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HNI Corporation Reports Earnings for First Quarter Fiscal Year 2022

April 28, 2022

MUSCATINE, Iowa--(BUSINESS WIRE)-- HNI Corporation (NYSE: HNI) today announced sales for the first quarter ended April 2, 2022 of $572.3 million and net income of $14.2 million. GAAP net income per diluted share was $0.33, compared to $0.34 in the prior year. Non-GAAP net income per diluted share was $0.33, compared to $0.36 in the prior year. GAAP to Non-GAAP reconciliations follow the financial statements in this release.

First Quarter Highlights

  • Positive price-cost and sequential gross profit margin improvement. The Corporation delivered positive price-cost, despite record levels of inflation during the quarter. This, along with the benefits of the previously discussed business simplification and labor capacity actions, helped improve gross margin from fourth quarter 2021 levels.
  • Strong revenue growth. The Corporation generated revenue growth of more than 18 percent driven by pricing actions, volume improvement, and the benefits of acquisitions completed in the prior year.

“Our initiatives to improve long-term profitability are on-track and delivering results. These include pricing actions to improve price-cost, strategic growth initiatives, multiple business simplification actions, and efforts to expand labor capacity. We expect noteworthy improvement as 2022 progresses driven by margin expansion in our Workplace Furnishings segment and strong growth in Residential Building Products,” stated Jeff Lorenger, Chairman, President, and Chief Executive Officer.

HNI Corporation – Financial Performance

(Dollars in millions, except per share data)

 

Three Months Ended

 

 

 

April 2,
2022

 

April 3,
2021

 

Change

GAAP

 

 

 

 

 

Net Sales

$572.3

 

 

$484.3

 

 

18.2

%

Gross Profit %

34.4

%

 

37.2

%

 

-280 bps

SG&A %

30.8

%

 

32.5

%

 

-170 bps

Operating Income

$20.4

 

 

$22.6

 

 

(9.6

%)

Operating Income %

3.6

%

 

4.7

%

 

-110 bps

Effective Tax Rate

23.2

%

 

28.0

%

 

 

Net Income %

2.5

%

 

3.1

%

 

-60 bps

EPS – diluted

$0.33

 

 

$0.34

 

 

(2.9

%)

 

 

 

 

 

 

Non-GAAP

 

 

 

 

 

Gross Profit %

34.4

%

 

37.2

%

 

-280 bps

Operating Income

$20.7

 

 

$23.3

 

 

(11.4

%)

Operating Income %

3.6

%

 

4.8

%

 

-120 bps

EPS – diluted

$0.33

 

 

$0.36

 

 

(8.3

%)

First Quarter Summary Comments

  • Consolidated net sales increased 18.2 percent from the prior-year quarter to $572.3 million. On an organic basis, sales increased 15.3 percent year-over-year. The acquisition of residential building products companies in 2021 increased year-over-year sales by $14.0 million. A reconciliation of organic sales, a non-GAAP measure, follows the financial statements in this release.
  • Gross profit margin compressed 280 basis points compared to the prior-year quarter. This decrease was driven by price-cost dilution and lower net productivity, partially offset by higher volume.
  • Selling and administrative expenses as a percent of sales decreased 170 basis points compared to the prior-year quarter. The decrease was driven by dilution from price realization along with lower variable compensation, partially offset by higher core SG&A, increased freight costs, and higher investment spend.
  • Net income per diluted share was $0.33 compared to $0.34 in the prior-year quarter. The decrease was driven by lower productivity, higher core SG&A, and higher investment spend, partially offset by higher volume. Non-GAAP net income per diluted share was $0.33 compared to $0.36 in the prior-year quarter.

First Quarter Orders

  • Orders in the Workplace Furnishings segment excluding the impacts of restructuring, increased more than 10 percent year-over-year led by price realization and strength with small to mid-sized customers. That strength was offset somewhat by continued softness with contract customers.
  • Orders in the Residential Building Products segment increased 25 percent organically compared to the prior-year quarter. Remodel-retrofit and new construction order rates were both strong.

