Item 1A. Risk Factors
The following risk factors and other information included in this report should be carefully considered. If any of the following risks occur, the Corporation’s business, operating results, cash flows, or financial condition could be materially adversely affected. Other factors not currently known to the Corporation or that it currently considers to be immaterial also may adversely affect its business, operating results, cash flows, or financial condition.
Industry and Economic Risks
Unfavorable economic and industry factors could adversely affect the Corporation’s business, operating results, or financial condition.
Workplace furnishings industry sales are subject to risks resulting from a variety of macroeconomic factors including service-sector employment levels, corporate profits, business confidence, commercial construction, office vacancy rates, and hospitality refurbishment rates. Industry factors, including corporate restructuring, technology changes, corporate relocations, health and safety concerns, including ergonomic considerations, and the globalization of companies also influence workplace furnishings industry revenues. In addition, adoption of hybrid working models has resulted in a significant decrease in worker attendance at their office locations. Despite office re-entry in many markets, office occupancy levels remain below historic levels. Lower office occupancy levels have had and could continue to have an adverse impact on the demand for workplace furnishings.
Residential building products industry sales are impacted by a variety of macroeconomic factors including housing starts, housing inventory, home sales, overall employment levels, interest rates, home affordability, consumer confidence, energy costs, disposable income, and changing demographics. Such sales are also subject to risks associated with industry factors such as technology changes, health and safety concerns, and environmental regulation, including indoor air quality standards. Deterioration of economic conditions or a slowdown in the homebuilding industry and the hearth products market could decrease demand for the Corporation's residential building products and have additional adverse effects on operating results.
Deteriorating economic conditions, which may be caused by uncertainties and volatility in the financial markets, rising or sustained inflation and interest rates, and potential economic recessions, could affect the Corporation’s business significantly by contributing to reduced demand for the Corporation's products, insolvency of independent dealers resulting in increased provisions for credit losses, insolvency of key suppliers resulting in product delays, inability of customers to obtain credit to finance purchases of products, and decreased customer demand, including order delays or cancellations. In a recessionary economy, business confidence, service-sector employment, corporate cash flows, and residential and non-residential commercial construction often decrease, which typically leads to a decrease in demand for workplace furnishings and residential building products.
The Corporation may not be successful in winning new business in the highly competitive workplace furnishings and residential building products industries.
The workplace furnishings and residential building products industries are highly competitive. Many of the Corporation’s competitors in both industries offer similar products. Competitive factors include price, delivery and service, brand recognition,
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product design, product quality, strength of dealers and other distributors, and relationships with customers and key influencers, including architects, designers, home-builders, and facility managers. In both industries, most of the top competitors have an installed base of products that can be a source of significant future sales through repeat and expansion orders. The Corporation’s main competitors manufacture products with strong acceptance in the marketplace and are capable of developing products that have a competitive advantage, which could make it difficult for the Corporation to win new business.
In both the workplace furnishings and residential building products industries, the Corporation faces price competition from competitors and from new market entrants who may manufacture and source products from lower cost countries. Price competition impacts the Corporation’s ability to implement price increases or, in some cases, maintain prices, which could lower profit margins and adversely affect future financial performance.
Changes in industry dynamics, including demand and order patterns from customers, distribution changes, or the loss of a significant number of dealers, could adversely affect the Corporation’s business, operating results, or financial condition.
Consolidation among the Corporation’s customers may result in a smaller number of total customers and an increase in large customers whose size and purchasing power give them increased bargaining power that may result in, among other impacts, decreases in average selling prices. In addition, the Corporation’s business, financial condition, and operating results could be harmed by further consolidations, which may lead to fluctuations in revenue, increases in costs to meet demands of large customers, and pressure to accept disadvantageous contract terms.
The Corporation sells products through multiple distribution channels, which primarily include independent dealers, national dealers, and sales representatives. These distribution channels have experienced significant consolidation, which may continue in future periods. The Corporation relies on distribution partners to provide a variety of important specification, installation, and after-market services to customers. Some distribution partners may terminate their relationship with the Corporation at any time and for any reason. Loss or termination of a significant number of reseller relationships could cause difficulties in marketing and distributing products, resulting in a decline in sales, which may adversely affect the Corporation’s business, operating results, or financial condition.
In addition, individual dealers may not continue to be viable and profitable and may suffer from a lack of available credit. While the Corporation is not significantly dependent on any single dealer, if dealers go out of business or are restructured, the Corporation may suffer losses as the dealers may not be able to pay the Corporation for products previously delivered to them.
The loss of a dealer relationship could negatively affect the Corporation’s ability to maintain market share in the affected geographic market and to compete for and service clients in that market until a new dealer relationship is established. Establishing a viable dealer in a market can take a significant amount of time and resources. The loss or termination of a significant dealer or a substantial number of dealer relationships could cause significant difficulties in marketing and distributing the Corporation’s products, resulting in a decline in sales and/or impairment of the Corporation’s contract assets related to distribution agreements with the respective dealers.
