Exhibit 99.1
KIMBALL INTERNATIONAL, INC. REPORTS SECOND QUARTER FISCAL
2006 RESULTS
JASPER, IN (February 2, 2006) - Kimball International, Inc. (NASDAQ: KBALB)
today announced the financial results for the second quarter of fiscal year
2006, which ended December 31, 2005.
Discontinued Operations
As a continuing component of the previous announcement made by the Company to
tighten its focus within the Furniture and Cabinets segment, during the second
quarter of fiscal year 2006 the Company commenced actions to sell a non-core
business that manufactures polyurethane and polyester molded components
primarily for the recreational vehicle, signage and residential furniture
industries. This operation was classified as held-for-sale as of December 31,
2005 and results of this operation, including an estimated loss on disposal, are
reported as a discontinued operation. Sales, gross margin, selling, general and
administrative costs and income from continuing operations discussed below
exclude the results of discontinued operations for all periods.
Consolidated Overview
Fiscal year 2006 second quarter net sales totaled $273.9 million which
approximated net sales of $272.7 million reported for the fiscal 2005 second
quarter. An increase of 6% in net sales in the Furniture and Cabinets segment
was offset by a decline of 7% in the Electronic Contract Assemblies segment when
compared to the prior year. Income from continuing operations in the current
year second quarter was $5.1 million or $0.14 per Class B share, inclusive of
after-tax charges associated with previously announced restructuring activities.
Excluding the restructuring charges, income from continuing operations in the
current year second quarter was $6.8 million, or $0.18 per Class B share. The
Company recorded income from continuing operations in the prior year second
quarter of $7.5 million, or $0.20 per Class B share.
Including a loss from discontinued operations of ($0.9) million after-tax or
($0.03) per Class B share, fiscal year 2006 second quarter net income was $4.2
million, or $0.11 per Class B share. The loss from the discontinued operations
was primarily related to an estimated loss on the disposal of the polyurethane
components business operation that was held for sale at December 31, 2005. For
the prior year second quarter, net income was $6.1 million, or $0.16 per Class B
share, inclusive of a loss on discontinued operations of ($1.4) million
after-tax, or ($0.04) per Class B share.
All discontinued operations and restructuring costs recognized during the
current quarter pursuant to the Company's plans to sharpen its focus within the
Furniture and Cabinets segment were within previously announced estimates.
On a consolidated basis, the Company's gross margin in the second quarter of
fiscal year 2006 was 21.7% compared to 22.1% in the second quarter of fiscal
year 2005. Margin declines within the Electronic Contract Assemblies segment
when compared to the prior year second quarter were partially offset by an
improvement in gross margin in the Furniture and Cabinets segment coupled with a
sales mix shift toward the Furniture and Cabinets segment which carries a higher
gross margin than the Electronics segment.
Consolidated selling, general and administrative (SG&A) costs for the second
quarter of fiscal year 2006 decreased in both absolute dollars and as a percent
of sales compared to the prior year as lower selling and product warranty costs
and gains on the sale of an idle manufacturing facility and an administrative
office building were partially offset by higher incentive compensation costs.
Pre-tax restructuring charges in the current year second quarter totaled ($2.6)
million. The current year restructuring charges were within the Furniture and
Cabinets segment and included exit costs related to the activity to consolidate
two Mexican operations into one facility that began late in fiscal year 2005 and
accelerated amortization of integrated Enterprise Resource Planning (ERP)
software resulting from the consolidation of various business functions within
this segment. There were no restructuring charges recorded in the second quarter
of the prior year.
Operating income including restructuring charges was $5.0 million in the second
quarter of fiscal year 2006 compared to $6.5 million in the same quarter last
year. Excluding restructuring charges, fiscal year 2006 second quarter operating
income was $7.6 million, an increase from the prior year. While second quarter
operating income excluding restructuring charges was ahead of the prior year,
income from continuing operations excluding restructuring fell below the prior
year as a result of a higher effective tax rate in the current year quarter as a
greater percentage of current year consolidated income was generated by domestic
operations which have a higher tax rate than the Company's foreign operations.
