UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (State of Incorporation) Iowa 42-0617510 600 East Second Street P.O. Box 1109 Muscatine , Iowa 52761-0071 ( 563 ) 272-7400 (I.R.S. Employer Identification No.) Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading Symbol(s) Name of each exchange on which registered Common Stock HNI New York Stock Exchange ...

Financial Data and Key Metrics Changes - Non-GAAP EPS grew by 6% year-over-year despite a 15% decline in organic sales, indicating effective profit transformation efforts [4][19] - Non-GAAP gross margin expanded by 270 basis points and non-GAAP operating margin expanded by 150 basis points, driven by the profit transformation plan [17][19] - The company ended Q2 2023 with a debt to EBITDA ratio of 2.3 times, which would have been approximately 1.6 times if private notes were repaid [13][27] Business Line Data and Key Metrics Changes - Workplace Furnishings segment saw a 3% year-over-year growth in orders for the first half of 2023, with non-GAAP operating margin expanding by 550 basis points to 8.5% [7][19] - Residential Building Products segment experienced a 16% decline in orders compared to Q2 2022, but this was an improvement from a 37% decline in Q1 2023 [10][46] - The company expects Residential Building Products revenue to decline in the high teens during the second half of 2023, with a moderation in year-over-year declines [11][46] Market Data and Key Metrics Changes - The company noted strong demand trends in Workplace Furnishings, particularly among small to midsized customers, which are expected to continue [7][39] - The housing market remains undersupplied, with demographic trends indicating robust future construction growth, despite current volume pressures [42][49] Company Strategy and Development Direction - The company is focused on profit transformation and margin improvement, particularly in Workplace Furnishings, and is committed to expanding margins in both legacy HNI and Kimball International [19][49] - The divestiture of Poppin is expected to enhance annual operating profit by $20 million while reducing annual revenue by $56 million, allowing for a clearer focus on core business strengths [21][28] - The company is investing in initiatives aimed at expanding market presence, including new product innovation and online capabilities [23] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the benefits of the Kimball International acquisition, anticipating significant synergies and improved market positioning [8][28] - The company expects organic revenue growth rates in Workplace Furnishings to be in the low single-digits for the second half of 2023, with a positive outlook for the fourth quarter [24][26] - Management acknowledged the challenges in the Residential Building Products segment but remains optimistic about long-term growth prospects [49] Other Important Information - The company has increased its cost reduction efforts to a total of $40 million to $45 million, up from $35 million previously announced [22] - The divestiture of Poppin is expected to negatively impact non-GAAP EPS until finalized, with an estimated operating loss of $3.5 million to $4 million for the quarter [12] Q&A Session Summary Question: Can you discuss demand trends in Workplace Furnishings? - Management noted solid positive orders in Workplace Furnishings since the start of Q3, running ahead of the first half rate of 3% [31] Question: What is the target margin for Residential Building Products? - Management indicated that they are focused on improving profitability in the Residential Building Products segment, with expectations for improved margins in the future [32] Question: What drove the decision to divest Poppin? - The decision was made to streamline the business and focus on core profitable growth areas, as Poppin's operating losses masked the strength of Kimball International's core businesses [58][68] Question: How do you expect margins to trend in the second half? - Management expects margins to improve significantly in the second half, aiming for mid to upper teens range [52][66] Question: What are the expectations for the impact of Kimball International? - The company anticipates Kimball International to add $290 million to $320 million in revenue and $0.10 to $0.15 to non-GAAP EPS in the second half, excluding Poppin [44]

Financial Data and Key Metrics Changes - The first quarter of 2023 marked the fourth consecutive quarter of year-over-year profit improvement in Workplace Furnishings, with a seasonal non-GAAP operating loss narrowing by more than 40% year-over-year and segment gross margin expanding by 190 basis points [7][8] - Consolidated second quarter revenue for HNI is expected to decline at a rate in the high teens to low 20s, with organic revenue expected to be down at a mid to high teens rate [25][26] - Approximately 80% of annual non-GAAP earnings per share is expected to be generated in the second half of 2023, compared to approximately 60% in the second half of 2022 [22][87] Business Line Data and Key Metrics Changes - In the Workplace Furnishings segment, organic orders grew by 13% year-over-year, driven by improving market demand trends and price increases implemented during the quarter [10] - The Residential Building Products segment experienced a decline in orders due to weakening macroeconomic conditions, but