Herman Miller, Inc., Reports Gains in Fourth Quarter and Fiscal
Year Results: Announces Succession Plan
Webcast to be held Thursday, June 24, 2004, at 9:30 a.m. EDT
ZEELAND, Mich., June 23 /PRNewswire-FirstCall/ -- Herman Miller, Inc. (NASDAQ:MLHR), today announced results for the fourth quarter and fiscal year
ended May 29, 2004. Growth continued this quarter as sales were $353.8
million, an increase of 9.9% from the year-ago period. Gross margin was 31.8%
for the quarter. Cash flow from operations was a strong $36.5 million for the
quarter, and the company ended the year with a cash balance of $189.2 million. Net earnings for the quarter were $19.3 million, or $0.27 per share. These
amounts include pre-tax charges of $0.9 million associated with the previously
announced restructuring actions, and a $6.9 million favorable impact from the
resolution of prior years' tax audits. Additionally, the company adopted a new
accounting standard, FASB Interpretation No. 46 "Consolidation of Variable
Interest Entities" (FIN 46) resulting in a cumulative effect, non-cash charge
of $0.5 million after-tax.
FINANCIAL HIGHLIGHTS (Dollars in millions, except per share data) Three Months Ended Fiscal Year Ended
5/29/04 05/31/03 Percent 5/29/04 05/31/03 Percent
Change Change
Net Sales 353.8 321.9 9.9% 1,338.3 1,336.5 0.1%
Gross Margin 112.5 107.2 4.9% 415.6 423.6 (1.9)%
Operating Expenses 92.9 89.9 3.3% 344.1 358.9 (4.1)%
Restructuring Expenses 0.9 15.9 (94.3)% 10.3 16.4 (37.2)%
Operating earnings 18.7 1.4 1235.7% 61.2 48.3 26.7%
Net earnings 19.3 (1.3) NA 42.3 23.3 81.5%
Earnings per share -
diluted $0.27 $(0.02) NA $0.58 $0.31 87.1%
Orders 361.8 337.8 7.1% 1,353.4 1,317.9 2.7%
Backlog 209.5 182.0 15.1%
Fourth Quarter 2004 Financial Results
The company's consolidated sales and orders for the quarter were $353.8 million
and $361.8 million, respectively. Orders continued to grow, both
year-over-year and sequentially, up 7.1% from the prior year and up 16.7% over
the prior quarter. In addition, the order backlog ended the quarter at $209.5
million, a 15.1% increase over the prior year and a 6.9% increase from the
prior quarter.
Beth Nickels, Chief Financial Officer, stated, "Top line growth was strong
again this quarter. Our weekly order entry rates continued to rise, averaging
$27.8 million per week, the highest rate we've seen in the last eleven
quarters. We're also encouraged by the strong attendance at our annual NeoCon
trade show in Chicago last week. The signals are clear that our industry is
back on the growth path." Gross margin for the quarter was 31.8%, the highest gross margin rate for the
year, driven by leverage from the increased volume, combined with the initial
benefits of the company's recent Canton, Georgia, plant consolidation, and in
spite of increased steel costs. On a year-over-year basis, gross margin
declined from the 33.3% achieved in the fourth quarter of 2003. The prior year
margin benefited from approximately $4.8 million in favorable adjustments for
LIFO inventory valuations, and incentive and benefit accrual reductions that
did not recur in the current year. In addition, pricing pressures, while
consistent with last quarter, continued to have a negative influence on
year-over-year gross margins.
Operating expenses for the quarter totaled $92.9 million, or 26.3% of sales,
compared to $89.9 million, or 27.9% of sales, for the same period in fiscal
2003. The dollar increase in spending is due mainly to variable selling costs
associated with the higher volume, combined with increases in new product
research and development. The decrease as a percentage of sales reflects the
company's continuing commitment to leverage its cost structure.
The $0.9 million of restructuring charges for the quarter were primarily
associated with the previously announced relocation of the Canton operations. That move is now complete. Modest restructuring charges will be reported in
the future as the final costs related to Canton are incurred. The prior year's
restructuring charges for the same quarter included $13.5 million for the
impairment of assets associated with the relocations of the Canton and Formcoat
facilities. In addition, the prior year charges include $3.6 million related
to workforce reductions announced in prior quarters, and a favorable reserve
adjustment of $1.2 million primarily associated with the final sale of the
Rocklin, California, facility.
