rex9921809.htm

HNI CORPORATION ANNOUNCES RESULTS FOR FOURTH QUARTER AND YEAR-END – FISCAL 2008

MUSCATINE, Iowa (February 17, 2009) – HNI Corporation (NYSE: HNI) today announced sales of $637.9 million and net income of $8.5 million for the fourth quarter ending January 3, 2009. Net income per diluted share for the quarter was $0.19 or $0.45 on a non-GAAP basis when excluding restructuring and impairment charges and favorable adjustments to redeemable liabilities. For fiscal year 2008, the Corporation reported sales of $2.5 billion and net income of $45.5 million. Net income per diluted share for the year was $1.02 or $1.46 on a non-GAAP basis when excluding restructuring and impairment charges, transition costs, and favorable adjustments to redeemable liabilities.

Fourth Quarter and FY’08 Summary Comments

"We continued to take focused and strong actions during the quarter, adjusting our businesses to the harsh marketplace realities. Consistent with our actions throughout 2008, we attacked structural and day-to-day operating costs in every corner of the corporation. These actions along with declining freight costs and better price realization allowed us to partially offset weakening demand and exceed our fourth quarter expectations.

"We faced unprecedented challenges in 2008, and I would like to thank our members for their hard work, dedication, and sacrifice," said Stan Askren, HNI Corporation Chairman, President and Chief Executive Officer.

Fourth Quarter

Dollars in millions	Three Months Ended						Percent
except per share data	1/03/2009			12/29/2007			Change

Net Sales	$	637.9		$	668.5			-4.6	%
Gross Margin	$	210.4		$	243.2			-13.5	%
Gross Margin %		33.0	%		36.4	%
SG&A	$	194.6		$	190.0			2.4	%
SG&A %		30.5	%		28.4	%
Operating Income	$	15.8		$	53.2			-70.2	%
Operating Income %		2.5	%		8.0	%
Income from Continuing Operations	$	8.5		$	37.5			-77.3	%

Earnings per share from Continuing Operations – Diluted	$	0.19		$	0.82			-76.8	%

Fourth Quarter Results – Continuing Operations

Consolidated net sales decreased $30.5 million to $637.9 million or 4.6 percent. Acquisitions contributed approximately $30 million or 4.6 percentage points of sales.

Gross margins were 3.4 percentage points lower than prior year primarily due to decreased volume and increased material costs partially offset by increased price realization.

Total selling and administrative expenses, including restructuring charges, as a percent of sales, increased due to higher restructuring and impairment charges, non-volume related freight and distribution expenses and severance costs. These were partially offset by favorable adjustments to the current fair value of mandatorily redeemable liabilities from prior acquisitions, cost control initiatives and lower incentive-based compensation expense.

The Corporation recorded $21.5 million of restructuring and impairment charges. These charges included goodwill and intangible impairment charges of $21.8 million related to various office furniture reporting units offset partially by a favorable adjustment of $0.3 million related to previously announced facility shutdowns. Included in 2007 were $4.9 million of restructuring and impairment charges and $1.3 million of transition costs not classified as restructuring costs related to transitioning production to other office furniture facilities.

The annualized effective tax rate for 2008 was reduced during the fourth quarter compared to earlier in the year primarily due to reinstatement of the research tax credit. The annualized effective tax rate for 2007 was reduced during the fourth quarter of 2007 compared to earlier in that year primarily due to a reduction in state taxes and an increase in foreign excludable income.

Fourth Quarter – Non-GAAP Financial Measures (Reconciled with Most Comparable GAAP Financial Measures)
Dollars in millions except per share data	Three Months Ended 1/03/2009									Three Months Ended 12/29/2007
	SG&A			Operating Income			EPS			SG&A			Operating Income			EPS
As Reported (GAAP)	$	194.6		$	15.8		$	0.19		$	190.0		$	53.2		$	0.82
% of Net Sales		30.5	%		2.5	%					28.4	%		8.0	%

Restructuring and impairment	$	(21.5	)	$	21.5		$	0.35		$	(4.9	)	$	5.5		$	0.09
Transition costs		-			-			-		$	(1.3	)	$	1.3		$	0.02
Redeemable liability adjustments	$	5.7		$	(5.7	)	$	(.09	)		-			-			-

Results (non-GAAP)	$	178.8		$	31.6		$	0.45		$	183.8		$	60.0		$	0.93
% of Net Sales		28.0	%		5.0	%					27.5	%		9.0	%

