HNI Corporation and SUBSIDIARIES
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INDEX
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PART I. FINANCIAL INFORMATION
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Page
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Item 1. Financial Statements
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Condensed Consolidated Balance Sheets
April 3, 2010, and January 2, 2010
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3
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Condensed Consolidated Statements of Income
Three Months Ended April 3, 2010, and April 4, 2009
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5
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Condensed Consolidated Statements of Cash Flows
Three Months Ended April 3, 2010, and April 4, 2009
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6
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Notes to Condensed Consolidated Financial Statements
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7
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Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
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17
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
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22
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Item 4. Controls and Procedures
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23
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PART II. OTHER INFORMATION
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Item 1. Legal Proceedings
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24
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Item 1A. Risk Factors
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24
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
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24
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Item 3. Defaults Upon Senior Securities - None
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-
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Item 5. Other Information – None
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-
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Item 6. Exhibits
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25
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SIGNATURES
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26
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EXHIBIT INDEX
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27
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HNI Corporation and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
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Three Months Ended
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Apr. 3,
2010
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Apr. 4,
2009
(As Adjusted)
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(In thousands, except share and per share data)
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Net sales
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$ | 363,506 | $ | 396,829 | ||||
Cost of sales
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244,326 | 274,183 | ||||||
Gross profit
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119,180 | 122,646 | ||||||
Selling and administrative expenses
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122,800 | 133,938 | ||||||
Restructuring and impairment
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1,834 | 5,085 | ||||||
Operating income (loss)
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(5,454 | ) | (16,377 | ) | ||||
Interest income
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88 | 135 | ||||||
Interest expense
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2,723 | 3,198 | ||||||
Earnings (loss) before income taxes
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(8,089 | ) | (19,440 | ) | ||||
Income taxes
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(3,947 | ) | (7,742 | ) | ||||
Income (loss) from continuing operations, less applicable income taxes
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(4,142 | ) | (11,698 | ) | ||||
Discontinued operations, less applicable income taxes
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(1,711 | ) | (161 | ) | ||||
Net income (loss)
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(5,853 | ) | (11,859 | ) | ||||
Less: Net income attributable to the noncontrolling interest
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(133 | ) | (27 | ) | ||||
Net income (loss) attributable to HNI Corporation
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$ | (5,986 | ) | $ | (11,886 | ) | ||
Income (loss) from continuing operations attributable to HNI Corporation per common share – basic
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$ | (0.09 | ) | $ | (0.26 | ) | ||
Discontinued operations attributable to HNI Corporation per common share – basic
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$ | (0.04 | ) | $ | (0.01 | ) | ||
Net income (loss) attributable to HNI Corporation per common share – basic
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$ | (0.13 | ) | $ | (0.27 | ) | ||
Average number of common shares outstanding – basic
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45,166,450 | 44,612,079 | ||||||
Income (loss) from continuing operations attributable to HNI Corporation per common share – diluted
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$ | (0.09 | ) | $ | (0.26 | ) | ||
Discontinued operations attributable to HNI Corporation per common share – diluted
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$ | (0.04 | ) | $ | (0.01 | ) | ||
Net income (loss) attributable to HNI Corporation per common share – diluted
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$ | (0.13 | ) | $ | (0.27 | ) | ||
Average number of common shares outstanding – diluted
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45,166,450 | 44,612,079 | ||||||
Cash dividends per common share
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$ | 0.215 | $ | 0.215 | ||||
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(In thousands)
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Apr. 3, 2010
(Unaudited)
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Jan. 2, 2010
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Finished products
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$ | 46,549 | $ | 48,198 | ||||
Materials and work in process
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41,752 | 40,322 | ||||||
LIFO allowance
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(23,376 | ) | (23,376 | ) | ||||
$ | 64,925 | $ | 65,144 |
Three Months Ended
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(In thousands)
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Apr. 3,
2010
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Apr. 4,
