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Water Tower Research is a leading equity research firm that provides research on micro, small and mid cap companies.

Water Tower Research was founded by Wall Street veterans after witnessing a fundamental shift in the investment research industry with the result being a declining knowledge base among investors, a lack of awareness and a shrinking pool of fundamental research being conducted on companies across the small-cap and micro-cap spectrum. The same issues are now increasingly occurring in the mid-cap space. This sea change within the investment community is impacting not only the companies themselves but also current shareholders and potential investors. With significantly less active sell-side sponsorship by Wall Street, a substantial information gap has developed between companies and various constituents in the financial community. The net result is fewer channels for insight and information to flow between companies and investors.

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<h2>KEY POINTS</h2>
<ul>
<li>Highlights from 1Q22 included:&nbsp;(1) Consolidated sales of $553.2 million, up 18.2% from 1Q21, with Workplace Furnishings up 16.6% and Residential Building Products up 20.8%; (2) The company experienced positive price-cost of $2 million in the quarter, leading to a sequential gross margin expansion from 4Q21; (3) 1Q22 diluted EPS was $0.33 versus $0.34 in 1Q21, with SG&amp;A as a % of revenue of 30.8%, down from 32.5% one year ago; (4) The company purchased ~$25 million worth of shares in 1Q22 at an average cost of $41.95. This is the fourth straight quarter that HNI repurchased shares; and (5) Debt increased by ~$67 million, leaving Net Debt/EBITDA at ~1.3x.</li>
<li>·&nbsp;Guidance:&nbsp;The company maintains its FY22 outlook as stated in the FY21 year-end release. It expects Workplace Furnishings segment revenues to grow in the high teens to low 20%, while it projects Residential Building Products segment revenues to grow in the high teens. HNI still expects more than 70% of its FY22 net income to come in the second half of the year. Positive price-cost for the 2H22 is expected to be roughly $50 million. Workplace Furnishing orders are up 50% Y/Y, while Residential Build Products orders are up 25% organically Y/Y.</li>
<li>Our views:&nbsp;HNI’s strong backlog, combined with its ability to pass through cost inflation, lead to high hopes for 2Q22 and the rest of FY22 and beyond. Alongside those factors, dealers are reporting robust demand for design requests and HNI’s new facility in Mexico is ramping up capacity, giving us confidence in the performance of HNI going forward.</li>
</ul>
<h2>ESTIMATES AND VALUATION</h2>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/272/382/original/image_97231597861651798804533.png?1651798805" class="editor-image img-responsive" data-smartkarma-image-id="272382"></figure>
<h2>COMPANY OVERVIEW</h2>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/272/383/original/image_31527348171651798822438.png?1651798824" class="editor-image img-responsive" data-smartkarma-image-id="272383"></figure>
<p>With its headquarters in Muscatine, Iowa, HNI Corporation manufactures and markets workplace furnishings and residential building products. HNI operates in two distinct yet unrelated businesses: commercial / contract office furniture and fireplaces and related products. HNI was founded in the mid-1940s on the idea of treating its employees fairly and serving customers with products that they value.</p>
<p>HNI’s office furniture includes systems, seating, storage, tables, and architectural products; HNI reports results of its office furniture business in its Workplace Furnishings (WF) segment. Residential Building Products (RBP) is HNI’s official segment name for its fireplace business that was previously called “Hearth Products.” Its products include a broad offering of gas, wood, electric, and pellet-fueled fireplaces, fireplace inserts, stoves, facings, and accessories.</p>
<h2>INSIDE THIS REPORT</h2>
<p>Tables 1 &amp; 2 are variance analyses that compare 1Q22 consolidated results with 1Q21 and our 1Q22 estimates. In addition, we show operating income results for the two segments as well as for unallocated expenses.</p>
<p>Our estimates are summarized in “Estimates and Valuation” and shown in detail with our income statements, balance sheet, and cash flow models.</p>
<h2>REFLECTIONS ON 1Q22</h2>
<p>Consolidated sales for 1Q22 were $553.2 million, up 18.2% from 1Q21, beating our estimate by ~$19.1 million.</p>
<p>1Q22 revenue was led by strong growth across both business segments. 1Q22 Workplace Furnishing revenue grew by 16.6% to ~$353.1 million, from ~$302.7 million in 1Q21. In Residential Building Products, revenues in 1Q22 totaled ~$219.2 million, up from ~$181.5 million in 1Q21, a 20.8% increase.</p>
<p>Workplace Furnishings segment orders for 1Q22 grew 50% Y/Y, while Residential Building Products segment orders increased 25% compared with 1Q21. With increasing capacity, HNI should be able to work through the increased backlog more efficiently than before.</p>
<p>1Q22 gross profit grew by ~$17 million Y/Y to $196.9 million, missing our estimate of $205 million. Gross margin for 1Q22 was 34.4%, down from 37.2% in 1Q21. With price-cost expected to be strongly positive in the back half of the year, gross margin stands to expand going forward.</p>
<p>Workplace Furnishings’ operating loss of ~$6.4 million was roughly in line with our estimate of ~$6.2 million, representing a decline in operating margin of 80 bps. Residential Building Products’ operating profit grew by 1.3%, from ~$39.9 million in 1Q21 to ~$40.4 million in 1Q22. Operating profit margin of 18.42% was a 350 basis point decline from the same period one year prior.</p>
<p>Although non-GAAP diluted EPS of $0.33 compared unfavorably with the $0.36 delivered in 1Q21, it exceeded our $0.22 estimate by $0.11.</p>
<p>Tables 1 &amp; 2 provide the detail of the results discussed above.</p>
<h2>DIRECTIONAL GUIDANCE FOR FY22 – OUR ESTIMATES AND BEYOND</h2>
<p>Given the challenges of 2021 and the uncertainty occasioned by the new Omicron variant, management decided to provide a directional guidance for FY2022. Below is the summary of the guidance.</p>
