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0000055772-10-000011.txt : 20101105
0000055772-10-000011.hdr.sgml : 20101105
20101105091712
ACCESSION NUMBER: 0000055772-10-000011
CONFORMED SUBMISSION TYPE: 10-Q
PUBLIC DOCUMENT COUNT: 7
CONFORMED PERIOD OF REPORT: 20100930
FILED AS OF DATE: 20101105
DATE AS OF CHANGE: 20101105
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: KIMBALL INTERNATIONAL INC
CENTRAL INDEX KEY: 0000055772
STANDARD INDUSTRIAL CLASSIFICATION: OFFICE FURNITURE [2520]
IRS NUMBER: 350514506
STATE OF INCORPORATION: IN
FISCAL YEAR END: 0630
FILING VALUES:
FORM TYPE: 10-Q
SEC ACT: 1934 Act
SEC FILE NUMBER: 000-03279
FILM NUMBER: 101166874
BUSINESS ADDRESS:
STREET 1: 1600 ROYAL ST
CITY: JASPER
STATE: IN
ZIP: 47549
BUSINESS PHONE: 8124821600
MAIL ADDRESS:
STREET 1: 1600 ROYAL STREET
CITY: JASPER
STATE: IN
ZIP: 47549
FORMER COMPANY:
FORMER CONFORMED NAME: JASPER CORP
DATE OF NAME CHANGE: 19740826
10-Q
1
q111.htm
KIMBALL INTERNTIONAL, INC. FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2010
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 0-3279
KIMBALL INTERNATIONAL, INC.
|
(Exact name of registrant as specified in
its charter)
|
Indiana |
|
35-0514506 |
(State or other jurisdiction
of |
|
(I.R.S. Employer
Identification No.) |
incorporation or
organization) |
|
|
|
1600 Royal Street, Jasper,
Indiana |
|
47549-1001 |
(Address of principal
executive offices) |
|
(Zip Code) |
(812) 482-1600 |
Registrant's telephone number, including
area code |
|
Not Applicable |
Former name, former address and former
fiscal year, if changed since last report |
|
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes
X No __ |
|
Indicate by check mark whether the registrant
has submitted electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted pursuant to
Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such
files).
Yes __
No |
|
Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See
the definitions of "large accelerated filer," "accelerated filer"
and "smaller reporting company" in Rule 12b-2
of the Exchange Act.
Large accelerated filer ___ Accelerated filer
X
Non-accelerated filer (Do
not check if a smaller reporting company)
Smaller reporting company
|
|
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act).
Yes __
No X |
|
The number of shares outstanding of the Registrant's common stock as of
October 21, 2010 was: |
|
Class A Common Stock - 10,595,085 shares |
|
Class B Common Stock - 27,116,280 shares |
1 |
KIMBALL INTERNATIONAL, INC.
FORM 10-Q
INDEX
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
KIMBALL INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands, Except for
Share and
Per Share Data)
|
|
(Unaudited) |
|
|
|
|
September 30, |
|
June 30, |
|
|
2010 |
|
2010 |
ASSETS |
|
|
|
|
Current Assets: |
|
|
|
|
Cash and cash equivalents |
|
$ 50,699 |
|
$ 65,342 |
Short-term investments |
|
2,596 |
|
2,496 |
Receivables, net of allowances of $3,472 and $3,349,
respectively |
|
146,269 |
|
154,343 |
Inventories |
|
167,391 |
|
146,406 |
Prepaid expenses and other current assets |
|
45,926 |
|
43,776 |
Assets held for sale |
|
1,160 |
|
1,160 |
Total current assets |
|
414,041 |
|
413,523 |
Property and Equipment, net of accumulated depreciation of $344,744
and |
|
|
|
|
$337,251, respectively |
|
192,717 |
|
186,999 |
Goodwill |
|
2,567 |
|
2,443 |
Other Intangible Assets, net of accumulated amortization of $63,936
and |
|
|
|
|
$63,595, respectively |
|
7,896 |
|
8,113 |
Other Assets |
|
25,439 |
|
25,673 |
Total Assets |
|
$ 642,660 |
|
$ 636,751 |
LIABILITIES AND SHARE OWNERS' EQUITY |
|
|
|
|
Current Liabilities: |
|
|
|
|
Current maturities of long-term debt |
|
$ 62 |
|
$ 61 |
Accounts payable |
|
180,205 |
|
178,693 |
Dividends payable |
|
1,833 |
|
1,828 |
Accrued expenses |
|
53,310 |
|
52,923 |
Total current liabilities |
|
235,410 |
|
233,505 |
Other Liabilities: |
|
|
|
|
Long-term debt, less current maturities |
|
286 |
|
299 |
Other |
|
23,646 |
|
25,519 |
Total other liabilities |
|
23,932 |
|
25,818 |
Share Owners' Equity: |
|
|
|
|
Common stock-par value $0.05 per share: |
|
|
|
|
Class A - 49,826,000 shares authorized |
|
|
|
|
14,368,000 shares issued |
|
718 |
|
718 |
Class B - 100,000,000 shares authorized |
|
|
|
|
28,657,000 shares issued |
|
1,433 |
|
1,433 |
Additional paid-in capital |
|
144 |
|
119 |
Retained earnings |
|
451,872 |
|
454,800 |
Accumulated other comprehensive loss |
|
(2,540) |
|
(9,775) |
Less: Treasury stock, at cost: |
|
|
|
|
Class A - 3,771,000 and 3,834,000 shares, respectively |
|
(48,311) |
|
(49,415) |
Class B - 1,543,000 and 1,579,000 shares, respectively |
|
(19,998) |
|
(20,452) |
Total Share Owners' Equity |
|
383,318 |
|
377,428 |
Total Liabilities and Share Owners' Equity |
|
$ 642,660 |
|
$ 636,751 |
See
Notes to Condensed Consolidated Financial Statements |
|
|
|
|
3
KIMBALL INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Amounts in Thousands, Except for Per Share
Data)
|
(Unaudited) |
|
Three Months Ended |
|
September 30 |
|
2010 |
|
2009 |
Net Sales |
$ 294,676 |
|
$ 274,659 |
Cost of Sales |
247,529 |
|
227,475 |
Gross Profit |
47,147 |
|
47,184 |
Selling and Administrative Expenses |
47,340 |
|
46,066 |
Restructuring Expense |
117 |
|
486 |
Operating Income (Loss) |
(310) |
|
632 |
Other Income (Expense): |
|
|
|
Interest income |
220 |
|
277 |
Interest expense |
(20) |
|
(15) |
Non-operating income |
602 |
|
1,724 |
Other income, net |
802 |
|
1,986 |
Income Before Taxes on Income |
492 |
|
2,618 |
Provision for Income Taxes |
36 |
|
844 |
Net Income |
$ 456 |
|
$ 1,774 |
Earnings Per Share of Common Stock: |
|
|
|
Basic Earnings Per Share: |
|
|
|
Class A |
$ 0.01 |
|
$ 0.04 |
Class B |
$ 0.01 |
|
$ 0.05 |
Diluted Earnings Per Share: |
|
|
|
Class A |
$ 0.01 |
|
$ 0.04 |
Class B |
$ 0.01 |
|
$ 0.05 |
|
|
|
|
Dividends Per Share of Common Stock: |
|
|
|
Class A |
$ 0.045 |
|
$ 0.045 |
Class B |
$ 0.050 |
|
$ 0.050 |
|
|
|
|
Average Number of Shares Outstanding: |
|
|
|
Class A and B Common Stock: |
|
|
|
Basic |
37,680 |
|
37,313 |
Diluted |
37,764 |
|
37,508 |
See Notes to Condensed Consolidated Financial Statements |
|
|
|
4
KIMBALL INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
|
(Unaudited)
Three Months Ended
September 30 |
|
2010 |
|
2009 |
Cash Flows From Operating Activities: |
|
|
|
Net income |
$ 456 |
|
$ 1,774 |
Adjustments to reconcile net income to net cash
(used for) provided by
operating activities: |
|
|
|
Depreciation and amortization |
7,804 |
|
9,046 |
Gain on sales of assets |
(22) |
|
(20) |
Deferred income tax and other deferred charges |
1,467 |
|
(720) |
Stock-based compensation |
348 |
|
359 |
Other, net |
(94) |
|
-0- |
Change in operating assets and liabilities: |
|
|
|
Receivables |
7,189 |
|
3,172 |
Inventories |
(21,368) |
|
(17,616) |
Prepaid expenses and other current assets |
(2,541) |
|
296 |
Accounts payable |
(96) |
|
22,012 |
Accrued expenses |
(3,511) |
|
(5,796) |
Net cash (used for) provided by operating activities |
(10,368) |
|
12,507 |
Cash Flows From Investing Activities: |
|
|
|
Capital expenditures |
(6,359) |
|
(13,505) |
Proceeds from sales of assets |
276 |
|
463 |
Purchase of capitalized software and other assets |
(377) |
|
(44) |
Purchases of available-for-sale securities |
-0- |
|
(918) |
Sales and maturities of available-for-sale securities |
-0- |
|
1,825 |
Other, net |
40 |
|
-0- |
Net cash used for investing activities |
(6,420) |
|
(12,179) |
Cash Flows From Financing Activities: |
|
|
|
Payments on capital leases and long-term debt |
(12) |
|
(10) |
Dividends paid to Share Owners |
(1,828) |
|
(1,811) |
Repurchase of employee shares for tax withholding |
(228) |
|
(115) |
Net cash used for financing activities |
(2,068) |
|
(1,936) |
Effect of Exchange Rate Change on Cash and Cash Equivalents |
4,213 |
|
1,897 |
Net (Decrease) Increase in Cash and Cash Equivalents |
(14,643) |
|
289 |
Cash and Cash Equivalents at Beginning of Period |
65,342 |
|
75,932 |
Cash and Cash Equivalents at End of Period |
$ 50,699 |
|
$ 76,221 |
Supplemental Disclosure of Cash Flow Information |
|
|
|
Cash paid during the period for: |
|
|
|
Income taxes |
$ 258 |
|
$ 3,211 |
Interest expense |
$ 42 |
|
$ 29 |
See Notes to Condensed Consolidated Financial Statements |
|
|
|
5
KIMBALL INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1.
