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| 8-K - KIMBALL INTERNATIONAL, INC. FORM 8-K - KIMBALL INTERNATIONAL INC | form8-kearningsrelease1231.htm |
Exhibit 99.1
KIMBALL INTERNATIONAL, INC. REPORTS SECOND QUARTER FISCAL YEAR 2012 RESULTS
JASPER, IN (February 3, 2012) - Kimball International, Inc. (NASDAQ: KBALB) today reported net sales of $296.9 million and net income of $3.2 million, or $0.09 per Class B diluted share, for the second quarter of fiscal year 2012 which ended December 31, 2011. Net income for the fiscal year 2012 second quarter included $0.9 million of after-tax restructuring expense, or $0.02 per Class B diluted share.
Consolidated Overview
Financial Highlights (Amounts in Thousands, Except Per Share Data) | Three Months Ended | |||||||||
December 31, 2011 | December 31, 2010 | Percent Change | ||||||||
Net Sales | $ | 296,904 | $ | 310,632 | (4 | %) | ||||
Gross Profit | $ | 54,320 | $ | 49,576 | 10 | % | ||||
Gross Profit % | 18.3 | % | 16.0 | % | ||||||
Selling and Administrative Expense | $ | 48,597 | $ | 48,997 | (1 | %) | ||||
Selling and Administrative Expense % | 16.4 | % | 15.8 | % | ||||||
Restructuring Expense | $ | 1,480 | $ | 368 | 302 | % | ||||
Operating Income | $ | 4,243 | $ | 211 | 1,911 | % | ||||
Operating Income % | 1.4 | % | 0.1 | % | ||||||
Adjusted Operating Income * | $ | 5,723 | $ | 579 | 888 | % | ||||
Adjusted Operating Income % * | 1.9 | % | 0.2 | % | ||||||
Net Income | $ | 3,197 | $ | 876 | 265 | % | ||||
Adjusted Net Income * | $ | 4,087 | $ | 1,098 | 272 | % | ||||
Earnings Per Class B Diluted Share | $ | 0.09 | $ | 0.02 | 350 | % | ||||
Adjusted Earnings Per Class B Diluted Share * | $ | 0.11 | $ | 0.03 | 267 | % | ||||
*Items indicated represent Non-GAAP measurements. See "Reconciliation of Non-GAAP Financial Measures" below.
• | Consolidated net sales in the second quarter of fiscal year 2012 declined 4% from the prior year second quarter as a 15% increase in net sales in the Furniture segment was more than offset by an 18% decline in net sales in the Electronic Manufacturing Services (EMS) segment. The decline in net sales in the EMS segment resulted from the previously announced expiration of a contract with one medical customer (Bayer AG) late in fiscal year 2011 which accounted for a $36.6 million reduction in net sales in the current year second quarter compared to the second quarter of the prior year. Excluding sales to this customer, current year second quarter consolidated net sales increased 8% compared to the prior year. Sequentially, consolidated net sales in the second quarter of fiscal year 2012 increased 10% from the most recent first quarter on increases in both the EMS segment and the Furniture segment. |
• | Second quarter gross profit as a percent of net sales improved 2.3 percentage points from the prior year second quarter due to a shift in sales mix towards the Furniture segment which carries a higher gross profit percentage than the EMS segment and improved margins in the EMS segment. |
• | Consolidated second quarter selling and administrative expenses declined 1% compared to the prior year as benefits realized from restructuring activities in the EMS segment were mostly offset by increased spending on sales and marketing initiatives in the Furniture segment to drive growth, and higher commissions associated with the increased sales levels in the Furniture segment. |
• | Restructuring expense in the second quarter of fiscal year 2012 of $1.5 million was primarily related to facility consolidation plans within the EMS segment. During the second quarter, the Company completed the consolidation of its Wales UK facility into its Poland operation and the consolidation of its Fremont, California facility into an Indiana facility as final production ceased in both facilities in November. |
• | Other Income for the second quarter of fiscal year 2012 was $1.4 million compared to $0.2 million in the prior year second quarter, with the variance primarily related to foreign currency exchange movement in the EMS segment. |
• | The Company recorded $0.4 million of unfavorable net tax accrual adjustments, none of which were individually significant, in the second quarter of fiscal year 2012 compared to $0.5 million of favorable net tax accrual adjustments in the second quarter of the prior year. |
• | Operating cash flow for the second quarter of fiscal year 2012 was a cash inflow of $7.8 million compared to an operating cash outflow of $10.6 million in the second quarter of the prior year. |
• | The Company's cash and cash equivalents declined to $31.6 million at December 31, 2011, compared to $51.4 million at June 30, 2011, primarily due to the reinvestment of $17.5 million into capital investments for the future with the largest investments being made for manufacturing equipment in the EMS segment. The Company had no short-term borrowings outstanding at December 31, 2011 or June 30, 2011. Long-term debt including current maturities remains at $0.3 million. |
James C. Thyen, Chief Executive Officer and President, stated, "We made great strides in both of our segments in the second quarter. In the EMS segment, we completed the exit of our Wales UK facility and our Fremont, California facility as final production ceased in both facilities in November. Second quarter earnings in the EMS segment were favorably impacted by cost benefits realized in conjunction with these closures. In the Furniture segment, our sales and net income performance in the second quarter was the best quarterly performance in the last three years in this segment."
