HNI Corporation (NYSE: HNI) today announced sales of
$2.434 billion and net income of $49.2 million for the full year
ended December 30, 2023. GAAP net income per diluted share was
$1.09, compared to $2.94 in the prior year. Non-GAAP net income per
diluted share was $2.65, compared to $2.20 in the prior year. GAAP
to non-GAAP reconciliations follow the financial statements in this
release.
Fourth quarter sales of $679.8 million were up 19 percent from
year-ago levels, and fourth quarter net income was $22.7 million.
GAAP net income per diluted share was $0.48, compared to $0.39 in
the prior year. Non-GAAP net income per diluted share was $0.98, up
from $0.63 reported in the prior-year period.
Fourth Quarter Highlights
- Strong earnings growth. Fourth quarter GAAP earnings per
share increased 23 percent year-over-year. On a non-GAAP basis, the
Corporation delivered diluted earnings per share that were 56
percent higher than the fourth quarter of fiscal year 2022 despite
a 6.4 percent year-over-year organic revenue decline.
- Significant Workplace Furnishings margin expansion.
Segment GAAP operating margin expanded 410 basis points on a
year-over-year basis. Excluding impacts from the Kimball
International acquisition, fourth quarter non-GAAP operating profit
margin for legacy HNI workplace furnishings (“Legacy Workplace”)
increased 480 basis points compared to the prior-year period.
Price-cost improvement, productivity gains, and benefits from
recent cost savings initiatives were the primary drivers of margin
expansion.
- Kimball International solidly accretive; estimated synergies
move higher. Kimball International (“KII”) added approximately
$16 million to fourth quarter operating profit while generating an
operating profit margin of approximately 11 percent. KII also added
an estimated $0.07 to fourth quarter non-GAAP EPS. The Corporation
now expects to achieve total annual cost synergies of $35 million.
This is up from previous expectations of at least $25 million,
which is now expected to be achieved in 2024—well ahead of the
initially communicated time horizon.
- Residential Building Products margins improve despite
continued housing market weakness. Segment GAAP operating
margin expanded 310 basis points year-over-year to 22.3 percent.
Non-GAAP operating margin improved to 22.3 percent, a 240 basis
point improvement from 19.9 percent in the year-ago period. This
was despite a 13.1 percent year-over-year revenue decline. Recent
cost reduction actions continued to support profitability. The
segment remains well positioned for sustained long-term profitable
growth. Order trends improved during the quarter, and the
intermediate- to long-term demand dynamics remain encouraging for
the segment.
- Strong balance sheet further strengthened. The
Corporation reduced debt by $73 million in the fourth quarter and
by $162 million during the second half of 2023. As a result, the
Corporation ended the fourth quarter with $436 million in total
debt with a gross leverage ratio of 1.9x, as calculated by the
Corporation’s lending agreements. Gross leverage is back below 2.0x
only two quarters following the acquisition of Kimball
International.
“We made outstanding progress in 2023 and finished the year on a
strong note, delivering greater than 50 percent earnings growth in
the fourth quarter. Our Workplace Furnishings profit transformation
plan continues to pay dividends and drove segment fourth quarter
operating margin to pre-pandemic levels. The synergy capture
associated with the Kimball International acquisition is ahead of
schedule; moreover, we now expect total synergies to be $10 million
higher than our initial projection. In Residential Building
Products, our actions to support profitability fueled margins to
near record levels despite housing market weakness. Overall, we
exited 2023 a fundamentally stronger company, reflecting the power
and dedication of our member-owners,” stated Jeff Lorenger,
Chairman, President, and Chief Executive Officer.
HNI Corporation — Fourth Quarter Results
HNI Corporation – Fourth
Quarter Financial Performance
(Dollars in millions, except per
share data)
Three Months Ended
December 30, 2023
December 31, 2022
Change
GAAP
Net Sales
$679.8
$568.9
19.5
%
Gross Profit %
40.2
%
36.6
%
360 bps
SG&A %
31.0
%
31.5
%
-50 bps
Restructuring and Impairment Charges %
4.6
%
1.0
%
360 bps
Operating Income
$30.7
$23.0
33.6
%
Operating Income %
4.5
%
4.0
%
50 bps
Effective Tax Rate
0.0
%
21.0
%
Net Income %
3.3
%
2.9
%
40 bps
EPS – diluted
$0.48
$0.39
23.1
%
Non-GAAP
Gross Profit %
40.2
%
37.4
%
280 bps
Operating Income
$66.1
$36.2
82.6
%
Operating Income %
9.7
%
6.4
%
330 bps
EPS – diluted
$0.98
$0.63
55.6
%
The following table contains results for (1) the Corporation’s
legacy business, excluding the impacts of KII and Poppin (“Legacy
HNI”) and (2) KII. As previously disclosed, the Corporation
divested Poppin in the third quarter of 2023. Please refer to
non-GAAP reconciliations, which follow the financial statements in
this release, for further information on the adjustments made to
calculate non-GAAP performance.
HNI Corporation – Fourth
Quarter Impact of Kimball International Acquisition
(Dollars in millions, except per
share data)
Three Months Ended
December 30, 2023
December 31, 2022
GAAP
Legacy HNI
KII
Consolidated HNI
Consolidated HNI
Legacy Change
Consolidated Change
Net Sales
$532.4
$147.4
$679.8
$568.9
(6.4
%)
19.5
%
Gross Profit
$211.8
$61.3
$273.1
$208.0
1.8
%
31.3
%
Gross Profit %
39.8
%
41.6
%
40.2
%
36.6
%
320 bps
360 bps
Restructuring and Impairment
$33.3
($1.9
)
$31.4
$5.7
488
%
455
%
Operating Income
$14.5
$16.2
$30.7
$23.0
(36.9
%)
33.6
%
Operating Income %
2.7
%
11.0
%
4.5
%
4.0
%
-130 bps
50 bps
EPS - diluted
$0.48
$0.39
23.1
%
Non-GAAP
Gross Profit
$212.1
$61.3
$273.5
$212.8
(0.3
%)
28.5
%
Gross Profit %
39.8
%
41.6
%
40.2
%
37.4
%
240 bps
280 bps
Operating Income
$50.3
$15.7
$66.1
$36.2
39.1
%
82.6
%
Operating Income %
9.5
%
10.7
%
9.7
%
6.4
%
310 bps
330 bps
EPS - diluted
$0.91
$0.98
$0.63
44.4
%
55.6
%
HNI Corporation — Fourth Quarter Summary Comments
- Consolidated net sales increased 19.5 percent from the
prior-year quarter to $679.8 million. On an organic basis, sales
decreased 6.4 percent compared to the prior-year quarter. The
acquisition of Kimball International increased year-over-year sales
by $147.4 million. A reconciliation of organic sales, a non-GAAP
measure, follows the financial statements in this release.