Summary of Significant Accounting Policies
Note 2. Inventories
Inventory components of the Company were as follows:
|
September
30, |
|
June 30, |
(Amounts in Thousands) |
2010 |
|
2010 |
Finished Products |
$ 38,869 |
|
$ 33,177 |
Work-in-Process |
13,712 |
|
13,209 |
Raw Materials |
127,717 |
|
112,897 |
Total FIFO
Inventory |
$180,298 |
|
$159,283 |
LIFO Reserve |
(12,907) |
|
(12,877) |
Total Inventory |
$167,391 |
|
$146,406 |
For interim reporting, LIFO inventories are computed based on quantities
as of the end of the quarter and interim changes in price levels. Changes in quantities and
price levels are reflected in the interim financial statements in the period
in which they occur, except in cases where LIFO inventory liquidations are
expected to be reinstated by fiscal year end. During the three-month periods ended
September 30, 2010 and 2009, LIFO inventory liquidations increased net
income by, in thousands, $438 and $596, respectively.
8
Note 3. Comprehensive Income
Comprehensive income includes all changes in equity during a period
except those resulting from investments by and distributions to Share
Owners. Comprehensive income, shown net of tax if applicable, for the
three-month periods ended September 30, 2010 and 2009 was as follows:
|
Three Months Ended
September 30, 2010 |
|
Three Months Ended
September 30, 2009 |
(Amounts in Thousands) |
Pre-tax |
|
Tax |
|
Net of Tax |
|
Pre-tax |
|
Tax |
|
Net of Tax |
Net income |
|
|
|
|
$ 456 |
|
|
|
|
|
$ 1,774 |
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments |
$ 8,935 |
|
$ (1,960) |
|
$ 6,975 |
|
$ 3,363 |
|
$ (785) |
|
$ 2,578 |
Postemployment severance actuarial change |
370 |
|
(148) |
|
222 |
|
(1,190) |
|
475 |
|
(715) |
Other fair value changes: |
|
|
|
|
|
|
|
|
|
|
|
Derivatives |
84 |
|
(53) |
|
31 |
|
(315) |
|
210 |
|
(105) |
Reclassification to (earnings) loss: |
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale securities |
-0- |
|
-0- |
|
-0- |
|
(26) |
|
10 |
|
(16) |
Derivatives |
(239) |
|
74 |
|
(165) |
|
1,445 |
|
(460) |
|
985 |
Amortization of prior service costs |
71 |
|
(28) |
|
43 |
|
71 |
|
(28) |
|
43 |
Amortization of actuarial change |
215 |
|
(86) |
|
129 |
|
152 |
|
(61) |
|
91 |
Other comprehensive income |
$ 9,436 |
|
$(2,201) |
|
$ 7,235 |
|
$ 3,500 |
|
$ (639) |
|
$ 2,861 |
Total comprehensive income |
|
|
|
|
$ 7,691 |
|
|
|
|
|
$ 4,635 |
Accumulated other comprehensive loss, net
of tax effects, was as follows: |
|
September 30, |
|
June 30, |
|
2010 |
|
2010 |
(Amounts in Thousands) |
|
|
|
Foreign currency translation adjustments |
$ 4,412 |
|
$ (2,563) |
Unrealized loss from: |
|
|
|
Derivatives |
(4,141) |
|
(4,007) |
Postemployment benefits: |
|
|
|
Prior service costs |
(764) |
|
(807) |
Net actuarial loss |
(2,047) |
|
(2,398) |
Accumulated other comprehensive loss |
$ (2,540) |
|
$ (9,775) |
9
Note 4. Segment Information
Management organizes the Company into segments based upon differences in
products and services offered in each segment. The Electronic Manufacturing
Services (EMS) segment provides
engineering and manufacturing services which utilize common production and
support capabilities to a variety of industries globally. The EMS segment
focuses on electronic assemblies that have high durability requirements and
are sold on a contract basis and produced to customers' specifications. The
EMS segment currently sells primarily to customers in the medical,
automotive, industrial controls, and public safety industries. The Furniture
segment provides furniture for the office and hospitality industries, sold
under the Company's family of brand names. Each segment's product line
offerings consist of similar products and services sold within various
industries. Intersegment sales were
insignificant.
Unallocated corporate assets include cash and cash equivalents, short-term
investments, and other assets not allocated to segments. Unallocated
corporate net income consists of income not
allocated to segments for purposes of evaluating segment performance and
includes income from corporate investments and other non-operational items.
The basis of segmentation and accounting policies of the segments are
consistent with those disclosed in the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 2010.
|
Three Months Ended |
|
|
September 30 |
|
(Amounts in Thousands) |
2010 |
|
2009 |
|
Net Sales: |
|
|
|
|
Electronic Manufacturing
Services |
$177,867 |
|
$165,486 |
|
Furniture
|
116,809 |
|
109,166 |
|
Unallocated
Corporate and Eliminations |
-0- |
|
7
|
|
Consolidated |
$294,676 |
|
$274,659 |
|
|
|
|
|
|
Net Income (Loss): |
|
|
|
|
Electronic Manufacturing
Services |
$ (248)
|
|
$ (219)
|
|
Furniture
|
589 |
|
1,780
|
|
Unallocated
Corporate and Eliminations |
115 |
|
213
|
|
Consolidated |
$ 456 |
(1) |
$
1,774 |
(2) |
(1) Net Income (Loss) included after-tax
restructuring charges, in thousands, of $70 in the three months ended
September 30, 2010. The EMS segment and Unallocated Corporate and Eliminations recorded, respectively, in thousands, $59 and $11 of after-tax restructuring
charges. See
Note 6 - Restructuring Expense
of Notes to Condensed Consolidated Financial Statements for further discussion.
(2) Net Income (Loss) included after-tax
restructuring charges, in thousands, of $292 in the three months ended
September 30, 2009. The EMS segment, the Furniture segment, and
Unallocated Corporate and Eliminations recorded, respectively, in thousands, $276,
$8, and $8 of after-tax restructuring charges. See
Note 6 - Restructuring Expense of
Notes to Condensed Consolidated Financial Statements for further discussion.
|
September 30, |
|
June 30, |
|
(Amounts in Thousands) |
2010 |
|
2010 |
|
Total Assets: |
|
|
|
|
Electronic
Manufacturing Services |
$403,870 |
|
$384,491 |
|
Furniture
|
182,701 |
|
182,396 |
|
Unallocated
Corporate and Eliminations |
56,089 |
|
69,864 |
|
Consolidated
|
$642,660 |
|
$636,751 |
|
10
Note
5. Commitments
and Contingent Liabilities
Standby letters of credit are issued to third-party suppliers, lessors,
and
insurance and financial institutions and can only be drawn upon in the event
of the Company's failure to pay its obligations to the beneficiary. As
of September 30, 2010, the Company had a maximum financial exposure
from unused standby letters of credit totaling $5.2 million. The Company is
not aware of circumstances that
would require it to perform under any of these arrangements and believes that
the resolution of any claims that might arise in the future, either
individually or in the aggregate, would not materially affect the Company's
financial statements. Accordingly, no liability has been recorded as
of September 30, 2010 with respect to the standby letters of
credit. The Company also enters into commercial letters of credit to
facilitate payment to vendors and from customers.
The Company estimates product warranty liability at the time of sale based
on historical repair or replacement cost trends in conjunction with the length of the
warranty offered. Management refines the warranty liability in cases where
specific warranty issues become known.
Changes in the product warranty accrual for the three months ended
September
30, 2010 and 2009 were as follows:
|
Three Months Ended
September 30 |
(Amounts in Thousands) |
2010 |
|
2009 |
Product Warranty Liability at the
beginning of the period |
$ 1,818 |
|
$ 2,176
|
Additions to warranty accrual (including
changes in estimates) |
738 |
|
192 |
Settlements made (in cash or in kind) |
(571) |
|
(324) |
Product Warranty Liability at the end of the period |
$
1,985
|
|
$ 2,044
|
11
Note 6. Restructuring Expense
12
Summary of All Plans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued
June 30,
2010 (2) |
|
Three Months Ended September 30, 2010 |
|
Accrued
September 30,
2010 (2) |
|
Total Charges
Incurred Since Plan Announcement (3) |
|
Total Expected
Plan Costs (3) |
(Amounts in Thousands) |
|
Amounts
Charged Cash |
|
Amounts
Charged
Non-cash |
|
Amounts Utilized/
Cash Paid |
|
Adjustments |
|
|
|
EMS Segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FY 2008 European Consolidation Plan |
|
|
|
|
|
|
|
|
|
|
|
|
Transition and Other Employee Costs |
$9,181 |
|
$ 63 |
|
$ -0- |
|
$ -0- |
|
$ 533 |
(4) |
$ 9,777 |
|
$ 19,337 |
|
$19,683 |
Asset Write-downs |
-0- |
|
-0- |
|
-0- |
|
-0- |
|
-0- |
|
-0- |
|
522 |
|
522 |
Plant Closure and Other Exit Costs |
-0- |
|
35 |
|
-0- |
|
(35) |
|
-0- |
|
-0- |
|
692 |
|
1,129 |
Total EMS Segment |
$9,181 |
|
$ 98 |
|
$ -0- |
|
$ (35) |
|
$ 533 |
|
$ 9,777 |
|
$ 20,551 |
|
$21,334 |
Unallocated Corporate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Restructuring Plan (1) |
-0- |
|
19 |
|
-0- |
|
(19) |
|
-0- |
|
-0- |
|
680 |
|
751 |
Consolidated Total of All Plans |
$9,181 |
|
$ 117 |
|
$ -0- |
|
$ (54) |
|
$ 533 |
|
$ 9,777 |
|
$ 21,231 |
|
$22,085 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Other Restructuring Plan represents the Gaylord
restructuring plan initiated in fiscal year 2007. |
(2) Accrued restructuring at September 30, 2010 and June 30,
2010 was $9.8 million and $9.2 million, respectively. The
balances include $6.2 million and $2.5 million recorded in
current liabilities and $3.6 million and $6.7 million recorded
in other long-term liabilities at September 30, 2010 and June
30, 2010, respectively.
|
(3) These columns include restructuring plans that were active
during the three months ended September 30, 2010, including the
EMS segment European Consolidation Plan initiated in fiscal year
2008 and the Gaylord restructuring plan initiated in fiscal year
2007. |
(4) The effect of changes in foreign currency exchange rates
within the EMS segment primarily due to revaluation of the
restructuring liability is included in this amount. |
13
Note
7. Fair Value
Note 8.
