UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, DC 20549
FORM 10-Q
(MARK ONE)
/ X / QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended June 29, 2002
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from ___________________ to ___________________
Commission File Number 0-2648
HON INDUSTRIES Inc.(Exact name of Registrant as specified in its charter)
Iowa(State or other jurisdiction ofincorporation or organization)
42-0617510(I.R.S. EmployerIdentification Number)
P. O. Box 1109, 414 East Third Street,Muscatine, Iowa(Address of principal executive offices)
52761-0071(Zip Code)
Registrant's telephone number, including area code: 563/264-7400
Indicated by check mark whether the registrant (1) has filed all required reports to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
YES X NO ________
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date.
ClassCommon Shares, $1 Par Value
Outstanding at June 29, 200258,937,186
<Page>
HON INDUSTRIES Inc. and SUBSIDIARIES
INDEXPART I. FINANCIAL INFORMATION
Page
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets -June 29, 2002 and December 29, 2001
3-4
Condensed Consolidated Statements of Income -Three Months Ended June 29, 2002, and June 30, 2001
5
Condensed Consolidated Statements of Income -Six Months Ended June 29, 2002, and June 30, 2001
6
Condensed Consolidated Statements of Cash Flows -Six Months Ended June 29, 2002, and June 30, 2001
7
Notes to Condensed Consolidated Financial Statements
8-14
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
15-18
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
19
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
20
PART I. FINANCIAL INFORMATION
HON INDUSTRIES Inc. and SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS
June 29,2002(Unaudited)
December 29,2001
ASSETS
(In thousands)
CURRENT ASSETS
Cash and cash equivalents
$ 88,213
$ 78,838
Short-term investments
5,000
-
Receivables
181,677
161,390
Inventories (Note C)
62,260
50,140
Deferred income taxes
14,059
14,940
Prepaid expenses and other current assets
9,195
14,349
Total Current Assets
360,404
319,657
PROPERTY, PLANT, AND EQUIPMENT, at cost
Land and land improvements
21,561
21,678
Buildings
208,517
212,352
Machinery and equipment
500,575
494,458
Construction in progress
9,988
14,247
740,641
742,735
Less accumulated depreciation
362,098
337,764
Net Property, Plant, and Equipment
378,543
404,971
GOODWILL
186,685
186,694
OTHER ASSETS
58,132
50,569
Total Assets
$ 983,764
$ 961,891
See accompanying Notes to Condensed Consolidated Financial Statements.
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses
$ 200,785
$ 216,184
Income taxes
13,732
6,112
Note payable and current maturities of long-term debt
59,297
6,715
Current maturities of other long-term obligations
999
1,432
Total Current Liabilities
274,813
230,443
LONG-TERM DEBT
26,062
79,570
CAPITAL LEASE OBLIGATIONS
791
1,260
OTHER LONG-TERM LIABILITIES
20,002
18,306
DEFERRED INCOME TAXES
41,352
39,632
SHAREHOLDERS' EQUITY
Capital Stock:
Preferred, $1 par value; authorized
2,000,000 shares; no shares outstanding
Common, $1 par value; authorized
200,000,000 shares; outstanding -
58,937
58,673
2002 - 58,937,186 shares;
2001 - 58,672,933 shares
Paid-in capital
7,755
891
Retained earnings
553,869
532,555
Accumulated other comprehensive income
183
561
Total Shareholders' Equity
620,744
592,680
Total Liabilities and Shareholders' Equity
HON INDUSTRIES Inc. and SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF INCOME(Unaudited)
Three Months Ended
June 29,2002
June 30,2001
(In thousands, except per share data)
Net Sales
$ 399,299
$ 444,196
Cost of products sold
256,696
292,789
Gross Profit
142,603
151,407
Selling and administrative expenses
111,320
118,983
Restructuring and impairment charges
(900)
24,000
Operating Income
32,183
8,424
Interest income
549
486
Interest expense
1,259
2,318
Income Before Income Taxes
31,473
6,592
11,330
2,373
Net Income
$ 20,143
$ 4,219
Net income per common share (basic and diluted)
$0.34
$0.07
Average number of common shares outstanding (basic)
58,918,130
59,204,849
Cash dividends per common share
$0.125
$0.12
Six Months Ended
$ 798,438
$ 906,193
516,094
604,500
282,344
301,693
221,745
238,033
3,000
57,599
39,660
1,184
708
2,474
5,240
56,309
35,128
20,271
12,646
$ 36,038
$ 22,482
$0.61
$0.38
58,847,543
59,326,535
$0.25
$0.24
