UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-Q

(MARK ONE)

     / X /   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
               SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 29, 2002

OR

     / /   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
              SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________________ to ___________________

Commission File Number 0-2648

HON INDUSTRIES Inc.
(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)

P. O. Box 1109, 414 East Third Street,
Muscatine, Iowa
(Address of principal executive offices)

52761-0071
(Zip Code)

Registrant's telephone number, including area code: 563/264-7400

Indicated by check mark whether the registrant (1) has filed all required reports to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES    X                  NO ________

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date.

Class
Common Shares, $1 Par Value

Outstanding at June 29, 2002
58,937,186

 HON INDUSTRIES Inc. and SUBSIDIARIES

INDEX

PART I.    FINANCIAL INFORMATION

Page

Item 1.    Financial Statements (Unaudited)

Condensed Consolidated Balance Sheets -
June 29, 2002 and December 29, 2001

3-4

Condensed Consolidated Statements of Income -
Three Months Ended June 29, 2002, and June 30, 2001

5

Condensed Consolidated Statements of Income -
Six Months Ended June 29, 2002, and June 30, 2001

6

Condensed Consolidated Statements of Cash Flows -
Six Months Ended June 29, 2002, and June 30, 2001

7

Notes to Condensed Consolidated Financial Statements

8-14

Item 2.    Management's Discussion and Analysis of
               Financial Condition and Results of Operations

15-18

PART II.    OTHER INFORMATION

Item 4.    Submission of Matters to a Vote of Security Holders

19

Item 6.    Exhibits and Reports on Form 8-K

19

SIGNATURES

20

HON INDUSTRIES Inc. and SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

June 29,
2002
(Unaudited)

December 29,
2001

ASSETS

(In thousands)

CURRENT ASSETS

  Cash and cash equivalents

$       88,213

$       78,838

  Short-term investments

5,000

-

  Receivables

181,677

161,390

  Inventories (Note C)

62,260

50,140

  Deferred income taxes

14,059

14,940

  Prepaid expenses and other current assets

         9,195

        14,349

     Total Current Assets

       360,404

       319,657

PROPERTY, PLANT, AND EQUIPMENT, at cost

  Land and land improvements

21,561

21,678

  Buildings

208,517

212,352

  Machinery and equipment

500,575

494,458

  Construction in progress

         9,988

        14,247

740,641

742,735

  Less accumulated depreciation

       362,098

       337,764

     Net Property, Plant, and Equipment

378,543

404,971

GOODWILL

186,685

186,694

OTHER ASSETS

        58,132

        50,569

     Total Assets

$      983,764

$      961,891

See accompanying Notes to Condensed Consolidated Financial Statements.

HON INDUSTRIES Inc. and SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

June 29,
2002
(Unaudited)

December 29,
2001

LIABILITIES AND SHAREHOLDERS' EQUITY

(In thousands)

CURRENT LIABILITIES

  Accounts payable and accrued expenses

$   200,785

$   216,184

  Income taxes

13,732

6,112

  Note payable and current maturities
     of long-term debt

59,297

6,715

  Current maturities of other long-term
     obligations

         999

       1,432

     Total Current Liabilities

274,813

230,443

LONG-TERM DEBT

26,062

79,570

CAPITAL LEASE OBLIGATIONS

791

1,260

OTHER LONG-TERM LIABILITIES

20,002

18,306

DEFERRED INCOME TAXES

41,352

39,632

SHAREHOLDERS' EQUITY

  Capital Stock:

  Preferred, $1 par value; authorized

  2,000,000 shares; no shares outstanding

-

-

  Common, $1 par value; authorized

  200,000,000 shares; outstanding -

58,937

58,673

  2002 - 58,937,186 shares;

  2001 - 58,672,933 shares

  Paid-in capital

7,755

891

  Retained earnings

553,869

532,555

  Accumulated other comprehensive income

         183

         561

     Total Shareholders' Equity

620,744

592,680

     Total Liabilities and Shareholders' Equity

$   983,764

$   961,891

See accompanying Notes to Condensed Consolidated Financial Statements.

