<Page>

<Page>

<Page>

<Page>

<Page>

<Page>

<Page>

PART I.     FINANCIAL INFORMATION

Item 1.     Financial Statements (Unaudited)

<Page>

<Page>

<Page>

<Page>

<Page>

HON INDUSTRIES Inc. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 29,

HON INDUSTRIES Inc. and SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) September 28, 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-monthnine-month period ended June 29,September 28, 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 Policies Revenue 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: Note B. Summary of Significant Accounting Policies Revenue 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 and third quarters 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 September 28, 2002. Note B. Summary of Significant Accounting Policies Revenue 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 and third quarters 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 September 28, 2002. Note C. Inventories Note C. Inventories Inventories of the Company and its subsidiaries are summarized as follows: Inventories of the Company and its subsidiaries are summarized as follows: September 28, 2002 (Unaudited)  December 29, 2001 ($000) June 29, 2002 (Unaudited)  December 29, 2001      Finished products $       45,371  $       33,280  Finished products $       37,625  $       33,280  Materials and work in process 26,604          26,469  Materials and work in process 29,069          26,469  LIFO allowance         (9,715)         (9,609) LIFO allowance         (9,766)         (9,609) $       62,260  $       50,140  $       56,928  $       50,140  <Page> Note D.  Comprehensive Income The Company's comprehensive income in 2002 consists totally of foreign currency adjustments. Note E.  Earnings Per Share The following table reconciles the numerators and denominators used in the calculation of basic and diluted earnings per share (EPS): Three Months Ended Nine Months Ended Three Months Ended Six Months Ended September 28, 2002 September 29, 2001 September 28, 2002 September 29, 2001 June 29, 2002 June 30, 2001 June 29, 2002 June 30, 2001 Numerators: Numerators for both basic and diluted EPS net income (in millions) $       20.1   $        4.2  $       36.0  $       22.5  $       27.2  $        28.7  $       63.2  $       51.1        Denominators: Denominator for basic EPS weighted-average common shares outstanding Denominators: Denominator for basic EPS weighted-average common shares outstanding   58,918,130    59,204,849    58,847,543    59,326,535  Denominators: Denominator for basic EPS weighted-average common shares outstanding 58,918,097  59,047,587  58,871,061  59,233,573  Potentially dilutive shares from stock option plans      243,149       116,713       239,804       138,034     221,711     124,421     319,878     163,150  Denominator for diluted EPS Denominator for diluted EPS   59,161,279    59,321,562    59,087,347    59,464,569  Denominator for diluted EPS 59,139,808  59,172,008  59,190,939  59,396,723  Certain exercisable and non-exercisable stock options were not included in the computation of diluted EPS at June 29,September 28, 2002 and June 30,September 29, 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 sixnine months ended June 29,September 28, 2002, was 130,000 with a range of per share exercise prices of $26.69 - $32.50 and 30,000 with a range of per share exercise prices of $28.25 - $32.50.$32.50, respectively. The number of stock options outstanding, which met this criterion for the threethree- and six-monthnine-month periods ended June 30,September 29, 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.32.50. There was no difference between EPS on a basic and diluted basis for the periods presented. <Page> Note F.  Restructuring Reserve The following table details the change in restructuring reserve since the end of the previous fiscal year: Severance Costs    Facility   Termination Costs    Other    Costs    Asset     Impairment  Write-downs Total    Severance Costs   Facility   Termination Costs    Other    Costs    Asset     Impairment  Write-downs Total     Restructuring reserve at December 29, 2001 $    768  $  1,233  $    716  $      -   $  2,717    $    768  $  1,233  $    716  $      -   $  2,717    Restructuring charge      737     1,550       313     1,300     3,900       737     1,550       313     1,300     3,900  Cash payments     (636)     (522)     (367)        -     (1,525)     (636)     (522)     (367)        -     (1,525) Charge against assets        -      (1,300)   (1,300)        -          -          -      (1,300)   (1,300) Restructuring reserve at March 30, 2002 $    869  $  2,261  $    662  $      -   $  3,792  $    869  $  2,261  $    662  $      -   $  3,792  Restructuring charge        -      1,465         -        1,465         -      1,465         -          -      1,465  Restructuring credit     (852)     (933)     (580)     (2,365)     (852)     (933)     (580)        -     (2,365) Cash payments      (17)     (314)      (49)                (380)      (17)     (314)      (49)        -       (380) Restructuring reserve at June 29, 2002 $      -   $  2,479  $     33  $      -   $  2,512  $      -   $  2,479  $     33  $      -   $  2,512  Cash payments        -       (174)      (17)        -       (191) Restructuring reserve at September 28, 2002 $      -   $  2,305  $     16  $      -   $  2,321  <Page> 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 142 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. 