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| 8-K - KIMBALL INTERNATIONAL, INC. FORM 8-K - KIMBALL INTERNATIONAL INC | form8-kearningsrelease0930.htm |
Exhibit 99.1
KIMBALL INTERNATIONAL, INC. REPORTS FIRST QUARTER FISCAL YEAR 2014 RESULTS
JASPER, IN (November 5, 2013) - Kimball International, Inc. (NASDAQ: KBALB) today reported net sales of $317.4 million and net income of $9.2 million, or $0.24 per Class B diluted share, for the first quarter of fiscal year 2014 which ended September 30, 2013.
Consolidated Overview
Financial Highlights (Amounts in Thousands, Except Per Share Data) | Three Months Ended | |||||||||
September 30, 2013 | September 30, 2012 | Percent Change | ||||||||
Net Sales | $ | 317,439 | $ | 288,190 | 10 | % | ||||
Gross Profit | $ | 61,324 | $ | 55,205 | 11 | % | ||||
Gross Profit % | 19.3 | % | 19.2 | % | ||||||
Selling and Administrative Expenses | $ | 54,217 | $ | 48,238 | 12 | % | ||||
Selling and Administrative Expenses % | 17.1 | % | 16.8 | % | ||||||
Other General Income | $ | (5,022 | ) | $ | 0 | |||||
Restructuring Expense | $ | 402 | $ | 60 | 570 | % | ||||
Operating Income | $ | 11,727 | $ | 6,907 | 70 | % | ||||
Operating Income % | 3.7 | % | 2.4 | % | ||||||
Adjusted Operating Income * | $ | 7,107 | $ | 6,967 | 2 | % | ||||
Adjusted Operating Income % * | 2.2 | % | 2.4 | % | ||||||
Net Income | $ | 9,183 | $ | 4,961 | 85 | % | ||||
Adjusted Net Income * | $ | 6,405 | $ | 4,997 | 28 | % | ||||
Earnings Per Class B Diluted Share | $ | 0.24 | $ | 0.13 | 85 | % | ||||
Adjusted Earnings Per Class B Diluted Share * | $ | 0.17 | $ | 0.13 | 31 | % | ||||
* Items indicated represent Non-GAAP measurements. See "Reconciliation of Non-GAAP Financial Measures" below.
• | Consolidated net sales in the first quarter of fiscal year 2014 increased 10% from the prior year first quarter on increased net sales in both the Electronic Manufacturing Services (EMS) segment and the Furniture segment. |
• | First quarter gross profit as a percent of net sales increased 0.1 of a percentage point from the prior year first quarter. A slight decline in the gross profit percentage in both segments was more than offset by the favorable impact of a sales mix shift towards the Furniture segment which carries a higher margin. |
• | Consolidated selling and administrative expenses in the first quarter of fiscal year 2014 increased 12% in absolute dollars compared to the prior year. The increased costs were primarily due to higher incentive compensation costs, increased salary costs, higher sales and marketing costs, and higher commissions related to increased sales in the Furniture segment. In addition, the Company classified one of its three aircraft as held for sale during the first quarter of fiscal year 2014 and recorded a $1.2 million pre-tax impairment charge ($0.7 million after-tax impact). |
• | Other General Income in the first quarter of fiscal year 2014 included $5.0 million of pre-tax income resulting from settlement proceeds related to two antitrust class action lawsuits of which the Company was a member. The class actions alleged the defendant sellers illegally conspired to fix prices of electronic components purchased several years ago by some of our manufacturing facilities in the EMS segment. |
• | Other Income/Expense for the first quarter of fiscal year 2014 was income of $1.0 million compared to income of $0.3 million in the first quarter of the prior year. The variance in Other Income/Expense was driven in part by foreign exchange movement that impacted the EMS segment. |
• | The Company's effective tax rate for the first quarter of fiscal year 2014 was 28.0% compared to 31.0% in the prior year first quarter. The current year first quarter effective tax rate was favorably impacted by a $0.5 million adjustment to the Company's deferred tax asset valuation allowance in the EMS segment. |
• | Operating cash flow for the first quarter of fiscal year 2014 was $16.0 million compared to $9.5 million in the first quarter of the prior year. |
• | The Company's cash and cash equivalents increased to $109.6 million at September 30, 2013, compared to $103.6 million at June 30, 2013. The Company had no short-term borrowings outstanding at September 30, 2013 or June 30, 2013. Long-term debt including current maturities was $0.3 million at September 30, 2013. |
James C. Thyen, President and Chief Executive Officer, stated, "Our operating performance in the Furniture segment in the first quarter reflects increased demand, the effective execution of our strategy, and the commitment of our entire Furniture team to improve results. Our Furniture segment returned to profitability in the first quarter, after recording losses for the second half of last fiscal year. Our focus on accelerating top-line growth in the Furniture segment was evident in the first quarter as the orders received during the quarter increased 18% over the prior year first quarter. Overall, we are pleased with the progress being made in the Furniture segment."
