SEC Info - Hni Corp. - ‘10-Q’ for 3/30/24

i 47,297,068


HNI Corporation and Subsidiaries
Quarterly Report on Form 10-Q

Table of Contents

PART I. FINANCIAL INFORMATION
		Page
Item 1.	Financial Statements (Unaudited)

	Condensed Consolidated Statements of Comprehensive Income - Three Months Ended March 30, 2024 and April 1, 2023	3

	Condensed Consolidated Balance Sheets - March 30, 202 4 and December 30, 2023	4

	Condensed Consolidated Statements of Equity - Three Months Ended March 30, 2024 a nd April 1, 2023	6

	Condensed Consolidated Statements of Cash Flows - Three Months Ended March 30, 2024 and April 1, 2023	7

	Notes to Condensed Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29

Item 4.	Controls and Procedures	29

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	29

Item 1A.	Risk Factors	29

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29

Item 3.	Defaults Upon Senior Securities - None	-

Item 4.	Mine Safety Disclosures - Not Applicable	-

Item 5.	Other Information	30

Item 6.	Exhibits	31

Signatures		32

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

HNI Corporation and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income

(In millions, except per share data)

(Unaudited)

Three Months Ended

Net sales

i 588.0

i 479.1

Cost of sales

i 355.1

i 304.8

Gross profit

i 232.8

i 174.3

Selling and administrative expenses

i 203.1

i 167.9

Restructuring charges

i 0.1

i —

Operating income

i 29.7

i 6.4

Interest expense, net

i 7.6

i 2.7

Income before income taxes

i 22.0

i 3.8

Income tax expense

i 4.3

i 2.2

Net income

i 17.7

i 1.6

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

i 0.0

( i 0.0)

Net income attributable to HNI Corporation

i 17.7

i 1.6

Average number of common shares outstanding – basic

i 47.1

i 41.5

Net income attributable to HNI Corporation per common share – basic

i 0.38

i 0.04

Average number of common shares outstanding – diluted

i 48.1

i 42.1

Net income attributable to HNI Corporation per common share – diluted

i 0.37

i 0.04

Foreign currency translation adjustments

i 0.0

i 0.1

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

( i 0.0)

i 0.2

Change in derivative financial instruments, net of tax

i 1.4

( i 0.1)

Other comprehensive income (loss), net of tax

i 1.4

i 0.1

Comprehensive income

i 19.0

i 1.7

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

i 0.0

( i 0.0)

Comprehensive income attributable to HNI Corporation

i 19.0

i 1.7

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).

Amounts may not sum due to rounding.


HNI Corporation and Subsidiaries Condensed Consolidated Balance Sheets (In millions)
(Unaudited)

	March 30, 2024		December 30, 2023
Assets
Current Assets:
Cash and cash equivalents	$	i 27.0	$	i 28.9
Short-term investments	i 5.5		i 5.6
Receivables	i 231.9		i 247.1
Allowance for doubtful accounts	( i 2.8)		( i 3.5)
Inventories, net	i 212.1		i 196.6

Prepaid expenses and other current assets	i 53.5		i 61.3

Total Current Assets	i 527.2		i 535.9

Property, Plant, and Equipment:
Land and land improvements	i 59.0		i 58.9
Buildings	i 409.6		i 406.8
Machinery and equipment	i 714.5		i 705.8
Construction in progress	i 21.8		i 22.2
	i 1,204.8		i 1,193.7
Less accumulated depreciation	( i 652.6)		( i 638.5)
Net Property, Plant, and Equipment	i 552.2		i 555.2

Right-of-use - Finance Leases	i 11.7		i 12.2

Right-of-use - Operating Leases	i 113.8		i 115.2

Goodwill and Other Intangible Assets, net	i 645.9		i 651.9

Other Assets	i 61.8		i 58.4

Total Assets	$	i 1,912.6	$	i 1,928.8

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).

Amounts may not sum due to rounding.


HNI Corporation and Subsidiaries Condensed Consolidated Balance Sheets (In millions)
(Unaudited)

	March 30, 2024		December 30, 2023
Liabilities and Equity
Current Liabilities:
Accounts payable and accrued expenses	$	i 363.7	$	i 418.7
Current maturities of debt	i 12.8		i 7.5
Current maturities of other long-term obligations	i 2.0		i 7.3
Current lease obligations - Finance	i 4.4		i 4.4
Current lease obligations - Operating	i 24.9		i 25.9

Total Current Liabilities	i 407.7		i 463.7

Long-Term Debt	i 460.2		i 428.3



Long-Term Lease Obligations - Finance	i 7.3		i 7.9

Long-Term Lease Obligations - Operating	i 103.7		i 104.0

Other Long-Term Liabilities	i 78.8		i 78.0

Deferred Income Taxes	i 83.0		i 85.1

Total Liabilities	i 1,140.8		i 1,167.0

Equity:









HNI Corporation shareholders’ equity	i 771.5		i 761.4

Non-controlling interest	i 0.3		i 0.3

Total Equity	i 771.8		i 761.8

Total Liabilities and Equity	$	i 1,912.6	$	i 1,928.8

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).

Amounts may not sum due to rounding.

