HNI CORP - FORM 8-K - EX-99.1 - NEWS RELEASE

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8-K - FORM 8-K - HNI CORP	r8k10212015.htm

HNI Corporation 408 East Second Street, Muscatine, Iowa 52761, Tel 563 272 7400, Fax 563 272 7347, www.hnicorp.com

EXHIBIT 99.1

News Release

For Information Contact:

Matthew D. McGough, Vice President, Corporate Finance (563) 272-7563

Kurt A. Tjaden, Senior Vice President and Chief Financial Officer (563) 272-7400

HNI CORPORATION REPORTS

DOUBLE DIGIT EARNINGS GROWTH

FOR THIRD QUARTER FISCAL YEAR 2015

Third Quarter Highlights

·	Non-GAAP net income per share increased 15% to $0.93; GAAP net income per share $0.90

·	Non-GAAP gross profit increased 160 basis points; GAAP gross profit increased 180 basis points

·	Sales increased $1.2 million or 0.2%

MUSCATINE, Iowa (October 21, 2015) – HNI Corporation (NYSE: HNI) today announced sales for the third quarter ended October 3, 2015, of $615.9 million and net income of $40.8 million, or $0.90 per diluted share. Non-GAAP net income per diluted share improved 14.8 percent from the prior year quarter to $0.93, which excludes restructuring and transition costs.

Third Quarter Summary Comments

"We delivered double digit earnings growth for the third quarter. We are competing well in our markets despite a softening economy which led to modest declines in office furniture and organic hearth sales. We are taking calculated actions to reset our cost structure for a range of slowing economic scenarios," said Stan Askren, HNI Corporation Chairman, President and Chief Executive Officer.

Third Quarter – Financial Performance (Dollars in millions, except per share data)
	Three Months Ended
	10/3/2015			9/27/2014			Change
GAAP
Net Sales	$	615.9		$	614.7			0.2	%
Gross Profit %		37.6	%		35.8	%	180 bps
SG&A %		27.7	%		27.0	%	70 bps
(Gain) loss on sale of assets %		0.0	%		0.0	%	0 bps
Restructuring charges %		0.0	%		0.2	%	-20 bps
Operating Income	$	61.1		$	52.7			15.9	%
Operating Income %		9.9	%		8.6	%	130 bps
Net Income %		6.6	%		5.5	%	110 bps
EPS – diluted	$	0.90		$	0.74			21.6	%

Non-GAAP
Gross Profit %		38.0	%		36.4	%	160 bps
Operating Income	$	63.4		$	57.6			9.9	%
Operating Income %		10.3	%		9.4	%	90 bps
EPS – diluted	$	0.93		$	0.81			14.8	%

Third Quarter Summary Comments

·	Consolidated net sales increased $1.2 million or 0.2 percent to $615.9 million. Compared to prior year quarter, the Vermont Castings Group acquisition increased sales $18.7 million. On an organic basis, sales decreased 2.8 percent.

·	Non-GAAP gross margin increased 160 basis points compared to prior year driven by strong operational performance, favorable material costs and better price realization, partially offset by lower volume and unfavorable product mix.

·	Selling and administrative expenses, as a percentage of sales, increased 70 basis points due to higher freight costs, strategic investments and acquisition impact, partially offset by cost management actions.

The Corporation recorded $2.3 million of restructuring and transition expenses in the current quarter in connection with previously announced closures, acquisition integration and structural realignment. Third quarter 2014 included $4.9 million of restructuring and transition costs associated with facility closures.

Office Furniture – Financial Performance (Dollars in millions)
	Three Months Ended
	10/3/2015			9/27/2014			Change
GAAP
Net Sales	$	476.0		$	488.6			(2.6	%)
Operating Profit	$	48.4		$	42.8			13.2	%
Operating Profit %		10.2	%		8.7	%	150 bps

Non-GAAP
Operating Profit	$	49.0		$	47.6			2.9	%
Operating Profit %		10.3	%		9.8	%	50 bps

·	Third quarter sales decreased $12.6 million or 2.6 percent to $476.0 million. Sales for the quarter decreased in both our supplies-driven and contract channels.

