HNI Corp: Form 10-Q for the period ended Sep 27, 2025

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 28, 2024 filed with the Securities and Exchange Commission (the "2024 Form 10-K"). 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 about forward-looking statements.

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

Overview

The Corporation is a manufacturer of workplace furnishings and residential building products, operating under two segments. The workplace furnishings segment is a leading designer and provider of commercial furnishings, going to market under multiple unique brands. The residential building product 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.

The Corporation has two reportable segments: workplace furnishings and residential building products. In the current period, the Corporation maintained focus on its strategic priorities. In workplace furnishings, the strategic focus remains margin expansion. The ongoing integration of the Kimball International business and related synergies, expanded utilization of its manufacturing facility in Mexico, and the factory optimization initiative are enabling the segment's profit transformation plan, while the divestiture of HNI India in the second quarter of 2025 allows the Corporation to focus on its core strategies. The residential building products business remains focused on driving revenue growth over the long term. Currently, the business is navigating challenging housing market dynamics resulting from interest rate volatility, inventory challenges, and affordability issues. In addition, macroeconomic volatility driven and evolving government tariff policies continue to drive a heightened level of uncertainty in the Corporation's markets. In spite of these headwinds, the workplace furnishings segment achieved third quarter year-over-year net sales growth, and the residential building products segment was essentially flat. Both segments increased profitability and increased investments in capabilities to support long-term growth.

In August 2025, the Corporation announced its entry into an agreement to acquire Steelcase Inc., a global design and furniture company, in a cash and stock transaction currently valued at approximately $2.1 billion, (the "Steelcase Acquisition"), which is expected to close before the end of calendar 2025. See "Note 3. Acquisitions and Divestitures" and "Note 7. Debt" in the Notes to Condensed Consolidated Financial Statements for further information about this pending transaction and related financing arrangements.

Other recent developments impacting the Corporation's business include the passage of the One Big Beautiful Bill Act (“OBBBA”). The OBBBA includes significant provisions, including permanent extensions of certain expiring provisions of the Tax Cuts and Jobs Act, modification to the international tax framework and restoration of favorable tax treatment for certain business provisions. These changes include allowing accelerated tax deductions for qualified business property and immediate expensing of research and development expenditures. The legislation has multiple effective dates, with some provisions effective in 2025 and other provisions scheduled to become effective on various dates through 2027. For 2025, the Corporation plans to elect the accelerated tax deductions for qualified business property and immediate expensing of research and development expenditures, which are expected to decrease cash payments for U.S. federal income taxes. An increase in the annual effective tax rate is expected, driven by a decrease in the research and development credit and foreign derived intangible income (“FDII”) deduction. Following the enactment of the OBBBA, the Corporation recognized the tax effects of the legislation in the interim period that included the enactment date, as required under ASC 740. The Corporation has evaluated the impact of the OBBBA on deferred tax assets and liabilities, including adjustments to valuation allowances, and has reflected these effects in the consolidated financial statements for the third quarter of 2025.

Consolidated net sales for the third quarter of 2025 were $683.8 million, an increase of 1.7 percent compared to net sales of $672.2 million in the prior-year quarter, with net sales in the workplace furnishings segment increasing 2.3 percent, and residential building products net sales decreasing 0.1 percent. Consolidated and workplace furnishings net sales include a $5.6 million year-over-year decrease related to the divestiture of HNI India in the current quarter. See "Note 3. Acquisitions and Divestitures" in the Notes to Condensed Consolidated Financial Statements for further information.

Net income attributable to the Corporation in the third quarter of 2025 was $41.2 million compared to net income of $47.5 million in the third quarter of 2024. The decrease in net income in the current quarter was driven by $9.7 million of one-time costs associated with the pending acquisition of Steelcase, partially offset by improved net productivity.

Results of Operations

The following table presents certain results of operations:

Three Months Ended September 27, 2025 and September 28, 2024

Net Sales

Consolidated net sales for the third quarter of 2025 increased 1.7 percent compared to the same quarter last year. The increase was driven by price realization in both segments and higher volume in the workplace furnishings segment. The divestiture of HNI India during the current quarter decreased year-over-year net sales by $5.6 million.

Gross Profit

Gross profit as a percentage of net sales increased 60 basis points in the third quarter of 2025 compared to the same quarter last year, driven by improved net productivity.

Selling, General, and Administrative Expenses

Selling and administrative expenses as a percentage of net sales increased 160 basis points in the third quarter of 2025 compared to the same quarter last year. The increase was driven by $8.3 million of one-time costs associated with the pending acquisition of Steelcase, along with increased input costs, partially offset by higher net sales.

Restructuring, Impairment, and Loss on Divestiture

In the third quarter of 2025, the Corporation recorded charges of $0.8 million, primarily related to the network optimization program. In the prior-year quarter, $1.6 million of charges were incurred primarily in connection with reorganization actions in the residential building products segment and factory consolidation initiatives in the workplace furnishings segment.

