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HNI Corporation (formerly Hon Industries)- Furniture -
Category Main Page
563/264-7400
414
East Third Street
P. O. Box 1109
Muscatine, IA 52761
www.honi.com
Sales
$1.8
billion
Business Description
The Company is a provider
of office furniture and hearth products. Approximately 74% of fiscal year
2003 net sales were in office furniture and 26% in hearth products. A broad
office furniture product offering is sold to dealers, wholesalers, warehouse
clubs, retail superstores, end-user customers, and federal and state
governments. Dealer, wholesaler, and retail superstores are the major
channels based on sales. Hearth products include wood-, pellet-, gas-burning
and electric factory-built fireplaces, fireplace inserts, stoves, gas logs,
and accessories. These products are sold through a national system of
dealers, wholesalers, large regional contractors, and Company-owned retail
outlets. In fiscal 2003, the Company had net sales of $1.8 billion, of which
approximately $1.3 billion was attributable to office furniture products and
$0.5 billion was attributable to hearth products. Please refer to Operating
Segment Information in the Notes to Consolidated Financial Statements for
further information about operating segments.
The Company is organized into a corporate headquarters and operating units
with offices, manufacturing plants, distribution centers, and sales
showrooms in the United States, Canada, and Mexico. See Item 2. Properties,
for additional related discussion. Five operating units, marketing under
various brand names, participate in the office furniture industry. These
operating units include: The HON Company, Allsteel Inc., Maxon Furniture
Inc., The Gunlocke Company L.L.C., and Holga Inc. Each of these operating
units provides products which are sold through various channels of
distribution and segments of the industry. On January 5, 2004, the Company
finalized the acquisition of Paoli, Inc., a leading provider of wood case
goods and seating.
Hearth & Home Technologies Inc. (previously Hearth Technologies Inc.) was
created in October 1996 with the acquisition of Heat-N-Glo Fireplace
Products, Inc. and its subsequent integration with the Company's Heatilator
operation. On February 20, 1998, the Company acquired Aladdin Steel
Products, Inc., a manufacturer of stoves and inserts. On February 29, 2000,
the Company completed the acquisition of two leading hearth products
distributors, American Fireplace Company (AFC) and the Allied Group
(Allied). AFC and Allied have been integrated under the trade name Fireside
Hearth & Home. Fireside Hearth & Home sells, installs, and services a broad
range of gas- and wood-burning fireplaces as well as fireplace mantels,
surrounds, facings, and other accessories.
HON International Inc. markets select products manufactured by the other
various HON INDUSTRIES operating units outside the United States and Canada.
It also operates foreign business development offices in Singapore, Japan,
and Mexico.
Since its inception, the Company has been committed to improvement in
manufacturing and in 1992 introduced its process improvement approach known
as Rapid Continuous Improvement ("RCI") which focuses on streamlining
design, manufacturing, and administrative processes. The Company's RCI
program, in which most members participate, has contributed to increased
productivity, lower manufacturing costs, improved product quality, and
workplace safety. In addition, the Company's RCI efforts enable it to offer
short average lead times, from receipt of order to delivery and
installation, for most of its products.
The Company distributes its products through an extensive network of
independent office furniture dealers, office products dealers, wholesalers
and retailers. The Company is a supplier of office furniture to the largest
nationwide chains of office products dealers, or "national supply dealers,"
which include Boise Cascade Corporation; Corporate Express Inc., A Buhrmann
Company; Office Depot Business Services Group; and Staples Commercial
Advantage. The Company is also a supplier to the Office Depot, Staples, and
Office Max superstores.
The Company's product development efforts are focused on developing and
providing solutions that deliver quality, aesthetics, style, and are focused
on reducing the cost to manufacture existing products.
An important element of the Company's success has been its member-owner
culture, which has enabled it to attract, develop, retain, and motivate
skilled, experienced and efficient members. Each of the Company's eligible
members own stock in the Company through a number of stock-based plans,
including a member stock purchase plan and a profit-sharing retirement plan,
which drives a unique level of commitment to the Company's success
throughout the entire workforce. In addition, most production members are
eligible for incentive bonuses.