·	Third quarter non-GAAP operating profit increased $1.4 million or 2.9 percent. Strong operational performance, cost management actions and better price realization were partially offset by lower volume, higher freight costs and unfavorable product mix.

Hearth Products – Financial Performance (Dollars in millions)
	Three Months Ended
	10/3/2015			9/27/2014			Change
GAAP
Net Sales	$	139.9		$	126.1			11.0	%
Operating Profit	$	23.5		$	23.8			(1.2	%)
Operating Profit %		16.8	%		18.9	%	-210 bps

Non-GAAP
Operating Profit	$	25.1		$	23.8			5.6	%
Operating Profit %		17.9	%		18.9	%	-100 bps

Third quarter sales increased $13.8 million or 11.0 percent to $139.9 million. Compared to prior year quarter, the Vermont Castings Group acquisition increased sales by $18.7 million. On an organic basis, sales decreased 3.9 percent for the quarter driven by a 24 percent decline in biomass products partially offset by growth in the new construction channel.

·	For the quarter, non-GAAP operating profit increased $1.3 million or 5.6 percent due to cost management actions, better price realization and favorable material costs.

Outlook

"I am pleased with our profit performance and believe we are competing well in our markets. We will continue to adjust our cost structure while investing for long-term profitable growth. I remain confident in our ability to create long-term shareholder value," said Mr. Askren.

The Corporation estimates sales to be down 4 to 8 percent in the fourth quarter over the same period in the prior year. Non-GAAP earnings per share are anticipated to be in the range of $2.55 to $2.60 for the full year, which includes the Vermont Castings Group acquisition results and excludes restructuring and transition costs.

Conference Call

HNI Corporation will host a conference call on Thursday, October 22, 2015 at 10:00 a.m. (Central) to discuss third quarter fiscal year 2015 results. To participate, call 1-877-512-9166 – conference ID number 46783871. A live webcast of the call will be available on HNI Corporation's website at http://www.hnicorp.com (under Investor Information – Webcasts). A replay of the webcast will be made available at the website address above. An audio replay of the call will be available until Thursday, October 29, 2015, 10:30 p.m. (Central) by dialing 1-855-859-2056 or 1-404-537-3406 – Conference ID number 46783871.

About HNI Corporation

HNI Corporation is a NYSE traded company (ticker symbol: HNI) providing products and solutions for the home and workplace environments. HNI Corporation is a leading global office furniture manufacturer and is the nation's leading manufacturer of hearth products. The Corporation's strong brands have leading positions in their markets. 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 and financial performance, expectations for future sales growth and earnings per diluted share (GAAP and non-GAAP) for the fourth quarter and full year fiscal 2015. 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: general economic conditions in the United States and internationally; unfavorable changes in the United States housing market; industry and competitive conditions; a decline in corporate spending on office furniture; changes in raw material, component or commodity pricing; future acquisitions, divestitures or investments; the cost of energy; changing legal, regulatory, environmental and healthcare conditions; the Corporation's ability to successfully complete its business software system implementation; the Corporation's ability to implement price increases; changes in the sales mix of products; 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 undertakes no obligation to update, amend or clarify forward-looking statements.

