Herman Miller Closing Factory, Slashing Dividend to Cut Costs
May 15, 2009
Herman Miller (NASDAQ: MLHR) plans to shutter a factory in Michigan, consolidating manufacturing to other facilities, as part of a cost-cutting initiative that also includes slashing the company's quarterly dividend.
The company is closing its Integrated Metal Technologies (IMT) subsidiary in Spring Lake, Mich. The bulk of the work and equipment will move to other factories in the area. Relocation is expected to begin in August with the final closure targeted for spring 2010.
The company said the one-time cost will be between $9 million to $12 million with expected savings of $5 million to $7 million annually.
The quarterly cash dividend will be reduced to 2.2 cents per share from the 8.8 cents per share that the company declared and paid in the last nine quarters. The new dividend is payable July 15 to shareholders of record on May 30. The reduced dividend rate will enable the company retain about $14 million a year.
"The dividend reduction and plant consolidation plan reflects our determination to enhance cash flow and balance sheet flexibility," said Greg Bylsma, Herman Miller's chief financial officer. "While we remain committed to a dividend policy, this move aligns our dividend with our historical payout metrics. These actions also create further opportunity to re-align our capital structure through debt retirement, as well as freeing up resources for increased investment in our strategic priorities."
Brian Walker, chief executive officer, noted, "The board and management have taken these challenging but necessary actions in the context of continued weak market conditions. They are integral to our comprehensive strategy to more effectively manage our resources and to ensure the long-term strength and future prospects of our company. For more than a year we have been undertaking a detailed and comprehensive review of our business with the objective to transform our cost structure—and fuel new, profitable and sustainable growth. These actions will further that agenda.
The company is closing its Integrated Metal Technologies (IMT) subsidiary in Spring Lake, Mich. The bulk of the work and equipment will move to other factories in the area. Relocation is expected to begin in August with the final closure targeted for spring 2010.
The company said the one-time cost will be between $9 million to $12 million with expected savings of $5 million to $7 million annually.
The quarterly cash dividend will be reduced to 2.2 cents per share from the 8.8 cents per share that the company declared and paid in the last nine quarters. The new dividend is payable July 15 to shareholders of record on May 30. The reduced dividend rate will enable the company retain about $14 million a year.
"The dividend reduction and plant consolidation plan reflects our determination to enhance cash flow and balance sheet flexibility," said Greg Bylsma, Herman Miller's chief financial officer. "While we remain committed to a dividend policy, this move aligns our dividend with our historical payout metrics. These actions also create further opportunity to re-align our capital structure through debt retirement, as well as freeing up resources for increased investment in our strategic priorities."
Brian Walker, chief executive officer, noted, "The board and management have taken these challenging but necessary actions in the context of continued weak market conditions. They are integral to our comprehensive strategy to more effectively manage our resources and to ensure the long-term strength and future prospects of our company. For more than a year we have been undertaking a detailed and comprehensive review of our business with the objective to transform our cost structure—and fuel new, profitable and sustainable growth. These actions will further that agenda.