Beginning in fiscal year 2006, the Company adopted Statement of Financial
Accounting Standards No. 123(R), "Share-Based Payment", which required the
Company to recognize expense related to stock options in the income statement.
The impact on the second quarter results was minimal due to the Company's
limited issuance of stock options during the last several years.
Operating cash flow for the second quarter of fiscal year 2006 totaled $14.0
million compared to $12.3 million in the second quarter of last year. The
Company's cash and short-term investment balance increased to $143.5 million at
December 31, 2005 compared to $117.5 million at June 30, 2005 primarily due to
the generation of positive operating cash flow and proceeds received from the
sale of discontinued operations during the second quarter.
James C. Thyen, Chief Executive Officer and President, stated, "The sales level
we achieved in the second quarter was the highest in the last eight quarters on
the strength of our Furniture and Cabinets segment. And while consolidated
income from our continuing operations for the quarter fell below last year, I
was encouraged to see a substantial improvement in earnings from our most recent
first quarter. Our lower SG&A costs during the quarter are reflective of our
heightened focus on cost management." Mr. Thyen added, "Within our Furniture and
Cabinets segment, we are progressing as planned with actions from our
restructuring activities that were announced in September 2005 to sharpen our
focus within this segment. The sale of the hardwoods lumber operation and the
fixed-wall office furniture operation that were held for sale at the end of the
first quarter were both completed during the second quarter. In November 2005,
we announced plans to sell a polyurethane products manufacturing operation, and
that sale was completed in January, 2006. In addition, we continue to move
forward on consolidating various business functions within this segment to
simplify our processes. We believe the actions being taken to sharpen our focus
will result in improved profitability in this segment."
Mr. Thyen concluded, "As you look to our Contract Electronics segment, we
experienced a decline in our second quarter sales and earnings over last year
primarily due to declines with automotive industry customers. While we have been
successful in landing several new customers over the past year, the sales from
these new program awards are not ramping up quickly enough to offset programs
that are declining. In addition, these new programs are being awarded at lower
margins. As a result, we are continuing our focus on various productivity
initiatives to improve our efficiency within this segment."
Furniture and Cabinets Segment
In the Furniture and Cabinets segment, net sales for the second quarter of
fiscal year 2006 were $169.3 million, an increase of 6% over the net sales of
$159.9 million recorded in the same quarter last year. Sales of branded
furniture products, which include office and hospitality furniture, experienced
a double-digit increase when compared to the prior year while sales of contract
private label products decreased from the prior year.
Income from continuing operations in this segment for the second quarter of
fiscal year 2006 increased $0.8 million from the prior year. Included in the
current year second quarter earnings was ($1.7) million of after-tax
restructuring costs primarily related to the consolidation of the two Mexican
operations into one facility and the accelerated amortization of ERP software.
Gross margin as a percent of sales in this segment improved over last year
second quarter primarily due to price increases on select products, leverage
from the higher sales volumes and improved labor productivity. Gross margin was
somewhat hindered by inefficiencies associated with the facility consolidation
activities in Mexico. SG&A costs declined as a percent of sales but increased in
dollars in the second quarter when compared to last year as higher incentive
compensation costs were partially offset by lower product warranty costs.
Including an after-tax loss of ($0.9) million from discontinued operations, net
income in this segment was $1.6 million in the second quarter of fiscal year
2006. The loss from discontinued operations was primarily related to an
estimated loss on the disposal of the polyurethane components business operation
that was held for sale at December 31, 2005. Net income for the second quarter
of the prior year was $0.3 million which included a ($1.4) million after-tax
loss from discontinued operations.
Electronic Contract Assemblies Segment
The Electronic Contract Assemblies segment fiscal year 2006 second quarter net
sales of $104.6 million decreased 7% from net sales of $112.6 million for the
same quarter last year, as higher sales to customers in the industrial control
industry were more than offset by lower sales to customers in the automotive and
medical industries.
