UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
  
FORM 10-Q
  
(MARK ONE) 
  
     / X /   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
 SECURITIES EXCHANGE ACT OF 1934
  
For the quarterly period ended OctoberApril 3, 2009.2010.
  
OR
  
     /    /   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
 SECURITIES EXCHANGE ACT OF 1934
  
For the transition period from ____________________ to ____________________
  
Commission File Number: 1-14225
  
HNI Corporation
(Exact name of registrant as specified in its charter)
  
Iowa
(State or other jurisdiction of
incorporation or organization)
42-0617510
(I.R.S. Employer
Identification Number)
  
P. O. Box 1109, 408 East Second Street
Muscatine, Iowa 52761-0071
(Address of principal executive offices)
52761-0071
(Zip Code)
  
Registrant's telephone number, including area code: 563/272-7400
  
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d)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              
 
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(232.405 of this chapter) during the preceding 12 months (or for such shorter periodprior that the registrant was required to submit and post such files).          YES                  NONO____
  
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 the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer      X                                                                                               Accelerated filer          
Non-accelerated filer                 (Do not check if a smaller reporting company)
Smaller reporting company           
  
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).      YES                  NO      X        
 
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date.
Class
Common Shares, $1 Par Value
Outstanding at OctoberApril 3, 20092010
45,037,28745,217,413

 


HNI Corporation and SUBSIDIARIES
  
INDEX
  
PART I.    FINANCIAL INFORMATION
 Page
  
Item 1.    Financial Statements (Unaudited). 
  
Condensed Consolidated Balance Sheets OctoberApril 3, 2009,2010, and January 3, 20092, 20103
  
Condensed Consolidated Statements of Income Three Months Ended OctoberApril 3, 2009,2010, and September 27, 2008April 4, 20095
Condensed Consolidated Statements of Income Nine Months Ended October 3, 2009, and September 27, 20086
  
Condensed Consolidated Statements of Cash Flows NineThree Months Ended OctoberApril 3, 2009,2010, and September 27, 2008April 4, 200976
  
Notes to Condensed Consolidated Financial Statements87
  
Item 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations.Operations1917
  
Item 3.    Quantitative and Qualitative Disclosures About Market Risk.Risk2522
  
Item 4.    Controls and Procedures.Procedures2523
  
PART II.    OTHER INFORMATION
  
Item 1.    Legal Proceedings.Proceedings2624
  
Item 1A. Risk Factors.Factors2624
  
Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds.Proceeds2624
  
Item 3.    Defaults Upon Senior Securities – None.-
Item 4.    Submission of Matters to a Vote of Security Holders – None. None-
  
Item 5.    Other Information – None.None-
  
Item 6.    Exhibits.Exhibits2625
  
SIGNATURES2726
  
EXHIBIT INDEX2827



2

PART I.     FINANCIAL INFORMATION

Item 1.     Financial Statements (Unaudited).

HNI Corporation and SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
HNI Corporation and SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
 
HNI Corporation and SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
 
            
 
Oct. 3,
2009
(Unaudited)
  
Jan. 3,
2009
  
Apr. 3,
2010
(Unaudited)
  
Jan. 2,
2010
 
ASSETS (In thousands)  (In thousands) 
            
CURRENT ASSETS            
Cash and cash equivalents $45,968  $39,538  $43,041  $87,374 
Short-term investments  8,151   9,750   7,972   5,994 
Receivables  187,916   238,327   157,467   163,732 
Inventories (Note C)  67,011   84,290   64,925   65,144 
Deferred income taxes  20,022   16,313   18,508   20,299 
Prepaid expenses and other current assets  19,128   29,623   23,040   17,728 
Total Current Assets  348,196   417,841   314,953   360,271 
                
PROPERTY, PLANT, AND EQUIPMENT, at costPROPERTY, PLANT, AND EQUIPMENT, at cost     PROPERTY, PLANT, AND EQUIPMENT, at cost     
Land and land improvements  23,757   23,753   21,710   21,815 
Buildings  279,020   277,898   264,955   267,596 
Machinery and equipment  499,608   525,996   486,887   490,287 
Construction in progress  5,804   21,738   7,624   8,377 
  808,189   849,385   781,176   788,075 
Less accumulated depreciation  535,999   533,779   530,286   527,973 
                
Net Property, Plant, and Equipment  272,190   315,606   250,890   260,102 
                
GOODWILL  267,865   268,392   260,628   261,114 
                
OTHER ASSETS  136,133   163,790   109,224   112,839 
                
Total Assets $1,024,384  $1,165,629  $935,695  $994,326 
                
See accompanying Notes to Condensed Consolidated Financial Statements.

 
3 
 


HNI Corporation and SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
HNI Corporation and SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
 
HNI Corporation and SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
 
            
 
Oct. 3,
2009
(Unaudited)
  
Jan. 3,
2009
(As Adjusted)
  
Apr. 3,
2010
(Unaudited)
  
Jan. 2,
2010
 
LIABILITIES AND EQUITY (In thousands, except share and per share value data)  (In thousands, except share and per share value data) 
            
CURRENT LIABILITIES            
Accounts payable and accrued expenses $300,301  $313,431  $255,614  $299,718 
Note payable and current maturities of long-term
debt and capital lease obligations
  2,374   54,494   50,009   39 
Current maturities of other long-term obligations  478   5,700   321   385 
Total Current Liabilities  303,153   373,625   305,944   300,142 
                
LONG-TERM DEBT  200,000   267,300   150,000   200,000 
                
CAPITAL LEASE OBLIGATIONS  1   43   -   - 
                
OTHER LONG-TERM LIABILITIES  50,557   50,399   48,607   50,332 
                
DEFERRED INCOME TAXES  33,565   25,271   22,521   24,227 
                
EQUITY                
Parent Company shareholders' equity:        
HNI Corporation shareholders' equity:        
Capital Stock:                
Preferred, $1 par value, authorized 2,000,000
shares, no shares outstanding
  -   -   -   - 
                
Common, $1 par value, authorized
200,000,000 shares, outstanding -
  45,037   44,324         
October 3, 2009 – 45,037,287 shares;
        
January 3, 2009 – 44,324,409 shares        
April 3, 2010 – 45,217,413 shares;        
January 2, 2010 – 45,093,504 shares  45,217   45,093 
                
Additional paid-in capital  17,471   6,037   23,918   19,695 
Retained earnings  375,733   400,379   339,539   355,270 
Accumulated other comprehensive income  (1,471)  (1,907)  (526)  (774)
Total Parent Company shareholders' equity  436,770   448,833 
Total HNI Corporation shareholders' equity  408,148   419,284 
                
Noncontrolling interest  338   158   475   341 
                
Total Equity  437,108   448,991   408,623   419,625 
                
Total Liabilities and Equity $1,024,384  $1,165,629  $935,695  $994,326 
                
See accompanying Notes to Condensed Consolidated Financial Statements.

 
4 
 

HNI Corporation and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
  Three Months Ended
  
Apr. 3,
2010
  
Apr. 4,
2009
(As Adjusted)
  (In thousands, except share and per share data)
    
Net sales $363,506  $396,829 
Cost of sales  244,326   274,183 
  Gross profit  119,180   122,646 
Selling and administrative expenses  122,800   133,938 
Restructuring and impairment  1,834   5,085 
  Operating income (loss)  (5,454)  (16,377)
Interest income  88   135 
Interest expense  2,723   3,198 
  Earnings (loss) before income taxes  (8,089)  (19,440)
Income taxes  (3,947)  (7,742)
  Income (loss) from continuing operations, less applicable income taxes  (4,142)  (11,698)
Discontinued operations, less applicable income taxes   (1,711)  (161)
  Net income (loss)  (5,853)  (11,859)
Less: Net income attributable to the noncontrolling interest  (133)  (27)
  Net income (loss) attributable to HNI Corporation $(5,986) $(11,886)
         
Income (loss) from continuing operations attributable to HNI Corporation per common share – basic $(0.09) $(0.26)
Discontinued operations attributable to HNI Corporation per common share – basic $(0.04) $(0.01)
Net income (loss) attributable to HNI Corporation per common share – basic $(0.13) $(0.27)
Average number of common shares outstanding – basic  45,166,450   44,612,079 
Income (loss) from continuing operations attributable to HNI Corporation per common share – diluted $(0.09) $(0.26)
Discontinued operations attributable to HNI Corporation per common share – diluted $(0.04) $(0.01)
Net income (loss) attributable to HNI Corporation per common share – diluted $(0.13) $(0.27)
Average number of common shares outstanding – diluted  45,166,450   44,612,079 
Cash dividends per common share $0.215  $0.215 
 