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,September 28, 2002 and December 29, 2001, which are reflected in Other Assets in the Company's condensed consolidated balance sheets: June 29, 2002 Gross Carrying Amount     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    September 28, 2002 December 29, 2001 Gross   Carrying Amount  Accumulated Amortization Net    Value   Gross Carrying Amount     Accumulated  Amortization  Net Value    Patents $ 16,450  $  7,876  $  8,574  $ 16,450  $  9,009  $  7,441  License agreements and other   26,027     3,414    22,613    26,076     4,299    21,777  Total intangible assets $ 42,477  $ 11,290  $ 31,187  $ 42,526  $ 13,308  $ 29,218  <Page> December 29, 2001 Gross   Carrying Amount  Accumulated Amortization Net    Value   Patents $ 16,450  $  7,876  $  8,574  License agreements and other   26,027     3,414    22,613  Total intangible assets $ 42,477  $ 11,290  $ 31,187  Aggregate amortization expense for the three- and six-monthsnine-months ended June 29,September 28, 2002 and June 30,September 29, 2001 were $673,000, $1,346,000, $551,000,$672,000, $2,018,000, $552,000, and $1,096,000,$1,647,000, 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  Total    Balance as of December 30, 2001 $ 43,611  $ 143,083  $ 186,694  Net Goodwill disposed of during the period           -              (9)            (9) Balance as of June 29, 2002 $ 43,611  $ 143,074  $ 186,685  Office    Furniture  Hearth    Products   Total    Balance as of December 30, 2001 $ 43,611  $ 143,083  $ 186,694  Net Goodwill disposed of during the   period           -             (9)             (9) Balance as of June 29, 2002 $ 43,611  $ 143,074  $ 186,685  Goodwill increase during period           -         5,710         5,710  Balance as of September 28, 2002 $ 43,611  $ 148,784  $ 192,395  <Page> The third quarter goodwill increase relates to additional purchase consideration associated with debentures issued in connection with a prior acquisition. The following schedule reports the adjusted net income for the goodwill and indefinite-lived trademark amortization effect: Three Months Ended Nine Months Ended Three Months Ended Six Months Ended Sept. 28, 2002 Sept. 29, 2001 Sept. 28, 2002 Sept. 29, 2001 June 29, 2002 June 30, 2001 June 29, 2002 June 30, 2001 Reported net income $    20,143  $     4,219  $    36,038  $    22,482  Reported net income $    27,153  $     28,666  $    63,191  $    51,148  Add back: Goodwill amortization, net of tax            -        1,385             -        2,828  Add back: Goodwill amortization, net of tax            -        1,391             -        4,219  Add back: Trademark amortization, net of tax              -             37               -            74  Add back: Trademark amortization, net of tax              -             37               -            112  Adjusted net income $    20,143  $     5,641  $    36,038  $    25,385  Adjusted net income $    27,153  $   30,094  $    63,191  $    55,479  Basic and diluted earnings per share: Basic and diluted earnings per share: Basic and diluted earnings per share: Reported net income $      0.34  $     0.071  $      0.61  $     0.379  $      0.46  $     0.48  $      1.07  $     0.86  Goodwill & trademark amortization, net of tax Goodwill & trademark amortization, net of tax             -        0.024              -        0.049  Goodwill & trademark amortization, net of tax             -        0.02              -        0.07  Adjusted net income $      0.34  $     0.095  $      0.61  $     0.428  $      0.46  $     0.50  $      1.07  $     0.93  Note H.  New Accounting Standards The 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.  Contingencies The 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. <Page> Note J.  Business Segment Information Management 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 (including costs not considered in measuring segment unit performance), 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-monthnine-month periods ended June 29,September 28, 2002 and June 30,September 29, 2001, is as follows: <Page>    Three Months Ended Six-Months Ended June 29, June 30, June 29, June 30, 2002 2001 2002 2001 (In thousands) Net Sales:   Office furniture $  303,144  $  338,578  $  603,365  $  705,087    Hearth products     96,155     105,618     195,073     201,106  $  399,299  $  444,196  $  798,438  $  906,193  Operating Profit:   Office furniture     Operations before restructuring       charges $   30,948  $   32,366  $   59,096  $   64,890      Restructuring and impairment       charges          900     (22,500)      (3,000)    (22,500)       Office furniture - net 31,848  9,866  56,096  42,390    Hearth products     Operations before restructuring       charges 8,819  9,519  15,324  12,757      Restructuring and impairment       charges            -       (1,500)            -       (1,500)       Hearth products - net 8,819  8,019  15,324  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:   Office furniture $   12,110  $   14,877  $   24,401  $   29,754    Hearth products 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:   Office furniture $    2,127  $    9,260  $    6,279  $   18,976    Hearth products 1,552  1,600  2,472  4,522    General corporate         384           341          578           423  $    4,063  $   11,201  $    9,329  $   23,921  As of June 29, 2002 As of June 30, 2001 Identifiable Assets:   Office furniture $ 527,132  $ 575,470    Hearth products 311,008    339,483    General corporate   