Income from continuing operations in this segment for the second quarter of
fiscal year 2006 decreased $3.6 million from the same period last year partially
due to the lower sales volumes. As volumes declined, production labor costs did
not decrease in proportion to the volume decline. Lower product pricing in the
current year second quarter when compared to the prior year and a sales mix
shift to lower margin product also had a negative impact on gross margins as a
percent of sales in this segment. In addition, the second quarter year-over-year
earnings comparison in this segment was negatively impacted by prior year
favorable foreign currency movements and a higher effective tax rate in the
current year as a greater portion of net income in the current year was
generated by domestic operations which have a higher tax rate. Helping to
partially mitigate the earnings decline in the current year second quarter were
lower costs related to new product introductions and lower SG&A costs driven by
focused efforts on cost management and reduced incentive compensation costs.
Reclassifications
The Company changed its classification of investments in auction rate securities
to short-term investments for both the current and prior years. Previously these
investments were included in cash and cash equivalents. This reclassification
had no impact on the results of operations of the Company. The amount
reclassified as of December 31, 2004 was $28.0 million. As of December 31, 2005,
the Company had $34.1 million of auction rate securities classified as
short-term investments.
The Company also changed its classification of gains and losses on the sale of
property and equipment, previously shown in non-operating income, to selling,
general and administrative expense for each of the periods presented in the
Condensed Consolidated Statements of Income. Amounts reclassified in the three
and six month periods ended December 31, 2004 were, in millions, $0 and $0.5,
respectively. In the three and six month periods ended December 31, 2005, the
Company recognized, in millions, $1.0 and $1.2 of gains on the sale of property
and equipment as selling, general and administrative expense.
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 used within this release are income from continuing
operations excluding restructuring charges, earnings per share excluding
restructuring charges and operating income excluding restructuring charges. A
reconciliation of the reported GAAP numbers to these non-GAAP financial measures
is included in the Financial Highlights tables below. Management believes it is
useful for investors to understand how its core operations performed without the
effects of costs incurred in executing its restructuring plans as inclusion of
these costs make results less comparable between reporting periods. Excluding
these costs 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 costs associated with executing its restructuring plans to enable
meaningful trending of core operating metrics over an extended period of time.
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, significant volume
reductions from key contract customers, loss of key customers or suppliers
within specific industries, 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 period ended June 30, 2005.
Conference Call / Webcast
Kimball International will conduct its second quarter financial results
conference call beginning at 2:00 PM Eastern Time today, February 2, 2006. To
listen to the live conference call, dial 866-277-1182, or for international
calls, dial 617-597-5359. 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 16, 2006, at 888-286-8010 or internationally at
617-801-6888. The pass code to access the replay is 95912415.
About Kimball International, Inc.
Kimball International, Inc. provides a variety of products from its two business
segments: the Furniture and Cabinets segment and the Electronic Contract
Assemblies segment. The Furniture and Cabinets segment provides furniture for
the office and hospitality industries sold under the Company's family of brand
names. The Furniture and Cabinets segment also provides engineering and
manufacturing services which utilize common production and support capabilities
on a contract basis to customers in the office furniture and residential
furniture and cabinets industries. The Electronic Contract Assemblies segment
provides engineering and manufacturing services which utilize common production
and support capabilities to a variety of industries globally.