Evolving trade policy between the United States and other countries may have an adverse effect on the Corporation’s business and results of operations.
The Corporation has a global supply chain for products used in workplace furnishings and residential building products. Actions taken by the United States government to impose tariffs on certain products could have long-term impacts on existing supply chains. The situation could impact the competitive environment depending on the severity and duration of current and future policy changes. The imposition of tariffs may result in additional costs on the business, including costs with respect to products upon which the business depends. Increased costs could further lower profit margins as the Corporation may be challenged in effectively increasing the prices of its products, and its business and results of operations may be adversely affected.
Certain foreign governments have imposed tariffs on goods that their countries import from the United States. Changes in United States trade policy could result in one or more foreign governments adopting trade policies that make it more difficult or costly for the Corporation to do business in those countries.
The Corporation cannot predict the extent to which the United States or other countries will impose quotas, duties, tariffs, taxes, or other similar restrictions upon the import or export of products in the future, nor can the Corporation predict future trade policy or the terms of any renegotiated trade agreements and their impact on the business. The adoption and expansion of trade restrictions, the occurrence of a trade war, or other governmental action related to tariffs or trade agreements or policies has the
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potential to adversely impact demand for products, costs, customers, suppliers, and the United States economy, which could have a material adverse effect on the Corporation’s business, operating results, and financial condition.
The Corporation’s profitability may be adversely affected by increases in raw material and commodity costs as well as transportation and shipping challenges.
Fluctuations in the price and availability of commodities, raw materials, components, and finished goods could have an adverse effect on costs of sales, profitability, and ability to meet customers’ demand. The Corporation sources commodities, raw materials, components, and finished goods from domestic and international suppliers. From both domestic and international suppliers, the cost and availability of commodities, raw materials, components, and finished goods have been significantly affected in recent years by, among other things, changes in global supply and demand, changes in laws and regulations (including tariffs and duties), changes in exchange rates and worldwide price levels, inflationary forces, natural disasters, labor disputes, military action, terrorism, and political unrest or instability. These factors could lead to price volatility or supply interruptions in the future. Profit margins could be adversely affected if commodity, raw material, component, and finished good costs increase and the Corporation is either to offset such costs through strategic sourcing initiatives and continuous programs or, as a result of competitive market dynamics, to pass along a portion of the higher costs to customers.
The Corporation relies primarily on third-party freight and transportation providers to deliver products to customers. Increasing demand for freight providers and a shortage of qualified drivers have caused delays and may cause future delays in shipments and increase the cost to ship its products, which may adversely affect profitability. The Corporation also imports and exports products and components, primarily using container ships, which load and unload their cargoes through North American ports. Capacity-related and/or port-caused delays in the shipment or receipt of products and components, including labor disputes, have caused and could cause delayed receipt of products and components, which may adversely affect sales and profitability.
Strategic and Operational Risks
If customers do not perceive the Corporation’s products and services to be of good value, the Corporation’s brand and name recognition and reputation could suffer.
The Corporation believes that establishing and maintaining good brand and name recognition and a good reputation is critical to its business. In certain parts of the market, promotion and enhancement of the Corporation’s name and brands will depend on the effectiveness of marketing and advertising efforts and on successfully providing design-driven, innovative, and high-quality products and superior services. If customers do not perceive the Corporation’s products and services to be design-driven, innovative and of high quality, its reputation, brand, and name recognition could suffer, which could have a material adverse effect on the Corporation’s business.
The Corporation’s efforts to introduce new products to meet customer and workplace demands may not be successful, which could limit sales growth or cause its sales to decline.
To meet the changing needs of customers and keep pace with market trends and evolving regulatory and industry requirements, including environmental, health, safety, and similar standards for the workplace and for product performance, the Corporation regularly introduces new workplace furnishings and residential building products. The introduction of new products requires the coordination of the design, manufacturing, and marketing of the products, which may be affected by uncontrollable factors. The design and engineering of certain new products varies but can extend beyond a year, and further time may be required to achieve client acceptance. The Corporation may face difficulties if it cannot successfully align itself with independent architects, home-builders, and designers who are able to design, in a timely manner, high-quality products consistent with the Corporation’s image and customers’ needs. Accordingly, the launch of a product may be later or less successful than originally anticipated, limiting sales growth or causing sales to decline.
Natural disasters, acts of God, force majeure events, or other catastrophic events may impact the Corporation’s production capacity and, in turn, negatively impact profitability.
