Kimball International, Inc. Business Information, Profile, and History

Company Perspectives:

We Build Success. Kimball International is a pre-eminent manufacturer of furniture, furniture components, and electronic assemblies, serving customers around the world. Our customers, both large and small, receive our undivided attention, as we treat everyone as the only one. Our work with our customers is integrated into such an array of products and services our touch is felt throughout daily life in both the workplace and in the home. Kimball builds products, brands, and a reputation as an ideal place to entrust your livelihood, whether as a customer, supplier, employee, or share owner. Our vision is to advance a new industrial covenant: immediate access to world-class design and manufacturing. Our products will reach end users through many paths, whether as one of our own brand names that we market, as a brand that we agree to provide for a separate company, or as a component of another product. Regardless of the Kimball product or whether the customer is ourselves, a company, or a person, our covenant will stand firm. Our unifying bonds across our company will continue to be our unique culture and our shared skills in the development of efficient, high quality operations and services. By fulfilling our vision, we will emerge as an employer and supplier of choice. Our name will signal reliability and quality to the countless people who use our products and services, as well as to the inventors, designers, and marketers whose dreams take form in our factories and whose success we help build. Kimball International builds success.

History of Kimball International, Inc.

Once a leading piano manufacturer, Kimball International, Inc. is now known for two products: furniture and electronic assemblies. Furniture accounts for about 70 percent of Kimball's revenues. Its metal and wood furniture and fixtures are used in the hospitality and health care industries; the company also produces a line of home furniture. Kimball's electronic assemblies business supplies the computer, automotive, defense, medical, and telecom industries. The company also maintains a sizeable trucking fleet, a throwback to days when it manufactured and shipped its own pianos.

Origins

In 1950, a group of investors led by Arnold F. Habig took over the floundering Midwest Manufacturing Co. of Jasper, Indiana, an establishment with 30 employees and 25,000 square feet of production space. They soon realized that the company needed more than an infusion of capital. The group took charge of managing the small television and radio cabinet manufacturer, which they renamed the Jasper Corporation on May 23, 1950. With Habig acting as president and manager, the privately-owned company flourished, becoming a major supplier of television cabinets to electronics manufacturers. By 1955, the company's sales had grown to $4.6 million, and it was employing 436 people.

During the 1950s, the Jasper Corporation took advantage of the booming market in televisions to increase its production capacity and to attain control of several of the stages in the manufacturing process, a strategy known as vertical integration. The company's first acquisition came at the pressure of its customers, who asked Jasper to diversify its manufacturing sites to ensure a steady supply of cabinets in case of accident. With this in mind, the company purchased the Borden Cabinet Corporation in Borden, Indiana, in 1952. The wisdom of diversification was made evident several years later, in 1962, when the Borden plant burned to the ground. Nevertheless, the plant was rebuilt on the same location within six months.

Jasper took its first step toward vertical integration in 1953 when it formed the Jasper-American Manufacturing Co. in Henderson, Kentucky. This company supplied flakeboard for Jasper's cabinets at a lower price than could be obtained elsewhere. Striving for efficiency, Jasper moved further in the direction of vertical integration in the years to come. The company acquired the Evansville Veneer and Lumber Co. in 1955 and formed the Lafayette Manufacturing Co. in 1959. These companies supplied high quality veneer and hardwood lumber and dimension wood parts, respectively. Such acquisitions allowed Jasper to tailor its supply of raw materials to fit its requirements, although the subsidiary companies were also able to produce goods for sale to other manufacturers. This efficient and diverse use of productive capacity fueled Jasper's sales, which grew to $14.6 million by 1959, and prompted management to consider the benefits of decreasing the company's reliance on the demands of consumer products manufacturers and becoming a consumer products manufacturer itself.

W.W. Kimball Acquired 1959

The Jasper Corporation made several major changes in 1959. Most notably, it purchased the W.W. Kimball Company of Melrose Park, Illinois. Acquisition of the Kimball Company, which had been manufacturing pianos since 1857, gave Jasper an established brand in a prestigious industry. Not coincidentally, Jasper already had the capacity to manufacture many of the raw materials that went into the construction of vertical and grand pianos. In the years to come, they would acquire companies involved in other steps in the manufacturing process of pianos as well. Also in 1959, Jasper formed a traffic division that provided transportation for raw materials between the company's growing number of plants and delivered Kimball products to retail dealers. In 1987, this division was renamed Kimball International Transit, Inc.; the outfit operated a fleet of trucks that carried the company's products and was also licensed to carry goods for other companies.

