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Sep 26, 2020
HNI Q3 2020 Earnings Report
HNI Corporation reported earnings for the third quarter of fiscal year 2020.
Key Takeaways
HNI Corporation announced sales of $507.1 million and net income of $30.7 million for the third quarter ended September 26, 2020. The company saw strong results in Residential Building Products and solid profits in Workplace Furnishings, along with continued strong cash flow and a high-quality balance sheet.
Residential Building Products operating profit increased 27 percent; operating margin expanded 270 basis points; and net sales grew 9.3 percent year-over-year.
Workplace Furnishings operating profit was nearly $17 million, despite a 27 percent year-over-year contraction on the segment’s top line.
Operating cash flow increased $12.7 million or 12 percent versus the prior year quarter.
Quarter-ending debt levels were $175 million with a gross leverage ratio of approximately 0.9x. Cash totaled $109 million, representing an increase of $83 million from the second quarter balance.
HNI
HNI
HNI Revenue by Segment
Revenue by Segment
Workplace Furnishings Revenue
CapyFin.comResidential Building Products Revenue
CapyFin.com Forward Guidance
The Corporation expects year-over-year revenue declines will moderate slightly in the fourth quarter in Workplace Furnishings. The Corporation believes cyclical strength, secular support, company-specific initiatives, and its strong competitive position support revenue growth acceleration in Residential Building Products. The Corporation expects decremental margins for the full year to be less than 20 percent on a consolidated basis. The Corporation continues to expect strong cash generation and estimates the year-ending debt to be approximately $175 million.
Positive Outlook
- Recent order trends suggest year-over-year revenue declines will moderate slightly in the fourth quarter for Workplace Furnishings.
- The fourth quarter 2020 benefits from an extra week in the fiscal calendar.
- Cyclical strength in Residential Building Products.
- Secular support in Residential Building Products.
- Company-specific initiatives and its strong competitive position support revenue growth acceleration in Residential Building Products.
Challenges Ahead
- Pandemic-related uncertainty remains and limits the Corporation’s visibility.
- The combination of these factors point to fourth quarter revenue declines in the mid-teens on a year-over-year rate basis in Workplace Furnishings.
- Recent order trends, housing construction activity, and the fourth quarter’s extra week suggest fourth quarter growth rates in the mid to high teens compared to the prior year quarter in Residential Building Products revenue.
- This implies higher decremental margins in the fourth quarter, primarily driven by unfavorable business mix
- Accelerating investment levels.
Revenue & Expenses
Visualization of income flow from segment revenue to net income