HNI CORP (HNI)

Item 2. 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 Unaudited Condensed Consolidated Financial Statements of the Corporation and related notes included elsewhere in this Quarterly Report on Form 10-Q and with the Corporation’s Annual Report on Form 10-K for the fiscal year ended January 3, 2026 filed with the Securities and Exchange Commission (the "2025 Form 10-K"). 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 "Forward-Looking Statements" at the end of this section for further information about forward-looking statements.

References in this management discussion and analysis to "HNI" and the "Corporation" are to HNI and its consolidated subsidiaries.

Overview

HNI Corporation has been improving where people live, work, and gather for more than 80 years. HNI is a manufacturer of workplace furnishings and residential building products. The Corporation's two reportable segments consist of Workplace Furnishings and Residential Building Products. Within Workplace Furnishings, the Corporation is the thought leader in commercial furnishings and the preeminent global designer, innovator, and provider of workplace solutions going to market under unique brands serving multiple channels and customers from the largest multinational companies to small local businesses. Within Residential Building Products, the Corporation is the nation's 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. HNI is focused on growing its existing businesses while seeking out and developing new opportunities for expansion.

The Corporation's business is subject to seasonal fluctuations, with higher net sales and earnings typically generated in the second half of the year. As a consequence, interim period results may not be indicative of full year performance.

On December 10, 2025, the Corporation completed its acquisition of Steelcase, a global design and furniture manufacturing company, in a cash and stock transaction valued at approximately $1.9 billion. The acquisition of Steelcase unites two industry leaders to meet the dynamic marketplace and evolving needs of the workplace amid accelerating in-office work trends. This combination of two highly respected companies whose strong foundation, combined with expected synergies, will accelerate the Corporation's ability to invest in long-term operational enhancements, digital transformation, products to meet evolving customer needs, and customer-centered buying experiences. Steelcase is included in the Workplace Furnishings segment. See "Note 3. Acquisitions and Divestitures" in the Notes to Condensed Consolidated Financial Statements for more details on the Steelcase acquisition, which affects the comparability of results between the current and prior-year periods.

During the second quarter, the Corporation continues its focus on managing costs across all businesses in response to soft volume to begin the year, driven by current geopolitical uncertainty. In Workplace Furnishings, the strategic focus remains margin expansion. The cost management actions taken in the first two quarters within the segment are in addition to previously announced synergies associated with the integration of Steelcase, the realization of which is consistent with expectations. The Corporation also continues to expect additional savings from network optimization in the legacy Workplace Furnishing businesses over the next three years. The Residential Building Products segment remains focused on driving revenue growth over the long term. The business continues to navigate challenging housing market dynamics resulting from interest rate volatility and affordability issues. The combination of the Corporation's disciplined cost management, Steelcase synergies, and legacy network optimization projects continues to strengthen its earnings visibility story.

Consolidated net sales for the second quarter of 2026 were $1.5 billion, an increase of 121 percent compared to net sales of $667.1 million in the prior-year quarter, with net sales in the Workplace Furnishings segment increasing 157 percent, and Residential Building Products net sales decreasing 1.6 percent. Consolidated and Workplace Furnishings net sales include a $806.9 million year-over-year increase related to the acquisition of Steelcase in December 2025. See "Note 3. Acquisitions and Divestitures" in the Notes to Condensed Consolidated Financial Statements for further information about the acquisition.

Net income attributable to the Corporation in the second quarter of 2026 was $51.1 million compared to $48.2 million in the second quarter of 2025. The current quarter included favorable net tariff impact, higher net sales in the legacy HNI business, and improved net productivity. These factors were offset partially by Steelcase purchase accounting, restructuring and impairment charges, increased interest expense and higher variable compensation.

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Results of Operations

The following table presents certain results of operations:

Three Months Ended July 4, 2026 and June 28, 2025

Net Sales

Consolidated net sales for the second quarter of 2026 increased 121 percent compared to the same quarter last year. The increase was driven by the acquisition of Steelcase in December of 2025, which increased year-over-year net sales by $806.9 million.

Gross Profit

Gross profit as a percentage of net sales increased 110 basis points in the second quarter of 2026 compared to the same quarter last year, driven by 240 basis points of tariff refunds along with improved net productivity, which were partially offset by impacts from the acquisition of Steelcase, and restructuring costs related to the Corporation's network optimization projects.

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Selling, General, and Administrative Expenses

Selling, general and administrative expenses as a percentage of net sales increased 390 basis points in the second quarter of 2026 compared to the same quarter last year. The increase was driven by impacts from the acquisition of Steelcase, including $21.9 million of purchase accounting related to the amortization of intangibles and higher variable compensation.