After purchasing the W.W. Kimball Company, the Jasper Corporation took several steps to expand and diversify the production of musical instruments under the Kimball name. Kimball Piano, as the division was named, moved its manufacturing facilities to West Baden, Indiana, and grew to include 300,000 square feet of floor space. The company's machine and equipment division fashioned advanced manufacturing processes for the plant, and over the years the company added a retail store--the Kimball Music Center--that sold Kimball and other musical products and offered piano lessons in its teaching studios. In 1961, it formed the Jasper Electronics Manufacturing Co. to produce Kimball electronic organs. Production facilities grew to 200,000 square feet in size, an expansion that made Kimball a leading manufacturer of electronic organs and allowed it to develop expertise in the production of electronic components.

Jasper also expanded piano and organ production into European markets with the acquisition of the English company Herrburger Brooks P.L.C. in 1965. Merged in 1991 into Kimball Europe P.L.C., the unit makes and markets Herrburger Brooks brand piano components and office furniture for sale in the United Kingdom. Further expansion occurred in 1966, when Jasper purchased L. Bosendorfer Klavierfabrik, A.G., of Vienna, Austria, makers of fine concert grand pianos since 1828. With two facilities in Austria, the company produces a limited number of high-quality Bosendorfer brand pianos, some of which sell for as much as $100,000.

Changing Tune in the 1960s

As sales of pianos and organs declined beginning in the 1960s, Jasper (and later Kimball International) changed the nature of its involvement in this business segment. The company phased out organ operations in 1983, though it retained and expanded its electronic assembly business in the renamed Kimball Electronics-Jasper manufacturing facilities. Both U.S. and European piano manufacturing plants were made more efficient; U.S. facilities, for example, were converted to allow for the manufacture of products such as pool tables and jukebox cabinets for other companies. In addition, in 1988 the company expanded Kimco, S.A. de C.V., its Reynosa, Mexico, plant (established in 1973) to allow for lower-cost, up-to-date piano manufacturing. While the market for pianos continued to decrease into the 1990s, the company expected that gains in efficiency would allow this division to return to profitability after several years of losses.

By the late 1960s, Jasper Corporation had become highly efficient at manufacturing cabinetry and pianos, thanks in large part to Habig's efforts to achieve vertical integration and his ability to avoid debt by purchasing new companies outright. The company was capable of growing trees on its tree farms, processing lumber in its various sawmills, producing finished wood products in its veneer, laminate, and dimension lumber divisions, assembling a finished product in several assembly plants, and shipping its products via its own transport division. As the demand for television cabinets declined, the company took advantage of existing production capacity to manufacture office furniture out of its Borden, Indiana, plant beginning in 1970. Jasper also acquired an Alabama manufacturer of Victorian reproduction furniture in 1969; Jasper later renamed the company Kimball Furniture Reproductions, Inc. These new products became the center of the company's growth for the next two decades, propelling the company into the Fortune 500 and making it one of the largest employers in the state of Indiana.

Going Corporate in the 1970s and 1980s

In 1974, stockholders, primarily members of the founding Habig and Thyen families, voted to change the name of the company to Kimball International, Inc., in order to reflect the increasing recognition that the Kimball brand pianos and office furniture enjoyed in the marketplace and to recognize the company's international scope. Just two years later, Kimball became a publicly held company by offering 500,000 shares of Class B common stock.

In the late 1970s and early 1980s, Kimball consolidated its position in the office furniture business through acquisition and reorganization. In November 1979, the company acquired design and manufacturing rights for a line of office furniture systems produced by Artec, which became a unit of Kimball International. The division, which operates a 200,000-square-foot plant in Jasper, Indiana, began producing the Cetra line of office furniture in 1988. This versatile system was designed for all levels of office use and became part of the Kimball Office Furniture line. In 1980, Kimball created the National Office Furniture division to manufacture economy-to-medium-priced furniture. This furniture was manufactured in two plants in Kentucky and Indiana. With two complete furniture lines--Kimball and National--Kimball International was able to manufacture and market to all segments of the wood office furniture market.

Kimball International grew quickly as a result of its strength in manufacturing and marketing office furniture: sales rose from $104.2 million in 1975 to $319.9 million in 1984. In 1988, net sales of $529.8 million placed the company on the Fortune 500 list of top companies in America. The company's organization came to reflect this vast growth as manufacturing and marketing facilities were relocated and consolidated. Kimball's Jasper, Indiana, corporate headquarters were enlarged in 1985 and 1989, and a lavish corporate showroom was created in 1983 to display the entire line of office, hospitality, and health care furniture. Kimball restructured its corporate divisions as well in the early 1990s, grouping its many divisions and plants under office, lodging, home furniture, and, for European products, international groupings.

