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HNI publishes second quarter results

American professional furniture producer, HNI Corporation (HNI), announced sales for the second quarter ended June 29, 2013, of $510.7 million, a 6% increase from the prior year quarter.
Compared to prior year quarter, divestitures, partially offset by the acquisition of BP Ergo, resulted in a $4.9 million sales decline.

Net income in the second quarter amounted to $11.4 million, a 63% increase from the prior year quarter.
Net income per diluted share for the quarter was $0.25 or $0.28 on a non-GAAP basis when excluding a loss on the sale of a small non-core office furniture business.

HNI Q2 results

“Our growth investments delivered solid top and bottom line improvement in our office furniture and hearth businesses. Office furniture sales growth was led by a strong acceleration in our contract business driven by improved project activity.

Continued strong profit growth in our hearth business was led by substantial growth in the new construction channel and strong operational execution,” said Stan Askren, HNI Corporation Chairman, President and Chief Executive Officer.

Gross margins were 0.2 percentage points lower than prior year primarily due to new product ramp up and facility reconfiguration costs to meet changing market demands partially offset by higher volume and increased price realization.

Total selling and administrative expenses as a percent of net sales, including restructuring charges, improved 1.3 percentage points from the prior year quarter due to higher volume, network distribution realignment savings and lower restructuring charges partially offset by investment in growth initiatives and a loss on the sale of a small non-core office furniture business.

Included in the second quarter of 2012 was $1.0 million of restructuring and transition costs of which $0.3 million were included in cost of sales.

Office furniture results

HNI Q2 OF results

Second quarter sales for the office furniture segment increased $17.6 million or 4.2% to $436.2 million. The increase was across both channels of HNI’s office furniture segment.
Compared to prior year quarter, divestitures, partially offset by the acquisition of BP Ergo, resulted in a $4.9 million sales decline.

Second quarter operating profit increased $0.1 million. Operating profit was positively impacted by higher volume, increased price realization, network realignment savings, and lower restructuring charges.
These were partially offset by new product ramp-up, facility reconfiguration to meet changing market demands and a loss on the sale of a small non-core business.

Year-to-Date Results

Consolidated net sales for the first six months of 2013 increased $27.4 million, or 3.0%, to $953.0 million compared to $925.6 million in 2012.

Gross margin increased to 33.8% compared to 33.7% last year even with increased investments related to growth and manufacturing capability reconfiguration.

Net income attributable to HNI Corporation was $12.8 million compared to $6.9 million in 2012. Earnings per share increased to $0.28 per diluted share compared to $0.15 per diluted share for the first six months of 2012.

Operating activities used $12.5 million of cash during the first six months of 2013 compared to generating $5.7 million of cash for the same period last year.

Capital expenditures during the first six months were $39.3 million in 2013 compared to $25.1 million in 2012.

Outlook

“I am encouraged by the recent growth acceleration in our businesses and remain confident in our strategies to drive profit improvement while simultaneously investing for long-term profitable growth.

We enter the third quarter with good momentum across our office furniture and hearth businesses, and we remain on track to grow sales and solidly increase profits in 2013,” said Mr. Askren.

HNI estimates sales growth between 3 to 6% in the third quarter over the same period in the prior year.

Non-GAAP earnings per diluted share are anticipated in the range of $0.55 to $0.60 for the third quarter, which excludes restructuring charges and transition costs.

For the full year, HNI is narrowing its estimate of non-GAAP earnings per diluted share to the range of $1.30 to $1.40, which excludes restructuring charges, transition costs and a loss on the sale of a business.

HNI 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.

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