Kimball International, Inc. Reports Second Quarter Fiscal Year 2013 Results

  Kimball International, Inc. Reports Second Quarter Fiscal Year 2013 Results

Business Wire

JASPER, Ind. -- February 4, 2013

Kimball International, Inc. (NASDAQ: KBALB) today reported net sales of $295.1
million and net income of $4.2 million, or $0.11 per Class B diluted share,
for the second quarter of fiscal year 2013 which ended December31, 2012.

Consolidated Overview

Financial Highlights
(Amounts in Thousands, Except Per Share Data)
                                       Three Months Ended          
                                         December 31,  December 31,   Percent
                                         2012           2011           Change
Net Sales                                $ 295,136      $  296,904     (1   %)
Gross Profit                             $ 55,157       $  54,320      2    %
Gross Profit %                           18.7      %    18.3       %
Selling and Administrative Expenses      $ 49,006       $  48,597      1    %
Selling and Administrative Expenses %    16.6      %    16.4       %
Restructuring Expense                    $ 31           $  1,480       (98  %)
Operating Income                         $ 6,120        $  4,243       44   %
Operating Income %                       2.1       %    1.4        %
Adjusted Operating Income *              $ 6,151        $  5,723       7    %
Adjusted Operating Income % *            2.1       %    1.9        %
Net Income                               $ 4,179        $  3,197       31   %
Adjusted Net Income *                    $ 4,198        $  4,087       3    %
Earnings Per Class B Diluted Share       $ 0.11         $  0.09        22   %
Adjusted Earnings Per Class B Diluted    $ 0.11         $  0.11        0    %
Share *

* Items indicated represent Non-GAAP measurements. See "Reconciliation of
Non-GAAP Financial Measures" below.


  *Consolidated net sales in the second quarter of fiscal year 2013 decreased
    1% from the prior year second quarter as increased net sales in the
    Electronic Manufacturing Services (EMS) segment were more than offset by
    lower net sales in the Furniture segment. The Furniture segment saw growth
    in several market verticals offset by a double digit decline in office
    furniture sales to the federal government and a decline in hospitality
    furniture sales due to the prior year including sales from two unusually
    large projects.
  *Second quarter gross profit as a percent of net sales improved 0.4
    percentage points from the prior year second quarter on improved margins
    in both the EMS segment and the Furniture segment. The Company recorded a
    $1.1 million inventory reserve in the EMS segment in the second quarter of
    fiscal year 2013 relating to a customer that notified the Company they are
    going out of business. Sales to this customer were immaterial.
  *Consolidated second quarter selling and administrative expenses increased
    1% compared to the prior year. Lower sales and marketing costs and lower
    commissions related to the volume declines in the Furniture segment were
    more than offset by increased incentive compensation costs.
  *Other Income/Expense for the second quarter of fiscal year 2013 was
    expense of $1.4 million compared to income of $1.4 million in the prior
    year second quarter. During the current year second quarter, the Company
    recorded a non-cash pre-tax impairment charge of $1.5 million on an
    investment in non-marketable equity securities and stock warrants of a
    privately-held company.
  *The Company's effective tax rate for the second quarter of fiscal year
    2013 was 12.3% compared to 43.8% in the prior year second quarter. The
    current year effective tax rate was favorably impacted by the mix of
    earnings between U.S. and foreign jurisdictions as the Company had a
    greater share of income from foreign operations with lower tax rates.
  *Operating cash flow for the second quarter of fiscal year 2013 was a cash
    inflow of $20.5 million compared to an operating cash inflow of $7.8
    million in the second quarter of the prior year.
  *The Company's cash and cash equivalents increased to $88.1 million at
    December31, 2012, compared to $75.2 million at June30, 2012. The Company
    had no short-term borrowings outstanding at December31, 2012 or June30,
    2012. Long-term debt including current maturities remains at less than
    $0.3 million.

