

Net income attributable to HNI Corporation common shareholders – diluted

$0.71

$0.16

$2.32

$1.35

Average number of common shares outstanding – diluted

45,199,111

45,202,346

45,440,653

45,578,872

 

Unaudited Condensed Consolidated Balance Sheet

Assets

Liabilities and Shareholders' Equity

(Dollars in thousands)

As of

As of

1/2/2016

1/3/2015

1/2/2016

1/3/2015

Cash and cash equivalents

$28,548

$34,144

Accounts payable and

Short-term investments

4,252

3,052

accrued expenses

$424,405

$453,754

Receivables

243,409

240,053

Note payable and current

Inventories

125,228

121,791

   maturities of long-term debt

5,477

160

Deferred income taxes

0

17,310

Current maturities of other

Prepaid expenses and

long-term obligations

6,018

3,419

other current assets

36,933

39,209

Current assets

438,370

455,559

Current liabilities

435,900

457,333

Property and equipment – net

341,159

311,008

Long-term debt

185,000

197,736

Goodwill

277,650

279,310

Other long-term liabilities

76,792

80,353

Other assets

206,746

193,457

Deferred income taxes

88,934

89,411

Parent Company shareholders'

equity

476,954

414,587

Noncontrolling interest

345

(86)

Shareholders' equity

477,299

414,501

Total liabilities and

Total assets

$1,263,925

$1,239,334

shareholders' equity

$1,263,925

$1,239,334

 

Unaudited Condensed Consolidated Statement of Cash Flows

Twelve Months Ended

(Dollars in thousands)

1/2/2016

1/3/2015

Net cash flows from (to) operating activities

$173,352

$167,796

Net cash flows from (to) investing activities:

Capital expenditures

(114,966)

(112,713)

Other

2,091

(41,497)

Net cash flows from (to) financing activities

(66,073)

(44,472)

Net increase (decrease) in cash and cash equivalents

(5,596)

(30,886)

Cash and cash equivalents at beginning of period

34,144

65,030

Cash and cash equivalents at end of period

$28,548

$34,144

 

Business Segment Data

Three Months Ended

Twelve Months Ended

(Dollars in thousands)

1/2/2016

1/3/2015

1/2/2016

1/3/2015

Net sales:

Office furniture

$443,791

$468,645

$1,777,804

$1,739,049

Hearth products

153,075

178,016

526,615

483,646

$596,866

$646,661

$2,304,419

$2,222,695

Operating profit:

Office furniture

$28,261

$9,565

$136,593

$87,053

Hearth products

31,001

33,092

78,162

77,066

Total operating profit

59,262

42,657

214,755

164,119

Unallocated corporate expense

(12,634)

(19,720)

(57,585)

(59,188)

Income before income taxes

$46,628

$22,937

$157,170

$104,931

Depreciation and amortization expense:

Office furniture

$11,131

$11,493

$42,415

$45,891

Hearth products

2,259

1,960

8,430

5,415

General corporate

1,875

1,505

6,719

5,416

$15,265

$14,958

$57,564

$56,722

Capital expenditures (including capitalized software):

Office furniture

$18,861

$19,318

$64,850

$62,696

Hearth products

3,883

1,953

11,078

6,342

General corporate

10,649

9,694

39,038

43,675

$33,393

$30,965

$114,966

$112,713

As of

As of

1/2/2016

1/3/2015

Identifiable assets:

Office furniture

$739,915

$724,293

Hearth products

341,813

341,315

General corporate

182,197

173,726

$1,263,925

$1,239,334

 

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, net income per diluted share (i.e., EPS), excluding restructuring and impairment charges, transition costs and (gain)/loss on sale of assets.  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 first quarter and full fiscal year 2016.  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 first quarter and 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.

 

HNI Corporation Reconciliation

(Dollars in millions, except per share data)

Three Months Ended 1/2/2016

Three Months Ended 1/3/2015

Gross Profit

Operating Income

 

EPS

Gross Profit

Operating Income

 

EPS

As reported (GAAP)

$225.1

$47.8

$0.71

$228.0

$24.8

$0.16

% of net sales

37.7%

8.0%

35.3%

3.8%

Restructuring and impairment charges

$0.0

$11.8

$0.18

$0.2

$22.0

$0.47

Transition costs

$0.9

$0.9

$0.01

$2.5

$2.5

$0.03

(Gain)/loss on sale of assets

-$1.0

-$0.01

Results (non-GAAP)

$226.1

$60.5

$0.91

$230.7

$48.4

$0.65

% of net sales

37.9%

10.1%

35.7%

7.5%

 

HNI Corporation Reconciliation

(Dollars in millions, except per share data)

Twelve Months Ended 1/2/2016

Twelve Months Ended 1/3/2015

Gross Profit

Operating Income

 

EPS

Gross Profit

Operating Income

 

EPS

As reported (GAAP)

$847.4

$163.7

$2.32

$784.2

$112.8

$1.35

% of net sales

36.8%

7.1%

35.3%

5.1%

Restructuring and impairment charges

$0.8

$12.6

$0.19

$5.2

$38.2

$0.70

Transition costs

$4.7

$4.7

$0.07

$4.9

$4.9

$0.07

(Gain)/loss on sale of assets

-$10.7

-$0.15

Results (non-GAAP)

$852.9

$180.9

$2.58

$794.3

$145.3

$1.97

% of net sales

37.0%

7.9%

35.7%

6.5%

 

Office Furniture Reconciliation

(Dollars in millions)

Three Months Ended

Percent

Change

Twelve Months Ended

Percent

Change

1/2/2016

1/3/2015

1/2/2016

1/3/2015

Operating profit as reported (GAAP)

$28.3

$9.6

195.5%

$136.6

$87.1

56.9%

% of net sales

6.4%

2.0%

7.7%

5.0%

Restructuring and impairment charges

$11.8

$22.0

$11.6

$38.2

Transition costs

$0.8

$2.5

$3.3

$4.9

(Gain)/loss on sale of assets

-$1.0

-$9.4

Operating profit (non-GAAP)

$40.9

$33.1

23.4%

$151.6

$120.8

25.5%

% of net sales

9.2%

7.1%

8.5%

6.9%

Hearth Reconciliation

(Dollars in millions)

Three Months Ended

Percent

Change

Twelve Months Ended

Percent

Change

1/2/2016

1/3/2015

1/2/2016

1/3/2015

Operating profit as reported (GAAP)

$31.0

$33.1

-6.3%

$78.2

$77.1

1.4%

% of net sales

20.2%

18.6%

14.8%

15.9%

Restructuring charges

$0.0

$0.9

Transition costs

$0.1

$1.4

Operating profit (non-GAAP)

$31.1

$33.1

-5.9%

$80.4

$77.1

4.4%

% of net sales

20.3%

18.6%

15.3%

15.9%

 

SOURCE HNI Corporation



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