HNI CORPORATION
2021 ANNUAL REPORT
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 1, 2022
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 1-14225
HNI Corporation
Iowa
(State of Incorporation)
42-0617510
(I.R.S. Employer Identification No.)
600 East Second Street
P. O. Box 1109
Iowa
52761-0071
Muscatine ,
( 563 ) 272-7400
Title of each class
Common Stock
Securities registered pursuant to Section 12(b) of the Act:
Trading Symbol(s)
HNI
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 every Interactive Data File required to be submitted 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 such files).
Yes ☒
No
☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging
growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2
of the Exchange Act.
Large accelerated filer ☒
Smaller reporting company ☐
Accelerated filer ☐
Non-accelerated filer ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or
revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over
financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit
report.
☒
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 non-affiliates of the Registrant as of July 3, 2021 was $1,136,887,520 based on the New York Stock
Exchange closing price for such shares on that date, assuming for purposes of this calculation that all 10 percent 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 4, 2022, was 42,338,775.
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 26, 2022 are incorporated by
reference into Part III.
HNI Corporation and Subsidiaries
Annual Report on Form 10-K
Table of Contents
PART I
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Table I - Information about Executive Officers
PART II
Market for Registrant's Common Equity, Related Shareholder Matters, and Issuer Purchases of Equity Securities
[Reserved]
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
Disclosure Regarding Foreign Jurisdictions that Prevent Inspection
PART III
Directors, Executive Officers, and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
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 9C.
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Exhibits, Financial Statement Schedules
Form 10-K Summary
Item 15.
Item 16.
Signatures
Management Report on Internal Control Over Financial Reporting
Report of Independent Registered Public Accounting Firm
Financial Statements
Notes to Consolidated Financial Statements
PART IV
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Item 1. Business
General
PART I
HNI Corporation (the ''Corporation'', ''we'', ''us'', or ''our'') is an Iowa corporation incorporated in 1944. The Corporation is a provider of workplace furnishings and
residential building products. Workplace furnishings include furniture systems, seating, storage, tables, and architectural products. These products are sold
primarily through a national system of independent dealers, office product distributors, eCommerce retailers, and wholesalers but also directly to end-user
customers and federal, state, and local governments. Residential building products include a full array of gas, wood, electric, and pellet-fueled fireplaces, inserts,
stoves, facings, and accessories. These products are sold through a national system of independent dealers and distributors, as well as Corporation-owned
installing distribution and retail outlets. In fiscal 2021, the Corporation had net sales of $2.2 billion, of which $1.4 billion or 66 percent was attributable to
workplace furnishing products and $0.8 billion or 34 percent was attributable to residential building products.
The Corporation is organized into a corporate headquarters and operating units with offices, manufacturing plants, distribution centers, and sales showrooms in the
United States, China, India, Mexico, United Arab Emirates, Taiwan, and Singapore. See "Item 2. Properties" for additional related discussion.
The Corporation’s workplace furnishings segment includes several operating units, marketed under various brand names, that participate in the office furniture
industry. These units include:
Allsteel Inc.
Design Holdings Inc.
Hickory Business Furniture LLC
HNI Hong Kong Limited (''Lamex'')
HNI Office India Limited ("HNI India")
Maxon Furniture Inc.
OFM LLC
The HON Company LLC
The Corporation’s residential building products segment includes the Hearth & Home Technologies LLC (''Hearth & Home'') operating unit. This unit, which sells
hearth products within the residential building products industry, manufactures and markets products under various brand names. The retail and distribution brand
for this operating unit is Fireside Hearth & Home.
For further information with respect to acquisitions, divestitures, operating segment information, 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: "Note 1. Nature of Operations", "Note 4. Acquisitions", and "Note 16. Reportable Segment Information".
Markets
The Corporation competes in the workplace furnishings and residential building products markets principally by providing compelling value products designed to
be among the best in their price range for product quality and performance, along with superior customer service and short lead-times. This is made possible, in
part, by the Corporation's on-going investment in its brands, research and development efforts, efficient manufacturing operations, and extensive distribution
network.
Workplace Furnishings
The North American workplace furnishings market consists of two primary channels — the contract channel and the small- and medium-sized business ("SMB")
channel. The primary end-users for both channels are business customers. Again in 2021, driven by the remote and hybrid work environments caused by the
ongoing COVID-19 pandemic, a portion of the Corporation's sales were to consumers utilizing the products in work-from-home office environments. These sales
were conducted through both the contract and SMB channels.
The contract channel has traditionally been characterized by sales of office furniture and services to large corporations, primarily for new office facilities,
relocations, and/or office redesigns. Sales made through the contract channel are frequently customized to meet specific client and architect/designer preferences.
End users generally purchase through independent office furniture dealers who prepare a custom-designed office layout emphasizing image and design. The selling
process is complex, lengthy, and generally has several manufacturers competing for the same projects.
The SMB channel, in which the Corporation is a market leader, primarily represents smaller orders of office furniture that are less likely to involve an architect
and/or designer. Sales in this channel are driven on the basis of price, product quality, selection, and
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the speed and reliability of delivery. Independent dealers, national office product distributors, eCommerce retailers, and wholesalers are the primary distribution
channels in this market.
The workplace furnishings 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
workplace furnishings manufacturers, which cover a substantial portion of the North America market share in the contract-oriented workplace furnishings market.
Competitors include manufacturers such as MillerKnoll, Inc., Steelcase, Inc., Haworth, Inc., The Global Group, Kimball International, Inc., Krueger International,
Inc., and Teknion Corporation, as well as global importers. The Corporation faces significant price competition from its competitors and may encounter
competition from new market entrants.
Residential Building Products
The Corporation also competes in the residential building products industry, where it is the market leader in hearth products. 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 particularly concentrated in the September to December timeframe. Distribution is primarily through independent and
company-owned dealers, installing distributors, and retail outlets.
The hearth products market is highly competitive, with products manufactured by a number of national and regional competitors. The Corporation competes
against a broad range of manufacturers, including Travis Industries, Inc., Innovative Hearth Products, Wolf Steel Ltd. (Napoleon), and FPI Fireplace Products
International Ltd. (Regency).
Strategy
The Corporation's strategy is to build on its position as a leading manufacturer of workplace furnishings and residential building products.
The foundation of the Corporation’s strategy continues to be its distinct member-owner culture, which has enabled HNI to attract, develop, retain, and motivate
skilled, experienced, and efficient member-owners (i.e., employees), and which drives a unique level of commitment to the Corporation’s success. The Corporation
aims to leverage this culture to enable profitable growth by focusing members’ efforts on the following three pillars:
•
•
•
Customer-First Mindset (focus on the customer) – The journeys customers take buying and using workplace furnishings and residential building products
continue to rapidly evolve — presenting new opportunities to better serve them. The key to capitalizing on these changes is a deep understanding of
customers. To that end, the Corporation continues to broaden its involvement in and understanding of the entire customer journey, by investing in data
analytics, digital assets, branding, eCommerce capabilities, and market coverage. This customer-first mindset will allow the Corporation to identify and
take advantage of new and developing market dynamics.
Effortless Winning Experiences (simplify the buying process) – Customers continue to raise their expectations and demand more effortless experiences.
Buying office furniture and hearth products can be complicated and time-consuming. The Corporation's deep understanding of the customer buying
journey incorporates technology and digital assets to help customers navigate the buying process more quickly and with reduced effort. The Corporation
has scale, price point breadth, product depth, and resources to lead this charge.
Own Operational Excellence (leverage lean heritage) – All HNI member-owners embrace the principles of lean manufacturing. Members utilize Rapid
Continuous Improvement (RCI), which scrutinizes every facet of the business to identify areas of waste, and then refine and streamline. RCI can be seen
in action throughout the Corporation's value chain from the manufacturing floor to the administrative offices to customer interactions, as members always
look to find a better, more efficient, and more environmentally-friendly approach. This focus on RCI benefits stakeholders as the Corporation consistently
delivers productivity and cost savings that allow it to grow earnings and invest in the future.
Management believes that the skillful execution of these strategic initiatives will support robust organic sales growth, margin expansion, improved returns, strong
free cash flow, and position the Corporation for continued success.
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Sales
Workplace Furnishings
The Corporation designs, manufactures, and markets a broad range of workplace furnishings. The Corporation offers a complete line of office panel system
products, benching, tables, architectural products, storage, and social collaborative products in order to meet the needs of a wide spectrum of organizations.
Through the broad product offering the Corporation is able to service business furniture needs in virtually any setting including private office, open plan,
conference rooms, training areas, cafes, lounges, and collaborative spaces, among many others. The Corporation possesses significant expertise and vertical
manufacturing capabilities allowing it the flexibility to design and manufacture new products in-house to meet changing market needs.
To meet the demands of various markets, the Corporation's products are sold primarily under the Corporation's brands:
®
®
HON
Allsteel
Beyond
Gunlocke
®
Maxon
®
®
®
®
HBF
OFM
Respawn
®
Lamex
HNI India
®
®
In late 2021, management approved a plan to retire the Maxon brand, effective in 2022.
The Corporation sells its products through various distribution channels. A summary of each channel is as follows:
•
•
•
Independent, local office products dealers that specialize in the sale of office furniture and/or office products to business, government, education, and
health care entities.
National office product distributors that sell furniture and office supplies through a national network of dealerships and sales offices. These distributors
also sell through on-line and retail office products stores.
eCommerce focused resellers that sell a wide array of business and consumer products to commercial and non-commercial customers. Orders are fulfilled
both by the Corporation and/or directly by the eCommerce reseller from inventory held in their facilities.
• Wholesalers that serve as distributors of the Corporation's products to independent dealers and national office products distributors. These wholesalers
maintain inventories of standard product lines for quick delivery to customers.
Direct sales of products to federal, state, and local government offices or in certain circumstances a lead selling relationship with an end-user.
•
The Corporation's workplace furnishings sales force consists of sales managers, salespersons, and independent manufacturers' representatives who collectively
provide national sales coverage. Sales managers and salespersons are compensated by a combination of salary and variable performance compensation.
The Corporation also makes export sales through HNI International to independent 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 HNI India, the Corporation
manufactures and distributes office furniture directly to end-users and through independent dealers and distributors in Asia, primarily China and India.
Residential Building Products
The Corporation is North America’s largest manufacturer and marketer of prefabricated fireplaces, hearth stoves, and related products. These products are
primarily for the home and are sold under the following widely recognized brands:
®
®
®
Heatilator
Heat & Glo
Majestic
Monessen
Quadra-Fire
Harman
®
®
®
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®
®
TM
Vermont Castings
PelPro
Stellar
SimpliFire
The Outdoor GreatRoom Company
®
®
®
The Corporation’s line of hearth products includes a full array of gas, wood, electric, and pellet fueled fireplaces, inserts, stoves, facings, and accessories.
are brand leaders in the two largest segments of the home fireplace market: gas and wood
Heatilator , Heat & Glo , Majestic , Monessen , and Stellar
fireplaces. The Corporation is a leader in "direct vent" fireplaces, which replaces 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 a market leader in wood and pellet-burning stoves with its Quadra-Fire , Harman , Vermont
Castings , and PelPro product lines, which provide home heating solutions using renewable fuels.
TM
®
®
®
®
®
®
®
Hearth & Home sells its products through independent dealers, distributors, and 28 Corporation-owned installing distribution and retail outlets. The Corporation
has a field sales organization of sales managers, salespersons, and independent manufacturers' representatives.
Largest Customers
In fiscal 2021, the Corporation's five largest customers represented approximately 21 percent of its consolidated net sales. No single customer accounted for 10
percent or more of the Corporation’s consolidated net sales in fiscal 2021, and management does not consider the Corporation's operations or financial
performance to be dependent on any individual customer. The substantial purchasing power exercised by large customers may adversely affect the prices at which
the Corporation can successfully offer its products.
Resources
Manufacturing
The Corporation manufactures workplace furnishings in Georgia, Iowa, New York, North Carolina, China, and India. During 2021, the Corporation announced
plans to open a Workplace Furnishings manufacturing operation in Saltillo, Mexico. As of year-end, this facility was still in start-up with manufacturing expected
to initiate in early 2022. The Corporation manufactures hearth products in Iowa, Minnesota, Pennsylvania, and Vermont.
The Corporation purchases raw materials, components, and finished goods from a variety of suppliers, and most items are generally available from multiple
sources. Major raw materials include coil steel, aluminum, zinc, lumber, veneer, particleboard, textiles, paint, hardware, glass, plastic products, shipping cartons,
foam, and fiberglass.
Since its inception, the Corporation has focused on making its manufacturing facilities and processes more flexible while 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 reduce
and/or eliminate costs. The application of RCI has increased productivity by reducing set-up, processing times, square footage, inventory levels, product costs, and
delivery times, while improving quality and enhancing member safety. The Corporation's RCI process involves members, customers, and suppliers. Manufacturing
also plays a key role in the Corporation's concurrent research and development process in order to design new products for ease of manufacturability.
Research and Development
The Corporation's research and development efforts are primarily focused on developing relevant and differentiated end-user solutions focused on quality,
aesthetics, style, sustainable design, and reduced manufacturing costs. The Corporation accomplishes this through improving existing products, extending product
lines, applying ergonomic research, improving manufacturing processes, and leveraging alternative materials. The Corporation conducts its research and
development efforts at both the corporate and operating unit levels. See "Note 2. Summary of Significant Accounting Policies" in the Notes to Consolidated
Financial Statements for amounts that the Corporation has invested in research and development.
Intellectual Property
As of January 1, 2022, the Corporation owned 97 United States and 140 foreign patents with expiration dates through 2042 and had applications pending for 23
United States and 12 foreign patents. In addition, the Corporation holds 175 United States and 404 foreign trademark registrations and has applications pending for
19 United States and 3 foreign trademarks. The Corporation believes neither any individual workplace furnishings patent nor the Corporation's workplace
furnishings patents in the aggregate are material to the Corporation's business as a whole.
The Corporation’s patents covering its residential building 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 residential building product patent nor the Corporation’s
residential building product patents in the aggregate are material to the Corporation’s business as a whole.
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The Corporation applies for patent protection when it believes the expense of doing so is justified and 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 or adversely affect the Corporation's business as a whole, except for HON , Allsteel
®
, Heat & Glo , and Heatilator .
®
®
®
Environmental Regulations and Sustainability
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, the emission of pollutants from its operations, and the remediation of contamination associated with past releases of
hazardous substances. Although the Corporation believes it is compliant with 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 staff works with responsible personnel at each
manufacturing facility, the Corporation’s legal counsel, and consultants on the management of 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.
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 and is not expected to have material effect in the near future. However, there is no assurance environmental requirements or technology
will not change or the Corporation will not incur material costs to comply with such regulations.
The Corporation has expanded its Corporate Social Responsibility commitment and has become a signatory to the UN Global compact, joined RE100, committed
to 100 percent renewable electricity annually by 2030, and set aggressive science-based carbon emission reduction goals aligned with the 2015 Paris Agreement.
To support these goals, the Corporation has established metrics to divert waste from landfill, reduce energy use, and lower greenhouse gas emissions from its
operations. The Corporation also committed to reducing the impacts of its products through evaluations of design and development, suppliers, and supply chain
performance. Integrating these sustainable objectives into core business systems is consistent with the Corporation’s vision, ensures its commitment to being a
sustainable enterprise, and remains a priority for members. For more detailed information regarding its environmental and social goals, priorities,
accomplishments, and initiatives, please refer to the Corporation's Corporate Social Responsibility report available on its website.
Human Capital
The Corporation strives to attract exceptional talent to its workforce while integrating diversity, equity, and inclusion principles in its hiring and retention process.
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 talented members. An important part of the Corporation's member-owner culture is fostering a safe, respectful, fair, and inclusive environment
that promotes diversity, equity, and inclusion. For further information regarding its member-owner culture, initiatives, and goals, including in the areas of diversity,
equity and inclusion, please refer to the Corporation’s Corporate Social Responsibility report available on its website. The Corporate Social Responsibility Report
is not incorporated into this Annual Report on Form 10-K.
Additionally, 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 defined contribution retirement plan. These ownership opportunities drive a unique level of commitment to the Corporation’s
success throughout the workforce. Members own approximately seven percent of the Corporation's stock through these plans.
As of January 1, 2022, the Corporation employed approximately 8,100 persons, 7,900 of whom were full-time and 200 of whom were temporary personnel.
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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 (''SEC''). The information on the Corporation's website is not,
and shall not be, deemed to be a part hereof or incorporated into this or any of the Corporation's other filings with the SEC. The Corporation’s SEC filings are also
available 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 21 of the Securities Exchange Act of 1934, as amended, and 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 is based necessarily on assumptions made at the time the Corporation provides such statement, 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 but not
limited to: the duration and scope of the COVID-19 pandemic, including any emerging variants of the virus, and its effect on people and the economy; potential
disruptions in the global supply chain; the effects of prolonged periods of inflation; potential labor shortages; the levels of office furniture needs and housing starts;
overall demand for the Corporation's products; general economic and market conditions in the United States and internationally; industry and competitive
conditions; the consolidation and concentration of the Corporation's customers; the Corporation's reliance on its network of independent dealers; changes in trade
policy; changes in raw material, component, or commodity pricing; market acceptance and demand for the Corporation's new products; changing legal, regulatory,
environmental, and healthcare conditions; the risks associated with international operations; the potential impact of product defects; the various restrictions on the
Corporation's financing activities; an inability to protect the Corporation's intellectual property; cybersecurity threats, including those posed by potential
ransomware attacks; impacts of tax legislation; force majeure events outside the Corporation’s control, including those that may result from the effects of climate
change; and other risks as described under the heading "Item 1A. Risk Factors," as well as others that the Corporation may consider not material 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 have a material effect on 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 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 occur, the Corporation's
business, operating results, cash flows, or financial condition could be materially adversely affected.
INDUSTRY AND ECONOMIC RISKS
Unfavorable economic and industry factors could adversely affect the Corporation's business, operating results, or financial condition.
Workplace furnishings 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,
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including corporate restructuring, technology changes, corporate relocations, health and safety concerns, including ergonomic considerations, and the globalization
of companies also influence workplace furnishings industry revenues. In addition, measures taken to limit spread of COVID-19 have resulted in a significant
decrease in worker attendance at their office location, and have fueled current work-from-home and hybrid work trends. Lower office occupancy levels could have
an adverse impact on the demand for workplace furnishings.
Residential building products industry sales are impacted by a variety of macroeconomic factors including housing starts, housing inventory, overall employment
levels, interest rates, home affordability, 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 residential building products industry
revenues. Deterioration of economic conditions or a slowdown in the homebuilding industry and the hearth products market could decrease demand for residential
building products and have additional adverse effects on operating results.
A deterioration of economic conditions in the Corporation's key international markets, including China and India, could have adverse effects on the Corporation's
international workplace furnishings sales and operating results.
Deteriorating economic conditions could affect the Corporation's business significantly, including reduced demand for products, insolvency of independent dealers
resulting in increased provisions for credit losses, insolvency of key suppliers resulting in product delays, inability of customers to obtain credit to finance
purchases of products, and decreased customer demand, including order delays or cancellations. In a recessionary economy, business confidence, service-sector
employment, corporate cash flows, and residential and non-residential commercial construction often decrease, which typically leads to a decrease in demand for
workplace furnishings and residential building products.
The workplace furnishings and residential building products industries are highly competitive and, as a result, the Corporation may not be successful in winning
new business.
Both the workplace furnishings and residential building products industries are highly competitive. Many of the Corporation's competitors in both industries offer
similar products. Competitive factors include price, delivery and service, brand recognition, product design, product quality, strength of dealers and other
distributors, and relationships with customers and key influencers, including architects, designers, home-builders, and facility managers. In both industries, most
of the top competitors have an installed base of products that can be a source of significant future sales through repeat and expansion orders. The Corporation's
main competitors manufacture products with strong acceptance in the marketplace and are capable of developing products that have a competitive advantage,
which could make it difficult to win new business.
In both the workplace furnishings and residential building products industries, the Corporation faces price competition from competitors and from new market
entrants who may manufacture and source products from lower cost countries. Price competition impacts the ability to implement price increases or, in some
cases, even maintain prices, which could lower profit margins and adversely affect future financial performance.