For further financial-related information with respect to acquisitions,
restructuring, and Company operations in general, refer to Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations, and the following captions included in the Notes to Consolidated
Financial Statements, which are filed as part of this report: Nature of
Operations, Business Combinations, and Operating Segment Information.
Industry
According to the Business and Institutional Furniture Manufacturer's
Association ("BIFMA"), U.S. office furniture industry shipments are
estimated to be approximately $8,505,000,000 in 2003, a decrease of 4.3%
compared to 2002, which was a 19.0% decrease from 2001 levels. The Company
believes that the decrease was due to lower corporate profits and prevailing
economic conditions.
The U.S. office furniture market consists of two primary segments—the
project or contract segment and the commercial segment. The project segment
has traditionally been characterized by sales of office furniture and
services to large corporations, such as for new office facilities,
relocations, or department or office redesigns, which are frequently
customized to meet specific client and designer preferences. Project
furniture is generally purchased through office furniture dealers who
typically prepare a custom-designed office layout emphasizing image and
design. The selling process is often complex and lengthy and generally has
several manufacturers competing for the same projects.
The commercial segment of the market, in which the Company is a leader,
primarily represents smaller orders of office furniture purchased by
businesses and home office users on the basis of price, quality, selection,
and quick delivery. Office products dealers, wholesalers and retailers, such
as office products superstores, are the primary distribution channels in
this market segment. Office furniture and products dealers publish periodic
catalogs that display office furniture and products from various
manufacturers.
The Company also competes in the domestic hearth industry, where it is a
market leader. Hearth products are typically purchased by builders during
the construction of new homes and homeowners during the renovation of
existing homes. Both types of purchases involve seasonality with retrofit
activity being concentrated in the September to December time frame.
Distribution is primarily accomplished through independent dealers, who may
buy direct from the manufacturer or from an intermediate distributor. The
Company sells approximately 70% of its products to the new
construction/builder channel.
Growth Strategy
The Company's strategy is to build on its position as a leading manufacturer
of office furniture and hearth products in North America. The components of
this growth strategy are to introduce new products, build brand equity,
continually reduce costs, provide outstanding customer satisfaction by
focusing on the end-user, strengthen the distribution network, respond to
global competition, pursue complementary strategic acquisitions, and enter
markets not currently served.
Employees/Members
As of January 3, 2004, the Company employed approximately 8,900 persons,
8,500 of who were members and 400 of who were temporary personnel. The
Company employed approximately 300 members who were members of unions. The
Company believes that its labor relations are good.
Products and Solutions
Office Furniture
The Company designs, manufactures, and markets a broad range of office
furniture in four basic categories: (i) storage, including vertical files,
lateral files, pedestals, and high density filing; (ii) seating, including
task chairs, executive desk chairs, conference/training chairs, and side
chairs; (iii) office systems (typically modular and moveable workspaces with
integrated work surfaces, space dividers, and lighting); and (iv) desks and
related products, including tables, bookcases, and credenzas. The Company's
products are sold under the Company's brands—HON®, Allsteel®, Maxon®,
Gunlocke®, Paoli® and Holga®.
The following is a description of the Company's major product categories and
product lines:
Storage
The Company offers a variety of storage options designed either to be
integrated into the Company's office systems products or to function as
freestanding furniture in office applications. The Company sells most of its
freestanding storage through independent office products and office
furniture dealers, nationwide chains of office products dealers,
wholesalers, office products superstores, warehouse clubs, and mail order
distributors.
Seating
The Company's seating line includes chairs designed for all types of office
work. The chairs are available in a variety of frame colors, coverings, and
a wide range of price points. Key customer criteria in seating includes
superior design, ergonomics, aesthetics, comfort, and quality.
