HNI Corporation (NYSE: HNI) today announced sales for the
second quarter ended July 3, 2021 of $510.5 million and net income
of $17.4 million. GAAP net income per diluted share was $0.39,
compared to $0.29 in the prior year. Non-GAAP net income per
diluted share was $0.40, compared to $0.20 in the prior year. GAAP
to non-GAAP reconciliations follow the financial statements in this
release.
Second Quarter Highlights
- Non-GAAP EPS doubled vs. prior year: Second quarter 2021
non-GAAP EPS increased 100 percent year-over-year despite a
challenging inflationary environment and the return of costs
related to temporary actions taken in the prior-year quarter. The
profit growth was driven by increased volume and higher
productivity.
- Exceptional performance in Residential Building
Products: Second quarter 2021 revenue grew 51 percent,
organically, on a year-over-year basis, and operating margin
expanded 530 basis points from prior-year quarter. Segment
operating profit more than doubled versus second quarter 2020
levels.
- Recovery in Workplace Furnishings: Second quarter 2021
revenue was up approximately nine percent from the second quarter
of 2020, on an organic basis. Segment non-GAAP operating profit
increased more than 20 percent year-over-year.
“Our members again executed at a high level during the second
quarter—delivering substantial year-over-year profit improvement.
Our industry leading Residential Building Products platform
continues to drive exceptional growth, and we are capitalizing on
the beginnings of the post-pandemic recovery in Workplace
Furnishings. Our strong growth and the macro-economic environment
presented new challenges related to labor availability, supply
chain capacity, and inflation. Our teams managed through those
challenges to deliver strong results. Overall, the second 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
July 3, 2021
June 27, 2020
Change
GAAP
Net Sales
$510.5
$417.5
22.3
%
Gross Profit %
36.8
%
36.1
%
70
bps
SG&A %
32.0
%
32.6
%
-60
bps
Operating Income
$24.7
$14.8
66.3
%
Operating Income %
4.8
%
3.6
%
120
bps
Effective Tax Rate
23.7
%
2.7
%
Net Income %
3.4
%
3.0
%
40
bps
EPS – diluted
$0.39
$0.29
34.5
%
Non-GAAP
Gross Profit %
36.8
%
36.1
%
70
bps
Operating Income
$25.3
$14.8
70.7
%
Operating Income %
5.0
%
3.6
%
140
bps
EPS – diluted
$0.40
$0.20
100.0
%
Second Quarter Summary Comments
- Consolidated net sales increased 22.3 percent from the
prior-year quarter to $510.5 million. On an organic basis, sales
increased 19.8 percent year-over-year. The acquisition of Design
Public Group ("DPG") in the fourth quarter of 2020 increased
year-over-year sales by $8.7 million, and the acquisition of
residential building products distributors in 2020 and 2021
increased year-over-year sales by $1.5 million. A reconciliation of
organic sales, a non-GAAP measure, follows the financial statements
in this release.
- Gross profit margin expanded 70 basis points compared to the
prior-year quarter. This increase was primarily driven by higher
volume and improved net productivity, partially offset by
unfavorable price-cost and the return of costs related to temporary
actions taken in the prior-year quarter.
- Selling and administrative expenses as a percent of sales
decreased 60 basis points compared to the prior-year quarter. The
decrease was driven by improved leverage from higher volume,
partially offset by the return of costs related to temporary
actions taken in the prior-year quarter, higher investment spend,
increased freight costs, and normalized variable compensation.
Included in current-year quarter SG&A was $0.6 million of
one-time costs from exiting Workplace Furnishings showrooms.
- Non-GAAP net income per diluted share was $0.40 compared to
$0.20 in the prior-year quarter. The $0.20 increase was due to
higher volume and improved net productivity, partially offset by
unfavorable price-cost, the return of costs related to temporary
actions taken in the prior-year quarter, higher investment spend,
and normalized variable compensation.
- Non-GAAP EPS in the prior-year quarter included an effective
tax rate of 32.5 percent, compared to a GAAP tax rate of 2.7
percent. The higher non-GAAP tax rate was related to timing of the
tax impact from one-time charges recorded in first quarter
2020.
Second Quarter Orders
- Orders in the Workplace Furnishings segment increased more than
30 percent year-over-year, led by activity with small to mid-sized
customers. Public sector demand remained strong, and domestic
contract orders recovered—increasing more than 23 percent from
second quarter 2020 levels.
- Normalized orders in the Residential Building Products segment
increased more than 50 percent compared to the prior-year quarter,
with the trend moderating somewhat as the quarter progressed as
year-ago comparisons increased. Remodel-retrofit and new
construction were both strong throughout the quarter.
