UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM

10-Q

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended

~~July 1, 2023~~March 30, 2024

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number:

1-14225

HNI Corporation

Iowa

(Exact name of registrant as specified in its charter)

42-0617510

(State or other jurisdiction of ~~Incorporation)~~incorporation or organization)

(I.R.S. Employer Identification No.)

600 East Second Street

P.O. Box 1109

Muscatine

Iowa

52761-0071

(Address of principal executive offices) (Zip Code)

(

563

)

272-7400

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock

HNI

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes

☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes

☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Smaller reporting company

☐

Non-accelerated filer

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes

☐

No ☒

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

Common Stock, $1 Par Value

Outstanding as of

~~July 1, 2023~~March 30, 2024

~~46,548,782~~47,297,068


HNI Corporation and Subsidiaries
Quarterly Report on Form 10-Q

Table of Contents

PART I. FINANCIAL INFORMATION
		Page
Item 1.	Financial Statements (Unaudited)

	Condensed Consolidated Statements of Comprehensive Income - Three Months Ended March 30, 2024 and ~~Six~~ ~~Months Ended~~ ~~July~~April 1, 2023 ~~and~~ ~~July~~ ~~2, 2022~~	3

	Condensed Consolidated Balance Sheets - ~~July~~March 30, 202 ~~1, 2023~~4 and December ~~31, 2022~~30, 2023	4

	Condensed Consolidated Statements of Equity - Three ~~and Six~~ Months Ended ~~July~~March 30, 2024 a nd April 1, 2023 ~~and~~ ~~July~~ ~~2, 2022~~	6

	Condensed Consolidated Statements of Cash Flows - ~~Three~~ ~~and Six~~Three Months Ended ~~July~~ March 30, 2024 and April 1, 2023 ~~and~~ ~~July~~ ~~2, 2022~~	87

	Notes to Condensed Consolidated Financial Statements	98

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2723

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3429

Item 4.	Controls and Procedures	3429

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	3529

Item 1A.	Risk Factors	3529

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3729

Item 3.	Defaults Upon Senior Securities - None	-

Item 4.	Mine Safety Disclosures - Not Applicable	-

Item 5.	Other Information	3730

Item 6.	Exhibits	3831

Signatures		3932

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements


HNI Corporation and Subsidiaries Condensed Consolidated Statements of Comprehensive Income (In millions, except per share data)
HNI Corporation and Subsidiaries Condensed Consolidated Statements of Comprehensive Income (In millions, except per share data)
HNI Corporation and Subsidiaries Condensed Consolidated Statements of Comprehensive Income (In millions, except per share data)
(Unaudited)	(Unaudited)										(Unaudited)

		Three Months Ended					Six Months Ended
		July 1, 2023			July 2, 2022		July 1, 2023		July 2, 2022

		March 30, 2024
				March 30, 2024
		March 30, 2024



Net sales
Net sales
Net sales	Net sales	$	563.5		$	621.7	$	1,042.5	$	1,194.1
Cost of sales	Cost of sales	347.9			401.2		652.7		776.6
Cost of sales
Cost of sales
Gross profit
Gross profit
Gross profit	Gross profit	215.5			220.6		389.8		417.5
Selling and administrative expenses	Selling and administrative expenses	211.0			189.7		378.9		366.1
Selling and administrative expenses
Selling and administrative expenses

Restructuring and impairment charges		8.1			1.0		8.1		1.0
Operating income (loss)		(3.6)			29.9		2.9		50.3
Restructuring charges

Restructuring charges

Restructuring charges
Operating income
Operating income
Operating income
Interest expense, net	Interest expense, net	5.5			2.1		8.2		4.1
Income (loss) before income taxes		(9.0)			27.8		(5.3)		46.2
Income taxes		3.8			(2.5)		6.0		1.8
Net income (loss)		(12.8)			30.3		(11.3)		44.5
Interest expense, net
Interest expense, net
Income before income taxes
Income before income taxes
Income before income taxes
Income tax expense
Income tax expense
Income tax expense
Net income
Net income
Net income
Less: Net income (loss) attributable to non-controlling interest	Less: Net income (loss) attributable to non-controlling interest	(0.0)			0.0		(0.0)		(0.0)
Net income (loss) attributable to HNI Corporation		$	(12.8)		$	30.3	$	(11.3)	$	44.5
Less: Net income (loss) attributable to non-controlling interest
Less: Net income (loss) attributable to non-controlling interest
Net income attributable to HNI Corporation
Net income attributable to HNI Corporation
Net income attributable to HNI Corporation

Average number of common shares outstanding – basic	Average number of common shares outstanding – basic	43.3			41.8		42.4		42.1
Net income (loss) attributable to HNI Corporation per common share – basic		$	(0.30)		$	0.73	$	(0.27)	$	1.06

Average number of common shares outstanding – basic

Average number of common shares outstanding – basic
Net income attributable to HNI Corporation per common share – basic
Net income attributable to HNI Corporation per common share – basic
Net income attributable to HNI Corporation per common share – basic
Average number of common shares outstanding – diluted	Average number of common shares outstanding – diluted	43.3			42.4		42.4		42.7
Net income (loss) attributable to HNI Corporation per common share – diluted		$	(0.30)		$	0.72	$	(0.27)	$	1.04
Average number of common shares outstanding – diluted
Average number of common shares outstanding – diluted
Net income attributable to HNI Corporation per common share – diluted
Net income attributable to HNI Corporation per common share – diluted
Net income attributable to HNI Corporation per common share – diluted

Foreign currency translation adjustments

Foreign currency translation adjustments

Foreign currency translation adjustments	Foreign currency translation adjustments	$	(0.0)		$	(1.3)	$	0.0	$	(1.8)
Change in unrealized gains (losses) on marketable securities, net of tax	Change in unrealized gains (losses) on marketable securities, net of tax	(0.1)			(0.1)		0.1		(0.5)
Change in unrealized gains (losses) on marketable securities, net of tax
Change in unrealized gains (losses) on marketable securities, net of tax

Change in derivative financial instruments, net of tax

Change in derivative financial instruments, net of tax

Change in derivative financial instruments, net of tax	Change in derivative financial instruments, net of tax	—			0.1		(0.1)		1.0
Other comprehensive income (loss), net of tax	Other comprehensive income (loss), net of tax	(0.1)			(1.3)		0.0		(1.3)
Comprehensive income (loss)		(12.9)			29.0		(11.2)		43.1
Other comprehensive income (loss), net of tax
Other comprehensive income (loss), net of tax
Comprehensive income
Comprehensive income
Comprehensive income
Less: Comprehensive income (loss) attributable to non-controlling interest	Less: Comprehensive income (loss) attributable to non-controlling interest	(0.0)			0.0		(0.0)		(0.0)
Comprehensive income (loss) attributable to HNI Corporation		$	(12.9)		$	29.0	$	(11.2)	$	43.1
Less: Comprehensive income (loss) attributable to non-controlling interest
Less: Comprehensive income (loss) attributable to non-controlling interest
Comprehensive income attributable to HNI Corporation
Comprehensive income attributable to HNI Corporation
Comprehensive income attributable to HNI Corporation

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).

Amounts may not sum due to rounding.

HNI Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(In millions)

(Unaudited)

July 1,
2023

December 31,
2022

March 30,
2024

December 30,
2023

Assets

Current Assets:

Cash and cash equivalents

23.8

17.4

Short-term investments

5.7

2.0

Receivables

258.1

218.4

Allowance for doubtful accounts

(2.6)

(3.2)

Inventories, net

234.8

180.1

Prepaid expenses and other current assets

58.9

52.5

Assets held for sale

18.9

1.9

Prepaid expenses and other current assets

Total Current Assets

597.7

469.2

Property, Plant, and Equipment:

Land and land improvements

58.5

30.8

Buildings

410.0

275.4

Machinery and equipment

682.7

602.6

Construction in progress

41.7

34.2

1,192.9

942.9

Less: Accumulated depreciation

(613.3)

(590.3)

Less accumulated depreciation

Net Property, Plant, and Equipment

579.6

352.5

Right-of-use Finance Leases

11.8

11.4

Right-of-use - Finance Leases

Right-of-use Operating Leases

124.3

88.4

Right-of-use - Operating Leases

Goodwill and Other Intangible Assets, net

701.8

439.8

Other Assets

60.4

53.2

Other Assets

Total Assets

2,075.6

1,414.5

Total Assets

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).

Amounts may not sum due to rounding.

HNI Corporation and Subsidiaries

Condensed Consolidated Balance Sheets

(In millions)

HNI Corporation and Subsidiaries

Condensed Consolidated Balance Sheets

(In millions)

HNI Corporation and Subsidiaries

Condensed Consolidated Balance Sheets

(In millions)

(Unaudited)

July 1,
2023

December 31,
2022

March 30,
2024

December 30,
2023

Liabilities and Equity

Current Liabilities:

Accounts payable and accrued expenses

438.8

367.7

Current maturities of debt

1.1

1.3

Current maturities of other long-term obligations

7.3

2.1

Current lease obligations - Finance

4.0

3.7

Current lease obligations - Operating

23.8

20.3

Liabilities held for sale

14.4

—

Total Current Liabilities

489.4

395.1

Long-Term Debt

597.1

188.8

Long-Term Lease Obligations - Finance

7.7

Long-Term Lease Obligations - Finance

Long-Term Lease Obligations - Operating

114.0

78.9

Other Long-Term Liabilities

79.3

66.3

Other Long-Term Liabilities

Deferred Income Taxes

72.9

61.0

Total Liabilities

1,360.3

797.7

Total Liabilities

Equity:

HNI Corporation shareholders’ equity

715.0

616.5

HNI Corporation shareholders’ equity

Non-controlling interest

0.3

Total Equity

715.3

616.8

Total Equity

Total Liabilities and Equity

2,075.6

1,414.5

Total Liabilities and Equity

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).

Amounts may not sum due to rounding.


HNI Corporation and Subsidiaries Condensed Consolidated Statements of Equity (In millions, except per share data)	HNI Corporation and Subsidiaries Condensed Consolidated Statements of Equity (In millions, except per share data)													HNI Corporation and Subsidiaries Condensed Consolidated Statements of Equity (In millions, except per share data)
(Unaudited)	(Unaudited)													(Unaudited)

		Three Months Ended - March 30, 2024
		Three Months Ended - March 30, 2024
		Three Months Ended - March 30, 2024
		Three Months Ended - March 30, 2024
		Three Months Ended - March 30, 2024
		Three Months Ended - March 30, 2024
		Three Months Ended - March 30, 2024
		Three Months Ended - March 30, 2024
		Three Months Ended - March 30, 2024
		Three Months Ended - March 30, 2024
		Three Months Ended - March 30, 2024
		Three Months Ended - March 30, 2024
		Three Months Ended - March 30, 2024
		Three Months Ended - March 30, 2024
		Three Months Ended - March 30, 2024
		Three Months Ended - March 30, 2024
		Three Months Ended - March 30, 2024
		Three Months Ended - March 30, 2024
		Three Months Ended - March 30, 2024
		Three Months Ended - March 30, 2024
		Three Months Ended - March 30, 2024
		Three Months Ended - March 30, 2024
		Three Months Ended - March 30, 2024
		Three Months Ended - March 30, 2024
		Three Months Ended - March 30, 2024
		Three Months Ended - March 30, 2024
		Three Months Ended - March 30, 2024
		Three Months Ended - March 30, 2024
		Three Months Ended - March 30, 2024
		Three Months Ended - March 30, 2024
		Three Months Ended - March 30, 2024
		Three Months Ended - March 30, 2024
		Three Months Ended - March 30, 2024
		Three Months Ended - March 30, 2024
		Three Months Ended - March 30, 2024
		Three Months Ended - March 30, 2024
	Common Stock														Common Stock	Additional Paid-in Capital	Retained Earnings	Accumulated Other Comprehensive Income (Loss)	Non-controlling Interest	Total Shareholders’ Equity
Balance, December 30, 2023
Comprehensive income:
Net income
Net income
Net income
Other comprehensive income (loss), net of tax
		Three Months Ended - July 1, 2023
		Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Non-controlling Interest		Total Shareholders’ Equity
Balance, April 1, 2023		$	41.7	$	57.1	$	522.0	$	(7.9)	$	0.3	$	613.2
Comprehensive income:
Net income (loss)		—		—		(12.8)		—		(0.0)		(12.8)
Other comprehensive income (loss), net of tax		—		—		—		(0.1)		—		(0.1)

Dividends payable

Dividends payable

Dividends payable	Dividends payable	—		—		(0.3)		—		—		(0.3)
Cash dividends; $0.32 per share	Cash dividends; $0.32 per share	—		—		(14.9)		—		—		(14.9)

Common shares – treasury:	Common shares – treasury:
Common shares – treasury:
Common shares – treasury:
Shares purchased	Shares purchased	—		—		—		—		—		—
Shares issued in connection with Kimball International, Inc. acquisition		4.7		116.1		—		—		—		120.8
Shares purchased
Shares purchased

Shares issued under Members’ Stock Purchase Plan and stock awards, net of tax	Shares issued under Members’ Stock Purchase Plan and stock awards, net of tax	0.1		9.4		—		—		—		9.5
Balance, July 1, 2023		$	46.5	$	182.5	$	493.9	$	(8.0)	$	0.3	$	715.3
Shares issued under Members’ Stock Purchase Plan and stock awards, net of tax
Shares issued under Members’ Stock Purchase Plan and stock awards, net of tax
Balance, March 30, 2024

Six Months Ended - July 1, 2023
Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Non-controlling Interest Total Shareholders’ Equity
Balance, December 31, 2022 $ 41.4 $ 49.1 $ 534.0 $ (8.0) $ 0.3 $ 616.8
Comprehensive income:
Net income (loss) — — (11.3) — (0.0) (11.3)
Other comprehensive income (loss), net of tax — — — 0.0 — 0.0
Dividends payable — — (0.6) — — (0.6)
Cash dividends; $0.64 per share — — (28.2) — — (28.2)
Common shares – treasury:
Shares purchased — — — — — —
Shares issued in connection with Kimball International, Inc. acquisition 4.7 116.1 — — — 120.8
Shares issued under Members' Stock Purchase Plan and stock awards, net of tax 0.4 17.3 — — — 17.8
Balance, July 1, 2023 $ 46.5 $ 182.5 $ 493.9 $ (8.0) $ 0.3 $ 715.3





	Three Months Ended - April 1, 2023
	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Non-controlling Interest		Total Shareholders’ Equity
Balance, December 31, 2022	$	41.4	$	49.1	$	534.0	$	(8.0)	$	0.3	$	616.8
Comprehensive income:
Net income (loss)	—		—		1.6		—		(0.0)		1.6
Other comprehensive income (loss), net of tax	—		—		—		0.1		—		0.1



Dividends payable	—		—		(0.3)		—		—		(0.3)
Cash dividends; $0.32 per share	—		—		(13.3)		—		—		(13.3)
Common shares – treasury:
Shares purchased	—		—		—		—		—		—
Shares issued under Members’ Stock Purchase Plan and stock awards, net of tax	0.3		8.0		—		—		—		8.3
Balance, April 1, 2023	$	41.7	$	57.1	$	522.0	$	(7.9)	$	0.3	$	613.2

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).

Amounts may not sum due to rounding.

