| As filed with the Securities and Exchange Commission on April 28, 2009 | |||
Registration No. 333- 157578 | |||
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 | |||
FORM S-3 /A | |||
Amendment No. 1 to REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 | |||
HNI Corporation Co-registrants are listed on the page following the cover pages (Exact Name of Registrant as Specified in Its Charter) | |||
Iowa (State or Other Jurisdiction of Incorporation or Organization) | 42-0617510 (I.R.S. Employer Identification Number) | ||
408 East Second Street P.O. Box 1109 Muscatine, IA 52761-0071 563/272-7400 (Address, including Zip Code, and Telephone Number, including Area Code of Registrant's Principal Executive Offices) | |||
Steven M. Bradford Vice President, General Counsel and Secretary HNI Corporation 408 East Second Street P.O. Box 1109 Muscatine, IA 52761 563/272-7400 (Name, Address, including Zip Code and Telephone Number, including Area Code, of Agent For Service) Copy to: Joseph P. Richardson, Esq. Matthew M. Holman, Esq. Squire, Sanders & Dempsey L.L.P. Two Renaissance Square 40 North Central Avenue Phoenix, AZ 85004-4498 603/528-4000 | |||
Approximate date of commencement of proposed sale to public: From time to time after the effective date of this Registration
If the only securities being registered on this formForm are being offered pursuant to dividend or interest reinvestment plans, please check the following box. [_]
o
If any of the securities being registered on this formForm are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or reinvestment plans, please check the following box. [_]
þ
If this formForm is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_]
o __________________________
If this formForm is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_]
o ______________
If delivery ofthis Form is a registration statement pursuant to General Instruction I.D. or a post-effective amendment thereto that shall become effective upon filing with the prospectus is expected to be madeCommission pursuant to Rule 434,
please462(e) under the Securities Act, check the following box. [_]
o
If this Form is a post-effective amendment to a registration statement filed pursuant to General Instruction I.D. filed to register additional securities or additional classes of securities pursuant to Rule 413(b) under the Securities Act, check the following box. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12B-2 of the Exchange Act.
Large Accelerated Filer þ Accelerated Filer o Non-accelerated Filer o Smaller Reporting Company o
(Do not check if a smaller reporting company)
CALCULATION OF REGISTRATION FEE
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Title of each class of securities to be registered (1) | Amount to be registered (1)(2) | Proposed maximum offering price per share (2) | Proposed maximum aggregate offering price (2)(3) | Amount of registration fee (2)(4) |
| Common Stock, | ||||
| Preferred | ||||
| Debt Securities | ||||
| Guarantees of HNI Corporation and its subsidiaries with respect to the Debt Securities (5) | ||||
| Depositary Shares | ||||
| Warrants | ||||
| Purchase | ||||
| Units | ||||
| Total: | --- | --- | $250,000,000 | $9,825* |
| (1) | There are being registered under this registration statement such indeterminate number of shares of common stock and preferred stock; such indeterminate principal amount of debt securities; such indeterminate number of depositary shares; such indeterminate number of warrants to purchase common stock, preferred stock, debt securities and/or depositary shares; such indeterminate number of purchase contacts to purchase common stock, preferred stock, debt securities, depositary shares or warrants; and such indeterminate number of units as may be sold by the registrant from time to time, which together shall have an aggregate initial offering price not to exceed $250,000,000. If any debt securities are issued at an original issue discount, then the offering price of such debt securities shall be in such greater principal amount at maturity as shall result in an aggregate initial offering price not to exceed $250,000,000, less the aggregate dollar amount of all securities previously issued hereunder. Any securities registered hereunder may be sold separately or as units with other securities registered hereunder. The securities registered hereunder also include such indeterminate number of shares of |
| include such indeterminate number of shares of common stock and preferred stock as may be issuable with respect to the shares being registered hereunder as a result of stock splits, stock dividends or similar transactions. |
| (2) | In United States dollars or the equivalent thereof in any other currency, currency unit or units or composite currency or currencies. |
| (3) | The proposed maximum per unit and aggregate offering prices per class of securities will be determined from time to time by the registrant in connection with the issuance by the registrant of the securities registered under this registration statement and is not specified as to each class of security pursuant to General Instruction II.D of Form S-3 under the Securities Act of 1933. |
| (4) | Calculated pursuant to Rule 457(o) under the Securities Act of 1933. | |
| (5) | The guarantees are the full and unconditional guarantee of HNI Coproration's obligations under its debt securities by its subsidiaries listed on the following page. No separate consideration will be received for the guarantees of debt securities. No additional registration fee for the guarantees will be due pursuant to Rule 457(n) under the Securities Act of 1933. |
* Previously paid.
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that the Underwriters have the option to purchase
to cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating thethis registration fee and
calculatedstatement shall thereafter become effective in accordance with Rule 457(c) underSection 8(a) of the Securities Act of 1933 usingor until the averageregistration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
TABLE OF CO-REGISTRANTS
The following direct and indirect subsidiaries of the high and low pricesHNI Corporation are co-registrants for the Common Stockpurpose of providing guarantees, if any, of payment on September 24, 1997.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS the debt securities being registered hereunder:
| Name (1) | State of Incorporation or Organization | I.R.S. Employer Identification No. |
| Allsteel Inc. | Illinois | 36-0717079 |
| Hearth & Home Technologies Inc. | Iowa | 42-1161782 |
| Hickory Business Furniture, LLC | North Carolina | 74-3255576 |
| Maxon Furniture Inc. | Iowa | 42-1295118 |
| Paoli Inc. | Iowa | 20-0473460 |
| The Gunlocke Company L.L.C. | Iowa | 22-3887942 |
| The HON Company | Iowa | 42-1491474 |
(1) The address, including zip code, and telephone number, including area code, of each co-registrant is c/o HNI Corporation, 408 East Second Street, P.O. Box 1109, Muscatine, IA 52761-0071, (563) 272-7400.
| The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. |
SUBJECT TO COMPLETION, OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE.DATED APRIL 28, 2009
PROSPECTUS
HNI Corporation
$250,000,000
Common Stock
Preferred Stock
Debt Securities
Guarantees
Depositary Shares
Warrants
Purchase Contracts
Units
We may offer and sell from time to time, in one or more series or issuances and on terms that we will determine at the time of the offering, any combination of the securities described in this prospectus, up to an aggregate amount of $250,000,000.
We will provide specific terms of any offering in a supplement to this prospectus. Any prospectus supplement may also add, update or change information contained in this prospectus. You should carefully read this prospectus and the applicable prospectus supplement as well as the documents incorporated or deemed to be incorporated by reference in this prospectus before you purchase any of the securities offered hereby.
These securities may be offered and sold in the same offering or in separate offerings; to or through underwriters, dealers and agents; or directly to purchasers. The names of any underwriters, dealers or agents involved in the sale of our securities and their compensation will be described in the applicable prospectus supplement.
Our common stock is listed on the New York Stock Exchange ("NYSE") under the symbol "HNI." We will make application to list any shares of common stock sold by us under this prospectus and any prospectus supplement on the NYSE. We will provide information in any applicable prospectus supplement regarding any listing of securities other than shares of our common stock on any securities exchange.
This prospectus may not be used to consummate a sale of our securities unless accompanied by the applicable prospectus supplement.
You should consider the risks that we have described in this prospectus and in the accompanying prospectus supplement before you invest. See "RISK FACTORS" on page 2.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.
The date of this prospectus is _____________ ___, ______.
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| Exhibit 4.6 | |
| Exhibit 5.1 | |
| Exhibit 23.2 | |
| Exhibit 24.1 |
This prospectus is part of a registration statement that we filed with the Securities and Exchange Commission, or the SEC, utilizing a "shelf" registration process. Under this shelf registration process, we may sell any combination of the securities registered in one or more offerings, up to a total dollar amount of $250,000,000. This prospectus provides you with general information. We will provide a prospectus supplement that contains specific information about any offering by us.
The prospectus supplement also may add, update or change information contained in the prospectus. You should read both this prospectus and the prospectus supplement related to any offering as well as additional information described under the heading "WHERE YOU CAN FIND MORE INFORMATION."
We have not authorized anyone to provide you with information different from that contained or incorporated by reference in this prospectus or any accompanying prospectus supplement or any "free writing prospectus." We are offering to sell, and seeking offers to buy, securities only in jurisdictions in which offers and sales are permitted. The information contained in this prospectus and in any accompanying prospectus supplement is accurate only as of the date of their covers, regardless of the time of delivery of this prospectus or any prospectus supplement or of any sale of our securities. Our business, financial condition, results of operations and prospects may have changed since those dates. You should rely only on the information contained or incorporated by reference in this prospectus or any accompanying prospectus supplement. To the extent there is a conflict between the information contained in this prospectus and the prospectus supplement, you should rely on the information in the prospectus supplement, provided that if any statement in one of these documents is inconsistent with a statement in another document having a later date – for example, a document incorporated by reference into this prospectus or any prospectus supplement – the statement in the document having the later date modifies or supersedes the earlier statement.
In this prospectus, the terms "we," "our," "us," "HNI" and the "Corporation" refer to HNI Corporation, unless otherwise specified.
The following summary does not contain all of the 3,395,000 sharesinformation that may be important to purchasers of Common Stockour securities. Prospective purchasers of HON INDUSTRIES Inc.,securities should carefully review the detailed information and financial statements, including the notes thereto, appearing elsewhere in or incorporated by reference into this prospectus.
Our Company
We are an Iowa corporation, (the "Company")incorporated in 1944, and are the second largest office furniture manufacturer in the world and the nation's leading manufacturer and marketer of gas and wood-burning fireplaces. We provide a broad office furniture product offering to dealers (both independent and Corporation-owned), offered hereby, 1,000,000 shareswholesalers, retail superstores, end-user customers and federal, state and local governments. Dealer, wholesaler and retail superstores are being offered
by the Companymajor office furniture product distribution channels based on sales. Our hearth products include a full array of gas, electric and 2,395,000 shareswood-burning fireplaces, inserts, stoves, facings and accessories. We sell these products through a national system of dealers and distributors, as well as Corporation-owned distribution and retail outlets. We are being offered byorganized into a certain shareholder
(the "Selling Shareholder"). The Company will not receive any of the proceeds
of shares sold by the Selling Shareholder. See "Selling Shareholder."
Of the 3,395,000 shares of Common Stock of the Company offered, 2,716,000
shares are being offered insidecorporate headquarters and operating units with offices, manufacturing plants, distribution centers and sales showrooms in the United States, Canada, China, Hong Kong and CanadaTaiwan. We have eight operating units, marketing under various brand names, including HON®, Allsteel®, Gunlocke®, Paoli®, Maxon®, HBF® and Lamex®, that participate in the office furniture industry. These operating units include: The HON Company, Allsteel Inc., Maxon Furniture Inc., The Gunlocke Company L.L.C., Paoli Inc., Hickory Business Furniture, LLC, HNI Hong Kong Limited (Lamex) and Omni Workspace Company. Each of these operating units provides products , or in the case of Omni Workspace Company services, which are sold through various channels of distribution and segments of the office furniture industry. Our operating unit Hearth & Home Technologies Inc. participates in the hearth products industry manufacturing and distributing such brands as Heatilator®, Heat & Glo™, Quadra-Fire® and Harman Stove™. The retail and distribution brand for this operating unit is Fireside Hearth & Home. In fiscal 2008, we had net sales of $2.5 billion, of which approximately $2.1 billion or 83% was attributable to office furniture products and $0.4 billion or 17% was attributable to hearth products.
Our Growth Strategy
Our strategy is to build on our position as a leading manufacturer of office furniture and hearth products in North America and pursue select global markets where opportunities exist to create value. The key components of this strategy are to:
| · | introduce new products; |
| · | build brand equity; |
| · | provide outstanding customer satisfaction by focusing on the end-user; |
| · | strengthen the distribution network; |
| · | respond to global competition; |
| · | pursue complementary strategic acquisitions; |
| · | enter markets not currently served; and |
| · | continually reduce costs. |
Our strategy has a dual focus: working continuously to extract new growth from our core markets while identifying and developing new, adjacent potential areas of growth. We focus on extracting new growth from each of our existing businesses by deepening our understanding of end-users, using new insights gained to refine branding, selling and marketing and developing new products to serve them better. We also pursue opportunities in potential growth drivers outside of, but related to, our core business, such as vertical markets, new distribution models or a new business entirely.
Our Offices
We maintain our principal executive offices at 408 East Second Street, P.O. Box 1109, Muscatine, Iowa 52761. Our telephone number is 563/272-7400. Our website is located at www.hnicorp.com. Other than as described in "WHERE YOU CAN FIND MORE INFORMATION" below, the U.S.
Underwriters (the "U.S. Offering")information on, or that can be accessed through, our web site is not incorporated by reference in this prospectus or any prospectus supplement, and 679,000 shares are being offeredyou should not consider it to be a part of this prospectus or any prospectus supplement. Our web site address is included as an inactive textual reference only.
Investing in our securities involves a concurrent international offering outsidehigh degree of risk. Please see the United States and Canada byrisk factors described under the International Managers (the "International Offering" and togethercaption "ITEM 1A. RISK FACTORS" in our Annual Report on Form 10-K for the fiscal year ended January 3, 2009, on file with the U.S.
Offering,SEC, which are incorporated by reference in this prospectus and in any accompanying prospectus supplement. Before making an investment decision, you should carefully consider these risks as well as information we include or incorporate by reference in this prospectus and in any accompanying prospectus supplement.
We file annual, quarterly and current reports, proxy statements and other information with the "Offerings"). The priceSEC under the Securities Exchange Act of 1934, as amended, or the Exchange Act. Through our website at www.hnicorp.com, you may access, free of charge, our filings, as soon as reasonably practical after we electronically file them with or furnish them to the SEC. Other information contained in our website is not incorporated by reference in, and should not be considered a part of, this prospectus or any accompanying prospectus supplement. You also may read and copy any document we file at the SEC's Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the Public Reference Room. Our SEC filings are also available to the public from the SEC's website at www.sec.gov.
This prospectus is part of a registration statement on Form S-3 that we and our guarantor subsidiaries jointly filed with the aggregate
underwriting discount per share will be identical for both offerings. See
"Underwriting."
The Common Stock is quoted onSEC to register the Nasdaq National Market under the symbol
"HONI." On September 25, 1997, the last reported sale price of the Common Stock
on the Nasdaq National Market was $54 3/8 per share. See "Market Price of and
Dividends on Common Stock."
SEE "RISK FACTORS" BEGINNING ON PAGE 7 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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(1) The Company and the Selling Shareholder have agreed to indemnify the
Underwriters against certain liabilities, including liabilitiessecurities offered hereby under the Securities Act of 1933, as amended. See "Underwriting.amended, or the Securities Act. This prospectus does not contain all of the information included in the registration statement,
including certain exhibits and schedules. You may obtain the registration statement and exhibits to the registration statement from the SEC at the address listed above or from the SEC's website – www.sec.gov.
This prospectus and each prospectus supplement include and incorporate forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. All statements, other than statements of historical facts, included or incorporated in this prospectus or any prospectus supplement regarding our strategy, prospects, plans, objectives, future operations, future revenue and earnings, projected margins and expenses, technological innovations, future products or product development, product development strategies, potential acquisitions or strategic alliances, the success of particular product or marketing programs, the amount of revenue generated as a result of sales to significant customers, financial position, and liquidity and anticipated cash needs and availability are forward-looking statements. The words "anticipates," (2) Before deduction"believes," "could," "confident," "estimates," "expects," "forecasts," "hopes," "intends," "likely," "may," "plans," "possible," "potential," "predicts," "projects," "should," "will," "would" and variations of expenses,such words and similar expressions are intended to identify forward-looking statements.
Actual results or events could differ materially from the forward-looking statements we make. Among the factors that could cause actual results to differ materially are the factors discussed under "ITEM 1A. RISK FACTORS" in our Annual Report on Form 10-K for the fiscal year ended January 3, 2009. We also will include or incorporate by reference in each prospectus supplement important factors that we believe could cause actual results or events to differ materially from the forward-looking statements that we make. Should one or more known or unknown risks or uncertainties materialize, or should underlying assumptions prove inaccurate, actual results could differ materially from past results and those anticipated, estimated, projected or implied by these forward-looking statements. You should consider these factors and the other cautionary statements made in this prospectus, any prospectus supplement or the documents we incorporate by reference in this prospectus as being applicable to all related forward-looking statements wherever they appear in this prospectus, any prospectus supplement or the documents incorporated by reference. While we may elect to update forward-looking statements wherever they appear in this prospectus, any prospectus supplement or the documents incorporated by reference, we do not assume, and specifically disclaim, any obligation to do so, whether as a result of new information, future events or otherwise. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.
The SEC allows us to incorporate by reference the information we file with the SEC, which means that we can disclose important information to you by referring you to those documents. The information that we incorporate by reference is considered to be part of this prospectus. Information that we file with the SEC in the future and incorporate by reference in this prospectus automatically updates and supersedes previously filed information as applicable.
We incorporate by reference into this prospectus the following documents filed by us with the SEC, other than any portion of any such documents that are not deemed "filed" under the Exchange Act in accordance with the Exchange Act and applicable SEC rules:
| · | Annual Report on Form 10-K for the fiscal year ended January 3, 2009 . |
| · | Current Report on Form 8-K filed with the SEC on February 17, 2009 . |
| · | Current Report on Form 8-K filed with the SEC on February 25, 2009 . | |
| · | Current Report on Form 8-K filed with the SEC on April 3, 2009. | |
| · | Information contained in Item 2.05 of Current Report on Form 8-K filed with the SEC on April 22, 2009. |
| · | The information specifically incorporated by reference into our Annual Report on Form 10-K for the fiscal year ended January 3, 2009, from our definitive proxy statement on Schedule 14A filed with the SEC on March 30 , 2009 . |
| · | The description of our common stock contained in the Registration Statement on Form 8-A filed with the SEC on July 12, 1998, including any amendments or reports filed for the purpose of updating such description. |
We also incorporate by reference into this prospectus all documents (other than any portions of any such documents that are not deemed "filed" under the Exchange Act in accordance with the Exchange Act and applicable SEC rules) filed by us under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of the initial registration statement and before effectiveness of the registration statement, and after the date of this prospectus.
You may request a copy of these filings, which we shall deliver to you, together with all exhibits thereto, at $500,000, which are payableno cost, by writing or telephoning us as follows:
HNI Corporation
Attention: Corporate Secretary
408 East Second Street
P.O. Box 1109
Muscatine, Iowa 52761
563/272-7400
Any statement contained in a document that is incorporated by reference will be modified or superseded for all purposes to the Company. The Selling Shareholderextent that a statement contained in this prospectus or any accompanying prospectus supplement, or in any other document that is subsequently filed with the SEC and incorporated by reference, modifies or is contrary to that previous statement. Any statement so modified or superseded will not be payingdeemed a part of this prospectus or any accompanying prospectus supplement, except as so modified or superseded. Since information that we later file with the SEC will update and supersede previously incorporated information, you should look at all of the SEC filings that we incorporate by reference to determine if any of the expensesstatements in this prospectus or any accompanying prospectus supplement or in any documents previously incorporated by reference have been modified or superseded.
This prospectus provides you with a general description of the Offerings, other thanproposed offering of our securities. Each time that we sell securities under this prospectus, we will provide a prospectus supplement that will contain specific information about the expensesterms of its counsel.
(3)that offering. The Company has granted the U.S. Underwriters and the International
Managers options, exercisable within 30 days of the date hereof,prospectus supplement may add to, purchase up to an aggregate of 407,400 and 101,850, respectively,
additional shares of Common Stock on the same terms set forth above, to
cover over-allotments, if any. If the over-allotment options are exercised
in full, the total Price to Public, Underwriting Discount and Proceeds to
Company will be $ , $ and $ , respectively. See
"Underwriting."
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The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if issued to and accepted by them, subject to
approval of certain legal matters by counsel for the Company, counsel for the
Selling Shareholder and counsel for the Underwriters and certain other
conditions. The Underwriters reserve the right to withdraw, cancelupdate or modify
such offer and to reject orders in whole or in part. It is expected that
delivery of the Common Stock will be made against payment therefor in New York,
New York on or about , 1997.
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MERRILL LYNCH & CO. WILLIAM BLAIR & COMPANY
ROBERT W. BAIRD & CO. MCDONALD & COMPANY
INCORPORATED SECURITIES, INC.
The date of this Prospectus is , 1997.
[Pictures of filing cabinets, seating and office systems appear here.]
CERTAIN PERSONS PARTICIPATING IN THE OFFERINGS MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SUCH TRANSACTIONS MAY INCLUDE STABILIZING, THE PURCHASE OF SHARES OF COMMON
STOCK TO COVER SYNDICATE SHORT POSITIONS AND THE IMPOSITION OF PENALTY BIDS.
FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
IN CONNECTION WITH THE OFFERINGS, THE UNDERWRITERS MAY ENGAGE IN PASSIVE
MARKET MAKING TRANSACTIONS IN THE SHARES OF COMMON STOCK OF THE COMPANY ON THE
NASDAQ NATIONAL MARKET IN ACCORDANCE WITH RULE 103 OF REGULATION M. SEE
"UNDERWRITING."
HON(R), Concensys(R), Every-Day(R), Regent(R) and Solutions Seating(R) are
registered trademarks of the Company.
2
PROSPECTUS SUMMARY
The following is a summary of certainchange information contained in this Prospectus. This
summary is not intended to be completeprospectus and should be read as superseding this prospectus. You should read both this prospectus and any prospectus supplement together with additional information described under the heading "WHERE YOU CAN FIND MORE INFORMATION."
The prospectus supplement will describe the terms of any offering of securities, including the offering price to the public in conjunctionthat offering, the purchase price and net proceeds of that offering, and the other specific terms related to that offering of securities.
Our ratio of earnings to fixed charges for each of the five most recently completed fiscal years and any required interim periods will each be specified in a prospectus supplement or in a document that we file with the SEC and is qualifiedincorporate by reference pertaining to the issuance, if any, by us of debt securities in its entirety by, the more detailed information and
financial statements appearing elsewhere in this Prospectus or incorporated
herein by reference. Investors should consider carefully the informationfuture.
Except as may be otherwise set forth in "Risk Factors" before making any decisionprospectus supplement accompanying this prospectus, we will use the net proceeds we receive from sales of securities offered hereby for general corporate purposes, which may include the repayment of indebtedness outstanding from time to investtime and for working capital, capital expenditures, acquisitions and repurchases of our common stock or other securities. Pending these uses, the net proceeds may also be temporarily invested in short-term securities.
SECURITIES WE MAY OFFER
The descriptions of the securities contained in this prospectus, together with the applicable prospectus supplements, summarize the material terms and provisions of the various types of securities that we may offer. We will describe in the Common
Stock. Exceptapplicable prospectus supplement relating to any securities the particular terms of the securities offered by that prospectus supplement. If we indicate in the applicable prospectus supplement, the terms of the securities may differ from the terms we have summarized below. We will also include in the prospectus supplement information, when applicable, about material U.S. federal income tax considerations relating to the securities and the securities exchange, if any, on which the securities will be listed.
We may sell from time to time, in one or more offerings, any one or more of the following:
| · | common stock; |
| · | preferred stock; |
| · | debt securities; | |
| · | guarantees of debt securities; |
| · | depositary shares; |
| · | warrants to purchase common stock, preferred stock, debt securities and/or depositary shares; |
| · | purchase contracts; |
| · | units consisting of common stock, preferred stock, debt securities, depositary shares and/or warrants in any combination; or |
| · | any combination of the foregoing securities. |
In this prospectus, we refer to the common stock, preferred stock, debt securities, guarantees, depositary shares, warrants, purchase contracts and units collectively as otherwise noted,"securities." The total dollar amount of all securities that we may issue under this prospectus will not exceed $250,000,000.
If we issue debt securities at a discount from their original stated principal amount, then, for purposes of calculating the total dollar amount of all securities issued under this prospectus, we will treat the initial offering price of the debt securities as the total original principal amount of the debt securities.
This prospectus may not be used to consummate a sale of securities unless it is accompanied by a prospectus supplement.
This section describes the general terms of our common stock. A prospectus supplement may provide information that is different from this prospectus. If the information in the prospectus supplement with respect to our common stock being offered differs from this Prospectus assumes
thatprospectus, you should rely on the Underwriters' over-allotment options are not exercised. Unless the
context otherwise requires, the term "Company" means HON INDUSTRIES Inc. and
its subsidiaries and "fiscal 1992," "fiscal 1993," "fiscal 1994," "fiscal
1995," and "fiscal 1996" mean the fiscal years ended January 2, 1993, January
1, 1994, December 31, 1994, December 30, 1995 and December 28, 1996,
respectively, and "fiscal 1997" means the fiscal year ending January 3, 1998.
THE COMPANY
The Company is a leading designer and manufacturer of value-priced office
furniture and furniture systemsinformation in the United States. The Company's products
are marketed through multiple distribution channels primarilyprospectus supplement. A copy of our articles of incorporation, as amended, has been incorporated by reference from our filings with the SEC as an exhibit to small-the registration statement. Our common stock and medium-sized businesses and home offices on the basis of price, quality,
selection and quick delivery. The Company maintains its leadership position by
offering "compelling value" to its customers through a broad line of quality
office furniture, including filing cabinets, seating, office systems, desks and
related products, at attractive price points, with quick delivery. The
Company's low-cost manufacturing capabilities, extensive distribution network,
innovative product development and unique employee ("member") culture enable it
to provide compelling value to its customers. In addition to its core office
furniture business, the Company, through its Hearth Technologies Inc.
subsidiary ("Hearth Technologies"), is the leading manufacturer of wood- and
gas-burning fireplaces, stoves and related accessories in the United States.
The Company markets its hearth products through the widely-recognized
"Heatilator" and "Heat-N-Glo" brand names. In fiscal 1996, the Company had net
sales of $998.1 million, of which $887.3 million was attributable to office
furniture products and $110.8 million was attributable to hearth products.
A key driverrights of the Company's success has been its highly-efficient and low-
cost manufacturing operations. Since its inception,holders of our common stock are subject to the Company has been
committed to constant 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
significantly contributed to increased productivity, lower manufacturing costs,
and improved product quality and workplace safety. As a result of RCI,
productivity, as measured by annual revenue per member, has increased 50% over
the last five years. In addition, the Company's RCI efforts enable it to offer
short average lead times of two to four weeks, from receipt of order to
shipment, 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 oneapplicable provisions of the top two suppliersIowa Business Corporation Act, which we refer to as "Iowa law," our articles of office furniture to
eachincorporation, our by-laws, as amended, the rights of the largest national office products dealers, which are Boise Cascade
Corporation, BT Office Products International, Inc., U.S. Office Products
Company, Corporate Express Inc., Office Depot Inc.--Business Services Division
and Staples Commercial Advantage ("mega-dealers"), and toholders of our preferred stock, if any, the Office Depot and
Office Max superstores. The Company offers reduced freight costs and complete
order delivery, regardlessrights of the order size or combinationholders of products, by
manufacturing at multiple locations and cross-docking products throughout the
United States. The Company believes that more of its products are available for
immediate delivery, through over 135 nationwide wholesaler customer locations,
than those of any of its competitors.
The Company's product development efforts are primarily focused on reducing
the cost to manufacture existing products and designing new products that
provide additional features and better quality. The Company's ability to apply
RCI techniques to reduce manufacturing costs and enhance value allows its
products to be sold
3
at prices lower than those offered for competing products. For example, in 1996
the Company redesigned its leading line of file cabinets to add features while
lowering the Company's costs and maintaining prices. As a result of the
Company's aggressive product development efforts, approximately 45% of the
Company's 1996 sales volume consisted of products introduced within the last
three fiscal years.
An important element of the Company's success has been its ability to
attract, develop and retain skilled, experienced and efficient members. Each of
the Company's eligible members owns stock in the Company through a number of
stock-based plans, including a member stock ownership plan, and participates in
the Company's qualified profit sharing plan. In addition, most production
members are eligible for incentive bonuses.
According to industry sources, U.S. office furniture shipments, which totaled
approximately $10 billion in 1996, have grown at a compound annual growth rate
of approximately 7% over the three-year period ended December 31, 1996. The
U.S. office furniture market consists of two primary segments--the contract
segment and the transactional segment. The contract segment has traditionally
been characterized by one-time sales of large quantities of office furniture 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. The transactional 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.
Over the last several years, as competition in the contract segment has
intensified, dealers have sought to provide their clients with moderately-
priced alternatives to premium-priced contract furniture. In addition, small-
and medium-sized businesses with less complex needs have sought out affordable
office furniture that can be delivered quickly. In response to these trends,
the Company,our private notes, as well as some of its competitors, have developed value-priced
alternatives to contract furniture lines. The Company believes that this
portionthe terms of the contract segment will continue to expand with the proliferationour revolving credit facility and term loan credit agreement and any other outstanding indebtedness. Certain provisions of small-Iowa law and medium-sized businesses, growth in home offices, commoditizationour articles of office furnitureincorporation and consolidationby-laws are described below in the office furniture distribution
network.
GROWTH STRATEGY
The Company's strategy is to build on its position as a leading manufacturer
of value-priced office furniture and hearth products in North America. The
components of this growth strategy are to:
Introduce New Value-Priced Products. The Company has been increasingly
successful in developing compelling value alternatives to premium-priced office
furniture and intends to expand and further enhance its product offerings by
developing new products. The Company's development efforts emphasize the design
of products that are easily manufactured, and the use and development of
alternative materials that enhance quality and reduce product development
cycles and manufacturing costs. The Company conducts market research of end-
users to assess evolving customer demands. The Company offers its products in
many new models, sizes, alternative materials, designs, fabrics and finishes.
Areas in which the Company intends to expand its product offerings include
computer furniture, ready-to-assemble furniture, folding chairs and tables,
fire-proof files and school furniture.
Continually Improve Productivity. The Company intends to strengthen its low-
cost manufacturing position by continuing to apply RCI, designing special
machines and tooling to enhance proprietary processes, evaluating vertical
integration opportunities and improving information systems. Lower costs allow
the Company to enhance product features at no additional cost to the customer.
As successfully demonstrated in 1996 and the first half of 1997, lower
manufacturing costs also allow the Company to reduce prices on certain existing
products in order to increase volume and market share while maintaining
operating margins. The Company intends to implement proven RCI tools to realize
productivity gains in acquired operations.
4
Leverage Distribution Network. The changing dynamics of distribution in the
office furniture industry present an opportunity for the Company to benefit
from its extensive distributor network and its flexible operating structure.
Due to consolidation among office furniture distributors, fewer and larger
distributors exist and these distributors, such as office products and
furniture dealers, wholesalers and large, national retail chains, are reducing
their vendor bases and seeking stronger suppliers who offer more complete
product lines. As one of the top two suppliers of office furniture to each of
the mega-dealers and the Office Depot and Office Max superstores, the Company
believes that it is well-positioned to capitalize on this consolidation trend
due to its excellent reputation for price, quality, quick delivery and broad
product lines. In addition, the Company's commitment to providing distributors
with excellent customer service has helped to strengthen existing relationships
as well as develop new distribution channels.
Pursue Complementary Strategic Acquisitions. The Company continues to
evaluate potential acquisitions of complementary businesses that provide
opportunities for increased market penetration, innovative new products,
increased distribution capabilities, enhanced industry expertise and expanded
geographical presence in North America. Acquisition candidates must present
profitable growth opportunities within the Company's core businesses, must be
well managed and must be well respected by its customers. For example, in June
1997, the Company acquired Allsteel Inc. ("Allsteel"), a manufacturer of mid-
priced office furniture with 1996 sales of approximately $150 million.
Allsteel, which has a strong distribution network and modern, strategically-
located manufacturing facilities, enables the Company to broaden its customer
base by increasing its market penetration in the value-priced segment of the
office furniture industry.
Further Penetrate Hearth Products Market. The Company's recognized innovation
in direct-vent gas fireplace design and manufacturing coupled with its premier
position in wood-burning products provides it with the most comprehensive
product line and extensive distribution network in the hearth products market.
The Company plans to further enhance its competitive position in the hearth
products market by leveraging synergies with the office furniture business,
such as purchasing, manufacturing and product development.