New Lines in the 1990s

The Lodging Group was created in a 1992 merger of Kimball Healthcare Co., a manufacturer of beds, casegoods, and seating for long-term care facilities, and Kimball Hospitality Furniture, Inc., which produced beds, seating, tables, dressers, and other furniture for the lodging industry. The Lodging Group achieved particular success in the early 1990s. In recognition of the company's growing commitment to producing products for the hospitality industry, the company expanded its showroom in 1991. Kimball sales administrator Mike Paar told Lodging Hospitality magazine, "The mock-up rooms in the showroom provide one-source shopping and enable the lodging operator or designer to take care of his or her entire furnishings needs under one roof." Kimball achieved more tangible recognition for its success in this business unit in 1993 when it was chosen to furnish the guest rooms--all 10,500 of them--for four new hotels in Las Vegas, Nevada.

While Kimball has earned its name and garnered the majority of its sales from furniture and cabinets, it also developed a strong presence with its electronic contract assemblies. Sales of electronic assemblies grew from three percent of Kimball's total sales in 1984 to 25 percent of sales in 1994, a leap from $9.3 million to $204.1 million in sales. Kimball supplies electronic components and assemblies to corporate customers in the computer, automotive, telecommunications, and home appliance industries. What had begun as a spin-off business from manufacturing organs had matured into a major income producer. The company stated in its 1994 annual report that it had manufactured over 11 million computer keyboards, while it expected its share of the anti-lock brake subassembly market to grow through its continued connection supplying control modules for the Kelsey-Hayes Company.

In addition to its electronic components business, Kimball also continued to manufacture television cabinets and stands for television manufacturers such as Mitsubishi, Thomson, Sony, and Toshiba. It also manufactures speaker cabinets for Thomson and Definitive Technologies.

Through the 1980s and into the 1990s, Kimball also realized between 6 and 8 percent of total revenues from sales of processed wood products. Though the divisions producing such wood products as veneer, lumber, and plywood exist mainly to supply Kimball's furniture making plants, outside sales reached $54 million in 1994. Kimball also received a small portion of its sales from plastics and tooling operations, from its transport division, and from a transport repair division.

Kimball took a step toward further diversification in the production of furniture in 1992 when it acquired the Torrance, California-based Harpers, Inc., a manufacturer of metal office furniture. This acquisition gave Kimball an entrance into the largest segment of the office furniture market, estimated at $7.3 billion in 1992. Kimball immediately announced plans to move the company to Post Falls, Idaho, a small town just across the state line from Spokane, Washington. The Post Falls plant, at 461,000 square feet, is Kimball's largest and one of the largest in the inland Northwest. The plant began operations in 1994, manufacturing metal office furniture under the Harpers name.

Analysts have cited several factors in explaining the steady rise of Kimball International. Most notable is the stability that family control has given the company. The majority of the Class A stock and six of seven senior executive officer positions remained in the hands of the founding Habig and Thyen families in the mid-1990s. In 1994, founder Arnold F. Habig acted as assistant to the chief executive officer; his son Thomas L. Habig served as chairman of the board; and another son, Douglas A. Habig, acted as president and chief executive officer. "Family control is a real asset," Indiana business expert Raymond H. Diggle, Jr., told Indiana Business. "It allows them to run the enterprise for cash flow and long-term return on equity. They don't have to be as concerned about short-term swings."

Another important component of the company's success, Kimball has contended, is a corporate ethic that reflects a sense of obligation to contribute to the communities--mostly small towns like that of Jasper, Indiana, where the company was founded--in which they base their operations. This community-minded ethic led Kimball to pursue sustainable timberland development on its acreage in Indiana, Ohio, and Kentucky; to sponsor the Habig Foundation to award scholarships to the children of company employees; and to allow its employees control over their jobs long before such a management philosophy became popular. With its sound financial base, its careful managerial philosophy, and its track record, Kimball seemed poised to grow well into the twenty-first century.

Furniture and Electronics: 1995-2001

Kimball closed its sole piano store, Wilking Music Co., in September 1995. The Castleton, Indiana, store had been acquired in 1982 to use as a test market. Soon after, Kimball stopped making pianos in the United States. Japanese and Korean manufacturers dominated the lower and middle segments of the market. Kimball held on to its high-end Bosendorfer factory in Austria, but this too was sold in 2002.

