Herman Miller Reports Fourth Quarter Fiscal 2020 Results
Herman Miller, Inc. (“Herman Miller” or the “Company”) announced results for its fourth quarter ended May 30, 2020. Net sales in the quarter totaled $475.7 million, a decrease of 29.1% from the same quarter last fiscal year. New orders in the fourth quarter of $535.3 million were 19.4% below the prior year level.
On an organic basis, which excludes the impact of acquisitions and foreign currency translation, net sales and orders in the fourth quarter decreased by 34.9% and 25.3%, respectively, compared to the same quarter last fiscal year.
Herman Miller reported a net loss per share of $2.95 in the fourth quarter compared to diluted earnings per share of $0.78 in the same quarter last fiscal year. Excluding impairment charges, restructuring expenses, and other special charges, adjusted earnings per share in the fourth quarter totaled $0.11 compared to adjusted earnings per share of $0.88 in the fourth quarter of last fiscal year.
For the full fiscal year, net sales were $2,486.6 million, reflecting a year-over-year decrease of 3.1%. On an organic basis, net sales decreased by 6.6% compared to last fiscal year. Loss per share for the full year totaled $0.15 compared to diluted earnings per share of $2.70 last year. On an adjusted basis, diluted earnings per share totaled $2.61 in fiscal 2020 compared to $2.97 in fiscal 2019.
Andi Owen, President and Chief Executive Officer, stated, “While the final quarter of fiscal 2020 unfolded in ways we could not have imagined at the beginning of the fiscal year, I’m incredibly proud of our global teams for the ways they have come together to overcome the disruptions brought on by COVID-19. From ensuring the health and safety of our employees, finding ways to support our communities and first responders, and helping take swift action on our spending levels, I’m grateful for the tremendous efforts of our people. As we look ahead, we are encouraged – the global economy is beginning to restart and our strategy positions us extremely well for the opportunities ahead. We are actively applying our knowledge and research capabilities to help our customers re-imagine both their office spaces and their home environments. Our multi-channel distribution model supports a diverse revenue base that allows us to reach commercial and residential audiences across the globe. In particular, our digital transformation roadmap has become even more of an imperative and we expect these investments will help us leverage opportunities to serve the changing needs of our customers in the months ahead. Finally, our innovation capabilities will help us grow our broad line-up of products and services by designing new solutions to solve new challenges. We believe our clear set of priorities and differentiated business model will enable Herman Miller to emerge from this period an even stronger and more capable leader in the markets we serve.”
Consolidated gross margin in the fourth quarter of fiscal 2020 totaled 34.9%, representing a 210-basis point decrease from the same quarter last year. The decline in gross margin from last year was primarily driven by reduced production leverage due to lower manufacturing volume resulting from COVID-related facility shut-downs during the quarter.
Operating expenses in the fourth quarter were $154.9 million compared to $183.2 million in the same quarter a year ago. Operating expenses included certain special charges totaling $5.5 million in the fourth quarter of fiscal 2020 and $1.7 million in the same quarter last year. These items in the current quarter primarily related to costs arising as a direct result of COVID-19. Excluding these special charges, operating expenses decreased by $32.1 million compared to the same quarter last year.
The Company recorded non-cash, pre-tax charges related to Design Within Reach, Maharam, HAY and naughtone for the impairment of goodwill, intangible assets, and right of use assets of $205.4 million in the fourth quarter. These charges were determined based on the Company’s annual impairment review process and indicators of impairment arising from the impact of COVID-19 on financial results. The Company also recognized pre-tax restructuring expenses totaling $16.9 million in the fourth quarter. These items related primarily to severance and outplacement benefits associated with workforce reductions implemented during the quarter.
Herman Miller’s effective income tax rate in the fourth quarter was 14.2%, compared to 22.0% in the same quarter last fiscal year. Excluding the impact of adjustments related to impairment, restructuring and other special charges recorded during the quarter, a portion of which were not deductible for tax purposes, the effective tax rate in the quarter was 47.9%. This rate reflected both provision to return adjustments and the accrual of withholding taxes related to planned repatriation of cash from certain foreign jurisdictions.
Jeff Stutz, Chief Financial Officer, noted, “We remain focused on maintaining a strong liquidity position to navigate the uncertain business conditions that we are facing. Our cash and cash equivalents at the end of the fourth quarter totaled over $450 million. This balance reflected drawing excess cash from our revolving credit facility as a precautionary measure and $50 million in proceeds from the issuance of private placement notes in May. Earlier in the quarter, we announced the temporary suspension of our share repurchase program and dividend payment to conserve capital as well as a series of actions aimed at reducing operating expenses. These included temporary salary reductions and the suspension of retirement contributions and our fiscal 2021 bonus program. We also reduced discretionary spending and workforce levels to better align to the current demand environment. Despite the challenges we faced this quarter, these actions highlight our ability to adapt and execute as we delivered positive adjusted operating income and operating cash flows in the period, and we have a strong and flexible balance sheet to support our business going forward.”
The Company ended the fourth quarter with total cash and cash equivalents of $454.0 million. This amount included a draw down of excess cash on its revolving credit facility of $265 million during the quarter, which was subsequently repaid in full on June 29, 2020. Additionally, Herman Miller previously announced the deferral of its quarterly dividend payment to shareholders of record as of February 29, 2020. That dividend was originally scheduled to be paid on April 15, 2020. The Company’s Board of Directors has now approved the payment of this dividend, which will be made on July 15, 2020. The Company will, however, maintain a temporary suspension of future dividend payments given the ongoing uncertainty caused by COVID-19. Cash flow generated from operations in the fourth quarter and full fiscal year was $30.0 million and $221.8 million, respectively. This compared to $85.9 million and $216.4 million in the respective periods of last fiscal year.
First Quarter Fiscal 2021 Guidance
The outbreak of COVID-19 has created a high degree of uncertainty throughout the global economy. Due to this uncertainty, and the rapidly changing effects of risk mitigation efforts to control the outbreak around the world, we are not able to reasonably estimate the impact of the outbreak on our business or financial results in the near-term. Accordingly, we are continuing to withhold providing guidance for the upcoming quarter while this uncertainty persists.
To read the full results, click here.
About Herman Miller
Herman Miller is a globally recognized provider of furnishings and related technologies and services. Since its inception in 1905, the Company has relied on innovative design to help people do great things. The global design leader has evolved into Herman Miller Group, a family of brands that collectively offers a variety of products for environments where people live, learn, work, and heal. The family of brands includes Colebrook Bosson Saunders, Design Within Reach, Geiger, HAY, Maars Living Walls, Maharam, naughtone, Nemschoff, and Herman Miller. For more information visit www.hermanmiller.com/about-us.
Source: Herman Miller, Inc.