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 THIRD QUARTER FISCAL YEAR 2020

MUSCATINE, Iowa (October 19, 2020) - HNI Corporation (NYSE: HNI) today announced sales for the third quarter ended September 26, 2020 of $507.1 million and net income of $30.7 million. GAAP net income per diluted share was $0.71, compared to $1.07 in the prior year. Non-GAAP net income per diluted share was $0.71, compared to $1.08 in the prior year. GAAP to non-GAAP reconciliations follow the financial statements in this release.

Third Quarter Highlights

  • Strong results in Residential Building Products: Third quarter operating profit increased 27 percent; operating margin expanded 270 basis points; and net sales grew 9.3 percent on a year-over- year basis.
  • Solid profits in Workplace Furnishings: Third quarter 2020 operating profit was nearly $17 million, despite a 27 percent year-over-year contraction on the segment's top line.
  • Continued strong cash flow: Third quarter operating cash flow increased $12.7 million or 12 percent versus the prior year quarter despite continued pandemic related top-line pressures. Operating cash flow for the first three quarters of 2020 totaled $143 million, which represents a 24 percent increase compared to the prior year period.
  • High-qualitybalance sheet: Quarter-ending debt levels were $175 million with a gross leverage ratio of approximately 0.9x. Cash totaled $109 million as of the end of the third quarter, representing an increase of $83 million from the second quarter balance.

"Our members delivered another solid quarter in an environment that remains uniquely challenging. And, again in the third quarter, our results demonstrate much of what is unique about HNI. Our diversified revenue streams, our ability and willingness to invest despite ongoing uncertainty, and our cost and expense

1

management efforts combined to deliver strong free cash flow in the third quarter, positioning us well for the future," stated Jeff Lorenger, Chairman, President, and Chief Executive Officer.

HNI Corporation - Financial Performance

(Dollars in millions, except per share data)

Three Months Ended

September 26,

September 28,

Change

2020

2019

GAAP

Net Sales

$507.1

$625.4

(18.9%)

Gross Profit %

36.6%

38.0%

-140 bps

SG&A %

28.9%

28.3%

60 bps

Operating Income

$38.8

$60.7

(36.1%)

Operating Income %

7.6%

9.7%

-210 bps

Effective Tax Rate

17.6%

21.2%

Net Income %

6.1%

7.4%

-130 bps

EPS - diluted

$0.71

$1.07

(33.6%)

Non-GAAP

Gross Profit %

36.6%

38.0%

-140 bps

Operating Income

$38.8

$61.1

(36.6%)

Operating Income %

7.6%

9.8%

-220 bps

EPS - diluted

$0.71

$1.08

(34.3%)

Third Quarter Summary Comments

  • Consolidated net sales decreased 18.9 percent from the prior-year quarter to $507.1 million. On an organic basis, sales decreased 19.3 percent. The impact of residential building products distributors acquired in 2020 increased sales $2.4 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 140 basis points compared to the prior-year quarter. This decrease was primarily driven by lower Workplace Furnishings volume, partially offset by volume growth in Residential Building Products 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 freight & distribution productivity.
  • Consolidated operating income declined $21.9 million or 36.1 percent versus the prior year quarter. On a non-GAAP basis, the decline was $22.4 million, which equates to a decremental margin of 19 percent.
  • Non-GAAPnet income per diluted share was $0.71 compared to $1.08 in the prior-year quarter. The $0.37 decrease was due to lower Workplace Furnishings volume, partially offset by year-over-year SG&A expense management, net productivity benefits, and volume growth in Residential Building Products.

2

Third Quarter Balance Sheet and Cash Flow

  • The Corporation's cash balance totaled $109 million-representing an increase of $83 million from the second quarter's total of $26 million.
  • Quarter-endingdebt levels were $175 million, consisting of $100 million in private placement notes and $75 million drawn on the Corporation's $450 million revolving line of credit. The gross leverage ratio was approximately 0.9x and well below the Corporation's debt covenant of 3.5x.
  • Compared to the prior year period, cash flow from operating activities on a year-to-date basis increased 24 percent to $143 million. Improved working capital efficiency primarily drove the increase.
  • Capital expenditures on a year-to-date basis declined $21 million or 46 percent year-over-year. The decrease reflects the Corporation's response to pandemic-related pressures. Investment in capitalized software increased $3.2 million or 77 percent year-over-year on a year-to-date basis, reflecting the Corporation's emphasis on digital initiatives.