Full Year

Dollars in millions	Twelve Months Ended						Percent
except per share data	1/03/2009			12/29/2007			Change

Net Sales	$	2,477.6		$	2,570.5			-3.6	%
Gross Margin	$	828.6		$	905.8			-8.5	%
Gross Margin %		33.4	%		35.2	%
SG&A	$	743.7		$	712.1			4.4	%
SG&A %		30.0	%		27.7	%
Operating Income	$	84.9		$	193.7			-56.2	%
Operating Income %		3.4	%		7.5	%
Income from Continuing Operations	$	45.5		$	119.9			-62.1	%

Earnings per share from Continuing Operations – Diluted	$	1.02		$	2.55			-60.0	%

Full Year Results – Continuing Operations

Net sales decreased to $2.5 billion or 3.6 percent. Acquisitions contributed approximately $118 million or 4.6 percentage points of sales.

Gross margins decreased 1.8 percentage points due to lower volume, higher material costs, and restructuring and transition costs partially offset by price increases.

Total selling and administrative expenses, including restructuring charges, as a percent of sales, increased due to higher restructuring and impairment charges, non-volume related freight and distribution expenses and the impact of non-operating gains on prior year results. These were partially offset by favorable adjustments to the current fair value of mandatorily redeemable liabilities from prior acquisitions, cost control initiatives and lower incentive-based compensation expense. Included in 2008 were $25.9 million of restructuring and impairment charges compared to $9.8 million in 2007.

The Corporation's effective tax rate for 2008 was 34.2% compared to 32.3% in 2007.

Net income per share was positively impacted approximately $0.05 by the Corporation's share repurchase program reducing average shares outstanding by 2.5 million shares compared to 2007.

Cash flow from operations for the year was $174.4 million compared to $291.2 million last year. The reduction was due to lower earnings and a less favorable working capital reduction in 2008. Capital expenditures were $71.5 million in 2008 compared to $58.9 million in 2007 primarily due to new product introductions and facility consolidations completed during 2008. Acquisition spending during the year totaled $75.5 million. The Corporation repurchased 1,004,700 shares of common stock at a cost of $28.6 million during 2008, compared to 3,581,707 shares at a cost of $147.7 million in 2007.

Full Year – Non-GAAP Financial Measures (Reconciled with Most Comparable GAAP Financial Measures)
Dollars in millions except per share data	Twelve Months Ended 1/03/2009												Twelve Months Ended 12/29/2007
	Gross Profit			SG&A			Operating Income			EPS			Gross Profit			SG&A			Operating Income			EPS
As Reported (GAAP)	$	828.6		$	743.7		$	84.9		$	1.02		$	905.8		$	712.1		$	193.7		$	2.57
% of Net Sales		33.4	%		30.0	%		3.4	%					35.2	%		27.7	%		7.5	%

Restructuring and impairment	$	0.4		$	(25.9	)	$	26.3		$	0.39		$	0.6		$	(9.8	)	$	10.4		$	0.15
Transition costs	$	5.3		$	(3.5	)	$	8.8		$	0.13			-		$	(1.3	)	$	1.3		$	0.02
Non-operating gains		-			-			-			-			-		$	5.0		$	(5.0	)	$	(0.07	)
Redeemable liability adjustments		-		$	5.7		$	(5.7	)	$	(.08	)		-			-			-			-

Results (non-GAAP)	$	834.4		$	720.1		$	114.2		$	1.46		$	906.4		$	706.0		$	200.4		$	2.66
% of Net Sales		33.7	%		29.1	%		4.6	%					35.3	%		27.5	%		7.8	%

Discontinued Operations

The Corporation completed the sale of a previously announced small, non-core component of the office furniture segment during the second quarter of 2007. Revenues and expenses associated with this business's operations are presented as discontinued operations for all periods presented in the financial statements.

