HNI CORP (HNI)

Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion of the Corporation’s historical results of operations and of its liquidity and capital resources should be read in conjunction with the Consolidated Financial Statements of the Corporation and related notes. All dollar amounts presented are in millions, except per share data or where otherwise indicated. Amounts may not sum due to rounding. Statements that are not historical are forward-looking and involve risks and uncertainties. See "Item 1A. Risk Factors" and the Forward-Looking Statements section within "Item 1. Business" for further information.

The Corporation follows a 52/53-week fiscal year, which ends on the Saturday nearest December 31. Fiscal year 2024 ended on December 28, 2024, fiscal year 2023 ended on December 30, 2023, and fiscal year 2022 ended on December 31, 2022. The financial statements for fiscal years 2024, 2023, and 2022 are on a 52-week basis. A 53-week year occurs approximately every sixth year.

To review discussion and analysis of the consolidated and segment-level results of operations for the fiscal year ended December 30, 2023 compared with the fiscal year ended December 31, 2022, refer to "Part II - Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations" of the Corporation’s Annual Report on Form 10-K for the fiscal year ended December 30, 2023, as filed with the Securities and Exchange Commission on February 27, 2024.

Overview

HNI Corporation is a leading global designer and provider of commercial furnishings, and a leading manufacturer and marketer of hearth products. The Corporation utilizes a multi-faceted go-to-market model to deliver value to customers via various brands and selling models. The Corporation is focused on growing its existing businesses while seeking out and developing new opportunities for expansion.

The Corporation has two reportable segments: workplace furnishings and residential building products. In 2024, the Corporation maintained focus on its strategic priorities. In workplace furnishings, ongoing integration of the Kimball International business and related synergies, expanded utilization of the new factory in Mexico, and the previously announced manufacturing optimization initiative are enabling the segment's profit transformation plan. These actions drove strong growth in workplace furnishings operating margin for the year, despite demand variability driven by macroeconomic conditions and U.S. election ambiguity that particularly impacted the latter portion of the year. The residential business products business continued to navigate cyclical housing market softness and inconsistent demand trends resulting from interest rate volatility, cost inflation, and overall consumer affordability issues. In spite of market headwinds, the business remained solidly profitable and committed to investing in capabilities to support long-term growth.

Consolidated net sales for 2024 were $2.526 billion, an increase of 3.8 percent compared to net sales of $2.434 billion in the prior year. The change was driven by 8.5 percent year-over-year sales growth in the workplace furnishings segment, partially offset by an 8.0 percent decrease in the residential building products segment. The full year of Kimball International sales in 2024 increased year-over-year sales by $228.0 million. The divestiture of Poppin, Inc. ("Poppin") in 2023 reduced year-over-year sales by $11.1 million. Poppin had been acquired in the prior year as part of the Kimball International transaction and was a component of the workplace furnishings segment. See "Note 4. Acquisitions and Divestitures" in the Notes to Consolidated Financial Statements for more details on the Kimball International acquisition and the Poppin divestiture. These transactions affect the comparability of results between years. The references below to "legacy" HNI businesses refer to the Corporation's businesses excluding the acquisition and impact of Kimball International.

Net income attributable to the Corporation in 2024 was $139.5 million compared to net income of $49.2 million in 2023. The prior year included $41.2 million of acquisition costs associated with the Kimball International transaction and $31.0 million of goodwill and intangible asset impairment charges at small workplace furnishings business units. Excluding these items, net income increased in the current year driven by improved net productivity, favorable price-cost, and the full year benefit of the Kimball International acquisition, partially offset by lower sales volume in the legacy HNI businesses.

24

Table of Contents

Results of Operations

The following table presents certain results of operations:

Net Sales

Consolidated net sales for 2024 increased 3.8 percent compared to the prior year. The change was driven by $228.0 million of favorable impact from the full year of Kimball International sales in 2024 and price realization in both the residential building products and workplace furnishings segments. These factors were partially offset by lower volume in the legacy HNI businesses due to soft market conditions and an $11.1 million decrease in net sales from the divestiture of Poppin in the third quarter of 2023.

Gross Profit

Gross profit as a percentage of net sales increased 190 basis points in 2024 compared to 2023, driven by improved net productivity and favorable price-cost, partially offset by lower volume in the legacy HNI businesses.

Selling and Administrative Expenses

Selling and administrative expenses as a percentage of net sales decreased 90 basis points in 2024 compared to 2023. The decrease was driven by $41.2 million of acquisition-related expenses incurred in the prior year and acquisition-related cost synergies in 2024, partially offset by lower sales volume in the legacy HNI businesses.

Selling and administrative expenses include freight expense for shipments to customers, research and development costs, and amortization of intangible assets. Refer to "Note 2. Summary of Significant Accounting Policies" and "Note 6. Goodwill and Other Intangible Assets" in the Notes to Consolidated Financial Statements for further information regarding the comparative expense levels for these items.

Restructuring and Impairment Charges

In the current year the Corporation recorded restructuring charges of $6.2 million primarily in connection with factory consolidation initiatives in the workplace furnishings segment and reorganization efforts in the residential building products

25

Table of Contents

segment. Prior-year charges primarily consisted of $31.0 million of goodwill and intangible asset impairments at small business units in the workplace furnishings segment and $9.8 million of restructuring charges associated with the divestiture of Poppin. See "Note 6. Goodwill and Other Intangible Assets" and "Note 17. Restructuring and Impairment" in the Notes to Consolidated Financial Statements for further information regarding restructuring and impairment charges.

Operating Income

For 2024, operating margin increased 450 basis points compared to 2023. The prior year included $41.2 million of acquisition costs associated with the Kimball International transaction and $31.0 million of goodwill and intangible asset impairment charges at small workplace furnishings business units. Excluding these items, operating margin increased year-over-year driven by improved net productivity, favorable price-cost, the benefit of a full year of ownership of Kimball International, and lower restructuring costs, partially offset by lower sales volume in the legacy HNI businesses.

Interest Expense, Net

Interest expense, net was $27.2 million and $25.5 million in 2024 and 2023, respectively. The increase was driven by higher average outstanding borrowings resulting from indebtedness incurred to fund the acquisition of Kimball International.

Income Taxes

The following table summarizes the Corporation’s income tax provision:

The income tax provision reflects a lower rate in 2024 compared to the prior year, primarily due to the impact of non-deductible transaction costs incurred in 2023 in connection with the acquisition of Kimball International. See "Note 8. Income Taxes" in the Notes to Consolidated Financial Statements for further information relating to income taxes.

Net Income Attributable to HNI Corporation

Net income attributable to the Corporation was $139.5 million or $2.88 per diluted share in 2024 compared to $49.2 million or $1.09 per diluted share in 2023.

Workplace Furnishings

The following table presents certain results of operations in the workplace furnishings segment:

Net sales in 2024 for the workplace furnishings segment increased 8.5 percent compared to 2023. The full year of Kimball International sales in 2024 increased net sales by $228.0 million over the prior year, while the divestiture of Poppin in the third quarter of 2023 decreased net sales by $11.1 million year-over-year. Excluding the impact of these transactions, segment sales were down 4.0 percent driven by lower demand across most customer channels, partially offset by improved volume in the hospitality sector and price realization.

Operating income as a percentage of net sales increased 510 basis points in 2024 compared to 2023. The prior year included $31.0 million in goodwill and intangible asset impairment charges at small workplace furnishings business units, $12.5 million in Kimball International acquisition-related expenses, and $9.0 million of restructuring costs in connection with the exit of Poppin. Excluding these items, operating income as a percentage of sales increased driven by improved net productivity, the benefit of a full year of Kimball International ownership in 2024, and favorable price-cost, partially offset by lower sales volume in the legacy HNI businesses.

26

Table of Contents

Residential Building Products

The following table presents certain results of operations in the residential building products segment:

Net sales in 2024 for the residential building products segment decreased 8.0 percent compared to 2023. Remodel/retrofit sales volume decreased at a higher rate than new construction, with both channels adversely impacted by housing market weakness and broader macroeconomic volatility.

Operating income as a percentage of net sales increased 60 basis points in 2024 compared to 2023. The increase was driven by improved net productivity, favorable price-cost, lower variable compensation, and favorable product mix, partially offset by lower sales volume.

Liquidity and Capital Resources

Cash, cash equivalents, and short-term investments totaled $28.9 million at the end of 2024, compared to $34.5 million at the end of 2023. These funds, coupled with cash flow from future operations, borrowing capacity expected to be available under the Corporation’s existing credit agreements, and the ability to access capital markets, are expected to be adequate to fund operations and satisfy the Corporation's cash flow needs for at least the next twelve months. As of December 28, 2024, the Corporation can access the full $425 million of borrowing capacity available under the revolving credit facility, which includes the $45.7 million outstanding as of that date, and maintain compliance with applicable covenants. As of the end of 2024, an immaterial amount of cash was held overseas and considered permanently reinvested.

Cash Flow – Operating Activities

Operating cash flows were $226.7 million in 2024, compared to $267.5 million cash in 2023. The decrease was driven by higher usage of working capital in the current year. Working capital was a use of cash in 2024, compared to a source of cash in 2023. The current year working capital cash usage was consistent with normal historical patterns, while working capital activity in 2023 did not adhere to this pattern due to the impact and timing of the acquisition of Kimball International. Additionally, non-cash items adjusted from net income to reconcile to operating cash flows were lower in 2024 primarily as a result of the absence of asset impairment charges and an increase in non-cash deferred tax benefits. These factors were partially offset by higher net income in 2024 as described in the preceding "Results of Operations" section.

The Corporation places special emphasis on management and control of working capital, including accounts receivable and inventory. Management believes recorded trade receivable valuation allowances at the end of 2024 are adequate to cover the risk of potential bad debts. Allowances for non-collectible trade receivables, as a percent of gross trade receivables, totaled 0.8 percent and 1.4 percent at the end of 2024 and 2023, respectively. The Corporation’s inventory turns were 7.6 and 7.9 for 2024 and 2023, respectively.

