HERMAN MILLER, INC., REPORTS SALES AND EARNINGS RESULTS FOR THE FOURTH QUARTER AND FISCAL YEAR ENDED MAY 30, 1992
HERMAN MILLER, INC., REPORTS SALES AND EARNINGS RESULTS FOR THE FOURTH QUARTER AND FISCAL YEAR ENDED MAY 30, 1992 ZEELAND, Mich., July 8 /PRNewswire/ -- Herman Miller, Inc. (NASDAQ-NMS: MLHR), today reported the following results for the fourth quarter and fiscal year ended May 30, 1992. Fourth Quarter 1991/92 Results Net sales increased 4.8 percent for the three months ended May 30, 1992, compared with fourth quarter results a year ago. During this period, the company had net sales of $215.1 million and a net loss of $17.6 million, equal to $.70 per share, compared with net sales of $205.2 million and net income of $7.1 million, or $.28 per share, in the fourth quarter last year. The three months ended May 30, 1992, included pretax charges totalling $34.4 million. These charges included restructuring and other charges of $30.2 million, and an extraordinary loss of $4.2 million on the prepayment of long-term debt, all of which are detailed below. These charges reduced fourth quarter net income by $23.4 million, or $.93 per share. Before giving effect to these changes, fourth quarter net income was $5.8 million, or $.23 per share. Net sales of foreign operations and exports from the United States for the fourth quarter were $35.2 million compared with $35.3 million in the same period last year, resulting in a net loss of $4.0 million compared with net loss of $1.5 million a year ago. The fourth quarter 1992 net loss included $1.3 million after tax of other charges referred to above. Fiscal 1991/92 Results Net sales for the fiscal year ended May 30, 1992, decreased 8.4 percent compared with levels attained in fiscal 1991. For the year ended May 30, 1992, the company had net sales of $804.7 million and net loss of $14.1 million, equal to $.56 per share, compared with net sales of $878.7 million and net income of $14.1 million, or $.55 per share, for the year ended June 1, 1991.
In addition to the fourth quarter pretax charges and extraordinary loss, the annual results also included the effect of the fourth quarter adoption of Statement of Financial Accounting Standards No. 106 (SFAS No. 106), also described below, which reduced net income by $9.1 million, or $.35 per share.
Net sales of foreign operations and exports from the United States were $124.0 million this year compared with $153.2 million last year, resulting in a net loss of $6.5 million this year compared to net income of $3.4 million last year. These results included $1.3 million and $1.5 million of other charges recorded in fiscal years 1992 and 1991, respectively. The fiscal year 1991 results included $25.9 million of pretax charges in the third quarter ended March 2, 1991. These charges included a wood casegoods restructuring charge of $18.6 million and other pretax charges of $7.3 million. These charges had an after-tax effect of $22.9 million, or $.89 per share, in fiscal 1991. Fourth Quarter Restructuring and Other Charges The company recorded $30.2 million of pretax charges in the fourth quarter ended May 30, 1992. These charges resulted from the refocusing of facility and product strategies and the simplifying of work processes in order to create greater customer value and satisfaction. These charges, which also are designed to improve long-term profitability, included restructuring charges of $25.0 million and other charges of $5.2 million for additional inventory and accounts receivable reserves. The restructuring charges of $25.0 million included leasehold abandonments and facility closings ($8.1 million), product discontinuance and production relocation reserves ($9.9 million), and a reorganization reserve and early retirement incentive ($7.0 million). The $8.1 million of restructuring charges relating to leasehold abandonments and facility closings recognized the diminished use and effectiveness of certain North American showrooms in the selling process. In addition, these charges also include the scheduled closing of the Irvine facility early in the second quarter of fiscal 1993. The closing of the Irvine facility represents the final step in transferring all of the company's California-based assembly and logistical operations to Rocklin (Sacramento), most of which was accomplished during the last two fiscal years. The product discontinuance and production relocation reserves of $9.9 million resulted from the company's decision to refocus its product strategy by discontinuing low volume and unprofitable product lines. The product lines to be discontinued had net sales of $16.0 million in 1992 compared with $15.2 million in 1991. The aggregate pretax loss associated with these products was $1.3 million and $2.2 million in 1992 and 1991, respectively. The net book value of assets directly attributable to these products was approximately $9.3 million as of May 30, 1992. The discontinuances will occur during the first nine months of fiscal 1993, and customers will be informed well in advance in order to minimize any disruption or inconvenience to them. The reorganization reserve of $7.0 million included both an early retirement incentive and significant retraining expenses for employee- owners as levels of supervision continue to be removed from the company. The company believes as work processes are reconfigured and as individual empowerment is further increased, greater productivity and a closer relationship between all employee-owners and the customer will result. The additional reserves for inventories ($3.6 million) include both North America and Europe. The reserves in North America reflect the company's decision to redefine its classifications for obsolete, inactive, and slow-moving inventories to reflect the faster lead times and shorter cycle times achieved in fiscal 1992. These faster lead times and shorter cycle times are expected to be the standard on a going forward basis. In Europe, a general inventory reserve was established to recognize the impact of the lower level of European sales, especially in the United Kingdom. The additional accounts receivable reserve ($1.6 million) represents