-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DhBFgowzkAkXf2G0kqLyfugq9F1fW3uQNDz1WETX35tpu+8qy4gl8MHPui4EyGeG mGlMJQYuN85/INoVWITQqQ== 0000055772-97-000007.txt : 19971105 0000055772-97-000007.hdr.sgml : 19971105 ACCESSION NUMBER: 0000055772-97-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971104 SROS: NASD 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: SEC FILE NUMBER: 000-03279 FILM NUMBER: 97707387 BUSINESS ADDRESS: STREET 1: 1600 ROYAL ST CITY: JASPER STATE: IN ZIP: 47549 BUSINESS PHONE: 8124821600 MAIL ADDRESS: STREET 1: 1600 ROYAL STREET STREET 2: 1600 ROYAL STREET CITY: JASPER STATE: IN ZIP: 47549 FORMER COMPANY: FORMER CONFORMED NAME: JASPER CORP DATE OF NAME CHANGE: 19740826 10-Q 1 1ST QTR FORM 10-Q FOR KIMBALL INTERNATIONAL, INC. 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, 1997 __ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 0-3279 KIMBALL INTERNATIONAL, INC. Indiana 35-0514506 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1600 Royal Street, Jasper, Indiana 47549-1001 (Address of principal executive offices) (Zip Code) Registrant's telephone number (812) 482-1600 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___ The number of shares outstanding of the Registrant's common stock as of October 22, 1997 were: Class A Common Stock - 7,215,496 shares Class B Common Stock - 13,538,355 shares The exhibit index appears on page 13. - 1 - KIMBALL INTERNATIONAL, INC. FORM 10-Q INDEX
PAGE NO. PART I FINANCIAL INFORMATION: Item 1. Financial Statements Condensed Consolidated Balance Sheets - September 30, 1997 and June 30, 1997 . . . . . . . . . . . . 3 Consolidated Statements of Income - Three Months Ended September 30, 1997 and 1996. . . . . . . . 4 Consolidated Statements of Cash Flows - Three Months Ended September 30, 1997 and 1996. . . . . . . . 5 Notes To Consolidated Financial Statements. . . . . . . . . . . 6-7 Item 2. Management's Discussion and Analysis Of Financial Condition and Results of Operations . . . . . . . . . 8-11 PART II OTHER INFORMATION: Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . 12 Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Exhibit Index. . . . . . . . . . . . . . . . . . . . . . . . . 13
- 2 - PART I. FINANCIAL INFORMATION KIMBALL INTERNATIONAL, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (dollars in thousands)
(unaudited) September 30, June 30, 1997 1997 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 12,178 $ 18,818 Short-term investments 142,196 149,677 Receivables, less allowances of $4,006 and $4,017, respectively 124,828 110,142 Inventories 83,898 76,142 Other 23,211 21,994 Total Current Assets 386,311 376,773 PROPERTY AND EQUIPMENT - at cost, less accumulated depreciation of $234,306 and $237,191, respectively 175,095 174,010 OTHER ASSETS 30,398 30,800 Total Assets $591,804 $581,583 LIABILITIES AND SHARE OWNERS' EQUITY CURRENT LIABILITIES: Loans payable $ 2,593 $ 2,472 Current maturities of long-term debt 390 471 Accounts payable 56,038 53,063 Dividends payable 5,999 5,989 Accrued expenses 71,068 71,263 Total Current Liabilities 136,088 133,258 OTHER LIABILITIES: Long-term debt, less current maturities 2,238 2,313 Deferred income taxes and other 22,817 23,186 Total Other Liabilities 25,055 25,499 SHARE OWNERS' EQUITY: Common stock 6,723 6,723 Additional paid-in capital 1,338 1,607 Retained earnings 441,695 434,665 Foreign currency translation adjustment 1,547 1,721 Unrealized gain (loss) on available-for-sale securities 285 (73) Less: Treasury stock, at cost (20,927) (21,817) Total Share Owners' Equity 430,661 422,826 Total Liabilities and Share Owners' Equity $591,804 $581,583 See Notes to Consolidated Financial Statements
- 3 - KIMBALL INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF INCOME (amounts in thousands except per share amounts)