Mr. Thyen continued, "In the EMS segment, the automotive end market is benefiting from relative strength in the U.S. market and improvement in the Chinese market which contributed to a double digit increase in our first quarter sales to the automotive market compared to last year. Industrial market demand is also improving. While first quarter sales increased over the prior year first quarter in this segment, sales were down compared to the third and fourth quarters of fiscal year 2013 when we surpassed our 4% operating goal. The lower absorption of our fixed costs as a result of the lower revenue was the primary driver for missing our 4% operating income goal in the first quarter."
Electronic Manufacturing Services Segment
Financial Highlights (Amounts in Thousands) | Three Months Ended | |||||||||
September 30, 2013 | September 30, 2012 | Percent Change | ||||||||
Net Sales | $ | 175,636 | $ | 164,175 | 7 | % | ||||
Operating Income | $ | 9,996 | $ | 5,023 | 99 | % | ||||
Operating Income % | 5.7 | % | 3.1 | % | ||||||
Adjusted Operating Income * | $ | 5,046 | $ | 5,088 | (1 | %) | ||||
Adjusted Operating Income % * | 2.9 | % | 3.1 | % | ||||||
Net Income | $ | 7,462 | $ | 3,283 | 127 | % | ||||
Adjusted Net Income * | $ | 4,486 | $ | 3,322 | 35 | % | ||||
* Items indicated represent Non-GAAP measurements. See "Reconciliation of Non-GAAP Financial Measures" below.
• | Fiscal year 2014 first quarter net sales in the EMS segment increased 7% compared to the first quarter of the prior year on double-digit sales growth to customers in the automotive and industrial industries. Net sales to the public safety industry declined compared to the prior year while sales to the medical industry remained flat. |
• | Gross profit as a percent of net sales in the EMS segment for the first quarter of fiscal year 2014 declined 0.1 of a percentage point when compared to the first quarter of the prior year. The current year first quarter gross profit was negatively impacted by a $0.6 million inventory write-down related to products specific to a former customer. |
• | Selling and administrative expenses in this segment increased 8% in the fiscal year 2014 first quarter when compared to the prior year. Higher incentive compensation costs and increased salary costs were partially |
offset by a favorable warranty reserve adjustment and lower costs for workers compensation claims. As a percent of sales, selling and administrative costs in the EMS segment increased 0.1 of a percentage point for the first quarter of fiscal year 2014 compared to the prior year.