operating margin remained in the mid-teens, marking the 11th consecutive quarter with an operating margin exceeding 15% [11][12] - The sale of Lamex is expected to lower growth in Workplace Furnishings by 6 percentage points or $27 million in the second quarter [15] Market Data and Key Metrics Changes - Recent Workplace Furnishings demand trends are encouraging, with actual first quarter organic sales down only 11%, compared to previous expectations of a high teens decline [17] - The company anticipates that new construction will be more negatively impacted than remodel/retrofit for the year, despite the first quarter showing unexpected results in remodel/retrofit [41][43] - The housing market's strong fundamentals are expected to drive robust future construction growth, with unique growth opportunities identified in product innovation and market expansion [19] Company Strategy and Development Direction - The company is focused on profit improvement actions in Workplace Furnishings, emphasizing simplification of business and cost structure streamlining [9] - The acquisition of Kimball International is expected to create a market leader with pro forma revenue of approximately $3 billion and combined EBITDA of approximately $305 million, enhancing the company's market position [20] - The company remains committed to investing in long-term growth despite short-term demand challenges in Residential Building Products [30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to drive profit growth in Workplace Furnishings despite macroeconomic uncertainties [16] - The company is optimistic about mid to long-term growth due to strong housing market fundamentals and demographic trends [19] - Management noted that while macro conditions are uncertain, they expect to maintain reasonable leverage levels and strong free cash flow [27] Other Important Information - The company has replaced initial bridge loan financing with a new term loan facility for the Kimball International transaction, maintaining a focus on reasonable leverage levels [27] - The company expects to provide more commentary on guidance following the completion of the Kimball acquisition [91] Q&A Session All Questions and Answers Question: Order growth in Workplace Furnishings seems higher than industry trends - Management noted that order growth was driven by price increases and improving market demand, particularly in the mid-market segment [34][35] Question: Impact of price increases on order trends - Management confirmed that the price increase implemented in March had a significant impact, with approximately 50% of order growth attributed to pull-forward activity ahead of the price increase [38][40] Question: Performance in Residential Building Products and acquisition appetite - Management indicated that they continue to invest in Residential Building Products and are open to acquisition opportunities, maintaining a proactive posture in the market [42][46] Question: Changes in gross profit and SG&A margins - Management highlighted that gross profit margin expanded due to favorable price cost and cost savings programs, while SG&A as a percentage of sales increased due to volume decline [50][51] Question: Trends in Workplace Furnishings and competition - Management acknowledged that the SMB segment is performing better than the contract segment, but competition remains strong across the board [77] Question: Long-term margin expectations for Residential Building Products - Management expressed confidence in returning to previous margin levels and driving topline growth in the long term [82]

Part I [Business](index=4&type=section&id=Item%201.%20Business) HNI Corporation provides workplace furnishings and residential building products through two primary segments | Segment | 2022 Net Sales (Billions) | Percentage of Total | | :--- | :--- | :--- | | Workplace Furnishings | $1.5 | 63% | | Residential Building Products | $0.9 | 37% | | **Total** | **$2.4** | **100%** | - The company's strategy is founded on its member-owner culture and executed through three pillars: a **Customer-First Mindset**, creating **Effortless Winning Experiences**, and **Owning Operational Excellence** through lean principles[32](index=32&type=chunk)[34](index=34&type=chunk) - The workplace furnishings market is divided into the contract channel and the SMB channel, where HNI is a **market leader**[24](index=24&type=chunk)[25](index=25&type=chunk)[26](index=26&type=chunk) - HNI is the **market leader** in hearth products within the residential building products industry[28](index=28&type=chunk)[30](index=30&type=chunk) - In fiscal 2022, the Corporation's five largest customers accounted for approximately **18% of consolidated net sales**, with no single customer representing 10% or more[39](index=39&type=chunk) - As of December 31, 2022, the Corporation employed **approximately 7,300 people**, including about 200 temporary personnel[53](index=53&type=chunk) [Risk Factors](index=11&type=section&id=Item%201A.