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Edited Transcript of HNI earnings conference call or presentation 23-Oct-18 3:00pm GMT

Q3 2018 HNI Corp Earnings Call

MUSCATINE Oct 24, 2018 (Thomson StreetEvents) -- Edited Transcript of HNI Corp earnings conference call or presentation Tuesday, October 23, 2018 at 3:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Jack D. Herring

HNI Corporation - Treasurer, Director of Finance & IR

* Jeffrey D. Lorenger

HNI Corporation - President, CEO & Director

* Marshall H. Bridges

HNI Corporation - Senior VP & CFO

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Conference Call Participants

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* Beryl Bugatch

Raymond James & Associates, Inc., Research Division - MD and Director of Furnishings Research

* Gregory John Burns

Sidoti & Company, LLC - Senior Equity Research Analyst

* Matthew Schon McCall

Seaport Global Securities LLC, Research Division - MD and Furnishings & Senior Analyst

* Steven Ramsey

Thompson Research Group, LLC - Associate Research Analyst

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Presentation

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Operator [1]

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Good morning. My name is Kelly, and I will be your conference operator today. I would like to welcome everyone to the HNI Corporation Third Quarter Fiscal 2018 Conference Call. (Operator Instructions) As a reminder, today's conference is being recorded. Thank you. Mr. Herring, you may begin your conference.

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Jack D. Herring, HNI Corporation - Treasurer, Director of Finance & IR [2]

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Good morning. I am Jack Herring, Treasurer and Director of Investor Relations for HNI Corporation. Thank you for joining us to discuss our third quarter fiscal 2018 results. Here with me are Jeff Lorenger, President and CEO; and Marshall Bridges, Senior Vice President and CFO. Copies of our financial news release, earnings presentation and non-GAAP reconciliations are posted on our website.

Statements made during this call that are not strictly historical facts are forward-looking statements, which are subject to known and unknown risk. Actual results could differ materially. The earnings presentation posted on our website includes additional factors that could affect actual results. The corporation assumes no obligation to update any forward-looking statements made during the call.

I am pleased to turn the call over to Jeff Lorenger.

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Jeffrey D. Lorenger, HNI Corporation - President, CEO & Director [3]

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Thanks, Jack. Good morning, everyone. We'll share our assessment of the third quarter, and provide some thoughts on our outlook for the fourth quarter. We'll then open up the call for questions.

We are pleased with our overall results. The third quarter was an important time for us. We continued our market momentum, turned the corner on our BST transition and drove $10 million of net productivity and cost savings benefit. Our team is focused on delivering consistent, flawless execution to our customers, while reducing costs through rapid, continuous improvement. We remain confident our investments will continue providing strong returns for our shareholders.

In our supplies-driven business, we delivered strong results growing 12% in the quarter, while generating strong profit improvement. This business is focused on selling to small- and medium-sized companies. And over the last several years, we have invested significantly to enhance our market-leading position. In the last 12 months this market has become more active, and we have seen strong returns from our investments. During a very dynamic period, we have strengthened our relationships with our channel partners and accelerated our market momentum, while adapting our business models to evolving customer needs.

Our hearth business grew sales and delivered profit results as expected. We continue to be excited about our market position and growth potential as that business remains on track for another year of record profits. In our contract business, we did see softer sales, primarily due to timing. Contract was down 3% compared to the 22% increase we delivered in the third quarter of last year. We are still seeing solid overall activity in the contract business and a growing sales funnel, but projects are being delayed and generally taking longer to move through the sales cycle. We have confidence in our competitive position and maintain a positive market outlook.

Looking at our operating expenses, we were able to smartly manage them below our expectations, helping improve our profit for the quarter. We did this while continuing to invest in growth and fulfillment initiatives. Overall, I feel good about our momentum and our path forward to drive long-term shareholder value.

I'll now turn the call over to Marshall to review some financial details on the third quarter. Marshall?

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Marshall H. Bridges, HNI Corporation - Senior VP & CFO [4]

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Thanks, Jeff. Third quarter consolidated organic net sales grew 4.6% versus the prior year. Including the impacts from closing and divesting small-office furniture companies, sales increased 1.9%.

In the office furniture segment, sales increased 4.7% organically or 1.4% in total. Within the office furniture segment, sales in our supplies-driven business increased 12%, sales in our contract business were down 3% organically, or down 9% in total.