Changes in industry dynamics, including demand and order patterns from customers, distribution changes, or the loss of a significant number of dealers, could
adversely affect the Corporation's business, operating results, or financial condition.
Consolidation among the Corporation's customers may result in a smaller number of total customers, but an increase in large customers whose size and purchasing
power give them increased leverage that may result in, among other things, decreases in average selling prices. In addition, further consolidations may lead to
fluctuations in revenue, increases in costs to meet demands of large customers, and pressure to accept onerous contract terms, and the Corporation's business,
financial condition, and operating results could be harmed.
The Corporation sells products through multiple distribution channels, which primarily include independent dealers, national dealers, wholesalers, and eCommerce
channels. Within these distribution channels, there has been, and may continue to be, consolidation. The Corporation relies on distribution partners to provide a
variety of important specification, installation, and after-market services to customers. Some distribution partners may terminate their relationship with the
Corporation at any time and for any reason. Loss or termination of a significant number of reseller relationships could cause difficulties in marketing and
distributing products, resulting in a decline in sales, which may adversely affect the business, operating results, or financial condition.
10
In addition, individual dealers may not continue to be viable and profitable and may suffer from a lack of available credit. While the Corporation is not
significantly dependent on any single dealer, if dealers go out of business or are restructured, the Corporation may suffer losses as the dealers may not be able to
pay the Corporation for products previously delivered to them.
The loss of a dealer relationship could negatively affect the Corporation's ability to maintain market share in the affected geographic market and to compete for and
service clients in that market until a new dealer relationship is established. Establishing a viable dealer in a market can take a significant amount of time and
resources. The loss or termination of a significant dealer or a substantial number of dealer relationships could cause significant difficulties in marketing and
distributing the Corporation's products, resulting in a decline in sales.
Evolving trade policy between the United States and other countries may have an adverse effect on the Corporation's business and results of operations.
The Corporation has a global supply chain for products used in workplace furnishings and residential building products. Actions taken by the United States
government to apply tariffs on certain products could have long-term impacts on existing supply chains. The situation could impact the competitive environment
depending on the severity and duration of current and future policy changes. This may manifest in additional costs on the business, including costs with respect to
products upon which the business depends. Increased costs could further lower profit margins as the Corporation may be challenged in effectively increasing the
prices of its products, and its business and results of operations may be adversely affected.
Certain foreign governments have imposed tariffs on goods that their countries import from the United States. Changes in United States trade policy could result in
one or more foreign governments adopting trade policies that make it more difficult or costly for the Corporation to do business in or import products from those
countries.
The Corporation cannot predict the extent to which the United States or other countries will impose quotas, duties, tariffs, taxes, or other similar restrictions upon
the import or export of products in the future, nor can the Corporation predict future trade policy or the terms of any renegotiated trade agreements and their impact
on the business. The adoption and expansion of trade restrictions, the occurrence of a trade war, or other governmental action related to tariffs or trade agreements
or policies has the potential to adversely impact demand for products, costs, customers, suppliers, and the United States economy, which in turn could have a
material adverse effect on the business, operating results, and financial condition.
The Corporation's profitability may be adversely affected by increases in raw material and commodity costs as well as transportation and shipping challenges.
Fluctuations in the price and availability of commodities, raw materials, components, and finished goods could have an adverse effect on costs of sales,
profitability, and ability to meet customers' demand. The Corporation sources commodities, raw materials, components, and finished goods from domestic and
international suppliers for both the workplace furnishings and residential building products. From both domestic and international suppliers, the cost and
availability of commodities, raw materials, components, and finished goods including steel, have been significantly affected in recent years by, among other things,
changes in global supply and demand, the onset of the COVID-19 pandemic, changes in laws and regulations (including tariffs and duties), changes in exchange
rates and worldwide price levels, inflationary forces, natural disasters, labor disputes, terrorism, and political unrest or instability. These factors could lead to price
volatility or supply interruptions in the future. Profit margins could be adversely affected if commodity, raw material, component, and finished good costs increase
and the Corporation is 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 customers.
The Corporation relies primarily on third-party freight and transportation providers to deliver products to customers. Increasing demand for freight providers and a
shortage of qualified drivers has caused delays and may cause future delays in shipments and increase the cost to ship its products, which may adversely affect
profitability. The Corporation also imports and exports products and components, primarily using container ships, which load and unload through North American
ports. Capacity-related and/or port-caused delays in the shipment or receipt of products and components, including labor disputes, have caused and could cause
delayed receipt of products and components. While these risks are ever present, the COVID-19 pandemic has and continues to cause such delays, leading to
manufacturing disruptions, increased expense from current and alternate shipping methods, and the inability to meet customer delivery expectations, which may
adversely affect sales and profitability.
11
STRATEGIC AND OPERATIONAL RISKS
If customers do not perceive the Corporation's products and services to be of good value, the Corporation's brand and name recognition and reputation could
suffer.
The Corporation believes that establishing and maintaining good brand and name recognition and a good reputation is critical to its business. In certain parts of the
market, promotion and enhancement of the Corporation's name and brands will depend on the effectiveness of marketing and advertising efforts and on
successfully providing design-driven, innovative, and high-quality products and superior services. If customers do not perceive the Corporation's products and
services to be design-driven, innovative and of high quality, its reputation, brand and name recognition could suffer, which could have a material adverse effect on
the Corporation's business.
The Corporation's efforts to introduce new products to meet customer and workplace demands may not be successful, which could limit sales growth or cause its
sales to decline.
To meet the changing needs of customers and keep pace with market trends and evolving regulatory and industry requirements, including environmental, health,
safety, and similar standards for the workplace and for product performance, the Corporation regularly introduces new workplace furnishings and residential
building products. The introduction of new products requires the coordination of the design, manufacturing, and marketing of the products, which may be affected
by uncontrollable factors. The design and engineering of certain new products varies but can extend beyond a year; further time may be required to achieve client
acceptance. The Corporation may face difficulties if it cannot successfully align itself with independent architects, home-builders, and designers who are able to
design, in a timely manner, high-quality products consistent with the Corporation's image and customers' needs. Accordingly, the launch of a product may be later
or less successful than originally anticipated, limiting sales growth or causing sales to decline.
The Corporation’s financial condition and results of operation have been and are expected to continue to be adversely affected by the coronavirus outbreak.
To date, the COVID-19 pandemic and preventative measures taken to contain or mitigate the outbreak have caused, and are continuing to cause, business
slowdown or shutdown in affected areas and significant economic disruption both globally and in the United States. Such economic disruption has lowered demand
for workplace furnishings, and in turn create a material negative impact on the Corporation’s business, sales, financial condition, and results of operations. Other
impacts of the COVID-19 pandemic may include, but are not limited to:
•
•
•
•
labor shortages;
adverse impacts to the Corporation's supply chain, which may increase operating costs and result in supply disruptions;
disruptions to the Corporation’s manufacturing facilities and distribution centers, including through the effects of reductions in operating hours, and real-
time changes in operating procedures, including for social distancing and quarantine protocols; and
the inability or impairment of independent dealers, wholesalers, and office product distributors to sell the Corporation’s products.
In addition, the impact of the COVID-19 pandemic on the Corporation’s members could adversely impact the Corporation’s sales and operations. At this point, the
extent to which the COVID-19 pandemic will continue to impact the Corporation’s results is uncertain and depends on future developments, such as the emergence
of variant strains of the virus and the effectiveness of vaccines. These future developments are highly uncertain, cannot be predicted, and could be material.
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,
floods, and fires, could disrupt operations and likewise, the ability to produce or deliver products. Several of the Corporation's production facilities, members, and
key management are located within a small geographic area in eastern Iowa located near the Mississippi River, and a natural disaster or catastrophe in the area,
such as flooding or severe storms, could have a significant adverse effect on the results of operations and business conditions. Further, several of the Corporation's
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 operations and business conditions. Members are an integral part of the business and events including an epidemic such as
COVID-19 have reduced, and could
12
negatively impact, the availability of members reporting for work. In the event the Corporation experiences a temporary or permanent interruption in its ability to
produce or deliver product, revenues could be reduced, and business could be materially adversely affected. In addition, any continuing disruption in the
Corporation's computer system could adversely affect the ability to receive and process customers' orders, procure materials, manufacture products and ship
products on a timely basis, which could adversely affect relations with customers and potentially reduce customer orders or result in the loss of customers.
The Corporation’s business and operations are subject to risks related to climate change.
The long-term effects of global climate change could present both physical risks and transition risks (such as regulatory, supply chain, or technology changes),
which could be widespread and unpredictable. These changes over time could affect the availability and cost of raw materials, commodities, and energy (including
utilities), which in turn may impact the Corporation’s ability to procure goods or services required for the operation of the Corporation’s business at the quantities
and levels the Corporation requires. Additionally, the Corporation has facilities located in areas that may be impacted by the physical risks of climate change,
including flooding, and faces the risk of losses incurred as a result of physical damage to its facilities and inventory as well business interruption caused by such
events. Furthermore, periods of extended inclement weather or associated flooding may inhibit construction activity utilizing the Corporation’s products and delay
shipments of products to customers. The Corporation uses natural gas, diesel fuel, gasoline and electricity in its operations, all of which could face increased
regulation as a result of climate change or other environmental concerns. The increased prevalence of global climate issues may result in new regulations that
negatively impact the Corporation, including regulations limiting emissions from, or restricting the use of wood, coal, natural gas, or other fuel sources in,
fireplaces and heating appliances, which may impair the Corporation's ability to market and sell those products. Any such events could have a material adverse
effect on the Corporation’s costs or results of operations.
A continued shortage of qualified labor could negatively affect the Corporation’s business and materially reduce earnings.
During 2021, the Corporation experienced shortages of qualified labor across its operations. Outside suppliers that the Corporation relies upon have also
experienced shortages of qualified labor. The success of the Corporation’s operations depends on its ability, and the ability of third parties upon which the
Corporation relies, to identify, recruit, develop, and retain qualified and talented individuals in order to supply and deliver the Corporation’s products. A continued
shortage of qualified labor could have a negative effect on the Corporation’s business. Member recruitment, development, and retention efforts may not be
successful, which could result in a continued shortage of qualified individuals in future periods. Any such shortage could decrease the Corporation’s ability to
effectively produce workplace furnishings and residential building products and meet customer demand. Such a shortage would also likely lead to higher wages for
employees (or higher costs to purchase the services of such third parties) and a corresponding reduction in the Corporation’s results of operations. In the current
operating environment, the Corporation is experiencing a shortage of qualified labor in certain geographies, particularly with plant production workers, resulting in
increased costs from certain temporary wage actions, such as hiring and referral bonus programs. A continuation of such shortages for a prolonged period of time
could have a material adverse effect on the Corporation’s operating results.
The Corporation's failure to retain its existing management team, maintain its engineering, finance, technical, and manufacturing process expertise, or continue to
attract qualified personnel could adversely affect the Corporation's business.
The Corporation depends significantly on its executive officers and other key personnel. The Corporation's success is also dependent on keeping pace with
technological advancements and adapting services to provide manufacturing capabilities that meet customers' changing needs. To do that, the Corporation must
retain qualified engineering and technical personnel and successfully anticipate and respond to technological changes in a cost effective and timely manner. The
Corporation focuses on continuous training, motivation, and development of its members, and it strives to attract and retain qualified personnel. Failure to retain
the Corporation's executive officers and retain and attract other key personnel could adversely affect the Corporation's business.
The Corporation’s strategy is partially based on growth through acquisitions or strategic alliances. Failure to properly identify, value, and manage acquisitions or
alliances may negatively affect the Corporation’s business, results of operations and financial condition.
One of the Corporation's growth strategies is to supplement its organic growth through acquisitions and strategic alliances, which may include transactions with
other manufacturers of workplace furnishings and residential building products or distributors of workplace furnishings and residential building products. The
Corporation may not be successful in identifying suitable acquisition or alliance opportunities, prevailing against competing potential acquirers, negotiating
appropriate acquisition terms,
13
obtaining financing, completing proposed acquisitions or alliances, or expanding into new markets or product categories. If the Corporation fails to effectively
identify, value, consummate, or manage any acquired company, it may not realize the potential growth opportunities or achieve the financial results anticipated at
the time of the acquisition or alliance. An acquisition or alliance could also adversely impact the Corporation’s operating performance or cash flow due to, among
other things, the issuance of acquisition-related debt, pre-acquisition assumed liabilities, undisclosed facts about the business, or acquisition expense. The
Corporation's ability to grow through future acquisitions will depend, in part, on the availability of suitable acquisition candidates at an acceptable price, the ability
to compete effectively for these acquisition candidates, and the availability of capital to complete the acquisitions. Any potential acquisition may not be successful
and could adversely affect the business, operating results, or financial condition.
The Corporation may not be able to successfully integrate and manage acquired businesses and alliances.
One of the Corporation's growth strategies is to supplement its organic growth through acquisitions and strategic alliances. The benefits of acquisitions or alliances
may take more time than expected to develop or integrate into operations. In addition, an acquisition or alliance may not perform as anticipated, be accretive to
earnings, or prove to be beneficial to the Corporation’s operations and cash flow. Acquisitions and alliances involve a number of risks, including:
•
•
•
•
•
•
•
•
diversion of management’s attention;
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;
negative impact on member morale and performance as a result of job changes and reassignments;
reallocation of amounts of capital from other operating initiatives or an increase in leverage and debt service requirements to pay the acquisition purchase
prices, which could in turn restrict the ability to access additional capital when needed or to pursue other important elements of the business strategy;
inaccurate assessment of undisclosed, contingent, or other liabilities or problems and unanticipated costs associated with the acquisition;
possible tax costs or inefficiencies associated with integrating the operations of a combined company; 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 the financial results.
Goodwill and other intangible assets represent a significant amount of the Corporation's net worth, and an impairment charge would adversely affect the
Corporation's financial results.
Goodwill and other acquired intangible assets with indefinite lives are recorded at fair value at the time of acquisition and are not amortized, but reviewed for
impairment annually or more frequently if an event occurs or circumstances change making it reasonably possible an impairment may exist. In evaluating the
potential for impairment of goodwill and other intangible assets, the Corporation makes assumptions regarding future operating performance, business trends and
market and economic performance, and the Corporation’s sales, operating margins, growth rates and discount rates. There are inherent uncertainties related to these
factors. If the Corporation experiences disruptions in its business, unexpected significant declines in operating results, a divestiture of a significant component of
its business, declines in the market value of equity, or other factors causing the Corporation's goodwill or intangible assets to be impaired, the Corporation could be
required to recognize additional non-cash impairment charges, which would adversely affect the results of operations. See "Note 6. Goodwill and Other Intangible
Assets" for information on impairment charges recorded in 2020 and 2021.
Increasing healthcare costs could adversely affect the Corporation's business, operating results, and financial condition.
The Corporation provides healthcare benefits to the majority of its members and is self-insured. Healthcare costs have continued to rise over time, which increases
the annual spending on healthcare and could adversely affect the Corporation's business, operating results, and financial condition.
The Corporation's international operations expose it to risks related to conducting business in multiple jurisdictions outside the United States.
The Corporation manufactures, markets, and sells products in international markets, including China and India.
14
The Corporation's international sales and operations are subject to a number of additional risks, including:
•
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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 the 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;
the failure of the Corporation's compliance programs and internal training to prevent violations of the United States Foreign Corrupt Practices Act and
similar anti-bribery laws;
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 and ransomware attacks;
unfavorable business conditions or economic instability in any country or region;
infrastructure disruptions;
potentially conflicting cultural and business practices;
difficulty in obtaining distribution and support; and
changes to border taxes or other international tax reforms.
These risks may be elevated given the current uncertainties around the impact of the global COVID-19 pandemic, ongoing disputes and increased tensions related
to global trade, particularly involving the United States and China, and complexities with foreign regulatory environments including the decreased ability of United
States regulators to exercise oversight of subsidiaries of United States companies based in certain international jurisdictions.
Additionally, the Corporation primarily sells products and reports the financial results in United States dollars; however, increased business in countries outside the
United States creates exposure to fluctuations in foreign currency exchange rates. Paying expenses in other currencies can result in a significant increase or
decrease in the amount of those expenses in terms of United States dollars, which may affect profits. In the future, any foreign currency appreciation relative to the
United States dollar would increase expenses that are denominated in that currency. Additionally, as the Corporation reports currency in the United States dollar,
the financial position is affected by the strength of the currencies in countries where the Corporation has operations relative to the strength of the United States
dollar.
Further, certain countries have complex regulatory systems that impose administrative and legal requirements, which make managing international operations more
difficult, including approvals to transfer funds among certain countries. If the Corporation is unable to provide financial support to the international operations in a
timely manner, business, operating results, and financial condition could be adversely affected.
The Corporation periodically reviews foreign currency exposure and evaluates whether it should enter into hedging transactions. As of the date of this report and
for the period presented, the Corporation has not utilized any currency hedging instruments.
The Corporation's sales to the United States federal, 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.
The Corporation derives a portion of its revenue from sales to various United States federal, state, and local government agencies and departments. The ability to
compete successfully for and retain business with the United States government, as well as with state and local governments, is highly dependent on cost-effective
performance. This 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 frequently experience downward pressure and are subject to uncertainty.
The Corporation's contracts with government entities are subject to various statutes and regulations that apply to companies doing business with the
government. The United States government, as well as state and local governments, can typically terminate or modify their contracts either for their convenience
or if the Corporation defaults by failing to perform under the terms of the applicable contract. A termination arising out of default could expose the Corporation to
liability and impede its ability to compete in the future for contracts and orders with agencies and departments at all levels of government. Moreover, the
Corporation is 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 the Corporation were found to not be a responsible
supplier or to have committed fraud or certain criminal offenses, it could be suspended or debarred from all further federal, state, or local government contracting.
15
The Corporation relies on information technology systems to manage numerous aspects of the business and a disruption or failure of these systems could adversely
affect business, operating results, and financial condition.
The Corporation relies upon information technology networks and systems to process, transmit, and store electronic information, as well as to manage numerous
aspects of the business and provide information to management. Additionally, the Corporation collects and stores sensitive data of its customers, suppliers, and
members 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 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. The Corporation has, and may in the future, face unauthorized
attempts by hackers seeking to harm the Corporation or, as a result of industrial espionage or ransomware, to penetrate the Corporation’s network security and gain
access to its systems, steal intellectual or other proprietary data, including design, sales or personally identifiable information, introduce malicious software, or
interrupt the Corporation’s internal systems, manufacturing or distribution. Though the Corporation attempts to detect and prevent these incidents, it may not be
successful. In addition, the Corporation is subject to data privacy and other similar laws in various jurisdictions. If the Corporation is the target of a cybersecurity
attack, computer virus, physical or electronic break-in or similar disruption resulting in unauthorized disclosure of sensitive data of customers, suppliers, and
members, the Corporation may be required to undertake costly notification procedures. The Corporation may also be required to expend significant additional
resources to protect against the threat of security breaches or to alleviate problems, including reputational harm and litigation, caused by any breaches. Any
disruption of information technology networks or systems, or access to or disclosure of information stored in or transmitted by systems, could result in legal claims
and damages and loss of intellectual property or other proprietary information.
The Corporation's results of operations and earnings may not meet guidance or expectations.
The Corporation frequently provides public guidance on the expected results of operations for future periods. This guidance comprises forward-looking statements
subject to risks and uncertainties, including the risks and uncertainties described in this Annual Report on Form 10-K and in other public filings and public
statements, and is based necessarily on assumptions made at the time the Corporation provides such guidance. The guidance may not always be accurate. If, in the
future, the results of operations for a particular period do not meet its guidance or the expectations of investment analysts or if the Corporation reduces its guidance
for future periods, the market price of common stock could decline significantly.
LEGAL AND REGULATORY RISKS
The Corporation is subject to extensive environmental regulation and has exposure to potential environmental liabilities.
Through the past and present operation and ownership of manufacturing facilities and real property, the Corporation is subject to extensive and changing federal,
state, and local environmental laws and regulations, both domestic and abroad, 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 capital expenditures, earnings, or competitive position to date; however, compliance with current laws or more stringent
laws or regulations which may be imposed in the future, stricter interpretation of existing laws or discoveries of contamination at the Corporation's real property
sites which occurred prior to ownership, or the advent of environmental regulation may require additional expenditures in the future, some of which may be
material.
