Kimball International, Inc. Reports First Quarter Fiscal Year 2014 Results

  Kimball International, Inc. Reports First Quarter Fiscal Year 2014 Results

Business Wire

JASPER, Ind. -- November 5, 2013

Kimball International, Inc. (NASDAQ: KBALB) today reported net sales of $317.4
million and net income of $9.2 million, or $0.24 per Class B diluted share,
for the first quarter of fiscal year 2014 which ended September30, 2013.

Consolidated Overview

Financial Highlights
(Amounts in Thousands, Except Per     Three Months Ended            
Share Data)
                                       September 30,  September 30,   Percent
                                       2013            2012            Change
Net Sales                              $  317,439      $  288,190      10   %
Gross Profit                           $  61,324       $  55,205       11   %
Gross Profit %                         19.3        %   19.2        %
Selling and Administrative Expenses    $  54,217       $  48,238       12   %
Selling and Administrative Expenses    17.1        %   16.8        %
%
Other General Income                   $  (5,022   )   $  0
Restructuring Expense                  $  402          $  60           570  %
Operating Income                       $  11,727       $  6,907        70   %
Operating Income %                     3.7         %   2.4         %
Adjusted Operating Income *            $  7,107        $  6,967        2    %
Adjusted Operating Income % *          2.2         %   2.4         %
Net Income                             $  9,183        $  4,961        85   %
Adjusted Net Income *                  $  6,405        $  4,997        28   %
Earnings Per Class B Diluted Share     $  0.24         $  0.13         85   %
Adjusted Earnings Per Class B          $  0.17         $  0.13         31   %
Diluted Share *

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

  *Consolidated net sales in the first quarter of fiscal year 2014 increased
    10% from the prior year first quarter on increased net sales in both the
    Electronic Manufacturing Services (EMS) segment and the Furniture segment.
  *First quarter gross profit as a percent of net sales increased 0.1 of a
    percentage point from the prior year first quarter. A slight decline in
    the gross profit percentage in both segments was more than offset by the
    favorable impact of a sales mix shift towards the Furniture segment which
    carries a higher margin.
  *Consolidated selling and administrative expenses in the first quarter of
    fiscal year 2014 increased 12% in absolute dollars compared to the prior
    year. The increased costs were primarily due to higher incentive
    compensation costs, increased salary costs, higher sales and marketing
    costs, and higher commissions related to increased sales in the Furniture
    segment. In addition, the Company classified one of its three aircraft as
    held for sale during the first quarter of fiscal year 2014 and recorded a
    $1.2 million pre-tax impairment charge ($0.7 million after-tax impact).
  *Other General Income in the first quarter of fiscal year 2014 included
    $5.0 million of pre-tax income resulting from settlement proceeds related
    to two antitrust class action lawsuits of which the Company was a member.
    The class actions alleged the defendant sellers illegally conspired to fix
    prices of electronic components purchased several years ago by some of our
    manufacturing facilities in the EMS segment.
  *Other Income/Expense for the first quarter of fiscal year 2014 was income
    of $1.0 million compared to income of $0.3 million in the first quarter of
    the prior year. The variance in Other Income/Expense was driven in part by
    foreign exchange movement that impacted the EMS segment.
  *The Company's effective tax rate for the first quarter of fiscal year 2014
    was 28.0% compared to 31.0% in the prior year first quarter. The current
    year first quarter effective tax rate was favorably impacted by a $0.5
    million adjustment to the Company's deferred tax asset valuation allowance
    in the EMS segment.
  *Operating cash flow for the first quarter of fiscal year 2014 was $16.0
    million compared to $9.5 million in the first quarter of the prior year.
  *The Company's cash and cash equivalents increased to $109.6 million at
    September30, 2013, compared to $103.6 million at June30, 2013. The
    Company had no short-term borrowings outstanding at September30, 2013 or
    June30, 2013. Long-term debt including current maturities was $0.3
    million at September30, 2013.

