<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 December 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 January
24, 2000 were:
Class A Common Stock - 14,297,013 shares
Class B Common Stock - 26,164,403 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
- December 31, 1999 (Unaudited) and June 30, 1999 . . . . . . . 3
Consolidated Statements of Income (Unaudited)
- Three and Six Months Ended December 31, 1999 and 1998 . . . . 4
Consolidated Statements of Cash Flows (Unaudited)
- Six Months Ended December 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 4 (c). Submission of Matters to a Vote of Security Holders . . . . 14
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . 15
Signatures. . . . . . . . . . . . . . . . . . . . . . . . . 15
Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
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<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
KIMBALL INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(amounts in thousands)
<CAPTION>
(unaudited)
December 31, June 30,
<S> 1999 1999
Assets <C> <C>
Current Assets:
Cash and cash equivalents $ 2,286 $ 16,775
Short-term investments 107,693 114,996
Receivables, less allowances
of $4,416 and $3,816, respectively 143,815 132,284
Inventories 109,941 96,157
Other 25,296 26,129
Total current assets 389,031 386,341
Property And Equipment - net of
accumulated depreciation of $281,158
and $265,141, respectively 230,844 221,498
Other Assets 57,631 53,547
Total assets $677,506 $661,386
Liabilities And Share Owners' Equity
Current Liabilities:
Loans payable $ 14,092 $ 3,518
Current maturities of long-term debt 1,213 1,185
Accounts payable 81,411 77,976
Dividends payable 6,402 6,380
Accrued expenses 69,402 79,505
Total current liabilities 172,520 168,564
Other Liabilities:
Long-term debt, less current maturities 1,200 1,730
Deferred income taxes and other 27,481 26,815
Total other liabilities 28,681 28,545
Share Owners' Equity:
Common stock 2,151 2,151
Additional paid-in capital 8,112 6,379
Retained earnings 509,956 498,962
Accumulated other comprehensive income 551 1,312
Less: Treasury stock, at cost (44,465) (44,527)
Total Share Owners' Equity 476,305 464,277
Total liabilities and Share Owners' equity $677,506 $661,386
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 for per share data)
<CAPTION>
(unaudited) (unaudited)
Three Months Ended Six Months Ended
December 31, December 31,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Net Sales $294,275 $280,080 $572,677 $544,726
Cost of Sales 211,807 197,027 413,434 383,116
Gross Profit 82,468 83,053 159,243 161,610
Selling, General and
Administrative Expenses 65,995 64,715 128,635 126,697
Operating Income 16,473 18,338 30,608 34,913
Other Income (Expense):
Interest expense (145) (168) (237) (273)
Interest income 1,231 1,570 2,674 3,534
Other - net 979 3,095 2,446 4,152
Other income - net 2,065 4,497 4,883 7,413
Income Before Taxes on Income 18,538 22,835 35,491 42,326
Taxes on Income 6,311 7,900 11,705 14,828
Net Income $ 12,227 $ 14,935 $ 23,786 $ 27,498
Earnings Per Share of Common Stock:
Basic:
Class A $ .30 $ .36 $ .58 $ .67
Class B $ .30 $ .37 $ .59 $ .68
Diluted:
Class A $ .30 $ .36 $ .58 $ .66
Class B $ .30 $ .37 $ .59 $ .67
Dividends Per Share of Common Stock:
Class A $ .155 $ .155 $ .31 $ .31
Class B $ .160 $ .160 $ .32 $ .32
Average Total Number of Shares
Outstanding Class A and B
Common Stock:
Basic 40,377 40,698 40,375 40,814
Diluted 40,499 40,971 40,548 41,073
See Notes to Consolidated Financial Statements
</TABLE>
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<TABLE>
KIMBALL INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
<CAPTION>
(unaudited)
Six Months Ended
December 31,
1999 1998
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 23,786 $ 27,498
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 21,731 19,103
Gain on sales of assets (1,102) (231)
Deferred income tax and other deferred charges (551) (51)
Change in current assets and liabilities:
Receivables (8,729) (15,577)
Inventories (9,683) (4,334)
Other current assets 1,443 1,027
Accounts payable 1,949 4,865
Accrued expenses (14,097) (8,089)
Net cash provided by operating activities 14,747 24,211
Cash Flows From Investing Activities:
Capital expenditures (25,594) (29,341)
Proceeds from sales of assets 1,668 737
Increase in other assets (2,570) (17,485)
Purchases of held-to-maturity investments -0- (400)
