Iowa
|
1-14225
|
42-0617510
|
(State or Other Jurisdiction
of Incorporation)
|
(Commission File Number)
|
(IRS Employer
Identification No.)
|
o
|
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
|
o
|
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
|
Section 2 — Financial Information
|
Item 2.02
|
Results of Operations and Financial Condition.
|
99.1
|
Text of press release dated July 16, 2014.
|
HNI CORPORATION
|
||||
Date:
|
July 16, 2014
|
By
|
/s/ Kurt A. Tjaden
|
|
Kurt A. Tjaden
Vice President and Chief Financial Officer
|
|
99.1
|
Text of press release dated July 16, 2014.
|
Second Quarter – GAAP Financial Measures
|
||||||||||||
Dollars in millions
except per share data
|
Three Months Ended
|
|||||||||||
6/28/2014
|
6/29/2013
|
Percent Change
|
||||||||||
Net sales
|
$ | 509.1 | $ | 510.7 | -0.3 | % | ||||||
Gross profit
|
$ | 181.1 | $ | 174.7 | 3.7 | % | ||||||
Gross profit %
|
35.6 | % | 34.2 | % | ||||||||
SG&A (including restructuring and impairment)
|
$ | 165.6 | $ | 152.0 | 8.9 | % | ||||||
SG&A %
|
32.5 | % | 29.8 | % | ||||||||
(Gain) loss on sale of assets
|
$ | (1.3 | ) | $ | 2.5 | |||||||
Operating income
|
$ | 16.9 | $ | 20.2 | -16.1 | % | ||||||
Operating income %
|
3.3 | % | 3.9 | % | ||||||||
Net income attributable to HNI Corporation
|
$ | 9.7 | $ | 11.4 | -15.0 | % | ||||||
Earnings per share attributable to HNI Corporation – diluted
|
$ | 0.21 | $ | 0.25 | -16.0 | % |
·
|
Consolidated net sales decreased $1.6 million or 0.3 percent to $509.1 million. Compared to prior year quarter, divestitures reduced sales $8.1 million. On an organic basis sales increased 1.3 percent.
|
·
|
Gross margin was 1.4 percentage points higher than prior year primarily due to increased price realization, strong operational performance and higher hearth volume partially offset by lower volume and increased restructuring and transition charges in the office furniture segment.
|
·
|
Total selling and administrative expenses as a percent of net sales, including restructuring and impairment charges, increased 2.7 percentage points due mainly to restructuring and impairment charges and increased incentive-based compensation.
|
·
|
During the second quarter, as part of continuing efforts to reduce structural costs, the Corporation made the decision to close an office furniture facility in Florence, Alabama and consolidate production into existing manufacturing facilities. The Corporation also notified its members and the union representing the bargaining unit at its office furniture facility located in Chicago, Illinois of its tentative decision, pending negotiations and consultation with the union, to close the facility and consolidate production into an existing facility. In connection with these decisions the Corporation recorded $4.8 million of restructuring and transition costs of which $3.4 million were included in cost of sales. The Corporation estimates the realignments will save $8.1 million annually beginning in 2015. The tentative decision to close the Chicago facility, along with market factors, was identified as a triggering event for purposes of goodwill impairment testing. The Corporation recognized pre-tax goodwill impairment expense of $8.9 million during the second quarter.
|
·
|
The Corporation’s second quarter results included a $1.3 million gain on the sale of California air emission credits. Second quarter 2013 included a $2.5 million loss on the sale of a small non-core office furniture business.
