<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549-1004
(mark one) FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended June 30, 2000
or
[ ] 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 Number)
1600 Royal Street, Jasper, Indiana 47549-1001
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (812) 482-1600
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Name of each exchange
Title of each class on which registered
Class A Common Stock, par value $.05 per share None
Class B Common Stock, par value $.05 per share NASDAQ
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The number of shares outstanding of the Registrant's common stock as of
August 31, 2000 were:
Class A Common Stock - 14,162,346 shares
Class B Common Stock - 25,125,043 shares
Class A Common Stock is not publicly traded and, therefore, no market value is
available. The aggregate market value of the Class B Common Stock held by
non-affiliates, as of August 31, 2000, was $353.2 million, based upon an
estimate that 85.7% of Class B Common Stock is held by non-affiliates.
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Portions of the Proxy Statement for the Annual Meeting of Share Owners to be
held on October 17, 2000, are incorporated by reference into Part III.
The exhibit index is located on page 54.
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<TABLE>
<CAPTION>
TABLE OF CONTENTS
KIMBALL INTERNATIONAL, INC.
FORM 10-K YEAR ENDED JUNE 30, 2000
Pages
<S> <C> <C>
PART I.
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . 5-12
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . 13-14
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . 14
Item 4. Submission of Matters to Vote of Security Holders . . . 15
PART II.
Item 5. Market for the Registrant's Common Stock and
Related Share Owner Matters . . . . . . . . . . . . . . 16
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . 17
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . 18-24
Item 7a. Quantitative and Qualitative Disclosures About
Market Risk. . . . . . . . . . . . . . . . . . . . . . . 25
Item 8. Financial Statements and Supplementary Data . . . . . . 26-48
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosures . . . . . . . . . . 49
PART III.
Item 10. Directors and Executive Officers of the Registrant . . . 49
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . 49
Item 12. Security Ownership of Certain Beneficial
Owners and Management . . . . . . . . . . . . . . . . . 49
Item 13. Certain Relationships and Related Transactions . . . . . 49
PART IV.
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K . . . . . . . . . . . . . . . . . . 50
Signatures . . . . . . . . . . . . . . . . . . . . . . . 51-52
</TABLE>
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Forward-Looking Statements
This document may contain certain forward-looking statements. These are
statements made by management, using their best business judgement based upon
facts known at the time of the statements or reasonable estimates, about future
results, events and the like. They should not be construed as a guarantee that
such results or events will, in fact, occur or be realized. The statements may
be identified by specific reference or by the use of words such as
"believes", "anticipates", "expects", "intends", "projects" and similar
expressions.
Such statements involve risk, uncertainty, and their ultimate validity is
affected by a number of factors, both specific and general. Specific risk
factors may be noted along with the statement itself. However, other more
general risks and uncertainties which are inherent in any forward-looking
statement include, but are not necessarily limited to changes in:
- Demand for the Company's product
- Relationships with strategic customers, suppliers and product distributors
- Competition in each of the Company's product lines
- Domestic and International business legislation and regulation
- Technology
- General economic conditions
- Cost and/or assumptions underlying strategic decisions
- Operational capabilities due to natural disasters or other similar unforeseen
events
This listing of factors is NOT intended to include ALL potential risk factors.
The Company makes no commitment to update these factors or to revise any
forward-looking statements for events or circumstances occurring after the
statement is issued.
At any time when the Company makes forward-looking statements, it desires to
take advantage of the "safe harbor" which is afforded such statements under the
Private Securities Litigation Reform Act of 1995 when they are accompanied by
meaningful cautionary statements identifying important factors that could cause
actual results to differ materially from those in the forward-looking
statements.
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PART I
Item 1. - Business
As used herein, the term "Company" refers to Kimball International, Inc.,
the Registrant, and its subsidiaries unless the context indicates otherwise.
The Company was incorporated in Indiana in 1939, and present management
assumed control in 1950. The corporate headquarters is located at 1600 Royal
Street, Jasper, Indiana.
The Company provides a vast array of products from its two business
segments: the Furniture and Cabinets Segment and the Electronic Contract
Assemblies 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
manufacturer 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, telecommunications, computer, and
medical industries.