Natural disasters, acts of God, global pandemics or epidemics, force majeure events, or other catastrophic events, including severe weather, military action, terrorist attacks, power interruptions, floods, and fires, could disrupt operations and the ability to produce or deliver products. Some of the Corporation’s production facilities, members, and key management are located within a small geographic area in eastern Iowa located near the Mississippi River, and a natural disaster or catastrophe in the area, such as flooding or severe storms, could have a significant adverse effect on the Corporation's results of operations and business conditions. Further, several of the Corporation’s production facilities are single-site manufacturers of certain products, and an
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adverse event affecting any of those facilities could significantly delay production of certain products and adversely affect operations and business conditions. Members are an integral part of the business and events such as those described above could negatively impact the availability of members for work. In the event the Corporation experiences a temporary or permanent interruption in its ability to produce or deliver products, revenues could be reduced, and business could be materially adversely affected. In addition, any continuing disruption in the Corporation’s information technology systems could adversely affect the ability to receive and process customers’ orders, procure materials, manufacture products and ship products on a timely basis, which could adversely affect relations with customers and potentially reduce customer orders or result in the loss of customers.
The Corporation’s business and operations are subject to risks related to climate change.
The long-term effects of global climate change could present both physical risks and transition risks (such as regulatory, supply chain, or technology changes), which could be widespread and unpredictable. These changes over time could affect the availability and cost of raw materials, commodities, and energy (including utilities), which in turn may impact the Corporation’s ability to procure goods or services required for the operation of the Corporation’s business at the quantities and levels the Corporation requires. Additionally, the Corporation has manufacturing and distribution facilities located in areas that may be impacted by the physical risks of climate change, including flooding, and faces the risk of losses incurred as a result of physical damage to its facilities and inventory as well as business interruption caused by such events. Furthermore, periods of extended inclement weather or associated flooding may inhibit construction activity utilizing the Corporation’s products and delay shipments of products to customers. The Corporation uses natural gas, diesel fuel, gasoline, and electricity in its operations, all of which could face increased regulation as a result of climate change or other environmental concerns. The increased prevalence of global climate issues may result in new regulations that could impact the Corporation, including regulations limiting emissions from, or restricting the use of wood, coal, natural gas, or other fuel sources in, fireplaces and heating appliances, which may the Corporation’s ability to market and sell those products. Any such events could have a material effect on the Corporation’s costs or results of operations.
A continued shortage of qualified labor could negatively affect the Corporation’s business and materially reduce earnings.
The success of the Corporation’s operations depends on its ability, and the ability of third parties upon which the Corporation relies, to identify, recruit, develop, and retain qualified and talented individuals in order to supply and deliver the Corporation’s products. The Corporation has experienced shortages of qualified labor across its operations. Outside suppliers that the Corporation relies upon have also experienced shortages of qualified labor. Current and future shortages of qualified labor could have a negative effect on the Corporation’s business. Member recruitment, development, and retention efforts may not be successful, which could result in a shortage of qualified individuals in future periods. Any such shortage could decrease the Corporation’s ability to effectively produce workplace furnishings and residential building products and meet customer demand. Such a shortage would also likely lead to higher wages for members (or higher costs to purchase the services of such third parties) and a corresponding reduction in the Corporation’s profitability. A of qualified labor in certain geographies, particularly where plant production workers are employed, could result in increased costs from certain temporary wage actions, such as hiring and referral bonus programs. Such for a period could have a material effect on the Corporation’s operating results.
The Corporation’s failure to retain its existing management team, maintain its engineering, finance, technical, and manufacturing process expertise, or continue to attract qualified personnel could adversely affect the Corporation’s business.
The Corporation depends significantly on its executive officers and other key personnel. The Corporation’s success is also dependent on keeping pace with technological advancements and adapting services to provide manufacturing capabilities that meet customers’ changing needs. To meet these goals, the Corporation must retain qualified engineering and technical personnel and successfully anticipate and respond to technological changes in a cost effective and timely manner. The Corporation focuses on continuous training, motivation, and development of its members, and it strives to attract and retain qualified personnel. Failure to retain the Corporation’s executive officers and retain and attract other key personnel could adversely affect the Corporation’s business.
Failure to properly identify, value, and manage acquisitions or strategic alliances in accordance with the Corporation's strategy may negatively affect the Corporation’s business, results of operations and financial condition.
One of the Corporation’s growth strategies is to supplement its organic growth through acquisitions and strategic alliances, which may include transactions with other manufacturers of workplace furnishings and residential building products or distributors of workplace furnishings and residential building products. The Corporation may not be successful in identifying suitable acquisition or alliance opportunities, prevailing against competing potential acquirers, negotiating appropriate acquisition terms, obtaining
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financing, completing proposed acquisitions or alliances, or expanding into new markets or product categories. If the Corporation fails to effectively identify, value, consummate, or manage any acquired company, it may not realize the potential growth opportunities or achieve the financial results anticipated at the time of the acquisition or alliance. An acquisition or alliance could also adversely impact the Corporation’s operating performance or cash flow due to, among other things, the issuance of acquisition-related debt, pre-acquisition assumed liabilities, undisclosed facts about the business, or acquisition expense. Any of such risks could adversely affect the Corporation’s business, operating results, or financial condition.
