HNI Corporation

05/06/2026 | Press release | Distributed by Public on 05/06/2026 15:29

Quarterly Report for Quarter Ending April 4, 2026 (Form 10-Q)

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 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 3, 2026 filed with the Securities and Exchange Commission (the "2025 Form 10-K"). All dollar amounts presented are in millions, except per share data or where otherwise indicated. Amounts may not sum due to rounding. 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 about forward-looking statements.
References in this management discussion and analysis to "HNI" and the "Corporation" are to HNI and its consolidated subsidiaries.
Overview
HNI Corporation has been improving where people live, work, and gather for more than 80 years. HNI is a manufacturer of workplace furnishings and residential building products. Within Workplace Furnishings, the Corporation is the thought leader in commercial furnishings and the preeminent global designer, innovator, and provider of workplace solutions going to market under unique brands serving multiple channels and customers from the largest multinational companies to small local businesses. Within Residential Building Products, the Corporation is the nation's leading manufacturer and marketer of hearth products. The Corporation utilizes a multi-faceted go-to-market model to deliver value to customers via various brands and selling models. HNI is focused on growing its existing businesses while seeking out and developing new opportunities for expansion. The Corporation's two reportable segments consist of Workplace Furnishings and Residential Building Products.
On December 10, 2025, the Corporation completed its acquisition of Steelcase, a global design and furniture company, in a cash and stock transaction valued at approximately $1.9 billion. The acquisition of Steelcase unites two industry leaders to meet the dynamic marketplace and evolving needs of the workplace amid accelerating in-office work trends. This combination of two highly respected companies whose strong foundation, combined with expected synergies, will accelerate the Corporation's ability to invest in long-term operational enhancements, digital transformation, products to meet evolving customer needs, and customer-centered buying experiences. Steelcase is included in the Workplace Furnishings segment. See "Note 3. Acquisitions and Divestitures" in the Notes to Condensed Consolidated Financial Statements for more details on the Steelcase acquisition, which affects the comparability of results between the current and prior-year periods.
During the first quarter, the Corporation began managing costs across all businesses in response to soft volume to begin the year, driven by current geopolitical uncertainty. In Workplace Furnishings, the strategic focus remains margin expansion. The first quarter cost management actions within the segment are in addition to previously announced synergies associated with the integration of Steelcase, which are on track. Current synergy projections are focused on the Americas business and do not include any revenue synergies. The Corporation also continues to expect additional savings from network optimization in the legacy Workplace Furnishing businesses over the next three years. The Residential Building Products segment remains focused on driving revenue growth over the long term. The business continues to navigate challenging housing market dynamics resulting from interest rate volatility and affordability issues. The combination of the Corporation's disciplined cost management, Steelcase synergies, and legacy network optimization projects continue to strengthen its earnings visibility story. The Corporation is also focused on streamlining priorities. As an example, Steelcase's multi-year ERP implementation project was terminated during the first quarter. This move is part of a broader corporation-wide effort to focus on profitable growth, while also avoiding disruption, eliminating substantial future ERP investment, and redeploying resources back into the business - toward customer-focused initiatives.
Consolidated net sales for the first quarter of 2026 were $1.3 billion, an increase of 125 percent compared to net sales of $599.8 million in the prior-year quarter, with net sales in the Workplace Furnishings segment increasing 169 percent, and Residential Building Products net sales increasing 2.1 percent. Consolidated and Workplace Furnishings net sales include a $774.0 million year-over-year increase related to the acquisition of Steelcase in December 2025. See "Note 3. Acquisitions and Divestitures" in the Notes to Condensed Consolidated Financial Statements for further information about the acquisition.
Net loss attributable to the Corporation in the first quarter of 2026 was $38.8 million compared to net income of $13.9 million in the first quarter of 2025. The current quarter includes pretax costs of $64.2 million of purchase accounting adjustments related to the Steelcase acquisition for inventory step-up and additional amortization of intangibles and depreciation for the preliminary valuation of property, plant and equipment, additionally the Corporation recorded acquisition related expenses of $3.5 million. The Corporation also recorded $20.5 million of restructuring and impairment charges, inclusive of restructuring
recorded to cost of sales. This amount was primarily attributable to the termination of Steelcase's multi-year ERP implementation project, Steelcase acquisition costs and the closure of the Wayland, New York facility. Excluding the purchase accounting adjustments and restructuring and impairment charges, net income increased in the current quarter driven by improved net productivity.
