MUSCATINE, IOWA - HNI Corporation (NYSE: HNI) today announced sales for the second quarter ended July 4, 2015, of $568.2 million and net income of $23.9 million, or $0.52 per diluted share.  Non-GAAP net income per diluted share improved 35.9 percent from the prior year quarter to $0.53, which excludes restructuring, impairment, transition costs and gain on sale of assets.     

Second Quarter Summary Comments 
"We are pleased with our results for the second quarter.  We delivered strong sales growth and significant earnings improvement.  Office furniture business performance was led by sales growth in the contract business and solid operational execution.  Momentum continued in our hearth business with strong sales growth in both the new construction channel and the retail gas portion of the remodel/retrofit channel," saidStan Askren, HNI Corporation Chairman, President and Chief Executive Officer.

Second Quarter – Financial Performance

(Dollars in millions, except per share data)

 

Three Months Ended

 
 

7/4/2015

6/28/2014

Change

GAAP

     

Net Sales

$568.2

$509.1

11.6%

Gross Profit %

36.3%

35.6%

70 bps

SG&A %

29.4%

30.5%

-110 bps

(Gain) loss on sale of assets %

-

(0.3%)

30 bps

Restructuring charges %

(0.1%)

2.0%

-210 bps

Operating Income

$39.4

$16.9

133.0%

Operating Income %

6.9%

3.3%

360 bps

Net Income %

4.2%

1.9%

230 bps

EPS – diluted

$0.52

$0.21

147.6%

       

Non-GAAP

     

Gross Profit %

36.5%

36.3%

20 bps

Operating Income

$40.2

$29.3

37.2%

Operating Income %

7.1%

5.8%

130 bps

EPS - diluted

$0.53

$0.39

35.9%

 

Second Quarter Summary Comments

  • Consolidated net sales increased $59.1 million or 11.6 percent to $568.2 million. Compared to prior year quarter, the Vermont Castings Group acquisition increased sales $25.0 million. On an organic basis, sales increased 6.7 percent.
  • Non-GAAP gross margin increased 20 basis points compared to prior year driven by higher volume, better price realization and strong operational performance, partially offset by unfavorable product mix.
  • Selling and administrative expenses, as a percentage of sales, decreased 110 basis points due to the benefit of higher sales volume partially offset by strategic investments, higher incentive-based compensation and acquisition impact.
  • Restructuring charges for the quarter were favorable $0.6M due to lower than anticipated postemployment costs. The Corporation recorded $1.3 million of transition expenses included in cost of sales in connection with previously announced closures, acquisition integration and structural realignment. Second quarter 2014 included $4.8 million of restructuring and transition costs of which$3.4 million were included in cost of sales. The prior year quarter also included a goodwill impairment of $8.9 million and a $1.3 million gain on the sale of assets.

Office Furniture – Financial Performance

(Dollars in millions)

 

Three Months Ended

 
 

7/4/2015

6/28/2014

Change

GAAP

     

Net Sales

$450.6

$423.4

6.4%

Operating Profit

$39.8

$18.2

118.1%

Operating Profit %

8.8%

4.3%

450 bps

       

Non-GAAP

     

Operating Profit

$40.0

$32.0

25.2%

Operating Profit %

8.9%

7.6%

130 bps

 

 

  • Second quarter sales increased $27.2 million or 6.4 percent to $450.6 million. Sales for the quarter increased in both our supplies-driven and contract channels.
  • Second quarter non-GAAP operating profit increased $8.1 million or 25.2 percent. Increased volume, higher price realization and solid operational performance were partially offset by unfavorable product mix, strategic investments and incentive-based compensation.

 

Hearth Products – Financial Performance

(Dollars in millions)

 

Three Months Ended

 
 

7/4/2015

6/28/2014

Change

GAAP

     

Net Sales

$117.6

$85.7

37.2%

Operating Profit

$11.2

$8.5

31.6%

Operating Profit %

9.5%

9.9%

-40 bps

       

Non-GAAP

     

Operating Profit

$11.7

$8.5

37.9%

Operating Profit %

9.9%

9.9%

0 bps

 

 

  • Second quarter sales increased $31.9 million or 37.2 percent to $117.6 million. Compared to prior year quarter, the Vermont Castings Group acquisition increased sales by $25.0 million. On an organic basis, sales increased 8.0 percent for the quarter driven by an increase in both the new construction channel and the retail gas portion of the remodel/retrofit channel.
  • For the quarter, non-GAAP operating profit increased $3.2 million or 37.9 percent due to increased volume and higher price realization.

