UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q/A
(MARK ONE)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 1, 1994
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-2648
HON INDUSTRIES Inc.
An Iowa Corporation IRS Employer No. 42-0617510
414 East Third Street
P.O. Box 1109
Muscatine, Iowa 52761-7109
(319) 264-7400
Indicate by check mark whether the registrant (1) has filed all required
reports to be filed by Section 13 or 15(d) of the Securities and 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.
Common Stock, $1 Par Value -- 31,045,165 shares as of October 1, 1994
Exhibit Index is on page 13.
Page 1
HON INDUSTRIES Inc. and SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited) Page
Condensed Consolidated Balance Sheets --
October 1, 1994, and January 1, 1994 3-4
Condensed Consolidated Statements of Income --
Three Months Ended October 1, 1994, and October 2, 1993 5
Condensed Consolidated Statements of Income --
Nine Months Ended October 1, 1994, and October 2, 1993 6
Condensed Consolidated Statements of Cash Flows --
Nine Months Ended October 1, 1994, and October 2, 1993 7
Notes to Condensed Consolidated Financial Statements 8-9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10-11
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 12
EXHIBIT INDEX 13
Page 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
HON INDUSTRIES Inc. and SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
October 1,
1994 January 1,
ASSETS (Unaudited) 1994
(In thousands)
CURRENT ASSETS
Cash and cash equivalents $ 15,693 $ 32,778
Short-term investments 6,167 11,598
Receivables 97,380 83,650
Inventories (Note B) 37,912 38,630
Deferred income taxes 12,691 11,304
Prepaid expenses and
other current assets 6,967 10,459
Total Current Assets 176,810 188,419
PROPERTY, PLANT, AND EQUIPMENT, at cost
Land and land improvements 8,839 8,779
Buildings 84,062 81,409
Machinery and equipment 181,545 158,386
Construction in progress 18,963 18,085
293,409 266,659
Less accumulated depreciation 116,975 108,889
Net Property, Plant, and Equipment 176,434 157,770
OTHER ASSETS 6,111 6,216
Total Assets $359,355 $352,405
See accompanying notes to condensed consolidated financial statements.
Page 3
HON INDUSTRIES Inc. and SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
October 1,
1994 January 1,
LIABILITIES AND SHAREHOLDERS' EQUITY (Unaudited) 1994
(In thousands)
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 93,272 $ 97,205
Income taxes 5,931 6,936
Note payable and current maturities
of long-term debt obligations 6,057 6,618
Total Current Liabilities 105,260 110,759
LONG-TERM DEBT AND OTHER LIABILITIES 45,771 45,260
CAPITAL LEASE OBLIGATIONS 9,233 5,854
DEFERRED INCOME TAXES 11,724 10,979
SHAREHOLDERS' EQUITY
Capital Stock:
Preferred, $1 par value; authorized
1,000,000 shares; outstanding --
1994 - 0 shares; 1993 - 0 shares - -
Common, $1 par value; authorized
100,000,000 shares; outstanding --
1994 - 31,045,165 shares;
1993 - 31,675,846 Shares 31,045 31,676
Paid-in capital 604 281
Retained earnings 169,201 161,079
Receivable from HON Members Company
Ownership Plan (13,483) (13,483)
Total Shareholders' Equity 187,367 179,553
Total Liabilities and
Shareholders' Equity $359,355 $352,405
See accompanying notes to condensed consolidated financial statements.
Page 4
HON INDUSTRIES Inc. and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
October 1, October 2,
1994 1993
(In thousands, except
per share data)
Net sales $222,112 $203,070
Cost of products sold 151,107 139,046
Gross Profit 71,005 64,024
Selling and administrative expenses 46,384 45,331
Operating Income 24,621 18,693
Interest income 925 603
Interest expense 887 668
Income Before Income Taxes 24,659 18,628
Income taxes 9,124 7,021
Net Income $ 15,535 $ 11,607
Net income per common share $.49 $.36
Average number of common shares
outstanding 31,169,155 32,033,985
Cash dividends per common share $.11 $.10
See accompanying notes to condensed consolidated financial statements.
