# HNI Corp: Form 10-Q for the period ended Mar 30, 2024

- Company: [HNI Corp](/companies/hni.md) (CIK 48287)
- Form: 10-Q
- Filed: 2024-04-30
- Accepted by EDGAR: Apr 30, 2024, 08:30 ET
- Period: 2024-03-30
- Accession: 0000048287-24-000097
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/48287/000004828724000097/hni-20240330.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/48287/000004828724000097/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-03-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-12-31 to 2024-03-30 | $588.0m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2023-12-31 to 2024-03-30 | $355.1m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2023-12-31 to 2024-03-30 | $232.8m | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2023-12-31 to 2024-03-30 | $203.1m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2023-12-31 to 2024-03-30 | $29.7m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2023-12-31 to 2024-03-30 | $4.3m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-12-31 to 2024-03-30 | $17.7m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-12-31 to 2024-03-30 | $0.37 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-12-31 to 2024-03-30 | $0.38 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-12-31 to 2024-03-30 | 48,100,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2023-12-31 to 2024-03-30 | −$4.3m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2023-12-31 to 2024-03-30 | $11.2m | us-gaap:PaymentsToAcquireProductiveAssets |
| Dividends paid | 3 months, 2023-12-31 to 2024-03-30 | $16.6m | us-gaap:PaymentsOfDividends |
| Share repurchases | 3 months, 2023-12-31 to 2024-03-30 | $2.6m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2024-03-30 | $27.0m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-03-30 | $527.2m | us-gaap:AssetsCurrent |
| Total assets | at 2024-03-30 | $1.91bn | us-gaap:Assets |
| Current liabilities | at 2024-03-30 | $407.7m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-03-30 | $1.14bn | us-gaap:Liabilities |
| Long-term debt | at 2024-03-30 | $460.2m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2024-03-30 | $12.8m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2024-03-30 | $771.5m | us-gaap:StockholdersEquity |
| Shares outstanding | at 2024-03-30 | 47,297,068 shares | dei:EntityCommonStockSharesOutstanding |

## Management's discussion and analysis

As filed, 22,200 characters.

The following discussion of the Corporation’s historical results of operations and of its liquidity and capital resources should be read in conjunction with the Unaudited Condensed Consolidated Financial Statements of the Corporation and related notes included elsewhere in this Quarterly Report on Form 10-Q and with the Corporation’s Annual Report on Form 10-K for the fiscal year ended December 30, 2023. All dollar amounts presented are in millions, except per share data or where otherwise indicated. Amounts may not sum due to rounding. Statements that are not historical are forward-looking and involve risks and uncertainties. See "Forward-Looking Statements" at the end of this section for further information.

References in this management discussion and analysis to "HNI" and the "Corporation" are to HNI and its consolidated subsidiaries.

### Overview

The Corporation has two reportable segments: workplace furnishings and residential building products. The Corporation is a leading global designer and provider of commercial furnishings, and a leading manufacturer and marketer of hearth products. The Corporation utilizes a multi-faceted go-to-market business model to deliver value to customers via various brands and selling models. The Corporation is focused on growing its existing businesses while seeking out and developing new opportunities for expansion.

Consolidated net sales for the first quarter of 2024 were $588.0 million, an increase of 22.7 percent compared to net sales of $479.1 million in the prior-year quarter. The change was due to a 46.8 percent increase in net sales in the workplace furnishings segment, partially offset by a 17.4 percent decrease in net sales in the residential building products segment. The acquisition of Kimball International on June 1, 2023 increased year-over-year sales by $147.5 million. See "Note 3. Acquisitions and Divestitures" in the Notes to Condensed Consolidated Financial Statements for more information about the Kimball International acquisition, which affects the comparability of results between the current and prior-year periods.

Net income attributable to the Corporation in the first quarter of 2024 was $17.7 million compared to net income of $1.6 million in the first quarter of 2023. The year-over-year increase in net income was driven by favorable price-cost, improved net productivity, favorable net impacts of the Kimball International acquisition, lower core selling and administrative expenses ("SG&A"), and a lower effective tax rate, partially offset by lower volume in the legacy HNI businesses (excluding Kimball International) and higher variable compensation.

