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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 March 31, 1999
__ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 0-3279
KIMBALL INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
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, including area code (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 April
28, 1999 were:
Class A Common Stock - 14,330,351 shares
Class B Common Stock - 26,004,542 shares
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<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
- March 31, 1999 (Unaudited) and June 30, 1998. . . . . . . . . 3
Consolidated Statements of Income (Unaudited)
- Three Months and Nine Months Ended March 31, 1999 and 1998. . 4
Consolidated Statements of Cash Flows (Unaudited)
- Nine Months Ended March 31, 1999 and 1998 . . . . . . . . . . 5
Notes To Consolidated Financial Statements (Unaudited). . . . . 6-7
Item 2. Management's Discussion and Analysis Of
Financial Condition and Results of Operations . . . . . . . . . 8-12
Item 3. Quantitative & Qualitative Disclosures about Market Risk. . . . 13
PART II OTHER INFORMATION:
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . 14
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . 14
Exhibit Index. . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
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<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
KIMBALL INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
<CAPTION>
(unaudited)
March 31, June 30,
1999 1998
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 939 $ 16,757
Short-term investments 125,626 156,010
Receivables, less allowances
of $3,623 and $4,023, respectively 142,187 119,170
Inventories 93,989 96,303
Other 22,109 24,697
Total Current Assets 384,850 412,937
PROPERTY AND EQUIPMENT - at cost, less
accumulated depreciation of $263,653
and $245,751, respectively 200,390 182,798
OTHER ASSETS 51,081 33,903
Total Assets $636,321 $629,638
LIABILITIES AND SHARE OWNERS' EQUITY
CURRENT LIABILITIES:
Loans payable $ 4,117 $ 4,318
Current maturities of long-term debt 509 434
Accounts payable 58,946 60,907
Dividends payable 6,381 6,521
Accrued expenses 82,213 81,030
Total Current Liabilities 152,166 153,210
OTHER LIABILITIES:
Long-term debt, less current maturities 2,419 1,856
Deferred income taxes and other 26,548 25,949
Total Other Liabilities 28,967 27,805
SHARE OWNERS' EQUITY:
Common stock 2,151 2,151
Additional paid-in capital 6,386 6,022
Retained earnings 488,304 464,880
Foreign currency translation adjustment 1,609 1,535
Unrealized gain on available-for-sale
securities 1,086 2,174
Less: Treasury stock, at cost (44,348) (28,139)
Total Share Owners' Equity 455,188 448,623
Total Liabilities and Share Owners' Equity $636,321 $629,638
See Notes to Consolidated Financial Statements
</TABLE>
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<TABLE>
KIMBALL INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(amounts in thousands except per share amounts)
<CAPTION>
(unaudited) (unaudited)
Three Months Ended Nine Months Ended
March 31, March 31,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Net Sales $288,054 $265,001 $832,780 $775,382
Cost of Sales 201,621 187,269 584,737 543,418
Gross Profit 86,433 77,732 248,043 231,964
Selling, Administrative
and General Expenses 64,241 60,414 190,938 176,825
Operating Income 22,192 17,318 57,105 55,139
Other Income (Expense):
Interest Expense (102) (123) (375) (316)
Interest Income 1,530 2,383 5,064 6,970
Other - net 744 1,989 4,896 5,296
Other Income - net 2,172 4,249 9,585 11,950
Income Before Taxes on Income 24,364 21,567 66,690 67,089
Taxes on Income 9,175 7,865 24,003 24,873
Net Income $ 15,189 $ 13,702 $ 42,687 $ 42,216
Earnings Per Share of Common Stock:
Basic:
Class A Common Stock $ .37 $ .33 $ 1.04 $1.01
Class B Common Stock $ .38 $ .33 $ 1.06 $1.02
Diluted:
Class A Common Stock $ .37 $ .33 $ 1.03 $1.00
Class B Common Stock $ .38 $ .33 $ 1.05 $1.01
Dividends Per Share of Common Stock:
Class A Common Stock $ .155 $ .145 $ .465 $ .43375
Class B Common Stock $ .160 $ .150 $ .480 $ .445
Average total number of shares
outstanding Class A and B
Common Stock:
Basic 40,536 41,423 40,721 41,474
Diluted 40,710 41,825 40,952 41,880
See Notes to Consolidated Financial Statements
</TABLE>
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KIMBALL INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
<CAPTION>
(unaudited)
Nine Months Ended
March 31,
1999 1998
