Attached files
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| 8-K - FORM 8-K - HNI CORP | r8k07222015.htm |
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HNI Corporation 408 East Second Street, Muscatine, Iowa 52761, Tel 563 272 7400, Fax 563 272 7347, www.hnicorp.com
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EXHIBIT 99.1
News Release For Information Contact:
Matthew D. McGough, Vice President, Corporate Finance (563) 272-7563
Kurt A. Tjaden, Senior Vice President and Chief Financial Officer (563) 272-7400
HNI CORPORATION REPORTS
STRONG SALES AND EARNINGS GROWTH
FOR SECOND QUARTER FISCAL YEAR 2015
Second Quarter Highlights
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·
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Non-GAAP net income per share increased 36% to $0.53; GAAP net income per share $0.52
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·
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Sales increased 12%
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MUSCATINE, Iowa (July 22, 2015) – 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 $0.53, which excludes restructuring, impairment, transition costs and gain on sale of assets.
Second Quarter Summary Comments
"We are pleased with our results for the second quarter. We delivered strong sales growth and significant earnings improvement. Office furniture business performance was led by sales growth in the contract business and solid operational execution. Momentum continued in our hearth business with strong sales growth in both the new construction channel and the retail gas portion of the remodel/retrofit channel," said Stan Askren, HNI Corporation Chairman, President and Chief Executive Officer.
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Second Quarter – Financial Performance
(Dollars in millions, except per share data)
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Three Months Ended
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7/4/2015
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6/28/2014
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Change
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GAAP
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||||||||||||
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Net Sales
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$ | 568.2 | $ | 509.1 | 11.6 | % | ||||||
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Gross Profit %
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36.3 | % | 35.6 | % |
70 bps
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SG&A %
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29.4 | % | 30.5 | % |
-110 bps
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(Gain) loss on sale of assets %
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- | (0.3 | %) |
30 bps
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Restructuring charges %
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(0.1 | %) | 2.0 | % |
-210 bps
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Operating Income
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$ | 39.4 | $ | 16.9 | 133.0 | % | ||||||
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Operating Income %
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6.9 | % | 3.3 | % |
360 bps
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Net Income %
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4.2 | % | 1.9 | % |
230 bps
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EPS – diluted
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$ | 0.52 | $ | 0.21 | 147.6 | % | ||||||
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Non-GAAP
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Gross Profit %
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36.5 | % | 36.3 | % |
20 bps
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Operating Income
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$ | 40.2 | $ | 29.3 | 37.2 | % | ||||||
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Operating Income %
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7.1 | % | 5.8 | % |
130 bps
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EPS - diluted
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$ | 0.53 | $ | 0.39 | 35.9 | % | ||||||
Second Quarter Summary Comments
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·
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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.
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·
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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.
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·
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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.
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·
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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 $1.3 million gain on the sale of assets.
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Office Furniture – Financial Performance
(Dollars in millions)
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Three Months Ended
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7/4/2015
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6/28/2014
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Change
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GAAP
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Net Sales
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$ | 450.6 | $ | 423.4 | 6.4 | % | ||||||
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Operating Profit
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$ | 39.8 | $ | 18.2 | 118.1 | % | ||||||
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Operating Profit %
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8.8 | % | 4.3 | % |
450 bps
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Non-GAAP
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Operating Profit
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$ | 40.0 | $ | 32.0 | 25.2 | % | ||||||
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Operating Profit %
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8.9 | % | 7.6 | % |
130 bps
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·
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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.
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·
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Second quarter non-GAAP operating profit increased $8.1 million or 25.2 percent. Increased volume, higher price realization and solid operational performance were partially offset by unfavorable product mix, strategic investments and incentive based compensation.
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Hearth Products – Financial Performance
(Dollars in millions)
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Three Months Ended
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7/4/2015
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6/28/2014
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Change
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GAAP
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Net Sales
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$ | 117.6 | $ | 85.7 | 37.2 | % | ||||||
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Operating Profit
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$ | 11.2 | $ | 8.5 | 31.6 | % | ||||||
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Operating Profit %
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9.5 | % | 9.9 | % |
-40 bps
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Non-GAAP
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Operating Profit
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$ | 11.7 | $ | 8.5 | 37.9 | % | ||||||
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Operating Profit %
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9.9 | % | 9.9 | % |
0 bps
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·
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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.
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·
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For the quarter, non-GAAP operating profit increased $3.2 million or 37.9 percent due to increased volume and higher price realization.
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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 Group acquisition. 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 the Vermont Castings Group acquisition results and excludes restructuring and transition costs.
Conference Call
HNI Corporation will host a conference call on Thursday, July 23, 2015 at 10:00 a.m. (Central) to discuss second quarter fiscal year 2015 results. To participate, call 1-877-512-9166 – conference ID number 76049525. 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 30, 2015, 10:59 p.m. (Central) by dialing 1-855-859-2056 or 1-404-537-3406 – Conference ID number 76049525.
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 third quarter and full year fiscal 2015. 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.
