HNI Corporation (NYSE: HNI) today announced sales for the
third quarter ended September 30, 2023 of $711.6 million and net
income of $37.8 million. GAAP earnings per diluted share declined
from $1.51 in the prior year to $0.80 in the current year primarily
due to a non-recurring $51 million pre-tax gain on sale that was
included in the prior year results. When excluding the gain and
other items in both the current and prior year periods, non-GAAP
net income per diluted share was $0.93 in the current year,
compared to $0.71 in the prior year. GAAP to non-GAAP
reconciliations follow the financial statements in this
release.
Third Quarter Highlights
- Strong profit growth. While GAAP earnings per share
declined year-over-year primarily due to a one-time gain in the
year-ago period, non-GAAP earnings per diluted share grew more than
31 percent compared to the prior-year period despite a 7.1 percent
year-over-year organic revenue decline.
- Substantial margin expansion in Workplace Furnishings.
Segment GAAP operating margin expanded 730 basis points on a
year-over-year basis to 8.8 percent. Excluding Kimball
International and Poppin, third quarter non-GAAP operating profit
margin for legacy HNI workplace furnishings (“Legacy Workplace”)
was 10.7 percent, an improvement of 820 basis points
year-on-year.
- KII accretive; Poppin divestiture completed. Kimball
International excluding Poppin (“KII”) added approximately $15.2
million in GAAP operating profit and $15.9 million in non-GAAP
operating profit in the third quarter of 2023. KII’s third quarter
non-GAAP operating profit margin was 10.6 percent despite incurring
$5.1 million in incremental purchase accounting costs. KII added
approximately $0.06 to third quarter non-GAAP EPS when including
estimated interest costs and incremental shares outstanding related
to the acquisition, and the Corporation expects the rate of
accretion to increase as synergies mature. As previously announced,
the Corporation expects to achieve annual cost synergies of at
least $25 million and sees the strong potential for more. The
Corporation completed the divestiture of Poppin during the third
quarter. Exiting Poppin eliminated an annual operating loss of
nearly $20 million and improves strategic focus.
- Residential Building Products margin resilient in the face
of housing market weakness. Segment operating margin was
unchanged year-over-year at 17.7 percent despite 21.8 percent lower
net sales. Last quarter, the Corporation enacted cost reduction
actions, which supported third quarter 2023 profitability. 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 profit transformation actions continue to
accelerate—reflecting the focus and dedication of our members. Our
strategies to expand operating profit margin in our Workplace
Furnishings segment continue to deliver. We reached margin levels
last seen in 2019 and see more opportunity ahead. In Residential
Building Products, our actions to support profitability helped our
margins rebound and remain unchanged versus the prior year despite
ongoing macro pressures on the top line. Overall, our businesses
are now stronger and additional opportunity remains,” stated Jeff
Lorenger, Chairman, President, and Chief Executive Officer.
HNI Corporation – Financial
Performance
(Dollars in millions, except per
share data)
Three Months Ended
September 30, 2023
October 1, 2022
Change
GAAP
Net Sales
$711.6
$598.8
18.8
%
Gross Profit %
40.1
%
35.0
%
510 bps
SG&A %
31.4
%
29.8
%
160 bps
Gain on Sale of Subsidiary
$—
$50.6
NM
Restructuring and Impairment Charges %
0.7
%
—
%
70 bps
Operating Income
$56.8
$81.9
(30.7
%)
Operating Income %
8.0
%
13.7
%
-570 bps
Effective Tax Rate
20.3
%
20.7
%
Net Income %
5.3
%
10.5
%
-520 bps
EPS – diluted
$0.80
$1.51
(47.0
%)
Non-GAAP
Gross Profit %
40.1
%
35.6
%
450 bps
Operating Income
$65.2
$40.4
61.2
%
Operating Income %
9.2
%
6.8
%
240 bps
EPS – diluted
$0.93
$0.71
31.0
%
The following table contains results for (1) the Corporation’s
