MUSCATINE, IA - HNI Corporation (NYSE: HNI) today announced sales for the first quarter ended April 4, 2015, of $523.5 million and net income of $8.5 million, or $0.19 per diluted share. Non-GAAP net income per diluted share improved 75 percent from the prior year quarter to $0.21, which excludes restructuring charges, transition costs and prior year gain on sale of assets.
First Quarter Summary Comments
"We are pleased with our very strong sales and earnings for the first quarter. Performance in our office furniture businesses was outstanding, with double-digit growth in both the supplies-driven and contract businesses and strong operational execution. Our hearth business delivered significant sales growth in the new construction channel," said Stan Askren, HNI Corporation Chairman, President and Chief Executive Officer.
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First Quarter -- Financial Performance (Dollars in millions, except per share data) |
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Three Months Ended |
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|
4/4/2015 |
3/29/2014 |
Change |
|
|
GAAP |
|||
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Net Sales |
$523.5 |
$452.2 |
15.8% |
|
Gross Profit % |
35.2% |
34.3% |
90 bps |
|
SG&A % |
32.2% |
32.1% |
10 bps |
|
(Gain) loss on sale of assets % |
- |
(1.9%) |
-190 bps |
|
Restructuring charges % |
0.1% |
- |
10 bps |
|
Operating Income |
$15.4 |
$18.4 |
-16.2% |
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Operating Income % |
2.9% |
4.1% |
-120 bps |
|
Net Income % |
1.6% |
2.5% |
-90 bps |
|
EPS - diluted |
$0.19 |
$0.24 |
-20.8% |
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Non-GAAP |
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Gross Profit % |
35.5% |
34.3% |
120 bps |
|
Operating Income |
$16.9 |
$10.0 |
69.8% |
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Operating Income % |
3.2% |
2.2% |
100 bps |
|
EPS - diluted |
$0.21 |
$0.12 |
75.0% |
First Quarter Summary Comments
- Consolidated net sales increased $71.3 million or 15.8 percent to $523.5 million. Compared to prior year quarter, an acquisition increased sales $19.0 million. On an organic basis, sales increased 11.6 percent.
- Non-GAAP gross margin increased 120 basis points compared to prior year driven by higher volume, better price realization and strong operational performance.
- Selling and administrative expenses, as a percentage of sales, increased 10 basis points due to increased freight costs, strategic investments, higher incentive-based compensation and acquisition impact.
- In connection with previously announced closures, the Corporation recorded $1.5 million of restructuring and transition costs of which $1.1 million was included in cost of sales. First quarter 2014 included an $8.4 million gain on the sale of a vacated facility.
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Office Furniture -- Financial Performance (Dollars in millions) |
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Three Months Ended |
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4/4/2015 |
3/29/2014 |
Change |
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|
GAAP |
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|
Net Sales |
$407.4 |
$358.4 |
13.7% |
|
Operating Profit |
$20.2 |
$16.5 |
22.2% |
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Operating Profit % |
4.9% |
4.6% |
30 bps |
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Non-GAAP |
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Operating Profit |
$21.7 |
$8.1 |
168.5% |
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Operating Profit % |
5.3% |
2.3% |
300 bps |
- First quarter sales increased $49.1 million or 13.7 percent to $407.4 million. Sales for the quarter increased across all channels.
- First quarter non-GAAP operating profit increased $13.6 million or 168.5 percent. Increased volume, higher price realization and strong operational performance were partially offset by increased freight costs and strategic investments.
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Hearth Products -- Financial Performance (Dollars in millions) |
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Three Months Ended |
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4/4/2015 |
3/29/2014 |
Change |
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GAAP |
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Net Sales |
$116.0 |
$93.8 |
23.7% |
|
Operating Profit |
$12.5 |
$11.7 |
6.8% |
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Operating Profit % |
10.8% |
12.5% |
-170 bps |
- First quarter sales increased $22.2 million or 23.7 percent to $116.0 million. Compared to prior year quarter, acquisitions increased sales by $19.0 million. On an organic basis, sales increased 3.4 percent for the quarter driven by an increase in the new construction channel partially offset by a decrease in the remodel/retrofit channel due to biomass products.