2009
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Net income (loss)
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$ | (5,853 | ) | $ | (11,859 | ) | ||
Other comprehensive income, net of income tax as applicable:
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Foreign currency translation adjustments
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(4 | ) | (91 | ) | ||||
Change in unrealized gains (losses) on marketable securities
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- | (133 | ) | |||||
Change in pension and postretirement liability
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79 | 79 | ||||||
Change in derivative financial instruments
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173 | (12 | ) | |||||
Comprehensive income (loss)
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$ | (5,605 | ) | $ | (12,016 | ) | ||
Comprehensive (income) attributable to noncontrolling interest
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(133 | ) | (27 | ) | ||||
Comprehensive income (loss) attributable to HNI Corporation
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$ | (5,738 | ) | $ | (12,043 | ) |
(in thousands)
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Foreign Currency Translation Adjustment
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Pension Postretirement Liability
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Derivative Financial Instruments
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Accumulated Other Comprehensive Loss
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Balance at January 2, 2010
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$ | 3,526 | $ | (2,710 | ) | $ | (1,590 | ) | $ | (774 | ) | |||||
Year-to date change
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(4 | ) | 79 | 173 | 248 | |||||||||||
Balance at
April 3, 2010
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$ | 3,522 | $ | (2,631 | ) | $ | (1,417 | ) | $ | (526 | ) |
Three Months Ended
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(In thousands, except per share data)
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Apr. 3,
2010
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Apr. 4,
2009
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Numerators:
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Numerator for both basic and diluted EPS attributable to Parent Company net income (loss)
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$ | (5,986 | ) | $ | (11,886 | ) | ||
Denominators:
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Denominator for basic EPS weighted-average common shares outstanding
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45,166 | 44,612 | ||||||
Potentially dilutive shares from stock-based compensation plans
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- | - | ||||||
Denominator for diluted EPS
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45,166 | 44,612 | ||||||
Earnings per share – basic
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$ | (0.13 | ) | $ | (0.27 | ) | ||
Earnings per share – diluted
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$ | (0.13 | ) | $ | (0.27 | ) |
(In thousands)
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Severance
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Facility Exit Costs & Other
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Total
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Balance as of January 2, 2010
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$ | 4,389 | $ | 1,569 | $ | 5,958 | ||||||
Restructuring charges
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1,286 | 548 | 1,834 | |||||||||
Cash payments
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(1,699 | ) | (877 | ) | (2,576 | ) | ||||||
Balance as of April 3, 2010
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$ | 3,976 | $ | 1,240 | $ | 5,216 |
Three Months Ended
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(in thousands)
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Apr. 3, 2010
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Apr. 4, 2009
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Discontinued operations:
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Operating loss before tax
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$ | (1,291 | ) | $ | (230 | ) | ||
Benefit for income tax
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(471 | ) | (69 | ) | ||||
Net loss from discontinued
operations, net of income tax
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(820 | ) | (161 | ) | ||||
Impairment loss and loss on sale of
discontinued operations:
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Impairment loss and loss on sale of
discontinued operations before tax
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(1,403 | ) | - | |||||
Benefit for income tax
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(512 | ) | - | |||||
Net impairment loss and loss on sale
of discontinued operations
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(891 | ) | - | |||||
Loss from discontinued operations, net
of income tax benefit
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$ | (1,711 | ) | $ | (161 | ) |
(in thousands)
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Apr. 3, 2010
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Prepaid Expenses and Other Current Assets
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Receivables
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$ | 3,062 | ||
Prepaid expenses
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105 | |||
3,167 | ||||
Other Assets
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Property and equipment
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389 | |||
Intangible assets
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1,595 | |||
1,983 | ||||
Accounts Payable and Accrued Expenses
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Accounts Payable
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514 | |||
Accrued Expenses
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492 | |||
1,006 | ||||
Total net assets held for sale
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$ | 4,144 |
(In thousands)
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Apr. 3, 2010
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Jan. 2, 2010
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Patents
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$ | 19,325 | $ | 19,325 | ||||
Customer relationships and other
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108,463 | 115,451 | ||||||
Less: accumulated amortization
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65,742 | 68,004 | ||||||
$ | 62,046 | $ | 66,772 |
(In millions)
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2010
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2011
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2012
