HM Posts Slight Gain For Fiscal Year

June 5, 2002
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ZEELAND — Tight controls over costs and spending enabled Herman Miller to post a slight earnings gain for the fiscal year, despite the downturn that hit the industry hard during the last six months and led to lower fourth-quarter sales and net income.

Zeeland-based Herman Miller’s quarterly earnings beat analysts’ revised consensus estimates of 39 cents per share and were within the window the company set in early May.

Measures taken in recent months to respond quickly to “the most abrupt slowdown in industry history” has better positioned Herman Miller for when the economy eventually rebounds, Herman Miller Chairman and Chief Executive Officer Michael Volkema said.

“We will exit this current market condition better, stronger and a more focused competitor,” Volkema told brokerage analysts during a June 28 conference call.

Herman Miller, for the fiscal year that ended June 2, recorded earnings of $140.6 million, or $1.86 per share, which compares to $139.7 million, or $1.74 EPS, during FY 2000.

Sales for the year grew 11.2 percent, from $2.01 billion to $2.23 billion, with a torrid 23 percent growth rate recorded during the first six months of the year bolstering the annual figures.

Quarterly sales, slowed by the weakened U.S. economic conditions that began hitting Herman Miller in its third quarter, totaled $511 million, down 5.5 percent from the $540.9 million in the previous year. New orders for the quarter fell 17.7 percent.

Fourth-quarter earnings took a 17.4 percent hit, falling from $39.7 million, or 50 cents per share, to $32.8 million, or 43 cents per share. Gross margins for the quarter, as a percent of net sales, improved from 33.9 percent to 35 percent on a year-to-year basis.

Executives say savings resulting from productivity gains and cost reductions helped to partly negate the effects of the weakened economy, although tough business conditions are expected to continue through the rest of the calendar year and will surely take a further toll on sales and earnings.

While forecasting the future is “very difficult” at best, given the present business conditions, Herman Miller estimates that first-quarter sales will total $455 million to $485 million, with earnings per share of 20 cents to 25 cents, Chief Financial Officer Beth Nickels said. That compares with sales of $526.5 million and EPS of 46 cents for the same period in FY 2001.

“The current business environment is the toughest we’ve faced in 10 years, but we’re confident we’re up to the test,” Nickels told analysts.

The office furniture industry’s trade group, BIFMA, forecasts industrywide orders for 2001 to fall 6.8 percent and shipments to decline 4.4 percent from last year. BIFMA’s present forecast calls for only a 1.8 percent growth in shipments in 2002.

In response to the continued industry downturn, Herman Miller plans to make a bigger push to lure new customers, adjust spending, continue a hiring freeze implemented in March and look at further workforce reductions beyond the several hundred temporary positions already cut.

One initiative being taken to reduce the workforce is an early-retirement incentive for workers who are at least 55 years old and have been with the company for a minimum of five years. About 400 Herman Miller employees qualify for the early retirement.

Nickels could not cite specific cost-cutting goals under the early-retirement program, “which is not a major part of our cost-reduction efforts,” she said.

“It’s more along the lines of us believing this is the right way to treat employees,” Nickels said.

By offering incentives to employees who may have already been considering retirement, the company can avoid possible layoffs elsewhere, a company spokesman said.    

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