balances in Europe where a general reserve has been taken in light of continuing weaknesses in the various European economies, especially the United Kingdom. Continuing profit pressure at the European dealer level also makes this reserve an important precaution given the difficult economic environment there. Adoption of SFAS No. 106 During the fourth quarter of 1992 and retroactive to June 2, 1991, the company adopted Statement of Financial Accounting Standards No. 106- Employers' Accounting for Postretirement Benefits Other Than Pensions (SFAS No. 106) which requires the recognition of such costs (principally retiree health care) on an accrual rather than on a cash basis. Thus, as a result of the adoption of SFAS No. 106, fiscal 1992 net income was reduced by $9.1 million, or $.35 per share. Of this amount, approximately $8.0 million, or $.31 per share, was recorded to establish an accrued liability for the cumulative effect of this accounting change as of the beginning of fiscal 1992. The remaining $1.1 million reduced fiscal 1992 earnings by $.04 per share due to use of the accrual method. The fourth quarter adoption of SFAS No. 106 caused the retroactive restatement of earnings per share for the first three fiscal quarters as follows: 1st Qtr. 2nd Qtr. 3rd Qtr. Reported $ .10 $ .22 $ .17 SFAS No. 106 (.32) (.01) (.01) Restated $(.22) $ .21 $ .16 The adoption of SFAS No. 106 had no effect on the company's cash position and represented 3.2 percent of total shareholders' equity on an after-tax basis. Extraordinary Loss on Prepayment of Long-Term Debt In May of 1992, the company also incurred a $4.2 million prepayment penalty for early extinguishment of a $42.9 million, 10.15 percent per annum, unsecured note payable due in 1997. The penalty of $2.7 million net of applicable income taxes, or $.11 per share, was recorded as an extraordinary loss in the accompanying statement of operations. The company has arranged for formal and informal lines of credit totalling $145.0 million at substantially lower rates than the existing note. The entire amount prepaid, $47.5 million (including accrued interest and the prepayment penalty), was financed from these lines and from existing cash balances. Backlog and Outlook The backlog of unfilled orders at May 30, 1992, was $116.2 million compared with $112.2 million a year earlier and $118.3 million at Feb. 29, 1992. James H. Bloem, vice president and chief financial officer, said, "While thus far in fiscal 1993 preorder activity has increased in June and early July over fourth quarter fiscal 1992 levels, the ability to maintain year-ago price levels remains difficult in both North America and Europe. In Europe, the effects of the severe recession in the United Kingdom, together with slowing economic growth on the continent, are expected to continue at least through our first two fiscal quarters. In addition, during the fourth quarter of 1992, the company exhausted its ability to carry back net operating losses to prior periods for income tax purposes in the United Kingdom. Together, these factors will adversely affect our prospects during the first half of fiscal 1993 to significantly increase net sales and profitability over the levels attained in the first two quarters of fiscal 1992." Fiscal 1992 in Perspective Bloem continued, "Fiscal 1992 was a difficult year which produced unacceptable earnings results and yet further demonstrated our solid worldwide market position and enhanced our financial strength and flexibility. "1. Fiscal 1992 marked our first decline in annual sales since becoming a public company in 1970. In North America, total office furniture industry sales declined for the second consecutive fiscal year as the declines in both white-collar employment and the commercial real estate market continued. In Europe, severe recession in the United Kingdom, our dominant European market, also continued. Slowing economic growth on the European continent also contributed to the decline in sales. Despite these external factors, we have maintained our share of these markets during the last two years. "2. The decline in annual sales brought with it reduced earnings. Prior to giving effect to the restructuring and all of the other charges described above, earnings declined to $.72 per share versus $1.44 per share on a comparable basis in fiscal 1991. Lower unit volumes and increased price competition, which increased in severity during the year, only partially were offset by the important and lasting effects of closer partnerships between our employee-owners, dealers, and suppliers. The further strengthening of these partnerships, which better serve the customer by creating greater value, is vital to our future success. "3. Interest expense was reduced by $3.4 million. In addition, the prepayment of long-term debt at year end (which resulted in the $4.2 million pretax extraordinary loss), is expected to save an additional $1.6 million for each of the next five fiscal years. "4. Total interest-bearing debt was reduced $21.7 million in fiscal 1992, following a $34.3 million reduction in fiscal 1991. Our debt-to- total capital now stands at 9.5 percent down from 14.8 percent on June 1, 1991, and 22.1 percent on June 2, 1990. Few industrial corporations worldwide can match either this indicator of financial strength or rate of improvement during the past two years. "5. While sales declined 8.4 percent and net income prior to giving effect to restructuring and all of the other charges decreased 50.0 percent during fiscal 1992, cash flow from operating activities declined only 10.9 percent, to a strong $77.0 million. Cash of $16.5 million was generated through the conversion of other working capital accounts versus $5.3 million during fiscal 1991. "6. Days sales in accounts receivable and inventory declined to 90.0 days at May 30, 1992. This compares with 94.4 days at June 1, 1991, and 110.2 days at June 2, 1990. These comparisons reflect one of
the key financial results of stronger partnerships between our employee- owners, dealers, and suppliers, which have improved efficiency and customer satisfaction by shortening lead and cycle times.
