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, 2021
March 28, 2020
Change
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, 2021
March 28, 2020
Change
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, 2021
March 28, 2020
Change
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, 2021
March 28, 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 interest
(1
)
(1
)
Net income (loss) attributable to HNI
Corporation
$
15,019
$
(23,895
)
Average number of common shares
outstanding – basic
43,163
42,628
Net income (loss) attributable to HNI
Corporation per common share – basic
$
0.35
$
(0.56
)
Average number of common shares
outstanding – diluted
43,584
42,628
Net income (loss) attributable to HNI
Corporation per common share – diluted
$
0.34
$
(0.56
)
Foreign currency translation
adjustments
$
(132
)
$
(600
)
Change in unrealized gains (losses) on
marketable securities, net of tax
(100
)
59
Change in derivative financial
instruments, net of tax
263
(2,216
)
Other comprehensive income (loss), net of
tax
31
(2,757
)
Comprehensive income (loss)
15,049
(26,653
)
Less: Comprehensive loss attributable to
non-controlling interest
(1
)
(1
)
Comprehensive income (loss) attributable
to HNI Corporation
$
15,050
$
(26,652
)
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
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
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
Reconciliation
(Dollars in millions)
Three Months Ended
April 3, 2021
March 28, 2020
Workplace Furnishings
Residential Building Products
Total
Workplace Furnishings
Residential Building Products
Total
Sales as reported (GAAP)
$
302.7
$
181.5
$
484.3
$
338.4
$
130.3
$
468.7
% change from PY
(10.5
%)
39.3
%
3.3
%
Less: Acquisitions
6.4
2.4
8.8
—
—
—
Organic Sales (non-GAAP)
$
296.4
$
179.1
$
475.5
$
338.4
$
130.3
$
468.7
% change from PY
(12.4
%)
37.4
%
1.5
%
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 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
%
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/
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
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