Maturities of held-to-maturity investments 400 5,410
Purchases of available-for-sale securities (52,225) (24,405)
Sales and maturities of available-for-sale securities 58,390 41,580
Net cash used for investing activities (19,931) (23,904)
Cash Flows From Financing Activities:
Net change in short-term borrowings 7,990 5,992
Net change in long-term debt (502) 547
Acquisition of treasury stock, net of sales (4,733) (10,738)
Dividends paid to share owners (12,770) (12,962)
Proceeds from exercise of stock options 692 818
Other - net 9 62
Net cash used for financing activities (9,314) (16,281)
Effect of Exchange Rate Change on
Cash and Cash Equivalents 9 1
Net Decrease in Cash and Cash Equivalents (14,489) (15,973)
Cash and Cash Equivalents-Beginning of Period 16,775 16,757
Cash and Cash Equivalents-End of Period $ 2,286 $ 784
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Income taxes $ 14,131 $ 14,210
Interest $ 206 $ 287
Total Cash, Cash Equivalents and
Short-Term Investments:
Cash and cash equivalents $ 2,286 $ 784
Short-term investments 107,693 132,988
Totals $109,979 $133,772
See Notes to Consolidated Financial Statements
</TABLE>
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<PAGE> KIMBALL INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 1. Basis of Presentation
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.
Note 2. Inventories
Inventory components of the Company are as follows:
<TABLE>
<CAPTION>
December 31, June 30,
1999 1999
(in thousands)
<S> <C> <C>
Finished Products $ 31,808 $33,262
Work-in-Process 16,881 14,471
Raw Materials 61,252 48,424
Total inventory $109,941 $96,157
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>
Note 3. Segment Information
Effective for the year ended June 30, 1999, the Company adopted Statement
of Financial Accounting Standards (SFAS) No. 131, Disclosures about
Segments of an Enterprise and Related Information. The adoption of SFAS 131
requires the presentation of segment information that is consistent with
information utilized by management for purposes of allocating resources and
assessing performance.
Management organizes the Company into segments based upon differences in
products and services offered in each segment. The Furniture and Cabinets
Segment manufactures furniture for the office, residential, lodging and
healthcare industries and store display fixtures, all sold under the
Company's family of brand names. Other products produced by the Furniture
and Cabinets Segment on an original equipment manufactured basis include
store fixtures, television cabinets and stands, audio speaker systems,
residential furniture and furniture components. The Electronic Contract
Assemblies Segment is a global provider of design engineering,
manufacturing, packaging and distribution of electronic assemblies,
circuit boards, multi-chip modules and semiconductor components on a
contract basis to customers in the transportation, industrial controls,
telecommunications, computer and medical industries. Intersegment sales
are insignificant. Unallocated corporate assets include cash and cash
equivalents, short-term investments and other assets not allocated to
segments. The basis of segmentation and accounting policies of the
segments are consistent with those as disclosed in the Company's Annual
Report on Form 10-K for the year ended June 30, 1999.
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Note 3. Segment Information (continued)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
1999 1998 1999 1998
(in thousands)
<S> <C> <C> <C> <C>
Net Sales:
Furniture and Cabinets $208,711 $195,677 $402,397 $387,364
Electronic Contract Assemblies 85,539 84,387 170,239 157,335
Unallocated Corporate and Eliminations 25 16 41 27
Consolidated $294,275 $280,080 $572,677 $544,726
Net Income:
Furniture and Cabinets $ 7,838 $ 7,541 $ 13,131 $ 15,551
Electronic Contract Assemblies 3,080 4,331 6,520 6,775
Unallocated Corporate and Eliminations 1,309 3,063 4,135 5,172
Consolidated $ 12,227 $ 14,935 $ 23,786 $ 27,498
Total Assets:
Furniture and Cabinets $423,533 $363,833
Electronic Contract Assemblies 144,608 137,320
Unallocated Corporate and Eliminations 109,365 130,339
Consolidated $677,506 $631,492
</TABLE>
In the second quarter of fiscal 1999, Unallocated Corporate net income includes,
in thousands, a $1,337 gain ($.03 per share) on the sale of a stock
investment of which the Company held a minor interest.