### Results of Operations

The following table presents certain results of operations:

|  | Three Months Ended March 30, 2024 | April 1, 2023 | Change |
| --- | ---: | ---: | ---: |
| Net sales | $588.0 | $479.1 | 22.7% |
| Cost of sales | 355.1 | 304.8 | 16.5% |
| Gross profit | 232.8 | 174.3 | 33.6% |
| Selling and administrative expenses | 203.1 | 167.9 | 21.0% |
| Restructuring charges | 0.1 | — | NM |
| Operating income | 29.7 | 6.4 | 362% |
| Interest expense, net | 7.6 | 2.7 | 188% |
| Income before income taxes | 22.0 | 3.8 | 485% |
| Income taxes | 4.3 | 2.2 | 96.5% |
| Net income (loss) attributable to non-controlling interest | 0.0 | (0.0) | NM |
| Net income attributable to HNI Corporation | $17.7 | $1.6 | 1,030% |
| As a Percentage of Net Sales: |  |  |  |
| Net sales | 100.0% | 100.0% |  |
| Gross profit | 39.6 | 36.4 | 320 bps |
| Selling and administrative expenses | 34.5 | 35.0 | -50 bps |
| Operating income | 5.0 | 1.3 | 370 bps |
| Income taxes | 0.7 | 0.5 | 20 bps |
| Net income attributable to HNI Corporation | 3.0 | 0.3 | 270 bps |

#### Net Sales

Consolidated net sales for the first quarter of 2024 increased 22.7 percent compared to the same quarter last year. The change was driven by $147.5 million of favorable impact from the acquisition of Kimball International in the second quarter of 2023, as well as price realization in both the workplace furnishings and residential building products segments. These factors were partially offset by lower volume in the legacy HNI businesses due to continued softness in macroeconomic conditions impacting the Corporation's applicable markets.

#### Gross Profit

Gross profit as a percentage of net sales increased 320 basis points in the first quarter of 2024 compared to the same quarter last year, driven by favorable price-cost, improved net productivity, and the impact of the Kimball International acquisition, partially offset by lower volume in the legacy HNI businesses. Favorable price-cost was attributable to the Corporation’s ability to implement price increases over the past several quarters in response to inflationary pressures.

#### Selling and Administrative Expenses

Selling and administrative expenses as a percentage of net sales decreased 50 basis points in the first quarter of 2024 compared to the same quarter last year. The decrease was driven by $3.4 million of non-repeating Kimball International acquisition-related fees and expenses incurred in the prior-year quarter, dilution from price realization, lower legacy core SG&A, and Kimball International acquisition-related administrative cost synergies, partially offset by lower volume in the legacy HNI businesses and higher variable compensation.

#### Operating Income

In the first quarter of 2024, operating margin increased 370 basis points compared to the same quarter last year, driven by favorable price-cost, improved net productivity, favorable impact of the acquisition of Kimball International, $3.4 million of non-repeating Kimball International acquisition-related fees and expenses incurred in the prior-year quarter, and lower legacy core SG&A, partially offset by lower volume in the legacy HNI businesses and higher variable compensation.

#### Interest Expense, Net

Interest expense, net for the first quarter of 2024 was $7.6 million, compared to $2.7 million in the same quarter last year, driven by higher average outstanding borrowings resulting from indebtedness incurred to fund the acquisition of Kimball International and higher interest rates in the current period on the Corporation's variable-rate revolving debt obligations.

#### Income Taxes

The Corporation’s income tax provision for the first quarter of 2024 was $4.3 million of expense on income before taxes of $22.0 million, or an effective tax rate of 19.6 percent. For the first quarter of 2023, the Corporation’s income tax expense was $2.2 million on income before taxes of $3.8 million, or an effective tax rate of 58.4 percent. The Corporation's effective tax rate was lower in the current year period driven by favorable equity-based compensation adjustments and the impact of higher income on certain tax attributes. Additionally, the prior-year quarter included nondeductible Kimball International acquisition costs, which did not recur in the current-year quarter.