 

Outlook 
"We delivered very strong results during the first six months of 2015.  I remain confident in our ability to grow sales and significantly increase profits for the remainder of the year.  Our office furniture and hearth businesses are performing well and we continue to make investments to drive long-term profitable growth and shareholder value," said Mr. Askren.

The Corporation estimates sales to be up 5 to 9 percent in the third quarter over the same period in the prior year, including sales from the Vermont Castings Groupacquisition.  Non-GAAP earnings per share are anticipated to be in the range of $0.84 to $0.89 for the third quarter and $2.55 to $2.65 for the full year, which includes theVermont Castings Group acquisition results and excludes restructuring and transition costs.

HNI CORPORATION

Unaudited Condensed Consolidated Statement of Operations

 
 
     

 

(Dollars in thousands, except per share data)

Three Months Ended

Six Months Ended

7/4/2015

6/28/2014

7/4/2015

6/28/2014

Net sales

$568,226

$509,143

$1,091,703

$961,344

Cost of products sold

362,102

328,010

701,079

625,039

Gross profit

206,124

181,133

390,624

336,305

Selling and administrative expenses

167,278

155,288

335,982

300,498

(Gain) loss on sale of assets

-

(1,346)

-

(9,746)

Restructuring charges

(560)

10,282

(183)

10,254

Operating income

39,406

16,909

54,825

35,299

Interest income

119

146

209

216

Interest expense

1,968

2,187

3,957

4,389

Income before income taxes

37,557

14,868

51,077

31,126

Income taxes

13,680

5,203

18,748

10,445

Net income

23,877

9,665

32,329

20,681

Less:  Net (loss) attributable to the noncontrolling interest

(2)

(40)

(28)

(120)

Net income attributable to HNI Corporation

$23,879

$9,705

$32,357

$20,801

Net income attributable to HNI Corporation common shareholders – basic

$0.54

$0.22

$0.73

$0.46

Average number of common shares outstanding – basic

44,416,008

45,019,783

44,359,898

45,029,148

Net income attributable to HNI Corporation common shareholders – diluted

$0.52

$0.21

$0.71

$0.45

Average number of common shares outstanding – diluted

45,620,984

45,867,927

45,573,952

45,843,118

 

Unaudited Condensed Consolidated Balance Sheet

     

Assets

 

Liabilities and Shareholders' Equity

(Dollars in thousands)

As of

   

As of

 

7/4/2015

1/3/2015

   

7/4/2015

1/3/2015

Cash and cash equivalents

$33,438

$34,144

 

Accounts payable and

   

Short-term investments

5,252

3,052

 

   accrued expenses

$404,685

$453,754

Receivables

274,606

240,053

 

Note payable and current

   

Inventories

164,684

121,791

 

   maturities of long-term debt1

304,326

160

Deferred income taxes

16,915

17,310

 

Current maturities of other long-term obligations

4,225

3,419

Prepaid expenses and other current assets

28,152

39,209

 
     

      Current assets

523,047

455,559

 

      Current liabilities

713,236

457,333

             

Property and equipment – net

320,722

311,008

 

Long-term debt

9

197,736

Goodwill

279,374

279,310

 

Other long-term liabilities

84,054

80,353

Other assets

201,820

193,457

 

Deferred income taxes

92,529

89,411

             
       

Parent Company shareholders' equity

434,787

414,587

       

Noncontrolling interest

348

(86)

       

Shareholders' equity

435,135

414,501

Total assets

$1,324,963

$1,239,334

 

      Total liabilities and shareholders' equity

$1,324,963

$1,239,334

 
 

1All debt classified as short term due to timing of maturity

 

 

Unaudited Condensed Consolidated Statement of Cash Flows

   
 

Six Months Ended

(Dollars in thousands)

7/4/2015

6/28/2014

Net cash flows from (to) operating activities

$(31,904)

$(6,992)

Net cash flows from (to) investing activities:

   

   Capital expenditures

(49,882)

(51,122)

   Other

876

17,560

Net cash flows from (to) financing activities

80,204

4,802

Net increase (decrease) in cash and cash equivalents

(706)