HNI Corporation and Subsidiaries
Condensed Consolidated Statements of Equity

(In millions, except per share data)

(Unaudited)

Three Months Ended - March 30, 2024

Common Stock

Additional Paid-in Capital

Retained Earnings

Accumulated Other Comprehensive Income (Loss)

Non-controlling Interest

Total Shareholders’ Equity

Balance, December 30, 2023

i 46.9

i 201.6

i 523.6

( i 10.6)

i 0.3

i 761.8

Comprehensive income:

Net income

—

i 17.7

—

i 0.0

i 17.7

Other comprehensive income (loss), net of tax

—

i 1.4

—

i 1.4

Dividends payable

—

( i 0.8)

—

( i 0.8)

Cash dividends; $ i 0.32 per share

—

( i 15.1)

—

( i 15.1)

Common shares – treasury:

Shares purchased

( i 0.1)

( i 2.5)

—

( i 2.5)

Shares issued under Members’ Stock Purchase Plan and stock awards, net of tax

i 0.5

i 8.9

—

i 9.4

Balance, March 30, 2024

i 47.3

i 208.1

i 525.4

( i 9.3)

i 0.3

i 771.8

Three Months Ended - April 1, 2023

Common Stock

Additional Paid-in Capital

Retained Earnings

Accumulated Other Comprehensive Income (Loss)

Non-controlling Interest

Total Shareholders’ Equity

Balance, December 31, 2022

i 41.4

i 49.1

i 534.0

( i 8.0)

i 0.3

i 616.8

Comprehensive income:

Net income (loss)

—

i 1.6

—

( i 0.0)

i 1.6

Other comprehensive income (loss), net of tax

—

i 0.1

—

i 0.1

Dividends payable

—

( i 0.3)

—

( i 0.3)

Cash dividends; $ i 0.32 per share

—

( i 13.3)

—

( i 13.3)

Common shares – treasury:

Shares purchased

—

Shares issued under Members’ Stock Purchase Plan and stock awards, net of tax

i 0.3

i 8.0

—

i 8.3

Balance, April 1, 2023

i 41.7

i 57.1

i 522.0

( i 7.9)

i 0.3

i 613.2

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).

Amounts may not sum due to rounding.


HNI Corporation and Subsidiaries Condensed Consolidated Statements of Cash Flows (In millions)
(Unaudited)

	Three Months Ended
	March 30, 2024		April 1, 2023
Net Cash Flows From (To) Operating Activities:
Net income	$	i 17.7	$	i 1.6
Non-cash items included in net income:
Depreciation and amortization	i 26.4		i 20.1
Other post-retirement and post-employment benefits	i 0.3		i 0.3
Stock-based compensation	i 7.7		i 4.5


Deferred income taxes	( i 2.1)		( i 0.6)


Other – net	i 0.6		i 0.6
Net decrease in cash from operating assets and liabilities	( i 47.6)		( i 10.5)
Increase (decrease) in other liabilities	( i 7.2)		i 1.4
Net cash flows from (to) operating activities	( i 4.3)		i 17.3

Net Cash Flows From (To) Investing Activities:
Capital expenditures	( i 10.7)		( i 19.9)

Capitalized software	( i 0.5)		( i 0.2)

Purchase of investments	( i 0.6)		( i 1.6)
Sales or maturities of investments	i 1.2		i 1.5

Other – net	i 0.1		i 0.1
Net cash flows from (to) investing activities	( i 10.6)		( i 20.0)

Net Cash Flows From (To) Financing Activities:
Payments of debt	( i 81.5)		( i 77.8)
Proceeds from debt	i 118.6		i 97.1
Dividends paid	( i 16.6)		( i 13.7)
Purchase of HNI Corporation common stock	( i 2.6)		i —
Proceeds from sales of HNI Corporation common stock	i 0.6		i 0.6
Other – net	( i 5.6)		( i 4.0)
Net cash flows from (to) financing activities	i 12.9		i 2.1



Net decrease in cash and cash equivalents	( i 2.0)		( i 0.6)
Cash and cash equivalents at beginning of period	i 28.9		i 17.4
Cash and cash equivalents at end of period	$	i 27.0	$	i 16.8

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).

Amounts may not sum due to rounding.

HNI Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 1. i Basis of Presentation

The accompanying unaudited, condensed consolidated financial statements of HNI Corporation (individually and together with its consolidated subsidiaries, the "Corporation") have been prepared in accordance with generally accepted accounting principles ("GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. The December 30, 2023, consolidated balance sheet included in this Form 10-Q was derived from audited financial statements but does not include all disclosures required by GAAP. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair statement have been included. Operating results for the three-month period ended March 30, 2024, are not necessarily indicative of the results expected for the fiscal year ending December 28, 2024 or for any other period. For further information, refer to the consolidated financial statements and accompanying notes included in the Corporation's Annual Report on Form 10-K for the fiscal year ended December 30, 2023. All dollar amounts presented are in millions, except per share data or where otherwise indicated. Amounts may not sum due to rounding.

On June 1, 2023, the Corporation acquired Kimball International, Inc. ("Kimball International"). The Corporation included the financial results of Kimball International in the Condensed Consolidated Financial Statements starting as of the date of acquisition. See "Note 3. Acquisition and Divestitures" for further information.

Note 2. i Revenue from Contracts with Customers

Disaggregation of Revenue

Revenue from contracts with customers disaggregated by product category is as follows:

Three Months Ended

Systems and storage

i 279.5

i 182.3

Seating

i 126.0

i 93.5

Other

i 34.2

i 23.9

Total workplace furnishings

i 439.8

i 299.6

Residential building products

i 148.2

i 179.4

Net sales

i 588.0

i 479.1

Sales by product category are subject to similar economic factors and market conditions. See "Note 14. Reportable Segment Information" for further information about operating segments.

Contract Assets and Contract Liabilities

In addition to trade receivables, the Corporation has contract assets consisting of funds paid up-front to certain workplace furnishings dealers in exchange for their multi-year commitment to market and sell the Corporation’s products. These contract assets are amortized over the term of the contracts and recognized as a reduction of revenue. The Corporation has contract liabilities consisting of customer deposits and rebate and marketing program liabilities.

