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HNI Corporation Announces Results In Line With Guidance For Fourth Quarter And Year-End Fiscal 2012

2013-02-05 17:12 ET - News Release

MUSCATINE, Iowa, Feb. 5, 2013 /PRNewswire/ -- HNI Corporation (NYSE: HNI) today announced sales of $527.5 million and net income of $17.6 million for the fourth quarter ended December 29, 2012.  Net income per diluted share for the quarter was $0.39 or $0.40 on a non-GAAP basis when excluding restructuring and transition costs.  For fiscal year 2012, the Corporation reported sales of $2.0 billion, a 9.3 percent increase from prior year, and net income of $49.0 million, a 6.5 percent increase from prior year.  Net income per diluted share for the year was $1.07 or $1.13 on a non-GAAP basis when excluding restructuring and transition costs.

Fourth Quarter and FY'12 Summary Comments
"We continue to compete well in our markets and delivered solid results for the fourth quarter and full year 2012 in a challenging environment.  Our growth investments delivered top-line improvement in the quarter despite considerable economic uncertainty, and outstanding working capital management drove significant cash generation.  Office furniture sales growth was led by a solid increase in our supplies-driven business.  Continued strong profit growth in our hearth business was led by substantial growth in the new construction channel and strong operational execution.  We enter 2013 financially strong, competitively well positioned, and focused on delivering profitable growth," said Stan Askren, HNI Corporation Chairman, President and Chief Executive Officer.

Fourth Quarter – GAAP Financial Measures

Dollars in millions

except per share data

Three Months Ended

Percent

Change

12/29/2012

12/31/2011





Net sales

$527.5

$500.3

5.5%

Gross margin

$186.0

$178.0

4.5%

Gross margin %

35.2%

35.6%


SG&A

$155.6

$148.2

5.0%

SG&A %

29.5%

29.6%


Operating income

$30.3

$29.8

1.6%

Operating income %

5.7%

6.0%


Net income attributable to HNI Corporation

$17.6

$18.1

-3.0%





Earnings per share attributable to HNI Corporation – diluted

$0.39

$0.40

-2.5%

 

  • Consolidated net sales increased $27.3 million or 5.5 percent from the prior year quarter to $527.5 million.  Acquisitions contributed $10.0 million of sales, or 2.0 percent sales growth.
  • Gross margins were 0.4 percentage points lower than prior year quarter primarily due to unfavorable mix, investments to improve operations, new product ramp-up and impact of acquisitions offset partially by higher volume and lower material costs.
  • Total selling and administrative expenses, including restructuring charges, increased 5.0 percent due to volume related expenses, investments in growth initiatives and the impact of acquisitions.  
  • The Corporation's fourth quarter results included $1.1 million of restructuring and transition costs 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.  Included in the fourth quarter of 2011 were $1.1 million of restructuring and transition costs net of a non-operating gain on the sale of property.    
  • The provision for income taxes for fourth quarter 2012 reflects an effective tax rate of 37.6 percent compared to 33.8 percent in the prior year quarter.  The increase is due to the research tax credit being extended in 2013 and other permanent differences.    

 

Fourth Quarter – Non-GAAP Financial Measures

(Reconciled with most comparable GAAP financial measures)

Dollars in millions

except per share data

Three Months Ended 12/29/2012


Three Months Ended 12/31/2011

Gross

Profit

SG&A

Operating

Income

EPS


Gross

Profit

SG&A

Operating

Income

EPS











As reported (GAAP)

$186.0

$155.6

$30.3

$0.39


$178.0

$148.2

$29.8

$0.40

  % of net sales

35.2%

29.5%

5.7%



35.6%

29.6%

6.0%












Restructuring and impairment

-

$(0.6)

$0.6

$0.01


$0.1

$(1.1)

$1.2

$0.02

Transition costs

$0.3

$(0.2)

$0.5

$0.00


$0.2

-

$0.2

$0.00

Non-operating gain

-

-

-

-


-

$0.4

$(0.4)

$(0.01)











Results (non-GAAP)

