UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington,
DC 20549
FORM
10-K
(Mark
One)
x
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ANNUAL
REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For the
fiscal year ended January 2, 2010
OR
o
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
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Commission
File Number 1-14225
HNI
Corporation
An
Iowa Corporation
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408
East Second Street
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IRS
Employer No. 42-0617510
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P. O. Box
1109
Muscatine,
IA 52761-0071
563/272-7400
Securities
registered pursuant to Section 12(b) of the Act:
Title of Each Class
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Name of Each Exchange on Which
Registered
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Common
Stock, with par value of $1.00 per share.
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New
York Stock Exchange
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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
x
No
o
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
o
No
x
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
x
No
o
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
Yes
o
No
o
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting
company. See definitions of “large accelerated filer,” “accelerated
filer” and “smaller reporting company” in Rule 12b-2 of the Exchange
Act. (Check One):
Large accelerated filer
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T
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Accelerated filer
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o
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Non-accelerated filer
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o
(Do not check if a smaller reporting company)
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Smaller reporting company
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o
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Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act).
Yes
o
No
T
The
aggregate market value of the voting stock held by nonaffiliates of the
Registrant, as of
July 4,
2009 was $559,283,601, based on the New York Stock Exchange closing price for
such shares on that date, assuming for purposes of this calculation that all 5%
holders and all directors and executive officers of the Registrant are
affiliates.
The
number of shares outstanding of the Registrant's common stock, as of February 5,
2010 was 45,093,508.
Documents
Incorporated by Reference
Portions
of the Registrant's Proxy Statement dated March 26, 2010, for the May 11, 2010,
Annual Meeting of Shareholders are incorporated by reference into Part
III.
TABLE
OF CONTENTS
PART
I
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Page
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Item 1.
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5
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Item
1A.
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13
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Item
1B.
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Item 2.
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Item 3.
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Item 4.
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PART
II
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Item 5.
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Item 6.
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Item 7.
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Item
7A.
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39
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Item 8.
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Item 9.
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Item
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Item
9B.
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PART
III
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Item
10.
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Item
11.
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Item
12.
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Item
13.
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Item
14.
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PART
IV
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Item
15.
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ANNUAL
REPORT ON FORM 10-K
PART
I
General
HNI
Corporation (the “Corporation”, “we”, “us” or “our”) is an Iowa corporation
incorporated in 1944. The Corporation is a provider of office
furniture and hearth products. A broad office furniture product
offering is sold to dealers, wholesalers, retail superstores, end-user
customers, and federal, state and local governments. Dealers and
wholesalers are the major channels based on sales. Hearth products
include a full array of gas, electric, wood and biomass burning fireplaces,
inserts, stoves, facings and accessories. These products are sold
through a national system of dealers and distributors, as well as
Corporation-owned distribution and retail outlets. In fiscal 2009,
the Corporation had net sales of $1.7 billion, of which approximately $1.4
billion or 83% was attributable to office furniture products and $0.3 billion or
17% was attributable to hearth products. Please refer to Operating
Segment Information in the Notes to Consolidated Financial Statements for
further information about operating segments.
The
Corporation is organized into a corporate headquarters and operating units with
offices, manufacturing plants, distribution centers and sales showrooms in the
United States, Canada, China, Hong Kong and Taiwan. See Item 2.
Properties later in this report for additional related discussion.
Eight
operating units, marketing under various brand names, participate in the office
furniture industry. These operating units include: The HON
Company, Allsteel Inc., Maxon Furniture Inc., The Gunlocke Company L.L.C., Paoli
Inc., Hickory Business Furniture, LLC (“HBF”), HNI Hong Kong Limited (“Lamex”)
and Omni Workspace Company. Each of these operating units provides
products which are sold through various channels of distribution and segments of
the industry.
The
operating unit Hearth & Home Technologies Inc. (“Hearth & Home”)
participates in the hearth products industry. The retail and
distribution brand for this operating unit is Fireside Hearth &
Home.
HNI
International Inc. (“HNI International”) sells office furniture products
manufactured by the Corporation’s operating units in select markets outside the
United States and Canada. With dealers and servicing partners located
in more than fifty countries, HNI International provides project management
services virtually anywhere in the world.
Since its
inception, the Corporation has been committed to systematically eliminating
waste and in 1992 introduced its process improvement approach known as Rapid
Continuous Improvement (“RCI”), which focuses on streamlining design,
manufacturing and administrative processes. The Corporation's RCI
program, in which most members participate, has contributed to increased
productivity, lower costs, improved product quality and workplace
safety. In addition, the Corporation's RCI efforts enable it to offer
short average lead times, from receipt of order to delivery and installation,
for most of its products.
The
Corporation distributes its products through an extensive network of independent
office furniture dealers, office products dealers, wholesalers and
retailers. The Corporation is a supplier of office furniture to the
largest nationwide distributors of office products.
The
Corporation's product development efforts are focused on developing and
providing solutions that are relevant and differentiated, and deliver quality,
aesthetics and style.
An
important element of the Corporation's success has been its member-owner
culture, which has enabled it to attract, develop, retain and motivate skilled,
experienced and efficient members (i.e., employees). Each of the
Corporation's eligible members own stock in the Corporation through a number of
stock-based plans, including a member stock purchase plan and a profit-sharing
retirement plan, which drives a unique level of commitment to the Corporation’s
success throughout the entire workforce.
For
further financial-related information with respect to acquisitions,
restructuring and the Corporation’s operations in general, refer to “Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of
Operations” later in this report, and the following sections in the Notes to
Consolidated Financial Statements: Nature of Operations, Business
Combinations and Operating Segment Information.
Industry
According
to the Business and Institutional Furniture Manufacturer's Association
(“BIFMA”), U.S. office furniture industry shipments were estimated to be $7.8
billion in 2009, a decrease of 30% compared to 2008, which was a 2% decrease
from 2007 levels. The Corporation believes the decrease in 2009 was
due to weakness in the overall economy, declining white collar employment and
corporate profitability and lack of small business confidence.
The U.S.
office furniture market consists of two primary channels—the project or contract
channel and the supplies-driven channel. The project channel has
traditionally been characterized by sales of office furniture and services to
large corporations, primarily for new office facilities, relocations or
department or office redesigns, which are frequently customized to meet specific
client and designer preferences. Project furniture is generally
purchased through office furniture dealers who typically prepare a
custom-designed office layout emphasizing image and design. The
selling process is often complex and lengthy and generally has several
manufacturers competing for the same projects.
The
supplies-driven channel of the market, in which the Corporation is a leader,
primarily represents smaller orders of office furniture purchased by businesses
and home office users on the basis of price, quality, selection and speed and
reliability of delivery. Office products dealers, wholesalers and
retailers, such as office products superstores, are the primary distribution
channels in this market channel. Office furniture and products
dealers publish periodic catalogs that display office furniture and products
from various manufacturers.
The
Corporation also competes in the domestic hearth products industry, where it is
a market leader. Hearth products are typically purchased by builders
during the construction of new homes and homeowners during the renovation of
existing homes. Both types of purchases involve seasonality with
remodel/retrofit activity being concentrated in the September to December
time-frame. Distribution is primarily through independent dealers,
who may buy direct from the manufacturer or from an intermediate
distributor. The Corporation sells approximately 45% of its hearth
products to the new construction/builder channel.
Growth
Strategy
The
Corporation's strategy is to build on its position as a leading manufacturer of
office furniture and hearth products in North America and pursue select global
markets where opportunities exist to create value. The components of
this growth strategy are to introduce new products, build brand equity, provide
outstanding customer satisfaction by focusing on the end-user, strengthen the
distribution network, respond to global competition, pursue complementary
strategic acquisitions, enter markets not currently served and continually
reduce costs.
The
Corporation’s strategy has a dual focus: working continuously to
extract new growth from its core markets while identifying and developing new,
adjacent potential areas of growth. The Corporation focuses on
extracting new growth from each of its existing businesses by deepening its
understanding of end-users, using new insights gained to refine branding,
selling and marketing and developing new products to serve them
better. The Corporation also pursues opportunities in potential
growth drivers outside of, but related to, its core business, such as vertical
markets or new distribution models.
Employees/Members
As of
January 2, 2010, the Corporation employed approximately 8,700 persons, 8,600 of
whom were full-time and 100 of whom were temporary personnel. The
Corporation employed approximately 100 persons who were members of
unions. The Corporation believes its labor relations are
good.
Products
and Solutions
Office
Furniture
The
Corporation designs, manufactures and markets a broad range of office furniture
in four basic categories: (i) storage, including vertical files, lateral files
and pedestals; (ii) seating, including task chairs, executive desk chairs,
conference/training chairs and side chairs; (iii) office systems (typically
modular and moveable workspaces with integrated work surfaces, space dividers
and lighting); and (iv) desks and related products, including tables, bookcases
and credenzas. In order to meet the demands of various markets, the
Corporation's products are sold under the Corporation's brands – HON
®
,
Allsteel
®
,
Maxon
®
,
Gunlocke
®
,
Paoli
®
,
Whitehall
®
,
HBF
®
,
basyx
TM
and
Lamex
®
, as
well as private labels.
The
following is a description of the Corporation's major product categories and
product lines:
Storage
The
Corporation offers a variety of storage options designed either to be integrated
into the Corporation's office systems products or to function as freestanding
furniture in office applications. The Corporation sells most of its
freestanding storage through independent office products and office furniture
dealers, nationwide chains of office products dealers, wholesalers, office
products superstores and mail order distributors.
Seating
The
Corporation's seating line includes chairs designed for all types of office
work. The chairs are available in a variety of frame colors,
coverings and a wide range of price points. Key customer criteria in
seating includes superior design, ergonomics, aesthetics, comfort and
quality.
Office
Panel Systems
The
Corporation offers a complete line of office panel system products in order to
meet the needs of a wide spectrum of organizations. Office panel
systems may be used for team work settings, private offices and open floor
plans. They are typically modular and movable workspaces composed of
adjustable partitions, work surfaces, desk extensions, storage cabinets and
electrical lighting systems which can be moved, reconfigured and reused within
the office. Office panel systems offer a cost-effective and flexible
alternative to traditional drywall office construction. A typical
installation of office panels often includes related sales of seating, storage
and accessories.
The
Corporation offers whole office solutions, movable panels, storage units and
work surfaces that can be installed easily and reconfigured to accommodate
growth and change in organizations. The Corporation also offers
consultative selling and design services for its office system
products.
Desks
and Related Products
The
Corporation's offering of desks and related products includes stand-alone steel,
laminate and wood furniture items, such as desks, bookshelves, credenzas and
mobile desking. These products are available in a range of designs
and price points. The Corporation's desks and related products are
sold to a wide variety of customers from those designing large office
configurations to small retail and home office purchasers. The
Corporation offers a variety of tables designed for use in conference rooms,
private offices, training areas, team work settings and open floor
plans.
Hearth
Products
The
Corporation is North America’s largest manufacturer and marketer of
prefabricated fireplaces and related products, primarily for the home, which it
sells under its widely recognized Heatilator
®
, Heat
& Glo
®
,
Quadra-Fire
®
and
Harman Stove
TM
brand names.
The
Corporation’s line of hearth products includes a full array of gas, electric and
wood burning fireplaces, inserts, stoves, facings and
accessories. Heatilator
®
and
Heat & Glo
®
are
brand leaders in the two largest segments of the home fireplace market:
vented-gas and wood fireplaces. The Corporation is the leader in
“direct vent” fireplaces, which replace the chimney-venting system used in
traditional fireplaces with a less expensive vent through the roof or an outer
wall. In addition, the Corporation is the leader in pellet-burning
stoves and furnaces with its Quadra-Fire and Harman product lines which provide
home heating solutions using renewable fuel, an environmentally friendly trend
that has come to the fore front in home heating and continues to
grow. See “Intellectual Property” under this Item 1. Business for
additional details.
Manufacturing
The
Corporation manufactures office furniture in Alabama, Georgia, Indiana, Iowa,
Kentucky, New York, North Carolina and China. The Corporation
manufactures hearth products in Iowa, Maryland, Minnesota, Washington,
California and Pennsylvania.
The
Corporation purchases raw materials and components from a variety of suppliers,
and generally most items are available from multiple sources. Major
raw materials and components include coil steel, aluminum, zinc, castings,
lumber, veneer, particleboard, fabric, paint, lacquer, hardware, plastic
products and shipping cartons.
Since its
inception, the Corporation has focused on making its manufacturing facilities
and processes more flexible while at the same time reducing cost, eliminating
waste and improving product quality. In 1992, the Corporation adopted
the principles of RCI, which focus on developing flexible and efficient design,
manufacturing and administrative processes that remove excess
cost. The Corporation’s lean manufacturing philosophy leverages the
creativity of its members to eliminate and reduce costs. To achieve
flexibility and attain efficiency goals, the Corporation has adopted a variety
of production techniques, including cellular manufacturing, focused factories,
just-in-time inventory management, value engineering, business simplification
and 80/20 principles. The application of RCI has increased
productivity by reducing set-up and processing times, square footage, inventory
levels, product costs and delivery times, while improving quality and enhancing
member safety. The Corporation's RCI process involves production and
administrative employees, management, customers and suppliers. The
Corporation has facilitators, coaches and consultants dedicated to the RCI
process and strives to involve all members in the RCI
process. Manufacturing also plays a key role in the Corporation's
concurrent product development process that primarily seeks to design new
products for ease of manufacturability.
Product
Development
The
Corporation's product development efforts are primarily focused on developing
end-user solutions that are relevant, differentiated and focused on quality,
aesthetics, style, sustainable design and on reducing manufacturing
costs. The Corporation accomplishes this through improving existing
products, extending product lines, applying ergonomic research, improving
manufacturing processes, applying alternative materials and providing
engineering support and training to its operating units. The
Corporation conducts its product development efforts at both the corporate and
operating unit level. The Corporation invested approximately $21.1
million, $27.8 million, and $24.0 million in product development during fiscal
2009, 2008, and 2007, respectively, and has budgeted $21 million for product
development in fiscal 2010.
Intellectual
Property
As of
January 2, 2010, the Corporation owned 333 U.S. and 305 foreign patents and had
applications pending for 32 U.S. and 64 foreign patents. In addition,
the Corporation holds 171 U.S. and 378 foreign trademark registrations and has
applications pending for 19 U.S. and 41 foreign trademarks.
The
Corporation's principal office furniture products do not require frequent
technical changes. The Corporation believes neither any individual
office furniture patent nor the Corporation's office furniture patents in the
aggregate are material to the Corporation's business as a whole.
The
Corporation’s patents covering its hearth products protect various technical
innovations. While the acquisition of patents reflects Hearth &
Home’s position in the market as an innovation leader, the Corporation believes
neither any individual hearth product patent nor the Corporation’s hearth
product patents in the aggregate are material to the Corporation’s business as a
whole.
The
Corporation applies for patent protection when it believes the expense of doing
so is justified, and the Corporation believes the duration of its registered
patents is adequate to protect these rights. The Corporation also
pays royalties in certain instances for the use of patents on products and
processes owned by others.
The
Corporation actively protects its trademarks it believes have significant
value.
Sales
and Distribution: Customers
The
Corporation sells its office furniture products through five principal
distribution channels. The first channel, which consists of
independent, local office furniture and office products dealers, specializes in
the sale of a broad range of office furniture and office furniture systems to
business, government, education, health care entities and home office
owners.
The
second distribution channel comprises national office product distributors
including Staples, Inc., Office Max Incorporated and Office Depot,
Inc. These distributors sell furniture along with office supplies
through a national network of dealerships and sales offices, which assist their
customers with the evaluation of office space requirements, systems layout and
product selection and design and office solution services provided by
professional designers. All of these distributors also sell through
retail office products superstores.
The third
distribution channel, comprising corporate accounts, is where the Corporation
has the lead selling relationship with the end-user. Installation and
service are normally provided through a dealer.
The
fourth distribution channel comprises wholesalers that serve as distributors of
the Corporation's products to independent dealers, national supply dealers and
superstores. The Corporation sells to the nation's largest
wholesalers, United Stationers Inc. and S.P. Richards
Company. Wholesalers maintain inventory of standard product lines for
resale to the various dealers and retailers. They also special order
products from the Corporation in customer-selected models and
colors. The Corporation's wholesalers maintain warehouse locations
throughout the United States, which enables the Corporation to make its products
available for rapid delivery to retailers anywhere in the country.
The fifth
distribution channel comprises direct sales of the Corporation's products to
federal, state and local government offices
.
The
Corporation's office furniture sales force consists of regional sales managers,
salespersons and firms of independent manufacturers' representatives who
collectively provide national sales coverage. Sales managers and
salespersons are compensated by a combination of salary and incentive
bonus.
Office
products dealers, national wholesalers and retailers market their products over
the Internet and through catalogs published periodically. These
catalogs are distributed to existing and potential customers. The
Corporation believes the inclusion of the Corporation's product lines in
customer catalogs and e-business listings offers strong potential for increased
sales of the listed product lines due to the exposure provided.
The
Corporation also makes export sales through HNI International to office
furniture dealers and wholesale distributors serving select foreign
markets. Distributors are principally located in Latin America, the
Caribbean and Middle East. With the acquisition of Lamex in 2006 the
Corporation manufactures and distributes office furniture directly to end-users
through independent dealers and distributors in Greater China and
Asia.
Limited
quantities of select finished goods inventories primarily built to order
awaiting shipment are at the Corporation's principal manufacturing plants and at
its various distribution centers.
Hearth
& Home sells its fireplace and stove products through dealers, distributors
and Corporation-owned distribution and retail outlets. The
Corporation has a field sales organization of regional sales managers,
salespersons, and firms of independent manufacturers'
representatives.
The
Corporation had one customer, United Stationers Inc., which accounted for
approximately 9% of the Corporation’s consolidated net sales in fiscal 2009, 10%
in fiscal 2008, and 11% in fiscal 2007. The substantial purchasing
power exercised by large customers may adversely affect the prices at which the
Corporation can successfully offer its products. In addition, there
can be no assurance the Corporation will be able to maintain its customer
relationships.
As of
January 2, 2010, the Corporation had an order backlog of approximately $121.1
million, which will be filled in the ordinary course of business within the
first few weeks of the current fiscal year. This compares with $130.8
million as of January 3, 2009, and $162.0 million as of December 29,
2007. Backlog, in terms of percentage of net sales, was 7.3%, 5.3%,
and 6.3%, for fiscal 2009, 2008, and 2007, respectively. The
Corporation’s products are typically manufactured and shipped within a few weeks
following receipt of order. The dollar amount of the Corporation’s
order backlog is, therefore, not considered by management to be a leading
indicator of the Corporation’s expected sales in any particular fiscal
period.
Competition
The
Corporation is one of the largest office furniture manufacturers in the world
and believes it is the largest provider of furniture to small- and medium-sized
workplaces. The Corporation is the largest manufacturer and marketer
of fireplaces in North America.
The
office furniture industry is highly competitive, with a significant number of
competitors offering similar products. The Corporation competes by
emphasizing its ability to deliver compelling value products, solutions and a
high level of customer service. The Corporation competes with large
office furniture manufacturers, which cover a substantial portion of the North
America market share in the project-oriented office furniture market, such as
Steelcase Inc., Haworth, Inc., Herman Miller, Inc. and Knoll,
Inc. The Corporation also competes with a number of other office
furniture manufacturers, including The Global Group (a Canadian company),
Kimball International, Inc., KI and Teknion Corporation (a Canadian company), as
well as global importers. The Corporation faces significant price
competition from its competitors and may encounter competition from new market
entrants.
Hearth
products, consisting of prefabricated fireplaces and related products, are
manufactured by a number of national and regional competitors. The
Corporation competes primarily against a broad range of manufacturers, including
Travis Industries, Inc., Lennox International Inc., Monessen Hearth Systems
Company, DESA Fmi LLC, Wolf Steel Ltd. (Napolean) and FPI Fireplace Products
International Ltd.
Both
office furniture and hearth products compete on the basis of performance,
quality, price, complete and on-time delivery to the customer and customer
service and support. The Corporation believes it competes principally
by providing compelling value products designed to be among the best in their
price range for product quality and performance, superior customer service and
short lead-times. This is made possible, in part, by the
Corporation's on-going investment in product development, highly efficient and
low cost manufacturing operations and an extensive distribution
network.
For
further discussion of the Corporation's competitive situation, refer to “Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations” later in this report.
Effects
of Inflation
Certain
business costs may, from time to time, increase at a rate exceeding the general
rate of inflation. The Corporation’s objective is to offset the
effect of inflation on its costs primarily through productivity increases in
combination with certain adjustments to the selling price of its products as
competitive market and general economic conditions permit.
Investments
are routinely made in modernizing plants, equipment, support systems and RCI
programs. These investments collectively focus on business
simplification and increasing productivity which helps to offset the effect of
rising material and labor costs. The Corporation also routinely
employs ongoing cost control disciplines. In addition, the last-in,
first-out (LIFO) valuation method is used for most of the Corporation's
inventories, which ensures that changing material and labor costs are recognized
in reported income and, more importantly, these costs are recognized in pricing
decisions.
Environmental
The
Corporation is subject to a variety of environmental laws and regulations
governing use of materials and substances in products, the management of wastes
resulting from use of certain material and the remediation of contamination
associated with releases of hazardous substances used in the
past. Although the Corporation believes it is in material compliance
with all of the various regulations applicable to its business, there can be no
assurance requirements will not change in the future or that the Corporation
will not incur material costs to comply with such regulations. The
Corporation has trained staff responsible for monitoring compliance with
environmental, health and safety requirements. The Corporation’s
environmental staff works with responsible personnel at each manufacturing
facility, the Corporation’s environmental legal counsel and consultants on the
management of environmental, health and safety issues. The
Corporation’s ultimate goal is to reduce and, when practical, eliminate the
generation of environmental pollutants in its manufacturing
processes.
The
Corporation’s environmental management system has earned the recognition of
numerous state and federal agencies as well as non-government
organizations. The Corporation’s lean manufacturing philosophy
leverages the creativity of its members to eliminate waste and reduce
cost. Aligning these continuous improvement initiatives with the
Corporation’s environmental objectives creates a model of the triple bottom line
of sustainable development where members work toward shared goals of personal
growth, economic reward and a healthy environment for the future.
Over the
past several years, the Corporation has expanded its environmental management
system and established metrics to influence product design and development,
supplier and supply chain performance, energy and resource consumption and the
impacts of its facilities. In addition, the Corporation is providing
sustainability training to senior decision makers and has assigned resources to
documenting and communicating its progress to an increasingly knowledgable
market. Integrating sustainable objectives into core business systems
is consistent with the Corporation’s vision and ensures its commitment to being
a sustainable enterprise remains a priority for all members.
Compliance
with federal, state and local environmental regulations has not had a material
effect on the capital expenditures, earnings or competitive position of the
Corporation to date. The Corporation does not anticipate that
financially material capital expenditures will be required during fiscal 2010
for environmental control facilities. It is management’s judgment
that compliance with current regulations should not have a material effect on
the Corporation’s financial condition or results of
operations. However, there can be no assurance new environmental
legislation and technology in this area will not result in or require material
capital expenditures.
Business
Development
The
development of the Corporation's business during the fiscal years ended January
2, 2010, January 3, 2009, and December 29, 2007, is discussed in “Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations” later in this report.
Available
Information
Information
regarding the Corporation’s annual reports on Form 10-K, quarterly reports on
Form 10-Q, current reports on Form 8-K, and any amendments to these reports,
will be made available, free of charge, on the Corporation’s website at
www.hnicorp.com
, as
soon as reasonably practicable after the Corporation electronically files such
reports with or furnishes them to the Securities and Exchange Commission (the
“SEC”). The Corporation’s information is also available from the
SEC’s Public Reference room at 100 F Street, N.E., Washington, D.C. 20549, or on
the SEC website at
www.sec.gov
.
Forward-Looking
Statements
Statements
in this Annual Report on Form 10-K to the extent that they are not statements of
historical or present fact, including statements as to plans, outlook,
objectives and future financial performance, are “forward-looking” statements,
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934 and are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of
1995. Words, such as “anticipate,” “believe,” “could,” “confident,”
“estimate,” “expect,” “forecast,” “hope,” “intend,” “likely,” “may,” “plan,”
“possible,” “potential,” “predict,” “project,” “should,” “will,” “would” and
variations of such words, and similar expressions identify forward-looking
statements.
Forward-looking
statements involve known and unknown risks and uncertainties, which may cause
the Corporation’s actual results in the future to differ materially from
expected results. The most significant factors known to the
Corporation that may adversely affect the Corporation’s business, operations,
industries, financial position or future financial performance are described
later in this report under the heading entitled “Item 1A. Risk
Factors.” The Corporation cautions readers not to place undue
reliance on any forward-looking statement which speaks only as of the date made
and to recognize that forward-looking statements are predictions of future
results, which may not occur as anticipated. Actual results could
differ materially from those anticipated in the forward-looking statements and
from historical results due to the risks and uncertainties described elsewhere
in this report, including under the heading “Item 1A. Risk Factors,” as well as
others that the Corporation may consider immaterial or does not anticipate at
this time. The risks and uncertainties described in this report,
including those under the heading “Item 1A. Risk Factors,” are not exclusive and
further information concerning the Corporation, including factors that
potentially could materially affect the Corporation’s financial results or
condition, may emerge from time to time.
The
Corporation assumes no obligation to update, amend or clarify forward-looking
statements, whether as a result of new information, future events or otherwise,
except as required by applicable law. The Corporation advises you,
however, to consult 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.
The
following risk factors and other information included in this Annual Report on
Form 10-K should be carefully considered. If any of the following
risks actually occur, our business, operating results, cash flows and financial
condition could be materially adversely affected.
Unfavorable
economic and market conditions could reduce our sales and profitability and as a
result, our operating results may be adversely affected.
Over the
past few years, economic conditions have deteriorated significantly in the U. S.
and many of the countries and regions in which we do business, and, despite the
possible beginning signs of the recovery in the U.S. and elsewhere, remain
challenging for the foreseeable future. The recent downturns in the
economy in the U.S. and in international markets have had, and may continue to
have, a significant adverse impact on demand for our
products. General business and economic conditions that could affect
us include short-term and long-term interest rates, unemployment, inflation,
fluctuations in debt and equity capital markets, limited availability of
consumer financing and weak credit markets, the strength of the U.S. economy and
the local economies in which we operate.
There
could be a number of effects from these economic developments on our business,
including: reduced demand for products; insolvency of our dealers,
resulting in increased provisions for credit losses; insolvency of our key
suppliers resulting in product delays; inability of customers to obtain credit
to finance purchases of our products; decreased customer demand, including order
delays or cancellations; and counterparty failures negatively impacting our
treasury operations.
In
addition, the current negative worldwide economic conditions and market
instability makes it increasingly difficult for us, our customers and our
suppliers to accurately forecast future product demand trends, which could cause
us to incur excess costs. Additionally, this forecasting difficulty
could cause a shortage of products, labor or materials used in our products that
could result in an inability to satisfy demand for our products and a loss of
market share.
We
may need to take additional impairment charges related to goodwill and
indefinite-lived intangible assets, which would adversely affect our results of
operations.
Goodwill
and other acquired intangible assets with indefinite lives are not amortized but
are annually tested for impairment, and when an event occurs or circumstances
change such that it is reasonably possible that an impairment may
exist. We test for impairment annually during the fourth quarter of
the year and whenever indicators of impairment exist. We test
goodwill for impairment by first comparing the carrying value of net assets to
the fair value of the reporting unit. If the fair value is determined
to be less than carrying value, a second step is performed to determine the
implied fair value of goodwill associated with the reporting unit. If
the carrying value of goodwill exceeds the implied fair value of goodwill, such
excess represents the amount of goodwill impairment, and, accordingly such
impairment is recognized.
We
estimate the fair values of the reporting units using discounted cash
flows. Forecasts of future cash flows are based on our best estimate
of longer-term broad market trends. We combine this trend data with
estimates of current economic conditions in the U.S., competitor behavior, the
mix of product sales, commodity costs, wage rates, the level of manufacturing
capacity and the pricing environment. In addition, estimates of fair
value are impacted by estimates of the market-participant-derived weighted
average cost of capital. Changes in these forecasts could
significantly change the amount of impairment recorded, if any.
We
operate in a highly competitive environment and, as a result, we may not always
be successful.
Both the
office furniture and hearth products industries are highly competitive, with a
significant number of competitors in both industries offering similar
products. While competitive factors vary geographically and between
differing sales situations, typical factors for both industries
include: price; delivery and service; product design and features;
product quality; strength of dealers and other distributors; and relationships
with customers and key influencers, such as architects, designers, home-builders
and facility managers. Our principal competitors in the office
furniture industry include The Global Group, Haworth, Inc., Kimball
International, Inc., Steelcase Inc., Herman Miller, Inc., Teknion Corporation,
KI and Knoll, Inc. Our principal competitors in the hearth products
industry include Travis Industries, Inc., Lennox International Inc., Monessen
Hearth Systems Company, DESA Fmi LLC, Wolf Steel Ltd. (Napolean) and FPI
Fireplace Products International Ltd. In both industries, most of our
top competitors have an installed base of products that can be a source of
significant future sales through repeat and expansion orders. These
competitors manufacture products with strong acceptance in the marketplace and
are capable of developing products that have a competitive advantage over our
products.
Our
continued success will depend on many factors, including our ability to continue
to manufacture and market high quality, high performance products at competitive
prices and our ability to adapt our business model to effectively compete in the
highly competitive environments of both the office furniture and hearth products
industries. Our success is also subject to our ability to sustain and
grow our positive brand reputation and recognition among existing and potential
customers and use our brands and trademarks effectively in entering new
markets.
In both
the office furniture and hearth products industries, we also face significant
price competition from our competitors and from new market entrants who
primarily manufacture and source products from lower-cost
countries. Such price competition impacts our ability to implement
price increases or, in some cases, even maintain prices, which could lower our
profit margins. In addition, we may not be able to maintain or raise
the prices of our products in response to rising raw material prices and other
inflationary pressures. Competition from low-cost Asian imports
continues to represent a threat to our current market share in the office
furniture industry.
The
concentration of our customer base, changes in demand and order patterns from
our customers, as well as the increased purchasing power of such customers,
could adversely affect our business, operating results or financial
condition.
We sell
our products through multiple distribution channels. These
distribution channels have been consolidating in the past several years and may
continue to consolidate in the future. Such consolidation may result
in a greater proportion of our sales being concentrated in fewer
customers. The increased purchasing power exercised by larger
customers may adversely affect the prices at which we can successfully offer our
products. As a result of this consolidation, changes in the purchase
patterns or the loss of a single customer may have a greater impact on our
business, operating results or financial condition than such events would have
had prior to such consolidation.
The
growth in sales of private label products by some of our largest office
furniture customers may reduce our revenue and adversely affect our business,
operating results or financial condition.
Private
label products are products sold under the name of the distributor or retailer,
but manufactured by another party. Some of our largest customers have
aggressive private label initiatives to increase sales of office
furniture. If successful, they may reduce our revenue and inhibit our
ability to raise prices and may, in some cases, even force us to lower prices,
which could result in an adverse effect on our business, operating results or
financial condition.
Increases
in basic commodity, raw material and component costs, as well as disruptions to
the supply of such basic commodities, raw materials and components, could
adversely affect our profitability.
Fluctuations
in the price, availability and quality of the commodities, raw materials and
components used by us in manufacturing could have an adverse effect on our costs
of sales, profitability and our ability to meet customers' demand. We
source commodities, raw materials, and components from low-cost, international
suppliers for both our office furniture and hearth products. From
both domestic and international suppliers, the cost, quality and availability of
commodities, raw materials and components, including steel, our largest raw
material category, have been significantly affected in recent years by, among
other things, changes in global supply and demand, changes in laws and
regulations (including tariffs and duties), changes in exchange rates and
worldwide price levels, natural disasters, labor disputes, terrorism and
political unrest or instability. These factors could lead to further
price increases or supply interruptions in the future. Our profit
margins could be adversely affected if commodity, raw material and component
costs remain high or escalate further, and we are either unable to offset such
costs through strategic sourcing initiatives and continuous improvement programs
or, as a result of competitive market dynamics, unable to pass along a portion
of the higher costs to our customers.
We
are affected by the cost of energy, and increases in energy prices could
adversely affect our gross margins and profitability.
Our gross
margins and the profitability of our business operations are sensitive to the
cost of energy because it is reflected in our cost of transportation,
petroleum-based materials like plastics and operation of our manufacturing
facilities. If the costs of petroleum-based products, operating our
manufacturing facilities or transportation increase, it could adversely affect
our gross margins and profitability.
We
may not be successful in implementing and managing the risks inherent in our
growth strategy.
As a part
of our growth strategy, we seek to increase sales and market share by
introducing new products, further enhancing our existing line of products and
continuing to pursue complementary acquisitions. This strategy
depends on our ability to increase sales through our existing customer network,
principally dealers, wholesalers and retailers. Furthermore, the
ability to effectuate and manage profitable growth will depend on our ability to
contain costs, including costs associated with increased manufacturing, sales
and marketing efforts, freight utilization, warehouse capacity, product
development and acquisition efforts.
Our
efforts to introduce new products that meet customer and workplace/home
requirements may not be successful, which could limit our sales growth or cause
our sales to decline.
To keep
pace with market trends in both the office furniture and hearth products
industries, we must periodically introduce new products. Such trends
include changes in workplace and home design and increases in the use of
technology, and evolving regulatory and industry requirements, including
environmental, health, safety and similar standards for the workplace and home
and for product performance. The introduction of new products in both
industries requires the coordination of the design, manufacturing and marketing
of such products, which may be affected by factors beyond our
control. The design and engineering of certain of our new products
can take up to a year or more, and further time may be required to achieve
client acceptance. In addition, we may face difficulties in
introducing new products if we cannot successfully align ourselves with
independent architects, home-builders and designers who are able to design, in a
timely manner, high quality products consistent with our
image. Accordingly, the launch of any particular product may be later
or less successful than we originally anticipated. Difficulties or
delays in introducing new products or lack of customer acceptance of new
products could limit our sales growth or cause our sales to decline, and may
result in an adverse effect on our business, operating results or financial
condition.
We
intend to grow our business through additional acquisitions, alliances and joint
venture arrangements, which could adversely affect our business, operating
results or financial condition.
One of
our growth strategies is to supplement our internal growth through acquisitions
of, and alliances and joint venture arrangements with, businesses with
technologies or products that complement or augment our existing products or
distribution or add new products or distribution to our business. The
benefits of an acquisition, alliance or joint venture may take more time than
expected to develop or integrate into our operations, and we cannot guarantee
any completed or future acquisitions, alliances or joint ventures will in fact
produce any benefits. In addition, acquisitions, alliances and joint
ventures involve a number of risks, including, without limitation:
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diversion
of management’s attention;
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difficulties
in assimilating the operations and products of an acquired business or in
realizing projected efficiencies, cost savings and revenue
synergies;
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potential
loss of key employees or customers of the acquired businesses or adverse
effects on existing business relationships with suppliers and
customers;
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adverse
impact on overall profitability if acquired businesses do not achieve the
financial results projected in our valuation
models;
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reallocation
of amounts of capital from other operating initiatives or an increase in
our leverage and debt service requirements to pay the acquisition purchase
prices, which could in turn restrict our ability to access additional
capital when needed or to pursue other important elements of our business
strategy;
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inaccurate
assessment of undisclosed, contingent or other liabilities or problems and
unanticipated costs associated with the acquisition;
and
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incorrect
estimates made in accounting for acquisitions, incurrence of non-recurring
charges and write-off of significant amounts of goodwill that could
adversely affect our operating
results.
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Our
ability to grow through acquisitions will depend, in part, on the availability
of suitable acquisition candidates at an acceptable price, our ability to
compete effectively for these acquisition candidates and the availability of
capital to complete such acquisitions. These risks could be
heightened if we complete several acquisitions within a relatively short period
of time. In addition, there can be no assurance we will be able to
continue to identify attractive opportunities or enter into any such
transactions with acceptable terms in the future. If an acquisition
is completed, there can be no assurance we will be able to successfully
integrate the acquired entity into our operations or that we will achieve sales
and profitability that justify our investment in such businesses. Any
potential acquisition may not be successful and could adversely affect our
business, operating results or financial condition.
We
are subject to extensive environmental regulation and have exposure to potential
environmental liabilities.
The past
and present operation and ownership by us of manufacturing facilities and real
property are subject to extensive and changing federal, state and local
environmental laws and regulations, including those relating to discharges in
air, water and land, the handling and disposal of solid and hazardous waste and
the remediation of contamination associated with releases of hazardous
substances. Compliance with environmental regulations has not had a
material affect on our capital expenditures, earnings or competitive position to
date; however, compliance with current laws or more stringent laws or
regulations which may be imposed on us in the future, stricter interpretation of
existing laws or discoveries of contamination at our real property sites which
occurred prior to our ownership or the advent of environmental regulation may
require us to incur additional expenditures in the future, some of which may be
material.
The
existence of various unfavorable macroeconomic and industry factors for a
prolonged period could adversely affect our business, operating results or
financial condition.
Office
furniture industry revenues are impacted by a variety of macroeconomic factors
such as service-sector employment levels, corporate profits, commercial
construction and office vacancy rates. Industry factors, such as
corporate restructuring, technology changes, corporate relocations, health and
safety concerns, including ergonomic considerations, and the globalization of
companies also influence office furniture industry revenues.
Hearth
products industry revenues are impacted by a variety of macroeconomic factors as
well, including housing starts, overall employment levels, interest rates,
consumer confidence, energy costs, disposable income and changing
demographics. Industry factors, such as technology changes, health
and safety concerns and environmental regulation, including indoor air quality
standards, also influence hearth products industry revenues. The U.S.
homebuilding industry is currently experiencing a significant downturn, the
duration and ultimate severity of which are still uncertain. Further
deterioration of the economic conditions in the homebuilding industry and the
hearth products market could further decrease demand for our hearth products and
have additional adverse effects on our operating results.
Increasing healthcare costs could
adversely affect our business, operating results and financial
condition.
We
provide healthcare benefits to the majority of our
members. Healthcare costs have continued to rise over time and could
adversely affect our business, operating results and financial
condition.
Our
inability to improve the quality/capability of our network of independent
dealers or the loss of a significant number of such dealers could adversely
affect our business, operating results or financial condition.
In both
the office furniture and hearth products industries, we rely in large part on a
network of independent dealers to market our products to
customers. We also rely upon these dealers to provide a variety of
important specification, installation and after-market services to our
customers. Our dealers may terminate their relationships with us at
any time and for any reason. The loss or termination of a significant
number of dealer relationships could cause difficulties for us in marketing and
distributing our products, resulting in a decline in our sales, which may
adversely affect our business, operating results or financial
condition.
Our
international operations expose us to risks related to conducting business in
multiple jurisdictions outside the United States.
We
primarily sell our products and report our financial results in U.S. dollars;
however, we have increasingly been conducting business in countries outside the
United States, which exposes us to fluctuations in foreign currency exchange
rates. Paying our expenses in other currencies can result in a
significant increase or decrease in the amount of those expenses in terms of
U.S. dollars, which may affect our profits. In the future, any
foreign currency appreciation relative to the U.S. dollar would increase our
expenses that are denominated in that currency. Additionally, as we
report currency in the U.S. dollar, our financial position is affected by the
strength of the currencies in countries where we have operations relative to the
strength of the U.S. dollar.
We
periodically review our foreign currency exposure and evaluate whether we should
enter into hedging transactions.
Our
international sales and operations are subject to a number of additional risks,
including, without limitation:
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social
and political turmoil, official corruption and civil
unrest;
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restrictive
government actions, such as the imposition of trade quotas and tariffs and
restrictions on transfers of funds;
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changes
in labor laws and regulations affecting our ability to hire, retain or
dismiss employees;
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the
need to comply with multiple and potentially conflicting laws and
regulations, including environmental laws and
regulations;
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preference
for locally branded products and laws and business practices favoring
local competition;
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less
effective protection of intellectual
property;
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unfavorable
business conditions or economic instability in any particular country or
region; and
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difficulty
in obtaining distribution and
support.
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We
may not be able to maintain our effective tax rate.
We may
not be able to maintain our effective tax rate because: (1) of
future changes in tax laws or interpretations of such tax laws; (2) the
losses incurred in certain jurisdictions may not offset the tax expense in
profitable jurisdictions; (3) there are differences between foreign and
U.S. income tax rates; and (4) many tax years are subject to audit by
different tax jurisdictions, which may result in additional taxes
payable.
Restrictions imposed by the terms of
our existing credit facility and note purchase agreement may limit our operating
and financial flexibility
.
Our
existing credit facility and note purchase agreement, dated as of April 6, 2006,
pursuant to which we issued $150 million of senior, unsecured notes designated
as Series 2006-A Senior Notes, limit our ability to finance operations, service
debt or engage in other business activities that may be in our
interest. Specifically, our credit facility restricts our ability to
incur additional indebtedness, create or incur certain liens with respect to any
of our properties or assets, engage in lines of business substantially different
than those currently conducted by us, sell, lease, license, or dispose of any of
our assets, enter into certain transactions with affiliates, make certain
restricted payments or take certain restricted actions and enter into certain
sale-leaseback arrangements. Our note purchase agreement contains
customary restrictive covenants that, among other things, place limits on our
ability to incur liens on assets, incur additional debt, transfer or sell our
assets, merge or consolidate with other persons or enter into material
transactions with affiliates. Our credit facility and note purchase
agreement also require us to maintain certain financial covenants.
Our
failure to comply with the obligations under our credit facility may result in
an event of default, which, if not cured or waived, may cause accelerated
repayment of the indebtedness under the credit facility and could result in a
cross default under our note purchase agreement. We cannot be certain
we will have sufficient funds available to pay any accelerated repayments or
that we will have the ability to refinance accelerated repayments on terms
favorable to us or at all.
Costs
related to product defects could adversely affect our
profitability.
We incur
various expenses related to product defects, including product warranty costs,
product recall and retrofit costs and product liability costs. These
expenses relative to product sales vary and could increase. We
maintain reserves for product defect-related costs based on estimates and our
knowledge of circumstances that indicate the need for such
reserves. We cannot, however, be certain these reserves will be
adequate to cover actual product defect-related claims in the
future. Any significant increase in the rate of our product defect
expenses could have a material adverse effect on operations.
We may require additional capital in
the future, which may not be available or may be available only on unfavorable
terms
.
Our
capital requirements depend on many factors, including capital improvements,
tooling, new product development and acquisitions. To the extent our
existing capital is insufficient to meet these requirements and cover any
losses, we may need to raise additional funds through financings or curtail our
growth and reduce our assets. Our ability to generate cash depends on
economic, financial, competitive, legislative, regulatory and other factors that
may be beyond our control. Future borrowings or financings may not be
available to us under our credit facility or otherwise in an amount sufficient
to enable us to pay our debt or meet our liquidity needs.
Any
equity or debt financing, if available at all, could have terms that are not
favorable to us. In addition, financings could result in dilution to
our shareholders or the securities may have rights, preferences and privileges
that are senior to those of our common stock. If our need for capital
arises because of significant losses, the occurrence of these losses may make it
more difficult for us to raise the necessary capital.
Our
relationship with the U.S. government and various state and local governments is
subject to uncertain future funding levels and federal, state and local
procurement laws and is governed by restrictive contract terms; any of these
factors could limit current or future business.
We derive
a significant portion of our revenue from sales to various U.S. federal, state
and local government agencies and departments. Our ability to compete
successfully for and retain business with the U.S. government, as well as with
state and local governments, is highly dependent on cost-effective
performance. Our government business is highly sensitive to changes
in procurement laws, national, international, state and local public priorities
and budgets at all levels of government.
Our
contracts with these government entities are subject to various statutes and
regulations that apply to companies doing business with the
government. The U.S. government as well as state and local
governments can typically terminate or modify their contracts with us either for
their convenience or if we default by failing to perform under the terms of the
applicable contract. A termination arising out of our default could
expose us to liability and impede our ability to compete in the future for
contracts and orders with agencies and departments at all levels of
government. Moreover, we are subject to investigation and audit for
compliance with the requirements governing government contracts, including
requirements related to procurement integrity, export controls, employment
practices, the accuracy of records and reporting of costs. If we were
found to not be a responsible supplier, or to have committed fraud or certain
criminal offenses, we could be suspended or debarred from all further federal,
state or local government contracting.
Disruptions
in financial markets may adversely impact availability and cost of credit and
business and consumer spending patterns.
As noted
in other risks identified above, our ability to make scheduled payments or to
refinance debt obligations will depend on our operating and financial
performance, which in turn is subject to prevailing economic conditions and to
financial, business and other factors beyond our control. Despite the
recent credit crisis and disruptions in the financial markets, including the
bankruptcy or restructuring of certain financial institutions, we continue to
believe the lenders participating in our revolving credit facility will be
willing and able to provide financing in accordance with their contractual
obligations. However, the current economic environment may adversely
impact the availability and cost of credit in the future.
Disruptions
in the financial markets may have an adverse effect on the U.S. and world
economy, which could negatively impact business and consumer spending
patterns. The overall tightening of credit in financial markets also
adversely affects the ability of customers and suppliers to obtain financing for
significant purchases and operations and could result in a decrease in or
cancellation of orders for our products. There is no assurance
on-going government responses to the disruptions in the financial markets will
restore business and consumer confidence, stabilize the markets or increase
liquidity and the availability of credit.
Changes
in government regulation and increased focus on enforcement may significantly
increase our operating costs.
The
federal government has a broad agenda of potential legislative and regulatory
changes, which if enacted, could significantly impact our profitability by
imposing on us additional costs that most likely could not be recovered by
increased pricing. These changes include, without limitation proposed
legislation relating to:
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universal
healthcare and healthcare reform;
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tax
regulations increasing our effective tax
rate;
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union
organizing activities; and
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energy
costs in manufacturing and cap and trade
proposals.
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In
addition, the federal government has increased its focus on enforcement under a
wide range of laws and regulations impacting our business, particularly in the
following areas:
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antitrust
and competition;
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government
contracting;
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securities
and public company reporting;
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labor
and employment practices;
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Should we
become the target of a government investigation or enforcement action, we could
incur significant costs and suffer damage to our reputation which could
adversely impact our business, operating results or financial
condition.
Our
business is subject to a number of other miscellaneous risks that may adversely
affect our business, operating results or financial condition.
Other
miscellaneous risks include, without limitation:
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uncertainty
related to disruptions of business by accidents, third-party labor
disputes, terrorism, military action, natural disasters, epidemic, acts of
God or other force majeure events;
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reduced
demand for our storage products caused by changes in office technology,
including the change from paper record storage to electronic record
storage;
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the
effects of economic conditions on demand for office furniture and hearth
products, customer insolvencies, bankruptcies and related bad debts and
claims against us that we received preferential
payments;
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our
ability to realize cost savings and productivity improvements from our
cost containment, business simplification, manufacturing consolidation and
logistical realignment initiatives;
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increased
foreign sourcing of components and finished goods could reduce our level
of manufacturing in the United States and cause us to have excess capacity
issues;
|
|
·
|
volatility
in the market price and trading volume of equity securities may adversely
affect the market price for our common
stock;
|
|
·
|
changes
in labor laws and regulations may affect our ability to hire, retain or
dismiss members and the cost and structure of our corporate compliance
practices;
|
|
·
|
changes
in securities laws, SEC rules or NYSE listing standards may increase
governmental and non-governmental organization oversight of our business,
dictate changes in some of our corporate governance, securities disclosure
and corporate compliance practices and cause our legal and financial
accounting costs to increase;
|
|
·
|
our
ability to protect our intellectual
property;
|
|
·
|
labor
or other manufacturing inefficiencies due to items such as new product
introductions, a new operating system or turnover in
personnel;
|
|
·
|
our
ability to effectively manage working
capital;
|
|
·
|
future
impairment of assets such as facilities or
equipment;
|
|
·
|
our
ability to successfully implement information technology
solutions;
|
|
·
|
potential
claims by third parties that we infringed upon their intellectual property
rights;
|
|
·
|
our
insurance may not adequately (1) insulate us from expenses for product
defects and the negligent acts and omissions of our members and agents and
(2) compensate us for damages to our facilities and equipment and loss of
business; and
|
|
·
|
our
ability to retain our experienced management team and recruit other key
personnel.
|
ITEM
1B. UNRESOLVED STAFF COMMENTS
None.
The
Corporation maintains its corporate headquarters in Muscatine, Iowa, and
conducts its operations at locations throughout the United States, Canada,
China, Hong Kong and Taiwan, which house manufacturing, distribution and retail
operations and offices totaling an aggregate of approximately 10.4 million
square feet. Of this total, approximately 2.7 million square feet are
leased.
Although
the plants are of varying ages, the Corporation believes they are well
maintained, equipped with modern and efficient equipment, in good operating
condition and suitable for the purposes for which they are being
used. The Corporation has sufficient capacity to increase output at
most locations by increasing the use of overtime or the number of production
shifts employed.
The
Corporation's principal manufacturing and distribution facilities (200,000
square feet in size or larger) are as follows:
Location
|
Approximate
Square Feet
|
Owned
or
Leased
|
Description
of Use
|
|
|
|
|
Cedartown,
Georgia
|
555,559
|
Owned
|
Manufacturing
nonwood casegoods office furniture
|
|
|
|
|
Dongguan,
China
|
1,007,716
|
Owned
|
Manufacturing
wood and nonwood casegoods and seating office furniture
|
|
|
|
|
Florence,
Alabama
|
304,365
|
Owned
|
Manufacturing
wood and nonwood casegoods office furniture
|
|
|
|
|
Hickory,
North Carolina
|
206,316
|
Owned
|
Manufacturing
wood casegoods and seating office furniture
|
|
|
|
|
Lake
City, Minnesota
|
241,500
|
Owned
|
Manufacturing
metal prefabricated fireplaces (1)
|
|
|
|
|
Lithia
Springs, Georgia
|
585,000
|
Leased
|
Warehousing
office furniture
|
|
|
|
|
Mt.
Pleasant, Iowa
|
288,006
|
Owned
|
Manufacturing
metal prefabricated fireplaces (1)
|
|
|
|
|
Muscatine,
Iowa
|
272,900
|
Owned
|
Manufacturing
nonwood casegoods office furniture
|
|
|
|
|
Muscatine,
Iowa
|
578,284
|
Owned
|
Warehousing
office furniture
|
|
|
|
|
Muscatine,
Iowa
|
236,100
|
Owned
|
Manufacturing
nonwood casegoods office furniture
|
|
|
|
|
Muscatine,
Iowa
|
636,250
|
Owned
|
Manufacturing
nonwood casegoods and systems office furniture (1)
|
|
|
|
|
Muscatine,
Iowa
|
237,800
|
Owned
|
Manufacturing
nonwood seating office furniture
|
|
|
|
|
Orleans,
Indiana
|
1,196,946
|
Owned
|
Manufacturing
wood casegoods and seating office furniture (1)
|
|
|
|
|
Owensboro,
Kentucky
|
311,575
|
Owned
|
Manufacturing
wood seating office furniture
|
|
|
|
|
Wayland,
New York
|
716,484
|
Owned
|
Manufacturing
wood casegoods and seating office furniture (1)
|
|
|
|
|
|
(1)
|
Also
includes a regional warehouse/distribution
center
|
Other
Corporation facilities, under 200,000 square feet in size, are located in
various communities throughout the United States, Canada, China, Hong Kong and
Taiwan. These facilities total approximately 3.0 million square feet
with approximately 1.9 million square feet used for the manufacture and
distribution of office furniture and approximately 1.0 million square feet for
hearth products. Of this total, approximately 2.1 million square feet
are leased. The Corporation also leases sales showroom space in
office furniture market centers in several major metropolitan
areas.
There are
no major encumbrances on Corporation-owned properties. Refer to
Property, Plant, and Equipment in the Notes to Consolidated Financial Statements
for related cost, accumulated depreciation and net book value data.
ITEM
3. LEGAL PROCEEDINGS
The
Corporation is involved in various kinds of 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, although such
matters could have a material effect on the Corporation’s quarterly or annual
operating results and cash flows when resolved in a future period.
ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
None.
EXECUTIVE
OFFICERS OF THE REGISTRANT
January
2, 2010
Name
|
Age
|
Family
Relationship
|
Position
|
Position
Held
Since
|
Other
Business Experience
During Past Five Years
|
|
|
|
|
|
|
Stan
A. Askren
|
49
|
None
|
Chairman
of the Board
Chief
Executive Officer
President
Director
|
2004
2004
2003
2003
|
|
|
|
|
|
|
|
Steven
M. Bradford
|
52
|
None
|
Vice
President, General
Counsel
and Secretary
|
2008
|
President
and Regional General Counsel for The Americas, ICI Group Services
(2003-08); General Counsel, North America, ICI Paints
(2004-08)
|
|
|
|
|
|
|
Gary
L. Carlson
|
59
|
None
|
Vice
President, Member and
Community
Relations
|
2007
|
President
and CEO, Greater Muscatine Chamber of Commerce and Industry
(2003-07)
|
|
|
|
|
|
|
Bradley
D. Determan
|
48
|
None
|
Executive
Vice President
President,
Hearth & Home
Technologies
Inc.
|
2005
2003
|
|
|
|
|
|
|
|
Jerald
K. Dittmer
|
52
|
None
|
Executive
Vice President, President, The HON Company
|
2008
|
Vice
President and Chief Financial Officer (2001-08)
|
|
|
|
|
|
|
Tamara
S. Feldman
|
49
|
None
|
Vice
President, Financial
Reporting
|
2001
|
|
|
|
|
|
|
|
Douglas
L. Jones
|
51
|
None
|
Vice
President and Chief Information Officer
|
2005
|
Vice
President, Business Systems (2001-05)
|
|
|
|
|
|
|
Kelly
J. McGriff
|
43
|
None
|
Treasurer
and Vice President, Investor Relations
|
2009
|
Director,
Marketing Services (2008-09); Manager, Bids and Marketing (2007-08); and
Commercial Controller (2005-07), The HON Company
|
|
|
|
|
|
|
Marco
V. Molinari
|
50
|
None
|
Executive
Vice President
President,
HNI International Inc.
|
2006
2003
|
President,
International and Business Development (2003-04); Vice President, HON
Products, The HON Company (2004-06)
|
|
|
|
|
|
|
Alan
R. Moorhead
|
58
|
None
|
Vice
President, Internal Audit
|
2008
|
Director,
Internal Audit (2006-08); Vice President, Audit Director, Assurance, Inc.
(2001-06)
|
|
|
|
|
|
|
Michael
Al. Mundy
|
38
|
None
|
Vice
President and Controller
|
2009
|
CFO
and Treasurer, Gencor Industries (2009); CFO, Stanley National Hardware
(Division) (2008); Director of Finance, Sun Chemical Corporation
(2003-08)
|
|
|
|
|
|
|
Jean
M. Reynolds
|
52
|
None
|
Vice
President, Corporate
Marketing
and e-Business
|
2008
|
President,
Maxon Furniture Inc. (1999-09)
|
|
|
|
|
|
|
Kurt
A. Tjaden
|
46
|
None
|
Vice
President and Chief Financial Officer
|
2008
|
Vice
President and Chief Financial Officer, Asia, Whirlpool Corporation
(2007-08); Vice President and Chief Financial Officer, Pure Fishing, LLC
(2001-06)
|
PART
II
ITEM
5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES
The
Corporation’s common stock is listed for trading on the New York Stock Exchange
(NYSE), trading symbol HNI. As of year-end 2009, the Corporation had
8,257 stockholders of record.
Wells
Fargo Shareowner Services, St. Paul, Minnesota, serves as the Corporation’s
transfer agent and registrar of its common stock. Shareholders may
report a change of address or make inquiries by writing or
calling: Wells Fargo Shareowner Services, P.O. Box 64874, St. Paul,
MN 55164-0874 or telephone 800/468-9716.
Common
Stock Market Prices and Dividends (Unaudited) and Common Stock Market Price and
Price/Earnings Ratio (Unaudited) are presented in the Investor Information
section which follows the Notes to Consolidated Financial Statements filed as
part of this report.
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 39% of prior
year earnings. Future dividends are dependent on future earnings,
capital requirements and the Corporation’s financial condition, and are declared
in the sole discretion of the Corporation’s Board of Directors.
Directors
and members of the Corporation receive common stock equivalents pursuant to the
HNI Corporation Executive Deferred Compensation Plan and the HNI Corporation
Directors Deferred Compensation Plan, respectively (collectively, the “Deferred
Plans”). Common stock equivalents are hypothetical shares of common
stock having a value on any given date equal to the value of a share of common
stock. Common stock equivalents earn dividend equivalents that are
converted into additional common stock equivalents but carry no voting rights or
other rights afforded to a holder of common stock. The common stock
equivalents credited to members and directors under the Deferred Plans are
exempt from registration under Section 4(2) of the Securities Act of 1933 as
private offerings made only to directors and members of the Corporation in
accordance with the provisions of the Deferred Plans.