Costs related to product defects could adversely affect the Corporation's profitability.
The Corporation incurs 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. The Corporation uses chemicals and materials in products and includes components in
products from external suppliers, which are believed to be safe and appropriate for their designated use; however, harmful effects may later become known, which
could subject the Corporation to litigation and significant losses. The Corporation maintains reserves for product defect-related costs but there can be no certainty
these reserves will be adequate to cover actual claims. Incorrect estimates or any significant increase in the rate of product defect expenses could have a material
adverse effect on operations.
16
Iowa law and provisions in the Corporation's charter documents may have the effect of preventing or hindering a change in control and adversely affecting the
market price of its common stock.
The Corporation's Articles of Incorporation give the Corporation's Board of Directors ("Board") the authority to issue up to two million shares of preferred stock
and to determine the rights and preferences of the preferred stock without obtaining shareholder approval. The existence of this preferred stock could make it more
difficult or discourage an attempt to obtain control of the Corporation by means of a tender offer, merger, proxy contest, or otherwise. Furthermore, this preferred
stock could be issued with other rights, including economic rights, senior to common stock, thereby having a potentially adverse effect on the market price of
common stock.
The Board is divided into three classes. The Corporation's classified Board, along with other provisions of the Corporation's Articles of Incorporation and Bylaws
and Iowa corporate law, could make it more difficult for a third party to acquire the Corporation or remove the Corporation's directors by means of a proxy contest,
even if doing so would be beneficial to shareholders. Additionally, the Corporation may, in the future, adopt measures (such as a shareholder rights plan or "poison
pill") that could have the effect of delaying, deferring, or preventing an unsolicited takeover, even if such a change in control were at a premium price or favored
by a majority of unaffiliated shareholders. These measures may be adopted without any further vote or action by the shareholders.
An inability to protect the Corporation's intellectual property could have a significant impact on the business.
The Corporation attempts to protect its intellectual property rights, both in the United States and in foreign countries, through a combination of patent, trademark,
copyright, and trade secret laws, as well as licensing agreements and third-party nondisclosure and assignment agreements. Because of the differences in foreign
trademark, copyright, patent, and other laws concerning proprietary rights, intellectual property rights do not generally receive the same degree of protection in
foreign countries as they do in the United States. In some countries, the Corporation has limited protections, if any, for its intellectual property. The degree of
protection offered by the claims of the various patents, copyrights, trademarks, and service marks may not be broad enough to provide significant proprietary
protection or competitive advantages to the Corporation, and patents, copyrights, trademarks, or service marks may not be issued on pending or contemplated
applications. In addition, not all of the Corporation's products are covered by patents or similar intellectual property protections. It is also possible that patents,
copyrights, trademarks, and service marks may be challenged, invalidated, canceled, narrowed, or circumvented.
In the past, certain products have been copied and sold by others. The Corporation tries to enforce its intellectual property rights, but has to make choices about
where and how to pursue enforcement and where to seek and maintain intellectual property protection. In many cases, the cost of enforcing rights is substantial,
and the Corporation may determine that the costs of enforcement outweigh the potential benefits.
If third parties claim that the Corporation infringes upon their intellectual property rights, the Corporation may incur liabilities and costs and may have to
redesign or discontinue an infringing product.
The Corporation faces the risk of claims that it has infringed upon third parties’ intellectual property rights. Companies operating in the Corporation's industry
routinely seek patent protection for their product designs, and many of the principal competitors have large patent portfolios. Prior to launching major new
products in the key markets, the Corporation normally evaluates existing intellectual property rights. However, competitors and suppliers may have filed for patent
protection, which is not, at the time of the evaluation, a matter of public knowledge. The Corporation's efforts to identify and avoid infringing upon third parties’
intellectual property rights may not always be successful. Any claims of patent or other intellectual property infringement, even those without merit, could be
expensive and time consuming to defend, cause the Corporation to cease making, licensing, or using products that incorporate the challenged intellectual property,
require the Corporation to redesign, re-engineer, or re-brand the products or packaging, if feasible, or require the Corporation to enter into royalty or licensing
agreements in order to obtain the right to use a third party’s intellectual property.
FINANCING RISKS
Restrictions imposed by the terms of the Corporation's debt agreements limit the Corporation's operating and financial flexibility.
The Corporation's credit facility and other financing arrangements limit the ability of the Corporation to finance operations, service debt, or engage in other
business activities that may be in its interests. Specifically, the debt agreements restrict its ability to incur additional indebtedness, create or incur certain liens with
respect to any properties or assets, engage in lines of business substantially different than those currently conducted, sell, lease, license, or dispose of any assets,
enter into certain transactions
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with affiliates, make certain restricted payments or take certain restricted actions, and enter into certain sale-leaseback arrangements. The debt agreements also
require the Corporation to maintain certain financial covenants.
The failure to comply with the obligations under the debt agreements may result in an event of default, which, if not cured or waived, may cause accelerated
repayment of the indebtedness under the agreements. The Corporation cannot be certain it will have sufficient funds available to pay any accelerated repayments
or will have the ability to refinance accelerated repayments on favorable terms or at all.
Phase-out of the London Interbank Offered Rate (LIBOR), or the replacement of LIBOR with a different reference rate or modification of the method used to
calculate LIBOR, may adversely impact interest rates affecting the Corporation.
In July 2017, the Financial Conduct Authority ("FCA"), a regulatory body in the United Kingdom, announced that it will no longer require banks to submit rates
for LIBOR after 2021. On December 4, 2020, the FCA announced a consultation to extend the cessation date for certain tenors of USD LIBOR to June 2023. Such
extension will apply to the USD LIBOR rates currently referenced in the Corporation's respective financial agreements.
At this time the Corporation cannot predict the future impact of a departure from LIBOR as a reference rate; however, if future rates based upon the successor rate
(or a new method of calculating LIBOR) are higher than LIBOR rates as currently determined, it may have a material adverse effect on the Corporation's financial
condition and results of operations.
The Corporation may require additional capital in the future, which may not be available or may be available only on unfavorable terms.
The Corporation's capital requirements depend on many factors, including its need for capital improvements, tooling, research and development, and acquisitions.
To the extent existing cash, available borrowings, and cash flows are insufficient to meet these requirements and cover any losses, the Corporation may need to
raise additional funds through financings or curtail its growth and reduce the Corporation's assets. Future borrowings or financings may not be available under the
credit facility or otherwise in an amount sufficient to enable the Corporation to pay its debt or meet its liquidity needs.
Any equity or debt financing, if available, could have unfavorable terms. In addition, financings could result in dilution to shareholders or the securities may have
rights, preferences, and privileges senior to those of the Corporation's common stock. If the need for capital arises because of significant losses, the occurrence of
these losses may make it more difficult to raise the necessary capital.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
The Corporation maintains its corporate headquarters in Muscatine, Iowa, and conducts operations at locations throughout the United States, China, India, Mexico,
United Arab Emirates, Taiwan, and Singapore, which house manufacturing, distribution, and retail operations and offices, totaling an aggregate of approximately
8.9 million square feet. Of this total, approximately 3.4 million square feet are leased.
Although the plants are of varying ages, the Corporation believes they are well maintained, equipped with modern and efficient machinery and tooling, 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.
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The Corporation's principal manufacturing and distribution facilities (200,000 square feet in size or larger) are as follows:
Location
Cedartown, Georgia
Dongguan, China
Garland, Texas
Hickory, North Carolina
Lake City, Minnesota
Mechanicsburg, Pennsylvania
Mt. Pleasant, Iowa
Muscatine, Iowa
Muscatine, Iowa
Muscatine, Iowa
Muscatine, Iowa
Nagpur, India
Wayland, New York
Approximate Square
Feet
550,000
373,000
211,000
206,000
242,000
252,000
378,000
273,000
540,000
810,000
238,000
355,000
716,000
Owned or Leased Description of Use
Owned
Leased
Leased
Owned
Owned
Leased
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Manufacturing workplace furnishings (1)
Manufacturing workplace furnishings (1)
Warehousing workplace furnishings
Manufacturing workplace furnishings (1)
Manufacturing residential building products
Warehousing workplace furnishings
Manufacturing residential building products (1)
Manufacturing workplace furnishings
Manufacturing workplace furnishings (1)
Manufacturing workplace furnishings (1)
Manufacturing workplace furnishings
Manufacturing workplace furnishings
Manufacturing workplace furnishings (1)
(1) Also includes a regional warehouse/distribution center
Other facilities total approximately 3.7 million square feet, of which approximately 2.6 million square feet are leased. Approximately 2.0 million square feet are
used for the selling, manufacturing, and distribution of workplace furnishings, approximately 1.5 million square feet are used for the selling, manufacturing, and
distribution of residential building products, and approximately 0.2 million square feet are used for corporate administration.
There are no major encumbrances on Corporation-owned properties. Refer to the Property, Plant, and Equipment section in "Consolidated Balance Sheets" for
related cost, accumulated depreciation, and net book value data.
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. For more information regarding legal proceedings, see "Note 15. Guarantees, Commitments, and Contingencies"
in the Notes to Consolidated Financial Statements, which information is incorporated herein by reference.
Item 4. Mine Safety Disclosures
Not applicable.
19
Name
Vincent P. Berger
Age
49
Steven M. Bradford
Marshall H. Bridges
B. Brandon Bullock
Jason D. Hagedorn
Jeffrey D. Lorenger
Donna D. Meade
Kurt A. Tjaden
64
52
44
48
56
56
58
Table I
Information about Executive Officers
Family Relationship Position
None
None
None
Executive Vice President, HNI
Corporation
President, Hearth & Home
Technologies
Senior Vice President, General
Counsel and Secretary
Senior Vice President and Chief
Financial Officer
Position Held
Since
2018
2016
2015
2018
None
President, The HON Company
2018
None
President, Allsteel, Inc.
None
None
None
Chairman
President and Chief Executive
Officer
Vice President, Member and
Community Relations
President, HNI International
Senior Vice President, HNI
Corporation
2020
2020
2017
2014
2017
2015
20
Other Business Experience During Past Five
Years
Vice President and Chief Financial Officer
(2017-2018);
Vice President, Finance, HNI Contract
Furniture Group (2014-2017)
Advanced Development and Innovation
Leader, Whirlpool Corporation (2017-2018);
Global Platform Leader and General
Manager, Microwaves, Hong Kong,
Whirlpool Corporation (2016-2017)
VP & GM, Product Strategy and Finance,
HNI Corporation (2017-2020);
VP, Product Management & Development,
Allsteel (2015-2017)
President, Office Furniture, HNI Corporation
(2017-2018);
Executive Vice President, HNI Corporation
(2014-2017);
President, HNI Contract Furniture Group
(2014-2017)
Senior Vice President and Chief Financial
Officer (2015-2017)
PART II
Item 5. Market for Registrant's Common Equity, Related Shareholder 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 January 1, 2022, the
Corporation had approximately 5,643 shareholders of record.
EQ 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: EQ Shareowner Services, P.O. Box 64874, St. Paul, MN 55164-0854, or 800-468-9716.
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 64 percent 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 Board.
Issuer Purchases of Equity Securities:
The Corporation repurchases shares under previously announced plans authorized by the Board. The Corporation's share purchase authorization from February 13,
2019, provides for repurchase of $200 million with no specific expiration date. As of January 1, 2022, $97.9 million was authorized and available for the
repurchases of shares by the Corporation. The authorization does not obligate the Corporation to purchase any shares and the authorization may be terminated,
increased, or decreased by the Board at any time. No repurchase plans expired or were terminated during the fourth quarter of fiscal 2021, and no current plans are
expected to expire or terminate.
The following is a summary of share repurchase activity during the fourth quarter of fiscal 2021 (in thousands, except per share data):
Period
10/03/21 - 10/30/21
10/31/21 - 11/27/21
11/28/21 - 01/01/22
Total
Total Number of Shares (or
Units) Purchased (1)
Average Price
Paid per Share
(or Unit)
Total Number of Shares (or
Units) Purchased as Part of
Publicly Announced Plans or
Programs
Maximum Number (or
Approximate Dollar Value) of
Shares (or Units) that May Yet
be Purchased Under the Plans
or Programs
$
$
$
350
298
367
1,015
38.05
40.69
41.51
$
$
$
350
298
367
1,015
125,197
113,091
97,852
(1) No shares were purchased outside of a publicly announced plan or program.
Item 6. [Reserved]
21
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.
See "Item 1A. Risk Factors" and the Forward-Looking Statements section within "Item 1. Business" for further information.
Overview
The Corporation has two reportable segments: workplace furnishings and residential building products. The Corporation is a leading global designer and provider
of commercial furnishings, and a leading manufacturer and marketer of hearth products. The Corporation utilizes a decentralized business model to deliver value
to customers via various brands and selling models. The Corporation is focused on growing its existing businesses while seeking out and developing new
opportunities for growth.
Consolidated net sales for 2021 were $2.184 billion, an increase of 11.7 percent compared to net sales of $1.955 billion in the prior year. The change was driven
by a 27.3 percent increase in the residential building products segment, and 5.0 percent year-over-year sales growth in the workplace furnishings segment. The
acquisitions of Design Public Group ("DPG") and multiple residential building products companies added incremental year-over-year sales of $34.9 million and
$12.4 million, respectively.
Net income attributable to the Corporation in 2021 was $59.8 million compared to net income of $41.9 million in 2020. The increase was driven by lower
restructuring and impairment charges, higher residential building products volume, improved net productivity, and lower core selling and administrative expenses
("SG&A"), partially offset by unfavorable price-cost, the return of costs related to temporary actions taken in 2020, and higher investment levels.
Overall, the Corporation has experienced positive order trends in both of its segments throughout much of 2021. However, ongoing pandemic-induced difficulties
tied to labor availability, supply chain issues, and input cost inflation have persisted. These constraints, when combined with continued staffing shortages both
internally and at the Corporation's suppliers, are limiting production capacity growth, and have negatively impacted revenue and profit levels in much of the second
half of 2021. The Corporation has taken action to mitigate these constraints, including the implementation of price increases across its brands, opening of a new
manufacturing facility in Mexico, increased insourcing and strengthened resourcing of critical parts, and accelerated efforts to drive productivity through process
changes and automation to reduce labor requirements. The Corporation also has embarked on business simplification initiatives, including plans to exit a small
workplace furnishings brand and restructure an eCommerce business in the workplace furnishing segment. Both actions are aimed at improving long-term
profitability.
The Corporation also acquired two residential building products companies in the fourth quarter of 2021. The acquisition of Trinity Hearth & Home ("Trinity"), a
leading installing distributor in the Dallas/Fort Worth area, builds on the Corporation's vertical integration strategy, and provides a hub for the segment to better
serve its customers in the rapidly growing Southwest region. The Outdoor GreatRoom Company ("OGC"), a leading manufacturer and supplier of premium
outdoor living products, primarily fire tables and fire pits, positions the Corporation to grow and develop a leading position in the fast-growing outdoor living
market. See "Note 4. Acquisitions" in the Notes to the Consolidated Financial Statements for additional information.
22
Results of Operations
The following table presents certain key highlights from the results of operations (in thousands):
Net sales
Cost of sales
Gross profit
Selling and administrative expenses
Restructuring and impairment charges
Operating income
Interest expense, net
Income before income taxes
Income tax expense
Net income (loss) attributable to non-controlling interest
Net income attributable to HNI Corporation
As a Percentage of Net Sales:
Net sales
Gross profit
Selling and administrative expenses
Restructuring and impairment charges
Operating income
Income tax expense
Net income attributable to HNI Corporation
Net Sales
2021
2,184,408 $
1,427,048
757,360
665,641
6,299
85,420
7,153
78,267
18,456
(3)
59,814 $
$
$
100.0 %
34.7
30.5
0.3
3.9
0.8
2.7
2020
1,955,363
1,234,243
721,120
620,927
38,818
61,375
6,990
54,385
12,466
2
41,917
100.0 %
36.9
31.8
2.0
3.1
0.6
2.1
Change
11.7 %
15.6 %
5.0 %
7.2 %
(83.8)%
39.2 %
2.3 %
43.9 %
48.1 %
(250.0)%
42.7 %
-220 bps
-130 bps
-170 bps
80 bps
20 bps
60 bps
Consolidated net sales for 2021 increased 11.7 percent compared to the prior year. The change was driven by a significant increase in the residential building
products segment, along with a moderate increase in the workplace furnishings segment. Included in the 2021 sales results was a $34.9 million favorable impact
from acquiring DPG, and a $12.4 million favorable impact from acquiring residential building products businesses.
Gross Profit
Gross profit as a percentage of net sales decreased 220 basis points in 2021 compared to 2020, primarily driven by unfavorable price-cost, partially offset by higher
residential building products volume and improved net productivity. Unfavorable price-cost was attributable to inflationary pressures in labor, materials, and
transportation costs partially offset by increased price realization.
Selling and Administrative Expenses
Selling and administrative expenses as a percentage of net sales decreased 130 basis points in 2021 compared to 2020, driven by higher residential building
products volume and lower core SG&A, partially offset by increased freight costs, the return of costs related to temporary actions taken in 2020, and higher
investment spend. Included in current year and prior year SG&A was $1.4 million and $6.8 million, respectively, of one-time costs driven by conditions related to
the COVID-19 pandemic.
Selling and administrative expenses include freight expense for shipments to customers, research and development costs, and amortization of intangible
assets. Refer to "Note 2. Summary of Significant Accounting Policies" and "Note 6. Goodwill and Other Intangible Assets" in the Notes to Consolidated Financial
Statements for further information regarding the comparative expense levels for these items.
23
Restructuring and Impairment Charges
In 2021, the Corporation recorded $8.2 million of restructuring costs, as well as a $5.8 million goodwill impairment charge, in connection with business
simplification actions taken in the workplace furnishings segment. Of these charges, $7.6 million was included in "Cost of Sales" in the Consolidated Statements of
Comprehensive Income. Refer to "Note 6. Goodwill and Other Intangible Assets" and "Note 17. Restructuring and Impairment Charges" in the Notes to
Consolidated Financial Statements for further information regarding restructuring and impairment charges.
In 2020, the Corporation recorded net charges of $38.8 million related to the impairment of goodwill, intangibles, and other assets in the workplace furnishings
segment as a result of the COVID-19 pandemic and related economic disruption.
Operating Income
For 2021, operating income increased 39.2 percent to $85.4 million compared to $61.4 million in 2020. The increase was driven by higher residential building
products volume, improved net productivity, lower core SG&A, and lower restructuring and impairment charges, partially offset by unfavorable price-cost, higher
investment levels, and the return of costs related to temporary actions taken in 2020.
Interest Expense, Net
Interest expense, net was $7.2 million and $7.0 million in 2021 and 2020, respectively.
Income Taxes
The following table summarizes the Corporation's income tax provision (in thousands):
Income before income taxes
Income tax expense
Effective tax rate
$
$
2021
78,267
18,456
$
$
23.6 %
2020
54,385
12,466
22.9 %
The income tax provision reflects a higher rate in 2021 compared to 2020. The variance was primarily driven by higher income in the current year which diluted
the rate benefit from tax credits when compared to the prior year. Additionally, the increased rate in the current year is the result of an increase in current year
equity-based compensation offset by the benefit of increased foreign earnings over prior year. See "Note 8. Income Taxes" in the Notes to Consolidated Financial
Statements for further information relating to income taxes.
Net Income Attributable to HNI Corporation
Net income attributable to the Corporation was $59.8 million or $1.36 per diluted share in 2021 compared to $41.9 million or $0.98 per diluted share in 2020.