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2013
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2014
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Amortization Expense
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$ | 8.3 | $ | 6.4 | $ | 5.8 | $ | 5.3 | $ | 4.7 |
(In thousands)
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Office
Furniture
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Hearth
Products
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Total
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Balance as of January 2, 2010
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Goodwill
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$ | 123,948 | $ | 166,525 | $ | 290,473 | ||||||
Accumulated impairment losses
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(29,359 | ) | - | (29,359 | ) | |||||||
94,589 | 166,525 | 261,114 | ||||||||||
Goodwill acquired during the quarter
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- | - | - | |||||||||
Impairment losses
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- | - | - | |||||||||
Goodwill related to the sale of business units
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- | (486 | ) | (486 | ) | |||||||
Balance as of April 3, 2010
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Goodwill
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123,948 | 166,039 | 289,987 | |||||||||
Accumulated impairment losses
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(29,359 | ) | - | (29,359 | ) | |||||||
$ | 94,589 | $ | 166,039 | $ | 260,628 |
Three Months Ended
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(In thousands)
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Apr. 3, 2010
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Apr. 4, 2009
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Balance at beginning of period
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$ | 12,684 | $ | 13,948 | ||||
Accruals for warranties issued during period
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4,107 | 4,039 | ||||||
Adjustments related to pre-existing warranties
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749 | (180 | ) | |||||
Settlements made during the period
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(4,644 | ) | (4,092 | ) | ||||
Balance at end of period
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$ | 12,896 | $ | 13,715 |
Three Months Ended
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(In thousands)
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Apr. 3, 2010
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Apr. 4, 2009
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Service cost
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$ | 90 | $ | 97 | ||||
Interest cost
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210 | 240 | ||||||
Amortization of transition obligation
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127 | 127 | ||||||
Amortization of (gain)/loss
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(4 | ) | (2 | ) | ||||
Net periodic benefit cost
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$ | 423 | $ | 462 |
(in thousands)
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Fair value as of measurement date
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Quoted prices in active markets for identical assets
(Level 1)
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Significant other observable inputs
(Level 2)
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Significant unobservable inputs
(Level 3)
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Investment in target funds
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$ | 7,717 | $ | - | $ | 7,717 | $ | - | ||||||||
Derivative financial instrument
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$ | (2,270 | ) | $ | - | $ | (2,270 | ) | $ | - |
(in thousands)
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Fair value as of measurement date
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Quoted prices in active markets for identical assets
(Level 1)
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Significant other observable inputs
(Level 2)
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Significant unobservable inputs
(Level 3)
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Investment in target funds
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$ | 5,744 | $ | - | $ | 5,744 | $ | - | ||||||||
Derivative financial instrument
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$ | (2,548 | ) | $ | - | $ | (2,548 | ) | $ | - |
Three Months Ended
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(In thousands)
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Apr. 3, 2010
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Apr. 4, 2009
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Net Sales:
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Office Furniture
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$ | 300,032 | $ | 330,800 | ||||
Hearth Products
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63,474 | 66,029 | ||||||
$ | 363,506 | $ | 396,829 | |||||
Operating Profit (Loss):
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Office furniture
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Operations before restructuring charges
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$ | 7,980 | $ | 3,652 | ||||
Restructuring and impairment charges
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(1,733 | ) | (2,989 | ) | ||||
Office furniture – net
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6,247 | 663 | ||||||
Hearth products
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Operations before restructuring charges
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(2,805 | ) | (9,237 | ) | ||||
Restructuring and impairment charges
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(101 | ) | (2,096 | ) | ||||
Hearth products – net
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(2,906 | ) | (11,333 | ) | ||||
Total operating profit
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3,341 | (10,670 | ) | |||||
Unallocated corporate expense
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(11,430 | ) | (8,770 | ) | ||||
Income (loss) before income taxes
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$ | (8,089 | ) | $ | (19,440 | ) | ||
Depreciation & Amortization Expense:
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Office furniture
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$ | 11,641 | $ | 13,165 | ||||
Hearth products
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3,779 | 5,014 | ||||||
General corporate
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640 | 1,061 | ||||||
$ | 16,060 | $ | 19,240 | |||||
Capital Expenditures:
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Office furniture
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$ | 3,561 | $ | 2,910 | ||||
