HNI Corporation Announces Results for Fourth Quarter and Year-End - Fiscal 2010

Company Release - 2/8/2011 5:14 PM ET

MUSCATINE, Iowa, Feb. 8, 2011 /PRNewswire/ -- HNI Corporation (NYSE: HNI) today announced sales of $466.1 million and income from continuing operations of $12.6 million for the fourth quarter ended January 1, 2011.  Net income per diluted share from continuing operations for the quarter was $0.27 or $0.39 on a non-GAAP basis when excluding restructuring and impairment charges and transition costs.  For fiscal year 2010, the Corporation reported sales of $1.7 billion and income from continuing operations of $29.7 million.  Net income per diluted share from continuing operations for the year was $0.65 or $0.82 on a non-GAAP basis when excluding restructuring and impairment charges, transition costs, and non-operating gains.

Fourth Quarter and FY'10 Summary Comments

"We delivered strong performance across all of our businesses in the fourth quarter, led by double digit growth in our office furniture segment.  The cost reset actions implemented in 2009 and 2010, combined with our strategic growth initiatives, resulted in an increase in earnings of more than 40 percent over prior year quarter.

We enter 2011 financially stronger, well positioned within our markets and focused on long term profitable growth," said Stan Askren, HNI Corporation Chairman, President and Chief Executive Officer.

Fourth Quarter

Dollars in millions

Three Months Ended

Percent

except per share data

1/01/2011

1/02/2010

Change





Net sales

$466.1

$405.6

14.9%

Gross margin

$163.9

$148.0

10.8%

Gross margin %

35.2%

36.5%


SG&A

$143.5

$158.2

-9.2%

SG&A %

30.8%

39.0%


Operating income (loss)

$20.4

$(10.2)

299.7%

Operating income (loss) %

4.4%

-2.5%


Income (loss) from continuing operations

$12.6

$(9.3)

235.7%





Earnings per share from continuing operations attributable to HNI Corporation – diluted

$0.27

$(0.21)

228.6%




Fourth Quarter Results – Continuing Operations

  • Consolidated net sales increased $60.6 million or 14.9 percent from the prior year quarter to $466.1 million.
  • Gross margins were 1.3 percentage points lower than prior year primarily due to reduced price realization, increased material costs and higher mix of lower margin products in the office furniture segment offset partially by higher volume and lower restructuring and transition charges.
  • Total selling and administrative expenses, including restructuring and impairment charges, decreased $14.6 million or 9.2 percent due to distribution efficiencies and lower restructuring and impairment charges and transition costs.  These were offset by increased volume related expenses, higher fuel costs, investments in growth initiatives and higher incentive based compensation.
  • The Corporation recorded $7.1 million of restructuring and impairment charges and transition costs during the fourth quarter.  These charges included $1.9 million related to costs associated with shutdown and consolidation of office furniture facilities of which $0.5 million were included in cost of sales.  Also included were $5.2 million of impairment and restructuring charges related to hearth distribution locations that were classified as held for sale or closed as of the end of 2010.  Included in 2009 were $29.5 million of restructuring and impairment charges and transition costs.  


Fourth Quarter – Non-GAAP Financial Measures – Continuing Operations

(Reconciled with most comparable GAAP financial measures)

Dollars in millions

except per share data

Three Months Ended 1/01/2011


Three Months Ended 1/02/2010


Gross

Profit

SG&A

Operating

Income

EPS


Gross

Profit

SG&A

Operating

Income

(Loss)

EPS

As reported (GAAP)

$163.9

$143.5

$20.4

$0.27


$148.0

$158.2

$ (10.2)

$(0.21)

 % of net sales

35.2%

30.8%

4.4%



36.5%

39.0%

-2.5%












Restructuring and impairment

$0.3

$(6.6)

$6.9

$0.11


$1.2

$(27.0)

$28.2

$0.46

Transition costs

$0.2

-

$0.2

$0.01


$1.0

$(0.3)

