Herman Miller, Inc. Investor Presentation Q1 FY2013 NASDAQ: MLHR

Transcription

1 Herman Miller, Inc. Investor Presentation Q1 FY2013 NASDAQ: MLHR

2 Forward Looking Statements 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, 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, 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, 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 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 forwardlooking statements. 2

3 A History of Bold Innovation Founded as a manufacturer of traditional residential furniture Fostered lasting ties with well-known, independent designers; a model that continues to this day Pioneered ergonomic office seating A recognized industry leader in the areas of innovative product design, sustainable business practices, and financial performance s & 40s 1950s 1960s 1970s & 80s 1990s Today Became a leader in modern furniture design Transformed the office furniture industry with the introduction of Action Office the industry s first open plan office system Broadened product offering, expanded distribution, focused on manufacturing efficiency and sustainability At Herman Miller, we value our rich legacy more for what it shows us we might become than as a picture of what we ve been. 3

4 Herman Miller Around the World Global Product Distribution: North America: 250 Dealer Locations Worldwide*: 740 Dealer Locations Manufacturing Locations Design Center Showrooms Dealer Logistics & Support Centers * Including Posh franchise dealer locations 4

5 The Contract Office Furniture Industry No single source for industry data outside North America BIFMA is the North American trade organization for our industry Leading economic indicators include: Corporate profitability Service sector employment levels Non-residential construction activity Office vacancy rates Architectural billing activity (ABI) Corporate sentiment (CEO & small business confidence, etc.) Herman Miller N.A. market share 13.5% 5

6 Steady Growth to Cyclicality Source: BIFMA 6

7 Variable Cost Structure Manufacturing Costs We have designed our cost structure to flex with the economic cycles we face as an industry. Direct labor use temps and overtime which can be quickly flexed with volume Direct materials assembly based model (sub-assemblies outsourced) Overhead assembly based model (only 11-14% of sales) Freight & Distribution Utilize third-party outside freight haulers SG&A Costs Incentive compensation EVA based on continuous improvement Sales costs Variable commissions Distribution costs Variable cost independent dealers Designer royalties Variable cost independent designers Capital Base Assembly based manufacturing model keeps asset costs low Build to order keeps inventory costs low Early prepay discounts keeps accounts receivable balances low EVA incentive systems focuses on balance sheet and income statement 7

8 Commitment to Innovation Design & Research Expenditures $ Millions % Net Sales $60 3.3% 3.0% $50 $40 $30 $20 $10 2.7% 2.4% 2.1% 1.8% 1.5% 1.2% 0.9% 0.6% $ % 0.0% 8

9 We Have Diversified Our Revenue Base FY 2001 FY 2012 Health, Home & Educ. Health, Home & Educ. Int'l 16% 9% 23% 75% 48% U.S. Office / Gov't Int'l 29% U.S. Office / Gov't 9

10 Pension Funding Strategy The Situation: We have 3 defined benefit style pension plans Funding status has been highly volatile during the past 2 industry cycles. Company contributions have averaged $23MM/year over the past 10 years (to fund an $8MM/year employee benefit). Our Strategy: Fund U.S. plans to near 100% by end of FY2012. De-risk plan investment profiles. Convert U.S. employees to a DC-based retirement model. Begin process of terminating our U.S. DB plans. Expected Result: Some P&L volatility during the termination process as non-cash settlement expenses are recognized. Improved cash flow and expense visibility going forward. Better alignment of cash flow and expenses with business cycles. 10

11 Recent Operating Performance Quarterly Net Sales & Orders Gross Margin and Adj. Operating Income % * Millions $500 $450 $400 $350 $300 $250 $200 $150 $100 $446 $440 $400 $361 $421 $444 $450 $452 % Net Sales 50% 40% 30% 20% 10% 34.1% 9.1% 33.6% 6.3% 35.7% 33.3% 8.4% 8.4% $50 $0 Q2 FY12 Q3 FY12 Q4 FY12 Q1 FY13 0% Q2 FY12 Q3 FY12 Q4 FY12 Q1 FY13 Net Sales Orders Gross Margin % Adj. Operating Income % Millions Quarterly Operating Expenses $115 $115 $115 $114 $113 $112 $111 $111 $110 $109 $109 $108 $107 $106 $105 Q2 FY12 Q3 FY12 Q4 FY12 Q1 FY13 * Represents a Non-GAAP Measure, see Appendix for reconciliation. Q1 net sales increased 6% from the prior year after adjusting for the extra week of operations in FY2012; orders up 1% on this same basis. Orders in Q1 reflect continued softening from U.S. government and healthcare buyers; remaining core U.S. business was up 5% vs. prior year Q1. Q1 gross margin was negatively impacted by adverse product/channel mix, foreign currency (weak Euro), and inefficiencies relating to factory consolidation projects at Nemschoff. Expecting near-term improvement in gross margin as many of these factors are not expected to repeat in Q2. 11

