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Section 1: 8-K (8-K Q4 2019 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 19, 2020

Commission File Number: 1-14225

HNI Corporation

Iowa
 
42-0617510
(State of incorporation)
 
(IRS Employer No.)

600 East Second Street
P. O. Box 1109
Muscatine, Iowa 52761-0071
(563) 272-7400

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))
 
 
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock
HNI
New York Stock Exchange
 
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 19, 2020, HNI Corporation (the "Corporation") issued a press release announcing its financial results for fourth quarter and fiscal year-ended December 28, 2019.  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 19, 2020
 
By
/s/ Marshall H. Bridges
 
 
 
 
Marshall H. Bridges
Senior 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

402880600_hni_logoa06.gif
News Release
                                
For Information Contact:
Marshall H. Bridges, Senior Vice President and Chief Financial Officer (563) 272-7400
Matthew S. McCall, Vice President, Investor Relations and Corporate Development (563) 275-8898

HNI CORPORATION REPORTS STRONG PROFITABILITY FOR
FOURTH QUARTER FISCAL YEAR 2019

MUSCATINE, Iowa (February 19, 2020) – HNI Corporation (NYSE: HNI) today announced sales for the full year ended December 28, 2019 of $2.247 billion and net income of $111 million. GAAP net income per diluted share was $2.54, compared to $2.11 in the prior year. Non-GAAP net income per diluted share was $2.59, compared to $2.41 in the prior year. GAAP to non-GAAP reconciliations follow the financial statements in this release.

Fourth quarter sales of $616 million were up 3% from year-ago levels, and fourth quarter net income was $48 million. GAAP net income per diluted share was $1.10, compared to $0.73 in the prior year. Non-GAAP net income per diluted share was $1.12, compared to $0.97 in the prior year.

Highlights
Fourth quarter non-GAAP operating margin expanded 80 basis points year-over-year, driven by solid cost control.
Fourth quarter free cash flow exceeded expectations, strengthening the Corporation’s financial flexibility.
Fiscal year 2020 guidance assumes relatively stable domestic end markets, benefits of annual productivity and cost savings, and significant investments in future growth and margin expansion.

Fourth Quarter Summary Comments
“Our teams delivered a strong fourth quarter. We generated our best top line growth rate of the year and expanded operating margins despite choppy demand and tariff challenges. Our annual productivity and cost savings initiatives continue to gain momentum and drive improved profitability. Overall, our results show the performance our organization can drive and I am optimistic about what we can accomplish in the future,” said Jeff Lorenger, HNI Corporation, Chairman, President, and Chief Executive Officer.

1


Fourth Quarter - Financial Performance
(Dollars in millions, except per share data)
 
Three Months Ended
 
 
 
December 28,
2019
 
December 29,
2018
 
Change
GAAP
 
 
 
 
 
Net Sales

$616.1

 

$598.1

 
3.0
%
Gross Profit %
38.0
%
 
37.4
%
 
60
 bps
SG&A %
27.4
%
 
27.9
%
 
-50
 bps
Restructuring and impairment charges %
0.2
%
 
2.2
%
 
-200
 bps
Operating Income

$63.8

 

$43.8

 
45.6
%
Operating Income %
10.3
%
 
7.3
%
 
300
 bps
Effective Tax Rate
23.1
%
 
22.4
%
 
 
Net Income %
7.7
%
 
5.4
%
 
230
 bps
EPS – diluted

$1.10

 

$0.73

 
50.7
%
 
 
 
 
 
 
Non-GAAP
 
 
 
 
 
Gross Profit %
38.0
%
 
37.5
%
 
50
 bps
Operating Income

$64.9

 

$57.8

 
12.3
%
Operating Income %
10.5
%
 
9.7
%
 
80
 bps
EPS – diluted

$1.12

 