"7. Total assets declined to $471.3 million at May 30, 1992, from $492.9 million at June 1, 1991, or 4.4 percent. These amounts further compare with total assets of $534.0 at June 2, 1990. Thus, while sales have declined by 7.0 percent over the two-year period, total assets declined 11.7 percent. This continuing improvement in asset utilization demonstrates our flexibility in scaling the total assets employed to the current level of business. We believe this is a fundamental competitive advantage. "8. Despite our unacceptable earnings and because of our strong cash flow, we also maintained our $.13 per share quarterly dividend and additionally repurchased .578 million, or 2.25 percent, of our outstanding shares at a total cost of $10.4 million and an average cost of $17.81 per share. These two strategies returned over $23.5 million cash to our shareholders during fiscal 1992 versus $18.0 million in 1991. We remain committed to our quarterly cash dividend of $.13 per share and our January 1991 share repurchase commitment of 2.0 million shares. To date, .815 million shares have been repurchased at an average cost of $18.13 per share. "9. Finally, and for us most importantly, we have maintained our research and development expenditures at 2.6 percent of sales ($20.7 million) in the face of lower sales and earnings. This percentage is well in excess of the office furniture industry average. We believe this commitment to research and solve the needs and problems of our customers, together with our financial strength and flexibility and the increasing resourcefulness of our employee-owners, dealers, and suppliers, will serve both Herman Miller and its customers increasingly well in the future." Herman Miller, Inc., is an international firm engaged primarily in the manufacturing and sale of office systems products and related services principally for offices and, to a lesser extent, for health- care facilities and other uses. HERMAN MILLER, INC. Condensed Consolidated Statements of Operations (Audited) (Dollars in 000s, except per share data) Three months ended 5/30/92 6/1/91 Net Sales $215,131 $205,191 Income (Loss) Before Taxes and Extraordinary Item (19,856)(A) 11,068 Taxes on Income (Loss) (4,900) 4,000 Extraordinary Loss, Net of Taxes (2,681) -- Net Income (Loss) $(17,637)(A) $ 7,068 Net Income (Loss) Per Share $(.70)(A) $.28 Common Share Equivalents 25,135,228 25,665,696 Fiscal year ended 5/30/92 6/1/91 Net Sales $804,675 $878,732 Income (Loss) Before Taxes, Extraordinary Item, and Cumulative Effect (988)(A) 33,159 Taxes on Income (Loss) 2,500 19,100 Extraordinary Loss, Net of Taxes $ (2,681) -- Cumulative Effect of Change in Accounting Principle (7,976) -- Net Income (Loss) $(14,145)(A) $ 14,059(B) Net Income (Loss) Per Share $(.56) $.55(B) Common Share Equivalents 25,162,973 25,684,717 (A) -- Includes $30.2 million of pretax charges, including restructuring charges of $25.0 million and other charges of $5.2 million. These charges decreased net income by $20.6 million, or $.82 per share. (B) -- Includes $25.9 million of pretax charges, including wood casegoods restructuring charges of $18.6 million and other pretax charges of $7.3 million. These charges decreased net income by $22.9 million, or $.89 per share. HERMAN MILLER, INC. Condensed Consolidated Balance Sheets (Dollars in 000s) 5/30/92 6/1/91 ASSETS Current assets Cash and short-term investments $ 16,949 $ 15,369 Accounts receivable (net) 109,770 122,323 Inventories 59,861 69,420 Prepaid expenses 18,739 14,500 Totals 205,319 221,612 Net property and equipment 220,317 218,748 Other assets 45,632 52,587 Totals $ 471,268 $ 492,947 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Current long-term debt $ 2,756 $ 9,377 Notes payable 21,774 11,596 Accounts payable 36,945 34,435 Accrued liabilities 77,299 52,224 Totals 138,774 107,632 Long-term debt 29,445 54,720 Deferred items 22,967 15,813 Shareholders' equity 280,082 314,782 Totals $ 471,268 $ 492,947 HERMAN MILLER, INC. Condensed Consolidated Statements of Cash Flows (Dollars in 000s) Fiscal year ended 5/30/92 6/1/91 Net Income (Loss) $(14,145) $ 14,059 Cash Flows from Operating Activities 77,000 86,393 Cash Flows used for Investing Activities (30,362) (33,729) Cash Flows from Financing Activities (43,922) (50,140) Net Increase in Cash 1,580 3,613 Cash, Beginning of Year 15,369 11,756 Cash, End of Period $16,949 $15,369 -0- 7/8/92 /CONTACT: Jim Bloem, 616-772-3653, or Jim Schreiber, 616-772-1723, both of Herman Miller, Inc./ (MLHR) CO: Herman Miller, Inc. ST: Michigan IN: SU: ERN
GK -- NY081 -- 7665 07/08/92 22:13 EDT
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|Date:||Jul 8, 1992|
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