Kimball International, Inc. Reports First Quarter Fiscal Year 2010 Results

November 5, 2009 7:00 AM EST

JASPER, Ind.--(BUSINESS WIRE)-- Kimball International, Inc. (NASDAQ: KBALB) today reported net sales of $274.7 million and net income of $1.8 million, or $0.05 per Class B diluted share, for the first quarter of fiscal year 2010, which ended September 30, 2009.

Consolidated Overview

Financial Highlights
(Dollars in thousands,  Three Months Ended
Except Per Share Data)

                        September 30,   % of     September 30,   % of    Percent
                        2009            Sales    2008            Sales   Change

Net Sales               $274,659                 $339,495                (19%)

Gross Profit            $47,184         17.2 %   $58,512         17.2%

Selling and             $46,066         16.8%    $53,305         15.7%
Administrative Expense

Restructuring Expense   $486            0.2%     $963            0.3%

Net Income              $1,774          0.6%     $2,184          0.6%    (19%)

Earnings Per Class B    $0.05                    $0.06                   (17%)
Diluted Share

Non-GAAP Financial
Measures

Net Income excluding    $2,066          0.8%     $2,778          0.8%    (26%)
Restructuring Charges

Earnings Per Class B
Diluted Share           $0.06                    $0.08                   (25%)
excluding
Restructuring Charges

    --  First quarter fiscal year 2010 net sales declined 10% in the Electronic
        Manufacturing Services (EMS) segment while net sales in the Furniture
        segment declined 30% when compared with the prior year first quarter. A
        sharp decline in sales occurred in the second and third quarters of last
        fiscal year and sales have since stabilized. Sequentially, sales in the
        first quarter of fiscal year 2010 improved slightly over the immediately
        preceding quarter.
    --  Gross profit as a percent of net sales remained flat in the EMS segment
        while the Furniture segment increased when compared with the prior year.
        On a consolidated basis, in spite of the improvement in the Furniture
        segment gross profit percent, gross profit as a percent of net sales
        remained flat because of a sales mix shift toward the lower margined EMS
        segment.
    --  Consolidated first quarter selling and administrative expenses declined
        14% compared to the prior year primarily due to benefits realized from
        restructuring actions, comprehensive cost reduction efforts throughout
        the Company, lower depreciation/amortization expense and lower employee
        benefit costs which are linked to Company profitability. Partially
        offsetting these costs reductions was a $2.6 million increase in expense
        related to the Company's Supplemental Employee Retirement Plan (SERP)
        liability resulting from the normal revaluation of the liability to fair
        value in the current year first quarter. As the general equity markets
        improved, the value of the SERP investments increased, causing
        additional selling and administrative expense. The expense was exactly
        offset by an increase in the SERP investment which was recorded in Other
        income/expense as an investment gain; therefore, there was no effect on
        net earnings.
    --  Other income/expense for the first quarter increased $2.8 million from
        the prior year primarily related to the SERP investment gain noted
        above.
    --  Operating cash flow for the first quarter of fiscal year 2010 was $12.5
        million compared to $14.0 million in the first quarter of the prior
        year.
    --  The Company's net cash position, an aggregate of cash and short-term
        investments less short-term borrowings, totaled $87.5 million at
        September 30, 2009 compared to $88.6 million at June 30, 2009. Long-Term
        Debt including Current Maturities is $0.4 million.

James C. Thyen, Chief Executive Officer and President, stated, "Our EMS segment is seeing more positive signs of recovery from the recession than our Furniture segment. While first quarter sales in our EMS segment were down compared to the prior year, we did see our second sequential quarterly increase in sales. That is, our first quarter fiscal year 2010 sales in the EMS segment showed a 9% improvement over the fourth quarter of fiscal year 2009, after reporting last quarter that our EMS segment sales for the fourth quarter of fiscal year 2009 had improved 8% from the third quarter of fiscal year 2009. This sequential improvement in sales the last two quarters is an encouraging sign, but we remain guarded about the health of the overall economy. Our Furniture segment sales in the first quarter declined from both the first quarter of the prior year and from the fiscal year 2009 fourth quarter as we are now experiencing the full impact of the recession in our furniture markets which usually lag the general economic activity. The commercial real estate markets remain depressed."

Mr. Thyen concluded, "We are pleased with the efforts by all of our employees to defer spending where prudent and to be very innovative when spending is required, which has allowed us to remain profitable with the significant decline in sales. We remain committed to our long-term strategies of growth and diversification and will continue to invest in capital projects including potential acquisitions that will enhance our capabilities and bring profitable growth."