In our hearth segment, sales increased 3.9%. New construction sales increased 6%, sales of retail products increased 2%. Non-GAAP net income per diluted share was $0.90 compared to $0.82 in the third quarter of 2017. The benefit of productivity gains improved price realization and the impacts from the tax change more than offset higher input cost for the quarter. Jeff?

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Jeffrey D. Lorenger, HNI Corporation - President, CEO & Director [5]

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Thanks, Marshall. Let's shift to our fourth quarter outlook. Overall, we expect strong profit growth, primarily driven by cost savings and productivity gains. We're also expecting solid organic sales growth of 5% to 8% on a consolidated basis. Looking at our outlook for each business, we expect our supplies-driven business to be up 5% to 8%. We continue to have strong momentum and see positive market conditions in supplies.

Sales in our contract business will grow 3% to 6% organically. As we have discussed in the past, our contract business is inherently volatile due to our high mix of projects. Over the short term, we can see significant fluctuations in our growth rates that are not necessarily indicative of the overall market or our competitive strength. I continue to feel good about how we are competing in our long-term prospects for growth.

We expect the hearth business will be up 8% to 11%. We're seeing solid growth in both new construction and retail products. We have attractive opportunities in front of us, and I am excited about what we can achieve.

I will now have Marshall provide some details on our outlook. Marshall?

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Marshall H. Bridges, HNI Corporation - Senior VP & CFO [6]

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Looking to the fourth quarter, we expect consolidated organic sales to be up 5% to 8% or up 2% to 5%, when including the effects of closures and divestitures. Office furniture sales are expected to be up 4% to 7% organically, or flat to up 3% in total. Sales in our supplies-driven business are projected to be up 5% to 8%. We're forecasting sales in our contract office furniture business to be up 3% to 6% organically or down 2% to 5% in total. We expect hearth sales to be up 8% to 11%, with new construction sales up 5% to 8%, and sales of retail hearth products up 10% to 13%.

Non-GAAP gross profit margin is expected to be between 38% and 38.5%. Non-GAAP SG&A, which includes freight and distribution expense, is expected to be $175 million to $180 million. Our estimate of non-GAAP earnings per diluted share for the fourth quarter is in the range of $0.91 to $1.01. This results in a full year estimate of non-GAAP earnings per diluted share of $2.35 to $2.45. This compares to our prior guidance of $2.35 to $2.55. The primary driver of the narrowed full year outlook is lower than previously expected sales in our contract furniture business.

Our full year tax rate is expected to be approximately 22.5%. We now expect full year free cash flow will be in the range of $135 million to $140 million, including $65 million to $70 million of capital expenditures. Jeff?

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Jeffrey D. Lorenger, HNI Corporation - President, CEO & Director [7]

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Thanks, Marshall. We remain positive about our markets and prospects for growth. We have strong brands, a strong operating platform and the financial capacity to drive significant long-term value for our shareholders.

With those comments complete, I'll open it up for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Your first question comes from the line of Matt McCall from Seaport Global Securities.

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Matthew Schon McCall, Seaport Global Securities LLC, Research Division - MD and Furnishings & Senior Analyst [2]

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Jeff, could you talk a little bit about the comment you made on the contract side? You said you're seeing projects delayed, I think that's some new commentary we haven't heard, at least recently. Can you expand on those comments, what you're seeing? What you think is driving that shift?

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Jeffrey D. Lorenger, HNI Corporation - President, CEO & Director [3]

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Yes, Matt. As you know, the business is inherently lumpy on any quartered basis. We did see in the quarter projects slide out. It's -- mostly they're taking longer to go through the sales cycle. We're still seeing strong growth. We have seen strong growth over the last several quarters and our comps are getting a little more difficult as well. Overall, the market still is active, we like our competitive position and we -- the outlook is still good, but we just saw a little bit of a slowdown in getting projects to the pipe.

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Matthew Schon McCall, Seaport Global Securities LLC, Research Division - MD and Furnishings & Senior Analyst [4]

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So are these -- I'm just making sure I understand, the projects being delayed, are these projects the -- where the awards are being delayed? Or are these projects where you've been awarded the business and it's being pushed out in the next quarter? Just making sure I understand the terminology you're using.

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Jeffrey D. Lorenger, HNI Corporation - President, CEO & Director [5]

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Yes, Matt. It's a little bit of both, and it's kind of all across the map. The -- sometimes some things are just taking longer. People are busy. It's taking longer to get through the sales cycle. It's taking longer to get decisions made, decisions are coming later in the cycle. And so it's a little bit of both.

