# HNI CORP (HNI) FY 2024 MD&A

Verbatim Item 7 Management's Discussion and Analysis from HNI CORP's 10-K for fiscal year 2024.

SEC filing source: https://www.sec.gov/Archives/edgar/data/48287/000004828725000084/hni-20241228.htm
Accession: 0000048287-25-000084
Filing date: 2025-02-25
Report date: 2024-12-28
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/HNI/
All MD&A years: /company/HNI/mda/
Previous year: /company/HNI/mda/fy2023/ (FY 2023)
Next year: /company/HNI/mda/fy2026/ (FY 2026)

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.

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Results of Operations

The following table presents certain results of operations:

[[GREPCENT_TABLE]]
[["","2024","","2023","","Change"],["Net sales","$","2,526.4","","","$","2,434.0","","","3.8","%"],["Cost of sales","1,493.0","","","1,485.7","","","0.5","%"],["Gross profit","1,033.4","","","948.3","","","9.0","%"],["Selling and administrative expenses","820.7","","","813.2","","","0.9","%"],["Restructuring and impairment charges","6.2","","","44.8","","","(86.2)","%"],["Operating income","206.5","","","90.3","","","129","%"],["Interest expense, net","27.2","","","25.5","","","6.9","%"],["Income before income taxes","179.3","","","64.8","","","177","%"],["Income tax expense","39.8","","","15.6","","","155","%"],["Net income attributable to non-controlling interest","0.0","","","0.0","","","NM"],["Net income attributable to HNI Corporation","$","139.5","","","$","49.2","","","183","%"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["As a Percentage of Net Sales:"],["Net sales","100.0","%","","100.0","%"],["Gross profit","40.9","","","39.0","","","190","bps"],["Selling and administrative expenses","32.5","","","33.4","","","-90","bps"],["Restructuring and impairment charges","0.2","","","1.8","","","-160","bps"],["Operating income","8.2","","","3.7","","","450","bps"],["Income tax expense","1.6","","","0.6","","","100","bps"],["Net income attributable to HNI Corporation","5.5","","","2.0","","","350","bps"]]
[[/GREPCENT_TABLE]]

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

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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:

[[GREPCENT_TABLE]]
[["","2024","","2023"],["Income before income taxes","$","179.3","","","$","64.8"],["Income tax expense","$","39.8","","","$","15.6"],["Effective tax rate","22.2","%","","24.1","%"]]
[[/GREPCENT_TABLE]]

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:

[[GREPCENT_TABLE]]
[["","2024","","2023","","Change"],["Net sales","$","1,888.0","","","$","1,740.3","","","8.5","%"],["Operating income","$","169.1","","","$","68.6","","","146","%"],["Operating income %","9.0","%","","3.9","%","","510","bps"]]
[[/GREPCENT_TABLE]]

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.

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Residential Building Products

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

[[GREPCENT_TABLE]]
[["","2024","","2023","","Change"],["Net sales","$","638.4","","","$","693.7","","","(8.0","%)"],["Operating income","$","110.8","","","$","116.6","","","(5.0","%)"],["Operating income %","17.4","%","","16.8","%","","60","bps"]]
[[/GREPCENT_TABLE]]

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.

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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:

[[GREPCENT_TABLE]]
[["","2024","","2023"],["Dividends per common share","$","1.31","","","$","1.28"]]
[[/GREPCENT_TABLE]]

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.

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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

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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.

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