HNI Corporation and Subsidiaries
Condensed Consolidated Statements of Equity
(In millions, except per share data)
(Unaudited)
Three Months Ended - July 2, 2022
Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Non-controlling Interest Total Shareholders’ Equity
Balance, April 2, 2022 $ 42.4 $ 45.4 $ 500.8 $ (6.8) $ 0.3 $ 582.0
Comprehensive income:
Net income (loss) — — 30.3 — 0.0 30.3
Other comprehensive income (loss), net of tax — — — (1.3) — (1.3)
Dividends payable — — (0.4) — — (0.4)
Cash dividends; $0.32 per share — — (13.4) — — (13.4)
Common shares – treasury:
Shares purchased (1.1) (2.6) (36.3) — — (40.0)
Shares issued under Members’ Stock Purchase Plan and stock awards, net of tax 0.1 4.6 — — — 4.7
Balance, July 2, 2022 $ 41.3 $ 47.4 $ 481.1 $ (8.1) $ 0.3 $ 562.0

Six Months Ended - July 2, 2022
Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Non-controlling Interest Total Shareholders’ Equity
Balance, January 1, 2022 $ 42.6 $ 39.2 $ 514.6 $ (6.8) $ 0.3 $ 590.0
Comprehensive income:
Net income (loss) — — 44.5 — (0.0) 44.5
Other comprehensive income (loss), net of tax — — — (1.3) — (1.3)
Dividends payable — — (0.4) — — (0.4)
Cash dividends; $0.63 per share — — (26.5) — — (26.5)
Common shares – treasury:
Shares purchased (1.7) (11.1) (51.1) — — (63.9)
Shares issued under Members' Stock Purchase Plan and stock awards, net of tax 0.4 19.3 — — — 19.7
Balance, July 2, 2022 $ 41.3 $ 47.4 $ 481.1 $ (8.1) $ 0.3 $ 562.0


HNI Corporation and Subsidiaries Condensed Consolidated Statements of Cash Flows (In millions)
(Unaudited)

	Three Months Ended
	March 30, 2024		April 1, 2023
Net Cash Flows From (To) Operating Activities:
Net income	$	17.7	$	1.6
Non-cash items included in net income:
Depreciation and amortization	26.4		20.1
Other post-retirement and post-employment benefits	0.3		0.3
Stock-based compensation	7.7		4.5


Deferred income taxes	(2.1)		(0.6)


Other – net	0.6		0.6
Net decrease in cash from operating assets and liabilities	(47.6)		(10.5)
Increase (decrease) in other liabilities	(7.2)		1.4
Net cash flows from (to) operating activities	(4.3)		17.3

Net Cash Flows From (To) Investing Activities:
Capital expenditures	(10.7)		(19.9)

Capitalized software	(0.5)		(0.2)

Purchase of investments	(0.6)		(1.6)
Sales or maturities of investments	1.2		1.5

Other – net	0.1		0.1
Net cash flows from (to) investing activities	(10.6)		(20.0)

Net Cash Flows From (To) Financing Activities:
Payments of debt	(81.5)		(77.8)
Proceeds from debt	118.6		97.1
Dividends paid	(16.6)		(13.7)
Purchase of HNI Corporation common stock	(2.6)		—
Proceeds from sales of HNI Corporation common stock	0.6		0.6
Other – net	(5.6)		(4.0)
Net cash flows from (to) financing activities	12.9		2.1



Net decrease in cash and cash equivalents	(2.0)		(0.6)
Cash and cash equivalents at beginning of period	28.9		17.4
Cash and cash equivalents at end of period	$	27.0	$	16.8

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).

Amounts may not sum due to rounding.

HNI Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In millions)
(Unaudited)
Six Months Ended
July 1,
2023 July 2,
2022
Net Cash Flows From (To) Operating Activities:
Net income (loss) $ (11.3) $ 44.5
Non-cash items included in net income (loss):
Depreciation and amortization 42.7 42.4
Other post-retirement and post-employment benefits 0.5 0.7
Stock-based compensation 7.6 8.5
Deferred income taxes (9.5) (13.4)
Other – net 2.3 0.6
Net increase (decrease) in cash from operating assets and liabilities 4.8 (105.0)
Increase (decrease) in other liabilities 2.7 (3.5)
Net cash flows from (to) operating activities 39.8 (25.2)
Net Cash Flows From (To) Investing Activities:
Capital expenditures (37.7) (27.9)
Capitalized software (3.4) (5.3)
Acquisition spending, net of cash acquired (369.8) (9.3)
Purchase of investments (3.1) (1.8)
Sales or maturities of investments 3.0 1.5
Other – net 0.2 —
Net cash flows from (to) investing activities (410.8) (42.8)
Net Cash Flows From (To) Financing Activities:
Payments of debt (161.7) (159.3)
Proceeds from debt 572.3 291.8
Dividends paid (28.6) (26.7)
Purchase of HNI Corporation common stock — (65.2)
Proceeds from sales of HNI Corporation common stock 1.2 3.4
Other – net (5.9) (2.5)
Net cash flows from (to) financing activities 377.3 41.5
Net increase (decrease) in cash and cash equivalents including cash classified within current assets held for sale 6.3 (26.5)
Less: net increase in cash classified within current assets held for sale — 6.2
Net increase (decrease) in cash and cash equivalents 6.3 (32.7)
Cash and cash equivalents at beginning of period 17.4 52.3
Cash and cash equivalents at end of period $ 23.8 $ 19.6

~~See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).~~

~~Amounts may not sum due to rounding.~~

HNI Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

~~July 1, 2023~~March 30, 2024

Note 1. Basis of Presentation

The accompanying unaudited, condensed consolidated financial statements of HNI Corporation (individually and together with its consolidated subsidiaries, the "Corporation") have been prepared in accordance with generally accepted accounting principles ("GAAP") 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 notes required by ~~generally accepted accounting principles~~GAAP for complete financial statements. The December ~~31, 2022,~~30, 2023, 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.~~GAAP. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair statement have been included. Operating results for the ~~six-month~~three-month period ended ~~July 1, 2023,~~March 30, 2024, are not necessarily indicative of the results expected for the fiscal year ending December ~~30, 2023.~~28, 2024 or for any other period. For further information, refer to the consolidated financial statements and accompanying notes included in ~~HNI Corporation’s (the "Corporation")~~the Corporation's Annual Report on Form 10-K for the fiscal year ended December ~~31, 2022. Certain reclassifications have been made within the interim financial information to conform to the current presentation.~~30, 2023. All dollar amounts presented are in millions, except per share data or where otherwise indicated. Amounts may not sum due to rounding.

On June 1, 2023, the Corporation acquired Kimball International, Inc. ("Kimball International"). The Corporation included the financial results of Kimball International in the Condensed Consolidated Financial Statements starting as of the date of acquisition. See "Note 3. Acquisition and Divestitures" ~~in the Notes to Condensed Consolidated Financial Statements~~ for further information.

Note 2. Revenue from Contracts with Customers

Disaggregation of Revenue

Revenue from contracts with customers disaggregated by product category is as follows:


		Three Months Ended				Six Months Ended
		July 1, 2023		July 2, 2022		July 1, 2023		July 2, 2022
		Three Months Ended
		Three Months Ended
		Three Months Ended
		March 30, 2024
		March 30, 2024
		March 30, 2024
Systems and storage
Systems and storage
Systems and storage	Systems and storage	$	251.4	$	241.1	$	433.7	$	449.0
Seating	Seating	123.4		129.6		216.9		239.9
Seating
Seating
Other	Other	38.3		36.0		62.1		70.9
Other
Other
Total workplace furnishings
Total workplace furnishings
Total workplace furnishings	Total workplace furnishings	413.0		406.7		712.7		759.8

Residential building products	Residential building products	150.4		215.1		329.8		434.3

Residential building products

Residential building products
Net sales	Net sales	$	563.5	$	621.7	$	1,042.5	$	1,194.1
Net sales
Net sales

Sales by product category are subject to similar economic factors and market conditions. See "Note 14. Reportable Segment Information" ~~in the Notes to Condensed Consolidated Financial Statements~~ for further information about operating segments.

Contract Assets and Contract Liabilities

In addition to trade receivables, the Corporation has contract assets consisting of funds paid up-front to certain workplace furnishings dealers in exchange for their multi-year commitment to market and sell the Corporation’s products. These contract assets are amortized over the term of the contracts and recognized as a reduction of revenue. The Corporation has contract liabilities consisting of customer deposits and rebate and marketing program liabilities.

Contract assets and contract liabilities were as follows:

July 1,
2023 December 31,
2022
Trade receivables (1) $ 258.1 $ 218.4
Contract assets (current) (2) $ 3.1 $ 2.9
Contract assets (long-term) (3) $ 30.0 $ 29.8
Contract liabilities - Customer deposits (4) $ 39.7 $ 27.3
Contract liabilities - Accrued rebate and marketing programs (4) $ 32.0 $ 31.3

Increases in Trade receivables and Contract liabilities - Customer deposits balances during the current year to date period are primarily due to the acquisition of Kimball International. Balances as of July 1, 2023 in the table above exclude amounts classified as held for sale. See "Note 17. Held for Sale" in the Notes to Condensed Consolidated Financial Statements for further information.


	March 30, 2024		December 30, 2023
Trade receivables (1)	$	231.9	$	247.1
Contract assets (current) (2)	$	3.2	$	3.1
Contract assets (long-term) (3)	$	27.8	$	28.1
Contract liabilities - Customer deposits (4)	$	32.4	$	35.6
Contract liabilities - Accrued rebate and marketing programs (4)	$	21.5	$	31.4

The index below indicates the line item in the Condensed Consolidated Balance Sheets where contract assets and contract liabilities are reported:

(1) "Receivables"

(2) "Prepaid expenses and other current assets"

(3) "Other Assets"

(4) "Accounts payable and accrued expenses"

Contract liabilities for customer deposits paid to the Corporation prior to the satisfaction of performance obligations are recognized as revenue upon completion of the performance obligations. The contract liability balance related to customer deposits was ~~$27.3~~$35.6 million as of December ~~31, 2022,~~30, 2023, of which, ~~$15.9~~$29.7 million was recognized as revenue in the first ~~six~~three months of ~~2023.~~

~~Performance Obligations~~

The Corporation recognizes revenue for sales of workplace furnishings and residential building products at a point in time following the transfer of control of such products to the customer, which typically occurs upon shipment of the product. In certain circumstances, transfer of control to the customer does not occur until the goods are received by the customer or upon installation and/or customer acceptance, depending on the terms of the underlying contracts. Contracts typically have a duration of less than one year and normally do not include a significant financing component. Generally, payment is due within 30 days of invoicing.

The Corporation’s backlog orders are typically cancellable for a period of time and almost all contracts have an original duration of one year or less. As a result, the Corporation has elected the practical expedient permitted in the revenue accounting standard not to disclose the unsatisfied performance obligation as of period end. The backlog is typically fulfilled within a few months.

~~Significant Judgments~~

The amount of consideration the Corporation receives and revenue recognized varies with changes in rebate and marketing program incentives, as well as early pay discounts, offered to customers. The Corporation uses significant judgment throughout the year in estimating the reduction in net sales driven by variable consideration for rebate and marketing programs. Judgments made include expected sales levels and utilization of funds. However, this judgment factor is significantly reduced at the end of each year when sales volumes and the impact to rebate and marketing programs are known and recorded as the programs typically end near the Corporation’s fiscal year end.2024.

Note 3. Acquisitions and Divestitures

Acquisition - Kimball International

On June 1, 2023, the Corporation completed its ~~previously announced~~ acquisition of Kimball International, ~~Inc. ("Kimball International"),~~ a leading commercial furnishings company with expertise in workplace, health, and hospitality, resulting in Kimball International becoming a wholly-owned subsidiary of the Corporation. ~~Immediately following the close of the transaction, Kimball International shareholders owned approximately 10 percent of the combined company.~~ The Corporation has incurred aggregate acquisition-related expenses of ~~$31.3~~$41.2 million related to this transaction, of which $28.6 million were incurred as corporate costs and ~~$34.7~~$12.5 million were recorded in the ~~three months and six months~~workplace furnishings segment. Of these expenses, corporate costs of $3.4 million were incurred in the three-month period ended ~~July~~April 1, 2023, ~~respectively, that~~

and are included in "Selling and administrative expenses" in the Condensed Consolidated Statements of Comprehensive Income. Additionally, acquisition-related financing costs of ~~$2.7~~$2.8 million and $0.2 million were recorded to the Condensed Consolidated Balance Sheet in "Long-term debt" and "Other assets", respectively, while $0.3 million of acquisition-related stock issuance costs were recorded to "Additional paid-in capital".

The acquired assets and assumed liabilities and results of Kimball International's operations are included in the Corporation's ~~Workplace Furnishings~~workplace furnishings reportable segment. The ~~excess~~acquisition was accounted for using the acquisition method pursuant to ASC 805, with goodwill being recorded as a result of the purchase ~~consideration over~~price exceeding the fair value of ~~net~~identifiable tangible and intangible assets ~~acquired was recorded as goodwill,~~and liabilities. Goodwill, which is not ~~expected to be~~ tax-deductible, ~~and has not yet been assigned to the new reporting units created. Goodwill~~ is primarily ~~attributed~~attributable to the assembled workforce of Kimball International and anticipated synergies.

Under the terms of the Agreement and Plan of Merger, the Corporation acquired all outstanding shares of Kimball International's common stock and holders of Kimball International’s outstanding common stock received $9.00 in cash and 0.1301 shares of the Corporation’s common stock for each share of Kimball International’s common stock. For fair value purposes, shares of the Corporation's common stock were valued at $25.50, the closing market price on May 31, 2023 the day preceding the transaction's close.

~~The total preliminary fair market value of consideration is approximately $503.7 million, which is allocated as follows:~~

Kimball International Shares HNI Shares Exchanged Fair Value
Cash Consideration:
Shares of Kimball International stock issued and outstanding as of June 1, 2023 36.4 $ 327.8
Kimball International equivalent shares 0.2 2.3
Total number of Kimball International shares for cash consideration 36.6 330.0
Consideration for payment to settle Kimball International's outstanding debt 50.2
Share Consideration:
Shares of Kimball International stock issued and outstanding as of June 1, 2023 36.4 4.7 120.8
Replacement Share-Based Awards:
Outstanding awards of Kimball International restricted stock units relating to Kimball International Common Stock as of June 1, 2023 0.5 0.2 2.6
Total preliminary acquisition date fair value of purchase consideration $ 503.7

Consideration provided in the form of HNI Corporation shares and HNI Corporation replacement share-based awards represent non-cash consideration and thus are not included in the acquisition spending presented in the Condensed Consolidated Statement of Cash Flows.

119

The total fair market value of consideration was approximately $503.7 million, which is allocated as follows:


	Kimball International Shares	HNI Shares Exchanged	Fair Value
Cash Consideration:
Shares of Kimball International common stock issued and outstanding as of June 1, 2023	36.4		$	327.8
Kimball International equivalent shares	0.2		2.3
Total number of Kimball International shares for cash consideration	36.6		330.0

Consideration for payment to settle Kimball International's outstanding debt			50.2

Share Consideration:
Shares of Kimball International stock issued and outstanding as of June 1, 2023	36.4	4.7	120.8

Replacement Share-Based Awards:
Outstanding awards of Kimball International restricted stock units relating to Kimball International common stock as of June 1, 2023	0.5	0.2	2.6

Total acquisition date fair value of purchase consideration			$	503.7

Consideration provided in the form of HNI Corporation shares and HNI Corporation replacement share-based awards represents non-cash consideration.

The preliminary purchase price allocation ~~of identifiable tangible and intangible assets and liabilities as of~~at the date of acquisition, as updated, is as follows:


	~~Fair Value~~
~~Assets~~
~~Cash and cash equivalents~~	$	~~10.5~~
~~Short-term investments~~	~~4.2~~
~~Receivables~~	~~46.1~~
~~Inventories, net~~	~~52.3~~
~~Prepaid expenses and other current assets~~	~~13.3~~
~~Assets held for sale~~	~~17.5~~
~~Property, plant, and equipment~~	~~218.4~~
~~Right-of-use operating leases~~	~~16.0~~
~~Goodwill~~	~~187.3~~
~~Intangible assets~~	~~88.0~~
~~Other assets~~	~~12.2~~
~~Total Assets~~	$	~~665.9~~

~~Liabilities~~
~~Accounts payable and accrued expenses~~	$	~~91.2~~
~~Current lease obligations - operating~~	~~5.8~~
~~Liabilities held for sale~~	~~14.4~~
~~Long-term lease obligations - operating~~	~~16.2~~
~~Other long-term liabilities~~	~~13.3~~
~~Deferred income taxes~~	~~21.3~~
~~Total Liabilities~~	$	~~162.2~~

~~Net Assets and Liabilities~~	$
~~503.7~~


	Preliminary at December 30, 2023		Measurement period adjustments		As adjusted at March 30, 2024
Goodwill	$	162.7	$	1.1	$	163.8
Intangible assets	110.1		—		110.1
Other assets acquired and liabilities assumed, net	231.0		(1.1)		229.9
Net Assets and Liabilities	$	503.7	$	—	$	503.7

The following table summarizes the acquired identified intangible assets and weighted average useful lives:

Category

Weighted-average useful life

Fair Value

Software

3 years

~~13.9~~5.6

Customer lists and other

1012 years

~~40.7~~47.2

Acquired technology

1618 years

~~14.9~~16.5

Trademarks and trade names - Definite-lived

1617 years

~~18.5~~3.8

Trademarks and trade names - Indefinite-lived

Indefinite-lived

37.0

Total intangible assets

~~88.0~~110.1

The valuation analysis requires the use of complex management estimates and assumptions such as ~~property appraisals,~~customer attrition rates, trade name and technology royalty rates, future cash flows, discount rates, ~~royalty rates,~~property appraisals, and long-term growth ~~rates, and technology build costs. At this time,~~rates. As of March 30, 2024, assets and liabilities are recorded based on preliminary data and assumptions ~~and~~as the Corporation ~~has not obtained all~~is in the process of ~~the~~reviewing information ~~necessary~~related to ~~finalize~~ the determination of the fair values. The provisional assets and liabilities may be adjusted to reflect the finally determined amounts, and those adjustments may be material. The Corporation expects to finalize the purchase price allocation in the first half of 2024. See "Note 17. Held for Sale" for information on certain assets and liabilities acquired of Kimball International's Poppin business unit, which were determined to meet the held for sale accounting criteria.