See accompanying Notes to Condensed Consolidated Financial Statements.
HNI Corporation and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
  Three Months Ended
  
Oct. 3,
2009
  
Sep. 27,
2008
(As Adjusted)
  (In thousands, except share and per share data)
    
Net sales $453,956  $663,141 
Cost of sales  287,352   438,423 
  Gross profit  166,604   224,718 
Selling and administrative expenses  129,897   189,577 
Restructuring and impairment  4,440   1,497 
  Operating income  32,267   33,644 
Interest income  51   208 
Interest expense  3,167   4,245 
  Earnings before income taxes  29,151   29,607 
Income taxes  11,441   10,107 
  Net income  17,710   19,500 
Less: Net income attributable to the noncontrolling interest  96   11 
  Net income attributable to Parent Company $17,614  $19,489 
         
Net income attributable to Parent Company per common share – basic $0.39  $0.44 
Average number of common shares outstanding – basic  44,994,399   44,213,017 
Net income attributable to Parent Company per common share – diluted $0.39  $0.44 
Average number of common shares outstanding – diluted  45,598,155   44,340,220 
Cash dividends per common share $0.215  $0.215 
See accompanying Notes to Condensed Consolidated Financial Statements.


5

HNI Corporation and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
  Nine Months Ended
  
Oct. 3,
2009
  
Sep. 27,
2008
(As Adjusted)
  (In thousands, except share and per share data)
    
Net sales $1,242,612  $1,839,638 
Cost of sales  821,792   1,221,439 
  Gross profit  420,820   618,199 
Selling and administrative expenses  390,920   544,805 
Restructuring and impairment  13,403   4,344 
  Operating income  16,497   69,050 
Interest income  311   846 
Interest expense  9,414   12,481 
  Earnings before income taxes  7,394   57,415 
Income taxes  2,944   20,382 
  Net income  4,450   37,033 
Less: Net income attributable to the noncontrolling interest  119   98 
  Net income attributable to Parent Company $4,331  $36,935 
         
Net income attributable to Parent Company per common share – basic $0.10  $0.83 
Average number of common shares outstanding – basic  44,833,711   44,327,939 
Net income attributable to Parent Company per common share – diluted $0.10  $0.83 
Average number of common shares outstanding – diluted  45,272,912   44,453,445 
Cash dividends per common share $0.645  $0.645 
See accompanying Notes to Condensed Consolidated Financial Statements.




6

HNI Corporation and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
  Nine Months Ended 
  Oct. 3, 2009  Sep. 27, 2008 
  (In thousands) 
Net Cash Flows From (To) Operating Activities:      
  Net income $4,450  $37,033 
  Noncash items included in net income:        
    Depreciation and amortization  55,715   52,407 
    Other postretirement and post employment benefits  1,386   1,132 
    Stock-based compensation  2,869   1,373 
    Excess tax benefits from stock compensation  -   (11)
    Deferred income taxes  4,197   1,196 
    (Gain)/Loss on sale, retirement and impairment of
      long-lived assets and intangibles
  81   1,346 
    Stock issued to retirement plan  6,565   6,592 
    Other – net  891   1,801 
  Net increase (decrease) in operating assets and liabilities  66,615   4,266 
  Increase (decrease) in other liabilities  (6,848)  (2,537)
    Net cash flows from (to) operating activities  135,921   104,598 
         
Net Cash Flows From (To) Investing Activities:        
  Capital expenditures  (9,715)  (53,664)
  Proceeds from sale of property, plant and equipment  6,569   1,009 
  Acquisition spending, net of cash acquired  (500)  (75,479)
  Capitalized software  (1,159)  (926)
  Short-term investments – net  -   (250)
  Purchase of long-term investments  (9,710)  (10,531)
  Sales or maturities of long-term investments  31,672   12,758 
  Other – net  400   - 
    Net cash flows from (to) investing activities  17,557   (127,083)
         
Net Cash Flows From (To) Financing Activities:        
  Proceeds from sales of HNI Corporation common stock  2,191   3,251 
  Purchase of HNI Corporation common stock  -   (28,553)
  Excess tax benefits from stock compensation  -   11 
  Proceeds from long-term debt  97,000   306,000 
  Payments of note and long-term debt and other financing  (217,261)  (236,298)
  Dividends paid  (28,978)  (28,579)
    Net cash flows from (to) financing activities  (147,048)  15,832 
         
Net increase (decrease) in cash and cash equivalents  6,430   (6,653)
Cash and cash equivalents at beginning of period  39,538   33,881 
Cash and cash equivalents at end of period $45,968  $27,228 
  
See accompanying Notes to Condensed Consolidated Financial Statements. 

 
75 
HNI Corporation and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
  Three Months Ended 
  Apr. 3, 2010  Apr. 4, 2009 
  (In thousands) 
Net Cash Flows From (To) Operating Activities:      
  Net income (loss) $(5,853) $(11,859)
  Noncash items included in net income:        
    Depreciation and amortization  16,060   19,240 
    Other postretirement and post employment benefits  423   462 
    Stock-based compensation  1,509   709 
    Deferred income taxes  (68)  1,712 
    (Gain)/Loss on sale, retirement and impairment of long-lived assets and intangibles  818   132 
    Stock issued to retirement plan  5,400   6,565 
    Other – net  (128)  (528)
  Net increase (decrease) in operating assets and liabilities  (43,121)  (6,085)
  Increase (decrease) in other liabilities  (442)  (4,719)
    Net cash flows from (to) operating activities  (25,402)  5,629 
         
Net Cash Flows From (To) Investing Activities:        
  Capital expenditures  (4,706)  (4,026)
  Proceeds from sale of property, plant and equipment  1,327   299 
  Capitalized software  (93)  (590)
  Purchase of long-term investments  (2,805)  (285)
  Sales or maturities of long-term investments  900   3,550 
  Other – net  603   - 
    Net cash flows from (to) investing activities  (4,774)  (1,052)
         
Net Cash Flows From (To) Financing Activities:        
  Proceeds from sales of HNI Corporation common stock  608   - 
  Purchase of HNI Corporation common stock  (3,291)  - 
  Proceeds from long-term debt  -   60,000 
  Payments of note and long-term debt and other financing  (1,729)  (72,336)
  Dividends paid  (9,745)  (9,649)
    Net cash flows from (to) financing activities  (14,157)  (21,985)
         
Net increase (decrease) in cash and cash equivalents  (44,333)  (17,408)
Cash and cash equivalents at beginning of period  87,374   39,538 
Cash and cash equivalents at end of period $43,041  $22,130 
  
See accompanying Notes to Condensed Consolidated Financial Statements. 

6 
 

HNI Corporation and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
OctoberApril 3, 20092010

Note A.  Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.  The January 3, 20092, 2010 consolidated balance sheet included in this Form 10-Q was derived from audited financial statements but does not include all disclosures required by generally accepted accounting principles.  In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.  Operating results for theth e three-month and nine-month periodsperiod ended OctoberApril 3, 20092010 are not necessarily indicative of the results that may be expected for the fiscal year ending January 2, 2010.1, 2011.  For further information, refer to the consolidated financial statements and footnotesaccompanying notes included in HNI Corporation's (the "Corporation") Annual Report on Form 10-K for the fiscal year ended January 3, 2009.2, 2010.


Note B. Stock-Based Compensation

The Corporation measures stock-based compensation expense at grant date, based on the fair value of the award and recognizes expense over the employee requisite service period.  For the three and nine months ended OctoberApril 3, 2009,2010, and September 27, 2008,April 4, 2009, the Corporation recognized $1.0$1.5 million and $2.9 million, and $0.4 million and $1.4$0.7 million, respectively, of stock-based compensation expense for the cost of stock options and time-based restricted stock units issued under the HNI Corporation 2007 Stock-Based Compensation Plan and shares issued under the HNI Corporation 2002 Members' Stock Purchase Plan.