Acquisition and Related Costs

In the current quarter the Corporation recorded costs of $4.2 million associated with the Steelcase acquisition. Acquisition and related costs consist primarily of retention compensation and other professional service fees. See "Note 3. Acquisitions and Divestitures" in the Notes to the Condensed Consolidated Financial Statements for further information.

Restructuring and Impairment Charges

In the second quarter of 2026, the Corporation recorded charges of $17.9 million, primarily related to structural cost actions and an impairment charge related to a small residential building products business. In the prior-year quarter, $2.5 million of charges were recorded, primarily related to the Corporation's network optimization projects.

Operating Income

In the second quarter of 2026, operating margin contracted 390 basis points compared to the same quarter last year. This decrease was driven by impacts from the acquisition of Steelcase, including $21.9 million of purchase accounting with respect to intangible amortization related to the preliminary valuation of Steelcase, $23.8 million of restructuring and impairment charges inclusive of restructuring amounts recorded to cost of sales, and higher variable compensation, the effects of which were partially offset by 150 basis points of favorable net tariff impacts and improved net productivity.

Interest Expense, Net

Interest expense, net for the second quarter of 2026 increased to $23.7 million, from $6.1 million in the same quarter last year. The increase was driven by higher average outstanding borrowings incurred to fund the acquisition of Steelcase. See "Note 7. Debt" in the Notes to Condensed Consolidated Financial Statements for further information about such financing.

Income Taxes

The Corporation’s income tax expense for the second quarter of 2026 was $20.1 million on income before taxes of $71.2 million, or an effective tax rate of 28.2 percent. For the second quarter of 2025, the Corporation’s income tax expense was $13.8 million on income before taxes of $62.0 million, or an effective tax rate of 22.2 percent. The increase in the effective tax rate was primarily due to the impact of non-deductible executive compensation, unfavorable equity-based compensation adjustments, and the settlement of certain foreign-related tax positions.

Net Income Attributable to HNI Corporation

Net income attributable to the Corporation was $51.1 million, or $0.70 per diluted share, in the second quarter of 2026, compared to net income of $48.2 million, or $1.02 per diluted share, in the second quarter of 2025.

Six Months Ended July 4, 2026 and June 28, 2025

Net Sales

Consolidated net sales for the first six months of 2026 increased 123 percent compared to the same period last year. The increase was driven by the acquisition of Steelcase in the prior y

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

The following discussion of the Corporation’s 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 2025 ended on January 3, 2026, fiscal year 2024 ended on December 28, 2024, and fiscal year 2023 ended on December 30, 2023. The financial statements for fiscal year 2025 are on a 53-week basis and 2024, and 2023 are on a 52-week basis. A 53-week year occurs approximately every sixth year.

To review management's discussion and analysis of the consolidated and segment-level results of operations for the fiscal year ended December 28, 2024 compared with the fiscal year ended December 30, 2023, 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 28, 2024, as filed with the Securities and Exchange Commission on February 25, 2025.

Overview

HNI Corporation has been improving where people live, work, and gather for more than 80 years. HNI is a manufacturer of workplace furnishings and residential building products. Within workplace furnishings, the Corporation is the thought leader in commercial furnishings and the preeminent global designer, innovator, and provider of workplace solutions going to market under unique brands serving multiple channels and customers from the largest multinational companies to small local businesses. Within residential building products, the Corporation is the nation's 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. HNI is focused on growing its existing businesses while seeking out and developing new opportunities for expansion. The Corporation's two reportable segments consist of Workplace Furnishings and Residential Building Products. Fiscal year 2025 included 53 weeks, with the extra week occurring in the fourth quarter, while fiscal year 2024 included 52 weeks.

On December 10, 2025, the Corporation completed its acquisition of Steelcase Inc. ("Steelcase"), a global design and furniture company, in a cash and stock transaction valued at approximately $1.9 billion. See "Note 4. Acquisitions and Divestitures" in the Notes to Consolidated Financial Statements for more details on the Steelcase acquisition. Steelcase will be included in the Workplace Furnishings segment. The Corporation has included the financial results of Steelcase in the Consolidated Financial Statements starting as of the date of acquisition.

The acquisition of Steelcase unites two industry leaders to meet the dynamic marketplace and evolving needs of the workplace amid accelerating in-office work trends. The combination will not only transform the Corporation, but it will also be transformational for the workplace furnishings industry — as two highly respected companies with shared values, talented teams, strong financial profiles, and highly complementary capabilities have been brought together. This strong foundation, combined with expected synergies, will accelerate the Corporation's ability to invest in long-term operational enhancements, digital transformation, products to meet evolving customer needs, and customer-centered buying experiences. Integration efforts are underway, utilizing a disciplined and proven approach informed by recent experience, while continuing to build on the iconic brands for which both companies are widely respected.