<p>For Workplace Furnishings:&nbsp;Management expects “pricing benefits, backlog normalization, and assumed market improvements to drive revenue growth rates in the high teens to low twenties” for FY22. Our estimate is $1.66 billion, ~15.9% above 2021 WF sales. We do not forecast any impact from acquisitions in our WF sales estimates.</p>
<p>For Residential Building Products:&nbsp;“In Residential Building Products, pricing benefits revenue from acquisitions and multiple growth initiatives are expected to fuel growth rates in the high teens. Our view on consolidated margins remains the same. We continue to expect improving price cost” as per management. For RBP, our FY22 revenue forecast is $892.3 million, an 18.9% increase from FY21.</p>
<p>Also commenting on earnings seasonality (diluted EPS), management expects it to be more skewed than the recent historical trend of ~70% for the back half of 2022. Our diluted EPS estimates (shown below) conform to that distribution with ~26% of our $2.62 estimate targeted for the first half of 2022. Our diluted GAAP EPS estimates and diluted&nbsp;non-GAAP are, at this juncture, identical.</p>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/272/384/original/image_46221767281651798883974.png?1651798885" class="editor-image img-responsive" data-smartkarma-image-id="272384"></figure>
<p>Source: WTR Research</p>
<p>Management also provided directional guidance for 2Q22, expecting profitability to be in line with 1Q22 levels. Strong price-cost is expected to be realized in the second half of the year, totaling $50 million at the mid-point of company estimates. Roughly $35 million will be in the Workplace Furnishings segment, with the remainder in Residential Building Products.</p>
<p>Our detailed economic models are also attached. We forecast by segment, building into an income statement that conforms to the presentation HNI provides. We also forecast balance sheets and cash flow statements. We project that HNI’s financial condition remains strong. We have not incorporated any new acquisition assumptions into our model. That said, we forecast that free cash flow will be used for the benefit of shareholders in terms of dividends and share repurchases.</p>
<h2>HISTORICAL VALUATION METRICS</h2>
<p>A hallmark of our research at WTR is that we do not offer specific stock recommendations and/or stock price targets. Our purpose is to help educate our readers about a company and some of the factors that we believe can be relevant to their choices about when and if to invest in a particular issue. The chart below compares HNI’s price performance over the last 12 months to the broad market (S&amp;P 500) and to its peers (Steelcase, MillerKnoll, and Kimball International). The price performance of all of the peers, including HNI, paled versus the broad market. HNI, down 16.1% over the past 12 months, performed in line with Steelcase and much better than MillerKnoll and Kimball International.</p>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/272/385/original/image_45559994291651798908549.png?1651798910" class="editor-image img-responsive" data-smartkarma-image-id="272385"></figure>
<p>We do offer estimates and financial models that underpin those estimates. We also offer data and graphs about how the stock has been valued historically – typically, using conventional metrics – and sometimes, we present data and graphs that juxtapose historical valuations among issues that are believed to be comparable. For HNI, we are now focusing on historical valuation metrics for the past decade. The first set of graphs show HNI’s enterprise value, historical EBITDA (TTM), and track versus revenues, EBIT, and EBITDA. As noted, the source of the data and charts is YCharts. The chart directly below provides a 10-year look back at HNI valuation metrics.</p>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/272/386/original/image_862297638101651798926648.png?1651798937" class="editor-image img-responsive" data-smartkarma-image-id="272386"></figure>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/272/387/original/image_894253647111651798942029.png?1651798944" class="editor-image img-responsive" data-smartkarma-image-id="272387"></figure>
<p>Finally, the chart above compares HNI with its contract furniture peers, using Enterprise Value / EBITDA as the valuation metric to compare. Currently, on that metric, the public market market is valuing HNI less highly than any of the cited peers.</p>
<h2>TABULAR REVIEW OF 1Q22</h2>
<p>Tables 1 &amp; 2: Review of 1Q22 versus 1Q21 and WTR Estimates – Consolidated and by Segment</p>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/272/388/original/image_854642019121651798975080.png?1651798977" class="editor-image img-responsive" data-smartkarma-image-id="272388"></figure>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/272/389/original/image_714337293131651798991695.png?1651798994" class="editor-image img-responsive" data-smartkarma-image-id="272389"></figure>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/272/390/original/image_455902587141651799007609.png?1651799010" class="editor-image img-responsive" data-smartkarma-image-id="272390"></figure>
<p>EXHIBITS: WTR HNI ECONOMIC MODEL: INCOME STATEMENTS, BALANCE SHEET, AND CASH FLOW</p>
<p>Exhibit 1: HNI Corp. Consolidated Income Statement Model</p>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/272/391/original/image_662762334151651799032248.png?1651799035" class="editor-image img-responsive" data-smartkarma-image-id="272391"></figure>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/272/392/original/image_2684219161651799045153.png?1651799047" class="editor-image img-responsive" data-smartkarma-image-id="272392"></figure>
<p>Exhibit 2: HNI Corp. Segment Income Statement Models</p>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/272/393/original/image_594380878171651799063231.png?1651799066" class="editor-image img-responsive" data-smartkarma-image-id="272393"></figure>
<p></p>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/272/394/original/image_449563255181651799088748.png?1651799092" class="editor-image img-responsive" data-smartkarma-image-id="272394"></figure>
