Iowa | 1-14225 | 42-0617510 |
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2). Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ |
Exhibit No. | Description |
99.1 | Press release dated July 24, 2017 |
HNI CORPORATION | ||||
Date: | July 24, 2017 | By | /s/ Marshall H. Bridges | |
Marshall H. Bridges Vice President and Chief Financial Officer |
Exhibit No. | Description |
99.1 | Press release dated July 24, 2017 |
Second Quarter - Financial Performance | ||||||||
(Dollars in millions, except per share data) | ||||||||
Three Months Ended | ||||||||
July 1, 2017 | July 2, 2016 | Change | ||||||
GAAP | ||||||||
Net Sales | $514.5 | $536.5 | (4.1 | %) | ||||
Gross Profit % | 35.9 | % | 38.9 | % | -300 bps | |||
SG&A % | 31.6 | % | 30.3 | % | 130 bps | |||
Restructuring charges % | 0.1 | % | 0.1 | % | — | |||
Operating Income | $21.6 | $46.0 | (53.0 | %) | ||||
Operating Income % | 4.2 | % | 8.6 | % | -440 bps | |||
Net Income % | 2.7 | % | 5.4 | % | -270 bps | |||
EPS – diluted | $0.31 | $0.64 | (51.6 | %) | ||||
Non-GAAP | ||||||||
Organic Sales | $509.6 | $509.1 | 0.1 | % | ||||
Gross Profit % | 37.3 | % | 39.9 | % | -260 bps | |||
SG&A % | 31.6 | % | 30.6 | % | 100 bps | |||
Operating Income | $29.3 | $49.5 | (40.8 | %) | ||||
Operating Income % | 5.7 | % | 9.2 | % | -350 bps | |||
EPS – diluted | $0.42 | $0.68 | (38.2 | %) |
• | Consolidated net sales decreased $22.0 million or 4.1 percent from the prior year quarter to $514.5 million. On an organic basis, sales increased 0.1 percent. The net impact of acquisitions and divestitures of small office furniture companies decreased sales $22.5 million compared to the prior year quarter. |
• | GAAP gross profit margin decreased 300 basis points compared to the prior year quarter primarily driven by input cost inflation, deeper discounting, and product mix. Non-GAAP gross profit margin, which excludes restructuring and transition costs, decreased 260 basis points compared to the prior year quarter. |
• | Selling and administrative expenses increased as a percentage of sales due to strategic growth investments and prior year non-repeating adjustments, partially offset by the impact of divestitures, lower incentive based compensation, and the impact of stock price change on deferred compensation. |
• | The Corporation recorded $3.4 million of restructuring costs and $4.3 million of transition costs in the second quarter in connection with previously announced facility closures and structural realignments. $7.3 million of these charges were included in cost of sales. Specific items incurred include accelerated depreciation and production move costs. |
Office Furniture – Financial Performance | ||||||||
(Dollars in millions) | ||||||||
Three Months Ended | ||||||||
July 1, 2017 | July 2, 2016 | Change | ||||||
GAAP | ||||||||
Net Sales | $406.4 | $428.1 | (5.1 | %) | ||||
Operating Profit | $19.7 | $43.4 | (54.6 | %) | ||||
Operating Profit % | 4.8 | % | 10.1 | % | -530 bps | |||
Non-GAAP | ||||||||
Organic Sales | $401.6 | $400.7 | 0.2 | % | ||||
Operating Profit | $25.4 | $45.9 | (44.6 | %) | ||||
Operating Profit % | 6.3 | % | 10.7 | % | -440 bps |