Derivative Instruments
Fair Values of Derivative Instruments on
the Condensed Consolidated Balance Sheets |
|
|
Asset Derivatives |
|
Liability Derivatives |
|
|
|
|
Fair Value As of |
|
|
|
Fair Value As of |
(Amounts in Thousands) |
|
Balance Sheet Location |
|
September 30,
2010 |
|
June 30,
2010 |
|
Balance Sheet Location |
|
September 30,
2010 |
|
June 30,
2010 |
Derivatives designated as hedging instruments: |
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts |
|
Prepaid expenses and
other current assets |
$ 682 |
|
$ 525 |
|
Accrued expenses |
|
$ 184 |
|
$ 339 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives not designated as hedging instruments: |
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts |
|
Prepaid expenses and
other current assets |
117 |
|
1,698 |
|
Accrued expenses |
|
2,011 |
|
53 |
Stock warrants |
|
Other assets
(long-term) |
389 |
|
395 |
|
|
|
|
|
|
Total derivatives |
|
|
|
$ 1,188 |
|
$ 2,618 |
|
|
|
$ 2,195 |
|
$ 392 |
18
The Effect of Derivative Instruments on
Other Comprehensive Income (Loss) |
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30 |
(Amounts in Thousands) |
|
|
|
|
|
2010 |
|
2009 |
Amount of Pre-Tax Gain or (Loss) Recognized in Other
Comprehensive
Income (Loss) (OCI) on Derivatives (Effective Portion): |
|
|
|
|
Foreign exchange contracts |
|
|
|
$ 84 |
|
$ (315) |
|
|
|
|
|
|
|
|
|
The Effect of Derivative Instruments on Condensed Consolidated
Statements of Income |
(Amounts in Thousands) |
|
|
|
|
|
Three Months Ended
September 30 |
Derivatives in Cash Flow Hedging Relationships |
|
Location of Gain or (Loss) |
|
2010 |
|
2009 |
Amount of Pre-Tax Gain or (Loss) Reclassified from Accumulated
OCI into Income (Effective Portion): |
|
|
|
Foreign exchange contracts |
|
Net Sales |
|
$ -0- |
|
$ 11 |
Foreign exchange contracts |
|
Cost of Sales |
|
261 |
|
(1,216) |
Foreign exchange contracts |
|
Non-operating income |
|
(22) |
|
(283) |
Total |
|
|
|
|
|
$ 239 |
|
$ (1,488) |
|
|
|
|
|
|
|
|
|
Amount of Pre-Tax Gain or (Loss) Reclassified from Accumulated
OCI into Income (Ineffective Portion): |
|
|
|
Foreign exchange contracts |
|
Non-operating income |
|
$ -0- |
|
$ 43 |
|
|
|
|
|
|
|
|
|
Derivatives Not Designated as Hedging Instruments |
|
|
|
|
|
|
|
|
Amount of Pre-Tax Gain or (Loss) Recognized in Income on
Derivatives: |
|
|
|
|
Foreign exchange contracts |
|
Non-operating income |
|
$ (2,420) |
|
$ (837) |
Stock warrants |
|
Non-operating income |
|
(6) |
|
-0- |
Total |
|
|
|
|
|
$ (2,426) |
|
$ (837) |
|
|
|
|
|
|
|
|
|
Total Derivative Pre-Tax Gain (Loss) Recognized in Income |
|
|
|
$ (2,187) |
|
$ (2,282) |
19
Note 9. Short-Term
Investments
22
Note 10. Assets
Held for Sale
At both September 30, 2010 and June 30, 2010, a facility and land related to the
Gaylord, Michigan, exited operation within the EMS segment were
classified as held for sale and totaled, in thousands, $1,160. The assets
were reported as unallocated corporate assets for segment reporting
purposes.
Note 11. Postemployment Benefits
The Company maintains severance plans for all
domestic employees. These plans provide severance benefits to eligible employees
meeting the plans' qualifications, primarily involuntary termination without
cause. The components of net periodic postemployment benefit cost
applicable to the Company's severance plans were as follows:
|
Three Months Ended |
|
September 30 |
(Amounts in Thousands)
|
2010 |
|
2009 |
Service cost |
$ 242
|
|
$ 193
|
Interest cost |
69
|
|
108
|
Amortization of prior service costs |
71
|
|
71
|
Amortization of actuarial change |
215
|
|
152
|
Net periodic benefit cost |
$
597
|
|
$
524
|
The benefit cost in the above table includes only normal recurring levels
of severance activity, as estimated using an actuarial method. Unusual
or non-recurring severance actions, such as those disclosed in
Note 6 - Restructuring Expense
of Notes to Condensed Consolidated Financial Statements, are not estimable
using actuarial methods and are expensed in accordance with the applicable
U.S. GAAP.
23
Note 12. Stock Compensation Plan
During the first quarter of fiscal year 2011, the following stock
compensation was awarded to officers, key employees, and non-employee
directors. All awards were granted under the 2003 Stock Option and
Incentive Plan. For more information on similar unrestricted shares and performance share awards, refer to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 2010.
Performance Shares |
|
Quarter Awarded |
|
Maximum
Potential Shares Issuable |
|
Grant Date Fair Value
(4) |
Annual Performance Shares - Class A
(1) |
|
1st Quarter |
|
235,710 |
|
$ 5.09 |
Long-Term Performance Shares - Class A
(2) |
|
1st Quarter |
|
483,318 |
|
$ 5.09 |
Unrestricted Shares |
|
Quarter Awarded |
|
Shares |
|
Grant Date Fair Value
(4) |
Unrestricted Shares - Class A
(3) |
|
1st Quarter |
|
1,000 |
|
$ 5.27 |
Unrestricted Shares - Class B
(3) |
|
1st Quarter |
|
500 |
|
$ 5.27 |
(1) |
Annual performance shares were awarded to officers. Payouts
will be based upon the fiscal year 2011 cash incentive payout percentages
calculated under the Company's Profit Sharing Incentive
Bonus Plan. The
number of shares issued will be less than the maximum potential
shares issuable if the maximum cash incentive payout percentages
are not achieved. Annual performance shares vest after one year.
|
(2) |
Long-term performance shares were awarded to officers and
other key employees. Payouts will be based upon the cash
incentive payout percentages calculated under the Company's Profit Sharing Incentive Bonus Plan. Long-term performance
shares are based on five successive annual performance
measurement periods, with each annual tranche having a grant
date when economic profit tiers are established at the beginning
of the applicable fiscal year and a vesting date at the end of
each annual period. The number of shares issued will be less than
the maximum potential shares issuable if the maximum cash
incentive payout percentages are not achieved. |
(3) |
Unrestricted shares were awarded to officers
as consideration for their service to the Company. Unrestricted
shares do not have vesting periods, holding periods,
restrictions on sale, or other restrictions. |
(4) |
The grant
date fair value of performance shares is based on the stock
price at the date of the award, reduced by the present value of
dividends normally paid over the vesting period which are not
payable on outstanding performance share awards. The grant date
fair value shown for long-term performance shares is applicable
to the first tranche only. The grant date fair value of the
unrestricted shares was based on the stock price at the date of
the award. |
24
Note 13.
Variable Interest Entities
The Company's involvement with variable interest entities (VIEs) is
limited to situations in which the Company is not the primary
beneficiary as the Company lacks the power to direct the activities that
most significantly impact the VIE's economic performance. Thus,
consolidation is not required.
The Company is involved with VIEs consisting of an investment in
convertible debt securities and stock warrants of a privately-held
company, a loan agreement with a contract customer, and a note
receivable related to the sale of an Indiana facility. For information
related to the Company's investment in the privately-held company, see
Note 9 - Short-Term
Investments and Note 8 -
Derivative Instruments of Notes to Condensed Consolidated Financial
Statements. The aggregate carrying value of the loan agreement and note
receivable is $1.7 million,
net of reserves, as of September 30, 2010, and is recorded on the Other Assets
line of the Company's Condensed Consolidated Balance Sheet. The Company has no
material exposure related to the VIEs in addition to the items recorded
on its Condensed Consolidated Balance Sheet.
The Company has no obligation to provide additional funding to the
VIEs, and thus its risk of loss related to the VIEs is limited to the
original funding amount. The Company did not provide any additional
financial support to the VIEs during the quarter ended September 30,
2010.
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Business OverviewKimball International, Inc. provides a
variety of products from its two business segments: the Electronic
Manufacturing Services (EMS) segment and the Furniture segment. The EMS
segment provides engineering and manufacturing services which utilize
common production and support capabilities globally to the medical,
automotive, industrial control, and public safety industries. The
Furniture segment provides furniture for the office and hospitality
industries, sold under the Company's family of brand names.
Overall market conditions in the EMS industry
continue to be favorable. The EMS industry sales projections (by IDC,
InForum, and New Venture Research) show forecasted growth for calendar
year 2010 in the range of 7% to 12% compared to calendar year 2009 and
forecasted growth in the range of 8% to 11% for calendar year 2011
compared to calendar year 2010. In addition, the Semiconductor Industry
Association (SIA) reported that semiconductor sales are projected to
grow approximately 28% in calendar year 2010, and although the Company
does not directly serve this market, it may be indicative of increased
end market demand for products utilizing electronic components.
25
The Company
continues its strategy of diversification within the EMS segment
customer base as it currently focuses on the four key vertical markets
of medical, automotive, industrial control, and public safety.
