-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VuHNkLmg/r5pPwH8wECg4gfm/SMdPiAbu19OLOzXyxamTeqVhHEebml/5J4X1+BY zJa9+/HYf8PMx5kr38XdMQ== 0000950131-96-001391.txt : 19960402 0000950131-96-001391.hdr.sgml : 19960402 ACCESSION NUMBER: 0000950131-96-001391 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19941231 FILED AS OF DATE: 19960401 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: HON INDUSTRIES INC CENTRAL INDEX KEY: 0000048287 STANDARD INDUSTRIAL CLASSIFICATION: OFFICE FURNITURE (NO WOOD) [2522] IRS NUMBER: 420617510 STATE OF INCORPORATION: IA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-02648 FILM NUMBER: 96542833 BUSINESS ADDRESS: STREET 1: 414 EAST THIRD STREET - PO BOX 1109 CITY: MUSCATINE STATE: IA ZIP: 52761-7109 BUSINESS PHONE: 3192647400 MAIL ADDRESS: STREET 1: 414 EAST THIRD STREET STREET 2: P O BOX 1109 CITY: MUSCATINE STATE: IA ZIP: 52761 FORMER COMPANY: FORMER CONFORMED NAME: HOME O NIZE CO DATE OF NAME CHANGE: 19681001 10-K/A 1 FORM 10-K/A UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------------------- FORM 10-K/A AMENDMENT NO. 1 TO ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994 ----------------------- Commission File No. 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 Securities registered pursuant to Section 12(b) of the Act: None. Securities registered pursuant to Section 12(g) of the Act: Common Stock, with Par Value of $1.00 Per Share. Name of each exchange on which registered: The Nasdaq Stock Market. Indicate by check mark whether the registrant (1) has filed all reports required 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 by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K/A or any amendment to this Form 10-K/A. --- The aggregate market value of the voting stock held by nonaffiliates of the registrant, as of March 15, 1996, was: $391,628,151, assuming all 5% holders are affiliates. The numbers of shares outstanding of the registrant's common stock, as of March 15, 1996, was 30,290,764. Documents Incorporated by Reference None. Index of Exhibits is located on Page 18. Page 1 of 20 HON INDUSTRIES INC. AMENDMENT NO. 1 TO ANNUAL REPORT ON FORM 10-K/A TABLE OF CONTENTS
PAGE ---- Part II Item 8. Financial Statements and Supplementary Data.................... 3 Part IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.................................................. 4 Signatures............................................................... 6 Financial Statements..................................................... 8 Index of Exhibits........................................................ 18
2 PART II ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The financial statements listed under Item 14(a)(1) and (2) are filed as part of this report. The Summary of Unaudited Quarterly Results of Operations is presented in the "Investor Information" section which follows the "Notes to the Consolidated Financial Statements" material filed as part of this report. 3 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K (a) (1) ................................................. Financial Statements. The following consolidated financial statements of HON INDUSTRIES Inc. and Subsidiaries included in the Company's 1994 Annual Report to Shareholders are filed as a part of this report pursuant to Item 8:
Page ---- Report of Independent Auditors..................................... 8 Consolidated Statements of Income for the Years Ended December 31, 1994; January 1, 1994; and January 2, 1993............ 9 Consolidated Balance Sheets -- December 31, 1994; January 1, 1994; and January 2, 1993................................................ 10 Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 1994; January 1, 1994; and January 2, 1993............ 11 Consolidated Statements of Cash Flows for the Years Ended December 31, 1994; January 1, 1994; and January 2, 1993............ 12 Notes to Consolidated Financial Statements......................... 13 Investor Information (including Summary of Unaudited Quarterly Results of Operations)............................................. 17
(2) Financial Statement Schedules. The following consolidated financial statement schedule of the Company and subsidiaries was previously filed with the Company's Annual Report on Form 10-K for the year ended December 31, 1994 pursuant to Item 14(d) and is incorporated herein by reference: Schedule II Valuation and Qualifying Accounts for the Years Ended December 31, 1994; January 1, 1994; and January 2, 1993 All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and, therefore, have been omitted. (b) Reports on Form 8-K. There were no reports on Form 8-K filed during the last quarter of the period covered by this report. 4 (c) Exhibits. The following exhibits were previously filed with the Company's Annual Report on Form 10-K for the year ended December 31, 1994 pursuant to Item 601 of Regulation S-K and are incorporated herein by reference: Exhibits -------- (10) Change in Control Agreement of the Registrant (22) Subsidiaries of the Registrant (24) Consent of Independent Auditors (27) Financial Data Schedule (28A) Executive Bonus Plan of the Registrant (28B) Executive Long-Term Incentive Compensation Plan of the Registrant The following exhibit is filed pursuant to Item 601 of Regulation S-K: Page in Exhibit Form 10-K ------- --------- (23) Powers of Attorney 19 (d) Financial Statement Schedules. See Item 14(a)(2). 