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HNI CORPORATION

Unaudited Condensed Consolidated Statement of Operations

	Three Months Ended						Nine Months Ended
(Dollars in thousands, except per share data)	10/3/2015			9/27/2014			10/3/2015			9/27/2014
Net sales	$	615,850		$	614,690		$	1,707,553		$	1,576,034
Cost of products sold		384,219			394,758			1,085,298			1,019,797
Gross profit		231,631			219,932			622,255			556,237
Selling and administrative expenses		170,365			166,201			506,336			466,693
(Gain) loss on sale of assets		6			15			18			(9,725	)
Restructuring charges		172			987			(12	)		11,241
Operating income		61,088			52,729			115,913			88,028
Interest income		110			110			318			326
Interest expense		1,733			1,971			5,689			6,360
Income before income taxes		59,465			50,868			110,542			81,994
Income taxes		18,619			17,372			37,367			27,817
Net income		40,846			33,496			73,175			54,177
Less: Net (loss) attributable to the noncontrolling interest		(2	)		(92	)		(30	)		(212	)
Net income attributable to HNI Corporation	$	40,848		$	33,588		$	73,205		$	54,389
Net income attributable to HNI Corporation common shareholders – basic	$	0.92		$	0.75		$	1.65		$	1.21
Average number of common shares outstanding – basic		44,263,027			44,689,819			44,327,608			44,916,038
Net income attributable to HNI Corporation common shareholders – diluted	$	0.90		$	0.74		$	1.61		$	1.19
Average number of common shares outstanding – diluted		45,402,537			45,611,099			45,516,521			45,758,502

Unaudited Condensed Consolidated Balance Sheet

Assets					Liabilities and Shareholders' Equity
(Dollars in thousands)	As of					As of
	10/3/2015		1/3/2015			10/3/2015		1/3/2015
Cash and cash equivalents	$	24,616	$	34,144	Accounts payable and
Short-term investments		6,352		3,052	accrued expenses	$	419,744	$	453,753
Receivables		280,091		240,053	Note payable and current
Inventories		145,196		121,791	maturities of long-term debt1		257,244		160
Deferred income taxes		14,964		17,310	Current maturities of other
Prepaid expenses and					long-term obligations		13,364		3,419
other current assets		29,751		39,210
Current assets		500,970		455,560	Current liabilities		690,352		457,332

Property and equipment – net		333,912		311,008	Long-term debt1		-		197,736
Goodwill		280,612		279,310	Other long-term liabilities		80,551		80,354
Other assets		206,939		193,456	Deferred income taxes		95,721		89,411

					Parent Company shareholders'
					equity		455,464		414,587
					Noncontrolling interest		345		(86	)
					Shareholders' equity		455,809		414,501
					Total liabilities and
Total assets	$	1,322,433	$	1,239,334	shareholders' equity	$	1,322,433	$	1,239,334

1All debt classified as current as of 10/3/2015 due to timing of maturity

Unaudited Condensed Consolidated Statement of Cash Flows

	Nine Months Ended
(Dollars in thousands)	10/3/2015			9/27/2014
Net cash flows from (to) operating activities	$	58,402		$	74,807
Net cash flows from (to) investing activities:
Capital expenditures		(81,573	)		(81,748	)
Other		672			17,596
Net cash flows from (to) financing activities		12,971			(46,007	)
Net increase (decrease) in cash and cash equivalents		(9,528	)		(35,352	)
Cash and cash equivalents at beginning of period		34,144			65,030
Cash and cash equivalents at end of period	$	24,616		$	29,678

Business Segment Data

	Three Months Ended						Nine Months Ended
(Dollars in thousands)	10/3/2015			9/27/2014			10/3/2015			9/27/2014
Net sales:
Office furniture	$	475,960		$	488,612		$	1,334,013		$	1,270,404
Hearth products		139,890			126,078			373,540			305,630
	$	615,850		$	614,690		$	1,707,553		$	1,576,034

Operating profit:
Office furniture	$	48,389		$	42,753		$	108,332		$	77,488
Hearth products		23,498			23,785			47,161			43,974
Total operating profit		71,887			66,538			155,493			121,462
Unallocated corporate expense		(12,422	)		(15,670	)		(44,951	)		(39,468	)
Income before income taxes	$	59,465		$	50,868		$	110,542		$	81,994