<p>Source: Company Filings, Water Tower Research &amp; Analysis</p>
<p>Exhibit 3: HNI Corp. Balance Sheet Model</p>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/272/395/original/image_947683346191651799114244.png?1651799117" class="editor-image img-responsive" data-smartkarma-image-id="272395"></figure>
<p>Source: Company Filings, Water Tower Research &amp; Analysis</p>
<p>Exhibit 4: HNI Corp. Cash Flow Model</p>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/272/396/original/image_970037993201651799142185.png?1651799147" class="editor-image img-responsive" data-smartkarma-image-id="272396"></figure>
<p>Source: Company Filings, Water Tower Research &amp; Analysis</p>
<h2>INFORMATION ABOUT THE SOURCES OF DATA IN THIS REPORT</h2>
<p>Mattress Import Data:&nbsp;Investors can find a wealth of data about specific imports on the www.dataweb. usitc.gov website. This is a free, interactive site that allows users to query the trade database for information. In order to use the database, users need to register. Data is reported monthly, normally 45 days following the end of the month; but that is not always the case, particularly during COVID-19 when USITC employees are working remotely.</p>
<p>Other mattress data&nbsp;comes from the International Sleep Products Association (ISPA), which is the trade association for domestic mattress manufacturers and suppliers. For this report, we used ISPA's estimated US-produced shipments for 2016 to 2019 and our guess for 2020. The actual data for 2020 has not yet been published. Publication in the past has been in May of each year. In addition, we used ISPA's estimate for the average unit price of a US-produced adult mattress.</p>
<p>Specific Culp Financial Data:&nbsp;Our historical data for Culp, shown in Tables 1 &amp; 2 and Exhibits 4,5,6 &amp; 7 come from the company's periodic, quarterly, and annual filings with the SEC on forms 8-K, 10-Q, 10-K, and Def-14. Investors can find those filing on the company's website as well as on the&nbsp;sec.gov&nbsp;website.</p>
<p>Similarly, data quoted in the text of the report come from those filings.</p>
<h2>DISCLOSURES</h2>
<div></div>
<p>Water Tower Research (“WTR”) is a professional publisher of investment research reports on public companies and, to a lesser extent, private firms (“the Companies”). WTR provides investor-focused content and digital distribution strategies designed to help companies communicate with investors.<br><br>WTR is not a registered investment adviser or a broker/dealer nor does WTR provide investment banking services. WTR operates as an exempt investment adviser under the so called “publishers’ exemption” from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940. WTR does not provide investment ratings / recommendations or price targets on the companies it reports on. Readers are advised that the research reports are published and provided solely for informational purposes and should not be construed as an offer to sell or the solicitation of an offer to buy securities or the rendering of investment advice. The information provided in this report should not be construed in any manner whatsoever as personalized advice. All users and readers of WTR’s reports are cautioned to consult their own independent financial, tax and legal advisors prior to purchasing or selling securities.<br><br>Budd Bugatch and Darin Ostrowski who are the writers of this report, covers the Consumer sector for WTR. Mr. Bugatch and Mr. Ostrowski including members of their household have no personal or business-related relationship to the subject company other than providing digital content and any ancillary services WTR may offer.<br><br>Unless otherwise indicated, WTR intends to provide continuing coverage of the covered companies. WTR will notify its readers through website postings or other appropriate means if WTR determines to terminate coverage of any of the companies covered.<br><br>WTR is being compensated for its research by the company which is the subject of this report. WTR receives no more than a maximum of $10,500 per month from a given client and is required to have at least a 6-month commitment. None of the earned fees are contingent on, and WTR’s client agreements are not cancellable for the content of its reports. WTR does not accept any compensation in the form of warrants or stock options or other equity instruments that could increase in value based on positive coverage in its reports.<br><br>WTR or an affiliate may seek to receive compensation for non-research services to covered companies, such as charges for presenting at sponsored investor conferences, distributing press releases, advising on investor relations and broader corporate communications and public relations strategies as well as performing certain other related services (“Ancillary Services”). The companies that WTR covers in our research are not required to purchase or use Ancillary Services that WTR or an affiliate might offer to clients.<br><br>The manner of WTR’s research compensation and Ancillary Services to covered companies raise actual and perceived conflicts of interest. WTR is committed to manage those conflicts to protect its reputation and the objectivity of employees/analysts by adhering to strictly-written compliance guidelines.<br><br>The views and analyses included in our research reports are based on current public information that we consider to be reliable, but no representation or warranty, expressed or implied, is made as to their accuracy, completeness, timeliness, or correctness. Neither we nor our analysts, directors, officers, employees, representatives, independent contractors, agents or affiliate shall be liable for any omissions, errors or inaccuracies, regardless of cause, foreseeability or the lack of timeliness of, or any delay or interruptions in the transmission of our reports to content users. This lack of liability extends to direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, losses, lost income, lost profit or opportunity costs.<br><br>All investment information contained herein should be independently verified by the reader or user of this report. For additional information, all readers of this report are encouraged to visit WTR’s website www.watertowerresearch.com.</p>

