HNI Corporation Reports Earnings For Third Quarter Fiscal Year 2016

Mittwoch, 19.10.2016 22:30 von

PR Newswire

MUSCATINE, Iowa, Oct. 19, 2016 /PRNewswire/ -- HNI Corporation (NYSE: HNI) today announced sales for the third quarter ended October 1, 2016 of $584.6 million and net income of $33.8 million. GAAP net income per diluted share decreased 18 percent from the prior year quarter to $0.74. Non-GAAP net income per diluted share decreased 14 percent from the prior year quarter to $0.80. GAAP to Non-GAAP reconciliations follow the financial statements in this release.

Summary Comments

"Our markets continue to be dynamic in an uncertain economic environment.   We are responding to these near-term challenges while maintaining focus on the long-term.  Subsequent to the end of the quarter we announced the closure of an office furniture manufacturing facility in Orleans, Indiana.  The closure will result in $6.7M of cash expenses and cash savings of $6.9M annually once completed.  This is another step toward our previously announced plan to drive $35 to $40 million of structural costs savings by 2018.  Our investments are generating strong financial returns and we continue to invest for long-term profitable growth," 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



10/1/2016

10/3/2015

Change

GAAP




Net Sales

$584.6

$615.9

(5.1%)

Gross Profit %

37.9%

37.6%

30 bps

SG&A %

29.0%

27.7%

130 bps

Restructuring charges %

0.1%

0.0%

10 bps

Operating Income

$51.7

$61.1

(15.4%)

Operating Income %

8.8%

9.9%

-110 bps

Net Income %

5.8%

6.6%

-80 bps

EPS – diluted

$0.74

$0.90

(17.8%)





Non-GAAP




Gross Profit %

38.3%

38.0%

30 bps

SG&A %

28.7%

27.7%

100 bps

Operating Income

$56.0

$63.4

(11.6%)

Operating Income %

9.6%

10.3%

-70 bps

EPS – diluted

$0.80

$0.93

(14.0%)

Third Quarter Summary Comments

  • Consolidated net sales decreased $31.2 million or 5.1 percent to $584.6 million. Acquisitions and divestitures of small office furniture companies increased sales $9.4 million compared to the prior year quarter. On an organic basis, sales decreased 6.6 percent.
  • Gross profit increased 30 basis points compared to prior year driven by price realization, material cost and productivity partially offset by lower volume.
  • Selling and administrative expenses increased as a percentage of sales due to lower volume and the impact of acquisitions partially offset by lower freight costs and expense timing.
  • The Corporation recorded $1.1 million of restructuring costs and $1.6 million of transition costs in the third quarter in connection with previously announced facility closures and structural realignments. $2.3 million of these charges were included in cost of sales. Specific items incurred include severance, accelerated depreciation and production move costs. The Corporation also recorded $1.6 million of accelerated depreciation in the third quarter in conjunction with the announced charitable donation of a building.

Office Furniture – Financial Performance

(Dollars in millions)


Three Months Ended



10/1/2016

10/3/2015

Change

GAAP




Net Sales

$454.9

$476.0

(4.4%)

Operating Profit

$44.7

$48.4

(7.6%)

Operating Profit %

9.8%

10.2%

-40 bps





Non-GAAP




Operating Profit

$46.1

$49.0

(6.1%)

Operating Profit %

10.1%

10.3%

-20 bps

  • Third quarter net sales decreased $21.0 million or 4.4 percent to $454.9 million. Sales for the quarter decreased in our North America contract and international businesses partially offset by an increase in our supplies-driven business. Acquisitions and divestitures of small office furniture companies increased sales $9.4 million compared to the prior year quarter. On an organic basis, sales decreased 6.4 percent.
  • Third quarter GAAP operating profit decreased 40 basis points due to lower volume partially offset by price realization, material costs and productivity and lower freight costs. Non-GAAP operating profit, which excludes structural realignments, declined 20 basis points.