The Company utilizes a substantial degree of vertical integration. It does
not consider seasonal fluctuations to be significant. Production is carried on
in facilities located in the United States, Mexico, Austria, France and
Thailand. In the United States, the Company has facilities and showrooms in 16
states.
<TABLE>
Sales by segment, after elimination of intersegment sales, for each of the
three years in the period ended June 30, 2000 are as follows:
<CAPTION>
SALES BY SEGMENT (dollars in thousands)
2000 1999 1998
<S> <C> <C> <C>
Furniture and Cabinets $ 833,801 $ 771,528 $ 706,679
Electronic Contract Assemblies 367,063 335,395 325,602
Unallocated Corporate 81 44 36
--------- --------- ---------
Total $1,200,945 $1,106,967 $1,032,317
</TABLE>
Financial information by segment and geographic area for each of the three
years in the period ended June 30, 2000 is included in Note 14, Segment and
Geographic Area Information, of the Notes to Consolidated Financial Statements,
which can be found in Item 8, and is incorporated herein by reference.
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Segments
FURNITURE AND CABINETS
Historical Overview
Since 1950, the Company has produced wood furniture and cabinets, which
continue to be a significant part of the business. Included in this segment are
sales of office furniture that has been manufactured and sold under the Kimball
(registered trademark) trade name since 1970. In 1992, the Company expanded its
product offering with the acquisition of Harpers, a metal office furniture
manufacturer. Harpers has marketed metal office furniture under the Harpers
(registered trademark) trade name since 1982. In fiscal year 1999, the Company
further expanded its office furniture product offering with the acquisition of
Transwall, a manufacturer of stackable panel systems and floor-to-ceiling
products. Kimball and Harpers office furniture systems have broad market
application, while Transwall office furniture systems are focused more toward
technical applications where wiring capabilities need to be flexible. The
Kimball and National (registered trademark) casegoods and seating lines are more
focused to the wood segment of the office furniture industry. The Cetra
(registered trademark) and Footprint (registered trademark) lines of Kimball
office furniture systems provide flexible configurations and help architects and
designers optimize space planning by utilizing Traxx (registered trademark),
which increases space efficiency and eliminates the need for a secondary support
structure by using existing walls. The Reasons line of Kimball office furniture
systems provides interchangeable panels that stack vertically and allow the
flexibility of stacking from floor to ceiling. The Interworks (registered
trademark) line of Harpers office furniture systems is designed to integrate
easily with existing Kimball systems products and provide more flexibility and
functionality in office design. The Corporate Wall line of Transwall office
furniture combines the privacy and security of a full height partition with the
versatility of an open plan system.
The Company has expanded its sales and manufacture of furniture over the
years to include residential furniture, lodging and healthcare furniture, and in
fiscal year 1999, store fixtures through the acquisition of Southeast Millwork.
The Company expanded its offering of fully upholstered and wood framed seating
products to the lodging and healthcare market with the purchase of Jackson of
Danville in fiscal year 2000.
Other products within this segment are original equipment manufacturer (OEM)
furniture and cabinets, including store fixtures, television cabinets and
stands, audio speaker systems, residential furniture, and other wood related
products manufactured on a contract basis and sold to leading manufacturers in
the home entertainment and home furniture industries.
Also included in the Furniture and Cabinets Segment are sales of furniture
component products including unprocessed lumber, dimension lumber, veneer, wood
panels and cabinet doors to both internal and external customers. The Company
also manufactures various miscellaneous products including plywood, polyurethane
and polyester molded products, stamped metal components and welded assemblies
and sells them to both internal and external customers.
Through a predecessor acquired in 1966, L. Bosendorfer of Vienna, Austria,
the Company has been engaged in acoustical piano manufacturing and sales since
1828. The prestigious Bosendorfer line of high-end pianos is sold and
recognized worldwide. The Company was also engaged in the manufacture and
sales of a domestically produced piano product line since 1857 through a
predecessor, W. W. Kimball Co., acquired in 1959, until cessation of this
product line in 1996.
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Services of the Company's trucking fleet are also sold to unaffiliated
customers.