Workplace Furnishings – Financial Performance

(Dollars in millions)

 

Three Months Ended

 

 

 

April 2,
2022

 

April 3,
2021

 

Change

GAAP

 

 

 

 

 

Net Sales

$353.1

 

 

$302.7

 

 

16.6

%

Operating Loss

($6.4

)

 

($3.1

)

 

(109.1

%)

Operating Loss %

(1.8

%)

 

(1.0

%)

 

-80 bps

 

 

 

 

 

 

Non-GAAP

 

 

 

 

 

Operating Loss

($6.2

)

 

($2.4

)

 

(162.8

%)

Operating Loss %

(1.8

%)

 

(0.8

%)

 

-100 bps

  • Workplace Furnishings net sales increased 16.6 percent from the prior-year quarter to $353.1 million.
  • Workplace Furnishings operating profit margin compressed 80 basis points year-over-year driven by operational investments, lower productivity, and higher core SG&A, partially offset by higher volume and favorable price-cost.

Residential Building Products – Financial Performance

(Dollars in millions)

 

Three Months Ended

 

 

 

April 2,
2022

 

April 3,
2021

 

Change

GAAP

 

 

 

 

 

Net Sales

$219.2

 

 

$181.5

 

 

20.8

%

Operating Profit

$40.4

 

 

$39.8

 

 

1.3

%

Operating Profit %

18.4

%

 

21.9

%

 

-350 bps

  • Residential Building Products net sales increased 20.8 percent from the prior-year quarter to $219.2 million. On an organic basis, sales increased 13.0 percent year-over-year. The impact of building products companies acquired in 2021 increased sales $14.0 million compared to the prior-year quarter.
  • Residential Building Products operating profit margin compressed 350 basis points year-over-year, driven by price-cost dilution, higher investment spend, and the impact of acquisitions.

Fiscal Year 2022 Outlook. The Corporation’s outlook for fiscal 2022 remains unchanged from the view provided in the fourth quarter 2021 earnings news release. Capacity additions and benefits from pricing actions are expected to drive strong revenue growth with accelerating profit improvement in the second half of 2022.

  • Workplace Furnishings revenue: pricing benefits, backlog normalization, and assumed market improvements are expected to drive revenue growth rates in the high teens to low twenties for 2022.
  • Residential Building Products revenue: pricing benefits, inorganic revenue from acquisitions closed in 2021, and continued benefits from multiple growth initiatives are expected to fuel growth rates in the high teens for 2022, on top of 25 percent organic growth generated by the segment in 2021.
  • Seasonality: earnings seasonality is expected to be more weighted to the back half of 2022 than in recent years when approximately 70 percent of total profit was generated during the second half.
  • Second Quarter 2022: the Corporation expects second quarter profitability to be near levels generated in the first quarter of 2022. On a sequential basis, the benefit from additional Workplace Furnishings volume is expected to be mostly offset by the normal seasonal step-down in Residential Building Products sales and labor capacity investments.
  • Balance Sheet: the Corporation expects to maintain a strong balance sheet throughout 2022. Low leverage and continued free cash flow generation are expected to provide ample capacity for continued investment, M&A, dividend payments, and share buyback activity.

Concluding Remarks

“I remain optimistic about our opportunities to grow revenue and earnings despite inflationary pressures and a dynamic environment. We continue to take actions to improve the long-term profitability of our Workplace Furnishings segment, where we are focused on margin expansion. In our Residential Building Products segment, we remain focused on driving strong top line growth, by leveraging our differentiated business model,” Mr. Lorenger concluded.

