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

~~UNITED STATES~~

~~SECURITIES AND EXCHANGE COMMISSION~~

~~Washington, D.C. 20549~~

FORM

10-Q

☒

~~FORM~~

~~10-Q~~

☒

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

For the quarterly period ended

September ~~28, 2019~~26, 2020

☐

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

Commission File Number:

~~1-14225~~

1-14225

HNI Corporation

Iowa

42-0617510

(State of Incorporation)

(I.R.S. Employer No.)

600 East Second Street

P.O. Box 1109

Muscatine

~~Iowa~~

~~52761-0071~~,

Iowa

52761-0071

(

563

)

272-7400

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~~

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 practical date.

Common Stock, $1 Par Value

Outstanding as of

September ~~28, 2019~~26, 2020

~~42,823,501~~42,714,650

HNI Corporation and Subsidiaries

Quarterly Report on Form 10-Q

~~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 and Nine Months Ended September 26 , 2020 and September 28 , 2019 ~~and September 29, 2018~~

Condensed Consolidated Balance Sheets - September 26 , 2020 and December 28, 2019 ~~and December 29, 2018~~

Condensed Consolidated Statements of Equity - Three ~~Months~~ and Nine Months Ended September 26 , 2020 and September 28 , 2019 ~~and September 29, 2018~~

Condensed Consolidated Statements of Cash Flows - Nine Months Ended September 26 , 2020 and September 28 , 2019 ~~and September 29, 2018~~

Notes to Condensed Consolidated Financial Statements

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

2622

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

3328

Item 4.

Controls and Procedures

3329

PART II. OTHER INFORMATION

Item 1.

Item 1A.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

3430

Item 3.

Defaults Upon Senior Securities - None

Item 4.

Mine Safety Disclosures - Not Applicable

Item 5.

Other Information - None

Item 6.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

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

Three Months Ended Nine Months Ended
September 28,
2019 September 29,
2018 September 28,
2019 September 29,
2018

Net sales $ 625,386
$ 611,120
$ 1,630,868
$ 1,659,803
Cost of sales 387,715
377,789
1,030,993
1,048,683
Gross profit 237,671
233,331
599,875
611,120
Selling and administrative expenses 176,731
179,577
511,080
524,445
Restructuring and impairment charges 284
128
1,214
2,303
Operating income 60,656
53,626
87,581
84,372
Interest expense, net 2,205
2,522
6,795
7,375
Income before income taxes 58,451
51,104
80,786
76,997
Income taxes 12,375
11,197
17,878
16,033
Net income 46,076
39,907
62,908
60,964
Less: Net loss attributable to non-controlling interest (2 ) 0
(2 ) (50 )
Net income attributable to HNI Corporation $ 46,078
$ 39,907
$ 62,910
$ 61,014

Average number of common shares outstanding – basic 42,899
43,823
43,217
43,616
Net income attributable to HNI Corporation per common share – basic $ 1.07
$ 0.91
$ 1.46
$ 1.40
Average number of common shares outstanding – diluted 43,186
44,679
43,620
44,349
Net income attributable to HNI Corporation per common share – diluted $ 1.07
$ 0.89
$ 1.44
$ 1.38

Foreign currency translation adjustments $ (1,035 ) $ (817 ) $ (406 ) $ (1,944 )
Change in unrealized gains (losses) on marketable securities, net of tax 36
(6 ) 252
(99 )
Change in pension and post-retirement liability, net of tax —
—
(1,185 ) —
Change in derivative financial instruments, net of tax (477 ) 106
(2,112 ) 1,459
Other comprehensive loss, net of tax (1,476 ) (717 ) (3,451 ) (584 )
Comprehensive income 44,600
39,190
59,457
60,380
Less: Comprehensive loss attributable to non-controlling interest (2 ) 0
(2 ) (50 )
Comprehensive income attributable to HNI Corporation $ 44,602
$ 39,190
$ 59,459
$ 60,430


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

	Three Months Ended						Nine Months Ended
	September 26, 2020		September 28, 2019		September 26, 2020		September 28, 2019

Net sales	$	507,063	$	625,386	$	1,393,224	$	1,630,868
Cost of sales	321,516		387,715		880,754		1,030,993
Gross profit	185,547		237,671		512,470		599,875
Selling and administrative expenses	146,785		176,731		449,933		511,080

Impairment and restructuring charges	0		284		32,661		1,214
Operating income	38,762		60,656		29,876		87,581
Interest expense, net	1,517		2,205		5,271		6,795
Income before income taxes	37,245		58,451		24,605		80,786
Income taxes	6,558		12,375		5,259		17,878
Net income	30,687		46,076		19,346		62,908
Less: Net income (loss) attributable to non-controlling interest	(1)		(2)		(3)		(2)
Net income attributable to HNI Corporation	$	30,688	$	46,078	$	19,349	$	62,910

Average number of common shares outstanding – basic	42,684		42,899		42,651		43,217
Net income attributable to HNI Corporation per common share – basic	$	0.72	$	1.07	$	0.45	$	1.46
Average number of common shares outstanding – diluted	43,010		43,186		42,905		43,620
Net income attributable to HNI Corporation per common share – diluted	$	0.71	$	1.07	$	0.45	$	1.44


Foreign currency translation adjustments	$	923	$	(1,035)	$	368	$	(406)
Change in unrealized gains (losses) on marketable securities, net of tax	(33)		36		269		252
Change in pension and post-retirement liability, net of tax	0		0		0		(1,185)
Change in derivative financial instruments, net of tax	106		(477)		(2,393)		(2,112)
Other comprehensive income (loss), net of tax	996		(1,476)		(1,756)		(3,451)
Comprehensive income	31,683		44,600		17,590		59,457
Less: Comprehensive income (loss) attributable to non-controlling interest	(1)		(2)		(3)		(2)
Comprehensive income attributable to HNI Corporation	$	31,684	$	44,602	$	17,593	$	59,459

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

HNI Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)

September 28,
2019 December 29,
2018
Assets
Current Assets:
Cash and cash equivalents $ 53,013
$ 76,819
Short-term investments 848
1,327
Receivables 271,960
255,207
Inventories 181,922
157,178
Prepaid expenses and other current assets 36,824
41,352
Total Current Assets 544,567
531,883

Property, Plant, and Equipment:
Land and land improvements 29,306
28,377
Buildings 292,902
290,263
Machinery and equipment 574,130
565,884
Construction in progress 22,046
28,443
918,384
912,967
Less accumulated depreciation 538,303
528,034
Net Property, Plant, and Equipment 380,081
384,933

Right-of-use Operating / Finance Leases 74,244
—

Goodwill and Other Intangible Assets 449,288
463,290

Deferred Income Taxes 286
1,569

Other Assets 22,010
20,169

Total Assets $ 1,470,476
$ 1,401,844


HNI Corporation and Subsidiaries Condensed Consolidated Balance Sheets (In thousands)
(Unaudited)

	September 26, 2020		December 28, 2019
Assets
Current Assets:
Cash and cash equivalents	$	109,385	$	52,073
Short-term investments	1,495		1,096
Receivables	209,921		278,124
Allowance for doubtful accounts	(5,991)		(3,559)
Inventories	144,135		163,465

Prepaid expenses and other current assets	41,490		37,635
Total Current Assets	500,435		528,834

Property, Plant, and Equipment:
Land and land improvements	29,782		29,394
Buildings	295,998		295,517
Machinery and equipment	577,442		581,225
Construction in progress	12,142		20,881
	915,364		927,017
Less accumulated depreciation	551,031		545,510
Net Property, Plant, and Equipment	364,333		381,507

Right-of-use Finance Leases	2,193		2,129

Right-of-use Operating Leases	73,896		72,883

Goodwill and Other Intangible Assets	412,287		445,709

Other Assets	21,581		21,450

Total Assets	$	1,374,725	$	1,452,512

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

HNI Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands, except par value)
(Unaudited)

September 28,
2019 December 29,
2018
Liabilities and Equity
Current Liabilities:
Accounts payable and accrued expenses $ 435,103
$ 428,865
Current maturities of long-term debt 1,440
679
Current maturities of other long-term obligations 1,876
4,764
Current lease obligations - operating / finance 21,007
—
Total Current Liabilities 459,426
434,308

Long-Term Debt 239,418
249,355

Long-Term Lease Obligations - Operating / Finance 61,143
—

Other Long-Term Liabilities 64,356
72,767

Deferred Income Taxes 85,788
82,155

Equity:

HNI Corporation shareholders' equity:

Capital Stock:

Preferred stock - $1 par value, authorized 2,000 shares, no shares outstanding —
—

Common stock - $1 par value, authorized 200,000 shares, outstanding:
September 28, 2019 – 42,824 shares; December 29, 2018 – 43,582 shares 42,824
43,582

Additional paid-in capital 18,534
18,041
Retained earnings 505,714
504,909
Accumulated other comprehensive income (loss) (7,050 ) (3,599 )
Total HNI Corporation shareholders' equity 560,022
562,933

Non-controlling interest 323
326

Total Equity 560,345
563,259

Total Liabilities and Equity $ 1,470,476
$ 1,401,844


HNI Corporation and Subsidiaries Condensed Consolidated Balance Sheets (In thousands, except par value)
(Unaudited)

	September 26, 2020		December 28, 2019
Liabilities and Equity
Current Liabilities:
Accounts payable and accrued expenses	$	390,535	$	453,202
Current maturities of long-term debt	0		790
Current maturities of other long-term obligations	2,890		1,931
Current lease obligations - finance	691		564
Current lease obligations - operating	23,124		22,218
Total Current Liabilities	417,240		478,705

Long-Term Debt	174,502		174,439



Long-Term Lease Obligations - Finance	1,522		1,581

Long-Term Lease Obligations - Operating	57,948		58,233

Other Long-Term Liabilities	67,187		67,990

Deferred Income Taxes	82,736		87,196

Equity:
HNI Corporation shareholders' equity:
Capital Stock:
Preferred stock - $1 par value, authorized 2,000 shares, 0 shares outstanding	0		0
Common stock - $1 par value, authorized 200,000 shares, outstanding:
September 26, 2020 – 42,715 shares; December 28, 2019 – 42,595 shares	42,715		42,595

Additional paid-in capital	31,865		19,799
Retained earnings	508,518		529,723
Accumulated other comprehensive income (loss)	(9,829)		(8,073)
Total HNI Corporation shareholders' equity	573,269		584,044

Non-controlling interest	321		324

Total Equity	573,590		584,368

Total Liabilities and Equity	$	1,374,725	$	1,452,512

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


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

	Three Months Ended - September 26, 2020
	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Non-controlling Interest		Total Shareholders’ Equity
Balance, June 27, 2020	$	42,675	$	29,988	$	490,909	$	(10,825)	$	322	$	553,069
Comprehensive income:
Net income (loss)	—		—		30,688		—		(1)		30,687
Other comprehensive income (loss), net of tax	—		—		—		996		—		996



Dividends payable	—		—		(58)		—		—		(58)
Cash dividends; $0.305 per share	—		—		(13,021)		—		—		(13,021)
Common shares – treasury:

Shares issued under Members' Stock Purchase Plan and stock awards, net of tax	40		1,877		—		—		—		1,917
Balance, September 26, 2020	$	42,715	$	31,865	$	508,518	$	(9,829)	$	321	$	573,590

	Nine Months Ended - September 26, 2020
	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Non-controlling Interest		Total Shareholders’ Equity
Balance, December 28, 2019	$	42,595	$	19,799	$	529,723	$	(8,073)	$	324	$	584,368
Comprehensive income:
Net income (loss)	—		—		19,349		—		(3)		19,346
Other comprehensive income (loss), net of tax	—		—		—		(1,756)		—		(1,756)
Impact of new accounting standard related to credit losses	—		—		(131)				—		(131)


Dividends payable	—		—		(175)		—		—		(175)
Cash dividends; $0.915 per share	—		—		(39,060)		—		—		(39,060)
Common shares – treasury:
Shares purchased	(214)		(4,988)		(1,188)		—		—		(6,390)
Shares issued under Members' Stock Purchase Plan and stock awards, net of tax	334		17,054		—		—		—		17,388
Balance, September 26, 2020	$	42,715	$	31,865	$	508,518	$	(9,829)	$	321	$	573,590

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

Three Months Ended - September 28, 2019
Common Stock
Additional Paid-in Capital
Retained Earnings
Accumulated Other Comprehensive Income (Loss)
Non-controlling Interest
Total Shareholders’ Equity
Balance, June 29, 2019 $ 42,875
$ 17,364
$ 474,519
$ (5,574 ) $ 325
$ 529,509
Comprehensive income:
Net income (loss) —
—
46,078
—
(2 ) 46,076
Other comprehensive income (loss), net of tax —
—
—
(1,476 ) —
(1,476 )
Cash dividends; $0.305 per share —
—
(13,088 ) —
—
(13,088 )
Common shares – treasury:
Shares purchased (221 ) (5,175 ) (1,795 ) —
—
(7,191 )
Shares issued under Members' Stock Purchase Plan and stock awards, net of tax 170
6,345
—
—
—
6,515
Balance, September 28, 2019 $ 42,824
$ 18,534
$ 505,714
$ (7,050 ) $ 323
$ 560,345

Nine Months Ended - September 28, 2019
Common Stock
Additional Paid-in Capital
Retained Earnings
Accumulated Other Comprehensive Income (Loss)
Non-controlling Interest
Total Shareholders’ Equity
Balance, December 29, 2018 $ 43,582
$ 18,041
$ 504,909
$ (3,599 ) $ 326
$ 563,259
Comprehensive income:
Net income (loss) —
—
62,910
—
(2 ) 62,908
Other comprehensive income (loss), net of tax —
—
—
(2,712 ) —
(2,712 )
Reclassification of Stranded Tax Effects (ASU 2018-02) —
—
739
(739 ) —
—
Impact of Implementation of Lease Guidance —
—
2,999
—
—
2,999
Cash dividends; $0.905 per share —
—
(39,164 ) —
—
(39,164 )
Common shares – treasury:
Shares purchased (1,797 ) (36,401 ) (26,679 ) —
—
(64,877 )
Shares issued under Members' Stock Purchase Plan and stock awards, net of tax 1,039
36,893
—
—
—
37,932
Balance, September 28, 2019 $ 42,824
$ 18,534
$ 505,714
$ (7,050 ) $ 323
$ 560,345