Results of Operations
The following table presents certain results of operations:
Three Months Ended
April 4,
2026 		March 29,
2025 		Change
Net sales $ 1,347.5 $ 599.8 125 %
Cost of sales 847.6 361.4 135 %
Gross profit 499.9 238.4 110 %
Selling and administrative expenses 514.8 207.6 148 %
Acquisition costs 3.5 - NM
Restructuring and impairment charges 18.0 6.4 181 %
Operating income (loss) (36.4) 24.4 (249) %
Other non-operating income, net 1.5 - NM
Interest expense, net 20.7 5.5 274 %
Income (loss) before income taxes (55.6) 18.9 (395) %
Income taxes (benefit) (16.8) 5.0 (439) %
Net income (loss) attributable to non-controlling interest - (0.0) NM
Net income (loss) attributable to HNI Corporation $ (38.8) $ 13.9 (379) %
As a Percentage of Net Sales:
Net sales 100.0 % 100.0 %
Gross profit 37.1 39.7 -260 bps
Selling and administrative expenses 38.2 34.6 360 bps
Acquisition Costs 0.3 - 30 bps
Restructuring and impairment charges 1.3 1.1 20 bps
Operating income (loss) (2.7) 4.1 -680 bps
Income taxes (benefit) (1.3) 0.8 -210 bps
Net income (loss) attributable to HNI Corporation (2.9) 2.3 -520 bps
Three Months Ended April 4, 2026 and March 29, 2025
Net Sales
Consolidated net sales for the first quarter of 2026 increased 125 percent compared to the same quarter last year. The increase was driven by the acquisition of Steelcase in the prior year, which increased year-over-year net sales by $774.0 million. The divestiture of HNI India during the prior-year quarter decreased year-over-year net sales by $7.1 million.
Gross Profit
Gross profit as a percentage of net sales decreased 260 basis points in the first quarter of 2026 compared to the same quarter last year, driven by impacts from the acquisition of Steelcase, including $36.4 million of incremental purchase accounting adjustments, of which $33.5 million is related to inventory step-up and $2.9 million is related to additional depreciation for the
preliminary valuation adjustment to property, plant, and equipment, as well as by lower legacy HNI net sales volume, partially offset by improved net productivity and favorable price-cost.
Selling, General, and Administrative Expenses
Selling and administrative expenses as a percentage of net sales increased 360 basis points in the first quarter of 2026 compared to the same quarter last year. The increase was driven by impacts from the acquisition of Steelcase, including $27.8 million of incremental purchase accounting adjustments related to additional amortization of intangibles and depreciation for the preliminary valuation to property, plant, and equipment, along with lower net sales in the legacy HNI business, and increased input costs.
Acquisition Costs
In the current year the Corporation recorded costs of $3.5 million associated with the Steelcase acquisition. Acquisition costs consist primarily of retention compensation, other professional service fees, and change in control compensation expense adjustments. See "Note 3. Acquisitions and Divestitures" in the Notes to the Condensed Consolidated Financial Statements for further information.
Restructuring and Impairment Charges
In the first quarter of 2026, the Corporation recorded charges of $18.0 million, primarily related to the termination of Steelcase's multi-year ERP implementation project, the Corporation's network optimization program and the closure of the Wayland, New York facility. In the prior-year quarter, $6.4 million of charges were recorded, primarily related to the divestiture of the HNI India business.
Operating Income (Loss)
In the first quarter of 2026, operating margin contracted 680 basis points compared to the same quarter last year. This decrease was driven by impacts from the acquisition of Steelcase, including $64.2 million of incremental purchase accounting adjustments with respect to inventory step-up, and intangible amortization and depreciation related to the preliminary valuation of Steelcase, $20.5 million of restructuring and impairment charges, and lower net sales in the legacy HNI business, the effect of which were partially offset by improved net productivity and favorable price-cost.
Interest Expense, Net
Interest expense, net for the first quarter of 2026 increased to $20.7 million, from $5.5 million in the same quarter last year. The increase was driven by higher average outstanding borrowings incurred to fund the acquisition of Steelcase. See "Note 7. Debt" in the Notes to Condensed Consolidated Financial Statements for further information about such financing.
Income Taxes
The Corporation's income tax provision for the first quarter of 2026 was $16.8 million of benefit on loss before taxes of $55.6 million, or an effective tax rate of 30.3 percent. For the first quarter of 2025, the Corporation's income tax provision was $5.0 million of expense on income before taxes of $18.9 million, or an effective tax rate of 26.3 percent. The increase in the effective tax rate was primarily due to favorable equity-based compensation payments driving a higher tax benefit on the loss for the quarter.
Net Income (Loss) Attributable to HNI Corporation
Net loss attributable to the Corporation was $38.8 million, or $0.55 per diluted share, in the first quarter of 2026, compared to net income of $13.9 million, or $0.29 per diluted share, in the first quarter of 2025.