Automotive activity is projected to moderate in fiscal year 2011 as the
impact of the government stimulus programs is now behind us. Demand in
the medical market has remained stable, and the Company sees signs of
growth. The industrial control market is also showing signs of
stability, after benefiting from spending targeted at energy savings
technologies, and the public safety market is likewise stable. Sales to
customers in the medical industry are the largest portion of the
Company's EMS segment with sales to customers in the automotive industry
being the second largest of the four vertical markets. The Company's
sales to customers in the automotive industry are diversified among more
than ten domestic and foreign customers and represented approximately
one-fourth of the EMS segment's net sales for the first quarter of
fiscal year 2011. The EMS segment September 30, 2010 open orders
exceeded the September 30, 2009 level by 29%.
The office furniture and hospitality furniture
markets appear to have stabilized, but are still fragile. The recovery
is expected to be long and slow. As of August 2010, the Business and
Institutional Furniture Manufacturer Association (BIFMA) projected a
1.5% year-over-year increase in the office furniture industry for
calendar year 2010 after a 29% industry decline in calendar year 2009.
BIFMA projects office furniture industry growth of approximately 9% in
calendar year 2011. While the Company's mid-market brand has fared
better than its contract office furniture brand due to the project
nature of the contract market and the changing U.S. consumption
patterns, the Company cannot predict future overall office furniture
order trends at this time due to the short lead time of orders and the
volatility in this market. In addition, the hotel industry forecasts
(reported by Smith Travel Research and PricewaterhouseCoopers LLP)
project occupancy rates to increase approximately 4% to 5% in calendar
year 2010 after a 9% industry decline in calendar year 2009 and project
revenue per available room to increase 3% to 4% for calendar year 2010
after a 17% industry decline in calendar year 2009. Although the
Company's recent hospitality order rates have improved, the Company
cannot predict if this activity will be sustained in the near-term.
Furniture segment open orders as of September 30, 2010 were 30% higher
than the September 30, 2009 level.
Competitive pricing pressures within the EMS
segment and on many projects within the Furniture segment continue to
put pressure on the Company's operating margins.
The Company made great strides over the last two
years in reducing its overall cost structure and thus lowering its
breakeven sales point. In addition, a long-standing component of the
Company's profit sharing incentive bonus plan is that it is linked to
the performance of the Company which automatically lowers total
compensation expense when profits are down. The focus on cost control
continues. At the same time, the Company has continued making prudent
investments in product development, technology, and marketing and
business development initiatives to drive profitable growth. The Company
also continues to closely monitor market changes and its liquidity in
order to proactively adjust its operating costs, discretionary capital
spending, and dividend levels as needed.
26
The Company continued to maintain a strong balance
sheet as of the end of the first quarter of fiscal year 2011, which
included a minimal amount of long-term debt of $0.3 million and Share
Owners' equity of $383.3 million. The Company's short-term liquidity
available, represented as cash, cash equivalents, and short-term
investments plus the unused amount of the Company's revolving credit
facility, was $148.1 million at September 30, 2010.
In addition to the above risks related to the
current market conditions, management currently considers the following
events, trends, and uncertainties to be most important to understanding
the Company's financial condition and operating performance:
- The Company will continue its focus on
preserving cash and minimizing debt. Managing working
capital in conjunction with fluctuating demand levels is
key. In addition, the Company plans to minimize capital
expenditures where appropriate but has been and will
continue to invest in capital expenditures for projects that
would enhance the Company's capabilities and diversification
while providing an opportunity for growth and improved
profitability as the economy and the Company's markets
recover.
|
- Commodity price pressure is expected
to continue in the near-term. Mitigating the impact of
commodity and fuel prices continues to be an area of focus
within the Company.
|
- Management continues to evaluate the
healthcare reform legislation that was signed into law in
March 2010 to understand the full impact on the Company.
This legislation is expected to increase the Company's
healthcare and related administrative expenses.
|
- Globalization continues to reshape not
only the industries in which the Company operates but also
its key customers and competitors.
|
- As demand within the EMS industry
increases, the availability of components used in products
manufactured by the Company is a concern. Suppliers have not
increased their production as rapidly as demand has
increased, and component shortages are occurring. The
Company's production and shipment schedules could be
negatively impacted if shortages of components continue or
worsen. In addition, pricing premiums associated with part
shortages impacted the Company's fiscal year 2011 first
quarter and remain a concern.
|
27
- The nature of the EMS industry is such
that the start-up of new programs to replace departing
customers or expiring programs occurs frequently. The
Company's sales to Bayer AG are expected to begin to decline
in the fourth quarter of fiscal year 2011 as the Company's
manufacturing contract with Bayer AG reaches end-of-life.
Margins on the Bayer AG product are generally lower than the
Company's other EMS products. The success of the Company's
EMS segment is dependent on the successful replacement of
such customers or programs. Such changes usually occur
gradually over time as old programs phase out of production
while newer programs ramp up. While the margins vary
depending on the size of the program and the vertical market
being served, replacement programs generally require more
competitive pricing. Thus the Company must strive to
identify cost savings opportunities to offset the lower
pricing. Additional information on the risks related to
contract customers is contained in the Company's Annual
Report on Form 10-K for the fiscal year ended June 30, 2010.
|
- The increasingly competitive
marketplace mandates that the Company continually
re-evaluate its business models.
|
- The Company's employees throughout its
business operations are an integral part of the Company's
ability to compete successfully, and the stability of its
management team is critical to long-term Share Owner value.
The Company's career development and succession planning
processes help to maintain stability in management.
|
- To support growth and diversification
efforts, the Company focuses on both organic growth and
potential acquisition targets. Acquisitions allow rapid
diversification of both customers and industries served.
|
Certain preceding statements could be considered
forward-looking statements under the Private Securities Litigation
Reform Act of 1995 and are subject to certain risks and uncertainties
including, but not limited to, a significant change in economic
conditions, loss of key customers or suppliers, or similar unforeseen
events.
28
Financial Overview - Consolidated
First quarter fiscal year 2011 consolidated net sales were $294.7
million compared to first quarter fiscal year 2010 net sales of $274.7
million, a 7% increase, due to 7% net sales increases in both the EMS
and Furniture segments. First quarter fiscal year 2011 net income was
$0.5 million, or $0.01 per Class B diluted share, compared to net income
of $1.8 million, or $0.05 per Class B diluted share, for the first
quarter of fiscal year 2010. The decline in net income was primarily
driven by lower net income generated by the Furniture segment.
Consolidated gross profit as a percent of net sales declined to 16.0%
for the first quarter of fiscal year 2011 from 17.2% in the first
quarter of fiscal year 2010 due to lower gross profit within the
Furniture segment. The first quarter of fiscal year 2011 and 2010 had a
similar mix of sales between the Furniture segment and the EMS segment,
and thus sales mix did not impact the consolidated gross profit as a
percent of net sales comparison. Gross profit is discussed in more
detail in the segment discussions below.
First quarter fiscal year 2011 consolidated selling
and administrative expenses increased in absolute dollars by 2.8% but
decreased as a percent of net sales compared to the first quarter of
fiscal year 2010, as sales volumes increased at a quicker rate than the
selling and administrative expenses. The consolidated selling and
administrative expense increase in absolute dollars for the first
quarter of fiscal year 2011 compared to the first quarter of fiscal year
2010 was primarily due to increased employee benefits expense, and
higher advertising and product marketing expense which were partially
offset by lower bad debt expense.
Other Income (Expense) for the first quarter of fiscal year 2011 was
$0.8 million compared to $2.0 million for the first quarter of fiscal
year 2010. The reduction in other income was primarily related to
volatility in the European foreign exchange rates which impact the
Company's EMS segment.
The first quarter fiscal year 2011 effective tax rate was 7.3%
compared to the effective tax rate for the first quarter of fiscal year
2010 of 32.2%. Relatively low pre-tax income coupled with a foreign
deferred tax valuation allowance adjustment of $0.1 million in the
current quarter drove the effective tax rate decline in the first
quarter of fiscal year 2011.
Comparing the balance sheet as of September 30,
2010 to June 30, 2010, the Company's inventory balance increased
primarily to support production ramp ups at select EMS facilities, to
support the transfer of production to the new EMS facility in Poland
from the other EMS facilities in Europe, and as a result of customer-requested shipping delays.
29
Electronic Manufacturing Services Segment
EMS segment results were as follows:
|
At or for the
Three Months Ended |
|
|
|
September 30 |
|
|
(Amounts in
Millions) |
2010 |
|
2009 |
|
% Change |
Net Sales |
$
177.9 |
|
$
165.5 |
|
7% |
Operating Income (Loss) |
$ 0.2 |
|
$
(0.7) |
|
123% |
Net Income (Loss) |
$
(0.2) |
|
$
(0.2) |
|
(13)% |
Open Orders |
$
208.6 |
|
$
161.3 |
|
29% |
First quarter fiscal year 2011 EMS segment net
sales to customers in the medical, industrial control, and public safety
industries increased compared to the first quarter of fiscal year 2010
which more than offset a decrease in net sales to customers in the
automotive industry. While open orders were up 29% as of September 30,
2010 compared to September 30, 2009, open orders at a point in time may
not be indicative of future sales trends due to the contract nature of
the EMS segment's business.
First quarter fiscal year 2011 EMS segment gross
profit as a percent of net sales improved 0.3 percentage points when
compared to the first quarter of fiscal year 2010. The improvement was
primarily driven by fixed cost leverage associated with the increased
sales and lower depreciation expense which were partially offset by
higher employee benefit costs and higher component costs and expedited
freight charges related to the rapid ramp up of new customer programs
which resulted from the inventory component shortages and allocations
within the industry.
EMS segment selling and administrative expenses in
the first quarter of fiscal year 2011 compared to the first quarter of
fiscal year 2010 increased in absolute dollars in-line with the higher
sales volumes and remained flat as a percent of net sales. The increase
in selling and administrative expenses for the first quarter of fiscal
year 2011 compared to the first quarter of fiscal year 2010 was
primarily related to an increase in salary expense to support sales
growth and increased employee benefit expenses which were partially
offset by lower bad debt expense.
30
As the Company continues to execute its plan to
expand its European automotive electronics capabilities and to establish
a European Medical Center of Expertise near Poznan, Poland, the
consolidation of its EMS facilities has a final completion target of
mid-fiscal year 2012. The consolidation is expected to improve the
Company's margins in the very competitive EMS market. While the
restructuring charges recorded during the first quarter of fiscal year
2011 were immaterial, the EMS segment is experiencing inefficiencies
related to the consolidation.
