HNI Corporation (NYSE: HNI) today announced sales for the
third quarter ended September 28, 2019 of $625.4 million and net
income of $46.1 million. GAAP net income per diluted share was
$1.07 compared to $0.89 in the prior year. Non-GAAP net income per
diluted share was $1.08 compared to $0.90 in the prior year. GAAP
to non-GAAP reconciliations follow the financial statements in this
release.
Third Quarter Summary Comments "Our teams delivered
strong profit growth during the third quarter. The demand
environment remains dynamic, and our organization continues to
adjust and drive value for shareholders," said Jeff Lorenger, HNI
Corporation President and Chief Executive Officer.
HNI Corporation - Financial
Performance
(Dollars in millions, except per
share data)
Three Months Ended
September 28,
September 29,
2019
2018
Change
GAAP
Net Sales
$625.4
$611.1
2.3%
Gross Profit %
38.0%
38.2%
-20 bps
SG&A %
28.3%
29.4%
-110 bps
Operating Income
$60.7
$53.6
13.1%
Operating Income %
9.7%
8.8%
90 bps
Effective Tax Rate
21.2%
21.9%
Net Income %
7.4%
6.5%
90 bps
EPS – diluted
$1.07
$0.89
20.2%
Non-GAAP
Gross Profit %
38.0%
38.2%
-20 bps
Operating Income
$61.1
$53.9
13.4%
Operating Income %
9.8%
8.8%
100 bps
EPS – diluted
$1.08
$0.90
20.0%
Third Quarter Summary Comments
- Consolidated net sales increased $14.3 million or 2.3 percent
from the prior year quarter to $625.4 million. On an organic basis,
sales increased 3.1 percent. The net impact of divesting small
office furniture companies decreased sales $4.5 million compared to
the prior year quarter. A reconciliation of organic sales, a
non-GAAP measure, follows the financial statements in this
release.
- Gross profit margin decreased 20 basis points compared to the
prior year quarter. This decrease was driven by lower volume and
higher input costs, partially offset by price realization and
productivity, net of investments.
- Selling and administrative expenses as a percent of sales
decreased 110 basis points compared to the prior year quarter. This
decrease was primarily due to higher net sales and lower core
SG&A spend.
- Non-GAAP net income per diluted share was $1.08 compared to
$0.90 in the prior year quarter. The $0.18 increase was due to
price realization and productivity, net of investments, partially
offset by lower sales volume and higher input costs.
Office Furniture – Financial
Performance
(Dollars in millions)
Three Months Ended
September 28,
September 29,
2019
2018
Change
GAAP
Net Sales
$484.8
$471.7
2.8%
Operating Profit
$51.2
$45.7
11.9%
Operating Profit %
10.6%
9.7%
90 bps
Non-GAAP
Operating Profit
$51.7
$45.7
13.0%
Operating Profit %
10.7%
9.7%
100 bps
- Office furniture net sales increased $13.1 million or 2.8
percent from the prior year quarter to $484.8 million. On an
organic basis, sales increased 3.8 percent primarily driven by
growth in the contract business. The net impact of divesting small
office furniture companies decreased sales $4.5 million compared to
the prior year quarter.
- Office furniture GAAP operating profit margin increased 90
basis points for the quarter. This increase was driven by improved
price realization and productivity, net of investments, partially
offset by lower sales volume, higher input costs, and higher
restructuring and transition costs.
Hearth Products – Financial
Performance
(Dollars in millions)
Three Months Ended
September 28,
September 29,
2019
2018
Change
GAAP
Net Sales
$140.6
$139.4
0.9%
Operating Profit
$23.8
$21.8
8.9%
Operating Profit %
16.9%
15.7%
120 bps
Non-GAAP
Operating Profit
$23.8
$22.1
7.5%
Operating Profit %
16.9%
15.9%
100 bps
- Hearth products net sales increased $1.2 million or 0.9 percent
from the prior year quarter to $140.6 million, driven by an
increase in the new construction business.
- Hearth products GAAP operating profit margin increased 120
basis points for the quarter. This increase was driven by price
realization and one-time restructuring and transition costs
incurred in the prior year quarter, partially offset by lower sales
volume and higher input costs.
Outlook The Corporation expects full year organic sales
to be up approximately 1 percent. This compares to the previous
organic sales growth expectation of up 1 to 4 percent. The change
is primarily driven by lower growth in the contract-driven office
furniture business. Including the impact of closing and divesting
small office furniture companies, full year sales are expected to
be flat to the prior year. The Corporation's estimate of full year
non-GAAP earnings per diluted share has narrowed and is expected to
be in the range of $2.50 to $2.60 versus the previous guidance
range of $2.50 to $2.70.