The Company's principal executive offices are located at 414 East Third
Street, P.O. Box 1109, Muscatine, Iowa 52761-7109. Its telephone number is
(319) 264-7400. The Company's World Wide Web site address is
http://www.honi.com.section titled "CERTAIN PROVISIONS OF IOWA LAW AND THE OFFERINGS
The offering hereby of 2,716,000 shares of common stock, $1.00 par value per
share, of the Company (the "Common Stock"), in the United States and Canada
(the "U.S. Offering") and the concurrent offering of 679,000 shares of common
stock outside of the United States and Canada (the "International Offering")
are collectively referred to as the "Offerings.CORPORATION'S ARTICLES OF INCORPORATION AND BY-LAWS," The closing of each of the
U.S. Offering and the International Offering is conditioned upon the closing of
the other.
- --------
(1) As of September 22, 1997 and excluding shares of Common Stock reserved for
issuance upon the exercise of options under the Company's stock option
plan, of which options to purchase 78,000 shares are currently outstanding
at a weighted average exercise price of $49.48 per share.
5
SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
(IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)
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(a) Includes a $3,200,000 pre-tax gain on the sale of Ring King Visibles, Inc.,
a wholly-owned subsidiary of the Company ("Ring King") (after-tax gain of
$2,000,000 or $.07 per share).
(b) Includes the results of Heat-N-Glo Fireplace Products, Inc. ("Heat-N-Glo")
from October 2, 1996, the date it was acquired.
(c) Net sales per member is equal to net sales for the year divided by the
number of members at year end. First half data are based on annualized net
sales divided by the number of members at the end of the period. The data
for fiscal 1996 does not give effect to the acquisition of Heat-N-Glo in
the fourth quarter of 1996.
(d) Adjusted to reflect the sale by the Company of 1,000,000 shares of the
Common Stock offered hereby and the application of the estimated net
proceeds therefrom (assuming an offering price of $54.375 per share). See
"Use of Proceeds."
(e) Includes current and non-current long-term debt. Also includes current and
non-current capital lease obligations of $7,169,000.
6
RISK FACTORS
Prospective purchasers of the Common Stock offered hereby should consider
carefully all of the information set forth in this Prospectus, and in
particular, should evaluate the following risks in connection with an
investment in the Common Stock. Statements in this Prospectus that are not
strictly historical, including statements as to plans, objectives and future
performance, are "forward-looking" statements that are made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of
1995. Forward-looking statements involve known and unknown risks, which may
cause the Company's actual results in the future to differ materially from
expected results. These risks include, among others, competition within the
office furniture and hearth products industries, the relationship between
supply and demand for value-priced office furniture, and gas- and wood-burning
hearth products, the effects of economic conditions, the issues associated
with the acquisition and integration of recently acquired operations,
including Heat-N-Glo and Allsteel, operating risks, the ability of the
Company's distributors to successfully market and sell the Company's products,
the availability of capital to finance planned growth, and the effect of
consolidation in the office furniture industry, as well as the risks,
uncertainties and other factors described in this Prospectus and from time to
time in the Company's other filings with the Securities and Exchange
Commission.
STRONG COMPETITION
The office furniture industry is highly competitive, with a significant
number of competitors offering similar products. The Company's competitors
include Global Furniture Inc.; Anderson-Hickey Co., Globe Business Furniture
and United Chair, Inc., divisions of Haworth, Inc.; National Office Furniture,
a division of Kimball Office Furniture Co.; and High Point Furniture
Industries, Inc. In addition, the Company competes with certain office
furniture manufacturers which control a substantial portion of the market
share in the contract office furniture market, such as Steelcase Inc., Herman
Miller, Inc., Haworth, Inc. and Knoll, Inc. Products and brands offered by
contract office furniture market participants have strong acceptance in the
marketplace, and such competitors have developed and may continue to develop
value-priced product designs to compete with the Company. The Company also
faces significant price competition from its competitors and may encounter
competition from new market entrants. There can be no assurance that the
Company will be able to compete successfully in its market in the future. See
"Business--Competition."
CONCENTRATION OF CUSTOMER BASE
The Company sells its products through multiple distribution channels,
including through dealers, wholesalers and retailers. These distribution
channels have been consolidating in the past several years and may continue to
consolidate in the future. Such consolidation may result in a greater
proportion of the Company's sales being concentrated in fewer customers. In
1996, the Company's ten largest customers represented approximately 40% of its
consolidated net sales. One customer, United Stationers Inc. ("United
Stationers"), accounted for approximately 12%, 12%, 13% and 13% of the
Company's consolidated net sales in the six months ended June 28, 1997, and in
fiscal 1996, 1995 and 1994, respectively. The increased purchasing power
exercised by larger customers may adversely affect the prices at which the
Company can successfully offer its products. As a result of this
consolidation, changes in the purchase patterns or the loss of a single
customer may have a greater impact on the Company's financial results than
such events would have had prior to such consolidation. In addition, there can
be no assurance that the Company will be able to maintain its customer
relationships as consolidation of its customers occurs. See "Business--Sales,
Marketing and Distribution."
RISKS ASSOCIATED WITH MANAGING GROWTH
As a part of its growth strategy, the Company seeks to increase sales and
market share by introducing innovative new products, further enhancing its
existing line of value-priced products and through complementary acquisitions.
Part of this strategy depends on the Company's ability to increase sales
through its existing customer network, principally office products dealers,
wholesalers and retailers. There can be no assurance that
7
the Company's distribution facilities will have the capacity to manage and
coordinate the delivery of increased amounts of the Company's products
consistent with current levels of customer service. Furthermore, the ability
to effectuate and manage any growth profitably will depend on the Company's
ability to contain costs, including costs associated with increased sales and
marketing efforts, freight utilization, warehouse capacity, product
development and acquisition efforts.
RISK OF ENVIRONMENTAL LIABILITIES
The past and present operation and ownership by the Company of manufacturing
plants and real property are subject to extensive and changing federal, state
and local environmental laws and regulations, including those relating to
discharges in air, water and land, the handling and disposal of solid and
hazardous waste and the remediation of contamination associated with releases
of hazardous substances. Compliance with environmental regulations has not had
a material effect on the Company's capital expenditures, earnings or
competitive position to date; however, compliance with current laws or more
stringent laws or regulations which may be imposed on the Company in the
future, or stricter interpretation of existing laws, may require additional
expenditures by the Company in the future, some of which may be material.
These risks and uncertainties are referenced in the "Contingencies" note
included in the notes to consolidated financial statements.
ECONOMIC FACTORS AFFECTING THE OFFICE FURNITURE INDUSTRY
Fluctuations in office furniture industry revenues may be driven by a
variety of macroeconomic factors, such as white collar employment levels,
corporate cash flows and commercial construction, as well as industry factors,
such as corporate reengineering and restructuring, technology demands,
ergonomic, health and safety concerns and corporate relocations. There can be
no assurance that current or future economic or industry trends will not
adversely affect the business of the Company. See "Business--Industry."
8
USE OF PROCEEDS
The net proceeds to the Company from the sale of 1,000,000 shares of Common
Stock offered hereby, assuming an offering price of $54.375 per share, will be
approximately $51.7 million ($78.3 million if the Underwriters' over-allotment
options are exercised in full), after deducting the underwriting discount and
estimated offering expenses payable by the Company. The Company will not
receive any proceeds from the sale of Common Stock by the Selling Shareholder.
The Company will pay all offering expenses incurred in the offering, except
that the Selling Shareholder will pay the expenses of its counsel.
The Company expects to use the net proceeds of this offering for general
corporate purposes, including the repayment of indebtedness incurred to
finance acquisitions in fiscal 1996 and fiscal 1997, which indebtedness
matures on June 11, 2002 and bears interest at a variable rate (currently
5.9%). The Company intends to use the remaining credit under its revolving
credit line to finance capital expenditures and any future acquisitions. See
"Capitalization."
MARKET PRICE OF AND DIVIDENDS ON COMMON STOCK
The Company's Common Stock is currently traded on the Nasdaq National Market
("Nasdaq") under the symbol "HONI." The following table sets forth, for the
fiscal periods indicated, the high and low sale prices for the Common Stock as
reported by Nasdaq.
On September 25, 1997, the closing sale price of the Common Stock on Nasdaq,
was $54.375 per share. As of September 25, 1997, there were 5,310 record
holders of the Common Stock.
9
CAPITALIZATION
The following table sets forth the capitalization of the Company as of June
28, 1997, and as adjusted to reflect the sale by the Company of 1,000,000
shares of the Common Stock offered hereby and the application of the estimated
net proceeds therefrom (assuming an offering price of $54.375 per share). See
"Use of Proceeds." This table should be read in conjunction with the
consolidated financial statements of the Company and notes thereto included
elsewhere in this Prospectus.
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(a) Excludes shares of Common Stock reserved for issuance upon the exercise of
options under the Company's stock option plan, of which options to purchase
78,000 shares are currently outstanding at a weighted average exercise
price of $49.48 per share.
10
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
(IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)
The following selected financial data for, and as of the end of, the six
months ended June 29, 1996 and June 28, 1997 are derived from the unaudited
condensed consolidated financial statements of the Company and, in the opinion
of management, reflect all adjustments (which include only normal recurring
adjustments) necessary for a fair presentation of the results for such
periods. The interim results of operations are not necessarily indicative of
results for the entire fiscal year. The selected financial data of the Company
presented below for, and as of the end of, fiscal 1996 are derived from the
consolidated financial statements of the Company, which have been audited by
Arthur Andersen LLP and for, and as of the end of, fiscal 1992, fiscal 1993,
fiscal 1994 and fiscal 1995, are derived from the consolidated financial
statements of the Company, which have been audited by Ernst & Young LLP. The
selected financial data should be read in conjunction with, and are qualified
in their entirety by reference to, the consolidated financial statements and
the notes thereto and "Management's Discussion and Analysis of Financial
Condition and Results of Operation" included elsewhere in this Prospectus.
- -------
(a) Includes a $3,200,000 pre-tax gain on the sale of Ring King (after-tax
gain of $2,000,000 or $.07 per share).
(b) Includes the results of Heat-N-Glo from October 2, 1996, the date it was
acquired.
(c) Net sales per member is equal to net sales for the year divided by the
number of members at year end. First half data are based on annualized net
sales divided by the number of members at the end of the period. The data
for fiscal 1996 does not give effect to the acquisition of Heat-N-Glo in
the fourth quarter of 1996.
(d) Includes current and non-current long-term debt. Also includes current and
non-current capital lease obligations of $7,169,000.
11
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of the Company's historical results of operations
and of its liquidity and capital resources should be read in conjunction with
the Selected Consolidated Financial and Operating Data and the financial
statements of the Company and related notes thereto appearing elsewhere in this
Prospectus.
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated the percentage of
net sales represented by certain items reflected in the Company's statements of
income.
As a result of the Company's October 1996 acquisition of Heat-N-Glo, it now
has two reportable core business segments: office furniture and hearth
products.
SIX MONTHS ENDED JUNE 28, 1997 COMPARED TO SIX MONTHS ENDED JUNE 29, 1996
Net Sales. Net sales increased by 28% to $579.4 million for the six months
ended June 28, 1997 from $452.7 million for the six months ended June 29, 1996,
reflecting continued strong demand for office furniture products and hearth
products.
Office furniture products net sales increased by 16% to $484.4 million in the
1997 period from $417.0 million in the 1996 period as a result of increased
sales volume driven by industry growth and market share gains. Management
believes the Company's market share gain in the office furniture segment is
being driven by its leading position in the faster growing value-priced office
furniture segment, expanding distribution, particularly as a result of gaining
more page count in customer catalog merchandising, and a steady stream of new
product offerings.
Hearth products net sales increased by 166% to $95.0 million in the 1997
period from $35.7 million in the 1996 period primarily as a result of the
Company's October 1996 acquisition of Heat-N-Glo. The Company believes the
market share gain in the hearth products segment can be attributed to the
Company's leadership position in this expanding industry, strong customer
acceptance of its existing fireplace and stove products, especially gas-burning
fireplaces and stoves, and innovative new products.
Gross Profit. Gross profit increased by 29% to $184.3 million for the six
months ended June 28, 1997 from $142.5 million for the six months ended June
29, 1996. Gross profit margin increased to 31.8% for the six months ended June
28, 1997 from 31.5% for the same period in the prior year, due to increased
production unit volume, productivity improvements, and effective cost control
efforts, partially offset by price reductions on many of the Company's
products.
12
Selling and Administrative Expenses. Selling and administrative expenses
increased by 26% to $124.8 million for the six months ended June 28, 1997 from
$99.4 million for the six months ended June 29, 1996. As a percentage of net
sales, selling and administrative expenses decreased to 21.5% for the six
months ended June 28, 1997 as compared to 21.9% for the same period in the
prior year. This decrease was a result of continued commitment to developing
more efficient business processes, which has improved member productivity,
coupled with stringent control of expenses and increased efficiencies
associated with higher net sales. However, these results were partially offset
by increased freight costs due to growth of unit volume, increased distribution
costs for new warehouse capacity and product handling technologies that
facilitate providing higher level of service to customers, and the ongoing
commitment to developing and marketing new products.
Operating Income. Operating income from continuing operations increased 38%
to $59.5 million for the six months ended June 28, 1997 compared to $43.2
million (excluding a nonrecurring pre-tax gain of $3.2 million) for the six
months ended June 29, 1996. The increase is attributable to increased gross
profit and lower selling and administrative expenses as a percentage of net
sales. In the six months ended June 29, 1996, the Company recognized a pre-tax
gain of $3.2 million on the sale of a subsidiary, Ring King.
Net Income. Net income increased by 32% to $35.8 million for the six months
ended June 28, 1997 compared to $27.1 million (excluding a nonrecurring after-
tax gain of $2.0 million) for the six months ended June 29, 1996. This increase
is a result of the increase in operating income offset partially by an increase
in interest expense and an increase in the Company's effective tax rate to
37.5% for the six months ended June 28, 1997 compared to 37.0% for the six
months ended June 29, 1996. Interest expense increased to $3.1 million for the
six months ended June 28, 1997 from $1.6 million for the same period in the
prior year due to the additional debt assumed to fund the Heat-N-Glo
acquisition in October 1996.
Net income per common share increased by 35% to $1.20 per share for the six
months ended June 28, 1997 from $0.89 earned from ongoing operations last year
(excluding a nonrecurring after-tax gain of $0.07 per share). Average shares
outstanding decreased to 29.7 million for the six months ended June 28, 1997
from 30.3 million for the six months ended June 29, 1996 due to share
repurchases.
FISCAL YEAR ENDED DECEMBER 28, 1996 COMPARED TO FISCAL YEAR ENDED DECEMBER 30,
1995
Net Sales. Net sales increased by 12% to $998.1 million in 1996 from $893.1
million in the prior year. The increase in net sales for both core business
segments was due to continued gains in market share, which management believes
resulted from the Company's offering of an ongoing stream of innovative and
quality new products and a commitment to manufacturing excellence. Office
furniture products net sales increased 8% in 1996 to $887.3 million from $818.9
million in 1995. Hearth products net sales increased 49% in 1996 to $110.8
million from $74.2 million in 1995 due in part to the Company's October 1996
acquisition of Heat-N-Glo.
Gross Profit. Gross profit increased by 19% to $318.6 million in 1996 from
$268.4 million in the prior year. The increase in gross profit is primarily
attributable to the Company's sales growth in both business segments, which has
been driven by unit sales growth as opposed to pricing growth. Gross profit
margin increased to 31.9% for 1996 compared to 30.1% for 1995. This increase
was a result of the elimination of production inefficiencies associated with
two operations closed during 1995 and increased production unit volume,
productivity improvements, and effective cost control efforts, partially offset
by continued price reductions on many of the Company's products.
Selling and Administrative Expenses. Selling and administrative expenses
increased by 7% to $215.6 million in 1996 from $201.7 million in the prior
year. Selling and administrative expenses as a percentage of net sales
decreased to 21.6% in 1996 from 22.6% in 1995. This decrease was a result of
continued implementation of the Company's RCI process, which led to more
efficient business processes and increased efficiencies associated with higher
net sales. These decreases were partially offset by more aggressive marketing
programs, greater use of cooperative advertising programs, freight costs
escalating at a more rapid rate than product price increases and additional
costs of pursuing a proactive acquisition strategy.
13
Operating Income. Operating income increased by 54% to $103.0 million
(excluding a nonrecurring pre-tax gain on the sale of a subsidiary of $3.2
million) in 1996 from $66.7 million in 1995. The increase is a result of the
increase in gross profit and lower selling and administrative expenses as a
percentage of net sales.
Net Income. Net income, excluding the $2.0 million nonrecurring after-tax
gain on the sale of a subsidiary, increased by 61% to $66.1 million in 1996
from $41.1 million in the prior year. This increase is primarily attributable
to increased operating income, lower net interest expense and a lower effective
income tax rate. The effective tax rate was 35.3% for 1996 compared to 37.3%
for 1995. The rate for 1996 was favorably impacted by non-recurring income tax
credits of $2.1 million, or $0.07 per share, recorded in the third quarter of
1996.
Net income per common share increased by 62% to $2.19 (excluding a
nonrecurring after-tax gain of $0.07 per share) in 1996 from $1.35 for 1995.
The Company's net income per share performance for 1996 benefited from the
Company's common stock repurchase program.
The Company has closed, consolidated, and sold several operations over the
past two years in an effort to concentrate further on its core strengths. In
addition, the Company resolved several litigation uncertainties, reduced its
work force, addressed several asset realization concerns, and benefited from
special tax credits. The net effect of these unusual business events was to
reduce annual net income by $3.3 million, or $0.11 per share, in 1996, and $4.8
million, or $0.16 per share, in 1995.
FISCAL YEAR ENDED DECEMBER 30, 1995 COMPARED TO FISCAL YEAR ENDED DECEMBER 31,
1994
Net Sales. Net sales increased by 6% to $893.1 million in 1995 from $846.0
million in the prior year. Sales growth in 1995 was impacted by a difficult
market environment which resulted in aggressive product pricing and inventory
adjustments related to some major customers. Office furniture products net
sales increased 6% in 1995 to $818.9 million from $772.3 million in 1994.
Hearth products net sales increased by less than 1% in 1995 to $74.2 million
from $73.7 million in 1994.
Gross Profit. Gross profit decreased by 2% to $268.4 million in 1995 from
$272.6 million in the prior year. The gross profit margin decreased to 30.1% in
1995 from 32.2% in 1994. This decrease in margin was primarily attributable to
competitive price decreases, inventory adjustments, and production
inefficiencies of two financially marginal operations which were closed or
consolidated during the year. These decreases were partially offset by the
Company's on-going RCI efforts.
Selling and Administrative Expenses. Selling and administrative expenses
increased by 9% to $201.7 million in 1995 from $185.5 million in the prior
year. Selling and administrative expenses as a percentage of net sales
increased to 22.6% in 1995 from 21.9% in 1994. These expenses were adversely
impacted in 1995 by increased sales support and freight costs, acquisition
exploration expenses, temporary business disruption costs resulting from
increasing warehouse capacity, increased investment in new product development,
and nonrecurring expenses of $7.6 million associated with closing marginal
operations and severance payments.
Operating Income. Operating income decreased by 23% to $66.7 million in 1995
from $87.1 million for 1994. The decrease is a result of lower gross profit and
higher selling and administrative expenses.
Net Income. Net income decreased by 24% to $41.1 million in 1995 from $54.4
million in the prior year (excluding a charge for the cumulative effect of an
accounting change). This decrease is primarily attributable to reduced
operating income.
Net income per common share decreased by 22% to $1.35 in 1995 from $1.74 for
1994 (excluding a charge for the cumulative effect of an accounting change).
The Company's net income per share performance for 1996 benefitted from the
Company's common stock repurchase program.
14
SEASONALITY; QUARTERLY RESULTS OF OPERATIONS
The Company's office furniture business is seasonal with the third (July-
September) and fourth (October-December) fiscal quarters historically having
higher sales than the prior quarters. Hearth products sales tend to have an
even larger concentration of sales in the third and fourth fiscal quarters. In
fiscal 1996, 53% of the Company's consolidated net sales of office furniture
were generated in the third and fourth quarters and 57% of consolidated net
sales of hearth products (pro forma to reflect the Heat-N-Glo acquisition) were
generated in the third and fourth quarters.
The following table presents certain unaudited quarterly financial
information for each of the past ten quarters. In the opinion of the Company's
management, this information has been prepared on the same basis as the
consolidated financial statements appearing elsewhere in this Prospectus and
includes all adjustments (consisting only of normal recurring accruals)
necessary to present fairly the financial results set forth herein. Results of
operations for any previous quarter are not necessarily indicative of results
for any future period.
- -------
(a) Includes the results of operation of Heat-N-Glo from October 2, 1996, the
date it was acquired.
(b) Includes various pre-tax charges totaling $5,575,000 (after-tax effect of
$3,512,000, or $.12 per share) for nonrecurring costs primarily associated
with closing several leased facilities and severance arrangements from
eliminating certain administrative positions.
(c) Includes a $3,200,000 pre-tax gain on the sale of Ring King (after-tax gain
of $2,000,000, or $.07 per share).
(d) Includes one-time federal and state income tax credits of $2,100,000, or
$.07 per share.
15
LIQUIDITY AND CAPITAL RESOURCES
For the six months ended June 28, 1997, cash from operations was $43.8
million. During 1996, cash from operations was $93.3 million, which provided
the funds necessary to meet working capital needs, help finance an
acquisition, invest in capital improvements, repay long-term debt, pay
increased dividends and repurchase Company stock.
Cash Management. Cash, cash equivalents, and short-term investments totaled
$24.4 million at June 28, 1997, compared to $32.7 million at the end of 1996,
$46.9 million at the end of 1995, and $30.7 million at year-end 1994. These
funds, coupled with future cash from operations and additional long-term debt,
if needed, are expected to be adequate to finance operations, planned
improvements, and internal growth.
Another major element in maintaining a strong balance sheet is managing the
investment in receivables and inventories. The Company's success in managing
receivables is in large part due to maintaining close communications with its
customers and utilizing prudent risk assessment techniques. Inventory levels
and turns continue to improve as a function of reducing production cycle
times. Trade receivables turns have approximated 10 times for the past several
years, including 1996, and inventory turns have been in the 14 to 16 range,
with 1996 reaching 17 turns.
Capital Expenditure Investments. Capital expenditures, net of disposals,
were $34.2 million for the six months ended June 28, 1997, $44.7 million in
1996, $53.9 million in 1995, and $35.0 million in 1994. Expenditures for the
six months ended June 28, 1997 were principally for machinery, equipment,
process improvements, support for new products, production and warehouse
capacity, and information technology. Expenditures in 1996 were principally
for machinery, equipment, process improvements and tooling for new products.
Approximately $11.0 million of the expenditures in 1995 were for facility
capacity expansion and improvements, with the remainder invested in more
productive machinery, equipment, process improvements and tooling of new
products. Expenditures for 1994 were also principally for machinery, equipment
and process improvements. Looking forward, the projected capital expenditure
level for 1997 will be at a higher level than in 1996 and will include some
facility capacity expansion, but the bulk of the investment will be for new
product tooling and more productive and flexible machinery, equipment and
processes as in the past.
Long-Term Debt. Long-term debt, including capital lease obligations, was 35%
of total capitalization at June 28, 1997. Long-term debt, including capital
lease obligations, was 23.5% of total capitalization at December 28, 1996,
after recording the debt associated with the Heat-N-Glo acquisition. The
Company does not expect future capital resources to be a concern. The Company
has significant additional borrowing capacity and treasury stock available in
the event cash generated from operations should be inadequate to meet future
capital needs.
Cash Dividends. Cash dividends were $0.28 per common share for the six
months ended June 28, 1997, $0.50 for 1996, $0.48 for 1995, and $0.44 for
1994. The Board of Directors announced a 17% increase in the quarterly
dividend rate, from $0.12 to $0.14 per common share, in November 1996,
effective with the December 1, 1996, dividend payment. The previous quarterly
dividend increase was from $0.11 to $0.12, effective with the March 1, 1995,
dividend payment. A cash dividend has been paid every quarter since April 15,
1955, and quarterly dividends are expected to continue. The dividend payout
percentage has ranged from approximately 22% to 33% of prior year earnings.
Common Share Repurchases. In August 1996, the Board of Directors authorized
an additional $20.0 million to acquire the Company's Common Stock. During the
first six months of 1997, 63,648 shares were reacquired at a cost of
approximately $2.5 million, or an average price of $40.10 per share. During
1996, 753,800 shares were reacquired at a cost of approximately $21.9 million,
or an average price of $29.07 per share. During 1995, 367,317 shares were
reacquired at a cost of approximately $9.8 million, and 1,078,835 shares were
purchased in 1994 at a cost of approximately $29.6 million. The Company
purchases its own shares in open market transactions. The stock repurchase
strategy was initiated in 1985. Approximately 16.0 million shares have been
repurchased since the program's inception at a cost of approximately $231.3
million. As of June 28, 1997, approximately $6.2 million of the Board's last
$20.0 million purchase authorization remained available.
Litigation and Uncertainties. The Company is involved in various legal
action arising in the course of business, including certain environmental
matters. These uncertainties are referenced in the "Contingencies" note
included in the notes to consolidated financial statements.
16
BUSINESS
The Company is a leading designer and manufacturer of value-priced office
furniture and furniture systems in the United States. The Company's products
are marketed through multiple distribution channels primarily to small- and
medium-sized businesses and home offices on the basis of price, quality,
selection and quick delivery. The Company maintains its leadership position by
offering "compelling value" to its customers through a broad line of quality
office furniture, including filing cabinets, seating, office systems, desks
and related products, at attractive price points, with quick delivery. The
Company's low-cost manufacturing capabilities, extensive distribution network,
innovative product development and unique employee ("member") culture enable
it to provide compelling value to its customers. In addition to its core
office furniture business, the Company, through its Hearth Technologies Inc.
subsidiary ("Hearth Technologies"), is the leading manufacturer of wood- and
gas-burning fireplaces, stoves and related accessories in the United States.
The Company markets its hearth products through the widely-recognized
"Heatilator" and "Heat-N-Glo" brand names. In fiscal 1996, the Company had net
sales of $998.1 million, of which $887.3 million was attributable to office
furniture products and $110.8 million was attributable to hearth products.
A key driver of the Company's success has been its highly-efficient and low-
cost manufacturing operations. Since its inception, the Company has been
committed to constant 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
significantly contributed to increased productivity, lower manufacturing
costs, and improved product quality and workplace safety. As a result of RCI,
productivity, as measured by annual revenue per member, has increased 50% over
the last five years. In addition, the Company's RCI efforts enable it to offer
short average lead times of two to four weeks, from receipt of order to
shipment, 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 one of the top two suppliers of office furniture to
each of the largest national office products dealers, which are Boise Cascade
Corporation, BT Office Products International, Inc., U.S. Office Products
Company, Corporate Express Inc., Office Depot Inc.--Business Services Division
and Staples Commercial Advantage ("mega-dealers"), and to the Office Depot and
Office Max superstores. The Company offers reduced freight costs and complete
order delivery, regardless of the order size or combination of products, by
manufacturing at multiple locations and cross-docking products throughout the
United States. The Company believes that more of its products are available
for immediate delivery, through over 135 nationwide wholesaler customer
locations, than those of any of its competitors.
The Company's product development efforts are primarily focused on reducing
the cost to manufacture existing products and designing new products that
provide additional features and better quality. The Company's ability to apply
RCI techniques to reduce manufacturing costs and enhance value allows its
products to be sold at prices lower than those offered for competing products.
For example, in 1996 the Company redesigned its leading line of file cabinets
to add features while lowering the Company's costs and maintaining prices. As
a result of the Company's aggressive product development efforts,
approximately 45% of the Company's 1996 sales volume consisted of products
introduced within the last three fiscal years.
An important element of the Company's success has been its ability to
attract, develop and retain skilled, experienced and efficient members. Each
of the Company's eligible members owns stock in the Company through a number
of stock-based plans, including a member stock ownership plan, and
participates in the Company's qualified profit sharing plan. In addition, most
production members are eligible for incentive bonuses.
INDUSTRY
According to the Business and Institutional Furniture Manufacturer's
Association ("BIFMA"), U.S. office furniture industry shipments, which totaled
approximately $10 billion in 1996, have grown at a compound annual
17
growth rate of approximately 7% over the three-year period ended December 31,
1996. The Company believes that growth in the office furniture industry is
being driven by changing customer needs due to the emergence of open office
floor plans to support team work environments, shared and multi-purpose office
spaces for flexible work arrangements, new office technology which requires
furniture systems that support the use of hardware and software, and an
increased focus on ergonomics and employee comfort.
The U.S. office furniture market consists of two primary segments--the
contract segment and the transactional segment. The contract segment has
traditionally been characterized by one-time sales of large quantities of
office furniture 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. Contract furniture is
generally purchased through office furniture dealers who typically prepare a
custom-designed office layout emphasizing image and design. The process is
often lengthy and generally has several manufacturers competing for the same
projects. Overhead and support associated with the sales and customization
efforts in this segment are major reasons why the prices for contract office
furniture have traditionally been relatively high.
The transactional 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 products dealers (many of whom also participate in the
contract segment of the market) publish periodic catalogs that display office
furniture and products from various manufacturers.
Over the last several years, as competition in the contract segment has
intensified, dealers have sought to provide their clients with moderately-
priced alternatives to premium-priced contract furniture. In addition, small-
and medium-sized businesses with less complex needs have sought out affordable
office furniture that can be delivered quickly. In response to these trends,
the Company, as well as some of its competitors, have developed value-priced
alternatives to contract furniture lines--standard selections of quality
office furniture offered at attractive price points with quick and convenient
delivery. The Company believes that this portion of the contract segment will
continue to expand with the proliferation of small- and medium-sized
businesses, growth in home offices, commoditization of office furniture and
consolidation in the office furniture distribution network.
GROWTH STRATEGY
The Company's strategy is to build on its position as a leading manufacturer
of value-priced office furniture and hearth products in North America. The
components of this growth strategy are to:
Introduce New Value-Priced Products. The Company has been increasingly
successful in developing compelling value alternatives to premium-priced
office furniture and intends to expand and further enhance its product
offerings by developing new products. The Company's development efforts
emphasize the design of products that are easily manufactured, and the use and
development of alternative materials that enhance quality and reduce product
development cycles and manufacturing costs. The Company conducts market
research of end-users to assess evolving customer demands. The Company offers
its products in many new models, sizes, alternative materials, designs,
fabrics and finishes. Areas in which the Company intends to expand its product
offerings include computer furniture, ready-to-assemble furniture, folding
chairs and tables, fire-proof files and school furniture.
Continually Improve Productivity. The Company intends to strengthen its low-
cost manufacturing position by continuing to apply RCI, designing special
machines and tooling to enhance proprietary processes, evaluating vertical
integration opportunities and improving information systems. Lower costs allow
the Company to enhance product features at no additional cost to the customer.
As successfully demonstrated in 1996 and the first half of 1997, lower
manufacturing costs also allow the Company to reduce prices on existing
products in order to increase volume and market share while maintaining
operating margins. The Company intends to implement proven RCI tools to
realize productivity gains in acquired operations.
18
Leverage Distribution Network. The changing dynamics of distribution in the
office furniture industry present an opportunity for the Company to benefit
from its extensive distributor network and its flexible operating structure.
Due to consolidation among office furniture distributors, fewer and larger
distributors exist and these distributors, such as office products and
furniture dealers, wholesalers and large, national retail chains, are reducing
their vendor bases and seeking stronger suppliers who offer more complete
product lines. As one of the top two suppliers of office furniture to each of
the mega-dealers and the Office Depot and Office Max superstores, the Company
believes that it is well-positioned to capitalize on this consolidation trend
due to its excellent reputation for price, quality, quick delivery and broad
product lines. In addition, the Company's commitment to providing distributors
with excellent customer service has helped to strengthen existing
relationships as well as develop new distribution channels.
Pursue Complementary Strategic Acquisitions. The Company continues to
evaluate potential acquisitions of complementary businesses that provide
opportunities for increased market penetration, innovative new products,
increased distribution capabilities, enhanced industry expertise and expanded
geographical presence in North America. Acquisition candidates must present
profitable growth opportunities within the Company's core businesses, must be
well managed and must be well respected by its customers. For example, in June
1997, the Company acquired Allsteel Inc. ("Allsteel"), a manufacturer of mid-
priced office furniture with 1996 sales of approximately $150 million.
Allsteel, which has a strong distribution network and modern, strategically-
located manufacturing facilities, enables the Company to broaden its customer
base by increasing its market penetration in the value-priced segment of the
office furniture industry.