Contract assets and contract liabilities were as follows:


	March 30, 2024		December 30, 2023
Trade receivables (1)	$	i 231.9	$	i 247.1
Contract assets (current) (2)	$	i 3.2	$	i 3.1
Contract assets (long-term) (3)	$	i 27.8	$	i 28.1
Contract liabilities - Customer deposits (4)	$	i 32.4	$	i 35.6
Contract liabilities - Accrued rebate and marketing programs (4)	$	i 21.5	$	i 31.4

The index below indicates the line item in the Condensed Consolidated Balance Sheets where contract assets and contract liabilities are reported:

(1) "Receivables"

(2) "Prepaid expenses and other current assets"

(3) "Other Assets"

(4) "Accounts payable and accrued expenses"

Contract liabilities for customer deposits paid to the Corporation prior to the satisfaction of performance obligations are recognized as revenue upon completion of the performance obligations. The contract liability balance related to customer deposits was $ i 35.6 million as of December 30, 2023, of which, $ i 29.7 million was recognized as revenue in the first three months of 2024.

Note 3. i Acquisitions and Divestitures

Acquisition - Kimball International

On June 1, 2023, the Corporation completed its acquisition of Kimball International, a leading commercial furnishings company with expertise in workplace, health, and hospitality, resulting in Kimball International becoming a wholly-owned subsidiary of the Corporation. The Corporation has incurred aggregate acquisition-related expenses of $ i 41.2 million related to this transaction, of which $ i 28.6 million were incurred as corporate costs and $ i 12.5 million were recorded in the workplace furnishings segment. Of these expenses, corporate costs of $ i 3.4 million were incurred in the three-month period ended April 1, 2023, and are included in "Selling and administrative expenses" in the Condensed Consolidated Statements of Comprehensive Income. Additionally, acquisition-related financing costs of $ i 2.8 million and $ i 0.2 million were recorded to the Condensed Consolidated Balance Sheet in "Long-term debt" and "Other assets", respectively, while $ i 0.3 million of acquisition-related stock issuance costs were recorded to "Additional paid-in capital".

The acquired assets and assumed liabilities and results of Kimball International's operations are included in the Corporation's workplace furnishings reportable segment. The acquisition was accounted for using the acquisition method pursuant to ASC 805, with goodwill being recorded as a result of the purchase price exceeding the fair value of identifiable tangible and intangible assets and liabilities. Goodwill, which is not tax-deductible, is primarily attributable to the assembled workforce of Kimball International and anticipated synergies.

The total fair market value of consideration was approximately $ i 503.7 million, which is allocated as follows:

Kimball International Shares

HNI Shares Exchanged

Fair Value

Cash Consideration:

Shares of Kimball International common stock issued and outstanding as of June 1, 2023

i 36.4

i 327.8

Kimball International equivalent shares

i 0.2

i 2.3

Total number of Kimball International shares for cash consideration

i 36.6

i 330.0

Consideration for payment to settle Kimball International's outstanding debt

i 50.2

Share Consideration:

Shares of Kimball International stock issued and outstanding as of June 1, 2023

i 36.4

i 4.7

i 120.8

Replacement Share-Based Awards:

Outstanding awards of Kimball International restricted stock units relating to Kimball International common stock as of June 1, 2023

i 0.5

i 0.2

i 2.6

Total acquisition date fair value of purchase consideration

i 503.7

Consideration provided in the form of HNI Corporation shares and HNI Corporation replacement share-based awards represents non-cash consideration.

The preliminary purchase price allocation at the date of acquisition, as updated, is as follows:

Preliminary at December 30, 2023

Measurement period adjustments

As adjusted at March 30, 2024

Goodwill

i 162.7

i 1.1

i 163.8

Intangible assets

i 110.1

i —

i 110.1

Other assets acquired and liabilities assumed, net

i 231.0

( i 1.1)

i 229.9

Net Assets and Liabilities

i 503.7

i —

i 503.7

The following table summarizes the acquired identified intangible assets and weighted average useful lives:

Category

Weighted-average useful life

Fair Value

Software

i 3 years

i 5.6

Customer lists and other

i 12 years

i 47.2

Acquired technology

i 18 years

i 16.5

Trademarks and trade names - Definite-lived

i 17 years

i 3.8

Trademarks and trade names - Indefinite-lived

Indefinite-lived

i 37.0

Total intangible assets

i 110.1

The valuation analysis requires the use of complex management estimates and assumptions such as customer attrition rates, trade name and technology royalty rates, future cash flows, discount rates, property appraisals, and long-term growth rates. As of March 30, 2024, assets and liabilities are recorded based on preliminary data and assumptions as the Corporation is in the process of reviewing information related to the determination of the fair values. The provisional assets and liabilities may be adjusted to reflect the finally determined amounts, and those adjustments may be material. The Corporation expects to finalize the purchase price allocation no later than one year from the date of the acquisition. During the three months ended March 30,

2024, the Corporation revised the preliminary purchase price allocation resulting in a net increase to goodwill of $ i 1.1 million, primarily attributable to adjustments to accrued expenses.

The following table summarizes the results of Kimball International operations that are included in the Corporation's Condensed Consolidated Statement of Comprehensive Income for the three-month period ended March 30, 2024.