James C. Thyen, President and Chief Executive Officer, stated, "Our operating
performance in the Furniture segment in the first quarter reflects increased
demand, the effective execution of our strategy, and the commitment of our
entire Furniture team to improve results. Our Furniture segment returned to
profitability in the first quarter, after recording losses for the second half
of last fiscal year. Our focus on accelerating top-line growth in the
Furniture segment was evident in the first quarter as the orders received
during the quarter increased 18% over the prior year first quarter. Overall,
we are pleased with the progress being made in the Furniture segment."

Mr. Thyen continued, "In the EMS segment, the automotive end market is
benefiting from relative strength in the U.S. market and improvement in the
Chinese market which contributed to a double digit increase in our first
quarter sales to the automotive market compared to last year. Industrial
market demand is also improving. While first quarter sales increased over the
prior year first quarter in this segment, sales were down compared to the
third and fourth quarters of fiscal year 2013 when we surpassed our 4%
operating goal. The lower absorption of our fixed costs as a result of the
lower revenue was the primary driver for missing our 4% operating income goal
in the first quarter."

Electronic Manufacturing Services Segment

Financial Highlights           Three Months Ended            
(Amounts in Thousands)
                                September 30,  September 30,   Percent
                                2013            2012            Change
Net Sales                       $  175,636      $  164,175      7    %
Operating Income                $  9,996        $  5,023        99   %
Operating Income %              5.7         %   3.1         %
Adjusted Operating Income *     $  5,046        $  5,088        (1   %)
Adjusted Operating Income % *   2.9         %   3.1         %
Net Income                      $  7,462        $  3,283        127  %
Adjusted Net Income *           $  4,486        $  3,322        35   %

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

  *Fiscal year 2014 first quarter net sales in the EMS segment increased 7%
    compared to the first quarter of the prior year on double-digit sales
    growth to customers in the automotive and industrial industries. Net sales
    to the public safety industry declined compared to the prior year while
    sales to the medical industry remained flat.
  *Gross profit as a percent of net sales in the EMS segment for the first
    quarter of fiscal year 2014 declined 0.1 of a percentage point when
    compared to the first quarter of the prior year. The current year first
    quarter gross profit was negatively impacted by a $0.6 million inventory
    write-down related to products specific to a former customer.
  *Selling and administrative expenses in this segment increased 8% in the
    fiscal year 2014 first quarter when compared to the prior year. Higher
    incentive compensation costs and increased salary costs were partially
    offset by a favorable warranty reserve adjustment and lower costs for
    workers compensation claims. As a percent of sales, selling and
    administrative costs in the EMS segment increased 0.1 of a percentage
    point for the first quarter of fiscal year 2014 compared to the prior
    year.

  *Operating income in the first quarter of fiscal year 2014 includes the
    $5.0 million of Other General Income related to the proceeds from the
    antitrust lawsuits mentioned above. The Adjusted Operating Income and
    Adjusted Net Income amounts in the EMS segment table above exclude this
    income for a more comparable comparison to last year.
  *The first quarter of fiscal year 2014 was favorably impacted by a $0.5
    million adjustment to the deferred tax asset valuation allowance.

Furniture Segment

Financial Highlights    Three Months Ended            
(Amounts in Thousands)
                         September 30,  September 30,   Percent
                         2013            2012            Change
Net Sales                $  141,803      $  124,015      14   %
Operating Income         $  4,787        $  2,803        71   %
Operating Income %       3.4         %   2.3         %
Net Income               $  2,899        $  1,668        74   %