As a percent of net sales, operating income was
0.1% for the first quarter of fiscal year 2011 compared to an operating
loss of (0.5)% for the first quarter of fiscal year 2010.
Included in this segment are a significant amount of sales to Bayer
AG affiliates which accounted for the following portions of consolidated
net sales and EMS segment net sales:
|
Three Months Ended September 30 |
|
2010 |
|
2009 |
Bayer AG affiliated sales as a percent of consolidated net sales |
13% |
|
15% |
Bayer AG affiliated sales as a percent of
EMS segment net sales |
22% |
|
26% |
The Company's sales to Bayer AG are expected to
begin to decline in the fourth quarter of fiscal year 2011 as the
Company's manufacturing contract with Bayer AG reaches end-of-life.
Margins on the Bayer AG product are generally lower than the Company's
other EMS products. The nature of the electronic manufacturing services
industry is such that the start-up of new customers and new programs to
replace expiring programs occurs frequently. New customer and program
start-ups generally cause losses early in the life of a program, which
are generally recovered as the program becomes established and matures.
This segment continues to experience margin pressures related to an
overall excess capacity position in the electronics subcontracting
services market.
Risk factors within the EMS segment include, but
are not limited to, general economic and market conditions, customer
order delays, increased globalization, foreign currency exchange rate
fluctuations, rapid technological changes, component availability,
supplier stability, the contract nature of this industry, unexpected
integration issues with acquisitions, the concentration of sales to
large customers, and the potential for customers to choose to in-source
a greater portion of their electronics manufacturing. The continuing
success of this segment is dependent upon its ability to replace
expiring customers/programs with new customers/programs. Additional risk
factors that could have an effect on the Company's performance are
contained in the Company's Annual Report on Form 10-K for the fiscal
year ended June 30, 2010.
31
Furniture Segment
Furniture segment results were as follows:
|
At or for the
Three Months Ended |
|
|
|
September 30 |
|
|
(Amounts in
Millions) |
2010 |
|
2009 |
|
% Change |
Net Sales |
$ 116.8 |
|
$
109.2 |
|
7% |
Operating Income |
$
1.1 |
|
$
2.9 |
|
(63)% |
Net Income |
$
0.6 |
|
$ 1.8 |
|
(67)% |
Open Orders |
$ 84.7 |
|
$
65.1 |
|
30% |
The first quarter fiscal year 2011 net sales
increase in the Furniture segment compared to the first quarter of
fiscal year 2010 resulted from increased net sales of office furniture
more than offsetting decreased net sales of hospitality furniture. The
increase in office furniture sales was primarily due to increased sales
volumes which more than offset the impact of higher discounting net of
price increases. First quarter fiscal year 2011 sales of newly
introduced office furniture products which have been sold for less than
twelve months approximated $5.5 million. Open orders of furniture
products at September 30, 2010 increased 30% when compared to the open
orders levels as of September 30, 2009 as open orders for both office
furniture and hospitality furniture increased. Open orders at a point in
time may not be indicative of future sales trends.
First quarter fiscal year 2011 Furniture segment
gross profit as a percent of net sales declined 3.4 percentage points
from the first quarter of fiscal year 2010. Items contributing to the
decline in gross profit as a percent of net sales included: increased
discounting resulting from competitive pricing pressures, higher
commodity costs, higher freight expense, and higher employee-related
costs. The gross profit decline was partially offset by a sales mix
shift to higher margin product, price increases on select product, and
other overall cost reduction efforts.
First quarter fiscal year 2011 Furniture segment
selling and administrative expenses increased slightly in absolute
dollars but as a percent of net sales decreased 1.6 percentage points
primarily due to the higher sales volumes when compared to the first
quarter of fiscal year 2010. Higher advertising and product marketing
expense and increased employee benefit expense were partially offset by
lower selling and administrative salary expense.
32
As a percent of net sales, operating income was
0.9% for the first quarter of fiscal year 2011 and 2.7% for the first
quarter of fiscal year 2010.
Risk factors within this segment include, but are
not limited to, general economic and market conditions, increased global
competition, financial stability of customers, supply chain cost
pressures, raw material availability, and relationships with strategic
customers and product distributors. Additional risk factors that could
have an effect on the Company's performance are contained in the
Company's Annual Report on Form 10-K for the fiscal year ended June 30,
2010.
Liquidity and Capital Resources
Working capital at September 30, 2010 was $178.6
million compared to working capital of $180.0 million at June 30, 2010.
The current ratio was 1.8 at both September 30, 2010 and June 30, 2010.
The Company's internal measure of accounts
receivable performance, also referred to as Days Sales Outstanding
(DSO), for the first quarter of fiscal year 2011 of 46.5 days
approximated the 46.2 days for the first quarter of fiscal year 2010.
The Company defines DSO as the average of monthly accounts and notes
receivable divided by an average day's net sales. The Company's
Production Days Supply on Hand (PDSOH) of inventory measure for the
first quarter of fiscal year 2011 increased to 69.0 days from 62.2 days
for the first quarter of fiscal year 2010. The increased PDSOH was
primarily due to higher inventory levels associated with customer-requested shipping delays, the ramp up of certain programs, and the
transfer of production among the Company's EMS segment facilities. The
Company defines PDSOH as the average of the monthly gross inventory
divided by an average day's cost of sales.
The Company's short-term liquidity available,
represented as cash, cash equivalents, and short-term investments plus
the unused amount of the Company's revolving credit facility, totaled
$148.1 million at September 30, 2010 compared to $163.6 million at June
30, 2010.
33
The Company's cash position from an aggregate of
cash, cash equivalents, and short-term investments decreased from $67.8
million at June 30, 2010 to $53.3 million at September 30, 2010. The
Company had no short-term borrowings as of September 30, 2010 or June
30, 2010. Operating activities used $10.4 million of cash flow in the
first quarter of fiscal year 2011 compared to the $12.5 million of cash
generated by operating activities in the first quarter of fiscal year
2010. The cash outflow in the first quarter of fiscal year 2011 was
primarily driven by an increase in inventory in the EMS segment due to
higher inventory levels associated with customer-requested shipping
delays, the ramp up of certain programs, and the transfer of production
among the Company's EMS segment facilities. In addition, during the
first quarter of fiscal year 2011, the Company reinvested $6.7 million
into capital investments for the future, primarily for manufacturing
equipment in the EMS segment. The Company also paid $1.8 million in
dividends, which remained flat with the first quarter of fiscal year
2010. Consistent with the Company's historical dividend policy, the
Company's Board of Directors will evaluate the appropriate dividend
payment on a quarterly basis. During fiscal year 2011, the Company
expects to minimize capital expenditures where appropriate but will
continue to invest in capital expenditures prudently, particularly for
projects that would enhance the Company's capabilities and
diversification while providing an opportunity for growth and improved
profitability as the economy and the Company's markets recover. At
September 30, 2010 and June 30, 2010, the Company had no short-term
borrowings outstanding under its $100 million credit facility or the
Company's several smaller foreign credit facilities.
At September 30, 2010, the Company had $5.2 million
in letters of credit against the $100 million credit facility. Total
availability to borrow under the $100 million credit facility was $94.8
million at September 30, 2010.
The Company maintains the $100 million credit
facility with an expiration date in April 2013 that allows for both
issuances of letters of credit and cash borrowings. The $100 million
credit facility provides an option to increase the amount available for
borrowing to $150 million at the Company's request, subject to the
consent of the participating banks. The $100 million credit facility,
upon which there were no borrowings at September 30, 2010, requires the
Company to comply with certain debt covenants, the most significant of
which are the interest coverage ratio and minimum net worth. The Company
was in compliance with the debt covenants at September 30, 2010.
34
The table below compares the actual net worth and
interest coverage ratio with the limits specified in the credit
agreement.
Covenant |
|
At or For the
Period Ended
September 30, 2010 |
|
Limit As Specified in Credit Agreement |
|
Excess |
Minimum Net Worth |
|
$383,318,000 |
|
$362,000,000 |
|
$21,318,000 |
Interest Coverage Ratio |
|
16.5 |
|
3.0 |
|
13.5 |
The Interest Coverage Ratio is calculated on a
rolling four-quarter basis as defined in the credit agreement.
In addition to the $100 million credit facility,
the Company can opt to utilize foreign credit facilities which are
available to satisfy short-term cash needs at that specific location
rather than funding from intercompany sources. The Company maintains a
foreign credit facility for its EMS segment operation in Thailand which
is backed by the $100 million revolving credit facility. The Company has
a credit facility for its EMS segment operation in Poland, which allows
for multi-currency borrowings up to 6 million Euro equivalent
(approximately $8.2 million U.S. dollars at September 30, 2010 exchange
rates). These foreign credit facilities can be cancelled at any time by
either the bank or the Company.
The Company believes its principal sources of
liquidity from available funds on hand, cash generated from operations,
and the availability of borrowing under the Company's credit facilities
will be sufficient for fiscal year 2011 and the foreseeable future. One
of the Company's sources of funds has been its ability to generate cash
from operations to meet its liquidity obligations, which during the
first quarter of fiscal year 2011 was hampered by the ramp up in
inventory balances, and could be adversely affected in the future by
factors such as general economic and market conditions, a decline in
demand for the Company's products, loss of key contract customers, the
ability of the Company to generate profits, and other unforeseen
circumstances. In particular, should demand for the Company's products
decrease significantly over the next 12 months due to its weakened
markets, the available cash provided by operations could be adversely
impacted. Another source of funds is the Company's credit facilities.
The $100 million credit facility is contingent on complying with certain
debt covenants.
The preceding statements are forward-looking
statements under the Private Securities Litigation Reform Act of 1995.
Certain factors could cause actual results to differ materially from
forward-looking statements.
35
Fair Value
During the first quarter of fiscal year 2011, no
financial assets were affected by a lack of market liquidity. For level
1 financial assets, readily available market pricing was used to value
the financial instruments. The Company's foreign currency derivatives,
which were classified as level 2 assets/liabilities, were independently
valued using a financial risk management software package using
observable market inputs such as forward interest rate yield curves,
current spot rates, and time value calculations. To verify the
reasonableness of the independently determined fair values, these
derivative fair values were compared to fair values calculated by the
counterparty banks. The Company's own credit risk and counterparty
credit risk had an immaterial impact on the valuation of the foreign
currency derivatives.
