HNI Corporation Reports Strong Sales And Earnings For Fourth Quarter And Fiscal Year 2014

Fourth Quarter Highlights

- Sales increased 19.5%

- Non-GAAP net income per share increased 30% to $0.65; GAAP net income per share $0.16

Fiscal Year Highlights

- Sales increased 7.9%

- Non-GAAP net income per share increased 38% to $1.97; GAAP net income per share $1.35

Company Release - 2/11/2015 5:18 PM ET

MUSCATINE, Iowa, Feb. 11, 2015 /PRNewswire/ -- HNI Corporation (NYSE: HNI) today announced sales for the fourth quarter ended January 3, 2015, of $646.7 million and net income of $7.1 million, or $0.16 per diluted share.  Non-GAAP net income per diluted share improved 30 percent from the prior year quarter to $0.65, which excludes restructuring charges, goodwill and intangible impairment, transition costs and gain on sale of assets.  For fiscal year 2014, the Corporation reported sales of $2.2 billion and net income of $61.5 million, or $1.35 per diluted share.  Non-GAAP net income per diluted share improved 38 percent from the prior year to $1.97, which excludes restructuring charges, goodwill and intangible impairment, transition costs and gains on sale of assets.   

Fourth Quarter and Year End Summary Comments
"We are pleased with our very strong sales and earnings for the fourth quarter and full year 2014.  Our hearth business achieved record financial results for the year, driven by four consecutive quarters of double-digit growth in both new construction and remodel/retrofit channels and strong operational execution.  Office furniture sales momentum accelerated in the fourth quarter with significant increases in both our supplies-driven and contract businesses.  We enter 2015 financially strong, competitively well positioned and focused on delivering profitable growth," said Stan Askren, HNI Corporation Chairman, President and Chief Executive Officer.

Fourth Quarter – Financial Performance

(Dollars in millions, except per share data)


Three Months Ended



1/3/2015

12/28/2013

Change

GAAP




Net Sales

$646.7

$541.3

19.5%

Gross Profit %

35.3%

35.7%

-40 bps

SG&A %

28.2%

28.7%

-50 bps

(Gain) loss on sale of assets %

(0.2%)

-

20 bps

Restructuring & impairment charges %

3.4%

-

340 bps

Operating Income

$24.8

$37.6

-34.1%

Operating Income %

3.8%

7.0%

-320 bps

Net Income %

1.1%

4.2%

-310 bps

EPS – diluted

$0.16

$0.50

-68.0%





Non-GAAP




Gross Profit %

35.7%

35.7%

-

Operating Income

$48.4

$37.7

28.2%

Operating Income %

7.5%

7.0%

50 bps

EPS - diluted

$0.65

$0.50

30.0%

 

Fourth Quarter Summary Comments

  • Consolidated net sales increased $105.4 million or 19.5 percent to $646.7 million. Compared to prior year quarter, an acquisition, net of divestiture, increased sales $24.4 million. On an organic basis sales increased 15.0 percent.
  • Non-GAAP gross margin was consistent with prior year. Higher volume and better price realization were offset by unfavorable product mix and investments in operations.
  • Selling and administrative expenses, as a percentage of sales, decreased 50 basis points due to volume, partially offset by increased freight costs due to carrier capacity constraints, strategic investments, higher incentive-based compensation and acquisition impact.
  • The Corporation recorded $24.5 million of restructuring and impairment charges and transition costs. These charges included goodwill and intangible impairment charges of $20.5 million related to a small office furniture business and $4.0 million of restructuring and transition costs in connection with closures announced earlier this year. Of the restructuring and transition charges, $2.7 million was included in cost of sales.
  • The effective tax rate for the current year quarter of 69.3 percent reflects the non-deductibility of the goodwill and intangible impairment. Excluding this impact the effective tax rate was 36.7 percent.

Full Year – Financial Performance

(Dollars in millions, except per share data)


Twelve Months Ended



1/3/2015

12/28/2013

Change

GAAP




Net Sales

$2,222.7

$2,060.0

7.9%

Gross Profit %

35.3%

34.7%

60 bps

SG&A %

29.2%

29.4%

-20 bps

(Gain) loss on sale of assets %

(0.5%)

0.1%

60 bps

Restructuring & impairment charges %

1.5%

-

150 bps

Operating Income

$112.8

$106.0

6.5%

Operating Income %

5.1%

5.1%

-

Net Income %

2.8%

3.1%

-30 bps

EPS – diluted

$1.35

$1.39

-2.9%





Non-GAAP




Gross Profit %

35.7%

34.7%

100 bps

Operating Income

$145.3

$108.8

33.5%

Operating Income %

6.5%

5.3%

120 bps

EPS - diluted

$1.97

$1.43

37.8%

 

