American maker of professional furniture, HNI Corporation, announced sales for the third quarter ended September 27, 2014, of $614.7 million (+8.7%) and net income of $33.6 million, or $0.74 per diluted share.
Non-GAAP net income per diluted share improved 33% from the prior year quarter to $0.81, which excludes restructuring and transition costs.
“We delivered strong results which exceeded our sales and profit expectations for the third quarter. Both our office furniture and hearth products segments increased sales and operating margins.
Performance in our hearth business was outstanding, led by continued double-digit growth in both the remodel/retrofit and new construction channels and strong operational execution.
Office furniture sales growth accelerated, led by our contract business,” said Stan Askren, HNI Corporation Chairman, President and Chief Executive Officer.
Q3 Summary comments
Consolidated net sales increased $49.0 million or 8.7% to $614.7 million. Compared to prior year quarter, divestitures reduced sales $2.0 million. On an organic basis sales increased 9.0%.
Non-GAAP gross margin improved 110 basis points from prior year primarily due to increased volume, better price realization and strong operational performance, partially offset by unfavourable mix and investments in operations.
Selling and administrative expenses, as a percentage of sales, decreased 30 basis points due to volume, partially offset by strategic investments, higher incentive-based compensation and timing of expenses.
During the third quarter, as part of HNI’s ongoing strategy to reduce structural costs, it made the decision to close a small international office furniture manufacturing facility. In connection with closures announced earlier this year and this decision, HNI recorded $4.9 million of restructuring and transition costs with $3.9 million included in cost of sales.
Office Furniture results
Sales increased $22.4 million or 4.8% to $488.6 million. Compared to prior year quarter, divestitures reduced sales by $2.0 million. On an organic basis, sales increased 5.2% driven by growth in the supplies-driven and contract channels.
Non-GAAP operating profit increased $6.8 million or 16.7%. Increased volume, higher price realization and strong operational performance were partially offset by unfavourable mix, investments in operations, increased incentive-based compensation and timing of expenses.
“We enter the fourth quarter with solid momentum in our hearth and office furniture businesses, and remain on track to grow sales and significantly increase profits in 2014. We continue to aggressively invest for long-term profitable growth, and I remain confident our investments are increasing shareholder value,” said Mr. Askren.
HNI estimates sales to be up 13 to 17% in the fourth quarter over the same period in the prior year, including sales from the recently acquired Vermont Castings Group.
For the full year, HNI is raising its estimate of non-GAAP earnings per diluted share to the range of $1.95 to $2.00, which includes the Vermont Castings Group acquisition fourth quarter results and excludes restructuring and impairment charges, transition costs and gain/loss on sale of assets.
HNI says 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.’