Operating Income

In the third quarter of 2025, operating margin contracted 80 basis points compared to the same quarter last year. This decrease was driven by one-time costs associated with the pending acquisition of Steelcase, partially offset by improved net productivity.

Interest Expense, Net

Interest expense, net for the third quarter of 2025 increased to $7.2 million, from $7.1 million in the same quarter last year. The increase primarily reflected $1.4 million of costs related to bridge financing incurred for the pending acquisition of Steelcase, partially offset by lower average interest rates under the Corporation's variable-rate debt. See "Note 7. Debt" in the Notes to Condensed Consolidated Financial Statements for further information about such financing.

Income Taxes

The Corporation’s income tax provision for the third quarter of 2025 was $16.2 million of expense on income before taxes of $57.4 million, or an effective tax rate of 28.2 percent. For the third quarter of 2024, the Corporation’s income tax provision was $14.3 million of expense on income before taxes of $61.8 million, or an effective tax rate of 23.1 percent. The increase in the effective tax rate was primarily due to the impact of transaction costs incurred for the pending acquisition of Steelcase in the current quarter.

Net Income Attributable to HNI Corporation

Net income attributable to the Corporation was $41.2 million, or $0.88 per diluted share, in the third quarter of 2025, compared to net income of $47.5 million, or $0.98 per diluted share, in the third quarter of 2024.

Nine Months Ended September 27, 2025 and September 28, 2024

Net Sales

Consolidated net sales for the first nine months of 2025 increased 3.5 percent compared to the same period last year. The increase was driven by price realization in both segments and higher volume in the workplace furnishings segment. These factors were partially offset by a $10.1 million decrease in net sales from the divestiture of HNI India in the second quarter of 2025.

Gross Profit

Gross profit as a percentage of net sales increased 70 basis points in the first nine months of 2025 compared to the same period last year, driven by improved net productivity.

Selling, General, and Administrative Expenses

Selling and administrative expenses as a percentage of net sales increased 30 basis points in the first nine months of 2025 compared to the same period last year. The increase was driven by $8.3 million in charges associated with the pending acquisition of Steelcase and higher input costs, partially offset by higher net sales.

Restructuring, Impairment, and Loss on Divestiture

In the first nine months of 2025, the Corporation recorded charges of $9.7 million primarily in connection with a $6.6 million loss on the sale of its HNI India business, and a network optimization program. In the prior-year period, charges of $3.7 million were incurred, primarily in connection with a workplace furnishings factory optimization initiative.

Operating Income

In the first nine months of 2025, operating margin was unchanged from the same period last year, with improved net productivity and higher net sales volume offset by one-time costs associated with the pending acquisition of Steelcase, unfavorable price-cost, and the loss on sale of the HNI India business.

Interest Expense, Net

Interest expense, net for the first nine months of 2025 was $18.9 million, compared to $22.1 million in the same period last year, driven by lower average outstanding borrowings and lower average interest rates under the Corporation's variable-rate debt, partially offset by $1.4 million of costs related to bridge financing incurred for the pending acquisition of Steelcase.

Income Taxes

The Corporation’s income tax provision for the first nine months of 2025 was $34.9 million of expense on income before taxes of $138.3 million, or an effective tax rate of 25.3 percent. For the first nine months of 2024, the Corporation’s income tax expense was $28.6 million on income before taxes of $129.8 million, or an effective tax rate of 22.0 percent. The increase in the effective tax rate was primarily due to the current-year impact of transaction costs incurred for the pending acquisition of Steelcase and the loss on the sale of HNI India that was not deductible for income tax purposes, along with favorable adjustments in the prior year.

Net Income Attributable to HNI Corporation

Net income attributable to the Corporation was $103.4 million, or $2.19 per diluted share, in the first nine months of 2025, compared to net income of $101.2 million, or $2.09 per diluted share, in the first nine months of 2024.

Workplace Furnishings

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

Three Months Ended September 27, 2025 and September 28, 2024

Third quarter 2025 net sales for the workplace furnishings segment increased 2.3 percent compared to the same quarter last year. The increase was driven by net favorable price-cost and higher volume in most customer channels, partially offset by the divestiture of HNI India in the second quarter of 2025, which decreased year-over-year sales by $5.6 million.

Operating income as a percentage of net sales in the third quarter of 2025 increased 70 basis points compared to the same period in 2024. The increase was driven by improved net productivity and higher net sales volume, partially offset by unfavorable price-cost.

Nine Months Ended September 27, 2025 and September 28, 2024

Net sales for the first nine months of 2025 for the workplace furnishings segment increased 3.4 percent compared to the same period last year. The increase was driven by net favorable price-cost and modestly higher volume in most customer channels, partially offset by the divestiture of HNI India in the current period, which decreased year-over-year sales by $10.1 million.