- Gross profit margin expanded 360 basis points compared to the
prior-year quarter, driven by favorable price-cost, improved net
productivity, lower restructuring costs, and the impact of the
Kimball International acquisition, partially offset by lower
building products volume.
- Selling and administrative expenses as a percent of sales
decreased 50 basis points from the prior-year quarter. This
decrease was driven by improved freight and distribution
productivity, lower core SG&A, and lower group medical expense,
partially offset by lower building products volume and higher
variable compensation. The current quarter also included $3.6
million of acquisition-related fees and expenses, while the
prior-year quarter included $2.5 million associated with a
company-wide cost reduction initiative.
- Restructuring and impairment charges totaled $31.4 million in
the current-year quarter, primarily from goodwill and intangible
asset impairments related to small business units in the Workplace
Furnishings segment. In the prior-year quarter, the Corporation
incurred $5.7 million of restructuring and impairment costs related
to efforts to drive business simplification and improve long-term
profitability in the Workplace Furnishings segment.
- Non-GAAP net income per diluted share was $0.98 compared to
$0.63 in the prior-year quarter. The $0.35 increase was primarily
driven by improved net productivity, favorable price-cost, lower
core SG&A, and the net impact of the Kimball International
acquisition, partially offset by lower building products volume and
higher variable compensation.
- The GAAP tax rate in the current-year period was impacted by
the effects of the Kimball International acquisition and impairment
charges, resulting in a rate of 0.0 percent. Non-GAAP net income
per diluted share in the current-year quarter includes an effective
tax rate of 19.5 percent.
HNI Corporation — Full Year Results
HNI Corporation — Full Year
Financial Performance
(Dollars in millions, except per
share data)
Twelve Months Ended
December 30, 2023
December 31, 2022
Change
GAAP
Net Sales
$2,434.0
$2,361.8
3.1
%
Gross Profit %
39.0
%
35.4
%
360 bps
SG&A %
33.4
%
30.6
%
280 bps
Gain on Sale of Subsidiary
$—
$ 50.4
NM
Restructuring and Impairment Charges %
1.8
%
0.3
%
150 bps
Operating Income
$90.3
$155.2
(41.8
%)
Operating Income %
3.7
%
6.6
%
-290 bps
Effective Tax Rate
24.1
%
15.4
%
Net Income %
2.0
%
5.2
%
-320 bps
EPS – diluted
$1.09
$2.94
(62.9
%)
Non-GAAP
Gross Profit %
39.0
%
35.7
%
330 bps
Operating Income
$178.1
$128.4
38.8
%
Operating Income %
7.3
%
5.4
%
190 bps
EPS – diluted
$2.65
$2.20
20.5
%
The following table contains results for (1) Legacy HNI, (2)
KII, and (3) Poppin. Please refer to non-GAAP reconciliations,
which follow the financial statements in this release, for further
information on the adjustments made to calculate non-GAAP
performance.
HNI Corporation – Full Year
Impact of Kimball International Acquisition
(Dollars in millions, except per
share data)
Twelve Months Ended
December 30, 2023
December 31, 2022
GAAP
Legacy HNI
KII
Poppin
Consolidated HNI
Consolidated HNI
Legacy Change
Consolidated Change
Net Sales
$2,072.6
$349.8
$11.6
$2,434.0
$2,361.8
(12.2
%)
3.1
%
Gross Profit
$798.6
$142.9
$6.7
$948.3
$834.9
(4.3
%)
13.6
%
Gross Profit %
38.5
%
40.9
%
57.8
%
39.0
%
35.4
%
310 bps
360 bps
Gain on Sale of Subsidiary
$—
$—
$—
$—
$50.4
NM
NM
Restructuring and Impairment
$35.8
($1.9
)
$10.8
$44.8
$6.7
437
%
572
%
Operating Income (Loss)
$78.9
$26.0
($14.7
)
$90.3
$155.2
(49.1
%)
(41.8
%)
Operating Income (Loss) %
3.8
%
7.4
%
(126
%)
3.7
%
6.6
%
-280 bps
-290 bps
EPS - diluted
$1.09
$2.94
(62.9
%)
Non-GAAP
Gross Profit
$799.5
$142.9
$6.7
$949.2
$843.7
(5.2
%)
12.5
%
Gross Profit %
38.6
%
40.9
%
57.8
%
39.0
%
35.7
%
290 bps
330 bps
Operating Income (Loss)
$145.3
$36.7
($3.8
)
$178.1
$128.4
13.2
%
38.8
%
Operating Income (Loss) %
7.0
%
10.5
%
(32.9
%)
7.3
%
5.4
%
160 bps
190 bps
EPS - diluted
$2.50
$2.65
$2.20
13.6
%
20.5
%
*2023 fiscal year results reflect seven months of KII and
approximately three and a half months of Poppin.
