KIMBALL INTERNATIONAL INC - FORM 8-K - EX-99.1 - KIMBALL INTERNATIONAL, INC. EXHIBIT 99.1 - November 6, 2014

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8-K - KIMBALL INTERNATIONAL, INC. FORM 8-K - KIMBALL INTERNATIONAL INCkbal8-k1162014proformas.htm


Exhibit 99.1

KIMBALL INTERNATIONAL, INC.
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION

On October 31, 2014, Kimball International, Inc. (the “Company”), completed the spin-off of its EMS segment. The separation resulted in two independent publicly-traded companies: Kimball International, Inc., an industry leader in the sale and manufacture of furnishings for the commercial, hospitality, government, healthcare, education, and finance market verticals which now is trading on the NASDAQ under the ticker symbol “KBAL”; and Kimball Electronics, Inc. (“Kimball Electronics”), a leading global provider of engineering, manufacturing, and supply chain services to customers in the automotive, medical, industrial, and public safety markets which now is trading on the NASDAQ under the ticker symbol “KE”. The Company distributed the related shares of Kimball Electronics, on a pro rata basis, to the Company's Share Owners of record as of October 22, 2014 (the Record Date). On October 31, 2014, each of the Company's shareholders received three shares of Kimball Electronics for every four shares of the Company held by such shareholder on the Record Date.

After the Distribution Date, the Company does not beneficially own any Kimball Electronics ordinary shares and will no longer consolidate Kimball Electronics into its financial results. Beginning in the second quarter of fiscal year 2015, Kimball Electronics’ historical financial results for periods prior to the Distribution Date will be reflected in the Company's consolidated financial statements as a discontinued operation.

The following unaudited pro forma consolidated financial information is based upon the historical financial statements of the Company, adjusted to reflect the spin-off of Kimball Electronics. The following unaudited pro forma consolidated financial statements of the Company should be read in conjunction with the related notes and with the historical consolidated financial statements of the Company and the related notes included in previous filings with the Securities and Exchange Commission. The unaudited pro forma consolidated balance sheet reflects the spin-off of Kimball Electronics as if it had occurred on September 30, 2014, while the unaudited pro forma consolidated statements of income for the periods ended September 30, 2014, June 30, 2014, June 30, 2013 and June 30, 2012, respectively, give effect to the spin-off of Kimball Electronics as if it had occurred on July 1, 2011. The pro forma adjustments, described in the related notes, are based on the best available information and certain assumptions that the Company's management believes to be reasonable.

The unaudited pro forma consolidated financial statements are provided for illustrative purposes only and are not necessarily indicative of operating results or financial position that would have occurred had the spin-off of Kimball Electronics occurred on the dates indicated for the unaudited pro forma consolidated balance sheet or for each period presented for the unaudited pro forma consolidated statements of income.



1


KIMBALL INTERNATIONAL, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
(Amounts in Thousands, Except for Per Share Data)
 
First Quarter Ended September 30, 2014
 
Historical Kimball International, Inc.
 
Kimball Electronics, Inc. Discontinued Operation (a)
 
Pro Forma Adjustments
 
Note
 
Pro Forma Continuing Operations
Net Sales
$
348,249

 
$
(203,803
)
 
$
—

 
 
 
$
144,446

Cost of Sales
275,687

 
(178,424
)
 
—

 
 
 
97,263

Gross Profit
72,562

 
(25,379
)
 
—

 
 
 
47,183

Selling and Administrative Expenses
58,888

 
(15,383
)
 
(1,135
)
 
(b)
 
42,370

Operating Income
13,674

 
(9,996
)
 
1,135

 
 
 
4,813

Other Income (Expense):
 
 
 
 
 
 
 
 
 
Interest income
45

 
(4
)
 
—

 
 
 
41

Interest expense
(10
)
 
4

 
—

 
 
 
(6
)
Non-operating income
23

 
(5
)
 
—

 
 
 
18

Non-operating expense
(853
)
 
