HNI Corporation Reports Double Digit Earnings Growth For Third Quarter Fiscal Year 2015

Third Quarter Highlights

- Non-GAAP net income per share increased 15% to $0.93; GAAP net income per share $0.90

- Non-GAAP gross profit increased 160 basis points; GAAP gross profit increased 180 basis points

- Sales increased $1.2 million or 0.2%

Company Release - 10/21/2015 5:04 PM ET

MUSCATINE, Iowa, Oct. 21, 2015 /PRNewswire/ -- HNI Corporation (NYSE: HNI) today announced sales for the third quarter ended October 3, 2015, of $615.9 million and net income of $40.8 million, or $0.90 per diluted share.  Non-GAAP net income per diluted share improved 14.8 percent from the prior year quarter to $0.93, which excludes restructuring and transition costs.     

Third Quarter Summary Comments
"We delivered double digit earnings growth for the third quarter.  We are competing well in our markets despite a softening economy which led to modest declines in office furniture and organic hearth sales.  We are taking calculated actions to reset our cost structure for a range of slowing economic scenarios," said Stan Askren, HNI Corporation Chairman, President and Chief Executive Officer.

Third Quarter – Financial Performance

(Dollars in millions, except per share data)


Three Months Ended



10/3/2015

9/27/2014

Change

GAAP




Net Sales

$615.9

$614.7

0.2%

Gross Profit %

37.6%

35.8%

180 bps

SG&A %

27.7%

27.0%

70 bps

(Gain) loss on sale of assets %

0.0%

0.0%

0 bps

Restructuring charges %

0.0%

0.2%

-20 bps

Operating Income

$61.1

$52.7

15.9%

Operating Income %

9.9%

8.6%

130 bps

Net Income %

6.6%

5.5%

110 bps

EPS – diluted

$0.90

$0.74

21.6%





Non-GAAP




Gross Profit %

38.0%

36.4%

160 bps

Operating Income

$63.4

$57.6

9.9%

Operating Income %

10.3%

9.4%

90 bps

EPS – diluted

$0.93

$0.81

14.8%

Third Quarter Summary Comments

  • Consolidated net sales increased $1.2 million or 0.2 percent to $615.9 million. Compared to prior year quarter, the Vermont Castings Group acquisition increased sales $18.7 million. On an organic basis, sales decreased 2.8 percent.
  • Non-GAAP gross margin increased 160 basis points compared to prior year driven by strong operational performance, favorable material costs and better price realization, partially offset by lower volume and unfavorable product mix.
  • Selling and administrative expenses, as a percentage of sales, increased 70 basis points due to higher freight costs, strategic investments and acquisition impact, partially offset by cost management actions.
  • The Corporation recorded $2.3 million of restructuring and transition expenses in the current quarter in connection with previously announced closures, acquisition integration and structural realignment. Third quarter 2014 included $4.9 million of restructuring and transition costs associated with facility closures.

Office Furniture – Financial Performance

(Dollars in millions)


Three Months Ended



10/3/2015

9/27/2014

Change

GAAP




Net Sales

$476.0

$488.6

(2.6%)

Operating Profit

$48.4

$42.8

13.2%

Operating Profit %

10.2%

8.7%

150 bps





Non-GAAP




Operating Profit

$49.0

$47.6

2.9%

Operating Profit %

10.3%

9.8%

50 bps

  • Third quarter sales decreased $12.6 million or 2.6 percent to $476.0 million. Sales for the quarter decreased in both our supplies-driven and contract channels.
  • Third quarter non-GAAP operating profit increased $1.4 million or 2.9 percent. Strong operational performance, cost management actions and better price realization were partially offset by lower volume, higher freight costs and unfavorable product mix.

