The name Herman Miller (MLHR, Financial) has become synonymous with “modern” furniture. Herman Miller is a recognized innovator in contemporary interior furnishings, solutions for health care environments and related technologies and services. A publicly held company headquartered in Zeeland, Michigan, it has manufacturing facilities in the United States, China, Italy and the United Kingdom and sales offices, dealers, licensees and customers in over 100 countries.
The company reported strong first-quarter results. The overall operating performance during the quarter reflected improvements in a number of key areas. The company had a meaningful gross margin and well-managed operating expenses.
Strong quarter
Net sales during the quarter totaled at $565.4 million, an increase of 10.9% from the prior year quarter.
New orders during the first quarter were $563.3 million, which marked an increase of 9.0% from the prior-year quarter.
On an organic basis, which adjusts for acquisitions and foreign currency translation, sales and orders in the first quarter increased 8.1% and 6.6%, respectively, from the same quarter last fiscal year.
Herman Miller reported net earnings of 56 cents per share on a diluted basis in the first quarter (42 cents in the prior-year quarter).
Adjusted diluted earnings were 47 cents per share in the first quarter of last year. The translation impact from year-over-year changes in currency exchange rates had an unfavorable impact on earnings per share of approximately 6 cents in the first quarter of fiscal 2016.
Consolidated gross margin in the first quarter totaled at 38.3% (36.4% reported in the prior-year quarter).
Operating expenses during the first quarter was $161.7 million (which was $143.4 million in the prior-year quarter).
On an adjusted basis, operating expenses in the first quarter increased by $20.3 million.
Effective income tax rate during the first quarter was 33.6% (which was 33.0% in the prior-year quarter).
The company ended the first quarter with total cash and cash equivalents of $52.0 million.
Cash flow generated from operations in the first quarter was $33.3 million (which was $42.0 million in the prior year quarter).
Segment results
North American furniture solutions
Net sales for the quarter within Herman Miller’s North American reportable segment were $338.1 million, an increase of 5.3% from the prior year quarter.
New orders in the first quarter totaled $331.9 million.
ELA furniture solutions
Net sales within the ELA segment during the quarter was $102.5 million, a 7.4% increase from the prior-year quarter.
New orders in the quarter were $58.4 million.
Consumer
The Consumer segment reported net sales in the quarter of $67.0 million, up $28.4 million from the prior-year quarter.
Orders in the first quarter were $64.8 million.
Second quarter fiscal 2016 guidance
| Net sales | In the range of $570 million to $590 million |
| Sales growth | To be 5% at the midpoint of the range(approx.) |
| Diluted earnings per share | 52 cents to 56 cents |
| Year-over-year negative impact of foreign currency translation on net sales | $13 million (approx.) |
Strong attributes of the quarter
- Overall operating performance.
- Improved momentum in North American segment (which posted year-over-year order growth of 6%).
- Better than expected sales growth.
- Meaningful gross margin expansion.
- Well-managed operating expenses.
- Consolidated operating margin was at its highest level in more than six years.
Positive attributes of the company
- Leading global brands.
- Large addressable market.
- Industry leader in design and innovation.
- Global, omni-channel reach.
- Robust operating performance.
- Strong balance sheet and returns on capital.
On a concluding note
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.
Over the past five years, the company has increased market opportunity by approximately 50% to $35 billion. Over the same period it increased gross margin by over 400 bps. Since 2010, it increased revenue by an average of 8% per year on an organic basis.
The concept of the modern office is changing, and so is the concept of office furniture. This company has plenty of room to grow in this scenario. It has strong fundamentals. It is one of the best players in the industry and has a bright future. It is a global lifestyle brand dedicated to creating inspiring places.
Disclosure: I do not hold any position in the company.
