UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(MARK ONE)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 1, 1995
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 -- 30,657,290 shares as of April 1, 1995
Exhibit Index is on page 11.
<PAGE> Page 1 of 12
HON INDUSTRIES Inc. and SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION
Page
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets --
April 1, 1995, and December 31, 1994 3-4
Condensed Consolidated Statements of Income --
Three Months Ended April 1, 1995, and April 2, 1994 5
Condensed Consolidated Statements of Cash Flows --
Three Months Ended April 1, 1995, and April 2, 1994 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-9
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 10
EXHIBIT INDEX 11
(27) Financial Data Schedule 12
<PAGE> Page 2 of 12
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
HON INDUSTRIES Inc. and SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
April 1,
1995 December 31,
(Unaudited) 1994
ASSETS (In thousands)
CURRENT ASSETS
Cash and cash equivalents $ 39,580 $ 27,659
Short-term investments 3,093 3,083
Receivables 78,127 94,269
Inventories (Note B) 44,046 43,259
Deferred income taxes 11,565 11,565
Prepaid expenses and
other current assets 9,515 8,975
Total Current Assets 185,926 188,810
PROPERTY, PLANT, AND EQUIPMENT, at cost
Land and land improvements 8,863 8,832
Buildings 84,940 84,801
Machinery and equipment 190,173 185,421
Construction in progress 23,498 17,915
307,474 296,969
Less accumulated depreciation 123,037 119,125
Net Property, Plant, and Equipment 184,437 177,844
OTHER ASSETS 5,769 5,914
Total Assets $376,132 $372,568
See accompanying notes to condensed consolidated financial statements.
<PAGE> Page 3 of 12
HON INDUSTRIES Inc. and SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
April 1,
1995 December 31,
(Unaudited) 1994
LIABILITIES AND SHAREHOLDERS' EQUITY (In thousands)
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 89,908 $ 99,898
Income taxes 11,670 4,949
Note payable and current maturities
of long-term debt obligations 4,717 6,246
Total Current Liabilities 106,295 111,093
LONG-TERM DEBT AND OTHER LIABILITIES 46,356 46,080
CAPITAL LEASE OBLIGATIONS 8,454 8,661
DEFERRED INCOME TAXES 12,094 12,094
SHAREHOLDERS' EQUITY
Capital Stock:
Preferred, $1 par value; authorized
1,000,000 shares; no shares outstanding - -
Common, $1 par value; authorized
100,000,000 shares; outstanding --
1995 - 30,657,290 shares;
1994 - 30,674,603 shares 30,657 30,675
Paid-in capital 529 434
Retained earnings 182,887 174,642
Receivable from HON Members Company
Ownership Plan (11,140) (11,111)
Total Shareholders' Equity 202,933 194,640
Total Liabilities and
Shareholders' Equity $376,132 $372,568
See accompanying notes to condensed consolidated financial statements.
<PAGE> Page 4 of 12
HON INDUSTRIES Inc. and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
April 1, April 2,
1995 1994
(In thousands, except
per share data)
Net sales $216,498 $200,693
Cost of products sold 147,556 137,319
Gross Profit 68,942 63,374
Selling and administrative expenses 48,565 44,820
Operating Income 20,377 18,554
Interest income 690 541
Interest expense 948 637
Income Before Income Taxes 20,119 18,458
Income taxes 7,544 6,830
Income Before Cumulative Effect of
Accounting Change 12,575 11,628
Cumulative effect of
accounting change (Note C) - (237)
Net Income $ 12,575 $ 11,391
Net income per common share:
Income before cumulative effect of
accounting change $ .41 $ .37
Cumulative effect of
accounting change (Note C) - (.01)
Net Income $ .41 $ .36
Average number of common
shares outstanding 30,644,226 31,517,001
Cash dividends per common share $ .12 $ .11
See accompanying notes to condensed consolidated financial statements.
<PAGE> Page 5 of 12
HON INDUSTRIES Inc. and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
April 1, April 2,
1995 1994
(In thousands)
Net Cash Flows From (To) Operating Activities:
Net income $ 12,575 $ 11,391
Noncash items included in net income:
Depreciation and amortization 4,997 4,599
Other postretirement and postemployment
benefits 645 701
Cumulative effect of accounting
change (Note C) - 237
Other - net 14 11
Net increase (decrease) in noncash operating
assets and liabilities 11,546 (4,935)
Increase in other liabilities (1,858) (1,134)
Net cash flows from operating
activities 27,919 10,870
Net Cash Flows From (To) Investing Activities:
Capital expenditures - net (11,432) (7,604)
Short-term investments - net (29) (4,084)
Long-term investments (10) -
Other - net 2 (91)
Net cash flows (to) investing
activities (11,469) (11,779)
Net Cash Flows (To) Financing Activities:
Purchase of HON INDUSTRIES common stock (1,129) (7,119)
Payments of note and long-term debt (276) (1,050)
Proceeds from sales of HON INDUSTRIES
common stock to members 553 339
Dividends paid (3,677) (3,457)
Net cash flows (to) financing
activities (4,529) (11,287)
Net increase (decrease) in cash and
cash equivalents 11,921 (12,196)
Cash and cash equivalents at beginning
of period 27,659 32,778
Cash and cash equivalents at end
of period $ 39,580 $ 20,582
See accompanying notes to condensed consolidated financial statements.
<PAGE> Page 6 of 12
HON INDUSTRIES Inc. and SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
April 1, 1995
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 three-month
period ended April 1, 1995, are not necessarily indicative of the results that
may be expected for the year ending December 30, 1995. 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 31, 1994.
