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Section 1: 8-K (8-K Q4 2018 PRESS RELEASE)

Document



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
______________________

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934


Date of Report (Date of earliest event reported):  February 25, 2019

HNI Corporation
(Exact name of registrant as specified in charter)


Iowa
1-14225
42-0617510
(State or other jurisdiction
of incorporation)
(Commission File Number)
(IRS Employer
Identification No.)


600 East Second Street, P.O. Box 1109, Muscatine, Iowa  52761-0071
(Address of principal executive offices, including Zip Code)

Registrant’s telephone number, including area code:  (563) 272-7400

N/A
(Former name or former address, if changed since last report)


Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2.):

Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act
(17 CFR 240.14d-2(b))
 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act
(17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐





Section 2 — Financial Information

Item 2.02    Results of Operations and Financial Condition.
    
On February 25, 2019, HNI Corporation (the "Corporation") issued a press release announcing its financial results for fourth quarter and fiscal year-ended December 29, 2018.  A copy of the press release is attached hereto as Exhibit 99.1.

The information in this Current Report on Form 8-K and the attached Exhibit shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.

Section 9 — Financial Statements and Exhibits

Item 9.01          Financial Statements and Exhibits.

Exhibit No.
Description
 
 
99.1






SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


 
 
 
HNI CORPORATION
 
 
Date:
February 25, 2019
 
By
/s/ Marshall H. Bridges
 
 
 
 
Marshall H. Bridges
Vice President and Chief Financial Officer




(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit
                                    
HNI Corporation 600 East Second Street, Muscatine, Iowa 52761, Tel 563 272 7400, Fax 563 272 7347, www.hnicorp.com

396866408_hni_logoa02.gif
News Release
                                
For Information Contact:
Marshall H. Bridges, Senior Vice President and Chief Financial Officer (563) 272-7400
Jack D. Herring, Treasurer, Director of Finance and Investor Relations (563) 506-9783

HNI CORPORATION REPORTS EARNINGS
FOR FOURTH QUARTER AND FISCAL YEAR 2018

MUSCATINE, Iowa (February 25, 2019) – HNI Corporation (NYSE: HNI) today announced sales for the full year ended December 29, 2018 of $2,258 million and net income of $93 million. GAAP net income per diluted share was $2.11 compared to $2.00 in the prior year. Non-GAAP net income per diluted share was $2.41 compared to $1.97 in the prior year.

Fourth quarter sales were $598 million and net income was $32 million. GAAP net income per diluted share was $0.73 compared to $0.77 in the prior year. Non-GAAP net income per diluted share was $0.97 compared to $0.47 in the prior year. GAAP to non-GAAP reconciliations follow the financial statements in this release.

Fourth Quarter Summary Comments
“Our teams performed well in the fourth quarter – delivering significant earnings growth and margin expansion. We are managing through multiple challenges, including continued inflationary pressures, tariff impacts, and choppy demand. Our organization is responding well, and I am optimistic about what we can accomplish in the future,” said Jeff Lorenger, HNI Corporation, President and Chief Executive Officer.

1


Fourth Quarter - Financial Performance
(Dollars in millions, except per share data)
 
Three Months Ended
 
 
 
December 29,
2018
 
December 30,
2017
 
Change
GAAP
 
 
 
 
 
Net Sales

$598.1

 

$584.3

 
2.4
%
Gross Profit %
37.4
%
 
35.0
%
 
240
 bps
SG&A %
27.9
%
 
30.1
%
 
-220
 bps
Loss on sale and disposal of assets %
%
 
0.8
%
 
-80
 bps
Restructuring and impairment charges %
2.2
%
 
5.8
%
 
-360
 bps
Operating Income (Loss)

$43.8

 

($10.6
)
 
NM

Operating Income (Loss) %
7.3
%
 
(1.8
%)
 
910
 bps
Effective Tax Rate
22.4
%
 
359.9
%
 
 
Net Income %
5.4
%
 
5.8
%
 
-40
 bps
EPS – diluted

$0.73

 

$0.77

 
(5.2
%)
 
 
 
 
 
 
Non-GAAP
 
 
 
 
 
Gross Profit %
37.5
%
 
36.1
%
 
140
 bps
Operating Income

$57.8

 

$35.2

 
64.2
%
Operating Income %
9.7
%
 
6.0
%
 
370
 bps
EPS – diluted

$0.97

 

