8-K
HNI CORP (HNI)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 22, 2020
Commission File Number: 1-14225
HNI Corporation
| Iowa | 42-0617510 |
|---|---|
| (State of incorporation) | (IRS Employer No.) |
600 East Second Street
P. O. Box 1109
Muscatine, Iowa 52761-0071
(563) 272-7400
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2.):
| ☐ | Written communications pursuant to Rule 425 under the Securities Act<br>(17 CFR 230.425) | |||
|---|---|---|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act<br>(17 CFR 240.14a-12) | |||
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act<br>(17 CFR 240.14d-2(b)) | |||
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act<br>(17 CFR 240.13e-4(c)) | |||
| Securities registered pursuant to Section 12(b) of the Act: | ||||
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| Common Stock | HNI | New York Stock Exchange | ||
| Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2). | ||||
| Emerging growth company | ☐ | |||
| If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ |
Section 2 — Financial Information
Item 2.02 Results of Operations and Financial Condition.
On July 22, 2020, HNI Corporation (the "Corporation") issued a press release announcing its financial results for its second fiscal quarter ended June 27, 2020. A copy of the press release is attached hereto as Exhibit 99.1.
The information furnished in this Item 2.02, including the attached Exhibit, shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.
Section 5 — Corporate Governance and Management
Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
On April 20, 2020, as part of the Corporation’s measures taken in response to the continuing impacts of the COVID-19 pandemic crisis, Jeff Lorenger, the Corporation’s Chairman, President, and Chief Executive Officer, agreed with the Board of Directors to reduce his 2020 base salary by 25%. In addition, the 2020 base salaries of the Corporation’s other named executive officers and certain other officers were reduced by 15%. On July 17, 2020, the Board of Directors restored Mr. Lorenger’s 2020 base salary to its previous level, effective August 9, 2020. In addition, the 2020 base salaries of all other named executive officers and other officers previously reduced have been restored to their previous levels.
Section 9 — Financial Statements and Exhibits
Item 9.01 Financial Statements and Exhibits.
| Exhibit No. | Description |
|---|---|
| 99.1 | Press release datedJuly22, 2020 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| HNI CORPORATION | |||
|---|---|---|---|
| Date: | July 22, 2020 | By | /s/ Marshall H. Bridges |
| Marshall H. Bridges<br>Senior Vice President and Chief Financial Officer |
Document
HNI Corporation 600 East Second Street, Muscatine, Iowa 52761, Tel 563 272 7400, Fax 563 272 7347, www.hnicorp.com
News Release
For Information Contact:
Marshall H. Bridges, Senior Vice President and Chief Financial Officer (563) 272-7400
Matthew S. McCall, Vice President, Investor Relations and Corporate Development (563) 275-8898
HNI CORPORATION REPORTS EARNINGS
FOR SECOND QUARTER FISCAL YEAR 2020
MUSCATINE, Iowa (July 22, 2020) – HNI Corporation (NYSE: HNI) today announced sales for the second quarter ended June 27, 2020 of $417.5 million and net income of $12.6 million. GAAP net income per diluted share was $0.29, compared to $0.36 in the prior year. Non-GAAP net income per diluted share was $0.20, compared to $0.38 in the prior year. GAAP to non-GAAP reconciliations follow the financial statements in this release.
Second Quarter Highlights
•The Corporation delivered solid profits and increased second quarter operating cash flows by $20 million or 49 percent versus the prior year despite pandemic related top-line pressures.
•Residential Building Products segment operating profit increased, and segment operating margin expanded on a year-over-year basis in the second quarter 2020.
•Workplace Furnishings segment generated second quarter 2020 operating profit of nearly $8 million, despite a 25 percent year-over-year contraction on the top line.
•Quarter-ending debt levels were $183 million, equal to a gross leverage ratio of approximately 0.8x. Liquidity, as measured by cash and borrowing availability, at the end of the second quarter was $392 million.
“Our members did a great job of managing through challenging second quarter conditions. We aggressively managed costs and drove productivity—offsetting much of the impact from lower volumes. Our teams stayed focused on our customers—generating and seizing market opportunities. The strength of our strategy, including our diverse revenue streams, price point breadth, channel reach, and lean operating model, along with the dedication of our members, helped demonstrate again what makes HNI unique,” stated Jeff Lorenger, Chairman, President, and Chief Executive Officer.
