Summary of Significant Accounting Policies

Principles of Consolidation and Fiscal Year-End

The consolidated financial statements include the accounts and transactions of the Corporation and its subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation.

The Corporation follows a 52/53 week fiscal year which ends on the Saturday nearest December 31. Fiscal year 2014 ended on January 3, 2015; 2013 ended on December 28, 2013; and 2012 ended on December 29, 2012. The financial statements for fiscal year 2014 is on a 53-week basis; fiscal 2013 and 2012 are on a 52-week basis. A 53-week year occurs approximately every sixth year.

Cash, Cash Equivalents and Investments

Cash and cash equivalents generally consist of cash and money market accounts. The fair value approximates the carrying value due to the short duration of the securities. These securities have original maturity dates not exceeding three months. The Corporation has short-term investments with maturities of less than one year and also has investments with maturities greater than one year included in Other Assets on the Consolidated Balance Sheets. Management classifies investments in marketable securities at the time of purchase and reevaluates such classification at each balance sheet date. Debt securities including government and corporate bonds are classified as available-for-sale and stated at current market value with unrealized gains and losses included as a separate component of equity, net of any related tax effect. The specific identification method is used to determine realized gains and losses on the trade date.

At January 3, 2015 and December 28, 2013, cash, cash equivalents and investments consisted of the following:



Year-End 2014 (In thousands)	Cash and cash equivalents		Short-term investments		Long-term investments
Held-to-maturity securities
Certificates of deposit	$	—	$	252	$	—
Available-for-sale securities
Debt securities	—		2,800		9,240
Cash and money market accounts	34,144		—		—
Total	$	34,144	$	3,052	$	9,240

The amortized cost basis of the debt securities as of January 3, 2015 was $12.0 million. Unrealized gains of $0.1 million and unrealized losses of $0.0 million are recorded in accumulated other comprehensive income as of January 3, 2015 for these debt securities.



Year-End 2013 (In thousands)	Cash and cash equivalents		Short-term investments		Long-term investments
Held-to-maturity securities
Certificates of deposit	$	—	$	251	$	—
Available-for-sale securities
Debt securities	—		7,000		9,113
Cash and money market accounts	65,030		—		—
Total	$	65,030	$	7,251	$	9,113

The amortized cost basis of the debt securities as of December 28, 2013 was $16.0 million. Unrealized gains of $0.2 million and unrealized losses of $0.1 million are recorded in accumulated other comprehensive income as of December 28, 2013 for these debt securities.

Receivables

Accounts receivable are presented net of allowance for doubtful accounts of $5.1 million and $6.2 million for 2014 and 2013, respectively. The allowance is developed based on several factors including overall customer credit quality, historical write-off experience, and specific account analyses projecting the ultimate collectability of the account. As such, these factors may change over time causing the reserve level to adjust accordingly.

Inventories

The Corporation valued 71% and 74% of its inventory by the LIFO method at January 3, 2015 and December 28, 2013, respectively. During 2014, 2013 and 2012, inventory quantities were reduced at certain reporting units. This reduction resulted in a liquidation of LIFO inventory quantities carried at lower costs prevailing in prior years as compared with the cost of current year purchases, the effect of which decreased cost of goods sold by approximately $0.03 million, $0.2 million and $0.8 million in 2014, 2013 and 2012, respectively. If the FIFO method had been in use, inventories would have been $28.0 million and $27.7 million higher than reported at January 3, 2015 and December 28, 2013, respectively.

Property, Plant and Equipment

Property, plant and equipment are carried at cost. Expenditures for repairs and maintenance are expensed as incurred. Major improvements that materially extend the useful lives of the assets are capitalized. Depreciation has been computed using the straight-line method over estimated useful lives: land improvements, 10 – 20 years; buildings, 10 – 40 years; and machinery and equipment, 3 – 12 years.

Long-Lived Assets

Long-lived assets are reviewed for impairment as events or changes in circumstances occur indicating the amount of the asset reflected in the Corporation’s balance sheet may not be recoverable. An estimate of undiscounted cash flows produced by the asset, or the appropriate group of assets, is compared to the carrying value to determine whether impairment exists. The estimates of future cash flows involve considerable management judgment and are based upon assumptions about expected future operating performance. The actual cash flows could differ from management’s estimates due to changes in business conditions, operating performance and economic conditions. Asset impairment charges recorded in connection with the Corporation’s restructuring activities are discussed in Restructuring Related Charges. These assets included real estate, manufacturing equipment and certain other fixed assets. The Corporation’s continuous focus on improving the manufacturing process tends to increase the likelihood of assets being replaced; therefore, the Corporation is regularly evaluating the expected lives of its equipment and accelerating depreciation where appropriate.