Office Systems
The Company offers a complete line of office panel systems products in order
to meet the needs of a wide spectrum of organizations. Systems may be used
for team work settings, private offices and open floor plans, and are
typically modular and movable workspaces composed of adjustable partitions,
work surfaces, desk extensions, storage cabinets and electrical lighting
systems which can be moved, reconfigured and reused within the office. Panel
systems offer a cost-effective and flexible alternative to traditional
drywall office construction. A typical installation of office panels often
includes associated sales of seating, storage, and accessories.
The Company offers whole office solutions, movable panels, storage units,
and work surfaces that can be installed easily and reconfigured to
accommodate growth and change in organizations. The Company also offers
consultative selling and design services for its office system products.
Desks and Related Products
The Company's collection of desks and related products include stand-alone
steel, laminate and wood furniture items, such as desks, bookshelves,
credenzas and mobile desking, and are available in a range of designs and
price points. The Company's desks and related products are sold to a wide
variety of customers from those designing large office configurations to
small retail and home office purchasers. The Company offers a variety of
tables designed for use in conference rooms, private offices, training
areas, team work settings and open floor plans.
Hearth Products
The Company is the largest U.S. manufacturer and marketer of metal
prefabricated fireplaces and related products, primarily for the home, which
it sells under the widely recognized Heatilator®, Heat-N-Glo®, and
Quadra-Fire® brand names.
The Company's line of hearth products includes electric, wood-, pellet-, and
gas-burning fireplaces and stoves, fireplace inserts, chimney systems, and
related accessories. Heatilator® and Heat-N-Glo® are brand leaders in the
two largest segments of the home fireplace market: vented-gas and wood
fireplaces. The Company is the leader in "direct vent" fireplaces, which
replace the chimney-venting system used in traditional fireplaces with a
less expensive vent through an outer wall. See Business—Intellectual
Property for additional details.
Manufacturing
The Company manufactures office furniture in Alabama, California, Georgia,
Iowa, Kentucky, New York, North Carolina, Virginia, Washington, and
Monterrey, Mexico. The Company manufactures hearth products in Iowa,
Maryland, Minnesota, and Washington.
The Company purchases raw materials and components from a variety of
suppliers, and generally most items are available from multiple sources.
Major raw materials and components include coil steel, bar stock, castings,
lumber, veneer, particleboard, fabric, paint, lacquer, hardware, plastic
products, and shipping cartons.
Since its inception, the Company has focused on making its manufacturing
facilities and processes more flexible while at the same time reducing costs
and improving product quality. In 1992, the Company adopted the principles
of RCI, which focus on developing flexible and efficient design,
manufacturing and administrative processes that remove excess cost. To
achieve flexibility and attain efficiency goals, the Company has adopted a
variety of production techniques including cellular manufacturing, focused
factories, just-in-time inventory management, value engineering, business
simplification, and 80/20 principles. The application of the RCI process has
increased productivity by reducing set-up and processing times, square
footage, inventory levels, product costs and delivery times, while improving
quality and enhancing member safety. The Company's RCI process involves
production and administrative employees, management, customers and
suppliers. The Company has facilitators, coaches and consultants dedicated
to the RCI process and strives to involve all members in the RCI process. In
addition, the Company has organized a group that designs, fabricates, tests
and installs proprietary manufacturing equipment. Manufacturing also plays a
key role in the Company's concurrent product development process that
primarily seeks to design new products for ease of manufacturability.
Product Development
The Company's product development efforts are primarily focused on
developing end-user solutions that are sensitive to quality, aesthetics,
style, and on reducing the cost to manufacture existing products. The
Company accomplishes this through improving existing products, extending
product lines, applying ergonomic research, improving manufacturing
processes, applying alternative materials and providing engineering support
and training to its operating units. The Company conducts its product
development efforts at both the corporate and operating unit level. At the
corporate level, the staff at the Company's Stanley M. Howe Technical
Center, working in conjunction with operating staff, seeks breakthrough
developments in product design, manufacturability and materials usage. At
the operating unit level, development efforts are focused on achieving
incremental improvements in product features
Ticker
MLHR
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