KEY POINTS

Highlights from 1Q22 included:&nbsp;(1) Consolidated sales of $553.2 million, up 18.2% from 1Q21, with Workplace Furnishings up 16.6% and Residential Building Products up 20.8%; (2) The company experienced positive price-cost of $2 million in the quarter, leading to a sequential gross margin expansion from 4Q21; (3) 1Q22 diluted EPS was $0.33 versus $0.34 in 1Q21, with SG&amp;A as a % of revenue of 30.8%, down from 32.5% one year ago; (4) The company purchased ~$25 million worth of shares in 1Q22 at an average cost of $41.95. This is the fourth straight quarter that HNI repurchased shares; and (5) Debt increased by ~$67 million, leaving Net Debt/EBITDA at ~1.3x.
·&nbsp;Guidance:&nbsp;The company maintains its FY22 outlook as stated in the FY21 year-end release. It expects Workplace Furnishings segment revenues to grow in the high teens to low 20%, while it projects Residential Building Products segment revenues to grow in the high teens. HNI still expects more than 70% of its FY22 net income to come in the second half of the year. Positive price-cost for the 2H22 is expected to be roughly $50 million. Workplace Furnishing orders are up 50% Y/Y, while Residential Build Products orders are up 25% organically Y/Y.
Our views:&nbsp;HNI’s strong backlog, combined with its ability to pass through cost inflation, lead to high hopes for 2Q22 and the rest of FY22 and beyond. Alongside those factors, dealers are reporting robust demand for design requests and HNI’s new facility in Mexico is ramping up capacity, giving us confidence in the performance of HNI going forward.