Electronic Manufacturing Services Segment

Financial Highlights                    Three Months Ended
(Dollars in thousands)

                                        September 30,   September 30,   Percent
                                        2009            2008            Change

Net Sales                               $165,486        $182,921        (10%)

Net (Loss)                              ($219)          ($768)          71%

Non-GAAP Financial Measures
Reconciliation

Net (Loss)                              ($219)          ($768)          71%

Add: Restructuring Charges, Net of Tax  $276            $435            (37%)

Net Income (Loss), Excluding            $57             ($333)          117%
Restructuring Charges

    --  First quarter net sales in the EMS segment declined 10% from the first
        quarter of the prior year as sales to customers in the medical,
        automotive, industrial control and public safety industries were all
        down compared to last year. First quarter fiscal year 2010 net sales in
        this segment increased 9% over the fiscal year 2009 fourth quarter due
        to increased sales in the automotive, medical and industrial control
        industries.
    --  Gross profit as a percent of net sales in the EMS segment for the first
        quarter of fiscal year 2010 remained flat with the first quarter of the
        prior year.
    --  Selling and administrative costs in this segment declined 16% in the
        first quarter when compared to the prior year primarily related to
        benefits realized from restructuring actions, lower
        depreciation/amortization expense, lower employee benefit costs which
        are linked to Company profitability, and other overall cost reduction
        efforts.

Furniture Segment

Financial Highlights                    Three Months Ended
(Dollars in thousands)

                                        September 30,   September 30,   Percent
                                        2009            2008            Change

Net Sales                               $109,166        $156,574        (30%)

Net Income                              $1,780          $3,183          (44%)

Non-GAAP Financial Measures
Reconciliation

Net Income                              $1,780          $3,183          (44%)

Add: Restructuring Charges, Net of Tax  $8              $146            (95%)

Net Income, Excluding Restructuring     $1,788          $3,329          (46%)
Charges

    --  Fiscal year 2010 first quarter net sales of furniture products declined
        30% compared to the prior year primarily on lower office furniture net
        sales and to a lesser extent lower hospitality furniture net sales.
    --  Gross profit as a percent of net sales increased in the Furniture
        segment for the first quarter of fiscal year 2010 when compared to the
        prior year. Price increases on select product, a decrease in LIFO
        inventory reserves resulting primarily from lower inventory levels,
        improved labor productivity at select facilities, lower freight and
        commodity costs and other overall cost reduction actions favorably
        impacted gross profit during the current year first quarter. While the
        Furniture segment gross profit as a percent of sales increased in the
        first quarter, the gross profit dollars declined when compared to the
        prior year due to the significant decline in sales volume.
    --  Selling and administrative costs in this segment for the first quarter
        of fiscal year 2010 declined 18% when compared to the prior year on
        decreased labor costs, lower sales and marketing costs, lower employee
        benefits costs which are linked to Company profitability, and other
        overall cost reduction efforts.

Non-GAAP Financial Measures

This press release contains non-GAAP financial measures. A non-GAAP financial measure is a numerical measure of a Company's financial performance that excludes or includes amounts so as to be different than the most directly comparable measure calculated and presented in accordance with Generally Accepted Accounting Principles (GAAP) in the United States in the statement of income, balance sheet or statement of cash flows of the Company. The two non-GAAP financial measures on a consolidated basis used within this release include 1) net income excluding restructuring charges and 2) earnings per share excluding restructuring charges. The non-GAAP financial measures on a segment basis used within this release include net income/(loss) excluding restructuring charges. Reconciliations of the reported GAAP numbers to these non-GAAP financial measures are included in the Financial Highlights table below for consolidated results or in the tables above for the segment results. Management believes it is useful for investors to understand how its core operations performed without the effects of the costs incurred in executing its restructuring plans. Excluding restructuring charges allows investors to meaningfully trend, analyze, and benchmark the performance of the Company's core operations. Many of the Company's internal performance measures that management uses to make certain operating decisions exclude these charges to enable meaningful trending of core operating metrics.

Forward-Looking Statements

Certain statements contained within this release are considered forward-looking under the Private Securities Litigation Reform Act of 1995 and are subject to risks and uncertainties including, but not limited to, the current global economic recession, other general economic conditions, significant volume reductions from key contract customers, significant reduction in customer order patterns, loss of key customers or suppliers within specific industries, financial stability of key customers and suppliers, availability or cost of raw materials, increased competitive pricing pressures reflecting excess industry capacities, and successful execution of restructuring plans. Additional cautionary statements regarding other risk factors that could have an effect on the future performance of the Company are contained in the Company's Form 10-K filing for the fiscal year ended June 30, 2009 and other filings with the Securities and Exchange Commission.

Conference Call / Webcast

Kimball International will conduct its first quarter financial results conference call beginning at 11:00 AM Eastern Time today, November 5, 2009. To listen to the live conference call, dial 866-700-0133, or for international calls, dial 617-213-8831. A webcast of the live conference call may be accessed by visiting Kimball's Investor Relations website at www.ir.kimball.com.

For those unable to participate in the live webcast, the call will be archived at www.ir.kimball.com within two hours of the conclusion of the live call and will remain there for approximately 90 days. A telephone replay of the conference call will be available within two hours after the conclusion of the live event through November 22, 2009, at 888-286-8010 or internationally at 617-801-6888. The pass code to access the replay is 80294396.

About Kimball International, Inc.

Recognized with a reputation for excellence, Kimball International is committed to a high performance culture that values personal and organizational commitment to quality, reliability, value, speed and ethical behavior. Kimball employees know they are part of a corporate culture that builds success for Customers while enabling employees to share in the Company's success through personal, professional and financial growth.

Kimball International, Inc. provides a variety of products from its two business segments: the Electronic Manufacturing Services segment and the Furniture segment. The Electronic Manufacturing Services segment provides engineering and manufacturing services which utilize common production and support capabilities to a variety of industries globally. The Furniture segment provides furniture for the office and hospitality industries sold under the Company's family of brand names.

For more information about Kimball International, Inc., visit the Company's website on the Internet at www.kimball.com.

"We Build Success"

Financial Highlights for the first quarter ended September 30, 2009, follow:

Condensed Consolidated
Statements of Income

(Unaudited)                    Three Months Ended

($000's, except per share      September 30, 2009          September 30, 2008
data)

Net Sales                      $ 274,659        100.0   %  $ 339,495    100.0 %

Cost of Sales                    227,475        82.8    %    280,983    82.8  %

Gross Profit                     47,184         17.2    %    58,512     17.2  %

Selling and Administrative       46,066         16.8    %    53,305     15.7  %
Expenses

Restructuring Expense            486            0.2     %    963        0.3   %

Operating Income                 632            0.2     %    4,244      1.2   %

Other Income (Expense)-Net       1,986          0.7     %    (779    )  (0.2  %)

Income Before Taxes on           2,618          0.9     %    3,465      1.0   %
Income

Provision for Income Taxes       844            0.3     %    1,281      0.4   %

Net Income                     $ 1,774          0.6     %  $ 2,184      0.6   %

Earnings Per Share of Common
Stock:

Basic Earnings Per Share:

Class A                        $ 0.04                      $ 0.06

Class B                        $ 0.05                      $ 0.06

Diluted Earnings Per Share:

Class A                        $ 0.04                      $ 0.06

Class B                        $ 0.05                      $ 0.06

Average Number of Shares
Outstanding

Class A and B Common Stock:

Basic                            37,313                      37,014

Diluted                          37,508                      37,319

Condensed Consolidated         Three Months Ended
Statements of Cash Flows

(Unaudited)                    September 30,

($000's)                       2009           2008

Net Cash Flow provided by      $ 12,507       $ 13,974
Operating Activities

Net Cash Flow used for           (12,179 )      (15,509 )
Investing Activities

Net Cash Flow used for           (1,936  )      (1,371  )
Financing Activities

Effect of Exchange Rate
Change on Cash and Cash          1,897          (2,150  )
Equivalents

Net Increase (Decrease) in       289            (5,056  )
Cash and Cash Equivalents

Cash and Cash Equivalents at     75,932         30,805
Beginning of Period

Cash and Cash Equivalents at   $ 76,221       $ 25,749
End of Period

Condensed Consolidated         (Unaudited)
Balance Sheets

                               September 30,  June 30,

($000's)                       2009           2009

ASSETS

Cash, cash equivalents and     $ 100,664      $ 101,308
short-term investments

Receivables, Net                 137,915        143,398

Inventories                      142,832        127,004

Prepaid expenses and other       39,369         35,720
current assets

Assets Held for Sale             1,358          1,358

Property and Equipment, Net      203,857        200,474

Goodwill                         2,657          2,608

Other Intangible Assets, Net     9,511          10,181

Other Assets                     19,198         20,218

Total Assets                   $ 657,361      $ 642,269

LIABILITIES AND SHARE
OWNERS' EQUITY

Current maturities of          $ 61           $ 60
long-term debt

Accounts payable                 180,494        165,051

Borrowings under credit          13,162         12,677
facilities

Dividends payable                2,402          2,393

Accrued expenses                 52,295         52,426

Long-term debt, less current     349            360
maturities

Other                            23,330         26,948

Share Owners' Equity             385,268        382,354

Total Liabilities and Share    $ 657,361      $ 642,269
Owners' Equity

Supplementary Information

Components of Other Income
(Expense), Net

                               Three Months Ended

(Unaudited)                    September 30,

($000's)                       2009           2008

Interest Income                $ 277          $ 775

Interest Expense                 (15     )      (776    )

Foreign Currency/Derivative      327            511
Gain

Gain (Loss) on Supplemental
Employee Retirement Plan         1,517          (1,123  )
Investment

Other Non-Operating Expense      (120    )      (166    )

Other Income (Expense), Net    $ 1,986        $ (779    )

Reconciliation of Non-GAAP
Financial Measures

(Unaudited)

($000's, except per share)

Net Income Excluding           Three Months Ended
Restructuring Charges

                               September 30,

                               2009           2008

Net Income, as reported        $ 1,774        $ 2,184

Restructuring Charges, Net       292            594
of Tax

Net Income, Excluding          $ 2,066        $ 2,778
Restructuring Charges

Earnings Per Class B Diluted
Share, Excluding
Restructuring Charges

Earnings per Class B Diluted   $ 0.05         $ 0.06
Share, as reported

Impact of Restructuring
Charges per Class B Diluted    $ 0.01         $ 0.02
Share

Earnings per Class B Diluted
Share, Excluding               $ 0.06         $ 0.08
Restructuring Charges

    Source: Kimball International, Inc.

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