HON INDUSTRIES Inc. and SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited)
Net Cash Flows From (To) Operating Activities:
Net income
Noncash items included in net income:
Depreciation and amortization
34,568
41,199
Other postretirement and postemployment
benefits
1,101
742
2,813
2,626
Asset impairment
1,300
16,200
Other - net
(502)
64
Changes in operating assets and liabilities
(36,882)
3,758
Increase (decrease) in other liabilities
595
613
Net cash flows from (to) operating activities
39,031
87,684
Net Cash Flows From (To) Investing Activities:
Capital expenditures - net
(9,329)
(23,921)
Capitalized software
(22)
(89)
Acquisition spending
(6,332)
Short-term investments - net
(5,000)
Long-term investments - net
(7,408)
1,094
(711)
Net cash flows from (to) investing activities
(20,665)
(31,053)
Net Cash Flows From (To) Financing Activities:
Purchase of HON INDUSTRIES common stock
(22,730)
Proceeds from long-term debt
36,000
Payments of note and long-term debt
(1,396)
(31,736)
Proceeds from sales of HON INDUSTRIES common stock to members
7,129
8,004
Dividends paid
(14,724)
(14,249)
Net cash flows from (to) financing activities
(8,991)
(24,711)
Net increase (decrease) in cash and cash equivalents
9,375
31,920
Cash and cash equivalents at beginning of period
78,838
3,181
Cash and cash equivalents at end of period
$ 35,101
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)June 29, 2002
Note A. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six-month period ended June 29, 2002, are not necessarily indicative of the results that may be expected for the year ending December 28, 2002. For further information, refer to the consolidated financial statements and footnotes included in the Company's annual report on Form 10-K for the year ended December 29, 2001.
Note B. Summary of Significant Accounting PoliciesRevenue recognition - Revenue is normally recognized upon shipment of goods to customers. In certain circumstances revenue is not recognized until the goods are received by the customer or upon installation and customer acceptance based on the terms of the sales agreement. Revenue includes freight charges to customers; related costs are in selling and administrative expense. Rebates, discounts, and other marketing program expenses that are directly related to the sale are recorded as a deduction to net sales.Investments - The Company acquired investments during the second quarter of 2002, which consist of investment grade debt securities. In accordance with SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities," the Company classifies these as held to maturity securities which are recorded at amortized cost, which approximates the fair value at June 29, 2002.
Note C. Inventories
Inventories of the Company and its subsidiaries are summarized as follows:
($000)
June 29, 2002(Unaudited)
December 29, 2001
Finished products
$ 45,371
$ 33,280
Materials and work in process
26,604
26,469
LIFO allowance
(9,715)
(9,609)
$ 62,260
$ 50,140
Note D. Comprehensive IncomeThe Company's comprehensive income in 2002 consists totally of foreign currency adjustments.
Note E. Earnings Per ShareThe following table reconciles the numerators and denominators used in the calculation of basic and diluted earnings per share (EPS):
June 29, 2002
June 30, 2001
Numerators:Numerators for bothbasic and diluted EPSnet income (in millions)
$ 20.1
$ 4.2
$ 36.0
$ 22.5
Denominators:Denominator for basic EPSweighted-average commonshares outstanding
Potentially dilutive sharesfrom stock option plans
243,149
116,713
239,804
138,034
Denominator for diluted EPS
59,161,279
59,321,562
59,087,347
59,464,569
Certain exercisable and non-exercisable stock options were not included in the computation of diluted EPS at June 29, 2002 and June 30, 2001, because the option prices were greater than the average market prices for the applicable periods. The number of stock options outstanding, which met this criterion for the three and six months ended June 29, 2002, was 30,000 with a range of per share exercise prices of $28.25 - $32.50. The number of stock options outstanding, which met this criterion for the three and six-month periods ended June 30, 2001, was 755,250 with a range of per share exercise prices of $23.31-$32.50 and 240,000 with a range of per share exercise prices of $24.28-$32.50, respectively. There was no difference between EPS on a basic and diluted basis for the periods presented.