Third Quarter Orders

  • Orders in the Workplace Furnishings segment excluding eCommerce declined 25 percent year-over-year. This compares favorably to the 35 percent order decline in the second quarter of 2020. Monthly year- over-year order declines moderated through the third quarter; however, market conditions remain uncertain and volatile.
  • Orders in eCommerce increased 35 percent year-over-year. Much of the moderation from the second quarter's triple-digit order increase was a result of tougher comparables and supply constraints. September eCommerce orders re-accelerated and are indicative of continued strong demand and improving inventory positions.
  • Orders in the Residential Building Products segment increased 13 percent compared to the prior year quarter. Remodel-retrofit activity was strong throughout the third quarter, and orders related to new home construction gained momentum over the period.

3

Workplace Furnishings - Financial Performance

(Dollars in millions)

Three Months Ended

September 26,

September 28,

Change

2020

2019

GAAP

Net Sales

$353.4

$484.8

(27.1%)

Operating Profit

$16.8

$51.2

(67.1%)

Operating Profit %

4.8%

10.6%

-580 bps

Non-GAAP

Operating Profit

$16.8

$51.7

(67.4%)

Operating Profit %

4.8%

10.7%

-590 bps

  • Workplace Furnishings net sales decreased 27.1 percent from the prior-year quarter to $353.4 million.
  • Workplace Furnishings GAAP operating profit margin decreased 580 basis points versus the prior-year quarter. On a non-GAAP basis, segment operating margin decreased 590 basis points year-over-year driven by lower volume, partially offset by net productivity and lower core SG&A spend.

Residential Building Products - Financial Performance

(Dollars in millions)

Three Months Ended

September 26,

September 28,

Change

2020

2019

GAAP

Net Sales

$153.7

$140.6

9.3%

Operating Profit

$30.2

$23.8

27.0%

Operating Profit %

19.6%

16.9%

270 bps

Non-GAAP

Operating Profit

$30.2

$23.8

27.0%

Operating Profit %

19.6%

16.9%

270 bps

  • Residential Building Products net sales increased 9.3 percent from the prior-year quarter to $153.7 million. On an organic basis, sales increased 7.6 percent. The impact of building products distributors acquired in 2020 increased sales $2.4 million compared to the prior-year quarter.
  • Residential Building Products operating profit margin expanded 270 basis points, primarily driven by higher volume, favorable price-cost, lower core SG&A spend, and net productivity.

4

Concluding Remarks

"As we look ahead, we are prepared to confront the continued near-term macro challenges. However, we see longer-term opportunity and signs our strategies are gaining momentum. I am extremely proud of all our HNI members and of the company's collective perseverance and ability to adapt.

As we emerge from this period, we will do so as a stronger company- well positioned to grow revenue, expand margins, and generate cash flow," Mr. Lorenger concluded.

Fourth Quarter 2020 Outlook

  • Limited visibility and volatile conditions: Pandemic-related uncertainty remains and limits the Corporation's visibility.
  • Workplace Furnishings revenue: Recent order trends suggest year-over-year revenue declines will moderate slightly in the fourth quarter. Additionally, the fourth quarter 2020 benefits from an extra week in the fiscal calendar. Assuming the recent trends continue, the combination of these factors point to fourth quarter revenue declines in the mid-teens on a year-over-year rate basis.
  • Residential Building Products revenue: The Corporation believes cyclical strength, secular support, company-specific initiatives, and its strong competitive position support revenue growth acceleration. Recent order trends, housing construction activity, and the fourth quarter's extra week suggest fourth quarter growth rates in the mid to high teens compared to the prior year quarter.
  • HNI decremental margins: The Corporation expects decremental margins for the full year to be less than 20 percent on a consolidated basis. This implies higher decremental margins in the fourth quarter, primarily driven by unfavorable business mix and accelerating investment levels.
  • Balance sheet: The Corporation continues to expect strong cash generation and estimates the year- ending debt to be approximately $175 million, consistent with the third quarter balance and the level reported at the end of 2019.

5

Conference Call

HNI Corporation will host a conference call on Monday, October 19, 2020 at 10:00 a.m. (Central) to discuss third quarter fiscal year 2020 results. To participate, call 1-877-512-9166 - conference ID number 6673387. 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 Monday, October 26, 2020, 10:59 p.m. (Central) by dialing 1-855-859-2056 or 1-404-537-3406 - Conference ID number 6673387.

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.