Note B. Inventories
Inventories of the Company and its subsidiaries are summarized as follows:
April 1, 1995
($000) (Unaudited) December 31, 1994
Finished products $14,902 $13,554
Materials and work in process 29,144 29,705
$44,046 $43,259
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.
<PAGE> Page 7 of 12
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
consolidated 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 Three Months Ended
Dollars in Thousands April 1, 1995 & April 1, 1995 &
April 2, 1994 Dec. 31, 1994
Net sales $15,805 7.9% $(13,650) (5.9)%
Cost of products sold 10,237 7.5 (4,078) (2.7)
Selling & Administrative
expenses 3,745 8.4 (1,018) (2.1)
Interest income 149 27.5 88 14.6
Interest expense 311 48.8 (1) (.1)
Income taxes 714 10.5 (3,032) (28.7)
Income before cumulative
effect of accounting
change 947 8.1 (5,433) (30.2)
Cumulative effect of
accounting change 237 100.0 - -
Net income 1,184 10.4 (5,433) (30.2)
For the quarter ended April 1, 1995, consolidated net sales were $216.5
million, a 7.9% increase from $200.7 million in the first quarter of 1994.
Net income increased 10.4% to $12.6 million from $11.4 million in the same
quarter a year ago. Earnings per share rose 13.9% to $0.41 from $0.36. This
was a record first quarter for the Company for both net sales and net income.
The increase in sales primarily resulted from an increase in the volume of
sales directed at end-users which are small and medium-sized companies. It
also reflected increased sales of higher margin products, resulting from an
aggressive marketing program. In recent weeks, the Company has experienced a
decrease in sales, which is believed to have resulted primarily from a
principal customer who has been reducing its inventory. Thus, it is premature
to know if this is a new trend.
The Company has been able to leverage its increased sales to make
profitability gains. Earnings have benefited from productivity improvements
achieved principally through rapid continuous improvement (RCI) programs. The
focus on RCI has allowed the Company to simplify processes, leading to cost
containment and increased efficiency. These gains have been offset somewhat
by increases in interest expenses and taxes.
<PAGE> Page 8 of 12<PAGE>
Gross profit margins have been maintained in the face of competitive market
conditions and increased labor and material costs. Gross profit for the first
quarter of 1995 was 31.8% versus 31.6% for the same period in 1994. The same
"holding the line" situation is true for comparative selling and
administrative expenses as well. Selling and administrative expenses for the
current quarter were 22.4% of net sales compared to 22.3% for the same quarter
in 1994.
Interest income and interest expense are both up for the quarter compared to a
year ago for the same reason -- higher interest rates.
The estimated annual effective income tax rate for fiscal year 1995 has
increased from 37.0% in 1994 to 37.5%, primarily as a result of the Company
being subjected to increased state income taxes.
Cash and short-term investments increased from $30.7 million as of year-end
1994 to $42.7 million as of April 1, 1995. The primary use of cash during the
first quarter was for new capital expenditures. Net capital expenditures for
the first three months of 1995 have been $11.4 million compared to $7.6
million for the same period in 1994.
In the first quarter, the Company repurchased 41,413 shares of its common
stock at an average price of $27.26 per share. At its February 13, 1995,
meeting, the Board of Directors authorized the repurchase of up to $20.0
million of the Company's common stock.
The Board of Directors raised the Company's quarterly dividend on common stock
in the first quarter to $0.12 per share from $0.11 per share. The dividend
was payable March 1, 1995, to shareholders of record February 23, 1995. The
payment of this dividend marked 40 consecutive years of paying a regular
quarterly dividend. The increase is the 38th time the rate has been increased
since the Company began paying dividends in 1955.
The Board of Directors at its May 8, 1995, meeting authorized the payment of a
$0.12 per share quarterly dividend payment on common stock payable June 1,
1995, to shareholders of record May 18, 1995.
<PAGE> Page 9 of 12<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
9, 1995, for the purpose of electing four Directors to the Board of
Directors, and to vote on the adoption of a proposed 1995 Stock-Based
Compensation Plan. Proxies for the meeting were solicited pursuant to
Section 14(a) of the Securities Exchange Act of 1934 and there was no
solicitation in opposition to management's solicitations. All of
management's nominees for Directors as listed in the proxy statement were
elected. Shareholders also approved the proposed stock-based compensation
plan as listed in the proxy statement.
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.
Dated: May 16, 1995 By /s/ David C. Stuebe
David C. Stuebe
Vice President and
Chief Financial Officer
By /s/ Melvin L. McMains
Melvin L. McMains
Controller
<PAGE> Page 10 of 12
PART II. EXHIBITS
EXHIBIT INDEX Page
(27) Financial Data Schedule 12
<PAGE> Page 11 of 12
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<ARTICLE> 5
<CIK> 0000048287
<NAME> HON INDUSTRIES INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-END> APR-1-1995
<CASH> 39,580
<SECURITIES> 3,093
<RECEIVABLES> 80,324
<ALLOWANCES> 2,197
<INVENTORY> 44,046
<CURRENT-ASSETS> 185,926
<PP&E> 307,474
<DEPRECIATION> 123,037
<TOTAL-ASSETS> 376,132
<CURRENT-LIABILITIES> 106,295
<BONDS> 46,356
<COMMON> 30,657
0
0
<OTHER-SE> 172,276
<TOTAL-LIABILITY-AND-EQUITY> 376,132
<SALES> 216,498
<TOTAL-REVENUES> 216,498
<CGS> 147,556
<TOTAL-COSTS> 147,556
<OTHER-EXPENSES> 48,565
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 948
<INCOME-PRETAX> 20,119
<INCOME-TAX> 7,544
<INCOME-CONTINUING> 12,575
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,575
<EPS-PRIMARY> .41
<EPS-DILUTED> .41
</TABLE>