	Three Months Ended
	March 30, 2024
Net sales	$	i 147.5
Net income	$	i 6.2

Pro Forma Results of Operations

The following table provides, on a pro forma basis, the combined results of operations of HNI Corporation and Kimball International for the three-month period ended April 1, 2023, as though the acquisition and related financing had occurred as of January 2, 2022, the first day of the Corporation's 2022 fiscal year. The pro forma results include certain purchase accounting adjustments such as: reclassifications to conform Kimball International's results to the Corporation's financial statement presentation; estimated depreciation and amortization expense on acquired tangible and intangible assets; estimated share based compensation expense for Kimball International equity awards converted to the Corporation's equity awards; interest associated with additional borrowings to finance the acquisition; non-recurring transaction costs as outlined above; and the impact to income tax expense. This pro forma information is not necessarily reflective of what the Corporation's results would have been had the acquisition occurred on the date indicated, nor is it indicative of future results.

Three Months Ended

Net sales

i 640.4

Net income

i 4.3

Note 4. i Inventories

i The Corporation’s residential building products inventories, and a majority of its workplace furnishings inventories, are valued at cost, on the "last-in, first-out" (LIFO) basis. Remaining inventories are generally valued at the lower of cost, on the "first-in, first-out" (FIFO) basis, or net realizable value. i Inventories included in the Condensed Consolidated Balance Sheets consisted of the following:


	March 30, 2024			December 30, 2023

Finished products, net	$	i 130.6		$	i 112.9
Materials and work in process, net	i 126.0			i 128.2
LIFO allowance	( i 44.5)			( i 44.5)
Total inventories, net	$	i 212.1		$	i 196.6

Inventory valued by the LIFO costing method	i 94		%	i 91		%

In addition to the LIFO allowance, the Corporation recorded inventory allowances reducing finished products, materials, and work in process of $ i 14.7 million and $ i 14.2 million as of March 30, 2024 and December 30, 2023, respectively, to adjust for excess and obsolete inventory or otherwise reduce FIFO-basis inventory to net realizable value.

Note 5. i Goodwill and Other Intangible Assets

Goodwill and other intangible assets included in the Condensed Consolidated Balance Sheets consisted of the following:


	March 30, 2024		December 30, 2023
Goodwill, net	$	i 442.1	$	i 441.0
Definite-lived intangible assets, net	i 154.6		i 161.7
Indefinite-lived intangible assets	i 49.1		i 49.1
Total goodwill and other intangible assets, net	$	i 645.9	$	i 651.9

Goodwill

The changes in the carrying amount of goodwill, by reporting segment, are as follows:

Workplace Furnishings

Residential Building Products

Total

Balance as of December 30, 2023

Goodwill

i 297.2

i 222.4

i 519.6

Accumulated impairment losses

( i 78.5)

( i 0.1)

( i 78.6)

Net goodwill balance as of December 30, 2023

i 218.7

i 222.3

i 441.0

Goodwill measurement period adjustments

i 1.1

i —

i 1.1

Balance as of March 30, 2024

Goodwill

i 298.3

i 222.4

i 520.7

Accumulated impairment losses

( i 78.5)

( i 0.1)

( i 78.6)

Net goodwill balance as of March 30, 2024

i 219.8

i 222.3

i 442.1

Goodwill measurement period adjustments in the current year relate to the acquisition of Kimball International. See "Note 3. Acquisitions and Divestitures" in the Notes to Condensed Consolidated Financial Statements for further information.

Definite-lived intangible assets

The table below summarizes amortizable definite-lived intangible assets, which are reflected in "Goodwill and Other Intangible Assets, net" in the Condensed Consolidated Balance Sheets:

December 30, 2023

Gross

Accumulated Amortization

Net

Gross

Accumulated Amortization

Net

Software

i 200.4

i 148.6

i 51.8

i 199.6

i 143.4

i 56.2

Trademarks and trade names

i 18.1

i 7.6

i 10.5

i 18.1

i 7.3

i 10.8

Customer lists and other

i 143.9

i 51.5

i 92.4

i 143.9

i 49.2

i 94.7

Net definite-lived intangible assets

i 362.3

i 207.7

i 154.6

i 361.6

i 199.8

i 161.7

Amortization expense is reflected in "Selling and administrative expenses" in the Condensed Consolidated Statements of Comprehensive Income and was as follows:

Three Months Ended

Capitalized software

i 5.2

i 5.5

Other definite-lived intangibles

i 2.6

i 1.5

The occurrence of events such as acquisitions, dispositions, or impairments may impact future amortization expense. Over the next several years, amortization expense is expected to decline due primarily to the completion of the amortization of the Corporation's Business Systems Transformation investment. i Based on the current amount of intangible assets subject to amortization, the estimated amortization expense for each of the following five years is as follows:


	2024		2025		2026		2027		2028
Amortization expense	$	i 30.1	$	i 27.3	$	i 22.7	$	i 16.8	$	i 9.0

Indefinite-lived intangible assets

The Corporation also owns certain intangible assets, which are deemed to have indefinite useful lives because they are expected to generate cash flows indefinitely. i These indefinite-lived intangible assets are reflected in "Goodwill and Other Intangible Assets, net" in the Condensed Consolidated Balance Sheets:


	March 30, 2024		December 30, 2023
Trademarks and trade names	$	i 49.1	$	i 49.1

Impairment Analysis

The Corporation evaluates its goodwill and indefinite-lived intangible assets for impairment on an annual basis during the fourth quarter, or whenever indicators of impairment exist. The Corporation also evaluates long-lived assets (which include definite-lived intangible assets) for impairment if indicators exist. No impairment indicators were identified in the current period.

Note 6. i Product Warranties

The Corporation issues certain warranty policies on its workplace furnishings and residential building products that provide for repair or replacement of any covered product or component that fails during normal use because of a defect in design, materials, or workmanship. The duration of warranty policies on the Corporation’s products varies based on the type of product. Allowances have been established for the anticipated future costs associated with the Corporation’s warranty programs.