"We expect continued profit growth in the fourth quarter.
Recently, we have seen increasing macro-economic uncertainty slow
our growth in the contract business; however, we are confident in
our contract competitive position as we come off a strong third
quarter. Our outlook for the supplies-driven office furniture and
hearth products businesses remains relatively unchanged. We have
multiple opportunities in front of us to grow profits and increase
long-term shareholder value,” said Mr. Lorenger.
Conference Call HNI
Corporation will host a conference call on Thursday, October 24,
2019 at 10:00 a.m. (Central) to discuss third quarter fiscal year
2019 results. To participate, call 1-877-512-9166 – conference ID
number 4141358. 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 also be made
available at that website address. An audio replay of the call will
be available until Thursday, October 31, 2019, 10:59 p.m. (Central)
by dialing 1-855-859-2056 or 1-404-537-3406 – Conference ID number
4141358.
About HNI Corporation HNI
Corporation is an 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,
financial performance, expectations for 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: the levels of office
furniture needs and housing starts; overall demand for the
Corporation's products; general economic and market conditions in
the United States and internationally; industry and competitive
conditions; the consolidation and concentration of the
Corporation's customers; the Corporation's reliance on its network
of independent dealers; change in trade policy; changes in raw
material, component, or commodity pricing; market acceptance and
demand for the Corporation's new products; changing legal,
regulatory, environmental, and healthcare conditions; the risks
associated with international operations; the potential impact of
product defects; the various restrictions on the Corporation's
financing activities; an inability to protect the Corporation's
intellectual property; impacts of tax legislation; 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 assumes no
obligation to update, amend, or clarify forward-looking statements,
except as required by applicable law.
HNI Corporation and
Subsidiaries
Condensed Consolidated
Statements of Comprehensive Income
(In thousands, except per share
data)
(Unaudited)
Three Months Ended
Nine Months Ended
September 28,
2019
September 29,
2018
September 28,
2019
September 29,
2018
Net sales
$625,386
$611,120
$1,630,868
$1,659,803
Cost of sales
387,715
377,789
1,030,993
1,048,683
Gross profit
237,671
233,331
599,875
611,120
Selling and administrative expenses
176,731
179,577
511,080
524,445
Restructuring and impairment charges
284
128
1,214
2,303
Operating income
60,656
53,626
87,581
84,372
Interest expense, net
2,205
2,522
6,795
7,375
Income before income taxes
58,451
51,104
80,786
76,997
Income taxes
12,375
11,197
17,878
16,033
Net income
46,076
39,907
62,908
60,964
Less: Net loss attributable to
non-controlling interest
(2
)
0
(2
)
(50
)
Net income attributable to HNI
Corporation
$46,078
$39,907
$62,910
$61,014
Average number of common shares
outstanding – basic
42,899
43,823
43,217
43,616
Net income attributable to HNI Corporation
per common share – basic
$1.07
$0.91
$1.46
$1.40
Average number of common shares
outstanding – diluted
43,186
44,679
43,620
44,349
Net income attributable to HNI Corporation
per common share – diluted
$1.07
$0.89
$1.44
$1.38
Foreign currency translation
adjustments
($1,035
)
($817
)
($406
)
($1,944
)
Change in unrealized gains (losses) on
marketable securities, net of tax
36
(6
)
252
(99
)
Change in pension and post-retirement
liability, net of tax
—
—
(1,185
)
0
Change in derivative financial
instruments, net of tax
(477
)
106
(2,112
)
1,459
Other comprehensive income (loss), net of
tax
(1,476
)
(717
)
(3,451
)
(584
)
Comprehensive income
44,600
39,190
59,457
60,380
Less: Comprehensive loss attributable to
non-controlling interest
(2
)
0
(2
)
(50
)
Comprehensive income attributable to HNI
Corporation
$44,602
$39,190
$59,459
$60,430
HNI Corporation and
Subsidiaries
Condensed Consolidated Balance
Sheets
(In thousands)
(Unaudited)
September 28,
December 29,
2019
2018
Assets
Current Assets:
Cash and cash equivalents
$53,013
$76,819
Short-term investments
848
1,327
Receivables
271,960
255,207
Inventories
181,922
157,178
Prepaid expenses and other current
assets
36,824
41,352
Total Current Assets
544,567
531,883
Property, Plant, and Equipment:
Land and land improvements
29,306
28,377
Buildings
292,902
290,263
Machinery and equipment
574,130
565,884
Construction in progress
22,046
28,443
918,384
912,967
Less accumulated depreciation
538,303
528,034
Net Property, Plant, and Equipment