Further Penetrate Hearth Products Market. The Company's recognized
innovation in direct-vent gas fireplace design and manufacturing coupled with
its premier position in wood-burning products provides it with the most
comprehensive product line and extensive distribution network in the hearth
products market. The Company plans to further enhance its competitive position
in the hearth products market by leveraging synergies with the office
furniture business, such as purchasing, manufacturing and product development.
PRODUCTS
The Company designs, manufactures and markets a broad range of office
furniture in four basic categories: (i) filing cabinets; (ii) seating,
including task chairs, executive desk 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
through the Company's HON Company Division ("The HON Company") and the
Company's wholly-owned subsidiaries--BPI Inc. ("BPI"), Holga Inc. ("Holga")
and The Gunlocke Company ("Gunlocke").
The Company's office furniture products are generally available in
contemporary as well as traditional styles, and are priced to sell in
different channels of distribution and at different price points. The
Company's products are offered in many models, sizes, designs and finishes and
are constructed from both wood and non-wood materials.
The following is a description of the Company's major product categories and
product lines:
Filing Cabinets
The Company offers a varietyclassification of filing options designed either to be
integrated into and support the Company's office systems products, or to
function as free-standing furniture in commercial and home offices. The
Company believes it is the largest manufacturer and marketerour board of mid-priced
steel filing cabinets in the United States.
The Company sells most of its free-standing files--such as The HON Company's
310 and 510 Series vertical files and 600, 700 and 800 Series lateral files--
through mega-dealers, wholesalers, office products
19
superstores, warehouse clubs and mail order distributors. Higher priced files,
such as The HON Company's 9000 Series lateral files and Allsteel's lateral
file line, both of which have drawer fronts designed to complement systems
furniture, are sold through contract office furniture dealers.
In 1996, the Company redesigned its industry-leading line of vertical filing
cabinets to make it even more attractive to customers. Drawer sides were
raised to a height that allows users to hang suspension file folders directly
on them, thus eliminating the need to purchase separate file folder suspension
frames at $2 to $3 per drawer. At the same time, the Company reduced the cost
of the cabinets using its RCI process and was able to sell the feature-
enriched units at the same price as the previous models.
Seating
The Company's seating line includes task chairs designed for different kinds
of office work, such as secretarial, computer, clerical, laboratory and
executive, guest chairs, conference and reception room seating, and stackable
chairs. The chairs are available in a variety of frame colors, a multitude of
fabrics and a wide range of price points. Key customer criteria in seating
includes superior ergonomics, aesthetics, comfort and quality. The Company
submits each of its chair models to customer surveys to assure that it is
among the best in its price range for design, comfort and ergonomic
adjustability to further build "compelling value" into its products.
The Company has high volume sellers throughout the range of value price
points. HON's Every-Day(R) chair and Solutions Seating(R) task chair are top
sellers with mega-dealers, wholesalers and superstores, while the HON 6000 and
5900 chairs and Allsteel's Tolleson chair are widely used by contract dealers
as key components in systems-based furniture projects.
Gunlocke is one of the few remaining companies that continues to make wood
curved legs, arms and backs through the steambending process, which produces
strong and attractive seating components. In the last year, Gunlocke
introduced two new contemporary wood seating lines, Serra(TM) and Miles, which
have been well-received by the market.
Office Systems
The Company offers a complete line of office systems products in order to
meet the needs of a variety 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. Systems offer a cost-
effective and flexible alternative to traditional drywall office construction.
The Company has experienced increased demand for panel systems able to
accommodate new work arrangements such as team work spaces and work spaces
shared by several employees who are frequently out of the office. According to
BIFMA, panel systems comprise the largest product segment in the office
furniture industry with 1996 sales from this segment amounting to $3.4
billion. Importantly, a typical installation of office panels often includes
associated sales of seating, case goods, files 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 certain of its office system products. The
compelling value of the Company's systems lines is that these products are
styled and featured similar to those of premium-priced contract systems
manufacturers but are offered at substantially lower prices. As a result of
this, the Company's system lines have grown considerably faster than industry
system sales over the past four years.
Leading products and brands include HON's Concensys(R) (solid panel) and
Terrace(TM) (tiled panel) systems lines, and its complementary line of
Regent(R) case goods and seating, which are sold through selected contract
furniture dealers in key markets throughout North America. BPI's People
Furniture is popular with smaller companies because of its entry level price
point and ease of assembly and reconfigurability. Echelon(TM) is a new and
more fully featured BPI systems line which is growing rapidly.
20
Desks and Related Products
The Company's collection of desks and related products include stand-alone
steel and wood furniture items, such as desks, bookshelves and credenzas, and
are available in a range of designs and price points. The Company offers these
products in both contemporary and traditional styles. 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 contemporary and traditional tables designed
for use in conference rooms, private offices, training areas, teamwork
settings and open floor plans. Tables are produced in wood veneer and laminate
and are available in numerous sizes, shapes and base styles.
HEARTH TECHNOLOGIES
The Company is the largest U.S. manufacturer and marketer of metal
prefabricated fireplace and related products, primarily for the home, which it
sells under the widely-recognized Heatilator and Heat-N-Glo brand names. The
Company's line of hearth products includes wood- and gas-burning fireplaces
and stoves, fireplace inserts, chimney systems and related accessories. In
October 1996, the Company acquired Heat-N-Glo and combined it with its
existing Heatilator operations to form Hearth Technologies, through which it
sells all its hearth products.
The Company believes that shipments for the North American segment of the
building products industry in which Hearth Technologies directly participates,
representing the wood fireplace, hearth stove, gas- and wood-fireplace insert
and gas log set product lines were $1 billion for 1996, representing an
increase of approximately 15% over the prior year. Heatilator and Heat-N-Glo
are leaders in the two largest segments of the home fireplace market: vented-
gas and wood fireplaces.
Historically, the hearth products industry has consisted primarily of low-
cost builders' box fireplaces sold through builder distributors and wood
stoves and high efficiency fireplaces sold through dealer showrooms. With the
acquisition of Heat-N-Glo in October 1996, Hearth Technologies began marketing
a "direct vent" fireplace, which replaces the top-venting chimney system used
in traditional fireplaces. See "Business--Intellectual Property." The Company
believes that the introduction of the direct vent fireplace, together with the
introduction of fireplace inserts and accessories such as remote controls, and
more sophisticated marketing, will lead to rapid industry growth in the
future. Sales of home fireplaces are largely dependent on new housing starts
while sales of heating stoves and fireplace inserts are largely dependent upon
home remodeling expenditures. Management believes that this complementary
diversity and Hearth Technologies' broad national distribution afford
potential for growth for the Company's products.directors.
As of December 28, 1996,April 4 , 2009, under our articles of incorporation, we had the Company's hearth products sales organization
consisted of 9 regional sales managers supervising 22 salespersons and 15
independent manufacturers' representatives.
MANUFACTURING
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 cell manufacturing, focused factories, just-in-time
inventory management and value engineering. 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 over 100 facilitators, coaches and consultants dedicatedauthority 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.
21
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 reducing
the cost to manufacture existing products and designing new products that
provide additional features and quality. 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 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 and manufacturing
processes. As a result of the Company's aggressive product development
efforts, approximately 45% of the Company's 1996 sales volume consisted of
products introduced within the last three fiscal years. The Company invested
approximately $10.4 million, $11.6 million, and $10.1 million in product
development during fiscal 1996, 1995 and 1994, respectively, and has budgeted
$15 million for product development in fiscal 1997.
BIFMA and the American National Standards Institute ("ANSI") have
promulgated a variety of voluntary standards governing the construction and
design of office furniture. The ANSI/BIFMA standards include tests for
strength, stability and durability. The Company's products undergo internal
testing in the Company's product testing laboratory to confirm that such
products meet or exceed applicable ANSI/BIFMA standards. All HON branded
products meet or exceed applicable ANSI/BIFMA standards. HON is a member of
the BIFMA task force working to develop standards for ready-to-assemble
furniture.
SALES, MARKETING AND DISTRIBUTION
Over the last ten years, the office products and office furniture industries
have experienced substantial consolidation as larger dealers have acquired
smaller local and regional dealers. Consolidation permits large dealers to
benefit from economies of scale, increased purchasing power and the
elimination of redundant management and overhead expenses. Larger dealers have
also been able to take advantage of more sophisticated management techniques
designed to enhance customer service, lower costs and increase operating
efficiency. According to the Business Products Industry Association ("BPIA"),
the number of office products dealers has decreased from approximately 15,500
in 1986 to approximately 5,000 in 1996. At the same time, office products
superstores have emerged and replaced local, retail office supply stores. The
Company believes that these trends may continue to result in fewer, larger
dealers and retailers as customers for the Company's products.
As a result of these trends, the Company today sells its products through
five principal distribution channels. The first channel, independent, local
office furniture and office products dealers, specialize in the sale of a
broad range of office furniture and office furniture systems, mostly to small-
and medium-sized businesses, branch offices of large corporations and home
office owners. The second distribution channel comprises the mega-dealers,
including Boise Cascade Corporation, BT Office Products International, Inc.,
U.S. Office Products Company, Corporate Express Inc., Office Depot Inc.--
Business Services Division and Staples Commercial Advantage. Many of the
independent dealers and mega-dealer locations assist their customers with the
evaluation of office space requirements, systems lay-out and product
selection, and design and office solution services provided by professional
designers.
The third distribution channel, wholesalers, serve as distributors of the
Company's products to independent dealers, mega-dealers and superstores. The
Company sells to the nation's largest wholesalers, United Stationers and S.P.
Richards, as well as to smaller, regional wholesalers. Wholesalers maintain
stocks of standard product lines for resale to dealers. They also special
order products from the Company in customer-selected models and colors. The
Company's wholesalers maintain over 135 warehouse locations throughout the
United States, which enable the Company to make its products available for
rapid delivery to dealers anywhere in the country.
22
The fourth distribution channel is retail stores, which include office
products superstores such as Office Depot, Office Max and Staples, and
warehouse clubs like Sam's Club and Costco.
The fifth distribution channel consists of government-focused dealers that
sell the Company's products to federal, state and local government offices in
accordance with contract terms to which the Company has agreed.
As of December 28, 1996, the Company's office furniture sales force
consisted of 16 regional sales managers supervising 70 salespersons, plus
approximately 150 independent manufacturers' representatives, who collectively
provided national sales coverage. Approximately 25 salespersons were added in
June 1997 as a result of the Allsteel acquisition.
Office products dealers, national wholesalers and retailers market their
products through catalogs published periodically and distributed to existing
and potential customers. The Company's marketing objective is to gain share in
its customers' catalogs. The Company believes that the inclusion of the
Company's product lines in customer catalogs offers strong potential for
increased sales of the listed product items due to the exposure provided by
these publications. The Company measures its sales potential and ranking
relative to its competitors on the basis of the Company's percentage share in
its customers' catalogs. The Company's average percentage share of pages in
the office furniture section of catalogs published for 1996 and 1997 and
estimated for 1998 by the six megadealers was approximately 39%, 48% and 64%,
respectively. The Company's average percentage share of pages in the office
furniture section of catalogs published for 1996 and 1997 and estimated for
1998 by SP Richards and United Stationers, two of the nation's largest
wholesalers, was approximately 34%, 38% and 53%, respectively. Catalog page
share is calculated on the basis of the total catalog page space featuring the
Company's products as a percentage of total catalog pages devoted to
comparable office furniture products from all suppliers.
The Company also makes export sales through HON Export Limited to
approximately 75 office furniture dealers and wholesale distributors serving
select foreign markets. Distributors are principally located in Latin America
and the Caribbean. The Company has an international field sales organization
consisting of a Vice President of Sales and Marketing and four regional
managers. Sales outside of the United States and Canada represented less than
1% of net sales in fiscal 1996.
COMPETITION
The office furniture industry is highly competitive, with a significant
number of competitors offering similar products. The Company competes by
emphasizing its ability to deliver compelling value products. In executing
this strategy, the Company has two significant classes of competitors. First,
the Company competes with numerous small- and medium-sized office furniture
manufacturers that focus on more limited product lines and/or end-user
segments and include Global Furniture Inc.; Anderson-Hickey Co., Globe
Business Furniture and United Chair, Inc., divisions of Haworth, Inc.;
National Office Furniture, a division of Kimball Office Furniture Co.; and
High Point Furniture Industries, Inc. Second, the Company competes with a
small number of large office furniture manufacturers which control a
substantial portion of the market share in the contract office furniture
market, such as Steelcase Inc., Haworth, Inc., Herman Miller, Inc. and Knoll,
Inc. Some of these large competitors have substantially greater assets,
resources and capabilities in the traditional contract market than the
Company.
Hearth products, consisting of prefabricated metal fireplaces and related
products, are manufactured by a number of national and regional competitors. A
limited number of manufacturers, however, are predominant in the relatively
small industry.
Both office furniture and hearth products compete on the basis of price,
product performance, product quality, complete and on-time delivery to the
customer and customer service and support. The Company believes that it
competes principally by providing compelling value products designed to be
among the best in their price range for product quality and performance,
superior customer service and short lead-times. This is made possible, in
part, by the Company's significant on-going investment in product development,
highly-efficient and low cost manufacturing operations, and an extensive
distribution network.
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The Company is the fourth largest office furniture manufacturer in the United
States, and believes that it is the largest manufacturer of value-priced
furniture. The Company is also the largest manufacturer and marketer of
fireplaces in the United States.
PROPERTIES
The Company maintains its corporate headquarters in Muscatine, Iowa, and
conducts its operations at locations throughout the United States and Canada
which house manufacturing and distribution operations and offices totaling an
aggregate of approximately 7.3 million square feet. Of this total,
approximately 2 million square feet are leased, including approximately 0.3
million square feet under a capital lease.
Although the plants are of varying ages, the Company believes they are well
maintained, are equipped with modern and efficient equipment, and are in good
operating condition and suitable for the purposes for which they are being
used. The Company has sufficient capacity to increase output at most locations
by increasing the use of overtime and/or number of production shifts employed.
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The Company's principal manufacturing and distribution facilities (100,000
square feet in size or larger) are as follows:
- --------
(1) Also includes a regional warehouse/distribution center.
(2) A capital lease.
25
Other Company manufacturing and distribution facilities, under 100,000
square feet in size, are located in Muscatine and Mt. Pleasant, Iowa; Van
Nuys, California; Kent, Washington; Salisbury, North Carolina; Richmond,
Virginia; Rome, Georgia; Cedartown, Georgia; and Calgary, Alberta, Canada.
These facilities total approximately 980,000 square feet with approximately
900,000 square feet used for the manufacture and distribution of office
furniture and approximately 80,000 square feet for hearth products. Of this
total, approximately 500,000 square feet are leased. The Company also leases
sales showroom space in office furniture market centers in several major
metropolitan areas. The Company is in the process of expanding its Cedartown
and Chester facilities to add an aggregate of approximately 150,000 square
feet of manufacturing and distribution capacity.
The Company also has two facility changes in progress. It recently moved the
manufacturing being performed at a approximately 104,000 square foot leased
plant in Savage, Minnesota to its Lake City, Minnesota plant. This plant had
been used for the manufacture of metal prefabricated fireplaces. The Savage
plant is in the process of being subleased. In addition, the Company is in the
process of renovating approximately 165,000 square feet of owned space in
Muscatine, Iowa to use for manufacturing systems office furniture. This space
was previously leased to a third party.
INTELLECTUAL PROPERTY
The Company owns 141 U.S. and 143 foreign patents and has applications
pending for 64 U.S. and 79 foreign patents. In addition, the Company holds
registrations for 77 U.S. and 132 foreign trademarks, and has applications
pending for 18 U.S. and 48 foreign trademarks.
The Company's principal office furniture products do not require frequent
technical changes. The majority of the Company's patents are design patents
which expire at various times depending on the patent's date of issuance. The
Company believes that neither any individual patents nor the Company's patents
in the aggregate are material to the Company's business as a whole.
When Hearth Technologies acquired Heat-N-Glo in October 1996, it also
acquired its patent for the design of a zero-clearance direct vent gas
fireplace (the "direct vent patent"). The direct vent design replaces the
traditional top-venting chimney system by permitting the exhaust pipe to
traverse a structure's exterior wall. The sealed combustion chamber of the
direct vent gas fireplace increases indoor air quality by using outside rather
than inside air for combustion and the direct vent design achieves 70% heating
efficiency, which means that the patented direct vent gas fireplaces are an
efficient alternative heat source in individual rooms. The direct vent gas
fireplaces are highly versatile for use in home design because the direct vent
design eliminates the need for a traditional chimney system with top venting,
thus opening the space above the fireplace up for use. The Company currently
offers numerous product designs that would not be possible without the direct
vent technology. Additionally, since a chimney is not employed in the direct
vent design, the cost of adding a new fireplace to a home is greatly reduced.
The direct vent patent has been successfully enforced against numerous
infringers. Hearth Technologies presently is engaged as a plaintiff in two
patent infringement cases involving this patent. Final disposition of these
cases is not likely for several years. Although the Company believes that the
protection afforded by the direct vent patent is not vital to sustaining
Hearth Technologies' gross profit margins on its direct vent gas fireplaces
due to other technological innovations that support the direct vent design,
the technology that underlies the patent is a significant distinguishing
feature for the Company's products.
The Company applies for patent protection when it believes the expense of
doing so is justified, and believes that the duration of its registered
patents is adequate to protect these rights. The Company also pays royalties
in certain instances for the use of patents on products and processes owned by
others.
The Company actively protects its trademarks which it believes have
significant goodwill value.
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EMPLOYEES/MEMBERS
As of June 28, 1997, the Company employed approximately 6,900 persons, 6,300
of whom were members and 600 of whom were temporary personnel. Of the
approximately 6,900 persons employed by the Company, 4,300 were in the
Company's manufacturing operations. The Company employed approximately 300
members who were members of unions. The Company believes that its labor
relations are good. As a result of the Allsteel acquisition, approximately
1,100 employees have been added subsequent to June 28, 1997.
27
MANAGEMENT
The current executive officers and directors of the Company are as follows:
Set forth below is certain information with respect to the Company's
executive officers and directors:
Jack D. Michaels. Mr. Michaels has served as the Company's Chairman of the
Board since 1996, the Company's Chief Executive Officer since 1991, and the
Company's President since March 1990. He has been a director since 1990. Prior
to joining the Company, Mr. Michaels served as President and Chief Executive
Officer of Hussmann Corporation, a manufacturer and marketer of food store
refrigerated display equipment, from 1987 to January 1990. Mr. Michaels is
also a director of Huffy Corporation.
George J. Koenigsaecker III. Mr. Koenigsaecker has served as President of
The HON Company since November 1995. From February 1995 to November 1995, he
served as Senior Vice President of the Company. From August 1992 through
October 1995, Mr. Koenigsaecker served as Executive Vice President,
Operations, The HON Company. Prior to joining the Company, Mr. Koenigsaecker
was Group Executive, Danaher Corporation, a manufacturer of automotive,
instrumentation and precision components products from 1990 to 1992.
David C. Stuebe. Mr. Stuebe has served as Vice President and Chief Financial
Officer of the Company since October 1994. Prior to joining the Company, he
was President, Chief Executive Officer and a director of Diversified
Industries, Inc., a processor and trader of precious and semi-precious metals
from January 1990 to September 1994.
Jeffrey D. Fick. Mr. Fick has served as the Company's Vice President, Member
and Community Relations since May 1997 and the Company's Secretary from March
1997 to September 1997. From March 1994 to April 1997, Mr. Fick served as
Senior Counsel. Prior to joining the Company, Mr. Fick was an attorney with
Gray, Plant, Mooty, Mooty & Bennett from May 1986 to February 1994.
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Melvin L. McMains. Mr. McMains has served as the Company's Controller since
1980.
James I. Johnson. Mr. Johnson has served as Vice President, General Counsel
and Secretary of the Company since September 1997. From May 1990 to August
1997, Mr. Johnson served as General Counsel and Secretary of Norand
Corporation.
Robert W. Cox. Mr. Cox has served as a Director of the Company since 1994.
He is currently of counsel to Baker & McKenzie, an international law firm.
From 1992 to 1994, Mr. Cox was Chairman of Baker & McKenzie's Policy Committee
and from 1984 to 1992, he was its Managing Partner and Chairman of its
Executive Committee and Strategic Planning Committee. Mr. Cox is also a
director of Carey International, Inc.
Stanley M. Howe. Mr. Howe has served as Chairman Emeritus of the Company
since 1996 and a Director since 1958. He has served the Company since 1948,
serving as Chairman from 1984 to 1996, President from 1964 to 1990 and Chief
Executive Officer from 1979 to 1991.
Lee Liu. Mr. Liu has served as a Director of the Company since 1990. He has
served as an officer of IES Industries Inc. ("IESI"), IES Utilities ("IESU")
and various affiliates or predecessor companies, in the energy, transportation
and telecommunications industries, since 1990, serving IESI as Chairman and
Chief Executive Officer since 1993 and President from 1993 to November 1996
and serving IESU as Chairman and Chief Executive Officer since 1993 and as
President in 1996, 1994 and 1993. From 1990 to 1993, Mr. Liu served as an
officer to various affiliates to IESI and IESU. Mr. Liu is also a director of
Eastman Chemical Company, Principal Financial Group and McLeod USA.
Lorne R. Waxlax. Mr. Waxlax has served as a Director of the Company since
1994. He served as Executive Vice President, Diversified Group of The Gillette
Company, a marketer and manufacturer of personal care and use products from
1985 to 1993. Mr. Waxlax is also a director of Clean Harbors, Inc., Quaker
State Corporation, B.J's Wholesale Club Inc. and Homebase Inc.
W. James Farrell. Mr. Farrell has been a Director of the Company since 1988.
He has served Illinois Tool Works Inc., a manufacturer of highly engineered
products and systems, since 1965, serving as Chairman since May 1996, Chief
Executive Officer since September 1995, President from 1994 to 1995 and as
Executive Vice President and President of the Specialty Mechanical and
Adhesive Products Group from 1983 to 1994. Mr. Farrell is also a director of
Morton International, Inc. and Premark International, Inc.
Michael S. Plunkett. Mr. Plunkett has served as a Director of the Company
since 1980. He has been the Senior Vice President, Engineering, Technology and
Human Resources since 1986 and a Director from 1986 to 1993 of Deere &
Company, a manufacturer of mobile power machinery. Mr. Plunkett is also a
director of Bank One, Quad Cities, NA.
Herman J. Schmidt. Mr. Schmidt has been a Director of the Company since
1980. He served as Vice Chairman of Mobil Oil Corporation from 1974 to 1978.
Mr. Schmidt is also a director of H.J. Heinz Co.
Robert L. Katz. Dr. Katz has served as a Director of the Company since 1995.
He has been President of Robert L. Katz and Associates, consultants on
corporate strategy, since 1953 and President of Caltex Investment Management
Co., a venture capital firm since 1975. Dr. Katz is also a director of Newell
Co., a manufacturer of window shades, hardware, cookware and school supplies.
Celeste C. Michalski. Ms. Michalski has served as a Director of the Company
since 1993. She served the Telecommunications Group of NYNEX, in the
telecommunications, directory publishing and information delivery services
industries, from July 1995 to April 1997, serving as Managing Director,
Finance from December 1996 to April 1997, Vice President--Collections--
Residence and Business from November 1995 to November 1996 and Managing
Director, Productivity and Process Improvement from July to November 1995.
From 1994 to June 1995, Ms. Michalski served as Assistant Comptroller of NYNEX
and from 1993 to 1994 she
29
served as Comptroller of New York Telephone, the largest operating subsidiary
of NYNEX. From 1988 to 1993, she was the Vice President and Controller of
GenCorp, Inc.
Richard H. Stanley. Mr. Stanley has served as Vice Chairman of the Company
since 1979 and as a Director since 1964. He has been the President of SC
Companies, Inc. since 1986, Chairman of Stanley Consultants, Inc., an
international engineering, architecture, planning and management firm, since
1984 and President since 1984 and Chairman since 1995 of The Stanley
Foundation, a private operating foundation. Mr. Stanley also serves as a
director of Dover Resources, Inc., a subsidiary of Dover Corporation, a
diversified manufacturer of industrial products.
SELLING SHAREHOLDER
The following table sets forth certain information regarding the Selling
Shareholder's beneficial ownership of the Company's Common Stock as of August
30, 1997, and as adjusted to reflect the sale of theissue 200,000,000 shares of Common Stock
offered hereby.
Bandag, Incorporated, headquartered in Muscatine, Iowa, manufactures
retreading materials and equipment for its worldwide network of 1,300
independent franchised dealers who produce and market retread tires.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 100 million shares
of Common Stock, par value $1.00 per share, and one million shares of
preferredcommon stock, par value $1.00 per share, (the "Preferred Stock"). At
September 25, 1997, the Company had 32,065,610of which 44,880,734 shares of Common Stock issued
andour common stock were outstanding as of that date, held of record by approximately 5,310 shareholders, and no
shares8,660 shareholders.
The following summarizesdescription of our common stock is , and any description of our common stock in a prospectus supplement will be, a summary and may not be complete . The description is subject to and qualified in its entirety by reference to the capital stockactual terms and provisions contained in our articles of the Companyincorporation and certain
provisions of the Company's Articles of Incorporation,by-laws, each as amended (the
"Articlesfrom time to time.
Voting Rights
Each outstanding share of Incorporation"), and its By-laws, as amended (the "By-laws").
COMMON STOCK
Except as required by law, holders of Common Stock areour common stock is entitled to one vote for eachper share held of record on all matters submitted to a vote of shareholders and to vote together as a single class for the holderselection of Common Stock. The holdersdirectors and in respect of Common Stock areother corporate matters. At a meeting of shareholders at which a quorum is present, all questions other than the contested election of directors shall be decided by determining if the votes cast by shareholders favoring the action exceed the votes casts by shareholders opposing the action, without regard to abstentions, unless the matter is one upon which a different vote is required by express provision of Iowa law, the NYSE or our articles of incorporation or by-laws. Directors, in a contested election, will be elected by a plurality of the votes of the shares present at a meeting. Holders of shares of common stock do not entitled tohave cumulative voting rights with respect to the election of directors. Subject to
preferences that may be applicable todirectors or any then outstanding Preferred Stock,
holdersother matter.
Dividends
Holders of Common Stockour common stock are entitled to receive ratably such dividends or other distributions when, as may
beand if declared by our board of directors. The right of our board of directors to declare dividends, however, is subject to any rights of the Boardholders of Directors outother classes of our capital stock and the availability of sufficient funds legally available therefor.under Iowa law to pay dividends.
Preemptive Rights
The holders of our common stock do not have preemptive rights to purchase or subscribe for any of our capital stock or other securities.
Redemption
The shares of our common stock are not subject to redemption by operation of a sinking fund or otherwise.
Liquidation Rights
In the event of aany liquidation, dissolution or winding up of the Company,
holders of the Common Stock are entitled to share ratably in all assets
remaining after payment of liabilities and the liquidation preference of any
then outstanding Preferred Stock. Holders of Common Stock have no preemptive
rights. There are no redemption or sinking fund provisions applicableCorporation, subject to the Common Stock. All outstanding shares of Common Stock are, and the Common Stock
to be outstanding upon consummation of the Offerings will be, fully paid and
nonassessable. The Board of Directors may issue additional authorized shares
of Common Stock without further action by the shareholders.
30
The Articles of Incorporation provide that the affirmative voterights, if any, of the holders of two-thirdsother classes of the total number of outstanding shares of Common
Stock entitled to vote shall be required and shall be sufficient to take any
action at any meeting of shareholders. Notwithstanding the foregoing, the
affirmative vote ofour capital stock, the holders of a majorityshares of our common stock are entitled to receive any of our assets available for distribution to our shareholders ratably in proportion to the number of shares held by them.
Options and Restricted Stock Units
From time to time, we have issued and expect to continue to issue options and restricted stock units (RSUs) to various members (i.e., employees) and officers of the total numberCorporation. As of April 4 , 2009, we had outstanding (i) stock options to purchase 1,924,164 shares of Common Stock entitledour common stock, of which 693,950 shares of common stock were issuable upon exercise of vested stock options as of that date and (ii) 695,648 undelivered RSUs.
Listing
Our common stock is listed on the NYSE under the symbol "HNI."
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is Wells Fargo Bank, N.A., Attention: Wells Fargo Shareowner Services, 161 North Concord Exchange, South St. Paul, Minnesota 55075-1139.
This section describes the general terms of our preferred stock to vote shallwhich any prospectus supplement may relate. A prospectus supplement will describe the terms relating to any preferred stock to be requiredoffered by us in greater
detail and shall be sufficientmay provide information that is different from terms described in this prospectus. If the information in the prospectus supplement with respect to approve (i) anythe particular preferred stock being offered differs from this prospectus, you should rely on the information in the prospectus supplement. A copy of our articles of incorporation has been incorporated by reference from our filings with the SEC as an exhibit to the registration statement. A certificate of designation or amendment to our articles of incorporation will specify the Articles of
Incorporation which has been approved or recommended by the Board of Directorsterms of the Company (other thanpreferred stock being offered, and will be filed or incorporated by reference as an exhibit to the provisionsregistration statement before the preferred stock is issued. The following description of our preferred stock is , and any description of the Articlespreferred stock in a prospectus supplement will be, a summary and may not be complete . The description is subject to, and qualified in its entirety by reference to, the actual terms and provisions contained in our articles of Incorporation
relatingincorporation and bylaws, each as amended from time to voting requirements and election or removaltime.
As of directors), (ii)February 27, 2009, under our articles of incorporation, we had the electionauthority to issue 2,000,000 shares of a classpreferred stock, par value $1.00 per share, which are issuable in series on terms to be determined by our board of directors. Accordingly, our board of directors at any annual meeting of the shareholders
if (A) at the annual meeting of the shareholders in the third preceding year,
an election of such class of directors was held or attempted, but no director
of such class was elected at such meeting because no candidate received a two-
thirds majority vote and (B) the term of such class of directors was extended
for an additional three-year term pursuant to the Articles of Incorporation,
and (iii) any other motion, resolution or action which has been approved or
recommended by the Board of Directors of the Company (provided, that this
provision shall not apply to any motion, resolution or action regarding the
election or removal of directors, any amendment of the Articles of
Incorporation, any Corporate Combination (as defined below), any liquidating
dividend or distribution, or any dissolution of the Company).
PREFERRED STOCK
The Board of Directors has the authority,is authorized, without further action by the shareholders, to issue uppreferred stock from time to one milliontime with such dividend, liquidation, conversion, voting and other rights and restrictions as it may determine. All shares of any one series of our preferred stock will be identical, except that shares of any one series issued at different times may differ as to the dates from which dividends may be cumulative. All series shall rank equally and shall provide for other terms as described in the applicable prospectus supplement. As of February 27, 2009, there were no outstanding shares of our preferred stock. Our board of directors has not designated any series of preferred stock other than 1,000,000 shares as Series A Junior Participating Preferred Stock (the "Series A Preferred Stock"). The Series A Preferred Stock was originally designated for use in oneconnection with our shareholder rights plan, which expired on August 20, 2008. We anticipate our board of directors will, in accordance with the terms of our articles of incorporation and Iowa law, remove the various provisions from our articles of incorporation designating the Series A Preferred Stock at the regularly scheduled August or more seriesNovember 2009 board meeting.
Terms of Series A Preferred Stock
Each share of Series A Preferred Stock will be entitled, when, as and if declared, to fixa minimum preferential quarterly dividend payment of $1.00 per share but will be entitled to an aggregate dividend of 100 times the dividend declared per share of our common stock. In the event of liquidation, dissolution or winding up of the Corporation, the holders of Series A Preferred Stock will be entitled to a minimum preferential payment of the greater of (a) $100 per share (plus any accrued but unpaid dividends) and (b) an amount equal to 100 times the payment made per share to holders of our common stock. Finally, in the event of any merger, consolidation or other transaction in which outstanding shares of our common stock are converted or exchanged, each share of Series A Preferred Stock will be entitled to receive 100 times the amount received per share of our common stock. These rights and preferences thereof, including dividend
rights, conversion rights,are protected by customary anti-dilution provisions.