HNI Corporation — Full Year Summary Comments
- Consolidated net sales increased 3.1 percent from the prior
year to $2.434 billion. On an organic basis, net sales decreased
10.6 percent compared to the prior year primarily due to declines
in Residential Building Products that were driven by housing market
weakness. The current-year acquisition of Kimball International
increased year-over-year sales by $361.4 million, while the
prior-year acquisition of a residential building products company
increased year-over-year sales by $2.4 million. The prior-year sale
of the Corporation's China- and Hong Kong-based Lamex office
furniture business (“Lamex”) decreased year-over-year sales by
$46.9 million.
- Gross profit margin expanded 360 basis points compared to the
prior year. This increase was driven by favorable price-cost,
improved net productivity, and the impact of the Kimball
International acquisition, partially offset by lower organic
volume.
- Selling and administrative expenses as a percent of sales
increased 280 basis points compared to the prior year. This
increase was driven by $41.2 million of acquisition-related fees
and expenses along with lower organic volume and higher variable
compensation, partially offset by lower core SG&A and dilution
from price realization. The prior year also included $8.0 million
associated with a company-wide cost reduction initiative.
- Restructuring and impairment costs in the current year were
primarily comprised of $31.0 million of goodwill and intangible
asset impairments related to small business units in the Workplace
Furnishings segment and $9.8 million incurred in connection with
the divestiture of Poppin. In the prior year, the Corporation
incurred restructuring and impairment costs of $6.7 million
primarily related to efforts to drive business simplification and
improve long-term profitability in the Workplace Furnishings
segment.
- A pre-tax gain of $50.4 million was recorded as a corporate
item during the prior year as a result of the divestiture of
Lamex.
- Non-GAAP net income per diluted share was $2.65, compared to
$2.20 in the prior year. The $0.45 increase was driven by favorable
price-cost, improved net productivity, lower core SG&A, and the
net impact of the Kimball International acquisition, partially
offset by lower organic volume and higher variable
compensation.
Workplace Furnishings — Fourth Quarter and Full Year
Results
Workplace Furnishings –
Financial Performance
(Dollars in millions)
Three Months Ended
Twelve Months Ended
December 30, 2023
December 31, 2022
Change
December 30, 2023
December 31, 2022
Change
GAAP
Net Sales
$490.7
$351.2
39.7
%
$1,740.3
$1,486.2
17.1
%
Operating Income (Loss)
$9.5
($7.7
)
223
%
$68.6
$3.4
NM
Operating Income (Loss) %
1.9
%
(2.2
%)
410 bps
3.9
%
0.2
%
370 bps
Non-GAAP
Operating Income
$40.4
$8.4
382
%
$124.5
$23.5
430
%
Operating Income %
8.2
%
2.4
%
580 bps
7.2
%
1.6
%
560 bps
The following tables contain results for (1) the Corporation’s
legacy workplace furnishings business, excluding the impacts of KII
and Poppin (“Legacy Workplace”), (2) KII, and (3) Poppin. Please
refer to non-GAAP reconciliations, which follow the financial
statements in this release for further information on the
adjustments made to calculate non-GAAP performance.
Workplace Furnishings – Fourth
Quarter Impact of Kimball International Acquisition
(Dollars in millions)
Three Months Ended
December 30, 2023
December 31, 2022
GAAP
Legacy Workplace
KII
Total Workplace
Total Workplace
Legacy Change
Total Change
Net Sales
$343.3
$147.4
$490.7
$351.2
(2.3
%)
39.7
%
Operating Income (Loss)
($6.7
)
$16.2
$9.5
($7.7
)
12.7
%
223
%
Operating Income (Loss) %
(2.0
%)
11.0
%
1.9
%
(2.2
%)
20 bps
410 bps
Non-GAAP
Operating Income
$24.6
$15.7
$40.4
$8.4
194
%
382
%
Operating Income %
7.2
%
10.7
%
8.2
%
2.4
%
480 bps
580 bps
Workplace Furnishings – Full
Year Impact of Kimball International Acquisition
(Dollars in millions)
Twelve Months Ended
December 30, 2023
December 31, 2022
GAAP
Legacy Workplace
KII
Poppin
Total Workplace
Total Workplace
Legacy Change
Total Change
Net Sales
$1,378.8
$349.8
$11.6
$1,740.3
$1,486.2
(7.2
%)
17.1
%
Operating Income (Loss)
$57.3
$26.0
($14.7
)
$68.6
$3.4
NM
NM
Operating Income (Loss) %
4.2
%
7.4
%
(126
%)
3.9
%
0.2
%
400 bps
370 bps
Non-GAAP
Operating Income (Loss)
$91.6
$36.7
($3.8
)
$124.5
$23.5
290
%
430
%
Operating Income (Loss) %
6.6
%
10.5
%
(32.9
%)
7.2
%
1.6
%
500 bps
560 bps
*2023 fiscal year results reflect seven months of KII and
approximately three and a half months of Poppin.
Workplace Furnishings — Fourth Quarter Summary
Comments
- Workplace Furnishings net sales increased 39.7 percent from the
prior-year quarter to $490.7 million. On an organic basis, net
sales decreased 2.3 percent from the prior-year quarter. The impact
of the Kimball International acquisition increased sales by $147.4
million over the prior-year quarter.
- Workplace Furnishings GAAP operating profit margin expanded 410
basis points versus the prior-year period. On a non-GAAP basis,
segment operating profit margin expanded 580 basis points, driven
by the impact of the Kimball International acquisition, favorable
price-cost, improved net productivity, and lower core SG&A,
partially offset by higher variable compensation. Excluding the
impact of KII, fourth quarter non-GAAP operating profit margin for
Legacy Workplace was 7.2 percent, an improvement of 480 basis
points year-on-year.
Workplace Furnishings — Full Year Summary Comments
- Workplace Furnishings net sales increased 17.1 percent from the
prior year to $1.740 billion. On an organic basis, net sales
decreased 4.2 percent from the prior year. The impact of the
Kimball International acquisition increased sales by $361.4 million
over the prior year, while the prior-year sale of Lamex decreased
sales $46.9 million year-over-year.