Cash Flow – Investing Activities

Capital Expenditures - Capital expenditures, including capitalized software, were $52.9 million in 2024 and $79.1 million in 2023. In the prior year, the Corporation had higher expenditures related to a manufacturing facility expansion, which did not recur in the current year. The Corporation’s expenditures are primarily focused on machinery, equipment, and tooling required to support new products, continuous improvements, and cost savings initiatives in manufacturing processes. Additionally, in support of the Corporation’s long-term strategy to create effortless winning experiences for customers, the Corporation continues to invest in technology. The Corporation expects capital expenditures for 2025 to be in the range of $75 million to $85 million.

Acquisitions and Divestitures - Investing activities in 2023 included expenditures of $369.7 million to acquire Kimball International, and $2.7 million received from the sale of Poppin (net of costs to sell). See "Note 4. Acquisitions and Divestitures" in the Notes to the Consolidated Financial Statements for further information.

27

Table of Contents

Cash Flow – Financing Activities

Debt - The Corporation maintains a revolving credit facility as the primary source of committed funding from which the Corporation finances its planned capital expenditures, strategic initiatives, and seasonal working capital needs. Cash flows included in financing activities for the current and prior periods include periodic borrowings and repayments under the revolving credit facility.

Additionally, in the prior year, the Corporation borrowed $300 million in connection with a term loan agreement entered into on March 31, 2023, as further amended on May 25, 2023 to support funding of the acquisition of Kimball International. In 2024, the Corporation separately executed an aggregate $100 million of early repayments of the outstanding principal balance on this term loan. Borrowings under the revolving credit facility were used to finance the early repayments. As a result, no additional principal amortization is due prior to maturity of the facility in March 2028. See "Note 7. Debt" in the Notes to Consolidated Financial Statements for further information.

Dividend - The Corporation is committed to maintaining or modestly growing the quarterly dividend. Cash dividends declared and paid per share are as follows:

The last quarterly dividend increase was from $0.32 to $0.33 per common share effective with the June 12, 2024 dividend payment for shareholders of record at the close of business on May 24, 2024. The average dividend payout percentage for the most recent three-year period has been 74 percent of prior-year earnings or 36 percent of prior-year cash flow from operating activities.

Stock Repurchase - The Corporation’s capital strategy related to stock repurchase is focused on offsetting the dilutive impact of issuances of common stock pursuant to equity awards granted for various compensation-related matters. The Corporation may elect to opportunistically purchase additional shares based on excess cash generation and/or share price considerations. In 2024, the Corporation spent $65.8 million to repurchase 1.3 million shares of its common stock. As of December 28, 2024, $167.6 million was authorized and available for repurchase of shares by the Corporation. See "Note 10. Accumulated Other Comprehensive Income (Loss) and Shareholders’ Equity" in the Notes to Consolidated Financial Statements for further information.

Sales of Stock - The Corporation records cash flows received from the sale of its common stock held in treasury, primarily in connection with stock option exercises and the HNI Corporation Members’ Stock Purchase Plan. The approximately $50 million increase in cash proceeds in the current year was due to a significant uptick in stock options exercised, driven by growth in the market value per share of the Corporation's common stock. See "Note 10. Accumulated Other Comprehensive Income (Loss) and Shareholders’ Equity" and "Note 11. Stock-Based Compensation" in the Notes to Consolidated Financial Statements for further information.

Cash Requirements

As of December 28, 2024, the Corporation has the following obligations and commitments to make future payments:

Purchase Obligations - The Corporation’s purchase obligations include agreements to purchase goods or services that are enforceable, legally binding, and specify all significant terms, including the quantity to be purchased, the price to be paid, and the timing of the purchase. Estimated purchase obligations total $116 million during 2025 and $2 million thereafter.

Debt - Debt principal obligations are approximately $50 million during 2025 and $296 million thereafter. Interest obligations from debt are estimated to be approximately $18 million during 2025 and $36 million thereafter. Refer to "Note 7. Debt" in the Notes to Consolidated Financial Statements for additional information.

Deferred Compensation - Deferred compensation cash obligations related to legacy HNI plans are expected to be approximately $0.3 million during 2025 and $3.0 million thereafter. Refer to "Note 11. Stock-Based Compensation" in the Notes to Consolidated Financial Statements for additional information. Obligations related to the Kimball International supplemental employee retirement plan are expected to be $4 million during 2025 and $7 million thereafter. Refer to "Note 2. Summary of Significant Accounting Policies" in the Notes to Consolidated Financial Statements for additional information.

28

Table of Contents

Post-Retirement Benefit Plan - Post-retirement benefit plan payments are expected to be approximately $1 million during 2025 and $11 million in aggregate from 2026 through 2034. Refer to "Note 13. Post-Retirement Health Care" in the Notes to Consolidated Financial Statements for additional information.

Operating and Finance Leases - Operating and finance lease obligations are expected to be approximately $41 million during 2025 and $152 million thereafter. There were no material commitments related to leases which had been signed but not commenced as of the end of 2024. Refer to "Note 14. Leases" in the Notes to Consolidated Financial Statements for additional information.

Other Obligations - Other long-term obligations of approximately $15 million are primarily comprised of a put option, uncertain tax liabilities, and dividends owed in connection with stock-based compensation awards. Additionally, in 2022 the Corporation entered into a long-term commitment to purchase solar energy from a local utility to satisfy a portion of the Corporation’s electricity demand in the Muscatine, Iowa area. The Corporation’s future commitment to the project totals approximately $13 million. The commencement of the project was initially estimated to be in 2025, but has been delayed. For the Corporation’s estimated future obligations related to product warranties and self-insured liabilities, refer to "Note 2. Summary of Significant Accounting Policies" in the Notes to Consolidated Financial Statements.

Litigation and Uncertainties

See "Note 15. Guarantees, Commitments, and Contingencies" in the Notes to Consolidated Financial Statements for further information.

Looking Ahead

The Corporation continues to navigate near-term uncertainty driven by macroeconomic conditions, including the recent dynamics around housing, cost inflation, and interest rates. However, management remains optimistic about the long-term prospects in the workplace furnishings and residential building products markets. Management believes the Kimball International acquisition will continue to generate new opportunities for growth, and the Corporation continues to compete well in its legacy business markets.

Critical Accounting Policies and Estimates

General

Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon the Consolidated Financial Statements, prepared in accordance with Generally Accepted Accounting Principles ("GAAP"). The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Senior management has discussed the development, selection, and disclosure of these estimates with the Audit Committee of the Board. Actual results may differ from these estimates under different assumptions or conditions.

An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the financial statements. Management believes the following critical accounting policies reflect its more significant estimates and assumptions used in the preparation of the Consolidated Financial Statements.

Goodwill

The Corporation evaluates its goodwill for impairment on an annual basis during the fourth quarter (using a valuation date as of the start of the Corporation's fourth quarter) or whenever indicators of impairment exist.

The Corporation reviews goodwill at the reporting unit level, which refers to components for which discrete financial information is available and regularly reviewed by segment management. The accounting standards for goodwill permit entities to first assess qualitative factors to determine whether it is more likely than not the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform a quantitative goodwill impairment test. If the quantitative test is required, the Corporation estimates the fair value of its reporting units based on a weighted average of the income approach and the market approach. This estimated fair value is compared to the carrying value of the reporting unit and an impairment is recorded if the estimate is less than the carrying value. In the income approach, the estimate of fair value of each reporting unit is based on management’s projection of revenues, gross margin, operating costs, and cash flows considering historical and estimated

29

Table of Contents

future results, general economic and market conditions, as well as the impact of planned business and operational strategies. The valuations employ present value techniques to measure fair value and consider market factors. In the market approach, the Corporation utilizes the guideline company method, which involves calculating valuation multiples based on operating data from guideline publicly-traded companies. These multiples are then applied to the operating data for the reporting units and adjusted for factors similar to those used in the discounted cash flow analysis. Management believes the assumptions used for the quantitative impairment test, if required, are consistent with those utilized by a market participant in performing similar valuations of its reporting units. Management bases its fair value estimates on assumptions they believe to be reasonable at the time, but such assumptions are subject to inherent uncertainty. Actual results may differ from those estimates.

Assessing the fair value of a reporting unit includes, among other things, making key assumptions for estimating future cash flows and appropriate market multiples. These assumptions are subject to a high degree of judgment and complexity. The Corporation makes every effort to estimate future cash flows as accurately as possible with the information available at the time the forecast is developed. However, changes in assumptions and estimates may affect the estimated fair value of the reporting unit, and could result in an impairment charge in future periods. Factors that have the potential to create variances in the estimated fair value of the reporting unit include, but are not limited to, economic conditions in the United States and other countries where the Corporation has a presence, competitor behavior, the mix of product sales, commodity costs, wage rates, the level of manufacturing capacity, the pricing environment, and currency exchange fluctuations. In addition, estimates of fair value are impacted by estimates of the market-participant derived weighted average cost of capital. Changes in this assumption could have a significant effect on the estimated fair value of the reporting unit.

The key to recoverability of goodwill is the forecast of economic conditions and its impact on future revenues, operating profit, and cash flows. Management’s projection for the United States office furniture and domestic hearth markets and global economic conditions is inherently subject to a number of uncertain factors, such as global economic improvement, the U.S. housing market, credit availability, borrowing rates, and overall consumer confidence. In the near term, as management monitors the above factors, it is possible it may change the revenue and cash flow projections of certain reporting units, which may require the recording of additional goodwill impairment charges.

As described in "Note 4. Acquisitions and Divestitures" in the Notes to Consolidated Financial Statements, in 2023 the Corporation acquired Kimball International in a transaction valued at $504 million, resulting in the addition of $164 million of goodwill. Of this goodwill, $156 million was assigned to the new Kimball Workplace & Health reporting unit. Recently acquired goodwill assigned to a new reporting unit generally has a higher inherent valuation risk, relative to goodwill assigned to reporting units that historically have had a large excess of fair value over carrying value. As discussed in "Note 6. Goodwill and Other Intangible Assets" in the Notes to Consolidated Financial Statements, management performed a quantitative goodwill impairment test in the fourth quarter of 2024. This testing resulted in no goodwill impairment charges recorded related to the Kimball Workplace & Health reporting unit, nor any of the remaining reporting units of the Corporation, in 2024.

