2015 ANNUAL REPORT
HNI CORPORATION
FINANCIAL
HIGHLIGHTS
(Amounts in thousands, except for per share)
2015
2014
Increase
INCOME STATEMENT DATA
Net sales
Gross profit
Selling and administrative expenses
Restructuring related and impairment charges
Non-GAAP net income attributable to HNI Corporation*
Non-GAAP net income as a % of net sales*
Per common share:
Non-GAAP net income attributable to HNI Corporation—diluted*
Cash dividends
$ 2,304,419
$ 847,398
$ 671,930
$
11,792
$ 117,020
$ 2,222,695
$ 784,200
$ 638,332
33,019
$
89,730
$
5.1%
4.0%
$
$
2.58
1.045
$
$
1.97
0.99
3.7%
30.4%
31.0%
BALANCE SHEET DATA
Total assets
Long-term debt and capital lease obligations
Debt/capitalization ratio
HNI Corporation’s shareholders’ equity
Working capital
OTHER DATA
Capital expenditures (including capitalized software)
Cash flow from operations
Weighted-average shares outstanding—diluted
$ 1,263,925
$ 185,000
$ 1,239,334
$ 197,736
28.5%
32.3%
$ 476,954
2,470
$
$ 414,587
(1,774)
$
$ 114,966
$ 173,352
45,440,653
$ 112,713
$ 167,796
45,578,872
*GAAP to Non-GAAP reconciliation
2015
2014
2013
GAAP net income
Adjustments
Restructuring and impairment
Transition costs
(Gain) loss on sale of assets
Total adjustments
Tax impact of adjustments
Amount
% of
Net Sales
Earnings
Per Share
Amount
% of
Net Sales
Earnings
Per Share
Amount
% of
Net Sales
Earnings
Per Share
$ 105,436
4.6%
$2.32
$ 61,471
2.8%
$1.35
$ 63,683
3.1%
$1.39
$ 12,569
4,704
$ 17,273
(5,689)
$ 38,232
4,894
(10,723)
$ 32,403
(4,144)
$
333
—
2,460
$ 2,793
(960)
Non-GAAP net income
$ 117,020
5.1%
$2.58
$ 89,730
4.0%
$1.97
$65,516
3.2%
$1.43
HNI CORPORATION
VALUE
CREATION
01
(2013–2015)
(2013–2015)
(2013–2015)
12%
REVENUE GROWTH
77%
PROFIT GROWTH
$506m
CASH GENERATED
NET SALES
(in millions)
NON-GAAP*
NET INCOME
(in millions)
CASH FLOW
FROM OPERATIONS
(in millions)
0
6
0
2
$
,
3
2
2
,
2
$
4
0
3
,
2
$
6
6
$
0
9
$
7
1
1
$
5
6
1
$
8
6
1
$
3
7
1
$
2013
2014
2015
2013
2014
2015
2013
2014
2015
CASH DIVIDEND
(per common share)
2
7
.
0
$
8
7
.
0
$
6
8
.
0
$
6
8
.
0
$
6
8
.
0
$
2
9
.
0
$
5
9
.
0
$
6
9
.
0
$
9
9
.
0
$
2006
2007
2008
2009
2010
2011
2012
2013
2014
5
4
0
.
1
$
2015
*See GAAP to Non-GAAP reconciliation on the inside front cover.
2015 ANNUAL REPORT
02
DEAR
SHAREHOLDER
2015 was another strong year. We delivered a thirty percent
improvement in non-GAAP earnings on modest sales growth.
We again generated solid cashflow to support our long-term
business investments and increased our already strong dividend.
Our businesses performed well versus the competition in a chal-
lenging, slow-growth economic environment. Office Furniture
markets were negatively impacted in the second half of 2015
by muted CEO and small business confidence and the economic
turmoil in China. In our Hearth markets, single family housing
starts continued to improve modestly while warmer weather
and dramatically lower oil prices severely impacted the bio-
mass market.
We executed well on our core strategies in 2015: focus on the
core, split and focus with leverage, core plus and Rapid
Continuous Improvement driven by the strength of our member/
owner culture.
HEARTH BUSINESS—ANOTHER YEAR OF RECORD EARNINGS
Our Hearth business achieved another year of record earnings,
delivering $80 million of operating profits on sales of $527 mil-
lion. Sales results across the business were mixed. Solid growth
in the new construction and retail gas businesses was partially
offset by a significant decline in the biomass business due to
low oil prices and warm weather. We continued investing to
strengthen our industry leading brands, products and distribu-
tion, and we are the preferred choice for builders and homeown-
ers. We are focused on significant investment and structural
cost reduction opportunities to drive additional value creation in
our Hearth business.
OFFICE FURNITURE—OUTSTANDING PROFIT IMPROVEMENT
Our Office Furniture business profitability improved by twenty-
five percent on modest sales growth. Strong operational
performance, consistent flawless execution for our customers
and benefits from strategic investments were key drivers for
increased earnings.
Our North America sales increased two percent led by growth in
our contract business of approximately five percent. Our
supplies driven business sales were flat driven by muted small
business con fidence. Sales in our international business were
up three percent despite the drag from the economic upheaval
in China.
Looking forward, we see significant opportunities for increased
investments and structural cost reductions to deliver attractive
financial returns and additional profit improvement across our
Office Furniture businesses, even in a challenging economic
environment.
HNI CORPORATION
03
BUSINESS SYSTEM TRANSFORMATION
We continued our investment and commitment to Business
Systems Transformation (BST). We made strong progress sim-
plifying and transforming our business processes to deliver
more value to our customers and reduce non-value added costs.
BST remains a significant focus for the organization and a major
strategic investment for HNI.
OUR CULTURE—A COMPETITIVE ADVANTAGE
We remain committed to our unique culture, core beliefs and
values. Our member owner culture continues to stand the test of
time and is what sets us apart from the competition. We believe
the key to value creation is an intense focus on creating value for
customers. When we create value for customers by consistently
delivering more, better, faster with less, we create value for
shareholders, and ultimately for our members.
LOOKING FORWARD—2016
As we look to 2016, we expect the weak economic environment
to continue, impacting our competitive markets. Despite facing
potential sales declines, we are aggressively driving significant
structural cost reductions while investing for the future across
our businesses. I am confident we are focused on the right
actions to deliver long-term value for customers, members and
shareholders.
THANK YOU
Finally, I want to thank our customers, members, and suppliers
for their contributions to our success. We appreciate the con-
tinued loyalty and trust placed in us by customers, suppliers and
shareholders. Thank you to our members for their continued
dedication and hard work to drive long-term value creation.
“
2015 was another strong year. We
delivered a thirty percent improvement
in non-GAAP earnings on modest
sales growth.”
Stan A. Askren
Chairman, President and Chief Executive Officer, HNI Corporation
2015 ANNUAL REPORT
04
®
®
Helping organizations
deliver workplace
outcomes that matter
Inspired by practicality and invested
in understanding the furniture needs
of today’s workplace
Inspired design and uncompromised
craftsmanship in elegant furniture and
fabrics for high impact customer spaces
The trusted partner for the professional services client,
providing a broad range of premium furniture solutions
that enhance comfort, collaboration and productivity
®
TM
®
®
®
India’s leading office furniture
company and pioneer of
modern modular furniture
K–12 thought leader helping
educators prepare students
for what’s next
Asia’s trusted leader in
making great workplace
design accessible
Office furniture systems with plan-
ning and design technologies for
small and mid-sized businesses
Delivering relevant solu-
tions with differentiated
service
HNI CORPORATION
05
The #1 preferred brand by builders
and remodelers
The design and innovation leader.
No one builds a better fire
Performance and easy operation come
standard. Nothing burns like a Quad
Premium wood and pellet stoves.
Built to a standard, not a price
®
®
®
®
®
Handcrafted stoves and inserts
that deliver a lifetime of warmth
Built to last with versatile design
options to fit your style
Clean style and designs from the vent
free experts
America’s most prominent specialty
hearth retailer and builder design center
2015 ANNUAL REPORT
06
OUR
VISION
We, the members of HNI Corporation, are dedicated to creating
long-term value for all stakeholders, exceeding our customers’
expectations and making our company a great place to work.
We will treat each other, customers, suppliers, shareholders and
our communities, with fairness and respect. Our success depends
on rapid continuous improvement, member engagement, individ-
ual and collective integrity, and innovation in everything we do.
We relentlessly pursue the following longstanding commitments:
WE WILL
BE A PREFERRED PROVIDER OF PRODUCTS AND SERVICES.
CREATE LONG-TERM VALUE FOR SHAREHOLDERS.
BE A GREAT PLACE TO WORK.
BE A RESPONSIBLE GLOBAL CITIZEN.
GROW PROFITABLY.
HNI CORPORATION
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended January 2, 2016
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
An Iowa Corporation
Commission File Number 1-14225
HNI Corporation
408 East Second Street
P. O. Box 1109
Muscatine, IA 52761-0071
563/272-7400
IRS Employer No. 42-0617510
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, with par value of $1.00 per share.
Name of each exchange on which registered
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes
No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes
No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes
No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during
the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes
No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not
contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a
smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in
Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
(Do not check if a smaller reporting company)
Smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes
No
The aggregate market value of the voting stock held by nonaffiliates of the Registrant, as of July 4, 2015 was $1,373,219,063,
based on the New York Stock Exchange closing price for such shares on that date, assuming for purposes of this calculation that
all 5% holders and all directors and executive officers of the Registrant are affiliates.
The number of shares outstanding of the Registrant's common stock, as of February 5, 2016, was 44,159,340.
Documents Incorporated by Reference
Portions of the Registrant's Definitive Proxy Statement on Schedule 14A for the Annual Meeting of Shareholders to be held on
May 10, 2016 are incorporated by reference into Part III.
Table of Contents
ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
PART I
Page
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Item 15.
Signatures
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Table I – Executive Officers of the Registrant
PART II
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Directors, Executive Officers and Corporate Governance
Executive Compensation
PART III
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
Exhibits, Financial Statement Schedules
PART IV
Management Report on Internal Control Over Financial Reporting
Report of Independent Registered Public Accounting Firm
Financial Statements
Financial Statement Schedules
Index of Exhibits
4
10
16
17
18
18
19
20
21
22
30
31
31
31
31
32
32
32
32
32
33
34
36
37
39
43
69
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Table of Contents
ITEM 1. BUSINESS
General
ANNUAL REPORT ON FORM 10-K
PART I
HNI Corporation (the “Corporation”, “we”, “us” or “our”) is an Iowa corporation incorporated in 1944. The Corporation is a
provider of office furniture and hearth products. Office furniture products include panel-based and freestanding furniture systems
and complementary products such as seating, storage and tables. These products are sold primarily through a national system of
dealers, wholesalers and office product distributors but also directly to end-user customers and federal, state and local
governments. Hearth products include a full array of gas, wood and pellet burning fireplaces, inserts, stoves, facings and
accessories. These products are sold through a national system of dealers and distributors, as well as Corporation-owned
distribution and retail outlets. In fiscal 2015, the Corporation had net sales of $2.3 billion, of which approximately $1.8 billion
or 77% was attributable to office furniture products and $0.5 billion or 23% was attributable to hearth products. Please refer to
Reportable Segment Information in the Notes to Consolidated Financial Statements for further information about operating
segments.
The Corporation is organized into a corporate headquarters and operating units with offices, manufacturing plants, distribution
centers and sales showrooms in the United States, Canada, China, Hong Kong, India and Taiwan. See Item 2."Properties" for
additional related discussion.
Nine operating units, marketing under various brand names, participate in the office furniture industry. These operating units
include: The HON Company LLC ("HON"), Allsteel Inc., Maxon Furniture Inc., The Gunlocke Company L.L.C., Paoli LLC,
Hickory Business Furniture, LLC (“HBF”), Artco-Bell Corporation ("Artcobell"), HNI Hong Kong Limited (“Lamex”) and BP
Ergo Limited ("BP Ergo"). Each of these operating units provides products which are sold through various channels of distribution
and segments of the industry. HNI International Inc. (“HNI International”) sells office furniture products manufactured by the
Corporation’s operating units in select markets outside the United States and Canada.
The operating unit Hearth & Home Technologies LLC (“Hearth & Home”) participates in the hearth products industry. The retail
and distribution brand for this operating unit is Fireside Hearth & Home. During fiscal 2014, the Corporation completed the
acquisition of Vermont Castings Group ("VCG"), a leading manufacturer of free-standing hearth stoves and fireplaces, for a
purchase price of approximately $62 million.
The Corporation has been committed to systematically eliminating waste through its process improvement approach known as
Rapid Continuous Improvement (“RCI”), which focuses on streamlining design, manufacturing and administrative processes. The
Corporation's RCI program has contributed to increased productivity, lower costs, improved product quality and enhanced
workplace safety. In addition, the Corporation's RCI efforts enable it to offer short average lead times, from receipt of order to
delivery and installation, for most products.
The Corporation's product development efforts are focused on developing and providing relevant and differentiated solutions
delivering quality, aesthetics and style.
An important element of the Corporation's success has been its member-owner culture, which has enabled it to attract, develop,
retain and motivate skilled, experienced and efficient members (i.e., employees). Each of the Corporation's eligible members has
the opportunity to own stock in the Corporation through a number of stock-based plans, including a member stock purchase plan
and a profit-sharing retirement plan, which drives a unique level of commitment to the Corporation’s success throughout the
workforce.
For further financial-related information with respect to acquisitions, divestitures, operating segment information, restructuring
and the Corporation’s operations in general, refer to “Item 7. Management’s Discussion and Analysis of Financial Condition and
Results of Operations” in Part II of this report, and the following sections in the Notes to Consolidated Financial Statements: Nature
of Operations, Business Combinations and Reportable Segment Information.
-4-
Table of Contents
Industry
According to the Business and Institutional Furniture Manufacturer's Association (“BIFMA”), U.S. office furniture industry
shipments were estimated to be $10.2 billion in 2015, an increase of 5% compared to 2014, which was a 4% increase from 2013
levels.
The U.S. office furniture market consists of 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, primarily for
new office facilities, relocations or department or office redesigns, which are frequently customized to meet specific client and
designer preferences. Contract furniture is generally purchased through office furniture dealers who typically prepare a custom-
designed office layout emphasizing image and design. The selling process is complex and lengthy and generally has several
manufacturers competing for the same projects.
The supplies-driven channel of the market, in which the Corporation is a leader, primarily represents smaller orders of office
furniture purchased by small/medium businesses on the basis of price, quality, selection and speed and reliability of delivery. Office
products dealers, wholesalers and national office product distributors are the primary distribution channels in this market. Office
furniture and products dealers publish content on the internet and periodic catalogs displaying office furniture and products from
various manufacturers.
The Corporation also competes in the hearth products industry, where it is a market leader. Hearth products are typically purchased
by builders during the construction of new homes and homeowners during the renovation of existing homes. Both types of
purchases involve seasonality with remodel/retrofit activity being concentrated in the September to December time-
frame. Distribution is primarily through independent dealers, who may buy direct from the manufacturer or from an intermediate
distributor.
Strategy
The Corporation's strategy is to build on its position as a leading manufacturer of office furniture and hearth products in North
America and pursue select global markets where opportunities exist to create shareholder value. The components of this growth
strategy are to introduce new products, build brand equity, provide outstanding customer satisfaction by focusing on the end-user,
strengthen the distribution network, respond to global competition, pursue complementary strategic acquisitions, enter markets
not currently served and continually reduce costs.
The Corporation’s strategy has a dual focus: working continuously to extract new growth from its core markets while identifying
and developing new, adjacent potential areas of growth. The Corporation focuses on extracting new growth from each of its
existing businesses by deepening its understanding of end-users, using new insights gained to refine branding, selling and marketing
and developing new products to serve them better. The Corporation also pursues opportunities in potential growth drivers related
to its core business, such as vertical markets or new distribution models.
Employees/Members
As of January 2, 2016, the Corporation employed approximately 10,400 persons, 10,000 of whom were full-time and 400 of whom
were temporary personnel. The Corporation believes its labor relations are good.
Products and Solutions
Office Furniture
The Corporation designs, manufactures and markets a broad range of office furniture systems and seating across a range of price
points. The Corporation's portfolio includes panel-based and freestanding furniture systems and complementary products such
as seating, storage and tables. The Corporation offers a complete line of office panel system products and freestanding desks,
classroom solutions, bookshelves and credenzas in order to meet the needs of a wide spectrum of organizations. The Corporation
offers a variety of storage options designed either to be integrated into the Corporation's office systems products or to function as
freestanding furniture in office applications. The Corporation's seating line includes chairs designed for all types of office
work. The chairs are available in a variety of frame colors, coverings and a wide range of price points.
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Table of Contents
To meet the demands of various markets, the Corporation's products are sold under the Corporation's brands – HON®, Allsteel®,
Maxon®, Gunlocke®, Paoli®, HBF®, artcobellTM, Midwest Folding ProductsTM, American DeskTM, basyx® by HON, Lamex® and
ERGO®, as well as private labels.
Hearth Products
The Corporation is North America’s largest manufacturer and marketer of prefabricated fireplaces, hearth stoves and related
products, primarily for the home, which it sells under its widely recognized Heatilator®, Heat & Glo®, Majestic®, Monessen®,
Quadra-Fire®, Harman StoveTM , Vermont Castings®and PelProTM brand names.
The Corporation’s line of hearth products includes a full array of gas, wood and pellet burning fireplaces, inserts, stoves, facings
and accessories. Heatilator®, Heat & Glo®, Majestic® and Monessen® are brand leaders in the two largest segments of the home
fireplace market: gas and wood fireplaces. The Corporation is the leader in “direct vent” fireplaces, which replace the chimney-
venting system used in traditional fireplaces with a less expensive vent through the roof or an outer wall. In addition, the Corporation
is the leader in wood and pellet-burning stoves and furnaces with its Quadra-Fire®, Harman StoveTM,Vermont Castings® and
PelProTM product lines which provide home heating solutions using renewable fuels. See “Intellectual Property” under Item 1.
"Business" for additional details.
Manufacturing
The Corporation manufactures office furniture in Georgia, Indiana, Iowa, New York, North Carolina, Texas, China and India. The
Corporation manufactures hearth products in Iowa, Kentucky, Maryland, Minnesota, Pennsylvania, Vermont and Washington.
The Corporation purchases raw materials and components from a variety of suppliers, and generally most items are available from
multiple sources. Major raw materials and components include coil steel, aluminum, zinc, castings, lumber, veneer, particleboard,
fabric, paint, lacquer, hardware, glass, plastic products and shipping cartons.
Since its inception, the Corporation has focused on making its manufacturing facilities and processes more flexible while at the
same time reducing cost, eliminating waste and improving product quality. The Corporation applies the principles of RCI and a
lean manufacturing philosophy leveraging the creativity of its members to eliminate and reduce costs. To achieve flexibility and
attain efficiency goals, the Corporation has adopted a variety of production techniques, including cellular manufacturing, focused
factories, just-in-time inventory management, value engineering, business simplification and 80/20 principles. The application
of RCI has increased productivity by reducing set-up and processing times, square footage, inventory levels, product costs and
delivery times, while improving quality and enhancing member safety. The Corporation's RCI process involves production and
administrative employees, management, customers and suppliers. The Corporation has facilitators, coaches and consultants
dedicated to the RCI process and strives to involve all members in the RCI process. Manufacturing also plays a key role in the
Corporation's concurrent product development process in order to design new products for ease of manufacturability.
Product Development
The Corporation's product development efforts are primarily focused on developing relevant and differentiated end-user solutions
focused on quality, aesthetics, style, sustainable design and on reducing manufacturing costs. The Corporation accomplishes this
through improving existing products, extending product lines and platforms, applying ergonomic research, improving
manufacturing processes, applying alternative materials and providing engineering support and training to its operating units. The
Corporation conducts its product development efforts at both the corporate and operating unit level. The Corporation invested
approximately $31.1 million, $29.7 million and $27.3 million in product development during fiscal 2015, 2014 and 2013,
respectively.
Intellectual Property
As of January 2, 2016, the Corporation owned 245 U.S. and 262 foreign patents with expiration dates through 2040 and had
applications pending for 25 U.S. and 84 foreign patents. In addition, the Corporation holds 198 U.S. and 460 foreign trademark
registrations and has applications pending for 29 U.S. and 26 foreign trademarks.
The Corporation's principal office furniture products do not require frequent technical changes. The Corporation believes neither
any individual office furniture patent nor the Corporation's office furniture patents in the aggregate are material to the Corporation's
business as a whole.
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Table of Contents
The Corporation’s patents covering its hearth products protect various technical innovations. While the acquisition of patents
reflects Hearth & Home’s position in the market as an innovation leader, the Corporation believes neither any individual hearth
product patent nor the Corporation’s hearth product patents in the aggregate are material to the Corporation’s business as a whole.
The Corporation applies for patent protection when it believes the expense of doing so is justified, and the Corporation believes
the duration of its registered patents is adequate to protect these rights. The Corporation also pays royalties in certain instances
for the use of patents on products and processes owned by others.
The Corporation applies for trademark protection for brands and products when it believes the expense of doing so is justified.
The Corporation actively protects trademarks it believes have significant value. The Corporation believes neither the loss of any
individual trademark nor the loss of the Corporation's trademarks in the aggregate would materially adversely affect the
Corporation's business as a whole, except for HNI, HON and Allsteel.
Sales and Distribution: Customers
The Corporation sells its office furniture products through five principal distribution channels. The first channel consisting of
independent, local office furniture and office products dealers, specializes in the sale of a broad range of office furniture and office
furniture systems to business, government, education and health care entities.
The second distribution channel comprises national office product distributors including Staples, Inc. and Office Depot, Inc. which
have announced a planned merger. These distributors sell furniture along with office supplies through a national network of
dealerships and sales offices, which assist their customers with the evaluation of office space requirements, systems layout and
product selection and design and office solution services provided by professional designers. These distributors also sell through
on-line and retail office products stores.
The third distribution channel is where the Corporation has the lead selling relationship with the end-user.
The fourth distribution channel comprises wholesalers serving as distributors of the Corporation's products to independent dealers
and national office products distributors. The Corporation sells to the nation's largest office supply/furniture wholesalers, Essendant
and S.P. Richards Company. Wholesalers maintain inventory of standard product lines for resale to the various dealers and national
office products distributors. They also special order products from the Corporation in customer-selected models and colors. The
Corporation's wholesalers maintain warehouse locations throughout the United States, which enables the Corporation to make its
products available for rapid delivery to resellers anywhere in the country.
The fifth distribution channel comprises direct sales of the Corporation's products to federal, state and local government offices.
The Corporation's office furniture sales force consists of regional sales managers, salespersons and firms of independent
manufacturers' representatives who collectively provide national sales coverage. Sales managers and salespersons are compensated
by a combination of salary and variable performance compensation.
Office products dealers, national wholesalers and national office product distributors market their products over the Internet and
through catalogs published periodically. These catalogs are distributed to existing and potential customers.
The Corporation also makes export sales through HNI International to office furniture dealers and wholesale distributors serving
select foreign markets. Distributors are principally located in the Middle East, Mexico, Latin America and the Caribbean. Through
Lamex and BP Ergo, the Corporation manufactures and distributes office furniture directly to end-users and through independent
dealers and distributors in Asia, primarily China and India.