6

HNI Corporation and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income

(In thousands, except per share data)

(Unaudited)

Three Months Ended

Nine Months Ended

September 26,

September 28,

September 26,

September 28,

2020

2019

2020

2019

Net sales

$

507,063

$

625,386

$

1,393,224

$

1,630,868

Cost of sales

321,516

387,715

880,754

1,030,993

Gross profit

185,547

237,671

512,470

599,875

Selling and administrative expenses

146,785

176,731

449,933

511,080

Impairment and restructuring charges

-

284

32,661

1,214

Operating income

38,762

60,656

29,876

87,581

Interest expense, net

1,517

2,205

5,271

6,795

Income before income taxes

37,245

58,451

24,605

80,786

Income taxes

6,558

12,375

5,259

17,878

Net income

30,687

46,076

19,346

62,908

Less: Net loss attributable to non-

(1)

(2)

(3)

(2)

controlling interest

Net income attributable to HNI

$

30,688

$

46,078

$

19,349

$

62,910

Corporation

Average number of common shares

42,684

42,899

42,651

43,217

outstanding - basic

Net income attributable to HNI

$

0.72

$

1.07

$

0.45

$

1.46

Corporation per common share - basic

Average number of common shares

43,010

43,186

42,905

43,620

outstanding - diluted

Net income attributable to HNI

$

0.71

$

1.07

$

0.45

$

1.44

Corporation per common share - diluted

Foreign currency translation adjustments

$

923

$

(1,035)

$

368

$

(406)

Change in unrealized gains (losses) on

(33)

36

269

252

marketable securities, net of tax

Change in pension and post-retirement

-

-

-

(1,185)

liability, net of tax

Change in derivative financial

106

(477)

(2,393)

(2,112)

instruments, net of tax

Other comprehensive income (loss), net

996

(1,476)

(1,756)

(3,451)

of tax

Comprehensive income

31,683

44,600

17,590

59,457

Less: Comprehensive loss attributable to

(1)

(2)

(3)

(2)

non-controlling interest

Comprehensive income attributable to

$

31,684

$

44,602

$

17,593

$

59,459

HNI Corporation

7

HNI Corporation and Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

September 26,

December 28,

2020

2019

Assets

Current Assets:

Cash and cash equivalents

$

109,385

$

52,073

Short-term investments

1,495

1,096

Receivables

209,921

278,124

Allowance for doubtful accounts

(5,991)

(3,559)

Inventories

144,135

163,465

Prepaid expenses and other current assets

41,490

37,635

Total Current Assets

500,435

528,834

Property, Plant, and Equipment:

Land and land improvements

29,782

29,394

Buildings

295,998

295,517

Machinery and equipment

577,442

581,225

Construction in progress

12,142

20,881

915,364

927,017

Less accumulated depreciation

551,031

545,510

Net Property, Plant, and Equipment

364,333

381,507

Right-of-use Finance Leases

2,193

2,129

Right-of-use Operating Leases

73,896

72,883

Goodwill and Other Intangible Assets

412,287

445,709

Other Assets

21,581

21,450

Total Assets

$

1,374,725

$

1,452,512

Liabilities and Equity

Current Liabilities:

Accounts payable and accrued expenses

$

390,535

$

453,202

Current maturities of long-term debt

-

790

Current maturities of other long-term obligations

2,890

1,931

Current lease obligations - Finance

691

564

Current lease obligations - Operating

23,124

22,218

Total Current Liabilities

417,240

478,705

Long-Term Debt

174,502

174,439

Long-Term Lease Obligations - Finance

1,522

1,581

Long-Term Lease Obligations - Operating

57,948

58,233

Other Long-Term Liabilities

67,187

67,990

Deferred Income Taxes

82,736

87,196

Equity:

HNI Corporation shareholders' equity

573,269

584,044

Non-controlling interest

321

324

Total Equity

573,590

584,368

Total Liabilities and Equity

$

1,374,725

$

1,452,512

8

HNI Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

Nine Months Ended

September 26,

September 28,

2020

2019

Net Cash Flows From (To) Operating Activities:

Net income

$

19,346

$

62,908

Non-cash items included in net income:

Depreciation and amortization

57,917

57,838

Other post-retirement and post-employment benefits

1,104

1,106

Stock-based compensation

6,746

5,408

Reduction in carrying amount of right-of-use assets

16,965

17,252

Deferred income taxes

(3,730)

4,798

Impairment of goodwill and intangible assets

32,661

-

Other - net

815

4,473

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

13,316

(28,359)

divestitures

Increase (decrease) in other liabilities

(1,779)

(9,802)

Net cash flows from (to) operating activities

143,361

115,622

Net Cash Flows From (To) Investing Activities:

Capital expenditures

(24,751)

(46,093)

Proceeds from sale of property, plant, and equipment

81

247

Acquisition spending, net of cash acquired

(10,857)

-

Capitalized software

(7,250)

(4,098)

Purchase of investments

(3,922)

