r8kexh99.htm

Kurt A. Tjaden, Vice President and Chief Financial Officer (563) 272-7400

HNI CORPORATION ANNOUNCES RESULTS FOR THIRD QUARTER FISCAL 2009

MUSCATINE, Iowa (October 21, 2009) – HNI Corporation (NYSE: HNI) today announced sales of $454.0 million and net income of $17.6 million or $0.39 per diluted share for the third quarter ending October 3, 2009. Included in third quarter results are charges related to the shutdown of three office furniture manufacturing plants and restructuring of hearth operations. Net income per diluted share for the quarter was $0.47 on a non-GAAP basis excluding restructuring and transition costs.

Third Quarter Summary Comments

"Our strong third quarter profitability demonstrates the power of our reset cost structure. Our members have done an outstanding job of attacking costs and increasing efficiency throughout the corporation. We increased profitability and generated almost twice as much operating cash flow during the quarter despite the challenging market and revenue down almost 32 percent," said Stan Askren, HNI Corporation Chairman, President and Chief Executive Officer.

Third Quarter

Dollars in millions	Three Months Ended						Percent
except per share data	10/03/2009			9/27/2008			Change

Net Sales	$	454.0		$	663.1			-31.5	%
Gross Margin	$	166.6		$	224.7			-25.9	%
Gross Margin %		36.7	%		33.9	%
SG&A	$	134.3		$	191.1			-29.7	%
SG&A %		29.6	%		28.8	%
Operating Income	$	32.3		$	33.6			-4.1	%
Operating Income %		7.1	%		5.1	%
Net Income attributable to Parent Company	$	17.6		$	19.5			-9.6	%

Earnings per share attributable to Parent Company – Diluted	$	0.39		$	0.44

Third Quarter Results

Consolidated net sales decreased $209.2 million or 31.5 percent from the prior year quarter to $454.0 million.

Gross margins were 2.8 percentage points higher due to increased price realization, lower material costs and cost reduction initiatives partially offset by lower volume.

Total selling and administrative expenses, including restructuring charges, decreased $56.7 million or 29.7% due to cost control actions, lower volume related costs and improved distribution efficiencies.

The Corporation's third quarter results included $6.0 million of restructuring and transition costs of which $1.6 million were included in cost of sales. These included $4.1 million of costs associated with shutdown and consolidation of production of three office furniture manufacturing locations and $1.8 million related to restructuring of hearth operations net of a non-operating gain. Included in third quarter 2008 results were $1.5 million of restructuring charges.

The Corporation estimates additional charges related to various restructuring initiatives will impact pre-tax earnings by an estimated $4.2 million over the remainder of 2009.

Third Quarter – Non-GAAP Financial Measures (Reconciled with Most Comparable GAAP Financial Measures)
Dollars in millions except per share data	Three Months Ended 10/03/2009									Three Months Ended 9/27/2008
	Gross Profit			Operating Income			EPS			Gross Profit			Operating Income			EPS
As Reported (GAAP)	$	166.6		$	32.3		$	0.39		$	224.7		$	33.6		$	0.44
% of Net Sales		36.7	%		7.1	%					33.9	%		5.1	%

Restructuring and impairment	$	1.4		$	5.8		$	0.08			-		$	1.5		$	0.02
Transition costs	$	0.2		$	0.5		$	0.01			-
Non-operating gains		-		$	(0.3	)	$	(0.01	)

Results (non-GAAP)	$	168.2		$	38.2		$	0.47		$	224.7		$	35.1		$	0.46
% of Net Sales		37.1	%		8.4	%					33.9	%		5.3	%

Year-to-Date Results

Consolidated net sales for the first nine months of 2009 decreased $0.6 billion, or 32.5 percent, to $1.2 billion compared to $1.8 billion in the prior year period. Acquisitions added $10 million or 0.6 percentage points of sales. Gross margins increased to 33.9 percent compared to 33.6 percent last year. Operating income was $16.5 million compared to $69.1 million in the prior year period. Earnings per share decreased to $0.10 per diluted share compared to $0.83 per diluted share last year.

Cash flow from operations for the first nine months of 2009 was $135.9 million compared to $104.6 million in the same period last year. The increase was driven by strong working capital management offset partially by lower earnings. Capital expenditures were $10.9 million in 2009 compared to $54.6 million in 2008. The Corporation reduced total debt $119 million during the first nine months of 2009 using cash flow from operations and proceeds from the sale of long-term investments.