Note 4. 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 and
six month periods ending December 31, 1999 and 1998 is as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
1999 1998 1999 1998
(in thousands)
<S> <C> <C> <C> <C>
Net Income $12,227 $14,935 $23,786 $27,498
Net Change in Unrealized Gains/Losses
on Securities (495) (581) (738) (838)
Foreign Currency Translation Adjustment (210) 173 (23) 161
Comprehensive Income $11,522 $14,527 $23,025 $26,821
</TABLE>
Note 5. New Accounting Standard
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 periodically engages in
limited forward purchases of foreign currency 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 2001.
Note 6. Acquisition
In November 1999, the Company purchased Jackson of Danville, a privately
held manufacturer of custom and in-line fully upholstered seating
products and wood framed chairs. The acquisition was accounted for as a
purchase with operating results included in the Company's Consolidated
Statements of Income from the date of acquisition, and was financed with
available cash on hand and the Company's Class B Common Stock. The
acquisition price and operating results of this acquisition were not
material to the Company's second quarter fiscal 2000 consolidated
operating results.
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Item 2.
Management's Discussion and Analysis
of Financial Condition and Results of Operations
OVERVIEW
Net sales for the second quarter of fiscal year 2000 increased 5% over the prior
year to $294,275,000 and set a new quarterly record. Net income and Class B
diluted earnings per share were $12,227,000 and $0.30, respectively, for the
second quarter of fiscal 2000, a decrease of 18% and 19%, respectively, from the
prior year. Net sales for the six-month period ending December 31, 1999 of
$572,677,000 surpassed the prior year sales by 5%. Current year net income and
Class B diluted earnings per share for the six month period were $23,786,000 and
$0.59, respectively, a decrease of 13% and 12%, respectively, from the prior
year. Fiscal year 1999 second quarter and six-month net income results include
a $1,337,000 after tax gain ($0.03 per diluted share) on the sale of a stock
investment.
RESULTS OF OPERATIONS - THREE AND SIX MONTHS ENDED DECEMBER 31, 1999 COMPARED TO
THREE AND SIX MONTHS ENDED DECEMBER 31, 1998
Net sales for the Company for the three and six-month periods of fiscal year
2000 surpassed second quarter 1999 levels on increases from both of the
Company's segments -- the Furniture and Cabinets Segment and the Electronic
Contract Assemblies Segment. Net income for the second quarter declined as
increased profits in the Furniture and Cabinets Segment were more than offset by
a decline in net income for the Electronic Contract Assemblies Segment when
compared to the prior year. A decline in net income for the six-month period
was the result of decreased profits in both the Furniture and Cabinet Segment
and the Electronic Contract Assemblies Segment.
FURNITURE AND CABINETS SEGMENT
Product line offerings in the Furniture and Cabinets Segment include office
furniture, home furniture, lodging and healthcare furniture, store fixtures,
original equipment manufactured (OEM) furniture and cabinets and furniture
components. The Company's production flexibility allows it to utilize 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, when necessary.
In November 1999, the Company purchased Jackson of Danville, a privately held
manufacturer of custom and in-line fully upholstered seating products and wood
framed chairs. The acquisition was accounted for as a purchase with operating
results included in the Company's consolidated results from the date of
acquisition, and was financed with available cash on hand and the Company's
Class B Common Stock. The acquisition price and operating results of this
acquisition were not material to the Company's second quarter fiscal year 2000
consolidated operating results.
Fiscal year 2000 second quarter and six-month net sales increased 7% and 4%,
respectively, in the Furniture and Cabinets Segment when compared to the prior
year. Sales increased in the office furniture, OEM furniture and cabinets, home
furniture and furniture component product lines while sales in the lodging and
healthcare product line declined for both periods.
Net sales for both the three and six-month periods of fiscal year 2000 increased
in the office furniture product line over the prior year on increased sales of
casegoods, seating and systems product groups. The Company's office furniture
sales surpassed the industry's estimate of flat shipments as reported by the
Business and Institutional Furniture Manufacturer's Association (BIFMA) for the
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two-month period ending November 1999 compared to November 1998. Price
discounting on most office furniture products was higher in the second quarter
of fiscal year 2000 when compared to the prior year as the market remains price
competitive due to the slow growth in the industry in general.