%20Risk%20Factors) The company faces a range of industry, economic, strategic, operational, legal, and financing risks [Industry and Economic Risks](index=11&type=section&id=INDUSTRY%20AND%20ECONOMIC%20RISKS) Performance is susceptible to macroeconomic factors, intense competition, and international trade policy uncertainty - Sales are impacted by service-sector employment, corporate profits, office occupancy levels, housing starts, and interest rates[64](index=64&type=chunk)[65](index=65&type=chunk)[66](index=66&type=chunk) - Both business segments operate in **highly competitive industries**, facing pressure on pricing that could impact profit margins[68](index=68&type=chunk)[70](index=70&type=chunk) - The company relies on a network of independent dealers, and the **loss of a significant number of these partners** could adversely affect sales[71](index=71&type=chunk)[72](index=72&type=chunk) - Increases in **raw material and commodity costs**, along with transportation challenges, could adversely affect profitability[80](index=80&type=chunk)[81](index=81&type=chunk) [Strategic and Operational Risks](index=13&type=section&id=STRATEGIC%20AND%20OPERATIONAL%20RISKS) Key risks include brand reputation, new product failures, pandemic effects, labor shortages, and M&A integration challenges - The **COVID-19 pandemic** has had and may continue to have adverse effects, including labor shortages and supply chain disruptions[86](index=86&type=chunk) - A continued **shortage of qualified labor** could negatively affect production capacity, increase wage costs, and reduce earnings[89](index=89&type=chunk) - The company's growth strategy includes acquisitions, which carry risks such as **failing to successfully integrate** acquired businesses[91](index=91&type=chunk)[93](index=93&type=chunk) - **Goodwill and other intangible assets** represent a significant portion of total assets, and an impairment charge would adversely affect financial results[94](index=94&type=chunk) [Legal and Regulatory Risks](index=18&type=section&id=LEGAL%20AND%20REGULATORY%20RISKS) The company is subject to environmental regulations, product defect liabilities, and intellectual property risks - The company is subject to extensive environmental laws, and compliance with more stringent future regulations could require **material expenditures**[111](index=111&type=chunk) - Costs related to **product defects**, including warranty, recall, and liability costs, could adversely affect profitability[112](index=112&type=chunk) - An inability to **protect intellectual property rights** or facing claims of infringement could harm the business[116](index=116&type=chunk)[118](index=118&type=chunk) [Financing Risks](index=19&type=section&id=FINANCING%20RISKS) Financing risks stem from restrictive debt covenants and the potential need for future capital - The company's debt agreements contain **restrictive covenants** that limit its operational flexibility, and failure to comply could result in default[119](index=119&type=chunk)[120](index=120&type=chunk) - Future capital requirements may necessitate raising additional funds, which **may not be available** or could be on unfavorable terms[122](index=122&type=chunk)[123](index=123&type=chunk) [Unresolved Staff Comments](index=20&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the SEC - None[124](index=124&type=chunk) [Properties](index=20&type=section&id=Item%202.%20Properties) The Corporation operates approximately 8.4 million square feet of space across the US, India, and Mexico | Location | Workplace Furnishings Facilities | Residential Building Products Facilities | Owned (sq ft, thousands) | Leased (sq ft, thousands) | | :--- | :--- | :--- | :--- | :--- | | Muscatine, IA | 6 | — | 2,211 | — | | Lake City, MN | — | 2 | 342 | — | | Other U.S. | 9 | 6 | 1,966 | 1,556 | | Outside U.S. | 2 | — | 355 | 159 | [Legal Proceedings](index=20&type=section&id=Item%203.%20Legal%20Proceedings) Management does not expect liabilities from ordinary course legal proceedings to have a material adverse effect - The Corporation is involved in various disputes and legal proceedings but believes any resulting liabilities are **not expected to have a material adverse effect**[128](index=128&type=chunk) [Mine Safety Disclosures](index=20&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the Corporation - Not applicable[129](index=129&type=chunk) Part II [Market for Registrant's Common Equity, Related Shareholder Matters, and Issuer Purchases of Equity Securities](index=23&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Shareholder%20Matters%2C%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's stock trades on the NYSE, with a history of paying dividends and an active share repurchase program - The Corporation has paid dividends each quarter since 1955, with an average payout for the last three years of **75% of prior year earnings**[136](index=136&type=chunk) - As of December 31, 2022, **$234.0 million remained authorized** and available for share repurchases under its plan[138](index=138&type=chunk) [[Reserved]](index=23&type=section&id=Item%206.