Shares of Series A Preferred Stock are not redeemable. Holders of Series A Preferred Stock have no voting rights, terms of redemption, liquidation
preferences, and the number of shares constituting any series or the
designation of such series. Exceptexcept as required by Iowa law, holders of
Preferred Stock have no voting rights. Holders of Preferred Stock shall haveand no preemptive rights. Series A Preferred Stock ranks, with respect to the payment of dividends and the distribution of assets, junior to all series of any other class of our preferred stock. The issuance of Series A Preferred Stock could adversely affect the voting power of holders of Common Stockour common stock and could have the effect of delaying, deferring or preventing a change in control of the Company.Corporation. Furthermore, certain provisions of Iowa law and our articles of incorporation and by-laws could have the effect of delaying, deferring or preventing a change in control of the Corporation. A description of such provisions is included below in the section titled "CERTAIN PROVISIONS OF IOWA LAW AND THE CORPORATION'S ARTICLES OF INCORPORATION AND BY-LAWS."
Terms of Other Preferred Stock
As set forth in our articles of incorporation, the shares of our preferred stock to be issued will have no preemptive rights. Any prospectus supplement offering our preferred stock will furnish the following information with respect to the preferred stock offered by that prospectus supplement:
| · | the title and stated value of the preferred stock; | |
· | the number of shares of preferred stock to be issued and the offering price of the preferred stock; | |
· | any dividend rights; |
| · | any dividend rates, periods, or payment dates, or methods of calculation of dividends applicable to the preferred stock; | |
| · | the date from which distributions on the preferred stock shall accumulate, if applicable; | |
| · | the terms and conditions, if applicable, upon which the preferred stock will be convertible into our common stock, including the conversion price (or manner of calculation thereof); | |
· | any right to convert the preferred stock into a different type of security; | |
· | any rights and preferences upon our liquidation or winding up of our affairs; | |
· | any terms of redemption; | |
· | the procedures for any auction and remarketing, if any, for the preferred stock; | |
· | the provisions for a sinking fund, if any, for the preferred stock; | |
· | any listing of the preferred stock on any securities exchange; | |
· | a discussion of federal income tax considerations applicable to the preferred stock; | |
· | the relative ranking and preferences of the preferred stock as to distribution rights (including whether any liquidation preference as to the preferred stock will be treated as a liability for purposes of determining the availability of assets for distributions to holders of stock ranking junior to the shares of preferred stock as to distribution rights); | |
· | any limitations on issuance of any series of preferred stock ranking senior to or on a parity with the series of preferred stock being offered as to distribution rights and rights upon the liquidation, dissolution or winding up or our affairs; and | |
· | any other specific terms, preferences, rights, limitations or restrictions of the preferred stock. |
Rank
Unless otherwise indicated in the applicable prospectus supplement, shares of our preferred stock will rank, with respect to payment of distributions and rights upon our liquidation, dissolution or winding up, and allocation of our earnings and losses:
| · | senior to Series A Preferred Stock, all classes or series of our common stock and all of our equity securities ranking junior to the preferred stock; | |
· | on a parity with all equity securities issued by us, the terms of which specifically provide that these equity securities rank on a parity with the preferred stock; and | |
· | junior to all equity securities issued by us, the terms of which specifically provide that these equity securities rank senior to the preferred stock. |
Distributions
Subject to any preferential rights of any outstanding stock or series of stock, our preferred shareholders are entitled to receive distributions when, as and if declared by our board of directors, out of legally available funds and to share pro rata based on the number of preferred shares, common stock and other parity equity securities outstanding. The Company hasrates and dates of payment of dividends will be set forth in the prospectus supplement relating to the applicable series of preferred stock. Dividends will be payable to holders of record of preferred stock as they appear on our books or, if applicable, the records of the depositary referred to below on the record dates fixed by the board of directors. Dividends on a series of preferred stock may be cumulative or noncumulative.
We may not declare, pay or set apart for payment dividends on the preferred stock unless full dividends on other series of preferred stock that rank on an equal or senior basis have been paid or sufficient funds have been set apart for payment for:
| · | all prior dividend periods of other series of preferred stock that pay dividends on a cumulative basis; or | |
· | the immediately preceding dividend period of other series of preferred stock that pay dividends on a noncumulative basis. |
Partial dividends declared on shares of preferred stock and each other series of preferred stock ranking on an equal basis as to dividends will be declared pro rata. A pro rata declaration means that the ratio of dividends declared per share to accrued dividends per share will be the same for each series of preferred stock. Similarly, we may not declare, pay or set apart for payment non-stock dividends or make other payments on the common stock or any other of our stock ranking junior to the preferred stock until full dividends on the preferred stock have been paid or set apart for payment for:
| · | all prior dividend periods if the preferred stock pays dividends on a cumulative basis; or | |
· | the immediately preceding dividend period if the preferred stock pays dividends on a noncumulative basis. |
Voting Rights
Unless otherwise required by Iowa law, holders of our preferred stock will not have any voting rights.
Liquidation Preference
Upon the voluntary or involuntary liquidation, dissolution or winding up of our affairs, then, before any distribution or payment shall be made to the holders of any common stock or any other class or series of stock ranking junior to the preferred stock in our distribution of assets upon any liquidation, dissolution or winding up, the holders of each series of our preferred stock will be entitled to receive, after payment or provision for payment of our debts and other liabilities, out of our assets legally available for distribution to shareholders, liquidating distributions in the amount of the liquidation preference per share (set forth in the applicable prospectus supplement), plus an amount, if applicable, equal to all distributions accrued and unpaid thereon (which shall not include any accumulation in respect of unpaid distributions for prior distribution periods if the preferred stock does not have a cumulative distribution). Unless otherwise specified in the applicable prospectus supplement, after payment of the full amount of the liquidating distributions to which they are entitled, the holders of preferred stock will have no present planright or claim to any of our remaining assets. In the event that, upon our voluntary or involuntary liquidation, dissolution or winding up, the legally available assets are insufficient to pay the amount of the liquidating distributions on all of our outstanding preferred stock and the corresponding amounts payable on all of our other classes or series of equity securities ranking on a parity with the preferred stock in the distribution of assets upon liquidation, dissolution or winding up, then the holders of our preferred stock and all other such classes or series of equity securities will share ratably in the distribution of assets in proportion to the full liquidating distributions to which they would otherwise be respectively entitled.
If the liquidating distributions are made in full to all holders of preferred stock, our remaining assets will be distributed among the holders of any other classes or series of equity security ranking junior to the preferred stock upon our liquidation, dissolution or winding up, according to their respective rights and preferences and in each case according to their respective number of shares of stock.
Conversion Rights
The terms and conditions, if any, upon which shares of any series of preferred stock are convertible into other securities will be set forth in the applicable prospectus supplement. These terms will include the amount and type of security into which the shares of preferred stock are convertible, the conversion price (or manner of calculation thereof), the conversion period, provisions as to whether conversion will be at the option of the holders of the preferred stock or us, the events requiring an adjustment of the conversion price and provisions affecting conversion in the event of the redemption of that preferred stock.
Redemption
If so provided in the applicable prospectus supplement, our preferred stock will be subject to mandatory redemption or redemption at our option, in whole or in part, in each case upon the terms, at the times and at the redemption prices set forth in such prospectus supplement. Unless we default in the payment of the redemption price, dividends will cease to accrue after the redemption date on shares of preferred stock called for redemption and all rights of holders of such shares will terminate, except for the right to receive the redemption price. No series of preferred stock will receive the benefit of a sinking fund except as set forth in the applicable prospectus supplement.
Registrar and Transfer Agent
The registrar and transfer agent for our preferred stock will be set forth in the applicable prospectus supplement.
If our board of directors decides to issue any preferred stock, it may discourage or make more difficult a merger, tender offer, business combination or proxy contest, assumption of control by a holder of a large block of our securities or the removal of incumbent management, even if these events were favorable to the interests of shareholders. Our board of directors, without shareholder approval, may issue preferred stock with voting and conversion rights and dividend and liquidation preferences that may adversely affect the holders of our other equity or debt securities.
This prospectus describes certain general terms and provisions of the debt securities we may offer under this prospectus and one or more prospectus supplements. When we offer to sell a particular series of debt securities, we will describe the specific terms of the series in a prospectus supplement. The following description of debt securities will apply to the debt securities offered by this prospectus unless we provide otherwise in the applicable prospectus supplement. The applicable prospectus supplement for a particular series of debt securities may specify different or additional terms.
We may issue "senior," "senior subordinated" or "subordinated" debt securities. "Senior securities" will be direct obligations of ours and will rank equally and ratably in right of payment with other indebtedness of ours that is not subordinated. "Senior subordinated securities" will be subordinated in right of payment to the prior payment in full of senior indebtedness, as defined in the applicable prospectus supplement, and may rank equally and ratably with the senior subordinated notes and any other senior subordinated indebtedness. "Subordinated securities" will be subordinated in right of payment to senior subordinated securities.
We need not issue all debt securities of one series at the same time. Unless we provide otherwise, we may reopen a series, without the consent of the holders of such series, for issuances of additional securities of that series.
We will issue the senior debt securities and senior subordinated debt securities under a senior indenture, which we will enter into with a trustee to be identified in the applicable prospectus supplement (the "trustee") , and we will issue the subordinated debt securities under a subordinated indenture, which we will enter into with the trustee , unless we identify a different trustee in the applicable prospectus supplement . We use the term "indenture" or "indentures" to refer to both the senior indenture and the subordinated indenture. Each indenture will be subject to and governed by the Trust Indenture Act of 1939, as amended ( the " Trust Indenture Act ") , and we may supplement the indenture from time to time. Any trustee under any indenture may resign or be removed with respect to one or more series of debt securities, and we may appoint a successor trustee to act with respect to that series. We have filed a form of indenture relating to senior, senior subordinated and subordinated debt securities as an exhibit to the registration statement, of which this prospectus forms a part. The terms of the senior indenture and subordinated indenture will be substantially similar, except that the subordinated indenture will include provisions pertaining to the subordination of the subordinated debt securities and senior subordinated debt securities to the senior debt securities and any other of our senior securities. The following statements relating to the debt securities and the indenture are summaries only, are subject to change and are qualified in their entirety to the detailed provisions of the indenture, any supplemental indenture and the discussion contained in any prospectus supplements.
General
The debt securities will be our direct obligations. We may issue debt securities from time to time and in one or more series as our board of directors may establish by resolution or as we may establish in one or more supplemental indentures. The particular terms of each series of debt securities will be described in a prospectus supplement relating to the series. We may issue debt securities with terms different from those of debt securities that we previously issued. Our payment obligations under any series of debt securities may be guaranteed by one or more co-registrants.
We may issue debt securities from time to time and in one or more series with the same or various maturities, at par, at a premium or at a discount. We will set forth in a prospectus supplement, relating to any series of debt securities being offered, the initial offering price and the following terms of the debt securities:
| · | the title of the debt securities; | |
· | the series designation and whether they are senior securities, senior subordinated securities or subordinated securities; | |
· | the aggregate principal amount of the debt securities and any limit on the aggregate amount of the series of debt securities; | |
· | the price or prices (expressed as a percentage of the aggregate principal amount) at which we will issue the debt securities and, if other than the principal amount of the debt securities, the portion of the principal amount of the debt securities payable upon the maturity of the debt securities; | |
· | the date or dates on which we will pay the principal on the debt securities; |
| · | the rate or rates (which may be fixed or variable) per annum or the method used to determine the rate or rates (including any commodity, commodity index, stock exchange index or financial index) at which the debt securities will bear interest, the date or dates from which interest will accrue, the date or dates on which interest will commence and be payable and any regular record date for the interest payable on any interest payment date; | |
· | the place where principal, interest and any additional amounts will be payable and where the debt securities can be surrendered for transfer, exchange or conversion; | |
· | the terms, if any, by which holders of the debt securities may convert or exchange the debt securities for our common stock, preferred stock or any other security or property; | |
· | if convertible, the initial conversion price, the conversion period and any other terms governing such conversion; | |
· | any subordination provisions or limitations relating to the debt securities; | |
· | any sinking fund requirements; | |
· | any obligation we have to redeem or purchase the debt securities pursuant to any sinking fund or analogous provisions or at the option of a holder of debt securities; | |
· | the dates on which and the price or prices at which we will repurchase the debt securities at the option of the holders of debt securities and other detailed terms and provisions of these repurchase obligations; | |
· | the denominations in which the debt securities will be issued, if other than denominations of $1,000 and any integral multiple thereof; | |
· | the portion of principal amount of the debt securities payable upon declaration of acceleration of the maturity date, if other than the principal amount; | |
· | whether we will issue the debt securities in certificated or book-entry form; | |
· | whether the debt securities will be issued in hte form of one or more permanent global securities and, if so, the identity of the depositary for the same ; | |
· | the designation of the currency, currencies or currency units in which payment of principal of, premium, and interest on the debt securities will be made; | |
· | if payments of principal of, and interest and any additional amounts on, the debt securities will be made in one or more currencies or currency units other than that or those in which the debt securities are denominated, the manner in which the exchange rate with respect to these payments will be determined; | |
· | the manner in which the amounts of payment of principal of, and interest and any additional amounts on, the debt securities will be determined, if these amounts may be determined by reference to an index based on a currency or currencies other than that in which the debt securities are denominated or designated to be payable or by reference to a commodity, commodity index, stock exchange index or financial index; |
| · | any applicability of the defeasance provisions described in this prospectus or any prospectus supplement; | |
· | any addition to or change in the events of default described in this prospectus or in the indenture with respect to the debt securities and any change in the acceleration provisions described in this prospectus or in the indenture with respect to the debt securities; | |
· | any addition to or change in the covenants described in this prospectus or in the indenture with respect to the debt securities; | |
· | if the debt securities are to be issued upon the exercise of debt warrants, the time, manner and place for them to be authenticated and delivered; | |
· | any securities exchange on which we will list the debt securities; | |
· | any restrictions on transfer, sale or other assignment; | |
· | any provisions relating to any security provided for the debt securities; | |
· | any provisions relating to any guarantee of the debt securities; | |
· | any other terms of the debt securities, which may modify or delete any provision of the indenture as it applies to that series; and | |
· | any depositaries, interest rate calculation agents, exchange rate calculation agents or other agents with respect to the debt securities. |
We may issue debt securities that are exchangeable for or convertible into shares of our common stock or other securities or property. The terms, if any, on which the debt securities may be exchanged for or converted into shares of our common stock or other securities or property will be set forth in the applicable prospectus supplement. Such terms may include provisions for conversion, either mandatory, at the option of the holder or at our option, in which case the number of shares of common stock or other securities or property to be received by the holders of debt securities would be calculated as of a time and in the manner stated in the prospectus supplement.
We may issue debt securities at less than the principal amount payable upon maturity. We refer to these securities as "original issue discount securities." If material or applicable, we will describe in the applicable prospectus supplement special U.S. federal income tax, accounting and other considerations applicable to original issue discount securities.
If we denominate the purchase price of any of the debt securities in a foreign currency or currencies or a foreign currency unit or units, or if the principal of, and interest and any additional amounts on, any series of debt securities is payable in a foreign currency or currencies or a foreign currency unit or units, we will provide you with information on the restrictions, elections, general tax considerations, specific terms and other information with respect to that issue of debt securities and such foreign currency or currencies or foreign currency unit or units in the applicable prospectus supplement.
Except as may be set forth in any prospectus supplement relating to the debt securities, an indenture will not contain any other provisions that would limit our ability to incur indebtedness or that would afford holders of the debt securities protection in the event of a highly leveraged or similar transaction involving us or in the event of a change in control. You should review carefully the applicable prospectus supplement for information with respect to events of default and any covenants applicable to the debt securities being offered.
Payments and Paying Agents
Unless we otherwise indicate in the applicable prospectus supplement, we will make payment of the interest on any debt securities on any interest payment date to the person in whose name the debt securities, or one or more predecessor securities, are registered at the close of business on the regular record date for the interest.
We will pay principal of, and interest and any additional amounts on, the debt securities of a particular series at the office of the paying agents designated by us, except that, unless we otherwise indicate in the applicable
prospectus supplement, we may make interest payments by check, which we will mail to the holder, or by wire transfer to certain holders. Unless we otherwise indicate in a prospectus supplement, we will designate the corporate trust office of the trustee as our sole paying agent for payments with respect to debt securities of each series. We will name in the applicable prospectus supplement any other paying agents that we initially designate for the debt securities of a particular series.
Form, Transfer and Exchange
Each debt security will be represented by either one or more global securities registered in the name of The Depository Trust Company, New York, New York, known as DTC, as depositary, or a nominee of the depositary (as a "book-entry debt security"), or a certificate issued in definitive registered form (as a "certificated debt security"), as described in the applicable prospectus supplement. Except as described under "Global Debt Securities and Book-Entry System" below, book-entry debt securities will not be issuable in certificated form.
Certificated Debt Securities
You may transfer or exchange certificated debt securities at the trustee's office or paying agencies in accordance with the terms of the indenture. No service charge will be made for any transfer or exchange of certificated debt securities, but we may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection with a transfer or exchange.
You may transfer certificated debt securities and the right to receive the principal of, and interest and any additional amounts on, certificated debt securities only by surrendering the old certificate representing those certificated debt securities and either we or the trustee will reissue the old certificate to the new holder, or we or the trustee will issue a new certificate to the new holder.
Global Debt Securities and Book-Entry System
Each global debt security representing book-entry debt securities will be deposited with, or on behalf of, the depositary, and registered in the name of the depositary or a nominee of the depositary. Ownership of beneficial interests in book-entry debt securities will be limited to persons that have accounts with the depositary for the related global debt security, whom we refer to as participants, or persons that may hold interests through participants.
Except as described in this prospectus or any applicable prospectus supplement, beneficial owners of book-entry debt securities will not be entitled to have securities registered in their names, will not receive or be entitled to receive physical delivery of a certificate in definitive form representing securities and will not be considered the owners or holders of those securities under the indenture. Accordingly, to exercise any rights of a holder under the indenture, each person beneficially owning book-entry debt securities must rely on the procedures of the depositary for the related global debt security and, if that person is not a participant, on the procedures of the participant through which that person owns its interest.
We understand, however, that under existing industry practice, the depositary will authorize the persons on whose behalf it holds a global debt security to exercise certain rights of holders of debt securities, and the indenture provides that we, the trustee and our respective agents will treat as the holder of a debt security the persons specified in a written statement of the depositary with respect to that global debt security for purposes of obtaining any consents or directions required to be given by holders of the debt securities pursuant to the indenture.
We will make payments of principal of, and interest and any additional amounts on, book-entry debt securities to the depositary or its nominee, as the case may be, as the registered holder of the related global debt security. We, the trustee and any other agent of ours or agent of the trustee will not have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in a global debt security or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests.
Any certificated debt securities issued in exchange for a global debt security will be registered in such name or names as the depositary shall instruct the trustee. We expect that such instructions will be based upon directions received by the depositary from participants with respect to ownership of book-entry debt securities relating to such global debt security.
For additional discussion of book entry and certificated securities, see the section entitled "Legal Ownership of Securities" included in this prospectus. We have obtained the foregoing information in this section and the "Legal Ownership of Securities" section concerning the depositary and the depositary's book-entry system from sources we believe to be reliable. We take no responsibility for the depositary's performance of its obligations under the rules and regulations governing its operations.
No Protection in the Event of a Change in Control
Unless we provide otherwise in the applicable prospectus supplement, the debt securities will not contain any provisions that may afford holders of the debt securities protection in the event we have a change in control or in the event of a highly leveraged transaction (whether or not such transaction results in a change in control).
Covenants
Unless we provide otherwise in the applicable prospectus supplement, the debt securities will not contain any restrictive covenants, including covenants restricting us or any of our subsidiaries from incurring, issuing, assuming or guaranteeing any indebtedness secured by a lien on any of our or our subsidiaries' property or capital stock or restricting us or any of our subsidiaries from entering into any sale and leaseback transactions.
Merger, Consolidation and Sale of Assets
Unless we provide otherwise in the applicable prospectus supplement, we may not merge with or into or consolidate with, or convey, transfer or lease all or substantially all of our properties and assets to, any person (a "successor person"), unless the following apply :
| · | either (a) HNI is the surviving entity or (b) the successor person is a corporation, partnership, trust or other entity organized and validly existing under the laws of any United States domestic jurisdiction and expressly assumes our obligations on the debt securities and under the indenture; | |
· | immediately after giving effect to the transaction, no event of default, and no event that, after notice or lapse of time, or both, would become an event of default, shall have occurred and be continuing under the indenture; and | |
· | certain other conditions that may be set forth in the applicable prospectus supplement are met. |
This covenant would not apply to any recapitalization transaction, a change in control of us or a transaction in which we incur a large amount of additional debt unless the transactions or change in control included a merger, consolidation or transfer or lease of substantially all of our assets. Except as may be described in the applicable prospectus supplement, there are no covenants or other provisions in the indenture providing for a "put" right or increased interest or that would otherwise afford holders of debt securities additional protection in the event of a recapitalization transaction, a change in control of us or a transaction in which we incur a large amount of additional debt.
Events of Default Under the Indenture
Unless we provide otherwise in the applicable prospectus supplement, an "event of default" will mean, with respect to any series of debt securities, any of the following:
| · | default in the payment of any interest upon any debt security of that series when it becomes due and payable and continuance of that default for a period of 30 days (unless the entire amount of such payment is deposited by us with the trustee or with a paying agent before the expiration of the 30-day period); | |
· | default in the payment of principal of, or premium, if any, on any debt security of that series when due and payable either at maturity, redemption or otherwise; | |
· | default in the deposit of any sinking fund payment, when and as due in respect of any debt security of that series; | |
| · | default in the performance or breach of any other covenant or warranty by us in the indenture (other than a covenant or warranty that has been included in the indenture solely for the benefit of a series of debt securities other than that series) or in the debt security, which default continues uncured for a period of 90 days after we receive written notice from the trustee or we and the trustee receive written notice from the holders of not less than 25% in principal amount of the outstanding debt securities of that series as provided in the indenture; |
· | we, pursuant to or within the meaning of any applicable bankruptcy law, commence a voluntary case, consent to the entry of an order for relief against us in an involuntary case, consent to the appointment of a custodian for all or substantially all of our property, make a general assignment for the benefit of our creditors or admit in writing our inability generally to pay our debts as they become due; or, similarly, a court enters an order or decree under any applicable bankruptcy law that provides for relief against us in an involuntary case, appoints a custodian for all or substantially all of our properties or orders our liquidation (and the order remains in effect for 90 days); and | |
· | any other event of default provided with respect to debt securities of that series that is included in any supplemental indenture or is described in the applicable prospectus supplement accompanying this prospectus. |
No event of default with respect to a particular series of debt securities (except as to certain events of bankruptcy, insolvency or reorganization) necessarily constitutes an event of default with respect to any other series of debt securities. An event of default may also be an event of default under our bank credit agreements or other debt securities in existence from time to time and under certain guaranties by us of any subsidiary indebtedness. In addition, certain events of default or an acceleration under the indenture may also be an event of default under some of our other indebtedness outstanding from time to time.
Unless we provide otherwise in the applicable prospectus supplement, if an event of default with respect to debt securities of any series at the time outstanding occurs and is continuing (other than certain events of our bankruptcy, insolvency or reorganization), then the trustee or the holders of not less than 25% in principal amount of the outstanding debt securities of that series may, by written notice to us (and to the trustee if given by the holders), declare to be due and payable immediately the principal (or, if the debt securities of that series are discount securities, that portion of the principal amount as may be specified in the terms of that series) of and accrued and unpaid interest, if any, of all debt securities of that series. In the case of an event of default resulting from certain events of bankruptcy, insolvency or reorganization, the principal (or such specified amount) of and accrued and unpaid interest, if any, of all outstanding debt securities will become and be immediately due and payable without any declaration or other act by the trustee or any holder of outstanding debt securities.
At any time after an acceleration with respect to debt securities of a series has been made, but before a judgment or decree for payment of the money due has been obtained by the trustee, the holders of not less than a majority in principal amount of the outstanding debt securities of that series may cancel the acceleration and annul its consequences if the rescission would not conflict with any judgment or decree and if all existing events of default with respect to that series have been cured or waived except nonpayment of principal (or such lesser amount) or interest that has become due solely because of the acceleration.
The indenture also provides that the holders of not less than a majority in principal amount of the outstanding debt securities of any series may waive any past default with respect to that series and its consequences, except a default involving the following:
| · | our failure to pay the principal of, and interest and any additional amounts on, any debt security; or |
| · | a covenant or provision contained in the indenture that cannot be modified or amended without the consent of the holders of each outstanding debt security affected by the default. |
The trustee is generally required to give notice to the holders of debt securities of each affected series as provided by the Trust Indenture Act . The indenture provides that the trustee shall withhold notice to the holders of debt securities of any series of any default or event of default that the Corporation is given a 90-day period to cure under the indenture, until at least 30 calendar days after the occurrence thereof .
Unless we provide otherwise in the applicable prospectus supplement, the indenture will provide that the trustee will be under no obligation to exercise any of its rights or powers under the indenture at the request or direction of any holder of any such outstanding debt securities unless the trustee receives indemnity satisfactory to it against any loss, liability or expense. Subject to certain rights of the trustee, the holders of a majority in principal
amount of the outstanding debt securities of any series will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the trustee or exercising any trust or power conferred on the trustee with respect to the debt securities of that series. The trustee may, however, refuse to follow any direction that conflicts with the indenture or any law.
Unless we provide otherwise in the applicable prospectus supplement, no holder of any debt security of any series will have any right to institute any proceeding, judicial or otherwise, with respect to the indenture or for the appointment of a receiver or trustee, or for any remedy under the indenture, unless:
| · | that holder has previously given to the trustee written notice of a continuing event of default with respect to debt securities of that series; and | |
| · | the holders of at least 25% in principal amount of the outstanding debt securities of that series have made written request, and offered reasonable indemnity, to the trustee to institute such proceeding as trustee, and the trustee shall not have received from the holders of a majority in principal amount of the outstanding debt securities of that series a direction inconsistent with that request and has failed to institute the proceeding within 60 days. |
Notwithstanding the foregoing, except as provided in the subordination provisions, if any, the holder of any debt security will have an absolute and unconditional right to receive payment of the principal of, and any interest or additional amounts on, that debt security on or after the due dates expressed in that debt security and to institute suit for the enforcement of payment.
The indenture requires us, within 120 days after the end of our fiscal year, to furnish to the trustee a certificate as to compliance with the indenture, or, in the event of noncompliance, specify the noncompliance and the nature and status of the noncompliance.
Modification of Indenture and Waiver
Except as specified below, modifications and amendments to the indenture require the approval of not less than a majority in principal amount of our outstanding debt securities.
Changes Requiring the Unanimous Approval
We and the trustee may not make any modification or amendment to the indenture without the consent of the holder of each affected debt security then outstanding if that amendment will have any of the following results:
| · | reduce the rate of or extend the time for payment of interest, including default interest, on any debt security; | |
· | reduce the principal of or any additional amounts on or change the fixed maturity of any debt security or reduce the amount of, or postpone the date fixed for, the payment of any sinking fund or analogous obligation with respect to any series of debt securities; | |
· | reduce the principal amount of discount securities payable upon acceleration of maturity; | |
· | waive a default in the payment of the principal of, and interest or any additional amounts on, any debt security, except a rescission of acceleration of the debt securities of any series by the holders of at least a majority in aggregate principal amount of the then outstanding debt securities of that series and a waiver of the payment default that resulted from that acceleration; | |
· | make the principal of, or interest or any additional amounts on, any debt security payable in currency other than that stated in the debt security; | |
· | change the place of payment on a debt security; | |
| · | change the currency or currencies of payment of the principal of, and any premium, make-whole payment, interest or additional amounts on, any debt security; | |
· | impair the right to initiate suit for the enforcement of any payment on or with respect to any debt security; |
· | reduce the percentage of holders of debt securities whose consent is needed to modify or amend an indenture, to waive compliance with certain provisions of an indenture or to waive certain defaults; | |
· | waive a redemption payment with respect to any debt security; or | |
· | make any change to certain provisions of the indenture relating to, among other things, the right of holders of debt securities to receive payment of the principal of, and interest and any additional amount on, those debt securities, the right of holders to institute suit for the enforcement of any payment or the right of holders to waive past defaults. |
Changes Not Requiring Approval of Debt Holders
We and the trustee may modify or amend an indenture, without the consent of any holder of debt securities, for any of the following purposes:
| · | to evidence the succession of another person to us as obligor under the indenture; | |
· | to add to our existing covenants additional covenants for the benefit of the holders of all or any series of debt securities, or to surrender any right or power conferred upon us in the indenture; | |
· | to add events of default for the benefit of the holders of all or any series of debt securities; | |
· | to add or change any provisions of the indenture to facilitate the issuance of, or to liberalize the terms of, debt securities in bearer form, or to permit or facilitate the issuance of debt securities in uncertificated form; | |
· | to add, change or eliminate any provisions of the indenture, provided that any addition, change or elimination (a) shall neither (i) apply to any debt security of any series created prior to the execution of such supplemental indenture and entitled to the benefit of such provision nor (ii) modify the rights of the holder of any debt security with respect to such provision, or (b) shall become effective only when there are no outstanding debt securities; | |
· | to establish the form or terms of debt securities of any series, including the provisions and procedures, if applicable, for the conversion or exchange of the debt securities into our common stock, preferred stock or other securities or property; | |
· | to evidence and provide for the acceptance or appointment of a successor trustee or facilitate the administration of the trusts under the indenture by more than one trustee; or | |
· | to cure any ambiguity, defect or inconsistency in the indenture, provided that the action does not adversely affect the interests of holders of debt securities of any series issued under the indenture . |
Defeasance of Debt Securities and Certain Covenants in Certain Circumstances
Legal Defeasance
Unless the terms of the applicable series of debt securities provide otherwise, we may be discharged from any and all obligations in respect of the debt securities of any series (except for certain obligations to register the transfer or exchange of debt securities of the series; to replace stolen, lost or mutilated debt securities of the series; and to maintain paying agencies and certain provisions relating to the treatment of funds held by paying agents). We will be so discharged upon the deposit with the trustee, in trust, of money and/or U.S. government obligations that, through the payment of interest and principal in accordance with their terms, will provide money in an amount sufficient to pay and discharge each installment of principal, interest and any additional amounts on and any mandatory sinking fund payments in respect of the debt securities of that series on the stated maturity of such payments in accordance with the terms of the indenture and those debt securities.
This discharge may occur only if, among other things, we have delivered to the trustee an officers' certificate and an opinion of counsel stating that we have received from, or there has been published by, the U.S. Internal Revenue Service a ruling or, since the date of execution of the indenture, there has been a change in the applicable U.S. federal income tax law, in either case to the effect that holders of the debt securities of such series will not recognize income, gain or loss for U.S. federal income tax purposes as a result of the deposit,
defeasance and discharge and will be subject to U.S. federal income tax on the same amount and in the same manner and at the same times as would have been the case if the deposit, defeasance and discharge had not occurred.
Defeasance of Certain Covenants
Unless the terms of the applicable series of debt securities provide otherwise, upon compliance with certain conditions, we may omit to comply with the restrictive covenants contained in the indenture, as well as any additional covenants contained in the applicable prospectus supplement.
The conditions include, among others, the following:
| · | depositing with the trustee money and/or U.S. government obligations that, through the payment of interest and principal in accordance with their terms, will provide money in an amount sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay principal, interest and any additional amounts on and any mandatory sinking fund payments in respect of the debt securities of that series on the stated maturity of those payments in accordance with the terms of the indenture and those debt securities; and | |
· | delivering to the trustee an opinion of counsel to the effect that the holders of the debt securities of that series will not recognize income, gain or loss for U.S. federal income tax purposes as a result of the deposit and related covenant defeasance and will be subject to U.S. federal income tax in the same amount and in the same manner and at the same times as would have been the case if the deposit and related covenant defeasance had not occurred. |
Covenant Defeasance and Events of Default
If we exercise our option, as described above, not to comply with certain covenants of the indenture with respect to any series of debt securities, and the debt securities of that series are declared due and payable because of the occurrence of any event of default, the amount of money and/or U.S. government obligations on deposit with the trustee will be sufficient to pay amounts due on the debt securities of that series at the time of their stated maturity but may not be sufficient to pay amounts due on the debt securities of that series at the time of the acceleration resulting from the event of default. However, we will remain liable for those payments.
Guarantees
Our payment obligations under any series of debt securities may be guaranteed by one or more co-registrants or such other of our subsidiaries that from time to time may become subsidiary guarantors under one or more indentures . The terms of any such guarantee will be set forth in the applicable prospectus supplement.