$186.3

$154.8

$31.4

$0.40


$178.3

$147.4

$30.8

$0.41

  % of net sales

35.3%

29.3%

6.0%



35.6%

29.5%

6.2%






Full Year – GAAP Financial Measures

Dollars in millions

except per share data

Twelve Months Ended

Percent

Change

12/29/2012

12/31/2011





Net sales

$2,004.0

$1,833.5

9.3%

Gross margin

$689.2

$639.1

7.8%

Gross margin %

34.4%

34.9%


SG&A

$601.6

$557.6

7.9%

SG&A %

30.0%

30.4%


Operating income

$87.6

$81.5

7.5%

Operating income %

4.4%

4.4%


Net income attributable to HNI Corporation

$49.0

$46.0

6.5%





Earnings per share attributable to HNI
Corporation – diluted

$1.07

$1.01


 

  • Net sales increased $170.6 million, or 9.3 percent, to $2.0 billion compared to $1.8 billion for the prior year.  Acquisitions contributed $93.0 million, or 5.1 percent sales growth.
  • Gross margins were 0.5 percentage points lower than prior year due to unfavorable mix, investments to improve operations, new product ramp-up and impact of acquisitions offset partially by increased volume, better price realization and lower material costs.
  • Total selling and administrative expenses as a percent of net sales, including restructuring charges, improved 0.4 percentage points due to higher volume partially offset by investments in growth initiatives and costs associated with acquisitions.  Included in 2012 were $3.0 million of restructuring and transition charges compared to $3.3 million in 2011.
  • The provision for income taxes for 2012 reflects an effective tax rate of 37.7 percent compared to 34.8 percent in 2011.  The increase is due to the research tax credit being extended in 2013 and other permanent differences.

Cash flow from operations for the year was $144.8 million compared to $134.3 million in 2011.   Capital expenditures were $60.3 million in 2012 compared to $31.1 million in 2011.  The Corporation completed the acquisition of BP Ergo, a leading manufacturer and marketer of office furniture in India. 

Full Year – Non-GAAP Financial Measures

(Reconciled with most comparable GAAP financial measures)

Dollars in millions

except per share data

Twelve Months Ended 12/29/2012


Twelve Months Ended 12/31/2011

Gross

Profit

SG&A

Operating

Income

EPS


Gross

Profit

SG&A

Operating

Income

EPS











As reported (GAAP)

$689.2

$601.6

$87.6

$1.07


$639.1

$557.6

$81.5

$1.01

  % of net sales

34.4%

30.0%

4.4%



34.9%

30.4%

4.4%












Restructuring and impairment

$0.4

$(1.9)

$2.3

$0.03


$0.2

$(3.3)

$3.5

$0.05

Transition costs

$0.7

$(1.1)

$1.8

$0.03


$0.3

-

$0.3

$0.00

Non-operating gains

-

-

-

-


-

$0.4

$(0.4)

$(0.01)











Results (non-GAAP)

$690.3

$598.6

$91.8

$1.13


$639.6

$554.7

$84.9

$1.05

  % of net sales

34.4%

29.9%

4.6%



34.9%

30.3%

4.6%







Office Furniture – GAAP Financial Measures

Dollars in millions

Three Months Ended

Percent
Change

Twelve Months Ended

Percent
Change

12/29/2012

12/31/2011

12/29/2012

12/31/2011








Sales

$422.3

$402.4

5.0%

$1,687.3

$1,528.1

10.4%

Operating profit

$23.5

$32.2

-27.0%

$91.8

$99.6

-7.8%

Operating profit %

5.6%

8.0%


5.4%

6.5%






Non-GAAP Financial Measures

(Reconciled with most comparable GAAP measures)

Dollars in millions

Three Months Ended

Percent
Change

Twelve Months Ended

Percent
Change

12/29/2012

12/31/2011

12/29/2012

12/31/2011








Operating profit

as reported (GAAP)

$23.5

$32.2

-27.0%

$91.8

$99.6

-7.8%

% of net sales

5.6%

8.0%


5.4%

6.5%









Restructuring and impairment

$0.6

$1.2


$2.3

$3.1


Transition costs

$0.5

$0.2


$1.8

$0.3


Non-operating gains

-

$(0.4)


-

$(0.4)









Operating profit (non-GAAP)

$24.6

$33.2

-25.8%

$96.0

$102.6

-6.4%

% of net sales

5.8%

8.2%


5.7%

6.7%


  • Fourth quarter and full year sales for the office furniture segment increased $19.9 million and $159.3 million, respectively.  These increases were driven mainly by an increase in the supplies driven channel of the office furniture industry.  Acquisitions contributed $10.0 million of sales or 2.5 percent sales growth in the fourth quarter and $93.0 million of sales or 6.1 percent sales growth for the full year.
  • Fourth quarter and full year operating profit decreased $8.7 million and $7.8 million, respectively.  Operating profit margin was negatively impacted by unfavorable mix, investments to improve operations, new product ramp-up, investments in growth initiatives and impact of acquisitions.  These were partially offset by higher volume, better price realization and lower material costs.