Comparison of Fiscal Year Ended January 2, 2021 with the Fiscal Year Ended December 28, 2019
To review commentary for the consolidated and segment-level results of operations comparison of the fiscal year ended January 2, 2021 with the fiscal year ended
December 28, 2019, please refer to Item 7 of the Corporation's Form 10-K filed March 2, 2021 with the Securities and Exchange Commission, or follow the link
below:
https://www.sec.gov/ix?doc=/Archives/edgar/data/48287/000004828721000038/hni-20210102.htm
24
Workplace Furnishings
The following table presents certain key highlights from the results of operations in the workplace furnishings segment (in thousands):
Net sales
Operating loss
Operating loss %
$
$
2021
1,433,985
(539)
(0.0)%
$
$
2020
1,365,711
(4,972)
(0.4 %)
Change
5.0%
89.1%
40 bps
Net sales in 2021 for the workplace furnishings segment increased 5.0 percent compared to 2020. The results were driven by higher volumes in the small- and
medium-sized business and international channels, both of which experienced a rebound in demand in 2021 relative to 2020, which was more adversely impacted
by the COVID-19 pandemic. Volumes were lower in 2021 in the contract and eCommerce channels. The contract market has experienced a slower recovery in
demand primarily due to inconsistency in return-to-office plans throughout the country. Demand moderated in the eCommerce channel in 2021, following strong
sales growth in 2020 as a result of work-from-home trends driven by the onset of the pandemic. Price realization across most channels also contributed to the
segment's sales growth. Furthermore, included in the 2021 sales results was a $34.9 million favorable impact from acquiring DPG.
Operating loss as a percentage of net sales was 40 basis points more favorable in 2021 compared to 2020, driven by lower restructuring, impairment, and one-time
costs and improved net productivity, partially offset by unfavorable price-cost.
In the current year, the workplace furnishings segment recorded $7.9 million of restructuring costs and a $5.8 million goodwill impairment charge in connection
with business simplification actions, as well as $1.4 million of one-time costs as a result of the COVID-19 pandemic.
In 2020, the workplace furnishings segment recorded net charges of $38.8 million related to the impairment of goodwill, intangibles, and other assets, as well as
$5.2 million of one-time costs as a result of the COVID-19 pandemic.
Residential Building Products
The following table presents certain key highlights from the results of operations in the residential building products segment (in thousands):
Net sales
Operating profit
Operating profit %
$
$
2021
750,423
141,871
$
$
18.9 %
2020
589,652
109,321
18.5 %
Change
27.3 %
29.8 %
40 bps
Net sales in 2021 for the residential building products segment increased 27.3 percent compared to 2020, driven by strong volume growth in both the new
construction and existing home channels. Included in the 2021 sales results was a $12.4 million favorable impact from acquiring residential building products
companies.
Operating profit as a percentage of net sales increased 40 basis points in 2021 compared to 2020. The increase was driven by SG&A leverage from higher sales
volume, partially offset by unfavorable price-cost.
Liquidity and Capital Resources
Cash, cash equivalents, and short-term investments totaled $53.7 million at the end of 2021, compared to $117.8 million at the end of 2020. These funds, coupled
with cash flow from future operations, borrowing capacity under the Corporation's existing credit agreement, 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. Additionally, based on current earnings before interest, taxes,
depreciation and amortization generation, the Corporation can access the full $450 million of borrowing capacity available under the revolving credit facility and
maintain compliance with applicable covenants. As of the end of 2021, $9.2 million of cash was held overseas and considered permanently reinvested. If such
amounts were repatriated, it could result in additional foreign withholding and
25
state tax expense to the Corporation. The Corporation does not believe treating this cash as permanently reinvested will have any impact on the ability of the
Corporation to meet its obligations as they come due.
Cash Flow – Operating Activities
Operating activities were a source of $131.6 million of cash in 2021, compared to a source of $214.5 million cash in 2020. The lower cash generation compared to
the prior year was primarily due to changes in working capital. Changes in working capital balances resulted in a $59.6 million use of cash in 2021 compared to a
$24.2 million source of cash in the prior year. Prior year end working capital balances were lower than normal due to a significant decline in sales volume in 2020
as a result of the COVID-19 pandemic and related economic disruption. As demand has rebounded in many markets in 2021, the Corporation's receivables,
inventory, and accounts payable and accrued expenses have risen to more normal levels, resulting in a net use of cash.
The Corporation places special emphasis on management and control of working capital, including accounts receivable and inventory. Management believes
recorded trade receivable valuation allowances at the end of 2021 are adequate to cover the risk of potential bad debts. Allowances for non-collectible trade
receivables, as a percent of gross trade receivables, totaled 1.2 percent and 2.7 percent at the end of 2021 and 2020, respectively. The Corporation’s inventory turns
were 8.9 and 8.2 for 2021 and 2020, respectively.
Cash Flow – Investing Activities
Capital expenditures, including capitalized software, were $66.5 million in 2021 and $41.8 million in 2020. These expenditures are primarily focused on
machinery, equipment, and tooling required to support new products, continuous improvements, and cost savings initiatives in manufacturing processes.
Additionally, in support of the Corporation's long-term strategy to create effortless winning experiences for customers, the Corporation continues to invest in
technology and digital assets. The Corporation anticipates capital expenditures for 2022 in an estimated range of $70 million to $80 million.
Cash Flow – Financing Activities
Debt - The Corporation maintains a revolving credit facility as the primary source of committed funding from which the Corporation finances its planned capital
expenditures, strategic initiatives, and seasonal working capital needs. Cash flows included in financing activities represent periodic borrowings and repayments
under the revolving credit facility. See "Note 7. Debt" in the Notes to Consolidated Financial Statements for further information.
Dividend - The Corporation is committed to maintaining or modestly growing the quarterly dividend. Cash dividends declared and paid per share are as follows (in
dollars):
Common shares
$
2021
1.235 $
2020
1.220
The last quarterly dividend increase was from $0.305 to $0.310 per common share effective with the June 1, 2021 dividend payment for shareholders of record at
the close of business on May 21, 2021. The average dividend payout percentage for the most recent three-year period has been 64 percent of prior year earnings or
25 percent of prior year cash flow from operating activities.
Stock Repurchase - The Corporation’s capital strategy related to stock repurchase is focused on offsetting the dilutive impact of issuances for various
compensation-related matters. The Corporation may elect to opportunistically purchase additional shares based on excess cash generation and/or share price
considerations. The Board most recently authorized $200 million on February 13, 2019, for repurchases of the Corporation’s common stock. See "Note 10.
Accumulated Other Comprehensive Income (Loss) and Shareholders' Equity" in the Notes to Consolidated Financial Statements for further information.
Cash Requirements
As of January 1, 2022, the Corporation, has the following obligations and commitments to make future payments:
Purchase Obligations - The Corporation’s 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. Estimated purchase obligations total $188 million
during 2022 and $85 million thereafter.
26
Debt - Debt principal obligations are approximately $3 million during 2022, and $175 million thereafter. Interest obligations from debt are estimated to be
approximately $6 million during 2022 and $18 million thereafter. Refer to "Note 7. Debt" in the Notes to Consolidated Financial Statements for additional
information.
Deferred Compensation - Deferred compensation obligations, which include both cash and Corporation stock, are expected to be approximately $1 million during
2022 and $9 million thereafter. Refer to “Note 11. Stock-Based Compensation” in the Notes to Consolidated Financial Statements for additional information.
Post-Retirement Benefit Plan - Post-retirement benefit plan payments are expected to be approximately $1 million during 2022 and $11 million in aggregate from
2023 through 2031. Refer to “Note 13. Post-Retirement Health Care" in the Notes to Consolidated Financial Statements for additional information.
Operating and Finance Leases - Operating and finance lease obligations are expected to be approximately $25 million during 2022 and $80 million thereafter.
Refer to “Note 14. Leases" in the Notes to Consolidated Financial Statements for additional information.
Other Obligations - Other long-term obligations of approximately $13 million are primarily comprised of uncertain tax positions, acquisition-related holdbacks,
and put option liabilities. Additionally, refer to “Note 2. Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements for the
Corporation’s estimated future obligations related to product warranties and self-insured liabilities.
Litigation and Uncertainties
See "Note 15. Guarantees, Commitments, and Contingencies" in the Notes to Consolidated Financial Statements for further information.
Looking Ahead
The Corporation continues to navigate near-term uncertainty driven by the ongoing COVID-19 pandemic and recent dynamics around labor availability, supply
chain capacity, and cost inflation. However, management believes the Corporation is well positioned to grow revenues, expand margins, and generate cash flows.
Strength in residential building products is expected to continue, and conditions in workplace furnishings are expected to continue to improve.
Management remains optimistic about the long-term prospects in the workplace furnishings and residential building products
markets. Management believes the Corporation continues to compete well and remains confident the investments made in the business will continue to generate
strong returns for shareholders.
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 to 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 policy reflects its more significant estimates and
assumptions used in the preparation of the Consolidated Financial Statements.
Self-Insurance
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, with estimated liabilities of $26.3
million and $25.7 million as of January 1, 2022
27
and January 2, 2021, respectively, included in the Consolidated Balance Sheets. Certain risk exposures are mitigated through the use of independent third party
stop loss insurance coverages.
The Corporation’s policy is to accrue amounts in accordance with the actuarial determined liabilities. The actuarial valuations are based on historical and current
factors such as cost experience, claim frequency, and demographic information, along with certain assumptions about future events including legal actions, medical
cost inflation, the number or severity of claims, and the magnitude and change of actual experience development. No changes were made to the methodologies
utilized to estimate self-insurance reserves in 2021. While the recorded amounts are sensitive to the assumptions and factors described herein, management
believes that such assumptions and actuarial methods used to determine self-insurance reserves are reasonable and provide an appropriate basis for estimating the
liabilities. However, inherent uncertainty due to variability in the facts and circumstances of individual claims, as well as the length of time from incurrence of
claims to final settlement, may result in the Corporation's ultimate exposure differing significantly from what is currently estimated.
As of January 1, 2022, the Corporation's self-insurance reserve was accrued within an actuarial determined range, which accounts for the subjective nature of the
estimate. The span of the current range is approximately $6 million.
Recently Issued Accounting Standards Not Yet Adopted
None
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 variable
interest debt obligations. Interest rate swap derivative instruments are held and used by the Corporation as a tool for managing interest rate risk. They are not used
for trading or speculative purposes.
As of January 1, 2022, the Corporation had $75 million of debt outstanding under the Corporation's $450 million revolving credit facility, which bore variable
interest based on one month LIBOR. As of January 1, 2022, the Corporation had an interest rate swap agreement in place to fix the interest rate on $75 million of
the Corporation's revolving credit facility. Under the terms of this interest rate swap, the Corporation pays a fixed rate of 1.42 percent instead of LIBOR. As of
January 1, 2022, the Corporation had no borrowings on the revolving credit facility in excess of the amount covered by the interest rate swap agreement. The
Corporation may utilize additional borrowings over the course of the year, which will be subject to the variable borrowings rate as defined.
The Corporation monitors market interest rate risk exposures. As the Corporation holds no borrowings subject to variable interest rate exposure as of January 1,
2022, there is not current exposure given the current borrowings outstanding. The impacts of any hypothetical changes in interest rates will be directly correlated to
any necessary future borrowings above the current levels outstanding.
For information related to the Corporation’s long-term debt, refer to "Note 7. Debt" in the Notes to Consolidated Financial Statements. For information related to
the Corporation's interest rate swap activity, refer to "Note 10. Accumulated Other Comprehensive Income (Loss) and Shareholders’ Equity" in the Notes to
Consolidated Financial Statements.
The Corporation currently does not have significant foreign currency exposure.
The Corporation is exposed to risks arising from price changes and/or tariffs 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. The market price of plastics and
textiles, in particular, are sensitive to the cost of oil and natural gas. All of these materials are impacted increasingly by global market conditions. The Corporation
works to offset these increased costs through global sourcing initiatives, product re-engineering, and price increases on its products. Periodically, including in the
current year, margins are negatively impacted 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 a 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.
28
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure 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 Securities and
Exchange Commission'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 disclosure.
Under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer of the Corporation, the Corporation's management
carried out an evaluation of the Corporation’s disclosure controls and procedures pursuant to Exchange Act Rules 13a – 15(e) and 15d – 15(e) as of the end of the
period covered by this Annual Report on Form 10-K. As of January 1, 2022, based on this evaluation, the Chief Executive Officer and Chief Financial Officer
have concluded these disclosure controls and procedures are effective.
Changes in Internal Controls
There have been no changes in the Corporation's internal control over financial reporting during the fiscal quarter ended January 1, 2022 that have materially
affected, or are reasonably likely to materially affect, its internal control over financial reporting.
Management's Report on 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.
In fourth quarter 2021, the Corporation acquired Trinity and OGC (see Note 4). Due to the timing of the transactions, management has excluded both Trinity and
OGC from the annual assessment of the effectiveness of internal control over financial reporting as of January 1, 2022. On a combined basis, Trinity and OGC
represent approximately 3 percent of consolidated total assets and less than 1 percent of the consolidated net sales of the Corporation as of and for the year ended
January 1, 2022.
Item 9B. Other Information
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspection
Not applicable.
29
Item 10. Directors, Executive Officers, and Corporate Governance
PART III
The information under the caption "Corporate Governance and Board Matters" of the Corporation's Definitive Proxy Statement on Schedule 14A for the Annual
Meeting of Shareholders to be held on May 26, 2022 (the "2022 Proxy Statement") is incorporated herein by reference. For information with respect to executive
officers of the Corporation, see "Table I - Information about our Executive Officers" 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 "Directors"
of the 2022 Proxy Statement and is incorporated herein by reference.
Code of Ethics
The information under the caption "Code of Ethics" of the 2022 Proxy Statement is incorporated herein by reference.
Item 11. Executive Compensation
The information under the captions "Executive Compensation" and "Director Compensation" of the 2022 Proxy Statement is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters
The information under the captions "Beneficial Ownership of the Corporation's Stock" and "Equity Compensation Plan Information" of the 2022 Proxy Statement
is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information under the caption "Corporate Governance and Board Matters" of the 2022 Proxy Statement is incorporated herein by reference.
Item 14. Principal Accounting Fees and Services
The Corporation's independent registered public accounting firm is KPMG LLP, Chicago, IL, Auditor Firm ID: 185.
The information under the caption "Audit and Non-Audit Fees" of the 2022 Proxy Statement is incorporated herein by reference.
30
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 2021 Annual Report on Form 10-
K 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 1, 2022, January 2, 2021, and December 28, 2019
Consolidated Balance Sheets - January 1, 2022 and January 2, 2021
Consolidated Statements of Equity for the Years Ended January 1, 2022, January 2, 2021, and December 28, 2019
Consolidated Statements of Cash Flows for the Years Ended January 1, 2022, January 2, 2021, and December 28, 2019
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules
Page
35
36
38
39
41
42
43
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
(3.1)
(3.2)
(4.1)
(10.1)
(10.2)
(10.3)
(10.4)
(10.5)
(10.6)
Amended and Restated Articles of Incorporation of HNI Corporation (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, effective May 10, 2021 (incorporated by reference to Exhibit 3.1 to the
Registrant's Current Report on Form 8-K filed May 11, 2021)
Description of Securities of HNI Corporation (incorporated by reference to Exhibit 4.1 to the Registrant’s Annual Report on Form
10-K for the year ended December 28, 2019)
Third Amended and Restated Credit Agreement, dated April 20, 2018, among HNI Corporation, as borrower, certain domestic
subsidiaries of HNI Corporation, as guarantors, certain lenders 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 April 24, 2018)
Note Purchase Agreement, dated May 31, 2018, among HNI Corporation and the purchasers named therein (incorporated by
reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed May 31, 2018)
Guaranty Agreement, dated May 31, 2018, made by each of the guarantors named therein (incorporated by reference to Exhibit
10.2 to the Registrant's Current Report on Form 8-K filed May 31, 2018)
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)*
Amended form of HNI Corporation 2007 Stock-Based Compensation Plan Stock Option Award Agreement (incorporated by
reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed March 22, 2018)*
HNI Corporation 2017 Stock-Based Compensation Plan (incorporated by reference to Exhibit 4.3 to the Corporation's Form S-8
filed May 9, 2017)*
31
(10.7)
(10.8)
(10.9)
(10.10)
(10.11)
(10.12)
(10.13)
(10.14)
(10.15)
(10.16)
(10.17)
(10.18)
(10.19)
(10.20)
(10.21)
(10.22)
(10.23)
(10.24)
(10.25)
(10.26)
Amended form of HNI Corporation 2017 Stock-Based Compensation Plan Stock Option Award Agreement (incorporated by
reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed March 22, 2018)*
Form of HNI Corporation 2017 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 September 30, 2017)*
2017 Equity Plan for Non-Employee Directors of HNI Corporation (incorporated by reference to Exhibit 4.4 to the Registrant’s
Form S-8 filed May 9, 2017)*
Form of 2017 Equity Plan for Non-Employee Directors of HNI Corporation Participation Agreement (incorporated by reference to
Exhibit 10.3 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2017)*
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 June 29, 2018)*
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)*
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)*
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)*
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)*
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)*
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)*
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)*
Amended form of HNI Corporation 2017 Stock-Based Compensation Plan Restricted Stock Unit Award Agreement (incorporated
by reference to Exhibit 10.22 to the Registrant’s Annual Report on Form 10-K for the year ended December 28, 2019)*
Form of HNI Corporation 2017 Stock-Based Compensation Plan Performance Share Unit Award Agreement (incorporated by
reference to Exhibit 10.23 to the Registrant’s Annual Report on Form 10-K for the year ended December 28, 2019)*
Amended form of HNI Corporation 2017 Stock-Based Compensation Plan Restricted Stock Unit Award Agreement (incorporated
by reference to Exhibit 10.24 to the Registrant's Annual Report on Form 10-K for the year ended January 2, 2021*
HNI Corporation 2021 Stock-Based Compensation Plan (incorporated by reference from Appendix A to the Corporation's Proxy
Statement filed on April 12, 2021)*
Form of HNI Corporation 2021 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 July 3, 2021)*
Form of HNI Corporation 2021 Stock-Based Compensation Plan Restricted Stock Unit Award Agreement (CEO) (incorporated by
reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended July 3, 2021)*
Form of HNI Corporation 2021 Stock-Based Compensation Performance Share Unit Award Agreement (incorporated by reference
to Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended July 3, 2021)*
32
(21)
(23.1)
(24)
(31.1)
(31.2)
(32.1)
(101)
(104)
+
Subsidiaries of the Registrant
+
Consent of Independent Registered Public Accounting Firm
Powers of Attorney (included on the signatures page of this Annual Report on Form 10-K)
+
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 1, 2022 are
formatted in Inline XBRL (eXtensible Business Reporting Language) and filed electronically herewith: (i) Consolidated Statements
of Comprehensive Income; (ii) Consolidated Balance Sheets; (iii) Consolidated Statements of Equity; (iv) Consolidated Statements
of Cash Flows; and (v) Notes to Consolidated Financial Statements
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
* Indicates management contract or compensatory plan.
+ Filed or furnished herewith.
Item 16. Form 10-K Summary
None.
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.
Date: March 1, 2022
HNI Corporation
By:
/s/ Jeffrey D. Lorenger
Name: Jeffrey D. Lorenger
Title: Chairman, President, and Chief Executive Officer
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 Jeffrey D. Lorenger 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.
33
Signature
Title
Date
/s/ Jeffrey D. Lorenger
Jeffrey D. Lorenger
/s/ Marshall H. Bridges
Marshall H. Bridges
/s/ Mary A. Bell
Mary A. Bell
/s/ Miguel M. Calado
Miguel M. Calado
/s/ Cheryl A. Francis
Cheryl A. Francis
/s/ John R. Hartnett
John R. Hartnett
/s/ Mary K. W. Jones
Mary K. W. Jones
/s/ Larry B. Porcellato
Larry B. Porcellato
/s/ Dhanusha Sivajee
Dhanusha Sivajee
/s/ Abbie J. Smith
Abbie J. Smith
/s/ Ronald V. Waters, III
Ronald V. Waters, III
Chairman, President, and Chief Executive Officer,
Principal Executive Officer, and Director
Senior Vice President, Chief Financial Officer,
Principal Financial Officer, and Principal Accounting
Officer
Director
Director
Lead Director
Director
Director
Director
Director
Director
Director
34
March 1, 2022
March 1, 2022
March 1, 2022
March 1, 2022
March 1, 2022
March 1, 2022
March 1, 2022
March 1, 2022
March 1, 2022
March 1, 2022
March 1, 2022
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.