#### Net Income Attributable to HNI Corporation

Net income attributable to the Corporation was $17.7 million, or $0.37 per diluted share in the first quarter of 2024, compared to net income of $1.6 million, or $0.04 per diluted share in the first quarter of 2023.

### Workplace Furnishings

The following table presents summarized results of operations in the workplace furnishings segment:

|  | Three Months Ended March 30, 2024 | April 1, 2023 | Change |
| --- | ---: | ---: | ---: |
| Net sales | $439.8 | $299.6 | 46.8% |
| Operating income (loss) | $26.3 | $(4.0) | 759% |
| Operating income (loss) % | 6.0% | (1.3)% | 730 bps |

First quarter 2024 net sales for the workplace furnishings segment increased 46.8 percent compared to the same quarter last year. The acquisition of Kimball International in the second quarter of 2023 increased net sales by $147.5 million compared to the prior-year quarter. Excluding the effect of this transaction, segment sales decreased 2.5 percent year-over-year, driven by lower volume in the contract office furniture customer segment, partially offset by increased volume with small to medium-sized customers and price realization.

Operating income as a percentage of net sales in the first quarter of 2024 improved 730 basis points compared to the same period in 2023. The increase was driven by favorable price-cost, improved net productivity, favorable impacts from the Kimball International acquisition, and lower legacy core SG&A. These factors were partially offset by lower volume in the legacy HNI workplace businesses and higher variable compensation.

### Residential Building Products

The following table presents summarized results of operations in the residential building products segment:

|  | Three Months Ended March 30, 2024 | April 1, 2023 | Change |
| --- | ---: | ---: | ---: |
| Net sales | $148.2 | $179.4 | (17.4)% |
| Operating income | $21.4 | $28.1 | (23.9)% |
| Operating income % | 14.4% | 15.6% | -120 bps |

First quarter 2024 net sales for the residential building products segment decreased 17.4 percent compared to the same quarter last year. The decline was driven by lower volume in both the existing home and new construction channel. Slower demand from a continued soft housing market and reduced home remodeling activity was partially offset by price realization versus the prior-year quarter.

Operating profit as a percentage of net sales decreased 120 basis points in the first quarter of 2024 compared to the same quarter last year driven by lower volume, partially offset by improved net productivity, favorable price-cost, lower variable compensation, and lower core SG&A.

### Liquidity and Capital Resources

Cash, cash equivalents, and short-term investments, coupled with cash flow from future operations, borrowing capacity expected to be available under the Corporation's existing credit agreements, and the ability to access capital markets, are expected to be adequate to fund operations and satisfy cash flow needs for at least the next twelve months. Based on current earnings before interest, taxes, depreciation, and amortization, the Corporation can access the full $425 million of borrowing capacity available under its revolving credit facility, which includes the $74 million currently outstanding, and maintain compliance with applicable covenants.

#### Cash Flow – Operating Activities

Operating activities were a use of $4.3 million of cash in the first three months of 2024 compared to a source of $17.3 million of cash in the first three months of 2023. Working capital seasonal cash usage was higher in the current period versus the prior period driven by reductions in accrued expenses and higher receivables. The higher usage of working capital was partially offset by higher net income in the current period.

#### Cash Flow – Investing Activities

Capital Expenditures - Capital expenditures, including capitalized software, for the first three months of 2024 were $11.2 million compared to $20.0 million in the same period last year. In the prior-year period, the Corporation had higher expenditures related to a manufacturing facility expansion, which did not recur in the current period. The current year expenditures are primarily focused on machinery, equipment, and tooling required to support new products, continuous improvements, and cost savings initiatives in manufacturing processes. Additionally, in support of the Corporation’s long-term strategy to create effortless winning experiences for customers, the Corporation continues to invest in technology and digital assets. For the full year 2024, capital expenditures are expected to be approximately $85 to 95 million.

#### Cash Flow – Financing Activities

Debt - The Corporation maintains a revolving credit facility as the primary source of committed funding from which the Corporation finances its planned capital expenditures, strategic initiatives, and seasonal working capital needs. Cash flows included in financing activities for the current and prior periods presented represent periodic borrowings and repayments under the revolving credit facility. See "Note 7. Debt" in the Notes to Condensed Consolidated Financial Statements for further information.