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

Three Months Ended - September 29, 2018
Common Stock
Additional Paid-in Capital
Retained Earnings
Accumulated Other Comprehensive Income (Loss)
Non-controlling Interest
Total Shareholders’ Equity
Balance, June 30, 2018 $ 43,736
$ 26,077
$ 458,458
$ (3,477 ) $ 500
$ 525,294
Comprehensive income:
Net income (loss) —
—
39,907
—
0
39,907
Other comprehensive income (loss), net of tax —
—
—
(717 ) —
(717 )
Cash dividends; $0.295 per share —
—
(12,933 ) —
—
(12,933 )
Common shares – treasury:
Shares purchased (163 ) (6,758 ) —
—
—
(6,921 )
Shares issued under Members' Stock Purchase Plan and stock awards, net of tax 247
8,198
—
—
—
8,445
Balance, September 29, 2018 $ 43,820
$ 27,517
$ 485,432
$ (4,195 ) $ 500
$ 553,074

Nine Months Ended - September 29, 2018
Common Stock
Additional Paid-in Capital
Retained Earnings
Accumulated Other Comprehensive Income (Loss)
Non-controlling Interest
Total Shareholders’ Equity
Balance, December 30, 2017 $ 43,354
$ 7,029
$ 467,296
$ (3,611 ) $ 509
$ 514,577
Comprehensive income:
Net income (loss) —
—
61,014
—
(50 ) 60,964
Other comprehensive income (loss), net of tax —
—
—
(584 ) —
(584 )
Change in ownership of non-controlling interest —
—
(41 ) —
41
—
Cash dividends; $0.875 per share —
—
(38,201 ) —
—
(38,201 )
Common shares – treasury:
Shares purchased (369 ) (9,879 ) (4,636 ) —
—
(14,884 )
Shares issued under Members' Stock Purchase Plan and stock awards, net of tax 835
30,367
—
—
—
31,202
Balance, September 29, 2018 $ 43,820
$ 27,517
$ 485,432
$ (4,195 ) $ 500
$ 553,074






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

	Three Months Ended - September 28, 2019
	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Non-controlling Interest		Total Shareholders’ Equity
Balance, June 29, 2019	$	42,875	$	17,364	$	474,519	$	(5,574)	$	325	$	529,509
Comprehensive income:
Net income (loss)	—		—		46,078		—		(2)		46,076
Other comprehensive income (loss), net of tax	—		—		—		(1,476)		—		(1,476)




Cash dividends; $0.305 per share	—		—		(13,088)		—		—		(13,088)
Common shares – treasury:
Shares purchased	(221)		(5,175)		(1,795)		—		—		(7,191)
Shares issued under Members' Stock Purchase Plan and stock awards, net of tax	170		6,345		—		—		—		6,515
Balance, September 28, 2019	$	42,824	$	18,534	$	505,714	$	(7,050)	$	323	$	560,345

	Nine Months Ended - September 28, 2019
	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Non-controlling Interest		Total Shareholders’ Equity
Balance, December 29, 2018	$	43,582	$	18,041	$	504,909	$	(3,599)	$	326	$	563,259
Comprehensive income:
Net income (loss)	—		—		62,910		—		(2)		62,908
Other comprehensive income (loss), net of tax	—		—		—		(2,712)		—		(2,712)
Reclassification of Stranded Tax Effects (ASU 2018-02)	—		—		739		(739)		—		0
Impact of Implementation of Lease Guidance	—		—		2,999		—		—		2,999


Cash dividends; $0.905 per share	—		—		(39,164)		—		—		(39,164)
Common shares – treasury:
Shares purchased	(1,797)		(36,401)		(26,679)		—		—		(64,877)
Shares issued under Members' Stock Purchase Plan and stock awards, net of tax	1,039		36,893		—		—		—		37,932
Balance, September 28, 2019	$	42,824	$	18,534	$	505,714	$	(7,050)	$	323	$	560,345

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

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

Nine Months Ended
September 28,
2019 September 29,
2018
Net Cash Flows From (To) Operating Activities:
Net income $ 62,908
$ 60,964
Non-cash items included in net income:
Depreciation and amortization 57,838
55,887
Other post-retirement and post-employment benefits 1,106
1,325
Stock-based compensation 5,408
6,215
Operating / finance lease interest and amortization 17,252
—
Deferred income taxes 4,798
2,733
Loss on sale and retirement of long-lived assets, net 1,609
1,283
Other – net 2,864
2,314
Net decrease in operating assets and liabilities, net of divestitures (28,359 ) (16,533 )
Increase (decrease) in other liabilities (9,802 ) 849
Net cash flows from (to) operating activities 115,622
115,037

Net Cash Flows From (To) Investing Activities:

Capital expenditures (46,093 ) (39,887 )
Proceeds from sale of property, plant, and equipment 247
22,686
Capitalized software (4,098 ) (7,092 )
Acquisition spending, net of cash acquired —
(2,850 )
Purchase of investments (6,140 ) (2,471 )
Sales or maturities of investments 3,889
2,375
Other – net 2,327
1,135
Net cash flows from (to) investing activities (49,868 ) (26,104 )

Net Cash Flows From (To) Financing Activities:

Payments of long-term debt (125,039 ) (352,795 )
Proceeds from long-term debt 115,775
322,755
Dividends paid (39,164 ) (38,201 )
Purchase of HNI Corporation common stock (65,106 ) (16,043 )
Proceeds from sales of HNI Corporation common stock 22,338
15,896
Other – net 1,636
(155 )
Net cash flows from (to) financing activities (89,560 ) (68,543 )

Net increase (decrease) in cash and cash equivalents (23,806 ) 20,390
Cash and cash equivalents at beginning of period 76,819
23,348
Cash and cash equivalents at end of period $ 53,013
$ 43,738


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

	Nine Months Ended
	September 26, 2020		September 28, 2019
Net Cash Flows From (To) Operating Activities:
Net income	$	19,346	$	62,908
Non-cash items included in net income:
Depreciation and amortization	57,917		57,838
Other post-retirement and post-employment benefits	1,104		1,106
Stock-based compensation	6,746		5,408

Reduction in carrying amount of right-of-use assets	16,965		17,252
Deferred income taxes	(3,730)		4,798
Impairment of goodwill and intangible assets	32,661		0
Other – net	815		4,473
Net increase (decrease) in operating assets and liabilities, net of divestitures	13,316		(28,359)
Increase (decrease) in other liabilities	(1,779)		(9,802)
Net cash flows from (to) operating activities	143,361		115,622

Net Cash Flows From (To) Investing Activities:
Capital expenditures	(24,751)		(46,093)
Proceeds from sale of property, plant, and equipment	81		247
Capitalized software	(7,250)		(4,098)
Acquisition spending, net of cash acquired	(10,857)		0
Purchase of investments	(3,922)		(6,140)
Sales or maturities of investments	3,246		3,889
Other – net	0		2,327
Net cash flows from (to) investing activities	(43,453)		(49,868)

Net Cash Flows From (To) Financing Activities:
Payments of long-term debt	(82,828)		(125,039)
Proceeds from long-term debt	82,119		115,775
Dividends paid	(39,060)		(39,164)
Purchase of HNI Corporation common stock	(6,764)		(65,106)
Proceeds from sales of HNI Corporation common stock	2,210		22,338
Other – net	1,727		1,636
Net cash flows from (to) financing activities	(42,596)		(89,560)

Net increase (decrease) in cash and cash equivalents	57,312		(23,806)
Cash and cash equivalents at beginning of period	52,073		76,819
Cash and cash equivalents at end of period	$	109,385	$	53,013

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

HNI Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

September ~~28, 2019~~26, 2020

Note 1. Basis of Presentation

The accompanying unaudited, condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for complete financial statements. The December ~~29, 2018~~28, 2019 consolidated balance sheet included in this Form 10-Q was derived from audited financial statements but does not include all disclosures required by generally accepted accounting principles. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair statement have been included. Operating results for the nine-month period ended September ~~28, 2019~~26, 2020 are not necessarily indicative of the results expected for the fiscal year ending ~~December 28, 2019.~~January 2, 2021. For further information, refer to the consolidated financial statements and accompanying notes included in HNI Corporation's (the "Corporation") Annual Report on Form 10-K for the fiscal year ended December ~~29, 2018.~~28, 2019. Certain reclassifications have been made within the interim financial information to conform to the current presentation.

In the second quarter of 2020, the Corporation rebranded its segments to workplace furnishings (formerly office furniture) and residential building products (formerly hearth products). These changes clarify how and where the Corporation's products are used, and are intended to reduce confusion. These changes did not impact the Corporation's condensed consolidated financial statements or disclosures.

Note 2. Revenue from Contracts with Customers

Disaggregation of Revenue

Revenue from contracts with customers disaggregated by ~~sales channel and by segment~~product category is as follows (in thousands):


	Three Months Ended						Nine Months Ended
	September 26, 2020		September 28, 2019		September 26, 2020		September 28, 2019
Systems and storage	$	207,549	$	297,934	$	578,601	$	737,984
Seating	127,294		163,353		358,005		411,142
Other	18,518		23,468		63,221		98,652
Total workplace furnishings	353,361		484,755		999,827		1,247,778

Residential building products	153,702		140,631		393,397		383,090
Net sales	$	507,063	$	625,386	$	1,393,224	$	1,630,868

Three Months Ended Nine Months Ended
Segment September 28,
2019 September 29,
2018 September 28,
2019 September 29,
2018
Supplies-driven channel Office furniture $ 260,359
$ 265,971
$ 649,380
$ 680,656
Contract channel Office furniture 224,396
205,716
598,398
595,824
Hearth Hearth products 140,631
139,433
383,090
383,323
Net sales $ 625,386
$ 611,120
$ 1,630,868
$ 1,659,803

The majority of revenue presented as "Net sales" in the Condensed Consolidated Statements of Comprehensive Income is the result of contracts with customers. All other sources of revenue are not material to the Corporation's results of operations.

Sales by ~~channel type~~product category are subject to similar economic factors and market ~~conditions regardless of the channel under which the product is sold.~~conditions. See “Note ~~18.~~16. 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 to certain ~~office furniture~~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. For contracts less than one year, the Corporation has elected the practical expedient to recognize incremental costs to obtain a contract as an expense when incurred. The Corporation has contract liabilities consisting of customer deposits and rebate and marketing program liabilities.

Contract assets and contract liabilities were as follows (in thousands):


	September 26, 2020		December 28, 2019
Trade receivables (1)	$	209,921	$	278,124
Contract assets (current) (2)	$	747	$	857
Contract assets (long-term) (3)	$	2,676	$	2,700
Contract liabilities (4)	$	51,492	$	54,972

September 28,
2019 December 29,
2018
Trade receivables (1) $ 275,738
$ 259,075
Other contract assets (current) (2) $ 837
$ 529
Other contract assets (long-term) (3) $ 2,865
$ 2,188
Contract liabilities (4) $ 44,463
$ 44,858

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"

Changes in ~~other~~contract asset and contract liability balances during the nine months ended September 26, 2020 were as follows (in thousands):


	Contract assets increase (decrease)		Contract liabilities (increase) decrease
Contract assets recognized	$	358	$	—
Reclassification of contract assets to contra-revenue	(492)		—

Contract liabilities recognized and recorded to contra-revenue as a result of performance obligations satisfied	—		(88,981)
Contract liabilities paid	—		102,985
Cash received in advance and not recognized as revenue	—		(68,840)
Reclassification of cash received in advance to revenue as a result of performance obligations satisfied	—		58,316

Net change	$	(134)	$	3,480

Changes in contract asset and contract liability balances during the nine months ended September 28, 2019 were as follows (in thousands):


	Contract assets increase (decrease)		Contract liabilities (increase) decrease
Contract assets recognized	$	1,313	$	—
Reclassification of contract assets to contra-revenue	(328)		—

Contract liabilities recognized and recorded to contra-revenue as a result of performance obligations satisfied	—		(110,789)
Contract liabilities paid	—		109,592
Cash received in advance and not recognized as revenue	—		(49,962)
Reclassification of cash received in advance to revenue as a result of performance obligations satisfied	—		51,554

Net change	$	985	$	395

Contract assets increase (decrease) Contract liabilities (increase) decrease
Contract assets recognized $ 1,313
$ —
Reclassification of contract assets to contra revenue (328 ) —
Contract liabilities recognized and recorded to contra revenue as a result of performance obligations satisfied —
(110,789 )
Contract liabilities paid —
109,592
Cash received in advance and not recognized as revenue —
(49,962 )
Reclassification of cash received in advance to revenue as a result of performance obligations satisfied —
51,554
Net change $ 985
$ 395

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 amount of revenue recognized during the three and nine months ended September ~~28, 2019~~26, 2020 that was included in the December ~~29, 2018~~28, 2019 contract liabilities balance was $0.0 million and ~~$8.3~~$8.6 million, respectively.

Performance Obligations

The Corporation recognizes revenue for sales of ~~office furniture~~workplace furnishings and ~~hearth~~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 ~~cancelable~~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 ~~September 28, 2019.~~period end. The backlog is typically fulfilled within a ~~quarter.~~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.

