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

FORM

10-Q

☒

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

For the quarterly period ended

October ~~2, 2021~~1, 2022

☐

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

Commission File Number:

1-14225

HNI Corporation

Iowa

42-0617510

(State of Incorporation)

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

600 East Second Street

P.O. Box 1109

Muscatine

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

New York Stock Exchange

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

Yes

☒ No ☐

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

Yes

☒ No ☐

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

Large accelerated filer

☒

Accelerated filer

☐

Smaller reporting company

☐

Non-accelerated filer

☐

Emerging growth company

☐

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

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

Yes

☐

No ☒

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

Common Stock, $1 Par Value

Outstanding as of

October ~~2, 2021~~1, 2022

~~43,559,359~~41,363,775


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 and Nine Months Ended Oc tober 1, 2 022 and October 2, 2021 ~~and September 26, 2020~~	3

	Condensed Consolidated Balance Sheets -Oc ~~October 2, 2021~~tober 1 , 2022 and January ~~2, 2021~~1, 2022	4

	Condensed Consolidated Statements of Equity - Three and ~~Nine~~N ine Months Ended Oc tober 1 , 2022 and October 2 , 2021 ~~and September 26, 2020~~	6

	Condensed Consolidated Statements of Cash Flows - N ~~ine~~Nine Months Ended Oc tober 1 , 2022 and October 2 , 2021 ~~and September 26, 2020~~	8

	Notes to Condensed Consolidated Financial Statements	9

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	22

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2829

Item 4.	Controls and Procedures	2829

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	3031

Item 1A.	Risk Factors	3031

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3031

Item 3.	Defaults Upon Senior Securities - None	-

Item 4.	Mine Safety Disclosures - Not Applicable	-

Item 5.	Other Information - None	-

Item 6.	Exhibits	3132

Signatures		3233

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements


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

		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		October 2, 2021		September 26, 2020		October 2, 2021		September 26, 2020			October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021

Net sales	Net sales	$	586,750	$	507,063	$	1,581,498	$	1,393,224	Net sales	$	598.8	$	586.7	$	1,792.9	$	1,581.5
Cost of sales	Cost of sales	391,394		321,516		1,018,334		880,754		Cost of sales	389.3		391.4		1,165.9		1,018.3
Gross profit	Gross profit	195,356		185,547		563,164		512,470		Gross profit	209.5		195.4		627.0		563.2
Selling and administrative expenses	Selling and administrative expenses	169,113		146,785		489,634		449,933		Selling and administrative expenses	178.2		169.1		544.3		489.6

Gain on sale of subsidiary										Gain on sale of subsidiary	(50.6)		—		(50.6)		—
Impairment charges	Impairment charges	—		—		—		32,661		Impairment charges	—		—		1.0		—
Operating income	Operating income	26,243		38,762		73,530		29,876		Operating income	81.9		26.2		132.2		73.5
Interest expense, net	Interest expense, net	1,853		1,517		5,465		5,271		Interest expense, net	2.4		1.9		6.5		5.5
Income before income taxes	Income before income taxes	24,390		37,245		68,065		24,605		Income before income taxes	79.5		24.4		125.8		68.1
Income taxes	Income taxes	5,232		6,558		16,476		5,259		Income taxes	16.4		5.2		18.2		16.5
Net income	Net income	19,158		30,687		51,589		19,346		Net income	63.1		19.2		107.6		51.6
Less: Net loss attributable to non-controlling interest		0		(1)		(3)		(3)
Less: Net income (loss) attributable to non-controlling interest										Less: Net income (loss) attributable to non-controlling interest	(0.0)		0.0		(0.0)		(0.0)
Net income attributable to HNI Corporation	Net income attributable to HNI Corporation	$	19,158	$	30,688	$	51,592	$	19,349	Net income attributable to HNI Corporation	$	63.1	$	19.2	$	107.6	$	51.6

Average number of common shares outstanding – basic	Average number of common shares outstanding – basic	43,781		42,684		43,573		42,651		Average number of common shares outstanding – basic	41.3		43.8		41.8		43.6
Net income attributable to HNI Corporation per common share – basic	Net income attributable to HNI Corporation per common share – basic	$	0.44	$	0.72	$	1.18	$	0.45	Net income attributable to HNI Corporation per common share – basic	$	1.53	$	0.44	$	2.57	$	1.18
Average number of common shares outstanding – diluted	Average number of common shares outstanding – diluted	44,342		43,010		44,045		42,905		Average number of common shares outstanding – diluted	41.8		44.3		42.3		44.0
Net income attributable to HNI Corporation per common share – diluted	Net income attributable to HNI Corporation per common share – diluted	$	0.43	$	0.71	$	1.17	$	0.45	Net income attributable to HNI Corporation per common share – diluted	$	1.51	$	0.43	$	2.54	$	1.17

Foreign currency translation adjustments	Foreign currency translation adjustments	$	46	$	923	$	107	$	368	Foreign currency translation adjustments	$	(3.7)	$	0.0	$	(5.5)	$	0.1
Change in unrealized gains (losses) on marketable securities, net of tax	Change in unrealized gains (losses) on marketable securities, net of tax	(32)		(33)		(157)		269		Change in unrealized gains (losses) on marketable securities, net of tax	(0.3)		(0.0)		(0.8)		(0.2)

Change in derivative financial instruments, net of tax	Change in derivative financial instruments, net of tax	170		106		577		(2,393)		Change in derivative financial instruments, net of tax	(0.1)		0.2		0.9		0.6
Other comprehensive income (loss), net of tax	Other comprehensive income (loss), net of tax	184		996		527		(1,756)		Other comprehensive income (loss), net of tax	(4.0)		0.2		(5.4)		0.5
Comprehensive income	Comprehensive income	19,342		31,683		52,116		17,590		Comprehensive income	59.1		19.3		102.2		52.1
Less: Comprehensive loss attributable to non-controlling interest		0		(1)		(3)		(3)
Less: Comprehensive income (loss) attributable to non-controlling interest										Less: Comprehensive income (loss) attributable to non-controlling interest	(0.0)		0.0		(0.0)		(0.0)
Comprehensive income attributable to HNI Corporation	Comprehensive income attributable to HNI Corporation	$	19,342	$	31,684	$	52,119	$	17,593	Comprehensive income attributable to HNI Corporation	$	59.1	$	19.3	$	102.2	$	52.1

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

Amounts may not sum due to rounding.


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

		October 2, 2021		January 2, 2021			October 1, 2022		January 1, 2022
Assets	Assets					Assets
Current Assets:	Current Assets:					Current Assets:
Cash and cash equivalents	Cash and cash equivalents	$	126,436	$	116,120	Cash and cash equivalents	$	21.1	$	52.3
Short-term investments	Short-term investments	1,299		1,687		Short-term investments	2.0		1.4
Receivables	Receivables	238,620		207,971		Receivables	243.8		240.0
Allowance for doubtful accounts	Allowance for doubtful accounts	(4,185)		(5,514)		Allowance for doubtful accounts	(2.4)		(2.8)
Inventories		188,590		137,811
Inventories, net						Inventories, net	222.2		181.6

Prepaid expenses and other current assets	Prepaid expenses and other current assets	44,702		37,660		Prepaid expenses and other current assets	53.4		51.1

Total Current Assets	Total Current Assets	595,462		495,735		Total Current Assets	540.0		523.5

Property, Plant, and Equipment:	Property, Plant, and Equipment:					Property, Plant, and Equipment:
Land and land improvements	Land and land improvements	29,983		29,691		Land and land improvements	31.0		30.9
Buildings	Buildings	294,240		293,708		Buildings	292.3		294.5
Machinery and equipment	Machinery and equipment	588,126		578,643		Machinery and equipment	589.3		593.6
Construction in progress	Construction in progress	26,082		17,750		Construction in progress	31.9		29.7
		938,431		919,792			944.5		948.7
Less: Accumulated depreciation	Less: Accumulated depreciation	576,423		553,835		Less: Accumulated depreciation	(595.4)		(581.9)
Net Property, Plant, and Equipment	Net Property, Plant, and Equipment	362,008		365,957		Net Property, Plant, and Equipment	349.1		366.8

Right-of-use Finance Leases	Right-of-use Finance Leases	9,940		6,095		Right-of-use Finance Leases	11.0		10.2

Right-of-use Operating Leases	Right-of-use Operating Leases	80,223		70,219		Right-of-use Operating Leases	92.3		82.9

Goodwill and Other Intangible Assets		446,758		458,896
Goodwill and Other Intangible Assets, Net						Goodwill and Other Intangible Assets, Net	451.9		471.5

Other Assets	Other Assets	39,975		21,130		Other Assets	54.3		43.1

Total Assets	Total Assets	$	1,534,366	$	1,418,032	Total Assets	$	1,498.6	$	1,497.9

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

Amounts may not sum due to rounding.


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

		October 2, 2021		January 2, 2021			October 1, 2022		January 1, 2022
Liabilities and Equity	Liabilities and Equity					Liabilities and Equity
Current Liabilities:	Current Liabilities:					Current Liabilities:
Accounts payable and accrued expenses	Accounts payable and accrued expenses	$	464,599	$	413,638	Accounts payable and accrued expenses	$	435.0	$	473.8
Current maturities of long-term debt		3,345		841
Current maturities of debt						Current maturities of debt	1.2		3.2
Current maturities of other long-term obligations	Current maturities of other long-term obligations	3,598		2,990		Current maturities of other long-term obligations	2.0		3.9
Current lease obligations - finance		2,632		1,589
Current lease obligations - operating		19,970		19,970
Current lease obligations - Finance						Current lease obligations - Finance	3.3		2.8
Current lease obligations - Operating						Current lease obligations - Operating	18.8		22.8

Total Current Liabilities	Total Current Liabilities	494,144		439,028		Total Current Liabilities	460.4		506.4

Long-Term Debt	Long-Term Debt	174,587		174,524		Long-Term Debt	199.7		174.6

Long-Term Lease Obligations - Finance	Long-Term Lease Obligations - Finance	7,270		4,516		Long-Term Lease Obligations - Finance	7.7		7.4

Long-Term Lease Obligations - Operating	Long-Term Lease Obligations - Operating	64,634		53,249		Long-Term Lease Obligations - Operating	82.3		63.8

Other Long-Term Liabilities	Other Long-Term Liabilities	91,270		81,264		Other Long-Term Liabilities	77.5		80.7

Deferred Income Taxes	Deferred Income Taxes	72,754		74,706		Deferred Income Taxes	64.6		75.0

Total Liabilities	Total Liabilities	904,659		827,287		Total Liabilities	892.2		907.9

Equity:	Equity:					Equity:

HNI Corporation shareholders' equity	HNI Corporation shareholders' equity	629,384		590,419		HNI Corporation shareholders' equity	606.1		589.6

Non-controlling interest	Non-controlling interest	323		326		Non-controlling interest	0.3		0.3

Total Equity	Total Equity	629,707		590,745		Total Equity	606.4		590.0

Total Liabilities and Equity	Total Liabilities and Equity	$	1,534,366	$	1,418,032	Total Liabilities and Equity	$	1,498.6	$	1,497.9

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

Amounts may not sum due to rounding.