145,624      69,318  $ 983,764  $ 984,271      Three Months Ended Nine-Months Ended Sept. 28, 2002 Sept. 29, 2001 Sept, 28, 2002 Sept. 29, 2001 (In thousands) Net Sales:   Office furniture $  344,470  $  353,138  $   947,835  $ 1,058,225    Hearth products     101,804     106,214     296,877     307,320  $  446,274  $  459,352  $ 1,244,712  $ 1,365,545  Operating Profit:   Office furniture     Operations before restructuring       charges $   42,116  $   41,223  $   101,212  $   106,113      Restructuring and impairment       charges              -               -       (3,000)    (22,500)       Office furniture - net 42,116  41,223  98,212  83,613    Hearth products     Operations before restructuring       charges 11,727  12,277  27,051  25,034      Restructuring and impairment       charges              -               -               -       (1,500)       Hearth products - net 11,727  12,277  27,051  23,534        Total operating profit     53,843      53,500  125,263  107,147    Unallocated corporate expense    (11,416)    (8,709)    (26,527)    (27,228)       Income before income taxes $   42,427  $    44,791  $   98,736  $   79,919  Depreciation & Amortization Expense:   Office furniture $   12,176  $   14,957  $   36,577  $   44,711    Hearth products 3,328  5,028  10,318  15,314    General corporate       1,686          593        4,863        1,752  $   17,190  $   20,578  $   51,758  $   61,777  Capital Expenditures, Net:   Office furniture $    4,371  $    6,477  $    10,650  $   25,453    Hearth products 1,936  1,161  4,408  5,683    General corporate       1,096           611        1,674         1,034  $    7,403  $   8,249  $    16,732  $   32,170  As of Sept. 28, 2002 As of Sept. 29, 2001 Identifiable Assets:   Office furniture $  516,417  $ 574,858    Hearth products 312,136    340,921    General corporate   176,249      80,640  $ 1,004,802  $ 996,419  <Page> Item 2.  Management's Discussion and Analysis of Financial Condition and Results of             Operations Results of Operations A 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) Three Months Ended Six Months Ended Three Months Ended Dollars in Thousands June 29, 2002 & June 30, 2001 June 29, 2002 & June 30, 2001 June 29, 2002 & March 30, 2002 Net Sales $ (44,897) (10.1)% $(107,755) (11.9)% $     160  - % Cost of products sold (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    Restructuring and   impairment charges (24,900) (103.8)      (21,000) (87.5)    (4,800) (123.1)   Interest income 63  13.0     476  67.2     (86) (13.5)   Interest expense (1,059) (45.7)    (2,766) (52.8)    44  3.6    Income taxes 8,957  377.5     7,625  60.3     2,389  26.7    Net Income 15,924  377.4     13,556  60.3     4,248  26.7    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 Resources As 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 Policies The 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. Comparison of Increases (Decreases) Three Months Ended Nine Months Ended Three Months Ended Dollars in Thousands September 28, 2002 & September 29, 2001 September 28, 2002 & September 29, 2001 September 28, 2002 & June 29, 2002 Net Sales $ (13,078) (2.8)% $(120,833) (8.8)% $   46,975  11.8 % Cost of products sold (12,431) (4.2)    (100,837) (11.2)    29,300  11.4     Selling &   administrative   expenses 2,515  2.2     (13,773) (3.9)      5,954    5.3     Restructuring and   impairment charges -  -         (21,000) (87.5)    (900) (100.0)    Interest income 192  37.7     668  54.9     (152) 27.7     Interest expense (606) (32.2)    (3,372) (47.3)    19  1.5     Income taxes (851) (5.3)    6,774  23.5     3,944  34.8     Net Income (1,513) (5.3)    12,043  23.5     7,010  34.8     Consolidated net sales for the third quarter ending September 28, 2002 were $446.3 million, a 2.8% decrease from $459.4 million in the third quarter of 2001. Net income was $27.2 million, compared to $28.7 million for the same period a year ago. Net income per share was $0.46 per diluted share compared to $0.48 per diluted share in third quarter 2001. For the third quarter of 2002, office furniture comprised 77% of consolidated net sales and hearth products comprised 23%. Net sales for office furniture were down 2.5% due to continued softness in the economy. Hearth products sales decreased 4.2% for the quarter primarily due to pruning out less profitable product lines. Office furniture contributed 78% of third quarter 2002 consolidated operating profit before unallocated corporate expenses. The consolidated gross profit margin for the third quarter of 2002 increased to 35.9% compared to 35.0% for the same period in 2001. This increase in margin was due to rapid continuous improvement, new product introductions, and restructuring initiatives, offset by a small negative impact from increased steel prices due to the steel tariffs. Selling and administrative costs increased 2.2% or $2.5 million from the same quarter last year. This increase was due to brand equity building, new product development, and compensation charges at the corporate level for a debenture earn out related to an acquisition. Selling and administrative expenses include freight expense for shipments to customers, which amounted to $26.8 million and $26.7 million, for the quarter ended September 28, 2002 and September 29, <Page> 2001, respectively. Third 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. For the first nine months of 2002, consolidated net sales decreased 8.8% to $1.2 billion from $1.4 billion last year. Gross margins