HNI Corporation Announces Results for Fourth Quarter and Year-End - Fiscal 2010

MUSCATINE, Iowa, Feb. 8, 2011 /PRNewswire/ -- HNI Corporation (NYSE: HNI) today announced sales of $466.1 million and income from continuing operations of $12.6 million for the fourth quarter ended January 1, 2011.  Net income per diluted share from continuing operations for the quarter was $0.27 or $0.39 on a non-GAAP basis when excluding restructuring and impairment charges and transition costs.  For fiscal year 2010, the Corporation reported sales of $1.7 billion and income from continuing operations of $29.7 million.  Net income per diluted share from continuing operations for the year was $0.65 or $0.82 on a non-GAAP basis when excluding restructuring and impairment charges, transition costs, and non-operating gains.

Fourth Quarter and FY'10 Summary Comments

"We delivered strong performance across all of our businesses in the fourth quarter, led by double digit growth in our office furniture segment.  The cost reset actions implemented in 2009 and 2010, combined with our strategic growth initiatives, resulted in an increase in earnings of more than 40 percent over prior year quarter.

We enter 2011 financially stronger, well positioned within our markets and focused on long term profitable growth," said Stan Askren, HNI Corporation Chairman, President and Chief Executive Officer.

Fourth Quarter Results – Continuing Operations

• Consolidated net sales increased $60.6 million or 14.9 percent from the prior year quarter to $466.1 million.
• Gross margins were 1.3 percentage points lower than prior year primarily due to reduced price realization, increased material costs and higher mix of lower margin products in the office furniture segment offset partially by higher volume and lower restructuring and transition charges.
• Total selling and administrative expenses, including restructuring and impairment charges, decreased $14.6 million or 9.2 percent due to distribution efficiencies and lower restructuring and impairment charges and transition costs.  These were offset by increased volume related expenses, higher fuel costs, investments in growth initiatives and higher incentive based compensation.
• The Corporation recorded $7.1 million of restructuring and impairment charges and transition costs during the fourth quarter.  These charges included $1.9 million related to costs associated with shutdown and consolidation of office furniture facilities of which $0.5 million were included in cost of sales.  Also included were $5.2 million of impairment and restructuring charges related to hearth distribution locations that were classified as held for sale or closed as of the end of 2010.  Included in 2009 were $29.5 million of restructuring and impairment charges and transition costs.  

Full Year Results – Continuing Operations

• Net sales increased $63.4 million, or 3.9 percent, to $1.7 billion compared to $1.6 billion in the prior year.  
• Gross margins remained at 34.7 percent due to increased volume, cost reduction initiatives and lower restructuring and transition costs offset by lower price realization, higher material costs and higher mix of lower margin products in the office furniture segment.
• Total selling and administrative expenses, including restructuring charges, decreased $26.5 million or 4.8 percent due to cost control actions, distribution efficiencies and lower restructuring and impairment charges and transition costs.  These were partially offset by increased volume related costs, higher fuel costs, investments in growth initiatives and higher incentive based compensation.  Included in 2010 were $9.4 million of restructuring and impairment charges compared to $40.4 million in 2009.

Cash flow from operations for the year was $94.4 million compared to $193.2 million last year.   Capital expenditures were $26.7 million in 2010 compared to $17.6 million in 2009.  The Corporation repurchased 655,032 shares of its common stock during 2010.  There is approximately $145.8 million remaining under the current repurchase authorization.

• Fourth quarter and full year sales for the office furniture segment increased $52.9 million and $60.1 million, respectively.  These increases were driven by an increase in the supplies driven channel and a more substantial increase in the contract and international channels of the office furniture industry.  
• Fourth quarter and full year operating profit increased $29.8 million and $35.0 million, respectively.  Operating profit was positively impacted by increased volume, cost reduction initiatives, distribution efficiencies and lower restructuring, transition and impairment expenses.  These were partially offset by decreased price realization, higher input costs, investments in selling and growth initiatives and higher incentive based compensation expense.

Hearth Products

• Fourth quarter sales for the hearth products segment increased $7.7 million driven by a small increase in the new construction channel and a more significant increase in the remodel-retrofit channel.  Full year sales for the hearth products segment increased $3.3 million driven by an increase in the new construction channel and a decrease in the remodel/retrofit channel.  
• Fourth quarter and full year operating profit increased $1.7 million and $17.7 million, respectively.  Operating profit for the fourth quarter was positively impacted by higher volume, better price realization and cost reduction initiatives partially offset by higher restructuring and impairment costs.  Operating profit for the year was positively impacted by better price realization, cost reduction initiatives, and lower restructuring and impairment charges partially offset by higher input costs.