Conference Call

HNI Corporation will host a conference call on Thursday, April 28, 2022 at 10:00 a.m. (Central) to discuss first quarter fiscal year 2022 results. To participate, call 1-855-761-5600 – conference ID number 7175411. A live webcast of the call will be available on HNI Corporation’s website at https://investors.hnicorp.com/events-and-presentations. A replay of the webcast and call will be made available from Thursday, April 28, 2022 at 1:00 p.m. (Central) through Thursday, May 5, 2022, 10:59 p.m. (Central). To replay the webcast, go to the link above. To replay the call, dial 1-800-770-2030 or 1-647-362-9199 – Conference ID: 7175411.

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 the Corporation’s 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, including any emerging variants of the virus, and its effect on people and the economy; potential disruptions in the global supply chain; the effects of prolonged periods of inflation; potential labor shortages; the levels of office furniture needs and housing starts; overall demand for the Corporation’s products; general economic and market conditions in the United States and internationally; industry and competitive conditions; the consolidation and concentration of the Corporation’s customers; the Corporation’s reliance on its network of independent dealers; change in trade policy; changes in raw material, component, or commodity pricing; market acceptance and demand for the Corporation’s new products; changing legal, regulatory, environmental, and healthcare conditions; the risks associated with international operations; the potential impact of product defects; the various restrictions on the Corporation’s financing activities; an inability to protect the Corporation’s intellectual property; impacts of tax legislation; and force majeure events outside the Corporation’s control, including those that may result from the effects of climate change. A description of these risks and additional risks can be found in the Corporation’s annual and quarterly reports filed with the Securities and Exchange Commission on Forms 10-K and 10-Q. The Corporation assumes no obligation to update, amend, or clarify forward-looking statements, except as required by applicable law.

 

HNI Corporation and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income

(In thousands, except per share data)

(Unaudited)

 

Three Months Ended

April 2,
2022

 

April 3,
2021

Net sales

$

572,328

 

 

$

484,293

 

Cost of sales

 

375,419

 

 

 

304,347

 

Gross profit

 

196,909

 

 

 

179,946

 

Selling and administrative expenses

 

176,472

 

 

 

157,346

 

Operating income

 

20,437

 

 

 

22,600

 

Interest expense, net

 

1,986

 

 

 

1,755

 

Income before income taxes

 

18,451

 

 

 

20,845

 

Income taxes

 

4,274

 

 

 

5,827

 

Net income

 

14,177

 

 

 

15,018

 

Less: Net loss attributable to non-controlling interest

 

(1

)

 

 

(1

)

Net income attributable to HNI Corporation

$

14,178

 

 

$

15,019

 

 

 

 

 

Average number of common shares outstanding – basic

 

42,388

 

 

 

43,163

 

Net income attributable to HNI Corporation per common share – basic

$

0.33

 

 

$

0.35

 

Average number of common shares outstanding – diluted

 

43,072

 

 

 

43,584

 

Net income attributable to HNI Corporation per common share – diluted

$

0.33

 

 

$

0.34

 

 

 

 

 

Foreign currency translation adjustments

$

(568

)

 

$

(132

)

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

 

(410

)

 

 

(100

)

Change in derivative financial instruments, net of tax

 

913

 

 

 

263

 

Other comprehensive income (loss), net of tax

 

(65

)

 

 

31

 

Comprehensive income

 

14,112

 

 

 

15,049

 

Less: Comprehensive loss attributable to non-controlling interest

 

(1

)

 

 

(1

)

Comprehensive income attributable to HNI Corporation

$

14,113

 

 

$

15,050

 

HNI Corporation and Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

 

April 2,
2022

 

January 1,
2022

Assets

 

 

 

Current Assets:

 

 

 

Cash and cash equivalents

$

23,483

 

 

$

52,270

 

Short-term investments

 

1,335

 

 

 

1,392

 

Receivables

 

253,075

 

 

 

239,955

 

Allowance for doubtful accounts

 

(3,093

)

 

 

(2,813

)

Inventories, net

 

206,561

 

 

 

181,591

 

Prepaid expenses and other current assets

 

51,559

 

 

 

51,099

 

Total Current Assets

 