 

Hearth Products – GAAP Financial Measures

Dollars in millions

Three Months Ended

Percent
Change

Twelve Months Ended

Percent
Change

12/29/2012

12/31/2011

12/29/2012

12/31/2011








Sales

$105.2

$97.9

7.5%

$316.7

$305.4

3.7%

Operating profit

$15.4

$9.4

63.6%

$26.5

$14.8

79.5%

Operating profit %

14.7%

9.6%


8.4%

4.8%





Non-GAAP Financial Measures

(Reconciled with most comparable GAAP measures)

Dollars in millions

Three Months Ended

Percent
Change

Twelve Months Ended

Percent
Change

12/29/2012

12/31/2011

12/29/2012

12/31/2011








Operating profit

as reported (GAAP)

$15.4

$9.4

63.6%

$26.5

$14.8

79.5%

% of net sales

14.7%

9.6%


8.4%

4.8%









Restructuring and impairment

-

-


-

$0.4


Transition costs

-

-


-

-









Operating profit

 (non-GAAP)

$15.4

$9.4


$26.5

$15.2


% of net sales

14.7%

9.6%


8.4%

5.0%


  • Fourth quarter and full year sales for the hearth products segment increased $7.3 million and $11.3 million, respectively.  These increases were driven by increases in the new construction channel partially offset by decreases in the remodel/retrofit channel. 
  • Fourth quarter and full year operating profit increased $6.0 million and $11.7 million, respectively.  Operating profit was positively impacted by higher volume, better price realization, lower material costs and lower restructuring and impairment charges partially offset by investments in selling and marketing initiatives and incentive-based compensation.

Outlook
"I remain positive about our markets and our ability to grow sales and increase profits in 2013.  We continue to aggressively invest for long-term profitable growth, and I remain confident our investments are delivering 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 to be flat to down 5 percent in the first quarter over the same period in the prior year.  Non-GAAP earnings per diluted share are anticipated in the range of ($0.01) to ($0.07) for the first quarter.  For the full year, the Corporation is updating its estimate of non-GAAP earnings per diluted share to be in the range of $1.25 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 Wednesday, February 6, 2013 at 10:00 a.m. (Central) to discuss fourth quarter and year-end 2012 results.  To participate, call 1-877-512-9166 – conference ID number 90030431.  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 same website address.  An audio replay of the call will be available until Wednesday, February 13, 2013, 10:59 p.m. (Central) by dialing 1-855-859-2056 or 1-404-537-3406 – Conference ID number 90030431. 

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-Bell, Midwest Folding Products, LSI Corporation of America, ERGO®, Heatilator®, Heat & Glo®, Quadra-Fire® and Harman Stove 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 first quarter and full fiscal year 2013.  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 first quarter and full year fiscal 2013.  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.

 

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

 

 

 

HNI CORPORATION




Condensed Consolidated Statement of Operations




(Dollars in thousands, except per share data)

Three Months Ended

Twelve Months Ended

Dec. 29, 2012

Dec. 31, 2011

Dec. 29, 2012

Dec. 31, 2011

Net Sales

$  527,536

$  500,269

$2,004,003

$1,833,450

Cost of products sold

341,585

322,255

1,314,776

1,194,387

Gross profit

185,951

178,014

689,227

639,063

Selling and administrative expenses

155,046

147,034

599,656

554,315

Restructuring and impairment charges

583

1,131

1,944

3,261

Operating income

30,322

29,849

87,627

81,487

Interest income

232

158

842

623

Interest expense

2,684

2,762

10,865

11,951

Income before taxes

27,870

27,245

77,604

70,159

Income taxes

10,493

9,219

29,278

24,411

Net income

17,377

18,026

48,326

45,748

Less:  Net income (loss) attributable to the noncontrolling interest

(216)

(111)

(641)

(238)

Net income attributable to HNI Corporation

$   17,593

$   18,137

$   48,967

$   45,986

Net income attributable to HNI Corporation common shareholders – basic

$0.39

$0.40

$1.08

$1.03

Average number of common shares outstanding – basic

45,050,346

44,827,529

45,211,385

44,803,248

Net income attributable to HNI Corporation common shareholders – diluted

$0.39

$0.40

$1.07

$1.01

Average number of common shares outstanding – diluted 

45,691,600

45,759,137

45,819,979

45,694,278

 