The company adopted the provisions of FIN 46 at the end of the fourth quarter.
This new accounting standard broadens the requirements for determining whether
a company is required to consolidate the financial statements of another
entity. In adopting FIN 46, the company determined the need to consolidate the
financial statements of two independent contract furniture dealerships to which
it was providing ongoing financial support through loans and/or financial
guarantees. As a result of this consolidation, the company recorded a non-cash
cumulative effect loss of $0.5 million, or slightly less than $0.01 per share,
net of tax. As this new accounting standard was adopted at the end of the
fiscal year, the consolidation had no material impact on the company's fiscal
2004 income statement beyond that of the cumulative effect. The effect of
adoption on the company's balance sheet as of May 29, 2004, was an increase to
assets of approximately $2.0 million and liabilities of $2.6 million.
Net earnings for the quarter were $19.3 million, or $0.27 per share, as
compared to a loss of $1.3 million, or $(0.02) per share, in the prior year. Included in the current year results is a $6.9 million, or $.09 per share, net
earnings benefit from the favorable closing of prior years' tax audits during
the quarter.
Cash flow from operations for the quarter totaled $36.5 million, compared to
$3.6 million for the same period last year. The prior year amount included a
voluntary contribution to the company's employee pension fund of $15 million.
Capital spending for the quarter was $7.3 million, compared to $9.3 million for
the same period last year. During the quarter the company repurchased
approximately 1.4 million shares of its stock for $36.8 million, at an average
price of $26.35 per share. The company's ending cash position was $189.2
million.
Ms. Nickels added, "In addition to our strong top line performance, we continue
to see substantial benefits to the bottom line, and to our cash flow, driven by
the business model changes we put in place. We look forward to continuing to
drive improved results for our shareholders." Fiscal 2004 Financial Results For the year, consolidated net sales totaled $1.34 billion, up 0.1% from fiscal
2003. While essentially flat for the year, the trend reflected strong growth
in the second half of the year. Net sales in the first half were down 7%
year-to-year, but were up over 8% in the second half of the year. New orders
totaled $1.35 billion for the year, up 2.7% from fiscal 2003, again reflecting
strong growth of over 8% in the final six months.
Gross margins declined to 31.1% in fiscal 2004 from 31.7% in fiscal 2003, due
primarily to increased pricing pressure, partially offset by improvements in
manufacturing overhead as a result of the prior year's restructuring. Operating
expenses were reduced by over 4% year-to-year, to $344.1 million in fiscal
2004, from $358.9 million in fiscal 2003. Restructuring charges for the year
totaled $10.3 million, as compared to $16.4 million in the prior year. These
charges negatively impacted earnings per share by $.09 in fiscal 2004, and by
$.14 in 2003. In spite of these charges, the company generated net earnings of
$42.3 million or earnings per share of $.58 in fiscal 2004, as compared to
$23.3 million or earnings per share of $.31 in fiscal 2003.
Annual cash generated from operations was strong again in fiscal 2004 and
amounted to $82.7 million, compared to $144.7 million in fiscal 2003. Included
in the current and prior year's cash from operations were contributions to the
company's employee pension fund of $28.3 million and $32.1 million,
respectively. Capital spending for the year was $26.7 million compared to
$29.0 million for fiscal 2003. During the year the company repurchased
approximately 2,463,000 shares of its stock for $62.0 million at an average
price of $25.18 per share.
Looking forward, the company expects first quarter revenue to increase 9 - 16%
from the prior year's first quarter, in a range of $355 million to $375
million. It estimates earnings per share of between $.16 and $.21, which
assumes a 36% effective tax rate.
Michael Volkema, Chairman and Chief Executive Officer, commented, "I truly
believe that the stage is now set for an industry recovery. Our employee-
owners did a great job improving performance this past year, and we plan to
build on that momentum in the year ahead." Leadership Succession The Herman Miller Board of Directors also announced its plan to separate the
roles of Chairman and Chief Executive Officer. Effective July 26, 2004, Brian
Walker, President and Chief Operating Officer, will succeed Michael Volkema as
CEO. Volkema will continue to serve as Chairman of the Board. In addition,
Volkema will allocate time to the work of the Herman Miller Creative Office.