Net sales for both the three and six-month periods of fiscal year 2000 declined
from the prior year in the lodging and healthcare product line. Sales of
custom-made products increased while sales of standard product offerings
declined in the second quarter. On a year-to-date basis, sales of both
custom-made products and standard product offerings decreased. Gross margins of
lodging and healthcare products have declined in the current quarter when
compared to the prior year as the product mix shifted to less profitable
custom-made projects. The Company anticipates sales volumes to pick up in the
latter half of the fiscal year, as evidenced by an increase in the order backlog
as of December 31, 1999 when compared to the beginning of the fiscal year. The
preceding 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, customer order changes, raw material availability
delays or other unexpected production delays.
Net sales of OEM furniture and cabinets for both the second quarter and
six-month period exceeded the prior year sales. Second quarter and six-month
sales of residential contract furniture and metal component parts increased over
the prior year while sales of television cabinets declined for both periods when
compared to the prior year.
Net sales of furniture components increased in both the second quarter and
six-month period of fiscal year 2000 when compared to the prior year primarily
on increased sales of lumber products.
Net income in the Furniture and Cabinets Segment increased in the second quarter
of fiscal year 2000 when compared to one year ago partially as a result of
higher sales. Gross profit, as a percent of sales, decreased as increased
material and overhead costs, as a percent of sales, were partially offset by
lower labor costs, as a percent of sales. The Company's recently acquired
Juarez, Mexico facility continues to negatively impact the gross profitability
in this segment when compared to the prior year second quarter and six-month
periods. As projected, both sales and gross profit for this operation improved
in the second quarter when compared to the first quarter of fiscal year 2000.
However, customer schedule changes and production inefficiencies continue to
impact profitability. The Company has made and continues to make changes to
address these inefficiencies and anticipates continued improvement in both sales
growth and gross profitability during the second half of fiscal year 2000. The
preceding statement concerning the Company's Juarez, Mexico facility 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, customer order changes or additional unexpected manufacturing
inefficiencies. Also contributing to the decline in gross profit in this
segment was the lower volumes and a mix toward lower margin custom-made projects
in the lodging and healthcare product lines and lower margins on furniture
components. Selling, general and administrative expenses increased in dollars
but decreased, as a percent of sales, as a focus on cost management continues in
fiscal year 2000. Net income for the six-month period declined primarily due to
lower sales margins on lodging and healthcare products, lower margins on
furniture components, and start-up costs at the recently acquired Mexico
facility mentioned above.
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ELECTRONIC CONTRACT ASSEMBLIES SEGMENT
Net sales for the second quarter of fiscal year 2000 in the Electronic Contract
Assemblies Segment exceeded the prior year by 1%. Second quarter sales of
electronic transportation and telecommunication components, medical devices and
industrial controls increased while sales of computer related components
declined when compared to the prior year. Segment sales for the six-month
period increased 8% compared to one year ago aided partially by the unfavorable
impact the General Motors labor strike had on the prior year six-month results.
Net income for both the second quarter and six-month periods decreased from the
prior year. Gross profit, as a percent of net sales, decreased for both the
quarter and six-month comparisons. With a planned diversification of its
customer base into a variety of new industries, the Company's gross profit
margins in this segment are lower when compared to higher historic margins that
were achieved on more mature product lines. Selling, general and administrative
costs for both the three and six-month periods decreased in both dollars and as
a percent of sales when compared to the prior year.
Based upon the December 31, 1999 order backlog, the Company anticipates sales
and net income in this segment to improve in the second half of the fiscal year.
The preceding 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, customer order changes,
availability of raw materials or unexpected production delays.
Included in this segment are sales to one customer, TRW Inc., which accounted
for 15% and 16% of consolidated net sales in the second quarter of fiscal year
2000 and 1999, respectively, and 16% and 14% of consolidated net sales in the
six month period ending December 31, 1999 and 1998, respectively. Sales to this
customer represent approximately one half of total sales in the Electronic
Contract Assemblies Segment, which has historically carried a higher operating
income margin than the Company's other business segment.