Limited quantities of select finished goods inventories primarily built to order and awaiting shipment are at the Corporation's
principal manufacturing plants and at its various distribution centers.
Hearth & Home sells its fireplace and stove products through dealers, distributors and Corporation-owned distribution and retail
outlets. The Corporation has a field sales organization of regional sales managers, salespersons and firms of independent
manufacturers' representatives.
In fiscal 2015, the Corporation's five largest customers represented approximately 22% of its consolidated net sales. No single
customer accounted for 10% or more of the Corporation’s consolidated net sales in fiscal 2015. The substantial purchasing power
exercised by large customers may adversely affect the prices at which the Corporation can successfully offer its products.
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Table of Contents
The above percentages do not include revenue from various government agencies. In aggregate, purchases by federal government
entities collectively accounted for approximately 3% of the Corporation's consolidated net sales.
As of January 2, 2016, the Corporation had an order backlog of approximately $173.8 million, which will be filled in the ordinary
course of business within the first few months of the fiscal year. This compares with $192.4 million as of January 3, 2015. Backlog,
in terms of percentage of net sales, was 7.6% and 8.7% for fiscal 2015 and 2014, respectively. The Corporation’s products are
typically manufactured and shipped within a few weeks following receipt of order or later upon customer request. The dollar
amount of the Corporation’s order backlog is, therefore, not considered by management to be a leading indicator of the Corporation’s
expected sales in any particular fiscal period.
Competition
The Corporation is a leading global office furniture manufacturer and believes it is the largest provider of furniture to small- and
medium-sized workplaces. The Corporation is North America's largest manufacturer and marketer of fireplaces.
The office furniture industry is highly competitive, with a significant number of competitors offering similar products. The
Corporation competes by emphasizing its ability to deliver compelling value products, solutions and a high level of tailored
customer service. The Corporation competes with large office furniture manufacturers, which cover a substantial portion of the
North America market share in the contract-oriented office furniture market, such as Steelcase Inc., Haworth, Inc., Herman Miller,
Inc. and Knoll, Inc. The Corporation also competes with a number of other office furniture manufacturers, including The Global
Group (a Canadian company), Kimball International, Inc., Krueger International Inc. (KI), Virco Mfg. Corporation and Teknion
Corporation (a Canadian company), as well as global importers. The Corporation faces significant price competition from its
competitors and may encounter competition from new market entrants.
Hearth products, consisting of prefabricated fireplaces and related products, are manufactured by a number of national and regional
competitors. The Corporation competes primarily against a broad range of manufacturers, including Travis Industries Inc.,
Innovative Hearth Products, Wolf Steel Ltd. (Napoleon) and FPI Fireplace Products International Ltd. (Regency).
Both office furniture and hearth products compete on the basis of performance, quality, price, complete and on-time delivery to
the customer and customer service and support. The Corporation believes it competes principally by providing compelling value
products designed to be among the best in their price range for product quality and performance, superior customer service and
short lead-times. This is made possible, in part, by the Corporation's on-going investment in brands, product development, highly
efficient and low cost manufacturing operations and an extensive distribution network.
For further discussion of the Corporation's competitive situation, refer to “Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations” later in this report.
Effects of Inflation
Certain business costs may, from time to time, increase at a rate exceeding the general rate of inflation. The Corporation’s objective
is to offset the effect of normal inflation on its costs primarily through productivity increases in combination with certain adjustments
to the selling price of its products as competitive market and general economic conditions permit.
Investments are routinely made in modernizing plants, equipment, information technology capabilities and RCI programs. These
investments collectively focus on business simplification and increasing productivity which helps to offset the effect of rising
material and labor costs. The Corporation also routinely employs ongoing cost control disciplines. In addition, the last-in, first-
out ("LIFO") valuation method is used for most of the Corporation's inventories, which ensures changing material and labor costs
are recognized in reported income and, more importantly, these costs are recognized in pricing decisions.
Environmental
The Corporation is subject to a variety of environmental laws and regulations governing the use of materials and substances in
products, the management of wastes resulting from use of certain material and the remediation of contamination associated with
releases of hazardous substances used in the past. Although the Corporation believes it is in material compliance with all of the
various regulations applicable to its business, there can be no assurance requirements will not change in the future or the Corporation
will not incur material costs to comply with such regulations. The Corporation has trained staff responsible for monitoring
compliance with environmental, health and safety requirements. The Corporation’s environmental staff works with responsible
personnel at each manufacturing facility, the Corporation’s environmental legal counsel and consultants on the management of
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environmental, health and safety issues. The Corporation’s environmental objective is to reduce and, when practical, eliminate
the human and ecosystem impacts of materials and manufacturing processes.
The Corporation’s environmental management system has earned the recognition of numerous state and federal agencies as well
as non-government organizations. Aligning continuous improvement initiatives with the Corporation’s environmental objectives
creates a model of the triple bottom line of sustainable development where members work toward shared goals of personal growth,
economic reward and a healthy environment for the future.
Over the past several years, the Corporation has expanded its environmental management system and established metrics to
influence product design and development, supplier and supply chain performance, energy and resource consumption and the
impacts of its facilities. In addition, the Corporation is providing sustainability training to senior decision makers and has assigned
resources to documenting and communicating its progress to an increasingly knowledgeable market. Integrating sustainable
objectives into core business systems is consistent with the Corporation’s vision and ensures its commitment to being a sustainable
enterprise remains a priority for all members.
Compliance with federal, state and local environmental regulations has not had a material effect on the capital expenditures,
earnings or competitive position of the Corporation to date. The Corporation does not anticipate financially material capital
expenditures will be required during fiscal 2016 for environmental control facilities. It is management’s judgment that compliance
with current regulations should not have a material effect on the Corporation’s financial condition or results of operations. However,
there can be no assurance new environmental legislation, material science or technology in this area will not result in or require
material capital expenditures.
Business Development
The development of the Corporation's business during the fiscal years ended January 2, 2016, January 3, 2015 and December 28,
2013 is discussed in “Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations”.
Available Information
Information regarding the Corporation’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form
8-K, and any amendments to these reports, will be made available, free of charge, on the Corporation’s website at www.hnicorp.com,
as soon as reasonably practicable after the Corporation electronically files such reports with or furnishes them to the Securities
and Exchange Commission (the “SEC”). The Corporation’s information is also available from the SEC’s Public Reference room
at 100 F Street, N.E., Washington, D.C. 20549, or on the SEC website at www.sec.gov.
Forward-Looking Statements
Statements in this report to the extent they are not statements of historical or present fact, including statements as to plans, outlook,
objectives and future financial performance, are “forward-looking” statements, within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934 and are made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Words, such as “anticipate,” “believe,” “could,” “confident,” “estimate,”
“expect,” “forecast,” “hope,” “intend,” “likely,” “may,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “will,”
“would” and variations of such words and similar expressions identify forward-looking statements.
Forward-looking statements involve known and unknown risks and uncertainties, which may cause the Corporation’s actual results
in the future to differ materially from expected results. The most significant factors known to the Corporation that may adversely
affect the Corporation’s business, operations, industries, financial position or future financial performance are described later in
this report under the heading “Item 1A. Risk Factors.” The Corporation cautions readers not to place undue reliance on any
forward-looking statement which speaks only as of the date made and to recognize forward-looking statements are predictions of
future results, which may not occur as anticipated. Actual results could differ materially from those anticipated in the forward-
looking statements and from historical results due to the risks and uncertainties described elsewhere in this report, including under
the heading “Item 1A. Risk Factors,” as well as others that the Corporation may consider immaterial or does not anticipate at this
time. The risks and uncertainties described in this report, including those under the heading “Item 1A. Risk Factors,” are not
exclusive and further information concerning the Corporation, including factors that potentially could materially affect the
Corporation’s financial results or condition, may emerge from time to time.
The Corporation assumes no obligation to update, amend or clarify forward-looking statements, whether as a result of new
information, future events or otherwise, except as required by applicable law. The Corporation advises you, however, to consult
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any further disclosures made on related subjects in future quarterly reports on Form 10-Q and current reports on Form 8-K filed
with or furnished to the SEC.
ITEM 1A. RISK FACTORS
The following risk factors and other information included in this report should be carefully considered. If any of the following
risks actually occur, our business, operating results, cash flows or financial condition could be materially adversely affected.
The existence of various unfavorable macroeconomic and industry factors, or deterioration of economic conditions, for a prolonged
period could adversely affect our business operating results or financial condition.
Office furniture industry sales are impacted by a variety of macroeconomic factors including service-sector employment levels,
corporate profits, small business confidence, commercial construction and office vacancy rates. Industry factors, including
corporate restructuring, technology changes, corporate relocations, health and safety concerns, including ergonomic considerations,
and the globalization of companies also influence office furniture industry revenues. We experienced softening in the U.S. economy
in fiscal 2015 and we expect economic uncertainty to continue into 2016, which could decrease demand for our office furniture
products and have adverse effects on our operating results.
Hearth products industry sales are impacted by a variety of macroeconomic factors as well, including housing starts, overall
employment levels, interest rates, consumer confidence, energy costs, disposable income and changing demographics. Industry
factors, such as technology changes, health and safety concerns and environmental regulation, including indoor air quality standards,
also influence hearth products industry revenues. Deterioration of the economic conditions or a slowdown in the recovery in the
homebuilding industry and the hearth products market could decrease demand for our hearth products and have additional adverse
effects on our operating results. Additionally, the recent decline in oil and other fuel prices has negatively impacted demand for
our pellet stoves and we expect demand to remain soft in our pellet business as oil and other fuel prices are projected to remain
low.
Economic growth has slowed, and may continue to slow, in several key international markets, including China and India, which
could have adverse effects on our international office furniture sales and our operating results.
Deteriorating economic conditions could affect our business significantly, including: reduced demand for products; insolvency
of our dealers resulting in increased provisions for credit losses; insolvency of our key suppliers resulting in product delays;
inability of customers to obtain credit to finance purchases of our products; decreased customer demand, including order delays
or cancellations; and counter-party failures negatively impacting our treasury operations.
We may need to take additional impairment charges related to goodwill and indefinite-lived intangible assets, which would adversely
affect our results of operations.
Goodwill and other acquired intangible assets with indefinite lives are not amortized but are tested for impairment annually, and
when an event occurs or circumstances change making it reasonably possible an impairment may exist. As of January 2, 2016,
we had goodwill of $278 million recorded on our balance sheet. We test for impairment annually during the fourth quarter of the
year and whenever indicators of impairment exist. We test goodwill for impairment by first comparing the carrying value of net
assets to the fair value of the reporting unit. If the fair value is determined to be less than carrying value, a second step is performed
to determine the implied fair value of goodwill associated with the reporting unit. If the carrying value of goodwill exceeds the
implied fair value of goodwill, the excess represents the amount of goodwill impairment, and accordingly, an impairment is
recognized.
We estimate the fair values of the reporting units using discounted cash flows. Forecasts of future cash flows are based on our
best estimate of longer term, broad market trends. We combine this trend data with estimates of current economic conditions in
the U.S. and other countries where we have a presence, competitor behavior, the mix of product sales, commodity costs, wage
rates, the level of manufacturing capacity and the pricing environment. In addition, estimates of fair value are impacted by estimates
of the market-participant-derived weighted average cost of capital. Changes in these forecasts could significantly change the
amount of impairment recorded, if any. As a result of impairment testing, we recorded goodwill and other long-lived asset
impairments of $11 million during 2015.
The office furniture and hearth products industries are highly competitive and, as a result, we may not always be successful.
Both the office furniture and hearth products industries are highly competitive, with a significant number of competitors in both
industries offering similar products. While competitive factors vary geographically and between differing sales situations, typical
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factors for both industries include: price; delivery and service; product design and features; product quality; strength of dealers
and other distributors; and relationships with customers and key influencers, including architects, designers, home-builders and
facility managers. Our principal competitors in the office furniture industry include The Global Group, Haworth, Inc., Kimball
International, Inc., Steelcase Inc., Herman Miller, Inc., Teknion Corporation, Virco Mfg. Corporaton, Krueger International Inc.
(KI) and Knoll, Inc. Our principal competitors in the hearth products industry include Travis Industries Inc., Innovative Hearth
Products, Wolf Steel Ltd. (Napoleon) and FPI Fireplace Products International Ltd. (Regency). In both industries, most of our
top competitors have an installed base of products that can be a source of significant future sales through repeat and expansion
orders. These competitors manufacture products with strong acceptance in the marketplace and are capable of developing products
that have a competitive advantage over our products.
Our continued success will depend on many factors, including our ability to continue to manufacture and market high quality,
high performance products at competitive prices and our ability to adapt our business model to effectively compete in the highly
competitive environments of both the office furniture and hearth products industries. Our success is also subject to our ability to
sustain and grow our positive brand reputation and recognition among existing and potential customers and use our brands and
trademarks effectively in entering new markets.
In both the office furniture and hearth products industries, we also face significant price competition from our competitors and
from new market entrants who primarily manufacture and source products from lower cost countries. Price competition impacts
our ability to implement price increases or, in some cases, even maintain prices, which could lower our profit margins. In addition,
we may not be able to maintain or raise the prices of our products in response to rising raw material prices and other inflationary
pressures.
The concentration of our customer base, changes in demand and order patterns from our customers, as well as the increased
purchasing power of these customers, could adversely affect our business, operating results or financial condition.
We sell our products through multiple distribution channels. These distribution channels have been consolidating and may continue
to consolidate in the future. Consolidation may result in a greater proportion of our sales being concentrated in fewer customers,
including as a result of the recent mergers and announced mergers of national office product distributors. The increased purchasing
power exercised by larger customers may adversely affect the prices at which we can successfully offer our products. As a result
of this consolidation, changes in the purchase patterns or the loss of a single customer may have a greater impact on our business,
operating results or financial condition than the events would have had prior to the consolidation.
The growth in sales of private-label products by some of our largest office furniture customers may reduce our revenue and
adversely affect our business, operating results or financial condition.
Private-label products are products sold under the name of the distributor or retailer, but manufactured by another party. Some
of our largest customers have aggressive private-label initiatives to increase sales of office furniture. If successful, they may
reduce our revenue and inhibit our ability to raise prices and may, in some cases, even force us to lower prices, which could result
in an adverse effect on our business, operating results or financial condition.
Increases in basic commodity, raw material, component and transportation costs, as well as disruptions to the supply of basic
commodities, raw materials and components or transportation and shipping challenges, could adversely affect our profitability.
Fluctuations in the price, availability and quality of the commodities, raw materials and components used by us in manufacturing
could have an adverse effect on our costs of sales, profitability and our ability to meet customers' demand. We source commodities,
raw materials and components from domestic and international suppliers for both our office furniture and hearth products. From
both domestic and international suppliers, the cost, quality and availability of commodities, raw materials and components,
including steel, one of our largest raw material categories, have been significantly affected in recent years by, among other things,
changes in global supply and demand, changes in laws and regulations (including tariffs and duties), changes in exchange rates
and worldwide price levels, natural disasters, labor disputes, terrorism and political unrest or instability. These factors could lead
to further price increases or supply interruptions in the future. Our profit margins could be adversely affected if commodity, raw
material and component costs remain high or escalate further, and we are either unable to offset such costs through strategic
sourcing initiatives and continuous improvement programs or, as a result of competitive market dynamics, unable to pass along
a portion of the higher costs to our customers.
We rely primarily on third-party freight and transportation providers to deliver our products to customers. Increasing demand for
freight providers and a shortage of qualified drivers may cause delays in our shipments and increase the cost to ship our products,
which may adversely affect our profitability. Additionally, we import and export products and components, primarily using
container ships, which load and unload through several U.S. ports, including ports on the West Coast. Port-caused delays in the
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shipment or receipt of products and components, including labor disputes, could cause delayed receipt of our products and
components. These delays could cause manufacturing disruptions, increased expense resulting from alternate shipping methods
or the inability to meet customer delivery expectations, which may adversely affect our sales and profitability.
Our efforts to introduce new products to meet customer and workplace requirements may not be successful, which could limit our
sales growth or cause our sales to decline.
To meet the changing needs of our customers and keep pace with market trends in both the office furniture and hearth products
industries, we regularly introduce new products. Trends include changes in workplace and home design and increases in the use
of technology and evolving regulatory and industry requirements, including environmental, health, safety and similar standards
for the workplace and home and for product performance. The introduction of new products in both industries requires the
coordination of the design, manufacturing and marketing of the products, which may be affected by factors beyond our control. The
design and engineering of certain new products can take up to a year or more, and further time may be required to achieve client
acceptance. In addition, we may face difficulties introducing new products if we cannot successfully align ourselves with
independent architects, home-builders and designers who are able to design, in a timely manner, high quality products consistent
with our image and our customers' needs. Accordingly, the launch of any particular product may be later or less successful than
we originally anticipated. Difficulties or delays introducing new products or lack of customer acceptance of new products could
limit our sales growth or cause our sales to decline and may result in an adverse effect on our business, operating results or financial
condition.
We have grown, and may continue to grow, our business through acquisitions and alliances, which could adversely affect our
business, operating results or financial condition.
One of our growth strategies is to supplement our organic growth through acquisitions of, and or strategic alliances with, businesses
with technologies or products complimenting or augmenting our existing products or distribution or adding new products or
distribution to our business. In the past few years, we acquired Vermont Castings Group, a hearth stoves and fireplace company,
Artcobell, an education furniture company, and BP Ergo, an office furniture company in India, each of which we continue to
integrate into our business. The benefits of these acquisitions, or future acquisitions or alliances may take more time than expected
to develop or integrate into our operations, and we cannot guarantee any completed or future acquisitions or alliances will in fact
produce any benefits. In addition, acquisitions and alliances involve a number of risks, including, without limitation:
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diversion of management’s attention, including significant management time devoted to integrating acquisitions;
difficulties in assimilating the operations and products of an acquired business or in realizing projected efficiencies, cost
savings and revenue synergies;
potential loss of key employees or customers of the acquired businesses or adverse effects on existing business relationships
with suppliers and customers;
adverse impact on overall profitability if acquired businesses do not achieve the financial results projected in our valuation
models;
reallocation of amounts of capital from other operating initiatives or an increase in our leverage and debt service
requirements to pay the acquisition purchase prices, which could in turn restrict our ability to access additional capital
when needed or to pursue other important elements of our business strategy;
inaccurate assessment of undisclosed, contingent or other liabilities or problems and unanticipated costs associated with
the acquisition; and
incorrect estimates made in accounting for acquisitions, incurrence of non-recurring charges and write-off of significant
amounts of goodwill that could adversely affect our operating results.
Our ability to grow through future acquisitions will depend, in part, on the availability of suitable acquisition candidates at an
acceptable price, our ability to compete effectively for these acquisition candidates and the availability of capital to complete the
acquisitions. These risks could be heightened if we complete several acquisitions within a relatively short period of time. In
addition, there can be no assurance we will be able to continue to identify attractive opportunities or enter into any transactions
with acceptable terms in the future. If an acquisition is completed, there can be no assurance we will be able to successfully
integrate the acquired entity into our operations or achieve sales and profitability justifying our investment in the businesses. Any
potential acquisition may not be successful and could adversely affect our business, operating results or financial condition.
Our continuing activities to reduce structural costs and drive consistent, flawless execution may result in customer disruption
and may distract management from other activities.
As part of our commitment to taking structural cost out of our business, we regularly close, reconfigure or transform manufacturing
and distribution facilities. In the past two years, we have closed several facilities in the United States and internationally. We
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have implemented, and will continue to implement, restructuring actions to transform our business and reduce our manufacturing
footprint. These actions may take longer than anticipated, prove more costly than expected and may distract management from
other activities. If we do not fully realize the expected benefits of our restructuring activities, our financial condition and ability
to meet customer needs could be negatively affected.
We are subject to extensive environmental regulation and have exposure to potential environmental liabilities.
The past and present operation and ownership by us of manufacturing facilities and real property are subject to extensive and
changing federal, state and local environmental laws and regulations, including those relating to discharges in air, water and land,
the handling and disposal of solid and hazardous waste and the remediation of contamination associated with releases of hazardous
substances. Compliance with environmental regulations has not had a material effect on our capital expenditures, earnings or
competitive position to date; however, compliance with current laws or more stringent laws or regulations which may be imposed
on us in the future, stricter interpretation of existing laws or discoveries of contamination at our real property sites which occurred
prior to our ownership or the advent of environmental regulation may require us to incur additional expenditures in the future,
some of which may be material.
Increasing healthcare costs could adversely affect our business, operating results and financial condition.
We provide healthcare benefits to the majority of our members and are self-insured. Healthcare costs have continued to rise over
time, which increases our annual spending on healthcare and could adversely affect our business, operating results and financial
condition.
Our inability to improve the quality/capability of our network of independent dealers or the loss of a significant number of dealers
could adversely affect our business, operating results or financial condition.
In both the office furniture and hearth products industries, we rely in large part on a network of independent dealers to market our
products to customers. We also rely upon these dealers to provide a variety of important specification, installation and after-market
services to our customers. Many of our dealers may terminate their relationships with us at any time and for any reason. The loss
or termination of a significant number of dealer relationships could cause difficulties for us in marketing and distributing our
products, resulting in a decline in our sales, which may adversely affect our business, operating results or financial condition.
Our international operations expose us to risks related to conducting business in multiple jurisdictions outside the United States.
We manufacture, market, and sell our products in international operations and sales, including in China and India. We plan to
continue to grow internationally. We primarily sell our products and report our financial results in U.S. dollars; however, our
increased business in countries outside the United States exposes us to fluctuations in foreign currency exchange rates, including
the recent weakening of the Rupee in India and the Canadian Dollar. Paying our expenses in other currencies can result in a
significant increase or decrease in the amount of those expenses in terms of U.S. dollars, which may affect our profits. In the
future, any foreign currency appreciation relative to the U.S. dollar would increase our expenses that are denominated in that
currency. Additionally, as we report currency in the U.S. dollar, our financial position is affected by the strength of the currencies
in countries where we have operations relative to the strength of the U.S. dollar.
Further, certain countries have complex regulatory systems which impose administrative and legal requirements which make
managing international operations more difficult, including approvals to transfer funds into certain countries. If we are unable to
provide financial support to our international operations in a timely manner, our business, operating results and financial condition
could be adversely affected.
We periodically review our foreign currency exposure and evaluate whether we should enter into hedging transactions.
Our international sales and operations are subject to a number of additional risks, including, without limitation:
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social and political turmoil, official corruption and civil and labor unrest;
restrictive government actions, including the imposition of trade quotas and tariffs and restrictions on transfers of funds;
changes in labor laws and regulations affecting our ability to hire, retain or dismiss employees;
the need to comply with multiple and potentially conflicting laws and regulations, including environmental and corporate
laws and regulations;
preference for locally branded products and laws and business practices favoring local competition;
less effective protection of intellectual property and increased possibility of loss due to cyber-theft;
unfavorable business conditions or economic instability in any particular country or region;
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infrastructure disruptions;
potentially conflicting cultural and business practices; and
difficulty in obtaining distribution and support.