A warranty allowance is determined by recording a specific allowance for known warranty issues and an additional allowance for unknown claims expected to be incurred based on historical claims experience. Actual claims incurred could differ materially from the original estimates, requiring adjustments to the allowance.

Activity associated with warranty obligations was as follows:


	Three Months Ended
	March 30, 2024		April 1, 2023
Balance at beginning of period	$	i 18.0	$	i 14.8

Accruals for warranties issued	i 3.5		i 3.2



Settlements and other	( i 3.1)		( i 2.7)
Balance at end of period	$	i 18.4	$	i 15.3

The current and long-term portions of the allowance for estimated settlements are included within "Accounts payable and accrued expenses" and "Other Long-Term Liabilities," respectively, in the Condensed Consolidated Balance Sheets. The following table summarizes when these estimated settlements are expected to be paid:


	March 30, 2024		December 30, 2023
Current - in the next twelve months	$	i 6.4	$	i 6.0
Long-term - beyond one year	i 12.0		i 12.0
Total	$	i 18.4	$	i 18.0

Note 7. i Debt

Debt is as follows:


	March 30, 2024		December 30, 2023
Revolving credit facility with interest at a variable rate (March 30, 2024 - i 6.7%; December 30, 2023 - i 6.9%)	$	i 74.0	$	i 38.5
Term loan with interest at a variable rate (March 30, 2024 - i 6.8%; December 30, 2023 - i 7.0%)	i 300.0		i 300.0
Fixed-rate notes due in 2025 with an interest rate of i 4.2%	i 50.0		i 50.0
Fixed-rate notes due in 2028 with an interest rate of i 4.4%	i 50.0		i 50.0
Other amounts	i 1.6		i —
Deferred debt issuance costs	( i 2.6)		( i 2.7)
Total debt	i 473.0		i 435.8
Less: Current maturities of debt	i 12.8		i 7.5
Long-term debt	$	i 460.2	$	i 428.3

The aggregate carrying value of the Corporation’s variable-rate, long-term debt obligations under the revolving credit and term loan facilities at March 30, 2024, was $ i 374 million, which approximated fair value. The fair value of the fixed-rate notes was estimated based on a discounted cash flow method (Level 2) to be $ i 98 million at March 30, 2024.

As of March 30, 2024, the Corporation’s revolving credit facility borrowings were incurred under the amended and restated credit agreement entered into on June 14, 2022, as further amended on March 14, 2023 and June 1, 2023 with a scheduled maturity of June 14, 2027. The Corporation deferred the related debt issuance costs, which are classified as assets, and is amortizing them over the term of the credit agreement. The current portion of debt issuance costs of $ i 0.4 million is the amount to be amortized over the next twelve months, based on the current credit agreement and is reflected in "Prepaid expenses and other current assets" in the Condensed Consolidated Balance Sheets. The long-term portion of debt issuance costs of $ i 0.8 million is reflected in "Other Assets" in the Condensed Consolidated Balance Sheets.

As of March 30, 2024, there was $ i 74 million principal amount of borrowings outstanding under the $ i 425 million revolving credit facility. The entire amount drawn under the revolving credit facility is considered long-term as the Corporation assumes no obligation to repay any of the amounts borrowed in the next twelve months. Based on earnings before interest, taxes, depreciation, and amortization for the last four fiscal quarters, the Corporation can access the full remaining $ i 351 million of borrowing capacity available under the revolving credit facility and maintain compliance with the financial covenants under the facility described below.

In addition to cash flows from operations, the revolving credit facility under the credit agreement is the primary source of daily operating capital for the Corporation and provides additional financial capacity for capital expenditures, repurchases of common stock, and strategic initiatives, such as acquisitions.

As of March 30, 2024, the Corporation had $ i 300 million principal amount of borrowings outstanding under a term loan agreement entered into on March 31, 2023, as further amended on May 25, 2023. The proceeds of the term loan were used to support funding of the Corporation's acquisition of Kimball International on June 1, 2023. The principal amount under the term loan is subject to amortization beginning June 30, 2024, with incremental amounts due each quarter until the expiration of the term loan on the fifth year of the funding date, defined as June 1, 2028, with $ i 11.3 million due within the next twelve months.

The Corporation deferred the debt issuance costs related to the agreement, which are classified as a reduction of long-term debt, and is amortizing them over the term of the agreement. The deferred debt issuance costs do not reduce the amount owed by the Corporation under the terms of the agreement. As of March 30, 2024, the deferred debt issuance costs balance of $ i 2.4 million related to the agreement is reflected in "Long-Term Debt" in the Condensed Consolidated Balance Sheets.

As of March 30, 2024, the Corporation also had $ i 100 million principal amount of borrowings outstanding under private placement note agreements entered into on May 31, 2018. Under the agreements, the Corporation issued $ i 50 million of i seven-year fixed-rate notes with an interest rate of i 4.2 percent, due May 31, 2025, and $ i 50 million of i ten-year fixed-rate notes with an interest rate of i 4.4 percent, due May 31, 2028. The Corporation deferred the debt issuance costs related to the private placement note agreements, which are classified as a reduction of long-term debt, and is amortizing them over the terms of the private placement note agreements. The deferred debt issuance costs do not reduce the amount owed by the Corporation under the terms of the private placement note agreements. As of March 30, 2024, the deferred debt issuance costs balance of $ i 0.2 million related to the private placement note agreements is reflected in "Long-Term Debt" in the Condensed Consolidated Balance Sheets. As of March 30, 2024, due to current market rates, the Corporation would not owe any amounts to the note holders under a make-whole provision.