Recently Issued Accounting Standards Not Yet Adopted

In December 2023, the Financial Accounting Standards Board ("FASB") issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU 2023-09 enhances transparency of income tax disclosures by requiring consistent categories and greater disaggregation of information in the rate reconciliation, and disaggregation of income taxes paid by jurisdiction. Additionally, the ASU requires disclosure of pretax income (or loss) and income tax (or benefit) disaggregated by domestic and foreign. Finally, the ASU removes the requirement of certain disclosures related to unrecognized tax benefits. The ASU becomes effective for the Corporation beginning with its annual period ending December 2025. The ASU will not impact the financial condition, results of operations, or cash flows of the Corporation. The Corporation is currently evaluating the impact to the notes to the consolidated financial statements, and expects additional disclosures will be required on adoption.

In November 2024, the FASB issued ASU No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. ASU 2024-03 aims to improve the disclosures about a public business entity’s expenses by requiring more detailed information about the types of costs and expenses, including purchases of inventory, employee compensation, selling expenses, depreciation, and intangible asset amortization within commonly presented captions on the face of the income statement. Disclosures are required to be made on an annual and interim basis in a tabular format in the footnotes to the financial statements. The ASU becomes effective for the Corporation for its fiscal year ending December 2027, and for interim periods beginning with the first fiscal quarter of 2028, and may be applied either prospectively or retrospectively. Early adoption is permitted. The Corporation is currently evaluating the impact of adopting this guidance to the consolidated financial statements.

30

Table of Contents

Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion of the Corporation’s historical results of operations and of its liquidity and capital resources should be read in conjunction with the Consolidated Financial Statements of the Corporation and related notes. All dollar amounts presented are in millions, except per share data or where otherwise indicated. Amounts may not sum due to rounding. Statements that are not historical are forward-looking and involve risks and uncertainties. See "Item 1A. Risk Factors" and the Forward-Looking Statements section within "Item 1. Business" for further information.

The Corporation follows a 52/53-week fiscal year, which ends on the Saturday nearest December 31. Fiscal year 2023 ended on December 30, 2023, fiscal year 2022 ended on December 31, 2022, and fiscal year 2021 ended on January 1, 2022. The financial statements for fiscal years 2023, 2022, and 2021 are on a 52-week basis. A 53-week year occurs approximately every sixth year.

Overview

The Corporation has two reportable segments: workplace furnishings and residential building products. The Corporation is a leading global designer and provider of commercial furnishings, and a leading manufacturer and marketer of hearth products. The Corporation utilizes a multi-faceted go-to-market model to deliver value to customers via various brands and selling models. The Corporation is focused on growing its existing businesses while seeking out and developing new opportunities for expansion.

In 2023, significant developments included the second quarter acquisition of Kimball International in a cash and stock transaction valued at approximately $503.7 million, and the subsequent divestiture of Poppin Furniture, Inc, a business unit of Kimball International ("Poppin"), during the third quarter. In 2022, the Corporation completed its divestiture of its China- and Hong Kong-based Lamex office furniture business ("Lamex"), which was a component of the workplace furnishings segment. See "Note 4. Acquisitions and Divestitures" in the Notes to Consolidated Financial Statements for more details on the Kimball International acquisition, the Poppin divestiture, the Lamex divestiture, and other related information. These acquisition and divestiture transactions affect the comparability of results between years.

Consolidated net sales for 2023 were $2.434 billion, an increase of 3.1 percent compared to net sales of $2.362 billion in the prior year. The change was driven by 17.1 percent year-over-year sales growth in the workplace furnishings segment, partially offset by a 20.8 percent decrease in the residential building products segment. The acquisition of Kimball International increased year-over-year sales by $361.4 million and the acquisition of a residential building products company in 2022 increased year-over-year sales by $2.4 million. The divestiture of Lamex in 2022 reduced year-over-year sales by $46.9 million.

Net income attributable to the Corporation in 2023 was $49.2 million compared to net income of $123.9 million in 2022. The prior year included a pre-tax gain of $50.4 million on the sale of Lamex, while the current year included $41.2 million of acquisition costs associated with the Kimball International transaction and $31.0 million of goodwill and intangible asset impairment charges at small workplace furnishings business units. Excluding these items, net income increased in the current year driven by favorable price-cost, improved net productivity, favorable impacts from the acquisition of Kimball International, and lower core selling and administrative expenses ("SG&A"), partially offset by lower volume in the legacy HNI businesses (excluding Kimball International), higher variable compensation, and increased interest expense.

See "Note 6. Goodwill and Other Intangible Assets" and "Note 17. Restructuring and Impairment" in the Notes to Consolidated Financial Statements for further information regarding restructuring and impairment charges.

24

Table of Contents

Results of Operations

The following table presents certain results of operations:

Net Sales

Consolidated net sales for 2023 increased 3.1 percent compared to the prior year. The change was driven by the acquisition of Kimball International, which increased year-over-year sales by $361.4 million and price realization in both the residential building products and workplace furnishings segments, partially offset by lower volume in the legacy HNI businesses due to continued headwinds from macroeconomic conditions. Also included in the sales results for the current year is a $46.9 million unfavorable impact from the divestiture of Lamex in 2022, and a $2.4 million favorable impact from the acquisition of a residential building products business in 2022.

Gross Profit

Gross profit as a percentage of net sales increased 360 basis points in 2023 compared to 2022, driven by favorable price-cost, improved net productivity, and the impact of the Kimball International acquisition, partially offset by lower volume in legacy HNI businesses. Favorable price-cost was attributable to the Corporation’s ability to implement price increases over the past several quarters in response to inflationary pressures.

Selling and Administrative Expenses

Selling and administrative expenses as a percentage of net sales increased 280 basis points in 2023 compared to 2022, driven by $41.2 million of acquisition-related fees and expenses along with lower volume in legacy HNI businesses and higher variable compensation, partially offset by lower core SG&A and dilution from price realization. The prior year also included expenses of $8.0 million associated with a company-wide cost reduction initiative.

Selling and administrative expenses include freight expense for shipments to customers, research and development costs, and amortization of intangible assets. Refer to "Note 2. Summary of Significant Accounting Policies" and "Note 6. Goodwill and

25

Table of Contents

Other Intangible Assets" in the Notes to Consolidated Financial Statements for further information regarding the comparative expense levels for these items.

Gain on Sale of Subsidiary

In the prior year, the Corporation recorded a pre-tax gain of $50.4 million as a result of the divestiture of Lamex in July 2022.

Restructuring and Impairment Charges

In the current year the Corporation recorded restructuring and impairment charges primarily comprised of $31.0 million of impairments of goodwill and intangible assets at small business units in the workplace furnishings segment as well as $9.8 million of restructuring charges associated with the divestiture of Poppin. In the prior year, the Corporation recorded restructuring and impairment charges of $6.7 million primarily related to efforts to drive business simplification and improve long-term profitability in the workplace furnishings segment, including the restructuring of an eCommerce business. See "Note 17. Restructuring and Impairment" in the Notes to Consolidated Financial Statements for further information relating to these costs.

Operating Income

For 2023, operating income as a percentage of net sales decreased 290 basis points compared to 2022. The prior year included a pre-tax gain of $50.4 million on the sale of Lamex, while the current year included $41.2 million of acquisition costs associated with the Kimball International transaction and $31.0 million of goodwill and intangible asset impairment charges at small workplace furnishings business units. Excluding these items, operating income as a percentage of net sales increased year-over-year driven by favorable price-cost, improved net productivity, favorable impacts from the acquisition of Kimball International, and lower core selling, general, and administrative expenses, partially offset by lower volume at legacy HNI businesses and higher variable compensation.

Interest Expense, Net

Interest expense, net was $25.5 million and $8.8 million in 2023 and 2022, respectively. The increase was driven by higher average outstanding borrowings resulting from indebtedness incurred to fund the acquisition of Kimball International and higher interest rates in 2023 on the Corporation’s variable-rate revolving credit facility.

Income Taxes

The following table summarizes the Corporation’s income tax provision:

The income tax provision reflects a higher rate in 2023 compared to 2022, primarily due to the sale of the Lamex business in the prior year. This transaction created valuation allowance adjustment tax benefits related to existing deferred tax assets, as well as basis differences, which significantly reduced the Corporation’s effective tax rate in the prior year. See "Note 8. Income Taxes" in the Notes to Consolidated Financial Statements for further information relating to income taxes.

Net Income Attributable to HNI Corporation

Net income attributable to the Corporation was $49.2 million or $1.09 per diluted share in 2023 compared to $123.9 million or $2.94 per diluted share in 2022.

Comparison of Fiscal Year Ended December 31, 2022 with the Fiscal Year Ended January 1, 2022

To review discussion and analysis of the consolidated and segment-level results of operations for the fiscal year ended December 31, 2022 compared with the fiscal year ended January 1, 2022, refer to "Part II - Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations" of the Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, as filed with the Securities and Exchange Commission on February 28, 2023.

26

Table of Contents

Workplace Furnishings

The following table presents certain results of operations in the workplace furnishings segment:

Net sales in 2023 for the workplace furnishings segment increased 17.1 percent compared to 2022. The impact of the acquisition of Kimball International increased net sales by $361.4 million, while the sale of Lamex in the third quarter of 2022 decreased net sales by $46.9 million compared to the prior year. Excluding the effects of these transactions, segment sales were down 4.2 percent, with lower volume across most customer segments in the legacy HNI workplace businesses, partially offset by price realization. In addition to macroeconomic headwinds that have negatively affected volume in the current year, during much of 2022 the workplace furnishings segment was in the midst of managing through an elevated sales order backlog as a result of supply chain issues and capacity constraints that arose in 2021. These challenges were largely resolved by the end of 2022, resulting in a more normal backlog heading into 2023 and thus lower relative volume in the current year compared to the prior year.