Office Furniture

	Three Months Ended									Twelve Months Ended
Dollars in millions	1/03/2009			12/29/2007			Percent Change			1/03/2009			12/29/2007			Percent Change
Sales	$	512.8		$	548.2			-6.5	%	$	2,054.0		$	2,108.4			-2.6	%
Operating Profit	$	12.9		$	52.9			-75.6	%	$	101.3		$	194.7			-48.0	%
Operating Profit %		2.5	%		9.7	%					4.9	%		9.2	%

Non-GAAP Financial Measures (Reconciled with Most Comparable GAAP Measures)
	Three Months Ended						Percent Change			Twelve Months Ended						Percent Change
Dollars in millions	1/03/2009			12/29/2007			Percent Change			1/03/2009			12/29/2007			Percent Change
Operating Profit as Reported (GAAP)	$	12.9		$	52.9			-75.6	%	$	101.3		$	194.7			-48.0	%
% of Net Sales		2.5	%		9.7	%					4.9	%		9.2	%

Restructuring and impairment	$	21.6		$	4.4					$	26.0		$	9.3
Transition costs	$	-		$	1.3					$	8.8		$	1.3
Non-operating gains	$	-		$	-					$	-		$	(2.0	)
Redeemable liability adjustments	$	(5.7	)	$	-					$	(5.7	)	$	-

Operating profit (non-GAAP)	$	28.8		$	58.6			-50.9	%	$	130.3		$	203.3			-35.9	%
% of Net Sales		5.6	%		10.7	%					6.3	%		9.6	%

Fourth quarter and full year sales for the office furniture segment decreased $35.4 million and $54.4 million, respectively. The decrease was driven by substantial weakness in the supplies driven channel of the office furniture industry. Acquisitions contributed $14 million or 2.6 percentage points in the fourth quarter and $61 million or 2.9 percentage points for the full year.

Fourth quarter and full year operating profit decreased $40.0 million and $93.4 million, respectively. Operating profit was negatively impacted by increased restructuring and impairment expenses, lower volume and higher material costs. These were partially offset by price increases, gains related to the current fair value of mandatorily redeemable liabilities from prior acquisitions, contributions from acquisitions, cost control initiatives and lower incentive-based compensation expense.

Hearth Products

	Three Months Ended									Twelve Months Ended
Dollars in millions	1/03/2009			12/29/2007			Percent Change			1/03/2009			12/29/2007			Percent Change
Sales	$	125.1		$	120.3			4.0	%	$	423.6		$	462.0			-8.3	%
Operating Profit	$	9.3		$	10.4			-10.0	%	$	11.8		$	36.4			-67.7	%
Operating Profit %		7.4	%		8.6	%					2.8	%		7.9	%

Fourth quarter and full year sales for the hearth product segment increased $4.8 million and decreased $38.5 million, respectively. Acquisitions contributed $16 million or 13.4 percentage points in the fourth quarter and $57 million or 12.4 percentage points for the full year.

Fourth quarter and full year operating profit decreased $1.1 million and $24.7 million, respectively. Operating profit was negatively impacted due to lower volume, higher material costs and increased mix of lower margin product partially offset by price increases, contributions from acquisitions, cost reduction initiatives and lower restructuring expenses.

Outlook

"The economic outlook remains volatile and uncertain. Consistent with the ongoing and deepening recession, we anticipate weak demand across our businesses. We are responding to the conditions and adjusting our businesses accordingly. Despite the difficult environment, we are optimistic about the future because of the enhancements we're making to our cost structure, the investments we're making to improve our businesses, and the early cycle nature of our hearth business and office furniture supplies-driven channel," said Mr. Askren.

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

Conference Call

HNI Corporation will host a conference call on Wednesday, February 18, 2009 at 10:00 a.m. (Central) to discuss fourth quarter and year-end 2008 results. To participate, call the conference call line at 1-800-230-1074. A replay of the conference call will be available until Wednesday, February 25, 2009, 11:59 p.m. (Central). To access this replay, dial 1-800-475-6701 – Access Code: 982540. A link to the simultaneous web cast can be found on the Corporation's website at www.hnicorp.com.

Non-GAAP Financial Measures

This earnings release contains certain non-GAAP financial measures. A "non-GAAP financial measure" is defined as a numerical measure of a company's financial performance that excludes or includes amounts different than the most directly comparable measure calculated and presented in accordance with GAAP in the statements of income, balance sheets or statements of cash flow of the company. Pursuant to the requirements of Regulation G, the Corporation has provided a reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measure.

The non-GAAP financial measures used within this earnings release are: gross profit, selling and administrative expense, operating income, operating profit and net income per diluted share (i.e., EPS), excluding restructuring and impairment charges, transition costs, redeemable liability adjustments and non-operating gains. These measures are presented because management uses this information to monitor and evaluate financial results and trends. Management believes this information is also useful for investors.