Goodwill and Other Intangible Assets

The Corporation evaluates its goodwill for impairment on an annual basis during the fourth quarter or whenever indicators of impairment exist. The Corporation had nine reporting units within its office furniture and hearth products operating segments, which contained goodwill during the fourth quarter analysis. These reporting units constitute components for which discrete financial information is available and regularly reviewed by segment management. Determining the fair value of a reporting unit involves the use of significant estimates and assumptions. Management bases its fair value estimates on assumptions it believes to be reasonable at the time, but such assumptions are subject to inherent uncertainty. Actual results may different from those estimates.

The Corporation also determines the fair value of indefinite-lived trade names on an annual basis during the fourth quarter or whenever indication of impairment exists. The Corporation estimates the fair value of the trade names based on a discounted cash flow model using inputs which included projected revenues from management’s long-term plan, assumed royalty rates that could be payable if the trade names were not owned and a discount rate. Determining the fair value of a trade name involves the use of significant estimates and assumptions. Actual results may differ from those estimates.

The Corporation has definite-lived intangibles, including capitalized software, which are amortized over their estimated useful lives. Impairment losses are recognized if the carrying amount of an intangible, subject to amortization, is not recoverable from expected future cash flows and its carrying amount exceeds its fair value. Definite-lived intangibles, net of amortization, of approximately $141 million are included in other assets on the consolidated balance sheet as of the end of fiscal 2014.

See Goodwill and Other Intangible Assets footnote for further information.

Product Warranties

The Corporation issues certain warranty policies on its furniture and hearth products that provide for repair or replacement of any covered product or component failing during normal use because of a defect in design, materials or workmanship. Reserves have

been established for the various costs associated with the Corporation's warranty programs.

A warranty reserve is determined by recording a specific reserve for known warranty issues and an additional reserve for unknown claims expected to be incurred based on historical claims experience. Actual claims incurred could differ from the original estimates, requiring adjustments to the reserve. Activity associated with warranty obligations was as follows:



(In thousands)	2014			2013			2012
Balance at the beginning of the period	$	13,840		$	13,055		$	12,910
Accrual assumed from acquisition	1,100			—			301
Accruals for warranties issued during the period	18,951			21,878			18,370
Accrual related to pre-existing warranties	172			106			432
Settlements made during the period	(17,344		)	(21,199		)	(18,958		)
Balance at the end of the period	$	16,719		$	13,840		$	13,055

The portion of the reserve for estimated settlements expected to be paid in the next twelve months was $8.5 million and $6.7 million as of January 3, 2015 and December 28, 2013, respectively, and are included in "Accounts payable and accrued expenses" in the Consolidated Balance Sheets. The portion of the reserve for settlements expected to be paid beyond one year was $8.2 million and $7.1 million, as of January 3, 2015 and December 28, 2013, respectively, and are included in "Other Long-Term Liabilities" in the Consolidated Balance Sheets.

Revenue Recognition

Sales of office furniture and hearth products are generally recognized when title transfers and the risks and rewards of ownership have passed to customers. Typically title and risk of ownership transfer when the product is shipped. In certain circumstances, title and risk of ownership do not transfer until the goods are received by the customer or upon installation and customer acceptance. Revenue includes freight charged to customers; related costs are recorded in selling and administrative expense. Rebates, discounts and other marketing program expenses directly related to the sale are recorded as a reduction to net sales. Marketing program accruals require the use of management estimates and the consideration of contractual arrangements subject to interpretation. Customer sales that achieve or do not achieve certain award levels can affect the amount of such estimates and actual results could differ from these estimates.

Product Development Costs

Product development costs relating to development of new products and processes, including significant improvements and refinements to existing products, are expensed as incurred. These costs include salaries, contractor fees, building costs, utilities and administrative fees. The amounts charged against income were $29.7 million in 2014, $27.3 million in 2013 and $26.9 million in 2012 and were recorded in Selling and Administrative Expenses on the Consolidated Statements of Income.

Freight Expense

The Corporation records freight expense to customers in Selling and Administrative Expenses on the Consolidated Statements of Income. Amounts recorded were $131.0 million in 2014, $123.8 million in 2013 and $122.1 million in 2012.

Stock-Based Compensation

The Corporation measures the cost of employee services in exchange for an award of equity instruments based on the grant-date fair value of the award and recognizes cost over the requisite service period. See the Stock-Based Compensation footnote for further information.

