Business Wire | Apr 28, 2021 04:30PM EDT

HNI Corporation Reports Earnings for First Quarter Fiscal Year 2021

Apr. 28, 2021

MUSCATINE, Iowa--(BUSINESS WIRE)--Apr. 28, 2021--HNI Corporation (NYSE: HNI) today announced sales for the first quarter ended April 3, 2021 of $484.3 million and net income of $15.0 million. GAAP net income (loss) per diluted share was $0.34, compared to $(0.56) in the prior year. Non-GAAP net income per diluted share was $0.36, compared to $0.21 in the prior year. GAAP to non-GAAP reconciliations follow the financial statements in this release.

First Quarter Highlights

* Strong results in Residential Building Products: First quarter 2021 revenue grew 39 percent on a year-over-year basis, and operating margin expanded 600 basis points from prior-year, pre-COVID levels. This fueled a greater than 90 percent year-over-year increase in segment operating profit to a first quarter record of $39.8 million. * Signs of improvement in Workplace Furnishings: First quarter 2021 revenue was down approximately 12 percent from the first quarter of 2020, on an organic basis. This rate of decline was the lowest since the beginning of the pandemic. * Strong incremental margins: Non-GAAP consolidated operating income increased 67 percent year-over-year (or $9.4 million) to $23.3 million on two percent organic revenue growth (or $6.8 million). This equated to a 60 percent incremental operating margin, which was primarily driven by volume leverage in the Residential Building Products segment and solid cost control in the Workplace Furnishings segment, as both segments benefited from the Corporation's annual cost savings initiatives and cost actions taken last year to combat pandemic pressures. * High-quality balance sheet: Quarter-ending debt levels were $176 million, essentially unchanged from last quarter and down from $230 million at the end of the first quarter of last year. The gross leverage ratio at the end of the first quarter of 2021 was approximately 0.9x, slightly improved from last quarter and last year. Cash totaled $94 million as of the end of the first quarter of 2021, more than double the $35 million reported in the first quarter of 2020.

"This quarter, our members again demonstrated much of what is unique about HNI. We delivered substantial profit improvement, highlighted by strong revenue growth and expanded profitability in Residential Building Products. Although the pandemic continues to negatively impact demand in Workplace Furnishings, particularly in the contract market, we benefited from our reset cost structure and improving top-line performance in our brands focused on small to mid-sized customers. Overall, the first quarter shows the power of our diversified revenue streams, our ability to react quickly to changing market dynamics, and our overall operational capability," stated Jeff Lorenger, Chairman, President, and Chief Executive Officer.

HNI Corporation - Financial Performance

(Dollars in millions, except per share data)

