EX-99 2 r1q05pr11.htm PRESS RELEASE \Date

News Release

 

 

For Information Contact:

Jerald K. Dittmer, Vice President and CFO (563) 264-7400

Melinda C. Ellsworth, Vice President, Treasurer and Investor Relations (563) 264-7406

HNI Corporation Announces Record Results for
First Quarter - Fiscal 2005

MUSCATINE, Iowa (April 20, 2005)-HNI Corporation (NYSE: HNI) today announced record sales of $562.3 million and record net income of $26.1 million, for the first quarter ended April 2, 2005.

Dollars in Millions

Three Months Ended

Percent

Except per share data

4/2/2005

4/3/2004

Change

Net Sales

$   562.3

$  464.0

21.2%

Gross Margin

$  195.8

$  169.8

15.4%

Gross Margin %

    34.8%

    36.6%

SG&A

$   155.4

$   135.1

15.0%

SG&A %

   27.6%

    29.1%

Operating Profit

$     40.4

$     34.7

16.7%

Operating Profit %

    7.2%

    7.5%

Net Income

$     26.1

$     22.4

16.6%

Earnings per share  - Diluted

$     0.47

$      0.38

23.7%

Consolidated net sales for the first quarter increased to a record $562.3 million, compared to $464.0 million for the same quarter last year.  The Company experienced strong growth in both its office furniture and hearth products segments.  During the first quarter of 2005, four small acquisitions were completed to support specific operating company strategies in both the Office Furniture and Hearth segments.  Those acquisitions, along with the acquisition of Omni Remanufacturing and Edward George Company completed during the second half of 2004, accounted for approximately $22 million of the increase in sales.  Approximately $23 million resulted from sales price increases to offset higher material costs.  The Company also recorded approximately $20 million of sales in advance of price increases that will become effective during the second quarter.   "We are pleased with the strong revenue growth and solid market performance we experienced across our multiple brands and channels," stated Stan A. Askren, HNI Corporation Chairman, President and CEO.

Net income was $26.1 million compared to $22.4 million in the same period in 2004, an increase of 16.6 percent.  Net income per share was $0.47 per diluted share compared to $0.38 per diluted share in first quarter 2004, an increase of 23.7 percent.  The Company decreased its annualized effective tax rate for 2005 to 35.5 percent compared to 36.0 percent in first quarter 2004 due primarily to benefits resulting from the implementation of the American Jobs Creation Act of 2004.  Net income per share was positively impacted $0.02 per share as a result of the Company's share repurchase program.

Gross margins for the first quarter were 34.8 percent compared to 36.6 percent for the same quarter last year.  "As indicated in our previous news release, we continued to be negatively impacted by higher steel and other material costs," stated Mr. Askren.  Price increases previously announced to offset higher material and fuel costs will be fully effective during the second quarter.

Total selling and administrative expenses for the quarter decreased as a percent of sales to 27.6 percent compared to 29.1 percent in first quarter 2004.  Included in first quarter 2005 were additional selling and administrative costs of $6 million associated with new acquisitions and increased freight and distribution costs of $8 million due to volume, rate increases and fuel surcharges. First quarter 2004 included restructuring charges of $0.5 million related to the previous shutdown of two office furniture facilities.  

Cash flow from operations for the first three months was $18.7 million compared to $18.3 million last year.  Capital expenditures increased to $9.4 million in 2005 compared to $6.1 million in 2004 to support new product development.  The acquisitions completed during the quarter totaled $9.9 million. The Company repurchased 512,500 shares of its common stock at a cost of $21.7 million during the first quarter compared to $16.5 million in the same period in 2004.  There is $124.0 million remaining under the current repurchase authorization.  During the quarter, the Company utilized $23 million under its revolving credit facility to fund acquisitions and meet seasonal cash requirements.  "We continue to invest in our core growth initiatives and strategic acquisitions and still maintain significant capacity to fund our future growth," stated Mr. Askren.

