HNI reports Q4 net income up 29% year-over-year to US$22.8M, on sales 3% higher at US$541.3M; office furniture sales increased in company's supplies-driven business despite continued reductions in federal government spending, says CEO

MUSCATINE, Iowa , February 4, 2014 (press release) – HNI Corporation (NYSE: HNI) today announced sales for the fourth quarter ended December 28, 2013, of $541.3 million, a 3 percent increase from the prior year quarter and net income of $22.8 million, a 29 percent increase from the prior year quarter. Net income per diluted share for the quarter was $0.50. For fiscal year 2013, the Corporation reported sales of $2.1 billion, a 3 percent increase from prior year, and net income of $63.7 million, a 30 percent increase from prior year. Net income per diluted share for the year was $1.39 or $1.43 on a non-GAAP basis when excluding restructuring and transition costs and a loss on the sale of a small non-core office furniture business.

"We are pleased with our strong execution and profit improvement for the fourth quarter and full year 2013. Our growth investments delivered top-line improvement in the quarter despite a slow economy. Outstanding working capital management drove significant cash generation. Office furniture sales increased in our supplies-driven business despite continued reductions in federal government spending. Continued strong profit growth in our hearth business was led by substantial growth in both the new construction and remodel/retrofit channels and outstanding operational execution. We enter 2014 financially strong, competitively well positioned, and focused on delivering profitable growth," said Stan Askren, HNI Corporation Chairman, President and Chief Executive Officer.

Fourth Quarter – GAAP Financial Measures

 

Dollars in millions

except per share data

Three Months Ended

Percent

Change

12/28/2013

12/29/2012





Net sales

$541.3

$527.5

2.6%

Gross profit

$193.0

$186.0

3.8%

Gross profit %

35.7%

35.2%


SG&A

$155.3

$155.6

-0.2%

SG&A %

28.7%

29.5%


Operating income

$37.6

$30.3

24.2%

Operating income %

7.0%

5.7%


Net income attributable to HNI Corporation

$22.8

$17.6

29.4%





Earnings per share attributable to HNI Corporation – diluted

$0.50

$0.39

28.2%

  • Consolidated net sales increased $13.7 million or 2.6 percent to $541.3 million. Compared to prior year quarter, divestitures reduced sales $8.2 million. On an organic basis sales increased 4.1 percent.
  • Gross margin was 0.5 percentage points higher than prior year quarter primarily due to higher volume and increased price realization partially offset by new product ramp-up and operation reconfiguration costs to meet changing market demands.
  • Total selling and administrative expenses as a percent of net sales, including restructuring charges, decreased 0.8 percentage points from the prior year quarter due to higher volume, network distribution realignment savings and lower restructuring charges partially offset by investment in growth initiatives and higher incentive-based compensation.
  • The Corporation's fourth quarter results included $0.1 million of restructuring charges associated with previously announced shutdown and consolidation of office furniture manufacturing locations. Included in the fourth quarter of 2012 was $1.1 million of restructuring and transition costs of which $0.3 million was included in cost of sales.
 

 

Fourth Quarter – Non-GAAP Financial Measures

(Reconciled with most comparable GAAP financial measures)

Dollars in millions

except per share data

Three Months Ended 12/28/2013


Three Months Ended 12/29/2012

Gross

Profit

 

SG&A

Operating

Income

Diluted

EPS


Gross

Profit

 

SG&A

Operating

Income

Diluted

EPS











As reported (GAAP)

$193.0

$155.3

$37.6

$0.50


$186.0

$155.6

$30.3

$0.39

  % of net sales

35.7%

28.7%

7.0%



35.2%

29.5%

5.7%












Restructuring and impairment

-

$(0.1)

$0.1

$0.00


-

$(0.6)

$0.6

$0.01

Transition costs

-

-

-

-


$0.3

$(0.2)

$0.5

$0.00











Results (non-GAAP)

$193.0

$155.2

$37.7

$0.50


$186.3

$154.8

$31.4

$0.40

  % of net sales

35.7%

28.7%

7.0%



35.3%

29.3%

6.0%


 