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 42,687 $ 42,216
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 29,276 24,998
Gain on sales of assets (424) (2,104)
Deferred income tax and other deferred charges 3,242 (74)
Change in current assets and liabilities:
Receivables (23,017) (12,343)
Inventories (2,648) (6,689)
Other current assets (55) 606
Accounts payable (1,961) 5,013
Accrued expenses 6,546 7,026
Net Cash Provided By Operating Activities 53,646 58,649
Cash Flows From Investing Activities:
Capital expenditures (43,482) (29,005)
Proceeds from sales of assets 1,204 834
Proceeds from sale of division/subsidiary -- 3,150
Increase in other assets (21,612) (4,297)
Purchases of held-to-maturity investments (400) (21,750)
Maturities of held-to-maturity investments 5,415 46,932
Purchases of available-for-sale securities (23,799) (33,651)
Sales and maturities of available-for-sale securities 48,080 29,037
Net Cash Used For Investing Activities (34,594) (8,750)
Cash Flows From Financing Activities:
Change in short-term borrowings (201) 191
Net change in long-term debt 638 485
Dividends paid to share owners (19,403) (18,147)
Acquisition of treasury stock, net of sales (16,921) (3,735)
Proceeds from exercise of stock options 940 1,146
Other - net 82 (84)
Net Cash Used For Financing Activities (34,865) (20,144)
Effect of Exchange Rate Change on
Cash and Cash Equivalents (5) (26)
Net (Decrease)/Increase in Cash and Cash Equivalents (15,818) 29,729
Cash and Cash Equivalents-Beginning of Period 16,757 18,818
Cash and Cash Equivalents-End of Period $ 939 $ 48,547
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Income taxes $ 21,617 $ 24,063
Interest $ 386 $ 290
Total Cash, Cash Equivalents and
Short-Term Investments:
Cash and cash equivalents $ 939 $ 48,547
Short-term investments 125,626 131,118
Totals $126,565 $179,665
See Notes to Consolidated Financial Statements
</TABLE>
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KIMBALL INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(1) The accompanying consolidated financial statements of Kimball
International, Inc. ("the Company") are unaudited and have been prepared
in accordance with the instructions to Form 10-Q. As such, certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted, although the Company believes
that the disclosures are adequate to make the information presented not
misleading. All significant intercompany transactions and balances have
been eliminated. Management believes the financial statements include all
adjustments (consisting only of normal recurring adjustments) considered
necessary to present fairly the financial statements of the interim period.
It is suggested that these 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) Inventories consist of: (in thousands)
<CAPTION>
March 31, June 30,
1999 1998
<S> <C> <C>
Raw Materials $48,294 $51,967
Work-in-Process 12,108 12,971
Finished Goods 33,587 31,365
Total $93,989 $96,303
For interim reporting, LIFO inventories are computed based on estimated year-end
quantities and interim changes in 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 Financial
Accounting Standards Board Statement No. 128 for computing earnings per
share for two class common stock due to the dividend preference of Class B
Common Stock. The Company adopted FASB Statement No. 128 effective with
the second quarter of fiscal year 1998, disclosing both basic and
diluted earnings per share. The Company's outstanding stock options are
considered when calculating diluted earnings per share.
(4) Effective July 1, 1998, the Company adopted Financial Accounting Standards
Board Statement No. 130 - Comprehensive Income. Comprehensive income
includes all changes in equity during a period except those resulting from
investments by, and distributions to, Share Owners. Comprehensive income,
shown net of tax if applicable, for the three month and nine month periods
ending March 31, 1999 and 1998 is as follows: (in thousands)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Net Income $15,189 $13,702 $42,687 $42,216
Unrealized (Loss)/Gain on
Available-For-Sale-Securities (250) 1,528 (1,088) 2,009
Foreign Currency Translation Adjustment (87) (151) 74 (255)
Comprehensive Income $14,852 $15,079 $41,673 $43,970
</TABLE>
Unrealized holding gains related to a stock investment of which the company
held a minor interest were recorded in the three month period ending March
31, 1998. Unrealized gains on this investment have subsequently been
realized upon sales of this stock investment (Note 6 and 8).