• | Second quarter office furniture net sales decreased $21.7 million or 5.1 percent to $406.4 million. On an organic basis, sales increased 0.2 percent. Increases in the North American contract and international businesses were offset by a decrease in the supplies-driven business. The net impact of acquisitions and divestitures of small office furniture companies decreased sales $22.5 million compared to the prior year quarter. |
• | Second quarter office furniture GAAP operating profit margin decreased 530 basis points due to input cost inflation, deeper discounting, strategic growth investments, and product mix, partially offset by the impact of divestitures and lower incentive based compensation. Excluding restructuring and transition costs, non-GAAP operating profit margin declined 440 basis points. |
Hearth Products – Financial Performance | ||||||||
(Dollars in millions) | ||||||||
Three Months Ended | ||||||||
July 1, 2017 | July 2, 2016 | Change | ||||||
GAAP | ||||||||
Net Sales | $108.0 | $108.4 | (0.4 | %) | ||||
Operating Profit | $12.1 | $10.0 | 21.6 | % | ||||
Operating Profit % | 11.2 | % | 9.2 | % | 200 bps | |||
Non-GAAP | ||||||||
Operating Profit | $14.0 | $12.9 | 8.7 | % | ||||
Operating Profit % | 13.0 | % | 11.9 | % | 110 bps |
• | Second quarter net sales of hearth products decreased $0.4 million or 0.4 percent to $108.0 million. Increases in the new construction and retail pellet businesses were offset by a decrease in the retail wood/gas business. |
• | Second quarter GAAP operating profit margin of hearth products increased 200 basis points due to structural cost reductions and favorable operational performance. Excluding restructuring and transition costs, non-GAAP operating profit margin increased 110 basis points. |
Three Months Ended | Six Months Ended | ||||||||||||||
July 1, 2017 | July 2, 2016 | July 1, 2017 | July 2, 2016 | ||||||||||||
Net sales | $514,485 | $536,538 | $992,152 | $1,037,575 | |||||||||||
Cost of sales | 329,733 | 327,618 | 633,677 | 642,944 | |||||||||||
Gross profit | 184,752 | 208,920 | 358,475 | 394,631 | |||||||||||
Selling and administrative expenses | 162,684 | 162,319 | 326,350 | 327,425 | |||||||||||
Restructuring charges | 419 | 572 | 2,542 | 1,658 | |||||||||||
Operating income | 21,649 | 46,029 | 29,583 | 65,548 | |||||||||||
Interest income | 325 | 63 | 396 | 141 | |||||||||||
Interest expense | 1,347 | 1,131 | 2,393 | 3,005 | |||||||||||
Income before income taxes | 20,627 | 44,961 | 27,586 | 62,684 | |||||||||||
Income taxes | 6,771 | 15,934 | 8,949 | 21,815 | |||||||||||
Net income | 13,856 | 29,027 | 18,637 | 40,869 | |||||||||||
Less: Net loss attributable to the non-controlling interest | 8 | (2 | ) | (48 | ) | (3 | ) | ||||||||
Net income attributable to HNI Corporation | $13,848 | $29,029 | $18,685 | $40,872 | |||||||||||
Average number of common shares outstanding – basic | 44,178,287 | 44,431,198 | 44,114,164 | 44,344,778 | |||||||||||
Net income attributable to HNI Corporation per common share – basic | $0.31 | $0.65 | $0.42 | $0.92 | |||||||||||
Average number of common shares outstanding – diluted | 45,305,547 | 45,632,284 | 45,375,451 | 45,308,306 | |||||||||||
Net income attributable to HNI Corporation per common share – diluted | $0.31 | $0.64 | $0.41 | $0.90 |
July 1, 2017 | December 31, 2016 | ||||||
Assets | |||||||
Current Assets: | |||||||
Cash and cash equivalents | $27,148 | $36,312 | |||||
Short-term investments | 2,253 | 2,252 | |||||
Receivables | 227,212 | 229,436 | |||||