Workplace Furnishings –
Financial Performance
(Dollars in millions)
Three Months Ended
July 3, 2021
June 27, 2020
Change
GAAP
Net Sales
$344.1
$308.1
11.7
%
Operating Profit
$8.8
$7.8
12.5
%
Operating Profit %
2.5
%
2.5
%
0
bps
Non-GAAP
Operating Profit
$9.4
$7.8
20.8
%
Operating Profit %
2.7
%
2.5
%
20
bps
- Workplace Furnishings net sales increased 11.7 percent from the
prior-year quarter to $344.1 million. On an organic basis, sales
increased 8.9 percent year-over-year. The acquisition of DPG in the
fourth quarter of 2020 increased sales by $8.7 million compared to
the prior-year quarter.
- Workplace Furnishings GAAP operating profit margin was flat
versus the prior-year quarter. On a non-GAAP basis, segment
operating margin expanded 20 basis points year-over-year driven by
higher volume and improved productivity, partially offset by
unfavorable price-cost and the return of costs related to temporary
actions taken in the prior-year quarter.
- The Workplace Furnishings segment recorded $0.6 million of
one-time costs in the current-year quarter from exiting
showrooms.
Residential Building Products
– Financial Performance
(Dollars in millions)
Three Months Ended
July 3, 2021
June 27, 2020
Change
GAAP
Net Sales
$166.3
$109.4
52.1
%
Operating Profit
$30.5
$14.4
112.5
%
Operating Profit %
18.4
%
13.1
%
530
bps
Non-GAAP
Operating Profit
$30.5
$14.4
112.5
%
Operating Profit %
18.4
%
13.1
%
530
bps
- Residential Building Products net sales increased 52.1 percent
from the prior-year quarter to $166.3 million. On an organic basis,
sales increased 50.7 percent year-over-year. The impact of building
products distributors acquired in 2020 and 2021 increased sales
$1.5 million compared to the prior-year quarter.
- Residential Building Products operating profit margin expanded
530 basis points, primarily driven by strong volume growth,
partially offset by unfavorable price-cost, normalized variable
compensation, the return of costs related to temporary actions
taken in the prior-year quarter, and higher investment spend.
Third Quarter 2021 Outlook
- Strong consolidated growth: The Corporation expects
consolidated revenue to grow in the mid-20 percent range compared
to the prior-year quarter. This outlook includes the impact of
headwinds from labor availability and supply chain
constraints.
- Residential Building Products revenue:Recent order
trends, new home construction activity, the outlook for
remodel/retrofit demand, and expected benefits tied to multiple
growth initiatives, combine to suggest growth rates in the
mid-to-high 20 percent range compared to the prior-year quarter,
including the impact of constraints.
- Workplace Furnishings revenue:Strong second quarter
order trends, continued momentum with office re-entry activity, and
a low prior-year comparable suggest a growth rate, including
acquisition impacts, in the low-to-mid-20 percent range on a
year-over-year basis, net of the impact from constraints.
- Profitability drivers: Compared to the prior-year
quarter, the Corporation expects the impact of strong volume growth
to be mostly offset by cost challenges related to inflationary
pressures, increased growth investments, and the return of costs
associated with temporary actions taken in the prior year. The
Corporation expects profit growth to accelerate after the third
quarter as recent price actions become effective and temporary cost
actions taken during the pandemic are anniversaried.
Concluding Remarks
“Looking to the remainder of 2021 and into 2022, we remain
optimistic about our businesses and our markets. We continue to
gain momentum in Workplace Furnishings, where our winning customer
experiences, multiple strategic investments, and operational
excellence provide a competitive advantage as the market recovers.
In addition, our unique, industry-leading Residential Building
Products platform is positioned for sustained long-term growth. Our
growth strategies in this segment continue to gain traction, and we
see strong demand supported by demographics and low housing
inventories.
I am extremely proud of and grateful for the efforts of all HNI
members. As we move through the next stage of the recovery, we do
so positioned to grow revenue, expand margins, and increase cash
flow,” Mr. Lorenger concluded.
Conference Call
HNI Corporation will host a conference call on Thursday, July
29, 2021 at 10:00 a.m. (Central) to discuss second quarter fiscal
year 2021 results. To participate, call 1-833-522-0258 – conference
ID number 9696837. A live webcast of the call will be available on
HNI Corporation’s website at https://investors.hnicorp.com/events-and-presentations.
A replay of the webcast and call will be made available from
Thursday, July 29, 2021 at 1:00 p.m. (Central) through Thursday,
August 5, 2021, 10:59 p.m. (Central). To replay the webcast, go to
the link above. To replay the call, dial 1-800-585-8367 or
416-621-4642 – Conference ID: 9696837.
