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HNI Corporation Reports Earnings for Fourth Quarter and Fiscal Year 2020

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HNI Corporation (NYSE:HNI) today announced sales for the full year ended January 2, 2021 of $1.955 billion and net income of $41.9 million. GAAP net income per diluted share was $0.98, compared to $2.54 in the prior year. Non-GAAP net income per diluted share was $1.79, compared to $2.59 in the prior year. GAAP to non-GAAP reconciliations follow the financial statements in this release.

Fourth quarter sales of $562.1 million were down 9 percent from year-ago levels, and fourth quarter net income was $22.6 million. GAAP net income per diluted share was $0.52, compared to $1.10 in the prior year. Non-GAAP net income per diluted share was $0.66, compared to $1.12 in the prior year.

Fourth Quarter Highlights

  • Double-digit revenue and profit growth in Residential Building Products. Fourth quarter segment revenue increased 15.9 percent organically year-over-year, while operating profit was 11.4 percent higher than the year-ago period.
  • Solid profitability in Workplace Furnishings. Fourth quarter segment operating profit exceeded $11 million, despite an 18.6 percent year-over-year top line contraction.
  • Strong cash flow generation. Fourth quarter operating cash flow totaled $71 million, and full year operating cash flow was $214 million. Full year operating cash flow was only slightly below the $219 million generated in fiscal year 2019 despite year-over-year total revenue and non-GAAP operating profit declines of 13 percent and 30 percent, respectively.
  • High quality balance sheet. Debt at the end of the fourth quarter totaled $175 million— unchanged from last quarter and prior-year levels. The Corporation's gross leverage ratio remained low at 1.0x. Additionally, the Corporation ended the quarter with $116 million of cash, an increase of $7 million from the end of the third quarter and a $64 million increase from the end of fiscal year 2019. The quarter-ending balance sheet reflects the impacts of the acquisition of Design Public Group at the end of fiscal year 2020.

"Our members finished a challenging year by delivering another solid quarter. Our performance has enabled us to invest more aggressively to improve our competitive position. The acquisition of Design Public Group is a great example of these efforts, as it accelerates our initiatives around eCommerce while providing access to a broader customer group," stated Jeff Lorenger, Chairman, President, and Chief Executive Officer.

Fourth Quarter - Financial Performance

(Dollars in millions, except per share data)

 

Three Months Ended

 

 

 

January 2,

2021

 

December 28,

2019

 

Change

GAAP

 

 

 

 

 

Net Sales

$

562.1

 

 

$

616.1

 

 

(8.8

%)

Gross Profit %

 

37.1

%

 

 

38.0

%

 

-90

bps

SG&A %

 

30.4

%

 

 

27.4

%

 

300

bps

Restructuring and Impairment Charges %

 

1.1

%

 

 

0.2

%

 

90

bps

Operating Income

$

31.5

 

 

$

63.8

 

 

(50.6

%)

Operating Income %

 

5.6

%

 

 

10.3

%

 

-470

bps

Effective Tax Rate

 

24.2

%

 

 

23.1

%

 

 

Net Income %

 

4.0

%

 

 

7.7

%

 

-370

bps

EPS – diluted

$

0.52

 

 

$

1.10

 

 

(52.7

%)

 

 

 

 

 

 

Non-GAAP

 

 

 

 

 

Gross Profit %

 

37.1

%

 

 

38.0

%

 

-90

bps

Operating Income

$

39.5

 

 

$

64.9

 

 

(39.2

%)

Operating Income %

 

7.0

%

 

 

10.5

%

 

-350

bps

EPS – diluted

$

0.66

 

 

$

1.12

 

 

(41.1

%)

Fourth Quarter Summary Comments

  • Consolidated net sales decreased 8.8 percent from the prior-year quarter to $562.1 million. On an organic basis, sales decreased 9.2 percent. The impact of building products distributors acquired in 2020 increased sales $3.0 million compared to the prior-year quarter. A reconciliation of organic sales, a non-GAAP measure, follows the financial statements in this release.
  • Gross profit margin decreased 90 basis points compared to the prior-year quarter. This decrease was primarily due to lower Workplace Furnishings volume and unfavorable mix, partially offset by improved net productivity and higher Residential Building Products volume.
  • Selling and administrative expenses as a percent of sales increased 300 basis points compared to the prior-year quarter. This increase was primarily due to lower Workplace Furnishings volume and higher investments, partially offset by volume growth in Residential Building Products and freight & distribution productivity. Included in current year quarter SG&A was $1.8 million of one-time costs from exiting workplace furnishings showrooms, driven by conditions related to the COVID-19 pandemic.
  • The Corporation recorded net charges of $6.2 million in the current year quarter related to the impairment of goodwill and other assets in the Workplace Furnishings segment. In the prior-year quarter, the Corporation recorded $1.2 million of restructuring costs in connection with structural realignments in the Workplace Furnishings segment.
  • Non-GAAP net income per diluted share was $0.66 compared to $1.12 in the prior-year quarter. The $0.46 decrease was primarily driven by lower Workplace Furnishings volume and unfavorable mix, partially offset by strong Residential Building Products volume and net productivity.

