Kimball International Reports 3rd Quarter Results for 2013

Posted: 05/07/2013 9:48AM

 

JASPER, IN--Kimball International, Inc. (NASDAQ: KBALB) today reported net sales of $301.5 million and net income of $3.7 million, or $0.10 per Class B diluted share, for the third quarter of fiscal year 2013 which ended March 31, 2013.

Consolidated Overview

Financial Highlights

(Amounts in Thousands, Except Per Share Data)

        Three Months Ended    





March 31,
2013

   

March 31,
2012



Percent
Change

Net Sales



$ 301,486


$ 284,414


6 %
Gross Profit



$ 53,809


$ 50,639


6 %
Gross Profit %



17.8 %

17.8 %


Selling and Administrative Expenses



$ 50,358


$ 47,650


6 %
Selling and Administrative Expenses %



16.7 %

16.8 %


Restructuring Expense



$ 47


$ 895


(95 %)
Operating Income



$ 3,404


$ 2,094


63 %
Operating Income %



1.1 %

0.7 %


Adjusted Operating Income *



$ 3,451


$ 2,989


15 %
Adjusted Operating Income % *



1.1 %

1.0 %


Net Income



$ 3,678


$ 2,506


47 %
Adjusted Net Income *



$ 3,707


$ 3,045


22 %
Earnings Per Class B Diluted Share



$ 0.10


$ 0.07


43 %
Adjusted Earnings Per Class B Diluted Share *



$ 0.10


$ 0.08


25 %

* Items indicated represent Non-GAAP measurements. See "Reconciliation of Non-GAAP Financial Measures" below.

  • Consolidated net sales in the third quarter of fiscal year 2013 increased 6% from the prior year third quarter as increased net sales in the Electronic Manufacturing Services (EMS) segment were partially offset by lower net sales in the Furniture segment. Similar to last quarter, growth in several market verticals within the Furniture segment was offset by a double digit decline in both office furniture sales to the federal government and in hospitality furniture sales due to the comparable prior year period including sales from two unusually large projects.
  • Third quarter gross profit as a percent of net sales was flat with the prior year third quarter as improved margins in the EMS segment were partially offset by lower margins in the Furniture segment. A sales mix shift toward the EMS segment which carries a lower gross profit percent than the Furniture segment also negatively impacted the consolidated gross profit percent.
  • Consolidated third quarter selling and administrative expenses increased 6% in absolute dollars compared to the prior year but declined slightly as a percent of sales. The increased costs were primarily due to higher incentive compensation costs, an allowance recorded for uncollectible receivables related to one customer, and higher sales and marketing costs.
  • The Company's effective tax rate for the third quarter of fiscal year 2013 was (6.0)% compared to 23.2% in the prior year third quarter. The current 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.
  • Operating cash flow for the third quarter of fiscal year 2013 was a cash inflow of $11.4 million compared to $28.8 million in the third quarter of the prior year.
  • The Company's cash and cash equivalents less short-term borrowings increased to $89.0 million at March 31, 2013, compared to $75.2 million at June 30, 2012. Long-term debt including current maturities remains at less than $0.3 million.

James C. Thyen, President and Chief Executive Officer, stated, "We were very pleased with the performance in the EMS segment during the third quarter. Our key areas of focus in this segment are growth and further diversification of our customer base. The team is focused and taking advantage of the opportunities available in the marketplace. The progress made in the EMS segment was partially negated by a loss in the Furniture segment for the third quarter on the lower sales volumes. The comparison to the prior year third quarter was a difficult one in the Furniture segment as we shipped two unusually large hospitality furniture projects last year. Orders in this segment were soft during the quarter, particularly within certain areas of office furniture. Within the hospitality market, the high end of the market appears to be recovering while there is continued price sensitivity and discounting in the lower end of the market. Despite the challenges in this segment, we expect to see sequential improvement in the Furniture segment results in the fourth quarter compared to the third quarter we just completed."

Electronic Manufacturing Services Segment

Financial Highlights

(Amounts in Thousands)

        Three Months Ended    





March 31,
2013

   

March 31,
2012



Percent
Change

Net Sales



$ 182,067


$ 160,959


13 %
Operating Income



$ 8,877


$ 5,009


77 %
Operating Income %



4.9 %

3.1 %


Adjusted Operating Income *



$ 8,883


$ 5,869


51 %
Adjusted Operating Income % *



4.9 %

3.6 %


Net Income



$ 6,491


$ 3,303


97 %
Adjusted Net Income *



$ 6,496


$ 3,822


70 %

* Items indicated represent Non-GAAP measurements. See "Reconciliation of Non-GAAP Financial Measures" below.

  • Fiscal year 2013 third quarter net sales in the EMS segment increased 13% compared to the third quarter of the prior year related to sales growth to customers in all four of the vertical markets in which this segment competes, including the automotive, medical, industrial and public safety industries.
  • Gross profit as a percent of net sales in the EMS segment for the third quarter of fiscal year 2013 improved 1.4 percentage points when compared to the third quarter of the prior year primarily due to leverage gained on the higher revenue as well as benefits realized from global purchasing efforts and operating efficiencies related to continuous improvement initiatives.
  • Selling and administrative expenses in this segment increased 16% in the fiscal year 2013 third quarter when compared to the prior year primarily due to increased incentive compensation costs related to the significant improvement in earnings. As a percent of net sales, selling and administrative costs in the EMS segment increased 0.2 of a percentage point.

Furniture Segment

Financial Highlights

(Amounts in Thousands)

        Three Months Ended    





March 31,
2013

   

March 31,
2012



Percent
Change

Net Sales



$ 119,419


$ 123,455


(3 %)
Operating Loss



$ (3,703 )

$ (1,183 )

(213 %)
Operating Loss %



(3.1 %)

(1.0 %)


Net Loss



$ (2,455 )

$ (842 )

(192 %)
















 
  • Fiscal year 2013 third quarter net sales in the Furniture segment declined 3% compared to the prior year as decreased net sales of hospitality furniture, primarily due to two unusually large projects in the third quarter of last year, more than offset an increase in net sales of office furniture despite a double digit decline in office furniture sales to the federal government.
  • Gross profit as a percent of net sales declined 0.6 of a percentage point in the Furniture segment in the third quarter of fiscal year 2013 when compared to the prior year partially due to higher discounting and other competitive pricing pressures. In addition, the quarter-over-quarter comparison was negatively impacted by income received in the prior year third quarter related to the recovery of previously paid import duties due to a retroactive change in the tariff rate. Favorable impacts to the quarter-over-quarter comparison include benefits realized in the current year third quarter from price increases and higher costs incurred last year for supplier-related issues.
  • Selling and administrative expenses in the Furniture segment for the third quarter of fiscal year 2013 increased 2% compared to the prior year related to an allowance recorded for uncollectible receivables and higher sales and marketing costs.

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) operating income excluding restructuring charges, 2) net income excluding restructuring charges, and 3) earnings per Class B diluted share excluding restructuring charges. The non-GAAP financial measures on a segment basis used within this release include 1) operating income excluding restructuring charges and 2) 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.

Source: Kimball International


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