"I have always believed there is no lasting success without a successor, and it
was a privilege for me to recommend to the Board of Directors that Brian Walker
succeed me as Chief Executive Officer. We've worked together for over nine
years and in that time I have seen Brian demonstrate his gift for leadership,
first as Chief Financial Officer, then President of North America, and most
recently as President and Chief Operating Officer. Brian's leadership has been
instrumental in guiding the company through the difficulties of the past few
years, and he is ready to lead Herman Miller into a new era of growth and
profitability," said Mike Volkema, Chairman and CEO.
"In addition to my responsibilities as Chairman, this change will also allow me
to focus more of my time on the vital work of the Herman Miller Creative
Office, as we create new innovations and enhance the company's ability to
prosper in the future," Volkema added.
Brian Walker, President and COO, stated, "My abilities as a senior leader at
Herman Miller have grown through the trust, mentoring and friendship of Mike
Volkema. I look forward to the continuation of our partnership in this
evolution of our roles." Walker added, "As a company we benefit from this
continuity in our leadership team and its shared vision and strategy. Over the
past three years we have become a more focused organization with the will to
win. I'm looking forward to serving the people of Herman Miller in building
that future." The company has announced a live webcast to discuss the results of the fiscal
2004 fourth quarter, to be held Thursday, June 24, 2004, at 9:30 a.m. EDT. The
company encourages all interested parties to log in to the website to obtain
presentation materials, which will augment the verbal presentation. To ensure
your access to the webcast, you should allow extra time to visit our website at
http://www.hermanmiller.com/ to download the streaming software necessary to
participate. An online archive of the presentation will be available on the
website later that day.
This press release contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act, as amended, that are based on management's beliefs,
assumptions, current expectations, estimates, and projections about the office
furniture industry, the economy, and the company itself. Words like
"anticipates," "believes," "confident," "estimates," "expects," "forecasts,"
"likely," "plans," "projects," "should," variations of such words, and similar
expressions identify such forward-looking statements. These statements do not
guarantee future performance and involve certain risks, uncertainties, and
assumptions that are difficult to predict with regard to timing, extent,
likelihood, and degree of occurrence. Therefore, actual results and outcomes
may materially differ from what we express or forecast. Furthermore, Herman
Miller, Inc., undertakes no obligation to update, amend, or clarify
forward-looking statements.
Herman Miller provides complete solutions that help create great places to
work. Through research, design, manufacture, and distribution of innovative
interior furnishings, complemented by furniture management and strategic
consulting services, the company serves organizations and individuals around
the world. During fiscal 2004, Herman Miller's award-winning products and
services generated $1.34 billion in revenue. The company was also cited in
Fortune magazine as the "Most Admired" company in its industry and was again
named among Business Ethics magazine's "100 Best Corporate Citizens." Herman
Miller trades on the NASDAQ stock market under the symbol MLHR. For additional
information visit HermanMiller.com.
Financial highlights for the quarter ended May 29, 2004 follow: Herman Miller, Inc. Condensed Consolidated Statements of Operations
(Unaudited) (Dollars in millions, except per share data)
Three Months Ended
May 29, May 31,
2004 2003 Net Sales 353.8 100.0% 321.9 100.0%
Cost of Goods Sold 241.3 68.2% 214.7 66.7%
Gross Margin 112.5 31.8% 107.2 33.3%
Operating Expenses 92.9 26.3% 89.9 27.9%
Restructuring Expense 0.9 0.3% 15.9 4.9%
Operating Earnings 18.7 5.3% 1.4 0.4%
Other (Income)/Expense 1.2 0.3% 2.9 0.9%
Earnings Before Taxes 17.5 4.9% (1.5) (0.5%)
Income Taxes (2.3) (0.7%) (0.2) (0.1%)
Income Before Cumulative Effect 19.8 5.6% (1.3) (0.4%)
Cumulative Effect of Accounting
Change - Net 0.5 0.1% - 0.0%
Net Earnings $19.3 5.5% $(1.3) (0.4%)
Net Earnings Per Basic Share Before
Cum. Effect $0.28 $(0.02)
Net Earnings Per Basic Share $0.27 $(0.02)
Weighted Average Basic Common
Shares 71,865,409 72,784,735
Net Earnings Per Diluted Share
Before Cum. Effect (1) $0.27 $(0.02)
Net Earnings Per Diluted Share (1) $0.27 $(0.02)
Weighted Average Diluted Common
Shares (1) 72,597,145 72,784,735
(1) As the company reported a net loss for the quarter ended May 31, 2003,
shares resulting from stock option plans would be anti-dilutive to earnings per
share and have not been included in diluted earnings per common share.