At OctoberApril 3, 2009,2010, there was $7.2$13.8 million of unrecognized compensation cost related to nonvested stock-based compensation awards, which the Corporation expects to recognize over a weighted-average remaining requisite service period of 1.31.5 years.


Note C.  Inventories

The Corporation values its inventory at the lower of cost or market with approximately 85%80% valued by the last-in, first-out ("LIFO") method.

(In thousands)
 
Oct. 3, 2009
(Unaudited)
  
Jan. 3, 2009
  
Apr. 3, 2010
(Unaudited)
  Jan. 2, 2010 
Finished products $54,717  $51,807  $46,549  $48,198 
Materials and work in process  39,966   60,155   41,752   40,322 
LIFO allowance  (27,672)  (27,672)  (23,376)  (23,376)
 $67,011  $84,290  $64,925  $65,144 
 
 


87 
 


Note D.  Comprehensive Income and Shareholders' Equity

The following table reconciles net income to comprehensive income attributable to HNI Corporation:
 Three Months Ended  Nine Months Ended  Three Months Ended 
(In thousands)
 
Oct. 3,
2009
  
Sep. 27,
2008
  
Oct. 3,
2009
  
Sep. 27,
2008
  
Apr. 3,
2010
  
Apr. 4,
2009
 
Net income $17,710  $19,500  $4,450  $37,033 
Net income (loss) $(5,853) $(11,859)
        
Other comprehensive income, net of income tax as applicable:                        
Foreign currency translation adjustments  15   72   (86)  1,287   (4)  (91)
Change in unrealized gains (losses) on
marketable securities
  -   107   134   (96)  -   (133)
Change in pension and postretirement liability  79   79   237   237   79   79 
Change in derivative financial instruments  49   (224)  151   (356)  173   (12)
Comprehensive income  17,853   19,534   4,886   38,105 
Comprehensive income attributable to
noncontrolling interest
  96   11   119   98 
Comprehensive income attributable to HNI Corporation $17,757  $19,523  $4,767  $38,007 
Comprehensive income (loss) $(5,605) $(12,016)
Comprehensive (income) attributable to noncontrolling interest  (133)  (27)
Comprehensive income (loss) attributable to HNI Corporation $(5,738) $(12,043)

The following table summarizes the components of accumulated other comprehensive loss and the changes in accumulated other comprehensive loss, net of tax as applicable for the ninethree months ended OctoberApril 3, 2009:2010:
(in thousands)
 
Foreign Currency Translation Adjustment
  Unrealized Gains (Losses) on Marketable Securities  
 
Pension Postretirement Liability
  
 
Derivative Financial Instruments
  
Accumulated Other Comprehensive Loss
  Foreign Currency Translation Adjustment  
 
Pension Postretirement Liability
  
 
Derivative Financial Instruments
  Accumulated Other Comprehensive Loss 
Balance at January 3, 2009 $3,620  $(134) $(3,455) $(1,938) $(1,907)
Balance at January 2, 2010 $3,526  $(2,710) $(1,590) $(774)
Year-to date change  (86)  134   237   151   436   (4)  79   173   248 
Balance at October 3, 2009 $3,534  $-  $(3,218) $(1,787) $(1,471)
Balance at April 3, 2010 $3,522  $(2,631) $(1,417) $(526)


ForDuring the ninethree months ended OctoberApril 3, 2009,2010, the Corporation did not repurchase anyrepurchased 135,000 shares of its common stock.stock at a cost of approximately $3.3 million.  As of OctoberApril 3, 2009, $163.62010, $160.3 million of the Corporation's Board of Directors' current repurchase authorization remained unspent.







9  8

 
Note E.  Earnings Per Share

The following table reconciles the numerators and denominators used in the calculation of basic and diluted earnings per share ("EPS"):

 Three Months Ended  Nine Months Ended  Three Months Ended 
(In thousands, except per share data) 
Oct. 3,
2009
  
Sep. 27,
2008
  
Oct. 3,
2009
  
Sep.27,
2008
  
Apr. 3,
2010
  
Apr. 4,
2009
 
Numerators:                  
Numerator for both basic and diluted EPS attributable to Parent Company net income (loss) $17,614  $19,489  $4,331  $36,935  $(5,986) $(11,886)
Denominators:                        
Denominator for basic EPS weighted-average common shares outstanding  44,994   44,213   44,834   44,328   45,166   44,612 
Potentially dilutive shares from stock-based compensation plans  604   127   439   125   -   - 
Denominator for diluted EPS  45,598   44,340   45,273   44,453   45,166   44,612 
Earnings per share – basic $0.39  $0.44  $0.10  $0.83  $(0.13) $(0.27)
Earnings per share – diluted $0.39  $0.44  $0.10  $0.83  $(0.13) $(0.27)

Certain exercisable and non-exercisableNone of the outstanding stock options or restricted stock units were not included in the computation of diluted EPS at OctoberApril 3, 2010 and April 4, 2009, and September 27, 2008, because their inclusionas all would have been anti-dilutive.  The number of stock options outstanding which met thisbe anti-dilutive criterion fordue to the three and nine months ended October 3, 2009 was 1,325,023 and 1,394,946, respectively.  The number of stock options outstanding which met this anti-dilutive criterion for the three and nine months ended September 27, 2008 was 1,403,584 and 1,352,258, respectively.current period loss.


Note F.  Restructuring Reserve and Plant Closures

As a result of challenging market conditions and the Corporation's ongoing business simplification and cost reduction strategies, management made the decision to close an additional office furniture manufacturing facility located in Owensboro, KentuckySalisbury, North Carolina and consolidate production into existing office furniture manufacturing facilities.  During the quarter ended October 3, 2009, in connection with the closure of the Owensboro facility the Corporation recorded $0.5 million of severance costs for approximately 28 non-bargaining unit members and $1.7 million of costs to withdraw from the multi-employer pension plan.  The Corporation anticipates the closure and consolidation of this facility will be substantially complete by the end of the second quarter of 2010.  In connection with the closure of the South Gate, California and Louisburg, North Carolina office furniture manufacturing facilities announced earlier this year,Salisbury location, the Corporation recorded $1.6 million of charges during the third quarter ended April 3, 2010 which included $0.8 million of accelerated depreciation of machinery and equipment recorded in cost of sales and $0.8 million of other costs which were recorded as restructuring costs.  The Corporation had previously recorded $3.8$1.3 million of severance costs for approximately 340125 members during the first halfand $0.3 million of the yearaccelerated depreciation recorded in connection with the closurecost of the South Gate and Louisburg facilities.sales.  The Corporation anticipates the closure and consolidation of these two facilities will be substantially completecompleted by the end of 2009.

10
The Corporation made the decision to consolidate significant production from its hearth product Mount Pleasant, Iowa2010.  In connection with other office furniture plant to other existing hearth products manufacturing facilities.  Additionally,closures announced in 2009, 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 recorded $2.1$0.7 million of charges during the third quarter ended April 3, 2010 which included $0.6$0.3 million of accelerated depreciation recorded in cost of sales and $1.3 million of severance costs for approximately 160 members and $0.2$0.4 million of other costs which were recorded as restructuring costs.

The Corporation anticipates these structural changes will be substantially complete duringCorporation's hearth products segment recorded $0.1 million of restructuring costs in the first quarter related to the consolidation of 2010.production and shutdown of distribution centers announced in 2009.

FollowingThe following is a summary of changes in restructuring accruals during the ninethree months ended OctoberApril 3, 2009.2010.  This summary does not include accelerated depreciation of $1.4 million as this item was not accounted for through the restructuring accrual on the Corporation's Condensed Consolidated Balance Sheets but is included in theas a component of "Restructuring and impairment" line itemImpairment" in the Corporation's Condensed Consolidated Statements of Income.