The Corporation may not be able to successfully integrate and manage acquired businesses and alliances.
The benefits of acquisitions or alliances pursued as one of the Corporation’s growth strategies may take more time than expected to develop or integrate into operations. In addition, an acquisition or alliance may not perform as anticipated, be accretive to earnings, or prove to be beneficial to the Corporation’s operations and cash flow. Acquisitions and alliances involve a number of risks, including:
• diversion of management’s attention from operations;
• difficulties in assimilating the operations and products of an acquired business or in realizing projected efficiencies, cost savings and revenue synergies;
• potential loss of key employees or customers of the acquired businesses or adverse effects on existing business relationships with suppliers and customers;
• negative impact on member morale and performance as a result of job changes and reassignments;
• reallocation of amounts of capital from other operating initiatives or an increase in leverage and debt service requirements to pay the acquisition purchase prices, which could in turn restrict the ability to access additional capital when needed or to pursue other important elements of the business strategy;
• inaccurate assessment of undisclosed, contingent, or other liabilities or problems and unanticipated costs associated with the acquisition;
• possible tax costs or inefficiencies associated with integrating the operations of a combined company; and
• incorrect estimates made in accounting for acquisitions, incurrence of non-recurring charges, and write-off of significant amounts of goodwill that could adversely affect the financial results.
The Corporation's financial results could be negatively affected by an impairment charge relating to its goodwill or other intangible assets.
As of January 3, 2026, goodwill and indefinite-lived intangible assets, net represented approximately 35% of the Corporation's total consolidated assets. Goodwill and other acquired intangible assets with indefinite lives are recorded at fair value at the time of acquisition and are not amortized, but reviewed for impairment annually or more frequently if an event occurs or circumstances change making it reasonably possible an impairment may exist. In evaluating the potential for impairment of goodwill and other intangible assets, the Corporation makes assumptions regarding future operating performance, business trends and market and economic performance, and the Corporation’s sales, operating margins, growth rates and discount rates. There are inherent uncertainties related to these factors. If the Corporation experiences disruptions in its business, unexpected significant declines in operating results, a divestiture of a significant component of its business, declines in the market value of equity, or other factors causing the Corporation’s goodwill or intangible assets to be impaired, the Corporation could be required to recognize additional non-cash charges, which would affect its financial results.
Increasing health care costs could adversely affect the Corporation’s business, operating results, and financial condition.
The Corporation provides health care benefits to the majority of its member and Legacy HNI is self-insured. Health care costs have continued to rise significantly over time, which increases the annual spending on health care. Increased health care costs could adversely affect the Corporation’s business, operating results, and financial condition.
The Corporation’s international operations expose it to risks related to conducting business in multiple jurisdictions outside the United States.
The Corporation manufactures, markets, and sells products in international markets.
Its international sales and operations are subject to a number of additional risks, including:
• social and political turmoil, official corruption, and civil and labor unrest;
• restrictive government actions, including the imposition of trade quotas and tariffs and restrictions on transfers of funds;
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• changes in labor laws and regulations affecting the ability to hire, retain, or dismiss members;
• the need to comply with multiple and potentially conflicting laws and regulations, including environmental and corporate laws and regulations;
• the failure of the Corporation’s compliance programs and internal training to prevent violations of the United States Foreign Corrupt Practices Act and other anti-bribery and anti-corruption laws;
• preference for locally branded products and laws and business practices favoring local competition;
• less effective protection of intellectual property and increased possibility of loss due to cyber-theft and ransomware attacks;
• unfavorable business conditions or economic instability in any country or region;
• infrastructure disruptions;
• potentially conflicting cultural and business practices;
• difficulty in obtaining distribution and support; and
• changes to border taxes or other international tax reforms.
Further, certain countries have complex regulatory systems that impose administrative and legal requirements, which make managing international operations more difficult, including approvals to transfer funds among certain countries. If the Corporation is unable to provide financial support to the international operations in a timely manner, its business, operating results, and financial condition could be adversely affected.
These risks may be elevated given the current uncertainties regarding the impact of the conflicts in Europe and the Middle East, ongoing disputes and increased tensions related to global trade, and complexities with foreign regulatory environments including the decreased ability of regulators to exercise oversight of subsidiaries of United States companies based in certain international jurisdictions.
The Corporation is subject to currency risk in its international operations.
Increased business in countries outside the United States creates exposure to fluctuations in foreign currency exchange rates. Paying expenses in other currencies can result in a significant increase or decrease in the amount of those expenses in terms of dollars, which may affect profits. In the future, any foreign currency appreciation relative to the dollar would increase expenses that are denominated in that currency. Additionally, as the Corporation reports currency in the dollar, the financial position is affected by the strength of the currencies in countries where the Corporation has operations relative to the strength of the dollar.