380,081
384,933
Right-of-use Operating / Finance
Leases
74,244
—
Goodwill and Other Intangible Assets
449,288
463,290
Deferred Income Taxes
286
1,569
Other Assets
22,010
20,169
Total Assets
$1,470,476
$1,401,844
Liabilities and Equity
Current Liabilities:
Accounts payable and accrued expenses
$435,103
$428,865
Current maturities of long-term debt
1,440
679
Current maturities of other long-term
obligations
1,876
4,764
Current lease obligations - Operating /
Finance
21,007
—
Total Current Liabilities
459,426
434,308
Long-Term Debt
239,418
249,355
Long-Term Lease Obligations - Operating /
Finance
61,143
—
Other Long-Term Liabilities
64,356
72,767
Deferred Income Taxes
85,788
82,155
Equity:
HNI Corporation shareholders' equity
560,022
562,933
Non-controlling interest
323
326
Total Equity
560,345
563,259
Total Liabilities and Equity
$1,470,476
$1,401,844
HNI Corporation and
Subsidiaries
Condensed Consolidated
Statements of Cash Flows
(In thousands)
(Unaudited)
Nine Months Ended
September 28,
September 29,
2019
2018
Net Cash Flows From (To) Operating
Activities:
Net income
$62,908
$60,964
Non-cash items included in net income:
Depreciation and amortization
57,838
55,887
Other post-retirement and post-employment
benefits
1,106
1,325
Stock-based compensation
5,408
6,215
Operating / finance lease interest and
amortization
17,252
—
Deferred income taxes
4,798
2,733
Loss on sale and retirement of long-lived
assets, net
1,609
1,283
Other – net
2,864
2,314
Net increase (decrease) in operating
assets and liabilities, net of divestitures
(28,359)
(16,533)
Increase (decrease) in other
liabilities
(9,802)
849
Net cash flows from (to) operating
activities
115,622
115,037
Net Cash Flows From (To) Investing
Activities:
Capital expenditures
(46,093)
(39,887)
Proceeds from sale of property, plant, and
equipment
247
22,686
Acquisition spending, net of cash
acquired
—
(2,850)
Capitalized software
(4,098)
(7,092)
Purchase of investments
(6,140)
(2,471)
Sales or maturities of investments
3,889
2,375
Other – net
2,327
1,135
Net cash flows from (to) investing
activities
(49,868)
(26,104)
Net Cash Flows From (To) Financing
Activities:
Payments of long-term debt
(125,039)
(352,795)
Proceeds from long-term debt
115,775
322,755
Dividends paid
(39,164)
(38,201)
Purchase of HNI Corporation common
stock
(65,106)
(16,043)
Proceeds from sales of HNI Corporation
common stock
22,338
15,896
Other – net
1,636
(155)
Net cash flows from (to) financing
activities
(89,560)
(68,543)
Net increase (decrease) in cash and cash
equivalents
(23,806)
20,390
Cash and cash equivalents at beginning of
period
76,819
23,348
Cash and cash equivalents at end of
period
$53,013
$43,738
HNI Corporation and
Subsidiaries
Reportable Segment
Data
(In thousands)
(Unaudited)
Three Months Ended
Nine Months Ended
September 28,
September 29,
September 28,
September 29,
2019
2018
2019
2018
Net Sales:
Office furniture
$484,755
$471,687
$1,247,778
$1,276,480
Hearth products
140,631
139,433
383,090
383,323
Total
$625,386
$611,120
$1,630,868
$1,659,803
Income Before Income Taxes:
Office furniture
$51,162
$45,721
$68,180
$64,898
Hearth products
23,772
21,824
54,743
55,250
General corporate
(14,278)
(13,919)
(35,342)
(35,776)
Operating Income
60,656
53,626
87,581
84,372
Interest expense, net
2,205
2,522
6,795
7,375
Total
$58,451
$51,104
$80,786
$76,997
Depreciation and Amortization Expense:
Office furniture
$11,232
$11,012
$33,540
$33,202
Hearth products
2,291
2,026
6,521
6,080
General corporate
5,863
5,569
17,777
16,605
Total
$19,386
$18,607
$57,838
$55,887
Capital Expenditures (including
capitalized software):
Office furniture
$6,524
$10,324
$29,190
$35,321
Hearth products
3,204
2,150
10,779
6,317
General corporate
2,856
2,181
10,222
5,341
Total
$12,584
$14,655
$50,191
$46,979
As of
As of
September 28,
December 29,
2019
2018
Identifiable Assets:
Office furniture
$872,501
$797,574
Hearth products
379,534
352,060
General corporate
218,441
252,210
Total
$1,470,476
$1,401,844
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. This
information gives investors additional insights into HNI’s
financial performance and operations. While HNI’s management
believes the non-GAAP financial measures are useful in evaluating
HNI’s operations, this information should be considered
supplemental and not 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, income taxes, net income, and net income per diluted share
(i.e., EPS). These measures are adjusted from the comparable GAAP
measures to exclude the impacts of the selected items as summarized
in the table below. Generally, non-GAAP EPS is calculated using
HNI’s overall effective tax rate for the period, as this rate is
reflective of the tax applicable to most non-GAAP adjustments.