###
HNI CORPORATION
Unaudited Condensed Consolidated Statement of Operations
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Three Months Ended
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Six Months Ended
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(Dollars in thousands, except per share data)
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7/4/2015
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6/28/2014
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7/4/2015
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6/28/2014
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Net sales
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$ | 568,226 | $ | 509,143 | $ | 1,091,703 | $ | 961,344 | ||||||||
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Cost of products sold
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362,102 | 328,010 | 701,079 | 625,039 | ||||||||||||
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Gross profit
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206,124 | 181,133 | 390,624 | 336,305 | ||||||||||||
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Selling and administrative expenses
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167,278 | 155,288 | 335,982 | 300,498 | ||||||||||||
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(Gain) loss on sale of assets
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- | (1,346 | ) | - | (9,746 | ) | ||||||||||
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Restructuring charges
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(560 | ) | 10,282 | (183 | ) | 10,254 | ||||||||||
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Operating income
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39,406 | 16,909 | 54,825 | 35,299 | ||||||||||||
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Interest income
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119 | 146 | 209 | 216 | ||||||||||||
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Interest expense
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1,968 | 2,187 | 3,957 | 4,389 | ||||||||||||
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Income before income taxes
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37,557 | 14,868 | 51,077 | 31,126 | ||||||||||||
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Income taxes
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13,680 | 5,203 | 18,748 | 10,445 | ||||||||||||
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Net income
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23,877 | 9,665 | 32,329 | 20,681 | ||||||||||||
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Less: Net (loss) attributable to the noncontrolling interest
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(2 | ) | (40 | ) | (28 | ) | (120 | ) | ||||||||
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Net income attributable to HNI Corporation
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$ | 23,879 | $ | 9,705 | $ | 32,357 | $ | 20,801 | ||||||||
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Net income attributable to HNI Corporation common shareholders – basic
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$ | 0.54 | $ | 0.22 | $ | 0.73 | $ | 0.46 | ||||||||
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Average number of common shares outstanding – basic
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44,416,008 | 45,019,783 | 44,359,898 | 45,029,148 | ||||||||||||
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Net income attributable to HNI Corporation common shareholders – diluted
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$ | 0.52 | $ | 0.21 | $ | 0.71 | $ | 0.45 | ||||||||
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Average number of common shares outstanding – diluted
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45,620,984 | 45,867,927 | 45,573,952 | 45,843,118 | ||||||||||||
Unaudited Condensed Consolidated Balance Sheet
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Assets
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Liabilities and Shareholders' Equity
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(Dollars in thousands)
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As of
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As of
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7/4/2015
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1/3/2015
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7/4/2015
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1/3/2015
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Cash and cash equivalents
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$ | 33,438 | $ | 34,144 |
Accounts payable and
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Short-term investments
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5,252 | 3,052 |
accrued expenses
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$ | 404,685 | $ | 453,754 | ||||||||||
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Receivables
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274,606 | 240,053 |
Note payable and current
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Inventories
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164,684 | 121,791 |
maturities of long-term debt1
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304,326 | 160 | ||||||||||||
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Deferred income taxes
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16,915 | 17,310 |
Current maturities of other
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Prepaid expenses and
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long-term obligations
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4,225 | 3,419 | ||||||||||||||
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other current assets
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28,152 | 39,209 | |||||||||||||||
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Current assets
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523,047 | 455,559 |
Current liabilities
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713,236 | 457,333 | ||||||||||||
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Property and equipment – net
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320,722 | 311,008 |
Long-term debt
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9 | 197,736 | ||||||||||||
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Goodwill
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279,374 | 279,310 |
Other long-term liabilities
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84,054 | 80,353 | ||||||||||||
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Other assets
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201,820 | 193,457 |
Deferred income taxes
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92,529 | 89,411 | ||||||||||||
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Parent Company shareholders'
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equity
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434,787 | 414,587 | |||||||||||||||
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Noncontrolling interest
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348 | (86 | ) | ||||||||||||||
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Shareholders' equity
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435,135 | 414,501 | |||||||||||||||
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Total liabilities and
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Total assets
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$ | 1,324,963 | $ | 1,239,334 |
shareholders' equity
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$ | 1,324,963 | $ | 1,239,334 | ||||||||
1All debt classified as short term due to timing of maturity
Unaudited Condensed Consolidated Statement of Cash Flows
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Six Months Ended
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(Dollars in thousands)
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7/4/2015
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6/28/2014
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Net cash flows from (to) operating activities
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$ | (31,904 | ) | $ | (6,992 | ) | ||
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Net cash flows from (to) investing activities:
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Capital expenditures
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(49,882 | ) | (51,122 | ) | ||||
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Other
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876 | 17,560 | ||||||
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Net cash flows from (to) financing activities
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80,204 | 4,802 | ||||||
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Net increase (decrease) in cash and cash equivalents
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(706 | ) | (35,752 | ) | ||||
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Cash and cash equivalents at beginning of period
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34,144 | 65,030 | ||||||