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

		Three Months Ended - October 2, 2021													Three Months Ended - October 1, 2022
		Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Non-controlling Interest		Total Shareholders’ Equity			Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Non-controlling Interest		Total Shareholders' Equity
Balance, July 3, 2021		$	43,875	$	76,275	$	523,120	$	(8,810)	$	323	$	634,783
Balance, July 2, 2022														Balance, July 2, 2022	$	41.3	$	47.4	$	481.1	$	(8.1)	$	0.3	$	562.0
Comprehensive income:	Comprehensive income:													Comprehensive income:
Net income (loss)	Net income (loss)	—		—		19,158		—		0		19,158		Net income (loss)	—		—		63.1		—		(0.0)		63.1
Other comprehensive income (loss), net of tax	Other comprehensive income (loss), net of tax	—		—		—		184		—		184		Other comprehensive income (loss), net of tax	—		—		—		(4.0)		—		(4.0)

Dividends payable	Dividends payable	—		—		(132)		—		—		(132)		Dividends payable	—		—		0.2		—		—		0.2
Cash dividends; $0.310 per share		—		—		(13,578)		—		—		(13,578)
Cash dividends; $0.320 per share														Cash dividends; $0.320 per share	—		—		(13.2)		—		—		(13.2)
Common shares – treasury:														Common shares – treasury:

Shares issued under Members' Stock Purchase Plan and stock awards, net of tax														Shares issued under Members' Stock Purchase Plan and stock awards, net of tax	0.0		(1.6)		—		—		—		(1.6)
Balance, October 1, 2022														Balance, October 1, 2022	$	41.4	$	45.8	$	531.1	$	(12.2)	$	0.3	$	606.4

															Nine Months Ended - October 1, 2022
															Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Non-controlling Interest		Total Shareholders' Equity
Balance, January 1, 2022														Balance, January 1, 2022	$	42.6	$	39.2	$	514.6	$	(6.8)	$	0.3	$	590.0
Comprehensive income:														Comprehensive income:
Net income (loss)														Net income (loss)	—		—		107.6		—		(0.0)		107.6
Other comprehensive income (loss), net of tax														Other comprehensive income (loss), net of tax	—		—		—		(5.4)		—		(5.4)

Dividends payable														Dividends payable	—		—		(0.3)		—		—		(0.3)
Cash dividends; $0.950 per share														Cash dividends; $0.950 per share	—		—		(39.7)		—		—		(39.7)
Common shares – treasury:	Common shares – treasury:													Common shares – treasury:
Shares purchased	Shares purchased	(345)		(12,712)		—		—		—		(13,057)		Shares purchased	(1.7)		(11.1)		(51.1)		—		—		(63.9)
Shares issued under Members' Stock Purchase Plan and stock awards, net of tax	Shares issued under Members' Stock Purchase Plan and stock awards, net of tax	29		2,320		—		—		—		2,349		Shares issued under Members' Stock Purchase Plan and stock awards, net of tax	0.5		17.7		—		—		—		18.1
Balance, October 2, 2021		$	43,559	$	65,883	$	528,568	$	(8,626)	$	323	$	629,707

Balance, October 1, 2022														Balance, October 1, 2022	$	41.4	$	45.8	$	531.1	$	(12.2)	$	0.3	$	606.4

Nine Months Ended - October 2, 2021
Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Non-controlling Interest Total Shareholders’ Equity
Balance, January 2, 2021 $ 42,919 $ 38,659 $ 517,994 $ (9,153) $ 326 $ 590,745
Comprehensive income:
Net income (loss) — — 51,592 — (3) 51,589
Other comprehensive income (loss), net of tax — — — 527 — 527
Dividends payable — — (660) — — (660)
Cash dividends; $0.925 per share — — (40,358) — — (40,358)
Common shares – treasury:
Shares purchased (500) (19,274) — — — (19,774)
Shares issued under Members' Stock Purchase Plan and stock awards, net of tax 1,140 46,498 — — — 47,638
Balance, October 2, 2021 $ 43,559 $ 65,883 $ 528,568 $ (8,626) $ 323 $ 629,707


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

		Three Months Ended - September 26, 2020														Three Months Ended - October 2, 2021
		Common Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Non-controlling Interest		Total Shareholders’ Equity			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
Balance, July 3, 2021															Balance, July 3, 2021	$	43.9	$	76.3	$	523.1	$	(8.8)	$	0.3	$	634.8
Comprehensive income:	Comprehensive income:														Comprehensive income:
Net income (loss)	Net income (loss)	—			—		30,688		—		(1)		30,687		Net income (loss)	—		—		19.2		—		0.0		19.2
Other comprehensive income (loss), net of tax	Other comprehensive income (loss), net of tax	—			—		—		996		—		996		Other comprehensive income (loss), net of tax	—		—		—		0.2		—		0.2

Dividends payable	Dividends payable	—			—		(58)		—		—		(58)		Dividends payable	—		—		(0.1)		—		—		(0.1)
Cash dividends; $0.305 per share		—			—		(13,021)		—		—		(13,021)
Cash dividends; $0.310 per share															Cash dividends; $0.310 per share	—		—		(13.6)		—		—		(13.6)
Common shares – treasury:	Common shares – treasury:														Common shares – treasury:

Shares purchased															Shares purchased	(0.3)		(12.7)		—		—		—		(13.1)
Shares issued under Members' Stock Purchase Plan and stock awards, net of tax	Shares issued under Members' Stock Purchase Plan and stock awards, net of tax	40			1,877		—		—		—		1,917		Shares issued under Members' Stock Purchase Plan and stock awards, net of tax	0.0		2.3		—		—		—		2.3
Balance, September 26, 2020		$	42,715		$	31,865	$	508,518	$	(9,829)	$	321	$	573,590
Balance, October 2, 2021															Balance, October 2, 2021	$	43.6	$	65.9	$	528.6	$	(8.6)	$	0.3	$	629.7

				Nine Months Ended - October 2, 2021
																Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Non-controlling Interest		Total Shareholders' Equity
Balance, January 2, 2021															Balance, January 2, 2021	$	42.9	$	38.7	$	518.0	$	(9.2)	$	0.3	$	590.7
Comprehensive income:															Comprehensive income:
Net income (loss)															Net income (loss)	—		—		51.6		—		(0.0)		51.6
Other comprehensive income (loss), net of tax															Other comprehensive income (loss), net of tax	—		—		—		0.5		—		0.5

Dividends payable															Dividends payable	—		—		(0.7)		—		—		(0.7)
Cash dividends; $0.925 per share															Cash dividends; $0.925 per share	—		—		(40.4)		—		—		(40.4)
Common shares – treasury:															Common shares – treasury:
Shares purchased															Shares purchased	(0.5)		(19.3)		—		—		—		(19.8)
Shares issued under Members' Stock Purchase Plan and stock awards, net of tax															Shares issued under Members' Stock Purchase Plan and stock awards, net of tax	1.1		46.5		—		—		—		47.6
Balance, October 2, 2021															Balance, October 2, 2021	$	43.6	$	65.9	$	528.6	$	(8.6)	$	0.3	$	629.7

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

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

Amounts may not sum due to rounding.


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

		Nine Months Ended					Nine Months Ended
		October 2, 2021		September 26, 2020			October 1, 2022		October 2, 2021
Net Cash Flows From (To) Operating Activities:	Net Cash Flows From (To) Operating Activities:					Net Cash Flows From (To) Operating Activities:
Net income	Net income	$	51,589	$	19,346	Net income	$	107.6	$	51.6
Non-cash items included in net income:	Non-cash items included in net income:					Non-cash items included in net income:
Depreciation and amortization	Depreciation and amortization	62,010		57,917		Depreciation and amortization	63.5		62.0
Other post-retirement and post-employment benefits	Other post-retirement and post-employment benefits	996		1,104		Other post-retirement and post-employment benefits	1.0		1.0
Stock-based compensation	Stock-based compensation	9,540		6,746		Stock-based compensation	6.4		9.5

Reduction in carrying amount of right-of-use assets	Reduction in carrying amount of right-of-use assets	18,964		16,965		Reduction in carrying amount of right-of-use assets	19.7		19.0
Deferred income taxes	Deferred income taxes	(2,057)		(3,730)		Deferred income taxes	(10.4)		(2.1)
Impairment of goodwill and intangible assets		—		32,661

Gain on sale of subsidiary						Gain on sale of subsidiary	(50.6)		—
Other – net	Other – net	2,640		815		Other – net	(0.4)		2.6
Net increase (decrease) in cash from operating assets and liabilities		(64,073)		13,316
Net decrease in cash from operating assets and liabilities						Net decrease in cash from operating assets and liabilities	(99.3)		(64.1)
Increase (decrease) in other liabilities	Increase (decrease) in other liabilities	8,925		(1,779)		Increase (decrease) in other liabilities	(3.5)		8.9
Net cash flows from (to) operating activities	Net cash flows from (to) operating activities	88,534		143,361		Net cash flows from (to) operating activities	33.9		88.5

Net Cash Flows From (To) Investing Activities:	Net Cash Flows From (To) Investing Activities:					Net Cash Flows From (To) Investing Activities:
Capital expenditures	Capital expenditures	(38,182)		(24,751)		Capital expenditures	(41.7)		(38.2)
Proceeds from sale of property, plant, and equipment	Proceeds from sale of property, plant, and equipment	193		81		Proceeds from sale of property, plant, and equipment	0.0		0.2
Capitalized software	Capitalized software	(9,613)		(7,250)		Capitalized software	(7.0)		(9.6)
Acquisition spending, net of cash acquired	Acquisition spending, net of cash acquired	(1,530)		(10,857)		Acquisition spending, net of cash acquired	(9.2)		(1.5)
Purchase of investments	Purchase of investments	(3,273)		(3,922)		Purchase of investments	(2.3)		(3.3)
Sales or maturities of investments	Sales or maturities of investments	3,164		3,246		Sales or maturities of investments	1.9		3.2
Net proceeds from sale of subsidiary						Net proceeds from sale of subsidiary	71.4		—

Net cash flows from (to) investing activities	Net cash flows from (to) investing activities	(49,241)		(43,453)		Net cash flows from (to) investing activities	13.2		(49.2)

Net Cash Flows From (To) Financing Activities:	Net Cash Flows From (To) Financing Activities:					Net Cash Flows From (To) Financing Activities:
Payments of long-term debt		(1,810)		(82,828)
Proceeds from long-term debt		4,335		82,119
Payments of debt						Payments of debt	(298.5)		(1.8)
Proceeds from debt						Proceeds from debt	321.6		4.3
Dividends paid	Dividends paid	(40,419)		(39,060)		Dividends paid	(39.9)		(40.4)
Purchase of HNI Corporation common stock	Purchase of HNI Corporation common stock	(18,461)		(6,764)		Purchase of HNI Corporation common stock	(65.2)		(18.5)
Proceeds from sales of HNI Corporation common stock	Proceeds from sales of HNI Corporation common stock	29,944		2,210		Proceeds from sales of HNI Corporation common stock	4.0		29.9
Other – net	Other – net	(2,566)		1,727		Other – net	(0.4)		(2.6)
Net cash flows from (to) financing activities	Net cash flows from (to) financing activities	(28,977)		(42,596)		Net cash flows from (to) financing activities	(78.3)		(29.0)

Net increase in cash and cash equivalents		10,316		57,312

Net increase (decrease) in cash and cash equivalents						Net increase (decrease) in cash and cash equivalents	(31.2)		10.3
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	116,120		52,073		Cash and cash equivalents at beginning of period	52.3		116.1
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	126,436	$	109,385	Cash and cash equivalents at end of period	$	21.1	$	126.4

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

Amounts may not sum due to rounding.

HNI Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

October ~~2, 2021~~1, 2022

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 January ~~2, 2021,~~1, 2022, 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 October ~~2, 2021,~~1, 2022, are not necessarily indicative of the results expected for the fiscal year ending ~~January 1,~~December 31, 2022. 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 January ~~2, 2021.~~1, 2022. Certain reclassifications have been made within the interim financial information to conform to the current presentation. All dollar amounts presented are in millions, except per share data or where otherwise indicated. Amounts may not sum due to rounding.