HON INDUSTRIES Inc. and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

Three Months Ended

June 29,
2002

June 30,
2001

(In thousands, except
per share data)

Net Sales

$  399,299 

$   444,196

Cost of products sold

   256,696 

    292,789

  Gross Profit

142,603 

151,407

Selling and administrative expenses

111,320 

118,983

Restructuring and impairment charges

       (900)

     24,000

  Operating Income

32,183 

8,424

Interest income

549 

486

Interest expense

      1,259 

      2,318

  Income Before Income Taxes

31,473 

6,592

Income taxes

     11,330 

      2,373

  Net Income

$   20,143 

$     4,219

Net income per common share (basic and diluted)

      $0.34 

      $0.07

Average number of common shares outstanding (basic)

58,918,130 

59,204,849

Cash dividends per common share

     $0.125 

      $0.12

See accompanying Notes to Condensed Consolidated Financial Statements.

HON INDUSTRIES Inc. and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

Six Months Ended

June 29,
2002

June 30,
2001

(In thousands, except
per share data)

Net Sales

$  798,438 

$   906,193

Cost of products sold

   516,094 

    604,500

  Gross Profit

282,344 

301,693

Selling and administrative expenses

221,745 

238,033

Restructuring and impairment charges

     3,000 

     24,000

  Operating Income

57,599 

39,660

Interest income

1,184 

708

Interest expense

     2,474 

      5,240

  Income Before Income Taxes

56,309 

35,128

Income taxes

    20,271 

     12,646

  Net Income

$   36,038 

$    22,482

Net income per common share (basic and diluted)

      $0.61 

      $0.38

Average number of common shares outstanding
    (basic)

58,847,543 

59,326,535

Cash dividends per common share

      $0.25 

      $0.24

See accompanying Notes to Condensed Consolidated Financial Statements.

HON INDUSTRIES Inc. and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

Six Months Ended

June 29,
2002

June 30,
2001

(In thousands)

Net Cash Flows From (To) Operating Activities:

  Net income

$    36,038 

$    22,482 

  Noncash items included in net income:

    Depreciation and amortization

34,568 

41,199 

    Other postretirement and postemployment

      benefits

1,101 

742 

    Deferred income taxes

2,813 

2,626 

    Asset impairment

1,300 

16,200 

    Other - net

(502)

64 

Changes in operating assets and liabilities

(36,882)

3,758 

Increase (decrease) in other liabilities

        595 

        613 

  Net cash flows from (to) operating activities

     39,031 

     87,684 

Net Cash Flows From (To) Investing Activities:

  Capital expenditures - net

(9,329)

(23,921)

  Capitalized software

(22)

(89)

  Acquisition spending

- 

(6,332)

  Short-term investments - net

(5,000)

- 

  Long-term investments - net

(7,408)

- 

  Other - net

      1,094 

       (711)

    Net cash flows from (to) investing activities

    (20,665)

    (31,053)

Net Cash Flows From (To) Financing Activities:

  Purchase of HON INDUSTRIES common stock

- 

(22,730)

  Proceeds from long-term debt

- 

36,000 

  Payments of note and long-term debt

(1,396)

(31,736)

  Proceeds from sales of HON INDUSTRIES
    common stock to members

7,129 

8,004 

  Dividends paid

    (14,724)

    (14,249)

    Net cash flows from (to) financing activities

     (8,991)

    (24,711)

Net increase (decrease) in cash and
  cash equivalents

9,375 

31,920 

Cash and cash equivalents at beginning
  of period

     78,838 

      3,181 

Cash and cash equivalents at end of period

$    88,213 

$    35,101

See accompanying Notes to Condensed Consolidated Financial Statements.

Note A.  Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six-month period ended June 29, 2002, are not necessarily indicative of the results that may be expected for the year ending December 28, 2002. 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 29, 2001.

Note B.  Summary of Significant Accounting Policies

Revenue recognition - Revenue is normally recognized upon shipment of goods to customers. In certain circumstances revenue is not recognized until the goods are received by the customer or upon installation and customer acceptance based on the terms of the sales agreement. Revenue includes freight charges to customers; related costs are in selling and administrative expense. Rebates, discounts, and other marketing program expenses that are directly related to the sale are recorded as a deduction to net sales.

Investments - The Company acquired investments during the second quarter of 2002, which consist of investment grade debt securities. In accordance with SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities," the Company classifies these as held to maturity securities which are recorded at amortized cost, which approximates the fair value at June 29, 2002.

