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 $0.02 per Class B diluted share.
| Financial Highlights
(Amounts in Thousands, Except Per Share Data)
|Three Months Ended|
December 31, 2011
December 31, 2010
|Gross Profit %||18.3||%||16.0||%|
|Selling and Administrative Expense||$||48,597||$||48,997||(1%||)|
|Selling and Administrative Expense %||16.4||%||15.8||%|
|Operating Income %||1.4||%||0.1||%|
|Adjusted Operating Income *||$||5,723||$||579||888||%|
|Adjusted Operating Income % *||1.9||%||0.2||%|
|Adjusted Net Income *||$||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."