Note 2. Revenue from Contracts with Customers

Disaggregation of Revenue

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


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		October 2, 2021		September 26, 2020		October 2, 2021		September 26, 2020			October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021
Systems and storage	Systems and storage	$	227,827	$	207,549	$	611,097	$	578,601	Systems and storage	$	224.9	$	227.8	$	673.9	$	611.1
Seating	Seating	134,248		127,294		349,572		358,005		Seating	114.8		134.2		354.7		349.6
Other	Other	31,066		18,518		79,357		63,221		Other	35.5		31.1		106.4		79.4
Total workplace furnishings	Total workplace furnishings	393,141		353,361		1,040,026		999,827		Total workplace furnishings	375.2		393.1		1,135.0		1,040.0

Residential building products	Residential building products	193,609		153,702		541,472		393,397		Residential building products	223.6		193.6		657.9		541.5
Net sales	Net sales	$	586,750	$	507,063	$	1,581,498	$	1,393,224	Net sales	$	598.8	$	586.7	$	1,792.9	$	1,581.5

Sales by product category are subject to similar economic factors and market conditions. See ~~“Note 16.~~"Note 14. Reportable Segment ~~Information”~~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 or payable to certain workplace furnishings dealers in exchange for their multi-year commitment to market and sell the ~~Corporation’s~~Corporation's products. These contract assets are amortized over the term of the contracts and recognized as a reduction of revenue. ~~For contracts with a duration of 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):~~follows:


		October 2, 2021		January 2, 2021			October 1, 2022		January 1, 2022
Trade receivables (1)	Trade receivables (1)	$	238,620	$	207,971	Trade receivables (1)	$	243.8	$	240.0
Contract assets (current) (2)	Contract assets (current) (2)	$	1,265	$	761	Contract assets (current) (2)	$	2.8	$	1.5
Contract assets (long-term) (3)	Contract assets (long-term) (3)	$	16,876	$	2,486	Contract assets (long-term) (3)	$	30.6	$	18.2
Contract liabilities (4)		$	58,976	$	53,070
Contract liabilities - Customer deposits (4)						Contract liabilities - Customer deposits (4)	$	30.3	$	27.2
Contract liabilities - Accrued rebate and marketing programs (4)						Contract liabilities - Accrued rebate and marketing programs (4)	$	38.2	$	31.5

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"

The increase in long-term contract assets is related to multi-year distribution agreements in the workplace furnishings segment. Contract liabilities for customer deposits paid to the Corporation prior to the satisfaction of performance obligations are recognized as revenue upon completion of the performance obligations. The contract liability balance related to customer deposits was ~~$21.1~~$27.2 million as of January ~~2, 2021, all~~1, 2022, of which, $25.8 million was recognized as revenue in the first ~~quarter~~nine months of ~~2021.~~2022.

Performance Obligations

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

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

Significant Judgments

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

Note 3. Acquisitions and Divestitures

~~During~~In July 2022, the ~~first~~Corporation closed on the sale of its China- and Hong Kong-based Lamex ("Lamex") business, which was a component of the workplace furnishings segment, for approximately $75 million plus standard post-closing adjustments, net of cash acquired by the buyer. The Corporation recorded a pre-tax gain on sale in the current quarter of ~~2021,~~$50.6 million that included transaction-related expenses of approximately $5 million.

In June 2022, the Corporation acquired Dickerson Hearth Products ("Dickerson"), an installing fireplace distributor in the ~~assets of a~~Raleigh, North Carolina area, for approximately $8 million. The transaction, which aligns with the Corporation's vertical integration strategy in the residential building products ~~installing distributor~~market, was structured as an asset acquisition and was consummated entirely in ~~an all-cash deal.~~cash. The ~~aggregate~~preliminary purchase price ~~was approximately $1.6 million, and~~allocation includes ~~$1.2~~$7.7 million of ~~tax deductible goodwill.~~goodwill, which includes the impact of immaterial purchase adjustments made during the current quarter. The ~~purchase accounting is complete, and the~~ remaining assets and liabilities acquired were not ~~material.~~material to the consolidated financial statements. The Corporation expects to finalize the allocation of the purchase price during 2022.

OnIn December ~~31, 2020,~~2021, the Corporation acquired ~~Design Public Group~~The Outdoor GreatRoom Company ("~~DPG"~~OGC"), a leading ~~e-Commerce distributor~~manufacturer and supplier of ~~high-design furniture~~premium outdoor fire tables and ~~accessories~~fire pits, for ~~the office and home.~~approximately $15 million. This transaction, which positions the Corporation to grow and develop a leading position in the fast-growing outdoor living market, was structured as ~~an asset~~a stock acquisition and was consummated entirely in ~~cash of~~cash.

In October 2021, the Corporation acquired Trinity Hearth & Home ("Trinity"), an installing fireplace distributor in the Dallas/Fort Worth area, for approximately ~~$50 million,~~$31 million. This transaction, which aligns with the Corporation's long-term strategies related to digital and e-Commerce initiatives. DPG's assets and liabilities are included in the Corporation's workplace furnishings segment, and goodwill, which is tax-deductible, is assigned to its own reporting unit.

vertical integration

strategy in the residential building products market and provides a hub to better serve customers in the rapidly growing Southwest region, was structured as an asset acquisition and was consummated entirely in cash.

The ~~DPG~~assets and liabilities of Trinity, OGC, and Dickerson are included in the Corporation's residential building products segment. The related goodwill, which is expected to be tax deductible, is assigned to the residential building products reporting unit.

The purchase price allocation for Trinity and ~~weighted average~~OGC, and estimated amortization periods of identified intangible assets as of the ~~date~~respective dates of acquisition is as ~~follows (dollars in thousands):~~follows:


	~~Fair Value~~		~~Weighted Average Amortization Period~~
~~Inventories~~	$	~~1,597~~
~~Receivables~~	4
~~Prepaid expenses and other current assets~~	~~467~~
~~Accounts payable and accrued expenses~~	~~(8,035)~~
~~Goodwill~~	~~33,588~~
~~Customer lists~~	~~11,500~~		~~11 years~~
~~Software~~	~~5,500~~		~~5 years~~
~~Trade names~~	~~5,200~~		~~10 years~~
~~Other intangible assets~~	~~300~~		~~3 years~~
~~Total net assets~~	$	~~50,121~~


	Trinity			OGC
	Fair Value		Amortization Period	Fair Value		Amortization Period
Cash	$	—		$	0.3
Inventories	1.9			4.5
Receivables	4.6			1.8
Prepaid expenses and other current assets	—			1.2
Property, plant, and equipment	0.3			0.5
Accounts payable and accrued expenses	(1.7)			(2.8)
Goodwill	14.2			2.4
Customer lists	12.0		13 Years	4.9		10 Years
Trade names	—			2.5		10 Years
Total Net Assets	$	31.3		$	15.3

~~The valuation analysis required the use of complex management estimates and assumptions such as future cash flows, discount rates, royalty rates, long-term growth rates, and technology build costs.~~ As a result of further ~~reviews,~~review and refinement, measurement period adjustments were recorded in the ~~third~~first quarter of ~~2021 that~~2022 which decreased Trinity's inventory acquired by $0.2 million and increased goodwill related to both acquisitions by $0.9 million in the aggregate. Additionally, the aggregate purchase price of the deals increased by $0.8 million as a result of post-closing working capital settlements. There were no measurement period adjustments recorded after the first quarter of 2022, and ~~decreased goodwill by $0.5 million. As of October 2, 2021,~~ the ~~DPG~~ purchase accounting ~~is complete.~~for the Trinity and OGC acquisitions was complete as of July 2, 2022.

All ~~transactions disclosed~~acquisitions above ~~were deemed to be acquisitions of businesses, and~~ were accounted for using the acquisition method pursuant to ASC 805, with goodwill being recorded as a result of ~~future cash flows and related fair value~~the purchase price exceeding the fair value of ~~the identified~~identifiable tangible and intangible assets and liabilities.

Note 4. Inventories

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


		October 2, 2021			January 2, 2021					October 1, 2022					January 1, 2022

Finished products	Finished products	$	140,955					$	98,527		Finished products		$	156.0				$	137.2
Materials and work in process	Materials and work in process	86,615			70,264			Materials and work in process		123.8					92.0
Last-in, first-out ("LIFO") allowance		(38,980)			(30,980)
Total inventories		$	188,590		$	137,811

LIFO allowance								LIFO allowance		(57.6)					(47.6)
Total inventories, net								Total inventories, net		$	222.2				$	181.6

Inventory valued by the LIFO costing method	Inventory valued by the LIFO costing method	76		%	75		%	Inventory valued by the LIFO costing method		90		%			84		%

In addition to the LIFO allowance, the Corporation recorded inventory allowances of $15.0 million and $19.9 million as of October 1, 2022 and January 1, 2022, respectively, to adjust for excess and obsolete inventory or otherwise reduce FIFO-basis inventory to net realizable value.

Note 5. Goodwill and Other Intangible Assets

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

October 2,
2021 January 2,
2021
Goodwill $ 287,443 $ 292,434
Definite-lived intangible assets 132,763 139,863
Indefinite-lived intangible assets 26,552 26,599
Total goodwill and other intangible assets $ 446,758 $ 458,896


	October 1, 2022		January 1, 2022
Goodwill, net	$	306.0	$	297.3
Definite-lived intangible assets, net	130.4		147.6
Indefinite-lived intangible assets	15.5		26.5
Total goodwill and other intangible assets, net	$	451.9	$	471.5

Goodwill

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

Workplace Furnishings Residential Building Products Total
Balance as of January 2, 2021
Goodwill $ 168,477 $ 196,976 $ 365,453
Accumulated impairment losses (72,876) (143) (73,019)
Net goodwill balance as of January 2, 2021 95,601 196,833 292,434
Goodwill acquired / measurement period adjustments (6,211) 1,220 (4,991)
Balance as of October 2, 2021
Goodwill 162,266 198,196 360,462
Accumulated impairment losses (72,876) (143) (73,019)
Net goodwill balance as of October 2, 2021 $ 89,390 $ 198,053 $ 287,443


	Workplace Furnishings		Residential Building Products		Total
Balance as of January 1, 2022
Goodwill	$	162.3	$	213.8	$	376.1
Accumulated impairment losses	(78.6)		(0.1)		(78.8)
Net goodwill balance as of January 1, 2022	83.6		213.7		297.3

Goodwill acquired (disposed) / measurement period adjustments	(6.9)		8.6		1.7
Accumulated impairment losses disposed	6.9		—		6.9


Balance as of October 1, 2022
Goodwill	155.3		222.5		377.8
Accumulated impairment losses	(71.7)		(0.1)		(71.8)
Net goodwill balance as of October 1, 2022	$	83.6	$	222.3	$	306.0

Goodwill and accumulated impairment losses were disposed in conjunction with the sale of Lamex in third quarter of 2022. See "Note 3. ~~Acquisitions"~~Acquisitions and Divestitures" for additional information ~~regarding~~on transactions that resulted in changes in goodwill ~~acquired and related adjustments~~ in ~~the year-to-date period.~~2022.

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):~~Sheets:


		October 2, 2021						January 2, 2021							October 1, 2022						January 1, 2022
		Gross		Accumulated Amortization		Net		Gross		Accumulated Amortization		Net			Gross		Accumulated Amortization		Net		Gross		Accumulated Amortization		Net

Software	Software	$	193,634	$	96,041	$	97,593	$	182,127	$	78,619	$	103,508	Software	$	202.1	$	119.8	$	82.3	$	196.8	$	102.1	$	94.7
Trademarks and trade names	Trademarks and trade names	11,764		4,337		7,427		9,964		3,546		6,418		Trademarks and trade names	14.3		5.6		8.7		14.3		4.6		9.7
Customer lists and other	Customer lists and other	92,777		65,034		27,743		91,002		61,065		29,937		Customer lists and other	80.2		40.8		39.4		109.6		66.4		43.3
Net definite-lived intangible assets	Net definite-lived intangible assets	$	298,175	$	165,412	$	132,763	$	283,093	$	143,230	$	139,863	Net definite-lived intangible assets	$	296.5	$	166.2	$	130.4	$	320.7	$	173.0	$	147.6

The decrease in the gross and accumulated amortization of definite-lived intangible asset balances during the current year is primarily related to the sale of Lamex and the disposal of related fully amortized assets.