(unaudited) Three Months Ended September 30, 1997 1996 Net Sales $245,857 $247,700 Cost of Sales 171,577 174,566 Gross Profit 74,280 73,134 Selling, Administrative and General Expenses 56,277 53,951 Operating Income 18,003 19,183 Other Income (Expense): Interest Expense (95) (117) Interest Income 2,278 1,913 Other - net 646 (2,797) Other Income (Expense) - net 2,829 (1,001) Income Before Taxes on Income 20,832 18,182 Taxes on Income 7,803 4,661 Net Income $ 13,029 $ 13,521 Earnings Per Share of Common Stock: Class A Common Stock $ .63 $ .65 Class B Common Stock $ .63 $ .65 Dividends Per Share of Common Stock: Class A Common Stock $ .28 3/4 $ .25 3/4 Class B Common Stock $ .29 $ .26 Average total number of shares outstanding Class A and B Common Stock 20,737 20,795 See Notes to Consolidated Financial Statements
- 4- KIMBALL INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (dollars in thousands)
(unaudited) Three Months Ended September 30, 1997 1996 Cash Flows From Operating Activities: Net income $ 13,029 $ 13,521 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 8,194 8,269 Gain on sales of assets (148) (341) Deferred income tax and other deferred charges 640 (381) Change in current assets and liabilities: Receivables (14,686) (381) Inventories (7,756) 3,446 Other current assets 775 1,725 Accounts payable 2,975 7,582 Accrued expenses (3,056) 4,340 Net Cash (Used For) Provided By Operating Activities (33) 37,780 Cash Flows From Investing Activities: Capital expenditures (8,639) (8,974) Proceeds from sales of assets 298 372 Proceeds from sale of subsidiary --- 2,345 Increase in other assets (585) (315) Purchases of held-to-maturity securities (4,415) (397) Maturities of held-to-maturity securities 17,402 18,420 Purchases of available-for-sale securities (20,149) (31,408) Sales and maturities of available-for-sale securities 15,000 --- Net Cash Used For Investing Activities (1,088) (19,957) Cash Flows From Financing Activities: Increase in short-term borrowings 121 713 Decrease in long-term debt (156) (191) Dividends paid to share owners (5,989) (5,393) Acquisition of treasury stock, net --- (829) Proceeds from exercise of stock options 622 102 Other - net (161) 657 Net Cash Used For Financing Activities (5,563) (4,941) Effect of Exchange Rate Change on Cash 44 19 Net (Decrease) Increase in Cash and Cash Equivalents (6,640) 12,901 Cash and Cash Equivalents-Beginning of Period 18,818 5,647 Cash and Cash Equivalents-End of Period $ 12,178 $ 18,548 Supplemental Disclosure of Cash Flow Information: Cash paid during the period for: Income taxes $ 225 $ 1,160 Interest $ 121 $ 150 Total Cash, Cash Equivalents and Short-Term Investments: Cash and cash equivalents $ 12,178 $ 18,548 Short-term investments 142,196 121,810 Totals $154,374 $140,358 See Notes to Consolidated Financial Statements
- 5 - KIMBALL INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (1) The interim condensed consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. All significant intercompany transactions and balances have been eliminated. Management believes the financial statements include all adjustments of a normal, recurring nature necessary to present fairly the financial statements of the interim period. Results of operations for the three month period are not necessarily indicative of the results to be expected for the entire fiscal year. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these condensed financial statements be read in conjunction with the financial statements and the notes thereto included in the Company's latest annual report on Form 10-K. (2) Consolidated Inventories consist of: (in thousands)
September 30, June 30, 1997 1997 Raw Materials $44,909 $40,468 Work-in-Process 13,153 11,852 Finished Goods 25,836 23,822 Total $83,898 $76,142 For interim reporting, LIFO inventories are computed based on estimated year-end quantities and price levels. Changes in such estimates will be reflected in the interim financial statements in the period in which they occur.