$1.3

$0.02











Results (non-GAAP)

$164.4

$136.9

$27.5

$0.39


$150.1

$130.8

$19.3

$0.27

 % of net sales

35.3%

29.4%

5.9%



37.0%

32.3%

4.8%





Full Year

Dollars in millions

Twelve Months Ended

Percent

except per share data

1/01/2011

1/02/2010

Change





Net sales

$1,686.7

$1,623.3

3.9%

Gross margin

$585.6

$562.8

4.1%

Gross margin %

34.7%

34.7%


SG&A

$527.7

$554.2

-4.8%

SG&A %

31.3%

34.1%


Operating income

$57.9

$8.6

574.8%

Operating income %

3.4%

0.5%


Income (loss) from continuing operations

$29.7

$(1.6)

NM





Earnings per share from continuing operations attributable to HNI Corporation – diluted

$0.65

$(0.04)

NM




Full Year Results – Continuing Operations

  • Net sales increased $63.4 million, or 3.9 percent, to $1.7 billion compared to $1.6 billion in the prior year.  
  • Gross margins remained at 34.7 percent due to increased volume, cost reduction initiatives and lower restructuring and transition costs offset by lower price realization, higher material costs and higher mix of lower margin products in the office furniture segment.
  • Total selling and administrative expenses, including restructuring charges, decreased $26.5 million or 4.8 percent due to cost control actions, distribution efficiencies and lower restructuring and impairment charges and transition costs.  These were partially offset by increased volume related costs, higher fuel costs, investments in growth initiatives and higher incentive based compensation.  Included in 2010 were $9.4 million of restructuring and impairment charges compared to $40.4 million in 2009.

Cash flow from operations for the year was $94.4 million compared to $193.2 million last year.   Capital expenditures were $26.7 million in 2010 compared to $17.6 million in 2009.  The Corporation repurchased 655,032 shares of its common stock during 2010.  There is approximately $145.8 million remaining under the current repurchase authorization.


Full Year – Non-GAAP Financial Measures – Continuing Operations

(Reconciled with most comparable GAAP financial measures)

Dollars in millions

except per share data

Twelve Months Ended 1/01/2011


Twelve Months Ended 1/02/2010


Gross

Profit

SG&A

Operating

Income

EPS


Gross

Profit

SG&A

Operating

Income

EPS

As reported (GAAP)

$585.6

$527.7

$57.9

$0.65


$562.8

$554.2

$ 8.6

$(0.04)

 % of net sales

34.7%

31.3%

3.4%



34.7%

34.1%

0.5%












Restructuring and impairment

$2.6

$(9.4)

$12.1

$0.17


$3.9

$(40.4)

$44.4

$0.54

Transition costs

$1.5

-

$1.5

$0.02


$1.3

$(0.5)

$1.8

$0.02

Non-operating gains

-

$0.5

$(0.5)

$(0.01)


-

$1.6

($1.6)

$(0.02)











Results (non-GAAP)

$589.7

$518.8

$70.9

$0.82


$568.0

$514.9

$53.1

$0.50

 % of net sales

35.0%

30.8%

4.2%



35.0%

31.7%

3.3%





Office Furniture


Three Months Ended

Percent

Twelve Months Ended

Percent

Dollars in millions

1/01/2011

1/02/2010

Change

1/01/2011

1/02/2010

Change

Sales

$374.8

$321.9

16.4%

$1,404.9

$1,344.8

4.5%

Operating profit (loss)

$24.6

$(5.3)

567.4%

$87.6

$52.5

66.6%

Operating profit %

6.6%

-1.6%


6.2%

3.9%






Non-GAAP Financial Measures

(Reconciled with most comparable GAAP measures)


Three Months Ended

Percent

Twelve Months Ended

Percent

Dollars in millions

1/01/2011

1/02/2010

Change

1/01/2011

1/02/2010

Change

Operating profit (loss) as reported (GAAP)