Operating profit as a percentage of net sales increased 370 basis points in 2023 compared to 2022. The current year included $31.0 million in goodwill and intangible asset impairment charges at small workplace furnishings business units and $12.5 million in transaction-related fees and expenses associated with the acquisition of Kimball International. Excluding these items, operating profit as a percentage of sales increased driven by favorable price-cost, favorable impacts from the acquisition of Kimball International, improved net productivity, lower core SG&A, and lower restructuring costs, partially offset by lower volume in the legacy HNI businesses and higher variable compensation.

Residential Building Products

The following table presents certain results of operations in the residential building products segment:

Net sales in 2023 for the residential building products segment decreased 20.8 percent compared to 2022, driven by lower volume in both the new construction and existing home channels as a result of housing market weakness and reduced home remodeling activity due to higher interest rates and broader macroeconomic concerns, partially offset by price realization. Sales in the existing home channel were also negatively impacted by the normalization of trade inventory. Included in the 2023 sales results was a $2.4 million favorable impact from the acquisition of a residential building products company in 2022.

Operating profit as a percentage of net sales decreased 130 basis points in 2023 compared to 2022. The decrease was driven by lower volume, partially offset by favorable price-cost, improved net productivity, lower core SG&A, and lower variable compensation.

Liquidity and Capital Resources

Cash, cash equivalents, and short-term investments totaled $34.5 million at the end of 2023, compared to $19.5 million at the end of 2022. These funds, coupled with cash flow from future operations, borrowings expected to be available under the Corporation’s existing credit agreements, and the ability to access capital markets, are expected to be adequate to fund operations and satisfy cash flow needs for at least the next twelve months. Based on current earnings before interest, taxes, depreciation and amortization, the Corporation can access the full $425 million of borrowing capacity available under the revolving credit facility, which includes the $38.5 million currently outstanding, and maintain compliance with financial covenants under the facility. As of the end of 2023, $4.0 million of cash was held overseas and considered permanently reinvested. If such amounts were repatriated, such an action could result in additional foreign withholding and state tax expense to the Corporation. The

27

Table of Contents

Corporation does not believe treating this cash as permanently reinvested will have any impact on the ability of the Corporation to meet its obligations as they come due.

Cash Flow – Operating Activities

Operating activities were a source of $267.5 million of cash in 2023, compared to a source of $81.2 million cash in 2022. The higher cash generation compared to the prior year was primarily due to changes in working capital. Changes in working capital balances resulted in a $76.5 million source of cash in 2023 compared to a $72.7 million use of cash in the prior year. Driving the working capital year-over-year change is lower inventory in the legacy HNI businesses as a result of reduced volume and stabilized cost and supply chain requirements. Additionally, the Corporation’s legacy accounts payable, accrued expense, and prepaid expense levels have normalized after significant volatility experienced earlier in the decade due to impacts of the pandemic.

The Corporation places special emphasis on management and control of working capital, including accounts receivable and inventory. Management believes recorded trade receivable valuation allowances at the end of 2023 are adequate to cover the risk of potential bad debts. Allowances for non-collectible trade receivables, as a percent of gross trade receivables, totaled 1.4 percent and 1.5 percent at the end of 2023 and 2022, respectively. The Corporation’s inventory turns were 7.9 and 8.4 for 2023 and 2022, respectively.

Cash Flow – Investing Activities

Capital Expenditures - Capital expenditures, including capitalized software, were $79.1 million in 2023 and $68.4 million in 2022. The increase in capital expenditures over the prior year was driven by the addition of Kimball International. The Corporation’s expenditures are primarily focused on machinery, equipment, and tooling required to support new products, continuous improvements, and cost savings initiatives in manufacturing processes. Additionally, in support of the Corporation’s long-term strategy to create effortless winning experiences for customers, the Corporation continues to invest in technology. The Corporation anticipates capital expenditures for 2024 in an estimated range of $90 million to $100 million.

Acquisitions and Divestitures - Investing activities in the current year include $369.7 million spent related to the acquisition of Kimball International, and $2.7 million received from the sale of Poppin (net of costs to sell). Prior year activity includes $69.5 million received from the sale of the Lamex business as well as $11.4 million spent primarily to acquire residential building products companies. See "Note 4. Acquisitions and Divestitures" in the Notes to the Consolidated Financial Statements for further information.

Cash Flow – Financing Activities

Debt - The Corporation maintains a revolving credit facility as the primary source of committed funding from which the Corporation finances its planned capital expenditures, strategic initiatives, and seasonal working capital needs. Cash flows included in financing activities represent periodic borrowings and repayments under the revolving credit facility. Additionally, in the current year, the Corporation borrowed $300 million in connection with a term loan agreement entered into on March 31, 2023, as further amended on May 25, 2023, to support funding of the acquisition of Kimball International that closed in June 2023. See "Note 7. Debt" in the Notes to Consolidated Financial Statements for further information.

Dividend - The Corporation is committed to maintaining or modestly growing the quarterly dividend. Cash dividends declared and paid per share are as follows:

The last quarterly dividend increase was from $0.31 to $0.32 per common share effective with the June 8, 2022 dividend payment for shareholders of record at the close of business on May 27, 2022. The average dividend payout percentage for the most recent three-year period has been 73 percent of prior year earnings or 39 percent of prior year cash flow from operating activities.

Stock Repurchase - The Corporation’s capital strategy related to stock repurchase is focused on offsetting the dilutive impact of issuances for various compensation-related matters. The Corporation may elect to opportunistically purchase additional shares based on excess cash generation and/or share price considerations. As of December 30, 2023, $233.5 million was authorized and available for repurchase of shares by the Corporation. See "Note 10. Accumulated Other Comprehensive Income (Loss) and Shareholders’ Equity" in the Notes to Consolidated Financial Statements for further information.

Sales of Stock - The Corporation records cash flows received from the sale of its common stock held in treasury, primarily in connection with stock option exercises and the HNI Corporation Members’ Stock Purchase Plan. See "Note 10. Accumulated

28

Table of Contents

Other Comprehensive Income (Loss) and Shareholders’ Equity" and "Note 11. Stock-Based Compensation" in the Notes to Consolidated Financial Statements for further information.

Cash Requirements

As of December 30, 2023, the Corporation has the following obligations and commitments to make future payments:

Purchase Obligations - The Corporation’s purchase obligations include agreements to purchase goods or services that are enforceable, legally binding, and specify all significant terms, including the quantity to be purchased, the price to be paid, and the timing of the purchase. Estimated purchase obligations total $137 million during 2024 and $30 million thereafter.

Debt - Debt principal obligations are approximately $8 million during 2024 and $431 million thereafter. Interest obligations from debt are estimated to be approximately $28 million during 2024 and $74 million thereafter. Refer to "Note 7. Debt" in the Notes to Consolidated Financial Statements for additional information.

Deferred Compensation - Deferred compensation cash obligations related to legacy HNI plans are expected to be approximately $0.3 million during 2024 and $2.1 million thereafter. Refer to "Note 11. Stock-Based Compensation" in the Notes to Consolidated Financial Statements for additional information. The Corporation also acquired a supplemental employee retirement plan in connection with the Kimball International transaction. Obligations related to this plan are expected to be $4 million during 2024 and $7 million thereafter. Refer to "Note 2. Summary of Significant Accounting Policies" in the Notes to Consolidated Financial Statements for additional information.

Post-Retirement Benefit Plan - Post-retirement benefit plan payments are expected to be approximately $1 million during 2024 and $11 million in aggregate from 2025 through 2033. Refer to "Note 13. Post-Retirement Health Care" in the Notes to Consolidated Financial Statements for additional information.

Operating and Finance Leases - Operating and finance lease obligations are expected to be approximately $36 million during 2024 and $148 million thereafter. There were no material commitments related to leases which had been signed but not commenced as of the end of 2023. Refer to "Note 14. Leases" in the Notes to Consolidated Financial Statements for additional information.

Other Obligations - Other long-term obligations of approximately $18 million are primarily comprised of a put option, interest rate swap, and uncertain tax liabilities. Additionally, in 2022 the Corporation entered into a long-term commitment to purchase solar energy from a local utility to satisfy a portion of the Corporation’s electricity demand in the Muscatine, Iowa area. The project is currently estimated to commence in 2025 with the Corporation’s future commitment totaling approximately $13 million. For the Corporation’s estimated future obligations related to product warranties and self-insured liabilities, refer to "Note 2. Summary of Significant Accounting Policies" in the Notes to Consolidated Financial Statements.

Litigation and Uncertainties

See "Note 15. Guarantees, Commitments, and Contingencies" in the Notes to Consolidated Financial Statements for further information.

Looking Ahead

The Corporation continues to navigate near-term uncertainty driven by macroeconomic conditions, including the recent dynamics around housing, cost inflation, and interest rates. However, management remains optimistic about the long-term prospects in the workplace furnishings and residential building products markets. Management believes the Kimball International acquisition will continue to generate new opportunities for growth, and the Corporation continues to compete well in its legacy business markets.

Critical Accounting Policies and Estimates

General

Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon the Consolidated Financial Statements, prepared in accordance with Generally Accepted Accounting Principles ("GAAP"). The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other

29

Table of Contents

sources. Senior management has discussed the development, selection, and disclosure of these estimates with the Audit Committee of the Board. Actual results may differ from these estimates under different assumptions or conditions.

An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the financial statements. Management believes the following critical accounting policies reflect its more significant estimates and assumptions used in the preparation of the Consolidated Financial Statements.

Goodwill and Intangible Assets

The Corporation evaluates its goodwill for impairment on an annual basis during the fourth quarter (using a valuation date as of the start of the Corporation's fourth quarter) or whenever indicators of impairment exist. Asset impairment charges associated with the Corporation’s goodwill and intangible assets impairment testing are discussed in "Note 6. Goodwill and Other Intangible Assets" in the Notes to Consolidated Financial Statements.