$0.47

 
106.4
%

Fourth Quarter Summary Comments
Consolidated net sales increased $13.8 million or 2.4 percent from the prior year quarter to $598.1 million. On an organic basis, sales increased 5.4 percent. The net impact of closing and divesting small office furniture companies decreased sales $17.1 million compared to the prior year quarter. A reconciliation of organic sales, a non-GAAP measure, follows the financial statements in this release.
GAAP gross profit margin increased 240 basis points compared to the prior year quarter. Of this increase, 140 basis points were primarily driven by improved price realization and productivity partially offset by input cost inflation. The remaining increase of 100 basis points was due to lower restructuring and transition costs.
Selling and administrative expenses decreased 220 basis points primarily due to increased efficiency, lower Business System Transformation costs, the impact of closing and divesting small office furniture companies, and lower incentive based compensation, partially offset by increased strategic investments.
The Corporation recorded $0.3 million of restructuring costs and $0.6 million of transition costs in the fourth quarter in connection with previously announced facility closures and structural realignments. Of these charges, $0.6 million was included in cost of sales. The Corporation also recorded a $13.1 million impairment of goodwill, intangibles, and long-lived assets.







2


Full Year - Financial Performance
(Dollars in millions, except per share data)
 
Twelve Months Ended
 
 
 
December 29,
2018
 
December 30,
2017
 
Change
GAAP
 
 
 
 
 
Net Sales

$2,257.9

 

$2,175.9


3.8
%
Gross Profit %
37.0
%
 
36.0
%
 
100
 bps
SG&A %
30.6
%
 
30.9
%
 
-30
 bps
(Gain) loss on sale, disposal, and license of assets %
%
 
(0.1
%)
 
10
 bps
Restructuring and impairment charges %
0.7
%
 
1.7
%
 
-100
 bps
Operating Income

$128.2

 

$76.7

 
67.1
%
Operating Income %
5.7
%
 
3.5
%
 
220
 bps
Effective Tax Rate
21.4
%
 
(27.4
%)
 


Net Income %
4.1
%
 
4.1
%
 

EPS – diluted

$2.11

 

$2.00

 
5.5
%
 
 
 
 
 
 
Non-GAAP
 
 
 
 
 
Gross Profit %
37.1
%
 
37.3
%
 
-20
 bps
Operating Income

$146.2

 

$139.4

 
4.9
%
Operating Income %
6.5
%
 
6.4
%
 
10
 bps
EPS – diluted

$2.41

 

$1.97

 
22.3
%

Full Year Summary Comments
Consolidated net sales increased $82.0 million or 3.8 percent from the prior year to $2,257.9 million. On an organic basis, sales increased 6.6 percent. The net impact of closing and divesting small office furniture companies decreased sales $57.6 million compared to the prior year.
GAAP gross profit margin increased 100 basis points compared to the prior year. Input cost inflation partially offset by improved price realization, productivity and cost savings drove a decline of 20 basis points. This decline was more than offset by a 120 basis point increase due to lower restructuring and transition costs.
Selling and administrative expenses as a percent of sales decreased 30 basis points compared to the prior year. This decrease was primarily due to increased efficiency and the impact of closing and divesting small office furniture companies, partially offset by Business Systems Transformation investment costs, increased strategic investments and higher incentive based compensation.
The Corporation recorded $2.3 million of restructuring costs and $2.3 million of transition costs in 2018 in connection with previously announced facility closures and structural realignments. Of these charges, $2.3 million was included in cost of sales. Specific items include severance, accelerated depreciation, and production move costs. The Corporation also recorded net charges of $13.4 million related to impairments of goodwill, intangibles, and long-lived assets.


3


Office Furniture – Financial Performance
(Dollars in millions)
 
Three Months Ended
 
 
 
 
Twelve Months Ended
 
 
 
December 29,
2018
 
December 30,
2017
 
Change
 
 
December 29,
2018
 
December 30,
2017
 
Change
GAAP
 
 
 
 
 
 
 
 
 
 
 
 
Net Sales

$429.6

 

$429.0

 
0.1
%
 
 

$1,706.1

 

$1,660.7

 
2.7
%
Operating Profit (Loss)

$11.8

 

($15.7
)
 
NM

 
 

$79.3

 

$50.2

 
58.1
%
Operating Profit (Loss) %
2.7
%
 
(3.7
%)
 
640
 bps
 
 
4.6
%
 
3.0
%
 
160
 bps
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-GAAP
 
 
 
 
 
 
 
 
 
 
 
 
Operating Profit

$27.3

 

$18.4

 
48.4
%
 
 

$97.3

 