The revolving credit facility, term loan credit facility, and private placement notes all contain financial and non-financial covenants. Non-compliance with covenants under the agreements could prevent the Corporation from being able to access further borrowings, require immediate repayment of all amounts outstanding, and/or increase the cost of borrowing. The covenants under all the agreements are substantially the same. In the event the private placement notes are repaid by the Corporation, the revolving credit facility and term loan credit facility include certain fall-away provisions to allow for modification of the covenant measures whereby the Corporation would have increased financial flexibility. In such an event, the definition of consolidated EBITDA and the maximum leverage under the consolidated leverage ratio would adjust to a more flexible definition while the interest coverage ratio would no longer be an included measure.

The Corporation is subject to financial covenants requiring it to maintain the following financial ratios as of the end of any fiscal quarter:

•a consolidated interest coverage ratio (as defined in the credit agreements) of not less than i 4.0 to 1.0, based upon the ratio of (a) consolidated EBITDA for the last four fiscal quarters to (b) the sum of consolidated interest charges; and

•a consolidated leverage ratio (as defined in the credit agreements) of not greater than i 3.5 to 1.0, based upon the ratio of (a) the quarter-end consolidated funded indebtedness to (b) consolidated EBITDA for the last four fiscal quarters.

The more restrictive of the financial covenants is the consolidated leverage ratio requirement of i 3.5 to 1.0. Under the credit agreements, consolidated EBITDA is defined as consolidated net income before interest expense, income taxes, and depreciation and amortization of intangibles, as well as non-cash items that increase or decrease net income. As of March 30, 2024, the Corporation was in compliance with the financial covenants.

Note 8. i Income Taxes

The Corporation’s tax provision for interim periods is determined using an estimate of its annual effective tax rate, adjusted for discrete items. i The following table summarizes the Corporation’s income tax provision:

Three Months Ended

Income before income taxes

i 22.0

i 3.8

Income taxes

i 4.3

i 2.2

Effective tax rate

i 19.6

i 58.4

The Corporation’s effective tax rate was lower in the three-month period ended March 30, 2024 compared to the same period last year driven by favorable equity-based compensation adjustments and the impact of higher income on certain tax attributes. Additionally, the prior-year quarter included nondeductible Kimball International acquisition costs, which did not recur in the current-year quarter.

Note 9. i Fair Value Measurements of Financial Instruments

For recognition purposes, on a recurring basis, the Corporation is required to measure at fair value its marketable securities, derivative financial instruments, and put option liabilities. The marketable securities are comprised of money market funds, government securities, corporate bonds, and mutual funds. When available, the Corporation uses quoted market prices to determine fair value and classifies such measurements within Level 1. Where market prices are not available, the Corporation makes use of observable market-based inputs (prices or quotes from published exchanges and indexes) to calculate fair value using the market approach, in which case the measurements are classified within Level 2. Significant unobservable inputs, which are classified within Level 3, are used in the estimation of the fair value of put option liabilities, determined using a simulation model based on assumptions including future cash flows, discount rates, and volatility.

Financial instruments measured at fair value were as follows:

Fair value as of measurement date

Quoted prices in active markets for identical assets
(Level 1)

Significant other observable inputs
(Level 2)

Significant unobservable inputs
(Level 3)

Balance as of March 30, 2024

Cash and cash equivalents (including money market funds) (1)

i 27.0

i —

Mutual funds (2)

i 11.8

i —

Government securities (2)

i 5.7

i —

i 5.7

i —

Corporate bonds (2)

i 7.6

i —

i 7.6

i —

Interest rate swap derivative - asset (3)

i 0.2

i —

i 0.2

i —

Interest rate swap derivative - liability (4)

( i 1.9)

i —

( i 1.9)

i —

Put option liability (4)

( i 5.7)

i —

( i 5.7)

Balance as of December 30, 2023

Cash and cash equivalents (including money market funds) (1)

i 28.9

i —

Mutual funds (2)

i 11.3

i —

Government securities (2)

i 5.7

i —

i 5.7

i —

Corporate bonds (2)

i 7.8

i —

i 7.8

i —

Interest rate swap derivative - liability (4)

( i 3.5)

i —

( i 3.5)

i —

Put option liability (4)

( i 5.7)

i —

( i 5.7)

Amounts in parentheses indicate liabilities.

The index below indicates the line item in the Condensed Consolidated Balance Sheets where the financial instruments are reported:

(1) "Cash and cash equivalents"

(2) Current portion - "Short-term investments"; Long-term portion - "Other Assets"

(3) "Prepaid expenses and other current assets"

(4) "Other Long-Term Liabilities"

Note 10. i Accumulated Other Comprehensive Income (Loss) and Shareholders’ Equity

The following tables summarize the components of accumulated other comprehensive income (loss) and the changes in accumulated other comprehensive income (loss), net of tax, as applicable:

Foreign Currency Translation Adjustment

Unrealized Gains (Losses) on Debt Securities

Pension and Post-retirement Liabilities

Derivative Financial Instrument

Accumulated Other Comprehensive Income (Loss)

Balance as of December 30, 2023

( i 6.5)

( i 0.3)

( i 1.2)

( i 2.7)

( i 10.6)

Other comprehensive income (loss) before reclassifications

i 0.0

( i 0.1)

i —

i 2.0

i 1.9

Tax (expense) or benefit

i —

i 0.0

i —

( i 0.5)

Amounts reclassified from accumulated other comprehensive income (loss), net of tax

i —

i 0.0

i —

( i 0.1)

Balance as of March 30, 2024

( i 6.5)

( i 0.3)

( i 1.2)

( i 1.3)

( i 9.3)

Amounts in parentheses indicate reductions to equity.