Hearth Products – Financial Performance

(Dollars in millions)


Three Months Ended



10/3/2015

9/27/2014

Change

GAAP




Net Sales

$139.9

$126.1

11.0%

Operating Profit

$23.5

$23.8

(1.2%)

Operating Profit %

16.8%

18.9%

-210 bps





Non-GAAP




Operating Profit

$25.1

$23.8

5.6%

Operating Profit %

17.9%

18.9%

-100 bps

  • Third quarter sales increased $13.8 million or 11.0 percent to $139.9 million. Compared to prior year quarter, the Vermont Castings Group acquisition increased sales by $18.7 million. On an organic basis, sales decreased 3.9 percent for the quarter driven by a 24 percent decline in biomass products partially offset by growth in the new construction channel.
  • For the quarter, non-GAAP operating profit increased $1.3 million or 5.6 percent due to cost management actions, better price realization and favorable material costs.

Outlook
"I am pleased with our profit performance and believe we are competing well in our markets.  We will continue to adjust our cost structure while investing for long-term profitable growth.  I remain confident in our ability to create long-term shareholder value," said Mr. Askren.

The Corporation estimates sales to be down 4 to 8 percent in the fourth quarter over the same period in the prior year.  Non-GAAP earnings per share are anticipated to be in the range of $2.55 to $2.60 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, October 22, 2015 at 10:00 a.m. (Central) to discuss third quarter fiscal year 2015 results.  To participate, call 1-877-512-9166 – conference ID number 46783871.  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, October 29, 2015, 10:30 p.m. (Central) by dialing 1-855-859-2056 or 1-404-537-3406 – Conference ID number 46783871. 

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 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.

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

Unaudited Condensed Consolidated Statement of Operations


(Dollars in thousands, except per share data)

Three Months Ended

Nine Months Ended

10/3/2015

9/27/2014

10/3/2015

9/27/2014

Net sales

$615,850

$614,690

$1,707,553

$1,576,034

Cost of products sold

384,219

394,758

1,085,298

1,019,797

Gross profit

231,631

219,932

622,255

556,237

Selling and administrative expenses

170,365

166,201

506,336

466,693

(Gain) loss on sale of assets

6

15

18

(9,725)

Restructuring charges

172

987

(12)

11,241

Operating income

61,088

52,729

115,913

88,028

Interest income

110

110

318

326

Interest expense

1,733

1,971

5,689

6,360

Income before income taxes

59,465

50,868

110,542

81,994

Income taxes

18,619

17,372

37,367

27,817

Net income

40,846

33,496

73,175

54,177

Less:  Net (loss) attributable to the noncontrolling interest

(2)

(92)

(30)

(212)

Net income attributable to HNI Corporation

$40,848

$33,588

$73,205

$54,389

Net income attributable to HNI Corporation common shareholders – basic

$0.92

$0.75

$1.65

$1.21

Average number of common shares outstanding – basic

44,263,027

44,689,819

44,327,608

44,916,038

Net income attributable to HNI Corporation common shareholders – diluted

$0.90

$0.74

$1.61

$1.19

Average number of common shares outstanding – diluted

45,402,537

45,611,099

45,516,521

45,758,502

 

Unaudited Condensed Consolidated Balance Sheet


Assets


Liabilities and Shareholders' Equity

(Dollars in thousands)

As of



As of


10/3/2015

1/3/2015



10/3/2015

1/3/2015

Cash and cash equivalents

$24,616

$34,144


Accounts payable and



Short-term investments

6,352

3,052


   accrued expenses

$419,744

$453,753

Receivables

280,091

240,053


Note payable and current



Inventories

145,196

121,791


   maturities of long-term debt1

257,244

160

Deferred income taxes

14,964

17,310


Current maturities of other



Prepaid expenses and




   long-term obligations

13,364

3,419

   other current assets

29,751

39,210





      Current assets

500,970

455,560


      Current liabilities

690,352

457,332








Property and equipment – net

333,912

311,008


Long-term debt1

-

197,736

Goodwill

280,612

279,310


Other long-term liabilities

80,551

80,354

Other assets

206,939

193,456


Deferred income taxes

95,721

89,411












Parent Company shareholders'







   equity

455,464

414,587





Noncontrolling interest

345

(86)





Shareholders' equity

455,809

414,501





      Total liabilities and



Total assets

$1,322,433

$1,239,334


        shareholders' equity

$1,322,433

$1,239,334


1All debt classified as current as of 10/3/2015 due to timing of maturity

 

