ZEELAND, Mich., July 7 /PRNewswire/ -- Herman Miller, Inc. (NASDAQ/NMS: MLHR), today reported the following results for the fourth quarter and fiscal year ended May 29, 1993.
Fourth Quarter Fiscal 1993 Results
Net sales increased 8.6 percent, or $18.5 million, in the final three months of fiscal 1993 over the fourth quarter a year ago. During the three months ended May 29, 1993, the company recorded net sales of $233.6 million and net income of $8.9 million, equal to $.35 per share, compared with net sales of $215.1 million and a net loss of $17.6 million, or $.70 per share, in the fourth quarter of last year. The three months ended May 30, 1992, included pretax charges totaling $34.4 million. These charges included restructuring and other charges of $30.2 million, as well as an extraordinary loss of $4.2 million on the prepayment of $42.9 million of long-term debt. Together, these items reduced last year's fourth quarter net income by $23.4 million, or $.93 per share. Thus, before giving effect to the charges and extraordinary loss, fourth quarter fiscal 1992 net income was $5.8 million, or $.23 per share.
Net sales of foreign operations and export sales from the United States in the fourth quarter of fiscal 1993 totaled $30.1 million compared with $35.2 million last year, resulting in a net loss of $4.4 million compared with a net loss of $4.0 million in the fourth quarter of last year. The fourth quarter fiscal 1993 net loss of $4.4 million included $3.2 million of after-tax charges, or $.13 per share, arising out of the reconfiguration of manufacturing operations in the United Kingdom. The manufacturing reconfiguration, which commenced in April, will result in the consolidation of five facilities into two and the elimination of 90 positions. The fourth quarter fiscal 1992 net loss of $4.0 million included $1.3 million after tax of the other fourth quarter fiscal 1992 charges referred to above. Thus, before giving effect to fourth quarter charges in each fiscal year, foreign operations and export sales from the United States produced a net loss of $1.2 million in the fourth quarter of fiscal 1993 compared with a net loss of $2.7 million during the same period last year.
Fiscal 1993 Results
Net sales increased 6.3 percent, or $51.0 million, in fiscal 1993 over fiscal 1992. During the year ended May 29, 1993, the company recorded net sales of $855.7 million and net income of $22.1 million, equal to $.88 per share, compared with net sales of $804.7 million and a net loss of $14.1 million, or $.56 per share, in the year ended May 30, 1992. In addition to the fiscal 1992 fourth quarter pretax charges and the extraordinary loss described above, fiscal 1992 results also included the effect of adoption of Statement of Financial Accounting Standards No. 106 "Employers' Accounting for Postretirement Benefits Other Than Pensions" (SFAS No. 106), which further reduced fiscal 1992 net income by $9.1 million, or $.35 per share. Thus, before giving effect to (1) the restructuring and other charges, (2) the extraordinary loss, and (3) the effect of adoption of SFAS No. 106, fiscal 1992 net income was $18.1 million, or $.72 per share.
Net sales of foreign operations and export sales from the United States totaled $121.5 million in fiscal 1993 compared with $124.0 million last year, resulting in a net loss of $8.6 million compared with a net loss of $6.5 million last year. These results included the $3.2 million United Kingdom manufacturing reconfiguration after-tax charge (described above) in fiscal 1993 and $1.3 million of other after-tax charges (also described above) recorded in fiscal 1992. Thus, before giving effect to unusual charges in each fiscal year, foreign operations and export sales from the United States produced a net loss of $5.4 million for fiscal 1993 compared with a net loss of $5.2 million in fiscal 1992.
Backlog, Orders, and Outlook
The consolidated backlog of unfilled orders at May 29, 1993, was $129.8 million compared with $116.2 million a year earlier, an increase of 11.7 percent, and $126.2 million at February 27, 1993, an increase of 2.8 percent. New orders received in the fourth quarter were $237.2 million, an increase of $24.2 million, or 11.4 percent, compared with the same period a year ago. New orders for the year ended May 29, 1993, were $869.2 million, an increase of $60.5 million, or 7.5 percent, compared with the year ended May 30, 1992. Although lower than fourth quarter fiscal 1993, first quarter fiscal 1994 order levels have continued to be favorable on a comparative (year-over-year) basis through early July.