Restrictions imposed by the terms of our credit facility and note purchase agreement may limit our operating and financial flexibility.
Our credit facility and other financing arrangements, including the note purchase agreement related to our senior notes which
mature in April 2016, limit our ability to finance operations, service debt or engage in other business activities that may be in our
interest. Specifically, our credit facility restricts our ability to incur additional indebtedness, create or incur certain liens with
respect to any of our properties or assets, engage in lines of business substantially different than those currently conducted by us,
sell, lease, license or dispose of any of our assets, enter into certain transactions with affiliates, make certain restricted payments
or take certain restricted actions and enter into certain sale-leaseback arrangements. Our note purchase agreement contains
customary restrictive covenants, among other things, placing limits on our ability to incur liens on assets, incur additional debt,
transfer or sell our assets, merge or consolidate with other persons or enter into material transactions with affiliates. Our credit
facility and note purchase agreement also require us to maintain certain financial covenants.
Our failure to comply with the obligations under our credit facility may result in an event of default, which, if not cured or waived,
may cause accelerated repayment of the indebtedness under the credit facility. We cannot be certain we will have sufficient funds
available to pay any accelerated repayments or we will have the ability to refinance accelerated repayments on terms favorable to
us or at all.
Costs related to product defects, including product liability costs, could adversely affect our profitability.
We incur various expenses related to product defects, including product warranty costs, product recall and retrofit costs and product
liability costs. These expenses relative to product sales vary and could increase. We use chemicals and materials in our products
and include components in our products from external suppliers, which we believe are safe and appropriate for their designated
use; however, harmful effects may become known which could subject us to litigation, including health-related litigation, and
significant losses. We maintain reserves for product defect-related costs based on estimates and our knowledge of circumstances
indicating the need for such reserves. We cannot, however, be certain these reserves will be adequate to cover actual product
defect-related claims in the future. We also purchase insurance coverage to reduce our exposure to significant levels of product
liability claims and maintain a reserve for our self-insured losses based upon estimates of the aggregate liability using claims
experience and actuarial assumptions, but we cannot be certain insurance would cover all losses related to product claims. Incorrect
estimates or any significant increase in the rate of our product defect expenses could have a material adverse effect on operations.
We may require additional capital in the future, which may not be available or may be available only on unfavorable terms.
Our capital requirements depend on many factors, including capital improvements, tooling, new product development and
acquisitions. To the extent our existing capital is insufficient to meet these requirements and cover any losses, we may need to
raise additional funds through financings or curtail our growth and reduce our assets. Our ability to generate cash depends on
economic, financial, competitive, legislative, regulatory and other factors that may be beyond our control. Future borrowings or
financings may not be available to us under our credit facility or otherwise in an amount sufficient to enable us to pay our debt or
meet our liquidity needs.
Any equity or debt financing, if available at all, could have terms unfavorable to us. In addition, financings could result in dilution
to our shareholders or the securities may have rights, preferences and privileges senior to those of our common stock. If our need
for capital arises because of significant losses, the occurrence of these losses may make it more difficult for us to raise the necessary
capital.
Our sales to the U.S. government have declined in recent years and our sales to the U.S. state and local governments are subject
to uncertain future funding levels and federal, state and local procurement laws and are governed by restrictive contract terms;
any of these factors could limit current or future business.
We derive a portion of our revenue from sales to various U.S. federal, state and local government agencies and departments. Our
ability to compete successfully for and retain business with the U.S. government, as well as with state and local governments, is
highly dependent on cost-effective performance. Our government business is highly sensitive to changes in procurement laws;
national, international, state and local public priorities; and budgets at all levels of government, which have recently experienced
downward pressure and, in the case of the federal budget, are subject to uncertainty due to continuing budget cuts. Sales to federal
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government entities decreased by 8% in 2015 after being up 10% in the prior year and they may decline going forward, which
could adversely impact our operating results.
Our contracts with government entities are subject to various statutes and regulations that apply to companies doing business with
the government. The U.S. government, as well as state and local governments, can typically terminate or modify their contracts
with us either for their convenience or if we default by failing to perform under the terms of the applicable contract. A termination
arising out of our default could expose us to liability and impede our ability to compete in the future for contracts and orders with
agencies and departments at all levels of government. Moreover, we are subject to investigation and audit for compliance with
the requirements governing government contracts, including requirements related to procurement integrity, export controls,
employment practices, the accuracy of records and reporting of costs. If we were found to not be a responsible supplier or to have
committed fraud or certain criminal offenses, we could be suspended or debarred from all further federal, state or local government
contracting.
Increased government focus on enforcement may significantly increase our operating costs.
The federal government has increased its focus on enforcement under a wide range of laws and regulations impacting our business,
particularly in the following areas:
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antitrust and competition;
foreign corrupt practices;
government contracting;
securities and public company reporting;
labor and employment practices;
fraud and abuse; and
tax reporting.
Should we become the target of a government investigation or enforcement action, we could incur significant costs and suffer
damage to our reputation which could adversely impact our business, operating results or financial condition.
Our implementation and use of a new business software system, and accompanying transformation of our business processes,
could result in problems that could negatively impact our business and results of operations.
We are engaged in a multi-year, broad-based program, which we refer to as business systems transformation ("BST"), to implement
new integrated software systems to support and streamline our business processes. We expect implementation of BST will require
transformation of business and financial processes to realize the full benefits of the project. Significant efforts are required to
design, test and implement BST, requiring investment of resources, including additional selling, general and administrative and
capital expenditures. There can be no assurance other issues relating to BST implementation will not occur, including compatibility
issues, integration challenges and delays, and higher than expected implementation costs. Additionally, when implemented, BST
could function improperly or not deliver the projected benefits, which could significantly disrupt our business, including our ability
to provide quotes, process orders, ship products, invoice customers, process payments, generate management and financial reports
and otherwise run our business. Our business and results of operations may be adversely affected if we experience problems
related to BST.
We rely on information technology systems to manage numerous aspects of our business, and a disruption or failure of these
systems could adversely affect our business.
In the ordinary course of business, we rely upon information technology networks and systems to process, transmit and store
electronic information, and to manage numerous aspects of our business and provide information to management. Additionally,
we collect and store sensitive data of our customers and suppliers, as well as personally identifiable information of our employees,
in data centers and on information technology networks. The secure operation of these information technology networks, and the
processing and maintenance of this information, is critical to our business operations and strategy. These networks and systems,
despite security and precautionary measures, are vulnerable to, among other things, damage and interruption from power loss or
natural disasters, computer system and network failures, loss of telecommunications services, physical and electronic loss of data,
security breaches, hackers and employee misuse. We may face unauthorized attempts by hackers seeking to harm us or as a result
of industrial espionage to penetrate our network security and gain access to our network, steal intellectual or other proprietary
data, including design, sales or personally identifiable information, introduce malicious software or interrupt our internal systems,
manufacturing or distribution. Though we attempt to prevent and detect these incidents, we may not be successful. Any disruption
of our information technology networks or systems, or access to or disclosure of information stored in or transmitted by our
-15-
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systems, could result in legal claims and damages, loss of intellectual property or other proprietary information, including customer
data, disrupt operations, result in competitive disadvantage and damage our reputation, which could adversely affect our business
and results of operations. We are also required to comply with certain information technology standards, including standards
imposed by credit card providers regarding the storage, processing and transmission of cardholder data. These standards continue
to become more challenging to meet, and any failure of our systems to meet these standards could result in our inability to accept
certain forms of customer payments or risk of cardholder data being breached as described above.
Natural disasters, acts of God, force majeure events or other catastrophic events may impact the Corporation's production capacity
and, in turn, negatively impact profitability.
Natural disasters, acts of God, force majeure events or other catastrophic events, including severe weather, military action, terrorist
attacks, power interruptions and fires, could disrupt operations and likewise the ability to produce or deliver our products. Several
of our production facilities, members and key management are located within a small geographic area in eastern Iowa and a natural
disaster or catastrophe in the area could have a significant adverse effect on our results of operations and business conditions.
Further, several of our production facilities are single-site manufacturers of certain products, and an adverse event affecting any
of those facilities could significantly delay production of certain products and adversely affect our operations and business
conditions. Members are an integral part of our business and events including an epidemic could reduce the availability of members
reporting for work. In the event we experience a temporary or permanent interruption in our ability to produce or deliver product,
revenues could be reduced, and business could be materially adversely affected. In addition, any continuing disruption in our
computer system could adversely affect our ability to receive and process customers' orders, manufacture products and ship products
on a timely basis and could adversely affect relations with customers, potentially resulting in reduction in orders from customers
or loss of customers. We maintain insurance to help protect us from costs relating to some of these events, but it may not be
sufficient or paid in a timely manner in the event we suffer such an event.
Our business is subject to a number of other miscellaneous risks that may adversely affect our business, operating results or
financial condition.
Other miscellaneous risks include, without limitation:
•
•
•
•
•
•
•
•
reduced demand for our storage products caused by changes in office technology, including the change from paper record
storage to electronic record storage;
our ability to realize cost savings and productivity improvements from our cost containment, business simplification,
manufacturing consolidation and logistical realignment initiatives;
volatility in the market price and trading volume of equity securities may adversely affect the market price for our common
stock;
our ability to protect our intellectual property, including trade secrets and key business operations data;
labor or other manufacturing inefficiencies due to items including new product introductions, a new operating system or
turnover in personnel;
our ability to effectively manage working capital and maintain our effective tax rate;
potential claims by third parties that we infringed upon their intellectual property rights;
our insurance may not adequately (1) insulate us from expenses for product defects and the negligent acts and omissions
of our members and agents and (2) compensate us for damages to our facilities and equipment and loss of business; and
•
our ability to retain our experienced management team and recruit other key personnel.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
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ITEM 2. PROPERTIES
The Corporation maintains its corporate headquarters in Muscatine, Iowa, and conducts operations at locations throughout the
United States, Canada, China, Hong Kong, India and Taiwan, which house manufacturing, distribution and retail operations and
offices totaling an aggregate of approximately 10.7 million square feet. Of this total, approximately 1.6 million square feet are
leased.
Although the plants are of varying ages, the Corporation believes they are well maintained, equipped with modern and efficient
equipment, in good operating condition and suitable for the purposes for which they are being used. The Corporation has sufficient
capacity to increase output at most locations by increasing the use of overtime or the number of production shifts employed.
The Corporation's principal manufacturing and distribution facilities (200,000 square feet in size or larger) are as follows:
Location
Cedartown, Georgia
Dongguan, China
Hickory, North Carolina
Lake City, Minnesota
Mechanicsburg, Pennsylvania
Milan, Illinois
Mt. Pleasant, Iowa
Muscatine, Iowa
Muscatine, Iowa
Muscatine, Iowa
Muscatine, Iowa
Muscatine, Iowa
Nagpur, India
Orleans, Indiana
Paris, Kentucky
Temple, Texas
Temple, Texas
Wayland, New York
Approximate
Square Feet
550,000
1,007,716
206,316
241,500
400,000
244,017
288,006
272,900
578,284
236,100
636,250
237,800
355,135
1,196,946
300,000
395,428
354,000
716,484
Owned or
Leased
Owned
Owned
Owned
Owned
Leased
Leased
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Leased
Owned
Description
of Use
Manufacturing office furniture (1)
Manufacturing office furniture (1)
Manufacturing office furniture
Manufacturing fireplaces
Warehousing office furniture
Warehousing office furniture components
Manufacturing fireplaces (1)
Manufacturing office furniture
Warehousing office furniture
Manufacturing office furniture
Manufacturing office furniture
Manufacturing office furniture
Manufacturing office furniture
Manufacturing office furniture (1)
Manufacturing fireplaces
Manufacturing office furniture
Warehousing office furniture
Manufacturing office furniture (1)
(1) Also includes a regional warehouse/distribution center
Other Corporation facilities, under 200,000 square feet in size, are located in various communities throughout the United States,
Canada, China, Hong Kong, India and Taiwan. These facilities total approximately 2.6 million square feet with approximately
1.4 million square feet used for the manufacture and distribution of office furniture and approximately 1.0 million square feet for
hearth products. Of this total, approximately 1.0 million square feet are leased. The Corporation also leases sales showroom space
in office furniture market centers in several major metropolitan areas.
There are no major encumbrances on Corporation-owned properties. Refer to Property, Plant, and Equipment in the Notes to
Consolidated Financial Statements for related cost, accumulated depreciation and net book value data.
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ITEM 3. LEGAL PROCEEDINGS
The Corporation is involved in various disputes and legal proceedings that have arisen in the ordinary course of its business,
including 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 on the Corporation’s quarterly or annual operating results when resolved in a
future period.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
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Table of Contents
TABLE I
EXECUTIVE OFFICERS OF THE REGISTRANT
January 2, 2016
Name
Julie M. Abramowski
Age
40
Family
Relationship
None
Position
Vice President, Corporate Controller
Position
Held Since
2015
Stan A. Askren
55
None
Steven M. Bradford
58
None
Bradley D. Determan
54
None
Jerald K. Dittmer
58
None
Jeffrey D. Lorenger
50
None
Donald T. Mead
Donna D. Meade
Marco V. Molinari
Kurt A. Tjaden
56
50
56
52
None
None
None
None
Chairman of the Board
Chief Executive Officer
President
Director
Senior Vice President, General
Counsel and Secretary
Executive Vice President
President, Hearth & Home
Technologies Group
Executive Vice President
President, The HON Company LLC
Executive Vice President
President, HNI Contract Furniture
Group
Executive Vice President
President, The Gunlocke Company
L.L.C.
Vice President, Member Relations
Executive Vice President
President, HNI International Inc.
Senior Vice President and Chief
Financial Officer
2004
2004
2003
2003
2015
2005
2015
2008
2008
2010
2014
2011
2008
2014
2006
2003
2015
Other Business Experience
During Past Five Years
Director, Financial Reporting
(2014-2015); Director, Financial
Planning and Analysis, Leveraged
Furniture Operations (2013-2014);
Corporate Controller, The HON
Company (2007-2013)
Vice President, General Counsel and
Secretary (2008-2015)
President, Hearth & Home
Technologies LLC (2003-2015)
President, Allsteel, Inc.
(2008-2014)
Vice President, Member and
Community Relations, Allsteel Inc.
(2009-14)
Vice President and Chief Financial
Officer (2008-2015)
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND
ISSUER PURCHASES OF EQUITY SECURITIES
The Corporation’s common stock is listed for trading on the New York Stock Exchange (NYSE) under the trading symbol HNI. As
of year-end 2015, the Corporation had 7,171 stockholders of record.
Wells Fargo Shareowner Services, St. Paul, Minnesota, serves as the Corporation’s transfer agent and registrar of its common
stock. Shareholders may report a change of address or make inquiries by writing or calling: Wells Fargo Shareowner Services,
P.O. Box 64874, St. Paul, MN 55164-0854 or telephone 800/468-9716.
Information regarding historical sale prices of and dividends paid on the Corporation's common stock is presented in the Investor
Information section which follows the Notes to Consolidated Financial Statements filed as part of this report and is incorporated
herein by reference.
The Corporation expects to continue its policy of paying regular quarterly cash dividends. Dividends have been paid each quarter
since the Corporation paid its first dividend in 1955. The average dividend payout percentage for the most recent three-year period
has been 77% of prior year earnings. Future dividends are dependent on future earnings, capital requirements and the Corporation’s
financial condition, and are declared in the sole discretion of the Corporation’s Board of Directors.
Issuer Purchases of Equity Securities:
The following is a summary of share repurchase activity during the quarter ended January 2, 2016.
(a) Total Number
of Shares (or
Units) Purchased
(1)
(b) Average
Price Paid
per Share or
Unit
2,000
38,000
3,700
43,700
$42.48
$42.91
$43.80
(d) Maximum
Number (or
Approximate
Dollar Value) of
Shares (or Units)
that May Yet be
Purchased Under
the Plans or
Programs
$194,514,152
$192,883,610
$192,721,564
(c) Total Number
of
Shares (or Units)
Purchased as Part
of Publicly
Announced
Plans or Programs
2,000
38,000
3,700
43,700
Period
10/04/15 - 10/31/15
11/01/15 - 11/28/15
11/29/15 - 1/02/16
Total
(1) No shares were purchased outside of a publicly announced plan or program.
The Corporation repurchases shares under previously announced plans authorized by the Board as follows:
•
Plan announced November 9, 2007, providing share repurchase authorization of $200,000,000 with no specific expiration
date, with increase announced November 7, 2014, providing additional share repurchase authorization of $200,000,000
with no specific expiration date.
• No repurchase plans expired or were terminated during the fourth quarter of fiscal 2015, nor do any plans exist under
which the Corporation does not intend to make further purchases.
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ITEM 6. SELECTED FINANCIAL DATA — FIVE-YEAR SUMMARY
2015
2014
2013
2012
2011
Operating Results (Thousands of Dollars)
Net Sales
$ 2,304,419
$ 2,222,695
$ 2,059,964
$ 2,004,003
$ 1,833,450
Gross Profit as a % of Net Sales
36.8%
35.3%
34.7%
34.4%
34.9%
Net Income Attributable to HNI Corporation
$
105,436
$
61,471
$
63,683
$
48,967
$
45,986
4.6%
2.8%
3.1%
2.4%
2.5%
Net Income Attributable to HNI Corporation as
a % of Net Sales
Share and Per Share Data (Basic and Dilutive)
Net Income Attributable to HNI Corporation –
basic
Net Income Attributable to HNI Corporation –
diluted
Cash Dividends
Weighted-Average Shares Outstanding During
Year – basic (in Thousands)
Weighted-Average Shares Outstanding During
Year – diluted (in Thousands)
Financial Position (Thousands of Dollars)
Current Assets
Current Liabilities
Working Capital
Total Assets
$
$
$
$
$
$
2.38
2.32
1.045
$
$
$
1.37
1.35
0.99
44,285
44,760
45,441
45,579
438,370
$
455,559
435,900
2,470
$ 1,263,925
$
457,333
(1,774)
$ 1,239,334
$
$
$
$
$
$
$
1.41
1.39
0.96
45,251
45,956
433,228
411,584
21,644
$
$
$
$
$
$
1.08
1.07
0.95
45,211
45,820
402,375
389,171
13,204
$
$
$
$
$
$
1.03
1.01
0.92
44,803
45,694
431,504
382,270
49,234
$ 1,134,705
$ 1,077,066
$ 1,051,722
% Return on Beginning Assets Employed
13.3%
9.9%
9.8%
8.3%
8.2%
Long-Term Debt and Capital Lease Obligations $
185,000
Shareholders’ Equity
$
476,954
$
$
197,736
414,587
$
$
150,197
436,328
$
$
150,372
420,359
$
$
150,540
419,057
% Return on Average Shareholders’ Equity
23.7%
14.4%
14.9%
11.7%
11.1%
2014 reflects a 53-week year
Reflects Artcobell acquisition beginning in 2011, BP Ergo acquisition beginning in 2012 and VCG acquisition beginning in 2014.
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Table of Contents
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion of the Corporation’s historical results of operations and of its liquidity and capital resources should be
read in conjunction with the Consolidated Financial Statements of the Corporation and related notes. Statements that are not
historical are forward-looking and involve risks and uncertainties, including those discussed under "Item 1A. Risk Factors" and
elsewhere in this report.
Overview
The Corporation has two reportable segments: office furniture and hearth products. The Corporation is a leading global office
furniture manufacturer and North America’s leading manufacturer and marketer of gas and wood burning fireplaces. The
Corporation utilizes its split and focus, with leverage, decentralized business model to deliver value to its customers with various
brands and selling models. The Corporation is focused on growing its existing businesses while seeking out and developing new
opportunities for growth.
The Corporation delivered another strong year in 2015 with top-line growth in both the office furniture and hearth products
segments. Our businesses performed well in a challenging, slow-growth economic environment. Growth in the office furniture
segment was led by continued momentum in the contract channel. The supplies channel of the office furniture segment was flat
due to muted small business confidence. The Corporation's hearth products segment saw mixed results as solid growth in new
construction and retail/retrofit businesses was partially offset by a significant decline in the biomass business due to low oil prices
and unseasonably warm weather. Strong operational performance, consistent flawless execution for our customers and benefits
from operational investments were key drivers for increased earnings over 2014. The Corporation remains committed to long-
term profitable growth across its core businesses and continued focused investments in selling, marketing, manufacturing and
product initiatives.
Net sales during 2015 were $2.3 billion, an increase of 3.7 percent, compared to net sales of $2.2 billion in 2014. The sales increase
was driven by increased volume in the contract channel of the office furniture segment as well as the new construction channel
of the hearth products segment. The Corporation completed the acquisition of Vermont Castings Group ("VCG"), a manufacturer
of free-standing hearth stoves and fireplaces, during the fourth quarter of 2014. The VCG acquisition increased sales $62.7 million
in 2015.
Fiscal 2015 included 52 weeks compared to 53 weeks in 2014. Due to the Corporation's holiday schedule and production shutdowns,
the extra week in 2014 had minimal impact on net sales and operating income.
The Corporation recorded $11.2 million and $29.4 million of goodwill and intangible impairment charges during 2015 and 2014,
respectively, related to reporting units in the office furniture segment acquired over the past five years. These impairment charges
are the result of current and projected market conditions and product and operational transformation.
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Results of Operations
The following table sets forth the percentage of consolidated net sales represented by certain items reflected in the Corporation’s
Consolidated Statements of Income for the periods indicated.
Fiscal
Net Sales
Cost of products sold
Gross profit
Selling and administrative expenses
(Gain) loss on sale of assets
Restructuring related charges
Operating income
Interest expense net
Income before income taxes
Income taxes
Net income attributable to the noncontrolling interest
Net income attributable to HNI Corporation
Net Sales
2015
2014
2013
100.0%
63.2
36.8
29.2
—
0.5
7.1
0.3
6.8
2.2
—
4.6%
100.0%
64.7
35.3
29.2
(0.5)
1.5
5.1
0.4
4.7
2.0
—
2.8%
100.0%
65.3
34.7
29.4
0.1
—
5.1
0.5
4.7
1.6
—
3.1%
Net sales during 2015 were $2.3 billion, an increase of 3.7 percent, compared to net sales of $2.2 billion in 2014. Compared to
the prior year, the acquisition of VCG increased sales $62.7 million. On an organic basis, sales increased 0.9 percent. Sales in
the office furniture segment were driven by continued momentum in the contract channel while the supplies channel was flat due
to muted small business confidence. Sales in the hearth products segment were driven by new construction growth while the
remodel/retrofit channel declined due to the impact of warm weather and low oil prices on biomass sales. Both segments experienced
price realization compared to 2014.
Net sales during 2014 were $2.2 billion, an increase of 7.9 percent, compared to net sales of $2.1 billion in 2013. Both the office
furniture segment and the hearth products segment experienced better price realization and increased volume. Compared to 2013,
the acquisition of VCG, net of divestitures of several small businesses, including office furniture dealers, increased sales $7.5
million.
Fiscal 2014 included 53 weeks compared to 52 weeks in 2015 and 2013. Due to the Corporation's holiday schedule and production
shutdowns, the extra week had minimal impact on net sales and operating income.