%20%5BReserved%5D) This item is reserved and contains no information - Item 6 is reserved[139](index=139&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Net sales grew 8.1% in 2022, driven by price realization, with net income significantly boosted by a subsidiary sale - In 2022, the Corporation achieved **solid gross and operating margin improvement** and strong earnings growth[142](index=142&type=chunk) - Consolidated net sales for 2022 increased **8.1% to $2.362 billion**, while net income rose to **$123.9 million**, including a **$49.4 million net gain** from the sale of the Lamex business[143](index=143&type=chunk)[144](index=144&type=chunk) - The company initiated cost savings actions estimated to save approximately **$30 million annually**[145](index=145&type=chunk) [Results of Operations](index=25&type=section&id=Results%20of%20Operations) Net sales increased 8.1%, operating income surged 81.7% boosted by the Lamex sale, and net income grew 107.1% | Metric | 2022 | 2021 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $2,361.8M | $2,184.4M | 8.1% | | Gross Profit | $834.9M | $757.4M | 10.2% | | Operating Income | $155.2M | $85.4M | 81.7% | | Net Income | $123.9M | $59.8M | 107.1% | - The 2022 results include a pre-tax gain of **$50.4 million** from the divestiture of the Lamex subsidiary[152](index=152&type=chunk) - The effective tax rate for 2022 was **15.4%**, down from 23.6% in 2021, primarily due to tax benefits related to the Lamex sale[156](index=156&type=chunk) [Segment Analysis](index=28&type=section&id=Segment%20Analysis) Workplace Furnishings sales grew 3.6% while Residential Building Products sales increased 16.7% [Workplace Furnishings](index=28&type=section&id=Workplace%20Furnishings) Net sales increased 3.6% to $1.486 billion, with operating profit turning positive due to favorable price-cost | Metric | 2022 | 2021 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $1,486.2M | $1,434.0M | 3.6% | | Operating Profit (Loss) | $3.4M | $(0.5)M | 734.6% | | Operating Profit % | 0.2% | (0.0)% | +20 bps | [Residential Building Products](index=28&type=section&id=Residential%20Building%20Products) Net sales grew 16.7% to $875.6 million, driven by price realization and volume growth | Metric | 2022 | 2021 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $875.6M | $750.4M | 16.7% | | Operating Profit | $158.7M | $141.9M | 11.9% | | Operating Profit % | 18.1% | 18.9% | -80 bps | [Liquidity and Capital Resources](index=28&type=section&id=Liquidity%20and%20Capital%20Resources) Operating cash flow decreased due to working capital changes, while the company maintained a solid balance sheet - Cash from operating activities decreased to **$81.2 million** in 2022 from $131.6 million in 2021, primarily due to a **$72.7 million use of cash** from changes in working capital[164](index=164&type=chunk) - Capital expenditures were **$68.4 million** in 2022, with **$60 million to $70 million** anticipated for 2023[166](index=166&type=chunk) - In Q2 2022, the company amended its revolving credit facility, extending the maturity to June 2027 with a maximum borrowing capacity of **$400 million**[167](index=167&type=chunk) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Dividends per common share | $1.270 | $1.235 | [Quantitative and Qualitative Disclosures About Market Risk](index=32&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The Corporation is primarily exposed to interest rate risk on variable-rate debt and price risk for raw materials - The company is subject to interest rate risk from its **$89 million of variable-rate debt** outstanding as of December 31, 2022[188](index=188&type=chunk) - The Corporation is exposed to price risk for key materials such as **steel, plastics, textiles, and wood particleboard**[191](index=191&type=chunk) [Financial Statements and Supplementary Data](index=32&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section incorporates by reference the financial statements listed under Item 15 - The financial statements are filed as part of this report under Item 15(a)(1) and (2)[192](index=192&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=32&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants - None[193](index=193&type=chunk) [Controls and Procedures](index=32&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures are effective as of year-end 2022 - As of December 31, 2022, the CEO and CFO concluded that the Corporation's **disclosure controls and procedures are effective**[197](index=197&type=chunk) - **No material changes** in internal control over financial reporting occurred during the fourth quarter of 2022[198](index=198&type=chunk) [Other Information](index=34&type=section&id=Item%209B.%20Other%20Information) The company reports no other information - None[200](index=200&type=chunk) [Disclosure Regarding Foreign Jurisdictions that Prevent Inspection](index=34&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspection) This item is not applicable to the Corporation - Not applicable[201](index=201&type=chunk) Part III [Directors, Executive Officers, and Corporate Governance](index=35&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%2C%20and%20Corporate%20Governance) Required information is incorporated by reference from the company's 2023 Definitive Proxy Statement - Information required by this item is **incorporated by reference** from the Corporation's Definitive Proxy Statement for the Annual Meeting of Shareholders to be held on May 17, 2023[203](index=203&type=chunk)[204](index=204&type=chunk)[205](index=205&type=chunk) [Executive Compensation](index=35&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive and director compensation is incorporated by reference from the 2023 Proxy Statement - Information required by this item is **incorporated by reference** from the Corporation's 2023 Proxy Statement[206](index=206&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters](index=35&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Shareholder%20Matters) Information