Subordination
We will set forth in the applicable prospectus supplement the terms and conditions, if any, upon which any series of senior subordinated securities or subordinated securities is subordinated to debt securities of another series or to other indebtedness of ours. The terms will include a description of the following:
| · | the indebtedness ranking senior to the debt securities being offered; | |
· | any restrictions on payments to the holders of the debt securities being offered while a default with respect to the senior indebtedness is continuing; | |
· | any restrictions on payments to the holders of the debt securities being offered following an event of default; and | |
· | provisions requiring holders of the debt securities being offered to remit some payments to holders of senior indebtedness. |
Conversion and Exchange Rights
The terms on which debt securities of any series may be convertible into or exchangeable for our common stock, preferred stock, or other securities or property of the Corporation will be described in the applicable prospectus supplement. These terms will include the following:
| · | the conversion or exchange price or the manner of calculating the price; | |
· | the exchange or conversion period; | |
· | whether the conversion or exchange is mandatory, or voluntary at the option of the holder or at our option; | |
· | any restrictions on conversion or exchange in the event of redemption of the debt securities and any restrictions on conversion or exchange; and | |
· | the means of calculating the number of shares of our common stock, preferred stock or other securities or property of HNI to be received by the holders of debt securities. |
The conversion or exchange price of any debt securities of any series that are convertible into our common stock or preferred stock may be adjusted for any stock dividends, stock splits, reclassification, combinations or similar transactions, as set forth in the applicable prospectus supplement.
Redemption of Debt Securities
The debt securities may be subject to optional or mandatory redemption on terms and conditions described in the applicable prospectus supplement. Subject to such terms, we may opt at any time to partially or entirely redeem the debt securities.
If less than all the debt securities of any series are to be redeemed or purchased in an offer to purchase at any time, the trustee will select the debt securities of that series to be redeemed or purchased by such method as the trustee deems fair and appropriate.
Except as otherwise provided as to any particular series of debt securities, at least 30 days but not more than 60 days before a redemption date, we or the trustee will mail a notice of redemption to each holder whose debt securities are to be redeemed. From and after notice has been given as provided in the applicable indenture, if funds for the redemption of any debt securities called for redemption shall have been made available on the redemption date, the debt securities will cease to bear interest on the date fixed for the redemption specified in the notice, and the only right of the holders of the debt securities will be to receive payment of the redemption price.Governing Law
The indentures , the debt securities and the guarantees of debt securities will be governed by and construed in accordance with the laws of the state of New York, except to the extent that the Trust Indenture Act is applicable.
We may issue receipts for depositary shares representing fractional shares of preferred stock. The fractional share of the applicable series of preferred stock represented by each depositary share will be set forth in the applicable prospectus supplement.
The shares of any series of preferred stock underlying any depositary shares that we may sell under this prospectus will be deposited under a deposit agreement between us and a depositary selected by us. Subject to the terms of the deposit agreement, each holder of a depositary share will be entitled, in proportion to the applicable fraction of a share of the preferred stock underlying the depositary share, to all of the rights, preferences and privileges, and will be subject to the qualifications and restrictions, of the preferred stock underlying that depositary share.
The depositary shares will be evidenced by depositary receipts issued under the deposit agreement. Depositary receipts will be distributed to the holders of the depositary shares that are sold in the applicable offering. We will incorporate by reference into the registration statement of which this prospectus is a part the form of any deposit agreement, including a form of depositary receipt, that describes the terms of any depositary shares we are offering before the issuance of the related depositary shares. The following summaries of material provisions of the deposit agreement, the depositary shares and the depositary receipts are subject to, and qualified in their entirety by reference to, all of the provisions of the deposit agreement applicable to a particular offering of depositary shares. We urge you to read the prospectus supplements relating to any depositary shares that are sold under this prospectus, as well as the complete deposit agreement and depositary receipt.
Form
Pending the preparation of definitive depositary receipts, the depositary may, upon our written order, issue temporary depositary receipts substantially identical to the definitive depositary receipts but not in definitive form. These temporary depositary receipts will entitle their holders to all of the rights of definitive depositary receipts. Temporary depositary receipts will then be exchangeable for definitive depositary receipts at our expense.
Dividends and Other Distributions
The depositary will distribute all cash dividends or other cash distributions received with respect to the underlying preferred stock to the record holders of depositary shares in proportion to the number of depositary shares owned by those holders.
If there is a distribution other than in cash, the depositary will distribute property received by it to the record holders of depositary shares in proportion to the number of depositary shares owned by those holders, unless the depositary determines that it is not feasible to do so. If this occurs, the depositary may, with our approval, sell the property and distribute the net proceeds from the sale to those holders in proportion to the number of depositary shares owned by them.
The amount distributed to holders of depositary shares will be reduced by any amounts required to be withheld by us or the preferred stock depositary on account of taxes or other governmental charges.
If a series of preferred stock underlying the depositary shares has a liquidation preference, in the event of our voluntary or involuntary liquidation, dissolution or winding up, holders of depositary shares will be entitled to receive the fraction of the liquidation preference accorded each share of the applicable series of preferred stock, as set forth in the applicable prospectus supplement.
Withdrawal of Underlying Preferred Stock
Except as otherwise provided in a prospectus supplement, holders may surrender depositary receipts at the principal office of the depositary and, upon payment of any unpaid amount due to the depositary, be entitled to receive the number of whole shares of underlying preferred stock and all money and other property represented by the related depositary shares. We will not issue any partial shares of preferred stock. If the holder delivers depositary receipts evidencing a number of depositary shares that represent more than a whole number of shares of preferred stock, the depositary will issue a new depositary receipt evidencing the excess number of depositary shares to the holder.
Redemption of Depositary Shares
If the preferred stock underlying any depositary shares we may sell under this prospectus is subject to redemption, the depositary shares will be redeemed from the proceeds received by the depositary resulting from any such redemption, in whole or in part, of that underlying preferred stock. The redemption price per depositary share will be equal to the applicable fraction of the redemption price per share payable with respect to the underlying preferred stock. Whenever we redeem shares of underlying preferred stock that are held by the depositary, the depositary will redeem, as of the same redemption date, the number of depositary shares representing the shares of underlying preferred stock so redeemed. If fewer than all of the depositary shares are to be redeemed, the depositary shares to be redeemed will be selected by lot or proportionately, as may be determined by the depositary.
After the date fixed for redemption, the depositary shares called for redemption will no longer be deemed to be outstanding, and all rights of the holders of the depositary shares will cease, except the right to receive the monies payable and any other property to which the holders were entitled upon surrender to the preferred stock depositary of the depositary receipts evidencing the depositary shares. Any funds deposited by us with the preferred stock depositary for any depositary shares that the holders fail to redeem will be returned to us after a period of two years from the date the funds are deposited.
Voting
Upon receipt of notice of any meeting at which holders of the preferred stock underlying any depositary shares that we may sell under this prospectus are entitled to vote, the depositary will mail the information contained in the notice to the record holders of the depositary shares. Each record holder of the depositary shares on the record date, which will be the same date as the record date for the underlying preferred stock, will be entitled to instruct the depositary as to the exercise of the voting rights pertaining to the amount of the underlying preferred stock represented by the holder's depositary shares. The depositary will then try, as far as practicable, to vote the number of shares of preferred stock underlying those depositary shares in accordance with those instructions, and we will agree to take all reasonable actions which may be deemed necessary by the depositary to enable the depositary to do so. The depositary will not vote the underlying preferred stock to the extent it does not receive specific instructions with respect to the depositary shares representing such preferred stock.
Conversion of Preferred Stock
If the prospectus supplement relating to any depositary shares that we may sell under this prospectus states that the underlying preferred stock is convertible into our common stock or other thansecurities, the issuancefollowing will apply. The depositary shares, as such, will not be convertible into any of our securities. Rather, any holder of the depositary shares may surrender the related depositary receipts to the depositary with written instructions that direct us to cause conversion of the preferred stock represented by the depositary shares into or for whole shares of Series A Junior
Participating Preferred Stockour common stock or other securities, as applicable. Upon receipt of those instructions and any amounts payable by the holder in connection with the Company's shareholderconversion, we will cause the conversion using the same procedures as those provided for conversion of the underlying preferred stock. If only some of a holder's depositary shares are converted, a new depositary receipt or receipts will be issued to the holder for any depositary shares not converted.
Amendment and Termination of the Deposit Agreement
The form of depositary receipt evidencing the depositary shares and any provision of the deposit agreement may at any time be amended by agreement between us and the depositary. However, any amendment which materially and adversely alters the rights plan.
ANTI-TAKEOVER EFFECTSof the holders of depositary shares will not be effective until 90 days after notice of that amendment has been given to the holders. Each holder of depositary shares at the time any amendment becomes effective shall be deemed to consent and agree to that amendment and to be bound by the deposit agreement as so amended. The deposit agreement may be terminated by us or by the depositary only if all outstanding depositary shares have been redeemed or converted into any other securities into which the underlying preferred stock is convertible or there has been a final distribution, including to holders of depositary receipts, of the underlying preferred stock in connection with our liquidation, dissolution or winding up.
Charges of Depositary
We will pay all transfer and other taxes and governmental charges arising solely from the existence of the depositary arrangement. We will also pay charges of the depositary in connection with the initial deposit of the preferred stock, the initial issuance of the depositary shares, any redemption of the preferred stock and all withdrawals of preferred stock by owners of depositary shares. Holders of depositary receipts will pay transfer, income and other taxes and governmental charges and other specified charges as provided in the deposit arrangement for their accounts. If these charges have not been paid, the depositary may refuse to transfer depositary shares, withhold dividends and distributions and sell the depositary shares evidenced by the depositary receipt.
Limitation on Liability
Neither we nor the depositary will be liable if either of us is prevented or delayed by law or any circumstance beyond our control in performing our respective obligations under the deposit agreement. Our obligations and those of the depositary will be limited to performance of our respective duties under the deposit agreement without, in our case, negligence or bad faith or, in the case of the depositary, negligence or willful misconduct. We and the depositary may rely upon advice of counsel or accountants, or upon information provided by persons presenting the underlying preferred stock for deposit, holders of depositary receipts or other persons believed by us in good faith to be competent and on documents believed to be genuine.
Corporate Trust Office of Preferred Stock Depositary
The preferred stock depositary's corporate trust office will be set forth in the applicable prospectus supplement relating to a series of depositary shares. The preferred stock depositary will act as transfer agent and registrar for depositary receipts, and, if shares of a series of preferred stock are redeemable, the preferred stock depositary will act as redemption agent for the corresponding depositary receipts.
Resignation and Removal of Depositary
The depositary may resign at any time by delivering notice to us of its election to resign. We may remove the depositary at any time. Any resignation or removal will take effect upon the appointment of a successor depositary and its acceptance of the appointment. The successor depositary must be appointed within 60 days after delivery of the notice of resignation or removal and must be a bank or trust company having its principal office in the United States and having a combined capital and surplus of at least $50,000,000.
Reports to Holders
We will deliver all required reports and communications to holders of the preferred stock to the preferred stock depositary, and it will forward those reports and communications to the holders of depositary shares. Upon request, the preferred stock depositary will provide for inspection to the holders of depositary shares the transfer books of the depositary and the list of holders of receipts; provided that any requesting holder certifies to the preferred stock depositary that such inspection is for a proper purpose reasonably related to such person's interest as an owner of depositary shares evidenced by the receipts.
General
We may issue warrants to purchase common stock (which we refer to as common stock warrants), preferred stock (which we refer to as preferred stock warrants), debt securities (which we refer to as debt security warrants) or depositary shares (which we refer to as depositary share warrants). Any of these warrants may be issued independently or together with any other securities offered by this prospectus and may be attached to or separate from those securities.
While the terms we have summarized below will generally apply to any future warrants we may offer under this prospectus, we will describe the particular terms of any warrants that we may offer in more detail in the applicable prospectus supplement. The terms of any warrants we offer under a prospectus supplement may differ from the terms we describe below.
We may issue the warrants under a warrant agreement, which we will enter into with a warrant agent to be selected by us. Each warrant agent will act solely as our agent under the applicable warrant agreement and will not assume any obligation or relationship of agency or trust with any holder of any warrant. A single bank or trust company may act as warrant agent for more than one issue of warrants. A warrant agent will have no duty or responsibility in case of any default by us under the applicable warrant agreement or warrant, including any duty or responsibility to initiate any proceedings at law or otherwise, or to make any demand upon us. Any holder of a warrant may, without the consent of the related warrant agent or the holder of any other warrant, enforce by appropriate legal action its right to exercise, and receive the securities purchasable upon exercise of, its warrants.
We will incorporate by reference into the registration statement of which this prospectus is a part the form of warrant agreement, including a form of warrant certificate, that describes the terms of the series of warrants we are offering before the issuance of the related series of warrants. The following summaries of material provisions of the warrants and the warrant agreements are subject to, and qualified in their entirety by reference to, all the provisions of the warrant agreement applicable to a particular series of warrants. We urge you to read the applicable prospectus supplements related to the warrants that we sell under this prospectus, as well as the complete warrant agreements that contain the terms of the warrants.
We will set forth in the applicable prospectus supplement the terms of the warrants in respect of which this prospectus is being delivered, including, when applicable, the following:
| · | the title of the warrants; | |
· | the aggregate number of the warrants; | |
· | the price or prices at which the warrants will be issued; | |
· | the designation, number and terms of the securities purchasable upon exercise of the warrants; | |
· | the designation and terms of the other securities, if any, with which the warrants are issued and the number of warrants issued with each such security; | |
· | the date, if any, on and after which the warrants and the related underlying securities will be separately transferable; | |
· | the price at which each underlying security purchasable upon exercise of the warrants may be purchased; | |
· | the date on which the right to exercise the warrants will commence and the date on which such right will expire; |
| · | the minimum amount of the warrants that may be exercised at any one time; | |
· | any information with respect to book-entry procedures; | |
· | the effect of any merger, consolidation, sale or other disposition of our business on the warrant agreement and the warrants; | |
· | any other terms of the warrants, including terms, procedures and limitations relating to the transferability, exchange and exercise of such warrants; | |
· | the terms of any rights to redeem or call, or accelerate the expiration of, the warrants; | |
· | the date on which the right to exercise the warrants begins and the date on which that right expires; | |
· | the U.S. federal income tax consequences of holding or exercising the warrants; and | |
· | any other specific terms, preferences, rights or limitations of, or restrictions on the warrants. |
Unless specified in an applicable prospectus supplement, common stock warrants, preferred stock warrants, debt security warrants or depositary share warrants will be in registered form only.
A holder of warrant certificates may exchange them for new certificates of different denominations, present them for registration of transfer and exercise them at the corporate trust office of the warrant agent or any other office indicated in the applicable prospectus supplement. Until any common stock warrants, preferred stock warrants, debt security warrants or depositary share warrants are exercised, holders of the warrants will not have any rights of holders of the underlying common stock, preferred stock, debt securities or depositary shares, except to the extent set forth under the heading "Warrant Adjustments" below.
Exercise of Warrants
Each warrant will entitle the holder to purchase for cash shares of common stock, preferred stock, debt securities or depositary shares at the applicable exercise price set forth in, or determined as described in, the applicable prospectus supplement. Warrants may be exercised at any time up to the close of business on the expiration date set forth in the applicable prospectus supplement. After the close of business on the expiration date, unexercised warrants will become void.
Warrants may be exercised by delivering to the corporation trust office of the warrant agent or any other officer indicated in the applicable prospectus supplement (a) the warrant certificate properly completed and duly executed and (b) payment of the amount due upon exercise. As soon as practicable following exercise, we will forward the shares of common stock, preferred stock, debt securities or depositary shares as applicable. If less than all of the warrants represented by a warrant certificate are exercised, a new warrant certificate will be issued for the remaining warrants. If we so indicate in the applicable prospectus supplement, holders of the warrants may surrender securities as all or a part of the exercise price for the warrants.
Amendments and Supplements to the Warrant Agreements
We may amend or supplement a warrant agreement without the consent of the holders of the applicable warrants to cure ambiguities in the warrant agreement, to cure or correct a defective provision in the warrant agreement or to provide for other matters under the warrant agreement that we and the warrant agent deem necessary or desirable, so long as, in each case, such amendments or supplements do not materially adversely affect the interests of the holders of the warrants.
Warrant Adjustments
Unless the applicable prospectus supplement states otherwise, the exercise price of, and the number of securities covered by, a common stock warrant, preferred stock warrant, debt security warrant or depositary share warrant will be adjusted proportionately if we subdivide or combine our common stock, preferred stock or depositary shares, as applicable. In addition, unless the prospectus supplement states otherwise, if we, without payment:
| · | issue capital stock or other securities convertible into or exchangeable for common stock or preferred stock, or any rights to subscribe for, purchase or otherwise acquire any of the foregoing, as a dividend or distribution to holders of our common stock or preferred stock; | |
· | pay any cash to holders of our common stock or preferred stock other than a cash dividend paid out of our current or retained earnings or other than in accordance with the terms of the preferred stock; | |
· | issue any evidence of our indebtedness or rights to subscribe for or purchase our indebtedness to holders of our common stock or preferred stock; or | |
· | issue common stock or preferred stock or additional stock or other securities or property to holders of our common stock or preferred stock by way of a spin-off, split-up, reclassification, combination of shares or similar corporate rearrangement, |
then the holders of common stock warrants, preferred stock warrants, debt security warrants and depositary share warrants, as applicable, will be entitled to receive upon exercise of the warrants, in addition to the securities otherwise receivable upon exercise of the warrants and without paying any additional consideration, the amount of stock and other securities and property such holders would have been entitled to receive had they held the common stock, preferred stock, debt securities or depositary shares, as applicable, issuable under the warrants on the dates on which holders of those securities received or became entitled to receive such additional stock and other securities and property.
Except as stated above, the exercise price and number of securities covered by a common stock warrant, preferred stock warrant, debt security warrant and depositary share warrant, and the amounts of other securities or property to be received, if any, upon exercise of those warrants, will not be adjusted or provided for if we issue those securities or any securities convertible into or exchangeable for those securities, or securities carrying the right to purchase those securities or securities convertible into or exchangeable for those securities.
Holders of common stock warrants, preferred stock warrants, debt security warrants and depositary share warrants may have additional rights under the following circumstances:
| · | certain reclassifications, capital reorganizations or changes of the common stock, preferred stock or depositary shares, as applicable; | |
· | certain share exchanges, mergers or similar transactions involving us and which result in changes of the common stock, preferred stock or depositary shares, as applicable; or | |
· | certain sales or dispositions to another entity of all or substantially all of our property and assets. |
If one of the above transactions occurs and holders of our common stock, preferred stock, debt securities or depositary shares are entitled to receive stock, securities or other property with respect to or in exchange for their securities, the holders of the common stock warrants, preferred stock warrants, debt security warrants and depositary share warrants then outstanding, as applicable, will be entitled to receive upon exercise of their warrants the kind and amount of shares of stock and other securities or property that they would have received upon the applicable transaction if they had exercised their warrants immediately before the transaction.
DESCRIPTION OF PURCHASE CONTRACTS
We may issue purchase contracts, including contracts obligating holders to purchase from us, and for us to sell to holders, a specific or varying number of debt securities, shares of common stock or preferred stock, depositary shares, warrants or any combination of the above, at a future date or dates. Alternatively, the purchase contracts may obligate us to purchase from holders, and obligate holders to sell to us, a specific or varying number of debt securities, shares of common stock or preferred stock, depositary shares, warrants or any combination of the above. The price of the securities subject to the purchase contracts may be fixed at the time the purchase contracts are issued or may be determined by reference to a specific formula described in the purchase contracts. We may issue purchase contracts separately or as a part of units each consisting of a purchase contract and one or more of the other securities described in this prospectus or securities of third parties, including U.S. Treasury securities, securing the holder's obligations under the purchase contract. If we issue a purchase contract as part of a unit, the applicable prospectus supplement will state whether the purchase contract will be separable from the other securities in the unit before the purchase contract settlement date. The purchase contracts may require us to make periodic payments to holders or vice versa and the payments may be unsecured or pre-funded on some basis. The purchase contracts may require holders to secure the holder's obligations in a manner specified in the applicable prospectus supplement, and in certain circumstances we may deliver newly issued prepaid purchase contracts, often known as prepaid securities, upon release to a holder of any collateral securing such holder's obligations under the original purchase contract.
The applicable prospectus supplement will describe the terms of any purchase contracts in respect of which this prospectus is being delivered, including, to the extent applicable, the following:
| · | whether the purchase contracts obligate the holder or us to purchase or sell, or both purchase and sell, the securities subject to purchase under the purchase contract, and the nature and amount of each of those securities or the method of determining those amounts; | |
· | whether the purchase contracts are to be prepaid or not; | |
· | whether the purchase contracts will be issued as part of a unit and, if so, the other securities comprising the unit; | |
· | whether the purchase contracts are to be settled by delivery, or by reference or linkage to the value, performance or level of the securities subject to purchase under the purchase contract; | |
· | any acceleration, cancellation, termination or other provisions relating to the settlement of the purchase contracts; and | |
· | whether the purchase contracts will be issued in fully registered or global form. |
Material U.S. federal income tax consideration applicable to the stock purchase contracts and the stock purchase units will also be discussed in the applicable prospectus supplement.
DESCRIPTION OF UNITS
The following description, together with the additional information we include in any applicable prospectus supplement, summarizes the material terms and provisions of the units that we may offer under this prospectus. Units may be offered independently or together with common stock, preferred stock, debt securities, depositary shares and warrants offered by any prospectus supplement, and may be attached to or separate from those securities. While the terms we have summarized below will generally apply to any future units that we may offer under this prospectus, we will describe the particular terms of any series of units that we may offer in more detail in the applicable prospectus supplement. The terms of any units offered under a prospectus supplement may differ from the terms described below.
We will incorporate by reference into the registration statement of which this prospectus is a part the form of unit agreement, including a form of unit certificate, if any, that describes the terms of the series of units we are offering before the issuance of the related series of units. The following summaries of material provisions of the units and the unit agreements are subject to, and qualified in their entirety by reference to, all the provisions of the unit agreement applicable to a particular series of units. We urge you to read the
General
We may issue units consisting of common stock, preferred stock, debt securities, depositary shares and/or warrants in any combination. Each unit will be issued so that the holder of the unit is also the holder of each security included in the unit. Thus, the holder of a unit will have the rights and obligations of a holder of each included security. The unit agreement under which a unit is issued may provide that the securities included in the unit may not be held or transferred separately, at any time or at any time before a specified date.
We will describe in the applicable prospectus supplement the terms of the series of units, including the following:
| · | the designation and terms of the units and of the securities comprising the units, including whether and under what circumstances those securities may be held or transferred separately; |
| · | any provisions of the governing unit agreement that differ from those described below; and |
| · | any provisions for the issuance, payment, settlement, transfer or exchange of the units or of the securities comprising the units. |
The provisions described in this section, as well as those described under "DESCRIPTION OF COMMON STOCK," "DESCRIPTION OF PREFERRED STOCK," "DESCRIPTION OF DEBT SECURITIES," "DESCRIPTION OF DEPOSITORY SHARES" and "DESCRIPTION OF WARRANTS" will apply to each unit and to any common stock, preferred stock, debt security, depositary share or warrant included in each unit, respectively.
Issuance in Series
We may issue units in such amounts and in such numerous distinct series as we determine.
Enforceability of Rights by Holders of Units
Each unit agent will act solely as our agent under the applicable unit agreement and will not assume any obligation or relationship of agency or trust with any holder of any unit. A single bank or trust company may act as unit agent for more than one series of units. A unit agent will have no duty or responsibility in case of any default by us under the applicable unit agreement or unit, including any duty or responsibility to initiate any proceedings at law or otherwise, or to make any demand upon us. Any holder of a unit may, without the consent of the related unit agent or the holder of any other unit, enforce by appropriate legal action its rights as holder under any security included in the unit.
Title
We, the unit agent and any of their agents may treat the registered holder of any unit certificate as an absolute owner of the units evidenced by that certificate for any purposes and as the person entitled to exercise the rights attaching to the units so requested, despite any notice to the contrary.
LEGAL OWNERSHIP OF SECURITIES
We can issue securities in registered form or in the form of one or more global securities. We refer to those persons who have securities registered in their own names on the books that we or any applicable trustee, depositary, or warrant agent maintain for this purpose as the "holders" of those securities. These persons are the legal holders of the securities. We refer to those persons who, indirectly through others, own beneficial interests in securities that are not registered in their own names as "indirect holders" of those securities. As we discuss below, indirect holders are not legal holders, and investors in securities issued in book-entry form or in street name will be indirect holders.
See also the section entitled "DESCRIPTION OF DEBT SECURITIES — Form, Transfer and Exchange" above for additional discussion of book entry and certificated form of ownership as such forms of ownership impact the rights and obligations of purchasers of debt securities to be issued under this prospectus.
Book-Entry Holders
We may issue securities in whole or in part in book-entry form, as we will specify in the applicable prospectus supplement. Book-entry form means securities may be represented by one or more global securities registered in the name of a financial institution that holds them as depositary on behalf of other financial institutions that participate in the depositary's book-entry system. These participating institutions, which are referred to as participants, in turn, hold beneficial interests in the securities on behalf of themselves or their customers. Upon the issuance of a global security, the depositary will credit, on its book-entry registration and transfer system, the participants' accounts with the respective principal amounts of the book-entry securities represented by the global security beneficially owned by such participants. The accounts to be credited will be designated by any dealers, underwriters or agents participating in the distribution of the book-entry securities. Ownership of book-entry securities will be shown on, and the transfer of the ownership interests will be effected only through, records maintained by the depositary for the related global security (with respect to interests of participants) and on the records of participants (with respect to interests of persons holding through participants). The laws of some states may require that certain purchasers of securities take physical delivery of such securities in definitive form. These laws may impair the ability to own, transfer or pledge beneficial interests in book-entry securities.
Only the person in whose name a security is registered is recognized as the holder of that security. Securities issued in global form will be registered in the name of the depositary or its participants. Consequently, for securities issued in global form, we will recognize only the depositary as the holder of the securities, and we will make all payments on the securities to the depositary. The depositary passes along the payments it receives to its participants, which in turn pass the payments along to their customers who are the beneficial owners. The depositary and its participants do so under agreements they have made with one another or with their customers; they are not obligated to do so under the terms of the securities.
As a result, investors in a book-entry security will not own securities directly. Instead, they will own beneficial interests in a global security, through a bank, broker or other financial institution that participates in the depositary's book-entry system or holds an interest through a participant. As long as the securities are issued in global form, investors will be indirect holders, not holders, of the securities.
Street Name Holders
We may terminate a global security or issue securities in non-global form. In these cases, investors may choose to hold their securities in their own names or in "street name." Securities held by an investor in street name would be registered in the name of a bank, broker or other financial institution that the investor chooses, and the investor would hold only a beneficial interest in those securities through an account he, she or it maintains at that institution.
For securities held in street name, we will recognize only the intermediary banks, brokers and other financial institutions in whose names the securities are registered as the holders of those securities, and we will make all payments on those securities to them. These institutions pass along the payments they receive to their customers who are the beneficial owners, but only because they agree to do so in their customer agreements or because they are legally required to do so. Investors who hold securities in street name will be indirect holders, not holders, of those securities.
Legal Holders
Our obligations, as well as the obligations of any applicable trustee and of any third parties employed by us or a trustee, run only to the legal holders of the securities. We do not have obligations to investors who hold beneficial interests in global securities, in street name or by any other indirect means. This will be the case whether an investor chooses to be an indirect holder of a security or has no choice because we are issuing the securities only in global form.
For example, once we make a payment or give a notice to the holder, we have no further responsibility for the payment or notice even if that holder is required, under agreements with depositary participants or customers or by law, to pass it along to the indirect holders but does not do so. Whether and how the holders contact the indirect holders is up to the holders.
Special Considerations For Indirect Holders
If you hold securities through a bank, broker or other financial institution, either in book-entry form or in street name, you should check with your own institution to determine the following:
| · | how it handles securities payments and notices; | |
· | whether it imposes fees or charges; | |
· | how it would handle a request for the holders' consent, if ever required; | |
· | whether and how you can instruct it to send you securities registered in your own name so you can be a holder, if that is permitted in the future; | |
· | how it would exercise rights under the securities if there were a default or other event triggering the need for holders to act to protect their interests; and | |
· | if the securities are in book-entry form, how the depositary's rules and procedures will affect these matters. |
Global Securities
A global security is a security that represents one or any other number of individual securities held by a depositary. Generally, all securities represented by the same global securities will have the same terms. Each security issued in book-entry form will be represented by a global security that we deposit with and register in the name of a financial institution or its nominee that we select. The financial institution that we select for this purpose is called the depositary. Unless we specify otherwise in the applicable prospectus supplement, DTC will be the depositary for all securities issued in book-entry form.
A global security may not be transferred to or registered in the name of anyone other than the depositary, its nominee or a successor depositary, unless special termination situations arise. We describe those situations below under "Special Situations When a Global Security Will Be Terminated." As a result of these arrangements, the depositary, or its nominee, will be the sole registered owner and holder of all securities represented by a global security, and investors will be permitted to own only beneficial interests in a global security. Beneficial interests must be held by means of an account with a broker, bank or other financial institution that in turn has an account with the depositary or with another institution that does. Thus, an investor whose security is represented by a global security will not be a holder of the security, but only an indirect holder of a beneficial interest in the global security.
If the prospectus supplement for a particular security indicates that the security will be issued in global form only, then the security will be represented by a global security at all times unless and until the global security is terminated. If termination occurs, we may issue the securities through another book-entry clearing system or decide that the securities may no longer be held through any book-entry clearing system.
We may, at any time and in our sole discretion, determine not to have any of the book-entry securities of any series represented by one or more global securities and, in that event, we will issue certificated securities in exchange for the global securities of that series.
Special Considerations For Global Securities
The rights of an indirect holder relating to a global security will be governed by the account rules of the investor's financial institution and of the depositary, as well as general laws relating to securities transfers. We do not recognize an indirect holder as a holder of securities and instead deal only with the depositary that holds the global security.
If securities are issued only in the form of a global security, an investor should be aware of the following:
| · | an investor cannot cause the securities to be registered in his, her or its name, and cannot obtain non-global certificates for his, her or its interest in the securities, except in the special situations we describe below; | |
· | an investor will be an indirect holder and must look to his, her or its own bank or broker for payments on the securities and protection of his, her or its legal rights relating to the securities, as we describe above; | |
· | an investor may not be able to sell interests in the securities to some insurance companies and to other institutions that are required by law to own their securities in non-book-entry form; |
| · | an investor may not be able to pledge his, her or its interest in a global security in circumstances where certificates representing the securities must be delivered to the lender or other beneficiary of the pledge in order for the pledge to be effective; | |
| · | the depositary's policies, which may change from time to time, will govern payments, transfers, exchanges and other matters relating to an investor's interest in a global security; | |
| · | we and any applicable trustee have no responsibility for any aspect of the depositary's actions or for its records of ownership interests in a global security, nor do we or any applicable trustee supervise the depositary in any way; | |
| · | the depositary may, and we understand that DTC will, require that those who purchase and sell interests in a global security within its book-entry system use immediately available funds, and your broker or bank may require you to do so as well; and | |
| · | financial institutions that participate in the depositary's book-entry system, and through which an investor holds its interest in a global security, may also have their own policies affecting payments, notices and other matters relating to the securities. |
There may be more than one financial intermediary in the chain of ownership for an investor. We do not monitor and are not responsible for the actions of any of those intermediaries.
Special Situations When a Global Security Will Be Terminated
In a few special situations described below, the global security will terminate and interests in it will be exchanged for physical certificates representing those interests. After that exchange, the choice of whether to hold securities directly or in street name will be up to the investor. Investors must consult their own banks or brokers to find out how to have their interests in securities transferred to their own name, so that they will be direct holders. We have described the rights of holders and street name investors above.
Unless we provide otherwise in the applicable prospectus supplement, the global security will terminate when the following special situations occur:
| · | if the depositary notifies us that it is unwilling, unable or no longer qualified under the Exchange Act to continue as depositary for that global security and we do not appoint another institution to act as depositary within 90 days; | |
· | if we notify any applicable trustee that we wish to terminate that global security; or | |
· | if an event of default has occurred with regard to securities represented by that global security and has not been cured or waived. |
The prospectus supplement may also list additional situations for terminating a global security that would apply only to the particular types and series of securities covered by the applicable prospectus supplement. When a global security terminates, the depositary, and not we or any applicable trustee, is responsible for deciding the names of the institutions that will be the initial direct holders.