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
Six Months Ended
July 3, 2021
June 27, 2020
July 3, 2021
June 27, 2020
Net sales
$
510,455
$
417,456
$
994,748
$
886,161
Cost of sales
322,593
266,551
626,940
559,238
Gross profit
187,862
150,905
367,808
326,923
Selling and administrative expenses
163,175
136,063
320,521
303,148
Impairment charges
—
—
—
32,661
Operating income (loss)
24,687
14,842
47,287
(8,886
)
Interest expense, net
1,857
1,943
3,612
3,754
Income (loss) before income taxes
22,830
12,899
43,675
(12,640
)
Income taxes
5,418
345
11,245
(1,299
)
Net income (loss)
17,412
12,554
32,430
(11,341
)
Less: Net loss attributable to
non-controlling interest
(2
)
(2
)
(3
)
(2
)
Net income (loss) attributable to HNI
Corporation
$
17,414
$
12,556
$
32,433
$
(11,339
)
Average number of common shares
outstanding – basic
43,776
42,640
43,469
42,634
Net income (loss) attributable to HNI
Corporation per common share – basic
$
0.40
$
0.29
$
0.75
$
(0.27
)
Average number of common shares
outstanding – diluted
44,481
42,929
43,986
42,634
Net income (loss) attributable to HNI
Corporation per common share – diluted
$
0.39
$
0.29
$
0.74
$
(0.27
)
Foreign currency translation
adjustments
$
194
$
45
$
62
$
(555
)
Change in unrealized gains (losses) on
marketable securities, net of tax
(25
)
244
(125
)
302
Change in derivative financial
instruments, net of tax
143
(283
)
406
(2,499
)
Other comprehensive income (loss), net of
tax
312
6
343
(2,752
)
Comprehensive income (loss)
17,724
12,560
32,773
(14,093
)
Less: Comprehensive loss attributable to
non-controlling interest
(2
)
(2
)
(3
)
(2
)
Comprehensive income (loss) attributable
to HNI Corporation
$
17,726
$
12,562
$
32,776
$
(14,091
)
HNI Corporation and
Subsidiaries
Condensed Consolidated Balance
Sheets
(In thousands)
(Unaudited)
July 3, 2021
January 2, 2021
Assets
Current Assets:
Cash and cash equivalents
$
118,498
$
116,120
Short-term investments
102
1,687
Receivables
213,925
207,971
Allowance for doubtful accounts
(4,365
)
(5,514
)
Inventories
187,467
137,811
Prepaid expenses and other current
assets
47,571
37,660
Total Current Assets
563,198
495,735
Property, Plant, and Equipment:
Land and land improvements
29,974
29,691
Buildings
293,842
293,708
Machinery and equipment
580,730
578,643
Construction in progress
24,310
17,750
928,856
919,792
Less accumulated depreciation
568,551
553,835
Net Property, Plant, and Equipment
360,305
365,957
Right-of-use Finance Leases
9,671
6,095
Right-of-use Operating Leases
66,254
70,219
Goodwill and Other Intangible Assets
451,624
458,896
Other Assets
26,136
21,130
Total Assets
$
1,477,188
$
1,418,032
Liabilities and Equity
Current Liabilities:
Accounts payable and accrued expenses
$
420,706
$
413,638
Current maturities of long-term debt
3,955
841
Current maturities of other long-term
obligations
4,119
2,990
Current lease obligations - Finance
2,439
1,589
Current lease obligations - Operating
19,680
19,970
Total Current Liabilities
450,899
439,028
Long-Term Debt
174,566
174,524
Long-Term Lease Obligations - Finance
7,193
4,516
Long-Term Lease Obligations -
Operating
50,710
53,249
Other Long-Term Liabilities
85,710
81,264
Deferred Income Taxes
73,327
74,706
Total Liabilities
842,405
827,287
Equity:
HNI Corporation shareholders' equity
634,460
590,419
Non-controlling interest
323
326
Total Equity
634,783
590,745
Total Liabilities and Equity
$
1,477,188
$
1,418,032
HNI Corporation and
Subsidiaries
Condensed Consolidated
Statements of Cash Flows
(In thousands)
(Unaudited)
Six Months Ended
July 3, 2021
June 27, 2020
Net Cash Flows From (To) Operating
Activities:
Net income (loss)
$
32,430
$
(11,341
)
Non-cash items included in net income:
Depreciation and amortization
41,139
38,605
Other post-retirement and post-employment
benefits
664
736
Stock-based compensation
7,788
5,659
Reduction in carrying amount of
right-of-use assets
13,081
11,342
Deferred income taxes
(1,430
)
1,092
Impairment of goodwill and intangible
assets
—
32,661
Other – net
3,211
(284
)
Net increase (decrease) in operating
assets and liabilities