regarding security ownership is incorporated by reference from the 2023 Proxy Statement - Information required by this item is **incorporated by reference** from the Corporation's 2023 Proxy Statement[207](index=207&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=35&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information regarding related transactions and director independence is incorporated by reference from the 2023 Proxy Statement - Information required by this item is **incorporated by reference** from the Corporation's 2023 Proxy Statement[208](index=208&type=chunk) [Principal Accounting Fees and Services](index=35&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Information regarding accounting fees is incorporated by reference from the 2023 Proxy Statement - The Corporation's independent registered public accounting firm is **KPMG LLP**[209](index=209&type=chunk) - Information regarding audit and non-audit fees is **incorporated by reference** from the 2023 Proxy Statement[210](index=210&type=chunk) Part IV [Exhibits, Financial Statement Schedules](index=36&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists the financial statements, schedules, and exhibits filed as part of the report - The consolidated financial statements, including the Report of Independent Registered Public Accounting Firm and Notes to Consolidated Financial Statements, are **filed as part of this report**[212](index=212&type=chunk) [Form 10-K Summary](index=38&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company provides no summary for its Form 10-K - None[216](index=216&type=chunk) Financial Statements and Notes [Financial Statements](index=43&type=section&id=Financial%20Statements) The statements show 2022 net sales of $2.36 billion, net income of $123.9 million, and total assets of $1.41 billion | (In millions, except per share data) | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Net sales | $2,361.8 | $2,184.4 | $1,955.4 | | Operating income | $155.2 | $85.4 | $61.4 | | Net income attributable to HNI Corporation | $123.9 | $59.8 | $41.9 | | Net income per common share – diluted | $2.94 | $1.36 | $0.98 | | (In millions) | Dec 31, 2022 | Jan 1, 2022 | | :--- | :--- | :--- | | Total Current Assets | $469.2 | $523.5 | | Total Assets | $1,414.5 | $1,497.9 | | Total Current Liabilities | $395.1 | $506.4 | | Total Liabilities | $797.7 | $907.9 | | Total Equity | $616.8 | $590.0 | [Notes to Consolidated Financial Statements](index=48&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail accounting policies, including LIFO inventory valuation, goodwill testing, and revenue recognition [Note 2. Summary of Significant Accounting Policies](index=48&type=section&id=Note%202.%20Summary%20of%20Significant%20Accounting%20Policies) Key policies include LIFO for inventories, annual impairment testing, and expensing R&D costs as incurred - The majority of inventories (**91% in 2022**) are valued using the last-in, first-out (LIFO) method; if FIFO had been used, inventories would have been **$53.7 million higher**[269](index=269&type=chunk) - The company is primarily self-insured for various liabilities, with total estimated liabilities of **$23.8 million** as of December 31, 2022[294](index=294&type=chunk) | Expense (in millions) | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Research and development costs | $47.8 | $39.4 | $35.3 | | Freight expense | $142.0 | $118.2 | $98.4 | [Note 3. Revenue from Contracts with Customers](index=55&type=section&id=Note%203.%20Revenue%20from%20Contracts%20with%20Customers) This note disaggregates revenue by major product category for each business segment | Revenue (in millions) | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | **Workplace Furnishings** | | | | | Systems and storage | $889.6 | $833.2 | $741.2 | | Seating | $473.7 | $481.7 | $489.3 | | Other | $123.0 | $119.0 | $135.2 | | **Total Workplace Furnishings** | **$1,486.2** | **$1,434.0** | **$1,365.7** | | **Residential Building Products** | **$875.6** | **$750.4** | **$589.7** | | **Total Net Sales** | **$2,361.8** | **$2,184.4** | **$1,955.4** | [Note 4. Acquisitions and Divestitures](index=56&type=section&id=Note%204.%20Acquisitions%20and%20Divestitures) The company sold its Lamex business for ~$75 million and made several acquisitions in residential building products - In July 2022, the Corporation sold its Lamex office furniture business for approximately **$75 million**, recording a pre-tax gain of **$50.4 million**[303](index=303&type=chunk) - The company acquired Dickerson Hearth Products for **~$8 million** in June 2022, The Outdoor GreatRoom Company for **~$15 million** in December 2021, and Trinity Hearth & Home for **~$31 million** in October 2021[305](index=305&type=chunk)[306](index=306&type=chunk)[307](index=307&type=chunk) [Note 6. Goodwill and Other Intangible Assets](index=58&type=section&id=Note%206.%20Goodwill%20and%20Other%20Intangible%20Assets) The company held $305.9 million in goodwill at year-end, with no material impairments identified in 2022 | (in millions) | Workplace Furnishings | Residential Building Products | Total | | :--- | :--- | :--- | :--- | | Net Goodwill Balance as of Jan 1, 2022 | $83.6 | $213.7 | $297.3 | | Goodwill acquired (disposed) / adjustments | $(13.6) | $8.6 | $(5.0) | | Accumulated impairment losses disposed | $13.6 | — | $13.6 | | **Net Goodwill Balance as of Dec 31, 2022** | **$83.6** | **$222.3** | **$305.9** | - The annual impairment testing for goodwill and indefinite-lived intangible assets in Q4 2022 resulted in **no identified impairments**[321](index=321&type=chunk)[323](index=323&type=chunk) [Note 7. Debt](index=62&type=section&id=Note%207.