James C. Thyen, President and Chief Executive Officer, stated, "We were very
pleased with the strong second quarter results in spite of the earnings
charges for the customer that notified us they are going out of business and
the impaired investment in a start-up company. These two charges had an
after-tax impact of 4 cents per share and offset nice progress in the EMS
segment. During the second quarter, our EMS segment continued its trend of
gaining traction with double-digit sales growth and improved margins. We again
saw sales growth to customers in the automotive market during the quarter as
the overall U.S. automotive industry experienced steady growth in calendar
year 2012. Sales to the industrial and public safety vertical markets also
increased compared to last year partially resulting from the ramp up of sales
to new customers. Quote activity in this segment has been strong, and we are
optimistic in this segment going into the second half of our fiscal year."

Mr. Thyen concluded, "Sales in the Furniture segment declined compared to last
year primarily due to lower office furniture sales to the federal government,
and the effect of higher sales in hospitality furniture last year resulting
from two unusually large projects. We were encouraged, though, by a 7%
increase in orders received during the quarter over last year. This increase
is in spite of a continued decline in orders from the federal government and
continued fiscal uncertainty in Washington, D.C. which has caused customers to
delay implementation of planned projects. We are heading into the normal
seasonal slowdown within the office furniture industry and anticipate our
third quarter to again be challenging. We continue to aggressively manage our
costs to align with the fluctuating volumes within this segment."

Electronic Manufacturing Services Segment

Financial Highlights                                       
(Amounts in Thousands)          Three Months Ended
                                December 31,  December 31,   Percent
                                2012           2011           Change
Net Sales                       $ 164,181      $  148,112     11    %
Operating Income                $ 4,996        $  225         2,120 %
Operating Income %              3.0       %    0.2        %
Adjusted Operating Income *     $ 5,025        $  1,680       199   %
Adjusted Operating Income % *   3.1       %    1.1        %
Net Income                      $ 3,932        $  315         1,148 %
Adjusted Net Income *           $ 3,950        $  1,189       232   %

* Items indicated represent Non-GAAP measurements. See "Reconciliation of
Non-GAAP Financial Measures" below.


  *Fiscal year 2013 second quarter net sales in the EMS segment increased 11%
    compared to the second quarter of the prior year related to sales growth
    to customers in the automotive, industrial and public safety industries.
    Sales to customers in the medical industry declined in the second quarter
    compared to the prior year.
  *Gross profit as a percent of net sales in the EMS segment for the second
    quarter of fiscal year 2013 improved 2.1 percentage points when compared
    to the second quarter of the prior year primarily due to leverage gained
    on the higher revenue as well as benefits realized from global purchasing
    efforts and operating efficiencies related to continuous improvement
    initiatives. As mentioned above, second quarter fiscal year 2013 gross
    profit was unfavorably impacted by a $1.1 million inventory reserve
    relating to a customer that announced they are going out of business.
  *Selling and administrative expenses in this segment increased 12% in the
    fiscal year 2013 second quarter when compared to the prior year primarily
    due to increased incentive compensation costs related to the significant
    improvement in earnings. As a percent of net sales, selling and
    administrative costs in the EMS segment increased 0.1 percentage point.

Furniture Segment

Financial Highlights                                
(Amounts in Thousands)   Three Months Ended
                         December 31,  December 31,   Percent
                         2012           2011           Change
Net Sales                $  130,955     $  148,792     (12  %)
Operating Income         $  1,939       $  5,401       (64  %)
Operating Income %       1.5        %   3.6        %
Net Income               $  1,504       $  3,438       (56  %)

  *Fiscal year 2013 second quarter net sales in the Furniture segment
    declined 12% compared to the prior year on decreased net sales of both
    hospitality and office furniture. Sales of hospitality product were lower
    in the second quarter of the current year primarily due to two unusually
    large projects that began shipping in the second quarter of last year.
    Sales of office furniture product to the federal and state governments
    lagged prior year with the largest decline to the federal government.
  *Gross profit as a percent of net sales improved 0.7 percentage points in
    the Furniture segment in the second quarter of fiscal year 2013 when
    compared to the prior year as benefits realized from price increases and
    lower commodity costs were partially offset by the loss of leverage from
    the lower revenue.
  *Selling and administrative expenses in the Furniture segment for the
    second quarter of fiscal year 2013 declined 1% compared to the prior year
    as lower sales and marketing costs and lower commission costs due to the
    decline in revenue were partially offset by higher incentive compensation
    costs.

