Published: February 07, 2012
HNI Corporation Announces Increased Sales and Earnings for Fourth Quarter and Year-End - Fiscal 2011
MUSCATINE, Iowa, Feb. 7, 2012 /PRNewswire/ -- HNI Corporation (NYSE: HNI) today announced sales for the fourth quarter ended December 31, 2011, of $500.3 million, a 7 percent increase from the prior year quarter, and income from continuing operations of $18.0 million, a 43 percent increase from prior year quarter. Net income per diluted share from continuing operations for the quarter was $0.40 or $0.41 on a non-GAAP basis when excluding restructuring and transition costs and non-operating gains. For fiscal year 2011, the Corporation reported sales of $1.8 billion, a 9 percent increase from prior year, and income from continuing operations of $45.7 million, a 54 percent increase from prior year. Net income per diluted share from continuing operations for the year was $1.01 or $1.05 on a non-GAAP basis when excluding restructuring and transition costs and non-operating gains.
Fourth Quarter and FY'11 Summary Comments
"We are pleased with our strong execution and solid profit improvement for the fourth quarter and full year 2011. Our growth investments delivered top-line improvement across all businesses in the quarter, and outstanding working capital results drove significant cash generation. Office furniture sales growth was led by strong performance in our contract and international businesses. Hearth sales benefited from improved conditions in new home construction and high energy prices.
"We enter 2012 financially strong and with positive momentum across all of our businesses. We are aggressively investing for growth, competitively well positioned within our markets, and delivering 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 12/31/2011 1/01/2011 Change
---------- --------- ------
Net sales $500.3 $466.1 7.3%
Gross margin $178.0 $163.9 8.6%
Gross margin % 35.6% 35.2%
SG&A $148.2 $143.5 3.2%
SG&A % 29.6% 30.8%
Operating income $29.8 $20.4 46.6%
Operating income % 6.0% 4.4%
Income from continuing operations $18.0 $12.6 43.3%
Earnings per share from continuing
operations attributable to HNI
Corporation - diluted $0.40 $0.27 48.1%
Fourth Quarter Results - Continuing Operations
-- Consolidated net sales increased $34.1 million or 7.3 percent from the
prior year quarter to $500.3 million. The acquisition of Sagus
contributed $8.2 million, or 1.8 percentage points of sales.
-- Gross margins were 0.4 percentage points higher than prior year quarter
primarily due to higher volume and better price realization offset
partially by increased material costs.
-- Total selling and administrative expenses as a percent of net sales,
including restructuring charges, improved 1.2 percentage points from the
prior year quarter due to higher volume, lower restructuring charges and
a non-operating gain partially offset by increased fuel costs, higher
incentive based compensation and costs associated with the new
acquisition.
-- The Corporation's fourth quarter results included $1.0 million of
restructuring and transition costs of which $0.2 million were included
in cost of sales. This represented $1.4 million associated with
shutdown and consolidation of office furniture manufacturing locations
net of a $0.4 million non-operating gain on the sale of property.
Included in the fourth quarter of 2010 were $7.1 million of
restructuring, impairment and transition costs.
Fourth Quarter - Non-GAAP Financial Measures - Continuing Operations
(Reconciled with most comparable GAAP financial measures)
Dollars
in
millions Three Months Ended 12/31/2011 Three Months Ended 1/01/2011
except
per
share
data ----------------------------- ----------------------------
Gross SG&A Operating EPS Gross SG&A Operating EPS
Profit ---- Income --- Profit ---- Income ---
------ ------ ------ ------
As
reported
(GAAP) $178.0 $148.2 $29.8 $0.40 $163.9 $143.5 $20.4 $0.27
% of
net
sales 35.6% 29.6% 6.0% 35.2% 30.8% 4.4%
Restructuring
and
impairment $0.1 $(1.1) $1.2 $0.02 $0.3 $(6.6) $6.9 $0.11
Transition
costs $0.2 - $0.2 $0.00 $0.2 - $0.2 $0.01
Non-
operating
gain - $0.4 $(0.4) $(0.01)
Results
(non-
GAAP) $178.3 $147.4 $30.8 $0.41 $164.4 $136.9 $27.5 $0.39
% of
net
sales 35.6% 29.5% 6.2% 35.3% 29.4% 5.9%
Full Year
Dollars in millions Twelve Months Ended Percent
-------------------
except per share data 12/31/2011 1/01/2011 Change
---------- --------- ------
Net sales $1,833.5 $1,686.7 8.7%
Gross margin $639.1 $585.6 9.1%
Gross margin % 34.9% 34.7%
SG&A $557.6 $527.7 5.7%
SG&A % 30.4% 31.3%
Operating income $81.5 $57.9 40.7%
Operating income % 4.4% 3.4%
Income from continuing operations $45.7 $29.7 54.1%
Earnings per share from continuing
operations attributable to HNI
Corporation - diluted $1.01 $0.65 55.4%
Full Year Results - Continuing Operations
-- Net sales increased $146.7 million, or 8.7 percent, to $1.8 billion
compared to $1.7 billion for the prior year. Acquisitions contributed
$8.2 million, or 0.5 percentage points of sales.