$24.6

$(5.3)

567.4%

$87.6

$52.5

66.6%

% of net sales

6.6%

-1.6%


6.2%

3.9%









Restructuring and impairment

$1.7

$27.1


$6.1

$37.6


Transition costs

$0.2

$  0.6


$2.0

$1.0


Non-operating gains

-

-


$(0.5)

-









Operating profit (non-GAAP)

$26.4

$22.5

17.5%

$95.1

$91.2

4.3%

% of net sales

7.1%

7.0%


6.8%

6.8%





  • Fourth quarter and full year sales for the office furniture segment increased $52.9 million and $60.1 million, respectively.  These increases were driven by an increase in the supplies driven channel and a more substantial increase in the contract and international channels of the office furniture industry.  
  • Fourth quarter and full year operating profit increased $29.8 million and $35.0 million, respectively.  Operating profit was positively impacted by increased volume, cost reduction initiatives, distribution efficiencies and lower restructuring, transition and impairment expenses.  These were partially offset by decreased price realization, higher input costs, investments in selling and growth initiatives and higher incentive based compensation expense.

Hearth Products



Three Months Ended

Percent

Twelve Months Ended

Percent

Dollars in millions

1/01/2011

1/02/2010

Change

1/01/2011

1/02/2010

Change

Sales

$91.3

$83.6

9.2%

$281.8

$278.5

1.2%

Operating profit (loss)

$5.4

$3.7

45.3%

$2.9

$(14.7)

119.8%

Operating profit %

5.9%

4.5%


1.0%

-5.3%






Non-GAAP Financial Measures

(Reconciled with most comparable GAAP measures)


Three Months Ended

Percent

Twelve Months Ended

Percent

Dollars in millions

1/01/2011

1/02/2010

Change

1/01/2011

1/02/2010

Change

Operating profit (loss) as reported (GAAP)

$5.4

$3.7

45.3%

$2.9

$(14.7)

119.8%

% of net sales

5.9%

4.5%


1.0%

-5.3%









Restructuring and impairment

$5.3

$1.1


$5.4

$6.7


Transition costs

-

$0.7


$0.1

$0.8


Non-operating gains

-

-


-

$(0.3)









Operating profit (loss) (non-GAAP)

$10.7

$5.5

94.4%

$8.4

$(7.6)

210.8%

% of net sales

11.7%

6.6%


3.0%

-2.7%





  • Fourth quarter sales for the hearth products segment increased $7.7 million driven by a small increase in the new construction channel and a more significant increase in the remodel-retrofit channel.  Full year sales for the hearth products segment increased $3.3 million driven by an increase in the new construction channel and a decrease in the remodel/retrofit channel.  
  • Fourth quarter and full year operating profit increased $1.7 million and $17.7 million, respectively.  Operating profit for the fourth quarter was positively impacted by higher volume, better price realization and cost reduction initiatives partially offset by higher restructuring and impairment costs.  Operating profit for the year was positively impacted by better price realization, cost reduction initiatives, and lower restructuring and impairment charges partially offset by higher input costs.

Outlook

"I remain optimistic about our markets and the gradually improving economy.  We will build on the momentum from 2010 to grow our businesses and increase profits in 2011.  We will continue to reduce cost, improve operations and fiercely manage cash.  Our strategy to invest in growth initiatives across our multiple platforms has not changed.  The corporation is financially strong and well positioned for long term profitable growth," said Mr. Askren.    

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 9, 2011 at 10:00 a.m. (Central) to discuss fourth quarter and year-end 2010 results.  To participate, call the conference call line at 1-800-230-1092.  A replay of the conference call will be available until Wednesday, February 16, 2011, 11:59 p.m. (Central).  To access this replay, dial 1-800-475-6701 – Access Code:  189302.  A link to the simultaneous web cast 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 defined as 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.  Pursuant to the requirements of Regulation G, the Corporation has 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, selling and administrative expense, operating income, operating profit and net income per diluted share (i.e., EPS), excluding restructuring and impairment charges, transition costs and non-operating gains.  These measures are presented because management uses this information to monitor and evaluate financial results and trends.  Management believes this information is also useful for investors.