Dividend - The Corporation is committed to maintaining or modestly growing the quarterly dividend. Cash dividends declared and paid per common share were as follows:

|  | Three Months Ended March 30, 2024 | April 1, 2023 |
| --- | ---: | ---: |
| Dividends per common share | $0.32 | $0.32 |

During the first quarter of 2024, the Board of Directors declared the regular quarterly cash dividend on February 13, 2024. The dividend was paid on March 6, 2024, to shareholders of record as of February 26, 2024.

Stock Repurchase - The Corporation’s capital strategy related to stock repurchase is focused on offsetting the dilutive impact of issuances for various compensation related matters. The Corporation also may elect to opportunistically purchase additional shares based on excess cash generation and/or share price considerations. During the three months ended March 30, 2024, the Corporation spent $2.6 million to repurchase shares of its common stock. As of March 30, 2024, $231.0 million was authorized and available for repurchase of shares by the Corporation. See "Note 10. Accumulated Other Comprehensive Income (Loss) and Shareholders’ Equity" in the Notes to Condensed Consolidated Financial Statements for further information.

Sales of Stock - The Corporation records cash flows received from the sale of its common stock held in treasury, primarily in connection with stock option exercises and the HNI Corporation Members’ Stock Purchase Plan. See "Note 10. Accumulated Other Comprehensive Income (Loss) and Shareholders’ Equity" and "Note 12. Stock-Based Compensation" in the Notes to Condensed Consolidated Financial Statements for further information.

### Cash Requirements

Various commitments and obligations associated with ongoing business and financing activities will result in cash payments in future periods. A summary of the amounts and estimated timing of these future cash payments was provided in the Corporation’s Annual Report on Form 10-K for the fiscal year ended December 30, 2023. There were no material changes outside the ordinary course of business in the Corporation’s contractual obligations or the estimated timing of the future cash payments during the first three months of 2024.

### Commitments and Contingencies

See "Note 13. Guarantees, Commitments, and Contingencies" in the Notes to Condensed Consolidated Financial Statements for further information.

### Critical Accounting Policies and Estimates

Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon the Consolidated Financial Statements, prepared in accordance with generally accepted accounting principles ("GAAP"). The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses, and related disclosure of contingent assets and liabilities. Management bases its estimates on historical experience and on a variety of other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Senior management has discussed the development, selection, and disclosure of these estimates with the Audit Committee of the Board of Directors. Actual results may differ from these estimates under different assumptions or conditions. A summary of the more significant accounting policies requiring the use of estimates and assumptions in preparing the financial statements is provided in the Corporation’s Annual Report on Form 10-K for the fiscal year ended December 30, 2023.

### Recently Issued Accounting Standards Not Yet Adopted

In November 2023, the Financial Accounting Standards Board ("FASB") issued ASU No. 2023-07, *Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures*. ASU 2023-07 enhances disclosures regarding segment performance, including information about the chief operating decision maker and measures used to assess performance. The ASU becomes effective for the Corporation beginning with its annual period ending December 2024, and interim periods beginning with first quarter of 2025. The ASU will not impact the financial condition, results of operations, or cash flows of the Corporation. The

Corporation is currently evaluating the impact on the notes to the consolidated financial statements, and expects additional disclosures will be required on adoption.

In December 2023, the FASB issued ASU No. 2023-09, *Income Taxes (Topic 740): Improvements to Income Tax Disclosures.* ASU 2023-09 enhances transparency of income tax disclosures by requiring consistent categories and greater disaggregation of information in the rate reconciliation, and disaggregation of income taxes paid by jurisdiction. Additionally, the ASU requires disclosure of pretax income (or loss) and income tax (or benefit) disaggregated by domestic and foreign. Finally, the ASU removes the requirement of certain disclosures related to unrecognized tax benefits. The ASU becomes effective for the Corporation beginning with its annual period ending December 2025. The ASU will not impact the financial condition, results of operations, or cash flows of the Corporation. The Corporation is currently evaluating the impact on the notes to the consolidated financial statements, and expects additional disclosures will be required on adoption.