Foreign Currency Translation Adjustment

Unrealized Gains (Losses) on Debt Securities

Pension and Post-retirement Liabilities

Derivative Financial Instrument

Accumulated Other Comprehensive Income (Loss)

Balance as of December 31, 2022

( i 6.4)

( i 0.6)

( i 1.1)

i 0.1

( i 8.0)

Other comprehensive income (loss) before reclassifications

i 0.1

i 0.2

i —

i 0.2

Tax (expense) or benefit

i —

( i 0.0)

i —

( i 0.0)

Amounts reclassified from accumulated other comprehensive income (loss), net of tax

i —

i 0.0

i —

( i 0.1)

Balance as of April 1, 2023

( i 6.3)

( i 0.5)

( i 1.1)

i —

( i 7.9)

Amounts in parentheses indicate reductions to equity.

Interest Rate Swap

During the normal course of business, the Corporation is subjected to market risk associated with interest rate movements. Interest rate risk arises from variable interest debt obligations. Interest rate swap derivative instruments are periodically held and used by the Corporation as a tool for managing interest rate risk. They are not used for trading or speculative purposes.

In November 2023, the Corporation entered into an interest rate swap transaction to hedge $ i 100 million of outstanding variable rate term loan borrowings against future interest rate volatility. Under the terms of this interest rate swap, the Corporation pays a fixed rate of i 4.7 percent and receives one-month SOFR on a $ i 100 million notional value expiring June 14, 2027. As of March 30, 2024, the fair value of the Corporation’s interest rate swap was comprised of a current asset of $ i 0.2 million and a non-current liability of $ i 1.9 million; see "Note 9. Fair Value Measurements of Financial Instruments." The unrecognized change in value of the interest rate swap is reported net of tax as $( i 1.3) million in "Accumulated other comprehensive income (loss)" in the Consolidated Balance Sheets.

In April 2022, the Corporation terminated its prior interest rate swap agreement and received cash proceeds of $ i 0.4 million, the fair value of the swap on the termination date. The $ i 0.4 million gain from the termination of this interest rate swap agreement was recorded to "Accumulated other comprehensive income (loss)" and was amortized to interest expense through April 1, 2023, the remaining term of the original interest rate swap agreement.

The following table details the reclassifications from accumulated other comprehensive income (loss):

Three Months Ended

Details about Accumulated Other Comprehensive Income (Loss) Components

Affected Line Item in the Statement Where Net Income is Presented

Derivative financial instrument

Interest rate swap

Interest expense, net

i 0.2

i 0.1

Income taxes

( i 0.0)

Unrealized gains (losses) on debt securities

Gain (loss) on sale of debt securities

Selling and administrative expenses

( i 0.0)

i 0.0

Income taxes

i 0.0

( i 0.0)

Net of tax

i 0.1

Amounts in parentheses indicate reductions to profit.

Dividend

The Corporation declared and paid cash dividends per common share as follows:


	Three Months Ended
	March 30, 2024		April 1, 2023
Dividends per common share	$	i 0.32	$	i 0.32

Stock Repurchase

The following table summarizes shares repurchased and settled by the Corporation:


	Three Months Ended
	March 30, 2024		April 1, 2023
Shares repurchased	i 0.1		i —
Average price per share	$	i 42.32	$	i —

Cash purchase price	$	( i 2.5)	$	i —
Purchases unsettled as of quarter end	i 0.0		i —
Prior year purchases settled in current year	( i 0.1)		i —
Shares repurchased per cash flow	$	( i 2.6)	$	i —

As of March 30, 2024, $ i 231.0 million of the Corporation’s stock repurchase authorization by the Board of Directors remained available.

Note 11. i Earnings Per Share

The following table reconciles the numerators and denominators used in the calculation of basic and diluted earnings per share ("EPS"):

Three Months Ended

Numerator:

Numerator for both basic and diluted EPS attributable to HNI Corporation net income

i 17.7

i 1.6

Denominators:

Denominator for basic EPS weighted-average common shares outstanding

i 47.1

i 41.5

Potentially dilutive shares from stock-based compensation plans

i 1.0

i 0.5

Denominator for diluted EPS

i 48.1

i 42.1

Earnings per share – basic

i 0.38

i 0.04

Earnings per share – diluted

i 0.37

i 0.04

The year-over-year increase in shares outstanding is primarily due to the issuance of i 4.7 million shares in June 2023 as part of the consideration to acquire Kimball International. See "Note 3. Acquisition and Divestitures" for further information

The weighted-average common stock equivalents presented above do not include the effect of the common stock equivalents in the table below because their inclusion would be anti-dilutive:

Three Months Ended

Common stock equivalents excluded because their inclusion would be anti-dilutive

i 0.8

i 2.2

Note 12. i Stock-Based Compensation

The Corporation measures stock-based compensation expense at grant date, based on the fair value of the award. Forms of awards issued under shareholder approved plans include stock options, restricted stock units based on a service condition ("restricted stock units"), restricted stock units based on both performance and service conditions ("performance stock units"), and shares issued under member stock purchase plans. Stock-based compensation expense related to stock options, restricted stock units, and performance stock units is recognized over the employees’ requisite service periods, adjusted for an estimated forfeiture rate for those shares not expected to vest. Additionally, expense related to performance stock units is periodically adjusted for the probable number of shares to be awarded based on Corporation achievement within an established target range of cumulative profitability over a multi-year period.

The following table summarizes expense associated with these plans:

Three Months Ended

Compensation cost

i 7.7

i 4.5

The increase in stock compensation cost was driven by higher forecasted Corporation achievement relative to performance stock unit targets, as well as an increase in members participating in stock-based incentive plans as a result of the Kimball International acquisition.

