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HNI CORPORATION

(HNI)
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HNI : REPORTS EARNINGS FOR THIRD QUARTER FISCAL YEAR 2021 - Form 8-K

10/25/2021 | 07:34am EST
HNI CORPORATION REPORTS EARNINGS
FOR THIRD QUARTER FISCAL YEAR 2021

MUSCATINE, Iowa (October 25, 2021) - HNI Corporation (NYSE: HNI) today announced sales for the third quarter ended October 2, 2021 of $586.7 million and net income of $19.2 million. GAAP net income per diluted share was $0.43, compared to $0.71 in the prior year. There was no variation between GAAP and Non-GAAP net income per diluted share in the third quarter of 2021 or 2020.

Third Quarter Highlights
•Strong growth in Residential Building Products: Third quarter 2021 revenue grew 26 percent on a year-over-year basis, and operating profit increased more than 10 percent versus third quarter 2020 levels despite multiple sources of pressure.
•Continuing recovery in Workplace Furnishings: Third quarter 2021 revenue was up approximately 11 percent from the third quarter of 2020.
•Expanding capacity: In September, the Corporation announced plans to expand production by opening a new seating facility in Mexico. The facility, along with continued domestic hiring, will provide capacity to help meet growing customer demand.
•Residential Building Products acquisition: Earlier this month, the Corporation completed the acquisition of Trinity Hearth and Home, an installing distributor in North Texas. Trinity adds to the Corporation's leading installing distributor platform and will allow the Corporation's Residential Building Products segment to better serve its customers in the rapidly growing Southwest region.

"Our members stayed focused on serving customers in the third quarter as the continued ripple effects of the pandemic created near-term headwinds. While we drove strong order growth, the ongoing difficulties tied to labor availability, supply chain disruptions, and inflation in all categories of input costs negatively impacted our results. Despite these pressures, we are increasingly encouraged about 2022 given the actions we are taking,
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the on-going recovery in Workplace Furnishings, and strength in our Hearth business," stated Jeff Lorenger, Chairman, President, and Chief Executive Officer.

HNI Corporation - Financial Performance
(Dollars in millions, except per share data)
Three Months Ended
October 2,
2021
September 26,
2020
Change
GAAP
Net Sales $586.7 $507.1 15.7 %
Gross Profit % 33.3 % 36.6 % -330 bps
SG&A % 28.8 % 28.9 % -10 bps
Operating Income $26.2 $38.8 (32.3 %)
Operating Income % 4.5 % 7.6 % -310 bps
Effective Tax Rate 21.5 % 17.6 %
Net Income % 3.3 % 6.1 % -280 bps
EPS - diluted $0.43 $0.71 (39.4 %)

Third Quarter Summary Comments
•Consolidated net sales increased 15.7 percent from the prior-year quarter to $586.7 million. On an organic basis, sales increased 13.8 percent year-over-year. The acquisition of Design Public Group ("DPG") in the fourth quarter of 2020 increased year-over-year sales by $8.9 million, and the acquisition of residential building products distributors in 2021 increased year-over-year sales by $0.9 million. A reconciliation of organic sales, a non-GAAP measure, follows the financial statements in this release.
•Gross profit margin decreased 330 basis points compared to the prior-year quarter. This decrease was driven by unfavorable price-cost and was partially offset by higher volume and improved net productivity.
•Selling and administrative expenses as a percent of sales decreased 10 basis points compared to the prior-year quarter. The decrease was driven by improved leverage from higher volume, partially offset by the return of costs related to temporary actions taken in the prior-year quarter, higher investment spend, and increased freight costs.
•Net income per diluted share was $0.43 compared to $0.71 in the prior-year quarter. The majority of the $0.28 decrease was driven by unfavorable price-cost along with the return of costs related to temporary actions taken in the prior-year quarter and increased investment spend, and was partially offset by increased volume.
Third Quarter Orders
•Orders in the Workplace Furnishings segment increased more than 30 percent year-over-year, led by broad-based strength with both small to mid-sized and contract customers. Workplace Furnishings orders were also up greater than five percent versus third quarter 2019 pre-pandemic levels.
•Normalized orders in the Residential Building Products segment increased 35 percent compared to the prior-year quarter, with the year-over-year trend moderating somewhat as the quarter progressed. Remodel-retrofit and new construction were both strong throughout the quarter.

