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Herman Miller announces 2014 results; sales up; profit down.

Monday 30 June 2014

US office furniture manufacturer Herman Miller reported annual sales for 2014 of 1,882.0m USD, 6.0% up o2013.
The loss for the year of 22.1m USD versus a profit of 68.2m USD.
Brian Walker, Chief Executive Officer, stated, "Our results this quarter reflected an overall pace and timing of new orders that was a bit slower than we anticipated through the first half of the quarter, but showed positive momentum as the period progressed. This late-quarter improvement drove healthy organic order growth for the quarter, resulting in an 11.7% increase in our ending backlog relative to last year.
The uneven pace of orders is a reflection of the sluggish, albeit steady, pace of the global economic recovery. We continue to be encouraged by the pace of improvements in Europe, early signs of recovery in our business in Asia, and reports of strong project activity by architectural practices in North America."

Net sales in the 4th quarter totalled $487.5 million, an increase of 6.0% from the same quarter last fiscal year. New orders in the quarter of $479.5 million were 3.9% above the prior year level.
Herman Miller's order growth in the quarter was negatively impacted by the timing of its February 2014 price increase, which had the effect of accelerating approximately USD 22.0 million of new orders into the third quarter that would have otherwise been entered in the fourth quarter.
On an organic basis, which adjusts for this order acceleration as well as acquisitions, divestitures, and foreign currency translation, sales and orders in the 4th quarterincreased 2.9% and 5.7%, respectively, from the same quarter last fiscal year.
Herman Miller reported net earnings of $0.28 per share on a diluted basis in the fourth quarter. This compares to diluted earnings per share of $0.40 in the same quarter last fiscal year.
Excluding the impact of restructuring and impairment charges and current quarter reductions in contingent consideration liabilities, adjusted diluted earnings per share in the 4th quartertotalled $0.50.
Sales for the quarter within Herman Miller’s North American reportable segment were $307.1 million, a decrease of 1.4% from the same quarter last fiscal year. On an organic basis (as defined above), segment sales were flat on a year-over-year comparison.
New orders in the 4th quarter totalled $316.9 million representing an increase of 0.2% from last year. On an organic basis, segment orders were up 7.2% from the 4th quarter of last fiscal year. Demand from the U.S. federal government sector showed continued signs of improvement this quarter, with modest year-over-year increases in both sales and orders versus the same quarter last year.
Net sales within the ELA segment totalled $109.6 million in the 4th quarter of fiscal 2014. This represents a 10.6% increase from the same quarter last fiscal year, with the largest contributor of this growth coming from the company's business in the United Kingdom.
New orders in this segment totalled $94.7 million in the fourth quarter, representing a year-over-year increase of 1.5%. On an organic basis, segment sales increased 9.3% and orders were flat relative to the 4th quarter of last fiscal year.
New orders in the 4th quarter of $67.9 million increased 30.3% compared to last year. On an organic basis, adjusting for the Maharam acquisition and order pull-ahead from the price increase last quarter, segment orders increased 7.1% compared to the same quarter last year. This organic order growth was driven by increased orders in the Herman Miller Collection and Geiger business units.
Herman Miller's consolidated gross margin in the 4th quarter totalled 36.7%, a 130 basis point improvement over last year's 4th quarter gross margin of 35.4%.
The addition of higher margin Maharam products and net benefit from the recent price increase drove the majority of this year-over-year increase.
Mr. Walker stated, "Despite the required reduction in accounting book value, we continue to believe the Nemschoff and POSH brands and companies are important contributors to the overall Herman Miller offer. This past year Nemschoff was again recognized as the number one brand for Healthcare furnishings in the United States, and the POSH brand continues to maintain a leading position in China with a growing presence throughout Asia."
Greg Bylsma, Chief Financial Officer, added, "It's important to note these acquisitions included forms of contingent consideration that were payable based on performance subsequent to the date of acquisition. These write-downs reflect, in part, that the performance levels needed to earn the additional consideration were not achieved. As a result, over time, we have also recorded gains as it became clear the contingent consideration would not be paid."
Mr. Bylsma continued, "Our teams did a good job this quarter delivering on the performance we committed to coming into the period, while at the same time advancing on a number of near-term priorities - including readying new products for commercial launch and delivering a powerful presentation at the NeoCon trade show. We continue to demonstrate improvement in our financial performance through focused efforts to increase operating efficiency, shift the mix of our business toward higher margin growth opportunities, and generate strong cash flow."
Looking forward, Herman Miller expects net sales in the first quarter of fiscal 2015 to be in the range of $480 million to $500 million. This would represent an increase of between 2.5% and 7% from the first quarter of fiscal 2014.
Diluted earnings per share in the quarter are expected to range between $0.44 and $0.48.
Mr. Walker concluded, “As we close this past fiscal year we are encouraged by our significant progress in virtually every area of the business as we advance our strategic agenda. We have meaningfully improved our ability to deliver Herman Miller’s unique brand of human-centered solutions to customers in diverse settings around the world and we see further opportunity ahead."

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