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Herman Miller Reports Strong Sales and Earnings Growth

Monday 29 December 2014

Herman Miller, Inc. announced results for its second quarter ended November 29, 2014. Net sales in the quarter totalled $565.4 million, an increase of 20.2% from the same quarter last fiscal year. New orders in the second quarter of $572.1 million were 13.8% above the prior year level.

The company's results include a full quarter of activity related to the July 2014 acquisition of Design Within Reach, Inc. ("DWR"). On an organic basis, which adjusts for the impact of acquisitions, divestitures and foreign currency translation, sales and orders in the second quarter increased 8.8% and 2.5%, respectively, from the same quarter last fiscal year.

Operating earnings in the second quarter were 8.3% of net sales compared to an operating loss of 26.6% reported in the same quarter last year. The company's earnings in the current year second quarter were reduced by $5.0 million due to costs associated with the DWR acquisition. The operating loss in the second quarter of last fiscal year was driven by expenses related to the company's domestic pension plan termination and an asset impairment charge associated with property in Ningbo, China. Excluding these items, adjusted operating earnings in the second quarter were 9.1% of net sales compared to 8.5% in the same quarter of last fiscal year.

Brian Walker, Chief Executive Officer, stated, "This quarter we delivered solid sales and adjusted earnings growth in virtually all of our segments. Gross margin improvement was once again an important component of our earnings growth, supported by higher volumes and reflecting our continuing drive for improved product and channel mix. With our first full quarter of DWR results reflected in our Consumer business, we are also encouraged by the significant progress on integration activities related to this important strategic investment."

Walker added, "This was our 12th consecutive quarter of year-over-year organic order growth. While we are pleased the positive trend continued and believe the macro dynamics remain favorable in all of our focused segments, the growth rate this quarter was less than we anticipated. This was, in part, attributed to a difficult year-on-year comparison caused by two particularly large projects recorded in our North American segment in the second quarter of last year. With that said, we believe the underlying pace of order growth in our North American segment has also been impacted by gaps in sales capacity and delays in some new product introductions. In response, we have amplified our focus and resources in support of ameliorating these issues and believe we will have the majority of them behind us in the third quarter."

Sales for the quarter within Herman Miller's North American reportable segment were $315.3 million, an increase of 6.1% from the same quarter last fiscal year. On an organic basis, segment sales increased 7.6% on a year-over-year basis. New orders in the second quarter totalled $319.3 million, a decrease of 4.3% from the year ago period, reflecting choppy demand patterns from the project side of the business, particularly related to certain large customer projects in the prior year that did not repeat. On an organic basis, segment orders in the second quarter were 3.1% lower than last year.



Looking forward, Herman Miller expects net sales in the third quarter of fiscal 2015 to be in the range of $510 million to $530 million. Diluted earnings per share in the quarter are expected to range between $0.33 and $0.37. On a full year basis, Herman Miller expects net sales for fiscal 2015 to be in the range of $2.145 billion to $2.185 billion. Diluted earnings per share for the full fiscal year are expected to range between $1.71 and $1.79. On an adjusted basis, full year diluted earnings per share are expected to range between $1.80 and $1.88.


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