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Cash and cash equivalents at end of period
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$ | 33,438 | $ | 29,278 | ||||
Business Segment Data
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Three Months Ended
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Six Months Ended
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(Dollars in thousands)
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7/4/2015
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6/28/2014
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7/4/2015
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6/28/2014
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Net sales:
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Office furniture
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$ | 450,624 | $ | 423,423 | $ | 858,053 | $ | 781,792 | ||||||||
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Hearth products
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117,602 | 85,720 | 233,650 | 179,552 | ||||||||||||
| $ | 568,226 | $ | 509,143 | $ | 1,091,703 | $ | 961,344 | |||||||||
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Operating profit:
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Office furniture
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$ | 39,791 | $ | 18,242 | $ | 59,943 | $ | 34,735 | ||||||||
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Hearth products
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11,162 | 8,481 | 23,663 | 20,189 | ||||||||||||
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Total operating profit
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50,953 | 26,723 | 83,606 | 54,924 | ||||||||||||
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Unallocated corporate expense
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(13,396 | ) | (11,855 | ) | (32,529 | ) | (23,798 | ) | ||||||||
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Income before income taxes
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$ | 37,557 | $ | 14,868 | $ | 51,077 | $ | 31,126 | ||||||||
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Depreciation and amortization expense:
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Office furniture
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$ | 10,263 | $ | 12,472 | $ | 20,640 | $ | 21,971 | ||||||||
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Hearth products
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2,047 | 1,158 | 4,005 | 2,334 | ||||||||||||
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General corporate
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1,625 | 1,298 | 3,150 | 2,647 | ||||||||||||
| $ | 13,935 | $ | 14,928 | $ | 27,795 | $ | 26,952 | |||||||||
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Capital expenditures (including capitalized software):
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Office furniture
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$ | 11,848 | $ | 16,348 | $ | 26,399 | $ | 29,836 | ||||||||
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Hearth products
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1,993 | 1,187 | 4,397 | 2,698 | ||||||||||||
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General corporate
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7,818 | 10,894 | 19,086 | 18,587 | ||||||||||||
| $ | 21,659 | $ | 28,429 | $ | 49,882 | $ | 51,122 | |||||||||
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As of
7/4/2015
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As of
1/3/2015
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Identifiable assets:
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Office furniture
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$ | 788,899 | $ | 724,293 | ||||||||||||
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Hearth products
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359,992 | 341,315 | ||||||||||||||
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General corporate
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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.
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HNI Corporation Reconciliation
(Dollars in millions, except per share data)
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Three Months Ended
7/4/2015
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Three Months Ended
6/28/2014
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Gross
Profit
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Operating
Income
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EPS
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Gross
Profit
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Operating
Income
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EPS
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|||||||||||||||||||
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As Reported (GAAP)
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$ | 206.1 | $ | 39.4 | $ | 0.52 | $ | 181.1 | $ | 16.9 | $ | 0.21 | ||||||||||||
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% of net sales
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36.3 | % | 6.9 | % | 35.6 | % | 3.3 | % | ||||||||||||||||
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Restructuring & Impairment charges
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- | $ | (0.6 | ) | $ | (0.01 | ) | $ | 2.6 | $ | 12.9 | $ | 0.19 | |||||||||||
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Transition costs
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$ | 1.3 | $ | 1.3 | $ | 0.02 | $ | 0.8 | $ | 0.8 | $ | 0.01 | ||||||||||||
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(Gain) loss on sale of assets
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- | - | - | - | $ | (1.3 | ) | $ | (0.02 | ) | ||||||||||||||
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Results (non-GAAP)
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$ | 207.5 | $ | 40.2 | $ | 0.53 | $ | 184.6 | $ | 29.3 | $ | 0.39 | ||||||||||||
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% of net sales
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36.5 | % | 7.1 | % | 36.3 | % | 5.8 | % | ||||||||||||||||
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Office Furniture Reconciliation
(Dollars in millions)
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||||||||||||
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Three Months Ended
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Percent
Change
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7/4/2015
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6/28/2014
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Operating profit as reported (GAAP)
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$ | 39.8 | $ | 18.2 | 118.1 | % | ||||||
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% of Net Sales
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8.8 | % | 4.3 | % | ||||||||
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Restructuring & Impairment charges
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$ | (0.6 | ) | $ | 12.9 | |||||||
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Transition Costs
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$ | 0.8 | $ | 0.8 | ||||||||
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(Gain) Loss on Sale of Assets
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- | - | ||||||||||
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Operating profit (non-GAAP)
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$ | 40.0 | $ | 32.0 | 25.2 | % | ||||||
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% of Net Sales
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8.9 | % | 7.6 | % | ||||||||
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Hearth Reconciliation
(Dollars in millions)
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Three Months Ended
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Percent
Change
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|
7/4/2015
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6/28/2014
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Operating profit as reported (GAAP)
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$ | 11.2 | $ | 8.5 | 31.6 | % | ||||||
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% of Net Sales
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9.5 | % | 9.9 | % | ||||||||
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Restructuring charges
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- | - | ||||||||||
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Transition Costs
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$ | 0.5 | - | |||||||||
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(Gain) Loss on Sale of Assets
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- | - | ||||||||||
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Operating profit (non-GAAP)
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$ | 11.7 | $ | 8.5 | 37.9 | % | ||||||
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% of Net Sales
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9.9 | % | 9.9 | % | ||||||||