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TheStreet Open House

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

Kimball International, Inc. (NASDAQ: KBALB) today reported net sales of $310.8 million and net income of $7.2 million, or $0.19 per Class B diluted share, for the third quarter of fiscal year 2014 which ended March 31, 2014.

Consolidated Overview

Financial Highlights        
(Amounts in Thousands, Except Per Share Data) Three Months Ended
March 31,   March 31, Percent
2014 2013 Change
Net Sales $ 310,788 $ 301,486 3 %
Gross Profit $ 60,292 $ 53,809 12 %
Gross Profit % 19.4 % 17.8 %
Selling and Administrative Expenses $ 52,578 $ 50,358 4 %
Selling and Administrative Expenses % 16.9 % 16.7 %
Other General Income $ (666 ) $ 0 %
Operating Income $ 8,380 $ 3,404 146 %
Operating Income % 2.7 % 1.1 %
Net Income $ 7,208 $ 3,678 96 %
Earnings Per Class B Diluted Share $ 0.19 $ 0.10 90 %
  • Consolidated net sales in the third quarter of fiscal year 2014 increased 3% from the prior year third quarter on increased net sales in both the Electronic Manufacturing Services (EMS) segment and the Furniture segment.
  • Third quarter gross profit as a percent of net sales increased 1.6 percentage points from the prior year third quarter on improved margins in both the EMS segment and the Furniture segment.
  • Consolidated selling and administrative expenses in the third quarter of fiscal year 2014 increased 4% in absolute dollars compared to the prior year primarily due to higher incentive compensation costs and higher salary and employee benefit costs. Selling and administrative expenses in the third quarter of fiscal year 2014 also included $0.9 million of incremental external costs related to the spin-off of the Company's EMS segment. Partially offsetting these higher costs, the Company recorded $0.7 million less expense related to the normal revaluation to fair value of its Supplemental Employee Retirement Plan (SERP) liability compared to the third quarter of the prior fiscal year. This impact from the change in the SERP liability is offset with less 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. Also favorably impacting the comparison to prior year was a bad debt allowance related to one customer that was recorded in the third quarter of the prior fiscal year.
  • Other General Income included $0.7 million of pre-tax income resulting from settlement proceeds related to an antitrust class action lawsuit that 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. This receipt of funds is in addition to the $5.0 million in funds received in the first quarter of this fiscal year for class action lawsuits.
  • Other Income/Expense was income of $0.1 million for both the third quarter of fiscal year 2014 and the third quarter of the prior year.
  • The Company's effective tax rate for the third quarter of fiscal year 2014 was 15.4% compared to (6.0)% in the prior year third quarter. The current year third quarter effective tax rate was favorably impacted by a higher mix of earnings in foreign jurisdictions which carry a lower tax rate than the U.S. and $0.7 million of other discrete tax adjustments including a decrease in a foreign deferred tax asset valuation allowance and state tax accrual adjustments. The prior year third quarter effective tax rate was favorably impacted by the mix of earnings between U.S. and foreign jurisdictions (pre-tax loss in the high-tax U.S. jurisdiction coupled with pre-tax income in lower tax rate countries) and tax benefits related to the extension of the research and development tax credit during that period.
  • Operating cash flow for the third quarter of fiscal year 2014 was $19.8 million compared to $11.4 million in the third quarter of the prior year.
  • The Company's cash and cash equivalents increased to $138.3 million at March 31, 2014, compared to $103.6 million at June 30, 2013. The Company had no short-term borrowings outstanding at March 31, 2014 or June 30, 2013. Long-term debt including current maturities was less than $300,000 at March 31, 2014.

James C. Thyen, President and Chief Executive Officer, stated, "Our margin improvement in the Furniture segment in the third quarter was encouraging. As we focus on continued margin improvement, we are increasing our efforts in product development and making other strategic investments to accelerate growth and further strengthen our position in the furniture markets."

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