U.S. Securities and Exchange Commission guidance allows companies to exclude acquisitions from management's report on internal control over financial
reporting for the first year after the acquisition when it is not possible to conduct an assessment. In fourth quarter 2021, the Corporation acquired Trinity and OGC
(see Note 4). Due to the timing of the transactions, management has excluded both Trinity and the OGC from the annual assessment of the effectiveness of internal
control over financial reporting as of January 1, 2022. On a combined basis, Trinity and OGC combined represent approximately 3 percent of consolidated total
assets and less than 1 percent of the consolidated net sales of the Corporation as of and for the year ended January 1, 2022.
Management assessed the effectiveness of HNI Corporation’s internal control over financial reporting as of January 1, 2022. 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 1, 2022, HNI Corporation maintained effective internal control over financial reporting.
The effectiveness of HNI Corporation’s internal control over financial reporting as of January 1, 2022 has been audited by KPMG LLP, an independent registered
public accounting firm, as stated in its report which appears herein.
March 1, 2022
35
To the Shareholders and the Board of Directors
HNI Corporation:
Report of Independent Registered Public Accounting Firm
Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting
We have audited the accompanying consolidated balance sheets of HNI Corporation and subsidiaries (the Company) as of January 1, 2022 and January 2, 2021, the
related consolidated statements of comprehensive income, equity, and cash flows for each of the fiscal years in the three-year period ended January 1, 2022, and
the related notes (collectively, the consolidated financial statements). We also have audited the Company’s internal control over financial reporting as of January 1,
2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of January 1,
2022 and January 2, 2021, and the results of its operations and its cash flows for each of the fiscal years in the three-year period ended January 1, 2022, in
conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control
over financial reporting as of January 1, 2022 based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission.
The Company acquired Trinity Hearth and Home Inc. and The Outdoor GreatRoom Company during 2021, and management excluded from its assessment of the
effectiveness of the Company’s internal control over financial reporting as of January 1, 2022, Trinity Hearth and Home Inc. and The Outdoor GreatRoom
Company’s internal control over financial reporting associated with total assets of 3 percent of consolidated total assets and total revenues of less than 1 percent of
the consolidated net sales included in the consolidated financial statements of the Company as of and for the year ended January 1, 2022. Our audit of internal
control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of Trinity Hearth and Home Inc. and
The Outdoor GreatRoom Company.
Basis for Opinions
The Company’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 Report on Internal Control over
Financial Reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal
control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United
States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable
assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal
control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. 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.
Definition and Limitations of Internal Control Over Financial Reporting
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
36
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.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or
required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2)
involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the
consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical
audit matter or on the accounts or disclosures to which it relates.
Workers’ compensation and product liabilities
As discussed in Note 2 to the consolidated financial statements, the Company reported general, auto, product, and workers’ compensation liabilities of
$26.3 million. The Company is primarily self-insured and actuarial valuations are used to determine the liabilities. Those valuations are based in part on
certain assumptions about legal actions and the magnitude of change in actual experience development.
We identified the evaluation of the Company’s workers’ compensation and product liabilities as a critical audit matter because of the inherent uncertainty
in the amounts that will ultimately be paid to settle these claims. Assessing the Company’s estimate of the workers’ compensation and product liabilities
involved assumptions that included uncertainty about legal actions and the magnitude of change in actual experience development. In addition,
professionals with specialized skills and knowledge were needed to evaluate the actuarial methods and assumptions used to develop estimated liabilities.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating
effectiveness of certain internal controls related to the development of workers’ compensation and product liabilities. Specifically, this included controls
over the Company’s review of the methods and assumptions used to determine the liabilities. We confirmed with the Company’s legal counsel about the
likelihood and magnitude of outstanding claims and legal actions. We involved actuarial professionals with specialized skills and knowledge, who
assisted in:
•
•
•
evaluating the qualifications of the external actuarial specialists
examining methods, procedures, certain assumptions, and judgments used by the external actuarial specialists for consistency with accepted
actuarial methods and procedures
comparing the Company’s workers’ compensation and product liabilities to ranges of reserves independently developed based on assumptions
independently determined by our actuarial professionals.
/s/ KPMG LLP
We have served as the Company’s auditor since 2015.
Chicago, Illinois
March 1, 2022
37
Financial Statements
HNI Corporation and Subsidiaries
Consolidated Statements of Comprehensive Income
(In thousands, except per share data)
Net sales
Cost of sales
Gross profit
Selling and administrative expenses
Restructuring and impairment charges
Operating income
Interest expense, net
Income before income taxes
Income tax expense
Net income
Less: Net income (loss) attributable to non-controlling interest
Net income attributable to HNI Corporation
Average number of common shares outstanding – basic
Net income attributable to HNI Corporation per common share – basic
Average number of common shares outstanding – diluted
Net income attributable to HNI Corporation per common share – diluted
Foreign currency translation adjustments
Change in unrealized gains (losses) on marketable securities, net of tax
Change in pension and post-retirement liability, net of tax
Change in derivative financial instruments, net of tax
Other comprehensive income (loss), net of tax
Comprehensive income
Less: Comprehensive income (loss) attributable to non-controlling interest
Comprehensive income attributable to HNI Corporation
The accompanying notes are an integral part of the consolidated financial statements.
38
2021
2,184,408 $
1,427,048
757,360
665,641
6,299
85,420
7,153
78,267
18,456
59,811
(3)
59,814 $
43,438
1.38 $
43,964
1.36 $
417 $
(301)
1,238
1,024
2,378
62,189
(3)
62,192 $
2020
1,955,363 $
1,234,243
721,120
620,927
38,818
61,375
6,990
54,385
12,466
41,919
2
41,917 $
42,689
0.98 $
42,956
0.98 $
1,841 $
265
(920)
(2,266)
(1,080)
40,839
2
40,837 $
2019
2,246,947
1,413,185
833,762
680,049
2,371
151,342
8,628
142,714
32,211
110,503
(2)
110,505
43,101
2.56
43,495
2.54
61
251
(2,833)
(1,953)
(4,474)
106,029
(2)
106,031
$
$
$
$
$
$
HNI Corporation and Subsidiaries
Consolidated Balance Sheets
(In thousands)
Assets
Current Assets:
Cash and cash equivalents
Short-term investments
Receivables
Allowance for doubtful accounts
Inventories, net
Prepaid expenses and other current assets
Total Current Assets
Property, Plant, and Equipment:
Land and land improvements
Buildings
Machinery and equipment
Construction in progress
Less accumulated depreciation
Net Property, Plant, and Equipment
Right-of-use - Finance Leases
Right-of-use - Operating Leases
Goodwill and Other Intangible Assets
Other Assets
Total Assets
The accompanying notes are an integral part of the consolidated financial statements.
39
January 1, 2022
January 2, 2021
$
52,270 $
1,392
239,955
(2,813)
181,591
51,099
523,494
30,851
294,545
593,630
29,663
948,689
(581,909)
366,780
10,173
82,881
116,120
1,687
207,971
(5,514)
137,811
37,660
495,735
29,691
293,708
578,643
17,750
919,792
(553,835)
365,957
6,095
70,219
471,502
458,896
43,067
21,130
$
1,497,897 $
1,418,032
HNI Corporation and Subsidiaries
Consolidated Balance Sheets
(In thousands, except par value)
Liabilities and Equity
Current Liabilities:
Accounts payable and accrued expenses
Current maturities of debt
Current maturities of other long-term obligations
Current lease obligations - Finance
Current lease obligations - Operating
Total Current Liabilities
Long-Term Debt
Long-Term Lease Obligations - Finance
Long-Term Lease Obligations - Operating
Other Long-Term Liabilities
Deferred Income Taxes
Equity:
HNI Corporation shareholders' equity:
Capital Stock:
Preferred stock - $1 par value, authorized 2,000 shares, no shares outstanding
Common stock - $1 par value, authorized 200,000 shares, outstanding:
January 1, 2022 - 42,582 shares; January 2, 2021 - 42,919 shares
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Total HNI Corporation shareholders' equity
Non-controlling interest
Total Equity
Total Liabilities and Equity
The accompanying notes are an integral part of the consolidated financial statements.
40
January 1, 2022
January 2, 2021
$
473,753 $
3,221
3,910
2,765
22,799
506,448
413,638
841
2,990
1,589
19,970
439,028
174,608
174,524
7,373
63,757
4,516
53,249
80,736
81,264
75,008
74,706
—
—
42,582
42,919
39,192
514,645
(6,775)
589,644
38,659
517,994
(9,153)
590,419
323
326
589,967
590,745
$
1,497,897 $
1,418,032
HNI Corporation and Subsidiaries
Consolidated Statements of Equity
(In thousands, except per share data)
Common
Stock
43,582 $
Additional
Paid-in Capital
18,041 $
Retained
Earnings
504,909 $
Accumulated Other
Comprehensive
Income (Loss)
(3,599)
Non-controlling
Interest
$
326 $
Total
Shareholders'
Equity
563,259
$
Balance, December 29, 2018
Comprehensive income:
Net income (loss)
Other comprehensive income (loss), net of tax
Reclassification of Stranded Tax Effects (ASU
2018-02)
Impact of Implementation of Lease Guidance
Cash dividends; $1.210 per share
Common shares – treasury:
Shares purchased
Shares issued under Members' Stock Purchase
Plan and stock awards, net of tax
Balance, December 28, 2019
Comprehensive income:
Net income
Other comprehensive income (loss), net of tax
Impact of new accounting standard related to credit
losses
Dividends payable
Cash dividends; $1.220 per share
Common shares – treasury:
Shares purchased
Shares issued under Members' Stock Purchase
Plan and stock awards, net of tax
Balance, January 2, 2021
Comprehensive income:
Net income (loss)
Other comprehensive income (loss), net of tax
Dividends payable
Cash dividends; $1.235 per share
Common shares – treasury:
Shares purchased
Shares issued under Members' Stock Purchase
Plan and stock awards, net of tax
Balance, January 1, 2022
—
—
—
—
—
—
—
—
—
—
110,505
—
739
2,999
(52,232)
(2,286)
(44,424)
(37,197)
—
(3,735)
(739)
—
—
—
(2)
—
—
—
—
—
1,299
42,595 $
46,182
19,799 $
—
529,723 $
$
—
(8,073)
$
—
324 $
—
—
—
—
—
—
—
—
—
—
41,917
—
(131)
(231)
(52,096)
(214)
(4,988)
(1,188)
—
(1,080)
—
—
—
—
2
—
—
—
—
—
538
42,919 $
23,848
38,659 $
—
517,994 $
—
(9,153)
$
—
326 $
—
—
—
—
—
—
—
—
59,814
—
(1,001)
(53,689)
(1,515)
(50,448)
(8,473)
—
2,378
—
—
—
(3)
—
—
—
—
1,178
42,582 $
50,981
39,192 $
—
514,645 $
—
(6,775)
$
—
323 $
$
$
110,503
(3,735)
—
2,999
(52,232)
(83,907)
47,481
584,368
41,919
(1,080)
(131)
(231)
(52,096)
(6,390)
24,386
590,745
59,811
2,378
(1,001)
(53,689)
(60,436)
52,159
589,967
The accompanying notes are an integral part of the consolidated financial statements.
41
HNI Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
Net Cash Flows From (To) Operating Activities:
Net income
Non-cash items included in net income:
Depreciation and amortization
Other post-retirement and post-employment benefits
Stock-based compensation
Reduction in carrying amount of right-of-use assets
Deferred income taxes
Impairment of goodwill and intangible assets
Other – net
Net increase (decrease) in cash from operating assets and liabilities
Increase (decrease) in other liabilities
Net cash flows from (to) operating activities
Net Cash Flows From (To) Investing Activities:
Capital expenditures
Acquisition spending, net of cash acquired
Capitalized software
Purchase of investments
Sales or maturities of investments
Other – net
Net cash flows from (to) investing activities
Net Cash Flows From (To) Financing Activities:
Payments of debt
Proceeds from debt
Dividends paid
Purchase of HNI Corporation common stock
Proceeds from sales of HNI Corporation common stock
Other – net
Net cash flows from (to) financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
The accompanying notes are an integral part of the consolidated financial statements.
42
2021
2020
2019
$
59,811 $
41,919 $
110,503
83,146
1,328
12,881
25,206
(372)
5,750
4,047
(59,635)
(530)
131,632
(53,463)
(44,552)
(13,085)
(3,411)
3,295
210
(111,006)
(2,556)
4,966
(53,750)
(59,167)
31,135
(5,104)
(84,476)
77,683
1,472
7,827
22,997
(12,005)
39,580
3,064
24,204
7,728
214,469
(32,296)
(58,258)
(9,506)
(4,222)
3,611
299
(100,372)
(83,179)
83,309
(52,096)
(6,764)
8,064
616
(50,050)
(63,850)
116,120
52,270 $
64,047
52,073
116,120 $
$
77,427
1,475
6,830
22,936
6,750
—
5,607
(3,280)
(8,868)
219,380
(60,826)
—
(6,059)
(6,702)
4,845
5,847
(62,895)
(215,934)
141,035
(52,232)
(83,887)
30,473
(686)
(181,231)
(24,746)
76,819
52,073
HNI Corporation and Subsidiaries
Notes to Consolidated Financial Statements
January 1, 2022
Note 1. Nature of Operations
HNI Corporation with its subsidiaries (the "Corporation") is a provider of workplace furnishings and residential building products. Refer to "Note 16. Reportable
Segment Information" in the Notes to Consolidated Financial Statements for further information. Workplace furnishings products include panel-based and
freestanding furniture systems, seating, storage, tables, and architectural products. These products are sold primarily through a national system of independent
dealers, wholesalers, and office product distributors but also directly to end-user customers and federal, state, and local governments. Residential building products
include a full array of gas, wood, electric, and pellet fueled fireplaces, inserts, stoves, facings, and accessories. These products are sold through a national system
of independent 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 through its export subsidiary to a limited number of markets outside North America,
principally the Middle East, Mexico, Latin America, and the Caribbean. The Corporation also manufactures and markets office furniture in Asia, primarily China
and India.
Fiscal year-end – The Corporation follows a 52/53-week fiscal year, which ends on the Saturday nearest December 31. Fiscal year 2021 ended on January 1,
2022, fiscal year 2020 ended on January 2, 2021, and fiscal year 2019 ended on December 28, 2019. The financial statements for fiscal years 2021 and 2019 are on
a 52-week basis, while 2020 is on a 53-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, as well as investments with maturities between one and five years. 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. The Corporation's equity investments consist of investments in private entities and are
carried at cost, as they do not have a readily determinable fair value.
Cash, cash equivalents, and investments are reflected in the Consolidated Balance Sheets and were as follows (in thousands):
Cash and cash
equivalents
January 1, 2022
Short-term
investments
Other Assets
Cash and cash
equivalents
January 2, 2021
Short-term
investments
Other Assets
Debt securities
Equity investment
Cash and money market accounts
Total
$
$
— $
—
52,270
52,270 $
1,392 $
—
—
1,392 $
11,913
2,500
—
14,413
$
$
— $
—
116,120
116,120 $
1,687 $
—
—
1,687 $
11,912
1,500
—
13,412
43
The following table summarizes the amortized cost basis of the debt securities (in thousands):
Amortized cost basis of debt securities
January 1, 2022
January 2, 2021
$
13,231 $
13,143
Immaterial unrealized gains and losses are recorded in "Accumulated other comprehensive income (loss)" in the Consolidated Balance Sheets for these debt
securities. Immaterial amounts of accrued interest receivable related to the Corporation's portfolio are recorded in "Prepaid expenses and other current assets".
Receivables
Trade receivables are recorded at amortized cost, net of an allowance for doubtful accounts. 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. The following table
summarizes the change in the allowance for doubtful accounts (in thousands):
Balance at
beginning of
period
Current provision
and adjustments
Amounts written
off
Recoveries and
other
Balance at end of
period
Year ended January 1, 2022
Year ended January 2, 2021
Year ended December 28, 2019
$
$
$
5,514 $
3,559 $
3,867 $
$
(879)
3,625 $
$
508
(1,911) $
(1,685) $
(1,099) $
89 $
15 $
283 $
2,813
5,514
3,559
Inventories
The Corporation's residential building products inventories, and a majority of its workplace furnishings inventories, are valued at cost, on the "last-in, first-out"
(LIFO) basis. Remaining inventories are generally valued at the lower of cost, on the "first-in, first-out" (FIFO) basis, or net realizable value. Inventories included
in the Consolidated Balance Sheets consisted of the following (in thousands):
Finished products
Materials and work in process
Last-in, first-out ("LIFO") allowance
Total inventories, net
January 1, 2022
137,187
91,996
(47,592)
181,591
$
$
January 2, 2021
98,527
70,264
(30,980)
137,811
$
$
Inventory valued by the LIFO costing method
84 %
75 %
There were no material liquidations of previously established LIFO layers in 2021 or 2020. If only the FIFO method had been in use, inventories would have been
$47.6 million and $31.0 million higher than reported as of January 1, 2022 and January 2, 2021, respectively. The increase in the LIFO allowance from prior year
end was primarily attributed to an increase in current costs stemming from inflationary pressure, as well as an increase in units on hand driven by higher sales
volumes and strategic sourcing decisions to help mitigate supply chain delays.
The FIFO inventory allowance was $19.9 million and $12.0 million as of January 1, 2022, and January 2, 2021, respectively. The year-over-year increase was due
to strategic restructuring activity of an eCommerce business in the workplace furnishings segment.
Property, Plant, and Equipment
Property, plant, and equipment are carried at cost less accumulated depreciation. 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. Total depreciation expense was as follows (in
thousands):
Depreciation expense
$
2021
52,990 $
2020
53,420 $
2019
53,022
44
Long-Lived Assets
The Corporation evaluates long-lived assets for indicators of impairment as events or changes in circumstances occur indicating that an impairment risk may be
present. The judgments regarding the existence of impairment are based on business and market conditions, operational performance, and estimated future cash
flows. If the carrying value of a long-lived asset is considered impaired, an impairment charge is recorded to adjust the asset to its estimated fair value.
Goodwill and Other Intangible Assets
The Corporation evaluates its goodwill for impairment on an annual basis during the fourth quarter or whenever indicators of impairment exist. Asset impairment
charges associated with the Corporation’s goodwill impairment testing are discussed in "Note 6. Goodwill and Other Intangible Assets" in the Notes to
Consolidated Financial Statements.
The Corporation reviews goodwill at the reporting unit level within its workplace furnishings and residential building 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 carrying amount as a basis for determining whether it is necessary to perform a quantitative goodwill impairment test. If the quantitative test is required, the
Corporation estimates the fair value of its reporting units based on an average of the income approach and the market approach. This estimated fair value is
compared to the carrying value of the reporting unit and an impairment is recorded if the estimate is less than the carrying value. 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
involves 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
quantitative impairment test, if required, 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.
The Corporation also evaluates the fair value of indefinite-lived trade names on an annual basis during the fourth quarter or whenever an indication of impairment
exists. Consistent with goodwill impairment testing, a qualitative assessment may be performed to determine whether it is more likely than not the fair value of
indefinite-lived trade names is less than the carrying amount. If it is determined necessary to perform a quantitative test, the estimate of the fair value of the trade
names is based on a discounted cash flows model using inputs which include: projected revenues, assumed royalty rates that would be payable if the trade names
were not owned, and discount rates.
The Corporation has definite-lived intangible assets that are amortized over their estimated useful lives. Impairment losses are recognized if the carrying amount of
an intangible asset subject to amortization is not recoverable from expected future cash flows and its carrying amount exceeds its fair value.
Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses are reflected in the Consolidated Balance Sheets and were as follows (in thousands):
Trade accounts payable
Compensation
Profit sharing and retirement
Accrued marketing
Accrued freight
Customer deposits
Other accrued expenses
January 1, 2022
January 2, 2021
$
$
233,759 $
55,404
22,861
31,498
19,129
27,218
83,884
473,753 $
190,527
49,439
26,414
31,969
15,288
21,101
78,900
413,638
45
Product Warranties
The Corporation issues certain warranty policies on its workplace furnishings and residential building products that provide for repair or replacement of any
covered product or component that fails during normal use because of a defect in design, materials, or workmanship. The duration of warranty policies on the
Corporation's products varies based on the type of product. Allowances have been established for the anticipated future costs associated with the Corporation's
warranty programs.
A warranty allowance is determined by recording a specific allowance for known warranty issues and an additional allowance for unknown claims expected to be
incurred based on historical claims experience. Actual claims incurred could differ from the original estimates, requiring adjustments to the allowance.