$0.97

 
15.5
%

Fourth Quarter Summary Comments
Consolidated net sales increased $18.0 million or 3.0% from the prior-year quarter to $616.1 million. On an organic basis, sales increased 3.9% or $23.1 million year-over-year. The net impact of divesting several small office furniture companies decreased sales $5.1 million or 0.9% 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 expanded 60 basis points compared to the prior-year quarter. On a non-GAAP basis, gross profit margin expanded 50 basis points year-over-year, driven by price realization and net productivity, partially offset by lower volume and higher input costs.
Selling and administrative expenses as a percent of sales decreased 50 basis points compared to the prior-year quarter. This decrease was primarily due to lower core SG&A spend and leverage from higher net sales, partially offset by higher variable compensation.
The Corporation recorded $1.2 million of restructuring costs in the fourth quarter in connection with structural realignments in the office furniture segment. In the prior-year quarter, the Corporation recorded $0.9 million of one-time costs associated with previously announced facility closures and structural realignments, as well as a $13.1 million impairment of goodwill, intangibles, and long-lived assets.
Non-GAAP net income per diluted share was $1.12 compared to $0.97 in the prior-year quarter.  The $0.15 increase was due to price realization, net productivity, and lower core SG&A spend, partially offset by lower volume and higher input costs.






2


Full Year - Financial Performance
(Dollars in millions, except per share data)
 
Twelve Months Ended
 
 
 
December 28,
2019
 
December 29,
2018
 
Change
GAAP
 
 
 
 
 
Net Sales

$2,246.9

 

$2,257.9


(0.5
%)
Gross Profit %
37.1
%
 
37.0
%
 
10
 bps
SG&A %
30.3
%
 
30.6
%
 
-30
 bps
Restructuring and impairment charges %
0.1
%
 
0.7
%
 
-60
 bps
Operating Income

$151.3

 

$128.2

 
18.1
%
Operating Income %
6.7
%
 
5.7
%
 
100
 bps
Effective Tax Rate
22.6
%
 
21.4
%
 


Net Income %
4.9
%
 
4.1
%
 
80
 bps
EPS – diluted

$2.54

 

$2.11

 
20.4
%
 
 
 
 
 
 
Non-GAAP
 
 
 
 
 
Gross Profit %
37.1
%
 
37.1
%
 

Operating Income

$153.9

 

$146.2

 
5.3
%
Operating Income %
6.8
%
 
6.5
%
 
30
 bps
EPS – diluted

$2.59

 

$2.41

 
7.5
%

Full Year Summary Comments
Consolidated net sales decreased $10.9 million or 0.5% from the prior year to $2.247 billion. On an organic basis, sales increased 0.5% year-over-year. The net impact of closing and divesting several small office furniture companies decreased sales $23.1 million or 1.0% compared to the prior year.
GAAP gross profit margin expanded 10 basis points compared to the prior year. On a non-GAAP basis, gross profit margin was flat year-over-year as price realization and net productivity were offset by lower volume and higher input 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 improved SG&A efficiency.
The Corporation recorded $2.6 million of costs in the current year in connection with structural realignments in the office furniture segment. In the prior year, the Corporation recorded $4.6 million of costs in connection with previously announced facility closures and structural realignments, as well as net charges of $13.4 million related to impairments of goodwill, intangibles, and long-lived assets.
Non-GAAP net income per diluted share was $2.59, compared to $2.41 in the prior year.  The $0.18 increase was due to price realization, net productivity, and improved SG&A efficiency, partially offset by lower volume and higher input costs.


3


Office Furniture – Financial Performance
(Dollars in millions)
 
Three Months Ended
 
 
 
 
Twelve Months Ended
 
 
 
December 28,
2019
 
December 29,
2018
 
Change
 
 
December 28,
2019
 
December 29,
2018
 
Change
GAAP
 
 
 
 
 
 
 
 
 
 
 
 
Net Sales

$449.4

 

$429.6

 
4.6
%
 
 

$1,697.2

 

$1,706.1

 
(0.5
%)
Operating Profit

$35.7

 

$11.1

 
222.7
%
 
 

$103.9

 

$76.0

 
36.8
%
Operating Profit %
7.9
%
 
2.6
%
 
530
 bps
 
 
6.1
%
 
4.5
%
 
160
 bps
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-GAAP
 
 
 
 
 
 
 
 
 
 
 
 
Operating Profit

$36.9

 

$26.5

 
39.0
%
 
 

$106.5

 