532,920

 

 

 

523,494

 

Property, Plant, and Equipment:

 

 

 

Land and land improvements

 

30,940

 

 

 

30,851

 

Buildings

 

295,715

 

 

 

294,545

 

Machinery and equipment

 

601,776

 

 

 

593,630

 

Construction in progress

 

27,905

 

 

 

29,663

 

 

 

956,336

 

 

 

948,689

 

Less accumulated depreciation

 

(592,695

)

 

 

(581,909

)

Net Property, Plant, and Equipment

 

363,641

 

 

 

366,780

 

Right-of-use Finance Leases

 

11,444

 

 

 

10,173

 

Right-of-use Operating Leases

 

95,812

 

 

 

82,881

 

Goodwill and Other Intangible Assets

 

467,217

 

 

 

471,502

 

Other Assets

 

53,970

 

 

 

43,067

 

Total Assets

$

1,525,004

 

 

$

1,497,897

 

Liabilities and Equity

 

 

 

Current Liabilities:

 

 

 

Accounts payable and accrued expenses

$

434,793

 

 

$

473,753

 

Current maturities of debt

 

2,165

 

 

 

3,221

 

Current maturities of other long-term obligations

 

1,880

 

 

 

3,910

 

Current lease obligations - Finance

 

3,226

 

 

 

2,765

 

Current lease obligations - Operating

 

20,797

 

 

 

22,799

 

Total Current Liabilities

 

462,861

 

 

 

506,448

 

Long-Term Debt

 

240,929

 

 

 

174,608

 

Long-Term Lease Obligations - Finance

 

8,173

 

 

 

7,373

 

Long-Term Lease Obligations - Operating

 

78,779

 

 

 

63,757

 

Other Long-Term Liabilities

 

78,198

 

 

 

80,736

 

Deferred Income Taxes

 

74,024

 

 

 

75,008

 

Total Liabilities

 

942,964

 

 

 

907,930

 

Equity:

 

 

 

HNI Corporation shareholders' equity

 

581,718

 

 

 

589,644

 

Non-controlling interest

 

322

 

 

 

323

 

Total Equity

 

582,040

 

 

 

589,967

 

Total Liabilities and Equity

$

1,525,004

 

 

$

1,497,897

 

HNI Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

Three Months Ended

 

April 2,
2022

 

April 3,
2021

Net Cash Flows From (To) Operating Activities:

 

 

 

Net income

$

14,177

 

 

$

15,018

 

Non-cash items included in net income:

 

 

 

Depreciation and amortization

 

21,098

 

 

 

20,463

 

Other post-retirement and post-employment benefits

 

330

 

 

 

332

 

Stock-based compensation

 

5,638

 

 

 

5,220

 

Reduction in carrying amount of right-of-use assets

 

6,328

 

 

 

6,537

 

Deferred income taxes

 

(1,157

)

 

 

1,076

 

Other – net

 

(882

)

 

 

1,315

 

Net decrease in cash from operating assets and liabilities

 

(80,773

)

 

 

(51,436

)

Increase (decrease) in other liabilities

 

(3,709

)

 

 

3,159

 

Net cash flows from (to) operating activities

 

(38,950

)

 

 

1,684

 

 

 

 

 

Net Cash Flows From (To) Investing Activities:

 

 

 

Capital expenditures

 

(15,098

)

 

 

(16,197

)

Proceeds from sale of property, plant, and equipment

 

 

 

 

48

 

Acquisition spending, net of cash acquired

 

(1,654

)

 

 

(1,408

)

Capitalized software

 

(3,138

)

 

 

(2,767

)

Purchase of investments

 

(971

)

 

 

(598

)

Sales or maturities of investments

 

704

 

 

 

515

 

Net cash flows from (to) investing activities

 

(20,157

)

 

 

(20,407

)

 

 

 

 

Net Cash Flows From (To) Financing Activities:

 

 

 

Payments of debt

 

(100,538

)

