HNI Corporation (HNI) today announced sales for the third quarter ended September 28, 2019 of $625.4 million and net income of $46.1 million. GAAP net income per diluted share was $1.07 compared to $0.89 in the prior year. Non-GAAP net income per diluted share was $1.08 compared to $0.90 in the prior year. GAAP to non-GAAP reconciliations follow the financial statements in this release.
Third Quarter Summary Comments
"Our teams delivered strong profit growth during the third quarter. The demand environment remains dynamic, and our organization continues to adjust and drive value for shareholders," said Jeff Lorenger, HNI Corporation President and Chief Executive Officer.
Third Quarter Summary Comments
Consolidated net sales increased $14.3 million or 2.3 percent from the prior year quarter to $625.4 million. On an organic basis, sales increased 3.1 percent. The net impact of divesting small office furniture companies decreased sales $4.5 million compared to the prior year quarter. A reconciliation of organic sales, a non-GAAP measure, follows the financial statements in this release.
Gross profit margin decreased 20 basis points compared to the prior year quarter. This decrease was driven by lower volume and higher input costs, partially offset by price realization and productivity, net of investments.
Selling and administrative expenses as a percent of sales decreased 110 basis points compared to the prior year quarter. This decrease was primarily due to higher net sales and lower core SG&A spend.
Non-GAAP net income per diluted share was $1.08 compared to $0.90 in the prior year quarter. The $0.18 increase was due to price realization and productivity, net of investments, partially offset by lower sales volume and higher input costs.
Office furniture net sales increased $13.1 million or 2.8 percent from the prior year quarter to $484.8 million. On an organic basis, sales increased 3.8 percent primarily driven by growth in the contract business. The net impact of divesting small office furniture companies decreased sales $4.5 million compared to the prior year quarter.
Office furniture GAAP operating profit margin increased 90 basis points for the quarter. This increase was driven by improved price realization and productivity, net of investments, partially offset by lower sales volume, higher input costs, and higher restructuring and transition costs.fi
Hearth products net sales increased $1.2 million or 0.9 percent from the prior year quarter to $140.6 million, driven by an increase in the new construction business.
Hearth products GAAP operating profit margin increased 120 basis points for the quarter. This increase was driven by price realization and one-time restructuring and transition costs incurred in the prior year quarter, partially offset by lower sales volume and higher input costs.
Outlook
The Corporation expects full year organic sales to be up approximately 1 percent. This compares to the previous organic sales growth expectation of up 1 to 4 percent. The change is primarily driven by lower growth in the contract-driven office furniture business. Including the impact of closing and divesting small office furniture companies, full year sales are expected to be flat to the prior year. The Corporation's estimate of full year non-GAAP earnings per diluted share has narrowed and is expected to be in the range of $2.50 to $2.60 versus the previous guidance range of $2.50 to $2.70.
"We expect continued profit growth in the fourth quarter. Recently, we have seen increasing macro-economic uncertainty slow our growth in the contract business; however, we are confident in our contract competitive position as we come off a strong third quarter. Our outlook for the supplies-driven office furniture and hearth products businesses remains relatively unchanged. We have multiple opportunities in front of us to grow profits and increase long-term shareholder value,” said Mr. Lorenger.