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5) On September 15, 1998, the Company acquired, with available cash on hand,
the assets of Transwall, Inc., a manufacturer of stackable panel systems and
floor-to-ceiling products. The acquisition was accounted for as a purchase with
operating results included in the Company's Consolidated Statement of Income
from the date of acquisition. Transwall's results of operations were immaterial
to the Company's Consolidated Statements of Income for the three month and nine
month periods ending March 31, 1999.
6) The Company recorded a $2.1 million pretax gain on the sale of a stock
investment of which the Company held a minor interest, during the second quarter
of the current fiscal year. This pretax gain is reported in Other-net, and
added $1.3 million to net income, or $0.03 per common share. The per share
amount applies to both basic and diluted earnings per share.
7) On January 8, 1999, the Company announced the acquisition of Southeast
Millwork, a privately held manufacturer of store display fixtures located in
Florida. The acquisition was accounted for as a purchase and was financed with
available cash on hand. Operating results were included in the Company's
Consolidated Statement of Income from the date of acquisition. Results of
operations for Southeast Millwork were immaterial to the Company's Consolidated
Statements of Income for the three and nine month periods ending March 31, 1999.
8) The Company recorded a $1.2 million pretax gain on the sale of a stock
investment of which the Company held a minor interest, during the third quarter
of the prior fiscal year. This pretax gain is reported in Other-net, and added
$616 thousand to net income, or $0.01 per common share. The Company recorded a
$1.8 million pretax gain on the sale of real estate in the second quarter of the
prior fiscal year. This pretax gain is reported in Other-net, and added $1.0
million to net income, or $0.02 per common share. Per share amounts apply to
both basic and diluted earnings per share.
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Item 2.
Management's Discussion and Analysis
of Financial Condition and Results of Operations
OVERVIEW
Fiscal year 1999 third quarter results showed improvement over the previous year
as net sales of $288,054,000 exceeded the prior year by 9%. Current year third
quarter net income and Class B diluted earnings per share were $15,189,000 and
$0.38, respectively, an increase of 11% from the prior year. Net sales of
$832,780,000 for the nine month period ending March 31, 1999 surpassed the prior
year sales by 7%. Net income and Class B diluted earnings per share for the
nine month period of fiscal year 1999 were $42,687,000 and $1.05, respectively,
an increase of 1% from the prior year. Fiscal year 1999 nine month results
include a $1,337,000 after tax gain ($0.03 per diluted share) on the sale of the
remaining stock investment of which the Company held a minor interest. Fiscal
year 1998 third quarter results include a $616,000 after tax gain ($0.01 per
diluted share) on the partial sale of a stock investment of which the company
held a minor interest and nine month results include a $1,008,000 after tax gain
($0.02 per diluted share) in fiscal year 1998 on the sale of real estate.
RESULTS OF OPERATIONS - THREE AND NINE MONTHS ENDED MARCH 31, 1999 COMPARED TO
THREE AND NINE MONTHS ENDED MARCH 31, 1998
Net sales in the third quarter of fiscal year 1999 increased from the prior year
in all three of the Company's business segments. Net sales for the nine month
period ending March 31, 1999 increased in two of the Company's three business
segments when compared to the prior year - the Furniture and Cabinets segment
and the Processed Wood Products and Other segment. The Electronic Contract
Assemblies segment experienced a decline in net sales during this same time
period. Operating income in the current year third quarter increased 28% to
$22,192,000, from $17,318,000 in the same period of 1998. Operating income of
$57,105,000 for the nine month period increased 4% when compared to the prior
year's operating income of $55,139,000.
FURNITURE AND CABINETS
Net sales in the Company's largest segment, Furniture and Cabinets, increased
11% for both the three and nine month periods when compared to one year ago, as
sales of office furniture, television cabinets, and lodging furniture all
increased for both comparisons.