The Corporation's Condensed Consolidated Statements of Comprehensive Income for the period ended July 1, 2023, include Net sales of $56.0 million and Net loss of $21.3 million attributable to results of operations of Kimball Internationalno later than one year from the ~~acquisition~~ date ~~thru July 1, 2023. These amounts include~~of the ~~results of Poppin, which was determined not to require~~acquisition. During the three months ended March 30,

1210

~~discontinued operations presentation as this entity is not material~~2024, the Corporation revised the preliminary purchase price allocation resulting in a net increase to goodwill of $1.1 million, primarily attributable to adjustments to accrued expenses.

The following table summarizes the ~~consolidated~~ results of ~~the periods presented, and also since the planned divestiture does not represent a strategic shift~~Kimball International operations that are included in the Corporation's ~~business.~~Condensed Consolidated Statement of Comprehensive Income for the three-month period ended March 30, 2024.


	Three Months Ended
	March 30, 2024
Net sales	$	147.5
Net income	$	6.2

Pro Forma Results of Operations ~~- Kimball International Acquisition:~~

The following table provides, on a pro forma basis, the combined results of operations of HNI Corporation and Kimball International for the ~~three and six month periods~~three-month period ended ~~July~~April 1, 2023, as though the acquisition and ~~July 2, 2022, as if Kimball International~~related financing had ~~been acquired~~occurred as of January 2, 2022, the first day of the Corporation's 2022 fiscal year. The pro forma results include certain purchase accounting adjustments such as: reclassifications to conform Kimball International's results to ~~HNI's~~the Corporation's financial statement presentation; estimated depreciation and amortization expense on acquired tangible and intangible assets; estimated share based compensation expense for Kimball International equity awards converted to ~~HNI~~the Corporation's equity awards; interest associated with additional borrowings to finance the acquisition; non-recurring transaction costs as outlined above; and the impact to income tax expense. This pro forma information is not necessarily reflective of what the Corporation's results would have been had the acquisition occurred on the date indicated, nor is it indicative of future results.

Three Months Ended Six Months Ended
July 1,
2023 July 2,
2022 July 1,
2023 July 2,
2022
Net sales $ 666.3 $ 793.3 $ 1,306.6 $ 1,541.7
Net income $ 11.2 $ 32.2 $ 15.4 $ 22.9

~~Acquisition - Dickerson~~

In June 2022, the Corporation acquired Dickerson Hearth Products ("Dickerson"), an installing fireplace distributor in the Raleigh, North Carolina area, for approximately $8 million. The transaction, which aligns with the Corporation’s vertical integration strategy in the residential building products market, was structured as an asset acquisition and was consummated entirely in cash. The purchase price allocation includes $7.6 million of goodwill. The remaining assets and liabilities acquired were not material to the consolidated financial statements. The purchase accounting was finalized in the second quarter of 2023.

The above acquisitions were accounted for using the acquisition method pursuant to ASC 805, with goodwill being recorded as a result of the purchase price exceeding the fair value of identifiable tangible and intangible assets and liabilities.

~~Divestiture~~

In July 2022, the Corporation closed on the sale of its China- and Hong Kong-based Lamex office furniture business ("Lamex"), which was a component of the workplace furnishings segment, to Kokuyo Co., Ltd, a leading manufacturer and provider of office furniture in Japan and across Asia. The transaction was valued at approximately $75 million plus standard post-closing working capital adjustments, net of cash acquired by the buyer. The Corporation recorded a pre-tax gain on sale in the second half of 2022 of $50.4 million that included transaction-related expenses of approximately $6 million as well as a cumulative foreign currency translation benefit of $3.3 million that was reclassified from accumulated other comprehensive income.

~~The assets and liabilities of Lamex which were disposed of in conjunction with the sale are as follows:~~

Three Months Ended

~~As of~~April 1,
~~July 20, 2022~~2023

~~Assets:~~Net sales

~~Cash and cash equivalents~~

~~5.5~~640.4

~~Receivables~~Net income

~~20.1~~

~~Allowance for doubtful accounts~~

~~(0.5)~~

~~Inventories, net~~

~~6.9~~

~~Prepaid expenses and other current assets~~

~~6.4~~

~~Buildings~~

~~6.2~~

~~Machinery and equipment~~

~~25.9~~

~~Accumulated depreciation~~

~~(17.0)~~

~~Right-of-use - Operating Leases~~

~~5.8~~

~~Goodwill and Other Intangible Assets, net~~

~~10.9~~

~~Total Assets~~

~~70.4~~4.3

~~Liabilities:~~

~~Accounts payable and accrued expenses~~

~~36.1~~

~~Current lease obligations - Operating~~

~~1.7~~

~~Long-Term Lease Obligations - Operating~~

~~4.9~~

~~Deferred Income Taxes~~

~~0.1~~

~~Total Liabilities~~

~~42.7~~

Note 4. Inventories

The Corporation’s residential building products inventories, and a majority of its workplace furnishings inventories, are valued at cost, on the "last-in, first-out" (LIFO) basis. Remaining inventories are generally valued at the lower of cost, on the "first-in, first-out" (FIFO) basis, or net realizable value. Inventories included in the Condensed Consolidated Balance Sheets consisted of the following:

July 1,
2023 December 31,
2022
Finished products, net $ 148.1 $ 121.0
Materials and work in process, net 140.6 112.8
LIFO allowance (54.0) (53.7)
Total inventories, net $ 234.8 $ 180.1
Inventory valued by the LIFO costing method 91 % 91 %

The increase in inventory during the current year-to-date period is primarily due to the acquisition of Kimball International. Balances as of July 1, 2023 in the table above exclude amounts classified as held for sale. See "Note 17. Held for Sale" in the Notes to Condensed Consolidated Financial Statements for further information.


	March 30, 2024			December 30, 2023

Finished products, net	$	130.6		$	112.9
Materials and work in process, net	126.0			128.2
LIFO allowance	(44.5)			(44.5)
Total inventories, net	$	212.1		$	196.6

Inventory valued by the LIFO costing method	94		%	91		%

In addition to the LIFO allowance, the Corporation recorded inventory allowances reducing finished products, materials, and work in process of ~~$15.0~~$14.7 million and ~~$14.9~~$14.2 million as of ~~July 1, 2023~~March 30, 2024 and December ~~31, 2022,~~30, 2023, respectively, to adjust for excess and obsolete inventory or otherwise reduce FIFO-basis inventory to net realizable value.

1411

Note 5. Goodwill and Other Intangible Assets

Goodwill and other intangible assets included in the Condensed Consolidated Balance Sheets consisted of the following:


		July 1, 2023		December 31, 2022
	March 30, 2024					March 30, 2024	December 30, 2023
Goodwill, net	Goodwill, net	$	493.2	$	305.9
Definite-lived intangible assets, net	Definite-lived intangible assets, net	193.0		118.4
Indefinite-lived intangible assets	Indefinite-lived intangible assets	15.5		15.5
Total goodwill and other intangible assets, net	Total goodwill and other intangible assets, net	$	701.8	$	439.8

Goodwill

The changes in the carrying amount of goodwill, by reporting segment, are as follows:

Workplace Furnishings Residential Building Products Total
Balance as of December 31, 2022
Goodwill $ 148.7 $ 222.4 $ 371.1
Accumulated impairment losses (65.0) (0.1) (65.2)
Net goodwill balance as of December 31, 2022 83.6 222.3 305.9
Goodwill acquired 187.3 — 187.3
Balance as of July 1, 2023
Goodwill 336.0 222.4 558.4
Accumulated impairment losses (65.0) (0.1) (65.2)
Net goodwill balance as of July 1, 2023 $ 270.9 $ 222.3 $ 493.2


	Workplace Furnishings		Residential Building Products		Total
Balance as of December 30, 2023
Goodwill	$	297.2	$	222.4	$	519.6
Accumulated impairment losses	(78.5)		(0.1)		(78.6)
Net goodwill balance as of December 30, 2023	218.7		222.3		441.0

Goodwill measurement period adjustments	1.1		—		1.1



Balance as of March 30, 2024
Goodwill	298.3		222.4		520.7
Accumulated impairment losses	(78.5)		(0.1)		(78.6)
Net goodwill balance as of March 30, 2024	$	219.8	$	222.3	$	442.1

Goodwill ~~acquired~~measurement period adjustments in the ~~second quarter of 2023 relates~~current year relate to the acquisition of Kimball International. See "Note 3. Acquisitions and Divestitures" in the Notes to Condensed Consolidated Financial Statements for further information.

Definite-lived intangible assets

The table below summarizes amortizable definite-lived intangible assets, which are reflected in "Goodwill and Other Intangible Assets, net" in the Condensed Consolidated Balance Sheets:


	March 30, 2024															March 30, 2024			December 30, 2023
	Gross													Gross	Accumulated Amortization		Net	Gross		Accumulated Amortization	Net
		July 1, 2023						December 31, 2022
		Gross		Accumulated Amortization		Net		Gross		Accumulated Amortization		Net

Software
Software
Software	Software	$	223.6	$	134.1	$	89.5	$	194.4	$	122.5	$	71.9
Trademarks and trade names	Trademarks and trade names	34.3		6.7		27.6		14.3		5.9		8.4
Customer lists and other	Customer lists and other	120.6		44.7		75.9		80.2		42.1		38.1
Net definite-lived intangible assets	Net definite-lived intangible assets	$	378.5	$	185.5	$	193.0	$	288.8	$	170.4	$	118.4

~~The increase in gross definite-lived intangible assets is due to the acquisition of Kimball International.~~

1512

Amortization expense is reflected in "Selling and administrative expenses" in the Condensed Consolidated Statements of Comprehensive Income and was as follows:


		Three Months Ended				Six Months Ended
		July 1, 2023		July 2, 2022		July 1, 2023		July 2, 2022
		Three Months Ended
		Three Months Ended
		Three Months Ended
		March 30, 2024
		March 30, 2024
		March 30, 2024
Capitalized software
Capitalized software
Capitalized software	Capitalized software	$	5.5	$	6.1	$	10.9	$	12.3
Other definite-lived intangibles	Other definite-lived intangibles	$	1.9	$	1.6	$	3.4	$	3.2
Other definite-lived intangibles
Other definite-lived intangibles

The occurrence of events such as acquisitions, dispositions, or impairments may impact future amortization expense. Over the next several years, amortization expense is expected to decline due primarily to the completion of the amortization of the Corporation's Business Systems Transformation investment. Based on the current amount of intangible assets subject to amortization, the estimated amortization expense for each of the following five years is as follows:

2023 2024 2025 2026 2027
Amortization expense $ 32.3 $ 33.7 $ 31.3 $ 25.0 $ 17.8


	2024		2025		2026		2027		2028
Amortization expense	$	30.1	$	27.3	$	22.7	$	16.8	$	9.0

Indefinite-lived intangible assets

The Corporation also owns certain intangible assets, which are deemed to have indefinite useful lives because they are expected to generate cash flows indefinitely. These indefinite-lived intangible assets are reflected in "Goodwill and Other Intangible Assets, net" in the Condensed Consolidated Balance Sheets:

July 1,
2023 December 31,
2022
Trademarks and trade names $ 15.5 $ 15.5


	March 30, 2024		December 30, 2023
Trademarks and trade names	$	49.1	$	49.1

Impairment Analysis

The Corporation evaluates its goodwill and indefinite-lived intangible assets for impairment on an annual basis during the fourth quarter, or whenever indicators of impairment exist. The Corporation also evaluates long-lived assets (which include definite-lived intangible assets) for impairment if indicators exist. No impairment indicators were identified in the current period.

Note 6. Product Warranties

The Corporation issues certain warranty policies on its workplace furnishings and residential building products that provide for repair or replacement of any covered product or component that fails during normal use because of a defect in design, materials, or workmanship. The duration of warranty policies on the Corporation’s products varies based on the type of product. Allowances have been established for the anticipated future costs associated with the Corporation’s warranty programs.

A warranty allowance is determined by recording a specific allowance for known warranty issues and an additional allowance for unknown claims expected to be incurred based on historical claims experience. Actual claims incurred could differ materially from the original estimates, requiring adjustments to the allowance.

Activity associated with warranty obligations was as follows:


	Three Months Ended						Three Months Ended
	March 30, 2024					March 30, 2024		April 1, 2023
Balance at beginning of period
		Six Months Ended
		July 1, 2023		July 2, 2022
Balance at beginning of period		$	14.8	$	16.0
Accruals related to acquisitions		3.5		—
Accruals for warranties issued
Accruals for warranties issued
Accruals for warranties issued	Accruals for warranties issued	6.2		5.2

Settlements and other	Settlements and other	(5.6)		(5.3)

Settlements and other

Settlements and other
Balance at end of period	Balance at end of period	$	19.0	$	15.9

1613

The current and long-term portions of the allowance for estimated settlements are included within "Accounts payable and accrued expenses" and "Other Long-Term Liabilities," respectively, in the Condensed Consolidated Balance Sheets. The following table summarizes when these estimated settlements are expected to be paid:

July 1,
2023 December 31,
2022
Current - in the next twelve months $ 6.9 $ 5.4
Long-term - beyond one year 12.1 9.4
Total $ 19.0 $ 14.8

Balances as of July 1, 2023 in the tables above exclude amounts classified as held for sale. See "Note 17. Held for Sale" in the Notes to Condensed Consolidated Financial Statements for further information.


	March 30, 2024		December 30, 2023
Current - in the next twelve months	$	6.4	$	6.0
Long-term - beyond one year	12.0		12.0
Total	$	18.4	$	18.0

Note 7. Debt

Debt is as follows:


		July 1, 2023		December 31, 2022
Revolving credit facility with interest at a variable rate (July 1, 2023 - 6.2%; December 31, 2022 - 5.6%)		$	200.0	$	89.1
Term loan with interest at a variable rate (July 1, 2023 - 6.9%)		300.0		—
Fixed-rate notes due in 2025 with an interest rate of 4.22%		50.0		50.0
Fixed-rate notes due in 2028 with an interest rate of 4.40%		50.0		50.0
	March 30, 2024					March 30, 2024	December 30, 2023
Revolving credit facility with interest at a variable rate (March 30, 2024 - 6.7%; December 30, 2023 - 6.9%)
Term loan with interest at a variable rate (March 30, 2024 - 6.8%; December 30, 2023 - 7.0%)
Fixed-rate notes due in 2025 with an interest rate of 4.2%
Fixed-rate notes due in 2028 with an interest rate of 4.4%
Other amounts	Other amounts	1.1		1.3
Deferred debt issuance costs	Deferred debt issuance costs	(2.9)		(0.3)
Total debt	Total debt	598.1		190.1
Less: Current maturities of debt	Less: Current maturities of debt	1.1		1.3
Long-term debt	Long-term debt	$	597.1	$	188.8

The aggregate carrying value of the Corporation’s variable-rate, long-term debt obligations under the revolving credit and term loan facilities at ~~July 1, 2023,~~March 30, 2024, was ~~$500~~$374 million, which approximated fair value. The fair value of the ~~fixed rate~~fixed-rate notes was estimated based on a discounted cash flow method (Level 2) to be ~~$96~~$98 million at ~~July 1, 2023.~~March 30, 2024.

As of ~~July 1, 2023,~~March 30, 2024, the Corporation’s revolving credit facility borrowings were incurred under the amended and restated credit agreement entered into on June 14, 2022, as further amended on March 14, 2023 and June 1, 2023 with a scheduled maturity of June 14, 2027. The Corporation deferred the related debt issuance costs, which are classified as assets, and is amortizing them over the term of the credit agreement. The current portion of debt issuance costs of $0.4 million is the amount to be amortized over the next twelve months, based on the current credit agreement and is reflected in "Prepaid expenses and other current assets" in the Condensed Consolidated Balance Sheets. The long-term portion of debt issuance costs of ~~$1.1~~$0.8 million is reflected in "Other Assets" in the Condensed Consolidated Balance Sheets.

