Miller Expects Its Gains To Continue

September 17, 2004
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HOLLAND — Herman Miller Inc. expects to post solid quarterly sales and earnings gains in the current quarter, as business continues to steadily rebound.

After reporting a 10 percent sales gain for the first quarter and more than doubling earnings from a year ago, Herman Miller is forecasting sales of $360 million to $380 million for the present second quarter of the 2005 fiscal year. That represents a 9 percent to 15 percent increase over the $323.9 million recorded in the second quarter of FY2004.

The company projects net income for the second quarter of 19 cents to 24 cents per share. Herman Miller made $9.1 million, or 12 cents per share, during the same period in FY2004.

While macro-economic conditions that affect the office furniture industry — white-collar job growth, office construction, corporate profitability and capital spending — are not improving as fast as earlier expected, Herman Miller Chief Executive Officer Brian Walker told brokerage analysts last week that business continues to improve.

“We demonstrated solid progress again this quarter,” Walker said during a conference call to discuss results for the first quarter that ended Aug. 28.

Walker believes the industry, after mounting a recovery earlier this year following a harsh three-year downturn, can record “good growth” in the year ahead as long as the economy continues to perform better.

“As an industry we’re still making progress over the declines of prior years and we’re well positioned to grow into the future,” he said. “It’s really going to depend on what is the economic data continuing to play out at overall.”

Herman Miller last week reported first quarter sales of $357.3 million, up 10.1 percent from the $324.5 million in the same period a year ago.

Net income totaled $14.3 million, or 20 cents per share for the quarter that ended Aug. 28. That compares with net income of $6.2 million, or 8 cents per share, in the first quarter a year ago.

Earnings met the consensus expectations of Wall Street brokerage analysts polled by Thomson/First Call, while sales came in on the low end of the company’s previous quarterly guidance.

The period was the third consecutive quarter in which Herman Miller recorded year-to-year sales gains, indicating the office furniture industry’s rebound continues on track. Orders during the quarter were up 18 percent from a year earlier and backlogged orders increased 24.6 percent.

A highlight for the quarter was a nearly 41 percent increase in international sales. Domestic sales grew 5 percent.

The increasing costs of raw materials such as steel continues to concern executives, although Chief Financial Officer Beth Nickels believes the company can maintain current gross margins and largely offset cost increases through further productivity gains and increasing volumes. The company will also begin to see the benefits in the second half of the fiscal year from a price increase implemented Aug. 1 in response to higher steel prices, which grew $4 million alone in the quarter.

“We are confident we’ll be able to offset a good portion of the raw materials cost increases as we get further into the year,” Nickels said.           

Miller’s Move

Net Sales

1Q FY 2005: $357.3 million

1Q FY 2004: $324.5 million

Net Income

1Q FY 2005: $14.3 million, 20 cents EPS

1Q FY 2004: $6.2 million, 8 cents EPS

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