-- Gross margins were 0.2 percentage points higher than prior year due to
increased volume, better price realization and lower restructuring and
transition costs offset partially by increased material costs.
-- Total selling and administrative expenses as a percent of net sales,
including restructuring charges, improved 0.9 percentage points due to
higher volume and lower restructuring charges partially offset by
increased fuel costs, investments in growth initiatives, higher
incentive based compensation and costs associated with the new
acquisition. Included in 2011 were $3.3 million of restructuring and
impairment charges compared to $9.4 million in 2010.
Cash flow from operations for the year was $134.3 million compared to $94.4 million in 2010. Capital expenditures were $31.1 million in 2011 compared to $26.7 million in 2010. The Corporation completed the acquisition of Sagus International, a designer and manufacturer of educational furniture solutions, for a total purchase price of $55 million. The Corporation repurchased 323,965 shares of its common stock during 2011. There is approximately $135.8 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 Twelve Months Ended 12/31/2011 Twelve Months Ended 1/01/2011
except
per
share
data ------------------------------ -----------------------------
Gross SG&A Operating EPS Gross SG&A Operating EPS
Profit ---- Income --- Profit ---- Income ---
------ ------ ------ ------
As
reported
(GAAP) $639.1 $557.6 $81.5 $1.01 $585.6 $527.7 $57.9 $0.65
%
of
net
sales 34.9% 30.4% 4.4% 34.7% 31.3% 3.4%
Restructuring
and
impairment $0.2 $(3.3) $3.5 $0.05 $2.6 $(9.4) $12.1 $0.17
Transition
costs $0.3 - $0.3 $0.00 $1.5 - $1.5 $0.02
Non-
operating
gains - $0.4 $(0.4) $(0.01) - $0.5 $(0.5) $(0.01)
Results
(non-
GAAP) $639.6 $554.7 $84.9 $1.05 $589.7 $518.8 $70.9 $0.82
%
of
net
sales 34.9% 30.3% 4.6% 35.0% 30.8% 4.2%
Discontinued Operations
The Corporation completed the sale of a small, non-core business in the office furniture segment and a small, non-core component of its hearth products segment during 2010. Revenues and expenses associated with these business operations are presented as discontinued operations for all periods presented in the financial statements.
Office Furniture
Twelve Months
Three Months Ended Percent Ended Percent
Dollars in
millions 12/31/2011 1/01/2011 Change 12/31/2011 1/01/2011 Change
---------- --------- ------ ---------- --------- ------
Sales $402.4 $374.8 7.4% $1,528.1 $1,404.9 8.8%
Operating profit $32.2 $24.6 30.9% $99.6 $87.6 13.8%
Operating profit
% 8.0% 6.6% 6.5% 6.2%
Non-GAAP Financial Measures
(Reconciled with most comparable GAAP measures)
Twelve Months
Three Months Ended Percent Ended Percent
Dollars in
millions 12/31/2011 1/01/2011 Change 12/31/2011 1/01/2011 Change
---------- --------- ------ ---------- --------- ------
Operating profit
as reported
(GAAP) $32.2 $24.6 30.9% $99.6 $87.6 13.8%
% of net sales 8.0% 6.6% 6.5% 6.2%
Restructuring and
impairment $1.2 $1.7 $3.1 $6.7
Transition costs $0.2 $0.2 $0.3 $1.4
Non-operating
gains $(0.4) - $(0.4) $(0.5)
Operating profit
(non-GAAP) $33.2 $26.4 25.4% $102.6 $95.1 7.9%
% of net sales 8.2% 7.1% 6.7% 6.8%
-- Fourth quarter and full year sales for the office furniture segment
increased $27.6 million and $123.1 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. Acquisitions contributed $8.2 million
or 2.2 percentage points in the fourth quarter and $8.2 million or 0.6
percentage points for the full year.