502

 
—

 
 
 
(351
)
Other income (expense), net
(795
)
 
497

 
—

 
 
 
(298
)
Income Before Taxes on Income
12,879

 
(9,499
)
 
1,135

 
 
 
4,515

Provision for Income Taxes
4,883

 
(3,019
)
 
12

 
(c)
 
1,876

Net Income
$
7,996

 
$
(6,480
)
 
$
1,123

 
 
 
$
2,639

 
 
 
 
 
 
 
 
 
 
Earnings Per Share of Common Stock:
 
 
 
 
 
 
 
 
 
Basic Earnings Per Share:
 
 
 
 
 
 
 
 
 
Class A
$
0.20

 
 
 
 
 
 
 
$
0.06

Class B
$
0.21

 
 
 
 
 
 
 
$
0.07

Diluted Earnings Per Share:
 
 
 
 
 
 
 
 
 
Class A
$
0.20

 
 
 
 
 
 
 
$
0.06

Class B
$
0.21

 
 
 
 
 
 
 
$
0.07

 
 
 
 
 
 
 
 
 
 
Average Number of Shares Outstanding:
 
 
 
 
 
 
 
 
 
Class A and B Common Stock:
 
 
 
 
 
 
 
 
 
Basic
38,712

 
 
 
 
 
 
 
38,712

Diluted
38,746

 
 
 
 
 
 
 
38,746


Management believes it is useful for investors to understand that the pro forma continuing operations reported above include some expenses that are not indicative of the post-spin cost structure:
•
Estimated pre-tax cost of $2.4 million ($1.4 million after-tax or $0.04 per Class B diluted share) associated with the retirement and separation of employees due to the spin-off. Costs include salary, incentive compensation, performance shares, retirement contribution, and payroll tax.
Operating income includes pre-tax supplemental employee retirement plan (“SERP”) income of $0.2 million within Selling and Administrative Expense and is offset in Other Income (Expense), resulting in no impact on Net Income.


2


KIMBALL INTERNATIONAL, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
(Amounts in Thousands, Except for Per Share Data)
 
Fiscal Year Ended June 30, 2014
 
Historical Kimball International, Inc.
 
Kimball Electronics, Inc. Discontinued Operation (a)
 
Pro Forma Adjustments
 
Note
 
Pro Forma Continuing Operations
Net Sales
$
1,285,347

 
$
(741,530
)
 
$
—

 
 
 
$
543,817

Cost of Sales
1,029,323

 
(652,231
)
 
—

 
 
 
377,092

Gross Profit
256,024

 
(89,299
)
 
—

 
 
 
166,725

Selling and Administrative Expenses
220,727

 
(55,946
)
 
(1,523
)
 
(b)
 
163,258

Other General Income
(5,688
)
 
5,688

 
—

 
 
 
—

Restructuring Expense
402

 
(402
)
 
—

 
 
 
—

Operating Income
40,583

 
(38,639
)
 
1,523

 
 
 
3,467

Other Income (Expense):
 
 
 
 
 
 
 
 
 
Interest income
220

 
(41
)
 
—

 
 
 
179

Interest expense
(28
)
 
2

 
—

 
 
 
(26
)
Non-operating income
3,612

 
(732
)
 
—

 
 
 
2,880

Non-operating expense
(1,214
)
 
449

 
—

 
 
 
(765
)
Other income (expense), net
2,590

 
(322
)
 
—

 
 
 
2,268

Income Before Taxes on Income
43,173

 
(38,961
)
 
1,523

 
 
 
5,735

Provision for Income Taxes
9,712

 
(8,919
)
 
170

 
(c)
 
963

Net Income
$
33,461

 
$
(30,042
)
 
$
1,353

 
 
 
$
4,772

 
 
 
 
 
 
 
 
 
 
Earnings Per Share of Common Stock:
 
 
 
 
 
 
 
 
 
Basic Earnings Per Share:
 
 
 
 
 
 
 