Three Months Ended

April 3, March 28, Change 2021 2020

GAAP

Net Sales $484.3 $468.7 3.3 %

Gross Profit % 37.2 % 37.6 % -40 bps

SG&A % 32.5 % 35.6 % -310 bps

Impairment Charges % - % 7.0 %

Operating Income (Loss) $22.6 ($23.7 ) 195.2 %

Operating Income (Loss) % 4.7 % (5.1 %) 980 bps

Effective Tax Rate 28.0 % 6.4 %

Net Income (Loss) % 3.1 % (5.1 %) 820 bps

EPS - diluted $0.34 ($0.56 ) 160.7 %



Non-GAAP

Gross Profit % 37.2 % 37.6 % -40 bps

Operating Income $23.3 $13.9 67.3 %

Operating Income % 4.8 % 3.0 % 180 bps

EPS - diluted $0.36 $0.21 71.4 %

First Quarter Summary Comments

* Consolidated net sales increased 3.3 percent from the prior-year quarter to $484.3 million. On an organic basis, sales increased 1.5 percent year-over-year. The acquisition of Design Public Group ("DPG") in the fourth quarter of 2020 increased year-over-year sales by $6.4 million, and the acquisition of residential building products distributors in 2020 and 2021 increased year-over-year sales by $2.4 million. A reconciliation of organic sales, a non-GAAP measure, follows the financial statements in this release. * Gross profit margin decreased 40 basis points compared to the prior-year quarter. This decrease was primarily driven by lower Workplace Furnishings volume and unfavorable price-cost, partially offset by improved net productivity and higher Residential Building Products volume. * Selling and administrative expenses as a percent of sales decreased 310 basis points compared to prior-year quarter. The decrease was driven by lower core SG&A, higher Residential Building Products volume, and freight and distribution productivity, partially offset by lower Workplace Furnishings volume and higher variable compensation. Included in current year quarter SG&A was $0.7 million of one-time costs from exiting Workplace Furnishings showrooms, driven by conditions related to the COVID-19 pandemic. The prior-year quarter included $5.0 million of one-time costs incurred as the result of the COVID-19 pandemic (of which $1.6 million was recorded as a corporate charge). * The Corporation recorded charges of $32.7 million in the prior-year quarter related to the impairment of goodwill and intangible assets. * Non-GAAP net income per diluted share was $0.36 compared to $0.21 in the prior-year quarter. The $0.15 increase was due to higher Residential Building Products volume, lower core SG&A, and improved net productivity, partially offset by lower Workplace Furnishings volume, unfavorable price-cost, and higher variable compensation.

First Quarter Orders

* Orders in the Workplace Furnishings segment declined 10 percent year-over-year. Within the segment, orders to small to mid-sized customers were down less than the segment overall and improved through the quarter. Demand in the contract market remained soft with orders down over 20 percent. eCommerce and international both generated positive order growth. * Normalized orders in the Residential Building Products segment increased 40 percent compared to the prior-year quarter. Remodel-retrofit activity and orders tied to new construction were both strong throughout the quarter.

Workplace Furnishings - Financial Performance

(Dollars in millions)

Three Months Ended

April 3, March 28, Change 2021 2020

GAAP

Net Sales $302.7 $338.4 (10.5 %)

Operating Loss ($3.1 ) ($33.2 ) 90.8 %

Operating Loss % (1.0 %) (9.8 %) 880 bps



Non-GAAP

Operating Profit (Loss) ($2.4 ) $2.8 (183.3 %)

Operating Profit (Loss) % (0.8 %) 0.8 % -160 bps

* Workplace Furnishings net sales decreased 10.5 percent from the prior-year quarter to $302.7 million. On an organic basis, sales decreased 12.4 percent year-over-year. The acquisition of DPG in the fourth quarter of 2020 increased sales by $6.4 million compared to the prior-year quarter. * Workplace Furnishings GAAP operating profit margin increased 880 basis points versus the prior-year quarter. On a non-GAAP basis, segment operating margin decreased 160 basis points year-over-year driven by lower volume and unfavorable price-cost, partially offset by net productivity and lower core SG&A spend. * The Workplace Furnishings segment recorded $0.7 million of one-time costs in the current year quarter from exiting showrooms. The prior-year quarter included $32.7 million of charges related to the impairment of goodwill and intangible assets, as well as $3.4 million of one-time costs incurred as the result of the COVID-19 pandemic.

Residential Building Products - Financial Performance

(Dollars in millions)

Three Months Ended

April 3, March 28, Change 2021 2020

GAAP

Net Sales $181.5 $130.3 39.3 %

Operating Profit $39.8 $20.7 92.8 %

Operating Profit % 21.9 % 15.9 % 600 bps



Non-GAAP

Operating Profit $39.8 $20.7 92.8 %

Operating Profit % 21.9 % 15.9 % 600 bps

* Residential Building Products net sales increased 39.3 percent from the prior-year quarter to $181.5 million. On an organic basis, sales increased 37.4 percent year-over-year. The impact of building products distributors acquired in 2020 and 2021 increased sales $2.4 million compared to the prior-year quarter. * Residential Building Products operating profit margin expanded 600 basis points, primarily driven by strong volume growth and SG&A leverage, partially offset by unfavorable price-cost and higher variable compensation.

Concluding Remarks

"As we look to the rest of the year, we are increasingly optimistic. We expect our strength in Residential Building Products to continue and see evidence our HNI-specific strategies are gaining momentum for the long-term. In Workplace Furnishings, we see improving conditions and expect revenue growth as we progress through the remainder of the year. Signs of improvement are strongest in our businesses focused on small to mid-sized customers, where we have a strong competitive position. Our opportunities to grow profits will improve as we move into the back half of the year.