Note C.  Inventories

Inventories of the Company and its subsidiaries are summarized as follows:

($000)

June 29, 2002
(Unaudited) 

December 29, 2001

Finished products

$       45,371 

$       33,280 

Materials and work in process

26,604 

        26,469 

LIFO allowance

        (9,715)

        (9,609)

$       62,260 

$       50,140 

Note D.  Comprehensive Income

The Company's comprehensive income in 2002 consists totally of foreign currency adjustments.

Note E.  Earnings Per Share

The following table reconciles the numerators and denominators used in the calculation of basic and diluted earnings per share (EPS):

Three Months Ended

Six Months Ended

June 29, 2002

June 30, 2001

June 29, 2002

June 30, 2001

Numerators:
Numerators for both
basic and diluted EPS
net income (in millions)

$       20.1 

 $        4.2 

$       36.0 

$       22.5 

Denominators:
Denominator for basic EPS
weighted-average common
shares outstanding

  58,918,130 

  59,204,849 

  58,847,543 

  59,326,535 

Potentially dilutive shares
from stock option plans

     243,149 

     116,713 

     239,804 

     138,034 

Denominator for diluted EPS

  59,161,279 

  59,321,562 

  59,087,347 

  59,464,569 

Certain exercisable and non-exercisable stock options were not included in the computation of diluted EPS at June 29, 2002 and June 30, 2001, because the option prices were greater than the average market prices for the applicable periods. The number of stock options outstanding, which met this criterion for the three and six months ended June 29, 2002, was 30,000 with a range of per share exercise prices of $28.25 - $32.50. The number of stock options outstanding, which met this criterion for the three and six-month periods ended June 30, 2001, was 755,250 with a range of per share exercise prices of $23.31-$32.50 and 240,000 with a range of per share exercise prices of $24.28-$32.50, respectively. There was no difference between EPS on a basic and diluted basis for the periods presented.

Note F.  Restructuring Reserve

The following table details the change in restructuring reserve since the end of the previous fiscal year:

Severance
Costs  

Facility  
Termination
Costs   

Other   
Costs   

Asset    
Impairment 
Write-downs

Total    

Restructuring reserve at December 29, 2001

$    768 

$  1,233 

$    716 

$      -  

$  2,717   

Restructuring charge

     737 

   1,550 

     313 

   1,300 

   3,900 

Cash payments

    (636)

    (522)

    (367)

       -  

  (1,525)

Charge against assets

       -  

       -  

       -  

   (1,300)

  (1,300)

Restructuring reserve at March 30, 2002

$    869 

$  2,261 

$    662 

$      -  

$  3,792 

Restructuring charge

       -  

   1,465 

       -  

   1,465 

Restructuring credit

    (852)

    (933)

    (580)

  (2,365)

Cash payments

     (17)

    (314)

     (49)

    (380)

Restructuring reserve at June 29, 2002

$      -  

$  2,479 

$     33 

$      -  

$  2,512 

The additional restructuring charges taken during the first and second quarters of 2002 were due to the shutdown of an office furniture facility in Jackson, Tennessee. A total of 125 members were terminated and received severance due to this shutdown. The additional charge of approximately $1.5 million taken during the second quarter was due to new developments in the area regarding real estate availability that required revised estimates on the Company's ability to sublease the facility.

Approximately $2.4 million of a restructuring credit was taken back into income during the second quarter. This was mainly due to the fact that the Company was able to exit a lease with a lessor at more favorable terms than originally estimated and the Company's ability to minimize the number of members terminated as compared to the original plan.

<Page>

Note G.   Goodwill - Adoption of Statement 142

The Company adopted Statement of Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible Assets" on December 30, 2001, the beginning of its 2002 fiscal year. Pursuant to this standard, the Company has completed an assessment of the categorization of its existing intangible assets and goodwill. In addition, the Company completed an analysis of the fair value of its reporting units using both a discounted cash flow analysis and market multiple approach and has determined that the fair value of its reporting units exceeds the carrying values at the beginning of the period and therefore, no impairment of goodwill was recorded. Also pursuant to the standard, the Company has ceased recording of goodwill and indefinite-lived intangibles amortization in 2002.

The Company also owns a trademark having a gross carrying amount of $9.3 million, accumulated amortization of $1.2 million and a net value of $8.1 million as of December 29, 2001. The fair value of the trademark exceeded the carrying value of the trademark at the beginning of the period and thus, no impairment was recorded. The trademark is deemed to have an indefinite useful life because it is expected to generate cash flows indefinitely. The Company ceased amortizing the trademark in 2002.