legacy business, excluding the impacts of KII and Poppin (“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 – Financial
Performance
(Dollars in millions, except per
share data)
Three Months Ended
September 30, 2023
October 1, 2022
GAAP
Legacy HNI
KII
Poppin
Consolidated HNI
Consolidated HNI
Legacy Change
Consolidated Change
Net Sales
$553.6
$150.4
$7.7
$711.6
$598.8
(7.5
%)
18.8
%
Gross Profit
$219.9
$60.7
$4.8
$285.3
$209.5
5.0
%
36.2
%
Gross Profit %
39.7
%
40.4
%
62.3
%
40.1
%
35.0
%
470 bps
510 bps
Gain on Sale of Subsidiary
$—
$—
$—
$—
$50.6
(100.0
%)
(100.0
%)
Restructuring and Impairment
$0.5
$—
$4.8
$5.3
$—
NM
NM
Operating Income (Loss)
$49.1
$15.2
($7.5
)
$56.8
$81.9
(40.0
%)
(30.7
%)
Operating Income (Loss) %
8.9
%
10.1
%
(98.2
%)
8.0
%
13.7
%
-480 bps
-570 bps
EPS - diluted
$0.87
$0.80
$1.51
(42.4
%)
(47.0
%)
Non-GAAP
Gross Profit
$220.2
$60.7
$4.8
$285.6
$213.0
3.4
%
34.1
%
Gross Profit %
39.8
%
40.4
%
62.3
%
40.1
%
35.6
%
420 bps
450 bps
Operating Income (Loss)
$51.9
$15.9
($2.7
)
$65.2
$40.4
28.4
%
61.2
%
Operating Income (Loss) %
9.4
%
10.6
%
(35.0
%)
9.2
%
6.8
%
260 bps
240 bps
EPS - diluted
$0.91
$0.93
$0.71
28.2
%
31.0
%
Third Quarter Summary Comments
- Consolidated net sales increased 18.8 percent from the
prior-year quarter to $711.6 million. On an organic basis, sales
decreased 7.1 percent year-over-year. The acquisition of Kimball
International increased year-over-year net sales by $158.0 million.
The prior-year sale of the Corporation’s China- and Hong Kong-based
Lamex office furniture business decreased year-over-year sales by
$2.7 million. A reconciliation of organic sales, a non-GAAP
measure, follows the financial statements in this release.
- Gross profit margin expanded 510 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
organic volume.
- Selling and administrative expenses as a percent of sales
increased 160 basis points compared to the prior-year quarter. The
increase was primarily driven by higher variable compensation,
lower organic volume, and the impact of the Kimball International
acquisition, partially offset by lower core SG&A expenses and
price realization. The current quarter also included $2.8 million
of acquisition-related fees and expenses, while the prior-year
quarter included $5.6 million associated with a company-wide cost
reduction initiative.
- Restructuring and impairment charges totaled $5.3 million in
the current quarter, primarily in connection with the exit of the
Poppin business.
- A pre-tax gain of $50.6 million was recorded as a corporate
item during the prior-year quarter as a result of the divestiture
of the Lamex business.
- Non-GAAP net income per diluted share was $0.93 compared to
$0.71 in the prior-year quarter. The 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 –
Financial Performance
(Dollars in millions)
Three Months Ended
September 30, 2023
October 1, 2022
Change
GAAP
Net Sales
$536.8
$375.2
43.1
%
Operating Income
$47.3
$5.6
738
%
Operating Income %
8.8
%
1.5
%
730 bps
Non-GAAP
Operating Income
$53.6
$9.2
483
%
Operating Income %
10.0
%
2.5
%
750 bps
The following table contains 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 –
Financial Performance
(Dollars in millions)
Three Months Ended
September 30, 2023
October 1, 2022
GAAP
Legacy Workplace
KII
Poppin
Total Workplace
Total Workplace
Legacy Change
Total Change
Net Sales
$378.8
$150.4
$7.7
$536.8
$375.2
1.0
%
43.1
%
Operating Income (Loss)
$39.6
$15.2
($7.5
)
$47.3
$5.6
603
%
738
%
Operating Income (Loss) %
10.5
%
10.1
%
(98.2
%)
8.8
%
1.5
%
900 bps
730 bps
Non-GAAP
Operating Income (Loss)
$40.4
$15.9
($2.7
)
$53.6
$9.2
339
%
483
%
Operating Income (Loss) %
10.7
%
10.6
%
(35.0
%)
10.0
%
2.5
%
820 bps
750 bps
- Workplace Furnishings net sales increased 43.1 percent from the
prior-year quarter to $536.8 million. On an organic basis, sales
increased 1.7 percent year-over-year. The impact of the Kimball
International acquisition increased sales by $158.0 million over
the prior-year quarter, while the prior-year sale of Lamex
decreased sales $2.7 million compared to the prior-year
quarter.