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Workplace Furnishings - Financial Performance
(Dollars in millions)
Three Months Ended
October 2,
2021
September 26,
2020
Change
GAAP
Net Sales $393.1 $353.4 11.3 %
Operating Profit $3.9 $16.8 (76.9 %)
Operating Profit % 1.0 % 4.8 % -380 bps

•Workplace Furnishings net sales increased 11.3 percent from the prior-year quarter to $393.1 million. On an organic basis, sales increased 8.7 percent year-over-year. The acquisition of DPG in the fourth quarter of 2020 increased sales by $8.9 million compared to the prior-year quarter.
•Workplace Furnishings operating profit margin decreased 380 basis points year-over-year driven by unfavorable price-cost and the return of costs related to temporary actions taken in the prior-year quarter, partially offset by higher volume and improved productivity.

Residential Building Products - Financial Performance
(Dollars in millions)
Three Months Ended
October 2,
2021
September 26,
2020
Change
GAAP
Net Sales $193.6 $153.7 26.0 %
Operating Profit $33.4 $30.2 10.6 %
Operating Profit % 17.2 % 19.6 % -240 bps

•Residential Building Products net sales increased 26.0 percent from the prior-year quarter to $193.6 million. On an organic basis, sales increased 25.4 percent year-over-year. The impact of building products distributors acquired in 2021 increased sales $0.9 million compared to the prior-year quarter.
•Residential Building Products operating profit margin decreased 240 basis points, primarily driven by unfavorable price-cost, lower productivity, higher freight costs, and higher investment spend, partially offset by increased volume and lower variable compensation.

Fourth Quarter 2021 Outlook
•Solid consolidated growth: The Corporation expects consolidated revenue, including the impact of acquisitions, to grow in the mid-to-high single-digit percent range compared to the prior-year quarter. This outlook includes the assumption of continued impacts from labor availability and supply chain constraints.
•Workplace Furnishings revenue: The Corporation expects growth in the mid-single-digit percent range on a year-over-year basis including acquisitions impacts. Order trends, an elevated backlog, and continued momentum with office re-entry activity support stronger growth but fourth quarter revenue will be constrained by ongoing labor shortages and supply chain issues.
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•Residential Building Products revenue: Recent order trends, quarter-ending backlog, new home construction activity, the outlook for remodel/retrofit demand, and expected benefits tied to multiple growth initiatives, combine to suggest growth rates in the high single-digit percent range compared to the prior-year quarter, including impacts from acquisitions and labor and supply chain constraints.
•Profitability drivers: Many of the margin pressures experienced in the third quarter of 2021 are expected to persist in the fourth quarter of 2021. As a result, the Corporation expects fourth quarter operating income to be at or slightly below that reported in the third quarter.

Concluding Remarks
"We remain optimistic about our businesses and ability to drive profit growth. We are aggressively addressing the current headwinds. This includes increasing our capacity, strengthening our supply chains, and taking aggressive pricing actions to offset the ongoing and increasing inflationary pressures. Supported by our strong balance sheet, we are also continuing to invest as reflected by the addition of Trinity, which expands our strong Fireside Hearth & Home installing distribution business into a rapidly expanding housing region. These actions and investments position us for success in 2022 and over the long-term," Mr. Lorenger concluded.

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Conference Call
HNI Corporation will host a conference call on Monday, October 25, 2021 at 10:00 a.m. (Central) to discuss third quarter fiscal year 2021 results. To participate, call 1-833-522-0258 - conference ID number 3066955. A live webcast of the call will be available on HNI Corporation's website at https://investors.hnicorp.com/events-and-presentations. A replay of the webcast and call will be made available from Monday, October 25, 2021 at 1:00 p.m. (Central) through Monday, November, 1, 2021, 10:59 p.m. (Central). To replay the webcast, go to the link above. To replay the call, dial 1-800-585-8367 or 416-621-4642 - Conference ID: 3066955.