Under the
Deferred Plans, each director or member participating in the Deferred Plans, may
elect to defer the receipt of all or any portion of the compensation paid to
such director or member by the Corporation to a cash or stock
sub-account. All deferred payments to the stock sub-account are held
in the form of common stock equivalents. Payments out of the deferred
stock sub-accounts are made in the form of common stock of the Corporation (and
cash as to any fractional common stock equivalent). In the fourth
quarter of 2009, the directors and members, as a group, were credited with 3,587
common stock equivalents under the Deferred Plans. The value of each
common stock equivalent, when credited, ranged from $25.27 to
$27.63.
The
information under the caption “Equity Compensation Plan Information: of the
Corporation’s Proxy Statement for the Annual Meeting of Shareholders to be held
on May 11, 2010, is incorporated herein by reference.
The
Corporation did not repurchase any of its shares during the fourth quarter ended
January 2, 2010. As of January 2, 2010, $163.6 million was authorized
and available for the repurchase of shares by the Corporation.
ITEM
6. SELECTED FINANCIAL DATA — FIVE-YEAR
SUMMARY
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
Per
Common Share Data (Basic and Dilutive)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(Loss) from Continuing Operations Attributable to Parent Company –
basic
|
|
$
|
(0.14
|
)
|
|
$
|
1.03
|
|
|
$
|
2.57
|
|
|
$
|
2.59
|
|
|
$
|
2.53
|
|
Income
(Loss) from Continuing Operations Attributable to Parent Company –
diluted
|
|
$
|
(0.14
|
)
|
|
|
1.02
|
|
|
|
2.55
|
|
|
|
2.57
|
|
|
|
2.51
|
|
Net
Income (Loss) Attributable to Parent Company – basic
|
|
$
|
(0.14
|
)
|
|
|
1.03
|
|
|
|
2.58
|
|
|
|
2.46
|
|
|
|
2.51
|
|
Net
Income (Loss) Attributable to Parent Company – diluted
|
|
$
|
(0.14
|
)
|
|
|
1.02
|
|
|
|
2.57
|
|
|
|
2.45
|
|
|
|
2.50
|
|
Cash
Dividends
|
|
|
.86
|
|
|
|
.86
|
|
|
|
.78
|
|
|
|
.72
|
|
|
|
.62
|
|
Book
Value – year-end
|
|
|
9.30
|
|
|
|
10.13
|
|
|
|
10.24
|
|
|
|
10.35
|
|
|
|
11.46
|
|
Net
Working Capital – year-end
|
|
|
1.33
|
|
|
|
1.00
|
|
|
|
2.33
|
|
|
|
3.04
|
|
|
|
2.48
|
|
Operating
Results (Thousands of Dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Sales
|
|
$
|
1,656,289
|
|
|
$
|
2,477,587
|
|
|
$
|
2,570,472
|
|
|
$
|
2,679,803
|
|
|
$
|
2,433,316
|
|
Gross
Profit as a % of Net Sales
|
|
|
34.5
|
%
|
|
|
33.4
|
%
|
|
|
35.2
|
%
|
|
|
34.6
|
%
|
|
|
36.3
|
%
|
Interest
Expense
|
|
$
|
12,080
|
|
|
$
|
16,865
|
|
|
$
|
18,161
|
|
|
$
|
14,323
|
|
|
$
|
2,355
|
|
Income
(Loss) from Continuing Operations
|
|
|
(6,259
|
)
|
|
|
45,607
|
|
|
|
119,446
|
|
|
|
129,499
|
|
|
|
138,156
|
|
Income
(Loss) from Continuing Operations as a % of Net Sales
|
|
|
(0.4
|
)%
|
|
|
1.8
|
%
|
|
|
4.7
|
%
|
|
|
4.8
|
%
|
|
|
5.7
|
%
|
Discontinued
Operations
(a)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
514
|
|
|
$
|
(6,297
|
)
|
|
$
|
(746
|
)
|
Net
Income (Loss) Attributable to Parent Company
|
|
|
(6,442
|
)
|
|
|
45,450
|
|
|
|
120,378
|
|
|
|
123,375
|
|
|
|
137,420
|
|
Net
Income (Loss) Attributable to Parent Company as a % of Net
Sales
|
|
|
(0.4
|
)%
|
|
|
1.8
|
%
|
|
|
4.7
|
%
|
|
|
4.6
|
%
|
|
|
5.6
|
%
|
Cash
Dividends
|
|
$
|
38,667
|
|
|
$
|
38,095
|
|
|
$
|
36,408
|
|
|
$
|
36,028
|
|
|
$
|
33,841
|
|
%
Return on Average Shareholders’ Equity
|
|
|
(1.5
|
)%
|
|
|
10.0
|
%
|
|
|
25.2
|
%
|
|
|
22.6
|
%
|
|
|
21.8
|
%
|
Depreciation
and Amortization
|
|
$
|
74,867
|
|
|
$
|
70,155
|
|
|
$
|
68,173
|
|
|
$
|
69,503
|
|
|
$
|
65,514
|
|
Financial
Position (Thousands of Dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Assets
|
|
$
|
360,271
|
|
|
$
|
417,841
|
|
|
$
|
489,072
|
|
|
$
|
504,174
|
|
|
$
|
486,598
|
|
Current
Liabilities
|
|
|
300,142
|
|
|
|
373,625
|
|
|
|
384,461
|
|
|
|
358,542
|
|
|
|
358,174
|
|
Working
Capital
|
|
|
60,129
|
|
|
|
44,216
|
|
|
|
104,611
|
|
|
|
145,632
|
|
|
|
128,424
|
|
Current
Ratio
|
|
|
1.20
|
|
|
|
1.12
|
|
|
|
1.27
|
|
|
|
1.41
|
|
|
|
1.36
|
|
Total
Assets
|
|
$
|
994,326
|
|
|
$
|
1,165,629
|
|
|
$
|
1,206,976
|
|
|
$
|
1,226,359
|
|
|
$
|
1,140,271
|
|
%
Return on Beginning Assets Employed
|
|
|
0.3
|
%
|
|
|
7.0
|
%
|
|
|
15.8
|
%
|
|
|
18.1
|
%
|
|
|
21.2
|
%
|
Long-Term
Debt and Capital Lease Obligations
|
|
$
|
200,000
|
|
|
$
|
267,343
|
|
|
$
|
281,091
|
|
|
$
|
285,974
|
|
|
$
|
103,869
|
|
Shareholders’
Equity
|
|
|
419,283
|
|
|
|
448,833
|
|
|
|
458,908
|
|
|
|
495,919
|
|
|
|
593,944
|
|
Current
Share Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
of Shares Outstanding at Year-End
|
|
|
45,093,379
|
|
|
|
44,324,409
|
|
|
|
44,834,519
|
|
|
|
47,905,351
|
|
|
|
51,848,591
|
|
Weighted-Average
Shares Outstanding During Year – basic
|
|
|
44,888,809
|
|
|
|
44,309,765
|
|
|
|
46,684,774
|
|
|
|
50,059,443
|
|
|
|
54,649,199
|
|
Weighted-Average
Shares Outstanding During Year – diluted
|
|
|
44,888,809
|
|
|
|
44,433,945
|
|
|
|
46,925,161
|
|
|
|
50,374,758
|
|
|
|
55,033,741
|
|
Number
of Shareholders of Record at Year-End
|
|
|
8,257
|
|
|
|
8,274
|
|
|
|
7,625
|
|
|
|
7,475
|
|
|
|
6,702
|
|
Other
Operational Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
Expenditures (Thousands of Dollars)
|
|
$
|
16,017
|
|
|
$
|
70,083
|
|
|
$
|
58,568
|
|
|
$
|
58,921
|
|
|
$
|
38,912
|
|
Members
(Employees) at Year-End
|
|
|
8,748
|
|
|
|
12,241
|
(b)
|
|
|
13,271
|
(b)
|
|
|
14,170
|
(b)
|
|
|
12,504
|
(b)
|
|
(a)
|
Component
reported as discontinued operations acquired in
2004.
|
|
(b)
|
Includes
acquisitions completed during the fiscal
year.
|
ITEM
7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The
following discussion of the Corporation’s historical results of operations and
of its liquidity and capital resources should be read in conjunction with the
Consolidated Financial Statements of the Corporation and related
notes. Statements that are not historical are forward-looking and
involve risks and uncertainties, including those discussed under the heading
“Item 1A Risk Factors” and elsewhere in this report.
Overview
The
Corporation has two reportable segments: office furniture and hearth
products. The Corporation is the second largest office furniture
manufacturer in the world and the nation’s leading manufacturer and marketer of
gas and wood burning fireplaces. The Corporation utilizes its split
and focus, decentralized business model to deliver value to its customers with
various brands and selling models. The Corporation is focused on
growing its existing businesses while seeking out and developing new
opportunities for growth.
The
Corporation’s results continued to be negatively impacted by macroeconomic
pressures during 2009. Unemployment surged and small business
confidence sank. New housing starts, which have fallen steadily since
2006, declined even further. Credit markets continued to
contract. Businesses and individuals stopped spending on most
discretionary purchases. These factors impacted the Corporation’s
office furniture segment and the hearth segment dramatically during
2009. As a result the Corporation implemented actions to align its
businesses with market realities while investing to improve competitive
capabilities. These included reductions in staffing, short work weeks
and other actions to reduce labor costs. The Corporation made the
decision to close three office furniture manufacturing facilities and
consolidate production into existing manufacturing facilities in
2009. The Corporation also made the decision to consolidate
significant production from its Mount Pleasant hearth products plant to other
existing hearth products manufacturing facilities allowing it to close
distribution centers in other locations and move the operations to the Mount
Pleasant facility.
Net sales
during 2009 were $1.7 billion, a decrease of 33.1 percent, compared to net sales
of $2.5 billion in 2008. The sales decline was driven by substantial
weakness in both the supplies-driven and contract channels of the office
furniture segment as well as significant declines in both the new construction
and remodel-retrofit channels of the hearth products segment.
The
Corporation recorded $25.0 million of goodwill and intangible impairment charges
during 2009 related to reporting units acquired over the past five years in its
office furniture segment due to current and projected market and economic
conditions.
Management
expects the current challenging market conditions to continue in
2010. The Corporation will continue to mitigate substantial economic
and market weakness by eliminating waste, attacking structural cost and
streamlining its business.
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, which have been 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
Corporation’s Board of Directors (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 that are uncertain at the time the
estimate is made, and if different estimates that reasonably could have been
used, or changes in the accounting estimates that are reasonably likely to occur
periodically, could materially impact the financial
statements. Management believes the following critical accounting
policies reflect its more significant estimates and assumptions used in the
preparation of the Consolidated Financial Statements.
Fiscal year-end
– The
Corporation follows a 52/53-week fiscal year which ends on the Saturday nearest
December 31. Fiscal year 2009 ended on January 2, 2010; 2008 ended on
January 3, 2009; and 2007 ended on December 29, 2007. The financial
statements for fiscal year 2009 are on a 52-week basis; 2008 are on a 53-week
basis; and 2007 are on a 52-week basis. A 53-week year occurs
approximately every sixth year.
Revenue recognition
– The
Corporation normally recognizes revenue upon shipment of goods to
customers. In certain circumstances, the Corporation does not
recognize revenue until the goods are received by the customer or upon
installation or customer acceptance based on the terms of the sale
agreement. Revenue includes freight charged to customers; related
costs are included in selling and administrative expense. Rebates,
discounts and other marketing program expenses directly related to the sale are
recorded as a reduction to sales. Marketing program accruals require
the use of management estimates and the consideration of contractual
arrangements subject to interpretation. Customer sales that achieve
or do not achieve certain award levels can affect the amount of such estimates,
and actual results could differ from these estimates. Future market
conditions may require increased incentive offerings, possibly resulting in an
incremental reduction in net sales at the time the incentive is
offered.
Allowance for doubtful
accounts
receivable
– The allowance
for doubtful accounts receivable is based on several factors, including overall
customer credit quality, historical write-off experience, the length of time a
receivable has been outstanding and specific account analysis that projects the
ultimate collectability of the account. As such, these factors may
change over time causing the Corporation to adjust the reserve level
accordingly.
When the
Corporation determines a customer is unlikely to pay, a charge is recorded to
bad debt expense in the income statement and the allowance for doubtful accounts
is increased. When the Corporation is reasonably certain the customer
cannot pay, the receivable is written off by removing the accounts receivable
amount and reducing the allowance for doubtful accounts
accordingly.
As of
January 2, 2010, there was approximately $170 million in outstanding accounts
receivable and $6 million recorded in the allowance for doubtful accounts to
cover potential future customer non-payments. However, if economic
conditions were to deteriorate significantly or one of the Corporation’s large
customers declares bankruptcy, a larger allowance for doubtful accounts might be
necessary. The allowance for doubtful accounts was approximately $9
million at year-end 2008 and $11 million at year-end 2007.
Inventory valuation
– The
Corporation valued 82% of its inventory by the last-in, first-out (“LIFO”)
method at January 2, 2010. Additionally, the Corporation evaluates
inventory reserves in terms of excess and obsolete exposure. This
evaluation includes such factors as anticipated usage, inventory turnover,
inventory levels and ultimate product sales value. As such, these
factors may change over time causing the Corporation to adjust the reserve level
accordingly. The Corporation’s reserves for excess and obsolete
inventory were approximately $8
million at
year-end 2009, $8 million at year-end 2008, and $9 million at year-end
2007.
Long-lived assets
- The
Corporation reviews long-lived assets for impairment as events or changes in
circumstances occur indicating the amount of the asset reflected in the
Corporation’s balance sheet may not be recoverable. The Corporation
compares an estimate of undiscounted cash flows produced by the asset, or the
appropriate group of assets, to the carrying value to determine whether
impairment exists. The estimates of future cash flows involve
considerable management judgment and are based upon the Corporation’s
assumptions about future operating performance. The actual cash flows
could differ from management’s estimates due to changes in business conditions,
operating performance and economic conditions. Asset impairment
charges associated with the Corporation’s restructuring activities are discussed
in Restructuring Related and Impairment Charges in the Notes to Consolidated
Financial Statements.
The
Corporation’s continuous focus on improving the manufacturing process tends to
increase the likelihood of assets being replaced; therefore, the Corporation is
regularly evaluating the expected useful lives of its equipment which can result
in accelerated depreciation.
Goodwill and other
intangibles
– The Corporation evaluates its goodwill for impairment on an
annual basis during the fourth quarter or whenever indicators of impairment
exist. The Corporation estimates the fair value of its reporting
units using various valuation techniques, with the primary technique being a
discounted cash flow analysis. The Corporation has eleven reporting
units within its office furniture and hearth products operating segments, of
which seven contained goodwill. These reporting units constitute
components for which discrete financial information is available and regularly
reviewed by segment management. Determining the fair value of a
reporting unit involves the use of significant estimates and
assumptions. 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. Management believes the
assumptions used for the impairment test are consistent with those utilized by a
market participant in performing similar valuations of its reporting
units. A separate discount rate was utilized for each reporting unit
with rates ranging from 11% to 12%. 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. In addition, for reasonableness, the
summation of all reporting units’ fair values is compared to the Corporation’s
market capitalization.
If the
fair value of the reporting unit is less than its carrying value, an additional
step is required to determine the implied fair value of goodwill associated with
that reporting unit. The implied fair value of goodwill is determined
by first allocating the fair value of the reporting unit to all of its assets
and liabilities and then computing the excess of the reporting unit’s fair value
over the amounts assigned to the assets and liabilities. If the
carrying value of goodwill exceeds the implied fair value of goodwill, such
excess represents the amount of goodwill impairment, and, accordingly such
impairment is recognized.
As a
result of the review performed in the fourth quarter of 2009, the Corporation
determined the carrying amount of a reporting unit acquired the previous year in
the office furniture segment exceeded its fair value. Management then
compared the carrying value of goodwill to the implied fair value of the
goodwill of this reporting unit, and concluded that $7 million of impairment
charges needed to be recognized. Goodwill of $24 million remains on
the balance sheet of this reporting unit as of January 2, 2010. A
downward modification in forecasted results would result in additional
impairments. The Corporation recorded $17 million of impairment
charges in 2008 for reporting units acquired in the past few
years. The reporting units impacted included an office furniture
services unit, dealer distribution unit and a recent acquisition with goodwill
charges of approximately $10 million, $5 million and $2 million,
respectively.
The
changes to fair value in the reporting unit that triggered impairment charges in
the fourth quarter were primarily attributable to the continuing deterioration
in market conditions which became apparent in the fourth quarter as management
completed its annual strategic planning process and caused management to change
its estimates of the timing of market recovery. The Corporation
factored these current market conditions and estimates into its projected
forecasts of sales, operating income and cash flows of each reporting unit
through the course of its strategic planning process completed in the fourth
quarter.
The
significant estimates and assumptions used in estimating future cash flows of
its reporting units are based on management’s view of longer-term broad market
trends. Management combines this trend data with estimates of current
economic conditions in the U.S., competitor behavior, the mix of product sales,
commodity costs, wage rates, the level of manufacturing capacity, and the
pricing environment. In addition, estimates of fair value are
impacted by estimates of the market participant derived weighted average cost of
capital. The Corporation’s cash flow projections in most of its
reporting units assumed virtually flat revenue and cash flows in 2010 and that
significant recovery would not begin until 2011. As a reasonableness
test, management also compared the market capitalization of the Corporation at
January 2, 2010 to the aggregate fair value of the reporting units, resulting in
an implied control premium of approximately 25 percent. Management
believes this implied control premium is reasonable, in light of the synergies
across its operating units, lean manufacturing environment and strong position
in the markets it serves.
Goodwill
of approximately $261 million remains on the consolidated balance sheet as of
the end of fiscal 2009.
The
Corporation also determines the fair value of indefinite lived trade names on an
annual basis during the fourth quarter or whenever indication of impairment
exists. The Corporation performed its fiscal 2009 assessment of
indefinite lived trade names during the fourth quarter. The estimate
of the fair value of the trade names was based on a discounted cash flow model
using inputs which included: projected revenues from management’s
long term plan, assumed royalty rates that could be payable if the trade names
were not owned and a discount rate. As a result of the review, the
Corporation determined the carrying value of certain trade names primarily
associated with acquisitions over the past few years in the office furniture
segment exceeded their fair value and concluded that an $18 million impairment
charge needed to be recognized. A carrying value of $30 million for
these trade names remains as of January 2, 2010. A minor downward
modification in projected revenues would result in additional impairments. The
Corporation recorded $5 million of impairment charges in 2008 related to trade
names acquired over the past few years in the office furniture
segment. A carrying value of all trade names of approximately $42
million remains on the consolidated balance sheet at the end of fiscal
2009.
The
Corporation has definite lived intangibles that are amortized over their
estimated useful lives. Impairment losses are recognized if the
carrying amount of an intangible, subject to amortization, is not recoverable
from expected future cash flows and its carrying amount exceeds its fair
value. No impairment losses related to definite lived intangibles
were recorded. Intangibles, net of amortization, of approximately $67
million are included on the consolidated balance sheet as of the end of fiscal
2009.
Key to
recoverability of goodwill, indefinite-lived intangibles and long-lived assets
is the forecast of the depth and duration of the economic downturn and its
impact on future revenues, operating margins, and cash
flows. Management’s projection for the U.S. office furniture and
domestic hearth markets and global economic conditions is inherently subject to
a number of uncertain factors, such as the depth and duration of the global
economic slowdown, U.S housing market, credit availability and borrowing rates,
and overall consumer confidence. In the near term, as management
monitors the above factors, it is possible they may change the revenue and cash
flow projections of certain reporting units, which may require the recording of
additional asset impairment charges. There are certain reporting
units that have been recently acquired and therefore have a historical cost that
is closer to the current fair value. In addition to the reporting
unit discussed above, a minor downward modification in forecasted results would
result in an impairment charge for one other reporting unit within the office
furniture segment. This reporting unit has approximately $7 million
of goodwill at January 2, 2010. For all other reporting units, where
impairment charges have not been recorded, the calculated fair value exceeds the
carrying value by a large margin with the closest margin at greater than 60
percent of the carrying value. While the Corporation has recorded
impairment charges connected to acquisitions in the office furniture segment
over the past few years, management’s strategy with regards to these reporting
units has not changed and the Corporation expects to receive additional value
from these reporting units as the economy stabilizes.
Self-insured reserves
– The
Corporation is partially 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; the related
liabilities are included in the accompanying financial statements. As
of January 2, 2010, those liabilities totaled $27 million. The
Corporation’s policy is to accrue amounts in accordance with the actuarially
determined liabilities. The actuarial valuations are based on
historical information along with certain assumptions about future
events. Changes in assumptions for such matters as the number or
severity of claims, medical cost inflation, and magnitude of change in actual
experience development could cause these estimates to change in the near
term.
Stock-based compensation
–
The Corporation measures the cost of employee services in exchange for an award
of equity instruments based on the grant-date fair value of the award and
recognizes cost over the requisite service period. This resulted in a
cost of approximately $3.8 million in 2009, $1.6 million in 2008, and $3.6
million in 2007. The decrease in cost in 2008 was due to a true-up
adjustment to estimated forfeitures based on current year events.
Income taxes
– Deferred
income taxes are provided for the temporary differences between the financial
reporting basis and the tax basis of the Corporation’s assets and
liabilities. The Corporation provides for taxes that may be payable
if undistributed earnings of overseas subsidiaries were to be remitted to the
United States, except for those earnings that it considers to be permanently
reinvested.
Recent
Accounting Pronouncements
In
September 2006, the Financial Accounting Standards Board (“FASB”) provided
enhanced guidance for using fair value to measure assets and liabilities for
financial assets and liabilities. The guidance also expanded the
amount of required disclosure regarding the extent to which companies measure
assets and liabilities at fair value, the information used to measure fair
value, and the effect of fair value measurements on earnings. The
guidance applies whenever other guidance requires (or permits) assets or
liabilities to be measured at fair value but does not expand the use of fair
value in any new circumstances. The Corporation adopted the guidance
with regard to its financial assets and liabilities on December 30, 2007, the
beginning of its 2008 fiscal year and with regard to its nonfinancial assets and
liabilities on January 4, 2009, the beginning of its 2009 fiscal
year. The adoption did not have a material impact on its financial
statements.
In
February, 2007, the FASB issued guidance which permits entities to choose to
measure many financial instruments and certain other items at fair value that
are not currently required to be measured at fair value. The
objective was to improve financial reporting by providing entities with the
opportunity to mitigate volatility in reported earnings caused by measuring
related assets and liabilities differently without having to apply complex hedge
accounting provisions. The Corporation adopted the guidance December
30, 2007, the beginning of fiscal 2008. As the Corporation did not
elect to fair value any additional assets or liabilities, it did not have a
material impact on its financial statements.
In
December 2007, the FASB issued new guidance which requires a noncontrolling
interest in a subsidiary to be reported as equity and the amount of consolidated
net income specifically attributable to the noncontrolling interest be
identified in the consolidated financial statements. It also requires
consistency in the manner of reporting changes in the parent’s ownership
interest and requires fair value measurement of any noncontrolling equity
investment retained in a deconsolidation. The Corporation adopted the
guidance January 4, 2009, the beginning of fiscal 2009. As a result
of the adoption, the Corporation has reported noncontrolling interests as a
component of equity in its Consolidated Balance Sheets and the net income or
loss attributable to noncontrolling interests has been separately identified in
its Consolidated Statements of Income. The prior periods presented
have also been reclassified to conform to the current classification
requirements.
In March
2008, the FASB expanded the disclosure requirements for derivative instruments
and hedging activities with the intent to provide users of financial statements
with an enhanced understanding of an entity’s derivative
activity. The Corporation adopted the new guidance as of January 4,
2009.
In June
2009, the FASB issued guidance that identifies the sources of accounting
principles and the framework for selecting principles used in the preparation of
financial statements of nongovernmental entities that are presented in
conformity with US GAAP (the GAAP hierarchy). The Corporation adopted
the new guidance beginning October 3, 2009. This guidance had no
impact on the Corporation’s financial statements.
Results
of Operations
The
following table sets forth the percentage of consolidated net sales represented
by certain items reflected in the Corporation’s statements of income for the
periods indicated.
Fiscal
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Net
Sales
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
Cost
of products sold
|
|
|
65.5
|
|
|
|
66.6
|
|
|
|
64.8
|
|
Gross
profit
|
|
|
34.5
|
|
|
|
33.4
|
|
|
|
35.2
|
|
Selling
and administrative expenses
|
|
|
31.8
|
|
|
|
29.0
|
|
|
|
27.3
|
|
Restructuring
related charges
|
|
|
2.4
|
|
|
|
1.0
|
|
|
|
0.4
|
|
Operating
income
|
|
|
0.2
|
|
|
|
3.4
|
|
|
|
7.5
|
|
Interest
income (expense) net
|
|
|
(0.7
|
)
|
|
|
(0.6
|
)
|
|
|
(0.7
|
)
|
Income
(loss) from continuing operations before income taxes
|
|
|
(0.5
|
)
|
|
|
2.8
|
|
|
|
6.9
|
|
Income
taxes
|
|
|
(0.1
|
)
|
|
|
1.0
|
|
|
|
2.2
|
|
Net
income attributable to the noncontrolling interest
|
|
|
0.0
|
|
|
|
0.0
|
|
|
|
0.0
|
|
Income
(loss) from continuing operations attributable to the Parent
Company
|
|
|
(0.4
|
)%
|
|
|
1.8
|
%
|
|
|
4.7
|
%
|
Net
Sales
Net sales
during 2009 were $1.7 billion, a decrease of 33.1 percent, compared to net sales
of $2.5 billion in 2008. Acquisitions contributed $10 million
or 0.4 percentage points of sales. Higher price realization of $83
million was offset by significant weakness in both the supplies driven and
contract channels of the office furniture segment and lower volume in the hearth
products segment. Net sales during 2008 were $2.5 billion, a decrease
of 3.6 percent, compared to net sales of $2.6 billion in
2007. Acquisitions contributed $118 million or 4.6 percentage points
of sales. Higher price realization of $66 million was offset by soft
demand in the supplies driven channel of the office furniture segment and lower
volume in the hearth products segment.
Gross
Profit
Gross
profit as a percent of net sales increased 1.1 percentage points in 2009 as
compared to 2008 due to better price realization, lower material costs and cost
reduction initiatives offset partially by lower volume. Gross profit
as a percent of net sales decreased 1.8 percentage points in 2008 as compared to
2007 due to lower volume, higher material costs and restructuring and transition
costs offset partially by better price realization.
Selling
and Administrative Expenses
Selling
and administrative expenses decreased 26.7 percent in 2009 and increased 2.2
percent in 2008. The decrease in 2009 was due to lower volume related
expenses, lower fuel costs, improved distribution efficiencies, cost control
initiatives and gains from the sale of a facility and a corporate
airplane. These were offset partially by the impact of prior year
favorable adjustments related to the fair value of mandatorily redeemable
liabilities from prior acquisitions, increased costs from acquisitions and
transition costs related to the various plant consolidations. The
increase in 2008 was due to increased freight and distribution costs due to
freight increases and fuel surcharges, additional costs from acquisitions,
increased costs related to new product development and gains recorded in 2007
from the sale of a facility and a corporate airplane. These were
offset partially by lower volume related expenses, lower incentive based
compensation costs, favorable adjustments to the current fair value of
mandatorily redeemable liabilities from prior acquisitions and cost control
initiatives.
Selling
and administrative expenses include freight expense for shipments to customers,
product development costs and amortization expense of intangible
assets. Refer to Summary of Significant Accounting Policies and
Goodwill and Other Intangible Assets in the Notes to Consolidated Financial
Statements for further information regarding the comparative expense levels for
these expense items.
Restructuring
and Impairment Charges
During
2009, the Corporation made the decision to close three office furniture
facilities in South Gate, California; Louisburg, North Carolina and Owensboro,
Kentucky and consolidate production into existing office furniture manufacturing
facilities. In connection with the closure of these facilities, the
Corporation recorded $12.6 million of pre-tax charges which included $2.7
million of accelerated depreciation of machinery and equipment recorded in cost
of sales, and $9.9 million of severance and facility exit costs which were
recorded as restructuring costs in 2009. The Corporation expects to
incur additional restructuring and transition costs in 2010 of approximately $3
to $4 million in connection with these closures.
The
Corporation made the decision to consolidate significant production from its
hearth product Mount Pleasant, Iowa plant to other existing hearth products
manufacturing facilities. Additionally the Corporation will close
hearth products distribution centers in Alsip, Illinois and Lake City, Minnesota
and transfer operations to its Mount Pleasant facility. The
Corporation’s hearth product segment disposed and consolidated several retail
and distribution locations during 2009. In connection with these
activities, the Corporation recorded $6.7 million of pre-tax charges which
included $1.2 million of accelerated depreciation of machinery and equipment
recorded in cost of sales, and $5.5 million of severance and facility exit
costs, including accelerated depreciation of $1.4 million and write-off of
goodwill of $0.6 million, which were recorded as restructuring costs in
2009.
As part
of the Corporation’s annual impairment review, management concluded due to
market and economic conditions that a portion of its goodwill and
indefinite-lived intangibles had carrying values greater than their fair market
value and recorded an impairment charge of $25.0 million in 2009 and $21.8
million in 2008.
During
2008, the Corporation completed the shutdown of an office furniture facility in
Richmond, Virginia, consolidated production into other manufacturing locations,
closed two distribution centers and started up a new distribution
center. The Corporation announced and started these activities during
third quarter 2007. In connection with the shutdown of the
Richmond facility, the Corporation recorded $4.4 million of pre-tax charges
which included $0.6 million of accelerated depreciation of machinery and
equipment recorded in cost of sales, and $3.8 million of severance recorded as
restructuring costs during 2007. During 2008, the Corporation
incurred $4.2 million of current period charges which included $0.4 million of
accelerated depreciation of machinery and equipment recorded in cost of sales
and $3.8 million of other costs which were recorded as restructuring
costs.
The
Corporation made the decision in 2007 to sell several small non-core components
of its office furniture services business and recorded $2.7 million of
impairment charges, included in the restructuring related and impairment charges
line item on the statement of income, to reflect the fair market value of the
assets being held for sale.
The
Corporation’s hearth product segment consolidated some of its service and
distribution locations during 2007. In connection with those
consolidations, the Corporation recorded $1.1 million of severance and facility
exit costs which were recorded as restructuring costs in 2007. The
Corporation incurred $0.3 million of current period charges during 2008 which
were recorded as restructuring costs.
During
2007, the Corporation completed the shutdown of an office furniture facility,
which began in the fourth quarter of 2006. The facility was located
in Monterrey, Mexico and production from this facility was consolidated into
other locations. In connection with this shutdown, the Corporation
recorded $0.8 million of severance costs in 2006. The Corporation
incurred $2.1 million of current period charges during 2007.
Operating
Income
Operating
income was $4.0 million in 2009, a decrease of 95.3 percent compared to $84.9
million in 2008. The decrease was due to lower volume in all channels
of the office furniture and hearth products segments, higher restructuring,
transition and impairment charges and favorable adjustments recorded in 2008 to
the fair value of mandatorily redeemable liabilities from prior
acquisitions. These were offset partially by improved price
realization, lower input costs, improved distribution efficiencies, cost control
initiatives and gains recorded on the sale of a facility and a corporate
airplane. Operating income was $84.9 million in 2008, a decrease of
56.2 percent compared to $194 million in 2007. The decrease in 2008
was due to lower volume in the supplies-driven channel of the office furniture
segment and the hearth products segment, higher material and freight and
distribution costs, investments in product development, restructuring,
transition and impairment charges, gains recorded in 2007 from the sale of a
facility and a corporate airplane, and severance costs. These were
offset partially by improved price realization, lower volume related and
incentive based compensation expenses, favorable adjustments to the current fair
value of mandatorily redeemable liabilities from prior acquisitions and cost
control initiatives.
Income
(Loss) From Continuing Operations
Income
from continuing operations in 2009, which excludes the Corporation’s
discontinued business (see Discontinued Operations in the Notes to Consolidated
Financial Statements), was a loss of $6.3 million compared with income of $45.6
million in 2008, a 113.7 percent decrease. The current year loss from
continuing operations was positively impacted by decreased interest expense of
$4.8 million due to lower debt levels. Income from continuing
operations in 2008 was $45.6 million compared with $119.4 million in 2007, a
61.8 percent decrease. Income from continuing operations was
positively impacted by decreased interest expense of $1.3 million on moderate
debt levels due to lower average interest rates. Income from
continuing operations per diluted share decreased by 113.7 percent to ($0.14) in
2009 and decreased by 60.0 percent to $1.02 in 2008.
Discontinued
Operations
During
December 2006, the Corporation committed to a plan to sell a small non-core
component of its office furniture segment. The Corporation reduced
the assets to the fair market value and classified them as held for
sale. The sale was completed during the second quarter of
2007. Revenues and expenses associated with this component are
presented as discontinued operations for all periods presented. This
operation was formerly reported within the Office Furniture
segment. Refer to Discontinued Operations in the Notes to
Consolidated Financial Statements for further information.
Net
Income (Loss) Attributable to Parent Company
Net
income attributable to parent company decreased 114.1 percent to a loss of $6.4
million in 2009 compared to income of $45.5 million in 2008 which was a decrease
of 62.2 percent compared to 2007. Net income per diluted share
decreased by 113.7 percent to ($0.14) in 2009 and decreased by 60.3 percent to
$1.02 in 2008. Net income per diluted share was positively impacted
$0.05 per share in 2008 by the Corporation’s share repurchase
program.
Office
Furniture
Office
furniture comprised 83 percent, 83 percent and 82 percent of consolidated net
sales for 2009, 2008, and 2007, respectively. Net sales for office
furniture decreased 33 percent in 2009 to $1.37 billion compared to $2.05
billion in 2008. Acquisitions contributed $10 million of additional
sales. Organic sales decreased $694 million or 34 percent including
increased price realization of $77 million due to substantial weakness in both
the supplies-driven and contract channels which were both impacted by the
current economic conditions. Net sales for office furniture decreased
3 percent in 2008 to $2.05 billion compared to $2.11 billion in
2007. Acquisitions contributed $61 million of additional
sales. Organic sales decreased $115 million or 5 percent, including
increased price realization of $50 million, due to softness in the
supplies-driven channel. BIFMA reported 2009 shipments down 30
percent from 2008 levels which were down 2 percent from 2007
levels.
Operating
profit as a percent of net sales was 3.7 percent in 2009, 4.9 percent in 2008,
and 9.2 percent in 2007. The decrease in operating margins in 2009
was due to additional restructuring and impairment charges of $9 million
compared to 2008 as well as lower volume and the impact of prior year favorable
adjustments to the current fair value of mandatorily redeemable liabilities from
prior acquisitions. These were partially offset by increased price
realization, lower material costs, improved distribution efficiencies, lower
transition costs and cost control initiatives. The decrease in
operating margins in 2008 was due to additional restructuring and impairment
charges of $17 million compared to 2007 as well as lower volume, higher material
and fuel costs, transition costs and severance expenses offset partially by
better price realization, cost reduction initiatives, lower incentive based
compensation and favorable adjustments to the current fair value of mandatorily
redeemable liabilities from prior acquisitions.
Hearth
Products
Hearth
products sales decreased 32.5 percent in 2009 to $286 million compared to $424
million in 2008. The decrease was due to significant declines in both
the new construction and remodel-retrofit channels. Hearth products
sales decreased 8 percent in 2008 to $424 million compared to $462 million in
2007. New acquisitions contributed $57 million of net
sales. The decrease in organic sales was due to the continuing
decline in new home construction. This was partially offset by the
high demand for alternative fuel products.
Operating
loss as a percent of sales in 2009 was 6.0 percent compared to operating profit
as a percent of sales of 2.8 percent and 7.9 percent in 2008 and 2007,
respectively. The decrease in operating margins in 2009 was due to
lower volume and higher restructuring and transition costs offset partially by
cost reduction initiatives. The decrease in operating margins in 2008
was due to lower overall volume, rising material costs and increased mix of
lower margin remodel/retrofit business offset partially by price increases, cost
reduction initiatives and lower restructuring expenses.
Liquidity
and Capital Resources
Cash
Flow – Operating Activities
Cash
generated from operating activities in 2009 totaled $193.2 million compared to
$174.4 million generated in 2008. Changes in working capital balances
resulted in a $97.3 million source of cash in the current fiscal year compared
to a $30.3 million source of cash in the prior year.
The
source of cash related to working capital balances in 2009 was primarily driven
from lower trade receivables of $74.6 million and lower inventory of $19.1
million due to strong collection efforts and lower sales. These
sources of cash were offset partially by decreased current liabilities of $5.8
million. The decrease in current liabilities is comprised of $31.9
million of other accruals namely compensation, retirement and marketing expense
accruals offset by a $17.6 million increase in trade accounts payable and $8.5
million in tax-related accruals.
The
source of cash related to working capital balances in 2008 was primarily driven
by lower trade receivables of $58.6 million and lower inventory of $31.8 million
due to strong collection efforts and the company wide shutdown for the last two
weeks of the fiscal year. These sources of cash were offset partially
by decreased current liabilities of $60.4 million. The decrease in
current liabilities was comprised of $36.5 million of decreased trade accounts
payable, $1.3 million in tax-related accruals and $22.6 million of other
accruals namely compensation, retirement and marketing expense
accruals.
The
Corporation places special emphasis on the management and control of its working
capital with a particular focus on trade receivables and inventory
levels. The success achieved in managing receivables is in large part
a result of doing business with quality customers and maintaining close
communication with them. During these uncertain economic times
management is placing additional emphasis on monitoring its trade
receivables. Management believes its recorded trade receivable
valuation allowances at the end of 2009 are adequate to cover the risk of
potential bad debts. Allowances for non-collectible trade
receivables, as a percent of gross trade receivables, totaled 3.8 percent, 3.6
percent, and 3.8 percent at the end of fiscal years 2009, 2008, and 2007,
respectively. The Corporation’s inventory turns were 15, 17, and 16, for 2009,
2008, and 2007, respectively.
Cash
Flow – Investing Activities
Capital
expenditures including capitalized software were $17.6 million in 2009, $71.5
million in 2008, and $58.9 million in 2007. These expenditures have
consistently focused on machinery and equipment and tooling required to support
new products, continuous improvements in our manufacturing processes and cost
savings initiatives. The increase in capital expenditures in 2008 was
due to the facility consolidations that were completed in 2008. The
Corporation anticipates capital expenditures for 2010 to total $25 to $35
million and be primarily related to new products and operational process
improvement.
Included
in 2009 investing activities is a net cash outflow of $0.5 million for a
contingent purchase commitment related to the Harman Stove Company (“Harman”)
acquisition in 2007. In 2008, the investing activities reflected a
net cash outflow of $75.5 million related to the acquisition of
HBF. The addition of HBF bolstered the Corporation’s contract office
furniture business with its strong brand recognition among interior designers
and emphasis on new products. In 2007, the investing activities
reflected a cash outflow of $41.7 million related to the acquisition of Harman
and two small office furniture dealers. The acquisition of Harman
added to the hearth products segment alternative fuel business. Refer
to the Business Combination note in the Notes to Consolidated Financial
Statements for additional information.
In 2009,
the Corporation completed the sale of a corporate airplane and a facility
located in Lakeville, Minnesota. In 2008, the Corporation completed
the sale of a facility located in Richmond, Virginia. In 2007, the
Corporation completed the sale of a corporate airplane and a facility located in
Monterrey, Mexico. The proceeds from these sales of $5 million, $5
million and $11 million are reflected in the Consolidated Statement of Cash
Flows as “Proceeds from sale of property, plant and equipment” for 2009, 2008
and 2007, respectively.
In 2009,
the Corporation sold $21 million of long-term investments and used the proceeds
to repay debt.
Cash
Flow – Financing Activities
On June
30, 2008, the Corporation entered into a term loan credit agreement which
allowed for a one-time borrowing of $50 million in the form of a term
loan. The Corporation paid off the term loan during
2009.
The
Corporation has a revolving credit facility that provides for a maximum
borrowing of $300 million. Amounts borrowed under the revolving
credit facility may be borrowed, repaid and reborrowed from time to time until
January 28, 2011. As of January 2, 2010, $50 million was outstanding
under the revolving credit facility and classified as long-term as the
Corporation does not expect to repay the borrowings within a
year. The Corporation plans to negotiate a new revolving credit
facility before the current one expires.
In 2006,
the Corporation refinanced $150 million of borrowings outstanding under the
revolving credit facility with 5.54 percent, ten-year unsecured Senior Notes due
in 2016 issued through the private placement debt market. Interest
payments are due semi-annually on April 1 and October 1 of each year and the
principal is due in a lump sum in 2016.
Additional
borrowing capacity of $250 million, less amounts used for designated letters of
credit, is available through the revolving credit facility in the event cash
generated from operations should be inadequate to meet future
needs. The Corporation does not currently expect future capital
resources to be a constraint on planned growth. Certain of the
Corporation’s credit agreements include covenants that limit the assumption of
additional debt and lease obligations. Long-term debt, including
capital lease obligations, was 32% of total capitalization as of January 2,
2010, 37% as of January 3, 2009, and 38% as of December 29, 2007.
The
credit agreement pertaining to the revolving credit facility and the note
purchase agreement pertaining to the Senior Notes contain covenants that, among
other things, restrict, subject to certain exceptions, our ability
to:
|
·
|
incur
additional indebtedness and make
guarantees;
|
|
·
|
create
liens on assets;
|
|
·
|
engage
in any material line of business substantially different from existing
lines of business;
|
|
·
|
make
investments, loans and advances, including
acquisitions;
|
|
·
|
engage
in sale-leaseback transactions in excess of $50 million in the
aggregate;
|
|
·
|
repay
the Senior Notes or enter into certain amendments thereof;
and
|
|
·
|
engage
in certain transactions with
affiliates.
|
The
credit agreement governing the Corporation’s revolving credit facility contains
a number of covenants, including covenants requiring maintenance of the
following financial ratios as of the end of any fiscal quarter:
|
·
|
a
consolidated interest coverage ratio of not less than 4.0 to 1.0, based
upon the ratio of (a) consolidated EBITDA (as defined in the credit
agreement) for the last four fiscal quarters to (b) the sum of
consolidated interest charges; and
|
|
·
|
a
consolidated leverage ratio of not greater than 3.0 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.
|
The note
purchase agreement pertaining to the Corporation’s Senior Notes also contains a
number of covenants, including a covenant requiring maintenance of consolidated
debt to consolidated EBITDA (as defined in the note purchase agreement) of not
greater than 3.5 to 1.0, based upon the ratio of (a) the quarter-end
consolidated funded indebtedness (as defined in the note purchase agreement) to
(b) consolidated EBITDA for the last four fiscal quarters.
The
revolving credit facility and Senior Notes are the primary sources of committed
funding from which the Corporation finances its planned capital expenditures,
strategic initiatives such as repurchases of common stock and certain working
capital needs. Non-compliance with the various financial covenant
ratios could prevent the Corporation from being able to access further
borrowings under the revolving credit facility, require immediate repayment of
all amounts outstanding with respect to the revolving credit facility and Senior
Notes and increase the cost of borrowing.
The most
restrictive of the financial covenants is the consolidated leverage ratio
requirement of 3.0 to 1.0 included in the credit agreement governing the
revolving credit facility. Under that credit agreement, adjusted
EBITDA is defined as consolidated net income before interest expense, income
taxes and depreciation and amortization of intangibles, as well as non-cash
nonrecurring charges and all non-cash items increasing net income. At
January 2, 2010, the Corporation was well below this ratio and was in compliance
with all of the covenants and other restrictions in the credit agreement and
note purchase agreement. The Corporation currently expects to remain
in compliance over the next twelve months.
In 2008,
the Corporation entered into an interest rate swap agreement with one of its
relationship banks, designated as a cash flow hedge, for purposes of managing
its benchmark interest rate fluctuation risk. The fair value of its
interest rate swap arrangement, as further described in the Derivative Financial
Instrument note in the Notes to Consolidated Financial Statements, was a
negative $2.5 million at the end of 2009. The fair value of the swap
arrangement changes based on fluctuations in market interest
rates. The changes in fair value are recorded as a component of
accumulated other comprehensive income in the equity section of the
Corporation’s consolidated balance sheet. This interest rate swap had
the effect of increasing total interest expense by $1.7 million in
2009.
During
2009, the Corporation did not repurchase any shares of its common
stock. During 2008, the Corporation repurchased 1,004,700 shares of
its common stock at a cost of approximately $28.6 million, or an average price
of $28.42. The Board of Directors authorized $200 million
on August 8, 2006, and an additional $200 million on November 9, 2007, for
repurchases of the Corporation’s common stock. As of January 2, 2010,
approximately $163.6 million of this authorized amount remained
unspent. During 2007, the Corporation repurchased 3,581,707 shares of
its common stock at a cost of approximately $147.7 million, or an average price
of $41.23.
A cash
dividend has been paid every quarter since April 15, 1955, and quarterly
dividends are expected to continue. Cash dividends were $0.86 per
common share for 2009, $0.86 for 2008, and $0.78 for 2007. The last
increase was a 10.3 percent increase in the quarterly dividend effective with
the February 29, 2008, dividend payment for shareholders of record at the close
of business on February 22, 2008. The average dividend payout
percentage for the most recent three-year period has been 39 percent of prior
year earnings.
Cash,
cash equivalents and short-term investments totaled $93.4 million at the end of
2009 compared to $49.3 million at the end of 2008 and $43.8 million at the end
of 2007. These funds, coupled with cash from future operations and
additional borrowings, if needed, are expected to be adequate to finance
operations, planned improvements and internal growth. Due to the
volatile and uncertain economic outlook for 2010, the Corporation will manage
cash to maintain strategic flexibility. The Corporation currently
expects to be able to satisfy its cash flow needs over the next twelve months
with existing facilities.
Contractual
Obligations
The
following table discloses the Corporation’s obligations and commitments to make
future payments under contracts:
|
|
Payments
Due by Period
|
|
(In
thousands)
|
|
Total
|
|
|
Less
than
1
Year
|
|
|
1 –
3
Years
|
|
|
3 –
5
Years
|
|
|
More
than
5
Years
|
|
Long-term
debt obligations, including estimated interest (1)
|
|
$
|
255,247
|
|
|
$
|
10,660
|
|
|
$
|
67,579
|
|
|
$
|
16,620
|
|
|
$
|
160,388
|
|
Capital
lease obligations
|
|
|
40
|
|
|
|
40
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Operating
lease obligations
|
|
|
97,791
|
|
|
|
31,640
|
|
|
|
39,957
|
|
|
|
12,503
|
|
|
|
13,691
|
|
Purchase
obligations (2)
|
|
|
62,490
|
|
|
|
62,490
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Other
long-term obligations (3)
|
|
|
28,575
|
|
|
|
1,452
|
|
|
|
8,577
|
|
|
|
2,557
|
|
|
|
15,989
|
|
Total
|
|
$
|
444,143
|
|
|
$
|
106,282
|
|
|
$
|
116,113
|
|
|
$
|
31,680
|
|
|
$
|
190,068
|
|
|
(1)
|
Interest
has been included for all debt at either the fixed rate or variable rate
in effect as of January 2, 2010, as
applicable.
|
|
(2)
|
Purchase
obligations include agreements to purchase goods or services that are
enforceable, legally binding, and specify all significant terms, including
the quantity to be purchased, the price to be paid, and the timing of the
purchase.
|
|
(3)
|
Other
long-term obligations represent payments due to members who are
participants in the Corporation’s deferred and long-term incentive
compensation programs, mandatory purchases of the remaining unowned
interest in an acquisition, liability for unrecognized tax liabilities,
and contribution and benefit payments expected to be made pursuant to the
Corporation’s post-retirement benefit plans. It should be noted
the obligations related to post-retirement benefit plans are not
contractual and the plans could be amended at the discretion of the
Corporation. The disclosure of contributions and benefit
payments has been limited to 10 years, as information beyond this time
period was not available.
|
Litigation
and Uncertainties
The
Corporation is involved in various kinds of disputes and legal proceedings that
have arisen in the ordinary course of 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, although such
matters could have a material effect on the Corporation’s quarterly or annual
operating results and cash flows when resolved in a future period.
Looking
Ahead
Management
believes the challenging market conditions will continue in 2010. It
is unclear when recovery will occur in the office furniture market, and while
there are early indications the worst is over in housing, the recovery remains
uncertain with only modest improvement likely in 2010. The
Corporation has adjusted the cost structure of its various businesses to the
current conditions and believes they are strategically well positioned to
increase market share and grow sales.
The
Corporation will focus on its core customers and core market segments, respond
to customers’ needs and the demands of the market. It will continue
to adjust to changing market conditions and fiercely manage cash. The
Corporation will continue to invest in new products, brand development, selling
initiatives and build its e-business capabilities. The Corporation
will continue its drive for best-cost/lean enterprise.
The
Corporation remains focused on creating long-term shareholder value by growing
its business through investment in building brands, product solutions and
selling models, enhancing its strong member-owner culture and remaining focused
on its long-standing rapid continuous improvement programs to build best total
cost and a lean enterprise.
ITEM
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
During
the normal course of business, the Corporation is subjected to market risk
associated with interest rate movements. Interest rate risk arises
from our variable interest debt obligations. For information related
to the Corporation’s long-term debt, refer to the Long-Term Debt disclosure in
the Notes to Consolidated Financial Statements filed as part of this
report. As of January 2, 2010, the Corporation has one interest rate
swap agreement. Under the interest rate swap agreement, the
Corporation pays a fixed rate of interest and receives a variable rate of
interest equal to the one-month London Interbank Offered Rate (“LIBOR”) as
determined on the last day of each monthly settlement period on an aggregated
notational principal amount of $50 million. The interest rate swap
derivative instrument is held and used by the Corporation as a tool for managing
interest rate risk. It is not used for trading or speculative
purposes. The fair market value of the effective swap instrument was
negative $2.5 million at January 2, 2010. The impact of this swap
instrument on total interest expense was an addition to interest expense of $1.7
million in 2009. The Corporation does not currently have any
significant foreign currency exposure.
The
Corporation is exposed to risks arising from price changes for certain direct
materials and assembly components used in its operations. The most
significant material purchases and cost for the Corporation are for steel,
plastics, textiles, wood particleboard and cartoning. Steel is the
most significant raw material used in the manufacturing of
products. The market price of plastics and textiles in particular are
sensitive to the cost of oil and natural gas. Oil, natural gas and
diesel fuel prices have experienced high volatility in the last several years
and as a result the costs of plastics, textiles and transportation have also
been volatile. The cost of wood particleboard has been impacted by
continued downsizing of production capacity as well as increased volatility in
input and transportation costs. All of these materials are impacted
increasingly by global market pressure and impacts. The Corporation
works to offset these increased costs through global sourcing initiatives and
price increases on its products, however, historically margins have been
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 an
outlook risk to the business.
ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA
The
financial statements listed under Item 15(a)(1) and (2) are filed as part of
this Report.
The
Summary of Unaudited Quarterly Results of Operations follows the Notes to
Consolidated Financial Statements filed as part of this Report.
ITEM
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
ITEM
9A. CONTROLS AND PROCEDURES
Disclosure
controls and procedures are designed to ensure that information required to be
disclosed by the Corporation in the reports that it files or submits under the
Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed,
summarized and reported, within the time periods specified in the SEC’s rules
and forms. Disclosure controls and procedures are also designed to
ensure that information is accumulated and communicated to management, including
the Chief Executive Officer and Chief Financial Officer, as appropriate, to
allow timely decisions regarding required disclosures.
Under the
supervision and with the participation of management, the Chief Executive
Officer and Chief Financial Officer of the Corporation have evaluated the
effectiveness of the design and operation of the Corporation’s disclosure
controls and procedures as defined in Rules 13a – 15(e) and 15d – 15(e) under
the Exchange Act. As of January 2, 2010, and, based on their
evaluation, the Chief Executive Officer and Chief Financial Officer have
concluded that these controls and procedures are effective. There
have not been any changes in the Corporation’s internal control over financial
reporting that occurred during the fiscal quarter ended January 2, 2010 that
have materially affected, or are reasonably likely to materially affect, the
Corporation’s internal control over financial reporting.
Management’s
annual report on internal control over financial reporting and the attestation
report of the Corporation’s independent registered public accounting firm are
included in Item 15. Exhibits, Financial Statement Schedules of this report
under the headings “Management Report on Internal Control Over Financial
Reporting” and “Report of Independent Registered Public Accounting Firm,”
respectively.
ITEM
9B. OTHER INFORMATION
None.
PART
III
ITEM
10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE
The
information under the caption "Election of Directors" of the Corporation's Proxy
Statement for the Annual Meeting of Shareholders to be held on May 11, 2010, is
incorporated herein by reference. For information with respect to
executive officers of the Corporation, see Part I, Table I "Executive Officers
of the Registrant" included in this report.
Information
relating to the identification of the audit committee, audit committee financial
expert and director nomination procedures of the registrant is contained under
the caption “Information Regarding the Board” of the Corporation’s Proxy
Statement for the Annual Meeting of Shareholders to be held on May 11, 2010, and
is incorporated herein by reference.
Code
of Ethics
The
information under the caption “Code of Business Conduct and Ethics” of the
Corporation’s Proxy Statement for the Annual Meeting of Shareholders to be held
on May 11, 2010, is incorporated herein by reference.
Section
16(a) Beneficial Ownership Reporting Compliance
The
information under the caption "Section 16(a) Beneficial Ownership Reporting
Compliance" of the Corporation's Proxy Statement for the Annual Meeting of
Shareholders to be held on May 11, 2010, is incorporated herein by
reference.
ITEM
11. EXECUTIVE COMPENSATION
The
information under the captions “Executive Compensation” and “Director
Compensation” of the Corporation's Proxy Statement for the Annual Meeting of
Shareholders to be held on May 11, 2010, is incorporated herein by
reference.
IT
EM
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
The
information under the captions “Security Ownership” and “Equity Compensation
Plan Information” of the Corporation's Proxy Statement for the Annual Meeting of
Shareholders to be held on May 11, 2010, is incorporated herein by
reference.
IT
EM
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
The
information under the captions “Information Regarding the Board - Director
Independence” and “Review, Approval or Ratification of Transactions with Related
Persons” of the Corporation's Proxy Statement for the Annual Meeting of
Shareholders to be held on May 11, 2010, is incorporated herein by
reference.
ITEM
14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The
information under the caption “Fees Incurred for PricewaterhouseCoopers LLP” of
the Corporation’s Proxy Statement for the Annual Meeting of Shareholders to be
held on May 11, 2010, is incorporated herein by reference.
PART IV
ITEM
15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
|
(a)
(1)
|
Financial
Statements
|
The
following consolidated financial statements of the Corporation and its
subsidiaries included in the Corporation's 2009 Annual Report to Shareholders
are filed as a part of this Report pursuant to Item 8:
|
|
Page
|
|
|
|
Management
Report on Internal Control Over Financial Reporting
|
|
46
|
|
|
|
Report
of Independent Registered Public Accounting Firm
|
|
47
|
|
|
|
Consolidated
Statements of Income for the Years Ended
January
2, 2010, January 3, 2009, and December 29, 2007
|
|
48
|
|
|
|
Consolidated
Balance Sheets – January 2, 2010, January 3, 2009, and December 29,
2007
|
|
49
|
|
|
|
Consolidated
Statements of Shareholders’ Equity for the Years Ended
January
2, 2010, January 3, 2009, and December 29, 2007
|
|
50
|
|
|
|
Consolidated
Statements of Cash Flows for the Years Ended
January
2, 2010, January 3, 2009, and December 29, 2007
|
|
51
|
|
|
|
Notes
to Consolidated Financial Statements
|
|
52
|
|
|
|
Investor
Information
|
|
81
|
|
(2)
|
Financial Statement
Schedules
|
The
following consolidated financial statement schedule of the Corporation and its
subsidiaries is attached:
Schedule
II
|
Valuation
and Qualifying Accounts for the Years Ended January 2, 2010, January 3,
2009, and December 29, 2007
|
82
|
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.
An
exhibit index of all exhibits incorporated by reference into, or filed with,
this Report
appears
on Page 83. The following exhibits are filed herewith:
Exhibit
|
|
|
|
|
|
(3.1)
|
|
Articles
of Incorporation of HNI Corporation
|
|
|
|
(3.2)
|
|
By-laws
of HNI Corporation
|
|
|
|
(10.2)
|
|
2007
Equity Plan for Non-Employee Directors of HNI
Corporation
|
|
|
|
(10.6)
|
|
Form
of 2007 Equity Plan for Non-Employee Directors of HNI Corporation
Participant Agreement
|
|
|
|
(10.12)
|
|
HNI
Corporation Executive Deferred Compensation Plan
|
|
|
|
(10.15)
|
|
HNI
Corporation Directors Deferred Compensation
Plan
|
(10.25)
|
|
Form
of HNI Corporation Executive Deferred Compensation Plan Deferral Election
Agreement
|
|
|
|
(10.26)
|
|
Form
of HNI Corporation Directors Deferred Compensation Plan Deferral Election
Agreement
|
|
|
|
(21)
|
|
Subsidiaries
of the Registrant
|
|
|
|
(23)
|
|
Consent
of Independent Registered Public Accounting Firm
|
|
|
|
(31.1)
|
|
Certification
of the CEO Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
|
|
|
|
(31.2)
|
|
Certification
of the CFO Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
|
|
|
|
(32.1)
|
|
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
|
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this Annual Report on Form 10-K to be
signed on its behalf by the undersigned, thereunto duly authorized.
|
|
HNI
Corporation
|
|
|
|
|
|
|
|
|
|
Date:
February 26, 2010
|
|
By:
|
/s/ Stan A. Askren
|
|
|
|
Stan
A. Askren
|
|
|
|
Chairman,
President and CEO
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated. Each Director whose signature
appears below authorizes and appoints Stan A. Askren as his or her
attorney-in-fact to sign and file on his or her behalf any and all amendments
and post-effective amendments to this report.