Note 3. ~~Restructuring and Impairment Charges~~Acquisitions

~~Restructuring costs recorded in the Condensed Consolidated Statements of Comprehensive Income are as follows (in thousands):~~

Three Months Ended Nine Months Ended
September 28,
2019 September 29,
2018 September 28,
2019 September 29,
2018
Restructuring and impairment charges $ 284
$ 128
$ 1,214
$ 2,303

~~Restructuring costs~~During the nine months ended September 26, 2020, the Corporation acquired 3 residential building products distribution businesses, in ~~2019 related to a structural realignment in the office furniture segment~~January 2020, March 2020 and June 2020. All transactions were structured as asset acquisitions and were ~~primarily comprised~~consummated entirely in cash. The aggregate purchase price was approximately $12 million, and the preliminary allocation as of ~~severance costs. Restructuring~~September 26, 2020 includes $10.4 million of goodwill, which is tax deductible. The remaining assets and ~~impairment costs in 2018 were primarily incurred as part~~liabilities acquired are not material. The Corporation will finalize the allocation of the ~~previously announced closure of~~purchase price during 2020 based on the ~~hearth manufacturing facility in Paris, Kentucky~~final purchase price and any adjustments required over the ~~office furniture manufacturing facility in Orleans, Indiana.~~remaining measurement period.

The accrued restructuring expenses are expected to be paid in the next twelve months and are reflected in "Accounts payable and accrued expenses" in the Condensed Consolidated Balance Sheets. The following is a summary of changes in restructuring accruals (in thousands):

Severance Costs Facility Exit Costs & Other Total
Restructuring allowance as of December 29, 2018 $ 136
$ 150
$ 286
Restructuring charges 899
315
1,214
Cash payments (640 ) (99 ) (739 )
Restructuring allowance as of September 28, 2019 $ 395
$ 366
$ 761

Note 4. ~~Acquisitions and Divestitures~~

As part of the Corporation's ongoing business strategy, it continues to acquire and divest small office furniture dealerships, for which the impact is not material to the Corporation's financial statements.

~~Note 5.~~ Inventories

The Corporation values its inventory at the lower of cost or net realizable ~~value with approximately 73 percent valued by the last-in, first-out ("LIFO") costing method.~~value. Inventories included in the Condensed Consolidated Balance Sheets consisted of the following (in thousands):


	September 26, 2020			December 28, 2019

Finished products	$	107,792		$	118,633
Materials and work in process	67,037			75,526
Last-in, first-out ("LIFO") allowance	(30,694)			(30,694)
Total inventories	$	144,135		$	163,465


Inventory valued by the LIFO costing method	81		%	65		%

September 28,
2019 December 29,
2018

Finished products $ 138,767
$ 97,398
Materials and work in process 77,269
94,161
LIFO allowance (34,114 ) (34,381 )
Total inventories $ 181,922
$ 157,178

~~Note 6. Leases~~

~~The Corporation implemented ASU No. 2016-02,~~ ~~Leases (Topic 842)~~, at the beginning of fiscal 2019 using the modified-retrospective transition approach. The new standard requires lessees to recognize most leases, including operating leases, on-balance sheet via a right of use ("ROU") asset and lease liability. The Corporation selected a technology tool to assist with the accounting and disclosure requirements of the new standard. All necessary changes required by the new standard, including those to the Corporation's accounting policies, business process, systems, controls, and disclosures, were identified and implemented as of the first quarter 2019.

Implementation of ASU No. 2016-02 increased retained earnings by $3.0 million. This included an increase of $3.3 million driven by the recognition of the remaining deferred gain on a 2018 sale-leaseback directly into retained earnings. An offsetting decrease of $0.3 million was driven by the calculation of beginning ROU assets and lease liabilities. The Corporation recognized $73.8 million in ROU assets and $82.0 million in lease liabilities as a result of the implementation of this standard.

The Corporation leases certain showrooms, office space, manufacturing facilities, distribution centers, retail stores and equipment and determines if an arrangement is a lease at inception. ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Leases with an initial term of twelve months or less are not recorded on the Condensed Consolidated Balance Sheets; expense for these leases is recognized on a straight-line basis over the lease term.

As the rates implicit in its leases cannot be readily determined, the Corporation uses a secured incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The Corporation uses separate discount rates for its U.S. operations and overseas operations.

Certain real estate leases include 1 or more options to renew with renewal terms that can extend the lease term from one to ten years. The exercise of lease renewal options is at the Corporation's sole discretion. Certain real estate leases include an option to terminate the lease term earlier than the specified lease term for a fee. These options are not included as part of the lease term unless they are reasonably certain to be exercised.

Many of the Corporation's real estate lease agreements include periods of rent holidays and payments that escalate over the lease term by specified amounts. While not significant, certain equipment leases have variable lease payments based on machine hours and certain real estate leases have rate changes based on the Consumer Price Index. The Corporation's lease agreements do not contain any material residual value guarantees.

~~The Corporation has lease agreements with lease and non-lease components, which are generally accounted for as a single lease component.~~

~~On occasion, the Corporation rents or subleases certain real estate to third parties. This sublease portfolio consists mainly of operating leases for office furniture showrooms and is not significant.~~

~~Leases included in the Condensed Consolidated Balance Sheet consisted of the following (in thousands):~~

Classification September 28,
2019
Assets
   Right-of-use operating leases $ 72,087
   Right-of-use finance leases 2,157
      Total Right-of-use operating / finance leases $ 74,244

Liabilities
   Current lease obligations - operating $ 20,506
   Current lease obligations - finance 501
      Total Current lease obligations - operating / finance 21,007

   Long-term lease obligations - operating 59,474
   Long-term lease obligations - finance 1,669
      Total Long-term lease obligations - operating / finance 61,143

         Total lease obligations - operating / finance $ 82,150

~~Approximately 85 percent of the value of the leased assets is for real estate. The remaining 15 percent of the value of the leased assets is for equipment.~~

~~Lease costs included in the Condensed Consolidated Statements of Comprehensive Income consisted of the following (in thousands):~~

Three Months Ended Nine Months Ended
Classification September 28,
2019 September 28,
2019
Operating lease costs
Fixed Cost of sales $ 438
$ 1,366
Selling and administrative expenses 5,913
18,212
Short-term / variable Cost of sales 317
635
Selling and administrative expenses 385
807
Finance lease costs
Amortization Cost of sales, selling and administrative, and interest expense 154
307
Less: Sublease income 48
133
Total lease costs $ 7,159
$ 21,194

~~Maturity of lease liabilities as of September 28, 2019 is as follows (in thousands):~~

Operating Leases (a) Finance Leases (a) Total
2019 (remaining portion of year) $ 6,590
$ 143
$ 6,733
2020 23,521
593
24,114
2021 16,792
564
17,356
2022 11,332
488
11,820
2023 9,388
436
9,824
Thereafter 22,531
112
22,643
Total lease payments 90,154
2,336
92,490
Less: Interest 10,177
163
10,340
Present value of lease liabilities $ 79,977
$ 2,173
$ 82,150


~~(a)~~	At this time there are 0 operating or finance lease options to extend lease terms that are reasonably certain of being exercised, 0r are there any legally binding minimum lease payments for operating or finance leases signed, but not yet commenced.

~~The following table summarizes the weighted-average discount rates and weighted-average remaining lease terms for operating and finance leases as of September 28, 2019:~~

Weighted-Average Discount Rate (percent)
Weighted-Average Remaining Lease Term
(years)
Operating leases 4.2 % 5.5
Finance leases 3.6 % 4.3

The following table summarizes cash paid for amounts included in the measurements of lease liabilities and the leased assets obtained in exchange for new operating and finance lease liabilities (in thousands):

Nine Months Ended
September 28,
2019
Cash paid for amounts included in the measurements of lease liabilities:
Operating cash flows from operating / finance leases $ 20,072
Financing cash flows from finance leases $ 262
Leased assets obtained in exchange for new operating / finance lease liabilities $ 18,387

~~Accounting Policies and Practical Expedients Elected~~

The Corporation elected to use the modified-retrospective method of adopting ASU 2016-02. It has been applied to all leases active on or after December 30, 2018, the start of the Corporation's fiscal year.

~~The Corporation elected the following practical expedients as a result of adopting ASU 2016-02:~~

The Corporation has made an accounting election by class of underlying assets to not separate non-lease components of a contract from the lease components to which they relate for all classes of assets except for embedded leases.

~~The Corporation has elected not to restate prior period financial statements for the effects of the new standard. Required ASC 840 disclosures for periods prior to 2019 have been provided.~~

~~The Corporation has elected not to use hindsight in determining the lease term and in assessing the likelihood that a lessee purchase option will be exercised.~~

~~The Corporation has elected for all asset classes to not recognize ROU assets and lease liabilities for leases that at the acquisition date have a remaining lease term of twelve months or less.~~

~~Presented below are the final disclosures utilizing ASC 840 treatment which was provided in the Corporation's Annual Report on Form 10-K for the fiscal year ended December 29, 2018:~~

~~Commitments for minimum rentals under non-cancelable leases were as follows (in thousands):~~

Operating Leases
2019 $ 24,387
2020 18,250
2021 13,324
2022 9,082
2023 6,228
Thereafter 10,469
Total minimum lease payments $ 81,740

~~There were 0 capitalized leases as of December 29, 2018 and December 30, 2017.~~

~~Rent expense under ASC 840 was as follows (in thousands):~~

2018
2017
2016
Rent expense $ 31,027
$ 32,158
$ 35,288

~~There was 0 contingent rent expense under operating leases for the years 2018, 2017, and 2016.~~

As part of the Corporation's continued efforts to drive efficiency and simplification, the Corporation entered into a sale-leaseback transaction in the first quarter of 2018, selling a manufacturing facility and subsequently leasing back a portion of the facility for a term of 10 years. The net proceeds from the sale of the facility of $16.9 million were reflected in "Proceeds from sale and license

of property, plant, equipment, and intangibles" in the Consolidated Statements of Cash Flows in 2018. In accordance with ASC 840, the $5.1 million gain on the sale of the facility was deferred and was being amortized as a reduction to rent expense evenly over the term of the lease. In accordance with the ASU No. 2016-02 adoption, the remaining unamortized deferred gain related to the sale-leaseback as of December 29, 2018 was recognized directly in "Retained earnings" in the Condensed Consolidated Balance Sheets in the first quarter of 2019 as a cumulative-effect adjustment as the Corporation transferred control of the asset.

Note 7.5. Goodwill and Other Intangible Assets

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


	September 26, 2020		December 28, 2019
Goodwill	$	259,663	$	270,820
Definite-lived intangible assets	126,021		146,040
Indefinite-lived intangible assets	26,603		28,849
Total goodwill and other intangible assets	$	412,287	$	445,709

September 28,
2019 December 29,
2018
Goodwill $ 270,781
$ 270,788
Definite-lived intangible assets 149,732
163,714
Indefinite-lived intangible assets 28,775
28,788
Total goodwill and other intangible assets $ 449,288
$ 463,290

Goodwill

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


	Workplace Furnishings		Residential Building Products		Total
Balance as of December 28, 2019
Goodwill	$	128,677	$	186,662	$	315,339
Accumulated impairment losses	(44,376)		(143)		(44,519)
Net goodwill balance as of December 28, 2019	84,301		186,519		270,820

Goodwill acquired	0		10,422		10,422
Impairment losses	(21,607)		0		(21,607)
Foreign currency translation adjustment	28		0		28

Balance as of September 26, 2020
Goodwill	128,705		197,084		325,789
Accumulated impairment losses	(65,983)		(143)		(66,126)
Net goodwill balance as of September 26, 2020	$	62,722	$	196,941	$	259,663

Office Furniture Hearth Products Total
Balance as of December 29, 2018
Goodwill $ 128,645
$ 186,662
$ 315,307
Accumulated impairment losses (44,376 ) (143 ) (44,519 )
Net goodwill balance as of December 29, 2018 84,269
186,519
270,788

Foreign currency translation adjustment (7 ) —
(7 )

Balance as of September 28, 2019

Goodwill 128,638
186,662
315,300
Accumulated impairment losses (44,376 ) (143 ) (44,519 )
Net goodwill balance as of September 28, 2019 $ 84,262
$ 186,519
$ 270,781

In the first quarter of 2020, the Corporation recorded goodwill impairment charges of $14.1 million and $7.5 million, respectively, related to two reporting units in the workplace furnishings segment.

See "Note 3. Acquisitions" for additional information regarding goodwill acquired in the year-to-date period.

Definite-lived intangible assets

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


	September 26, 2020										December 28, 2019
	Gross		Accumulated Amortization		Net		Gross		Accumulated Amortization		Net
Patents	$	0	$	0	$	0	$	40	$	40	$	0
Software	175,422		73,596		101,826		176,836		67,541		109,295
Trademarks and trade names	6,564		3,412		3,152		7,564		3,381		4,183
Customer lists and other	81,111		60,068		21,043		104,004		71,442		32,562
Net definite-lived intangible assets	$	263,097	$	137,076	$	126,021	$	288,444	$	142,404	$	146,040

September 28, 2019 December 29, 2018
Gross Accumulated Amortization Net Gross Accumulated Amortization Net
Patents $ 40
$ 40
$ —
$ 40
$ 34
$ 6
Software 174,550
63,097
111,453
170,274
49,561
120,713
Trademarks and trade names 7,564
3,216
4,348
7,564
2,721
4,843
Customer lists and other 103,803
69,872
33,931
103,840
65,688
38,152
Net definite-lived intangible assets $ 285,957
$ 136,225
$ 149,732
$ 281,718
$ 118,004
$ 163,714

In the first quarter of 2020, the Corporation recorded impairment charges of $0.6 million and $8.2 million, related to definite-lived tradenames and customer lists, respectively, in the workplace furnishings segment.

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


	Three Months Ended						Nine Months Ended
	September 26, 2020		September 28, 2019		September 26, 2020		September 28, 2019
Capitalized software	$	4,910	$	4,479	$	14,288	$	13,686
Other definite-lived intangibles	$	1,136	$	1,571	$	3,811	$	4,716

Three Months Ended Nine Months Ended
September 28,
2019 September 29,
2018 September 28,
2019 September 29,
2018
Capitalized software $ 4,479
$ 4,290
$ 13,686
$ 12,734
Other definite-lived intangibles $ 1,571
$ 1,642
$ 4,716
$ 4,972

The occurrence of events such as acquisitions, dispositions, or impairments may impact future amortization expense. Based on the current amount of intangible assets subject to amortization, the estimated amortization expense for each of the following five ~~fiscal~~ years is as follows (in millions):


	2020		2021		2022		2023		2024
Amortization expense	$	24.1	$	23.3	$	20.3	$	16.9	$	15.2

2019 2020 2021 2022 2023
Amortization expense $ 24.4
$ 23.4
$ 22.3
$ 19.6
$ 17.2

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" in the Condensed Consolidated Balance Sheets (in thousands):


	September 26, 2020		December 28, 2019
Trademarks and trade names	$	26,603	$	28,849

September 28,
2019 December 29,
2018
Trademarks and trade names $ 28,775
$ 28,788

In the first quarter of 2020, the Corporation recorded an impairment charge of $2.3 million, related to an indefinite-lived tradename in the workplace furnishings segment. The remaining immaterial change in the indefinite-lived intangible assets balances shown above is related to foreign currency translation impacts.