The units granted by the Corporation had fair values as follows:


	Three Months Ended
	March 30, 2024		April 1, 2023

Restricted stock units	$	i 7.3	$	i 6.0
Performance stock units	$	i 7.2	$	i 6.0

The following table summarizes unrecognized compensation expense and the weighted-average remaining service period for non-vested stock units as of March 30, 2024:


	Unrecognized Compensation Expense		Weighted-Average Remaining Service Period (years)

Non-vested restricted stock units	$	i 5.6	i 0.9
Non-vested performance stock units	$	i 12.4	i 1.2

Note 13. i Guarantees, Commitments, and Contingencies

The Corporation utilizes letters of credit and surety bonds in the amount of approximately $ i 39 million to back certain insurance policies and payment obligations. Additionally, the Corporation periodically utilizes trade letters of credit and banker's acceptances to guarantee certain payments to overseas suppliers. As of March 30, 2024, there were i no outstanding amounts related to these types of guarantees. The letters of credit, bonds, and banker's acceptances reflect fair value as a condition of their underlying purpose and are subject to competitively determined fees.

The Corporation periodically guarantees borrowing arrangements involving certain workplace furnishings dealers and third-party financial institutions. The remaining terms of these guarantees, which range from less than i one year to i four years, generally require the Corporation to make payments directly to the financial institution in the event that the dealer is unable to repay its borrowings in accordance with the stated terms. The aggregate amount guaranteed by the Corporation in connection with these agreements is approximately $ i 5 million as of March 30, 2024. The Corporation has determined the likelihood of making future payments under these guarantees is not probable and therefore no liability has been accrued.

The Corporation has contingent liabilities which have arisen in the ordinary course of its business, including liabilities relating to pending litigation, environmental remediation, taxes, and other claims. It is the Corporation’s opinion, after consultation with legal counsel, that liabilities, if any, resulting from these matters are not expected to have a material adverse effect on the Corporation’s financial condition, cash flows, or quarterly or annual operating results when resolved in a future period.

Note 14. i Reportable Segment Information

Management views the Corporation as i two reportable segments based on industries: workplace furnishings and residential building products.

The aggregated workplace furnishings segment, which includes the recently acquired Kimball International business, designs, manufactures, and markets a broad line of commercial office furniture, which includes panel-based and freestanding furniture systems, seating, storage, benching, tables, architectural products, social collaborative items, ancillary products, and hospitality products. The residential building products segment manufactures and markets a full array of gas, wood, electric, and pellet-fueled fireplaces, inserts, stoves, facings, outdoor fire pits and fire tables, and accessories.

For purposes of segment reporting, intercompany sales between segments are not material, and operating profit is income before income taxes exclusive of certain unallocated corporate expenses. These unallocated general corporate expenses include the net costs of the Corporation’s corporate operations. Management views interest income and expense as corporate financing costs and not as a reportable segment cost. In addition, management applies an effective income tax rate to its consolidated income before income taxes so income taxes are not reported or viewed internally on a segment basis. Identifiable assets by segment are those assets applicable to the respective industry segments. Corporate assets consist principally of cash and cash equivalents, short-term investments, long-term investments, IT infrastructure, and corporate office real estate and related equipment.

No geographic information for revenues from external customers or for long-lived assets is disclosed since the Corporation’s primary market and capital investments are concentrated in the United States.

Reportable segment data reconciled to the Corporation’s condensed consolidated financial statements was as follows:

Three Months Ended

Net Sales:

Workplace furnishings

i 439.8

i 299.6

Residential building products

i 148.2

i 179.4

Total

i 588.0

i 479.1

Income (Loss) Before Income Taxes:

Workplace furnishings

i 26.3

( i 4.0)

Residential building products

i 21.4

i 28.1

General corporate

( i 18.0)

( i 17.7)

Operating income

i 29.7

i 6.4

Interest expense, net

i 7.6

i 2.7

Total

i 22.0

i 3.8

Depreciation and Amortization Expense:

Workplace furnishings

i 17.8

i 11.2

Residential building products

i 3.5

i 3.3

General corporate

i 5.1

i 5.7

Total

i 26.4

i 20.1

Capital Expenditures (including capitalized software):

Workplace furnishings

i 6.2

i 13.9

Residential building products

i 2.5

i 5.0

General corporate

i 2.5

i 1.1

Total

i 11.2

i 20.0

As of
March 30, 2024

As of
December 30, 2023

Identifiable Assets:

Workplace furnishings

i 1,302.9

i 1,311.4

Residential building products

i 471.3

i 467.1

General corporate

i 138.3

i 150.3

Total

i 1,912.6

i 1,928.8

Note 15. i Supplier Finance Programs

Some of the Corporation’s third-party financial institutions offer supply chain finance ("SCF") programs by which they allow eligible Corporation suppliers the opportunity to sell their trade receivables due from the Corporation. Supplier participation in the SCF programs is voluntary and requires an agreement between the supplier and the financial institution, to which the Corporation is not a party. Any sales of supplier receivables to the financial institutions is at the sole discretion of the supplier and are priced at a rate that leverages the Corporation’s credit rating and thus may be more beneficial to the supplier. The Corporation’s responsibility is limited to making payment on the terms originally negotiated with each supplier.

The Corporation’s payments to the financial institutions to settle obligations related to suppliers that elected to participate in the SCF programs are reflected in cash flows from operating activities in the Condensed Consolidated Statements of Cash Flows. Additionally, SCF programs payment obligations due by the Corporation to the financial institutions are recorded in "Accounts payable and accrued expenses" in the Condensed Consolidated Balance Sheets as follows: