JASPER, Ind. - 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.

Financial highlights for the third quarter ended March 31, 2013 are as follows:

Condensed Consolidated Statements of Income                  
(Unaudited) Three Months Ended
(Amounts in Thousands, except per share data) March 31, 2013 March 31, 2012
Net Sales $ 301,486 100.0 % $ 284,414 100.0 %
Cost of Sales 247,677   82.2 % 233,775   82.2 %
Gross Profit 53,809 17.8 % 50,639 17.8 %
Selling and Administrative Expenses 50,358 16.7 % 47,650 16.8 %
Restructuring Expense 47   0.0 % 895   0.3 %
Operating Income 3,404 1.1 % 2,094 0.7 %
Other Income, net 67   0.1 % 1,168   0.4 %
Income Before Taxes on Income 3,471 1.2 % 3,262 1.1 %
Provision (Benefit) for Income Taxes (207 ) 0.0 % 756   0.2 %
Net Income $ 3,678   1.2 % $ 2,506   0.9 %
Earnings Per Share of Common Stock:
Basic Earnings Per Share:
Class A $ 0.09 $ 0.06
Class B $ 0.10 $ 0.07
Diluted Earnings Per Share:
Class A $ 0.09 $ 0.06
Class B $ 0.10 $ 0.07
 
Average Number of Shares Outstanding
Class A and B Common Stock:
Basic 38,080 37,899
Diluted 38,176 38,005

 

 
(Unaudited) Nine Months Ended
(Amounts in Thousands, except per share data) March 31, 2013 March 31, 2012
Net Sales $ 884,812 100.0 % $ 851,953 100.0 %
Cost of Sales 720,641   81.4 % 700,024   82.2 %
Gross Profit 164,171 18.6 % 151,929 17.8 %
Selling and Administrative Expenses 147,602 16.7 % 142,215 16.7 %
Restructuring Expense 138   0.0 % 2,488   0.3 %
Operating Income 16,431 1.9 % 7,226 0.8 %
Other Income (Expense), net (1,003 ) (0.2 %) 1,408   0.2 %
Income Before Taxes on Income 15,428 1.7 % 8,634 1.0 %
Provision for Income Taxes 2,610   0.3 % 3,077   0.3 %
Net Income $ 12,818   1.4 % $ 5,557   0.7 %
Earnings Per Share of Common Stock:
Basic Earnings Per Share:
Class A $ 0.32 $ 0.14
Class B $ 0.34 $ 0.15
Diluted Earnings Per Share:
Class A $ 0.32 $ 0.14
Class B $ 0.34 $ 0.15
 
Average Number of Shares Outstanding
Class A and B Common Stock:
Basic 38,058 37,875
Diluted 38,428 38,024
 
       
 
Condensed Consolidated Statements of Cash Flows Nine Months Ended
(Unaudited) March 31,
(Amounts in Thousands) 2013     2012
Net Cash Flow provided by Operating Activities $ 41,354 $ 29,999
Net Cash Flow used for Investing Activities (21,954 ) (19,785 )
Net Cash Flow used for Financing Activities (4,511 ) (5,826 )
Effect of Exchange Rate Change on Cash and Cash Equivalents 182   (1,330 )
Net Increase in Cash and Cash Equivalents 15,071 3,058
Cash and Cash Equivalents at Beginning of Period 75,197   51,409  
Cash and Cash Equivalents at End of Period $ 90,268   $ 54,467  
 
           
 
(Unaudited)
Condensed Consolidated Balance Sheets

March 31,
2013

June 30,
2012

(Amounts in Thousands)
ASSETS
Cash and cash equivalents $ 90,268 $ 75,197
Receivables, net 144,611 139,467
Inventories 128,205 117,681
Prepaid expenses and other current assets 41,179 44,636
Assets held for sale 1,709 1,709
Property and Equipment, net 187,096 186,099
Goodwill 2,494 2,480
Other Intangible Assets, net 5,439 6,206
Other Assets 25,130   22,041
Total Assets $ 626,131   $ 595,516
 
LIABILITIES AND SHARE OWNERS' EQUITY
Current maturities of long-term debt $ 23 $ 14
Accounts payable 146,587 137,423
Borrowings under credit facilities 1,286 0
Dividends payable 1,863 1,843
Accrued expenses 53,108 48,460
Long-term debt, less current maturities 296 273
Other 24,039 21,275
Share Owners' Equity 398,929   386,228
Total Liabilities and Share Owners' Equity $ 626,131   $ 595,516
 
               
 
Supplementary Information
Components of Other Income (Expense), net Three Months Ended Nine Months Ended
(Unaudited) March 31, March 31,
(Amounts in Thousands) 2013 2012 2013 2012
Interest Income $ 94 $ 121 $ 325 $ 341
Interest Expense (12 ) (7 ) (27 ) (23 )
Foreign Currency/Derivative Gain (Loss) (493 ) (261 ) (1,009 ) 891
Gain on Supplemental Employee Retirement Plan Investment 970 1,370 1,956 495
Impairment Loss on Privately-Held Investment (173 ) 0 (908 ) 0
Loss on Stock Warrants (119 ) (22 ) (871 ) (63 )
Other Non-Operating Expense (200 ) (33 ) (469 ) (233 )
Other Income (Expense), net $ 67   $ 1,168   $ (1,003 ) $ 1,408  
 
           
 
Reconciliation of Non-GAAP Financial Measures
(Unaudited)
(Amounts in Thousands, except per share data)
 
 
Operating Income excluding Restructuring Charges
Three Months Ended
March 31,
Kimball International, Inc. 2013 2012
Operating Income, as reported $ 3,404 $ 2,094
Pre-tax Restructuring Charges 47   895
Adjusted Operating Income $ 3,451   $ 2,989
 
Electronic Manufacturing Services Segment
Operating Income, as reported $ 8,877 $ 5,009
Pre-tax Restructuring Charges 6   860
Adjusted Operating Income $ 8,883   $ 5,869
 
 
Net Income excluding Restructuring Charges
Three Months Ended
March 31,
Kimball International, Inc. 2013 2012
Net Income, as reported $ 3,678 $ 2,506
After-tax Restructuring Charges 29   539
Adjusted Net Income $ 3,707   $ 3,045
 
Electronic Manufacturing Services Segment
Net Income, as reported $ 6,491 $ 3,303
After-tax Restructuring Charges 5   519
Adjusted Net Income $ 6,496   $ 3,822
 
 
Earnings Per Class B Diluted Share excluding Restructuring Charges
Three Months Ended
March 31,
2013 2012
Earnings per Class B Diluted Share, as reported $ 0.10 $ 0.07
Impact of Restructuring Charges per Class B Diluted Share 0.00   0.01
Adjusted Earnings Per Class B Diluted Share $ 0.10   $ 0.08
 

Source: Kimball International, Inc.

Have something to say? Share your thoughts with us in the comments below.