<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1997
__ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 0-3279
KIMBALL INTERNATIONAL, INC.
Indiana 35-0514506
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1600 Royal Street, Jasper, Indiana 47549-1001
(Address of principal executive offices) (Zip Code)
Registrant's telephone number (812) 482-1600
Not Applicable
Former name, former address and former fiscal year, if changed since last report
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes _X_ No___
The number of shares outstanding of the Registrant's common stock as of October
22, 1997 were:
Class A Common Stock - 7,215,496 shares
Class B Common Stock - 13,538,355 shares
The exhibit index appears on page 13.
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<PAGE>
<TABLE>
KIMBALL INTERNATIONAL, INC.
FORM 10-Q
INDEX
<CAPTION>
PAGE NO.
<S> <C>
PART I FINANCIAL INFORMATION:
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
- September 30, 1997 and June 30, 1997 . . . . . . . . . . . . 3
Consolidated Statements of Income
- Three Months Ended September 30, 1997 and 1996. . . . . . . . 4
Consolidated Statements of Cash Flows
- Three Months Ended September 30, 1997 and 1996. . . . . . . . 5
Notes To Consolidated Financial Statements. . . . . . . . . . . 6-7
Item 2. Management's Discussion and Analysis Of
Financial Condition and Results of Operations . . . . . . . . . 8-11
PART II OTHER INFORMATION:
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . 12
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Exhibit Index. . . . . . . . . . . . . . . . . . . . . . . . . 13
</TABLE>
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<PAGE>
<TABLE>
PART I.
FINANCIAL INFORMATION
KIMBALL INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
<CAPTION>
(unaudited)
September 30, June 30,
<S> 1997 1997
ASSETS <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 12,178 $ 18,818
Short-term investments 142,196 149,677
Receivables, less allowances of $4,006
and $4,017, respectively 124,828 110,142
Inventories 83,898 76,142
Other 23,211 21,994
Total Current Assets 386,311 376,773
PROPERTY AND EQUIPMENT - at cost, less
accumulated depreciation of $234,306
and $237,191, respectively 175,095 174,010
OTHER ASSETS 30,398 30,800
Total Assets $591,804 $581,583
LIABILITIES AND SHARE OWNERS' EQUITY
CURRENT LIABILITIES:
Loans payable $ 2,593 $ 2,472
Current maturities of long-term debt 390 471
Accounts payable 56,038 53,063
Dividends payable 5,999 5,989
Accrued expenses 71,068 71,263
Total Current Liabilities 136,088 133,258
OTHER LIABILITIES:
Long-term debt, less current maturities 2,238 2,313
Deferred income taxes and other 22,817 23,186
Total Other Liabilities 25,055 25,499
SHARE OWNERS' EQUITY:
Common stock 6,723 6,723
Additional paid-in capital 1,338 1,607
Retained earnings 441,695 434,665
Foreign currency translation adjustment 1,547 1,721
Unrealized gain (loss) on available-for-sale securities 285 (73)
Less: Treasury stock, at cost (20,927) (21,817)
Total Share Owners' Equity 430,661 422,826
Total Liabilities and Share Owners' Equity $591,804 $581,583
See Notes to Consolidated Financial Statements
</TABLE>
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<TABLE>
KIMBALL INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
(amounts in thousands except per share amounts)
<CAPTION>
(unaudited)
Three Months Ended
September 30,
1997 1996
<S> <C> <C>
Net Sales $245,857 $247,700
Cost of Sales 171,577 174,566
Gross Profit 74,280 73,134
Selling, Administrative
and General Expenses 56,277 53,951
Operating Income 18,003 19,183
Other Income (Expense):
Interest Expense (95) (117)
Interest Income 2,278 1,913
Other - net 646 (2,797)
Other Income (Expense) - net 2,829 (1,001)
Income Before Taxes on Income 20,832 18,182
Taxes on Income 7,803 4,661
Net Income $ 13,029 $ 13,521
Earnings Per Share of Common Stock:
Class A Common Stock $ .63 $ .65
Class B Common Stock $ .63 $ .65
Dividends Per Share of Common Stock:
Class A Common Stock $ .28 3/4 $ .25 3/4
Class B Common Stock $ .29 $ .26
Average total number of shares
outstanding Class A and B
Common Stock 20,737 20,795
See Notes to Consolidated Financial Statements
</TABLE>
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<TABLE>
KIMBALL INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