Full Year – GAAP Financial Measures

 

Dollars in millions

except per share data

Twelve Months Ended

Percent

Change

12/28/2013

12/29/2012





Net sales

$2,060.0

$2,004.0

2.8%

Gross profit

$715.3

$689.2

3.8%

Gross profit %

34.7%

34.4%


SG&A

$609.3

$601.6

1.3%

SG&A %

29.6%

30.0%


Operating income

$106.0

$87.6

21.0%

Operating income %

5.1%

4.4%


Net income attributable to HNI Corporation

$63.7

$49.0

30.1%





Earnings per share attributable to HNI Corporation – diluted

$1.39

$1.07

29.9%

 

  • Consolidated net sales increased $56.0 million or 2.8 percent to $2.1 billion. Compared to prior year, divestitures, partially offset by the acquisition of BP Ergo, reduced sales $27.5 million. On an organic basis sales increased 4.2 percent.
  • Gross margin was 0.3 percentage points higher than prior year due to increased volume, better price realization and lower material costs offset partially by unfavorable mix, new product ramp-up and operation reconfiguration costs to meet changing market demands.
  • Total selling and administrative expenses as a percent of net sales, including restructuring charges, improved 0.4 percentage points due to higher volume, network distribution realignment savings and lower restructuring charges partially offset by investment in growth initiatives, higher incentive-based compensation and a loss on the sale of a small non-core office furniture business. Included in 2013 were $0.3 million of restructuring and transition charges compared to $3.0 million in 2012.
  • The provision for income taxes for 2013 reflects an effective tax rate of 34.5 percent compared to 37.7 percent in 2012. The decrease is due to the research tax credit for 2012 being applied in fiscal 2013.

Cash flow from operations for the year was $165.0 million compared to $144.8 million in 2012.   Capital expenditures were $78.9 million in 2013 compared to $60.3 million in 2012.    

Full Year – Non-GAAP Financial Measures

(Reconciled with most comparable GAAP financial measures)

Dollars in millions

except per share data

Twelve Months Ended 12/28/2013


Twelve Months Ended 12/29/2012

Gross

Profit

 

SG&A

Operating

Income

Diluted

EPS


Gross

Profit

 

SG&A

Operating

Income

Diluted

EPS











As reported (GAAP)

$715.3

$609.3

$106.0

$1.39


$689.2

$601.6

$87.6

$1.07

  % of net sales

34.7%

29.6%

5.1%



34.4%

30.0%

4.4%












Restructuring and impairment

-

$(0.3)

$0.3

$0.01


$0.4

$(1.9)

$2.3

$0.03

Transition costs

-

-

-

-


$0.7

$(1.1)

$1.8

$0.03

Loss on sale

-

$(2.5)

$2.5

$0.03
















Results (non-GAAP)

$715.3

$606.5

$108.8

$1.43


$690.3

$598.6

$91.8

$1.13

  % of net sales

34.7%

29.4%

5.3%



34.4%

29.9%

4.6%


 

Office Furniture – GAAP Financial Measures






Dollars in millions

Three Months Ended

Percent
Change

Twelve Months Ended

Percent
Change

12/28/2013

12/29/2012

12/28/2013

12/29/2012








Sales

$417.0

$422.3

-1.3%

$1,685.2

$1,687.3

-0.1%

Operating profit

$25.8

$23.5

9.8%

$97.3

$91.8

6.0%

Operating profit %

6.2%

5.6%


5.8%

5.4%










Non-GAAP Financial Measures

(Reconciled with most comparable GAAP measures)






Dollars in millions

Three Months Ended

Percent
Change

Twelve Months Ended

Percent
Change

12/28/2013

12/29/2012

12/28/2013

12/29/2012








Operating profit

as reported (GAAP)

$25.8

$23.5

9.8%

$97.3

$91.8

6.0%

% of net sales

6.2%

5.6%


5.8%

5.4%









Restructuring and impairment

$0.1

$0.6


$0.3

$2.3


Transition costs

-

$0.5


-

$1.8


Loss on sale

-

-


$2.5

-









Operating profit (non-GAAP)