• | Operating income in the first quarter of fiscal year 2014 includes the $5.0 million of Other General Income related to the proceeds from the antitrust lawsuits mentioned above. The Adjusted Operating Income and Adjusted Net Income amounts in the EMS segment table above exclude this income for a more comparable comparison to last year. |
• | The first quarter of fiscal year 2014 was favorably impacted by a $0.5 million adjustment to the deferred tax asset valuation allowance. |
Furniture Segment
Financial Highlights (Amounts in Thousands) | Three Months Ended | |||||||||
September 30, 2013 | September 30, 2012 | Percent Change | ||||||||
Net Sales | $ | 141,803 | $ | 124,015 | 14 | % | ||||
Operating Income | $ | 4,787 | $ | 2,803 | 71 | % | ||||
Operating Income % | 3.4 | % | 2.3 | % | ||||||
Net Income | $ | 2,899 | $ | 1,668 | 74 | % | ||||
• | Fiscal year 2014 first quarter net sales in the Furniture segment increased 14% compared to the prior year on increased net sales of both office and hospitality furniture. All vertical markets within the office furniture industry increased over the prior year except for a slight decline in the federal and state governments. Sequentially, sales to the federal and state governments increased compared to the fourth quarter of fiscal year 2013. Furniture segment orders increased 18% in the first quarter of fiscal year 2014 when compared to the prior year. |
• | Gross profit as a percent of net sales declined 0.1 of a percentage point in the Furniture segment in the first quarter of fiscal year 2014 when compared to the prior year. The operational improvements achieved in this segment and benefits realized from pricing adjustments were offset by an unfavorable shift in sales mix, higher freight costs and an increase in the LIFO inventory reserve. |
• | Higher incentive compensation costs, increased salary costs, higher sales and marketing costs, and higher commissions resulting from the increased sales contributed to a 9% increase in selling and administrative expenses in the Furniture segment for the first quarter of fiscal year 2014 compared to the prior year. As a percent of sales, selling and administrative costs in the Furniture segment decreased 1.3 percentage points for the first quarter of fiscal year 2014 compared to the prior year. |
Non-GAAP Financial Measures
This press release contains non-GAAP financial measures. A non-GAAP financial measure is a numerical measure of a company's financial performance that excludes or includes amounts so as to be different than the most directly comparable measure calculated and presented in accordance with Generally Accepted Accounting Principles (GAAP) in the United States in the statement of income, statement of comprehensive income, balance sheet, or statement of cash flows of the Company. The non-GAAP financial measures on a consolidated basis used within this release include 1) operating income excluding settlement proceeds from lawsuit and restructuring charges, 2) net income excluding settlement proceeds from lawsuits and restructuring charges, and 3) earnings per Class B diluted share excluding settlement proceeds from lawsuits and restructuring charges. The non-GAAP financial measures in the EMS segment used within this release include 1) operating income excluding settlement proceeds from lawsuits and restructuring charges, and 2) net income excluding settlement proceeds from lawsuits and restructuring charges. Reconciliations of the reported GAAP numbers to these non-GAAP financial measures are included in the Financial Highlights table below. Management believes it is useful for investors to understand how its core operations performed without the effects of the lawsuit income and costs incurred in executing its restructuring plans. Excluding these amounts allows investors to meaningfully trend, analyze, and benchmark the performance of the Company's core operations. Many of the Company's internal performance measures that
management uses to make certain operating decisions exclude these charges to enable meaningful trending of core operating metrics.
Forward-Looking Statements
Certain statements contained within this release are considered forward-looking under the Private Securities Litigation Reform Act of 1995 and are subject to risks and uncertainties including, but not limited to, the global economic conditions, significant volume reductions from key contract customers, significant reduction in customer order patterns, loss of key customers or suppliers within specific industries, financial stability of key customers and suppliers, availability or cost of raw materials, and increased competitive pricing pressures reflecting excess industry capacities. Additional cautionary statements regarding other risk factors that could have an effect on the future performance of the Company are contained in the Company's Form 10-K filing for the fiscal year ended June 30, 2013 and other filings with the Securities and Exchange Commission.
Conference Call / Webcast | ||
Date: | November 5, 2013 | |
Time: | 11:00 AM Eastern Time | |
Dial-In #: | 877-280-4959 (International Calls - 857-244-7316) | |
Pass Code: | Kimball | |
A webcast of the live conference call may be accessed by visiting Kimball's Investor Relations website at www.ir.kimball.com.
For those unable to participate in the live webcast, the call will be archived at www.ir.kimball.com within two hours of the conclusion of the live call and will remain there for approximately 90 days. A telephone replay of the conference call will be available within two hours after the conclusion of the live event through November 19, 2013.
Replay Dial-In #: | 888-286-8010 (International Calls - 617-801-6888) | |
Replay Pass Code: | 66756350 | |
About Kimball International, Inc.
Recognized with a reputation for excellence, Kimball International, Inc. is committed to a high performance culture that values personal and organizational commitment to quality, reliability, value, speed, and ethical behavior. Kimball employees know they are part of a corporate culture that builds success for Customers while enabling employees to share in the Company's success through personal, professional, and financial growth.