- Workplace Furnishings GAAP operating profit margin expanded 370
basis points. On a non-GAAP basis, segment operating profit margin
expanded 560 basis points, primarily driven by favorable
price-cost, the impact of the Kimball International acquisition,
improved net productivity, and lower core SG&A, partially
offset by lower organic volume and higher variable compensation.
Excluding the impact of KII and Poppin, full year non-GAAP
operating profit margin for Legacy Workplace was 6.6 percent, an
improvement of 500 basis points year-on-year.
Residential Building Products — Fourth Quarter and Full Year
Results
Residential Building Products
– Financial Performance
(Dollars in millions)
Three Months Ended
Twelve Months Ended
December 30, 2023
December 31, 2022
Change
December 30, 2023
December 31, 2022
Change
GAAP
Net Sales
$189.1
$217.7
(13.1
%)
$693.7
$875.6
(20.8
%)
Operating Income
$42.1
$41.7
0.9
%
$116.6
$158.7
(26.5
%)
Operating Income %
22.3
%
19.2
%
310 bps
16.8
%
18.1
%
-130 bps
Non-GAAP
Operating Income
$42.1
$43.3
(2.7
%)
$117.8
$160.3
(26.5
%)
Operating Income %
22.3
%
19.9
%
240 bps
17.0
%
18.3
%
-130 bps
Residential Building Products — Fourth Quarter Summary
Comments
- Residential Building Products net sales decreased 13.1 percent
from the prior-year quarter to $189.1 million, primarily due to
housing market weakness. Remodel/retrofit sales declined at a
higher rate than new construction.
- Residential Building Products GAAP operating profit margin
expanded 310 basis points, driven by improved net productivity,
favorable price-cost, lower core SG&A, and favorable product
mix, partially offset by lower volume.
Residential Building Products — Full Year Summary
Comments
- Residential Building Products net sales decreased 20.8 percent
from the prior year to $693.7 million, primarily due to housing
market weakness. Remodel/retrofit sales, which also were negatively
impacted by the normalization of trade inventory, declined at a
higher rate than new construction. On an organic basis, sales
decreased 21.0 percent year-over-year. The prior-year acquisition
of a building product company increased sales $2.4 million
year-over-year.
- Residential Building Products GAAP operating profit margin
compressed 130 basis points due to lower volume, partially offset
by favorable price-cost, improved net productivity, lower core
SG&A, and lower variable compensation.
Fourth Quarter Orders
- Organic orders in the Workplace Furnishings segment modestly
grew during the quarter. Orders from small-to-medium sized
customers and at KII Workplace & Health both increased
year-over-year at a mid-single digit rate, outpacing contract
orders, which were approximately flat versus the prior-year period.
Overall, year-over-year order trends were uneven during the quarter
and were strongest in December.
- Orders in the Residential Building Products segment decreased
three percent versus the fourth quarter of 2022. This represents an
improvement compared to the third quarter when orders were down 18
percent year-over-year. Year-over-year order trends improved
through the quarter, and new construction outperformed
remodel/retrofit.
Outlook
- 2024 non-GAAP earnings per share are expected to
increase solidly year-over-year primarily driven by continued
margin expansion in Workplace Furnishings and accretion from
Kimball International.
- 2024 demand environment. The Corporation expects 2024
organic revenue to grow at a low-single-digit rate in both
Workplace Furnishings and Residential Building Products. For
Workplace Furnishings, this outlook assumes demand conditions
remain generally in-line with those experienced in the second-half
2023. In Residential Building Products, the Corporation expects
growth in new construction to be partially offset by continued
declines in remodel/retrofit.
- 2024 impact of Kimball International. The Corporation
expects KII to add $215 to $225 million of incremental revenue to
2024 and be solidly accretive to earnings.
- Balance Sheet. The Corporation expects to further reduce
leverage and improve its already strong balance sheet during 2024
through modest debt reduction and continued EBITDA growth. Low
leverage and consistent cash flow generation will provide the
Corporation with substantial capacity for capital deployment. The
Corporation’s current priorities for capital deployment are
reinvesting in the business, funding dividends, and pursuing share
buybacks and M&A opportunities.
- First quarter non-GAAP earnings per share are expected
to increase year-over-year, with margin expansion and accretion
from Kimball International more than offsetting macro-driven top
line pressure. The Corporation expects first quarter Workplace
Furnishings organic revenue to be down in the low-single digits
versus the same quarter of 2023. KII is expected to add $125 to
$130 million of revenue. In Residential Building Products, the
Corporation expects first quarter revenue to be down in the low- to
mid-teens year-over-year. This primarily reflects the impact from
unwinding the elevated remodel-retrofit backlog in the year-ago
period, partially offset by forecasted growth in new
construction.
Concluding Remarks
“Our strategies have driven non-GAAP EPS growth in excess of 60
percent and expanded operating margin by 270 basis points over the
past two years despite a consistently turbulent macroeconomic
environment. In Workplace Furnishings, our profit transformation
initiatives and the addition of Kimball International have expanded
margins more than 600 basis points, and segment operating profit
has grown $110 million or more than 750 percent from 2021 levels.
We expect continued year-over-year profit and margin improvement
from here.
“The integration and accretion from Kimball International are
ahead of schedule, and our synergy expectations have moved higher.
KII is complementary from a product, market, and cultural
perspective; and it strengthens our Workplace Furnishings exposure
to several important trends and markets—namely, ancillary products,
secondary geographies, healthcare, and hospitality. Each provides
new opportunities for profit growth. Our confidence in the
combination’s strategic and financial benefits continues to
accelerate.
“In Residential Building Products, we quickly adjusted our cost
structure to respond to the housing re-set in 2023. Despite the
macro-driven top line pressure, our operating profit margin in the
fourth quarter expanded to near-record levels, even as we continued
to invest in our growth strategies, leading brands, and operating
platforms. Although the near term remains dynamic, leading
indicators are improving, and we are uniquely positioned to drive
high-margin growth as the housing market stabilizes.