Full Year - Financial Performance

(Dollars in millions, except per share data)

 

Twelve Months Ended

 

 

 

January 2,

2021

 

December 28,

2019

 

Change

GAAP

 

 

 

 

 

Net Sales

$

1,955.4

 

 

$

2,246.9

 

 

(13.0

%)

Gross Profit %

 

36.9

%

 

 

37.1

%

 

-20

bps

SG&A %

 

31.8

%

 

 

30.3

%

 

150

bps

Restructuring and Impairment Charges %

 

2.0

%

 

 

0.1

%

 

190

bps

Operating Income

$

61.4

 

 

$

151.3

 

 

(59.4

%)

Operating Income %

 

3.1

%

 

 

6.7

%

 

-360

bps

Effective Tax Rate

 

22.9

%

 

 

22.6

%

 

 

Net Income %

 

2.1

%

 

 

4.9

%

 

-280

bps

EPS – diluted

$

0.98

 

 

$

2.54

 

 

(61.4

%)

 

 

 

 

 

 

Non-GAAP

 

 

 

 

 

Gross Profit %

 

36.9

%

 

 

37.1

%

 

-20

bps

Operating Income

$

107.0

 

 

$

153.9

 

 

(30.5

%)

Operating Income %

 

5.5

%

 

 

6.8

%

 

-130

bps

EPS – diluted

$

1.79

 

 

$

2.59

 

 

(30.9

%)

Full Year Summary Comments

  • Consolidated net sales decreased 13.0 percent from the prior year to $1.955 billion. On an organic basis, sales decreased 13.4 percent year-over-year. The impact of building products distributors acquired in 2020 increased sales $9.4 million compared to the prior year.
  • Gross profit margin decreased 20 basis points compared to the prior year. This decrease was driven by lower Workplace Furnishings volume, partially offset by net productivity and higher Residential Building Products volume.
  • Selling and administrative expenses as a percent of sales increased 150 basis points compared to the prior year. This increase was driven by lower Workplace Furnishings volume, partially offset by lower core SG&A and freight & distribution productivity. Included in current year SG&A was $6.8 million of one-time costs incurred as a result of the COVID-19 pandemic (of which $1.6 million was recorded as a corporate charge).
  • The Corporation recorded net charges of $38.8 million related to impairments of goodwill, intangibles, and other assets in the Workplace Furnishings segment. In the prior year, the Corporation recorded $2.4 million of restructuring costs in connection with structural realignments in the Workplace Furnishings segment.
  • Non-GAAP net income per diluted share was $1.79, compared to $2.59 in the prior year. The $0.80 decrease was due to lower Workplace Furnishings volume, partially offset by improved net productivity, lower core SG&A, and higher Residential Building Products volume.

Fourth Quarter Balance Sheet and Cash Flow

  • The Corporation's cash balance at the end of the fourth quarter of 2020 totaled $116 million—representing a $7 million increase from third quarter-ending levels and a $64 million increase from the total reported at the end of the fourth quarter of 2019. The Corporation built cash during the fourth quarter while funding the acquisition of Design Public Group.
  • Quarter-ending debt levels were $175 million—approximately equal to the prior quarter and prior year balances. The outstanding debt consisted of $100 million in private placement notes and $75 million drawn on the Corporation's $450 million revolving credit facility. The gross leverage ratio was 1.0x at the end of the fourth quarter, which was up slightly from 0.9x last quarter but well below the Corporation's debt covenant of 3.5x.
  • Full-year cash flow from operations of $214 million was only modestly below the $219 million generated in 2019 despite challenging conditions throughout 2020.
  • Capital expenditures in 2020 of $32.3 million were down 47 percent from the $60.8 million in 2019. The decrease reflects the Corporation's adjustment to the pandemic-related conditions. Investment in capitalized software increased 57 percent on a year-over-year basis to $9.5 million, reflecting the Corporation's emphasis on digital initiatives. Cash flow used for acquisitions totaled $58.3 million in 2020.

Fourth Quarter Orders

  • Orders in the Workplace Furnishings segment excluding eCommerce declined 21 percent year-over-year in the fourth quarter. December year-over-year trends improved from those in October and November. Order rates in the business focused on small to mid-sized customers were better than those with contract customers.
  • Orders in eCommerce increased 51 percent year-over-year in the fourth quarter. While sales growth continued to be impacted by supply constraints and tough year-ago comparables, year-over-year order growth trends (adjusted for the extra week) were consistently above 23 percent in each month of the quarter.
  • Orders in the Residential Building Products segment increased 24 percent year-over-year in the fourth quarter. Order growth in the quarter was comparable in the new construction and repair/remodel markets, and total segment order growth strengthened in December.
  • The Corporation estimates the extra week in the fourth quarter of 2020 added approximately five percentage points on a year-over-year basis to total order growth.