The table below summarizes amortizable definite-lived intangible assets as of June 29, 2002 and December 29, 2001, which are reflected in Other Assets in the Company's condensed consolidated balance sheets:

June 29, 2002

Gross Carrying
Amount    

Accumulated 
Amortization 

Net Value   

Patents

$ 16,450 

$  8,632 

$  7,818 

License agreements and other

  26,027 

   4,004 

  22,023 

Total intangible assets

$ 42,477 

$ 12,636 

$ 29,841 

December 29, 2001

Gross Carrying
Amount    

Accumulated 
Amortization 

Net Value   

Patents

$ 16,450 

$  7,876 

$  8,574 

License agreements and other

  26,027 

   3,414 

  22,613 

Total intangible assets

$ 42,477 

$ 11,290 

$ 31,187 

Aggregate amortization expense for the three- and six-months ended June 29, 2002 and June 30, 2001 were $673,000, $1,346,000, $551,000, and $1,096,000, respectively. Amortization expense is estimated to be approximately $2.7 million per year for each of the next five years.

The changes in the carrying amount of goodwill since December 29, 2001 are as follows, by reporting segment:

Office Furniture 

Hearth Products 

Total   

Balance as of
December 30, 2001

$ 43,611 

$ 143,083 

$ 186,694 

Net Goodwill disposed of during the period

          -  

           (9)

           (9)

Balance as of June 29, 2002

$ 43,611 

$ 143,074 

$ 186,685 

The following schedule reports the adjusted net income for the goodwill and indefinite-lived trademark amortization effect:

Three Months Ended

Six Months Ended

June 29,
2002

June 30,
2001

June 29,
2002

June 30,
2001

Reported net income

$    20,143 

$     4,219 

$    36,038 

$    22,482 

Add back: Goodwill amortization,
net of tax

           - 

      1,385 

           - 

      2,828 

Add back: Trademark amortization, net of tax

             - 

           37 

             - 

          74 

Adjusted net income

$    20,143 

$     5,641 

$    36,038 

$    25,385 

Basic and diluted earnings per
   share:

 Reported net income

$      0.34 

$     0.071 

$      0.61 

$     0.379 

 Goodwill & trademark
   amortization, net of tax

            - 

      0.024 

            - 

      0.049 

 Adjusted net income

$      0.34 

$     0.095 

$      0.61 

$     0.428 

Note H.  New Accounting Standards

The Company adopted SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," on December 30, 2001, the beginning of its 2002 fiscal year. The adoption did not have an impact on the Company's financial statements.

The Company will be required to adopt Statement No. 143, "Accounting for Asset Retirement Obligations," on December 29, 2002, the beginning of its 2003 fiscal year. The adoption of SFAS No. 143 is not expected to have a material impact on the Company's financial statements.

<Page>

The Company will be required to adopt SFAS No. 146 "Accounting for Costs Associated with Exit or Disposal Activities" for exit or disposal activities that are initiated after December 31, 2002. This Statement requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred.

Note I.  Contingencies

The Company has contingent liabilities, which have arisen in the course of its business, including pending litigation, environmental remediation, taxes, and other claims. The Company believes the outcome of these matters will not have a material adverse effect on its consolidated financial position, results of operations, or cash flow.

Note J.  Business Segment Information

Management views the Company as being in two business segments:  office furniture and hearth products with the former being the 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 product segment manufactures and markets a broad line of manufactured gas-, pellet- and wood-burning fireplaces and stoves, fireplace inserts, and chimney systems principally for the home.

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. These unallocated corporate expenses include the net cost of the Company's corporate operations, interest income, and interest expense.

Management views interest income and expense as corporate financing costs and not as a business segment cost. In addition, management applies one effective tax rate to its consolidated income before income taxes so income taxes are not reported or viewed internally on a segment basis.

No geographic information for revenues from external customers or for long-lived assets is disclosed as the Company's primary market and capital investments are concentrated in the United States.