Office Furniture

Dollars in Millions

Three Months Ended

Percent

4/2/2005

4/3/2004

Change

Sales

$   427.5

$   349.7

22.3%

Operating Profit

$     38.8

$     31.7

22.6%

Operating Profit %

    9.1%

     9.1%

For the quarter, sales for the office furniture segment increased to $427.5 million from $349.7 million for the same quarter last year.  The Company's acquisitions since first quarter 2004 accounted for $14 million of the increase; while $15 million resulted from sales price increases to partially offset higher material costs.  Approximately $20 million of the increase resulted from sales in advance of announced price increases.  "Strong sales results across our multiple brands and segments benefited from an improving economy and strong industry growth," stated Mr. Askren.

Operating profit prior to unallocated corporate expenses increased to $38.8 million compared to $31.7 million for the same quarter last year.  Operating profit as a percent of net sales remained flat at 9.1 percent due to increased steel and other material costs of $22 million and increased freight and distribution costs of $7 million.

Hearth Products

Dollars in Millions

Three Months Ended

Percent

4/2/2005

4/3/2004

Change

Sales

$    134.7

$   114.4

    17.8%

Operating Profit

$      10.5

$     10.6

      -1.5%

Operating Profit %

      7.8%

     9.3%

For the quarter, net sales for the hearth products segment increased to $134.7 million compared to $114.4 million in 2004.  The Company's acquisition of Edward George Company in July 2004 along with an acquisition of the hearth products distributor completed during the first quarter of 2005 accounted for approximately $8 million of the increase in net sales and approximately $8 million resulted from sales price increases to offset higher material costs.

Operating profit prior to unallocated corporate expenses decreased slightly to $10.5 million from $10.6 million in 2004.  Operating profit as a percent of net sales decreased to 7.8 percent compared to 9.3 percent in 2004.  "The results of our Hearth business did not meet our expectations for the quarter.  We experienced retail softness in certain markets due to milder winter conditions.  In addition, we incurred higher than normal operating expenses due to investments in selling, brand, and new product initiatives as well as other operating costs," stated Mr. Askren.

2005 Outlook

"We anticipate the office furniture and hearth products markets will continue to grow.  Order trends remain solid across our multiple brands and businesses," said Mr. Askren. "We believe our operating philosophy of pursuing multiple and distinct market segments with separate, focused companies, business models, brands and products will result in solid market performance."

The Company 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 Wednesday, April 20, 2005; at 10:00 a.m. Central time to discuss first quarter fiscal 2005 results.  To participate, call the conference call line at 800-230-1951.  A replay of the conference call will be available until Wednesday, April 27, 2005.  To access this replay, dial 800-475-6701, access code 776571.  A link to the simultaneous web cast can be found on the company's website at www.hnicorp.com.

HNI Corporation provides products and solutions for the home and workplace environments and is the second largest office furniture manufacturer in the United States.  HNI Corporation is also the nation's leading manufacturer and marketer of gas- and wood-burning fireplaces.  The company's strong brands, including HON®, Allsteel®, Gunlocke®, Paoli®, Heatilator®, Heat & Glo™, and Quadra-Fire®, 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. By doing so, the company was recognized for the seventh consecutive year as one of the 400 Best Big Companies in America by Forbes Magazine in 2005, and was again recognized as one of America's Most Admired Companies in the furniture industry by Fortune Magazine in 2005.  HNI Corporation's common stock is traded on the New York Stock Exchange under the symbol HNI.  More information can be found on the Company's website at www.hnicorp.com.

Forward-looking Statements

Statements in this news release that are not strictly historical, including statements as to plans, objectives, and future financial performance, are "forward-looking" statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.  Forward-looking statements involve known and unknown risks, which may cause the Company's actual results in the future to differ materially from expected results.  These risks include, among others: the Company's ability to realize financial benefits (a) from its price increases, (b) from its cost containment and business simplification initiatives, (c) from its investments in strategic acquisitions, new products and brand building, (d) from its investments in distribution and rapid continuous improvement and (e) from its repurchases of common stock; uncertainty related to the availability of cash to fund future growth; lower than expected demand for the Company's products due to uncertain political and economic conditions; lower industry growth than expected; uncertainty related to disruptions of business by terrorism or military action; competitive pricing pressure from foreign and domestic competitors; higher than expected costs and lower than expected supplies of materials (including steel and other materials); and other factors described in the Company's annual and quarterly reports filed with the Securities and Exchange Commission on Forms 10-K and 10-Q.

