MUSCATINE, Iowa - HNI Corporation (NYSE: HNI) today announced sales for the second quarter ended June 29, 2013, of $510.7 million, a 6 percent increase from the prior year quarter and net income of $11.4 million, a 63 percent increase from the prior year quarter. Net income per diluted share for the quarter was $0.25 or $0.28 on a non-GAAP basis when excluding a loss on the sale of a small non-core office furniture business.

Second Quarter Summary Comments

"Our growth investments delivered solid top and bottom line improvement in our office furniture and hearth businesses. Office furniture sales growth was led by a strong acceleration in our contract business driven by improved project activity. Continued strong profit growth in our hearth business was led by substantial growth in the new construction channel and strong operational execution," said Stan Askren, HNI Corporation Chairman, President and Chief Executive Officer.

Second Quarter Results

• Consolidated net sales increased $30.3 million or 6.3 percent to $510.7 million. Compared to prior year quarter, divestitures, partially offset by the acquisition of BP Ergo, resulted in a $4.9 million sales decline.
• Gross margins were 0.2 percentage points lower than prior year primarily due to new product ramp up and facility reconfiguration costs to meet changing market demands partially offset by higher volume and increased price realization.
• Total selling and administrative expenses as a percent of net sales, including restructuring charges, improved 1.3 percentage points from the prior year quarter due to higher volume, network distribution realignment savings and lower restructuring charges partially offset by investment in growth initiatives and a loss on the sale of a small non-core office furniture business.
• Included in the second quarter of 2012 was $1.0 million of restructuring and transition costs of which $0.3 million were included in cost of sales.

• Second quarter sales for the office furniture segment increased $17.6 million or 4.2 percent to $436.2 million. The increase was across both channels of the Corporation's office furniture segment. Compared to prior year quarter, divestitures, partially offset by the acquisition of BP Ergo, resulted in a $4.9 million sales decline.
• Second quarter operating profit increased $0.1 million. Operating profit was positively impacted by higher volume, increased price realization, network realignment savings, and lower restructuring charges. These were partially offset by new product ramp-up, facility reconfiguration to meet changing market demands and a loss on the sale of a small non-core business.

• Second quarter sales for the hearth products segment increased $12.7 million or 20.5 percent to $74.5 million driven by increases in both the new construction channel and the remodel/retrofit channel.
• Second quarter operating profit increased $4.8 million. Operating profit was positively impacted by increased volume, higher price realization and lower input costs partially offset by increased investments in selling initiatives and higher incentive-based compensation.

Year-to-Date Results
Consolidated net sales for the first six months of 2013 increased $27.4 million, or 3.0 percent, to $953.0 million compared to $925.6 million in 2012.  Gross margin increased to 33.8 percent compared to 33.7 percent last year even with increased investments related to growth and manufacturing capability reconfiguration.  Net income attributable to HNI Corporation was $12.8 million compared to $6.9 million in 2012.  Earnings per share increased to $0.28 per diluted share compared to $0.15 per diluted share for the first six months of 2012. 

Operating activities used $12.5 million of cash during the first six months of 2013 compared to generating $5.7 million of cash for the same period last year.  Capital expenditures during the first six months were $39.3 million in 2013 compared to $25.1 million in 2012.

Outlook
"I am encouraged by the recent growth acceleration in our businesses and remain confident in our strategies to drive profit improvement while simultaneously investing for long-term profitable growth.  We enter the third quarter with good momentum across our office furniture and hearth businesses, and we remain on track to grow sales and solidly increase profits in 2013," said Mr. Askren.

The Corporation estimates sales growth between 3 to 6 percent in the third quarter over the same period in the prior year.  Non-GAAP earnings per diluted share are anticipated in the range of $0.55 to $0.60 for the third quarter, which excludes restructuring charges and transition costs.  For the full year, the Corporation is narrowing its estimate of non-GAAP earnings per diluted share to the range of $1.30 to $1.40, which excludes restructuring charges, transition costs and a loss on the sale of a business.

The Corporation remains focused on creating long-term shareholder value by growing its business through investment in building brands, product solutions and selling models, enhancing its strong member-owner culture and remaining focused on its long-standing rapid continuous improvement programs to build best total cost and a lean enterprise.

About HNI Corporation
HNI Corporation is a NYSE traded company (ticker symbol:  HNI) providing products and solutions for the home and workplace environments.  HNI Corporation is the second largest office furniture manufacturer in the world and is also the nation's leading manufacturer and marketer of gas- and wood-burning fireplaces.  The Corporation's strong brands, including HON^®, Allsteel^®, Gunlocke^®, Paoli^®, Maxon^®, Lamex^®, HBF^® , artcobell^TM, Midwest Folding Products^TM, ERGO^®, Heatilator^®, Heat & Glo^®, Quadra-Fire^® and Harman Stove^TM have leading positions in their markets.  HNI Corporation is committed to maintaining its long-standing corporate values of integrity, financial soundness and a culture of service and responsiveness.  More information can be found on the Corporation's website at www.hnicorp.com.

Non-GAAP Financial Measures
This earnings release contains certain non-GAAP financial measures.  A "non-GAAP financial measure" is a numerical measure of a company's financial performance that excludes or includes amounts different than the most directly comparable measure calculated and presented in accordance with GAAP in the statements of income, balance sheets or statements of cash flow of the company.  We have provided a reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measure.

The non-GAAP financial measures used within this earnings release are:  gross profit, operating income, operating profit and net income per diluted share (i.e., EPS), excluding restructuring and impairment charges, transition costs and loss on sale of a business.  Non-GAAP EPS is calculated using the Corporation's overall effective tax rate for the period.  We present these measures because management uses this information to monitor and evaluate financial results and trends.  Management believes this information is also useful for investors.  This earnings release also contains a forward-looking estimate of non-GAAP earnings per diluted share for the third quarter and full fiscal year 2013.  We provide such non-GAAP measures to investors on a prospective basis for the same reasons we provide them to investors on a historical basis.  We are unable to provide a reconciliation of our forward-looking estimate of non-GAAP earnings per diluted share to a forward-looking estimate of GAAP earnings per diluted share because certain information needed to make a reasonable forward-looking estimate of GAAP earnings per diluted share for the full fiscal year is difficult to predict and estimate and is often dependent on future events which may be uncertain or outside of our control.  These may include unanticipated charges related to asset impairments (fixed assets, intangibles or goodwill), unanticipated acquisition related costs and other unanticipated non-recurring items not reflective of ongoing operations.