HNI Corporation (NYSE: HNI) today announced sales for the
second quarter ended July 1, 2023 of $563.5 million and a net loss
of $12.8 million. GAAP earnings per diluted share declined from
$0.72 in the prior year to ($0.30) in the current year primarily
due to transaction expenses related to the acquisition of Kimball
International. When excluding acquisition expenses and select other
items, non-GAAP net income per diluted share was $0.55, compared to
$0.52 in the prior year. GAAP to non-GAAP reconciliations follow
the financial statements in this release.
Second Quarter Highlights
- Grew non-GAAP profit in a challenging demand
environment. Although one-time expenses related to the Kimball
International acquisition impacted GAAP profit measures, non-GAAP
EPS grew six percent despite a nine percent (15 percent organic)
decline in net sales compared to the prior year. Improved
price-cost and recent profit improvement actions more than offset
lower volume.
- Delivered significant profit improvement in Workplace
Furnishings. Segment GAAP operating profit grew 33 percent
driven by a 90 basis point expansion of GAAP operating margin to
3.8 percent. On a year-over-year basis and excluding the impact of
the Kimball International acquisition, segment non-GAAP operating
margin expanded 550 basis points to 8.5 percent. This is the
highest non-GAAP margin level since the third quarter of fiscal
year 2019. Segment non-GAAP operating profit, excluding the impact
of the Kimball International acquisition, grew 149 percent compared
to the prior year, marking the fifth consecutive quarterly period
of year-over-year improvement.
- Kimball International accretion moves significantly higher
due to planned exit of Poppin. The Corporation intends to
divest Poppin, which was acquired by Kimball International in 2020.
Based on trailing 12-month results, exiting Poppin is estimated to
increase annual operating profit by $20 million while reducing
annual revenue by $56 million. Poppin is classified as “held for
sale” on the Corporation’s financial statements, and the
divestiture is expected to be completed during the third quarter of
2023. Poppin’s losses have masked the strength of Kimball
International’s core businesses, which collectively generate strong
operating margins. Further, the Corporation is increasingly
confident in the strategic and financial rationale for the
combination of HNI and Kimball International and confirms the
previously announced annual run-rate synergies of $25 million, not
including eliminating Poppin’s $20 million annual loss. In
addition, the Corporation now sees the strong potential for
additional synergies and will provide updates as the integration
process progresses.
- Profit support actions in place in Residential Building
Products. The Residential Building Products segment continues
to face volume pressure, consistent with general weakness in the
broader housing market. In response to the volume declines, the
Corporation enacted new cost reduction actions. These actions will
begin to support profitability in the third quarter of 2023. The
intermediate- to long-term demand dynamics remain encouraging for
the segment, and the Corporation is well positioned for sustained
long-term profit growth.
“Our members delivered an excellent quarter. In Workplace
Furnishings, our profit transformation efforts are ahead of
schedule as evidenced by our margin expansion and profit growth.
And since closing, we are even more confident our combination with
Kimball International will give us a stronger platform for growth
in our Workplace Furnishings segment. In Residential Building
Products, we are taking actions to support near-term profitability
while staying focused on our attractive long-term opportunities in
both the new construction and remodel/retrofit spaces,” stated Jeff
Lorenger, Chairman, President, and Chief Executive Officer.
