HNI
Annual Report 2011

Plain-text annual report

HNI Corporation 2011 Annual Report Financial Highlights (Amounts in thousands, except for per share and member data) 2011 2010 Income Statement Data Net sales Gross profit Selling and administrative expenses Restructuring related and impairment charges Operating income Net income attributable to HNI Corporation Net income attributable to HNI Corporation as a % of: Net sales Average shareholders’ equity Per common share: $1,833,450 $1,686,728 639,063 554,315 3,261 81,487 45,986 2.5% 11.1% 585,616 518,257 9,449 57,910 26,941 1.6% 6.5% Net income attributable to HNI Corporation – basic $÷« 1.03 $÷« 0.60 Net income attributable to HNI Corporation – diluted Cash dividends Balance Sheet Data Total assets Long-term debt and capital lease obligations Debt/capitalization ratio HNI Corporation’s shareholders’ equity Working capital Other Data 1.01 0.92 0.59 0.86 $«1,054,258 $ 997,880 150,540 26.4% 150,111 26.9% $«÷419,057 $÷«407,985 45,130 46,810 Capital expenditures (including capitalized software) $«÷÷31,143 $÷÷«26,722 Cash flow from operations Weighted-average shares outstanding – basic Weighted-average shares outstanding – diluted Share repurchases Number of shareholders at year-end Members (employees) at year-end Net Sales (in millions) 3 2 6 , 1 $ 09 3 3 8 , 1 $ 7 8 6 , 1 $ 10 11 HNI Corporation 2011 Annual Report Net Income (in millions) 6 4 $ 7 2 $ 10 11 6 $ - 09 134,278 44,803,248 45,694,278 ÷÷$ ÷÷10,000 7,259 9,490 94,384 44,993,934 45,808,704 $««« 17,817 7,866 8,470 Diluted Earnings per Share (dollars) 4 1 . 0 $ - 09 1 0 . 1 $ 9 5 . 0 $ 10 11 Dear Shareholders: Stan A. Askren Chairman, President and Chief Executive Officer 2011 was a year of strong performance for Growth in our supplies-driven business was modest HNI Corporation. All businesses achieved solid as employment and broader economic concerns growth and corporate profits improved by over weighed on small business confidence. We performed 70 percent. We made significant progress on our well relative to the market as investments in new strategies, and our growth investments are yielding products and selling initiatives are paying off. attractive returns. The continued improvement in HNI is the leader in the supplies-driven office furniture the economy is encouraging, and we are determined channel, and we continue to invest to strengthen to build on our momentum in 2012. We are compet- our competitive position. itively well positioned in our markets, and the prospects for our businesses are excellent. Hearth Business—Strong Profit Improvement Despite challenging market conditions and declining Office Furniture—Encouraging Growth housing starts, our hearth business leveraged its Our overall market position in office furniture is leading market position to increase sales and drive strong with the broadest and deepest product offering significant profit improvement. We are investing in and distribution. We are investing to keep our brands new products and expanding our selling and marketing relevant and to help our partners compete more capabilities to enhance our competitive advantage. effectively and profitably. With the hearth industry’s strongest brands, best products, and superior manufacturing and distribution Growth in our corporate projects-driven office capabilities, we are well positioned for continued furniture businesses was robust, particularly in strong profitable growth. the first half of the year. Business spending increased as the economy improved, and demand Strong Cash Generation—Focused Capital Deployment benefited from corporate investment in real estate Our operating cash flow remained strong at over strategies to reduce lease and occupancy costs. $130 million. We grew our businesses without adding working capital, which allowed us to reinvest for Our international business delivered exceptional growth and generate attractive free cash flow. We are performance, especially in China where we are committed to an industry-leading dividend, which we a market leader. We are investing aggressively to increased by 7 percent in 2011. We reduced debt, expand within our existing international markets strengthened our balance sheet and increased our and pursue new growth frontiers. financial flexibility. HNI Corporation 2011 Annual Report We continue investing to build strong businesses and drive long-term shareholder value-creation. Value-enhancing acquisitions remain a priority. We reach more customers and make it easier for our partners bolstered our growing position in the education mar- to do business with HNI. Our investments in industry- ket with the acquisition of Sagus, a leading provider leading selling programs and processes are designed of high-quality and well-priced educational furniture to make HNI the preferred choice—the first time, every solutions. HNI Corporation is now the industry leader time for our partners and customers. We are adding sell- in the K–12 education market and offers the most ing and marketing capabilities to deeply penetrate our extensive line of products. existing markets and extend the reach of HNI into new markets. We are building for the future, today. Competitive Advantage HNI’s split-and-focus business model is core to our Looking Forward With Confidence success and competitive advantage. Our decentralized Looking forward, I am optimistic about the future despite structure enables our businesses to operate close an uncertain economy. HNI is well positioned for long- to the markets they serve, deeply understand custom- term profitable growth given our leadership in attractive ers and create tailored selling and fulfillment models markets. Our