CERTAIN PROVISIONS OF IOWA LAW AND
THE COMPANY'SCORPORATION'S ARTICLES OF INCORPORATION BY-LAWS AND IOWA CORPORATE LAWBY-LAWS
The Company's following paragraphs summarize certain provisions of Iowa law and our articles of incorporation and by-laws, as amended. The summary does not purport to be complete and is subject to and qualified in its entirety by reference to our articles of incorporation and by-laws, copies of which are on file with the SEC as exhibits to reports previously filed by us and included as an exhibit to the registration statement . See "WHERE YOU CAN FIND MORE INFORMATION" above.
General
Certain provisions of our articles of incorporation and by-laws, as amended, and Iowa law could make our acquisition by a third party, a change in our incumbent management or a similar change in control more difficult, including:
| · | an acquisition of us by means of a tender or exchange offer; |
| · | an acquisition of us by means of a proxy contest or otherwise; or |
| · | the removal of a majority or all of our incumbent officers and directors. |
These provisions, which are summarized below, are likely to discourage certain types of coercive takeover practices and inadequate takeover bids. These provisions are also designed to encourage persons seeking to acquire control of us to first negotiate with our board of directors. We believe that these provisions help to protect our potential ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure us, and that this benefit outweighs the potential disadvantages of discouraging such a proposal because our ability to negotiate with the proponent could result in an improvement of the terms of the proposal. The existence of these provisions which are described below could limit
the price that investors might otherwise pay in the future for our securities. This description is intended as a summary only and is qualified in its entirety by reference to our articles of incorporation and by-laws.
Articles of Incorporation, By-laws and By-laws contain provisionsIowa Law
Authorized But Unissued Capital Stock
We have shares of common stock and preferred stock available for future issuance without shareholder approval, subject to any limitations imposed by the listing standards of the NYSE. We may utilize these additional shares for a variety of corporate purposes, including for future public offerings to raise additional capital or facilitate corporate acquisitions or for payment as a dividend on our capital stock. The existence of unissued and unreserved common stock and preferred stock may enable our board of directors to issue shares to persons friendly to current management or to issue preferred stock with terms that could makehave the effect of making it more difficult for a third party to acquire, or could discourage a third party from seeking to acquire, a controlling interest in the acquisitionCorporation by means of control of the Company by various
means, such as a merger, tender offer, open market purchases, a proxy contest or otherwise. Supermajority Vote Requirement. The Company's ArticlesIn addition, if we issue preferred stock, the issuance could adversely affect the likelihood that such holders will receive dividend payments and payments upon liquidation.
Blank Check Preferred Stock
Our board of Incorporation
provide thatdirectors, without shareholder approval, has the affirmative voteauthority under our articles of incorporation, as amended, to issue preferred stock with rights superior to the rights of the holders of common stock. As a result, preferred stock could be issued quickly and easily, could impair the rights of holders of common stock and could be issued with terms calculated to delay or prevent a change in control or make removal of management more difficult.
Number of Directors; Removal; Filling Vacancies
Our articles of incorporation, as amended, provide that fractionthe number of directors shall be fixed by the by-laws, as amended, which our board of directors can amend without shareholder approval. Our by-laws default to Iowa law with respect to the removal of directors. Iowa law provides that directors may be removed with or without cause where the votes cast by shareholders favoring the action exceed the votes cast by shareholders opposing the action at a shareholder's meeting at which a quorum is present where one of the total
outstanding shares of Common Stock entitled to vote, but not less than two-
thirds, determined by using as the numerator a number equal to the sum of (i)
the outstanding shares of Common Stock entitled to vote which are owned by a
Related Person (as defined below), plus (ii) two-thirds of the remaining
number of outstanding shares of Common Stock entitled to vote, and using as
the denominator a number equal to the total number of outstanding shares of
Common Stock entitled to vote, shall be required for any act of the
shareholders of the Company relating to adoption of a Corporate Combination or
any amendment of such provision of the Articles of Incorporation. For purposes of the Articlesmeeting is to remove one or more directors. A director cannot be removed by written consent of Incorporation, "Corporate Combination" is defined as (a)
any merger or consolidationshareholders unless written consents are obtained from the holders of the Company or any majority-owned subsidiary
with (i) any Related Person other than a majority-owned subsidiary or (ii) any
other corporation other than a majority-owned subsidiary which is, or after
such merger or consolidation would be, an affiliate of a Related Person, (b)
any sale, lease, exchange, mortgage, pledge, transfer, or other disposition in
one transaction or a series of transactions to or with any Transaction Person
(as defined below) of any assets of the Company or any majority-owned
subsidiary having an aggregate fair market value of $1,000,000 or more; (c)
the issuance or transfer by the Company or any majority-owned subsidiary in
one transaction or a series of transactions of any securities of the Company
or any majority-owned subsidiary to any Transaction Person in exchange for
cash, securities, other property, or a combination thereof, having an
aggregate fair market value of $1,000,000 or more; (d) the adoption of any
plan or proposal for the liquidation or dissolution of the Company proposed by
or on behalf of a Related Person or any affiliate of any Related Person; (e)
any reclassification of securities, including any reverse stock split or
recapitalization of the Company, or any merger or consolidation of the Company
with
31
any of its majority-owned subsidiary, or any other transaction (whether or not
with, into, or otherwise involving a Related Person) which has the effect,
directly or indirectly, of increasing the proportionate share ofall the outstanding shares of any class of capital stock or any securities which are
convertible (with or without consideration) into shares of capital stock or
into other securities convertible into shares of capital stock or convertible
securities of the Company or any majority-owned subsidiary which is directly
or indirectly owned by any Related Person or any affiliate of any Related
Person. "Related Person" is defined as any person which, together with its
affiliates, associates and the associates of its affiliates, owns 10% or more
of the outstanding Common Stock.
Notwithstanding the foregoing, the affirmative vote of two-thirds of the
outstanding shares of Common Stock entitled to vote shall be sufficient for
the adoption and authorization of a Corporate Combination when (i) the
Corporate Combination will result in an involuntary sale, redemption,
cancellation, or other termination of ownership of all shares of Common Stock
owned by shareholders who do not vote in favor of or consent in writing to the
Corporate Combination; (ii) the cash or fair market value (as determined in
good faith by the Board of Directors) of other readily marketable
consideration to be received by all holders of Common Stock for their shares
will be (A) at least equal to the highest gross price per share paid or agreed
to be paid to acquire any shares of Common Stock by any Related Person within
two years of the record date for determining the shareholders entitled to vote on the Corporate Combination, and (B) in cash or in the same form as the
Related Person, any person who would become a Related Person as a resultremoval of the Corporate Combination or any affiliate, associate or affiliatedirector. Our by-laws provide that vacancies on our board of an
associate of suchdirectors may be filled by a person ("Transaction Person") has previously paid for
shares of Common Stock (if the Transaction Person has paid for shares of
Common Stock with varying forms of consideration, the form of consideration
for such Common Stock shall be either cash or the form used to acquire the
largest number of shares of such class of stockmajority vote of the Company previously
acquiredremaining directors, even though less than a quorum. Iowa law also provides that shareholders may fill any vacancy on our board of directors.
Shareholder Action
Iowa law provides that shareholders may act outside of a meeting if one or more written consents describing the action taken are signed by it); (iii) during the period from the earlier of the date that a
person becomes a Transaction Person or a Transaction Person becomes a Related
Person until the date of consummation of such Corporate Combination (A) there
shall have been no failure to declare and pay at the regular date therefor any
full dividends, whether or not cumulative, on any outstanding preferred stock
of the Company; (B) there shall have been no reduction in the annual rate of
dividends paid on the Common Stock, except as necessary to reflect any
subdivision of such stock, and all increases in such annual rate of dividends
necessary to reflect any reclassification, including any reverse stock split,
recapitalization, reorganization, or any similar transaction which has the
effect of reducing the numberholders of outstanding shares having not less than ninety percent (90%) of the Common Stock; (C)votes entitled to be cast at a meeting at which all shares entitled to vote on the Transaction Personaction were present and voted.
Shareholder Meetings
Our by-laws, as amended, provide that shareholders can only call a special meeting with the approval of holders of not less than fifty percent (50%) of all votes entitled to be cast on any issue proposed to be considered at the proposed special meeting. Our by-laws also provide that the business of special meetings of shareholders shall not have becomebe confined to the beneficial owner of any
additional shares of stockpurposes stated in the notice of the Company except as partmeeting. These provisions may discourage another person or entity from making a tender offer, unless it acquired a majority of our outstanding voting stock, because the transaction
which resultsperson or entity could only take action at a duly called shareholders' meeting relating to the business specified in the Transaction Person's becoming a Related Person;notice of meeting and (D)
the Transaction Person shall not have received the benefit, directly or
indirectly, except proportionatelyby written consent.
Requirements for Advance Notification of Shareholder Nominations and Proposals
Our by-laws, as amended, provide that a shareholder seeking to bring business before an annual meeting of any loans, advances,
guaranties, pledges, other financial assistance, tax credits,shareholders, or tax
advantages provided byto nominate candidates for election as directors at an annual meeting of shareholders, must provide timely notice of this intention in writing. To be timely, a shareholder must deliver the Company, whethernotice in anticipation of or in
connection with suchwriting to our Corporate Combination or otherwise;Secretary at our principal executive offices not less than 60 and (iv) a proxy
statement responsive to the requirements of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), shall be mailed to the shareholders of
the Company at least 30nor more than 90 days prior to the proposed consummationfirst anniversary of the preceding year's annual meeting, subject to certain exceptions. Our by-laws also specify requirements as to the form and content of the shareholder's notice. These provisions could delay shareholder actions that are favored by the holders of a Corporate
Combination (whether or not such proxy statement is required to be mailed
pursuant tomajority of our outstanding shares until the Exchange Act or subsequent provisions) for the purpose of
soliciting shareholder approval of the proposed Corporate Combination.
next shareholders' meeting.
Classified Board of Directors. The Company's BoardDirectors
Our board of Directorsdirectors is divided into three classes, as nearly equal in number as is reasonably possible, serving staggered terms. One class of directors is elected at each annual meeting to serve a term of three years. At least two annual meetings of
shareholders, instead of one, will be required to effect a change in a
majority of the Company's Board of Directors. In addition, special meetings of
shareholders may only be called by a majority of the Board of Directors or the
Chairman, Vice Chairman, President or Secretary of the Company. Amendments to the staggered board provisions require that the votes cast by shareholders favoring the action exceed the votes cast by shareholders opposing the action at a two-thirds voteshareholders' meeting at which a quorum is present. The effect of shareholders. The
purposesa classified board of these provisions aredirectors may be to discourage certain types of transactions
which may involve an actual or threatened change of control of the Company and
encourage persons seekingmake it more difficult to acquire control of the Company to consult first
with the Board of Directors to negotiate the terms of any proposed business
combination or offer. The provisions are designed to reduce the vulnerability
of the Company to an
32
unsolicited proposal for a takeover that does not contemplate the acquisition
of all outstanding shares or is otherwise unfair to shareholders of the
Company, or an unsolicited proposal for the restructuring or sale of all or
part of the Company.
Section 490.1109 of the Corporation.
Iowa Business Corporation Act. The Company isCombination Statute
We are subject to the provisions of Section 490.1109490.1110 of the Iowa Business Corporation Act (the "Business Combination Statute"). Under the Business Combination Statute, certain "business combinations" between an Iowa corporation whose stock is publicly traded or held by more than 2,000 shareholders and an "interested shareholder" are prohibited for a three-year period following the date that such a shareholder became an interested shareholder, unlessunless: (i) prior to the time the shareholder became an interested shareholder, the board of directors of the corporation approved either the business combination or the transaction which resulted in the shareholder becoming an interested shareholder; (ii) at or subsequent to the time the shareholder became an interested shareholder, the business combination is approved by the board of directors and authorized at an annual or special meeting of shareholders (such approval shall not be by written consent) by the affirmative vote of at least sixty-six and two-thirds percent (66-2/3%) of the outstanding voting stock which is not owned by the interested shareholder
(such approval shall not be by written consent)shareholder; or (iii) upon consummation of the transaction that made it an interested stockholder,shareholder, the interested stockholdershareholder owned at least 85% of the voting stock of the corporation outstanding at the commencement of the transaction (excluding voting stock owned by directors who are also officers or held in employee benefit plans in which the employees do not have a confidential right to tender or vote stock held by the plan). The three-year prohibition also does not apply to certain business combinations proposed by an interested shareholder following the announcement or notification of certain extraordinary transactions involving the corporation and a person who had not been an interested shareholder during the previous three years. The term "business combination" is defined generally to include mergers or consolidations between an Iowa corporation and an "interested shareholder," transactions with an "interested shareholder" involving the assets or stock of the corporation or its majority-owned subsidiaries and transactions which increase an interested shareholder's percentage ownership of stock. The term "interested shareholder" is defined generally as a shareholder who, together with affiliates and associates, owns (or, within three years prior, did own) 10% or more of an Iowa corporation's voting stock. The Business Combination Statute could prohibit
Limitation of Liability and Indemnification
Iowa law authorizes an Iowa corporation to limit the personal liability of directors to the corporation or delayits shareholders for money damages for certain actions or failures to act in their capacity as a merger, takeoverdirector and to indemnify a director or other changeofficer against certain liabilities. We believe that such provisions, together with provisions limiting the personal liability of officers to the Corporation or its shareholders, are beneficial in controlattracting and retaining qualified directors and officers. Accordingly, our articles of incorporation, as amended, provide that no director shall be personally liable to the Corporation or any shareholder for money damages for any action, or failure to take action, except for:
| · | the amount of financial benefit received by a director to which the director is not entitled; |
| · | an intentional infliction of harm on the Corporation or its shareholders; |
| · | a violation of Section 490.833 (Liability for unlawful distribution) of the Iowa Business Corporation Act; or |
| · | an intentional violation of criminal law. |
In addition, our by-laws, as amended, provide that:
| · | no officer shall be liable as an officer to the Corporation or its shareholders for any decision to take or not to take action, or any failure to take any action, if the duties of the officer are performed in compliance with the standards of conduct for officers prescribed in Iowa law; and |
| · | we may indemnify a director or officer to the maximum extent permitted by Iowa law. |
We may sell the securities described in this prospectus from time to time in one or more of the Company and therefore could
discourage attempts following ways:
| · | to or through underwriters or dealers; | |
· | directly to one or more purchasers; | |
· | through agents; or | |
· | through a combination of any of those methods of sale. |
The prospectus supplement with respect to the offered securities will describe the terms of the offering, including the following:
| · | the name or names of any underwriters or agents; | |
· | any public offering price; | |
· | the proceeds from such sale; | |
· | any underwriting discounts or agency fees and other items constituting underwriters' or agents' compensation; | |
· | any over-allotment options under which underwriters may purchase additional securities from us; | |
· | any discounts or concessions allowed or reallowed or paid to dealers; and | |
· | any securities exchanges on which the securities may be listed. |
We may distribute the securities from time to time in one or more of the following ways:
| · | at a fixed public offering price or prices, which may be changed; |
| · | at prices relating to prevailing market prices at the time of sale; |
| · | at varying prices determined at the time of sale; or |
| · | at negotiated prices. |
Unless otherwise indicated in the applicable prospectus supplement, if we use underwriters for a sale of securities, the underwriters will acquire the Company.
33
UNDERWRITING
Subject tosecurities for their own count. The underwriters may resell the terms and conditions set forthsecurities in one or more transactions, including negotiated transactions, at a purchase agreement (the
"U.S. Purchase Agreement"), amongfixed public offering price, or at varying prices determined at the Company, the Selling Shareholder and eachtime of sale. The obligations of the underwriters named below (the "U.S. Underwriters"), and concurrently
with the sale of 679,000 shares of Common Stock to the International Managers
(as defined below), the Company and the Selling Shareholder have agreed to sell
to each of the U.S. Underwriters, and each of the U.S. Underwriters severally
has agreed to purchase from the Company and the Selling Shareholder the number
of shares of Common Stock set forth opposite its name below.
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), William
Blair & Company, L.L.C., Robert W. Baird & Co. Incorporated and McDonald &
Company Securities, Inc. are acting as representatives (the "U.S.
Representatives") for the U.S. Underwriters.
The Company and the Selling Shareholder have also entered into a purchase
agreement (the "International Purchase Agreement" and, together with the U.S.
Purchase Agreement, the "Purchase Agreements") with certain underwriters
outside the United States and Canada (collectively, the "International
Managers," and together with the U.S. Underwriters, the "Underwriters"), for
whom Merrill Lynch International, William Blair & Company, L.L.C., Robert W.
Baird & Co. Incorporated and McDonald & Company Securities, Inc. are acting as
representatives (the "International Representatives" and, together with the
U.S. Representatives, the "Representatives"). Subjectsecurities will be subject to the terms and conditions set forth in the International Purchase Agreement,applicable underwriting agreement. Unless otherwise indicated in a prospectus supplement, the underwriters will be obligated to purchase all the securities of the series offered if they purchase any of the securities of that series. We may change from time to time any initial public offering price and concurrentlyany discounts or concessions the underwriters allow or reallow or pay to dealers. We may use underwriters with whom we have a material relationship. We will describe in the prospectus supplement naming the underwriter the nature of any such relationship. We may designate agents who agree to use their reasonable efforts to solicit purchases for the period of their appointment or to sell securities on a continuing basis. We may also sell securities directly to one or more purchasers without using underwriters or agents.
Underwriters, dealers or agents may receive compensation in the form of discounts, concessions or commissions from us or from purchasers of the securities as their agents in connection with the sale of 2,716,000 shares of Common Stockthe securities. These underwriters, dealers or agents may be considered to the U.S. Underwriters
pursuant to the U.S. Purchase Agreement, the Company and the Selling
Shareholder have agreed to sell to the International Managers, and the
International Managers have severally agreed to purchase from the Company and
the Selling Shareholder, an aggregate of 679,000 shares of Common Stock. The
public offering price per share of Common Stock and the underwriting discount
per share of Common Stock are identicalbe underwriters under the U.S. Purchase Agreement and
the International Purchase Agreement. The respective percentages of the Common
Stock to be soldSecurities Act. As a result, discounts, commissions or profits on resale received by each of the Company and the Selling Shareholder will be
identical in the U.S. Offering and the International Offering.
In the U.S. Purchase Agreement and the International Purchase Agreement, the
several U.S. Underwriters and the several International Managers, respectively,
have agreed, subject to the terms and conditions set forth
34
therein, to purchase all of the shares of Common Stock being sold pursuant to
each such agreement if any of the shares of Common Stock being sold pursuant
to such agreement are purchased. Under certain circumstances involving a
default by an Underwriter, the commitments of non-defaulting U.S. Underwritersunderwriters, dealers or International Managers (as the case may be)agents may be increasedtreated as underwriting discounts and commissions. Each prospectus supplement will identify any underwriter, dealer or the U.S.
Purchase Agreement or the International Purchase Agreement (as the case may
be) may be terminated. The sale of Common Stock to the U.S. Underwriters is
conditioned upon the sale of Common Stock to the International Managersagent and vice versa.
The U.S. Underwriters and the International Managers have entered into an
intersyndicate agreement (the "Intersyndicate Agreement") providing for the
coordination of their activities. The Underwriters are permitted to sell
shares of Common Stock to each other for purposes of resale at thedescribe any compensation received by them from us. Any initial public offering price less an amountand any discounts or concessions allowed or reallowed or paid to dealers may be changed from time to time.
Unless otherwise specified in the applicable prospectus supplement, each class or series of securities will be a new issue with no established trading market, other than our common stock, which is listed on the NYSE. We may elect to list any other class or series of securities on any exchange, but we are not greater thanobligated to do so. It is possible that one or more underwriters may make a market in a class or series of securities, but the selling concession.
Underunderwriters will not be obligated to do so and may discontinue any market making at any time without notice. We cannot give any assurance as to the termsliquidity of the Intersyndicate Agreement,trading market for any of the U.S. Underwriters and any
dealer to whom they sell shares of Common Stock will not offer to sell or sell
shares of Common Stock to persons who are non-U.S. or non-Canadian persons or
to persons they believe intend to resell to persons who are non-U.S. or non-
Canadian persons, and the International Managers and any dealer to whom they
sell shares of Common Stock will not offer to sell or sell shares of Common
Stock to U.S. persons or to Canadian persons or to persons they believe intend
to resell to U.S. persons or Canadian persons, except in the case of
transactions pursuant to the Intersyndicate Agreement.
The U.S. Representatives have advised the Company and the Selling
Shareholder that the U.S. Underwriters propose initially to offer the shares
of Common Stock to the public at the offering price set forth on the cover
page of this Prospectus and to certain dealers at such price less a concession
not in excess of $. per share. The U.S. Underwriters may allow, and such
dealers may reallow, a discount not in excess of $. per share to certain
other dealers. After the initial public offering, the public offering price,
concession and discount may be changed.
The Company has granted to the U.S. Underwriters an option, exercisable
within 30 days after the date of this Prospectus, to purchase up to an
aggregate of 407,400 additional shares of Common Stock at the public offering
price set forth on the cover page of this Prospectus, less the underwriting
discount. The U.S. Underwriters may exercise this option only to cover over-
allotments, if any, made on the sale of Common Stock offered hereby. To the
extent that the U.S. Underwriters exercise this option, each U.S. Underwriter
will be obligated, subject to certain conditions, to purchase a number of
additional shares of Common Stock proportionate to such U.S. Underwriters'
initial amount reflected in the foregoing table. If purchased, the
Underwriters will offer such additional shares on the same terms as those on
which the 3,395,000 shares are being offered.
The Company has, subject to certain exceptions, agreed not to, directly or
indirectly, offer, pledge, sell, contract to sell or otherwise transfer or
dispose of any shares of Common Stock or any securities convertible into or
exchangeable or exercisable for Common Stock without the prior written consent
of Merrill Lynch for a period of 90 days from the date of this Prospectus,
except that the Company may, without such consent, issue shares of Common
Stock upon the exercise or conversion of any outstanding options, rights,
warrants or other convertible securities, or issue shares of Common Stock or
grant options to purchase shares of Common Stock pursuant to the Company's
existing employee benefit plans, director stock plan, or dividend reinvestment
plan. In addition, the Company's executive officers and directors have agreed
not to effect any sales of Common Stock in open market transactions without
the prior written consent of Merrill Lynch for a period of 90 days from the
date of this Prospectus.securities.
In connection with any offering, the Offerings, the Underwriters or their respective
affiliates and selling group members (if any) who are qualified market makers
on Nasdaqunderwriters may engage in "passive market making" in the Common Stock on the
Nasdaq National Marketstabilizing transactions, over-allotment transactions, syndicate covering transactions and penalty bids in accordance with Rule 103 of Regulation M under the Exchange Act. Rule 103 permits, upon
| · | Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum. | |
· | Over-allotment involves sales by the underwriters of shares of our common stock in excess of the number of shares the underwriters are obligated to purchase, which creates a syndicate short position. The short position may be either a covered short position or a naked short position. In a covered short position, the number of shares of our common stock over-allotted by the underwriters is not greater than the number of shares that they may purchase in the over-allotment option. In a naked short position, the number of shares of our common stock involved is greater than the number of shares in the over-allotment option. The underwriters may close out any covered short position by either exercising their over-allotment option or purchasing shares of our common stock in the open market. | |
· | Syndicate covering transactions involve purchases of our common stock in the open market after the distribution has been completed in order to cover syndicate short positions. In determining the source of shares to close out the short position, the underwriters will consider, among other things, the price of shares of our common stock available for purchase in the open market as compared to the price at which they may purchase shares through the over-allotment option so that if there is a naked short position, the position can only be closed out by buying shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there could be downward pressure on the price of the shares of our common stock in the open market after the pricing of any offering that could adversely affect investors who purchase in that offering. | |
· | Penalty bids permit the representatives of the underwriters to reclaim a selling concession from a syndicate member when the common stock originally sold by the syndicate member is purchased in a stabilizing or syndicate covering transaction to cover syndicate short positions. |
These stabilizing transactions, syndicate covering transactions and penalty bids may have the satisfactioneffect of certain conditions,
underwriters and selling group members participating inraising or maintaining the market price of our common stock or preventing or retarding a distribution that
are also Nasdaq market makersdecline in the security being distributed (ormarket price of our common stock. As a related
security) to engage in limited market making transactions during the period
when Regulation M under the Exchange Act would otherwise prohibit such
activity. Rule 103 prohibits underwriters and selling group members engaged in
passive market making generally from entering a bid or affecting a purchase at
a price that
35
exceeds the highest bid for those securities displayed on the Nasdaq National
Market by a market maker that is not participating in the distribution. Under
Rule 103, each underwriter or selling group member engaged in passive market
making is subject to a daily net purchase limitation equal to 30% of such
entity's average daily trading volume during the two full consecutive calendar
months immediately preceding the date of the filing of the registration
statement under the Securities Act of 1933, as amended (the "Securities Act")
pertaining to the security to be distributed (or such related security).
Until the distribution of the Common Stock is completed, rules of the
Securities and Exchange Commission may limit the ability of the Underwriters
and certain selling group members to bid for and purchase the Common Stock. As
an exception to these rules, the Representatives are permitted to engage in
certain transactions that stabilizeresult, the price of the Common Stock. Such
transactions consist of bids or purchases for the purpose of pegging, fixing or
maintainingour common stock may be higher than the price of the Common Stock.
If the Underwriters create a short position in the Common Stock in connection
with the offering, i.e., if they sell more shares of Common Stock than are set
forth on the cover page of this Prospectus, the Representatives may reduce that short position by purchasing Common Stockmight otherwise exist in the open market. The
RepresentativesThese transactions may also elect to reduce any short position by exercising all
or part of the over-allotment option described above.
The Representatives may also impose a penalty bid on certain Underwriters and
selling group members. This means that if the Representatives purchase shares
of Common Stock in the open market to reduce the Underwriters' short position
or to stabilize the price of the Common Stock, they may reclaim the amount of
the selling concession from the Underwriters and selling group members who sold
those shares as part of the offering.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effecteffected on the price of a securityNYSE or otherwise and, if commenced, may be discontinued at any time.
Underwriters, dealers and agents may be entitled under agreements entered into with us to the extent that it were
to discourage resales of the security.
The Company and the Selling Shareholder have agreed to indemnify the
Underwritersindemnification against certain civil liabilities, including liabilities under the Securities Act, or to contributecontribution with respect to payments initially the Underwritersthey may be required to make in respect of these liabilities thereof. NeitherUnderwriters, dealers, agents and their affiliates may be customers of, may engage in transactions with or perform services for us in the Company nor anyordinary course of business for which they receive compensation.
The validity of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Common Stock. In addition, neither
the Company nor any of the Underwriters makes any representation that the
Representatives will engage in such transactions or that such transactions,
once commenced, will not be discontinued without notice.
Edgar D. Jannotta, a director of the Selling Shareholder, is Senior Director
of William Blair & Company, L.L.C.
36
LEGAL MATTERS
The legality of the Common Stocksecurities offered hereby has been passed upon for the
Company by Stanley, Lande & Hunter, P.C., Muscatine, Iowa. Certain other legal
matters will be passed upon by Squire, Sanders & Dempsey L.L.P. , Two Renaissance Square, 40 North Central Avenue, Phoenix, AZ 85004-4498. Certain legal matters may be passed upon for any agents or underwriters by counsel for such agents or underwriters identified in the Company by Jones, Day, Reavis & Pogue,
Chicago, Illinois and Stanley, Lande & Hunter, P.C., for the Selling
Shareholder by Foley & Lardner, Milwaukee, Wisconsin and for the Underwriters
by Sidley & Austin, Chicago, Illinois. Members of Stanley, Lande & Hunter,
P.C., own of record and beneficially a total of 102,957 shares of Common Stock.
applicable prospectus supplement.
The audited consolidated financial statements and schedulesmanagement's assessment of HON INDUSTRIES
Inc. and Subsidiaries asthe effectiveness of andinternal control over financial reporting (which is included in Management's Report on Internal Control over Financial Reporting) incorporated in this prospectus by reference to our Annual Report on Form 10-K for the fiscal year ended December 28, 1996
included in this Prospectus and elsewhere in the Registration StatementJanuary 3, 2009 have been audited by Arthur Andersenso incorporated in reliance on the reports of PricewaterhouseCoopers LLP, an independent registered public accountants, as
indicated in its reports with respect thereto, and are included herein in
reliance uponaccounting firm, given on the authority of said firm as experts in giving said reports.
The consolidated balance sheetsauditing and accounting.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and its subsidiaries
as of December 30, 1995 and December 31, 1994, and the related consolidated
statements of income, shareholders' equity and cash flows for the years then
ended included in this Prospectus and the related financial statement schedule
listed in Item 14 of HON INDUSTRIES Inc.'s Annual Report on Form 10-K for the
fiscal year ended December 28, 1996, incorporated by reference into this
Registration Statement, have been audited by Ernst & Young LLP, as stated in
its reports appearing herein and incorporated by reference into this
Registration Statement. Such financial statements and financial statement
schedule have been so included and incorporated by reference in reliance upon
such reports given upon the authority of such firms as experts in accounting
and auditing.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-3 (of which this Prospectus is
a part) under the Securities Act, with respect to the securities offered
hereby. This Prospectus does not contain all information set forth in the
Registration Statement, certain portions of which have been omitted in
accordance with the rules and regulations of the Commission. For further
information about the Company and the securities offered hereby, reference is
made to the Registration Statement, including the exhibits filed as a part
thereof and otherwise incorporated therein. Statements made in this Prospectus
as to the contents of any document referred to are not necessarily complete,
and in each instance reference is made to such exhibit for a more complete
description and each such statement is qualified in its entirety by such
reference.
The Company is subject to the informational requirements of the Exchange Act
and in accordance therewith files periodic reports, proxy statements and other
information with the Commission. The Registration Statement, including exhibits
thereto, as well as such reports, proxy statements and other information filed
by the Company with the Commission can be inspected, without charge, and copied
at the public reference facilities maintained by the Commission at 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549, 7 World Trade Center, 13th
Floor, New York, New York 10048 and Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such materials can also be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549, at prescribed rates. The
Commission maintains a Web site that contains reports, proxy and information
statements and other information regarding registrants, including the Company,
that file electronically with the Commission and that is located at
http://www.sec.gov. The Registration Statement was filed electronically with
the Commission.
37
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed with the Commission by the Company
(File No. 0-2648) pursuant to the Exchange Act are incorporated by reference in
this Prospectus and made a part hereof: the Company's Annual Report on Form 10-
K for the fiscal year ended December 28, 1996; the Company's Quarterly Reports
on Form 10-Q for the fiscal quarters ended March 29, 1997 and June 28, 1997;
the Company's Current Report on Form 8-K dated June 30, 1997; and the
description of the Company's Common Stock set forth in Item 1 of the Company's
Registration Statement on Form 8-A filed May 1, 1967 and all amendments and
reports filed for the purpose of updating that description.
All documents filed by the Company with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus
and prior to the termination of this offering shall be deemed to be
incorporated by reference into this Prospectus and to be a part hereof from
their respective dates of filing. Any statement contained in a document
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
modifies, supersedes or replaces such statement. Any statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO ANY PERSON TO WHOM THIS PROSPECTUS
IS DELIVERED, UPON WRITTEN OR ORAL REQUEST OF SUCH PERSON, A COPY OF ANY OR ALL
OF THE DOCUMENTS WHICH HAVE BEEN INCORPORATED BY REFERENCE IN THIS PROSPECTUS,
OTHER THAN EXHIBITS TO SUCH DOCUMENTS, UNLESS SUCH EXHIBITS ARE SPECIFICALLY
INCORPORATED BY REFERENCE INTO THE DOCUMENTS SO INCORPORATED. REQUESTS FOR SUCH
COPIES SHOULD BE DIRECTED TO HON INDUSTRIES INC., OFFICE OF THE SECRETARY, 414
EAST THIRD STREET, P.O. BOX 1109, MUSCATINE, IOWA 52761-7109 (TELEPHONE NUMBER
(319) 264-7400).
38
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
F-1
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
Board of Directors and Shareholders
HON INDUSTRIES Inc.