     

Workplace Furnishings – Financial Performance

(Dollars in millions)

 

Three Months Ended

 

 

 

 

Twelve Months Ended

 

 

 

January 2,

2021

 

December 28,

2019

 

Change

 

 

January 2,

2021

 

December 28,

2019

 

Change

GAAP

 

 

 

 

 

 

 

 

 

 

 

 

Net Sales

$

365.9

 

 

$

449.4

 

 

(18.6

%)

 

 

$

1,365.7

 

 

 

$

1,697.2

 

 

(19.5

%)

Operating Profit (Loss)

$

3.6

 

 

$

35.7

 

 

(89.8

%)

 

 

($5.0

)

 

 

$

103.9

 

 

(104.8

%)

Operating Profit (Loss) %

 

1.0

%

 

 

7.9

%

 

-690

bps

 

 

 

(0.4

%)

 

 

6.1

%

 

-650

bps

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP

 

 

 

 

 

 

 

 

 

 

 

 

Operating Profit

$

11.6

 

 

$

36.9

 

 

(68.4

%)

 

 

$

39.1

 

 

 

$

106.5

 

 

(63.3

%)

Operating Profit %

 

3.2

%

 

 

8.2

%

 

-500

bps

 

 

 

2.9

%

 

 

6.3

%

 

-340

bps

Fourth Quarter Summary Comments - Workplace Furnishings

  • Workplace Furnishings net sales decreased 18.6 percent from the prior-year quarter to $365.9 million.
  • Workplace Furnishings GAAP operating profit margin decreased 690 basis points versus the prior-year period. On a non-GAAP basis, segment operating margin decreased 500 basis points driven by lower volume and unfavorable mix, partially offset by net productivity.
  • The Workplace Furnishings segment recorded net charges of $6.2 million in the current year quarter related to the impairment of goodwill and other assets; as well as $1.8 million of one-time costs from exiting workplace furnishings showrooms, driven by conditions related to the COVID-19 pandemic.

Full Year Summary Comments - Workplace Furnishings

  • Workplace Furnishings net sales decreased 19.5 percent from the prior year to $1.366 billion.
  • Workplace Furnishings GAAP operating profit margin decreased 650 basis points. On a non-GAAP basis, segment operating margin decreased 340 basis points year-over-year, driven by lower volume, partially offset by net productivity, and lower core SG&A spend.
  • The Workplace Furnishings segment recorded net charges of $38.8 million during the current year related to impairments of goodwill, intangibles, and other assets, as well as $5.2 million of one-time costs as a result of the COVID-19 pandemic.

Residential Building Products – Financial Performance

(Dollars in millions)

 

Three Months Ended

 

 

 

 

Twelve Months Ended

 

 

 

January 2,

2021

 

December 28,

2019

 

Change

 

 

January 2,

2021

 

December 28,

2019

 

Change

GAAP

 

 

 

 

 

 

 

 

 

 

 

 

Net Sales

$

196.3

 

 

$

166.7

 

 

17.8

%

 

 

$

589.7

 

 

$

549.8

 

 

7.3

%

Operating Profit

$

44.1

 

 

$

39.6

 

 

11.4

%

 

 

$

109.3

 

 

$

94.3

 

 

15.9

%

Operating Profit %

 

22.5

%

 

 

23.8

%

 

-130

bps

 

 

 

18.5

%

 

 

17.2

%

 

130

bps

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP

 

 

 

 

 

 

 

 

 

 

 

 

Operating Profit

$

44.1

 

 

$

39.6

 

 

11.4

%

 

 

$

109.3

 

 

$

94.3

 

 

15.9

%

Operating Profit %

 

22.5

%

 

 

23.8

%

 

-130

bps

 

 

 

18.5

%

 

 

17.2

%

 

130

bps

Fourth Quarter Summary Comments - Residential Building Products

  • Residential Building Products net sales increased 17.8 percent from the prior-year quarter to $196.3 million. On an organic basis, sales increased 15.9 percent year-over-year. The impact of building products distributors acquired in 2020 increased sales $3.0 million compared to prior-year quarter.
  • Residential Building Products operating profit margin decreased 130 basis points, driven by increased investment spending and higher variable compensation, partially offset by strong volume growth.

Full Year Summary Comments - Residential Building Products

  • Residential Building Products net sales increased 7.3 percent from the prior year to $589.7 million. On an organic basis, sales increased 5.6 percent year-over-year. The impact of building product distributors acquired in 2020 increased sales $9.4 million compared to prior year.
  • Residential Building Products operating profit margin expanded 130 basis points, driven by higher volume and favorable price-cost, partially offset by higher variable compensation.

Concluding Remarks

"In 2020, our members adapted, stayed agile, and kept HNI strong in the face of challenging conditions. I am extremely proud of and grateful for the efforts of all HNI members. I have no doubt we are a stronger company because of what we experienced and how we performed this past year.

As we look toward 2021, we see strengthening growth and momentum in our Residential Building Products segment. Activity in both new construction and remodeling are rising and continue to be supported by demographics, deurbanization, nesting trends, and low housing inventories.