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® , 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.

Statements in this release that are not strictly historical, including statements as to plans, outlook, objectives and future financial performance, are "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.  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 identify forward-looking statements.  Forward-looking statements involve known and unknown risks, which may cause the Corporation's actual results in the future 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 for the entire Corporation, (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, including the recent credit crisis, 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; uncertainty related to disruptions of business by terrorism, military action, epidemic, acts of God or other Force Majeure events; competitive pricing pressure from foreign and domestic competitors; higher than expected costs and lower than expected supplies of materials (including steel and petroleum based materials); higher than expected 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, whether as a result of new information, future events or otherwise, except as required by applicable law.

HNI CORPORATION


Condensed Consolidated Statement of Operations



(Dollars in thousands, except per share data)

Three Months Ended

Twelve Months Ended

Jan. 1, 2011

Jan. 2, 2010

Jan. 1, 2011

Jan. 2, 2010

Net Sales

$  466,148

$  405,553

$1,686,728

$1,623,327

Cost of products sold

302,246

257,601

1,101,112

1,060,526

Gross profit

163,902

147,952

585,616

562,801

Selling and administrative expenses

136,912

131,110

518,257

513,776

Restructuring and impairment charges

6,628

27,040

9,449

40,443

Operating income (loss)

20,362

(10,198)

57,910

8,582

Interest income

125

104

471

415

Interest expense

3,283

2,666

11,903

12,080

Income (loss) from continuing operations before income taxes

17,204

(12,760)

46,478

(3,083)

Income taxes

4,621

(3,490)

16,797

(1,485)

Income (loss) from continuing operations, less applicable income taxes

12,583

(9,270)

29,681

(1,598)

Discontinued operations, less applicable income taxes

(6)

(1,500)

(2,558)

(4,661)

Net income (loss)

12,577

(10,770)

27,123

(6,259)

Less:  Net income attributable to the noncontrolling interest

33

3

182

183

Net income (loss) attributable to HNI Corporation

$   12,544

$ (10,773)

$   26,941

$   (6,442)

Income (loss) from continuing operations attributable to HNI Corporation per common share – basic

$0.28

$(0.21)

$0.66

$(0.04)

Discontinued operations attributable to HNI Corporation per common share – basic

$0.00

$(0.03)

$(0.06)

$(0.10)

Net income (loss) attributable to HNI Corporation common shareholders – basic

$0.28

$(0.24)

$0.60

$(0.14)

Average number of common shares outstanding – basic

44,815,129

45,054,103

44,993,934

44,888,809

Income (loss) from continuing operations attributable to HNI Corporation per common share – diluted

$0.27

$(0.21)

$0.65

$(0.04)

Discontinued operations attributable to HNI Corporation per common share – diluted

$0.00

$(0.03)

$(0.06)

$(0.10)

Net income (loss) attributable to HNI Corporation common shareholders – diluted

$0.27

$(0.24)

$0.59

$(0.14)

Average number of common shares outstanding – diluted  

45,742,520

45,054,103

45,808,704

44,888,809




Condensed Consolidated Balance Sheet


Assets

Liabilities and Shareholders' Equity


As of


As of


Jan. 1,

Jan. 2,


Jan. 1,

Jan. 2,

(Dollars in thousands)