The Corporation continues to realize significant savings from synergies associated with the 2023 acquisition of Kimball International and the ramp-up of its Mexico facility. In addition, synergies associated with the integration of Steelcase will increase earnings over the next five years, with modest accretion expected in 2026. In addition to eliminating redundant public company corporate costs, the synergies are associated with expected savings in the Americas and does not include any revenue synergies.

During 2025, in Workplace Furnishings, the strategic focus remains margin expansion. The ongoing integration of the Kimball International business and related synergies, expanded utilization of its manufacturing facility in Mexico, and network optimization initiatives are enabling the segment's profit transformation plan, while the divestiture of HNI India in the second quarter of 2025 allows the Corporation to focus on its core strategies. The Residential Building Products business remains focused on driving revenue growth over the long term. Currently, the business is navigating challenging housing market dynamics resulting from interest rate volatility and affordability issues. In addition, macroeconomic volatility and evolving government

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Table of Contents

tariff policies continue to drive a heightened level of uncertainty in the Corporation's markets. Both the Workplace Furnishings segment and the Residential Building Products segment increased net sales year-over-year, while maintaining strong profitability.

Consolidated net sales for 2025 were $2.8 billion, an increase of 12.4 percent compared to net sales of $2.5 billion in the prior year. The change was driven by 14.6 percent year-over-year sales growth in the Workplace Furnishings segment, and an 5.7 percent increase in net sales in the Residential Building Products segment. Steelcase contributed $187.5 million in net sales since the acquisition date. The divestiture of HNI India in the second quarter of 2025 reduced year-over-year sales by $16.2 million. 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 Steelcase.

Net income attributable to the Corporation in 2025 was $54.2 million compared to net income of $139.5 million in 2024. The current year included $94.6 million of acquisition costs, $9.5 million of additional interest expense related to the Steelcase transaction, the $7.7 million impairment of intangible assets at a small Workplace Furnishings business, a loss of $6.5 million on the divestiture of HNI India, and $4.6 million of purchase accounting adjustments related to the Steelcase acquisition. Excluding these items, net income increased in the current year driven by higher net sales volume in the legacy HNI businesses and improved net productivity, partially offset by higher core Selling and administrative expenses ("SG&A").

Results of Operations

The following table presents certain results of operations:

Net Sales

Consolidated net sales for 2025 increased 12.4 percent compared to the prior year. The change was driven by $187.5 million of favorable impact from the acquisition of Steelcase in the current year along with volume growth and price realization in both the Residential Building Products and Workplace Furnishings segments. These factors were partially offset by a $16.2 million decrease in net sales from the divestiture of HNI India in the second quarter of 2025.

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Gross Profit

Gross profit as a percentage of net sales increased 50 basis points in 2025 compared to 2024, driven by improved net productivity. Gross profit contains $2.2 million of Steelcase purchase accounting adjustments for inventory step-up and additional depreciation for the preliminary valuation adjustment to property, plant and equipment.

Selling and Administrative Expenses

Selling and administrative expenses as a percentage of net sales increased 50 basis points in 2025 compared to 2024. This increase was driven by wage inflation, the impacts from the acquisition of Steelcase, and higher core SG&A, partially offset by higher net sales in the legacy HNI businesses. Selling and administrative expenses includes $2.4 million of Steelcase purchase accounting adjustments related to amortization of intangibles and additional depreciation for the preliminary valuation.

Acquisition Costs

In the current year the Corporation recorded costs of $94.6 million associated with the Steelcase acquisition. Acquisition costs consist primarily of change in control compensation expenses, transaction success fees, and other professional services fees. See "Note 4. Acquisitions and Divestitures" in the Notes to the Consolidated Financial Statements for further information.

Restructuring, Impairment, and Divestitures

In the current year the Corporation recorded charges of $18.5 million primarily in connection with the impairment of intangible assets related to a small business unit in the Workplace Furnishings segment, the loss on divestiture of the HNI India business, and the Corporation's network optimization program. Prior-year restructuring and impairment charges of $6.2 million were primarily incurred in connection with the Corporation's network optimization program.

Operating Income

In 2025, operating margin decreased 380 basis points compared to 2024 driven by acquisition costs and restructuring, impairment and divestiture charges. Excluding these items, operating margin was flat year-over-year with higher net sales volume in the legacy HNI businesses and improved net productivity, offset by impacts from the acquisition of Steelcase and higher core SG&A.

Interest Expense, Net

Interest expense, net was $35.6 million and $27.2 million in 2025 and 2024, respectively. The increase was driven by higher average outstanding borrowings incurred to fund the acquisition of Steelcase.

Income Taxes

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

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