The Company invested in convertible promissory
notes and stock warrants of a privately-held company during fiscal year
2010 and has been chosen by the privately-held company as a supplier to produce EMS products. The convertible promissory notes,
classified as available-for-sale debt securities, were valued using a
recurring market-based method which approximates fair value by using the
amortized cost basis of the promissory notes, with the discount
amortized to interest income over the term. The stock warrants,
classified as derivative instruments, were valued on a recurring basis
using a market-based method which utilizes the Black-Scholes valuation
model. The fair value measurements for the convertible promissory notes
and stock warrants were calculated using unobservable inputs and were
classified as level 3 financial assets.
See
Note 7 - Fair Value of Notes to Condensed Consolidated Financial
Statements for more information.
Contractual Obligations
There have been no material changes outside the
ordinary course of business to the Company's summary of contractual
obligations under the caption, "Contractual Obligations" in Item 7
"Management's Discussion and Analysis of Financial Condition and Results
of Operations" of the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 2010.
36
Off-Balance Sheet Arrangements
The Company has no off-balance sheet arrangements other than standby
letters of credit and operating leases entered into in the normal course
of business. These arrangements do not have a material current effect
and are not reasonably likely to have a material future effect on the
Company's financial condition, results of operations, liquidity, capital
expenditures, or capital resources. See
Note 5 - Commitments and Contingent Liabilities of Notes to
Condensed Consolidated Financial Statements for more information on
standby letters of credit. The Company does not have material exposures
to trading activities of non-exchange traded contracts.
The preceding statements are forward-looking statements under the
Private Securities Litigation Reform Act of 1995. Certain factors could
cause actual results to differ materially from forward-looking
statements.
Critical Accounting Policies
The Company's consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United
States of America. These principles require the use of estimates and
assumptions that affect amounts reported and disclosed in the
consolidated financial statements and related notes. Actual results
could differ from these estimates and assumptions. Management uses its
best judgment in the assumptions used to value these estimates, which
are based on current facts and circumstances, prior experience, and
other assumptions that are believed to be reasonable. The Company's
management overlays a fundamental philosophy of valuing its assets and
liabilities in an appropriately conservative manner. Management believes
the following critical accounting policies reflect the more significant
judgments and estimates used in preparation of the Company's
consolidated financial statements and are the policies that are most
critical in the portrayal of the Company's financial position and
results of operations. Management has discussed these critical
accounting policies and estimates with the Audit Committee of the
Company's Board of Directors and with the Company's independent
registered public accounting firm.
37
Revenue recognition - The Company recognizes revenue when
title and risk transfer to the customer, which under the terms and
conditions of the sale may occur either at the time of shipment or when
the product is delivered to the customer. Service revenue is recognized
as services are rendered. Shipping and handling fees billed to customers
are recorded as sales while the related shipping and handling costs are
included in cost of goods sold. The Company recognizes sales net of
applicable sales tax.
- Sales returns and allowances - At the time
revenue is recognized certain provisions may also be recorded,
including a provision for returns and allowances, which involve
estimates based on current discussions with applicable customers,
historical experience with a particular customer and/or product, and
other relevant factors. As such, these factors may change over time
causing the provisions to be adjusted accordingly. At September 30,
2010 and June 30, 2010, the reserve for returns and allowances was
$2.4 million and $2.5 million, respectively. The returns and
allowances reserve approximated 2% to 3% of gross trade receivables
during the past two fiscal years.
- Allowance for doubtful accounts - Allowance
for doubtful accounts is generally based on a percentage of aged
accounts receivable, where the percentage increases as the accounts
receivable become older. However, management judgment is utilized in
the final determination of the allowance based on several factors
including specific analysis of a customer's credit worthiness,
changes in a customer's payment history, historical bad debt
experience, and general economic and market trends. The allowance
for doubtful accounts at September 30, 2010 and June 30, 2010 was
$1.4 million and $1.3 million, respectively. During the preceding
two-year period, this reserve had approximated 1% of gross trade
accounts receivable except for the period March 2009 through
December 2009 during which time it approximated 2% of gross trade
accounts receivable. The higher reserve was driven by increased risk
created by deteriorating market conditions during that time.
38
Excess and obsolete inventory - Inventories were valued using
the lower of last-in, first-out (LIFO) cost or market value for
approximately 9% of consolidated inventories at both September 30, 2010
and June 30, 2010, respectively, including approximately 79% and 78% of
the Furniture segment inventories at September 30, 2010 and June 30,
2010, respectively. The remaining inventories were valued at lower of
first-in, first-out (FIFO) cost or market value. Inventories recorded on
the Company's balance sheet are adjusted for excess and obsolete
inventory. In general, the Company purchases materials and finished
goods for contract-based business from customer orders and projections,
primarily in the case of long lead time items, and has a general
philosophy to only purchase materials to the extent covered by a written
commitment from its customers. However, there are times when inventory
is purchased beyond customer commitments due to minimum lot sizes and
inventory lead time requirements, or where component allocation or other
procurement issues may exist. The Company may also purchase additional
inventory to support transfers of production between manufacturing
facilities. Evaluation of excess inventory includes such factors as
anticipated usage, inventory turnover, inventory levels, and product
demand levels. Factors considered when evaluating inventory obsolescence
include the age of on-hand inventory and reduction in value due to
damage, use as showroom samples, design changes, or cessation of product
lines.
Self-insurance reserves - The Company is self-insured up to
certain limits for auto and general liability, workers' compensation,
and certain employee health benefits such as medical, short-term
disability and dental with the related liabilities included in the
accompanying financial statements. The Company's policy is to estimate
reserves based upon a number of factors including known claims,
estimated incurred but not reported claims, and other analyses, which
are based on historical information along with certain assumptions about
future events. Changes in assumptions for such matters as increased
medical costs and changes in actual experience could cause these
estimates to change and reserve levels to be adjusted accordingly. At
September 30, 2010 and June 30, 2010, the Company's accrued liabilities
for self-insurance exposure were $4.1 million and $4.7 million,
respectively.
Taxes - Deferred income tax assets and liabilities are
recognized for the estimated future tax consequences attributable to
temporary differences between the financial statement carrying amounts
of existing assets and liabilities and their respective tax bases. These
assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which the temporary differences
are expected to reverse. The Company evaluates the recoverability of its
deferred tax assets each quarter by assessing the likelihood of future
profitability and available tax planning strategies that could be
implemented to realize its deferred tax assets. If recovery is not
likely, the Company provides a valuation allowance based on its best
estimate of future taxable income in the various taxing jurisdictions
and the amount of deferred taxes ultimately realizable. Future events
could change management's assessment.
39
The Company operates within multiple taxing jurisdictions and is
subject to tax audits in these jurisdictions. These audits can involve
complex issues, which may require an extended period of time to resolve.
However, the Company believes it has made adequate provision for income
and other taxes for all years that are subject to audit. As tax periods
are effectively settled, the provision will be adjusted accordingly. The
liability for uncertain income tax and other tax positions, including
accrued interest and penalties on those positions, was $3.7 million at
both September 30, 2010 and June 30, 2010.
New Accounting Standards
See
Note 1 - Summary of Significant Accounting Policies of Notes to
Condensed Consolidated Financial Statements for information regarding
New Accounting Standards.
Forward-Looking Statements
Certain statements contained within this document
are considered forward-looking under the Private Securities Litigation
Reform Act of 1995. These statements can be identified by the use of
words such as "believes," "estimates," "projects," "expects," "intends,"
"anticipates," "forecasts," and similar expressions. These
forward-looking statements are subject to risks and uncertainties
including, but not limited to, continuing impacts of 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
components, increased competitive pricing pressures reflecting excess
industry capacities, successful execution of restructuring plans,
changes in the regulatory environment, or similar unforeseen events.
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 Annual Report on Form 10-K for the fiscal year ended June
30, 2010.
40
Item 3. Quantitative and Qualitative Disclosures
About Market Risk
There have been no material changes to market risks from the
information disclosed in Item
7A "Quantitative and Qualitative Disclosures About Market Risk" of
the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 2010.
Item 4. Controls and Procedures
(a) Evaluation of disclosure controls and procedures.
The Company maintains controls and procedures designed to ensure that
information required to be disclosed in the reports that the Company files
or submits under the Securities Exchange Act of 1934 is recorded, processed,
summarized, and reported within the time periods specified in the rules and
forms of the Securities and Exchange Commission and that such information is
accumulated and communicated to the Company's management, including its
Chief Executive Officer and Chief Financial Officer, as appropriate, to
allow timely decisions regarding required disclosure. Based upon their evaluation
of those controls and procedures performed as of September 30, 2010, the
Chief Executive Officer and Chief Financial Officer of the Company
concluded that its disclosure
controls and procedures were effective.
(b) Changes in internal control over financial reporting.
There have been no changes in the
Company's internal control over financial reporting that occurred during the
quarter ended September 30, 2010 that have materially affected, or that are
reasonably likely to materially affect, the Company's internal control over
financial reporting.
PART II. OTHER INFORMATION
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
A share repurchase program authorized by the Board of
Directors was announced on October 16, 2007. The program allows for the repurchase of up
to two million shares of any combination of Class A and Class B shares and will remain in effect until all shares authorized have
been repurchased. The Company did not repurchase any shares under the repurchase
program during the first quarter of fiscal year 2011. At September 30, 2010, two
million shares remained available under the repurchase program.