Salary adjustments
Compensation for HNI members and Board of Directors are being restored to levels existing prior to the reductions announced on April 22, 2020.
“Our members responded in an outstanding manner to this environment, and I am pleased we are able to take this action 60-90 days earlier than we originally anticipated,” continued Mr. Lorenger.
Debt Level Update
As of June 27, 2020, the Corporation’s net debt totaled $157 million (as defined as gross debt of $183 million less cash and cash equivalents of $26 million). At the end of the quarter, the Corporation had $366 million of borrowing capacity under its existing $450 million credit facility. On a gross leverage basis, the quarter-ending level of 0.8x remains well below the Corporation’s debt covenant of 3.5x.
“We generated strong free cash flow in the quarter and further enhanced our already strong balance sheet. We have the financial strength and cost structure to successfully weather this crisis for a prolonged period,” said Mr. Lorenger.
| HNI Corporation – Financial Performance | ||||
|---|---|---|---|---|
| (Dollars in millions, except per share data) | ||||
| Three Months Ended | ||||
| June 27,2020 | June 29,2019 | Change | ||
| GAAP | ||||
| Net Sales | 417.5 | 526.0 | (20.6 | %) |
| Gross Profit % | 36.1 | 36.6 | -50 bps | |
| SG&A % | 32.6 | 32.0 | 60 bps | |
| Restructuring Charges % | — | 0.2 | ||
| Operating Income | 14.8 | 23.2 | (36.2 | %) |
| Operating Income % | 3.6 | 4.4 | -80 bps | |
| Effective Tax Rate | 2.7 | 23.9 | ||
| Net Income % | 3.0 | 3.0 | — bps | |
| EPS – diluted | 0.29 | 0.36 | (19.4 | %) |
| Non-GAAP | ||||
| Gross Profit % | 36.1 | 36.6 | -50 bps | |
| Operating Income | 14.8 | 24.2 | (38.6 | %) |
| Operating Income % | 3.6 | 4.6 | -100 bps | |
| EPS – diluted | 0.20 | 0.38 | (47.4 | %) |
All values are in US Dollars.
Second Quarter Summary Comments
•Consolidated net sales decreased 20.6 percent from the prior-year quarter to $417.5 million. On an organic basis, sales decreased 21.2 percent. The impact of acquiring residential building products distributors increased sales $2.9 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 50 basis points compared to the prior-year quarter. This decrease was primarily driven by lower volume, partially offset by price realization and net productivity.
•Selling and administrative expenses as a percent of sales increased 60 basis points compared to prior-year quarter due to lower volume, partially offset by lower core SG&A spend and net productivity.
•Non-GAAP net income per diluted share was $0.20 compared to $0.38 in the prior-year quarter. The $0.18 decrease was primarily due to lower volume, partially offset by lower core SG&A spend, net productivity, and price realization.
•Non-GAAP EPS in the current quarter includes an effective tax rate of 32.5 percent, compared to a GAAP tax rate of 2.7 percent. The higher non-GAAP tax rate is related to timing of the tax impact from one-time charges recorded in first quarter 2020.
| Workplace Furnishings – Financial Performance | ||||
|---|---|---|---|---|
| (Dollars in millions) | ||||
| Three Months Ended | ||||
| June 27,2020 | June 29,2019 | Change | ||
| GAAP | ||||
| Net Sales | 308.1 | 409.5 | (24.8 | %) |
| Operating Income | 7.8 | 18.7 | (58.5 | %) |
| Operating Income % | 2.5 | 4.6 | -210 bps | |
| Non-GAAP | ||||
| Operating Profit | 7.8 | 19.7 | (60.4 | %) |
| Operating Profit % | 2.5 | 4.8 | -230 bps |
All values are in US Dollars.
•Workplace Furnishings net sales decreased 24.8 percent from the prior-year quarter to $308.1 million.
