EX-99.1 2 r8kexh991q2010.htm PRESS RELEASE r8kexh991q2010.htm
EXHIBIT 99.1
 
                                 News Release
 

 
For Information Contact:
Kelly McGriff, Treasurer and Vice President, Investor Relations (563) 272-7967
Kurt A. Tjaden, Vice President and Chief Financial Officer (563) 272-7400
 

HNI CORPORATION ANNOUNCES RESULTS FOR
FIRST QUARTER FISCAL 2010
 
 
MUSCATINE, Iowa (April 21, 2010) – HNI Corporation (NYSE:  HNI) today announced sales of $363.5 million and a loss from continuing operations of ($4.1) million for the first quarter ending April 3, 2010.  Net loss per diluted share from continuing operations for the quarter was ($0.09) or ($0.06) on a non-GAAP basis when excluding restructuring and impairment charges, transition costs and non-operating gains.

First Quarter Summary Comments
"Demand in our core segments stabilized during the first quarter.  We continued to improve our network distribution model, reduced day-to-day costs across our business and realized the benefit of our structural cost reset in 2009.  Our cost improvement actions, combined with past investments in our selling models and long-term growth initiatives allowed us to deliver improved results versus prior year and exceed first quarter expectations," said Stan Askren, HNI Corporation Chairman, President and Chief Executive Officer.











First Quarter
           
Dollars in millions
except per share data
 
Three Months Ended
       
 
4/03/2010
   
4/04/2009
   
Percent Change
 
                   
Net sales
  $ 363.5     $ 396.8       -8.4 %
Gross margin
  $ 119.2     $ 122.6       -2.8 %
Gross margin %
    32.8 %     30.9 %        
SG&A
  $ 124.6     $ 139.0       -10.4 %
SG&A %
    34.3 %     35.0 %        
Operating income (loss)
  $ (5.5 )   $ (16.4 )     66.7 %
Operating income (loss) %
    -1.5 %     -4.1 %        
Income (loss) from continuing operations
  $ (4.1 )   $ (11.7 )     64.6 %
                         
Earnings per share from continuing operations attributable to Parent Company - diluted
  $ (0.09 )   $ (0.26 )     65.4 %


First Quarter Results – Continuing Operations
·  
Consolidated net sales decreased $33.3 million or 8.4 percent to $363.5 million.
·  
Gross margins were 1.9 percentage points higher than prior year primarily due to lower material costs and cost reduction initiatives partially offset by lower volume and price realization and higher restructuring and transition costs.
·  
Total selling and administrative expenses, including restructuring charges, decreased $14.4 million or 10.4% due to cost control initiatives, lower volume related costs, improved distribution efficiencies and lower restructuring and transition costs.
·  
The Corporation's first quarter results included $2.8 million of restructuring and transition costs of which $1.5 million were included in cost of sales.  These included $2.6 million associated with shutdown and consolidation of production of office furniture manufacturing locations net of a non-operating gain and $0.2 million related to restructuring of hearth operations.  Included in 2009 were $5.1 million of restructuring charges.
·  
The Corporation estimates additional charges related to various restructuring initiatives will impact pre-tax earnings by $5.9 million over the remainder of 2010.












First Quarter – Non-GAAP Financial Measures – Continuing Operations
(Reconciled with most comparable GAAP financial measures)
 
Dollars in millions
except per share data
 
Three Months Ended
   
Three Months Ended
 
       
4/03/2010
               
4/04/2009
       
   
Gross
Profit
   
Operating
(Loss)
   
EPS
   
Gross
Profit
   
Operating
(Loss)
   
EPS
 
As reported (GAAP)
  $ 119.2     $ (5.5 )   $ (0.09 )   $ 122.7     $ (16.4 )   $ (0.26 )
 % of net sales
    32.8 %     -1.5 %             30.9 %     -4.1 %        
                                                 
Restructuring and impairment
  $ 0.6     $ 2.4     $ 0.03       -     $ 5.1     $ 0.07  
Transition costs
  $ 0.9     $ 0.9     $ 0.01       -       -       -  
Non-operating gain
    -     $ (0.5 )   $ (0.01 )     -       -       -  
                                                 
Results (non-GAAP)
  $ 120.7     $ (2.7 )   $ (0.06 )   $ 122.7     $ (11.3 )   $ (0.19 )
 % of net sales
    33.2 %     -0.7 %             30.9 %     -2.8 %        

Cash flow from operations for the quarter was ($25.4) million compared to $5.6 million last year.  Operating cash flow results in 2009 were positively impacted by reductions in accounts receivable due to decreased revenue.  Capital expenditures were $4.8 million in 2010 compared to $4.6 million in 2009.

Discontinued Operations
The Corporation made a decision to sell a small, non-core business of the office furniture segment.  During the first quarter a pre-tax charge of $1.0 million was recorded to reduce the assets held for sale to fair market value.  In addition the Corporation sold a small, non-core component of the hearth products segment during the first quarter.  A pre-tax charge of $0.4 million was recorded at the time of sale.  Revenues and expenses associated with these business operations are presented as discontinued operations for all periods presented in the financial statements.