HNI Corporation – Financial
Performance
(Dollars in millions, except per
share data)
Three Months Ended
July 1, 2023
July 2, 2022
Change
GAAP
Net Sales
$563.5
$621.7
(9.4
%)
Gross Profit %
38.3
%
35.5
%
280 bps
SG&A %
37.4
%
30.5
%
690 bps
Restructuring and Impairment Charges %
1.4
%
0.2
%
120 bps
Operating Income (Loss)
($3.6
)
$29.9
(111.9
%)
Operating Income (Loss) %
(0.6
%)
4.8
%
-540 bps
Effective Tax Rate
(41.8
%)
(9.0
%)
Net Income (Loss) %
(2.3
%)
4.9
%
-720 bps
EPS – diluted
($0.30
)
$0.72
(141.7
%)
Non-GAAP
Gross Profit %
38.2
%
35.5
%
270 bps
Operating Income
$36.6
$31.1
17.7
%
Operating Income %
6.5
%
5.0
%
150 bps
EPS – diluted
$0.55
$0.52
5.8
%
The following table contains results for (1) the Corporation’s
legacy business, excluding the impacts of the Kimball International
acquisition (“Legacy HNI”), (2) the newly acquired Kimball
International business, excluding Poppin (“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 – Financial
Performance
(Dollars in millions, except per
share data)
Three Months Ended
July 1, 2023
July 2, 2022
GAAP
Legacy HNI
KII*
Poppin*
Consolidated HNI*
Consolidated HNI
Legacy Change
Consolidated Change
Net Sales
$507.5
$52.0
$4.0
$563.5
$621.7
(18.4
%)
(9.4
%)
Gross Profit
$192.7
$20.9
$2.0
$215.5
$220.6
(12.6
%)
(2.3
%)
Gross Profit %
38.0
%
40.2
%
49.1
%
38.3
%
35.5
%
250 bps
280 bps
Restructuring and Impairment
$2.1
$—
$6.0
$8.1
$1.0
107.3
%
707.3
%
Operating Income (Loss)
$8.9
($5.3
)
($7.1
)
($3.6
)
$29.9
(70.1
%)
(111.9
%)
Operating Income (Loss) %
1.8
%
(10.3
%)
(179.6
%)
(0.6
%)
4.8
%
-300 bps
-540 bps
EPS - diluted
$0.20
($0.30
)
$0.72
(72.2
%)
(141.7
%)
Non-GAAP
Gross Profit
$192.4
$20.9
$2.0
$215.3
$220.8
(12.8
%)
(2.5
%)
Gross Profit %
37.9
%
40.2
%
49.1
%
38.2
%
35.5
%
240 bps
270 bps
Operating Income (Loss)
$32.7
$5.0
($1.1
)
$36.6
$31.1
5.3
%
17.7
%
Operating Income (Loss) %
6.5
%
9.6
%
(28.7
%)
6.5
%
5.0
%
150 bps
150 bps
EPS - diluted
$0.55
$0.55
$0.52
5.8
%
5.8
%
*2023 second quarter results reflect one
month of KII and Poppin.
Second Quarter Summary Comments
- Consolidated net sales decreased 9.4 percent from the
prior-year quarter to $563.5 million. On an organic basis, sales
decreased 14.8 percent year-over-year. The acquisition of Kimball
International in the current quarter increased year-over-year net
sales by $56.0 million, while the acquisition of a residential
building products company in the second quarter of 2022 increased
year-over-year sales by $0.9 million. The sale of the Corporation’s
China- and Hong Kong-based Lamex office furniture business in the
third quarter of 2022 decreased year-over-year sales by $27.0
million. A reconciliation of organic sales, a non-GAAP measure,
follows the financial statements in this release.
- Gross profit margin expanded 280 basis points compared to the
prior-year quarter. This increase was driven by favorable
price-cost, improved net productivity, and the impact of the
Kimball International acquisition, partially offset by lower
volume.
- Selling and administrative expenses as a percent of sales
increased 690 basis points compared to the prior-year quarter. The
increase was primarily driven by $31.3 million of costs associated
with the acquisition of Kimball International. Also contributing to
the increase was lower volume, partially offset by price
realization and lower core SG&A.
- Restructuring and impairment charges totaled $8.1 million in
the current quarter, primarily in connection with the planned exit
of the Poppin business.
- Non-GAAP net income per diluted share was $0.55 compared to
$0.52 in the prior-year quarter. The increase was driven by
favorable price-cost, lower core SG&A, and improved net
productivity, partially offset by lower volume and higher interest
expense.
- Non-GAAP net income per diluted share in the current quarter
includes an effective tax rate of 22.4 percent, compared to a GAAP
tax rate of (41.8) percent. The negative GAAP tax rate in the
current-year period was driven by non-deductible costs related to
the acquisition of Kimball International.