James H. Bloem, vice president and chief financial officer, said, "We finished fiscal 1993 on a strong upward trend. After the modest results of the first quarter, each subsequent quarter saw sequentially increasing net sales and net income. Our fourth quarter net sales were the highest in 11 quarters, falling only $.3 million short of the highest net sales level achieved by the company in any quarter.
"Domestic sales were up 13.2 percent during the fourth quarter over year ago levels, after being up 11.5 percent on a year-over-year basis in the third quarter. Both these net sales growth rates are well in excess of the most recent industry statistics which show total United States shipments to be up approximately 4 to 5 percent year to date in calendar 1993.
"In addition, our fourth quarter and annual order levels also were the second highest in the company's history.
"The rates of pretax income for the fourth quarter and fiscal 1993 improved to the highest level in two years as a result of (1) price stability achieved during the last six months of the fiscal year, (2) implemented cost reductions initiated earlier in the fiscal year, (3) increased unit sales volume, and (4) a lower fixed cost structure resulting from last year's restructuring charges and the extraordinary loss on repayment of long-term debt. While also improved significantly, net income for both the fourth quarter and fiscal year was burdened by income tax rates of 55.4 and 47.9 percent, respectively. These high tax rates primarily were due to the current nondeductibility of the $3.2 million after-tax charges for the manufacturing reconfiguration in the United Kingdom commenced in the fourth quarter.
"In addition to the improved net sales, orders, and pretax profitability rates achieved in the fourth quarter and fiscal year, we also further strengthened our financial position and cash flow from operating activities as follows:
"1. Asset utilization continued on a five-year track of improvement. During the fourth quarter, total assets increased only 2.1 percent, or $9.8 million, while net sales increased 8.6 percent, or $18.5 million, over year-ago levels. For fiscal 1993, total assets increased only 2.8 percent, or $13.1 million, versus an increase in net sales of 6.3 percent, or $51.0 million. Days sales in accounts receivable plus days sales in inventory at May 29, 1993, were 83.0 days. This compares with 90.0 days at May 30, 1992, and 107.4 days at the end of fiscal year 1989, a decrease of 24.4 days over the five-year period. Total assets have decreased from $520.8 million at the end of fiscal 1989 to $484.3 million at May 29, 1993, a decrease of $36.5 million, or 7.0 percent. During the same period, net sales increased $26.7 million, or 3.2 percent. Effective asset utilization continues to be a key competitive strength in an industry which has experienced substantial price erosion during the past five-year period. Our net sales-to-total assets ratio was 1.8 at May 29, 1993.
"2. Increasingly effective asset utilization has generated improved cash flow. Fourth quarter fiscal 1993 cash flow from operating activities was $19.4 million, while for the full fiscal year cash flow from operating activities was $82.6 million. For fiscal 1992, cash flow from operating activities was $77.0 million. Five years ago, cash flow from operating activities was $61.1 million on net sales of $829.0 million and net income of $45.7 million.
"3. Beset by flat total industry sales and industry-wide declining profitability rates over the past five years, improved cash flow from operating activities has enabled us to enhance our competitive position in several important respects during the fourth quarter, the fiscal year, and over the past five years.
"a. We continued to make the necessary capital expenditures for process improvements and new products. Capital expenditures during the fourth quarter and fiscal 1993 were $10.2 million and $43.4 million, respectively. During the past five years, capital expenditures have totaled $203.8 million. This compares with total net property and equipment of $228.4 million at May 29, 1993, indicating the modern and efficient manufacturing and logistic capabilities required for heightened product and service quality standards as well as shortened customer lead times.
"b. We also continued to fund research and design rigorously, spending $7.2 million and $24.5 million in the fourth quarter and fiscal 1993, respectively. For fiscal 1993, research and design expense was 2.9 percent of net sales. During the past five years, research and design expenditures have totaled $110.9 million, or 2.6 percent of net sales. Both the fiscal 1993 and the five-year average research and design spending rates exceeded twice the industry average.
"c. We further reduced interest-bearing debt by $9.7 million and $14.1 million during the fourth quarter and fiscal 1993, respectively. Total interest-bearing debt at May 29, 1993, was $39.9 million versus $54.0 million at May 30, 1992, and $140.3 million at the end of fiscal 1989, a $100.4 million decrease in five years. As a result, our debt- to-total capital ratio was further reduced from 9.5 percent on May 30, 1992, to 6.9 percent on May 29, 1993. Our debt-to-total capital ratio was 26.0 percent at the end of 1989. This key indicator of financial strength and flexibility currently is among the lowest of all industrial companies worldwide.
