HNI Corporation (HNI) today announced sales for the full year ended December 30, 2017 of $2,176 million and net income of $90 million. GAAP net income per diluted share was $2.00 compared to $1.88in the prior year. GAAP net income includes a one-time tax benefit of $45 million related to the recently enacted tax legislation, partially offset by several nonrecurring charges. Non-GAAP net income per diluted share was $1.97 compared to $2.62 in the prior year.

Fourth quarter sales were $584 million and net income was $34 million. GAAP net income per diluted share, which also includes the tax legislation impact and several nonrecurring charges, was $0.77 compared to $0.24 in the prior year. Non-GAAP net income per diluted share was $0.47 compared to $0.82 in the prior year.

Fourth Quarter Summary Comments
"Our fourth quarter played out as we expected. We stabilized our supplies-driven business, made strong progress with our operational transformations, and positioned our Business Systems Transformation initiative for a successful go-live. The new tax legislation created a positive non-cash adjustment of our deferred tax liabilities and will lower our future tax expense. We also incurred several charges reflecting our multi-year effort to advance our operational capability and optimize our business portfolio. With this round of efforts largely complete, we are excited about our market momentum and the platform we've built 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 $27.6 million or 1.3 percent from the prior year to $2,175.9 million. On an organic basis, sales increased 3.1 percent. The net impact of acquisitions and divestitures of small office furniture companies decreased sales $92.2 million compared to the prior year.
GAAP gross profit margin decreased 190 basis points compared to the prior year. Of this decline, 130 basis points were driven by input cost inflation and unfavorable product mix, partially offset by higher sales volume and the impact of divestitures. The remaining decrease of 60 basis points was due to higher restructuring and transition costs.
Selling and administrative expenses increased primarily due to strategic investments, partially offset by lower incentive based compensation, the impact of divestitures, and the impact of stock price change on deferred compensation.
The Corporation recorded $16.5 million of restructuring costs and $17.0 million of transition costs in 2017 in connection with previously announced facility closures and structural realignments. Of these charges, $27.3 million was included in cost of sales. Specific items include severance, accelerated depreciation, and production move costs. The Corporation also recorded net charges of $29.3 million related to impairments of goodwill and intangibles, nonrecurring gains and losses, and a valuation reserve on a long-term note receivable.
The Corporation recorded a one-time tax benefit of $44.8 million related to the recently enacted tax legislation. The adjustment resulted primarily from the revaluation of deferred tax items.

Fourth Quarter Summary Comments

Consolidated net sales increased $3.0 million or 0.5 percent from the prior year quarter to $584.3 million. On an organic basis, sales increased 3.7 percent. The net impact of acquisitions and divestitures of small office furniture companies decreased sales $17.8 million compared to the prior year quarter.
GAAP gross profit margin decreased 260 basis points compared to the prior year quarter. Of this decline, 250 basis points were driven by input cost inflation, operational transformations, and unfavorable product and business mix, partially offset by higher sales volume and the impact of divestitures. The remaining decrease of 10 basis points was due to higher restructuring and transition costs.
Selling and administrative expenses increased primarily due to strategic investments, partially offset by the impact of stock price change on deferred compensation, the impact of divestitures, and lower incentive based compensation.
The Corporation recorded $4.5 million of restructuring costs and $5.3 million of transition costs in the fourth quarter in connection with previously announced facility closures and structural realignments. Of these charges, $6.9 million was included in cost of sales. Specific items include severance, accelerated depreciation, and production move costs. The Corporation also recorded net charges of $36.1 millionrelated to impairments of goodwill and intangibles, a nonrecurring loss, and a valuation reserve on a long-term note receivable.
The Corporation recorded a one-time tax benefit of $44.8 million related to the recently enacted tax legislation. The adjustment resulted primarily from the revaluation of deferred tax items.

Fourth quarter office furniture net sales decreased $4.5 million or 1.0 percent from the prior year quarter to $429.0 million. On an organic basis, sales increased 3.2 percent driven by increases in the North American contract and international businesses. The net impact of acquisitions and divestitures of small office furniture companies decreased sales $17.8 million compared to the prior year quarter.
Fourth quarter office furniture GAAP operating profit margin decreased 550 basis points. Of this decline, 560 basis points were driven by input cost inflation, operational transformations, unfavorable product and business mix, and strategic investments, partially offset by higher sales volume, lower incentive based compensation, and the impact of divestitures. This decline was partially offset by an increase of 10 basis points due to lower nonrecurring items, which include restructuring and impairment charges, transition costs, and loss on sale and disposal of assets.

Fourth quarter hearth products net sales increased $7.5 million or 5.1 percent from the prior year quarter to $155.3 million driven by increases in the new construction and retail businesses.
Fourth quarter hearth products GAAP operating profit margin increased 80 basis points. Of this increase, 30 basis points were driven by structural cost reductions and higher sales volume. The remaining increase of 50 basis points was due to lower restructuring and transition costs.

Outlook
"We are excited about 2018 and optimistic about our opportunities to drive volume and profit growth. The investments we've made, including our Business Systems Transformation initiative that successfully went live February 1st, have put us in position to drive new levels of productivity and take advantage of improving market demand. The actions we've taken over the last several years have made us a stronger company, able to better drive long-term profitable growth for our shareholders.

"The first quarter will be a period of transition and a low point for the year. Profit will be negatively impacted by costs associated with our Business Systems Transformation initiative, input cost inflation, and unfavorable business mix. We expect our profit to improve through the year as we complete our significant transformations and realize the financial returns from our efforts," said Mr. Askren.

The Corporation estimates full year 2018 non-GAAP earnings per share, which excludes restructuring and transition costs, to be in the range of $2.40 to $2.80. This estimate includes the recently enacted tax legislation impact. Full year organic sales are expected to be up 5 to 8 percent. Including the impacts of acquisitions and divestitures, full year sales are expected to be up 1 to 4 percent.

For the first quarter, the Corporation expects organic sales to be up 5 to 8 percent. Including the impacts of acquisitions and divestitures, first quarter sales are expected to be up 2 to 5 percent. First quarter non-GAAP earnings per share are anticipated to be in the range of $0.01 to $0.06, which excludes restructuring and transition costs.