Workplace Furnishings –
Financial Performance
(Dollars in millions)
Three Months Ended
July 1, 2023
July 2, 2022
Change
GAAP
Net Sales
$413.0
$406.7
1.6
%
Operating Income
$15.9
$11.9
33.1
%
Operating Income %
3.8
%
2.9
%
90 bps
Non-GAAP
Operating Income
$34.0
$12.1
180.9
%
Operating Income %
8.2
%
3.0
%
520 bps
The following table contains results for (1) the Corporation’s
legacy workplace furnishings business, excluding the impacts of the
Kimball International acquisition (“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 –
Financial Performance
(Dollars in millions)
Three Months Ended
July 1, 2023
July 2, 2022
GAAP
Legacy Workplace
KII*
Poppin*
Total Workplace*
Total Workplace
Legacy Change
Total Change
Net Sales
$357.1
$52.0
$4.0
$413.0
$406.7
(12.2
%)
1.6
%
Operating Income (Loss)
$28.4
($5.3
)
($7.1
)
$15.9
$11.9
137.8
%
33.1
%
Operating Income (Loss) %
8.0
%
(10.2
%)
(177.5
%)
3.8
%
2.9
%
510 bps
90 bps
Non-GAAP
Operating Income (Loss)
$30.2
$5.0
($1.1
)
$34.0
$12.1
149.2
%
180.9
%
Operating Income (Loss) %
8.5
%
9.6
%
(28.7
%)
8.2
%
3.0
%
550 bps
520 bps
*2023 second quarter results reflect one
month of KII and Poppin.
- Workplace Furnishings net sales increased 1.6 percent from the
prior-year quarter to $413.0 million. On an organic basis, sales
decreased 5.9 percent year-over-year. The impact of the Kimball
International acquisition in the current quarter increased sales by
$56.0 million over the prior-year quarter, while the sale of Lamex
in the third quarter of 2022 decreased sales $27.0 million compared
to the prior-year quarter.
- Workplace Furnishings GAAP operating margin improved 90 basis
points versus the prior-year quarter, driven by favorable
price-cost, lower core SG&A, and improved net productivity,
partially offset by $10.3 million in Kimball International
acquisition costs and $6.0 million of costs related to the planned
exit of Poppin.
Residential Building Products
– Financial Performance
(Dollars in millions)
Three Months Ended
July 1, 2023
July 2, 2022
Change
GAAP
Net Sales
$150.4
$215.1
(30.1
%)
Operating Profit
$15.6
$37.0
(57.9
%)
Operating Profit %
10.3
%
17.2
%
-690 bps
Non-GAAP
Operating Profit
$16.8
$37.0
(54.5
%)
Operating Profit %
11.2
%
17.2
%
-600 bps
- Residential Building Products net sales decreased 30.1 percent
from the prior-year quarter to $150.4 million. On an organic basis,
sales decreased 30.5 percent year-over-year primarily due to
housing market weakness. Remodel/retrofit sales, which also were
negatively impacted by the normalization of trade inventory,
declined more than new construction sales. The impact of a
residential building products company acquired in the second
quarter of 2022 increased sales $0.9 million compared to the
prior-year quarter.
- Residential Building Products operating profit margin
compressed 690 basis points year-over-year, driven by lower volume,
partially offset by favorable price-cost, improved net
productivity, and lower variable compensation.
Order Rates
- In the Workplace Furnishings segment, organic orders during the
first six months of 2023 grew three percent year-over-year. Orders
from small-to-medium sized customers outperformed orders from
contract customers. Second quarter organic orders in the segment
decreased six percent compared to the prior year, which benefited
from pull ahead activity related to price increases. Comparing
orders over the first half smooths the distortion related to price
increase timing and offers clearer indication of demand.
- Orders in the Residential Building Products segment decreased
16 percent versus the second quarter of 2022. During the quarter,
orders in the new construction market were weaker than those in the
remodel/retrofit channel.
Fiscal Year 2023 Outlook
- Demand environment. The Corporation expects second half
organic revenue to grow at a rate in the low single-digits for
Workplace Furnishings. This outlook is consistent with first half
order patterns. In Residential Building Products, the Corporation
expects year-over-year revenue declines to moderate in the second
half due to lower prior-year comparisons, moving past the
normalization of trade inventory in the remodel/retrofit channel,
and improved trends in new construction. The Corporation expects
Residential Building Products revenue to decline at a
year-over-year rate in the high teens during the second half of
2023 with the fourth quarter declining at a slower rate than the
third quarter.
- Third quarter commentary. The Corporation expects third
quarter 2023 non-GAAP EPS to be modestly below third quarter 2022
levels primarily due to lower volume in Residential Building
Products and normalization of variable compensation, partially
offset by higher profitability in Workplace Furnishings.
- Impact of Kimball International excluding Poppin. For
2023, the Corporation expects the Kimball International acquisition
excluding the impact of Poppin to be solidly accretive to non-GAAP
EPS and add $340 to $370 million of revenue. The benefit to
non-GAAP EPS is expected to be greatest in the fourth quarter.