$94.0

 
13.3
%
Operating Profit %
8.2
%
 
6.2
%
 
200
 bps
 
 
6.3
%
 
5.5
%
 
80
 bps

Fourth Quarter Summary Comments - Office Furniture
Office furniture net sales increased $19.8 million or 4.6% from the prior-year quarter to $449.4 million. On an organic basis, sales increased 5.9%, driven by increases in the supplies and contract businesses. The net impact of divesting several small office furniture companies decreased sales $5.1 million or 1.3% compared to the prior-year quarter.
Office furniture GAAP operating profit margin expanded 530 basis points versus the prior-year period. On a non-GAAP basis, segment operating margin expanded 200 basis points year-over-year, driven by price realization, net productivity, and lower core SG&A spend, partially offset by lower volume, higher input costs, and unfavorable product mix.

Full Year Summary Comments - Office Furniture
Office furniture net sales decreased $8.9 million or 0.5% from the prior year to $1.697 billion. On an organic basis, sales increased 0.8% primarily driven by growth in the contract business. The net impact of closing and divesting several small office furniture companies decreased sales $23.1 million or 1.3% compared to the prior year.
Office furniture GAAP operating profit margin expanded 160 basis points. On a non-GAAP basis, segment operating margin expanded 80 basis points year-over-year, driven by price realization, net productivity, and improved SG&A efficiency, partially offset by lower volume and higher input costs.

4


Hearth Products – Financial Performance
(Dollars in millions)
 
Three Months Ended
 
 
 
 
Twelve Months Ended
 
 
 
December 28,
2019
 
December 29,
2018
 
Change
 
 
December 28,
2019
 
December 29,
2018
 
Change
GAAP
 
 
 
 
 
 
 
 
 
 
 
 
Net Sales

$166.7

 

$168.5

 
(1.1
%)
 
 

$549.8

 

$551.8

 
(0.4
%)
Operating Profit

$39.6

 

$36.1

 
9.6
%
 
 

$94.3

 

$91.4

 
3.2
%
Operating Profit %
23.8
%
 
21.4
%
 
240
 bps
 
 
17.2
%
 
16.6
%
 
60
 bps
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-GAAP
 
 
 
 
 
 
 
 
 
 
 
 
Operating Profit

$39.6

 

$36.4

 
8.6
%
 
 

$94.3

 

$93.1

 
1.3
%
Operating Profit %
23.8
%
 
21.6
%
 
220
 bps
 
 
17.2
%
 
16.9
%
 
30
 bps

Fourth Quarter Summary Comments - Hearth Products
Hearth products net sales decreased $1.8 million or 1.1% from the prior-year quarter to $166.7 million.
Hearth products operating profit margin expanded 240 basis points. On a non-GAAP basis, segment operating margin expanded 220 basis points, driven by price realization, net productivity benefits, and lower variable compensation, partially offset by lower volume.

Full Year Summary Comments - Hearth Products
Hearth products net sales decreased $2.0 million or 0.4% from the prior year to $549.8 million.
Hearth products GAAP operating profit margin expanded 60 basis points. On a non-GAAP basis, segment operating margin expanded 30 basis points year-over-year, driven by price realization, lower variable compensation, and improved SG&A efficiency, partially offset by lower volume and higher input costs.

5


Outlook
The Corporation estimates full year 2020 sales to be $2.30 billion to $2.35 billion, which represents growth of 2.5% to 4.5% versus the prior year. Full year non-GAAP earnings per diluted share is expected to be in the range of $2.60 to $2.90.

"Looking ahead to 2020, we expect solid revenue growth in both Office Furniture and Hearth Products. Our key markets are showing greater stability; our e-commerce efforts are driving growth; and our recent investments are generating results.

We expect higher volume and our annual productivity and cost savings initiatives to drive improvement in gross profit margin. In line with our long-term strategy, we are increasing our level of investment in key go-to-market initiatives. As a result, operating margin expansion will be less robust over the near-term. These initiatives will support top line growth, margin expansion, and free cash flow generation in the coming years. I am optimistic about the results we can drive in the future,” said Mr. Lorenger.