$101.2

 
(3.9
%)
Operating Profit %
6.3
%
 
4.3
%
 
200
 bps
 
 
5.7
%
 
6.1
%
 
-40
 bps

Fourth Quarter Summary Comments
Fourth quarter office furniture net sales increased $0.6 million or 0.1 percent from the prior year quarter to $429.6 million. On an organic basis, sales increased 4.3 percent driven by increases in the supplies and contract businesses. The net impact of closing and divesting small office furniture companies decreased sales $17.1 million compared to the prior year quarter.
Fourth quarter office furniture GAAP operating profit margin increased 640 basis points. Of this increase, 200 basis points were driven by improved price realization, reduced spending, lower incentive based compensation, and the impact of closing small office furniture companies, partially offset by lower volume and input cost inflation. The remaining increase of 440 basis points was due to lower nonrecurring items, which include restructuring and impairment charges, and transition costs.
Full Year Summary Comments
Full year office furniture net sales increased $45.4 million or 2.7 percent from the prior year to $1,706.1 million. On an organic basis, sales increased 6.4 percent driven by increases in the supplies and contract businesses. The net impact of closing and divesting small office furniture companies decreased sales $57.6 million compared to the prior year.
Full year office furniture GAAP operating profit margin increased 160 basis points. Input cost inflation, amortization and implementation costs from the Business Systems Transformation initiative, and strategic investments were partially offset by improved price realization, productivity and cost savings, and the impact of closing and divesting small office furniture companies, driving a decline of 40 basis points. This decline was more than offset by a 200 basis point increase due to lower nonrecurring items, which include restructuring and impairment charges, and transition costs.

4


Hearth Products – Financial Performance
(Dollars in millions)
 
Three Months Ended
 
 
 
 
Twelve Months Ended
 
 
 
December 29,
2018
 
December 30,
2017
 
Change
 
 
December 29,
2018
 
December 30,
2017
 
Change
GAAP
 
 
 
 
 
 
 
 
 
 
 
 
Net Sales

$168.5

 

$155.3

 
8.5
%
 
 

$551.8

 

$515.2

 
7.1
%
Operating Profit

$36.1

 

$31.0

 
16.5
%
 
 

$91.4

 

$83.6

 
9.2
%
Operating Profit %
21.4
%
 
20.0
%
 
140
 bps
 
 
16.6
%
 
16.2
%
 
40
 bps
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-GAAP
 
 
 
 
 
 
 
 
 
 
 
 
Operating Profit

$36.4

 

$32.4

 
12.3
%
 
 

$93.1

 

$85.0

 
9.5
%
Operating Profit %
21.6
%
 
20.9
%
 
70
 bps
 
 
16.9
%
 
16.5
%
 
40
 bps

Fourth Quarter Summary Comments
Fourth quarter hearth products net sales increased $13.2 million or 8.5 percent from the prior year quarter to $168.5 million driven by increases in the new construction and retail businesses.
Fourth quarter hearth products GAAP operating profit margin increased 140 basis points. Of this increase, 70 basis points were driven by improved price realization and higher sales volume, partially offset by input cost inflation. The remaining increase of 70 basis points was due to lower restructuring and transition costs.
Full Year Summary Comments
Full year hearth products net sales increased $36.6 million or 7.1 percent from the prior year to $551.8 million driven by increases in the new construction and retail businesses.
Full year hearth products GAAP operating profit margin increased 40 basis points. This 40 basis points increase was primarily driven by higher sales volume, productivity and cost savings, and improved price realization, partially offset by input cost inflation and higher incentive based compensation.


5


Outlook
"Looking to 2019, we see a dynamic environment with pockets of uncertainty. Late in the fourth quarter and early this year, market activity generally slowed. We expect demand will start slowly and improve throughout 2019. We continue to see pressure from inflation and tariff impacts. Despite these pressures, we expect to grow profits through productivity and cost saving efforts while continuing to invest in new capabilities. I remain excited about our members, opportunities, and market position,” said Mr. Lorenger.

For the first quarter, the Corporation expects organic sales to be down 2 to 4 percent compared to the same quarter last year. Including the impacts of closing and divesting small office furniture companies, first quarter sales are expected to be down 3 to 5 percent. First quarter diluted earnings per share are anticipated to be in the range of $(0.02) to $0.04.

The Corporation estimates full year 2019 organic sales to be up 3 to 7 percent. Including the impacts of closing and divesting small office furniture companies, full year sales are expected to be up 2 to 6 percent. The Corporation estimates full year diluted earnings per share to be in the range of $2.50 to $2.90.



6


Conference Call
HNI Corporation will host a conference call on Tuesday, February 26, 2019 at 10:00 a.m. (Central) to discuss fourth quarter and fiscal year 2018 results. To participate, call 1-877-512-9166 – conference ID number 2763239. A live webcast of the call will be available on HNI Corporation’s website at http://www.hnicorp.com (under Investors – News Releases & Events). A replay of the webcast will be made available at this website address. An audio replay of the call will be available until Tuesday, March 5, 2019, 10:59 p.m. (Central) by dialing 1-855-859-2056 or 1-404-537-3406 – Conference ID number 2763239.
  