 
(In thousands)
 Severance and Member Related Costs  Facility Exit Costs & Other  Total 
Balance as of January 3, 2009 $155  $224  $379 
Restructuring charges  7,731   3,707   11,438 
Cash payments  (2,724)  (3,057)  (5,781)
Balance as of October 3, 2009 $5,162  $874  $6,036 
 
The Corporation completed the sale of a hearth distribution location and recorded $0.6 million of goodwill impairment charges, included in the "Restructuring and impairment" line item in the Corporation's Condensed Consolidated Statements of Income, to reduce the assets being held for sale to fair market value.
9 


 
(In thousands)
 Severance  Facility Exit Costs & Other  Total 
Balance as of January 2, 2010 $4,389  $1,569  $5,958 
Restructuring charges  1,286   548   1,834 
Cash payments  (1,699)  (877)  (2,576)
Balance as of April 3, 2010 $3,976  $1,240  $5,216 


Note G.  Discontinued Operations

During the quarter ended April 3, 2010, the Corporation committed to a plan to sell a small non-core business of its office furniture segment.  The Corporation also sold a small non-core component of its hearth product segment during the first quarter.  Revenues and expenses associated with these business operations are presented as discontinued operations for all periods presented.

During the quarter ended April 3, 2010, the Corporation recorded a pre-tax charge of approximately $1.0 million to reduce the assets of the office furniture business to fair market value.  The charge was principally due to the write-down of intangibles not deductible for tax purposes.  A pre-tax loss of $0.4 million was recorded at the time of sale of the hearth products component referred to above.

Summarized financial information for discounted operations is as follows:

  Three Months Ended 
(in thousands) Apr. 3, 2010  Apr. 4, 2009 
Discontinued operations:      
  Operating loss before tax $(1,291) $(230)
  Benefit for income tax  (471)  (69)
Net loss from discontinued operations, net of income tax  (820)  (161)
Impairment loss and loss on sale of discontinued operations:        
Impairment loss and loss on sale of discontinued operations before tax  (1,403)  - 
Benefit for income tax ��(512)  - 
Net impairment loss and loss on sale of discontinued operations  (891)  - 
Loss from discontinued operations, net of income tax benefit $(1,711) $(161)









10 



Assets to be disposed of as of April 3, 2010 are recorded as follows:

(in thousands) Apr. 3, 2010 
Prepaid Expenses and Other Current Assets   
  Receivables $3,062 
  Prepaid expenses  105 
   3,167 
Other Assets    
  Property and equipment  389 
  Intangible assets  1,595 
   1,983 
Accounts Payable and Accrued Expenses    
  Accounts Payable  514 
  Accrued Expenses  492 
   1,006 
  Total net assets held for sale $4,144 


Note H. Goodwill and Other Intangible Assets

The table below summarizes amortizable definite-lived intangible assets as of OctoberApril 3, 20092010 and January 3, 2009,2, 2010, which are reflected in the "Other Assets" line item in the Corporation's Condensed Consolidated Balance Sheets:

(In thousands) Oct. 3, 2009  Jan. 3, 2009  Apr. 3, 2010  Jan. 2, 2010 
Patents $19,325  $19,325  $19,325  $19,325 
Customer relationships and other  115,664   115,664   108,463   115,451 
Less: accumulated amortization  63,615   56,098   65,742   68,004 
 $71,374  $78,891  $62,046  $66,772 


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Aggregate amortization expense for the three and nine months ended OctoberApril 3, 2010 and April 4, 2009 and September 27, 2008 was $2.6$3.0 million and $7.5 million, and $3.1 million and $8.0$2.3 million, respectively.  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) 2009  2010  2011  2012  2013  2010  2011  2012  2013  2014 
Amortization Expense $10.0  $8.6  $7.2  $6.2  $5.8  $8.3  $6.4  $5.8  $5.3  $4.7 

As events such as potential acquisitions, dispositions or impairments occur in the future, these amounts may change.

The Corporation also owns trademarks and trade names with a net carrying amount of $60.6$41.0 million.  The trademarks are deemed to have indefinite useful lives because they are expected to generate cash flows 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 concluded that there was not a need for an interim assessment as performance is in line with management’s expectations.






11 

The changes in the carrying amount of goodwill since January 3, 2009,2, 2010, are as follows by reporting segment:

 
(In thousands)
 
Office
Furniture
  
Hearth
Products
  Total 
Balance as of January 3, 2009 $101,339  $167,053  $268,392 
Goodwill increase during period  -   500   500 
Goodwill decrease during period  -   (1,027)  (1,027)
Balance as of October 3, 2009 $101,339  $166,526  $267,865 
 
(In thousands)
 
Office
Furniture
  
Hearth
Products
  Total 
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 
Goodwill acquired during the quarter  -   -   - 
Impairment losses  -   -   - 
Goodwill related to the sale of business units  -   (486)  (486)
Balance as of April 3, 2010            
Goodwill  123,948   166,039   289,987 
Accumulated impairment losses  (29,359)  -   (29,359)
  $94,589  $166,039  $260,628 

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.  This method employs assumptions that are market participant based.  The increasedecrease in the hearth products segment goodwill is for contingent consideration payments related to a previous acquisition.

The Corporation completed the sale of a hearth distribution location, included in the Hearth & Home Technologies reporting unitnon-core component during the third quarter.  The Corporation determined the fair value of goodwill associated with this location to be $1.0 million during the second quarter and recorded an impairment charge of $0.6 million, included in the "Restructuring and impairment" line item in the Corporation's Condensed Consolidated Statements of Income during the second quarter.

As a result, management reviewed the valuation of the remaining Hearth & Home Technologies reporting unit during the second quarter, excluding the cash flows association with the location discussed above.  The Corporation's analysis of this reporting unit concluded the fair value exceeded the carrying value by approximately 15% and as such, no impairment charges during second quarter were necessary.  For the quarter ended October 3, 2009, all reporting units continue to perform in line with management’s expectations since the last assessment therefore the Corporation concluded there was not a need for an interim assessment.

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Note H.I.  Product Warranties

The Corporation issues certain warranty policies on its office furniture and hearth products that provide for repair or replacement of any covered product or component that fails during normal use because of a defect in design 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 during the period:periods noted:

 Nine Months Ended  Three Months Ended 
(In thousands) Oct. 3, 2009  Sep. 27, 2008  Apr. 3, 2010  Apr. 4, 2009 
Balance at beginning of period $13,948  $12,123  $12,684  $13,948 
Accrual assumed from acquisition  -   250 
Accruals for warranties issued during period  9,715   14,449   4,107   4,039 
Adjustments related to pre-existing warranties  (78)  1,190   749   (180)
Settlements made during the period  (10,772)  (14,690)  (4,644)  (4,092)
Balance at end of period $12,813  $13,322  $12,896  $13,715 





12 
Note I.J.  Postretirement Health Care

The following table sets forth the components of net periodic benefit cost included in the Corporation's income statement for:

 
Nine Months Ended
  
Three Months Ended
 
(In thousands) Oct. 3, 2009  Sep. 27, 2008  Apr. 3, 2010  Apr. 4, 2009 
Service cost $293  $297  $90  $97 
Interest cost  719   722   210   240 
Expected return on plan assets  -   (268)
Amortization of transition obligation  381   381   127   127 
Amortization of (gain)/loss  (7)  -   (4)  (2)
Net periodic benefit cost $1,386  $1,132  $423  $462 

 
Note J.K.  Income Taxes

The provision for income taxes in the thirdfirst quarter of fiscal 20092010 reflects an actual effective tax rate of 39.245.2 percent, compared to an estimated annuala discrete period effective tax rate of 34.139.7 percent for the thirdfirst quarter of fiscal 2008 and actual2009.  The first quarter 2010 effective tax rate forwas impacted by a discrete benefit associated with an adjustment of deferred tax assets.  The 2010 estimated annual effective tax rate including discontinued operations is expected to be 36 percent, slightly higher than the full year 2008U.S. tax rate of 34.2 percent.35 percent, primarily due to increased profitability and the lack of U.S. research and development tax credits which have not been extended past 2009.  A discrete calculation was used to report the 2009 thirdfirst quarter tax provision rather than an estimated annual tax rate as uncertainty in the full year outlook produces significantproduced sign ificant variability inand made it difficult to reasonably estimate the estimated2009 annual effective tax rate.


13
Note K.L.  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 London Interbank Offered Rate (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’sCorporation's consolidated balance sheet.  The interest rate swap agreement matures on MayM ay 27, 2011.

