HNI CORP (HNI) FY 2023 MD&A

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.

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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

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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.

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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

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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

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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

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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

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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.

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