- For the quarter, operating profit increased $0.8 million or 6.8 percent due to increased volume partially offset by acquisition impact.
Outlook
"Our office furniture and hearth businesses have strong momentum as we enter the second quarter. We continue to make investments to drive long-term profitable growth and shareholder value," said Mr. Askren.
The Corporation estimates sales to be up 12 to 16 percent in the second quarter over the same period in the prior year, including sales from the Vermont Castings Group acquisition. Non-GAAP earnings per share are anticipated to be in the range of $0.47 to $0.52 for the second quarter and $2.50 to $2.65 for the full year, which includes the Vermont Castings Group acquisition results and excludes restructuring and transition costs.
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.
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HNI CORPORATION |
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(Dollars in thousands, except per share data) |
Three Months Ended |
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4/4/2015 |
3/29/2014 |
|
|
Net sales |
$523,477 |
$452,201 |
|
Cost of products sold |
338,977 |
297,029 |
|
Gross profit |
184,500 |
155,172 |
|
Selling and administrative expenses |
168,704 |
145,210 |
|
(Gain) loss on sale of assets |
- |
(8,400) |
|
Restructuring charges |
377 |
(28) |
|
Operating income |
15,419 |
18,390 |
|
Interest income |
90 |
70 |
|
Interest expense |
1,989 |
2,202 |
|
Income before income taxes |
13,520 |
16,258 |
|
Income taxes |
5,068 |
5,242 |
|
Net income |
8,452 |
11,016 |
|
Less: Net (loss) attributable to the noncontrolling interest |
(26) |
(80) |
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Net income attributable to HNI Corporation |
$8,478 |
$11,096 |
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Net income attributable to HNI Corporation common shareholders -- basic |
$0.19 |
$0.25 |
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Average number of common shares outstanding -- basic |
44,303,788 |
45,038,512 |
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Net income attributable to HNI Corporation common shareholders -- diluted |
$0.19 |
$0.24 |
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Average number of common shares outstanding -- diluted |
45,523,785 |
45,837,579 |
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Unaudited Condensed Consolidated Balance Sheet |
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Assets |
Liabilities and Shareholders' Equity |
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(Dollars in thousands) |
As of |
As of |
||||
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4/4/2015 |
1/3/2015 |
4/4/2015 |
1/3/2015 |
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Cash and cash equivalents |
$25,469 |
$34,144 |
Accounts payable and accrued expenses |
$369,891 |
$453,754 |
|
|
Short-term investments |
1,152 |
3,052 |
||||
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Receivables |
232,678 |
240,053 |
Note payable and current maturities of long-term debt |
|||
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Inventories |
143,883 |
121,791 |
74,653 |
160 |
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Deferred income taxes |
17,047 |
17,310 |
Current maturities of other long-term obligations |
4,229 |
3,419 |
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Prepaid expenses and other current assets |
37,810 |
39,209 |
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Current assets |
458,039 |
455,559 |
Current liabilities |
448,773 |
457,333 |
|
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Property and equipment -- net |
310,713 |
311,008 |
Long-term debt |
198,023 |
197,736 |
|
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Goodwill |
279,772 |
279,310 |
Other long-term liabilities |
83,607 |
80,353 |
|
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Other assets |
200,628 |
193,457 |
Deferred income taxes |
91,169 |
89,411 |
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Parent Company shareholders' equity |
427,231 |
414,587 |
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Noncontrolling interest |
349 |
(86) |
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Shareholders' equity |
427,580 |
414,501 |
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Total liabilities and shareholders' equity |
$1,249,152 |
$1,239,334 |
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Total assets |
$1,249,152 |
$1,239,334 |
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Unaudited Condensed Consolidated Statement of Cash Flows |
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Three Months Ended |
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(Dollars in thousands) |
4/4/2015 |
3/29/2014 |
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Net cash flows from (to) operating activities |
$(49,317) |
$(36,065) |
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Net cash flows from (to) investing activities: |