5 SIGNATURES ---------- Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Amendment No. 1 to Annual Report on Form 10-K/A to be signed on its behalf by the undersigned, thereunto duly authorized. HON INDUSTRIES Inc. Date: March 27, 1996 By /s/ Stanley M. Howe ---------------------------- Stanley M. Howe Chairman of the Board Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities indicated on March 27, 1996. Signature Title Date - --------- ----- ---- /s/ Stanley M. Howe Chairman of the Board and 3/27/96 - ------------------------ Director Stanley M. Howe * President and CEO, 3/27/96 - ------------------------ Principal Executive Officer, Jack D. Michaels and Director * Controller and 3/27/96 - ------------------------ Principal Accounting Officer Melvin L. McMains * Vice President and 3/27/96 - ------------------------ Chief Financial Officer David C. Stuebe 6 Signature Title Date - --------- ----- ---- * Director 3/27/96 - ------------------------ Robert W. Cox * Director 3/27/96 - ------------------------ W. James Farrell * Director 3/27/96 - ------------------------ Robert L. Katz * Director 3/27/96 - ------------------------ Lee Liu * Director 3/27/96 - ------------------------ Celeste C. Michalski * Director 3/27/96 - ------------------------ Michael S. Plunkett * Director 3/27/96 - ------------------------ Herman J. Schmidt * Director 3/27/96 - ------------------------ Richard H. Stanley * Director 3/27/96 - ------------------------ Jan K. Ver Hagen * Director 3/27/96 - ------------------------ Lorne R. Waxlax * The undersigned by signing his name hereunto has hereby signed this report on behalf of the undersigned in the capacities mentioned and the above- named officers and directors, on March 27, 1996, pursuant to a power of attorney executed on behalf of each such director and officer and filed with the Securities and Exchange Commission as Exhibit 23 to this report By: /s/ Stanley M. Howe ------------------------------------------------- Stanley M. Howe Chairman of the Board and Director 7 REPORT OF INDEPENDENT AUDITORS Board of Directors and Shareholders HON INDUSTRIES Inc. We have audited the accompanying balance sheets of HON INDUSTRIES Inc. and subsidiaries as of December 31, 1994, January 1, 1994, and January 2, 1993, and the related consolidated statements of income, shareholders' equity, and cash flows for the years then ended. Our audits also included the financial statement schedule listed in the Index at Item 14(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of HON INDUSTRIES Inc. and subsidiaries as of December 31, 1994, January 1, 1994, and January 2, 1993, and the consolidated results of their operations and their cash flows for the years then ended, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. As discussed in the Notes to Consolidated Financial Statements, the Company changed its method of accounting for postemployment benefits in 1994 and its method of accounting for income taxes and postretirement benefits other than pensions in 1993. Ernst & Young LLP Chicago, Illinois February 1, 1995 8 HON INDUSTRIES Inc. and Subsidiaries Consolidated Statements of Income
================================================================================================================================== FOR THE YEARS 1994 1993 1992 - ---------------------------------------------------------------------------------------------------------------------------------- Net sales.............................................................................. $845,998,000 $780,326,000 $706,550,000 Cost of products sold.................................................................. 573,392,000 537,828,000 479,179,000 - ---------------------------------------------------------------------------------------------------------------------------------- GROSS PROFIT 272,606,000 242,498,000 227,371,000 Selling and administrative expenses.................................................... 185,490,000 171,048,000 165,075,000 - ---------------------------------------------------------------------------------------------------------------------------------- OPERATING INCOME 87,116,000 71,450,000 62,296,000 - ---------------------------------------------------------------------------------------------------------------------------------- Interest income........................................................................ 2,470,000 2,524,000 3,038,000 Interest expense....................................................................... 3,248,000 3,120,000 3,441,000 - ---------------------------------------------------------------------------------------------------------------------------------- INCOME BEFORE INCOME TAXES.......................................................... 86,338,000 70,854,000 61,893,000 Income taxes........................................................................... 31,945,000 26,216,000 23,210,000 - ---------------------------------------------------------------------------------------------------------------------------------- INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGES............................... 54,393,000 44,638,000 38,683,000 Cumulative effect of accounting changes................................................ (237,000) 489,000 -- NET INCOME.......................................................................... $ 54,156,000 $ 45,127,000 $ 38,683,000 ================================================================================================================================== NET INCOME PER COMMON SHARE: Income before cumulative effect of accounting changes.................................. $ 1.74 $ 1.39 $1.18 Cumulative effect of accounting changes................................................ (.01) .02 -- NET INCOME.......................................................................... $ 1.73 $ 1.41 $1.18 ================================================================================================================================== The accompanying notes are an integral part of the consolidated financial statements.