- Impact of Poppin. The Corporation expects to complete
the divestiture of Poppin during the third quarter of 2023. Prior
to the exit, Poppin is expected to generate an operating loss of
$3.5 to $4.0 million and revenue of $7 to $9 million during the
third quarter.
Concluding Remarks
“Our second quarter results show the ongoing potential of our
profit transformation initiatives, and there are many additional
opportunities ahead. As we look to the remainder of the year, we
expect continued year-over-year profit and margin improvement in
Workplace Furnishings.
“The addition of Kimball International will strengthen our
business. It better positions us to lead in the evolving workplace
environment and provides new opportunities for profit growth. We
are increasingly confident in the combination’s strategic and
financial benefits.
“In Residential Building Products, we have demonstrated the
ability to grow profit over the long-term and will continue to
invest in our growth strategies, even as we navigate near-term
headwinds in the housing space. The intermediate- to long-term
fundamentals of the housing market are strong as the market remains
undersupplied, and demographic trends will continue to support
demand. Our market-leading brands, product depth, and price-point
breadth uniquely position us to drive high-margin growth through
category awareness and product innovation as we continue to
leverage our owned installing-distribution footprint.
“Our core strategies are unchanged and gaining momentum. We will
continue to expand margins in Workplace Furnishings and drive
long-term revenue growth in Residential Building Products,”
concluded Mr. Lorenger.
Conference Call
HNI Corporation will host a conference call on Tuesday, August
8, 2023 at 10:00 a.m. (Central) to discuss second quarter 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
https://investors.hnicorp.com/events-and-presentations. A replay of
the webcast and call will be made available from Tuesday, August 8,
2023 at 1:00 p.m. (Central) through Tuesday, August 15, 2023, 10:59
p.m. (Central). To replay the webcast, go to the link above. To
replay the call, dial 1-800-770-2030 – Conference ID: 7175411.
About HNI Corporation
HNI Corporation (NYSE: HNI) has been improving where people
live, work, and gather for more than 75 years. 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 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
Six Months Ended
July 1, 2023
July 2, 2022
July 1, 2023
July 2, 2022
Net sales
$
563.5
$
621.7
$
1,042.5
$
1,194.1
Cost of sales
347.9
401.2
652.7
776.6
Gross profit
215.5
220.6
389.8
417.5
Selling and administrative expenses
211.0
189.7
378.9
366.1
Restructuring and impairment charges
8.1
1.0
8.1
1.0
Operating income (loss)
(3.6
)
29.9
2.9
50.3
Interest expense, net
5.5
2.1
8.2
4.1
Income (loss) before income taxes
(9.0
)
27.8
(5.3
)
46.2
Income taxes
3.8
(2.5
)
6.0
1.8
Net income (loss)
(12.8
)
30.3
(11.3
)
44.5
Less: Net income (loss) attributable to
non-controlling interest
(0.0
)
0.0
(0.0
)
(0.0
)
Net income (loss) attributable to HNI
Corporation
$
(12.8
)
$
30.3
$
(11.3
)
$
44.5
Average number of common shares
outstanding – basic
43.3
41.8
42.4
42.1
Net income (loss) attributable to HNI
Corporation per common share – basic
$
(0.30
)
$
0.73
$
(0.27
)
$
1.06
Average number of common shares
outstanding – diluted
43.3
42.4
42.4
42.7
Net income (loss) attributable to HNI
Corporation per common share – diluted
$
(0.30
)
$
0.72
$
(0.27
)
$
1.04
Foreign currency translation
adjustments
$
(0.0
)
$
(1.3
)
$
0.0
$
(1.8
)
Change in unrealized gains (losses) on
marketable securities, net of tax
(0.1
)
(0.1
)
0.1
(0.5
)
Change in derivative financial
instruments, net of tax
—
0.1
(0.1
)
1.0
Other comprehensive income (loss), net of
tax
(0.1
)
(1.3
)
0.0
(1.3
)
Comprehensive income (loss)
(12.9
)
29.0
(11.2
)
43.1
Less: Comprehensive income (loss)
attributable to non-controlling interest
(0.0
)
0.0
(0.0
)
(0.0
)
Comprehensive income (loss) attributable
to HNI Corporation
$
(12.9
)
$
29.0
$
(11.2
)
$
43.1
Amounts may not sum due to rounding.