The Corporation reviews goodwill at the reporting unit level, which refers to components for which discrete financial information is available and regularly reviewed by segment management. The accounting standards for goodwill permit entities to first assess qualitative factors to determine whether it is more likely than not the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform a quantitative goodwill impairment test. If the quantitative test is required, the Corporation estimates the fair value of its reporting units based on a weighted average of the income approach and the market approach. This estimated fair value is compared to the carrying value of the reporting unit and an impairment is recorded if the estimate is less than the carrying value. In the income approach, the estimate of fair value of each reporting unit is based on management’s projection of revenues, gross margin, operating costs, and cash flows considering historical and estimated future results, general economic and market conditions, as well as the impact of planned business and operational strategies. The valuations employ present value techniques to measure fair value and consider market factors. In the market approach, the Corporation utilizes the guideline company method, which involves calculating valuation multiples based on operating data from guideline publicly-traded companies. These multiples are then applied to the operating data for the reporting units and adjusted for factors similar to those used in the discounted cash flow analysis. Management believes the assumptions used for the quantitative impairment test, if required, are consistent with those utilized by a market participant in performing similar valuations of its reporting units. Management bases its fair value estimates on assumptions they believe to be reasonable at the time, but such assumptions are subject to inherent uncertainty. Actual results may differ from those estimates.

Assessing the fair value of goodwill includes, among other things, making key assumptions for estimating future cash flows and appropriate market multiples. These assumptions are subject to a high degree of judgment and complexity. The Corporation makes every effort to estimate future cash flows as accurately as possible with the information available at the time the forecast is developed. However, changes in assumptions and estimates may affect the estimated fair value of the reporting unit, and could result in an impairment charge in future periods. Factors that have the potential to create variances in the estimated fair value of the reporting unit include, but are not limited to, economic conditions in the United States and other countries where the Corporation has a presence, competitor behavior, the mix of product sales, commodity costs, wage rates, the level of manufacturing capacity, the pricing environment, and currency exchange fluctuations. In addition, estimates of fair value are impacted by estimates of the market-participant derived weighted average cost of capital.

The key to recoverability of goodwill is the forecast of economic conditions and its impact on future revenues, operating profit, and cash flows. Management’s projection for the United States office furniture and domestic hearth markets and global economic conditions is inherently subject to a number of uncertain factors, such as global economic improvement, the U.S. housing market, credit availability, borrowing rates, and overall consumer confidence. In the near term, as management monitors the above factors, it is possible it may change the revenue and cash flow projections of certain reporting units, which may require the recording of additional goodwill impairment charges.

The Corporation also evaluates the fair value of indefinite-lived trade names on an annual basis during the fourth quarter (using a valuation date as of the start of the Corporation's fourth quarter) or whenever an indication of impairment exists. Consistent with goodwill impairment testing, a qualitative assessment may be performed to determine whether it is more likely than not the fair value of indefinite-lived trade names is less than the carrying amount. If it is determined necessary to perform a quantitative test, the estimate of the fair value of the trade names is based on a discounted cash flows model using inputs which include: projected revenues, assumed royalty rates that would be payable if the trade names were not owned, and discount rates.

The Corporation also leverages intangible asset valuation procedures in connection with the acquisition method of accounting for business combinations. This method requires, among other things, that results of operations of acquired companies are included in

30

Table of Contents

the Corporation’s results of operations beginning on the respective acquisition dates and that assets acquired and liabilities assumed are recognized at fair value as of the acquisition date. Any excess of the fair value of consideration transferred over the fair values of the net assets acquired is recognized as goodwill.

As described in "Note 4. Acquisitions and Divestitures" to the consolidated financial statements, on June 1, 2023, the Corporation completed its acquisition of Kimball International in a transaction valued at $503.7 million, resulting in the recognition of intangible assets with aggregate value of approximately $110 million. The largest intangible asset acquired was customer lists valued at $47 million. Management determined the fair value of the acquired customer list intangible asset by applying the multi-period excess earnings method, which involved the use of significant estimates and assumptions related to forecasted revenue growth rates and customer retention rates. Valuation specialists were used to develop and evaluate the appropriateness of the multi-period excess earnings method, discount rates, customer retention rates, and fair value estimates using the cash flow projections.

The fair value of assets acquired and liabilities assumed is subject to revision based on the final determination of fair value during a period of time not to exceed 12 months from the acquisition date. Legal costs, due diligence costs, business valuation costs and all other business acquisition costs are expensed when incurred.

Self-Insurance

The Corporation is primarily self-insured or carries high deductibles for general, auto, and product liability, workers’ compensation, and certain employee health benefits. The general, auto, product, and workers’ compensation liabilities are managed via a wholly-owned insurance captive, with estimated liabilities of $24.8 million and $23.8 million as of December 30, 2023 and December 31, 2022, respectively, included in the Consolidated Balance Sheets. Certain risk exposures are mitigated through the use of independent third party stop loss insurance coverages.

The Corporation’s policy is to accrue amounts in accordance with the actuarial determined liabilities. The actuarial valuations are based on historical and current factors such as cost experience, claim frequency, and demographic information, along with certain assumptions about future events including legal actions, medical cost inflation, the number or severity of claims, and the magnitude and change of actual experience development. No changes were made to the methodologies utilized to estimate self-insurance reserves in 2023. While the recorded amounts are sensitive to the assumptions and factors described herein, management believes that such assumptions and actuarial methods used to determine self-insurance reserves are reasonable and provide an appropriate basis for estimating the liabilities. However, inherent uncertainty due to variability in the facts and circumstances of individual claims, as well as the length of time from incurrence of claims to final settlement, may result in the Corporation’s ultimate exposure differing significantly from what is currently estimated.

As of December 30, 2023, the Corporation’s self-insurance reserve was accrued within an actuarial determined range, which accounts for the subjective nature of the estimate. The span of the current range is approximately $6 million.

Recently Issued Accounting Standards Not Yet Adopted

In November 2023, the Financial Accounting Standards Board ("FASB") issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. ASU 2023-07 enhances disclosures regarding segment performance, including information about the chief operating decision maker and measures used to assess performance. The ASU becomes effective for the Corporation beginning with its annual period ending December 2024, and interim periods beginning with first quarter of 2025. The ASU will not impact the financial condition, results of operations, or cash flows of the Corporation. The Corporation is currently evaluating the impact on the notes to the consolidated financial statements, and expects additional disclosures will be required on adoption.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU 2023-09 enhances transparency of income tax disclosures by requiring consistent categories and greater disaggregation of information in the rate reconciliation, and disaggregation of income taxes paid by jurisdiction. Additionally, the ASU requires disclosure of pretax income (or loss) and income tax (or benefit) disaggregated by domestic and foreign. Finally, the ASU removes the requirement of certain disclosures related to unrecognized tax benefits. The ASU becomes effective for the Corporation beginning with its annual period ending December 2025. The ASU will not impact the financial condition, results of operations, or cash flows of the Corporation. The Corporation is currently evaluating the impact on the notes to the consolidated financial statements, and expects additional disclosures will be required on adoption.

31

Table of Contents

Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion of the Corporation’s historical results of operations and of its liquidity and capital resources should be read in conjunction with the Consolidated Financial Statements of the Corporation and related notes. All dollar amounts presented are in millions, except per share data or where otherwise indicated. Amounts may not sum due to rounding. Statements that are not historical are forward-looking and involve risks and uncertainties. See "Item 1A. Risk Factors" and the Forward-Looking Statements section within "Item 1. Business" for further information.

Overview

The Corporation has two reportable segments: workplace furnishings and residential building products. The Corporation is a leading global designer and provider of commercial furnishings, and a leading manufacturer and marketer of hearth products. The Corporation utilizes a decentralized business model to deliver value to customers via various brands and selling models. The Corporation is focused on growing its existing businesses while seeking out and developing new opportunities for growth.

In 2022, the Corporation achieved solid gross and operating margin improvement and strong earnings growth, despite a weakening macroeconomic environment that drove softer demand, particularly in the second half of the year. Strong price realization in both reportable segments drove higher sales and helped the Corporation recover the unfavorable price-cost impact experienced in the prior year due to the rapid onset of material, freight, and labor cost inflation in 2021. In workplace furnishings, business simplification plans and capacity actions, including restructuring of an eCommerce business, the addition of a new manufacturing facility in Mexico, and the divestiture of Lamex, have favorably impacted margins and are expected to deliver improved segment profitability going forward. In residential building products, higher mortgage rates and macroeconomic concerns in 2022 have started to pressure volumes in this market, coming off several periods of historically strong sales and profit performance driven by COVID-19 pandemic-induced trends. However, the Corporation’s category-leading position and favorable housing demographics support the expectation of solid demand over the long-term in this segment. In spite of elevating economic pressures during the year, the Corporation maintained a solid balance sheet, which supported a strong level of investment in the business to allow for the continued execution of strategic initiatives.

Consolidated net sales for 2022 were $2.362 billion, an increase of 8.1 percent compared to net sales of $2.184 billion in the prior year. The change was driven by a 16.7 percent increase in the residential building products segment, and 3.6 percent year-over-year sales growth in the workplace furnishings segment. The acquisition of residential building products companies added incremental year-over-year sales of $43.7 million, and the divestiture of Lamex reduced year-over-year sales by $48.7 million. See "Note 4. Acquisitions and Divestitures" in the Notes to the Consolidated Financial Statements for additional information.

Net income attributable to the Corporation in 2022 was $123.9 million compared to net income of $59.8 million in 2021. The increase was driven by favorable price-cost and a net gain on the sale of Lamex of $49.4 million, partially offset by reduced net productivity, higher investment spend, and increased expenses related to restructuring, impairment, and cost reduction initiatives.

In preparation for continued pressure from lower volumes heading into 2023, the Corporation initiated corporate-wide cost savings actions in third quarter 2022 that are estimated to save approximately $30 million on an annual basis.

21

Table of Contents

Results of Operations

The following table presents certain results of operations:

Net Sales

Consolidated net sales for 2022 increased 8.1 percent compared to the prior year. The change was driven by price realization in both the residential building products and workplace furnishings segments, along with higher residential building products volume, partially offset by lower volume in the workplace furnishings segment. The lower workplace volume was primarily driven by restructuring of an eCommerce business, which resulted in unfavorable year-over-year sales impact of approximately 5 percent. Also affecting the year-over-year sales comparison was a $48.7 million unfavorable impact from the sale of Lamex, and a $43.7 million favorable impact from acquiring residential building products businesses.