year-to-date increased to 35.6% compared to 33.9% last year. Year-to-date 2002 included approximately $6.8 million of goodwill and certain other intangible amortization on a pre-tax basis or $0.07 per share that is not included in 2002. Net income was $63.2 million or $1.07 per diluted share compared to $0.86 per diluted share last year after recording a $0.26 per diluted share restructuring charge. Net sales on a year-to-date basis for the office furniture segment decreased 10.4% while operating profits, before restructuring charges and unallocated corporate expenses as a percent of sales increased to 10.7% versus 10.0% in 2001. Cost reduction, new product introductions and restructuring initiatives are primarily responsible for the improvement in operating margin. The Business and Institutional Furniture Manufacturer's Association (BIFMA) reported shipments down 22% for the first nine months of 2002. The hearth products net sales on a year-to-date basis declined 3.4%; however, operating profits before restructuring and unallocated corporate expenses increased 8.1%. Cost reduction, cost containment efforts and the discontinuance of goodwill amortization are primarily responsible for improved earnings on a year-to-date basis in the hearth products segment. 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. The Company is in the process of reviewing the impact of various federal and state tax credits that may have a favorable effect on its future effective tax rate. The Company's current effective tax rate is 36.0%. Liquidity and Capital Resources As of September 28, 2002, cash and short-term investments increased to $111.6 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 nine months was $103.2 <Page> million compared to $144.3 million last year. While inventory levels increased from year-end due to the year-end 2001 production shutdown, annualized third quarter inventory turns increased to 19.2 versus 16.8 last year. Trade receivables increased from year-end due to normal seasonality and the effect of unusually strong cash collections at the end of 2001. Days sales outstanding for the third quarter were 37.8 compared to 37.6 for the same quarter last year. Cash flow and working capital management are major focuses of management to ensure the Company is poised for growth. Net capital expenditures for the first nine months of 2002 were $16.7 million compared to $32.2 million in 2001 and were primarily for new products and productivity improvements. These investments were funded by cash from operations. The Company's long-term debt decreased from year-end due to classification of $53 million of debentures related to an acquisition as current liabilities and the retirement of $16 million of Industrial Development Revenue bonds. The Board of Directors declared a regular quarterly cash dividend of $0.125 per share on its common stock on August 5, 2002, to shareholders of record at the close of business on August 15, 2002. It was paid on August 30, 2002, and represented the 190th consecutive quarterly dividend paid by the Company. For the nine months ended September 28, 2002, the Company repurchased 30,100 shares of its common stock at a cost of approximately $749,000 or an average price of $24.88 per share. As of September 28, 2002, approximately $77.8 million of the Board's current repurchase authorization remained unspent. On November 7, 2002, the Board of Directors declared a $0.125 per common share cash dividend to shareholders of record on November 15, 2002, to be paid on November 27, 2002. Critical Accounting Policies The 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 and third quarters 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 September 28, 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 <Page> 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 amortization in 2002. Looking Ahead The 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 14.4% in the fourth quarter of 2002 compared to the same quarter last year. 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 effect. Some of the key indicators in the new home construction market are stronger than last year which normally translates into increased market demand for hearth products in future quarters; however, competitive pricing pressures are expected to continue for the balance of the year. The Company continues to work to mitigate the potential negative impact from steel tariffs through various initiatives, including alternative materials and suppliers. The Company anticipates gross margins in the fourth quarter to be slightly lower than recent quarters but comparable with the fourth quarter last year due to increased steel prices. 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 realize financial benefits from investments in new products, to minimize the effects of industry over capacity and foreign imports on its sales and margins, to mitigate the effects of uncertain steel prices and supplies, the possibility that recent improvements in key indicators in the new home construction market will not translate into an increase in demand, and other factors described in the Company's annual and q uarterly reports filed with the Securities and Exchange Commission on Forms 10-K and 10-Q. Item 4.     