The Corporation periodically reviews foreign currency exposure and evaluates whether it should enter into hedging transactions.
The Corporation’s sales to the United States federal, state, and local governments are subject to uncertain future funding levels and federal, state, and local procurement laws and are governed by restrictive contract terms, any of which factors could limit current or future business.
In fiscal year 2025, the Corporation derived a portion of its revenue from sales to various United States federal, state, and local government agencies and departments. The ability to compete successfully for and retain business with the United States government, as well as with state and local governments, is highly dependent on cost-effective performance. Business pursuant to government contracts is highly sensitive to changes in procurement laws, national, international, state, and local public priorities, and budgets at all levels of government, which frequently experience downward pressure and are subject to uncertainty, including the potential for a temporary shutdown of the United States federal government.
The Corporation’s contracts with government entities are subject to various statutes and regulations that apply to companies doing business with the government. The United States government, as well as state and local governments, can typically terminate or modify their contracts either for their convenience or if the Corporation fails to perform under the terms of the applicable contract. A termination arising out of default could expose the Corporation to liability and impede its ability to compete in the future for contracts and orders with agencies and departments at all levels of government. Moreover, the Corporation is subject to investigation and audit for compliance with the requirements governing government contracts, including requirements related to procurement integrity, export controls, employment practices, the accuracy of records, and reporting of costs. If the Corporation were found not to be a responsible supplier or to have committed fraud or certain criminal offenses, it could be or from all further federal, state, or local government contracting.
The Corporation's information technology systems, processes, and sites may suffer interruptions, security incidents, or failures that may affect its ability to conduct its business, cause significant damage to its reputation, and expose it to substantial legal liability.
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The Corporation’s operations rely upon certain key information technology systems, which are dependent on services provided by third parties and provide critical data connectivity, information, and services for internal and external users. These interactions include, among others, ordering and managing materials from suppliers, risk management activities, converting raw materials to finished products, inventory management, shipping products to customers, processing transactions, summarizing and reporting results of operations, human resources benefits and payroll management, complying with regulatory, legal and tax requirements, and other processes necessary to manage the business. Increased information technology security and social engineering threats and more sophisticated cyber crime, including advanced persistent threats, pose potential risks to the security of the Corporation’s information technology systems, networks, and services, as well as the confidentiality, availability and integrity of the Corporation’s third-party and employee data.
The frequency, sophistication and unpredictability of cybersecurity events globally have increased, and can be acute during times of geopolitical tension or instability between countries or when the Corporation makes changes to its information technology systems or implements new ones. The Corporation has been subjected in the past, and may be subjected in the future, to incidents including phishing, e-mails purporting to come from vendors making payment requests, malware, and communications from look-alike corporate domains, as well as security-related risks resulting from the Corporation’s use of third-party software and services. The use of generative artificial intelligence is increasing the sophistication and effectiveness of these types of social engineering attacks. Future data security incidents could compromise or lead to the loss of material confidential, proprietary or otherwise protected information, seize, destroy or corrupt data, or otherwise the Corporation’s operations or affect its customers or other stakeholders.
Insider or employee cyber and security threats are also a significant concern for the Corporation. Despite the Corporation’s substantial investment in physical and technological security measures, employee training and contractual precautions, the Corporation’s information technology networks and infrastructure (or those of the Corporation’s third-party vendors and other service providers) are potentially vulnerable to unauthorized access to data, loss of access to systems or breaches of confidential information due to criminal conduct, attacks by hackers, employee or insider malfeasance or human error.
The Corporation has put in place security measures to protect itself against cyber-based attacks and disaster recovery plans for its critical systems that are designed to protect its data and customer data and to prevent data loss and other security incidents. These security measures, however, cannot provide absolute security. In some cases, it is difficult to anticipate, detect or identify indicators of such incidents and assess the damage caused by the incidents. In addition, a failure to promptly disclose such material incidents as required by law may result in additional financial or regulatory consequences.
If the Corporation’s information technology systems are breached, damaged, or cease to function properly due to any number of causes, such as catastrophic events, power outages, security incidents, or cyber-based attacks, and if the Corporation’s cybersecurity response plans and disaster recovery and its cyber incident response plans do not effectively mitigate the risks on a timely basis, the Corporation may encounter significant disruptions that could interrupt its ability to manage its operations, cause loss of valuable data, and damage its reputation. Any such incidents also could subject the Corporation to government investigations or private . These factors may impact the Corporation’s revenues, operating results, and financial condition. The Corporation could also experience in reporting its financial results.