Operating income as a percentage of net sales in the first nine months of 2025 increased 20 basis points compared to the same period in 2024. Improved net productivity and higher net sales volume were offset by unfavorable price-cost and the $6.1 million loss incurred on the divestiture of HNI India in the current period.

Residential Building Products

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

Three Months Ended September 27, 2025 and September 28, 2024

Third quarter 2025 net sales for the residential building products segment decreased 0.1 percent compared to the same quarter last year, with decreased net sales in new construction partially offset by increased sales in remodel-retrofit.

Operating income as a percentage of net sales increased 10 basis points in the third quarter of 2025 compared to the same quarter last year, driven by favorable price-cost, partially offset by lower net sales volume and reduced net productivity.

Nine Months Ended September 27, 2025 and September 28, 2024

Net sales for the first nine months of 2025 for the residential building products segment increased 3.9 percent compared to the same period last year. The increase was driven by price realization along with higher volume in both the remodel-retrofit and new construction channels.

Operating income as a percentage of net sales in the first nine months of 2025 increased 100 basis points compared to the same period last year driven by favorable price-cost.

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 the Corporation's ability to access capital markets, are expected to be adequate to fund the Corporation's operations and satisfy its other cash requirements for at least the next twelve months. As of September 27, 2025, the Corporation can access the full $425 million of borrowing capacity available under its revolving credit facility, which includes the $75 million of borrowings outstanding as of that date, and to maintain compliance with applicable financial covenants.

Cash Flow – Operating Activities

Operating cash flows were a source of $198.9 million for the first nine months of 2025 compared to a source of $175.5 million for the first nine months of 2024. The increase was driven by a decrease in tax payments resulting from the recent OBBBA legislation, partially offset by increased working capital usage in the current year.

Cash Flow – Investing Activities

Capital Expenditures - Capital expenditures, including capitalized software, for the first nine months of 2025 were $50.8 million compared to $43.2 million for the same period last year. The current-year capital expenditures are primarily applied to machinery, equipment, and tooling required to support continuing operations, continuous improvements, and cost savings initiatives in the 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 capabilities. For the full year 2025, capital expenditures are expected to be approximately $75 to $80 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 include periodic borrowings and repayments under the revolving credit facility.

As discussed in "Note 7. Debt" in the Notes to Condensed Consolidated Financial Statements, the Corporation also has borrowings outstanding under a term loan agreement and private placement note agreements. On May 31, 2025, the Corporation repaid the $50 million principal of matured seven-year private placement notes. In the prior fiscal year, during the second quarter of 2024, the Corporation executed a $50 million early repayment of outstanding principal under the term loan, with an additional early repayment of $50 million in the third quarter of 2024. The repayments in both the current and prior year were financed using borrowings from the revolving credit facility. As a result of early repayments of the term loan, no additional principal amortization is currently due to be repaid on the term loan prior to maturity of the facility in March 2028.

Steelcase Acquisition Financing

As described in more detail in "Note 7. Debt" in the Notes to Condensed Consolidated Financial Statements, the Corporation has entered into certain agreements in connection with the Steelcase Acquisition contemplated by the Merger Agreement. On August 3, 2025, the Corporation entered into a debt financing commitment letter (the "Commitment Letter") with JPMorgan Chase Bank, N.A., Wells Fargo Bank, National Association and Wells Fargo Securities, LLC (the “Commitment Parties”), pursuant to which the Commitment Parties have committed to provide HNI with debt financing in an aggregate principal amount of $1.1 billion in the form of a senior unsecured 364-day bridge loan facility (the “Bridge Loan”).

Pursuant to the Commitment Letter, on September 5, 2025, HNI entered into a Credit Agreement, which provides for revolving and term credit facilities in an aggregate principal amount of $925 million. The proceeds of borrowings under the facilities may be used for the consummation of the Steelcase Acquisition, including payment of the Cash Consideration described below under "Cash Requirements," the repayment of existing indebtedness of HNI and Steelcase, and the payment of fees, commissions and expenses in connection with the foregoing.