Office Furniture

	Three Months Ended
Dollars in millions	10/03/2009			9/27/2008			Percent Change
Sales	$	379.9		$	560.7			-32.2	%
Operating Profit	$	38.1		$	39.5			-3.6	%
Operating Profit %		10.0	%		7.0	%

Office Furniture Third Quarter – Non-GAAP Financial Measures (Reconciled with Most Comparable GAAP Financial Measures)
	Three Months Ended						Percent Change
Dollars in millions	10/03/2009			9/27/2008			Percent Change
Operating Profit as Reported (GAAP)	$	38.1		$	39.5			-3.6	%
% of Net Sales		10.0	%		7.0	%

Restructuring and impairment	$	3.8		$	1.1
Transition costs	$	0.4			-

Operating profit (non-GAAP)	$	42.2		$	40.6			4.1	%
% of Net Sales		11.1	%		7.2	%

·	Third quarter sales for the office furniture segment decreased $180.7 million. The decrease was driven by substantial weakness in both the supplies-driven and contract channels.
·	Operating profit decreased $1.4 million. Operating profit was negatively impacted by lower volume and increased restructuring and transition costs partially offset by price realization, lower input costs and cost control initiatives.

Hearth Products

	Three Months Ended
Dollars in millions	10/03/2009			9/27/2008			Percent Change
Sales	$	74.0		$	102.5			-27.7	%
Operating Profit	$	1.8		$	3.7			-51.1	%
Operating Profit %		2.5	%		3.6	%

Hearth Products Third Quarter – Non-GAAP Financial Measures (Reconciled with Most Comparable GAAP Financial Measures)
	Three Months Ended						Percent Change
Dollars in millions	10/03/2009			9/27/2008			Percent Change
Operating Profit as Reported (GAAP)	$	1.8		$	3.7			-51.1	%
% of Net Sales		2.5	%		3.6	%

Restructuring and impairment	$	2.1		$	0.4
Transition costs	$	0.1			-
Non-operating gains	$	(0.3	)		-

Operating profit (non-GAAP)	$	3.6		$	4.1			-12.3	%
% of Net Sales		4.9	%		4.0	%

·	Third quarter sales for the hearth products segment decreased $28.4 million driven by significant declines in both the new construction and remodel-retrofit channels.
·	Third quarter operating profit decreased $1.9 million. Operating profit was negatively impacted due to lower volume and higher restructuring expenses partially offset by cost reduction initiatives, lower incentive based compensation costs and a non-operating gain related to the sale of a building.

Outlook

"We continue to face uncertain and challenging market conditions. Our third quarter results benefited from relatively strong seasonal office furniture demand, primarily driven by government and education customers. We expect seasonal demand to dissipate in the fourth quarter, resulting in revenue below third quarter levels. Seasonality aside, we believe demand has generally stabilized. We remain excited about the future given our ongoing cost reset actions and aggressive efforts to improve our competitive position," 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 Thursday, October 22, 2009 at 10:00 a.m. (Central) to discuss third quarter results. To participate, call the conference call line at 1-800-230-1951. A replay of the conference call will be available until Thursday, October 29, 2009, 11:59 p.m. (Central). To access this replay, dial 1-800-475-6701 – Access Code: 117729. A link to the simultaneous webcast 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, operating income, operating profit and net income per diluted share (i.e., EPS), excluding restructuring and impairment charges, non-operating gains and transition costs. 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 Stove™ 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 recent 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, epidemic, acts of God or other Force Majeure events; competitive pricing pressure from foreign and domestic competitors; higher than expected costs and lower than expected supplies of materials (including steel and petroleum based materials); higher than expected costs for energy and fuel; changes in the mix of products sold and of customers purchasing; relationships with distribution channel partners, including the financial viability of distributors and dealers; restrictions imposed by the terms of the Corporation's revolving credit facility, term loan 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

Unaudited Condensed Consolidated Statement of Operations

	Three Months Ended				Nine Months Ended
(Dollars in thousands, except per share data)	Oct. 3, 2009		Sep.27, 2008		Oct. 3, 2009		Sep. 27, 2008
Net sales	$	453,956	$	663,141	$	1,242,612	$	1,839,638
Cost of products sold		287,352		438,423		821,792		1,221,439
Gross profit		166,604		224,718		420,820		618,199
Selling and administrative expenses		129,897		189,577		390,920		544,805
Restructuring and impairment charges		4,440		1,497		13,403		4,344
Operating income		32,267		33,644		16,497		69,050
Interest income		51		208		311		846
Interest expense		3,167		4,245		9,414		12,481
Earnings before income taxes		29,151		29,607		7,394		57,415
Income taxes		11,441		10,107		2,944		20,382
Net income		17,710		19,500		4,450		37,033
Less: Net income attributable to the noncontrolling interest		96		11		119		98
Net income attributable to Parent Company	$	17,614	$	19,489	$	4,331	$	36,935
Net income attributable to Parent Company common shareholders - basic	$	0.39	$	0.44	$	0.10	$	0.83
Average number of common shares outstanding – basic		44,994,399		44,213,017		44,833,711		44,327,939
Net income attributable to Parent Company common shareholders - diluted	$	0.39	$	0.44	$	0.10	$	0.83
Average number of common shares outstanding - diluted		45,598,155		44,340,220		45,272,912		44,453,445