 

 

# # #

 

 

HNI Corporation

 

 

Unaudited Condensed Consolidated Statement of Operations

 

Three Months Ended

 

(Dollars in thousands, except per share data)

Apr. 2, 2005

Apr. 3, 2004

 

Net sales

$  562,261

$  464,037

 

Cost of products sold

366,416

294,275

 

Gross profit

195,845

169,762

 

Selling and administrative expenses

155,400

134,580

 

Restructuring and impairment charges

 -  

520

 

Operating income

40,445

34,662

 

Interest income

539

725

 

Interest expense

484

370

 

Income before income taxes

40,500

35,017

 

Income taxes

14,378

12,606

 

Net income

$     26,122

$    22,411

 

Net income per common share - (basic and diluted)

$0.47

$0.38

 

Average number of common shares outstanding - basic

55,175,803

58,240,221

 

Average number of common shares outstanding - diluted

55,551,134

58,690,281

 

 

Unaudited Condensed Consolidated Balance Sheet

 

 

Assets

 
 

Liabilities and Shareholders' Equity

As of

As of

Apr. 2,

Jan. 1,

Apr. 2,

Jan. 1,

(Dollars in thousands)

2005

2005

2005

2005

Cash and cash equivalents

$    26,307

$     29,676

Accounts payable and accrued expenses

$   239,711

$  253,958

Short-term investments

8,647

6,836

Income taxes

21,559

6,804

Receivables

259,308

234,731

Note payable and current maturities of long-term debt

645

646

Inventories

80,456

77,590

Current maturities of other long-term obligations

5,160

4,842

Deferred income taxes

15,441

14,639

Current liabilities

267,075

266,250

Prepaid expenses and other current assets

12,852

11,107

 Current assets

403,011

374,579

Long-term debt

25,769

2,627

Capital lease obligations

924

1,018

Property and equipment - net

304,173

311,344

Other long-term liabilities

40,070

40,045

Goodwill

228,016

224,554

Deferred income taxes

38,470

42,554

Other assets

111,920

111,180

 Shareholders' equity

674,812

669,163

 Total liabilities and

    Total assets

$1,047,120

$1,021,657

    shareholders' equity

$1,047,120

$1,021,657

 

HNI Corporation

 

Unaudited Condensed Consolidated Statement of Cash Flows

             Three Months Ended

 
(Dollars in thousands)

Apr. 2, 2005

Apr. 3, 2004

Net cash flows from (to) operating activities

               $    18,653

                 $    18,255

Net cash flows from (to) investing activities:

 Capital expenditures

(9,447)

(6,090)

 Acquisition spending

(9,874)

(85,488)

 Other

                        2,802

                      61,702

Net cash flows from (to) financing activities

(5,503)

(46,472)

Net increase (decrease) in cash and cash equivalents

(3,369)

(58,093)

Cash and cash equivalents beginning of period

                      29,676

                    138,982

Cash and cash equivalents at end of period

               $    26,307

                 $   80,889

 

Unaudited Business Segment Data

Three Months Ended

(Dollars in thousands)

Apr. 2, 2005

Apr. 3, 2004

Net sales:

 Office furniture

      $   427,547

      $   349,671

 Hearth products

          134,714

           114,366

      $   562,261

      $   464,037

Operating profit:

 Office furniture

    Operations before restructuring charges

          $38,808

      $     32,181

    Restructuring and impairment charges

             - 

(520)     

      Office furniture - net

            38,808

             31,661

 Hearth products

            10,480

             10,639

    Total operating profit

            49,288

             42,300

 Unallocated corporate expense

(8,788)  

(7,283)    

    Income before income taxes

         $  40,500

      $     35,017

Depreciation and amortization expense:

 Office furniture

         $  10,968

      $    11,676

 Hearth products

               4,322

              4,184

 General corporate

               1,592

              1,452

         $  16,882

      $    17,312

Capital expenditures:

 Office furniture

         $    6,598

       $      3,291

 Hearth products

               2,562

              2,343

 General corporate

                  287

                 456

         $    9,447

       $     6,090

As of

Apr. 2, 2005

As of 

Apr. 3, 2004

Identifiable assets:

 Office furniture

       $  594,732

       $  499,005

 Hearth products

           351,229

           307,588

 General corporate

           101,159

           169,843

      $1,047,120

       $  976,436