Kimball International, Inc. provides a variety of products from its two business segments: the Electronic Manufacturing Services segment and the Furniture segment. The Electronic Manufacturing Services segment provides engineering and manufacturing services which utilize common production and support capabilities to a variety of industries globally. The Furniture segment provides furniture for the office and hospitality industries sold under the Company's family of brand names.
For more information about Kimball International, Inc., visit the Company's website on the Internet at www.kimball.com.
"We Build Success"
Financial highlights for the first quarter ended September 30, 2013 are as follows:
Condensed Consolidated Statements of Income | |||||||||||||
(Unaudited) | Three Months Ended | ||||||||||||
(Amounts in Thousands, except per share data) | September 30, 2013 | September 30, 2012 | |||||||||||
Net Sales | $ | 317,439 | 100.0 | % | $ | 288,190 | 100.0 | % | |||||
Cost of Sales | 256,115 | 80.7 | % | 232,985 | 80.8 | % | |||||||
Gross Profit | 61,324 | 19.3 | % | 55,205 | 19.2 | % | |||||||
Selling and Administrative Expenses | 54,217 | 17.1 | % | 48,238 | 16.8 | % | |||||||
Other General Income | (5,022 | ) | (1.6 | %) | 0 | 0.0 | % | ||||||
Restructuring Expense | 402 | 0.1 | % | 60 | 0.0 | % | |||||||
Operating Income | 11,727 | 3.7 | % | 6,907 | 2.4 | % | |||||||
Other Income (Expense), net | 1,019 | 0.3 | % | 287 | 0.1 | % | |||||||
Income Before Taxes on Income | 12,746 | 4.0 | % | 7,194 | 2.5 | % | |||||||
Provision for Income Taxes | 3,563 | 1.1 | % | 2,233 | 0.8 | % | |||||||
Net Income | $ | 9,183 | 2.9 | % | $ | 4,961 | 1.7 | % | |||||
Earnings Per Share of Common Stock: | |||||||||||||
Basic Earnings Per Share: | |||||||||||||
Class A | $ | 0.24 | $ | 0.12 | |||||||||
Class B | $ | 0.24 | $ | 0.13 | |||||||||
Diluted Earnings Per Share: | |||||||||||||
Class A | $ | 0.23 | $ | 0.12 | |||||||||
Class B | $ | 0.24 | $ | 0.13 | |||||||||
Average Number of Shares Outstanding | |||||||||||||
Class A and B Common Stock: | |||||||||||||
Basic | 38,310 | 38,017 | |||||||||||
Diluted | 38,596 | 38,256 | |||||||||||
Condensed Consolidated Statements of Cash Flows | Three Months Ended | ||||||
(Unaudited) | September 30, | ||||||
(Amounts in Thousands) | 2013 | 2012 | |||||
Net Cash Flow provided by Operating Activities | $ | 16,025 | $ | 9,486 | |||
Net Cash Flow used for Investing Activities | (6,425 | ) | (5,138 | ) | |||
Net Cash Flow used for Financing Activities | (3,784 | ) | (2,141 | ) | |||
Effect of Exchange Rate Change on Cash and Cash Equivalents | 214 | 96 | |||||
Net Increase in Cash and Cash Equivalents | 6,030 | 2,303 | |||||
Cash and Cash Equivalents at Beginning of Period | 103,600 | 75,197 | |||||
Cash and Cash Equivalents at End of Period | $ | 109,630 | $ | 77,500 | |||
(Unaudited) | |||||||
Condensed Consolidated Balance Sheets | September 30, 2013 | June 30, 2013 | |||||
(Amounts in Thousands) | |||||||
ASSETS | |||||||
Cash and cash equivalents | $ | 109,630 | $ | 103,600 | |||
Receivables, net | 161,840 | 160,767 | |||||
Inventories | 128,777 | 123,998 | |||||
Prepaid expenses and other current assets | 38,473 | 39,013 | |||||
Assets held for sale | 2,646 | 1,521 | |||||