This segment's investment capital carries a higher degree of risk than the
Company's other segment due to rapid technological changes, the contract nature
of this industry and the importance of sales to one customer.
CONSOLIDATED OPERATIONS
Consolidated selling, general and administrative expenses decreased, as a
percent of sales, 0.7 percentage point in the second quarter of fiscal year 2000
from the prior year and decreased 0.8 percentage point on a year-to-date
comparison related primarily to decreased selling expenses and reduced incentive
compensation which is linked to company profitability. The Company began a
focused effort on managing costs in the latter half of the prior fiscal year and
continues to review activities and processes to assess where costs could further
be reduced while continuing to provide quality products and services to the
marketplace.
Other income decreased from the prior year for both the three and six-month
comparisons on lower interest income caused by lower average investment balances
and a decrease in miscellaneous income. Miscellaneous income in the second
quarter of the prior year includes a $2.1 million gain ($1.3 million after-tax
effect) relating to the sale of a stock investment.
The effective income tax rate decreased 0.6 percentage point in the second
quarter compared to one year ago. The fiscal year 2000 six-month effective tax
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rate declined 2.0 percentage points from the prior year. An increase in the
state tax rate was more than offset by a decrease in the federal effective tax
rate as the Company realized the benefit of research and development tax credits
in the current year.
Net income and Class B diluted earnings per share of $12,227,000 and $0.30,
respectively, for the second quarter of fiscal year 2000 decreased 18% and 19%,
respectively, from the prior year levels of $14,935,000 and $0.37. Fiscal 2000
year-to-date net income and Class B diluted earnings per share of $23,786,000
and $0.59, respectively, decreased 13% and 12%, respectively, from the prior
year levels of $27,498,000 and $0.67. Fiscal year 1999 second quarter and
six-month net income results include a $1,337,000 after tax gain ($0.03 per
diluted share) on the sale of a stock investment.
LIQUIDITY AND CAPITAL RESOURCES
The Company's aggregate of cash, cash equivalents, and short-term investments
decreased from $132 million at June 30, 1999 to $110 million at December 31,
1999. Working capital at December 31, 1999 was $217 million with a current
ratio of 2.3, compared to working capital of $218 million and a current ratio of
2.3 at June 30, 1999.
Operating activities generated $15 million of cash flow in the first six months
of fiscal year 2000 compared to $24 million in 1999. The Company reinvested $28
million into capital investments for the future, including production equipment,
a new veneer mill and veneer face operation, and office facilities. Financing
cash flow activities include $13 million in dividend payments.
To meet short-term capital requirements the Company maintains a $100 million
revolving credit facility to be used for acquisitions and general corporate
purposes. The agreement allows for both issuance of letters of credit and cash
borrowings. At December 31, 1999, $10 million of short-term cash borrowings
were outstanding under the revolving credit facility.
The Company anticipates maintaining a strong liquidity position for the 2000
fiscal year and believes its available funds on hand, unused credit line
available under the revolving credit facility and cash generated from operations
will be sufficient for working capital needs and to fund investments in the
Company's future. 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 a downturn in the economy, loss
of key customers or suppliers, availability or increased costs of raw materials,
or a natural disaster or similar unforeseen event.
YEAR 2000 READINESS DISCLOSURE
The Year 2000 issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Any of the Company's
programs that have time-sensitive software could have recognized a date using
"00" as the year 1900 rather than the year 2000, which could have resulted in a
major system failure or miscalculations.
Prior to the turn of the century, the Company implemented a plan to alleviate
any potential problems which may have been caused by the Year 2000 which
included inventory assessment, remediation and testing. Currently, the Company
has not experienced any major interruptions or malfunctions in its operations
related to the Year 2000 issue and does not anticipate any. In addition, the
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Company has currently not experienced any interruptions caused by a lack of Year
2000 readiness by any of its key suppliers, distributors, customers, public
infrastructure suppliers and other vendors. While a major hurdle has passed
with the turn of the century, the Company continues to monitor its systems for
potential problems that may still occur, particularly related to the leap year
date of February 29, 2000, and continues to keep in contact with its mission
critical suppliers on any potential problems that may arise. The Company can
provide no assurance that the systems of any third party on which the Company's
systems and operations rely will continue operating without major interruptions
and which will not have a material adverse effect on the Company. This
information is subject to the same risks and uncertainties outlined in the
Company's Form 10-K filing for its fiscal year ended June 30, 1999.