Mr. Thyen continued, "Despite the success we achieved in the second quarter, our outlook remains guarded given the global economic challenges that persist and continue to drive volatility and uncertainty in our markets. Trade industry forecasts in both segments have shown a declining trend from previous forecasts."
Electronic Manufacturing Services Segment
Financial Highlights (Amounts in Thousands) | Three Months Ended | |||||||||
December 31, 2011 | December 31, 2010 | Percent Change | ||||||||
Net Sales | $ | 148,112 | $ | 181,439 | (18 | %) | ||||
Operating Income | $ | 225 | $ | 179 | 26 | % | ||||
Operating Income % | 0.2 | % | 0.1 | % | ||||||
Adjusted Operating Income * | $ | 1,680 | $ | 521 | 222 | % | ||||
Adjusted Operating Income % * | 1.1 | % | 0.3 | % | ||||||
Net Income (Loss) | $ | 315 | $ | (109 | ) | 389 | % | |||
Adjusted Net Income * | $ | 1,189 | $ | 97 | 1,126 | % | ||||
*Items indicated represent Non-GAAP measurements. See "Reconciliation of Non-GAAP Financial Measures" below.
• | Fiscal year 2012 second quarter net sales in the EMS segment decreased 18% compared to the second quarter of the prior year with decreased net sales to customers in the medical and industrial control industries. As discussed above, the decline in net sales in the EMS segment resulted from the previously announced expiration of a contract with one medical customer late in fiscal year 2011 which accounted for a $36.6 million reduction in net sales in the current year second quarter compared to the second quarter of the prior year. Excluding sales to this customer, current year second quarter net sales in the EMS segment increased 2% compared to the prior year. Sequentially, compared to the fiscal year 2012 first quarter, current year second quarter net sales in the EMS segment increased 4% on higher net sales to the medical and automotive markets. |
• | Gross profit as a percent of net sales in the EMS segment for the second quarter of fiscal year 2012 improved 1.2 percentage points when compared to the second quarter of the prior year primarily related to a sales mix shift to higher margin product. |
• | Selling and administrative costs in this segment declined 14% in the fiscal year 2012 second quarter when compared to the prior year as the Company realized benefits related to the closing of its Fremont, California and Wales, UK facilities which were completed during the second quarter. As a percent of net sales, selling and administrative costs increased 0.4 percentage points due to the lower sales volumes. |
Furniture Segment
Financial Highlights (Amounts in Thousands) | Three Months Ended | |||||||||
December 31, 2011 | December 31, 2010 | Percent Change | ||||||||
Net Sales | $ | 148,792 | $ | 129,193 | 15 | % | ||||
Operating Income | $ | 5,401 | $ | 1,267 | 326 | % | ||||
Operating Income % | 3.6 | % | 1.0 | % | ||||||
Net Income | $ | 3,438 | $ | 801 | 329 | % | ||||
• | Fiscal year 2012 second quarter net sales of furniture products increased 15% compared to the prior year on increased net sales of both hospitality furniture and office furniture. Sequentially, second quarter fiscal year 2012 net sales in this segment increased 16% over the first quarter of fiscal year 2012 on increased net sales of hospitality furniture. |
