MUSCATINE, Iowa - 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.

Source: HNI Corporation

 

Have something to say? Share your thoughts with us in the comments below.