About HNI Corporation
HNI Corporation is an NYSE traded company (ticker symbol:  HNI) providing products and solutions for the home and workplace environments. HNI Corporation is a leading global provider and designer of office furniture and the leading manufacturer and marketer of hearth products. The Corporation sells the broadest and deepest selection of quality office furniture solutions available to meet the needs of every customer through an extensive portfolio of well-known and trusted brands. The Corporation's hearth products are the strongest, most respected brands in the industry and include a full array of gas, electric, wood and biomass burning fireplaces, inserts, stoves, facings, and accessories. More information can be found on the Corporation's website at www.hnicorp.com.


Forward-looking Statements
This release contains "forward-looking" statements based on current expectations regarding future plans, events, outlook, objectives, and financial performance, expectations for future sales growth, and earnings per diluted share (GAAP and non-GAAP). Forward-looking statements can be identified by words including “expect,” “believe,” “anticipate,” “estimate,” “may,” “will,” “would,” “could,” “confident”, or other similar words, phrases, or expressions. Forward-looking statements involve known and unknown risks and uncertainties, which may cause the Corporation's actual future results and performance to differ materially from expected results. These risks include but are not limited to: the levels of office furniture needs and housing starts; overall demand for the Corporation's products; general economic and market conditions in the United States and internationally; industry and competitive conditions; the consolidation and concentration of the Corporation's customers; the Corporation's reliance on its network of independent dealers; changes in trade policy; changes in raw material, component, or commodity pricing; market acceptance and demand for the Corporation's new products; changing legal, regulatory, environmental, and healthcare conditions; the risks associated with international operations; the potential impact of product defects; the various restrictions on the Corporation's financing activities; an inability to protect the Corporation's intellectual property; impacts of tax legislation; and force majeure events outside the Corporation’s control. A description of these risks and additional risks can be found in the Corporation's annual and quarterly reports filed with the Securities and Exchange Commission on Forms 10-K and 10-Q. The Corporation assumes no obligation to update, amend, or clarify forward-looking statements.


7


HNI Corporation and Subsidiaries
Condensed Consolidated Statements of Income
(In thousands, except share and per share data)

(Unaudited)
 
Three Months Ended
 
Twelve Months Ended
December 29,
2018
 
December 30,
2017
 
December 29,
2018
 
December 30,
2017
Net sales
$
598,092

 
$
584,275

 
$
2,257,895

 
$
2,175,882

Cost of sales
374,174

 
380,006

 
1,422,857

 
1,391,894

Gross profit
223,918

 
204,269

 
835,038

 
783,988

Selling and administrative expenses
166,695

 
175,934

 
691,140

 
671,831

(Gain) loss on sale, disposal, and license of assets

 
4,856

 

 
(1,949
)
Restructuring and impairment charges
13,422

 
34,091

 
15,725

 
37,416

Operating income (loss)
43,801

 
(10,612)

 
128,173

 
76,690

Interest income
297

 
(170)

 
579

 
297

Interest expense
2,370

 
2,147

 
10,027

 
6,375

Income before income taxes
41,728

 
(12,929)

 
118,725

 
70,612

Income tax expense (benefit)
9,366

 
(46,859)

 
25,399

 
(19,286)

Net income
32,362

 
33,930

 
93,326

 
89,898

Less: Net income (loss) attributable to the non-controlling interest
(1
)
 
91

 
(51
)
 
103

Net income attributable to
HNI Corporation
$
32,363

 
$
33,839

 
$
93,377

 
$
89,795

 
 
 
 
 
 
 
 
Average number of common shares outstanding – basic
43,707,873

 
43,444,885

 
43,639,003

 
43,839,004

Net income attributable to
HNI Corporation per common share – basic
$
0.74

 
$
0.78

 
$
2.14

 
$
2.05

 
 
 
 
 
 
 
 
Average number of common shares outstanding – diluted
44,310,574

 
44,153,300

 
44,327,602

 
44,839,813

Net income attributable to
HNI Corporation per common share – diluted
$
0.73

 
$
0.77

 
$
2.11

 
$
2.00


8


HNI Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands)

(Unaudited)
 
December 29,
2018
 
December 30,
2017
Assets
 
 
 
Current Assets:
 
 
 
   Cash and cash equivalents
$
76,819

 
$
23,348

   Short-term investments
1,327

 
2,015

   Receivables
255,207

 
258,551

   Inventories
157,178

 
155,683

   Prepaid expenses and other current assets
41,352

 
49,283

     Total Current Assets
531,883

 
488,880

 
 
 
 
Property, Plant, and Equipment:
 
 
 