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Matthew Schon McCall, Seaport Global Securities LLC, Research Division - MD and Furnishings & Senior Analyst [6]

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Okay. Can you talk about the hearth segment margin outlook in your guidance and it was a little lower than we expected in the quarter, but what's in the guidance, how long the pressures are expected to persist? And maybe how beyond Q4 is there anything to think about?

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Marshall H. Bridges, HNI Corporation - Senior VP & CFO [7]

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Yes, Matt. You -- we did see a bit of margin pressure in the third quarter in hearth, as you saw. The vast majority of that was driven by inflationary pressures in excess of net price realization, so we had about $1 million more inflation than price realization in the third quarter. We have pushed through another round of pricing in the hearth business. And as we look into the fourth quarter, we expect to close that gap to be basically neutral as we enter the fourth quarter. And we are expecting some good volume growth in hearth in the fourth quarter, which will leverage well and create margin expansion versus the prior year.

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Matthew Schon McCall, Seaport Global Securities LLC, Research Division - MD and Furnishings & Senior Analyst [8]

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Okay. So neutral there. What about on the tariff front? Last we spoke, I think that you were still evaluating the impact of the 10% going to 25%. Can you give us an update on what the outlook is for your potential pressure and what you're doing to combat it?

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Jeffrey D. Lorenger, HNI Corporation - President, CEO & Director [9]

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Yes, Matt. This is Jeff. We have had time now to review the announced tariffs and they are going to have an impact of different degrees on our various businesses. Near term, we're implementing pricing actions, which include list-price adjustments and, in some cases, surcharges. Over the long term, we expect to maintain -- remain neutral on a price cost basis given the tariff specifically.

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Matthew Schon McCall, Seaport Global Securities LLC, Research Division - MD and Furnishings & Senior Analyst [10]

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Can you put any numbers behind that? I think we had some numbers in our notes from kind of the assumption around 10%. What was the -- what does 25% mean from a dollars perspective?

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Marshall H. Bridges, HNI Corporation - Senior VP & CFO [11]

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It's a number that kind of is moving around a bit, Matt, as we assess what sourcing decisions we need to make. Obviously, with that 25% tariff it can vastly change where you want to source your supply chain from. That said, it's, roughly speaking, 10% to 12% of cost of goods sold is potential impact, but it's a number that can move around depending on those decisions. And as Jeff said, we expect to be able to offset those pressures with pricing actions as we enter into 2019.

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Matthew Schon McCall, Seaport Global Securities LLC, Research Division - MD and Furnishings & Senior Analyst [12]

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Okay, okay. And then final one from me. The single-family environment is getting very little love out there. Can you talk about what you're seeing from a housing perspective and what you're hearing? And kind of the trends and the expected trends just given the way the market is treating some of these housing names?

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Jeffrey D. Lorenger, HNI Corporation - President, CEO & Director [13]

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Yes, Matt. It's Jeff, again. The indicators we look at are, we still see growth. We are seeing slower activity in permits and some of the same data you look at every day and given some mixed signals, but the builders are still confident and our team is confident in our market position so we still like our position, and we see -- we still see growth there, albeit maybe a little bit mixed.

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Matthew Schon McCall, Seaport Global Securities LLC, Research Division - MD and Furnishings & Senior Analyst [14]

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So is the -- basically the macro indicators you mentioned, the -- or the industry data around permits, is that where you're referencing slowdown? Are you hearing your customers actually talk about slower growth expectations?

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Marshall H. Bridges, HNI Corporation - Senior VP & CFO [15]

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I think to me, it's a bit of both, Matt. I mean, it's more on the macro side. We talked to the builders, they still feel pretty confident. I think everyone recognizes that mortgage rates and affordability are headwinds, but we still have some pretty favorable demographic trends and there's not a lot of inventory out there. So how it all plays out is yet to be determined, but it doesn't feel like it's dramatically bad. It maybe slightly less good.

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Operator [16]

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Your next question comes from the line of Budd Bugatch from Raymond James.

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Beryl Bugatch, Raymond James & Associates, Inc., Research Division - MD and Director of Furnishings Research [17]

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Let me just try and put some numbers together. The tariff impact, Marshall, you said 10% to 12% of cost of goods sold is potentially impacted. That means, you probably have $140 million to $150 million of potential product you import now that could be subjected to tariff. Is that the way to read that?

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Marshall H. Bridges, HNI Corporation - Senior VP & CFO [18]

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Yes, Budd, that's correct.