• | Gross profit as a percent of net sales increased 0.1 percentage points in the Furniture segment in the second quarter of fiscal year 2012 when compared to the prior year as benefits realized from recent price increases net of incremental discounting were partially offset by commodity cost increases and the impact of excess operating capacity at select locations. |
• | Selling and administrative costs in the Furniture segment for the second quarter of fiscal year 2012 increased 4% when compared to the prior year on increased spending on sales and marketing initiatives to drive growth, higher labor costs, and higher commissions associated with the increased sales levels. As a percent of net sales, fiscal year 2012 second quarter selling and administrative expenses declined 2.5 percentage points compared to the prior year on the leverage from the increase in revenue. |
Non-GAAP Financial Measures
This press release contains non-GAAP financial measures. A non-GAAP financial measure is a numerical measure of a company's financial performance that excludes or includes amounts so as to be different than the most directly comparable measure calculated and presented in accordance with Generally Accepted Accounting Principles (GAAP) in the United States in the statement of income, balance sheet or statement of cash flows of the Company. The non-GAAP financial measures on a consolidated basis used within this release include 1) net sales excluding sales to Bayer AG, 2) operating income excluding restructuring charges, 3) net income excluding restructuring charges, and 4) earnings per Class B diluted share excluding restructuring charges. The non-GAAP financial measures on a segment basis used within this release include 1) net sales excluding sales to Bayer AG, 2) operating income excluding restructuring charges and 3) net income excluding 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 costs incurred in executing its restructuring plans. Excluding the restructuring charges 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, increased competitive pricing pressures reflecting excess industry capacities, and successful execution of restructuring plans. 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, 2011 and other filings with the Securities and Exchange Commission.
Conference Call / Webcast
Date: Friday, February 3, 2012
Time: 11:00 AM Eastern Time
Dial-In #: 866-362-4666 (International Calls - 617-597-5313)
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 February 17, 2012.
Replay Dial-In #: 888-286-8010 (International Calls - 617-801-6888)
Replay Pass Code: 54228439
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 second quarter ended December 31, 2011 are as follows:
Condensed Consolidated Statements of Income | |||||||||||||
(Unaudited) | Three Months Ended | ||||||||||||
(Amounts in Thousands, except per share data) | December 31, 2011 | December 31, 2010 | |||||||||||
Net Sales | $ | 296,904 | 100.0 | % | $ | 310,632 | 100.0 | % | |||||
Cost of Sales | 242,584 | 81.7 | % | 261,056 | 84.0 | % | |||||||
Gross Profit | 54,320 | 18.3 | % | 49,576 | 16.0 | % | |||||||
Selling and Administrative Expenses | 48,597 | 16.4 | % | 48,997 | 15.8 | % | |||||||
Restructuring Expense | 1,480 | 0.5 | % | 368 | 0.1 | % | |||||||
Operating Income | 4,243 | 1.4 | % | 211 | 0.1 | % | |||||||
Other Income, net | 1,442 | 0.5 | % | 185 | 0.0 | % | |||||||
Income Before Taxes on Income | 5,685 | 1.9 | % | 396 | 0.1 | % | |||||||
Provision (Benefit) for Income Taxes | 2,488 | 0.8 | % | (480 | ) | (0.2 | %) | ||||||