businesses are strong, competitive and to serve them. Our management teams are equipped agile. Our strategies are focused, and we have solid, to rapidly respond to emerging opportunities and executable plans to capture the growth potential generate new sources of growth. created by our strategies. Our members are engaged We know how to compete, manufacture and execute. Our principles and values are enduring and will guide We have a strong culture of lean thinking, and our the company forward to continued success. and empowered to make a positive difference. pursuit of performance improvement is relentless. Our members continuously collaborate across our Thank You businesses to identify opportunities to fully leverage I would like to thank our members for their dedication the scale of HNI in core functions such as purchasing, and passion. They make HNI a great place to work. information technology, logistics, product develop- Finally, thank you to our customers and partners ment and manufacturing. for their loyalty, and to our shareholders for their investment and continued trust. Investing for Profitable Growth We continue investing to build strong businesses and drive long-term shareholder value-creation. In 2011 we launched 51 new product series, a reflection of our Stan A. Askren commitment to build market leadership with innovative Chairman, President and Chief Executive Officer products. We are building e-business capabilities to HNI Corporation HNI Corporation 2011 Annual Report Office Furniture HNI Corporation is the second-largest office furniture manufacturer in the world. Our office furniture businesses compete in two primary channels: the contract channel and the supplies-driven channel. The contract channel has traditionally been characterized by sales of office furniture and services to large corporations, frequently customized to meet specific client and designer preferences. The supplies-driven channel represents primarily smaller orders of office furniture purchased by small businesses and home office users. Our office furniture sales are similar in both channels. Hearth Net Sales (in millions) Operating Profit (in millions) 8 2 5 , 1 $ 5 0 4 , 1 $ 5 4 3 , 1 $ 8 8 $ 0 0 1 $ 3 5 $ 09 10 11 09 10 11 HNI Corporation is the nation’s leading manufacturer and marketer of gas- and wood-burning fireplaces. Our hearth business competes in two primary channels: new construction and remodel/retrofit. Hearth products sold in the new construction channel typically are purchased by builders during the construc- tion of new homes, and remodel/retrofit channel sales traditionally are homeowner purchases of an additional heating source during the renovation of existing homes. The corporation sells approximately 65 percent of its hearth products in the remodel/retrofit channel. Net Sales (in millions) Operating Profit (in millions) 5 0 3 $ 8 7 2 $ 2 8 2 $ 09 10 11 5 1 $ 3 $ 5 1 $ - 09 10 11 HNI Corporation 2011 Annual Report ® Allsteel designs, builds and delivers relevant innovation in workplace furniture. ® Inspired by practicality, offering a full line of high-quality solutions serving the small and medium-size workplace. Innovative brands that offer the best of style, ® An industry leader in the design, manufacture and marketing of premium wood office furniture. ® A leading provider of high-quality and well-priced wood office furniture. HNI Corporation 2011 Annual Report ® China’s leading manufacturer and marketer of a full range of office furniture solutions. ® Award-winning design and superior craftsmanship in wood furniture and fabrics created for demanding clients worldwide. functionality, durability and price in today’s marketplace. ® Office furniture systems for small to medium-size workplace solutions. ™ Industry leader for K–12 educational furniture. HNI Corporation 2011 Annual Report ® The number-one preferred fireplace brand among homebuilders since 1927. ® The innovation and design leader in gas hearth systems – the industry’s most award-winning brand. Brands that make a house feel more like a home. ® Renowned for performance, durability and control in wood, pellet and gas-fueled hearth products. ® America’s largest network of hearth product and service outlets for consumers and homebuilders. The hearth industry’s foremost producer of precision quality-crafted wood and pellet stoves. ™ HNI Corporation 2011 Annual Report A Unique Culture Members Make a Difference Every member has the opportunity to participate in HNI Corporation’s unique and powerful member-owner culture and to share in the company’s success. Our culture is built around Rapid Continuous Improvement (RCI) and the belief every member has something valuable to contribute. We know when our people share their ideas, and management acts on those ideas, we achieve something powerful: 9,000-plus individuals working actively to make the corporation better. HNI Corporation 2011 Annual Report Our Vision We, the members of HNI Corporation, We will be profitable. are dedicated to creating long-term value We pursue mutually profitable relationships with customers and suppliers. for all of our stakeholders, to exceeding Only when our company achieves an adequate profit can the other our customers’ expectations and to making our company a great place to work. We will always treat each other, as well as customers, suppliers, shareholders and our communities, with fairness and respect. Our success depends upon business simplification, rapid continuous improvement and elements of this Vision be realized. We will create long-term value for shareholders. We create long-term value for shareholders by earning financial returns significantly