Gross Profit
Gross profit as a percent of net sales increased 150 basis points in 2015 as compared to 2014 driven by strong operational
performance, structural cost reductions, lower restructuring charges, favorable material costs and price realization partially offset
by lower volume and unfavorable product mix. Gross profit as a percent of net sales increased 60 basis points in 2014 as compared
to 2013 due to higher volume, price realization and strong operational performance offset partially by unfavorable product mix,
investments in operations, higher warranty costs and increased restructuring and transition costs.
Selling and Administrative Expenses
Selling and administrative expenses increased 3.6 percent in 2015 but were flat as a percentage of net sales driven by higher freight
costs, strategic investments and acquisition impact, offset by lower incentive based compensation and cost reductions. Selling
and administrative costs increased 7.0 percent in 2014 due to volume related expenses, higher freight costs, investments in selling
and growth initiatives, increased group medical costs, higher incentive-based compensation and costs associated with an acquisition.
Selling and administrative expenses include freight expense for shipments to customers, product development costs and
amortization expense of intangible assets. Refer to Summary of Significant Accounting Policies and Goodwill and Other Intangible
Assets in the Notes to Consolidated Financial Statements for further information regarding the comparative expense levels for
these items.
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Table of Contents
Gain/Loss on Sale of Assets
The Corporation realized gains totaling $10.7 million on the sale of two facilities and California air emission credits in 2014. The
Corporation realized a $2.5 million loss on the sale of a non-core office furniture business in 2013.
Restructuring and Impairment Charges
As a result of the Corporation's ongoing business simplification and cost reduction strategies, the Corporation made the decision
to exit a small line of business within our hearth products segment during 2015. The Corporation incurred $0.9 million of
restructuring charges as the result of this decision, of which $0.8 million were included in Cost of Sales.
During 2014, the Corporation made decisions to close three office furniture manufacturing facilities located in Florence, Alabama,
Chicago, Illinois and Nalagarh, India and consolidate production into existing office furniture manufacturing facilities. In
connection with these decisions, the Corporation recorded $8.8 million of pre-tax charges in 2014, which included $5.2 million
of accelerated depreciation on machinery and equipment recorded in cost of sales and $3.6 million of severance and facility exit
costs which were recorded as restructuring charges during the year. During 2015, the Corporation incurred $0.4 million of pre-
tax restructuring charges related to these closures in the form of facility exit costs partially offset by lower than anticipated post
employment costs.
During 2010, the Corporation completed the shutdown of an office furniture facility in South Gate, California and consolidated
production into existing office furniture manufacturing facilities. During 2013, the Corporation incurred $0.3 million of
restructuring charges due to ongoing costs related to a vacant building from this closure.
The Corporation recorded $11.2 million and $29.4 million of goodwill and intangible impairments in 2015 and 2014, respectively,
related to reporting units in the office furniture segment acquired over the past five years. These impairment charges are the result
of current and projected market conditions and product and operational transformation.
Operating Income
Operating income increased $50.9 million to $163.7 million in 2015, compared to $112.8 million in 2014, driven by strong
operational performance, structural cost reductions, lower restructuring and impairment charges, favorable material costs and price
realization. These factors were offset partially by lower volume, unfavorable product mix, higher freight costs and strategic
investments.
Operating income increased $6.9 million to $112.8 million in 2014, compared to $106.0 million in 2013. The increase was due
to higher volume, price realization, strong operational performance and gains on sale of assets. These drivers were offset partially
by investments in operations, unfavorable product mix, increased warranty costs, higher freight costs, increased group medical
costs, higher incentive-based compensation and restructuring, impairment and transition costs
Income Taxes
The provision for income taxes reflect an effective tax rate of 32.9 percent, 41.7 percent and 34.5 percent for 2015, 2014 and 2013,
respectively. The 2015 decrease in the effective tax rate was driven by the non-deductibility of goodwill impairment in 2014, an
increased tax benefit for the U.S. Manufacturing Deduction, and an increase in the R&D credit. The 2014 effective tax rate increase
over 2013 was primarily driven by the non-deductibility of goodwill impairment.
Net Income Attributable to HNI Corporation
Net income attributable to HNI Corporation increased 71.5 percent to $105.4 million in 2015 compared to $61.5 million in 2014
and $63.7 million in 2013. Net income per diluted share increased 71.9 percent to $2.32 in 2015 compared to $1.35 in 2014 and
$1.39 in 2013.
Office Furniture
Office furniture comprised 77 percent, 78 percent, and 82 percent of consolidated net sales for 2015, 2014 and 2013,
respectively. Net sales for office furniture increased $38.8 million or 2.2 percent in 2015 to $1.778 billion compared to $1.739
billion in 2014 including price realization of $31 million. The Corporation experienced growth in the contract channel while the
supplies channel remained flat. BIFMA reported 2015 shipments up 5 percent from 2014 levels, which were up 4 percent from
2013 levels.
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Net sales for office furniture increased $53.8 million or 3.2 percent in 2014 to $1.739 billion compared to $1.685 billion in 2013
including price realization of $36 million. Compared to prior year, divestitures of several small businesses, including office
furniture dealers, reduced sales by $17.7 million. The Corporation experienced growth in both the supplies-driven and contract
channels.
Operating profit as a percent of net sales was 7.7 percent in 2015, 5.0 percent in 2014 and 5.8 percent in 2013. The improvement
in operating margins for 2015 was due to increased volume, strong operational performance, cost reductions, lower restructuring
and impairment charges, favorable material costs and price realization. These drivers were partially offset by unfavorable product
mix, higher freight costs, strategic investments, and incentive based compensation. The decrease in operating margins in 2014
from 2013 was due to unfavorable product mix, investment in operations, higher freight costs, increased incentive-based
compensation, restructuring charges, goodwill and intangible impairments and transition costs. These factors were partially offset
by higher volume, better price realization, strong operational performance and gains on sale of assets.
Hearth Products
Hearth products sales increased $43.0 million or 8.9 percent in 2015 to $527 million compared to $484 million in 2014 including
price realization of $6 million and incremental sales from the VCG acquisition of $63 million. Sales in the new construction
channel grew as the housing market continued to recover but were offset by a decline in the biomass portion of the remodel/retrofit
channel due to unseasonably warm weather and low oil prices.
Hearth products sales increased 29.1 percent in 2014 to $484 million compared to $375 million in 2013 including price realization
of $6 million and incremental sales from the VCG acquisition of $25 million. The sales increase was also due to an increase in
both the new construction channel due to the continued housing market recovery and the remodel/retrofit channel due to strong
biomass product sales.
Operating profit as a percent of sales in 2015 was 14.8 percent compared to 15.9 percent in 2014 and 12.5 percent in 2013. The
2015 decrease in operating margins was due to dilution caused by the VCG acquisition and decreased volume partially offset by
by cost reductions, lower material costs, and price realization. The increase in operating margins in 2014 compared to 2013 was
due to higher volume and better price realization, partially offset by increased material costs, higher warranty expense, increased
incentive-based compensation and acquisition impact.
Liquidity and Capital Resources
Cash Flow – Operating Activities
Cash generated from operating activities in 2015 totaled $173.4 million compared to $167.8 million generated in 2014. The
increase in cash generated was driven by higher net income partially offset by working capital. Changes in working capital balances
resulted in a $28.1 million use of cash in 2015 compared to $2.3 million source of cash in the prior year. Cash generated from
operating activities in 2013 totaled $165.0 million and changes in working capital balances resulted in a $16.8 million source of
cash.
The use of cash related to working capital balance in 2015 was primarily driven from lower accounts payable of $26.3 million
due to timing of payments. Other uses of cash include higher receivables due to sales timing and increased inventory due to
strategic investments.
The use of cash related to working capital balance in 2014 was primarily driven from higher inventory of $23.4 million due to
strategic initiatives, impact of west coast port congestion and timing of shipments. This use of cash was offset partially by an $8.6
million decrease in trade receivables due to strong collection efforts and timing and a $21.8 million increase in current liabilities
from timing of accounts payable and higher compensation, benefits and marketing accruals partially offset by a decrease in tax
related accruals.
The Corporation places special emphasis on management and control of working capital with a particular focus on trade receivables
and inventory levels. The success achieved in managing receivables is in large part a result of doing business with quality customers
and maintaining close communication with them. Management believes recorded trade receivable valuation allowances at the
end of 2015 are adequate to cover the risk of potential bad debts. Allowances for non-collectible trade receivables, as a percent
of gross trade receivables, totaled 1.7 percent, 2.1 percent and 2.6 percent at the end of fiscal years 2015, 2014 and 2013, respectively.
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The Corporation’s inventory turns were 12, 12 and 15, for fiscal years 2015, 2014 and 2013, respectively. The decrease in inventory
turns from 2013 is due to strategic initiatives.
Cash Flow – Investing Activities
Capital expenditures, including capitalized software, were $115.0 million in 2015, $112.7 million in 2014 and $78.9 million in
2013. These expenditures continue to focus on machinery, equipment and tooling required to support new products, continuous
improvements and cost savings initiatives in our manufacturing processes as well as the implementation of new integrated
information systems to support business process transformation. The Corporation anticipates capital expenditures for 2016 to
total $105 million to $110 million, primarily related to new products, operational process improvements and capabilities and the
business process transformation project referred to above.
In 2014, the investing activities reflected a net cash outflow of $61.8 million related to the acquisition of VCG. The acquisition
of VCG adds brands, strong customer relationships and quality products to the Corporation's Hearth and Home Technologies
business. Refer to the Business Combination note in the Notes to Consolidated Financial Statements for additional information.
In 2014, the Corporation completed the sales of a facility located in South Gate, California, a facility and equipment located in
Chicago, Illinois and California air emission credits. The proceeds from these sales of $16 million are reflected in the Consolidated
Statement of Cash Flows as “Proceeds from sale of property, plant and equipment” for 2014.
Cash Flow – Financing Activities
The Corporation, certain domestic subsidiaries of the Corporation, the lenders and Wells Fargo Bank, National Association, as
administrative agent, entered into a Second Amended and Restated Credit Agreement (the "Credit Agreement") on June 9, 2015.
The Credit Agreement amended and restated the Corporation's existing $250 million revolving credit facility dated September 28,
2011.
As of January 2, 2016, there was $40 million outstanding under the $250 million revolving credit facility of which $35 million
was classified as long-term as the Corporation does not expect to repay the borrowings within a year and $5 million was classified
as current as the Corporation does expect to repay the borrowings within a year.
The Corporation, certain domestic subsidiaries of the Corporation, the lenders and Wells Fargo Bank, National Association, as
administrative agent, entered into the First Amendment to Second Amended and Restated Credit Agreement (the "Credit Agreement
Amendment") on January 6, 2016. The Credit Agreement Amendment amends the Second Amended and Restated Credit Agreement
dated as of June 9, 2015.
The Credit Agreement was amended to, among other things, increase the revolving commitment of the lenders from $250 million
to $400 million (while retaining the Corporation's option under the Credit Agreement to increase its borrowing capacity by an
additional $150 million) in order to provide funding for the expected pay off of maturing Senior Notes and to extend the maturity
date from June 2020 to January 2021.
The revolving credit facility is the primary source of committed funding from which the Corporation finances its planned capital
expenditures and strategic initiatives, such as acquisitions, repurchases of common stock and certain working capital needs. Non-
compliance with the various financial covenant ratios in the revolving credit facility or the Senior Notes could prevent the
Corporation from being able to access further borrowings under the revolving credit facility, require immediate repayment of all
amounts outstanding with respect to the revolving credit facility and Senior Notes and/or increase the cost of borrowing.
The Credit Agreement contains a number of covenants, including covenants requiring maintenance of the following financial
ratios as of the end of any fiscal quarter:
•
•
a consolidated interest coverage ratio of not less than 4.0 to 1.0, based upon the ratio of (a) consolidated EBITDA (as
defined in the Credit Agreement) for the last four fiscal quarters to (b) the sum of consolidated interest charges; and
a consolidated leverage ratio of not greater than 3.5 to 1.0, based upon the ratio of (a) the quarter-end consolidated funded
indebtedness (as defined in the Credit Agreement) to (b) consolidated EBITDA for the last four fiscal quarters.
The most restrictive of the financial covenants is the consolidated leverage ratio requirement of 3.5 to 1.0 included in the Credit
Agreement. Under the Credit Agreement, consolidated EBITDA is defined as consolidated net income before interest expense,
income taxes and depreciation and amortization of intangibles, as well as non-cash, nonrecurring charges and all non-cash items
increasing net income. At January 2, 2016, the Corporation was well below the maximum allowable ratio and was in compliance
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with all of the covenants and other restrictions in the Credit Agreement and the note purchase agreement. The Corporation expects
to remain in compliance over the next twelve months.
In 2006, the Corporation refinanced $150 million of borrowings outstanding under its prior revolving credit facility with 5.54
percent, ten-year unsecured Senior Notes (due 2016) issued through the private placement debt market. Interest payments are due
semi-annually on April 1 and October 1 of each year and the principal is due in a lump sum on April 6, 2016. These Senior Notes
were classified as long term as of January 2, 2016 since the Corporation will pay off the Senior Notes upon maturity with revolving
credit facility borrowings expected to remain outstanding for more than twelve months.
During 2015, the Corporation repurchased 550,000 shares of its common stock at a cost of approximately $26.7 million, or an
average price of $48.47 per share. The Board authorized $200 million on November 9, 2007, and an additional $200 million on
November 7, 2014, for repurchases of the Corporation’s common stock. As of January 2, 2016, approximately $192.7 million of
this authorized amount remained unspent. During 2014, the Corporation repurchased 1,665,850 shares of its common stock at a
cost of approximately $67.9 million, or an average price of $40.76 per share. During 2013, the Corporation repurchased 740,000
shares of its common stock at a cost of approximately $27.5 million, or an average price of $37.15 per share.
A cash dividend has been paid every quarter since April 15, 1955, and quarterly dividends are expected to continue. Cash dividends
were $1.045 per common share for 2015, $0.99 for 2014 and $0.96 for 2013. The last quarterly dividend increase was from $0.25
to $0.265 per common share effective with the May 29, 2015 dividend payment for shareholders of record at the close of business
on May 15, 2015. The average dividend payout percentage for the most recent three-year period has been 77 percent of prior year
earnings or 28 percent of prior year cash flow from operating activities.
Cash, cash equivalents and short-term investments totaled $32.8 million at the end of 2015 compared to $37.2 million at the end
of 2014 and $72.3 million at the end of 2013. These funds, coupled with cash from future operations, borrowing capacity under
the existing facility as amended January 6, 2016 and the ability to access capital markets are expected to be adequate to fund
operations and satisfy cash flow needs for at least the next twelve months. As of the end of 2015, $13.1 million of cash was held
overseas and considered permanently reinvested. If such amounts were repatriated it could result in additional tax expense to the
Corporation. The Corporation does not believe asserting this cash as permanently reinvested will have any impact on its liquidity.
Contractual Obligations
The following table discloses the Corporation’s obligations and commitments to make future payments under contracts:
(In thousands)
Long-term debt obligations, including
estimated interest (1)
Operating lease obligations
Purchase obligations (2)
Other long-term obligations (3)
Total
Payments Due by Period
Total
Less than
1 Year
1 – 3
Years
3 – 5
Years
More than
5 Years
$
195,222
$
159,604
$
35,618
$
— $
98,706
64,403
47,835
30,241
64,403
7,034
40,324
—
11,665
17,873
—
3,197
$
406,166
$
261,282
$
87,607
$
21,070
$
—
10,268
—
25,939
36,207
(1) Interest has been included for all debt at the fixed or variable rate in effect as of January 2, 2016, as applicable. See Note
10 "Long-Term Debt" in the Notes to Consolidated Financial Statements for further information.
(2) Purchase obligations include agreements to purchase goods or services that are enforceable, legally binding and specify
all significant terms, including the quantity to be purchased, the price to be paid and the timing of the purchase.
(3) Other long-term obligations represent payments due to members who are participants in the Corporation’s deferred and
long-term incentive compensation programs, liability for unrecognized tax liabilities and contribution and benefit
payments expected to be made pursuant to the Corporation’s post-retirement benefit plans. It should be noted the
obligations related to post-retirement benefit plans are not contractual and the plans could be amended at the discretion
of the Corporation. The disclosure of contributions and benefit payments has been limited to 10 years, as information
beyond this time period was not available.
Litigation and Uncertainties
The Corporation is involved in various kinds of disputes and legal proceedings that have arisen in the ordinary course of business,
including pending litigation, environmental remediation, taxes and other claims. It is the Corporation’s opinion, after consultation
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with legal counsel, that additional 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 on the Corporation’s quarterly or annual operating results when resolved
in a future period.
Looking Ahead
Management remains optimistic about the office furniture and hearth markets and the Corporation's long-term prospects.
The Corporation remains focused on creating long-term shareholder value by growing its business through investment in building
brands, product solutions and selling models, enhancing its strong member-owner culture and remaining focused on its long-
standing rapid continuous improvement programs to build best total cost and a lean enterprise.
Off-Balance Sheet Arrangements
The Corporation does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future
material effect on the Corporation's financial condition, revenues or expenses, results of operations, liquidity, capital expenditures
or capital resources.
Critical Accounting Policies and Estimates
General
Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon the Consolidated Financial
Statements, prepared in accordance with Generally Accepted Accounting Principles ("GAAP"). The preparation of these financial
statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue
and expenses, and related disclosure of contingent assets and liabilities. Management bases its estimates on historical experience
and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis
for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Senior
management has discussed the development, selection and disclosure of these estimates with the Audit Committee of the Board.
Actual results may differ from these estimates under different assumptions or conditions.
An accounting policy is deemed to be critical if it requires an accounting estimate be made based on assumptions about matters
uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the
accounting estimates that are reasonably likely to occur periodically, could materially impact the financial statements. Management
believes the following critical accounting policies reflect its more significant estimates and assumptions used in the preparation
of the Consolidated Financial Statements.
Allowance for doubtful accounts receivable – The allowance for doubtful accounts receivable is based on several factors, including
overall customer credit quality, historical write-off experience, the length of time a receivable has been outstanding and specific
account analysis that projects the ultimate collectability of the account. As such, these factors may change over time causing the
Corporation to adjust the reserve level accordingly.
Long-lived assets - The Corporation reviews long-lived assets for impairment as events or changes in circumstances occur indicating
the amount of the asset reflected in the Corporation’s balance sheet may not be recoverable. The Corporation compares an estimate
of undiscounted cash flows produced by the asset, or the appropriate group of assets, to the carrying value to determine whether
impairment exists. The estimates of future cash flows involve considerable management judgment and are based upon the
Corporation’s assumptions about future operating performance. The actual cash flows could differ from management’s estimates
due to changes in business conditions, operating performance and economic conditions. Asset impairment charges associated
with the Corporation’s restructuring activities are discussed in Restructuring Related and Impairment Charges in the Notes to
Consolidated Financial Statements.
Goodwill and other intangibles – The Corporation evaluates its goodwill for impairment on an annual basis during the fourth
quarter or whenever indicators of impairment exist. The Corporation reviews goodwill at the reporting unit level within its office
furniture and hearth products operating segments. These reporting units constitute components for which discrete financial
information is available and regularly reviewed by segment management. The accounting standards for goodwill permit entities
to first assess qualitative factors to determine whether it is more likely than not the fair value of a reporting unit is less than its
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carrying amount as a basis for determining whether it is necessary to perform a two-step goodwill impairment test. If the two-
step is required, the Corporation estimates the fair value of its reporting units. In estimating the fair value, the Corporation relies
on an average of the income approach and the market approach. In the income approach, the estimate of fair value of each reporting
unit is based on management’s projection of revenues, gross margin, operating costs and cash flows considering historical and
estimated future results, general economic and market conditions as well as the impact of planned business and operational
strategies. The valuations employ present value techniques to measure fair value and consider market factors. In the market
approach, the Corporation utilizes the guideline company method, which involved calculating valuation multiples based on
operating data from guideline publicly-traded companies. These multiples are then applied to the operating data for the reporting
units and adjusted for factors similar to those used in the discounted cash flow analysis. Management believes the assumptions
used for the impairment test are consistent with those utilized by a market participant in performing similar valuations of its
reporting units. Management bases its fair value estimates on assumptions they believe to be reasonable at the time, but such
assumptions are subject to inherent uncertainty. Actual results may differ from those estimates.
If the fair value of the reporting unit is less than its carrying value, an additional step is required to determine the implied fair
value of goodwill associated with that reporting unit. The implied fair value of goodwill is determined by first allocating the fair
value of the reporting unit to all of its assets and liabilities and then computing the excess of the reporting unit’s fair value over
the amounts assigned to the assets and liabilities. If the carrying value of goodwill exceeds the implied fair value of goodwill,
such excess represents the amount of goodwill impairment and, accordingly, such impairment is recognized.
Assessing the fair value of goodwill includes, among other things, making key assumptions for estimating future cash flows and
appropriate market multiples. These assumptions are subject to a high degree of judgment and complexity. The Corporation
makes every effort to estimate future cash flows as accurately as possible with the information available at the time the forecast
is developed. However, changes in assumptions and estimates may affect the estimated fair value of the reporting unit, and could
result in an impairment charge in future periods. Factors that have the potential to create variances in the estimated fair value of
the reporting unit include but are not limited to economic conditions in the U.S. and other countries where the Corporation has a
presence, competitor behavior, the mix of product sales, commodity costs, wage rates, the level of manufacturing capacity, the
pricing environment and currency exchange fluctuations. In addition, estimates of fair value are impacted by estimates of the
market-participant derived weighted average cost of capital.
Additionally, the Corporation compares the estimated aggregate fair value of its reporting units to its overall market capitalization.
The Corporation also evaluates the fair value of indefinite-lived trade names on an annual basis during the fourth quarter or
whenever indication of impairment exists. The estimate of the fair value of the trade names is based on a discounted cash flow
model using inputs which include: projected revenues from management’s long-term plan, assumed royalty rates that could be
payable if the trade names were not owned and a discount rate.
The Corporation has definite-lived intangibles that are amortized over their estimated useful lives. Impairment losses are
recognized if the carrying amount of an intangible, subject to amortization, is not recoverable from expected future cash flows
and its carrying amount exceeds its fair value.
Key to recoverability of goodwill, indefinite-lived intangibles and long-lived assets is the forecast of economic conditions and its
impact on future revenues, operating margins and cash flows. Management’s projection for the U.S. office furniture and domestic
hearth markets and global economic conditions is inherently subject to a number of uncertain factors, such as global economic
improvement, the U.S housing market, credit availability and borrowing rates, and overall consumer confidence. In the near term,
as management monitors the above factors, it is possible it may change the revenue and cash flow projections of certain reporting
units, which may require the recording of additional asset impairment charges.
Self-insured reserves – The Corporation is primarily self-insured or carries high deductibles for general, auto, and product liability,
workers’ compensation, and certain employee health benefits. The general, auto, product, and workers’ compensation liabilities
are managed via a wholly-owned insurance captive and the related liabilities are included in the accompanying financial
statements. The Corporation’s policy is to accrue amounts in accordance with the actuarially determined liabilities. The actuarial
valuations are based on historical information along with certain assumptions about future events. Changes in assumptions for
such matters as the number or severity of claims, medical cost inflation, and magnitude of change in actual experience development
could cause these estimates to change in the near term.