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 quarter ended December 31, 2005,
follow:
| Condensed Consolidated Statements of Income | ||||
| (Unaudited) ($000's, except per share data) |
Three Months Ended | |||
| December 31, 2005 |
December
31, 2004 |
|||
| Net Sales | $ 273,934 | 100.0% | $ 272,686 | 100.0% | |||
| Cost of Sales | 214,516 | 78.3% | 212,302 | 77.9% | |||
| Gross Profit | 59,418 | 21.7% | 60,384 | 22.1% | |||
| Selling, General & Administrative Expenses | 51,814 | 18.9% | 53,867 | 19.7% | |||
| Restructuring Expense | 2,627 | 1.0% | -0- | 0.0% | |||
| Operating Income | 4,977 | 1.8% | 6,517 | 2.4% | |||
| Other Income-Net | 2,118 | 0.8% | 2,677 | 1.0% | |||
| Income from Continuing Operations Before Taxes on Income | 7,095 | 2.6% | 9,194 | 3.4% | |||
| Provision for Income Taxes | 1,969 | 0.7% | 1,675 | 0.6% | |||
| Income from Continuing Operations | 5,126 | 1.9% | 7,519 | 2.8% | |||
| Loss from Discontinued Operations, Net of Tax | (892) | (0.4%) | (1,403) | (0.6%) | |||
| Net Income | $ 4,234 | 1.5% | $ 6,116 | 2.2% | |||
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| Earnings Per Share of Common Stock: | |||||||
| Basic from Continuing Operations: | |||||||
| Class A | $0.13 | $0.19 | |||||
| Class B | $0.14 | $0.20 | |||||
| Diluted from Continuing Operations: | |||||||
| Class A | $0.13 | $0.19 | |||||
| Class B | $0.14 | $0.20 | |||||
| Basic: | |||||||
| Class A | $0.10 | $0.16 | |||||
| Class B | $0.11 | $0.16 | |||||
| Diluted: | |||||||
| Class A | $0.10 | $0.16 | |||||
| Class B | $0.11 | $0.16 | |||||
| Average Shares Outstanding | |||||||
| Basic | 38,203 | 38,139 | |||||
| Diluted | 38,343 | 38,525 |
| (Unaudited) ($000's, except per share data) |
Six Months Ended | |||
| December 31, 2005 |
December 31, 2004 |
|||
| Net Sales | $ 541,338 | 100.0% | $ 531,645 | 100.0% | |||
| Cost of Sales | 424,515 | 78.4% | 414,282 | 77.9% | |||
| Gross Profit | 116,823 | 21.6% | 117,363 | 22.1% | |||
| Selling, General & Administrative Expenses | 106,360 | 19.6% | 105,266 | 19.8% | |||
| Restructuring Expense | 7,398 | 1.4% | 321 | 0.1% | |||
| Operating Income | 3,065 | 0.6% | 11,776 | 2.2% | |||
| Other Income-Net | 3,485 | 0.6% | 5,277 | 1.0% | |||
| Income from Continuing Operations Before Taxes on Income | 6,550 | 1.2% | 17,053 | 3.2% | |||
| Provision for Income Taxes | 1,580 | 0.3% | 3,583 | 0.7% | |||
| Income from Continuing Operations | 4,970 | 0.9% | 13,470 | 2.5% | |||
| Loss from Discontinued Operations, Net of Tax | (7,598) | (1.4%) | (2,339) | (0.4%) | |||
| Income (Loss) Before Cumulative Effect in Change in Accounting Principle | (2,628) | (0.5%) | 11,131 | 2.1% | |||
| Cumulative Effect of Change in Accounting Principle | 299 | 0.1% | -0- | 0.0% | |||
| Net Income (Loss) | $ (2,329) | (0.4%) | $ 11,131 | 2.1% | |||
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| Earnings (Loss) Per Share of Common Stock: | |||||||
| Basic from Continuing Operations: | |||||||
| Class A | $0.12 | $0.35 | |||||
| Class B | $0.13 | $0.36 | |||||
| Diluted from Continuing Operations: | |||||||
| Class A | $0.12 | $0.34 | |||||
| Class B | $0.13 | $0.35 | |||||
| Basic: | |||||||
| Class A | ($0.07) | $0.29 | |||||
| Class B | ($0.06) | $0.29 | |||||
| Diluted: | |||||||
| Class A | ($0.07) | $0.28 | |||||
| Class B | ($0.06) | $0.29 | |||||
| Average Shares Outstanding | |||||||
| Basic | 38,184 | 38,129 | |||||
| Diluted | 38,309 | 38,518 |
|
Condensed Consolidated Statements of Cash Flows |
|||
|
(Unaudited) |
Six Months Ended | ||
|
($000's) |
December 31, |
December 31, |
|
| Net Cash Flow provided by Operating Activities | $ 21,885 | $ 22,227 | |
| Net Cash Flow provided by (used for) Investing Activities | 11,065 | (7,320) | |
| Net Cash Flow used for Financing Activities | (12,149) | (10,716) | |
| Effect of Exchange Rates | (46) | 636 | |
| Net Increase in Cash & Cash Equivalents | 20,755 | 4,827 | |
| Cash & Cash Equivalents at Beginning of Period | 57,253 | 39,991 | |
| Cash & Cash Equivalents at End of Period | $ 78,008 | $ 44,818 | |