The Credit Agreement establishes (i) a senior secured revolving credit facility in an aggregate principal amount of $425 million (the “Revolving Facility,” and the loans thereunder, the “Revolving Loans”) (which may be increased from time-to-time pursuant to, and subject to the limitations of, the Credit Agreement), (ii) a senior secured “term loan A” credit facility in an aggregate amount of up to $500 million (the “TLA Facility,” and the loans thereunder, the “Term A Loans”) (which may be increased from time-to-time pursuant to, and subject to the limitations of, the Credit Agreement) and (iii) a senior secured “term loan B” credit facility in an aggregate amount of $0 on the Effective Date and which, on the date of consummation of the Mergers (the “Closing Date”), is structured to be potentially drawn to an aggregate amount of up to $800 million, (the “TLB Facility,” and the loans thereunder, the “Term B Loans”) (which may be increased from time-to-time pursuant to, and subject to the limitations of, the Credit Agreement). On the date of consummation of the Mergers (the "Closing Date"), the TLA Facility is expected to be drawn to an aggregate of $350 million and the TLB Facility is expected to be drawn to an aggregate amount of $500 million. Such amounts will be reduced from the maximum aggregate amounts as defined at the execution of the Credit Agreement after giving effect to successful exchange process related to $450 million of Steelcase private notes, as described in more detail in "Note 7. Debt" in the Notes to Condensed Consolidated Financial Statements.

The principal amount of the Revolving Loans and Term A Loans, together with accrued and unpaid interest thereon, will be due and payable on the earlier of the (a) fifth anniversary of the Closing Date (the “Revolving Maturity Date” or “TLA Maturity Date”) or (b) a customary springing maturity date. Commencing with the first full fiscal quarter ending after the Closing Date, the Corporation is required to repay the Term A Loans in quarterly installments equal to the following amounts per annum of the original principal amount of the Term A Loans: (i) during the first year following the Closing Date, 2.5%; (ii) during the second and third years following the Closing Date, 5.0%; (iii) during the fourth year following the Closing Date, 7.5%; and (iv) during the fifth year following the Closing Date, 10.0%, with the remaining principal amount and accrued and unpaid interest being due and payable on the fifth anniversary of the Closing Date.

The principal amount of the Term B Loans, together with accrued and unpaid interest thereon, will be due and payable on the earlier of the (a) seventh anniversary of the Closing Date or (b) a customary springing maturity date. The TLB Facility will amortize on a quarterly basis in an amount equal to 0.25% per quarter, commencing with the first full fiscal quarter ending after the Closing Date, with the remaining principal amount and accrued and unpaid interest being due and payable on the seventh anniversary of the Closing Date.

Borrowings under the Revolving Facility and TLA Facility will bear interest, at the Corporation's option, at either: (a) the alternate base rate, which is defined as a fluctuating rate per annum equal to the greatest of (i) the prime rate then in effect, (ii) the federal funds rate then in effect, plus 0.50% per annum, and (iii) the term SOFR rate determined on the basis of a one-month interest period, plus 1.00%, in each case, plus a margin of between 0.25% and 0.875%; and (b) the term SOFR rate (based on one, three or six month interest periods), plus a margin of between 1.25% and 1.875%. The term SOFR rate will be subject to a floor of 0% and the alternate base rate will be subject to a floor of 1.00%. The applicable margin in each case is determined based on the Corporation's net leverage ratio at such time. Interest is payable quarterly in arrears with respect to borrowings bearing interest at the alternate base rate or on the last day of an interest period, but at least every three months, with respect to borrowings bearing interest at the term SOFR rate.

Borrowings under the TLB Facility will bear interest at a rate per annum to be determined based on market conditions.

Following the execution of the Credit Agreement, the Corporation retired $300 million of the committed financing under the Bridge Loan associated with the TLA Facility. On October 31, 2025, after the close of the Corporation's third quarter, an additional $300 million of committed financing under the Bridge Loan associated with the TLB Facility were retired. The $500 million of commitments remaining under the Bridge Loan are associated with the TLB Facility and are expected to be retired prior to the Closing Date.

On September 26, 2025, the Corporation announced the commencement of an offer to exchange (the “Exchange Offer”) any and all outstanding 5.125% Notes due 2029 (the “Existing Steelcase Notes”), as issued by Steelcase, for up to $450 million aggregate principal amount of new notes to be issued by the Corporation (the “New HNI Notes”). The completion of the Exchange Offer is contingent on the closing of the Steelcase Acquisition. The New HNI Notes will be guaranteed by certain subsidiaries of the combined company. Each New HNI Note issued in the Exchange Offer for a validly tendered Existing Steelcase Note will have an interest rate and maturity date that is identical to the interest rate and maturity date of the tendered Existing Steelcase Notes, as well as identical interest payment dates and optional redemption prices.

Upon a successful exchange, the Corporation expects to reduce the aggregate borrowings under the TLA Facility by one-third of the principal amount of the New HNI Notes (up to $150 million) and the aggregate borrowings under the TLB Facility by two-thirds of the principal amount of the New HNI Notes (up to $300 million). Following these expected reductions, the aggregate borrowings at the Closing Date are expected to be $350 million under the TLA Facility and $500 million under the TLB Facility.

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

During the third quarter of 2025, the Board of Directors declared the regular quarterly cash dividend at the rate of $0.34 per share on August 11, 2025. This represents a $0.01 per share or 3.0 percent increase from the prior quarterly dividend level. The dividend was paid on September 11, 2025, to shareholders of record as of August 22, 2025.