In Workplace Furnishings, we are optimistic our environments will improve as we progress through the year and continue to see some signs of initial recovery. The vaccine roll-out, associated return-to-the-office programs, and our ability to capture work-from-home demand support revenue and profit growth as we move through 2021. However, the precise timing and rate of improvement remain uncertain.

In the first quarter of 2021, we expect the conditions we experienced last quarter to generally continue," Mr. Lorenger concluded.

First Quarter Outlook

  • Residential Building Products revenue: Cyclical strength, secular support, company-specific initiatives, and a strong competitive position will continue to drive revenue growth in this segment. Recent trends point to first quarter year-over-year total segment revenue growth rates in the mid-20 percent range.
  • Workplace Furnishings revenue: Pandemic-related uncertainty remains and limits the Corporation's visibility. However, recent order trends point to continued moderation in year-over-year revenue declines driven by small to mid-sized customers and public sector activity. Assuming recent trends continue, first quarter segment revenue, including acquisition impacts, would decline at a year-over-year rate in the high-single digits to low-teens.
  • Profitability drivers: The Corporation expects lower first quarter profit margins compared to the prior year due to reduced Workplace Furnishings volume, rising input costs, and higher investment levels. However, first quarter earnings are expected to be positive and will benefit from continued year-over-year improvement in Residential Building Products volume, net productivity benefits, and SG&A cost management.
  • Balance sheet and cash flow: The Corporation expects to maintain a strong balance sheet throughout 2021 with leverage ratios in-line with those seen in recent quarters. Low leverage and continued free cash flow generation will provide ample capacity for continued investment, dividend payments, and opportunistic M&A and share buyback activity.

Conference Call

HNI Corporation will host a conference call on Monday, March 1, 2021 at 10:00 a.m. (Central) to discuss fourth quarter and fiscal year 2020 results. To participate, call 1-833-522-0258 – conference ID number 5995465. A live webcast of the call will be available on HNI Corporation's website at http://www.hnicorp.com (under Investors – News Releases & Events). A replay of the webcast will be made available at this website address. An audio replay of the call will be available until Monday, March 8, 2021, 10:59 p.m. (Central) by dialing 1-800-585-8367 or 1-416-621-4642 – Conference ID number 5995465.

About HNI Corporation

HNI Corporation (NYSE:HNI) is a manufacturer of workplace furnishings and residential building products, operating under two segments. The Workplace Furnishings segment is a leading global designer and provider of commercial furnishings, going to market under multiple unique brands. The Residential Building Products segment is the nation's leading manufacturer and marketer of hearth products, which include a full array of gas, electric, wood, and pellet-burning fireplaces, inserts, stoves, facings, and accessories. More information can be found on the Corporation's website at www.hnicorp.com.

Forward-Looking Statements

This release contains "forward-looking" statements based on current expectations regarding future plans, events, outlook, objectives, financial performance, expectations for sales growth, and earnings per diluted share (GAAP and non-GAAP), including statements regarding the expected effects on our business, financial condition and results of operations from the COVID-19 pandemic. Forward-looking statements can be identified by words including "expect," "believe," "anticipate," "estimate," "may," "will," "would," "could," "confident", or other similar words, phrases, or expressions. Forward-looking statements involve known and unknown risks and uncertainties, which may cause the Corporation's actual future results and performance to differ materially from expected results. These risks include but are not limited to: the duration and scope of the COVID-19 pandemic, and its effect on people and the economy; the levels of office furniture needs and housing starts; overall demand for the Corporation's products; general economic and market conditions in the United States and internationally; industry and competitive conditions; the consolidation and concentration of the Corporation's customers; the Corporation's reliance on its network of independent dealers; change in trade policy; changes in raw material, component, or commodity pricing; market acceptance and demand for the Corporation's new products; changing legal, regulatory, environmental, and healthcare conditions; the risks associated with international operations; the potential impact of product defects; the various restrictions on the Corporation's financing activities; an inability to protect the Corporation's intellectual property; impacts of tax legislation; and force majeure events outside the Corporation's control. A description of these risks and additional risks can be found in the Corporation's annual and quarterly reports filed with the Securities and Exchange Commission on Forms 10-K and 10-Q. The Corporation assumes no obligation to update, amend, or clarify forward-looking statements, except as required by applicable law.