6


Conference Call
HNI Corporation will host a conference call on Thursday, February 20, 2020 at 10:00 a.m. (Central) to discuss fourth quarter and fiscal year 2019 results. To participate, call 1-877-512-9166 – conference ID number 1077266. 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 Thursday, February 27, 2020, 10:59 p.m. (Central) by dialing 1-855-859-2056 or 1-404-537-3406 – Conference ID number 1077266.
  

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 office furniture manufacturer and is the nation's leading manufacturer of hearth products. The Corporation's strong brands have leading positions in their markets. 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, financial performance, expectations for sales growth, and earnings per diluted share (GAAP and non-GAAP). Forward-looking statements can be identified by words including "anticipate," "believe," "could," "confident," "estimate," "expect," "forecast," "hope," "intend," "likely," "may," "plan," "possible," "potential," "predict," "project," "should," "will," "would", 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; change 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, except as required by applicable law.


7


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

(Unaudited)
 
Three Months Ended
 
Twelve Months Ended
December 28,
2019
 
December 29,
2018
 
December 28,
2019
 
December 29,
2018
Net sales
$
616,079

 
$
598,092

 
$
2,246,947

 
$
2,257,895

Cost of sales
382,192

 
374,174

 
1,413,185

 
1,422,857

Gross profit
233,887

 
223,918

 
833,762

 
835,038

Selling and administrative expenses
168,969

 
166,695

 
680,049

 
691,140

Restructuring and impairment charges
1,157

 
13,422

 
2,371

 
15,725

Operating income
63,761

 
43,801

 
151,342

 
128,173

Interest expense, net
1,833

 
2,073

 
8,628

 
9,448

Income before income taxes
61,928

 
41,728

 
142,714

 
118,725

Income taxes
14,333

 
9,366

 
32,211

 
25,399

Net income
47,595

 
32,362

 
110,503

 
93,326

Less: Net loss attributable to the non-controlling interest
0

 
(1
)
 
(2
)
 
(51
)
Net income attributable to
HNI Corporation
$
47,595

 
$
32,363

 
$
110,505

 
$
93,377

 
 
 
 
 
 
 
 
Average number of common shares outstanding – basic
42,755

 
43,708

 
43,101

 
43,639

Net income attributable to
HNI Corporation per common share – basic
$
1.11

 
$
0.74

 
$
2.56

 
$
2.14

 
 
 
 
 
 
 
 
Average number of common shares outstanding – diluted
43,137

 
44,311

 
43,495

 
44,328

Net income attributable to
HNI Corporation per common share – diluted
$
1.10

 
$
0.73

 
$
2.54

 
$
2.11

 
 
 
 
 
 
 
 
Foreign currency translation adjustments
$
468

 
$
(1,060
)
 
$
61

 
$
(3,004
)
Change in unrealized gains (losses) on marketable securities, net of tax
(1
)
 
75

 
251

 
(24
)
Change in pension and post-retirement liability, net of tax
(1,648
)
 
2,701

 
(2,833
)
 
2,701

Change in derivative financial instruments, net of tax
159

 
(1,120
)
 
(1,953
)
 
339

Other comprehensive income (loss), net of tax
(1,022
)
 
596

 
(4,474
)
 
12

Comprehensive income
46,573

 
32,958

 
106,029

 
93,338

Less: Comprehensive loss attributable to non-controlling interest
0

 
(1
)
 
(2
)
 
(51
)
Comprehensive income attributable to HNI Corporation
$
46,573

 
$
32,959

 
$
106,031

 
$
93,389


8


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

(Unaudited)
 
December 28,
2019
 
December 29,
2018
Assets
 
 
 
Current Assets:
 
 
 
   Cash and cash equivalents
$
52,073

 
$
76,819

   Short-term investments
1,096

 
1,327

   Receivables
274,565

 
255,207

   Inventories
163,465

 
157,178

   Prepaid expenses and other current assets
37,635

 
41,352

     Total Current Assets
528,834

 
531,883

 
 
 
 
Property, Plant, and Equipment:
 
 
 