Full Year Summary Comments

  • Consolidated net sales increased $162.7 million or 7.9 percent to $2.2 billion. Compared to prior year, an acquisition, net of divestitures, increased sales $7.5 million. On an organic basis sales increased 7.5 percent.
  • Non-GAAP gross margin improved 100 basis points from prior year primarily due to higher volume, better price realization and strong operational performance, partially offset by unfavorable product mix, investments in operations and higher warranty costs.
  • Selling and administrative expenses, as a percentage of sales, decreased 20 basis points due to volume, partially offset by increased freight costs due to carrier capacity constraints, strategic investments, increased group medical costs, higher incentive-based compensation and acquisition impact.
  • The Corporation recorded $43.1 million of restructuring and impairment charges and transition costs. These charges included goodwill and intangible impairment charges of $29.4 million related to two office furniture businesses and $13.7 million of restructuring and transition costs in connection with closures announced during this year. Of the restructuring and transition charges, $10.1 million was included in cost of sales.
  • The effective tax rate for the current year of 41.6 percent reflects the non-deductibility of the goodwill and intangible impairment recorded in the fourth quarter. Excluding this impact the effective tax rate was 34.8 percent.

Office Furniture – Financial Performance

(Dollars in millions)


Three Months Ended


Twelve Months Ended



1/3/2015

12/28/2013

Change

1/3/2015

12/28/2013

Change

GAAP







Net Sales

$468.6

$417.0

12.4%

$1,739.0

$1,685.2

3.2%

Operating Income

$9.6

$25.8

-62.9%

$87.1

$97.3

-10.6%

Operating Income %

2.0%

6.2%

-420 bps

5.0%

5.8%

-80 bps








Non-GAAP







Operating Income

$33.1

$25.9

27.8%

$120.8

$100.1

20.6%

Operating Income %

7.1%

6.2%

90 bps

6.9%

5.9%

100 bps

 

  • Fourth quarter sales increased $51.7 million or 12.4 percent to $468.6 million. Compared to prior year quarter, divestitures reduced sales by $0.7 million. On an organic basis, sales increased 12.6 percent. Full year sales increased $53.8 million or 3.2 percent to $1.74 billion. Compared to prior year, divestitures reduced sales by $17.7 million. On an organic basis, sales increased 4.2 percent. The increase in sales for the quarter and the year were driven by growth in the supplies-driven and contract channels.
  • Fourth quarter non-GAAP operating profit increased $7.2 million or 27.8 percent. Full year non-GAAP operating profit increased $20.7 million or 20.6 percent. Increased volume, higher price realization and strong operational performance were partially offset by unfavorable mix, investments in operations, increased freight costs due to carrier capacity constraints and increased incentive-based compensation.

Hearth Products – Financial Performance

(Dollars in millions)


Three Months Ended


Twelve Months Ended



1/3/2015

12/28/2013

Change

1/3/2015

12/28/2013

Change

GAAP







Net Sales

$178.0

$124.3

43.2%

$483.6

$374.8

29.1%

Operating Income

$33.1

$23.0

44.1%

$77.1

$46.7

65.2%

Operating Income %

18.6%

18.5%

10 bps

15.9%

12.5%

340 bps

 

  • Fourth quarter sales increased $53.7 million or 43.2 percent to $178.0 million. Full year sales increased $108.9 million or 29.1 percent to $483.6 million. Compared to prior year for the quarter and full year, acquisitions increased sales by $25.2 million. On an organic basis, sales increased 23.0 percent for the quarter and 22.3 percent for the full year driven by increases in both the new construction and the remodel/retrofit channel.
  • For the quarter, operating profit increased $10.1 million or 44.1 percent due to increased volume, higher price realization and the impact of the acquisition partially offset by higher material costs and strategic investments. Full year operating profit increased $30.4 million or 65.2 percent due to increased volume, higher price realization and the impact of the acquisition partially offset by increased material costs, higher warranty expense and increased incentive-based compensation.

Outlook
"We enter 2015 with strong momentum and will continue to drive long-term shareholder value creation," said Mr. Askren.

The Corporation estimates sales to be up 17 to 21 percent in the first quarter over the same period in the prior year, including sales from the Vermont Castings Group acquisition.  Non-GAAP earnings per share are anticipated in the range of $0.18 to $0.23 for the first quarter and $2.45 to $2.65 for the full year, which includes the Vermont Castings Group acquisition results and excludes restructuring and impairment charges, transition costs and gain/loss on sale of assets.