Gross Profit

Gross profit as a percentage of net sales increased 70 basis points in 2022 compared to 2021, primarily driven by favorable price-cost, which was partially offset by operational investments and reduced net productivity. Favorable price-cost was attributable to the Corporation’s ability to implement price increases in response to recent inflationary pressures which have driven up the cost of labor, materials and transportation.

Selling and Administrative Expenses

Selling and administrative expenses ("SG&A") as a percentage of net sales increased 10 basis points in 2022 compared to 2021, driven by lower workplace furnishings volume, higher freight costs, and increased investment spend, partially offset by price realization.

Selling and administrative expenses include freight expense for shipments to customers, research and development costs, and amortization of intangible assets. Refer to "Note 2. Summary of Significant Accounting Policies" and "Note 6. Goodwill and

22

Table of Contents

Other Intangible Assets" in the Notes to Consolidated Financial Statements for further information regarding the comparative expense levels for these items.

Gain on Sale of Subsidiary

In the current year, the Corporation recorded a pre-tax gain of $50.4 million as a result of the divestiture of Lamex in July 2022.

Restructuring and Impairment Charges

In the current year and prior year, the Corporation recorded restructuring and impairment charges primarily related to efforts to drive business simplification and improve long-term profitability in the workplace furnishings segment, including the restructuring of an eCommerce business. Charges include:

Refer to "Note 6. Goodwill and Other Intangible Assets" and "Note 17. Restructuring and Impairment Charges" in the Notes to Consolidated Financial Statements for further information regarding restructuring and impairment charges.

Operating Income

For 2022, operating income as a percentage of net sales increased 270 basis points compared to 2021. The increase was driven by favorable price-cost and gain on the sale of Lamex, partially offset by reduced net productivity and higher investment spend.

Interest Expense, Net

Interest expense, net was $8.8 million and $7.2 million in 2022 and 2021, respectively. The increase was driven by increased borrowings during 2022 and higher interest rates on the Corporation’s variable-rate revolving credit facility.

Income Taxes

The following table summarizes the Corporation’s income tax provision:

The income tax provision reflects a lower rate in 2022 compared to 2021, primarily due to the sale of the Lamex business in July 2022. This transaction created valuation adjustment tax benefits related to existing deferred tax assets, as well as basis differences, which significantly reduced the Corporation’s full year effective tax rate. See "Note 8. Income Taxes" in the Notes to Consolidated Financial Statements for further information relating to income taxes.

Net Income Attributable to HNI Corporation

Net income attributable to the Corporation was $123.9 million or $2.94 per diluted share in 2022 compared to $59.8 million or $1.36 per diluted share in 2021.

Comparison of Fiscal Year Ended January 1, 2022 with the Fiscal Year Ended January 2, 2021

To review commentary for the consolidated and segment-level results of operations comparison of the fiscal year ended January 1, 2022 with the fiscal year ended January 2, 2021, please refer to Item 7 of the Corporation’s Form 10-K filed March 1, 2022 with the Securities and Exchange Commission.

23

Table of Contents

Workplace Furnishings

The following table presents certain results of operations in the workplace furnishings segment:

Net sales in 2022 for the workplace furnishings segment increased 3.6 percent compared to 2021. The impact of the sale of Lamex in the third quarter of 2022 decreased net sales by $48.7 million compared to prior year. Aside from this item, segment sales were up 7.3 percent, primarily driven by price realization across most customer segments along with volume growth in the international and small and medium-sized business customer segments, partially offset by lower eCommerce and contract customer volume. The contract customer business was negatively affected by macroeconomic uncertainty which impacted return-to-office plans and investments by large corporate customers. Lower eCommerce volume was due to the previously announced restructuring of an eCommerce business, and had an unfavorable impact of approximately 8 percent on workplace furnishings year-over-year sales.

Operating profit as a percentage of net sales increased 20 basis points in 2022 compared to 2021, driven by favorable price-cost and improved mix, partially offset by increased investments, reduced net productivity, and lower volume.

Residential Building Products

The following table presents certain results of operations in the residential building products segment:

Net sales in 2022 for the residential building products segment increased 16.7 percent compared to 2021, driven by price realization and volume growth in both the new construction and existing home channels. Included in the 2022 sales results was a $43.7 million favorable impact from acquiring residential building products companies.

Operating profit as a percentage of net sales decreased 80 basis points in 2022 compared to 2021. The decrease was driven by the impact of acquisitions, higher SG&A, and reduced net productivity, partially offset by favorable price-cost and higher volume.

Liquidity and Capital Resources

Cash, cash equivalents, and short-term investments totaled $19.5 million at the end of 2022, compared to $53.7 million at the end of 2021. These funds, coupled with cash flow from future operations, borrowing capacity under the Corporation’s existing credit agreement, and the ability to access capital markets, are expected to be adequate to fund operations and satisfy cash flow needs for at least the next twelve months. Based on current earnings before interest, taxes, depreciation and amortization, the Corporation can access the full $400 million of borrowing capacity available under the revolving credit facility, which includes the $89 million currently outstanding, and maintain compliance with applicable covenants. As of the end of 2022, $1.1 million of cash was held overseas and considered permanently reinvested. If such amounts were repatriated, it could result in additional foreign withholding and state tax expense to the Corporation. The Corporation does not believe treating this cash as permanently reinvested will have any impact on the ability of the Corporation to meet its obligations as they come due.

Cash Flow – Operating Activities

Operating activities were a source of $81.2 million of cash in 2022, compared to a source of $131.6 million cash in 2021. The lower cash generation compared to the prior year was primarily due to changes in working capital. Changes in working capital balances resulted in a $72.7 million use of cash in 2022 compared to a $34.4 million use of cash in the prior year. As demand moderated toward the end of 2022, and a company-wide cost savings initiative was put into place, the Corporation’s accounts payable and accrued expense balances were reduced, resulting in a net use of cash.

24

Table of Contents

The Corporation places special emphasis on management and control of working capital, including accounts receivable and inventory. Management believes recorded trade receivable valuation allowances at the end of 2022 are adequate to cover the risk of potential bad debts. Allowances for non-collectible trade receivables, as a percent of gross trade receivables, totaled 1.5 percent and 1.2 percent at the end of 2022 and 2021, respectively. The Corporation’s inventory turns were 8.4 and 8.9 for 2022 and 2021, respectively.

Cash Flow – Investing Activities

Capital expenditures, including capitalized software, were $68.4 million in 2022 and $66.5 million in 2021. These expenditures are primarily focused on machinery, equipment, and tooling required to support new products, continuous improvements, and cost savings initiatives in manufacturing processes. Additionally, in support of the Corporation’s long-term strategy to create effortless winning experiences for customers, the Corporation continues to invest in technology. The Corporation anticipates capital expenditures for 2023 in an estimated range of $60 million to $70 million.

Cash Flow – Financing Activities

Debt - The Corporation maintains a revolving credit facility as the primary source of committed funding from which the Corporation finances its planned capital expenditures, strategic initiatives, and seasonal working capital needs. In the second quarter 2022, this facility was amended and the maturity extended until June 2027 with a revised maximum borrowing capacity of $400 million. Cash flows included in financing activities represent periodic borrowings and repayments under the revolving credit facility. See "Note 7. Debt" in the Notes to Consolidated Financial Statements for further information.

Dividend - The Corporation is committed to maintaining or modestly growing the quarterly dividend. Cash dividends declared and paid per share are as follows:

The last quarterly dividend increase was from $0.31 to $0.32 per common share effective with the June 8, 2022 dividend payment for shareholders of record at the close of business on May 27, 2022. The average dividend payout percentage for the most recent three-year period has been 75 percent of prior year earnings or 28 percent of prior year cash flow from operating activities.

Stock Repurchase - The Corporation’s capital strategy related to stock repurchase is focused on offsetting the dilutive impact of issuances for various compensation-related matters. The Corporation may elect to opportunistically purchase additional shares based on excess cash generation and/or share price considerations. The Board most recently authorized $200 million on May 17, 2022, for repurchases of the Corporation’s common stock. See "Note 10. Accumulated Other Comprehensive Income (Loss) and Shareholders’ Equity" in the Notes to Consolidated Financial Statements for further information.

Sales of Stock - The Corporation records cash flows received from the sale of its common stock held in treasury, primarily in connection with stock option exercises and the HNI Corporation Members’ Stock Purchase Plan. See "Note 10. Accumulated Other Comprehensive Income (Loss) and Shareholders’ Equity" and "Note 11. Stock-Based Compensation" in the Notes to Consolidated Financial Statements for further information.

Cash Requirements

As of December 31, 2022, the Corporation has the following obligations and commitments to make future payments:

Purchase Obligations - The Corporation’s purchase obligations include agreements to purchase goods or services that are enforceable, legally binding, and specify all significant terms, including the quantity to be purchased, the price to be paid, and the timing of the purchase. Estimated purchase obligations total $149 million during 2023 and $4 million thereafter.

Debt - Debt principal obligations are approximately $1 million during 2023, and $189 million thereafter. Interest obligations from debt are estimated to be approximately $9 million during 2023 and $31 million thereafter. Refer to "Note 7. Debt" in the Notes to Consolidated Financial Statements for additional information.

Deferred Compensation - Deferred compensation obligations, which include both cash and Corporation stock, are expected to be approximately $0.5 million during 2023 and $6.6 million thereafter. Refer to "Note 11. Stock-Based Compensation" in the Notes to Consolidated Financial Statements for additional information.

25

Table of Contents

Post-Retirement Benefit Plan - Post-retirement benefit plan payments are expected to be approximately $1 million during 2023 and $11 million in aggregate from 2024 through 2031. Refer to "Note 13. Post-Retirement Health Care" in the Notes to Consolidated Financial Statements for additional information.

Operating and Finance Leases - Operating and finance lease obligations are expected to be approximately $27 million during 2023 and $94 million thereafter. In addition the Corporation has approximately $65 million in commitments related to leases which have been signed but not commenced as of the end of 2022; these commitments primarily relate to a manufacturing facility under construction. Refer to "Note 14. Leases" in the Notes to Consolidated Financial Statements for additional information.