The aggregate fair market value of the interest rate swap as of OctoberApril 3, 20092010 was a liability of $2.9$2.3 million, of which $1.9$2.0 million is included in current liabilities and $1.0$0.3 million is included in long-term liabilities in the Corporation's Condensed Consolidated Balance Sheetcondensed consolidated balance sheet as of OctoberApril 3, 2009.2010.  For the nine-monththree month period ended OctoberApril 3, 2009,2010, the Corporation recorded a 

13 

deferred net loss of $987,000$249,000 in other comprehensive income and reclassified $1,228,000$527,000 from other comprehensive income to current period earnings as interest expense in its Condensed Consolidated Statementsthe consolidated statement of Income.income.  As of OctoberApril 3, 2009, $1.2 million2010, $1,246,500 of deferred net losses, net of tax, included in equity ("Accumulated other comprehensive income (loss)" in the Corporation's Condensed Consolidated Balance Sheets)Sheet) related to this interest rate swap, are expected to be reclassified to current earnings ("Interest expense" in the Corporation's Condensed Consolidated StatementStatements of Income) over the next twelve months.


Note L.M.  Fair Value Measurements

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, 2008 and with regard to its nonfinancial assets and liabilities on January 4, 2009.  The adoption did not have a material impact on the Corporation’s financial statements.

For recognition purposes, on a recurring basis the Corporation is required to measure at fair value its marketable securities, which are classified as available-for-sale, and its investment in target funds.  The marketable securities were comprised of investments in money market funds.  They are reported as noncurrent assets as they are not anticipated to be used for current operations.  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.

14
Assets measured at fair value during the ninethree months ended OctoberApril 3, 20092010 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)
  
 
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 $7,901  $-  $7,901  $-  $7,717  $-  $7,717  $- 
Derivative financial instrument $(2,864) $-  $(2,864) $-  $(2,270) $-  $(2,270) $- 


Assets measured at fair value for the Corporation's fiscal year ended January 3, 20092, 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) $- 

 
 
 
 
(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) $- 

In addition to the methods and assumptions the Corporation uses to record the fair value of financial instruments as discussed in the section above, it uses the following methods and assumptions to estimate the fair value of its financial instruments.  Effective April 5, 2009, the Corporation adopted the guidance on interim disclosures about fair value of financial instruments.  See Note N. New Accounting Standards for additional information.

Cash and cash equivalents
CarryingThe carrying amount approximated fair value.


Available-for-sale securities
Fair value for available-for-sale securities was estimated based on quoted market prices.
14 

Long-term debt (including current portion)
The faircarrying value of the Corporation’sCorporation's outstanding variable ratevariable-rate, long-term debt obligations at OctoberApril 3, 20092010 and January 3, 2009,2, 2010, the end of the Corporation's 2009 fiscal year, approximates the carryingfair value.  The fair value of the Corporation's outstanding fixed ratefixed-rate, long-term debt obligations is estimated to be $137$150 million at OctoberApril 3, 20092010 and $151 million at January 3, 2009, below2, 2010, compared to the carrying value of $150 million.


15
Note M.N.  Commitments and Contingencies

The Corporation utilizes letters of credit in the amount of $20.9$18.4 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 competitively determined fees.

The Corporation has contingent liabilities which 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.


Note N.O.  New Accounting Standards

In December 2007,There were no new accounting standards issued during the FASB issued amended guidance regarding accounting for business combinations.  The amended guidance applies the acquisition method to all transactions and other events in which one entity obtains control over one or more other businesses, and requires, among other things,quarter that assets acquired and liabilities assumed be measured at fair value as of the acquisition date, that liabilities related to contingent considerations be recognized at the acquisition date and remeasured at fair value in each subsequent reporting period, that acquisition-related costs be expensed as incurred, and that income be recognized if the fair value of the net assets acquired exceeds the fair value of the consideration transferred.  The Corporation will apply the guidance as amended prospectively to business combinations for which the acquisition date is on or after January 3, 2009 and can only assess the impact of the amended guidance once an acquisition is consummated.

In December 2007, the FASB issued new guidance which requires a noncontrolling interest in a subsidiary 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 in the first quarter of 2009.  As a result of the adoption, the Corporation has reported noncontrolling interests as a component of equity in its Condensed Consolidated Balance Sheets and the net income or loss attributableexpects to noncontrolling interests has been separately identified in its Condensed 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 and has included related disclosures in Note K. Derivative Financial Instruments.

In April 2009, the FASB issued guidance requiring the disclosures about fair value of financial instruments to be included for interim reporting periods.  The Corporation adopted the new guidance effective April 5, 2009 and has included related disclosures in Note L. Fair Value Measurements.

16
In April 2009, the FASB issued guidance on determining when the trading volume and activity for an asset or liability has significantly decreased, which may indicate an inactive market, and on measuring the fair value of an asset or liability in inactive markets.  The Corporation adopted the guidance effective April 5, 2009.  The adoption did not have a material impact on the financial statements.

In May 2009, the FASB established general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued.  The Corporation adopted the guidelines as of July 4, 2009.  The Corporation has performed an evaluation of subsequent events through November 5, 2009, the date the financial statements were issued.


Note O.P.  Business Segment Information

Management views the Corporation as operating in two business segments: office furniture and hearth products with the former being the principal business 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 manufactured 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 cost of the Corporation's corporate operations, interest income and interest expense.  The decreaseincrease in unallocated corporate expenses during the quarter ended April 3, 2010, compared to the same quarter in the prior year is due primarily to decreased interest expense and cost control initiatives.increased group medical costs.  Management views interest income and expense as corporate financing costs rather than a business segment cost.  In addition, management applies one effective tax rate to its consolidated income before income taxes so income taxes are not reported or viewed internally on a segmentsegme nt basis.

15 

The Corporation's primary market and capital investments are concentrated in the United States.


17
Reportable segment data reconciled to the consolidated financial statements for the three- and nine-monthsthree month periods ended OctoberApril 3, 2009,2010, and September 27, 2008,April 4, 2009, is as follows:

  Three Months Ended  Nine Months Ended 
(In thousands) 
Oct. 3,
2009
  
Sep. 27,
2008
  
Oct. 3,
2009
  
Sep. 27,
2008
 
Net Sales:            
  Office Furniture $379,913  $560,661  $1,041,747  $1,541,207 
  Hearth Products  74,043   102,480   200,865  ��298,431 
  $453,956  $663,141  $1,242,612  $1,839,638 
                 
Operating Profit (Loss):                
  Office furniture (1)                
    Operations before restructuring charges $41,048  $40,583  $64,001  $92,327 
    Restructuring and impairment charges  (2,954)  (1,072)  (8,451)  (3,943)
      Office furniture – net  38,094   39,511   55,550   88,384 
  Hearth products                
    Operations before restructuring charges  3,305   4,148   (13,731)  2,843 
    Restructuring and impairment charges  (1,486)  (425)  (4,952)  (401)
      Hearth products – net  1,819   3,723   (18,683)  2,442 
    Total operating profit  39,913   43,234   36,867   90,826 
  Unallocated corporate expense  (10,908)  (13,644)  (29,653)  (33,562)
    Income (loss) before income taxes $29,005  $29,590  $7,214  $57,264 
                 
Depreciation & Amortization Expense:                
  Office furniture $12,958  $12,936  $39,857  $37,583 
  Hearth products  4,237   3,785   13,117   11,479 
  General corporate  738   1,121   2,741   3,345 
  $17,933  $17,842  $55,715  $52,407 
                 
Capital Expenditures:                
  Office furniture $2,498  $15,125  $8,227  $44,973 
  Hearth products  537   3,163   2,237   8,350 
  General corporate  86   363   410   1,267 
  $3,121  $18,651  $10,874  $54,590 
                 
          
As of
Oct. 3,
2009
  
As of
Sep. 27,
2008
 
Identifiable Assets:                
  Office furniture         $631,369  $828,095 
  Hearth products          309,219   340,467 
  General corporate          83,796   107,638 
          $1,024,384  $1,276,200 
(1)  Includes noncontrolling interest.
  Three Months Ended 
(In thousands) Apr. 3, 2010  Apr. 4, 2009 
Net Sales:      
  Office Furniture $300,032  $330,800 
  Hearth Products  63,474   66,029 
  $363,506  $396,829 
         
Operating Profit (Loss):        
  Office furniture        
    Operations before restructuring charges $7,980  $3,652 
    Restructuring and impairment charges  (1,733)  (2,989)
      Office furniture – net  6,247   663 
  Hearth products        
    Operations before restructuring charges  (2,805)  (9,237)
    Restructuring and impairment charges  (101)  (2,096)
      Hearth products – net  (2,906)  (11,333)
    Total operating profit  3,341   (10,670)
  Unallocated corporate expense  (11,430)  (8,770)
    Income (loss) before income taxes $(8,089) $(19,440)
         
Depreciation & Amortization Expense:        
  Office furniture $11,641  $13,165 
  Hearth products  3,779   5,014 
  General corporate  640   1,061 
  $16,060  $19,240 
         
Capital Expenditures:        
  Office furniture $3,561  $2,910 
  Hearth products  442   1,469 
  General corporate  796   237 
  $4,799  $4,616 
         
  
As of
Apr. 3, 2010
  
As of
Apr. 4, 2009
 
Identifiable Assets:        
  Office furniture $565,226  $659,776 
  Hearth products  284,881   321,115 
  General corporate  85,588   97,043 
  $935,695  $1,077,934 







1816 


Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations.Operations

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 its various brands and selling models.  The Corporation is focused on growing its existing businesses while seeking out and developing new opportunities for growth.