HNI Corporation and Subsidiaries

Condensed Consolidated Statements of Income

(In thousands, except per share data)

(Unaudited)

 

 

Three Months Ended

 

Twelve Months Ended

January 2,

2021

 

December 28,

2019

 

January 2,

2021

 

December 28,

2019

Net sales

$

562,139

 

 

 

$

616,079

 

 

 

$

1,955,363

 

 

 

$

2,246,947

 

 

Cost of sales

353,489

 

 

 

382,192

 

 

 

1,234,243

 

 

 

1,413,185

 

 

Gross profit

208,650

 

 

 

233,887

 

 

 

721,120

 

 

 

833,762

 

 

Selling and administrative expenses

170,994

 

 

 

168,969

 

 

 

620,927

 

 

 

680,049

 

 

Restructuring and impairment charges

6,157

 

 

 

1,157

 

 

 

38,818

 

 

 

2,371

 

 

Operating income

31,499

 

 

 

63,761

 

 

 

61,375

 

 

 

151,342

 

 

Interest expense, net

1,719

 

 

 

1,833

 

 

 

6,990

 

 

 

8,628

 

 

Income before income taxes

29,780

 

 

 

61,928

 

 

 

54,385

 

 

 

142,714

 

 

Income taxes

7,207

 

 

 

14,333

 

 

 

12,466

 

 

 

32,211

 

 

Net income

22,573

 

 

 

47,595

 

 

 

41,919

 

 

 

110,503

 

 

Less: Net income (loss) attributable to the non-controlling interest

5

 

 

 

0

 

 

 

2

 

 

 

(2

)

 

Net income attributable to

HNI Corporation

$

22,568

 

 

 

$

47,595

 

 

 

$

41,917

 

 

 

$

110,505

 

 

 

 

 

 

 

 

 

 

Average number of common shares outstanding – basic

42,797

 

 

 

42,755

 

 

 

42,689

 

 

 

43,101

 

 

Net income attributable to

HNI Corporation per common share – basic

$

0.53

 

 

 

$

1.11

 

 

 

$

0.98

 

 

 

$

2.56

 

 

 

 

 

 

 

 

 

 

Average number of common shares outstanding – diluted

43,220

 

 

 

43,137

 

 

 

42,956

 

 

 

43,495

 

 

Net income attributable to

HNI Corporation per common share – diluted

$

0.52

 

 

 

$

1.10

 

 

 

$

0.98

 

 

 

$

2.54

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

$

1,474

 

 

 

$

468

 

 

 

$

1,841

 

 

 

$

61

 

 

Change in unrealized gains (losses) on marketable securities, net of tax

(4

)

 

 

(1

)

 

 

265

 

 

 

251

 

 

Change in pension and post-retirement liability, net of tax

(920

)

 

 

(1,648

)

 

 

(920

)

 

 

(2,833

)

 

Change in derivative financial instruments, net of tax

126

 

 

 

159

 

 

 

(2,266

)

 

 

(1,953

)

 

Other comprehensive income (loss), net of tax

676

 

 

 

(1,022

)

 

 

(1,080

)

 

 

(4,474

)

 

Comprehensive income

23,249

 

 

 

46,573

 

 

 

40,839

 

 

 

106,029

 

 

Less: Comprehensive income (loss) attributable to non-controlling interest

5

 

 

 

0

 

 

 

2

 

 

 

(2

)

 

Comprehensive income attributable to HNI Corporation

$

23,244

 

 

 

$

46,573

 

 

 

$

40,837

 

 

 

$

106,031

 

 

HNI Corporation and Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

 

 

January 2,

2021

 

December 28,

2019

Assets

 

 

 

Current Assets:

 

 

 

Cash and cash equivalents

$

116,120

 

 

 

$

52,073

 

 

Short-term investments

1,687

 

 

 

1,096

 

 

Receivables

207,971

 

 

 

278,124

 

 

Allowance for doubtful accounts

(5,514

)

 

 

(3,559

)

 

Inventories

137,811

 

 

 

163,465

 

 

Prepaid expenses and other current assets

37,660

 

 

 

37,635

 

 

Total Current Assets

495,735

 

 

 

528,834

 

 

Property, Plant, and Equipment:

 

 

 

Land and land improvements

29,691

 

 

 

29,394

 

 

Buildings

293,708

 

 

 

295,517

 

 

Machinery and equipment

578,643

 

 

 

581,225

 

 

Construction in progress

17,750

 

 

 

20,881

 

 

 

919,792

 

 

 

927,017

 

 

Less accumulated depreciation

553,835

 

 

 

545,510

 

 

Net Property, Plant, and Equipment

365,957

 

 

 

381,507

 

 

Right-of-use Finance Leases

6,095

 

 

 

2,129

 

 

Right-of-use Operating Leases

70,219

 

 

 

72,883

 

 

Goodwill and Other Intangible Assets

458,896

 

 

 

445,709

 

 

Deferred Income Taxes

607

 

 

 

176

 

 

Other Assets

20,523

 

 

 

21,274

 

 

Total Assets

$

1,418,032

 

 

 

$

1,452,512

 

 

 

 

 

 

Liabilities and Equity

 

 

 

Current Liabilities:

 

 

 

Accounts payable and accrued expenses

$

413,638

 

 

 

$

453,202

 

 

Current maturities of long-term debt

841

 

 

 

790

 

 

Current maturities of other long-term obligations

2,990

 

 

 

1,931

 

 

Current lease obligations - Finance

1,589

 

 

 

563

 

 

Current lease obligations - Operating

19,970

 

 

 

22,219

 

 