Other Obligations - Other long-term obligations of approximately $10 million are primarily comprised of uncertain tax and put option liabilities. Additionally, in 2022 the Corporation entered into a long-term commitment to purchase solar energy from a local utility to satisfy a portion of the Corporation’s electricity demand in the Muscatine, IA area. The project is currently estimated to commence in 2025 with the Corporation’s future commitment approximating $13 million. For the Corporations’s estimated future obligations related to product warranties and self-insured liabilities, refer to "Note 2. Summary of Significant Accounting Policies" in the Notes to Consolidated Financial Statements.

Litigation and Uncertainties

See "Note 15. Guarantees, Commitments, and Contingencies" in the Notes to Consolidated Financial Statements for further information.

Looking Ahead

The Corporation continues to navigate near-term uncertainty driven by macroeconomic conditions including the impacts of the pandemic and recent dynamics around labor availability, supply chain capacity, and cost inflation. However, management remains optimistic about the long-term prospects in the workplace furnishings and residential building products markets. Management believes the Corporation continues to compete well and remains confident the investments made in the business will continue to generate strong returns for shareholders.

Critical Accounting Policies and Estimates

General

Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon the Consolidated Financial Statements, prepared in accordance with Generally Accepted Accounting Principles ("GAAP"). The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Senior management has discussed the development, selection, and disclosure of these estimates with the Audit Committee of the Board. Actual results may differ from these estimates under different assumptions or conditions.

An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the financial statements. Management believes the following critical accounting policy reflects its more significant estimates and assumptions used in the preparation of the Consolidated Financial Statements.

Self-Insurance

The Corporation is primarily self-insured or carries high deductibles for general, auto, and product liability, workers’ compensation, and certain employee health benefits. The general, auto, product, and workers’ compensation liabilities are managed via a wholly-owned insurance captive, with estimated liabilities of $23.8 million and $26.3 million as of December 31, 2022 and January 1, 2022, respectively, included in the Consolidated Balance Sheets. Certain risk exposures are mitigated through the use of independent third party stop loss insurance coverages.

The Corporation’s policy is to accrue amounts in accordance with the actuarial determined liabilities. The actuarial valuations are based on historical and current factors such as cost experience, claim frequency, and demographic information, along with certain assumptions about future events including legal actions, medical cost inflation, the number or severity of claims, and the magnitude and change of actual experience development. No changes were made to the methodologies utilized to estimate self-insurance reserves in 2022. While the recorded amounts are sensitive to the assumptions and factors described herein,

26

Table of Contents

management believes that such assumptions and actuarial methods used to determine self-insurance reserves are reasonable and provide an appropriate basis for estimating the liabilities. However, inherent uncertainty due to variability in the facts and circumstances of individual claims, as well as the length of time from incurrence of claims to final settlement, may result in the Corporation’s ultimate exposure differing significantly from what is currently estimated.

As of December 31, 2022, the Corporation’s self-insurance reserve was accrued within an actuarial determined range, which accounts for the subjective nature of the estimate. The span of the current range is approximately $6 million.

Recently Issued Accounting Standards Not Yet Adopted

In September 2022, the FASB issued ASU No. 2022-04, Liabilities—Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations. ASU 2022-04 enhances transparency of supplier finance programs by requiring disclosure of key terms, amounts outstanding, a rollforward of outstanding amounts, and a description of where in the financial statements outstanding amounts are presented. ASU 2022-04 is effective for the Corporation in the first quarter of fiscal 2023. While this guidance will not impact the financial condition, results of operations, or cash flows of the Corporation, management is currently evaluating the impact on the notes to the consolidated financial statements.

Item 7.  Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion of the Corporation’s historical results of operations and of its liquidity and capital resources should be read in conjunction with the Consolidated Financial Statements of the Corporation and related notes.  Statements that are not historical are forward-looking and involve risks and uncertainties. See "Item 1A. Risk Factors" and the Forward-Looking Statements section within "Item 1. Business" for further information.

Overview

The Corporation has two reportable segments: workplace furnishings and residential building products. The Corporation is a leading global designer and provider of commercial furnishings, and a leading manufacturer and marketer of hearth products.  The Corporation utilizes a decentralized business model to deliver value to customers via various brands and selling models.  The Corporation is focused on growing its existing businesses while seeking out and developing new opportunities for growth.

Consolidated net sales for 2021 were $2.184 billion, an increase of 11.7 percent compared to net sales of $1.955 billion in the prior year.  The change was driven by a 27.3 percent increase in the residential building products segment, and 5.0 percent year-over-year sales growth in the workplace furnishings segment. The acquisitions of Design Public Group ("DPG") and multiple residential building products companies added incremental year-over-year sales of $34.9 million and $12.4 million, respectively.

Net income attributable to the Corporation in 2021 was $59.8 million compared to net income of $41.9 million in 2020. The increase was driven by lower restructuring and impairment charges, higher residential building products volume, improved net productivity, and lower core selling and administrative expenses ("SG&A"), partially offset by unfavorable price-cost, the return of costs related to temporary actions taken in 2020, and higher investment levels.

Overall, the Corporation has experienced positive order trends in both of its segments throughout much of 2021. However, ongoing pandemic-induced difficulties tied to labor availability, supply chain issues, and input cost inflation have persisted. These constraints, when combined with continued staffing shortages both internally and at the Corporation's suppliers, are limiting production capacity growth, and have negatively impacted revenue and profit levels in much of the second half of 2021. The Corporation has taken action to mitigate these constraints, including the implementation of price increases across its brands, opening of a new manufacturing facility in Mexico, increased insourcing and strengthened resourcing of critical parts, and accelerated efforts to drive productivity through process changes and automation to reduce labor requirements. The Corporation also has embarked on business simplification initiatives, including plans to exit a small workplace furnishings brand and restructure an eCommerce business in the workplace furnishing segment. Both actions are aimed at improving long-term profitability.

The Corporation also acquired two residential building products companies in the fourth quarter of 2021. The acquisition of Trinity Hearth & Home ("Trinity"), a leading installing distributor in the Dallas/Fort Worth area, builds on the Corporation's vertical integration strategy, and provides a hub for the segment to better serve its customers in the rapidly growing Southwest region. The Outdoor GreatRoom Company ("OGC"), a leading manufacturer and supplier of premium outdoor living products, primarily fire tables and fire pits, positions the Corporation to grow and develop a leading position in the fast-growing outdoor living market. See "Note 4. Acquisitions" in the Notes to the Consolidated Financial Statements for additional information.

22

Table of Contents

Results of Operations

The following table presents certain key highlights from the results of operations (in thousands):

Net Sales

Consolidated net sales for 2021 increased 11.7 percent compared to the prior year.  The change was driven by a significant increase in the residential building products segment, along with a moderate increase in the workplace furnishings segment. Included in the 2021 sales results was a $34.9 million favorable impact from acquiring DPG, and a $12.4 million favorable impact from acquiring residential building products businesses.

Gross Profit

Gross profit as a percentage of net sales decreased 220 basis points in 2021 compared to 2020, primarily driven by unfavorable price-cost, partially offset by higher residential building products volume and improved net productivity. Unfavorable price-cost was attributable to inflationary pressures in labor, materials, and transportation costs partially offset by increased price realization.

Selling and Administrative Expenses

Selling and administrative expenses as a percentage of net sales decreased 130 basis points in 2021 compared to 2020, driven by higher residential building products volume and lower core SG&A, partially offset by increased freight costs, the return of costs related to temporary actions taken in 2020, and higher investment spend. Included in current year and prior year SG&A was $1.4 million and $6.8 million, respectively, of one-time costs driven by conditions related to the COVID-19 pandemic.

Selling and administrative expenses include freight expense for shipments to customers, research and development costs, and amortization of intangible assets.  Refer to "Note 2. Summary of Significant Accounting Policies" and "Note 6. Goodwill and Other Intangible Assets" in the Notes to Consolidated Financial Statements for further information regarding the comparative expense levels for these items.

23

Table of Contents

Restructuring and Impairment Charges

In 2021, the Corporation recorded $8.2 million of restructuring costs, as well as a $5.8 million goodwill impairment charge, in connection with business simplification actions taken in the workplace furnishings segment. Of these charges, $7.6 million was included in "Cost of Sales" in the Consolidated Statements of Comprehensive Income. Refer to "Note 6. Goodwill and Other Intangible Assets" and "Note 17. Restructuring and Impairment Charges" in the Notes to Consolidated Financial Statements for further information regarding restructuring and impairment charges.

In 2020, the Corporation recorded net charges of $38.8 million related to the impairment of goodwill, intangibles, and other assets in the workplace furnishings segment as a result of the COVID-19 pandemic and related economic disruption.

Operating Income

For 2021, operating income increased 39.2 percent to $85.4 million compared to $61.4 million in 2020. The increase was driven by higher residential building products volume, improved net productivity, lower core SG&A, and lower restructuring and impairment charges, partially offset by unfavorable price-cost, higher investment levels, and the return of costs related to temporary actions taken in 2020.

Interest Expense, Net

Interest expense, net was $7.2 million and $7.0 million in 2021 and 2020, respectively.

Income Taxes

The following table summarizes the Corporation's income tax provision (in thousands):

The income tax provision reflects a higher rate in 2021 compared to 2020. The variance was primarily driven by higher income in the current year which diluted the rate benefit from tax credits when compared to the prior year. Additionally, the increased rate in the current year is the result of an increase in current year equity-based compensation offset by the benefit of increased foreign earnings over prior year. See "Note 8. Income Taxes" in the Notes to Consolidated Financial Statements for further information relating to income taxes.

Net Income Attributable to HNI Corporation

Net income attributable to the Corporation was $59.8 million or $1.36 per diluted share in 2021 compared to $41.9 million or $0.98 per diluted share in 2020.