(3) Earnings per share are computed under the method prescribed in Accounting Principles Board Opinion No. 15 for computing earnings per share for two class common stock due to the dividend preference of Class B Common Stock. - 6 - (4) The Company sold its piano key and action production facility located in the United Kingdom, Herrburger Brooks, PLC, during the first quarter of the prior fiscal year. Included in the three month consolidated statement of income ended September 30, 1996, is a $3.8 million pretax loss on the sale reported in Other-net, with an offsetting $3.8 million income tax benefit reported in Taxes on Income. This tax benefit was the result of a higher U.S. tax basis in this subsidiary due to previously nondeductible losses on the investment in this U.K. subsidiary. This transaction resulted in no impact to fiscal year 1997 consolidated three month net income. (5) At the annual meeting held on October 28, 1997, the Company's Share Owners approved a two-for-one stock split on the Company's Class A and Class B Common Stock. The Share Owners also approved restating the Company's Articles of Incorporation by increasing the number of authorized shares to 150 million shares, reducing the par value of common stock from $.3125 to $0.05, and increasing the dividend preference on Class B Common Stock to $0.02 per share. The stock split will become effective on or about November 12, 1997. Financial information contained in this report has not been adjusted to reflect the impact of the common stock split. (6) Certain prior period amounts have been reclassified to conform with the current period presentations. - 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations OVERVIEW Net sales in the first quarter of fiscal year 1998 were $245,857,000, which is 1% below the $247,700,000 reported in the same period of the prior fiscal year. Net income and Class B earnings per share in the first quarter of fiscal 1998 were $13,029,000 and $0.63, respectively, compared to $13,521,000 and $0.65, respectively, in the same period of fiscal 1997. Open orders as of September 30, 1997 were $228,686,000. RESULTS OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 1996 For the quarter ended September 30, 1997, the Company reported consolidated net sales of $245,857,000, a decrease of 1% when compared to the $247,700,000 reported in the same quarter one year ago. Net sales in the Company's largest segment, Furniture and Cabinets improved over the prior year, but this improvement was more than offset by declines in the Company's remaining segments, Electronic Contract Assemblies and Processed Wood Products and Other. Operating income in the first quarter of fiscal 1998 was $18,003,000 compared to $19,183,000 in fiscal 1997. FURNITURE AND CABINETS Net sales in the Company's largest segment, Furniture and Cabinets were 1% higher in the first quarter of fiscal 1998 than in the prior fiscal year as increases in office furniture, lodging furniture, and home furniture were partially offset by declines in contract cabinets. Quarterly comparisons were also impacted by the sale of the Company's piano key and action production facility located in the United Kingdom during the first quarter of fiscal 1997. This facility was responsible for 1.4% of revenues in this segment in the first quarter of fiscal 1997. Sales growth in office furniture product lines was spread across all major product groupings as casegoods, seating and systems all realized volume increases over the prior year's first quarter. Sales of higher-end casegoods and seating increased while value-oriented products declined. Management believes the downturn in value-oriented products, which was primarily the result of shipping delays created by internal re-engineering efforts, to be a temporary situation as orders for these products remain strong. Selected price increases on certain products also contributed to the increased sales levels during the current period. First quarter sales of cabinets and furniture were lower than the same quarter in the prior year due to lower volumes of television cabinets and stands, and audio speaker cabinets. Sales of residential furniture increased over the same quarter to quarter comparisons. Volumes of OEM cabinets and stands for the home entertainment market were lower as some customers realized lower retail sales of their products while the market anticipates the next generation of television technology and also due to temporary production interruptions as a result of a large customer moving to a new facility. The Company utilized portions of the available production capacity created by lower volumes within these product lines to support and balance increased production schedules of other product lines within this segment. - 8 - Sales