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
|
|
|
|
/s/
Stan A. Askren
|
|
Chairman,
President and CEO,
|
|
February
26, 2010
|
Stan
A. Askren
|
|
Principal
Executive Officer,
|
|
|
|
|
and
Director
|
|
|
|
|
|
|
|
/s/
Kurt A. Tjaden
|
|
Vice
President and Chief Financial
|
|
February
26, 2010
|
Kurt
A. Tjaden
|
|
Officer,
Principal Financial Officer and Principal Accounting
Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Mary H. Bell
|
|
Director
|
|
February
26, 2010
|
Mary
H. Bell
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Miguel M. Calado
|
|
Director
|
|
February
26, 2010
|
Miguel
M. Calado
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Gary M. Christensen
|
|
Director
|
|
February
26, 2010
|
Gary
M. Christensen
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Cheryl A. Francis
|
|
Director
|
|
February
26, 2010
|
Cheryl
A. Francis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/
John A. Halbrook
|
|
Director
|
|
February
26, 2010
|
John
A. Halbrook
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/
James R. Jenkins
|
|
Director
|
|
February
26, 2010
|
James
R. Jenkins
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Dennis J. Martin
|
|
Director
|
|
February
26, 2010
|
Dennis
J. Martin
|
|
|
|
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Larry B. Porcellato
|
|
Director
|
|
February
26, 2010
|
Larry
B. Porcellato
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Abbie J. Smith
|
|
Director
|
|
February
26, 2010
|
Abbie
J. Smith
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Brian E. Stern
|
|
Director
|
|
February
26, 2010
|
Brian
E. Stern
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Ronald V. Waters, III
|
|
Director
|
|
February
26, 2010
|
Ronald
V. Waters, III
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 that controls may
become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
Management
assessed the effectiveness of HNI Corporation’s internal control over financial
reporting as of January 2, 2010. Management based this assessment on
criteria for effective internal control over financial reporting described in
Internal Control – Integrated
Framework
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 the 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 that, as of January 2, 2010, HNI
Corporation maintained effective internal control over financial
reporting.
Management’s
assessment of the effectiveness of HNI Corporation’s internal control over
financial reporting as of January 2, 2010 has been audited by
PricewaterhouseCoopers LLP, an independent registered public accounting firm, as
stated in its report which appears herein.
February
26, 2010
Report
of
Independent Registered Public Accounting Firm
To the
Board of Directors and Shareholders of HNI Corporation:
In our
opinion, the consolidated financial statements listed in the index appearing
under Item 15(a)(1), present fairly, in all material respects, the financial
position of HNI Corporation and its subsidiaries (the “Corporation”) at January
2, 2010, January 3, 2009, and December 29, 2007, and the results of their
operations and their cash flows for each of the three years in the period ended
January 2, 2010 in conformity with accounting principles generally accepted in
the United States of America. In addition, in our opinion, the
financial statement schedule listed in the index appearing under Item 15(a)(2)
presents fairly, in all material respects, the information set forth therein
when read in conjunction with the related consolidated financial
statements. Also in our opinion, the Company maintained, in all
material respects, effective internal control over financial reporting as of
January 2, 2010, based on criteria established in
Internal Control - Integrated
Framework
issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO). The Corporation's management is responsible for
these financial statements and financial statement schedule, for maintaining
effective internal control over financial reporting and for its assessment of
the effectiveness of internal control over financial reporting, included in the
Management Report on Internal Control Over Financial Reporting appearing under
Item 15. Our responsibility is to express opinions on these financial
statements, on the financial statement schedule, and on the Corporation's
internal control over financial reporting based on our integrated
audits. We conducted our audits in accordance with the standards of
the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material
misstatement and whether effective internal control over financial reporting was
maintained in all material respects. Our audits of the financial
statements included examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. Our audit of internal control over
financial reporting included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, and
testing and evaluating the design and operating effectiveness of internal
control based on the assessed risk. Our audits also included
performing such other procedures as we considered necessary in the
circumstances. We believe that our audits provide a reasonable basis for our
opinions.
A
company’s internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company’s internal
control over financial reporting includes those policies and procedures that
(i) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of
the company; (ii) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and
(iii) 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.
/s/PricewaterhouseCoopers
LLP
Chicago,
Illinois
February
26, 2010
HNI
CORPORATION AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF INCOME
(Amounts
in thousands, except for per share data)
|
|
|
|
|
|
|
|
|
|
For
the Years
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Net
sales
|
|
$
|
1,656,289
|
|
|
$
|
2,477,587
|
|
|
$
|
2,570,472
|
|
Cost
of products sold
|
|
|
1,085,508
|
|
|
|
1,648,975
|
|
|
|
1,664,697
|
|
Gross
profit
|
|
|
570,781
|
|
|
|
828,612
|
|
|
|
905,775
|
|
Selling
and administrative expenses
|
|
|
526,346
|
|
|
|
717,870
|
|
|
|
702,329
|
|
Restructuring
related and impairment charges
|
|
|
40,443
|
|
|
|
25,859
|
|
|
|
9,788
|
|
Operating
income
|
|
|
3,992
|
|
|
|
84,883
|
|
|
|
193,658
|
|
Interest
income
|
|
|
415
|
|
|
|
1,172
|
|
|
|
1,229
|
|
Interest
expense
|
|
|
12,080
|
|
|
|
16,865
|
|
|
|
18,161
|
|
Income
(loss) from continuing operations before tax
|
|
|
(7,673
|
)
|
|
|
69,190
|
|
|
|
176,726
|
|
Income
taxes
|
|
|
(1,414
|
)
|
|
|
23,583
|
|
|
|
57,280
|
|
Income
(loss) from continuing operations, less applicable income
taxes
|
|
|
(6,259
|
)
|
|
|
45,607
|
|
|
|
119,446
|
|
Discontinued
operations, less applicable income taxes
|
|
|
-
|
|
|
|
-
|
|
|
|
514
|
|
Net
income (loss)
|
|
|
(6,259
|
)
|
|
|
45,607
|
|
|
|
119,960
|
|
Less:
Net income attributable to the noncontrolling
interest
|
|
|
183
|
|
|
|
157
|
|
|
|
(418
|
)
|
Net
income (loss) attributable to Parent Company
|
|
$
|
(6,442
|
)
|
|
$
|
45,450
|
|
|
$
|
120,378
|
|
Income
(loss) from continuing operations attributable to Parent Company per
common share – basic
|
|
$
|
(0.14
|
)
|
|
$
|
1.03
|
|
|
$
|
2.57
|
|
Discontinued
operations attributable to Parent Company per common share –
basic
|
|
|
-
|
|
|
|
-
|
|
|
|
0.01
|
|
Net
income (loss) attributable to Parent Company per common share –
basic
|
|
$
|
(0.14
|
)
|
|
$
|
1.03
|
|
|
$
|
2.58
|
|
Weighted
average shares outstanding – basic
|
|
|
44,888,809
|
|
|
|
44,309,765
|
|
|
|
46,684,774
|
|
Net
income (loss) attributable to Parent Company per common share –
diluted
|
|
$
|
(0.14
|
)
|
|
$
|
1.02
|
|
|
$
|
2.55
|
|
Discontinued
operations attributable to Parent Company per common share –
diluted
|
|
|
-
|
|
|
|
-
|
|
|
|
0.02
|
|
Net
income (loss) attributable to Parent Company per common share –
diluted
|
|
$
|
(0.14
|
)
|
|
$
|
1.02
|
|
|
$
|
2.57
|
|
Weighted
average shares outstanding - diluted
|
|
|
44,888,809
|
|
|
|
44,433,945
|
|
|
|
46,925,161
|
|
The
accompanying notes are an integral part of the consolidated financial
statements.
HNI
CORPORATION AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
(Amounts
in thousands of dollars and shares except par value)
As
of Year-end
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Current
Assets
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
87,374
|
|
|
$
|
39,538
|
|
|
$
|
33,881
|
|
Short-term
investments
|
|
|
5,994
|
|
|
|
9,750
|
|
|
|
9,900
|
|
Receivables,
net
|
|
|
163,732
|
|
|
|
238,327
|
|
|
|
288,777
|
|
Inventories
|
|
|
65,144
|
|
|
|
84,290
|
|
|
|
108,541
|
|
Deferred
income taxes
|
|
|
20,299
|
|
|
|
16,313
|
|
|
|
17,828
|
|
Prepaid
expenses and other current assets
|
|
|
17,728
|
|
|
|
29,623
|
|
|
|
30,145
|
|
Total
Current Assets
|
|
|
360,271
|
|
|
|
417,841
|
|
|
|
489,072
|
|
Property,
Plant, and Equipment
|
|
|
260,102
|
|
|
|
315,606
|
|
|
|
305,431
|
|
Goodwill
|
|
|
261,114
|
|
|
|
268,392
|
|
|
|
256,834
|
|
Other
Assets
|
|
|
112,839
|
|
|
|
163,790
|
|
|
|
155,639
|
|
Total
Assets
|
|
$
|
994,326
|
|
|
$
|
1,165,629
|
|
|
$
|
1,206,976
|
|
Liabilities
and Shareholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
$
|
299,718
|
|
|
$
|
313,431
|
|
|
$
|
367,320
|
|
Note
payable and current maturities of long-term debt and capital lease
obligations
|
|
|
39
|
|
|
|
54,494
|
|
|
|
14,715
|
|
Current
maturities of other long-term obligations
|
|
|
385
|
|
|
|
5,700
|
|
|
|
2,426
|
|
Total
Current Liabilities
|
|
|
300,142
|
|
|
|
373,625
|
|
|
|
384,461
|
|
Long-Term
Debt
|
|
|
200,000
|
|
|
|
267,300
|
|
|
|
280,315
|
|
Capital
Lease Obligations
|
|
|
-
|
|
|
|
43
|
|
|
|
776
|
|
Other
Long-Term Liabilities
|
|
|
50,332
|
|
|
|
50,399
|
|
|
|
55,843
|
|
Deferred
Income Taxes
|
|
|
24,227
|
|
|
|
25,271
|
|
|
|
26,672
|
|
Commitments
and Contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
stock - $1 par value
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Authorized: 2,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued: None
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock - $1 par value
|
|
|
45,093
|
|
|
|
44,324
|
|
|
|
44,835
|
|
Authorized: 200,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued
and outstanding: 2009-45,093; 2008-44,324;
2007-44,835
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
paid-in capital
|
|
|
19,695
|
|
|
|
6,037
|
|
|
|
3,152
|
|
Retained
Earnings
|
|
|
355,270
|
|
|
|
400,379
|
|
|
|
410,075
|
|
Accumulated
other comprehensive income
|
|
|
(774
|
)
|
|
|
(1,907
|
)
|
|
|
846
|
|
Total
Parent Company shareholders’ equity
|
|
|
419,284
|
|
|
|
448,833
|
|
|
|
458,908
|
|
Noncontrolling
interest
|
|
|
341
|
|
|
|
158
|
|
|
|
1
|
|
Total Equity
|
|
|
419,625
|
|
|
|
448,991
|
|
|
|
458,909
|
|
Total
Liabilities and Equity
|
|
$
|
994,326
|
|
|
$
|
1,165,629
|
|
|
$
|
1,206,976
|
|
The
accompanying notes are an integral part of the consolidated financial
statements.
HNI
CORPORATION AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF SHAREHOLDERS’ EQUITY
|
|
Parent
Company Shareholders’ Equity
|
|
|
|
|
|
|
|
(Amounts
in thousands)
|
|
Common
Stock
|
|
|
Additional
Paid-in
Capital
|
|
|
Retained
Earnings
|
|
|
Accumulated
Other
Comprehensive
(Loss)/Income
|
|
|
Non-
controlling
Interest
|
|
|
Total
Shareholders’
Equity
|
|
Balance,
December 30, 2006
|
|
$
|
47,906
|
|
|
$
|
2,807
|
|
|
|
448,268
|
|
|
$
|
(3,062
|
)
|
|
$
|
500
|
|
|
$
|
496,419
|
|
Comprehensive
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
|
|
|
|
|
|
|
|
120,378
|
|
|
|
|
|
|
|
(418
|
)
|
|
|
119,960
|
|
Other
comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,908
|
|
|
|
|
|
|
|
3,908
|
|
Comprehensive
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
123,868
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adoption
of FIN 48 impact
|
|
|
|
|
|
|
|
|
|
|
(509
|
)
|
|
|
|
|
|
|
|
|
|
|
(509
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
in ownership of noncontrolling interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(81
|
)
|
|
|
(81
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
dividends; $0.78 per share
|
|
|
|
|
|
|
|
|
|
|
(36,408
|
)
|
|
|
|
|
|
|
|
|
|
|
(36,408
|
)
|
Common
shares – treasury:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
purchased
|
|
|
(3,582
|
)
|
|
|
(22,439
|
)
|
|
|
(121,654
|
)
|
|
|
|
|
|
|
|
|
|
|
(147,675
|
)
|
Shares
issued under Members’ Stock Purchase Plan and stock awards
|
|
|
511
|
|
|
|
22,784
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,295
|
|
Balance,
December 29, 2007
|
|
$
|
44,835
|
|
|
$
|
3,152
|
|
|
$
|
410,075
|
|
|
$
|
846
|
|
|
$
|
1
|
|
|
$
|
458,909
|
|
Comprehensive
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
|
|
|
|
|
|
|
|
45,450
|
|
|
|
|
|
|
|
157
|
|
|
|
45,607
|
|
Other
comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,753
|
)
|
|
|
|
|
|
|
(2,753
|
)
|
Comprehensive
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42,854
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
dividends; $0.86 per share
|
|
|
|
|
|
|
|
|
|
|
(38,095
|
)
|
|
|
|
|
|
|
|
|
|
|
(38,095
|
)
|
Common
shares – treasury:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
purchased
|
|
|
(1,005
|
)
|
|
|
(10,497
|
)
|
|
|
(17,051
|
)
|
|
|
|
|
|
|
|
|
|
|
(28,553
|
)
|
Shares
issued under Members’ Stock Purchase Plan and stock awards
|
|
|
494
|
|
|
|
13,382
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,876
|
|
Balance,
January 3, 2009
|
|
$
|
44,324
|
|
|
$
|
6,037
|
|
|
$
|
400,379
|
|
|
$
|
(1,907
|
)
|
|
$
|
158
|
|
|
$
|
448,991
|
|
Comprehensive
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
|
|
|
|
|
|
|
|
|
(6,442
|
)
|
|
|
|
|
|
|
183
|
|
|
|
(6,259
|
)
|
Other
comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,133
|
|
|
|
|
|
|
|
1,133
|
|
Comprehensive
income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,126
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
dividends; $0.86 per share
|
|
|
|
|
|
|
|
|
|
|
(38,667
|
)
|
|
|
|
|
|
|
|
|
|
|
(38,667
|
)
|
Common
shares – treasury:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
purchased
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued under Members’ Stock Purchase Plan and stock awards
|
|
|
769
|
|
|
|
13,658
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,426
|
|
Balance,
January 2, 2010
|
|
$
|
45,093
|
|
|
$
|
19,695
|
|
|
$
|
355,270
|
|
|
$
|
(774
|
)
|
|
$
|
341
|
|
|
$
|
419,625
|
|
The
accompanying notes are an integral part of the consolidated financial
statements.
HNI
CORPORATION AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Amounts
in thousands)
For
the Years
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Net
Cash Flows From (To) Operating Activities:
|
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
$
|
(6,259
|
)
|
|
$
|
45,607
|
|
|
$
|
119,960
|
|
Noncash
items included in net income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
74,867
|
|
|
|
70,155
|
|
|
|
68,173
|
|
Other
postretirement and post-employment benefits
|
|
|
1,849
|
|
|
|
1,509
|
|
|
|
2,132
|
|
Stock-based
compensation
|
|
|
3,830
|
|
|
|
1,616
|
|
|
|
3,603
|
|
Excess
tax benefits from stock compensation
|
|
|
(8
|
)
|
|
|
(11
|
)
|
|
|
(808
|
)
|
Deferred
income taxes
|
|
|
(5,844
|
)
|
|
|
2,600
|
|
|
|
(4,935
|
)
|
Net
loss on sales, retirements and impairments of long-lived assets and
intangibles
|
|
|
26,025
|
|
|
|
22,691
|
|
|
|
1,662
|
|
Stock
issued to retirement plan
|
|
|
6,565
|
|
|
|
6,592
|
|
|
|
6,611
|
|
Other
– net
|
|
|
2,338
|
|
|
|
(4,065
|
)
|
|
|
(744
|
)
|
Changes
in working capital, excluding acquisition and disposition:
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables
|
|
|
74,593
|
|
|
|
58,570
|
|
|
|
39,941
|
|
Inventories
|
|
|
19,146
|
|
|
|
31,842
|
|
|
|
20,380
|
|
Prepaid
expenses and other current assets
|
|
|
9,317
|
|
|
|
306
|
|
|
|
2,264
|
|
Accounts
payable and accrued expenses
|
|
|
(14,313
|
)
|
|
|
(59,145
|
)
|
|
|
30,944
|
|
Income
taxes
|
|
|
8,514
|
|
|
|
(1,255
|
)
|
|
|
1,169
|
|
Increase
(decrease) in other liabilities
|
|
|
(7,415
|
)
|
|
|
(2,643
|
)
|
|
|
835
|
|
Net
cash flows from (to) operating activities
|
|
|
193,205
|
|
|
|
174,369
|
|
|
|
291,187
|
|
Net
Cash Flows From (To) Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
expenditures
|
|
|
(16,017
|
)
|
|
|
(70,083
|
)
|
|
|
(58,568
|
)
|
Proceeds
from sale of property, plant and equipment
|
|
|
6,733
|
|
|
|
6,191
|
|
|
|
12,145
|
|
Capitalized
software
|
|
|
(1,537
|
)
|
|
|
(1,413
|
)
|
|
|
(346
|
)
|
Acquisition
spending, net of cash acquired
|
|
|
(500
|
)
|
|
|
(75,479
|
)
|
|
|
(41,696
|
)
|
Short-term
investments – net
|
|
|
-
|
|
|
|
(250
|
)
|
|
|
-
|
|
Purchase
of long-term investments
|
|
|
(9,710
|
)
|
|
|
(10,650
|
)
|
|
|
(24,427
|
)
|
Sales
or maturities of long-term investments
|
|
|
33,872
|
|
|
|
20,158
|
|
|
|
20,576
|
|
Other
– net
|
|
|
440
|
|
|
|
-
|
|
|
|
294
|
|
Net
cash flows from (to) investing activities
|
|
|
13,281
|
|
|
|
(131,526
|
)
|
|
|
(92,022
|
)
|
Net
Cash Flows From (To) Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase
of HNI Corporation common stock
|
|
|
-
|
|
|
|
(28,553
|
)
|
|
|
(147,675
|
)
|
Proceeds
from long-term debt
|
|
|
97,000
|
|
|
|
359,500
|
|
|
|
289,503
|
|
Payments
of note and long-term debt and other financing
|
|
|
(219,884
|
)
|
|
|
(334,200
|
)
|
|
|
(309,297
|
)
|
Proceeds
from sale of HNI Corporation common stock
|
|
|
2,893
|
|
|
|
4,151
|
|
|
|
9,708
|
|
Excess
tax benefits from stock compensation
|
|
|
8
|
|
|
|
11
|
|
|
|
808
|
|
Dividends
paid
|
|
|
(38,667
|
)
|
|
|
(38,095
|
)
|
|
|
(36,408
|
)
|
Net
cash flows from (to) financing activities
|
|
|
(158,650
|
)
|
|
|
(37,186
|
)
|
|
|
(193,361
|
)
|
Net
increase (decrease) in cash and cash equivalents
|
|
|
47,836
|
|
|
|
5,657
|
|
|
|
5,804
|
|
Cash
and cash equivalents at beginning of year
|
|
|
39,538
|
|
|
|
33,881
|
|
|
|
28,077
|
|
Cash
and cash equivalents at end of year
|
|
$
|
87,374
|
|
|
$
|
39,538
|
|
|
$
|
33,881
|
|
Supplemental
Disclosures of Cash Flow Information:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
paid during the year for:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
12,316
|
|
|
$
|
17,160
|
|
|
$
|
18,213
|
|
Income
taxes
|
|
$
|
(4,528
|
)
|
|
$
|
22,852
|
|
|
$
|
57,128
|
|
The
accompanying notes are an integral part of the consolidated financial
statements.
HNI
CORPORATION and subsidiaries
Notes
to Consolidated Financial Statements
Nature
of Operations
HNI
Corporation with its subsidiaries (the “Corporation”), is a provider of office
furniture and hearth products. Both industries are reportable
segments; however, the Corporation’s office furniture business is its principal
line of business. Refer to Operating Segment Information for further
information. Office furniture products are sold through a national
system of dealers, wholesalers, retail superstores, and directly to end-user
customers, and federal and state governments. Dealers and wholesalers are the
major channels based on sales. Hearth products include a full array
of gas, electric, and wood burning fireplaces, inserts, stoves, facings, and
accessories. These products are sold through a national system of
dealers and distributors, as well as Corporation-owned distribution and retail
outlets. The Corporation’s products are marketed predominantly in the
United States and Canada. The Corporation exports select products to
a limited number of markets outside North America, principally Latin America and
the Caribbean, through its export subsidiary and manufactures and markets office
furniture in Asia; however, based on sales, these activities are not
significant.
Summary
of Significant Accounting Policies
Principles
of Consolidation and Fiscal Year-End
The
consolidated financial statements include the accounts and transactions of the
Corporation and its subsidiaries. Intercompany accounts and
transactions have been eliminated in consolidation.
The
Corporation follows a 52/53 week fiscal year which ends on the Saturday nearest
December 31. Fiscal year 2009 ended on January 2, 2010, 2008 ended on January 3,
2009; and 2007 ended on December 29, 2007. The financial statements
for fiscal year 2009 are on a 52-week basis; fiscal 2008 are on a 53-week basis;
and fiscal 2007 52-week basis. A 53-week year occurs approximately
every sixth year.
Cash,
Cash Equivalents and Investments
Cash and
cash equivalents generally consist of cash and money market
accounts. These securities have original maturity dates not exceeding
three months from date of purchase. The Corporation has short-term
investments with maturities of less than one year and also has investments with
maturities greater than one year that are included in Other Assets on the
Consolidated Balance Sheet. Management classifies investments in
marketable securities at the time of purchase and reevaluates such
classification at each balance sheet date. Equity securities are
classified as available-for-sale and are stated at current market value with
unrealized gains and losses included as a separate component of equity, net of
any related tax effect. The Corporation recognized $1.5 million of
other than temporary impairments on these investments during 2008 due to the
length of time and extent of which the market value was below cost and current
financial conditions. These investments were sold in 2009 resulting
in a loss of $0.2 million. Debt securities are normally classified as
held-to-maturity and are stated at amortized cost. Certain debt
securities were reclassified to trading securities at the end of 2008 due to the
Corporation’s intentions to sell. A loss of $41,000 was recognized on
these securities. These debt securities were sold in 2009 resulting
in a gain of $59,000. The specific identification method is used to
determine realized gains and losses on the trade date. The
Corporation has invested in an investment fund in which the Corporation’s
ownership in this investment fund is such that the underlying investments are
recorded at fair market value through the income statement.
At
January 2, 2010, January 3, 2009, and December 29, 2007, cash, cash equivalents
and investments consisted of the following:
Year-End 2009
(In
thousands)
|
|
Cash
and cash equivalents
|
|
|
Short-term
investments
|
|
|
Long-term
investments
|
|
Held-to-maturity
securities
|
|
|
|
|
|
|
|
|
|
Certificates
of deposit
|
|
$
|
-
|
|
|
$
|
250
|
|
|
$
|
-
|
|
Investment
in target fund
|
|
|
-
|
|
|
|
5,744
|
|
|
|
-
|
|
Cash
and money market accounts
|
|
|
87,374
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
87,374
|
|
|
$
|
5,994
|
|
|
$
|
-
|
|
Year-End 2008
(In
thousands)
|
|
Cash
and cash equivalents
|
|
|
Short-term
investments
|
|
|
Long-term
investments
|
|
Trading
securities
|
|
|
|
|
|
|
|
|
|
Debt
securities
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,541
|
|
Held-to-maturity
securities
|
|
|
|
|
|
|
|
|
|
|
|
|
Certificates
of deposit
|
|
|
-
|
|
|
|
-
|
|
|
|
250
|
|
Debt
securities
|
|
|
-
|
|
|
|
-
|
|
|
|
181
|
|
Available
for sale securities
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
securities
|
|
|
-
|
|
|
|
-
|
|
|
|
1,974
|
|
Investment
in target fund
|
|
|
-
|
|
|
|
9,750
|
|
|
|
15,297
|
|
Cash
and money market accounts
|
|
|
39,538
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
39,538
|
|
|
$
|
9,750
|
|
|
$
|
19,243
|
|
Year-End 2007
(In
thousands)
|
|
Cash
and cash equivalents
|
|
|
Short-term
investments
|
|
|
Long-term
investments
|
|
Held-to-maturity
securities
|
|
|
|
|
|
|
|
|
|
Debt
securities
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,858
|
|
Available
for sale securities
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
securities
|
|
|
-
|
|
|
|
-
|
|
|
|
3,138
|
|
Investment
in target fund
|
|
|
-
|
|
|
|
9,900
|
|
|
|
25,705
|
|
Cash
and money market accounts
|
|
|
33,881
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
33,881
|
|
|
$
|
9,900
|
|
|
$
|
30,701
|
|
Receivables
Accounts
receivable are presented net of an allowance for doubtful accounts of $6.4
million, $8.8 million, and $11.5 million, for 2009, 2008, and 2007,
respectively. The allowance is developed based on several factors
including overall customer credit quality, historical write-off experience, and
specific account analyses that project the ultimate collectibility of the
account. As such, these factors may change over time causing the
reserve level to adjust accordingly.
Inventories
The
Corporation valued 82%, 83%, and 87% of its inventory by the last-in, first-out
(“LIFO”) method at January 2, 2010, January 3, 2009, and December 29, 2007,
respectively. During 2009 and 2008, inventory quantities were
reduced. This reduction resulted in a liquidation of LIFO inventory
quantities carried at lower costs prevailing in prior years as compared with the
cost of current year purchases, the effect of which decreased cost of goods sold
by approximately $2.4 million and $3.7 million in 2009 and 2008,
respectively. Additionally, the Corporation evaluates its inventory
reserves in terms of excess and obsolete exposures. This evaluation
includes such factors as anticipated usage, inventory turnover, inventory
levels, and ultimate product sales value. As such, these factors may
change over time causing the reserve level to adjust accordingly. The
reserves for excess and obsolete inventory were $8.2 million, $7.8 million, and
$9.1 million, at year-end 2009, 2008, and 2007, respectively.
Property,
Plant and Equipment
Property,
plant and equipment are carried at cost. Depreciation has been
computed using the straight-line method over estimated useful
lives: land improvements, 10 – 20 years; buildings, 10 – 40 years;
and machinery and equipment, 3 – 12 years.
Long-Lived
Assets
Long-lived
assets are reviewed for impairment as events or changes in circumstances occur
indicating the amount of the asset reflected in the Corporation’s balance sheet
may not be recoverable. An estimate of undiscounted cash flows
produced by the asset, or the appropriate group of assets, is compared to the
carrying value to determine whether impairment exists. The estimates
of future cash flows involve considerable management judgment and are based upon
assumptions about expected future operating performance. The actual
cash flows could differ from management’s estimates due to changes in business
conditions, operating performance and economic conditions. Asset
impairment charges recorded in connection with the Corporation’s restructuring
activities are discussed in Restructuring Related Charges. These
assets included real estate, manufacturing equipment and certain other fixed
assets. The Corporation’s continuous focus on improving the
manufacturing process tends to increase the likelihood of assets being replaced;
therefore, the Corporation is regularly evaluating the expected lives of its
equipment and accelerating depreciation where appropriate.
Goodwill
and Other Intangible Assets
The
Corporation evaluates its goodwill for impairment on an annual basis during the
fourth quarter or whenever indicators of impairment exist. The
Corporation estimates the fair value of its reporting units using various
valuation techniques, with the primary technique being a discounted cash flow
method. Determining the fair value of a reporting unit involves the
use of significant estimates and assumptions. Management bases its
fair value estimates on assumptions it believes to be reasonable at the time,
but such assumptions are subject to inherent uncertainty. Actual
results may differ from those estimates.
The
Corporation also determines the fair value of indefinite-lived trade names on an
annual basis or whenever indications of impairment exist. The
Corporation estimates the fair value of the trade names based on a discounted
cash flow model using inputs which include projected revenues from management’s
long term plan, assumed royalty rates that could be payable if the trade names
were not owned and a discount rate. Determining the fair value of a
trade name involves the use of significant estimates and
assumptions. Actual results may differ from those
estimates.
The
Corporation has definite-lived intangibles that are amortized over their
estimated useful lives. Impairment losses are recognized if the
carrying amount of an intangible, subject to amortization, is not recoverable
from expected future cash flows and its carrying amount exceeds its fair
value. Intangibles, net of amortization, of approximately $67 million
are included on the consolidated balance sheet as of the end of fiscal
2009.
See
Goodwill and Other Intangible Assets footnote for further
information.
Product
Warranties
The
Corporation issues certain warranty policies on its furniture and hearth
products that provides for repair or replacement of any covered product or
component that fails during normal use because of a defect in design, materials
or workmanship. A warranty reserve is determined by recording a
specific reserve for known warranty issues and an additional reserve for unknown
claims that are expected to be incurred based on historical claims
experience. Actual claims incurred could differ from the original
estimates, requiring adjustments to the reserve. Activity associated
with warranty obligations was as follows:
(In
thousands)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Balance
at the beginning of the period
|
|
$
|
13,948
|
|
|
$
|
12,123
|
|
|
$
|
10,624
|
|
Accrual
assumed from acquisition
|
|
|
-
|
|
|
|
250
|
|
|
|
703
|
|
Accruals
for warranties issued during the period
|
|
|
13,111
|
|
|
|
20,008
|
|
|
|
14,831
|
|
Accrual
related to pre-existing warranties
|
|
|
(357
|
)
|
|
|
1,368
|
|
|
|
600
|
|
Settlements
made during the period
|
|
|
(14,018
|
)
|
|
|
(19,801
|
)
|
|
|
(14,635
|
)
|
Balance
at the end of the period
|
|
$
|
12,684
|
|
|
$
|
13,948
|
|
|
$
|
12,123
|
|
Revenue
Recognition
Revenue
is normally recognized upon shipment of goods to customers. In
certain circumstances revenue is not recognized until the goods are received by
the customer or upon installation and customer acceptance based on the terms of
the sales agreement. Revenue includes freight charged to customers;
the related costs are recorded in selling and administrative
expense. Rebates, discounts and other marketing program expenses that
are directly related to the sale are recorded as a reduction to net
sales. Marketing program accruals require the use of management
estimates and the consideration of contractual arrangements that are subject to
interpretation. Customer sales that achieve or do not achieve certain
award levels can affect the amount of such estimates and actual results could
differ from these estimates.
Product
Development Costs
Product
development costs relating to the development of new products and processes,
including significant improvements and refinements to existing products, are
expensed as incurred. These costs include salaries, contractor fees,
building costs, utilities and administrative fees. The amounts
charged against income were $21.1 million in 2009, $27.8 million in 2008, and
$24.0 million in 2007 and were recorded in Selling and Administrative Expenses
on the Consolidated Statements of Income.
Freight
Expense
The
Corporation records freight expense to customers in Selling and Administrative
Expenses on the Consolidated Statements of Income. The amounts
recorded were $97.1 million in 2009, $169.2 million in 2008 and $164.1 million
in 2007.
Stock-Based
Compensation
The
Corporation measures the cost of employee services in exchange for an award of
equity instruments based on the grant-date fair value of the award and
recognizes cost over the requisite service period. See the
Stock-Based Compensation footnote for further information.
Income
Taxes
The
Corporation uses an asset and liability approach that 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 the
differences between the tax bases of assets and liabilities and their reported
amounts in the financial statements. The Corporation provides for
taxes that may be payable if undistributed earnings of overseas subsidiaries
were to be remitted to the United States, except for those earnings it considers
to be permanently reinvested. There were approximately $12.4 million
of accumulated earnings considered to be permanently reinvested as of January 2,
2010. See the Income Tax footnote for further
information.
Earnings
Per Share
Basic
earnings per share are based on the weighted-average number of common shares
outstanding during the year. Shares potentially issuable under
options and deferred restricted stock have been considered outstanding for
purposes of the diluted earnings per share calculation.
The
following table reconciles the numerators and denominators used in the
calculation of basic and diluted earnings per share (EPS):
(In
thousands, except per share data)
|
2009
|
2008
|
2007
|
Numerators:
|
|
|
|
Numerators
for both basic and diluted EPS net income (loss) attributable to parent
company
|
$
(6,442)
|
$
45,450
|
$120,378
|
Denominators:
|
|
|
|
Denominator
for basic EPS weighted- average common shares outstanding
|
44,889
|
44,310
|
46,685
|
Potentially
dilutive shares from stock option plans
|
-
|
124
|
240
|
|
|
|
|
Denominator
for diluted EPS
|
44,889
|
44,434
|
46,925
|
|
|
|
|
Earnings
per share – basic
|
$(0.14)
|
$1.03
|
$2.58
|
Earnings
per share – diluted
|
$(0.14)
|
$1.02
|
$2.57
|
None of
the outstanding stock options or restricted stock units was included in the
computation of diluted EPS at January 2, 2010, as all would be anti-dilutive due
to the current period loss.
Certain
exercisable and non-exercisable stock options were not included in the
computation of diluted EPS for fiscal years 2008 and 2007, because their
inclusion would have been anti-dilutive. The number of stock options
outstanding, which met this criterion for 2008 was 1,350,886; and for 2007 was
412,916.
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. The more significant areas requiring the use of
management estimates relate to allowance for doubtful accounts, inventory
reserves, marketing program accruals, warranty accruals, accruals for
self-insured medical claims, workers’ compensation, legal contingencies, general
liability and auto insurance claims, valuation of long-lived assets, and useful
lives for depreciation and amortization. Actual results could differ
from those estimates.
Self-Insurance
The
Corporation is partially self-insured for general, auto and product liability,
workers’ compensation, and certain employee health benefits. The
general, auto, product and workers’ compensation liabilities are managed using a
wholly owned insurance captive; the related liabilities are included in the
accompanying consolidated financial statements. As of January 2,
2010, these liabilities totaled $27 million. The Corporation’s policy
is to accrue amounts in accordance with the actuarially determined
liabilities. The actuarial valuations are based on historical
information along with certain assumptions about future
events. Changes in assumptions for such matters as legal actions,
medical cost inflation and magnitude of change in actual experience development
could cause these estimates to change in the future.
Foreign
Currency Translations
Foreign
currency financial statements of foreign operations where the local currency is
the functional currency are translated using exchange rates in effect at period
end for assets and liabilities and average exchange rates during the period for
results of operations. Related translation adjustments are reported
as a component of Shareholders’ Equity. Gains and losses on foreign
currency transactions are included in the “Selling and administrative expenses”
caption of the Consolidated Statements of Income.
Reclassifications
Prior
periods Statements of Income, Balance Sheets, Statements of Shareholders’ Equity
and Statements of Cash Flows have been restated in accordance with the new
guidance on noncontrolling interest classification
requirements. Certain reclassifications have been made within the
footnotes to conform to the current year presentation.
Recent
Accounting Pronouncements
In
September 2006, the Financial Accounting Standards Board (“FASB”) provided
enhanced guidance for using fair value to measure assets and liabilities for
financial assets and liabilities. The guidance also expanded the
amount of required disclosure regarding the extent to which companies measure
assets and liabilities at fair value, the information used to measure fair
value, and the effect of fair value measurements on earnings. The
guidance applies whenever other guidance requires (or permits) assets or
liabilities to be measured at fair value but does not expand the use of fair
value in any new circumstances. The Corporation adopted the guidance
with regard to its financial assets and liabilities on December 30, 2007, the
beginning of its 2008 fiscal year and with regard to its nonfinancial assets and
liabilities on January 4, 2009, the beginning of its 2009 fiscal
year. The adoption did not have a material impact on its financial
statements.
In
February, 2007, the FASB issued guidance which permits entities to choose to
measure many financial instruments and certain other items at fair value that
are not currently required to be measured at fair value. The
objective was to improve financial reporting by providing entities with the
opportunity to mitigate volatility in reported earnings caused by measuring
related assets and liabilities differently without having to apply complex hedge
accounting provisions. The Corporation adopted the guidance December
30, 2007, the beginning of fiscal 2008. As the Corporation did not
elect to fair value any additional assets or liabilities it did not have a
material impact on its financial statements.
In
December 2007, the FASB issued new guidance which requires a noncontrolling
interest in a subsidiary to be reported as equity and the amount of consolidated
net income specifically attributable to the noncontrolling interest be
identified in the consolidated financial statements. It also requires
consistency in the manner of reporting changes in the parent’s ownership
interest and requires fair value measurement of any noncontrolling equity
investment retained in a deconsolidation. The Corporation adopted the
guidance January 4, 2009, the beginning of fiscal 2009. As a result
of the adoption, the Corporation has reported noncontrolling interests as a
component of equity in its Consolidated Balance Sheets and the net income or
loss attributable to noncontrolling interests has been separately identified in
its Consolidated Statements of Income. The prior periods presented
have also been reclassified to conform to the current classification
requirements.
In March
2008, the FASB expanded the disclosure requirements for derivative instruments
and hedging activities with the intent to provide users of financial statements
with an enhanced understanding of an entity’s derivative
activity. The Corporation adopted the new guidance as of January 4,
2009.
In June
2009, the FASB issued guidance that identifies the sources of accounting
principles and the framework for selecting principles used in the preparation of
financial statements of nongovernmental entities that are presented in
conformity with US GAAP (the GAAP hierarchy). The Corporation adopted
the new guidance beginning October 3, 2009. This guidance had no
impact on the Corporation’s financial statements.
Restructuring
Related and Impairment Charges
During
2009, the Corporation made the decision to close three office furniture
facilities in South Gate, California; Louisburg, North Carolina and Owensboro,
Kentucky and consolidate production into existing office furniture manufacturing
facilities. In connection with the closure of these facilities, the
Corporation recorded $12.6 million of pre-tax charges which included $2.7
million of accelerated depreciation of machinery and equipment recorded in cost
of sales, and $9.9 million of severance and facility exit costs which were
recorded as restructuring costs in 2009. The Corporation expects to
incur additional restructuring and transition costs in 2010 of approximately $3
to $4 million in connection with these closures.
The
Corporation made the decision to consolidate significant production from its
hearth product Mount Pleasant, Iowa plant to other existing hearth products
manufacturing facilities. Additionally the Corporation will close
hearth products distribution centers in Alsip, Illinois and Lake City, Minnesota
and transfer operations to its Mount Pleasant facility. The
Corporation’s hearth product segment disposed and consolidated several retail
and distribution locations during 2009. In connection with these
activities, the Corporation recorded $6.7 million of pre-tax charges which
included $1.2 million of accelerated depreciation of machinery and equipment
recorded in cost of sales, and $5.5 million of severance and facility exit costs
which were recorded as restructuring costs in 2009. These included
accelerated depreciation of $1.4 million and write-off of goodwill of $0.6
million, which were non-cash transactions.
During
2008, the Corporation completed the shutdown of an office furniture facility in
Richmond, Virginia, consolidated production into other manufacturing locations,
closed two distribution centers and started up a new distribution center that
began in third quarter 2007. In connection with these activities the
Corporation recorded $4.4 million of pre-tax charges which included $0.6 million
of accelerated deprecation of machinery and equipment recorded in cost of sales
and $3.8 million of severance which were recorded as restructuring costs in
2007. The Corporation incurred $4.2 million of current period charges
during 2008 which included $0.4 million of accelerated depreciation of machinery
and equipment recorded in cost of sales and $3.8 million of other costs which
were recorded as restructuring costs.
The
Corporation’s hearth product segment consolidated some of its service and
distribution locations during 2007. In connection with those
consolidations, the Corporation recorded $1.1 million of severance and facility
exit costs which were recorded as restructuring costs in 2007. The
Corporation incurred $0.3 million of current period charges during 2008 which
were recorded as restructuring costs.
During
2007, the Corporation completed the shutdown of an office furniture facility,
which began in the fourth quarter of 2006. The facility was located
in Monterrey, Mexico and production from this facility was consolidated into
other locations. In connection with this shutdown, the Corporation
recorded $0.8 million of severance costs in 2006. The Corporation
incurred $2.1 million of current period charges during 2007.
The
following table summarizes the restructuring accrual activity since the
beginning of fiscal 2007.
(In
thousands)
|
|
Severance
Costs
|
|
|
Facility
Termination
&
Other
Costs
|
|
|
Total
|
|
Restructuring
reserve at December 30, 2006
|
|
$
|
841
|
|
|
$
|
-
|
|
|
$
|
841
|
|
Restructuring
charges
|
|
|
3,539
|
|
|
|
3,523
|
|
|
|
7,062
|
|
Cash
payments
|
|
|
(522
|
)
|
|
|
(2,533
|
)
|
|
|
(3,055
|
)
|
Restructuring
reserve at December 29, 2007
|
|
$
|
3,858
|
|
|
$
|
990
|
|
|
$
|
4,848
|
|
Restructuring
charges
|
|
|
(135
|
)
|
|
|
4,197
|
|
|
|
4,062
|
|
Cash
payments
|
|
|
(3,568
|
)
|
|
|
(4,963
|
)
|
|
|
(8,531
|
)
|
Restructuring
reserve at January 3, 2009
|
|
$
|
155
|
|
|
$
|
224
|
|
|
$
|
379
|
|
Restructuring
charges
|
|
|
8,168
|
|
|
|
5,166
|
|
|
|
13,334
|
|
Cash
Payments
|
|
|
(3,934
|
)
|
|
|
(3,821
|
)
|
|
|
(7,755
|
)
|
Restructuring
reserve At January 2, 2010
|
|
$
|
4,389
|
|
|
$
|
1,569
|
|
|
$
|
5,958
|
|
The
Corporation recorded $25.0 million and $21.8 million of goodwill and trade name
impairment charges in 2009 and 2008, respectively, included in the
“Restructuring Related and Impairment Charges” line item on the Consolidated
Statements of Income, as a result of its annual impairment
testing. See Goodwill and Other Intangible Assets footnote for more
information.
The
Corporation made the decision in 2007 to sell several small non-core components
of its office furniture services business and recorded $2.7 million of
impairment charges, included in the “Restructuring Related and Impairment
Charges” line item on the Consolidated Statements of Income, to reduce the
assets being held for sale to fair market value.
Business
Combinations
The
Corporation completed the acquisition of HBF, a leading provider of premium
upholstered seating, textiles, wood tables and wood case goods for the office
environment on March 29, 2008 for a purchase price of approximately $75
million. The transaction was funded on March 31, 2008 with the
proceeds of the Corporation’s revolving credit facility. The
Corporation finalized the allocation of the purchase price during the fourth
quarter of 2008. There were approximately $32.7 million of intangible
assets other than goodwill associated with this acquisition. Of these
acquired intangible assets, $19.8 million was assigned to a trade name that is
not subject to amortization. The remaining $12.9 million have
estimated useful lives ranging from four to twenty years with amortization
recorded based on the projected cash flow associated with the respective
intangible assets’ existing relationship. There was approximately
$33.0 million of goodwill associated with this acquisition assigned to the
office furniture segment. The goodwill is deductible for income tax
purposes.
The
Corporation completed the acquisition of Harman, a privately held domestic
manufacturer of free-standing stoves and fireplace inserts, as well as two small
office furniture dealers during 2007. The combined purchase price of
these acquisitions less cash acquired totaled $40.9 million. The
Corporation finalized the allocation of the purchase price for the Harman Stove
Company acquisition in 2008. A reclassification of $4.2 million
between goodwill and other intangible assets occurred in 2008 based on the final
valuation report for the Harman Stove Company acquisition. There are
approximately $5.7 million of intangibles associated with these
acquisitions. Of these acquired intangibles, $2.5 million was
assigned to trade names that are not subject to amortization. The
remaining $3.2 million have estimated useful lives ranging from one to fifteen
years with amortization recorded based on the projected cash flow associated
with the respective intangible assets’ existing relationships. There
is approximately $4.4 million of goodwill associated with these acquisitions of
which $3.6 million was assigned to the office furniture segment and $0.8 million
was assigned to the hearth products segment. All goodwill is
deductible for income tax purposes.
The
results of the acquired entities have been included in the Consolidated
Financial Statements since the date of acquisition.
Discontinued
Operations
During
December 2006, the Corporation committed to a plan to sell a small non-core
component of its office furniture segment. The sale was completed
during the second quarter of 2007. Revenues and expenses associated
with this component are presented as discontinued operations for all periods
presented. During the fourth quarter 2006 the Corporation recorded a
pre-tax charge of approximately $7.1 million to reduce the assets to the fair
market value. The charge was mainly due to the writedown of goodwill
and other intangibles not deductible for tax purposes.
Summarized
financial information for discontinued operations is as follows:
(in
thousands)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Discontinued
Operations:
|
|
|
|
|
|
|
|
|
|
Operating
income (loss) before tax
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
796
|
|
Income
tax
|
|
|
-
|
|
|
|
-
|
|
|
|
282
|
|
Net
income (loss) from discontinued operations
|
|
|
-
|
|
|
|
-
|
|
|
|
514
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment
Loss on Discontinued Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment
loss on discontinued operations before tax
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Benefit
for income tax
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Net
impairment loss on discontinued operations
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Discontinued
operations, net of income tax
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
514
|
|
Inventories
|
|
|
|
|
|
|
|
|
|
(In
thousands)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Finished
products
|
|
$
|
48,198
|
|
|
$
|
51,807
|
|
|
$
|
76,804
|
|
Materials
and work in process
|
|
|
40,322
|
|
|
|
60,155
|
|
|
|
52,641
|
|
LIFO
reserve
|
|
|
(23,376
|
)
|
|
|
(27,672
|
)
|
|
|
(20,904
|
)
|
|
|
$
|
65,144
|
|
|
$
|
84,290
|
|
|
$
|
108,541
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property,
Plant, and Equipment
|
|
|
|
|
|
|
|
|
|
|
|
|
(In
thousands)
|
|
|
2009
|
|
|
|
2008
|
|
|
|
2007
|
|
Land
and land improvements
|
|
$
|
21,815
|
|
|
$
|
23,753
|
|
|
$
|
23,805
|
|
Buildings
|
|
|
267,596
|
|
|
|
277,898
|
|
|
|
268,650
|
|
Machinery
and equipment
|
|
|
490,287
|
|
|
|
525,996
|
|
|
|
501,950
|
|
Construction
and equipment installation in progress
|
|
|
8,377
|
|
|
|
21,738
|
|
|
|
25,858
|
|
|
|
|
788,075
|
|
|
|
849,385
|
|
|
|
820,263
|
|
Less: accumulated
depreciation
|
|
|
527,973
|
|
|
|
533,779
|
|
|
|
514,832
|
|
|
|
$
|
260,102
|
|
|
$
|
315,606
|
|
|
$
|
305,431
|
|
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. The
Corporation estimates the fair value of its reporting units using various
valuation techniques, with the primary technique being a discounted cash flow
analysis. The Corporation has eleven reporting units within its
office furniture and hearth products operating segments, of which seven
contained goodwill during the fourth quarter analysis. These
reporting units constitute components for which discrete financial information
is available and regularly reviewed by segment
management. Determining the fair value of a reporting unit involves
the use of significant estimates and assumptions. 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. Management believes the assumptions used for the
impairment test are consistent with those utilized by a market participant in
performing similar valuations of its reporting units. A separate
discount rate was utilized for each reporting unit with rates ranging from 11.0%
to 12.0%. 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. In addition, for reasonableness, the summation of all the
reporting units’ fair values is compared to the Corporation’s market
capitalization.
If the
fair value of the reporting unit is less than its carrying value, an additional
step is required to determine the implied fair value of goodwill associated with
that reporting unit. The implied fair value of goodwill is determined
by first allocating the fair value of the reporting unit to all of its assets
and liabilities and then computing the excess of the reporting unit’s fair value
over the amounts assigned to the assets and liabilities. If the
carrying value of goodwill exceeds the implied fair value of goodwill, such
excess represents the amount of goodwill impairment, and, accordingly such
impairment is recognized.
As a
result of the review performed in the fourth quarter of 2009, the Corporation
determined the carrying amount of a reporting unit acquired in the previous year
in the office furniture segment exceeded its fair value. Management
then compared the carrying value of goodwill to the implied fair value of the
goodwill of this reporting unit, and concluded that $7 million of impairment
charges needed to be recognized. Goodwill of $24 million remains on
the balance sheet of this reporting unit as of January 2, 2010. The
Corporation recorded $17 million of impairment charges in 2008. The
reporting units impacted included an office furniture services unit, dealer
distribution unit, and a recent acquisition with goodwill charges of
approximately $10 million, $5 million and $2 million, respectively.
The
changes to fair value in the reporting unit that triggered impairment charges in
the fourth quarter were primarily attributable to the continued deterioration in
market conditions which became apparent in the fourth quarter as management
completed its annual strategic planning process and caused management to change
its estimates of the timing of market recovery. The Corporation
factored these current market conditions and estimates into its projected
forecasts of sales, operating income and cash flows of each reporting unit
through the course of its strategic planning process completed in the fourth
quarter.
The
significant estimates and assumptions used in estimating future cash flows of
its reporting units are based on management’s view of longer-term broad market
trends. Management combines this trend data with estimates of current
economic conditions in the U.S., competitor behavior, the mix of products sales,
commodity costs, wage rates, the level of manufacturing capacity, and the
pricing environment. In addition, estimates of fair value are
impacted by estimates of the market participant derived weighted average cost of
capital. The Corporation’s cash flow projections in most of its
reporting units assumed virtually flat revenue and cash flows in 2010 and that
significant recovery would not begin until 2011. As a reasonableness
test, management also compared the market capitalization of the Corporation at
January 2, 2010 to the aggregate fair value of the reporting units, resulting in
an implied control premium of approximately 25
percent. Management believes this implied control premium is
reasonable, in light of the synergies across its operating units, lean
manufacturing environment and strong position in the markets it
serves.
The
Corporation also owns trade names having a net value of $42.1 million as of
January 2, 2010, $60.6 million as of January 3, 2009, and $43.5 million as of
December 29, 2007. The trade names are deemed to have an indefinite
useful life because they are expected to generate cash flow
indefinitely. The Corporation determines the fair value of indefinite
lived trade names on an annual basis during the fourth quarter or whenever
indication of impairment exists. The Corporation performed its fiscal
2009 assessment of indefinite lived trade names during the fourth
quarter. The estimate of the fair value of the trade names was based
on a discounted cash flow model using inputs which
included: projected revenues from management’s long term plan,
assumed royalty rates that could be payable if the trade names were not owned
and a discount rate. As a result of the review the Corporation
determined the carrying value of certain trade names acquired over the past few
years in the office furniture segment exceeded their fair value and recorded a
$18 million impairment charge. The Corporation recorded a $5 million
impairment charge for certain office furniture trade names in 2008.
The table
below summarizes amortizable definite-lived intangible assets, which are
reflected in Other Assets in the Corporation’s Consolidated Balance
Sheets:
(In
thousands)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Patents
|
|
$
|
19,325
|
|
|
$
|
19,325
|
|
|
$
|
18,780
|
|
Customer
lists and other
|
|
|
115,451
|
|
|
|
115,664
|
|
|
|
101,320
|
|
Less: accumulated
amortization
|
|
|
68,004
|
|
|
|
56,098
|
|
|
|
45,833
|
|
Net
intangible assets
|
|
$
|
66,772
|
|
|
$
|
78,891
|
|
|
$
|
74,267
|
|
Amortization
expense for definite-lived intangibles for 2009, 2008, and 2007, was $12.1
million, $10.3 million, and $9.2 million, respectively and was recorded in
Selling and Administrative Expenses on the Consolidated Statements of
Income. Based on the current amount of intangible assets subject to
amortization, the estimated amortization expense for each of the following five
fiscal years is as follows:
(in
millions)
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
2014
|
|
Amortization
expense
|
|
$
|
9.0
|
|
|
$
|
6.8
|
|
|
$
|
5.9
|
|
|
$
|
5.4
|
|
|
$
|
4.8
|
|
The
occurrence of events such as acquisitions, dispositions, or impairments in the
future may result in changes to amounts.
The
changes in the carrying amount of goodwill since December 30, 2006, are as
follows by reporting segment:
(In
thousands)
|
|
Office
Furniture
|
|
|
Hearth
Products
|
|
|
Total
|
|
Balance
as of December 30, 2006
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
$
|
90,469
|
|
|
$
|
166,946
|
|
|
$
|
257,415
|
|
Accumulated
impairment losses
|
|
|
(5,654
|
)
|
|
|
-
|
|
|
|
(5,654
|
)
|
|
|
|
84,815
|
|
|
|
166,946
|
|
|
|
251,761
|
|
Goodwill
acquired during the year
|
|
|
3,510
|
|
|
|
5,003
|
|
|
|
8,513
|
|
Impairment
losses
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Goodwill
related to the sale of business units
|
|
|
(710
|
)
|
|
|
(389
|
)
|
|
|
(1,099
|
)
|
Final
purchase price allocations/contingent payments from prior year
acquisitions
|
|
|
(2,341
|
)
|
|
|
-
|
|
|
|
(2,341
|
)
|
Balance
as of December 29, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
90,928
|
|
|
|
171,560
|
|
|
|
262,488
|
|
Accumulated
impairment losses
|
|
|
(5,654
|
)
|
|
|
-
|
|
|
|
(5,654
|
)
|
|
|
|
85,274
|
|
|
|
171,560
|
|
|
|
256,834
|
|
Goodwill
acquired during the year
|
|
|
33,020
|
|
|
|
-
|
|
|
|
33,020
|
|
Impairment
losses
|
|
|
(16,955
|
)
|
|
|
-
|
|
|
|
(16,955
|
)
|
Goodwill
related to the sale of business units
|
|
|
|
|
|
|
(355
|
)
|
|
|
(355
|
)
|
Final
purchase price allocations/contingent payments from prior year
acquisitions
|
|
|
|
|
|
|
(4,152
|
)
|
|
|
(4,152
|
)
|
Balance
as of January 3, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
123,948
|
|
|
|
167,053
|
|
|
|
291,001
|
|
Accumulated
impairment losses
|
|
|
(22,609
|
)
|
|
|
-
|
|
|
|
(22,609
|
)
|
|
|
|
101,339
|
|
|
|
167,053
|
|
|
|
268,392
|
|
Goodwill
acquired during the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Impairment
losses
|
|
|
(6,750
|
)
|
|
|
-
|
|
|
|
(6,750
|
)
|
Goodwill
related to the sale of business units
|
|
|
-
|
|
|
|
(1,028
|
)
|
|
|
(1,028
|
)
|
Final
purchase price allocations/contingent payments from prior year
acquisitions
|
|
|
-
|
|
|
|
500
|
|
|
|
500
|
|
Balance
as of January 2, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
123,948
|
|
|
|
166,525
|
|
|
|
290,473
|
|
Accumulated
impairment losses
|
|
|
(29,359
|
)
|
|
|
-
|
|
|
|
(29,359
|
)
|
|
|
$
|
94,589
|
|
|
$
|
166,525
|
|
|
$
|
261,114
|
|
The
goodwill increases relate to acquisitions completed. See the Business
Combinations note. The decreases in goodwill in the office furniture
segment in 2009 and 2008 were due to the impairment charges described
above. The decrease in goodwill in the office furniture segment in
2007 is due to goodwill associated with office services business units held for
sale and final purchase price allocations for previous
acquisitions. The decreases in the hearth products segment relates to
the sale of a few small service and distribution locations and final purchase
price allocations for previous acquisitions.