Note F. Restructuring ReserveThe following table details the change in restructuring reserve since the end of the previous fiscal year:
SeveranceCosts
Facility TerminationCosts
Other Costs
Asset Impairment Write-downs
Total
Restructuring reserve at December 29, 2001
$ 768
$ 1,233
$ 716
$ -
$ 2,717
Restructuring charge
737
1,550
313
3,900
Cash payments
(636)
(522)
(367)
(1,525)
Charge against assets
(1,300)
Restructuring reserve at March 30, 2002
$ 869
$ 2,261
$ 662
$ 3,792
1,465
Restructuring credit
(852)
(933)
(580)
(2,365)
(17)
(314)
(49)
(380)
Restructuring reserve at June 29, 2002
$ 2,479
$ 33
$ 2,512
The additional restructuring charges taken during the first and second quarters of 2002 were due to the shutdown of an office furniture facility in Jackson, Tennessee. A total of 125 members were terminated and received severance due to this shutdown. The additional charge of approximately $1.5 million taken during the second quarter was due to new developments in the area regarding real estate availability that required revised estimates on the Company's ability to sublease the facility.Approximately $2.4 million of a restructuring credit was taken back into income during the second quarter. This was mainly due to the fact that the Company was able to exit a lease with a lessor at more favorable terms than originally estimated and the Company's ability to minimize the number of members terminated as compared to the original plan.<Page>
Note G. Goodwill - Adoption of Statement 142The Company adopted Statement of Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible Assets" on December 30, 2001, the beginning of its 2002 fiscal year. Pursuant to this standard, the Company has completed an assessment of the categorization of its existing intangible assets and goodwill. In addition, the Company completed an analysis of the fair value of its reporting units using both a discounted cash flow analysis and market multiple approach and has determined that the fair value of its reporting units exceeds the carrying values at the beginning of the period and therefore, no impairment of goodwill was recorded. Also pursuant to the standard, the Company has ceased recording of goodwill and indefinite-lived intangibles amortization in 2002.The Company also owns a trademark having a gross carrying amount of $9.3 million, accumulated amortization of $1.2 million and a net value of $8.1 million as of December 29, 2001. The fair value of the trademark exceeded the carrying value of the trademark at the beginning of the period and thus, no impairment was recorded. The trademark is deemed to have an indefinite useful life because it is expected to generate cash flows indefinitely. The Company ceased amortizing the trademark in 2002.
The table below summarizes amortizable definite-lived intangible assets as of June 29, 2002 and December 29, 2001, which are reflected in Other Assets in the Company's condensed consolidated balance sheets:
Gross CarryingAmount
Accumulated Amortization
Net Value
Patents
$ 16,450
$ 8,632
$ 7,818
License agreements and other
26,027
4,004
22,023
Total intangible assets
$ 42,477
$ 12,636
$ 29,841
$ 7,876
$ 8,574
3,414
22,613
$ 11,290
$ 31,187
Aggregate amortization expense for the three- and six-months ended June 29, 2002 and June 30, 2001 were $673,000, $1,346,000, $551,000, and $1,096,000, respectively. Amortization expense is estimated to be approximately $2.7 million per year for each of the next five years.
The changes in the carrying amount of goodwill since December 29, 2001 are as follows, by reporting segment:
Office Furniture
Hearth Products
Balance as of December 30, 2001
$ 43,611
$ 143,083
$ 186,694
Net Goodwill disposed of during the period
(9)
Balance as of June 29, 2002
$ 143,074
$ 186,685
The following schedule reports the adjusted net income for the goodwill and indefinite-lived trademark amortization effect:
Reported net income
Add back: Goodwill amortization, net of tax
1,385
2,828
Add back: Trademark amortization, net of tax
37
74
Adjusted net income
$ 5,641
$ 25,385
Basic and diluted earnings per share:
$ 0.34
$ 0.071
$ 0.61
$ 0.379
Goodwill & trademark amortization, net of tax
0.024
0.049
$ 0.095
$ 0.428
Note H. New Accounting StandardsThe Company adopted SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," on December 30, 2001, the beginning of its 2002 fiscal year. The adoption did not have an impact on the Company's financial statements.The Company will be required to adopt Statement No. 143, "Accounting for Asset Retirement Obligations," on December 29, 2002, the beginning of its 2003 fiscal year. The adoption of SFAS No. 143 is not expected to have a material impact on the Company's financial statements.<Page>The Company will be required to adopt SFAS No. 146 "Accounting for Costs Associated with Exit or Disposal Activities" for exit or disposal activities that are initiated after December 31, 2002. This Statement requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred.
Note I. ContingenciesThe Company has contingent liabilities, which have arisen in the course of its business, including pending litigation, environmental remediation, taxes, and other claims. The Company believes the outcome of these matters will not have a material adverse effect on its consolidated financial position, results of operations, or cash flow.