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


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		October 2, 2021		September 26, 2020		October 2, 2021		September 26, 2020			October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021
Capitalized software	Capitalized software	$	6,070	$	4,910	$	17,497	$	14,288	Capitalized software	$	6.1	$	6.1	$	18.4	$	17.5
Other definite-lived intangibles	Other definite-lived intangibles	$	1,626	$	1,136	$	4,881	$	3,811	Other definite-lived intangibles	$	1.6	$	1.6	$	4.9	$	4.9

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 years is as ~~follows (in millions):~~follows:

2021 2022 2023 2024 2025
Amortization expense $ 29.9 $ 27.3 $ 23.1 $ 19.0 $ 17.3


	2022		2023		2024		2025		2026
Amortization expense	$	30.9	$	26.9	$	22.6	$	19.5	$	16.6

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):~~Sheets:

October 2,
2021 January 2,
2021
Trademarks and trade names $ 26,552 $ 26,599


	October 1, 2022		January 1, 2022
Trademarks and trade names	$	15.5	$	26.5

~~The immaterial change~~In the third quarter of 2022, the Corporation sold its Lamex business which resulted in the disposal of the related indefinite-lived ~~intangible assets balances shown above is related to foreign currency translation impacts.~~trade name.

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.

Note 6. Product Warranties

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

A warranty allowance is determined by recording a specific allowance for known warranty issues and an additional allowance for unknown claims expected to be incurred based on historical claims experience. Actual costs incurred could differ from the original estimates, requiring adjustments to the allowance. Activity associated with warranty obligations was as ~~follows (in thousands):~~follows:


		Nine Months Ended					Nine Months Ended
		October 2, 2021		September 26, 2020			October 1, 2022		October 2, 2021
Balance at beginning of period	Balance at beginning of period	$	16,109	$	15,865	Balance at beginning of period	$	16.0	$	16.1
Accruals for warranties issued during period	Accruals for warranties issued during period	6,580		5,483		Accruals for warranties issued during period	7.5		6.6
Adjustments related to pre-existing warranties		—		(272)

Settlements made during the period	Settlements made during the period	(5,411)		(6,013)		Settlements made during the period	(7.3)		(5.4)

Balance at end of period	Balance at end of period	$	17,278	$	15,063	Balance at end of period	$	16.3	$	17.3

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

October 2,
2021 January 2,
2021
Current - in the next twelve months $ 6,080 $ 5,918
Long-term - beyond one year 11,198 10,191
Total $ 17,278 $ 16,109


	October 1, 2022		January 1, 2022
Current	$	5.2	$	5.4
Long-term	11.1		10.6
Total	$	16.3	$	16.0

Note 7. ~~Long-Term~~ Debt

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


		October 2, 2021		January 2, 2021			October 1, 2022		January 1, 2022
Revolving credit facility with interest at a variable rate (October 2, 2021 - 1.1%; January 2, 2021 - 1.2%)		$	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
Revolving credit facility with interest at a variable rate (October 1, 2022 - 4.2%; January 1, 2022 - 1.1%)						Revolving credit facility with interest at a variable rate (October 1, 2022 - 4.2%; January 1, 2022 - 1.1%)	$	100.0	$	75.0
Fixed-rate notes due in 2025 with an interest rate of 4.22%						Fixed-rate notes due in 2025 with an interest rate of 4.22%	50.0		50.0
Fixed-rate notes due in 2028 with an interest rate of 4.40%						Fixed-rate notes due in 2028 with an interest rate of 4.40%	50.0		50.0
Other amounts	Other amounts	3,345		841		Other amounts	1.2		3.2
Deferred debt issuance costs	Deferred debt issuance costs	(413)		(476)		Deferred debt issuance costs	(0.3)		(0.4)
Total debt	Total debt	177,932		175,365		Total debt	200.8		177.8
Less: Current maturities of long-term debt		3,345		841
Less: Current maturities of debt						Less: Current maturities of debt	1.2		3.2
Long-term debt	Long-term debt	$	174,587	$	174,524	Long-term debt	$	199.7	$	174.6

The carrying value of the Corporation's outstanding variable-rate, long-term debt obligations at October ~~2, 2021,~~1, 2022, was ~~$75~~$100 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 ~~$116~~$97 million at October ~~2, 2021.~~1, 2022.

As of October ~~2, 2021,~~1, 2022, the ~~Corporation’s~~Corporation's revolving credit facility borrowings were under the amended and restated credit agreement entered into on ~~April 20, 2018,~~June 14, 2022, with a scheduled maturity of ~~April 20, 2023.~~June 2027. The Corporation deferred the related 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~~$0.3 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 ~~$0.2~~$1.2 million is reflected in "Other Assets" in the Condensed Consolidated Balance Sheets.

As of October ~~2, 2021,~~1, 2022, there was ~~$75~~$100 million outstanding under the ~~$450~~$400 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 ~~$375~~$300 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~~fixed-rate notes with an interest rate of 4.22 percent, due May 31, 2025, and $50 million of ten-year ~~fixed rate~~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, 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 October ~~2, 2021,~~1, 2022, the deferred debt issuance costs balance of ~~$0.4~~ $0.3

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 October ~~2, 2021,~~1, 2022, 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 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):~~provision:


		Three Months Ended						Nine Months Ended							Three Months Ended						Nine Months Ended
		October 2, 2021			September 26, 2020			October 2, 2021			September 26, 2020				October 1, 2022			October 2, 2021			October 1, 2022			October 2, 2021
Income before income taxes	Income before income taxes	$	24,390		$	37,245		$	68,065		$	24,605		Income before income taxes	$	79.5		$	24.4		$	125.8		$	68.1
Income taxes	Income taxes	$	5,232		$	6,558		$	16,476		$	5,259		Income taxes	$	16.4		$	5.2		$	18.2		$	16.5
Effective tax rate	Effective tax rate	21.5		%	17.6		%	24.2		%	21.4		%	Effective tax rate	20.7		%	21.5		%	14.5		%	24.2		%

The Corporation's effective tax rate was ~~higher~~substantially lower in the ~~three and~~ nine months ended October ~~2, 2021,~~1, 2022, compared to the same ~~periods~~period last ~~year. The variance was driven by an improved full~~ year, ~~2021 income outlook, relative~~primarily due to the ~~prior-year full year outlook which was adversely impacted by the onset~~sale of the ~~COVID-19 pandemic, resulting~~Lamex business in ~~asset impairment charges~~July 2022. This transaction created tax benefits related to existing deferred tax assets that were previously reduced through valuation adjustments, as well as basis differences, which significantly reduced the Corporation's year-to-date effective tax rate. See "Note 3. Acquisitions and ~~other one-time costs recorded in~~Divestitures" for further information regarding the U.S. jurisdictions. These factors drove a greater rate benefit from tax credits in the prior-year periods. Additionally, the increased rate was impacted by higher equity-based compensation and the timingsale of ~~tax reserves released year-over-year.~~Lamex.

Note 9. Fair Value Measurements of Financial Instruments

For recognition purposes, on a recurring basis, the Corporation is required to measure at fair value its marketable securities, derivative financial instruments, put option liabilities, and deferred stock-based compensation. The marketable securities ~~comprise~~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. Significant unobservable inputs, which are classified within Level 3, are used in the estimation of the fair value of put ~~option liabilities,~~options related to private entities, determined using a simulation model based on assumptions including future cash flows, discount rates, and volatility.

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


		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)			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 October 2, 2021
Balance as of October 1, 2022										Balance as of October 1, 2022
Cash and cash equivalents (including money market funds) (1)	Cash and cash equivalents (including money market funds) (1)	$	126,436	$	126,436	$	—	$	—	Cash and cash equivalents (including money market funds) (1)	$	21.1	$	21.1	$	—	$	—
Government securities (2)	Government securities (2)	$	5,557	$	—	$	5,557	$	—	Government securities (2)	$	5.4	$	—	$	5.4	$	—
Corporate bonds (2)	Corporate bonds (2)	$	7,936	$	—	$	7,936	$	—	Corporate bonds (2)	$	7.2	$	—	$	7.2	$	—

Derivative financial instruments - liability (3)		$	1,543	$	—	$	1,543	$	—

Deferred stock-based compensation (4)	Deferred stock-based compensation (4)	$	7,245	$	—	$	7,245	$	—	Deferred stock-based compensation (4)	$	(4.3)	$	—	$	(4.3)	$	—
Put option liability (5)	Put option liability (5)	$	5,100	$	—	$	—	$	5,100	Put option liability (5)	$	(5.1)	$	—	$	—	$	(5.1)

Balance as of January 2, 2021
Balance as of January 1, 2022										Balance as of January 1, 2022
Cash and cash equivalents (including money market funds) (1)	Cash and cash equivalents (including money market funds) (1)	$	116,120	$	116,120	$	—	$	—	Cash and cash equivalents (including money market funds) (1)	$	52.3	$	52.3	$	—	$	—
Government securities (2)	Government securities (2)	$	6,371	$	—	$	6,371	$	—	Government securities (2)	$	5.5	$	—	$	5.5	$	—
Corporate bonds (2)	Corporate bonds (2)	$	7,228	$	—	$	7,228	$	—	Corporate bonds (2)	$	7.8	$	—	$	7.8	$	—
Derivative financial instruments - liability (3)	Derivative financial instruments - liability (3)	$	2,328	$	—	$	2,328	$	—	Derivative financial instruments - liability (3)	$	(1.0)	$	—	$	(1.0)	$	—
Deferred stock-based compensation (4)	Deferred stock-based compensation (4)	$	7,207	$	—	$	7,207	$	—	Deferred stock-based compensation (4)	$	(8.1)	$	—	$	(8.1)	$	—
Put option liability (5)										Put option liability (5)	$	(5.1)	$	—	$	—	$	(5.1)

Amounts in parentheses indicate liabilities.

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

(1) "Cash and cash equivalents"

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

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

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

(5) "Other Long-Term Liabilities"

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

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


		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 Debt Securities		Pension and Post-retirement Liabilities		Derivative Financial Instrument		Accumulated Other Comprehensive Income (Loss)
Balance as of January 2, 2021		$	(1,071)	$	360	$	(6,682)	$	(1,760)	$	(9,153)
Balance as of January 1, 2022												Balance as of January 1, 2022	$	(0.7)	$	0.1	$	(5.4)	$	(0.7)	$	(6.8)
Other comprehensive income (loss) before reclassifications	Other comprehensive income (loss) before reclassifications	107		(199)		—		42		(50)		Other comprehensive income (loss) before reclassifications	(2.2)		(1.0)		—		1.1		(2.1)
Tax (expense) or benefit	Tax (expense) or benefit	—		42		—		(10)		32		Tax (expense) or benefit	—		0.2		—		(0.3)		(0.1)

Amounts reclassified from accumulated other comprehensive income (loss), net of tax	Amounts reclassified from accumulated other comprehensive income (loss), net of tax	—		—		—		545		545		Amounts reclassified from accumulated other comprehensive income (loss), net of tax	(3.3)		—		—		0.0		(3.3)
Balance as of October 2, 2021		$	(964)	$	203	$	(6,682)	$	(1,183)	$	(8,626)
Balance as of October 1, 2022												Balance as of October 1, 2022	$	(6.2)	$	(0.7)	$	(5.4)	$	0.2	$	(12.2)

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 Debt Securities		Pension and Post-retirement Liabilities		Derivative Financial Instrument		Accumulated Other Comprehensive Income (Loss)
Balance as of December 28, 2019		$	(2,912)	$	95	$	(5,762)	$	506	$	(8,073)
Balance as of January 2, 2021												Balance as of January 2, 2021	$	(1.1)	$	0.4	$	(6.7)	$	(1.8)	$	(9.2)
Other comprehensive income (loss) before reclassifications	Other comprehensive income (loss) before reclassifications	368		341		—		(3,236)		(2,527)		Other comprehensive income (loss) before reclassifications	0.1		(0.2)		—		0.0		(0.1)
Tax (expense) or benefit	Tax (expense) or benefit	—		(72)		—		758		686		Tax (expense) or benefit	—		0.0		—		(0.0)		0.0

Amounts reclassified from accumulated other comprehensive income (loss), net of tax	Amounts reclassified from accumulated other comprehensive income (loss), net of tax	—		—		—		85		85		Amounts reclassified from accumulated other comprehensive income (loss), net of tax	—		—		—		0.5		0.5
Balance as of September 26, 2020		$	(2,544)	$	364	$	(5,762)	$	(1,887)	$	(9,829)
Balance as of October 2, 2021												Balance as of October 2, 2021	$	(1.0)	$	0.2	$	(6.7)	$	(1.2)	$	(8.6)

Amounts in parentheses indicate reductions to equity.