Net sales of office furniture surpassed the prior year for both the three and
nine month periods of fiscal year 1999. Sales for the three month period,
excluding acquisitions, outpaced the most recent Business and Institutional
Furniture Manufacturer's Association (BIFMA) industry statistics for the
three-month period ending February 1999. Third quarter sales of casegoods and
seating products exceeded the prior year while sales of systems product
decreased when compared to last year, excluding acquisitions. Nine month
results include increases in casegoods, systems, and seating products. On
September 15, 1998, the Company finalized the purchase of Transwall, Inc., a
manufacturer of stackable panel systems and floor-to-ceiling products, which
increased its already extensive office furniture product offering. The
acquisition was accounted for as a purchase, with results of operations included
in consolidated results from the date of acquisition, and was financed with
available cash on hand. Transwall's three and nine month results were not
material to the consolidated operating results.
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Fiscal 1999 net sales for both the three and nine month periods for cabinets and
furniture product lines outpaced 1998 levels. Sales growth occurred primarily
on increased volumes of original equipment manufacturer (OEM) television
cabinets and secondarily as a result of an acquisition during the quarter. In
the nine month period of the prior year, the Company's sales of OEM cabinets
were negatively impacted by the relocation of a large customer and its longer
than anticipated start up time, resulting in lower volumes in fiscal 1998. On
January 8, 1999, the Company announced the purchase of Southeast Millwork, a
privately held manufacturer of store display fixtures. This acquisition
provides an entry point for the Company to pursue new store fixture markets.
The acquisition was accounted for as a purchase and was financed with available
cash on hand. Results of operations from this acquisition are included in the
Furniture and Cabinets Segment from the date of purchase. Southeast Millwork's
three month results were not material to the consolidated operating results.
Lodging furniture net sales experienced double-digit growth in the third quarter
when compared to last year, on increases of both custom-made hospitality
casegoods products and furniture for healthcare facilities. While select
segments of the lodging industry have been experiencing a softening in demand,
the Company has experienced sales growth in the third quarter through
custom-made projects for large customers. Lodging furniture net sales for the
current year nine month period are also ahead of the prior year.
Operating income in the Furniture and Cabinets segment increased in both the
three and nine month periods in fiscal year 1999 when compared to one year ago
on increased sales. Cost of goods sold, as a percent of net sales, increased in
the three and nine month periods of fiscal 1999 primarily due to higher material
costs, as a percent of net sales. As a percent of sales, selling and
administrative costs were lower in the current year third quarter and nine month
period primarily the result of a more aggressive focus on cost reductions.
ELECTRONIC CONTRACT ASSEMBLIES
Net sales for the third quarter in the Electronic Contract Assemblies segment
exceeded the prior year by 6%. Sales for the nine month period declined 1% from
last year. Sales of electronic automotive products increased for both the
quarter and nine month period. Fiscal 1999 nine month results were unfavorably
impacted by the General Motors (GM) labor strike which was settled in July 1998,
as the Electronic Contract Assemblies segment manufactures components that are
installed in GM vehicles.
Operating income increased over the prior year third quarter, primarily due to
higher sales volumes. Operating income declined year-to-date from the prior
year. Due to the competitiveness of the marketplace, the selling prices of
selected products have been reduced. Cost of goods sold, as a percent of net
sales, remained steady in the third quarter of fiscal year 1999 when compared to
1998. On a year-to-date basis, cost of goods sold, as a percent of sales,
increased during fiscal year 1999. Third quarter selling and administrative
costs, as a percent of sales, decreased from fiscal year 1998 primarily the
result of the collection of receivables which were previously written off. Nine
month selling and administrative costs, as a percent of sales, increased over
the prior year on increased investments in people.