-- Fourth quarter and full year operating profit increased $7.6 million and
$12.1 million, respectively. Operating profit was positively impacted
by increased volume, better price realization and lower restructuring,
transition and impairment expenses. These were partially offset by
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 12/31/2011 1/01/2011 Change 12/31/2011 1/01/2011 Change
---------- --------- ------ ---------- --------- ------
Sales $97.9 $91.3 7.1% $305.4 $281.8 8.4%
Operating profit $9.4 $5.4 74.0% $14.8 $2.9 406.1%
Operating profit
% 9.6% 5.9% 4.8% 1.0%
Non-GAAP Financial Measures
(Reconciled with most comparable GAAP measures)
Three Months Ended Percent Twelve Months Ended Percent
Dollars in
millions 12/31/2011 1/01/2011 Change 12/31/2011 1/01/2011 Change
---------- --------- ------ ---------- --------- ------
Operating profit
as reported
(GAAP) $9.4 $5.4 74.0% $14.8 $2.9 406.1%
% of net sales 9.6% 5.9% 4.8% 1.0%
Restructuring and
impairment - $5.3 $0.4 $5.4
Transition costs - - - $0.1
Operating profit
(non-GAAP) $9.4 $10.7 -11.7% $15.2 $8.4 81.0%
% of net sales 9.6% 11.7% 5.0% 3.0%
-- Fourth quarter sales for the hearth products segment increased $6.5
million driven by increases in the new construction channel and the
remodel-retrofit channel. Full year sales for the hearth products
segment increased $23.6 million driven by an increase in the
remodel/retrofit channel partially offset by a decrease in the new
construction channel.
-- Fourth quarter and full year operating profit increased $4.0 million and
$11.8 million, respectively. Operating profit was positively impacted
by higher volume, better price realization and lower restructuring and
impairment charges partially offset by higher input costs, investments
in selling and marketing initiatives and incentive-based compensation.
Outlook
"I am encouraged by the ongoing recovery in our economy and remain optimistic about our markets and growth prospects. We will continue to aggressively invest for future growth while pursuing opportunities for structural and operating cost reductions. Our businesses are strong, competitive, and agile, and we are well positioned for long term profitable growth," said Mr. Askren.
The Corporation estimates sales growth between 10 to 13 percent in the first quarter over the same period in the prior year. Non-GAAP earnings per diluted share is anticipated in the range of ($0.05) to $0.00 for the first quarter. For the full year, the Company is confirming its estimate of non-GAAP earnings per diluted share in the range of $1.30 to $1.50, which excludes restructuring charges and transition costs.
The Corporation remains focused on creating long-term shareholder value by growing its business through investment in building brands, product solutions and selling models, enhancing its strong member-owner culture, and remaining focused on its long-standing rapid continuous improvement programs to build best total cost and a lean enterprise.
Conference Call
HNI Corporation will host a conference call on Wednesday, February 8, 2012 at 10:00 a.m. (Central) to discuss fourth quarter and year-end 2011 results. To participate, call the conference call line at 1-877-512-9166 - conference ID number 41420276. 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 and a replay of the call also will be available telephonically until Wednesday, February 15, 2012, 10:59 p.m. (Central). To access this replay, dial 1-855-859-2056 or 1-404-537-3406 - Conference ID number 41420276.
