Even Good Quarter Cant Raise Herman Millers Spirits

June 5, 2002
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ZEELAND — Despite feeling the pains of a soft U.S. economy, Herman Miller Inc. posted what its chairman calls “comfortable” sales and earnings figures for the third quarter.

The Zeeland-based office furniture maker says it won’t do so well in the next three months, however, as customers defer spending in the wake of the economic conditions.

Herman Miller has responded by cutting much of its temporary workforce, implementing a hiring freeze for new positions deemed non-critical, slowing capital spending and stepping up efforts to contain and cut costs in the wake of the economic conditions that aren’t expected to improve until the latter half of the year at the earliest.

While the latest weekly sales volumes have shown strength, “We don’t believe we have enough data to call this a trend,” Chief Financial Officer Beth Nickels said.

“Obviously, like you, we are watching economic trends closely,” Nickels told brokerage analysts during a conference call last week.

The call came the day after Herman Miller reported sales of $538.4 million for the quarter that ended March 3. That’s up 12.6 percent from the $478.2 million for the same period a year earlier. The growth was driven primarily by backlogged orders from the previous quarter, Nickels said.

Net earnings totaled $33 million, or 43 cents per share, up 3.8 percent from the $31.8 million, or 40 cents per share, from the same quarter a year ago.

The financial results were on the lower end of expectations.

Executives said that given the economic conditions, they were pleased with the results, but warned of difficulty ahead as customers defer spending plans.

“I’m comfortable with our results from the third quarter, given the slowdown in our industry and in the general economy. I’m less than thrilled with the guidance we have to give you for the fourth quarter, and be assured that the leadership team will continue to work hard to improve our position by aggressively pursuing every customer opportunity and appropriately aligning our costs with the current market conditions,” Herman Miller Chairman and CEO Michael Volkema told analysts.

“There are a lot of unknowns out there,” Volkema said.

While industry shipments for the first two months of the year grew 4.5 percent from over a year ago, new orders decreased 0.8 percent, according to the industry trade group BIFMA International. BIFMA expects industry shipments to grow 2.8 percent this year, which is about half of what it initially forecast.

Herman Miller’s fourth quarter sales will shadow results from a year ago and fall below results from the previous three months. Earnings for the present quarter will also fall from the same period in the previous year, the company expects.

In offering a look ahead, the company expects fourth quarter sales of between $510 million and $530 million. Quarterly net earnings will total 37 to 43 cents per share. Herman Miller posted sales of $522 million and earnings of 50 cents per share during the fourth quarter of its previous fiscal year.

Among the steps Herman Miller has taken to shave costs is the reduction of its temporary workforce, from about 1,200 at the start of the fiscal year in June to less than 400 today, Nickels said. Much of the reduction came during the last quarter, spokesman Mark Schurman said.

The company has also secured cost savings from its suppliers and vendors totaling $13 million, Nickels said.

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