Included in this segment are sales to one customer, Lucas Varity, PLC, which
accounted for 17% and 15%, respectively, of consolidated net sales in the three
and nine month periods of fiscal 1999. This same customer accounted for 18% and
17% of consolidated net sales in the three and nine month periods, respectively,
one year ago. Sales to this customer represent approximately one half of total
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sales in the Electronic Contract Assemblies segment, which has historically
carried a higher operating income margin than the Company's other two business
segments. Consistent with the general trend of consolidation in the automotive
supplier business, TRW, Inc. announced in late January its intention to acquire
Lucas Varity. The transaction is expected to be complete in the near future.
The Company remains uncertain at this time what effect, if any, this
announcement may have on the contract production levels for this customer. This
statement is a forward-looking statement under the Private Securities Litigation
Reform Act of 1995 and is subject to certain risks and uncertainties including,
but not limited to, strategic business actions taken by this customer.
This segment's investment capital carries a higher degree of risk than the
Company's other segments due to rapid technological changes, the contract nature
of this industry and the importance of sales to one customer.
PROCESSED WOOD PRODUCTS AND OTHER
Outside sales in the Processed Wood Products and Other segment increased 4% and
13%, respectively, for the three and nine month periods compared to the prior
year. The increase in sales resulted primarily from new product offerings and
increases of lumber, laminate products and metal parts for the three month
period. Sales increases occurred in most major products within this segment for
the nine month period. Internal sales of this segment to the Company's other
operations, particularly the Furniture and Cabinets segment, provide a key link
in the Company's vertically integrated supply chain. Operating income declined
for the third quarter and the nine month period of fiscal 1999 when compared to
1998. Cost of goods sold, as a percent of net sales, increased for both the
three and nine month comparisons partially due to higher direct labor costs, as
a percent of sales. Material and overhead costs, as a percent of sales, were
also higher in the third quarter.
In the first quarter of fiscal 1999, the Company completed the purchase of an
11,700-acre land parcel which nearly doubled the timberland holdings of the
Company. The acquisition was made to help support the procurement of raw
materials in this segment and to provide possible future manufacturing facility
locations. The acquisition was financed with available cash on hand.
CONSOLIDATED OPERATIONS
Consolidated selling, general and administrative expenses decreased, as a
percent of sales, .5 percentage point for the third quarter and increased .1
percentage point for the nine months of fiscal 1999 compared to the prior year.
The Company has been focused on reducing costs with the results of that effort
becoming evident in the third quarter. The Company continues to review
activities, processes and costs to assess where such costs could further be
reduced while continuing to provide quality products and services to the
marketplace.
Other income decreased in both the three and nine month periods of fiscal 1999
partially the result of a decline in interest income caused by a shift in the
Company's investment portfolio to a mix more heavily weighted toward tax-free
municipal bonds with lower pre-tax interest rates. In the nine month period of
fiscal year 1999 the Company recorded a $1,337,000 after tax gain ($0.03 per
diluted share) on the sale of the remaining stock investment of which the
Company held a minor interest. Fiscal 1998 third quarter income includes a
$616,000 after tax gain ($0.01 per diluted share) on the partial sale of a stock
investment of which the Company held a minor interest and nine month results
includes a $1,008,000 after tax gain ($0.02 per diluted share) on the sale of
real estate.
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The effective income tax rate increased 1.2 percentage points for the third
quarter of fiscal 1999 and decreased 1.1 percentage points for the nine month
period when compared to the prior year. The increase in the third quarter rate
is primarily due to increased state income taxes. The nine month decrease in
the effective income tax rate is primarily the result of increased tax-free
municipal bond interest received.
Net income and Class B diluted earnings per share for the third quarter of
fiscal year 1999 of $15,189,000 and $0.38, respectively, increased 11% from the
prior year levels. Net income of $42,687,000 and Class B diluted earnings per
share of $1.05 for the nine month period of fiscal 1999 increased 1% from the
prior year.
LIQUIDITY AND CAPITAL RESOURCES
The Company's aggregate of cash, cash equivalents, and short-term investments
decreased from $173 million at the end of fiscal 1998 to $127 million at the end
of the third quarter in fiscal 1999 due primarily to cash outlays for strategic
capital investments, dividends and Class B common stock repurchases. Working
capital at March 31, 1999 was $233 million with a current ratio of 2.5, compared
to working capital of $260 million and a current ratio of 2.7 at June 30, 1998.