  *Fiscal year 2014 first quarter net sales in the Furniture segment
    increased 14% compared to the prior year on increased net sales of both
    office and hospitality furniture. All vertical markets within the office
    furniture industry increased over the prior year except for a slight
    decline in the federal and state governments. Sequentially, sales to the
    federal and state governments increased compared to the fourth quarter of
    fiscal year 2013. Furniture segment orders increased 18% in the first
    quarter of fiscal year 2014 when compared to the prior year.
  *Gross profit as a percent of net sales declined 0.1 of a percentage point
    in the Furniture segment in the first quarter of fiscal year 2014 when
    compared to the prior year. The operational improvements achieved in this
    segment and benefits realized from pricing adjustments were offset by an
    unfavorable shift in sales mix, higher freight costs and an increase in
    the LIFO inventory reserve.
  *Higher incentive compensation costs, increased salary costs, higher sales
    and marketing costs, and higher commissions resulting from the increased
    sales contributed to a 9% increase in selling and administrative expenses
    in the Furniture segment for the first quarter of fiscal year 2014
    compared to the prior year. As a percent of sales, selling and
    administrative costs in the Furniture segment decreased 1.3 percentage
    points for the first quarter of fiscal year 2014 compared to the prior
    year.

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, statement of comprehensive 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 settlement
proceeds from lawsuit and restructuring charges, 2) net income excluding
settlement proceeds from lawsuits and restructuring charges, and 3) earnings
per Class B diluted share excluding settlement proceeds from lawsuits and
restructuring charges. The non-GAAP financial measures in the EMS segment used
within this release include 1) operating income excluding settlement proceeds
from lawsuits and restructuring charges, and 2) net income excluding
settlement proceeds from lawsuits and 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 lawsuit income and costs incurred in executing its restructuring plans.
Excluding these amounts 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, 2013 and other
filings with the Securities and Exchange Commission.

Conference Call / Webcast
           
Date:        November 5, 2013
Time:        11:00 AM Eastern Time
Dial-In #:   877-280-4959 (International Calls - 857-244-7316)
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 November 19, 2013.

Replay Dial-In #:  888-286-8010 (International Calls - 617-801-6888)
Replay Pass Code:   66756350

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 first quarter ended September30, 2013 are as
follows:

                                                          
Condensed Consolidated Statements of Income
(Unaudited)                       Three Months Ended                        
(Amounts in Thousands, except      September 30, 2013       September 30, 2012
per share data)
Net Sales                          $ 317,439     100.0 %    $ 288,190  100.0 %
Cost of Sales                      256,115      80.7  %    232,985    80.8  %
Gross Profit                       61,324        19.3  %    55,205     19.2  %
Selling and Administrative         54,217        17.1  %    48,238     16.8  %
Expenses
Other General Income               (5,022    )   (1.6  %)   0          0.0   %
Restructuring Expense              402          0.1   %    60         0.0   %
Operating Income                   11,727        3.7   %    6,907      2.4   %
Other Income (Expense), net        1,019        0.3   %    287        0.1   %
Income Before Taxes on Income      12,746        4.0   %    7,194      2.5   %
Provision for Income Taxes         3,563        1.1   %    2,233      0.8   %
Net Income                         $ 9,183      2.9   %    $ 4,961    1.7   %
Earnings Per Share of Common
Stock:
Basic Earnings Per Share:
Class A                            $ 0.24                   $ 0.12
Class B                            $ 0.24                   $ 0.13
Diluted Earnings Per Share:
Class A                            $ 0.23                   $ 0.12
Class B                            $ 0.24                   $ 0.13
                                                              
Average Number of Shares
Outstanding
Class A and B Common Stock:
Basic                              38,310                   38,017
Diluted                            38,596                   38,256

                                                    
Condensed Consolidated Statements of Cash Flows       Three Months Ended
(Unaudited)                                           September 30,
(Amounts in Thousands)                                2013         2012
Net Cash Flow provided by Operating Activities        $ 16,025      $ 9,486
Net Cash Flow used for Investing Activities           (6,425    )   (5,138   )
Net Cash Flow used for Financing Activities           (3,784    )   (2,141   )
Effect of Exchange Rate Change on Cash and Cash       214          96       
Equivalents
Net Increase in Cash and Cash Equivalents             6,030         2,303
Cash and Cash Equivalents at Beginning of Period      103,600      75,197   
Cash and Cash Equivalents at End of Period            $ 109,630    $ 77,500 