- Workplace Furnishings GAAP operating margin improved 730 basis
points versus the prior-year quarter, driven by favorable
price-cost, improved net productivity, favorable impacts from KII,
and lower core SG&A. These factors were partially offset by
$4.8 million of restructuring costs related to the exit of Poppin
and higher variable compensation. Excluding the impact of KII and
Poppin, third quarter non-GAAP operating profit margin for Legacy
Workplace was 10.7 percent, an improvement of 820 basis points
year-on-year.
Residential Building Products
– Financial Performance
(Dollars in millions)
Three Months Ended
September 30, 2023
October 1, 2022
Change
GAAP
Net Sales
$174.8
$223.6
(21.8
%)
Operating Income
$30.9
$39.6
(22.1
%)
Operating Income %
17.7
%
17.7
%
0 bps
- Residential Building Products net sales decreased 21.8 percent
from the prior-year quarter to $174.8 million primarily due to
housing market weakness. New construction and remodel/retrofit
sales declined at similar rates.
- Residential Building Products operating profit margin was flat
year-over-year with the impact of lower volume fully offset by
favorable price-cost, improved net productivity, lower core
SG&A, and lower variable compensation.
Third Quarter Order Rates
- In the Workplace Furnishings segment, orders from
small-to-medium sized customers increased six percent versus the
prior-year quarter on an organic basis—outperforming order rates
from contract customers, which were down four percent
year-over-year organically in the quarter.
- Orders in the Residential Building Products segment decreased
18 percent versus the third quarter of 2022. During the quarter,
orders in new construction outperformed remodel/retrofit.
Fourth Quarter 2023 Outlook
- Fourth quarter non-GAAP earnings per share are expected
to increase solidly year-over-year and be modestly below
just-reported third quarter of 2023 results, consistent with normal
seasonal patterns.
- Demand environment. The Corporation expects Workplace
Furnishings segment organic revenue to be approximately flat versus
the same quarter of 2022. In Residential Building Products, the
Corporation expects fourth quarter revenue to be down
year-over-year at a rate in the high-single digit to low-teens
range. The expectation of moderating year-over-year revenue
declines reflects easier prior-year comparisons and sequentially
better new home market dynamics—consistent with recent
single-family permit trends.
- Impact of Kimball International. For the fourth quarter
of 2023, the Corporation expects KII to be accretive to non-GAAP
EPS, consistent with third quarter results. KII is expected to add
$140 to $150 million of revenue to fourth quarter results.
Concluding Remarks
“Our strategies are delivering results. Operating margin in
Workplace Furnishings continues to expand—reaching 10 percent in
the third quarter. Our profit transformation initiatives have
momentum, and we expect continued year-over-year profit and margin
improvement in the segment.
“The integration of Kimball International is going well. KII is
already strengthening our business and delivering earnings
accretion, which will only increase as our synergies mature. KII
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 adjusted the cost
structure and demonstrated the resiliency of our margins while
continuing to invest in our growth strategies, leading brands, and
operating platforms. Although the near term remains dynamic, we are
uniquely positioned to drive high-margin growth as housing
stabilizes.
“We remain committed to our core strategies of continuing to
expand margins in Workplace Furnishings and driving long-term
revenue growth in Residential Building Products,” concluded Mr.
Lorenger.