“Our balance sheet is in excellent shape, and our cash flow is
strong. Our members are focused and driving our core strategies of
expanding margins in Workplace Furnishings and driving long-term
high-margin revenue growth in Residential Building Products,”
concluded Mr. Lorenger.
Conference Call
HNI Corporation will host a conference call on Thursday,
February 22, 2024 at 10:00 a.m. (Central) to discuss fourth quarter
and fiscal year 2023 results. To participate, call 1-855-761-5600 –
conference ID number 7175411. A live webcast of the call will be
available on HNI Corporation’s website at http://www.hnicorp.com
(under Investors – Events & Presentations). 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 29,
2024, 10:59 p.m. (Central) by dialing 1-800-770-2030 – Conference
ID number 7175411.
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 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), including
statements regarding future levels of demand, anticipated
macroeconomic conditions, expected differences in seasonality and
its results on the Corporation’s results of operations, the
anticipated benefits and cost synergies of the acquisition of
Kimball International and sale of Poppin, and future levels of
productivity. 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. Actual results could differ
materially from those anticipated in the forward-looking statements
and from historical results due to the risks and uncertainties
described elsewhere in this release, including but not limited to:
the Corporation’s ultimate realization of the anticipated benefits
of the acquisition of Kimball International and sale of Poppin;
disruptions in the global supply chain; the effects of prolonged
periods of inflation and rising interest rates; labor shortages;
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; cybersecurity threats, including those posed
by potential ransomware attacks; impacts of tax legislation; and
force majeure events outside the Corporation’s control, including
those that may result from the effects of climate change. 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.
HNI Corporation and
Subsidiaries
Condensed Consolidated
Statements of Comprehensive Income
(In millions, except per share
data)
(Unaudited)
Three Months Ended
Twelve Months Ended
December 30, 2023
December 31, 2022
December 30, 2023
December 31, 2022
Net sales
$
679.8
$
568.9
$
2,434.0
$
2,361.8
Cost of sales
406.7
361.0
1,485.7
1,526.9
Gross profit
273.1
208.0
948.3
834.9
Selling and administrative expenses
211.0
179.1
813.2
723.4
(Gain) loss on sale of subsidiary
—
0.3
—
(50.4
)
Restructuring and impairment charges
31.4
5.7
44.8
6.7
Operating income
30.7
23.0
90.3
155.2
Interest expense, net
7.9
2.3
25.5
8.8
Income before income taxes
22.7
20.6
64.8
146.4
Income taxes
0.0
4.3
15.6
22.5
Net income
22.7
16.3
49.2
123.9
Less: Net income (loss) attributable to
non-controlling interest
0.0
0.0
0.0
(0.0
)
Net income attributable to
HNI Corporation
$
22.7
$
16.3
$
49.2
$
123.9
Average number of common shares
outstanding – basic
46.7
41.4
44.5
41.7
Net income attributable to
HNI Corporation per common share –
basic
$
0.49
$
0.39
$
1.11
$
2.97
Average number of common shares
outstanding – diluted
47.7
41.9
45.4
42.2
Net income attributable to
HNI Corporation per common share –
diluted
$
0.48
$
0.39
$
1.09
$
2.94
Foreign currency translation
adjustments
$
(0.0
)
$
(0.2
)
$
(0.2
)
$
(5.7
)
Change in unrealized gains (losses) on
marketable securities, net of tax
0.3
0.1
0.4
(0.7
)
Change in pension and post-retirement
liability, net of tax
(0.0
)
4.3
(0.0
)
4.3
Change in derivative financial
instruments, net of tax
(2.7
)
(0.1
)
(2.8
)
0.8
Other comprehensive income (loss), net of
tax
(2.4
)
4.1
(2.6
)
(1.3
)
Comprehensive income
20.3
20.4
46.6
122.6
Less: Comprehensive income (loss)
attributable to non-controlling interest
0.0
0.0
0.0
(0.0
)
Comprehensive income attributable to HNI
Corporation
$
20.3
$
20.4
$
46.6
$
122.6
Amounts may not sum due to rounding.
HNI Corporation and
Subsidiaries
Condensed Consolidated Balance
Sheets
(In millions)
(Unaudited)
December 30, 2023
December 31, 2022
Assets
Current Assets:
Cash and cash equivalents
$
28.9
$
17.4
Short-term investments
5.6
2.0
Receivables
247.1
218.4
Allowance for doubtful accounts
(3.5
)
(3.2
)
Inventories, net
196.6
180.1
Prepaid expenses and other current
assets
61.3
54.4
Total Current Assets
535.9
469.2
Property, Plant, and Equipment:
Land and land improvements
58.9
30.8
Buildings
406.8
275.4
Machinery and equipment
705.8
602.6
Construction in progress
22.2
34.2
1,193.7
942.9
Less accumulated depreciation
(638.5
)
(590.3
)
Net Property, Plant, and Equipment
555.2
352.5
Right-of-use Finance Leases
12.2
11.4
Right-of-use Operating Leases
115.2
88.4
Goodwill and Other Intangible Assets,
net
651.9
439.8
Other Assets
58.4
53.2
Total Assets
$
1,928.8
$
1,414.5
Liabilities and Equity
Current Liabilities:
Accounts payable and accrued expenses
$
418.7
$
367.7
Current maturities of debt
7.5
1.3
Current maturities of other long-term
obligations
7.3
2.1
Current lease obligations - Finance
4.4
3.7
Current lease obligations - Operating
25.9
20.3
Total Current Liabilities
463.7
395.1
Long-Term Debt
428.3
188.8
Long-Term Lease Obligations - Finance
7.9
7.7
Long-Term Lease Obligations -
Operating
104.0
78.9
Other Long-Term Liabilities
78.0
66.3
Deferred Income Taxes
85.1
61.0
Equity:
HNI Corporation shareholders’ equity
761.4
616.5
Non-controlling interest
0.3
0.3
Total Equity
761.8
616.8
Total Liabilities and Equity
$
1,928.8
$
1,414.5
Amounts may not sum due to rounding.
