Herman Miller financials decline

March 19, 2009
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ZEELAND — Herman Miller announced its third quarter results of consolidated net sales for the quarter at $354.4 million. The number represents a 28.5 percent decline from the same quarter of the previous year and a 25.6 percent decline from the previous quarter.

“As we expected, business levels continued to decline with the overall economic stagnation that occurred during the quarter,” said Brian Walker, Chief Executive Officer. “Fortunately, our management teams were once again out in front of the rapid change and moved quickly to modify our cost structure and strengthen our cash position. Our people remain motivated and focused on the most important ways to serve our customers and improve our operating performance.

The company put in place the majority of its restructuring actions to reduce costs, but was not able to reap the full financial benefits of those actions within the quarter. The suspected savings totals between $110 million and $115 million in decreased expenses. Along with a cut in employee levels, the company also has moved to an alternating four-day work week and has suspended its 401(k) match. Walker and other top level executives have taken pay cuts as well.

“We continue to challenge ourselves to find faster and more efficient methods to improve our position in the market and take advantage of competitive opportunities,” said Walker.

The company’s efforts have started to take root. Operating expenses have declined by 21.2 percent, $23 million, compared to last year’s third quarter. From the second quarter, operating expenses dropped by $15.1 million. Still, the company was unable to overcome the lower volume. Gross margin for the quarter fell to 29.9 percent of sales from 34.3 percent in the period a year ago.

“The rapid implementation of expense and overhead cost reductions during the quarter, along with our organization-wide focus on continuous improvement, enabled us to rapidly adjust to an unprecedented drop in market demand,” said Greg Bylsma, Chief Financial Officer. “These actions were somewhat offset by unfavorable raw material prices. We expect additional benefits from our cost reduction efforts and improvement in raw material prices through the balance of this fiscal year.”

The company also improved its quarter end cash position to $172.4 million, up from $81.4 million in last year’s third quarter.

North American sales, however, experience a decline of 27.7 percent, $295.9 million from the previous year. Non-North American sales were also down from last year, coming in at $51.8 million, a 28 percent decline.

“With all of the uncertainty in the global economy, it is difficult to predict the length and depth of the recession. However, I am confident that our management team and culture of employee ownership and participation will enable us to find creative methods to adjust in this difficult environment,” said Walker. “This quarter’s results, while disappointing in absolute terms, once again demonstrated this proven ability to adapt, innovate, and execute. Our lean business model and continued investment in our performance innovation strategy will prove resilient and valuable today, and when the economic environment improves.”

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