While the Year 2000 issue has been given the highest priority among the IT
group, any deferrals of other IT projects by the Company have not had a material
effect on its financial condition or results of operations.
The total gross cost of Year 2000 compliance is estimated at approximately $8.5
million, of which approximately 95% had been incurred as of December 31, 1999.
The remaining 5% of the costs will be incurred primarily in the January-March
2000 timeframe, as the Company fixes any minor problems that occurred with the
roll over of the Year 2000 and monitors the leap year date. Existing
information technology resources were redeployed, which 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 were capitalized or in certain situations leased,
with the remaining costs being expensed as incurred.
Contingency plans are in place in the unlikely event the Company would
experience problems in the future. The contingency plans include such items as
sourcing alternatives for single source suppliers and business continuity plans.
This Year 2000 disclosure contains 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 unexpected
hidden problems relating to the Year 2000 that may not have surfaced to this
point or delays or interruptions caused by the leap year date of February 29,
2000.
ACCOUNTING STANDARDS
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 periodically engages in limited forward purchases of
foreign currency 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 2001.
________________________________________________________________________________
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, 1999.
- 12 -
<PAGE>
Item 3 - Quantitative and Qualitative Disclosures About Market Risk
As of December 31, 1999, the Company had an investment portfolio of fixed
income securities, excluding those classified as cash and cash equivalents, of
$108 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. 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.
A hypothetical 100 basis point increase in market interest rates from levels at
December 31, 1999 would cause the fair value of these short-term investments to
decline by an immaterial amount.
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 subsidiaries' 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 4 (c) - Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting of Share Owners was held on October 19, 1999.
The Board of Directors was elected in its entirety, based on the following
election results:
<TABLE>
<CAPTION>
Nominees as Directors by
Holders of Class A Common Stock Votes For* Votes Withheld
<S> <C> <C>
Thomas L. Habig 13,614,158 5,884
Douglas A. Habig 13,614,158 5,884
James C. Thyen 13,614,158 5,884
John B. Habig 13,614,158 5,884
Ronald J. Thyen 13,613,134 6,908
Christine M. Vujovich 13,614,158 5,884
Brian K. Habig 13,614,158 5,884
John T. Thyen 13,614,158 5,884
Gary P. Critser 13,614,158 5,884
Alan B. Graf, Jr. 13,614,158 5,884
Polly B. Kawalek 13,614,158 5,884
* Votes for nominees as Directors by holders of Class A Common Stock
represented 95% of the total 14,326,377 Class A shares outstanding
and eligible to vote.
<CAPTION>
Nominee as Director by
Holders of Class B Common Stock Votes For* Votes Withheld
<S> <C> <C>
Dr. Jack R. Wentworth 22,141,526 299,912
* Votes for nominee as Director by holders of Class B Common Stock
represented 85% of the total 26,047,151 Class B shares outstanding
and eligible to vote.
</TABLE>
- 14 -
<PAGE>
<PAGE>
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 October 20, 1999, was filed pursuant to Item 5
(Other Events) which contained the Company's news releases dated
October 19, 1999, announcing the agreement to acquire Jackson of
Danville and the election of Nominees to the Board of Directors.
Form 8-K dated November 3, 1999, was filed pursuant to Item 5
(Other Events) which contained the Company's news release dated
November 2, 1999, announcing the completion of the purchase of Jackson
of Danville.