%20Debt) Total debt was $190.1 million, consisting of a revolving credit facility and fixed-rate notes | Debt Component (as of Dec 31, 2022) | Amount (in millions) | Interest Rate/Maturity | | :--- | :--- | :--- | | Revolving credit facility | $89.1 | Variable (5.6%), due 2027 | | Fixed rate notes | $50.0 | 4.22%, due 2025 | | Fixed rate notes | $50.0 | 4.40%, due 2028 | | Other | $1.3 | N/A | | **Total Debt** | **$190.4** | | - The company's **$400 million** revolving credit facility matures in June 2027, with **$311 million** of borrowing capacity available at year-end[326](index=326&type=chunk)[327](index=327&type=chunk) [Note 10. Accumulated Other Comprehensive Income (Loss) and Shareholders' Equity](index=66&type=section&id=Note%2010.%20Accumulated%20Other%20Comprehensive%20Income%20(Loss)%20and%20Shareholders'%20Equity) This note details changes in shareholders' equity, the stock repurchase program, and dividends paid | Metric | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Shares repurchased (millions) | 1.7 | 1.5 | 0.2 | | Average price per share | $38.11 | $39.89 | $29.83 | | Cash purchase price (millions) | $(63.9) | $(60.4) | $(6.4) | | Year | Dividends per common share | | :--- | :--- | | 2022 | $1.27 | | 2021 | $1.24 | | 2020 | $1.22 | [Note 11. Stock-Based Compensation](index=69&type=section&id=Note%2011.%20Stock-Based%20Compensation) Total stock-based compensation cost was $9.0 million in 2022, with no stock options granted | (in millions) | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Compensation cost | $9.0 | $12.9 | $7.8 | - **No stock options** were granted in 2022, 2021, or 2020[364](index=364&type=chunk) - As of December 31, 2022, there was **$4.5 million** of unrecognized compensation cost related to RSUs and **$2.3 million** related to PSUs[360](index=360&type=chunk)[361](index=361&type=chunk) [Note 16. Reportable Segment Information](index=76&type=section&id=Note%2016.%20Reportable%20Segment%20Information) This note provides key financial data for the Workplace Furnishings and Residential Building Products segments | (in millions) | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | **Net Sales** | | | | | Workplace furnishings | $1,486.2 | $1,434.0 | $1,365.7 | | Residential building products | $875.6 | $750.4 | $589.7 | | **Income (Loss) Before Income Taxes** | | | | | Workplace furnishings | $3.4 | $(0.5) | $(5.0) | | Residential building products | $158.7 | $141.9 | $109.3 | | **Identifiable Assets** | | | | | Workplace furnishings | $761.5 | $809.0 | $762.8 | | Residential building products | $493.0 | $479.5 | $381.6 |

Financial Data and Key Metrics Changes - The company reported a 65% year-over-year growth in non-GAAP earnings for Q3 2022, driven by positive price costs and an improving product mix [6][7] - Consolidated gross and operating margins improved both sequentially and year-over-year, supported by favorable price costs [7] - The company expects to fully recover last year's shortfall caused by inflationary pressures by the end of the year [7] Business Line Data and Key Metrics Changes - The workplace furnishings segment saw flat organic revenue growth, but excluding recent restructuring impacts, segment shipments grew by 7% due to price realization [9] - The residential building products business achieved a 10% organic revenue growth year-over-year, with operating profit increasing by 19% and operating margin expanding by 50 basis points to 17.7% [10][11] Market Data and Key Metrics Changes - Orders in the residential building products segment were down modestly year-over-year, but the company remains optimistic about long-term growth due to favorable housing demographics [10] - The company anticipates declines in top-line performance in 2023 due to higher mortgage rates affecting new home construction and remodel activities [15] Company Strategy and Development Direction - The company is committed to its core strategies despite preparing for a challenging near-term environment, focusing on margin expansion in workplace furnishings and revenue growth in residential building products [5][31] - The company plans to implement a corporate-wide cost reduction plan expected to yield $30 million in annual savings, which will support long-term strategic objectives [16] Management's Comments on Operating Environment and Future Outlook - Management noted that broader macro indicators suggest increasingly challenging operating conditions as they move into 2023, particularly in workplace furnishings [14] - The company is prepared for a weaker economic period in 2023 but remains focused on long-term objectives, leveraging its strong balance sheet and cash flow generation capabilities [28][29] Other Important Information - The company has a unique competitive position due to vertical integration, regional distribution, and lean manufacturing capabilities, which are expected to support long-term growth [12][13] - The company expects fourth-quarter revenue in workplace furnishings to decline at a low teens year-over-year rate, with a full-year growth