48 49
H O N  I N D U S T R I E S  I n c .  a n d  S U B S I D I A R I E S
The changes in the carrying amount of goodwill since December 29, 
2001, are as follows by reporting segment:
  Office Hearth
(In thousands) Furniture Products Total
Balance as of December 29, 2001 $ 43,611 $ 143,083 $ 186,694
(after SFAS 142 reclassification)
Goodwill increase during period  –  5,710  5,710
Net goodwill disposed of 
 during period  –  (9)  (9)
Balance as of December 28, 2002 $ 43,611 $ 148,784 $ 192,395
Adjustment for a prior acquisition  –   (309)   (309)
Balance as of January 3, 2004 $ 43,611 $ 148,475 $ 192,086
The goodwill increase in 2002 relates to additional purchase consider-
ation associated with debentures issued in connection with a prior 
acquisition. The decrease in goodwill in 2003 is due to an adjustment 
relating to a prior acquisition.
The following schedule reports the adjusted net income for 
the goodwill and indefinite-lived trademark amortization effect:
(In thousands except for per share data) 2003 2002 2001 
Reported net income $ 98,105 $ 91,360 $ 74,407
Add back: Goodwill 
 amortization, net of tax  –  –  5,611
Add back: Trademark 
 amortization, net of tax  –  –  149
Adjusted net income $ 98,105  $ 91,360 $ 80,167
Diluted earnings per share: 
Reported net income  $ 1.68 $ 1.55 $ 1.26
Goodwill & trademark 
 amortization, net of tax  –  –  .10
Adjusted net income $ 1.68 $ 1.55 $ 1.36
Accounts Payable and Accrued Expenses
(In thousands) 2003 2002 2001 
Trade accounts payable $ 44,295 $ 66,204 $ 53,660
Compensation  22,803  20,686  13,663
Profit sharing and 
 retirement expense  30,365  26,788  26,020
Vacation pay  13,745  14,095  13,881
Marketing expenses  44,795  59,224  54,861
Casualty self-insurance expense  9,385  10,973  17,189
Other accrued expenses  45,848    54,175    36,910
     $ 211,236 $ 252,145 $ 216,184
Long-Term Debt
(In thousands) 2003 2002 2001 
Industrial development revenue 
 bonds, various issues, payable 
 through 2018 with interest 
 at 1.49-5.40% per annum $ 2,300 $ 7,938 $ 23,995
Convertible debentures 
 payable to individuals, with 
 interest at 5.5% per annum  26,130   40,443   58,074
Other notes and amounts  503  736    3,285
Total debt   28,933  49,117  85,354
Less: current portion  26,243  40,564   5,784
Long-term debt $ 2,690 $ 8,553 $ 79,570
Aggregate maturities of long-term debt are as follows:
(In thousands)
 2004       $ 26,243
 2005         117
 2006        95
 2007         52
 2008        43
 Thereafter      2,383
The convertible debentures are payable to the former owners of busi -
nesses that were acquired by the Company. Following the acquisition 
some of these individuals continued as members of the Company. The 
convertible debentures are convertible into cash. The debentures con-
tain certain conversion features that are recorded as earned. During 
2003 the Company recorded approximately $3 million of appreciation 
on these debentures.
Certain of the above borrowing arrangements include 
covenants which limit the assumption of additional debt and lease 
obligations. The Company has been and currently is in compliance 
with the covenants related to these debt agreements. The fair value 
of the Company’s outstanding long-term debt obligations at year-
end 2003 approximates the recorded aggregate amount.
Selling and Administrative Expenses
(In thousands) 2003 2002 2001 
Freight expense for shipments
 to customers $ 105,933 $  98,876 $ 103,489
Amortization of 
 intangible and other assets  4,625  4,317  12,646
Product development costs  25,791  25,849  21,415
Other selling and  
 administrative expenses    344,395  325,147  326,656
     $ 480,744 $ 454,189 $ 464,206