Workplace Furnishings
The following table presents certain results of operations in the Workplace Furnishings segment:
Three Months Ended
April 4,
2026 		March 29,
2025 		Change
Net sales $ 1,185.4 $ 441.1 169 %
Operating income (loss) $ (42.6) $ 18.0 (336) %
Operating income (loss) % (3.6) % 4.1 % -770 bps
Three Months Ended April 4, 2026 and March 29, 2025
First quarter 2026 net sales for the Workplace Furnishings segment increased 169 percent compared to the same quarter last year. The increase was driven by the acquisition of Steelcase in December of 2025, which increased net sales by $774.0 million, partially offset by the divestiture of HNI India in the second quarter of 2025, which decreased year-over-year sales by $7.1 million and lower legacy Workplace Furnishings sales volume partially offset by price.
Operating income (loss) as a percentage of net sales in the first quarter of 2026 decreased 770 basis points compared to the same period in 2025. The decrease was driven by impacts from the acquisition of Steelcase, including $64.2 million of incremental purchase accounting adjustments related to inventory step-up, intangible amortization and depreciation related to the preliminary valuation of Steelcase, $20.5 million of restructuring and impairment costs, and $6.6 million of acquisition costs, as well as lower net sales in the legacy HNI business, partially offset by improved net productivity.
Residential Building Products
The following table presents certain results of operations in the Residential Building Products segment:
Three Months Ended
April 4,
2026 		March 29,
2025 		Change
Net sales $ 162.1 $ 158.7 2.1 %
Operating income $ 28.5 $ 25.0 14.0 %
Operating income % 17.6 % 15.7 % 190 bps
Three Months Ended April 4, 2026 and March 29, 2025
First quarter 2026 net sales for the Residential Building Products segment increased 2.1 percent compared to the same quarter last year, with increased net sales in the remodel-retrofit market partially offset by decreased net sales in the new home market.
Operating income as a percentage of net sales increased 190 basis points in the first quarter of 2026 compared to the same quarter last year, driven by improved net productivity and favorable price-cost, partially offset by lower volume.
Liquidity and Capital Resources
Cash, cash equivalents, and short-term investments, coupled with cash flow from future operations, borrowing capacity expected to be available under the Corporation's existing revolving credit facility, and the Corporation's ability to access capital markets, are expected to be adequate to fund the Corporation's operations and satisfy its other cash requirements for at least the next twelve months. As of April 4, 2026, the Corporation can access the full $425 million of borrowing capacity available under its revolving credit facility, which includes the $169 million of borrowings outstanding as of that date, and to maintain compliance with specified financial covenants.
Cash Flow - Operating Activities
Operating cash flows were a use of $171.8 million for the first three months of 2026 compared to a source of $12.6 million for the first three months of 2025. The increase was driven by higher working capital usage, including settlement of certain acquisition related expense accruals in the current period.
Cash Flow - Investing Activities
Capital Expenditures - Capital expenditures, including capitalized software, for the first three months of 2026 were $35.7 million compared to $16.3 million for the same period last year. The current-period capital expenditures are primarily applied to machinery, equipment, and tooling required to support continuing operations, continuous improvements, and cost savings initiatives in the 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 capabilities. For the full year 2026, capital expenditures are expected to be approximately $130 to $140 million.
Cash Flow - Financing Activities
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 for the current and prior periods presented include periodic borrowings and repayments under the revolving credit facility.
As discussed in "Note 7. Debt" in the Notes to Condensed Consolidated Financial Statements, the Corporation also has borrowings outstanding under (i) a senior secured TLA Facility, and (ii) a senior secured TLB Facility, which were primarily used to fund the acquisition of Steelcase in December 2025. Cash flows included in financing activities in the current period include scheduled principal amortization payments under the TLA and TLB Facilities.
Dividend - The Corporation is committed to maintaining or modestly increasing the quarterly dividend rate. Cash dividends declared and paid per common share were as follows:
Three Months Ended
April 4,
2026 		March 29,
2025
Dividends per common share $ 0.34 $ 0.33
During the first quarter of 2026, the Board of Directors declared the regular quarterly cash dividend at the rate of $0.34 per share on February 17, 2026. This represents a $0.01 per share or 3.0 percent increase from the prior quarterly dividend level. The dividend was paid on March 11, 2026, to shareholders of record as of March 2, 2026.
Stock Repurchase - The Corporation's capital strategy related to stock repurchase is focused on offsetting the dilutive impact of issuances of common stock pursuant to equity awards granted for various compensation-related matters. The Corporation also may elect to opportunistically purchase additional shares based on excess cash generation and/or share price considerations. During the three months ended April 4, 2026, the Corporation did not repurchase any of its outstanding common stock. As of April 4, 2026, $84.3 million was available under the current authorization of the Board of Directors for repurchase of shares by the Corporation. See "Note 10. Accumulated Other Comprehensive Income (Loss) and Shareholders' Equity" in the Notes to Condensed Consolidated Financial Statements for further information.