HNI Corporation and Subsidiaries
Condensed Consolidated Balance Sheets (In millions)
(Unaudited)
July 1, 2023
December 31, 2022
Assets
Current Assets:
Cash and cash equivalents
$
23.8
$
17.4
Short-term investments
5.7
2.0
Receivables
258.1
218.4
Allowance for doubtful accounts
(2.6
)
(3.2
)
Inventories, net
234.8
180.1
Prepaid expenses and other current
assets
58.9
52.5
Assets held for sale
18.9
1.9
Total Current Assets
597.7
469.2
Property, Plant, and Equipment:
Land and land improvements
58.5
30.8
Buildings
410.0
275.4
Machinery and equipment
682.7
602.6
Construction in progress
41.7
34.2
1,192.9
942.9
Less accumulated depreciation
(613.3
)
(590.3
)
Net Property, Plant, and Equipment
579.6
352.5
Right-of-use Finance Leases
11.8
11.4
Right-of-use Operating Leases
124.3
88.4
Goodwill and Other Intangible Assets,
net
701.8
439.8
Other Assets
60.4
53.2
Total Assets
$
2,075.6
$
1,414.5
Liabilities and Equity
Current Liabilities:
Accounts payable and accrued expenses
$
438.8
$
367.7
Current maturities of debt
1.1
1.3
Current maturities of other long-term
obligations
7.3
2.1
Current lease obligations - Finance
4.0
3.7
Current lease obligations - Operating
23.8
20.3
Liabilities held for sale
14.4
—
Total Current Liabilities
489.4
395.1
Long-Term Debt
597.1
188.8
Long-Term Lease Obligations - Finance
7.7
7.7
Long-Term Lease Obligations -
Operating
114.0
78.9
Other Long-Term Liabilities
79.3
66.3
Deferred Income Taxes
72.9
61.0
Total Liabilities
1,360.3
797.7
Equity:
HNI Corporation shareholders’ equity
715.0
616.5
Non-controlling interest
0.3
0.3
Total Equity
715.3
616.8
Total Liabilities and Equity
$
2,075.6
$
1,414.5
Amounts may not sum due to rounding.
HNI Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows (In
millions) (Unaudited)
Six Months Ended
July 1, 2023
July 2, 2022
Net Cash Flows From (To) Operating
Activities:
Net income (loss)
$
(11.3
)
$
44.5
Non-cash items included in net income
(loss):
Depreciation and amortization
42.7
42.4
Other post-retirement and post-employment
benefits
0.5
0.7
Stock-based compensation
7.6
8.5
Deferred income taxes
(9.5
)
(13.4
)
Other – net
2.3
0.6
Net increase (decrease) in cash from
operating assets and liabilities
4.8
(105.0
)
Increase (decrease) in other
liabilities
2.7
(3.5
)
Net cash flows from (to) operating
activities
39.8
(25.2
)
Net Cash Flows From (To) Investing
Activities:
Capital expenditures
(37.7
)
(27.9
)
Acquisition spending, net of cash
acquired
(369.8
)
(9.3
)
Capitalized software
(3.4
)
(5.3
)
Purchase of investments
(3.1
)
(1.8
)
Sales or maturities of investments
3.0
1.5
Other – net
0.2
—
Net cash flows from (to) investing
activities
(410.8
)
(42.8
)
Net Cash Flows From (To) Financing
Activities:
Payments of debt
(161.7
)
(159.3
)
Proceeds from debt
572.3
291.8
Dividends paid
(28.6
)
(26.7
)
Purchase of HNI Corporation common
stock
—
(65.2
)
Proceeds from sales of HNI Corporation
common stock
1.2
3.4
Other – net
(5.9
)
(2.5
)
Net cash flows from (to) financing
activities
377.3
41.5
Net increase (decrease) in cash and cash
equivalents including cash classified within current assets held
for sale
6.3
(26.5
)
Less: net increase in cash classified
within current assets held for sale
—
6.2
Net increase (decrease) in cash and cash
equivalents
6.3
(32.7
)
Cash and cash equivalents at beginning of
period
17.4
52.3
Cash and cash equivalents at end of
period
$
23.8
$
19.6
Amounts may not sum due to rounding.