I continue to be extremely proud of our HNI members. As we move into the next stage of the recovery, we do so as a stronger company-well positioned to grow revenue, expand margins, and generate cash flow," Mr. Lorenger concluded.

Second Quarter 2021 Outlook

* Residential Building Products revenue: Recent order trends, housing construction activity, and expected benefits tied to multiple growth initiatives, combine to suggest growth rates in the low-30 percent range compared to the prior-year quarter. * Workplace Furnishings revenue: Improving order trends driven by small to mid-sized customers, public sector activity, and a low prior year comparable suggest a growth rate, including acquisition impacts, in the low-teens on a year-over-year basis. * Profitability drivers: Despite inflationary pressures, investments, and the return of temporary cost actions taken in the prior year, the Corporation expects the benefit of higher volume and net productivity to generate modest year-over-year profit growth, on a non-GAAP basis.

Conference Call

HNI Corporation will host a conference call on Thursday, April 29, 2021 at 10:00 a.m. (Central) to discuss first quarter fiscal year 2021 results. To participate, call 1-833-522-0258 - conference ID number 7988133. 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, May 6, 2021, 10:59 p.m. (Central) by dialing 1-800-585-8367 or 416-621-4642 - Conference ID number 7988133.

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 Comprehensive Income

(In thousands, except per share data)

(Unaudited)

Three Months Ended April 3, March 28, 2021 2020

Net sales $ 484,293 $ 468,704

Cost of sales 304,347 292,686

Gross profit 179,946 176,018

Selling and administrative expenses 157,346 167,085

Impairment charges - 32,661

Operating income (loss) 22,600 (23,728 )

Interest expense, net 1,755 1,811

Income (loss) before income taxes 20,845 (25,539 )

Income taxes 5,827 (1,643 )

Net income (loss) 15,018 (23,896 )

Less: Net loss attributable to non-controlling (1 ) (1 ) interest

Net income (loss) attributable to HNI Corporation $ 15,019 $ (23,895 )



Average number of common shares outstanding - 43,163 42,628 basic

Net income (loss) attributable to HNI Corporation $ 0.35 $ (0.56 ) per common share - basic

Average number of common shares outstanding - 43,584 42,628 diluted

Net income (loss) attributable to HNI Corporation $ 0.34 $ (0.56 ) per common share - diluted



Foreign currency translation adjustments $ (132 ) $ (600 )

Change in unrealized gains (losses) on marketable (100 ) 59 securities, net of tax

Change in derivative financial instruments, net of 263 (2,216 ) tax

Other comprehensive income (loss), net of tax 31 (2,757 )

Comprehensive income (loss) 15,049 (26,653 )

Less: Comprehensive loss attributable to (1 ) (1 ) non-controlling interest

Comprehensive income (loss) attributable to HNI $ 15,050 $ (26,652 ) Corporation

HNI Corporation and Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

April 3, 2021

January 2, 2021

Assets

Current Assets:

Cash and cash equivalents

$

94,281

$

116,120

Short-term investments

1,776

1,687

Receivables

198,039

207,971

Allowance for doubtful accounts

(4,904

)

(5,514

)

Inventories

154,176

137,811

Prepaid expenses and other current assets

42,204

37,660

Total Current Assets

485,572

495,735

Property, Plant, and Equipment:

Land and land improvements

29,989

29,691

Buildings

294,760

293,708

Machinery and equipment

580,398

578,643

Construction in progress

20,460

17,750

925,607

919,792

Less accumulated depreciation

562,717

553,835

Net Property, Plant, and Equipment

362,890

365,957

Right-of-use Finance Leases

10,119

6,095

Right-of-use Operating Leases

66,897

70,219

Goodwill and Other Intangible Assets

455,486

458,896

Other Assets

24,617

21,130

Total Assets

$

1,405,581

$

1,418,032

Liabilities and Equity

Current Liabilities:

Accounts payable and accrued expenses

$

367,072

$

413,638

Current maturities of long-term debt

1,261

841

Current maturities of other long-term obligations

3,731

2,990

Current lease obligations - Finance

2,398

1,589

Current lease obligations - Operating

20,195

19,970

Total Current Liabilities

394,657

439,028

Long-Term Debt

174,545

174,524

Long-Term Lease Obligations - Finance

7,677

4,516

Long-Term Lease Obligations - Operating

50,222

53,249

Other Long-Term Liabilities

84,895

81,264

Deferred Income Taxes

75,824

74,706

Equity:

HNI Corporation shareholders' equity

617,436

590,419

Non-controlling interest

325

326

Total Equity

617,761

590,745

Total Liabilities and Equity

$

1,405,581

$

1,418,032

HNI Corporation and Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

April 3, January 2, 2021 2021

Assets

Current Assets:

Cash and cash equivalents $ 94,281 $ 116,120

Short-term investments 1,776 1,687

Receivables 198,039 207,971

Allowance for doubtful accounts (4,904 ) (5,514 )

Inventories 154,176 137,811

Prepaid expenses and other current assets 42,204 37,660

Total Current Assets 485,572 495,735

Property, Plant, and Equipment:

Land and land improvements 29,989 29,691

Buildings 294,760 293,708

Machinery and equipment 580,398 578,643

Construction in progress 20,460 17,750

925,607 919,792

Less accumulated depreciation 562,717 553,835

Net Property, Plant, and Equipment 362,890 365,957

Right-of-use Finance Leases 10,119 6,095

Right-of-use Operating Leases 66,897 70,219

Goodwill and Other Intangible Assets 455,486 458,896

Other Assets 24,617 21,130

Total Assets $ 1,405,581 $ 1,418,032

Liabilities and Equity

Current Liabilities:

Accounts payable and accrued expenses $ 367,072 $ 413,638

Current maturities of long-term debt 1,261 841

Current maturities of other long-term 3,731 2,990 obligations

Current lease obligations - Finance 2,398 1,589

Current lease obligations - Operating 20,195 19,970

Total Current Liabilities 394,657 439,028

Long-Term Debt 174,545 174,524

Long-Term Lease Obligations - Finance 7,677 4,516

Long-Term Lease Obligations - Operating 50,222 53,249

Other Long-Term Liabilities 84,895 81,264

Deferred Income Taxes 75,824 74,706

Equity:

HNI Corporation shareholders' equity 617,436 590,419

Non-controlling interest 325 326

Total Equity 617,761 590,745

Total Liabilities and Equity $ 1,405,581 $ 1,418,032

HNI Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

Three Months Ended

April 3, 2021

March 28, 2020

Net Cash Flows From (To) Operating Activities:

Net income (loss)

$

15,018

$

(23,896

)

Non-cash items included in net income:

Depreciation and amortization

20,463

19,487

Other post-retirement and post-employment benefits

332

364

Stock-based compensation

5,220

4,358

Reduction in carrying amount of right-of-use assets

6,537

5,599

Deferred income taxes

1,076

12,258

Impairment of goodwill and intangible assets

-

32,661

Other - net

1,315

(2,252

)

Net increase (decrease) in operating assets and liabilities

(51,436

)

(81,573

)

Increase (decrease) in other liabilities

3,159

(312

)

Net cash flows from (to) operating activities

1,684

(33,306

)

Net Cash Flows From (To) Investing Activities:

Capital expenditures

(16,197

)

(8,488

)

Proceeds from sale of property, plant, and equipment

48

49

Acquisition spending, net of cash acquired

(1,408

)

(9,321

)

Capitalized software

(2,767

)

(4,671

)

Purchase of investments

(598

)

(1,456

)

Sales or maturities of investments

515

996

Net cash flows from (to) investing activities

(20,407

)

(22,891

)

Net Cash Flows From (To) Financing Activities:

Payments of long-term debt

(118

)

(15,000

)

Proceeds from long-term debt

547

70,129

Dividends paid

(13,234

)

(13,033

)

Purchase of HNI Corporation common stock

-

(5,839

)

Proceeds from sales of HNI Corporation common stock

13,030

722

Other - net

(3,341

)

2,558

Net cash flows from (to) financing activities

(3,116

)