Hearth Products – Financial Performance

(Dollars in millions)


Three Months Ended



10/1/2016

10/3/2015

Change

GAAP




Net Sales

$129.7

$139.9

(7.3%)

Operating Profit

$19.1

$23.5

(18.7%)

Operating Profit %

14.7%

16.8%

-210 bps





Non-GAAP




Operating Profit

$20.5

$25.1

(18.5%)

Operating Profit %

15.8%

17.9%

-210 bps

  • Third quarter net sales decreased $10.2 million or 7.3 percent to $129.7 million. Sales for the quarter decreased in the new construction and retail pellet businesses, partially offset by an increase in retail wood/gas sales.
  • Third quarter GAAP operating profit declined 210 basis points due to lower volume partially offset by price realization. Non-GAAP operating profit, which excludes the impact of a previously announced facility closure, declined 210 basis points.

Outlook

"I remain confident in our strategies for profitable growth and maintain a positive long-term outlook while we manage through near term economic uncertainty.  Our businesses are strong and well positioned to drive long-term shareholder value," said Mr. Askren.

The Corporation estimates sales to be down 1 to 4 percent in the fourth quarter over the same period in the prior year, including impacts of acquisitions and divestitures.  Non-GAAP earnings per diluted share are anticipated in the range of $2.60 to $2.70 for the full year.

The Corporation estimates Non-GAAP earnings per diluted share for the full year 2017 will be in the range of $2.75 to $3.15 with consolidated net sales down 2 percent to up 2 percent, including the impacts of acquisitions and divestitures.

Conference Call

HNI Corporation will host a conference call on Thursday, October 20, 2016 at 10:00 a.m. (Central) to discuss third quarter fiscal year 2016 results.  To participate, call 1-877-512-9166 – conference ID number 78965544. A live webcast of the call will be available on HNI Corporation's website at http://www.hnicorp.com (under Investors – News Releases & Events).  A replay of the webcast will be made available at this website address.  An audio replay of the call will be available until Thursday, October 27, 2016, 10:59 p.m. (Central) by dialing 1-855-859-2056 or 1-404-537-3406 – Conference ID number 78965544.

About HNI Corporation

HNI Corporation is a NYSE traded company (ticker symbol:  HNI) providing products and solutions for the home and workplace environments.  HNI is a leading global provider and designer of office furniture and the leading manufacturer and marketer of hearth products. We sell the broadest and deepest selection of quality office furniture solutions available to meet the needs of every customer through an extensive portfolio of well-known and trusted brands. Our hearth products are the strongest, most respected brands in the industry and include a full array of gas, electric, wood and biomass burning fireplaces, inserts, stoves, facings and accessories.  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). 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; the Corporation's ability to achieve the anticipated benefits from closures and structural alignment initiatives; 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:
Kurt A. Tjaden, Senior Vice President and Chief Financial Officer (563) 272-7400
Jack D. Herring, Manager, Investor Relations (563) 506-9783

 

HNI CORPORATION

Unaudited Condensed Consolidated Statement of Operations


 

(Dollars in thousands, except per share data)

Three Months Ended

Nine Months Ended

10/1/2016

10/3/2015

10/1/2016

10/3/2015

Net sales

$584,629

$615,850

$1,622,204

$1,707,553

Cost of products sold

363,075

384,219

1,006,019

1,085,298

Gross profit

221,554

231,631

616,185

622,255

Selling and administrative expenses

169,495

170,371

496,920

506,354

Restructuring

399

172

2,057

(12)

Operating income

51,660

61,088

117,208

115,913

Interest income

80

110

221

318

Interest expense

1,091

1,733

4,096

5,689

Income before income taxes

50,649

59,465

113,333

110,542

Income taxes

16,837

18,619

38,652

37,367

Net income

33,812

40,846

74,681

73,175

Less:  Net loss attributable to the noncontrolling interest

(1)

(2)

(4)

(30)

Net income attributable to HNI Corporation

$33,813

$40,848

$74,685

$73,205






Net income attributable to HNI Corporation common shareholders – basic

$0.76

$0.92

$1.68

$1.65

Average number of common shares outstanding – basic

44,547,375

44,263,027

44,412,310

44,327,608






Net income attributable to HNI Corporation common shareholders – diluted

$0.74

$0.90

$1.64

$1.61

Average number of common shares outstanding – diluted

45,844,566

45,402,537

45,488,067

45,516,521

 

Unaudited Condensed Consolidated Balance Sheet



As of


As of

(Dollars in thousands)