The third-party data management providers and other vendors upon which the Corporation relies may have or develop security problems or security vulnerabilities that may also affect the Corporation’s systems or data. A data security or privacy breach of the Corporation’s systems or other form of cyber-based attack may occur in the future. In addition, the Corporation uses external vendors to perform security assessments on a periodic basis to review and assess its information security. The Corporation utilizes this information to audit itself, monitor the security of its technology infrastructure, and assess whether and how to prioritize the allocation of scarce resources to protect data and systems. These security assessments and audits may not identify or appropriately categorize relevant risks or protect its computer networks against security intrusions. Although the Corporation requires its third-party vendors contractually to maintain a level of security that is acceptable to it and work closely with key vendors to address potential and actual security concerns and attacks, all confidential, proprietary, or personal information may not be protected on their systems.
Regardless of whether incidents result from an attack on the Corporation directly or on third-party vendors upon which the Corporation relies, the costs to address the foregoing security problems and security vulnerabilities before or after a cybersecurity incident could be significant. Remediation efforts may not be successful or timely and could result in interruptions, delays or cessation of service and loss of existing or potential customers that may impede the Corporation’s manufacturing, sales, or other critical functions. Breaches of its security measures and the unapproved dissemination of proprietary information or sensitive or
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confidential data about the Corporation, its employees, its customers or other third parties could expose the Corporation, its employees, and customers or other affected third parties to a risk of loss or misuse of this information.
The impact on our industry of the development and deployment of artificial intelligence in the workplace is unknown, and potential changes in work spaces and work patterns could impact order volume and adversely affect our business and financial results.
As companies of all sizes evaluate and deploy artificial intelligence technologies, our customers may begin to change or adapt their work patterns, workplace needs, and approach to workspace design and furniture procurement. The impact of end users’ integration of AI on our industry is unknown, and there can be no assurance that the use of AI will benefit our business or profitability.
Further, we may face competition from other companies that are developing AI technologies to improve specification and procurement process, potentially including accelerated quoting, improved accuracy, targeted product selection, and vendor coordination. If we are unable to integrate AI to increase efficiency and reduce costs for our trade partners and end users, our business may be adversely affected.
Risks Related to the Steelcase Acquisition
The Corporation may not achieve the intended benefits of the acquisition, and the acquisition may disrupt its current plans or operations.
The Corporation may not be able to successfully integrate Steelcase’s assets or otherwise realize the expected benefits of the acquisition (including operating and other cost synergies). Difficulties in integrating Steelcase into the Corporation may result in the combined company performing differently than expected, in operational challenges, in the failure to realize anticipated run-rate cost synergies and efficiencies in the expected time frame or at all, or in the difficulty or failure of utilizing available U.S. tax attributes, in which case the acquisition may not be accretive to earnings per share, may not improve the Corporation's balance sheet position, and may not enhance its ability to deliver or generate additional free cash flow due to reduced cash tax payments.
The integration of Steelcase may result in material challenges. Those challenges may include the diversion of management’s attention from ongoing business concerns; difficulty in retaining key management and other employees; challenges in retaining or attracting business opportunities and establishing or maintaining business relationships; the possibility of faulty assumptions underlying expectations regarding the integration process and associated expenses; difficulty in consolidating corporate and administrative infrastructures and eliminating duplicative operations; challenges in coordinating geographically separate organizations; unanticipated issues in integrating information technology, communications and other systems; discovery of previously unknown liabilities; unforeseen expenses relating to integration; or delays associated with the acquisition.
The results of the Corporation may be adversely impacted if it does not effectively manage its expanded operations.
The size of the Corporation's business is significantly larger than the current size of either HNI’s or Steelcase’s respective businesses prior to the acquisition. The Corporation's ability to successfully manage this expanded business will depend, in part, upon management’s ability to design and implement strategic initiatives that address not only the integration of two independent stand-alone companies, but also the increased scale and scope of the combined business with its associated increased costs and complexity. The combined company may not be successful or realize the expected operating efficiencies, cost savings and other benefits currently anticipated from the acquisition.
The Corporation will incur substantial expenses in connection with the integration of HNI and Steelcase. The expectation of substantial integration expenses reflects in part the many processes, policies, procedures, operations, technologies and systems that must be integrated, potentially including purchasing, accounting and finance, sales, payroll, pricing, revenue management, marketing and benefits. The substantial majority of the expenses of the acquisition and the integration of HNI and Steelcase will be non-recurring expenses (including financing of the acquisition) and related to facilities and systems consolidation. The Corporation may incur additional costs to maintain employee morale and to attract, motivate or retain management personnel and other key employees. HNI and Steelcase will also incur transaction fees and costs related to formulating integration plans for the combined business, and the execution of these plans may lead to additional unanticipated costs. These incremental merger-related costs may exceed the savings the Corporation expects to achieve from the elimination of duplicative costs and the realization of other efficiencies related to the integration of the businesses, particularly in the near term and in the event there are material unanticipated costs.
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The acquisition may result in a loss of customers, distributors, suppliers, vendors, landlords and other business partners and may result in the termination of existing contracts.