Accounts
Payable and Accrued Expenses
|
|
(In
thousands)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Trade
accounts payable
|
|
$
|
114,448
|
|
|
$
|
96,820
|
|
|
$
|
133,293
|
|
Compensation
|
|
|
24,978
|
|
|
|
27,764
|
|
|
|
30,544
|
|
Profit
sharing and retirement expense
|
|
|
19,668
|
|
|
|
26,905
|
|
|
|
30,441
|
|
Marketing
expenses
|
|
|
26,391
|
|
|
|
51,786
|
|
|
|
61,568
|
|
Freight
|
|
|
15,972
|
|
|
|
11,586
|
|
|
|
13,980
|
|
Other
accrued expenses
|
|
|
98,261
|
|
|
|
98,570
|
|
|
|
97,494
|
|
|
|
$
|
299,718
|
|
|
$
|
313,431
|
|
|
$
|
367,320
|
|
Long-Term
Debt
|
|
|
|
|
|
|
|
|
|
(In
thousands)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Note
payable to bank, revolving credit agreement with interest at a variable
rate (2009-0.54
%;
2008-0.79%; 2007-5.46%)
|
|
$
|
50,000
|
|
|
$
|
107,500
|
|
|
$
|
128,000
|
|
Note
payable to bank, with interest at a fixed rate (2008-3.08%;
2007-5.03%)
|
|
|
-
|
|
|
|
14,294
|
|
|
|
14,205
|
|
Senior
notes due in 2016 with interest at a fixed rate of 5.54% per
annum.
|
|
|
150,000
|
|
|
|
150,000
|
|
|
|
150,000
|
|
Note
payable to bank, with interest at a variable rate
(2008-2.36%)
|
|
|
-
|
|
|
|
47,500
|
|
|
|
-
|
|
Industrial
development revenue bonds, payable 2018 with interest at a variable rate
(2008-1.40%; 2007-3.55%)
|
|
|
-
|
|
|
|
2,300
|
|
|
|
2,300
|
|
Other
notes and amounts
|
|
|
-
|
|
|
|
-
|
|
|
|
63
|
|
Total
debt
|
|
|
200,000
|
|
|
|
321,594
|
|
|
|
294,568
|
|
Less: current
portion
|
|
|
-
|
|
|
|
54,294
|
|
|
|
14,253
|
|
Long-term
debt
|
|
$
|
200,000
|
|
|
$
|
267,300
|
|
|
$
|
280,315
|
|
Aggregate
maturities of long-term debt are as follows:
|
|
(In
thousands)
|
|
|
|
2010
|
|
$
|
-
|
|
2011
|
|
|
50,000
|
|
2012
|
|
|
-
|
|
2013
|
|
|
-
|
|
2014
|
|
|
-
|
|
Thereafter
|
|
$
|
150,000
|
|
On
January 28, 2005, the Corporation replaced a $136 million revolving credit
facility entered into on May 10, 2002 with a new revolving credit facility that
provided for a maximum borrowing of $150 million subject to increase (to a
maximum amount of $300 million) or reduction from time to time according to the
terms of the facility. On December 22, 2005, the Corporation
increased the facility to the maximum amount of $300 million. Amounts
borrowed under the revolving credit facility may be borrowed, repaid, and
reborrowed from time to time until January 28, 2011. As of January 2,
2010, $50 million was outstanding under the revolving credit facility and
classified as long-term.
On April
6, 2006, the Corporation refinanced $150 million of borrowings outstanding under
the revolving credit facility with 5.54 percent ten-year unsecured Senior Notes
due in 2016 issued through the private placement debt
market. Interest payments are due semi-annually on April 1 and
October 1 of each year and the principal is due in a lump sum in
2016. The Corporation maintained the revolving credit facility with a
maximum borrowing of $300 million.
On June
30, 2008, the Corporation entered into a Credit Agreement which allowed for a
one-time borrowing of $50 million in the form of a term loan. The
Corporation paid off the term loan during 2009.
Certain
of the above borrowing arrangements include covenants which limit the assumption
of additional debt and lease obligations. The Corporation has been
and currently is in compliance with the covenants related to these debt
agreements. The fair value of the Corporation’s outstanding variable
rate long-term debt obligations at year-end 2009 approximates the carrying
value. The fair value of the Corporation’s outstanding fixed rate
long-term debt obligations is estimated to be $151 million, slightly above the
carrying value of $150 million.
Income
Taxes
Significant
components of the provision for income taxes including those related to
noncontrolling interest and discontinued operations are as follows:
(In
thousands)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Current:
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
5,400
|
|
|
$
|
18,165
|
|
|
$
|
53,965
|
|
State
|
|
|
(278
|
)
|
|
|
2,402
|
|
|
|
6,588
|
|
Foreign
|
|
|
780
|
|
|
|
482
|
|
|
|
811
|
|
Current
provision
|
|
|
5,902
|
|
|
|
21,049
|
|
|
|
61,364
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
(5,065
|
)
|
|
|
3,265
|
|
|
|
(3,031
|
)
|
State
|
|
|
(2,673
|
)
|
|
|
222
|
|
|
|
(353
|
)
|
Foreign
|
|
|
422
|
|
|
|
(954
|
)
|
|
|
(418
|
)
|
Deferred
provision
|
|
|
(7,316
|
)
|
|
|
2,533
|
|
|
|
(3,802
|
)
|
|
|
$
|
(1,414
|
)
|
|
$
|
23,582
|
|
|
$
|
57,562
|
|
The
differences between the actual tax expense (benefit) and tax expense (benefit)
computed at the statutory U.S. Federal tax rate are explained as
follows:
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Federal
statutory tax expense (benefit)
|
|
$
|
(2,750
|
)
|
|
$
|
24,161
|
|
|
$
|
62,000
|
|
State
taxes, net of federal tax effect
|
|
|
(1,919
|
)
|
|
|
1,813
|
|
|
|
4,049
|
|
Credit
for increasing research activities
|
|
|
(1,100
|
)
|
|
|
(1,700
|
)
|
|
|
(1,600
|
)
|
Deduction
related to domestic production activities
|
|
|
(316
|
)
|
|
|
(1,242
|
)
|
|
|
(2,383
|
)
|
Foreign
income tax
|
|
|
1,202
|
|
|
|
543
|
|
|
|
393
|
|
Excludable
foreign income
|
|
|
(670
|
)
|
|
|
(1,096
|
)
|
|
|
(3,555
|
)
|
True-up
of deferred tax items
|
|
|
2,137
|
|
|
|
436
|
|
|
|
(1,028
|
)
|
Basis
in subsidiary
|
|
|
4,378
|
|
|
|
(3,073
|
)
|
|
|
-
|
|
Valuation
allowance
|
|
|
(3,073
|
)
|
|
|
3,073
|
|
|
|
-
|
|
Uncertain
tax positions
|
|
|
636
|
|
|
|
814
|
|
|
|
911
|
|
Other
tax credits
|
|
|
(213
|
)
|
|
|
(400
|
)
|
|
|
(400
|
)
|
Other
– net
|
|
|
274
|
|
|
|
254
|
|
|
|
(1,107
|
)
|
Total
income tax expense (benefit)
|
|
$
|
(1,414
|
)
|
|
$
|
23,583
|
|
|
$
|
57,280
|
|
The
Corporation recorded additional deferred tax assets in 2008 for the tax basis in
the stock of a subsidiary in excess of the net tax basis of the subsidiary’s
assets and liabilities. As a result of managements change in intent
of potential disposition of this subsidiary the deferred tax assets and related
valuation allowance were reduced.
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.
Significant
components of the Corporation’s deferred tax liabilities and assets are as
follows:
(In
thousands)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Net
long-term deferred tax liabilities:
|
|
|
|
|
|
|
|
|
|
Tax
over book depreciation
|
|
$
|
1,334
|
|
|
$
|
(1,028
|
)
|
|
$
|
1,614
|
|
Compensation
|
|
|
3,221
|
|
|
|
3,175
|
|
|
|
4,624
|
|
Goodwill
|
|
|
(40,314
|
)
|
|
|
(42,802
|
)
|
|
|
(38,559
|
)
|
Basis
in subsidiary
|
|
|
-
|
|
|
|
5,314
|
|
|
|
-
|
|
Valuation
allowance
|
|
|
-
|
|
|
|
(1,981
|
)
|
|
|
-
|
|
Other
– net
|
|
|
11,532
|
|
|
|
12,051
|
|
|
|
5,649
|
|
Total
net long-term deferred tax liabilities
|
|
|
(24,227
|
)
|
|
|
(25,271
|
)
|
|
|
(26,672
|
)
|
Net
current deferred tax assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance
for doubtful accounts
|
|
|
2,337
|
|
|
|
2,601
|
|
|
|
3,491
|
|
Vacation
accrual
|
|
|
4,029
|
|
|
|
3,646
|
|
|
|
5,302
|
|
Inventory
differences
|
|
|
3,845
|
|
|
|
3,878
|
|
|
|
2,572
|
|
Deferred
income
|
|
|
(2,798
|
)
|
|
|
(3,836
|
)
|
|
|
(4,484
|
)
|
Warranty
accruals
|
|
|
4,742
|
|
|
|
5,177
|
|
|
|
4,234
|
|
Valuation
allowance
|
|
|
-
|
|
|
|
(1,092
|
)
|
|
|
-
|
|
Other
– net
|
|
|
8,144
|
|
|
|
5,939
|
|
|
|
6,713
|
|
Total
net current deferred tax assets
|
|
|
20,299
|
|
|
|
16,313
|
|
|
|
17,828
|
|
Net
deferred tax (liabilities) assets
|
|
$
|
(3,928
|
)
|
|
$
|
(8,958
|
)
|
|
$
|
(8,844
|
)
|
The
Corporation adopted new FASB authoritative guidance on accounting for
uncertainty in income taxes effective December 31, 2006, the beginning of fiscal
2007. As a result of the adoption, the Corporation recognized a $1.7
million increase in the liability for unrecognized benefits. This
increase in liability resulted in a decrease to the December 31, 2006 retained
earnings balance in the amount of $0.5 million and a reduction in deferred tax
liabilities of $1.2 million.
A
reconciliation of the beginning and ending amount of unrecognized tax benefits
is as follows:
(in
thousands)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Unrecognized
tax benefits, beginning of period
|
|
$
|
3,646
|
|
|
$
|
2,839
|
|
|
$
|
3,895
|
|
Increases
(decreases) in positions taken in a prior period
|
|
|
(71
|
)
|
|
|
796
|
|
|
|
49
|
|
Decreases
in positions taken in a prior period
|
|
|
(500
|
)
|
|
|
(52
|
)
|
|
|
(6
|
)
|
Increases
in positions taken in a current period
|
|
|
651
|
|
|
|
834
|
|
|
|
1,018
|
|
Decrease
due to settlements
|
|
|
(204
|
)
|
|
|
(391
|
)
|
|
|
(2,117
|
)
|
Decrease
due to lapse of statute of limitations
|
|
|
(76
|
)
|
|
|
(380
|
)
|
|
|
-
|
|
Unrecognized
tax benefits, end of period
|
|
$
|
3,446
|
|
|
$
|
3,646
|
|
|
$
|
2,839
|
|
The
amount of unrecognized tax benefits which would impact the Corporation’s
effective tax rate, if recognized, was $3.2 million at January 2, 2010, $3.2
million at January 3, 2009 and $2.3 million at December 29, 2007.
The
Corporation recognized interest accrued related to unrecognized tax benefits in
interest expense and penalties in operating expenses which is consistent with
the recognition of these items in prior reporting. Interest and
penalties recognized in the Consolidated Statements of Income amounted to a
benefit of $0.1 million. The Corporation had recorded a liability for
interest and penalties related to unrecognized tax benefits of $0.4
million, $0.4 million, and $0.4 million as of January 2, 2010,
January 3, 2009, and December 29, 2007, respectively.
The
Internal Revenue Service (the “IRS”) has completed the examination of all
federal income tax returns through 2004 with no issues pending or
unresolved. The years 2005 through 2009 remain open for examination
by the IRS. The years 2005 through 2009 are currently under
examination or remain open to examination by several states.
As of
January 2, 2010, it is reasonably possible the amount of unrecognized tax
benefits may increase or decrease within the twelve months following the
reporting date. These increases or decreases in the unrecognized tax
benefits would be due to new positions that may be taken on income tax returns,
settlement of tax positions and the closing of statues of
limitation. It is not expected that any of the changes will be
material individually or in total to the results or financial position of the
Corporation.
Derivative
Financial Instruments
The
Corporation uses derivative financial instruments to reduce its exposure to
adverse fluctuations in interest rates. On the date a derivative is
entered into, the Corporation designates the derivative as (i) a fair value
hedge, (ii) a cash flow hedge, (iii) a hedge of a net investment in a foreign
operation or (iv) a risk management instrument not eligible for hedge
accounting. The Corporation recognizes all derivatives on its
consolidated balance sheet at fair value.
In June
2008, the Corporation entered into an interest rate swap agreement, designated
as a cash flow hedge, for purposes of managing its benchmark interest rate
fluctuation risk. Under the interest rate swap agreement, the
Corporation pays a fixed rate of interest and receives a variable rate of
interest equal to the one-month LIBOR as determined on the last day of each
monthly settlement period on an aggregated notional principal amount of $50
million. The net amount paid or received upon monthly settlements is
recorded as an adjustment to interest expense, while the change in fair value is
recorded as a component of accumulated other comprehensive income in the equity
section of the Corporation’s Consolidated Balance Sheet. The interest
rate swap agreement matures in 2011.
The
aggregate fair market value of the interest rate swap as of January 2, 2010 was
a liability of $2.5 million, of which $1.9 million is included in current
liabilities and $0.6 million is included in long-term liabilities in the
Corporation's Consolidated Balance Sheet as of January 2, 2010. For
the year ended January 2, 2010, the Corporation recorded a deferred net loss of
$1.1 million in other comprehensive income and reclassified $1.7 million of
losses from other comprehensive income to current period earnings as interest
expense in its Consolidated Statements of Income.
As of
January 2, 2010, $1.2 million of deferred net losses, net of tax, included in
equity (“Accumulated other comprehensive income” in the Corporation’s
Consolidated Balance Sheets) related to this interest rate swap, are expected to
be reclassified to current earnings (“Interest expense” in the Corporation’s
Consolidated Statement of Income) over the next twelve months.
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 and its investment in target
funds. The marketable securities were comprised of investments in
money market funds. The target funds are reported as both current and
noncurrent assets based on the portion that is anticipated to be used for
current operations. When available the Corporation uses quoted market
prices to determine fair value and classify such measurements within Level
1. In some cases where market prices are not available, the
Corporation makes use of observable market based inputs to calculate fair value,
in which case the measurements are classified within Level 2.
Assets
measured at fair value for the year ended January 2, 2010 were as
follows:
(in
thousands)
|
|
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)
|
|
Investment
in target funds
|
|
$
|
5,744
|
|
|
$
|
-
|
|
|
$
|
5,744
|
|
|
$
|
-
|
|
Derivative
financial instrument
|
|
$
|
(2,548
|
)
|
|
$
|
-
|
|
|
$
|
(2,548
|
)
|
|
$
|
-
|
|
Assets
measured at fair value for the Corporation’s fiscal year ended January 3, 2009
were as follows:
(in
thousands)
|
|
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)
|
|
Marketable
securities
|
|
$
|
3,696
|
|
|
$
|
3,696
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Investment
in target funds
|
|
$
|
25,047
|
|
|
$
|
-
|
|
|
$
|
25,047
|
|
|
$
|
-
|
|
Derivative
financial instrument
|
|
$
|
(3,106
|
)
|
|
$
|
-
|
|
|
$
|
(3,106
|
)
|
|
$
|
-
|
|
Shareholders’
Equity
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Common
Stock, $1 Par Value
|
|
|
|
|
|
|
|
|
|
Authorized
|
|
|
200,000,000
|
|
|
|
200,000,000
|
|
|
|
200,000,000
|
|
Issued
and outstanding
|
|
|
45,093,379
|
|
|
|
44,324,409
|
|
|
|
44,834,519
|
|
Preferred
Stock, $1 Par Value
|
|
|
|
|
|
|
|
|
|
|
|
|
Authorized
|
|
|
2,000,000
|
|
|
|
2,000,000
|
|
|
|
2,000,000
|
|
Issued
and outstanding
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
The
Corporation purchased 0; 1,004,700; and 3,581,707 shares of its common stock
during 2009, 2008, and 2007, respectively. The par value method of
accounting is used for common stock repurchases. The excess of the
cost of shares acquired over their par value is allocated to Additional Paid-In
Capital with the excess charged to Retained Earnings on the Corporation’s
Consolidated Balance Sheet.
The
following table reconciles net income to comprehensive income attributable to
HNI Corporation:
(in
thousands)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Net
income (loss)
|
|
$
|
(6,259
|
)
|
|
$
|
45,607
|
|
|
$
|
119,960
|
|
Other
comprehensive income, net of income tax as applicable:
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation adjustments
|
|
|
(94
|
)
|
|
|
1,355
|
|
|
|
765
|
|
Change
in unrealized gains (losses) on marketable securities
|
|
|
134
|
|
|
|
14
|
|
|
|
(148
|
)
|
Change
in pension and postretirement liability
|
|
|
745
|
|
|
|
(2,184
|
)
|
|
|
3,291
|
|
Change
in derivative financial instruments
|
|
|
348
|
|
|
|
(1,938
|
)
|
|
|
-
|
|
Comprehensive
income (loss)
|
|
|
(5,126
|
)
|
|
|
42,854
|
|
|
|
123,868
|
|
Comprehensive
income attributable to noncontrolling interest
|
|
|
183
|
|
|
|
157
|
|
|
|
(418
|
)
|
Comprehensive
income (loss) attributable to HNI Corporation
|
|
$
|
(5,309
|
)
|
|
$
|
42,697
|
|
|
$
|
124,286
|
|
The
following table summarizes the components of accumulated other comprehensive
loss and the changes in accumulated other comprehensive loss, net of tax as
applicable:
(in
thousands)
|
|
Foreign
Currency Translation Adjustment
|
|
|
Unrealized
Gains (Losses) on Marketable Securities
|
|
|
Pension
Postretirement Liability
|
|
|
Derivative
Financial Instruments
|
|
|
Accumulated
Other Comprehensive Loss
|
|
Balance
at December 30, 2006
|
|
$
|
1,500
|
|
|
$
|
-
|
|
|
$
|
(4,562
|
)
|
|
$
|
-
|
|
|
$
|
(3,062
|
)
|
Change
during year
|
|
|
765
|
|
|
|
(148
|
)
|
|
|
3,291
|
|
|
|
-
|
|
|
|
3,908
|
|
Balance
at December 29, 2007
|
|
|
2,265
|
|
|
|
(148
|
)
|
|
|
(1,271
|
)
|
|
|
-
|
|
|
|
846
|
|
Change
during year
|
|
|
1,355
|
|
|
|
14
|
|
|
|
(2,184
|
)
|
|
|
(1,938
|
)
|
|
|
(2,753
|
)
|
Balance
at January 3, 2009
|
|
|
3,620
|
|
|
|
(134
|
)
|
|
|
(3,455
|
)
|
|
|
(1,938
|
)
|
|
|
(1,907
|
)
|
Change
during year
|
|
|
(94
|
)
|
|
|
134
|
|
|
|
745
|
|
|
|
348
|
|
|
|
1,133
|
|
Balance
at January 2, 2010
|
|
$
|
3,526
|
|
|
$
|
-
|
|
|
$
|
(2,710
|
)
|
|
$
|
(1,590
|
)
|
|
$
|
(774
|
)
|
In May
2007, the Corporation registered 300,000 shares of its common stock under its
2007 Equity Plan for Non-Employee Directors of HNI Corporation, as amended (the
“Director Plan”). This plan permits the Corporation to issue to its
non-employee directors options to purchase shares of Corporation common stock,
restricted stock of the Corporation and awards of Corporation common
stock. The 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. Upon approval of this plan in May
2007, no awards are granted under the 1997 Equity Plan for Non-Employee
Directors of HNI Corporation, but all outstanding awards previously granted
under that plan shall remain outstanding in accordance with their
terms. During 2009, 2008, and 2007, 39,914; 31,599; and 17,349
shares, respectively, of Corporation common stock were issued under these
plans.
Cash
dividends declared and paid per share for each year are:
(In
dollars)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Common
shares
|
|
$
|
.86
|
|
|
$
|
.86
|
|
|
$
|
.78
|
|
During
2002, shareholders approved the 2002 Members’ Stock Purchase Plan, as amended
January 1, 2007. Under the plan, 800,000 shares of common stock were
registered for issuance to participating members. On June 12, 2009 an
additional 1,000,000 shares of common stock were registered for issuance to
participating members. Beginning on June 30, 2002, rights to purchase
stock are granted on a quarterly basis to all members who customarily work 20
hours or more per week and who customarily work for five months or more in any
calendar year. The price of the stock purchased under the plan is 85%
of the closing price on the exercise date. No member may purchase
stock under the plan in an amount which exceeds a maximum fair value of $25,000
in any calendar year. During 2009, 147,723 shares of common stock
were issued under the plan at an average price of $13.77. During
2008, 209,061 shares of common stock were issued under the plan at an average
price of $17.90. During 2007, 127,436 shares of common stock were
issued under the plan at an average price of $33.43. An additional
923,396 shares were available for issuance under the plan at January 2,
2010.
The
Corporation has entered into change in control employment agreements with
certain corporate officers and other key members. According to the
agreements, a change in control occurs when a third person or entity becomes the
beneficial owner of 20% or more of the Corporation’s common stock when more than
one-third of the Board is composed of persons not recommended by at least
three-fourths of the incumbent Board, upon certain business combinations
involving the Corporation or upon approval by the Corporation’s shareholders of
a complete liquidation or dissolution. Upon a change in control, a
key member is deemed to have a two-year employment agreement with the
Corporation, and all of his or her benefits vest under the Corporation’s
compensation plans. If, at any time within two years of the change in
control, his or her employment is terminated by the Corporation for any reason
other than cause or disability, or by the key member for good reason, as such
terms are defined in the agreement, then the key member is entitled to receive,
among other benefits, a severance payment equal to two times (three times for
the Corporation’s Chairman, President and CEO) annual salary and the average of
the prior two years’ bonuses.
Stock-Based
Compensation
Under the
Corporation’s 2007 Stock-Based Compensation Plan (the “Plan”), as amended
effective May 8, 2007, the Corporation may award options to purchase shares of
the Corporation’s common stock and grant other stock awards to executives,
managers and key personnel. Upon shareholder approval of the Plan in
May 2007, no future awards were granted under the Corporation’s 1995 Stock-Based
Compensation Plan, but all outstanding awards previously granted under that plan
shall remain outstanding in accordance with their terms. As of
January 2, 2010, there were approximately 3.3 million shares available for
future issuance under the Plan. The Plan is administered by the Human
Resources and Compensation Committee of the Board. Restricted stock
awarded under the Plan is expensed ratably over the vesting period of the
awards. Stock options awarded to members under the Plan must be at
exercise prices equal to or exceeding the fair market value of the Corporation’s
common stock on the date of grant. Stock options are generally
subject to four-year cliff vesting and must be exercised within 10 years from
the date of grant.
As
discussed above, the Corporation also has a shareholder approved Members’ Stock
Purchase Plan (the “MSP Plan”). The price of the stock purchased
under the MSP Plan is 85% of the closing price on the applicable purchase
date. During 2009, 147,723 shares of the Corporation’s common stock
were issued under the MSP Plan at an average price of $13.77.
The
Corporation measures the cost of employee services in exchange for an award of
equity instruments based on the grant-date fair value of the award and
recognizes cost over the requisite service period.
Compensation
cost that has been charged against operations for the two plans described above
was $3.8 million, $1.6 million, and $3.6 million for the years ended January 2,
2010, January 3, 2009, and December 29, 2007, respectively. The total
income tax benefit recognized in the income statement for share-based
compensation arrangements was $1.3 million, $0.5 million, and $1.2 million for
the years ended January 2, 2010, January 3, 2009, and December 29, 2007,
respectively.
The stock
compensation expense for the years ended January 2, 2010, January 3, 2009, and
December 29, 2007, was estimated on the date of grant using the Black-Scholes
option-pricing model that used the following assumptions by grant
year:
|
|
Year
Ended
Jan.
2, 2010
|
|
|
Year
Ended
Jan.
3, 2009
|
|
|
Year
Ended
Dec.
29, 2007
|
|
Expected
term
|
|
7
years
|
|
|
7
years
|
|
|
7
years
|
|
Expected
volatility:
|
|
|
|
|
|
|
|
|
|
Range
used
|
|
|
33.83
|
%
|
|
|
25.62%
- 30.61
|
%
|
|
|
26.97
|
%
|
Weighted-average
|
|
|
33.83
|
%
|
|
|
26.15
|
%
|
|
|
26.97
|
%
|
Expected
dividend yield:
|
|
|
|
|
|
|
|
|
|
|
|
|
Range
used
|
|
|
4.00
|
%
|
|
|
2.71%
- 5.06
|
%
|
|
|
1.60
|
%
|
Weighted-average
|
|
|
4.00
|
%
|
|
|
3.11
|
%
|
|
|
1.60
|
%
|
Risk-free
interest rate:
|
|
|
|
|
|
|
|
|
|
|
|
|
Range
used
|
|
|
3.04
|
%
|
|
|
3.48%
- 4.62
|
%
|
|
|
4.71
|
%
|
Expected
volatilities are based on historical volatility as the Corporation does not feel
that future volatility over the expected term of the options is likely to differ
from the past. The Corporation used a simple-average calculation
method based on monthly frequency points for the prior seven
years. The Corporation normally uses the current dividend yield as
there are no plans to substantially increase or decrease its
dividends. For options issued in February, 2009 the Corporation used
the average dividend yield over the prior two years due to the large drop in the
market at the date of grant resulting in an unsustainable dividend
yield. The Corporation elected to continue to use the simplified
method to determine the expected term since the awards qualified as “plain
vanilla” options. The risk-free interest rate was selected based on
yields from U.S. Treasury zero-coupon issues with a remaining term equal to the
expected term of the options being valued.
The
following table summarizes the changes in outstanding stock options since the
beginning of fiscal 2007.
|
|
Number
of
Shares
|
|
|
Weighted-Average
Exercise
Price
|
|
Outstanding
at December 30, 2006
|
|
|
1,173,616
|
|
|
$
|
35.27
|
|
Granted
|
|
|
185,823
|
|
|
|
48.66
|
|
Exercised
|
|
|
(214,000
|
)
|
|
|
24.86
|
|
Forfeited
|
|
|
(102,373
|
)
|
|
|
46.14
|
|
Outstanding
at December 29, 2007
|
|
|
1,043,066
|
|
|
$
|
38.72
|
|
Granted
|
|
|
560,786
|
|
|
|
28.70
|
|
Exercised
|
|
|
(19,500
|
)
|
|
|
21.00
|
|
Forfeited
or Expired
|
|
|
(119,293
|
)
|
|
|
38.13
|
|
Outstanding
at January 3, 2009
|
|
|
1,465,059
|
|
|
$
|
35.17
|
|
Granted
|
|
|
497,734
|
|
|
|
10.36
|
|
Exercised
|
|
|
(41,750
|
)
|
|
|
18.31
|
|
Forfeited
or Expired
|
|
|
(65,409
|
)
|
|
|
31.22
|
|
Outstanding
at January 2, 2010
|
|
|
1,855,634
|
|
|
$
|
29.03
|
|
A summary
of the Corporation’s nonvested shares as of January 2, 2010 and changes during
the year are presented below:
Nonvested
Shares
|
|
Shares
|
|
|
Weighted-Average
Grant-Date
Fair
Value
|
|
Nonvested
at January 3, 2009
|
|
|
872,409
|
|
|
$
|
11.11
|
|
Granted
|
|
|
497,734
|
|
|
|
2.53
|
|
Vested
|
|
|
(121,200
|
)
|
|
|
15.77
|
|
Forfeited
|
|
|
(35,009
|
)
|
|
|
9.59
|
|
Nonvested
at January 2, 2010
|
|
|
1,213,934
|
|
|
$
|
7.17
|
|
At
January 2, 2010, there was $3.0 million of unrecognized compensation cost
related to nonvested stock option awards, which the Corporation expects to
recognize over a weighted-average period of 1.2 years. Information
about stock options that are vested or expected to vest and that are exercisable
at January 2, 2010, follows:
Options
|
|
Number
|
|
|
Weighted-Average
Exercise
Price
|
|
|
Weighted-Average
Remaining
Life in
Years
|
|
|
Aggregate
Intrinsic
Value
($000s)
|
|
Vested
or expected to vest
|
|
|
1,720,542
|
|
|
$
|
29.50
|
|
|
|
6.6
|
|
|
|
-
|
|
Exercisable
|
|
|
670,700
|
|
|
$
|
34.43
|
|
|
|
3.6
|
|
|
|
-
|
|
The
weighted-average grant-date fair value of options granted was $2.53, $6.64, and
$15.67, for 2009, 2008, and 2007, respectively. Other
information for the last three years follows:
|
|
|
|
(In
thousands)
|
|
Jan.
2, 2010
|
|
|
Jan.
3, 2009
|
|
|
Dec.
29, 2007
|
|
Total
fair value of shares vested
|
|
$
|
1,911
|
|
|
$
|
2,358
|
|
|
$
|
2,261
|
|
Total
intrinsic value of options exercised
|
|
|
312
|
|
|
|
222
|
|
|
|
4,673
|
|
Cash
received from exercise of stock options
|
|
|
307
|
|
|
|
410
|
|
|
|
5,321
|
|
Tax
benefit realized from exercise of stock options
|
|
|
109
|
|
|
|
79
|
|
|
|
1,551
|
|
In 2009
the Corporation issued restricted stock units (“RSUs”) to executives, managers
and key personnel. The RSUs vest at the end of three years after the
grant date. No dividends are accrued on the RSUs. The
share-based compensation expense associated with the RSUs is based on the quoted
market price of HNI Corporation shares on the date of grant less the discounted
present value of dividends not received on the shares and is amortized to
expense using the straight-line method from the grant date through the earlier
of the vesting date or the estimated retirement eligibility date.
During
the year ended January 2, 2010, RSU activity was as follows:
|
|
Number
of
Shares
|
|
|
Weighted-Average
Grant
Date
Fair
Value
|
|
Outstanding
at January 3, 2009
|
|
|
-
|
|
|
|
|
Granted
|
|
|
698,641
|
|
|
$
|
7.87
|
|
Vested
|
|
|
-
|
|
|
|
-
|
|
Forfeited
|
|
|
(17,685
|
)
|
|
|
7.84
|
|
Outstanding
at January 2, 2010
|
|
|
680,956
|
|
|
$
|
7.87
|
|
At
January 2, 2010, there was $3.4 million of unrecognized compensation cost
related to RSUs which the Corporation expects to recognize over a weighted
average period of 1.2 years.
Retirement
Benefits
The
Corporation has defined contribution profit-sharing plans covering substantially
all employees who are not participants in certain defined benefit
plans. The Corporation’s annual contribution to the defined
contribution plans is based on employee eligible earnings and results of
operations and amounted to $20.3 million, $24.5 million, and $28.1 million, in
2009, 2008, and 2007, respectively. A portion of the annual
contribution is in the form of common stock of the Corporation. The
amount of the stock contribution was $6.6 million in 2009, 2008, and
2007.
The
Corporation sponsors defined benefit plans which include a limited number of
salaried and hourly members at certain subsidiaries. The
Corporation’s funding policy is generally to contribute annually the minimum
actuarially computed amount. Net pension costs relating to these
plans were $291,000, $0, and $0, in 2009, 2008, and 2007,
respectively. The actuarial present value of obligations, less
related plan assets at fair value, is not significant.
The
Corporation also participates in a multi-employer plan, which provides defined
benefits to certain of the Corporation’s union employees. Pension
expense for this plan amounted to $217,000, $320,000, and $376,000, in 2009,
2008, and 2007, respectively.
Postretirement
Health Care
Guidance
on employers’ accounting for other postretirement plans requires recognition of
the overfunded or underfunded status on the balance sheet. Under this
guidance, gains and losses, prior services costs and credits and any remaining
transition amounts under previous guidance that have not yet been recognized
through net periodic benefit cost are recognized in accumulated other
comprehensive income (loss), net of tax effects, until they are amortized as a
component of net periodic benefit cost. Also, the measurement date –
the date at which the benefit obligation and plan assets are measured – is
required to be the Corporation’s fiscal year-end.
(In
thousands)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Change
in benefit obligation
|
|
|
|
|
|
|
|
|
|
Benefit
obligation at beginning of year
|
|
$
|
14,864
|
|
|
$
|
15,603
|
|
|
$
|
19,082
|
|
Service
cost
|
|
|
391
|
|
|
|
396
|
|
|
|
480
|
|
Interest
cost
|
|
|
959
|
|
|
|
963
|
|
|
|
1,067
|
|
Plan
changes
|
|
|
-
|
|
|
|
-
|
|
|
|
(584
|
)
|
Benefits
paid
|
|
|
(823
|
)
|
|
|
(1,147
|
)
|
|
|
(1,361
|
)
|
Actuarial
(gain)/loss
|
|
|
(137
|
)
|
|
|
(951
|
)
|
|
|
(3,081
|
)
|
Benefit
obligation at end of year
|
|
$
|
15,254
|
|
|
$
|
14,864
|
|
|
$
|
15,603
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
in plan assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
value at beginning of year
|
|
$
|
-
|
|
|
$
|
5,819
|
|
|
$
|
6,693
|
|
Actual
return on assets
|
|
|
-
|
|
|
|
(274
|
)
|
|
|
487
|
|
Employer
contribution
|
|
|
823
|
|
|
|
159
|
|
|
|
-
|
|
Transferred
out
|
|
|
-
|
|
|
|
(4,557
|
)
|
|
|
-
|
|
Benefits
paid
|
|
|
(823
|
)
|
|
|
(1,147
|
)
|
|
|
(1,361
|
)
|
Fair
value at end of year
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
5,819
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded
Status of Plan
|
|
$
|
(15,254
|
)
|
|
$
|
(14,864
|
)
|
|
$
|
(9,784
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts
recognized in the Statement of Financial Position consist
of:
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
$
|
1,067
|
|
|
$
|
1,089
|
|
|
$
|
-
|
|
Noncurrent
liabilities
|
|
$
|
14,187
|
|
|
$
|
13,775
|
|
|
$
|
9,784
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts
recognized in Accumulated Other Comprehensive Income (before tax) consist
of:
|
|
|
|
|
|
|
|
|
|
|
|
|
Actuarial
(gain)/loss
|
|
$
|
(1,720
|
)
|
|
$
|
(1,592
|
)
|
|
$
|
(1,273
|
)
|
Transition
(asset)/obligation
|
|
|
1,639
|
|
|
|
2,147
|
|
|
|
2,654
|
|
Prior
service cost
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
$
|
(81
|
)
|
|
$
|
555
|
|
|
$
|
1,381
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
in Accumulated Other Comprehensive Income (before tax):
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount
disclosed at beginning of year
|
|
$
|
555
|
|
|
$
|
1,381
|
|
|
$
|
6,118
|
|
Actuarial
(gain)/loss
|
|
|
(137
|
)
|
|
|
(319
|
)
|
|
|
-
|
|
Amortization
of actuarial gain or loss
|
|
|
9
|
|
|
|
-
|
|
|
|
(3,342
|
)
|
Amortization
of transition amount
|
|
|
(508
|
)
|
|
|
(507
|
)
|
|
|
(964
|
)
|
Amortization
of prior service cost
|
|
|
-
|
|
|
|
-
|
|
|
|
(431
|
)
|
Amount
disclosed at end of year
|
|
$
|
(81
|
)
|
|
$
|
555
|
|
|
$
|
1,381
|
|
Estimated Future Benefit
Payments
(In thousands)
|
|
Fiscal
2010
|
|
|
1,067
|
|
Fiscal
2011
|
|
|
1,055
|
|
Fiscal
2012
|
|
|
1,047
|
|
Fiscal
2013
|
|
|
1,046
|
|
Fiscal
2014
|
|
|
1,052
|
|
Fiscal
2015 – 2019
|
|
|
5,738
|
|
Expected
Contributions During Fiscal 2010
|
|
|
|
|
Total
|
|
$
|
1,067
|
|
The
discount rates at fiscal year-end 2009, 2008, and 2007, were 5.7%, 6.7%, and
6.4%, respectively. The Corporation payment for these benefits has
reached the maximum amounts per the plan; therefore, healthcare trend rates have
no impact on the Corporation’s cost. Approximately $4.5 million of
assets previously held in a voluntary employee benefit association (VEBA) fund
designated to pay retiree healthcare claims were transferred into a VEBA fund
designated to pay active healthcare claims during 2008. As such there
were no funds designated as plan assets as of end of 2008 and 2009.
Components of Net Periodic
Postretirement Benefit Cost
(in thousands)
|
|
2010
|
|
Service
cost
|
|
$
|
391
|
|
Interest
cost
|
|
|
959
|
|
Amortization
of net (gain)/loss
|
|
|
(9
|
)
|
Amortization
of unrecognized transition (asset)/obligation
|
|
|
508
|
|
Net
periodic postretirement benefit cost/(income)
|
|
$
|
1,849
|
|
A
discount rate of 5.7% was used to determine net periodic benefit cost for
2010. The discount rate is set at the measurement date to reflect the
yield of a portfolio of high quality, fixed income debt
instruments. There are no plan assets invested.
Leases
The
Corporation leases certain warehouse and plant facilities and
equipment. Commitments for minimum rentals under non-cancelable
leases at the end of 2009 are as follows:
(In
thousands)
|
|
Capitalized
Leases
|
|
|
Operating
Leases
|
|
2010
|
|
$
|
40
|
|
|
$
|
31,640
|
|
2011
|
|
|
0
|
|
|
|
26,863
|
|
2012
|
|
|
-
|
|
|
|
13,094
|
|
2013
|
|
|
-
|
|
|
|
6,648
|
|
2014
|
|
|
-
|
|
|
|
5,855
|
|
Thereafter
|
|
|
-
|
|
|
|
13,691
|
|
Total
minimum lease payments
|
|
|
40
|
|
|
$
|
97,791
|
|
Less: amount
representing interest
|
|
|
1
|
|
|
|
|
|
Present
value of net minimum lease payments, including current maturities of
$39
|
|
$
|
39
|
|
|
|
|
|
Property,
plant and equipment at year-end include the following amounts for capitalized
leases:
(In
thousands)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Buildings
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
3,299
|
|
Machinery
and equipment
|
|
|
438
|
|
|
|
869
|
|
|
|
906
|
|
Office
equipment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
438
|
|
|
|
869
|
|
|
|
4,205
|
|
Less: allowances
for depreciation
|
|
|
148
|
|
|
|
126
|
|
|
|
3,084
|
|
|
|
$
|
290
|
|
|
$
|
743
|
|
|
$
|
1,121
|
|
The
Corporation purchased the leased building and sold it during 2008.
Rent
expense for the years 2009, 2008, and 2007, amounted to approximately $39.4
million, $43.2 million, and $35.6 million, respectively. The
Corporation has an operating lease for a production facility with annual rentals
totaling approximately $401,000 with a corporation in which the minority owner
of one of the Corporation’s consolidated subsidiaries is an
investor. There was no contingent rent expense under either
capitalized and operating leases (generally based on mileage of transportation
equipment) for the years 2009, 2008, and 2007.
Guarantees,
Commitments and Contingencies
The
Corporation utilizes letters of credit in the amount of $18 million to back
certain financing instruments, insurance policies and payment
obligations. The letters of credit reflect fair value as a condition
of their underlying purpose and are subject to fees competitively
determined.
The
Corporation is involved in various kinds of disputes and legal proceedings that
have arisen in the course of its business, including pending litigation,
environmental remediation, taxes, and other claims. It is the
Corporation’s opinion, after consultation with legal counsel, that additional
liabilities, if any, resulting from these matters are not expected to have a
material adverse effect on the Corporation’s quarterly or annual operating
results and cash flows when resolved in a future period.
Significant
Customer
One
office furniture customer accounted for approximately 9%, 10%, and 11% of
consolidated net sales in 2009, 2008, and 2007, respectively.
Operating
Segment Information
Management
views the Corporation as being in two operating segments: office
furniture and hearth products, with the former being the principal
segment. The office furniture segment manufactures and markets a
broad line of metal and wood commercial and home office furniture which includes
storage products, desks, credenzas, chairs, tables, bookcases, freestanding
office partitions and panel systems and other related products. The
hearth products segment manufactures and markets a broad line of gas, electric,
wood and biomass burning fireplaces, inserts, stoves, facings and accessories,
principally for the home.
For
purposes of segment reporting, intercompany sales transfers between segments are
not material, and operating profit is income before income taxes exclusive of
certain unallocated corporate expenses. These unallocated corporate
expenses include the net costs of the Corporation’s corporate operations,
interest income, and interest expense. Management views interest
income and expense as corporate financing costs and not as an operating segment
cost. In addition, management applies an effective income tax rate to
its consolidated income before income taxes so income taxes are not reported or
viewed internally on a segment basis. Identifiable assets by segment
are those assets applicable to the respective industry
segments. Corporate assets consist principally of cash and cash
equivalents, short-term investments, long-term investments and corporate office
real estate and related equipment.
No
geographic information for revenues from external customers or for long-lived
assets is disclosed since the Corporation’s primary market and capital
investments are concentrated in the United States.
Reportable
segment data reconciled to the consolidated financial statements for the years
ended 2009, 2008, and 2007, is as follows for continuing
operations:
(In
thousands)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Net
sales:
|
|
|
|
|
|
|
|
|
|
Office
furniture
|
|
$
|
1,370,197
|
|
|
$
|
2,054,037
|
|
|
$
|
2,108,439
|
|
Hearth
products
|
|
|
286,092
|
|
|
|
423,550
|
|
|
|
462,033
|
|
|
|
$
|
1,656,289
|
|
|
$
|
2,477,587
|
|
|
$
|
2,570,472
|
|
Operating
profit:
|
|
|
|
|
|
|
|
|
|
|
|
|
Office
furniture
(a)
|
|
$
|
50,376
|
|
|
$
|
101,447
|
|
|
$
|
195,274
|
|
Hearth
products
(b)
|
|
|
(17,194
|
)
|
|
|
11,759
|
|
|
|
36,444
|
|
Total
operating profit
|
|
|
33,182
|
|
|
|
113,206
|
|
|
|
231,718
|
|
Unallocated
corporate expenses
|
|
|
(40,855
|
)
|
|
|
(44,016
|
)
|
|
|
(53,992
|
)
|
Income
(loss) before income taxes
|
|
$
|
(7,673
|
)
|
|
$
|
69,190
|
|
|
$
|
177,726
|
|
Depreciation
and amortization expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
Office
furniture
|
|
$
|
52,137
|
|
|
$
|
50,511
|
|
|
$
|
49,294
|
|
Hearth
products
|
|
|
19,041
|
|
|
|
15,212
|
|
|
|
14,453
|
|
General
corporate
|
|
|
3,689
|
|
|
|
4,432
|
|
|
|
4,426
|
|
|
|
$
|
74,867
|
|
|
$
|
70,155
|
|
|
$
|
68,173
|
|
Capital
expenditures:
|
|
|
|
|
|
|
|
|
|
|
|
|
Office
furniture
|
|
$
|
13,482
|
|
|
$
|
59,101
|
|
|
$
|
47,408
|
|
Hearth
products
|
|
|
3,484
|
|
|
|
10,530
|
|
|
|
8,736
|
|
General
corporate
|
|
|
588
|
|
|
|
1,865
|
|
|
|
2,770
|
|
|
|
$
|
17,554
|
|
|
$
|
71,496
|
|
|
$
|
58,914
|
|
Identifiable
assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Office
furniture
|
|
$
|
579,187
|
|
|
$
|
730,348
|
|
|
$
|
724,447
|
|
Hearth
products
|
|
|
291,518
|
|
|
|
326,168
|
|
|
|
356,273
|
|
General
corporate
|
|
|
123,621
|
|
|
|
109,113
|
|
|
|
126,256
|
|
|
|
$
|
994,326
|
|
|
$
|
1,165,629
|
|
|
$
|
1,206,976
|
|
|
(a)
|
Included
in operating profit for the office furniture segment are pretax charges of
$34.9, $25.5 million, and $8.7 million, for closing of facilities and
impairment charges in 2009, 2008, and 2007,
respectively.
|
|
(b)
|
Included
in operating profit for the hearth products segment are pretax charges of
$5.5, $0.3 million, and $1.1 million for closing facilities in 2009, 2008,
and 2007, respectively.
|
Summary
of Quarterly Results of Operations (Unaudited)
The
following table presents certain unaudited quarterly financial information for
each of the past 12 quarters. In the opinion of the Corporation’s
management, this information has been prepared on the same basis as the
consolidated financial statements appearing elsewhere in this report and
includes all adjustments (consisting only of normal recurring accruals)
necessary to present fairly the financial results set forth
herein. Results of operations for any previous quarter are not
necessarily indicative of results for any future period.
Year-End 2009:
(In thousands, except per share data)
|
|
First
Quarter
|
|
|
Second
Quarter
|
|
|
Third
Quarter
|
|
|
Fourth
Quarter
|
|
Net
sales
|
|
$
|
405,666
|
|
|
$
|
382,990
|
|
|
$
|
453,956
|
|
|
$
|
413,677
|
|
Cost
of products sold
|
|
|
280,931
|
|
|
|
253,509
|
|
|
|
287,352
|
|
|
|
263,716
|
|
Gross
profit
|
|
|
124,735
|
|
|
|
129,481
|
|
|
|
166,604
|
|
|
|
149,961
|
|
Selling
and administrative expenses
|
|
|
136,257
|
|
|
|
124,766
|
|
|
|
129,897
|
|
|
|
135,426
|
|
Restructuring
related charges (income)
|
|
|
5,085
|
|
|
|
3,878
|
|
|
|
4,440
|
|
|
|
27,040
|
|
Operating
income (loss)
|
|
|
(16,607
|
)
|
|
|
837
|
|
|
|
32,267
|
|
|
|
(12,505
|
)
|
Interest
income (expense) – net
|
|
|
(3,063
|
)
|
|
|
(2,924
|
)
|
|
|
(3,116
|
)
|
|
|
(2,562
|
)
|
Income
(loss) from continuing operations before tax
|
|
|
(19,670
|
)
|
|
|
(2,087
|
)
|
|
|
29,151
|
|
|
|
(15,067
|
)
|
Income
taxes
|
|
|
(7,811
|
)
|
|
|
(697
|
)
|
|
|
11,391
|
|
|
|
(4,297
|
)
|
Net
income attributable to the noncontrolling interest
|
|
|
27
|
|
|
|
7
|
|
|
|
146
|
|
|
|
3
|
|
Net
income (loss) attributable to Parent Company
|
|
$
|
(11,886
|
)
|
|
$
|
(
1,397
|
)
|
|
$
|
17,614
|
|
|
$
|
(10,773
|
)
|
Net
income (loss) per common share – basic
|
|
$
|
(0.27
|
)
|
|
$
|
(0.03
|
)
|
|
$
|
0.39
|
|
|
$
|
(0.24
|
)
|
Weighted-average
common shares outstanding – basic
|
|
|
44,612
|
|
|
|
44,895
|
|
|
|
44,994
|
|
|
|
45,054
|
|
Net
income (loss) per common share – diluted
|
|
$
|
(0.27
|
)
|
|
$
|
(0.03
|
)
|
|
$
|
0.39
|
|
|
$
|
(0.24
|
)
|
Weighted-average
common shares outstanding – diluted
|
|
|
44,612
|
|
|
|
44,895
|
|
|
|
45,598
|
|
|
|
45,054
|
|
As a Percentage of Net
Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
Gross
profit
|
|
|
30.7
|
|
|
|
33.8
|
|
|
|
36.7
|
|
|
|
36.3
|
|
Selling
and administrative expenses
|
|
|
33.6
|
|
|
|
32.6
|
|
|
|
28.6
|
|
|
|
32.7
|
|
Restructuring
related charges
|
|
|
1.3
|
|
|
|
1.0
|
|
|
|
1.0
|
|
|
|
6.5
|
|
Operating
income (loss)
|
|
|
(4.1
|
)
|
|
|
0.2
|
|
|
|
7.1
|
|
|
|
(3.0
|
)
|
Income
taxes
|
|
|
(1.9
|
)
|
|
|
(0.2
|
)
|
|
|
2.5
|
|
|
|
(1.0
|
)
|
Net
income (loss) attributable to Parent Company
|
|
|
(2.9
|
)
|
|
|
(0.4
|
)
|
|
|
3.9
|
|
|
|
(2.6
|
)
|
Year-End
2008:
(In
thousands, except per share data)
|
|
First
Quarter
|
|
|
Second
Quarter
|
|
|
Third
Quarter
|
|
|
Fourth
Quarter
|
|
Net
sales
|
|
$
|
563,383
|
|
|
$
|
613,114
|
|
|
$
|
663,141
|
|
|
$
|
637,949
|
|
Cost
of products sold
|
|
|
379,345
|
|
|
|
403,671
|
|
|
|
438,423
|
|
|
|
427,536
|
|
Gross
profit
|
|
|
184,038
|
|
|
|
209,443
|
|
|
|
224,718
|
|
|
|
210,413
|
|
Selling
and administrative expenses
|
|
|
172,555
|
|
|
|
182,673
|
|
|
|
189,577
|
|
|
|
173,065
|
|
Restructuring
related charges (income)
|
|
|
818
|
|
|
|
2,029
|
|
|
|
1,497
|
|
|
|
21,515
|
|
Operating
income
|
|
|
10,665
|
|
|
|
24,741
|
|
|
|
33,644
|
|
|
|
15,833
|
|
Interest
income (expense) – net
|
|
|
(3,414
|
)
|
|
|
(4,184
|
)
|
|
|
(4,037
|
)
|
|
|
(4,058
|
)
|
Income
from continuing operations before tax
|
|
|
7,251
|
|
|
|
20,557
|
|
|
|
29,607
|
|
|
|
11,775
|
|
Income
taxes
|
|
|
3,130
|
|
|
|
7,098
|
|
|
|
10,101
|
|
|
|
3,254
|
|
Net
income attributable to the noncontrolling interest
|
|
|
144
|
|
|
|
(10
|
)
|
|
|
17
|
|
|
|
6
|
|
Net
income attributable to Parent Company
|
|
$
|
3,977
|
|
|
$
|
13,469
|
|
|
$
|
19,489
|
|
|
$
|
8,515
|
|
Net
income per common share – basic
|
|
$
|
0.09
|
|
|
$
|
0.30
|
|
|
$
|
0.44
|
|
|
$
|
0.19
|
|
Weighted-average
common shares outstanding – basic
|
|
|
44,537
|
|
|
|
44,233
|
|
|
|
44,213
|
|
|
|
44,259
|
|
Net
income per common share – diluted
|
|
$
|
0.09
|
|
|
$
|
0.30
|
|
|
$
|
0.44
|
|
|
$
|
0.19
|
|
Weighted-average
common shares outstanding – diluted
|
|
|
44,706
|
|
|
|
44,370
|
|
|
|
44,340
|
|
|
|
44,386
|
|
As a Percentage of Net
Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
Gross
profit
|
|
|
32.7
|
|
|
|
34.2
|
|
|
|
33.9
|
|
|
|
33.0
|
|
Selling
and administrative expenses
|
|
|
30.6
|
|
|
|
29.8
|
|
|
|
28.6
|
|
|
|
27.1
|
|
Restructuring
related charges
|
|
|
0.1
|
|
|
|
0.3
|
|
|
|
0.2
|
|
|
|
3.4
|
|
Operating
income
|
|
|
1.9
|
|
|
|
4.0
|
|
|
|
5.1
|
|
|
|
2.5
|
|
Income
taxes
|
|
|
0.6
|
|
|
|
1.2
|
|
|
|
1.5
|
|
|
|
0.5
|
|
Net
income attributable to Parent Company
|
|
|
0.7
|
|
|
|
2.2
|
|
|
|
2.9
|
|
|
|
1.3
|
|
Year-End 2007:
(In thousands, except per share data)
|
|
First
Quarter
|
|
|
Second
Quarter
|
|
|
Third
Quarter
|
|
|
Fourth
Quarter
|
|
Net
sales
|
|
$
|
609,200
|
|
|
$
|
618,160
|
|
|
$
|
674,628
|
|
|
$
|
668,484
|
|
Cost
of products sold
|
|
|
402,500
|
|
|
|
402,523
|
|
|
|
434,385
|
|
|
|
425,289
|
|
Gross
profit
|
|
|
206,700
|
|
|
|
215,637
|
|
|
|
240,243
|
|
|
|
243,195
|
|
Selling
and administrative expenses
|
|
|
170,814
|
|
|
|
169,559
|
|
|
|
176,904
|
|
|
|
185,052
|
|
Restructuring
related charges (income)
|
|
|
(136
|
)
|
|
|
728
|
|
|
|
4,264
|
|
|
|
4,932
|
|
Operating
income
|
|
|
36,022
|
|
|
|
45,350
|
|
|
|
59,075
|
|
|
|
53,211
|
|
Interest
income (expense) – net
|
|
|
(4,036
|
)
|
|
|
(4,578
|
)
|
|
|
(4,489
|
)
|
|
|
(3,829
|
)
|
Income
from continuing operations before tax
|
|
|
31,986
|
|
|
|
40,772
|
|
|
|
54,586
|
|
|
|
49,382
|
|
Income
taxes
|
|
|
11,379
|
|
|
|
14,417
|
|
|
|
19,377
|
|
|
|
12,107
|
|
Net
income attributable to the noncontrolling interest
|
|
|
(44
|
)
|
|
|
(38
|
)
|
|
|
(98
|
)
|
|
|
(238
|
)
|
Income
from continuing operations
|
|
|
20,651
|
|
|
|
26,393
|
|
|
|
35,307
|
|
|
|
37,513
|
|
Discontinued
operations, less applicable taxes
|
|
|
30
|
|
|
|
484
|
|
|
|
-
|
|
|
|
-
|
|
Net
income attributable to Parent Company
|
|
$
|
20,681
|
|
|
$
|
26,877
|
|
|
$
|
35,307
|
|
|
$
|
37,513
|
|
Net
income from continuing operations – basic
|
|
$
|
.43
|
|
|
$
|
.56
|
|
|
$
|
.76
|
|
|
$
|
.82
|
|
Net
income from discontinued operations – basic
|
|
|
.00
|
|
|
|
.01
|
|
|
|
-
|
|
|
|
-
|
|
Net
income per common share – basic
|
|
$
|
.43
|
|
|
$
|
.57
|
|
|
$
|
.76
|
|
|
$
|
.82
|
|
Weighted-average
common shares outstanding – basic
|
|
|
47,996
|
|
|
|
46,937
|
|
|
|
46,256
|
|
|
|
45,550
|
|
Net
income from continuing operations – diluted
|
|
$
|
.43
|
|
|
$
|
.56
|
|
|
$
|
.76
|
|
|
$
|
.82
|
|
Net
income from discontinued operations – diluted
|
|
|
.00
|
|
|
|
.01
|
|
|
|
-
|
|
|
|
-
|
|
Net
income per common share – diluted
|
|
$
|
.43
|
|
|
$
|
.57
|
|
|
$
|
.76
|
|
|
$
|
.82
|
|
Weighted-average
common shares outstanding – diluted
|
|
|
48,278
|
|
|
|
47,199
|
|
|
|
46,487
|
|
|
|
45,775
|
|
As a Percentage of Net
Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
Gross
profit
|
|
|
33.9
|
|
|
|
34.9
|
|
|
|
35.6
|
|
|
|
36.4
|
|
Selling
and administrative expenses
|
|
|
28.0
|
|
|
|
27.4
|
|
|
|
26.2
|
|
|
|
27.7
|
|
Restructuring
related charges
|
|
|
(0.0
|
)
|
|
|
0.1
|
|
|
|
0.6
|
|
|
|
0.7
|
|
Operating
income
|
|
|
5.9
|
|
|
|
7.3
|
|
|
|
8.8
|
|
|
|
8.0
|
|
Income
taxes
|
|
|
1.9
|
|
|
|
2.3
|
|
|
|
2.9
|
|
|
|
1.8
|
|
Income
from continuing operations
|
|
|
3.4
|
|
|
|
4.3
|
|
|
|
5.2
|
|
|
|
5.6
|
|
Discontinued
operations, less applicable taxes
|
|
|
0.0
|
|
|
|
0.1
|
|
|
|
-
|
|
|
|
-
|
|
Net
income attributable to Parent Company
|
|
|
3.4
|
|
|
|
4.3
|
|
|
|
5.2
|
|
|
|
5.6
|
|
INVESTOR
INFORMATION
Common
Stock Market Prices and Dividends (Unaudited)
Quarterly
2009 – 2007
2009
by
Quarter
|
|
High
|
|
|
Low
|
|
|
Dividends
per
Share
|
|
1
st
|
|
$
|
17.29
|
|
|
$
|
7.70
|
|
|
$
|
.215
|
|
2
nd
|
|
|
19.00
|
|
|
|
11.00
|
|
|
|
.215
|
|
3
rd
|
|
|
24.26
|
|
|
|
15.85
|
|
|
|
.215
|
|
4
th
|
|
|
29.40
|
|
|
|
21.94
|
|
|
|
.215
|
|
Total
Dividends Paid
|
|
|
$
|
.86
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
by
Quarter
|
|
High
|
|
|
Low
|
|
|
Dividends
per
Share
|
|
1
st
|
|
$
|
37.97
|
|
|
$
|
26.64
|
|
|
$
|
.215
|
|
2
nd
|
|
|
28.37
|
|
|
|
18.07
|
|
|
|
.215
|
|
3
rd
|
|
|
34.37
|
|
|
|
16.71
|
|
|
|
.215
|
|
4
th
|
|
|
25.76
|
|
|
|
9.09
|
|
|
|
.215
|
|
Total
Dividends Paid
|
|
|
$
|
.86
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
by
Quarter
|
|
High
|
|
|
Low
|
|
|
Dividends
per
Share
|
|
1
st
|
|
$
|
51.65
|
|
|
$
|
43.95
|
|
|
$
|
.195
|
|
2
nd
|
|
|
47.94
|
|
|
|
40.14
|
|
|
|
.195
|
|
3
rd
|
|
|
45.35
|
|
|
|
35.56
|
|
|
|
.195
|
|
4
th
|
|
|
44.32
|
|
|
|
33.79
|
|
|
|
.195
|
|
Total
Dividends Paid
|
|
|
$
|
.78
|
|
Common
Stock Market Price and Price/Earnings Ratio (Unaudited)
Fiscal
Years 2009 – 2005
|
|
Market
Price
|
|
Diluted
Earnings
per
Share
|
|
|
Price/Earnings
Ratio
|
|
Year
|
|
High
|
|
|
Low
|
|
|
|
|
High
|
|
|
Low
|
|
2009
|
|
$
|
29.40
|
|
|
$
|
7.70
|
|
|
$
|
(0.14
|
)
|
|
|
(210
|
)
|
|
|
(55
|
)
|
2008
|
|
|
37.97
|
|
|
|
9.09
|
|
|
|
1.02
|
|
|
|
37
|
|
|
|
9
|
|
2007
|
|
|
51.65
|
|
|
|
33.79
|
|
|
|
2.57
|
|
|
|
20
|
|
|
|
13
|
|
2006
|
|
|
61.68
|
|
|
|
38.34
|
|
|
|
2.45
|
|
|
|
25
|
|
|
|
16
|
|
2005
|
|
|
62.41
|
|
|
|
38.80
|
|
|
|
2.50
|
|
|
|
25
|
|
|
|
16
|
|
Five-Year
Average
|
|
|
|
(21
|
)
|
|
|
(0
|
)
|
SCHEDULE
II – VALUATION AND QUALIFYING ACCOUNTS
HNI
CORPORATION AND SUBSIDIARIES
January
2, 2010
COL.
