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Kimball International -
Office Furniture Furniture - Category Main Page
(812)
482-1600
1600
Royal Street
Jasper, IN 47549
www.kimball.com
Sales
$1.2
billion
Business Description
The Company provides a
vast array of products from its two business segments: the Furniture and
Cabinets Segment and the Electronic Contract Assemblies Segment. The
Furniture and Cabinets Segment manufactures furniture for the office,
residential, and lodging and healthcare industries, all sold under the
Company's family of brand names. Other products produced by the Furniture
and Cabinets Segment on a contract basis include store fixtures, television
cabinets and stands, residential furniture and furniture components. The
Electronic Contract Assemblies Segment provides design engineering,
manufacturing, packaging and distribution of electronic assemblies, circuit
boards, multi-chip modules and semiconductor components on a contract basis
to a variety of industries on a global scale.
The Company utilizes a substantial degree of vertical integration. It does
not consider seasonal fluctuations to be significant. Production is carried
on in facilities located in the United States, Mexico, France, Thailand and
Poland. In the United States, the Company has facilities and showrooms in 15
states.
SEGMENTS
FURNITURE AND CABINETS
HISTORICAL OVERVIEW
Since 1950, the Company has produced wood furniture and cabinets, which
continue to be a significant part of the business. Included in this segment
are sales of office furniture that has been manufactured and sold under the
Kimball (registered trademark) trade name since 1970 and the National
(registered trademark) trade name since 1980. In 1992, the Company expanded
its product offering with the acquisition of Harpers, a metal office
furniture manufacturer. Harpers had marketed metal office furniture under
the Harpers (registered trademark) trade name since 1982. Harpers office
furniture began to be marketed under the Kimball brand name in fiscal 2001.
In fiscal year 1999, the Company further expanded its office furniture
product offering with the acquisition of Transwall, a manufacturer of
stackable panel systems and floor-to-ceiling products. Kimball office
furniture systems have broad market application, while Transwall movable,
demountable partitions products are focused more toward the office
construction applications that demand a high degree of flexibility and
reconfiguration. The Kimball and National casegoods and seating lines are
more focused to the wood segment of the office furniture industry while
utilizing other materials to an increasing extent. The Cetra (registered
trademark) and Footprint (registered trademark) lines of Kimball office
furniture systems provide flexible configurations and help architects and
designers optimize space planning by utilizing Traxx (registered trademark),
which increases space efficiency and eliminates the need for a secondary
support structure by using existing walls. The Interworks (registered
trademark) product line, formerly a Harpers office furniture system, began
being marketed under the Kimball brand in fiscal year 2001 and is designed
to integrate easily with existing Kimball systems products and provide more
flexibility and functionality in office design. The Reasons line of Kimball
office furniture systems, marketed under Transwall prior to fiscal year
2001, provides interchangeable panels that stack vertically and allow the
flexibility of stacking from floor to ceiling. The Corporate Wall and
recently introduced ZWall (registration pending) lines of Transwall
floor-to-ceiling movable wall systems combine the privacy and security of a
full height partition with the flexibility of an open plan system.
The Company has expanded its sales and manufacture of furniture over the
years to include home furniture and lodging and healthcare furniture. The
Company expanded its offering of fully upholstered and wood framed seating
products to the lodging and healthcare market with the purchase of Jackson
of Danville in fiscal year 2000.
Other products within this segment include furniture and cabinets produced
on a contract basis, including cabinets for televisions, television stands,
pool tables, home furniture, store fixtures and other related products sold
to leading manufacturers and retailers primarily in the home entertainment,
home furniture and retail industries. The Company also produces other
products including plywood, polyurethane and polyester molded products and
stamped metal components and welded assemblies and sells them to both
internal and external customers. Contract furniture manufacturing services
and capabilities began being marketed under the flexcel name in fiscal year
2002. The flexcel group of manufacturing units provides rapid, customized
manufacturing solutions to the commercial, government, institutional and
entertainment market segments. Services of the Company's trucking fleet are
also sold to unaffiliated customers.
