Fourth Quarter Fiscal 2015 Financial Results
Sales for the quarter within Herman Miller’s North American reportable segment were $309.5 million, an increase of 0.8% from the same quarter last fiscal year. On an organic basis, excluding the impact of dealer divestitures and foreign currency translation, segment sales increased by 2.9% on a year-over-year comparison. New orders in the fourth quarter totaled $321.5 million, representing an increase of 1.5% from last year. On an organic basis, segment orders were up 3.6% from the fourth quarter of last fiscal year. This represents an improvement from the year-over-year decrease of 1% reported for this segment in the third quarter of fiscal 2015.
Net sales within the ELA segment totaled $102.9 million in the fourth quarter of fiscal 2015. This represents a 6.1% decrease from the same quarter last fiscal year. The strength of the U.S. dollar compared to prior year continued to pose a significant headwind to segment growth this quarter. New orders in this segment totaled $93.4 million in the fourth quarter, representing a year-over-year decrease of 1.4%. On an organic basis, excluding the impact of foreign currency translation, segment sales increased 2.8% and orders were 8.3% higher than the fourth quarter of last fiscal year.
Net sales in the fourth quarter within Herman Miller’s Specialty segment totaled $59.4 million. This represents an increase of 11.9% over sales in the same quarter last year. New orders in the fourth quarter of $57.9 million increased 8.2% compared to last year. Sales and order growth were broad-based across the Specialty business.
The Consumer segment reported sales of $78.9 million, which were $61.2 million higher than the prior year period. The majority of this increase related to the acquisition of DWR, which added sales of $60.8 million, net of eliminations. Orders in the quarter of $84.1 million were up by $69.7 million from the prior year.
Herman Miller's consolidated gross margin in the fourth quarter totaled 38.1%, a 140 basis point improvement over last year's fourth quarter gross margin of 36.7%. This continued trend of year-over-year improvement was fueled by favorable product and channel mix, including the acquisition of DWR, operational improvements, favorable commodities and pricing realization, all of which combined to more than offset the unfavorable currency translation impact from a stronger U.S. dollar.
Jeff Stutz, Chief Financial Officer stated, "We’re pleased to report strong sales and order growth this quarter, coupled with overall earnings performance that exceeded our expectations coming into the quarter. Our operating results were highlighted by continued gross margin expansion and strong operating cash flows, which helped us further reduce the debt we incurred last summer to acquire DWR. These improvements are particularly encouraging as they reflect measured progress in our strategy of expanding in markets with structurally attractive margins and supportive growth prospects."
Herman Miller reported operating expenses in the fourth quarter of $161.7 million compared to $131.5 million in the same quarter a year ago. This represents a year-over-year increase of $30.2 million, which relates primarily to the acquisition of DWR.
During the fourth quarter, the company recognized pretax asset impairment expenses totaling $10.8 million associated with the POSH trade name intangibles. This non-cash charge was determined based upon Herman Miller's impairment review process.
Herman Miller’s effective income tax rate in the fourth quarter was 29.5%. The quarterly income tax rate included a one-time tax benefit of $3.9 million associated with the implementation of a holding company structure for certain non-U.S. subsidiaries. On an adjusted basis, excluding the one-time benefit and asset impairment expenses, the effective rate in the quarter was approximately 35%.
The company ended the fiscal year with total cash and cash equivalents of $63.7 million, an increase of $1.9 million from the balance at the end of the third quarter. Cash flow generated from operations in the fourth quarter and full fiscal year was $57.9 million and $167.7 million, respectively. This compares to $39.7 million and $90.1 million in the respective periods last fiscal year. The full year cash flow from operations in the prior year included a $49 million cash outflow related to the final termination of the company's domestic defined benefit pension plans.
Looking forward, Herman Miller expects net sales in the first quarter of fiscal 2016 to be in the range of $545 million to $565 million. This would represent an increase of between 7% and 11% from the first quarter of fiscal 2015. On an organic basis, adjusted for the DWR acquisition and impact of foreign currency translation, this forecast implies sales growth of approximately 4% at the mid-point of the range. The year-over-year impact of foreign currency translation on net sales is estimated to be approximately $12 million. Diluted earnings per share in the quarter are expected to range between $0.44 and $0.48.
The company will host a live webcast to discuss the results of the fourth quarter of fiscal 2015 on Thursday, June 25, 2015, at 9:00 a.m. ET. To ensure your access to the webcast, you should allow extra time to visit the company’s website to download the streaming software necessary to participate. An online archive of the presentation will be available on the website later that day.
About Herman Miller
Herman Miller’s inspiring designs, inventive technologies, and strategic services help people do great things and organizations perform at their best. The company’s award-winning products and services generated approximately $2.1 billion in revenue in fiscal 2015. A past recipient of the Smithsonian Institution's Cooper Hewitt National Design Award, Herman Miller designs can be found in the permanent collections of museums worldwide. Innovative business practices and a commitment to social responsibility have also helped establish Herman Miller as a recognized global leader. Herman Miller maintains the Human Rights Campaign Foundation’s top rating in its annual Corporate Equality Index and was named among the 50 Best U.S. Manufacturers by Industry Week in 2014. Herman Miller is included in the Dow Jones Sustainability World Index and trades on the NASDAQ Global Select Market under the symbol MLHR.
This information contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act, as amended, that are based on management’s beliefs, assumptions, current expectations, estimates, and projections about the office furniture industry, the economy, and the company itself. Words like “anticipates,” “believes,” “confident,” “estimates,” “expects,” “forecasts,” likely,” “plans,” “projects,” and “should,” variations of such words, and similar expressions identify such forward-looking statements. These statements do not guarantee future performance and involve certain risks, uncertainties, and assumptions that are difficult to predict with regard to timing, extent, likelihood, and degree of occurrence. These risks include, without limitation, the success of our growth strategy, employment and general economic conditions, the pace of economic recovery in the U.S. and in our International markets, the increase in white-collar employment, the willingness of customers to undertake capital expenditures, the types of products purchased by customers, competitive-pricing pressures, the availability and pricing of raw materials, our reliance on a limited number of suppliers, our ability to expand globally given the risks associated with regulatory and legal compliance challenges and accompanying currency fluctuations, the ability to increase prices to absorb the additional costs of raw materials, the financial strength of our dealers and the financial strength of our customers, the mix of our products purchased by customers, our ability to locate new DWR studios, negotiate favorable lease terms for new and existing locations and the implementation of our studio portfolio transformation, our ability to attract and retain key executives and other qualified employees, our ability to continue to make product innovations, the success of newly introduced products, our ability to serve all of our markets, possible acquisitions, divestitures or alliances, the pace and level of government procurement, the outcome of pending litigation or governmental audits or investigations, political risk in the markets we serve, and other risks identified in our filings with the Securities and Exchange Commission. Therefore, actual results and outcomes may materially differ from what we express or forecast. Furthermore, Herman Miller, Inc., undertakes no obligation to update, amend or clarify forward-looking statements.