41
Item 6. Exhibits
Exhibits (numbered in accordance with Item 601 of Regulation S-K)
(3(a)) Amended and restated Articles of Incorporation of the Company
(Incorporated by reference to Exhibit 3(a) to the Company's Form 10-K for the
fiscal year ended June
30, 2007)
(3(b)) Restated By-laws of the Company (Incorporated by reference to
Exhibit 3(b) to
the Company's Form 8-K filed October 23, 2009)
(10(a)) Summary of Director and Named Executive Officer
Compensation
(10(b)) Description of the Company's 2010 Profit Sharing
Incentive Bonus Plan (Incorporated by reference to Exhibit 10.1 to
the Company's Form 8-K filed October 25, 2010)
(11) Computation of Earnings Per Share
(31.1) Certification filed by Chief Executive Officer pursuant to
Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
(31.2) Certification filed by Chief Financial Officer pursuant to
Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
(32.1) Certification furnished by the Chief Executive Officer
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
(32.2) Certification furnished by the Chief Financial Officer
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
42
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
|
|
|
|
|
KIMBALL INTERNATIONAL, INC. |
|
|
|
|
|
|
|
By: |
/s/ James C. Thyen |
|
|
JAMES C. THYEN President, Chief Executive Officer |
|
|
November 5, 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
By: |
/s/ Robert F. Schneider |
|
|
ROBERT F. SCHNEIDER Executive Vice President, Chief Financial Officer |
|
|
November 5, 2010 |
43
Kimball International, Inc.
Exhibit Index
Exhibit No. |
|
Description |
3(a) |
|
Amended and restated Articles of Incorporation of the Company
(Incorporated by reference to Exhibit 3(a) to the Company's Form 10-K for the
fiscal year ended
June 30, 2007) |
3(b) |
|
Restated By-laws of the Company (Incorporated by reference to Exhibit
3(b) to the
Company's Form 8-K filed October 23, 2009) |
10(a) |
|
Summary of Director and Named Executive Officer Compensation |
10(b) |
|
Description of the Company's 2010 Profit Sharing Incentive Bonus
Plan (Incorporated by reference to Exhibit 10.1 to the Company's
Form 8-K filed October 25, 2010) |
11 |
|
Computation of Earnings Per Share |
31.1 |
|
Certification filed by Chief Executive Officer pursuant to
Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 |
31.2 |
|
Certification filed by Chief Financial Officer pursuant to
Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 |
32.1 |
|
Certification furnished by the Chief Executive Officer
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 |
32.2 |
|
Certification furnished by the Chief Financial Officer
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 |
44
EX-10
2
exhibit10a.htm
KIMBALL INTERNTIONAL, INC. EXHIBIT 10(A)
Exhibit 10(a)
Exhibit 10(a)SUMMARY
OF DIRECTOR AND NAMED EXECUTIVE OFFICER COMPENSATION
This summary sets forth the compensation of the Directors of Kimball
International, Inc. (the "Company"). The summary also includes compensation of the
Chief Executive Officer, Chief Financial Officer, and three most highly compensated executive officers of the Company as of the
quarter ended September 30,
2010 (the "Named Executive Officers").
For a detailed description of the compensation arrangements that the
Directors and Named Executive Officers participate in, refer to the Company's
most recent Proxy Statement filed with the Securities and Exchange Commission.
Director Compensation
All Outside (non-employee) Directors receive annual compensation of $55,000 for
the year for service as Directors. The Chairperson of the Audit Committee of the
Board of Directors receives $5,500 per committee meeting, and other Audit
Committee members receive $4,000 per committee meeting. The Chairperson of the
Compensation and Governance Committee receives $4,000 per committee meeting, and
other members of the Compensation and Governance Committee receive $2,500 per
committee meeting. Members of the Strategic Planning Committee receive $4,000 per committee meeting.
The Directors can elect to receive all of their annual retainer and/or
meeting fees in shares of Class B Common Stock under the Company's 2003 Stock
Option and Incentive Plan. Directors are also reimbursed for travel
expenses incurred in connection with Board and Committee meeting attendance.
An Outside Director is a director who is not an employee of the Company
or one of its subsidiaries. James C. Thyen, President and Chief Executive
Officer, and Douglas A. Habig, Chairman of the Board, are Directors of the
Company but do not receive compensation for their services as Directors.
Named Executive Officers
Base Pay
Periodically,
the Compensation and Governance Committee of the Board of Directors reviews and
approves the salaries that are paid to the Company's executive
officers. The following are the current annualized base salaries for the
Company's Named Executive Officers:
|
James C. Thyen, President and Chief Executive Officer |
$879,996 |
|
Donald D. Charron, Executive Vice President, President-Kimball Electronics Group |
$520,728 |
|
Robert F. Schneider, Executive Vice President, Chief Financial Officer |
$421,564 |
|
John H. Kahle,
Executive Vice President, General Counsel, Secretary |
$354,120 |
|
Gary W. Schwartz,
Executive Vice President, Chief Information Officer |
$284,180 |
Cash Incentive Compensation
Each of the Named Executive Officers was eligible to participate in the Company's
2005 Profit Sharing Incentive Bonus Plan (the "Plan") for fiscal year
2010. A long-standing component of the Company's profit sharing incentive
bonus plan is that it is linked to the performance of the Company which
automatically lowers total compensation expense when profits are down. Under the
Plan, cash incentives are accrued
annually and paid in five installments over the succeeding fiscal year. Except
for provisions relating to retirement, death, permanent disability, and certain
other circumstances described in a participant's employment agreement,
participants must be actively employed on each payment date to be eligible to
receive any unpaid cash incentive installment. The total amount of cash
incentives accrued and
authorized to be paid to the Named Executive Officers based on the Company's
fiscal year 2010 results is listed below. The Named Executive Officers received
an installment of 50% of the payment in August 2010,
12.5% was paid in September 2010, and the remaining portions will be paid in equal installments in
January 2011, April 2011, and June 2011.
|
James C. Thyen, President and Chief Executive Officer |
$
64,867 |
|
Donald D. Charron, Executive Vice President, President-Kimball Electronics Group |
$
138,239 |
|
Robert F. Schneider, Executive Vice President, Chief Financial Officer |
$
33,159 |
|
John H. Kahle,
Executive Vice President, General Counsel, Secretary |
$
27,854 |
|
Gary W. Schwartz,
Executive Vice President, Chief Information Officer |
$
22,353 |
Donald D. Charron, Robert F. Schneider, John H. Kahle, and
Gary W. Schwartz were awarded additional discretionary cash compensation of
$10,000, $33,000, $27,000, and $22,000, respectively, for fiscal year 2010.
Stock Compensation
The Named Executive Officers may also receive a variety of stock incentive
benefits under the 2003 Stock Option and Incentive Plan consisting of: restricted
stock, restricted share units, unrestricted share grants, incentive stock
options, nonqualified stock options, stock appreciation rights, performance
shares, and performance units. The only form of award granted to Named
Executive Officers for fiscal
year 2011 was performance shares. Performance shares include both an
annual performance share ("APS") award and a long-term performance share ("LTPS")
award with one-fifth (1/5) of the LTPS award vesting annually over the succeeding
five-year period. No other form of award has been granted to the Named
Executive Officers
since July 2005.
The following table summarizes the performance shares issued in Class A
Common Stock during August 2010 to the Company's Named Executive Officers
pursuant to their fiscal year 2010
performance share awards:
|
APS Award |
|
LTPS Award |
|
(number of
shares issued) (1) |
|
(number of
shares issued) (1) |
|
|
|
|
James C. Thyen, President and Chief Executive Officer |
11,440 |
|
20,104 |
Donald D. Charron, Executive Vice President, President-Kimball Electronics Group |
2,025 |
|
5,956 |
Robert F. Schneider, Executive Vice President, Chief Financial Officer |
600 |
|
4,316 |
John H. Kahle,
Executive Vice President, General Counsel, Secretary |
600 |
|
4,316 |
Gary W. Schwartz,
Executive Vice President, Chief Information Officer |
600 |
|
4,316 |
(1) Shares have not been reduced by the number of shares
withheld to satisfy tax withholding obligations.
The following table summarizes the maximum number of performance shares awarded
in August 2010 to the Company's Named Executive Officers for fiscal year 2011:
|
APS Award |
|
LTPS Award |
|
(number of shares) |
|
(number of shares) |
|
|
|
|
James C. Thyen, President and Chief Executive Officer |
143,000 |
|
183,000 |
Donald D. Charron, Executive Vice President, President-Kimball Electronics Group |
7,500 |
|
26,300 |
Robert F. Schneider, Executive Vice President, Chief Financial Officer |
7,500 |
|
30,300 |
John H. Kahle,
Executive Vice President, General Counsel, Secretary |
7,500 |
|
29,300 |
Gary W. Schwartz,
Executive Vice President, Chief Information Officer |
7,500 |
|
28,300 |
The number of shares to be issued will be dependent upon the percentage payout
under the Plan. Refer to the Company's Proxy Statement for further
details.
Retirement Plans
The Named Executive Officers participate in a defined
contribution, participant-directed retirement plan with a 401(k) provision that
all domestic employees are eligible
to participate in (the "Retirement Plan"). The Retirement Plan provides for
voluntary employee contributions as well as a discretionary annual Company
contribution based on a percent of net income with certain minimum and maximum
limits as determined annually by the Board of Directors. Each eligible employee's Company
contribution is defined as a percent of eligible compensation, the percent being
identical for all eligible employees, including Named Executive Officers.
Participant contributions are fully vested immediately, and Company contributions
are fully vested after five years of participation. All Named Executive Officers
are fully vested. The Retirement
Plan is fully funded. For those eligible employees who, under the 1986 Tax
Reform Act, are deemed to be highly compensated, their individual Company
contribution under the Retirement Plan is reduced. For employees who are
eligible, including all Named Executive Officers, there is a nonqualified,
Supplemental Employee Retirement Plan (SERP) in which the Company contributes to
the account of each individual an amount equal to the reduction in the
contribution under the Retirement Plan arising from the provisions of the 1986
Tax Reform Act. The SERP investment is primarily composed of employee
contributions.
Other
The Named Executive
Officers receive nominal benefits such as financial counseling, medical
reimbursement, executive preventive healthcare program, tax
preparation, and other
miscellaneous items. The Named Executive Officers may use the Company
aircraft for transportation related to the executive preventive healthcare
program and for limited personal reasons. The exact amounts received from these benefits are
not predetermined and are disclosed annually in the Company's Proxy Statement.