Conference Call
HNI Corporation will host a conference call on Tuesday, October
31, 2023 at 10:00 a.m. (Central) to discuss third 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, October
31, 2023 at 1:00 p.m. (Central) through Tuesday, November 7, 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
Nine Months Ended
September 30, 2023
October 1, 2022
September 30, 2023
October 1, 2022
Net sales
$
711.6
$
598.8
$
1,754.2
$
1,792.9
Cost of sales
426.3
389.3
1,079.0
1,165.9
Gross profit
285.3
209.5
675.2
627.0
Selling and administrative expenses
223.3
178.2
602.2
544.3
Gain on sale of subsidiary
—
(50.6
)
—
(50.6
)
Restructuring and impairment charges
5.3
—
13.4
1.0
Operating income
56.8
81.9
59.6
132.2
Interest expense, net
9.4
2.4
17.5
6.5
Income before income taxes
47.4
79.5
42.1
125.8
Income taxes
9.6
16.4
15.6
18.2
Net income
37.8
63.1
26.5
107.6
Less: Net income (loss) attributable to
non-controlling interest
0.0
(0.0
)
0.0
(0.0
)
Net income attributable to HNI
Corporation
$
37.8
$
63.1
$
26.5
$
107.6
Average number of common shares
outstanding – basic
46.6
41.3
43.8
41.8
Net income attributable to HNI Corporation
per common share – basic
$
0.81
$
1.53
$
0.60
$
2.57
Average number of common shares
outstanding – diluted
47.3
41.8
44.5
42.3
Net income attributable to HNI Corporation
per common share – diluted
$
0.80
$
1.51
$
0.60
$
2.54
Foreign currency translation
adjustments
$
(0.2
)
$
(3.7
)
$
(0.2
)
$
(5.5
)
Change in unrealized gains (losses) on
marketable securities, net of tax
(0.0
)
(0.3
)
0.1
(0.8
)
Change in derivative financial
instruments, net of tax
—
(0.1
)
(0.1
)
0.9
Other comprehensive income (loss), net of
tax
(0.2
)
(4.0
)
(0.2
)
(5.4
)
Comprehensive income
37.5
59.1
26.3
102.2
Less: Comprehensive income (loss)
attributable to non-controlling interest
0.0
(0.0
)
0.0
(0.0
)
Comprehensive income attributable to HNI
Corporation
$
37.5
$
59.1
$
26.3
$
102.2
Amounts may not sum due to rounding.
HNI Corporation and Subsidiaries
Condensed Consolidated Balance Sheets (In millions)
(Unaudited)
September 30, 2023
December 31, 2022
Assets
Current Assets:
Cash and cash equivalents
$
24.4
$
17.4
Short-term investments
5.8
2.0
Receivables
262.2
218.4
Allowance for doubtful accounts
(3.4
)
(3.2
)
Inventories, net
228.9
180.1
Prepaid expenses and other current
assets
54.5
54.4
Total Current Assets
572.4
469.2
Property, Plant, and Equipment:
Land and land improvements
58.7
30.8
Buildings
403.1
275.4
Machinery and equipment
689.2
602.6
Construction in progress
32.9
34.2
1,184.0
942.9
Less accumulated depreciation
(624.2
)
(590.3
)
Net Property, Plant, and Equipment
559.8
352.5
Right-of-use Finance Leases
12.1
11.4
Right-of-use Operating Leases
119.4
88.4
Goodwill and Other Intangible Assets,
net
693.3
439.8
Other Assets
60.0
53.2
Total Assets
$
2,017.0
$
1,414.5
Liabilities and Equity
Current Liabilities:
Accounts payable and accrued expenses
$
450.8
$
367.7
Current maturities of debt
15.4
1.3
Current maturities of other long-term
obligations
7.5
2.1
Current lease obligations - Finance
4.3
3.7
Current lease obligations - Operating
24.3
20.3
Total Current Liabilities
502.3
395.1
Long-Term Debt
493.2
188.8
Long-Term Lease Obligations - Finance
7.9
7.7
Long-Term Lease Obligations -
Operating
109.0
78.9
Other Long-Term Liabilities
81.2
66.3
Deferred Income Taxes
82.3
61.0
Total Liabilities
1,275.9
797.7
Equity:
HNI Corporation shareholders’ equity
740.8
616.5
Non-controlling interest
0.3
0.3
Total Equity
741.1
616.8
Total Liabilities and Equity
$
2,017.0
$
1,414.5
Amounts may not sum due to rounding.