Also included in the Furniture and Cabinets Segment are sales of furniture
component products including unprocessed lumber, dimension lumber, veneer,
wood panels and cabinet doors to both internal and external customers.
During fiscal year 2002 the Company sold its Boesendorfer piano subsidiary,
which had originally been acquired in 1966. The Company was also engaged in
the manufacture and sales of a domestically produced piano product line
since 1857 through a predecessor, W. W. Kimball Co., acquired in 1959, until
cessation of this product line in 1996.
Office, home, lodging and healthcare furniture, furniture and cabinets
produced on a contract basis and related products, which make up the largest
part of this segment, as of June 30, 2002 are produced at twenty plants;
thirteen located in Indiana, two in Kentucky, and one each in Idaho,
Pennsylvania, Florida, Mississippi, and Mexico. As a result of the
restructuring plan announced in the fourth quarter of fiscal year 2001, four
manufacturing facilities not included above, two in Indiana and one each in
Kentucky and North Carolina, ceased operations under the plan with three of
the facilities being held for sale or lease. One of the manufacturing
facilities in Indiana that ceased operations under the plan was converted to
a distribution and warehouse facility in fiscal year 2002, which replaced a
previously leased facility. This segment's production flexibility would
allow numerous facilities to interchange production between different
products based on a change in customer or product demand, if needed.
The Company also owns and operates three sawmills, three lumberyards, two
dimension lumber plants, two plants that manufacture contract wood products
and a technologically advanced veneer mill. These facilities are located in
Indiana, Tennessee and Kentucky. Property located in Indiana, where the
Company's idle sliced veneer plant was located, was sold in June 2001.
A facility in Jasper, Indiana houses an Education Center for dealer and
employee training, the Product Design and Research Center, and a Corporate
showroom for product display.
In the United States, showrooms are maintained in nine cities for office
furniture and two cities for home furniture. In addition, an office
furniture showroom is maintained in London, England. In certain showrooms
other Company products are also on display.
MARKETING CHANNELS
Kimball and National brands of office furniture are marketed through Company
salespersons to office furniture dealers, wholesalers, and rental companies
and catalog houses throughout North America and England. Certain Kimball
brands of office furniture systems are manufactured and distributed locally
in Central America, South America, Australia, and the Middle East through
license arrangements with unaffiliated partners. The Transwall products are
marketed through Company salespersons to the government, select office
furniture dealers and to construction contractors. Home furniture is
generally marketed through independent sales representatives to independent
furniture dealers throughout the United States. Lodging and healthcare
furniture is marketed through Company sales representatives and independent
manufacturers' representatives. Contract furniture and cabinets are
generally marketed through Company salespersons and, to a lessor extent,
independent representatives. The Company's marketing strategy facilitates
the sale of related office furniture, residential furniture and upholstery
product within the lodging and healthcare channels. Furniture component
products manufactured by the Company are used internally as well as sold to
others. Products sold to others are marketed principally to furniture
manufacturers, primarily through Company personnel.
MAJOR COMPETITIVE FACTORS
The major competitive factors in the office furniture industry are price in
relation to quality and appearance, the utility of the product, supplier
lead-time, and ability to respond to requests for special and non-standard
products. Certain market segments are more price sensitive than others, but
all segments expect on-time, damage-free delivery. The Company believes it
is well positioned to capitalize on an emerging trend for turnkey integrated
solutions in the office furniture industry. The Company maintains sufficient
finished goods inventories to be able to offer prompt shipment of certain
lines of Kimball and National office furniture to domestic dealers, thereby
permitting the dealers to maintain smaller inventories. Many products are
shipped through the Company's delivery system, which the Company believes
offers it the ability to reduce damage to product, enhance scheduling
flexibility, and improve the capability for on-time deliveries, which are
all key competitive factors in the office furniture industry.