Page 5
HON INDUSTRIES Inc. and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Nine Months Ended
October 1, October 2,
1994 1993
(In thousands, except
per share data)
Net sales $615,850 $566,718
Cost of products sold 421,758 393,594
Gross Profit 194,092 173,124
Selling and administrative expenses 135,907 128,171
Operating Income 58,185 44,953
Interest income 1,868 1,888
Interest expense 2,299 2,460
Income Before Income Taxes 57,754 44,381
Income taxes 21,369 16,421
Income Before Cumulative Effect of
Accounting Changes 36,385 27,960
Cumulative effect of accounting
changes (Note C) (237) 489
Net Income $ 36,148 $ 28,449
Income per common share:
Income before cumulative effect of
accounting changes $1.16 $.86
Cumulative effect of accounting
changes (Note C) (.01) .02
Net Income $1.15 $.88
Average number of common shares
outstanding 31,337,772 32,185,209
Cash dividends per common share $.33 $.30
See accompanying notes to condensed consolidated financial statements.
Page 6
HON INDUSTRIES Inc. and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
October 1, October 2,
1994 1993
(In thousands)
Net Cash Flows From (To) Operating Activities:
Net income $ 36,148 $ 28,449
Noncash items included in net income:
Depreciation and amortization 14,222 11,850
Other postretirement and postemployment
benefits 1,742 1,203
Deferred income taxes (643) (949)
Cumulative effect of accounting
changes (Note C) 237 (489)
Other - net 34 43
Net increase (decrease) in noncash operating
assets and liabilities (14,280) 1,733
Increase in other liabilities 202 553
Net cash flows from operating activities 37,662 42,393
Net Cash Flows From (To) Investing Activities:
Capital expenditures - net (28,985) (20,387)
Short-term investments - net 5,431 (831)
Long-term investments (7) (1,900)
Other - net (277) 225
Net cash flows (to) investing activities (23,838) (22,893)
Net Cash Flows From (To) Financing Activities:
Purchase of HON INDUSTRIES common stock (19,411) (11,421)
Payments of note and long-term debt (2,575) (3,864)
Proceeds from sale of HON INDUSTRIES common
stock to members 1,398 844
Dividends paid (10,321) (9,525)
Net cash flows (to) financing activities (30,909) (23,966)
Net increase (decrease) in cash and cash
equivalents (17,085) (4,466)
Cash and cash equivalents at beginning
of period 32,778 40,069
Cash and cash equivalents at end of period $ 15,693 $ 35,603
See accompanying notes to condensed consolidated financial statements.
Page 7
HON INDUSTRIES Inc. and SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
October 1, 1994
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 adjust-
ments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included, except as discussed in Note E. Operating
results for the nine-month period ended October 1, 1994, are not necessarily
indicative of the results that may be expected for the year ending December 31,
1994. 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 January 1, 1994.
Note B. Inventories
Inventories of the Company and its subsidiaries are summarized as follows:
October 1, 1994
($000) (Unaudited) January 1, 1994
Finished products $13,134 $10,731
Materials and work in process 24,778 27,899
$37,912 $38,630
Note C. Employers' Accounting for Postemployment Benefits
The Company adopted Statement of Financial Accounting Standards No. 112,
"Employers' Accounting for Postemployment Benefits," in the first quarter of
1994. This Statement requires an accrual method of recognizing postemployment
benefits such as disability-related benefits. The cumulative effect at
January 2, 1994, of adopting Statement No. 112 reduced net income by $237,000,
net of tax, or $.01 per share.
The Company adopted Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes," in the first quarter of 1993. Management chose
to record the cumulative effect of the accounting change from the deferred
method to the liability method on an immediate recognition basis with no
restatement of prior years' financial statements. The accounting change
increased net income by $489,000, or $.02 per share.
Page 8
Note D. Accounting for Certain Investments in Debt and Equity Securities
The Company adopted Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities," in the
first quarter of 1994. This Statement requires that, except for debt
securities classified as "held-to-maturity securities," investments in debt
and equity securities should be reported at fair value. The effect of
adopting the new rules was not material to the Company's financial position or
results of operations.
Note E. Changes in Business
On October 8, 1993, the Company announced the closing of its CorryHiebert
Corporation furniture plant located in Corry, Pennsylvania. The closure
resulted in a pretax charge of $3,980,000 ($.08 a share after-tax effect) and
was recorded in the third fiscal quarter ended October 2, 1993.
Page 9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
The following is management's discussion and analysis of certain significant
factors which have affected the Company's financial position and results of
operations during the periods included in the accompanying condensed consoli-
dated financial statements.