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.

In the first quarter of 2020, the Corporation determined that a triggering event occurred, resulting in quantitative impairment tests performed over the goodwill, indefinite-lived intangible assets, and long-lived asset groups related to three reporting units in the workplace furnishings segment. This determination was made considering the reduced sales and profitability projections for these reporting units, driven by the COVID-19 pandemic and related economic disruption. The resulting impairment charges recorded in the first quarter of 2020, as described in the preceding sections, are reflected in "Impairment and restructuring charges" in the Condensed Consolidated Statements of Comprehensive Income. For further information, refer to "Note 5. Goodwill and Other Intangible Assets" included in the Corporation's Quarterly Report on Form 10-Q for the fiscal quarter ended March 28, 2020.

No additional triggering events occurred and 0 impairment charges were recorded during the second or third quarters of 2020.

Note 8.6. Product Warranties

The Corporation issues certain warranty policies on its ~~office furniture~~workplace furnishings and ~~hearth~~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. 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 ~~issues~~claims expected to be incurred based on historical claims experience. Actual costs incurred could differ from the original estimates, requiring adjustments to the allowance. Activity associated with warranty obligations was as follows (in thousands):


	Nine Months Ended
	September 26, 2020		September 28, 2019
Balance at beginning of period	$	15,865	$	15,450
Accruals for warranties issued during period	5,483		8,814
Adjustments related to pre-existing warranties	(272)		144
Settlements made during the period	(6,013)		(8,802)
Balance at end of period	$	15,063	$	15,606

Nine Months Ended
September 28,
2019 September 29,
2018
Balance at beginning of period $ 15,450
$ 15,388
Accruals for warranties issued during period 15,406
22,130
Adjustments related to pre-existing warranties 127
116
Warranty issues resolved during the period (15,377 ) (22,203 )
Balance at end of period $ 15,606
$ 15,431

The current and long-term portions of the allowance for estimated ~~warranty issues~~settlements are ~~reflected~~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 ~~warranty issues~~settlements are expected to be paid (in thousands):


	September 26, 2020		December 28, 2019
Current - in the next twelve months	$	7,448	$	7,940
Long-term - beyond one year	7,615		7,925
Total	$	15,063	$	15,865

September 28,
2019 December 29,
2018
Current - in the next twelve months $ 9,538
$ 9,455
Long-term - beyond one year 6,068
5,995
Total $ 15,606
$ 15,450

Note 9.7. Long-Term Debt

Long-term debt is as follows (in thousands):


	September 26, 2020		December 28, 2019
Revolving credit facility with interest at a variable rate (September 26, 2020 - 1.2%; December 28, 2019 - 2.8%)	$	75,000	$	75,000
Fixed rate notes due in 2025 with an interest rate of 4.22%	50,000		50,000
Fixed rate notes due in 2028 with an interest rate of 4.40%	50,000		50,000
Other amounts	0		790
Deferred debt issuance costs	(498)		(561)
Total debt	174,502		175,229
Less: Current maturities of long-term debt	0		790
Long-term debt	$	174,502	$	174,439

September 28,
2019 December 29,
2018
Revolving credit facility with interest at a variable rate
(September 28, 2019 - 3.2%; December 29, 2018 - 3.5%)
$ 140,000
$ 150,000
Fixed rate notes due in 2025 with an interest rate of 4.22% 50,000
50,000
Fixed rate notes due in 2028 with an interest rate of 4.40% 50,000
50,000
Other amounts 1,440
679
Deferred debt issuance costs (582 ) (645 )
Total debt 240,858
250,034
Less: Current maturities of long-term debt 1,440
679
Long-term debt $ 239,418
$ 249,355

The carrying value of the Corporation's outstanding variable-rate, long-term debt obligations at September 26, 2020 was $75 million, which approximated fair value. The fair value of the fixed rate notes was estimated based on a discounted cash flow method (Level 2) to be $124 million at September 26, 2020.

As of September ~~28, 2019,~~26, 2020, the Corporation’s revolving credit facility borrowings were under the credit agreement entered into on April 20, 2018 with a scheduled maturity of April 20, 2023. The Corporation deferred the debt issuance costs related to the credit agreement, 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~~$0.7 million is reflected in "Other Assets" in the Condensed Consolidated Balance Sheets.

As of September ~~28, 2019,~~26, 2020, there was ~~$140~~$75 million outstanding under the $450 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, the Corporation can access the full remaining ~~$310~~$375 million of borrowing capacity available under the revolving credit facility and maintain compliance with applicable covenants.

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, and strategic initiatives, such as acquisitions.

In addition to the revolving credit facility, the Corporation also has $100 million 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 percent, due May 31, 2025, and $50 million of ten-year fixed rate notes with an interest rate of 4.40 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, ~~in accordance with ASU No. 2015-03,~~ 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 September ~~28, 2019~~26, 2020, the debt issuance costs balance of ~~$0.6~~$0.5 million

related to the private placement note agreements is reflected in "Long-Term Debt" in the Condensed Consolidated Balance Sheets.

The credit agreement and private placement notes both contain financial and non-financial covenants. The covenants under both are substantially the same. 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.

Covenants require maintenance of financial ratios as of the end of any fiscal quarter, including:

•a consolidated interest coverage ratio (as defined in the credit agreement) 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) 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 restrictive of the financial covenants is the consolidated leverage ratio requirement of 3.5 to 1.0. Under the credit agreement, 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 September ~~28, 2019,~~26, 2020, 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.

Note ~~10.~~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 (dollars in thousands):


	Three Months Ended									Nine Months Ended
	September 26, 2020			September 28, 2019			September 26, 2020			September 28, 2019
Income before income taxes	$	37,245		$	58,451		$	24,605		$	80,786
Income taxes	$	6,558		$	12,375		$	5,259		$	17,878
Effective tax rate	17.6		%	21.2		%	21.4		%	22.1		%

Three Months Ended Nine Months Ended
September 28,
2019 September 29,
2018 September 28,
2019 September 29,
2018
Income before income taxes $ 58,451
$ 51,104
$ 80,786
$ 76,997
Income taxes $ 12,375
$ 11,197
$ 17,878
$ 16,033
Effective tax rate 21.2 % 21.9 % 22.1 % 20.8 %

The Corporation's effective tax rate was lower in the three and nine months ended September ~~28, 2019~~26, 2020 compared to the same period last year primarily due to reduced foreign taxes and the release of tax reserves due to statute of limitations in the current year. The effective tax rate was higher in the nine months ended September 28, 2019 compared to the same periodperiods last year, primarily due to the ~~release~~effect of ~~a valuation allowance for certain foreign jurisdictions~~tax credits on lower projected worldwide full year income.

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act ("CARES Act") was enacted in ~~2018.~~

~~On February 14, 2018 the FASB issued ASU 2018-02,~~ ~~Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which provides entities an option to reclassify stranded tax effects related~~response to the ~~Tax Cuts~~COVID-19 pandemic crisis. The CARES Act contains provisions relating to net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and ~~Jobs Act (the "Act") within accumulated other comprehensive income ("AOCI")~~technical corrections to ~~retained earnings~~tax depreciation methods for ~~each period in which the effects of the Act~~qualified improvement property. The deferred tax benefit is ~~recorded. ASU 2018-02 does not modify the existing requirement~~estimated to ~~allocate the income tax effects of~~be $0.9 million related to changes in tax ~~laws or rates directly to continuing operations as a component of income tax expense (benefit). The amendments are effective~~depreciation for ~~all organizations for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years with early adoption permitted.~~qualified improvement property.

The Corporation adopted in Q1 2019 and applied the portfolio approach of accounting related to releasing income tax effects from AOCI. During the three months ended March 30, 2019, the Corporation reclassified $0.7 million of federal income taxes that were stranded in AOCI due to the Act to retained earnings. No income tax effects were reclassified subsequent to Q1 2019.

Note ~~11.~~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, ~~variable-rate and fixed-rate debt obligations,~~ and deferred stock-based compensation. The marketable securities are comprised of money market funds, government securities and corporate bonds. 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.

Financial instruments measured at fair value were as follows (in thousands):


	Fair value as of measurement date		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Balance as of September 26, 2020
Cash and cash equivalents (including money market funds) (1)	$	109,385	$	109,385	$	0	$	0
Government securities (2)	$	6,696	$	0	$	6,696	$	0
Corporate bonds (2)	$	6,984	$	0	$	6,984	$	0

Derivative financial instruments - liability (4)	$	2,583	$	0	$	2,583	$	0
Deferred stock-based compensation (5)	$	6,480	$	0	$	6,480	$	0

Balance as of December 28, 2019
Cash and cash equivalents (including money market funds) (1)	$	52,073	$	52,073	$	0	$	0
Government securities (2)	$	6,339	$	0	$	6,339	$	0
Corporate bonds (2)	$	6,323	$	0	$	6,323	$	0
Derivative financial instruments - asset (3)	$	276	$	0	$	276	$	0
Deferred stock-based compensation (5)	$	7,503	$	0	$	7,503	$	0

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 September 28, 2019
Cash and cash equivalents (including money market funds) (1) $ 53,013
$ 53,013
$ —
$ —
Government securities (2) $ 6,580
$ —
$ 6,580
$ —
Corporate bonds (2) $ 6,474
$ —
$ 6,474
$ —
Derivative financial instruments - asset (3) $ 166
$ —
$ 166
$ —
Derivative financial instruments - liability (4) $ 341
$ —
$ 341
$ —
Variable-rate debt obligations (5) $ 140,000
$ —
$ 140,000
$ —
Fixed-rate debt obligations (5) $ 100,000
$ —
$ 100,000
$ —
Deferred stock-based compensation (6) $ 7,057
$ —
$ 7,057
$ —

Balance as of December 29, 2018
Cash and cash equivalents (including money market funds) (1) $ 76,819
$ 76,819
$ —
$ —
Government securities (2) $ 7,384
$ —
$ 7,384
$ —
Corporate bonds (2) $ 4,620
$ —
$ 4,620
$ —
Derivative financial instruments (3) $ 3,797
$ —
$ 3,797
$ —
Variable-rate debt obligations (5) $ 150,000
$ —
$ 150,000
$ —
Fixed-rate debt obligations (5) $ 100,000
$ —
$ 100,000
$ —
Deferred stock-based compensation (6) $ 7,857
$ —
$ 7,857
$ —

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 - "Prepaid expenses and other current assets"; Long-term portion - "Other Assets"

(4) Current portion - "Accounts payable and accrued expenses"; Long-term portion - "Other Long-Term Liabilities"

(5) ~~Current portion - "Current maturities of long-term debt"; Long-term portion - "Long-Term Debt"~~

~~(6)~~ Current portion - "Current maturities of other long-term obligations"; Long-term portion - "Other Long-Term Liabilities"

Note ~~12.~~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 (in thousands):

Foreign Currency Translation Adjustment Unrealized Gains (Losses) on Marketable Securities Pension and Post-retirement Liabilities Derivative Financial Instruments Accumulated Other Comprehensive Income (Loss)
Balance as of December 29, 2018 $ (2,973 ) $ (156 ) $ (2,929 ) $ 2,459
$ (3,599 )
Other comprehensive income (loss) before reclassifications (406 ) 319
—
(2,272 ) (2,359 )
Tax (expense) or benefit —
(67 ) —
661
594
Reclassification of stranded tax impact —
—
(1,185 ) 446
(739 )
Amounts reclassified from accumulated other comprehensive income (loss), net of tax —
—
—
(947 ) (947 )
Balance as of September 28, 2019 $ (3,379 ) $ 96
$ (4,114 ) $ 347
$ (7,050 )

~~Amounts in parentheses indicate reductions to equity.~~


																	Foreign Currency Translation Adjustment		Unrealized Gains (Losses) on Debt Securities		Pension and Post-retirement Liabilities		Derivative Financial Instruments		Accumulated Other Comprehensive Income (Loss)
	Foreign Currency Translation Adjustment			Unrealized Gains (Losses) on Marketable Securities			Pension and Post-retirement Liabilities			Derivative Financial Instruments			Accumulated Other Comprehensive Income (Loss)
Balance as of December 30, 2017	$	31		$	(132	)	$	(5,630	)	$	2,120		$	(3,611	)
Balance as of December 28, 2019																Balance as of December 28, 2019	$	(2,912)	$	95	$	(5,762)	$	506	$	(8,073)
Other comprehensive income (loss) before reclassifications	(1,944		)	(125		)	—			2,593			524			Other comprehensive income (loss) before reclassifications	368		341		0		(3,236)		(2,527)
Tax (expense) or benefit	—			26			—			(635		)	(609		)	Tax (expense) or benefit	0		(72)		0		758		686

Amounts reclassified from accumulated other comprehensive income (loss), net of tax	—			—			—			(499		)	(499		)	Amounts reclassified from accumulated other comprehensive income (loss), net of tax	0		0		0		85		85
Balance as of September 29, 2018	$	(1,913	)	$	(231	)	$	(5,630	)	$	3,579		$	(4,195	)
Balance as of September 26, 2020																Balance as of September 26, 2020	$	(2,544)	$	364	$	(5,762)	$	(1,887)	$	(9,829)

Amounts in parentheses indicate reductions to equity.