As of ~~July 1, 2023,~~March 30, 2024, there was ~~$200~~$74 million principal amount of borrowings outstanding under the $425 million revolving credit facility. The entire amount drawn under the revolving credit facility is considered long-term as the Corporation assumes no obligation to repay any of the amounts borrowed in the next twelve months. Based on ~~current~~ earnings before interest, taxes, depreciation, and amortization for the last four fiscal quarters, the Corporation can access the full remaining ~~$225~~$351 million of borrowing capacity available under the revolving credit facility and maintain compliance with ~~applicable covenants.~~the financial covenants under the facility described below.

In addition to cash flows from operations, the revolving credit facility under the credit agreement is the primary source of daily operating capital for the Corporation and provides additional financial capacity for capital expenditures, repurchases of common stock, ~~payment of dividends,~~ and ~~investments in~~ strategic ~~initiatives.~~initiatives, such as acquisitions.

~~Additionally, as~~As of ~~July 1, 2023,~~March 30, 2024, the Corporation ~~has borrowings outstanding under a term loan credit facility and private placement notes.~~

~~The Corporation has~~had $300 million principal amount of borrowings outstanding under a term loan agreement entered into on March 31, 2023, as further amended on May 25, 2023. The proceeds of the term loan were used to support funding of the Corporation's acquisition of Kimball International on June 1, 2023. The principal amount under the term loan is subject to amortization beginning June 30, 2024, with incremental amounts due each quarter until the expiration of the term loan on the fifth year of the funding date, defined as June 1, ~~2028.~~ 2028, with $11.3 million due within the next twelve months.

The Corporation deferred the debt issuance costs related to the agreement, which are classified as a reduction of long-term debt, and is amortizing them over the term of the agreement. The deferred debt issuance costs do not reduce the amount owed by the Corporation under the terms of the agreement. As of ~~July 1, 2023,~~March 30, 2024, the deferred debt issuance costs balance of ~~$2.7~~$2.4 million related to the agreement is reflected in "Long-Term Debt" in the Condensed Consolidated Balance Sheets.

~~The~~As of March 30, 2024, the Corporation also ~~has~~had $100 million principal amount of borrowings outstanding under private placement note agreements entered into on May 31, 2018. Under the agreements, the Corporation issued $50 million of seven-year fixed-rate notes with an interest rate of ~~4.22~~4.2 percent, due May 31, 2025, and $50 million of ten-year fixed-rate notes with an interest rate of ~~4.40~~4.4 percent, due May 31, 2028. The Corporation deferred the debt issuance costs related to the private placement note agreements, which are classified as a reduction of long-term debt, and is amortizing them over the terms of the private placement note agreements. The deferred debt issuance costs do not reduce the amount owed by the Corporation under the terms of the private placement note agreements. As of ~~July 1, 2023,~~March 30, 2024, the deferred debt issuance costs balance of ~~$0.3~~$0.2 million related to the private placement note agreements is reflected in "Long-Term Debt" in the Condensed Consolidated Balance Sheets. The Corporation has the option to repay the private placement notes upon providing 10-day notice to the noteholders. Such repayment is subject to payment of any accrued but yet unpaid interest in addition to a make-whole provision which is calculated based on current market interest rates. As of ~~July 1, 2023,~~March 30, 2024, due to current market rates, the Corporation would not owe any amounts to the note holders ~~for the~~under a make-whole provision.

The revolving credit facility, term loan credit facility, and private placement notes all contain financial and non-financial covenants. Non-compliance with covenants under the agreements could prevent the Corporation from being able to access further borrowings, require immediate repayment of all amounts outstanding, and/or increase the cost of borrowing. The covenants under all the agreements are substantially the same. In the event the private placement notes are repaid by the Corporation, the revolving credit facility and term loan credit facility include certain fall-away provisions to allow for modification of the covenant measures whereby the Corporation ~~shall~~would have increased financial flexibility. ~~Namely,~~In such an event, the definition of consolidated EBITDA and the maximum leverage under the consolidated leverage ratio would adjust to a more flexible definition while the interest coverage ratio would no longer be an included measure.

~~Covenants require maintenance of~~The Corporation is subject to financial covenants requiring it to maintain the following financial ratios as of the end of any fiscal ~~quarter, including:~~quarter:

•a consolidated interest coverage ratio (as defined in the credit ~~agreement)~~agreements) of not less than 4.0 to 1.0, based upon the ratio of (a) consolidated EBITDA for the last four fiscal quarters to (b) the sum of consolidated interest charges; and

•a consolidated leverage ratio (as defined in the credit ~~agreement)~~agreements) of not greater than 3.5 to 1.0, based upon the ratio of (a) the quarter-end consolidated funded indebtedness to (b) consolidated EBITDA for the last four fiscal quarters.

The ~~most~~more restrictive of the financial covenants is the consolidated leverage ratio requirement of 3.5 to 1.0. Under the credit ~~agreement,~~agreements, consolidated EBITDA is defined as consolidated net income before interest expense, income taxes, and depreciation and amortization of intangibles, as well as non-cash items that increase or decrease net income. As of ~~July 1, 2023,~~March 30, 2024, the Corporation ~~was below the maximum allowable ratio and~~ was in compliance with ~~all of~~ the covenants and other restrictions in the credit agreement. The Corporation expects to remain in compliance with all of the covenants and other restrictions in the credit agreement over the next twelve months.financial covenants.

Note 8. Income Taxes

The Corporation’s tax provision for interim periods is determined using an estimate of its annual effective tax rate, adjusted for discrete items. The following table summarizes the Corporation’s income tax provision:


		Three Months Ended						Six Months Ended
		July 1, 2023			July 2, 2022			July 1, 2023			July 2, 2022
Income (loss) before income taxes		$	(9.0)		$	27.8		$	(5.3)		$	46.2
		Three Months Ended
		Three Months Ended
		Three Months Ended
		March 30, 2024
		March 30, 2024
		March 30, 2024
Income before income taxes
Income before income taxes
Income before income taxes
Income taxes
Income taxes
Income taxes	Income taxes	$	3.8		$	(2.5)		$	6.0		$	1.8
Effective tax rate	Effective tax rate	(41.8)		%	(9.0)		%	(113.1)		%	3.8		%
Effective tax rate
Effective tax rate

The Corporation’s effective tax rate was lower in the three-month period ended March 30, 2024 compared to the same period last year driven by favorable equity-based compensation adjustments and the impact of higher income on certain tax attributes. Additionally, the prior-year quarter included nondeductible Kimball International acquisition costs, which did not recur in the current-year quarter.

1815

The Corporation’s income tax expense was higher in the three and six month periods ended July 1, 2023, compared to the same periods last year. The variation in the effective tax rates versus the prior-year periods was primarily due to lower pre-tax income impacted by non-deductible transaction costs related to the acquisition of Kimball International, as well as tax benefits recognized in the prior-year periods for valuation adjustments related to existing deferred tax assets and basis differences tied to the sale of Lamex in July 2022.

Note 9. Fair Value Measurements of Financial Instruments

For recognition purposes, on a recurring basis, the Corporation is required to measure at fair value its marketable securities, derivative financial instruments, and put option ~~liabilities, and deferred stock-based compensation.~~liabilities. The marketable securities are comprised of money market funds, government securities, corporate bonds, and mutual funds. When available, the Corporation uses quoted market prices to determine fair value and classifies such measurements within Level 1. Where market prices are not available, the Corporation makes use of observable market-based inputs (prices or quotes from published exchanges and indexes) to calculate fair value using the market approach, in which case the measurements are classified within Level 2. Significant unobservable inputs, which are classified within Level 3, are used in the estimation of the fair value of put ~~options related to private entities,~~option liabilities, determined using a simulation model based on assumptions including future cash flows, discount rates, and volatility.

In connection with the Kimball International transaction in the second quarter of 2023, the Corporation acquired Kimball International's supplemental employee retirement plan (“SERP”). SERP investment assets consist of mutual fund holdings classified as trading securities which are recognized on the Condensed Consolidated Balance Sheets at fair value, along with a corresponding liability of the same amount which represents the obligation to distribute SERP funds to participants.

Financial instruments measured at fair value were as follows:


	Fair value as of measurement date									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)
Balance as of March 30, 2024
Cash and cash equivalents (including money market funds) (1)
Cash and cash equivalents (including money market funds) (1)
Cash and cash equivalents (including money market funds) (1)
Mutual funds (2)
Government securities (2)
Corporate bonds (2)
Interest rate swap derivative - asset (3)
Interest rate swap derivative - liability (4)

		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)
Balance as of July 1, 2023
Put option liability (4)

Put option liability (4)

Put option liability (4)

Balance as of December 30, 2023
Balance as of December 30, 2023
Balance as of December 30, 2023
Cash and cash equivalents (including money market funds) (1)	Cash and cash equivalents (including money market funds) (1)	$	23.8	$	23.8	$	—	$	—
Mutual funds in SERP (2)		$	11.2	$	11.2	$	—	$	—
Cash and cash equivalents (including money market funds) (1)
Cash and cash equivalents (including money market funds) (1)
Mutual funds (2)
Government securities (2)	Government securities (2)	$	5.8	$	—	$	5.8	$	—
Corporate bonds (2)	Corporate bonds (2)	$	7.2	$	—	$	7.2	$	—
Interest rate swap derivative - liability (4)

SERP liabilities (3)		$	(11.2)	$	(11.2)	$	—	$	—
Deferred stock-based compensation (3)		$	(4.4)	$	—	$	(4.4)	$	—
Put option liability (4)	Put option liability (4)	$	(5.1)	$	—	$	—	$	(5.1)

Balance as of December 31, 2022
Cash and cash equivalents (including money market funds) (1)		$	17.4	$	17.4	$	—	$	—
Government securities (2)		$	5.6	$	—	$	5.6	$	—
Corporate bonds (2)		$	7.2	$	—	$	7.2	$	—

Deferred stock-based compensation (3)		$	(4.7)	$	—	$	(4.7)	$	—
Put option liability (4)	Put option liability (4)	$	(5.1)	$	—	$	—	$	(5.1)
Put option liability (4)

Amounts in parentheses indicate liabilities.

The index below indicates the line item in the Condensed Consolidated Balance Sheets where the financial instruments are reported:

(1) "Cash and cash equivalents"

(2) Current portion - "Short-term investments"; Long-term portion - "Other Assets"

(3) ~~Current portion - "Current maturities of~~"Prepaid expenses and other ~~long-term obligations"; Long-term portion - "Other Long-Term Liabilities"~~current assets"

(4) "Other Long-Term Liabilities"

1916

Note 10. Accumulated Other Comprehensive Income (Loss) and Shareholders’ Equity

The following tables summarize the components of accumulated other comprehensive income (loss) and the changes in accumulated other comprehensive income (loss), net of tax, as applicable:


			Foreign Currency Translation Adjustment		Unrealized Gains (Losses) on Debt Securities		Pension and Post-retirement Liabilities		Derivative Financial Instrument		Accumulated Other Comprehensive Income (Loss)
Balance as of December 31, 2022			$	(6.4)	$	(0.6)	$	(1.1)	$	0.1	$	(8.0)
		Foreign Currency Translation Adjustment											Foreign Currency Translation Adjustment	Unrealized Gains (Losses) on Debt Securities	Pension and Post-retirement Liabilities	Derivative Financial Instrument	Accumulated Other Comprehensive Income (Loss)
Balance as of December 30, 2023
Other comprehensive income (loss) before reclassifications	Other comprehensive income (loss) before reclassifications		0.0		0.0		—		—		0.1
Tax (expense) or benefit	Tax (expense) or benefit		—		(0.0)		—		—		(0.0)

Amounts reclassified from accumulated other comprehensive income (loss), net of tax	Amounts reclassified from accumulated other comprehensive income (loss), net of tax		—		0.1		—		(0.1)		(0.0)
Balance as of July 1, 2023			$	(6.3)	$	(0.5)	$	(1.1)	$	—	$	(8.0)
Amounts reclassified from accumulated other comprehensive income (loss), net of tax
Amounts reclassified from accumulated other comprehensive income (loss), net of tax
Balance as of March 30, 2024

Amounts in parentheses indicate reductions to equity.


			Foreign Currency Translation Adjustment		Unrealized Gains (Losses) on Debt Securities		Pension and Post-retirement Liabilities		Derivative Financial Instrument		Accumulated Other Comprehensive Income (Loss)
Balance as of January 1, 2022			$	(0.7)	$	0.1	$	(5.4)	$	(0.7)	$	(6.8)
		Foreign Currency Translation Adjustment											Foreign Currency Translation Adjustment	Unrealized Gains (Losses) on Debt Securities	Pension and Post-retirement Liabilities	Derivative Financial Instrument	Accumulated Other Comprehensive Income (Loss)
Balance as of December 31, 2022
Other comprehensive income (loss) before reclassifications	Other comprehensive income (loss) before reclassifications		(1.8)		(0.6)		—		1.1		(1.3)
Tax (expense) or benefit	Tax (expense) or benefit		—		0.1		—		(0.3)		(0.1)

Amounts reclassified from accumulated other comprehensive income (loss), net of tax	Amounts reclassified from accumulated other comprehensive income (loss), net of tax		—		0.0		—		0.1		0.1
Balance as of July 2, 2022			$	(2.5)	$	(0.4)	$	(5.4)	$	0.3	$	(8.1)
Amounts reclassified from accumulated other comprehensive income (loss), net of tax
Amounts reclassified from accumulated other comprehensive income (loss), net of tax
Balance as of April 1, 2023

Amounts in parentheses indicate reductions to equity.

Interest Rate Swap ~~Termination~~

During the normal course of business, the Corporation is subjected to market risk associated with interest rate movements. Interest rate risk arises from variable interest debt obligations. Interest rate swap derivative instruments are periodically held and used by the Corporation as a tool for managing interest rate risk. They are not used for trading or speculative purposes.

In November 2023, the Corporation entered into an interest rate swap transaction to hedge $100 million of outstanding variable rate term loan borrowings against future interest rate volatility. Under the terms of this interest rate swap, the Corporation pays a fixed rate of 4.7 percent and receives one-month SOFR on a $100 million notional value expiring June 14, 2027. As of March 30, 2024, the fair value of the Corporation’s interest rate swap was comprised of a current asset of $0.2 million and a non-current liability of $1.9 million; see "Note 9. Fair Value Measurements of Financial Instruments." The unrecognized change in value of the interest rate swap is reported net of tax as $(1.3) million in "Accumulated other comprehensive income (loss)" in the Consolidated Balance Sheets.

In April 2022, the Corporation terminated its prior interest rate swap agreement and received cash proceeds of $0.4 million, the fair value of the swap on the termination date. The ~~proceeds were recorded as cash provided by operating activities in the Condensed Consolidated Statement of Cash Flows. The~~ $0.4 million gain from the termination of this interest rate swap agreement was recorded to "Accumulated other comprehensive income (loss)" and ~~has been fully~~was amortized to interest expense ~~as of~~through April 1, ~~2023.~~2023, the remaining term of the original interest rate swap agreement.

The following table details the reclassifications from accumulated other comprehensive income (loss):

Three Months Ended

Six Months Ended

Three Months Ended

Details about Accumulated Other Comprehensive Income (Loss) Components

Affected Line Item in the Statement Where Net Income is Presented

July 1,
2023

July 2,
2022

July 1,
2023

July 2,
2022

Derivative financial instrument

Interest rate swap

Interest expense, net

—

0.1

(0.2)

Income taxes

—

(0.0)

0.0

Interest rate swap

Income taxes

Unrealized gains (losses) on debt securities

Gain (loss) on sale of debt securities

Selling and administrative expenses

0.0

(0.1)

0.0

Gain (loss) on sale of debt securities

Income taxes

Income tax expense

(0.0)

0.0

(0.0)

Net of tax

0.0

(0.1)

Net of tax

Amounts in parentheses indicate reductions to profit.