Operating activities generated $54 million of cash flow in the first nine months
of fiscal 1999 compared to $59 million in the first nine months of 1998. Net
income and non-cash charges to net income were partially offset by increases in
receivables of $23 million. The Company reinvested a record $65 million into
capital investments for the future, including acquisitions, the purchase of
11,700 acres of timber and harvest land, computer equipment, production
equipment, office facilities and a child development facility. Financing cash
flows were primarily in the form of $17 million in share repurchases and $19
million in dividend payments. Net cash flow, excluding the purchases and
maturities of short-term investments was an outflow of $45 million for the nine
month period ending March 31, 1999.
As the Company anticipates increased investment activity in the future, it
believes that available funds on hand, borrowing capacity, and cash generated
from operations will be sufficient for working capital needs and to fund
investments and acquisitions in the future. This disclosure is forward-looking
under the Private Securities Litigation Reform Act of 1995 and is subject to
certain risks and uncertainties including, but not limited to a downturn in the
economy, loss of key customers or suppliers, availability or cost of raw
materials, or a natural disaster or similar unforeseen event.
YEAR 2000 READINESS DISCLOSURE
The Company continues to focus on the Year 2000 issue. For U.S. operations, all
phases of the Company's Year 2000 plan have been completed for its mission
critical computer systems and the embedded systems contained in its machinery,
equipment and other infrastructure, including inventory assessment, remediation,
and testing. The estimated completion date for Year 2000 compliance for
critical items for the remaining few foreign operations is the end of June 1999.
In addition, the Company continues to make progress on Year 2000 compliance of
non-critical computer and embedded systems. The Company will continue its Year
2000 assessment and testing efforts for new or modified systems throughout 1999
and will continue to test its critical systems for continued Year 2000
compliance. Contingency plans outlining recovery strategies for possible
failures are currently being developed.
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<PAGE>
The total gross cost of Year 2000 compliance remains in the $9.0 million to
$11.0 million range, as disclosed in the Company's Form 10-K for the period
ending June 30, 1998. Approximately 75% of the total costs had been incurred as
of March 31, 1999, compared to 60% at December 31, 1998. Redeployed information
technology resources are anticipated to account for approximately 50% of the
total costs, with the balance being incremental costs to the Company.
Approximately 30% of the total gross costs relate to machinery and other fixed
assets which will be capitalized, with the remaining costs being expensed as
incurred.
The Company has not identified any additional material key risk factors
associated with the Year 2000 beyond those disclosed in its Form 10-K for the
period ending June 30, 1998.
The Year 2000 disclosure includes forward-looking statements under the Private
Securities Litigation Reform Act of 1995 and is subject to risks and
uncertainties including, but not limited to such factors as the availability and
cost of human resources with expertise in this area, the ability of its
customers and suppliers to meet Year 2000 compliance, the ability to locate and
correct all relevant computer codes and time constraints.
EURO CURRENCY
The European Union's adoption of a common currency, known as the Euro, is not
expected to have a material effect on the Company's financial condition or
results of operations. As the Company continues to explore investment
opportunities abroad, it will monitor the possible effects of this currency
conversion.
ACCOUNTING STANDARDS
In July 1998, the Company adopted Financial Accounting Standards No. 130,
Comprehensive Income. This standard requires the disclosure of all changes in
equity during a period except those resulting from investments by, and
distributions to, Share Owners. Comprehensive income is reported in Note 4 of
the Consolidated Financial Statements.
In June, 1998, the Financial Accounting Standards Board issued Financial
Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging
Activities, which requires the recognition of all derivatives as either assets
or liabilities in the balance sheet and the measurement of those instruments at
fair value. The Company currently engages in limited derivative activity and
currently does not expect this new standard to have a material effect on the
Company's financial condition or results of operations. This standard will be
effective for the Company's fiscal year 2000.
_____________________________________________________________________________
This document 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
document, when appropriate. Additional cautionary statements regarding these
types of Statements and other factors that could have an effect on the future
performance of the Company are contained in the Company's Form 10-K filing for
the period ending June 30, 1998.
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Item 3.
