| HON INDUSTRIES Announces Results for Third Quarter - Fiscal 2003 |
MUSCATINE, Iowa, Oct 22, 2003 (BUSINESS WIRE) -- HON INDUSTRIES Inc. (NYSE:HNI) announced today sales of $500.1 million and net income of $34.4 million for the third quarter ending October 4, 2003. Consolidated net sales for the third quarter increased 12.1 percent to $500.1 million, compared to $446.3 million for the same quarter last year. The increase is due in part to third quarter 2003 being a 14-week period rather than the normal 13 weeks, an event that occurs once every six years due to the Company's 52/53-week fiscal year. The extra week contributes approximately 8 percent of the increase. The strong performance of the hearth products segment also contributed to the increase. Net income was $34.4 million compared to $27.2 million in the same period in 2002. Net income was $0.59 per diluted share compared to $0.46 for the same quarter last year. During the third quarter, the Company continued the process of closing two office furniture facilities and consolidating production into other U.S. manufacturing locations. In connection with the shutdowns, the Company recorded $9.0 million of pre-tax charges or $0.10 per diluted share during the third quarter. These charges included $5.1 million of accelerated depreciation of machinery and equipment, which was recorded in cost of sales, and $0.7 million for severance and $3.2 million of facility exit, production relocation, and other costs, which were recorded as restructuring costs. The closedowns and consolidation will be completed prior to the end of the year. The additional costs related to the shutdowns are expected to total $2.5 to $4.0 million in the fourth quarter. This operational realignment is expected to reduce costs $13.0 to $14.0 million on an annualized basis beginning in 2004 and result in improved service to customers with faster and better-coordinated delivery and lead-time performance. As a percent of sales, gross margins for the third quarter increased to 36.7 percent from 35.9 percent for the same quarter last year. Included in gross margin for the third quarter of 2003 is $5.1 million of accelerated depreciation of machinery and equipment related to the shutdown of two facilities reducing margins by 1.0 percentage points. "Benefits from our business simplification and cost-saving initiatives and the hard work of our dedicated member-owners enabled us to improve our gross margins," said Jack Michaels, HON INDUSTRIES Chairman and CEO. Total selling and administrative expenses, including restructuring charges, for the quarter totaled $131.4 million compared to $117.3 million for the same quarter last year. Included in third quarter 2003 were restructuring charges of $3.9 million related to the shutdown and relocation of production from two office furniture facilities. Excluding the restructuring charges, selling and administrative expenses were up 8.7% from the year earlier period primarily due to the extra week included in the current quarter. For the first nine months of 2003, consolidated net sales increased 4.3% to $1.3 billion compared to $1.2 billion in 2002. Gross margins year-to-date increased to 36.1 percent compared to 35.6 percent last year. Included in 2003 gross margins was $6.7 million of accelerated depreciation which reduced margins 0.5 percentage points. Net income was $70.5 million or $1.21 per diluted share compared to $63.2 million or $1.07 per diluted share in 2002. Included in the year-to-date results were net pre-tax restructuring charges and accelerated depreciation of $12.8 million or $0.14 per diluted share in 2003 and net pre-tax restructuring charges of $3.0 million or $0.03 per diluted share in 2002. Cash flow from operations for the first nine months was $94.7 million compared to $103.2 million last year. Capital expenditures increased from $16.8 million in 2002 to $32.1 million in 2003 which included funding for the purchase of a previously leased hearth products plant, information system improvements, and tooling and equipment for new products. The Company's cash position remains strong and totaled $168.5 million, including $94.9 million of short-term investments, as of October 4, 2003. The Company repurchased 762,300 shares of its common stock at a price of approximately $21.5 million during the first nine months of 2003. Office Furniture For the quarter, sales for HON INDUSTRIES' office furniture segment were up 9.8% to $378.4 million from $344.5 million for the same quarter last year. The increase is largely due to third quarter 2003 being a 14-week period versus a normal 13-week period. Operating profit was $45.2 million compared to $42.1 million in 2002. Operating profit as a percent of net sales decreased to 12.0 percent versus 12.2 percent in 2002. Included in 2003 are $9.0 million of charges related to the shutdown of two office furniture