9 HON INDUSTRIES Inc. and Subsidiaries Consolidated Balance Sheets
=================================================================================================================================== AS OF YEAR-END 1994 1993 1992 - ----------------------------------------------------------------------------------------------------------------------------------- ASSETS - ----------------------------------------------------------------------------------------------------------------------------------- CURRENT ASSETS Cash and cash equivalents........................................................... $ 27,659,000 $ 32,778,000 $ 40,069,000 Short-term investments.............................................................. 3,083,000 11,598,000 5,872,000 Receivables......................................................................... 94,269,000 83,650,000 78,857,000 Inventories......................................................................... 43,259,000 38,630,000 30,262,000 Deferred income taxes............................................................... 11,565,000 11,304,000 11,439,000 Prepaid expenses and other current assets........................................... 8,975,000 10,459,000 4,810,000 - ----------------------------------------------------------------------------------------------------------------------------------- TOTAL CURRENT ASSETS 188,810,000 188,419,000 171,309,000 PROPERTY, PLANT, AND EQUIPMENT......................................................... 177,844,000 157,770,000 145,849,000 OTHER ASSETS........................................................................... 5,914,000 6,216,000 5,588,000 - ----------------------------------------------------------------------------------------------------------------------------------- TOTAL ASSETS $372,568,000 $ 352,405,000 $322,746,000 =================================================================================================================================== LIABILITIES AND SHAREHOLDERS' EQUITY - ----------------------------------------------------------------------------------------------------------------------------------- CURRENT LIABILITIES Accounts payable and accrued expenses............................................... $ 99,898,000 $ 97,205,000 $ 78,904,000 Income taxes........................................................................ 4,949,000 6,936,000 5,750,000 Note payable and current maturities of long-term obligations........................ 6,246,000 6,618,000 7,126,000 - ----------------------------------------------------------------------------------------------------------------------------------- TOTAL CURRENT LIABILITIES 111,093,000 110,759,000 91,780,000 LONG-TERM DEBT AND OTHER LIABILITIES................................................... 46,080,000 45,260,000 46,519,000 CAPITAL LEASE OBLIGATIONS.............................................................. 8,661,000 5,854,000 7,721,000 DEFERRED INCOME TAXES.................................................................. 12,094,000 10,979,000 13,717,000 SHAREHOLDERS' EQUITY Common stock........................................................................ 30,675,000 31,676,000 32,369,000 Paid-in capital..................................................................... 434,000 281,000 2,580,000 Retained earnings................................................................... 174,642,000 161,079,000 143,741,000 Receivable from HON Members Company Ownership Plan.................................. (11,111,000) (13,483,000) (15,681,000) - ----------------------------------------------------------------------------------------------------------------------------------- TOTAL SHAREHOLDERS' EQUITY 194,640,000 179,553,000 163,009,000 - ----------------------------------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $372,568,000 $ 352,405,000 $322,746,000 =================================================================================================================================== The accompanying notes are an integral part of the consolidated financial statements.
10 HON INDUSTRIES Inc. and Subsidiaries Consolidated Statements of Shareholders' Equity
=================================================================================================================== FOR THE YEARS 1994 1993 1992 - ------------------------------------------------------------------------------------------------------------------- COMMON STOCK Balance, beginning of year......................................... $ 31,676,000 $ 32,369,000 $ 32,209,000 Purchase of shares................................................. (1,078,000) (751,000) (818,000) Shares issued under Members Stock Purchase Plan and restricted stock awards....................................... 77,000 58,000 62,000 Shares issued under HON Members Company Ownership Plan.................................................... -- -- 916,000 - ------------------------------------------------------------------------------------------------------------------- Balance, end of year............................................ $ 30,675,000 $ 31,676,000 $ 32,369,000 - ------------------------------------------------------------------------------------------------------------------- PAID-IN CAPITAL Balance, beginning of year......................................... $ 281,000 $ 2,580,000 $ 194,000 Purchase of shares................................................. (1,567,000) (3,615,000) (15,229,000) Shares issued under Members Stock Purchase Plan and restricted stock awards....................................... 1,720,000 1,316,000 1,031,000 Shares issued under HON Members Company Ownership Plan.................................................... -- -- 16,584,000 - ------------------------------------------------------------------------------------------------------------------- Balance, end of year............................................ $ 434,000 $ 281,000 $ 2,580,000 - ------------------------------------------------------------------------------------------------------------------- RETAINED EARNINGS Balance, beginning of year......................................... $161,079,000 $143,741,000 $117,172,000 Net income......................................................... 54,156,000 45,127,000 38,683,000 Purchase of shares................................................. (26,992,000) (15,202,000) -- Cash dividends declared, common.................................... (13,601,000) (12,587,000) (12,114,000) - ------------------------------------------------------------------------------------------------------------------- Balance, end of year............................................ $174,642,000 $161,079,000 $143,741,000 - ------------------------------------------------------------------------------------------------------------------- RECEIVABLE FROM HON MEMBERS COMPANY OWNERSHIP PLAN Balance, beginning of year......................................... $(13,483,000) $(15,681,000) $ -- Principal loaned to HON Members Company Ownership Plan.................................................... -- -- (17,500,000) Principal repaid by HON Members Company Ownership Plan.................................................... 2,372,000 2,198,000 1,819,000 - ------------------------------------------------------------------------------------------------------------------- Balance, end of year............................................ $(11,111,000) $(13,483,000) $(15,681,000) - ------------------------------------------------------------------------------------------------------------------- SHAREHOLDERS' EQUITY Balance, end of year............................................ $194,640,000 $179,553,000 $163,009,000 ===================================================================================================================