|
Dollars in millions
Except per share data
|
Three Months Ended 6/28/2014
|
Three Months Ended 6/29/2013
|
||||||||||||||||||||||
Gross
Profit
|
Operating
Income
|
EPS
|
Gross
Profit
|
Operating
Income
|
EPS
|
|||||||||||||||||||
As reported (GAAP)
|
$ | 181.1 | $ | 16.9 | $ | 0.21 | $ | 174.7 | $ | 20.2 | $ | 0.25 | ||||||||||||
% of net sales
|
35.6 | % | 3.3 | % | 34.2 | % | 3.9 | % | ||||||||||||||||
Restructuring and Impairment
|
$ | 2.6 | $ | 12.9 | $ | 0.18 | - | $ | (0.0 | ) | $ | (0.00 | ) | |||||||||||
Transition costs
|
$ | 0.8 | $ | 0.8 | $ | 0.01 | - | - | - | |||||||||||||||
(Gain) loss on sale
|
- | $ | (1.3 | ) | $ | (0.02 | ) | - | $ | 2.5 | $ | 0.03 | ||||||||||||
Results (non-GAAP)
|
$ | 184.6 | $ | 29.3 | $ | 0.39 | $ | 174.7 | $ | 22.6 | $ | 0.28 | ||||||||||||
% of net sales
|
36.3 | % | 5.8 | % | 34.2 | % | 4.4 | % |
Office Furniture – GAAP Financial Measures
|
||||||||||||
Dollars in millions
|
Three Months Ended
|
Percent Change
|
||||||||||
6/28/2014
|
6/29/2013
|
|||||||||||
Sales
|
$ | 423.4 | $ | 436.2 | -2.9 | % | ||||||
Operating profit
|
$ | 18.2 | $ | 22.1 | -17.6 | % | ||||||
Operating profit %
|
4.3 | % | 5.1 | % |
Second Quarter – Non-GAAP Financial Measures
(Reconciled with most comparable GAAP financial measures)
|
||||||||||||
Three Months Ended
|
||||||||||||
Dollars in millions
|
6/28/2014
|
6/29/2013
|
Percent Change
|
|||||||||
Operating profit as reported (GAAP)
|
$ | 18.2 | $ | 22.1 | -17.6 | % | ||||||
% of Net Sales
|
4.3 | % | 5.1 | % | ||||||||
Restructuring and impairment
|
$ | 12.9 | $ | (0.0 | ) | |||||||
Transition Costs
|
$ | 0.8 | - | |||||||||
Loss on sale
|
- | $ | 2.4 | |||||||||
Operating profit (non-GAAP)
|
$ | 32.0 | $ | 24.6 | 30.2 | % | ||||||
% of Net Sales
|
7.6 | % | 5.6 | % |
·
|
Second quarter sales for the office furniture segment decreased $12.7 million or 2.9 percent to $423.4 million. Compared to prior year quarter, divestitures reduced sales by $8.1 million. On an organic basis, sales decreased 1.1 percent driven by a decrease in the contract channel partially offset by an increase in the supplies-driven channel.
|
·
|
Second quarter operating profit decreased $3.9 million. Operating profit was negatively impacted by lower volume, unfavorable mix and restructuring, transition and impairment charges. These were partially offset by increased price realization, strong operational performance and the loss on sale of a small non-core business in the prior year quarter.
|
·
|
Second quarter operating profit excluding restructuring, transition and impairment costs and loss on sale of business in the prior year increased $7.4 million or 30.2 percent.
|
Hearth Products
|
||||||||||||
Dollars in millions
|
Three Months Ended
|
Percent Change
|
||||||||||
6/28/2014
|
6/29/2013
|
|||||||||||
Sales
|
$ | 85.7 | $ | 74.5 | 15.0 | % | ||||||
Operating profit
|
$ | 8.5 | $ | 5.7 | 48.8 | % | ||||||
Operating profit %
|
9.9 | % | 7.6 | % |
·
|
Second quarter sales for the hearth products segment increased $11.2 million or 15.0 percent to $85.7 million driven by increases in both the new construction channel and the remodel/retrofit channel.
|
·
|
Second quarter operating profit increased $2.8 million. Operating profit was positively impacted by increased volume and higher price realization partially offset by increased warranty expense and higher incentive-based compensation.
