HNI does well in 2013
American professional furniture and hearth maker, HNI, reported sales of $2.1 billion for fiscal 2013, a 2.8% increase from prior year, and net income of $63.7 million, a 30.1% increase from prior year.
“We are pleased with our strong execution and profit improvement for the fourth quarter and full year 2013. Our growth investments delivered top-line improvement in the quarter despite a slow economy. Outstanding working capital management drove significant cash generation.
Office furniture sales increased in our supplies-driven business despite continued reductions in federal government spending. Continued strong profit growth in our hearth business was led by substantial growth in both the new construction and remodel/retrofit channels and outstanding operational execution.
We enter 2014 financially strong, competitively well positioned, and focused on delivering profitable growth,” said Stan Askren, HNI Corporation Chairman, President and Chief Executive Officer.
Sales for the fourth quarter ended December 28, 2013, amounted to $541.3 million, a 2.6% increase from the prior year quarter and net income of $22.8 million, a 29.4% increase from the prior year quarter.
On an organic basis sales increased 4.1% in the fourth quarter of 2013.
Consolidated net sales increased $13.7 million or 2.6% to $541.3 million. Compared to prior year quarter, divestitures reduced sales $8.2 million. On an organic basis sales increased 4.1%.
Gross margin was 0.5% points higher than prior year quarter primarily due to higher volume and increased price realization partially offset by new product ramp-up and operation reconfiguration costs to meet changing market demands.
Total selling and administrative expenses as a percent of net sales, including restructuring charges, decreased 0.8% 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 higher incentive-based compensation.
HNI’s fourth quarter results included $0.1 million of restructuring charges associated with previously announced shutdown and consolidation of office furniture manufacturing locations. Included in the fourth quarter of 2012 was $1.1 million of restructuring and transition costs of which $0.3 million was included in cost of sales.
Fiscal 2013 results
Consolidated net sales increased $56.0 million or 2.8% to $2.1 billion. Compared to prior year, divestitures, partially offset by the acquisition of BP Ergo, reduced sales $27.5 million. On an organic basis sales increased 4.2%.
Gross margin was 0.3% points higher than prior year due to increased volume, better price realization and lower material costs offset partially by unfavourable mix, new product ramp-up and operation reconfiguration costs to meet changing market demands.
Total selling and administrative expenses as a percent of net sales, including restructuring charges, improved 0.4% points due to higher volume, network distribution realignment savings and lower restructuring charges partially offset by investment in growth initiatives, higher incentive-based compensation and a loss on the sale of a small non-core office furniture business. Included in 2013 were $0.3 million of restructuring and transition charges compared to $3.0 million in 2012.
The provision for income taxes for 2013 reflects an effective tax rate of 34.5% compared to 37.7% in 2012. The decrease is due to the research tax credit for 2012 being applied in fiscal 2013.
Cash flow from operations for the year was $165.0 million compared to $144.8 million in 2012. Capital expenditures were $78.9 million in 2013 compared to $60.3 million in 2012.
Office furniture results
Fourth quarter sales for the office furniture segment were $417.0 million which was $5.4 million or 1.3% less than the same quarter last year.
Compared to prior year quarter, divestitures reduced sales by $8.2 million. On an organic basis, sales increased 0.7% driven by growth in the supplies-driven channel partially offset by a decrease in the contract and international businesses. Federal government sales declined over 40% compared to the same quarter last year.
Full year sales for the office furniture segment were $1.69 billion which was $2.1 million or 0.1% less than prior year. Compared to prior year, divestitures partially offset by the acquisition of BP Ergo, reduced sales by $27.5 million. On an organic basis, sales increased 1.5% driven mainly by growth in the supplies-driven channel. Full year sales to the federal government declined over 27% compared to the prior year.
Fourth quarter and full year operating profit increased $2.3 million and $5.5 million, respectively.
Operating profit margin was positively impacted by increased price realization, network realignment savings and lower restructuring charges. These were partially offset by lower volume, new product ramp-up, operation reconfiguration to meet changing market demands and a loss on the sale of a small non-core office furniture business.
“I remain positive about our markets and our ability to grow sales and increase profits in 2014. We continue to aggressively invest for long-term profitable growth, and I remain confident our investments are delivering shareholder value. Our businesses are strong, competitive, and well-positioned in their markets, and the prospects for our businesses are encouraging,” said Mr. Askren.
HNI estimates sales growth between 1 and 5% in the first quarter over the same period in the prior year.
Non-GAAP earnings per diluted share are anticipated in the range of $0.07 to $0.12 for the first quarter. For the full year, HNI is updating its estimate of non-GAAP earnings per diluted share to be in the range of $1.60 to $1.80, which excludes restructuring charges and transition costs.