View printer-friendly version << Back HON INDUSTRIES Announces Results for First Quarter - Fiscal 2003 MUSCATINE, Iowa--(BUSINESS WIRE)--April 22, 2003--HON INDUSTRIES Inc. (NYSE:HNI) announced today sales of $392.0 million and net income of $15.9 million for the first quarter ending March 29, 2003. Consolidated net sales for the first quarter decreased 1.8 percent to $392.0 million, compared to $399.1 million for the same quarter last year. Net income was $15.9 million and net income per share was $0.27 per diluted share, which was the same as first quarter 2002. The economy and markets continue to experience softness due to economic and political uncertainty. As a percent of sales, gross margins for the first quarter increased to 35.5 percent from 35.0 percent for the same quarter last year. "The benefits from restructuring initiatives implemented over the past few years plus our rapid continuous improvement programs and the hard work of our dedicated member-owners are enabling us to continue to improve our gross margins," said Jack Michaels, HON INDUSTRIES' Chairman and CEO. Selling and administrative expenses for the quarter as a percent of sales increased to 29.2 percent, compared with 28.6 percent in first quarter 2002. The increase is due to lower overall sales volume and charges totaling $4.0 million that consisted of increased freight surcharges, a reserve for a preferential payment claim and an additional impairment charge related to a facility that was closed in 2001. Included in 2002 selling and administrative expenses were $3.9 million of costs due to the shutdown of an office furniture facility in Jackson, Tennessee. Cash flow from operations for the first three months was $7.9 million compared to $1.6 million last year. As is typical, a large outflow of cash was required in the first quarter for the annual payment of marketing programs and the funding of the defined contribution retirement plan. Capital expenditures increased from $5.3 million in 2002 to $14.5 million in 2003 which included funding for the purchase of a leased plant, information system improvements, new products, and productivity improvements. The Company's cash position remains strong and totaled $114.0 million, including short-term investments, as of March 29, 2003. The Company repurchased 406,000 shares of its common stock at a price of approximately $10.8 million during the first quarter. There is $52.0 million of the Board's current repurchase authorization remaining to purchase common stock. Office Furniture For the quarter, sales for the HON INDUSTRIES' office furniture segment were down 1.8 percent to $294.9 million from $300.2 million in 2002. Operating profit as a percent of net sales increased to 8.5 percent compared to 8.1 percent for 2002. The Business and Institutional Furniture Manufacturer's Association (BIFMA) reported shipments down 8 percent for the first two months of 2003. "We are encouraged that we are continuing to gain market share and improve gross margins," stated Mr. Michaels. Hearth Products Net sales in the first quarter for the hearth products segment decreased 1.8 percent to $97.1 million, compared to $98.9 million in the first quarter of last year. Operating profit as a percent of net sales decreased to 6.0 percent of net sales versus 6.6 percent for 2002 primarily due to continued investment in long-term growth opportunities. 2003 Outlook "We expect to continue to outperform the industries in which we compete; however, we feel that the global economic and geopolitical uncertainty will continue to challenge growth and profitability during the second quarter," stated Mr. Michaels. "We are continuing to implement our plan to increase long-term shareholder value by streamlining our processes and operations, understanding and responding to end-users, building brand power, and reducing our cost structure." Conference Call HON INDUSTRIES will host a conference call on Tuesday, April 22, 2003, at 10:00 a.m. to discuss the first quarter fiscal 2003 results. To participate, call the conference call line at 888- 273-9890. A replay of the conference call will be available until Tuesday, April 29, 2003. To access this replay, dial 800-475-6701, access code 680242. A line to the simultaneous webcast can be found on the company's website at www.honi.com. HON INDUSTRIES Inc. provides products and solutions for the home and workplace environments and is the third largest office furniture manufacturer in the United States. HON INDUSTRIES is also the nation's leading manufacturer and marketer of gas- and wood-burning fireplaces. The Company's strong brands, including HON, Allsteel, Gunlocke, Heatilator and Heat-N-Glo, have leading positions in their markets. HON INDUSTRIES is committed to maintaining its long-standing corporate values of integrity, financial soundness and a culture of service and responsiveness. By doing so, the Company was recognized for the third consecutive year as one of the 400 Best Big Companies in America by Forbes magazine in 2003, and as America's Most Admired Company in the furniture industry by Fortune magazine in 2003. HON INDUSTRIES' common stock is traded on the New York Stock Exchange under the symbol HNI. More information can be found on the Company's website at www.honi.com. Forward-looking Statements Statements in this news release that are not strictly historical, including statements as to plans, objectives, and future financial performance, are "forward-looking" statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks, which may cause the Company's actual results in the future to differ materially from expected results, particularly those with respect to expected earnings for the remainder of the fiscal year. These risks include, among