Note J. Business Segment InformationManagement views the Company as being in two business segments: office furniture and hearth products with the former being the principal business segment.The office furniture segment manufactures and markets a broad line of metal and wood commercial and home office furniture which includes file cabinets, desks, credenzas, chairs, storage cabinets, tables, bookcases, freestanding office partitions and panel systems, and other related products. The hearth product segment manufactures and markets a broad line of manufactured gas-, pellet- and wood-burning fireplaces and stoves, fireplace inserts, and chimney systems principally for the home.For purposes of segment reporting, intercompany sales transfers between segments are not material and operating profit is income before income taxes exclusive of certain unallocated corporate expenses. These unallocated corporate expenses include the net cost of the Company's corporate operations, interest income, and interest expense.
Management views interest income and expense as corporate financing costs and not as a business segment cost. In addition, management applies one effective tax rate to its consolidated income before income taxes so income taxes are not reported or viewed internally on a segment basis.
No geographic information for revenues from external customers or for long-lived assets is disclosed as the Company's primary market and capital investments are concentrated in the United States.Reportable segment data reconciled to the consolidated financial statements for the three-month and six-month periods ended June 29, 2002, and June 30, 2001, is as follows:
Six-Months Ended
June 29,
June 30,
2002
2001
Net Sales:
Office furniture
$ 303,144
$ 338,578
$ 603,365
$ 705,087
Hearth products
96,155
105,618
195,073
201,106
Operating Profit:
Operations before restructuring charges
$ 30,948
$ 32,366
$ 59,096
$ 64,890
900
(22,500)
(3,000)
Office furniture - net
31,848
9,866
56,096
42,390
8,819
9,519
15,324
12,757
(1,500)
Hearth products - net
8,019
11,257
Total operating profit
40,667
17,885
71,420
53,647
Unallocated corporate expense
(9,194)
(11,293)
(15,111)
(18,519)
Income before income taxes
$ 31,473
$ 6,592
$ 56,309
$ 35,128
Depreciation & Amortization Expense:
$ 12,110
$ 14,877
$ 24,401
$ 29,754
3,681
5,160
6,990
10,286
General corporate
1,629
579
3,177
1,159
$ 17,420
$ 20,616
$ 34,568
$ 41,199
Capital Expenditures, Net:
$ 2,127
$ 9,260
$ 6,279
$ 18,976
1,552
1,600
2,472
4,522
384
341
578
423
$ 4,063
$ 11,201
$ 9,329
$ 23,921
As of June 29,2002
As of June 30, 2001
Identifiable Assets:
$ 527,132
$ 575,470
311,008
339,483
145,624
69,318
$ 984,271
Results of OperationsA summary of the period-to-period changes in the principal items included in the Condensed Consolidated Statements of Income is shown below:
Comparison of
Increases (Decreases)
Dollars in Thousands
June 29, 2002 &June 30, 2001
June 29, 2002 &March 30, 2002
$ (44,897)
(10.1)%
$(107,755)
(11.9)%
$ 160
- %
(36,093)
(12.3)
(88,406)
(14.6)
(2,702)
(1.0)
Selling & administrative expenses
(7,663)
(6.4)
(16,288)
(6.8)
895
0.8
(24,900)
(103.8)
(21,000)
(87.5)
(4,800)
(123.1)
63
13.0
476
67.2
(86)
(13.5)
(1,059)
(45.7)
(2,766)
(52.8)
44
3.6
8,957
377.5
7,625
60.3
2,389
26.7
15,924
377.4
13,556
4,248
Consolidated net sales for the second quarter ending June 29, 2002, were $399.3 million, a 10.1% decrease from $444.2 million in the second quarter of 2001. Net income was $20.1 million, compared to $4.2 million for the same period a year ago. Net income per share was $0.34 per diluted share compared to $0.07 per diluted share in second quarter 2001. Second quarter 2001 results included a pre-tax charge of $24.0 million ($0.26 per diluted share) for a restructuring plan that involved consolidating facilities, discontinuing low volume product lines and reducing the workforce.For the first six months of 2002, consolidated net sales decreased 11.9% to $798.4 million from $906.2 million last year. Net income was $36.0 million or $0.61 per diluted share compared to $0.38 per diluted share last year after recording the $0.26 per diluted share restructuring charge.For the second quarter of 2002, office furniture comprised 76% of consolidated net sales and hearth products comprised 24%. Net sales for office furniture were down 10.5% due to continued deterioration in the office furniture industry. Hearth products sales decreased 9.0% for the quarter primarily due to the latent impact on second quarter demand of reduced mortgage applications which occurred immediately after the September 11 tragedy, inventory level adjustments in the home center business channel, and reduced demand for pellet stoves due to lower energy costs. Office furniture contributed 78% of second quarter 2002 consolidated operating profit before unallocated corporate expenses.