of lodging furniture were above the prior year's first quarter due to higher sales in the Company's standard and custom-made furniture lines destined for installation in recently renovated and newly constructed lodging facilities. Moderate price increases on portions of the Company's standard product also contributed to the increased revenues. Sales of lodging furniture for use within healthcare, government, and other institutional environments declined on lower volumes. Operating income in the Furniture and Cabinets segment declined in the first quarter of fiscal 1998 when compared to the same quarter in fiscal 1997. Lower material costs, as a percent of sales, were more than offset by higher labor costs, measured on an absolute basis and as a percent of sales. The changes in the material and labor components of the cost structure were driven by a shift in product mix towards products with lower material content and higher labor requirements. Sales and administrative expenses increased in the first quarter primarily due to higher investments in people and technology as the Company positions itself for growth in selected markets. ELECTRONIC CONTRACT ASSEMBLIES Net sales in the Electronic Contract Assemblies segment during the first quarter of fiscal 1998 were 4% lower than the same quarter in the prior fiscal year, as stronger demand for electronic automotive products was more than offset by weaker demand for computer-related products. Rescheduling, production flexibility and material availability are inherent risks in the contract electronic assemblies market. While volumes were impacted in the current period by a reduction in orders by some customers, other customers were increasing their orders for the Company's products. This segment's working capital carries a higher degree of risk than the Company as a whole due to the inherent risks in the industry and also due to being a supplier to customers that bear risk associated with labor relations within their industries. Included in this segment are sales to three customers which combined accounted for 24% of consolidated sales in the first quarter of fiscal 1998 and 25% in the first quarter of fiscal 1997. One of these customers accounted for 15% of first quarter sales in both fiscal years. Operating income declined in the first quarter primarily due to lower volumes and also due to a change in the product mix. Material costs declined and labor costs increased due to the shift in the product mix. Investments in people, equipment and technology resulted in higher overhead costs and increased selling and administrative expenses. PROCESSED WOOD PRODUCTS AND OTHER Net outside sales in the Processed Wood Products and Other segment declined 2% as increases in sales of lumber and wood products were more than offset by lower volumes of molded plastic and stamped metal parts, and carbide cutting tools. This segment provides a significant amount of its goods and services to the Company's internal operations, particularly in the Furniture and Cabinets segment, and is a key link in the vertically integrated supply chain of the Company. Operating income increased on a favorable product mix shift and also due to lower overhead costs. - 9 - CONSOLIDATED OPERATIONS Consolidated cost of sales decreased 0.7 percentage point, as a percent of net sales, primarily due to lower material costs resulting from a product mix shift within certain business segments. The lower material costs were offset to some extent by higher labor costs, also resulting primarily from the product mix shifts within business segments. Overhead costs declined in dollars, while remaining level as a percent of net sales, reflecting the effectiveness of the Company's cost control efforts within the manufacturing processes. Selling, administrative and general expenses increased 1.1 percentage point, as a percent of net sales, when compared to the same period in the prior year as the Company continued to invest in people, services, and technology to strengthen its core infrastructure and better position itself for the future. Operating income in the first quarter of fiscal 1998 was $18,003,000, compared to $19,183,000 in the same period of fiscal 1997. The decline in operating income was mainly due to the increased investments in the selling and administrative areas of the Company's infrastructure. Other income in the first quarter increased over the prior year as interest income increased on higher average investment balances in the current quarter. The prior year quarter also included a $3.8 million charge to Other - net related to a pretax loss on the sale of a foreign subsidiary. The effective income tax rate increased 11.9 percentage points in the first quarter of fiscal 1998 due primarily to the $3.8 million tax