Interest Rate Swap Termination

In ~~2019,~~April 2022, the Corporation ~~entered into an~~terminated its interest rate swap ~~transaction to hedge $75~~agreement and received cash proceeds of $0.4 million, the fair value of ~~outstanding variable rate revolver borrowings against future interest rate volatility. Under~~ the ~~terms~~swap on the termination date. The proceeds were recorded as cash provided by operating activities in the Condensed Consolidated Statement of Cash Flows. The $0.4 million gain from the termination of this interest rate swap agreement was recorded to "Accumulated other comprehensive income (loss)" and will be amortized to interest expense through April 2023, the ~~Corporation pays a fixed rate of 1.42 percent and receives one month LIBOR on a $75 million notional value expiring April 2023. As of October 2, 2021, the fair value~~remaining term of the ~~Corporation's~~original interest rate swap liability was $1.5 million; see "Note 9. Fair Value Measurements of Financial Instruments". The unrecognized change in value of the interest rate swap is reported net of tax as $(1.2) million in "HNI Corporation Shareholders' Equity" in the Condensed Consolidated Balance Sheets.agreement.

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


			Three Months Ended				Nine Months Ended						Three Months Ended				Nine Months Ended
Details about Accumulated Other Comprehensive Income (Loss) Components	Details about Accumulated Other Comprehensive Income (Loss) Components	Affected Line Item in the Statement Where Net Income is Presented	October 2, 2021		September 26, 2020		October 2, 2021		September 26, 2020		Details about Accumulated Other Comprehensive Income (Loss) Components	Affected Line Item in the Statement Where Net Income is Presented	October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021
Derivative financial instruments
Derivative financial instrument											Derivative financial instrument
Interest rate swap	Interest rate swap	Interest expense, net	$	(250)	$	(147)	$	(713)	$	(107)	Interest rate swap	Interest expense, net	$	0.1	$	(0.3)	$	(0.1)	$	(0.7)
		Income taxes	59		33		168		22			Income taxes	(0.0)		0.1		0.0		0.2
Foreign currency translation											Foreign currency translation
Lamex divestiture											Lamex divestiture	Gain on sale of subsidiary	3.3		—		3.3		—
		Net of tax	$	(191)	$	(114)	$	(545)	$	(85)		Net of tax	$	3.4	$	(0.2)	$	3.3	$	(0.5)

Amounts in parentheses indicate reductions to profit.

Dividend

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

Nine Months Ended
October 2,
2021 September 26,
2020
Dividends per common share $ 0.925 $ 0.915


	Nine Months Ended
	October 1, 2022		October 2, 2021
Dividends per common share	$	0.950	$	0.925

Stock Repurchase

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


		Nine Months Ended					Nine Months Ended
		October 2, 2021		September 26, 2020			October 1, 2022		October 2, 2021
Shares repurchased	Shares repurchased	500		214		Shares repurchased	1.7		0.5
Average price per share	Average price per share	$	39.52	$	29.83	Average price per share	$	38.11	$	39.52

Cash purchase price	Cash purchase price	$	(19,774)	$	(6,390)	Cash purchase price	$	(63.9)	$	(19.8)
Purchases unsettled as of quarter end	Purchases unsettled as of quarter end	1,313		—		Purchases unsettled as of quarter end	—		1.3
Prior year purchases settled in current year	Prior year purchases settled in current year	—		(374)		Prior year purchases settled in current year	(1.3)		—
Shares repurchased per cash flow	Shares repurchased per cash flow	$	(18,461)	$	(6,764)	Shares repurchased per cash flow	$	(65.2)	$	(18.5)

As of October ~~2, 2021,~~1, 2022, approximately ~~$138.5~~$234.0 million remained of the Corporation's Board of Directors' ("Board") current repurchase ~~authorization remained unspent.~~authorization.

Note 11. Earnings Per Share

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


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		October 2, 2021		September 26, 2020		October 2, 2021		September 26, 2020			October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021
Numerator:	Numerator:									Numerator:
Numerator for both basic and diluted EPS attributable to HNI Corporation net income	Numerator for both basic and diluted EPS attributable to HNI Corporation net income	$	19,158	$	30,688	$	51,592	$	19,349	Numerator for both basic and diluted EPS attributable to HNI Corporation net income	$	63.1	$	19.2	$	107.6	$	51.6
Denominators:	Denominators:									Denominators:
Denominator for basic EPS weighted-average common shares outstanding	Denominator for basic EPS weighted-average common shares outstanding	43,781		42,684		43,573		42,651		Denominator for basic EPS weighted-average common shares outstanding	41.3		43.8		41.8		43.6
Potentially dilutive shares from stock-based compensation plans	Potentially dilutive shares from stock-based compensation plans	561		326		472		254		Potentially dilutive shares from stock-based compensation plans	0.5		0.6		0.5		0.5
Denominator for diluted EPS	Denominator for diluted EPS	44,342		43,010		44,045		42,905		Denominator for diluted EPS	41.8		44.3		42.3		44.0
Earnings per share – basic	Earnings per share – basic	$	0.44	$	0.72	$	1.18	$	0.45	Earnings per share – basic	$	1.53	$	0.44	$	2.57	$	1.18
Earnings per share – diluted	Earnings per share – diluted	$	0.43	$	0.71	$	1.17	$	0.45	Earnings per share – diluted	$	1.51	$	0.43	$	2.54	$	1.17

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 (in thousands):~~anti-dilutive:

Three Months Ended Nine Months Ended
October 2,
2021 September 26,
2020 October 2,
2021 September 26,
2020
Common stock equivalents excluded because their inclusion would be anti-dilutive 1,768 3,124 1,671 3,183

Three Months Ended

Nine Months Ended

October 1,
2022

October 2,
2021

October 1,
2022

October 2,
2021

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

2.0

1.8

1.9

1.7

Note 12. Stock-Based Compensation

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

period. In the third quarter of 2022, management's estimate of cumulative profitability in connection with various tranches of performance stock units was reduced, resulting in a decrease to the aggregate expense recognized to date, as well as to unrecognized expense.

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

Three Months Ended Nine Months Ended
October 2,
2021 September 26,
2020 October 2,
2021 September 26,
2020
Compensation cost $ 1,752 $ 1,087 $ 9,540 $ 6,746


	Three Months Ended				Nine Months Ended
	October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021
Compensation cost	$	(2.1)	$	1.8	$	6.4	$	9.5

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


		Nine Months Ended					Nine Months Ended
		October 2, 2021		September 26, 2020			October 1, 2022		October 2, 2021

Restricted stock units	Restricted stock units	$	15,923	$	6,431	Restricted stock units	$	7.0	$	15.9
Performance stock units	Performance stock units	$	6,054	$	5,920	Performance stock units	$	6.2	$	6.1

The following table summarizes unrecognized compensation expense and the weighted-average remaining service period for non-vested stock options and stock units as of October ~~2, 2021:~~1, 2022:


		Unrecognized Compensation Expense (in thousands)		Weighted-Average Remaining Service Period (years)		Unrecognized Compensation Expense		Weighted-Average Remaining Service Period (years)
Non-vested stock options	Non-vested stock options	$	709	0.7	Non-vested stock options	$	0.2	0.2
Non-vested restricted stock units	Non-vested restricted stock units	$	8,005	1.1	Non-vested restricted stock units	$	5.9	0.8
Non-vested performance stock units	Non-vested performance stock units	$	4,249	1.2	Non-vested performance stock units	$	2.2	1.0

~~Note 13. Recently Adopted Accounting Standards~~

~~In December 2019, the FASB issued ASU No. 2019-12,~~ ~~Simplifying the Accounting for Income Taxes~~. This update simplifies various aspects related to accounting for income taxes, removes certain exceptions to the general principles in ASC 740, and clarifies and amends existing guidance to improve consistent application. The Corporation adopted ASC 740 in the first quarter of fiscal 2021, with no material effect on the Condensed Consolidated Financial Statements and related footnote disclosures.

Note ~~14.~~13. Guarantees, Commitments, and Contingencies

The Corporation utilizes letters of credit and surety bonds in the amount of approximately ~~$31~~$27 million to back certain insurance policies and payment obligations. Additionally, the Corporation periodically utilizes trade letters of credit and ~~banker's~~bankers' acceptances to guarantee certain payments to overseas suppliers; as of October ~~2, 2021,~~1, 2022, there were no outstanding amounts related to these types of guarantees. The letters of credit, bonds, and ~~banker's~~bankers' acceptances reflect fair value as a condition of their underlying purpose and are subject to competitively determined fees.

The Corporation periodically guarantees borrowing arrangements involving certain workplace furnishings dealers and third-party financial institutions. The terms of these guarantees, which range from less than one year to five years, generally require the Corporation to make payments directly to the financial institution in the event that the dealer is unable to repay its borrowings in accordance with the stated terms. The aggregate amount guaranteed by the Corporation in connection with these agreements is approximately $12 million as of October 1, 2022. The Corporation has determined the likelihood of making future payments under these guarantees is not probable and therefore no liability has been accrued.

In the first quarter of 2022, the Corporation entered into an agreement to lease a new facility. The lease requires approximately $61 million of legally binding minimum payments over the approximate 15-year term of the agreement. The contractual payments and lease accounting are expected to commence in 2023 when construction of the facility is complete.

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 15. Subsequent Events~~

In October 2021, the Corporation acquired a residential building products installing distributor at a purchase price of approximately $30 million. The acquired company builds on the Corporation's strategy to expand the Fireside Hearth & Home owned-distribution component of the residential building products segment.19

Due to the recent timing of the close of the acquisition, the Corporation has not yet allocated the purchase price to the fair value of the assets acquired and the liabilities assumed at the acquisition date.

Note ~~16.~~14. Reportable Segment Information

Management views the Corporation as ~~having 2~~two reportable segments based on industries: workplace furnishings and residential building products.

The aggregated 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, tables, and architectural products. The

residential building products segment manufactures and markets a full array of gas, wood, electric, and pellet fueled fireplaces, inserts, stoves, facings, and accessories.

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

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

R~~eportable segment data reconciled to the Corporation's condensed consolidated financial statements was as follows (in thousands):~~

Three Months Ended Nine Months Ended
October 2,
2021 September 26,
2020 October 2,
2021 September 26,
2020
Net Sales:
Workplace furnishings $ 393,141 $ 353,361 $ 1,040,026 $ 999,827
Residential building products 193,609 153,702 541,472 393,397
Total $ 586,750 $ 507,063 $ 1,581,498 $ 1,393,224
Income (Loss) Before Income Taxes:
Workplace furnishings $ 3,893 $ 16,826 $ 9,578 $ (8,619)
Residential building products 33,392 30,197 103,766 65,232
General corporate (11,042) (8,261) (39,814) (26,737)
Operating income 26,243 38,762 73,530 29,876
Interest expense, net 1,853 1,517 5,465 5,271
Total $ 24,390 $ 37,245 $ 68,065 $ 24,605
Depreciation and Amortization Expense:
Workplace furnishings $ 11,882 $ 11,065 $ 35,918 $ 33,177
Residential building products 2,545 2,351 7,403 6,976
General corporate 6,443 5,896 18,689 17,764
Total $ 20,870 $ 19,312 $ 62,010 $ 57,917
Capital Expenditures (including capitalized software):
Workplace furnishings $ 6,494 $ 6,946 $ 24,001 $ 18,340
Residential building products 5,456 2,695 12,113 5,874
General corporate 3,549 1,584 11,681 7,787
Total $ 15,499 $ 11,225 $ 47,795 $ 32,001
As of,
October 2, 2021 As of
January 2, 2021
Identifiable Assets:
Workplace furnishings $ 832,055 $ 762,780
Residential building products 415,092 381,550
General corporate 287,219 273,702
Total $ 1,534,366 $ 1,418,032