Following the acquisition, some of the customers, distributors, dealers, suppliers, vendors, landlords and other business partners of Steelcase may terminate or scale back their current or prospective business relationships with the Corporation. Some customers may not wish to source a larger percentage of their needs from a single company or may believe that the Corporation is too closely allied with one of their competitors. In addition, Steelcase has contracts with customers, distributors, dealers, suppliers, vendors, landlords and other business partners that may require it to obtain consents from these other parties in connection with the acquisition, which may not be obtained on favorable terms or at all. If relationships with customers, distributors, dealers, suppliers, vendors, landlords and other business partners are adversely affected by the acquisition, or if the Corporation, following the acquisition, loses the benefits of the contracts of Steelcase, its business and financial performance could suffer.
Legal and Regulatory Risks
The Corporation is subject to extensive environmental regulation and has exposure to potential environmental liabilities.
Through the past and present operation and ownership of manufacturing facilities and real property, the Corporation is subject to extensive and changing federal, state, and local environmental laws and regulations, in the United States and other countries where it operates, including those relating to discharges in air, water, and land, the handling and disposal of solid and hazardous waste, and the remediation of contamination associated with releases of hazardous substances. Compliance with environmental regulations has not had a material effect on capital expenditures, earnings, or competitive position to date, but compliance with current laws or more stringent laws or regulations which may be imposed in the future, stricter interpretation of existing laws or discoveries of contamination at the Corporation’s real property sites which occurred prior to ownership may require additional expenditures in the future, some of which may be material.
Costs related to product defects could adversely affect the Corporation’s profitability.
The Corporation incurs various expenses related to product defects, including product warranty costs, product recall and retrofit costs, and product liability costs. These expenses relative to product sales vary and could increase. The Corporation uses chemicals and materials in products and includes components in products from external suppliers, which it believes to be safe and appropriate for their designated use. Harmful effects, however, may later become known, which could subject the Corporation to litigation and significant losses. The Corporation maintains reserves for product defect-related costs but these reserves may not be adequate to cover actual claims. Incorrect estimates or any significant increase in the rate of product defect expenses could have a material adverse effect on operations.
An inability to protect the Corporation’s intellectual property could have a significant impact on the business.
The Corporation attempts to protect its intellectual property rights, both in the United States and in other countries, through a combination of patent, trademark, copyright, and trade secret laws, as well as licensing agreements and third-party nondisclosure and assignment agreements. Because of the differences in foreign trademark, copyright, patent, and other laws concerning proprietary rights, intellectual property rights do not generally receive the same degree of protection in foreign countries as in the United States. In some countries, the Corporation has limited protections, if any, for its intellectual property. The degree of protection offered by the claims of the various patents, copyrights, trademarks, and service marks may not be broad enough to provide significant proprietary protection or competitive advantages to the Corporation, and patents, copyrights, trademarks, or service marks may not be issued on pending or contemplated applications. In addition, not all of the Corporation’s products are covered by patents or similar intellectual property protections. It is also possible that patents, copyrights, trademarks, and service marks may be challenged, invalidated, canceled, narrowed, or circumvented.
In the past, certain of the Corporation's products have been copied and sold by others. The Corporation tries to enforce its intellectual property rights, but has to make choices about where and how to pursue enforcement and where to seek and maintain intellectual property protection. In many cases, the cost of enforcing rights is substantial, and the Corporation may determine that the costs of enforcement outweigh the potential benefits.
If third parties claim that the Corporation infringes upon their intellectual property rights, the Corporation may incur liabilities and costs and may have to redesign or discontinue an infringing product.
The Corporation faces the risk of claims that it has infringed upon third parties’ intellectual property rights. Companies operating in the Corporation’s industry routinely seek patent protection for their product designs, and many of the principal competitors
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have large patent portfolios. Prior to launching major new products in the key markets, the Corporation normally evaluates existing intellectual property rights. However, competitors and suppliers may have filed for patent protection, which is not, at the time of the evaluation, a matter of public knowledge. The Corporation’s efforts to identify and avoid infringing upon third parties’ intellectual property rights may not always be successful. Any claims of patent or other intellectual property infringement, even those without merit, could be expensive and time consuming to defend, cause the Corporation to cease making, licensing, or using products that incorporate the challenged intellectual property, require the Corporation to redesign, re-engineer, or re-brand the products or packaging, if feasible, or require the Corporation to enter into royalty or licensing agreements in order to obtain the right to use a third party’s intellectual property.
Financing Risks
The financing arrangements of the Corporation contain restrictions and limitations that may, under certain circumstances, significantly impact the Corporation’s ability to operate its business.
As of January 3, 2026, the Corporation had $1.3 billion of long-term indebtedness, including indebtedness it incurred in connection with its acquisition of Steelcase. The agreements governing such indebtedness may, under certain circumstances, impose significant operating and financial restrictions on the Corporation. The debt agreements restrict the Corporation’s ability to incur additional indebtedness, create or incur certain liens with respect to any properties or assets, engage in lines of business substantially different than those currently conducted, sell, lease, license, or dispose of certain assets, enter into certain transactions with affiliates, make certain restricted payments or take certain restricted actions, and enter into certain sale-leaseback arrangements. These restrictions may affect the Corporation’s ability to operate its business and may limit the Corporation’s ability to take advantage of potential business opportunities as they arise.