benefit received on the sale of a foreign subsidiary in the first quarter of the prior fiscal year. Excluding this benefit, the effective income tax rate decreased 0.9 percentage point when compared to the prior quarter due to reduced European operating losses and a reduction in the effective state tax rate. The Company achieved net income and Class B earnings per share of $13,029,000 and $0.63, respectively, in the first quarter of fiscal 1998, compared to $13,521,000 and $0.65, respectively, in the first quarter of fiscal 1997. LIQUIDITY AND CAPITAL RESOURCES The Company's liquidity position remained strong with $154 million in cash, cash investments, and short-term investments at the end of the first quarter, compared to $168 million at the end of fiscal 1997. Working capital of $250 million as of September 30, 1997 was an increase of $7 million over the working capital level as of June 30, 1997. The current ratio remained steady at 2.8. Operating activities in the current three month period did not generate positive cash flow as net income was offset by investments in working capital. An additional $9 million was invested in capital investments for the future, including facility and production equipment upgrades and investments in the Company's information systems and $6 million was used for financing activities, primarily dividends to share owners. Cash needs were funded by available cash balances provided by the Company's strong liquidity position in cash and short-term investments on hand. Net cash flow, excluding the purchases and maturities of short-term investments was a negative $14 million for the quarter ended September 30, 1997. - 10 - The Company anticipates maintaining a strong liquidity position for the remainder of the 1998 fiscal year and believes its available funds on hand, borrowing capacity, and cash generated from operations will be sufficient for working capital needs and to fund investments in the Company's future. This discussion contains certain statements which could be considered forward-looking under the Private Securities Litigation Reform Act of 1995. Cautionary statements regarding these statements have been included in this discussion, when appropriate. Additional cautionary statements regarding these statements and other factors that could have an effect on the future performance of the Company are contained in the Company's 8-K filing of April 10, 1997. - 11 - PART II. OTHER INFORMATION Item 6. - Exhibits and Reports on Form 8-K (a) Exhibits See Exhibit Index on page 13 (b) Reports on Form 8-K Form 8-K dated October 28, 1997 was filed pursuant to Item 5 (Other Events) which contained the Company's news release dated October 28, 1997, announcing approval by the Company's Share Owners of a two-for-one stock split, effective on or about November 12, 1997. 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. Douglas A. Habig DOUGLAS A. HABIG (Chairman, Chief Executive Officer) Roy W. Templin ROY W. TEMPLIN (Vice President, Corporate Controller) Date: November 3, 1997 - 12 - KIMBALL INTERNATIONAL, INC. EXHIBIT INDEX Exhibit No. Description 11 Computation of Earnings Per Share 27 Financial Data Schedule
- 13 - EX-11 2 EXHIBIT 11 TO KIMBALL'S 10-Q KIMBALL INTERNATIONAL, INC. COMPUTATION OF EARNINGS PER SHARE THREE MONTHS ENDED SEPTEMBER 30, (amounts in thousands except per share amounts) (UNAUDITED)
1997 1996 ------------------------- --------------------- Net income, three months ended September 30, . $13,029 $13,521 Dividends declared on common stock: Class A -- $0.2875 and $0.2575 per share . . (2,074) (1,873) Class B -- $0.2900 and $0.2600 per share . . (3,925) (3,514) (5,999) (5,387) Undistributed Earnings . . . . . . . . . . . . $ 7,030 $ 8,134 Average number of shares outstanding . . . . . 20,737 20,795 Undistributed earnings divided by average number of shares outstanding . . . . . . . . . . . . $ .3390 $ .3911 Class A Class B Class A Class B Undistributed earnings per share . . . . . . . $.3390 $.3390 $.3911 $.3911 Assumed distribution of earnings . . . . . . . .2875 .2900 .2575 .2600 Earnings per share . . . . . . . . . . . . . . $.6265 $.6290 $.6486 $.6511 Rounded. . . . . . . . . . . . . . . . . . . . $ .63 $ .63 $ .65 $ .65
Part I-Exhibit(11) EX-27 3 EXHIBIT 27 TO KIMBALL'S 10-Q
5 This schedule contains three month summary financial information extracted from Kimball International, Inc., and subsidiaries 1998 first quarter Form 10-Q and is qualified in its entirety by reference to such Form 10-Q filing. 1000 3-MOS JUN-30-1998 SEP-30-1997 12,178 142,196 128,834 4,006 83,898 386,311 409,401 234,306 591,804 136,088 0 0 0 6,723 423,938 591,804 245,857 245,857 171,577 171,577 0 83 95 20,832 7,803 13,029 0 0 0 13,029 .63 .63
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