Stock Repurchase - The Corporation’s capital strategy related to stock repurchase is focused on offsetting the dilutive impact of issuances of common stock pursuant to equity awards granted 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 nine months ended September 27, 2025, the Corporation spent $83.6 million to repurchase 1.8 million shares of its common stock. Effective on August 4, 2025, following its entry into the Merger Agreement, the Corporation ceased share repurchase activity pending the closing of the Steelcase Acquisition. As of September 27, 2025, $84.3 million was available under the current authorization of the Board of Directors 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 is presented in the 2024 Form 10-K. Except for the item below, 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 nine months of 2025.

Upon the closing of the Steelcase Acquisition, the Corporation will be obligated pay each eligible holder of the Steelcase Common Stock the merger consideration, including Cash Consideration, such holder elects, as follows:

• Mixed Consideration of (a) 0.2192 shares of HNI common stock, par value $1.00 per share (“HNI Common Stock”), and (b) $7.20 in cash; or
• Cash Consideration, equal to the sum of (a) $7.20 and (b) the product obtained by multiplying 0.2192 by the volume-weighted average closing price (rounded to four decimal places) of one share of HNI Common Stock on the NYSE for the 10 consecutive trading days ending on the second full trading day preceding the First Effective Time (the “HNI Common Stock Reference Price”); or
• Stock Consideration equal to the sum of (a) 0.2192 and (b) the quotient (rounded to four decimal places) obtained by dividing $7.20 by the HNI Common Stock Reference Price, in each case without interest and subject to any required tax withholding.

If such holders elect the maximum amount of Mixed Consideration payable in the transaction, the Corporation would be obligated to pay an estimated $883 million of Cash Consideration. See "Note 3. Acquisitions and Divestitures" in the Notes to the Condensed Consolidated Financial Statements for further information. The Steelcase Acquisition is currently expected to close before the end of calendar 2025.

Commitments and Contingencies

See "Note 13. Guarantees, Commitments, and Contingencies" in the Notes to Condensed Consolidated Financial Statements for further information about the Corporation's commitments and contingencies.

Critical Accounting Policies and Estimates

This 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 2024 Form 10-K.

Recently Issued Accounting Standards Not Yet Adopted

In December 2023, the Financial Accounting Standards Board ( 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 operations. 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 of this guidance on the notes to the consolidated financial statements, and expects additional disclosures will be required on adoption.

In November 2024, the FASB issued ASU No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. ASU 2024-03 aims to improve the disclosures about a public business entity’s expenses by requiring more detailed information about the types of costs and expenses, including purchases of inventory, employee compensation, selling expenses, depreciation, and intangible asset amortization within commonly presented captions on the face of the income statement. Disclosures are required to be made on an annual and interim basis in a tabular format in the footnotes to the financial statements. The ASU becomes effective for the Corporation for its fiscal year ending December 2027, and for interim periods beginning with the first fiscal quarter of 2028, and may be applied either prospectively or retrospectively. Early adoption is permitted. The Corporation is currently evaluating the impact of adopting this guidance on the consolidated financial statements.

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 21E of the Securities Exchange Act of 1934 and Section 27A of the Securities Act of 1933. 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 in this report about the pending transaction between the Corporation and Steelcase (the "Transaction") include, but are not limited to, statements about the completion and the benefits of the Transaction, including future financial and operating results, the combined company's plans, objectives, expectations and intentions, and other statements that are not historical facts.

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 2024 Form 10-K. 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 that 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.

The following Transaction-related factors, among others, could cause actual results to differ materially from those expressed in or implied by forward-looking statements: the occurrence of any event, change, or other circumstance that could give rise to the right of one or both of the parties to terminate the definitive merger agreement between HNI and Steelcase; the outcome of any legal proceedings that may be instituted against HNI or Steelcase; the possibility that the Transaction does not close when expected or at all because required regulatory, shareholder, or other approvals and other conditions to closing are not received or satisfied on a timely basis or at all (and the risk that seeking or obtaining such approvals may result in the imposition of conditions that could adversely affect the combined company or the expected benefits of the Transaction); the risk that the benefits from the Transaction may not be fully realized or may take longer to realize than expected, including as a result of changes in, or problems arising from, general economic and market conditions, interest and exchange rates, monetary policy, trade policy (including tariff levels), laws and regulations and their enforcement, and the degree of competition in the geographic and business areas in which HNI and Steelcase operate; any failure to promptly and effectively integrate the businesses of HNI and Steelcase; the possibility that the Transaction may be more expensive to complete than anticipated, including as a result of unexpected factors or events; reputational risk and potential adverse reactions of HNI's or Steelcase's customers, employees or other business partners, including those resulting from the announcement, pendency or completion of the Transaction; the dilution caused by HNI's issuance of additional shares of its capital stock in connection with the Transaction; and the diversion of management's attention and time to the Transaction from ongoing business operations and opportunities.

