HNI Corporation Announces Plant Consolidation

Rhea-AI Summary

HNI (NYSE: HNI) announced it will close its manufacturing plant in Hickory, North Carolina, in the first half of 2025. The production will be consolidated into other North American facilities to enhance productivity and operational strength. HNI anticipates annual cost savings of approximately $11 million by 2026, with $8-$9 million realized in 2025. The consolidation, enabled partly by the integration of Kimball International (acquired in June 2023), will incur charges affecting pre-tax earnings by about $10.3 million in 2024 and 2025. Around 200 employees will be impacted by the closure. HNI will retain a commercial presence in Hickory through its HBF brand.

Positive

• Estimated annual cost savings of $11 million by 2026.
• Anticipated savings of $8-$9 million in 2025.
• Strategic integration of Kimball International, contributing $50 million in total cost synergies.
• Improved productivity and strengthened operations from consolidation.
• No loss in production capacity or disruption in services anticipated.

Negative

• Pre-tax earnings to be impacted by approximately $10.3 million in 2024 and 2025 due to consolidation charges.
• Around 200 employees will be affected by the plant closure.

Insights

Financial Analyst

The plant consolidation by HNI Corporation in Hickory, North Carolina, aims to improve operational efficiency and reduce costs. The company estimates annual savings of $11 million by 2026, with initial savings of $8 to $9 million expected in 2025. These savings are in addition to the already announced cost synergies from the acquisition of Kimball International Inc. (KII), which total an estimated $50 million. The integration of KII allows HNI to tap into new markets such as healthcare and hospitality, providing further growth opportunities.

However, the restructuring comes with a pre-tax charge of $10.3 million over two years, which will impact short-term earnings. Investors should consider this temporary financial hit against the long-term benefits of enhanced operational efficiency and cost savings.

While the consolidation could imply potential disruption in the short-term, the overall strategy seems sound, focusing on streamlined operations and improved cost structures.

Market Research Analyst

The decision to consolidate manufacturing plants is part of HNI's broader strategy to optimize its operational footprint post the KII acquisition. This move will reinforce HNI's market position by leveraging synergies and focusing on high-growth areas like healthcare and hospitality. Improved production efficiencies and coordinated delivery logistics are expected to enhance customer experience, which is vital for maintaining competitive advantage.

The company's focus on maintaining a commercial presence in Hickory with its HBF brand shows a commitment to brand strength and customer relations. This should reassure clients and partners about the continuity and quality of service.

However, the workforce reduction, impacting around 200 employees, might raise concerns regarding corporate social responsibility and potentially affect local economies. It's a trade-off between operational efficiency and social impact.

Tech Expert

The consolidation move also suggests that HNI is focusing on modernizing its manufacturing processes by concentrating production in centers of excellence. This likely involves adopting advanced technologies and optimized workflows, which can lead to improved product quality and reduced lead times.

Technological advancement in production facilities can significantly enhance operational efficiency, reduce waste and improve quality control. This approach aligns with current industry trends where companies strive for digital transformation and smart manufacturing to remain competitive.

The company's commitment to high standards in quality assurance and logistics coordination further ensures that these technological investments will translate into tangible benefits for end-users.

MUSCATINE, Iowa--(BUSINESS WIRE)-- HNI Corporation (NYSE: HNI) announced today it will close its Hickory, North Carolina, manufacturing plant during the first half of 2025 and consolidate production into its other North American facilities.

HNI expects the consolidation to improve productivity and strengthen operations, without sacrificing capacity or creating disruption. Customers and trade partners will benefit from production efficiencies, coordinated delivery logistics, and rigorous quality assurance.

HNI will maintain a commercial presence in Hickory with its HBF brand of workplace furnishings and textile products. HBF’s brand headquarters will remain in Hickory as will its marketing, customer experience, product development, and product engineering members (employees).

“Closing a facility is a difficult decision and is not a reflection on the hard work and effort of the Hickory operations team. We are grateful for their dedication and will work to assist them through this transition.

“This is a strategic decision to optimize our operational footprint and improve business performance. We are announcing this several months in advance as part of our commitment to make the transition as smooth as possible. We will continue to grow our premium HBF business with our talented brand team in Hickory. This move will improve the customer experience for our trade partners and end-users, and more efficiently deliver on our commitments to safety, quality, lead-times, and reliability,” said Jeff Lorenger, HNI’s Chairman, President, and Chief Executive Officer.

