HNI Corporation Reports Earnings For Second Quarter Fiscal Year 2017

MUSCATINE, Iowa, July 24, 2017

Summary Comments
"We continue to manage through a dynamic environment in our office furniture businesses.  Our second quarter results were consistent with our prior announcement.  Office furniture sales were negatively impacted by shipment timing and a greater than anticipated decline in the wholesale channel.  We continue to aggressively respond to the changing environment by investing in new products and selling capabilities and advancing initiatives around quick ship, direct fulfillment.  Though a short-term negative profit impact, our response to these shifts will make us stronger in the long term as we become closer to our customers, delivering unmatched value," said Stan Askren, HNI Corporation Chairman, President and Chief Executive Officer.

Second Quarter - Financial Performance
(Dollars in millions, except per share data)
	Three Months Ended
	July 1,  2017 ARIVA.DE Börsen-Geflüster Kurse Hni 42,09 $ -1,50%	July 2,  2016	Change
GAAP
Net Sales	$514.5	$536.5	(4.1%)
Gross Profit %	35.9%	38.9%	-300 bps
SG&A %	31.6%	30.3%	130 bps
Restructuring charges %	0.1%	0.1%	— bps
Operating Income	$21.6	$46.0	(53.0%)
Operating Income %	4.2%	8.6%	-440 bps
Net Income %	2.7%	5.4%	-270 bps
EPS – diluted	$0.31	$0.64	(51.6%)
Non-GAAP
Organic Sales	$509.6	$509.1	0.1%
Gross Profit %	37.3%	39.9%	-260 bps
SG&A %	31.6%	30.6%	100 bps
Operating Income	$29.3	$49.5	(40.8%)
Operating Income %	5.7%	9.2%	-350 bps
EPS – diluted	$0.42	$0.68	(38.2%)

Second Quarter Summary Comments

• Consolidated net sales decreased $22.0 million or 4.1 percent from the prior year quarter to $514.5 million. On an organic basis, sales increased 0.1 percent. The net impact of acquisitions and divestitures of small office furniture companies decreased sales $22.5 million compared to the prior year quarter.
• GAAP gross profit margin decreased 300 basis points compared to the prior year quarter primarily driven by input cost inflation, deeper discounting, and product mix. Non-GAAP gross profit margin, which excludes restructuring and transition costs, decreased 260 basis points compared to the prior year quarter.
• Selling and administrative expenses increased as a percentage of sales due to strategic growth investments and prior year non-repeating adjustments, partially offset by the impact of divestitures, lower incentive based compensation, and the impact of stock price change on deferred compensation.
• The Corporation recorded $3.4 million of restructuring costs and $4.3 million of transition costs in the second quarter in connection with previously announced facility closures and structural realignments. $7.3 million of these charges were included in cost of sales. Specific items incurred include accelerated depreciation and production move costs.

Office Furniture – Financial Performance
(Dollars in millions)
	Three Months Ended
	July 1,  2017	July 2,  2016	Change
GAAP
Net Sales	$406.4	$428.1	(5.1%)
Operating Profit	$19.7	$43.4	(54.6%)
Operating Profit %	4.8%	10.1%	-530 bps
Non-GAAP
Organic Sales	$401.6	$400.7	0.2%
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