About HNI Corporation
HNI Corporation (NYSE: HNI) is a manufacturer of workplace furnishings and residential building products, operating under two segments. The Workplace Furnishings segment is a leading global designer and provider of commercial furnishings, going to market under multiple unique brands. The Residential Building Products segment is the nation's leading manufacturer and marketer of hearth products, which include a full array of gas, electric, wood, and pellet-burning fireplaces, inserts, stoves, facings, and accessories. More information can be found on the Corporation's website atwww.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), including statements regarding the expected effects on our business, financial condition and results of operations from the COVID-19 pandemic. 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 duration and scope of the COVID-19 pandemic, and its effect on people and the economy; 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.
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HNI Corporation and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income
(In thousands, except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
October 2,
2021
September 26,
2020
October 2,
2021
September 26,
2020
Net sales $ 586,750 $ 507,063 $ 1,581,498 $ 1,393,224
Cost of sales 391,394 321,516 1,018,334 880,754
Gross profit 195,356 185,547 563,164 512,470
Selling and administrative expenses 169,113 146,785 489,634 449,933
Impairment charges - - - 32,661
Operating income 26,243 38,762 73,530 29,876
Interest expense, net 1,853 1,517 5,465 5,271
Income before income taxes 24,390 37,245 68,065 24,605
Income taxes 5,232 6,558 16,476 5,259
Net income 19,158 30,687 51,589 19,346
Less: Net loss attributable to non-controlling interest 0 (1) (3) (3)
Net income attributable to HNI Corporation $ 19,158 $ 30,688 $ 51,592 $ 19,349
Average number of common shares outstanding - basic 43,781 42,684 43,573 42,651
Net income attributable to HNI Corporation per common share - basic $ 0.44 $ 0.72 $ 1.18 $ 0.45
Average number of common shares outstanding - diluted 44,342 43,010 44,045 42,905
Net income attributable to HNI Corporation per common share - diluted $ 0.43 $ 0.71 $ 1.17 $ 0.45
Foreign currency translation adjustments $ 46 $ 923 $ 107 $ 368
Change in unrealized gains (losses) on marketable securities, net of tax (32) (33) (157) 269
Change in derivative financial instruments, net of tax 170 106 577 (2,393)
Other comprehensive income (loss), net of tax 184 996 527 (1,756)
Comprehensive income 19,342 31,683 52,116 17,590
Less: Comprehensive loss attributable to non-controlling interest 0 (1) (3) (3)
Comprehensive income attributable to HNI Corporation $ 19,342 $ 31,684 $ 52,119 $ 17,593
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HNI Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
October 2,
2021
January 2,
2021
Assets
Current Assets:
Cash and cash equivalents $ 126,436 $ 116,120
Short-term investments 1,299 1,687
Receivables 238,620 207,971
Allowance for doubtful accounts (4,185) (5,514)
Inventories 188,590 137,811
Prepaid expenses and other current assets 44,702 37,660
Total Current Assets 595,462 495,735
Property, Plant, and Equipment:
Land and land improvements 29,983 29,691
Buildings 294,240 293,708
Machinery and equipment 588,126 578,643
Construction in progress 26,082 17,750
938,431 919,792
Less accumulated depreciation 576,423 553,835
Net Property, Plant, and Equipment 362,008 365,957
Right-of-use Finance Leases 9,940 6,095
Right-of-use Operating Leases 80,223 70,219
Goodwill and Other Intangible Assets 446,758 458,896
Other Assets 39,975 21,130
Total Assets $ 1,534,366 $ 1,418,032
Liabilities and Equity
Current Liabilities:
Accounts payable and accrued expenses $ 464,599 $ 413,638
Current maturities of long-term debt 3,345 841
Current maturities of other long-term obligations 3,598 2,990
Current lease obligations - Finance 2,632 1,589
Current lease obligations - Operating 19,970 19,970
Total Current Liabilities 494,144 439,028
Long-Term Debt 174,587 174,524
Long-Term Lease Obligations - Finance 7,270 4,516
Long-Term Lease Obligations - Operating 64,634 53,249
Other Long-Term Liabilities 91,270 81,264
Deferred Income Taxes 72,754 74,706
Total Liabilities 904,659 827,287
Equity:
HNI Corporation shareholders' equity 629,384 590,419
Non-controlling interest 323 326
Total Equity 629,707 590,745
Total Liabilities and Equity $ 1,534,366 $ 1,418,032
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HNI Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Nine Months Ended
October 2,
2021
September 26,
2020
Net Cash Flows From (To) Operating Activities:
Net income $ 51,589 $ 19,346
Non-cash items included in net income:
Depreciation and amortization 62,010 57,917
Other post-retirement and post-employment benefits 996 1,104
Stock-based compensation 9,540 6,746
Reduction in carrying amount of right-of-use assets 18,964 16,965
Deferred income taxes (2,057) (3,730)
Impairment of goodwill and intangible assets - 32,661
Other - net 2,640 815
Net increase (decrease) in cash from operating assets and liabilities (64,073) 13,316
Increase (decrease) in other liabilities 8,925 (1,779)
Net cash flows from (to) operating activities 88,534 143,361
Net Cash Flows From (To) Investing Activities:
Capital expenditures (38,182) (24,751)
Proceeds from sale of property, plant, and equipment 193 81
Acquisition spending, net of cash acquired (1,530) (10,857)
Capitalized software (9,613) (7,250)
Purchase of investments (3,273) (3,922)
Sales or maturities of investments 3,164 3,246
Net cash flows from (to) investing activities (49,241) (43,453)
Net Cash Flows From (To) Financing Activities:
Payments of long-term debt (1,810) (82,828)
Proceeds from long-term debt 4,335 82,119
Dividends paid (40,419) (39,060)
Purchase of HNI Corporation common stock (18,461) (6,764)
Proceeds from sales of HNI Corporation common stock 29,944 2,210
Other - net (2,566) 1,727
Net cash flows from (to) financing activities (28,977) (42,596)
Net increase in cash and cash equivalents 10,316 57,312
Cash and cash equivalents at beginning of period 116,120 52,073
Cash and cash equivalents at end of period $ 126,436 $ 109,385
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HNI Corporation and Subsidiaries
Reportable Segment Data
(In thousands)