A
|
|
COL.
B
|
|
|
COL.
C
|
|
|
COL.
D
|
|
|
COL.
E
|
|
|
|
|
|
|
ADDITIONS
|
|
|
|
|
|
|
|
DESCRIPTION
|
|
BALANCE
AT BEGINNING OF PERIOD
|
|
|
(1)
CHARGED TO COSTS AND EXPENSES
|
|
|
(2)
CHARGED TO OTHER ACCOUNTS (DESCRIBE)
|
|
|
DEDUCTIONS
(DESCRIBE)
|
|
|
BALANCE
AT END OF PERIOD
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
ended January 2, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance
for doubtful accounts
|
|
$
|
8,788
|
|
|
$
|
2,511
|
|
|
|
-
|
|
|
$
|
4,889
|
(A)
|
|
$
|
6,410
|
|
Valuation
allowance for deferred tax asset
|
|
|
3,073
|
|
|
|
(3,073
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
ended January 3, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance
for doubtful accounts
|
|
$
|
11,458
|
|
|
$
|
3,107
|
|
|
|
-
|
|
|
$
|
5,777
|
(A)
|
|
$
|
8,788
|
|
Valuation
allowance for deferred tax asset
|
|
|
-
|
|
|
$
|
3,073
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
3,073
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
ended December 29, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance
for doubtful accounts
|
|
$
|
12,796
|
|
|
$
|
3,906
|
|
|
|
-
|
|
|
$
|
5,244
|
(A)
|
|
$
|
11,458
|
|
Note
A: Excess of accounts written off over recoveries.
ITEM
15(c) -
INDEX OF EXHIBITS
Exhibit Number
|
|
Description of Document
|
|
|
|
|
|
Articles
of Incorporation of HNI Corporation, as amended
+
|
|
|
|
|
|
By-laws
of HNI Corporation, as amended
+
|
|
|
|
(10.1)
|
|
HNI
Corporation 2007 Stock-Based Compensation Plan, as amended, incorporated
by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form
10-Q for the quarter ended April 4, 2009*
|
|
|
|
|
|
2007
Equity Plan for Non-Employee Directors of HNI Corporation, as
amended*
+
|
|
|
|
(10.3)
|
|
Form
of HNI Corporation Change In Control Employment Agreement, incorporated by
reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K
filed November 16, 2006*
|
|
|
|
(10.4)
|
|
HNI
Corporation ERISA Supplemental Retirement Plan, as amended effective
January 1, 2005, incorporated by reference to Exhibit 10.3 to the
Registrant’s Quarterly Report on Form 10-Q for the quarter ended September
29, 2007*
|
|
|
|
(10.5)
|
|
Form
of HNI Corporation Amended and Restated Indemnity Agreement, incorporated
by reference to Exhibit 10.1 to the Registrant’s Current Report on Form
8-K filed November 14, 2007*
|
|
|
|
|
|
Form
of 2007 Equity Plan For Non-Employee Directors of HNI Corporation
Participation Agreement*
+
|
|
|
|
(10.7)
|
|
Form
of HNI Corporation 2007 Stock-Based Compensation Plan Stock Option Award
Agreement, incorporated by reference to Exhibit 10.1 to the Registrant’s
Quarterly Report on Form 10-Q for the quarter ended July 4,
2009*
|
|
|
|
(10.8)
|
|
Credit
Agreement dated as of January 28, 2005, by and among HNI Corporation, as
Borrower, certain domestic subsidiaries of the Borrower from time to time
party thereto, as Guarantors, the lenders parties thereto and Wachovia
Bank, National Association, as Administrative Agent, incorporated by
reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K
filed February 2, 2005
|
|
|
|
(10.9)
|
|
Description
of Material Compensatory Arrangements Contained in Offer Letter between
HNI Corporation and Kurt Tjaden, incorporated by reference to Exhibit 10.3
to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended
September 27, 2008*
|
|
|
|
(10.10)
|
|
HNI
Corporation Long-Term Performance Plan, as amended effective January 1,
2005, incorporated by reference to Exhibit 10.6 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended September 29,
2007*
|
Exhibit Number
|
|
Description of Document
|
|
|
|
(10.11)
|
|
First
Amendment to Credit Agreement dated as of December 22, 2005, by and among
HNI Corporation, as Borrower, certain domestic subsidiaries of the
Borrower from time to time party thereto, as Guarantors, the lenders
parties thereto and Wachovia Bank, National Association, as Administrative
Agent, incorporated by reference to Exhibit 99.1 to the Registrant’s
Current Report on Form 8-K filed February 17, 2006
|
|
|
|
|
|
HNI
Corporation Executive Deferred Compensation Plan, as amended*
+
|
|
|
|
(10.13)
|
|
Second
Amendment to Credit Agreement dated as of April 6, 2006, by and among HNI
Corporation as Borrower, certain domestic subsidiaries of the Borrower
from time to time party thereto, as Guarantors, the lenders parties
thereto and Wachovia 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 10, 2006
|
|
|
|
(10.14)
|
|
Note
Purchase Agreement dated as of April 6, 2006, by and among HNI Corporation
and the Purchasers named therein, incorporated by reference to Exhibit
10.2 to the Registrant’s Current Report on Form 8-K filed April 10,
2006
|
|
|
|
|
|
HNI
Corporation Directors Deferred Compensation Plan, as amended*
+
|
|
|
|
(10.16)
|
|
Third
Amendment to Credit Agreement dated as of November 8, 2006, by and among
HNI Corporation as Borrower, certain domestic subsidiaries of the Borrower
from time to time party thereto, as Guarantors, the lenders parties
thereto and Wachovia Bank, National Association, as Administrative Agent,
incorporated by reference to Exhibit 10.1 to the Registrant’s Current
Report on Form 8-K filed November 8, 2006
|
|
|
|
(10.17)
|
|
HNI
Corporation Executive Bonus Plan as amended effective January 1, 2005,
incorporated by reference to Exhibit 10.4 to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended September 29,
2007*
|
|
|
|
(10.18)
|
|
Form
of HNI Corporation Amendment No. 1 to Change in Control Employment
Agreement incorporated by reference to Exhibit 10.1 to the Registrant's
Current Report on Form 8-K filed August 10, 2007*
|
|
|
|
(10.19)
|
|
HNI
Corporation Stock-Based Compensation Plan, as amended effective August 8,
2006, incorporated by reference to Exhibit 10.1 to the Registrant’s
Quarterly Report on Form 10-Q for the quarter ended September 30,
2006*
|
|
|
|
(10.20)
|
|
Form
of Exercise of Stock Option granted under the HNI Corporation Stock-Based
Compensation Plan, incorporated by reference to Exhibit 10.2 to the
Registrant’s Quarterly Report on Form 10-Q for the quarter ended September
27, 2008*
|
|
|
|
(10.21)
|
|
Form
of HNI Corporation Stock-Based Compensation Plan Stock Option Award
Agreement, incorporated by reference to Exhibit 99D to the Registrant’s
Current Report on Form 8-K filed February 22,
2005*
|
Exhibit Number
|
|
Description of Document
|
|
|
|
(10.22)
|
|
Fourth
Amendment to Credit Agreement dated as of June 20, 2008, by and among HNI
Corporation as Borrower, certain domestic subsidiaries of the Borrower
from time to time party thereto as Guarantors, the lenders parties thereto
and Wachovia Bank, National Association, as Administrative Agent,
incorporated by reference to Exhibit 10.1 to the Registrant’s Current
Report on Form 8-K filed July 7, 2008
|
|
|
|
(10.23)
|
|
Credit
Agreement dated as of June 30, 2008, by and among HNI Corporation, as
Borrower, certain domestic subsidiaries of HNI Corporation from time to
time party thereto, as Guarantors, certain lenders party thereto and
Wachovia Bank, National Association, as Administrative Agent, incorporated
by reference to Exhibit 10.2 to the Registrant’s Current Report on Form
8-K filed July 7, 2008
|
|
|
|
(10.24)
|
|
Form
of HNI Corporation 2007 Stock-Based Compensation Plan Restricted Stock
Unit Award Agreement, incorporated by reference to Exhibit 10.2 to the
Registrant’s Quarterly Report on Form 10-Q for the quarter ended April 4,
2009*
|
|
|
|
|
|
Form
of HNI Corporation Executive Deferred Compensation Plan Deferral Election
Agreement*
+
|
|
|
|
|
|
Form
of HNI Corporation Directors Deferred Compensation Plan Deferral Election
Agreement*
+
|
|
|
|
|
|
Subsidiaries
of the Registrant
+
|
|
|
|
|
|
Consent
of Independent Registered Public Accounting Firm
+
|
|
|
|
|
|
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
+
|
*
Indicates management contract or compensatory plan.
+
Filed
herewith.
-85-
Exhibit
3.1
ARTICLES
OF INCORPORATION
OF
HNI
CORPORATION
Amended
and restated on May 5, 1987.
Amended
on May 3, 1988, July 7, 1988, May 12, 1998, August 10, 1998,
May 11,
1999, May 5, 2003, May 4, 2004, May 8, 2007 and November 30, 2009
ARTICLE
1.
Section
1.01. Name.
The name of the Corporation is HNI
Corporation. (As amended 5/04/04.)
Section 1.02. Law
Under Which Incorporated.
The Corporation was incorporated
under Chapter 384 of the Code of Iowa (1939), and has voluntarily adopted the
provisions of the Iowa Business Corporation Act, Chapter 496A of the Code of
Iowa.
ARTICLE
2.
Section
2.01. Duration.
The Corporation shall have
perpetual duration.
ARTICLE
3.
Section
3.01. Purposes
and
Powers.
The Corporation shall have unlimited power to engage
in, and to do any lawful act concerning, any or all lawful businesses for which
corporations may be organized under the Iowa Business Corporation
Act.
ARTICLE
4.
Section
4.01. Authorized Shares.
The aggregate number of
shares which the Corporation shall have the authority to issue is 202,000,000
shares, consisting of 2,000,000 shares designated as "preferred shares" or
"preferred stock," with a par value of $1.00 per share, and 200,000,000 shares
designated as "common stock" or "common shares," with a par value of $1.00 per
share. (Amended 5/12/98 and 5/11/99.)
Section
4.02. Series of Preferred Shares.
Authority is
hereby vested in the Board of Directors to divide the preferred shares into
series and, within the limitations set forth in the Iowa Business Corporation
Act and in these Articles of Incorporation, to fix and determine the relative
rights and preferences of the shares of any series so established. In
order to establish such series, the Board of Directors and the Corporation shall
comply with the procedure therefor as provided in the Iowa Business Corporation
Act. Upon such compliance, the resolution of the Board of Directors
establishing and designating the series and fixing and determining the relative
rights and preferences thereof shall become effective and shall constitute an
amendment of these Articles of Incorporation.
Section
4.03. Relative Rights and Preferences of Each
Series.
All preferred shares shall be identical, except as to
the relative rights and preferences as to which the Iowa Business Corporation
Act permits variations between different series.
Section
4.04. Pre-Emptive Rights Denied.
No holder of
shares of any class shall have any pre-emptive right to acquire, subscribe for,
or purchase any shares of any class (whether such shares shall be authorized by
these Articles of Incorporation or authorized hereafter), treasury shares, or
securities of the Corporation. Any and all pre-emptive rights which
might otherwise exist are expressly denied.
Section
4.05. Voting Rights.
The preferred shareholders
shall have no voting rights, and the vote or consent of the preferred
shareholders shall not be required with respect to any matter, except that the
preferred shareholders shall have the right to vote on any matter as to which
the Iowa Business Corporation Act expressly requires that they be permitted to
vote notwithstanding any contrary provisions of the Articles of
Incorporation.
Cumulative
voting shall not be permitted or be effective at any meeting of
shareholders.
ARTICLE
5.
Section
5.01. Directors: Number, Terms, Classification.
The number of
Directors shall
be fixed by the By-laws. The Directors shall
be divided into three classes, each of which shall be as nearly equal in number
as possible. The term of office of one class shall expire in each
year. At each annual meeting of the shareholders, a number of
Directors equal to the number of the class whose term expires at the annual
meeting shall be elected for a term ending when Directors are elected at the
third succeeding annual meeting. (As amended 5/8/07.)
Section
5.02. Limitation of Director's Liability.
No
Director shall be liable to the Corporation or its shareholders for money
damages for any action taken, or any failure to take any action, as a Director,
and the Corporation may indemnify a Director as provided in the By-laws for any
such liability to the Corporation or its shareholders or any liability to any
person for such action or failure to take any action as a Director, except
liability for any of the following:
(a)
The amount of a financial benefit
received by a Director to which the Director
is not
entitled;
(b) An
intentional infliction of harm on the Corporation or the
shareholders;
(c) A
violation of Section 490.833 of the Iowa Business Corporation Act;
and
(d) An
intentional violation of criminal law.
Nothing
in this Section 5.02 shall be construed to eliminate or limit the liability of a
Director for an act or omission occurring prior to the date when this Section
5.02 became effective. For purposes of this Section 5.02, the terms
"Director" and "liability" shall have the meanings ascribed to such terms in the
Iowa Business Corporation Act, as amended from time to time. (As
amended 5/8/07.)
ARTICLE
6.
Section
6.01. By-laws.
The power to
amend the By-laws
is vested in the Board
of
Directors. Wherever
used in these Articles of Incorporation with respect to the By-laws, the
word "amendment" or "amend" includes and shall apply to the
amendment, alteration, or repeal of any or all provisions of the By-laws or the
adoption of new By-laws.
Section
6.02. Effect of Articles of Incorporation and By-laws.
Each
shareholder, by the
act of becoming or
remaining a shareholder of the Corporation, shall be deemed to have accepted and
agreed to all provisions of these Articles of Incorporation and the By-laws, as
amended from time to time. All provisions of the By-laws which (or
the substance of which) at any time shall
have
been adopted, approved, or ratified by the affirmative vote of the holders of a
majority of the outstanding common shares entitled to vote shall have the same
force and effect as if such provisions were included in full in these Articles
of Incorporation. No such provision of the By-laws shall be construed
as having any lesser force or effect by reason of being included in the By-laws
rather than in the Articles of Incorporation. This Section shall not
be construed to require that any provision or amendment of the By-laws be
adopted, approved, or ratified by the shareholders. Any shareholder,
regardless of the period of time during which he has been a shareholder, shall
have the right to examine the By-laws of the Corporation in person or by agent
or attorney at any reasonable time or times and to make extracts
therefrom. Upon the written request of any shareholder, the
Corporation shall mail to such shareholder within a reasonable time a copy of
the By-laws.
Section
6.03. Amendment of Articles of Incorporation.
The
Corporation and the shareholders expressly reserve the right from time to time
to amend these Articles of Incorporation, in the manner now or hereafter
permitted by the Iowa Business Corporation Act or other applicable law, whether
or not such amendment shall constitute or result in a fundamental change in the
purposes or structure of the Corporation or in the rights or privileges of
shareholders or others or in any or all of the foregoing. All
rights and privileges of
shareholders or others shall be subject to this reservation. Wherever
used in these Articles of Incorporation with respect to the Articles of
Incorporation, the word "amendment" or "amend" includes and shall apply to the
amendment, alteration, or repeal of any or all provisions of the Articles of
Incorporation or the adoption of new or restated Articles of
Incorporation.
3
Exhibit
3.2
BY-LAWS
OF
HNI
CORPORATION
Adopted
on September 7, 1960.
Amended
on April 23, 1964, April 28, 1966, August 13, 1969, April 15, 1970,
February
12, 1976, July 23, 1976, January 11, 1977, February 13, 1977, April 18,
1977,
July 28,
1977, July 29, 1977, October 27, 1977, February 27, 1978, February 19,
1979,
August 1,
1979, March 3, 1980, April 30, 1980, October 29, 1980, August 3,
1982,
January
31, 1983, October 31, 1983, October 30, 1984, February 5, 1985, May 6,
1985,
February
4, 1986, August 5, 1986, February 15, 1988, July 7, 1988, March 13,
1990,
February
11, 1991, April 29, 1991, July 29, 1991, May 5, 1992, November 2,
1992,
May 11,
1993, February 14, 1994, May 10, 1994, November 13, 1995, May 14,
1996,
May 12,
1997, March 4, 1998, July 29, 1998, November 10, 2000, November 7,
2002,
February
12, 2003, May 5, 2003, November 7, 2003, February 11, 2004, August 2,
2004,
May 3,
2005, November 11, 2005, November 10, 2006, May 8, 2007, August 7,
2007,
November
7, 2008 and November 19, 2009.
ARTICLE
1. OFFICES AND PLACES OF BUSINESS
Section
1.01. Principal Place of Business.
The principal
place of business of the Corporation shall be located in such place, within or
without the State of Iowa, as shall be fixed by or pursuant to authority granted
by the Board of Directors from time to time.
Section
1.02. Registered Office.
The registered office of
the Corporation required by the Iowa Business Corporation Act to be maintained
in the State of Iowa may be, but need not be, the same as its principal place of
business. The registered office may be changed from time to time by
the Board of Directors as provided by law.
Section
1.03. Other Places.
The Corporation may conduct its
business, carry on its operations, have offices, carry out any or all of its
purposes, and exercise any or all of its powers anywhere in the world, within or
without the State of Iowa.
ARTICLE
2. SHAREHOLDERS
Section
2.01. Annual Meeting.
The annual meeting of the
shareholders shall be held in each year at such time and place as shall be fixed
by the Board of Directors or by the Chairman of the Board of Directors;
provided, however, that the annual meeting shall not be scheduled on a legal
holiday in the state where held. Any previously scheduled annual
meeting may be postponed by resolution of the Board of Directors and on public
notice given prior to the date previously scheduled for such annual
meeting. At the annual meeting, the shareholders shall elect
Directors as provided in Section 3.02 and may conduct any other business
properly brought before the meeting. (As amended 4/23/64, 8/1/79,
10/31/83, and 4/29/91.)
Section
2.02. Special Meetings.
Special
meetings of the shareholders, for any purpose
or purposes, may be called,
and the time and place thereof fixed by the Board of Directors or by the holders
of not less than 50 percent of all votes entitled to be cast on any issue
proposed to be considered at the proposed special meeting. Business
conducted at any special meeting of shareholders shall be limited to the
purposes stated in the notice of the meeting. Any previously
scheduled special meeting of shareholders may be postponed by resolution of the
Board of Directors and public notice given prior to the date previously
scheduled for such special meeting of shareholders.
(As amended 4/23/64,
8/1/79, 4/29/91 and 11/7/03.)
Section
2.03. Place of Shareholders' Meetings.
Any annual
meeting or special meeting of shareholders may be held at any place, either
within or without the State of Iowa. The place of each meeting of
shareholders shall be fixed as provided in these By-laws, or by a waiver or
waivers of notice fixing the place of such meeting and signed by all
shareholders entitled to vote at such meeting. If no designation is
made of the place of a meeting of shareholders, the place of meeting shall be
the registered office of the Corporation in the State of Iowa.
Section
2.04. Notice of Shareholders' Meetings.
Written or
printed notice stating the place, day, and hour of the meeting and, in case of a
special meeting, the purpose or purposes for which the meeting is called, shall
be delivered not less than ten days (unless a longer period shall be required by
law) nor more than sixty days before the date of the meeting, either personally
or by mail, by or at the direction of the President, the Secretary, or the
officer or persons calling the meeting, to each shareholder of record entitled
to vote at such meeting. If mailed, such notice shall be deemed to be
delivered when deposited in the United States mail addressed to the shareholder
at his address as it appears on the stock transfer books of the Corporation,
with postage thereon prepaid. (As amended 4/29/91.)
Section
2.05. Closing of Transfer Books; Fixing of Record
Date.
For the purpose of determining shareholders entitled to
notice of or to vote at any meeting of shareholders or any adjournment thereof,
or entitled to receive payment of any dividend, or in order to make a
determination of shareholders for any other proper purpose, the Board of
Directors of the Corporation may provide that the stock transfer books shall be
closed for a stated period but not to exceed, in any case, seventy
days. If the stock transfer books shall be closed for the purpose of
determining shareholders entitled to notice of or to vote at a meeting of
shareholders, such books shall be closed for at least fifteen days immediately
preceding such meeting. In lieu of closing the stock transfer books,
the Board of Directors may fix in advance a date as the record date for any such
determination of shareholders, such date in any case to be not more than seventy
days and, in case of a meeting of shareholders, not less than fifteen days prior
to the date on which the particular action, requiring such determination of
shareholders, is to be taken. If the Board of Directors does not
provide that the stock transfer books shall be closed and does not fix a record
date for the determination of shareholders entitled to notice of or to vote at a
meeting of shareholders, or shareholders entitled to receive payment of a
dividend, the record date for such determination of shareholders shall be
seventy days prior to the date fixed for such meeting or seventy days prior to
the date of payment of such dividend, as the case may be. When any
record date is fixed for any determination of shareholders such determination of
shareholders shall be made as of the close of business on the record
date. When a determination of shareholders entitled to vote at any
meeting of shareholders has been made as provided in this Section, such
determination shall apply to any adjournment thereof. (As amended
4/30/80, 8/3/82 and 4/29/91.)
Section
2.06. Voting List.
The officer or agent having
charge of the stock transfer books for shares of the Corporation shall make, at
least ten days before each meeting of shareholders, a complete list of the
shareholders entitled to vote at such meeting or any adjournment thereof,
arranged in alphabetical order, with the address of and the number of shares
held by each, which list, for a period of ten days prior to such meeting shall
be kept on file at the registered office of the Corporation and shall be subject
to inspection by any shareholder at any time during usual business
hours. Such list shall also be produced and kept open at the time and
place of the meeting and shall be subject to the inspection of any shareholder
during the whole time of the meeting. The original stock transfer
books shall be prima facie evidence as to who are the shareholders entitled to
examine such list or transfer books or to vote at any meeting of
shareholders. Failure to comply with the requirements of this Section
shall not affect the validity of any action taken at such
meeting. (As amended 4/29/91.)
Section
2.07. Quorum of Shareholders.
Except as otherwise
expressly provided by the Articles of Incorporation or these By-laws, a majority
of the outstanding common shares entitled to vote, represented in person or by
proxy, shall constitute a quorum at any meeting of shareholders.
Section
2.08. Adjourned Meetings.
Any meeting of
shareholders may be adjourned from time to time and to any place, without
further notice, by the chairman of the meeting or by the affirmative vote of the
holders of a majority of the outstanding common shares entitled to vote and
represented at the meeting, even if less than a quorum. At any
adjourned meeting at which a quorum shall be present, any business may be
transacted which might have been transacted at the meeting as originally
notified. (As amended 4/29/91.)
Section
2.09. Vote Required for Action.
The vote required
for the adoption of any motion or resolution or the taking of any action at any
meeting of shareholders shall be as provided in the Articles of
Incorporation. However, action may be taken on the following
procedural matters by the affirmative vote of the holders of a majority of the
outstanding common shares entitled to vote and represented at the meeting, even
if less than a quorum: election or appointment of a Chairman or
temporary Secretary of the meeting (if necessary), or adoption of any motion to
adjourn or recess the meeting or any proper amendment of any such
motion. Whenever the minutes of any meeting of shareholders shall
state that any motion or resolution was adopted or that any action was taken at
such meeting of shareholders, such minutes shall be prima facie evidence that
such motion or resolution was duly adopted or that such action was duly taken by
the required vote, and such minutes need not state the number of shares voted
for and against such motion, resolution, or action.
Section
2.10. Proxies.
At all meetings of shareholders, a
shareholder entitled to vote may vote either in person or by proxy executed in
writing by the shareholder or by his duly authorized attorney in
fact. Each such proxy shall be filed with the Secretary of the
Corporation or the person acting as Secretary of the meeting, before or during
the meeting. No proxy shall be valid after eleven months from the
date of its execution, unless otherwise provided in the proxy.
Section
2.11. Shareholders' Voting Rights.
Each outstanding
share entitled to vote shall be entitled to one vote on each matter submitted to
a vote at a meeting of shareholders, except as otherwise provided in the
Articles of Incorporation. Voting rights for the election of
Directors shall be as provided in Section 3.02 and in the Articles of
Incorporation. (As amended 2/12/76.)
Section
2.12. Voting of Shares by Certain Holders.
Shares
standing in the name of another corporation, domestic or foreign, may be voted
by such officer, agent, or proxy as the By-laws of such corporation may
prescribe, or, in the absence of such provision, as the Board of Directors of
such corporation may determine.
Shares
standing in the name of a receiver may be voted by such receiver, and shares
held by or under the control of a receiver may be voted by such receiver without
the transfer thereof into his name if authority to do so be contained in an
appropriate order of the court by which such receiver was
appointed.
A
shareholder whose shares are pledged shall be entitled to vote such shares until
the shares have been transferred into the name of the pledgee, and thereafter
the pledgee shall be entitled to vote the shares so transferred.
Treasury
shares shall not be voted at any meeting or counted in determining the total
number of outstanding shares at any given time.
Section
2.13. Organization.
The Chairman of the Board of
Directors or the Lead Director or the President or a Vice-President, as provided
in these By-laws, shall preside at each meeting of shareholders; but if the
Chairman of the Board of Directors, the Lead Director, the President, and each
Vice-President shall be absent or refuse to act, the shareholders may elect or
appoint a Chairman to preside at the meeting. The Secretary or an
Assistant Secretary, as provided in these By-laws, shall act as Secretary of
each meeting of shareholders; but if the Secretary and each Assistant Secretary
shall be absent or refuse to act, the shareholders may elect or appoint a
temporary Secretary to act as Secretary of the meeting. (As amended 4/23/64,
8/1/79 and 5/3/05.)
Section
2.14. Waiver of Notice by Shareholders.
Whenever
any notice whatsoever is required to be given to any shareholder of the
Corporation under any provision of law or the Articles of Incorporation or these
By-laws, a waiver thereof in writing signed by the person or persons entitled to
such notice, whether signed before or after the time of the meeting or event of
which notice is required, shall be deemed equivalent to the giving of such
notice. Neither the business to be conducted at, nor the purpose of,
any annual or special meeting of shareholders need be specified in any waiver of
notice of such meeting. The attendance of any shareholder, in person
or by proxy, at any meeting of shareholders shall constitute a waiver by such
shareholder of any notice of such meeting to which such shareholder would
otherwise be entitled, and shall constitute consent by such shareholder to the
place, day, and hour of such meeting and all business which may be conducted at
such meeting, unless such shareholder attends such meeting and objects at such
meeting to any business conducted because the meeting is not lawfully
called or convened. (As amended 4/29/91.)
Section
2.15. Postponement of Shareholders' Meetings.
Any
meeting of the shareholders may be postponed prior to the record date by the
Board of Directors or by the Chairman. Written or printed notice of
the postponement shall be delivered not less than 10 days nor more than 60 days
before the date set for the meeting, either personally or by mail to each
shareholder of record entitled to vote. If mailed, such notice shall
be deemed to be delivered when deposited in the United States mail, addressed to
the shareholder at his or her address as it appears on the stock transfer books
of the Corporation, with postage thereon prepaid. (As adopted
2/11/91.)
Section
2.16. Notice of Shareholder Business and
Nominations.
|
(a)
|
Annual Meeting of
Shareholders.
|
(1) Nominations
of persons for election to the Board of Directors of the Corporation and the
proposal of business to be considered by the shareholders may be made at an
annual meeting of shareholders (i) pursuant to the Corporation's notice of
meeting, (ii) by or at the direction of the Board of Directors, or (iii) by any
shareholder of the Corporation who was a shareholder of record at the time of
giving of notice provided for in this By-law, who is entitled to vote at the
meeting and who complies with the notice procedures set forth in this
By-law.
(2) For
nominations or other business to be properly brought before an annual meeting by
a shareholder pursuant to Subsection 2.16(a)(1)(iii), the shareholder must have
given timely notice thereof in writing to the Secretary of the
Corporation. To be timely, a shareholder's notice shall be delivered
to the Secretary at the principal executive offices of the Corporation not less
than sixty days nor more than ninety days prior to the first anniversary of the
preceding year's annual meeting of shareholders; provided, however, that, if the
date of the annual meeting is advanced by more than thirty days or delayed by
more than sixty days from such anniversary date, notice by the shareholder, to
be timely, must be so delivered not earlier than ninety days prior to such
annual meeting and not later than the close of business on the later of the
sixtieth day prior to such annual meeting or the tenth day following the date on
which public announcement of the date of such meeting is first
made. Such shareholder's notice shall set forth:
(i) as
to each person whom the shareholder proposes to nominate for election or
re-election as a Director, (A) all information relating to such person that is
required to be disclosed in solicitations of proxies for election of Directors,
or is otherwise required, in each case pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended (the "Exchange Act") (including such
person's written consent to being named in the proxy statement as a nominee and
to serving as a Director if elected), and (B) a statement whether such person,
if elected, intends to tender, promptly following such person's election or
re-election and in accordance with Section 3.02 of these By-laws and the
Corporation's Corporate Governance Guidelines, an irrevocable resignation that
is effective ninety (90) days after the date of the certification of the
election results upon such person's failure to receive the required vote for
re-election at any future meeting at which such person would face re-election;
and (As amended 5/08/07 and 11/7/08.)
(ii) as
to any other business that the shareholder proposes to bring before the meeting,
a brief description of the business desired to be brought before the meeting,
the reasons for conducting such business at the meeting, and any material
interest of such shareholder in such business and the beneficial owner, if any,
on whose behalf the proposal is made; and (iii) as to the shareholder giving the
notice and the beneficial owner, if any, on whose behalf the nomination or
proposal is made, the name and address of such shareholder and of such
beneficial owner as they appear on the Corporation's books, and the class and
number of shares of the Corporation which are owned beneficially and of record
by such shareholder and such beneficial owner.
(3) Notwithstanding
anything in the second sentence of Subsection 2.16(a)(2) to the contrary, if the
number of Directors to be elected to the Board of Directors of the Corporation
is increased and there is no public announcement by the Corporation naming all
the nominees for Director or specifying the size of the increased Board of
Directors at least seventy days prior to the first anniversary of the preceding
year's annual meeting of shareholders, a shareholder's notice required by this
By-law shall also be considered timely, but only with respect to nominees for
any new positions created by such increase, if it is delivered to the Secretary
at the principal executive offices of the Corporation not later than the close
of business on the tenth day following the date on which such public
announcement is first made by the Corporation.
(b)
Special Meetings of
Shareholders.
Nominations of persons for election to the Board
of Directors may be made at a special meeting of shareholders at which Directors
are to be elected pursuant to the Corporation's notice of meeting (1) by or at
the direction of the Board of Directors or (2) by any shareholder of the
Corporation who was a shareholder of record at the time of giving of notice
provided for in this By-law, who is entitled to vote at the meeting, and who
complies with the notice procedures set forth in this
By-law. Nominations by shareholders of persons for election to the
Board of Directors may be made at such a special meeting of shareholders if the
shareholder's notice required by Subsection 2.16(a)(2) is delivered to the
Secretary at the principal executive offices of the Corporation no earlier than
ninety days prior to such special meeting and not later than the close of
business on the later of the sixtieth day prior to such special meeting or the
tenth day following the date on which public announcement is first made of the
date of the special meeting and of the nominees proposed by the Board of
Directors to be elected at such meeting.
(c)
Appointment of
Inspectors.
The Chairman shall appoint one or more inspectors
to act at a meeting of Shareholders and make a written report of the inspectors'
determinations. Each inspector shall sign an oath faithfully to
execute the duties of inspector with strict impartiality and according to the
best of the inspector's ability. The inspector or inspectors
shall: (1) ascertain the number of shares outstanding and the voting
power of each, (2) determine the shares represented at the meeting, (3)
determine the validity of proxies and ballots, (4) count all votes, and (5)
determine the results. (As adopted 2/12/03.)
(d)
General.
(1) Only
persons who are nominated in accordance with the procedures set forth in this
By-law shall be eligible to serve as Directors, and only such business shall be
conducted at a meeting of shareholders as shall have been brought before the
meeting in accordance with the procedures set forth in these
By-laws. Except as otherwise provided by law, the Articles of
Incorporation, or the By-laws of the Corporation, the Chairman of the meeting
shall have the power and duty to determine whether a nomination or any business
proposed to be brought before the meeting was made in accordance with the
procedures set forth in these By-laws and, if any proposed nomination or
business is not in compliance with these By-laws, to declare that such defective
proposal or nomination shall be disregarded. (As adopted
2/12/03).
(2) The
Chairman shall determine the order of business for the meeting
and shall have the authority to establish rules for the conduct of
the meeting. Such rules and the conduct of any meeting of
shareholders shall be fair to the shareholders. When elections are
conducted at the meeting, the Chairman shall announce the meeting when the polls
close for each matter upon which a vote is taken; if no such announcement is
made, the polls will be deemed to have closed at the final adjournment of the
meeting. No ballots, proxies, votes or revocations or changes to any
ballots, proxies or votes will be accepted after the polls have
closed. (As adopted 2/12/03.)
(3) For
purposes of this By-law, "public announcement" means disclosure in a press
release reported by the Dow Jones News Service, Associated Press, or comparable
national news service or in a document publicly filed by the Corporation with
the Securities and Exchange Commission pursuant to Section 13, 14, or 15(d) of
the Exchange Act.
(4) Notwithstanding
the foregoing provisions of this By-law, a shareholder shall also comply with
all applicable requirements of the Exchange Act and the rules and regulations
thereunder with respect to the matters set forth in this
By-law. Nothing in this By-law shall be deemed to affect any rights
of shareholders to request inclusion of proposals in the Corporation's proxy
statement pursuant to Rule 14a-8 under the Exchange Act. (As adopted
4/19/91.)
ARTICLE 3. BOARD
OF DIRECTORS
Section
3.01. General Powers.
The business and affairs of
the Corporation shall be managed by its Board of Directors. The Board
of Directors may exercise all such powers of the Corporation and may do all such
lawful acts and things as are not by law or the Articles of Incorporation or
these By-laws expressly required to be exercised or done by the
shareholders.
Section
3.02. Election of Directors.
(a) Subject
to the Articles of Incorporation, the common shareholders shall elect one class
of Directors at each annual meeting of shareholders. At each election
of Directors, each common shareholder entitled to vote shall have the right to
vote, in person or by proxy, the number of common shares owned by him and
entitled to vote, for as many persons as the number of the class to be
elected. Cumulative voting shall not be permitted. The
election of Directors may be conducted by written ballot, but need not be
conducted by written ballot unless required by a rule or motion adopted by the
shareholders. (As amended 2/12/76 and 5/08/07.)
(b) In
an Uncontested Election, a nominee for Director who receives a greater number of
votes "AGAINST" his or her election than votes "FOR" such election shall, to the
extent permitted by law, resign no later than ninety (90) days after the date of
the certification of the election results. "Uncontested Election"
shall mean any election of Directors of the Corporation other than a Contested
Election. "Contested Election" shall mean any election of Directors
of the Corporation in which (i) the Secretary of the Corporation has received a
notice that a shareholder has nominated a person for election to the Board of
Directors in compliance with the advance notice requirements for shareholder
nominees for Director set forth in Section 2.16 of these By-laws and (ii) such
nomination has not been withdrawn by such shareholder on or prior to the day
next preceding the date the Corporation first mails its notice of meeting for
its meeting of shareholders. (As amended 5/08/07.)
Section
3.03. Number, Terms, Classification, and
Qualifications.
Subject to the Articles of
Incorporation:
(a) The
number of Directors shall be twelve. (As amended 10/29/80, 1/31/83,
2/5/85, 8/5/86, 3/13/90, 5/5/92, 11/2/92, 5/11/93, 2/14/94, 5/10/94, 11/13/95,
5/14/96, 3/4/98, 7/29/98, 11/7/02, 2/12/03, 5/05/03, 11/07/03, 8/2/04, 5/3/05,
11/11/05, 11/10/06 and 11/19/09.)
(b) The
Directors shall be divided into three classes, each of which shall be as nearly
equal in number as possible. The term of office of one class shall
expire in each year. At each annual meeting of the shareholders a
number of Directors equal to the number of the class whose term expires at the
annual meeting shall be elected for a term ending when Directors are elected at
the third succeeding annual meeting. Section 5.03 of the Articles of
Incorporation shall apply if there is a failure in any one or more years to
elect one or more Directors or to elect any class of Directors. (As
amended 2/4/86.)
(c) The
number of Directors may be increased or decreased from time to time by amendment
of this Section, but no decrease shall have the effect of shortening the term of
any incumbent Director. Any new Directorships shall be assigned to
classes, and any decrease in the number of Directors shall be scheduled, in such
a manner that the three classes of Directors shall be as nearly equal in number
as possible.
(d) The
term of each Director shall begin at the time of his election. Unless
sooner removed as provided in the Articles of Incorporation or elected to fill a
vacancy with a shorter unexpired term pursuant to Section 3.04, each Director
shall serve for a term ending when Directors are elected at the third succeeding
annual meeting of shareholders.
However,
any Director may resign at any time by delivering his written resignation to the
Chairman, Lead Director, President, or Secretary of the
Corporation. The resignation shall take effect immediately upon
delivery, unless it states a later effective date. (As amended 8/1/79
and 5/3/05.)
(e) Directors
need not be residents of the State of Iowa or shareholders of the Corporation.
(As amended 4/23/64, 4/15/70, 2/12/76, 7/23/76, 1/11/77, 4/18/77, 7/28/77,
7/29/77, 2/27/78, and 2/4/86.)
Section
3.04. Vacancies in Board.
Any vacancy occurring in
the Board of Directors for any reason, and any Directorship to be filled by
reason of an increase in the number of Directors, may be filled by the
affirmative vote of a majority of the Directors then in office even if less than
a quorum (notwithstanding Sections 3.09 and 3.11). Except as
otherwise provided in Section 5.03 of the Articles of Incorporation, a Director
elected as provided in this Section shall be elected for the unexpired term of
his predecessor in office or the unexpired term of the class of Directors to
which his new Directorship is assigned. However, if a Director is
elected to fill a vacancy caused by the resignation of a predecessor whose
resignation has not yet become effective, the new Director's term shall begin
when his predecessor's resignation becomes effective. (As amended
4/23/64 and 2/12/76.)
Section
3.05. Regular Meetings.
A regular meeting of the
Board of Directors may be held without notice other than this Section, promptly
after and at the same place as each annual meeting of
shareholders. Other regular meetings of the Board of Directors may be
held at such time and at such places as shall be fixed by (or pursuant to
authority granted by) resolution or motion adopted by the Board of Directors
from time to time, without notice other than such resolution or
motion. However, unless both the time and place of a regular meeting
shall be fixed by the Board of Directors, notice of such meeting shall be given
as provided in Section 3.08.
Section
3.06. Special Meetings.
Special meetings of the
Board of Directors may be called, and the time and place thereof fixed, by the
Chairman of the Board of Directors or the Lead Director or the President or the
Secretary or by a majority of the Directors then in office. (As
amended 4/23/64, 8/1/79 and 5/3/05.)
Section
3.07. Place of Meetings.
Any regular meeting or
special meeting of the Board of Directors may be held at any place, either
within or without the State of Iowa. The place of each meeting of the
Board of Directors shall be fixed as provided in these By-laws, or by waiver or
waivers of notice fixing the place of such meeting and signed by all Directors
then in office. If no designation is made of the place of a meeting
of the Board of Directors, the place of meeting shall be the registered office
of the Corporation in the State of Iowa.
Section
3.08. Notice of Special Meetings.
Written or
printed notice stating the place, day, and hour of a special meeting of the
Board of Directors shall be delivered before the time of the meeting, either
personally or by mail or by telegram, by or at the direction of the President,
the Secretary, or the officer or persons calling the meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the United
States mail addressed to the Director at his address as it appears on the
records of the Corporation, with postage thereon prepaid. If given by
telegram, such notice shall be deemed to be delivered when the telegram is
delivered to the telegraph company, addressed to the Director at his address as
it appears on the records of the Corporation. Neither the business to
be transacted at, nor the purpose of, any meeting of the Board of Directors need
be specified in the notice of such meeting. (As amended
7/7/88.)
Section
3.09. Quorum.
Except as otherwise expressly
provided by the Articles of Incorporation or these By-laws, a majority of the
number of Directors fixed by these By-laws shall constitute a quorum at any
meeting of the Board of Directors.
Section
3.10. Adjourned Meetings.
Any meeting of the Board
of Directors may be adjourned from time to time and to any place, without
further notice, by the affirmative vote of a majority of the Directors present
at the meeting, even if less than a quorum. At any adjourned meeting
at which a quorum shall be present, any business may be conducted which might
have been transacted at the meeting as originally notified. (As
amended 4/29/91.)
Section
3.11. Vote Required for Action.
Except as otherwise
provided in these By-laws, the affirmative vote of a majority of the number of
Directors fixed by these By-laws shall be required for and shall be sufficient
for the adoption of any motion or resolution or the taking of any action at any
meeting of the Board of Directors. However, the following actions may
be taken by the affirmative vote of a majority of the Directors present at the
meeting, even if less than a quorum: election or appointment of a
Chairman or temporary Secretary of the meeting (if necessary), or adoption of
any motion to adjourn or recess the meeting or any proper amendment of any such
motion. Whenever the minutes of any meeting of the Board of Directors
shall state that any motion or resolution was adopted or that any action was
taken at such meeting of the Board of Directors, such minutes shall be prima
facie evidence that such motion or resolution was duly adopted or that such
action was duly taken by the required vote, and such minutes need not state the
number of Directors voting for and against such motion, resolution, or
action.
Section
3.12. Voting.
Each Director (including, without
limiting the generality of the foregoing, any Director who is also an officer of
the Corporation and any Director presiding at a meeting) may vote on any
question at any meeting of the Board of Directors, except as otherwise expressly
provided in these By-laws. (As amended 4/23/64.)
Section
3.13. Organization.
The Chairman of the Board of
Directors or the Lead Director or the President or a Vice-President, as provided
in these By-laws, shall preside at each meeting of the Board of Directors; but
if the Chairman of the Board of Directors, the Lead Director, the President, and
each Vice-President shall be absent or refuse to act, the Board of Directors may
elect or appoint a Chairman to preside at the meeting. The Secretary
or an Assistant Secretary, as provided in these By-laws, shall act as Secretary
of each meeting of the Board of Directors; but if the Secretary and each
Assistant Secretary shall be absent or refuse to act, the Board of Directors may
elect or appoint a temporary Secretary to act as Secretary of the
meeting. (As amended 4/23/64, 8/1/79 and 5/3/05.)
Section
3.14. Rules and Order of Business.
The Board of
Directors may adopt such rules and regulations, not inconsistent with applicable
law or the Articles of Incorporation or these By-laws, as the Board of Directors
deems advisable for the conduct of its meetings. Except as otherwise
expressly required by law or the Articles of Incorporation or these By-laws or
such rules or regulations, meetings of the Board of Directors shall be conducted
in accordance with Robert's Rules of Order, Revised (as further revised from
time to time). Unless otherwise determined by the Board of Directors,
the order of business at the first meeting of the Board of Directors held after
each annual meeting of shareholders, and at other meetings of the Board of
Directors to the extent applicable, shall be as follows:
|
(1)
|
Roll
call or other determination of attendance and
quorum.
|
|
(2)
|
Proof
of notice of meeting.
|
|
(3)
|
Reading
and action upon minutes of preceding meeting and any other unapproved
minutes.
|
|
(5)
|
Reports
of other officers and committees.
|
|
(6)
|
Election
of officers.
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Failure
to comply with the requirements of this Section shall not affect the validity of
any action taken at any meeting unless (a) specific and timely objection is made
at the meeting and (b) the person complaining thereto sustains direct and
material damage by reason of such failure.
Section
3.15. Presumption of Assent.
A Director of the
Corporation who is present at a meeting of the Board of Directors or a committee
thereof at which action on any corporate matter is taken, shall be presumed to
have assented to the action taken unless his dissent shall be entered in the
minutes of the meeting or unless he shall file his written dissent to such
action with the person acting as the Secretary of the meeting before the
adjournment thereof or shall forward such dissent by registered or certified
mail to the Secretary of the Corporation immediately after the adjournment of
the meeting. Such right to dissent shall not apply to a Director who
voted in favor of such action.
Section
3.16. Waiver of Notice by Directors.
Whenever any
notice whatsoever is required to be given to any Director of the Corporation
under any provision of law or the Articles of Incorporation or these By-laws, a
waiver thereof in writing signed by the Director or Directors entitled to such
notice, whether signed before or after the time of the meeting or event of which
notice is required, shall be deemed equivalent to the giving of such
notice. Neither the business to be transacted at, nor the purpose of,
any meeting of the Board of Directors need be specified in any waiver of notice
of such meeting. The attendance of any Director at any meeting of the
Board of Directors shall constitute a waiver by such Director of any notice of
such meeting to which such Director would otherwise be entitled, and shall
constitute consent by such Director to the place, day, and hour of such meeting
and all business which may be conducted at such meeting, unless such Director
attends such meeting and objects at such meeting to any business conducted
because the meeting is not lawfully called or convened. (As amended
4/29/91.)
Section
3.17. Informal Action by Directors.
Any action
required by law or the Articles of Incorporation or these By-laws to be taken by
vote of or at a meeting of the Board of Directors, or any action which may or
could be taken at a meeting of the Board of Directors (or of a committee of
Directors), may be taken without a meeting if a consent in writing setting forth
the action so taken shall be signed by all of the Directors then in office (or
all of the members of such committee, as the case may be). Such
consent shall have the same force and effect as unanimous vote. The
signing by each such Director (or by each member of such committee) of any one
of several duplicate originals or copies of the instrument evidencing such
consent shall be sufficient. The written instrument or instruments
evidencing such consent shall be filed with the Secretary, and shall be kept by
the Secretary as part of the minutes of the Corporation. Such action
shall be deemed taken on the date of such written instrument or instruments as
stated therein, or on the date of such filing with the Secretary, whichever of
such two dates occurs first. (As amended 4/23/64.)
Section
3.18. Committees.
The Board of Directors, by
resolution adopted by the affirmative vote of a majority of the number of
Directors fixed by Section 3.03, may designate one or more committees
(including, without limiting the generality of the foregoing, an Executive
Committee). Each committee shall consist of two or more Directors
elected or appointed by the Board of Directors. To the extent
provided in such resolution as initially adopted and as thereafter supplemented
or amended by further resolution adopted by a like vote, any such committee
shall have and may exercise, when the Board of Directors is not in session, all
the authority and powers of the Board of Directors. However, no
committee shall have or exercise any authority prohibited by law.
No member
of any committee shall continue to be a member thereof after he ceases to be a
Director of the Corporation.
Unless
otherwise ordered by the Board of Directors, the affirmative vote or consent in
writing of all members of a committee shall be required for the adoption of any
motion or resolution or the taking of any action by any such committee, except
that an alternate member may take the place of any absent member to the extent
hereinafter provided.
The Board
of Directors may elect or appoint one or more Directors as alternate members of
any such committee. Any such alternate member may take the place of
any absent member, upon request by the Chairman of the Board of Directors or the
Lead Director or the President or the Chairman of such committee. The
vote or consent in writing of such alternate member in the absence of such
member shall have the same effect as the vote or consent in writing of such
member. (As amended 8/1/79 and 5/3/05.)
The Board
of Directors may at any time increase or decrease the number of members of any
committee, fill vacancies therein, remove any member thereof, adopt rules and
regulations therefor, or change the functions or terminate the existence
thereof. The designation of any committee and the delegation thereto
of authority shall not operate to relieve the Board of Directors or any Director
of any responsibility imposed by law. (As amended
4/23/64.)
Section
3.19. Compensation.
The Board of Directors may fix
or provide for reasonable compensation of any or all Directors for services
rendered to the Corporation as Directors, including, without limiting
the generality of the foregoing, payment of expenses of attendance at
meetings of the Board of Directors or committees, payment of a fixed sum for
attendance at each meeting of the Board of Directors or a committee, salaries,
bonuses, pensions, pension plans, pension trusts, profit-sharing plans, stock
bonus plans, stock option plans (subject to approval of the shareholders if
required by law), and other incentive, insurance, and welfare plans, whether or
not on account of prior services rendered to the Corporation. No such
compensation shall preclude any Director from serving the Corporation in any
other capacity and receiving compensation therefor. (As amended
2/11/04.)
ARTICLE
4. OFFICERS
Section
4.01. Number and Designation.
The officers of the
Corporation shall be a Chairman of the Board of Directors, a Lead Director of
the Board of Directors, a Chief Executive Officer, a President, one or more
Vice-Presidents, a Secretary, a Treasurer, one or more Assistant Secretaries,
one or more Assistant Treasurers, and such other officers as the Board of
Directors deems advisable. (As amended 4/23/64, 8/1/79, 2/11/04 and
5/3/05.)
Section
4.02. Election or Appointment of Officers.
At the
first meeting of the Board of Directors held after each annual meeting of
shareholders, the Board of Directors shall elect the officers specifically
referred to in Section 4.01, and shall elect or appoint such other officers and
agents as the Board deems advisable. If in any year the election of
officers does not take place at such meeting, such election shall be held as
soon thereafter as may be convenient. In addition, the Board of
Directors may from time to time elect, appoint, or authorize any officer to
appoint such other officers and agents as the Board deems
advisable. Any election may be conducted by ballot, but need not be
conducted by ballot unless required by a rule, regulation, or motion adopted by
the Board of Directors. (As amended 3/3/80 and 2/11/04.)
Section
4.03. Tenure and Qualifications.
Each officer,
unless sooner removed as provided in Section 4.04, shall hold office until his
successor shall be elected or appointed and shall qualify. However,
any officer may resign at any time by filing his written resignation with the
President or Secretary of the Corporation; and such resignation shall take
effect immediately upon such filing, unless a later effective date is stated
therein. Officers need not be residents of the State of Iowa or
Directors or shareholders of the Corporation. Any two or more offices
may be held by the same person.
Section
4.04. Removal.
Any officer or agent of the
Corporation may be removed by the Board of Directors whenever in its judgment
the best interests of the Corporation will be served thereby, but such removal
shall be without prejudice to the contract rights, if any, of the person so
removed. Election or appointment of an officer or agent shall not of
itself create contract rights.
Section
4.05. Vacancies.
Any vacancy occurring in any
office for any reason may be filled by the Board of Directors.
Section
4.06. Duties and Powers of Officers.
Except as
otherwise expressly provided by law or the Articles of Incorporation or these
By-laws, the duties and powers of all officers and agents of the Corporation
shall be determined and defined from time to time by the Board of
Directors. Unless otherwise determined by the Board of Directors, the
officers referred to in the following Sections shall have the duties and powers
set forth in the following Sections, in addition to all duties and powers of
such officers prescribed by law or by the Articles of Incorporation or other
provisions of these By-laws. However, the Board of Directors may from
time to time alter, add to, limit, transfer to another officer or agent, or
abolish any or all of the duties and powers of any officer or agent of the
Corporation (including, without limiting the generality of the foregoing, the
duties and powers set forth in the following Sections and in other provisions of
these By-laws). Any person who holds two or more offices at the same
time may perform or exercise any or all of the duties and powers of either or
both of such offices in either or both of such capacities.
Section
4.07. Chairman of the Board of Directors; Lead Director; Chief
Executive Officer; President.
(a) The
Chairman of the Board of Directors shall preside at all meetings of shareholders
and of the Board of Directors. He shall be responsible for making
recommendations concerning Board policies and committees, shall maintain Board
liaison with the Chief Executive Officer and the President, and, when required,
because of the inability of the Chief Executive Officer to act or otherwise,
shall have the same powers as the Chief Executive Officer on behalf of the
Corporation. He may from time to time, unless otherwise ordered by
the Board, authorize or direct the Lead Director, Chief Executive Officer or
President to perform any of the duties or exercise any of the powers of the
Chairman. (As amended 10/27/77, 10/30/84, 2/15/88, 7/29/91, 2/12/03
and 5/3/05.)
(b) The
Lead Director shall preside at meetings of the shareholders or of the Board in
the absence of the Chairman. He shall also perform such other duties
as the Chairman may authorize or direct. (As amended 7/29/91 and
5/3/05.)
(c) The
Chief Executive Officer shall be the principal executive officer of the
Corporation. Subject only to the Board of Directors, he shall be in
charge of the business of the Corporation; he shall see that all Corporation
policies and all orders and resolutions of the Board are carried into effect
except in those instances in which that responsibility is specifically assigned
to some other person by the Board of Directors; and, in general, he shall
discharge all duties incident to the office of the chief executive officer of
the Corporation and such other duties as may be prescribed by the Board from
time to time. In the absence of the Chairman and Lead Director, the
Chief Executive Officer shall preside at meetings of shareholders and of the
Board. (As amended 2/12/03 and 5/3/05.)
(d) The
President shall be the principal operating officer of the Corporation and,
subject only to the Board of Directors and to the Chief Executive Officer, he
shall have the general authority over and general management and control of the
property, business and affairs of the Corporation. In general, he
shall discharge all duties incident to the office of the principal operating
officer of the Corporation and such other duties as may be prescribed by the
Board of Directors and the Chief Executive Officer from time to
time. In the absence of the Chairman, Lead Director, and Chief
Executive Officer, the President shall preside at all meetings of shareholders
and Board of Directors. In the absence of the Chairman and the Chief
Executive Officer or in the event of their disability, or inability to act, or
to continue to act, the President shall perform the duties of the Chief
Executive Officer, and when so acting, shall have all of the powers of and be
subject to all of the restrictions upon the office of the Chief Executive
Officer. Except in those instances in which the authority to execute
is expressly delegated to another officer or agent of the Corporation or a
different mode of execution is expressly prescribed by the Board of Directors or
these By-laws, he may employ, appoint and discharge such employees, agents,
attorneys and accountants (except the certified public accountants appointed by
the Audit Committee of the Board as the independent auditor for the Corporation)
for the Corporation as he deems necessary or advisable, and shall prescribe
their authority, duties, powers, and compensation, including, if appropriate,
the authority to perform some or all of the duties or exercise some or all of
the powers of the President; and may make and enter into on behalf of the
Corporation all deeds, conveyances, mortgages, leases, contracts, agreements,
bonds, reports, releases, and other documents or instruments which may in his
judgment be necessary or advisable in the ordinary course of the Corporation's
business or which shall be authorized by the Board. (As amended
7/29/91, 2/12/03, 2/11/04 and 5/3/05.)
Section
4.08. Vice-Presidents.
Two or more Vice Presidents,
one or more of whom may also be designated as Executive Vice President or Senior
Vice President, each of whom shall have such duties and powers as may be
prescribed from time to time by the President or the Board of
Directors. (As amended 4/23/64, 10/27/77 and 11/10/00.)
Section
4.09. Secretary.
The Secretary:
(a) shall,
when present, act as Secretary of each meeting of the shareholders and of the
Board of Directors;
(b) shall
keep as permanent records the minutes of the meetings of the shareholders and
the Board of Directors, a record of all actions taken by the shareholders and
the Board of Directors without a meeting, and a record of all actions taken by a
committee of the Board of Directors in place of the Board of Directors on behalf
of the Corporation in one or more books provided for that purpose; (As amended
2/12/03.)