<CAPTION>
(unaudited)
Three Months
Ended
September 30,
1997 1996
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 13,029 $ 13,521
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 8,194 8,269
Gain on sales of assets (148) (341)
Deferred income tax and other deferred charges 640 (381)
Change in current assets and liabilities:
Receivables (14,686) (381)
Inventories (7,756) 3,446
Other current assets 775 1,725
Accounts payable 2,975 7,582
Accrued expenses (3,056) 4,340
Net Cash (Used For) Provided By Operating Activities (33) 37,780
Cash Flows From Investing Activities:
Capital expenditures (8,639) (8,974)
Proceeds from sales of assets 298 372
Proceeds from sale of subsidiary --- 2,345
Increase in other assets (585) (315)
Purchases of held-to-maturity securities (4,415) (397)
Maturities of held-to-maturity securities 17,402 18,420
Purchases of available-for-sale securities (20,149) (31,408)
Sales and maturities of available-for-sale securities 15,000 ---
Net Cash Used For Investing Activities (1,088) (19,957)
Cash Flows From Financing Activities:
Increase in short-term borrowings 121 713
Decrease in long-term debt (156) (191)
Dividends paid to share owners (5,989) (5,393)
Acquisition of treasury stock, net --- (829)
Proceeds from exercise of stock options 622 102
Other - net (161) 657
Net Cash Used For Financing Activities (5,563) (4,941)
Effect of Exchange Rate Change on Cash 44 19
Net (Decrease) Increase in Cash and Cash Equivalents (6,640) 12,901
Cash and Cash Equivalents-Beginning of Period 18,818 5,647
Cash and Cash Equivalents-End of Period $ 12,178 $ 18,548
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Income taxes $ 225 $ 1,160
Interest $ 121 $ 150
Total Cash, Cash Equivalents and
Short-Term Investments:
Cash and cash equivalents $ 12,178 $ 18,548
Short-term investments 142,196 121,810
Totals $154,374 $140,358
See Notes to Consolidated Financial Statements
</TABLE> - 5 -<PAGE>
<PAGE>
KIMBALL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(1) The interim condensed consolidated financial statements included herein
have been prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. All significant
intercompany transactions and balances have been eliminated. Management
believes the financial statements include all adjustments of a normal,
recurring nature necessary to present fairly the financial statements of
the interim period. Results of operations for the three month period are
not necessarily indicative of the results to be expected for the entire
fiscal year. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to
such rules and regulations, although the Company believes that the
disclosures are adequate to make the information presented not misleading.
It is suggested that these condensed financial statements be read in
conjunction with the financial statements and the notes thereto included in
the Company's latest annual report on Form 10-K.
<TABLE>
(2) Consolidated Inventories consist of: (in thousands)
<CAPTION>
September 30, June 30,
1997 1997
<S> <C> <C>
Raw Materials $44,909 $40,468
Work-in-Process 13,153 11,852
Finished Goods 25,836 23,822
Total $83,898 $76,142
For interim reporting, LIFO inventories are computed based on estimated
year-end quantities and price levels. Changes in such estimates will be
reflected in the interim financial statements in the period in which they
occur.
</TABLE>
(3) Earnings per share are computed under the method prescribed in Accounting
Principles Board Opinion No. 15 for computing earnings per share for two
class common stock due to the dividend preference of Class B Common Stock.
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<PAGE>
(4) The Company sold its piano key and action production facility located in the
United Kingdom, Herrburger Brooks, PLC, during the first quarter of the
prior fiscal year. Included in the three month consolidated statement of
income ended September 30, 1996, is a $3.8 million pretax loss on the sale
reported in Other-net, with an offsetting $3.8 million income tax benefit
reported in Taxes on Income. This tax benefit was the result of a higher
U.S. tax basis in this subsidiary due to previously nondeductible losses on
the investment in this U.K. subsidiary. This transaction resulted in no
impact to fiscal year 1997 consolidated three month net income.