•Workplace Furnishings GAAP operating profit margin decreased 210 basis points versus the prior-year quarter. On a non-GAAP basis, segment operating margin decreased 230 basis points year-over-year driven by lower volume, partially offset by net productivity, lower core SG&A spend, and price realization.
| Residential Building Products – Financial Performance | ||||
|---|---|---|---|---|
| (Dollars in millions) | ||||
| Three Months Ended | ||||
| June 27,2020 | June 29,2019 | Change | ||
| GAAP | ||||
| Net Sales | 109.4 | 116.5 | (6.1 | %) |
| Operating Profit | 14.4 | 13.4 | 7.5 | % |
| Operating Profit % | 13.1 | 11.5 | 160 bps | |
| Non-GAAP | ||||
| Operating Profit | 14.4 | 13.4 | 7.5 | % |
| Operating Profit % | 13.1 | 11.5 | 160 bps |
All values are in US Dollars.
•Residential Building Products net sales decreased 6.1 percent from the prior-year quarter to $109.4 million. On an organic basis, sales decreased 8.6 percent. The impact of acquiring building products distributors increased sales $2.9 million compared to the prior-year quarter.
•Residential Building Products operating profit margin expanded 160 basis points, driven by price realization, lower variable compensation, lower core SG&A spend, and net productivity, partially offset by lower volume and unfavorable mix.
Concluding Remarks
“The HNI culture remains the foundation for our success. Together, our members, dealers, suppliers, and communities will continue to overcome the challenges presented by this crisis.
Pandemic-related uncertainty continues to limit visibility and our ability to provide guidance. However, we are seeing a seasonal uptick in sales and do expect third quarter sales and profit to track ahead of second quarter 2020 levels. We have demonstrated we can adapt our cost structure quickly, and our balance sheet is strong. More importantly, we have developed new and better ways to operate our businesses that will serve us well in the future,” Mr. Lorenger concluded.
Conference Call
HNI Corporation will host a conference call on Thursday, July 23, 2020 at 10:00 a.m. (Central) to discuss second quarter fiscal year 2020 results. To participate, call 1-877-512-9166 – conference ID number 6232199. 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 also be made available at that website address. An audio replay of the call will be available until Thursday, July 30, 2020, 10:59 p.m. (Central) by dialing 1-855-859-2056 or 1-404-537-3406 – Conference ID number 6232199.
About HNI Corporation
HNI Corporation (NYSE: HNI) is a manufacturer of workplace furnishings and 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 Comprehensive Income
(In thousands, except per share data)
(Unaudited)
| Three Months Ended | Six Months Ended | |||||||
|---|---|---|---|---|---|---|---|---|
| June 27,<br>2020 | June 29,<br>2019 | June 27,<br>2020 | June 29,<br>2019 | |||||
| Net sales | $ | 417,456 | $ | 526,026 | $ | 886,161 | $ | 1,005,482 |
| Cost of sales | 266,551 | 333,437 | 559,238 | 643,279 | ||||
| Gross profit | 150,905 | 192,589 | 326,923 | 362,203 | ||||
| Selling and administrative expenses | 136,063 | 168,411 | 303,148 | 334,348 | ||||
| Impairment and restructuring charges | — | 930 | 32,661 | 930 | ||||
| Operating income (loss) | 14,842 | 23,248 | (8,886) | 26,925 | ||||
| Interest expense, net | 1,943 | 2,480 | 3,754 | 4,591 | ||||
| Income (loss) before income taxes | 12,899 | 20,768 | (12,640) | 22,334 | ||||
| Income taxes | 345 | 4,957 | (1,299) | 5,503 | ||||
| Net income (loss) | 12,554 | 15,811 | (11,341) | 16,831 | ||||
| Less: Net income (loss) attributable to non-controlling interest | (2) | 1 | (2) | (1) | ||||
| Net income (loss) attributable to HNI Corporation | $ | 12,556 | $ | 15,810 | $ | (11,339) | $ | 16,832 |
| Average number of common shares outstanding – basic | 42,640 | 43,218 | 42,634 | 43,376 | ||||
| Net income (loss) attributable to HNI Corporation per common share – basic | $ | 0.29 | $ | 0.37 | $ | (0.27) | $ | 0.39 |
| Average number of common shares outstanding – diluted | 42,929 | 43,634 | 42,634 | 43,860 | ||||