Unaudited Condensed Consolidated Balance Sheet

Assets					Liabilities and Shareholders' Equity
	As of					As of
	Oct. 3,		Jan. 3,			Oct. 3,		Jan. 3,
(Dollars in thousands)	2009		2009			2009		2009
Cash and cash equivalents	$	45,968	$	39,538	Accounts payable and
Short-term investments		8,151		9,750	accrued expenses	$	300,301	$	313,431
Receivables		187,916		238,327	Note payable and current
Inventories		67,011		84,290	maturities of long-term debt		2,374		54,494
Deferred income taxes		20,022		16,313	Current maturities of other
Prepaid expenses and					long-term obligations		478		5,700
other current assets		19,128		29,623
Current assets		348,196		417,841	Current liabilities		303,153		373,625

					Long-term debt		200,000		267,300
					Capital lease obligations		1		43
Property and equipment - net		272,190		315,606	Other long-term liabilities		50,557		50,399
Goodwill		267,865		268,392	Deferred income taxes		33,565		25,271
Other assets		136,133		163,790
					Parent Company shareholders' equity		436,770		448,833
					Noncontrolling interest		338		158
					Shareholders' equity		437,108		448,991
					Total liabilities and
Total assets	$	1,024,384	$	1,165,629	shareholders' equity	$	1,024,384	$	1,165,629

Unaudited Condensed Consolidated Statement of Cash Flows

	Nine Months Ended
(Dollars in thousands)	Oct. 3, 2009			Sep. 27, 2008
Net cash flows from (to) operating activities	$	135,921		$	104,598
Net cash flows from (to) investing activities:
Capital expenditures		(10,874	)		(54,590	)
Acquisition spending		(500	)		(75,479	)
Other		28,931			2,986
Net cash flows from (to) financing activities		(147,048	)		15,832
Net increase (decrease) in cash and cash equivalents		6,430			(6,653	)
Cash and cash equivalents at beginning of period		39,538			33,881
Cash and cash equivalents at end of period	$	45,968		$	27,228

Unaudited Business Segment Data

	Three Months Ended						Nine Months Ended
(Dollars in thousands)	Oct. 3, 2009			Sep. 27, 2008			Oct. 3, 2009			Sep. 27, 2008
Net sales:
Office furniture	$	379,913		$	560,661		$	1,041,747		$	1,541,207
Hearth products		74,043			102,480			200,865			298,431
	$	453,956		$	663,141		$	1,242,612		$	1,839,638

Operating profit (loss):
Office furniture (1)
Operations before restructuring and impairment charges	$	41,048		$	40,583		$	64,001		$	92,327
Restructuring and impairment charges		(2,954	)		(1,072	)		(8,451	)		(3,943	)
Office furniture - net		38,094			39,511			55,550			88,384
Hearth products
Operations before restructuring and impairment charges		3,305			4,148			(13,731	)		2,843
Restructuring and impairment charges		(1,486	)		(425	)		(4,952	)		(401	)
Hearth products - net		1,819			3,723			(18,683	)		2,442
Total operating profit		39,913			43,234			36,867			90,826
Unallocated corporate expense		(10,908	)		(13,644	)		(29,653	)		(33,562	)
Income before income taxes	$	29,005		$	29,590		$	7,214		$	57,264

Depreciation and amortization expense:
Office furniture	$	12,958		$	12,936		$	39,857		$	37,583
Hearth products		4,237			3,785			13,117			11,479
General corporate		738			1,121			2,741			3,345
	$	17,933		$	17,842		$	55,715		$	52,407

Capital expenditures – net:
Office furniture	$	2,498		$	15,125		$	8,227		$	44,973
Hearth products		537			3,163			2,237			8,350
General corporate		86			363			410			1,267
	$	3,121		$	18,651		$	10,874		$	54,590
							As of Oct. 3, 2009			As of Sep. 27, 2008
Identifiable assets:
Office furniture							$	631,369		$	828,095
Hearth products								309,219			340,467
General corporate								83,796			107,638
							$	1,024,384		$	1,276,200
(1) Includes noncontrolling interest