 
 

 

Office Furniture
 
 
Dollars in millions
 
Three Months Ended
   
Percent Change
 
 
4/03/2010
   
4/04/2009
 
Sales
  $ 300.0     $ 330.8       -9.3 %
Operating profit
  $ 6.2     $ 0.7       842.2 %
Operating profit %
    2.1 %     0.2 %        


First Quarter – Non-GAAP Financial Measures
(Reconciled with most comparable GAAP financial measures)
 
   
Three Months Ended
   
Percent
 
Dollars in millions
 
4/03/2010
   
4/04/2009
   
Change
 
                   
Operating profit as reported (GAAP)
  $ 6.2     $ 0.7       842.2 %
% of Net Sales
    2.1 %     0.2 %        
                         
Restructuring and impairment
  $ 1.7     $ 3.0          
Transition costs
  $ 1.4       -          
Non-operating gain
  $ (0.5 )                
                         
Operating profit (non-GAAP)
  $ 8.8     $ 3.7       141.6 %
% of Net Sales
    2.9 %     1.1 %        

·  
First quarter sales for the office furniture segment decreased to $300.0 million.  The decrease was across all channels of the Corporation's office furniture segment.
·  
First quarter operating profit increased $5.6 million.  Operating profit was positively impacted by lower material costs, improved distribution efficiencies, cost reduction initiatives and a non-operating gain.  These were partially offset by lower volume and price realization.






Hearth Products
 
 
Dollars in millions
 
Three Months Ended
   
Percent Change
 
 
4/03/2010
   
4/04/2009
 
Sales
  $ 63.5     $ 66.0       -3.9 %
Operating profit (Loss)
  $ (2.9 )   $ (11.3 )     74.4 %
Operating profit %
    -4.6 %     -17.2 %        
 

 
First Quarter – Non-GAAP Financial Measures
(Reconciled with most comparable GAAP financial measures)
 
   
Three Months Ended
   
Percent
 
Dollars in millions
 
4/03/2010
   
4/04/2009
   
Change
 
                   
Operating profit as reported (GAAP)
  $ (2.9 )   $ (11.3 )     74.4 %
% of Net Sales
    -4.6 %     -17.2 %        
                         
Restructuring and impairment
  $ 0.1     $ 2.1          
Transition costs
  $ 0.1       -          
                         
Operating profit (non-GAAP)
  $ (2.7 )   $ (9.2 )     70.8 %
% of net sales
    -4.3 %     -14.0 %        
 

·  
First quarter sales for the hearth products segment decreased $2.6 million driven by a decline in the remodel-retrofit channel partially offset by an increase in the new construction channel.
·  
First quarter operating profit increased $8.4 million.  Operating profit was positively impacted by cost reduction initiatives and lower material and restructuring costs partially offset by lower volume and price realization.

Outlook

"We are encouraged by the recent trends in both the hearth and office furniture markets.  We will continue to strengthen our businesses by investing in selling and growth initiatives, improving operations, resetting cost structure and fiercely managing cash.  I am excited and optimistic about the future.  The company is financially strong and well positioned to benefit disproportionately as the markets improve," said Mr. Askren.

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 Thursday, April 22, 2010 at 10:00 a.m. (Central) to discuss first quarter results.  To participate, call the conference call line at 1-800-398-9389.  A replay of the conference call will be available until Thursday, April 29, 11:59 p.m. (Central).  To access this replay, dial 1-800-475-6701 – Access Code:  153086.  A link to the simultaneous web cast can be found on the Corporation's website at www.hnicorp.com.


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, the Corporation has 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 (loss), operating profit (loss) and net income (loss) per diluted share from continuing operations (i.e., EPS), excluding restructuring and impairment charges, transition costs and non-operating gains.  These measures are presented because management uses this information to monitor and evaluate financial results and trends.  Management believes this information is also useful for investors.


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® , Heatilator®, Heat & Glo, Quadra-Fire® and Harman Stovehave 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.

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.  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.

 
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HNI CORPORATION
Unaudited Condensed Consolidated Statement of Operations
   
Three Months Ended
 
(Dollars in thousands, except per share data)
 