Income Taxes

The Corporation uses an asset and liability approach that takes into account guidance related to uncertain tax positions and requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Corporation’s financial statements or tax returns. Deferred income taxes are provided to reflect differences between the tax bases of assets and liabilities and their reported amounts in the financial statements. The Corporation provides for taxes that may be payable if undistributed earnings of overseas subsidiaries were to be remitted to the United States, except for those earnings it considers to be permanently reinvested. There were approximately $31.4 million of accumulated earnings considered permanently reinvested in China, Hong Kong and India as of January 3, 2015. The Corporation believes the U.S. tax cost on unremitted foreign earnings would be approximately $9.6 million if the amounts were not considered permanently reinvested. See the Income Tax footnote for further information.

Earnings Per Share

Basic earnings per share are based on the weighted-average number of common shares outstanding during the year. Shares potentially issuable under stock options, restricted stock units and common stock equivalents under the Corporation's deferred compensation plans have been considered outstanding for purposes of the diluted earnings per share calculation. The following table reconciles the numerators and denominators used in the calculation of basic and diluted earnings per share (EPS):



(In thousands, except per share data)	2014		2013		2012
Numerators:
Numerators for both basic and diluted EPS net income attributable to parent company	$	61,471	$	63,683	$	48,967
Denominators:
Denominator for basic EPS weighted- average common shares outstanding	44,760		45,251		45,211
Potentially dilutive shares from stock option plans	819		706		609
Denominator for diluted EPS	45,579		45,956		45,820
Earnings per share – basic	$	1.37	$	1.41	$	1.08
Earnings per share – diluted	$	1.35	$	1.39	$	1.07

Certain exercisable and non-exercisable stock options were not included in the computation of diluted EPS for fiscal years 2014, 2013 and 2012 because inclusion would have been anti-dilutive. The number of stock options outstanding, which met this criterion was 500,058; 769,394 and 1,760,220 for 2014, 2013 and 2012, respectively.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The more significant areas requiring use of management estimates relate to allowance for doubtful accounts, inventory reserves, marketing program accruals, warranty accruals, accruals for self-insured medical claims, workers’ compensation, legal contingencies, general liability and auto insurance claims, valuation of long-lived assets, and useful lives for depreciation and amortization. Actual results could differ from those estimates.

Self-Insurance

The Corporation is primarily self-insured for general, auto and product liability, workers’ compensation, and certain employee health benefits. The general, auto, product and workers’ compensation liabilities are managed using a wholly owned insurance captive; the related liabilities are included in the accompanying consolidated financial statements. As of January 3, 2015, these liabilities totaled $28.9 million. The Corporation’s policy is to accrue amounts in accordance with the actuarially determined liabilities. The actuarial valuations are based on historical information along with certain assumptions about future events. Changes in assumptions for such matters as legal actions, medical cost inflation and magnitude of change in actual experience development could cause these estimates to change in the future.

Foreign Currency Translations

Foreign currency financial statements of foreign operations where the local currency is the functional currency are translated using exchange rates in effect at period end for assets and liabilities and average exchange rates during the period for results of operations. Related translation adjustments are reported as a component of Shareholders’ Equity. Gains and losses on foreign currency transactions are included in the “Selling and administrative expenses” caption of the Consolidated Statements of Income.

Reclassifications

Certain reclassifications have been made within the footnotes to conform to the current year presentation.

Recent Accounting Pronouncements

In July 2013, the FASB issued accounting guidance on the financial statement presentation of an unrecognized tax benefit when

a net operating loss carryforward, or similar tax loss, or a tax carryforward exists. The guidance was effective for annual

reporting periods beginning on or after December 15, 2013, and interim periods within those annual periods. The Corporation adopted the guidance effective December 29, 2013, the beginning of the Corporation's 2014 fiscal year. The guidance did not have a material impact on the Corporation's financial statements.

In April 2014, the FASB issued accounting guidance which changes the criteria for determining which disposals can be presented as discontinued operations and modifies related disclosure requirements. The guidance will be effective for fiscal years beginning on or after December 15, 2014 and interim periods within those annual periods with early adoption allowed. This guidance would impact the Corporation's consolidated results of operations and financial condition only in the instance of a disposal under this guidance.

In May 2014, the FASB issued accounting guidance which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. The core principle of the revenue model is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance will be effective for fiscal years, and interim periods within those years, beginning after December 15, 2016. Early adoption is not permitted. The Corporation is currently evaluating the impact of adopting this standard and the method of adoption on its financial statements.