HNI Corporation Wednesday announced sales for the full year ended December 31, 2016 of $2,203 million, a decrease of 4.4% from sales of $2.304 million in the year earlier quarter, and net income of $86 million or $1.88 per diluted share. Non-GAAP net income per diluted share increased 1.6 percent from the prior year to $2.62.

Fourth quarter sales were $581 million and net income was $11 million or $0.24 per diluted share. Non-GAAP net income per diluted share decreased 9.9 percent from the prior year quarter to $0.82.

Year-End Summary Comments
"2016 was another strong year. We increased non-GAAP operating margins 50 basis points while generating significant cash flow and increasing our strong dividend. Our businesses performed well as we strategically repositioned and simplified our portfolio to increase profitability. We continued to significantly invest in our businesses to drive long-term profitable growth. I am pleased with our 2016 results. We exit the year a stronger company, well positioned to drive long-term shareholder value," said Stan Askren, HNI Corporation Chairman, President and Chief Executive Officer.

Full Year Summary Comments

Consolidated net sales decreased $100.9 million or 4.4 percent to $2.2 billion. Compared to prior year, the net impact of small office furniture company acquisitions and divestitures increased sales $27.2 million. On an organic basis, sales decreased 5.6 percent.
GAAP gross profit margin increased 110 basis points and non-GAAP gross profit margin increased 160 basis points compared to prior year driven by strong operational performance, price realization, favorable material costs and productivity, partially offset by lower volume.
Selling and administrative expenses, as a percentage of sales, increased 110 basis points compared to prior year driven by lower volume, strategic investments and the impact of stock price appreciation on deferred compensation, partially offset by broad-based cost reductions.
The Corporation recorded $10.5 million of restructuring costs and $9.3 million of transition costs in 2016 in conjunction with previously announced closures and structural realignments, of which $14.6 million was recognized in cost of goods sold. The Corporation recorded $5.8 million of goodwill and intangible impairment charges related to a small office furniture business. The Corporation also recorded $4.4 million of accelerated depreciation associated with the charitable donation of a building.
The Corporation recorded a $22.6 million non-cash loss on the sale of Artcobell, a K-12 education furniture company. The sale of this non-core business unit will result in approximately $5.0 million of improved operating profit in 2017. This sale was partially offset by a $2.0 million non-recurring gain on a litigation settlement.

Fourth Quarter Summary Comments

Consolidated net sales decreased $15.6 million or 2.6 percent to $581.3 million. Compared to prior year, the net impact of small office furniture company acquisitions and divestitures increased sales $10.0 million. On an organic basis, sales decreased 4.3 percent.
GAAP gross profit margin decreased 10 basis points driven by restructuring and transition costs and lower volume partially offset by strong operational performance, price realization and favorable material costs. Non-GAAP gross profit margin, which excludes restructuring and transition costs, increased 70 basis points compared to prior year.
Selling and administrative expenses, as a percentage of sales, increased 160 basis points compared to prior year, due to lower volume, strategic investments and the impact of stock price appreciation on deferred compensation.
The Corporation recorded $6.3 million of restructuring costs and $2.5 million of transition costs in the fourth quarter in connection with previously announced closures and structural realignments, of which $5.6 million was recognized in cost of goods sold. The Corporation recorded $5.8 million of goodwill and intangible impairment charges related to a small office furniture business. The Corporation also recorded $2.8 million of accelerated depreciation associated with the charitable donation of a building.
The Corporation recorded a $22.6 million non-cash loss on the sale of Artcobell, a K-12 education furniture company.

Fourth quarter sales decreased $10.3 million or 2.3 percent to $433.5 million. Sales increased in the supplies-driven business but were more than offset by decreases in the contract and international businesses. Compared to prior year, the net impact of small office furniture company acquisitions and divestitures increased sales $10.0 million. On an organic basis, sales decreased 4.6 percent.
Fourth quarter GAAP operating profit margin decreased 460 basis points to 1.8 percent driven by the sale of Artcobell and lower volume partially offset by material productivity and lower freight costs. Non-GAAP operating profit margin, which excludes the loss on sale and impacts from structural realignment and previously announced closures, increased 70 basis points to 9.9 percent.

Fourth quarter sales decreased $5.3 million or 3.5 percent to $147.8 million. Sales for the quarter decreased in the retail wood/gas and retail pellet businesses partially offset by an increase in the new construction channel.
Fourth quarter GAAP operating profit margin decreased 110 basis points to 19.2 percent due to lower volume, unfavorable material and freight costs and restructuring and transition costs related to a previously announced closure, partially offset by price realization and cost reductions. Non-GAAP operating profit margin, which excludes the impact of the previously announced closure, increased 30 basis points to 20.6 percent.

Outlook
"We expect strong 2017 performance driven by top line growth and the continued benefit of structural cost reductions and operational improvements. As we progress through 2017, we expect demand to start slowly and build throughout the year driven by an improving economy and investments in new products and selling capabilities," said Mr. Askren.

The Corporation estimates full year non-GAAP earnings per share to be in the range of $2.80 to $3.15, which excludes restructuring and transition costs. Full year organic sales growth is expected to be 3 to 6 percent.

For the first quarter, organic sales are expected to be down 3 to 6 percent over the same period in the prior year. Non-GAAP earnings per share are anticipated to be in the range of $0.17 to $0.24 for the first quarter, which excludes restructuring and transition costs.