Income taxes – The provision for income taxes is determined using the asset and liability approach taking into account guidance
related to uncertain tax positions. Deferred income taxes are provided for the temporary differences between the financial reporting
basis and the tax basis of the Corporation’s assets and liabilities. The Corporation provides for taxes that may be payable if
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undistributed earnings of overseas subsidiaries were to be remitted to the United States, except for those earnings that it considers
to be permanently reinvested.
Recent Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-09, Revenue from Contracts with
Customers (Topic 606). The new standard will replace most existing revenue recognition guidance in U.S. GAAP. The core principle
of the ASU requires companies to reevaluate when revenue is recorded on a transaction based upon newly defined criteria, either
at a point in time or over time as goods or services are delivered. The ASU requires additional disclosure about the nature, amount,
timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and estimates,
and changes in those estimates. The new standard becomes effective for us in fiscal 2018, and allows for both retrospective and
modified-retrospective methods of adoption. We are currently evaluating the effect, if any, that the updated standard will have on
our consolidated financial statements and related disclosures.
In April 2015, the FASB issued ASU No. 2015-03, Interest - Imputation of Interest (Subtopic 835-30) - Simplifying Presentation
of Debt Issuance Costs. The core principle of the ASU is that an entity should present debt issuance costs as a direct deduction
from the face amount of that debt in the balance sheet similar to the manner in which a debt discount or premium is presented,
and not reflected as a deferred charge or deferred credit. The ASU requires additional disclosure about the nature of and reason
for the change in accounting principle, the transition method, a description of the prior-period information that has been
retrospectively adjusted and the effect of the change on the financial statement line item (that is, the debt issuance cost asset and
the debt liability). The new standard becomes effective for us in fiscal 2016, and requires retrospective implementation in which
the balance sheet of each individual period presented is to be adjusted to reflect the period-specific effects of applying the new
guidance, early adoption is permitted. Subsequent to the issuance of ASU 2015-03 the SEC staff made an announcement regarding
the presentation of debt issuance costs associated with line-of-credit arrangements, which was codified by the FASB in ASU
2015-15. This guidance, which clarifies the exclusion of line-of-credit arrangements from the scope of ASU 2015-03, is effective
upon adoption of ASU 2015-03. We are currently evaluating the effect, if any, that the updated standard will have on our consolidated
financial statements and related disclosures.
In April 2015, the FASB issued ASU No. 2015-05, Internal-Use Software (Subtopic 350-40) - Customer’s Accounting for Fees
Paid in a Cloud Computing Arrangement. The ASU applies to cloud computing arrangements including software as a service,
platform as a service, infrastructure as a service, and other similar hosting arrangements, and was issued to help entities evaluate
the accounting for fees paid by a customer in a cloud computing arrangement. The ASU provides guidance about whether the
arrangement includes a software license. The core principle of the ASU is that if a cloud computing arrangement includes a software
license, then the customer should account for the software license element of the arrangement consistent with the acquisition of
other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for
the arrangement as a service contract. The guidance will not change U.S. GAAP for a customer’s accounting for service contracts.
The ASU is effective for annual reporting periods, including interim periods within those annual periods, beginning after December
15, 2015. The company anticipates the adoption in the effective period and we are currently evaluating the effect, if any, that the
ASU will have on our consolidated financial statements and related disclosures.
In September 2015, the FASB issued ASU No. 2015-16, Simplifying the Accounting for Measurement-Period Adjustments. The
ASU eliminates the requirement for an acquirer to retrospectively adjust the financial statements for measurement-period
adjustments that occur in periods after a business combination is consummated. The core principle of the ASU is that entities will
be required to recognize the cumulative impact of a measurement period adjustment (including the impact on prior periods) in the
reporting period in which the adjustment is identified. The ASU is effective for annual reporting periods, including interim periods
within those annual periods, beginning after December 15, 2015. However early adoption is permitted. The company anticipates
the adoption for fiscal 2016 with minimal impact.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
During the normal course of business, the Corporation is subjected to market risk associated with interest rate movements. Interest
rate risk arises from our variable interest debt obligations. For information related to the Corporation’s long-term debt, refer to
the Long-Term Debt disclosure in the Notes to Consolidated Financial Statements filed as part of this report. The Corporation
does not currently have any interest rate swap agreements in place. The Corporation does not currently have any significant foreign
currency exposure.
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The Corporation is exposed to risks arising from price changes for certain direct materials and assembly components used in its
operations. The most significant material purchases and cost for the Corporation are for steel, plastics, textiles, wood particleboard
and cartoning. Steel, aluminum and wood/wood related products are the most significant raw material used in the manufacturing
of products. The market price of plastics and textiles, in particular, are sensitive to the cost of oil and natural gas. The cost of
wood particleboard has been impacted by continued downsizing of production capacity as well as increased volatility in input and
transportation costs. All of these materials are impacted increasingly by global market pressure. The Corporation works to offset
these increased costs through global sourcing initiatives, product re-engineering and price increases on its products. Margins have
been negatively impacted in the past due to the lag between cost increases and the Corporation’s ability to increase its prices. The
Corporation believes future market price increases on its key direct materials and assembly components are likely. Consequently,
it views the prospect of such increases as an outlook risk to the business.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements listed under Item 15(a)(1) and (2) are filed as part of this report and are incorporated herein by reference.
The Summary of Unaudited Quarterly Results of Operations follows the Notes to Consolidated Financial Statements filed as part
of this report and are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure controls and procedures are designed to ensure that information required to be disclosed by the Corporation in the
reports it files or submits under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized
and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures are also designed
to ensure information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial
Officer, as appropriate, to allow timely decisions regarding required disclosures.
Under the supervision and with the participation of management, the Chief Executive Officer and Chief Financial Officer of the
Corporation have evaluated the effectiveness of the design and operation of the Corporation’s disclosure controls and procedures
as defined in Rules 13a – 15(e) and 15d – 15(e) under the Exchange Act. As of January 2, 2016, and, based on their evaluation,
the Chief Executive Officer and Chief Financial Officer have concluded these controls and procedures are effective. There have
not been any changes in the Corporation’s internal control over financial reporting that occurred during the fiscal quarter ended
January 2, 2016 that have materially affected, or are reasonably likely to materially affect, the Corporation’s internal control over
financial reporting.
Management’s annual report on internal control over financial reporting and the attestation report of the Corporation’s independent
registered public accounting firm are included in Item 15. Exhibits, Financial Statement Schedules of this report under the headings
“Management Report on Internal Control Over Financial Reporting” and “Report of Independent Registered Public Accounting
Firm,” respectively and management's annual report is incorporated herein by reference.
ITEM 9B. OTHER INFORMATION
None.
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PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information under the caption "Proposal No. 1 - Election of Directors" of the Corporation's Definitive Proxy Statement on
Schedule 14A for the Annual Meeting of Shareholders to be held on May 10, 2016, is incorporated herein by reference. For
information with respect to executive officers of the Corporation, see Table I - Executive Officers of the Registrant included in
Part I of this report.
Information relating to the identification of the audit committee and audit committee financial expert of the Corporation is contained
under the caption “Information Regarding the Board” of the Corporation’s Definitive Proxy Statement on Schedule 14A for the
Annual Meeting of Shareholders to be held on May 10, 2016, and is incorporated herein by reference.
Code of Ethics
The information under the caption “Code of Business Conduct and Ethics” of the Corporation’s Definitive Proxy Statement on
Schedule 14A for the Annual Meeting of Shareholders to be held on May 10, 2016, is incorporated herein by reference.
Compliance with Section 16(a) of the Exchange Act
The information under the caption "Section 16(a) Beneficial Ownership Reporting Compliance" of the Corporation's Definitive
Proxy Statement on Schedule 14A for the Annual Meeting of Shareholders to be held on May 10, 2016, is incorporated herein by
reference.
ITEM 11. EXECUTIVE COMPENSATION
The information under the captions “Executive Compensation” and “Director Compensation” of the Corporation's Definitive
Proxy Statement on Schedule 14A for the Annual Meeting of Shareholders to be held on May 10, 2016, is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The information under the captions “Security Ownership” and “Equity Compensation Plan Information” of the Corporation's
Definitive Proxy Statement on Schedule 14A for the Annual Meeting of Shareholders to be held on May 10, 2016, is incorporated
herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information under the captions “Information Regarding the Board” and “Review, Approval or Ratification of Transactions
with Related Persons” of the Corporation's Definitive Proxy Statement on Schedule 14A for the Annual Meeting of Shareholders
to be held on May 10, 2016, is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information under the caption “Fees Incurred for KPMG LLP and PricewaterhouseCoopers LLP” of the Corporation’s
Definitive Proxy Statement on Schedule 14A for the Annual Meeting of Shareholders to be held on May 10, 2016, is incorporated
herein by reference.
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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a)(1) Financial Statements
PART IV
The following consolidated financial statements of the Corporation and its subsidiaries included in the Corporation's
2015 Annual Report to Shareholders are filed as a part of this Report pursuant to Item 8:
Management Report on Internal Control Over Financial Reporting
Report of Independent Registered Public Accounting Firm
Consolidated Statements of Comprehensive Income for the Years Ended January 2, 2016 , January 3, 2015, and December 28,
2013
Consolidated Balance Sheets – January 2, 2016 and January 3, 2015
Consolidated Statements of Equity for the Years Ended January 2, 2016, January 3, 2015, and December 28, 2013
Consolidated Statements of Cash Flows for the Years Ended January 2, 2016, January 3, 2015, and December 28, 2013
Notes to Consolidated Financial Statements
Investor Information
(2) Financial Statement Schedules
Page
36
37
39
40
41
42
43
68
All other schedules for which provision is made in the applicable accounting regulation of the SEC are not
required under the related instructions or are inapplicable and, therefore, have been omitted.
(b)
Exhibits
An exhibit index of all exhibits incorporated by reference into, or filed with, this Report appears on Page 71. The
following exhibits are filed herewith:
Exhibit
(21)
(23.1)
(23.2)
(31.1)
(31.2)
(32.1)
101
Subsidiaries of the Registrant
Consent of Independent Registered Public Accounting Firm (KPMG)
Consent of Independent Registered Public Accounting Firm (PwC)
Certification of the CEO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification of the CFO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification of CEO and CFO Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
The following materials from HNI Corporation's Annual Report on Form 10-K for the fiscal year ended
January 2, 2016 formatted in XBRL (eXtensible Business Reporting Language) and furnished
electronically herewith: (i) Consolidated Balance Sheets; (ii) Consolidated Statements of
Comprehensive Income; (iii) Consolidated Statements of Equity; (iv) Consolidated Statements of Cash
Flows; and (iv) Notes to Consolidated Financial Statements
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this
Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.
HNI Corporation
Date: February 29, 2016
By:
/s/ Stan A. Askren
Stan A. Askren
Chairman, President and CEO
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the dates indicated. Each Director whose signature appears below authorizes
and appoints Stan A. Askren as his or her attorney-in-fact to sign and file on his or her behalf any and all amendments and post-
effective amendments to this report.
Signature
Title
Date
/s/ Stan A. Askren
Stan A. Askren
/s/ Kurt A. Tjaden
Kurt A. Tjaden
/s/ Mary H. Bell
Mary H. Bell
/s/ Miguel M. Calado
Miguel M. Calado
/s/ Cheryl A. Francis
Cheryl A. Francis
/s/ James R. Jenkins
James R. Jenkins
/s/ Mary K. W. Jones
Mary K. W. Jones
/s/ Dennis J. Martin
Dennis J. Martin
/s/ Larry B. Porcellato
Larry B. Porcellato
Chairman, President and CEO,
Principal Executive Officer,
and Director
Senior Vice President and Chief Financial
Officer, Principal Financial Officer and
Principal Accounting Officer
Director
Director
Director
Director
Director
Director
Director
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February 29, 2016
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February 29, 2016
February 29, 2016
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February 29, 2016
February 29, 2016
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Signature
Title
Date
/s/ Abbie J. Smith
Abbie J. Smith
/s/ Brian E. Stern
Brian E. Stern
/s/ Ronald V. Waters, III
Ronald V. Waters, III
Lead Director
February 29, 2016
Director
Director
February 29, 2016
February 29, 2016
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Management Report on Internal Control Over Financial Reporting
Management of HNI Corporation is responsible for establishing and maintaining adequate internal control over financial reporting
as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. HNI Corporation’s internal control over
financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United
States of America. HNI Corporation’s internal control over financial reporting includes those written policies and procedures that:
•
•
•
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions
of the assets of HNI Corporation;
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with accounting principles generally accepted in the United States of America, and that receipts and
expenditures of HNI Corporation are being made only in accordance with authorizations of management and directors
of HNI Corporation; and
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of
assets that could have a material effect on the consolidated financial statements.
Internal control over financial reporting includes the controls themselves, monitoring (including internal auditing practices), and
actions taken to correct deficiencies as identified.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk controls may become inadequate because of
changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of HNI Corporation’s internal control over financial reporting as of January 2,
2016. Management based this assessment on criteria for effective internal control over financial reporting described in Internal
Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission. Management’s assessment included an evaluation of the design of HNI Corporation’s internal control over financial
reporting and testing of operational effectiveness of HNI Corporation’s internal control over financial reporting. Management
reviewed the results of its assessment with the Audit Committee of the Board of Directors.
Based on this assessment, management determined, as of January 2, 2016, HNI Corporation maintained effective internal control
over financial reporting.
The effectiveness of HNI Corporation’s internal control over financial reporting as of January 2, 2016 has been audited by KPMG
LLP, an independent registered public accounting firm, as stated in its report which appears herein.
February 29, 2016
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Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of HNI Corporation:
We have audited the accompanying consolidated balance sheet of HNI Corporation (the Company) and subsidiaries
as of January 2, 2016 and the related consolidated statements of comprehensive income, equity, and cash flows for the
year ended January 2, 2016. We also have audited HNI Corporation’s internal control over financial reporting as of
January 2, 2016, based on criteria established in Internal Control - Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO). HNI Corporation’s management is
responsible for these consolidated financial statements, for maintaining effective internal control over financial
reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the
accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express
an opinion on these consolidated financial statements and an opinion on the Company’s internal control over financial
reporting based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement and whether effective internal control over financial reporting
was maintained in all material respects. Our audit of the consolidated financial statements included examining, on a
test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and evaluating the overall financial statement
presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design
and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such
other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable
basis for our opinions.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company’s internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are being made only in accordance with authorizations
of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on
the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
financial position of HNI Corporation and subsidiaries as of January 2, 2016, and the results of their operations and
their cash flows for the year ended January 2, 2016, in conformity with U.S. generally accepted accounting principles.
Also in our opinion, HNI Corporation maintained, in all material respects, effective internal control over financial
reporting as of January 2, 2016, based on criteria established in Internal Control - Integrated Framework (2013) issued
by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) .
Chicago, Illinois
February 29, 2016
/s/ KPMG LLP
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Table of Contents
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of HNI Corporation:
In our opinion, the consolidated balance sheet as of January 3, 2015 and the related consolidated
statements of comprehensive income, statements of equity, and statements of cash flows for each of two
years in the period ended January 3, 2015 present fairly, in all material respects, the financial position of
HNI Corporation and its subsidiaries at January 3, 2015, and the results of their operations and their cash
flows for each of the two years in the period ended January 3, 2015, in conformity with accounting
principles generally accepted in the United States of America. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these statements in accordance with
the standards of the Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
Chicago, Illinois
February 27, 2015
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HNI CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Amounts in thousands, except for per share data)
For the Years
Net sales
Cost of products sold
Gross profit
Selling and administrative expenses
(Gain) loss on sale of assets
Restructuring and impairment charges
Operating income
Interest income
Interest expense
Income before income taxes
Income taxes
Net income
Less: Net (loss) attributable to the noncontrolling interest
Net income attributable to HNI Corporation
Net income attributable to HNI Corporation per common share – basic
Weighted average shares outstanding – basic
Net income attributable to HNI Corporation per common share –
diluted
Weighted average shares outstanding - diluted
Foreign currency translation adjustments
Change in unrealized gains and losses on marketable securities (net of
tax)
Change in pension and postretirement liabilty (net of tax)
Change in derivative financial instruments (net of tax)
Other comprehensive income(loss) net of tax
Comprehensive income
Less: Comprehensive (loss) attributable to noncontrolling interest
Comprehensive income attributable to HNI Corporation
2015
2014
2013
$
2,304,419
$
2,222,695
$
2,059,964
1,457,021
1,438,495
1,344,672
847,398
672,125
(195)
11,792
163,676
395
6,901
157,170
51,764
105,406
(30)
105,436
2.38
$
$
784,200
649,055
(10,723)
33,019
112,849
418
8,336
104,931
43,776
61,155
(316)
61,471
1.37
$
$
715,292
606,512
2,460
333
105,987
626
9,906
96,707
33,338
63,369
(314)
63,683
1.41
44,285,298
44,759,716
45,250,665
2.32
$
1.35
$
1.39
45,440,653
45,578,872
45,956,280
(1,901) $
(691) $
(2,562)
(39)
1,256
873
189
105,595
(30)
105,625
$
$
(44)
(4,622)
(983)
(6,340) $
54,815
(316)
55,131
$
(124)
2,151
187
(348)
63,021
(314)
63,335
$
$
$
$
$
$
The accompanying notes are an integral part of the consolidated financial statements.
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Table of Contents
HNI CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands of dollars and shares except par value)
As of Year-end
Assets
Current Assets
Cash and cash equivalents
Short-term investments
Receivables, net
Inventories, net
Deferred income taxes
Prepaid expenses and other current assets
Total Current Assets
Property, Plant, and Equipment
Goodwill
Other Assets
Total Assets
Liabilities and Shareholders’ Equity
Current Liabilities
Accounts payable and accrued expenses
Note payable and current maturities of long-term debt and capital
lease obligations
Current maturities of other long-term obligations
Total Current Liabilities
Long-Term Debt
Other Long-Term Liabilities
Deferred Income Taxes
Commitments and Contingencies
Shareholders’ Equity
Preferred stock - $1 par value
Authorized: 2,000
Issued: None
Common stock - $1 par value
Authorized: 200,000
Issued and outstanding: 2015 - 44,158; 2014 - 44,166
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Total HNI Corporation shareholders’ equity
Noncontrolling interest
Total Equity
Total Liabilities and Equity
2015
2014
28,548
4,252
243,409
125,228
—
36,933
438,370
341,159
277,650
206,746
1,263,925
$
$
424,405
$
5,477
6,018
435,900
185,000
76,792
88,934
34,144
3,052
240,053
121,791
17,310
39,209
455,559
311,008
279,310
193,457
1,239,334
453,754
160
3,419
457,333
197,736
80,353
89,411
—
—
44,158
44,166
4,407
433,575
(5,186)
476,954
345
477,299
1,263,925
$
867
374,929
(5,375)
414,587
(86)
414,501
1,239,334
$
$
$
$
The accompanying notes are an integral part of the consolidated financial statements.
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Table of Contents
HNI CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
(Amounts in thousands)
Parent Company Shareholders’ Equity
Common
Stock
Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
(Loss)/Income
Non-
controlling
Interest
Total
Shareholders’
Equity
Balance, December 29, 2012
$
44,951
$
20,153
$ 353,942
$
1,313
$
301
$
420,660
Comprehensive income:
Net income
Other comprehensive income (net of
tax)
Distributions to noncontrolling interest
Change in ownership of
noncontrolling interest
Cash dividends; $0.96 per share
Common shares – treasury:
Shares purchased
Shares issued under Members’ Stock
Purchase Plan and stock awards
(740)
(26,748)
771
23,324
63,683
(314)
63,369
(348)
(167)
269
(479)
(43,494)
(348)
(167)
(210)
(43,494)
(27,488)
24,095
Balance, December 28, 2013
$
44,982
$
16,729
$ 373,652
$
965
$
89
$
436,417
Comprehensive income:
Net income (loss)
Other comprehensive (loss) (net of
tax)
Distributions to noncontrolling interest
Change in ownership of
noncontrolling interest
Cash dividends; $0.99 per share
Common shares – treasury:
Balance, January 3, 2015
Comprehensive income:
Net income (loss)
Other comprehensive (loss) (net of
tax)
Distributions to noncontrolling interest
Change in ownership of
noncontrolling interest
Cash dividends; $1.045 per share
Common shares – treasury:
Shares purchased
(1,666)
(50,522)
(15,720)
Shares issued under Members’ Stock
Purchase Plan and stock awards
850
34,660
$
44,166
$
867
$ 374,929
$
(5,375) $
(86) $
414,501
105,436
(30)
105,406
61,471
(316)
61,155
(6,340)
(5)
146
(146)
(44,328)
(6,340)
(5)
—
(44,328)
(67,908)
35,510
189
(461)
(46,329)
461
189
—
—
(46,329)
(26,657)
30,189
Shares purchased
(550)
(26,107)
Shares issued under Members’ Stock
Purchase Plan and stock awards
542
29,647
Balance, January 2, 2016
$
44,158
$
4,407
$ 433,575
$
(5,186) $
345
$
477,299
The accompanying notes are an integral part of the consolidated financial statements.
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Table of Contents
HNI CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
For the Years
Net Cash Flows From (To) Operating Activities:
Net income
Noncash items included in net income:
Depreciation and amortization
Other postretirement and post-employment benefits
Stock-based compensation
Excess tax benefits from stock compensation
Deferred income taxes
Net (gain) loss on sale of long-lived assets
Loss on impairment of intangibles
Loss on sale of business
Other – net
Changes in working capital, excluding acquisition and disposition:
Receivables
Inventories
Prepaid expenses and other current assets
Accounts payable and accrued expenses
Income taxes
Increase (decrease) in other liabilities
Net cash flows from (to) operating activities
Net Cash Flows From (To) Investing Activities:
Capital expenditures
Proceeds from sale of property, plant and equipment
Capitalized software
Acquisition spending, net of cash acquired
Purchase of investments
Sales or maturities of investments
Other – net
Net cash flows from (to) investing activities
Net Cash Flows From (To) Financing Activities:
Purchase of HNI Corporation common stock
Withholding related to net share settlements of equity based awards
Proceeds from note and long-term debt
Payments of note and long-term debt and other financing
Proceeds from sale of HNI Corporation common stock
Excess tax benefits from stock compensation
Dividends paid
Net cash flows from (to) financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
$
The accompanying notes are an integral part of the consolidated financial statements.