39,537

Net increase (decrease) in cash and cash equivalents

(21,839

)

(16,660

)

Cash and cash equivalents at beginning of period

116,120

52,073

Cash and cash equivalents at end of period

$

94,281

$

35,413

HNI Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

Three Months Ended

April 3, March 28, 2021 2020

Net Cash Flows From (To) Operating Activities:

Net income (loss) $ 15,018 $ (23,896 )

Non-cash items included in net income:

Depreciation and amortization 20,463 19,487

Other post-retirement and post-employment 332 364 benefits

Stock-based compensation 5,220 4,358

Reduction in carrying amount of right-of-use 6,537 5,599 assets

Deferred income taxes 1,076 12,258

Impairment of goodwill and intangible assets - 32,661

Other - net 1,315 (2,252 )

Net increase (decrease) in operating assets and (51,436 ) (81,573 ) liabilities

Increase (decrease) in other liabilities 3,159 (312 )

Net cash flows from (to) operating activities 1,684 (33,306 )



Net Cash Flows From (To) Investing Activities:

Capital expenditures (16,197 ) (8,488 )

Proceeds from sale of property, plant, and 48 49 equipment

Acquisition spending, net of cash acquired (1,408 ) (9,321 )

Capitalized software (2,767 ) (4,671 )

Purchase of investments (598 ) (1,456 )

Sales or maturities of investments 515 996

Net cash flows from (to) investing activities (20,407 ) (22,891 )



Net Cash Flows From (To) Financing Activities:

Payments of long-term debt (118 ) (15,000 )

Proceeds from long-term debt 547 70,129

Dividends paid (13,234 ) (13,033 )

Purchase of HNI Corporation common stock - (5,839 )

Proceeds from sales of HNI Corporation common 13,030 722 stock

Other - net (3,341 ) 2,558

Net cash flows from (to) financing activities (3,116 ) 39,537



Net increase (decrease) in cash and cash (21,839 ) (16,660 ) equivalents

Cash and cash equivalents at beginning of period 116,120 52,073

Cash and cash equivalents at end of period $ 94,281 $ 35,413

HNI Corporation and Subsidiaries

Reportable Segment Data

(In thousands)

(Unaudited)

Three Months Ended

April 3, 2021

March 28, 2020

Net Sales:

Workplace furnishings

$

302,748

$

338,386

Residential building products

181,545

130,318

Total

$

484,293

$

468,704

Income (Loss) Before Income Taxes:

Workplace furnishings

$

(3,071

)

$

(33,231

)

Residential building products

39,849

20,671

General corporate

(14,178

)

(11,168

)

Operating Income

22,600

(23,728

)

Interest expense, net

1,755

1,811

Total

$

20,845

$

(25,539

)

Depreciation and Amortization Expense:

Workplace furnishings

$

11,984

$

11,332

Residential building products

2,410

2,306

General corporate

6,069

5,849

Total

$

20,463

$

19,487

Capital Expenditures (including capitalized software):

Workplace furnishings

$

10,487

$

7,101

Residential building products

4,710

2,973

General corporate

3,767

3,085

Total

$

18,964

$

13,159

As of April 3, 2021

As of January 2, 2021

Identifiable Assets:

Workplace furnishings

$

757,753

$

762,780

Residential building products

390,520

381,550

General corporate

257,308

273,702

Total

$

1,405,581

$

1,418,032

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. Generally, non-GAAP EPS is calculated using HNI's overall effective tax rate for the year, 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 DPG and residential building products distributors. The transactions excluded for purposes of our other non-GAAP financial information included in this earnings release include non-recurring costs related to the COVID-19 pandemic, and prior year impairments of goodwill and intangible assets.