10/1/2016


1/2/2016

Assets




Current Assets




   Cash and cash equivalents

$27,335


$28,548

   Short-term investments

7,400


4,252

   Receivables

246,989


243,409

   Inventories

150,690


125,228

   Prepaid expenses and other current assets

32,615


36,933

     Total Current Assets

465,029


438,370

Property, Plant and Equipment




   Land and land improvements

30,077


28,801

   Buildings

306,483


298,516

   Machinery and equipment

535,968


515,131

   Construction in progress

40,027


31,986

     Gross Property, Plant, and Equipment

912,555


874,434

   Less accumulated depreciation

543,221


533,275

     Net Property, Plant, and Equipment

369,334


341,159

Goodwill

293,517


277,650

Deferred Income Taxes

1,606


Other Assets

231,572


206,746

     Total Assets

$1,361,058


$1,263,925





Liabilities and Equity




Current Liabilities




   Accounts payable and accrued expenses

$415,555


$424,405

   Current maturities of long-term debt

21,091


5,477

   Current maturities of other long-term obligations

4,777


6,018

     Total Current Liabilities

441,423


435,900

Long-term Debt

215,800


185,000

Other Long-term Liabilities

75,584


76,792

Deferred Income Taxes

103,910


88,934





Parent Company Shareholders' Equity

524,000


476,954

Noncontrolling Interest

341


345

     Total Shareholders' Equity

524,341


477,299

     Total Liabilities and Shareholders' Equity

$1,361,058


$1,263,925

 

Unaudited Condensed Consolidated Statement of Cash Flows



Nine Months Ended

(Dollars in thousands)

10/1/2016

10/3/2015

Net cash flows from (to) operating activities

$113,707

$58,402

Net cash flows from (to) investing activities

(114,722)

(80,901)

Net cash flows from (to) financing activities

(198)

12,971

Net increase (decrease) in cash and cash equivalents

(1,213)

(9,528)

Cash and cash equivalents at beginning of period

28,548

34,144

Cash and cash equivalents at end of period

$27,335

$24,616

 

Business Segment Data



Three Months Ended


Nine Months Ended

(Dollars in thousands)

10/1/2016

10/3/2015


10/1/2016

10/3/2015

Net sales:






Office furniture

$454,946

$475,960


$1,270,398

$1,334,013

Hearth products

129,683

139,890


351,806

373,540


$584,629

$615,850


$1,622,204

$1,707,553







Operating profit:






Office furniture

$44,729

$48,389


$109,396

$108,332

Hearth products

19,108

23,498


41,623

47,161

Total operating profit

63,837

71,887


151,019

155,493

Unallocated corporate expense

(13,188)

(12,422)


(37,686)

(44,951)

Income before income taxes

$50,649

$59,465


$113,333

$110,542







Depreciation and amortization expense:






Office furniture

$10,889

$10,644


$32,709

$31,284

Hearth products

3,034

2,166


9,012

6,171

General corporate

3,354

1,694


7,187

4,844


$17,277

$14,504


$48,908

$42,299







Capital expenditures (including capitalized software):






Office furniture

$13,875

$19,590


$43,923

$45,989

Hearth products

1,957

2,798


8,969

7,195

General corporate

10,811

9,303


29,607

28,389


$26,643

$31,691


$82,499

$81,573











As of

As of





10/1/2016

1/2/2016

Identifiable assets:






Office furniture




$797,458

$739,915

Hearth products




360,081

341,813

General corporate




203,519

182,197





$1,361,058

$1,263,925

Non-GAAP Financial Measures

This earnings release includes certain non-GAAP financial information as defined by Securities and Exchange Commission Regulation G. Pursuant to the requirements of this regulation, reconciliations of this non-GAAP financial information to HNI's financial statements as prepared in accordance with GAAP are included below and throughout this earnings release. HNI's management believes providing investors with this information gives additional insights into HNI's financial performance and operations. While HNI's management believes that the non-GAAP financial measures herein are useful in evaluating HNI's operations, this information should be considered supplemental and should not be considered in isolation or as a substitute for, or superior to, financial information prepared and presented in accordance with GAAP. In addition, these measures may be different from non-GAAP financial measures used by other companies, limiting their usefulness for comparison purposes.