(6,140)

Sales or maturities of investments

3,246

3,889

Other - net

-

2,327

Net cash flows from (to) investing activities

(43,453)

(49,868)

Net Cash Flows From (To) Financing Activities:

Payments of long-term debt

(82,828)

(125,039)

Proceeds from long-term debt

82,119

115,775

Dividends paid

(39,060)

(39,164)

Purchase of HNI Corporation common stock

(6,764)

(65,106)

Proceeds from sales of HNI Corporation common stock

2,210

22,338

Other - net

1,727

1,636

Net cash flows from (to) financing activities

(42,596)

(89,560)

Net increase (decrease) in cash and cash equivalents

57,312

(23,806)

Cash and cash equivalents at beginning of period

52,073

76,819

Cash and cash equivalents at end of period

$

109,385

$

53,013

9

HNI Corporation and Subsidiaries

Reportable Segment Data

(In thousands)

(Unaudited)

Three Months Ended

Nine Months Ended

September 26,

September 28,

September 26,

September 28,

2020

2019

2020

2019

Net Sales:

Workplace furnishings

$

353,361

$

484,755

$

999,827

$

1,247,778

Residential building products

153,702

140,631

393,397

383,090

Total

$

507,063

$

625,386

$

1,393,224

$

1,630,868

Income (Loss) Before Income Taxes:

Workplace furnishings

$

16,826

$

51,162

$

(8,619)

$

68,180

Residential building products

30,197

23,772

65,232

54,743

General corporate

(8,261)

(14,278)

(26,737)

(35,342)

Operating Income

38,762

60,656

29,876

87,581

Interest expense, net

1,517

2,205

5,271

6,795

Total

$

37,245

$

58,451

$

24,605

$

80,786

Depreciation and Amortization Expense:

Workplace furnishings

$

11,065

$

11,232

$

33,177

$

33,540

Residential building products

2,351

2,291

6,976

6,521

General corporate

5,896

5,863

17,764

17,777

Total

$

19,312

$

19,386

$

57,917

$

57,838

Capital Expenditures (including

capitalized software):

Workplace furnishings

$

6,946

$

6,524

$

18,340

$

29,190

Residential building products

2,695

3,204

5,874

10,779

General corporate

1,584

2,856

7,787

10,222

Total

$

11,225

$

12,584

$

32,001

$

50,191

As of

As of

September 26,

December 28,

2020

2019

Identifiable Assets:

Workplace furnishings

$

714,896

$

874,913

Residential building products

393,941

364,653

General corporate

265,888

212,946

Total

$

1,374,725

$

1,452,512

10

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, 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 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 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. Transition items incurred in connection with this realignment include member relocation costs.

HNI Corporation Reconciliation

(Dollars in millions)

Three Months Ended

September 26, 2020

September 28, 2019

Workplace

Residential

Workplace

Residential

Building

Total

Building

Total

Furnishings

Products

Furnishings

Products

Sales as reported (GAAP)

$

353.4

$

153.7

$

507.1

$

484.8

$

140.6

$

625.4

% change from PY

(27.1%)

9.3%

(18.9%)

Less: Acquisitions

-

2.4

2.4

-

-

-

Organic Sales (non-GAAP)

$

353.4

$

151.3

$

504.6

$

484.8

$

140.6

$

625.4

% change from PY

(27.1%)

7.6%

(19.3%)

11

HNI Corporation Reconciliation

(Dollars in millions, except per share data)

Three Months Ended

September 28, 2019

Gross

Operating

Tax

Net

EPS

Profit

Income

Income

As reported (GAAP)

$

237.7

$

60.7

$

12.4

$

46.1

$

1.07

% of net sales

38.0 %

9.7 %

7.4 %

Tax %

21.2%

Restructuring charges

-

0.3

0.1

0.2

0.01

Transition costs

-

0.2

0.0

0.2

0.00

Results (non-GAAP)

$

237.7

$

61.1

$

12.5

$

46.5

$

1.08

% of net sales

38.0%

9.8%

7.4%

Tax %

21.2%

Workplace Furnishings Reconciliation

(Dollars in millions)

Three Months Ended

September 26,

September 28,

Percent

2020

2019

Change

Operating profit as reported (GAAP)

$

16.8

$

51.2

(67.1%)

% of net sales

4.8%

10.6%

Restructuring charges

-

0.3

Transition costs

-

0.2

Operating profit (non-GAAP)

$

16.8

$

51.7

(67.4%)

% of net sales

4.8%

10.7%

12

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HNI Corporation published this content on 19 October 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 29 October 2020 10:34:00 UTC