Acquisitions and Divestitures

12 Months Ended

Dec. 30, 2023

Business Combination and Asset Acquisition [Abstract]

Acquisition - Kimball International

On June 1, 2023, the Corporation completed its acquisition of 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 closing of the transaction, Kimball International shareholders owned approximately 10 percent of the combined company. The Corporation incurred acquisition-related expenses of $41.2 million in the year ended December 30, 2023, that are included in "Selling and administrative expenses" in the Consolidated Statements of Comprehensive Income. Of these expenses, $28.6 million were incurred as corporate costs and $12.5 million were recorded in the workplace furnishings segment. Additionally, acquisition-related financing costs of $2.8 million and $0.2 million were recorded to the 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 reportable segment. The excess of purchase consideration over the fair value of net assets acquired was recorded as goodwill, which is not tax-deductible. Goodwill is primarily attributed 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 as reported on the New York Stock Exchange on May 31, 2023, the day preceding the transaction’s close.

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 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 represent non-cash consideration and thus are not included in the acquisition spending presented in the Consolidated Statements of Cash Flows.

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


	Fair Value
Assets
Cash and cash equivalents	$	10.5
Short-term investments	4.2
Receivables	47.4
Inventories, net	75.0
Prepaid expenses and other current assets	12.0
Assets held for sale	12.7
Property, plant, and equipment	200.5
Right-of-use operating leases	22.7
Goodwill	162.7
Intangible assets	110.1
Other assets	7.1
Total Assets	$	665.0

Liabilities
Accounts payable and accrued expenses	$	93.2
Current lease obligations – operating	3.9
Liabilities held for sale	10.0
Long-term lease obligations – operating	19.0
Other long-term liabilities	10.0
Deferred income taxes	25.3
Total Liabilities	$	161.3

Net Assets and Liabilities	$	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

5.6

Customer lists and other

12 years

47.2

Acquired technology

18 years

16.5

Trademarks and trade names – Definite-lived

17 years

3.8

Trademarks and trade names – Indefinite-lived

Indefinite-lived

37.0

Total intangible assets

110.1

The valuation analysis requires the use of complex management estimates and assumptions such as customer attrition rates, trade name and technology royalty rates, future cash flows, discount rates, property appraisals, and long-term growth rates. At this time, assets and liabilities are recorded based on preliminary data and assumptions as the Corporation is in the process of reviewing information related to 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 no later than one year from the date of the acquisition. During the period since the acquisition date, revisions were made to the purchase price allocation resulting in a net decrease to goodwill of $24.6 million, primarily due to provisional valuation adjustments to inventory, intangible assets, personal property, deferred income taxes, and right-of-use operating leases.

The following table summarizes the results of Kimball International operations since the acquisition date that are included in the Corporation’s Consolidated Statements of Comprehensive Income for the year ended December 30, 2023. These amounts include the results of Poppin Furniture, Inc., a unit of Kimball International, for the respective period during which it was owned by the Corporation. Poppin was determined not to require discontinued operations presentation as this entity is not material to the consolidated results of the periods presented.


	2023
Net sales	$	361.4
Net loss	$	(3.0)

Pro Forma Results of Operations - Kimball International Acquisition (Unaudited)

The following table provides pro forma results of operations for the fiscal years ended December 30, 2023 and December 31, 2022, as if Kimball International had been acquired 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 financial statement presentation; estimated depreciation and amortization expense on acquired tangible and intangible assets; estimated share based compensation expense for Kimball International awards converted to HNI 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.


	2023		2022
Net sales	$	2,698.1	$	3,058.0
Net income	$	82.8	$	52.1

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 aligned 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 included $7.6 million of goodwill and 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.

Acquisition - OGC

In December 2021, the Corporation acquired The Outdoor GreatRoom Company ("OGC"), a leading manufacturer and supplier of premium outdoor fire tables and fire pits, for approximately $15 million. This transaction, which positioned the Corporation to grow and develop a leading position in the fast-growing outdoor living market, was structured as a stock acquisition and was consummated entirely in cash.

Acquisition - Trinity

In October 2021, the Corporation acquired Trinity Hearth & Home ("Trinity"), an installing fireplace distributor in the Dallas/Fort Worth area, for approximately $31 million. This transaction, which aligns with the Corporation’s vertical integration strategy in the residential building products market and provides a hub to better serve customers in the rapidly growing Southwest region, was structured as an asset acquisition and was consummated entirely in cash.

The assets and liabilities of Trinity, OGC, and Dickerson, including the tax-deductible goodwill resulting from these acquisitions, are included in the Corporation’s residential building products segment.

All acquisitions discussed above 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 - Poppin

On September 12, 2023, the Corporation closed on the sale of substantially all of the assets of Poppin for $2.7 million in cash, net of selling costs; the transaction was structured as an asset sale. Poppin had been acquired as part of the Kimball International transaction in June 2023 and was a component of the workplace furnishings segment. Balances divested include $9.7 million of inventory, $3.1 million of various other assets, $7.0 million of accounts payable and accrued expenses, and $3.0 million of operating lease obligations.

Divestiture - Lamex

In July 2022, the Corporation closed on the sale of its China- and Hong Kong-based Lamex office furniture business, 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, for 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 prior year 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:


	As of July 20, 2022
Assets:
Cash and cash equivalents	$	5.5
Receivables	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

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