   Land and land improvements
28,377

 
28,593

   Buildings
290,263

 
306,137

   Machinery and equipment
565,884

 
556,571

   Construction in progress
28,443

 
39,788

 
912,967

 
931,089

   Less accumulated depreciation
528,034

 
540,768

     Net Property, Plant, and Equipment
384,933

 
390,321

 
 
 
 
Goodwill and Other Intangible Assets
463,290

 
490,892

 
 
 
 
Deferred Income Taxes
1,569

 
193

 
 
 
 
Other Assets
20,169

 
21,264

 
 
 
 
     Total Assets
$
1,401,844

 
$
1,391,550

 
 
 
 
Liabilities and Equity
 
 
 
Current Liabilities:
 
 
 
   Accounts payable and accrued expenses
$
428,865

 
$
450,128

   Current maturities of long-term debt
679

 
36,648

   Current maturities of other long-term obligations
4,764

 
2,927

     Total Current Liabilities
434,308

 
489,703

 
 
 
 
Long-Term Debt
249,355

 
240,000

 
 
 
 
Other Long-Term Liabilities
72,767

 
70,409

 
 
 
 
Deferred Income Taxes
82,155

 
76,861

 
 
 
 
Equity:
 
 
 
HNI Corporation shareholders' equity
562,933

 
514,068

Non-controlling interest
326

 
509

 
 
 
 
     Total Equity
563,259

 
514,577

 
 
 
 
     Total Liabilities and Equity
$
1,401,844

 
$
1,391,550



9


HNI Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In thousands)

(Unaudited)
 
Twelve Months Ended
 
December 29,
2018
 
December 30,
2017
Net Cash Flows From (To) Operating Activities:
 
 
 
Net income
$
93,326

 
$
89,898

Non-cash items included in net income:
 
 
 
Depreciation and amortization
74,788

 
72,872

Other post-retirement and post-employment benefits
1,767

 
1,592

Stock-based compensation
7,317

 
7,750

Deferred income taxes
3,197

 
(33,606
)
(Gain) loss on sale, retirement, license, and impairment of long-lived assets and intangibles, net
16,264

 
30,892

Amortization of deferred gain on sale leaseback transaction
(400
)
 

Other – net
(1,336
)
 
(1,949
)
Net increase (decrease) in operating assets and liabilities, net of divestitures
(10,729
)
 
(29,409
)
Increase (decrease) in other liabilities
2,236

 
(4,891
)
Net cash flows from (to) operating activities
186,430

 
133,149

 
 
 
 
Net Cash Flows From (To) Investing Activities:
 
 
 
Capital expenditures
(55,648
)
 
(109,243
)
Proceeds from sale and license of property, plant, equipment, and intangibles
23,767

 
9,009

Capitalized software
(8,048
)
 
(18,148
)
Acquisition spending, net of cash acquired
(2,850
)
 
(898
)
Purchase of investments
(2,676
)
 
(3,451
)
Sales or maturities of investments
3,100

 
3,197

Other – net
1,135

 
1,510

Net cash flows from (to) investing activities
(41,220
)
 
(118,024
)
 
 
 
 
Net Cash Flows From (To) Financing Activities:
 
 
 
Payments of note and long-term debt and other financing
(352,727
)
 
(274,343
)
Proceeds from long-term debt
323,075

 
339,337

Dividends paid
(51,085
)
 
(49,557
)
Purchase of HNI Corporation common stock
(30,452
)
 
(57,505
)
Proceeds from sales of HNI Corporation common stock
19,606

 
14,224

Withholding related to net share settlements of equity based awards
(156
)
 
(245
)
Net cash flows from (to) financing activities
(91,739
)
 
(28,089
)
 
 
 
 
Net increase (decrease) in cash and cash equivalents
53,471

 
(12,964
)
Cash and cash equivalents at beginning of period
23,348

 
36,312

Cash and cash equivalents at end of period
$
76,819

 
$
23,348


10


HNI Corporation and Subsidiaries
Reportable Segment Data
(In thousands)

(Unaudited)
 
Three Months Ended
 
Twelve Months Ended
 
December 29,
2018
 
December 30,
2017
 
December 29,
2018
 
December 30,
2017
Net Sales:
 
 
 
 
 
 
 
Office furniture
$
429,612

 
$
428,987

 
$
1,706,092

 
$
1,660,723

Hearth products
168,480

 
155,288

 
551,803

 
515,159

Total
$
598,092

 
$
584,275

 
$
2,257,895

 
$
2,175,882

 
 
 
 
 
 
 
 
Income Before Income Taxes:
 
 
 
 
 
 
 
Office furniture
$
11,808

 
$
(15,680
)
 
$
79,323

 
$
50,176

Hearth products
36,117

 
30,997

 
91,367

 
83,649

General corporate
(4,124
)
 