Activity associated with warranty obligations was as follows (in thousands):
Balance at beginning of period
Accruals for warranties issued during period
Adjustments related to pre-existing warranties
Settlements made during the period
Balance at end of period
$
$
2021
16,109 $
7,723
(189)
(7,602)
16,041 $
2020
15,865 $
9,380
127
(9,263)
16,109 $
2019
15,450
11,035
906
(11,526)
15,865
The current and long-term portions of the allowance for the estimated settlements are included within "Accounts payable and accrued expenses" and "Other Long-
Term Liabilities", respectively, in the Consolidated Balance Sheets. The following table summarizes when these estimated settlements are expected to be paid (in
thousands):
Current - in the next twelve months
Long-term - beyond one year
January 1, 2022
January 2, 2021
$
$
5,442 $
10,599
16,041 $
5,918
10,191
16,109
Revenue Recognition
Performance Obligations - The Corporation recognizes revenue for sales of workplace furnishings and residential building products at a point in time following the
transfer of control of such products to the customer, which typically occurs upon shipment of the product. In certain circumstances, transfer of control to the
customer does not occur until the goods are received by the customer or upon installation and/or customer acceptance, depending on the terms of the underlying
contracts. Contracts typically have a duration of less than one year and normally do not include a significant financing component. Generally, payment is due
within 30 days of invoicing.
Significant Judgments - The amount of consideration the Corporation receives and revenue recognized varies with changes in rebate and marketing program
incentives, as well as early pay discounts, offered to customers. The Corporation uses significant judgment throughout the year in estimating the reduction in net
sales driven by variable consideration for rebate and marketing programs. Judgments made include expected sales levels and utilization of funds. However, this
judgment factor is significantly reduced at the end of each year when sales volumes and the impact to rebate and marketing programs are known and recorded as
the programs typically end near the Corporation's fiscal year end.
Accounting Policies and Practical Expedients:
•
•
•
The Corporation applies the accounting policy election which allows an entity to account for shipping and handling activities that occur after control is
transferred as fulfillment activities. The Corporation accrues for shipping and handling costs at the same time revenue is recognized, which is in
accordance with the policy election. When shipping and handling activities occur prior to the customer obtaining control of the good(s), they are
considered fulfillment activities rather than a performance obligation and the costs are accrued for as incurred.
The Corporation applies the accounting policy election which allows an entity to exclude from the measurement of the transaction price all taxes assessed
by a governmental authority associated with the transaction, including sales, use, excise, value-added, and franchise taxes (collectively referred to as sales
taxes). This allows the Corporation to present revenue net of these certain types of taxes.
The Corporation applies the practical expedient which permits an entity to recognize incremental costs to obtain a contract as an expense when incurred if
the amortization period will be less than one year.
46
•
•
The Corporation applies the practical expedient which allows an entity to not adjust the promised amount of consideration for the effects of a significant
financing component if a contract has a duration of one year or less. As the Corporation's contracts are typically less than one year in length, consideration
will not be adjusted.
The Corporation's backlog orders are typically cancellable for a period of time and almost all contracts have an original duration of one year or less. As a
result, the Corporation elected the practical expedient not to disclose the unsatisfied performance obligation as of period end. The backlog is typically
fulfilled within a few months.
Leases
Accounting Policies and Practical Expedients:
•
•
The Corporation has made an accounting election by class of underlying assets to not separate non-lease components of a contract from the lease
components to which they relate for all classes of assets except for embedded leases.
The Corporation has elected for all asset classes to not recognize right of use ("ROU") assets and lease liabilities for leases that at the acquisition date or
business combination date have a remaining lease term of twelve months or less.
Research and Development Costs
Research and 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, prototype costs, and administrative fees. The amounts charged against income and recorded
in "Selling and administrative expenses" on the Consolidated Statements of Comprehensive Income were as follows (in thousands):
Research and development costs
$
2021
39,415 $
2020
35,318 $
2019
34,699
Freight Expense
Freight expense on shipments to customers was recorded in "Selling and administrative expenses" on the Consolidated Statements of Comprehensive Income as
follows (in thousands):
Freight expense
2021
118,196 $
$
2020
98,417 $
2019
123,667
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
generally recognizes cost over the requisite service period. See "Note 11. Stock-Based Compensation" in the Notes 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 consolidated financial statements.
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.
47
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):
Numerator:
Numerator for both basic and diluted EPS attributable to HNI Corporation net income
Denominators:
Denominator for basic EPS weighted-average common shares outstanding
Potentially dilutive shares from stock-based compensation plans
Denominator for diluted EPS
Earnings per share – basic
Earnings per share – diluted
2021
2020
2019
59,814 $
41,917 $
110,505
43,438
526
43,964
1.38 $
1.36 $
42,689
267
42,956
0.98 $
0.98 $
43,101
394
43,495
2.56
2.54
$
$
$
The weighted-average common stock equivalents presented above do not include the effect of the common stock equivalents in the table below because their
inclusion would be anti-dilutive (in thousands):
Common stock equivalents excluded because their inclusion would be anti-dilutive
2021
1,606
2020
3,110
2019
2,131
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 consolidated financial statements and accompanying notes. Areas requiring significant use of management
estimates relate to goodwill and intangibles, accruals for self-insured medical claims, workers’ compensation, legal contingencies, general liability and auto
insurance claims, valuation of long-lived assets, and estimates of income taxes. Other areas requiring use of management estimates relate to allowance for doubtful
accounts, inventory allowances, marketing program accruals, warranty accruals, 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. Certain risk
exposures are mitigated through the use of independent third party stop loss insurance coverages. The general, auto, product, and workers’ compensation liabilities
are managed using a wholly-owned insurance captive and the related liabilities are included in the Consolidated Balance Sheets as follows (in thousands):
General, auto, product, and workers' compensation liabilities
January 1, 2022
January 2, 2021
$
26,300 $
25,666
The preceding table excludes self-insured member health benefits liabilities of $5.9 million and $6.0 million as of January 1, 2022 and January 2, 2021,
respectively.
The Corporation’s policy is to accrue amounts in accordance with the actuarial 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. Immaterial gains and losses on foreign currency transactions are included in "Selling and administrative expenses" in the
Consolidated Statements of Comprehensive Income.
48
Recently Adopted Accounting Standards
In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes. This update simplifies various aspects related to accounting
for income taxes, removes certain exceptions to the general principles in ASC 740, and clarifies and amends existing guidance to improve consistent application.
The Corporation adopted ASC 740 in the first quarter of fiscal 2021, with no material effect on the Consolidated Financial Statements and related footnote
disclosures.
Reclassifications
Certain reclassifications have been made within the financial statements to conform to the current year presentation.
Note 3. Revenue from Contracts with Customers
Disaggregation of Revenue
Revenue from contracts with customers disaggregated by product category is as follows (in thousands):
Systems and storage
Seating
Other
Total workplace furnishings
Residential building products
2021
833,220 $
481,739
119,026
1,433,985
2020
741,183 $
489,342
135,186
1,365,711
2019
951,965
583,245
161,976
1,697,186
750,423
2,184,408 $
589,652
1,955,363 $
549,761
2,246,947
$
$
Sales by product category are subject to similar economic factors and market conditions. See “Note 16. Reportable Segment Information” in the Notes to
Consolidated Financial Statements for further information about operating segments.
Contract Assets and Contract Liabilities
In addition to trade receivables, the Corporation has contract assets consisting of funds paid up-front to certain workplace furnishings dealers in exchange for their
multi-year commitment to market and sell the Corporation's products. These contract assets are amortized over the term of the contracts and recognized as a
reduction of revenue. The Corporation has contract liabilities consisting of customer deposits and rebate and marketing program liabilities. Contract assets and
contract liabilities were as follows (in thousands):
Trade receivables (1)
Contract assets (current) (2)
Contract assets (long-term) (3)
Contract liabilities (4)
January 1,
2022
January 2,
2021
$
$
$
$
239,955 $
1,471 $
18,198 $
58,716 $
207,971
761
2,486
53,070
The index below indicates the line item in the Consolidated Balance Sheets where contract assets and contract liabilities are reported:
(1) "Receivables"
(2) "Prepaid expenses and other current assets"
(3) "Other Assets"
(4) "Accounts payable and accrued expenses"
49
Changes in contract asset and contract liability balances during the year ended January 1, 2022 were as follows (in thousands):
Contract assets recognized
Reclassification of contract assets to contra-revenue
Contract liabilities recognized and recorded to contra-revenue as a result of performance obligations satisfied
Contract liabilities paid
Cash received in advance and not recognized as revenue
Reclassification of cash received in advance to revenue as a result of performance obligations satisfied
Impact of business combinations
Net change
$
Contract assets
increase (decrease)
$
Contract liabilities
(increase)
decrease
17,294 $
(872)
—
—
—
—
—
16,422 $
—
—
(121,654)
122,127
(115,242)
109,919
(796)
(5,646)
The increase in contract assets in 2021 is due to payments made in connection with multi-year distribution agreements in the workplace furnishings segment.
Changes in contract asset and contract liability balances during the year ended January 2, 2021 were as follows (in thousands):
Contract assets recognized
Reclassification of contract assets to contra-revenue
Contract liabilities recognized and recorded to contra-revenue as a result of performance obligations satisfied
Contract liabilities paid
Cash received in advance and not recognized as revenue
Reclassification of cash received in advance to revenue as a result of performance obligations satisfied
Impact of business combination
Net change
$
Contract assets
increase (decrease)
$
Contract liabilities
(increase)
decrease
358 $
(668)
—
—
—
—
—
(310) $
—
—
(122,501)
136,876
(82,251)
76,047
(6,269)
1,902
Contract liabilities for customer deposits paid to the Corporation prior to the satisfaction of performance obligations are recognized as revenue upon completion of
the performance obligations. The amount of revenue recognized during the year ended January 1, 2022 that was included in the January 2, 2021 contract liabilities
balance was $21.1 million. The amount of revenue recognized during the year ended January 2, 2021 that was included in the December 28, 2019 contract
liabilities balance was $8.6 million.
Note 4. Acquisitions
On October 14, 2021, the Corporation acquired Trinity Hearth & Home ("Trinity"), an installing fireplace distributor in the Dallas/Fort Worth area, for
approximately $30 million. This transaction, which aligns with the Corporation's vertical integration strategy in the residential building products market and
provides a hub to better serve customers in the rapidly growing Southwest region, was structured as an asset acquisition and was consummated entirely in cash.
On December 17, 2021, the Corporation acquired The Outdoor GreatRoom Company ("OGC"), a leading manufacturer and supplier of premium outdoor fire tables
and fire pits, for approximately $15 million. This transaction, which positions the Corporation to grow and develop a leading position in the fast-growing outdoor
living market, was structured as a stock acquisition and was consummated entirely in cash.
The preliminary assets and liabilities of Trinity and OGC are included in the Corporation's residential building products segment, and goodwill, which is expected
to be tax deductible, is assigned to the residential building products reporting unit.
50
The provisional purchase price allocation for Trinity and OGC, and estimated amortization periods of identified intangible assets as of the date of acquisition is as
follows (dollars in thousands):
Cash
Inventories
Receivables
Prepaid expenses and other current assets
Property, plant, and equipment
Accounts payable and accrued expenses
Goodwill
Customer lists
Trade names
Total net assets
Trinity
OGC
Fair Value
Amortization Period
Fair Value
Amortization Period
$
$
—
2,079
4,604
—
281
(1,726)
13,742
12,000
—
30,980
13 Years
$
$
331
4,460
1,783
1,247
520
(2,844)
1,860
4,945
2,500
14,802
10 Years
10 Years
The provisional purchase price accounting of both acquisitions remains open. The valuation analysis requires the use of complex management estimates and
assumptions such as future cash flows discount rates, royalty rates, and long-term growth rates. At this time, intangible assets and goodwill are recorded based on
preliminary assumptions, and the Corporation has not finalized the determination of fair values of intangible assets. The portions of the allocation that are
provisional may be adjusted to reflect the finally determined amounts, and those adjustments may be material. The Corporation expects to finalize the purchase
price allocation of both of these acquisitions later in 2022.
During the first quarter of 2021, the Corporation acquired the assets of a residential building products distributor in an all-cash deal. The aggregate purchase price
was approximately $1.6 million, and includes $1.2 million of tax deductible goodwill. The purchase accounting is complete, and the remaining assets and liabilities
acquired were not material.
On December 31, 2020, the Corporation acquired Design Public Group ("DPG"), a leading eCommerce distributor of high-design furniture and accessories for the
office and home. This transaction, which was structured as an asset acquisition and consummated entirely in cash of approximately $50 million, aligns with the
Corporation's long-term strategies related to digital and eCommerce initiatives. DPG's assets and liabilities are included in the Corporation's workplace furnishings
segment, and goodwill, which is tax-deductible, is assigned to its own reporting unit.
The DPG purchase price allocation, which was completed in the third quarter of 2021, and amortization periods of identified intangible assets as of the date of
acquisition is as follows (dollars in thousands):
Inventories
Receivables
Prepaid expenses and other current assets
Accounts payable and accrued expenses
Goodwill
Customer lists
Software
Trade names
Other intangible assets
Total net assets
Fair Value
Weighted Average Amortization
Period
$
$
1,597
4
467
(8,035)
33,588
11,500
5,500
5,200
300
50,121
11 Years
5 Years
10 Years
3 Years
As a result of further review and refinement of certain valuation assumptions, measurement period adjustments were recorded in 2021 related to the DPG
acquisition that increased working capital by $0.8 million, customer lists by $1.8 million, software by $1.7 million, trade names by $1.8 million, and other
intangible assets by $0.1 million; goodwill was decreased by $6.2 million.
51
All acquisitions in the years presented were accounted for using the acquisition method pursuant to ASC 805, with goodwill being recorded as a result of the
purchase price exceeding the fair value of identifiable tangible and intangible assets and liabilities.
Note 5. Supplemental Cash Flow Information
The Corporation's cash payments for interest, income taxes, and non-cash investing and financing activities are as follows (in thousands):
Cash paid for:
Interest
Income taxes
Changes in accrued expenses due to:
Purchases of property and equipment
Purchases of capitalized software
Note. 6. Goodwill and Other Intangible Assets
2021
2020
2019
$
$
$
$
7,571 $
26,428 $
235 $
38 $
7,472 $
31,441 $
6,406 $
223 $
9,867
21,181
(8,476)
653
Goodwill and other intangible assets included in the Consolidated Balance Sheets consisted of the following (in thousands):
Goodwill
Definite-lived intangible assets
Indefinite-lived intangible assets
Total goodwill and other intangible assets
January 1, 2022
January 2, 2021
$
$
297,339 $
147,627
26,536
471,502 $
292,434
139,863
26,599
458,896
52
Goodwill
The changes in the carrying amount of goodwill, by reporting segment, are as follows (in thousands):
Balance as of December 28, 2019
Goodwill
Accumulated impairment losses
Net goodwill balance as of December 28, 2019
Goodwill acquired during the year
Impairment losses
Balance as of January 2, 2021
Goodwill
Accumulated impairment losses
Net goodwill balance as of January 2, 2021
Goodwill acquired during the year / measurement period adjustments
Impairment losses
Balance as of January 1, 2022
Goodwill
Accumulated impairment losses
Net goodwill balance as of January 1, 2022
Workplace
Furnishings
Residential
Building Products
Total
$
$
$
$
128,677 $
(44,376)
84,301 $
186,662 $
(143)
186,519 $
39,800
(28,500)
10,314
—
168,477
(72,876)
95,601 $
196,976
(143)
196,833 $
(6,211)
(5,750)
16,866
—
162,266
(78,626)
83,640 $
213,842
(143)
213,699 $
315,339
(44,519)
270,820
50,114
(28,500)
365,453
(73,019)
292,434
10,655
(5,750)
376,108
(78,769)
297,339
Goodwill acquired in 2021 was the result of the Corporation's acquisition of residential building products companies. The decrease in workplace furnishings
goodwill in 2021 was the result of the finalization of the acquisition accounting for DPG. See "Note 4. Acquisitions" for additional information.
In the fourth quarter of 2021, the Corporation recorded a pretax goodwill impairment charge of $5.8 million in connection with the decision to exit the Maxon
office furniture brand. This action is consistent with the Corporation's broader business simplification efforts in the workplace furnishings segment. The Maxon
reporting unit has no remaining goodwill.
Definite-lived intangible assets
The table below summarizes amortizable definite-lived intangible assets, which are reflected in "Goodwill and Other Intangible Assets" in the Corporation’s
Consolidated Balance Sheets (in thousands):
Software
Trademarks and trade names
Customer lists and other
Net definite-lived intangible assets
Gross
196,754 $
14,264
109,635
320,653 $
$
$
January 1, 2022
Accumulated
Amortization
102,072 $
4,600
66,354
173,026 $
Net
Gross
94,682 $
9,664
43,281
147,627 $
182,127 $
9,964
91,002
283,093 $
January 2, 2021
Accumulated
Amortization
78,619 $
3,546
61,065
143,230 $
Net
103,508
6,418
29,937
139,863
The table above includes the estimated fair values of software, trademarks and trade names, and customer lists and other identified intangible assets acquired
through business combinations in 2021 and 2020. See "Note 4. Acquisitions" for additional information.
53
Amortization expense is reflected in "Selling and administrative expenses" in the Consolidated Statements of Comprehensive Income and was as follows (in
thousands):
Capitalized software
Other definite-lived intangibles
$
$
2021
23,649 $
6,507 $
2020
19,313 $
4,950 $
2019
18,130
6,275
The occurrence of events such as acquisitions, dispositions, or impairments may impact future amortization expense. 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
$
2022
29.9 $
2023
25.7 $
2024
21.4 $
2025
18.9 $
2026
16.6
Indefinite-lived intangible assets
The Corporation also owns certain intangible assets, which are deemed to have indefinite useful lives because they are expected to generate cash flows indefinitely.
These indefinite-lived intangible assets are reflected in "Goodwill and Other Intangible Assets" in the Consolidated Balance Sheets (in thousands):
Trademarks and trade names
January 1, 2022
January 2, 2021
$
26,536 $
26,599
The immaterial change in the indefinite-lived intangible assets balances shown above is related to foreign currency translation impacts.
Impairment Analysis
The Corporation evaluates its goodwill and indefinite-lived intangible assets for impairment on an annual basis during the fourth quarter, or whenever indicators of
impairment exist. The Corporation also evaluates long-lived assets (which include definite-lived intangible assets) for impairment if indicators exist.
The Corporation elected to perform a qualitative assessment for purposes of its annual goodwill impairment testing in 2021. Based on this assessment, management
concluded that it was more likely than not that the fair value of each reporting unit was greater than its carrying value. Therefore, no further quantitative testing
was performed. Near the end of the fourth quarter, subsequent to the annual impairment testing, a triggering event occurred that was specific to the Maxon
reporting unit, and which resulted in the impairment charge discussed herein.
The Corporation also elected to perform a qualitative assessment for purposes of its annual impairment testing for certain indefinite-lived intangible assets in 2021.
Based on this assessment, management concluded that it was more likely than not that the fair value of the respective assets was greater than carrying value.
Quantitative impairment testing was performed for the remaining indefinite-lived intangible assets, with no impairments identified. Additionally, there were no
impairments identified with respect to long-lived assets in 2021.
54
Note 7. Debt
Debt is as follows (in thousands):
Revolving credit facility with interest at a variable rate
(January 1, 2022 - 1.1%; January 2, 2021 - 1.2%)
Fixed rate notes due in 2025 with an interest rate of 4.22%
Fixed rate notes due in 2028 with an interest rate of 4.40%
Other amounts
Deferred debt issuance costs
Total debt
Less: Current maturities
Long-term debt
Aggregate maturities of debt are as follows (in thousands):
2022
3,221 $
Maturities of debt
$
January 1, 2022
January 2, 2021
$
$
75,000 $
50,000
50,000
3,221
(392)
177,829
3,221
174,608 $
75,000
50,000
50,000
841
(476)
175,365
841
174,524
2023
75,000 $
2024
— $
2025
50,000 $
2026
— $
Thereafter
50,000
The carrying value of the Corporation's outstanding variable-rate, long-term debt obligations at January 1, 2022 was $75 million, which approximated fair value.