Controls and Procedures Under the supervision and with the participation of management, the chief executive officer and chief financial officer of the Company have evaluated the effectiveness of the design and operation of the Company's disclosure controls and procedures within 90 days of the filing date of this quarterly report, and, based on their evaluation, the chief executive officer and chief <Page> financial officer have concluded that these controls and procedures are effective. There were no significant changes in internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation. Disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures are also designed to ensure that information is accumulated and communicated to management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure. <Page> Looking Ahead The 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. <Page> PART II.    OTHER INFORMATION 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 50,629,037 or 85.4% 1,290,335 or 2.2% - -0- or 0.0% Three-Year Term: Cheryl A. Francis M. Farooq Kathwari Richard H. Stanley Brian E. Stern 50,693,514 or 86.1% 50,659,534 or 86.0% 50,520,259 or 85.8% 50,938,601 or 86.5% 865,858 or 1.5% 899,838 or 1.5% 1,039,113 or 1.8% 620,771 or 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.See Exhibit Index.   (b)   Reports on Form 8-K.  The Company filed a periodic report on        Form 8-K dated May 7,August 9, 2002, as amended, to report that the dismissal of Arthur Andersen LLP        Chairman, President and Chief Executive Officer and the appointmentVice        President and Chief Financial Officer of PricewaterhouseCoopers LLP as the Company's independent auditorCompany each had        certified the Form 10-Q of HON INDUSTRIES Inc. for the fiscal yearperiod        ended June 29, 2002, pursuant of 18 U.S.C. Section 1350, as        adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. <Page> SIGNATURES 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,November 11, 2002 HON INDUSTRIES Inc. By:   /s/Jerald K. Dittmer                          Jerald K. Dittmer     Vice President and Chief Financial Officer <Page> PART II.    EXHIBITS EXHIBIT INDEX (99.1) Certification of CEO and CFO Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 <Page> (EXHIBIT 99.1) Certification of CEO and CFO Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 In connection with the Quarterly Report on Form 10-Q of HON INDUSTRIES Inc. (the "Company") for the quarterly period ended September 28, 2002, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Jack D. Michaels, as Chairman, President and Chief Executive Officer of the Company, and Jerald K. Dittmer, as Vice President and Chief Financial Officer of the Company, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge: 1.  The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2.  The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.       /s/ Jack D. Michaels                     Name:  Jack D. Michaels Title:   Chairman, President and Chief            Executive Officer Date:   November 11, 2002     /s/ Jerald K. Dittmer                     Name:  Jerald K. Dittmer Title:   Vice President and Chief Financial            Officer Date:   November 11, 2002 This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. <Page> CERTIFICATION OF CHIEF EXECUTIVE OFFICER Sarbanes-Oxley Act Section 302 I, Jack D. Michaels, Chairman, President and Chief Executive Officer of HON INDUSTRIES Inc., certify that: 1.  I have reviewed this quarterly report on Form 10-Q of HON INDUSTRIES Inc.; 2.  Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; and 3.  Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; and 4.  The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:     a.  designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly, during the period in which this quarterly report is being prepared;     b.  evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and     c.  presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; and 5.  The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors:     a.  all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and     b.  any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6.  The registrant's other certifying officer and I have indicated in this quarterly report whether there are significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date:   November 11, 2002     /s/ Jack D. Michaels                        Name:  Jack D. Michaels Title:   Chairman, President and Chief            Executive Officer <Page> CERTIFICATION OF CHIEF FINANCIAL OFFICER Sarbanes-Oxley Act Section 302 I, Jerald K. Dittmer, Vice President and Chief Financial Officer of HON INDUSTRIES Inc., certify that: 1.  I have reviewed this quarterly report on Form 10-Q of HON INDUSTRIES Inc.; 2.  Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; and 3.  Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; and 4.  The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:     a.  designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly, during the period in which this quarterly report is being prepared;     b.  evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and     c.  presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; and 5.  The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors:     a.  all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and     b.  any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6.  The registrant's other certifying officer and I have indicated in this quarterly report whether there are significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date:   November 11, 2002     /s/ Jerald K. Dittmer                       Name:  Jerald K. Dittmer Title:   Vice President and Chief Financial            Officer