Reportable segment data reconciled to the consolidated financial statements for the three-month and six-month periods ended June 29, 2002, and June 30, 2001, is as follows:

Three Months Ended

Six-Months Ended

June 29,

June 30,

June 29,

June 30,

2002

2001

2002

2001

(In thousands)

Net Sales:

  Office furniture

$  303,144 

$  338,578 

$  603,365 

$  705,087 

  Hearth products

    96,155 

   105,618 

   195,073 

   201,106 

$  399,299 

$  444,196 

$  798,438 

$  906,193 

Operating Profit:

  Office furniture

    Operations before restructuring       charges

$   30,948 

$   32,366 

$   59,096 

$   64,890 

    Restructuring and impairment       charges

         900 

   (22,500)

     (3,000)

   (22,500)

      Office furniture - net

31,848 

9,866 

56,096 

42,390 

  Hearth products

    Operations before restructuring
      charges

8,819 

9,519 

15,324 

12,757 

    Restructuring and impairment
      charges

           - 

     (1,500)

           - 

     (1,500)

      Hearth products - net

8,819 

8,019 

15,324 

11,257 

      Total operating profit

    40,667 

    17,885 

71,420 

53,647 

  Unallocated corporate expense

     (9,194)

   (11,293)

   (15,111)

   (18,519)

      Income before income taxes

$   31,473 

$    6,592 

$   56,309 

$   35,128 

Depreciation & Amortization Expense:

  Office furniture

$   12,110 

$   14,877 

$   24,401 

$   29,754 

  Hearth products

3,681 

5,160 

6,990 

10,286 

  General corporate

      1,629 

        579 

      3,177 

      1,159 

$   17,420 

$   20,616 

$   34,568 

$   41,199 

Capital Expenditures, Net:

  Office furniture

$    2,127 

$    9,260 

$    6,279 

$   18,976 

  Hearth products

1,552 

1,600 

2,472 

4,522 

  General corporate

        384 

         341 

        578 

         423 

$    4,063 

$   11,201 

$    9,329 

$   23,921 

As of
June 29,
2002

As of
June 30, 2001

Identifiable Assets:

  Office furniture

$ 527,132 

$ 575,470 

  Hearth products

311,008 

  339,483 

  General corporate

  145,624 

    69,318 

$ 983,764 

$ 984,271 

Item 2.  Management's Discussion and Analysis of Financial Condition and Results of
            Operations

Results of Operations

A summary of the period-to-period changes in the principal items included in the Condensed Consolidated Statements of Income is shown below:

Comparison of

Increases (Decreases)

Three Months Ended

Six Months Ended

Three Months Ended

Dollars in Thousands

June 29, 2002 &
June 30, 2001

June 29, 2002 &
June 30, 2001

June 29, 2002 &
March 30, 2002

Net Sales

$ (44,897)

(10.1)%

$(107,755)

(11.9)%

$     160 

- %

Cost of products sold

(36,093)

(12.3)   

(88,406)

(14.6)   

(2,702)

(1.0)  

Selling &
  administrative
  expenses

(7,663)

(6.4)   

(16,288)

(6.8)   

895 

0.8   

Restructuring and
  impairment charges

(24,900)

(103.8)   

(21,000)

(87.5)   

(4,800)

(123.1)  

Interest income

63 

13.0    

476 

67.2    

(86)

(13.5)  

Interest expense

(1,059)

(45.7)   

(2,766)

(52.8)   

44 

3.6   

Income taxes

8,957 

377.5    

7,625 

60.3    

2,389 

26.7   

Net Income

15,924 

377.4    

13,556 

60.3    

4,248 

26.7   

Consolidated net sales for the second quarter ending June 29, 2002, were $399.3 million, a 10.1% decrease from $444.2 million in the second quarter of 2001. Net income was $20.1 million, compared to $4.2 million for the same period a year ago. Net income per share was $0.34 per diluted share compared to $0.07 per diluted share in second quarter 2001. Second quarter 2001 results included a pre-tax charge of $24.0 million ($0.26 per diluted share) for a restructuring plan that involved consolidating facilities, discontinuing low volume product lines and reducing the workforce.

For the first six months of 2002, consolidated net sales decreased 11.9% to $798.4 million from $906.2 million last year. Net income was $36.0 million or $0.61 per diluted share compared to $0.38 per diluted share last year after recording the $0.26 per diluted share restructuring charge.