(c) shall
see that all notices are duly given and that lists of shareholders are made and
filed as required by law or the Articles of Incorporation or these
By-laws;
(d) shall
be custodian of and authenticate the corporate records of the Corporation as
required by the Iowa Business Corporation Act and the seal of the Corporation
and shall, when duly authorized, see that the seal is affixed to any instrument
requiring it; (As amended 2/12/03.)
(e) shall
keep a record of the Directors, giving the names and business addresses of all
Directors; and (As amended 4/23/64, 2/19/79 and 2/12/03.)
(f) shall
have all the usual duties and powers of the Secretary of a corporation and such
duties and powers as may be prescribed from time to time by the Chief Executive
Officer, the President or the Board of Directors. (As amended 2/19/79
and 2/12/03.)
Section
4.10. Treasurer.
The Treasurer:
(a) shall
have charge and custody of and be responsible for all funds, securities, and
evidences of indebtedness belonging to the Corporation;
(b) shall
receive and give receipts for moneys due and payable to the Corporation from any
source whatever;
(c) shall
see that all such moneys are deposited in the name of and to the credit of the
Corporation in such depositories as shall be designated by or pursuant to
authority granted by the Board of Directors;
(d) shall
cause the funds of the Corporation to be disbursed when and as duly authorized
to do so;
(e) shall
see that correct and complete books of account and financial statements are kept
and prepared in accordance with generally accepted accounting principles except
to the extent such duties are assigned by the President to other officers or
employees of the Corporation; (As amended 2/13/77.)
(f) shall
have all the usual duties and powers of the Treasurer of a corporation and such
duties and powers as may be prescribed from time to time by the President or the
Board of Directors; (As amended 2/13/77.)
(g) shall
keep at the registered office or principal place of business of the Corporation
a record of its shareholders (which shall be part of the stock transfer books of
the Corporation), giving the names and addresses of all shareholders and the
number and class of the shares held by each; and (As amended
2/19/79.)
(h) shall
have charge of the stock transfer books of the Corporation, and shall record the
issuance and transfer of shares, except to the extent that such duties shall be
delegated by the Board of Directors to a transfer agent or
registrar. (As amended 2/19/79.)
Section
4.11. Assistant Secretaries.
In the absence of the
Secretary or in the event of his death or inability or refusal to act, the
Assistant Secretary (or, if there shall be more than one, the Assistant
Secretaries in the order designated by the Board of Directors from time to time,
or, in the absence of any such designation, in the order in which their names
shall appear in the minutes showing their election) shall perform the duties and
exercise the powers of the Secretary. Each Assistant Secretary shall
also have such duties and powers as may be prescribed from time to time by the
Secretary or the President or the Board of Directors. (As amended
4/23/64.)
Section
4.12. Assistant Treasurers.
In the absence of the
Treasurer or in the event of his death or inability or refusal to act, the
Assistant Treasurer (or, if there shall be more than one, the Assistant
Treasurers in the order designated by the Board of Directors from time to time,
or, in the absence of any such designation, in the order in which their names
shall appear in the minutes showing their election) shall perform the duties and
exercise the powers of the Treasurer. Each Assistant Treasurer shall
also have such duties and powers as may be prescribed from time to time by the
Treasurer or the President or the Board of Directors. (As amended
4/23/64.)
Section
4.13. Compensation.
The Board of Directors may fix
or provide for, or may authorize any officer to fix or provide for, reasonable
compensation of any or all of the officers, except the Chief Executive Officer,
and agents of the Corporation, including, without limiting the generality of the
foregoing, salaries, bonuses, payment of expenses, pensions, pension plans,
pension trusts, profit-sharing plans, stock bonus plans, stock option plans
(subject to approval of the shareholders if required by law), and other
incentive, insurance, and welfare plans, whether or not on account of prior
services rendered to the Corporation. The compensation of the Chief
Executive Officer shall be set by the Human Resources and Compensation Committee
in connection with the independent directors who are not members of that
Committee. (As amended 4/23/64 and 2/11/04.)
Section
4.14. Bond.
The Board of Directors may require an
officer or agent to give a bond for the faithful performance of his duties, in
such amount and with such surety or sureties as the Board of Directors deems
advisable.
ARTICLE 5. SHARES
AND CERTIFICATES
Section
5.01. Issuance of and Consideration for
Shares.
Shares and securities convertible into shares of the
Corporation may be issued for such consideration as shall be fixed from time to
time by the Board of Directors, and may be issued to such persons as may be
designated from time to time by or pursuant to authority granted by the Board of
Directors, except as otherwise required by law or the Articles of Incorporation
or these By-laws. (As amended 5/12/97.)
Section
5.02. Restrictions on Issuance of Shares and
Certificates.
No share of the Corporation shall be issued
until such share is fully paid as provided by law. (As amended
5/12/97.)
No
fractional share or certificate representing any fractional share shall be
issued unless expressly authorized by the Board of Directors. (As
amended 8/7/07.)
With
respect to certificated shares, if any, no new certificate shall be issued in
place of any certificate until the old certificate for a like number of shares
shall have been surrendered and cancelled and a new certificate requested,
except as otherwise provided in Section 5.04. (As amended
8/7/07.)
Section
5.03. Certificates Representing Shares.
(a) At
the election of the Board of Directors, ownership of shares may be evidenced by
a certificate or certificates representing the shares of the Corporation owned
by him. Certificates representing shares of the Corporation shall be
in such form as shall be determined by or pursuant to authority granted by the
Board of Directors. Each certificate shall be signed by the President
or a Vice-President and by the Secretary or an Assistant Secretary, and the
corporate seal may be affixed thereto. All certificates shall be
consecutively numbered or otherwise identified. The name and address
of the person to whom the shares represented thereby are issued, and the number
and class of shares and date of issuance, shall be entered on the stock transfer
books of the Corporation. (As amended 8/7/07.)
(b) Notwithstanding
Section 5.03(a) hereof, the Board of Directors may authorize the issuance of
some or all shares without certificates. The authorization does not
affect the shares already represented by certificates until they are surrendered
to the Corporation. At the time of issuance or transfer of shares
without certificates, the Corporation shall send the shareholders a written
statement of the information required under the Iowa Business Corporations
Act. (As amended 8/7/07.)
Section
5.04. Lost, Destroyed, Stolen, or Mutilated
Certificates.
With respect to certificated shares, if any, the
Board of Directors may authorize a new certificate to be issued in place of any
certificate alleged to have been lost, destroyed, or stolen, or which shall have
been mutilated, upon production of such evidence and upon compliance with such
conditions as the Board of Directors may prescribe. (As amended
8/7/07.)
Section
5.05. Transfer of Shares.
Shares of the Corporation
shall be transferable only on the stock transfer books of the Corporation, by
the holder of record thereof or by his duly authorized attorney or legal
representative (who shall furnish such evidence of authority to transfer as the
Corporation or its agent may reasonably require), upon compliance with the
customary procedures for transferring shares in uncertificated form or surrender
to the Corporation for cancellation of the certificate representing such shares,
duly endorsed or with a proper written assignment or power of attorney duly
executed and attached thereto, and with such proof of the authenticity of
signatures as the Corporation or its agent may reasonably
require. The Corporation shall cancel the old certificate, issue a
new certificate to the person entitled thereto, and record the transaction on
its stock transfer books. However, if the applicable law permits
shares to be transferred in a different manner, then to the extent required to
comply with such law all references in this Section to "shares" shall mean the
rights against the Corporation inherent in or arising out of such
shares. (As amended 8/7/07.)
Section
5.06. Shareholders of Record; Change of Name or
Address.
The Corporation shall be entitled to recognize the
exclusive right of a person shown on its stock transfer books as the holder of
shares to receive notices and dividends, to vote as such holder, and to have and
exercise all other rights deriving from such shares, and shall not be bound to
recognize any equitable or other claim to or interest in such shares on the part
of any other person, whether or not it shall have actual or constructive notice
thereof. Unless the context or another provision of these By-laws
clearly indicates otherwise, all references in these By-laws to "shareholders"
and "holders" shall mean the shareholders of record as shown on the stock
transfer books of the Corporation.
Each
shareholder and each Director shall promptly notify the Secretary in writing of
his correct address and any change in his name or address from time to
time. If any shareholder or Director fails to give such notice,
neither the Corporation nor any of its Directors, officers, agents, or employees
shall be liable or responsible to such shareholder or Director for any error or
loss which might have been prevented if such notice had been given. (As amended
4/23/64.)
Section
5.07. Regulations.
The Board of Directors may adopt
such rules and regulations, not inconsistent with applicable law or the Articles
of Incorporation or these By-laws, as it deems advisable concerning the
issuance, transfer, conversion, and registration of certificates, if any,
representing shares of the Corporation. (As amended
8/7/07.)
ARTICLE
6. GENERAL PROVISIONS
Section
6.01. Seal.
The corporate seal shall be circular in
form and shall have inscribed thereon the name of the Corporation and the words
"Corporate Seal" and "Iowa". The seal may be affixed by causing it or
a facsimile thereof to be impressed or reproduced or otherwise.
Section
6.02. Fiscal Year.
The fiscal year of the
Corporation shall be fixed by the Board of Directors from time to
time.
Section
6.03. Dividends.
The Board of Directors may from
time to time declare, and the Corporation may pay, dividends on the outstanding
shares in the manner and upon the terms and conditions provided by law and the
Articles of Incorporation.
Section
6.04. Execution of Documents and Instruments.
All
deeds and conveyances of real estate, mortgages of real estate, and leases of
real estate (for an initial term of five years or more) to be executed by the
Corporation shall be signed in the name of the Corporation by the Chairman of
the Board of Directors or the Lead Director or the Chief Executive Officer or
the President or a Vice-President and signed or attested by the Secretary or an
Assistant Secretary, and the corporate seal shall be affixed
thereto.
All other
documents or instruments to be executed by the Corporation (including, without
limiting the generality of the foregoing, contracts, agreements, bonds, reports,
notices, releases, promissory notes, and evidences of indebtedness; and deeds,
conveyances, mortgages, and leases other than those referred to in the preceding
sentence) shall be signed in the name of the Corporation by any one or more of
the officers of the Corporation, with or without the corporate
seal.
However,
from time to time the Board of Directors or the Chairman of the Board of
Directors or the Lead Director or the Chief Executive Officer or the President
may alter, add to, limit, transfer to another officer or agent, or abolish the
authority of any officer or officers to sign any or all documents or
instruments, or may authorize the execution of any document or instrument by any
person or persons, with or without the corporate seal, and such action may be
either general or confined to specific instances. (As amended
4/23/64, 8/1/79, 2/11/04 and 5/3/05.)
Section
6.05. Loans.
No loans shall be contracted on behalf
of the Corporation and no evidences of indebtedness shall be issued in its name
unless authorized by or pursuant to authority granted by the Board of
Directors. Such authorization may be either general or confined to
specific instances.
Section
6.06. Checks and Drafts.
All checks and drafts
issued in the name of the Corporation shall be signed by such person or persons
and in such manner as shall be authorized by or pursuant to authority granted by
the Board of Directors.
Section
6.07. Voting of Shares Owned by Corporation.
Any
shares or securities of any other corporation or company owned by this
Corporation may be voted at any meeting of shareholders or security holders of
such other corporation or company by the Chairman of the Board of Directors of
this Corporation. Whenever in the judgment of the Chairman of the
Board of Directors it shall be advisable for the Corporation to execute a proxy
or waiver of notice or to give a consent with respect to any shares or
securities of any other corporation or company owned by this Corporation, such
proxy, waiver, or consent shall be executed in the name of this Corporation, as
directed by the Chairman of the Board of Directors, without necessity of any
authorization by the Board of Directors. Any person or persons so
designated as the proxy or proxies of this Corporation shall have full right,
power, and authority to vote such shares or securities on behalf of this
Corporation. In the absence of the Chairman of the Board of Directors
or in the event of his death or inability to act, the Lead Director may perform
the duties and exercise the powers of the Chairman of the Board of Directors
under this Section. The provisions of this Section shall be subject
to any specific directions by the Board of Directors. (As amended
4/23/64, 8/1/79 and 5/3/05.)
Section
6.08. Director Conflict of Interest.
(a) A
conflict of interest transaction is a transaction with the corporation in which
a
Director
of the Corporation has a direct or indirect interest. A conflict of
interest transaction is not voidable by the Corporation solely because of the
Director's interest in the transaction if any one of the following is
true:
(1) The
material facts of the transaction and the Director's interest were disclosed or
known to the Board of Directors or a committee of the Board of Directors and the
Board of Directors or committee authorized, approved or ratified the
transaction.
(2) The
material facts of the transaction and the Director's interest were disclosed or
known to the shareholders entitled to vote and the shareholders authorized,
approved or ratified the transaction.
(3)
The
transaction was fair to the Corporation.
(b) For
purposes of these By-laws, a Director of the Corporation has an indirect
interest in a transaction if either of the following is true:
(1)
Another
entity in which the Director has a material financial interest or in which the
Director is a general partner is a party to the transaction.
(2)
Another
entity of which the Director is a director, officer or trustee is a party to the
transaction and the transaction is or should be considered by the Board of
Directors of the Corporation.
(c)
For
purposes of subsection a(1), a conflict of interest transaction is authorized,
approved or ratified if it receives the affirmative vote of a majority of the
Directors on the Board of Directors or on the committee, who have no direct or
indirect interest in the transaction, but a transaction may not be authorized,
approved or ratified under this section by a single Director. If a
majority of the Directors who have no direct or indirect interest in the
transaction vote to authorize, approve or ratify the transaction, a quorum is
present for the purpose of taking action. The presence of, or a vote
cast by, a Director with a direct or indirect interest in the transaction does
not affect the validity of any action taken under subsection (a)(1), if the
transaction is otherwise authorized, approved or ratified as provided in that
subsection.
(d)
For
purposes of subsection (a)(2), a conflict of interest is authorized, approved or
ratified if it receives the vote of a majority of the shares entitled to be
counted under this subsection. Shares owned by or voted under the
control of a Director who has a direct or indirect interest in the transaction,
and shares owned by or voted under the control of an entity described in
subsection (b)(1) shall not be counted in a vote of shareholders to determine
whether to authorize, approve or ratify a conflict of interest transaction under
subsection (a)(2). The vote of those shares, however, is counted in
determining whether the transaction is approved under other sections of these
By-laws. A majority of the shares, whether or not present, that are
entitled to be counted in a vote on the transaction under this subsection
constitutes a quorum for the purpose of taking action under this
section. (As adopted 2/12/03.)
Section
6.09. Limitation of Officers' Liability.
An officer
shall not be liable as an officer to the Corporation or its shareholders for any
decision to take or not to take action, or any failure to take any action, if
the duties of the officer are performed in compliance with the standards of
conduct for officers prescribed in the Iowa Business Corporation Act. (As
amended 2/12/03.)
Section
6.10. Indemnification.
The Corporation may
indemnify a Director or officer of the Corporation who is a party to a
proceeding against liability incurred by such Director or officer in the
proceeding to the maximum extent now or hereafter permitted by and in the manner
prescribed by the Iowa Business Corporation Act, including the advancement of
expenses. Without limiting the generality of the foregoing, the
Corporation may enter into indemnification agreements consistent with the Iowa
Business Corporation Act with each Director of the Corporation and such officers
of the Corporation as the Board of Directors deems appropriate from time to
time. (As amended 2/12/03.)
Section
6.11. Reliance on Documents.
Each Director and
officer shall, in the performance of his duties, be fully protected in relying
and acting in good faith upon the books of account or other records of the
Corporation, or reports made or financial statements presented by any officer of
the Corporation or by an independent public or certified public accountant or
firm of such accountants or by an appraiser selected with reasonable care by the
Board of Directors or by any committee thereof; and each Director and officer is
hereby expressly relieved from any liability which might otherwise exist or
arise from or in connection with any such action.
Section
6.12. Effect of Partial Invalidity.
If a court of
competent jurisdiction shall adjudge to be invalid any clause, sentence,
paragraph, section, or part of the Articles of Incorporation or these By-laws,
such judgment or decree shall not affect, impair, invalidate, or nullify the
remainder of the Articles of Incorporation or these By-laws, but the effect
thereof shall be confined to the clause, sentence, paragraph, section, or part
so adjudged to be invalid.
Section
6.13. Definitions.
Any word or term which is
defined in the Iowa Business Corporation Act shall have the same meaning
wherever used in the Articles of Incorporation or in these By-laws, unless the
context or another provision of the Articles of Incorporation or these By-laws
clearly indicates otherwise. Wherever used in the Articles of
Incorporation or in these By-laws, unless the context or another provision of
the Articles of Incorporation or these By-laws clearly indicates otherwise, the
use of the singular shall include the plural, and vice versa; and the use of any
gender shall be applicable to any other gender. Wherever used in the
Articles of Incorporation or in these By-laws, the word "written" shall mean
written, typed, printed, duplicated, or reproduced by any
process. (As amended 4/23/64.)
Section
6.14. Authority to Carry Out Resolutions and
Motions.
Each resolution or motion adopted by the shareholders
or by the Board of Directors shall be deemed to include the following provision,
unless the resolution or motion expressly negates this provision: The
officers of the Corporation are severally authorized on behalf of the
Corporation to do all acts and things which may be necessary or convenient to
carry out this resolution (motion), including, without limitation, the authority
to make, execute, seal, deliver, file, and perform all appropriate contracts,
agreements, certificates, documents, and instruments.
The
foregoing provision shall automatically be a part of the resolution or motion
even though not stated in the minutes; and any officer may state or certify that
the foregoing provision is included in the resolution or
motion. (Added entire section 8/3/82.)
ARTICLE
7. AMENDMENTS
Section
7.01. Reservation of Right to Amend.
The
Corporation expressly reserves the right from time to time to amend these
By-laws, in the manner now or hereafter permitted by the provisions of the
Articles of Incorporation and these By-laws, whether or not such amendment shall
constitute or result in a fundamental change in the purposes or structures of
the Corporation or in the rights or privileges of shareholders or others or in
any or all of the foregoing. All rights and privileges of
shareholders or others shall be subject to this reservation. Wherever
used in these By-laws with respect to the By-laws, the word "amend," "amended,"
or "amendment" includes and applies to the amendment, alteration, or repeal of
any or all provisions of the By-laws or the adoption of new
By-laws. (As amended 4/28/66.)
Section
7.02. Procedure to Amend.
Any amendment to these
By-laws may be adopted at any meeting of the Board of Directors by the
affirmative vote of a majority of the number of Directors fixed by Section
3.03. No notice of any proposed amendment to the By-laws shall be
required. (As amended 4/28/66.)
24
Exhibit
10.2
2007
EQUITY PLAN
FOR
NON-EMPLOYEE DIRECTORS OF
HNI
CORPORATION
TABLE
OF CONTENTS
|
|
Page
|
|
|
|
I.
|
PURPOSES;
EFFECT ON PRIOR PLANS
|
3
|
|
1.1
|
Purpose
|
3
|
|
1.2
|
Effect
on Prior Plans
|
3
|
|
|
|
II.
|
DEFINITIONS
|
3
|
|
|
|
III.
|
ADMINISTRATION
|
7
|
|
3.1
|
Administration
by the Board; Delegation
|
7
|
|
3.2
|
Administrative
Powers
|
7
|
|
3.3
|
Professional
Assistance; Good Faith Actions
|
7
|
|
3.4
|
Liability
and Indemnification of Board Members
|
7
|
|
|
|
IV.
|
ELIGIBILITY
|
8
|
|
|
|
V.
|
SHARES
AVAILABLE FOR AWARDS
|
8
|
|
5.1
|
Shares
Available
|
8
|
|
5.2
|
Accounting
for Awards
|
8
|
|
5.3
|
Adjustments
|
8
|
|
|
|
VI.
|
OPTIONS
|
8
|
|
6.1
|
Options
|
8
|
|
6.2
|
Exercise
Price
|
9
|
|
6.3
|
Option
Term
|
9
|
|
6.4
|
Time,
Method and Conditions of Exercise
|
9
|
|
|
|
VII.
|
STOCK
AWARDS
|
9
|
|
7.1
|
Restricted
Stock
|
9
|
|
7.2
|
Stock
Grant Awards
|
10
|
|
7.3
|
Additional
Cash Award to Offset Tax
|
10
|
|
|
|
VIII.
|
GENERAL
PROVISIONS GOVERNING AWARDS
|
10
|
|
8.1
|
Consideration
for Awards
|
10
|
|
8.2
|
Awards
Subject to Performance Measures
|
10
|
|
8.3
|
Awards
May Be Granted Separately or Together
|
10
|
|
8.4
|
Forms
of Payment under Awards
|
10
|
|
8.5
|
Separation
from Service; Vesting
|
10
|
|
8.6
|
Limits
on Transfer of Awards
|
12
|
|
8.7
|
Restrictions;
Securities Exchange Listing
|
12
|
|
|
|
IX.
|
ELECTION
TO RECEIVE FEES IN SHARES
|
13
|
|
9.1
|
Election
to Receive Fees in Shares
|
13
|
|
9.2
|
Participation
Agreement.
|
13
|
|
9.3
|
Issuance
of Shares
|
13
|
|
9.4
|
Holding
Period
|
13
|
X.
|
AMENDMENT
AND TERMINATION; CORRECTIONS
|
13
|
|
10.1
|
Amendments
to the Plan
|
13
|
|
10.2
|
Amendments
to Awards
|
14
|
|
10.3
|
Correction
of Defects, Omissions and Inconsistencies
|
14
|
|
|
|
XI.
|
GENERAL
PROVISIONS GOVERNING PLAN
|
14
|
|
11.1
|
No
Rights to Awards
|
14
|
|
11.2
|
Rights
as Stockholder
|
14
|
|
11.3
|
Governing
Law
|
14
|
|
11.4
|
Award
Agreements
|
14
|
|
11.5
|
No
Limit on Compensation Plans or Arrangements
|
14
|
|
11.6
|
No
Right to Remain a Director
|
14
|
|
11.7
|
Severability
|
15
|
|
11.8
|
No
Trust or Fund Created
|
15
|
|
11.9
|
Securities
Matters
|
15
|
|
11.10
|
No
Fractional Shares
|
15
|
|
11.11
|
Headings
|
15
|
|
11.12
|
Nontransferability
|
15
|
|
11.13
|
No
Other Agreements
|
15
|
|
11.14
|
Incapacity
|
15
|
|
11.15
|
Release
|
15
|
|
11.16
|
Notices
|
16
|
|
11.17
|
Successors
|
16
|
|
|
|
XII.
|
EFFECTIVE
DATE AND TERM OF PLAN
|
16
|
2007
EQUITY PLAN
FOR
NON-EMPLOYEE DIRECTORS OF
HNI
CORPORATION
HNI Corporation, an Iowa corporation
(the “Corporation”), first adopted the 2007 Equity Plan for Non-Employee
Directors of HNI Corporation (the “Plan”) on May 8, 2007. The Plan
was amended and restated effective May 8, 2007 to comply with Section 409A of
the Internal Revenue Code. The Corporation hereby amends and restates
the Plan, effective November 19, 2009.
I.
PURPOSES; EFFECT ON PRIOR
PLANS
1.1
Purpose
.
The purpose of
the Plan is to aid the Corporation in recruiting and retaining non-employee
directors (“Outside Directors”) capable of assuring the future success of the
Corporation through the grant of Awards of stock-based compensation and the
opportunity to receive fees in the form of stock of the
Corporation. The Corporation expects the Awards and opportunities for
stock ownership in the Corporation will provide incentives to Outside Directors
to exert their best efforts for the success of the Corporation’s business and
thereby align the interests of Outside Directors with those of the Corporation’s
stockholders.
1.2
Effect on
Prior Plans
.
From and after
the date of stockholder approval of the Plan, no awards shall be granted under
the 1997 Equity Plan for Non-Employee Directors of HNI Corporation, as amended,
but all outstanding awards previously granted under that plan shall remain
outstanding in accordance with their terms.
II.
DEFINITIONS
In addition to other terms that may be
defined elsewhere herein, wherever the following terms are used in this Plan
with initial capital letters, they shall have the meanings specified below,
unless the context clearly indicates otherwise.
|
(a)
|
“Award”
means an Option,
Restricted Stock or Stock Grant Award granted under the
Plan. The term “Award” shall also mean Shares issued to a
Participant pursuant to a Participation Agreement under Article 9 of the
Plan.
|
|
(b)
|
“Award Agreement”
means
any written agreement, contract or other instrument or document evidencing
an Award granted under the Plan. Each Award Agreement shall be
subject to the applicable terms and conditions of the Plan and any other
terms and conditions (not inconsistent with the Plan) determined by the
Board.
|
|
(c)
|
“Board”
means the Board
of Directors of the Corporation.
|
|
(d)
|
“Chairman”
means the
Chairman of the Board.
|
|
(e)
|
“Change in Control”
means:
|
(i)
the acquisition by any individual, entity or group (with the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”)) (a “Person”) of beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) of 35% or more of the combined
voting power of the then outstanding voting securities of the Corporation
entitled to vote generally in the election of directors (the “Outstanding
Corporation Voting Securities”); provided, however, that for purposes of this
subsection (i), the following acquisitions shall not constitute a Change in
Control: (I) any acquisition directly from the Corporation; (II) any
acquisition by the Corporation; (III) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by the Corporation or any
corporation controlled by the Corporation; or (IV) any acquisition by any
corporation pursuant to a transaction which complies with clauses (A), (B) and
(C) of subsection (iii) of this paragraph; or
(ii) individuals
who, as of the date hereof, constitute the Board (the “Incumbent Board”) cease
during a 12-month period for any reason to constitute a majority of the Board;
provided, however, that any individual becoming a director subsequent to the
date hereof whose election, or nomination for election by the Corporation’s
shareholders, was approved by a vote of a majority of the directors then
comprising the Incumbent Board shall be considered as though such individual
were a member of the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result of an actual or
threatened election contest with respect to the election or removal of directors
or other actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board; or
(iii) consummation
of a reorganization, merger or consolidation or sale or other disposition of all
or substantially all of the assets of the Corporation (a “Business
Combination”), in each case, unless, following such Business
Combination: (A) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the Outstanding
Corporation Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, 50% or more of, respectively, the then
outstanding shares of common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation which as a result of
such transaction owns the Corporation or all or substantially all of the
Corporation’s assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately prior to such
Business Combination of the Outstanding Corporation Voting Securities; (B) no
Person (excluding any corporation resulting from such Business Combination or
any employee benefit plan (or related trust) of the Corporation or such
corporation resulting from such Business Combination) beneficially owns,
directly or indirectly, 35% or more of the combined voting power of the then
outstanding voting securities of such corporation except to the extent that such
ownership existed prior to the Business Combination; and (C) at least a majority
of the members of the board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Board, providing for
such Business Combination, if such change in the members of the Board was not
indorsed by a majority of the members of the Incumbent Board.
|
(f)
|
“Code”
means the
Internal Revenue Code of 1986, as amended, and any regulations promulgated
thereunder.
|
|
(g)
|
“Corporation”
means HNI
Corporation, an Iowa corporation.
|
|
(h)
|
“Director”
means a
member of the Board.
|
|
(i)
|
“Disability
,
”
of a Director, means
the inability of the Director to perform his or her services as a Director
for six months.
|
|
(j)
|
“Exchange Act”
means the
Securities Exchange Act of 1934, as
amended.
|
|
(k)
|
“Fair Market Value,”
of
a Share,
means the closing
price of a Share as reported on the New York Stock Exchange on the date as
of which such value is being determined, or, if there are no reported
transactions for such date, on the next preceding date for which
transactions were reported; provided, however, if Fair Market Value for
any date cannot be so determined, Fair Market Value shall be determined by
the Board by whatever means or method as the Board, in the good faith
exercise of its discretion, shall at such time deem reasonable and within
the meaning of Code Section 409A and the regulations
thereunder.
|
|
(l)
|
“Fees,”
of an Outside
Director, means the Outside Director’s annual retainer, meeting fees and
any other amounts payable to the Outside Director by the Corporation for
services performed as an Outside Director, excluding any amounts
distributable under the Plan.
|
|
(m)
|
“Option”
means an option
granted under Article 6 of the Plan to purchase Shares. All
Options granted under the Plan shall be “non-statutory stock options,”
meaning they are not intended to satisfy the requirements set forth in
Section 422 of the Code to be “incentive stock
options.”
|
|
(n)
|
“Outside Director”
means
a member of the Board who is not an employee of the Corporation or a
Subsidiary.
|
|
(o)
|
“Participant”
means an
Outside Director who receives an Award under the Plan, including an
Outside Director who enters into a Participation Agreement pursuant to
Section 9.2 of the Plan.
|
|
(p)
|
“Participation Agreement”
means the agreement entered into by an Outside Director pursuant to
Section 9.2 of the Plan under which the Outside Director elects to receive
Fees in the form of Shares rather than
cash.
|
|
(q)
|
“Performance Measure”
means the criteria and objectives established by the Board, which
shall be satisfied or met as a condition to the exercisability, vesting or
receipt of all or a portion of an Award. Such criteria and
objectives may include, but are not limited to, the attainment by a Share
of a specified Fair Market Value for a specified period of time, earnings
per Share, return to stockholders (including dividends), return on equity,
earnings of the Corporation, revenues, market share, cash flow or cost
reduction goals or any combination of the foregoing and any other criteria
and objectives established by the Board. In the sole discretion
of the Board, the Board may amend or adjust the Performance Measures or
other terms and conditions of an outstanding Award in recognition of
unusual or nonrecurring events affecting the Corporation or its financial
statements or changes in law or accounting
principles.
|
|
(r)
|
“Plan”
means the “2007
Equity Plan for Non-Employee Directors of HNI Corporation,” as set forth
herein and as may be amended or restated from time to
time.
|
|
(s)
|
“Restricted Stock”
means
Shares subject to forfeiture restrictions established by the
Board.
|
|
(t)
|
“Restricted Stock Award”
means a grant of Restricted Stock under Section 7.1 of the
Plan.
|
|
(u)
|
“Retirement Eligible
Date,”
of a Participant, means the date on which the Participant
attains age 55
with at least ten
years of service as a Board member. The Chairman or, with
respect to the Chairman if the Chairman is a Participant, the Board, in
his, her or its discretion, may waive or reduce the ten-year service
requirement with respect to a Participant; provided if any such waiver or
reduction applies to a benefit subject to Section 409A of the Code, such
waiver or reduction is made before the Outside Director performs the
services for which the benefit is
payable.
|
|
(v)
|
“Separation from
Service,”
with respect to a Participant, has the meaning set forth
in Treasury Regulation Section 1.409A-1(h) or any subsequent
authority.
|
|
(w)
|
“Share”
means a Share of
common stock, par value of $1.00, of the Corporation or any other
securities or property as may become subject to an Award pursuant to an
adjustment made under Section 5.3 of the
Plan.
|
|
(x)
|
“Stock Grant Award”
means any right granted under Section 7.2 of the
Plan.
|
|
(y)
|
“Subsidiary”
means any
corporation, joint venture, partnership, limited liability company,
unincorporated association or other entity in which the Corporation has a
direct or indirect ownership or other equity interest and directly or
indirectly owns or controls 50 percent or more of the total combined
voting or other decision-making
power.
|
III.
ADMINISTRATION
3.1
Administration
by the Board; Delegation
.
The Plan shall be
administered by the Board, which may from time to time delegate all or any part
of its authority under the Plan to a committee or subcommittee of not less than
two Directors appointed by the Board who are “non-employee directors” within the
meaning of that term as defined in Rule 16b-3 under the Exchange
Act. To the extent of any delegation by the Board under the Plan,
references in the Plan to the Board shall also refer to the applicable committee
or subcommittee. The majority of any such committee or subcommittee
shall constitute a quorum, and the action of a majority of its members present
at any meeting at which a quorum is present, or acts unanimously approved in
writing, shall be the acts of such committee or subcommittee.
3.2
Administrative
Powers
.
The Board shall
have the power and authority to interpret the Plan and any Award or Award
Agreement entered into under the Plan, to establish, amend, waive and rescind
any rules and regulations relating to the administration of the Plan (including
without limitation, the manner in which Participants shall make elections
pursuant to Section 9.2 of the Plan and the terms of a Participation Agreement),
to determine the terms and provisions of the Award Agreements (not inconsistent
with the terms of the Plan), and to make all other determinations necessary or
advisable for the administration of the Plan. The determinations of
the Board in the administration of the Plan, as described in the Plan, shall be
final, binding and conclusive.
3.3
Professional
Assistance; Good Faith Actions
.
All expenses and
liabilities members of the Board incur in connection with the administration of
the Plan shall be borne by the Corporation. The Board may employ
attorneys, consultants, accountants, appraisers, brokers or other
persons. The Board, the Corporation and the Corporation’s officers
and Directors shall be entitled to rely upon the advice, opinions or valuations
of any such persons.
3.4
Liability
and Indemnification of Board Members
.
No member of the Board
shall be liable for any act, omission, interpretation, construction or
determination made in connection with the Plan in good faith, and the members of
the Board shall be entitled to indemnification and reimbursement by the
Corporation in respect of any claim, loss, damage or expense (including
attorneys’ fees) arising therefrom to the full extent permitted by law, except
as otherwise may be provided in the Corporation’s Articles of Incorporation,
By-laws and under any directors' and officers' liability insurance that may be
in effect from time to time.
IV.
ELIGIBILITY
Participation
in the Plan shall be limited to Outside Directors.
V. SHARES
AVAILABLE FOR AWARDS
5.1
Shares
Available
.
Subject to adjustment
as provided in Section 5.3, the total number of Shares available for all grants
of Awards under the Plan shall be 300,000 Shares. Shares to be issued
under the Plan will be authorized but unissued Shares or Shares that have been
reacquired by the Corporation and designated as treasury
shares. Shares subject to Awards that terminate, lapse or are
cancelled or forfeited shall be available again for grant under the
Plan. Shares tendered by a Participant or withheld by the Corporation
as full or partial payment to the Corporation of the purchase or exercise price
relating to an Award shall not be available for future grants under the
Plan.
5.2
Accounting
for Awards
.
For purposes of this
Article 5, if an Award entitles the holder thereof to receive or purchase
Shares, the number of Shares covered by such Award or to which such Award
relates shall be counted on the date of grant of such Award against the
aggregate number of Shares available for granting Awards. For
purposes hereof, an Award of Shares pursuant to a Participation Agreement under
Article 9 shall be deemed to be granted on the date the Shares are issued to the
Participant.
5.3
Adjustments
.
In the event any
dividend or other distribution (whether in the form of cash, Shares, other
securities or other property), recapitalization, stock split, reverse stock
split, reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase or exchange of Shares or other securities of the Corporation,
issuance of warrants or other rights to purchase Shares or other securities of
the Corporation or other similar corporate transaction or event affects the
Shares such that an adjustment is required in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made available
under the Plan, then the Board shall, in such manner as it may deem equitable,
adjust any or all of: (i) the number and type of Shares (or other
securities or other property) that thereafter may be made the subject of Awards;
(ii) the number and type of Shares (or other securities or other property)
subject to outstanding Awards; (iii) the purchase or exercise price with respect
to any Award; and (iv) the number and type of Shares (or other securities or
other property) payable under a Participation Agreement pursuant to Article 9,
provided such change is made in accordance with the requirements of Treas. Reg.
§ 1.409A-1(a)(5)(iii)(E)(4).
VI.
OPTIONS
6.1
Options
.
The Board may
grant Options with the terms and conditions set forth in this Article 6 and with
such additional terms and conditions not inconsistent with the provisions of the
Plan as the Board shall determine.
6.2
Exercise
Price
.
The purchase
price per Share purchasable under an Option shall be determined by the Board and
shall not be less than 100% of the Fair Market Value of a Share on the date of
grant of such Option.
6.3
Option
Term
.
The term of each Option
shall be fixed by the Board but shall not be longer than ten years.
6.4
Time,
Method and Conditions of Exercise
.
The Board shall
determine the time or times at which an Option may be exercised in whole or in
part, the method or methods by which, and the form or forms (including, without
limitation, cash or Shares having a Fair Market Value on the exercise date equal
to the applicable exercise price) in which, payment of the exercise price with
respect thereto may be made or deemed to have been made.
VII.
STOCK
AWARDS
7.1
Restricted
Stock
.
The Board may
grant Awards of Restricted Stock with the following terms and conditions and
with such additional terms and conditions not inconsistent with the provisions
of the Plan as the Board shall determine:
(a)
Restrictions.
Shares
of Restricted Stock shall be subject to such restrictions as the Board may
impose (including, without limitation, satisfaction of Performance Measures or a
performance period and a restriction on the right to vote a Share of Restricted
Stock or the right to receive any dividend or other right or property with
respect thereto), which restrictions may lapse separately or in combination at
such time or times, in such installments or otherwise, as the Board may deem
appropriate. The minimum vesting period of such Awards shall be one
year from the date of grant.
(b)
Forfeiture.
Subject
to Sections 8.5, upon a Participant’s Separation from Service during the
applicable restriction period, all Shares of Restricted Stock held by the
Participant at such time shall be forfeited and reacquired by the
Corporation.
(c)
Issuance and Delivery of
Shares.
Any Restricted Stock granted under the Plan shall be
issued at the time the Restricted Stock Award is granted and may be evidenced in
such manner as the Board may deem appropriate, including book-entry registration
or issuance of a stock certificate or certificates, which certificate or
certificates shall be held by the Corporation. Such certificate or
certificates shall be registered in the name of the Participant and shall bear
an appropriate legend referring to the restrictions applicable to such
Restricted Stock. Shares representing Restricted Stock no longer
subject to restrictions shall be delivered to the Participant promptly after the
applicable restrictions lapse or are waived.
(d)
Restrictions on
Dividends.
Any Award of Restricted Stock may require any or
all dividends or other distributions paid on the Shares during the period of
restriction be automatically sequestered and reinvested on an immediate or
deferred basis in additional Shares, in which case such additional Shares shall
be subject to the same restrictions as the underlying Restricted Stock or such
other restrictions as the Board may determine.
7.2
Stock
Grant Awards
.
The Board may
grant Shares without restrictions thereon. Subject to the terms of
the Plan, Stock Grant Awards may have such terms and conditions as the Board
shall determine.
7.3
Additional
Cash Award to Offset Tax
.
The Board may
provide, at or after the time of grant of a Restricted Stock Award or Stock
Grant Award, for the payment of a cash award to the Participant intended to
offset the amount of tax the Participant may incur in connection with such
Award, including, without limitation, tax on the receipt of such cash award;
provided, however, any such payment shall be made no later than by the end of
the Participant’s taxable year next following the Participant’s taxable year in
which the related taxes are remitted to the taxing authority.
VIII.
GENERAL PROVISIONS GOVERNING
AWARDS
8.1
Consideration
for Awards
.
Awards may be
granted for no cash consideration or for any cash or other consideration as may
be determined by the Board or required by applicable law.
8.2
Awards
Subject to Performance Measures
.
The Board may, in
its discretion, establish Performance Measures which shall be satisfied or met
as a condition to the grant or exercisability of an Award or portion
thereof. Subject to the terms of the Plan and any applicable Award
Agreement, the Performance Measures to be achieved during any performance
period, the length of any performance period, the amount of any Award granted,
the amount of any payment or transfer to be made pursuant to any such Award and
any other terms and conditions applicable thereto shall be determined by the
Board.
8.3
Awards
May Be Granted Separately or Together
.
Awards may, in the
discretion of the Board, be granted either alone or in addition to, in tandem
with, or in substitution for, any other Award or any award granted under any
other plan of the Corporation or any Subsidiary. Awards granted in
addition to or in tandem with other Awards or in addition to or in tandem with
awards granted under any other plan of the Corporation or any Subsidiary may be
granted either at the same time as, or at a different time from, the grant of
such other Awards or awards.
8.4
Forms of
Payment under Awards
.
Subject to the
terms of the Plan and of any applicable Award Agreement, payments or transfers
to be made by the Corporation upon the grant, exercise or payment of an Award
may be made in such form or forms as the Board shall determine (including,
without limitation, cash, Shares, other securities, other Awards or other
property, or any combination thereof), and may be made in a single payment or
transfer, in installments or on a deferred basis, in each case in accordance
with rules and procedures established by the Board. Such rules and
procedures may include, without limitation, provisions for the payment or
crediting of reasonable interest on installment or deferred
payments.
8.5
Separation
from Service; Vesting
.
All of the terms
relating to the exercise, cancellation, forfeiture or other disposition of an
Award upon a Separation from Service of a Participant shall be determined by the
Board. Such determination shall be made at the time of the grant of
such Award and shall be specified in the Award Agreement relating to the
Award. Notwithstanding the foregoing or any other provision of the
Plan to the contrary:
(a)
If
a Participant becomes an employee of the Corporation or a Subsidiary while
continuing to serve as a Director, that fact alone shall not result in a
Separation from Service or otherwise impair the rights such Director may have
under the Plan, including, without limitation, the rights such Director may have
under any Award outstanding under the Plan, but such Director shall no longer be
eligible to receive any further Awards under the Plan.
(b)
Each
Award granted under the Plan shall become fully exercisable and vested upon the
Participant’s death, Disability or the occurrence of a Change in Control,
provided such Award had not then otherwise expired and the Participant is an
Outside Director or employee of the Corporation on the date of death, Disability
or a Change in Control. In addition thereto, in the case of an Award
of an Option, such Award shall become fully exercisable and vested upon the
Participant’s Retirement Eligible Date, provided such Award had not then
otherwise expired and the Participant is an Outside Director or is employed by
the Corporation on the Retirement Eligible Date.
(c)
In
the event of hardship or other special circumstances of a Participant who holds
an Option Award that is not immediately exercisable or a Restricted Stock Award
then subject to the restrictions set forth in Section 7.1(a) or a Stock Grant
Award subject to the transfer restrictions set forth Section 8.6, the Board or
the Chairman may in its (or his or her) sole discretion take any action it (or
he or she) deems to be equitable under the circumstances or in the best
interests of the Corporation, including, without limitation, waiving or
modifying any limitation, restriction or requirement with respect to such
Award. Notwithstanding the preceding sentence, in the event the
Chairman is a Participant, for any Award granted to the Chairman, only the Board
has discretion to take action it deems to be equitable under the circumstances
or in the best interests of the Corporation, including, without limitation,
waiving or modifying any limitation, restriction or requirement with respect to
such Award.
(d)
The
Board may provide in any Award Agreement the Corporation shall have the right to
repurchase from the Participant Restricted Stock granted under Section 7.1 then
subject to the restrictions set forth in Section 7.1(a) immediately upon a
Separation from Service for any reason at a cash price per Share equal to the
cash price paid by the Participant for the Shares. In the discretion
of the Board, provision may be made that no such right of repurchase shall exist
in the event of a Separation from Service without cause or because of the
Participant’s Separation from Service on or after the Participant’s Retirement
Eligible Date, or due to death or Disability.
(e)
For
purposes of this Section 8.5, the Board shall determine whether a Participant’s
Separation from Service is due to cause, occurs on or after the Participant’s
Retirement Eligible Date or is due to death or Disability, or whether the
Participant has incurred a hardship, and any such determination shall be final,
binding and conclusive.
8.6
Limits on
Transfer of Awards
.
Except as
otherwise provided by the Board or the terms of the Plan, no Award (and no right
thereunder) shall be transferable by a Participant other than by will or by the
laws of descent and distribution. An Award of Restricted Stock shall
provide that during the period the Award is subject to restrictions pursuant to
Section 7.1(a), and any Stock Grant Award may provide that the transferability
of the Shares subject to such Award shall be prohibited or restricted in the
manner and to the extent prescribed by the Board at the time the Award is
granted. Such restrictions may include, without limitation, a right
of repurchase or first refusal in the Corporation or provisions subjecting
Restricted Stock to continuing restrictions in the hand of the
transferee. In addition, any Award may provide that all or any part
of the Shares to be issued or transferred by the Corporation upon the exercise
of an Option, or are no longer subject to forfeiture and restrictions on
transfer referred to herein, shall be subject to further restrictions upon
transfer. The Board may establish procedures as it deems appropriate
for a Participant to designate an individual, trust or other entity as
beneficiary or beneficiaries to exercise the rights of the Participant and
receive any property distributable with respect to any Award in the event of the
Participant’s death. The Board, in its discretion and subject to such
additional terms and conditions as it determines, may permit a Participant to
transfer an Option to any “family member” (as such term is defined in the
General Instructions to Form S-8 (or any successor to such Instructions or such
Form) under the Securities Act of 1933, as amended) at any time such Participant
holds such Option, provided: (a) such transfer may not be for value
(
i.e.
, the transferor
may not receive any consideration therefor) and the family member may not make
any subsequent transfer other than by will or by the laws of descent and
distribution; (b) no such transfer shall be effective unless reasonable prior
notice thereof has been delivered to the Corporation and such transfer is
thereafter effected subject to the specific authorization of, and in accordance
with any terms and conditions made applicable to by, the Board; and (c) the
transferee is subject to the same terms and conditions hereunder as the
Participant. Each Option Award (or right under such Award) shall be
exercisable during the Participant’s lifetime only by the Participant (except as
provided herein or in an Award Agreement or amendment thereto) or, if
permissible under applicable law, by the Participant’s guardian or legal
representative. No Option Award or Restricted Stock Award (or right
under any such Award) may be pledged, alienated, attached or otherwise
encumbered, and any purported pledge, alienation, attachment or encumbrance
thereof shall be void and unenforceable against the Corporation or any
Subsidiary.
8.7
Restrictions;
Securities Exchange Listing
.
All Shares or
other securities delivered under the Plan pursuant to any Award or the exercise
thereof shall be subject to such restrictions as the Board may deem advisable
under the Plan, applicable federal or state securities laws and regulatory
requirements, and the Board may cause appropriate entries to be made or legends
to be placed on the certificates for such Shares or other securities to reflect
such restrictions. If the Shares or other securities are traded on a
securities exchange, the Corporation shall not be required to deliver any Shares
or other securities covered by an Award unless and until such Shares or other
securities have been admitted for trading on such securities
exchange.
IX.
ELECTION TO RECEIVE FEES IN
SHARES
9.1
Election
to Receive Fees in Shares
.
Each Outside
Director shall be eligible to elect to receive his or her Fees in the form of
Shares rather than cash according to the following provisions of this Article
9.
9.2
Participation
Agreement
.
For each calendar
year, the Board shall specify an election period (which shall end no later than
the last day of the calendar year immediately preceding such calendar year)
during which an Outside Director may enter into an election to receive up to
100% of the Fees otherwise payable to him or her for the calendar year in the
form of Shares rather than cash
.
The election
shall be made pursuant to a Participation Agreement entered into by the Outside
Director and filed with the Secretary of the Corporation no later than the
expiration of the election period. A separate Participation Agreement
must be entered into for each calendar year. Except as the Board may
otherwise provide, the Participation Agreement in effect for a calendar year
shall be irrevocable after the expiration of the election period for the
calendar year.
9.3
Issuance
of Shares
.
The Corporation
shall issue Shares to the Outside Director for each calendar quarter during
which the Outside Director has a Participation Agreement in
effect. The Shares shall be issued on the date on which the quarterly
meeting of the Board is held. The number of Shares so issued shall be
equal to: (i) the dollar amount of the Fees the Outside Director has
elected to receive as Shares for the calendar quarter pursuant to his or her
Participation Agreement; divided by (ii) the Fair Market Value per Share on the
date on which the Outside Director would have been paid the Fees in cash but for
the Participation Agreement.
9.4
Holding
Period
.
To the extent
required to satisfy any condition for exemption available pursuant to Rule 16b-3
of the Exchange Act, Shares acquired by an Outside Director pursuant to this
Article 9 shall be held by the Outside Director for a period of at least six
months following the date of acquisition.
X.
AMENDMENT AND TERMINATION;
CORRECTIONS
10.1
Amendments
to the Plan
.
The Board may
amend, alter, suspend, discontinue or terminate the Plan; provided, however,
notwithstanding any other provision of the Plan or any Award Agreement, prior
approval of the stockholders of the Corporation shall be required for any
amendment to the Plan that:
(a)
requires
stockholder approval under the rules or regulations of the Securities and
Exchange Commission, the New York Stock Exchange, any other securities exchange
or the National Association of Securities Dealers, Inc. applicable to the
Corporation;
(b)
increases
the number of Shares authorized under the Plan as specified in Section 5.1(a) of
the Plan;
(c)
permits
the repricing of Options; or
(d)
permits
the award of Options at a price less than 100% of the Fair Market Value of a
Share on the date of grant of such Option contrary to the provisions of Sections
6.2 of the Plan.
10.2
Amendments
to Awards
.
Subject to the
provisions of the Plan, the Board may waive any conditions of or rights of the
Corporation under any outstanding Award, prospectively or
retroactively. Except as otherwise provided in the Plan, the Board
may amend, alter, suspend, discontinue or terminate any outstanding Award,
prospectively or retroactively, but no such action may adversely affect the
rights of the holder of such Award without the consent of the holder
thereof.
10.3
Correction
of Defects, Omissions and Inconsistencies
.
The Board may
correct any defect, supply any omission or reconcile any inconsistency in the
Plan or in any Award, Award Agreement or Participation Agreement in the manner
and to the extent it shall deem desirable to implement or maintain the
effectiveness of the Plan.
XI.
GENERAL PROVISIONS GOVERNING
PLAN
11.1
No Rights
to Awards
.
No Outside
Director or other person shall have any claim to be granted any Award under the
Plan, and there is no obligation for uniformity of treatment of Outside
Directors, Participants, holders or beneficiaries of Awards under the
Plan. The terms and conditions of Awards need not be the same with
respect to any Participant or with respect to different
Participants.
11.2
Rights as
Stockholder
.
No person shall
have any right as a stockholder of the Corporation with respect to any Shares or
other equity security of the Corporation which is subject to an Award hereunder
unless and until such person becomes a stockholder of record with respect to
such Shares or equity security.
11.3
Governing
Law
.
The Plan, each
Award hereunder (and the related Award Agreement), each Participation Agreement,
and all determinations made and actions taken pursuant thereto, to the extent
not otherwise governed by the Code or the laws of the United States, shall be
governed by the laws of the State of Iowa and construed in accordance therewith
without giving effect to principles of conflicts of laws.
11.4
Award
Agreements
.
No Participant
shall have rights under an Option or Restricted Stock award granted to such
Participant unless and until an Award Agreement shall have been duly executed on
behalf of the Corporation and, if requested by the Corporation, signed by the
Participant.
11.5
No Limit
on Compensation Plans or Arrangements
.
Nothing contained
in the Plan shall prevent the Corporation or any Subsidiary from adopting or
continuing in effect other or additional compensation plans or
arrangements.
11.6
No Right
to Remain a Director
.
The grant of an
Award shall not be construed as giving a Participant the right to be retained as
a Director of the Corporation, nor will it affect in any way the right of the
Corporation to terminate a Participant’s position as a Director, with or without
cause. In addition, the Corporation may at any time remove or dismiss
a Participant from his or her position as a Director free from any liability or
any claim under the Plan or any Award, unless otherwise expressly provided in
the Plan or in any Award Agreement.
11.7
Severability
.
If any provision
of the Plan or any Award is or becomes or is deemed to be invalid, illegal or
unenforceable in any jurisdiction or would disqualify the Plan or any Award
under any law deemed applicable by the Board, such provision shall be construed
or deemed amended to conform to applicable laws, or if it cannot be so construed
or deemed amended without, in the determination of the Board, materially
altering the purpose or intent of the Plan or the Award, such provision shall be
stricken as to such jurisdiction or Award, and the remainder of the Plan or any
such Award shall remain in full force and effect.
11.8
No Trust
or Fund Created
.
Neither
the Plan, any Award nor any Participation Agreement shall create or be construed
to create a trust or separate fund of any kind or a fiduciary relationship
between the Corporation or any Subsidiary and a Participant or any other
person. To the extent any person acquires a right to receive payments
from the Corporation or a Subsidiary pursuant to an Award, such right shall be
no greater than the right of any unsecured general creditor of the Corporation
or the Subsidiary.
11.9
Securities
Matters
.
The Corporation
shall not be required to deliver any Shares until the requirements of any
federal or state securities or other laws, rules or regulations (including the
rules of any securities exchange) as may be determined by the Corporation to be
applicable are satisfied.
11.10
No
Fractional Shares
.
No fractional
Shares shall be issued or delivered pursuant to the Plan or any Award, and the
Board shall determine whether cash shall be paid in lieu of any fractional Share
or whether such fractional Share or any rights thereto shall be canceled,
terminated or otherwise eliminated.
11.11
Headings
.
Headings are
given to the Articles, Sections and Subsections of the Plan solely as a
convenience to facilitate reference. Such headings shall not be
deemed in any way material or relevant to the construction or interpretation of
the Plan or any provision thereof.
11.12
Nontransferability
.
Except as set
forth in Section 8.6, no Award or other benefit payable at any time under the
Plan will be subject in any manner to alienation, sale, transfer, assignment,
pledge, levy, attachment or encumbrance of any kind.
11.13
No Other
Agreements
.
The terms and
conditions set forth herein constitute the entire understanding of the
Corporation, the Subsidiaries and the Participants with respect to the matters
addressed herein.
11.14
Incapacity
.
In the event any
Participant is unable to care for his or her affairs because of illness or
accident, any payment due may be paid to the Participant’s spouse, parent,
brother, sister, adult child or other person deemed by the Corporation to have
incurred expenses for the care of the Participant, unless a duly qualified
guardian or other legal representative has been appointed.
11.15
Release
.
Any payment of
benefits to or for the benefit of a Participant made in good faith by the
Corporation in accordance with the Corporation’s interpretation of its
obligations hereunder, shall be in full satisfaction of all claims against the
Corporation and all Subsidiaries for benefits under the Plan to the extent of
such payment.
11.16
Notices
.
Any notice
permitted or required under the Plan shall be in writing and shall be hand
delivered or sent, postage prepaid, by first class mail, or by certified or
registered mail with return receipt requested, to the Committee, if to the
Corporation, or to the address last shown on the records of the Corporation, if
to a Participant. Any such notice shall be effective as of the date
of hand delivery or mailing.
11.17
Successors
.
All obligations
of the Corporation under the Plan shall be binding upon and inure to the benefit
of any successor to the Corporation, whether the existence of such successor is
the result of a direct or indirect purchase, merger, consolidation, or
otherwise, of all or substantially all of the business and or assets of the
Corporation.
XII.
EFFECTIVE DATE AND TERM OF
PLAN
The Plan
became effective on May 8, 2007, the date it was approved by the stockholders of
the Corporation at the Corporation’s annual meeting of
stockholders. The amendment set forth herein shall become effective
on November 19, 2009.
The Plan
shall terminate at midnight on May 7, 2017, unless terminated before then by the
Board. Awards may be granted, and Participation Agreements may be
entered into, under the Plan until the Plan terminates or until all Shares
available for Awards under the Plan have been purchased or
acquired. Notwithstanding the preceding sentence, the Plan shall
remain in effect for purposes of administering outstanding Awards and
Participation Agreements as long as they are outstanding.
16
Exhibit
10.6
HNI
CORPORATION
DIRECTORS
DEFERRED COMPENSATION PLAN
DEFERRAL
ELECTION AGREEMENT
Applies
Only to Fees Earned in ________
This Deferral Election Agreement (this
"Agreement") is made by and between HNI Corporation (the "Corporation") and
_____________________________
(print name)
(the "Director")
on the date below. The Corporation has established a nonqualified
deferred compensation plan, the HNI Corporation Directors Deferred Compensation
Plan (the "Plan"), for the benefit of the Corporation's outside
Directors. The Plan permits the Director to defer a percentage of the
Director's annual retainer, including any common stock grant, meeting fees (if
any) and any other amounts payable to the Director by the Corporation for
services performed as a Director (collectively, "Fees"). The deferral
for the Plan year commencing ______________ (the "Current Election Year") is
made by entering into this Agreement with the Corporation.
The Corporation and the Director agree
as follows:
1.
Fee Reduction
Election.
The Corporation will reduce the amount of the
Director's Fees otherwise payable to the Director for services performed in the
Current Election Year and will credit these amounts to the Director's account
under the Plan according to the Director's elections in Section 4
below.
2.
Accounts.
The
Corporation will maintain two accounts under the Plan, the Cash Account and the
Stock Account. The Cash Account will be credited with interest at
prime rate plus one percentage point. The Stock Account will be held
in stock units. Each stock unit will be equal to a share of common
stock of the Corporation ("Stock") and will be credited with reinvested
dividends as if actually held in the form of Stock. The Director may
elect to have Fees that otherwise (but for this Agreement) would have been paid
to the Director in the form of cash, credited to the Stock Account and held in
the form of stock units or credited to the Cash Account. Fees
deferred under this Agreement that would otherwise be paid to the Director in
the form of Stock will automatically be credited to the Stock Account and held
in stock units.
3.
Manner of Distribution of
Accounts.
All distributions from the Cash Account will be made
in cash. All distributions from the Stock Account will be made in
Stock. The Director may elect when and how amounts credited under
this Agreement will be distributed. Distributions may be made in a
lump sum or annual installments over a period of years, elected by the
Director.
4.