-42-
2015
2014
2013
$
105,406
$
61,155
$
63,369
57,564
1,856
9,097
(1,581)
15,257
1,222
11,241
—
(1,216)
(3,592)
(4,221)
(5,940)
(21,121)
6,799
2,581
173,352
(82,610)
2,201
(32,356)
—
(3,660)
3,550
—
(112,875)
(26,657)
(171)
448,449
(455,222)
12,276
1,581
(46,329)
(66,073)
(5,596)
34,144
28,548
$
56,722
1,239
8,597
(2,161)
14,655
(10,327)
29,382
—
4,693
8,631
(23,437)
(4,622)
32,915
(11,165)
1,519
167,796
(74,323)
16,361
(38,390)
(61,823)
(3,801)
7,770
(4)
(154,210)
(67,908)
(79)
282,808
(235,595)
18,469
2,161
(44,328)
(44,472)
(30,886)
65,030
34,144
$
46,621
1,309
7,451
(2,211)
18,451
344
—
2,177
4,419
(21,029)
1,606
526
31,215
4,525
6,229
165,002
(60,977)
421
(17,918)
—
(1,107)
5,053
(891)
(75,419)
(27,488)
(1,598)
157,967
(163,524)
9,591
2,211
(43,494)
(66,335)
23,248
41,782
65,030
Table of Contents
HNI CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 1. Nature of Operations
HNI Corporation with its subsidiaries (the “Corporation”) is a provider of office furniture and hearth products. Both industries
are reportable segments; however, the Corporation’s office furniture business is its principal line of business. Refer to Reportable
Segment Information for further information. Office furniture products include panel-based and freestanding furniture systems
and complementary products such as seating, storage and tables. These products are sold primarily through a national system of
dealers, wholesalers and office product distributors but also directly to end-user customers and federal, state and local governments.
Hearth products include a full array of gas, wood and pellet burning fireplaces, inserts, stoves, facings and accessories. These
products are sold through a national system of dealers and distributors, as well as Corporation-owned distribution and retail
outlets. The Corporation’s products are marketed predominantly in the United States and Canada. The Corporation exports select
products to a limited number of markets outside North America, principally the Middle East, Mexico, Latin America and the
Caribbean, through its export subsidiary and manufactures and markets office furniture in Asia and India; however, based on sales,
these activities are not significant.
Fiscal year-end – The Corporation follows a 52/53-week fiscal year which ends on the Saturday nearest December 31. Fiscal
year 2015 ended on January 2, 2016; 2014 ended on January 3, 2015; and 2013 ended on December 28, 2013. The financial
statements for fiscal year 2014 are on a 53-week basis. The financial statements for fiscal years 2015 and 2013 are on a 52-week
basis. A 53-week year occurs approximately every sixth year.
Note 2. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts and transactions of the Corporation and its subsidiaries. Intercompany
accounts and transactions have been eliminated in consolidation.
Cash, Cash Equivalents and Investments
Cash and cash equivalents generally consist of cash and money market accounts. The fair value approximates the carrying value
due to the short duration of the securities. These securities have original maturity dates not exceeding three months. The
Corporation has short-term investments with maturities of less than one year and also has investments with maturities greater than
one year included in Other Assets on the Consolidated Balance Sheets. Management classifies investments in marketable securities
at the time of purchase and reevaluates such classification at each balance sheet date. Debt securities including government and
corporate bonds are classified as available-for-sale and stated at current market value with unrealized gains and losses included
as a separate component of equity, net of any related tax effect. The specific identification method is used to determine realized
gains and losses on the trade date.
At January 2, 2016 and January 3, 2015, cash, cash equivalents and investments consisted of the following:
Year-End 2015
(In thousands)
Held-to-maturity securities
Certificates of deposit
Available-for-sale securities
Debt securities
Cash and money market accounts
Total
Cash and cash
equivalents
Short-term
investments
Long-term
investments
$
$
— $
252
$
—
—
28,548
4,000
—
28,548
$
4,252
$
8,067
—
8,067
The amortized cost basis of the debt securities as of January 2, 2016 was $12.1 million. Immaterial unrealized gains are recorded
in accumulated other comprehensive income as of January 2, 2016 for these debt securities.
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Table of Contents
Year-End 2014
(In thousands)
Held-to-maturity securities
Certificates of deposit
Available-for-sale securities
Debt securities
Cash and money market accounts
Total
Cash and cash
equivalents
Short-term
investments
Long-term
investments
$
$
— $
252
$
—
—
34,144
2,800
—
34,144
$
3,052
$
9,240
—
9,240
The amortized cost basis of the debt securities as of January 3, 2015 was $12.0 million. Unrealized gains of $0.1 million and
unrealized losses of $0.0 million are recorded in accumulated other comprehensive income as of January 3, 2015 for these debt
securities.
Receivables
Accounts receivable are presented net of allowance for doubtful accounts of $4.3 million and $5.1 million for 2015 and 2014,
respectively. The allowance is developed based on several factors including overall customer credit quality, historical write-off
experience, and specific account analyses projecting the ultimate collectability of the account. As such, these factors may change
over time causing the reserve level to adjust accordingly.
Allowance for doubtful accounts
Year ended January 2, 2016
Year ended January 3, 2015
Year ended December 28, 2013
Balance at
beginning of
period
Charged to costs
and expenses
5,096
6,208
5,151
1,394
343
2,590
Amounts
written off, net
of recoveries
and other
adjustments
2,203
1,455
1,533
Balance at end
of period
4,287
5,096
6,208
Inventories
The Corporation valued 78 percent and 71 percent of its inventory by the LIFO method at January 2, 2016 and January 3, 2015,
respectively. During 2014 and 2013, inventory quantities were reduced at certain reporting units. This reduction resulted in a
liquidation of LIFO inventory quantities carried at lower costs prevailing in prior years as compared with the cost of current year
purchases, the effect of which decreased cost of goods sold by approximately $0.03 million and $0.2 million in 2014 and 2013,
respectively. If the FIFO method had been in use, inventories would have been $25.1 million and $28.0 million higher than
reported at January 2, 2016 and January 3, 2015, respectively.
Property, Plant and Equipment
Property, plant and equipment are carried at cost. Expenditures for repairs and maintenance are expensed as incurred. Major
improvements that materially extend the useful lives of the assets are capitalized. Depreciation has been computed using the
straight-line method over estimated useful lives: land improvements, 10 – 20 years; buildings, 10 – 40 years; and machinery and
equipment, 3 – 12 years.
Long-Lived Assets
Long-lived assets are reviewed for impairment as events or changes in circumstances occur indicating the amount of the asset
reflected in the Corporation’s balance sheet may not be recoverable. An estimate of undiscounted cash flows produced by the
asset, or the appropriate group of assets, is compared to the carrying value to determine whether impairment exists. The estimates
of future cash flows involve considerable management judgment and are based upon assumptions about expected future operating
performance. The actual cash flows could differ from management’s estimates due to changes in business conditions, operating
performance and economic conditions. Asset impairment charges recorded in connection with the Corporation’s restructuring
activities are discussed in Restructuring Related Charges. These assets included real estate, manufacturing equipment and certain
other fixed assets. The Corporation’s continuous focus on improving the manufacturing process tends to increase the likelihood
of assets being replaced; therefore, the Corporation is regularly evaluating the expected lives of its equipment and accelerating
depreciation where appropriate.
Goodwill and Other Intangible Assets
See Goodwill and Other Intangible Assets note to consolidated financial statements.
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Product Warranties
The Corporation issues certain warranty policies on its furniture and hearth products that provide for repair or replacement of any
covered product or component failing during normal use because of a defect in design, materials or workmanship. Reserves have
been established for the various costs associated with the Corporation's warranty programs.
A warranty reserve is determined by recording a specific reserve for known warranty issues and an additional reserve for unknown
claims expected to be incurred based on historical claims experience. Actual claims incurred could differ from the original
estimates, requiring adjustments to the reserve. Activity associated with warranty obligations was as follows:
(In thousands)
Balance at the beginning of the period
Accrual assumed from acquisition
Accruals for warranties issued during the period
Accrual(Recovery) related to pre-existing warranties
Settlements made during the period
Balance at the end of the period
2015
16,719
—
19,995
(334)
(20,153)
16,227
$
$
2014
13,840
1,100
18,951
172
(17,344)
16,719
$
$
2013
13,055
—
21,878
106
(21,199)
13,840
$
$
The portion of the reserve for estimated settlements expected to be paid in the next twelve months was $8.2 million and $8.5
million as of January 2, 2016 and January 3, 2015, respectively, and is included in "Accounts payable and accrued expenses" in
the Consolidated Balance Sheets. The portion of the reserve for settlements expected to be paid beyond one year was $8.0 million
and $8.2 million, as of January 2, 2016 and January 3, 2015, respectively, and are included in "Other Long-Term Liabilities" in
the Consolidated Balance Sheets.
Revenue Recognition
Sales of office furniture and hearth products are generally recognized when title transfers and the risks and rewards of ownership
have passed to customers. Typically title and risk of ownership transfer when the product is shipped. In certain circumstances,
title and risk of ownership do not transfer until the goods are received by the customer or upon installation and customer
acceptance. Revenue includes freight charged to customers; related costs are recorded in selling and administrative
expense. Rebates, discounts and other marketing program expenses directly related to the sale are recorded as a reduction to net
sales. Marketing program accruals require the use of management estimates and the consideration of contractual arrangements
subject to interpretation. Customer sales that achieve or do not achieve certain award levels can affect the amount of such estimates
and actual results could differ from these estimates.
Product Development Costs
Product development costs relating to development of new products and processes, including significant improvements and
refinements to existing products, are expensed as incurred. These costs include salaries, contractor fees, building costs, utilities
and administrative fees. The amounts charged against income were $31.1 million in 2015, $29.7 million in 2014 and $27.3 million
in 2013 and were recorded in "Selling and Administrative Expenses" on the Consolidated Statements of Income.
Freight Expense
The Corporation records freight expense on shipments to customers in "Selling and Administrative Expenses" on the Consolidated
Statements of Income. Amounts recorded were $133.4 million in 2015, $131.0 million in 2014 and $123.8 million in 2013.
Stock-Based Compensation
The Corporation measures the cost of employee services in exchange for an award of equity instruments based on the grant-date
fair value of the award and recognizes cost over the requisite service period. See the Stock-Based Compensation note to
consolidated financial statements for further information.
Income Taxes
The Corporation uses an asset and liability approach that takes into account guidance related to uncertain tax positions and requires
the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized
in the Corporation’s financial statements or tax returns. Deferred income taxes are provided to reflect differences between the tax
bases of assets and liabilities and their reported amounts in the financial statements. The Corporation provides for taxes that may
be payable if undistributed earnings of overseas subsidiaries were to be remitted to the United States, except for those earnings it
considers to be permanently reinvested. There were approximately $33.9 million of accumulated earnings considered permanently
reinvested in China, Hong Kong and India as of January 2, 2016. The Corporation believes the U.S. tax cost on unremitted foreign
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earnings would be approximately $10.3 million if the amounts were not considered permanently reinvested. See the Income Tax
note to consolidated financial statements for further information.
Earnings Per Share
Basic earnings per share are based on the weighted-average number of common shares outstanding during the year. Shares
potentially issuable under stock options, restricted stock units and common stock equivalents under the Corporation's deferred
compensation plans have been considered outstanding for purposes of the diluted earnings per share calculation. The following
table reconciles the numerators and denominators used in the calculation of basic and diluted earnings per share (EPS):
(In thousands, except per share data)
Numerators:
2015
2014
2013
Numerators for both basic and diluted EPS net income attributable to
parent company
$
105,436
$
61,471
$
63,683
Denominators:
Denominator for basic EPS weighted- average common shares
outstanding
Potentially dilutive shares from stock option plans
Denominator for diluted EPS
Earnings per share – basic
Earnings per share – diluted
44,285
1,156
45,441
2.38
2.32
$
$
44,760
819
45,579
1.37
1.35
$
$
45,251
706
45,956
1.41
1.39
$
$
Certain exercisable and non-exercisable stock options were not included in the computation of diluted EPS for fiscal years 2015,
2014 and 2013 because inclusion would have been anti-dilutive. The number of stock options outstanding which met this criterion
was 493,202; 500,058 and 769,394 for 2015, 2014 and 2013, respectively.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying
notes. The more significant areas requiring use of management estimates relate to allowance for doubtful accounts, inventory
reserves, marketing program accruals, warranty accruals, accruals for self-insured medical claims, workers’ compensation, legal
contingencies, general liability and auto insurance claims, valuation of long-lived assets, and useful lives for depreciation and
amortization. Actual results could differ from those estimates.
Self-Insurance
The Corporation is primarily self-insured for general, auto and product liability, workers’ compensation, and certain employee
health benefits. The general, auto, product and workers’ compensation liabilities are managed using a wholly owned insurance
captive and the related liabilities are included in the accompanying consolidated financial statements. As of January 2, 2016, these
liabilities totaled $27.7 million. The Corporation’s policy is to accrue amounts in accordance with the actuarially determined
liabilities. The actuarial valuations are based on historical information along with certain assumptions about future
events. Changes in assumptions for such matters as legal actions, medical cost inflation and magnitude of change in actual
experience development could cause these estimates to change in the future.
Foreign Currency Translations
Foreign currency financial statements of foreign operations where the local currency is the functional currency are translated using
exchange rates in effect at period end for assets and liabilities and average exchange rates during the period for results of
operations. Related translation adjustments are reported as a component of Shareholders’ Equity. Gains and losses on foreign
currency transactions are included in the “Selling and administrative expenses” caption of the Consolidated Statements of Income.
Reclassifications
Certain reclassifications have been made within the financial statements to conform to the current year presentation.
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Recently Adopted Accounting Pronouncements
In November 2015, the FASB issued ASU No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred
Taxes. The new guidance requires that all deferred tax assets and liabilities, along with any related valuation allowance, be classified
as noncurrent on the balance sheet. The guidance is effective for annual periods, and interim periods within those annual periods,
beginning after December 15, 2016, with early adoption permitted. The new guidance has been adopted on a prospective basis by
the Company for the fiscal year ended January 2, 2016.
Note 3. Restructuring and Impairment Charges
As a result of the Corporation's ongoing business simplification and cost reduction strategies, the Corporation made the decision
to exit a line of business within our hearth products segment during 2015. The Corporation incurred $0.9 million of restructuring
charges as the result of this decision of which $0.8 million were included in Cost of Sales.
During 2014, the Corporation made decisions to close three office furniture manufacturing facilities located in Florence, Alabama,
Chicago, Illinois and Nalagarh, India and consolidate production into existing office furniture manufacturing facilities. In
connection with these decisions, the Corporation recorded $8.8 million of pre-tax charges in 2014, which included $5.2 million
of accelerated depreciation on machinery and equipment recorded in cost of sales and $3.6 million of severance and facility exit
costs which were recorded as restructuring charges during the year. During 2015 the Corporation incurred $0.4 million of pre-
tax restructuring charges related to these closures in the form of facility exit costs partially offset by lower than anticipated post
employment costs.
During 2010, the Corporation completed the shutdown of an office furniture facility in South Gate, California and consolidated
production into existing office furniture manufacturing facilities. During 2013, the Corporation incurred $0.3 million of
restructuring charges due to ongoing costs related to a vacant building from this closure.
The following table summarizes the restructuring accrual activity since the beginning of fiscal 2013.
(In thousands)
Restructuring reserve at December 29, 2012
Restructuring charges
Cash payments
Restructuring reserve At December 28, 2013
Restructuring charges
Cash payments
Restructuring reserve At January 3, 2015
Restructuring charges
Cash Payments
Restructuring reserve At January 2, 2016
Severance
Costs
Facility
Termination &
Other Costs
Total
$
$
$
$
192
(8)
(135)
49
2,933
(1,769)
1,213
(706)
(257)
250
$
$
$
$
18
$
341
(353)
6
705
(711)
$
— $
1,255
(1,240)
15
$
210
333
(488)
55
3,638
(2,480)
1,213
549
(1,497)
265
The Corporation recorded $11.2 million of goodwill and long-lived asset impairments in 2015 included in the “Restructuring and
Impairment Charges” line item on the Consolidated Statements of Income. See Goodwill and Other Intangible Assets note to
consolidated financial statements for more information.
Note 4. Business Combinations
The Corporation completed the acquisition of Vermont Casting Group, a leading manufacturer of free-standing hearth stoves and
fireplaces, on October 1, 2014 for a purchase price of $62.2 million in an all cash transaction. There were $24.9 million of intangible
assets other than goodwill associated with this acquisition with estimated useful lives ranging from five to fifteen years with
amortization recorded on a straight line basis based on the projected cash flow associated with the respective intangible assets’
existing relationships. There was $17.0 million of goodwill associated with this acquisition assigned to the hearth products segment.
The goodwill is not deductible for income tax purposes.
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Note 5. Supplemental Cash Flow Information
The Corporation's cash payments for interest and income taxes and non-cash investing and financing activities are as follows:
(In thousands)
Cash paid for:
Interest paid (net of capitalized interest)
Income taxes paid
Changes in accrued expenses due to:
Purchases of property and equipment
Purchases of capitalized software
Note 6. Inventories
(In thousands)
Finished products
Materials and work in process
LIFO reserve
Note 7. Property, Plant, and Equipment
(In thousands)
Land and land improvements
Buildings
Machinery and equipment
Construction and equipment installation in progress
Less: accumulated depreciation
2015
2014
2013
$
$
7,066
28,252
$
8,301
36,637
(327)
(2,806)
3,873
2,183
2015
68,478
$
81,860
(25,110)
125,228
$
$
$
2015
$
28,801
$
298,516
515,131
31,986
874,434
533,275
$
341,159
$
9,909
9,576
3,769
1,114
2014
65,126
84,677
(28,012)
121,791
2014
27,329
298,170
492,646
27,704
845,849
534,841
311,008
Total depreciation expense was $46.5 million, $46.1 million and $36.3 million in 2015, 2014 and 2013, respectively.
Note 8. Goodwill and Other Intangible Assets
As a result of the required annual impairment assessment performed in the fourth quarter of 2015, the Corporation determined the
fair value of a recently acquired reporting unit within the office furniture segment was below its carrying value. The decline in
the estimated fair value of this reporting unit was largely driven by lower than expected operating performance in 2015. The
projections used in the impairment model reflected management's assumptions regarding revenue growth rates, economic and
market trends, cost structure, investments required for sales force and operational transformation and other expectations about the
anticipated short-term and long-term operating results of the reporting unit. Based on the two-step analysis, the Corporation
recorded a $3.0 million goodwill impairment charge in 2015, and there was no remaining net goodwill in the reporting unit as of
January 2, 2016. Additionally and prior to the goodwill impairment assessment, the Corporation tested the recoverability of the
long-lived assets in that reporting unit, other than goodwill, which included definite-lived intangible assets consisting of customer
lists and trade names, and recorded an impairment charge of $8.3 million.
Based on the results of the annual impairment tests, the Corporation concluded that no other goodwill impairment existed apart
from the impairment charges discussed above. For all other reporting units included in the annual two-step impairment test except
the two noted below, the estimated fair value is significantly in excess of carrying value.
For one of the office furniture reporting units that exceeded its carrying value by approximately 12.9 percent, the Corporation
assumed a discount rate of 13.0 percent, near term growth rates ranging from 3.5 percent to 7.5 percent and a terminal growth rate
of 3.0 percent. The fair value model assumes continued positive economic momentum and transformation of the reporting unit
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including sales and marketing initiatives, new product development and operational processes. Holding other assumptions constant
a 100 basis point increase in the discount rate would result in a $5.0 million decrease in the estimated fair value of the reporting
unit and a 100 basis point decrease in the long-term growth rate would result in a $2.0 million decrease in the estimated fair value
of the reporting unit. Neither of these scenarios individually would result in the reporting unit failing step one.
For the other office furniture reporting unit that exceeded its carrying value by approximately 17.8 percent, the Corporation assumed
a discount rate of 15.0 percent, near term growth rates ranging from negative 10.7 percent to positive 8.0 percent and a terminal
growth rate of 4.0 percent. The fair value model assumes continued positive economic momentum and transformation of the
reporting unit including sales and marketing initiatives, new product development and operational processes. Holding other
assumptions constant a 100 basis point increase in the discount rate would result in a $5.0 million decrease in the estimated fair
value of the reporting unit and a 100 basis point decrease in the long-term growth rate would result in a $2.5 million decrease in
the estimated fair value of the reporting unit. Neither of these scenarios individually would result in the reporting unit failing step
one.
The Corporation also owns certain trademarks and trade names having a carrying value of $41.0 million as of January 2, 2016,
$41.0 million as of January 3, 2015, and $41.0 million as of December 28, 2013. These trademarks and trade names are deemed
to have indefinite useful lives because they are expected to generate cash flows indefinitely. As a result of the review performed
in the fourth quarter of 2015, the Corporation determined the fair value of all trade names exceeded the respective carrying value
and, therefore no impairment was recorded.
One trade name within the office furniture segment had a minimal amount of headroom on its valuation. This trade name exceeded
its carrying value by approximately $1.0 million and had a carrying value of $11.2 million. For this trade name the Corporation
assumed a discount rate of 12.0 percent, terminal growth rate of 3.0 percent and a royalty rate of 2.5 percent. Holding other
assumptions constant, a nominal change in the discount rate or royalty rate could trigger an impairment.
The table below summarizes amortizable definite-lived intangible assets, which are reflected in Other Assets in the Corporation’s
Consolidated Balance Sheets:
(In thousands)
Patents
Software
Trademarks and trade names
Customer lists and other
Net definite lived intangible
assets
January 2, 2016
Accumulated
Amortization
18,615
$
21,193
753
60,063
$
Gross
18,645
122,892
6,564
105,586
$
Net
30
101,699
5,811
45,523
$
Gross
18,945
93,343
11,424
113,671
January 3, 2015
Accumulated
Amortization
18,724
$
17,711
1,724
58,019
$
Net
221
75,632
9,700
55,652
$
253,687
$
100,624
$
153,063
$
237,383
$
96,178
$
141,205
The Corporation recorded an impairment charge of $8.3 million to adjust the customer list and trade names associated with a small
office furniture reporting unit to fair market value as discussed above.
Amortization expense for capitalized software for 2015, 2014 and 2013, was $3.5 million, $3.3 million and $2.9 million,
respectively. Amortization expense for all other definite-lived intangibles for 2015, 2014 and 2013, was $7.6 million, $7.2 million
and $7.4 million, respectively. All amortization expense was recorded in Selling and Administrative Expenses on the Consolidated
Statements of Income. Based on the current amount of intangible assets subject to amortization, the estimated amortization expense
for each of the following five fiscal years is as follows:
(in millions)
Amortization expense
2016
2017
2018
2019
$
11.6
$
17.6
$
17.8
$
17.1
$
2020
16.5
The occurrence of events such as acquisitions, dispositions or impairments in the future may result in changes to amounts.
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The changes in the carrying amount of goodwill since December 28, 2013, are as follows by reporting segment:
(In thousands)
Balance as of December 28, 2013
Goodwill
Accumulated impairment losses
Goodwill acquired during the year
Impairment losses
Foreign currency translation adjustment
Balance as of January 3, 2015
Goodwill
Accumulated impairment losses
Impairment losses
Final purchase price allocations/contingent payments from prior year
acquisitions
Foreign currency translation adjustment
Balance as of January 2, 2016
Goodwill
Accumulated impairment losses
Office
Furniture
Hearth
Products
Total
$
149,969
(29,359)
120,610
—
(22,802)
(256)
149,713
(52,161)
97,552
(2,963)
—
5
149,718
(55,124)
94,594
$
$
166,188
(143)
166,045
15,713
—
—
181,901
(143)
181,758
—
1,298
—
183,199
(143)
183,056
316,157
(29,502)
286,655
15,713
(22,802)
(256)
331,614
(52,304)
279,310
(2,963)
1,298
5
332,917
(55,267)
277,650
The goodwill increases relate to acquisitions completed. See the Business Combinations note. The decreases in goodwill in the
office furniture segment in 2014 and 2015 were due to the impairment charges described above.