Estimated Financial Impacts

• Cost savings. HNI estimates the consolidation will save approximately $11 million annually once fully mature in 2026. Savings realized in 2025 are expected to be $8 to $9 million.
• Savings are incremental to previously announced cost synergies from the acquisition of Kimball International, Inc. (“KII”). Moving Hickory production to HNI’s manufacturing centers of excellence was partially enabled by the strategic integration of KII, which HNI acquired in June 2023. Total cost synergies associated with the integration of KII now total an estimated $50 million, reflecting the previously announced $35 million, $11 million associated with the Hickory consolidation, and approximately $4 million of new cost synergies related to ongoing procurement efforts. In addition to these cost synergies, KII continues to be highly complementary from a product, market, and cultural perspective. KII’s brands strengthen HNI’s exposure to several important trends and markets, including ancillary products, secondary geographies, healthcare, and hospitality.
• Resulting charges. HNI anticipates charges resulting from the consolidation will impact pre-tax earnings by an estimated $10.3 million in 2024 and 2025, including $1.5 million of non-cash charges. The following table lists the estimated composition and timing of these charges:

(Dollars in millions)

Time Period	Restructuring Costs (Cash)	Accelerated Depreciation (Non-Cash)	Other Costs (Cash and Non-Cash)		Total
Q2 2024	2.5	0.1	1.4		4.1
Q3 2024	0.7	0.4	1.5		2.6
Q4 2024	0.8	0.4	0.7		1.8
				2024 Total	8.5
Q1 2025	0.7	0.4	0.4		1.5
Q2 2025	0.2	-	0.1		0.3
				2025 Total	1.8
				Grand Total	10.3

The decision will impact approximately 200 production and operations members in Hickory.

About HNI Corporation

HNI Corporation (NYSE: HNI) has been improving where people live, work, and gather for more than 75 years. HNI is a manufacturer of workplace furnishings and residential building products, operating under two segments. The Workplace Furnishings segment is a leading global designer and provider of commercial furnishings, going to market under multiple unique brands. The Residential Building Products segment is the nation's leading manufacturer and marketer of hearth products, which include a full array of gas, electric, wood, and pellet-burning fireplaces, inserts, stoves, facings, and accessories. More information can be found on the Corporation's website at www.hnicorp.com.

Forward-Looking Statements

This release contains "forward-looking" statements based on current expectations regarding future plans, events, outlook, objectives, financial performance, and expectations for sales growth, including statements regarding HNI’s ability to achieve the estimated benefits of the consolidation described above within the anticipated time period and subject to the costs in the amounts estimated. Forward-looking statements can be identified by words including “expect,” “believe,” “anticipate,” “estimate,” “may,” “will,” “would,” “could,” “confident,” or other similar words, phrases, or expressions. Forward-looking statements involve known and unknown risks and uncertainties, which may cause the Corporation’s actual future results and performance to differ materially from expected results. Actual results could differ materially from those anticipated in the forward-looking statements and from historical results due to the risks and uncertainties described elsewhere in this release, including but not limited to: the Corporation’s ultimate realization of the anticipated benefits of the acquisition of KII; disruptions in the global supply chain; the effects of prolonged periods of inflation and rising interest rates; labor shortages; the levels of office furniture needs and housing starts; overall demand for the Corporation’s products; general economic and market conditions in the United States and internationally; industry and competitive conditions; the consolidation and concentration of the Corporation’s customers; the Corporation’s reliance on its network of independent dealers; change in trade policy; changes in raw material, component, or commodity pricing; market acceptance and demand for the Corporation’s new products; changing legal, regulatory, environmental, and healthcare conditions; the risks associated with international operations; the potential impact of product defects; the various restrictions on the Corporation’s financing activities; an inability to protect the Corporation’s intellectual property; cybersecurity threats, including those posed by potential ransomware attacks; impacts of tax legislation; and force majeure events outside the Corporation’s control, including those that may result from the effects of climate change. A description of these risks and additional risks can be found in the Corporation’s annual and quarterly reports filed with the Securities and Exchange Commission on Forms 10-K and 10-Q. The Corporation assumes no obligation to update, amend, or clarify forward-looking statements, except as required by applicable law.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240520465333/en/

Marshall H. Bridges, Senior Vice President, and Chief Financial Officer (563) 272-7400

Matthew S. McCall, Vice President, Investor Relations, and Corporate Development (563) 275-8898

Source: HNI Corporation

FAQ

Why is HNI closing the Hickory, North Carolina plant?

HNI is closing the Hickory plant to consolidate production into other North American facilities, aiming to improve productivity and operational strength.

What are the financial impacts of HNI 's plant consolidation?

HNI estimates annual cost savings of $11 million by 2026, with $8-$9 million saved in 2025. Charges of $10.3 million will impact pre-tax earnings in 2024 and 2025.

How many employees will be affected by the Hickory plant closure?

Approximately 200 production and operations employees in Hickory will be impacted by the closure.

When will the Hickory plant of HNI close?

The Hickory plant is scheduled to close in the first half of 2025.

What role will HBF brand play after the Hickory plant closure?

HNI will maintain a commercial presence in Hickory through its HBF brand, with headquarters and key personnel remaining in the city.