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 non-GAAP
financial measures on a consolidated basis used within this release include 1)
operating income excluding restructuring charges, 2) net income excluding
restructuring charges, and 3) earnings per Class B diluted share excluding
restructuring charges. The non-GAAP financial measures on a segment basis used
within this release include 1) operating income excluding restructuring
charges and 2) net income excluding restructuring charges. Reconciliations of
the reported GAAP numbers to these non-GAAP financial measures are included in
the Financial Highlights table below. 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 the
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
global 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, and increased
competitive pricing pressures reflecting excess industry capacities.
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 June30, 2012 and other
filings with the Securities and Exchange Commission.

Conference Call / Webcast
           
Date:        February 4, 2013
Time:        11:00 AM Eastern Time
Dial-In #:   800-510-0146 (International Calls - 617-614-3449)
Pass Code:   Kimball

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 February 18, 2013.

Replay Dial-In #:  888-286-8010 (International Calls - 617-801-6888)
Replay Pass Code:   67616296

About Kimball International, Inc.

Recognized with a reputation for excellence, Kimball International, Inc. 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 second quarter ended December 31, 2012 are as
follows:


Condensed Consolidated Statements of Income
(Unaudited)                    Three Months Ended
(Amounts in Thousands, except   December 31, 2012       December 31, 2011
per share data)
Net Sales                       $ 295,136    100.0 %    $ 296,904   100.0 %
Cost of Sales                   239,979      81.3  %    242,584      81.7  %
Gross Profit                    55,157        18.7  %    54,320        18.3  %
Selling and Administrative      49,006        16.6  %    48,597        16.4  %
Expenses
Restructuring Expense           31           0.0   %    1,480        0.5   %
Operating Income                6,120         2.1   %    4,243         1.4   %
Other Income (Expense), net     (1,357    )   (0.5  %)   1,442        0.5   %
Income Before Taxes on Income   4,763         1.6   %    5,685         1.9   %
Provision for Income Taxes      584          0.2   %    2,488        0.8   %
Net Income                      $ 4,179      1.4   %    $ 3,197      1.1   %
Earnings Per Share of Common
Stock:
Basic Earnings Per Share:
Class A                         $ 0.11                   $ 0.08
Class B                         $ 0.11                   $ 0.09
Diluted Earnings Per Share:
Class A                         $ 0.11                   $ 0.08
Class B                         $ 0.11                   $ 0.09
                                                                       
Average Number of Shares
Outstanding
Class A and B Common Stock:
Basic                           38,077                   37,891
Diluted                         38,295                   37,979
                                                                       

(Unaudited)                    Six Months Ended
(Amounts in Thousands, except   December 31, 2012       December 31, 2011
per share data)
Net Sales                       $ 583,326    100.0 %    $ 567,539   100.0 %
Cost of Sales                   472,964      81.1  %    466,249      82.2  %
Gross Profit                    110,362       18.9  %    101,290       17.8  %
Selling and Administrative      97,244        16.7  %    94,565        16.6  %
Expenses
Restructuring Expense           91           0.0   %    1,593        0.3   %
Operating Income                13,027        2.2   %    5,132         0.9   %
Other Income (Expense), net     (1,070    )   (0.2  %)   240          0.0   %
Income Before Taxes on Income   11,957        2.0   %    5,372         0.9   %
Provision for Income Taxes      2,817        0.4   %    2,321        0.4   %
Net Income                      $ 9,140      1.6   %    $ 3,051      0.5   %
Earnings Per Share of Common
Stock:
Basic Earnings Per Share:
Class A                         $ 0.23                   $ 0.07
Class B                         $ 0.24                   $ 0.08
Diluted Earnings Per Share:
Class A                         $ 0.22                   $ 0.07
Class B                         $ 0.24                   $ 0.08
                                                                       
Average Number of Shares
Outstanding
Class A and B Common Stock:
Basic                           38,047                   37,863
Diluted                         38,469                   37,973
                                                                       