(5) At the annual meeting held on October 28, 1997, the Company's Share Owners
approved a two-for-one stock split on the Company's Class A and Class B
Common Stock. The Share Owners also approved restating the Company's
Articles of Incorporation by increasing the number of authorized shares to
150 million shares, reducing the par value of common stock from $.3125 to
$0.05, and increasing the dividend preference on Class B Common Stock to
$0.02 per share. The stock split will become effective on or about
November 12, 1997. Financial information contained in this report has
not been adjusted to reflect the impact of the common stock split.
(6) Certain prior period amounts have been reclassified to conform with the
current period presentations.
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<PAGE>
Management's Discussion and Analysis
of Financial Condition and Results of Operations
OVERVIEW
Net sales in the first quarter of fiscal year 1998 were $245,857,000, which is
1% below the $247,700,000 reported in the same period of the prior fiscal year.
Net income and Class B earnings per share in the first quarter of fiscal 1998
were $13,029,000 and $0.63, respectively, compared to $13,521,000 and $0.65,
respectively, in the same period of fiscal 1997. Open orders as of September
30, 1997 were $228,686,000.
RESULTS OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO THREE
MONTHS ENDED SEPTEMBER 30, 1996
For the quarter ended September 30, 1997, the Company reported consolidated net
sales of $245,857,000, a decrease of 1% when compared to the $247,700,000
reported in the same quarter one year ago. Net sales in the Company's largest
segment, Furniture and Cabinets improved over the prior year, but this
improvement was more than offset by declines in the Company's remaining
segments, Electronic Contract Assemblies and Processed Wood Products and Other.
Operating income in the first quarter of fiscal 1998 was $18,003,000 compared to
$19,183,000 in fiscal 1997.
FURNITURE AND CABINETS
Net sales in the Company's largest segment, Furniture and Cabinets were 1%
higher in the first quarter of fiscal 1998 than in the prior fiscal year as
increases in office furniture, lodging furniture, and home furniture were
partially offset by declines in contract cabinets. Quarterly comparisons were
also impacted by the sale of the Company's piano key and action production
facility located in the United Kingdom during the first quarter of fiscal 1997.
This facility was responsible for 1.4% of revenues in this segment in the first
quarter of fiscal 1997.
Sales growth in office furniture product lines was spread across all major
product groupings as casegoods, seating and systems all realized volume
increases over the prior year's first quarter. Sales of higher-end casegoods
and seating increased while value-oriented products declined. Management
believes the downturn in value-oriented products, which was primarily the result
of shipping delays created by internal re-engineering efforts, to be a temporary
situation as orders for these products remain strong. Selected price increases
on certain products also contributed to the increased sales levels during the
current period.
First quarter sales of cabinets and furniture were lower than the same quarter
in the prior year due to lower volumes of television cabinets and stands, and
audio speaker cabinets. Sales of residential furniture increased over the same
quarter to quarter comparisons. Volumes of OEM cabinets and stands for the home
entertainment market were lower as some customers realized lower retail sales of
their products while the market anticipates the next generation of television
technology and also due to temporary production interruptions as a result of a
large customer moving to a new facility. The Company utilized portions of the
available production capacity created by lower volumes within these product
lines to support and balance increased production schedules of other product
lines within this segment.
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Sales of lodging furniture were above the prior year's first quarter due to
higher sales in the Company's standard and custom-made furniture lines destined
for installation in recently renovated and newly constructed lodging facilities.
Moderate price increases on portions of the Company's standard product also
contributed to the increased revenues. Sales of lodging furniture for use
within healthcare, government, and other institutional environments declined on
lower volumes.
Operating income in the Furniture and Cabinets segment declined in the first
quarter of fiscal 1998 when compared to the same quarter in fiscal 1997. Lower
material costs, as a percent of sales, were more than offset by higher labor
costs, measured on an absolute basis and as a percent of sales. The changes in
the material and labor components of the cost structure were driven by a shift
in product mix towards products with lower material content and higher labor
requirements. Sales and administrative expenses increased in the first quarter
primarily due to higher investments in people and technology as the Company
positions itself for growth in selected markets.