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


	Three Months Ended				Nine Months Ended
	October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021
Net Sales:
Workplace furnishings	$	375.2	$	393.1	$	1,135.0	$	1,040.0
Residential building products	223.6		193.6		657.9		541.5
Total	$	598.8	$	586.7	$	1,792.9	$	1,581.5

Income (Loss) Before Income Taxes:
Workplace furnishings	$	5.6	$	3.9	$	11.1	$	9.6
Residential building products	39.6		33.4		117.0		103.8
General corporate	(14.0)		(11.0)		(46.5)		(39.8)
Gain on sale of subsidiary	50.6		—		50.6		—
Operating income	81.9		26.2		132.2		73.5
Interest expense, net	2.4		1.9		6.5		5.5
Total	$	79.5	$	24.4	$	125.8	$	68.1

Depreciation and Amortization Expense:
Workplace furnishings	$	11.3	$	11.9	$	34.6	$	35.9
Residential building products	3.2		2.5		9.3		7.4
General corporate	6.5		6.4		19.6		18.7
Total	$	21.0	$	20.9	$	63.5	$	62.0

Capital Expenditures (including capitalized software):
Workplace furnishings	$	10.0	$	6.5	$	26.4	$	24.0
Residential building products	3.6		5.5		12.1		12.1
General corporate	1.8		3.5		10.2		11.7
Total	$	15.5	$	15.5	$	48.7	$	47.8

					As of October 1, 2022		As of January 1, 2022
Identifiable Assets:
Workplace furnishings					$	807.7	$	809.0
Residential building products					517.7		479.5
General corporate					173.3		209.5
Total					$	1,498.6	$	1,497.9

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.~~notes included elsewhere in this Quarterly Report on Form 10-Q and with the Corporation's Annual Report on Form 10-K for the fiscal year ended January 1, 2022. All dollar amounts presented are in millions, except per share data or where otherwise indicated. 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 and residential building products. The Corporation is a leading global designer and provider of commercial and home office 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.

Significant developments in the third quarter include the Corporation's sale of its China- and Hong Kong-based Lamex office furniture business to Kokuyo Co., Ltd, a leading manufacturer and provider of office furniture in Japan and across Asia, for $75 million U.S. dollars, plus standard post-closing adjustments. This transaction further streamlines the Corporation's business portfolio and allows for an enhanced focus on the Corporation's core strategies. In response to the current environment and anticipated further weakening in market conditions, the Corporation initiated company-wide cost reduction actions during the third quarter. The savings are estimated to be $30 million on an annual basis once they become fully mature in 2023.

Consolidated net sales for the third quarter of ~~2021~~2022 were ~~$586.7~~$598.8 million, an increase of ~~15.7~~2.1 percent compared to net sales of ~~$507.1~~$586.7 million in the prior-year quarter. The change was due to a ~~26.0~~15.5 percent increase in the residential building products segment, ~~and an 11.3~~partially offset by a 4.6 percent ~~increase~~decrease in the workplace furnishings segment. The acquisition of ~~DPG increased current-year quarter~~residential building products companies contributed incremental year-over-year sales ~~by $8.9~~of $11.2 million, and the ~~acquisition~~sale of ~~residential building products distributors increased current-year quarter~~the Lamex business decreased year-over-year sales by ~~$0.9~~$17.9 million. See "Note 3. Acquisitions and Divestitures" for acquisition and divestiture activity.

Net income attributable to the Corporation in the third quarter of ~~2021~~2022 was ~~$19.2~~$63.1 million compared to ~~$30.7~~$19.2 million in the third quarter of ~~2020.~~2021. The ~~majority of the decrease~~increase was driven by ~~unfavorable price-cost~~a $50.6 million pre-tax gain on the sale of Lamex, along with ~~the return of costs related to temporary actions taken in the prior-year quarter~~favorable price-cost, improved product mix, lower variable compensation, and lower core selling and administrative expenses ("SG&A"), partially offset by lower workplace furnishings volume, lower net productivity, and increased investment ~~spend, which was partially offset by increased volume.~~

Overall, the Corporation has experienced strong order trends in both of its segments in the third quarter of 2021. However, ongoing pandemic-induced difficulties tied to labor availability, supply chain issues, and input cost inflation have persisted. These constraints, when combined with continued staffing shortages both internally and at the Corporation's suppliers, are limiting production capacity growth, and have negatively impacted revenue and profit levels in the quarter. The Corporation expects these constraints to continue through the remainder of 2021 and is taking action to mitigate them, including the opening of a new manufacturing facility in Mexico, increased insourcing and strengthened resourcing of critical parts, and accelerated efforts to drive productivity through process changes and automation to reduce labor requirements.spend.

Results of Operations

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


		Three Months Ended								Nine Months Ended									Three Months Ended								Nine Months Ended
		October 2, 2021			September 26, 2020			Change		October 2, 2021			September 26, 2020			Change			October 1, 2022			October 2, 2021			Change		October 1, 2022			October 2, 2021			Change
Net sales	Net sales	$	586,750		$	507,063		15.7%		$	1,581,498		$	1,393,224		13.5%		Net sales	$	598.8		$	586.7		2.1%		$	1,792.9		$	1,581.5		13.4%
Cost of sales	Cost of sales	391,394			321,516			21.7%		1,018,334			880,754			15.6%		Cost of sales	389.3			391.4			(0.5)%		1,165.9			1,018.3			14.5%
Gross profit	Gross profit	195,356			185,547			5.3%		563,164			512,470			9.9%		Gross profit	209.5			195.4			7.2%		627.0			563.2			11.3%
Selling and administrative expenses	Selling and administrative expenses	169,113			146,785			15.2%		489,634			449,933			8.8%		Selling and administrative expenses	178.2			169.1			5.4%		544.3			489.6			11.2%

Gain on sale of subsidiary																		Gain on sale of subsidiary	(50.6)			—			100.0%		(50.6)			—			100.0%
Impairment charges	Impairment charges	—			—			—%		—			32,661			(100.0)%		Impairment charges	—			—			—%		1.0			—			100.0%
Operating income	Operating income	26,243			38,762			(32.3)%		73,530			29,876			146.1%		Operating income	81.9			26.2			212.1%		132.2			73.5			79.8%
Interest expense, net	Interest expense, net	1,853			1,517			22.1%		5,465			5,271			3.7%		Interest expense, net	2.4			1.9			27.1%		6.5			5.5			18.1%
Income before income taxes	Income before income taxes	24,390			37,245			(34.5)%		68,065			24,605			176.6%		Income before income taxes	79.5			24.4			226.1%		125.8			68.1			84.8%
Income taxes	Income taxes	5,232			6,558			(20.2)%		16,476			5,259			213.3%		Income taxes	16.4			5.2			214.1%		18.2			16.5			10.4%
Net loss attributable to non-controlling interest		0			(1)			100.0%		(3)			(3)			0.0%
Net income (loss) attributable to non-controlling interest																		Net income (loss) attributable to non-controlling interest	(0.0)			0.0			0.0%		(0.0)			(0.0)			0.0%
Net income attributable to HNI Corporation	Net income attributable to HNI Corporation	$	19,158		$	30,688		(37.6)%		$	51,592		$	19,349		166.6%		Net income attributable to HNI Corporation	$	63.1		$	19.2		229.4%		$	107.6		$	51.6		108.5%

As a Percentage of Net Sales:	As a Percentage of Net Sales:																	As a Percentage of Net Sales:
Net sales	Net sales	100.0		%	100.0		%			100.0		%	100.0		%			Net sales	100.0		%	100.0		%			100.0		%	100.0		%
Gross profit	Gross profit	33.3			36.6			-330	bps	35.6			36.8			-120	bps	Gross profit	35.0			33.3			170	bps	35.0			35.6			-60	bps
Selling and administrative expenses	Selling and administrative expenses	28.8			28.9			-10	bps	31.0			32.3			-130	bps	Selling and administrative expenses	29.8			28.8			100	bps	30.4			31.0			-60	bps

Gain on sale of subsidiary																		Gain on sale of subsidiary	8.5			—			850	bps	2.8			—			280	bps
Impairment charges	Impairment charges	—			—			—	bps	—			2.3			-230	bps	Impairment charges	—			—			—	bps	0.1			—			10	bps
Operating income	Operating income	4.5			7.6			-310	bps	4.6			2.1			250	bps	Operating income	13.7			4.5			920	bps	7.4			4.6			280	bps
Income taxes	Income taxes	0.9			1.3			-40	bps	1.0			0.4			60	bps	Income taxes	2.7			0.9			180	bps	1.0			1.0			—	bps
Net income attributable to HNI Corporation	Net income attributable to HNI Corporation	3.3			6.1			-280	bps	3.3			1.4			190	bps	Net income attributable to HNI Corporation	10.5			3.3			720	bps	6.0			3.3			270	bps

Results of Operations - Three Months Ended

Net Sales

Consolidated net sales for the third quarter of ~~2021~~2022 increased ~~15.7~~2.1 percent compared to the same quarter last year. The change was driven by ~~increases of 26.0 percent and 11.3 percent~~price realization in both the residential building products and workplace furnishings segments, ~~respectively.~~along with higher residential building products volume, partially offset by lower volume in the workplace furnishings segment. Included in the sales results for the current quarter was a ~~$9.8~~$17.9 million unfavorable impact from the divestiture of Lamex and an $11.2 million favorable impact from acquiring ~~DPG and~~ residential building products ~~installing distributors.~~companies.

Gross Profit

Gross profit as a percentage of net sales ~~decreased 330~~increased 170 basis points in the third quarter of ~~2021~~2022 compared to the same quarter last year, driven by ~~unfavorable~~improved price-cost ~~which was~~and favorable product mix, partially offset by ~~higher~~lower volume in the workplace furnishings segment, operational investments, and ~~improved~~reduced net productivity. Included in current quarter cost of sales was $3.6 million in one-time charges primarily due to strategic restructuring of an eCommerce business in the workplace furnishings segment that commenced in the fourth quarter of 2021.

Selling and Administrative Expenses

Selling and administrative expenses ~~("SG&A")~~ as a percentage of net sales ~~decreased 10~~increased 100 basis points in the third quarter of ~~2021~~2022 compared to the same quarter last year, ~~due to improved leverage from higher~~driven by $5.6 million associated with a company-wide cost reduction initiative, along with lower volume ~~partially offset by the return of costs related to temporary actions taken~~ in the ~~prior-year quarter,~~workplace furnishings segment, higher investment spend, and increased freight ~~costs.~~costs, partially offset by dilution from price realization, lower variable compensation, and lower core SG&A.

Gain on Sale of Subsidiary

In the third quarter of 2022, the Corporation recorded a one-time pretax gain of $50.6 million as a result of the divestiture of the Lamex business.

Operating Income

In the third quarter of ~~2021,~~2022, operating income was ~~$26.2~~$81.9 million, compared to ~~$38.8~~$26.2 million in the same quarter last year. The ~~majority of the decrease~~increase was driven by ~~unfavorable price-cost,~~the gain on sale of the Lamex business, along with favorable price-cost, favorable product mix, lower variable compensation, and lower core SG&A, partially offset by lower workplace furnishings volume, lower net productivity, and increased investment spend. The Corporation also incurred $9.1 million of one-time charges in the ~~return of costs~~current-year quarter related to ~~temporary actions taken~~restructuring of an eCommerce business and a company-wide cost reduction initiative. There were no comparable one-time charges in the prior-year ~~quarter and increased investment spend, which was partially offset by increased volume.~~quarter.

Interest Expense, Net

Interest expense, net for the third quarter of ~~2021~~2022 was ~~$1.9~~$2.4 million, compared to ~~$1.5~~$1.9 million in the same quarter last ~~year.~~year, driven by an increase in the average debt balance year-over-year and higher interest rates on the Corporation's variable-rate debt, partially offset by amortization of the gain recorded on termination of the Corporation's interest rate swap. See "Note 10. Accumulated Other Comprehensive Income (Loss) and Shareholders' Equity" for further information on the termination of the interest rate swap.