To supplement our condensed consolidated financial statements, which are prepared and presented in accordance with GAAP, we use the following non-GAAP financial measures within this earnings release: organic sales, gross profit, operating income, operating profit, and net income per diluted share (i.e., EPS). These measures are adjusted from the comparable GAAP measures to exclude the after-tax impacts of the selected items as summarized in the table below. Non-GAAP EPS is calculated using HNI's overall effective tax rate for the period.

The sales adjustments to arrive at our non-GAAP organic sales information included in this earnings release include the impacts of acquisitions and divestitures.  The transactions excluded for purposes of our other non-GAAP financial information included in this earnings release include restructuring and transition costs and the accelerated depreciation in conjunction with the announced donation of a building. The restructuring and transition costs are costs incurred as part of the previously announced closure of the hearth manufacturing facility in Paris, Kentucky and structural realignments between office furniture facilities in Muscatine, Iowa. Specific items incurred include severance, accelerated depreciation and production move costs.

This earnings release also contains a forward-looking estimate of non-GAAP earnings per diluted share for the fiscal year. 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 without unreasonable efforts because certain information needed to make a reasonable forward-looking estimate of GAAP earnings per diluted share is highly variable and difficult to predict and estimate, and is dependent on future events which are 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 nonrecurring items not reflective of ongoing operations. We expect the variability of these charges to have a potentially unpredictable, and potentially significant, impact on our GAAP earnings per diluted share.

HNI Corporation Reconciliation

(Dollars in millions)


Three Months Ended 10/1/2016


Three Months Ended 10/3/2015


Office Furniture


Hearth


Total


Office Furniture


Hearth


Total

Sales as reported

$454.9


$129.7


$584.6


$476.0


$139.9


$615.9

% change from PY

(4.4%)


(7.3%)


(5.1%)



















Less: Impact of Acquisitions and Divestitures

13.8




13.8


4.4



4.4













Organic Sales

$441.1


$129.7


$570.8


$471.5


$139.9


$611.4

% change from PY

(6.4%)


(7.3%)


(6.6%)





















 

HNI Corporation Reconciliation

(Dollars in millions, except per share data)


Three Months Ended 10/1/2016


Gross Profit


Operating Income


Tax


Net Income


EPS

As reported (GAAP)

$221.6


$51.7


$16.8


$33.8


$0.74

% of net sales

37.9%


8.8%




5.8%



Tax %





33.2%















Restructuring charges

$0.7


$1.1


$0.4


$0.8


$0.02

Charitable donation of building

$0.0


$1.6


$0.5


$1.1


$0.02

Transition costs

$1.6


$1.6


$0.5


$1.1


$0.02











Results (non-GAAP)

$223.9


$56.0


$18.3


$36.7


$0.80

% of net sales

38.3%


9.6%




6.3%



Tax %





33.2%





 

HNI Corporation Reconciliation

(Dollars in millions, except per share data)


Three Months Ended 10/3/2015


Gross Profit


Operating Income


Tax


Net Income


EPS

As reported (GAAP)

$231.6


$61.1


$18.6


$40.8


$0.90

% of net sales

37.6%


9.9%




6.6%



Tax %





31.3%















Restructuring charges

$0.8


$1.0


$0.3


$0.7


$0.01

Transition costs

$1.3


$1.3


$0.4


$0.9


$0.02











Results (non-GAAP)

$233.7


$63.4


$19.3


$42.4


$0.93

% of net sales

38.0%


10.3%




6.9%



Tax %





31.3%





 

Office Furniture Reconciliation

(Dollars in millions)


Three Months Ended


Percent

Change


10/1/2016


10/3/2015


Operating profit as reported (GAAP)

$44.7


$48.4


(7.6%)

% of net sales

9.8%


10.2%









Restructuring charges

$0.1


$0.0



Transition costs

$1.2


$0.6









Operating profit (non-GAAP)

$46.1


$49.0


(6.1%)

% of net sales

10.1%


10.3%




Hearth Reconciliation

(Dollars in millions)


Three Months Ended


Percent

Change


10/1/2016


10/3/2015


Operating profit as reported (GAAP)

$19.1


$23.5


(18.7%)

% of net sales

14.7%


16.8%









Restructuring charges

$1.0


$0.9



Transition costs

$0.4


$0.7









Operating profit (non-GAAP)

$20.5


$25.1


(18.5%)

% of net sales

15.8%


17.9%



 

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SOURCE HNI Corporation