(Unaudited)
Three Months Ended Nine Months Ended
October 2,
2021
September 26,
2020
October 2,
2021
September 26,
2020
Net Sales:
Workplace furnishings $ 393,141 $ 353,361 $ 1,040,026 $ 999,827
Residential building products 193,609 153,702 541,472 393,397
Total $ 586,750 $ 507,063 $ 1,581,498 $ 1,393,224
Income (Loss) Before Income Taxes:
Workplace furnishings $ 3,893 $ 16,826 $ 9,578 $ (8,619)
Residential building products 33,392 30,197 103,766 65,232
General corporate (11,042) (8,261) (39,814) (26,737)
Operating Income 26,243 38,762 73,530 29,876
Interest expense, net 1,853 1,517 5,465 5,271
Total $ 24,390 $ 37,245 $ 68,065 $ 24,605
Depreciation and Amortization Expense:
Workplace furnishings $ 11,882 $ 11,065 $ 35,918 $ 33,177
Residential building products 2,545 2,351 7,403 6,976
General corporate 6,443 5,896 18,689 17,764
Total $ 20,870 $ 19,312 $ 62,010 $ 57,917
Capital Expenditures (including capitalized software):
Workplace furnishings $ 6,494 $ 6,946 $ 24,001 $ 18,340
Residential building products 5,456 2,695 12,113 5,874
General corporate 3,549 1,584 11,681 7,787
Total $ 15,499 $ 11,225 $ 47,795 $ 32,001
As of,
October 2, 2021
As of
January 2, 2021
Identifiable Assets:
Workplace furnishings $ 832,055 $ 762,780
Residential building products 415,092 381,550
General corporate 287,219 273,702
Total $ 1,534,366 $ 1,418,032

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Non-GAAP Financial Measure

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. This information gives investors additional insights into HNI's financial performance and operations. While HNI's management believes the non-GAAP financial measure is 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, this measure may be different from non-GAAP financial measures used by other companies, limiting its usefulness for comparison purposes.

To supplement condensed consolidated financial statements, which are prepared and presented in accordance with GAAP, this earnings release uses the following non-GAAP financial measure: organic sales. This measure is adjusted from the comparable GAAP measure to exclude the impacts of the selected items as summarized in the table below.

The sales adjustments to arrive at the non-GAAP organic sales information included in this earnings release exclude the impact of acquiring DPG and residential building products distributors.

HNI Corporation Reconciliation
(Dollars in millions)
Three Months Ended
October 2, 2021 September 26, 2020
Workplace Furnishings Residential Building Products Total Workplace Furnishings Residential Building Products Total
Sales as reported (GAAP) $ 393.1 $ 193.6 $586.7 $ 353.4 $ 153.7 $ 507.1
% change from PY 11.3 % 26.0 % 15.7 %
Less: Acquisitions 8.9 0.9 9.8 - - -
Organic Sales (non-GAAP) $ 384.2 $ 192.8 $ 577.0 $ 353.4 $ 153.7 $ 507.1
% change from PY 8.7 % 25.4 % 13.8 %

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Disclaimer

HNI Corporation published this content on 25 October 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 25 October 2021 11:33:02 UTC.


© Publicnow 2021
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Marshall H. Bridges Chief Financial Officer & Senior Vice President
Kris Rao Chief Information & Digital Officer, VP
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