Director's Election for Current Election
Year.
Please fill
in all applicable blanks (showing "0" if no amount will be deferred) and check
all applicable boxes below to complete the election.
a.
Amount Deferred
i.
Deferral
from Cash Fees
The
Director elects to defer Fees payable in cash for services performed in the
Current Election Year to be credited to the Director's Cash Account and/or Stock
Account as follows:
Cash
Account:
_____%
(Insert percent)
Stock
Account:
_____%
(Insert percent)
(together,
can be no more than 100%)
ii.
Deferral
from Stock Fees
The
Director elects to defer Fees payable in Stock (common stock grant) for services
performed in the Current Election Year to be credited to the Director's Stock
Account as follows:
Stock
Account:
_____%
(Insert percent)
b. When/How
Distributions Are Made
Distribution
from the Cash Account will be made in the form of cash. Distributions
from the Stock Account will be made in the form of Stock, which will be
delivered to the Corporation's transfer agent and placed in a direct
registration account in the Director's name unless the Director notifies the
Corporation in sufficient time to coordinate a different share delivery
method. All distributions from the Plan will be made on the 3
rd
Monday of January.
Distributions from both
the Cash Account and the Stock Account will be made as follows:
i.
Distribution
Date
:
[Select one]
|
o
|
Separation
from Service (as defined in the
Plan)
|
|
o
|
Commencement
date: Distribution from the Cash Account and/or Stock Account
will commence in _____
[Specify year in which
distributions will begin, may be no earlier than
______.]
|
ii.
Form
of Distribution
:
[Select one]
|
o
|
Substantially
equal annual installments over ___ years
[Insert number of years, not
to exceed 15.]
|
Note: You may change the
time and form of distribution of an account only under limited circumstances,
generally requiring an additional 5-year deferral of your benefit commencement
date.
The Corporation reserves the right to
amend the Plan in any manner and to terminate the Plan and, to the extent
permitted by Section 409A of the Internal Revenue Code and other applicable law,
require an immediate distribution of all accounts.
5.
The
above deferral elections are based on the assumption the Corporation will, in
_____, continue its established practice of paying 50% of director compensation
in cash and 50% in Stock. If actual _____ director
compensation varies (for example, 100% cash and 0% Stock), the Corporation
will adjust the amount deferred in Stock or cash (as the case may be) under
this Agreement so the dollar amount of the total deferral is the same as if the
Corporation paid compensation according to the 50%-50% established
practice.
6.
The
Director understands this Agreement is subject to all of the terms and
conditions of the Plan, and acknowledges the Director has either read, or been
given the opportunity to read, the Plan. In particular, the Director
understands there are some exceptions to the payment terms described
above. For example, if the Director Separates from Service for
reasons other than Retirement (as defined in the Plan), payment of the
Director's account will generally be made in a lump sum when the Director
Separates from Service, and a single lump-sum distribution will be made to the
Director in the event of a Change in Control (as defined in the
Plan).
7.
The
Director acknowledges in making the decision to defer Fees under the Plan, the
Director has not relied upon any financial or tax advice provided by the
Corporation, and the Director understands the Corporation has not received a
ruling or determination from the Internal Revenue Service as to the effect of
the deferral on the Director's income or employment tax liability.
8.
Except
as permitted by the Plan and applicable law or deemed advisable by the
Corporation in order to preserve the intended tax consequences of the Plan, this
Agreement, once made, may not be revoked. It is binding upon, and
will inure to the benefit of, the Director, the Director's beneficiaries, heirs
and personal representatives, the Corporation and its successors and
assigns.
Dated this ____ day of _______________,
_______.
Received and accepted by HNI
Corporation this______day of_________________, ______.
|
HNI
Corporation
|
|
|
|
|
|
|
|
|
|
By:
|
|
|
|
Name:
|
|
|
|
Title:
|
|
|
Exhibit
10.12
HNI
CORPORATION
EXECUTIVE
DEFERRED COMPENSATION PLAN
As
Amended and Restated Effective November 19, 2009
TABLE OF
CONTENTS
|
|
|
Page
|
|
|
|
|
I.
|
AMENDMENT
AND RESTATEMENT
|
1
|
|
1.1
|
Amendment
and Restatement.
|
1
|
|
1.2
|
Purpose
|
1
|
|
1.3
|
Application
of the Plan.
|
1
|
|
|
|
|
II.
|
DEFINITIONS
|
1
|
|
2.1
|
Definitions.
|
1
|
|
2.2
|
Gender
and Number
|
6
|
|
|
|
|
III.
|
ELIGIBILITY
AND PARTICIPATION
|
6
|
|
3.1
|
Eligibility
|
6
|
|
3.2
|
Participation
|
6
|
|
3.3
|
Missing
Persons
|
6
|
|
|
|
|
IV
.
|
ESTABLISHMENT
AND ENTRIES TO ACCOUNTS
|
6
|
|
4.1
|
Accounts
|
6
|
|
4.2
|
Deferral
Election Agreement
|
7
|
|
4.3
|
Adjustments
to Accounts
|
9
|
|
4.4
|
Commencement
and Form of Distribution of Sub-Accounts
|
9
|
|
4.5
|
Exceptions
to Payment Terms
|
13
|
|
4.6
|
Death
Benefit
|
15
|
|
4.7
|
Funding
|
15
|
|
|
|
|
V
.
|
ADMINISTRATION
|
16
|
|
5.1
|
Administration
|
16
|
|
5.2
|
Actions
of the Committee
|
16
|
|
5.3
|
Delegation
|
16
|
|
5.4
|
Expenses
|
16
|
|
5.5
|
Reports
and Records
|
16
|
|
5.6
|
Valuation
of Accounts and Account Statements
|
16
|
|
5.7
|
Indemnification
and Exculpation
|
17
|
|
|
|
|
VI.
|
BENEFICIARY
DESIGNATION
|
17
|
|
6.1
|
Designation
of Beneficiary
|
17
|
|
6.2
|
Death
of Beneficiary
|
17
|
|
6.3
|
Ineffective
Designation
|
17
|
|
|
|
|
VII.
|
WITHHOLDING
|
17
|
|
|
|
|
VIII.
|
CHANGE
IN CONTROL, AMENDMENT, AND TERMINATION
|
18
|
|
8.1
|
Change
in Control
|
18
|
|
8.2
|
Plan
Amendment and Termination
|
18
|
|
|
|
|
IX.
|
CLAIMS
PROCEDURE
|
18
|
X.
|
MISCELLANEOUS
|
19
|
|
10.1
|
Rights
as Stockholder
|
19
|
|
10.2
|
Governing
Law
|
19
|
|
10.3
|
No
Limit on Compensation Plans or Arrangements
|
19
|
|
10.4
|
No
Rights to Employment
|
19
|
|
10.5
|
Severability
|
19
|
|
10.6
|
Securities
Matters
|
20
|
|
10.7
|
No
Fractional Shares
|
20
|
|
10.8
|
Headings
|
20
|
|
10.9
|
Nontransferability
|
20
|
|
10.10
|
Unfunded
Plan
|
20
|
|
10.11
|
No
Other Agreements
|
20
|
|
10.12
|
Incapacity
|
20
|
|
10.13
|
Release
|
20
|
|
10.14
|
Notices
|
20
|
|
10.15
|
Successors
|
20
|
HNI
CORPORATION
EXECUTIVE
DEFERRED COMPENSATION PLAN
I.
AMENDMENT AND
RESTATEMENT
1.1
Amendment
and Restatement
. HNI Corporation, an Iowa corporation (the
"Corporation"), established this HNI Corporation Executive Deferred Compensation
Plan (the "Plan"), effective February 13, 1986. The Corporation has
amended and restated the Plan from time to time, most recently effective January
1, 2005. The Corporation hereby again amends and restates the Plan,
effective November 19, 2009 (the "Restatement Date"), to accomplish certain
changes to its form and operation.
1.2
Purpose
. The
purpose of the Plan is to give eligible executive members of the Corporation and
certain of its Subsidiaries the opportunity to defer the receipt of compensation
to supplement their retirement savings and to achieve their personal financial
planning goals.
1.3
Application
of the Plan
. Except as otherwise set forth herein, the terms
of the Plan, as amended and restated herein, apply to all amounts deferred under
the Plan, whether before, on, or after the Restatement Date.
II.
DEFINITIONS
2.1
Definitions
. Whenever
used in the Plan, the following terms shall have the meaning set forth below
and, when the defined meaning is intended, the term is capitalized:
(a)
“Account”
means the device
used to measure and determine the amount of benefits payable to a Participant or
Beneficiary under the Plan. The Corporation shall establish a Cash
Account and Stock Account for each Participant under the Plan, and the term
"Account," as used in the Plan, may refer to either such Account or the
aggregate of the two Accounts. In addition, the Corporation shall
establish a separate Sub-Account under each of the Participant's Cash Account
and Stock Account for each Deferral Election Agreement entered into by the
Participant pursuant to Section 4.2.
(b)
“Annual Incentive,”
of a
Participant for a Plan Year, means the incentive compensation awarded by the
Employer to a Participant in cash or Stock for services performed by the
Participant during the Plan Year, as provided in the HNI Corporation Annual
Incentive Plan, or any predecessor plan thereto.
(c)
“Base Salary,”
of a
Participant for a Plan Year, means the base salary, including all regular basic
wages before reduction for any amounts deferred on a tax-qualified or
nonqualified basis, payable in cash to the Participant for services rendered to
an Employer during the Plan Year. Base Salary shall exclude incentive
compensation, special fees or awards, allowances or any other form of premium or
incentive pay, or amounts designated by an Employer as payment toward or
reimbursement of expenses.
(d)
“Beneficiary”
means the
persons or entities designated by a Participant in writing pursuant to Article 6
of the Plan as being entitled to receive any benefit payable under the Plan by
reason of the death of a Participant, or, in the absence of such designation,
the Participant's estate (pursuant to the rules specified in Article
6).
(e)
“Board”
means the Board of
Directors of the Corporation.
(f)
“Change in Control”
means:
(i) the
acquisition by any individual, entity or group (with the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) (a "Person") of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of 35% or more of the combined
voting power of the then outstanding voting securities of the Corporation
entitled to vote generally in the election of directors (the "Outstanding
Corporation Voting Securities"); provided, however, that for purposes of this
subsection (i), the following acquisitions shall not constitute a Change in
Control: (I) any acquisition directly from the Corporation; (II) any
acquisition by the Corporation; (III) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by the Corporation or any
corporation controlled by the Corporation; or (IV) any acquisition by any
corporation pursuant to a transaction which complies with clauses (A), (B) and
(C) of subsection (iii) of this paragraph; or
(ii) individuals
who, as of the date hereof, constitute the Board (the "Incumbent Board") cease
during a 12-month period for any reason to constitute a majority of the Board;
provided, however, that any individual becoming a director subsequent to the
date hereof whose election, or nomination for election by the Corporation's
shareholders, was approved by a vote of a majority of the directors then
comprising the Incumbent Board shall be considered as though such individual
were a member of the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result of an actual or
threatened election contest with respect to the election or removal of directors
or other actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board; or
(iii) consummation
of a reorganization, merger or consolidation or sale or other disposition of all
or substantially all of the assets of the Corporation (a "Business
Combination"), in each case, unless, following such Business
Combination: (A) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the Outstanding
Corporation Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, 50% or more of, respectively, the then
outstanding shares of common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation which as a result of
such transaction owns the Corporation or all or substantially all of the
Corporation's assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately prior to such
Business Combination of the Outstanding Corporation Voting Securities; (B) no
Person (excluding any corporation resulting from such Business Combination or
any employee benefit plan (or related trust) of the Corporation or such
corporation resulting from such Business Combination) beneficially owns,
directly or indirectly, 35% or more of the combined voting power of the then
outstanding voting securities of such corporation except to the extent that such
ownership existed prior to the Business Combination; and (C) at least a majority
of the members of the board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Board, providing for
such Business Combination, if such change in the members of the Board was not
indorsed by a majority of the members of the Incumbent Board.
(g)
“Code”
means the Internal
Revenue Code of 1986, as amended from time to time, or any successor
thereto.
(h)
“Committee”
means the Human
Resources and Compensation Committee of the Board or a delegate of such
Committee.
(i)
“Compensation”
means the
remuneration paid or awarded to the Participant by an Employer as Base Salary,
Annual Incentive, LTPP Award or Supplemental Income Plan payment.
(j)
“Corporation”
means HNI
Corporation, an Iowa corporation.
(k)
“Deferral Election Agreement”
means the agreement described in Section 4.2 in which the Participant designates
the amount of his or her Compensation, if any, he or she wishes to contribute to
the Plan and acknowledges and agrees to the terms of the Plan.
(l)
“Elective Deferral”
means a
contribution to the Plan made by a Participant pursuant to a Deferral Election
Agreement the Participant enters into with the Corporation. Elective
Deferrals shall be made according to the terms of the Plan set forth in Section
4.2.
(m)
“Employer”
means the
Corporation, any Subsidiary that adopts the Plan, and any entity that continues
the Plan as a successor under Section 10.15.
(n)
“Enrollment Period”
means the
period designated by the Corporation during which a Deferral Election Agreement
may be entered into with respect to an eligible member's future Compensation as
described in Section 4.2. Generally, the Enrollment Period must end
no later than the end of the calendar year before the calendar year in which the
services giving rise to the Compensation to be deferred are
performed. As described in Section 4.2, an exception may be made to
this requirement for individuals who first become eligible to participate in the
Plan and for Elective Deferrals from Compensation considered to be
Performance-Based Compensation, as determined by the Committee or by the
Vice-President, Member and Community Relations, from time to time.
(o)
“ERISA”
means the Employee
Retirement Income Security Act of 1974, as amended from time to time, or any
successor thereto.
(p)
“Fair Market Value,”
of a
share of Stock, means the closing price of a share as reported on the New York
Stock Exchange on the date as of which such value is being determined, or, if
there shall be no reported transactions for such date, on the next preceding
date for which transactions were reported; provided, however, if Fair Market
Value for any date cannot be so determined, Fair Market Value shall be
determined by the Committee by whatever means or method as the Committee, in the
good faith exercise of its discretion, shall at such time deem reasonable and
within the meaning of Code Section 409A and the regulations
thereunder.
(q)
“LTPP Award,”
of a Participant
for a performance period, means the amount payable to the Participant in cash or
Stock for the performance period pursuant to the HNI Corporation Long-Term
Performance Plan. The performance period for an LTPP Award shall be
set forth in the HNI Corporation Long-Term Performance Plan.
(r)
“Participant”
means an
individual who satisfies the requirements of Section 3.1 and who has entered
into a Deferral Election Agreement.
(s)
“Performance-Based
Compensation,”
of a Participant for a period, means incentive
compensation of the Participant for such period where the amount of, or
entitlement to, the incentive compensation is contingent on the satisfaction of
pre-established organizational or individual performance criteria relating to a
performance period of at least 12 consecutive months. Organizational
or individual performance criteria are considered pre-established if established
in writing by not later than 90 days after the commencement of the period of
service to which the criteria relate, provided the outcome is substantially
uncertain at the time the criteria are established. Performance-based
compensation may include payment based on performance criteria not approved by
the Board or the Committee or by the stockholders of the
Corporation. Performance-based Compensation does not include any
amount or portion of any amount that will be paid either regardless of
performance or based upon a level of performance that is substantially certain
to be met at the time the criteria are established.
(t)
“Plan Year”
means the
consecutive 12-month period beginning each January 1 and ending December
31.
(u)
“Prime Rate”
means the prime interest rate published in the Wall
Street Journal or its web site as of the first business day coincident with or
immediately following the third Monday in January
.
(v)
“Qualified Domestic Relations
Order”
has the same meaning as in Section 414(p) of the Code, but without
regard to Section 414(p)(9) of the Code.
(w)
“Restatement Date”
means
November 19, 2009.
(x)
“Retirement,”
of a
Participant, means the Participant's Separation from Service on or after the
attainment of age 55
with ten years of
service with an Employer. The Chief Executive Officer of the
Corporation or, with respect to the Chief Executive Officer if the Chief
Executive Officer is a Participant, the Committee, in his, her or its
discretion, may waive or reduce the ten-year service requirement with respect to
a Participant; provided any such waiver or reduction is made before the eligible
executive member becomes a Participant or, with respect to each Deferral
Election Agreement, before the last day of the Enrollment Period for the Plan
Year for which the agreement is made.
(y)
“Separation from Service,”
of
a Participant, means the Participant's separation from service with the
Corporation and all of its affiliates, within the meaning of Section
409A(a)(2)(A)(i) of the Code and the regulations thereunder. Solely
for these purposes, a Participant will be considered to have a Separation from
Service when the Participant dies, retires, or otherwise has a termination of
employment with all affiliates. The employment relationship is
treated as continuing intact while the Participant is on military leave, sick
leave or other bona fide leave of absence (such as temporary employment by the
government) if the period of such leave does not exceed six months, or if
longer, so long as the individual's rights to re-employment with the Corporation
or any affiliate is provided either by statute or by contract. If the
period of leave exceeds six months and the individual's right to re-employment
is not provided either by statute or contract, the employment relationship is
deemed to terminate on the first date immediately following such six-month
period. Whether a termination of employment has occurred is based on
the facts and circumstances.
(z)
“Specified Employee”
means a
"key employee" (as defined in Section 416(i) of the Code without regard to
Section 416(i)(5)) of the Corporation. For purposes hereof, an
employee is a key employee if the employee meets the requirements of Section
416(1)(A)(i), (ii) or (iii) (applied in accordance with the regulations
thereunder and disregarding Section 416(i)(5)) at any time during the 12-month
period ending on December 31. If a person is a key employee as of
such date, the person is treated as a Specified Employee for the 12-month period
beginning on the first day of the fourth month following such
date.
(aa)
“Subsidiary”
means any
corporation, joint venture, partnership, limited liability company,
unincorporated association or other entity in which the Corporation has a direct
or indirect ownership or other equity interest and directly or indirectly owns
or controls 50 percent or more of the total combined voting or other
decision-making power.
(bb)
“Supplemental Income Plan”
means the HNI Corporation Supplemental Income Plan, as may be amended
from time to time, or any predecessor thereto.
(cc)
“Stock”
means the
Corporation's common stock, $1.00 par value.
(dd)
“Stock Unit”
means the
notational unit representing the right to receive one share
of Stock.
2.2
Gender
and Number
. Except when otherwise indicated by the context,
any masculine term used in the Plan also shall include the feminine gender; and
the definition of any plural shall include the singular and the singular shall
include the plural.
III.
ELIGIBILITY AND
PARTICIPATION
3.1
Eligibility
. Participation
in the Plan shall be limited to those executive members of an Employer who are
eligible to participate in the HNI Corporation Annual Incentive
Plan.
3.2
Participation
. An
eligible executive member shall be notified of his or her eligibility to make an
Elective Deferral under the Plan for a Plan Year prior to the beginning of the
Plan Year, or as soon as administratively possible thereafter. Unless
so notified, a member shall not have the right to make Elective Deferrals for a
Plan Year, whether or not he or she has been permitted to make Elective Deferral
for any prior Plan Year.
3.3
Missing
Persons
. Each Participant and Beneficiary entitled to receive
benefits under the Plan shall be obligated to keep the Corporation informed of
his or her current address until all Plan benefits due to be paid to the
Participant or Beneficiary have been paid to him or her. If, after
having made reasonable efforts to do so, the Corporation is unable to locate the
Participant or Beneficiary for purposes of making a distribution, the amount of
the Participant's benefits under the Plan that would otherwise be considered as
nonforfeitable will be forfeited. If the missing Participant or
Beneficiary is located after the date of the forfeiture, the benefits for the
Participant or Beneficiary will not be reinstated. In no event will a
Participant's or Beneficiary's benefits be paid to him or her later than the
date otherwise required by the Plan and Code Section 409A.
IV
.
ESTABLISHMENT AND ENTRIES TO
ACCOUNTS
4.1
Accounts
. The
Committee shall establish two Accounts for each Participant under the Plan as
follows:
(
a)
Cash
Account
. A Participant's Cash Account, as of any date, shall
consist of the Compensation the Participant has elected to allocate to that
Account under his or her Deferral Election Agreement(s) pursuant to Section 4.2,
increased by earnings thereon pursuant to Section 4.3(a) and reduced by
distributions from the Account pursuant to Sections 4.4, 4.5 and
4.6.
(b)
Stock
Account
. A Participant's Stock Account, as of any date, shall
consist of the Compensation the Participant has elected to allocate to that
Account under his or her Deferral Election Agreement(s) pursuant to
Section 4.2, increased with earnings (including dividend equivalents) thereon
and converted to Stock Units pursuant to Section 4.3(b) and reduced by
distributions from the Account pursuant to Sections 4.4, 4.5 and
4.6.
The Committee shall establish a
separate Sub-Account under each of these Accounts for each Deferral Election
Agreement entered into by the Participant pursuant to Section 4.2. As
specified in Section 4.2, as part of a Participant's Deferral Election
Agreement, the Participant shall elect how amounts deferred under each Deferral
Election Agreement are to be distributed to him or her from among the available
distribution options described in Section 4.4. The separate
Sub-Accounts are established to account for the different distribution terms
that may apply to each Sub-Account. The Corporation may combine
Sub-Accounts that have identical distribution terms or may establish other
Sub-Accounts for a Participant under the Plan from time to time in its
discretion, as it deems appropriate or advisable. A Participant shall
have a full and immediate nonforfeitable interest in his or her Accounts at all
times.
4.2
Deferral
Election Agreement
. A Participant wishing to make an Elective
Deferral under the Plan for a Plan Year shall enter into a Deferral Election
Agreement during the Enrollment Period immediately preceding the beginning of
the Plan Year. A separate Deferral Election Agreement must be entered
into for each Plan Year a Participant wishes to make Elective Deferrals under
the Plan. In order to be effective, the Deferral Election Agreement
must be completed and submitted to the Committee at the time and in the manner
specified by the Committee, which may be no later than the last day of the
Enrollment Period. The Committee shall not accept Deferral Election
Agreements entered into after the end of the Enrollment Period. The
Committee may require that a Participant enter into a separate Deferral Election
Agreement for each component of the Participant's Compensation, i.e., Base
Compensation, Annual Incentive, LTPP Award and Supplemental Income Plan payment,
he or she wishes to defer for a Plan Year. Except as specified in the
following two paragraphs, a Deferral Election Agreement will be effective to
defer Compensation earned after the Deferral Election Agreement is entered into
and not before.
For the
Plan Year in which a member first becomes eligible to participate in the Plan,
the Committee may, in its discretion, allow the member to enter into a Deferral
Election Agreement within 30 days after he or she first becomes
eligible. In order to be effective, the Deferral Election Agreement
must be completed and submitted to the Committee on or before the 30-day period
has elapsed. The Committee shall not accept Deferral Election
Agreements entered into after the 30-day period has elapsed. If the
member fails to complete a Deferral Election Agreement by such time, he or she
may enter into a Deferral Election Agreement during any succeeding Enrollment
Period in accordance with the rules described in the preceding
paragraph. For Compensation that is earned based upon a specified
performance period (for example, the Annual Incentive) where a Deferral Election
Agreement is entered into in the first year of eligibility but after the
beginning of the performance period, the Deferral Election Agreement will be
deemed to apply to Compensation paid for services performed subsequent to the
date the Deferral Election Agreement is entered into if the Deferral Election
Agreement applies to the portion of the Compensation equal to the total amount
of the Compensation for the performance period multiplied by the ratio of the
number of days remaining in the performance period after the election over the
total number of days in the performance period. For purposes of the
exception described in this paragraph, the term "Plan" shall mean the Plan and
any other plan required to be aggregated with the Plan pursuant to Code Section
409A, and the regulations and other guidance thereunder. Accordingly,
if a member has previously been eligible to participate in a plan required to be
aggregated with the Plan, then the 30-day exception described in this paragraph
shall not apply to him or her.
Deferral
Election Agreements for Base Salary, incentive compensation (other than
Performance-Based Compensation) and Supplemental Income Plan payments shall be
completed and submitted to the Corporation at the time described above that is
ordinarily applicable to Deferral Election Agreements (subject to the exception
for employees who are newly eligible to participate). Deferral
Election Agreements for Compensation that is Performance-Based Compensation
shall be completed and submitted to the Corporation no later than six months
before the end of the performance period for such Compensation. The
Committee shall determine from time to time whether an item of incentive
compensation is considered Performance-Based Compensation for these
purposes.
For each Deferral Election Agreement
the Participant enters into, the Participant shall specify:
(a)
The
percentage of each component of Compensation, i.e., Base Salary, Annual
Incentive, LTPP Award or Supplemental Income Plan payment, the Participant
wishes to contribute as an Elective Deferral;
(b)
The
manner (by percentage) in which the amounts in (a), above, are to be allocated
between the Participant's Cash Account and Stock Account; provided, however, in
the case of Compensation otherwise payable to the Participant in Stock, the
Compensation shall automatically be allocated to the Stock Account;
and
(c)
The time
and manner of distribution (consistent with the requirements of Section 4.4) of
the Sub-Account established with respect to the Deferral Election
Agreement.
The Committee may from time to time
establish a minimum amount that may be deferred by a Participant pursuant to
this Section 4.2 for any Plan Year.
Elective Deferrals shall be credited to
the Participant's Cash Account or Stock Account, as the case may be, as soon as
administratively reasonable after the Compensation would have been paid to the
Participant had the Participant not elected to defer it under the
Plan.
In general, a Deferral Election
Agreement shall become irrevocable as of the last day of the Enrollment Period
applicable to it. However, if a Participant incurs an "unforeseeable
emergency," as defined in Section 4.5(c)(ii), or becomes entitled to receive a
hardship distribution pursuant to Treas. Reg. Section 1.401(k)-1(d)(3) after the
Deferral Election Agreement otherwise becomes irrevocable, the Deferral Election
Agreement shall be cancelled as of the date on which the Participant is
determined to have incurred the unforeseeable emergency or becomes eligible to
receive the hardship distribution and no further Elective Deferrals will be made
under it.
4.3
Adjustments
to Accounts
.
(a)
The
Participant's Cash Account shall be credited with earnings as of the last day of
each month. The amount so credited shall be the product
of: (i) the Cash Account balance as of such date (less any
contributions credited to the Account during the month); and (ii) 1/12 of the
sum of (A) the Prime Rate (in effect for the Plan Year) and (B) one percentage
point.
(b)
The
Elective Deferrals allocable to a Participant's Stock Account under a Deferral
Election Agreement shall be converted to Stock Units. In the case of
Elective Deferrals of Compensation otherwise payable to the Participant in cash,
the conversion shall occur on the day (the "conversion date") on which the
Elective Deferrals are credited to the Stock Account. On the
conversion date, the Elective Deferrals shall be converted to a number of whole
and fractional Stock Units determined by dividing the Elective Deferrals (plus
earnings) by the Fair Market Value of a share of Stock on the conversion
date. In the case of Elective Deferrals of Compensation otherwise
payable to the Participant in Stock, the conversion shall occur at the time the
Elective Deferrals are credited to the Stock Account pursuant to Section 4.2,
with the number of Stock Units so credited equal to the number of shares of
Stock otherwise payable to the Participant but for the Deferral Election
Agreement. On each date on which the Corporation pays a cash dividend
(the "dividend date"), the Stock Account shall be credited with an additional
number of Stock Units determined by dividing the dollar amount the Corporation
would have paid as a dividend if the Stock Units held in the Participant's Stock
Account as of the record date for the dividend were actual shares of Stock
divided by the Fair Market Value of a share of Stock on the dividend
date. Appropriate adjustments in the Stock Account shall be made as
equitably required to prevent dilution or enlargement of the Account from any
Stock dividend, Stock split, reorganization or other such corporate transaction
or event.
|
4.4
|
Commencement
and Form of Distribution of
Sub-Accounts
.
|
(a)
For Plan
Years Commencing Before January 1, 2010
.
For Elective Deferrals
made for Plan Years commencing before January 1, 2010, the following rules set
forth in this Section 4.4(a) shall apply. As stated in Section
4.2(c), above, as part of his or her Deferral Election Agreement, a Participant
shall elect: (a) the date on which distribution of each Sub-Account
established for him or her under the Plan is to commence, which date may be no
earlier than December 31 of the Plan Year immediately after the Plan Year in
which the Compensation deferred under the Deferral Election Agreement would
otherwise have been paid to the Participant; and (b) the form of distribution of
each such Sub-Account from the available distribution forms set forth
below:
(1) a
single lump-sum payment; or
(2) monthly,
quarterly or annual installment payments:
(A) in
the case of a Cash Sub-Account,
(i)
of a specified dollar amount; or
(ii) over
a specified period; and
(B) in
the case of a Stock Sub-Account,
(i)
of
a number of shares of Stock equal to a specified dollar
amount;
(ii) of
a specified number of shares of Stock; or
(iii) over
a specified period.
All
distributions from Cash Sub-Accounts shall be paid in the form of
cash. All distributions from Stock Sub-Accounts shall be paid in the
form of Stock (with each Stock Unit converted to one share of Stock at the time
of distribution).
If a
Participant elects payment in the form of a lump sum, distribution shall be made
to the Participant in a lump sum on the commencement date elected by the
Participant.
In the
case of a Participant who elects to receive a Sub-Account in the form of
installments, earnings and dividends shall be credited to the Participant's
Sub-Account in the manner provided in Section 4.3(a) and (b) during the payment
period.
If the
Participant elects to receive payment of a Sub-Account in the form of annual
installments, the initial installment payment shall be made on January 15 of the
Plan Year selected by the Participant. The remaining annual
installment payments shall be made on January 15 of each year thereafter until
the Participant's entire Sub-Account has been paid.
If the
Participant elects to receive payment in the form of monthly or quarterly
installments, the installment payments shall commence on the first day of the
first month or quarter (as the case may be) of the Plan Year selected by the
Participant and will continue to be made on the first day of each month or
quarter (as the case may be) thereafter until the Participant's entire
Sub-Account has been paid.
In the
case of a Participant who elects to receive installment payments of a specified
dollar amount from a Cash Sub-Account, the amount of each installment payment
will equal such specified dollar amount until the Sub-Account is exhausted, with
the last installment consisting of the balance in the Sub-Account. In
the case of a Participant who elects to receive installment payments of a number
of shares of Stock equal to a specified dollar amount, the number of shares to
be distributed in each installment payment shall be determined by dividing such
specified dollar amount by the Fair Market Value of a share of Stock on the
distribution date, with the last installment consisting of the balance in the
Sub-Account.
In the
case of a Participant who elects to receive installment payments over a
specified period from a Cash Sub-Account or Stock Sub-Account, the amount of
each installment payment shall be equal to the cash balance or number of Stock
Units (as the case may be) in the Participant's Sub-Account immediately prior to
the installment payment, multiplied by a fraction, the numerator of which is
one, and the denominator of which is the number of installment payments
remaining, with the last installment consisting of the balance of the
Participant's Sub-Account.
In the
case of a Participant who elects to receive installment payments from a
Stock-Sub-Account equal to a specified number of shares, each installment
payment shall consist of such specified number, with the last installment
consisting of the balance of the Participant's Sub-Account.
Notwithstanding
anything in this Section 4.4(a) to the contrary, a Participant who elects to
receive a Sub-Account in installments must elect a payment amount that results
in a total annual Plan payment from all Sub-Accounts (of cash, Stock or both)
equaling at least $25,000. If, on January 15 of a Plan Year, the
balance of a Participant's Sub-Account then being distributed in the form of
monthly or quarterly installments is less than $25,000, the entire balance will
be paid to the Participant in a single sum on such date. In any
event, the remaining balance of a Participant's Account shall be paid on the
25th anniversary of the first payment.
A
Participant may modify an election for payment of a Sub-Account to postpone the
commencement date or change the method of payment to another method permitted
under the Plan. In order to be effective, the requested modification
must: (a) be in writing and be submitted to the Corporation at the
time and in the manner specified by the Committee; (b) not take effect for at
least 12 months from the date on which it is submitted to the Corporation; (c)
be submitted to the Corporation at least 12 months prior to the then scheduled
distribution commencement date ("original distribution date"); and (d) specify a
new distribution commencement date no earlier than five years after the original
distribution date. For purposes hereof, if the original distribution
date is a Plan Year rather than a specified date within a Plan Year, the
original distribution date shall be deemed to be the first day of the Plan
Year.
(b)
For Plan
Years Commencing On or After January 1, 2010
.
For Elective Deferrals
made for Plan Years commencing on or after January 1, 2010, the rules set forth
in this Section 4.4(b) shall apply. As part of his or her Deferral
Election Agreement, a Participant shall elect: (i) the Plan Year in
which distribution of each Sub-Account established for him or her under the Plan
is to commence, which date may be no earlier than the third Monday in January
immediately after the end of the first Plan Year following the Plan Year in
which the Compensation deferred under the Deferral Election Agreement would
otherwise have been paid to the Participant; and (ii) the method of distribution
of each such Sub-Account from the available distribution methods set forth
below:
(1) a
single lump-sum payment, or
(2) annual
installments over a number, not to exceed 15, of years specified by the
Participant.
All
distributions from Cash Sub-Accounts shall be paid in the form of
cash. All distributions from Stock Sub-Accounts shall be paid in the
form of Stock (with each Stock Unit converted to one share of Stock at the time
of distribution).
If a
Participant elects a Sub-Account in the form of a lump sum, distribution shall
be made to the Participant in a lump sum on the third Monday in January of the
Plan Year elected by the Participant.
If a
Participant elects to receive a Sub-Account in the form of installments, the
initial installment payment shall be made on the third Monday in January of the
Plan Year elected by the Participant for benefit commencement. The
remaining annual installment payments shall be made on each anniversary of the
commencement date during the payment period elected by the
Participant. The amount of each installment payment shall be equal to
the cash balance or number of Stock Units (as the case may be) in the
Participant's Sub-Account immediately prior to the installment payment,
multiplied by a fraction, the numerator of which is one, and the denominator of
which is the number of installment payments remaining, with the last installment
consisting of the balance of the Participant's Sub-Account. Earnings
and dividends shall be credited to the Participant's Sub-Account in the manner
provided in Section 4.3(a) and (b) during the payment period.
If at any time the present value of any
benefit under the Plan that would be considered a "single plan" under Treasury
Regulation Section 1.409A-1(c)(2) together with the present value of any benefit
required to be aggregated with such benefit under Treasury Regulation Section
1.409A-1(c)(2), is less than the dollar limit set forth in Section 402(g)(1)(B)
of the Code, the Corporation may, in its discretion, distribute such benefit (or
benefits) to the Participant in the form of a single lump sum, provided the
payment results in the liquidation of the entirety of the Participant's interest
under the "single plan," including all benefits required to be aggregated as
part of the "single plan" under Treasury Regulation Section 1.409A-1(c)(2), and
provided further the Corporation evidences its exercise of such discretion in
writing no later than the date of such payment.
A
Participant may modify an election for payment of a Sub-Account to postpone the
commencement date or change the method of payment to another method permitted
under the Plan. In order to be effective, the requested modification
must: (a) be in writing and be submitted to the Committee at the time
and in the manner specified by the Committee; (b) not take effect for at least
12 months from the date on which it is submitted to the Committee; (c) be
submitted to the Committee at least 12 months prior to the then scheduled
distribution commencement date ("original distribution date"); and (d) specify a
new distribution commencement date no earlier than five years after the original
distribution date. For purposes hereof, if the original distribution
date is a Plan Year rather than a specified date within a Plan Year, the
original distribution date shall be deemed to be the first day of the Plan
Year.
4.5
Exceptions
to Payment Terms
. Notwithstanding anything in this Article 4
or a Participant's Deferral Election Agreement (as may be modified pursuant to
Section 4.4) to the contrary, the following terms, if applicable, shall apply to
the payment of a Participant's Sub-Accounts.
(a)
Separation
from Service for Reasons Other than Retirement or Death
. If a
Participant has a Separation from Service for reasons other than Retirement or
death, all of the Participant's Sub-Accounts (or the remaining balances thereof
if distribution has already commenced) will be distributed to him or her in a
single sum (regardless of the form otherwise elected by the Participant) within
90 days following the Participant's Separation from Service. If the
Participant has a Separation from Service due to death, the rules set forth in
Section 4.6 shall apply.
(b)
Delay in
Distributions
.
(i)
If the Participant is a Specified
Employee, any Plan distributions that are otherwise to commence on the
Participant's Separation from Service shall commence on the date immediately
following the six-month anniversary of the Separation from Service or, if
earlier, on the date of the Participant's death. In this case, the
first payment following the period of delay required by this Section 4.5(b)(i)
shall be increased by any amount that would otherwise have been payable to the
Participant under the Plan during the delay period.
(ii) The
Corporation shall delay the distribution of any amount otherwise required to be
distributed under the Plan if, and to the extent that, the Corporation
reasonably anticipates the Corporation's deduction with respect to such
distribution otherwise would be limited or eliminated by application of Code
Section 162(m). In such event, (A) if any payment is delayed during
any year on account of Code Section 162(m), then all payments that could be
delayed on account of Code Section 162(m) during such year must also be delayed;
(B) such delayed payments must be paid either (1) in the first year in which the
Corporation reasonably anticipates the payment to be deductible, or (2) the
period beginning on the date of the Participant's Separation from Service and
ending on the later of the end of the Participant's year of separation or the
fifteenth (15th) day of the third month after such separation; and (C) if
payment is delayed to the date of Separation from Service with respect to a
Participant who is a Specified Employee, such payment shall commence on the date
immediately following the six-month anniversary of the Separation from Service,
or if earlier, on the date of the Participant's death.
(iii) The
Corporation shall delay the distribution of any amount otherwise required to be
distributed under the Plan if, and to the extent that, the Corporation
reasonably anticipates the making of the distribution would violate Federal
securities laws or other applicable law. In such event, the
distribution will be made at the earliest date on which the Corporation
reasonably anticipates the making of the distribution will not cause such a
violation.
(c)
Acceleration
of Distributions
. All or a portion of a Participant's
Sub-Accounts may be distributed at an earlier time and in a different form than
specified in this Article 4:
(i) As
may be necessary to fulfill a Qualified Domestic Relations Order or as specified
in Section 1.409A-3(j)(4)(3) of the Treasury
Regulations. Distributions pursuant to a Qualified Domestic Relations
Order shall be made according to administrative procedures established by the
Corporation.
(ii) If
the Participant has an unforeseeable emergency. For these purposes an
"unforeseeable emergency" is a severe financial hardship of the Participant
resulting from an illness or accident of the Participant or the Participant's
spouse, Beneficiary or dependent (as defined in Section 152(a) of the Code,
without regard to Section 152(b)(1), (b)(2), and (d)(1)(B)), loss of the
Participant's property due to casualty (including the need to rebuild a home
following damage to a home not otherwise covered by insurance, for example, not
as a result of a natural disaster); or other similar extraordinary and
unforeseeable circumstances arising as a result of events beyond the control of
the Participant. For example, the imminent foreclosure of or eviction
from the Participant's primary residence may constitute an unforeseeable
emergency. In addition, the need to pay for medical expenses,
including non-refundable deductibles, as well as for the cost of prescription
drug medication, may constitute an unforeseeable emergency. Finally,
the need to pay for funeral expenses of a spouse, Beneficiary or a dependent (as
defined in Section 152(a) of the Code, without regard to Section 152(b)(1),
(b)(2) and (d)(1)(B)) may also constitute an unforeseeable
emergency. Except as otherwise provided in this paragraph (c)(ii),
the purchase of a home and the payment of college tuition are not unforeseeable
emergencies. Whether a Participant is faced with an unforeseeable
emergency permitting a distribution under this paragraph (c)(ii) is to be
determined based on the relevant facts and circumstances of each case, but, in
any case a distribution on account of an unforeseeable emergency may not be made
to the extent such emergency is or may be relieved through reimbursement or
compensation from insurance or otherwise, by liquidation of the Participant's
assets, to the extent the liquidation of such assets would not cause severe
financial hardship, or by cessation of Elective Deferrals.
Distributions because of an
unforeseeable emergency must be limited to the amount reasonably necessary to
satisfy the emergency need (which may include amounts necessary to pay any
Federal, state, or local income taxes or penalties reasonably anticipated to
result from the distribution). Determinations of the amounts
reasonably necessary to satisfy the emergency need must take into account any
additional compensation available due to the Participant's cancellation of a
Deferral Election Agreement due to an unforeseeable emergency pursuant to
Section 4.2. However, the determination of amounts reasonably
necessary to satisfy the emergency need is not required to take into account any
additional compensation that, due to the unforeseeable emergency, is available
under another nonqualified deferred compensation plan but has not actually been
paid.
(iii) Due
to a failure of the Plan to satisfy Section 409A with respect to the
Participant, but only to the extent an amount is required to be included in the
Participant's income as a result of such failure.
(iv) For
Elective Deferrals made for Plan Years commencing on or after January 1, 2010,
in the event of a Change in Control, in which case the Participant's Account
shall be distributed to him or her in a lump sum within 90 days after the date
on which the Change in Control occurs.
4.6
Death
Benefit
. If a Participant dies with all or a portion of his or
her Account unpaid, the Account shall be paid to his or her Beneficiary, as
designated in accordance with Article 6, in the form (single lump sum or
installments) and time elected by the Participant under Sections 4.2 and 4.4,
subject to Section 4.5 and Article 8. Notwithstanding the preceding
sentence, for Elective Deferrals made for Plan Years beginning on or after
January 1, 2010, if a Participant dies with all or a portion of his or her
Account unpaid, the Account shall be paid to his or her Beneficiary, as
designated in accordance with Article 6, in the form of a single lump sum, with
distribution commencing to the Beneficiary within 90 days following the date of
the Participant's death.
4.7
Funding
. An
Employer's obligations under the Plan shall in every case be an unfunded and
unsecured promise to pay. Each Participant's or Beneficiary's rights
under the Plan shall be no greater than those of a general, unsecured creditor
of an Employer. The amount of each Participant's Account shall be
reflected on the accounting records of the Corporation but shall not be
construed to create, or require the creation of, a trust, custodial or escrow
account. No Participant shall have any right, title, or interest
whatsoever in or to any investment reserves, accounts or funds an Employer may
purchase, establish, or accumulate, and, except as provided in Section 8.1, no
Plan provision or action taken pursuant to the Plan shall create or be construed
to create a trust or a fiduciary relationship of any kind between an Employer
and a Participant or any other person. All amounts paid under the
Plan shall be paid in cash or Stock from the general assets of an Employer, and
an Employer shall not be obligated under any circumstances to fund its financial
obligations under the Plan. The Corporation may create a trust to
hold funds or securities to be used in payment of its obligation under the Plan,
and may fund such trust; provided, however, any funds contained therein shall
remain liable to the claims of the Corporation's general creditors.
V
.
ADMINISTRATION
5.1
Administration
. The
Plan shall be administered by the Committee. In addition to the other
powers granted under the Plan, the Committee shall have all powers necessary to
administer the Plan, including, without limitation, powers:
(a)
to
interpret the provisions of the Plan;
(b)
to
establish and revise the method of accounting for the Plan and to maintain the
Accounts; and
(c)
to
establish rules for the administration of the Plan and to prescribe any forms
required to administer the Plan.
5.2
Actions
of the Committee
. The Committee (including any person or
entity to whom the Committee has delegated duties, responsibilities or
authority, to the extent of such delegation) has total and complete
discretionary authority to determine conclusively for all parties all questions
arising in the administration of the Plan, to interpret and construe the terms
of the Plan and to determine all questions of eligibility and status of members,
Participants and Beneficiaries under the Plan and their respective
interests. Subject to the claims procedures of Article 9, all
determinations, interpretations, rules and decisions of the Committee (including
those made or established by any person or entity to whom the Committee has
delegated duties, responsibilities or authority, if made or established pursuant
to such delegation) are conclusive and binding upon all persons having or
claiming to have any interest or right under the Plan.
5.3
Delegation
. The
Committee, or any officer or other member of the Corporation designated by the
Committee, shall have the power to delegate specific duties and responsibilities
to officers or other members of the Corporation or other individuals or
entities. Any delegation may be rescinded by the Committee at any
time. Each person or entity to whom a duty or responsibility has been
delegated shall be responsible for the exercise of such duty or responsibility
and shall not be responsible for any act or failure to act of any other person
or entity.
5.4
Expenses
. The
expenses of administering the Plan shall be borne by the
Corporation.
5.5
Reports
and Records
. The Committee, and those to whom the Committee
has delegated duties under the Plan, shall keep records of all their proceedings
and actions and shall maintain books of account, records and other data as shall
be necessary for the proper administration of the Plan and for compliance with
applicable law.
5.6
Valuation
of Accounts and Account Statements
. As of each valuation date,
the Committee shall adjust the previous Account balances of each Participant for
Elective Deferrals, distributions and investment gains and losses. A
"valuation date," for these purposes, is the last day of each calendar quarter,
and such other dates as the Committee may designate from time to time in its
discretion. The Committee shall provide each Participant with a
statement of his or her Account balances on a quarterly basis.
5.7
Indemnification
and Exculpation
. The agents, officers, directors and members
of the Corporation and its Subsidiaries and the Committee shall be indemnified
and held harmless by the Corporation against and from any and all loss, cost,
liability or expense that may be imposed upon or reasonably incurred by them in
connection with or resulting from any claim, action, suit or proceeding to which
they may be a party or in which they may be involved by reason of any action
taken or failure to act under the Plan and against and from any and all amounts
paid by them in settlement (with the Corporation's written approval) or paid by
them in satisfaction of a judgment in any such action, suit or
proceeding. The foregoing provision shall not be applicable to any
person if the loss, cost, liability or expense is due to such person's gross
negligence or willful misconduct.
VI.
BENEFICIARY
DESIGNATION
6.1
Designation
of Beneficiary
. Each Participant shall be entitled to
designate a Beneficiary or Beneficiaries who, upon the Participant's death, will
receive the amounts that otherwise would have been paid to the Participant under
the Plan. All designations shall be signed by the Participant and
shall be in a form prescribed by the Committee. The Participant may
change his or her designation of Beneficiary at any time, on a form prescribed
by the Committee. The filing of a new Beneficiary designation form by
a Participant shall automatically revoke all prior designations by that
Participant.
6.2
Death of
Beneficiary
. In the event all the Beneficiaries named by a
Participant pursuant to Section 6.1 predecease the Participant, the amounts that
would have been paid to the Participant under the Plan shall be paid to the
Participant's estate.
6.3
Ineffective
Designation
. In the event the Participant does not designate a
Beneficiary, or for any reason such designation is ineffective in whole or in
part, the ineffectively designated amounts shall be paid to the Participant's
estate.
VII.
WITHHOLDING
The Corporation shall reduce the amount
of any cash payment under the Plan and an Employer may reduce the amount of any
other compensation payable to a Participant to the extent the Corporation or
Employer deems appropriate for Federal, state or local tax withholding or other
purposes required by law. The Corporation shall reduce the amount of
any Stock payment under the Plan to the extent the Corporation deems appropriate
for Federal, state or local tax withholding, based upon the supplemental wage
withholding rate, or for other purposes required by law.
VIII.
CHANGE IN CONTROL,
AMENDMENT, AND TERMINATION
8.1
Change in
Control
. The provisions of this Section 8.1 shall apply to
Elective Deferrals made for Plan Years commencing before January 1,
2010.
(a)
Retention
of Plan Benefits
. A Participant shall retain rights to payment
of all amounts credited to his or her Accounts under the Plan, including
earnings pursuant to Section 4.3, in the event of a Change in
Control.
(b)
Contributions
to Trust
. Notwithstanding anything in Section 4.7 to the
contrary, the Corporation shall be obligated not later than upon the occurrence
of a Change in Control, to transfer assets to one or more irrevocable grantor
trusts established by the Corporation in an amount at least sufficient to
provide for the obligations of the Employers under the Plan as of the date of
such transfer. The assets of any such trust shall at all times be
subject to the claims of the general unsecured creditors of the Employers and
not be subject to the prior claim of any Participant or Beneficiary under the
Plan. Any such trust so established and the rights and obligations of
any individual, the Employers, and the trustee in such trust shall be governed
exclusively by such trust; provided the provisions of the Plan shall govern
exclusively the rights of a Participant or Beneficiary to benefits under the
Plan.
8.2
Plan
Amendment and Termination
. The Board or the Committee has the
authority to amend, modify, and/or terminate the Plan at any time. No
amendment or termination of the Plan shall in any manner reduce the Account
balance of any Participant without the consent of the Participant (or if the
Participant has died, his or her Beneficiary). Without limiting the
foregoing, the Board may, in its sole discretion: (a) freeze the Plan
by precluding any further Elective Deferrals and/or other credits, but otherwise
maintain the balance of the provisions of the Plan; or (b) terminate the Plan in
its entirety and distribute the Participant's Accounts at an earlier date and in
a different form than otherwise provided under the Plan, provided such
termination and distribution comply with the requirements of Section 409A of the
Code.
IX.
CLAIMS
PROCEDURE
The Committee shall notify a
Participant in writing within 90 days of the Participant's written application
for benefits of the Participant's eligibility or non-eligibility for benefits
under the Plan; provided, however, benefit distribution shall not be contingent
upon a Participant's application for benefits. If the Committee
determines a Participant is not eligible for benefits or full benefits, the
notice shall set forth: (a) the specific reasons for such denial; (b)
a specific reference to the provision of the Plan on which the denial is based;
(c) a description of any additional information or material necessary for the
Participant to perfect the claim, and a description of why it is needed; and (d)
an explanation of the Plan's claims review procedure and other appropriate
information as to the steps to be taken if the Participant wishes to have the
claim reviewed. If the Committee determines there are special
circumstances requiring additional time to make a decision, the Committee shall
notify the Participant of the special circumstances and the date by which a
decision is expected to be made, and may extend the time for up to an additional
90-day period. If a Participant is determined by the Committee to be
not eligible for benefits, or if a Participant believes he or she is entitled to
greater or different benefits, the Participant shall have the opportunity to
have the Participant's claim reviewed by the Committee by filing a petition for
review with the Committee within 60 days after receipt by the Participant of the
notice issued by the Committee. The petition shall state the specific
reasons the Participant believes the Participant is entitled to benefits or
greater or different benefits. Within 60 days after receipt by the
Committee of the petition, the Committee shall afford the Participant (and the
Participant's counsel, if any) an opportunity to present the Participant's
position to the Committee orally or in writing, and the Participant (or counsel)
shall have the right to review the pertinent documents, and the Committee shall
notify the Participant of its decision in writing within the 60-day period,
stating specifically the basis of the decision written in a manner calculated to
be understood by the Participant and the specific provisions of the Plan on
which the decision is based. If, because of the need for a hearing,
the 60-day period is not sufficient, the decision may be deferred for up to
another 60-day period at the election of the Committee, but notice of this
deferral shall be given to the Participant. If a Participant does not
appeal on time, the Participant will lose the right to appeal the denial and the
right to file suit under ERISA, and the Participant will have failed to exhaust
the Plan's internal administrative appeal process, which is generally a
prerequisite to bringing suit. In the event an appeal of a denial of
a claim for benefits is denied, any lawsuit to challenge the denial of such
claim must be brought within one year of the date the Committee has rendered a
final decision on the appeal.
In the case of a Participant's death,
the same procedures shall apply to the Beneficiary.
X.
MISCELLANEOUS
10.1
Rights as
Stockholder
. No person shall have any right as a stockholder
of the Corporation with respect to any shares of Stock or other equity security
of the Corporation payable under the Plan unless and until such person becomes a
stockholder of record with respect to such shares or equity
security.
10.2
Governing
Law
. The Plan and all determinations made and actions taken
pursuant thereto, to the extent not otherwise governed by the Code or the laws
of the United States, shall be governed by the laws of the State of Iowa and
construed in accordance therewith without giving effect to principles of
conflicts of laws.
10.3
No Limit
on Compensation Plans or Arrangements
. Nothing contained in
the Plan shall prevent the Corporation or a Subsidiary from adopting or
continuing in effect other or additional compensation plans or
arrangements.
10.4
No Right
to Employment
. Neither the adoption and maintenance of the
Plan nor the execution by the Corporation of a Deferral Election Agreement with
any Participant shall be construed as giving a Participant the right to be
retained as a member of the Corporation or any Subsidiary, nor will it affect in
any way the right of the Corporation or a Subsidiary to terminate a
Participant's employment at any time, with or without cause. In
addition, the Corporation or a Subsidiary may at any time dismiss a Participant
from employment free from any liability or any claim under the Plan, unless
otherwise expressly provided in the Plan.
10.5
Severability
. If
any provision of the Plan or any Deferral Election Agreement is or becomes or is
deemed to be invalid, illegal or unenforceable in any jurisdiction or would
disqualify the Plan or any Deferral Election Agreement under any law deemed
applicable by the Board, such provision shall be construed or deemed amended to
conform to applicable laws, or if it cannot be so construed or deemed amended
without, in the determination of the Board, materially altering the purpose or
intent of the Plan or the Deferral Election Agreement, such provision shall be
stricken as to such jurisdiction or Deferral Election Agreement, and the
remainder of the Plan or any such Deferral Election Agreement shall remain in
full force and effect.
10.6
Securities
Matters
. The Corporation shall not be required to deliver any
share of Stock until the requirements of any federal or state securities or
other laws, rules or regulations (including the rules of any securities
exchange) as may be determined by the Corporation to be applicable are
satisfied.
10.7
No
Fractional Shares
. No fractional shares of Stock
shall be issued or delivered pursuant to the Plan. Any fractional
share otherwise payable under the Plan shall be settled in the form of
cash.
10.8
Headings
. Headings
are given to the Articles, Sections and Subsections of the Plan solely as a
convenience to facilitate reference. Such headings shall not be
deemed in any way material or relevant to the construction or interpretation of
the Plan or any provision thereof.
10.9
Nontransferability
. No
benefit payable at any time under the Plan will be subject in any manner to
alienation, sale, transfer, assignment, pledge, levy, attachment or encumbrance
of any kind.
10.10
Unfunded
Plan
. The Plan is intended to be an unfunded plan maintained
primarily to provide deferred compensation benefits for "a select group of
management or highly compensated employees" within the meaning of Sections
201(2), 301(a)(3) and 401(a)(1)
of ERISA, and
therefore is further intended to be exempt from the provisions of Parts 2, 3,
and 4 of Title I of ERISA.
10.11
No Other
Agreements
. The terms and conditions set forth herein
constitute the entire understanding of the Corporation, the Subsidiaries and the
Participants with respect to the matters addressed herein.
10.12
Incapacity
. In
the event any Participant is unable to care for his or her affairs because of
illness or accident, any payment due may be paid to the Participant's spouse,
parent, brother, sister, adult child or other person deemed by the Corporation
to have incurred expenses for the care of the Participant, unless a duly
qualified guardian or other legal representative has been
appointed.
10.13
Release
. Any
payment of benefits to or for the benefit of a Participant made in good faith by
the Corporation in accordance with the Corporation's interpretation of its
obligations hereunder, shall be in full satisfaction of all claims against the
Corporation and all Subsidiaries for benefits under the Plan to the extent of
such payment.
10.14
Notices
. Any
notice permitted or required under the Plan shall be in writing and shall be
hand delivered or sent, postage prepaid, by first class mail, or by certified or
registered mail with return receipt requested, to the Committee, if to the
Corporation, or to the address last shown on the records of the Corporation, if
to a Participant. Any such notice shall be effective as of the date
of hand delivery or mailing.
10.15
Successors
. All
obligations of the Corporation under the Plan shall be binding upon and inure to
the benefit of any successor to the Corporation, whether the existence of such
successor is the result of a direct or indirect purchase, merger, consolidation
or otherwise, of all or substantially all of the business or assets of the
Corporation.