(35,752)

Cash and cash equivalents at beginning of period

34,144

65,030

Cash and cash equivalents at end of period

$33,438

$29,278

 

 

Business Segment Data

     
 

Three Months Ended

Six Months Ended

(Dollars in thousands)

7/4/2015

6/28/2014

7/4/2015

6/28/2014

Net sales:

       

  Office furniture

$450,624

$423,423

$858,053

$781,792

  Hearth products

117,602

85,720

233,650

179,552

 

$568,226

$509,143

$1,091,703

$961,344

         

Operating profit:

       

  Office furniture

$39,791

$18,242

$59,943

$34,735

  Hearth products

11,162

8,481

23,663

20,189

  Total operating profit

50,953

26,723

83,606

54,924

  Unallocated corporate expense

(13,396)

(11,855)

(32,529)

(23,798)

  Income before income taxes

$37,557

$14,868

$51,077

$31,126

         

Depreciation and amortization expense:

       

  Office furniture

$10,263

$12,472

$20,640

$21,971

  Hearth products

2,047

1,158

4,005

2,334

  General corporate

1,625

1,298

3,150

2,647

 

$13,935

$14,928

$27,795

$26,952

         

Capital expenditures (including capitalized software):

       

  Office furniture

$11,848

$16,348

$26,399

$29,836

  Hearth products

1,993

1,187

4,397

2,698

  General corporate

7,818

10,894

19,086

18,587

 

$21,659

$28,429

$49,882

$51,122

         
     

As of

7/4/2015

As of

1/3/2015

Identifiable assets:

       

  Office furniture

   

$788,899

$724,293

  Hearth products

   

359,992

341,315

  General corporate

   

176,072

173,726

     

$1,324,963

$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 charges, transition costs impairments and gain/loss on sale.  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 third quarter and full fiscal year 2015.  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 third 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 7/4/2015

 

Three Months Ended 6/28/2014

 

Gross Profit

 

Operating Income

 

 

EPS

 

Gross Profit

 

Operating Income

 

 

EPS

As Reported (GAAP)

$206.1

 

$39.4

 

$0.52

 

$181.1

 

$16.9

 

$0.21

  % of net sales

36.3%

 

6.9%

     

35.6%

 

3.3%

   
                       

Restructuring & Impairment charges

-

 

$(0.6)

 

$(0.01)

 

$2.6

 

$12.9

 

$0.19

Transition costs

$1.3

 

$1.3

 

$0.02

 

$0.8

 

$0.8

 

$0.01

(Gain) loss on sale of assets

-

 

-

 

-

 

-

 

$(1.3)

 

$(0.02)

                       

Results (non-GAAP)

$207.5

 

$40.2

 

$0.53

 

$184.6

 

$29.3

 

$0.39

  % of net sales

36.5%

 

7.1%

     

36.3%

 

5.8%

   
 

 

Office Furniture Reconciliation

(Dollars in millions)

 

Three Months Ended

 

Percent

Change

 

7/4/2015

 

6/28/2014

 

Operating profit as reported (GAAP)

$39.8

 

$18.2

 

118.1%

  % of Net Sales

8.8%

 

4.3%

   
           

Restructuring & Impairment charges

$(0.6)

 

$12.9

   

Transition Costs

$0.8

 

$0.8

   

(Gain) Loss on Sale of Assets

-

 

-

   
           

Operating profit (non-GAAP)

$40.0

 

$32.0

 

25.2%

  % of Net Sales

8.9%

 

7.6%

   
 

Hearth Reconciliation

(Dollars in millions)

 

Three Months Ended

 

Percent

Change

 

7/4/2015

 

6/28/2014

 

Operating profit as reported (GAAP)

$11.2

 

$8.5

 

31.6%

  % of Net Sales

9.5%

 

9.9%

   
           

Restructuring charges

-

 

-

   

Transition Costs

$0.5

 

-

   

(Gain) Loss on Sale of Assets

-

 

-

   
           

Operating profit (non-GAAP)

$11.7

 

$8.5

 

37.9%

  % of Net Sales

9.9%

 

9.9%

   
           
 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/hni-corporation-reports-strong-sales-and-earnings-growth-for-second-quarter-fiscal-year-2015-300117401.html

Source: HNI Corporation

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