HON Industries Inc.

views updated

HON Industries Inc.

414 East Third Street
Muscatine, Iowa 52761-7109
U.S.A.
(319) 264-7400
Fax: (319) 264-7217

Public Company
Incorporated: 1944 as Home-O-Nize Co.
Employees: 6,250
Sales: $846 million
Stock Exchanges: NASDAQ
SICs: 2521 Wood Office Furniture; 2522 Office Furniture Except Wood; 3272 Concrete Products, Not Elsewhere Classified; 3433 Heating Equipment Except Electric

HON INDUSTRIES Inc. is one of America’s leading manufacturers and marketers of business furniture, work space accessories, and fireplaces. From small beginnings, the company developed into a thriving business with offices, showrooms, and distribution and manufacturing centers nationwide and annual sales reaching toward the billion dollar mark.

HON was conceived in a backyard in Iowa on a Sunday afternoon in 1943 by C. Maxwell Stanley and Clement T. Hanson. The two long-time friends were discussing the war, politics, and business, when Stanley proposed that he and Hanson start a manufacturing business after the war, one in which they could put into practice their common beliefs. Specifically, Stanley and Hanson agreed that good personal relations between management and workers were crucial to a company’s success, but that American business, focusing only on making a profit, had ceased to treat employees with fairness and respect. Moreover, they believed that when the war was over, the United States would see large unemployment figures. Their idea, therefore, was to build a successful company that would not only provide work for returning veterans, but would distinguish itself for its enlightened employee-management relations. Hanson thought it was a good idea and suggested inviting a mutual friend, H. Wood Miller, to join the business venture. Combined, the three had a variety of different attributes and experience to bring to their new business.

Stanley had earned a bachelor’s degree in general engineering and a master’s degree in hydraulic engineering, both from the University of Iowa, and had worked several years for engineering firms in Chicago and in Dubuque before arriving in Muscatine, Iowa, in 1932 at the depth of the Great Depression. There, he became a partner in a small engineering firm and built the business, which eventually became Stanley Consultants, Inc. A leader in the profession, Stanley authored The Consulting Engineer, a definitive text on private consulting.

Clement T. Hanson was a graduate of the College of Commerce at the University of Iowa. He had worked as advertising executive for a firm in Iowa and as head of sales at a company in Illinois, developing along the way a keen interest and expertise in the areas of communications, public relations, and marketing. H. Wood Miller had spent several years studying design at the Art Institute of Chicago, eventually establishing his own design firm, the H. Wood Miller Company, which served several industrial clients.

Welcoming the challenge of creating and managing a new business, the three men began making plans. They were very confident in their abilities and eager to use them in a new venture. But as Max Stanley stated in The HON Story, “Our confident enthusiasm was matched only by our considerable naiveté. Little did we understand the difficult problems and obstacles that new enterprises usually encounter. But this was as it should be. Had we foreseen the hurdles, we might never have ventured.”

Predicting the huge postwar construction boom, Stanley, Hanson, and Miller decided to target the home market, and, from there, narrowed down their ideas to focus on products for the kitchen. They eventually decided to enter the home appliance field with the manufacture of home freezers, followed by steel kitchen cabinets.

While considering what their company should be called, Hanson proposed Home-O-Nize. His colleagues liked the sound of it; the first syllable suggested the ultimate destination of their products, while the third syllable would be useful in creating future advertising slogans, such as “Economize with Home-O-Nize” or “Modernize with Home-O-Nize.” Since Hanson, Miller, and Stanley had no actual production experience, they brought in Albert F. Uchtorff, president and owner of a sheet metal products manufacturing company, who offered his facilities for manufacture of the company’s first product. On January 6, 1944, the four signed the Articles of Incorporation for the Home-O-Nize Company; offices were set up in Davenport, Iowa, and each of the four directors contributed $1,000 for ten shares of stock to the start-up project.

That year, product development began. Miller made sketches for a deep freeze unit, as well as for some unique kitchen cabinets that could be quickly erected in a variety of configurations to custom fit a kitchen. He and Miller began setting up a prototype shop, while Stanley began working with compressors. The company hired its first employee, who worked with the sheet metal on a part-time basis. Soon, the men opted to focus solely on realizing Miller’s kitchen cabinet idea, rather than on freezer production.

Before actually introducing a product, however, the company met with adversity. Several disagreements between Uchtorff and the three company founders, over the direction and scope of Home-O-Nize, eventually prompted Uchtorff to sell his stock and resign from the fledgling board of directors. Uchtorff left what would become a successful project, and the company was left without a manufacturing plan and facilities.

Nevertheless, the three persevered, deciding that they would eventually establish their own manufacturing plant. First, however, they went ahead with their official presentation of the kitchen cabinet prototype, and distributors reacted with enthusiasm. Financing during this time was obtained through a $100,000 loan from a federal agency as well as a successful stock sale; by the spring of 1947, 988 shares of Home-O-Nize had been sold to investors, and the three founders increased their shares as well.