Net sales for the thirdfirst quarter of fiscal 20092010 decreased 31.58.4 percent to $454.0$363.5 million aswhen compared to the thirdfirst quarter of the prior year.fiscal 2009.  The decrease was driven by large declines in both segments due to adverse market conditions.segments.  Gross margins for the quarter increased from prior year levels due primarily to increased price realization, lower material costs and cost reduction initiatives partially offset partially by lower volume and decreased volume.price realization.  Selling and administrative expenses decreased due to cost control initiatives, lower volume related costs, and improved distribution efficiencies offset partially by increasedand lower restructuring and transition costs.

The Corporation continues to take actions to reset its cost structure due to challenging market conditions and pursuant to its ongoing business simplification and cost reduction strategies.  The Corporation announced the decision to shutdownclose an office furniture manufacturing facility and recorded $4.1$2.8 million of restructuring and transition costs in the thirdfirst quarter in connection with this shutdownclosure as well as previouslyoffice furniture plant closures announced shutdowns.in 2009 net of a non-operating gain on the sale of one of the facilities.  In addition $1.8the Corporation recorded $0.2 million of chargesrestructuring and transition costs in its hearth products segment related to the restructuringconsolidation of production and closure of distribution centers announced in 2009.

The Corporation made a decision to sell a non-core business of the office furniture segment and sold a non-core component of the hearth operations were recordedproducts segment during the third quarter.first quarter of 2010.  Revenues and expenses associated with these business operations are presented as discontinued operations for all periods presented in the condensed consolidated financial statements.

Critical Accounting Policies

The preparation of the financial statements requires the Corporation to make estimates and judgments that affect the reported amount of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.  The Corporation continually evaluates its accounting policies and estimates.  The Corporation bases its estimates on historical experience and on a variety of other assumptions believed by management to be reasonable in order to make judgments about the carrying value of assets and liabilities.  Actual results may differ from these estimates under different assumptions or conditions.  A summary of the more significant accounting policies that require the use of estimates and judgments in preparing the financial statements is provided in the Corporation's AnnualAnnu al Report on Form 10-K for the year ended January 3, 2009.2, 2010.  During the first ninethree months of fiscal 2009,2010, there were no material changes in the accounting policies and assumptions previously disclosed.



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New Accounting Standards

For information pertaining to the Corporation's adoption ofThere were no new accounting standards and any resultingissued during the quarter that the Corporation expects to have a material impact toon the Corporation's financial statements, please refer to the first paragraph of Note L. Fair Value Measurements and the entirety of Note N. New Accounting Standards of the Notes to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.


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statements.

Results of Operations

The following table presents certain key highlights from the results of operations for the periods indicated:
 Three Months Ended  Nine Months Ended  Three Months Ended 
(In thousands)
 
Oct. 3,
2009
  
Sep. 27,
2008
  
Percent
Change
  
Oct. 3,
2009
  
Sep. 27,
2008
  
Percent
Change
  
Apr. 3,
2010
  
Apr. 4,
2009
  
Percent
Change
 
Net sales $453,956  $663,141   -31.5  $1,242,612  $1,839,638   -32.5  $363,506  $396,829   -8.4%
Cost of sales  287,352   438,423   -34.5   821,792   1,221,439   -32.7   244,326   274,183   -10.9 
Gross profit  166,604   224,718   -25.9   420,820   618,199   -31.9   119,180   122,646   -2.8 
Selling & administrative expenses  129,897   189,577   -31.5   390,920   544,805   -28.2   122,800   133,938   -8.3 
Restructuring & impairment charges  4,440   1,497   196.6   13,403   4,344   208.5   1,834   5,085   -63.9 
Operating income (loss)  32,267   33,644   -4.1   16,497   69,050   -76.1   (5,454)  (16,377)  66.7 
Interest expense, net  3,116   4,037   -22.8   9,103   11,635   -21.8   2,635   3,063   -14.0 
Earnings (loss) before income taxes  29,151   29,607   -1.5   7,394   57,415   -87.1   (8,089)  (19,440)  58.4 
Income taxes  11,441   10,107   13.2   2,944   20,382   -85.6   (3,947)  (7,742)  -49.0 
Less: Net income attributable to the noncontrolling interest  96   11   772.7   119   98   21.4 
Net income (loss) attributable to Parent Company $17,614  $19,489   -9.6  $4,331  $36,935   -88.3 
Income (loss) from continuing operations  (4,142)  (11,698)  64.6 

Consolidated net sales for the thirdfirst quarter of 2009 decreased 31.58.4 percent or $209.2$33.3 million compared to the same quarter last year due to challenging market conditionsyear.  The decrease occurred in both the office furniture and hearth products segments.

Gross marginsmargin for the thirdfirst quarter of 2009 increased to 36.732.8 percent compared to 33.930.9 percent for the same quarter last year.  The improvement in gross margin was due to increased price realization,driven by cost reduction initiatives and lower material costs and cost reduction initiatives offset partially by decreased volume.  Thirdvolume and price realization and higher restructuring and transition costs.  First quarter 20092010 included $1.6$1.5 million of accelerated depreciation and transition costs related to the shutdownclosure and consolidation of office furniture manufacturing facilities and hearth restructuring.consolidation.

As a result of challenging market conditions and the Corporation's ongoing business simplification and cost reduction strategies, management made the decision to close an office furniture manufacturing facility located in Owensboro, KentuckySalisbury, North Carolina and consolidate production into existing office furniture manufacturing facilities.  In connection with the closure of the Owensboro facilitySalisbury location the Corporation recorded $0.5$1.6 million of charges during the quarter ended April 3, 2010 which included $1.3 million of severance costs for approximately 30 non-bargaining unit125 members and $1.7$0.3 million of costs to withdraw from the multi-employer pension plan during the quarter ended October 3, 2009.accelerated depreciation recorded in cost of sales.  The Corporation anticipates the closure and consolidation of this facility will be substantially completecompleted by the end of the second quarter of 2010.  In connection with the closure of twoother office furniture facilitiesplant closures announced earlier this year,in 2009, the Corporation recorded $2.0$1.5 million of restructuring and transition charges during the thirdfirst quarter which included $0.8$0.3 million of accelerated depreciation and $0.2$0.8 million of other transition costs recorded in cost of sales $0.8 million of costs recorded as restructuring costs and $0.2 million of other transition costs recorded in selling and administrative expense.  The Corporation anticipates the closure and consolidation of these two facilities will be substantially complete by the end of 2009.  The Corporation made the decision to consolidate significant production from its hearth product Mount Pleasant, Iowa plant to other
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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.  In connection with the hearth restructuring the Corporation recorded $2.1 million of charges during the third quarter which included $0.6 million of accelerated depreciation recorded in cost of sales and $1.3 million of severance costs for approximately 160 members and $0.2$0.4 million of other costs which were recorded as restructuring costs.  The Corporation expects these changes will be substantially completerecorded a gain of $0.5 million on the sale of one of the closed office furniture manufacturing facilities during the first quarter.  The Corporation's hearth products segment recorded $0.2 million of charges during the first quarter related to the consolidation of 2010.production and shutdown of distribution centers announced in 2009.  These charges included

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$0.1 million of transition costs recorded in cost of sales and $0.1 million of other costs which were recorded as restructuring costs.  The Corporation anticipates additional restructuring and transition chargescosts of approximately $9.2$5.9 million related to the various closures of which $4.2 million will impactover the remainder of 2009 and $5.0 million will impact the first two quarters of 2010.  The Corporation is currently in negotiations with the union representing the bargaining unit at the Owensboro facility and therefore is not able to estimate all of the charges associated with that closure until the negotiations conclude.