Note 9. Accounts Payable and Accrued Expenses
(In thousands)
Trade accounts payable
Compensation
Profit sharing and retirement expense
Marketing expenses
Freight
Other accrued expenses
2015
2014
$
197,579
$
224,026
43,380
29,089
35,969
16,384
102,004
$
424,405
$
46,619
27,956
39,175
15,531
100,447
453,754
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Note 10. Long-Term Debt
(In thousands)
2015
2014
Note payable to bank, revolving credit facility with interest at a variable rate (2015 -
1.5%; 2014 - 1.8%)
$
40,300
$
Senior notes due April 2016 with interest at a fixed rate of 5.54% per annum.
Other notes and amounts
Total debt
Less: current portion
Long-term debt
Aggregate maturities of long-term debt are as follows:
(In thousands)
2016
2017
2018
2019
2020
Thereafter
150,000
177
190,477
5,477
47,700
150,000
91
197,791
55
$
185,000
$
197,736
$
5,477
35,000
—
—
—
150,000
The carrying value of the Corporation's outstanding variable-rate, long-term debt obligations at January 2, 2016 and January 3,
2015 was $40 million and $48 million, respectively, which approximated fair value. The fair value of the Corporation’s outstanding
fixed rate long-term debt obligations was estimated based on discounted cash flow method (Level 2) to be $148 million at January 2,
2016 and $154 million at January 3, 2015 compared to the carrying value of $150 million.
The Corporation increased the borrowing capacity (while preserving the existing $150 million accordian feature) under the
revolving credit facility on January 6, 2016 to $400 million and will use the additional borrowings to pay off the Corporation's
Senior Notes due April 6, 2016. These Senior Notes were classified as long term as of January 2, 2016 since the Corporation will
pay off the Senior Notes upon maturity with revolving credit facility borrowings expected to remain outstanding for more than
twelve months.
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Note 11. Income Taxes
Significant components of the provision for income taxes including those related to noncontrolling interest and discontinued
operations are as follows:
(In thousands)
Current:
Federal
State
Foreign
Current provision
Deferred:
Federal
State
Foreign
Deferred provision
2015
2014
2013
$
$
27,768
5,258
1,713
34,739
15,348
2,217
(540)
17,025
51,764
$
$
22,738
4,623
972
28,333
13,692
2,013
(262)
15,443
43,776
$
$
12,077
1,036
2,153
15,266
16,614
2,558
(1,100)
18,072
33,338
The differences between the actual tax expense and tax expense computed at the statutory U.S. Federal tax rate are explained as
follows:
Federal statutory tax expense
State taxes, net of federal tax effect
Credit for increasing research activities
Deduction related to domestic production activities
Valuation allowance
Goodwill Impairment
Change in uncertain tax positions
Other – net
Total income tax expense
2015
2014
$
55,020
$
36,836
$
4,269
(3,320)
(3,320)
—
—
(1,344)
459
$
51,764
$
4,118
(2,569)
(1,751)
2,474
4,298
1,099
(729)
43,776
$
2013
33,957
2,469
(1,338)
(1,396)
—
—
773
(1,127)
33,338
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for income tax purposes.
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Significant components of the Corporation’s deferred tax liabilities and assets are as follows:
(In thousands)
Deferred Taxes
Allowance for doubtful accounts
Compensation
Inventory differences
Marketing accrual
Stock-based compensation
Accrued post-retirement benefit obligations
OCI tax effected items
Vacation accrual
Warranty Accrual
Other – net
Total deferred tax assets
Deferred income
Goodwill
Prepaids
Tax over book depreciation
Total deferred tax liabilities
Valuation allowance
Total net deferred tax liabilities
Current net deferred tax assets
Long term net deferred tax liabilities
Total net deferred tax liabilities
2015
2014
$
1,089
$
15,491
4,497
1,355
11,923
6,682
3,169
4,181
6,052
12,167
$
66,606
(4,907)
(79,471)
(7,876)
(59,308)
(151,562) $
(3,978)
(88,934) $
—
(88,934)
(88,934) $
$
$
$
$
1,240
16,817
5,691
1,454
9,906
6,341
3,887
3,875
6,023
10,774
66,008
(4,836)
(80,366)
(7,724)
(41,770)
(134,696)
(3,413)
(72,101)
17,310
(89,411)
(72,101)
The valuation allowance for deferred tax assets is as follows:
Valuation allowance for deferred tax asset (in
thousands)
Year ended January 2, 2016
Year ended January 3, 2015
Year ended December 28, 2013
Balance at
beginning of
period
3,413
1,579
1,580
Charged to
expenses
Adjustments to
balance sheet
Balance at end of
period
—
2,474
—
565
(640)
(1)
3,978
3,413
1,579
At January 2, 2016, the Corporation has approximately $6.4 million of U.S. state tax net operating losses and $2.2 million of
U.S. state tax credits which expire over the next twenty years.
The Corporation has adopted ASU No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes on
a prospective basis for the fiscal year ended January 2, 2016. The new guidance requires that all deferred tax assets and
liabilities, along with any related valuation allowance, be classified as noncurrent on the balance sheet.
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A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
(in thousands)
Unrecognized tax benefits, beginning of period
Increases in positions due to purchase accounting
Increases in positions taken in a prior period
Decreases in positions taken in a prior period
New positions taken in a current period
Decrease due to settlements
Decrease due to lapse of statute of limitations
Unrecognized tax benefits, end of period
2015
4,250
—
82
(1,611)
793
—
(656)
2,858
$
$
$
$
2014
2,809
400
406
(124)
1,422
—
(663)
4,250
The amount of unrecognized tax benefits which would impact the Corporation’s effective tax rate, if recognized, was $2.8 million
at January 2, 2016 and $4.2 million at January 3, 2015.
As of January 2, 2016, it is reasonably possible the amount of unrecognized tax benefits may increase or decrease within the twelve
months following the reporting date. These increases or decreases in the unrecognized tax benefits would be due to new positions
that may be taken on income tax returns, settlement of tax positions and the closing of statutes of limitation. It is not expected
any of the changes will be material individually or in total to the results or financial position of the Corporation.
The Corporation recognized interest accrued related to unrecognized tax benefits in interest expense and penalties in operating
expenses consistent with the recognition of these items in prior reporting. Interest and penalties recognized in the Consolidated
Statements of Income amounted to a benefit of $0.1 million, $0.0 million and $0.1 million in January 2, 2016, January 3, 2015
and December 28, 2013, respectively. The Corporation had recorded a liability for interest and penalties related to unrecognized
tax benefits of $0.1 million and $0.2 million as of January 2, 2016 and January 3, 2015, respectively.
Tax years 2012 through 2015 remain open for examination by the Internal Revenue Service ("IRS"). The Corporation is currently
under examination in various state jurisdictions, of which years 2009 through 2014 remain open to examination.
Deferred income taxes are provided to reflect differences between the tax basis of assets and liabilities and their reported amounts
in the financial statements. The Corporation provides for taxes that may be payable if undistributed earnings of overseas subsidiaries
were to be remitted to the United States, except for those earnings it considers to be permanently reinvested. There were
approximately $33.9 million of accumulated earnings considered permanently reinvested in Canada, China, and Hong Kong as
of January 2, 2016. The Corporation believes the U.S tax cost on unremitted foreign earnings would be approximately $10.3
million if the amounts were not considered permanently reinvested.
Note 12. 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. The
marketable securities are comprised of investments in government securities, corporate bonds and money market funds. When
available, the Corporation uses quoted market prices to determine fair value and classifies such measurements within Level 1. In
some cases where market prices are not available, the Corporation makes use of observable market based inputs (prices or quotes
from published exchanges/indexes) to calculate fair value using the market approach, in which case the measurements are classified
within Level 2.
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Assets measured at fair value for the year ended January 2, 2016 were as follows:
$
$
$
$
(in thousands)
Government securities
Corporate bonds
Derivative financial instruments $
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)
9,663
2,405
$
$
(1,252) $
— $
— $
— $
9,663
$
$
2,405
(1,252) $
—
—
—
Assets measured at fair value for the year ended January 3, 2015 were as follows:
(in thousands)
Government securities
Corporate bonds
Derivative financial instruments $
Note 13. Shareholders’ Equity
Common Stock, $1 Par Value
Authorized
Issued and outstanding
Preferred Stock, $1 Par Value
Authorized
Issued and outstanding
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)
9,835
2,205
$
$
(1,374) $
— $
— $
— $
9,835
$
$
2,205
(1,374) $
—
—
—
2015
2014
200,000,000
200,000,000
44,158,256
44,165,676
2,000,000
2,000,000
—
—
The Corporation purchased 550,000, 1,665,850, and 740,000 shares of its common stock during 2015, 2014 and 2013,
respectively. The par value method of accounting is used for common stock repurchases.
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The following table summarizes the components of accumulated other comprehensive income (loss) and the changes in accumulated
other comprehensive income loss:
(in thousands)
Foreign
Currency
Translation
Adjustment
Unrealized Gains
Losses) on
Marketable
Securities
Pension
Postretirement
Liability
Derivative
Financial
Instruments
Accumulated
Other
Comprehensive
Loss
Balance at December 29, 2012
$
5,475
$
205
$
(4,291) $
(76) $
Other comprehensive income
before reclassifications
Less: Taxes
Amounts reclassified from
accumulated other comprehensive
income, net of tax
Balance at December 28, 2013
Other comprehensive income
before reclassifications
Less: Taxes
Amounts reclassified from
accumulated other comprehensive
income, net of tax
Balance at January 3, 2015
Other comprehensive income
before reclassifications
Less: Taxes
Amounts reclassified from
accumulated other comprehensive
income, net of tax
(2,562)
—
—
2,913
(690)
—
—
2,223
(1,901)
—
—
Balance at January 2, 2016
$
322
$
(191)
(67)
—
81
(67)
(23)
—
37
(60)
(21)
3,389
1,312
74
(2,140)
(7,280)
(2,657)
—
(6,763)
1,975
718
538
197
(154)
111
(1,728)
(631)
114
(872)
(1,188)
(433)
—
(2) $
—
(5,506) $
1,627
— $
1,313
1,174
1,442
(80)
965
(9,765)
(3,311)
114
(5,375)
(1,174)
264
1,627
(5,186)
The following table details the reclassifications from accumulated other comprehensive income (loss) for the years ended
January 3, 2015 and January 2, 2016 (in thousands):
Details about Accumulated Other
Comprehensive Income Components
Affected Line Item in the Statement Where
Net Income is Presented
2015
2014
Derivative financial instruments
Diesel hedge
Selling and administrative expenses
Tax (expense) or benefit
Net of tax
$
$
(2,562) $
935
(1,627) $
(180)
66
(114)
The Corporation determined in fourth quarter 2015 that the qualifications for hedge accounting treatment on the diesel hedge
derivative financial instruments were not met and reversed $1.3 million recorded in accumulated other comprehensive income
as a reduction to net income.
In May 2007, the Corporation registered 300,000 shares of its common stock under its 2007 Equity Plan for Non-Employee
Directors of HNI Corporation, as amended (the “Director Plan”). The Director Plan permits the Corporation to issue to its non-
employee directors options to purchase shares of Corporation common stock, restricted stock or restricted stock units of the
Corporation and awards of Corporation common stock. The Director Plan also permits non-employee directors to elect to receive
all or a portion of their annual retainers and other compensation in the form of shares of Corporation common stock. During 2015,
2014, and 2013, 20,146; 27,272; and 26,520 shares, respectively, of Corporation common stock were issued under the Director
Plan.
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Cash dividends declared and paid per share for each year are:
(In dollars)
Common shares
2015
1.045 $
2014
0.99 $
2013
0.96
$
During 2007, shareholders approved the 2002 Members’ Stock Purchase Plan (the "Purchase Plan"), as amended January 1,
2007. Under the plan, 800,000 shares of common stock were initially registered for issuance to participating members. On June
12, 2009, an additional 1,000,000 shares of common stock were registered for issuance to participating members. Beginning on
June 30, 2002, rights to purchase stock are granted on a quarterly basis to all participating members who customarily work 20
hours or more per week and for five months or more in any calendar year. The price of the stock purchased under the Purchase
Plan is 85% of the closing price on the exercise date. No member may purchase stock under the Purchase Plan in an amount which
exceeds a maximum fair value of $25,000 in any calendar year. During 2015, 73,874 shares of common stock were issued under
the Purchase Plan at an average price of $32.18. During 2014, 84,065 shares of common stock were issued under the plan at an
average price of $27.92. During 2013, 86,291 shares of common stock were issued under the Purchase Plan at an average price
of $25.63. An additional 373,268 shares were available for issuance under the Purchase Plan at January 2, 2016.
The Corporation has entered into change in control employment agreements with certain officers. According to the agreements,
a change in control occurs when a third person or entity becomes the beneficial owner of 20% or more of the Corporation’s common
stock, when more than one-third of the Board is composed of persons not recommended by at least three-fourths of the incumbent
Board, upon certain business combinations involving the Corporation or upon approval by the Corporation’s shareholders of a
complete liquidation or dissolution. Upon a change in control, a key member is deemed to have a two year employment agreement
with the Corporation, and all of his or her benefits vest under the Corporation’s compensation plans. If, at any time within two
years of the change in control, his or her employment is terminated by the Corporation for any reason other than cause or disability,
or by the key member for good reason, as such terms are defined in the agreement, then the key member is entitled to receive,
among other benefits, a severance payment equal to two times (three times for the Corporation’s Chairman, President and CEO)
annual salary and the average of the prior two years’ bonuses.
Note 14. Stock-Based Compensation
Under the Corporation’s 2007 Stock-Based Compensation Plan (the “Plan”), effective May 8, 2007, as amended, the Corporation
may award options to purchase shares of the Corporation’s common stock and grant other stock awards to executives, managers
and key personnel. Upon shareholder approval of the Plan in May 2007, no future awards were granted under the Corporation’s
1995 Stock-Based Compensation Plan, but all outstanding awards previously granted under that plan shall remain outstanding in
accordance with their terms. As of January 2, 2016, there were approximately 3.7 million shares available for future issuance
under the Plan. The Plan is administered by the Human Resources and Compensation Committee of the Board. Restricted stock
units awarded under the Plan are expensed ratably over the vesting period of the awards. Stock options awarded to members under
the Plan must be at exercise prices equal to or exceeding the fair market value of the Corporation’s common stock on the date of
grant. Stock options are generally subject to four-year cliff vesting and must be exercised within 10 years from the date of grant.
The Corporation measures the cost of employee services in exchange for an award of equity instruments based on the grant-date
fair value of the award and recognizes cost over the requisite service period.
Compensation cost charged against operations for the Plan and Purchase Plan described in Note 13 of the consolidated financial
statements was $9.1 million, $8.6 million and $7.5 million for the years ended January 2, 2016, January 3, 2015 and December 28,
2013, respectively. The total income tax benefit recognized in the income statement for share-based compensation arrangements
was $3.1 million, $3.1 million and $2.6 million for the years ended January 2, 2016, January 3, 2015 and December 28, 2013,
respectively.
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The stock compensation expense for the years ended January 2, 2016, January 3, 2015 and December 28, 2013, was estimated on
the date of grant using the Black-Scholes option-pricing model with the following assumptions by grant year:
Expected term
Expected volatility:
Weighted-average
Expected dividend yield:
Weighted-average
Risk-free interest rate:
Range used
Year Ended
Jan, 2, 2016
Year Ended
Jan, 3, 2015
Year Ended
Dec. 28, 2013
6 years
5 years
5 years
43.54%
42.49%
50.39%
1.94%
1.69%
2.76%
1.54%
3.02%
0.93%
Expected volatilities were based on historical volatility as the Corporation does not feel that future volatility over the expected
term of the options is likely to differ from the past. The Corporation used a calculation method based on daily frequency for the
prior six years for 2015 and a simple-average calculation method based on monthly frequency points for the prior five years for
2014 and 2013. The Corporation used the current dividend yield in all years as there are no plans to substantially increase or
decrease its dividends. The Corporation used historical exercise experience in all years to determine the expected term. The risk-
free interest rate was selected based on yields from treasury securities as published by the Federal Reserve equal to the expected
term of the options being valued for 2015 and yields from U.S. Treasury zero-coupon issues with a remaining term equal to the
expected term of the options being valued for 2014 and 2013.
The following table summarizes the changes in outstanding stock options since the beginning of fiscal 2013.
Outstanding at December 29, 2012
Granted
Exercised
Forfeited or Expired
Outstanding at December 28, 2013
Granted
Exercised
Forfeited or Expired
Outstanding at January 3, 2015
Granted
Exercised
Forfeited or Expired
Outstanding at January 2, 2016
Number of
Shares
3,456,514
611,599
(394,476)
(43,070)
3,630,567
536,275
(542,837)
(288,560)
3,335,445
350,038
(302,635)
(24,525)
3,358,323
Weighted-
Average
Exercise Price
27.96
31.79
14.86
35.05
29.94
34.78
28.53
38.55
29.93
51.54
30.22
39.14
32.09
$
$
$
$
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A summary of the Corporation’s nonvested stock options as of January 2, 2016 and changes during the year are presented below:
Nonvested Stock Options
Nonvested at January 3, 2015
Granted
Vested
Forfeited
Nonvested at January 2, 2016
Weighted-
Average
Grant-Date
Fair Value
10.14
22.66
11.56
11.63
11.86
Shares
2,286,997
$
350,038
(480,585)
(17,726)
2,138,724
$
At January 2, 2016, there was $3.3 million of unrecognized compensation cost related to nonvested stock option awards, which
the Corporation expects to recognize over a weighted-average period of 1.2 years. Information about stock options expected to
vest or currently exercisable at January 2, 2016, is as follows:
Options
Expected to vest
Exercisable
Weighted-
Average
Exercise Price
33.39
$
29.30
$
Number
2,084,026
1,219,599
Weighted-
Average
Remaining Life
in
Years
Aggregate
Intrinsic
Value
($000s)
7.3
3.7
$
$
13,155
13,078
The weighted-average grant-date fair value of options granted was $18.45, $10.48 and $10.85, for 2015, 2014 and 2013,
respectively. Other information for the last three years is as follows:
(In thousands)
Total fair value of shares vested
Total intrinsic value of options exercised
Cash received from exercise of stock options
Tax benefit realized from exercise of stock options
Jan. 2, 2016
Jan. 3, 2015
Dec. 28, 2013
$
5,554
$
5,735
$
6,412
9,145
2,111
8,389
15,489
2,982
1,127
6,445
5,862
2,291
The Corporation has occasionally issued restricted stock units (“RSUs”) to executives, managers and key personnel. The RSUs
vest at the end of three years after the grant date. No dividends are accrued on the RSUs. The share-based compensation expense
associated with the RSUs is based on the quoted market price of HNI Corporation shares on the date of grant less the discounted
present value of dividends not received on the shares and is amortized using the straight-line method from the grant date through
the earlier of the vesting date or the estimated retirement eligibility date.
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The following table summarizes the changes in outstanding RSUs since the beginning of fiscal 2013:
Outstanding at December 29, 2012
Granted
Vested
Forfeited
Outstanding at December 28, 2013
Granted
Vested
Forfeited
Outstanding at January 3, 2015
Granted
Vested
Forfeited
Outstanding at January 2, 2016
Number of
Shares
Weighted-
Average
Grant Date
Fair Value
157,219
—
(132,693)
—
24,526
15,500
(14,000)
—
26,026
23,000
(10,526)
—
38,500
$
$
$
$
21.71
—
21.47
—
23.01
32.23
21.47
—
27.76
51.54
21.19
—
43.77
At January 2, 2016, there was $1.0 million of unrecognized compensation cost related to RSUs which the Corporation expects to
recognize over a weighted-average period of 0.6 year. The total value of shares vested in 2015, 2014 and 2013 was $0.2 million,
$0.3 million and $2.8 million, respectively.
Note 15. Retirement Benefits
The Corporation has defined contribution profit-sharing plans covering substantially all employees who are not participants in
certain defined benefit plans. The Corporation’s annual contribution to the defined contribution plans is based on employee eligible
earnings and results of operations and amounted to $29.1 million, $26.8 million, and $23.3 million, in 2015, 2014, and 2013,
respectively. A portion of the annual contribution is in the form of common stock of the Corporation. The amount of the stock
contribution was $6.8 million, $6.4 million, and $6.1 million in 2015, 2014, and 2013, respectively.
The Corporation sponsors a defined benefit plan which covers a limited number of former salaried and hourly members. The
Corporation’s funding policy is generally to contribute annually the minimum actuarially computed amount. Net pension costs
relating to these plans were $281,000, $167,000 and $185,000, in 2015, 2014 and 2013, respectively. The actuarial present value
of obligations, less related plan assets at fair value, is not significant.
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Note 16. Postretirement Health Care
Guidance on employers’ accounting for other postretirement plans requires recognition of the overfunded or underfunded status
on the balance sheet. Under this guidance, gains and losses, prior services costs and credits and any remaining transition amounts
under previous guidance not yet recognized through net periodic benefit cost are recognized in accumulated other comprehensive
income (loss), net of tax effects, until they are amortized as a component of net periodic benefit cost. Also, the measurement date
– the date at which the benefit obligation and plan assets are measured – is required to be the Corporation’s fiscal year-end.
(In thousands)
Change in benefit obligation
2015
2014
Benefit obligation at beginning of year
$
21,972
$
803
816
(1,009)
(1,698)
20,884
$
— $
—
1,009
—
(1,009)
— $
(20,884) $
16,448
504
735
(1,280)
5,565
21,972
—
—
1,280
—
(1,280)
—
(21,972)
1,014
19,870
$
$
1,004
20,968
2,730
$
4,665
—
—
—
—
2,730
$
4,665
$
4,665
(1,698)
(237)
(900)
5,565
—
—
—
2,730
$
4,665
Service cost
Interest cost
Benefits paid
Actuarial (gain)/loss
Benefit obligation at end of year
Change in plan assets
Fair value at beginning of year
Actual return on assets
Employer contribution
Transferred out
Benefits paid
Fair value at end of year
Funded Status of Plan
Amounts recognized in the Statement of Financial Position consist of:
Current liabilities
Noncurrent liabilities
Amounts recognized in Accumulated Other Comprehensive Income (before tax)
consist of:
Actuarial (gain)/loss
Transition (asset)/obligation
Prior service cost
Change in Accumulated Other Comprehensive Income (before tax):
Amount disclosed at beginning of year
Actuarial (gain)/loss
Amortization of actuarial gain or loss
Amortization of transition amount
Amortization of prior service cost
Amount disclosed at end of year
$
$
$
$
$
$
$
$
$
$
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Estimated Future Benefit Payments (In thousands)
Fiscal 2016
Fiscal 2017
Fiscal 2018
Fiscal 2019
Fiscal 2020
Fiscal 2021 – 2025
Expected Contributions During Fiscal 2016
Total
$
1,014
1,020
1,018
1,042
1,076
6,375
$
1,014
The discount rates at fiscal year-end 2015, 2014 and 2013, were 4.2%, 3.8% and 4.6%, respectively. The Corporation's payment
for these benefits has reached the maximum amounts per the plan; therefore, healthcare trend rates have no impact on the
Corporation’s cost. There were no funds designated as plan assets.