Dividend

The Corporation declared and paid cash dividends per common share as follows:

Six Months Ended
July 1,
2023 July 2,
2022
Dividends per common share $ 0.64 $ 0.63


	Three Months Ended
	March 30, 2024		April 1, 2023
Dividends per common share	$	0.32	$	0.32

Stock Repurchase

The following table summarizes shares repurchased and settled by the Corporation:


	~~Six~~Three Months Ended
	March 30, 2024		~~July~~April 1, 2023		July 2, 2022
Shares repurchased	0.1		—		~~1.7~~
Average price per share	$	—42.32	$	~~38.11~~—

Cash purchase price	$	— (2.5)	$	~~(63.9)~~—
Purchases unsettled as of quarter end	0.0		—
Prior year purchases settled in current year	(0.1)		—		~~(1.3)~~
Shares repurchased per cash flow	$	— (2.6)	$	~~(65.2)~~—

As of ~~July 1, 2023, $234.0~~March 30, 2024, $231.0 million of the Corporation’s stock repurchase authorization by the Board of ~~Directors’ ("Board") current repurchase authorizations~~Directors remained ~~unspent.~~available.

Note 11. 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				Six Months Ended
		July 1, 2023		July 2, 2022		July 1, 2023		July 2, 2022

		March 30, 2024
		March 30, 2024
		March 30, 2024
Numerator:
Numerator:
Numerator:	Numerator:
Numerator for both basic and diluted EPS attributable to HNI Corporation net income	Numerator for both basic and diluted EPS attributable to HNI Corporation net income	$	(12.8)	$	30.3	$	(11.3)	$	44.5
Numerator for both basic and diluted EPS attributable to HNI Corporation net income
Numerator for both basic and diluted EPS attributable to HNI Corporation net income
Denominators:
Denominators:
Denominators:	Denominators:
Denominator for basic EPS weighted-average common shares outstanding	Denominator for basic EPS weighted-average common shares outstanding	43.3		41.8		42.4		42.1
Denominator for basic EPS weighted-average common shares outstanding
Denominator for basic EPS weighted-average common shares outstanding
Potentially dilutive shares from stock-based compensation plans
Potentially dilutive shares from stock-based compensation plans
Potentially dilutive shares from stock-based compensation plans	Potentially dilutive shares from stock-based compensation plans	—		0.6		—		0.6
Denominator for diluted EPS	Denominator for diluted EPS	43.3		42.4		42.4		42.7
Denominator for diluted EPS
Denominator for diluted EPS
Earnings per share – basic
Earnings per share – basic
Earnings per share – basic	Earnings per share – basic	$	(0.30)	$	0.73	$	(0.27)	$	1.06
Earnings per share – diluted	Earnings per share – diluted	$	(0.30)	$	0.72	$	(0.27)	$	1.04
Earnings per share – diluted
Earnings per share – diluted

AsThe year-over-year increase in shares outstanding is primarily due to the issuance of ~~the end of second quarter 2023 the Corporation had 46.5 million shares of common stock outstanding, including~~ 4.7 million shares ~~issued~~ in June 2023 as part of the consideration to acquire Kimball International.See "Note 3. Acquisition and Divestitures" for further information

The weighted-average common stock equivalents presented above do not include the effect of the common stock equivalents in the table below because their inclusion would be anti-dilutive:

Three Months Ended Six Months Ended
July 1,
2023 July 2,
2022 July 1,
2023 July 2,
2022
Common stock equivalents excluded because their inclusion would be anti-dilutive 3.0 2.0 2.8 1.8

Three Months Ended

March 30,
2024

April 1,
2023

Common stock equivalents excluded because their inclusion would be anti-dilutive

0.8

2.2

Note 12. Stock-Based Compensation

The Corporation measures stock-based compensation expense at grant date, based on the fair value of the award. Forms of awards issued under shareholder approved plans include stock options, restricted stock units based on a service condition ("restricted stock units"), restricted stock units based on both performance and service conditions ("performance stock units"), and shares issued under member stock purchase plans. Stock-based compensation expense related to stock options, restricted stock units, and performance stock units is recognized over the employees’ requisite service periods, adjusted for an estimated forfeiture rate for those shares not expected to vest. Additionally, expense related to performance stock units is periodically adjusted for the probable number of shares to be awarded based on Corporation achievement within an established target range of cumulative profitability over a multi-year period.

In the second quarter of 2023, the Corporation assumed the Kimball International, Inc. Stock Incentive Plan and its remaining share pool. The plan was renamed the “HNI Corporation Stock Incentive Plan for Legacy Kimball Employees”. Under this plan the Corporation may grant equity compensation awards using the plan’s share pool. At inception, there were approximately 1.1 million shares of the Corporation's stock available for issuance under this plan.

The following table summarizes expense associated with these plans:

Three Months Ended Six Months Ended
July 1,
2023 July 2,
2022 July 1,
2023 July 2,
2022
Compensation cost $ 3.1 $ 2.9 $ 7.6 $ 8.5


	Three Months Ended
	March 30, 2024		April 1, 2023
Compensation cost	$	7.7	$	4.5

The increase in stock compensation cost was driven by higher forecasted Corporation achievement relative to performance stock unit targets, as well as an increase in members participating in stock-based incentive plans as a result of the Kimball International acquisition.

The units granted by the Corporation had fair values as follows:

Six Months Ended
July 1,
2023 July 2,
2022
Restricted stock units $ 12.1 $ 6.8
Performance stock units $ 6.0 $ 6.1

Included in the current year period restricted stock units total above is $6.1 million of fair value associated with replacement awards issued in the second quarter of 2023 in connection with the Kimball International acquisition. Approximately 48 percent of the fair value of the replacement awards is attributed to service provided by Kimball International employees prior to the acquisition by the Corporation and is accounted for as purchase consideration. See "Note 3. Acquisitions and Divestitures" for further information.


	Three Months Ended
	March 30, 2024		April 1, 2023

Restricted stock units	$	7.3	$	6.0
Performance stock units	$	7.2	$	6.0

The following table summarizes unrecognized compensation expense and the weighted-average remaining service period for non-vested stock units as of ~~July 1, 2023:~~March 30, 2024:


		Unrecognized Compensation Expense		Weighted-Average Remaining Service Period (years)
	Unrecognized Compensation Expense								Unrecognized Compensation Expense			Weighted-Average Remaining Service Period (years)

Non-vested restricted stock units	Non-vested restricted stock units	$	6.0	0.7
Non-vested restricted stock units
Non-vested restricted stock units						$	5.6			0.9
Non-vested performance stock units	Non-vested performance stock units	$	6.8	1.2	Non-vested performance stock units	$	12.4	1.2			1.2

Note 13. Guarantees, Commitments, and Contingencies

The Corporation utilizes letters of credit and surety bonds in the amount of approximately ~~$36~~$39 million to back certain insurance policies and payment obligations. Additionally, the Corporation periodically utilizes trade letters of credit and ~~bankers’~~banker's acceptances to guarantee certain payments to overseas ~~suppliers; as~~suppliers. As of ~~July 1, 2023,~~March 30, 2024, there were no outstanding amounts related to these types of guarantees. The letters of credit, bonds, and ~~bankers’~~banker's acceptances reflect fair value as a condition of their underlying purpose and are subject to competitively determined fees.

The Corporation periodically guarantees borrowing arrangements involving certain workplace furnishings dealers and third-party financial institutions. The remaining terms of these guarantees, which range from less than one year to ~~five~~four years, generally require the Corporation to make payments directly to the financial institution in the event that the dealer is unable to repay its borrowings in accordance with the stated terms. The aggregate amount guaranteed by the Corporation in connection with these agreements is approximately $8$5 million as of ~~July 1, 2023.~~March 30, 2024. The Corporation has determined the likelihood of making future payments under these guarantees is not probable and therefore no liability has been accrued.

The Corporation has contingent liabilities which have arisen in the ordinary course of its business, including liabilities relating to pending litigation, environmental remediation, taxes, and other claims. It is the Corporation’s opinion, after consultation with legal counsel, that liabilities, if any, resulting from these matters are not expected to have a material adverse effect on the Corporation’s financial condition, cash flows, or ~~on the Corporation’s~~ quarterly or annual operating results when resolved in a future period.

In the first quarter of 2022, the Corporation entered into an agreement to lease a new facility. The lease requires approximately $61 million of legally binding minimum payments over the approximate 15-year term of the agreement. The lease accounting, which includes recording right-of-use assets, lease obligations (liabilities), and lease expense, commenced during the second quarter of 2023 and thus the asset and liability related to this agreement was recorded on the Condensed Consolidated Balance Sheet as of July 1, 2023.

Note 14. Reportable Segment Information

Management views the Corporation as two reportable segments based on industries: workplace furnishings and residential building products.

The aggregated workplace furnishings segment, which includes the ~~newly~~recently acquired Kimball International business, designs, manufactures, and markets a broad line of commercial office furniture, which includes panel-based and freestanding furniture systems, seating, storage, benching, tables, architectural products, social collaborative items, ancillary products, and ~~architectural~~hospitality products. The residential building products segment manufactures and markets a full array of gas, wood, electric, and ~~pellet fueled~~pellet-fueled fireplaces, inserts, stoves, facings, outdoor fire pits and fire tables, and accessories.

For purposes of segment reporting, intercompany sales between segments are not material, and operating profit is income before income taxes exclusive of certain unallocated ~~general~~ corporate expenses. These unallocated general corporate expenses include the net costs of the Corporation’s corporate operations. Management views interest income and expense as corporate financing costs and not as a reportable segment cost. In addition, management applies an effective income tax rate to its consolidated income before income taxes so income taxes are not reported or viewed internally on a segment basis. Identifiable assets by segment are those assets applicable to the respective industry segments. Corporate assets consist principally of cash and cash equivalents, short-term investments, long-term investments, IT infrastructure, and corporate office real estate and related equipment.

No geographic information for revenues from external customers or for long-lived assets is disclosed since the Corporation’s primary market and capital investments are concentrated in the United States.

Reportable segment data reconciled to the Corporation’s condensed consolidated financial statements was as follows:


		Three Months Ended					Six Months Ended
		July 1, 2023		July 2, 2022			July 1, 2023		July 2, 2022
											Three Months Ended
						March 30, 2024							March 30, 2024	April 1, 2023
Net Sales:	Net Sales:
Workplace furnishings
Workplace furnishings
Workplace furnishings	Workplace furnishings	$	413.0	$	406.7		$	712.7	$	759.8
Residential building products	Residential building products	150.4		215.1			329.8		434.3
Total	Total	$	563.5	$	621.7		$	1,042.5	$	1,194.1

Income (Loss) Before Income Taxes:	Income (Loss) Before Income Taxes:
Income (Loss) Before Income Taxes:
Income (Loss) Before Income Taxes:
Workplace furnishings
Workplace furnishings
Workplace furnishings	Workplace furnishings	$	15.9	$	11.9		$	11.9	$	5.5
Residential building products	Residential building products	15.6		37.0			43.6		77.3
General corporate	General corporate	(35.0)		(19.0)			(52.7)		(32.5)

Operating income (loss)		(3.6)		29.9			2.9		50.3
Operating income
Operating income
Operating income
Interest expense, net	Interest expense, net	5.5		2.1			8.2		4.1
Total	Total	$	(9.0)	$	27.8		$	(5.3)	$	46.2

Depreciation and Amortization Expense:	Depreciation and Amortization Expense:
Depreciation and Amortization Expense:
Depreciation and Amortization Expense:
Workplace furnishings
Workplace furnishings
Workplace furnishings	Workplace furnishings	$	13.8	$	11.7		$	25.0	$	23.2
Residential building products	Residential building products	3.4		3.1			6.7		6.1
General corporate	General corporate	5.4		6.6			11.0		13.1
Total	Total	$	22.6	$	21.3		$	42.7	$	42.4

Capital Expenditures (including capitalized software):	Capital Expenditures (including capitalized software):
Capital Expenditures (including capitalized software):
Capital Expenditures (including capitalized software):
Workplace furnishings
Workplace furnishings
Workplace furnishings	Workplace furnishings	$	17.9	$	8.2		$	31.8	$	16.4
Residential building products	Residential building products	2.4		2.7			7.4		8.5
General corporate	General corporate	0.9		4.1			2.0		8.4
Total	Total	$	21.1	$	15.0		$	41.2	$	33.2

							As of July 1, 2023		As of December 31, 2022
							As of March 30, 2024
							As of March 30, 2024
							As of March 30, 2024					As of December 30, 2023
Identifiable Assets:	Identifiable Assets:
Workplace furnishings
Workplace furnishings
Workplace furnishings	Workplace furnishings						$	1,440.8	$	761.5
Residential building products	Residential building products						491.5		493.0
General corporate	General corporate						143.3		160.0
Total	Total						$	2,075.6	$	1,414.5

Note 15. Supplier Finance ~~Program~~Programs

~~The Corporation adopted ASU 2022-04,~~ ~~Liabilities—Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations~~ in the first fiscal quarter of 2023, which enhances the transparency of supplier finance programs by requiring the disclosure of key terms, amounts outstanding, a rollforward of outstanding amounts, and a description of where in the financial statements outstanding amounts are presented. The rollforward disclosure is not required until fiscal 2024.

~~One~~Some of the Corporation’s third-party financial institutions ~~offers a~~offer supply chain finance ("SCF") ~~program~~programs by which ~~it allows~~they allow eligible Corporation suppliers the opportunity to sell their trade receivables due from the Corporation. Supplier participation in the SCF ~~program~~programs is voluntary and requires an agreement between the supplier and the financial institution, to which the Corporation is not a party. Any sales of supplier receivables to the financial ~~institution~~institutions is at the sole discretion of the supplier

and isare priced at a rate that leverages the Corporation’s credit rating and thus may be more beneficial to the supplier. The Corporation’s responsibility is limited to making payment on the terms originally negotiated with each ~~supplier, regardless of whether the supplier sells its receivables to the financial institution.~~supplier.

The Corporation’s payments to the financial ~~institution~~institutions to settle obligations related to suppliers that elected to participate in the SCF ~~program~~programs are reflected in cash flows from operating activities in the Condensed Consolidated Statements of Cash Flows. Additionally, SCF ~~program~~programs payment obligations due by the Corporation to the financial ~~institution~~institutions are recorded in "Accounts payable and accrued expenses" in the Condensed Consolidated Balance Sheets as follows:

As of
July 1, 2023 As of
December 31, 2022
Supplier finance program obligations $ 29.3 $ 27.4

~~Note 16. Restructuring and Impairment~~

Restructuring charges relate to exit costs in connection with the Poppin divestiture (as further described below under "Note 17. Held for Sale"), costs tied to the closure of a small workplace furnishings eCommerce brand, and start up costs at a manufacturing facility in Mexico. Impairment charges relate to long-lived asset disposals in the current year and an equity investment in the prior year.

Three Months Ended Six Months Ended
Classification July 1,
2023 July 2,
2022 July 1,
2023 July 2,
2022
Workplace Furnishings
Inventory valuation Cost of sales $ (0.4) $ 0.1 $ (0.3) $ 0.2
Facility set-up costs Cost of sales 0.2 0.1 0.5 0.2
Long-lived asset impairments Restructuring and impairment charges 2.1 — 2.1 —
Exit costs Restructuring and impairment charges 6.0 — 6.0 —
General Corporate
Investment impairment Restructuring and impairment charges — 1.0 — 1.0
Total $ 7.8 $ 1.2 $ 8.3 $ 1.4

As of July 1, 2023 and December 31, 2022, accrued restructuring expenses of $6.3 million and $0.5 million, respectively, were included in "Accounts payable and accrued expenses" in the Consolidated Balance Sheets. Cash payments related to restructuring charges in all periods presented were not significant, and any future costs connected to these current initiatives are not expected to be material.

~~Note 17. Held for Sale~~

The Corporation evaluated the Poppin business unit of Kimball International and determined that it met the criteria for held-for-sale presentation, as established in ASC 360. In August 2023, subsequent to the end of the second quarter, the Corporation reached an agreement to sell substantially all assets and liabilities of Poppin.


	March 30, 2024		December 30, 2023
Supplier finance programs obligations	$	37.9	$	28.4

The following table summarizes assets and liabilities held for sale in the workplace furnishings segment in the "Condensed Consolidated Balance Sheets," by major class. In addition to Poppin assets and liabilities, the assets held for sale includes $1.4 million related to the pending sale of one of the Corporation's office buildings in Muscatine, Iowa. The long-lived asset balances are recorded at fair value, based on the expected sales price, less costs to sell.