HNI Corporation and
Subsidiaries
Condensed Consolidated
Statements of Cash Flows
(In millions)
(Unaudited)
Twelve Months Ended
December 30, 2023
December 31, 2022
Net Cash Flows From (To) Operating
Activities:
Net income
$
49.2
$
123.9
Non-cash items included in net income:
Depreciation and amortization
94.9
84.2
Other post-retirement and post-employment
benefits
1.1
1.3
Stock-based compensation
16.5
9.0
Deferred income taxes
(0.6
)
(15.3
)
Restructuring and impairment charges
31.5
6.2
Gain on sale of subsidiary
—
(50.4
)
Other – net
5.1
2.7
Net increase (decrease) in cash from
operating assets and liabilities
76.5
(72.7
)
Decrease in other liabilities
(6.6
)
(7.7
)
Net cash flows from (to) operating
activities
267.5
81.2
Net Cash Flows From (To) Investing
Activities:
Capital expenditures
(78.1
)
(60.0
)
Acquisition spending, net of cash
acquired
(369.7
)
(11.4
)
Capitalized software
(1.0
)
(8.4
)
Purchase of investments
(5.7
)
(2.8
)
Sales or maturities of investments
5.4
2.3
Net proceeds from sale of subsidiary
2.7
69.5
Other – net
1.6
0.0
Net cash flows from (to) investing
activities
(444.8
)
(10.7
)
Net Cash Flows From (To) Financing
Activities:
Payments of debt
(436.0
)
(401.6
)
Proceeds from debt
684.0
413.9
Dividends paid
(58.5
)
(53.2
)
Purchase of HNI Corporation common
stock
(0.3
)
(65.2
)
Proceeds from sales of HNI Corporation
common stock
2.3
4.7
Other – net
(2.8
)
(4.0
)
Net cash flows from (to) financing
activities
188.8
(105.4
)
Net increase (decrease) in cash and cash
equivalents
11.5
(34.8
)
Cash and cash equivalents at beginning of
period
17.4
52.3
Cash and cash equivalents at end of
period
$
28.9
$
17.4
Amounts may not sum due to rounding.
HNI Corporation and
Subsidiaries
Reportable Segment
Data
(In millions)
(Unaudited)
Three Months Ended
Twelve Months Ended
December 30, 2023
December 31, 2022
December 30, 2023
December 31, 2022
Net Sales:
Workplace Furnishings
$
490.7
$
351.2
$
1,740.3
$
1,486.2
Residential Building Products
189.1
217.7
693.7
875.6
Total
$
679.8
$
568.9
$
2,434.0
$
2,361.8
Income (Loss) Before Income Taxes:
Workplace Furnishings
$
9.5
$
(7.7
)
$
68.6
$
3.4
Residential Building Products
42.1
41.7
116.6
158.7
General corporate
(20.9
)
(10.8
)
(94.9
)
(57.3
)
Gain (loss) on sale of subsidiary
—
(0.3
)
—
50.4
Operating Income
$
30.7
$
23.0
$
90.3
$
155.2
Interest expense, net
7.9
2.3
25.5
8.8
Total
$
22.7
$
20.6
$
64.8
$
146.4
Depreciation and Amortization Expense:
Workplace Furnishings
$
17.8
$
11.1
$
59.5
$
45.7
Residential Building Products
3.5
3.3
13.7
12.6
General corporate
5.2
6.4
21.6
25.9
Total
$
26.5
$
20.7
$
94.9
$
84.2
Capital Expenditures (including
capitalized software):
Workplace Furnishings
$
12.2
$
14.0
$
62.7
$
40.4
Residential Building Products
2.5
4.1
12.6
16.2
General corporate
1.6
1.5
3.7
11.7
Total
$
16.3
$
19.7
$
79.1
$
68.4
As of December 30, 2023
As of December 31, 2022
Identifiable Assets:
Workplace Furnishings
$
1,311.4
$
761.5
Residential Building Products
467.1
493.0
General corporate
150.3
160.0
Total
$
1,928.8
$
1,414.5
Amounts may not sum due to rounding.
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 the condensed consolidated financial statements,
which are prepared and presented in accordance with GAAP, this
earnings release contains the following non-GAAP financial
measures: 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 tables below. In the current quarter and year periods, the
effective tax rate used to calculate non-GAAP EPS differs from the
GAAP effective tax rate primarily due to the impact of the Kimball
International acquisition. In the prior-year quarter and year
periods, the effective tax rate used to calculate non-GAAP EPS
differs from the GAAP effective tax rate due to the impact of the
Lamex divestiture. 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.
Additionally, non-GAAP EPS for the Legacy HNI business is
calculated by excluding the impact of new issuances of HNI common
stock and HNI restricted stock units made in connection with the
acquisition of Kimball International.
The sales adjustments to arrive at the non-GAAP organic sales
information presented in this earnings release relate to the
exclusion of net sales of KII and Poppin in the current year
periods, as well as a residential building products company
acquired in the second quarter of 2022. Furthermore, prior year net
sales of the Lamex business that was divested in the third quarter
of 2022 are excluded.
The transactions excluded for purposes of other non-GAAP
financial information included in this earnings release include:
professional fees and other costs related to the acquisition of
Kimball International; current prior periods charges incurred due
to the impairment of equity investments; current and prior periods
restructuring charges recorded to cost of sales comprised of
inventory valuation adjustments and relocation and new facility
setup costs in the Workplace Furnishings segment; current periods
restructuring and impairment costs in the Workplace Furnishings
segment related to goodwill and intangible asset impairments, the
exit of Poppin, the sale of an office building, and the exit of an
eCommerce business. Additionally, prior period transactions
excluded include the gain from the divestiture of the Lamex
business and charges related to company-wide cost reduction
initiatives.
