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Hni Corp (HNI) SEC Filing 8-K Material Event for the period ending Monday, October 25, 2021

Hni Corp

CIK: 48287 Ticker: HNI




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

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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 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 Rate21.5 %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 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 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 EndedNine 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 sales391,394 321,516 1,018,334 880,754 
Gross profit195,356 185,547 563,164 512,470 
Selling and administrative expenses169,113 146,785 489,634 449,933 
Impairment charges— — — 32,661 
Operating income26,243 38,762 73,530 29,876 
Interest expense, net 1,853 1,517 5,465 5,271 
Income before income taxes24,390 37,245 68,065 24,605 
Income taxes5,232 6,558 16,476 5,259 
Net income19,158 30,687 51,589 19,346 
Less: Net loss attributable to non-controlling interest(1)(3)(3)
Net income attributable to HNI Corporation$19,158 $30,688 $51,592 $19,349 
Average number of common shares outstanding – basic43,781 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 – diluted44,342 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 tax170 106 577 (2,393)
Other comprehensive income (loss), net of tax184 996 527 (1,756)
Comprehensive income19,342 31,683 52,116 17,590 
Less: Comprehensive loss attributable to non-controlling interest(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 investments1,299 1,687 
   Receivables238,620 207,971 
   Allowance for doubtful accounts(4,185)(5,514)
   Inventories188,590 137,811 
   Prepaid expenses and other current assets44,702 37,660 
     Total Current Assets595,462 495,735 
Property, Plant, and Equipment:
   Land and land improvements29,983 29,691 
   Buildings294,240 293,708 
   Machinery and equipment588,126 578,643 
   Construction in progress26,082 17,750 
938,431 919,792 
   Less accumulated depreciation576,423 553,835 
     Net Property, Plant, and Equipment362,008 365,957 
Right-of-use Finance Leases9,940 6,095 
Right-of-use Operating Leases80,223 70,219 
Goodwill and Other Intangible Assets446,758 458,896 
Other Assets39,975 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 debt3,345 841 
   Current maturities of other long-term obligations3,598 2,990 
   Current lease obligations - Finance2,632 1,589 
   Current lease obligations - Operating19,970 19,970 
     Total Current Liabilities494,144 439,028 
Long-Term Debt174,587 174,524 
Long-Term Lease Obligations - Finance7,270 4,516 
Long-Term Lease Obligations - Operating64,634 53,249 
Other Long-Term Liabilities91,270 81,264 
Deferred Income Taxes72,754 74,706 
Total Liabilities904,659 827,287 
Equity:
HNI Corporation shareholders' equity629,384 590,419 
Non-controlling interest323 326 
     Total Equity629,707 590,745 
     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 amortization62,010 57,917 
Other post-retirement and post-employment benefits996 1,104 
Stock-based compensation9,540 6,746 
Reduction in carrying amount of right-of-use assets18,964 16,965 
Deferred income taxes(2,057)(3,730)
Impairment of goodwill and intangible assets— 32,661 
Other – net2,640 815 
Net increase (decrease) in cash from operating assets and liabilities(64,073)13,316 
Increase (decrease) in other liabilities8,925 (1,779)
Net cash flows from (to) operating activities88,534 143,361 
Net Cash Flows From (To) Investing Activities:
Capital expenditures(38,182)(24,751)
Proceeds from sale of property, plant, and equipment193 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 investments3,164 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 debt4,335 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 stock29,944 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 equivalents10,316 57,312 
Cash and cash equivalents at beginning of period116,120 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 EndedNine 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 products193,609 153,702 541,472 393,397 
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 products33,392 30,197 103,766 65,232 
General corporate(11,042)(8,261)(39,814)(26,737)
Operating Income26,243 38,762 73,530 29,876 
Interest expense, net1,853 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 products2,545 2,351 7,403 6,976 
General corporate6,443 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 products5,456 2,695 12,113 5,874 
General corporate3,549 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 products415,092 381,550 
General corporate287,219 273,702 
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, 2021September 26, 2020
Workplace FurnishingsResidential Building ProductsTotalWorkplace FurnishingsResidential Building ProductsTotal
Sales as reported (GAAP)$393.1 $193.6 $586.7 $353.4 $153.7 $507.1 
% change from PY11.3 %26.0 %15.7 %
Less: Acquisitions8.9 0.9 9.8 — — — 
Organic Sales (non-GAAP)$384.2 $192.8 $577.0 $353.4 $153.7 $507.1 
% change from PY8.7 %25.4 %13.8 %












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Ticker: HNI
CIK: 48287
Form Type: 8-K Corporate News
Accession Number: 0000048287-21-000134
Submitted to the SEC: Mon Oct 25 2021 7:30:39 AM EST
Accepted by the SEC: Mon Oct 25 2021
Period: Monday, October 25, 2021
Industry: Office Furniture No Wood
Events:
  1. Earnings Release
  2. Financial Exhibit

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