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Capital expenditures |
(28,223) |
(22,693) |
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Other |
51 |
12,812 |
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Net cash flows from (to) financing activities |
68,814 |
26,600 |
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Net increase (decrease) in cash and cash equivalents |
(8,675) |
(19,346) |
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Cash and cash equivalents at beginning of period |
34,144 |
65,030 |
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Cash and cash equivalents at end of period |
$25,469 |
$ 45,684 |
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Business Segment Data |
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Three Months Ended |
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(Dollars in thousands) |
4/4/2015 |
3/29/2014 |
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Net sales: |
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|
Office furniture |
$407,429 |
$358,369 |
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Hearth products |
116,048 |
93,832 |
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$523,477 |
$452,201 |
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Operating profit: |
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|
Office furniture |
$20,152 |
$16,493 |
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Hearth products |
12,501 |
11,708 |
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Total operating profit |
32,653 |
28,201 |
|
Unallocated corporate expense |
(19,133) |
(11,943) |
|
Income before income taxes |
$13,520 |
$16,258 |
|
Depreciation and amortization expense: |
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|
Office furniture |
$10,377 |
$9,499 |
|
Hearth products |
1,958 |
1,176 |
|
General corporate |
1,525 |
1,349 |
|
$13,860 |
$12,024 |
|
|
Capital expenditures (including capitalized software): |
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|
Office furniture |
$14,551 |
$13,488 |
|
Hearth products |
2,404 |
1,512 |
|
General corporate |
11,268 |
7,693 |
|
$28,223 |
$22,693 |
|
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As of 4/4/2015 |
As of 1/3/2015 |
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Identifiable assets: |
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|
Office furniture |
$734,190 |
$724,293 |
|
Hearth products |
345,617 |
341,315 |
|
General corporate |
169,345 |
173,726 |
|
$1,249,152 |
$1,239,334 |
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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 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 second 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 second 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.
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HNI Corporation Reconciliation (Dollars in millions, except per share data) |
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Three Months Ended 4/4/2015 |
Three Months Ended 3/29/2014 |
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|
Gross Profit |
Operating Income |
EPS |
Gross Profit |
Operating Income |
EPS |
||||||
|
As Reported (GAAP) |
$184.5 |
$15.4 |
$0.19 |
$155.2 |
$18.4 |
$0.24 |
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% of net sales |
35.2% |
2.9% |
34.3% |
4.1% |
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Restructuring charges |
- |
$0.4 |
$0.01 |
- |
- |
||||||
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Transition costs |
$1.1 |
$1.1 |
$0.02 |
- |
- |
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(Gain) loss on sale of assets |
- |
- |
- |
- |
$(8.4) |
$(0.12) |
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Results (non-GAAP) |
$185.6 |
$16.9 |
$0.21 |
$155.2 |
$10.0 |
$0.12 |
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% of net sales |
35.5% |
3.2% |
34.3% |
2.2% |
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Office Furniture Reconciliation (Dollars in millions) |
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|
Three Months Ended |
Percent Change |
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4/4/2015 |
3/29/2014 |
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Operating profit as reported (GAAP) |
$20.2 |
$16.5 |
22.2% |
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% of Net Sales |
4.9% |
4.6% |
|||
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Restructuring charges |
$0.4 |
- |
|||
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Transition Costs |
$1.1 |
- |
|||
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(Gain) Loss on Sale of Assets |
- |
$(8.4) |
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Operating profit (non-GAAP) |
$21.7 |
$8.1 |
168.5% |
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% of Net Sales |
5.3% |
2.3% |
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Source: HNI Corporation
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