MUSCATINE, Iowa - HNI Corporation (NYSE: HNI) today announced sales for the fourth quarter ended December 28, 2013, of $541.3 million, a 3 percent increase from the prior year quarter and net income of $22.8 million, a 29 percent increase from the prior year quarter.  Net income per diluted share for the quarter was $0.50.  For fiscal year 2013, the Corporation reported sales of $2.1 billion, a 3 percent increase from prior year, and net income of $63.7 million, a 30 percent increase from prior year.  Net income per diluted share for the year was $1.39 or $1.43 on a non-GAAP basis when excluding restructuring and transition costs and a loss on the sale of a small non-core office furniture business.

"We are pleased with our strong execution and profit improvement for the fourth quarter and full year 2013.  Our growth investments delivered top-line improvement in the quarter despite a slow economy.  Outstanding working capital management drove significant cash generation.  Office furniture sales increased in our supplies-driven business despite continued reductions in federal government spending.  Continued strong profit growth in our hearth business was led by substantial growth in both the new construction and remodel/retrofit channels and outstanding operational execution.  We enter 2014 financially strong, competitively well positioned, and focused on delivering profitable growth," said Stan Askren, HNI Corporation Chairman, President and Chief Executive Officer.

• Consolidated net sales increased $13.7 million or 2.6 percent to $541.3 million. Compared to prior year quarter, divestitures reduced sales $8.2 million. On an organic basis sales increased 4.1 percent.
• Gross margin was 0.5 percentage points higher than prior year quarter primarily due to higher volume and increased price realization partially offset by new product ramp-up and operation reconfiguration costs to meet changing market demands.
• Total selling and administrative expenses as a percent of net sales, including restructuring charges, decreased 0.8 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 higher incentive-based compensation.
• The Corporation's fourth quarter results included $0.1 million of restructuring charges associated with previously announced shutdown and consolidation of office furniture manufacturing locations. Included in the fourth quarter of 2012 was $1.1 million of restructuring and transition costs of which $0.3 million was included in cost of sales.

• Consolidated net sales increased $56.0 million or 2.8 percent to $2.1 billion. Compared to prior year, divestitures, partially offset by the acquisition of BP Ergo, reduced sales $27.5 million. On an organic basis sales increased 4.2 percent.
• Gross margin was 0.3 percentage points higher than prior year due to increased volume, better price realization and lower material costs offset partially by unfavorable mix, new product ramp-up and operation reconfiguration costs to meet changing market demands.
• Total selling and administrative expenses as a percent of net sales, including restructuring charges, improved 0.4 percentage points due to higher volume, network distribution realignment savings and lower restructuring charges partially offset by investment in growth initiatives, higher incentive-based compensation and a loss on the sale of a small non-core office furniture business. Included in 2013 were $0.3 million of restructuring and transition charges compared to $3.0 million in 2012.
• The provision for income taxes for 2013 reflects an effective tax rate of 34.5 percent compared to 37.7 percent in 2012. The decrease is due to the research tax credit for 2012 being applied in fiscal 2013.

Cash flow from operations for the year was $165.0 million compared to $144.8 million in 2012.   Capital expenditures were $78.9 million in 2013 compared to $60.3 million in 2012.    

• Fourth quarter sales for the office furniture segment were $417.0 million which was $5.4 million or 1.3 percent less than the same quarter last year. Compared to prior year quarter, divestitures reduced sales by $8.2 million. On an organic basis, sales increased 0.7 percent driven by growth in the supplies-driven channel partially offset by a decrease in the contract and international businesses. Federal government sales declined over 40 percent compared to the same quarter last year. Full year sales for the office furniture segment were $1.69 billion which was $2.1 million or 0.1 percent less than prior year. Compared to prior year, divestitures partially offset by the acquisition of BP Ergo, reduced sales by $27.5 million. On an organic basis, sales increased 1.5 percent driven mainly by growth in the supplies-driven channel. Full year sales to the federal government declined over 27 percent compared to the prior year.
• Fourth quarter and full year operating profit increased $2.3 million and $5.5 million, respectively. Operating profit margin was positively impacted by increased price realization, network realignment savings and lower restructuring charges. These were partially offset by lower volume, new product ramp-up, operation reconfiguration to meet changing market demands and a loss on the sale of a small non-core office furniture business.

• Fourth quarter and full year sales for the hearth products segment increased $19.1 million and $58.1 million, respectively. These increases were driven by increases in both the new construction and the remodel/retrofit channels.
• Fourth quarter and full year operating profit increased $7.6 million and $20.2 million, respectively. Operating profit was positively impacted by higher volume, better price realization and lower material costs partially offset by investments in growth initiatives and incentive-based compensation.

Outlook
"I remain positive about our markets and our ability to grow sales and increase profits in 2014.  We continue to aggressively invest for long-term profitable growth, and I remain confident our investments are delivering shareholder value.  Our businesses are strong, competitive, and well-positioned in their markets, and the prospects for our businesses are encouraging," said Mr. Askren.

The Corporation estimates sales growth between 1 and 5 percent in the first quarter over the same period in the prior year.  Non-GAAP earnings per diluted share are anticipated in the range of $0.07 to $0.12 for the first quarter.  For the full year, the Corporation is updating its estimate of non-GAAP earnings per diluted share to be in the range of $1.60 to $1.80, which excludes restructuring charges and transition costs.

The Corporation remains focused on delivering long-term shareholder value through its core strategic framework:  Member/Owner Culture, Rapid Continuous Improvement (RCI), Core Plus and Split-and-Focus with Leverage.

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, selling and administrative expense, 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 first quarter and full fiscal year 2014.  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. 

 Source: HNI Corp.