   Land and land improvements
29,394

 
28,377

   Buildings
295,517

 
290,263

   Machinery and equipment
581,225

 
565,884

   Construction in progress
20,881

 
28,443

 
927,017

 
912,967

   Less accumulated depreciation
545,510

 
528,034

     Net Property, Plant, and Equipment
381,507

 
384,933

 
 
 
 
Right-of-use Operating / Finance Leases
75,012

 

Goodwill and Other Intangible Assets
445,709

 
463,290

Deferred Income Taxes
176

 
1,569

Other Assets
21,274

 
20,169

     Total Assets
$
1,452,512

 
$
1,401,844

 
 
 
 
Liabilities and Equity
 
 
 
Current Liabilities:
 
 
 
   Accounts payable and accrued expenses
$
453,202

 
$
428,865

   Current maturities of long-term debt
790

 
679

   Current maturities of other long-term obligations
1,931

 
4,764

   Current lease obligations - Operating / Finance
22,782

 

     Total Current Liabilities
478,705

 
434,308

 
 
 
 
Long-Term Debt
174,439

 
249,355

Long-Term Lease Obligations - Operating / Finance
59,814

 

Other Long-Term Liabilities
67,990

 
72,767

Deferred Income Taxes
87,196

 
82,155

Equity:
 
 
 
HNI Corporation shareholders' equity
584,044

 
562,933

Non-controlling interest
324

 
326

     Total Equity
584,368

 
563,259

     Total Liabilities and Equity
$
1,452,512

 
$
1,401,844



9


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

(Unaudited)
 
Twelve Months Ended
 
December 28,
2019
 
December 29,
2018
Net Cash Flows From (To) Operating Activities:
 
 
 
Net income
$
110,503

 
$
93,326

Non-cash items included in net income:
 
 
 
Depreciation and amortization
77,427

 
74,788

Other post-retirement and post-employment benefits
1,475

 
1,767

Stock-based compensation
6,830

 
7,317

Operating / finance lease interest and amortization
22,936

 

Deferred income taxes
6,750

 
3,197

Loss on sale and retirement of long-lived assets, net
2,014

 
16,264

Other – net
3,593

 
(1,736
)
Net increase (decrease) in operating assets and liabilities, net of divestitures
(3,280
)
 
(10,729
)
Increase (decrease) in other liabilities
(8,868
)
 
2,236

Net cash flows from (to) operating activities
219,380

 
186,430

 
 
 
 
Net Cash Flows From (To) Investing Activities:
 
 
 
Capital expenditures
(60,826
)
 
(55,648
)
Proceeds from sale and license of property, plant, and equipment, and intangibles

327

 
23,767

Acquisition spending, net of cash acquired

 
(2,850
)
Capitalized software
(6,059
)
 
(8,048
)
Purchase of investments
(6,702
)
 
(2,676
)
Sales or maturities of investments
4,845

 
3,100

Other – net
5,520

 
1,135

Net cash flows from (to) investing activities
(62,895
)
 
(41,220
)
 
 
 
 
Net Cash Flows From (To) Financing Activities:
 
 
 
Payments of long-term debt
(215,934
)
 
(348,987
)
Proceeds from long-term debt
141,035

 
323,075

Dividends paid
(52,232
)
 
(51,085
)
Purchase of HNI Corporation common stock
(83,887
)
 
(30,452
)
Proceeds from sales of HNI Corporation common stock
30,473

 
19,606

Other – net
(686
)
 
(3,896
)
Net cash flows from (to) financing activities
(181,231
)
 
(91,739
)
 
 
 
 
Net increase (decrease) in cash and cash equivalents
(24,746
)
 
53,471

Cash and cash equivalents at beginning of period
76,819

 
23,348

Cash and cash equivalents at end of period
$
52,073

 
$
76,819


10


HNI Corporation and Subsidiaries
Reportable Segment Data
(In thousands)

(Unaudited)
 
Three Months Ended
 
Twelve Months Ended
 
December 28,
2019
 
December 29,
2018
 
December 28,
2019
 
December 29,
2018
Net Sales:
 
 
 
 
 
 
 
Office furniture
$
449,408

 
$
429,612

 
$
1,697,186

 
$
1,706,092

Hearth products
166,671

 
168,480

 
549,761

 
551,803

Total
$
616,079

 
$
598,092

 
$
2,246,947

 
$
2,257,895

 
 