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Beryl Bugatch, Raymond James & Associates, Inc., Research Division - MD and Director of Furnishings Research [19]

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Okay.

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Marshall H. Bridges, HNI Corporation - Senior VP & CFO [20]

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And again, as I said with Matt, that's a number that can move around depending on where we decide to source things from after this goes in the -- after this is implemented at the beginning of the year.

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Beryl Bugatch, Raymond James & Associates, Inc., Research Division - MD and Director of Furnishings Research [21]

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So put some color to that, what are you importing that makes up that $140 million to $150 million of imports?

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Marshall H. Bridges, HNI Corporation - Senior VP & CFO [22]

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Yes, that's a great question. So more than 2/3 of that is associated with the supplies-driven business. And the supplies-driven business, as you know, competes against a lot of Asian importers, a lot of product that is brought in from China. And what we're seeing is some pricing action pretty consistently across the competitors there. So there is a combination...

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Beryl Bugatch, Raymond James & Associates, Inc., Research Division - MD and Director of Furnishings Research [23]

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What does that mean? They're raising prices?

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Jeffrey D. Lorenger, HNI Corporation - President, CEO & Director [24]

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Yes, Budd.

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Beryl Bugatch, Raymond James & Associates, Inc., Research Division - MD and Director of Furnishings Research [25]

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Okay, I'm sorry.

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Marshall H. Bridges, HNI Corporation - Senior VP & CFO [26]

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Yes, I know. And if you look at what that is, there is a combination of components in finished goods, the supplies business does have some finished goods that come in from China, that's different than our other businesses.

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Beryl Bugatch, Raymond James & Associates, Inc., Research Division - MD and Director of Furnishings Research [27]

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So you're saying about $100 million of it is -- it goes to supplies-driven?

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Marshall H. Bridges, HNI Corporation - Senior VP & CFO [28]

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Yes, yes, maybe a bit more than that, actually, but that's in the ballpark.

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Beryl Bugatch, Raymond James & Associates, Inc., Research Division - MD and Director of Furnishings Research [29]

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Okay, all right. Greater than $100 million. To Matt's question, can you give us maybe an idea of what kind of order of growth rate you saw in contracts for office?

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Jeffrey D. Lorenger, HNI Corporation - President, CEO & Director [30]

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No, Budd. We don't generally disclose that. And what I would say is, we're -- our sales funnel is growing and the activity is still strong.

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Beryl Bugatch, Raymond James & Associates, Inc., Research Division - MD and Director of Furnishings Research [31]

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Well, I understand that, Jeff. But if you're going to give us a timing kind of issue, then I think it goes from sales funnel to order to backlog to delivery. And how do we get some comfort that the sales funnel has really got orders at the end of it that goes to backlog and delivery?

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Marshall H. Bridges, HNI Corporation - Senior VP & CFO [32]

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Yes, but we feel pretty confident in the 3% to 6% growth rate that we're anticipating for the fourth quarter in the contract business and the order rates support that. We have seen a recent uptick in orders here that support that as well as a, as Jeff said, good funnel activity and preorder activity. As we look into what is going to happen next year because this is -- this delay is going to hit 2019, we're still assessing, how that plays out. Obviously, that's a positive, but there may be other things going on there as well.

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Beryl Bugatch, Raymond James & Associates, Inc., Research Division - MD and Director of Furnishings Research [33]

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I mean, in contract you get a -- you get a pretty quick backlog move, all right, or movement that if it's in the backlog, it's delivered within 4 weeks and typically in most of the contract side. Is that correct still?

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Marshall H. Bridges, HNI Corporation - Senior VP & CFO [34]

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It is, in 4 weeks. It could be a couple of weeks more than that, but generally, you're right.

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Beryl Bugatch, Raymond James & Associates, Inc., Research Division - MD and Director of Furnishings Research [35]

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Yes. I mean, mostly what I'm putting in the backlog until you really got a bona fide specification of how it's going to be configured.

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Marshall H. Bridges, HNI Corporation - Senior VP & CFO [36]

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Correct.

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Jeffrey D. Lorenger, HNI Corporation - President, CEO & Director [37]

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Yes, right, Budd.

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Beryl Bugatch, Raymond James & Associates, Inc., Research Division - MD and Director of Furnishings Research [38]

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All right. All right. And when you look at the SG&A, in this -- in the third quarter, you had a $4.1 million unfavorable variance in freight and distribution, which I take it represents all that we've been hearing about freight. Can we get an idea of what you think fourth quarter will look like on that?