HNI Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows (In
millions) (Unaudited)
Nine Months Ended
September 30, 2023
October 1, 2022
Net Cash Flows From (To) Operating
Activities:
Net income
$
26.5
$
107.6
Non-cash items included in net income:
Depreciation and amortization
68.3
63.5
Other post-retirement and post-employment
benefits
0.8
1.0
Stock-based compensation
11.3
6.4
Deferred income taxes
(6.0
)
(10.4
)
Gain on sale of subsidiary
—
(50.6
)
Other – net
5.2
(0.4
)
Net increase (decrease) in cash from
operating assets and liabilities
63.0
(79.7
)
Increase (decrease) in other
liabilities
(6.7
)
(3.5
)
Net cash flows from (to) operating
activities
162.5
33.9
Net Cash Flows From (To) Investing
Activities:
Capital expenditures
(61.9
)
(41.7
)
Acquisition spending, net of cash
acquired
(369.7
)
(9.2
)
Capitalized software
(0.9
)
(7.0
)
Purchase of investments
(3.8
)
(2.3
)
Sales or maturities of investments
4.0
1.9
Net proceeds from sale of subsidiary
3.1
71.4
Other – net
1.5
0.0
Net cash flows from (to) investing
activities
(427.6
)
13.2
Net Cash Flows From (To) Financing
Activities:
Payments of debt
(304.3
)
(298.5
)
Proceeds from debt
625.3
321.6
Dividends paid
(43.5
)
(39.9
)
Purchase of HNI Corporation common
stock
—
(65.2
)
Proceeds from sales of HNI Corporation
common stock
1.8
4.0
Other – net
(7.1
)
(0.4
)
Net cash flows from (to) financing
activities
272.1
(78.3
)
Net increase (decrease) in cash and cash
equivalents
6.9
(31.2
)
Cash and cash equivalents at beginning of
period
17.4
52.3
Cash and cash equivalents at end of
period
$
24.4
$
21.1
Amounts may not sum due to rounding.
HNI Corporation and Subsidiaries
Reportable Segment Data (In millions) (Unaudited)
Three Months Ended
Nine Months Ended
September 30, 2023
October 1, 2022
September 30, 2023
October 1, 2022
Net Sales:
Workplace furnishings
$
536.8
$
375.2
$
1,249.5
$
1,135.0
Residential building products
174.8
223.6
504.7
657.9
Total
$
711.6
$
598.8
$
1,754.2
$
1,792.9
Income Before Income Taxes:
Workplace furnishings
$
47.3
$
5.6
$
59.2
$
11.1
Residential building products
30.9
39.6
74.5
117.0
General corporate
(21.4
)
(14.0
)
(74.0
)
(46.5
)
Gain on sale of subsidiary
—
50.6
—
50.6
Operating income
56.8
81.9
59.6
132.2
Interest expense, net
9.4
2.4
17.5
6.5
Total
$
47.4
$
79.5
$
42.1
$
125.8
Depreciation and Amortization Expense:
Workplace furnishings
$
16.8
$
11.3
$
41.7
$
34.6
Residential building products
3.5
3.2
10.2
9.3
General corporate
5.4
6.5
16.4
19.6
Total
$
25.6
$
21.0
$
68.3
$
63.5
Capital Expenditures (including
capitalized software):
Workplace furnishings
$
18.8
$
10.0
$
50.6
$
26.4
Residential building products
2.7
3.6
10.1
12.1
General corporate
0.1
1.8
2.1
10.2
Total
$
21.6
$
15.5
$
62.8
$
48.7
As of September 30,
2023
As of December 31,
2022
Identifiable Assets:
Workplace furnishings
$
1,385.5
$
761.5
Residential building products
488.6
493.0
General corporate
142.9
160.0
Total
$
2,017.0
$
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 KII and Poppin, 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: professional fees and other 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;
restructuring and impairment costs in the Workplace Furnishings
segment related to 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
September 30, 2023
October 1, 2022
Workplace Furnishings
Residential Building Products
Total
Workplace Furnishings
Residential Building Products