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: February 7, 2000
- 15 -
<PAGE>
<PAGE>
<TABLE>
Kimball International, Inc
Exhibit Index
<S> <C>
Exhibit No. Description
11 Computation of Earnings Per Share
27 Financial Data Schedule
</TABLE>
- 16 -
<PAGE>
<TABLE>
KIMBALL INTERNATIONAL, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
THREE MONTHS ENDED DECEMBER 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 12/31/1999 . . . $ 12,227
Distributed earnings:
Class A dividends declared . . . . . . . . . (2,216) $ .155
Class B dividends declared . . . . . . . . . (4,186) $ .160
Undistributed basic earnings . . . . . . . . . $ 5,825 40,377 $ .144 $ .144
Basic Earnings Per Share . . . . . . . . . . . $ .299 $ .304
Basic Earnings Per Share (rounded) . . . . . . $ .30 $ .30
Dilutive effect of stock options . . . . . . . (20) 122
Undistributed diluted earnings . . . . . . . . $ 5,805 40,499 $ .143 $ .143
Diluted Earnings Per Share . . . . . . . . . . $ .298 $ .303
Diluted Earnings Per Share (rounded) . . . . . $ .30 $ .30
1,507,000 of the 2,145,000 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 DECEMBER 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 12/31/1998. . . $14,935
Distributed earnings:
Class A dividends declared . . . . . . . . . (2,220) $ .155
Class B dividends declared . . . . . . . . . (4,221) $ .160
Undistributed basic earnings . . . . . . . . . $ 8,494 40,698 $ .209 $ .209
Basic Earnings Per Share . . . . . . . . . . . $ .364 $ .369
Basic Earnings Per Share (rounded) . . . . . . $ .36 $ .37
Dilutive effect of stock options . . . . . . . (44) 273
Undistributed diluted earnings . . . . . . . . $ 8,450 40,971 $ .206 $ .206
Diluted Earnings Per Share . . . . . . . . . . $ .361 $ .366
Diluted Earnings Per Share (rounded) . . . . . $ .36 $ .37
568,000 of the 2,030,000 average outstanding stock options were antidilutive, and were excluded from the
dilutive computation for this period.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
KIMBALL INTERNATIONAL, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
SIX MONTHS ENDED DECEMBER 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, six months ended 12/31/1999. . . . $23,786
Distributed earnings:
Class A dividends declared . . . . . . . . . (4,435) $ .310
Class B dividends declared . . . . . . . . . (8,357) $ .320
Undistributed basic earnings . . . . . . . . . $10,994 40,375 $ .272 $ .272
Basic Earnings Per Share . . . . . . . . . . . $ .582 $ .592
Basic Earnings Per Share (rounded) . . . . . . $ .58 $ .59
Dilutive effect of stock options . . . . . . . (55) 173
Undistributed diluted earnings . . . . . . . . $10,939 40,548 $ .270 $ .270
Diluted Earnings Per Share . . . . . . . . . . $ .580 $ .590
Diluted Earnings Per Share (rounded) . . . . . $ .58 $ .59
1,355,000 of the 2,052,000 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
SIX MONTHS ENDED DECEMBER 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, six months ended 12/31/1998. . . . $27,498
Distributed earnings:
Class A dividends declared . . . . . . . . . (4,449) $ .310
Class B dividends declared . . . . . . . . . (8,433) $ .320
Undistributed basic earnings . . . . . . . . . $14,616 40,814 $ .358 $ .358
Basic Earnings Per Share . . . . . . . . . . . $ .668 $ .678
Basic Earnings Per Share (rounded) . . . . . . $ .67 $ .68
Dilutive effect of stock options . . . . . . . (83) 259
Undistributed diluted earnings . . . . . . . . $14,533 41,073 $ .354 $ .354
Diluted Earnings Per Share . . . . . . . . . . $ .664 $ .674
Diluted Earnings Per Share (rounded) . . . . . $ .66 $ .67
570,000 of the 1,903,000 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 six month summary financial information extracted from
Kimball International, Inc., and subsidiaries 2000 second 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> 6-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-END> DEC-31-1999
<CASH> 2,286
<SECURITIES> 107,693
<RECEIVABLES> 148,231
<ALLOWANCES> 4,416
<INVENTORY> 109,941
<CURRENT-ASSETS> 389,031
<PP&E> 512,002
<DEPRECIATION> 281,158
<TOTAL-ASSETS> 677,506
<CURRENT-LIABILITIES> 172,520
<BONDS> 0
0
0
<COMMON> 2,151
<OTHER-SE> 474,154
<TOTAL-LIABILITY-AND-EQUITY> 677,506
<SALES> 572,677
<TOTAL-REVENUES> 572,677
<CGS> 413,434
<TOTAL-COSTS> 413,434
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 689
<INTEREST-EXPENSE> 237
<INCOME-PRETAX> 35,491
<INCOME-TAX> 11,705
<INCOME-CONTINUING> 23,786
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 23,786
<EPS-BASIC> .59
<EPS-DILUTED> .59
</TABLE>