<Page>The consolidated gross profit margin for the second quarter of 2002 increased to 35.7% compared to 34.1% for the same period in 2001. This increase in margin was due to rapid continuous improvement, new product introductions, cost containment, and restructuring initiatives.Selling and administrative expenses for the second quarter of 2002 were 27.9% of net sales compared to 26.8% in the comparable quarter of 2001. This increase was due to lower overall sales volume and increased investment in building brand equity and new product development. Selling and administrative expenses include freight expense for shipments to customers, which amounted to $24.3 million and $25.8 million, for the quarter ended June 29, 2002 and June 30, 2001, respectively. Actual selling and administrative dollars for the quarter decreased over 6% or $7.7 million. Second quarter 2001 included approximately $2.2 million of goodwill amortization that is not included in 2002 due to the adoption of Statement of Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible Assets," on December 30, 2001, the beginning of the Company's 2002 fiscal year.During the quarter ended June 30, 2001, the Company recorded a pretax restructuring charge of $24.0 million or $0.26 per diluted share. The plan involved consolidating physical facilities, discontinuing low volume product lines and reducing the workforce. Approximately 470 plant members were terminated and received severance due to the restructuring plan. Approximately $2.4 million of the charge was taken back into income during the second quarter of 2002. This was mainly due to the fact that the Company was able to exit a lease with a lessor at more favorable terms than originally estimated and the Company's ability to minimize the number of members terminated as compared to the original plan.The Company recorded additional restructuring charges of approximately $5.4 million during the first and second quarters of 2002 due to the shutdown of an office furniture facility in Jackson, Tennessee. A total of 125 members were terminated and received severance due to this shutdown. The additional charge during the second quarter was due to new developments in the area regarding real estate availability that required revised estimates on the Company's ability to sublease the facility.
Liquidity and Capital ResourcesAs of June 29, 2002, cash and short-term investments increased to $93.2 million compared to a $78.8 million balance at year-end 2001. Net cash flows from operations contributed to the improvement. Cash flow from operations for the first six months was $39.0 million compared to $87.7 million last year. Inventory levels increased primarily as a result of the year-end 2001 production shutdown and inventory produced in 2002 associated with new turnkey contracts. The increase in receivables reflects an increase in day's sales outstanding of 38.9 compared to 36.8 in 2001 mainly due to larger contract customers and the effect of unusually strong cash collections at the end of 2001. Cash flow and working capital management are major focuses of management to ensure the Company is poised for growth.<Page>Net capital expenditures for the first six months of 2002 were $9.3 million and primarily represent investment in new machinery and equipment for new products compared to $23.9 million in 2001, which was primarily for new products and productivity improvements. These investments were funded by cash from operations.The Board of Directors declared a regular quarterly cash dividend of $0.125 per share on its common stock on May 7, 2002, to shareholders of record at the close of business on May 17, 2002. It was paid on May 31, 2002, and represented the 189th consecutive quarterly dividend paid by the Company.For the six months ended June 29, 2002, the Company did not repurchase any of its common stock. As of June 29, 2002, approximately $78.6 million of the Board's current repurchase authorization remained unspent.On August 5, 2002, the Board of Directors declared a $0.125 per common share cash dividend to shareholders of record on August 15, 2002, to be paid on August 30, 2002.Critical Accounting PoliciesThe Company's critical accounting policies are outlined in its Form 10-K for fiscal year ended December 29, 2001. The following policies are relevant to 2002.The Company normally recognizes revenue upon shipment of goods. In certain circumstances revenue is not recognized until the goods are received by the customer or upon installation and customer acceptance. Revenue includes freight charges to customers; related costs are in selling and administrative expense. Rebates, discounts, and other marketing program expenses that are directly related to the sale are recorded as a deduction to net sales.The Company acquired investments during the second quarter of 2002, which consist primarily of investment grade debt securities. In accordance with SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities," the Company classifies these as held to maturity securities which are recorded at amortized cost, which approximates the fair value at June 29, 2002.The Company adopted Statement of Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible Assets" on December 30, 2001, the beginning of its 2002 fiscal year. Pursuant to this standard, the Company has completed an assessment of the categorization of its existing intangible assets and goodwill. In addition, the Company completed an analysis of the fair value of its reporting units using both a discounted cash flow analysis and market multiple approach and has determined that the fair value of its reporting units exceeds the carrying values at the beginning of the period and therefore, no impairment of goodwill was recorded. The fair market value of the reporting units are sensitive to significant assumptions and estimates, including projected cash flows and discount rates. Should the fair value decline based upon changes in these estimates and assumptions, an impairment charge may need to be recorded. Also pursuant to the standard, the Company has ceased recording of goodwill amortizatio n in 2002.