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| Cash & Cash Equivalents | $ 78,008 | $ 44,818 | |
| Short-Term Investments | 65,487 | 57,820 | |
| Totals | $ 143,495 | $ 102,638 | |
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Condensed Consolidated Balance Sheets |
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(Unaudited) |
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| Assets | |||
| Cash, Cash Equivalents and Short-Term Investments | $ 143,495 | $ 117,523 | |
| Receivables, Net | 128,076 | 125,178 | |
| Inventories | 75,434 | 87,531 | |
| Assets Held for Sale | 10,111 | -0- | |
| Other Current Assets | 20,793 | 21,808 | |
| Property & Equipment, Net | 146,004 | 176,054 | |
| Capitalized Software, Net | 29,702 | 37,273 | |
| Other Assets | 29,197 | 35,173 | |
| Totals | $ 582,812 | $ 600,540 | |
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| Liabilities & Share Owners' Equity | |||
| Current Liabilities | $ 153,325 | $ 148,372 | |
| Long-Term Debt, Less Current Maturities | 339 | 350 | |
| Deferred Income Taxes & Other | 13,847 | 23,592 | |
| Share Owners' Equity | 415,301 | 428,226 | |
| Totals | $ 582,812 | $ 600,540 | |
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Reconciliation of Non-GAAP Financial Measures |
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(Unaudited) |
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Income from Continuing Operations, excluding Restructuring Charges |
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Three Months Ended | |||
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December 31, |
December 31, |
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| Income from Continuing Operations, as reported | $ 5,126 | $ 7,519 | ||
| Restructuring Charges, Net of Tax | 1,653 | -0- | ||
| Income from Continuing Operations, excluding Restructuring Charges | $ 6,779 | $ 7,519 | ||
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| Earnings Per Share of Common Stock, excluding Restructuring Charges | ||||
| Diluted from Continuing Operations, Class B, as reported | $0.14 | $0.20 | ||
| Diluted Impact of Restructuring Charges, Class B | $0.04 | $0.00 | ||
| Diluted from Continuing Operations, Class B, excluding Restructuring Charges | $0.18 | $0.20 | ||
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Operating Income, excluding Restructuring Charges |
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Three Months Ended | |||
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December 31, |
December 31, |
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| Operating Income, as reported | $ 4,977 | $ 6,517 | ||
| Restructuring Charges | 2,627 | -0- | ||
| Operating Income, excluding Restructuring Charges | $ 7,604 | $ 6,517 | ||
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| Select Quarterly Historical Financial Information Restated for the Effect of Discontinued Operations |
| In fiscal years 2005 and 2006, the Company exited or sold
select operations that are required to be accounted for as Discontinued
Operations. The results of these operations are shown as Income (Loss) from Discontinued Operations on the Company's Condensed Consolidated Statements of Income. Prior year financial information is required to be restated for comparison purposes. Management believes it to be beneficial to provide investors the following unaudited select quarterly financial data that has been restated for the effect of these discontinued operations to facilitate comparison to recent quarterly results. |
| (Unaudited) | ||||||
| ($000's, except per share data) | Q2 FY'06 |
Q1 FY'06 |
Q4 FY'05 |
Q3 FY'05 |
Q2 FY'05 |
Q1 FY'05 |
| Net Sales | $ 273,934 | $ 267,404 | $ 263,033 | $ 258,469 | $ 272,686 | $ 258,959 |
| Income (Loss) from Continuing Operations | $ 5,126 | ($ 156) | $ 4,534 | $ 3,097 | $ 7,519 | $ 5,951 |
| Earnings Per Share of Common Stock: | ||||||
| Diluted from Continuing Operations: | ||||||
| Class A | $0.13 | $0.00 | $0.11 | $0.08 | $0.19 | $0.15 |
| Class B | $0.14 | $0.00 | $0.12 | $0.08 | $0.20 | $0.16 |