Condensed Consolidated Statements of Cash Flows       Six Months Ended
(Unaudited)                                            December 31,
(Amounts in Thousands)                                 2012        2011
Net Cash Flow provided by Operating Activities         $ 29,962     $ 1,185
Net Cash Flow used for Investing Activities            (13,394  )   (15,380  )
Net Cash Flow used for Financing Activities            (4,010   )   (3,966   )
Effect of Exchange Rate Change on Cash and Cash        336         (1,651   )
Equivalents
Net Increase (Decrease) in Cash and Cash Equivalents   12,894       (19,812  )
Cash and Cash Equivalents at Beginning of Period       75,197      51,409   
Cash and Cash Equivalents at End of Period             $ 88,091    $ 31,597 

                                                         
                                             (Unaudited)
Condensed Consolidated Balance Sheets        December 31,   June 30,
(Amounts in Thousands)                       2012           2012
ASSETS
Cash and cash equivalents                    $  88,091      $ 75,197
Receivables, net                             127,543        139,467
Inventories                                  137,306        117,681
Prepaid expenses and other current assets    38,511         44,636
Assets held for sale                         1,709          1,709
Property and Equipment, net                  188,853        186,099
Goodwill                                     2,529          2,480
Other Intangible Assets, net                 5,703          6,206
Other Assets                                 23,072        22,041
Total Assets                                 $  613,317    $ 595,516
                                                            
LIABILITIES AND SHARE OWNERS' EQUITY
Current maturities of long-term debt         $  17          $ 14
Accounts payable                             144,777        137,423
Dividends payable                            1,862          1,843
Accrued expenses                             46,305         48,460
Long-term debt, less current maturities      268            273
Other                                        23,143         21,275
Share Owners' Equity                         396,945       386,228
Total Liabilities and Share Owners' Equity   $  613,317    $ 595,516

                                                                  
Supplementary Information
Components of Other Income       Three Months Ended       Six Months Ended
(Expense), net
(Unaudited)                      December 31,             December 31,
(Amounts in Thousands)           2012         2011        2012         2011
Interest Income                  $ 121        $ 100       $ 231        $ 220
Interest Expense                 (8       )   (7      )   (15      )   (16   )
Foreign Currency/Derivative      (124     )   378         (516     )   1,152
Gain (Loss)
Gain (Loss) on Supplemental
Employee Retirement Plan         283          1,087       986          (875  )
Investment
Impairment Loss on               (735     )   —           (735     )   —
Privately-Held Investment
Loss on Stock Warrants           (751     )   (11     )   (752     )   (41   )
Other Non-Operating Expense      (143     )   (105    )   (269     )   (200  )
Other Income (Expense), net      $ (1,357 )   $ 1,442    $ (1,070 )   $ 240 
                                                                             

Reconciliation of Non-GAAP Financial Measures
(Unaudited)
(Amounts in Thousands, except per share data)
                                                                    
Operating Income excluding Restructuring Charges
                                                           Three Months Ended
                                                           December 31,
Kimball International, Inc.                                2012        2011
Operating Income, as reported                              $ 6,120     $ 4,243
Pre-tax Restructuring Charges                              31         1,480
Adjusted Operating Income                                  $ 6,151    $ 5,723
                                                                       
Electronic Manufacturing Services Segment
Operating Income, as reported                              $ 4,996     $ 225
Pre-tax Restructuring Charges                              29         1,455
Adjusted Operating Income                                  $ 5,025    $ 1,680
                                                                       
Net Income excluding Restructuring Charges
                                                           Three Months Ended
                                                           December 31,
Kimball International, Inc.                                2012        2011
Net Income, as reported                                    $ 4,179     $ 3,197
After-tax Restructuring Charges                            19         890
Adjusted Net Income                                        $ 4,198    $ 4,087
                                                                       
Electronic Manufacturing Services Segment
Net Income, as reported                                    $ 3,932     $ 315
After-tax Restructuring Charges                            18         874
Adjusted Net Income                                        $ 3,950    $ 1,189
                                                                       
Earnings Per Class B Diluted Share excluding Restructuring Charges
                                                           Three Months Ended
                                                           December 31,
                                                           2012        2011
Earnings per Class B Diluted Share, as reported            $ 0.11      $ 0.09
Impact of Restructuring Charges per Class B Diluted        0.00       0.02
Share
Adjusted Earnings Per Class B Diluted Share                $ 0.11     $ 0.11

Contact:

Kimball International
Martin Vaught, Director of Public Relations, 812-482-1600
martin.vaught@kimball.com
 
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