Looking AheadThe Company anticipates the remainder of the year to be challenging. DRI-WEFA, the Business and Institutional Furniture Manufacturer's Association's ("BIFMA") forecasting consultant, is projecting the office furniture industry to be down 7 percent in the third quarter and up 3 percent in the fourth quarter of 2002 compared to the same quarters last year. The Company's recent order patterns have been stronger. Over capacity in the domestic office furniture industry as well as an increase in lower-priced foreign imports is likely to result in margin pressure. The Company is pursuing strategies to minimize this impact.Increased investment in new products in the hearth products segment, which were well received at recent industry trade shows, is expected to positively impact performance during the remainder of the year. In addition, continued strength of new residential construction and low inventories in the retail channel should stimulate demand in subsequent quarters.The recently enacted tariff on steel imports has created uncertainty in pricing and supply of steel in America. The Company is working to mitigate the potential negative impact this may have on its results and is also working with an industry coalition to address the broader issue.Statements in this report that are not strictly historical, including statements as to plans, objectives, and future financial performance, are "forward-looking" statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks, which may cause the Company's actual results in the future to differ materially from expected results. These risks include, among others: the Company's ability to realize financial benefits from its cost containment and business simplification initiatives, to minimize the effects of industry over capacity and foreign imports on its sales and margins, to realize financial benefits from investments in new products, to mitigate the effects of uncertain steel prices and supplies, the possibility that recent improvements in order patterns may not continue and other factors described in the Company's annual and quarterly reports filed with the Securities and Exchange Commission on Forms 10-K and 10-Q.
Item 4.
Submission of Matters to a Vote of Security Holders
The Annual Meeting of Shareholders of HON INDUSTRIES Inc. was held on May 6, 2002, for purposes of electing five Directors to the Board of Directors, and to adopt the HON INDUSTRIES Inc. 2002 Members' Stock Purchase Plan. As of March 1, 2002, the record date for the meeting, there were 58,895,314 shares of common stock issued and outstanding and entitled to vote at the meeting. The first proposal voted upon was the election of one Director for a term of two years and four Directors for a term of three years and until their successors are elected and shall qualify. The five persons nominated by the Company's Board of Directors received the following votes and were elected:
For
Withheld/Abstained
Against
Two-Year Term:Robert L. Katz
50,629,037or 85.4%
1,290,335or 2.2%
- -0-or 0.0%
Three-Year Term:Cheryl A. FrancisM. Farooq KathwariRichard H. StanleyBrian E. Stern
50,693,514or 86.1%50,659,534or 86.0%50,520,259or 85.8%50,938,601or 86.5%
865,858or 1.5%899,838or 1.5%1,039,113or 1.8%620,771or 1.1%
- -0-or 0.0%- -0-or 0.0%- -0-or 0.0%- -0-or 0.0%
Other Directors whose term of office as a Director continued after the meeting are: Gary M. Christensen, Robert W. Cox, Dennis J. Martin, Jack D. Michaels, Abbie J. Smith, and Lorne R. Waxlax.
The second proposal voted upon was the adoption of the 2002 Members' Stock Purchase Plan. The proposal was approved with 46,535,771 votes, or 79.0% voting for; 4,522,971 votes, or 7.7% voting against; and 500,630 votes, or 0.9% abstaining.
Item 6.
Exhibits and Reports on Form 8-K
(a) Exhibits. None.
(b) Reports on Form 8-K. The Company filed a periodic report on Form 8-K dated May 7, 2002, to report the dismissal of Arthur Andersen LLP and the appointment of PricewaterhouseCoopers LLP as the Company's independent auditor for the fiscal year 2002.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Dated: August 9, 2002
HON INDUSTRIES Inc.By: /s/ Jerald K. Dittmer Jerald K. Dittmer Vice President and Chief Financial Officer