	Foreign Currency Translation Adjustment		Unrealized Gains (Losses) on Debt Securities		Pension and Post-retirement Liabilities		Derivative Financial Instruments		Accumulated Other Comprehensive Income (Loss)
Balance as of December 29, 2018	$	(2,973)	$	(156)	$	(2,929)	$	2,459	$	(3,599)
Other comprehensive income (loss) before reclassifications	(406)		319		0		(2,272)		(2,359)
Tax (expense) or benefit	0		(67)		0		661		594
Reclassification of stranded tax impact	0		0		(1,185)		446		(739)
Amounts reclassified from accumulated other comprehensive income (loss), net of tax	0		0		0		(947)		(947)
Balance as of September 28, 2019	$	(3,379)	$	96	$	(4,114)	$	347	$	(7,050)

Amounts in parentheses indicate reductions to equity.

Interest Rate Swap

In March 2016, the Corporation entered into an interest rate swap transaction to hedge $150 million of outstanding variable rate revolver borrowings against future interest rate volatility. Under the terms of the interest rate swap, the Corporation paid a fixed rate of 1.29 percent and received one month LIBOR on a $150 million notional value. In August 2019, the agreement governing this interest rate swap was terminated, and the Corporation received cash proceeds of $0.5 million, the fair value of the interest rate swap on the termination date. The proceeds were recorded as cash provided by operating activities in the Condensed Consolidated Statement of Cash Flows. The $0.5 million gain from the termination of this interest rate swap agreement was recorded to "Accumulated other comprehensive income (loss)" and will be amortized to interest expense through January 2021, the remaining term of the original interest rate swap agreement.

In August 2019, concurrent with the termination of ~~the~~a previous interest rate swap, the Corporation entered into a new interest rate swap transaction to hedge $75 million of outstanding variable rate revolver borrowings against future interest rate volatility. Under the terms of this interest rate swap, the Corporation pays a fixed rate of 1.42 percent and receives one month LIBOR on a $75 million notional value expiring August 2023. As of September ~~28, 2019,~~26, 2020, the fair value of the Corporation's interest rate swap ~~asset and~~ liability was ~~$0.2 million and $0.3 million, respectively.~~$2.6 million. The unrecognized change in value of the interest rate swap, which includes the unamortized gain on the termination of the previous interest rate swap, is reported net of tax as ~~$0.3~~$(1.9) million in "Accumulated other comprehensive income (loss)" in the Condensed Consolidated Balance Sheets.

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

Three Months Ended Nine Months Ended
Details about Accumulated Other Comprehensive Income (Loss) Components Affected Line Item in the Statement Where Net Income is Presented September 28,
2019 September 29,
2018 September 28,
2019 September 29,
2018
Derivative financial instruments
Interest rate swap Interest (expense) or income $ 315
$ 305
$ 1,220
$ 661
Tax (expense) or benefit (60 ) (75 ) (273 ) (162 )
Net of tax $ 255
$ 230
$ 947
$ 499


		Three Months Ended						Nine Months Ended
Details about Accumulated Other Comprehensive Income (Loss) Components	Affected Line Item in the Statement Where Net Income is Presented	September 26, 2020		September 28, 2019		September 26, 2020		September 28, 2019
Derivative financial instruments
Interest rate swap	Interest expense, net	$	(147)	$	315	$	(107)	$	1,220
	Income taxes	33		(60)		22		(273)
	Net of tax	$	(114)	$	255	$	(85)	$	947

Amounts in parentheses indicate reductions to profit.

Dividend

The Corporation declared and paid cash dividends per common share as follows (in dollars):


	Nine Months Ended
	September 26, 2020		September 28, 2019
Dividends per common share	$	0.915	$	0.905

Nine Months Ended
September 28,
2019 September 29,
2018
Dividends per common share $ 0.905
$ 0.875

Stock Repurchase

The following table summarizes shares repurchased and settled by the Corporation (in thousands, except share and per share data):


	Nine Months Ended
	September 26, 2020		September 28, 2019
Shares repurchased	214,200		1,797,448
Average price per share	$	29.83	$	36.09

Cash purchase price	$	(6,390)	$	(64,877)
Purchases unsettled as of quarter end	0		125
Prior year purchases settled in current year	(374)		(354)
Shares repurchased per cash flow	$	(6,764)	$	(65,106)

Nine Months Ended
September 28,
2019 September 29,
2018
Shares repurchased 1,797
369
Average price per share $ 36.09
$ 40.36

Cash purchase price $ (64,877 ) $ (14,884 )
Purchases unsettled as of quarter end 125
222
Prior year purchases settled in current year (354 ) (1,381 )
Shares repurchased per cash flow $ (65,106 ) $ (16,043 )

As of September ~~28, 2019,~~26, 2020, approximately ~~$183.7~~$158.3 million of the Corporation's Board of Directors' ("Board") current repurchase authorization remained unspent. As announced in the April 6, 2020 COVID-19 response update, the Corporation temporarily suspended share repurchase activity to support available cash flow.

Note ~~13.~~11. Earnings Per Share

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


	Three Months Ended						Nine Months Ended
	September 26, 2020		September 28, 2019		September 26, 2020		September 28, 2019
Numerator:
Numerator for both basic and diluted EPS attributable to HNI Corporation net income	$	30,688	$	46,078	$	19,349	$	62,910
Denominators:
Denominator for basic EPS weighted-average common shares outstanding	42,684		42,899		42,651		43,217
Potentially dilutive shares from stock-based compensation plans	326		287		254		403
Denominator for diluted EPS	43,010		43,186		42,905		43,620
Earnings per share – basic	$	0.72	$	1.07	$	0.45	$	1.46
Earnings per share – diluted	$	0.71	$	1.07	$	0.45	$	1.44

Three Months Ended Nine Months Ended
September 28,
2019 September 29,
2018 September 28,
2019 September 29,
2018
Numerator:
Numerator for both basic and diluted EPS attributable to HNI Corporation net income $ 46,078
$ 39,907
$ 62,910
$ 61,014
Denominators:

Denominator for basic EPS weighted-average common shares outstanding 42,899
43,823
43,217
43,616
Potentially dilutive shares from stock-based compensation plans 287
856
403
733
Denominator for diluted EPS 43,186
44,679
43,620
44,349
Earnings per share – basic $ 1.07
$ 0.91
$ 1.46
$ 1.40
Earnings per share – diluted $ 1.07
$ 0.89
$ 1.44
$ 1.38

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.~~anti-dilutive (in thousands):

Three Months Ended

Nine Months Ended

September 26,
2020

September 28,
2019

September 26,
2020

September 28,
2019

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

3,124

2,731

3,183

2,118

Three Months Ended Nine Months Ended
September 28,
2019 September 29,
2018 September 28,
2019 September 29,
2018
Common stock equivalents excluded because their inclusion would be anti-dilutive (in thousands) 2,731
1,273
2,118
1,474

Note ~~14.~~12. Stock-Based Compensation

The Corporation measures stock-based compensation expense at grant date, based on the fair value of the ~~award,~~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 ~~recognizes~~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. ~~Stock-based compensation~~Additionally, expense ~~is the cost of stock options and time-based restricted~~related to performance stock units ~~issued under~~is adjusted for the ~~shareholder approved stock-based compensation plans and shares issued under~~probability that the ~~shareholder approved member stock purchase plans.~~ Corporation will perform within an established target range of cumulative profitability over a multi-year period.

The following table summarizes expense associated with these plans (in thousands):


	Three Months Ended						Nine Months Ended
	September 26, 2020		September 28, 2019		September 26, 2020		September 28, 2019
Compensation cost	$	1,087	$	1,336	$	6,746	$	5,408

Three Months Ended Nine Months Ended
September 28,
2019 September 29,
2018 September 28,
2019 September 29,
2018
Compensation cost $ 1,336
$ 1,307
$ 5,408
$ 6,215

The options and units granted by the Corporation had fair values as follows (in thousands):


	Nine Months Ended
	September 26, 2020		September 28, 2019
Stock options	$	0	$	6,211
Restricted stock units	$	6,431	$	361
Performance stock units	$	5,920	$	0

Nine Months Ended
September 28,
2019 September 29,
2018
Stock options $ 6,211
$ 7,200
Restricted stock units $ 361
$ 76

The following table summarizes unrecognized compensation expense and the weighted-average remaining service period for non-vested stock options and ~~restricted~~ stock units as of September ~~28, 2019:~~26, 2020:


	Unrecognized Compensation Expense (in thousands)		Weighted-Average Remaining Service Period (years)
Non-vested stock options	$	1,519	1.1
Non-vested restricted stock units	$	1,994	0.9
Non-vested performance stock units	$	876	1.3

Unrecognized Compensation Expense
(in thousands)

Weighted-Average Remaining
Service Period (years)
Non-vested stock options $ 4,237
1.1
Non-vested restricted stock units $ 516
1.1

Note ~~15.~~13. Post-Retirement Health Care

The following table sets forth the components of net periodic benefit costs included in the Condensed Consolidated Statements of Comprehensive Income (in thousands):


	Three Months Ended						Nine Months Ended
	September 26, 2020		September 28, 2019		September 26, 2020		September 28, 2019
Service cost	$	194	$	170	$	583	$	510
Interest cost	169		199		507		596

Amortization of net loss	5		0		14		0
Net periodic post-retirement benefit cost	$	368	$	369	$	1,104	$	1,106

Three Months Ended Nine Months Ended
September 28,
2019 September 29,
2018 September 28,
2019 September 29,
2018
Service cost $ 170
$ 213
$ 510
$ 639
Interest cost 199
197
596
591
Amortization of net (gain) loss —
32
—
95
Net periodic post-retirement benefit cost $ 369
$ 442
$ 1,106
$ 1,325

Note ~~16.~~14. Recently Adopted Accounting Standards

In ~~February~~June 2016, the FASB issued ASU No. ~~2016-02,~~2016-13, ~~Leases~~Measurement of Credit Losses on Financial Instruments and also issued subsequent amendments to the initial guidance: ASU 2018-19, ASU 2019-04, and ASU 2019-05 (collectively, Topic 326). Topic 326 replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses by requiring consideration of a broader range of reasonable and supportable information and is intended to provide financial statement users with more useful information about expected credit losses on financial instruments.

The ~~new standard requires lessees to recognize most leases, including operating leases, on-balance sheet via a right~~Corporation adopted Topic 326 in the first quarter of ~~use asset and lease liability. The new standard became effective for the Corporation in~~ fiscal ~~2019 and was implemented~~2020 using a ~~modified-retrospective~~modified retrospective transition approach. The ~~Corporation selected~~adoption resulted in a ~~technology tool~~cumulative effect decrease to ~~assist with~~retained earnings of $0.1 million to reflect a change in the ~~accounting~~allowance for doubtful accounts. Additionally, Topic 326 requires the allowance for doubtful accounts balance (contra-asset) to be presented

separately in the Condensed Consolidated Balance Sheets. No other financial statement line items were materially impacted by the adoption.

The Corporation's allowance for doubtful accounts is developed based on several factors, including overall customer credit quality, historical write-off experience, and ~~disclosure requirements~~specific account analyses projecting the ultimate collectability of the ~~new standard. All necessary changes required by the new standard, including those to~~account. The adoption of Topic 326 did not significantly impact the Corporation's accounting policies ~~business process, systems, controls,~~or estimation methods related to the allowance for doubtful accounts. Furthermore, in the second quarter of 2020 the Corporation adjusted its method for determining the allowance for doubtful accounts in response to the COVID-19 pandemic. The impact of this adjustment was not material to the financial statements.

Topic 326 also introduced new accounting and ~~disclosures, were identified~~reporting requirements related to available-for-sale debt securities, including consideration of whether an allowance for credit losses should be established. The Corporation has determined that such an allowance is not required with respect to its available-for-sale debt security portfolio. See "Note 9. Fair Value Measurements" for fair value information of the Corporation's available-for-sale debt securities and ~~implemented~~where such are recorded in the Condensed Consolidated Balance Sheets. The amortized cost of this portfolio was $13.2 million and $12.5 million as of ~~the first quarter 2019. See "Note 6. Leases" in the Notes to Condensed Consolidated Financial Statements for financial impacts, accounting elections,~~September 26, 2020 and ~~further information.~~

~~In February 2018, the FASB issued ASU No. 2018-02,~~ ~~Reclassification~~December 28, 2019, respectively. Immaterial amounts of ~~Certain Tax Effects from Accumulated Other Comprehensive Income~~. The new standard allows entities to reclassify certain stranded tax effects from accumulated other comprehensive income to retained earnings resulting from the Tax Cuts and Jobs Act of 2017 (the "Act"). The standard also requires certain disclosures about stranded tax effects. The new standard became effective for the Corporation in fiscal 2019. See "Note 10. Income Taxes" in the Notes to Condensed Consolidated Financial Statements for further information.

~~In August 2017, the FASB issued ASU No. 2017-12,~~ ~~Targeted Improvements to Accounting for Hedging Activities~~. The new standard improves the financial reporting of hedging relationships to better portray the economic results of an entity's risk management activities in its financial statements and make certain targeted improvements to simplify the application of the hedge accounting guidance through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. The new standard became effective for the Corporation in fiscal 2019. The standard requires a cumulative effect adjustmentaccrued interest receivable related to the ~~opening balance of retained earnings as of the beginning of the fiscal year of adoption for the previously~~Corporation's portfolio are recorded ~~ineffectiveness included~~ in retained earnings related to existing net investment hedges as of the date of adoption. The Corporation did not record a cumulative effect adjustment to retained earnings as no net investment hedges existed as of the ASU adoption date. New hedging relationships entered after the adoption date have been presented in the financial statements using the guidance of the ASU. The standard did not have a material effect on consolidated financial statements"Prepaid expenses and ~~related disclosures.~~other current assets" and "Other assets".

Note ~~17.~~15. Guarantees, Commitments, and Contingencies

The Corporation utilizes letters of credit and surety bonds in the amount of approximately ~~$25~~$22 million to back certain insurance policies and payment obligations. ~~The~~Additionally, the Corporation periodically utilizes trade letters of credit and banker's acceptances ~~in the amount of approximately $2 million~~ to guarantee certain payments to overseas ~~suppliers.~~suppliers; as of September 26, 2020, there were 0 outstanding amounts related to these types of guarantees. The letters of credit, bonds, and banker's acceptances reflect fair value as a condition of their underlying purpose and are subject to competitively determined fees.