The sales adjustments to arrive at our non-GAAP organic sales
information included in this earnings release excludes the impact
of divesting small office furniture companies. The transactions
excluded for purposes of our other non-GAAP financial information
included in this earnings release for both periods presented
include restructuring charges, impairment charges, and/or
transition costs. Restructuring charges incurred in the current
year period presented are primarily comprised of severance costs
related to a structural realignment in the office furniture
segment. Transition items incurred in connection with this
realignment include member relocation costs. In the prior year
period presented, costs were incurred as part of the previously
announced closures of the hearth manufacturing facility in Paris,
Kentucky, the office furniture manufacturing facility in Orleans,
Indiana, and structural realignments in China. Restructuring items
incurred include severance, while transition items incurred include
production move costs.
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 measure to investors on a prospective basis
for the same reasons we provide it 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
September 28, 2019
September 29, 2018
Office Furniture
Hearth
Total
Office Furniture
Hearth
Total
Sales as reported (GAAP)
$484.8
$140.6
$625.4
$471.7
$139.4
$611.1
% change from PY
2.8%
0.9%
2.3%
Less: Divestitures
—
—
—
4.5
—
4.5
Organic Sales (non-GAAP)
$484.8
$140.6
$625.4
$467.2
$139.4
$606.6
% change from PY
3.8%
0.9%
3.1%
HNI Corporation
Reconciliation
(Dollars in millions, except per
share data)
Three Months Ended
September 28, 2019
Gross
Operating
Net
Profit
Income
Tax
Income
EPS
As reported (GAAP)
$237.7
$60.7
$12.4
$46.1
$1.07
% of net sales
38.0%
9.7%
7.4%
Tax %
21.2%
Restructuring charges
—
0.3
0.1
0.2
0.01
Transition costs
—
0.2
0.0
0.2
0.00
Results (non-GAAP)
$237.7
$61.1
$12.5
$46.5
$1.08
% of net sales
38.0%
9.8%
7.4%
Tax %
21.2%
HNI Corporation
Reconciliation
(Dollars in millions, except per
share data)
Three Months Ended
September 29, 2018
Gross
Operating
Net
Profit
Income
Tax
Income
EPS
As reported (GAAP)
$233.3
$53.6
$11.2
$39.9
$0.89
% of net sales
38.2%
8.8%
6.5%
Tax %
21.9%
Restructuring charges
—
0.1
0.0
0.1
0.00
Transition costs
0.2
0.2
0.1
0.1
0.01
Results (non-GAAP)
$233.5
$53.9
$11.3
$40.1
$0.90
% of net sales
38.2%
8.8%
6.6%
Tax %
21.9%
Office Furniture
Reconciliation
(Dollars in millions)
Three Months Ended
September 28,
September 29,
Percent
2019
2018
Change
Operating profit as reported (GAAP)
$51.2
$45.7
11.9%
% of net sales
10.6%
9.7%
Restructuring charges
0.3
0.0
Transition costs
0.2
0.0
Operating profit (non-GAAP)
$51.7
$45.7
13.0%
% of net sales
10.7%
9.7%
Hearth Products
Reconciliation
(Dollars in millions)
Three Months Ended
September 28,
September 29,
Percent
2019
2018
Change
Operating profit as reported (GAAP)
$23.8
$21.8
8.9%
% of net sales
16.9%
15.7%
Restructuring charges
—
0.1
Transition costs
—
0.2
Operating profit (non-GAAP)
$23.8
$22.1
7.5%
% of net sales
16.9%
15.9%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191023005844/en/
Marshall H. Bridges, Senior Vice President and Chief Financial
Officer (563) 272-7400
Jack D. Herring, Treasurer, Director of Finance and Investor
Relations (563) 506-9783
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