                                                          
                                             (Unaudited)
Condensed Consolidated Balance Sheets        September 30,   June 30,
(Amounts in Thousands)                       2013            2013
ASSETS
Cash and cash equivalents                    $    109,630    $ 103,600
Receivables, net                             161,840         160,767
Inventories                                  128,777         123,998
Prepaid expenses and other current assets    38,473          39,013
Assets held for sale                         2,646           1,521
Property and Equipment, net                  184,122         185,744
Goodwill                                     2,556           2,511
Other Intangible Assets, net                 4,817           5,276
Other Assets                                 24,632          22,089
Total Assets                                 $    657,493    $ 644,519
                                                             
LIABILITIES AND SHARE OWNERS' EQUITY
Current maturities of long-term debt         $    25         $ 23
Accounts payable                             158,803         155,709
Dividends payable                            1,880           1,863
Accrued expenses                             56,598          56,856
Long-term debt, less current maturities      275             294
Other                                        25,179          25,268
Share Owners' Equity                         414,733         404,506
Total Liabilities and Share Owners' Equity   $    657,493    $ 644,519

                                                                    
Supplementary Information
Components of Other Income (Expense), net                  Three Months Ended
(Unaudited)                                                September 30,
(Amounts in Thousands)                                     2013        2012
Interest Income                                            $ 68        $ 110
Interest Expense                                           (7      )   (7    )
Foreign Currency/Derivative Gain (Loss)                    118         (393  )
Gain on Supplemental Employee Retirement Plan Investment   1,051       703
Other Non-Operating Expense                                (211    )   (126  )
Other Income (Expense), net                                $ 1,019    $ 287 

                                                                    
Reconciliation of Non-GAAP Financial Measures
(Unaudited)
(Amounts in Thousands, except per share data)
                                                                       
Operating Income excluding Restructuring Charges and
Settlement Proceeds from Lawsuits
                                                            Three Months Ended
                                                            September 30,
Kimball International, Inc.                                 2013       2012
Operating Income, as reported                               $ 11,727   $ 6,907
Less: Pre-tax Settlement Proceeds from Lawsuits             5,022      0
Add: Pre-tax Restructuring Charges                          402        60
Adjusted Operating Income                                   $ 7,107    $ 6,967
                                                                       
Electronic Manufacturing Services Segment
Operating Income, as reported                               $ 9,996    $ 5,023
Less: Pre-tax Settlement Proceeds from Lawsuits             5,022      0
Add: Pre-tax Restructuring Charges                          72         65
Adjusted Operating Income                                   $ 5,046    $ 5,088
                                                                       
Net Income excluding Restructuring Charges and Settlement
Proceeds from Lawsuits
                                                            Three Months Ended
                                                            September 30,
Kimball International, Inc.                                 2013       2012
Net Income, as reported                                     $ 9,183    $ 4,961
Less: After-tax Settlement Proceeds from Lawsuits           3,020      0
Add: After-tax Restructuring Charges                        242        36
Adjusted Net Income                                         $ 6,405    $ 4,997
                                                                       
Electronic Manufacturing Services Segment
Net Income, as reported                                     $ 7,462    $ 3,283
Less: After-tax Settlement Proceeds from Lawsuits           3,020      0
Add: After-tax Restructuring Charges                        44         39
Adjusted Net Income                                         $ 4,486    $ 3,322
                                                                       
Earnings Per Class B Diluted Share excluding
Restructuring Charges and Settlement Proceeds from
Lawsuits
                                                            Three Months Ended
                                                            September 30,
                                                            2013       2012
Earnings per Class B Diluted Share, as reported             $ 0.24     $ 0.13
Less: Impact of Settlement Proceeds from Lawsuits           0.08       0.00
Add: Impact of Restructuring Charges                        0.01       0.00
Adjusted Earnings Per Class B Diluted Share                 $ 0.17     $ 0.13

Contact:

Kimball International
Dennis Gerber, 812-482-8619
Dennis.Gerber@kimball.com
 
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