Apr. 3, 2010
   
Apr. 4, 2009
 
Net Sales
  $ 363,506     $ 396,829  
Cost of products sold
    244,326       274,183  
Gross profit
    119,180       122,646  
Selling and administrative expenses
    122,800       133,938  
Restructuring and impairment charges
    1,834       5,085  
Operating income (loss)
    (5,454 )     (16,377 )
Interest income
    88       135  
Interest expense
    2,723       3,198  
Income (loss) from continuing operations before income taxes
    (8,089 )     (19,440 )
Income taxes
    (3,947 )     (7,742 )
Income (loss) from continuing operations, less applicable income taxes
    (4,142 )     (11,698 )
Discontinued operations, less applicable income taxes
    (1,711 )     (161 )
Net income (loss)
    (5,853 )     (11,859 )
Less:  Net income attributable to the noncontrolling interest
    133       27  
Net income (loss) attributable to Parent Company
  $ (5,986 )   $ (11,886 )
Income (loss) from continuing operations attributable to Parent Company per common share-basic
  $ (0.09 )   $ (0.26 )
Discontinued operations attributable to Parent Company per common share-basic
  $ (0.04 )   $ (0.01 )
Net income (loss) attributable to Parent Company common shareholders – basic
  $ (0.13 )   $ (0.27 )
Average number of common shares outstanding – basic
    45,166,450       44,612,079  
Income (loss) from continuing operations attributable to Parent Company per common share-diluted
  $ (0.09 )   $ (0.26 )
Discontinued operations attributable to Parent Company per common share-diluted
  $ (0.04 )   $ (0.01 )
Net income (loss) attributable to Parent Company common shareholders – diluted
  $ (0.13 )   $ (0.27 )
Average number of common shares outstanding - diluted
    45,166,450       44,612,079  

 
Unaudited Condensed Consolidated Balance Sheet
 
 
 
Assets
 
As of
 
Liabilities and Shareholders' Equity
 
As of
 
 
(Dollars in thousands)
 
Apr. 3,
2010
   
Jan. 2,
2010
     
Apr.3,
2010
   
Jan. 2,
2010
 
Cash and cash equivalents
  $ 43,041     $ 87,374  
Accounts payable and
           
Short-term investments
    7,972       5,994  
   accrued expenses
  $ 255,614     $ 299,718  
Receivables
    157,467       163,732  
Note payable and current
               
Inventories
    64,925       65,144  
   maturities of long-term debt
    50,009       39  
Deferred income taxes
    18,508       20,299  
Current maturities of other
               
Prepaid expenses and
               
   long-term obligations
    321       385  
   other current assets
    23,040       17,728                    
      Current assets
    314,953       360,271  
      Current liabilities
    305,944       300,142  
                                   
                 
Long-term debt
    150,000       200,000  
                 
Other long-term liabilities
    48,607       50,332  
Property and equipment – net
    250,890       260,102  
Deferred income taxes
    22,521       24,227  
Goodwill
    260,628       261,114                    
Other assets
    109,224       112,839  
Parent Company shareholders' equity
    408,148        419,284   
                 
Noncontrolling interest
    475       341  
                 
Shareholders' equity
    408,623       419,625  
Total assets
  $ 935,695     $ 994,326  
 Total liabilities and shareholders' equity
  $ 935,695     $ 994,326  
 
 
 

 
 
Unaudited Condensed Consolidated Statement of Cash Flows
 
   
Three Months Ended
 
(Dollars in thousands)
 
Apr. 3, 2010
   
Apr. 4, 2009
 
Net cash flows from (to) operating activities
  $ (25,402 )   $ 5,629  
Net cash flows from (to) investing activities:
               
   Capital expenditures
    (4,799 )     (4,616 )
   Acquisition spending
    -       -  
   Other
    25       3,564  
Net cash flows from (to) financing activities
    (14,157 )     (21,985 )
Net increase (decrease) in cash and cash equivalents
    (44,333 )     (17,408 )
Cash and cash equivalents at beginning of period
    87,374       39,538  
Cash and cash equivalents at end of period
  $ 43,041     $ 22,130  

 
 
Business Segment Data
   
Three Months Ended
 
(Dollars in thousands)
 
Apr. 3, 2010
   
Apr. 4, 2009
 
Net sales:
           
  Office furniture
  $ 300,032     $ 330,800  
  Hearth products
    63,474       66,029  
    $ 363,506     $ 396,829  
                 
Operating profit (loss):
               
  Office furniture
               
    Operations before restructuring and impairment charges
  $ 7,980     $ 3,652  
    Restructuring and impairment charges
    (1,733 )     (2,989 )
       Office furniture – net
    6,247       663  
  Hearth products
               
    Operations before restructuring and impairment charges
    (2,805 )     (9,237 )
    Restructuring and impairment charges
    (101 )     (2,096 )
       Hearth products - net
    (2,906 )     (11,333 )
  Total operating profit
    3,341       (10,671 )
       Unallocated corporate expense
    (11,430 )     (8,770 )
  Income before income taxes
  $ (8,089 )   $ (19,441 )
                 
Depreciation and amortization expense:
               
  Office furniture
  $ 11,641     $ 13,165  
  Hearth products
    3,779       5,014  
  General corporate
    640       1,061  
    $ 16,060     $ 19,240  
                 
Capital expenditures – net:
               
  Office furniture
  $ 3,561     $ 2,910  
  Hearth products
    442       1,469  
  General corporate
    796       237  
    $ 4,799     $ 4,616  
                 
   
As of
Apr. 3, 2010
   
As of
Apr. 4, 2009
 
Identifiable assets:
               
  Office furniture
  $ 565,226     $ 659,776  
  Hearth products
    284,881       321,115  
  General corporate
    85,588       97,043  
    $ 935,695     $ 1,077,934  

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