rate in the low to mid-single digits [24] Q&A Session All Questions and Answers Question: Can you provide details on the cost-saving initiative and its timing? - The company expects to fully realize the $30 million in cost savings in 2023, with the first quarter potentially being slightly below that run rate as it matures [37] Question: How does the company balance growth investments in the current environment? - Management remains optimistic about long-term opportunities in residential building products and continues to invest in category expansion despite facing headwinds in 2023 [38] Question: What is the current state of inventory in the residential segment? - There is some inventory that needs adjustment, but the company has a strong regional distribution network that allows for quick delivery to dealer partners, minimizing the need for significant inventory corrections [72][74] Question: How are orders trending in the residential building products segment? - Orders were down about 6% in Q3 2022, with new construction showing strength due to builder backlogs, while remodel retrofit orders have declined more significantly [51] Question: What is the company's outlook for the midmarket and small business segments? - The midmarket segment has shown strength, while the transactional business, which includes small businesses, continues to be down and is historically driven by macroeconomic trends [83]

Financial Data and Key Metrics Changes - The company reported a 30% earnings growth in Q2 2022, driven by solid organic volume growth and positive price cost [6][8] - Consolidated gross and operating margins improved sequentially due to higher volume and recovery from inflationary pressures faced in the previous year [9][10] - Price exceeded cost by nearly $8 million during the quarter, with expectations for significant profit improvement in 2022 [10] Business Line Data and Key Metrics Changes - Workplace Furnishings and Residential Building Products both achieved double-digit year-over-year revenue growth, with Workplace Furnishings segment shipments growing nearly 30% when excluding recent restructuring impacts [8][9] - Residential Building Products experienced a 21% organic revenue growth, supported by pricing volume and lead time improvements [9] Market Data and Key Metrics Changes - Orders in Workplace Furnishings increased by 4% compared to Q2 2021, while orders from small- to medium-sized customers lagged behind contract customers [16] - In Residential Building Products, orders increased by 14% compared to Q2 2021, with new construction order rates outperforming remodel retrofit activity [18] Company Strategy and Development Direction - The company continues to invest in operational network and go-to-market capabilities, with over $5 million invested in Q2 2022 [11][12] - The divestiture of Lamex for $75 million aligns with the company's portfolio simplification efforts, allowing for a greater focus on core strategies [15][29] - Inorganic growth remains a key part of the long-term strategy, particularly in the Residential Building Products segment [13] Management's Comments on Operating Environment and Future Outlook - Management acknowledged macroeconomic and recession concerns impacting second-half demand, leading to a lowered 2022 outlook [22][24] - Despite negative trends, the company remains optimistic about long-term dynamics in the Residential Building Products segment, driven by demographic trends and an undersupplied market [20][34] Other Important Information - The company returned over $50 million to shareholders in the quarter, totaling more than $170 million over the past four quarters through dividends and repurchases [14] - The balance sheet remains strong, with a debt to EBITDA ratio of 1.7 at the end of Q2 [28] Q&A Session Summary Question: Differences in contract and small- to medium-sized businesses - Management noted that historically, small- to medium-sized businesses show a slowdown before contract businesses, but current economic uncertainty makes predictions difficult [38][40] Question: Growth in new construction versus repair and remodel - Remodel retrofit sales grew faster than new construction, with organic growth expected in the low teens, including about 10% price realization [45][46] Question: Strategy behind vertical integration and acquisitions - The strategy focuses on getting closer to customers and improving service levels through a network of installing distributors [49][50] Question: Preparing for a slowdown - Management is being prudent and has plans in place to respond to potential economic changes, maintaining flexibility in operations [53][54] Question: Price cost trajectory - Price cost improved from $2 million favorable in Q1 to $8 million in Q2, with expectations of $25 million to $30 million favorable in the second half [67] Question: Maintaining profitability during a slowdown - The company plans to continue investing in the Residential Building Products segment while managing profitability, expecting to invest $7 million to $9 million in the back half of the year [70][71]

HNI Corporation Investor Presentation HNI Forward-Looking Statements This presentation 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 the Corporation's business, financial condition and results of operations from the COVID-19 pandemic. Forward-looking statements can be identif ...