For the second quarter of 2002, office furniture comprised 76% of consolidated net sales and hearth products comprised 24%. Net sales for office furniture were down 10.5% due to continued deterioration in the office furniture industry. Hearth products sales decreased 9.0% for the quarter primarily due to the latent impact on second quarter demand of reduced mortgage applications which occurred immediately after the September 11 tragedy, inventory level adjustments in the home center business channel, and reduced demand for pellet stoves due to lower energy costs. Office furniture contributed 78% of second quarter 2002 consolidated operating profit before unallocated corporate expenses.

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The consolidated gross profit margin for the second quarter of 2002 increased to 35.7% compared to 34.1% for the same period in 2001. This increase in margin was due to rapid continuous improvement, new product introductions, cost containment, and restructuring initiatives.

Selling and administrative expenses for the second quarter of 2002 were 27.9% of net sales compared to 26.8% in the comparable quarter of 2001. This increase was due to lower overall sales volume and increased investment in building brand equity and new product development. Selling and administrative expenses include freight expense for shipments to customers, which amounted to $24.3 million and $25.8 million, for the quarter ended June 29, 2002 and June 30, 2001, respectively. Actual selling and administrative dollars for the quarter decreased over 6% or $7.7 million. Second quarter 2001 included approximately $2.2 million of goodwill amortization that is not included in 2002 due to the adoption of Statement of Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible Assets," on December 30, 2001, the beginning of the Company's 2002 fiscal year.

During the quarter ended June 30, 2001, the Company recorded a pretax restructuring charge of $24.0 million or $0.26 per diluted share. The plan involved consolidating physical facilities, discontinuing low volume product lines and reducing the workforce. Approximately 470 plant members were terminated and received severance due to the restructuring plan. Approximately $2.4 million of the charge was taken back into income during the second quarter of 2002. This was mainly due to the fact that the Company was able to exit a lease with a lessor at more favorable terms than originally estimated and the Company's ability to minimize the number of members terminated as compared to the original plan.

The Company recorded additional restructuring charges of approximately $5.4 million during the first and second quarters of 2002 due to the shutdown of an office furniture facility in Jackson, Tennessee. A total of 125 members were terminated and received severance due to this shutdown. The additional charge during the second quarter was due to new developments in the area regarding real estate availability that required revised estimates on the Company's ability to sublease the facility.

Liquidity and Capital Resources

As of June 29, 2002, cash and short-term investments increased to $93.2 million compared to a $78.8 million balance at year-end 2001. Net cash flows from operations contributed to the improvement. Cash flow from operations for the first six months was $39.0 million compared to $87.7 million last year. Inventory levels increased primarily as a result of the year-end 2001 production shutdown and inventory produced in 2002 associated with new turnkey contracts. The increase in receivables reflects an increase in day's sales outstanding of 38.9 compared to 36.8 in 2001 mainly due to larger contract customers and the effect of unusually strong cash collections at the end of 2001. Cash flow and working capital management are major focuses of management to ensure the Company is poised for growth.

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Net capital expenditures for the first six months of 2002 were $9.3 million and primarily represent investment in new machinery and equipment for new products compared to $23.9 million in 2001, which was primarily for new products and productivity improvements. These investments were funded by cash from operations.

The Board of Directors declared a regular quarterly cash dividend of $0.125 per share on its common stock on May 7, 2002, to shareholders of record at the close of business on May 17, 2002. It was paid on May 31, 2002, and represented the 189^th consecutive quarterly dividend paid by the Company.

For the six months ended June 29, 2002, the Company did not repurchase any of its common stock. As of June 29, 2002, approximately $78.6 million of the Board's current repurchase authorization remained unspent.

On August 5, 2002, the Board of Directors declared a $0.125 per common share cash dividend to shareholders of record on August 15, 2002, to be paid on August 30, 2002.

Critical Accounting Policies

The Company's critical accounting policies are outlined in its Form 10-K for fiscal year ended December 29, 2001. The following policies are relevant to 2002.

The Company normally recognizes revenue upon shipment of goods. In certain circumstances revenue is not recognized until the goods are received by the customer or upon installation and customer acceptance. Revenue includes freight charges to customers; related costs are in selling and administrative expense. Rebates, discounts, and other marketing program expenses that are directly related to the sale are recorded as a deduction to net sales.

The Company acquired investments during the second quarter of 2002, which consist primarily of investment grade debt securities. In accordance with SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities," the Company classifies these as held to maturity securities which are recorded at amortized cost, which approximates the fair value at June 29, 2002.