 

 

(118

)

Proceeds from debt

 

165,822

 

 

 

547

 

Dividends paid

 

(13,359

)

 

 

(13,234

)

Purchase of HNI Corporation common stock

 

(25,158

)

 

 

 

Proceeds from sales of HNI Corporation common stock

 

2,749

 

 

 

13,030

 

Other – net

 

804

 

 

 

(3,341

)

Net cash flows from (to) financing activities

 

30,320

 

 

 

(3,116

)

 

 

 

 

Net decrease in cash and cash equivalents

 

(28,787

)

 

 

(21,839

)

Cash and cash equivalents at beginning of period

 

52,270

 

 

 

116,120

 

Cash and cash equivalents at end of period

$

23,483

 

 

$

94,281

 

HNI Corporation and Subsidiaries

Reportable Segment Data

(In thousands)

(Unaudited)

 

Three Months Ended

 

April 2,

2022

 

April 3,

2021

Net Sales:

 

 

 

Workplace furnishings

$

353,106

 

 

$

302,748

 

Residential building products

 

219,222

 

 

 

181,545

 

Total

$

572,328

 

 

$

484,293

 

 

 

 

 

Income (Loss) Before Income Taxes:

 

 

 

Workplace furnishings

$

(6,420

)

 

$

(3,071

)

Residential building products

 

40,382

 

 

 

39,849

 

General corporate

 

(13,525

)

 

 

(14,178

)

Operating Income

 

20,437

 

 

 

22,600

 

Interest expense, net

 

1,986

 

 

 

1,755

 

Total

$

18,451

 

 

$

20,845

 

 

 

 

 

Depreciation and Amortization Expense:

 

 

 

Workplace furnishings

$

11,524

 

 

$

11,984

 

Residential building products

 

3,063

 

 

 

2,410

 

General corporate

 

6,511

 

 

 

6,069

 

Total

$

21,098

 

 

$

20,463

 

 

 

 

 

Capital Expenditures (including capitalized software):

 

 

 

Workplace furnishings

$

8,217

 

 

$

10,487

 

Residential building products

 

5,754

 

 

 

4,710

 

General corporate

 

4,265

 

 

 

3,767

 

Total

$

18,236

 

 

$

18,964

 

 

 

 

 

 

As of

April 2, 2022

 

As of

January 1, 2022

Identifiable Assets:

 

 

 

Workplace furnishings

$

850,998

 

 

$

808,963

 

Residential building products

 

498,060

 

 

 

479,462

 

General corporate

 

175,946

 

 

 

209,472

 

Total

$

1,525,004

 

 

$

1,497,897

 

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 measure is useful in evaluating HNI’s operations, this information should be considered supplemental and not in isolation or as a substitute for, or superior to, financial information prepared and presented in accordance with GAAP. In addition, these measures may be different from non-GAAP financial measures used by other companies, limiting their usefulness for comparison purposes.

To supplement the condensed consolidated financial statements, which are prepared and presented in accordance with GAAP, this earnings release contains the following non-GAAP financial measures: organic sales, gross profit, operating income, operating profit, income taxes, net income, and net income per diluted shares (i.e., EPS). These measures are adjusted from the comparable GAAP measure to exclude the impacts of the selected items as summarized in the following tables. Generally, non-GAAP EPS is calculated using HNI's overall effective tax rate for the period, as this rate is reflective of the tax applicable to most non-GAAP components.

The sales adjustments to arrive at the non-GAAP organic sales information included in this earnings release exclude the impact of acquiring residential building products companies. The transactions excluded for purposes of other non-GAAP financial information included in this earnings release include restructuring charges and COVID-19 costs in the Workplace Furnishings segment. Restructuring charges incurred in the current period presented are comprised of adjustments related to inventory valuation in connection with business simplification efforts, and relocation and new facility setup costs in connection with capacity expansion initiatives. COVID-19 costs incurred in the prior period presented include showroom exit charges.