The fair value of the fixed rate notes was estimated based on a discounted cash flow method (Level 2) to be $114 million at January 1, 2022.
As of January 1, 2022, the Corporation’s revolving credit facility borrowings were under the credit agreement entered into on April 20, 2018 with a scheduled
maturity of April 20, 2023. The Corporation deferred the debt issuance costs related to the credit agreement, which are classified as assets, and is amortizing them
over the term of the credit agreement. The current portion of debt issuance costs of $0.4 million is the amount to be amortized over the next twelve months based
on the current credit agreement and is reflected in "Prepaid expenses and other current assets" in the Consolidated Balance Sheets. The long-term portion of debt
issuance costs of $0.1 million is reflected in "Other Assets" in the Consolidated Balance Sheets.
As of January 1, 2022, there was $75 million outstanding under the $450 million revolving credit facility. The entire amount drawn under the revolving credit
facility is considered long-term as the Corporation assumes no obligation to repay any of the amounts borrowed in the next twelve months. Based on current
earnings before interest, taxes, depreciation and amortization, the Corporation can access the full remaining $375 million of borrowing capacity available under the
revolving credit facility and maintain compliance with applicable covenants.
In addition to cash flows from operations, the revolving credit facility under the credit agreement is the primary source of daily operating capital for the
Corporation and provides additional financial capacity for capital expenditures, repurchases of common stock, and strategic initiatives, such as acquisitions. The
Corporation expects to refinance the revolving credit facility prior to its scheduled maturity in April 2023.
In addition to the revolving credit facility, the Corporation also has $100 million of borrowings outstanding under private placement note agreements entered into
on May 31, 2018. Under the agreements, the Corporation issued $50 million of seven-year fixed rate notes with an interest rate of 4.22 percent, due May 31, 2025,
and $50 million of ten-year fixed rate notes with an interest rate of 4.40 percent, due May 31, 2028. The Corporation deferred the debt issuance costs related to the
private placement note agreements, which are classified as a reduction of long-term debt, and is amortizing them over the terms of the private placement note
agreements. The deferred debt issuance costs do not reduce the amount owed by the Corporation under the terms of the private placement note agreements. As of
January 1, 2022, the debt issuance costs balance of $0.4 million related to the private placement note agreements is reflected in "Long-Term Debt" in the
Consolidated Balance Sheets.
The credit agreement and private placement notes both contain financial and non-financial covenants. The covenants under both are substantially the same. Non-
compliance with covenants under the agreements could prevent the Corporation from being able to access further borrowings, require immediate repayment of all
amounts outstanding, and/or increase the cost of borrowing.
55
Covenants require maintenance of financial ratios as of the end of any fiscal quarter, including:
•
•
a consolidated interest coverage ratio (as defined in the credit agreement) of not less than 4.0 to 1.0, based upon the ratio of (a) consolidated EBITDA for
the last four fiscal quarters to (b) the sum of consolidated interest charges; and
a consolidated leverage ratio (as defined in the credit agreement) of not greater than 3.5 to 1.0, based upon the ratio of (a) the quarter-end consolidated
funded indebtedness to (b) consolidated EBITDA for the last four fiscal quarters.
The most restrictive of the financial covenants is the consolidated leverage ratio requirement of 3.5 to 1.0. 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 items that increase
or decrease net income. As of January 1, 2022, the Corporation was below the maximum allowable ratio and was in compliance with all of the covenants and other
restrictions in the credit agreement. The Corporation expects to remain in compliance with all of the covenants and other restrictions in the credit agreement over
the next twelve months.
Note 8. Income Taxes
Significant components of the provision for income taxes, including those related to non-controlling interest, are as follows (in thousands):
Current:
Federal
State
Foreign
Current provision
Deferred:
Federal
State
Foreign
Deferred provision
Total income tax expense
2021
2020
2019
14,115 $
3,957
766
18,838
(699)
437
(120)
(382)
18,456 $
18,365 $
6,030
146
24,541
(9,100)
(2,395)
(580)
(12,075)
12,466 $
20,122
5,418
662
26,202
4,140
1,634
235
6,009
32,211
$
$
The differences between the actual tax expense and tax expense computed at the statutory United States federal tax rate are explained as follows (in thousands):
Federal statutory tax expense
State taxes, net of federal tax effect
Credit for research activities
Valuation allowance
Goodwill impairment
Executive compensation limitation
Other – net
Total income tax expense
$
$
2021
16,436 $
3,687
(3,965)
(221)
137
1,179
1,203
18,456 $
2020
11,420 $
2,387
(3,891)
1,264
1,453
529
(696)
12,466 $
2019
29,970
5,159
(4,050)
98
—
139
895
32,211
In the current year, the 2020 federal income tax returns were completed resulting in a $0.4 million benefit related to a change in estimate of research and
development credits and other items.
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.
56
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
Stock-based compensation
Accrued post-retirement benefit obligations
Vacation accrual
Warranty accrual
Tax loss and tax credit carryforwards
Capital loss carryforward
Lease liability
Payroll deferral
Other – net
Total deferred tax assets
Deferred income
Goodwill and other intangible assets
Prepaid expenses
Right of use asset
Tax over book depreciation
Total deferred tax liabilities
Valuation allowance
Total net deferred tax liabilities
Long-term net deferred tax assets
Long-term net deferred tax liabilities
Total net deferred tax liabilities
January 1,
2022
January 2,
2021
505 $
7,306
3,138
7,890
5,713
3,201
4,401
10,197
2,104
23,429
2,056
8,000
77,940 $
(5,049)
(49,744)
(6,481)
(23,109)
(56,582)
(140,965) $
(11,303)
(74,328) $
680
(75,008)
(74,328) $
1,228
7,187
2,725
8,494
6,676
2,896
4,185
9,338
2,012
16,392
4,114
7,491
72,738
(4,743)
(48,934)
(6,454)
(16,626)
(58,556)
(135,313)
(11,524)
(74,099)
607
(74,706)
(74,099)
$
$
$
$
$
The valuation allowance, which primarily relates to foreign deferred tax assets, is as follows (in thousands):
Year ended January 1, 2022
Year ended January 2, 2021
Year ended December 28, 2019
Balance at
beginning of
period
$
$
$
11,524 $
10,260 $
7,153 $
Charged to
expenses
Adjustments to
balance sheet
Balance at end of
period
(221) $
1,264 $
98 $
— $
— $
3,009 $
11,303
11,524
10,260
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):
Balance at beginning of period
Increases in positions taken in a prior period
New positions taken in a current period
Decrease due to lapse of statute of limitations
Balance at end of period
$
$
2021
2,227 $
81
568
(681)
2,195 $
2020
2,578
53
364
(768)
2,227
As of January 1, 2022, 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
57
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 recognizes interest related to unrecognized tax benefits in interest expense, and penalties in operating expenses, consistent with the recognition of
these items in prior reporting periods. The expenses and liabilities recorded for interest and penalties as of and for the years ended January 1, 2022 and January 2,
2021 are immaterial.
Tax years 2018 through 2020 remain open for examination by the Internal Revenue Service ("IRS"). Tax years 2016 through 2020, and 2015 through 2020 remain
open for examination in various state and foreign jurisdictions, respectively. The Corporation is not currently under federal examination. The Corporation is
currently under examination in certain states in which the outcome is expected to be immaterial.
Note 9. Fair Value Measurements of Financial Instruments
For recognition purposes, on a recurring basis, the Corporation is required to measure at fair value its marketable securities, derivative financial instruments, put
option liabilities, and deferred stock-based compensation. The marketable securities are comprised of money market funds, government securities, and corporate
bonds. When available, the Corporation uses quoted market prices to determine fair value and classifies such measurements within Level 1. Where market prices
are not available, the Corporation makes use of observable market-based inputs (prices or quotes from published exchanges and indexes) to calculate fair value
using the market approach, in which case the measurements are classified within Level 2. Significant unobservable inputs, which are classified within Level 3, are
used in the estimation of the fair value of put option liabilities, determined using a simulation model based on assumptions including future cash flows, discount
rates, and volatility.
Financial instruments measured at fair value were as follows (in thousands):
Balance as of January 1, 2022
Cash and cash equivalents (including money market funds) (1)
Government securities (2)
Corporate bonds (2)
Derivative financial instruments - liability (3)
Deferred stock-based compensation (4)
Put option liability (5)
Balance as of January 2, 2021
Cash and cash equivalents (including money market funds) (1)
Government securities (2)
Corporate bonds (2)
Derivative financial instruments - liability (3)
Deferred stock-based compensation (4)
Amounts in parentheses indicate liabilities.
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)
$
$
$
$
$
$
$
$
$
$
$
52,270 $
5,489 $
7,816 $
(959) $
(8,079) $
(5,100) $
116,120 $
6,371 $
7,228 $
(2,328) $
(7,207) $
52,270 $
— $
— $
— $
— $
— $
116,120 $
— $
— $
— $
— $
— $
5,489 $
7,816 $
(959) $
(8,079) $
— $
— $
6,371 $
7,228 $
(2,328) $
(7,207) $
—
—
—
—
—
(5,100)
—
—
—
—
—
The index below indicates the line item in the Consolidated Balance Sheets where the financial instruments are reported:
(1) "Cash and cash equivalents"
(2) Current portion - "Short-term investments"; Long-term portion - "Other Assets"
(3) Current portion - "Accounts payable and accrued expenses"; Long-term portion - "Other Long-Term Liabilities"
(4) Current portion - "Current maturities of other long-term obligations"; Long-term portion - "Other Long-Term Liabilities"
(5) "Other Long-Term Liabilities"
58
Note 10. Accumulated Other Comprehensive Income (Loss) and Shareholders’ Equity
Accumulated Other Comprehensive Income (Loss)
The following table summarizes the components of accumulated other comprehensive income (loss) and the changes in accumulated other comprehensive income
(loss), net of tax, as applicable (in thousands):
Foreign
Currency
Translation
Adjustment
Unrealized
Gains
(Losses) on
Debt
Securities
Pension and Post-
retirement
Liabilities
Derivative
Financial
Instruments
Accumulated Other
Comprehensive
Income (Loss)
Balance as of December 29, 2018
Other comprehensive income (loss) before reclassifications
Tax (expense) or benefit
Reclassification of stranded tax impact
Amounts reclassified from accumulated other
comprehensive income (loss), net of tax
Balance as of December 28, 2019
Other comprehensive income (loss) before reclassifications
Tax (expense) or benefit
Amounts reclassified from accumulated other
comprehensive income (loss), net of tax
Balance as of January 2, 2021
Other comprehensive income (loss) before reclassifications
Tax (expense) or benefit
Amounts reclassified from accumulated other
comprehensive income (loss), net of tax
Balance as of January 1, 2022
Amounts in parentheses indicate reductions to equity.
$
$
$
$
(2,973) $
61
—
—
—
(2,912) $
1,439
—
402
(1,071) $
417
—
—
(654) $
(156)
318
(67)
—
—
95
335
(70)
—
360
(381)
80
—
59
$
$
$
$
(2,929) $
(2,254)
606
(1,185)
—
(5,762) $
(1,162)
242
—
(6,682) $
1,668
(430)
—
(5,444) $
2,459 $
(1,739)
403
446
(1,063)
506 $
(3,242)
759
217
(1,760) $
374
(88)
738
(736) $
(3,599)
(3,614)
942
(739)
(1,063)
(8,073)
(2,630)
931
619
(9,153)
2,078
(438)
738
(6,775)
Interest Rate Swap
In 2019, the Corporation entered into an interest rate swap transaction to hedge $75 million of outstanding variable rate revolver borrowings against future interest
rate volatility. Under the terms of this interest rate swap, the Corporation pays a fixed rate of 1.42 percent and receives one month LIBOR on a $75 million
notional value expiring April 2023. As of January 1, 2022, the fair value of the Corporation's interest rate swap liability was $1.0 million; see "Note 9. Fair Value
Measurements of Financial Instruments". The unrecognized change in value of the interest rate swap is reported net of tax as $(0.7) million in "Accumulated other
comprehensive income (loss)" in the Consolidated Balance Sheets.
The following table details the reclassifications from accumulated other comprehensive income (loss) (in thousands):
Details about Accumulated Other Comprehensive
Income (Loss) Components
Derivative financial instruments
Affected Line Item in the Statement Where Net
Income is Presented
Interest rate swap
Foreign currency translation
Foreign entity reorganization
Amounts in parentheses indicate reductions to profit.
Interest expense, net
Income tax expense
Selling and administrative expenses
Net of tax
$
$
2021
2020
(965) $
227
—
(738) $
(278) $
61
(402)
(619) $
2019
1,392
(329)
—
1,063
59
Director Plan
In May 2017, the Corporation registered 300,000 shares of its common stock under its 2017 Equity Plan for Non-Employee Directors of HNI Corporation (the
"2017 Director Plan"). The 2017 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 2017 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.
Common stock was issued under the Director Plans as follows:
Director Plan issued shares of common stock
2021
24,779
2020
37,833
2019
37,269
Dividend
The Corporation declared and paid cash dividends per common share as follows (in dollars):
Dividends per common shares
$
2021
1.24 $
2020
1.22 $
2019
1.21
Members' Stock Purchase Plan
During 2017, shareholders approved the HNI Corporation Members' Stock Purchase Plan (the "2017 MSPP"). Under the 2017 MSPP, 800,000 shares of common
stock were registered for issuance to participating members. Under the 2017 MSPP, 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 MSPP is
85 percent of the closing price on the exercise date. No member may purchase stock under the MSPP in an amount which exceeds a maximum fair value of
$25,000 in any calendar year. The following table provides the details of stock under the MSPPs:
Shares of common stock issued
Average price per share
2021
68,467
34.49 $
2020
92,701
25.30 $
2019
76,041
30.67
$
An additional 432,055 shares were available for issuance under the 2017 MSPP as of January 1, 2022.
Change in Control
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 percent 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 Chief Executive Officer) annual salary and the average of the prior two years' bonuses.
Stock Repurchase
The par value method of accounting is used for common stock repurchases. The following table summarizes shares repurchased and settled by the Corporation (in
thousands, except share and per share data):
Shares repurchased
Average price per share
Cash purchase price
Purchases unsettled as of year end
Prior year purchases settled in current year
Shares repurchased per cash flow
2021
1,515,067
2020
214,200
39.89 $
29.83 $
2019
2,286,200
36.70
(60,436) $
1,269
—
(59,167) $
(6,390) $
—
(374)
(6,764) $
(83,907)
374
(354)
(83,887)
$
$
$
60
As of January 1, 2022, approximately $97.9 million of the Board's current repurchase authorization remained unspent.
Note 11. Stock-Based Compensation
Under the Corporation’s 2021 Stock-Based Compensation Plan (the "2021 Plan"), effective May 24, 2021, 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 2021 Plan in May
2021, no future awards were granted under the Corporation’s 2017 Stock-Based Compensation Plan (the "2017 Plan" and together with the 2021 Plan, the "Plans"),
but all outstanding awards previously granted under the 2017 Plan shall remain outstanding in accordance with their terms. As of January 1, 2022, there were
approximately 3.0 million shares available for future issuance under the Plans. The Plans are administered by the Human Resources and Compensation Committee
of the Board. Forms of awards issued under the Plans include stock options, restricted stock units based on a service condition ("RSUs"), and restricted stock units
based on both financial performance and service conditions ("PSUs"). The Corporation uses common shares held in treasury to satisfy share option exercises and
distributions of shares related to vested RSUs and PSUs.
RSUs awarded prior to 2020 generally cliff-vest after three years, while RSUs awarded starting in 2020 generally vest ratably over three years. PSUs were awarded
starting in 2020, and generally vest at the end of a three year period, subject to a performance metric based on the Corporation's cumulative profitability during the
period. PSUs and RSUs awarded starting in 2020 generally accrue cash dividends during the vesting periods, with payment made when earned shares are
distributed to participants. Stock options awarded to members 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 stock-based compensation expense at grant date, based on the fair value of the award, and recognizes expense over the employees'
requisite service periods, adjusted for an estimated forfeiture rate for those shares not expected to vest. Additionally, expense related to PSUs is periodically
adjusted for the probable number of shares to be awarded at the end of the three year performance period.
Compensation cost charged against operations for the Plans and the 2017 MSPP described in "Note 10. Accumulated Other Comprehensive Income (Loss) and
Shareholders' Equity" in the Notes to Consolidated Financial Statements was as follows (in thousands):
Compensation cost
$
2021
12,881 $
2020
7,827 $
2019
6,830
The total income tax benefit recognized in the Consolidated Statements of Comprehensive Income for share-based compensation arrangements was as follows (in
thousands):
Income tax benefit
$
2021
3,076 $
2020
1,925 $
2019
1,545
61
RSUs
The following table summarizes the changes in RSUs:
Nonvested as of December 29, 2018
Granted
Vested
Forfeited
Nonvested as of December 28, 2019
Granted
Vested
Forfeited
Nonvested as of January 2, 2021
Granted
Vested
Forfeited
Nonvested as of January 1, 2022
Number of Shares
Weighted-Average
Grant Date Fair
Value
45,724 $
10,000
(24,823)
(9,289)
21,612 $
173,766
(6,968)
(5,930)
182,480 $
430,109
(62,989)
(4,541)
545,059 $
36.49
36.05
33.30
40.22
38.41
36.78
40.77
37.50
36.80
37.02
37.09
32.90
36.98
As of January 1, 2022, there was $6.7 million of unrecognized compensation cost related to RSUs, which the Corporation expects to recognize over a weighted-
average period of 1.0 year. The total value of shares vested was as follows (in thousands):
Value of shares vested
PSUs
The following table summarizes the changes in PSUs:
Nonvested as of December 28, 2019
Granted
Forfeited
Nonvested as of January 2, 2021
Granted
Forfeited
Nonvested as of January 1, 2022
$
2021
2,336 $
2020
284 $
2019
827
Number of Shares
Weighted-Average
Grant Date Fair
Value
— $
157,266
(9,440)
147,826 $
163,650
(2,036)
309,440 $
—
37.64
38.08
37.62
36.99
37.61
37.29
As of January 1, 2022, there was $4.9 million of unrecognized compensation cost related to PSUs, which the Corporation expects to recognize over a weighted-
average period of 1.0 year.
62
Stock Options
Stock-based compensation expense related to stock options 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 (weighted-average)
There were no stock options granted in 2021 or 2020.
2019
5 years
33.86 %
2.98 %
2.52 %
Expected volatilities were based on historical volatility as the Corporation does not expect 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 the historical daily frequency for a period of time equal to the expected term. The
Corporation used the current dividend yield as there are no plans to substantially increase or decrease its dividends. The Corporation used historical exercise
experience 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. The amount of stock-based compensation expense recognized during a period is also based on the portion of the stock
options that are ultimately expected to vest. The Corporation estimates pre-vesting forfeitures at the time of grant by analyzing historical data and revises those
estimates in subsequent periods if actual forfeitures differ from those estimates.
The following table summarizes the changes in outstanding stock options:
Outstanding as of December 29, 2018
Granted
Exercised
Forfeited or Expired
Outstanding as of December 28, 2019
Exercised
Forfeited or Expired
Outstanding as of January 2, 2021
Exercised
Forfeited or Expired
Outstanding as of January 1, 2022
A summary of the Corporation’s non-vested stock options and changes during the year are presented below:
Non-vested as of January 2, 2021
Vested
Forfeited
Non-vested as of January 1, 2022
Number of Shares
Weighted Average
Exercise Price
3,627,005 $
637,763
(921,900)
(120,143)
3,222,725 $
(188,734)
(27,813)
3,006,178 $
(814,639)
(832)
2,190,707 $
36.89
39.64
30.29
39.29
39.24
29.24
42.38
39.84
35.04
39.77
41.62
Number of Shares
Weighted Average
Grant-Date Fair
Value
1,195,317 $
(238,046)
(832)
956,439 $
10.62
13.97
9.88
9.79
As of January 1, 2022, there was $0.5 million of unrecognized compensation cost related to stock option awards, which the Corporation expects to recognize over a
weighted-average period of 0.6 years.