We have audited the accompanying consolidated balance sheet of HON
INDUSTRIES Inc. and subsidiaries as of December 28, 1996, and the related
consolidated statement of income, shareholders' equity, and cash flows for the
fiscal year then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audit 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 audit provides 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 28, 1996, and the
consolidated results of its operations and its cash flows for the year then
ended, in conformity with generally accepted accounting principles.
Arthur Andersen LLP
Chicago, Illinois
January 30, 1997
F-2
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholders
HON INDUSTRIES Inc.
We have audited the accompanying consolidated balance sheets of HON
INDUSTRIES Inc. and subsidiaries as of December 30, 1995, and December 31,
1994, and the related consolidated statements of income, shareholders' equity,
and cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements 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 30, 1995, and December
31, 1994, and the consolidated results of their operations and their cash
flows for the years then ended, in conformity with generally accepted
accounting principles.
As discussed in the Notes to Consolidated Financial Statements, the Company
changed its method of accounting for postemployment benefits in 1994.
Ernst & Young LLP
Chicago, Illinois
January 30, 1996
F-3
HON INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
HON INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
HON INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
HON INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
The accompanying notes are an integral part of the consolidated financial
statements.
F-7
HON INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NATURE OF OPERATIONS
HON INDUSTRIES Inc. and subsidiaries (the Company) are a national
manufacturer and marketer of office furniture and hearth products. Both
industries are reportable segments; however, the Company's office furniture
business is its principal line of business. Refer to the "Business Segment
Information" note for further information. Office furniture products are sold
through a national system of dealers, wholesalers, mass merchandisers,
warehouse clubs, and retail superstores and to end-user customers and federal
and state governments. Dealer, wholesaler, and retail superstores are the
major channels based on sales. Hearth products include wood- and gas-burning
factory-built fireplaces, fireplace inserts, gas logs, and stoves. These
products are sold through a national system of dealers, wholesalers, and large
regional contractors. The Company's products are marketed predominately in the
United States and Canada. The Company exports select products to a limited
number of markets outside North America, principally Latin America and the
Caribbean, through its export subsidiary; however, based on sales, it is not
significant.
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 1996 ended on December 28, 1996; 1995 ended on December 30, 1995; and
1994 ended on December 31, 1994.
Cash and Cash Equivalents
Cash and cash equivalents generally consist of cash and commercial paper.
These securities have original maturity dates not exceeding three months from
date of purchase.
Short-Term Investments
Short-term investments are classified as available-for-sale and are highly
liquid debt and equity securities. These investments are stated at cost which
approximates market value.
Receivables
Accounts receivable are presented net of an allowance for doubtful accounts
of $1,830,000; $1,867,000; and $1,654,000 for 1996, 1995, and 1994,
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, 3-12 years. The Company capitalized interest costs of $95,000 and
$256,000 in 1996 and 1995, respectively.
F-8
HON INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Goodwill and Patents
Goodwill represents the excess of cost over the fair value of net
identifiable assets of acquired companies. Goodwill is being amortized on a
straight-line basis predominately over 40 years. Patents are being amortized
on a straight-line basis over their estimated useful lives which range from 7
to 16 years. Patents are reported by the Company as "Other Assets."
The carrying value of goodwill and patents is reviewed by the Company
whenever significant events or changes occur which might impair recovery of
recorded costs. Based on its most recent analysis, the Company believes no
material impairment of these intangible assets exists at December 28, 1996.
Product Development Costs
Product development costs relating to the development of new products and
processes, including significant improvements and refinements to existing
products, are expensed as incurred. The amounts charged against income were
$10,423,000 in 1996, $11,591,000 in 1995, and $10,081,000 in 1994.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
New Accounting Policies
The Company adopted Financial Accounting Standards Board Statement No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of," in the first quarter of 1996. The adoption had no material
effect on results of operations.
BUSINESS COMBINATIONS
On October 2, 1996, the Company acquired all of the outstanding stock of
Heat-N-Glo Fireplace Products, Inc., located in Savage, Minnesota, for a
combination of cash and debt totaling approximately $79 million. The Company
merged Heat-N-Glo into Heatilator Inc., a wholly owned subsidiary, which
changed its name to Hearth Technologies Inc. Both Heatilator and Heat-N-Glo
are engaged in the manufacture and marketing of quality hearth products and
operate as divisions of Hearth Technologies Inc.
The Company paid approximately $62.0 million in cash, a $5.0 million long-
term note, and $12.0 million as a convertible debenture for Heat-N-Glo. In
connection with the merger, the Company entered into a $34.0 million five-year
term loan with LaSalle National Bank.
This transaction has been accounted for under the purchase method.
Accordingly, the accounts and transactions of the acquired company have been
included in the consolidated financial statements from the date of
acquisition.
F-9
HON INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Assuming the acquisition had occurred as of the beginning of fiscal year
1995, the Company's pro forma consolidated net sales would have been
approximately $1.07 billion and $971.6 million for 1996 and 1995,
respectively. Pro forma consolidated net income and net income per common
share would not have been materially different than reported amounts.
The net purchase price was preliminarily allocated as follows: (In
thousands)
BUSINESS DISPOSITION
On January 24, 1996, the Company sold the outstanding stock of Ring King
Visibles, Inc., a wholly owned subsidiary, for $8.0 million in cash and the
forgiveness of intercompany receivables of approximately $2.0 million. The
sale resulted in an approximate $3.2 million pretax gain for the Company (an
after-tax gain of $2.0 million, or $0.07 per share) which was recorded in the
first quarter of fiscal year 1996.
INVENTORIES
Current replacement cost exceeded the amount stated for inventories valued
by the LIFO method by approximately $12,337,000; $13,594,000; and $12,983,000
as of year-end 1996, 1995, and 1994, respectively.
PROPERTY, PLANT, AND EQUIPMENT
F-10
HON INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
ACCOUNTS PAYABLE AND ACCRUED EXPENSES
LONG-TERM DEBT AND OTHER LIABILITIES
- --------
* The Company has entered into an interest rate swap agreement on a notional
amount of $34 million, which is equivalent to the amount of the term loan,
to obtain a fixed rate of interest in lieu of a floating rate. The interest
rate swap agreement matures at the time the related note matures. The
Company is exposed to credit loss in the event of nonperformance by the
bank making the loan who is the other party to the agreement. However, the
Company does not anticipate nonperformance by the counterparty.
Aggregate maturities of long-term debt are as follows (in thousands):
The note and convertible debenture payable to individuals are payable to the
former owners of a business acquired by the Company in 1996. These individuals
continue as officers of a subsidiary of the business
F-11
HON INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
following the merger. The convertible debenture is convertible into shares of
common stock of Hearth Technologies Inc., a subsidiary of the Company,
representing 10% of the current issued and outstanding stock of Hearth
Technologies Inc.
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 $198,176,000 of retained earnings were
unrestricted at the end of 1996.
The fair value of the Company's outstanding long-term debt obligations at
year-end 1996 approximates the recorded aggregate amount.
Property, plant, and equipment, with net carrying values of approximately
$33,451,000 at the end of 1996, are mortgaged.
INCOME TAXES
Significant components of the provision for income taxes are as follows:
A reconciliation of the statutory federal income tax rate to the Company's
effective income tax rate is as follows:
The Company recognized one-time federal and state research and development
and new jobs tax credits totaling $2.1 million, or $0.07 per share, in 1996
related to prior tax years.
F-12
HON INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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:
SHAREHOLDERS' EQUITY AND EARNINGS PER SHARE
The Company purchased 753,800; 367,317; and 1,078,835 shares of its common
stock during 1996, 1995, and 1994, respectively.
Cash dividends declared and paid per share for each year are:
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 1996, 1995, and 1994 pursuant to a
members' stock purchase plan as follows:
F-13
HON INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company uses the par value method of accounting for common stock
repurchases. The excess of the cost of shares acquired over their par value is
allocated to Paid-In Capital to the extent appropriate, with the excess
charged to Retained Earnings.
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. An
additional 275,279 shares were available for issuance under the plan at
December 28, 1996. The effect of the application of adopting Financial
Accounting Standards Board Statement No. 123, "Accounting for Stock-Based
Compensation," was not material to the Company.
The Company has granted restricted stock awards aggregating 75,500 shares of
common stock to officers. The officers were entitled to dividends and had
voting rights on all shares awarded. Unearned compensation expense,
representing the fair market value of the shares at the date of grant, was
charged to income over the vesting period. Approximately $37,000 were charged
to income as a result of the awards for the years 1995 and 1994. All of the
awarded shares were vested as of year-end 1995.
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, the
employee's 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 $11,118,000; $10,955,000; and $10,849,000 in 1996, 1995, and 1994,
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 $146,000; $256,000; and
F-14
HON INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
$228,000 for 1996, 1995, and 1994, 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 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 distributed to the ESOP trust for allocation to participants.
Selected financial data pertaining to the ESOP is as follows:
In 1994, the Company adopted Statement of Financial Accounting Standards No.
112, "Employers' Accounting for 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.
Distribution.
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:
F-15
HON INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The discount rates at fiscal year-end 1996, 1995,estimated fees and 1994 were 7.5%, 7.75%,
and 8.0%, respectively. The pre-65 1997 gross trend rates begin at 11.0% for
the medical and prescription drug coverages and grade down to 5.0% in 2006 and
remain at this level for all future years. The post-64 gross trend rates begin
at 9.0% for the medical coverage and decrease until the maximum Company
subsidy (cap) is reached in 2003. For the prescription drug coverage, the 1997
gross trend rates begin at 11.0% and decrease until the cap is reached in
2003. If the health care cost trend rates were increased by 1.0% for each
year, the accumulated postretirement benefit obligation as of December 28,
1996, would increase by $493,520; and, the sum of the service and interest
cost components of the net periodic postretirement benefit cost for fiscal
year 1996 would increase by $45,000. The Company's postretirement health care
plans are not funded.
LEASES
The Company leases certain warehouse and plant facilities and equipment.
Commitments for minimum rentals under noncancellable leases at the end of 1996
are as follows:
Property, plant, and equipment at year-end include the following amounts for
capitalized leases:
Rent expense for the years 1996, 1995, and 1994 amounted to approximately
$6,788,000; $7,439,000; and $6,572,000, respectively. The Company has
operating leases for office and production facilities with annual rentals
totaling $578,000 with the former owners of a business acquired in 1996. These
individuals continue as officers of a subsidiary of the Company following the
merger. Contingent rent expense under both capitalized and operating leases
(generally based on mileage of transportation equipment) amounted to $353,000;
$608,000; and $525,000 for the years 1996, 1995, and 1994, respectively.
CONTINGENCIES
The Company is involved in various legal actions arising in the course of
business. Although management cannot predict the ultimate outcome of these
matters with certainty, it believes, after taking into consideration
F-16
HON INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
legal counsel's evaluation of such actions, that the outcome of these matters
will not have a material effect on the financial position or results of
operations of the Company.
The Company and certain subsidiaries are party to three environmental
actions which have arisen in the ordinary course of business. These include
possible obligations to investigate and mitigate the effects on the
environment of the disposal or release of certain chemical substances at
various sites, such as Superfund sitesexpenses, other than underwriting discounts and other operating or closed
facilities. The effect of these actions on the Company's financial positionfees and operations to date has not been significant. The Company is participating
in environmental assessments and monitoring, and liabilities have been accrued
reflecting management's best estimate of the eventual future cost of the
Company's anticipated share (based upon estimated ranges of remediation costs,
the existence of many other larger "potentially responsible parties" who are
financially viable to share in such costs, the Company's experience to date in
relation to the determination of its allocable share, the volume and type of
waste the Company is believed to have contributed to each site, and the
anticipated periods of time over which such costs may be paid) of remediation
costs. Potential insurance reimbursements are not anticipated. The Company is
also reviewing available defenses and claims it may have against third
parties. Due to such factors as the wide discretion of regulatory authorities
regarding clean-up levels and uncertain allocation of liability at multiple
party sites, estimates made prior to the approval of a formal plan of action
represent management's best judgment as to estimates of reasonably foreseeable
expenses based upon average remediation costs at comparable sites. While the
final resolution of these contingencies could result in expenses in excess of
current accruals and therefore have an impact on the Company's consolidated
financial results in a future reporting period, management believes that the
ultimate outcome will not have a material effect on the Company's financial
position or results of operations.
BUSINESS SEGMENT INFORMATION
The Company has two reportable business segments: office furniture and
hearth products. However, the manufacture and marketing of office furniture is
the Company's principal business segment.
The office furniture segment manufactures and markets a broad line of metal
and wood commercial and home office furniture which includes file cabinets,
desks, credenzas, chairs, storage cabinets, tables, bookcases, freestanding
office partitions and panel systems, and other related products. The hearth
products segment manufactures and markets a broad line of manufactured gas-
and wood-burning fireplaces and stoves, fireplace inserts, and chimney systems
principally for the home.
The Company's October 2, 1996, acquisition of Heat-N-Glo Fireplace Products,
Inc., resulted in hearth products becoming a reportable segment. Prior to this
acquisition, the Company had only one reportable segment, office furniture.
Refer to the "Business Combinations" note for additional information regarding
this acquisition.
For purposes of segment reporting, intercompany sales transfers between
segments are not material, and operating profit is income before income taxes
exclusive of certain unallocated corporate expenses. Identifiable assets by
segment are those assets applicable to the respective industry segments.
Corporate assets consist principally of cash and cash equivalents, short-term
investments, and corporate office real estate and related equipment.
F-17
HON INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Reportable segment data reconciled to the consolidated financial statements
for the years ended 1996, 1995, and 1994 is as follows:
One office furniture customer accounted for approximately 12%, 13%, and 13%
of consolidated net sales in 1996, 1995, and 1994, respectively.
F-18
HON INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SUMMARY OF UNAUDITED QUARTERLY RESULTS OF OPERATIONS
- --------
*Includes the results of operation of Heat-N-Glo Fireplace Products, Inc.,
acquired October 2, 1996.
**First quarter 1996 includes a $3,200,000 pretax gain on the sale of Ring
King Visibles, Inc., a wholly owned subsidiary (after-tax gain of
$2,000,000, or $.07 per share), and third quarter includes one-time federal
and state income tax credits of $2,100,000, or $.07 per share.
***Fourth quarter 1995 includes various pretax charges totaling $5,575,000
(after-tax effect of $3,512,000, or $.12 per share) for nonrecurring costs
primarily associated with closing several leased facilities and severance
arrangements from eliminating certain administrative positions.
F-19
HON INDUSTRIES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
See accompanying notes to condensed consolidated financial statements.
F-20
HON INDUSTRIES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
See accompanying notes to condensed consolidated financial statements.
F-21
HON INDUSTRIES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
See accompanying notes to condensed consolidated financial statements.
F-22
HON INDUSTRIES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
See accompanying notes to condensed consolidated financial statements.
F-23
HON INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 28, 1997
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 10offerings 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 six-month
period ended June 28, 1997, are not necessarily indicative of the results that
may be expected for the year ending January 3, 1998. 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 28, 1996.
NOTE B. INVENTORIES
Inventories of the Company and its subsidiaries are summarized as follows:
NOTE C. GAIN ON SALE OF SUBSIDIARY
During the first quarter of 1996, the Company sold all outstanding shares of
its subsidiary, Ring King Visibles, Inc., for a sale price of $8,000,000 in
cash and the forgiveness of intercompany receivables of approximately
$2,000,000. The sale resulted in an approximate $3,200,000 pre-tax gain.
NOTE D. NET INCOME PER COMMON SHARE
In March 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (FAS) No. 128, "Earnings per Share." The
Statement requires the current primary earnings per share calculation to be
replaced with a new basic earnings per share calculation. The Statement will
become effective for public companies for financial statements issued after
December 15, 1997, and early adoption is not permitted. Management estimates
the impact of adopting FAS 128 will have no effect on the calculation of the
Company's reported year-end 1997 earnings per share given its current capital
structure of common stock and no potentially dilutive securities.
NOTE E. BUSINESS COMBINATIONS
Assuming the acquisition of Heat-N-Glo Fireplace Products, Inc., had
occurred on December 31, 1995, the beginning of the Company's 1996 fiscal
year, instead of on October 2, 1996, when it actually occurred, the Company's
pro forma consolidated net sales for the second quarter ended June 29, 1996,
would have been approximately $242.5 million instead of the reported $219.3
million. Pro forma consolidated net sales for the six months ended June 29,
1996, would have been approximately $495.6 million instead of the reported
$452.7 million. Pro forma consolidated net income and net income per share for
the second quarter and first six months of 1996 would not have been materially
different from the reported amounts.
F-24
HON INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company acquired Allsteel Inc. on June 17, 1997. The transaction has
been accounted for under the purchase method. Accordingly, Allsteel's opening
balance has been included in the Company's consolidated balance sheet as of
June 28, 1997, and its purchase in the Consolidated Statement of Cash Flows
for the six months ended June 28, 1997. The purchase price of Allsteel was
$66.0 million which has been preliminarily allocated as follows:
Allsteel had no impact on the Company's reported consolidated statements of
income for the second fiscal quarter and six months ended June 28, 1997.
Further information regarding the transaction is set forth in the Company's
Form 8-K, filed June 30, 1997.
F-25
[Inside back cover page]
[Pictures of hearth products appear here.]
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NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFOR-
MATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPO-
RATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING COVERED
BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, THE SELLING SHARE-
HOLDER OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE COMMON STOCK IN ANY JURISDIC-
TION WHERE, OR TO ANY PERSON WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICI-
TATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS NOT BEEN
ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE
COMPANY OR THE SELLING SHAREHOLDER SINCE THE DATE HEREOF.
----------------
TABLE OF CONTENTS
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3,395,000 SHARES
HON INDUSTRIES INC.
COMMON STOCK
--------------
PROSPECTUS
--------------
MERRILL LYNCH & CO.
WILLIAM BLAIR & COMPANY
ROBERT W. BAIRD & CO.
INCORPORATED
MCDONALD & COMPANY
SECURITIES, INC.
, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[INTERNATIONAL PAGE]
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE +
+WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES +
+LAWS OF ANY SUCH JURISDICTION. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED SEPTEMBER 26, 1997
PROSPECTUS
3,395,000 SHARES
HON INDUSTRIES INC.
COMMON STOCK
-----------
Of the 3,395,000 shares of Common Stock of HON INDUSTRIES Inc., an Iowa
corporation (the "Company") offered hereby, 1,000,000 shares are being sold by
the Company and 2,395,000 shares are being sold by a certain shareholder (the
"Selling Shareholder"). The Company will not receive any of the proceeds of
shares sold by the Selling Shareholder. See "Selling Shareholder."
Of the 3,395,000 shares of Common Stock of the Company offered, 679,000
shares are being offered initially outside the United States and Canada by the
International Managers (the "International Offering") and 2,716,000 shares are
being offered in a concurrent offering inside the United States and Canada by
the U.S. Underwriters (the "U.S. Offering"), and together with the
International Offering, the "Offerings"). The price to the public and the
aggregate underwriting discount per share will be identical for both offerings.
See "Underwriting."
The Common Stock is listed on the Nasdaq National Market under the symbol
"HONI." On September 25, 1997, the last reported sale price of the Common Stock
on the Nasdaq National Market was $54 3/8 per share. See "Market Price of and
Dividends on Common Stock."
SEE "RISK FACTORS" BEGINNING ON PAGE 7 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) The Company and the Selling Shareholder have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting expenses, estimated at $500,000, which are payable by the
Company. The Selling Shareholder will not be paying any expenses of the
Offerings, other than the expenses of its counsel.
(3) The Company has granted the International Managers and the U.S.
Underwriters options, exercisable within 30 days of the date hereof, to
purchase up to an aggregate of 101,850 and 407,400, respectively,
additional shares of Common Stock on the same terms as set forth above, to
cover over-allotments, if any. If the over-allotment options are exercised
in full, the total Price to Public, Underwriting Discount, and Proceeds to
Company will be $ , $ and $ , respectively. See
"Underwriting."
-----------
The shares of Common Stock are being offered by the several Underwriters
subject to prior sale, when, as and if issued to and accepted by them and
subject to approval of certain legal matters by counsel for the Company,
counsel for the Selling Shareholder and counsel for the Underwriters and
certain other conditions. The Underwriters reserve the right to withdraw,
cancel or modify such offer and to reject orders in whole or in part. It is
expected that delivery of the Common Stock will be made against payment
therefor in New York, New York on or about , 1997.
-----------
MERRILL LYNCH INTERNATIONAL WILLIAM BLAIR & COMPANY
ROBERT W. BAIRD & CO. MCDONALD & COMPANY
INCORPORATED SECURITIES, INC.
The date of this Prospectus is , 1997.
[INTERNATIONAL PAGE]
UNITED STATES TAXATION OF FOREIGN SHAREHOLDERS
The following is a general discussion of certain United States federal
income and estate tax consequences of the ownership and disposition of Common
Stock that may be relevant to Non-United States Holders of such Common Stock.
For purposes of this discussion, a "Non-United States Holder" is any
corporation, individual, partnership, estate or trust that is, as to the
United States, a foreign corporation, a non-resident alien individual, a
foreign partnership or a foreign estate or trust as such terms are defined in
Section 7701 of the United States Internal Revenue Code of 1986, as amended
(the "Code"). In general, a "Non-United States Holder" is any holder of Common
Stock that is not (i) a citizen or resident alien individual of the United
States, (ii) a corporation, partnership or other entity created or organized
in or under the laws of the United States or any State thereof, (iii) an
estate the income of which is subject to United States federal income taxation
regardless of its source, or (iv) a trust with respect to which a court within
the United States is able to exercise primary supervision over its
administration, and one or more United States persons have the authority to
control all of its substantial decisions. Resident alien individuals will be
subject to United States federal income taxation with respect to the Common
Stock in the same manner as if they were United States citizens.
The following discussion does not deal with all aspects of United States
federal income and estate taxation and does not consider specific facts and
circumstances that may be relevant to a particular Non-United States Holder in
light of such holder's personal investment or tax position. Furthermore, the
discussion does not address tax consequences that may be relevant to certain
Non-United States Holders subject to special treatment under the United States
federal income tax laws, such as insurance companies, tax-exempt
organizations, financial institutions or broker-dealers. The discussion does
not discuss any aspects of non-United States or United States state and local
tax consequences that may be relevant to Non-United States Holders. Finally,
the discussion is based on the current provisions of the Code, the final,
temporary and proposed Treasury Regulations promulgated thereunder, and
administrative and judicial interpretations of the foregoing, all as in effect
on the date of this Prospectus and all of which are subject to change,
possibly with retroactive effect.
PROSPECTIVE NON-UNITED STATES HOLDERS ARE URGED TO CONSULT THEIR OWN TAX
ADVISORS REGARDING THE SPECIFIC UNITED STATES FEDERAL, STATE AND LOCAL AND
NON-UNITED STATES INCOME, ESTATE AND OTHER TAX CONSEQUENCES TO THEM OF THE
OWNERSHIP AND DISPOSITION OF COMMON STOCK (INCLUDING SUCH HOLDER'S STATUS AS A
NON-UNITED STATES HOLDER).
DIVIDENDS
Dividends paid by the Company to a Non-United States Holder will generally
be subject to United States federal income tax withholding at the rate of 30
percent of the gross amount of the dividends, or at such lower rate as may be
specified by an applicable United States income tax treaty. Under current
United States Treasury Regulations and published Revenue Rulings, dividends
paid to an address in a foreign country generally are presumed to be paid to a
resident of such country (unless the payor has actual knowledge to the
contrary) for purposes of both applying the withholding tax and determining
the applicability of a reduced treaty rate of withholding, if any. Under
proposed United States Treasury Regulations, however, a Non-United States
Holder who wishes to claim the benefit of an applicable reduced treaty rate of
withholding would be required to satisfy certain certification and other
requirements. A Non-United States Holder eligible for a reduced rate of United
States withholding tax pursuant to a tax treaty may obtain a refund of any
excess amounts currently withheld by filing an appropriate claim for refund
with the United States Internal Revenue Service (the "IRS"). To the extent
that a distribution with respect to the Common Stock represents a return of
basis for United States federal income tax purposes, a Non-United States
Holder may apply for a refund of any amounts currently withheld with respect
to such return of basis by filing an appropriate claim for refund with the
IRS.
Dividends received by a Non-United States Holder that are effectively
connected with the conduct by the Non-United States Holder of a trade or
business within the United States (or, if certain income tax treaties apply,
that are attributable to a permanent establishment maintained by such Non-
United States Holder in the United
2
[INTERNATIONAL PAGE]
States) are exempt from United States federal income tax withholding provided
that such Non-United States Holder files with the Company, its paying agent or
such other entity as may be required to withhold the tax, a properly completed
IRS Form 4224 (or, in the case of an applicable tax treaty, IRS Form 1001), or
such other applicable form that may in the future be required by the IRS. If
the dividends are effectively connected with such a United States trade or
business (or are attributable to such a United States permanent
establishment), the dividends will be subject to United States federal income
tax (on a net income basis) at the same graduated rates applicable to United
States persons. In the case of a Non-United States Holder that is a
corporation, such effectively connected dividends may also be subject to the
branch profits tax (which is generally imposed at a 30 percent rate (or a
lower applicable treaty rate) on repatriated effectively connected earnings
and profits).
DISPOSITION OF COMMON STOCK
A Non-United States Holder generally will not be subject to United States
federal income tax (and no tax generally will be withheld) on any gain
realized upon the sale or other disposition of Common Stock unless (i) such
gain is effectively connected with a United States trade or business of the
Non-United States Holder (or, if certain income tax treaties apply, such gain
is attributable to a permanent establishment maintained by such Non-United
States Holder in the United States), (ii) the gain is not described in clause
(i) above and the Non-United States Holder is a non-resident alien individual
who holds the Common Stock as a capital asset and who is present in the United
States for a period or periods aggregating 183 days or more during the
calendar year (or taxable year if one has been established) in which such
disposition occurs, and either (a) such individual's "tax home," within the
meaning of Section 911(d)(3) of the Code, is in the United States or (b) the
gain is attributable to an office or other fixed place of business in the
United States, (iii) the Non-United States Holder is an individual who is a
former citizen or long-term resident alien of the United States and who is
subject to tax pursuant to the provisions of the United States federal income
tax laws applicable to certain United States expatriates, or (iv) the Company
is, or has been at any time during the five-year period preceding the
disposition (or such shorter period during which such Non-United States Holder
owned such Common Stock), a "United States real property holding corporation"
for United States federal income tax purposes and, so long as the Common Stock
continues to be "regularly traded on an established securities, market" for tax
purposes, the Non-United States Holder disposing of the Common Stock directly
or indirectly owned more than five percent of the value of the Common Stock at
any time during such five-year (or shorter) period.
A corporation is generally a "United States real property holding
corporation" if the fair market value of its United States real property
interests equals or exceeds 50 percent of the sum of the fair market value of
its worldwide real property interests plus its other assets used or held for
use in a trade or business both within and without the United States. The
Company believes it is not currently, and does not expect that it will become,
a United States real property holding corporation for United States federal
income tax purposes. There can be no assurance, however, that the Company will
not become, or be determined to be, such a corporation.
Gain that is effectively connected with the conduct of a trade or business
by a Non-United States Holder within the United States (or that is
attributable to a United States permanent establishment maintained by such
Non-United States Holder in the United States) will be subject to United
States federal income tax (on a net income basis) at the same graduated rates
applicable to United States persons, but will not be subject to withholding.
In the case of a Non-United States Holder that is a corporation, such gain may
also be subject to the branch profits tax. An individual Non-United States
Holder that is described under clause (ii) above will be subject to a flat 30
percent tax on the gain derived from the sale, which gain may be offset by
certain U.S.-source capital losses (notwithstanding the fact that such
individual is not considered to be a resident of the United States for United
States federal income tax purposes).
BACKUP WITHHOLDING AND INFORMATION REPORTING
The Company must report annually to the IRS and to each Non-United States
Holder the amount of dividends paid, and the tax withheld, with respect to
shares of Common Stock held by such holder. These information reporting
requirements apply regardless of whether the withholding tax was reduced or
eliminated
3
[INTERNATIONAL PAGE]
by an applicable tax treaty. This information may also be made available
(under the provisions of an applicable income tax treaty or other agreement)
to the tax authorities of the country in which the Non-United States Holder
resides. United States federal income tax backup withholding (imposed at a
rate of 31 percent on dividends paid to certain holders who fail to provide in
the required manner certain identifying information, such as the holder's
name, address and taxpayer identification number, or under certain other
circumstances) generally does not apply to dividends that are subject to
United States federal income tax withholding at the 30 percent statutory rate
or at a reduced tax treaty rate, dividends that are effectively connected with
a United States trade or business of the Non-United States Holder, or
dividends paid to a Non-United States Holder at an address outside the United
States or otherwise to a Non-United States Holder who is an "exempt recipient"
(such as a corporation).
If a Non-United States Holder sells shares of Common Stock to or through a
United States office of a broker, the broker is required to file an
information return and is required to apply backup withholding at the rate of
31 percent unless the Non-United States Holder has provided the broker with a
certification, under penalties of perjury, as to its non-United States status
or has otherwise established its entitlement to an exemption from backup
withholding. Under existing United States Treasury Regulations, if payment of
the proceeds from the sale of Common Stock by a Non-United States Holder is
made to or through the foreign office of a broker, the broker generally will
not be required to apply backup withholding (provided, if certain proposed
Treasury Regulations are adopted, that the foreign office "effects" the sale
at that office) or, except as provided below, to file information returns. The
IRS has indicated, however, that it is studying the possible application of
backup withholding in the case of a foreign office of a broker that is (a) a
United States person, (b) a controlled foreign corporation for United States
federal income tax purposes, or (c) a foreign person 50 percent or more of
whose gross income for the three-year period ending with the close of the
taxable year preceding the year of payment (or for the part of that period
that the broker has been in existence) is effectively connected with the
conduct of a trade or business in the United States. Moreover, under the
existing Treasury Regulations, information reporting with respect to the
payment of proceeds from the disposition of Common Stock to or through the
foreign office of such a broker is required unless that broker has documentary
evidence in its files that the payee is not a United States person and certain
other conditions are met (and, if certain proposed Treasury Regulations are
adopted, the foreign office "effects" the sale at such office), or the payee
has otherwise established its entitlement to an exemption.
Backup withholding is not an additional tax. Amounts withheld under the
backup withholding rules are generally allowable as a refund or credit against
a Non-United States Holder's United States federal income tax liability, if
any, provided that the required information is furnished to the IRS.
The procedures described above for United States federal income tax
withholding on dividend payments, and some of the associated backup
withholding and information reporting rules, are currently the subject of
proposed Treasury Regulations, which were issued in 1996 and are proposed to
be effective for payments made after December 31, 1997, subject to certain
transition rules (the "1996 Proposed Regulations"). The 1996 Proposed
Regulations, if adopted in their current form, would modify the procedures for
establishing an exemption from or a reduced rate of withholding tax as
described above. Informal statements by the IRS indicate that the 1996
Proposed Regulations, when finally adopted, will be made effective for
payments made after December 31, 1998. No official announcement to this
effect, however, has been issued by the IRS. Prospective Non-United States
Holders should consult their own tax advisors concerning the potential
adoption of the 1996 Proposed Regulations and the potential effect of such
Regulations on their ownership of Common Stock.
ESTATE TAX
Common Stock owned, or treated as owned, by an individual who is neither a
citizen or a resident (as specially defined for United States federal estate
tax purposes) of the United States at the time of such individual's death will
be included in such individual's gross estate for United States federal estate
tax purposes and thus will be subject to United States federal estate tax,
subject to certain credits, at graduated rates of up to 55 percent, unless an
applicable estate tax treaty provides otherwise.
4
[INTERNATIONAL PAGE]
UNDERWRITING
Subject to the terms and conditions set forth in an international purchase
agreement (the "International Purchase Agreement") among the Company, the
Selling Shareholder and each of the underwriters named below (the
"International Managers") and concurrently with the sale of 2,716,000 shares
of Common Stock to the U.S. Underwriters (as defined below), the Company and
the Selling Shareholder have agreed to sell to the International Managers, and
each of the International Managers severally has agreed to purchase from the
Company and the Selling Shareholder the number of shares of Common Stock set
forth opposite its name below.
Merrill Lynch International ("Merrill Lynch"), William Blair & Co., L.L.C.,
Robert W. Baird & Co. Incorporated and McDonald & Company Securities, Inc. are
acting as representatives (the "International Representatives") of the
International Managers.