Income Taxes

The Corporation's income tax provision for the third quarter of ~~2021~~2022 was ~~an expense of $5.2~~$16.4 million on income before taxes of $79.5 million, or an effective tax rate of 20.7 percent. For the third quarter of 2021, the Corporation's income tax provision was $5.2 million on pre-tax income of $24.4 million, or an effective tax rate of 21.5 percent. For the third quarter of 2020, the Corporation's income tax provision was an expense of $6.6 million on pre-tax income of $37.2 million, or an effective tax rate of 17.6 percent. The variance was driven by an improved full year 2021 income outlook, relative to the prior-year full outlook which was adversely impacted by the onset of the COVID-19 pandemic, resulting in asset impairment charges and other one-time costs recorded in the U.S. jurisdictions. These factors drove a greater rate of benefit from tax credits in the prior-year periods. Additionally, the increased rate was impacted by higher equity-based compensation and the timing of tax reserves released year-over-year.

Net Income Attributable to HNI Corporation

Net income attributable to the Corporation was $63.1 million, or $1.51 per diluted share in the third quarter of 2022, compared to $19.2 million, or $0.43 per diluted share in the third quarter of ~~2021, compared to $30.7 million, or $0.71 per diluted share in the third quarter of 2020.~~2021.

Results of Operations - Nine Months Ended

Net Sales

Consolidated net sales for the first nine months of ~~2021~~2022 increased ~~13.5~~13.4 percent compared to the same period last year. The change was ~~driven by increases of 37.6~~due to a 21.5 percent ~~and 4.0 percent~~increase in the residential building products segment and a 9.1 percent increase in the workplace furnishings segment. Price realization in both segments ~~respectively.~~drove the improved sales performance, along with higher volume in the residential building products segment. Included in the sales results for the current period was a ~~$28.8~~$17.9 million unfavorable impact from the divestiture of Lamex and a $39.8 million favorable impact from acquiring ~~DPG and~~ residential building products ~~installing distributors.~~companies.

Gross Profit

Gross profit as a percentage of net sales decreased ~~120~~60 basis points in the first nine months of ~~2021~~2022 compared to the same period last year primarily driven by ~~unfavorable price-cost, which was~~reduced net productivity, partially offset by higher residential building products ~~volume and improved net productivity.~~volume. Included in current year-to-date period cost of sales is $4.0 million in one-time charges primarily due to strategic restructuring of an eCommerce business in the workplace furnishings segment that commenced in the fourth quarter of 2021.

Selling and Administrative Expenses

~~SG&A~~Selling and administrative expenses as a percentage of net sales decreased ~~130~~60 basis points in the first nine months of ~~2021~~2022 compared to the same period last year due to ~~higher residential building products volume~~dilution from price realization and lower ~~core SG&A,~~variable compensation, partially offset by increased freight costs, higher investment spend, and lower workplace furnishings volume. Additionally, $5.6 million of one-time charges were recorded in the ~~return of costs~~current year period related to ~~temporary actions taken in~~a company-wide cost reduction initiative. In the prior-year period, ~~and higher investment spend. Included in current-year period SG&A was~~ $1.4 million of one-time costs ~~from exiting workplace furnishings showrooms. The prior-year period included $5.0~~were recorded in connection with showroom exits.

Gain on Sale of Subsidiary

In the first nine months of 2022, the Corporation recorded a one-time pretax gain of $50.6 million ~~of one-time costs incurred~~ as ~~the~~a result of the ~~COVID-19 pandemic (of which $1.6 million was recorded as a corporate charge).~~divestiture of the Lamex business.

Impairment Charges

In the first nine months of ~~2020,~~2022, the Corporation recorded ~~$32.7~~a charge of $1.0 million related to the full impairment of ~~impairment charges on goodwill and intangible assets as a result of the COVID-19 pandemic and related economic disruption.~~an equity investment. The Corporation did not record any impairment charges during the first nine months of 2021.

Operating Income

In the first nine months of ~~2021,~~2022, operating income was ~~$73.5~~$132.2 million, compared to ~~$29.9~~operating income of $73.5 million in the same period last year. Results improved compared to the prior-year period driven by the gain on sale of the Corporation's Lamex business, along with favorable price-cost and higher volume in the residential building products ~~volume, improved net productivity, and lower core SG&A,~~segment, partially offset by ~~unfavorable price-cost,~~lower operational productivity, increased investments and freight costs, and the ~~return of costs~~one-time charges discussed above related to ~~temporary actions~~

~~taken in the prior-year period,~~restructuring of an eCommerce brand and ~~higher investment spend. Additionally, the prior-year period included $37.7 million of impairment charges and costs related to the COVID-19 pandemic and resulting economic disruption.~~a company-wide cost reduction initiative.

Interest Expense, Net

Interest expense, net for the first nine months of ~~2021~~2022 was ~~$5.5~~$6.5 million, compared to ~~$5.3~~$5.5 million in the same period last year. The increase was driven by an increase in the average debt balance year-over-year and higher interest rates on the Corporation's variable rate debt, partially offset by amortization of the gain recorded on termination of the Corporation's interest rate swap. See "Note 10. Accumulated Other Comprehensive Income (Loss) and Shareholders' Equity" for further information on the termination of the interest rate swap.

Income Taxes

The Corporation's income tax provision for the first nine months of 2022 was $18.2 million on income before taxes of $125.8 million, or an effective tax rate of 14.5 percent. For the first nine months of 2021, the Corporation's income tax provision was ~~an expense of~~ $16.5 million on income before taxes of $68.1 million, or an effective tax rate of 24.2 percent. ~~For~~The Corporation's effective tax rate was lower in the first nine months of ~~2020,~~2022 compared to the same period last year primarily due to the sale of the Lamex business in July 2022. This transaction created tax benefits related to existing deferred tax assets that were previously reduced through valuation adjustments, as well as basis differences, which significantly reduced the Corporation's ~~income tax provision was an expense of $5.3 million on income before taxes of $24.6 million, or an~~year-to-date effective tax rate of 21.4 percent. The variance was driven by higher income and an improved full year 2021 income outlook, relative to the prior-year period performance and full year outlook which was adversely impacted by the onset of the COVID-19 pandemic, resulting in asset impairment charges and other one-time costs recorded in the U.S. jurisdictions. Additionally, the increased rate was impacted by higher equity-based compensation and the timing of tax reserves released year-over-year.rate.

Net Income Attributable to HNI Corporation

Net income attributable to the Corporation was $107.6 million, or $2.54 per diluted share in the first nine months of 2022, compared to net income attributable to the Corporation of $51.6 million, or $1.17 per diluted share in the first nine months of ~~2021, compared to $19.3 million, or $0.45 per diluted share in the first nine months of 2020.~~2021.

Workplace Furnishings

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

Three Months Ended Nine Months Ended
October 2,
2021 September 26,
2020 Change October 2,
2021 September 26,
2020 Change
Net sales $ 393,141 $ 353,361 11.3 % $ 1,040,026 $ 999,827 4.0 %
Operating profit (loss) $ 3,893 $ 16,826 (76.9 %) $ 9,578 $ (8,619) 211.1 %
Operating profit (loss) % 1.0 % 4.8 % -380 bps 0.9 % (0.9) % 180 bps


	Three Months Ended								Nine Months Ended
	October 1, 2022			October 2, 2021			Change		October 1, 2022			October 2, 2021			Change
Net sales	$	375.2		$	393.1		(4.6)%		$	1,135.0		$	1,040.0		9.1	%
Operating profit	$	5.6		$	3.9		44.9	%	$	11.1		$	9.6		16.4	%
Operating profit %	1.5		%	1.0		%	50	bps	1.0		%	0.9		%	10	bps

Three months ended

Third quarter ~~2021~~2022 net sales for the workplace furnishings segment ~~increased 11.3~~decreased 4.6 percent compared to the same quarter last year. ~~Included~~The impact of the sale of the Lamex business during the quarter decreased net sales by $17.9 million compared to the prior quarter. Aside from this item, segment sales were flat, with price realization in most customer segments offset by decreased volume from small- and medium-sized business and contract customers, as well as lower eCommerce volume due to the ~~sales results was an $8.9 million favorable impact from acquiring DPG.~~previously announced restructuring of one of the Corporation's eCommerce brands.

Operating profit as a percentage of net sales in the third quarter of ~~2021 decreased by 380~~2022 increased 50 basis points compared to the ~~third quarter of 2020.~~same period in 2021. The ~~decrease~~increase was driven by ~~unfavorable~~favorable price-cost, favorable product mix, and ~~the return of costs related to temporary actions taken in the prior-year quarter,~~lower core SG&A, partially offset by ~~higher~~lower volume, reduced net productivity, and ~~improved net productivity.~~increased investment spend. Additionally, the segment recorded $3.6 million of one-time charges in the current quarter primarily due to strategic restructuring of an eCommerce business that commenced in the fourth quarter of 2021. No one-time charges were recorded in the prior year quarter.

Nine months ended

Net sales for the first nine months of ~~2021~~2022 for the workplace furnishings segment increased ~~4.0~~9.1 percent compared to the same period last year. ~~Included~~The results were driven by price realization in most customer segments, partially offset by the divestiture of the Lamex business, which reduced net sales ~~results was~~for the current period by $17.9 million, and lower eCommerce volume as a ~~$24.0 million favorable impact from acquiring DPG.~~result of a previously announced restructuring at one of the Corporation's eCommerce businesses.

Operating profit ~~(loss)~~ as a percentage of net sales increased ~~180~~10 basis points in the first nine months of ~~2021~~2022 compared to the same period last year. The increase was primarily driven by favorable price-cost and improved product mix, partially offset by lower operational productivity and increased investments. Additionally, in the first nine months of 2022, the workplace furnishings segment recorded $4.0 million of one-time charges primarily due to strategic restructuring of an eCommerce business that commenced in the fourth quarter of 2021. $1.4 million of one-time costs were recorded in the ~~current period from exiting showrooms. The prior-year period included $32.7 million~~first nine months of ~~charges related to the impairment of goodwill and intangible assets,~~2021 as ~~well as $3.4 million of one-time costs incurred as the~~a result of the COVID-19 pandemic. Aside from these charges, the workplace furnishings segment operating profit as a percentage of net sales decreased 170 basis points compared to the prior-year period driven by unfavorable price-cost and the return of costs related to temporary actions taken in the prior-year period, partially offset by improved net productivity and lower core SG&A spend.showroom exits.

Residential Building Products

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


		Three Months Ended								Nine Months Ended									Three Months Ended								Nine Months Ended
		October 2, 2021			September 26, 2020			Change		October 2, 2021			September 26, 2020			Change			October 1, 2022			October 2, 2021			Change		October 1, 2022			October 2, 2021			Change
Net sales	Net sales	$	193,609		$	153,702		26.0	%	$	541,472		$	393,397		37.6	%	Net sales	$	223.6		$	193.6		15.5	%	$	657.9		$	541.5		21.5	%
Operating profit	Operating profit	$	33,392		$	30,197		10.6	%	$	103,766		$	65,232		59.1	%	Operating profit	$	39.6		$	33.4		18.7	%	$	117.0		$	103.8		12.7	%
Operating profit %	Operating profit %	17.2		%	19.6		%	-240	bps	19.2		%	16.6		%	260	bps	Operating profit %	17.7		%	17.2		%	50	bps	17.8		%	19.2		%	-140	bps

Three months ended

Third quarter ~~2021~~2022 net sales for the residential building products segment increased ~~26.0~~15.5 percent compared to the same quarter last ~~year.~~year, driven by price realization and volume growth in both the new construction and existing home channels. Included in the sales results for the current quarter was ~~a $0.9~~an $11.2 million favorable impact from acquiring residential building products ~~installing distributors.~~companies.

Operating profit as a percentage of net sales ~~decreased 240~~increased 50 basis points in the third quarter of ~~2021~~2022 compared to the same quarter last ~~year. The decrease compared to the prior-year quarter was primarily~~year, driven by ~~unfavorable~~favorable price-cost ~~lower productivity,~~and higher ~~freight costs,~~volume, partially offset by the impact of acquisitions and increased investment ~~spend, partially offset by increased volume and lower variable compensation.~~spend.