facilities reducing operating margins by 2.3 percentage points. "While current year earnings will be negatively impacted by these shutdowns, future results will be positively impacted once these consolidations are complete," stated Mr. Michaels. Net sales on a year-to-date basis increased 3.1% to $977.2 from $947.8 million in 2002 mainly due to the additional week. Operating profit as a percent of sales decreased to 10.0 percent compared to 10.4 percent in 2002. Included in 2003 are $12.8 million of charges related to the shutdown of two office furniture facilities reducing operating margins by 1.3 percentage points. The Business and Institutional Furniture Manufacturer's Association (BIFMA) reported shipments down 7 percent for the first eight months of 2003. Hearth Products Net sales for the hearth products segment increased 19.6 percent in the third quarter of 2003 to $121.7 million compared to $101.8 million for the same quarter last year. Excluding the effects of the extra week in third quarter 2003, net sales for the hearth products segment showed double-digit growth. This increase is attributable to strong emphasis on aggressive profitable growth through its aligned sales force, strengthening alliances with key distributors and dealers, as well as focused new product introductions. Operating profit was $17.5 million compared to $11.7 million in 2002. Operating profit as a percent of net sales increased to 14.3 percent versus 11.5 percent for 2002. Improved profitability was primarily the result of an increase in sales volume and leveraging of fixed costs, and increased sales through owned distribution channels. Net sales on a year-to-date basis increased 8.4 percent to $321.7 million from $296.9 million and operating profit as a percent of net sales increased to 10.5 percent compared to 9.1 percent in 2002. "We are very pleased with the results of the hearth products segment," stated Stan Askren, HON INDUSTRIES President. 2003 Outlook "The office furniture segment of our business continues to be challenging," stated Mr. Michaels, "therefore, we are still cautious about the near-term outlook for this segment. The final quarter of 2003 appears positive for our hearth segment based on strong recent orders for our retail brands and the expected continued solid demand for new residential construction." As a result of the Company's 52/53-week year, an additional two days of holidays fall in fourth quarter 2003 reducing the number of working days compared to the same quarter in 2002. Conference Call HON INDUSTRIES will host a conference call on Thursday October 23, 2003, at 10:00 a.m. CDT to discuss the third quarter fiscal 2003 results. To participate, call the conference call line at 888-273-9885. A replay of the conference call will be available until Thursday, October 30, 2003. To access this replay, dial 800-475-6701, access code 699319. A line to the simultaneous web cast 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 second 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(R), Allsteel(R), Gunlocke(R), Heatilator(R) and Heat-N-Glo(R), 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, facilities closing, production consolidation, 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
(Dollars in Three Months Ended Nine Months Ended
thousands, except Oct. 4, Sep. 28, Oct. 4, Sep. 28,
per share data) 2003 (1) 2002 2003 (1) 2002
----------------------------------------------------------------------
Net sales $500,091 $446,274 $1,298,855 $1,244,712
Cost of products
sold 316,412 285,996 829,620 802,090
----------------------------------------------------------------------
Gross profit 183,679 160,278 469,235 442,622
Selling and
administrative
expenses 127,472 117,274 354,877 339,019
Restructuring and
impairment
charges 3,881 - 6,146 3,000
----------------------------------------------------------------------
Operating income 52,326 43,004 108,212 100,603
Interest income 1,148 701 2,532 1,885
Interest expense 531 1,278 2,329 3,752
----------------------------------------------------------------------
Income before
income taxes 52,943 42,427 108,415 98,736
Income taxes 18,530 15,274 37,945 35,545
----------------------------------------------------------------------
Net income $34,413 $27,153 $70,470 $63,191
----------------------------------------------------------------------
Net income per
common share
(basic and
diluted) $0.59 $0.46 $1.21 $1.07
----------------------------------------------------------------------
Average number of
common shares
outstanding 58,043,055 58,918,097 58,164,638 58,871,061
----------------------------------------------------------------------
(1) Three months ended October 4, 2003, represents 14 weeks of
business activity compared to 13 weeks in the prior year. Nine months
ended October 4, 2003, similarly represents 40 weeks compared to 39
weeks in the prior year.