|
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
(Dollars in thousands, except per share data)
|
Jun. 28, 2014
|
Jun. 29, 2013
|
Jun. 28, 2014
|
Jun. 29, 2013
|
||||||||||||
Net Sales
|
$ | 509,143 | $ | 510,698 | $ | 961,344 | $ | 952,995 | ||||||||
Cost of products sold
|
328,010 | 336,040 | 625,039 | 630,555 | ||||||||||||
Gross profit
|
181,133 | 174,658 | 336,305 | 322,440 | ||||||||||||
Selling and administrative expenses
|
155,288 | 152,078 | 300,498 | 296,634 | ||||||||||||
(Gain) loss on sale of assets
|
(1,346 | ) | 2,460 | (9,746 | ) | 2,460 | ||||||||||
Restructuring and impairment charges
|
10,282 | (35 | ) | 10,254 | 121 | |||||||||||
Operating income
|
16,909 | 20,155 | 35,299 | 23,225 | ||||||||||||
Interest income
|
146 | 158 | 216 | 310 | ||||||||||||
Interest expense
|
2,187 | 2,725 | 4,389 | 5,393 | ||||||||||||
Income before income taxes
|
14,868 | 17,588 | 31,126 | 18,142 | ||||||||||||
Income taxes
|
5,203 | 6,189 | 10,445 | 5,564 | ||||||||||||
Net income
|
9,665 | 11,399 | 20,681 | 12,578 | ||||||||||||
Less: Net income (loss) attributable to the noncontrolling interest
|
(40 | ) | (22 | ) | (120 | ) | (251 | ) | ||||||||
Net income attributable to HNI Corporation
|
$ | 9,705 | $ | 11,421 | $ | 20,801 | $ | 12,829 | ||||||||
Net income attributable to HNI Corporation common shareholders – basic
|
$ | 0.22 | $ | 0.25 | $ | 0.46 | $ | 0.28 | ||||||||
Average number of common shares outstanding – basic
|
45,019,783 | 45,412,668 | 45,029,148 | 45,283,716 | ||||||||||||
Net income attributable to HNI Corporation common shareholders – diluted
|
$ | 0.21 | $ | 0.25 | $ | 0.45 | $ | 0.28 | ||||||||
Average number of common shares outstanding – diluted
|
45,867,927 | 46,109,563 | 45,843,118 | 45,891,246 |
Assets
|
Liabilities and Shareholders’ Equity
|
||||||||||||||||
As of
|
As of
|
||||||||||||||||
(Dollars in thousands)
|
Jun. 28,
2014
|
Dec. 28,
2013
|
Jun. 28,
2014
|
Dec. 28,
2013
|
|||||||||||||
Cash and cash equivalents
|
$ | 29,278 | $ | 65,030 |
Accounts payable and
|
||||||||||||
Short-term investments
|
2,852 | 7,251 |
accrued expenses
|
$ | 396,203 | $ | 407,799 | ||||||||||
Receivables
|
238,076 | 228,715 |
Note payable and current
|
||||||||||||||
Inventories
|
128,377 | 89,516 |
maturities of long-term debt
|
35,702 | 484 | ||||||||||||
Deferred income taxes
|
14,855 | 16,051 |
Current maturities of other
|
||||||||||||||
Prepaid expenses and
|
long-term obligations
|
3,089 | 3,301 | ||||||||||||||
other current assets
|
26,037 | 26,665 | |||||||||||||||
Current assets
|
439,475 | 433,228 |
Current liabilities
|
434,994 | 411,584 | ||||||||||||
Long-term debt
|
150,064 | 150,091 | |||||||||||||||
Capital lease obligations
|
46 | 106 | |||||||||||||||
Other long-term liabilities
|
68,804 | 67,543 | |||||||||||||||
Property and equipment – net
|
278,439 | 267,401 |
Deferred income taxes
|
69,366 | 68,964 | ||||||||||||
Goodwill
|
278,125 | 286,655 | |||||||||||||||
Other assets
|
164,233 | 147,421 |
Parent Company shareholders’
