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HNI Corp results for 1st Qtr 2013 – Office furniture sales down 3.4%

Tuesday 30 April 2013

HNI Corp has two reportable segments: office furniture and hearth products. The Corporation is the second largest office furniture manufacturer in the world and the nation's leading manufacturer and marketer of gas- and wood-burning fireplaces. The Corporation utilizes its split and focus, decentralized business model to deliver value to its customers with its various brands and selling models. The Corporation is focused on growing its existing businesses while seeking out and developing new opportunities for growth.

Net sales for the first quarter of fiscal 2013 decreased 0.7 percent to $442.3 million when compared to the first quarter of fiscal 2012. The decrease was driven by a decline in the contract and international businesses of the office furniture segment partially offset by an increase in the supplies-driven channel of the office furniture segment and higher sales in the hearth products segment. Sales of office furniture to the federal government were down 27 percent in the first quarter compared to the same period last year. Gross margins for the quarter increased from prior year levels due to higher volume in the hearth products segment and increased price realization partially offset by lower volume and unfavorable mix in the office furniture segment. Total selling and administrative expenses increased due to selling initiatives and higher incentive-based compensation.


Consolidated net sales for the first quarter of 2013 decreased 0.7 percent or $2.9 million compared to the same quarter last year. The decrease was driven by a decline in the contract and international channel of the office furniture segment partially offset by an increase in the supplies-driven channel of the office furniture segment and higher sales in the hearth products segment. Sales of office furniture to the federal government were down 27 percent in the first quarter compared to the same period last year. Compared to prior year quarter, divestitures of several small businesses, including office furniture dealers, partially offset by the acquisition of BP Ergo, resulted in a $1.9 million sales decline.

Gross margin for the first quarter of 2013 increased to 33.4 percent compared to 33.0 percent for the same quarter last year. The increase in gross margin was driven by higher volume in the hearth products segment and increased price realization partially offset by lower volume and unfavorable mix in the office furniture segment. First quarter 2012 included $0.3 million of accelerated depreciation and transition costs related to the closure and consolidation of office furniture manufacturing facilities.

Total selling and administrative expenses, including restructuring charges, as a percentage of net sales increased to 32.7 percent compared to 32.5 percent for the same quarter last year due to selling initiatives and higher incentive-based compensation partially offset by distribution network realignment savings and lower restructuring costs. First quarter 2013 included $0.2 million of restructuring and transition charges associated with plant consolidations compared to $0.9 million in the same period in the prior year.


The provision for income taxes for continuing operations for the three months ended March 30, 2013, reflects an effective tax rate of (113.0) percent compared to 36.0 percent for the same period last year. First quarter 2013 reflects the effect of a retroactive extension of the 2012 research tax credit of $0.9 million. The 2013 estimated annual effective tax rate is expected to be 35 percent.

Net income attributable to HNI Corporation was $1.4 million or $0.03 per diluted share in the first quarter of 2013 compared to $(0.1) million or $0.00 per diluted share in the first quarter of 2012.


Office Furniture

First quarter 2013 sales for the office furniture segment decreased 3.4 percent or $12.8 million to $365.8 million from $378.6 million for the same quarter last year. The change was driven by a decrease in the contract and international businesses partially offset by an increase in the supplies-driven channel. Sales to the federal government were down 27 percent in the first quarter compared to the same period last year. Compared to the prior year quarter, divestitures, partially offset by the acquisition of BP Ergo, resulted in a $1.9 million sales decline. First quarter 2013 operating profit prior to unallocated corporate expenses increased 10.8 percent or $0.8 million to $8.7 million as a result of increased price realization, distribution network realignment savings, lower incentive-based compensation and restructuring charges. These were partially offset by lower volume and unfavorable mix. First quarter 2013 included $0.2 million of restructuring costs compared to $1.2 million of restructuring and transition costs in first quarter 2012.

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