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Marshall H. Bridges, HNI Corporation - Senior VP & CFO [39]

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Yes. A part of that freight and distribution that you've seen throughout the year and in the third quarter has to do with our investment in the quick ship fulfillment, which we talked about last year. There is still some incremental cost there. But here we have seen inflation as well, which I think what you're alluding to. For the fourth quarter, we're expecting to be pretty much in line with the prior year levels of freight and distribution all-in where you start an anniversary or where you had a lot of that quick shipping, and we're getting some productivity there as well as some inflation from the carrier rates.

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Beryl Bugatch, Raymond James & Associates, Inc., Research Division - MD and Director of Furnishings Research [40]

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Yes, we were pretty well in place in the fourth quarter last year, right?

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Marshall H. Bridges, HNI Corporation - Senior VP & CFO [41]

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Pretty well. There's always a little bit more incremental there, but for the most part, that's correct.

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Beryl Bugatch, Raymond James & Associates, Inc., Research Division - MD and Director of Furnishings Research [42]

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Okay. And so -- and then the other side of SG&A was that $5.9 million. You talked about increased incentive expense, I don't think you had any LCHIP expense last year. What's causing the incentive? What's the accrual for the fourth quarter look like?

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Marshall H. Bridges, HNI Corporation - Senior VP & CFO [43]

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Yes. So as it relates to the third quarter, we're anniversarying where we really took those programs down last year given our results. So we're now resetting them to more normalized levels, so that's what's causing the -- that increase there. We'll still see some of that in the fourth quarter, but not as much.

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Beryl Bugatch, Raymond James & Associates, Inc., Research Division - MD and Director of Furnishings Research [44]

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So the bulk of that $6 million delta is incentive comp accrual?

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Marshall H. Bridges, HNI Corporation - Senior VP & CFO [45]

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Yes. There is incentive comp accruals as well as the mark-to-market, the stock price held in deferred compensation programs, that's also in there. And then we've got some investments. They're also in SG&A-related go-to-market growth initiatives and the fulfillment that we talked about earlier.

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Beryl Bugatch, Raymond James & Associates, Inc., Research Division - MD and Director of Furnishings Research [46]

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Okay. One of the other areas that hasn't been talked about much is in hearth. As energy costs rise, we get nearer a breakpoint where the heating side of the business starts to get attractive. And I know it's been reduced to a fraction of where it used to be, but can you reflect for us what that looks like as, unfortunately, energy costs rise?

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Marshall H. Bridges, HNI Corporation - Senior VP & CFO [47]

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Yes. The...

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Jeffrey D. Lorenger, HNI Corporation - President, CEO & Director [48]

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And I'm an energy analyst, unfortunately, as energy costs rise.

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Marshall H. Bridges, HNI Corporation - Senior VP & CFO [49]

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I suppose you're just in it for the pellet business, which I think, is what you're referring to there. Yes -- no, we've seen -- pellet is very small. It's roughly 3% of the total HNI business, but we are expecting some pretty decent growth there in the fourth quarter from that business. That's embedded in our retail estimates of -- that we gave of 10% to 13% growth. I'd say, roughly half of that growth is coming from the pellet products and so we're pretty excited about that trajectory as we enter the fourth quarter here.

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Beryl Bugatch, Raymond James & Associates, Inc., Research Division - MD and Director of Furnishings Research [50]

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Okay, all right. That's interesting. That's an -- that's a delta of somewhere we've been, right?

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Marshall H. Bridges, HNI Corporation - Senior VP & CFO [51]

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Yes, it's been relatively low-dollar growth here for the last year or so, but that's right.

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Beryl Bugatch, Raymond James & Associates, Inc., Research Division - MD and Director of Furnishings Research [52]

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Okay. And you have been giving us some new disclosure, I think, as part of revenue recognition in supplies and contracts. Can we get those numbers for the fourth -- third and fourth quarter for last year to know where we -- what those baselines are? Or I can do that with Jack off-line, if it's okay?

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Marshall H. Bridges, HNI Corporation - Senior VP & CFO [53]

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Yes. We can get those, and they'll be in our Qs and Ks as we continue to file.

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Operator [54]

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And your next question comes from the line of Greg Burns from Sidoti & Company.

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Gregory John Burns, Sidoti & Company, LLC - Senior Equity Research Analyst [55]

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When we look at the 4Q guide, can you just let us know what's embedded in terms of the cost savings realizations that you've been targeting? I know you were -- just the total I think was $35 million to $40 million maybe and you had about $15 million remaining. So do you expect to get that full number in the fourth quarter?

