Kimball International, Inc. - Company Profile, Information, Business Description, History, Background Information on Kimball International, Inc.

1600 Royal Street
Jasper, Indiana 47549

History of Kimball International, Inc.

Kimball International, Inc. is a diversified manufacturer of consumer durable goods best known for its wide range of office, hospitality, healthcare, and home furnishings. The company achieved its first successes in the 1950s by specializing in the manufacture of television cabinets for a variety of original equipment manufacturers (OEMs). Over the years, Kimball has taken advantage of its control of several stages in the manufacturing process to broaden its line of wood cabinetry and furniture offerings to consumers and OEMs. A majority of its 1994 sales--$549 million of a total of $822.5 million--came from the furniture and cabinets segment of the company. Kimball received the majority of the remainder of its sales from its electronic contract assemblies and processed wood products segments. The company also continues to market Kimball pianos, a brand that dates its origins to 1857.

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.

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.

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 have been 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.

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 healthcare 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.

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 reported in its 1994 annual report that it had manufactured over 11 million computer keyboards, while it expects its share of the antilock 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 continues 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 received between six and eight percent of total sales 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 receives 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 cite 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, contends Kimball, is a corporate ethic that reflects an 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 has 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 to exert responsibility and 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 seems poised to grow well into the twenty-first century.

Principal Subsidiaries: Kimball Office Furniture Sales; National Office Furniture Sales; Kimball Office Furniture Manufacturing; Artec Manufacturing; National Office Furniture Manufacturing; Kimball Upholstered Products; Harpers, Inc.; Kimball Lodging Group; Jasper Manufacturing Co.; Batesville American Manufacturing; Kimball Piano Group; Kimball Furniture Reproductions; The Jasper Corporation; Heritage Hills; Kimball Europe P.L.C.; L. Bosendorfer Klavierfabrik GmbH; Kimball Electronics Group; Kimco, S.A. de C.V.; Lafayette Manufacturing; Lafayette Sawmill; Dale Wood Manufacturing; Indiana Hardwoods; Indiana Hardwoods Sawmill; Greensburg Manufacturing; West Jefferson Wood Products; Jasper Laminates; Evansville Veneer and Lumber Co.; Jasper Plastics; ToolPro; Kimball International Transit, Inc.; Facilities/Technology Support Group.

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Further Reference

"Back on Key: Improving Piano Business Aids Results for Kimball," Barron's, December 24, 1984, p. 28.Brooks, Nancy Rivera, and Michele Fuetsch, "Harpers, Citing High Business Costs, Will Move to Idaho," Los Angeles Times, August 26, 1992, p. D2."Easy Shopping at Kimball Showroom," Lodging Hospitality, January 1992, p. 70.Hoffman, Marilyn, "Furniture Makers Target Multiplying Home Offices," Christian Science Monitor, April 5, 1994, p. 9.Johnson, J. Douglas, "Knock on Wood," Indiana Business, December 1992, p. 8.Jones, Grayden, "Furniture Company to Give Big Boost to Local Economy," Spokesman-Review, August 26, 1992."Kimball Furnishes Vegas Megahotels," Lodging Hospitality, January 1994, p. 44.Mabert, Vincent A., John F. Muth, and Roger W. Schmenner, "Collapsing New Product Development Times: Six Case Studies," Journal of Product Innovation Management, Vol. 9, 1992, pp. 200-212.Massey, Steve, "Hitting the Road: Behind the Scenes, Harpers Prepares for Life in Idaho," Spokesman-Review, May 8, 1994, p. E1.------, "Greg Davis: Harpers Manager Knows What It's Like to Live in Small Town," Spokesman-Review, January 24, 1994.Miller, Laura Novello, "Manufacturers Contribute Most to Indiana Employment Scene," Indianapolis Business Journal, May 23, 1994, p. B24.Ripley, Richard, "Kimball Buys Property near Big Harpers Plant," Journal of Business--Spokane, July 7, 1994, p. 3.Vaught, Martin, "Kimball International Subsidiary Announces Relocation," PR Newswire, August 25, 1992.

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