Total selling and administrative expenses, including restructuring charges, as a percent of sales increaseddecreased to 29.634.3 percent compared to 28.835.0 percent for the same quarter last year due to lower volume.year.  Actual selling and administrative expenses decreased $56.7$14.4 million as a result of cost control initiatives, lower volume related expenses, improved distribution efficiencies and a gain of $0.3 million on the sale of a building.  Thirdlower restructuring and transition costs.  First quarter 2009 included $4.4$5.1 million of restructuring charges compared to $1.5 million in 2008.associated with a plant consolidation.

Net income attributable to parent company for the third quarterThe Corporation experienced a net loss from continuing operations of 2009 was $17.6($4.1) million or $0.39 per diluted share compared to net income of $19.5 million or $0.44($0.09) per diluted share in thirdthe first quarter 2008.of 2010 compared to a net loss of ($11.7) million or ($0.26) per diluted share in the first quarter of 2009.  Net interest expense decreased $0.9$0.4 million during the quarter as compared to third quarter 2008 due to reducedlower borrowing.

The provision for income taxes in the thirdfirst quarter of fiscal 20092010 reflects an actual effective tax rate of 39.245.2 percent, compared to an estimated annuala discrete period effective tax rate of 34.139.7 percent for the thirdfirst quarter of fiscal 2008 and actual2009.  The first quarter 2010 effective tax rate forwas impacted by a discrete benefit associated with an adjustment of deferred tax assets.  The 2010 estimated annual effective tax rate including discontinued operations is expected to be 36 percent, slightly higher than the full year 2008U.S. tax rate of 34.2 percent.35 percent, primarily due to increased profitability and the lack of U.S. research and development tax credits which have not been extended past 2009.  A discrete calculation was used to report the third2009 first quarter tax provision rather than an estimated annual tax rate as uncertainty in the full year outlook produces significantproduced signif icant variability inand made it difficult to reasonably estimate the estimated2009 annual effective tax rate.

ForThe Corporation made a decision to sell a small, non-core business of the office furniture segment during the first nine monthsquarter of 2009, consolidated net sales decreased $0.6 billion, or 32.5 percent,2010.  A pre-tax charge of $1.0 million was recorded to $1.2 billion comparedreduce the assets held for sale to $1.8 billionfair market value.  In addition, the Corporation sold a small non-core component of its hearth products segment during the quarter.  A pre-tax charge of $0.4 million was recorded at the time of the sale.  Revenues and expenses associated with these business operations are presented as discontinued operations for the same periodall periods presented in the prior year.  Acquisitions added $10.2 million or 0.6 percentage points of sales.  Gross margins increased to 33.9 percent compared to 33.6 percent for the same period last year.  Operating income was $16.5 million for the first nine months of 2009 compared to $69.1 million for the first nine months of 2008.  Earnings per share decreased to $0.10 per diluted share compared to $0.83 per diluted share for the same period last year.financial statements.

Office Furniture

ThirdFirst quarter 2010 sales for the office furniture segment decreased 32.29.3 percent or $180.7$30.8 million to $379.9$300.0 million from $560.7$330.8 million for the same quarter last year driven by substantial weaknessdeclines in both the supplies-driven and contractall channels of the office furniture industry.  Operating profit prior to unallocated corporate expenses for the quarter decreased $1.4increased $5.6 million to $38.1$6.2 million when  compared to the same period last year as a result of lower volumematerial costs, improved distribution efficiencies, cost reduction initiatives and increased restructuring and transition costsa $0.5 million gain on the sale of a facility.  These were partially offset by lower volume and decreased price realization, lower input costs, distribution efficiencies and cost control initiatives.  Thirdrealization.  First quarter 20092010 included $4.1$3.1 million of restructuring and transition costs including accelerated depreciation compared to $1.1$3.0 million of restructuring costs in thirdfirst quarter 2008.2009.





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Net sales for the first nine months of 2009 decreased 32.4 percent or $0.5 billion to $1.0 billion compared to $1.5 billion for the same period in 2008.  Acquisitions added $10.2 million or 0.7 percentage points of sales.  Operating profit decreased 37.1 percent or $32.8 million to $55.6 million over the first nine months of 2009 when compared to the same period in 2008.

Hearth Products

ThirdFirst quarter 2010 net sales for the hearth products segment decreased 27.73.9 percent or $28.4$2.6 million to $74.0$63.5 million from $102.5$66.0 million for the same quarter last year driven by significant declinesa decline in boththe remodel-retrofit channel partially offset by an increase in the new construction and remodel-retrofit channels.channel.  Operating profit prior to unallocated corporate expenses for the quarter decreased $1.9increased $8.4 million to $1.8a $2.9 million when comparedloss due to third quarter 2008 due tocost reduction initiatives and lower material and restructuring costs partially offset by lower volume and higherdecreased price realization.  First quarter 2010 included $0.2 million of restructuring expenses partially offset by cost reduction initiatives, lower incentive based compensationand transition costs and a non-operating gain related to the sale of a building.

Net sales for the first nine months of 2009 decreased 32.7 percent or $97.6 million to $200.9 million compared to $298.4$2.1 million for the same periodof restructuring costs in 2008.  Operating profit decreased $21.1 million to a $18.7 million loss over the first nine months ofquarter 2009.

Liquidity and Capital Resources

Cash Flow – Operating Activities
Cash generated from operatingOperating activities for the first nine monthsused $25.4 million of 2009 totaled $135.9 million compared to $104.6 million generatedcash in the first nine monthsquarter 2010 compared to generating $5.6 million of 2008.  Improved workingcash in the first quarter 2009.  Working capital performance resulted in a $66.6$43.1 million sourceuse of cash in the current fiscal year compared to $4.2$6.1 million use of cash in the prior year.  Working capital performance in the first quarter of 2009 was positively impacted by reductions in accounts receivable due to a significant decrease in revenue.  The Corporation's first quarter is historically the lowest quarter for operating cash flow due to seasonal business patterns and funding requirements.  Cash flow from operating activities is expected to be positive for the year.

Cash Flow – Investing Activities
Capital expenditures including capitalized software for the first ninethree months of fiscal 20092010 were $10.9$4.8 million compared to $54.6$4.6 million in the same period of fiscal 20082009 and were primarily for tooling and equipment for new products.  For the full year 2009,2010, capital expenditures are expected to be approximately $20$25 to $30 million primarily forfocused on new product development and related tooling.  The Corporation sold $21 million of long-term investments during the first nine months and used the proceeds to repay debt.

Cash Flow – Financing Activities
During the first ninethree months of fiscal 2009,2010, net borrowings under the Corporation's revolving credit facility decreased $57.5remained at $50 million.  As of OctoberApril 3, 2009, $50 million2010, it is classified as short-term as the revolver expires in January of 2011.  The Corporation is currently exploring its financing options and plans to have a new credit facility in place by the end of the revolving credit facility was outstanding and all classified as long-term.  The Corporation paid off its $47.5 million term loan during the first nine months of 2009.  Included in current liabilities is $2.3 million outstanding under the Corporation’s industrial revenue bonds as of October 3, 2009.  The Corporation expects to repay that portion of the bonds within the next twelve months.Corporation's second fiscal quarter.

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:
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·  a consolidated interest coverage ratio of not less than 4.0 to 1.0, based upon the ratio of (a) consolidated EBITDA (as defined in the respective 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 respective 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.


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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 andand/or 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 OctoberApril 3, 2009,2010, the Corporation was well below this ratio and was in compliance with all of the covenants and other restrictions in the credit agreements and note purchase agreement.  The Corporation currently expects to remain in compliance over the next twelve months.  If the Corporation’s actual results over the next twelve months are lower than current projections, the margin by which the Corporation is below the consolidated leverage ratio will decrease.  However, even if a 20 percent decline in expected results over the next twelve months were to occur, the Corporation would remain in compliance with the covenant.