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Marshall H. Bridges, HNI Corporation - Senior VP & CFO [56]

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Yes. So just to take a step back, as it relates to the benefit for net productivity gains and cost savings in the fourth quarter, we're expecting between $13 million and $15 million there. Some of that is driven by -- I think what you're referring to, Greg, on the structural cost pick up that we talked about 2, 3 years ago was $35 million to $40 million. Some of that is embedded in that $13 million to $15 million number, and that's sort of last tranche. After we get through the fourth quarter, all of that $35 million to $40 million we mentioned a few years ago, it will be in place. But in addition to that structural cost takeout, we are seeing the benefit of just a lot of small projects we're getting back to what we typically historically been good at is grinding out good cost savings on a daily basis.

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Gregory John Burns, Sidoti & Company, LLC - Senior Equity Research Analyst [57]

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Okay, great. And then when we look, I guess, beyond the fourth quarter into 2019, is it going to be more about offsetting kind of some of these headwinds you've been discussing? Or do you feel like you have some incremental margin leverage based on some of these ongoing initiatives that you have in place?

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Marshall H. Bridges, HNI Corporation - Senior VP & CFO [58]

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Yes. We do feel like we've got momentum on the cost savings and productivity gain side, but there are a lot of headwinds out there and how all that mixes up is yet to be determined. And as we said earlier, we do think we've got pricing actions to help offset the inflationary and tariff pressures and we have momentum, but I'm not sure we've got a view on what exactly that does to margins next year yet.

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Operator [59]

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Your next question comes from the line of Kathryn Thompson from Thompson Research Group.

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Steven Ramsey, Thompson Research Group, LLC - Associate Research Analyst [60]

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This is Steven Ramsey on for Kathryn. The strategic investments that you called out in the press release, can you maybe talk about these? Were they more cost-takeout focused or growth -- top line growth focused? Were they different than the kinds of investments you've been making in the past year or 2?

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Jeffrey D. Lorenger, HNI Corporation - President, CEO & Director [61]

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Yes, Steven, this is Jeff. Those -- the investments we called out in the release are mostly focused on sale capability and growth in international. There's always ongoing investments on the cost side as Marshall referenced. We're getting back on the gas relative to our kind of day to day many small project, daily improvements. But the investments you're referring to were really selling capacity and international.

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Steven Ramsey, Thompson Research Group, LLC - Associate Research Analyst [62]

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Great. Thinking about cost of goods sold, the 10% to 12% you called out, is that tariffs-only impact? And if not, can you maybe talk about just more intrinsic inflationary pressures that are impacting you aside from the 10% to 12%?

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Marshall H. Bridges, HNI Corporation - Senior VP & CFO [63]

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Well, the 10% to 12% is sort of the amount of Chinese exposure we have, so that could possibly be subject to tariffs. But as it relates to inflation, we are seeing pressures. They are not getting any better, that's for sure. If you look at what we're expecting in the fourth quarter that's included in our guidance, we're expecting total inflation, including tariff impact for the fourth quarter, in the range of $18 million to $22 million. And we don't have a great view of how that's going to turn out next year, but we don't expect it to slow down any.

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Steven Ramsey, Thompson Research Group, LLC - Associate Research Analyst [64]

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All right. And then just -- this is like maybe more of an intangible kind of broader step-back question. As you think about just visibility in your business and having confidence in an outlook, has visibility changed at all given there's so much movement in your various end-markets both on the demand/top line side of things and the cost side of things?

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Jeffrey D. Lorenger, HNI Corporation - President, CEO & Director [65]

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Yes, Steven, this is Jeff. That's a good question. I don't think. I mean, it's obviously dynamic out there right now, and it's probably more dynamic than it was when we entered the year. But from a pure visibility standpoint, it's about the same kind of across the board when we look at hearth versus supply versus contract. We have seen -- like we've talked about, we had some project slide on the contract side, but we've reassessed that and the visibility outlook's pretty similar to what it has in the last 12 months.

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Operator [66]

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And there are no further questions at this time. I turn the call back over to Mr. Lorenger for closing remarks.

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Jeffrey D. Lorenger, HNI Corporation - President, CEO & Director [67]

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Okay. Thanks so much, and I'd like to thank everybody for joining us today, and have a great day. Thanks.

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Operator [68]

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And this concludes today's conference call. You may now disconnect.