Hearth products
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442 | 1,469 | ||||||
General corporate
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796 | 237 | ||||||
$ | 4,799 | $ | 4,616 | |||||
As of
Apr. 3, 2010
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As of
Apr. 4, 2009
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Identifiable Assets:
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Office furniture
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$ | 565,226 | $ | 659,776 | ||||
Hearth products
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284,881 | 321,115 | ||||||
General corporate
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85,588 | 97,043 | ||||||
$ | 935,695 | $ | 1,077,934 |
Three Months Ended
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(In thousands)
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Apr. 3,
2010
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Apr. 4,
2009
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Percent
Change
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Net sales
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$ | 363,506 | $ | 396,829 | -8.4 | % | ||||||
Cost of sales
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244,326 | 274,183 | -10.9 | |||||||||
Gross profit
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119,180 | 122,646 | -2.8 | |||||||||
Selling & administrative expenses
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122,800 | 133,938 | -8.3 | |||||||||
Restructuring & impairment charges
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1,834 | 5,085 | -63.9 | |||||||||
Operating income (loss)
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(5,454 | ) | (16,377 | ) | 66.7 | |||||||
Interest expense, net
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2,635 | 3,063 | -14.0 | |||||||||
Earnings (loss) before income taxes
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(8,089 | ) | (19,440 | ) | 58.4 | |||||||
Income taxes
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(3,947 | ) | (7,742 | ) | -49.0 | |||||||
Income (loss) from continuing operations
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(4,142 | ) | (11,698 | ) | 64.6 |
·
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a consolidated interest coverage ratio of not less than 4.0 to 1.0, based upon the ratio of (a) consolidated EBITDA (as defined in the credit agreement) for the last four fiscal quarters to (b) the sum of consolidated interest charges; and
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a consolidated leverage ratio of not greater than 3.0 to 1.0, based upon the ratio of (a) the quarter-end consolidated funded indebtedness (as defined in the credit agreement) to (b) consolidated EBITDA for the last four fiscal quarters.
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Period
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(a) Total Number of Shares (or Units) Purchased (1)
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(b) Average Price Paid per Share or Unit
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(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs
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(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet be Purchased Under the Plans or Programs
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1/03/10 – 1/30/10
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- | $ | - | - | $ | 163,612,128 | ||||||||||
1/31/10 – 2/27/10
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- | $ | - | - | $ | 163,612,128 | ||||||||||
2/28/10 – 4/03/10
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135,000 | $ | 24.38 | 135,000 | $ | 160,320,828 | ||||||||||
Total
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135,000 | 135,000 |
·
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Plan announced November 9, 2007, providing share repurchase authorization of $200,000,000 with no specific expiration date.
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·
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No repurchase plans expired or were terminated during the first quarter of fiscal 2010, nor do any plans exist under which the Corporation does not intend to make further purchases.
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HNI Corporation | |||
Date: May 5, 2010
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By:
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/s/ Kurt A. Tjaden | |
Name: Kurt A. Tjaden | |||
Title : Vice President and Chief Financial Officer | |||
EXHIBIT INDEX
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(10.1)
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Form of HNI Corporation 2007 Stock-Based Compensation Plan Restricted Stock Unit Award Agreement*
+
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(10.2)
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HNI Corporation 2007 Stock-Based Compensation Plan, as amended and restated, incorporated by reference to Appendix A to the Registrant's Proxy Statement on Schedule 14A filed March 26, 2010*
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(10.3)
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HNI Corporation Annual Incentive Plan (f/k/a HNI Corporation Executive Bonus Plan), as amended and restated, incorporated by reference to Appendix B to the Registrant's Proxy Statement on Schedule 14A filed March 26, 2010*
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(10.4)
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HNI Corporation Long-Term Performance Plan, as amended and restated, incorporated by reference to Appendix C to the Registrant's Proxy Statement on Schedule 14A filed March 26, 2010*
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(10.5)
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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*
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(31.1)
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Certification of the CEO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
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(31.2)
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Certification of the CFO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
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(32.1)
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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
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CONFIDENTIAL |
Overview of Your Restricted Stock Unit Grant
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1. |
Number of Restricted Stock Units Granted:
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2. |
Date of Grant:
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3. |
Vesting of Restricted Stock Units:
Subject to the terms of Section 7 below, 100% of the Restricted Stock Units granted above will vest on [Vesting Date].