Unaudited Condensed Consolidated Statement of Cash Flows



Nine Months Ended

(Dollars in thousands)

           10/3/2015

9/27/2014

Net cash flows from (to) operating activities

$58,402

$74,807

Net cash flows from (to) investing activities:



   Capital expenditures

(81,573)

(81,748)

   Other

672

17,596

Net cash flows from (to) financing activities

12,971

(46,007)

Net increase (decrease) in cash and cash equivalents

(9,528)

(35,352)

Cash and cash equivalents at beginning of period

34,144

65,030

Cash and cash equivalents at end of period

$24,616

$29,678

 

Business Segment Data



Three Months Ended

Nine Months Ended

(Dollars in thousands)

10/3/2015

9/27/2014

10/3/2015

9/27/2014

Net sales:





  Office furniture

$475,960

$488,612

$1,334,013

$1,270,404

  Hearth products

139,890

126,078

373,540

305,630


$615,850

$614,690

$1,707,553

$1,576,034






Operating profit:





  Office furniture

$48,389

$42,753

$108,332

$77,488

  Hearth products

23,498

23,785

47,161

43,974

  Total operating profit

71,887

66,538

155,493

121,462

  Unallocated corporate expense

(12,422)

(15,670)

(44,951)

(39,468)

  Income before income taxes

$59,465

$50,868

$110,542

$81,994






Depreciation and amortization expense:





  Office furniture

$10,644

$12,427

$31,284

$34,398

  Hearth products

2,166

1,121

6,171

3,455

  General corporate

1,694

1,264

4,844

3,911


$14,504

$14,812

$42,299

$41,764






Capital expenditures (including capitalized software):





  Office furniture

$19,590

$13,542

$45,989

$43,378

  Hearth products

2,798

1,691

7,195

4,389

  General corporate

9,303

15,394

28,389

33,981


$31,691

$30,627

$81,573

$81,748









As of

10/3/2015

As of

1/3/2015

Identifiable assets:





  Office furniture



$769,641

$724,293

  Hearth products



374,716

341,315

  General corporate



178,076

173,726




$1,322,433

$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 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 fourth 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 fourth 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 10/3/2015


Three Months Ended 9/27/2014


Gross Profit


Operating Income


EPS


Gross Profit


Operating Income


EPS

As Reported (GAAP)

$231.6


$61.1


$0.90


$219.9


$52.7


$0.74

  % of net sales

37.6%


9.9%




35.8%


8.6%















Restructuring & Impairment charges

$0.8


$1.0


$0.01


$2.4


$3.4


$0.05

Transition costs

$1.3


$1.3


$0.02


$1.5


$1.5


$0.02

























Results (non-GAAP)

$233.7


$63.4


$0.93


$223.8


$57.6


$0.81

  % of net sales

38.0%


10.3%




36.4%


9.4%



 

Office Furniture Reconciliation

(Dollars in millions)


Three Months Ended


Percent

Change


10/3/2015


9/27/2014


Operating profit as reported (GAAP)

$48.4


$42.8


13.2%

  % of Net Sales

10.2%


8.7%









Restructuring & Impairment charges

$0.0


$3.4



Transition Costs

$0.6


$1.5















Operating profit (non-GAAP)

$49.0


$47.6


2.9%

  % of Net Sales

10.3%


9.8%




Hearth Reconciliation

(Dollars in millions)


Three Months Ended


Percent

Change


10/3/2015


9/27/2014


Operating profit as reported (GAAP)

$23.5


$23.8


(1.2%)

  % of Net Sales

16.8%


18.9%









Restructuring charges

$0.9


-



Transition Costs

$0.7


-















Operating profit (non-GAAP)

$25.1


$23.8


5.6%

  % of Net Sales

17.9%


18.9%









 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/hni-corporation-reports-double-digit-earnings-growth-for-third-quarter-fiscal-year-2015-300164218.html

SOURCE HNI Corporation

NYSE: HNI 02/17/2017 $46.09