American professional furniture and hearth maker HNI Corporation continues to do well.
After having closed fiscal 2013 with satisfactory sales results and strong profit growth, HNI seems to be continuing on the same path.
HNI announced sales for the first quarter ended March 29, 2014, of $452.2 million (+2.2%) and net income of $11.1 million (+688.2%), or $0.24 per diluted share for the quarter.
Non-GAAP net income per diluted share improved nine cents from the prior year quarter to $0.12, which excludes a pre-tax gain of $8.4 million on the sale of a vacated facility.
“We are pleased with our continued improved performance and strong profit growth over prior year. Strong performance in our hearth business was a key driver to our first quarter profit improvement.
As expected, office furniture sales increased in our contract channel while our supplies-driven channel was negatively impacted by harsh weather,” said Stan Askren, HNI Corporation Chairman, President and Chief Executive Officer.
Consolidated net sales increased $9.9 million or 2.2% to $452.2 million. Compared to prior year quarter, divestitures reduced sales $6.8 million. On an organic basis sales increased 3.8%.
Gross margin was 0.9% points higher than prior year primarily 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 as a percent of net sales, including restructuring charges, decreased 0.6% points due to volume and freight efficiencies partially offset by investment in strategic initiatives and higher incentive-based compensation.
HNI’s first quarter results included an $8.4 million gain on the sale of a vacated facility.
The provision for income taxes for the prior year quarter reflects the effect of the retroactive extension of the 2012 research tax credit of $0.9 million, all of which was recognized in first quarter 2013.
Cash flow used in operations for the quarter was $36.1 million compared to $31.3 million for the same quarter last year. Capital expenditures were $22.7 million in the first quarter of 2014 compared to $14.8 million in the first quarter of 2013.
Office furniture results
First quarter sales for the office furniture segment decreased $7.5 million or 2.0% to $358.4 million. Compared to prior year quarter, divestitures reduced sales by $6.8 million.
On an organic basis, sales decreased 0.2% driven by a decrease in the supplies-driven channel partially offset by an increase in the contract channel.
First quarter operating profit increased $7.8 million. Operating profit was positively impacted by increased price realization, freight efficiencies and the gain on sale of a vacated facility. These were partially offset by lower volume and unfavourable mix.
“We enter the second quarter with solid momentum across our office furniture and hearth businesses, and we remain on track to grow sales and significantly increase profits in 2014. I remain confident about our long-term investments and ability to deliver long-term shareholder value,” said Mr. Askren.
HNI estimates sales to be flat to up 4% in the second quarter over the same period in the prior year. Non-GAAP earnings per diluted share are anticipated in the range of $0.32 to $0.37 for the second quarter, which excludes restructuring charges.
For the full year, HNI is raising its estimate of non-GAAP earnings per diluted share to the range of $1.70 to $1.85, which excludes restructuring charges and gain on sale of a vacated facility.
HNI states it ‘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 continuing to execute its long-standing rapid continuous improvement discipline to build best total cost and a lean enterprise’.