EX-11
3
q111ex11.htm
KIMBALL INTERNTIONAL, INC. EXHIBIT 11
Exhibit 11
Exhibit 11
KIMBALL INTERNATIONAL, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(Unaudited) |
Three Months Ended
September 30, 2010 |
|
Three Months Ended
September 30, 2009 |
|
(Amounts in Thousands, Except for Per Share Data) |
Class A |
|
Class B |
|
Total |
|
Class A |
|
Class B |
|
Total |
|
Basic Earnings Per Share: |
|
|
|
|
|
|
|
|
|
Dividends Declared |
$ 477 |
|
$ 1,356 |
|
$ 1,833 |
|
$ 492 |
|
$ 1,328 |
|
$ 1,820 |
|
Less: Unvested Participating Dividends |
-0- |
|
-0- |
|
-0- |
|
(4) |
|
-0- |
|
(4) |
|
Dividends to Common Share Owners |
477 |
|
1,356 |
|
1,833 |
|
488 |
|
1,328 |
|
1,816 |
|
Undistributed Earnings (Loss) |
|
|
|
|
(1,377) |
|
|
|
|
|
(46) |
|
Less: Earnings Allocated to Participating Securities |
|
|
|
|
-0- |
|
|
|
|
|
-0- |
|
Undistributed Earnings (Loss) allocated to Common Share Owners |
(386) |
|
(991) |
|
(1,377) |
|
(13) |
|
(33) |
|
(46) |
|
Net Income Available to Common Share Owners |
$ 91 |
|
$ 365 |
|
$ 456 |
|
$ 475 |
|
$ 1,295 |
|
$ 1,770 |
|
Average Basic Common Shares Outstanding |
10,575 |
|
27,105 |
|
37,680 |
|
10,730 |
|
26,583 |
|
37,313 |
|
Basic Earnings Per Share |
$ 0.01 |
|
$ 0.01 |
|
|
|
$ 0.04 |
|
$ 0.05 |
|
|
|
Diluted Earnings Per Share: |
|
|
|
|
|
|
|
|
|
Dividends Declared and Assumed Dividends on Dilutive Shares |
$ 481 |
|
$ 1,356 |
|
$ 1,837 |
|
$ 494 |
|
$ 1,328 |
|
$ 1,822 |
|
Less: Unvested Participating Dividends |
-0- |
|
-0- |
|
-0- |
|
(4) |
|
-0- |
|
(4) |
|
Dividends and Assumed Dividends to Common Share Owners |
481 |
|
1,356 |
|
1,837 |
|
490 |
|
1,328 |
|
1,818 |
|
Undistributed Earnings (Loss) |
|
|
|
|
(1,381) |
|
|
|
|
|
(48) |
|
Less: Earnings Allocated to Participating Securities |
|
|
|
|
-0- |
|
|
|
|
|
-0- |
|
Undistributed Earnings (Loss) allocated to Common Share Owners |
(390) |
|
(991) |
|
(1,381) |
|
(14) |
|
(34) |
|
(48) |
|
Net Income Available to Common Share Owners |
$ 91 |
|
$ 365 |
|
$ 456 |
|
$ 476 |
|
$ 1,294 |
|
$ 1,770 |
|
Average Diluted Common Shares Outstanding |
10,659 |
|
27,105 |
|
37,764 |
|
10,863 |
|
26,645 |
|
37,508 |
|
Diluted Earnings Per Share |
$ 0.01 |
|
$ 0.01 |
|
|
|
$ 0.04 |
|
$ 0.05 |
|
|
|
Reconciliation of Basic and Diluted EPS Calculations: |
|
|
|
|
|
|
|
|
|
|
|
|
Net Income Used for Basic EPS Calculation |
$ 91 |
|
$ 365 |
|
$ 456 |
|
$ 475 |
|
$ 1,295 |
|
$ 1,770 |
|
Assumed Dividends Payable on Dilutive Shares: |
|
|
|
|
|
|
|
|
|
|
|
Performance shares |
4 |
|
-0- |
|
4 |
|
2 |
|
-0- |
|
2 |
|
Increase (Reduction) of Undistributed Earnings - allocated based |
|
|
|
|
|
|
|
|
|
|
|
|
on Class A and Class B shares |
(4) |
|
-0- |
|
(4) |
|
(1) |
|
(1) |
|
(2) |
|
Net Income Used for Diluted EPS Calculation |
$ 91 |
|
$ 365 |
|
$ 456 |
|
$ 476 |
|
$ 1,294 |
|
$ 1,770 |
|
Average Shares Outstanding for Basic
EPS Calculation |
10,575 |
|
27,105 |
|
37,680 |
|
10,730 |
|
26,583 |
|
37,313 |
|
Dilutive Effect of Average Outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
Performance shares |
84 |
|
-0- |
|
84 |
|
53 |
|
1 |
|
54 |
|
Restricted share units |
-0- |
|
-0- |
|
-0- |
|
80 |
|
61 |
|
141 |
|
Average Shares Outstanding for Diluted
EPS Calculation |
10,659 |
|
27,105 |
|
37,764 |
|
10,863 |
|
26,645 |
|
37,508 |
|
Included in dividends declared for the basic and diluted earnings
per share computation for the three months ended September 30, 2009
are dividends computed and accrued on unvested Class A and Class B
restricted share units, which were paid by a conversion to the
equivalent value of common shares on the vesting date. Restricted
share units held by retirement-age participants at September 30,
2009 had a nonforfeitable right to dividends and were deducted from
the above dividends and undistributed earnings figures allocable to
common Share Owners. There were no restricted share units
outstanding as of September 30, 2010. |
|
All of the 634,000 and 729,000 average outstanding stock options
were antidilutive and were excluded from the dilutive calculations
for the quarters ended September 30, 2010 and 2009, respectively. |
|
EX-31
4
exhibit311.htm
KIMBALL INTERNTIONAL, INC. EXHIBIT 31.1
Exhibit 31.1
Exhibit 31.1
CERTIFICATION PURSUANT TO
RULE 13a-14(a)/15d-14(a),
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, James C. Thyen, certify that:
1. |
I have reviewed this quarterly report on Form
10-Q of Kimball International, Inc.; |
|
|
2. |
Based on my knowledge, this report does not
contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to the
period covered by this report; |
|
|
3. |
Based on my knowledge, the financial
statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods
presented in this report; |
|
|
4. |
The registrant's other certifying officer and
I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have: |
|
|
|
(a) Designed such disclosure
controls and procedures, or caused such disclosure controls and procedures
to be designed under our supervision, to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period
in which this report is being prepared; |
|
|
|
(b) Designed such internal
control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles; |
|
|
|
(c) Evaluated the effectiveness
of the registrant's disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this report based on
such evaluation; and |
|
|
|
(d) Disclosed in this report any
change in the registrant's internal control over financial reporting that
occurred during the registrant's most recent fiscal quarter (the
registrant's fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and |
|
|
5. |
The registrant's other certifying officer and
I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons performing the
equivalent functions): |
|
|
|
(a) All significant deficiencies and material
weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant's
ability to record, process, summarize and report financial information; and |
|
|
|
(b) Any fraud, whether or not material, that
involves management or other employees who have a significant role in the
registrant's internal control over financial reporting. |
|
|
Date: November 5, 2010 |
|
|
|
|
/s/ James C. Thyen |
|
|
JAMES C. THYEN
President,
Chief Executive Officer |
|
|
|
EX-31
5
exhibit312.htm
KIMBALL INTERNTIONAL, INC. EXHIBIT 31.2
Exhibit 31.2
Exhibit 31.2
CERTIFICATION PURSUANT TO
RULE 13a-14(a)/15d-14(a),
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Robert F. Schneider, certify that:
1. |
I have reviewed this quarterly report on Form
10-Q of Kimball International, Inc.; |
|
|
2. |
Based on my knowledge, this report does not
contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to the
period covered by this report; |
|
|
3. |
Based on my knowledge, the financial
statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods
presented in this report; |
|
|
4. |
The registrant's other certifying officer and
I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have: |
|
|
|
(a) Designed such disclosure
controls and procedures, or caused such disclosure controls and procedures
to be designed under our supervision, to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period
in which this report is being prepared; |
|
|
|
(b) Designed such internal
control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles; |
|
|
|
(c) Evaluated the effectiveness
of the registrant's disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this report based on
such evaluation; and |
|
|
|
(d) Disclosed in this report any
change in the registrant's internal control over financial reporting that
occurred during the registrant's most recent fiscal quarter (the
registrant's fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and |
|
|
5. |
The registrant's other certifying officer and
I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons performing the
equivalent functions): |
|
|
|
(a) All significant deficiencies and material
weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant's
ability to record, process, summarize and report financial information; and |
|
|
|
(b) Any fraud, whether or not material, that
involves management or other employees who have a significant role in the
registrant's internal control over financial reporting. |
|
|
Date: November 5, 2010 |
|
|
|
|
/s/ Robert F. Schneider |
|
|
ROBERT F. SCHNEIDER
Executive Vice
President,
Chief Financial Officer |
|
|
|
EX-32
6
exhibit321.htm
KIMBALL INTERNTIONAL, INC. EXHIBIT 32.1
Exhibit 32.1
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report of Kimball International,
Inc. (the "Company") on Form 10-Q for the period ending September 30, 2010 as filed
with the Securities and Exchange Commission on the date hereof (the "Report"),
I, James C. Thyen, President and Chief Executive Officer of the Company, certify, pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly
presents, in all material respects, the financial condition and results of
operations of the Company.
Date: November 5, 2010 |
|
|
|
|
/s/ James C. Thyen |
|
|
JAMES C. THYEN
President,
Chief Executive Officer |
EX-32
7
exhibit322.htm
KIMBALL INTERNTIONAL, INC. EXHIBIT 32.2
Exhibit 32.2
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report of Kimball International,
Inc. (the "Company") on Form 10-Q for the period ending September 30, 2010 as filed
with the Securities and Exchange Commission on the date hereof (the "Report"),
I, Robert F. Schneider, Chief Financial Officer of the Company, certify,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly
presents, in all material respects, the financial condition and results of
operations of the Company.
Date: November 5, 2010 |
|
|
|
|
/s/ Robert F. Schneider |
|
|
ROBERT F. SCHNEIDER
Executive Vice President,
Chief Financial Officer |
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