(25,929
)
 
(42,517
)
 
(57,135
)
Operating Income
$
43,801

 
$
(10,612
)
 
$
128,173

 
$
76,690

Interest expense, net
2,073

 
2,317

 
9,448

 
6,078

Total
$
41,728

 
$
(12,929
)
 
$
118,725

 
$
70,612

 
 
 
 
 
 
 
 
Depreciation and Amortization Expense:
 
 
 
 
 
 
 
Office furniture
$
11,101

 
$
10,920

 
$
44,303

 
$
48,435

Hearth products
2,091

 
1,942

 
8,171

 
10,109

General corporate
5,709

 
5,487

 
22,314

 
14,328

Total
$
18,901

 
$
18,349

 
$
74,788

 
$
72,872

 
 
 
 
 
 
 
 
Capital Expenditures (including capitalized software):
 
 
 
 
 
 
 
Office furniture
$
12,539

 
$
14,991

 
$
47,860

 
$
79,458

Hearth products
2,537

 
4,538

 
8,854

 
17,356

General corporate
1,641

 
3,971

 
6,982

 
30,577

Total
$
16,717

 
$
23,500

 
$
63,696

 
$
127,391

 
 
 
 
 
 
 
 
 
 
 
 
 
As of December 29, 2018
 
As of December 30, 2017
Identifiable Assets:
 
 
 
 
 
 
 
Office furniture
 
 
 
 
$
797,574

 
$
821,767

Hearth products
 
 
 
 
352,060

 
347,189

General corporate
 
 
 
 
252,210

 
222,594

Total
 
 
 
 
$
1,401,844

 
$
1,391,550


11


Non-GAAP Financial Measures

This earnings release includes certain non-GAAP financial information as defined by Securities and Exchange Commission Regulation G. Pursuant to the requirements of this regulation, reconciliations of this non-GAAP financial information to HNI’s financial statements as prepared in accordance with GAAP are included below and throughout this earnings release. This information gives investors additional insights into HNI’s financial performance and operations. While HNI’s management believes the non-GAAP financial measures are useful in evaluating HNI’s operations, this information should be considered supplemental and not in isolation or as a substitute for, or superior to, financial information prepared and presented in accordance with GAAP. In addition, these measures may be different from non-GAAP financial measures used by other companies, limiting their usefulness for comparison purposes.

To supplement our condensed consolidated financial statements, which are prepared and presented in accordance with GAAP, we use the following non-GAAP financial measures within this earnings release: organic sales, gross profit, operating income, operating profit, and net income per diluted share (i.e., EPS). These measures are adjusted from the comparable GAAP measures to exclude the after-tax impacts of the selected items as summarized in the table below. Generally, non-GAAP EPS is calculated using HNI’s overall effective tax rate for the period, as this rate is reflective of the tax applicable to most non-GAAP adjustments. In fourth quarter 2017, the effective tax rate applied to most non-GAAP items was adjusted for one-time tax impacts that cause a variation in the effective tax rate, including the one-time tax credit due to the revaluation of deferred tax items relating to tax legislation.

The sales adjustments to arrive at our non-GAAP organic sales information included in this earnings release excludes the impact of closing and divesting small office furniture companies. The transactions excluded for purposes of our other non-GAAP financial information included in this earnings release for both years presented include restructuring and transition costs. The restructuring and transition costs are costs incurred as part of the previously announced closures of the hearth manufacturing facilities in Paris, Kentucky and Colville, Washington and the office furniture manufacturing facility in Orleans, Indiana and structural realignments in China and between office furniture facilities in Muscatine, Iowa. Specific restructuring items incurred include severance and accelerated depreciation. Specific transition items incurred include production move costs. Specific transactions in 2018 excluded for purposes of our other non-GAAP financial information included in this earnings release include the impairments of closed manufacturing facilities held for sale, a nonrecurring gain on the recovery of an impaired long-lived asset, and impairments of goodwill, intangibles, and other long-lived assets. Specific transactions in 2017 excluded for purposes of our other non-GAAP financial information included in this earnings release include the impairment of goodwill and other intangibles, a valuation reserve on a long-term note receivable, the loss on the disposal of a manufacturing facility, the tax impact related to tax legislation, a nonrecurring gain on the sale and license of a previously acquired intangible asset, and the gain on the sale of a closed manufacturing facility.