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, 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, selling and administrative expense, operating income, operating profit and net income per diluted share from continuing operations (i.e., EPS), excluding restructuring and impairment charges, transition costs and non-operating gains. 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 full fiscal year. We provide such non-GAAP measures to investors on a prospective basis for the same reasons (set forth above) we provide them to investors on a historical basis. We are unable to provide a reconciliation of our forward-looking estimate of non-GAAP earnings per diluted share to a forward-looking estimate of GAAP earnings per diluted share because certain information needed to make a reasonable forward-looking estimate of GAAP earnings per diluted share for the full fiscal year is difficult to predict and estimate and is often dependent on future events which may be uncertain or outside of our control. Such events 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.
About HNI Corporation
HNI Corporation is a NYSE traded company (ticker symbol: HNI) providing products and solutions for the home and workplace environments. HNI Corporation is the second largest office furniture manufacturer in the world and is also the nation's leading manufacturer and marketer of gas- and wood-burning fireplaces. The Corporation's strong brands, including HON®, Allsteel®, Gunlocke®, Paoli®, Maxon®, Lamex®, HBF® , Artco-Bell(TM), Midwest Folding Products(TM), LSI Corporation of America(TM), Heatilator®, Heat & Glo®, Quadra-Fire® and Harman Stove(TM) 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.
Forward Looking Statements
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. These statements include, without limitation, expectations for (i) sales growth to be between 10 and 13 percent for the first quarter of fiscal 2012, (ii) non-GAAP earnings per diluted share (excluding restructuring charges and transition costs) to be in the range of $0.00 to ($0.05) for the first quarter of fiscal 2012, and (iii) non-GAAP earnings per diluted share (excluding restructuring charges and transition costs) to be in the range of $1.30 to $1.50 for fiscal 2012. In addition, 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.
For Information Contact:
Derek P. Schmidt, Treasurer and Vice President, Corporate Finance (563)
272-7344
Kurt A. Tjaden, Vice President and Chief Financial Officer (563) 272-7400
HNI CORPORATION
Condensed Consolidated Statement of Operations
Three Months Ended Twelve Months Ended
(Dollars in
thousands, except
per share data)
Dec. 31, Jan. 1, Dec. 31, Jan. 1,
2011 2011 2011 2011
--------- -------- --------- --------
Net Sales $500,269 $466,148 $1,833,450 $1,686,728
Cost of products
sold 322,255 302,246 1,194,387 1,101,112
Gross profit 178,014 163,902 639,063 585,616
Selling and
administrative
expenses 147,034 136,912 554,315 518,257
Restructuring and
impairment charges 1,131 6,628 3,261 9,449
Operating income 29,849 20,362 81,487 57,910
Interest income 158 125 623 471
Interest expense 2,762 3,283 11,951 11,903
Income from
continuing
operations before
income taxes 27,245 17,204 70,159 46,478
Income taxes 9,219 4,621 24,411 16,797
Income from
continuing
operations, less
applicable income
taxes 18,026 12,583 45,748 29,681
Discontinued
operations, less
applicable income
taxes - (6) - (2,558)
Net income (loss) 18,026 12,577 45,748 27,123
Less: Net income
(loss)
attributable to
the noncontrolling
interest (111) 33 (238) 182
Net income
attributable to
HNI Corporation $18,137 $12,544 $45,986 $26,941
Income from
continuing
operations
attributable to
HNI Corporation
per common share -
basic $0.40 $0.28 $1.03 $0.66
Discontinued
operations
attributable to
HNI Corporation
per common share -
basic - $0.00 - $(0.06)
Net income
attributable to
HNI Corporation
common
shareholders -
basic $0.40 $0.28 $1.03 $0.60
Average number of
common shares
outstanding -
basic 44,827,529 44,815,129 44,803,248 44,993,934
Income from
continuing
operations
attributable to