Sales of Stock - The Corporation records cash flows received from the sale of its common stock held in treasury, primarily in connection with stock option exercises and the HNI Corporation Members' Stock Purchase Plan. See "Note 10. Accumulated Other Comprehensive Income (Loss) and Shareholders' Equity" and "Note 12. Stock-Based Compensation" in the Notes to Condensed Consolidated Financial Statements for further information.
Cash Requirements
Various commitments and obligations associated with ongoing business and financing activities will result in cash payments in future periods. A summary of the amounts and estimated timing of these future cash payments is presented in the 2025 Form 10-K. 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 three months of 2026.
Commitments and Contingencies
See "Note 13. Guarantees, Commitments, and Contingencies" in the Notes to Condensed Consolidated Financial Statements for further information about the Corporation's commitments and contingencies.
Critical Accounting Policies and Estimates
This 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 of Directors. 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 2025 Form 10-K.
Recently Issued Accounting Standards Not Yet Adopted
In November 2024, the Financial Accounting Standards Board (the "FASB") issued ASU No. 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. ASU 2024-03 aims to improve the disclosures about a public business entity's expenses by requiring more detailed information about the types of costs and expenses, including purchases of inventory, employee compensation, selling expenses, depreciation, and intangible asset amortization within commonly presented captions on the face of the income statement. Disclosures are required to be made on an annual and interim basis in a tabular format in the footnotes to the financial statements. The ASU becomes effective for the Corporation for its fiscal year ending December 2027, and for interim periods beginning with the first fiscal quarter of 2028, and may be applied either prospectively or retrospectively. Early adoption is permitted. The Corporation is currently evaluating the impact of adopting this guidance on the consolidated financial statements.
In September 2025, the FASB issued ASU No. 2025-06, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40) Targeted Improvements to the Accounting for Internal-Use Software. ASU 2025-06 modernizes internal-use software guidance, eliminating accounting consideration for software development stages, requiring cost capitalization when management has authorized and is committed to funding the project and it is probable the project will be completed and the software used for its intended function. The ASU becomes effective beginning with the first fiscal quarter of 2028, and may be applied either prospectively or retrospectively. Early adoption is permitted. The Corporation is currently evaluating the impact of adopting this guidance to the Consolidated Financial Statements.
Looking Ahead
The Corporation continues to navigate near-term uncertainty driven by macroeconomic conditions. However, 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 21E of the Securities Exchange Act of 1934 and Section 27A of the Securities Act of 1933. Words such as "anticipate," "believe," "could," "confident," "estimate," "expect," "forecast," "hope," "intend," "likely," "may," "plan," "possible," "potential," "predict," "project," "should," "will," "would," and variations of such words and similar expressions identify forward-looking statements. Forward-looking statements in this report about the transaction between the Corporation and Steelcase (the "Transaction") include, but are not limited to, statements about the completion and the benefits of the Transaction, including future financial and operating results, the combined company's plans, objectives, expectations and intentions, and other statements that are not historical facts.
Forward-looking statements involve known and unknown risks and uncertainties, which may cause the Corporation's actual results in the future to differ materially from expected results. The most significant factors known to the Corporation that may adversely affect the Corporation's business, operations, industries, financial position, or future financial performance are
described within Part II, Item 1A of this report and Item 1A of the 2025 Form 10-K. The Corporation cautions readers not to place undue reliance on any forward-looking statement, which is based necessarily on assumptions made at the time the Corporation provides such statement, and to recognize that 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.
The following factors related to the Steelcase acquisition, among others, could cause actual results to differ materially from those expressed in or implied by forward-looking statements: the risk that the benefits of the Steelcase acquisition may not be fully realized or may take longer to realize than expected, including as a result of changes in, or problems arising from, general economic and market conditions, interest and exchange rates, monetary policy, trade policy (including tariff levels), laws and regulations and their enforcement, and the degree of competition in the geographic and business areas in which HNI and Steelcase operate; any failure to promptly and effectively integrate the businesses of HNI and Steelcase; and potential adverse reactions to the transaction of HNI's or Steelcase's customers, employees or other business partners.
Additional important factors relating to the Corporation that could cause actual results to differ materially from those in forward-looking statements include, but are not limited to, disruptions in the global supply chain; the effects of prolonged periods of inflation and rising interest rates; 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, including with respect to tariff levels; changes in raw material, component, or commodity pricing; market acceptance and demand for the Corporation's new products; changing legal, regulatory, environmental, and health care 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, including those that may result from the effects of climate change; and other risks and uncertainties as described in the 2025 Form 10-K and in the Corporation's subsequent quarterly and current reports filed on Forms 10-Q and 8-K with the Securities and Exchange Commission, as well as other risks and uncertainties the Corporation may consider not material or are not known at this time. The risks and uncertainties described in this report, as well as those described within Item 1A of the 2025 Form 10-K, are not exclusive and further information concerning the Corporation, including risks and uncertainties 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 reports it files with or furnishes to the Securities and Exchange Commission.
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