Kimball Electronics acquired Elmo Semiconductor Corp., based in Burbank, California, in early 1996, as well as Elmo Semiconducteurs, located near Paris. Elmo was a $15 million business. This was the electronic unit's first acquisition; it had grown organically to revenues of $250 million a year.

Kimball entered the residential furniture business in 1997 under the Kimball Home brand. The first collections, Cherry Falls and Oak Meadow, debuted in April 1997 and were designed by Ron Stilwell of North Carolina. A string of acquisitions in the late 1990s gave Kimball several plants in Pennsylvania, California, Idaho, and the South. These included Southeast Millworks, a Boca Raton, Florida-based company specializing in customized store display fixtures.

Company founders Arnold F. Habig and Herb Thyen both died in 1999. Habig continued to assist his son, CEO and chairman Douglas A. Habig, until shortly before his death. James C. Thyen, son of the founder, was company president. The two families together owned about 13 percent of Kimball's stock.

Kimball had record sales of $1.1 billion in fiscal 1999, with 70 percent of revenues deriving from its furniture segment. Kimball Electronics Group, a contract maker of electronic assemblies, accounted for the remainder. Kimball International still maintained a large fleet, then numbering 35 tractors and 120 trailers, to carefully ship its wares. In 1995, the company began outsourcing maintenance for the trucks.

The electronics business was expanded with several acquisitions in 2000. In April 2000, a plant in Thailand opened. Construction of a 40,000-square-foot microelectronics plant in Valencia, California began in June. In September, the company entered Poland, buying an 80,000-square-foot plant in Poznan from Alcatel, which would be buying switching equipment made there from Kimball. The company also opened a plant in Jasper, Indiana.

In November 2001, Kimball Electronics took over another components plant. VDO North America LLC, a maker of automotive and aerospace instrumentation, sold Kimball its Auburn, Indiana, facility, which produced automotive sensors and circuit boards.

Kimball closed five plants in Indiana, North Carolina, Kentucky, and France in 2001, and cut 2,300 workers from its payroll, due to a slowdown in furniture demand. Consolidated sales rose slightly to $1.26 billion in 2001. Net income after restructuring charges was $16.6 million, down from fiscal 2000's net income of $48.5 million.

The Music Ends in 2002

Kimball cut its remaining ties to the music industry when it sold Vienna-based L. Bösendorfer Klavierfabrik GmbH, the high-end piano maker, to BAWAG-Bank of Austria in early 2002. Around the same time, Kimball was temporarily closing its oldest plant (built in 1936), where subsidiary Jasper Corp. supplied it and other furniture makers on contract. Its 100-plus workers were transferred to the more modern Jasper Furniture Co. plant, which supplied the Kimball Lodging Group.

Principal Subsidiaries: Elmo Semiconducteurs SARL (France); Jackson Furniture of Danville, LLC; Kepco, Inc.; Kimball de Juarez, S.A. de C.V. (Mexico); Kimball de Mexicali, S.A. de C.V. (Mexico); Kimball Electronics Design Services, Inc.; Kimball Electronics, Inc.; Kimball Electronics Manufacturing, Inc.; Kimball Electronics Poland, Sp.z.o.o. (Poland); Kimball Electronics (Thailand) Limited; Kimball Hospitality Furniture, Inc.; Kimball, Inc.; Kimball International Marketing, Inc.; Kimball International Manufacturing, Inc.; Kimball International Transit, Inc.; Kimball Microelectronics, Inc.; Kimball U.K., Inc.; Kimco, S.A. de C.V. (Mexico); McAllen-American Corporation.

Principal Operating Units: Electronics Manufacturing Services; Office Furniture; Home Furniture; Hospitality Furniture; Health Care Furniture; Contract Manufacturing.

Principal Competitors: Haworth Inc.; Herman Miller Inc.; HON Industries Inc.; Knoll Inc.; Steelcase Inc.

Chronology

• Key Dates:
• 1950: Investors take over Midwest Mfg. Co., a maker of cabinets for televisions, and rename it Jasper Corporation.
• 1955: Evansville Veneer and Lumber Co. is acquired.
• 1959: Piano manufacturer W.W. Kimball Co. acquired.
• 1961: Jasper Electronics Mfg. Co. formed to make electronic organs.
• 1974: Name changed to Kimball International, Inc.
• 1976: Kimball goes public.
• 1979: Kimball acquires Artec brand of office furniture.
• 1980: National Office Furniture division is created.
• 1983: Organ operations are phased out in favor of electronics.
• 1992: Metal office furniture maker Harpers, Inc. is acquired.
• 2002: Kimball exits music business.