Unaudited Condensed Consolidated Balance Sheet
Assets
As of
Oct. 4, Dec. 28,
(Dollars in thousands) 2003 2002
----------------------------------------------------------------------
Cash and cash equivalents $73,645 $139,165
Short-term investments 94,853 16,378
Receivables 204,817 181,096
Inventories 52,260 46,823
Deferred income taxes 14,087 10,101
Prepaid expenses and other current assets 9,251 11,491
----------------------------------------------------------------------
Current assets $448,913 $405,054
Property and equipment - net 324,187 353,270
Goodwill 192,086 192,395
Other assets 60,227 69,833
----------------------------------------------------------------------
Total assets $1,025,413 $1,020,552
----------------------------------------------------------------------
Liabilities and Shareholders' Equity
As of
Oct. 4, Dec. 28,
2003 2002
----------------------------------------------------------------------
Accounts payable and accrued expenses $210,134 $252,145
Income taxes 20,712 3,740
Note payable and current maturities of long-
term debt 28,649 41,298
Current maturities of other long-term
obligations 305 1,497
----------------------------------------------------------------------
Current liabilities $259,800 $298,680
Long-term debt 2,717 8,553
Capital lease obligations 1,587 1,284
Other long-term liabilities 34,612 28,028
Deferred income taxes 38,903 37,114
Shareholders' equity 687,794 646,893
----------------------------------------------------------------------
Total liabilities and shareholders'
equity $1,025,413 $1,020,552
----------------------------------------------------------------------
HON INDUSTRIES
Unaudited Condensed Consolidated Statement of Cash Flows
Nine Months Ended
Oct. 4, Sep. 28,
(Dollars in thousands) 2003 2002
----------------------------------------------------------------------
Net cash flows from (to) operating activities $94,678 $103,236
Net cash flows from (to) investing activities:
Capital expenditures (32,124) (16,753)
Other (77,211) (16,998)
Net cash flows from (to) financing activities (50,863) (38,669)
----------------------------------------------------------------------
Net increase (decrease) in cash and cash
equivalents (65,520) 30,816
Cash and cash equivalents at beginning of period 139,165 78,838
----------------------------------------------------------------------
Cash and cash equivalents at end of period $73,645 $109,654
----------------------------------------------------------------------
Unaudited Business Segment Data
Three Months Ended Nine Months Ended
Oct. 4, Sep. 28, Oct. 4, Sep. 28,
(Dollars in thousands) 2003 2002 2003 2002
----------------------------------------------------------------------
Net sales:
Office furniture $378,356 $344,470 $ 977,182 $ 947,835
Hearth products 121,735 101,804 321,673 296,877
----------------------------------------------------------------------
$500,091 $446,274 $1,298,855 $1,244,712
----------------------------------------------------------------------
Operating profit:
Office furniture
Operations before
restructuring
charges $49,123 $42,116 $103,897 $101,212
Restructuring and
impairment charges (3,881) - (6,146) (3,000)
----------------------------------------------------------------------
Office furniture -
net 45,242 42,116 97,751 98,212
Hearth products 17,452 11,727 33,820 27,051
----------------------------------------------------------------------
Total operating
profit 62,694 53,843 131,571 125,263
Unallocated corporate
expense (9,751) (11,416) (23,156) (26,527)
----------------------------------------------------------------------
Income before
income taxes $52,943 $42,427 $108,415 $98,736
----------------------------------------------------------------------
Depreciation and
amortization expense:
Office furniture $17,978 $12,176 $42,465 $36,577
Hearth products 3,309 3,328 10,266 10,318
General corporate 1,378 1,686 3,663 4,863
----------------------------------------------------------------------
$22,665 $17,190 $56,394 $51,758
----------------------------------------------------------------------
Capital expenditures -
net:
Office furniture $4,555 $4,371 $14,481 $10,650
Hearth products 1,629 1,936 11,303 4,462
General corporate 1,587 1,095 6,340 1,641
----------------------------------------------------------------------
$7,771 $7,402 $32,124 $16,753
----------------------------------------------------------------------
As of As of
Oct. 4, Sep. 28,
2003 2002
----------- -----------
Identifiable assets:
Office furniture $478,299 $516,417
Hearth products 316,508 312,136
General corporate 230,606 176,249
-----------------------
$1,025,413 $1,004,802
----------------------------------------------------------------------
SOURCE: HON INDUSTRIES Inc. HON INDUSTRIES Inc., Muscatine Jerald K. Dittmer, 563-264-7400 or Melinda C. Ellsworth, 563-264-7406 http://www.businesswire.com Today's News On The Net - Business Wire's full file on the Internet with Hyperlinks to your home page. |