 

Condensed Consolidated Balance Sheet



Assets

     Liabilities and Shareholders' Equity


As of


As of

(Dollars in thousands)

Dec. 29, 2012

Dec. 31, 2011


Dec. 29, 2012

Dec. 31, 2011

Cash and cash equivalents

$  41,782

$   72,812

     Accounts payable and



Short-term investments

7,250

9,157

        accrued expenses

$  390,958

$  358,290

Receivables

213,490

204,036

     Note payable and current



Inventories

93,515

101,873

       maturities of long-term debt

4,554

30,345

Deferred income taxes

21,977

18,797

     Current maturities of other



Prepaid expenses and



       long-term obligations

373

275

  other current assets

26,926

27,365




      Current assets

404,940

434,040

          Current liabilities

395,885

388,910










     Long-term debt

150,146

150,200




     Capital lease obligations

226

340

Property and equipment  - net

240,490

229,727

     Other long-term liabilities

57,281

52,716

Goodwill

288,348

270,761

     Deferred income taxes

55,433

42,770

Other assets

145,853

119,730







     Parent Company shareholders'

        equity

420,359

419,057




     Noncontrolling interest

301

265




     Shareholders' equity

420,660

419,322




          Total liabilities and



     Total assets

$1,079,631

$1,054,258

            shareholders' equity

$1,079,631

$1,054,258

 

 

 Condensed Consolidated Statement of Cash Flows



(Dollars in thousands)

Twelve Months Ended

Dec. 29, 2012

Dec. 31, 2011

Net cash flows from (to) operating activities

$144,777

$134,278

Net cash flows from (to) investing activities:



     Capital expenditures

(60,270)

(31,143)

     Acquisition spending

(26,894)

(54,990)

     Other

1,351

(5,407)

Net cash flows from (to) financing activities

(89,994)

(69,022)

Net increase (decrease) in cash and cash equivalents

(31,030)

(26,284)

Cash and cash equivalents at beginning of period

72,812

99,096

Cash and cash equivalents at end of period

$  41,782

$ 72,812

 

 

Business Segment Data




(Dollars in thousands)

Three Months Ended

Twelve Months Ended

Dec. 29, 2012

Dec. 31, 2011

Dec. 29, 2012

Dec. 31, 2011

Net sales:





  Office furniture

$ 422,349

$ 402,407

$1,687,302

$1,528,050

  Hearth products

105,187

97,862

316,701

305,400


$ 527,536

$ 500,269

$2,004,003

$1,833,450






Operating profit:





  Office furniture





     Operations before restructuring and impairment charges

$ 24,086

$ 33,307

$ 93,793

$ 102,468

     Restructuring and impairment charges

(583)

(1,131)

(1,944)

(2,842)

        Office furniture  - net

23,503

32,176

91,849

99,626

  Hearth products





    Operations before restructuring and impairment charges

15,411

9,422

26,477

15,171

    Restructuring and impairment charges

-

-

-

(419)

      Hearth products - net

15,411

9,422

26,477

14,752

  Total operating profit

38,914

41,598

118,326

114,378

      Unallocated corporate expense

(11,044)

(14,353)

(40,722)

(44,219)

  Income before income taxes

$ 27,870

$ 27,245

$ 77,604

$  70,159






Depreciation and amortization expense:





  Office furniture

$ 9,068

$   8,801

$ 34,491

$ 36,109

  Hearth products

1,438

1,649

5,957

7,574

  General corporate

749

702

2,911

2,604


$11,255

$ 11,152

$ 43,359

$ 46,287






Capital expenditures (including capitalized software)





  Office furniture

$ 10,874

$  8,249

$ 36,080

$ 24,061

  Hearth products

536

199

2,008

2,179

  General corporate

4,201

2,501

22,182

4,903


$ 15,611

$ 10,949

$ 60,270

$ 31,143









As of

As of




Dec. 29, 2012

Dec. 31, 2011

Identifiable assets:





  Office furniture



$ 700,665

$    671,334

  Hearth products



254,835

259,142

  General corporate



124,131

123,782




$ 1,079,631

$ 1,054,258

 

SOURCE HNI Corp.

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