Smooth Sailing for Herman Miller

June 30, 2006
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GRAND RAPIDS — Herman Miller Inc. is well on track to achieve its two-year-old goal to double its business and challenge for the industry's top spot by 2010.

To do that, the company has had to outpace the growth of the industry, and it has done so in spades, delivering its 10th consecutive quarter of year-over-year sales growth and another year of double-digit growth.

Net sales for fiscal 2006 were up 14.6 percent to $1.74 billion, and up 9 percent to $444 million for the fourth quarter ending June 3. Profits skyrocketed 51 percent to 1.45 billion for the year.

"Our intent is to do that again in 2007 through the investments we have made in new products and new markets," President and CEO Brian Walker said in a conference call with investors and analysts last week.

Fresh off an incredibly busy NeoCon trade show, Herman Miller is going into fiscal 2007 with significant orders and backlog, up 15.1 percent and 4.2 percent, respectively, from the previous year. The international business achieved exceptional growth — 36 percent in the fourth quarter alone — and for the first time has positioned itself as a player in several regions across the globe.

Operationally, the company is at its strongest point in percent in the fourth quarter. However, operational expenses were up $23.8 million in the quarter, a surprise to analysts. CFO Beth Nickels explained that when adjusting for a number of benefits that skew the year-ago expenses, the increase is closer to $15 million, a third of which was research, development and marketing of new products.

"The new product costs were high, but based on the excitement we received at NeoCon, we believe it's worth it," said Walker. He added that those initiatives will likely lay the foundation for continued growth into 2007.

Analysts also questioned the lackluster margin improvements brought by last year's price increase.

"The short answer to that is competition," Walker said. "Almost every project we do is a bid situation, and our competitors aren't going to let us off."     

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