ESTIMATES AND VALUATION

COMPANY OVERVIEW

With its headquarters in Muscatine, Iowa, HNI Corporation manufactures and markets workplace furnishings and residential building products. HNI operates in two distinct yet unrelated businesses: commercial / contract office furniture and fireplaces and related products. HNI was founded in the mid-1940s on the idea of treating its employees fairly and serving customers with products that they value.
HNI’s office furniture includes systems, seating, storage, tables, and architectural products; HNI reports results of its office furniture business in its Workplace Furnishings (WF) segment. Residential Building Products (RBP) is HNI’s official segment name for its fireplace business that was previously called “Hearth Products.” Its products include a broad offering of gas, wood, electric, and pellet-fueled fireplaces, fireplace inserts, stoves, facings, and accessories.
INSIDE THIS REPORT
Tables 1 &amp; 2 are variance analyses that compare 1Q22 consolidated results with 1Q21 and our 1Q22 estimates. In addition, we show operating income results for the two segments as well as for unallocated expenses.
Our estimates are summarized in “Estimates and Valuation” and shown in detail with our income statements, balance sheet, and cash flow models.
REFLECTIONS ON 1Q22
Consolidated sales for 1Q22 were $553.2 million, up 18.2% from 1Q21, beating our estimate by ~$19.1 million.
1Q22 revenue was led by strong growth across both business segments. 1Q22 Workplace Furnishing revenue grew by 16.6% to ~$353.1 million, from ~$302.7 million in 1Q21. In Residential Building Products, revenues in 1Q22 totaled ~$219.2 million, up from ~$181.5 million in 1Q21, a 20.8% increase.
Workplace Furnishings segment orders for 1Q22 grew 50% Y/Y, while Residential Building Products segment orders increased 25% compared with 1Q21. With increasing capacity, HNI should be able to work through the increased backlog more efficiently than before.
1Q22 gross profit grew by ~$17 million Y/Y to $196.9 million, missing our estimate of $205 million. Gross margin for 1Q22 was 34.4%, down from 37.2% in 1Q21. With price-cost expected to be strongly positive in the back half of the year, gross margin stands to expand going forward.
Workplace Furnishings’ operating loss of ~$6.4 million was roughly in line with our estimate of ~$6.2 million, representing a decline in operating margin of 80 bps. Residential Building Products’ operating profit grew by 1.3%, from ~$39.9 million in 1Q21 to ~$40.4 million in 1Q22. Operating profit margin of 18.42% was a 350 basis point decline from the same period one year prior.
Although non-GAAP diluted EPS of $0.33 compared unfavorably with the $0.36 delivered in 1Q21, it exceeded our $0.22 estimate by $0.11.
Tables 1 &amp; 2 provide the detail of the results discussed above.
DIRECTIONAL GUIDANCE FOR FY22 – OUR ESTIMATES AND BEYOND
Given the challenges of 2021 and the uncertainty occasioned by the new Omicron variant, management decided to provide a directional guidance for FY2022. Below is the summary of the guidance.
For Workplace Furnishings:&nbsp;Management expects “pricing benefits, backlog normalization, and assumed market improvements to drive revenue growth rates in the high teens to low twenties” for FY22. Our estimate is $1.66 billion, ~15.9% above 2021 WF sales. We do not forecast any impact from acquisitions in our WF sales estimates.
For Residential Building Products:&nbsp;“In Residential Building Products, pricing benefits revenue from acquisitions and multiple growth initiatives are expected to fuel growth rates in the high teens. Our view on consolidated margins remains the same. We continue to expect improving price cost” as per management. For RBP, our FY22 revenue forecast is $892.3 million, an 18.9% increase from FY21.
Also commenting on earnings seasonality (diluted EPS), management expects it to be more skewed than the recent historical trend of ~70% for the back half of 2022. Our diluted EPS estimates (shown below) conform to that distribution with ~26% of our $2.62 estimate targeted for the first half of 2022. Our diluted GAAP EPS estimates and diluted&nbsp;non-GAAP are, at this juncture, identical.