Property and Equipment, net | 184,122 | 185,744 | |||||
Goodwill | 2,556 | 2,511 | |||||
Other Intangible Assets, net | 4,817 | 5,276 | |||||
Other Assets | 24,632 | 22,089 | |||||
Total Assets | $ | 657,493 | $ | 644,519 | |||
LIABILITIES AND SHARE OWNERS' EQUITY | |||||||
Current maturities of long-term debt | $ | 25 | $ | 23 | |||
Accounts payable | 158,803 | 155,709 | |||||
Dividends payable | 1,880 | 1,863 | |||||
Accrued expenses | 56,598 | 56,856 | |||||
Long-term debt, less current maturities | 275 | 294 | |||||
Other | 25,179 | 25,268 | |||||
Share Owners' Equity | 414,733 | 404,506 | |||||
Total Liabilities and Share Owners' Equity | $ | 657,493 | $ | 644,519 | |||
Supplementary Information | |||||||
Components of Other Income (Expense), net | Three Months Ended | ||||||
(Unaudited) | September 30, | ||||||
(Amounts in Thousands) | 2013 | 2012 | |||||
Interest Income | $ | 68 | $ | 110 | |||
Interest Expense | (7 | ) | (7 | ) | |||
Foreign Currency/Derivative Gain (Loss) | 118 | (393 | ) | ||||
Gain on Supplemental Employee Retirement Plan Investment | 1,051 | 703 | |||||
Other Non-Operating Expense | (211 | ) | (126 | ) | |||
Other Income (Expense), net | $ | 1,019 | $ | 287 | |||
Reconciliation of Non-GAAP Financial Measures | |||||||
(Unaudited) | |||||||
(Amounts in Thousands, except per share data) | |||||||
Operating Income excluding Restructuring Charges and Settlement Proceeds from Lawsuits | |||||||
Three Months Ended | |||||||
September 30, | |||||||
Kimball International, Inc. | 2013 | 2012 | |||||
Operating Income, as reported | $ | 11,727 | $ | 6,907 | |||
Less: Pre-tax Settlement Proceeds from Lawsuits | 5,022 | 0 | |||||
Add: Pre-tax Restructuring Charges | 402 | 60 | |||||
Adjusted Operating Income | $ | 7,107 | $ | 6,967 | |||
Electronic Manufacturing Services Segment | |||||||
Operating Income, as reported | $ | 9,996 | $ | 5,023 | |||
Less: Pre-tax Settlement Proceeds from Lawsuits | 5,022 | 0 | |||||
Add: Pre-tax Restructuring Charges | 72 | 65 | |||||
Adjusted Operating Income | $ | 5,046 | $ | 5,088 | |||
Net Income excluding Restructuring Charges and Settlement Proceeds from Lawsuits | |||||||
Three Months Ended | |||||||
September 30, | |||||||
Kimball International, Inc. | 2013 | 2012 | |||||
Net Income, as reported | $ | 9,183 | $ | 4,961 | |||
Less: After-tax Settlement Proceeds from Lawsuits | 3,020 | 0 | |||||
Add: After-tax Restructuring Charges | 242 | 36 | |||||
Adjusted Net Income | $ | 6,405 | $ | 4,997 | |||
Electronic Manufacturing Services Segment | |||||||
Net Income, as reported | $ | 7,462 | $ | 3,283 | |||
Less: After-tax Settlement Proceeds from Lawsuits | 3,020 | 0 | |||||
Add: After-tax Restructuring Charges | 44 | 39 | |||||
Adjusted Net Income | $ | 4,486 | $ | 3,322 | |||
Earnings Per Class B Diluted Share excluding Restructuring Charges and Settlement Proceeds from Lawsuits | |||||||
Three Months Ended | |||||||
September 30, | |||||||
2013 | 2012 | ||||||
Earnings per Class B Diluted Share, as reported | $ | 0.24 | $ | 0.13 | |||
Less: Impact of Settlement Proceeds from Lawsuits | 0.08 | 0.00 | |||||
Add: Impact of Restructuring Charges | 0.01 | 0.00 | |||||
Adjusted Earnings Per Class B Diluted Share | $ | 0.17 | $ | 0.13 | |||