$25.9

$24.6

5.2%

$100.1

$96.0

4.3%

% of net sales

6.2%

5.8%


5.9%

5.7%


 

  • Fourth quarter sales for the office furniture segment were $417.0 million which was $5.4 million or 1.3 percent less than the same quarter last year. Compared to prior year quarter, divestitures reduced sales by $8.2 million. On an organic basis, sales increased 0.7 percent driven by growth in the supplies-driven channel partially offset by a decrease in the contract and international businesses. Federal government sales declined over 40 percent compared to the same quarter last year. Full year sales for the office furniture segment were $1.69 billion which was $2.1 million or 0.1 percent less than prior year. Compared to prior year, divestitures partially offset by the acquisition of BP Ergo, reduced sales by $27.5 million. On an organic basis, sales increased 1.5 percent driven mainly by growth in the supplies-driven channel. Full year sales to the federal government declined over 27 percent compared to the prior year.
  • Fourth quarter and full year operating profit increased $2.3 million and $5.5 million, respectively. Operating profit margin was positively impacted by increased price realization, network realignment savings and lower restructuring charges. These were partially offset by lower volume, new product ramp-up, operation reconfiguration to meet changing market demands and a loss on the sale of a small non-core office furniture business.

Hearth Products – GAAP Financial Measures








Dollars in millions

Three Months Ended

Percent
Change

Twelve Months Ended

Percent
Change

12/28/2013

12/29/2012

12/28/2013

12/29/2012








Sales

$124.3

$105.2

18.1%

$374.8

$316.7

18.3%

Operating profit

$23.0

$15.4

49.0%

$46.7

$26.5

76.2%

Operating profit %

18.5%

14.7%


12.5%

8.4%


 

  • Fourth quarter and full year sales for the hearth products segment increased $19.1 million and $58.1 million, respectively. These increases were driven by increases in both the new construction and the remodel/retrofit channels.
  • Fourth quarter and full year operating profit increased $7.6 million and $20.2 million, respectively. Operating profit was positively impacted by higher volume, better price realization and lower material costs partially offset by investments in growth initiatives and incentive-based compensation.

Outlook
"I remain positive about our markets and our ability to grow sales and increase profits in 2014.  We continue to aggressively invest for long-term profitable growth, and I remain confident our investments are delivering shareholder value.  Our businesses are strong, competitive, and well-positioned in their markets, and the prospects for our businesses are encouraging," said Mr. Askren.

The Corporation estimates sales growth between 1 and 5 percent in the first quarter over the same period in the prior year.  Non-GAAP earnings per diluted share are anticipated in the range of $0.07 to $0.12 for the first quarter.  For the full year, the Corporation is updating its estimate of non-GAAP earnings per diluted share to be in the range of $1.60 to $1.80, which excludes restructuring charges and transition costs.

The Corporation remains focused on delivering long-term shareholder value through its core strategic framework:  Member/Owner Culture, Rapid Continuous Improvement (RCI), Core Plus and Split-and-Focus with Leverage.

Conference Call
HNI Corporation will host a conference call on Wednesday, February 5, 2014 at 10:00 a.m. (Central) to discuss fourth quarter and year-end 2013 results.  To participate, call 1-877-512-9166 – conference ID number 36780244.  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 same website address.  An audio replay of the call will be available until Wednesday, February 12, 2014, 11:59 p.m. (Central) by dialing 1-855-859-2056 or 1-404-537-3406 – Conference ID number 36780244. 

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® , artcobellTM, Midwest Folding ProductsTM, ERGO®, Heatilator®, Heat & Glo®, Quadra-Fire® and Harman StoveTM 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.

* All content is copyrighted by Industry Intelligence, or the original respective author or source. You may not recirculate, redistrubte or publish the analysis and presentation included in the service without Industry Intelligence's prior written consent. Please review our terms of use.