Hni Corporation · NYSE:HNI
Hni — Q1 2020 Earnings Presentation
18 slides from Hni's earnings presentation, Apr 23, 2020
Slide 1: First Quarter Fiscal 2020 Results
First Quarter Fiscal 2020 Results April 23, 2020 1
Slide 2: Forward-Looking Statements
Forward-Looking Statements This release contains "forward-looking" statements based on current expectations regarding future plans, events, outlook, objectives, financial performance, expectations for sales growth, and earnings per diluted share (GAAP and non-GAAP), including statements regarding th
Slide 3: Q1 2020 Conference Call Agenda
Q1 2020 Conference Call Agenda I. Pandemic Crisis Response Update II. Financial Results & Scenario Analysis III. Strategic Framework IV. Q&A 3
Slide 4: Pandemic Response Update
Pandemic Response Update Taking a balanced approach to address the crisis – prioritizing the health and well-being of all HNI members, while successfully navigating this crisis. 1. Safety and health measures: • Members working remotely • Physical layout of facilities reorganized • Frequency and dept
Slide 5: Pandemic Response Update: Operating Locations
Pandemic Response Update Operating in primary locations Office manufacturing 4 of 4 campuses open Office distribution 8 of 8 open Hearth manufacturing 2 of 4 open Hearth distribution 2 of 2 open Domestic operations only; PCR & Hong Kong locations open India closed Open location Closed location Locat
Slide 6: Pandemic Response Update: Future Demand Trends
Pandemic Response Update Gaining insight into potential future demand trends from: • Recent U.S. order trends – Office Furniture & Hearth Products • Year-to-date trends in China • Comparison to previous recessions Post-pandemic opportunities: • Work-from-home • Go-forward office configurations • Arc
Slide 7: Q1 2020 Review
Q1 2020 Review • Organic revenue -2.5% YoY organically • Office Furniture -4.3% YoY and Hearth Products +2.6% YoY organically • Gross margin expanded 220 bps (non-GAAP) year-over-year to 37.6% • Operating income (non-GAAP) grew 279% year-over-year • Operating margin expanded 220 bps year-over-year t
Slide 8: Liquidity and Leverage
Liquidity and Leverage • Quarter-ending debt levels: $230 million • Quarter-ending gross leverage ratio: ~1.0x • Existing lending agreements gross leverage covenant: 3.5x TTM EBITDA • First debt maturity: 2023 • Quarter-ending liquidity (cash plus borrowing availability): >$350 million 8
Slide 9: 2020 Scenario Analysis
2020 Scenario Analysis* Decremental EBIT Margin* 25% Free Cash Flow = or > Dividend Year-End Debt ~2019 year-end Covenant Compliant Yes *Includes significant cost actions. 9
Slide 10: Capital Structure Stress Test
Capital Structure Stress Test Can support nearly $270 million in debt with no earnings • Should remain covenant compliant, even in a scenario in which we have little to no earnings. • Supported by $77MM of D&A. Stress test is not an outlook or a scenario • Meant to illustrate the financial flexibili
Slide 11: Long-Term Strategic Framework
Long-Term Strategic Framework Goal: Drive significant annual profitability and free cash flow improvements. More details will be provided later this year, post the period of pandemic pressure. 11
Slide 12: Q&A
Q&A 12
Slide 13: Q1 2020 Details – Segments
Q1 2020 Details – Segments $ change % change Segment Breakdown 1Q20 1Q19 F/(U) Basis Pt Change Sales Office Furniture (1) $338.4 $353.5 ($15.1) (4.3%) Hearth Products (2) $130.3 $125.9 $4.4 3.5% Total $468.7 $479.5 ($10.8) (2.2%) Operating Profit Office Furniture (3) ($33.2) ($1.7) ($31.5) NM Office
Slide 14: Q1 2020 Details
Q1 2020 Details $ change % change Income Statement 1Q20 1Q19 F/(U) Basis Pt Change Net Sales $468.7 $479.5 ($10.8) (2.2%) Non-GAAP Gross Profit (excluding restructuring and transition costs) 176.0 169.6 6.4 3.8% % of Net Sales (1) 37.6% 35.4% 220 Transition Costs (2) - - - GAAP Gross Profit $176.0 $
Slide 15: Non-GAAP Financial Measures
Non-GAAP Financial Measures This earnings release includes certain non-GAAP financial information as defined by Securities and Exchange Commission Regulation G. Pursuant to the requirements of this regulation, reconciliations of this non-GAAP financial information to HNI’s financial statements as pr
Slide 16: Non-GAAP Reconciliations
Non-GAAP Reconciliations Three Months Ended 3/28/2020 Three Months Ended 3/30/2019 Office Office (Dollars in millions) Furniture Hearth Total Furniture Hearth Total Sales as reported (GAAP) $338.4 $130.3 $468.7 $353.5 $125.9 $479.5 % change from PY (4.3%) 3.5% (2.2%) Less: Impact of Acquisitions and
Slide 17: Non-GAAP Reconciliations (cont.)
Non-GAAP Reconciliations (cont.) Three Months Ended 3/28/2020 Gross Operating Net Diluted (Dollars in millions, except per share data) Profit Income Tax Income EPS As reported (GAAP) $176.0 ($23.7) ($1.6) ($23.9) ($0.56) % of net sales 37.6% (5.1%) (5.1%) Tax % 6.4% Impairment charges - 32.7 4.0 28.
Slide 18: Non-GAAP Reconciliations (cont.)
Non-GAAP Reconciliations (cont.) Office Furniture Hearth Products Three Months Ended Percent Three Months Ended Percent (Dollars in millions) 3/28/2020 3/30/2019 Change 3/28/2020 3/30/2019 Change Operating profit as reported (GAAP) ($33.2) ($1.7) NM $20.7 $17.6 17.4% % of net sales (9.8%) (0.5%) 15.