ELECTRONIC CONTRACT ASSEMBLIES
Net sales in the Electronic Contract Assemblies segment during the first quarter
of fiscal 1998 were 4% lower than the same quarter in the prior fiscal year, as
stronger demand for electronic automotive products was more than offset by
weaker demand for computer-related products. Rescheduling, production
flexibility and material availability are inherent risks in the contract
electronic assemblies market. While volumes were impacted in the current period
by a reduction in orders by some customers, other customers were increasing
their orders for the Company's products. This segment's working capital carries
a higher degree of risk than the Company as a whole due to the inherent risks in
the industry and also due to being a supplier to customers that bear risk
associated with labor relations within their industries. Included in this
segment are sales to three customers which combined accounted for 24% of
consolidated sales in the first quarter of fiscal 1998 and 25% in the first
quarter of fiscal 1997. One of these customers accounted for 15% of first
quarter sales in both fiscal years.
Operating income declined in the first quarter primarily due to lower volumes
and also due to a change in the product mix. Material costs declined and labor
costs increased due to the shift in the product mix. Investments in people,
equipment and technology resulted in higher overhead costs and increased selling
and administrative expenses.
PROCESSED WOOD PRODUCTS AND OTHER
Net outside sales in the Processed Wood Products and Other segment declined 2%
as increases in sales of lumber and wood products were more than offset by lower
volumes of molded plastic and stamped metal parts, and carbide cutting tools.
This segment provides a significant amount of its goods and services to the
Company's internal operations, particularly in the Furniture and Cabinets
segment, and is a key link in the vertically integrated supply chain of the
Company. Operating income increased on a favorable product mix shift and also
due to lower overhead costs.
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CONSOLIDATED OPERATIONS
Consolidated cost of sales decreased 0.7 percentage point, as a percent of net
sales, primarily due to lower material costs resulting from a product mix shift
within certain business segments. The lower material costs were offset to some
extent by higher labor costs, also resulting primarily from the product mix
shifts within business segments. Overhead costs declined in dollars, while
remaining level as a percent of net sales, reflecting the effectiveness of the
Company's cost control efforts within the manufacturing processes. Selling,
administrative and general expenses increased 1.1 percentage point, as a percent
of net sales, when compared to the same period in the prior year as the Company
continued to invest in people, services, and technology to strengthen its core
infrastructure and better position itself for the future.
Operating income in the first quarter of fiscal 1998 was $18,003,000, compared
to $19,183,000 in the same period of fiscal 1997. The decline in operating
income was mainly due to the increased investments in the selling and
administrative areas of the Company's infrastructure.
Other income in the first quarter increased over the prior year as interest
income increased on higher average investment balances in the current quarter.
The prior year quarter also included a $3.8 million charge to Other - net
related to a pretax loss on the sale of a foreign subsidiary.
The effective income tax rate increased 11.9 percentage points in the first
quarter of fiscal 1998 due primarily to the $3.8 million tax benefit received on
the sale of a foreign subsidiary in the first quarter of the prior fiscal year.
Excluding this benefit, the effective income tax rate decreased 0.9 percentage
point when compared to the prior quarter due to reduced European operating
losses and a reduction in the effective state tax rate.
The Company achieved net income and Class B earnings per share of $13,029,000
and $0.63, respectively, in the first quarter of fiscal 1998, compared to
$13,521,000 and $0.65, respectively, in the first quarter of fiscal 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity position remained strong with $154 million in cash, cash
investments, and short-term investments at the end of the first quarter,
compared to $168 million at the end of fiscal 1997. Working capital of $250
million as of September 30, 1997 was an increase of $7 million over the working
capital level as of June 30, 1997. The current ratio remained steady at 2.8.
Operating activities in the current three month period did not generate positive
cash flow as net income was offset by investments in working capital. An
additional $9 million was invested in capital investments for the future,
including facility and production equipment upgrades and investments in the
Company's information systems and $6 million was used for financing activities,
primarily dividends to share owners. Cash needs were funded by available cash
balances provided by the Company's strong liquidity position in cash and
short-term investments on hand. Net cash flow, excluding the purchases and
maturities of short-term investments was a negative $14 million for the quarter
ended September 30, 1997.