| Net income (loss) attributable to HNI Corporation per common share – diluted | $ | 0.29 | $ | 0.36 | $ | (0.27) | $ | 0.38 |
| Foreign currency translation adjustments | $ | 45 | $ | (333) | $ | (555) | $ | 630 |
| Change in unrealized gains (losses) on marketable securities, net of tax | 244 | 126 | 302 | 216 | ||||
| Change in pension and post-retirement liability, net of tax | — | — | — | (1,185) | ||||
| Change in derivative financial instruments, net of tax | (283) | (1,327) | (2,499) | (1,636) | ||||
| Other comprehensive income (loss), net of tax | 6 | (1,534) | (2,752) | (1,975) | ||||
| Comprehensive income (loss) | 12,560 | 14,277 | (14,093) | 14,856 | ||||
| Less: Comprehensive income (loss) attributable to non-controlling interest | (2) | 1 | (2) | (1) | ||||
| Comprehensive income (loss) attributable to HNI Corporation | $ | 12,562 | $ | 14,276 | $ | (14,091) | $ | 14,857 |
HNI Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
| June 27,<br>2020 | December 28,<br>2019 | |||
|---|---|---|---|---|
| Assets | ||||
| Current Assets: | ||||
| Cash and cash equivalents | $ | 26,204 | $ | 52,073 |
| Short-term investments | 2,310 | 1,096 | ||
| Receivables | 208,795 | 278,124 | ||
| Allowance for doubtful accounts | (5,778) | (3,559) | ||
| Inventories | 156,647 | 163,465 | ||
| Prepaid expenses and other current assets | 42,816 | 37,635 | ||
| Total Current Assets | 430,994 | 528,834 | ||
| Property, Plant, and Equipment: | ||||
| Land and land improvements | 29,750 | 29,394 | ||
| Buildings | 294,238 | 295,517 | ||
| Machinery and equipment | 568,265 | 581,225 | ||
| Construction in progress | 22,630 | 20,881 | ||
| 914,883 | 927,017 | |||
| Less accumulated depreciation | 546,036 | 545,510 | ||
| Net Property, Plant, and Equipment | 368,847 | 381,507 | ||
| Right-of-use Finance Leases | 2,282 | 2,129 | ||
| Right-of-use Operating Leases | 76,614 | 72,883 | ||
| Goodwill and Other Intangible Assets | 416,317 | 445,709 | ||
| Other Assets | 20,309 | 21,450 | ||
| Total Assets | $ | 1,315,363 | $ | 1,452,512 |
| Liabilities and Equity | ||||
| Current Liabilities: | ||||
| Accounts payable and accrued expenses | $ | 334,719 | $ | 453,202 |
| Current maturities of long-term debt | — | 790 | ||
| Current maturities of other long-term obligations | 2,953 | 1,931 | ||
| Current lease obligations - Finance | 654 | 564 | ||
| Current lease obligations - Operating | 23,266 | 22,218 | ||
| Total Current Liabilities | 361,592 | 478,705 | ||
| Long-Term Debt | 183,481 | 174,439 | ||
| Long-Term Lease Obligations - Finance | 1,639 | 1,581 | ||
| Long-Term Lease Obligations - Operating | 60,761 | 58,233 | ||
| Other Long-Term Liabilities | 67,337 | 67,990 | ||
| Deferred Income Taxes | 87,484 | 87,196 | ||
| Equity: | ||||
| HNI Corporation shareholders' equity | 552,747 | 584,044 | ||
| Non-controlling interest | 322 | 324 | ||
| Total Equity | 553,069 | 584,368 | ||
| Total Liabilities and Equity | $ | 1,315,363 | $ | 1,452,512 |
HNI Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
| Six Months Ended | ||||
|---|---|---|---|---|
| June 27,<br>2020 | June 29,<br>2019 | |||
| Net Cash Flows From (To) Operating Activities: | ||||
| Net income (loss) | $ | (11,341) | $ | 16,831 |
| Non-cash items included in net income: | ||||
| Depreciation and amortization | 38,605 | 38,450 | ||
| Other post-retirement and post-employment benefits | 736 | 738 | ||
| Stock-based compensation | 5,659 | 4,072 | ||
| Reduction in carrying amount of right-of-use assets | 11,342 | 11,617 | ||
| Deferred income taxes | 1,092 | 1,360 | ||
| Impairment of goodwill and intangible assets | 32,661 | — | ||
| Other – net | (284) | 3,856 | ||
| Net increase (decrease) in operating assets and liabilities, net of divestitures | (49,631) | (56,281) | ||
| Increase (decrease) in other liabilities | (1,019) | (7,876) | ||
| Net cash flows from (to) operating activities | 27,820 | 12,767 | ||
| Net Cash Flows From (To) Investing Activities: | ||||
| Capital expenditures | (15,739) | (34,659) | ||