 
 
 
 
 
 
Income Before Income Taxes:
 
 
 
 
 
 
 
Office furniture
$
35,714

 
$
11,068

 
$
103,894

 
$
75,965

Hearth products
39,586

 
36,117

 
94,329

 
91,367

General corporate
(11,539
)
 
(3,384
)
 
(46,881
)
 
(39,159
)
Operating Income
$
63,761

 
$
43,801

 
$
151,342

 
$
128,173

Interest expense, net
1,833

 
2,073

 
8,628

 
9,448

Total
$
61,928

 
$
41,728

 
$
142,714

 
$
118,725

 
 
 
 
 
 
 
 
Depreciation and Amortization Expense:
 
 
 
 
 
 
 
Office furniture
$
11,348

 
$
11,101

 
$
44,887

 
$
44,303

Hearth products
2,363

 
2,091

 
8,884

 
8,171

General corporate
5,880

 
5,709

 
23,656

 
22,314

Total
$
19,591

 
$
18,901

 
$
77,427

 
$
74,788

 
 
 
 
 
 
 
 
Capital Expenditures (including capitalized software):
 
 
 
 
 
 
 
Office furniture
$
11,947

 
$
12,539

 
$
41,137

 
$
47,860

Hearth products
1,446

 
2,537

 
12,225

 
8,854

General corporate
3,301

 
1,641

 
13,523

 
6,982

Total
$
16,694

 
$
16,717

 
$
66,885

 
$
63,696

 
 
 
 
 
 
 
 
 
 
 
 
 
As of December 28, 2019
 
As of December 29, 2018
Identifiable Assets:
 
 
 
 
 
 
 
Office furniture
 
 
 
 
$
874,913

 
$
797,574

Hearth products
 
 
 
 
364,653

 
352,060

General corporate
 
 
 
 
212,946

 
252,210

Total
 
 
 
 
$
1,452,512

 
$
1,401,844


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, income taxes, net income, and net income per diluted share (i.e., EPS). These measures are adjusted from the comparable GAAP measures to exclude the 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.

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 all periods presented include restructuring charges, impairment charges, and/or transition costs. Restructuring charges incurred in the current year periods presented are primarily comprised of severance costs related to a structural realignment in the office furniture segment. Transition costs incurred in connection with this realignment include member relocation costs. In the prior-year periods presented, costs were 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. Prior year restructuring charges include severance costs, while transition costs incurred include production move costs. Specific transactions in the prior-year periods include impairment 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.

This earnings release also contains a forward-looking estimate of non-GAAP earnings per diluted share for fiscal year 2020. 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 28, 2019
 
December 29, 2018
 
Office Furniture
Hearth
Total
 
Office Furniture
Hearth
Total
Sales as reported (GAAP)
$
449.4

$
166.7

$
616.1

 
$
429.6

$
168.5

$
598.1

% change from PY
4.6
%
(1.1
%)
3.0
%
 
 
 
 
 
 
 
 
 
 
 
 
Less: Impact of Acquisitions and Divestitures



 
5.1


5.1

 
 
 
 
 
 
 
 
Organic Sales (non-GAAP)
$
449.4

$
166.7

$
616.1

 
$
424.4

$
168.5

$
592.9

% change from PY
5.9
%
(1.1
%)
3.9
%
 
 
 
 

HNI Corporation Reconciliation
(Dollars in millions)
 
Twelve Months Ended
 
December 28, 2019
 
December 29, 2018
 
Office Furniture
Hearth
Total
 
Office Furniture
Hearth
Total
Sales as reported (GAAP)
$
1,697.2

$
549.8

$
2,246.9

 
$
1,706.1

$
551.8

$
2,257.9

% change from PY
(0.5
%)
(0.4
%)
(0.5
%)
 
 
 
 
 
 
 
 
 
 
 
 
Less: Impact of Acquisitions and Divestitures



 
23.1


23.1

 
 
 
 
 
 
 
 