After finding a suitable plant location in Muscatine, Iowa, hiring workers, investing in the necessary machinery, and securing a contract from Stampings Inc., the Home-O-Nize company manufactured its first product in April 1947; ironically, it was neither a freezer nor a kitchen cabinet that first left the plant, but instead an aluminum hood used in installing commercial gas at farms, residences, and businesses. A steel shortage in 1947 and 1948 prevented the company from ever realizing its original plans; as the founders waited out the shortage, they took on contract work that would eventually lead them into the office supply business.

The cutting of aluminum hoods for Stampings left a considerable amount of metal scraps, and the company soon found a use for them: the company began making anodized aluminum coasters for beverage glasses. Stamping the coasters with a company logo or a sailboat motif, Home-O-Nize marketed the coasters to businesses, which used them as gifts. They also began manufacturing aluminum ground markers to identify garden plants and recipe file boxes.

The development and sale of such 3" × 5" and 4" × 6" file boxes changed the direction of the company. Disappointed with its continuing inability to purchase steel for kitchen cabinets, and pleased with the market reception of the card file boxes, the company decided to direct its focus on office products. Green card files were produced for office use, red and white recipe files were made for the home, and red and black versions were sold to the Sunbeam Company in large quantities for use as premiums. Sales from the products made from scrap in 1947 amounted to almost $20,000.

During this time the group also developed programs and policies to support their continued belief that a company’s success was based on good employee relations. While developing an employee manual, Hanson suggested that they refer to all employees as “members,” a word that suggested, according to Stanley, “a greater sense of belonging and participation.” Also, at the onset, the company established an automatic cost-of-living adjustment keyed to the cost-of-living index. The company was among the first to establish such a program; most large corporations adopted this practice only under union pressure.

With the help of a contract for farm equipment from John Deere’s Harvester Works, 1948 became Home-O-Nize’s first profitable year. However, the company was still under-financed and sought additional contracts to keep its manufacturing plant busy. In 1949, Home-O-Nize signed a contract worth $450,000 with Associated Manufacturers, Inc. to produce a newly designed corn picker that attached directly to the front of a tractor. However, what seemed like a promising job turned into “the greatest fiasco in the history of Home-O-Nize,” according to Stanley. Home-O-Nize produced the corn picker, with designs provided by Associated that proved full of bugs; at its first field test, the corn picker failed after just one pass. Months of costly redesign ensued, for which, as it turned out, Associated was unable to pay. Litigation ensued, and Associated eventually defaulted on the contract, entering into bankruptcy.

As a result, Home-O-Nize was forced to reduce costs and that meant making some considerable staff reductions. The company salvaged what they could from inventory and wrote off a loss of $52,541 on the corn pickers. Moreover, with additional write-offs from their unrealized kitchen cabinet project, Home-O-Nize’s cash position diminished by more than $100,000 during 1949. The company’s financial position was at the worst level ever experienced.

The company survived, though, through loans, stock purchases, and a contract with the Bell Aircraft Company. On March 2, 1950, Home-O-Nize bought Bell’s manufacturing rights to the Prime-Mover, an engine-powered wheelbarrow with a capacity of 1,000 pounds, and incorporated its subsidiary as The Prime-Mover Co. This purchase meant steady income and ultimately saved the company. The combined sales of Home-O-Nize and Prime-Mover totaled more than $600,000 at year end 1950.

The period from 1951–1955 was known as Operation Independence Home-O-Nize, with a goal of expanding the Prime-Mover and office product businesses, and to decrease dependence on contract work. During the four-year period of Operation Independence, the company saw their basic objectives realized. By 1953, total consolidated sales passed the $1 million milestone and two years later exceeded $2 million. Profitability resumed in 1952, to start more than four decades of uninterrupted profits.

Office products were becoming the chief product line for Home-O-Nize during this time. In addition to its non-suspension card files, the company began developing combination cabinets in 1953. One such product was the Unifile, which featured a unique one key handle that operated plungers to lock all doors and drawers, and incorporated an optional interior security compartment. The Unifile was a steady seller from its introduction and would remain in the HON product line into the 1990s. Other products during this period were full suspension filing cabinets, coat racks, and single pedestal desks with hairpin legs and matching tables. The company also began its name transition. Although the corporate name remained Home-O-Nize, the office products were branded H-O-N and given their own division within the company.

In the mid-1950s, the company strove for a greater market penetration through expanding sales of its office products and Prime-Movers, while raising productivity, improving the quality of products, and strengthening its financial position. The result was a decade of explosive growth. Annual sales passed $5 million in 1961 and surpassed $10 million in 1965. The number of members working at the company more than tripled, from less than 200 in 1956 to over 500 by the end of 1965. During this period, H. Wood Miller left Home-O-Nize to focus more closely on his industrial design work. He remained a shareholder, however, and, on occasion, assisted the company’s engineers with design projects.

The HON line of office equipment during this time grew to include such products as steel drawer card cabinets, steel cash boxes, the HONOR line of products for the schoolroom, and the VS (standing for Very Special) line of higher end office products. The company also acquired Luxco Company of La Crosse, Wisconsin, a manufacturer of chairs, stools, and machine stands, introducing HON to the seating industry.