The Corporation's Board of Directors (the "Board") declared a regular quarterly cash dividend of $0.215 per share on the Corporation's common stock on August 19, 2009,February 17, 2010, to shareholders of record at the close of business on August 31, 2009.March 1, 2010.  It was paid on SeptemberMarch 8, 2009.2010.

TheDuring the three months ended April 3, 2010, the Corporation repurchased 135,000 shares of common stock at a cost of approximately $3.3 million, or an average price of $24.38 per share.  For the three months ended April 4, 2009, the Corporation did not repurchase any shares of common stock during the third quarter of 2009.  For the nine months ended September 27, 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 per share.stock.  As of OctoberApril 3, 2009,2010, approximately $163.6$160.3 million of the Board's current repurchase authorization remained unspent.

Off-Balance Sheet Arrangements

The Corporation does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on the Corporation's financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.


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Contractual Obligations

Contractual obligations associated with ongoing business and financing activities will result in cash payments in future periods.  A table summarizing the amounts and estimated timing of these future cash payments was provided in the Corporation's Annual Report on Form 10-K for the year ended January 3, 2009.2, 2010.  During the first ninethree months of fiscal 2009,2010 there were no material changes outside the ordinary course of business in the Corporation's contractual obligations or the estimated timing of the future cash payments.

Commitments and Contingencies

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

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flows when resolved in a future period.

Looking Ahead

Although management sees signs of stabilizationManagement is encouraged by recent trends in many ofboth the Corporation's markets, management expects weak demand to continue across its businesseshearth and office furniture markets.  Management believes the actions it has taken during the remainder of 2009.  The Corporation continuesrecent downturn to reset its cost structure and invest in selling and growth initiatives has positioned the Corporation to market conditions while investing in new products, selling initiatives and operational improvements.benefit as its markets improve.

The Corporation continues to focus on creating long-term shareholder value by growing its businesses through investment in building brands, product solutions and selling models, enhancing its strong member-owner culture and remaining focused on its long-standing continuous improvement programs to build best total cost and a lean enterprise.

Forward-Looking Statements

Statements in this report that are not strictly historical, 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, which may cause the Corporation's actual results in the future to differ materially from expected results.  These risks include, without limitation:  the Corporation's ability to realize financial benefits from its (a) price increases, (b) cost containment and business simplification initiatives for the entire Corporation,
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(c) investments in strategic acquisitions, new products and brand building, (d) investments in distribution and rapid continuous improvement, (e) ability to maintain its effective tax rate, (f) repurchases of common stock, and (f)(g) consolidation and logistical realignment initiatives; uncertainty related to the availability of cash and credit, and the terms and interest rates on which credit would be available, to fund operations and future growth; lower than expected demand for the Corporation's products due to uncertain political and economic conditions, including the recent credit crisis, slow or negative growth rates in global and domestic economies and the protracted decline in the housing market; lower industry growthgrow th than expected; major disruptions at our key facilities or in the supply of any key raw materials, components or finished goods; uncertainty related to disruptions of business by terrorism, military action, epidemic, acts of God or other Force Majeure events; competitive pricing pressure from foreign and domestic competitors; higher than expected costs and lower than expected supplies of materials (including steel and petroleum based materials); higher than expected costs for energy and fuel; changes in the mix of products sold and of customers purchasing; relationships with distribution channel partners, including the financial viability of distributors and dealers; restrictions imposed by the terms of the Corporation's revolving credit facility term loan creditand note purchase agreement; currency fluctuations and other factors described in the Corporation's annual and quarterly reports filed with the Securities and Exchange Commission on Forms 10-K and 10-Q.  The Corporation undertakes 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.


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Item 3.  Quantitative and Qualitative Disclosures About Market Risk.Risk

As of OctoberApril 3, 2009,2010, there were no material changes to the financial market risks that affect the quantitative and qualitative disclosures presented in Item 7A of the Corporation's Annual Report on Form 10-K for the year ended January 3, 2009.2, 2010.


Item 4.  Controls and Procedures.Procedures

Disclosure controls and procedures are designed to ensure information required to be disclosed by the Corporation in the reports it files or submits under the Securities Exchange Act of 1934 (the "Exchange Act"), is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms.  Disclosure controls and procedures are also designed to ensure 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 disclosure.

Under the supervision and with the participation of management, the chief executive officer and chief financial officer of the Corporation carried out an evaluation of the Corporation's disclosure controls and procedures pursuant to Exchange Act Rules 13a – 15(e) and 15d – 15(e).   As of OctoberApril 3, 2009,2010, and, based on this evaluation, the chief executive officer and chief financial officer have concluded these disclosure controls and procedures are effective.

Furthermore, there have been no changes in the Corporation's internal control over financial reporting during the fiscal quarter covered by this Quarterly Reportquarterly report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.

 
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PART II.     OTHER INFORMATION


Item 1.  Legal Proceedings.Proceedings

There are no new legal proceedings or material developments to report other than ordinary routine litigation incidental to the business.


Item 1A. Risk Factors.Factors

There have been no material changes from the risk factors disclosed in the "Risk Factors" section of the Corporation's Annual Report on Form 10-K for the year ended January 3, 2009.2, 2010.


Item 2.      Unregistered Sales of Equity Securities and Use of Proceeds.Proceeds

Directors and members (i.e., employees) 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 directorsdir ectors 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 thirdfirst quarter of 2009,2010, the directors and members, as a group, were credited with 4,4895,294 common stock equivalents under the Deferred Plans.  The value of each common stock equivalent, when credited, ranged from $21.19$23.77 to $23.33.

The Corporation did not repurchase any of its shares during the third quarter ended October 3, 2009.  As of October 3, 2009, $163.6 million was authorized and available for the repurchase of shares by the Corporation.$26.63.














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Issuer Purchases of Equity Securities:

The following is a summary of share repurchase activity during the quarter ended April 3, 2010.
(1)  No shares were purchased outside of a publicly announced plan or program.
 
 
 
 
 
Period
 
 
(a) Total Number of Shares (or Units) Purchased (1)
  
 
(b) Average Price Paid per Share or Unit
  (c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs  (d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet be Purchased Under the Plans or Programs 
1/03/10 – 1/30/10  -  $-   -  $163,612,128 
1/31/10 – 2/27/10  -  $-   -  $163,612,128 
2/28/10 – 4/03/10  135,000  $24.38   135,000  $160,320,828 
Total  135,000       135,000     
(1)  No shares were purchased outside of a publicly announced plan or program.

The Corporation repurchases shares under previously announced plans authorized by the Board as follows:
·  Plan announced November 9, 2007, providing share repurchase authorization of $200,000,000 with no specific expiration date.
·  No repurchase plans expired or were terminated during the first quarter of fiscal 2010, nor do any plans exist under which the Corporation does not intend to make further purchases.


Item 6.     Exhibits.Exhibits

See Exhibit Index.













  2625 
 
 

SIGNATURES

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duyduly authorized.
 
 
 
HNI Corporation
 
    
Dated:  NovemberDate:  May 5, 20092010By:/s/ Kurt A. Tjaden 
  Name:  Kurt A. Tjaden 
  Title  :  Vice President and Chief Financial Officer 
    

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27 
 


 
EXHIBIT INDEX
(10.1)
Form of HNI Corporation 2007 Stock-Based Compensation Plan Restricted Stock Unit Award Agreement*+
(10.2)
HNI Corporation 2007 Stock-Based Compensation Plan, as amended and restated, incorporated by reference to Appendix A to the Registrant's Proxy Statement on Schedule 14A filed March 26, 2010*
(10.3)
HNI Corporation Annual Incentive Plan (f/k/a HNI Corporation Executive Bonus Plan), as amended and restated, incorporated by reference to Appendix B to the Registrant's Proxy Statement on Schedule 14A filed March 26, 2010*
(10.4)
HNI Corporation Long-Term Performance Plan, as amended and restated, incorporated by reference to Appendix C to the Registrant's Proxy Statement on Schedule 14A filed March 26, 2010*
(10.5)
HNI Corporation Supplemental Income Plan (f/k/a HNI Corporation ERISA Supplemental Retirement Plan), as amended and restated, incorporated by reference to Exhibit 10.4 to the Registrant's Current Report on Form 8-K filed February 22, 2010*
 
(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


*Indicates management contract or compensatory plan.

+ Filed herewith.
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