HNI Corporation and Subsidiaries

Reportable Segment Data

(In thousands)

(Unaudited)

Three Months Ended

April 3, March 28, 2021 2020

Net Sales:

Workplace furnishings $ 302,748 $ 338,386

Residential building products 181,545 130,318

Total $ 484,293 $ 468,704



Income (Loss) Before Income Taxes:

Workplace furnishings $ (3,071 ) $ (33,231 )

Residential building products 39,849 20,671

General corporate (14,178 ) (11,168 )

Operating Income 22,600 (23,728 )

Interest expense, net 1,755 1,811

Total $ 20,845 $ (25,539 )



Depreciation and Amortization Expense:

Workplace furnishings $ 11,984 $ 11,332

Residential building products 2,410 2,306

General corporate 6,069 5,849

Total $ 20,463 $ 19,487



Capital Expenditures (including capitalized software):

Workplace furnishings $ 10,487 $ 7,101

Residential building products 4,710 2,973

General corporate 3,767 3,085

Total $ 18,964 $ 13,159



As of As of April 3, January 2, 2021 2021

Identifiable Assets:

Workplace furnishings $ 757,753 $ 762,780

Residential building products 390,520 381,550

General corporate 257,308 273,702

Total $ 1,405,581 $ 1,418,032

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. Generally, non-GAAP EPS is calculated using HNI's overall effective tax rate for the year, 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 DPG and residential building products distributors. The transactions excluded for purposes of our other non-GAAP financial information included in this earnings release include non-recurring costs related to the COVID-19 pandemic, and prior year impairments of goodwill and intangible assets.

HNI Corporation Reconciliation

(Dollars in millions)

Three Months Ended

April 3, 2021 March 28, 2020

Workplace Residential Workplace Residential Furnishings Building Total Furnishings Building Total Products Products

Sales asreported $ 302.7 $ 181.5 $ 484.3 $ 338.4 $ 130.3 $ 468.7 (GAAP)

% change from (10.5 %) 39.3 % 3.3 % PY



Less: 6.4 2.4 8.8 - - - Acquisitions



Organic Sales $ 296.4 $ 179.1 $ 475.5 $ 338.4 $ 130.3 $ 468.7 (non-GAAP)

% change from (12.4 %) 37.4 % 1.5 % PY

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

%

HNI Corporation Reconciliation

(Dollars in millions, except per share data)

Three Months Ended April 3, 2021

Gross Operating Tax Net EPS Profit Income Income

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 %

HNI Corporation Reconciliation

(Dollars in millions, except per share data)

Three Months Ended March 28, 2020

Gross Profit

Operating Income (Loss)

Tax

Net Income (Loss)

EPS

As reported (GAAP)

$

176.0

$

(23.7

)

$

(1.6

)

$

(23.9

)

$

(0.56

)

% of net sales

37.6

%

(5.1

%)

(5.1

%)

Tax %

6.4

%

Impairment charges

-

32.7

4.0

28.7

0.67

COVID-19 costs

-

5.0

0.6

4.4

0.10

Results (non-GAAP)

$

176.0

$

13.9

$

2.9

$

9.2

$

0.21

% of net sales

37.6

%

3.0

%

2.0

%

Tax %

24.1

%

HNI Corporation Reconciliation

(Dollars in millions, except per share data)

Three Months Ended March 28, 2020

Gross Operating Net Income Profit Income Tax (Loss) EPS (Loss)

As reported $ 176.0 $ (23.7 ) $ (1.6 ) $ (23.9 ) $ (0.56 ) (GAAP)

% of net sales 37.6 % (5.1 %) (5.1 %)

Tax % 6.4 %



Impairment - 32.7 4.0 28.7 0.67 charges

COVID-19 costs - 5.0 0.6 4.4 0.10



Results $ 176.0 $ 13.9 $ 2.9 $ 9.2 $ 0.21 (non-GAAP)

% of net sales 37.6 % 3.0 % 2.0 %

Tax % 24.1 %

Workplace Furnishings Reconciliation

(Dollars in millions)

Three Months Ended

April 3, 2021

March 28, 2020

Percent Change

Operating loss as reported (GAAP)

$

(3.1

)

$

(33.2

)

90.8

%

% of net sales

(1.0

%)

(9.8

%)

Impairment charges

-

32.7

COVID-19 costs

0.7

3.4

Operating profit (loss) (non-GAAP)

$

(2.4

)

$

2.8

(183.3

%)

% of net sales

(0.8

%)

0.8

%

View source version on businesswire.com: https://www.businesswire.com/news/home/20210428005833/en/

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