HNI Corporation Reconciliation

(Dollars in millions)

 

Three Months Ended

 

April 2, 2022

 

April 3, 2021

 

Workplace Furnishings

Residential
Building
Products

Total

 

Workplace
Furnishings

Residential
Building
Products

Total

Sales as reported (GAAP)

$

353.1

 

$

219.2

 

$

572.3

 

 

$

302.7

$

181.5

$

484.3

% change from PY

 

16.6

%

 

20.8

%

 

18.2

%

 

 

 

 

 

 

 

 

 

 

 

 

Less: Acquisitions

 

 

 

14.0

 

 

14.0

 

 

 

 

 

 

 

 

 

 

 

 

 

Organic Sales (non-GAAP)

$

353.1

 

$

205.2

 

$

558.3

 

 

$

302.7

$

181.5

$

484.3

% change from PY

 

16.6

%

 

13.0

%

 

15.3

%

 

 

 

 

HNI Corporation Reconciliation

(Dollars in millions, except per share data)

 

Three Months Ended

April 2, 2022

 

Gross Profit

 

Operating Income

 

Tax

 

Net Income

 

EPS

As reported (GAAP)

$

196.9

 

 

$

20.4

 

 

$

4.3

 

 

$

14.2

 

 

$

0.33

% of net sales

 

34.4

%

 

 

3.6

%

 

 

 

 

2.5

%

 

 

Tax %

 

 

 

 

 

23.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restructuring charges

 

0.2

 

 

 

0.2

 

 

 

0.1

 

 

 

0.2

 

 

 

0.00

 

 

 

 

 

 

 

 

 

 

Results (non-GAAP)

$

197.1

 

 

$

20.7

 

 

$

4.3

 

 

$

14.3

 

 

$

0.33

% of net sales

 

34.4

%

 

 

3.6

%

 

 

 

 

2.5

%

 

 

Tax %

 

 

 

 

 

23.2

%

 

 

 

 

HNI Corporation Reconciliation

(Dollars in millions, except per share data)

 

Three Months Ended
April 3, 2021

 

Gross Profit

 

Operating Income

 

Tax

 

Net Income

 

EPS

As reported (GAAP)

$

179.9

 

 

$

22.6

 

 

$

5.8

 

 

$

15.0

 

 

$

0.34

% of net sales

 

37.2

%

 

 

4.7

%

 

 

 

 

3.1

%

 

 

Tax %

 

 

 

 

 

28.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

COVID-19 costs

 

 

 

 

0.7

 

 

 

0.2

 

 

 

0.5

 

 

 

0.01

 

 

 

 

 

 

 

 

 

 

Results (non-GAAP)

$

179.9

 

 

$

23.3

 

 

$

6.0

 

 

$

15.5

 

 

$

0.36

% of net sales

 

37.2

%

 

 

4.8

%

 

 

 

 

3.2

%

 

 

Tax %

 

 

 

 

 

28.0

%

 

 

 

 

Workplace Furnishings Reconciliation

(Dollars in millions)

 

Three Months Ended

 

 

 

April 2,
2022

 

April 3,
2021

 

Percent
Change

Operating loss as reported (GAAP)

$

(6.4

)

 

$

(3.1

)

 

(109.1

%)

% of net sales

 

(1.8

%)

 

 

(1.0

%)

 

 

 

 

 

 

 

 

Restructuring charges

 

0.2

 

 

 

 

 

 

COVID-19 costs

 

 

 

 

0.7

 

 

 

 

 

 

 

 

 

Operating loss (non-GAAP)

$

(6.2

)

 

$

(2.4

)

 

(162.8

%)

% of net sales

 

(1.8

%)

 

 

(0.8

%)

 

 

 

Marshall H. Bridges, Senior Vice President and Chief Financial Officer (563) 272-7400
Matthew S. McCall, Vice President, Investor Relations and Corporate Development (563) 275-8898

Source: HNI Corporation

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