Additional important factors relating to the Corporation that could cause actual results to differ materially from those in forward-looking statements include, but are 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, including with respect to tariff levels; changes in raw material, component, or commodity pricing; market acceptance and demand for the Corporation's new products; changing legal, regulatory, environmental, and health care 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 and uncertainties as described in the 2024 Form 10-K and in the Corporation's subsequent quarterly and current reports filed on Forms 10-Q and 8-K with the Securities and Exchange Commission, as well as other risks and uncertainties the Corporation may consider not material or are not known at this time. The risks and uncertainties described in this report, as well as those described within Item 1A of the 2024 Form 10-K, are not exclusive and further information concerning the Corporation, including risks and uncertainties 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 it files with or furnishes to the Securities and Exchange Commission.

As of September 27, 2025, there have been no material changes to the financial market risks affecting the quantitative and qualitative disclosures presented in Item 7A of the 2024 Form 10-K.

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 September 27, 2025, based on this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Corporation's disclosure controls and procedures are effective.

Changes in Internal Control Over Financial Reporting

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.

In addition to the information set forth in this report, consideration should be given to the risks discussed in the "Risk Factors" section of the 2024 Form 10-K, which could materially affect the Corporation's business, financial condition, and results of operations. Additional risks and uncertainties not currently known or that are currently deemed immaterial by management also may adversely affect the Corporation's business, financial condition, or results of operations.

During the nine months ended September 27, 2025, there have been no material changes to the risk factors discussed in the 2024 Annual Report other than the risk factors set forth below relating to the merger transactions (the "Mergers") described elsewhere in this report pursuant to which the Corporation will acquire Steelcase Inc. ("Steelcase") in accordance with the terms and subject to the conditions set forth in the Agreement and Plan of Merger (as amended from time to time, the "Merger Agreement"), dated as of August 3, 2025, by and among the Corporation, Geranium Merger Sub I, Inc., Geranium Merger Sub II, LLC and Steelcase, and under which holders of Steelcase common stock will receive, at their election, merger consideration consisting of cash, shares of HNI common stock, or a combination of cash and shares of HNI common stock. Additional information regarding the transactions contemplated by the Merger Agreement and risks related to the Mergers and to the Corporation after completion of the Mergers is contained in the Corporation's Registration Statement on Form S-4 filed with the Securities and Exchange Commission on September 12, 2025, as that document may be amended from time to time.

Risks Related to the Mergers

The Mergers are subject to conditions, some or all of which may not be satisfied or may not be completed on a timely basis, if at all. Failure to complete the Mergers on a timely basis or at all could have adverse effects on HNI.

The completion of the Mergers is subject to a number of conditions. If the Mergers are not completed, HNI's ongoing business, financial condition, financial results and stock price could be materially adversely affected, and HNI would forgo any benefit of completing the Mergers. In that event, HNI would be subject to a number of risks, including the following:

• the market price of HNI common stock could be reduced to the extent that the current market price reflects a market assumption that the transaction will be completed;
• HNI could owe Steelcase a termination fee of $71 million or $134 million, as applicable, if the Merger Agreement were terminated under specified circumstances;
• HNI could experience negative reactions from the financial markets or from its customers, dealers, suppliers or employees; and
• HNI could become involved in litigation related to any failure to complete the Mergers or related to any proceeding commenced against HNI to perform its obligations pursuant to the Merger Agreement.

HNI is subject to business uncertainties and contractual restrictions while the proposed transaction is pending, which could adversely affect its business and operations.

In connection with the pendency of the Mergers, it is possible that some customers, dealers, suppliers and other persons with which HNI has business relationships may delay or defer certain business decisions or might decide to seek to terminate, change or renegotiate their relationships with HNI, as a result of the Mergers or otherwise. Under the terms of the Merger Agreement, HNI is subject to restrictions on the conduct of its business prior to completing the Mergers, which may adversely affect HNI's ability to acquire assets. Each of these risks may be exacerbated by delays or other adverse developments with respect to the completion of the Mergers.

HNI's shareholders will be diluted by the Mergers.

The Mergers will dilute the ownership position of HNI's current shareholders. Based on the fully diluted shares of HNI and Steelcase as of the date of the Merger Agreement, HNI estimates that holders of Steelcase common stock immediately prior to the effective time of the first Merger will own approximately 36% of the common stock of HNI immediately following the completion of the Mergers and holders of HNI common stock immediately prior to the effective time of the first Merger will own approximately 64% of the common stock of HNI immediately following the completion of the Mergers.

The Mergers will involve substantial costs for HNI.

HNI has incurred, and expects to continue to incur, a number of non-recurring costs associated with the Mergers, a substantial majority of which will consist of transaction and regulatory costs.