The accompanying notes are an integral part of the consolidated financial statements. 11 HON INDUSTRIES Inc. and Subsidiaries Consolidated Statements of Cash Flows
- ----------------------------------------------------------------------------------------------------------------------------------- FOR THE YEARS 1994 1993 1992 - ----------------------------------------------------------------------------------------------------------------------------------- NET CASH FLOWS FROM (TO) OPERATING ACTIVITIES: Net income.......................................................................... $ 54,156,000 $ 45,127,000 $ 38,683,000 Noncash items included in net income: Depreciation and amortization..................................................... 19,042,000 16,631,000 15,478,000 Other postretirement and postemployment benefits.................................. 2,104,000 1,750,000 -- Deferred income taxes............................................................. 854,000 (2,113,000) (175,000) Cumulative effect of accounting changes........................................... 237,000 (489,000) -- Other -- net...................................................................... 54,000 58,000 (109,000) Changes in working capital: Receivables....................................................................... (10,619,000) (4,468,000) (12,962,000) Inventories....................................................................... (4,629,000) (7,909,000) 6,567,000 Prepaid expenses.................................................................. 1,484,000 (5,428,000) (677,000) Accounts payable and accrued expenses............................................. 4,619,000 16,434,000 8,847,000 Accrued facilities closing and reorganization expenses............................ (1,885,000) 1,867,000 -- Income taxes payable.............................................................. (1,847,000) 1,186,000 (350,000) Increase in other liabilities....................................................... 1,077,000 1,334,000 452,000 - ----------------------------------------------------------------------------------------------------------------------------------- Net cash flows from (to) operating activities.................................... 64,647,000 63,980,000 55,754,000 - ----------------------------------------------------------------------------------------------------------------------------------- NET CASH FLOWS FROM (TO) INVESTING ACTIVITIES: Capital expenditures -- net......................................................... (35,005,000) (27,541,000) (26,626,000) Acquisition spending................................................................ -- (1,265,000) (2,393,000) Receivable from HON Members Company Ownership Plan..................................................................... 2,372,000 2,198,000 (15,681,000) Short-term investments -- net....................................................... 8,515,000 (5,726,000) (1,444,000) Other -- net........................................................................ (291,000) (1,901,000) (134,000) - ----------------------------------------------------------------------------------------------------------------------------------- Net cash flows from (to) investing activities.................................... (24,409,000) (34,235,000) (46,278,000) - ----------------------------------------------------------------------------------------------------------------------------------- NET CASH FLOWS FROM (TO) FINANCING ACTIVITIES: Purchase of HON INDUSTRIES common stock............................................. (29,637,000) (19,568,000) (16,047,000) Proceeds from long-term debt........................................................ -- -- 17,500,000 Payments of note and long-term debt................................................. (3,916,000) (6,025,000) (7,375,000) Proceeds from sale of HON INDUSTRIES common stock to HON Members Company Ownership Plan.............................................. -- -- 17,500,000 Proceeds from sale of HON INDUSTRIES common stock to members............................................................ 1,797,000 1,144,000 944,000 Dividends paid...................................................................... (13,601,000) (12,587,000) (12,114,000) - ----------------------------------------------------------------------------------------------------------------------------------- Net cash flows from (to) financing activities................................... (45,357,000) (37,036,000) 408,000 - ----------------------------------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS................................... (5,119,000) (7,291,000) 9,884,000 - ----------------------------------------------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR......................................... 32,778,000 40,069,000 30,185,000 - ----------------------------------------------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS AT END OF YEAR............................................... $ 27,659,000 $ 32,778,000 $ 40,069,000 =================================================================================================================================== The accompanying notes are an integral part of the consolidated financial statements.
12 HON INDUSTRIES Inc. and Subsidiaries Notes to Consolidated Financial Statements PRINCIPAL BUSINESS AND SIGNIFICANT CUSTOMER INFORMATION The Company operates in one principal business segment, the manufacture of office furniture and accessories, including file cabinets, desks, chairs, credenzas, and panel systems. The Company also manufactures factory-built fireplaces, fireplace inserts, and stoves; however, this business is not of sufficient size to be a reportable segment. One customer accounted for approximately 10%, 13%, and 12% of consolidated net sales in 1994, 1993, and 1992, respectively. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation and Fiscal Year-End - ----------------------------------------------- The consolidated financial statements include the accounts and transactions of the Company and its subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation. The Company's fiscal year ends on the Saturday nearest December 31. Fiscal year 1994 ended on December 31, 1994; 1993 ended on January 1, 1994; and 1992 ended on January 2, 1993. Cash and Cash Equivalents - ------------------------- The Company considers all investments with a maturity of three months or less when purchased to be cash equivalents. Short-Term Investments - ---------------------- Short-term investments are stated at cost, which approximates market value. Receivables - ----------- Accounts receivable are presented net of an allowance for doubtful accounts of $1,654,000; $1,917,000; and $1,964,000 for 1994, 1993, and 1992, respectively. Inventories - ----------- Inventories are valued at the lower of cost or market, determined principally by the last-in, first-out (LIFO) method. Property, Plant, and Equipment - ------------------------------ Property, plant, and equipment are carried at cost. Depreciation has been computed by the straight-line method over estimated useful lives: land improvements, 10-20 years; buildings, 10-40 years; and machinery and equipment, 4-12 years. CHANGES IN BUSINESS On October 8, 1993, the Company announced the closing of its CorryHiebert Corporation furniture plant located in Corry, Pennsylvania, which closed on December 17, 1993. The closure resulted in a pretax charge of $3,980,000 (after- tax effect of $2,507,000, or $.08 per share) recorded in the fiscal quarter ended October 2, 1993. SUPPLEMENTAL CASH FLOW INFORMATION