HNI Corporation is a NYSE traded company (ticker symbol: HNI) providing products and solutions for the home and workplace environments. HNI Corporation is the second largest office furniture manufacturer in the world and is also the nation’s leading manufacturer and marketer of gas- and wood-burning fireplaces. The Corporation's strong brands, including HON®, Allsteel®, Gunlocke®, Paoli®, Maxon®, Lamex®, HBF® , Heatilator®, Heat & GloTM, Quadra-Fire®, and Harman StoveTM have leading positions in their markets. HNI Corporation is committed to maintaining its long-standing corporate values of integrity, financial soundness and a culture of service and responsiveness. More information can be found on the Corporation's website at www.hnicorp.com.

Statements in this release that are not strictly historical, including statements as to plans, outlook, objectives, and future financial performance, are "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Words such as "anticipate," "believe," "could," "confident," "estimate," "expect," "forecast," "hope," "intend," "likely," "may," "plan," "possible," "potential," "predict," "project," "should," "will," "would," and variations of such words and similar expressions identify forward-looking statements. Forward-looking statements involve known and unknown risks, which may cause the Corporation's actual results in the future to differ materially from expected results. These risks include, without limitation: the Corporation's ability to realize financial benefits from its (a) price increases, (b) cost containment and business simplification initiatives for the entire Corporation, (c) investments in strategic acquisitions, new products and brand building, (d) investments in distribution and rapid continuous improvement, (e) ability to maintain its effective tax rate, and (f) consolidation and logistical realignment initiatives; uncertainty related to the availability of cash and credit, and the terms and interest rates on which credit would be available,

to fund operations and future growth; lower than expected demand for the Corporation's products due to uncertain political and economic conditions, including the current credit crisis, slow or negative growth rates in global and domestic economies and the protracted decline in the domestic housing market; lower industry growth than expected; major disruptions at key facilities or in the supply of any key raw materials, components or finished goods; uncertainty related to disruptions of business by terrorism, military action, acts of God or other Force Majeure events; competitive pricing pressure from foreign and domestic competitors; higher than expected costs and lower than expected supplies of materials (including steel and petroleum based materials); higher than expected costs for energy and fuel; changes in the mix of products sold and of customers purchasing; relationships with distribution channel partners, including the financial viability of distributors and dealers; restrictions imposed by the terms of the Corporation's revolving credit facility, term loan credit agreement and note purchase agreement; currency fluctuations and other factors described in the Corporation's annual and quarterly reports filed with the Securities and Exchange Commission on Forms 10-K and 10-Q. The Corporation undertakes no obligation to update, amend, or clarify forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by applicable law.

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HNI CORPORATION

Condensed Consolidated Statement of Operations

	Three Months Ended					Twelve Months Ended
(Dollars in thousands, except per share data)	Jan. 3, 2009		Dec. 29, 2007			Jan. 3, 2009		Dec. 29, 2007
Net sales	$	637,949	$	668,484		$	2,477,587	$	2,570,472
Cost of products sold		427,536		425,289			1,648,975		1,664,697
Gross profit		210,413		243,195			828,612		905,775
Selling and administrative expenses		173,065		185,052			717,870		702,329
Restructuring and impairment charges		21,515		4,932			25,859		9,788
Operating income		15,833		53,211			84,883		193,658
Interest income		326		455			1,172		1,229
Interest expense		4,384		4,284			16,865		18,161
Earnings from continued operations before income taxes and minority interest		11,775		49,382			69,190		176,726
Income taxes		3,252		12,032			23,634		57,141
Earnings from continuing operations before minority interest		8,523		37,350			45,556		119,585
Minority interest in earnings of subsidiary		8		(163	)		106		(279	)
Income from continuing operations		8,515		37,513			45,450		119,864
Discontinued operations, less applicable income taxes		-		-			-		514
Net income	$	8,515	$	37,513		$	45,450	$	120,378
Net income from continuing operations – basic	$	0.19	$	0.82		$	1.03	$	2.57
Net income from discontinued operations – basic	$	0.00	$	0.00		$	0.00	$	0.01
Net income per common share – basic	$	0.19	$	0.82		$	1.03	$	2.58
Average number of common shares outstanding – basic		44,259,137		45,550,436			44,309,765		46,684,774
Net income from continuing operations – diluted	$	0.19	$	0.82		$	1.02	$	2.55
Net income from discontinued operations – diluted	$	0.00	$	0.00		$	0.00	$	0.02
Net income per common share – diluted	$	0.19	$	0.82		$	1.02	$	2.57
Average number of common shares outstanding - diluted		44,386,092		45,774,659			44,433,945		46,925,161