To facilitate the financing of the cash portion of the merger consideration, HNI has entered into a credit agreement subject to certain conditions which, if not satisfied, could delay or prevent completion of the Mergers.

On September 5, 2025, HNI and certain of its U.S. subsidiaries entered into a credit agreement with the subsidiary guarantors from time to time party thereto, the lenders from time to time party thereto (the "lenders") and Wells Fargo Bank, National Association, as administrative agent (the "Credit Agreement"). The disbursement of funds under the Credit Agreement, which are to be used by HNI to, among other things, (i) satisfy a portion of its monetary obligations with respect to the consummation of the transactions contemplated by the Merger Agreement and (ii) refinance its existing indebtedness, is subject to certain limited conditions set forth in the Credit Agreement. If such conditions are not satisfied, HNI may be unable to meet its monetary obligations with respect to the transactions contemplated by the Merger Agreement and the refinancing of its existing indebtedness.

In the event that the debt financing contemplated by the Credit Agreement is not available, there is a risk that other financing may not be available on acceptable terms, in a timely manner or at all. Although HNI's obligation to consummate the Mergers is not conditioned upon consummation of any debt financing, if HNI is unable to obtain the debt financing contemplated by the Credit Agreement, the Mergers could be delayed or not completed, in which case HNI could be in breach of its obligations under the Merger Agreement.

Risks Related to HNI After Completion of the Mergers

HNI may not achieve the intended benefits of the Mergers, and the Mergers may disrupt its current plans or operations.

HNI may not be able to successfully integrate Steelcase's assets or otherwise realize the expected benefits of the Mergers (including operating and other cost synergies). Difficulties in integrating Steelcase into HNI may result in HNI performing differently than expected, in operational challenges, in the failure to realize anticipated run-rate cost synergies and efficiencies in the expected time frame or at all, or in the difficulty or failure of utilizing available U.S. tax attributes, in which case the Mergers may not be accretive to earnings per share, may not improve HNI's balance sheet position, and may not enhance HNI's ability to deliver or generate additional free cash flow due to reduced cash tax payments. The integration of HNI and Steelcase may result in material challenges, including the diversion of management's attention from ongoing business concerns; difficulty in retaining key management and other employees; challenges in retaining or attracting business opportunities and establishing or maintaining business relationships; the possibility of faulty assumptions underlying expectations regarding the integration process and associated expenses; difficulty in consolidating corporate and administrative infrastructures and eliminating duplicative operations; challenges in coordinating geographically separate organizations; unanticipated issues in integrating information technology, communications and other systems; discovery of previously unknown liabilities; unforeseen expenses relating to integration; or delays associated with the Mergers.

The results of HNI after the completion of the Mergers may be adversely impacted if HNI does not effectively manage its expanded operations following the completion of the Mergers.

Following the completion of the Mergers, the size of HNI's business will be significantly larger than the current size of either HNI's or Steelcase's respective businesses. HNI's ability to successfully manage this expanded business will depend, in part, upon management's ability to design and implement strategic initiatives that address not only the integration of two independent stand-alone companies, but also the increased scale and scope of the combined business with its associated increased costs and complexity. The combined company may not be successful or realize the expected operating efficiencies, cost savings and other benefits currently anticipated from the Mergers.

The combined company is expected to incur substantial expenses related to the completion of the Mergers and the integration of HNI and Steelcase.

The combined company is expected to incur substantial expenses in connection with the completion of the Mergers and the integration of HNI and Steelcase, some of which may be incurred even if the Mergers are not completed. The expectation of substantial integration expenses reflects in part the many processes, policies, procedures, operations, technologies and systems that must be integrated, potentially including purchasing, accounting and finance, sales, payroll, pricing, revenue management, marketing and benefits. The substantial majority of the expenses of the Mergers and the integration of HNI and Steelcase will be non-recurring expenses related to the Mergers (including financing of the Mergers) and to facilities and systems consolidation. HNI may incur additional costs to maintain employee morale and to attract, motivate or retain management personnel and other key employees. HNI and Steelcase will also incur transaction fees and costs related to formulating integration plans for the combined business, and the execution of these plans may lead to additional unanticipated costs. In addition, as a result of the Mergers, HNI's financing costs, including costs in connection with the financing of the Mergers, may increase. These incremental merger-related costs may exceed the savings the combined company expects to achieve from the elimination of duplicative costs and the realization of other efficiencies related to the integration of the businesses, particularly in the near term and in the event there are material unanticipated costs.

The combined company will have significantly more indebtedness than the indebtedness of HNI prior to the Mergers.