The Corporation has contingent liabilities which have arisen in the ordinary course of its business, including 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.

Note ~~18.~~16. Reportable Segment Information

As discussed in "Note 1. Basis of Presentation", in the second quarter of 2020, the Corporation rebranded its reportable segments. These changes did not impact the Corporation's condensed consolidated financial statements or disclosures. Management views the Corporation as being in 2 reportable segments based on industries: workplace furnishings (formerly office ~~furniture~~furniture) and residential building products (formerly hearth ~~products,~~products), with the former being the principal segment.

The aggregated ~~office furniture~~workplace furnishings segment manufactures and markets a broad line of commercial and home office furniture which includes panel-based and freestanding furniture systems, seating, storage, ~~products, desks, credenzas, chairs,~~ tables, ~~bookcases, freestanding office partitions~~ and ~~panel systems, and other related~~architectural products. The ~~hearth~~residential building products segment manufactures and markets a ~~broad line~~full array of gas, wood, electric, ~~wood,~~ and ~~biomass burning~~pellet fueled fireplaces, inserts, stoves, facings, and ~~accessories, principally for the home.~~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 (in thousands):


	Three Months Ended						Nine Months Ended
	September 26, 2020		September 28, 2019		September 26, 2020		September 28, 2019
Net Sales:
Workplace furnishings	$	353,361	$	484,755	$	999,827	$	1,247,778
Residential building products	153,702		140,631		393,397		383,090
Total	$	507,063	$	625,386	$	1,393,224	$	1,630,868

Income (Loss) Before Income Taxes:
Workplace furnishings	$	16,826	$	51,162	$	(8,619)	$	68,180
Residential building products	30,197		23,772		65,232		54,743
General corporate	(8,261)		(14,278)		(26,737)		(35,342)
Operating income	38,762		60,656		29,876		87,581
Interest expense, net	1,517		2,205		5,271		6,795
Total	$	37,245	$	58,451	$	24,605	$	80,786

Depreciation and Amortization Expense:
Workplace furnishings	$	11,065	$	11,232	$	33,177	$	33,540
Residential building products	2,351		2,291		6,976		6,521
General corporate	5,896		5,863		17,764		17,777
Total	$	19,312	$	19,386	$	57,917	$	57,838

Capital Expenditures (including capitalized software):
Workplace furnishings	$	6,946	$	6,524	$	18,340	$	29,190
Residential building products	2,695		3,204		5,874		10,779
General corporate	1,584		2,856		7,787		10,222
Total	$	11,225	$	12,584	$	32,001	$	50,191

					As of September 26, 2020		As of December 28, 2019
Identifiable Assets:
Workplace furnishings					$	714,896	$	874,913
Residential building products					393,941		364,653
General corporate					265,888		212,946
Total					$	1,374,725	$	1,452,512

Three Months Ended Nine Months Ended
September 28,
2019 September 29,
2018 September 28,
2019 September 29,
2018
Net Sales:
Office furniture $ 484,755
$ 471,687
$ 1,247,778
$ 1,276,480
Hearth products 140,631
139,433
383,090
383,323
Total $ 625,386
$ 611,120
$ 1,630,868
$ 1,659,803

Income Before Income Taxes:
Office furniture $ 51,162
$ 45,721
$ 68,180
$ 64,898
Hearth products 23,772
21,824
54,743
55,250
General corporate (14,278 ) (13,919 ) (35,342 ) (35,776 )
Operating income 60,656
53,626
87,581
84,372
Interest expense, net 2,205
2,522
6,795
7,375
Total $ 58,451
$ 51,104
$ 80,786
$ 76,997

Depreciation and Amortization Expense:
Office furniture $ 11,232
$ 11,012
$ 33,540
$ 33,202
Hearth products 2,291
2,026
6,521
6,080
General corporate 5,863
5,569
17,777
16,605
Total $ 19,386
$ 18,607
$ 57,838
$ 55,887

Capital Expenditures (including capitalized software):
Office furniture $ 6,524
$ 10,324
$ 29,190
$ 35,321
Hearth products 3,204
2,150
10,779
6,317
General corporate 2,856
2,181
10,222
5,341
Total $ 12,584
$ 14,655
$ 50,191
$ 46,979

As of
September 28,
2019 As of
December 29,
2018
Identifiable Assets:
Office furniture $ 872,501
$ 797,574
Hearth products 379,534
352,060
General corporate 218,441
252,210
Total $ 1,470,476
$ 1,401,844

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. 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.

Overview

The Corporation has two reportable segments: workplace furnishings (formerly office ~~furniture~~furniture) and residential building products (formerly hearth ~~products.~~products). In the second quarter of 2020, the Corporation rebranded its reportable segments, with no impact on the Corporation's condensed consolidated financial statements or disclosures. The Corporation is a leading global ~~office furniture manufacturer~~designer and ~~the~~provider of commercial furnishings, and a leading manufacturer and marketer of hearth products. The Corporation utilizes a decentralized 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.

~~Net~~Consolidated net sales for the third quarter of ~~2019~~2020 were ~~$625.4~~$507.1 million, ~~an increase~~a decrease of ~~2.3~~18.9 percent compared to net sales of ~~$611.1~~$625.4 million in the ~~third quarter of 2018.~~prior-year quarter. The change was ~~driven~~due to a 27.1 percent decrease in the workplace furnishings segment, partially offset by a ~~2.8~~9.3 percent increase in the ~~office furniture segment, along with a 0.9 percent increase in the hearth~~residential building products segment. ~~Divestitures~~The acquisition of ~~small office furniture companies~~residential building products distributors resulted in a ~~net decrease in sales of $4.5~~$2.4 million increase compared to the third quarter of ~~2018.~~2019.

Net income attributable to the Corporation in the third quarter of ~~2019~~2020 was ~~$46.1~~$30.7 million compared to ~~net income of $39.9~~$46.1 million in the third quarter of ~~2018.~~2019. The ~~increase~~decrease was ~~primarily driven by price realization and productivity, net~~due to lower workplace furnishings volume as a result of ~~investments,~~the COVID-19 pandemic, partially offset by year-over-year selling, general, and administrative ("SG&A") expense management, net productivity benefits, and volume growth in residential building products.

Update on COVID-19 Pandemic

The Corporation's primary focus during the COVID-19 pandemic crisis continues to be the health and safety of its members. The Corporation implemented workplace health and safety measures consistent with guidelines from the Centers for Disease Control and Prevention and has taken strong measures to create social distancing and keep members safe. A portion of the Corporation's members continue to work remotely.

The HNI strategy, including diverse revenue streams, price point breadth, channel reach, and a lean operating model, along with the dedication of members, allowed the Corporation to continue to manage through challenging conditions. The Corporation aggressively managed costs and drove productivity, offsetting much of the impact from lower ~~sales volume~~volumes resulting from the COVID-19 pandemic. The Corporation’s teams stayed focused on customers, generating and ~~higher input costs.~~seizing market opportunities. As of September 26, 2020, the Corporation's major facilities continue to operate, and there are no material disruptions to the Corporation's supply chain, dealer network, manufacturing and distribution operations, or ability to serve customers.

As of the date of this filing, COVID-19 cases continue to show volatility in various regions of the U.S. and abroad, resulting in continuing restrictions in certain markets. As a result, there remains significant uncertainty concerning the magnitude of the impact and duration of the COVID-19 pandemic crisis. The Corporation continues to monitor the situation and may take further actions as may be required by federal, state, or local authorities or that the Corporation determines is in the best interest of its members.

Results of Operations

The following table presents certain key highlights from the results of operations (in thousands):

Three Months Ended Nine Months Ended
September 28,
2019 September 29,
2018 Change September 28,
2019 September 29,
2018 Change
Net sales $ 625,386
$ 611,120
2.3 % $ 1,630,868
$ 1,659,803
(1.7 %)
Cost of sales 387,715
377,789
2.6 % 1,030,993
1,048,683
(1.7 %)
Gross profit 237,671
233,331
1.9 % 599,875
611,120
(1.8 %)
Selling and administrative expenses 176,731
179,577
(1.6 %) 511,080
524,445
(2.5 %)
Restructuring and impairment charges 284
128
121.9 % 1,214
2,303
(47.3 %)
Operating income 60,656
53,626
13.1 % 87,581
84,372
3.8 %
Interest expense, net 2,205
2,522
(12.6 %) 6,795
7,375
(7.9 %)
Income before income taxes 58,451
51,104
14.4 % 80,786
76,997
4.9 %
Income taxes 12,375
11,197
10.5 % 17,878
16,033
11.5 %
Net loss attributable to non-controlling interest (2 ) 0
(100.0 %) (2 ) (50 ) 96.0 %
Net income attributable to HNI Corporation $ 46,078
$ 39,907
15.5 % $ 62,910
$ 61,014
3.1 %

As a Percentage of Net Sales:
Net sales 100.0 % 100.0 %

100.0 % 100.0 %

Gross profit 38.0
38.2
-20 bps 36.8
36.8
—
Selling and administrative expenses 28.3
29.4
-110 bps 31.3
31.6
-30 bps
Restructuring and impairment charges 0.0
0.0
—
0.1
0.1
—
Operating income 9.7
8.8
90 bps 5.4
5.1
30 bps
Income taxes 2.0
1.8
20 bps 1.1
1.0
10 bps
Net income attributable to HNI Corporation 7.4
6.5
90 bps 3.9
3.7
20 bps


	Three Months Ended														Nine Months Ended
	September 26, 2020			September 28, 2019			Change		September 26, 2020			September 28, 2019			Change
Net sales	$	507,063		$	625,386		(18.9	%)	$	1,393,224		$	1,630,868		(14.6	%)
Cost of sales	321,516			387,715			(17.1	%)	880,754			1,030,993			(14.6	%)
Gross profit	185,547			237,671			(21.9	%)	512,470			599,875			(14.6	%)
Selling and administrative expenses	146,785			176,731			(16.9	%)	449,933			511,080			(12.0	%)

Impairment and restructuring charges	—			284			NM		32,661			1,214			NM
Operating income	38,762			60,656			(36.1	%)	29,876			87,581			(65.9	%)
Interest expense, net	1,517			2,205			(31.2	%)	5,271			6,795			(22.4	%)
Income before income taxes	37,245			58,451			(36.3	%)	24,605			80,786			(69.5	%)
Income taxes	6,558			12,375			(47.0	%)	5,259			17,878			(70.6	%)
Net income (loss) attributable to non-controlling interest	(1)			(2)			NM		(3)			(2)			NM
Net income attributable to HNI Corporation	$	30,688		$	46,078		(33.4	%)	$	19,349		$	62,910		(69.2	%)


As a Percentage of Net Sales:
Net sales	100.0		%	100.0		%			100.0		%	100.0		%
Gross profit	36.6			38.0			-140 bps		36.8			36.8			0 bps
Selling and administrative expenses	28.9			28.3			60 bps		32.3			31.3			100 bps

Impairment and restructuring charges	—			0.0			0 bps		2.3			0.1			220 bps
Operating income	7.6			9.7			-210 bps		2.1			5.4			-330 bps
Income taxes	1.3			2.0			-70 bps		0.4			1.1			-70 bps
Net income attributable to HNI Corporation	6.1			7.4			-130 bps		1.4			3.9			-250 bps

Results of Operations - Three Months Ended

Net Sales

Consolidated net sales for the third quarter of ~~2019 increased 2.3~~2020 decreased 18.9 percent compared to the same quarter last year. The change was driven by a ~~2.8 percent~~decrease in the workplace furnishings segment, partially offset by an increase in the ~~office furniture segment, along with a 0.9 percent increase~~residential building products segment. Included in the ~~hearth~~sales results for the current quarter was a $2.4 million impact from acquiring residential building products segment. Office furniture segment sales increased driven by growth in the contract business, partially offset by a decrease of $4.5 million from the net impact of divesting small office furniture companies. Hearth products segment sales increased in the new construction business.distributors.

Gross Profit

Gross profit as a percentage of net sales decreased 20140 basis points in the third quarter of ~~2019~~2020 compared to the same quarter last year primarily driven by lower ~~sales~~workplace furnishings volume, ~~and higher input costs,~~ partially offset by ~~price realization~~volume growth in residential building products and ~~productivity,~~ net ~~of investments.~~productivity.

Selling and Administrative Expenses

Selling and administrative ~~(SG&A)~~ expenses as a percentage of net sales ~~decreased 110~~increased 60 basis points in the third quarter of ~~2019~~2020 compared to the same quarter last year ~~primarily driven~~due to lower volume, partially offset by ~~higher net sales and~~ lower core ~~spend.~~SG&A spend and freight and distribution productivity.

~~Restructuring Charges~~Operating Income

In the third quarter of ~~2019, the Corporation recorded $0.3~~2020, operating income was $38.8 million, ~~of restructuring costs in connection with a structural realignment~~compared to $60.7 million in the ~~office furniture segment.~~same quarter last year. The decrease was primarily driven by lower workplace furnishings volume, partially offset by year-over-year SG&A expense management, net productivity benefits, and volume growth in residential building products.

In the third quarter of 2018, the Corporation recorded $0.1 million of restructuring costs primarily associated with the previously announced closure of the hearth manufacturing facility in Paris, Kentucky.

Interest Expense, Net

Interest expense, net for the third quarter of ~~2019~~2020 was ~~$2.2~~$1.5 million, compared to ~~$2.5~~$2.2 million in the same quarter last year. The decrease was driven by ~~higher~~lower interest ~~income in the current period, as the Corporation held a larger average balance of excess cash in interest-bearing accounts.~~rates and reduced borrowings.