As of
July 1, 2023 As of
December 31, 2022
Assets:
Receivables $ 1.4 $ —
Inventories 11.9 —
Prepaid expenses and other current assets 0.7 —
Property, plant & equipment 3.1 1.9
Right-of-use operating leases 1.8 —
Total Assets held for sale $ 18.9 $ 1.9
Liabilities:
Accounts payable and accrued expenses $ 9.4 $ —
Lease obligations - operating 5.0 —
Total Liabilities held for sale $ 14.4 $ —

2622

Item 2. 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 Unaudited Condensed Consolidated Financial Statements of the Corporation and related notes included elsewhere in this Quarterly Report on Form 10-Q and with the Corporation’s Annual Report on Form 10-K for the fiscal year ended December ~~31, 2022.~~30, 2023. All dollar amounts presented are in millions, except per share data or where otherwise indicated. Amounts may not sum due to rounding. Statements that are not historical are forward-looking and involve risks and uncertainties. See "Forward-Looking Statements" at the end of this section for further information.

References in this management discussion and analysis to "HNI" and the "Corporation" are to HNI and its consolidated subsidiaries.

Overview

The Corporation has two reportable segments: workplace furnishings and residential building products. The Corporation is a leading global designer and provider of commercial furnishings, and a leading manufacturer and marketer of hearth products. The Corporation utilizes a multi-faceted ~~go-to market~~go-to-market business model to deliver value to customers via various brands and selling models. The Corporation is focused on growing its existing businesses while seeking out and developing new opportunities for ~~growth.~~

Significant developments in the second quarter include the Corporation’s acquisition of Kimball International in a cash and stock transaction valued at approximately $504 million, which closed on June 1, 2023. Additionally, in connection with this acquisition, the Corporation determined to divest Poppin, a business unit of Kimball International, with the sale expected to close in the third quarter of 2023. See "Note 3. Acquisitions and Divestitures" and "Note 17. Held for Sale" in the Notes to Condensed Consolidated Financial Statements for more details on the Kimball International acquisition, as well as other acquisition and divestiture-related information.expansion.

Consolidated net sales for the ~~second~~first quarter of ~~2023~~2024 were ~~$563.5~~$588.0 million, ~~a decrease~~an increase of ~~9.4~~22.7 percent compared to net sales of ~~$621.7~~$479.1 million in the prior-year quarter. The change was due to a ~~30.1~~46.8 percent increase in net sales in the workplace furnishings segment, partially offset by a 17.4 percent decrease in net sales in the residential building products ~~segment and a 1.6 percent increase in the workplace furnishings~~ segment. The acquisition of Kimball International on June 1, 2023 increased year-over-year sales by ~~$56.0 million~~$147.5 million. See "Note 3. Acquisitions and ~~the acquisition of a residential building products company~~Divestitures" in the ~~second quarter 2022 contributed incremental year-over-year sales~~Notes to Condensed Consolidated Financial Statements for more information about the Kimball International acquisition, which affects the comparability of ~~$0.9 million. The sale of~~results between the ~~Lamex business in the third quarter 2022 decreased year-over-year sales by $27.0 million.~~current and prior-year periods.

Net ~~loss~~income attributable to the Corporation in the ~~second~~first quarter of ~~2023~~2024 was ~~$12.8~~$17.7 million compared to net income of ~~$30.3~~$1.6 million in the ~~second~~first quarter of ~~2022.~~2023. The ~~decrease~~year-over-year increase in net income was driven by ~~lower volume and $31.3 million~~favorable price-cost, improved net productivity, favorable net impacts of ~~transaction costs incurred in connection with~~ the ~~acquisition of~~ Kimball International ~~partially offset by favorable price-cost,~~acquisition, lower core selling and administrative ~~expense~~expenses ("SG&A"), and ~~improved operational productivity.~~a lower effective tax rate, partially offset by lower volume in the legacy HNI businesses (excluding Kimball International) and higher variable compensation.

2723

Results of Operations

The following table presents certain results of operations:

Three Months Ended Six Months Ended
July 1,
2023 July 2,
2022 Change July 1,
2023 July 2,
2022 Change
Net sales $ 563.5 $ 621.7 (9.4) % $ 1,042.5 $ 1,194.1 (12.7) %
Cost of sales 347.9 401.2 (13.3) % 652.7 776.6 (15.9) %
Gross profit 215.5 220.6 (2.3) % 389.8 417.5 (6.6) %
Selling and administrative expenses 211.0 189.7 11.2 % 378.9 366.1 3.5 %
Restructuring and impairment charges 8.1 1.0 707.3 % 8.1 1.0 705.9 %
Operating income (loss) (3.6) 29.9 (111.9) % 2.9 50.3 (94.3) %
Interest expense, net 5.5 2.1 159.8 % 8.2 4.1 98.7 %
Income (loss) before income taxes (9.0) 27.8 (132.6) % (5.3) 46.2 (111.4) %
Income taxes 3.8 (2.5) 250.3 % 6.0 1.8 239.9 %
Net income (loss) attributable to non-controlling interest (0.0) 0.0 0.0 % (0.0) (0.0) 0.0 %
Net income (loss) attributable to HNI Corporation $ (12.8) $ 30.3 (142.3) % $ (11.3) $ 44.5 (125.3) %
As a Percentage of Net Sales:
Net sales 100.0 % 100.0 % 100.0 % 100.0 %
Gross profit 38.3 35.5 280 bps 37.4 35.0 240 bps
Selling and administrative expenses 37.4 30.5 690 bps 36.3 30.7 560 bps
Restructuring and impairment charges 1.4 0.2 120 bps 0.8 0.1 70 bps
Operating income (loss) (0.6) 4.8 -540 bps 0.3 4.2 -390 bps
Income taxes 0.7 (0.4) 110 bps 0.6 0.1 50 bps
Net income attributable to HNI Corporation (2.3) 4.9 -720 bps (1.1) 3.7 -480 bps

~~Results of Operations - Three Months Ended~~


	Three Months Ended
	March 30, 2024			April 1, 2023			Change
Net sales	$	588.0		$	479.1		22.7	%
Cost of sales	355.1			304.8			16.5	%
Gross profit	232.8			174.3			33.6	%
Selling and administrative expenses	203.1			167.9			21.0	%

Restructuring charges	0.1			—			NM
Operating income	29.7			6.4			362	%
Interest expense, net	7.6			2.7			188	%
Income before income taxes	22.0			3.8			485	%
Income taxes	4.3			2.2			96.5	%
Net income (loss) attributable to non-controlling interest	0.0			(0.0)			NM
Net income attributable to HNI Corporation	$	17.7		$	1.6		1,030	%


As a Percentage of Net Sales:
Net sales	100.0		%	100.0		%
Gross profit	39.6			36.4			320	bps
Selling and administrative expenses	34.5			35.0			-50	bps


Operating income	5.0			1.3			370	bps
Income taxes	0.7			0.5			20	bps
Net income attributable to HNI Corporation	3.0			0.3			270	bps

Net Sales

Consolidated net sales for the ~~second~~first quarter of ~~2023 decreased 9.4~~2024 increased 22.7 percent compared to the same quarter last year. The change was driven by lower volume due to continued softness in macroeconomic conditions and backlog normalization versus the prior year quarter, partially offset by price realization, in both the residential building products and workplace furnishings segments. Included in the sales results for the current quarter was a $56.0$147.5 million of favorable impact from the acquisition of Kimball International ~~a $27.0 million unfavorable impact from the divestiture of Lamex and a $0.9 million favorable impact from acquiring a residential building products company~~ in the second quarter of ~~2022.~~2023, as well as price realization in both the workplace furnishings and residential building products segments. These factors were partially offset by lower volume in the legacy HNI businesses due to continued softness in macroeconomic conditions impacting the Corporation's applicable markets.

Gross Profit

Gross profit as a percentage of net sales increased ~~280~~320 basis points in the ~~second~~first quarter of ~~2023~~2024 compared to the same quarter last year, driven by favorable price-cost, improved net productivity, and ~~improved operational productivity,~~the impact of the Kimball International acquisition, partially offset by lower ~~volume.~~volume in the legacy HNI businesses. Favorable price-cost was attributable to the Corporation’s ability to implement price increases over the past several quarters in response to inflationary ~~pressures which have driven up the cost of labor, materials, and transportation.~~pressures.

Selling and Administrative Expenses

Selling and administrative expenses as a percentage of net sales ~~increased 690~~decreased 50 basis points in the ~~second~~first quarter of ~~2023 compared to the same quarter last year. The increase was driven by $31.3 million in transaction costs associated with the~~

~~acquisition of Kimball International, as well as lower volume. These factors were partially offset by price realization and lower core SG&A.~~

~~Restructuring and Impairment Charges~~

In the second quarter of 2023, the Corporation recorded $8.1 million of restructuring and impairment charges, compared to $1.0 million in the same quarter last year. The current quarter charges are primarily comprised of $6.0 million of exit costs related to the planned divestiture of Poppin.

~~Operating Income (Loss)~~

~~In the second quarter of 2023, operating margin was 540 basis points less favorable~~2024 compared to the same quarter last year. The decrease was driven by ~~lower volume and transaction costs related to the acquisition~~$3.4 million of non-repeating Kimball International ~~partially offset by favorable price-cost,~~acquisition-related fees and expenses incurred in the prior-year quarter, dilution from price realization, lower legacy core SG&A, and ~~improved operational productivity.~~

~~Interest Expense, Net~~

~~Interest expense, net for the second quarter of 2023 was $5.5 million, compared to $2.1 million in the same quarter last year, driven by increased borrowings associated with the acquisition of~~ Kimball International ~~along with higher average interest rates on the Corporation’s variable-rate debt.~~

~~Income Taxes~~

The Corporation’s income tax provision for the second quarter of 2023 was $3.8 million of expense on loss before taxes of $9.0 million, or an effective tax rate of (41.8) percent. For the second quarter of 2022, the Corporation’s income tax benefit was $2.5 million on pre-tax income of $27.8 million, or an effective tax rate of (9.0) percent. The variation in the rate compared to the same quarter last year is due to lower pre-tax results impacted by non-deductible transaction costs related to the acquisition of Kimball International, as well as tax benefits recognized in prior-year quarter for valuation adjustments related to existing deferred tax assets and basis differences tied to the sale of Lamex in July 2022.

~~Net Income (Loss) Attributable to HNI Corporation~~

Net loss attributable to the Corporation was $12.8 million, or $0.30 per diluted share in the second quarter of 2023, compared to net income of $30.3 million, or $0.72 per diluted share in the second quarter of 2022.

~~Results of Operations - Six Months Ended~~

~~Net Sales~~

Consolidated net sales for the first six months of 2023 decreased 12.7 percent compared to the same period last year. The change was driven by lower volume due to continued softness in macroeconomic conditions and backlog normalization versus the prior year quarter, partially offset by price realization, in both the residential building products and workplace furnishings segments. Included in the sales results for the current period was a $56.0 million favorable impact from the acquisition of Kimball International, a $44.2 million unfavorable impact from the divestiture of Lamex in 2022, and a $2.4 million favorable impact from acquiring a residential building products company in the second quarter of 2022.

~~Gross Profit~~

Gross profit as a percentage of net sales increased 240 basis points in the first six months of 2023 compared to the same period last year, driven by favorable price-cost and improved operational productivity,acquisition-related administrative cost synergies, partially offset by lower ~~volume. Favorable price-cost was attributable to~~volume in the ~~Corporation’s continued ability to implement price increases in response to inflationary pressures which have driven up the cost of labor, materials,~~legacy HNI businesses and ~~transportation.~~higher variable compensation.

~~Selling and Administrative Expenses~~

Selling and administrative expenses as a percentage of net sales increased 560 basis points in the first six months of 2023 compared to the same period last year. The increase was driven by $34.7 million in transaction costs associated with the acquisition of Kimball International, as well as lower volume. These factors were partially offset by price realization and lower core SG&A.

2924

~~Restructuring and Impairment Charges~~

In the first six months of 2023, the Corporation recorded $8.1 million of restructuring and impairment charges, compared to $1.0 million in the same period last year. The current period charges are primarily comprised of $6.0 million of exit costs related to the planned divestiture of Poppin.

Operating Income

In the first ~~six months~~quarter of ~~2023,~~2024, operating margin ~~decreased 390~~increased 370 basis points compared to the same ~~period~~quarter last ~~year. The decrease was~~year, driven by ~~lower volume and transaction costs related to~~favorable price-cost, improved net productivity, favorable impact of the acquisition of Kimball International, $3.4 million of non-repeating Kimball International acquisition-related fees and expenses incurred in the prior-year quarter, and lower legacy core SG&A, partially offset by ~~favorable price-cost~~lower volume in the legacy HNI businesses and ~~lower core SG&A.~~higher variable compensation.

Interest Expense, Net

Interest expense, net for the first ~~six months~~quarter of ~~2023~~2024 was ~~$8.2~~$7.6 million, compared to ~~$4.1~~$2.7 million in the same ~~period~~quarter last year, driven by ~~increased~~higher average outstanding borrowings ~~associated with~~resulting from indebtedness incurred to fund the acquisition of Kimball International ~~along with~~and higher ~~average~~ interest rates in the current period on the ~~Corporation’s~~Corporation's variable-rate ~~debt.~~revolving debt obligations.

Income Taxes

The Corporation’s income tax provision for the first ~~six months~~quarter of ~~2023~~2024 was ~~$6.0~~$4.3 million of expense on ~~loss~~income before taxes of ~~$5.3~~$22.0 million, or an effective tax rate of ~~(113.1)~~19.6 percent. For the first ~~six months~~quarter of ~~2022,~~2023, the Corporation’s income tax ~~provision~~expense was ~~$1.8~~$2.2 million on income before taxes of ~~expense on pre-tax income of $46.2~~$3.8 million, or an effective tax rate of ~~3.8~~58.4 percent. The ~~variation~~Corporation's effective tax rate was lower in the ~~rate from the prior~~current year period ~~is due to lower pre-tax results impacted~~driven by ~~non-deductible transaction costs related to~~favorable equity-based compensation adjustments and the ~~acquisition~~impact of higher income on certain tax attributes. Additionally, the prior-year quarter included nondeductible Kimball International ~~as well as tax benefits recognized~~acquisition costs, which did not recur in the ~~prior-year period for valuation adjustments related to existing deferred tax assets and basis differences tied to the sale of Lamex in July 2022.~~current-year quarter.

Net Income ~~(Loss)~~ Attributable to HNI Corporation

Net ~~loss~~income attributable to the Corporation was ~~$11.3~~$17.7 million, or ~~$0.27~~$0.37 per diluted share in the first ~~six months~~quarter of ~~2023,~~2024, compared to net income of ~~$44.5~~$1.6 million, or ~~$1.04~~$0.04 per diluted share in the first ~~six months~~quarter of ~~2022.~~2023.

Workplace Furnishings

The following table presents summarized results of operations in the workplace furnishings segment:

Three Months Ended Six Months Ended
July 1,
2023 July 2,
2022 Change July 1,
2023 July 2,
2022 Change
Net sales $ 413.0 $ 406.7 1.6 % $ 712.7 $ 759.8 (6.2) %
Operating income $ 15.9 $ 11.9 33.1 % $ 11.9 $ 5.5 115.9 %
Operating income % 3.8 % 2.9 % 90 bps 1.7 % 0.7 % 100 bps


	Three Months Ended
	March 30, 2024			April 1, 2023			Change
Net sales	$	439.8		$	299.6		46.8	%
Operating income (loss)	$	26.3		$	(4.0)		759	%
Operating income (loss) %	6.0		%	(1.3)		%	730	bps

~~Three months ended~~

~~Second~~First quarter ~~2023~~2024 net sales for the workplace furnishings segment increased ~~1.6~~46.8 percent compared to the same quarter last year. The acquisition of Kimball International during the current-year quarter increased net sales by $56.0 million compared to the prior-year quarter, while the sale of the Lamex business during the third quarter of 2022 decreased net sales by $27.0 million compared to the prior year quarter. Excluding the impact of these items, segment sales decreased 5.9 percent year-over-year, with lower volume across most customer segments, partially offset by price realization. In addition to softer macroeconomic conditions, which have negatively affected volume in the current quarter, in the second quarter of 2022 the workplace furnishings segment was in the midst of managing through an elevated sales order backlog as a result of supply chain issues and capacity constraints that arose in 2021. These challenges were largely resolved by the end of 2022, resulting in a more normal backlog heading into 2023 and thus lower relative volume in the current quarter, compared to the prior year quarter.

~~Operating income as a percentage of net sales~~ in the second quarter of 2023 improved 90 basis points compared to the same period in 2022. The increase was driven by favorable price-cost, lower core SG&A, and improved net productivity, partially offset by $10.3 million in Kimball International acquisition costs and $6.0 million in restructuring costs related to the exit of the Poppin business, as well as lower volume.