| Proceeds from sale of property, plant, and equipment | 69 | 159 | ||
| Acquisition spending, net of cash acquired | (10,857) | — | ||
| Capitalized software | (5,037) | (2,948) | ||
| Purchase of investments | (1,631) | (2,459) | ||
| Sales or maturities of investments | 1,043 | 1,802 | ||
| Other – net | — | 2,025 | ||
| Net cash flows from (to) investing activities | (32,152) | (36,080) | ||
| Net Cash Flows From (To) Financing Activities: | ||||
| Payments of long-term debt | (73,828) | (40,272) | ||
| Proceeds from long-term debt | 82,129 | 76,677 | ||
| Dividends paid | (26,040) | (26,075) | ||
| Purchase of HNI Corporation common stock | (6,764) | (57,357) | ||
| Proceeds from sales of HNI Corporation common stock | 1,294 | 18,906 | ||
| Other – net | 1,672 | 3,397 | ||
| Net cash flows from (to) financing activities | (21,537) | (24,724) | ||
| Net increase (decrease) in cash and cash equivalents | (25,869) | (48,037) | ||
| Cash and cash equivalents at beginning of period | 52,073 | 76,819 | ||
| Cash and cash equivalents at end of period | $ | 26,204 | $ | 28,782 |
HNI Corporation and Subsidiaries
Reportable Segment Data
(In thousands)
(Unaudited)
| Three Months Ended | Six Months Ended | |||||||
|---|---|---|---|---|---|---|---|---|
| June 27,<br>2020 | June 29,<br>2019 | June 27,<br>2020 | June 29,<br>2019 | |||||
| Net Sales: | ||||||||
| Workplace furnishings | $ | 308,081 | $ | 409,512 | $ | 646,467 | $ | 763,023 |
| Residential building products | 109,375 | 116,514 | 239,694 | 242,459 | ||||
| Total | $ | 417,456 | $ | 526,026 | $ | 886,161 | $ | 1,005,482 |
| Income (Loss) Before Income Taxes: | ||||||||
| Workplace furnishings | $ | 7,785 | $ | 18,749 | $ | (25,446) | $ | 17,018 |
| Residential building products | 14,365 | 13,362 | 35,036 | 30,970 | ||||
| General corporate | (7,308) | (8,863) | (18,476) | (21,063) | ||||
| Operating Income (Loss) | 14,842 | 23,248 | (8,886) | 26,925 | ||||
| Interest expense, net | 1,943 | 2,480 | 3,754 | 4,591 | ||||
| Total | $ | 12,899 | $ | 20,768 | $ | (12,640) | $ | 22,334 |
| Depreciation and Amortization Expense: | ||||||||
| Workplace furnishings | $ | 10,782 | $ | 11,247 | $ | 22,113 | $ | 22,307 |
| Residential building products | 2,318 | 2,174 | 4,624 | 4,230 | ||||
| General corporate | 6,019 | 5,989 | 11,868 | 11,913 | ||||
| Total | $ | 19,119 | $ | 19,410 | $ | 38,605 | $ | 38,450 |
| Capital Expenditures (including capitalized software): | ||||||||
| Workplace furnishings | $ | 4,293 | $ | 12,347 | $ | 11,394 | $ | 22,666 |
| Residential building products | 206 | 2,577 | 3,179 | 7,575 | ||||
| General corporate | 3,118 | 3,587 | 6,203 | 7,366 | ||||
| Total | $ | 7,617 | $ | 18,511 | $ | 20,776 | $ | 37,607 |
| As of<br>June 27,<br>2020 | As of<br>December 28, 2019 | |||||||
| Identifiable Assets: | ||||||||
| Workplace furnishings | $ | 741,876 | $ | 874,913 | ||||
| Residential building products | 383,642 | 364,653 | ||||||
| General corporate | 189,845 | 212,946 | ||||||
| Total | $ | 1,315,363 | $ | 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 condensed consolidated financial statements, which are prepared and presented in accordance with GAAP, this earnings release uses the following non-GAAP financial measures: organic sales, gross profit, operating income (loss), operating profit (loss), income taxes, net income (loss), and net income (loss) 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 table below. In the current period, the effective tax rate used to calculate non-GAAP EPS differs from the GAAP effective tax rate due to the timing of the tax impact of one-time charges recorded in first quarter 2020. 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 the non-GAAP organic sales information included in this earnings release excludes the impact of acquiring residential building products distributors. Restructuring charges incurred in the prior year period are primarily comprised of severance costs related to a structural realignment in the Workplace Furnishings segment.