"d. The reduction in interest-bearing debt also has favorably impacted net income through a reduction in interest expense. Total interest expense for the fourth quarter was $.4 million and for all of fiscal 1993 was $2.1 million versus $6.9 million in fiscal 1992, $11.8 million in fiscal 1990, and $9.9 million in fiscal 1989.
"e. During fiscal 1993, we continued to repurchase our common shares. Although no shares were repurchased during the third and fourth quarters, we remain committed to our 2.0 million share repurchase program announced in January of 1991. During fiscal 1993, .529 million shares, or 2.1 percent of total shares outstanding at May 30, 1992, were repurchased at an average cost of $15.43 per share. The trading range for the year ended May 29, 1993, was $14.75 to $26.375 per share. To date, 1.344 million shares, or 5.2 percent of total shares then outstanding, of the 2.0 million shares authorized in January of 1991 have been repurchased at an average cost of $17.07 per share. The trading range between January 1, 1991, and May 29, 1993, was $14.75 to $26.375 per share. During the last five years, we have repurchased 2.0 million shares at an average cost of $18.09 per share, or $36.4 million. All share repurchases were made in the open market on an unsolicited basis.
"The last five years have been difficult for Herman Miller. Net sales have increased only 3.2 percent, from $829.0 million to $855.7 million. Overshadowing and explaining this modest increase are (1) the substantial decline in prices realized and (2) flat industry- wide unit sales. In addition, increased costs and intensified competition worldwide also have been significant factors. In fiscal 1993, we reversed a two-year downward trend in net income, and it is appropriate to reflect briefly on the progress we have made within the context of these substantial shifts in both our industry and the various economies of the world.
"While we are proud of the above-recited accomplishments, we, more importantly, realize that many challenges still lie ahead. To list a few, sluggish economies worldwide, continuing price competition, and upward cost pressures stand as ever-present impediments to our long- standing objective of being the functional design and price value leader in the office furniture and health-care industries. We believe the coordinated strategies and effective work of our employee-owners as well as our supplier and dealer partners will enable us to continue to set a distinctive reference point in our markets.
"We are especially pleased as employee-owners that our ingenuity and dedication, together with that of our supplier and dealer partners, has helped add nearly 60 percent, or $240 million, to the total market capitalization of our company during the past six months. The long-term share ownership of our employees and many of our supplier and dealer partners continues to work to the advantage of all of our shareholders."
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. The company's common stock is traded on the National Market System for over-the-counter stock issues (NASDAQ symbol: MLHR).
Financial highlights for the three months and fiscal year ended May 29, 1993, and May 30, 1992, follow:
HERMAN MILLER, INC.
CONDENSED CONSOLIDATED STATEMENTS
(Dollars in 000s, except per share data)
Three Months Ended
(Unaudited) May 29, 1993 May 30, 1992
Net Sales $233,641 $215,130
Income (Loss) Before Taxes
and Extraordinary Item 19,850 (19,856)(1)
Income Tax Provision (Credit) 11,000 (4,900)
Extraordinary Loss, Net of Taxes --- (2,681)
Net Income (Loss) $8,850 $(17,637)(1)
Net Income (Loss) Per Share $ .35 $ (.70)(1)
Common Share Equivalents 25,037,352 25,135,228
Fiscal Year Ended
(Audited) May 29, 1993 May 30, 1992
Net Sales $855,673 $804,675
Income (Loss) Before Taxes,
Extraordinary Item, and 42,354 (988)(1)
Income Tax Provision 20,300 2,500
Extraordinary Loss, Net of Taxes --- $ (2,681)
Cumulative Effect of Change --- (7,976)
in Accounting Principle
Net Income (Loss) $ 22,054 $(14,145)(1)
Net Income (Loss) Per Share $ .88 $ (.56)
Common Share Equivalents 24,992,600 25,162,973
(1)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.
HERMAN MILLER, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Audited) (Dollars in 000s)
May 29, May 30,
Cash and short-term investments $ 16,531 $ 16,949
Accounts receivable (net) 111,218 109,770
Inventories 56,038 59,861