Net Income | $ | 3,197 | 1.1 | % | $ | 876 | 0.3 | % | |||||
Earnings Per Share of Common Stock: | |||||||||||||
Basic Earnings Per Share: | |||||||||||||
Class A | $ | 0.08 | $ | 0.02 | |||||||||
Class B | $ | 0.09 | $ | 0.02 | |||||||||
Diluted Earnings Per Share: | |||||||||||||
Class A | $ | 0.08 | $ | 0.02 | |||||||||
Class B | $ | 0.09 | $ | 0.02 | |||||||||
Average Number of Shares Outstanding | |||||||||||||
Class A and B Common Stock: | |||||||||||||
Basic | 37,891 | 37,729 | |||||||||||
Diluted | 37,979 | 37,786 | |||||||||||
(Unaudited) | Six Months Ended | ||||||||||||
(Amounts in Thousands, except per share data) | December 31, 2011 | December 31, 2010 | |||||||||||
Net Sales | $ | 567,539 | 100.0 | % | $ | 605,308 | 100.0 | % | |||||
Cost of Sales | 466,249 | 82.2 | % | 508,585 | 84.0 | % | |||||||
Gross Profit | 101,290 | 17.8 | % | 96,723 | 16.0 | % | |||||||
Selling and Administrative Expenses | 94,565 | 16.6 | % | 96,337 | 15.9 | % | |||||||
Restructuring Expense | 1,593 | 0.3 | % | 485 | 0.1 | % | |||||||
Operating Income (Loss) | 5,132 | 0.9 | % | (99 | ) | 0.0 | % | ||||||
Other Income, net | 240 | 0.0 | % | 987 | 0.2 | % | |||||||
Income Before Taxes on Income | 5,372 | 0.9 | % | 888 | 0.2 | % | |||||||
Provision (Benefit) for Income Taxes | 2,321 | 0.4 | % | (444 | ) | 0.0 | % | ||||||
Net Income | $ | 3,051 | 0.5 | % | $ | 1,332 | 0.2 | % | |||||
Earnings Per Share of Common Stock: | |||||||||||||
Basic Earnings Per Share: | |||||||||||||
Class A | $ | 0.07 | $ | 0.03 | |||||||||
Class B | $ | 0.08 | $ | 0.04 | |||||||||
Diluted Earnings Per Share: | |||||||||||||
Class A | $ | 0.07 | $ | 0.03 | |||||||||
Class B | $ | 0.08 | $ | 0.04 | |||||||||
Average Number of Shares Outstanding | |||||||||||||
Class A and B Common Stock: | |||||||||||||
Basic | 37,863 | 37,705 | |||||||||||
Diluted | 37,973 | 37,816 | |||||||||||
Condensed Consolidated Statements of Cash Flows | Six Months Ended | ||||||
(Unaudited) | December 31, | ||||||
(Amounts in Thousands) | 2011 | 2010 | |||||
Net Cash Flow provided by (used for) Operating Activities | $ | 1,185 | $ | (21,005 | ) | ||
Net Cash Flow used for Investing Activities | (15,380 | ) | (13,628 | ) | |||
Net Cash Flow (used for) provided by Financing Activities | (3,966 | ) | 11,313 | ||||
Effect of Exchange Rate Change on Cash and Cash Equivalents | (1,651 | ) | 3,371 | ||||
Net Decrease in Cash and Cash Equivalents | (19,812 | ) | (19,949 | ) | |||
Cash and Cash Equivalents at Beginning of Period | 51,409 | 65,342 | |||||
Cash and Cash Equivalents at End of Period | $ | 31,597 | $ | 45,393 | |||
(Unaudited) | |||||||
Condensed Consolidated Balance Sheets | December 31, 2011 | June 30, 2011 | |||||
(Amounts in Thousands) | |||||||
ASSETS | |||||||
Cash and cash equivalents | $ | 31,597 | $ | 51,409 | |||
Receivables, net | 155,221 | 149,753 | |||||
Inventories | 127,846 | 141,097 | |||||
Prepaid expenses and other current assets | 49,396 | 50,215 | |||||
Assets held for sale | 2,264 | 2,807 | |||||
Property and Equipment, net | 190,973 | 196,682 | |||||
Goodwill | 2,507 | 2,644 | |||||
Other Intangible Assets, net | 7,076 | 7,625 | |||||
Other Assets | 23,178 | 24,080 | |||||
Total Assets | $ | 590,058 | $ | 626,312 | |||
LIABILITIES AND SHARE OWNERS' EQUITY | |||||||
Current maturities of long-term debt | $ | 14 | $ | 12 | |||
Accounts payable | 138,717 | 149,107 | |||||