Condensed Consolidated Balance Sheet

Assets					Liabilities and Shareholders' Equity
	As of					As of
	Jan. 3,		Dec. 29,			Jan. 3,		Dec. 29,
(Dollars in thousands)	2009		2007			2009		2007
Cash and cash equivalents	$	39,538	$	33,881	Accounts payable and
Short-term investments		9,750		9,900	accrued expenses	$	313,431	$	367,320
Receivables		238,327		288,777	Note payable and current
Inventories		84,290		108,541	maturities of long-term debt		54,494		14,715
Deferred income taxes		17,512		17,828	Current maturities of other
Prepaid expenses and					long-term obligations		5,700		2,426
other current assets		32,344		30,145
Current assets		421,761		489,072	Current liabilities		373,625		384,461

					Long-term debt		267,300		280,315
					Capital lease obligations		43		776
Property and equipment - net		315,606		305,431	Other long-term liabilities		50,399		55,843
Goodwill		268,392		256,834	Deferred income taxes		29,191		26,672
Other assets		163,790		155,639
					Minority interest in subsidiary		158		1
					Shareholders' equity		448,833		458,908
					Total liabilities and
Total assets	$	1,169,549	$	1,206,976	shareholders' equity	$	1,169,549	$	1,206,976

Condensed Consolidated Statement of Cash Flows

	Twelve Months Ended
(Dollars in thousands)	Jan. 3, 2009			Dec. 29, 2007
Net cash flows from (to) operating activities	$	174,369		$	291,187
Net cash flows from (to) investing activities:
Capital expenditures		(71,496	)		(58,914	)
Acquisition spending		(75,479	)		(41,696	)
Other		15,449			8,588
Net cash flows from (to) financing activities		(37,186	)		(193,361	)
Net increase (decrease) in cash and cash equivalents		5,657			5,804
Cash and cash equivalents at beginning of period		33,881			28,077
Cash and cash equivalents at end of period	$	39,538		$	33,881

Business Segment Data

	Three Months Ended						Twelve Months Ended
(Dollars in thousands)	Jan. 3, 2009			Dec. 29, 2007			Jan. 3, 2009			Dec. 29, 2007
Net sales:
Office furniture	$	512,830		$	548,214		$	2,054,037		$	2,108,439
Hearth products		125,119			120,270			423,550			462,033
	$	637,949		$	668,484		$	2,477,587		$	2,570,472

Operating profit:
Office furniture (1)
Operations before restructuring and impairment charges	$	34,506		$	56,769		$	126,833		$	203,378
Restructuring and impairment charges		(21,601	)		(3,830	)		(25,544	)		(8,686	)
Office furniture - net		12,905			52,939			101,289			194,692
Hearth products
Operations before restructuring and impairment charges		9,231			11,451			12,074			37,545
Restructuring and impairment charges		86			(1,101	)		(315	)		(1,101	)
Hearth products - net		9,317			10,350			11,759			36,444
Total operating profit		22,222			63,289			113,048			231,136
Unallocated corporate expense		(10,454	)		(13,669	)		(44,016	)		(53,992	)
Income before income taxes	$	11,768		$	49,620		$	69,032		$	177,144

Depreciation and amortization expense:
Office furniture	$	12,928		$	12,866		$	50,511		$	49,294
Hearth products		3,733			3,407			15,212			14,453
General corporate		1,087			1,084			4,432			4,426
	$	17,748		$	17,377		$	70,155		$	68,173

Capital expenditures – net:
Office furniture	$	14,128		$	13,919		$	59,101		$	47,408
Hearth products		2,180			1,444			10,530			8,736
General corporate		598			1,804			1,865			2,770
	$	16,906		$	17,167		$	71,496		$	58,914

							As of			As of
							Jan. 3, 2009			Dec. 29, 2007
Identifiable assets:
Office furniture							$	730,348		$	724,447
Hearth products								326,168			356,273
General corporate								113,033			126,256
							$	1,169,549		$	1,206,976
(1) Includes minority interest

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