HNI Corporation and Subsidiaries
Reportable Segment Data (In millions) (Unaudited)
Three Months Ended
Six Months Ended
July 1, 2023
July 2, 2022
July 1, 2023
July 2, 2022
Net Sales:
Workplace furnishings
$
413.0
$
406.7
$
712.7
$
759.8
Residential building products
150.4
215.1
329.8
434.3
Total
$
563.5
$
621.7
$
1,042.5
$
1,194.1
Income (Loss) Before Income Taxes:
Workplace furnishings
$
15.9
$
11.9
$
11.9
$
5.5
Residential building products
15.6
37.0
43.6
77.3
General corporate
(35.0
)
(19.0
)
(52.7
)
(32.5
)
Operating income (loss)
(3.6
)
29.9
2.9
50.3
Interest expense, net
5.5
2.1
8.2
4.1
Total
$
(9.0
)
$
27.8
$
(5.3
)
$
46.2
Depreciation and Amortization Expense:
Workplace furnishings
$
13.8
$
11.7
$
25.0
$
23.2
Residential building products
3.4
3.1
6.7
6.1
General corporate
5.4
6.6
11.0
13.1
Total
$
22.6
$
21.3
$
42.7
$
42.4
Capital Expenditures (including
capitalized software):
Workplace furnishings
$
17.9
$
8.2
$
31.8
$
16.4
Residential building products
2.4
2.7
7.4
8.5
General corporate
0.9
4.1
2.0
8.4
Total
$
21.1
$
15.0
$
41.2
$
33.2
As of July 1, 2023
As of December 31, 2022
Identifiable Assets:
Workplace furnishings
$
1,440.8
$
761.5
Residential building products
491.5
493.0
General corporate
143.3
160.0
Total
$
2,075.6
$
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 shares
(i.e., EPS). These measures are adjusted from the comparable GAAP
measure to exclude the impacts of the selected items as summarized
in the following tables. In the current period, the effective tax
rate used to calculate non-GAAP EPS differs from the GAAP effective
tax rate due to nondeductible charges associated with the
acquisition of Kimball International. 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
components. 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
current period exclusion of net sales of Kimball International,
Inc. and a residential building products company acquired in the
second quarter of 2022, as well as the exclusion of the prior
period net sales of the Lamex business that was divested in the
third quarter of 2022. The transactions excluded for purposes of
other non-GAAP financial information in this earnings release
include: legal, advisory, banker, and other professional fees, as
well as change-in-control employee costs, related to the
acquisition of Kimball International; current and prior period
restructuring charges recorded to cost of sales comprised of
inventory valuation adjustments and relocation and new facility
setup costs in the Workplace Furnishings segment; cost reduction
actions primarily related to the Residential Building Products
segment; restructuring costs in the Workplace Furnishings segment
related to the planned exit of Poppin; current impairment charges
in the Workplace Furnishings segment related to the planned sale of
an office building and the disposal of information technology
assets; prior period impairment charges at corporate related to an
equity investment. Nonrecurring tax items in the prior period are
related to the divestiture of the Lamex business.
HNI Corporation
Reconciliation
(Dollars in millions)
Three Months Ended
July 1, 2023
July 2, 2022
Workplace Furnishings
Residential Building Products
Total
Workplace Furnishings
Residential Building Products
Total
Sales as reported (GAAP)
$
413.0
$
150.4
$
563.5
$
406.7
$
215.1
$
621.7
% change from PY
1.6
%
(30.1
%)
(9.4
%)
Less: Acquisitions
56.0
0.9
56.9
—
—
—
Less: Divestiture
—
—
—
27.0
—
27.0
Organic Sales (non-GAAP)
$
357.1
$
149.5
$
506.6
$
379.6
$
215.1
$