Inventories | 167,205 | 118,438 | |||||
Prepaid expenses and other current assets | 43,424 | 46,603 | |||||
Total Current Assets | 467,242 | 433,041 | |||||
Property, Plant, and Equipment: | |||||||
Land and land improvements | 29,094 | 27,403 | |||||
Buildings | 305,821 | 283,930 | |||||
Machinery and equipment | 543,524 | 528,099 | |||||
Construction in progress | 60,671 | 51,343 | |||||
939,110 | 890,775 | ||||||
Less accumulated depreciation | 551,169 | 534,330 | |||||
Net Property, Plant, and Equipment | 387,941 | 356,445 | |||||
Goodwill | 290,660 | 290,699 | |||||
Deferred Income Taxes | 1,095 | 719 | |||||
Other Assets | 254,221 | 249,330 | |||||
Total Assets | $1,401,159 | $1,330,234 | |||||
Liabilities and Equity | |||||||
Current Liabilities: | |||||||
Accounts payable and accrued expenses | $387,853 | $425,046 | |||||
Current maturities of long-term debt | 93,323 | 34,017 | |||||
Current maturities of other long-term obligations | 3,187 | 4,410 | |||||
Total Current Liabilities | 484,363 | 463,473 | |||||
Long-Term Debt | 240,000 | 180,000 | |||||
Other Long-Term Liabilities | 71,177 | 75,044 | |||||
Deferred Income Taxes | 111,270 | 110,708 | |||||
Equity: | |||||||
HNI Corporation shareholders' equity | 493,991 | 500,603 | |||||
Non-controlling interest | 358 | 406 | |||||
Total Equity | 494,349 | 501,009 | |||||
Total Liabilities and Equity | $1,401,159 | $1,330,234 |
Six Months Ended | |||||||
July 1, 2017 | July 2, 2016 | ||||||
Net cash flows from (to) operating activities | ($27,302 | ) | $31,824 | ||||
Net cash flows from (to) investing activities | (62,023 | ) | (89,037 | ) | |||
Net cash flows from (to) financing activities | 80,161 | 53,106 | |||||
Net increase (decrease) in cash and cash equivalents | (9,164 | ) | (4,107 | ) | |||
Cash and cash equivalents at beginning of period | 36,312 | 28,548 | |||||
Cash and cash equivalents at end of period | $27,148 | $24,441 |
Three Months Ended | Six Months Ended | ||||||||||||||
July 1, 2017 | July 2, 2016 | July 1, 2017 | July 2, 2016 | ||||||||||||
Net Sales: | |||||||||||||||
Office furniture | $406,444 | $428,113 | $766,425 | $815,452 | |||||||||||
Hearth products | 108,041 | 108,425 | 225,727 | 222,123 | |||||||||||
Total | $514,485 | $536,538 | $992,152 | $1,037,575 | |||||||||||
Income Before Income Taxes: | |||||||||||||||
Office furniture | $19,683 | $43,367 | $26,127 | $64,667 | |||||||||||
Hearth products | 12,104 | 9,954 | 23,915 | 22,515 | |||||||||||
General corporate | (11,160 | ) | (8,360 | ) | (22,456 | ) | (24,498 | ) | |||||||
Total | $20,627 | $44,961 | $27,586 | $62,684 | |||||||||||
Depreciation and Amortization Expense: | |||||||||||||||
Office furniture | $12,498 | $11,127 | $25,383 | $21,820 | |||||||||||
Hearth products | 2,706 | 3,322 | 6,194 | 5,978 | |||||||||||
General corporate | 2,421 | 1,931 | 4,887 | 3,833 | |||||||||||
Total | $17,625 | $16,380 | $36,464 | $31,631 | |||||||||||
Capital Expenditures (including capitalized software): | |||||||||||||||
Office furniture | $16,345 | $13,580 | $37,365 | $30,048 | |||||||||||
Hearth products | 5,134 | 4,459 | 7,212 | 7,012 | |||||||||||
General corporate | 9,833 | 10,360 | 19,511 | 18,796 | |||||||||||
Total | $31,312 | $28,399 | $64,088 | $55,856 | |||||||||||
As of July 1, 2017 | As of December 31, 2016 | ||||||||||||||