Dividends payable | 1,843 | 1,835 | |||||
Accrued expenses | 48,987 | 66,316 | |||||
Long-term debt, less current maturities | 273 | 286 | |||||
Other | 19,983 | 21,357 | |||||
Share Owners' Equity | 380,241 | 387,399 | |||||
Total Liabilities and Share Owners' Equity | $ | 590,058 | $ | 626,312 | |||
Supplementary Information | |||||||||||||||
Components of Other Income, net | Three Months Ended | Six Months Ended | |||||||||||||
(Unaudited) | December 31, | December 31, | |||||||||||||
(Amounts in Thousands) | 2011 | 2010 | 2011 | 2010 | |||||||||||
Interest Income | $ | 100 | $ | 171 | $ | 220 | $ | 391 | |||||||
Interest Expense | (7 | ) | (50 | ) | (16 | ) | (70 | ) | |||||||
Foreign Currency/Derivative Gain (Loss) | 367 | (895 | ) | 1,111 | (1,371 | ) | |||||||||
Gain (Loss) on Supplemental Employee Retirement Plan Investment | 1,087 | 1,055 | (875 | ) | 2,276 | ||||||||||
Other Non-Operating Expense | (105 | ) | (96 | ) | (200 | ) | (239 | ) | |||||||
Other Income, net | $ | 1,442 | $ | 185 | $ | 240 | $ | 987 | |||||||
Reconciliation of Non-GAAP Financial Measures | |||||||||||||
(Unaudited) | |||||||||||||
(Amounts in Thousands, except per share) | |||||||||||||
Net Sales excluding Sales to Bayer AG | |||||||||||||
Three Months Ended | |||||||||||||
Kimball International, Inc. | December 31, | Variance | |||||||||||
2011 | 2010 | $ | % | ||||||||||
Net Sales, as reported | $ | 296,904 | $ | 310,632 | $ | (13,728 | ) | (4 | %) | ||||
Net Sales to Bayer AG | 1,526 | 38,155 | (36,629 | ) | (96 | %) | |||||||
Net Sales excluding Sales to Bayer AG | $ | 295,378 | $ | 272,477 | $ | 22,901 | 8 | % | |||||
Electronic Manufacturing Services Segment | |||||||||||||
Net Sales, as reported | $ | 148,112 | $ | 181,439 | $ | (33,327 | ) | (18 | %) | ||||
Net Sales to Bayer AG | 1,526 | 38,155 | (36,629 | ) | (96 | %) | |||||||
Net Sales excluding Sales to Bayer AG | $ | 146,586 | $ | 143,284 | $ | 3,302 | 2 | % | |||||
Operating Income excluding Restructuring Charges | |||||||||||||
Three Months Ended | |||||||||||||
Kimball International, Inc. | December 31, | ||||||||||||
2011 | 2010 | ||||||||||||
Operating Income, as reported | $ | 4,243 | $ | 211 | |||||||||
Pre-tax Restructuring Charges | 1,480 | 368 | |||||||||||
Adjusted Operating Income | $ | 5,723 | $ | 579 | |||||||||
Electronic Manufacturing Services Segment | |||||||||||||
Operating Income, as reported | $ | 225 | $ | 179 | |||||||||
Pre-tax Restructuring Charges | 1,455 | 342 | |||||||||||
Adjusted Operating Income | $ | 1,680 | $ | 521 | |||||||||
Net Income excluding Restructuring Charges | |||||||
Three Months Ended | |||||||
Kimball International, Inc. | December 31, | ||||||
2011 | 2010 | ||||||
Net Income, as reported | $ | 3,197 | $ | 876 | |||
After-tax Restructuring Charges | 890 | 222 | |||||
Adjusted Net Income | $ | 4,087 | $ | 1,098 | |||
Electronic Manufacturing Services Segment | |||||||
Net Income (Loss), as reported | $ | 315 | $ | (109 | ) | ||
After-tax Restructuring Charges | 874 | 206 | |||||
Adjusted Net Income | $ | 1,189 | $ | 97 | |||
Earnings Per Class B Diluted Share excluding Restructuring | Three Months Ended | ||||||
Charges | December 31, | ||||||
2011 | 2010 | ||||||
Earnings per Class B Diluted Share, as reported | $ | 0.09 | $ | 0.02 | |||
Impact of Restructuring Charges per Class B Diluted Share | 0.02 | 0.01 | |||||
Adjusted Earnings Per Class B Diluted Share | $ | 0.11 | $ | 0.03 | |||