Exhibit
10.15
HNI
CORPORATION
DIRECTORS
DEFERRED COMPENSATION PLAN
As
Amended and Restated Effective November 19, 2009
TABLE OF
CONTENTS
|
|
|
Page
|
|
|
|
I.
|
AMENDMENT
AND RESTATEMENT
|
1
|
|
1.1
|
Amendment
and Restatement.
|
1
|
|
1.2
|
Purpose
|
1
|
|
1.3
|
Application
of the Plan.
|
1
|
|
|
|
II.
|
DEFINITIONS
|
1
|
|
2.1
|
Definitions.
|
1
|
|
2.2
|
Gender
and Number
|
5
|
|
|
|
III.
|
ELIGIBILITY
AND PARTICIPATION
|
5
|
|
3.1
|
Eligibility
|
5
|
|
3.2
|
Missing
Persons
|
5
|
|
|
|
IV
.
|
ESTABLISHMENT
AND ENTRIES TO ACCOUNTS
|
5
|
|
4.1
|
Accounts
|
5
|
|
4.2
|
Deferral
Election Agreement
|
6
|
|
4.3
|
Adjustments
to Accounts
|
7
|
|
4.4
|
Commencement
and Form of Distribution of Sub-Accounts
|
7
|
|
4.5
|
Exceptions
to Payment Terms
|
8
|
|
4.6
|
Death
Benefit
|
11
|
|
4.7
|
Funding
|
11
|
|
|
|
V
.
|
ADMINISTRATION
|
12
|
|
5.1
|
Administration
|
12
|
|
5.2
|
Actions
of the Committee
|
12
|
|
5.3
|
Delegation
|
12
|
|
5.4
|
Expenses
|
12
|
|
5.5
|
Reports
and Records
|
12
|
|
5.6
|
Valuation
of Accounts and Account Statements
|
13
|
|
5.7
|
Indemnification
and Exculpation
|
13
|
|
|
|
VI.
|
BENEFICIARY
DESIGNATION
|
13
|
|
6.1
|
Designation
of Beneficiary
|
13
|
|
6.2
|
Death
of Beneficiary
|
13
|
|
6.3
|
Ineffective
Designation
|
13
|
|
|
|
VII.
|
AMENDMENT
AND TERMINATION
|
13
|
|
|
|
VIII.
|
CLAIMS
PROCEDURE
|
14
|
IX.
|
MISCELLANEOUS
|
14
|
|
9.1
|
Rights
as a Stockholder
|
14
|
|
9.2
|
Governing
Law
|
15
|
|
9.3
|
No
Limit on Compensation Plans or Arrangements
|
15
|
|
9.4
|
No
Right to Remain a Director
|
15
|
|
9.5
|
Severability
|
15
|
|
9.6
|
Securities
Matters
|
15
|
|
9.7
|
No
Fractional Shares
|
15
|
|
9.8
|
Headings
|
15
|
|
9.9
|
Nontransferability
|
15
|
|
9.10
|
Unfunded
Plan
|
15
|
|
9.11
|
No
Other Agreements
|
16
|
|
9.12
|
Incapacity
|
16
|
|
9.13
|
Release
|
16
|
|
9.14
|
Notices
|
16
|
|
9.15
|
Successors
|
16
|
HNI
CORPORATION
DIRECTORS
DEFERRED COMPENSATION PLAN
I.
AMENDMENT AND
RESTATEMENT
1.1
Amendment
and Restatement
. HNI Corporation, an Iowa corporation (the
"Corporation"), established this HNI Corporation Directors Deferred Compensation
Plan (the "Plan"), effective August 9, 1999. The Corporation has
amended and restated the Plan from time to time, most recently effective January
1, 2005. The Corporation hereby again amends and restates the Plan,
effective November 19, 2009 (the "Restatement Date"), to accomplish certain
changes to its form and operation.
1.2
Purpose
. The
purpose of the Plan is to give Outside Directors the opportunity to defer the
receipt of fees payable to them by the Corporation to achieve their personal
financial planning goals.
1.3
Application
of the Plan
. Except as otherwise set forth herein, the terms
of the Plan, as amended and restated herein, apply to all amounts deferred under
the Plan, whether before, on or after the Restatement Date.
II.
DEFINITIONS
2.1
Definitions
. Whenever
used in the Plan, the following terms shall have the meaning set forth below
and, when the defined meaning is intended, the term is capitalized:
(a)
“Account”
means the device
used to measure and determine the amount of benefits payable to a Participant or
Beneficiary under the Plan. The Corporation shall establish a Cash
Account and Stock Account for each Participant under the Plan, and the term
"Account," as used in the Plan, may refer to either such Account or the
aggregate of the two Accounts. In addition, the Corporation shall
establish a separate Sub-Account under each of the Participant's Cash Account
and Stock Account for each Deferral Election Agreement entered into by the
Participant pursuant to Section 4.2.
(b)
“Beneficiary”
means the
persons or entities designated by a Participant in writing pursuant to Article 6
of the Plan as being entitled to receive any benefit payable under the Plan by
reason of the death of a Participant, or, in the absence of such designation,
the Participant's estate (pursuant to the rules specified in Article
6).
(c)
“Board”
means the Board of
Directors of the Corporation.
(d)
“Change in Control”
means:
(i) the
acquisition by any individual, entity or group (with the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) (a "Person") of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of 35% or more of the combined
voting power of the then outstanding voting securities of the Corporation
entitled to vote generally in the election of directors (the "Outstanding
Corporation Voting Securities"); provided, however, that for purposes of this
subsection (i), the following acquisitions shall not constitute a Change in
Control: (I) any acquisition directly from the Corporation; (II) any
acquisition by the Corporation; (III) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by the Corporation or any
corporation controlled by the Corporation; or (IV) any acquisition by any
corporation pursuant to a transaction which complies with clauses (A), (B) and
(C) of subsection (iii) of this paragraph; or
(ii) individuals
who, as of the date hereof, constitute the Board (the "Incumbent Board") cease
during a 12-month period for any reason to constitute a majority of the Board;
provided, however, that any individual becoming a director subsequent to the
date hereof whose election, or nomination for election by the Corporation's
shareholders, was approved by a vote of a majority of the directors then
comprising the Incumbent Board shall be considered as though such individual
were a member of the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result of an actual or
threatened election contest with respect to the election or removal of directors
or other actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board; or
(iii) consummation
of a reorganization, merger or consolidation or sale or other disposition of all
or substantially all of the assets of the Corporation (a "Business
Combination"), in each case, unless, following such Business
Combination: (A) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the Outstanding
Corporation Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, 50% or more of, respectively, the then
outstanding shares of common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation which as a result of
such transaction owns the Corporation or all or substantially all of the
Corporation's assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately prior to such
Business Combination of the Outstanding Corporation Voting Securities; (B) no
Person (excluding any corporation resulting from such Business Combination or
any employee benefit plan (or related trust) of the Corporation or such
corporation resulting from such Business Combination) beneficially owns,
directly or indirectly, 35% or more of the combined voting power of the then
outstanding voting securities of such corporation except to the extent that such
ownership existed prior to the Business Combination; and (C) at least a majority
of the members of the board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Board, providing for
such Business Combination, if such change in the members of the Board was not
indorsed by a majority of the members of the Incumbent Board.
(e)
“Code”
means the Internal
Revenue Code of 1986, as amended from time to time, or any successor
thereto.
(f)
“Committee”
means the Human
Resources and Compensation Committee of the Board or a delegate of such
Committee.
(g)
“Compensation,”
of a
Participant, means the Participant's annual retainer, meeting fees (if any) and
any other amounts payable to the Participant by the Corporation for services
performed as an Outside Director, in cash or Stock, excluding any amounts
distributable under the Plan.
(h)
“Corporation”
means HNI
Corporation, an Iowa corporation.
(i)
“Deferral Election Agreement”
means the agreement described in Section 4.2 in which the Participant designates
the amount of his or her Compensation, if any, he or she wishes to contribute to
the Plan and acknowledges and agrees to the terms of the Plan.
(j)
“Elective Deferral”
means a
contribution to the Plan made by a Participant pursuant to a Deferral Election
Agreement the Participant enters into with the Corporation. Elective
Deferrals shall be made according to the terms of the Plan set forth in Section
4.2.
(k)
“Enrollment Period”
means the
period designated by the Corporation during which a Deferral Election Agreement
may be entered into with respect to an eligible employee's future Compensation
as described in Section 4.2. Generally, the Enrollment Period must
end no later than the end of the calendar year before the calendar year in which
the services giving rise to the Compensation to be deferred are
performed. As described in Section 4.2, an exception may be made to
this requirement for individuals who first become eligible to participate in the
Plan.
(l)
“Fair Market Value,”
of a
share of Stock, means the closing price of the share as reported on the New York
Stock Exchange on the date as of which such value is being determined, or, if
there shall be no reported transactions for such date, on the next preceding
date for which transactions were reported; provided, however, if Fair Market
Value for any date cannot be so determined, Fair Market Value shall be
determined by the Committee by whatever means or method as the Committee, in the
good faith exercise of its discretion, shall at such time deem
appropriate.
(m)
“Outside Director”
means a
non-employee member of the Board.
(n)
“Participant”
means an Outside
Director who has entered into a Deferral Election Agreement.
(o)
“Plan Year”
means the
consecutive 12-month period beginning each January 1 and ending December
31.
(p)
“Prime Rate”
means the prime
interest rate published in the Wall Street Journal or its web site as of the
first business day coincident with or immediately following the third Monday in
January
.
(q)
“Qualified Domestic Relations
Order”
has the same meaning as in Section 414(p) of the Code, but without
regard to Section 414(p)(9) of the Code.
(r)
“Restatement Date”
means
November 19, 2009, 2009.
(s)
“Retirement,”
of a
Participant, means the Participant's Separation from Service on or after the
attainment of age 55
with at least ten years
of service as a Board member. The Chairman of the Board or, with
respect to the Chairman if the Chairman is a Participant, the Committee, in his,
her or its discretion, may waive or reduce the ten-year service requirement with
respect to a Participant; provided that any such waiver or reduction is made
before the Outside Director becomes a Participant or, with respect to each
Deferral Election Agreement, before the last day of the Enrollment Period for
the Plan Year for which the agreement is made.
(t)
“Separation from Service,”
with respect to a Participant, has the meaning set forth in Treasury Regulation
Section 1.409A-1(h), or any subsequent authority.
(u)
“Specified Employee”
means a
"key employee" (as defined in Section 416(i) of the Code without regard to
Section 416(i)(5)) of the Corporation. For purposes hereof, an
employee is a key employee if the employee meets the requirements of Section
416(1)(A)(i), (ii) or (iii) (applied in accordance with the regulations
thereunder and disregarding Section 416(i)(5)) at any time during the 12-month
period ending on December 31. If a person is a key employee as of
such date, the person is treated as a Specified Employee for the 12-month period
beginning on the first day of the fourth month following such date.
(v)
“Stock”
means the
Corporation's common stock, $1.00 par value.
(w)
“Stock Unit”
means the
notational unit representing the right to receive one share
of Stock.
(x)
“Subsidiary”
means any
corporation, joint venture, partnership, limited liability company,
unincorporated association or other entity in which the Corporation has a direct
or indirect ownership or other equity interest and directly or indirectly owns
or controls 50 percent or more of the total combined voting or other
decision-making power.
2.2
Gender
and Number
. Except when otherwise indicated by the context,
any masculine term used in the Plan also shall include the feminine gender; and
the definition of any plural shall include the singular and the singular shall
include the plural.
III.
ELIGIBILITY AND
PARTICIPATION
3.1
Eligibility
. Participation
in the Plan shall be limited to Outside Directors.
3.2
Missing
Persons
. Each Participant and Beneficiary entitled to receive
benefits under the Plan shall be obligated to keep the Corporation informed of
his or her current address until all Plan benefits due to be paid to the
Participant or Beneficiary have been paid to him or her. If, after
having made reasonable efforts to do so, the Corporation is unable to locate the
Participant or Beneficiary for purposes of making a distribution, the amount of
the Participant's benefits under the Plan that would otherwise be considered as
nonforfeitable will be forfeited. If the missing Participant or
Beneficiary is located after the date of the forfeiture, the benefits for the
Participant or Beneficiary will not be reinstated. In no event will a
Participant's or Beneficiary's benefits be paid to him or her later than the
date otherwise required by the Plan and Code Section 409A.
IV
.
ESTABLISHMENT AND ENTRIES TO
ACCOUNTS
4.1
Accounts
. The
Committee shall establish two Accounts for each Participant under the Plan as
follows:
(a)
Cash
Account
. A Participant's Cash Account, as of any date, shall
consist of the Compensation the Participant has elected to allocate to that
Account under his or her Deferral Election Agreement(s) pursuant to Section 4.2,
increased by earnings thereon pursuant to Section 4.3(a) and reduced by
distributions from the Account pursuant to Sections 4.4, 4.5 and
4.6.
(b)
Stock
Account
. A Participant's Stock Account, as of any date, shall
consist of the Compensation the Participant has elected to allocate to that
Account under his or her Deferral Election Agreement(s) pursuant to Section 4.2,
increased with earnings (including dividend equivalents) thereon and converted
to Stock Units pursuant to Section 4.3(b) and reduced by distributions from the
Account pursuant to Sections 4.4, 4.5 and 4.6.
The Committee shall establish a
separate Sub-Account under each of these Accounts for each Deferral Election
Agreement entered into by the Participant pursuant to Section 4.2. As
specified in Section 4.2, as part of a Participant's Deferral Election
Agreement, the Participant shall elect how amounts deferred under each Deferral
Election Agreement are to be distributed to him or her from among the available
distribution options described in Section 4.4. The separate
Sub-Accounts are established to account for the different distribution terms
that may apply to each Sub-Account. The Corporation may combine
Sub-Accounts that have identical distribution terms or may establish other
Sub-Accounts for a Participant under the Plan from time to time in its
discretion, as it deems appropriate or advisable. A Participant shall
have a full and immediate nonforfeitable interest in his or her Accounts at all
times.
4.2
Deferral
Election Agreement
. A Participant wishing to make an Elective
Deferral under the Plan for a Plan Year shall enter into a Deferral Election
Agreement during the Enrollment Period immediately preceding the beginning of
the Plan Year. A separate Deferral Election Agreement must be entered
into for each Plan Year a Participant wishes to make Elective Deferrals under
the Plan. In order to be effective, the Deferral Election Agreement
must be completed and submitted to the Committee at the time and in the manner
specified by the Committee, which may be no later than the last day of the
Enrollment Period. The Committee shall not accept Deferral Election
Agreements entered into after the end of the Enrollment Period.
For the
Plan Year in which an individual first becomes an Outside Director, the
Committee may, in its discretion, allow the Outside Director to enter into a
Deferral Election Agreement within 30 days after he or she first becomes an
Outside Director. In order to be effective, the Deferral Election
Agreement must be completed and submitted to the Committee on or before the
30-day period has elapsed. The Committee will not accept Deferral
Election Agreements entered into after the 30-day period has
elapsed. If the Outside Director fails to complete a Deferral
Election Agreement by such time, he or she may enter into a Deferral Election
Agreement during any succeeding Enrollment Period in accordance with the rules
described in the preceding paragraph. For purposes of the exception
described in this paragraph, the term "Plan" means the Plan and any other plan
required to be aggregated with the Plan pursuant to Code Section 409A, and the
regulations and other guidance thereunder. Accordingly, if an Outside
Director has previously been eligible to participate in a plan required to be
aggregated with the Plan, then the 30-day exception described in this paragraph
shall not apply to him or her.
For each Deferral Election Agreement
the Participant enters into, the Participant shall specify:
(a)
The
percentage of Compensation the Participant wishes to contribute as an Elective
Deferral;
(b)
The
manner (by percentage) in which the amount in (a), above, is to be allocated
between the Participant's Cash Account and Stock Account; provided, however, in
the case of Compensation otherwise payable to the Participant in Stock, the
Compensation shall automatically be allocated to the Stock Account;
and
(c)
The
time and manner of distribution (consistent with the requirements of Section
4.4) of the Sub-Account established with respect to the Deferral Election
Agreement.
The Committee may from time to time
establish a minimum amount that may be deferred by a Participant pursuant to
this Section 4.2 for any Plan Year.
Elective Deferrals shall be credited to
the Participant's Cash Account or Stock Account, as the case may be, as soon as
administratively reasonable after the Compensation would have been paid to the
Participant had the Participant not elected to defer it under the
Plan.
In general, a Deferral Election
Agreement shall become irrevocable as of the last day of the Enrollment Period
applicable to it. However, if a Participant incurs an "unforeseeable
emergency," as defined in Section 4.5(d)(ii) after the Deferral Election
Agreement otherwise becomes irrevocable, the Deferral Election Agreement shall
be cancelled as of the date on which the Participant is determined to have
incurred the unforeseeable emergency and no further Elective Deferrals will be
made under it.
4.3
Adjustments
to Accounts
.
(a)
The
Participant's Cash Account shall be credited with earnings as of the last day of
each month. The amount so credited shall be the product
of: (i) the Cash Account balance as of such date (less any
contributions credited to the Account during the month); and (ii) 1/12 of the
sum of (A) the Prime Rate (in effect for the Plan Year) and (B) one percentage
point.
(b)
The
Elective Deferrals allocable to a Participant's Stock Account under a Deferral
Election Agreement shall be converted to Stock Units. In the case of
Elective Deferrals of Compensation otherwise payable to the Participant in cash,
the conversion shall occur on the day (the "conversion date") on which the
Elective Deferrals are credited to the Stock Account. On the
conversion date, the Elective Deferrals shall be converted to a number of whole
and fractional Stock Units determined by dividing the Elective Deferrals (plus
earnings) by the Fair Market Value of a share of Stock on the conversion
date. In the case of Elective Deferrals of Compensation otherwise
payable to the Participant in Stock, the conversion shall occur at the time the
Elective Deferrals are credited to the Stock Account pursuant to Section 4.2,
with the number of Stock Units so credited equal to the number of shares of
Stock otherwise payable to the Participant but for the Deferral Election
Agreement. On each date on which the Corporation pays a cash dividend
(the "dividend date"), the Stock Account shall be credited with an additional
number of Stock Units determined by dividing the dollar amount the Corporation
would have paid as a dividend if the Stock Units held in the Participant's Stock
Account as of the record date for the dividend were actual shares of Stock
divided by the Fair Market Value of a share of Stock on the dividend
date. Appropriate adjustments in the Stock Account shall be made as
equitably required to prevent dilution or enlargement of the Account from any
Stock dividend, Stock split, reorganization or other such corporate transaction
or event.
4.4
Commencement
and Form of Distribution of Sub-Accounts
. As stated in Section
4.2(c), above, as part of his or her Deferral Election Agreement, a Participant
shall elect: (a) the date on (or, in the case of Elective Deferrals
made for Plan Years commencing on or after January 1, 2010, the Plan Year in)
which distribution of each Sub-Account established for him or her under the Plan
is to commence, which date may be no earlier than December 31 of the Plan Year
immediately after the Plan Year in which the Compensation deferred under the
Deferral Election Agreement would otherwise have been paid to the Participant;
provided, however, for Elective Deferrals made for Plan Years commencing on or
after January 1, 2010, the date may be no earlier than the third Monday in
January immediately after the end of the first Plan Year following the Plan Year
in which the Compensation deferred under the Deferral Election Agreement would
otherwise have been paid to the Participant; and (b) the form of distribution of
each such Sub-Account from the available distribution forms set forth
below:
(a)
a
single lump-sum payment, or
(b)
annual
installments over a number, not to exceed 15, of years specified by the
Participant.
All
distributions from Cash Sub-Accounts shall be paid in the form of
cash. All distributions from Stock Sub-Accounts shall be paid in the
form of Stock (with each Stock Unit converted to one share of Stock at the time
of distribution).
If a
Participant elects payment in the form of a single lump sum, distribution shall
be made to the Participant in a single lump sum on the commencement date elected
by the Participant; provided, however, for Plan Years commencing on or after
January 1, 2010, distribution will be made on the third Monday in January of the
Plan Year elected by the Participant.
If the
Participant elects payment in the form of annual installments, the initial
installment payment shall be made on the commencement date elected by the
Participant; provided, however, for Elective Deferrals made for Plan Years
commencing on or after January 1, 2010, the initial installment shall be made on
the third Monday in January of the Plan Year elected by the Participant for
benefit commencement. The remaining annual installment payments shall
be made on each anniversary of the commencement date during the payment period
elected by the Participant. The amount of each installment payment
shall be equal to the cash balance or number of Stock Units (as the case may be)
in the Participant's Sub-Account immediately prior to the installment payment,
multiplied by a fraction, the numerator of which is one, and the denominator of
which is the number of installment payments remaining, with the last installment
consisting of the balance of the Participant's Sub-Account. Earnings
and dividends shall be credited to the Participant's Sub-Account in the manner
provided in Section 4.3(a) and (b) during the payment period.
A
Participant may modify an election for payment of a Sub-Account to postpone the
commencement date and change the form of payment to another form permitted under
the Plan. In order to be effective, the requested modification
must: (a) be in writing and be submitted to the Corporation at the
time and in the manner specified by the Committee; (b) not take effect for at
least 12 months from the date on which it is submitted to the Committee; (c) be
submitted to the Committee at least 12 months prior to the then scheduled
distribution commencement date ("original distribution date"); and (d) specify a
new distribution commencement date that is no earlier than five years after the
original distribution date. For purposes hereof, if the original
distribution date is a Plan Year rather than a specified date within a Plan
Year, the original distribution date shall be deemed to be the first day of the
Plan Year.
4.5
Exceptions
to Payment Terms
. Notwithstanding anything in this Article 4
or a Participant's Deferral Election Agreement (as may be modified pursuant to
Section 4.4) to the contrary, the following terms, if applicable, shall apply to
the payment of a Participant's Sub-Accounts.
(a)
Separation
from Service before Scheduled Distribution Commencement
Date
.
(i)
For Plan
Years Commencing Before January 1, 2010
.
For Elective Deferrals
made for Plan Years commencing before January 1, 2010, the rules set forth in
this Section 4.5(a)(i) shall apply. If a Participant has a Separation
from Service for any reason, including death or disability, before the date on
which distribution of a Sub-Account is scheduled to commence, distribution of
the Sub-Account will commence within 90 days after the date on which the
Separation from Service occurs. Except as specified in paragraph (b)
of this Section 4.5 and Article 7, distribution will be made in the same form
(i.e., lump sum or installments, and if installments, over the same period) as
elected by the Participant in his or her Deferral Election Agreement (as may be
modified pursuant to the last paragraph of Section 4.4).
(ii)
For Plan
Years Commencing On or After January 1, 2010
.
For Elective Deferrals
made for Plan Years commencing on or after January 1, 2010, the rules set forth
in this Section 4.5(a)(ii) shall apply. If a Participant has a
Separation from Service for any reason other than Retirement before the date on
which distribution of a Sub-Account is scheduled to commence, distribution of
the Sub-Account will be made in a single lump sum within 90 days after the date
on which the Separation from Service occurs.
(b)
Small
Payments
. If at any time the present value of any benefit
under the Plan that would be considered a "single plan" under Treasury
Regulation Section 1.409A-1(c)(2) together with the present value of any benefit
required to be aggregated with such benefit under Treasury Regulation Section
1.409A-1(c)(2), is less than the dollar limit set forth in Section 402(g)(1)(B)
of the Code, the Corporation may, in its discretion, distribute such benefit (or
benefits) to the Participant in the form of a single lump sum, provided that the
payment results in the liquidation of the entirety of the Participant's interest
under the "single plan," including all benefits required to be aggregated as
part of the "single plan" under Treasury Regulation Section 1.409A-1(c)(2), and
provided further the Corporation evidences its exercise of such discretion in
writing no later than the date of such payment.
(c)
Delay in
Distributions
.
(i) If
the Participant is a Specified Employee, any Plan distributions that are
otherwise to commence on the Participant's Separation from Service shall
commence on the date immediately following the six-month anniversary of the
Separation from Service or, if earlier, on the date of the Participant's
death. In this case, the first payment following the period of delay
required by this Section 4.5(c)(i) shall be increased by any amount that would
otherwise have been payable to the Participant under the Plan during the delay
period.
(ii) The
Corporation shall delay the distribution of any amount otherwise required to be
distributed under the Plan if, and to the extent that, the Corporation
reasonably anticipates the Corporation's deduction with respect to such
distribution otherwise would be limited or eliminated by application of Section
162(m) of the Code. In such event, (A) if any payment is delayed
during any year on account of Code Section 162(m), then all payments that could
be delayed on account of Code Section 162(m) during such year must also be
delayed; (B) such delayed payments must be paid either (1) in the first year in
which the Corporation reasonably anticipates the payment to be deductible, or
(2) the period beginning on the date of the Participant's Separation from
Service and ending on the later of the end of the Participant's year of
separation or the fifteenth (15th) day of the third month after such separation;
and (C) if payment is delayed to the date of Separation from Service with
respect to a Participant who is a Specified Employee, such payment shall
commence on the date immediately following the six-month anniversary of the
Separation from Service, or if earlier, on the date of the Participant's
death.
(iii) The
Corporation shall delay the distribution of any amount otherwise required to be
distributed under the Plan if, and to the extent that, the Corporation
reasonably anticipates the making of the distribution would violate Federal
securities laws or other applicable law. In such event, the
distribution will be made at the earliest date on which the Corporation
reasonably anticipates the making of the distribution will not cause such a
violation.
(d)
Acceleration
of Distributions
. All or a portion of a Participant's
Sub-Accounts may be distributed at an earlier time and in a different form than
specified in this Article 4:
(i) As
may be necessary to fulfill a Qualified Domestic Relations Order or as specified
in Section 1.409A-3(j)(4)(3) of the Treasury
Regulations. Distributions pursuant to a Qualified Domestic Relations
Order shall be made according to administrative procedures established by the
Corporation.
(ii) If
the Participant has an unforeseeable emergency. For these purposes an
"unforeseeable emergency" is a severe financial hardship of the Participant
resulting from an illness or accident of the Participant or the Participant's
spouse, Beneficiary or dependent (as defined in Section 152(a) of the Code,
without regard to Section 152(b)(1), (b)(2), and (d)(1)(B)), loss of the
Participant's property due to casualty (including the need to rebuild a home
following damage to a home not otherwise covered by insurance, for example, not
as a result of a natural disaster); or other similar extraordinary and
unforeseeable circumstances arising as a result of events beyond the control of
the Participant. For example, the imminent foreclosure of or eviction
from the Participant's primary residence may constitute an unforeseeable
emergency. In addition, the need to pay for medical expenses,
including non-refundable deductibles, as well as for the cost of prescription
drug medication, may constitute an unforeseeable emergency. Finally,
the need to pay for funeral expenses of a spouse, Beneficiary or a dependent (as
defined in Section 152(a) of the Code, without regard to Section 152(b)(1),
(b)(2) and (d)(1)(B)) may also constitute an unforeseeable
emergency. Except as otherwise provided in this paragraph (c)(ii),
the purchase of a home and the payment of college tuition are not unforeseeable
emergencies. Whether a Participant is faced with an unforeseeable
emergency permitting a distribution under this paragraph (c)(ii) is to be
determined based on the relevant facts and circumstances of each case, but, in
any case, a distribution on account of an unforeseeable emergency may not be
made to the extent such emergency is or may be relieved through reimbursement or
compensation from insurance or otherwise, by liquidation of the Participant's
assets, to the extent the liquidation of such assets would not cause severe
financial hardship, or by cessation of Elective Deferrals.
Distributions because of an
unforeseeable emergency must be limited to the amount reasonably necessary to
satisfy the emergency need (which may include amounts necessary to pay any
Federal, state, or local income taxes or penalties reasonably anticipated to
result from the distribution). Determinations of the amounts
reasonably necessary to satisfy the emergency need must take into account any
additional compensation available due to the Participant's cancellation of a
Deferral Election Agreement due to an unforeseeable emergency pursuant to
Section 4.2. However, the determination of amounts reasonably
necessary to satisfy the emergency need is not required to take into account any
additional compensation that, due to the unforeseeable emergency, is available
under another nonqualified deferred compensation plan but has not actually been
paid.
(iii) Due
to a failure of the Plan to satisfy Section 409A with respect to the
Participant, but only to the extent an amount is required to be included in the
Participant's income as a result of such failure.
(iv) In
the event of a Change in Control, in which case the Participant's Account shall
be distributed to him or her in a single lump sum within 90 days after the date
on which the Change in Control occurs.
4.6
Death
Benefit
. If a Participant dies with all or a portion of his or
her Account unpaid, the Account shall be paid to his or her Beneficiary, as
designated in accordance with Article 6, in the form (single lump sum or
installments) elected by the Participant under Sections 4.2 and 4.4, subject to
Section 4.5(b) and Article 7, with distribution commencing to the Beneficiary
within 90 days following the date of the Participant's
death. Notwithstanding the preceding sentence, for Elective Deferrals
made for Plan Years beginning on or after January 1, 2010, if a Participant dies
with all or a portion of his or her Account unpaid, the Account shall be paid to
his or her Beneficiary, as designated in accordance with Article 6, in the form
of a single lump sum, with distribution commencing to the Beneficiary within 90
days following the date of the Participant's death.
4.7
Funding
. The
Corporation's obligations under the Plan shall in every case be an unfunded and
unsecured promise to pay. Each Participant's or Beneficiary's rights
under the Plan shall be no greater than those of a general, unsecured creditor
of the Corporation. The amount of each Participant's Account shall be
reflected on the accounting records of the Corporation but shall not be
construed to create, or require the creation of, a trust, custodial or escrow
account. No Participant shall have any right, title or interest
whatsoever in or to any investment reserves, accounts or funds the Corporation
may purchase, establish or accumulate, and no Plan provision or action taken
pursuant to the Plan shall create or be construed to create a trust or a
fiduciary relationship of any kind between the Corporation and a Participant or
any other person. All amounts paid under the Plan shall be paid in
cash or Stock from the general assets of the Corporation, and the Corporation
shall not be obligated under any circumstances to fund its financial obligations
under the Plan. The Corporation may create a trust to hold funds or
securities to be used in payment of its obligation under the Plan and may fund
such trust; provided, however, any funds contained therein shall remain liable
to the claims of the Corporation's general creditors.
V
.
ADMINISTRATION
5.1
Administration
. The
Plan shall be administered by the Committee. In addition to the other
powers granted under the Plan, the Committee shall have all powers necessary to
administer the Plan, including, without limitation, powers:
(a)
to
interpret the provisions of the Plan;
(b)
to
establish and revise the method of accounting for the Plan and to maintain the
Accounts; and
(c)
to
establish rules for the administration of the Plan and to prescribe any forms
required to administer the Plan.
5.2
Actions
of the Committee
. The Committee (including any person or
entity to whom the Committee has delegated duties, responsibilities or
authority, to the extent of such delegation) has total and complete
discretionary authority to determine conclusively for all parties all questions
arising in the administration of the Plan, to interpret and construe the terms
of the Plan, and to determine all questions of eligibility and status of
Participants and Beneficiaries under the Plan and their respective
interests. Subject to the claims procedures of Article 9, all
determinations, interpretations, rules and decisions of the Committee (including
those made or established by any person or entity to whom the Committee has
delegated duties, responsibilities or authority, if made or established pursuant
to such delegation) are conclusive and binding upon all persons having or
claiming to have any interest or right under the Plan.
5.3
Delegation
. The
Committee, or any officer or other employee of the Corporation designated by the
Committee, shall have the power to delegate specific duties and responsibilities
to officers or other employees of the Corporation or other individuals or
entities. Any delegation may be rescinded by the Committee at any
time. Each person or entity to whom a duty or responsibility has been
delegated shall be responsible for the exercise of such duty or responsibility
and shall not be responsible for any act or failure to act of any other person
or entity.
5.4
Expenses
. The
expenses of administering the Plan shall be borne by the
Corporation.
5.5
Reports
and Records
. The Committee, and those to whom the Committee
has delegated duties under the Plan, shall keep records of all their proceedings
and actions and shall maintain books of account, records and other data as shall
be necessary for the proper administration of the Plan and for compliance with
applicable law.
5.6
Valuation
of Accounts and Account Statements
. As of each valuation date,
the Committee shall adjust the previous Account balances of each Participant for
Elective Deferrals, distributions and investment gains and losses. A
"valuation date," for these purposes, is the last day of each calendar quarter,
and such other dates as the Committee may designate from time to time in its
discretion. The Committee shall provide each Participant with a
statement of his or her Account balances on a quarterly basis.
5.7
Indemnification
and Exculpation
. The agents, officers, directors and employees
of the Corporation and its Subsidiaries and the Committee shall be indemnified
and held harmless by the Corporation against and from any and all loss, cost,
liability or expense that may be imposed upon or reasonably incurred by them in
connection with or resulting from any claim, action, suit or proceeding to which
they may be a party or in which they may be involved by reason of any action
taken or failure to act under the Plan and against and from any and all amounts
paid by them in settlement (with the Corporation's written approval) or paid by
them in satisfaction of a judgment in any such action, suit or
proceeding. The foregoing provision shall not be applicable to any
person if the loss, cost, liability or expense is due to such person's gross
negligence or willful misconduct.
VI.
BENEFICIARY
DESIGNATION
6.1
Designation
of Beneficiary
. Each Participant shall be entitled to
designate a Beneficiary or Beneficiaries who, upon the Participant's death, will
receive the amounts that otherwise would have been paid to the Participant under
the Plan. All designations shall be signed by the Participant and
shall be in a form prescribed by the Committee. The Participant may
change his or her designation of Beneficiary at any time, on a form prescribed
by the Committee. The filing of a new Beneficiary designation form by
a Participant shall automatically revoke all prior designations by that
Participant.
6.2
Death of
Beneficiary
. In the event all the Beneficiaries named by a
Participant pursuant to Section 6.1 predecease the Participant, the amounts that
would have been paid to the Participant under the Plan shall be paid to the
Participant's estate.
6.3
Ineffective
Designation
. In the event the Participant does not designate a
Beneficiary, or for any reason such designation is ineffective in whole or in
part, the ineffectively designated amounts shall be paid to the Participant's
estate.
VII.
AMENDMENT AND
TERMINATION
The Board of Directors or the Committee
has the authority to amend, modify and/or terminate the Plan at any
time. No amendment or termination of the Plan shall in any manner
reduce the Account balance of any Participant without the consent of the
Participant (or if the Participant has died, his or her
Beneficiary). Without limiting the foregoing, the Board may, in its
sole discretion: (a) freeze the Plan by precluding any further
Elective Deferrals and/or other credits, but otherwise maintain the balance of
the provisions of the Plan; or (b) terminate the Plan in its entirety and
distribute the Participant's Accounts at an earlier date and in a different form
than otherwise provided under the Plan, provided such termination and
distribution comply with the requirements of Section 409A of the
Code.
VIII.
CLAIMS
PROCEDURE
The
Committee shall notify a Participant in writing within 90 days of the
Participant's written application for benefits of the Participant's eligibility
or non-eligibility for benefits under the Plan; provided, however, benefit
distribution shall not be contingent upon a Participant's application for
benefits. If the Committee determines a Participant is not eligible
for benefits or full benefits, the notice shall set forth: (a) the
specific reasons for such denial; (b) a specific reference to the provision of
the Plan on which the denial is based; (c) a description of any additional
information or material necessary for the Participant to perfect the claim, and
a description of why it is needed; and (d) an explanation of the Plan's claims
review procedure and other appropriate information as to the steps to be taken
if the Participant wishes to have the claim reviewed. If the
Committee determines there are special circumstances requiring additional time
to make a decision, the Committee shall notify the Participant of the special
circumstances and the date by which a decision is expected to be made and may
extend the time for up to an additional 90-day period. If a
Participant is determined by the Committee to be not eligible for benefits, or
if a Participant believes he or she is entitled to greater or different
benefits, the Participant shall have the opportunity to have the Participant's
claim reviewed by the Committee by filing a petition for review with the
Committee within 60 days after receipt by the Participant of the notice issued
by the Committee. The petition shall state the specific reasons the
Participant believes the Participant is entitled to benefits or greater or
different benefits. Within 60 days after receipt by the Committee of
the petition, the Committee shall afford the Participant (and the Participant's
counsel, if any) an opportunity to present the Participant's position to the
Committee orally or in writing, and the Participant (or counsel) shall have the
right to review the pertinent documents, and the Committee shall notify the
Participant of its decision in writing within the 60-day period, stating
specifically the basis of the decision written in a manner calculated to be
understood by the Participant and the specific provisions of the Plan on which
the decision is based. If, because of the need for a hearing, the
60-day period is not sufficient, the decision may be deferred for up to another
60-day period at the election of the Committee, but notice of this deferral
shall be given to the Participant. If a Participant does not appeal
on time, the Participant will have failed to exhaust the Plan's internal
administrative appeal process, which is generally a prerequisite to bringing
suit. In the event an appeal of a denial of a claim for benefits is
denied, any lawsuit to challenge the denial of such claim must be brought within
one year of the date the Committee has rendered a final decision on the
appeal.
In the case of a Participant's death,
the same procedures shall apply to the Beneficiary.
IX.
MISCELLANEOUS
9.1
Rights as
Stockholder
. No person shall have any right as a stockholder
of the Corporation with respect to any shares of Stock or other equity security
of the Corporation payable under the Plan unless and until such person becomes a
stockholder of record with respect to such shares or equity
security.
9.2
Governing
Law
. The Plan and all determinations made and actions taken
pursuant thereto, to the extent not otherwise governed by the Code or the laws
of the United States, shall be governed by the laws of the State of Iowa and
construed in accordance therewith without giving effect to principles of
conflicts of laws.
9.3
No Limit
on Compensation Plans or Arrangements
. Nothing contained in
the Plan shall prevent the Corporation or a Subsidiary from adopting or
continuing in effect other or additional compensation plans or
arrangements.
9.4
No Right
to Remain a Director
. Neither the adoption and maintenance of
the Plan nor the execution by the Corporation of a Deferral Election Agreement
with any Participant be construed as giving a Participant the right to be
retained as a Director of the Corporation, nor will it affect in any way the
right of the Corporation to terminate a Participant's position as a Director,
with or without cause. In addition, the Corporation may at any time
remove or dismiss a Participant from his or her position as a Director free from
any liability or any claim under the Plan.
9.5
Severability
. If
any provision of the Plan or any Deferral Election Agreement is or becomes or is
deemed to be invalid, illegal or unenforceable in any jurisdiction or would
disqualify the Plan or any Deferral Election Agreement under any law deemed
applicable by the Board, such provision shall be construed or deemed amended to
conform to applicable laws, or if it cannot be so construed or deemed amended
without, in the determination of the Board, materially altering the purpose or
intent of the Plan or the Deferral Election Agreement, such provision shall be
stricken as to such jurisdiction or Deferral Election Agreement, and the
remainder of the Plan or any such Deferral Election Agreement shall remain in
full force and effect.
9.6
Securities
Matters
. The Corporation shall not be required to deliver any
share of Stock until the requirements of any federal or state securities or
other laws, rules or regulations (including the rules of any securities
exchange) as may be determined by the Corporation to be applicable are
satisfied.
9.7
No
Fractional Shares
. No fractional shares of Stock
shall be issued or delivered pursuant to the Plan. Any fractional
share otherwise payable under the Plan shall be settled in the form of
cash.
9.8
Headings
. Headings
are given to the Articles, Sections and Subsections of the Plan solely as a
convenience to facilitate reference. Such headings shall not be
deemed in any way material or relevant to the construction or interpretation of
the Plan or any provision thereof.
9.9
Nontransferability
. No
benefit payable at any time under the Plan will be subject in any manner to
alienation, sale, transfer, assignment, pledge, levy, attachment or encumbrance
of any kind.
9.10
Unfunded
Plan
. The Plan is intended to be an unfunded plan maintained
primarily to provide deferred compensation benefits for "a select group of
management or highly compensated employees" within the meaning of Sections
201(2), 301(a)(3) and 401(a)(1)
of ERISA, and
therefore is further intended to be exempt from the provisions of Parts 2, 3,
and 4 of Title I of ERISA.
9.11
No Other
Agreements
. The terms and conditions set forth herein
constitute the entire understanding of the Corporation, the Subsidiaries and the
Participants with respect to the matters addressed herein.
9.12
Incapacity
. In
the event any Participant is unable to care for his or her affairs because of
illness or accident, any payment due may be paid to the Participant's spouse,
parent, brother, sister, adult child or other person deemed by the Corporation
to have incurred expenses for the care of the Participant, unless a duly
qualified guardian or other legal representative has been
appointed.
9.13
Release
. Any
payment of benefits to or for the benefit of a Participant made in good faith by
the Corporation in accordance with the Corporation's interpretation of its
obligations hereunder, shall be in full satisfaction of all claims against the
Corporation and all Subsidiaries for benefits under the Plan to the extent of
such payment.
9.14
Notices
. Any
notice permitted or required under the Plan shall be in writing and shall be
hand-delivered or sent, postage prepaid, by first class mail, or by certified or
registered mail with return receipt requested, to the Committee, if to the
Corporation, or to the address last shown on the records of the Corporation, if
to a Participant. Any such notice shall be effective as of the date
of hand delivery or mailing.
9.15
Successors
. All
obligations of the Corporation under the Plan shall be binding upon and inure to
the benefit of any successor to the Corporation, whether the existence of such
successor is the result of a direct or indirect purchase, merger, consolidation
or otherwise, of all or substantially all of the business or assets of the
Corporation.
-16-
Exhibit
10.25
HNI
CORPORATION
EXECUTIVE
DEFERRED COMPENSATION PLAN
DEFERRAL
ELECTION AGREEMENT
Applies
Only to Compensation Earned in, or for Performance Periods Beginning in,
_____
This Deferral Election Agreement (this
"Agreement") is made by and between HNI Corporation (the "Corporation") and
_____________________________
(print name)
(the "Member")
on the date below. The Corporation has established a nonqualified
deferred compensation plan, the HNI Corporation Executive Deferred Compensation
Plan (the "Plan"), for the benefit of certain members of the Corporation who are
eligible to participate in the Plan according to the terms of the Plan
document. The Plan permits an eligible member to defer a percentage
of his/her Base Salary, as well as his/her compensation under the HNI
Corporation Annual Incentive Plan ("AIP") and HNI Corporation Supplemental
Income Plan ("SIP") (collectively, "Compensation"). The deferral for
the Plan year commencing
______________
(the
"Current Election Year") is made by entering into this Agreement with the
Corporation. Capitalized terms used but not defined in this Agreement
have the meaning given in the Plan.
The Corporation and the Member agree as
follows:
1.
Compensation Reduction
Election.
The Corporation will reduce the amount of the
Member's Base Salary otherwise payable to the Member in the Current Election
Year, and/or the amount payable to him/her under the AIP and SIP for services
performed in the Current Election Year and will credit these amounts to the
Member's Account under the Plan according to the Member's elections in Section 4
below.
2.
Accounts.
The
Corporation will maintain two Accounts under the Plan, the Cash Account and the
Stock Account. The Cash Account will be credited with interest at
Prime Rate plus one percentage point. The Stock Account will be held
in stock units. Each stock unit will be equal to a share of common
stock of the Corporation ("Stock") and will be credited with reinvested
dividends as if actually held in the form of Stock. The Member may
elect to have any Compensation (permitted to be deferred under this Agreement)
that otherwise (but for this Agreement) would have been paid to the Member in
the form of cash, credited to the Stock Account and held in the form of stock
units or credited to the Cash Account. Compensation deferred under
this Agreement that would otherwise be paid to the Member in the form of Stock
will automatically be credited to the Stock Account and held in stock
units.
3.
Manner of Distribution of
Accounts.
All distributions from the Cash Account will be made
in cash. All distributions from the Stock Account will be made in
Stock. The Member may elect when and how amounts credited under this
Agreement will be distributed. Distributions may be made in a single
lump sum or substantially equal annual installments over a period of years, as
elected by the Member.
4. Member's
Election for Current Election Year.
Please fill in all applicable blanks
(showing "0" if no amount will be deferred) and check all applicable boxes below
to complete the election.
i.
Base
Salary
The
Member elects to defer that portion of Base Salary otherwise payable to him/her
in cash for services performed by the Member in the Current Election Year to be
credited to the Member's Cash Account and/or Stock Account as
follows:
Cash
Account:
_____%
(Insert percent)
of total
Base Salary
Stock
Account:
_____%
(Insert percent)
of total
Base Salary
(together,
can be no more than 100%)
ii.
AIP
Compensation
1)
Deferral from
Cash Compensation.
The Member elects to defer that portion of
AIP Compensation otherwise payable to him/her in cash for services performed in
the Current Election Year to be credited to the Member's Cash Account and/or
Stock Account as follows:
Cash
Account:
_____%
(Insert percent)
Stock
Account:
_____%
(Insert percent)
(together,
can be no more than 100%)
2)
Deferral from
Stock Compensation
.
The Member elects
to defer that portion of AIP Compensation otherwise payable to him/her in Stock
for services performed in the Current Election Year to be credited to the
Member's Stock Account as follows:
Stock
Account:
_____%
(Insert percent)
iii.
SIP
Compensation
1)
Deferral from
Cash Compensation.
The Member elects to defer that portion of
SIP Compensation otherwise payable to him/her in cash for services performed in
the Current Election Year to be credited to the Member's Cash Account and/or
Stock Account as follows:
Cash
Account:
_____%
(Insert percent)
Stock
Account:
_____%
(Insert percent)
(together,
can be no more than 100%)
2)
Deferral from
Stock Compensation
.
The Member elects
to defer that portion of SIP Compensation otherwise payable to him/her in Stock
for services performed in the Current Election Year to be credited to the
Member's Stock Account as follows:
Stock
Account:
_____%
(Insert percent)
|
b.
|
When/How
Distributions Are Made
|
Distribution
from the Cash Account will be made in the form of cash. Distributions
from the Stock Account will be made in the form of Stock, which will be
delivered to the Corporation's transfer agent and placed in a direct
registration account in the Member's name unless the Member notifies the
Corporation in sufficient time to coordinate a different share delivery
method. All distributions from the Plan will be made on the 3
rd
Monday of January.
Distributions from both
the Cash Account and the Stock Account will be made as follows:
i.
Distribution
Date
:
[Select one]
o
Separation
from Service
|
o
|
Commencement
date: Distribution from the Cash Account and/or Stock Account
will commence in _____.
[Specify year in which
distributions will begin, may be no earlier than
_____.]
|
ii.
Form
of Distribution
:
[Select one]
o
Lump
sum
|
o
|
Substantially
equal annual installments over ___
[Insert number, not to exceed
15]
years
|
Note: You may change the
time and form of distribution of an Account only under limited circumstances,
generally requiring an additional 5-year deferral of your benefit commencement
date.
The Corporation reserves the right to
amend the Plan in any manner and to terminate the Plan and, to the extent
permitted by Section 409A of the Internal Revenue Code and other applicable law,
require an immediate distribution of all Accounts.
5.
The
above deferral elections are based on the assumption the Corporation will
continue its established practice of paying:
|
·
|
100%
of the AIP award in cash; and
|
|
·
|
100%
of the SIP award in Stock.
|
If any of the above Compensation items
should be paid according to a different method (for example, 100% of the AIP
award is actually paid in Stock), the Corporation will adjust the amount
deferred in Stock or cash (as the case may be) under this Agreement so the
dollar amount of the total deferral is the same as if the Corporation paid
Compensation according to the established practice described above.
6.
The
Member understands this Agreement is subject to all of the terms and conditions
of the Plan and acknowledges the Member has either read, or been given the
opportunity to read, the Plan. In particular, the Member understands
there are some exceptions to the payment terms described above. For
example, if the Member Separates from Service for reasons other than Retirement,
payment of the Member's Account will generally be made in a lump sum at
Separation from Service, and a single lump-sum distribution will be made in the
event of a Change in Control.
7.
The
Member understands if he or she is a "specified employee" within the meaning of
Section 409A of the Internal Revenue Code, any distribution that is otherwise to
begin on his or her Separation from Service will be delayed for six months to
comply with applicable tax law.
8.
The
Member acknowledges that in making the decision to defer Compensation under the
Plan, the Member has not relied upon any financial or tax advice provided by the
Corporation, and the Member understands the Corporation has not received a
ruling or determination from the Internal Revenue Service as to the effect of
the deferral on the Member's income or employment tax liability.
9.
Except
as permitted by the Plan and applicable law or deemed advisable by the
Corporation in order to preserve the intended tax consequences of the Plan, this
Agreement, once made, may not be revoked. It is binding upon, and
will inure to the benefit of, the Member, the Member's beneficiaries, heirs and
personal representatives, the Corporation and its successors and
assigns.
Dated this ___ day of
_________________, _____.
Received and accepted by HNI
Corporation this _______ day of_________________, _____.
|
HNI
Corporation
|
|
|
|
|
|
|
|
|
|
|
By:
|
|
|
|
Name:
|
|
|
|
Title:
|
|
|
Exhibit 10.26
PARTICIPATION
AGREEMENT
2007
Equity Plan for Non-Employee Directors of HNI Corporation
This Participation Agreement (this
"Agreement") between _________________________
(print name)
("Director") and
HNI Corporation (the "Corporation") is for the period commencing January 1, ____
and ending December 31, _____, and is subject to all of the terms and conditions
of the 2007 Equity Plan for Non-Employee Directors of HNI Corporation (the
"Plan") and any successor plan.
I elect to receive ________% of my
Director cash compensation paid in the form of HNI common stock in accordance
with the terms of the Plan.
Dated ________________________,
_____.
Please
complete this Agreement and return it to the Corporation's Vice President,
Member & Community Relations, before January 1, _____ should you wish to
participate.
Received and accepted by HNI
Corporation this
day
of_____________, ______.
|
HNI
Corporation
|
|
|
|
|
|
|
|
|
|
|
By:
|
|
|
|
Name:
|
|
|
|
Title:
|
|
|
EXHIBIT
21
SUBSIDIARIES
OF THE REGISTRANT
Subsidiary
|
|
Country/State
of Incorporation
|
|
Doing Business As
|
|
|
|
|
|
Allied
Fireside, Inc.
|
|
Wisconsin
|
|
Inactive
|
|
|
|
|
|
Allsteel
Inc.
|
|
Illinois
|
|
Allsteel
Inc.
|
|
|
|
|
|
Maxon
Furniture Inc.
|
|
Iowa
|
|
Maxon
Furniture Inc.
|
|
|
|
|
|
The
Gunlocke Company L.L.C.
|
|
Iowa
|
|
The
Gunlocke Company L.L.C.
|
|
|
|
|
|
Hearth
& Home Technologies Inc.
|
|
Iowa
|
|
Hearth
& Home Technologies Inc.
|
|
|
|
|
|
HNI
Asia L.L.C.
|
|
Iowa
|
|
HNI
Asia L.L.C.
|
|
|
|
|
|
HFM
Partners
|
|
Iowa
|
|
HFM
Partners
|
|
|
|
|
|
HNI
Services L.L.C.
|
|
Iowa
|
|
HNI
Services L.L.C.
|
|
|
|
|
|
The
HON Company
|
|
Iowa
|
|
The
HON Company
|
|
|
|
|
|
HON
INDUSTRIES (Canada) Inc.
|
|
Canada
|
|
HON
INDUSTRIES (Canada) Inc.
|
|
|
|
|
|
HNI
International Inc.
|
|
Iowa
|
|
HNI
International Inc.
|
|
|
|
|
|
HNI
International (Mexico) L.L.C.
|
|
Iowa
|
|
Inactive
|
|
|
|
|
|
HNI
Technologies Inc.
|
|
Iowa
|
|
HNI
Technologies Inc.
|
|
|
|
|
|
Pearl
City Insurance Company
|
|
Vermont
|
|
Pearl
City Insurance Company
|
|
|
|
|
|
River
Bend Capital Corporation
|
|
Iowa
|
|
River
Bend Capital Corporation
|
|
|
|
|
|
HON
Internacional de Mexico S.de R.L.de C.V.
|
|
Mexico
|
|
HON
Internacional de Mexico
S.de
R.L.de C.V.
|
|
|
|
|
|
HON
Internacional Servicios de Mexico, S.de R.L. de C.V.
|
|
Mexico
|
|
HON
Internacional Servicios de Mexico, S.de R.L. de C.V.
|
|
|
|
|
|
Paoli
Inc.
|
|
Iowa
|
|
Paoli
Inc.
|
|
|
|
|
|
HHT
L.L.C.
|
|
Washington
|
|
HHT
L.L.C.
|
|
|
|
|
|
Omni
Workspace Company
|
|
Minnesota
|
|
Omni
Workspace Company
|
|
|
|
|
|
IntraSpec
Solutions, LLC
|
|
Minnesota
|
|
Inactive
|
|
|
|
|
|
A&M
Business Interior Services, LLC
|
|
Minnesota
|
|
A&M
Business Interior Services, LLC
|
|
|
|
|
|
Corporate
Installations Minneapolis LLC
|
|
Iowa
|
|
Corporate
Installations Minneapolis LLC
|
|
|
|
|
|
HNI
International (Puerto Rico) L.L.C.
|
|
Iowa
|
|
HNI
International (Puerto Rico) L.L.C.
|
|
|
|
|
|
MacThrift
Office Furniture LLC
|
|
Delaware
|
|
MacThrift
Office Furniture LLC
|
|
|
|
|
|
Hickory
Business Furniture, LLC
|
|
North
Carolina
|
|
Hickory
Business Furniture, LLC
|
Subsidiary
|
|
Country/State
of Incorporation
|
|
Doing Business As
|
|
|
|
|
|
Commercial
Office Interiors LLC
|
|
Delaware
|
|
Commercial
Office Interiors LLC
|
|
|
|
|
|
Interior
Construction Services LLC
|
|
Minnesota
|
|
Interior
Construction Services LLC
|
|
|
|
|
|
Installation
Technology LLC
|
|
Minnesota
|
|
Installation
Technology LLC
|
|
|
|
|
|
Emerald
City Moving & Storage LLC
|
|
Minnesota
|
|
Emerald
City Moving & Storage LLC
|
|
|
|
|
|
Fullmer
Contract, LLC
|
|
Delaware
|
|
Fullmer
Contract, LLC
|
|
|
|
|
|
Contract
Resource Group LLC
|
|
Delaware
|
|
Contract
Resource Group LLC
|
|
|
|
|
|
Wilson
Office Interiors LLC
|
|
Delaware
|
|
Wilson
Office Interiors LLC
|
|
|
|
|
|
Compass
Office Solutions LLC
|
|
Delaware
|
|
Compass
Office Solutions LLC
|
|
|
|
|
|
Workspace
Ohio LLC
|
|
Delaware
|
|
Dupler
Office
|
|
|
|
|
|
Young
Office Solutions LLC
|
|
Delaware
|
|
Young
Office Solutions LLC
|
|
|
|
|
|
IAW
LLC
|
|
Delaware
|
|
Ivan
Allen Workspace
|
|
|
|
|
|
HNI
Asia Technology Services (Shenzhen) Limited
|
|
PRC
|
|
HNI
Asia Technology Services (Shenzhen) Limited
|
|
|
|
|
|
HNI
Hong Kong Limited
|
|
Hong
Kong
|
|
HNI
Hong Kong Limited
|
|
|
|
|
|
Fullmer
Installation Company
|
|
California
|
|
Fullmer
Installation Company
|
|
|
|
|
|
Dongguan
Lamex Furniture Co. Ltd.
|
|
PRC
|
|
Dongguan
Lamex Furniture Co. Ltd.
|
|
|
|
|
|
Global
Known Ltd.
|
|
Hong
Kong
|
|
Inactive
|
|
|
|
|
|
Lamex
Holdings Ltd.
|
|
Hong
Kong
|
|
Lamex
Holdings Ltd.
|
|
|
|
|
|
Lamex
Trading Co. Ltd.
|
|
Hong
Kong
|
|
Lamex
Trading Co. Ltd.
|
|
|
|
|
|
Allsteel
Asia Ltd.
|
|
Hong
Kong
|
|
Allsteel
Asia Ltd.
|
|
|
|
|
|
Polden
Co. Ltd.
|
|
Hong
Kong
|
|
Polden
Co. Ltd.
|
|
|
|
|
|
Lamex
China Investment Ltd.
|
|
Hong
Kong
|
|
Lamex
China Investment Ltd.
|
|
|
|
|
|
Lamex
China Development Ltd.
|
|
Hong
Kong
|
|
Lamex
China Development Ltd.
|
EXHIBIT
23
CONSENT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby
consent to incorporation by reference in the Registration Statements on Form S-8
(No. 033-54163, No.033-61305, No. 333-31366, No. 333-91682, No. 333-107690, No.
333-142717, No. 333-142742, and No. 333-159935) and on Form S-3 (No. 333-157578
and No. 333-159127) of HNI Corporation of our report dated February 26, 2010
relating to the financial statements, financial statement schedule, and the
effectiveness of internal control over financial reporting, which appears in
this Annual Report on Form 10-K.
/s/PricewaterhouseCoopers
LLP
Chicago,
Illinois
February
26, 2010
EXHIBIT 31.1
CERTIFICATION
OF CHIEF EXECUTIVE OFFICER
Sarbanes-Oxley
Act Section 302
I, Stan
A. Askren, 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:
February 26, 2010
|
|
/s/ Stan A. Askren
|
|
|
Name:
|
Stan
A. Askren
|
|
|
Title:
|
Chairman,
President and Chief
Executive
Officer
|
EXHIBIT
31.2
CERTIFICATION
OF CHIEF FINANCIAL OFFICER
Sarbanes-Oxley
Act Section 302
I, Kurt
A. Tjaden, 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 annual 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.
|
and
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: February
26, 2010
|
|
/s/ Kurt A. Tjaden
|
|
|
Name:
|
Kurt
A. Tjaden
|
|
|
Title:
|
Vice
President and Chief Financial
Officer
|
EXHIBIT
32.1
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
In
connection with the Annual Report on Form 10-K of HNI
Corporation (the "Corporation") for the period ended January 2, 2010,
as filed with the Securities and Exchange Commission on the date hereof (the
"Report"), Stan A. Askren, as Chairman, President and Chief Executive Officer of
the Corporation, 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 periods expressed in the Report.
|
/s/ Stan A. Askren
|
|
Name:
|
Stan
A. Askren
|
|
Title:
|
Chairman,
President and Chief
|
|
|
Executive
Officer
|
|
Date:
|
February
26, 2010
|
|
|
|
|
|
|
|
/s/ Kurt A. Tjaden
|
|
Name:
|
Kurt
A. Tjaden
|
|
Title:
|
Vice
President and Chief Financial
|
|
|
Officer
|
|
Date:
|
February
26, 2010
|
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.