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HNI Corporation announces 3rd Quarter 2012 Results with sales up 9%; profit up 3%

Wednesday 17 October 2012

HNI Corporation today announced sales of $550.9 million and net income of $24.5 million for the third quarter ended September 29, 2012

Stan Askren, HNI Corporation Chairman, President and Chief Executive Officer said 2We continue to compete well in our markets. Growth in our supplies-driven and contract office furniture businesses softened versus our expectations and first half results as U.S. economic and market uncertainty appear to be constraining near-term growth. Office furniture profits were negatively impacted by lower than expected sales and operational inefficiencies caused by extreme summer heat during our peak demand season. We are making operational improvements to ensure consistent, flawless execution during future periods of peak production. Continued strong profit growth in our hearth business was driven by outstanding operational performance and growth in the new construction channel. We continue to make good progress on our core strategies, improving our competitive position and investing for long-term value creation,"
• Consolidated net sales increased $46.6 million or 9.2 percent to $550.9 million. Acquisitions contributed $42.6 million of sales, or 8.5 percent sales growth.
• Gross margins were 0.9 percentage points lower than prior year primarily due to unfavorable mix, seasonal ramp up inefficiencies and the impact of acquisitions offset partially by better price realization and lower material costs.
• Total selling and administrative expenses, including restructuring charges, increased 7.7 percent due to investments in growth initiatives and the impact of acquisitions.
The Corporation's third quarter results included $0.8 million of restructuring and transition charges of which $0.2 million were included in cost of sales. These included costs associated with previously announced shutdown and consolidation of office furniture manufacturing locations. Included in the third quarter of 2011 were $0.5 million of restructuring and transition costs.
• Third quarter net sales for the office furniture segment increased $45.9 million or 10.9 percent to $467.8 million. Acquisitions contributed $42.6 million of sales, or 10.1 percent sales growth. Organic growth was effectively flat across all channels of the office furniture segment.
• Third quarter GAAP operating profit decreased $3.1 million. Operating profit was negatively impacted by unfavorable mix, seasonal ramp up inefficiencies and investments in growth initiatives. These were partially offset by better price realization and lower material costs.
• Third quarter operating profit increased $2.2 million. Operating profit was positively impacted by higher price realization and lower material costs offset partially by investments in selling and growth initiatives.
Year-to-Date Results
Consolidated net sales for the first nine months of 2012 increased $143.3 million, or 10.7 percent, to $1.5 billion compared to $1.3 billion in 2011. Acquisitions contributed $83.0 million of sales, or 6.2 percent sales growth. Gross margin decreased to 34.1 percent compared to 34.6 percent for the same period last year. Net income attributable to HNI Corporation was $31.4 million compared to $27.8 million in 2011. Earnings per share increased to $0.68 per diluted share compared to $0.61 per diluted share for the first nine months of 2011.
Cash flow from operations for the first nine months of 2012 was $80.8 million compared to $67.0 million last year. Capital expenditures during the first nine months were $44.7 million in 2012 compared to $20.2 million in 2011. The Corporation completed the acquisition of BP Ergo, a leading manufacturer and marketer of office furniture in India, during the third quarter of 2012.
Outlook
"Despite near-term economic and political uncertainties, I remain positive about our markets and prospects for long-term profitable growth. We remain confident in our strategies and will continue to closely monitor our markets, aggressively manage operating expenses, and invest in long-term growth. Our businesses are agile and well positioned for the future," said Mr. Askren.
The Corporation estimates sales growth between 2 to 6 percent in the fourth quarter over the same period in the prior year.

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