~~Six Months Ended~~

Net sales for the first six months of 2023 for the workplace furnishings segment decreased 6.2 percent compared to the same period last year. The acquisition of Kimball International during the current-year period increased net sales by ~~$56.0~~$147.5 million compared to the prior-year ~~period, while~~quarter. Excluding the ~~sale~~effect of ~~the Lamex business during the third quarter of 2022 decreased net sales by $44.2 million compared to the prior year period. Aside from these items,~~this transaction, segment sales decreased ~~8.2~~2.5 percent year-over-year, ~~with~~driven by lower volume ~~across most~~in the contract office furniture customer ~~segments,~~segment, partially offset by increased volume with small to medium-sized customers and price realization. In addition to softer macroeconomic conditions which have negatively affected volume in the current year period, in the first six months of 2022 the workplace furnishings segment was in the midst of managing through an elevated sales order backlog as a result of supply chain issues and capacity constraints that arose in 2021. These challenges were largely resolved by the end of 2022, resulting in a more normal backlog heading into 2023 and thus lower relative volume in the current year period, compared to the prior year period.

Operating income as a percentage of net sales in the first ~~six months~~quarter of ~~2023~~2024 improved ~~100~~730 basis points compared to the same period in ~~2022.~~2023. The increase was driven by favorable price-cost, improved net productivity, favorable impacts from the Kimball International acquisition, and lower legacy core SG~~&A, and improved operational productivity,~~&A. These factors were partially offset by lower volume ~~$10.3 million~~ in ~~Kimball International acquisition costs,~~the legacy HNI workplace businesses and ~~$6.0 million in restructuring costs related to the exit of the Poppin business.~~higher variable compensation.

Residential Building Products

The following table presents summarized results of operations in the residential building products segment:

Three Months Ended Six Months Ended
July 1,
2023 July 2,
2022 Change July 1,
2023 July 2,
2022 Change
Net sales $ 150.4 $ 215.1 (30.1) % $ 329.8 $ 434.3 (24.0) %
Operating profit $ 15.6 $ 37.0 (57.9) % $ 43.6 $ 77.3 (43.6) %
Operating profit % 10.3 % 17.2 % -690 bps 13.2 % 17.8 % -460 bps


	Three Months Ended
	March 30, 2024			April 1, 2023			Change
Net sales	$	148.2		$	179.4		(17.4)	%
Operating income	$	21.4		$	28.1		(23.9)	%
Operating income %	14.4		%	15.6		%	-120	bps

~~Three months ended~~

~~Second~~First quarter ~~2023~~2024 net sales for the residential building products segment decreased ~~30.1~~17.4 percent compared to the same quarter last year. The decline was driven by lower volume in both the existing home and new construction ~~and existing home channels as~~channel. Slower demand from a ~~result of a drop in~~continued soft housing ~~starts~~market and reduced home remodeling activity ~~due to higher interest rates and broader macroeconomic concerns,~~was partially offset by price realization versus the prior-year quarter. Sales in existing home channel was also negatively impacted by the normalization of trade inventory. Included in the sales results for the current quarter was a $0.9 million favorable impact from acquiring a residential building products company in the second quarter of 2022.

Operating profit as a percentage of net sales decreased ~~690~~120 basis points in the ~~second~~first quarter of ~~2023~~2024 compared to the same quarter last year driven by lower volume, partially offset by ~~favorable price-cost,~~ improved net productivity, ~~and lower variable compensation.~~

~~Six months ended~~

Net sales for the first six months of 2023 for the residential building products segment decreased 24.0 percent compared to the same period last year. The decline was driven by lower volume in both the new construction and existing home channels as a result of a drop in housing starts and reduced home remodeling activity due to higher interest rates and broader macroeconomic concerns, partially offset by price realization versus the prior-year period. Sales in existing home channel was also negatively impacted by the normalization of trade inventory. Included in the sales results for the current year period was a $2.4 million favorable impact from acquiring a residential building products company in the second quarter of 2022.

~~Operating profit as a percentage of net sales decreased 460 basis points in the first six months of 2023 compared to the same period last year, driven by lower volume, which was partially offset by~~ favorable price-cost, lower variable compensation, and ~~improved net productivity.~~lower core SG&A.

Liquidity and Capital Resources

Cash, cash equivalents, and short-term investments, coupled with cash flow from future operations, borrowing capacity expected to be available under the Corporation's existing credit agreements, and the ability to access capital markets, are expected to be adequate to fund operations and satisfy cash flow needs for at least the next twelve months. Based on current earnings before interest, taxes, depreciation, and amortization, the Corporation can access the full $425 million of borrowing capacity available under ~~the~~its revolving credit facility, which includes the ~~$200~~$74 million currently outstanding, and maintain compliance with applicable covenants.

Cash Flow – Operating Activities

Operating activities were a ~~source~~use of ~~$39.8~~$4.3 million of cash in the first ~~six~~three months of ~~2023~~2024 compared to a ~~use~~source of ~~$25.2~~$17.3 million of cash in the first ~~six~~three months of ~~2022. Cash provided by working~~2023. Working capital ~~activity~~seasonal cash usage was higher in the current period versus ~~significant working capital cash usage in~~ the prior period ~~was the main driver~~driven by reductions in accrued expenses and higher receivables. The higher usage of ~~the variance. This factor~~working capital was partially offset by ~~lower~~higher net income in the current ~~period driven by costs associated with the acquisition of Kimball International.~~period.

Cash Flow – Investing Activities

Capital Expenditures - Capital expenditures, including capitalized software, for the first ~~six~~three months of ~~2023~~2024 were ~~$41.2~~$11.2 million compared to ~~$33.2~~$20.0 million in the same period last year. ~~These~~In the prior-year period, the Corporation had higher expenditures related to a manufacturing facility expansion, which did not recur in the current period. The current year expenditures are primarily focused on machinery, equipment, and tooling required to support new products, continuous improvements, and cost savings initiatives in manufacturing processes. Additionally, in support of the Corporation’s long-term strategy to create effortless winning experiences for customers, the Corporation continues to invest in technology and digital assets. For the full year ~~2023,~~2024, capital expenditures are expected to be approximately ~~$80~~$85 to ~~$85 million; the increase from the most recent prior expectation is primarily due to anticipated capital spending at the acquired Kimball International business.~~

~~Acquisitions~~ - Investing activities in the current year-to-date period include $369.8 million of outflows related to the acquisition of Kimball International, while prior year activity includes acquisition spending for a residential building products company. See "Note 3. Acquisitions and Divestitures" in the Notes to the Condensed Consolidated Financial Statements for further information.95 million.

Cash Flow – Financing Activities

Debt - The Corporation maintains a revolving credit facility as the primary source of committed funding from which the Corporation finances its planned capital expenditures, strategic initiatives, and seasonal working capital needs. Cash flows included in financing activities for the current and prior periods presented represent periodic borrowings and repayments under the revolving credit facility.

Additionally, during the second quarter, the Corporation borrowed $300 million in connection with a term loan agreement entered into on March 31, 2023, as further amended on May 25, 2023, to support funding of the acquisition of Kimball International, which closed in June 2023.

See "Note 7. Debt" in the Notes to Condensed Consolidated Financial Statements for further information.

Dividend - The Corporation is committed to maintaining or modestly growing the quarterly dividend. Cash dividends declared and paid per common share were as follows:

Three Months Ended Six Months Ended
July 1,
2023 July 2,
2022 July 1,
2023 July 2,
2022
Dividends per common share $ 0.32 $ 0.32 $ 0.64 $ 0.63


	Three Months Ended
	March 30, 2024		April 1, 2023
Dividends per common share	$	0.32	$	0.32

During the ~~second~~first quarter of 2024, the Board of Directors declared the regular quarterly cash dividend on ~~May 15, 2023.~~February 13, 2024. The dividend was paid on ~~June 23, 2023,~~March 6, 2024, to shareholders of record as of ~~June 8, 2023.~~February 26, 2024.

Stock Repurchase - The Corporation’s capital strategy related to stock repurchase is focused on offsetting the dilutive impact of issuances for various compensation related matters. The Corporation also may elect to opportunistically purchase additional shares based on excess cash generation and/or share price considerations. ~~The Board most recently authorized an additional $200~~During the three months ended March 30, 2024, the Corporation spent $2.6 million ~~on May 17, 2022, for repurchases~~to repurchase shares of ~~the Corporation’s~~its common stock. As of ~~July 1, 2023, $234.0~~March 30, 2024, $231.0 million ~~remained~~was authorized and available for repurchase of

shares by the ~~Board’s current repurchase authorizations.~~Corporation. See "Note 10. Accumulated Other Comprehensive Income (Loss) and Shareholders’ Equity" in the Notes to Condensed Consolidated Financial Statements for further information.

Sales of Stock - The Corporation records cash flows received from the sale of its common stock held in treasury, primarily in connection with stock option exercises and the HNI Corporation Members’ Stock Purchase Plan. See "Note 10. Accumulated Other Comprehensive Income (Loss) and Shareholders’ Equity" and "Note 12. Stock-Based Compensation" in the Notes to Condensed Consolidated Financial Statements for further information.

Cash Requirements

Various commitments and obligations associated with ongoing business and financing activities will result in cash payments in future periods. A summary of the amounts and estimated timing of these future cash payments was provided in the Corporation’s Annual Report on Form 10-K for the fiscal year ended December ~~31, 2022. Except for the item described below, there~~30, 2023. 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 during the first ~~six~~three months of ~~2023.~~

In connection with the acquisition of Kimball International, the Corporation assumed certain cash obligations and commitments. These obligations include contractual commitments for items such as raw materials, supplies, ocean freight, capital expenditures, services, software acquisition and licenses, operating lease liabilities, and SERP liabilities. See "Note 3. Acquisitions and Divestitures" in the Notes to the Condensed Consolidated Financial Statements for further information.2024.

Commitments and Contingencies

See "Note 13. Guarantees, Commitments, and Contingencies" in the Notes to Condensed Consolidated Financial Statements for further information.

Critical Accounting Policies and Estimates

Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon the Consolidated Financial Statements, prepared in accordance with ~~Generally Accepted Accounting Principles~~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 a variety of other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Senior management has discussed the development, selection, and disclosure of these estimates with the Audit Committee of the ~~Board.~~Board of Directors. Actual results may differ from these estimates under different assumptions or conditions. A summary of the more significant accounting policies requiring the use of estimates and assumptions in preparing the financial statements is provided in the Corporation’s Annual Report on Form 10-K for the fiscal year ended December ~~31, 2022.~~30, 2023.

Recently Issued Accounting Standards Not Yet Adopted

In November 2023, the Financial Accounting Standards Board ("FASB") issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. ASU 2023-07 enhances disclosures regarding segment performance, including information about the chief operating decision maker and measures used to assess performance. The ASU becomes effective for the Corporation beginning with its annual period ending December 2024, and interim periods beginning with first quarter of 2025. The ASU will not impact the financial condition, results of operations, or cash flows of the Corporation. The

Corporation is currently evaluating the impact on the notes to the consolidated financial statements, and expects additional disclosures will be required on adoption.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU 2023-09 enhances transparency of income tax disclosures by requiring consistent categories and greater disaggregation of information in the rate reconciliation, and disaggregation of income taxes paid by jurisdiction. Additionally, the ASU requires disclosure of pretax income (or loss) and income tax (or benefit) disaggregated by domestic and foreign. Finally, the ASU removes the requirement of certain disclosures related to unrecognized tax benefits. The ASU becomes effective for the Corporation beginning with its annual period ending December 2025. The ASU will not impact the financial condition, results of operations, or cash flows of the Corporation. The Corporation is currently evaluating the impact on the notes to the consolidated financial statements, and expects additional disclosures will be required on adoption.

Looking Ahead

The Corporation continues to navigate near-term uncertainty driven by macroeconomic conditions. However, management remains optimistic about the long-term prospects in the workplace furnishings and residential building products markets. Management believes the Corporation continues to compete well and remains confident the investments made in the business will continue to generate strong returns for shareholders.

Forward-Looking Statements

Statements in this report to the extent they are not statements of historical or present fact, including statements as to plans, outlook, objectives, and future financial performance, are "forward-looking" statements, within the meaning of Section 21 of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. Words such as "anticipate," "believe," "could," "confident," "estimate," "expect," "forecast," "hope," "intend," "likely," "may," "plan," "possible," "potential," "predict," "project," "should," "will," "would," and variations of such words and similar expressions identify forward-looking statements.

Forward-looking statements involve known and unknown risks and uncertainties, which may cause the Corporation’s actual results in the future to differ materially from expected results. The most significant factors known to the Corporation that may adversely affect the Corporation’s business, operations, industries, financial position, or future financial performance are

described within Part II, Item 1A of this report and Item 1A of the Corporation’s Annual Report on Form 10-K for the fiscal year ended December ~~31, 2022.~~30, 2023. The Corporation cautions readers not to place undue reliance on any forward-looking statement, which is based necessarily on assumptions made at the time the Corporation provides such statement, and to recognize forward-looking statements are predictions of future results, which may not occur as anticipated. Actual results could differ materially from those anticipated in the forward-looking statements and from historical results due to the risks and uncertainties described elsewhere in this report, including but not limited to: ~~and~~ the Corporation’s ultimate realization of the anticipated benefits of the acquisition of Kimball ~~International and the sale of Poppin;~~International; disruptions in the global supply chain; the effects of prolonged periods of inflation and rising interest rates; labor shortages; the levels of office furniture needs and housing starts; overall demand for the Corporation’s products; general economic and market conditions in the United States and internationally; industry and competitive conditions; the consolidation and concentration of the Corporation’s customers; the Corporation’s reliance on its network of independent dealers; changes in trade policy; changes in raw material, component, or commodity pricing; market acceptance and demand for the Corporation’s new products; changing legal, regulatory, environmental, and healthcare conditions; the risks associated with international operations; the potential impact of product defects; the various restrictions on the Corporation’s financing activities; an inability to protect the Corporation’s intellectual property; cybersecurity threats, including those posed by potential ransomware attacks; impacts of tax legislation; force majeure events outside the Corporation’s control, including those that may result from the effects of climate change; and other risks as described in the Corporation’s annual and quarterly reports filed with the Securities and Exchange Commission on Forms 10-K and 10-Q, as well as others that the Corporation may consider not material or does not anticipate at this time. The risks and uncertainties described in this report, as well as those described within Item 1A of the Corporation’s Annual Report on Form 10-K for the fiscal year ended December ~~31, 2022,~~30, 2023, are not exclusive and further information concerning the Corporation, including factors that potentially could have a material effect on the Corporation’s financial results or condition, may emerge from time to time.

The Corporation assumes no obligation to update, amend, or clarify forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by applicable law. The Corporation advises you, however, to consult any further disclosures made on related subjects in future reports filed with or furnished to the SEC.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

As of ~~July 1, 2023,~~March 30, 2024, there have been no material changes to the financial market risks affecting the quantitative and qualitative disclosures presented in Item 7A of the Corporation’s Annual Report on Form 10-K for the fiscal year ended December ~~31, 2022.~~30, 2023.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are designed to ensure that information required to be disclosed by the Corporation in the reports it files or submits under the Securities Exchange Act of 1934 (the "Exchange Act") is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures are also designed to ensure information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer of the Corporation, the Corporation’s management carried out an evaluation of the Corporation’s disclosure controls and procedures pursuant to Exchange Act Rules 13a – 15 and 15d – 15. As of ~~July 1, 2023,~~March 30, 2024, based on this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded these disclosure controls and procedures are effective.

Changes in Internal ~~Controls~~Control Over Financial Reporting

~~There~~As discussed in "Note 3. Acquisitions and Divestitures" in the Notes to the Condensed Consolidated Financial Statements, the Corporation acquired Kimball International in June 2023. Since acquisition, the Corporation has been integrating Kimball International’s processes and procedures related to internal control over financial reporting.

Subject to the foregoing, there have been no changes in the Corporation’s internal ~~controls~~control over financial reporting during the fiscal quarter covered by this quarterly report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.

In June 2023, the Corporation acquired Kimball International (see "Note 3. Acquisitions and Divestitures" in the Notes to the Condensed Consolidated Financial Statements). In conducting its evaluation of the effectiveness of internal control over financial reporting, the Corporation has elected to exclude Kimball International from its evaluation as of July 1, 2023, as permitted by the regulations of the Securities and Exchange Commission.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

For information regarding legal proceedings, see "Note 13. Guarantees, Commitments, and Contingencies" in the Notes to Condensed Consolidated Financial Statements, which information is incorporated herein by reference.