|
||||||||||||||
equity
|
437,028 | 436,328 | |||||||||||||||
Noncontrolling interest
|
(30 | ) | 89 | ||||||||||||||
Shareholders’ equity
|
436,998 | 436,417 | |||||||||||||||
Total liabilities and
|
|||||||||||||||||
Total assets
|
$ | 1,160,272 | $ | 1,134,705 |
shareholders’ equity
|
$ | 1,160,272 | $ | 1,134,705 |
Six Months Ended
|
||||||||
(Dollars in thousands)
|
Jun. 28, 2014
|
Jun. 29, 2013
|
||||||
Net cash flows from (to) operating activities
|
$ | (6,992 | ) | $ | (18,229 | ) | ||
Net cash flows from (to) investing activities:
|
||||||||
Capital expenditures
|
(51,122 | ) | (33,619 | ) | ||||
Other
|
17,560 | 762 | ||||||
Net cash flows from (to) financing activities
|
4,802 | 43,055 | ||||||
Net increase (decrease) in cash and cash equivalents
|
(35,752 | ) | (8,031 | ) | ||||
Cash and cash equivalents at beginning of period
|
65,030 | 41,782 | ||||||
Cash and cash equivalents at end of period
|
$ | 29,278 | $ | 33,751 |
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
(Dollars in thousands)
|
Jun. 28, 2014
|
Jun. 29, 2013
|
Jun. 28, 2014
|
Jun. 29, 2013
|
||||||||||||
Net sales:
|
||||||||||||||||
Office furniture
|
$ | 423,423 | $ | 436,169 | $ | 781,792 | $ | 802,001 | ||||||||
Hearth products
|
85,720 | 74,529 | 179,552 | 150,994 | ||||||||||||
$ | 509,143 | $ | 510,698 | $ | 961,344 | $ | 952,995 | |||||||||
Operating profit (loss):
|
||||||||||||||||
Office furniture
|
||||||||||||||||
Operations before restructuring and impairment charges
|
$ | 28,524 | $ | 22,092 | $ | 44,989 | $ | 30,948 | ||||||||
Restructuring and impairment charges
|
10,282 | 35 | 10,254 | (121 | ) | |||||||||||
Office furniture – net
|
18,242 | 22,127 | 34,735 | 30,827 | ||||||||||||
Hearth products
|
8,481 | 5,699 | 20,189 | 9,290 | ||||||||||||
Total operating profit
|
26,723 | 27,826 | 54,924 | 40,117 | ||||||||||||
Unallocated corporate expense
|
(11,855 | ) | (10,238 | ) | (23,798 | ) | (21,975 | ) | ||||||||
Income before income taxes
|
$ | 14,868 | $ | 17,588 | $ | 31,126 | $ | 18,142 | ||||||||
Depreciation and amortization expense:
|
||||||||||||||||
Office furniture
|
$ | 12,472 | $ | 9,304 | $ | 21,971 | $ | 18,127 | ||||||||
Hearth products
|
1,158 | 1,372 | 2,334 | 2,765 | ||||||||||||
General corporate
|
1,298 | 1,073 | 2,647 | 1,946 | ||||||||||||
$ | 14,928 | $ | 11,749 | $ | 26,952 | $ | 22,838 | |||||||||
Capital expenditures (including capitalized software):
|
||||||||||||||||
Office furniture
|
$ | 16,348 | $ | 13,017 | $ | 29,836 | $ | 22,949 | ||||||||
Hearth products
|
1,187 | 1,051 | 2,698 | 1,665 | ||||||||||||
General corporate
|
10,894 | 4,758 | 18,587 | 9,005 | ||||||||||||
$ | 28,429 | $ | 18,826 | $ | 51,122 | $ | 33,619 | |||||||||
As of
Jun. 28, 2014
|
As of
Jun. 29, 2013
|
|||||||||||||||
Identifiable assets:
|
||||||||||||||||
Office furniture
|
$ | 756,888 | $ | 754,695 | ||||||||||||
Hearth products
|
266,617 | 266,171 | ||||||||||||||
General corporate
|
136,767 | 124,011 | ||||||||||||||
$ | 1,160,272 | $ | 1,144,877 |