MUSCATINE, Iowa — HNI Corp. reported a net loss of $12.8 million and net sales of $563.5 million in its second quarter.
In its earnings report, released Tuesday, Aug. 8, HNI said earnings on a per-share basis declined from 72 cents in the prior year to a loss of 30 cents in the second quarter, ended July 1. The decline was primarily due to transaction expenses related to its acquisition this year of Kimball International.
When excluding acquisition expenses and select other items, earnings were 55 cents per share, which compared to 52 cents in the prior year. The increase was driven by favorable price-cost, lower core operating expenses and improved net productivity.
The Muscatine-based office furniture and fireplaces maker announced on June 1 that it had completed its $485 million acquisition of Kimball International, an Indiana-based commercial furnishings company.
“Our members delivered an excellent quarter,” Jeff Lorenger, HNI Corp. chairman, president and CEO, said in the earnings release. “In Workplace Furnishings, our profit transformation efforts are ahead of schedule as evidenced by our margin expansion and profit growth.”
Since closing the acquisition deal, he said “We are even more confident our combination with Kimball International will give us a stronger platform for growth in our Workplace Furnishings segment.
Other second-quarter highlights HNI Corp. reported include:
- Grew non-GAAP profit in a challenging demand environment. Although one-time expenses related to the Kimball International acquisition impacted GAAP profit measures, non-GAAP EPS grew 6% despite a 9% decline in net sales compared to the prior year.
- Delivered significant profit improvement in Workplace Furnishings. Segment GAAP operating profit grew 33% marking the fifth consecutive quarterly period of year-over-year improvement.
- Kimball International accretion moves significantly higher due to planned exit of Poppin, which HNI intends to divest during the third quarter. Poppin was acquired by Kimball International in 2020. Poppin’s losses have masked the strength of Kimball International’s core businesses, which collectively generate strong operating margins.
- Profit support actions in place in Residential Building Products. This segment continues to face volume pressure, consistent with general weakness in the broader housing market. In response to volume declines, HNI enacted new cost reduction actions that it said will begin to support profitability in the third quarter.
“Our second quarter results show the ongoing potential of our profit transformation initiatives, and there are many additional opportunities ahead,” Mr. Lorenger said in the release. “As we look to the remainder of the year, we expect continued year-over-year profit and margin improvement in Workplace Furnishings.”
He said the addition of Kimball International “better positions us to lead in the evolving workplace environment and provides new opportunities for profit growth.”
According to Mr. Lorenger, the company’s Residential Building Products is showing its “ability to grow profit over the long-term… The intermediate- to long-term fundamentals of the housing market are strong as the market remains undersupplied, and demographic trends will continue to support demand.”
Other 2Q financial results, reported by HNI Corp., include:
- Consolidated net sales decreased 9.4% from the prior-year quarter to $563.5 million. The acquisition of Kimball International increased year-over-year net sales by $56.0 million, while the acquisition of a residential building products company in the second quarter of 2022 increased year-over-year sales by $0.9 million.
- Selling and administrative expenses as a percent of sales increased 690 basis points compared to the prior-year quarter, primarily driven by $31.3 million of costs associated with the acquisition of Kimball International.
- Restructuring and impairment charges totaled $8.1 million in the current quarter, primarily in connection with the planned exit of the Poppin business.
- Workplace Furnishings net sales increased 1.6% from the prior-year quarter to $413.0 million. The impact of the Kimball International acquisition increased sales by $56.0 million over the prior-year quarter, while the sale of Lamex in the third quarter of 2022 decreased sales $27.0 million compared to the prior-year quarter.
- Residential Building Products net sales decreased 30.1% from the prior-year quarter to $150.4 million. Remodel/retrofit sales, which also were negatively impacted by the normalization of trade inventory, declined more than new construction sales.
“Our core strategies are unchanged and gaining momentum. We will continue to expand margins in Workplace Furnishings and drive long-term revenue growth in Residential Building Products,” Mr. Lorenger said in the release.