 
 
Class A
$
0.85

 
 
 
 
 
 
 
$
0.11

Class B
$
0.88

 
 
 
 
 
 
 
$
0.13

Diluted Earnings Per Share:
 
 
 
 
 
 
 
 
 
Class A
$
0.84

 
 
 
 
 
 
 
$
0.11

Class B
$
0.86

 
 
 
 
 
 
 
$
0.13

 
 
 
 
 
 
 
 
 
 
Average Number of Shares Outstanding:
 
 
 
 
 
 
 
 
 
Class A and B Common Stock:
 
 
 
 
 
 
 
 
 
Basic
38,404

 
 
 
 
 
 
 
38,404

Diluted
39,037

 
 
 
 
 
 
 
39,037


Management believes it is useful for investors to understand that the pro forma continuing operations reported above include some expenses that are not indicative of the post-spin cost structure:
•
Estimated pre-tax cost of $6.8 million ($4.2 million after-tax or $0.10 per Class B diluted share) associated with the retirement and separation of employees due to the spin-off. Costs include salary, incentive compensation, performance shares, retirement contribution, and payroll tax.
•
Pre-tax loss related to decision to downsize the plane fleet from three jets to two and the resulting reclassification as held for sale, resulting in a $1.2 million impairment charge ($0.7 million after-tax or $0.02 per Class B diluted share).
•
Pre-tax gain on sale of an idle facility of $1.7 million ($1.1 million after-tax or $0.03 per Class B diluted share).
Operating Income includes pre-tax SERP expense of $2.6 million within Selling and Administrative Expense and is offset in Other Income (Expense) resulting in no impact on Net Income.


3


KIMBALL INTERNATIONAL, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
(Amounts in Thousands, Except for Per Share Data)
 
Fiscal Year Ended June 30, 2013
 
Historical Kimball International, Inc.
 
Kimball Electronics, Inc. Discontinued Operation (a)
 
Pro Forma Continuing Operations
Net Sales
$
1,203,134

 
$
(703,129
)
 
$
500,005

Cost of Sales
979,386

 
(619,757
)
 
359,629

Gross Profit
223,748

 
(83,372
)
 
140,376

Selling and Administrative Expenses
200,331

 
(49,345
)
 
150,986

Restructuring Expense
416

 
(416
)
 
—

Operating Income
23,001

 
(33,611
)
 
(10,610
)
Other Income (Expense):
 
 
 
 
 
Interest income
404

 
(96
)
 
308

Interest expense
(35
)
 
9

 
(26
)
Non-operating income
2,381

 
(362
)
 
2,019

Non-operating expense
(3,088
)
 
401

 
(2,687
)
Other income (expense), net
(338
)
 
(48
)
 
(386
)
Income Before Taxes on Income
22,663

 
(33,659
)
 
(10,996
)
Provision for Income Taxes
2,784

 
(7,164
)
 
(4,380
)
Net Income
$
19,879

 
$
(26,495
)
 
$
(6,616
)
 
 
 
 
 
 
Earnings Per Share of Common Stock:
 
 
 
 
 
Basic Earnings Per Share:
 
 
 
 
 
Class A
$
0.50

 
 
 
$
(0.20
)
Class B
$
0.53

 
 
 
$
(0.17
)
Diluted Earnings Per Share:
 
 
 
 
 
Class A
$
0.49

 
 
 
$
(0.20
)
Class B
$
0.52

 
 
 
$
(0.17
)
 
 
 
 
 
 
Average Number of Shares Outstanding:
 
 
 
 
 
Class A and B Common Stock:
 
 
 
 
 
Basic
38,063

 
 
 
38,063

Diluted
38,522

 
 
 
38,063


Management believes it is useful for investors to understand that the pro forma continuing operations reported above include some expenses that are not indicative of the post-spin cost structure:
•
Estimated pre-tax cost of $5.0 million ($3.1 million after-tax or $0.08 per Class B diluted share) associated with the retirement and separation of employees due to the spin-off. Costs include salary, incentive compensation, performance shares, retirement contribution, and payroll tax.
Operating income includes pre-tax SERP expense of $1.7 million within Selling and Administrative Expense and is offset in Other Income (Expense), resulting in no impact on Net Income.


