HM Expects Strong Third Quarter

December 17, 2004
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HOLLAND — Herman Miller Inc., after reporting solid results for the last three months, expects to record strong sales and earnings gains in the present quarter, a period that traditionally sees a decline in volumes.

In reporting one of its best quarters in recent years, Herman Miller last week offered a healthy outlook for the current third quarter that reflects the continued rebound in the office furniture industry that began in late 2003.

“We are building on momentum we started to see a year ago,” Chief Executive Officer Brian Walker told brokerage analysts in a Dec. 16 conference call to discuss second quarter results. “We have a much greater sense of optimism than we did a year ago at this time.”

Herman Miller’s guidance to investors predicts sales of $335 million to $375 million for the current third quarter that ends Feb. 28, 2005, an 8 percent to 14 percent increase over sales volumes a year earlier and, if achieved, the fifth straight period of year-to-year sales gains. Net income for the current quarter should total between 18 cents and 23 cents per share, the company said.

A strong order backlog will help boost the quarter, Chief Financial Officer Beth Nickels said. Sales volumes are strong enough that Herman Miller will continue production during the holiday week, Nickels said.

In recent years, the company has shut down production during the holidays.

The positive guidance came as Herman Miller reported sales of $368.4 million for the second quarter that ended Nov. 27, up 11.5 percent from the $330.3 million in the same period a year earlier.

Net income totaled $15.4 million, or 22 cents per share, up 69.2 percent from the $9.1 million, or 12 cents per share, in the second quarter a year ago.

Six-month sales reached $725.7 million, up 10.8 percent on the year from the $654.8 million at the mid-way point of the previous fiscal year. Net income for the first six months of the fiscal year was $29.6 million, or 42 cents per share, a nearly 95 percent improvement from the $15.2 million, or 21 cents per share, a year earlier.

International sales scored the biggest percentage gain, 40 percent, while domestic sales grew steadily at a 6.7 percent rate for the quarter.

While the quarterly report was mostly positive, Walker and Nickels said the company’s margins are feeling the effects of $5 million in higher steel costs and the rising cost of other raw materials such as wood and plastic.

The rising raw materials costs were largely offset by a price increase implemented in August and productivity gains, Nickels said. Even with the rising raw material costs, Herman Miller’s gross margin of 32.6 percent for the quarter was higher than the previous quarter, 31.4 percent, and a year ago, 30.9 percent.    

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