Herman Miller, Inc. (NASDAQ: MLHR) today announced results for its fourth quarter ended June 1, 2019. Net sales in the quarter totaled $671.0 million, an increase of 8.6% from the same quarter last fiscal year. New orders in the fourth quarter of $664.5 million were 7.0% above the prior year level.
On an organic basis, which excludes the impact of foreign currency translation and the adoption of the new revenue recognition standard at the start of fiscal 2019, net sales and orders in the fourth quarter increased by 7.6% and 6.4%, respectively, compared to the same quarter last fiscal year.
Herman Miller reported net earnings of $0.78 per share on a diluted basis in the fourth quarter compared to diluted earnings per share of $0.53 in the same quarter last fiscal year. Excluding the impact of restructuring expenses, other special charges, and a gain associated with the fair value adjustment of an investment, adjusted earnings per share in the fourth quarter totaled $0.88 compared to adjusted earnings per share of $0.66 in the same quarter of last fiscal year.
For the full fiscal year, net sales were $2,567.2 million, reflecting a year-over-year increase of 7.8%. On an organic basis, net sales increased by 7.1% compared to last fiscal year. Diluted earnings per share for the full year totaled $2.70 compared to $2.12 last year. On an adjusted basis, diluted earnings per share totaled $2.97 in fiscal 2019 compared to $2.30 in fiscal 2018.
The Company also announced an increase in its quarterly cash dividend to $0.21 per share payable in October 2019. This change represents an increase of 6% from the previous dividend payout of $0.1975 per share.
Andi Owen, Chief Executive Officer, stated, "Strong demand was a clear highlight of our results as we finished the quarter setting all-time records for quarterly and annual net sales for our Company. We leveraged this demand to deliver meaningful operating margin expansion over the same quarter last year. These results for the year are a tribute to the talent and effort of our people. At the same time, there is more work ahead, as we position ourselves behind a clear set of strategic priorities to drive sustainable, diversified revenue growth and long-term value creation for all of our stakeholders. As a result of our financial performance this year and strong balance sheet position, our Board of Directors approved a 6% increase in our quarterly dividend payout - an action that reflects the confidence of the Board and our leadership team in the power of our long-term strategy."
Consolidated gross margin in the fourth quarter of fiscal 2019 totaled 37.0%, representing a 10 basis point increase from the level reported in the same quarter of last fiscal year. The adoption of the new revenue recognition standard (ASC 606) at the beginning of fiscal 2019 required recording certain product pricing elements as expenses within cost of goods sold that were previously classified on a net basis within sales. This adoption reflected an unfavorable impact on gross margin of 60 basis points compared to the basis of presentation last year. Excluding this impact, gross margin expanded by 70 basis points compared to the same quarter last year.
Operating expenses in the fourth quarter were $183.2 million compared to $183.9 million in the same quarter a year ago. Operating expenses included pre-tax special charges totaling $1.7 million in the fourth quarter of fiscal 2019 and $7.9 million in the same quarter last year. These items in the current quarter related primarily to costs associated with the CEO transition and certain business structure realignment costs. Excluding these items, operating expenses increased by $5.5 million compared to the same quarter last year.
The Company recognized pre-tax restructuring expenses totaling $8.5 million in the fourth quarter. These items related primarily to restructuring actions associated with our profit improvement initiatives, including costs associated with an early retirement program.
Other expenses, net, in the fourth quarter included a gain of $2.1 million related to a fair value adjustment of an investment in a technology partner.
Herman Miller’s effective income tax rate in the fourth quarter was 22.0%, compared to 18.3% in the same quarter last fiscal year.
Jeff Stutz, Chief Financial Officer, noted, "We were encouraged by broad-based sales and order growth for the quarter, supported by favorable macro-economic conditions and continued traction from our strategic priorities. We also further positioned our Retail business for profitable growth with the opening of three new Design Within Reach studios in the fourth quarter, a lease termination related to an underperforming studio and beginning the transition to a new, state of the art distribution center in Batavia, Ohio. These actions reflected expenses of $4.5 million during the quarter and, while they pressured profitability in the quarter, are important enablers for future growth and operating margin expansion of our Retail business. Even after factoring in these initiatives, consolidated sales growth, gross margin expansion and well-managed operating expenses combined to drive 33% growth in adjusted earnings per share compared to the same quarter last year.”
The Company ended the fourth quarter with total cash and cash equivalents of $159.2 million. Cash flow generated from operations in the fourth quarter and full fiscal year was $85.9 million and $216.4 million, respectively. This compared to $55.8 million and $166.5 million in the respective periods last fiscal year.
First Quarter Fiscal 2020 Guidance
Looking forward, Herman Miller expects net sales in the first quarter of fiscal 2020 to be in the range of $650 million to $670 million. On an organic basis, adjusted for foreign currency translation, this forecast implies sales growth of 6% compared to the first quarter of the prior year at the mid-point of the range. The Company expects diluted earnings per share to range between $0.77 to $0.81.