Total Current Liabilities

439,028

 

 

 

478,705

 

 

Long-Term Debt

174,524

 

 

 

174,439

 

 

Long-Term Lease Obligations - Finance

4,516

 

 

 

1,581

 

 

Long-Term Lease Obligations - Operating

53,249

 

 

 

58,233

 

 

Other Long-Term Liabilities

81,264

 

 

 

67,990

 

 

Deferred Income Taxes

74,706

 

 

 

87,196

 

 

Equity:

 

 

 

HNI Corporation shareholders' equity

590,419

 

 

 

584,044

 

 

Non-controlling interest

326

 

 

 

324

 

 

Total Equity

590,745

 

 

 

584,368

 

 

Total Liabilities and Equity

$

1,418,032

 

 

 

$

1,452,512

 

 

HNI Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

Twelve Months Ended

 

January 2,

2021

 

December 28,

2019

Net Cash Flows From (To) Operating Activities:

 

 

 

Net income

$

41,919

 

 

 

$

110,503

 

 

Non-cash items included in net income:

 

 

 

Depreciation and amortization

77,683

 

 

 

77,427

 

 

Other post-retirement and post-employment benefits

1,472

 

 

 

1,475

 

 

Stock-based compensation

7,827

 

 

 

6,830

 

 

Reduction in carrying amount of right-of-use assets

22,997

 

 

 

22,936

 

 

Deferred income taxes

(12,005

)

 

 

6,750

 

 

Impairment of goodwill and intangible assets

39,580

 

 

 

 

 

Other – net

3,064

 

 

 

5,607

 

 

Net increase (decrease) in operating assets and liabilities, net of divestitures

24,204

 

 

 

(3,280

)

 

Increase (decrease) in other liabilities

7,728

 

 

 

(8,868

)

 

Net cash flows from (to) operating activities

214,469

 

 

 

219,380

 

 

 

 

 

 

Net Cash Flows From (To) Investing Activities:

 

 

 

Capital expenditures

(32,296

)

 

 

(60,826

)

 

Acquisition spending, net of cash acquired

(58,258

)

 

 

 

 

Capitalized software

(9,506

)

 

 

(6,059

)

 

Purchase of investments

(4,222

)

 

 

(6,702

)

 

Sales or maturities of investments

3,611

 

 

 

4,845

 

 

Other – net

299

 

 

 

5,847

 

 

Net cash flows from (to) investing activities

(100,372

)

 

 

(62,895

)

 

 

 

 

 

Net Cash Flows From (To) Financing Activities:

 

 

 

Payments of long-term debt

(83,179

)

 

 

(215,934

)

 

Proceeds from long-term debt

83,309

 

 

 

141,035

 

 

Dividends paid

(52,096

)

 

 

(52,232

)

 

Purchase of HNI Corporation common stock

(6,764

)

 

 

(83,887

)

 

Proceeds from sales of HNI Corporation common stock

8,064

 

 

 

30,473

 

 

Other – net

616

 

 

 

(686

)

 

Net cash flows from (to) financing activities

(50,050

)

 

 

(181,231

)

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

64,047

 

 

 

(24,746

)

 

Cash and cash equivalents at beginning of period

52,073

 

 

 

76,819

 

 

Cash and cash equivalents at end of period

$

116,120

 

 

 

$

52,073

 

 

HNI Corporation and Subsidiaries

Reportable Segment Data

(In thousands)

(Unaudited)

 

 

Three Months Ended

 

Twelve Months Ended

 

January 2,

2021

 

December 28,

2019

 

January 2,

2021

 

December 28,

2019

Net Sales:

 

 

 

 

 

 

 

Workplace Furnishings

$

365,883

 

 

 

$

449,408

 

 

 

$

1,365,711

 

 

 

$

1,697,186

 

 

Residential Building Products

196,256

 

 

 

166,671

 

 

 

589,652

 

 

 

549,761

 

 

Total

$

562,139

 

 

 

$

616,079

 

 

 

$

1,955,363

 

 

 

$

2,246,947

 

 

 

 

 

 

 

 

 

 

Income (Loss) Before Income Taxes:

 

 

 

 

 

 

 

Workplace Furnishings

$

3,646

 

 

 

$

35,714

 

 

 

$

(4,972

)

 

 

$

103,894

 

 

Residential Building Products

44,090

 

 

 

39,586

 

 

 

109,321

 

 

 

94,329

 

 

General corporate

(16,237

)

 

 

(11,539

)

 

 

(42,974

)

 

 

(46,881

)

 

Operating Income

$

31,499

 

 

 

$

63,761

 

 

 

$

61,375

 

 

 

$

151,342

 

 

Interest expense, net

1,719

 

 

 

1,833

 

 

 

6,990

 

 

 

8,628

 

 

Total

$

29,780

 

 

 

$

61,928

 

 

 

$

54,385

 

 

 

$

142,714

 

 

 

 

 

 

 

 

 

 

Depreciation and Amortization Expense:

 

 

 

 

 

 

 