This earnings release also contains a forward-looking estimate of non-GAAP earnings per diluted share for the first quarter and fiscal year 2019. We provide such non-GAAP measures to investors on a prospective basis for the same reasons we provide it to investors on a historical basis. We are unable to provide a reconciliation of our forward-looking estimate of non-GAAP earnings per diluted share to a forward-looking estimate of GAAP earnings per diluted share without unreasonable efforts because certain information needed to make a reasonable forward-looking estimate of GAAP earnings per diluted share is highly variable and difficult to predict and estimate, and is dependent on future events which are uncertain or outside of our control. These may include unanticipated charges related to asset impairments (fixed assets, intangibles, or goodwill), unanticipated acquisition related costs, and other unanticipated nonrecurring items not reflective of ongoing operations. We expect the variability of these charges to have a potentially unpredictable, and potentially significant, impact on our GAAP earnings per diluted share.

12


HNI Corporation Reconciliation
(Dollars in millions)
 
Three Months Ended
 
December 29, 2018
 
December 30, 2017
 
Office Furniture
Hearth
Total
 
Office Furniture
Hearth
Total
Sales as reported (GAAP)
$
429.6

$
168.5

$
598.1

 
$
429.0

$
155.3

$
584.3

% change from PY
0.1
%
8.5
%
2.4
%
 
 
 
 
 
 
 
 
 
 
 
 
Less: Impact of Acquisitions and Divestitures



 
17.1


17.1

 
 
 
 
 
 
 
 
Organic Sales (non-GAAP)
$
429.6

$
168.5

$
598.1

 
$
411.9

$
155.3

$
567.2

% change from PY
4.3
%
8.5
%
5.4
%
 
 
 
 

HNI Corporation Reconciliation
(Dollars in millions)
 
Twelve Months Ended
 
December 29, 2018
 
December 30, 2017
 
Office Furniture
Hearth
Total
 
Office Furniture
Hearth
Total
Sales as reported (GAAP)
$
1,706.1

$
551.8

$
2,257.9

 
$
1,660.7

$
515.2

$
2,175.9

% change from PY
2.7
%
7.1
%
3.8
%
 
 
 
 
 
 
 
 
 
 
 
 
Less: Impact of Acquisitions and Divestitures
4.2


4.2

 
61.8


61.8

 
 
 
 
 
 
 
 
Organic Sales (non-GAAP)
$
1,701.9

$
551.8

$
2,253.7

 
$
1,599.0

$
515.2

$
2,114.1

% change from PY
6.4
%
7.1
%
6.6
%
 
 
 
 



13


HNI Corporation Reconciliation
(Dollars in millions, except per share data)
 
Three Months Ended
 
December 29, 2018
 
Gross Profit
 
Operating Income (Loss)
 
Tax
 
Net Income
 

EPS
As reported (GAAP)
$
223.9

 
$
43.8

 
$
9.4

 
$
32.4

 
$
0.73

% of net sales
37.4
%
 
7.3
%
 
 
 
5.4
%
 
 
Tax %
 
 
 
 
22.4
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Restructuring charges

 
0.3

 
0.1

 
0.3

 
0.01

Impairment charges

 
13.1

 
3.3

 
9.7

 
0.22

Transition costs
0.6

 
0.6

 
0.1

 
0.4

 
0.01

 
 
 
 
 
 
 
 
 
 
Results (non-GAAP)
$
224.5

 
$
57.8

 
$
12.9

 
$
42.8

 
$
0.97

% of net sales
37.5
%
 
9.7
%
 
 
 
7.2
%
 
 
Tax %
 
 
 
 
23.2
%
 
 
 
 


HNI Corporation Reconciliation
(Dollars in millions, except per share data)
 
Three Months Ended
 
December 30, 2017
 
Gross Profit
 
Operating Income (Loss)
 
Tax
 
Net Income
 

EPS
As reported (GAAP)
$
204.3

 
$
(10.6
)
 
$
(46.9
)
 
$
33.8

 
$
0.77

% of net sales
35.0
%
 
(1.8
%)
 
 
 
5.8
%
 
 
Tax %
 
 
 
 
359.9
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Restructuring charges
1.6

 
4.5

 
1.5

 
3.0

 
0.07

Impairment charges

 
20.9

 
7.2

 
13.8

 
0.31

Transition costs
5.3

 
5.3

 
1.8

 
3.5

 
0.08

Valuation allowance of long-term note receivable

 
10.3

 
0.4

 
9.8

 
0.22

Loss on disposal of assets

 
4.8

 
3.0

 
1.8

 
0.04

Tax legislation

 

 
44.8

 
(44.8
)
 
(1.02
)
 
 
 
 
 
 
 
 
 
 
Results (non-GAAP)
$
211.2

 
$
35.2

 
$
11.8

 
$
20.9

 
$
0.47

% of net sales
36.1
%
 
6.0
%
 
 
 
3.6
%
 
 
Tax %
 
 
 
 
36.4
%
 
 
 
 



14


HNI Corporation Reconciliation
(Dollars in millions, except per share data)
 