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 Nine Months Ended Three Months Ended
Dollars in Thousands Oct. 1, 1994 & Oct. 1, 1994 & Oct. 1, 1994 &
Oct. 2, 1993 Oct. 2, 1993 July 2, 1994
Net sales $19,042 9.4% $49,132 8.7% $29,067 15.1%
Cost of products sold 12,061 8.7 28,164 7.2 17,775 13.3
Selling & Administrative
expenses 1,053 2.3 7,736 6.0 1,681 3.8
Interest income 322 53.4 (20) (1.1) 523 130.1
Interest expense 219 32.8 (161) (6.5) 112 14.5
Income taxes 2,103 30.0 4,948 30.1 3,709 68.5
Income before cumulative
effect of accounting
change 3,928 33.8 8,425 30.1 6,313 68.5
Cumulative effect of
accounting change - - (726) (148.5) - -
Net income 3,928 33.8 7,699 27.1 6,313 68.5
For the quarter ended October 1, 1994, consolidated net sales were $222.1
million compared to $203.1 million in 1993, up 9.4%. Net income was $15.5
million, a 33.8% increase over the third quarter of 1993. Net income per
share increased to $.49 per share, a 36.1% increase over the same quarter a
year ago.
For the nine months ended October 1, 1994, consolidated net sales were $615.9
million compared to $566.7 million in 1993, up 8.7%. Net income for the
period was $36.1 million, a 27.1% improvement over the $28.4 million earned in
1993. Earnings per share for the nine months were $1.15 compared to $.88 in
1993, a 30.7% increase.
This quarter's results are the highest third quarter results in the Company's
history. However, the 1994 net income percentage comparisons with the 1993
periods are influenced by a one-time charge taken in the third quarter of 1993
for the discontinuance of CorryHiebert Corporation operations. If this event
had not occurred, third quarter 1994 net income would have shown an increase
of only 10.3%, and net income per share would have increased only 11.4% over
the same quarter in 1993. Likewise, nine-month 1994 comparisons to 1993 would
have yielded a smaller increase in net income of 16.9% and an increase in net
income per share of only 19.8%.
Page 10
With approximately 60 days remaining in the fiscal year, 1994 appears to be a
year of solid accomplishments and encouraging trends for HON INDUSTRIES. All
sectors of the Company's office furniture business reported improvements in
sales and profits during the quarter. Heatilator Inc., the Company's
manufacturer of fireplaces, heating stoves, and related products has also
enjoyed increased sales and profitability.
These increases in sales and profits can be attributed to the Company's
ongoing program of rapid continuous improvement, sales initiatives, and cost
control and reduction. At the same time, the business and institutional
furniture industry is gaining momentum, according to trade association
figures. Office furniture industry sales are reported to be growing at an 8%
annual rate.
The Company's ongoing progress in rapid continuous improvement and vigorous
cost control is a significant factor in its improved profitability. However,
its strong relationships with dealers, its excellent distribution system, and
its continued emphasis on products characterized by quality and value are the
elements that support its growth in sales and profits in a very competitive
marketplace.
Cash and short-term investments as of October 1, 1994, were $21.9 million.
The two major uses of cash during the current year have been for capital
expenditures and purchase of HON INDUSTRIES common stock. Net capital
expenditures for the nine months of 1994 have been $29.0 million compared to
$20.4 million for the same period in 1993.
The Company acquired 256,585 shares of its common stock, at a cost of
approximately $6.7 million, on the open market during the quarter under its
ongoing stock repurchase program. On a year-to-date basis, 687,752 shares
have been acquired at a cost of approximately $19.4 million. Of the Board of
Directors authorized amount for repurchase of common stock under the program,
approximately $10.8 million remain available.
The Company's 158th consecutive quarterly common stock dividend of $.11 per
share was paid on September 1, 1994, to shareholders of record on August 18,
1994.
David C. Stuebe was named Vice President and Chief Financial Officer of the
Corporation. Mr. Stuebe is a Certified Public Accountant who has a diverse
financial and operations background in various manufacturing businesses. He
started with the Company on October 4, 1994. Mr. Stuebe replaces John W.
Axel, Senior Vice President, Finance and Development, who had resigned in
January 1994.
Page 11
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits. See Exhibit Index.
(b) Reports on Form 8-K. No reports on Form 8-K have been filed during the
quarter for which this report is filed.
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.
HON INDUSTRIES Inc.
Date: November 14, 1994 By /s/ David C. Stuebe
David C. Stuebe
Vice President and
Chief Financial Officer
By /s/ Melvin L. McMains
Melvin L. McMains
Controller
Page 12
PART II. EXHIBITS
EXHIBIT INDEX Page
(27) Financial Data Schedule 14
Page 13
EXHIBIT 27
Financial Data Schedule