Nine months ended

Net sales for the first nine months of ~~2021~~2022 for the residential building products segment increased ~~37.6~~21.5 percent compared to the same period last ~~year.~~year, driven by price realization and volume growth in both the new construction and existing home channels. Included in the sales results was a ~~$4.8~~$39.8 million favorable impact from acquiring residential building products ~~installing distributors.~~companies.

Operating profit as a percentage of net sales ~~increased 260~~decreased 140 basis points in the first nine months of ~~2021~~2022 compared to the same period last year. The ~~increase~~decrease was primarily driven by ~~strong volume growth,~~the impact of acquisitions, lower operational productivity, increased core SG&A and investment spend, partially offset by ~~unfavorable price-cost, the return of costs related to temporary actions taken in the prior-year period, normalized variable compensation,~~increased volume and lower ~~productivity.~~variable compensation.

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~~Based on current earnings before interest, taxes, depreciation, and amortization, the Corporation can access the full ~~$450~~$400 million of borrowing capacity available under the revolving credit facility, which includes the ~~$75~~$100 million currently outstanding, and maintain compliance with applicable covenants.

Cash Flow – Operating Activities

Operating activities were a source of $33.9 million of cash in the first nine months of 2022 compared to a source of $88.5 million of cash in the first nine months of ~~2021 compared~~2021. Working capital requirements are the primary driver of the variance from prior year due to timing. In the current year inventory was purchased earlier resulting in higher asset balances but lower short term liabilities. Inflationary cost pressures are also a ~~source~~driver of ~~$143.4 million of cash in~~ the ~~first nine months of 2020. The decrease in operating cash flows was driven by timing of~~higher working capital ~~fluctuations and lower noncash items, partially offset by higher income.~~requirements.

Cash Flow – Investing Activities

Capital Expenditures - Capital expenditures, including capitalized software, for the first nine months of ~~2021~~2022 were ~~$47.8~~$48.7 million compared to ~~$32.0~~$47.8 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. Additionally, in support of the Corporation's long-term strategy to create effortless winning experiences for customers, the Corporation continues to invest in technology and digital assets. For the full year ~~2021,~~2022, capital expenditures are expected to be approximately ~~$60~~$70 to ~~$65~~$75 million.

~~Current year~~Acquisitions and ~~prior year investing~~Divestitures - Investing activities include acquisition spending for residential building products ~~installing distributors, while current year activity also includes spending related to~~companies and proceeds from the ~~acquisition~~sale of ~~DPG.~~the Corporation's Lamex business. See "Note 3. ~~Acquisitions"~~Acquisitions and Divestitures" in the Notes to the 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. See "Note 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):~~follows:

Three Months Ended Nine Months Ended
October 2,
2021 September 26,
2020 October 2,
2021 September 26,
2020
Dividends per common share $ 0.310 $ 0.305 $ 0.925 $ 0.915


	Three Months Ended				Nine Months Ended
	October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021
Dividends per common share	$	0.320	$	0.310	$	0.950	$	0.925

During the third quarter, the Board declared the regular quarterly cash dividend on August ~~10, 2021.~~16, 2022. The dividend was paid on September ~~1, 2021,~~8, 2022, to shareholders of record as of August ~~20, 2021.~~26, 2022.

Stock Repurchase - The ~~Corporation’s~~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 most recently authorized an additional $200 million on ~~February 13, 2019,~~May 17, 2022, for repurchases of the ~~Corporation’s~~Corporation's common stock. As of October ~~2, 2021,~~1, 2022, approximately ~~$138.5~~$234.0 million remained of the Board's current repurchase ~~authorization remained unspent.~~authorizations. See "Note 10. Accumulated Other Comprehensive Income (Loss) and Shareholders' Equity" in the Notes to Condensed Consolidated Financial Statements for further information.

~~Off-Balance Sheet Arrangements~~Cash Requirements

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~~Various commitments and obligations associated with ongoing business and financing activities will result in cash payments in future periods. A ~~table summarizing~~summary of the amounts and estimated timing of these future cash payments was provided in the Corporation's Annual Report on Form 10-K for the fiscal year ended January ~~2, 2021. There~~1, 2022. Except for the item described below, 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 ~~2021.~~2022.

Commitments and Contingencies

See "Note ~~14.~~13. Guarantees, Commitments, and Contingencies" in the Notes to Condensed Consolidated Financial Statements for further information.

Critical Accounting Policies and Estimates

Management's Discussion and Analysis of Financial Condition and Results of Operations is based upon the Consolidated Financial Statements, prepared in accordance with Generally Accepted Accounting Principles ("GAAP"). The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses, and related disclosure of contingent assets and liabilities. Management bases its estimates on historical experience and on a variety of other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Senior management has discussed the development, selection, and disclosure of these estimates with the Audit Committee of the Board. Actual results may differ from these estimates under different assumptions or conditions. A summary of the more significant accounting policies requiring the use of estimates and assumptions in preparing the financial statements is provided in the Corporation's Annual Report on Form 10-K for the fiscal year ended January ~~2, 2021.~~1, 2022.

Recently Issued Accounting Standards Not Yet Adopted

In September 2022, the FASB issued ASU No. 2022-04, Liabilities—Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations.ASU 2022-04 enhances transparency of supplier finance programs by requiring disclosure of key terms, amounts outstanding, a rollforward of outstanding amounts, and a description of where in the financial statements outstanding amounts are presented. ASU 2022-04 is effective for the Corporation in the first quarter of fiscal 2023. The Corporation is currently evaluating the impact this guidance will have on the consolidated financial statements and disclosures.

Looking Ahead

The Corporation continues to navigate near-term uncertainty driven by macroeconomic conditions including the ~~ongoing COVID-19~~impacts of the pandemic and recent dynamics around labor availability, supply chain capacity, and cost inflation. However, management believes the Corporation is well positioned to grow revenues, expand margins, and generate cash flows as it moves into the next stage of the recovery. Strength in residential building products is expected to continue, with improving conditions being observed in workplace furnishings.

~~Management~~ remains optimistic about the long-term prospects in the workplace furnishings and residential building products markets. Management believes the Corporation continues to compete well and remains confident the investments made in the business will continue to generate strong returns for shareholders.

Forward-Looking Statements

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

"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~~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 January ~~2, 2021.~~1, 2022. The Corporation cautions readers not to place undue reliance on any forward-looking statement, which ~~speaks only as of~~is based necessarily on assumptions made at the ~~date made,~~time the Corporation provides such statement, and to recognize forward-looking statements are predictions of future results, which may not occur as anticipated. Actual results could differ materially from those anticipated in the forward-looking statements and from historical results due to the risks and uncertainties described elsewhere in this report, including but not limited to: the duration and scope of the COVID-19 pandemic, including any emerging variants of the virus, and its effect on people and the economy; potential disruptions in the global supply chain; the effects of prolonged periods of inflation; potential labor shortages; the levels of office furniture needs and housing starts; overall demand for the Corporation's products; general economic and market conditions in the United States and internationally; industry and competitive conditions; the consolidation and concentration of the Corporation's customers; the Corporation's reliance on its network of independent dealers; changes in trade policy; changes in raw material, component, or commodity pricing; market acceptance and demand for the Corporation's new products; changing legal, regulatory, environmental, and healthcare conditions; the risks associated with international operations; the potential impact of product defects; the various restrictions on the Corporation's financing activities; an inability to protect the Corporation's intellectual property; cybersecurity threats, including those posed by potential ransomware attacks; impacts of tax legislation; force majeure events outside the Corporation's ~~control;~~control, including those that may result from the effects of climate change; and other risks as described in the Corporation's annual and quarterly reports filed with the Securities and Exchange Commission on Forms 10-K and 10-Q, as well as others that the Corporation may consider not material or does not anticipate at this time. The risks and uncertainties described in this report, as well as those described within Item 1A of the Corporation's Annual Report on Form 10-K for the fiscal year ended January ~~2, 2021,~~1, 2022, 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 October ~~2, 2021,~~1, 2022, there ~~were~~have been no material changes to the financial market risks affecting the quantitative and qualitative disclosures presented in Item 7A of the Corporation's Annual Report on Form 10-K for the fiscal year ended January ~~2, 2021.~~1, 2022, except as described below.

In the second quarter of 2022, the Corporation terminated an interest rate swap agreement that had formerly been in place to fix the interest rate on $75 million of borrowings from the Corporation's revolving credit facility. As of October 1, 2022, the Corporation does not have any interest rate swap agreements or other derivative instruments outstanding. Also in the second quarter, the Corporation and its lenders agreed to amend and restate the revolving credit facility, which decreased the borrowing capacity from $450 million to $400 million, at the preference of the Corporation, while extending the maturity from April 2023 to June 2027. The amended facility bears interest at a variable rate based on the Secured Overnight Financing Rate.

As of October 1, 2022, the Corporation had $200.8 million of outstanding borrowings, of which $100 million was under the revolving credit facility and thus subject to market risk from interest rate fluctuations. The majority of the remaining debt balance is under private placement note agreements that bear interest at fixed rates. See "Note 7. Debt" and "Note 10. Accumulated Other Comprehensive Income (Loss) and Shareholders' Equity" in the Notes to Condensed Consolidated Financial Statements for further information.

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)~~15 and 15d – ~~15(e).~~15. As of October ~~2, 2021,~~1, 2022, 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.

In December 2020, the Corporation acquired DPG (see Note 3). In conducting its evaluation of the effectiveness of internal control over financial reporting, management has elected to exclude the acquisition from the evaluation as of October 2, 2021, as permitted by the regulations of the Securities and Exchange Commission. The Corporation is currently instituting internal controls over DPG's financial information and anticipates these controls to be implemented by the end of fiscal year 2021.

2930

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

For information regarding legal proceedings, see "Note ~~14.~~13. 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 January ~~2, 2021.~~1, 2022.

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

Issuer Purchases of Equity Securities:

The Corporation did not repurchase any of its shares during the quarter. As of October 1, 2022, $234.0 million was authorized and available for the repurchase of shares by the Corporation.

The Corporation repurchases shares under previously announced plans authorized by the Board. The Corporation's most recent share purchase authorization from ~~February 13, 2019,~~May 17, 2022, provides for repurchases of ~~$200,000,000~~an additional $200 million with no specific expiration date. The authorization does not obligate the Corporation to purchase any shares and the authorization may be terminated, increased, or decreased by the Board at any time. No repurchase plans expired or were terminated during the third quarter of fiscal ~~2021,~~2022, and no current plans are ~~currently in place under which further purchases are not intended.~~expected to expire or terminate.

~~The following is a summary of share repurchase activity during the quarter (in thousands, except per share data):~~

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
07/04/21 – 07/31/21 82 $ 40.77 82 $ 148,225
08/01/21 – 08/28/21 — $ — — $ 148,225
08/29/21 – 10/02/21 263 $ 37.00 263 $ 138,513
Total 345 345

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

3031

Item 6. Exhibits



10.1			Separation Agreement between HNI Corporation and Kurt Tjaden+



31.1			Certification of the CEO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002+
31.2			Certification of the CFO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002+
32.1			Certification of CEO and CFO Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002+
101			The following materials from HNI Corporation's Quarterly Report on Form 10-Q for the fiscal quarter ended October ~~2, 2021~~1, 2022 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.

3132

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: November ~~2, 2021~~1, 2022	By:	/s/ Marshall H. Bridges
		Marshall H. Bridges
		Senior Vice President and Chief Financial Officer

3233




	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


	2021		2022		2023		2024		2025
Amortization expense	$	29.9	$	27.3	$	23.1	$	19.0	$	17.3


	October 2, 2021		January 2, 2021
Current - in the next twelve months	$	6,080	$	5,918
Long-term - beyond one year	11,198		10,191
Total	$	17,278	$	16,109


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
07/04/21 – 07/31/21	82	$	40.77	82	$	148,225
08/01/21 – 08/28/21	—	$	—	—	$	148,225
08/29/21 – 10/02/21	263	$	37.00	263	$	138,513
Total	345			345