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Kimball International, Inc. Reports Second Quarter Fiscal Year 2014 Results

Kimball International, Inc. (NASDAQ: KBALB) today reported net sales of $320.3 million and net income of $9.2 million, or $0.24 per Class B diluted share, for the second quarter of fiscal year 2014 which ended December 31, 2013.

Consolidated Overview

Financial Highlights

         

(Amounts in Thousands, Except Per Share Data)

Three Months Ended

December 31,   December 31,

Percent

2013

2012

Change

Net Sales $ 320,313 $ 295,136 9 %
Gross Profit $ 66,846 $ 55,157 21 %
Gross Profit % 20.9 % 18.7 %
Selling and Administrative Expenses $ 56,664 $ 49,006 16 %
Selling and Administrative Expenses % 17.7 % 16.6 %
Operating Income $ 10,182 $ 6,120 66 %
Operating Income % 3.2 % 2.1 %
Net Income $ 9,222 $ 4,179 121 %
Earnings Per Class B Diluted Share $ 0.24 $ 0.11 118 %
  • Consolidated net sales in the second quarter of fiscal year 2014 increased 9% from the prior year second quarter on increased net sales in both the Electronic Manufacturing Services (EMS) segment and the Furniture segment.
  • Second quarter gross profit as a percent of net sales increased 2.2 percentage points from the prior year second quarter on improved margins in both the EMS segment and the Furniture segment.
  • Consolidated selling and administrative expenses in the second quarter of fiscal year 2014 increased 16% in absolute dollars compared to the prior year primarily due to higher incentive compensation costs, increased warranty reserves, higher salary costs, and increased investments in sales and marketing activities. In addition, selling and administrative expenses in the second quarter of fiscal year 2014 includes expense of $1.3 million related to the normal revaluation to fair value of the Company's Supplemental Employee Retirement Plan (SERP) liability compared to only $0.3 million of expense in the second quarter of the prior fiscal year. This impact from the change in the SERP liability is exactly offset with income related to the revaluation of the SERP investment which was recorded within Other Income/Expense, and thus there was no effect on net income.
  • Other Income/Expense for the second quarter of fiscal year 2014 was income of $1.2 million compared to expense of $1.4 million in the second quarter of the prior year. The current year second quarter includes income of $1.3 million related to the revaluation of the SERP investment as discussed above. The prior year second quarter included a non-cash pre-tax impairment charge of $1.5 million on an investment in non-marketable equity securities and stock warrants of a privately-held company.
  • The Company's effective tax rate for the second quarter of fiscal year 2014 was 19.2% compared to 12.3% in the prior year second quarter. The current year second quarter effective tax rate was favorably impacted by a $0.7 million tax adjustment in the EMS segment related to a tax law change in Mexico. When compared to the prior year, the fiscal year 2014 second quarter effective tax rate is higher primarily due to improvement in earnings from domestic operations which carry a higher tax rate.
  • Operating cash flow for the second quarter of fiscal year 2014 was $29.0 million compared to $20.5 million in the second quarter of the prior year.
  • The Company's cash and cash equivalents increased to $129.6 million at December 31, 2013, compared to $103.6 million at June 30, 2013. The Company had no short-term borrowings outstanding at December 31, 2013 or June 30, 2013. Long-term debt including current maturities was less than $300,000 at December 31, 2013.

James C. Thyen, President and Chief Executive Officer, stated, "Sales growth and effective operational execution drove significant earnings improvement in our Furniture segment during the second quarter with all furniture brands positively contributing. We've made notable improvements in our project execution and process discipline in this segment which is reflected in our financial performance this quarter. In our EMS segment, the 10% increase in sales was driven by the success of our business development efforts and continued strength in both the industrial and automotive markets. Overall, we were very pleased with the solid performance in both of our segments this quarter."

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