Source: WTR Research
Management also provided directional guidance for 2Q22, expecting profitability to be in line with 1Q22 levels. Strong price-cost is expected to be realized in the second half of the year, totaling $50 million at the mid-point of company estimates. Roughly $35 million will be in the Workplace Furnishings segment, with the remainder in Residential Building Products.
Our detailed economic models are also attached. We forecast by segment, building into an income statement that conforms to the presentation HNI provides. We also forecast balance sheets and cash flow statements. We project that HNI’s financial condition remains strong. We have not incorporated any new acquisition assumptions into our model. That said, we forecast that free cash flow will be used for the benefit of shareholders in terms of dividends and share repurchases.
HISTORICAL VALUATION METRICS
A hallmark of our research at WTR is that we do not offer specific stock recommendations and/or stock price targets. Our purpose is to help educate our readers about a company and some of the factors that we believe can be relevant to their choices about when and if to invest in a particular issue. The chart below compares HNI’s price performance over the last 12 months to the broad market (S&amp;P 500) and to its peers (Steelcase, MillerKnoll, and Kimball International). The price performance of all of the peers, including HNI, paled versus the broad market. HNI, down 16.1% over the past 12 months, performed in line with Steelcase and much better than MillerKnoll and Kimball International.

We do offer estimates and financial models that underpin those estimates. We also offer data and graphs about how the stock has been valued historically – typically, using conventional metrics – and sometimes, we present data and graphs that juxtapose historical valuations among issues that are believed to be comparable. For HNI, we are now focusing on historical valuation metrics for the past decade. The first set of graphs show HNI’s enterprise value, historical EBITDA (TTM), and track versus revenues, EBIT, and EBITDA. As noted, the source of the data and charts is YCharts. The chart directly below provides a 10-year look back at HNI valuation metrics.


Finally, the chart above compares HNI with its contract furniture peers, using Enterprise Value / EBITDA as the valuation metric to compare. Currently, on that metric, the public market market is valuing HNI less highly than any of the cited peers.
TABULAR REVIEW OF 1Q22
Tables 1 &amp; 2: Review of 1Q22 versus 1Q21 and WTR Estimates – Consolidated and by Segment



EXHIBITS: WTR HNI ECONOMIC MODEL: INCOME STATEMENTS, BALANCE SHEET, AND CASH FLOW
Exhibit 1: HNI Corp. Consolidated Income Statement Model


Exhibit 2: HNI Corp. Segment Income Statement Models



Source: Company Filings, Water Tower Research &amp; Analysis
Exhibit 3: HNI Corp. Balance Sheet Model

Source: Company Filings, Water Tower Research &amp; Analysis
Exhibit 4: HNI Corp. Cash Flow Model

Source: Company Filings, Water Tower Research &amp; Analysis
INFORMATION ABOUT THE SOURCES OF DATA IN THIS REPORT
Mattress Import Data:&nbsp;Investors can find a wealth of data about specific imports on the www.dataweb. usitc.gov website. This is a free, interactive site that allows users to query the trade database for information. In order to use the database, users need to register. Data is reported monthly, normally 45 days following the end of the month; but that is not always the case, particularly during COVID-19 when USITC employees are working remotely.
Other mattress data&nbsp;comes from the International Sleep Products Association (ISPA), which is the trade association for domestic mattress manufacturers and suppliers. For this report, we used ISPA's estimated US-produced shipments for 2016 to 2019 and our guess for 2020. The actual data for 2020 has not yet been published. Publication in the past has been in May of each year. In addition, we used ISPA's estimate for the average unit price of a US-produced adult mattress.
Specific Culp Financial Data:&nbsp;Our historical data for Culp, shown in Tables 1 &amp; 2 and Exhibits 4,5,6 &amp; 7 come from the company's periodic, quarterly, and annual filings with the SEC on forms 8-K, 10-Q, 10-K, and Def-14. Investors can find those filing on the company's website as well as on the&nbsp;sec.gov&nbsp;website.
Similarly, data quoted in the text of the report come from those filings.
DISCLOSURES

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Updating Estimates on HNI Corporation After 1Q22 Report: Strong Order Growth and Positive Price-Cost Mark a Solid Quarter for HNI