Depreciation and amortization expense:
Office furniture	$	10,644		$	12,427		$	31,284		$	34,398
Hearth products		2,166			1,121			6,171			3,455
General corporate		1,694			1,264			4,844			3,911
	$	14,504		$	14,812		$	42,299		$	41,764

Capital expenditures (including capitalized software):
Office furniture	$	19,590		$	13,542		$	45,989		$	43,378
Hearth products		2,798			1,691			7,195			4,389
General corporate		9,303			15,394			28,389			33,981
	$	31,691		$	30,627		$	81,573		$	81,748

							As of 10/3/2015			As of 1/3/2015
Identifiable assets:
Office furniture							$	769,641		$	724,293
Hearth products								374,716			341,315
General corporate								178,076			173,726
							$	1,322,433		$	1,239,334

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Non-GAAP Financial Measures

This earnings release contains certain non-GAAP financial measures. A "non-GAAP financial measure" is a numerical measure of a company's financial performance that excludes or includes amounts different than the most directly comparable measure calculated and presented in accordance with GAAP in the statements of income, balance sheets or statements of cash flow of the company. We have provided a reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measure.

The non-GAAP financial measures used within this earnings release are: gross profit, operating income, operating profit, net income per diluted share (i.e., EPS), excluding restructuring charges and transition costs. Non-GAAP EPS is calculated using the Corporation's overall effective tax rate for the period. We present these measures because management uses this information to monitor and evaluate financial results and trends. Management believes this information is also useful for investors. This earnings release also contains a forward-looking estimate of non-GAAP earnings per diluted share for the fourth quarter and full fiscal year 2015. We provide such non-GAAP measures to investors on a prospective basis for the same reasons we provide them to investors on a historical basis. We are unable to provide a reconciliation of our forward-looking estimate of non-GAAP earnings per diluted share to a forward-looking estimate of GAAP earnings per diluted share because certain information needed to make a reasonable forward-looking estimate of GAAP earnings per diluted share for the fourth quarter and full fiscal year is difficult to predict and estimate and is often dependent on future events which may be uncertain or outside of our control. These may include unanticipated charges related to asset impairments (fixed assets, intangibles or goodwill), unanticipated acquisition related costs and other unanticipated non-recurring items not reflective of ongoing operations.

HNI Corporation Reconciliation (Dollars in millions, except per share data)
	Three Months Ended 10/3/2015			Three Months Ended 9/27/2014
	Gross Profit	Operating Income	EPS	Gross Profit	Operating Income	EPS
As Reported (GAAP)	$231.6	$61.1	$0.90	$219.9	$52.7	$0.74
% of net sales	37.6%	9.9%		35.8%	8.6%

Restructuring & Impairment charges	$0.8	$1.0	$0.01	$2.4	$3.4	$0.05
Transition costs	$1.3	$1.3	$0.02	$1.5	$1.5	$0.02


Results (non-GAAP)	$233.7	$63.4	$0.93	$223.8	$57.6	$0.81
% of net sales	38.0%	10.3%		36.4%	9.4%

Office Furniture Reconciliation (Dollars in millions)
	Three Months Ended		Percent Change
	10/3/2015	9/27/2014	Percent Change
Operating profit as reported (GAAP)	$48.4	$42.8	13.2%
% of Net Sales	10.2%	8.7%

Restructuring & Impairment charges	$0.0	$3.4
Transition Costs	$0.6	$1.5


Operating profit (non-GAAP)	$49.0	$47.6	2.9%
% of Net Sales	10.3%	9.8%

Hearth Reconciliation (Dollars in millions)
	Three Months Ended		Percent Change
	10/3/2015	9/27/2014	Percent Change
Operating profit as reported (GAAP)	$23.5	$23.8	(1.2%)
% of Net Sales	16.8%	18.9%

Restructuring charges	$0.9	-
Transition Costs	$0.7	-


Operating profit (non-GAAP)	$25.1	$23.8	5.6%
% of Net Sales	17.9%	18.9%

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