### Looking Ahead

The Corporation continues to navigate near-term uncertainty driven by macroeconomic conditions. However, management remains optimistic about the long-term prospects in the workplace furnishings and residential building products markets. Management believes the Corporation continues to compete well and remains confident the investments made in the business will continue to generate strong returns for shareholders.

### Forward-Looking Statements

Statements in this report to the extent they are not statements of historical or present fact, including statements as to plans, outlook, objectives, and future financial performance, are "forward-looking" statements, within the meaning of Section 21 of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. Words such as "anticipate," "believe," "could," "confident," "estimate," "expect," "forecast," "hope," "intend," "likely," "may," "plan," "possible," "potential," "predict," "project," "should," "will," "would," and variations of such words and similar expressions identify forward-looking statements.

Forward-looking statements involve known and unknown risks and uncertainties, which may cause the Corporation’s actual results in the future to differ materially from expected results. The most significant factors known to the Corporation that may adversely affect the Corporation’s business, operations, industries, financial position, or future financial performance are described within Part II, Item 1A of this report and Item 1A of the Corporation’s Annual Report on Form 10-K for the fiscal year ended December 30, 2023. The Corporation cautions readers not to place undue reliance on any forward-looking statement, which is based necessarily on assumptions made at the time the Corporation provides such statement, and to recognize forward-looking statements are predictions of future results, which may not occur as anticipated. 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 report, including but not limited to: the Corporation’s ultimate realization of the anticipated benefits of the acquisition of Kimball International; 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; changes 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; force majeure events outside the Corporation’s control, including those that may result from the effects of climate change; and other risks as described in the Corporation’s annual and quarterly reports filed with the Securities and Exchange Commission on Forms 10-K and 10-Q, as well as others that the Corporation may consider not material or does not anticipate at this time. The risks and uncertainties described in this report, as well as those described within Item 1A of the Corporation’s Annual Report on Form 10-K for the fiscal year ended December 30, 2023, are not exclusive and further information concerning the Corporation, including factors that potentially could have a material effect on the Corporation’s financial results or condition, may emerge from time to time.

The Corporation assumes no obligation to update, amend, or clarify forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by applicable law. The Corporation advises you, however, to consult any further disclosures made on related subjects in future reports filed with or furnished to the SEC.

## Market risk

As filed, 256 characters.

As of March 30, 2024, there have been no material changes to the financial market risks affecting the quantitative and qualitative disclosures presented in Item 7A of the Corporation’s Annual Report on Form 10-K for the fiscal year ended December 30, 2023.

## Controls and procedures

As filed, 1,857 characters.

#### Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are designed to ensure that information required to be disclosed by the Corporation in the reports it files or submits under the Securities Exchange Act of 1934 (the "Exchange Act") is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures are also designed to ensure information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer of the Corporation, the Corporation’s management carried out an evaluation of the Corporation’s disclosure controls and procedures pursuant to Exchange Act Rules 13a – 15 and 15d – 15. As of March 30, 2024, based on this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded these disclosure controls and procedures are effective.

#### Changes in Internal Control Over Financial Reporting

As discussed in "Note 3. Acquisitions and Divestitures" in the Notes to the Condensed Consolidated Financial Statements, the Corporation acquired Kimball International in June 2023. Since acquisition, the Corporation has been integrating Kimball International’s processes and procedures related to internal control over financial reporting.

Subject to the foregoing, there have been no changes in the Corporation’s internal control over financial reporting during the fiscal quarter covered by this quarterly report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.

## Risk factors

As filed, 190 characters.

There have been no material changes from the risk factors disclosed in the "Risk Factors" section of the Corporation's Annual Report on Form 10-K for the fiscal year ended December 30, 2023.

Filed Apr 30, 2024.
Source: SEC EDGAR, the filing index for accession 0000048287-24-000097. Last ingested by Listed: Nov 3, 2026, 19:07 ET. No prices; not investment advice.