others: the Company's ability (a) to realize financial benefits from its cost containment and business simplification initiatives, (b) to realize financial benefits from investments in new products, and (c) to mitigate the effects of uncertain steel prices and supplies; lower than expected demand for the Company's products due to uncertain political and economic conditions; competitive pricing pressure from foreign and domestic competitors; and other factors described in the Company's annual and quarterly reports filed with the Securities and Exchange Commission on Forms 10-K and 10-Q. HON INDUSTRIES Unaudited Condensed Consolidated Statement of Operations Three Months Ended Mar. 29, Mar. 30, (Dollars in thousands, except per share data) 2003 2002 ---------------------------------------------------------------------- Net sales $391,971 $399,139 Cost of products sold 252,841 259,398 ---------------------------------------------------------------------- Gross profit 139,130 139,741 Selling and administrative expenses 114,426 114,325 ---------------------------------------------------------------------- Operating income 24,704 25,416 Interest income 821 635 Interest expense 1,086 1,215 ---------------------------------------------------------------------- Income before income taxes 24,439 24,836 Income taxes 8,554 8,941 ---------------------------------------------------------------------- Net income $15,885 $15,895 ---------------------------------------------------------------------- Net income per common share $0.27 $0.27 ---------------------------------------------------------------------- Average number of common shares outstanding 58,317,275 58,776,955 ---------------------------------------------------------------------- Unaudited Condensed Consolidated Balance Sheet Assets Liabilities and Shareholders' Equity As of As of (Dollars in Mar. 29, Dec. 28, Mar. 29, Dec. 28, thousands) 2003 2002 2003 2002 ---------------------------------------------------------------------- Cash and cash Current equivalents $99,542 $136,165 liabilities $219,039 $298,680 Short-term investments 14,473 16,378 Receivables 148,449 181,096 Long-term debt 2,894 8,553 Capital lease Inventories 46,306 46,823 obligations 1,259 1,284 Deferred income Other long-term taxes 11,129 10,101 liabilities 29,835 28,028 Prepaid Deferred income expenses taxes and other current assets 8,514 11,491 39,345 37,114 ---------------------------------------------------------------------- Current Total assets $328,413 $405,054 liabilities $292,372 $373,659 Capital stock 58,162 58,374 Paid-in capital 526 549 Property and equipment - net 352,404 353,270 Retained earnings 590,820 587,731 Goodwill 192,395 192,395 Accumulated other comprehensive Other assets 68,390 69,833 income 262 239 ---------------------------------------------------------------------- Total shareholders' equity 649,770 646,893 ------------------------------------ Total liabilities and Total shareholders' assets $942,142 $1,020,552 equity $942,142 $1,020,552 ---------------------------------------------------------------------- HON INDUSTRIES Unaudited Condensed Consolidated Statement of Cash Flows Three Months Ended Mar. 29, Mar. 30, (Dollars in thousands) 2003 2002 ---------------------------------------------------------------------- Net cash flows from (to) operating activities $7,910 $1,581 Net cash flows from (to) investing activities: Capital expenditures (14,463) (5,266) Other (5,393) 2,199 Net cash flows from (to) financing activities (27,677) (7,763) ---------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents (39,623) (9,249) Cash and cash equivalents at beginning of period 139,165 78,838 ---------------------------------------------------------------------- Cash and cash equivalents at end of period $99,542 $69,589 ---------------------------------------------------------------------- Unaudited Business Segment Data Three Months Ended Mar. 29, Mar. 30, (Dollars in thousands) 2003 2002 ---------------------------------------------------------------------- Net sales: Office furniture $294,867 $300,221 Hearth products 97,104 98,918 ---------------------------------------------------------------------- $391,971 $399,139 ---------------------------------------------------------------------- Operating Profit: Office furniture $25,193 $24,248 Hearth products 5,814 6,505 ---------------------------------------------------------------------- Total operating profit 31,007 30,753 Unallocated corporate expense (6,568) (5,917) ---------------------------------------------------------------------- Income before income taxes $24,439 $24,836 ---------------------------------------------------------------------- Depreciation & Amortization Expense: Office furniture $11,493 $12,291 Hearth products 3,646 3,309 General corporate 1,143 1,548 ---------------------------------------------------------------------- $16,282 $17,148 ---------------------------------------------------------------------- Capital Expenditure - Net Office furniture $4,553 $4,152 Hearth products 6,521 920 General corporate 3,389 194 ---------------------------------------------------------------------- $14,463 $5,266 ---------------------------------------------------------------------- As of As of Mar. 29, Mar. 30, 2003 2002 ------------------- Identifiable Assets: Office furniture $456,321 $512,194 Hearth products 302,741 308,734 General corporate 183,080 114,381 ---------------------------------------------------------------------- $942,142 $935,309 ---------------------------------------------------------------------- CONTACT: HON INDUSTRIES Inc., Muscatine Jerald K. Dittmer, 563/264-7400 or Investor Relations: Melinda C. Ellsworth, 563/264-7406 SOURCE: HON INDUSTRIES Inc.