HNI Corporation
per common share -
diluted $0.40 $0.27 $1.01 $0.65
Discontinued
operations
attributable to
HNI Corporation
per common share -
diluted - $0.00 - $(0.06)
Net income
attributable to
HNI Corporation
common
shareholders -
diluted $0.40 $0.27 $1.01 $0.59
Average number of
common shares
outstanding -
diluted 45,759,137 45,742,520 45,694,278 45,808,704
----------------- ---------- ---------- ---------- ----------
Condensed Consolidated Balance Sheet
Assets Liabilities and Shareholders' Equity
As of As of
Dec. 31, Jan. 1, Dec. 31, Jan. 1,
(Dollars in
thousands) 2011 2011 2011 2011
----------- ---- ---- ---- ----
Cash and cash
equivalents $72,812 $99,096 Accounts payable and
Short-term
investments 9,157 10,567 accrued expenses $358,290 $311,066
Note payable and
Receivables 204,036 190,118 current
maturities of long-
Inventories 101,873 68,956 term debt 30,345 50,029
Deferred income Current maturities
taxes 18,797 18,467 of other
Prepaid expenses long-term
and obligations 275 256
other current
assets 27,365 20,957
Current assets 434,040 408,161 Current liabilities 388,910 361,351
Long-term debt 150,200 150,000
Capital lease
obligations 340 111
Property and Other long-term
equipment -net 229,727 231,781 liabilities 52,716 47,437
Deferred income
Goodwill 270,761 260,634 taxes 42,770 30,525
Other assets 119,730 97,304
Parent Company
shareholders' 419,057 407,985
equity
Noncontrolling
interest 265 471
Shareholders' equity 419,322 408,456
Total liabilities
and
Total assets $1,054,258 $997,880 shareholders' equity $1,054,258 $997,880
------------ ---------- -------- -------------------- ---------- --------
Condensed Consolidated Statement of Cash Flows
Twelve Months
Ended
Dec. 31, Jan. 1,
(Dollars in thousands) 2011 2011
---------------------- --------- --------
Net cash flows from (to) operating activities $134,278 $94,384
Net cash flows from (to) investing activities:
Capital expenditures (31,143) (26,722)
Acquisition spending (54,990) (149)
Other (5,407) 1,818
Net cash flows from (to) financing activities (69,022) (57,609)
Net increase (decrease) in cash and cash
equivalents (26,284) 11,722
Cash and cash equivalents at beginning of
period 99,096 87,374
Cash and cash equivalents at end of period $72,812 $99,096
------------------------------------------ ------- -------
Business Segment Data
Three Months Ended Twelve Months Ended
(Dollars in Dec. 31, Jan. 1, Dec. 31, Jan. 1,
thousands) 2011 2011 2011 2011
----------- --------- -------- --------- --------
Net sales:
Office
furniture $402,407 $374,812 $1,528,050 $1,404,923
Hearth
products 97,862 91,336 305,400 281,805
$500,269 $466,148 $1,833,450 $1,686,728
-------- -------- ---------- ----------
Operating
profit:
Office
furniture
Operations
before
restructuring
and
impairment
charges $33,307 $25,949 $102,468 $91,649
Restructuring
and
impairment
charges (1,131) (1,370) (2,842) (4,090)
Office
furniture -
net 32,176 24,579 99,626 87,559
Hearth
products
Operations
before
restructuring
and
impairment
charges 9,422 10,672 15,171 8,274
Restructuring
and
impairment
charges - (5,258) (419) (5,359)
Hearth
products -
net 9,422 5,414 14,752 2,915
Total
operating
profit 41,598 29,993 114,378 90,474
Unallocated
corporate
expense (14,353) (12,789) (44,219) (43,996)
Income before
income taxes $27,245 $17,204 $70,159 $46,478
------------- ------- ------- ------- -------
Depreciation
and
amortization
expense:
Office
furniture $8,801 $10,249 $36,109 $44,717
Hearth
products 1,649 2,422 7,574 11,474
General
corporate 702 598 2,604 2,439
$11,152 $13,269 $46,287 $58,630
------- ------- ------- -------
Capital
expenditures
- net:
Office
furniture $8,249 $6,303 $24,061 $20,928
Hearth
products 199 980 2,179 2,423
General
corporate 2,501 763 4,903 3,371
$10,949 $8,046 $31,143 $26,722
------- ------ ------- -------
As of As of
Dec. 31, Jan. 1,
2011 2011
--------- --------
Identifiable
assets:
Office
furniture $671,334 $588,540
Hearth
products 259,142 267,125
General
corporate 123,782 142,215
$1,054,258 $997,880
---------- --------
SOURCE HNI Corporation
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