Income Taxes

The Corporation's income tax provision for the third quarter of 2020 was $6.6 million on income before taxes of $37.2 million, or an effective tax rate of 17.6 percent. For the third quarter of 2019, the Corporation's income tax provision was an expense of $12.4 million on income before taxes of $58.5 million, or an effective tax rate of 21.2 percent. ~~For~~The decreased rate was primarily due to the ~~third quarter~~effect of ~~2018, the Corporation's income~~ tax ~~provision was an expense of $11.2 million~~credits on ~~income before taxes of $51.1 million, or an effective tax rate of 21.9 percent.~~lower projected worldwide full year income. Refer to "Note ~~10.~~8. Income Taxes" for further information.

Net Income Attributable to HNI Corporation

Net income attributable to the Corporation was $30.7 million, or $0.71 per diluted share in the third quarter of 2020, compared to $46.1 million or $1.07 per diluted share in the third quarter of ~~2019 compared to $39.9 million or $0.89 per diluted share in the third quarter of 2018.~~

2019.

Results of Operations - Nine Months Ended

Net Sales

~~For~~Consolidated net sales for the first nine months of ~~2019, consolidated net sales~~2020 decreased ~~1.7~~14.6 percent compared to the same period last year. The change was driven by a ~~2.2~~19.9 percent decrease in the ~~office furniture segment. Office furniture~~workplace furnishings segment, ~~sales decreased primarily due to~~partially offet by a ~~decrease~~2.7 percent increase in the ~~supplies-driven business, along with~~residential building products segment. Included in the sales results for the first nine months of 2020 was a ~~decrease of $18.0~~$6.4 million impact from ~~the net impact of closing and divesting small office furniture companies. Hearth~~acquiring residential building products ~~segment sales decreased 0.1 percent compared to the same period last year.~~distributors.

Gross Profit

Gross profit as a percentage of net sales ~~was~~remained flat in the first nine months of ~~2019~~2020 compared to the same period last ~~year. A decrease of 10 basis points was driven primarily by~~year as lower volume ~~and higher input costs, partially~~was offset by ~~price realization. An offsetting increase of 10 basis points was due to transition costs incurred in the prior year period.~~net productivity and favorable price-cost.

During the first nine months of 2018, the Corporation recorded $1.7 million of transition costs in cost of sales primarily related to structural realignment in China and the previously announced closure of the office furniture manufacturing facility in Orleans, Indiana.

Selling and Administrative Expenses

Selling and administrative expenses as a percentage of net sales ~~decreased 30~~increased 100 basis points in the first nine months of ~~2019~~2020 compared to the same period last year ~~primarily driven by~~due to $5.0 million of one-time costs related to the COVID-19 pandemic and lower ~~business system implementation costs and core spend,~~volume, partially offset by ~~higher investments~~lower core SG&A spend.

Impairment and ~~cost inflation.~~

Restructuring ~~and Impairment~~ Charges

During the first nine months of 2020, the Corporation recorded $32.7 million of impairment charges related to goodwill and intangible assets as a result of the COVID-19 pandemic and related economic disruption.

During the first nine months of 2019, the Corporation recorded $1.2 million of restructuring costs in connection with a structural realignment in the ~~office furniture~~workplace furnishings segment.

~~During~~

Operating Income

In the first nine months of 2018, the Corporation recorded $2.3 million of restructuring and impairment charges primarily associated with the previously announced closures of the office furniture manufacturing facility in Orleans, Indiana and the hearth manufacturing facility in Paris, Kentucky. These costs include an impairment charge due to an updated valuation of the closed manufacturing facility held for sale.

~~Interest Expense, Net~~

~~Interest expense, net for the first nine months of 2019~~2020, operating income was ~~$6.8~~$29.9 million compared to ~~$7.4~~operating income of $87.6 million in the same period last year. The decrease was driven by ~~higher interest income~~lower volume and $37.7 million of impairment charges and costs related to the COVID-19 pandemic and resulting economic disruption, partially offset by lower core SG&A spend, net productivity, and favorable price-cost.

Interest Expense, Net

Interest expense, net for the first nine months of 2020 was $5.3 million, compared to $6.8 million in the ~~current~~same period ~~as the Corporation held a larger average balance of excess cash in interest-bearing accounts.~~last year. The decrease was due to lower interest rates and borrowings, partially offset by lower interest income.

Income Taxes

The Corporation's income tax provision for the first nine months of 2020 was an expense of $5.3 million on income before taxes of $24.6 million, or an effective tax rate of 21.4 percent. For the first nine months of 2019, the Corporation's income tax provision was an expense of $17.9 million on income before taxes of $80.8 million, or an effective tax rate of 22.1 percent. ~~For the first nine months of 2018, the Corporation's income tax provision~~The decrease was ~~an expense of $16.0 million on income before taxes of $77.0 million, or an effective tax rate of 20.8 percent. The income tax provision reflects a higher rate in 2019 compared to the prior year period~~ primarily due to the ~~release~~effect of ~~a valuation allowance for certain foreign jurisdictions in 2018.~~tax credits on lower projected worldwide full year income. Refer to "Note ~~10.~~8. Income Taxes" for further information.

Net Income Attributable to HNI Corporation

Net income attributable to the Corporation was $19.3 million, or $0.45 per diluted share in the first nine months of 2020, compared to net income attributable to the Corporation of $62.9 million or $1.44 per diluted share ~~for~~in the first nine months of ~~2019 compared to $61.0 million or $1.38 per diluted share for the first nine months of 2018.~~2019.

~~Office Furniture~~Workplace Furnishings

The following table presents certain key highlights from the results of operations in the ~~office furniture~~workplace furnishings segment (in thousands):


	Three Months Ended														Nine Months Ended
	September 26, 2020			September 28, 2019			Change		September 26, 2020			September 28, 2019			Change
Net sales	$	353,361		$	484,755		(27.1	%)	$	999,827		$	1,247,778		(19.9	%)
Operating profit (loss)	$	16,826		$	51,162		(67.1	%)	$	(8,619)		$	68,180		(112.6	%)
Operating profit (loss) %	4.8		%	10.6		%	-580 bps		(0.9		%)	5.5		%	-640 bps

Three Months Ended Nine Months Ended
September 28,
2019 September 29,
2018 Change September 28,
2019 September 29,
2018 Change
Net sales $ 484,755
$ 471,687
2.8 % $ 1,247,778
$ 1,276,480
(2.2 %)
Operating profit $ 51,162
$ 45,721
11.9 % $ 68,180
$ 64,898
5.1 %
Operating profit % 10.6 % 9.7 % 90 bps 5.5 % 5.1 % 40 bps

Three Months Ended

Third quarter ~~2019~~2020 net sales for the ~~office furniture~~workplace furnishings segment ~~increased 2.8~~decreased 27.1 percent compared to the same quarter last year. Sales increased primarily due to an increase in the contract business, partially offset by a decrease in the supplies-driven business, along with a decrease of $4.5 million due to the net impact of divesting small office furniture companies.

Operating profit as a percentage of net sales ~~increased 90~~decreased 580 basis points in the third quarter of ~~2019~~2020 compared to the same quarter last year. ~~This increase~~The decrease was driven by ~~price realization and productivity, net of investments,~~lower volume, partially offset by net productivity and lower ~~sales volume, higher input costs, and higher restructuring and transition costs.~~

core SG&A spend.

Nine Months Ended

Net sales for the first nine months of ~~2019~~2020 for the ~~office furniture~~workplace furnishings segment decreased ~~2.2~~19.9 percent compared to the same period last year. ~~Sales decreased primarily due to a decrease in the supplies-driven business, along with a decrease of $18.0 million due to the net impact of closing and divesting small office furniture companies.~~

Operating profit (loss) as a percentage of net sales ~~increased 40~~decreased 640 basis points ~~for~~in the first nine months of ~~2019~~2020 compared to the same period last year. ~~Of this increase, 30 basis points were driven primarily~~In the current year period, the workplace furnishings segment recorded charges of $32.7 million related to the impairment of goodwill and intangible assets and $3.4 million of other costs related to the COVID-19 pandemic and related economic disruption. Additionally, segment results decreased compared to the same period last year due to by ~~price realization,~~ lower ~~business system implementation costs, and improved productivity, net of investments,~~volume, partially offset by lower ~~sales volume~~core SG&A spend, net productivity, and ~~higher input costs. The remaining 10 basis points increase was due to lower restructuring and transition costs.~~favorable price-cost.

During the first nine months of 2019, the Corporation recorded $1.2 million of restructuring costs and $0.2 million of transition costs in connection with a structural realignment in the office furniture segment.

During the first nine months of 2018, the office furniture segment recorded $1.3 million of restructuring costs and $1.2 million of transition costs primarily associated with the previously announced closure of the office furniture manufacturing facility in Orleans, Indiana and structural realignments in China. Of these charges, $1.2 million was included in cost of sales.

~~Hearth~~Residential Building Products

The following table presents certain key highlights from the results of operations in the ~~hearth~~residential building products segment (in thousands):


	Three Months Ended														Nine Months Ended
	September 26, 2020			September 28, 2019			Change		September 26, 2020			September 28, 2019			Change
Net sales	$	153,702		$	140,631		9.3	%	$	393,397		$	383,090		2.7	%
Operating profit	$	30,197		$	23,772		27.0	%	$	65,232		$	54,743		19.2	%
Operating profit %	19.6		%	16.9		%	270 bps		16.6		%	14.3		%	230 bps

Three Months Ended Nine Months Ended
September 28,
2019 September 29,
2018 Change September 28,
2019 September 29,
2018 Change
Net sales $ 140,631
$ 139,433
0.9 % $ 383,090
$ 383,323
(0.1 %)
Operating profit $ 23,772
$ 21,824
8.9 % $ 54,743
$ 55,250
(0.9 %)
Operating profit % 16.9 % 15.7 % 120 bps 14.3 % 14.4 % -10 bps

Three ~~Months Ended~~months ended

Third quarter ~~2019~~2020 net sales for the ~~hearth~~residential building products segment increased ~~0.9~~9.3 percent compared to the same quarter last year. ~~Sales increased~~Included in the ~~new construction business, but were partially offset by~~sales results was a ~~decrease in the retail business.~~$2.4 million impact from acquiring residential building products distributors.

Operating profit as a percentage of net sales increased ~~120~~270 basis points in the third quarter of ~~2019~~2020 compared to the same quarter last year. ~~This~~The increase was primarily driven by ~~price realization~~higher volume, favorable price-cost, lower core SG&A spend, and ~~one-time restructuring and transition costs incurred in the prior year quarter, partially offset by lower sales volume and higher input costs.~~net productivity.

Nine ~~Months Ended~~months ended

Net sales for the first nine months of ~~2019~~2020 for the ~~hearth~~residential building products segment ~~decreased 0.1~~increased 2.7 percent compared to the same period last year. ~~The decrease was driven by the retail business, partially offset by an increase~~Included in the ~~new construction business.~~sales results was a $6.4 million impact from acquiring residential building products distributors.

Operating profit as a percentage of net sales ~~decreased 10~~increased 230 basis points ~~for~~in the first nine months of ~~2019~~2020 compared to the same period last year. ~~Of this decrease, 50 basis points were~~The increase was primarily driven by ~~lower sales volume, higher input costs, and investments, partially offset by price realization,~~favorable price-cost, net productivity, and lower core SG&A ~~spend and incentive compensation. This decline was partially offset by a 40 basis points increase due to restructuring and impairment charges, and transition costs, incurred in the prior year period.~~spend.

During the first nine months of 2018, the hearth products segment recorded $1.0 million of restructuring and impairment charges and $0.5 million of transition costs primarily associated with the previously announced closures of the hearth manufacturing facilities in Paris, Kentucky and Colville, Washington. Of these charges, $0.5 million was included in cost of sales.

Liquidity and Capital Resources

Cash, cash equivalents, and short-term investments, coupled with cash flow from future operations, borrowing capacity under the existing credit agreement, 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. Additionally, based on current earnings before interest, taxes, depreciation and amortization generation, the Corporation can access the full remaining $375 million of borrowing capacity available under the revolving credit facility and maintain compliance with applicable covenants.

Cash Flow – Operating Activities

Operating activities were a source of $143.4 million of cash in the first nine months of 2020 compared to a source of $115.6 million of cash in the first nine months of ~~2019 compared to a source of $115.0 million of cash in the first nine months of 2018. An~~2019. The increase in ~~non-cash items is primarily attributable to amortization of lease costs in accordance with ASU No. 2016-02, mostly offset~~operating cash flows was driven by ~~related lease outflows and other smaller~~favorable working capital ~~balance changes.~~activity.

Cash Flow – Investing Activities

Capital expenditures, including capitalized software, for the first nine months of ~~2019~~2020 were ~~$50.2~~$32.0 million compared to ~~$47.0~~$50.2 million in the same period last year. These expenditures are primarily focused on machinery, equipment, and tooling required to support new products, continuous improvements, and cost savings initiatives in manufacturing processes. For the full year ~~2019,~~2020, capital expenditures are ~~now~~ expected to be approximately ~~$60~~$40 to ~~$70~~$45 million.

Current year investing activities also include acquisition spending for residential building products distributors.

~~Real Estate Transaction~~
- In the first quarter of 2018, the Corporation entered into a sale-leaseback transaction, selling a manufacturing facility and subsequently leasing back a portion of the facility for a term of 10 years. The net proceeds from the sale of the facility of $16.9 million are reflected in "Proceeds from sale of property, plant, equipment" in the Condensed Consolidated Statements of Cash Flows. See "Note 6. Leases" in the Notes to Condensed Consolidated Financial Statements for further information.

Cash Flow – Financing Activities

Long-Term 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 represent periodic borrowings and repayments under the revolving credit facility. ~~During the second quarter of 2018, the Corporation issued $100 million of private placement notes. The proceeds were used to repay outstanding borrowings under the revolving credit facility.~~ See "Note 9.7. Long-Term 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 (in dollars):


	Three Months Ended						Nine Months Ended
	September 26, 2020		September 28, 2019		September 26, 2020		September 28, 2019
Dividends per common share	$	0.305	$	0.305	$	0.915	$	0.905

Three Months Ended Nine Months Ended
September 28,
2019 September 29,
2018 September 28,
2019 September 29,
2018
Dividends per common share $ 0.305
$ 0.295
$ 0.905
$ 0.875

During the third quarter, the Board declared the regular quarterly cash dividend on August ~~6, 2019.~~3, 2020. The dividend was paid on September ~~3, 2019~~1, 2020 to shareholders of record on August ~~16, 2019. This was a 3.4 percent per share increase over the comparable prior year quarterly dividend paid on September 4, 2018.~~14, 2020.