Upon completion of the Mergers, HNI expects to incur approximately $1.25 billion in additional indebtedness and to have consolidated indebtedness of approximately $1.55 billion, which is greater than the current indebtedness of HNI. The increased indebtedness of the combined company in comparison to that of HNI on a historical basis may have the effect of, among other impacts, reducing the flexibility of HNI to respond to changing business and economic conditions and increasing HNI's borrowing costs.

The financing arrangements that HNI will enter into in connection with the Mergers will contain restrictions and limitations that may, under certain circumstances, significantly impact HNI's ability to operate its business.

HNI is incurring significant new indebtedness in connection with the Mergers. The agreements governing the indebtedness that HNI will incur in connection with the Mergers, including, but not limited to, the credit agreement entered into to facilitate the financing of the cash portion of the Merger consideration, may, under certain circumstances, impose significant operating and financial restrictions on HNI. After the completion of the Mergers, these restrictions may affect HNI's ability to operate its business and may limit HNI's ability to take advantage of potential business opportunities.

In addition, the agreements governing such indebtedness will require HNI to comply with a consolidated leverage ratio financial covenant and consolidated interest coverage ratio financial covenant in certain circumstances. To the extent HNI is or becomes subject to these covenants, HNI's ability to comply with such covenants will depend on its financial and operating performance, which in turn will be subject to economic conditions and to financial, market and competitive factors, many of which are beyond HNI's control. HNI's ability to comply with these covenants will also depend upon HNI's ability to successfully implement its overall business strategy and realize the anticipated benefits of the Mergers, including synergies, cost savings, innovation and operational efficiencies.

Various risks, uncertainties and events beyond HNI's control could affect its ability to comply with the covenants contained in its financing agreements. Failure to comply with any of the covenants in its existing or future financing agreements could result in a default under those agreements and under other agreements containing cross-default provisions. A default would permit lenders to accelerate the maturity of the debt under these agreements. Under those circumstances, HNI might not have sufficient funds or other resources to satisfy all of its obligations. In addition, the limitations imposed by financing agreements on HNI's ability to incur additional debt and to take other actions might significantly impair its ability to obtain other financing.

If HNI incurs additional indebtedness following the Mergers, the risks related to the substantial indebtedness of HNI after the completion of the Mergers may intensify.

The market price of HNI common stock after the Mergers may be affected by factors different from those affecting the market price of HNI common stock before the Mergers.

As the businesses of HNI and Steelcase are different, the results of operations of the combined company and the market price of HNI common stock following the Mergers may be affected by factors different from those factors affecting HNI as an independent stand-alone company before the Mergers. Following the Mergers, HNI will face additional risks and uncertainties to which HNI may currently not be exposed as an independent stand-alone company.

The market price of HNI common stock may decline as a result of the Mergers.

The market price of HNI common stock may decline as a result of the Mergers, and HNI shareholders could lose the value of their investment in HNI common stock if, among other things, after completion of the Mergers, HNI is unable to achieve the expected growth in earnings, or if the anticipated benefits, including synergies, cost savings, innovation and operational efficiencies, from the Mergers are not realized, or if the transaction costs related to the Mergers are greater than expected, or if the Mergers are not completed within the anticipated time frame. The market price of HNI common stock also may decline if HNI does not achieve the perceived benefits and expected synergies of the transaction as rapidly or to the extent anticipated by financial or industry analysts or if the effect of the Mergers on HNI's financial position, results of operations or cash flows is not consistent with the expectations of financial or industry analysts.

The issuance of shares of HNI common stock in the Mergers could on its own have the effect of depressing the market price of HNI common stock. In addition, many Steelcase shareholders may decide not to hold the shares of HNI common stock they receive as a result of the Mergers. Other Steelcase shareholders, such as funds with limitations on their permitted holdings of stock in individual issuers, may be required to sell the shares of HNI common stock they receive as a result of the Mergers. Any such sales of HNI common stock could have the effect of depressing the market price of HNI common stock.

General fluctuations in stock markets could have a material adverse effect on the market for, or liquidity of, HNI common stock, regardless of the operating performance of HNI after the completion of the Mergers.

The Mergers may result in a loss of customers, distributors, suppliers, vendors, landlords and other business partners and may result in the termination of existing contracts.

Following the Mergers, some of the customers, distributors, dealers, suppliers, vendors, landlords and other business partners of Steelcase may terminate or scale back their current or prospective business relationships with HNI. Some customers may not wish to source a larger percentage of their needs from a single company or may believe that HNI is too closely allied with one of their competitors. In addition, Steelcase has contracts with customers, distributors, dealers, suppliers, vendors, landlords and other business partners that may require it to obtain consents from these other parties in connection with the Mergers, which may not be obtained on favorable terms or at all. If relationships with customers, distributors, dealers, suppliers, vendors, landlords and other business partners are adversely affected by the Mergers, or if HNI, following the Mergers, loses the benefits of the contracts of Steelcase, HNI's business and financial performance could suffer.