FINANCIAL HIGHLIGHTS (Dollars in millions, except per share data) Three Months Ended Nine Months Ended ------------------ ----------------- 2/27/10 2/28/09 % Chg. 2/27/10 2/28/09 % Chg. ------- ------- ------ ------- -------- ------ Net Sales $329.6 $354.4 (7.0) $997.3 $1,310.1 (23.9) Gross Margin % 31.8% 29.9% N/A 32.4% 32.3% N/A Operating Expenses $85.7 $85.3 0.5 $266.5 $291.5 (8.6) Restructuring Expenses $2.3 $23.4 (90.2) $7.1 $23.8 (70.2) Operating Earnings % 5.1% (0.8)% N/A 5.0% 8.3% N/A Adj. Operating Earnings %* 5.8% 5.8% N/A 6.1% 10.1% N/A Net Earnings $8.3 $(5.2) N/A $26.2 $60.8 (56.9) Earnings per share–diluted $0.12 $(0.10) N/A $0.43 $1.11 (61.3) Adj. Earnings per share–diluted* $0.15 $0.18 (16.7) $0.56 $1.39 (59.7) Orders $290.0 $279.4 3.8 $957.9 $1,240.6 (22.8) Backlog $193.6 $206.8 (6.4) *Items indicated represent Non-GAAP measurements; see "Reconciliation of Non-GAAP Financial Measures" below.Third Quarter 2010 Financial Results New orders in the third quarter within Herman Miller's North American business segment decreased 1% from the prior year period, while non-North American segment orders increased 21.4%. Net sales in the North American business segment totaled $269.5 million in the third quarter, representing a decrease of 8.9% from the same period last fiscal year. The company's non-North American business segment reported sales of $46.9 million in the third quarter, a 9.5% decrease from a year ago. Despite lower sales in comparison to the prior year, gross margin in the third quarter improved 190 basis points to 31.8%. The increase was driven by lower commodity costs relative to the prior year and cost savings from the company's restructuring initiatives. Herman Miller's third quarter gross margin decreased 40 basis points relative to the second quarter of this fiscal year; a change resulting principally from lower sales and production levels along with comparatively higher commodity costs. Production inefficiencies associated with the consolidation of the Brandrud and Nemschoff manufacturing operations also contributed to the sequential-quarter margin decrease. This consolidation project is scheduled to be completed by the end of fiscal 2010. Operating expenses in the third quarter totaled $85.7 million, an increase of approximately $0.4 million from the same quarter last year. The expenses for the current quarter include approximately $4.7 million from the consolidation of Nemschoff and also reflect a favorable adjustment related to the contingent value right (CVR) component of the Nemschoff purchase price. This adjustment, which was driven by the increase in the company's stock price during the quarter, resulted in a $1.8 million reduction to operating expenses in the period. On a sequential-quarter basis, operating expenses in the third quarter were $4.2 million lower than the second quarter of this fiscal year. The decrease resulted from lower compensation costs related to the company's performance-based wage recovery program and the valuation adjustment to the CVR. Greg Bylsma, Chief Financial Officer, stated, "As expected, the seasonal dip in sales and production schedules put pressure on our margins this quarter. We continue to operate under several initiatives aimed at aligning business expenses with lower revenue levels, including reduced work schedules for the majority of our employees. These programs will continue over the near-term as we navigate the business back to stronger and sustainable revenue levels. The order growth we reported this quarter is a clear step in that direction. In the meantime, we remain committed to balancing today's profitability goals with the investments required to fuel our future growth." The company's effective tax rate for the quarter was 32.8% compared to 34.0% in the second quarter of this fiscal year and 39.4% in the prior year period. The relatively high rate in the prior year third quarter was driven by the marginal tax rate benefit recorded against the company's loss in the quarter combined with additional benefits resulting from research and developmental credits.
Herman Miller Reports Order Growth In The Third Quarter Of FY2010
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