Quantitative and Qualitative Disclosures About Market Risk
As of March 31, 1999, the Company had an investment portfolio of fixed income
securities, excluding those classified as cash and cash equivalents, of $126
million. The Company classifies its short-term investments in accordance with
Financial Accounting Standards Board Statement No. 115, Accounting for Certain
Investments in Debt and Equity Securities. Held-to-maturity securities are
stated at amortized cost and available-for-sale securities are stated at market
value with unrealized gains and losses being recorded net of tax related effect,
if any, as a component of share owners' equity. These securities, like all
fixed income instruments, are subject to interest rate risk and will decline in
value if market interest rates increase.
The Company operates internationally, and thus is subject to potentially adverse
movements in foreign currency rate changes. As of the latest fiscal year-end,
foreign sales, operating income and assets each comprised less than 3% of
consolidated amounts. Historically, the effect of movements in the exchange
rates have been immaterial to the consolidated operating results of the Company.
- 13 -
<PAGE>
<PAGE>
PART II. OTHER INFORMATION
Item 6.
Exhibits and Reports on Form 8-K
(a) Exhibits (numbered in accordance with Item 601 of Regulation S-K)
(11) Computation of Earnings Per Share
(27) Financial Data Schedule
(b) Reports on Form 8-K
Form 8-K dated January 11, 1999, was filed pursuant to Item 5
(Other Events) which contained the Company's news release dated
January 8, 1999, announcing the acquisition of Southeast
Millwork.
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: May 5, 1999
- 14 -
<PAGE>
<PAGE>
<TABLE>
Kimball International, Inc
Exhibit Index
<S> <C>
Exhibit No. Description
11 Computation of Earnings Per Share
27 Financial Data schedule
</TABLE>
- 15 -
<PAGE>
<TABLE>
KIMBALL INTERNATIONAL, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
THREE MONTHS ENDED MARCH 31, 1999
(UNAUDITED)
<CAPTION>
(Amounts in Thousands, Except Per Share Data)
Available Average Earnings Per Share
Income Shares Class A Class B
--------- ----------- ------- --------
<S> <C> <C> <C> <C>
Net income, three months ended 03/31/1999. . . $15,189
Distributed earnings:
Class A dividends declared . . . . . . . . . (2,221) $ .155
Class B dividends declared . . . . . . . . . (4,161) $ .160
Undistributed basic earnings . . . . . . . . . $ 8,807 40,536 $ .217 $ .217
Basic Earnings Per Share . . . . . . . . . . . $ .372 $ .377
Basic Earnings Per Share (rounded) . . . . . . $ .37 $ .38
Dilutive effect of stock options . . . . . . . (28) 174
Undistributed diluted earnings . . . . . . . . $ 8,779 40,710 $ .216 $ .216
Diluted Earnings Per Share . . . . . . . . . . $ .371 $ .376
Diluted Earnings Per Share (rounded) . . . . . $ .37 $ .38
1,089,000 of the 1,976,000 average outstanding stock options were antidilutive, and were excluded from the
dilutive computation for this period.
</TABLE>
<TABLE>
KIMBALL INTERNATIONAL, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
THREE MONTHS ENDED MARCH 31, 1998
(UNAUDITED)
<CAPTION>
(Amounts in Thousands, Except Per Share Data)
Available Average Earnings Per Share
Income Shares Class A Class B
--------- ----------- ------- --------
<S> <C> <C> <C> <C>
Net income, three months ended 03/31/1998. . . $13,702
Distributed earnings:
Class A dividends declared . . . . . . . . . (2,088) $ .145
Class B dividends declared . . . . . . . . . (4,045) $ .150
Undistributed basic earnings . . . . . . . . . $ 7,569 41,423 $ .183 $ .183
Basic Earnings Per Share . . . . . . . . . . . $ .328 $ .333
Basic Earnings Per Share (rounded) . . . . . . $ .33 $ .33
Dilutive effect of stock options . . . . . . . (60) 402
Undistributed diluted earnings . . . . . . . . $ 7,509 41,825 $ .180 $ .180
Diluted Earnings Per Share . . . . . . . . . . $ .325 $ .330
Diluted Earnings Per Share (rounded) . . . . . $ .33 $ .33
583,000 of the 1,774,000 average outstanding stock options were antidilutive, and were excluded from the
dilutive computation for this period.