63
Information about stock options expected to vest or currently exercisable is as follows:
Expected to vest
Exercisable
Other information for the last three years is as follows (in thousands):
Total fair value of options vested
Total intrinsic value of options exercised
Cash received from exercise of stock options
Tax benefit realized from exercise of stock options
Weighted-average grant-date fair value of options granted
January 1, 2022
Weighted-
Average Exercise
Price
Weighted-Average
Remaining Exercisable
Period
(years)
Aggregate
Intrinsic Value
($000s)
Number of Shares
932,399 $
1,234,268 $
39.18
43.50
6.7 $
4.2 $
2,676
3,510
$
$
$
$
$
2021
3,326 $
5,433 $
28,549 $
1,000 $
— $
2020
3,608 $
1,527 $
5,519 $
376 $
— $
2019
11,470
5,981
27,926
1,353
9.84
Deferred Compensation
The following table details deferred compensation, which is a combination of cash and stock, and the affected line item in the Consolidated Balance Sheets where
deferred compensation is presented (in thousands):
Current maturities of other long-term obligations
Other long-term liabilities
Total deferred compensation
Total fair-market value of deferred compensation
Note 12. Retirement Benefits
The Corporation has a defined contribution retirement plan covering substantially all members.
January 1, 2022
January 2, 2021
1,496 $
9,033
10,529 $
1,490
8,649
10,139
8,079 $
7,207
$
$
$
The Corporation's annual contribution to the plan is based on member eligible earnings. A portion of the contribution is also based on results of operations, and a
portion is contributed in the form of common stock of the Corporation. The following table reconciles the annual contribution (in thousands):
2020
6,870 $
19,941
26,811 $
2021
7,140 $
17,818
24,958 $
Stock contribution
Cash contribution
2019
7,237
21,171
28,408
$
$
Total annual contribution
Note 13. Post-Retirement Health Care
The Corporation offers a fixed subsidy to certain retirees who choose to participate in a third party insurance plan selected by the Corporation. Guidance on
employers’ accounting for other post-retirement plans requires recognition of the overfunded or underfunded status on the balance sheet. Under this guidance,
gains and losses, prior service 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.
64
The following table sets forth the activity and reporting location of the benefit obligation and plan assets (in thousands):
Change in benefit obligation
Benefit obligation at beginning of year
Service cost
Interest cost
Benefits paid
Actuarial loss (gain)
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
Non-current liabilities
Amounts recognized in Accumulated Other Comprehensive Income (Loss) (before tax) consist of:
Actuarial loss
Change in Accumulated Other Comprehensive Income (Loss) (before tax):
Amount disclosed at beginning of year
Actuarial loss (gain)
Amortization of transition amount
Amount disclosed at end of year
Estimated future benefit payments are as follows (in thousands):
Fiscal 2022
Fiscal 2023
Fiscal 2024
Fiscal 2025
Fiscal 2026
Fiscal 2027 - 2031
Expected contributions are as follows (in thousands):
Fiscal 2022
65
$
$
$
$
$
$
$
$
$
$
2021
2020
23,403 $
597
549
(1,073)
(225)
23,251 $
— $
—
1,073
—
(1,073)
— $
(23,251) $
21,818
777
675
(1,204)
1,337
23,403
—
—
1,204
—
(1,204)
—
(23,403)
1,128 $
22,123 $
1,039
22,364
3,294 $
3,701
3,701 $
(225)
(182)
3,294 $
$
$
$
$
$
$
$
2,384
1,337
(20)
3,701
1,128
1,119
1,098
1,118
1,147
6,528
1,128
The discount rate is set at the measurement date to reflect the yield of a portfolio of high quality, fixed income debt instruments. The discount rate used was as
follows:
Discount rate
Note 14. Leases
2021
2.8 %
2020
2.4 %
2019
3.2 %
The Corporation leases certain showrooms, office space, manufacturing facilities, distribution centers, retail stores, and equipment and determines if an
arrangement is a lease at inception. ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make
lease payments arising from the lease. Leases with an initial term of twelve months or less are not recorded on the Consolidated Balance Sheets; expense for these
leases is recognized on a straight-line basis over the lease term. As of January 1, 2022, approximately 84 percent of the value of the Corporation's leased assets is
for real estate. The remaining 16 percent of the value of the Corporation's leased assets is for equipment.
As the rates implicit in its leases cannot be readily determined, the Corporation estimates secured incremental borrowing rates based on the information available at
the commencement date in determining the present value of lease payments. The Corporation uses separate discount rates for its United States operations and
overseas operations.
Certain real estate leases include one or more options to renew with renewal terms that can extend the lease term from one to ten years. The exercise of lease
renewal options is at the Corporation's sole discretion. Certain real estate leases include an option to terminate the lease term earlier than the specified lease term
for a fee. These options are not included as part of the lease term unless they are reasonably certain to be exercised.
Many of the Corporation's real estate lease agreements include periods of rent holidays and payments that escalate over the lease term by specified amounts. While
not significant, certain equipment leases have variable lease payments based on machine hours and certain real estate leases have rate changes based on the
Consumer Price Index. The Corporation's lease agreements do not contain any material residual value guarantees.
The Corporation has lease agreements with lease and non-lease components, which are generally accounted for as a single lease component.
On occasion, the Corporation rents or subleases certain real estate to third parties. This sublease portfolio consists mainly of operating leases for office furniture
showrooms and is not significant.
Lease costs included in the Consolidated Statements of Comprehensive Income consisted of the following (in thousands):
Classification
2021
2020
2019
Operating lease costs
Fixed
Short-term / variable
Finance lease costs
Amortization
Less: Sublease income
Total lease costs
Cost of sales
Selling and administrative expenses
Cost of sales
Selling and administrative expenses
Cost of sales
Selling and administrative, and interest expense
Cost of sales
Selling and administrative expenses
$
$
2,312 $
23,115
985
674
949
1,857
1,819 $
25,357
434
1,772
473
265
(174)
(346)
29,372 $
—
(130)
29,990 $
1,803
24,149
700
1,140
279
201
—
(181)
28,091
66
Maturity of lease liabilities as of January 1, 2022 is as follows (in thousands):
2022
2023
2024
2025
2026
Thereafter
Total lease payments
Less: Interest
Present value of lease liabilities
Operating Leases
(a)
$
$
21,876
18,883
14,943
13,338
10,070
15,225
94,335
(7,779)
86,556
Finance Leases (b)
2,914
$
2,841
2,484
2,085
139
—
10,463
(325)
10,138
$
$
$
Total
24,790
21,724
17,427
15,423
10,209
15,225
104,798
(8,104)
96,694
(a) At this time there are no operating lease options to extend lease terms that are reasonably certain of being exercised. Currently the Corporation has $17.3
million of legally binding minimum lease payments for operating leases signed but not yet commenced, which are excluded from operating lease
liabilities.
(b) At this time there are no finance lease options to extend lease terms that are reasonably certain of being exercised. Currently the Corporation has $3.4
million of legally binding minimum lease payments for finance leases signed but not yet commenced, which are excluded from finance lease liabilities.
The following table summarizes the weighted-average discount rates and weighted-average remaining lease terms for operating and finance leases as of January 1,
2022:
Operating leases
Finance leases
Weighted-Average Discount
Rate (percent)
Weighted-Average
Remaining Lease Term
(years)
3.0 %
1.8 %
5.3
3.8
The following table summarizes cash paid for amounts included in the measurements of lease liabilities and the leased assets obtained in exchange for new
operating and finance lease liabilities (in thousands):
Cash paid for amounts included in the measurements of lease liabilities
Operating cash flows from operating / finance leases
Financing cash flows from finance leases
Leased assets obtained in exchange for new operating / finance lease liabilities
Note 15. Guarantees, Commitments, and Contingencies
2021
2020
2019
$
$
$
24,679 $
2,671 $
49,344 $
31,461 $
674 $
27,260 $
26,446
419
25,268
The Corporation utilizes letters of credit and surety bonds in the amount of approximately $27 million to back certain insurance policies and payment
obligations. Additionally, the Corporation periodically utilizes trade letters of credit and banker's acceptances to guarantee certain payments to overseas suppliers;
as of January 1, 2022, there were no outstanding amounts related to these types of guarantees. The letters of credit, bonds, and banker's acceptances reflect fair
value as a condition of their underlying purpose and are subject to competitively determined fees.
The Corporation has contingent liabilities which have arisen in the ordinary course of its business, including liabilities relating to pending litigation, environmental
remediation, taxes, and other claims. It is the Corporation's opinion, after consultation with legal counsel, that liabilities, if any, resulting from these matters are not
expected to have a material adverse effect on the Corporation's financial condition, cash flows, or on the Corporation's quarterly or annual operating results when
resolved in a future period.
67
Note 16. Reportable Segment Information
Management views the Corporation as two reportable segments based on industries: workplace furnishings and residential building products.
The aggregated workplace furnishings segment manufactures and markets a broad line of commercial and home office furniture which includes panel-based and
freestanding furniture systems, seating, storage, tables, and architectural products. The residential building products segment manufactures and markets a full array
of gas, wood, electric, and pellet fueled fireplaces, inserts, stoves, facings, and accessories.
For purposes of segment reporting, intercompany sales between segments are not material, and operating profit is income before income taxes exclusive of certain
unallocated corporate expenses. These unallocated general corporate expenses include the net costs of the Corporation’s corporate operations. Management views
interest income and expense as corporate financing costs and not as a reportable segment cost. In addition, management applies an effective income tax rate to its
consolidated income before income taxes so income taxes are not reported or viewed internally on a segment basis. Identifiable assets by segment are those assets
applicable to the respective industry segments. Corporate assets consist principally of cash and cash equivalents, short-term investments, long-term investments,
IT infrastructure, and corporate office real estate and related equipment.
No geographic information for revenues from external customers or for long-lived assets is disclosed since the Corporation’s primary market and capital
investments are concentrated in the United States.
68
Reportable segment data reconciled to the Corporation's consolidated financial statements was as follows (in thousands):
2021
2020
2019
Net Sales:
Workplace furnishings
Residential building products
Total
Income (Loss) Before Income Taxes:
Workplace furnishings
Residential building products
General corporate
Operating income
Interest expense, net
Total
Depreciation and Amortization Expense:
Workplace furnishings
Residential building products
General corporate
Total
Capital Expenditures (including capitalized software):
Workplace furnishings
Residential building products
General corporate
Total
Identifiable Assets:
Workplace furnishings
Residential building products
General corporate
Total
Note 17. Restructuring
$
$
$
$
$
$
$
$
$
$
1,433,985 $
750,423
2,184,408 $
1,365,711 $
589,652
1,955,363 $
1,697,186
549,761
2,246,947
(539) $
141,871
(55,912)
85,420
7,153
78,267 $
47,838 $
10,001
25,307
83,146 $
34,809 $
16,091
15,648
66,548 $
(4,972) $
109,321
(42,974)
61,375
6,990
54,385 $
44,615 $
9,386
23,682
77,683 $
24,188 $
8,213
9,401
41,802 $
103,894
94,329
(46,881)
151,342
8,628
142,714
44,887
8,884
23,656
77,427
41,137
12,225
13,523
66,885
808,963 $
479,462
209,472
1,497,897 $
762,780 $
381,550
273,702
1,418,032 $
874,913
364,653
212,946
1,452,512
Restructuring costs in 2021 relate to business simplification and capacity expansion actions, including the planned exit of a small office furniture brand,
restructuring of a workplace furnishings eCommerce business, and the addition of a new manufacturing facility in Mexico. Charges incurred by the workplace
furnishing segment include $7.4 million of inventory valuation adjustments and $0.2 million of facility set-up costs including asset relocation and related travel
recorded to "Cost of sales" in the Consolidated Statements of Comprehensive Income. $0.5 million of related severance costs were recorded to "Restructuring and
impairment charges" in the Consolidated Statements of Comprehensive Income, of which $0.2 million was incurred by the workplace furnishings segment, with
the remainder being a corporate charge.
No restructuring charges were recorded in 2020, while in 2019 restructuring costs of $2.4 million were incurred related to a structural realignment in the workplace
furnishings segment, primarily severance.
As of January 1, 2022, $0.5 million of accrued restructuring expenses are included in "Accounts payable and accrued expenses" in the Consolidated Balance
Sheets. Cash payments made for restructuring costs in 2021 related to the business simplification and
69
capacity expansion actions described above were not significant, and any future restructuring costs connected to these current initiatives are not expected to be
material.
70
Hickory Business Furniture, LLC
North Carolina
Subsidiary
Allsteel Inc.
Design Holdings Inc.
Dongguan Lamex Furniture Co. Ltd.
Global Known Ltd.
The Gunlocke Company L.L.C.
Hearth & Home Technologies LLC
HFM Partners
HNI Asia L.L.C.
HNI Asia Technology Services (Shenzhen) Limited
HNI Holdings Inc.
HNI Hong Kong Limited
HNI International Inc.
HNI International (Mexico) L.L.C.
HNI International (Puerto Rico) L.L.C.
HNI Middle East DMCC
HNI Office India Ltd.
HNI Services LLC
HNI Singapore Private Limited
HNI Technologies Inc.
The HON Company LLC
HON INDUSTRIES (Canada) Inc.
HON Internacional de Mexico S.de R.L.de C.V.
HON Internacional Servicios de Mexico,
S.de R.L. de C.V.
Lamex China Investment Ltd.
Lamex Trading Co. Ltd.
Maxon Furniture Inc.
Monessen Hearth Canada, Inc.
Monessen Hearth Systems Company, LLC
OFM, LLC
Pearl City Insurance Company
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
Country/State
of Incorporation
Doing Business As
Illinois
Iowa
PRC
Allsteel Inc.; HNI Global; HNI One; HNI One - Global Accounts;
One from HNI; HNI Canada
Design Holdings Inc.
Dongguan Lamex Furniture Co. Ltd.
Hong Kong
Global Known Ltd.
Iowa
Iowa
Iowa
Iowa
PRC
Iowa
The Gunlocke Company L.L.C.
Hearth & Home Technologies; Stellar Hearth; Fireside Hearth &
Home
HFM Partners
Hickory Business Furniture, LLC;
HBF Furniture LLC
HNI Asia L.L.C.
HNI Asia Technology Services (Shenzhen) Limited
HNI Holdings Inc.
Hong Kong
HNI Hong Kong Limited
Iowa
Iowa
Iowa
Dubai
India
Iowa
HNI International Inc.
HNI International (Mexico) L.L.C.
HNI International (Puerto Rico) L.L.C.
HNI Middle East DMCC
HNI India
HNI Services LLC
Singapore
HNI Singapore Private Limited
Iowa
Iowa
Canada
Mexico
Mexico
Hong Kong
Hong Kong
Iowa
Canada
Kentucky
Delaware
Arizona
HNI Technologies Inc.
The HON Company LLC; Lewis Office LLC;
Lewis Office; The HON Company LLC - ATHC
HON INDUSTRIES (Canada) Inc.
HON Internacional de Mexico S.de R.L.de C.V.
HON Internacional Servicios de Mexico,
S.de R.L. de C.V.
Lamex China Investment Ltd.
Lamex Trading Co. Ltd.
Maxon Furniture Inc.
Monessen Hearth Canada, Inc.
Monessen Hearth Systems Company, LLC;
Vermont Castings Group
OFM, LLC; Essentials by OFM
Pearl City Insurance Company
EXHIBIT 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the registration statements (No. 333-256458, No. 333-217793, No. 333-190646, No. 333-168761, No. 333-168760,
No. 333-168758, No. 333-159935, No. 333-142742, No. 333-91682, and No. 333-31366) on Form S-8 and (No. 333-159127) on Form S-3 of our report dated
March 1, 2022, with respect to the consolidated financial statements of HNI Corporation and the effectiveness of internal control over financial reporting.
Our report dated March 1, 2022 on the effectiveness of internal control over financial reporting as of January 1, 2022 contains an explanatory paragraph that states
the Company acquired Trinity Hearth and Home Inc. and The Outdoor GreatRoom Company during 2021, and management excluded these acquired businesses
from its assessment of the effectiveness of the Company's internal control over financial reporting as of January 1, 2022. Our audit of internal control over financial
reporting of the Company also excluded an evaluation of the internal control over financial reporting of the operations of the acquired businesses.
/s/ KPMG LLP
Chicago, Illinois
March 1, 2022
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
Sarbanes-Oxley Act Section 302
EXHIBIT 31.1
I, Jeffrey D. Lorenger, certify that:
1. I have reviewed this Annual Report on Form 10-K of HNI Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial
condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a – 15(e) and 15d – 15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a – 15(f) and 15d – 15(f)) for the registrant
and have:
a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the
period in which this report is being prepared;
b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
c. evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter
(the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's
auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to
adversely affect the registrant's ability to record, process, summarize, and report financial information; and
b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial
reporting.
Date: March 1, 2022
By:
/s/ Jeffrey D. Lorenger
Name: Jeffrey D. Lorenger
Title: Chairman, President, and Chief Executive Officer
CERTIFICATION OF CHIEF FINANCIAL OFFICER
Sarbanes-Oxley Act Section 302
EXHIBIT 31.2
I, Marshall H. Bridges, certify that:
1. I have reviewed this Annual Report on Form 10-K of HNI Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial
condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a – 15(e) and 15d – 15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a – 15(f) and 15d – 15(f)) for the registrant
and have:
a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the
period in which this report is being prepared;
b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
c. evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter
(the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's
auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to
adversely affect the registrant's ability to record, process, summarize, and report financial information; and
b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial
reporting.
Date: March 1, 2022
By:
/s/ Marshall H. Bridges
Name: Marshall H. Bridges
Title: Senior Vice President and Chief Financial Officer
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
EXHIBIT 32.1
In connection with the Annual Report on Form 10-K of HNI Corporation (the "Corporation") for the period ended January 1, 2022, as filed with the Securities and
Exchange Commission on the date hereof (the "Report"), Jeffrey D. Lorenger, as Chairman, President, and Chief Executive Officer of the Corporation, and
Marshall H. Bridges, as Senior Vice President and Chief Financial Officer of the Corporation, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation as of the
dates and for periods expressed in the Report.
Date: March 1, 2022
By:
/s/ Jeffrey D. Lorenger
Name: Jeffrey D. Lorenger
Title: Chairman, President, and Chief Executive Officer
Date: March 1, 2022
By:
/s/ Marshall H. Bridges
Name: Marshall H. Bridges
Title: Senior Vice President and Chief Financial Officer
This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-
Oxley Act of 2002, be deemed filed by the Corporation for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
BOARD OF DIRECTORS
Jeffrey D. Lorenger
Chairman, President, and Chief Executive Officer,
HNI Corporation
Mary K.W. Jones
Senior Vice President, General Counsel, and Worldwide
Public Affairs, Deere & Company
Mary A. Bell
Vice President (retired), Caterpillar Inc.
Miguel M. Calado
Chairman and President, WY Group
Cheryl A. Francis*
Co-Chairman, Corporate Leadership Center
John R. Hartnett
Executive Vice President, Illinois Tool Works Inc.
*Lead Director
CORPORATE INFORMATION
Larry B. Porcellato
Former Chief Executive Officer, The Homax Group, Inc.
Dhanusha Sivajee
Chief Marketing Officer, Angi Inc.
Abbie J. Smith
Chaired Professor, University of Chicago Booth School of
Business
Ronald V. Waters III
Independent Business Consultant and Former President and
Chief Executive Officer
CORPORATE HEADQUARTERS
600 East Second Street
Muscatine, Iowa 52761
INVESTOR RELATIONS
Copies of HNI’s 2021 Annual Report
on Form 10-K are available at
hnicorp.com.
Please direct investor relations
questions to:
HNI Corporation
Attn: Investor Relations
600 East Second Street
Muscatine, Iowa 52761
563.272.7400
TRANSFER AGENT AND
REGISTRAR
EQ Shareholder Services
1110 Centre Point Curve, Suite 101
Mendota Heights, Minnesota
800.468.9716
AUDITORS
KPMG LLP
Chicago, Illinois
OUTSIDE LEGAL COUNSEL
Hogan Lovells US LLP
Denver, Colorado
STOCK EXCHANGE LISTING
New York Stock Exchange
Symbol: HNI
2022 ANNUAL MEETING
Thursday, May 26, 2022
10:30 a.m. Central
Held virtually