Herman Miller, Inc. Condensed Consolidated Statements of Operations
(Dollars in millions, except per share data)
Fiscal Year Ended
May 29, 2004 May 31, 2003
(Unaudited)
Net Sales 1,338.3 100.0% 1,336.5 100.0%
Cost of Goods Sold 922.7 68.9% 912.9 68.3%
Gross Margin 415.6 31.1% 423.6 31.7%
Operating Expenses 344.1 25.7% 358.9 26.9%
Restructuring Expense 10.3 0.8% 16.4 1.2%
Operating Earnings 61.2 4.6% 48.3 3.6%
Other (Income)/Expense 9.6 0.7% 12.5 0.9%
Earnings Before Taxes 51.6 3.9% 35.8 2.7%
Income Taxes 8.8 0.7% 12.5 0.9%
Income Before Cumulative Effect 42.8 3.2% 23.3 1.7%
Cumulative Effect of Accounting
Change - Net 0.5 0.0% - 0.0%
Net Earnings $42.3 3.2% $23.3 1.7%
Net Earnings Per Basic Share Before
Cum. Effect $0.59 $0.31
Net Earnings Per Basic Share $0.58 $0.31
Weighted Average Basic Common
Shares 72,567,476 74,155,582
Net Earnings Per Diluted Share
Before Cum. Effect $0.59 $0.31
Net Earnings Per Diluted Share $0.58 $0.31
Weighted Average Diluted Common
Shares 73,072,907 74,479,063
Herman Miller Inc. Condensed Consolidated Statements of Cash Flows
(Dollars in millions) Fiscal Year Ended
May 29, 2004 May 31, 2003
(Unaudited) Net Earnings $42.3 $23.3
Cash Flows provided by Operating Activities 82.7 144.7
Cash Flows used for Investing Activities (21.9) (7.3)
Cash Flows used for Financing Activities (60.0) (82.2)
Effect of Exchange Rates 2.7 6.3
Net Increase in Cash 3.5 61.5
Cash Increase from Adoption of FIN 46 0.2 -
Cash, Beginning of Year 185.5 124.0
Cash, End of Period $189.2 $185.5 Herman Miller, Inc. Condensed Consolidated Balance Sheets
(Dollars in millions)
Fiscal Year Ended
May 29, 2004 May 31, 2003
(Unaudited)
Assets
Current assets
Cash and equivalents 189.2 185.5
Short-term investments 10.7 11.5
Accounts receivable (net) 142.4 125.6
Inventories 38.1 31.4
Prepaid expenses and other 50.2 59.5
Totals 430.6 413.5
Net property and equipment 208.5 245.7
Other assets(1) 75.6 98.1
Total Assets $714.7 $757.3
Liabilities and Shareholders' Equity
Current liabilities
Unfunded checks 8.6 12.1
Current long-term debt 13.0 13.6
Notes payable 1.5 -
Accounts payable 90.4 73.9
Accrued liabilities 123.8 137.6
Totals 237.3 237.2
Long-term debt 192.7 209.4
Other noncurrent liabilities (1) 90.1 119.7
Shareholders' equity 194.6 191.0
Total Liabilities and Shareholders' Equity $714.7 $757.3
(1) Amounts for year ending May 31, 2003, have been restated to conform to
current year presentation. DATASOURCE: Herman Miller, Inc.
CONTACT: Joe Nowicki, +1-616-654-5222 or , Beth Nickels, +1-616-654-8050 or , Media: Mark Schurman, +1-616-654-5498 or , or Bruce Buursma, +1-616-654-5770 or , all of Herman Miller, Inc.
Web site: http://www.hermanmiller.com/
|