Item 1A. Risk Factors

~~In addition to~~There have been no material changes from the risk factors disclosed in the "Risk Factors" section of the ~~Corporation’s~~Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 2022, the following risks relating to the merger between the Corporation and Kimball International, Inc., among others, could adversely affect the Corporation’s business, financial condition, and results of operations.

~~The Corporation may not achieve the intended benefits of the merger, and the merger may disrupt its current plans or operations.~~

There can be no assurance that the Corporation will be able to successfully integrate Kimball International’s assets or otherwise realize the expected benefits of the transaction (including operating and other cost synergies). Difficulties in integrating Kimball International into the Corporation may result in the Corporation performing differently than expected, in operational challenges, in the failure to realize anticipated run-rate cost synergies and efficiencies in the expected time frame or at all, or in the difficulty or failure of utilizing available U.S. tax attributes, in which case the merger may not be accretive to earnings per share, may not improve the Corporation’s balance sheet position, may not enhance the Corporation’s ability to delever and may not generate additional free cash flow due to reduced cash tax payments. The integration of the two companies may result in material challenges, including the diversion of management’s attention from ongoing business concerns; retaining key management and other employees; retaining or attracting business and operational relationships; the possibility of faulty assumptions underlying expectations regarding the integration process and associated expenses; consolidating corporate and administrative infrastructures and eliminating duplicative operations; coordinating geographically separate organizations; unanticipated issues in integrating information technology, communications and other systems; as well as potential unknown liabilities, or unforeseen expenses relating to integration.

~~The future results of the Corporation may be adversely impacted if the Corporation does not effectively manage its expanded operations following the completion of the merger.~~

The Corporation’s business is significantly larger than the pre-merger size of either the Corporation’s or Kimball International’s respective businesses. The Corporation’s ability to successfully manage this expanded business will depend, in part, upon management’s ability to design and implement strategic initiatives that address not only the integration of two independent stand-alone companies, but also the increased scale and scope of the combined business with its associated increased costs and complexity. There can be no assurances that the combined company will be successful or that it will realize the expected operating efficiencies, cost savings and other benefits currently anticipated from the merger.

The combined company incurred substantial expenses related to the completion of the merger and expects to continue to incur substantial expenses relating to the integration of the Corporation and Kimball International.

The combined company incurred substantial expenses in connection with the completion of the merger and is expected to continue to incur substantial expenses in connection with the integration of the Corporation and Kimball International. There are a large number of processes, policies, procedures, operations, technologies and systems that must be integrated, potentially including purchasing, accounting and finance, sales, payroll, pricing, revenue management, marketing and benefits. The substantial majority of these costs are non-recurring expenses related to the merger (including financing of the merger), facilities and systems consolidation. The Corporation may incur additional costs to maintain employee morale and to attract, motivate or retain management personnel and other key employees. The Corporation and Kimball International also incurred transaction fees and costs related to formulating integration plans for the combined business, and the execution of these plans may lead to additional unanticipated costs. These incremental transaction- and merger-related costs may exceed the savings the combined company expects to achieve from the elimination of duplicative costs and the realization of other efficiencies related to the integration of the businesses, particularly in the near term and in the event there are material unanticipated costs.

Uncertainties associated with the merger may cause a loss of management personnel and other key employees, and the Corporation may have difficulty attracting and motivating management personnel and other key employees, which could adversely affect the future business and operations of the Corporation after the completion of the merger.

The Corporation is dependent on the experience and industry knowledge of its management personnel and other key employees to execute its business plans. The success of the Corporation after the completion of the merger depends in part upon the ability of the Corporation to attract, motivate and retain key management personnel and other key employees. Current and prospective employees of the Corporation may experience uncertainty about their roles within the combined company, which may have an adverse effect on the ability of the Corporation to attract, motivate or retain management personnel and other key employees. In addition, no assurance can be given that the Corporation will be able to attract, motivate or retain management personnel and other key employees of the Corporation to the same extent that the Corporation and Kimball International have previously been able to attract or retain their own employees prior to the merger.

~~The merger may result in a loss of customers, distributors, suppliers, vendors, landlords and other business partners and may result in the termination of existing contracts.~~

Some of the customers, distributors, suppliers, vendors, landlords and other business partners of Kimball International may terminate or scale back their current or prospective business relationships with the Corporation. Some customers may not wish to source a larger percentage of their needs from a single company or may feel that the Corporation is too closely allied with one of its former competitors. If relationships with customers, distributors, suppliers, vendors, landlords and other business partners are adversely affected by the merger, or if the Corporation loses the benefits of the contracts of Kimball International, the Corporation’s business and financial performance could suffer.

~~The combined company has significantly more indebtedness than the indebtedness of the Corporation prior to the merger.~~

Upon completion of the merger, the Corporation incurred approximately $390.2 million in additional indebtedness and has consolidated indebtedness of approximately $598.1 million, up from $207.9 million before the merger. The increased indebtedness of the combined company in comparison to that of the Corporation on a historical basis may have the effect, among other things, of reducing the flexibility of the Corporation to respond to changing business and economic conditions and increasing borrowing costs.

The financing arrangements that the Corporation entered into in connection with the merger contain restrictions and limitations that may, under certain circumstances, significantly impact the Corporation’s ability to operate its business.

The Corporation incurred significant new indebtedness in connection with the merger. The agreements governing the indebtedness that the Corporation incurred in connection with the merger, including, but not limited to, the Term Loan Credit Agreement may, under certain circumstances, impose significant operating and financial restrictions on the Corporation. These restrictions may affect the Corporation’s ability to operate its business and may limit the Corporation’s ability to take advantage of potential business opportunities as they arise.

In addition, the agreements governing such indebtedness require the Corporation to comply with a consolidated leverage ratio financial covenant and consolidated interest coverage ratio financial covenant. The Corporation’s ability to comply with such covenants will depend on its ongoing financial and operating performance, which in turn will be subject to economic conditions and to financial, market and competitive factors, many of which are beyond the Corporation’s control. The ability to comply with these covenants will also depend on the Corporation’s ability to successfully implement its overall business strategy and realize the anticipated benefits of the merger, including synergies, cost savings, innovation and operational efficiencies.

Various risks, uncertainties and events beyond the Corporation’s control could affect its ability to comply with the covenants contained in its financing agreements. Failure to comply with any of the covenants in its existing or future financing agreements could result in a default under those agreements and under other agreements containing cross-default provisions. A default would permit lenders to accelerate the maturity of the debt under these agreements. Under these circumstances, the Corporation might not have sufficient funds or other resources to satisfy all of its obligations. In addition, the limitations imposed by financing agreements on the Corporation’s ability to incur additional debt and to take other actions might significantly impair its ability to obtain other financing.

~~If the Corporation incurs additional indebtedness in future periods, the risks related to the substantial indebtedness of the Corporation after the completion of the merger may intensify.~~

~~The market price of the Corporation’s common stock after the merger may be affected by factors different from those affecting the price of the Corporation’s common stock before the merger.~~

As the businesses of the Corporation and Kimball International are different, the results of operations as well as the price of the Corporation’s common stock may be affected by factors different from those factors that previously affected the Corporation as an independent stand-alone company. Following the transaction, the Corporation faces additional risks and uncertainties that the Corporation or Kimball International may not have previously been exposed to as independent companies.

30, 2023.

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

~~Issuer~~ Purchases of Equity ~~Securities:~~Securities

The Corporation repurchases shares under previously announced plans authorized by the Board. The Corporation’s most recent share purchase authorization from May 17, 2022 ~~provides for repurchases~~authorized repurchase of ~~an additional~~ $200 million of shares in addition to the previously available amount, with no specific expiration date. As of March 30, 2024, $231.0 million was authorized and available for the repurchase of shares by the Corporation. The authorization does not obligate the Corporation to purchase any shares and the authorization may be terminated, increased, or decreased by the Board at any time. ~~No repurchase plans expired or were terminated during the second quarter of fiscal 2023, and no current plans are expected to expire or terminate.~~

The ~~Corporation did not~~following is a summary of share repurchase ~~any of its shares~~activity during the ~~quarter. As~~first quarter of ~~July 1, 2023, $234.0 million was authorized and available for the repurchase of shares by the Corporation.~~fiscal 2024:



Period	Total Number of Shares (or Units) Purchased (in thousands)	Average Price Paid per Share (or Unit)		Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs (in thousands)	Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet be Purchased Under the Plans or Programs (in millions)
12/31/23 - 01/27/24	18.0	$	40.94	18.0	$	232.8
01/28/28 - 02/24/24	19.0	$	42.09	19.0	$	232.0
02/25/24 - 03/30/24	22.3	$	43.62	22.3	$	231.0
Total	59.3			59.3

Item 5. Other Information

Securities Trading ~~Plans~~Arrangements of Directors and ~~Executive Officers:~~Officers

~~During the three months ended July 1, 2023, no director or officer~~The following table presents information about each adoption and termination of ~~the Company adopted or terminated~~ a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each such term is defined in Item 408(a) of Regulation ~~S-K.~~S-K, by directors and officers of the Corporation (as "officer" is defined in Rule 16a-1(f) under the Exchange Act) during the three months ended March 30, 2024:

Trading Arrangement

Name and Title

Action

Date

Rule 10b5-1

Non-
Rule 10b5-1

Total Shares to be Sold

Expiration Date

Donna D. Meade, Vice President, Member and Community Relations

Adopt

March 6, 2024

10,000

February 28, 2025

Marshall H. Bridges, Senior Vice President and Chief Financial Officer

Adopt

March 7, 2024

14,440

February 28, 2025

3730

Item 6. Exhibits


2.1*			Agreement and Plan of Merger, by and among HNI Corporation, Ozark Merger Sub, Inc. and Kimball International, Inc., dated as of March 7, 2023 (incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed March 10, 2023)
~~10.1~~			~~First additional Loan Amendment to Term Loan Credit Agreement, by and am~~o ~~ng HNI Corporation, certain domestic subsidiaries of HNI, as guarantors, certain lenders and Wells~~ F ~~argo Bank, National Associatio~~n ~~, as administrative agent,~~d ~~ated as of May 25, 2023 (incorporated by reference to Exh~~i bi ~~t 10.1 to the Registra~~nt ~~'s Current Report on Form 8-K filed J~~u ~~ne 1, 2023)~~
~~10.2~~			~~First Additional Loan Amendment to Fourth Amended and Restated Credit Agreement, by and~~ ~~among HNI Corporation, certain domestic subsidiaries of HNI, as guarantors, certain lenders and Wells Fargo Bank, National Association, as administrative agent, dated~~ ~~as of June 1, 2023 (incorporated by reference to Exhibit 10.2 to the Registrant's Current Report~~on ~~Form 8-~~K ~~filed June 1, 2023)~~
~~10.3~~			H NI Co ~~rporation Stock~~ In ~~centive Plan for Legacy Kimball Employees (incorporated by reference to Exhibit 99.1 to the Registrant's Form S-8 filed June 1, 2023)~~
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+
101			The following materials from HNI Corporation's Quarterly Report on Form 10-Q for the fiscal quarter ended ~~July 1, 2023~~March 30, 2024 are formatted in Inline XBRL (eXtensible Business Reporting Language) and filed electronically herewith: (i) Condensed Consolidated Statements of Comprehensive Income; (ii) Condensed Consolidated Balance Sheets; (iii) Condensed Consolidated Statements of Equity; (iv) Condensed Consolidated Statements of Cash Flows; ~~and~~ (v) Notes to Condensed Consolidated Financial ~~Statements+~~Statements; and (vi) information concerning trading plans appearing in Part II, Item 5 of this report+
104			Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

+ Filed or furnished herewith.

* Schedules omitted pursuant to Item 601(b)(2) of Regulation S-K. The Corporation agrees to furnish supplementally a copy of any omitted schedule to the Securities and Exchange Commission upon request; provided, however, that the Corporation may request confidential treatment pursuant to Rule 24b-2 of the Exchange Act for any schedules or exhibits so furnished.

3831

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 duly authorized.


	HNI Corporation

Date: ~~August 8, 2023~~April 30, 2024	By:	/s/ Marshall H. Bridges
		Marshall H. Bridges
		Senior Vice President and Chief Financial Officer

3932





	Six Months Ended - July 1, 2023
	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Non-controlling Interest		Total Shareholders’ Equity
Balance, December 31, 2022	$	41.4	$	49.1	$	534.0	$	(8.0)	$	0.3	$	616.8
Comprehensive income:
Net income (loss)	—		—		(11.3)		—		(0.0)		(11.3)
Other comprehensive income (loss), net of tax	—		—		—		0.0		—		0.0



Dividends payable	—		—		(0.6)		—		—		(0.6)
Cash dividends; $0.64 per share	—		—		(28.2)		—		—		(28.2)
Common shares – treasury:
Shares purchased	—		—		—		—		—		—
Shares issued in connection with Kimball International, Inc. acquisition	4.7		116.1		—		—		—		120.8
Shares issued under Members' Stock Purchase Plan and stock awards, net of tax	0.4		17.3		—		—		—		17.8
Balance, July 1, 2023	$	46.5	$	182.5	$	493.9	$	(8.0)	$	0.3	$	715.3


HNI Corporation and Subsidiaries Condensed Consolidated Statements of Equity (In millions, except per share data)
(Unaudited)

	Three Months Ended - July 2, 2022
	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Non-controlling Interest		Total Shareholders’ Equity
Balance, April 2, 2022	$	42.4	$	45.4	$	500.8	$	(6.8)	$	0.3	$	582.0
Comprehensive income:
Net income (loss)	—		—		30.3		—		0.0		30.3
Other comprehensive income (loss), net of tax	—		—		—		(1.3)		—		(1.3)



Dividends payable	—		—		(0.4)		—		—		(0.4)
Cash dividends; $0.32 per share	—		—		(13.4)		—		—		(13.4)
Common shares – treasury:
Shares purchased	(1.1)		(2.6)		(36.3)		—		—		(40.0)
Shares issued under Members’ Stock Purchase Plan and stock awards, net of tax	0.1		4.6		—		—		—		4.7
Balance, July 2, 2022	$	41.3	$	47.4	$	481.1	$	(8.1)	$	0.3	$	562.0




	Six Months Ended - July 2, 2022
	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Non-controlling Interest		Total Shareholders’ Equity
Balance, January 1, 2022	$	42.6	$	39.2	$	514.6	$	(6.8)	$	0.3	$	590.0
Comprehensive income:
Net income (loss)	—		—		44.5		—		(0.0)		44.5
Other comprehensive income (loss), net of tax	—		—		—		(1.3)		—		(1.3)




Dividends payable	—		—		(0.4)		—		—		(0.4)
Cash dividends; $0.63 per share	—		—		(26.5)		—		—		(26.5)
Common shares – treasury:
Shares purchased	(1.7)		(11.1)		(51.1)		—		—		(63.9)
Shares issued under Members' Stock Purchase Plan and stock awards, net of tax	0.4		19.3		—		—		—		19.7
Balance, July 2, 2022	$	41.3	$	47.4	$	481.1	$	(8.1)	$	0.3	$	562.0


	2023		2024		2025		2026		2027
Amortization expense	$	32.3	$	33.7	$	31.3	$	25.0	$	17.8


	As of July 1, 2023		As of December 31, 2022
Supplier finance program obligations	$	29.3	$	27.4


		Three Months Ended				Six Months Ended
	Classification	July 1, 2023		July 2, 2022		July 1, 2023		July 2, 2022
Workplace Furnishings
Inventory valuation	Cost of sales	$	(0.4)	$	0.1	$	(0.3)	$	0.2
Facility set-up costs	Cost of sales	0.2		0.1		0.5		0.2

Long-lived asset impairments	Restructuring and impairment charges	2.1		—		2.1		—
Exit costs	Restructuring and impairment charges	6.0		—		6.0		—

General Corporate
Investment impairment	Restructuring and impairment charges	—		1.0		—		1.0
Total		$	7.8	$	1.2	$	8.3	$	1.4


	As of July 1, 2023		As of December 31, 2022
Assets:
Receivables	$	1.4	$	—
Inventories	11.9		—
Prepaid expenses and other current assets	0.7		—
Property, plant & equipment	3.1		1.9
Right-of-use operating leases	1.8		—
Total Assets held for sale	$	18.9	$	1.9

Liabilities:
Accounts payable and accrued expenses	$	9.4	$	—
Lease obligations - operating	5.0		—
Total Liabilities held for sale	$	14.4	$	—