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The Company anticipates maintaining a strong liquidity position for the
remainder of the 1998 fiscal year and believes its available funds on hand,
borrowing capacity, and cash generated from operations will be sufficient for
working capital needs and to fund investments in the Company's future.
This discussion contains certain statements which could be considered
forward-looking under the Private Securities Litigation Reform Act of 1995.
Cautionary statements regarding these statements have been included in this
discussion, when appropriate. Additional cautionary statements regarding
these statements and other factors that could have an effect on the future
performance of the Company are contained in the Company's 8-K filing of
April 10, 1997.
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<PAGE>
PART II.
OTHER INFORMATION
Item 6. - Exhibits and Reports on Form 8-K
(a) Exhibits
See Exhibit Index on page 13
(b) Reports on Form 8-K
Form 8-K dated October 28, 1997 was filed pursuant to Item 5
(Other Events) which contained the Company's news release dated
October 28, 1997, announcing approval by the Company's Share
Owners of a two-for-one stock split, effective on or about
November 12, 1997.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
KIMBALL INTERNATIONAL, INC.
Douglas A. Habig
DOUGLAS A. HABIG
(Chairman, Chief Executive Officer)
Roy W. Templin
ROY W. TEMPLIN
(Vice President, Corporate Controller)
Date: November 3, 1997
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<TABLE>
KIMBALL INTERNATIONAL, INC.
EXHIBIT INDEX
<S> <C>
Exhibit No. Description
11 Computation of Earnings Per Share
27 Financial Data Schedule
</TABLE>
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<TABLE> KIMBALL INTERNATIONAL, INC.
COMPUTATION OF EARNINGS PER SHARE
THREE MONTHS ENDED SEPTEMBER 30,
(amounts in thousands except per share amounts)
(UNAUDITED)
<CAPTION>
1997 1996
------------------------- ---------------------
<S> <C> <C> <C> <C>
Net income, three months ended September 30, . $13,029 $13,521
Dividends declared on common stock:
Class A -- $0.2875 and $0.2575 per share . . (2,074) (1,873)
Class B -- $0.2900 and $0.2600 per share . . (3,925) (3,514)
(5,999) (5,387)
Undistributed Earnings . . . . . . . . . . . . $ 7,030 $ 8,134
Average number of shares outstanding . . . . . 20,737 20,795
Undistributed earnings divided
by average number
of shares outstanding . . . . . . . . . . . . $ .3390 $ .3911
Class A Class B Class A Class B
Undistributed earnings per share . . . . . . . $.3390 $.3390 $.3911 $.3911
Assumed distribution of earnings . . . . . . . .2875 .2900 .2575 .2600
Earnings per share . . . . . . . . . . . . . . $.6265 $.6290 $.6486 $.6511
Rounded. . . . . . . . . . . . . . . . . . . . $ .63 $ .63 $ .65 $ .65
</TABLE>
Part I-Exhibit(11)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains three month summary financial information extracted from
Kimball International, Inc., and subsidiaries 1998 first quarter Form 10-Q and
is qualified in its entirety by reference to such Form 10-Q filing.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> SEP-30-1997
<CASH> 12,178
<SECURITIES> 142,196
<RECEIVABLES> 128,834
<ALLOWANCES> 4,006
<INVENTORY> 83,898
<CURRENT-ASSETS> 386,311
<PP&E> 409,401
<DEPRECIATION> 234,306
<TOTAL-ASSETS> 591,804
<CURRENT-LIABILITIES> 136,088
<BONDS> 0
0
0
<COMMON> 6,723
<OTHER-SE> 423,938
<TOTAL-LIABILITY-AND-EQUITY> 591,804
<SALES> 245,857
<TOTAL-REVENUES> 245,857
<CGS> 171,577
<TOTAL-COSTS> 171,577
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 83
<INTEREST-EXPENSE> 95
<INCOME-PRETAX> 20,832
<INCOME-TAX> 7,803
<INCOME-CONTINUING> 13,029
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,029
<EPS-PRIMARY> .63
<EPS-DILUTED> .63
</TABLE>