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 may elect to opportunistically purchase additional shares based on excess cash generation and/or share price considerations. The Board authorized $200 million on November 9, 2007 and an additional $200 million each on November 7, 2014 and February 13, 2019 for repurchases of the Corporation’s common stock. As ~~of September 28, 2019, approximately $183.7 million of~~announced in the ~~authorizations remain unspent.~~

~~The following table summarizes shares repurchased and settled by~~April 6, 2020 COVID-19 response update, the Corporation ~~(in thousands, except per~~temporarily suspended share ~~data):~~

~~Cash,~~repurchase activity to support available cash ~~equivalents, and short-term investments, coupled with cash flow from future operations, borrowing capacity under the existing credit agreement, and the ability to access capital markets, are expected~~flow; this initiative continues to be ~~adequate~~evaluated and there is currently no timeframe planned regarding resumption of share repurchases. See "Note 10. Accumulated Other Comprehensive Income (Loss) and Shareholders' Equity" in the Notes to ~~fund operations and satisfy cash flow needs~~Condensed Consolidated Financial Statements for at least the next twelve months. Additionally, based on current earnings before interest, taxes, depreciation and amortization generation, the Corporation can access the full remaining $310 million of borrowing capacity available under the revolving credit facility and maintain compliance with applicable covenants.further information.

Off-Balance Sheet Arrangements

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

Contractual Obligations

Contractual obligations associated with ongoing business and financing activities will result in cash payments in future periods. A table summarizing the amounts and estimated timing of these future cash payments was provided in the Corporation's Annual Report on Form 10-K for the fiscal year ended December ~~29, 2018.~~28, 2019. 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 nine months of ~~2019.~~2020.

Commitments and Contingencies

See "Note ~~17.~~15. 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 ("GAAP"). The preparation of ~~the~~these financial statements requires ~~the Corporation~~management to make estimates and ~~judgments affecting~~assumptions that affect the reported ~~amount~~amounts of assets, liabilities, ~~revenues,~~revenue, and expenses, and related disclosure of contingent assets and liabilities. ~~The Corporation continually evaluates its accounting policies and estimates. The Corporation~~Management bases its estimates on historical experience and on a variety of other assumptions that are believed ~~by management~~ to be reasonable ~~in order to make~~under the circumstances, the results of which form the basis for making judgments about the carrying ~~value~~values of assets and ~~liabilities.~~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. 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 ~~judgments~~assumptions in preparing the financial statements is provided in the Corporation's Annual Report on Form 10-K for the fiscal year ended December ~~29, 2018.~~28, 2019.

Recently Issued Accounting Standards Not Yet Adopted

In ~~June 2016,~~December 2019, the FASB issued ASU No. ~~2016-13,~~2019-12, ~~Measurement of Credit Losses on Financial Instruments~~Simplifying the Accounting for Income Taxes. ~~and also issued subsequent amendments~~This update simplifies various aspects related to accounting for income taxes, removes certain exceptions to the ~~initial guidance: ASU 2018-19, ASU 2019-04,~~general principles in ASC 740, and ASU 2019-05 (collectively, Topic 326). Topic 326 replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses by requiring consideration of a broader range of reasonableclarifies and ~~supportable information and is intended~~amends existing guidance to ~~provide financial statement users with more useful information about expected credit losses on financial instruments. Topic 326~~improve consistent application. The new standard becomes effective for the

Corporation in fiscal ~~2020 and requires a cumulative effect adjustment in retained earnings as of the beginning of the year~~

~~of adoption.~~2021. The Corporation is currently evaluating the effect ~~Topic 326~~the standard will have on ~~the~~ consolidated financial statements and related disclosures.

Looking Ahead

Management continues to anticipate near-term challenges in both volume and profit levels as the Corporation navigates the COVID-19 pandemic and related economic disruption. However, management expects fourth quarter 2020 sales to increase from third quarter 2020 levels, driven by improving recent order trends in both segments, strong housing construction activity which supports Residential Building Products sales growth, and an extra week in the fourth quarter fiscal calendar. Cash flows are anticipated to remain healthy, with net debt levels expected to be stable through fiscal year-end.

Management remains optimistic about the long-term prospects in the ~~office furniture~~workplace furnishings and ~~hearth~~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 Item 1A of the Corporation's Annual Report on Form 10-K for the fiscal year ended December ~~29, 2018.~~28, 2019 and Part II, Item 1A of this report. The Corporation cautions readers not to place undue reliance on any forward-looking statement, which speaks only as of the date made, 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: the duration and scope of the COVID-19 pandemic and its effect on people and the economy; 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; impacts of tax legislation; force majeure events outside the Corporation's control; and other risks 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 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 ~~29, 2018,~~28, 2019 and Part II, Item 1A of this report, 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 quarterly reports on Form 10-Q and current reports on Form 8-K filed with or furnished to the SEC.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

As of September ~~28, 2019,~~26, 2020, there were 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 ~~29, 2018.~~28, 2019.

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(e) and 15d – 15(e). As of September ~~28, 2019,~~26, 2020, 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

There have been no changes in the Corporation's internal controls 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.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

For information regarding legal proceedings, see "Note ~~17.~~15. Guarantees, Commitments, and Contingencies" in the Notes to Condensed Consolidated Financial Statements, which information is incorporated herein by reference.

Item 1A. Risk Factors

There have been no additional material changes from the risk factors disclosed in the "Risk Factors" section of the Corporation's Annual Report on Form 10-K for the fiscal year ended December ~~29, 2018.~~28, 2019, with the exception of:

•A new risk factor pertaining to the COVID-19 pandemic, as disclosed in Part II, Item 1A."Risk Factors" in the Corporation's Quarterly Report on Form 10-Q for the fiscal quarter ended March 28, 2020.

•As previously disclosed in the "Risk Factors" section of the Corporation's Annual Report on Form 10-K for the year ended December 28, 2019, the Corporation's international operations expose it to risks related to conducting business in multiple jurisdictions outside the U.S. These risks may be elevated given the current uncertainties around the impact of the global pandemic; ongoing disputes and increased tensions related to global trade, particularly involving the U.S. and China; and complexities with foreign regulatory environments including the decreased ability of U.S. regulators to exercise oversight of subsidiaries of U.S. companies based in certain international jurisdictions.

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

Issuer Purchases of Equity Securities:

The ~~following is a summary~~Corporation did not repurchase any of ~~share repurchase activity~~its shares during the ~~quarter:~~quarter. As of September 26, 2020, $158.3 million was authorized and available for the repurchases of shares by the Corporation.

Period Total Number of Shares (or Units) Purchased (1)
Average Price
Paid per Share
(or Unit)
Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet be Purchased Under the Plans or Programs
06/30/19 – 07/27/19 22,000
$ 33.96
22,000
$ 190,152,818
07/28/19 – 08/24/19 95,440
$ 31.94
95,440
$ 187,104,103
08/25/19 – 09/28/19 103,400
$ 32.84
103,400
$ 183,708,380
Total 220,840
220,840

~~(1) No shares were purchased outside of a publicly announced plan or program.~~

The Corporation repurchases shares under previously announced plans authorized by the ~~Board as follows:~~

Board. The Corporation's share purchase program ("Program") announced November 9, 2007, ~~providing~~provided a share repurchase authorization of $200,000,000 with no specific expiration date, with increases announced November 7, 2014 and February 13, 2019, providing additional share repurchase authorizations each of $200,000,000 with no specific expiration date.

No repurchase plans expired or were terminated during the third quarter of ~~2019,~~2020, nor do any plans exist under which the Corporation does not intend to make further purchases. The Program does not obligate the Corporation to purchase any shares and the authorization for the Program may be terminated, increased, or decreased by the Board at any time. As announced in the April 6, 2020 COVID-19 response update, the Corporation temporarily suspended share repurchase activity to support available cash flow.

Item 6. Exhibits



~~(31.1)~~31.1			Certification of the CEO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002+
~~(31.2)~~31.2			Certification of the ~~CFO~~C F O Pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002~~2002++
~~(32.1)~~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 September ~~28, 2019~~26, 2020 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
104			Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

⁺ Filed or furnished herewith.

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: October ~~29, 2019~~27, 2020

By:

/s/ Marshall H. Bridges

Marshall H. Bridges

Senior Vice President and Chief Financial Officer



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


	Three Months Ended - September 29, 2018
	Common Stock			Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Non-controlling Interest			Total Shareholders’ Equity
Balance, June 30, 2018	$	43,736		$	26,077		$	458,458		$	(3,477	)	$	500		$	525,294
Comprehensive income:
Net income (loss)	—			—			39,907			—			0			39,907
Other comprehensive income (loss), net of tax	—			—			—			(717		)	—			(717		)
Cash dividends; $0.295 per share	—			—			(12,933		)	—			—			(12,933		)
Common shares – treasury:
Shares purchased	(163		)	(6,758		)	—			—			—			(6,921		)
Shares issued under Members' Stock Purchase Plan and stock awards, net of tax	247			8,198			—			—			—			8,445
Balance, September 29, 2018	$	43,820		$	27,517		$	485,432		$	(4,195	)	$	500		$	553,074

	Nine Months Ended - September 29, 2018
	Common Stock			Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Non-controlling Interest			Total Shareholders’ Equity
Balance, December 30, 2017	$	43,354		$	7,029		$	467,296		$	(3,611	)	$	509		$	514,577
Comprehensive income:
Net income (loss)	—			—			61,014			—			(50		)	60,964
Other comprehensive income (loss), net of tax	—			—			—			(584		)	—			(584		)
Change in ownership of non-controlling interest	—			—			(41		)	—			41			—
Cash dividends; $0.875 per share	—			—			(38,201		)	—			—			(38,201		)
Common shares – treasury:
Shares purchased	(369		)	(9,879		)	(4,636		)	—			—			(14,884		)
Shares issued under Members' Stock Purchase Plan and stock awards, net of tax	835			30,367			—			—			—			31,202
Balance, September 29, 2018	$	43,820		$	27,517		$	485,432		$	(4,195	)	$	500		$	553,074



		Three Months Ended				Nine Months Ended
	Segment	September 28, 2019		September 29, 2018		September 28, 2019		September 29, 2018
Supplies-driven channel	Office furniture	$	260,359	$	265,971	$	649,380	$	680,656
Contract channel	Office furniture	224,396		205,716		598,398		595,824
Hearth	Hearth products	140,631		139,433		383,090		383,323
Net sales		$	625,386	$	611,120	$	1,630,868	$	1,659,803



	September 28, 2019		December 29, 2018
Trade receivables (1)	$	275,738	$	259,075
Other contract assets (current) (2)	$	837	$	529
Other contract assets (long-term) (3)	$	2,865	$	2,188
Contract liabilities (4)	$	44,463	$	44,858



	Severance Costs			Facility Exit Costs & Other			Total
Restructuring allowance as of December 29, 2018	$	136		$	150		$	286
Restructuring charges	899			315			1,214
Cash payments	(640		)	(99		)	(739		)
Restructuring allowance as of September 28, 2019	$	395		$	366		$	761



Classification	September 28, 2019
Assets
Right-of-use operating leases	$	72,087
Right-of-use finance leases	2,157
Total Right-of-use operating / finance leases	$	74,244

Liabilities
Current lease obligations - operating	$	20,506
Current lease obligations - finance	501
Total Current lease obligations - operating / finance	21,007

Long-term lease obligations - operating	59,474
Long-term lease obligations - finance	1,669
Total Long-term lease obligations - operating / finance	61,143

Total lease obligations - operating / finance	$	82,150



	Operating Leases (a)		Finance Leases (a)		Total
2019 (remaining portion of year)	$	6,590	$	143	$	6,733
2020	23,521		593		24,114
2021	16,792		564		17,356
2022	11,332		488		11,820
2023	9,388		436		9,824
Thereafter	22,531		112		22,643
Total lease payments	90,154		2,336		92,490
Less: Interest	10,177		163		10,340
Present value of lease liabilities	$	79,977	$	2,173	$	82,150



	Weighted-Average Discount Rate (percent)		Weighted-Average Remaining Lease Term (years)
Operating leases	4.2	%	5.5
Finance leases	3.6	%	4.3



	Nine Months Ended
	September 28, 2019
Cash paid for amounts included in the measurements of lease liabilities:
Operating cash flows from operating / finance leases	$	20,072
Financing cash flows from finance leases	$	262
Leased assets obtained in exchange for new operating / finance lease liabilities	$	18,387



	Operating Leases
2019	$	24,387
2020	18,250
2021	13,324
2022	9,082
2023	6,228
Thereafter	10,469
Total minimum lease payments	$	81,740



	September 28, 2019						December 29, 2018
	Gross		Accumulated Amortization		Net		Gross		Accumulated Amortization		Net
Patents	$	40	$	40	$	—	$	40	$	34	$	6
Software	174,550		63,097		111,453		170,274		49,561		120,713
Trademarks and trade names	7,564		3,216		4,348		7,564		2,721		4,843
Customer lists and other	103,803		69,872		33,931		103,840		65,688		38,152
Net definite-lived intangible assets	$	285,957	$	136,225	$	149,732	$	281,718	$	118,004	$	163,714



Period	Total Number of Shares (or Units) Purchased (1)	Average Price Paid per Share (or Unit)		Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet be Purchased Under the Plans or Programs
06/30/19 – 07/27/19	22,000	$	33.96	22,000	$	190,152,818
07/28/19 – 08/24/19	95,440	$	31.94	95,440	$	187,104,103
08/25/19 – 09/28/19	103,400	$	32.84	103,400	$	183,708,380
Total	220,840			220,840