Components of Net Periodic Postretirement Benefit Cost (in thousands)
Service cost
Interest cost
Amortization of net (gain)/loss
Net periodic postretirement benefit cost/(income)
2016
735
846
62
1,643
$
$
A discount rate of 4.2% was used to determine net periodic benefit cost for 2016. The discount rate is set at the measurement date
to reflect the yield of a portfolio of high quality, fixed income debt instruments. There are no plan assets invested.
Note 17. Leases
The Corporation leases certain warehouse and plant facilities and equipment. Commitments for minimum rentals under non-
cancelable leases at the end of 2015 are as follows:
(In thousands)
2016
2017
2018
2019
2020
Thereafter
Total minimum lease payments
Operating
Leases
30,241
23,640
16,684
11,422
6,451
10,268
98,706
$
$
There are no capitalized leases at January 2, 2016. The present value of net minimum capital lease payments at January 3,
2015 was $105 thousand, all of which was classified as current.
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Property, plant and equipment at year-end include the following amounts for capitalized leases:
(In thousands)
Office equipment
Less: allowances for depreciation
2015
— $
—
— $
2014
570
460
110
$
$
Rent expense for the years 2015, 2014 and 2013, amounted to approximately $34.0 million, $48.0 million and $41.5 million,
respectively. There was no contingent rent expense under either capitalized and operating leases (generally based on mileage of
transportation equipment) for the years 2015, 2014, and 2013.
Note 18. Guarantees, Commitments and Contingencies
The Corporation utilizes letters of credit in the amount of $10 million to back certain financing instruments, insurance policies
and payment obligations. The letters of credit reflect fair value as a condition of their underlying purpose and are subject to fees
competitively determined.
The Corporation is involved in various kinds of disputes and legal proceedings that have arisen in the course of its business,
including pending litigation, environmental remediation, taxes and other claims. It is the Corporation’s opinion, after consultation
with legal counsel, that additional liabilities, if any, resulting from these matters are not expected to have a material adverse effect
on the Corporation’s quarterly or annual operating results and cash flows when resolved in a future period.
Note 19. Reportable Segment Information
Management views the Corporation as being in two reportable segments based on industries: office furniture and hearth products,
with the former being the principal segment. The aggregated office furniture segment manufactures and markets a broad line of
metal and wood commercial and home office furniture which includes storage products, desks, credenzas, chairs, tables, bookcases,
freestanding office partitions and panel systems and other related products. The hearth products segment manufactures and markets
a broad line of gas, electric, wood and biomass burning fireplaces, inserts, stoves, facings and accessories, principally for the
home.
For purposes of segment reporting, intercompany sales transfers between segments are not material, and operating profit is income
before income taxes exclusive of certain unallocated corporate expenses. These unallocated corporate expenses include the net
costs of the Corporation’s corporate operations, interest income and interest expense. 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 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.
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Reportable segment data reconciled to the consolidated financial statements for the years ended 2015, 2014, and 2013, is as follows
for continuing operations:
(In thousands)
Net sales:
Office furniture
Hearth products
Operating profit:
Office furniture (a)
Hearth products (b)
Total operating profit
Unallocated corporate expenses
Income (loss) before income taxes
Depreciation and amortization expense:
Office furniture
Hearth products
General corporate
Capital expenditures (including capitalized software):
Office furniture
Hearth products
General corporate
Identifiable assets:
Office furniture
Hearth products
General corporate
2015
2014
2013
$
$
$
$
$
$
$
$
$
1,777,804
526,615
2,304,419
136,593
78,162
214,755
(57,585)
157,170
42,415
8,430
6,719
57,564
64,850
11,078
39,038
114,966
739,915
341,813
182,197
$
$
$
$
$
$
$
$
$
1,739,049
483,646
2,222,695
87,053
77,066
164,119
(59,188)
104,931
45,891
5,415
5,416
56,722
62,696
6,342
43,675
112,713
724,293
341,315
173,726
1,685,205
374,759
2,059,964
97,339
46,662
144,001
(47,294)
96,707
36,992
5,288
4,341
46,621
51,954
4,220
22,721
78,895
722,697
255,978
156,030
1,263,925
$
1,239,334
$
1,134,705
$
$
$
$
$
$
$
$
$
$
(a) Included in operating profit for the office furniture segment are pretax charges of $11.7 million, $33.0 million and $0.3
million, for closing of facilities and impairment charges in 2015, 2014 and 2013, respectively.
(b) Included in operating profit for the hearth products segment are pretax charges of $0.9 million related to exiting a line
of business in 2015.
The Corporation's net sales by product category were as follows for the years ended 2015, 2014 and 2013:
(in thousands)
2015
2014
2013
Systems and storage
$
1,140,369
$
1,156,170
$
1,132,885
Seating
Other
Hearth products
561,392
76,043
526,615
498,389
84,490
483,646
469,220
83,100
374,759
$
2,304,419
$
2,222,695
$
2,059,964
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Note 20. Subsequent Events
On January 29, 2016 the Corporation acquired a small office furniture distribution company with annual sales of approximately
$27 million at a cost of approximately $34 million.
On February 17, 2016 the Corporation approved the closure of its Paris, Kentucky hearth manufacturing facility as part of ongoing
efforts to reduce structural costs and enhance efficiencies. The Corporation estimates the consolidation will save $9.0 million
annually beginning in 2017. The Corporation estimates pre-tax charges of $8.9 million related to the closure and consolidation.
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Summary of Quarterly Results of Operations (Unaudited)
The following table presents certain unaudited quarterly financial information for each of the past 8 quarters. In the opinion of
the Corporation’s management, this information has been prepared on the same basis as the consolidated financial statements
appearing elsewhere in this report and includes all adjustments (consisting only of normal recurring accruals) necessary to state
fairly the financial results set forth herein. Results of operations for any previous quarter are not necessarily indicative of
results for any future period.
Year-End 2015:
(In thousands, except per share data)
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
$
523,477
$
568,226
$
615,850
$
Net sales
Cost of products sold
Gross profit
Selling and administrative expenses
(Gain) on sale of assets
Restructuring related charges (income)
Operating income (loss)
Interest income (expense) – net
Income (loss) before income taxes
Income taxes
Net income (loss)
Less: net income attributable to the
noncontrolling interest
Net income (loss) attributable to HNI Corporation $
Net income (loss) attributable to HNI Corporation
per common share – basic
$
Weighted-average common shares outstanding –
basic
Net income (loss) attributable to HNI Corporation
per common share – diluted
$
Weighted-average common shares outstanding –
diluted
As a Percentage of Net Sales
Net sales
Gross profit
Selling and administrative expenses
Restructuring related charges
Operating income (loss)
Income taxes
Net income (loss) attributable to HNI Corporation
338,977
184,500
168,704
—
377
15,419
(1,899)
13,520
5,068
8,452
(26)
8,478
0.19
$
$
362,102
206,124
167,278
—
(560)
39,406
(1,849)
37,557
13,680
23,877
(2)
23,879
0.54
$
$
384,219
231,631
170,371
—
172
61,088
(1,623)
59,465
18,619
40,846
(2)
40,848
0.92
$
$
596,866
371,723
225,143
165,772
(195)
11,803
47,763
(1,135)
46,628
14,397
32,231
—
32,231
0.73
44,304
44,416
44,263
44,158
0.19
$
0.52
$
0.90
$
0.71
45,524
45,621
45,403
45,199
100.0%
100.0%
100.0%
100.0%
35.2
32.2
0.1
2.9
1.0
1.6
36.3
29.4
(0.1)
6.9
2.4
4.2
37.6
27.7
—
9.9
3.0
6.6
37.7
27.8
2.0
8.0
2.4
5.4
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Year-End 2014:
(In thousands, except per share data)
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
$
452,201
$
509,143
$
614,690
$
Net sales
Cost of products sold
Gross profit
Selling and administrative expenses
(Gain) on sale of assets
Restructuring related charges
Operating income (loss)
Interest income (expense) – net
Income (loss) before income taxes
Income taxes
Net income (loss)
Less: net income attributable to the
noncontrolling interest
Net income (loss) attributable to HNI Corporation $
Net income (loss) attributable to HNI Corporation
per common share – basic
$
Weighted-average common shares outstanding –
basic
Net income (loss) attributable to HNI Corporation
per common share – diluted
$
Weighted-average common shares outstanding –
diluted
As a Percentage of Net Sales
Net sales
Gross profit
Selling and administrative expenses
(Gain) on sale of assets
Restructuring related charges
Operating income (loss)
Income taxes
Net income (loss) attributable to HNI Corporation
297,029
155,172
145,210
(8,400)
(28)
18,390
(2,132)
16,258
5,242
11,016
(80)
11,096
0.25
328,010
181,133
155,288
(1,346)
10,282
16,909
(2,041)
14,868
5,203
9,665
(40)
9,705
0.22
$
$
$
$
394,758
219,932
166,216
—
987
52,729
(1,861)
50,868
17,372
33,496
(92)
33,588
0.75
$
$
646,661
418,698
227,963
182,341
(977)
21,778
24,821
(1,884)
22,937
15,959
6,978
(104)
7,082
0.16
45,039
45,020
44,690
44,324
0.24
$
0.21
$
0.74
$
0.16
45,838
45,868
45,611
45,202
100.0%
100.0%
100.0%
100.0%
34.3
32.1
(1.9)
—
4.1
1.2
2.5
35.6
30.5
(0.3)
2.0
3.3
1.0
1.9
35.8
27.0
—
0.2
8.6
2.8
5.5
35.3
28.2
(0.2)
3.4
3.8
2.5
1.1
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INVESTOR INFORMATION
Common Stock Market Prices and Dividends (Unaudited)
Quarterly 2015 – 2013
2015 by
Quarter
1st
2nd
3rd
4th
Total Dividends Paid
2014 by
Quarter
1st
2nd
3rd
4th
Total Dividends Paid
2013 by
Quarter
1st
2nd
3rd
4th
Total Dividends Paid
High
Low
Dividends
per Share
$56.47
57.74
52.52
47.68
High
Low
$39.42
39.29
40.43
52.90
High
Low
$35.74
38.53
40.73
40.10
$38.01
46.19
41.29
35.53
$31.00
31.61
34.62
34.75
$28.28
31.45
32.38
32.83
Dividends
per Share
Dividends
per Share
$0.25
0.265
0.265
0.265
$1.045
$0.24
0.25
0.25
0.25
$0.99
$0.24
0.24
0.24
0.24
$0.96
Common Stock Market Price and Price/Earnings Ratio (Unaudited)
Fiscal Years 2015 – 2011
Year
2015
2014
2013
2012
2011
Five-Year Average
Market Price
High
$57.74
52.90
40.73
32.02
36.48
Low
$35.53
31.00
28.28
21.57
15.78
Diluted
Earnings
per
Share
$2.32
1.35
1.39
1.07
1.01
Price/Earnings Ratio
High
Low
25
39
29
30
36
32
15
23
20
20
16
19
-68-
Table of Contents
ITEM 15(c) - INDEX OF EXHIBITS
Exhibit Number
Description of Document
(3.1)
(3.2)
(3.3)
(10.1)
(10.2)
(10.3)
(10.4)
(10.5)
(10.6)
(10.7)
(10.8)
(10.09)
(10.10)
(10.11)
(10.12)
(10.13)
(10.14)
(10.15)
(10.16)
(10.17)
Articles of Incorporation of HNI Corporation, as amended, incorporated by reference to Exhibit 3.1 to the
Registrant's Annual Report on Form 10-K for the year ended January 2, 2010
Amended and restated By-laws of HNI Corporation, incorporated by reference to Exhibit 3.1 to the Registrant's
Current Report on Form 8-K filed on August 8, 2014
Amended and restated By-laws of HNI Corporation, as amended, incorporated by reference to Exhibit 3.1 to
the Registrant's Current Report on Form 8-K filed on February 18, 2016
HNI Corporation 2007 Stock-Based Compensation Plan, as amended (incorporated by reference to Appendix
A to the Corporation's Definitive Proxy Statement filed with the SEC March 23, 2015)*
2007 Equity Plan for Non-Employee Directors of HNI Corporation, as amended (incorporated by reference
to Appendix D to the Corporation’s Definitive Proxy Statement filed with the SEC March 23, 2015)
Form of HNI Corporation Change In Control Employment Agreement, incorporated by reference to Exhibit
10.1 to the Registrant’s Current Report on Form 8-K filed November 16, 2006*
HNI Corporation Supplemental Income Plan (f/k/a HNI Corporation ERISA Supplemental Retirement Plan),
as amended and restated, incorporated by reference to Exhibit 10.4 to the Registrant's Current Report on Form
8-K filed February 22, 2010*
Form of HNI Corporation Amended and Restated Indemnity Agreement, incorporated by reference to Exhibit
10.1 to the Registrant’s Current Report on Form 8-K filed November 14, 2007*
Form of 2007 Equity Plan For Non-Employee Directors of HNI Corporation Participation Agreement,
incorporated by reference to Exhibit 10.26 to the Registrant's Annual Report on Form 10-K for the year ended
January 2, 2010*
Form of HNI Corporation 2007 Stock-Based Compensation Plan Stock Option Award Agreement,
incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter
ended July 4, 2009*
Second Amended and Restated Credit Agreement, including all schedules and exhibits, dated as of June 9,
2015, by and among HNI Corporation, as Borrower, certain domestic subsidiaries of HNI Corporation, as
Guarantors, certain lenders party thereto and Wells Fargo Bank, National Association, as Administrative
Agent, incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed June
12, 2015
First Amendment to Second Amended and Restated Credit Agreement, dated as of January 6, 2016,
incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed January 11,
2016
HNI Corporation Long-Term Performance Plan, as amended (incorporated by reference to Appendix C to the
Corporation’s Definitive Proxy Statement filed with the SEC March 23, 2015)*
HNI Corporation Executive Deferred Compensation Plan, as amended, incorporated by reference to Exhibit
10.1 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended July 4, 2015*
Note Purchase Agreement dated as of April 6, 2006, by and among HNI Corporation and the Purchasers
named therein, incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed
April 10, 2006
HNI Corporation Directors Deferred Compensation Plan, as amended, incorporated by reference to Exhibit
10.2 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended July 4, 2015*
HNI Annual Incentive Plan, as amended (incorporated by reference to Appendix B to the Corporation’s
Definitive Proxy Statement filed with the SEC March 23, 2015)*
Form of HNI Corporation Amendment No. 1 to Change in Control Employment Agreement incorporated by
reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed August 10, 2007*
Form of HNI Corporation 2007 Stock-Based Compensation Plan Restricted Stock Unit Award Agreement,
incorporated by reference to Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q for the quarter
ended April 4, 2009 (for restricted stock unit awards granted in 2009)*
HNI Corporation Stock-Based Compensation Plan, as amended, incorporated by reference to Exhibit 10.1 to
the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2006*
-69-
Table of Contents
Exhibit Number
Description of Document
(10.18)
(10.19)
(10.20)
(10.21)
(10.22)
(21)
(23.1)
(23.2)
(31.1)
(31.2)
(32.1)
101
Form of Exercise of Stock Option granted under the HNI Corporation Stock-Based Compensation Plan,
incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter
ended September 27, 2008*
Form of HNI Corporation Stock-Based Compensation Plan Stock Option Award Agreement, incorporated by
reference to Exhibit 99D to the Registrant’s Current Report on Form 8-K filed February 22, 2005*
Form of HNI Corporation 2007 Stock-Based Compensation Plan Restricted Stock Unit Award Agreement,
incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter
ended April 3, 2010 (for restricted stock unit awards granted in 2010)*
Form of HNI Corporation Executive Deferred Compensation Plan Deferral Election Agreement, incorporated
by reference to Exhibit 10.25 to the Registrant's Annual Report on Form 10-K for the year ended January 2,
2010*
Form of HNI Corporation Directors Deferred Compensation Plan Deferral Election Agreement, incorporated
by reference to Exhibit 10.6 to the Registrant's Annual Report on Form 10-K for the year ended January 2,
2010*
Subsidiaries of the Registrant+
Consent of Independent Registered Public Accounting Firm+ (KPMG)
Consent of Independent Registered Public Accounting Firm+ (PwC)
Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002+
Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002+
Certification of CEO and CFO Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002+
The following materials from HNI Corporation's Annual Report on Form 10-K for the fiscal year ended
January 2, 2016 formatted in XBRL (eXtensible Business Reporting Language) and furnished electronically
herewith: (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Comprehensive Income; (iii)
Consolidated Statements of Equity; (iv) Consolidated Statements of Cash Flows; and (v) Notes to Consolidated
Financial Statements
*
+
Indicates management contract or compensatory plan.
Filed herewith.
-70-
Performance Graph
Comparison of Five-Year Cumulative Return
HNI Corporation
S&P500
OFIG*
$200
$175
$150
$125
$100
$75
$50
$25
2010
2011
2012
2013
2014
2015
Annual Return
HNI Corporation
S&P500
OFIG*
2010
$100
$100
$100
2011
$87
$102
$77
2012
$100
$116
$105
2013
$140
$156
$144
2014
$184
$178
$150
2015
$134
$181
$140
*The Office Furniture Industry Group (OFIG) is a composite peer index constructed by the Corporation weighted by market
capitalization and comprised of the following companies: Herman Miller, Inc.; Kimball International, Inc., Knoll, Inc. and
Steelcase Inc. It is weighted at the beginning of each year according to the market capitalization of its constituents on the
last trading day of the Corporation's prior fiscal year.
Total returns for HNI Corporation, S&P 500 and OFIG are depicted at the end of Corporation's fiscal years. The total return
assumes $100.00 invested in each of the Corporation's common stock, the S&P 500 and OFIG stocks at the end of the
Corporation's 2010 fiscal year, plus further reinvestment of dividends on the date of dividend payment. S&P 500 returns
assume S&P 500 dividends are paid and reinvested on the last trading day of each of the Corporation's fiscal quarters.
The comparative performance of the Corporation's common stock against the indexes as depicted in this graph is dependent
on the price of stock at a particular measurement point in time. Since individual stocks are more volatile than broader stock
indexes, the perceived comparative performance of the Corporation's common stock may vary based on the strength or
weakness of the stock price at the new measurement point used in each future performance graph. For this reason, the
Corporation does not believe this graph should be considered as the sole indicator of the Corporation's performance.
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BOARD OF DIRECTORS
Stan A. Askren
Chairman, President and
Chief Executive Officer,
HNI Corporation
Cheryl A. Francis
Co-Chairman,
Corporate Leadership
Center
Larry B. Porcellato
Former Chief Executive
Officer,
The Homax Group, Inc.
Mary A. Bell
Retired Vice President,
Building Construction
Products Division,
Caterpillar Inc.
James R. Jenkins
Retired Senior Vice
President and
General Counsel,
Deere & Company
Miguel M. Calado
Vice President,
Hovione SA
*Lead Director
**Committee Chairperson
Mary K.W. Jones
Senior Vice President
and General Counsel,
Deere & Company
Dennis J. Martin
Executive Chairman,
Federal Signal
Corporation
Abbie J. Smith*
Chaired Professor,
University of Chicago
Booth School of
Business
Brian E. Stern
Director,
Starboard Capital
Partners, LLC
and Former Senior
Vice President,
Xerox Corporation
Ronald V. Waters, III
Independent Business
Consultant,
Former Director,
President and
Chief Executive Officer,
LoJack Corporation
COMMITTEES
OF THE BOARD
Audit
Cheryl A. Francis**
Dennis J. Martin
Larry B. Porcellato
Human Resources
and Compensation
Mary A. Bell
Miguel M. Calado
Ronald V. Waters, III**
Public Policy and
Corporate Governance
James R. Jenkins**
Mary K.W. Jones
Abbie J. Smith
Brian R. Stern
HNI CORPORATION OFFICERS AND COMPANY EXECUTIVES
Stan A. Askren
Chairman, President and
Chief Executive Officer
Peter C. M. Chu
President,
Lamex
Cooper V. Evans
Vice President,
Internal Audit
Sudhir Mambully
Managing Director,
BP Ergo
Brandon T. Sieben
President,
Allsteel
Julie M. Abramowski
Vice President,
Corporate Controller
Vincent P. Berger
President,
Hearth & Home
Technologies
Todd C. Birlingmair
Treasurer
Steven M. Bradford
Senior Vice President,
General Counsel and
Secretary
Gary L. Carlson
Vice President,
Community Relations
David E. Crimmins
Vice President and
General Manager,
Maxon
David W. Gardner
Vice President,
Operations
Furniture Operations
Donald T. Mead
Executive Vice President,
and President,
Gunlocke and HBF
Timothy R. Summers
Vice President,
Integrated Supply Chain
Furniture Operations
Kurt A. Tjaden
Senior Vice President
and Chief Financial
Officer
Bradley D. Determan
Executive Vice President,
and President,
Hearth & Home
Technologies Group
Jerald K. Dittmer
Executive Vice President,
and President,
The HON Company
Thomas D. Eberhard
Vice President,
Lean Enterprise
Furniture Operations
Mona K. Hoffman
President,
Paoli
Eric F. Jackson
President,
Artcobell
Richard K. Johnson
Vice President and
Chief Information Officer
Jeffrey D. Lorenger
Executive Vice President,
and President, HNI
Contract Furniture Group
Donna D. Meade
Vice President,
Member Relations
Marco V. Molinari
Executive Vice President,
and President,
HNI International
Mark R. Roumfort
Senior Vice President,
Product and Solutions
Development
INVESTOR INFORMATION
Fiscal 2016 Quarter-End Dates
1st Quarter: April 2
2nd Quarter: July 2
3rd Quarter: October 1
4th Quarter: December 31, 2016
Annual Meeting
The Corporation’s annual
shareholders’ meeting will be
held at 10:30 a.m. on Tuesday,
May 10, 2016, at the Allsteel
Corporate Head quarters, 2210
Second Avenue, Muscatine, Iowa.
Form 10-K Report
Financial information can be
accessed on the Corporation’s
website at www.hnicorp.com.
Corporate Headquarters and
Investor Relations
HNI Corporation
408 East Second Street
Muscatine, IA 52761-0071
Telephone: 563.272.7400
Investor Relations Email:
investorrelations@hnicorp.com
Independent Registered Public
Accounting Firm
KPMG LLP
Suite 5500
200 East Randolph Street
Chicago, IL 60601
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
1110 Centre Point Curve, Suite 101
Mendota Heights, MN 55120
Telephone: 800.468.9716
www.shareowneronline.com
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408 East Second Street, Muscatine, Iowa 52761 www.hnicorp.com