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4. |
Impact of Vesting of Restricted Stock Units:
You will be issued Shares equal to the number of Restricted Stock Units granted above on the vesting date. A portion of the Shares will be withheld to pay applicable withholding taxes due on the vesting date.
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5. |
Stockholder Rights:
Prior to the time that your Restricted Stock Units vest and the Corporation has issued Shares relating to such Restricted Stock Units, you will not be deemed to be the holder of, or to have any of the rights of a holder with respect to, any Shares deliverable with respect to such Restricted Stock Units. Restricted Stock Units will not pay or accrue dividends.
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6. |
Non-Transferability of Restricted Stock Units:
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(a)
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No assignment or transfer of Restricted Stock Units, whether voluntary or involuntary, by operation of law or otherwise, can be made except by will or the laws of descent and distribution or pursuant to beneficiary designation procedures approved by the Corporation.
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(b)
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Notwithstanding the preceding paragraph, you may transfer your Restricted Stock Units to one or more family member (as such term is used in the Plan) or to one or more trusts established solely for the benefit of one or more family member or to one or more partnerships in which the only partners are family members; provided, however, that (i) no such transfer shall be effective unless you deliver reasonable prior notice thereof to the Corporation and such transfer is thereafter effected subject to the specific authorization of, and in accordance with any terms and conditions that shall have been made applicable thereto by, the Committee or the Board, (ii) any such transferee shall be subject to the same terms and conditions hereunder as you are and (iii) such transfer can not be made for value.
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7. |
Termination of Employment:
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(a)
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By Death or Disability:
Restricted Stock Units which are outstanding as of the date of death or disability (as such term is used in the Plan) shall become immediately 100% vested, provided you are employed by the Corporation on the date of death or disability.
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(b)
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For other reasons:
Restricted Stock Units which are not vested as of the date of employment termination for reasons other than those specified in Section 7(a) or Section 8 shall immediately terminate, and shall be forfeited to the Corporation.
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8. |
Change in Control:
In the event of a Change in Control, all Restricted Stock Units shall become fully vested and Section 10.1 of the Plan will apply.
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Date: May 5, 2010
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By:
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/s/ Stan A. Askren | |
Name: Stan A. Askren | |||
Title: Chairman, President and Chief Executive Officer | |||
CERTIFICATION OF CHIEF FINANCIAL OFFICER
Sarbanes-Oxley Act Section 302
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I, Kurt A. Tjaden, certify that:
1. I have reviewed this quarterly report on Form 10-Q 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 15(d) - 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 function):
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.
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Date: May 5, 2010
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By:
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/s/ Kurt A. Tjaden | |
Name: Kurt A. Tjaden | |||
Title: 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
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In connection with the Quarterly Report on Form 10-Q of HNI Corporation (the "Corporation") for the quarterly period ended April 4, 2009, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Stan A. Askren, as Chairman, President and Chief Executive Officer and Kurt A. Tjaden as 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 the periods expressed in the Report.
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By:
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/s/ Stan A. Askren | |
Name: Stan A. Askren | |||
Title: Chairman, President and Chief Executive Officer | |||
Date: May 5, 2010 |
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By:
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/s/ Kurt A. Tjaden | |
Name: Kurt A. Tjaden | |||
Title: Vice President and Chief Financial Officer | |||
Date: May 5, 2010 |