The lodging and healthcare furniture markets compete on quality,
reliability, supplier lead-time and price. The Company offers its own line
of lodging and healthcare furniture as well as producing contract lodging
and healthcare furniture to customers' specifications.
The major competitive factors in the home furniture market are style and
aesthetics, quality, performance history, price, on-time delivery and
supplier lead-time. The Company's own line of home furniture is offered for
sale on an immediate ship basis.
The major competitive factors in the contract furniture and cabinet product
markets are quality, performance history, price, on-time delivery,
flexibility, speed, and providing customized manufacturing solutions.
Contract home furniture, television cabinets and television stands are
produced to customer specifications from specific orders. Finished goods
inventories are generally small, consisting primarily of goods awaiting
shipment to customers. The major competitive factors in the store fixtures
industry are quality, supplier lead-time, price, service and installation,
flexibility and on-time performance. Store fixtures are produced to customer
specifications from specific orders.
Competitive factors in the furniture component products market are price,
quality, availability, on-time delivery and supplier lead-time.
COMPETITORS
There are numerous manufacturers of office, home, lodging, and healthcare
furniture competing within the marketplace. The Company believes, however,
that there are a limited number of relatively large producers of wood office
and lodging furniture, of which the Company believes that it is one of the
larger in net sales. In many instances wood office furniture competes in the
market with metal office furniture. Based on available industry statistics,
metal office furniture has a larger share of the total office furniture
market. The Company has positioned itself, with the acquisitions of Harpers
and Transwall, to strengthen its market share in the non-wood segment of the
industry, and compliments the Company's wood product offerings.
There are many manufacturers of home furniture and the Company does not have
a significant share of this market.
The Company believes that it is one of the largest independent domestic
manufacturers of wood television cabinets, but certain manufacturers of
televisions, including some customers of the Company, produce cabinets for
their own use. There are many manufacturers of store fixtures and the
Company does not have a significant share of this market.
For furniture and cabinet components, the Company competes with many
integrated forest and specialty hardwood product companies and does not have
a significant share of the market for such products.
RAW MATERIAL AVAILABILITY
Many components used in the production of furniture and cabinets are
manufactured internally within the segment, including processed wood parts,
stamped metal components and certain polyurethane and polyester molded
plastics, all of which are generally readily available. Other raw materials
used in the production of wood furniture, cabinets and fixtures are
generally readily available. Certain metal components, such as precision
slide mechanisms used in various wood office furniture products, are
purchased in a pre-fabricated stage with additional fabrication and
finishing performed by the Company. Raw materials used in the manufacture of
metal office furniture, primarily rolled steel and aluminum, have been
readily available in the world market. Certain fabricated seating components
and wood frame assemblies are currently sourced from Europe and Asia and are
readily available. The Company has begun to source a limited number of
finished furniture products from Asia for resale in the United States and
abroad, which the Company expects to be generally readily available.
ELECTRONIC CONTRACT ASSEMBLIES
The Company entered the electronic contract assemblies market in 1985 with
knowledge acquired from the production of electronic keyboards for musical
instruments, which were first produced in 1963. Electronics and
electro-mechanical products (electronic assemblies) are sold on a contract
basis and produced to customers' specifications. The Company expanded its
capabilities to include semiconductor DIE processing, design, testing and
packaging through an acquisition in 1996.
As of June 30, 2002 the Company's electronic contract assemblies segment
consists of eight manufacturing facilities with three located in Indiana and
one each in California, Mexico, France, Thailand and Poland. One additional
facility located in Texas is utilized to receive inbound materials and
distribute finished goods for the Mexican facility. One of the facilities,
located in Auburn, Indiana, which was purchased in fiscal year 2002 from
Siemens VDO produces an electronics module for an automotive passenger
safety system and a line of small engine ignition products. The two other
Indiana facilities, including a former warehouse facility that was converted
to a high-flexibility production facility in fiscal year 2000, manufacture a
variety of electronic assemblies and assemble products for sale to outside
customers. The California facility assembles product and also provides
semiconductor DIE processing, design, testing and packaging services. The
facility located in Mexico provides services similar to those provided from
the Indiana facilities. The fully automated Thailand operation, started in
fiscal year 2000, offers board level assembly as well as box-build
capability of products for sale to outside customers in the global market.