The Company and the Selling Shareholder have also entered into a purchase
agreement (the "U.S. Purchase Agreement" and, together with the International
Purchase Agreement, the "Purchase Agreements") with certain underwriters in
the United States and Canada (collectively, the "U.S. Underwriters," and
together with the International Managers, the "Underwriters"), for whom
Merrill Lynch, Pierce Fenner & Smith Incorporated, William Blair & Company,
L.L.C., Robert W. Baird & Co. Incorporated and McDonald & Company Securities,
Inc. are acting as representatives (the "U.S. Representatives") and, together
with the International Representatives, the "Representatives"). Subject to the
terms and conditions set forth in the U.S. Purchase Agreement, and
concurrently with the sale of 679,000 shares of Common Stock to the
International Managers pursuant to the International Purchase Agreement, the
Company and the Selling Shareholder have agreed to sell to the U.S.
Underwriters, and the U.S. Underwriters have severally agreed to purchase from
the Company and the Selling Shareholder, an aggregate of 2,716,000 shares of
Common Stock. The public offering price per share of Common Stock and the
underwriting discount per share of Common Stock are identical under the
International Purchase Agreement and the U.S. Purchase Agreement. The
respective percentages of the Common Stock to be sold by each of the Company
and the Selling Shareholder will be identical in the U.S. Offering and the
International Offering.
In the International Purchase Agreement and the U.S. Purchase Agreement, the
several International Managers and the several U.S. Underwriters,
respectively, have agreed, subject to the terms and conditions set forth
therein, to purchase all of the shares of Common Stock being sold pursuant to
each such agreement if any of the shares of Common Stock being sold pursuant
to such agreement are purchased. Under certain circumstances involving a
default by an Underwriter, the commitments of non-defaulting International
Managers
5
[INTERNATIONAL PAGE]
or U.S. Underwriters (as the case may be) may be increased or the
International Purchase Agreement or the U.S. Purchase Agreement (as the case
may be) may be terminated. The sale of Common Stock to the International
Managers is conditioned upon the sale of Common Stock to the U.S. Underwriters
and vice versa.
The International Underwriters and the U.S. Underwriters have entered into
an intersyndicate agreement (the "Intersyndicate Agreement") providing for the
coordination of their activities. The Underwriters are permitted to sell
shares of Common Stock to each other for purposes of resale at the initial
public offering price, less an amount not greater than the selling concession.
Under the terms of the Intersyndicate Agreement, the International
Underwriters and any dealer to whom they sell shares of Common Stock will not
offer to sell or sell shares of Common Stock to persons who are United States
or Canadian persons or to persons they believe intend to resell to persons who
are United States or Canadian persons, and the U.S. Underwriters and any
dealer to whom they sell shares of Common Stock will not offer to sell or sell
shares of Common Stock to non-United States persons or to non-Canadian persons
or to persons they believe intend to resell to non-United States persons or
non-Canadian persons, except in the case of transactions pursuant to the
Intersyndicate Agreement.
The International Representatives have advised the Company and the Selling
Shareholder that the International Managers propose initially to offer the
shares of Common Stock to the public at the public offering price set forth on
the cover page of this Prospectus, and to certain selected dealers at such
price less a concession not in excess of $ . per share. The International
Managers may allow, and such dealers may reallow, a discount not in excess of
$ . per share on sales to certain other dealers. After the initial public
offering, the public offering price, concession and discount and may be
changed.
Each International Manager has agreed that (i) it has not offered or sold,
and will not for a period of six months following consummation of the
Offerings offer or sell, in the United Kingdom by means of any document, any
shares of Common Stock offered hereby, other than to persons whose ordinary
activities involve them in acquiring, holding, managing or disposing of
investments (as principal or agent) for the purposes of their businesses or
otherwise in circumstances that do not constitute an offer to the public
within the meaning of the Public Offers to Securities Regulations of 1995;
(ii) it has complied with and will comply with all applicable provisions of
the Financial Services Act of 1986 with respect to anything done by it in
relation to the Common Stock in, from or otherwise involving the United
Kingdom and (iii) it has only issued or passed on and will only issue or pass
on to any person in the United Kingdom any document received by it in
connection with the issue of the Common Stock if that person is of a kind
described in Article 11(3) of the Financial Services Act of 1986 (Investment
Advertisements) (Exemptions) Order 1996, as amended, or is a person to whom
the document may otherwise lawfully be issued or passed on.
The Company has granted to the International Managers an option, exercisable
within 30 days after the date of this Prospectus, to purchase up to an
aggregate of 101,850 additional shares of Common Stock at the public offering
price set forth on the cover page of this Prospectus, less the underwriting
discount. The International Managers may exercise this option only to cover
over-allotments, if any, made on the sale of Common Stock offered hereby. To
the extent that the International Managers exercise this option, each
International Manager will be obligated, subject to certain conditions, to
purchase a number of additional shares of Common Stock proportionate to such
International Manager's initial amount reflected in the foregoing table. If
purchased, the Underwriters will offer such additional shares on the same
terms as those on which the 3,395,000 shares are being offered.
Purchasers of the shares of Common Stock offered hereby may be required to
pay stamp taxes and other charges in accordance with the laws and practices of
the country of purchase, in addition to the offering price set forth on the
cover page hereof.
The Company has, subject to certain exceptions, agreed not to, directly or
indirectly, offer, pledge, sell, contract to sell or otherwise transfer or
dispose of any shares of Common Stock or any securities convertible into or
exchangeable or exercisable for Common Stock without the prior written consent
of Merrill Lynch for a period of 90 days from the date of this Prospectus,
except that the Company may, without such consent, issue
6
[INTERNATIONAL PAGE]
shares of Common Stock upon the exercise or conversion of any outstanding
options, rights, warrants or other convertible securities, or issue shares of
Common Stock or grant options to purchase shares of Common Stock pursuant to
the Company's employee benefit plans, director stock plan or dividend
reinvestment plan. In addition, the Company's executive officers and directors
have agreed not to effect any sales of Common Stock in open market
transactions without the prior written consent of Merrill Lynch for a period
of 90 days from the date of this Prospectus.
In connection with this Offering, the Underwriters or their respective
affiliates and selling group members (if any) who are qualified market makers
on Nasdaq may engage in "passive market making" in the Common Stock on the
Nasdaq National Market in accordance with Rule 103 of Regulation M under the
Exchange Act. Rule 103 permits, upon the satisfaction of certain conditions,
underwriters and selling group members participating in a distribution that
are also Nasdaq market makers in the security being distributed (or a related
security) to engage in limited market making transactions during the period
when Regulation M under the Exchange Act would otherwise prohibit such
activity. Rule 103 prohibits underwriters and selling group members engaged in
passive market making generally from entering a bid or affecting a purchase at
a price that exceeds the highest bid for those securities displayed on the
Nasdaq National Market by a market maker that is not participating in the
distribution. Under Rule 103, each underwriter or selling group member engaged
in passive market making is subject to a daily net purchase limitation equal
to 30% of such entity's average daily trading volume during the two full
consecutive calendar months immediately preceding the date of the filing of
the registration statement under the Securities Act of 1933, as amended (the
"Securities Act") pertaining to the security to be distributed (or such
related security).
In the International Purchase Agreement and the U.S. Purchase Agreement, the
several International Managers and the several U.S. Underwriters,
respectively, have agreed, subject to the terms and conditions set forth
therein, to purchase all of the shares of Common Stock being sold pursuant to
each such agreement if any of the shares of Common Stock being sold pursuant
to such agreement are purchased. Under certain circumstances involving a
default by an Underwriter, the commitments of non-defaulting International
Underwriters or U.S. Underwriters (as the case may be) may be increased or the
International Purchase Agreement or the U.S. Purchase Agreement (as the case
may be) may be terminated. The sale of Common Stock to the International
Managers is conditioned upon the sale of Common Stock to the U.S. Underwriters
and vice versa.
Until the distribution of the Common Stock is completed, rules of the
Securities and Exchange Commission may limit the ability of the Underwriters
and certain selling group members to bid for and purchase Common Stock. As the
exception to these rules, the Representatives are permitted to engage in
certain transactions that stabilize the price of the Common Stock. Such
transactions consist of bids or purchases for the purpose of pegging, fixing
or maintaining the price of the Common Stock.
If the Underwriters create a short position in the Common Stock in
connection with the offering, i.e., if they sell more shares of Common Stock
than are set forth on the cover page of this Prospectus, the Representatives
may reduce that short position by purchasing Common Stock in the open market.
The Representatives may also elect to reduce any short position by exercising
all or part of the over-allotment option described above.
The Representatives may also impose a penalty bid on certain Underwriters
and selling group members. This means that if the Representatives purchase
shares of Common Stock in the open market to reduce the Underwriters' short
position or to stabilize the price of the Common Stock, they may reclaim the
amount of the selling concession from the Underwriters and selling group
members who sold those shares as part of the offering.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher
than it might be in the absence of such purchases. The imposition of a penalty
bid might also have an effect on the price of a security to the extent that it
were to discourage resales of the security.
The Company and the Selling Shareholder have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended, or to contribute to payments initially the
Underwriters may be required to make in respect thereof.
7
[INTERNATIONAL PAGE]
Neither the Company nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Common Stock. In addition, neither
the Company nor any of the Underwriters makes any representation that the
Representatives will engage in such transactions or that such transactions,
once commenced, will not be discontinued without notice.
Edgar D. Jannotta, a director of the Selling Shareholder, is Senior Director
of William Blair & Company, L.L.C.
8
[INTERNATIONAL PAGE]
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NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING
COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY, THE SELLING SHAREHOLDER OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE COMMON
STOCK IN ANY JURISDICTION WHERE, OR TO ANY PERSON WHOM, IT IS UNLAWFUL TO MAKE
SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN
THE AFFAIRS OF THE COMPANY OR THE SELLING SHAREHOLDER SINCE THE DATE HEREOF.
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TABLE OF CONTENTS
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3,395,000 SHARES
HON INDUSTRIES INC.
COMMON STOCK
---------------
PROSPECTUS
---------------
MERRILL LYNCH INTERNATIONAL
WILLIAM BLAIR & COMPANY
ROBERT W. BAIRD & CO.
INCORPORATED
MCDONALD & COMPANY
SECURITIES, INC.
, 1997
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following expenses incurred in connection with the issuance and distribution of the securities being registered, other thanregistered. All of the amounts shown are estimates, except for the SEC registration listing and filing fees, are estimated.
fee:
| Description | Amount to be Paid ($) | |||
| SEC Registration Fee | $ | 9,825 | ||
| Accountants' Fees and | $ | 15,000 | ||
| Legal Fees and | $ | 30,000 | ||
| Printing and Engraving Expenses | $ | 25,000 | ||
| Transfer Agent Fees | * | |||
| Trustee Fees and | * | |||
| Miscellaneous Fees | $ | 10,000 | ||
| Total | $ | 89,825 | ||
*Not currently determinable--such fees will not be filed by amendment.
**Estimated.
The Company will pay for alldeterminable until such time as HNI Corporation (the "Corporation") approves the above-listed feesissuance of securities and expensesdetermines the type and amount of the
offering, except that the Selling Shareholder will pay all legal feessecurities to be issued.
Item 15. Indemnification of its
attorneys.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Directors and Officers.
HNI Corporation
As permitted by the Iowa Business Corporation Act ("IBCA"(the "IBCA"), the Company's Articles of Incorporation of HNI Corporation (the "Articles"" HNI Articles") provide that no director shall be personally liable to the CompanyCorporation or any shareholder for monetarymoney damages for breach of fiduciary duty as a director,any action, or failure to take action, except for: (i) the amount of financial benefit received by a breach of the
director's duty of loyaltydirector to the Company or its shareholders, (ii) acts or
omissions not in good faith or which involve intentional misconduct or knowing
violation of the law, (iii) a transaction from which the director derivedis not entitled; (ii) an improper personal benefit,intentional infliction of harm on the Corporation or its shareholders; (iii) a violation of Section 490.833 of the IBCA; or (iv) an improper act related to the payment of
dividends or approval of a stock purchase inintentional violation of Section 833 ofcriminal law. While the IBCA. While theHNI Articles provide protection from awards for monetary damages for breaches of the duty of care, it doesthey do not eliminate the director's duty of care. Accordingly, the HNI Articles will not effectaffect the availability of equitable remedies, such as an injunction, based on a director's breach of the duty of care.
In addition, the Company's By-LawsBy-laws of HNI Corporation (the " HNI By-laws") provide that: (i) an officer of the Corporation will not be liable as an officer to the Corporation or its shareholders for any decision to take or not to take action, or any failure to take any action, if the duties of the officer are performed in compliance with the standards of conduct for officers prescribed in the IBCA; and (ii) that the Corporation may indemnify a director or officer of the Corporation who is a party to a proceeding against liability incurred by such director or officer in the proceeding to the maximum extent permitted by and in the manner prescribed by the IBCA, including the advancement of expenses.
The HNI By-laws further provide that the Corporation may enter into indemnification agreements consistent with the IBCA with each director of the Corporation and with such officers of the Corporation as the Board of Directors of the Corporation deems appropriate. The Corporation has entered into agreements with its directors and with certain officers agreeing to indemnify them against certain liabilities to the fullest extent permitted under Iowa law, the HNI Articles and the HNI By-laws. The Corporation also has director and officer liability insurance in the amount of $70,000,000, under which each director and each of certain officers of the Corporation is insured against certain liabilities.
Illinois Corporate Guarantor
As permitted by the Illinois Business Corporation Act (the "Illinois Act"), the Articles of Incorporation of Allsteel Inc. (the "Allsteel Articles"), an Illinois corporation ("Allsteel"), provide that no director shall be personally liable to Allsteel or any shareholder except for: (i) any breach of the director’s duty of loyalty to Allsteel or its
shareholders; (ii) acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law; (iii) any transaction from which the director derived an improper personal benefit; or (iv) acts prohibited by Section 8.65 of the Illinois Act. In addition, the By-laws of Allsteel Inc. (the "Allsteel By-laws") provide that the liability of directors shall be limited or removed to the maximum extent allowed or provided either by the Allsteel Articles or by applicable law.
In accordance with the Illinois Act, the Allsteel By-laws provide that no officer shall be personally liable to Allsteel or any shareholder except for: (i) any breach of the officer’s duty of loyalty to Allsteel or its shareholders; (ii) acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law; or (iii) any transaction from which the officer derived an improper personal benefit.
The Illinois Act permits Allsteel to indemnify its directors and officers against certain litigation and settlement expenses, and the Allsteel Articles provide that the Allsteel By-laws may contain provisions for indemnification and advancement of expenses for directors and officers. The Allsteel By-laws provide for indemnification of directors and officers by any of the following methods: (i) in the manner and to the extent provided by the Illinois Act; (ii) upon a determination of the Allsteel Board of Directors (the "Allsteel Board") that the director or officer acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of Allsteel; (iii) in accordance with any agreement authorized by the Allsteel Board before commencement of the action; (iv) if and to the extent authorized by the shareholders; and (v) in any other manner not prohibited by Illinois law; provided however that Allsteel’s directors and officers may not be indemnified against: (a) a breach of the duty of loyalty to Allsteel; (b) acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of the law; (c) a transaction from which the officer or director derives an improper personal benefit; or (d) acts prohibited under Section 8.65 of the Illinois Act.
Iowa Corporate Guarantors
The articles of incorporation and by-laws of each of Hearth & Home Technologies Inc., Maxon Furniture Inc., Paoli Inc. and The HON Company, may indemnify anyall Iowa corporations, contain provisions limiting the liability and providing for the indemnification of directors and officers virtually identical to the director and officer limitation of liability and indemnification provisions contained in the HNI Articles and the HNI By-laws discussed above.
North Carolina Limited Liability Company Guarantor
As permitted by the North Carolina Limited Liability Company Act (the "North Carolina Act"), the Articles of Organization of Hickory Business Furniture, LLC (the "HBF Articles"), a North Carolina limited liability company ("HBF"), provide that no person who wasis serving or who has served as a manager of HBF shall be personally liable to HBF or any of its members for monetary damages for breach of duty as a manager, except for liability with respect to: (i) acts or omissions that the manager at the time of such breach knew were clearly in conflict with the best interests of HBF; (ii) any transaction from which the manager derived an improper personal benefit; (iii) acts or omissions occurring prior to the effective date of the HBF Articles; or (iv) acts or omissions with respect to which the North Carolina Act does not permit the limitation of liability.
In accordance with the North Carolina Act, the Amended and Restated Operating Agreement of Hickory Business Furniture, LLC provides that HBF shall indemnify Allsteel, its sole member, or its authorized delegatee(s) in connection with their services as a manager or officer of HBF to the fullest extent permitted or required by the North Carolina Act, and HBF may advance expenses incurred by such person upon the approval of Allsteel.
In addition, per the terms of the North Carolina Act: (i) a person who is a partymember, manager, director, executive or any combination thereof of HBF is threatened to be made a party to any
threatened, pending, or completed action, suit, or proceeding (whether civil,
criminal, administrative, or investigative including, without limitation, an
action or suit by or innot liable for the rightobligations of the Company (collectively, "Action"))HBF solely by reason of being a member, manager, director or executive and does not become so by participating, in whatever capacity, in the fact that hemanagement or shecontrol of HBF; (ii) a member of HBF is not a proper party to proceedings by or against HBF; (iii) HBF must indemnify every manager, director and executive in respect of payments made and personal liabilities reasonably incurred by the manager, director or executive in the authorized conduct of HBF’s business or for the preservation of HBF’s business or property; and (iv) HBF shall indemnify a member, manager, director or executive who is wholly successful, on the merits or otherwise, in the defense of any proceeding to which the person was a party because the person is or was a member, manager, director officer, employee,
member, if any, volunteer, or agentexecutive of HBF against reasonable expenses incurred by the Company, or is or was serving at the
request of the Company as a director, officer, partner, trustee, employee,
member, if any, volunteer, or agent of another foreign or domestic corporation,
partnership, joint venture, trust, other enterprise, or employee benefit plan
(each a "Qualified Person"). The indemnification, which may be made in any
manner not prohibited by Iowa law, may be against expenses (including
attorneys' fees), judgments, fines and amounts paid or incurred in settlement
which the Qualified Person actually and reasonably incurredperson in connection with the Action. Indemnificationproceeding.
Iowa Limited Liability Company Guarantor
As permitted by the Iowa Limited Liability Company Act (the "ILLCA"), the Articles of Organization of The Gunlocke Company L.L.C. (the "Gunlocke Articles"), an Iowa limited liability company ("Gunlocke"), provide that managers of Gunlocke shall not be provided in any caseliable to Gunlocke or its members for (i) amonetary damages for breach of fiduciary duty as a person'smanager, except for liability with respect to: (i) breach of the manager’s duty of loyalty to the Company,Gunlocke or its members; (ii) acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of the
law,law; and (iii) a transactiontransactions from which the personmanager derives an improper personal benefit or (iv) proceedings by ora wrongful distribution in the rightviolation of Section 490A.807 of the ILLCA. The ILLCA also prevents Gunlocke from limiting the liability of its managers to Gunlocke or its members for acts or omissions occurring prior to the effective date of the Gunlocke Articles.
In addition, the Operating Agreement of The Gunlocke Company unless permitted
by the IBCA. The By-Laws also provide that a Qualified PersonL.L.C. (the "Gunlocke Operating Agreement") provides that: (i) neither any manager nor any of his or her affiliates shall be indemnified against actually and reasonably incurred expensesliable to Gunlocke or any member for any act or omission based upon errors of judgment or other fault in connection with any Action to the extentbusiness or affairs of Gunlocke if the manager, or such Qualified Person has been successful on the
merits or otherwise in defenseaffiliate, determined that such course of such Action orconduct was in the defensebest interest of any claim,
issue or matter therein.
II-1
The Company has directorGunlocke; and officer liability insurance in the amount of
$20,000,000, under which each director and each of certain officers of the
Company is insured against certain liabilities. The Company and its directors
and executive officers are also parties to Indemnification Agreements that
entitle such director or officer to indemnification(ii) to the fullest extent permitted by applicable law, the manager shall be indemnified and held harmless by Gunlocke from and against any and all expenseslosses, claims, damages, settlements and liabilities with respect
toother amounts arising from any and all proceedings relating toclaims in which he or arising outshe may be involved, as a party or otherwise, by reason of his or her management of the indemnitee's beingaffairs of Gunlocke; provided that no manager shall be entitled to indemnification if a court of competent jurisdiction shall have determined that such losses, claims, damages, liabilities, expenses or having been a directorsuch other amounts resulted primarily from the gross negligence or officerwillful misconduct of such manager.
Per the terms of the Company.
ITEMILLCA: (i) no member or manager of Gunlocke is personally liable for the acts or debts of Gunlocke; (ii) a member of Gunlocke is not a proper party to proceedings by or against Gunlocke; (iii) a member or manager of Gunlocke is not personally liable solely by reason of being a member or manager of Gunlocke under any judgment, or in any other manner, for any debt, obligation or liability of Gunlocke, whether that liability or obligation arises in contract, tort or otherwise; and (iv) a manager is not liable for any action taken as a manager or any failure to take any action, if the manager performed the duties of the manager's office in compliance with Section 490A.706 of the ILLCA, or if, and to the extent that, liability for any such action or failure to act has been limited by the articles of organization pursuant to Section 490A.707 of the ILLCA.
Item 16. EXHIBITS
Exhibits.
| Exhibit | Description |
| 1.1* | Form of |
| 4.1 | Articles of Incorporation of HNI Corporation, as amended, incorporated by reference to Exhibit |
| 4.2 | By-laws of HNI Corporation, as amended, incorporated by reference to Exhibit |
| 4.3* | Form of Common Stock Certificate |
| 4.4* | Specimen Certificate of Preferred Stock |
| 4.5* | Form of Warrant Agreement |
| 4.6* | Form of |
| 4.7 * | Form of |
| 4.8* | Form of Deposit Agreement for Depositary Shares |
| 4.9* | Form of Purchase Contract |
| 4.10* | Form of Unit Agreement and Unit Certificate |
| 4.11* | Form of Senior Debt Security |
| 4.12* | Form of Senior Subordinated Debt Security |
| 4.13* | Form of Subordinated Debt Security |
| 4.14* | Form of Guarantee for Senior Debt Securities |
| 4.15* | Form of Guarantee for Senior Subordinated Debt Securities |
| 4.16* | Form of Guarantee for Subordinated Debt Securities |
| Exhibit | Description |
| 5.1 | Opinion of counsel regarding legality of shares |
| 12.1* | Statement of Computation of Ratio of Earnings to Fixed Charges |
| 23.1 | Consent of counsel (included in Exhibit |
| 23.2 | Consent of PricewaterhouseCoopers LLP |
| 24.1 | Power of attorney |
| 25.1* | Statement of Eligibility on Form |
* To be filed | |
Item 17. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in the volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;
Provided, however, that paragraphs (a)(1)(i), (a)(1)(ii) and (a)(1)(iii) of this section do not apply if the registration statement is on Form S-3 or Form F-3 and the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the Commission by the registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement, or is contained in a form of prospectus filed pursuant to Rule 424(b) that is part of the registration statement.
(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
(4) That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser:
(i) If the registrant is relying on Rule 430B:
(A) Each prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and
(B) Each prospectus required to Exhibit 1 to Amendment No. 1 to Registration Statement on
Form 8 filed May 29, 1990.
5.1 Form of opinion of Stanley, Lande & Hunter, P.C., as to the validity
of securities registered hereunder.
23.1 Consent of Stanley, Lande & Hunter, P.C. (set forth in their opinion
filed as Exhibit 5.1 to this Registration Statement).
23.2 Consent of Arthur Andersen LLP.
23.3 Consent of Ernst & Young LLP.
24.1 Powers of Attorney (set forth on the signature page of this
Registration Statement).
- --------
*To be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) for the purpose of providing the information required by amendment.
Long-term debtSection 10(a) of the
Securities Act of 1933 shall be deemed to be part of and included in the registration statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities in the registration statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date.
(5) That, for the purpose of determining liability of the registrant or variousunder the Securities Act of its subsidiaries is outstanding
under numerous instruments. No such instrument authorizes an amount1933 to any purchaser in the initial distribution of the securities:
The undersigned registrant undertakes that in a primary offering of securities thereunder in excess of 10% of the total assetsundersigned registrant pursuant to this registration statement, regardless of registrant and
its subsidiaries on a consolidated basis. The registrant agrees that it will
furnish a copythe underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any such instrumentof the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
(i) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;
(ii) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
(iii) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
(iv) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
(b) The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and Exchange
Commission upon its request.
ITEM 17. UNDERTAKINGS
(a)the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
(b)
(d) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the
II-2
Securities Exchange Act (and, where applicable, each filing of an employee
benefit plan's annual report pursuant to Section 15(d) of the Securities
Exchange Act of 1934) that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(c) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registrantregistration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registrantregistration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
II-3
(e) The undersigned registrant hereby undertakes to file an application for the purpose of determining the eligibility of the trustee to act under subsection (a) of Section 310 of the Trust Indenture Act of 1939 in accordance with the rules and regulations prescribed by the Commission under Section 305(b)(2) of the Act.
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF
Pursuant to the requirements of the Securities Act of 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORMthe registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF MUSCATINE, STATE OF IOWA, ON SEPTEMBER 26, 1997.and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Muscatine, State of Iowa, on April 28, 2009.
| HNI Corporation | |||
| By: | /s/ Steven M. Bradford | ||
| Steven M. Bradford | |||
| Vice President, General Counsel and Secretary | |||
The following direct and indirect subsidiaries of the registrant may guarantee the debt securities and are co-registrants under this registration statement.
Name of Co-Registrant
Allsteel Inc.
Hearth & Home Technologies Inc.
Hickory Business Furniture, LLC (1)
Maxon Furniture Inc.
Paoli Inc.
The Gunlocke Company L.L.C. (1)
The HON INDUSTRIESCompany
| as Co-Registrants | |||
| By: | /s/ Steven M. Bradford | ||
| Steven M. Bradford | |||
| Vice President and Secretary of each Co-Registrant that is a corporation and Vice President and Secretary of the sole member of each Co-Registrant that is a limited liability company | |||
(1) Executed by Allsteel Inc.
(Registrant)
/s/ Jack D. Michaels
By:__________________________________
Jack D. Michaels
Chairman, President, as sole member.
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and Chief
Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED. EACH DIRECTOR WHOSE SIGNATURE APPEARS
BELOW HEREBY APPOINTS JAMES I. JOHNSON, MELVIN L. MCMAINS AND DAVID C. STUEBE,
AND EACH OF THEM, AS ATTORNEYS-IN-FACT FOR EACH OF THEM (WITH FULL POWER OF
SUBSTITUTION AND RESUBSTITUTION), FOR AND IN THE NAME, PLACE AND STEAD OF SUCH
DIRECTOR, TO SIGN AND FILE WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER
THE SECURITIES ACT OF 1933, ANY AND ALL AMENDMENTS, SUPPLEMENTS AND EXHIBITS
TO THIS REGISTRATION STATEMENT, INCLUDING POST-EFFECTIVE AMENDMENTS, HEREBY
GRANTING UNTO SAID ATTORNEYS-IN-FACT, AND EACH OF THEM, FULL POWER AND
AUTHORITY TO DO AND PERFORM EACH AND EVERY ACT AND THING NECESSARY,
APPROPRIATE OR DESIRABLE TO BE DONE IN ORDER TO EFFECTUATE THE SAME AS FULLY
AND TO ALL INTENTS AND PURPOSES AS EACH OF THE UNDERSIGNED MIGHT OR COULD DO
IF PERSONALLY PRESENT, HEREBY RATIFYING AND CONFIRMING ALL THAT SAID
ATTORNEYS-IN-FACT AND AGENTS, OR ANY OF THEM, OR ANY OF THEIR SUBSTITUTES, MAY
DO OR CAUSE TO BE DONE BY VIRTUE HEREOF.on the date indicated.
Signature | Title | Date |
/s/ Stan A. Askren Stan A. Askren | Chairman, President and | April 28, 2009 |
/s/ Kurt A. Tjaden Kurt A. Tjaden | Vice President and Chief | April 28, 2009 |
* Mary H. Bell | Director | April 28, 2009 |
* Miguel M. Calado | Director | April 28, 2009 |
* Gary M. Christensen | Director | April 28, 2009 |
* Cheryl A. Francis | Director | April 28, 2009 |
* John A. Halbrook | Director | April 28, 2009 |
* James R. Jenkins | Director | April 28, 2009 |
* Dennis J. Martin | Director | April 28, 2009 |
* Larry B. Porcellato | Director | April 28, 2009 |
* Joseph E. Scalzo | Director | April 28, 2009 |
* Abbie J. Smith | Director | April 28, 2009 |
* Brian E. Stern | Lead Director | April 28, 2009 |
* Ronald V. Waters, III | Director | April 28, 2009 |
* Steven M. Bradford, the undersigned attorney-in-fact, by signing his name hereto, does hereby sign and execute this registration statement on behalf of the above indicated directors of the registrant (constituting all of the directors) pursuant to a Power of Attorney filed with this registration statement as Exhibit 24.1.
| HNI Corporation | |||
| April 28, 2009 | By: | /s/ Steven M. Bradford | |
| Steven M. Bradford | |||
| Vice President, General Counsel and Secretary | |||
ON BEHALF OF THE FOLLOWING INCORPORATED CO-REGISTRANTS:
Name of Co-Registrant:
Allsteel Inc.
Hearth & Home Technologies Inc.
Maxon Furniture Inc.
Paoli Inc.
The HON Company
Signature | Title | Date |
/s/ Stan A. Askren Stan A. Askren | Chairman and Director | April 28, 2009 |
/s/ Marshall H. Bridges Marshall H. Bridges | Treasurer (principal financial officer and principal accounting officer) | April 28, 2009 |
ON BEHALF OF THE FOLLOWING LIMITED LIABILITY COMPANY CO-REGISTRANTS:
| Name of Co-Registrant | Executed by Sole Member of Co-Registrant |
| Hickory Business Furniture, LLC | Allsteel Inc. |
| The Gunlocke Company L.L.C. | Allsteel Inc. |
Signature | Title | Date |
/s/ Stan A. Askren Stan A. Askren | Chairman and Director |
| April 28, 2009 | ||
/s/ Marshall H. Marshall H. | Treasurer (principal financial officer and principal accounting officer) | April 28, 2009 |
EXHIBIT INDEX
| Exhibit | Description |
| 1.1* | Form of Underwriting Agreement |
| 4.1 | Articles of Incorporation of HNI Corporation, as amended, incorporated by reference to Exhibit 3(i) to the Corporation's Current Report on From 8-K filed with the SEC on May 8, 2007 |
| 4.2 | By-laws of HNI Corporation, as amended, incorporated by reference to Exhibit 3(ii) to the Corporation's Current Report on Form 8-K filed with the SEC on November 12, 2008 |
| 4.3* | Form of Common Stock Certificate |
| 4.4* | Specimen Certificate of Preferred Stock |
| 4.5* | Form of Warrant Agreement and Certificate |
| 4.6* | Form of Indenture relating to Senior, Senior Subordinated and Subordinated Debt Securities |
| 4.7 * | Form of Depositary Receipt for Depositary Shares |
| 4.8* | Form of Deposit Agreement for Depositary Shares |
| 4.9* | Form of Purchase Contract |
| 4.10* | Form of Unit Agreement and Unit Certificate |
| 4.11* | Form of Senior Debt Security |
| 4.12* | Form of Senior Subordinated Debt Security |
| 4.13* | Form of Subordinated Debt Security |
| 4.14* | Form of Guarantee for Senior Debt Securities |
| 4.15* | Form of Guarantee for Senior Subordinated Debt Securities |
| 4.16* | Form of Guarantee for Subordinated Debt Securities |
| 5.1 | Opinion of counsel regarding legality of shares |
| 12.1* | Statement of Computation of Ratio of Earnings to Fixed Charges |
| 23.1 | Consent of counsel (included in Exhibit 5.1 hereto) |
| 23.2 | Consent of PricewaterhouseCoopers LLP |
| 24.1 | Power of attorney |
| 25.1* | Statement of Eligibility on Form T-1 under the Trust Indenture Act of 1939 of the Trustee under the Indenture |
* To be filed by amendment to this registration statement or by a report filed under the Securities Exchange Act of 1934, as amended, and incorporated herein by reference. | |