Outlook

"I remain optimistic about our markets and the gradually improving economy.  We will build on the momentum from 2010 to grow our businesses and increase profits in 2011.  We will continue to reduce cost, improve operations and fiercely manage cash.  Our strategy to invest in growth initiatives across our multiple platforms has not changed.  The corporation is financially strong and well positioned for long term profitable growth," said Mr. Askren.    

The Corporation 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, February 9, 2011 at 10:00 a.m. (Central) to discuss fourth quarter and year-end 2010 results.  To participate, call the conference call line at 1-800-230-1092.  A replay of the conference call will be available until Wednesday, February 16, 2011, 11:59 p.m. (Central).  To access this replay, dial 1-800-475-6701 – Access Code:  189302.  A link to the simultaneous web cast can be found on the Corporation's website at www.hnicorp.com.

Non-GAAP Financial Measures

This earnings release contains certain non-GAAP financial measures.  A "non-GAAP financial measure" is defined as a numerical measure of a company's financial performance that excludes or includes amounts different than the most directly comparable measure calculated and presented in accordance with GAAP in the statements of income, balance sheets or statements of cash flow of the company.  Pursuant to the requirements of Regulation G, the Corporation has provided a reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measure.

The non-GAAP financial measures used within this earnings release are:  gross profit, selling and administrative expense, operating income, operating profit and net income per diluted share (i.e., EPS), excluding restructuring and impairment charges, transition costs and non-operating gains.  These measures are presented because management uses this information to monitor and evaluate financial results and trends.  Management believes this information is also useful for investors.

HNI Corporation is a NYSE traded company (ticker symbol: HNI) providing products and solutions for the home and workplace environments.  HNI Corporation is the second largest office furniture manufacturer in the world and is also the nation's leading manufacturer and marketer of gas- and wood-burning fireplaces.  The Corporation's strong brands, including HON®, Allsteel®, Gunlocke®, Paoli®, Maxon®, Lamex®, HBF® , Heatilator®, Heat & Glo™, Quadra-Fire® and Harman Stove™ 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.  More information can be found on the Corporation's website at www.hnicorp.com.

Statements in this release that are not strictly historical, including statements as to plans, outlook, objectives and future financial performance, are "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.  Words such as "anticipate," "believe," "could," "confident," "estimate," "expect," "forecast," "hope," "intend," "likely," "may," "plan," "possible," "potential," "predict," "project," "should," "will," "would" and variations of such words and similar expressions identify forward-looking statements.  Forward-looking statements involve known and unknown risks, which may cause the Corporation's actual results in the future to differ materially from expected results.  These risks include, without limitation:  the Corporation's ability to realize financial benefits from its (a) price increases, (b) cost containment and business simplification initiatives for the entire Corporation, (c) investments in strategic acquisitions, new products and brand building, (d) investments in distribution and rapid continuous improvement, (e) ability to maintain its effective tax rate, (f) repurchases of common stock, and (g) consolidation and logistical realignment initiatives; uncertainty related to the availability of cash and credit, and the terms and interest rates on which credit would be available, to fund operations and future growth; lower than expected demand for the Corporation's products due to uncertain political and economic conditions, including the recent credit crisis, slow or negative growth rates in global and domestic economies and the protracted decline in the domestic housing market; lower industry growth than expected; major disruptions at key facilities or in the supply of any key raw materials, components or finished goods; uncertainty related to disruptions of business by terrorism, military action, epidemic, acts of God or other Force Majeure events; competitive pricing pressure from foreign and domestic competitors; higher than expected costs and lower than expected supplies of materials (including steel and petroleum based materials); higher than expected costs for energy and fuel; changes in the mix of products sold and of customers purchasing; relationships with distribution channel partners, including the financial viability of distributors and dealers; restrictions imposed by the terms of the Corporation's revolving credit facility and note purchase agreement; currency fluctuations and other factors described in the Corporation's annual and quarterly reports filed with the Securities and Exchange Commission on Forms 10-K and 10-Q.  The Corporation undertakes no obligation to update, amend or clarify forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

SOURCE HNI Corporation