But the major marketing breakthrough of the time was HON’s entry into the wholesale marketplace. By 1965, the company was serving about 75 wholesalers located throughout the United States, with about 35 percent of its furniture reaching dealers through this channel. Home-O-Nize also began selling HON products to Sears, Roebuck & Co., for retail to small businesses or consumers who maintained offices in their home. Continuing efficiency and expansion into new plant locations helped with growth during this period.

The 1960s also brought changes in management and in the company name. Stanley M. Howe was appointed executive vice-president of the company in 1961, and became president in 1964. Howe had joined Home-O-Nize in 1948, as the assistant to the head of the planning division. Proving himself a manufacturing genius and a shrewd administrative leader, Howe shared the founders’ vision of growth and had become vice-president of production by 1954. He would later become chairman of HON after the death of Max Stanley in 1984. Having long ago shifted its focus away from manufacturing products for the kitchen and home, the company changed its name in 1968 to HON INDUSTRIES, Inc.

Geographic expansion and acquisitions characterized the late 1960s and 1970s at HON. In 1967, the company purchased a plant site in Cedartown, Georgia, marking its first move out of Iowa on the way to becoming a national manufacturer. The introduction of computers in 1968, helped in the management and control of operations of the growing company. By 1969, net sales were $25 million. During this time, cofounder Clement Hanson retired from HON.

Under the leadership of CEO Stanley, the company continued to add to its holdings. Holga Metal Products of Van Nuys, California, was acquired in 1971, giving the company a manufacturing facility in the rapidly growing southern California region. Corry Jamestown of Corry, Pennsylvania, was acquired in 1972, HON’s first venture into the higher priced segment of the office furniture market. HON then bought Norman Bates Inc. of Anaheim, California, their first venture into wood manufacturing. To serve the East Coast markets, HON opened a plant in Virginia. The acquisition of Murphy-Miller of Owensboro, Kentucky, put HON into the wood seating business in 1977. By 1979, net sales surpassed $198 million, an eight-fold increase since 1969.

HON INDUSTRIES expansion continued in the 1980s. Heibert Inc. of Carson, California, brought HON into high quality wood furniture and wood office systems furniture. Heatilator, the leading name in prefabricated fireplaces became part of HON INDUSTRIES in 1981. J.K. Rischel Company, manufacturers of traditional wood office furniture, was purchased in 1982, and the next year, HON acquired 35 percent of Ring King Visibles, a rapidly growing office products company. In 1986, they acquired Budget Panels, Inc. of Kent, Washington.

In the spring of 1986, two years after the death of Maxwell Stanley, and after nearly a tenfold increase in sales from 1972 to 1985, HON was notified that it had become a Fortune 500 company. The company had a record of making 124 consecutive quarterly common stock dividends by 1985. In fact, cash dividends from a single share of stock issued by Home-O-Nize in its first public offering in 1946 totaled more than $10,600 by 1985.

By 1987, under the leadership of chairman and president Stanley Howe, HON had become known as the most efficient producer in the industry worldwide, capable of producing a desk every minute, a file every 40 seconds, and a chair every 20 seconds. Company sales reached $555 million that year, which also marked HON’s 40th year in operation.

The XLM Company was established during this time to manufacture a unique new design of budget file cabinets to be sold through mass merchandisers, and the company consolidated its Corry Jamestown and Hiebert divisions into a new operation known as the CorryHiebert Corporation. After a difficult decision, HON sold Prime-Mover to BT Industries, a worldwide materials handling equipment company; the sale benefited shareholders, as the company received a $8.3 million after-tax gain. In 1989, HON acquired The Gunlocke Company, of Wayland, New York, an established architectural and design firm for office furniture. Moreover, the remaining shares of Ring King Visibles were purchased and the company became a wholly owned subsidiary of HON.

The 1990s saw the rise to prominence of the home office, as estimates suggested that 26 million Americans did some part-time work at home and another 25 percent worked full time at home. This trend gave way to the emergence of two new major outlets of office furniture: warehouse clubs and office product superstores, such as Office Depot. HON moved quickly to become a major supplier to these retailers.

In March 1990, Jack D. Michaels, formerly the president and CEO of Hussmann Corp., was named president of HON INDUSTRIES. Michaels was eventually given the position of CEO as well, while Howe remained on as chairman of the board. Under Michaels, HON made a long-term commitment to explore and develop international opportunities with the formation of HON Export Limited. In 1991, the company had its first decline in sales in four decades, caused by a flat growth in the office furniture industry and the lowest level of housing starts since World War II.

But in following years, sales increased again. In 1993, the company made record investments in new product development, new capital equipment, new business ventures, and member development. Although HON was forced to close its CorryHiebert Corporation office, it entered a new market through the acquisition of the DOVRE brand of cast iron fireplaces and wood stoves, which were manufactured and marketed through Heatilator. According to a 1995 Fortune article, HON was one of America’s most admired companies in the furniture industry in the mid-1990s. Moreover, the company had positioned itself for continued growth and success into the 21st century. With a corporate goal of doubling its profit by the year 2000, HON was maintaining its leadership position nationally and was expanding its presence internationally.