The leased Poland facility, secured in fiscal year 2001 as part of an
agreement to purchase certain manufacturing assets of Alcatel, produces
electronic assemblies and telecommunication equipment for outside customers
primarily in the eastern European market. As part of the restructuring plan
announced in the fourth quarter of fiscal year 2001, the Company decided to
exit the business of providing DIE processing and assembly services to the
European market and as a result the Company, as of June 30, 2002, plans to
sell its manufacturing facility located in France. Engineering design and
support services are provided to the manufacturing facilities within this
segment and to outside customers through the Kimball Electronics Design
Services company, which is based in Indiana. The contract electronics
manufacturing industry in general has been faced with excess capacity due to
the slowing economy. The Company has not been immune and continually
evaluates its operations as to the most optimum capacity and service levels
by geographic region.
Manufacturing and design services are marketed by Company salespersons.
Contract electronic assemblies are manufactured based on specific orders,
generally resulting in a small amount of finished goods consisting primarily
of goods awaiting shipment to specific customers. Raw materials are normally
acquired for specific customer orders and may or may not be interchangeable
among products. Inherent risks associated with rapid technological changes
within this contract industry are mitigated by procuring raw materials, for
the most part, based on firm orders.
Key competitive factors in the electronic contract assemblies market are
competitive pricing on a global basis, quality, engineering design services,
production flexibility, reliability of on-time delivery, customer lead time,
test capability, and global presence. Growth in the electronic contract
assemblies industry is created through the proliferation of electronic
components in today's advanced products along with the continuing trend of
OEM's in the electronic industry to subcontract the assembly process to
companies with a core competence in this area. The electronics industry is
very competitive as numerous manufacturers of contract electronic assemblies
compete for business from existing and potential customers. The Company does
not have a significant share of the market for such products.
Raw materials utilized in the manufacture of contract electronic products
are generally readily available from both domestic and foreign sources,
although from time to time the industry experiences allocations of certain
components due to supply and demand forces, combined with rapid product life
cycles of certain components.
While the total electronic assemblies market has broad applications, the
Company's customers are concentrated in the automotive (automobiles and
light trucks), industrial controls, medical, computer and
telecommunications, and defense industries. Included in this segment are
sales of electronic assemblies to one customer, TRW Inc., a full-service
automotive supplier, which accounted for approximately 43% of this segment's
net sales in fiscal year 2002, compared to 49% and 56% in fiscal years 2001
and 2000, respectively. Sales to TRW Inc. accounted for approximately 16% of
consolidated net sales in fiscal year 2002, compared to 15% and 17% in
fiscal years 2001 and 2000, respectively. TRW in turn sells complete braking
assemblies, in part manufactured by the Company, to several major automotive
companies, most with multiple braking assembly programs that span multiple
vehicles, which partially mitigates the Company's exposure to a single
customer.
The nature of the contract electronics manufacturing industry is such that
the start-up of new customers and new programs to replace expiring programs
occurs frequently. New customer and program start-ups generally cause losses
early in the life of a program which is offset by higher profitability as
the program matures and becomes established. Presently, the Company has a
higher concentration of new customer and program start-ups than in prior
years due to its focused customer and program diversification efforts and
capability expansion, both domestically and internationally, which reduced
current year earnings.
This segment's operations carry a higher degree of risk than the Company's
other segment due to increased globalization, rapid technological changes,
component availability, capacity utilization given the contract nature of
this industry, and the importance of established program sales to one
customer. The continuing success of this segment is dependent upon its
ability to replace expiring customers/programs with new customers/programs.
Ticker
KBALB
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