2011

2010


2011

2010

Cash and cash equivalents

$ 99,096

$ 87,374

Accounts payable and



Short-term investments

10,567

5,994

 accrued expenses

$311,066

$299,718

Receivables

190,118

163,732

Note payable and current



Inventories

68,956

65,144

 maturities of long-term debt

50,029

39

Deferred income taxes

18,467

20,299

Current maturities of other



Prepaid expenses and



 long-term obligations

256

385

 other current assets

20,957

17,728




     Current assets

408,161

360,271

     Current liabilities

361,351

300,142










Long-term debt

150,000

200,000




Capital lease obligations

111

-

Property and equipment  - net

231,781

260,102

Other long-term liabilities

47,437

50,332

Goodwill

260,634

261,114

Deferred income taxes

30,525

24,227

Other assets

97,304

112,839







Parent Company shareholders'

 equity

407,985

419,284




Noncontrolling interest

471

341




Shareholders' equity

408,456

419,625




    Total liabilities and



    Total assets

$997,880

$994,326

      shareholders' equity

$997,880

$994,326










Condensed Consolidated Statement of Cash Flows



Twelve Months Ended

(Dollars in thousands)

Jan. 1, 2011

Jan. 2, 2010

Net cash flows from (to) operating activities

$ 94,384

$193,205

Net cash flows from (to) investing activities:



    Capital expenditures

(26,722)

(17,554)

    Acquisition spending

(149)

(500)

    Other

1,818

31,335

Net cash flows from (to) financing activities

(57,609)

(158,650)

Net increase (decrease) in cash and cash equivalents

11,722

47,836

Cash and cash equivalents at beginning of period

87,374

39,538

Cash and cash equivalents at end of period

$ 99,096

$ 87,374




Business Segment Data



Three Months Ended

Twelve Months Ended

(Dollars in thousands)

Jan. 1, 2011

Jan. 2, 2010

Jan. 1, 2011

Jan. 2, 2010

Net sales:





 Office furniture

$  374,812

$ 321,927

$1,404,923

$1,344,832

 Hearth products

91,336

83,626

281,805

278,495


$  466,148

$ 405,553

$1,686,728

$1,623,327






Operating profit (loss):





 Office furniture





    Operations before restructuring and impairment charges

$ 25,949

$ 21,234

$ 91,649

$ 87,486

    Restructuring and impairment charges

(1,370)

(26,493)

(4,090)

(34,944)

       Office furniture  - net

24,579

(5,259)

87,559

52,542

 Hearth products





   Operations before restructuring and impairment charges

10,672

4,274

8,274

(9,245)

   Restructuring and impairment charges

(5,258)

(547)

(5,359)

(5,499)

     Hearth products - net

5,414

3,727

2,915

(14,744)

 Total operating profit (loss)

29,993

(1,532)

90,474

37,798

     Unallocated corporate expense

(12,789)

(11,228)

(43,996)

(40,881)

 Income before income taxes

$ 17,204

$(12,760)

$ 46,478

$( 3,083)






Depreciation and amortization expense:





 Office furniture

$ 10,249

$  12,280

$ 44,717

$  52,137

 Hearth products

2,422

5,924

11,474

19,041

 General corporate

598

948

2,439

3,689


$ 13,269

$  19,152

$ 58,630

$  74,867






Capital expenditures – net:





 Office furniture

$  6,303

$  5,255

$ 20,928

$  13,482

 Hearth products

980

1,247

2,423

3,484

 General corporate

763

178

3,371

588


$  8,046

$  6,680

$ 26,722

$  17,554









As of

As of




Jan. 1, 2011

Jan. 2, 2010

Identifiable assets:





 Office furniture



$  588,540

$  579,187

 Hearth products



267,125

291,518

 General corporate



142,215

123,621




$  997,880

$  994,326









For Information Contact:

Kelly J. McGriff, Treasurer and Vice President, Investor Relations (563) 272-7967

Kurt A. Tjaden, Vice President and Chief Financial Officer (563) 272-7400



SOURCE HNI Corporation

Contact: Kelly J. McGriff, Treasurer and Vice President, Investor Relations, +1-563-272-7967, or Kurt A. Tjaden, Vice President and Chief Financial Officer, +1-563-272-7400, both of HNI Corp.
NYSE: HNI 04/28/2017 $46.76