594.7
% change from PY
(5.9
%)
(30.5
%)
(14.8
%)
HNI Corporation
Reconciliation
(Dollars in millions, except per
share data)
Three Months Ended
July 1, 2023
Gross Profit
Operating Income (Loss)
Tax
Net Income (Loss)
EPS
As reported (GAAP)
$
215.5
$
(3.6
)
$
3.8
$
(12.8
)
$
(0.30
)
% of net sales
38.3
%
(0.6
%)
(2.3
%)
Tax %
(41.8
%)
Restructuring charges
(0.2
)
7.2
1.6
5.6
0.13
Impairment charges
—
0.6
0.1
0.5
0.01
Cost reduction actions
—
1.1
0.2
0.8
0.02
Acquisition costs
—
31.3
1.2
30.1
0.69
Results (non-GAAP)
$
215.3
$
36.6
$
7.0
$
24.1
$
0.55
% of net sales
38.2
%
6.5
%
4.3
%
Tax %
22.4
%
HNI Corporation
Reconciliation
(Dollars in millions)
Three Months Ended
July 1, 2023
Legacy HNI
KII
Poppin
Consolidated HNI
Gross Profit as reported (GAAP)
$
192.7
$
20.9
$
2.0
$
215.5
% of net sales
38.0
%
40.2
%
49.1
%
38.3
%
Restructuring charges recorded to cost of
sales
(0.2
)
—
—
(0.2
)
Gross Profit (non-GAAP)
$
192.4
$
20.9
$
2.0
$
215.3
% of net sales
37.9
%
40.2
%
49.1
%
38.2
%
Operating income (loss) as reported
(GAAP)
$
8.9
$
(5.3
)
$
(7.1
)
$
(3.6
)
% of net sales
1.8
%
(10.3
%)
(179.6
%)
(0.6
%)
Restructuring charges
1.2
—
6.0
7.2
Impairment charges
0.6
—
—
0.6
Cost reduction actions
1.1
—
—
1.1
Acquisition costs
20.9
10.3
—
31.3
Operating income (loss) (non-GAAP)
$
32.7
$
5.0
$
(1.1
)
$
36.6
% of net sales
6.5
%
9.6
%
(28.7
%)
6.5
%
HNI Corporation
Reconciliation
(Dollars in millions, except per
share data)
Three Months Ended
July 1, 2023
GAAP (as reported):
Legacy HNI
Consolidated HNI
Operating income (loss)
$
8.9
$
(3.6
)
Interest expense, net
3.0
5.5
Income taxes (-41.8%)
(2.5
)
3.8
Net income (loss)
$
8.4
$
(12.8
)
Average number of common shares
outstanding – diluted
42.2
43.3
EPS - Diluted
$
0.20
$
(0.30
)
Non-GAAP:
Operating income
$
32.7
$
36.6
Interest expense, net
3.0
5.5
Income taxes (22.4%)
6.7
7.0
Net income
$
23.1
$
24.1
Average number of common shares
outstanding – diluted
42.2
43.9
EPS - Diluted
$
0.55
$
0.55
HNI Corporation
Reconciliation
(Dollars in millions, except per
share data)
Three Months Ended
July 2, 2022
Gross Profit
Operating Income
Tax
Net Income
EPS
As reported (GAAP)
$
220.6
$
29.9
$
(2.5
)
$
30.3
$
0.72
% of net sales
35.5
%
4.8
%
4.9
%
Tax %
(9.0
%)
Restructuring charges
0.2
0.2
0.0
0.1
0.00
Impairment charges
—
1.0
0.2
0.8
0.02
Income tax adjustment
—
—
9.1
(9.1
)
(0.21
)
Results (non-GAAP)
$
220.8
$
31.1
$
6.9
$
22.1
$
0.52
% of net sales
35.5
%
5.0
%
3.6
%
Tax %
23.7
%
Workplace Furnishings
Reconciliation
(Dollars in millions)
Three Months Ended
July 1, 2023
July 2, 2022
Legacy Workplace Furnishings
KII
Poppin
Total Workplace Furnishings
Total Workplace Furnishings
Total Change
Operating income (loss) as reported
(GAAP)
$
28.4
$
(5.3
)
$
(7.1
)
$
15.9
$
11.9
33.1
%
% of net sales
7.9
%
(10.3
%)
(179.6
%)
3.8
%
2.9
%
Impairment charges
0.6
—
—
0.6
—
Restructuring charges
1.2
—
6.0
7.2
0.2
Acquisition costs
—
10.3
—
10.3
—
Operating income (loss) (non-GAAP)
$
30.2
$
5.0
$
(1.1
)
$
34.0
$
12.1
180.9
%
% of net sales
8.5
%
9.6
%
(28.7
%)
8.2
%
3.0
%
Residential Building Products
Reconciliation
(Dollars in millions)
Three Months Ended
July 1, 2023
July 2, 2022
Percent Change
Operating income as reported (GAAP)
$
15.6
$
37.0
(57.9
%)
% of net sales
10.3
%
17.2
%
Cost reduction actions
1.3
—
Operating income (non-GAAP)
$
16.8
$
37.0
(54.5
%)
% of net sales
11.2
%
17.2
%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230807381365/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)
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