| HNI Corporation Reconciliation | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (Dollars in millions) | |||||||||||||||
| Three Months Ended | |||||||||||||||
| June 27, 2020 | June 29, 2019 | ||||||||||||||
| Workplace Furnishings | Residential Building Products | Total | Workplace Furnishings | Residential Building Products | Total | ||||||||||
| Sales as reported (GAAP) | $ | 308.1 | $ | 109.4 | $ | 417.5 | $ | 409.5 | $ | 116.5 | $ | 526.0 | |||
| % change from PY | (24.8 | %) | (6.1 | %) | (20.6 | %) | |||||||||
| Less: Acquisitions | — | 2.9 | 2.9 | — | — | — | |||||||||
| Organic Sales (non-GAAP) | $ | 308.1 | $ | 106.5 | $ | 414.6 | $ | 409.5 | $ | 116.5 | $ | 526.0 | |||
| % change from PY | (24.8 | %) | (8.6 | %) | (21.2 | %) | |||||||||
| HNI Corporation Reconciliation | |||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |
| (Dollars in millions, except per share data) | |||||||||||||||
| Three Months Ended<br>June 27, 2020 | |||||||||||||||
| Gross Profit | Operating Income | Tax | Net Income | EPS | |||||||||||
| As reported (GAAP) | $ | 150.9 | $ | 14.8 | $ | 0.3 | $ | 12.6 | $ | 0.29 | |||||
| % of net sales | 36.1 | % | 3.6 | % | 3.0 | % | |||||||||
| Tax % | 2.7 | % | |||||||||||||
| Income tax adjustment | — | — | 3.8 | (3.8) | (0.09) | ||||||||||
| Results (non-GAAP) | $ | 150.9 | $ | 14.8 | $ | 4.2 | $ | 8.7 | $ | 0.20 | |||||
| % of net sales | 36.1 | % | 3.6 | % | 2.1 | % | |||||||||
| Tax % | 32.5 | % | |||||||||||||
| HNI Corporation Reconciliation | |||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |
| (Dollars in millions, except per share data) | |||||||||||||||
| Three Months Ended<br>June 29, 2019 | |||||||||||||||
| Gross Profit | Operating Income | Tax | Net Income | EPS | |||||||||||
| As reported (GAAP) | $ | 192.6 | $ | 23.2 | $ | 5.0 | $ | 15.8 | $ | 0.36 | |||||
| % of net sales | 36.6 | % | 4.4 | % | 3.0 | % | |||||||||
| Tax % | 23.9 | % | |||||||||||||
| Restructuring charges | — | 0.9 | 0.2 | 0.7 | 0.02 | ||||||||||
| Results (non-GAAP) | $ | 192.6 | $ | 24.2 | $ | 5.2 | $ | 16.5 | $ | 0.38 | |||||
| % of net sales | 36.6 | % | 4.6 | % | 3.1 | % | |||||||||
| Tax % | 23.9 | % | |||||||||||||
| Workplace Furnishings Reconciliation | |||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | |||||||
| (Dollars in millions) | |||||||||||||||
| Three Months Ended | |||||||||||||||
| June 27,<br>2020 | June 29,<br>2019 | Percent Change | |||||||||||||
| Operating profit as reported (GAAP) | $ | 7.8 | $ | 18.7 | (58.5 | %) | |||||||||
| % of net sales | 2.5 | % | 4.6 | % | |||||||||||
| Restructuring charges | — | 0.9 | |||||||||||||
| Operating profit (non-GAAP) | $ | 7.8 | $ | 19.7 | (60.4 | %) | |||||||||
| % of net sales | 2.5 | % | 4.8 | % |
12