Total
Sales as reported (GAAP)
$
536.8
$
174.8
$
711.6
$
375.2
$
223.6
$
598.8
% change from PY
43.1
%
(21.8
%)
18.8
%
Less: Kimball International
acquisition
158.0
—
158.0
—
—
—
Less: Lamex divestiture
—
—
—
2.7
—
2.7
Organic Sales (non-GAAP)
$
378.8
$
174.8
$
553.6
$
372.5
$
223.6
$
596.1
% change from PY
1.7
%
(21.8
%)
(7.1
%)
HNI Corporation
Reconciliation
(Dollars in millions, except per
share data)
Three Months Ended
September 30, 2023
Gross Profit
Operating Income
Tax
Net Income
EPS
As reported (GAAP)
$
285.3
$
56.8
$
9.6
$
37.8
$
0.80
% of net sales
40.1
%
8.0
%
5.3
%
Tax %
20.3
%
Restructuring charges
0.3
5.4
1.1
4.2
0.09
Impairment charges
—
0.2
0.0
0.2
0.00
Acquisition costs
—
2.8
1.1
1.7
0.04
Results (non-GAAP)
$
285.6
$
65.2
$
11.9
$
43.9
$
0.93
% of net sales
40.1
%
9.2
%
6.2
%
Tax %
21.4
%
HNI Corporation
Reconciliation
(Dollars in millions)
Three Months Ended
September 30, 2023
Legacy HNI
KII
Poppin
Consolidated HNI
Gross Profit as reported (GAAP)
$
219.9
$
60.7
$
4.8
$
285.3
% of net sales
39.7
%
40.4
%
62.3
%
40.1
%
Restructuring charges recorded to cost of
sales
0.3
—
—
0.3
Gross Profit (non-GAAP)
$
220.2
$
60.7
$
4.8
$
285.6
% of net sales
39.8
%
40.4
%
62.3
%
40.1
%
Operating income (loss) as reported
(GAAP)
$
49.1
$
15.2
$
(7.5
)
$
56.8
% of net sales
8.9
%
10.1
%
(98.2
%)
8.0
%
Restructuring charges
0.5
—
4.8
5.4
Impairment charges
0.2
—
—
0.2
Acquisition costs
2.1
0.8
—
2.8
Operating income (loss) (non-GAAP)
$
51.9
$
15.9
$
(2.7
)
$
65.2
% of net sales
9.4
%
10.6
%
(35.0
%)
9.2
%
HNI Corporation
Reconciliation
(Dollars in millions, except per
share data)
Three Months Ended
September 30, 2023
GAAP (as reported):
Legacy HNI
Consolidated HNI
Operating income
$
49.1
$
56.8
Interest expense, net
2.6
9.4
Income taxes (20.3%)
9.4
9.6
Net income
$
37.1
$
37.8
Average number of common shares
outstanding – diluted
42.5
47.3
EPS - Diluted
$
0.87
$
0.80
Non-GAAP:
Operating income
$
51.9
$
65.2
Interest expense, net
2.6
9.4
Income taxes (21.4%)
10.5
11.9
Net income
$
38.8
$
43.9
Average number of common shares
outstanding – diluted
42.5
47.3
EPS - Diluted
$
0.91
$
0.93
HNI Corporation
Reconciliation
(Dollars in millions, except per
share data)
Three Months Ended
October 1, 2022
Gross Profit
Operating Income
Tax
Net Income
EPS
As reported (GAAP)
$
209.5
$
81.9
$
16.4
$
63.1
$
1.51
% of net sales
35.0
%
13.7
%
10.5
%
Tax %
20.7
%
Restructuring charges
3.6
3.6
0.8
2.8
0.07
Company-wide cost reduction initiative
—
5.6
1.2
4.4
0.10
Gain on sale of subsidiary
—
(50.6
)
(10.1
)
(40.5
)
(0.97
)
Results (non-GAAP)
$
213.0
$
40.4
$
8.3
$
29.7
$
0.71
% of net sales
35.6
%
6.8
%
5.0
%
Tax %
21.9
%
Workplace Furnishings
Reconciliation
(Dollars in millions)
Three Months Ended
September 30, 2023
October 1, 2022
Legacy Workplace Furnishings
KII
Poppin
Total Workplace Furnishings
Total Workplace Furnishings
Total Change
Operating income (loss) as reported
(GAAP)
$
39.6
$
15.2
$
(7.5
)
$
47.3
$
5.6
738
%
% of net sales
10.5
%
10.1
%
(98.2
%)
8.8
%
1.5
%
Impairment charges
0.2
—
—
0.2
—
Restructuring charges
0.5
—
4.8
5.4
3.6
Acquisition costs
—
0.8
—
0.8
—
Operating income (loss) (non-GAAP)
$
40.4
$
15.9
$
(2.7
)
$
53.6
$
9.2
483
%
% of net sales
10.7
%
10.6
%
(35.0
%)
10.0
%
2.5
%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231026671809/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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