Workplace Furnishings

$

11,436

 

 

 

$

11,348

 

 

 

$

44,615

 

 

 

$

44,887

 

 

Residential Building Products

2,411

 

 

 

2,363

 

 

 

9,386

 

 

 

8,884

 

 

General corporate

5,918

 

 

 

5,880

 

 

 

23,682

 

 

 

23,656

 

 

Total

$

19,765

 

 

 

$

19,591

 

 

 

$

77,683

 

 

 

$

77,427

 

 

 

 

 

 

 

 

 

 

Capital Expenditures (including capitalized software):

 

 

 

 

 

 

 

Workplace Furnishings

$

5,848

 

 

 

$

11,947

 

 

 

$

24,188

 

 

 

$

41,137

 

 

Residential Building Products

2,339

 

 

 

1,446

 

 

 

8,213

 

 

 

12,225

 

 

General corporate

1,614

 

 

 

3,301

 

 

 

9,401

 

 

 

13,523

 

 

Total

$

9,801

 

 

 

$

16,694

 

 

 

$

41,802

 

 

 

$

66,885

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of

January 2, 2021

 

As of

December 28, 2019

Identifiable Assets:

 

 

 

 

 

 

 

Workplace Furnishings

 

 

 

 

$

762,780

 

 

 

$

874,913

 

 

Residential Building Products

 

 

 

 

381,550

 

 

 

364,653

 

 

General corporate

 

 

 

 

273,702

 

 

 

212,946

 

 

Total

 

 

 

 

$

1,418,032

 

 

 

$

1,452,512

 

 

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 our condensed consolidated financial statements, which are prepared and presented in accordance with GAAP, we use the following non-GAAP financial measures within this earnings release: organic sales, gross profit, operating income, operating profit, income taxes, net income, and net income per diluted share (i.e., EPS). These measures are adjusted from the comparable GAAP measures to exclude the impacts of the selected items as summarized in the tables below. 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 adjustments.

The sales adjustments to arrive at our non-GAAP organic sales information included in this earnings release excludes the impact of acquiring building products distributors. The transactions excluded for purposes of our other non-GAAP financial information included in this earnings release for all periods presented include restructuring charges, impairment charges, COVID-19 costs, and/or transition costs. Impairment and COVID-19 costs incurred in the current year periods presented are primarily comprised of goodwill and intangible asset impairments and one-time charges related to the COVID-19 pandemic. Restructuring charges incurred in the prior year periods presented are primarily comprised of severance costs related to a structural realignment in the workplace furnishings segment. Transition costs incurred in connection with this realignment include member relocation costs.

HNI Corporation Reconciliation

(Dollars in millions)

 

Three Months Ended

 

January 2, 2021

 

December 28, 2019

 

Workplace

Furnishings

Residential

Building

Products

Total

 

Workplace

Furnishings

Residential

Building

Products

Total

Sales as reported (GAAP)

$

365.9

 

$

196.3

 

 

$

562.1

 

 

 

$

449.4

 

$

166.7

 

$

616.1

 

% change from PY

(18.6

%)

17.8

%

(8.8

%)

 

 

 

 

 

 

 

 

 

 

 

 

Less: Acquisitions

 

(3.0

)

 

(3.0

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Organic Sales (non-GAAP)

$

365.9

 

$

193.2

 

 

$

559.1

 

 

 

$

449.4

 

$

166.7

 

$

616.1

 

% change from PY

(18.6

%)

15.9

%

(9.2

%)

 

 

 

 

HNI Corporation Reconciliation

(Dollars in millions)

 

Twelve Months Ended

 

January 2, 2021

 

December 28, 2019

 

Workplace

Furnishings

Residential

Building

Products

Total

 

Workplace

Furnishings

Residential

Building

Products

Total

Sales as reported (GAAP)

$

1,365.7

 

$

589.7

 

 

$

1,955.4

 

 

 

$

1,697.2

 

$

549.8

 

$

2,246.9

 

% change from PY

(19.5

%)

7.3

%

(13.0

%)

 

 

 

 

 

 

 

 

 

 

 

 

Less: Acquisitions

 

(9.4

)

 

(9.4

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Organic Sales (non-GAAP)

$

1,365.7

 

$

580.3

 

 

$

1,946.0

 

 

 

$

1,697.2

 

$

549.8

 

$

2,246.9

 

% change from PY

(19.5

%)

5.6

%

(13.4

%)

 

HNI Corporation Reconciliation

(Dollars in millions, except per share data)

 

Three Months Ended

 

January 2, 2021

 

Gross Profit

 

Operating

Income

 

Tax

 

Net Income

 

 

EPS

As reported (GAAP)

$

208.6

 

 

$

31.5

 

 

$

7.2

 

 

$

22.6

 

 

$

0.52

 

% of net sales

37.1

%

 

5.6

%

 

 

 

4.0

%

 

 

Tax %

 

 

 

 

24.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Impairment charges

 

 

6.2

 

 

1.6

 

 

4.6

 