HNI Corporation
Reconciliation
(Dollars in millions)
Three Months Ended
December 30, 2023
December 31, 2022
Workplace Furnishings
Residential Building Products
Total
Workplace Furnishings
Residential Building Products
Total
Sales as reported (GAAP)
$
490.7
$
189.1
$
679.8
$
351.2
$
217.7
$
568.9
% change from PY
39.7
%
(13.1
%)
19.5
%
Less: Kimball International
acquisition
147.4
—
147.4
—
—
—
Organic sales (non-GAAP)
$
343.3
$
189.1
$
532.4
$
351.2
$
217.7
$
568.9
% change from PY
(2.3
%)
(13.1
%)
(6.4
%)
HNI Corporation
Reconciliation
(Dollars in millions)
Twelve Months Ended
December 30, 2023
December 31, 2022
Workplace Furnishings
Residential Building Products
Total
Workplace Furnishings
Residential Building Products
Total
Sales as reported (GAAP)
$
1,740.3
$
693.7
$
2,434.0
$
1,486.2
$
875.6
$
2,361.8
% change from PY
17.1
%
(20.8
%)
3.1
%
Less: Kimball International
acquisition
361.4
—
361.4
—
—
—
Less: Building Products acquisition
—
2.4
2.4
—
—
—
Less: Lamex divestiture
—
—
—
46.9
—
46.9
Organic sales (non-GAAP)
$
1,378.8
$
691.4
$
2,070.2
$
1,439.3
$
875.6
$
2,314.9
% change from PY
(4.2
%)
(21.0
%)
(10.6
%)
HNI Corporation
Reconciliation
(Dollars in millions, except per
share data)
Three Months Ended
December 30, 2023
Gross Profit
Operating Income
Tax
Net Income
EPS
As reported (GAAP)
$
273.1
$
30.7
$
0.0
$
22.7
$
0.48
% of net sales
40.2
%
4.5
%
3.3
%
Tax %
0.0
%
Restructuring charges
0.4
(0.7
)
(0.3
)
(0.4
)
(0.01
)
Impairment charges
—
32.5
6.9
25.6
0.54
Acquisition costs
—
3.6
4.7
(1.1
)
(0.02
)
Results (non-GAAP)
$
273.5
$
66.1
$
11.3
$
46.8
$
0.98
% of net sales
40.2
%
9.7
%
6.9
%
Tax %
19.5
%
HNI Corporation
Reconciliation
(Dollars in millions, except per
share data)
Three Months Ended
December 31, 2022
Gross Profit
Operating Income
Tax
Net Income
EPS
As reported (GAAP)
$
208.0
$
23.0
$
4.3
$
16.3
$
0.39
% of net sales
36.6
%
4.0
%
2.9
%
Tax %
21.0
%
Restructuring charges
4.8
7.5
1.7
5.8
0.14
Impairment charges
—
3.0
0.7
2.3
0.06
Cost reduction initiative
—
2.5
0.5
1.9
0.05
(Gain) loss on sale of subsidiary
—
0.3
0.1
0.2
0.00
Results (non-GAAP)
$
212.8
$
36.2
$
7.3
$
26.6
$
0.63
% of net sales
37.4
%
6.4
%
4.7
%
Tax %
21.4
%
HNI Corporation
Reconciliation
(Dollars in millions)
Three Months Ended
December 30, 2023
Legacy HNI
KII
Consolidated HNI
Gross profit as reported (GAAP)
$
211.8
$
61.3
$
273.1
% of net sales
39.8
%
41.6
%
40.2
%
Restructuring charges recorded to cost of
sales
0.4
—
0.4
Gross profit (non-GAAP)
$
212.1
$
61.3
$
273.5
% of net sales
39.8
%
41.6
%
40.2
%
Operating income as reported (GAAP)
$
14.5
$
16.2
$
30.7
% of net sales
2.7
%
11.0
%
4.5
%
Restructuring charges
1.2
(1.9
)
(0.7
)
Impairment charges
32.5
—
32.5
Acquisition costs
2.2
1.4
3.6
Operating income (non-GAAP)
$
50.3
$
15.7
$
66.1
% of net sales
9.5
%
10.7
%
9.7
%
HNI Corporation
Reconciliation
(Dollars in millions, except per
share data)
Three Months Ended
December 30, 2023
GAAP (as reported):
Legacy HNI
Consolidated HNI
Operating income
$
14.5
$
30.7
Interest expense, net
1.9
7.9
Income taxes (Legacy 9.1%, Consolidated
0.0%)
1.2
0.0
Net income
$
11.4
$
22.7
Average number of common shares
outstanding – diluted
42.8
(1)
47.7
EPS - Diluted
$
0.27
$
0.48
Non-GAAP:
Operating income
$
50.3
$
66.1
Interest expense, net
1.9
7.9
Income taxes (19.5%)
9.4
11.3
Net income
$
39.0
$
46.8
Average number of common shares
outstanding – diluted
42.8
(1)
47.7
EPS - Diluted
$
0.91
$
0.98
(1) The average number of common shares
outstanding – diluted for the Legacy HNI business is calculated by
excluding the fourth quarter average impacts of new issuances of
HNI common stock (4.7 million) and dilutive HNI restricted stock
units (0.1 million) as a result of the acquisition of Kimball
International.