Conference Call
HNI Corporation will host a conference call on Thursday, February 12, 2015 at 10:00 a.m. (Central) to discuss fourth quarter and fiscal year 2014 results.  To participate, call 1-877-512-9166 – conference ID number 64115968.  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, February 19, 2015, 10:59 p.m. (Central) by dialing 1-855-859-2056 or 1-404-537-3406 – Conference ID number 64115968. 

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 fourth quarter and full year fiscal 2014.  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.

For Information Contact:
Matthew D. McGough, Vice President, Corporate Finance (563) 272-7563
Kurt A. Tjaden, Vice President and Chief Financial Officer (563) 272-7400

HNI CORPORATION

Unaudited Condensed Consolidated Statement of Operations



Three Months Ended


Twelve Months Ended

(Dollars in thousands, except per share data)

1/3/2015

12/28/2013


1/3/2015

12/28/2013

Net Sales

$646,661

$541,263


$2,222,695

$2,059,964

Cost of products sold

418,698

348,282


1,438,495

1,344,672

Gross profit

227,963

192,981


784,200

715,292

Selling and administrative expenses

182,341

155,237


649,055

606,512

(Gain) loss on sale of assets

(977)

-


(10,723)

2,460

Restructuring and impairment charges

21,778

97


33,019

333

Operating income

24,821

37,647


112,849

105,987

Interest income

92

158


418

626

Interest expense

1,976

1,687


8,336

9,906

Income before income taxes

22,937

36,118


104,931

96,707

Income taxes

15,959

13,376


43,776

33,338

Net income

6,978

22,742


61,155

63,369

Less:  Net (loss) attributable to the noncontrolling interest

(104)

(18)


(316)

(314)

Net income attributable to HNI Corporation

$7,082

$22,760


$61,471

$63,683

Net income attributable to HNI Corporation common shareholders – basic

$0.16

$0.50


$1.37

$1.41

Average number of common shares outstanding – basic

44,324,249

45,117,315


44,759,716

45,250,665

Net income attributable to HNI Corporation common shareholders – diluted

$0.16

$0.50


$1.35

$1.39

Average number of common shares outstanding – diluted

45,202,346

45,964,128


45,578,872

45,956,280

 

Unaudited Condensed Consolidated Balance Sheet


Assets


Liabilities and Shareholders' Equity

(Dollars in thousands)

As of



As of


1/3/2015

12/28/2013



1/3/2015

12/28/2013

Cash and cash equivalents

$34,144

$65,030


Accounts payable and



Short-term investments

3,052

7,251


   accrued expenses

$453,754

$407,799

Receivables

240,053

228,715


Note payable and current



Inventories

121,791

89,516


   maturities of long-term debt

160

484

Deferred income taxes

17,310

16,051


Current maturities of other



Prepaid expenses and




   long-term obligations

3,419

3,301

   other current assets

39,209

26,665





      Current assets

455,559

433,228


      Current liabilities

457,333

411,584












Long-term debt

197,736

150,091





Capital lease obligations


106





Other long-term liabilities

80,353

67,543

Property and equipment – net

311,008

267,401


Deferred income taxes

89,411

68,964

Goodwill

279,310

286,655





Other assets

193,457

147,421


Parent Company shareholders'







   equity

414,587

436,328





Noncontrolling interest

(86)

89





Shareholders' equity

414,501

436,417





      Total liabilities and



Total assets

$1,239,334

$1,134,705


        shareholders' equity

$1,239,334

$1,134,705

 

Unaudited Condensed Consolidated Statement of Cash Flows



Twelve Months Ended

(Dollars in thousands)

1/3/2015

12/28/2013

Net cash flows from (to) operating activities

$167,796

$165,002

Net cash flows from (to) investing activities:



   Capital expenditures

(112,713)

(78,895)

   Other

(41,497)

3,476

Net cash flows from (to) financing activities

(44,472)

(66,335)

Net increase (decrease) in cash and cash equivalents

(30,886)

23,248

Cash and cash equivalents at beginning of period

65,030

41,782

Cash and cash equivalents at end of period

$34,144

$65,030

 

Business Segment Data



Three Months Ended


Twelve Months Ended

(Dollars in thousands)

1/3/2015

12/28/2013


1/3/2015

12/28/2013

Net sales:






  Office furniture

$468,645

$416,991


$1,739,049

$1,685,205

  Hearth products

178,016

124,272


483,646

374,759


$646,661

$541,263


$2,222,695

$2,059,964







Operating profit:






  Office furniture

$9,565

$25,816


$87,053

$97,339

  Hearth products

33,092

22,963


77,066

46,662

  Total operating profit

42,657

48,779


164,119

144,001

       Unallocated corporate expense

(19,720)

(12,661)


(59,188)

(47,294)

  Income before income taxes

$22,937

$36,118


$104,931

$96,707







Depreciation and amortization expense:






  Office furniture

$11,493

$9,608


$45,891

$36,992

  Hearth products

1,960

1,249


5,415

5,288

  General corporate

1,505

1,194


5,416

4,341


$14,958

$12,051


$56,722

$46,621







Capital expenditures (including capitalized software):






  Office furniture

$19,318

$12,552


$62,696

$51,954

  Hearth products

1,953

652


6,342

4,220

  General corporate

9,694

6,102


43,675

22,721


$30,965

$19,306


$112,713

$78,895











As of

1/3/2015

As of

12/28/2013

Identifiable assets:






  Office furniture




$724,293

$722,697

  Hearth products




341,315

255,978

  General corporate




173,726

156,030





$1,239,334

$1,134,705

 

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 and impairment charges, transition costs, gain/loss on sale, and effective tax rate excluding non-deductible goodwill and intangible impairment charges.  Non-GAAP EPS is calculated using the Corporation's overall effective tax rate for the period adjusted for non-deductible goodwill and intangible impairment deductions.  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 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 first 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. 

HNI Corporation Reconciliation

(Dollars in millions, except per share data)


Three Months Ended 1/3/2015


Three Months Ended 12/28/2013


Gross
Profit


Operating
Income


 

EPS


Gross
Profit


Operating
Income


 

EPS

As Reported (GAAP)

$228.0


$24.8


$0.16


$193.0


$37.6


$0.50

  % of net sales

35.3%


3.8%




35.7%


7.0%















Restructuring and Impairment

$0.2


$22.0


$0.47


-


$0.1


$0.00

Transition costs

$2.5


$2.5


$0.03


-


-


-

(Gain) loss on sale of assets

-


($1.0)


($0.01)


-


-


-













Results (non-GAAP)

$230.7


$48.4


$0.65


$193.0


$37.7


$0.50

  % of net sales

35.7%


7.5%




35.7%


7.0%






Twelve Months Ended 1/3/2015


Twelve Months Ended 12/28/2013


Gross
Profit


Operating
Income


 

EPS


Gross
Profit


Operating
Income


 

EPS

As Reported (GAAP)

$784.2


$112.8


$1.35


$715.3


$106.0


$1.39

  % of net sales

35.3%


5.1%




34.7%


5.1%















Restructuring and Impairment

$5.2


$38.2


$0.70


-


$0.3


$0.01

Transition costs

$4.9


$4.9


$0.07


-


-


-

(Gain) loss on sale of assets

-


($10.7)


($0.15)


-


$2.5


$0.03













Results (non-GAAP)

$794.3


$145.3


$1.97


$715.3


$108.8


$1.43

  % of net sales

35.7%


6.5%




34.7%


5.3%



 

Effective Tax Rate Reconciliation

(Dollars in millions)


Three Months Ended 1/3/2015


Twelve Months Ended 1/3/2015


Taxable
Income


Tax
Expense


Effective
Tax Rate


Taxable
Income


Tax
Expense


Effective
Tax Rate

Income before tax (including non-controlling interest)

$23.0


$16.0


69.3%


$105.2


$43.8


41.6%













Non-deductible impairments

$20.5


-




$20.5


-















Adjusted income before tax (including non-controlling interest)

 

$43.5


 

$16.0


 

36.7%


 

$125.7


 

$43.8


 

34.8%



Office Furniture Reconciliation

(Dollars in millions)


Three Months Ended


Percent
Change


Twelve Months Ended


Percent
Change


1/3/2015


12/28/2013



1/3/2015


12/28/2013


Operating profit as reported (GAAP)

$9.6


$25.8


-62.9%


$87.1


$97.3


-10.6%

  % of Net Sales

2.0%


6.2%




5.0%


5.8%















Restructuring and Impairment

$22.0


$0.1




$38.2


$0.3



Transition Costs

$2.5


-




$4.9


-



(Gain) Loss on Sale of Assets

($1.0)


-




($9.4)


$2.5















Operating profit (non-GAAP)

$33.1


$25.9


27.8%


$120.8


$100.1


20.6%

  % of Net Sales

7.1%


6.2%




6.9%


5.9%



 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/hni-corporation-reports-strong-sales-and-earnings-for-fourth-quarter-and-fiscal-year-2014-300034864.html

SOURCE HNI Corporation

NYSE: HNI 03/24/2017 $45.34