Financial Data and Key Metrics Changes - The company reported a positive price/cost impact of $2 million in Q1 2022, with input costs increasing by approximately $60 million compared to the prior year [37] - The outlook for price/cost improvement is expected to yield a net benefit to operating profit of $45 million to $55 million for the year [22][47] Business Line Data and Key Metrics Changes - Revenue from residential building products grew 13% organically, with incoming orders up 25% year-over-year [13][14] - Workplace furnishings revenue increased nearly 25% year-over-year, with a backlog up more than 50% from the same period last year [16][17] Market Data and Key Metrics Changes - The company noted strong demand in both new construction and remodel/retrofit channels, despite concerns over rising mortgage rates and affordability [14][15] - The backlog in residential building products is nearly double compared to last year, indicating strong market demand [77] Company Strategy and Development Direction - The company is focused on improving long-term profitability through margin expansion in workplace furnishings and strong top-line growth in residential building products [27] - Strategic initiatives include opening a new seating facility in Mexico and enhancing labor capacity to support volume growth [12][10] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about 2022, citing strong market demand and effective pricing actions to counter inflationary pressures [6][11] - The company expects to maintain a strong balance sheet and generate significant free cash flow for investments and shareholder returns [25] Other Important Information - The company anticipates that approximately 70% of its full-year profit will be generated in the second half of the year, driven by pricing improvements and capacity additions [23] Q&A Session Summary Question: Insights on workplace furnishings and larger customers - Management noted that bid activity is nearly double compared to the fourth quarter, with strong activity from small to midsize customers and improving trends in larger contracts [30][31] Question: Impact of affordability on residential building products - Management acknowledged concerns over affordability but emphasized strong backlog visibility and ongoing strength in the remodel market [34][50] Question: Clarification on price/cost dynamics - Management provided details on the positive price/cost impact and expected future improvements, with a significant portion benefiting workplace furnishings [38][47] Question: Trends in order rates and backlogs - Management confirmed that order rates remain solid, with a notable backlog in both workplace furnishings and residential building products [58][77] Question: Long-term impact of the new facility in Mexico - Management indicated that the facility is a capacity play and will contribute to shorter supply chains and improved inventory management over the next few years [71][73]

Financial Data and Key Metrics Changes - In 2021, the Workplace Furnishings segment's profit was negatively impacted by over $80 million due to rapid input cost inflation and labor constraints, resulting in a decrease of approximately 550 basis points in segment operating margin [9][12] - The Residential Building Products segment saw revenue growth of over 27% and operating profit increased by 30% to $142 million in 2021 [13] Business Line Data and Key Metrics Changes - Workplace Furnishings experienced significant challenges in 2021, but actions taken are expected to improve profitability, with production anticipated to increase by 10% to 15% in 2022 [11] - The Residential Building Products segment is expected to continue strong growth in 2022, driven by new home construction and remodeling activities, with elevated backlog levels entering the year [14][15] Market Data and Key Metrics Changes - The company noted that while large urban markets have been slower to reopen, they are beginning to show signs of increased activity, presenting opportunities for growth [12] - The company reported that orders in the Residential Building Products segment are up 20% year-to-date, indicating strong demand despite mixed housing indicators [41] Company Strategy and Development Direction - The company is focused on improving long-term profitability through pricing actions, addressing labor constraints, and restructuring initiatives [6][10] - Strategic acquisitions, such as The Outdoor GreatRoom Company and Trinity Hearth & Home, are aimed at expanding market presence and capitalizing on growth trends in outdoor living and hearth products [15][17] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for 2022, expecting strong revenue growth and profit improvement driven by pricing actions and added capacity [22] - The company anticipates that the first quarter of 2022 will see profits below the previous year due to ongoing supply chain and labor challenges, but expects strong profit growth for the full year [26][27] Other Important Information - The company celebrated its 75th anniversary, emphasizing its commitment to customer focus and community support as it moves into its next 75 years [29][30] - The company has paid $54 million in dividends in 2021 and has a remaining share repurchase authorization of approximately $100 million [19][20] Q&A Session Summary Question: Order rates in Workplace Furnishings - Management noted that while there was some softness due to Omicron, orders are up 10% year-over-year, with an elevated backlog encouraging optimism [36][37] Question: Price-cost pressure in Workplace - Management expects price-cost to be neutral in the first half of 2022, with a recovery of $40 million to $50 million of the previous year's negative price-cost gap anticipated in the second half [39] Question: Visibility in the Hearth segment - Management indicated that the Hearth segment has an elevated backlog and year-to-date orders are up 20%, with confidence in growth driven by specific initiatives [41] Question: Restructuring of the online channel - The restructuring was focused on the OFM side, exiting low-margin segments to concentrate on more profitable areas like gaming [62] Question: Operating margins in Workplace - Management expects to recover some margin in 2022 but anticipates that full recovery of the previous year's pressures will take longer [63]

Fourth Quarter Fiscal 2021 Results February 28th, 2022 HNI Forward-Looking Statements This presentation 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 the Corporation's business, financial condition and results of operations from the COVID-19 pandemic. Forward-looking statemen ...