Twelve Months Ended
 
December 29, 2018
 
Gross Profit
 
Operating Income
 
Tax
 
Net Income
 

EPS
As reported (GAAP)
$
835.0

 
$
128.2

 
$
25.4

 
$
93.4

 
$
2.11

% of net sales
37.0
%
 
5.7
%
 
 
 
4.1
%
 
 
Tax %
 
 
 
 
21.4
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Restructuring charges

 
2.3

 
0.6

 
1.7

 
0.04

Impairment charges

 
13.4

 
3.5

 
9.9

 
0.22

Transition costs
2.3

 
2.3

 
0.5

 
1.7

 
0.04

 
 
 
 
 
 
 
 
 
 
Results (non-GAAP)
$
837.3

 
$
146.2

 
$
30.0

 
$
106.7

 
$
2.41

% of net sales
37.1
%
 
6.5
%
 
 
 
4.7
%
 
 
Tax %
 
 
 
 
22.0
%
 
 
 
 

HNI Corporation Reconciliation
(Dollars in millions, except per share data)
 
Twelve Months Ended
 
December 30, 2017
 
Gross Profit
 
Operating Income
 
Tax
 
Net Income
 

EPS
As reported (GAAP)
$
784.0

 

$76.7

 
$
(19.3
)
 
$
89.8

 
$
2.00

% of net sales
36.0
%
 
3.5
%
 
 
 
4.1
%
 
 
Tax %
 
 
 
 
(27.4
%)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Restructuring charges
10.3

 
16.5

 
5.6

 
10.9

 
0.25

Impairment charges

 
20.9

 
7.1

 
13.9

 
0.31

Transition costs
17.0

 
17.0

 
5.7

 
11.2

 
0.25

Valuation allowance of long-term note receivable

 
10.3

 
0.4

 
9.8

 
0.22

(Gain) loss on sale, disposal, and license of assets

 
(2.0
)
 
0.7

 
(2.7
)
 
(0.06
)
Tax legislation

 

 
44.8

 
(44.8
)
 
(1.00
)
 
 
 
 
 
 
 
 
 
 
Results (non-GAAP)
$
811.3

 
$
139.4

 
$
45.0

 
$
88.1

 
$
1.97

% of net sales
37.3
%
 
6.4
%
 
 
 
4.1
%
 
 
Tax %
 
 
 
 
33.9
%
 
 
 
 



15


Office Furniture Reconciliation
(Dollars in millions)
 
Three Months Ended
 
 
 
 
Twelve Months Ended
 
 
 
December 29,
2018
 
December 30,
2017
 
Percent Change
 
 
December 29,
2018
 
December 30,
2017
 
Percent Change
Operating profit (loss) as reported (GAAP)

$11.8

 

($15.7
)
 
NM

 
 

$79.3

 

$50.2

 
58.1
%
% of net sales
2.7
%
 
(3.7
%)
 
 
 
 
4.6
%
 
3.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Restructuring charges
0.2

 
3.8

 
 
 
 
1.5

 
11.6

 
 
Impairment charges
14.9

 
20.9

 
 
 
 
14.9

 
20.9

 
 
Transition costs
0.4

 
4.6

 
 
 
 
1.6

 
13.7

 
 
Loss on sale and disposal of assets

 
4.8

 
 
 
 

 
4.8

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating profit (non-GAAP)

$27.3

 

$18.4

 
48.4
%
 
 

$97.3

 

$101.2

 
(3.9
%)
% of net sales
6.3
%
 
4.3
%
 
 
 
 
5.7
%
 
6.1
%
 
 
 
 
 
 
 
 
 
 
Hearth Reconciliation
(Dollars in millions)
 
Three Months Ended
 
 
 
 
Twelve Months Ended
 
 
 
December 29,
2018
 
December 30,
2017
 
Percent Change
 
 
December 29,
2018
 
December 30,
2017
 
Percent Change
Operating profit as reported (GAAP)

$36.1

 

$31.0

 
16.5
%
 
 

$91.4

 

$83.6

 
9.2
%
% of net sales
21.4
%
 
20.0
%
 
 
 
 
16.6
%
 
16.2
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Restructuring charges
0.2

 
0.7

 
 
 
 
0.8

 
4.9

 
 
Impairment charges

 

 
 
 
 
0.3

 

 
 
Transition costs
0.1

 
0.7

 
 
 
 
0.6

 
3.3

 
 
Gain on sale and license of assets

 

 
 
 
 

 
(6.8
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating profit (non-GAAP)

$36.4

 

$32.4

 
12.3
%
 
 

$93.1

 

$85.0

 
9.5
%
% of net sales
21.6
%
 
20.9
%
 
 
 
 
16.9
%
 
16.5
%
 
 

16
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