4


KIMBALL INTERNATIONAL, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
(Amounts in Thousands, Except for Per Share Data)
 
Fiscal Year Ended June 30, 2012
 
Historical Kimball International, Inc.
 
Kimball Electronics, Inc. Discontinued Operation (a)
 
Pro Forma Continuing Operations
Net Sales
$
1,142,061

 
$
(616,751
)
 
$
525,310

Cost of Sales
932,106

 
(556,481
)
 
375,625

Gross Profit
209,955

 
(60,270
)
 
149,685

Selling and Administrative Expenses
188,148

 
(43,490
)
 
144,658

Restructuring Expense
3,418

 
(3,418
)
 
—

Operating Income
18,389

 
(13,362
)
 
5,027

Other Income (Expense):
 
 
 
 
 
Interest income
430

 
(167
)
 
263

Interest expense
(35
)
 
6

 
(29
)
Non-operating income
1,096

 
(473
)
 
623

Non-operating expense
(2,178
)
 
333

 
(1,845
)
Other income (expense), net
(687
)
 
(301
)
 
(988
)
Income Before Taxes on Income
17,702

 
(13,663
)
 
4,039

Provision for Income Taxes
6,068

 
(3,778
)
 
2,290

Net Income
$
11,634

 
$
(9,885
)
 
$
1,749

 
 
 
 
 
 
Earnings Per Share of Common Stock:
 
 
 
 
 
Basic Earnings Per Share:
 
 
 
 
 
Class A
$
0.29

 
 
 
$
0.03

Class B
$
0.31

 
 
 
$
0.05

Diluted Earnings Per Share:
 
 
 
 
 
Class A
$
0.29

 
 
 
$
0.03

Class B
$
0.31

 
 
 
$
0.05

 
 
 
 
 
 
Average Number of Shares Outstanding:
 
 
 
 
 
Class A and B Common Stock:
 
 
 
 
 
Basic
37,881

 
 
 
37,881

Diluted
38,087

 
 
 
38,087


Management believes it is useful for investors to understand that the pro forma continuing operations reported above include some expenses that are not indicative of the post-spin cost structure:
•
Estimated pre-tax cost of $3.2 million ($1.9 million after-tax or $0.05 per Class B diluted share) associated with the retirement and separation of employees due to the spin-off. Costs include salary, incentive compensation, performance shares, retirement contribution, and payroll tax.
Operating income includes an immaterial amount of pre-tax SERP expense within Selling and Administrative Expense which is offset in Other Income (Expense), resulting in no impact on Net Income.


5


KIMBALL INTERNATIONAL, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(Amounts in Thousands, Except for Share and Per Share Data)
 
September 30, 2014
 
Historical Kimball International, Inc.
 
Kimball Electronics, Inc. Discontinued Operation (a)
 
Pro Forma Adjustments
 
Note
 
Pro Forma Continuing Operations
ASSETS
 

 
 
 
 
 
 
 
 

Current Assets:
 

 
 
 
 
 
 
 
 

Cash and cash equivalents
$
113,195

 
$
(20,701
)
 
$
(42,225
)
 
(d)
 
$
50,269

Receivables, net
180,992

 
(135,983
)
 
—

 
 
 
45,009

Inventories
150,295

 
(119,447
)
 
—

 
 
 
30,848

Prepaid expenses and other current assets
49,928

 
(22,046
)
 
—

 
 
 
27,882

Total current assets
494,410

 
(298,177
)
 
(42,225
)
 
 
 
154,008

Property and Equipment, net
189,137

 
(99,472
)
 
—

 
 
 
89,665

Goodwill
2,564

 
(2,564
)
 
—

 
 