1994 1993 1992 ------------------------- (In thousands) Interest paid during the year....................... $ 3,234 $ 3,219 $ 3,447 Income taxes paid during the year................... 32,534 27,144 23,734
The Company incurred capital lease obligations of $8,561,000 in 1992 in connection with lease agreements to acquire information technology equipment. INVENTORIES
1994 1993 1992 --------------------------- (In thousands) Finished products................................. $13,554 $10,731 $ 8,252 Materials and work in process..................... 29,705 27,899 22,010 --------------------------- $43,259 $38,630 $30,262 ===========================
Current replacement cost exceeded the amount stated for inventories valued by the LIFO method by approximately $12,983,000; $11,705,000; and $12,666,000 as of year-end 1994, 1993, and 1992, respectively. PROPERTY, PLANT, AND EQUIPMENT
1994 1993 1992 ------------------------------ (In thousands) Land and land improvements..................... $ 8,832 $ 8,779 $ 8,767 Buildings...................................... 84,801 81,409 79,819 Machinery and equipment........................ 185,421 158,386 142,528 Construction and equipment installation in progress..................... 17,915 18,085 17,048 ------------------------------ 296,969 266,659 248,162 Less allowances for depreciation............... 119,125 108,889 102,313 ------------------------------ $177,844 $157,770 $145,849 ==============================
ACCOUNTS PAYABLE AND ACCRUED EXPENSES
1994 1993 1992 --------------------------- (In thousands) Trade accounts payable............................ $40,939 $36,873 $28,638 Compensation...................................... 3,343 2,843 2,658 Profit sharing and retirement expense............. 11,066 10,913 10,009 Vacation pay...................................... 8,579 8,083 7,957 Marketing expenses................................ 17,443 20,995 12,370 Workers' compensation, general, and product liability expenses...................... 5,492 6,925 7,359 Other accrued expenses............................ 13,036 10,573 9,913 --------------------------- $99,898 $97,205 $78,904 ===========================
13 HON INDUSTRIES Inc. and Subsidiaries Notes to Consolidated Financial Statements LONG-TERM DEBT AND OTHER LIABILITIES
1994 1993 1992 ------------------------- (In thousands) Industrial development revenue bonds, various issues, payable through 2013 with interest at 5.85 - 8.13% per annum............................ $24,928 $25,396 $26,040 Note payable to bank, payable quarterly through 1996 with interest at a variable rate (6.69% at year- end 1994)......................................... 9,700 12,100 14,100 Other notes and amounts............................. 11,452 7,764 6,379 ------------------------- $46,080 $45,260 $46,519 =========================
Aggregate maturities of long-term debt and other liabilities are as follows (in thousands): 1995 $ 5,468 1996 12,150 1997 1,391 1998 1,541 1999 976 Thereafter 30,022
Certain of the above borrowing arrangements include covenants which require the maintenance of a minimum level of working capital, place restrictions on the payment of cash dividends, and limit the assumption of additional debt and lease obligations. Approximately $146,489,000 of retained earnings were unrestricted at the end of 1994. The fair value of the Company's outstanding long-term debt obligations at year- end 1994 approximates the recorded aggregate amount. Property, plant and equipment, with net carrying values of approximately $28,406,000 at the end of 1994, are mortgaged. INCOME TAXES Effective January 3, 1993, the Company changed its method of accounting for income taxes as required by Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" (FAS No. 109). Financial statements for years prior to 1993 were not restated. The cumulative effect of adopting FAS No. 109 at January 3, 1993, was to increase net income by $489,000, or $.02 a share. Significant components of the provision for income taxes are as follows:
Deferred Liability Method Method 1994 1993 1992 ---------------------------- (In thousands) Current: Federal........................................ $27,504 $26,084 $20,499 State.......................................... 3,587 2,734 2,886 ---------------------------- 31,091 28,818 23,385 Deferred......................................... 854 (2,602) (175) ---------------------------- $31,945 $26,216 $23,210 ============================
The components of the provision for deferred income taxes for the year ended January 2, 1993, are as follows:
1992 -------------- (In thousands) Provision for closing facilities and reorganization expenses....................................... $(164) Other, net..................................................... (11) ------ $(175) ======
A reconciliation of the statutory federal income tax rate to the Company's effective income tax rate is as follows:
1994 1993 1992 --------------------- Federal statutory tax rate.............................. 35.0% 35.0% 34.0% State taxes, net of federal tax effect.................. 2.8 2.4 3.1 Other, net.............................................. (.8) (.4) .4 Effective tax rate...................................... 37.0% 37.0% 37.5%
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax liabilities and assets are as follows:
Dec. 31, Jan. 1, 1994 1994 -------------------- (In thousands) Net long-term deferred tax liabilities: Tax over book depreciation............................. $(13,630) $(11,620) Other, net............................................. 1,536 641 -------------------- Total net long-term deferred tax liabilities......... (12,094) (10,979) -------------------- Net current deferred tax assets: Workers' compensation, general, and product liability accruals.............................................. 2,029 2,610 Vacation accrual....................................... 3,180 2,988 Other, net............................................. 6,356 5,706 -------------------- Total net current deferred tax assets................ 11,565 11,304 -------------------- Net deferred tax (liabilities) assets................ $ (529) $ 325 ====================
14 HON INDUSTRIES Inc. and Subsidiaries Notes to Consolidated Financial Statements SHAREHOLDERS' EQUITY AND EARNINGS PER SHARE
1994 1993 1992 ------------------------------------- Common Stock, $1 Par Value Authorized............................ 100,000,000 100,000,000 100,000,000 Issued and outstanding................ 30,674,603 31,675,846 32,368,956 Preferred Stock Authorized............................ 1,000,000 1,000,000 1,000,000 Issued and outstanding................ -- -- --