</TABLE>
Exhibit(11)
<PAGE>
<PAGE>
<TABLE>
KIMBALL INTERNATIONAL, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
NINE MONTHS ENDED MARCH 31, 1999
(UNAUDITED)
<CAPTION>
(Amounts in Thousands, Except Per Share Data)
Available Average Earnings Per Share
Income Shares Class A Class B
--------- ----------- ------- --------
<S> <C> <C> <C> <C>
Net income, nine months ended 03/31/1999 . . . $42,687
Distributed earnings:
Class A dividends declared . . . . . . . . . (6,670) $ .465
Class B dividends declared . . . . . . . . . (12,593) $ .480
Undistributed basic earnings . . . . . . . . . $23,424 40,721 $ .575 $ .575
Basic Earnings Per Share . . . . . . . . . . . $1.040 $1.055
Basic Earnings Per Share (rounded) . . . . . . $1.04 $1.06
Dilutive effect of stock options . . . . . . . (111) 231
Undistributed diluted earnings . . . . . . . . $23,313 40,952 $ .569 $ .569
Diluted Earnings Per Share . . . . . . . . . . $1.034 $1.049
Diluted Earnings Per Share (rounded) . . . . . $1.03 $1.05
964,000 of the 1,911,000 average outstanding stock options were antidilutive, and were excluded from the
dilutive computation for this period.
</TABLE>
<TABLE>
KIMBALL INTERNATIONAL, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
NINE MONTHS ENDED MARCH 31, 1998
(UNAUDITED)
<CAPTION>
(Amounts in Thousands, Except Per Share Data)
Available Average Earnings Per Share
Income Shares Class A Class B
--------- ----------- ------- --------
<S> <C> <C> <C> <C>
Net income, nine months ended 03/31/1998 . . . $42,216
Distributed earnings:
Class A dividends declared . . . . . . . . . (6,254) $ .43375
Class B dividends declared . . . . . . . . . (12,037) $ .44500
Undistributed basic earnings . . . . . . . . . $23,925 41,474 $ .57687 $ .57687
Basic Earnings Per Share . . . . . . . . . . . $1.01062 $1.02187
Basic Earnings Per Share (rounded) . . . . . . $1.01 $1.02
Dilutive effect of stock options . . . . . . . (273) 406
Undistributed diluted earnings . . . . . . . . $23,652 41,880 $ .56475 $ .56475
Diluted Earnings Per Share . . . . . . . . . . $ .99850 $1.00975
Diluted Earnings Per Share (rounded) . . . . . $1.00 $1.01
438,000 of the 1,691,000 average outstanding stock options were antidilutive, and were excluded from the
dilutive computation for this period.
</TABLE>
Exhibit(11)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains nine month summary financial information extracted from
Kimball International, Inc., and subsidiaries 1999 third quarter Form 10-Q and
is qualified in its entirety by reference to such Form 10-Q filing.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> MAR-31-1999
<CASH> 939
<SECURITIES> 125,626
<RECEIVABLES> 145,810
<ALLOWANCES> 3,623
<INVENTORY> 93,989
<CURRENT-ASSETS> 384,850
<PP&E> 464,043
<DEPRECIATION> 263,653
<TOTAL-ASSETS> 636,321
<CURRENT-LIABILITIES> 152,166
<BONDS> 0
0
0
<COMMON> 2,151
<OTHER-SE> 453,037
<TOTAL-LIABILITY-AND-EQUITY> 636,321
<SALES> 832,780
<TOTAL-REVENUES> 832,780
<CGS> 584,737
<TOTAL-COSTS> 584,737
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 515
<INTEREST-EXPENSE> 375
<INCOME-PRETAX> 66,690
<INCOME-TAX> 24,003
<INCOME-CONTINUING> 42,687
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 42,687
<EPS-PRIMARY> 1.06
<EPS-DILUTED> 1.05
</TABLE>