Comparison of Fiscal Year Ended January 2, 2021 with the Fiscal Year Ended December 28, 2019

To review commentary for the consolidated and segment-level results of operations comparison of the fiscal year ended January 2, 2021 with the fiscal year ended December 28, 2019, please refer to Item 7 of the Corporation's Form 10-K filed March 2, 2021 with the Securities and Exchange Commission, or follow the link below:

https://www.sec.gov/ix?doc=/Archives/edgar/data/48287/000004828721000038/hni-20210102.htm

24

Table of Contents

Workplace Furnishings

The following table presents certain key highlights from the results of operations in the workplace furnishings segment (in thousands):

Net sales in 2021 for the workplace furnishings segment increased 5.0 percent compared to 2020. The results were driven by higher volumes in the small- and medium-sized business and international channels, both of which experienced a rebound in demand in 2021 relative to 2020, which was more adversely impacted by the COVID-19 pandemic. Volumes were lower in 2021 in the contract and eCommerce channels. The contract market has experienced a slower recovery in demand primarily due to inconsistency in return-to-office plans throughout the country. Demand moderated in the eCommerce channel in 2021, following strong sales growth in 2020 as a result of work-from-home trends driven by the onset of the pandemic. Price realization across most channels also contributed to the segment's sales growth. Furthermore, included in the 2021 sales results was a $34.9 million favorable impact from acquiring DPG.

Operating loss as a percentage of net sales was 40 basis points more favorable in 2021 compared to 2020, driven by lower restructuring, impairment, and one-time costs and improved net productivity, partially offset by unfavorable price-cost.

In the current year, the workplace furnishings segment recorded $7.9 million of restructuring costs and a $5.8 million goodwill impairment charge in connection with business simplification actions, as well as $1.4 million of one-time costs as a result of the COVID-19 pandemic.

In 2020, the workplace furnishings segment recorded net charges of $38.8 million related to the impairment of goodwill, intangibles, and other assets, as well as $5.2 million of one-time costs as a result of the COVID-19 pandemic.

Residential Building Products

The following table presents certain key highlights from the results of operations in the residential building products segment (in thousands):

Net sales in 2021 for the residential building products segment increased 27.3 percent compared to 2020, driven by strong volume growth in both the new construction and existing home channels. Included in the 2021 sales results was a $12.4 million favorable impact from acquiring residential building products companies.

Operating profit as a percentage of net sales increased 40 basis points in 2021 compared to 2020. The increase was driven by SG&A leverage from higher sales volume, partially offset by unfavorable price-cost.

Liquidity and Capital Resources

Cash, cash equivalents, and short-term investments totaled $53.7 million at the end of 2021, compared to $117.8 million at the end of 2020.  These funds, coupled with cash flow from future operations, borrowing capacity under the Corporation's existing credit agreement, and the ability to access capital markets, are expected to be adequate to fund operations and satisfy cash flow needs for at least the next twelve months.  Additionally, based on current earnings before interest, taxes, depreciation and amortization generation, the Corporation can access the full $450 million of borrowing capacity available under the revolving credit facility and maintain compliance with applicable covenants. As of the end of 2021, $9.2 million of cash was held overseas and considered permanently reinvested. If such amounts were repatriated, it could result in additional foreign withholding and

25

Table of Contents

state tax expense to the Corporation. The Corporation does not believe treating this cash as permanently reinvested will have any impact on the ability of the Corporation to meet its obligations as they come due.

Cash Flow – Operating Activities

Operating activities were a source of $131.6 million of cash in 2021, compared to a source of $214.5 million cash in 2020.  The lower cash generation compared to the prior year was primarily due to changes in working capital. Changes in working capital balances resulted in a $59.6 million use of cash in 2021 compared to a $24.2 million source of cash in the prior year. Prior year end working capital balances were lower than normal due to a significant decline in sales volume in 2020 as a result of the COVID-19 pandemic and related economic disruption. As demand has rebounded in many markets in 2021, the Corporation's receivables, inventory, and accounts payable and accrued expenses have risen to more normal levels, resulting in a net use of cash.

The Corporation places special emphasis on management and control of working capital, including accounts receivable and inventory.  Management believes recorded trade receivable valuation allowances at the end of 2021 are adequate to cover the risk of potential bad debts.  Allowances for non-collectible trade receivables, as a percent of gross trade receivables, totaled 1.2 percent and 2.7 percent at the end of 2021 and 2020, respectively. The Corporation’s inventory turns were 8.9 and 8.2 for 2021 and 2020, respectively.

Cash Flow – Investing Activities

Capital expenditures, including capitalized software, were $66.5 million in 2021 and $41.8 million in 2020.  These expenditures are primarily focused on machinery, equipment, and tooling required to support new products, continuous improvements, and cost savings initiatives in manufacturing processes. Additionally, in support of the Corporation's long-term strategy to create effortless winning experiences for customers, the Corporation continues to invest in technology and digital assets. The Corporation anticipates capital expenditures for 2022 in an estimated range of $70 million to $80 million.

Cash Flow – Financing Activities

Debt - The Corporation maintains a revolving credit facility as the primary source of committed funding from which the Corporation finances its planned capital expenditures, strategic initiatives, and seasonal working capital needs. Cash flows included in financing activities represent periodic borrowings and repayments under the revolving credit facility. See "Note 7. Debt" in the Notes to Consolidated Financial Statements for further information.

Dividend - The Corporation is committed to maintaining or modestly growing the quarterly dividend. Cash dividends declared and paid per share are as follows (in dollars):

The last quarterly dividend increase was from $0.305 to $0.310 per common share effective with the June 1, 2021 dividend payment for shareholders of record at the close of business on May 21, 2021.  The average dividend payout percentage for the most recent three-year period has been 64 percent of prior year earnings or 25 percent of prior year cash flow from operating activities.

Stock Repurchase - The Corporation’s capital strategy related to stock repurchase is focused on offsetting the dilutive impact of issuances for various compensation-related matters. The Corporation may elect to opportunistically purchase additional shares based on excess cash generation and/or share price considerations. The Board most recently authorized $200 million on February 13, 2019, for repurchases of the Corporation’s common stock. See "Note 10. Accumulated Other Comprehensive Income (Loss) and Shareholders' Equity" in the Notes to Consolidated Financial Statements for further information.

Cash Requirements

As of January 1, 2022, the Corporation, has the following obligations and commitments to make future payments:

Purchase Obligations - The Corporation’s purchase obligations include agreements to purchase goods or services that are enforceable, legally binding, and specify all significant terms, including the quantity to be purchased, the price to be paid, and the timing of the purchase. Estimated purchase obligations total $188 million during 2022 and $85 million thereafter.

26

Table of Contents

Debt - Debt principal obligations are approximately $3 million during 2022, and $175 million thereafter. Interest obligations from debt are estimated to be approximately $6 million during 2022 and $18 million thereafter. Refer to "Note 7. Debt" in the Notes to Consolidated Financial Statements for additional information.

Deferred Compensation - Deferred compensation obligations, which include both cash and Corporation stock, are expected to be approximately $1 million during 2022 and $9 million thereafter. Refer to “Note 11. Stock-Based Compensation” in the Notes to Consolidated Financial Statements for additional information.

Post-Retirement Benefit Plan - Post-retirement benefit plan payments are expected to be approximately $1 million during 2022 and $11 million in aggregate from 2023 through 2031. Refer to “Note 13. Post-Retirement Health Care" in the Notes to Consolidated Financial Statements for additional information.

Operating and Finance Leases - Operating and finance lease obligations are expected to be approximately $25 million during 2022 and $80 million thereafter. Refer to “Note 14. Leases" in the Notes to Consolidated Financial Statements for additional information.

Other Obligations - Other long-term obligations of approximately $13 million are primarily comprised of uncertain tax positions, acquisition-related holdbacks, and put option liabilities. Additionally, refer to “Note 2. Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements for the Corporation’s estimated future obligations related to product warranties and self-insured liabilities.

Litigation and Uncertainties

See "Note 15. Guarantees, Commitments, and Contingencies" in the Notes to Consolidated Financial Statements for further information.

Looking Ahead

The Corporation continues to navigate near-term uncertainty driven by the ongoing COVID-19 pandemic and recent dynamics around labor availability, supply chain capacity, and cost inflation. However, management believes the Corporation is well positioned to grow revenues, expand margins, and generate cash flows. Strength in residential building products is expected to continue, and conditions in workplace furnishings are expected to continue to improve.

Management remains optimistic about the long-term prospects in the workplace furnishings and residential building products

markets. Management believes the Corporation continues to compete well and remains confident the investments made in the business will continue to generate strong returns for shareholders.

Critical Accounting Policies and Estimates

General

Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon the Consolidated Financial Statements, prepared in accordance with Generally Accepted Accounting Principles ("GAAP").  The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities.  Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.  Senior management has discussed the development, selection, and disclosure of these estimates with the Audit Committee of the Board. Actual results may differ from these estimates under different assumptions or conditions.

An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the financial statements.  Management believes the following critical accounting policy reflects its more significant estimates and assumptions used in the preparation of the Consolidated Financial Statements.

Self-Insurance

The Corporation is primarily self-insured or carries high deductibles for general, auto, and product liability, workers’ compensation, and certain employee health benefits. The general, auto, product, and workers’ compensation liabilities are managed via a wholly-owned insurance captive, with estimated liabilities of $26.3 million and $25.7 million as of January 1, 2022

27

Table of Contents

and January 2, 2021, respectively, included in the Consolidated Balance Sheets. Certain risk exposures are mitigated through the use of independent third party stop loss insurance coverages.

The Corporation’s policy is to accrue amounts in accordance with the actuarial determined liabilities. The actuarial valuations are based on historical and current factors such as cost experience, claim frequency, and demographic information, along with certain assumptions about future events including legal actions, medical cost inflation, the number or severity of claims, and the magnitude and change of actual experience development. No changes were made to the methodologies utilized to estimate self-insurance reserves in 2021. While the recorded amounts are sensitive to the assumptions and factors described herein, management believes that such assumptions and actuarial methods used to determine self-insurance reserves are reasonable and provide an appropriate basis for estimating the liabilities. However, inherent uncertainty due to variability in the facts and circumstances of individual claims, as well as the length of time from incurrence of claims to final settlement, may result in the Corporation's ultimate exposure differing significantly from what is currently estimated.

As of January 1, 2022, the Corporation's self-insurance reserve was accrued within an actuarial determined range, which accounts for the subjective nature of the estimate. The span of the current range is approximately $6 million.

Recently Issued Accounting Standards Not Yet Adopted

None