HNI Corporation (NYSE: HNI) announced sales for the third quarter ended October 1, 2016 of $584.6 million and net income of $33.8 million. GAAP net income per diluted share decreased 18 percent from the prior year quarter to $0.74. Non-GAAP net income per diluted share decreased 14 percent from the prior year quarter to $0.80. GAAP to Non-GAAP reconciliations follow the financial statements in this release.
“Our markets continue to be dynamic in an uncertain economic environment. We are responding to these near-term challenges while maintaining focus on the long-term. Subsequent to the end of the quarter we announced the closure of an office furniture manufacturing facility in Orleans, Indiana. The closure will result in $6.7M of cash expenses and cash savings of $6.9M annually once completed. This is another step toward our previously announced plan to drive $35 to $40 million of structural costs savings by 2018. Our investments are generating strong financial returns and we continue to invest for long-term profitable growth,” said Stan Askren, HNI Corporation Chairman, President and Chief Executive Officer.
Third Quarter Summary Comments
• Consolidated net sales decreased $31.2 million or 5.1 percent to $584.6 million. Acquisitions and divestitures of small office furniture companies increased sales $9.4 million compared to the prior year quarter. On an organic basis, sales decreased 6.6 percent.
• Gross profit increased 30 basis points compared to prior year driven by price realization, material cost and productivity partially offset by lower volume.
• Selling and administrative expenses increased as a percentage of sales due to lower volume and the impact of acquisitions partially offset by lower freight costs and expense timing.
• The Corporation recorded $1.1 million of restructuring costs and $1.6 million of transition costs in the third quarter in connection with previously announced facility closures and structural realignments. $2.3 million of these charges were included in cost of sales. Specific items incurred include severance, accelerated depreciation and production move costs. The Corporation also recorded $1.6 million of accelerated depreciation in the third quarter in conjunction with the announced charitable donation of a building.
Office Furniture – Financial Performance
• Third quarter net sales decreased $21.0 million or 4.4 percent to $454.9 million. Sales for the quarter decreased in our North America contract and international businesses partially offset by an increase in our supplies-driven business. Acquisitions and divestitures of small office furniture companies increased sales $9.4 million compared to the prior year quarter. On an organic basis, sales decreased 6.4 percent.
• Third quarter GAAP operating profit decreased 40 basis points due to lower volume partially offset by price realization, material costs and productivity and lower freight costs. Non-GAAP operating profit, which excludes structural realignments, declined 20 basis points.
Hearth Products – Financial Performance
• Third quarter net sales decreased $10.2 million or 7.3 percent to $129.7 million. Sales for the quarter decreased in the new construction and retail pellet businesses, partially offset by an increase in retail wood/gas sales.
• Third quarter GAAP operating profit declined 210 basis points due to lower volume partially offset by price realization. Non-GAAP operating profit, which excludes the impact of a previously announced facility closure, declined 210 basis points.
Outlook
“I remain confident in our strategies for profitable growth and maintain a positive long-term outlook while we manage through near term economic uncertainty. Our businesses are strong and well positioned to drive longterm shareholder value,” said Mr. Askren.
The Corporation estimates sales to be down 1 to 4 percent in the fourth quarter over the same period in the prior year, including impacts of acquisitions and divestitures. Non-GAAP earnings per diluted share are anticipated in the range of $2.60 to $2.70 for the full year.
The Corporation estimates Non-GAAP earnings per diluted share for the full year 2017 will be in the range of $2.75 to $3.15 with consolidated net sales down 2 percent to up 2 percent, including the impacts of acquisitions and divestitures.
Conference Call
A replay of HNI’s Oct. 20 conference call discussing third quarter fiscal year 2016 results, and the full text of the company’s 3Q16 earnings release, including all tables, may be accessed at www.hnicorp.com (under Investors – News Releases & Events). An audio replay of the conference call will be available until Thursday, October 27, 2016, 10:59 p.m. (Central) by dialing 1-855-859-2056 or 1-404-537-3406 – Conference ID number 78965544.
About HNI Corporation
HNI Corporation is a NYSE traded company (ticker symbol: HNI) providing products and solutions for the home and workplace environments. HNI is a leading global provider and designer of office furniture and the leading manufacturer and marketer of hearth products. We sell the broadest and deepest selection of quality office furniture solutions available to meet the needs of every customer through an extensive portfolio of well-known and trusted brands. Our hearth products are the strongest, most respected brands in the industry and include a full array of gas, electric, wood and biomass burning fireplaces, inserts, stoves, facings and accessories. More information can be found on the Corporation’s website at www.hnicorp.com.