Organic Sales (non-GAAP)
$
1,697.2

$
549.8

$
2,246.9

 
$
1,682.9

$
551.8

$
2,234.8

% change from PY
0.8
%
(0.4
%)
0.5
%
 
 
 
 


13



HNI Corporation Reconciliation
(Dollars in millions, except per share data)
 
Three Months Ended
 
December 28, 2019
 
Gross Profit
 
Operating Income
 
Tax
 
Net Income
 

EPS
As reported (GAAP)
$
233.9

 
$
63.8

 
$
14.3

 
$
47.6

 
$
1.10

% of net sales
38.0
%
 
10.3
%
 
 
 
7.7
%
 
 
Tax %
 
 
 
 
23.1
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Restructuring charges

 
1.2

 
0.3

 
0.9

 
0.02

 
 
 
 
 
 
 
 
 
 
Results (non-GAAP)
$
233.9

 
$
64.9

 
$
14.6

 
$
48.5

 
$
1.12

% of net sales
38.0
%
 
10.5
%
 
 
 
7.9
%
 
 
Tax %
 
 
 
 
23.1
%
 
 
 
 


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



14


HNI Corporation Reconciliation
(Dollars in millions, except per share data)
 
Twelve Months Ended
 
December 28, 2019
 
Gross Profit
 
Operating Income
 
Tax
 
Net Income
 

EPS
As reported (GAAP)
$
833.8

 
$
151.3

 
$
32.2

 
$
110.5

 
$
2.54

% of net sales
37.1
%
 
6.7
%
 
 
 
4.9
%
 
 
Tax %
 
 
 
 
22.6
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Restructuring charges

 
2.4

 
0.5

 
1.8

 
0.04

Transition costs

 
0.2

 
0.0

 
0.2

 
0.00

 
 
 
 
 
 
 
 
 
 
Results (non-GAAP)
$
833.8

 
$
153.9

 
$
32.8

 
$
112.5

 
$
2.59

% of net sales
37.1
%
 
6.8
%
 
 
 
5.0
%
 
 
Tax %
 
 
 
 
22.6
%
 
 
 
 

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
%
 
 
 
 



15


Office Furniture Reconciliation
(Dollars in millions)
 
Three Months Ended
 
 
 
 
Twelve Months Ended
 
 
 
December 28,
2019
 
December 29,
2018
 
Percent Change
 
 
December 28,
2019
 
December 29,
2018
 
Percent Change
Operating profit as reported (GAAP)

$35.7

 

$11.1

 
222.7
%
 
 

$103.9

 

$76.0

 
36.8
%
% of net sales
7.9
%
 
2.6
%
 
 
 
 
6.1
%
 
4.5
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Restructuring charges
1.2

 
0.2

 
 
 
 
2.4

 
1.5

 
 
Impairment charges

 
14.9

 
 
 
 

 
14.9

 
 
Transition costs

 
0.4

 
 
 
 
0.2

 
1.6

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating profit (non-GAAP)

$36.9

 

$26.5

 
39.0
%
 
 

$106.5

 

$94.0

 
13.3
%
% of net sales
8.2
%
 
6.2
%
 
 
 
 
6.3
%
 
5.5
%
 
 
 
 
 
 
 
 
 
 
Hearth Reconciliation
(Dollars in millions)
 
Three Months Ended
 
 
 
 
Twelve Months Ended
 
 
 
December 28,
2019
 
December 29,
2018
 
Percent Change
 
 
December 28,
2019
 
December 29,
2018
 
Percent Change
Operating profit as reported (GAAP)

$39.6

 

$36.1

 
9.6
%
 
 

$94.3

 

$91.4

 
3.2
%
% of net sales
23.8
%
 
21.4
%
 
 
 
 
17.2
%
 
16.6
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Restructuring charges

 
0.2

 
 
 
 

 
0.8

 
 
Impairment charges

 

 
 
 
 

 
0.3

 
 
Transition costs

 
0.1

 
 
 
 

 
0.6

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating profit (non-GAAP)

$39.6

 

$36.4

 
8.6
%
 
 

$94.3

 

$93.1

 
1.3
%
% of net sales
23.8
%
 
21.6
%
 
 
 
 
17.2
%
 
16.9
%
 
 

16
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