The Company purchased 1,078,835; 751,399; and 819,687 shares of its common stock during 1994, 1993, and 1992, respectively. Cash dividends declared and paid per share for each year are:
1994 1993 1992 -------------------- Common shares............................................ $.44 $.40 $.37
Net income per common share is based on the weighted average number of shares of common stock outstanding during each year including allocated and unallocated ESOP shares. Shares of common stock were issued in 1994, 1993, and 1992 pursuant to a members' stock purchase plan as follows:
1994 1993 1992 -------------------------- Shares issued...................................... 77,302 49,816 54,207 Average price per share............................ $23.25 $22.96 $17.42
During 1994, shareholders approved the 1994 Members' Stock Purchase Plan. Under the new plan, 500,000 shares of common stock were registered for issuance to participating members. Beginning on July 3, 1994, rights to purchase stock are granted on a quarterly basis to all members who have one year of employment eligibility and work a minimum of 20 hours per week. The price of the stock purchased under the plan is 85% of the closing price on the applicable purchase date. No member may purchase stock under the plan in an amount which exceeds the lesser of 20% of his or her gross earnings or 2,000 shares, with a maximum fair market value of $25,000 in any calendar year. During 1994, 77,302 shares of common stock were issued under the plan at an average price of $23.25. An additional 422,698 shares were available for issuance under the plan at December 31, 1994. The Company has granted restricted stock awards aggregating 75,500 shares of common stock to officers. Vesting of such shares, which is generally dependent on continued employment, occurs in 25% increments annually. The officers are entitled to dividends and have voting rights on all shares awarded. Unearned compensation expense, representing the fair market value of the shares at the date of grant, is charged to income over the vesting period. Approximately $37,000; $223,000; and $356,000 were charged to income as a result of the awards for the years 1994, 1993, and 1992, respectively. At year-end 1994, 1,875 of the awarded shares were not vested. Pursuant to the Company's Shareholder Rights Plan, each share of common stock carries with it one Right. Each Right entitles a shareholder to buy one two- hundredth of a share of a new series of preferred stock at an exercise price of $75.00. Each one two-hundredth of a share of the new preferred stock has terms designed to make it the economic equivalent of one share of common stock. Rights will be exercisable only if a person or group acquires 20% or more of the Company's common stock or announces a tender offer, the consummation of which would result in ownership by a person or group of 20% or more of the common stock. If the Company is acquired in a merger or other business combination transaction, each Right will entitle its holder to purchase, at the then current exercise price of the Right, a number of the acquiring company's common shares having a market value at that time of twice the exercise price of the Right. The Company has entered into change in control employment agreements with corporate officers and certain other key employees. According to the agreements, a change in control occurs when a third person or entity becomes the beneficial owner of 20% or more of the Company's common stock or when more than one-third of the Company's Board of Directors is composed of persons not recommended by at least three-fourths of the incumbent Board of Directors. Upon a change in control, a key employee is deemed to have a two-year employment with the Company, and all his or her benefits are vested under Company plans. If, at any time within two years of the change in control, his or her position, salary, bonus, place of work, or Company-provided benefits are modified, or employment is terminated by the Company for any reason other than cause or by the key employee for good reason, as such terms are defined in the agreement, then the key employee is entitled to receive a severance payment equal to two times salary and the average of the prior two years' bonuses. RETIREMENT BENEFITS The Company has defined contribution profit-sharing plans covering substantially all employees who are not participants in certain defined benefit plans. The Company's annual contribution to the defined contribution plans is based on employee eligible earnings and results of operations and amounted to $10,849,000; $10,092,000; and $9,472,000 in 1994, 1993, and 1992, respectively. The Company sponsors defined benefit plans which include a limited number of salaried and hourly employees at certain subsidiaries. The Company's funding policy is generally to contribute annually the minimum actuarially computed amount. Net pension costs relating to these plans were $228,000; $172,000; and $151,000 for 1994, 1993, and 1992, respectively. The actuarial present value of benefit obligations, less related plan assets at fair value, is not significant. In 1992, the Company established a trust to administer a newly adopted leveraged employee stock ownership plan (ESOP), the HON Members Company Ownership Plan. Company contributions based on employee eligible earnings and dividends on the shares are used to make loan interest and principal payments. As the loan is repaid, shares are 15 HON INDUSTRIES Inc. and Subsidiaries Notes to Consolidated Financial Statements distributed to the ESOP trust for allocation to participants. Selected financial data pertaining to the ESOP is as follows:
1994 1993 1992 ---------------------------------- (In thousands, except share data) Company contribution to ESOP............... $ 2,977 $ 2,962 $ 2,742 Dividend income of ESOP.................... 403 366 339 Company interest expense on ESOP loan...... 656 605 802 Shares of common stock allocated to ESOP participant accounts...................... 133,945 133,666 122,198 Shares held in suspense (unallocated) by ESOP as of year-end....................... 526,421 660,366 794,032 Fair value of shares held in suspense by ESOP as of year-end....................... $ 14,082 $ 18,490 $ 18,660 Closing market price of common stock as of year-end.................................. $ 26.75 $ 28.00 $ 23.50
In 1994, the Company adopted Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Postemployment Benefits," which required accrual accounting for nonaccumulating postemployment benefits. The cumulative effect of adoption was to reduce net income by $237,000, after tax, or $.01 a share. POSTRETIREMENT HEALTH CARE The Company adopted Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," as of January 3, 1993, and recorded the cumulative effect of the accounting change on the deferred recognition basis. The cost of providing these benefits was previously recognized in the period in which the benefits were paid. The following table sets forth the funded status of the plan, reconciled to the accrued postretirement benefits cost recognized in the Company's balance sheet at:
Dec. 31, Jan. 1, 1994 1994 ------------------- (In thousands) Accumulated postretirement benefit obligation (APBO): Retirees................................................ $ 6,947 $ 7,192 Fully eligible active plan participants................. 3,816 3,374 Other active plan participants.......................... 6,397 6,368 Unrecognized net loss..................................... (713) (1,659) Unrecognized transition obligation........................ (12,932) (13,650) ------------------- Accrued postretirement benefit cost....................... $ 3,515 $ 1,625 =================== Net periodic postretirement benefit costs include: Service cost.............................................. $ 687 $ 603 Interest cost............................................. 1,242 1,134 Amortization of transition obligation over 20 years....... 718 718 ------------------- Net periodic postretirement benefit cost.................. $ 2,647 $ 2,455 ===================
The discount rates at December 31, 1994, and January 1, 1994, were 8.0% and 7.5%, respectively. The 1995 trend rates begin at 8.6% for the post-65 medical coverage and 12.2% for the prescription drug coverage. These rates decrease until their respective caps are reached in the year 2002 for post-65 medical coverage and 2001 for prescription drug coverage. Thereafter, the medical trend rates applicable to the Company subsidy are assumed to be zero percent. Since the pre-65 benefit is currently capped, medical trend rates are assumed to be zero percent for all years. If the medical trend rates were increased by 1.0% for each year, the APBO as of December 31, 1994, would increase by $98,000, and the sum of the service and interest cost components of the net periodic postretirement benefit cost for fiscal year 1994 would increase by $8,000. The 1992 cost for these postretirement benefits on a pay-as-you-go basis was $1,023,000. LEASES The Company leases certain warehouse and plant facilities and equipment. Commitments for minimum rentals under noncancellable leases at the end of 1994 are as follows:
Capitalized Operating Leases Leases ---------------------- (In thousands) 1995.................................................... $ 1,696 $3,335 1996.................................................... 2,024 2,440 1997.................................................... 2,024 1,274 1998.................................................... 2,024 877 1999.................................................... 2,024 244 Thereafter.............................................. 5,210 511 ------- ------ Total minimum lease payments............................ 15,002 $8,681 ====== Less amount representing interest....................... 5,563 ------- Present value of net minimum lease payments, including current maturities of $778,000......................... $ 9,439 =======
Property, plant, and equipment at year-end include the following amounts for capitalized leases:
1994 1993 1992 --------------------------- (In thousands) Buildings......................................... $ 3,709 $ 3,709 $ 3,709 Machinery and equipment........................... 8,419 8,286 8,286 --------------------------- 12,128 11,995 11,995 Less allowances for depreciation..................................... 2,507 4,376 2,682 --------------------------- $ 9,621 $ 7,619 $ 9,313 ===========================
Rent expense for the years 1994, 1993, and 1992 amounted to approximately $6,572,000; $4,854,000; and $5,031,000, respectively. Contingent rent expense under both operating and capitalized leases (generally based on mileage of transportation equipment) amounted to $525,000; $490,000; and $674,000 for the years 1994, 1993, and 1992, respectively. CONTINGENCIES In connection with laws and regulations pertaining to the protection of the environment, the Company is a party to a few remediation investigations and clean-ups and, along with other companies, has been named a "potentially responsible party" for certain waste disposal sites. Because each of these matters is subject to various uncertainties (such as the extent of contamination, the type of remediation, or other action that may be required), the Company cannot predict the actual costs it will ultimately incur with respect to these matters. However, based on the existence of other "potentially responsible parties" to share in such costs, the volume and type of waste the Company is believed to have contributed to each site and the period of time over which environmental costs may be paid, the Company does not believe that potential liability at these sites will have a material effect on the Company's liquidity, financial position, or results of operations taken as a whole. 16 HON INDUSTRIES Inc. and Subsidiaries Investor Information SUMMARY OF UNAUDITED QUARTERLY RESULTS OF OPERATIONS
First Second Third Fourth Total Quarter Quarter Quarter* Quarter Year ------------------------------------------------- (In thousands, except per share data) Year-End 1994: Net sales............................................ $200,693 $193,045 $222,112 $230,148 $845,998 Gross profit......................................... 63,374 59,713 71,005 78,514 272,606 Income before income taxes........................... 18,458 14,637 24,659 28,584 86,338 Income taxes......................................... 6,830 5,415 9,124 10,576 31,945 Income before cumulative effect of accounting changes............................... 11,628 9,222 15,535 18,008 54,393 Cumulative effect of accounting changes.............. (237) -- -- -- (237) Net income........................................... 11,391 9,222 15,535 18,008 54,156 Net income per common share: Income before cumulative effect of accounting changes.................................. .37 .30 .49 .58 1.74 Cumulative effect of accounting changes.............. (.01) -- -- -- (.01) Net income per common share.......................... .36 .30 .49 .58 1.73 Year-End 1993: Net sales............................................ $186,111 $177,537 $203,070 $213,608 $780,326 Gross profit......................................... 55,457 53,643 64,024 69,374 242,498 Income before income taxes........................... 12,807 12,946 18,628 26,473 70,854 Income taxes......................................... 4,675 4,725 7,021 9,795 26,216 Income before cumulative effect of accounting changes............................... 8,132 8,221 11,607 16,678 44,638 Cumulative effect of accounting changes.............. 489 -- -- -- 489 Net income........................................... 8,621 8,221 11,607 16,678 45,127 Net income per common share: Income before cumulative effect of accounting changes.................................. .25 .25 .36 .53 1.39 Cumulative effect of accounting changes.............. .02 -- -- -- .02 Net income per common share.......................... .27 .25 .36 .53 1.41 Year-End 1992: Net sales............................................ $158,575 $163,806 $195,968 $188,201 $706,550 Gross profit......................................... 50,100 53,243 65,043 58,985 227,371 Income before income taxes........................... 11,470 14,025 19,632 16,766 61,893 Income taxes......................................... 4,301 5,260 7,361 6,288 23,210 Net income........................................... 7,169 8,765 12,271 10,478 38,683 Net income per common share.......................... .22 .26 .38 .32 1.18 *In 1993, includes a pretax charge of $3,980,000 (after-tax effect of $2,507,000, or $.08 per share) for discontinuing the operations of a subsidiary.