 

0.11

 

COVID-19 costs

 

 

1.8

 

 

0.4

 

 

1.4

 

 

0.03

 

 

 

 

 

 

 

 

 

 

 

Results (non-GAAP)

$

208.6

 

 

$

39.5

 

 

$

9.3

 

 

$

28.5

 

 

$

0.66

 

% of net sales

37.1

%

 

7.0

%

 

 

 

5.1

%

 

 

Tax %

 

 

 

 

24.5

%

 

 

 

 

HNI Corporation Reconciliation

(Dollars in millions, except per share data)

 

Three Months Ended

 

December 28, 2019

 

Gross Profit

 

Operating

Income

 

Tax

 

Net Income

 

 

EPS

As reported (GAAP)

$

233.9

 

 

$

63.8

 

 

$

14.3

 

 

$

47.6

 

 

$

1.10

 

% of net sales

38.0

%

 

10.3

%

 

 

 

7.7

%

 

 

Tax %

 

 

 

 

23.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restructuring charges

 

 

1.2

 

 

0.3

 

 

0.9

 

 

0.02

 

 

 

 

 

 

 

 

 

 

 

Results (non-GAAP)

$

233.9

 

 

$

64.9

 

 

$

14.6

 

 

$

48.5

 

 

$

1.12

 

% of net sales

38.0

%

 

10.5

%

 

 

 

7.9

%

 

 

Tax %

 

 

 

 

23.1

%

 

 

 

 

HNI Corporation Reconciliation

(Dollars in millions, except per share data)

 

Twelve Months Ended

 

January 2, 2021

 

Gross Profit

 

Operating Income

 

Tax

 

Net Income

 

 

EPS

As reported (GAAP)

$

721.1

 

 

$

61.4

 

 

$

12.5

 

 

$

41.9

 

 

$

0.98

 

% of net sales

36.9

%

 

3.1

%

 

 

 

2.1

%

 

 

Tax %

 

 

 

 

22.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Impairment charges

 

 

38.8

 

 

8.9

 

 

29.9

 

 

0.70

 

COVID-19 costs

 

 

6.8

 

 

1.6

 

 

5.3

 

 

0.12

 

 

 

 

 

 

 

 

 

 

 

Results (non-GAAP)

$

721.1

 

 

$

107.0

 

 

$

22.9

 

 

$

77.1

 

 

$

1.79

 

% of net sales

36.9

%

 

5.5

%

 

 

 

3.9

%

 

 

Tax %

 

 

 

 

22.9

%

 

 

 

 

HNI Corporation Reconciliation

(Dollars in millions, except per share data)

 

Twelve Months Ended

 

December 28, 2019

 

Gross Profit

 

Operating Income

 

Tax

 

Net Income

 

 

EPS

As reported (GAAP)

$

833.8

 

 

$

151.3

 

 

$

32.2

 

 

$

110.5

 

 

$

2.54

 

% of net sales

37.1

%

 

 

6.7

%

 

 

 

4.9

%

 

 

Tax %

 

 

 

 

22.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restructuring charges

 

 

 

2.4

 

 

0.5

 

 

1.8

 

 

0.04

 

Transition costs

 

 

 

0.2

 

 

0.0

 

 

0.2

 

 

0.00

 

 

 

 

 

 

 

 

 

 

 

Results (non-GAAP)

$

833.8

 

 

$

 

153.9

 

 

$

32.8

 

 

$

112.5

 

 

$

2.59

 

% of net sales

37.1

%

 

 

6.8

%

 

 

 

5.0

%

 

 

Tax %

 

 

 

 

22.6

%

 

 

 

 

 

Workplace Furnishings Reconciliation

(Dollars in millions)

 

Three Months Ended

 

 

 

 

Twelve Months Ended

 

 

 

January 2,

2021

 

December 28,

2019

 

Percent

Change

 

 

January 2,

2021

 

December 28,

2019

 

Percent

Change

Operating profit as reported (GAAP)

$

3.6

 

 

$

35.7

 

 

(89.8

%)

 

 

($

5.0

)

 

 

$

103.9

 

 

(104.8

%)

% of net sales

 

1.0

%

 

 

7.9

%

 

 

 

 

 

(0.4

%)

 

 

6.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restructuring charges

 

 

 

 

1.2

 

 

 

 

 

 

 

 

 

 

2.4

 

 

 

Impairment charges

 

6.2

 

 

 

 

 

 

 

 

 

38.8

 

 

 

 

 

 

 

COVID-19 costs

 

1.8

 

 

 

 

 

 

 

 

 

5.2

 

 

 

 

 

 

 

Transition costs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

0.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating profit (non-GAAP)

$

11.6

 

 

$

36.9

 

 

(68.4

%)

 

 

$

39.1

 

 

 

$

106.5

 

 

(63.3

%)

% of net sales

 

3.2

%

 

 

8.2

%

 

 

 

 

 

2.9

%

 

 

6.3

%

 

 

 

 

 

 

 

 

 

 

 

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