Identifiable Assets: | |||||||||||||||
Office furniture | $812,771 | $749,145 | |||||||||||||
Hearth products | 353,768 | 340,494 | |||||||||||||
General corporate | 234,620 | 240,595 | |||||||||||||
Total | $1,401,159 | $1,330,234 |
HNI Corporation Reconciliation | |||||||||||||||||||
(Dollars in millions) | |||||||||||||||||||
Three Months Ended July 1, 2017 | Three Months Ended July 2, 2016 | ||||||||||||||||||
Office Furniture | Hearth | Total | Office Furniture | Hearth | Total | ||||||||||||||
Sales as reported (GAAP) | $406.4 | $108.0 | $514.5 | $428.1 | $108.4 | $536.5 | |||||||||||||
% change from PY | (5.1 | %) | (0.4 | %) | (4.1 | %) | |||||||||||||
Less: Impact of Acquisitions and Divestitures | 4.9 | — | 4.9 | 27.4 | — | 27.4 | |||||||||||||
Organic Sales (non-GAAP) | $401.6 | $108.0 | $509.6 | $400.7 | $108.4 | $509.1 | |||||||||||||
% change from PY | 0.2 | % | (0.4 | %) | 0.1 | % |
HNI Corporation Reconciliation | |||||||||||||||||||
(Dollars in millions, except per share data) | |||||||||||||||||||
Three Months Ended July 1, 2017 | |||||||||||||||||||
Gross Profit | Operating Income | Tax | Net Income | EPS | |||||||||||||||
As reported (GAAP) | $184.8 | $21.6 | $6.8 | $13.8 | $0.31 | ||||||||||||||
% of net sales | 35.9 | % | 4.2 | % | 2.7 | % | |||||||||||||
Tax % | 32.8 | % | |||||||||||||||||
Restructuring charges | 3.0 | 3.4 | 1.1 | 2.3 | $0.05 | ||||||||||||||
Transition costs | 4.3 | 4.3 | 1.4 | 2.9 | $0.06 | ||||||||||||||
Results (non-GAAP) | $192.0 | $29.3 | $9.3 | $19.0 | $0.42 | ||||||||||||||
% of net sales | 37.3 | % | 5.7 | % | 3.7 | % | |||||||||||||
Tax % | 32.8 | % |
HNI Corporation Reconciliation | |||||||||||||||||||
(Dollars in millions, except per share data) | |||||||||||||||||||
Three Months Ended July 2, 2016 | |||||||||||||||||||
Gross Profit | Operating Income | Tax | Net Income | EPS | |||||||||||||||
As reported (GAAP) | $208.9 | $46.0 | $15.9 | $29.0 | $0.64 | ||||||||||||||
% of net sales | 38.9 | % | 8.6 | % | 5.4 | % | |||||||||||||
Tax % | 35.4 | % | |||||||||||||||||
Restructuring charges | 1.4 | 2.0 | 0.7 | 1.3 | $0.02 | ||||||||||||||
Transition costs | 3.5 | 3.5 | 1.2 | 2.3 | $0.05 | ||||||||||||||
Nonrecurring gain | 0.0 | (2.0 | ) | (0.7 | ) | (1.3 | ) | ($0.03 | ) | ||||||||||
Results (non-GAAP) | $213.8 | $49.5 | $17.1 | $31.3 | $0.68 | ||||||||||||||
% of net sales | 39.9 | % | 9.2 | % | 5.8 | % | |||||||||||||
Tax % | 35.4 | % |
Office Furniture Reconciliation | ||||||||
(Dollars in millions) | ||||||||
Three Months Ended | ||||||||
July 1, 2017 | July 2, 2016 | Percent Change | ||||||
Operating profit as reported (GAAP) | $19.7 | $43.4 | (54.6 | %) | ||||
% of net sales | 4.8 | % | 10.1 | % | ||||
Restructuring charges | 2.4 | 0.0 | ||||||
Transition costs | 3.3 | 2.5 | ||||||
Operating profit (non-GAAP) | $25.4 | $45.9 | (44.6 | %) | ||||
% of net sales | 6.3 | % | 10.7 | % | ||||
Hearth Products Reconciliation | ||||||||
(Dollars in millions) | ||||||||
Three Months Ended | ||||||||
July 1, 2017 | July 2, 2016 | Percent Change | ||||||
Operating profit as reported (GAAP) | $12.1 | $10.0 | 21.6 | % | ||||
% of net sales | 11.2 | % | 9.2 | % | ||||
Restructuring charges | 0.9 | 2.0 | ||||||
Transition costs | 1.0 | 1.0 | ||||||
Operating profit (non-GAAP) | $14.0 | $12.9 | 8.7 | % | ||||
% of net sales | 13.0 | % | 11.9 | % |