12 Debt & Liquidity Profile $45 $40 Quarterly Cash Flow from Operations $ Rolling 4Qtr Coverage Ratio (EBITDA* to Interest - excluding restructure) $35 $30 $ Millions $25 $20 $ $10 $8 4.0 Bank Covenant > 4.0 $5 $0 $0 Q2 FY12 Q3 FY12 Q4 FY12 Q1 FY Q2 FY12 Q3 FY12 Q4 FY12 Q1 FY Rolling 4Qtr Leverage Ratio (Debt to EBITDA* - excluding restructure) PPN & Bank Covenant < 3.50 (allows 4.0 for 4 Qtrs) Q2 FY12 Q3 FY12 Q4 FY12 Q1 FY13 Q1 Ending Cash and Equivalents of $184 million. Debt maturity schedule: PPN ($50M) due 2015 PPN ($150M) due 2018 PPN ($50M) due 2021 CAPEX totaled $16 million in Q1 (includes China land purchase for planned factory consolidation). Total FY13 CAPEX estimated to range between $50 million and $60 million. Increased dividend to $0.09 per share (from $0.02) to be reflected in the October payout. * Represents a Non-GAAP Measure, see Appendix for reconciliation. 12

13 Catalysts for Growth * Robust product development queue * Dealer Share of Wallet * Improve upon our industry leading position in highperformance task seating Benchmark Performance Seating Breadth of New Products Healthcare Furnishings * The combination of Nemschoff and HermanMiller Healthcare creates the industry s most comprehensive healthcare furniture offering Growth Avenues * Initiatives to capture small to mid-sized business customers * Targeted A&D focus through the Herman Miller Collection New Customers New Channels to Market Global Expansion * Acquisition of POSH significantly expands our Asian distribution presence * Future focus on India and Latin America * Herman Miller for the Home has a growing retail and wholesale presence * e-commerce 13

14 FY2015 Financial Targets $2,400 $2,200 $2,000 CAGR GOALS BY SEGMENT: N. America 5% Non-N.A 16% S&C 12% Net Sales ($ millions) $2,200 $1,800 $1,724 $1,600 $1,400 $1,200 $1,000 Fiscal 2012 Actual Fiscal 2015 Goal 14

15 FY2015 Financial Targets 11% 10% Adj. Operating Margin (% sales) * 10.0% 9% 8% 8.3% 7% 6% 5% 4% 3% Fiscal 2012 Actual Fiscal 2015 Goal * Represents a Non-GAAP Measure, see Appendix for reconciliation. 15

16 We Intend to Increase our North American Dealer Share of Wallet On average, approximately 40% of the sales through our dealer channel in North America involve non-herman Miller branded products. HMI Products 60% Non-HMI Products 40% Lower Price-Point Seating Ergonomic Solutions Performance Tables Setu SAYL Thrive Portfolio Everywhere Tables 16

17 NEOCON

18 NEOCON

19 NEOCON

20 New York City Pop-Up Shop 20

21 Appendix This report contains references to Adjusted Operating Income/Margin and Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) which are non-gaap financial measures. Table I Herman Miller, Inc. Reconciliation of Non-GAAP Measures ($ millions; percents represent % of net sales) (unaudited) Q2 FY12 Q3 FY12 Q4 FY12 Q1 FY13 Net Sales $ $ $ $ Operating Earnings Operating Earnings (GAAP) $ 40.7 $ 25.3 $ 29.8 $ 34.3 Operating Income (% net sales) 9.1% 6.3% 7.1% 7.6% Add: Restructuring Expense $ - $ - $ 5.4 $ 0.5 Add: Post-Tranisition Pension Amortization/Settlements $ - $ - $ - $ 3.1 Adj. Operating Earnings (non-gaap) $ 40.7 $ 25.3 $ 35.2 $ 37.9 Adj. Operating Income (% net sales) 9.1% 6.3% 8.4% 8.4% Table II Herman Miller, Inc. Reconciliation of Non-GAAP Measures (Calculation of EBITDA Ratios) ($ in millions) (unaudited) Trailing 4-Quarter Period Ended Q2 FY12 Q3 FY12 Q4 FY12 Q1 FY13 Earnings Before Income Taxes (EBT) $ $ Add: Depreciation Amortization Interest Other Adjustments Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) $ $ $ $ Total Debt, End of Trailing Period $ $ $ $ Rolling 4-Quarter Debt-to-EBITDA Rolling 4-Quarter EBITDA-to-Interest "Other Adjustments" include, as applicable in the period, non-cash stock based compensation expenses, charges associated w ith business restructuring initiatives, changes in the value of the contingent consideration components of the Nemschoff purchase price, pro-forma income statement adjustments associated w ith Nemschoff, as permitted under lender covenant arrangements, and non-cash charges and credits associated w ith the company's planned termination of its domestic defined benefit pension programs. 21

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