The Company adopted Statement of Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible Assets" on December 30, 2001, the beginning of its 2002 fiscal year. Pursuant to this standard, the Company has completed an assessment of the categorization of its existing intangible assets and goodwill. In addition, the Company completed an analysis of the fair value of its reporting units using both a discounted cash flow analysis and market multiple approach and has determined that the fair value of its reporting units exceeds the carrying values at the beginning of the period and therefore, no impairment of goodwill was recorded. The fair market value of the reporting units are sensitive to significant assumptions and estimates, including projected cash flows and discount rates. Should the fair value decline based upon changes in these estimates and assumptions, an impairment charge may need to be recorded. Also pursuant to the standard, the Company has ceased recording of goodwill amortizatio n in 2002.

Looking Ahead

The Company anticipates the remainder of the year to be challenging. DRI-WEFA, the Business and Institutional Furniture Manufacturer's Association's ("BIFMA") forecasting consultant, is projecting the office furniture industry to be down 7 percent in the third quarter and up 3 percent in the fourth quarter of 2002 compared to the same quarters last year. The Company's recent order patterns have been stronger. Over capacity in the domestic office furniture industry as well as an increase in lower-priced foreign imports is likely to result in margin pressure. The Company is pursuing strategies to minimize this impact.

Increased investment in new products in the hearth products segment, which were well received at recent industry trade shows, is expected to positively impact performance during the remainder of the year. In addition, continued strength of new residential construction and low inventories in the retail channel should stimulate demand in subsequent quarters.

The recently enacted tariff on steel imports has created uncertainty in pricing and supply of steel in America. The Company is working to mitigate the potential negative impact this may have on its results and is also working with an industry coalition to address the broader issue.

Statements in this report that are not strictly historical, including statements as to plans, objectives, and future financial 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: the Company's ability to realize financial benefits from its cost containment and business simplification initiatives, to minimize the effects of industry over capacity and foreign imports on its sales and margins, to realize financial benefits from investments in new products, to mitigate the effects of uncertain steel prices and supplies, the possibility that recent improvements in order patterns may not continue and other factors described in the Company's annual and quarterly reports filed with the Securities and Exchange Commission on Forms 10-K and 10-Q.

PART II.  OTHER INFORMATION

Item 4.

Submission of Matters to a Vote of Security Holders

The Annual Meeting of Shareholders of HON INDUSTRIES Inc. was held on May 6, 2002, for purposes of electing five Directors to the Board of Directors, and to adopt the HON INDUSTRIES Inc. 2002 Members' Stock Purchase Plan. As of March 1, 2002, the record date for the meeting, there were 58,895,314 shares of common stock issued and outstanding and entitled to vote at the meeting. The first proposal voted upon was the election of one Director for a term of two years and four Directors for a term of three years and until their successors are elected and shall qualify. The five persons nominated by the Company's Board of Directors received the following votes and were elected:

For    

Withheld/
Abstained 

Against 

Two-Year Term:
Robert L. Katz

50,629,037
or 85.4%

1,290,335
or 2.2%

- -0-
or 0.0%

Three-Year Term:
Cheryl A. Francis


M. Farooq Kathwari


Richard H. Stanley


Brian E. Stern

50,693,514
or 86.1%

50,659,534
or 86.0%

50,520,259
or 85.8%

50,938,601
or 86.5%

865,858
or 1.5%

899,838
or 1.5%

1,039,113
or 1.8%

620,771
or 1.1%

- -0-
or 0.0%

- -0-
or 0.0%

- -0-
or 0.0%

- -0-
or 0.0%

Other Directors whose term of office as a Director continued after the meeting are: Gary M. Christensen, Robert W. Cox, Dennis J. Martin, Jack D. Michaels, Abbie J. Smith, and Lorne R. Waxlax.

The second proposal voted upon was the adoption of the 2002 Members' Stock Purchase Plan. The proposal was approved with 46,535,771 votes, or 79.0% voting for; 4,522,971 votes, or 7.7% voting against; and 500,630 votes, or 0.9% abstaining.

Item 6.

Exhibits and Reports on Form 8-K

(a)   Exhibits.  None.

(b)   Reports on Form 8-K.  The Company filed a periodic report on Form 8-K dated May 7, 2002, to report the dismissal of Arthur Andersen LLP and the appointment of PricewaterhouseCoopers LLP as the Company's independent auditor for the fiscal year 2002.