 
—

Other Intangible Assets, net
4,015

 
(831
)
 
—

 
 
 
3,184

Other Assets
27,738

 
(14,464
)
 
—

 
 
 
13,274

Total Assets
$
717,864

 
$
(415,508
)
 
$
(42,225
)
 
 
 
$
260,131

 
 
 
 
 
 
 
 
 
 
LIABILITIES AND SHARE OWNERS' EQUITY
 
 
 
 
 
 
 
 
 
Current Liabilities:
 
 
 
 
 
 
 
 
 
Current maturities of long-term debt
$
27

 
$
—

 
$
—

 
 
 
$
27

Accounts payable
181,719

 
(122,523
)
 
—

 
 
 
59,196

Dividends payable
1,903

 
—

 
—

 
 
 
1,903

Accrued expenses
63,277

 
(20,516
)
 
—

 
 
 
42,761

Total current liabilities
246,926

 
(143,039
)
 
—

 
 
 
103,887

Other Liabilities:
 
 
 
 
 
 
 
 
 
Long-term debt, less current maturities
248

 
—

 
—

 
 
 
248

Other
26,714

 
(9,459
)
 
—

 
 
 
17,255

Total other liabilities
26,962

 
(9,459
)
 
—

 
 
 
17,503

Share Owners' Equity:
 
 
 
 
 
 
 
 
 
Common stock-par value $0.05 per share:
 
 
 
 
 
 
 
 
 
Class A - Shares authorized: 50,000,000
               Shares issued: 11,148,000
557

 
—

 
—

 
 
 
557

Class B - Shares authorized: 100,000,000
               Shares issued: 31,877,000
1,594

 
—

 
—

 
 
 
1,594

Additional paid-in capital
2,031

 
(380
)
 
—

 
 
 
1,651

Retained earnings
491,086

 
(265,807
)
 
(42,225
)
 
(e)
 
183,054

Accumulated other comprehensive income (loss)
(2,077
)
 
3,177

 
—

 
 
 
1,100

Less: Treasury stock, at cost:
 
 
 
 
 
 
 
 

Class A - 3,103,000 shares
(35,271
)
 
—

 
—

 
 
 
(35,271
)
Class B - 1,064,000 shares
(13,944
)
 
—

 
—

 
 
 
(13,944
)
Total Share Owners' Equity
443,976

 
(263,010
)
 
(42,225
)
 
 
 
138,741

Total Liabilities and Share Owners' Equity
$
717,864

 
$
(415,508
)
 
$
(42,225
)
 
 
 
$
260,131



6


KIMBALL INTERNATIONAL, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(a)
Reflects the operations of Kimball Electronics. It excludes certain general corporate overhead expenses that were allocated to Kimball Electronics in its historical consolidated financial statements that do not specifically relate to Kimball Electronics. Such general corporate expenses do not meet requirements to be presented in discontinued operations and thus are presented as part of the continuing operations of the Company. The cash balance shown in the discontinued operations column represents Kimball Electronics' closing cash balance as of September 30, 2014, prior to the spin-off, which consists only of cash held by the foreign operations of Kimball Electronics. Kimball Electronics began operation as an independent company with $63 million of cash, including the cash held by its foreign facilities.
(b)
Reflects the removal of spin-off costs incurred during the first quarter ended September 30, 2014 and fiscal year ended June 30, 2014 related to the spin-off of Kimball Electronics which were not included in the Kimball Electronics, Inc. Discontinued Operations column.
(c)
Reflects the tax effects of the pro forma adjustments at the applicable statutory income tax rates, adjusted for nondeductible spin-off costs.
(d)
Reflects the cash distribution to Kimball Electronics which, if the distribution had been paid as of September 30, 2014, would have been necessary to increase the cash held by Kimball Electronics to $63 million, pursuant to the terms of the Separation and Distribution Agreement.
(e)
Total equity was adjusted as a result of adjustment (d) above.




7

KIMBALL INTERNATIONAL INC Reports