Herman Miller Reports Fourth Quarter Fiscal 2020 Results

Rhea-AI Summary

Herman Miller, Inc. (NASDAQ: MLHR) reported a net sales decline of 29.1% to $475.7 million for Q4 FY2020 and 3.1% for the full year, totaling $2.49 billion. The company faced a net loss per share of $2.95, sharply down from earnings of $0.78 a year ago. Adjusted EPS fell to $0.11 from $0.88. The quarter also saw impairment charges of $205.4 million and restructuring costs of $16.9 million. Despite these challenges, cash and equivalents stood at $454 million, showcasing strong liquidity amid ongoing uncertainty. A webcast is scheduled for June 30, 2020.

Positive

• Strong liquidity with cash and cash equivalents of $454 million.
• Positive operating cash flow of $30 million in Q4.

Negative

• Q4 net sales of $475.7 million, a decrease of 29.1% year-over-year.
• Net loss per share of $2.95 compared to earnings of $0.78 the previous year.
• Adjusted EPS dropped to $0.11 from $0.88 year-over-year.
• New orders fell by 19.4% to $535.3 million in Q4.

ZEELAND, Mich., June 29, 2020 /PRNewswire/ --

• Decisive actions during the quarter to adjust spending levels in the near-term
• Strong liquidity with cash and cash equivalents of $454 million and positive cash flow generation
• Well-positioned strategically for commercial and residential opportunities ahead

Webcast to be held Tuesday, June 30, 2020, at 9:30AM ET

NOTE: A data supplement with additional financial information relating to the periods covered by this press release is available for download from the Company's website at http://www.hermanmiller.com/investors. A copy of this supplemental data file has also been included with this press release filed on Form 8-K with the Securities and Exchange Commission.

Herman Miller, Inc. (NASDAQ: MLHR) today 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."

Fourth Quarter Fiscal 2020 Financial Results

FINANCIAL HIGHLIGHTS
(Dollars in millions, except per share data)	(Unaudited)	(Unaudited)
	Three Months Ended	Twelve Months Ended
	May 30, 2020	June 1, 2019	% Chg.	May 30, 2020	June 1, 2019	% Chg.
Net Sales	$	475.7		$	671.0		(29.1)	%	$	2,486.6		$	2,567.2		(3.1)	%
Gross Margin %	34.9	%	37.0	%	N/A		36.6	%	36.2	%	N/A
Operating Expenses	$	154.9		$	183.2		(15.4)	%	$	717.3		$	716.2		0.2	%
Impairment Charges	$	205.4		$	—		N/A		$	205.4		$	—		N/A
Restructuring Expenses	$	16.9		$	8.5		98.8	%	$	26.4		$	10.2		158.8	%
Operating (Loss) Earnings %	(44.4)	%	8.4	%	N/A		(1.5)	%	7.9	%	N/A
Adjusted Operating Earnings %*	3.3	%	9.9	%	N/A		8.3	%	8.8	%	N/A
Net (Loss) Earnings Attributable to Herman Miller, Inc.	$	(173.7)		$	46.2		(476.0)	%	$	(9.1)		$	160.5		(105.7)	%
(Loss) Earnings Per Share – Diluted	$	(2.95)		$	0.78		(478.2)	%	$	(0.15)		$	2.70		(105.6)	%
Adjusted Earnings Per Share – Diluted*	$	0.11		$	0.88		(87.5)	%	$	2.61		$	2.97		(12.1)	%
Orders	$	535.3		$	664.5		(19.4)	%	$	2,538.6		$	2,614.9		(2.9)	%
Backlog	$	470.8		$	394.2		19.4	%
*Items indicated represent Non-GAAP measurements; see the reconciliations of Non-GAAP financial measures and related explanations in the supplemental data file available for download at http://www.hermanmiller.com/about-us/investors.html. A copy of this supplemental data file has also been included with the press release filed on Form 8-K with the Securities and Exchange Commission.

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.

Segment Sales and Orders

The following tables summarize reported and organic segment sales and orders for the fourth quarter of fiscal 2020:

Organic Sales Growth (Decline) by Segment *
	Three Months Ended	Three Months Ended
	May 30, 2020	June 1, 2019
	North America	International	Retail	Total	North America	International	Retail	Total
Net Sales, as reported	$	275.6		$	114.7		$	85.4		$	475.7		$	433.8		$	132.3		$	104.9		$	671.0
% change from PY	(36.5)	%	(13.3)	%	(18.6)	%	(29.1)	%
Proforma Adjustments
Acquisitions	(3.0)		(38.9)		—		(41.9)		—		—		—		—
Currency Translation Effects (1)	0.5		2.8		—		3.3		—		—		—		—
Net Sales, organic	$	273.1		$	78.6		$	85.4		$	437.1		$	433.8		$	132.3		$	104.9		$	671.0
% change from PY	(37.0)	%	(40.6)	%	(18.6)	%	(34.9)	%

Organic Order Growth (Decline) by Segment *
	Three Months Ended	Three Months Ended
	May 30, 2020	June 1, 2019
	North America	International	Retail	Total	North America	International	Retail	Total
Orders, as reported	$	304.2		$	124.1		$	107.0		$	535.3		$	440.5		$	111.7		$	112.3		$	664.5
% change from PY	(30.9)	%	11.1	%	(4.7)	%	(19.4)	%
Proforma Adjustments
Acquisitions	(6.0)		(38.0)		—		(44.0)		—		—		—		—
Currency Translation Effects (1)	0.6		4.7		—		5.3		—		—		—		—
Orders, organic	$	298.8		$	90.8		$	107.0		$	496.6		$	440.5		$	111.7		$	112.3		$	664.5
% change from PY	(32.2)	%	(18.7)	%	(4.7)	%	(25.3)	%
(1) Currency translation effects represent the estimated net impact of translating current period sales and orders using the average exchange rates applicable to the comparable prior year period

FAQ

What were Herman Miller's earnings for the fourth quarter of fiscal 2020?

Herman Miller reported a net loss per share of $2.95 for the fourth quarter, a decrease from earnings of $0.78 in the same quarter last year.

How did Herman Miller's net sales perform in the fourth quarter of fiscal 2020?

Net sales for Q4 FY2020 totaled $475.7 million, reflecting a decline of 29.1% compared to the same quarter last fiscal year.

What is the adjusted earnings per share for Herman Miller in FY2020?

Adjusted earnings per share for FY2020 was $2.61, down from $2.97 in the prior fiscal year.

What are the new orders reported by Herman Miller for Q4 FY2020?

Herman Miller reported new orders of $535.3 million in Q4 FY2020, a decrease of 19.4% from the previous year.

How much cash does Herman Miller have as of the end of Q4 FY2020?

As of the end of Q4 FY2020, Herman Miller had cash and cash equivalents totaling $454 million.