HNI Corporation
Reconciliation
(Dollars in millions, except per
share data)
Twelve Months Ended
December 30, 2023
Gross Profit
Operating Income
Tax
Net Income
EPS
As reported (GAAP)
$
948.3
$
90.3
$
15.6
$
49.2
$
1.09
% of net sales
39.0
%
3.7
%
2.0
%
Tax %
24.1
%
Restructuring charges
0.9
12.4
2.6
9.7
0.21
Impairment charges
—
33.3
7.1
26.2
0.58
Cost reduction initiative
—
1.0
0.2
0.8
0.02
Acquisition costs
—
41.2
7.0
34.2
0.75
Results (non-GAAP)
$
949.2
$
178.1
$
32.5
$
120.1
$
2.65
% of net sales
39.0
%
7.3
%
4.9
%
Tax %
21.3
%
HNI Corporation
Reconciliation
(Dollars in millions, except per
share data)
Twelve Months Ended
December 31, 2022
Gross Profit
Operating Income
Tax
Net Income
EPS
As reported (GAAP)
$
834.9
$
155.2
$
22.5
$
123.9
$
2.94
% of net sales
35.4
%
6.6
%
5.2
%
Tax %
15.4
%
Restructuring charges
8.8
11.5
2.6
8.9
0.21
Impairment charges
—
4.0
0.9
3.1
0.07
Cost reduction initiative
—
8.0
1.8
6.2
0.15
Gain on sale of subsidiary
—
(50.4
)
(1.0
)
(49.4
)
(1.17
)
Results (non-GAAP)
$
843.7
$
128.4
$
26.8
$
92.8
$
2.20
% of net sales
35.7
%
5.4
%
3.9
%
Tax %
22.4
%
HNI Corporation
Reconciliation
(Dollars in millions)
Twelve Months Ended
December 30, 2023
Legacy HNI
KII
Poppin
Consolidated HNI
Gross profit as reported (GAAP)
$
798.6
$
142.9
$
6.7
$
948.3
% of net sales
38.5
%
40.9
%
57.8
%
39.0
%
Restructuring charges recorded to cost of
sales
0.9
—
—
0.9
Gross profit (non-GAAP)
$
799.5
$
142.9
$
6.7
$
949.2
% of net sales
38.6
%
40.9
%
57.8
%
39.0
%
Operating income (loss) as reported
(GAAP)
$
78.9
$
26.0
$
(14.7
)
$
90.3
% of net sales
3.8
%
7.4
%
(126
%)
3.7
%
Restructuring charges
3.4
(1.9
)
10.8
12.4
Impairment charges
33.3
—
—
33.3
Cost reduction initiative
1.0
—
—
1.0
Acquisition costs
28.6
12.5
—
41.2
Operating income (loss) (non-GAAP)
$
145.3
$
36.7
$
(3.8
)
$
178.1
% of net sales
7.0
%
10.5
%
(32.9
%)
7.3
%
HNI Corporation
Reconciliation
(Dollars in millions, except per
share data)
Twelve Months Ended
December 30, 2023
GAAP (as reported):
Legacy HNI
Consolidated HNI
Operating income
$
78.9
$
90.3
Interest expense, net
10.1
25.5
Income taxes (24.1%)
16.6
15.6
Net income
$
52.2
$
49.2
Average number of common shares
outstanding – diluted
42.5
(1)
45.4
EPS - Diluted
$
1.23
$
1.09
Non-GAAP:
Operating income
$
145.3
$
178.1
Interest expense, net
10.1
25.5
Income taxes (21.3%)
28.8
32.5
Net income
$
106.3
$
120.1
Average number of common shares
outstanding – diluted
42.5
(1)
45.4
EPS - Diluted
$
2.50
$
2.65
(1)
The average number of common shares
outstanding – diluted for the Legacy HNI business is calculated by
excluding the full year average impacts of new issuances of HNI
common stock (2.8 million) and dilutive HNI restricted stock units
(0.05 million) as a result of the acquisition of Kimball
International.
Workplace Furnishings
Reconciliation
(Dollars in millions)
Three Months Ended
December 30, 2023
December 31, 2022
Legacy Workplace Furnishings
KII
Total Workplace Furnishings
Total Workplace Furnishings
Total Percent Change
Operating income (loss) as reported
(GAAP)
$
(6.7
)
$
16.2
$
9.5
$
(7.7
)
223
%
% of net sales
(2.0
%)
11.0
%
1.9
%
(2.2
%)
Restructuring charges
0.4
(1.9
)
(1.5
)
7.5
Impairment charges
31.0
—
31.0
3.0
Cost reduction initiative
—
—
—
5.6
Acquisition costs
—
1.4
1.4
—
Operating income (non-GAAP)
$
24.6
$
15.7
$
40.4
$
8.4
382
%
% of net sales
7.2
%
10.7
%
8.2
%
2.4
%
Workplace Furnishings
Reconciliation
(Dollars in millions)
Twelve Months Ended
December 30, 2023
December 31, 2022
Legacy Workplace Furnishings
KII
Poppin
Total Workplace Furnishings
Total Workplace Furnishings
Total Percent Change
Operating income (loss) as reported
(GAAP)
$
57.3
$
26.0
$
(14.7
)
$
68.6
$
3.4
NM
% of net sales
4.2
%
7.4
%
(126
%)
3.9
%
0.2
%
Restructuring charges
2.6
(1.9
)
10.8
11.6
11.5
Impairment charges
31.8
—
—
31.8
3.0
Cost reduction initiative
(0.1
)
—
—
(0.1
)
5.6
Acquisition costs
—
12.5
—
12.5
—
Operating income (loss) (non-GAAP)
$
91.6
$
36.7
$
(3.8
)
$
124.5
$
23.5
430
%
% of net sales
6.6
%
10.5
%
(32.9
%)
7.2
%
1.6
%
Residential Building Products
Reconciliation
(Dollars in millions)
Three Months Ended
Twelve Months Ended
December 30, 2023
December 31, 2022
Percent Change
December 30, 2023
December 31, 2022
Percent Change
Operating income as reported (GAAP)
$
42.1
$
41.7
0.9
%
$
116.6
$
158.7
(26.5
%)
% of net sales
22.3
%
19.2
%
16.8
%
18.1
%
Cost reduction initiative
—
1.5
1.3
1.5
Operating income (non-GAAP)
$
42.1
$
43.3
(2.7
%)
$
117.8
$
160.3
(26.5
%)
% of net sales
22.3
%
19.9
%
17.0
%
18.3
%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240219742244/en/
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 (NYSE:HNI)
Historical Stock Chart
From Aug 2024 to Sep 2024
HNI (NYSE:HNI)
Historical Stock Chart
From Sep 2023 to Sep 2024