- --------------------------------------------------------------------------------------------------------- COMMON STOCK MARKET PRICE AND PRICE/ EARNINGS RATIO (UNAUDITED) ANNUAL 1994 -- 1984 Price/ Market Earnings Price* Earnings Ratio ------------------- per ---------------- Year High Low Share* High Low - ----------------------------------------------------------------------- 1994 $34 $24 $1.73 20 14 1993 29 1/4 21 1/2 1.41 21 15 1992 23 1/2 16 1/2 1.18 20 14 1991 20 1/2 13 1/4 1.02 20 13 1990 23 13 1/2 1.30 18 10 1989 19 7/8 8 3/4 .79 25 11 1988 10 1/4 7 7/8 .94 11 8 1987 11 1/2 8 1/8 .62 19 13 1986 9 7/8 7 .71 14 10 1985 7 3/4 4 1/8 .61 13 7 1984 5 3/4 3 3/4 .38 15 10 ---------------- Eleven-Year Average 18 11 ================ *Adjusted for the effect of stock splits
COMMON STOCK MARKET PRICES AND DIVIDENDS (UNAUDITED) QUARTERLY 1994 -- 1993 1994 by Dividends Quarters High Low per Share - ----------------------------------------------------------------------- 1st $34 $24 1/2 $.11 2nd 34 26 1/4 .11 3rd 27 3/8 24 .11 4th 28 1/2 25 1/4 .11 ---- Total Dividends Paid $.44 ==== 1993 by Dividends Quarters High Low per Share - ----------------------------------------------------------------------- 1st $29 1/4 $22 3/4 $.10 2nd 29 1/4 21 1/2 .10 3rd 28 1/2 25 .10 4th 29 26 1/2 .10 ---- Total Dividends Paid $.40 ==== - ---------------------------------------------------------------------------------------------------------
17 INDEX OF EXHIBITS
Exhibit Page Number Description of Document Number - ------- ----------------------- ------ (10) Change in Control Agreement of the Registrant/(1)/ (22) Subsidiaries of the Registrant/(1)/ (23) Powers of Attorney 19 (24) Consent of Independent Auditors/(1)/ (27) Financial Data Schedule/(1)/ (28A) Executive Bonus Plan of the Registrant/(1)/ (28B) Executive Long-Term Incentive Compensation Plan of the Registrant/(1)/
/(1)/ Incorporated by reference to the same numbered exhibit filed with the registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1994 (Commission File No. 0-2648). 18 EX-23 2 POWERS OF ATTORNEY EXHIBIT 23 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this annual report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized. HON INDUSTRIES Inc. Date: February 13, 1995 By /s/ Stanley M. Howe ------------------ ----------------------------------- Stanley M. Howe Chairman of the Board Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Each Director whose signature appears below authorizes and appoints Stanley M. Howe as his or her attorney-in- fact to sign and file on his or her behalf any and all amendments and post- effective amendments to this report. Signature Title Date - --------- ----- ---- /s/ Stanley M. Howe Chairman of the Board and 2/13/95 - -------------------------------- Director Stanley M. Howe /s/ Jack D. Michaels President and CEO, 2/13/95 - -------------------------------- Principal Executive Officer, Jack D. Michaels and Director /s/ Melvin L. McMains Controller and 2/13/95 - -------------------------------- Principal Accounting Officer Melvin L. McMains /s/ David C. Stuebe Vice President and 2/13/95 - -------------------------------- Chief Financial Officer David C. Stuebe 19 Signature Title Date - --------- ----- ---- /s/ Robert W. Cox Director 2/13/95 - -------------------------------- Robert W. Cox /s/ W. James Farrell Director 2/13/95 - -------------------------------- W. James Farrell /s/ Lee Liu Director 2/13/95 - -------------------------------- Lee Liu /s/ Celeste C. Michalski Director 2/13/95 - -------------------------------- Celeste C. Michalski /s/ Michael S. Plunkett Director 2/13/95 - -------------------------------- Michael S. Plunkett /s/ Herman J. Schmidt Director 2/13/95 - -------------------------------- Herman J. Schmidt /s/ Richard H. Stanley Director 2/13/95 - -------------------------------- Richard H. Stanley /s/ Jan K. Ver Hagen Director 2/13/95 - -------------------------------- Jan K. Ver Hagen /s/ Lorne R. Waxlax Director 2/13/95 - -------------------------------- Lorne R. Waxlax 20 -----END PRIVACY-ENHANCED MESSAGE-----