(62,905
)
(49,631
)
Increase (decrease) in other
liabilities
3,305
(1,019
)
Net cash flows from (to) operating
activities
37,283
27,820
Net Cash Flows From (To) Investing
Activities:
Capital expenditures
(26,215
)
(15,739
)
Proceeds from sale of property, plant, and
equipment
151
69
Acquisition spending, net of cash
acquired
(1,529
)
(10,857
)
Capitalized software
(6,078
)
(5,037
)
Purchase of investments
(2,375
)
(1,631
)
Sales or maturities of investments
2,393
1,043
Net cash flows from (to) investing
activities
(33,653
)
(32,152
)
Net Cash Flows From (To) Financing
Activities:
Payments of long-term debt
(648
)
(73,828
)
Proceeds from long-term debt
3,785
82,129
Dividends paid
(26,841
)
(26,040
)
Purchase of HNI Corporation common
stock
(6,543
)
(6,764
)
Proceeds from sales of HNI Corporation
common stock
29,320
1,294
Other – net
(325
)
1,672
Net cash flows from (to) financing
activities
(1,252
)
(21,537
)
Net increase (decrease) in cash and cash
equivalents
2,378
(25,869
)
Cash and cash equivalents at beginning of
period
116,120
52,073
Cash and cash equivalents at end of
period
$
118,498
$
26,204
HNI Corporation and
Subsidiaries
Reportable Segment
Data
(In thousands)
(Unaudited)
Three Months Ended
Six Months Ended
July 3, 2021
June 27, 2020
July 3, 2021
June 27, 2020
Net Sales:
Workplace furnishings
$
344,137
$
308,081
$
646,885
$
646,467
Residential building products
166,318
109,375
347,863
239,694
Total
$
510,455
$
417,456
$
994,748
$
886,161
Income (Loss) Before Income Taxes:
Workplace furnishings
$
8,756
$
7,785
$
5,685
$
(25,446
)
Residential building products
30,525
14,365
70,374
35,036
General corporate
(14,594
)
(7,308
)
(28,772
)
(18,476
)
Operating Income (Loss)
24,687
14,842
47,287
(8,886
)
Interest expense, net
1,857
1,943
3,612
3,754
Total
$
22,830
$
12,899
$
43,675
$
(12,640
)
Depreciation and Amortization Expense:
Workplace furnishings
$
12,051
$
10,782
$
24,035
$
22,113
Residential building products
2,448
2,318
4,858
4,624
General corporate
6,177
6,019
12,246
11,868
Total
$
20,676
$
19,119
$
41,139
$
38,605
Capital Expenditures (including
capitalized software):
Workplace furnishings
$
7,017
$
4,293
$
17,504
$
11,394
Residential building products
1,947
206
6,657
3,179
General corporate
4,365
3,118
8,132
6,203
Total
$
13,329
$
7,617
$
32,293
$
20,776
As of
July 3, 2021
As of
January 2, 2021
Identifiable Assets:
Workplace furnishings
$
784,880
$
762,780
Residential building products
408,333
381,550
General corporate
283,975
273,702
Total
$
1,477,188
$
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.
HNI Corporation
Reconciliation
(Dollars in millions)
Three Months Ended
July 3, 2021
June 27, 2020
Workplace Furnishings
Residential Building Products
Total
Workplace Furnishings
Residential Building Products
Total
Sales as reported (GAAP)
$
344.1
$
166.3
$
510.5
$
308.1
$
109.4
$
417.5
% change from PY
11.7
%
52.1
%
22.3
%
Less: Acquisitions
8.7
1.5
10.2
—
—
—
Organic Sales (non-GAAP)
$
335.4
$
164.8
$
500.2
$
308.1
$
109.4
$
417.5
% change from PY
8.9
%
50.7
%
19.8
%
HNI Corporation
Reconciliation
(Dollars in millions, except per
share data)
Three Months Ended
July 3, 2021
Gross Profit
Operating Income
Tax
Net Income
EPS
As reported (GAAP)
$
187.9
$
24.7
$
5.4
$
17.4
$
0.39
% of net sales
36.8
%
4.8
%
3.4
%
Tax %
23.7
%
COVID-19 costs
—
0.6
0.2
0.5
0.01
Results (non-GAAP)
$
187.9
$
25.3
$
5.6
$
17.9
$
0.40
% of net sales
36.8
%
5.0
%
3.5
%
Tax %
23.7
%
HNI Corporation
Reconciliation
(Dollars in millions, except per
share data)
Three Months Ended
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
%
Workplace Furnishings
Reconciliation
(Dollars in millions)
Three Months Ended
July 3, 2021
June 27, 2020
Percent Change
Operating profit as reported (GAAP)
$
8.8
$
7.8
12.5
%
% of net sales
2.5
%
2.5
%
COVID-19 costs
0.6
—
Operating profit (non-GAAP)
$
9.4
$
7.8
20.8
%
% of net sales
2.7
%
2.5
%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210729005072/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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