In addition, the agreements governing such indebtedness require the Corporation to comply with a consolidated leverage ratio financial covenant and consolidated interest coverage ratio financial covenant. The Corporation’s ability to continue to comply with these financial covenants will depend on its ongoing financial and operating performance, which in turn will be subject to economic conditions and to financial, market and competitive factors, many of which are beyond the Corporation’s control. The ability to comply with these covenants will also depend on the Corporation’s ability to successfully implement its overall business strategy and realize anticipated synergies, cost savings, innovation, and operational efficiencies.
Various risks, uncertainties and events beyond the Corporation’s control could affect its ability to comply with the covenants contained in its financing agreements. Failure to comply with any of the covenants in its existing or future financing agreements could result in a default under those agreements and under other agreements containing cross-default provisions. A default would permit lenders to accelerate the maturity of the debt under these agreements. Under these circumstances, the Corporation might not have sufficient funds or other resources to satisfy all of its obligations. In addition, the limitations imposed by financing agreements on the Corporation’s ability to incur additional debt and to take other actions might significantly impair its ability to obtain other financing.
Fluctuating interest rates including potential future rate increases may raise the interest cost on the Corporation’s debt and could materially adversely impact the Corporation’s ability to refinance existing debt and limit its acquisition and development activities going forward.
The United States Federal Reserve Board has adjusted the benchmark interest rate multiple times in recent years, and may increase the rate or slow reductions in the rate in future periods. The agreements governing the indebtedness of the Corporation contain interest rates tied to various benchmark rates in effect at any given time, so as interest rates have increased, so has the Corporation’s interest costs for any new debt assumed in connection with the merger and in the normal course of our operations and any additional increases could further increase these costs. This increased cost could make the financing of any acquisition and development activity more costly, as well as lower future period earnings due to higher cost of borrowing.
The Corporation may require additional capital in the future, which may not be available or may be available only on unfavorable terms.
The Corporation’s capital requirements depend on many factors, including its need for capital improvements, tooling, research and development, and acquisitions. To the extent existing cash, available borrowings, and cash flows are insufficient to meet these requirements, the Corporation may need to raise additional funds through financings or curtail its growth and reduce the Corporation’s assets. Future borrowings or financings may not be available under the Corporation's credit facility or otherwise in an amount sufficient to enable the Corporation to pay its debt or meet its liquidity needs.
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Any equity or debt financing, if available, could have unfavorable terms. In addition, financings could result in dilution to shareholders or the securities may have rights, preferences, and privileges senior to those of the Corporation’s common stock. If the need for capital arises because of significant losses, the occurrence of these losses may make it more difficult to raise the necessary capital.
Risks Related to the Common Stock
The Corporation’s results of operations and earnings may not meet guidance or expectations.
The Corporation frequently provides public guidance on its expected results of operations for future periods. This guidance constitutes forward-looking statements subject to risks and uncertainties, including the risks and uncertainties described in this annual report on Form 10-K and in other public filings and public statements, and is necessarily based on assumptions made at the time the Corporation provides such guidance. The guidance may not always be accurate. If, in the future, the results of operations for a particular period do not meet the Corporation's guidance or the expectations of investment analysts, or if the Corporation reduces its guidance for future periods, the market price of its common stock could decline significantly.
Iowa law and provisions in the Corporation’s charter and bylaws may have the effect of preventing or hindering a change in control and adversely affecting the market price of its common stock.
The Corporation’s Articles of Incorporation give the Corporation’s Board of Directors the authority to issue up to two million shares of preferred stock and to determine the rights and preferences of the preferred stock without obtaining shareholder approval. The existence of this preferred stock could make it more difficult or discourage an attempt to obtain control of the Corporation by means of a tender offer, merger, proxy contest, or otherwise. Furthermore, this preferred stock could be issued with other rights, including economic rights, senior to the rights of the common stock, thereby having a potentially adverse effect on the market price of the Corporation’s common stock.
The Board of Directors is divided into three classes. The Corporation’s classified Board of Directors, along with other provisions of the Corporation’s Articles of Incorporation and Bylaws and Iowa corporate law, could make it more difficult for a third party to acquire the Corporation or remove the Corporation’s directors by means of a proxy contest, even if doing so would be beneficial to shareholders. Additionally, the Corporation may, in the future, adopt measures (such as a shareholder rights plan or "poison pill") that could have the effect of delaying, deferring, or preventing an unsolicited takeover, even if such a change in control were at a premium price or favored by a majority of unaffiliated shareholders. These measures may be adopted by the Board of Directors without any vote or action by the shareholders.