greater than our cost of capital and pursuing profitable growth opportunities. We will safeguard our shareholders’ equity by maintaining a strong balance sheet to allow flexibility in responding to a continuously changing market and business environment. innovation in everything we do, individual We will pursue profitable growth. and collective integrity, and the relent- We pursue profitable growth on a global basis in order to provide continued job opportunities for members and financial success for all stakeholders. We will be a supplier of quality products and services. We provide reliable products and services of high quality and brand value to our end-users. Our products and services exceed our customers’ expectations and enable our distributors and our company to make a fair profit. We will be a great place to work. We pursue a participative environment and support a culture that encourages and recognizes excellence, active involvement, ongoing learning and contributions of each member; that seeks out and values diversity; and that attracts and retains the most capable people who work safely, are motivated and are devoted to making our company and our members successful. We will be a responsible corporate citizen. We conduct our business in a way that sustains the well-being of society, our environment and the economy in which we live and work. We follow ethical and legal business practices. Our company supports our volunteer efforts and provides charitable contributions so that we can actively participate in the civic, cultural, educational, environmental and governmental affairs of our society. To our stakeholders: When our company is appreciated by its members, favored by its customers, supported by its suppliers, respected by the public and admired by its shareholders, this Vision is fulfilled. less pursuit of the following long-standing beliefs: HNI Corporation 2011 Annual Report Financial Information 2011 (This page intentionally left blank) End of 10-K Board of Directors Stan A. Askren Chairman, President and Chief Executive Officer, HNI Corporation Mary H. Bell Vice President, Building Construction Products Division, Caterpillar Inc. Miguel M. Calado Director and Chief Financial Officer, Hovione SA Gary M. Christensen Executive Advisor Partner, Wind Point Partners Cheryl A. Francis Co-Chairman, Corporate Leadership Center James R. Jenkins Senior Vice President and General Counsel, Deere & Company Dennis J. Martin President and Chief Executive Officer, Federal Signal Corporation Larry B. Porcellato Chief Executive Officer, The Homax Group, Inc. Abbie J. Smith Chaired Professor, University of Chicago Booth School of Business Brian E. Stern Director, Starboard Capital Partners, LLC Ronald V. Waters, III* Independent Business Consultant, Former Director, President and Chief Executive Officer, LoJack Corporation Committees of the Board Audit Miguel M. Calado, Chairperson Mary H. Bell James R. Jenkins Human Resources and Compensation Abbie J. Smith, Chairperson Cheryl A. Francis Dennis J. Martin Brian E. Stern HNI Corporation Officers Operating Companies Public Policy and Corporate Governance Larry B. Porcellato, Chairperson Gary M. Christensen Ronald V. Waters, III * Lead Director Stan A. Askren Chairman, President and Chief Executive Officer Steven M. Bradford Vice President, General Counsel and Secretary Gary L. Carlson Vice President, Member and Community Relations Tamara S. Feldman Vice President, Financial Reporting Derek P. Schmidt Treasurer and Vice President, Corporate Finance Alan R. Moorhead Vice President, Internal Audit Kurt A. Tjaden Vice President and Chief Financial Officer Charles C. Bell President, HBF Redus W. Brooks President, Maxon Furniture Peter C. M. Chu President, Lamex Bradley D. Determan Executive Vice President, HNI Corporation President, Hearth & Home Technologies Jerald K. Dittmer Executive Vice President, HNI Corporation President, HON Company Eric F. Jackson President, Sagus Jeffrey D. Lorenger Executive Vice President, HNI Corporation President, Allsteel Donald T. Mead Executive Vice President, HNI Corporation President, Gunlocke Marco V. Molinari Executive Vice President, HNI Corporation President, HNI International Brandon T. Sieben President, Paoli Investor Information Fiscal 2012 Quarter-End Dates 1st Quarter: Saturday, March 31 2nd Quarter: Saturday, June 30 3rd Quarter: Saturday, September 29 4th Quarter: Saturday, December 29 Annual Meeting The Corporation’s annual shareholders’ meeting will be held at 10:30 a.m. on Tuesday, May 8, 2012, at the Clarion Hotel, 2915 North Highway 61, Muscatine, Iowa. Shareholders and other interested investors are encouraged to attend the meeting. Form 10-K Report All financial information, including the Corporation’s annual report on Form 10-K, can be accessed on the Corporation’s website at www.hnicorp.com. Corporate Headquarters and Investor Relations HNI Corporation 408 East Second Street P.O. Box 1109 Muscatine, IA 52761-0071 Telephone: 563.272.7400 Company Fax: 563.272.7114 Investor Relations Fax: 563.272.7655 Investor Relations Email: investorrelations@hnicorp.com Independent Registered Public Accounting Firm PricewaterhouseCoopers LLP One North Wacker Drive Chicago, IL 60606 Common Stock HNI Corporation common stock trades on the New York Stock Exchange (NYSE) under the symbol: HNI. Transfer Agent Shareholders may report a change of address or make inquiries by writing or calling: Wells Fargo Shareowner Services 161 North Concord Exchange South Saint Paul, MN 55075 Telephone: 800.468.9716 HNI Corporation 408 East Second Street, Muscatine, Iowa 52761 hnicorp.com 

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