Locations
Office, home, lodging and healthcare furniture, store fixtures and OEM
furniture and cabinets and related products, which make up the largest part of
this segment, are produced at twenty-five plants, sixteen located in Indiana,
three in Kentucky, and one each in Idaho, Pennsylvania, North Carolina, Florida,
Mississippi, and Mexico. Nine of the twenty-five plants presently producing
furniture and cabinets could interchange production between these two basic
products, if needed. In fiscal year 1999, the Company purchased a manufacturing
facility in Mexico to produce television cabinets and to provide additional
capacity for other manufacturing operations in the future.
The Company also owns and operates three sawmills, three lumber yards, two
dimension lumber plants, two plants which manufacture contract wood products and
a newly constructed technologically advanced veneer mill which began operations
in June 2000. The operations of the Company's former sliced veneer plant have
been relocated to the newly constructed veneer mill and the former plant is
currently idle. These facilities are located in Indiana, Tennessee and
Kentucky.
Acoustical pianos are produced at a facility located in Austria.
The Company sold its period reproduction furniture production facility
located in Alabama, and its carbide cutting tools operation located in Indiana
during fiscal year 1999.
A facility in Jasper, Indiana houses an Education Center for dealer and
employee training, the Product Design and Research Center, and a Corporate
showroom for product display.
In the United States, showrooms are maintained in eleven cities for office
furniture and two cities for home furniture. In addition, office furniture
is maintained in showrooms in London, England and Toronto, Canada. In certain
showrooms other Company products are also on display. A piano showroom and
service facility is located in Vienna, Austria.
Marketing Channels
Kimball, National, and Harpers brands of office furniture are marketed
through Company salespersons to office furniture dealers, wholesalers, rental
companies and catalog houses throughout North America and England. Transwall
brands of office furniture are marketed through Company salespersons and
independent sales representatives to office furniture dealers throughout North
America. Home Furniture is generally marketed through independent sales
representatives to independent furniture dealers throughout the United States.
Lodging and healthcare furniture is marketed through independent manufacturers'
representatives. Store fixtures are generally sold directly to retail
businesses. Cabinets and contract furniture are generally marketed through
Company salespersons. The Company's marketing strategy facilitates the sale of
related office furniture, residential furniture and upholstery product within
the lodging and healthcare channels. Furniture component products manufactured
by the Company are used internally as well as sold to others. Products sold to
others are marketed principally to furniture manufacturers, primarily through
Company personnel. Bosendorfer (registered trademark) pianos are marketed
through Company salespersons and agents to independent dealers.
Major Competitive Factors
The major competitive factors in the office furniture industry are price
in relation to quality and appearance, the utility of the product, customer
lead time, and ability to respond to requests for special and non-standard
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products. Certain market segments are more price sensitive than others, but
all segments expect on-time, damage-free delivery. The Company maintains
sufficient finished goods inventories to be able to offer prompt shipment of
certain lines of Kimball, National and Harpers office furniture to domestic
dealers, thereby permitting the dealers to maintain smaller inventories. Many
products are shipped through the Company's delivery system, which the Company
believes offers it the ability to reduce damage to shipments, enhance scheduling
flexibility, and improve the capability for on-time deliveries, which are all
key competitive factors in the office furniture industry.
The lodging and healthcare furniture markets compete on quality,
reliability, customer lead time and price. The Company offers its own line of
lodging and healthcare furniture as well as producing contract lodging and
healthcare furniture to customers' specifications.
The major competitive factors in the store fixtures industry are quality,
customer lead time, price, service and installation. Store fixtures are
produced to customer specifications from specific orders.
The major competitive factors in the home furniture, cabinet and OEM product
markets are quality, performance history, price, on-time delivery and customer
lead time. Contract home furniture, television and audio speaker cabinets, and
television stands are produced to customer specifications from specific orders
and finished goods inventories are generally small, consisting primarily of
goods awaiting shipment to customers. The Company's own lines of home furniture
are offered for sale on an immediate ship basis.
Competitive factors in the furniture component products market are price,
quality, availability, on-time delivery and customer lead time.
The major competitive factors in the high-end acoustical piano industry are
quality, acoustical tone and appearance.
Competitors
There are numerous manufacturers of office, home, lodging, and healthcare
furniture competing within the marketplace. The Company believes, however, that
there are a limited number of relatively large producers of wood office and
lodging furniture, of which the Company believes that it is one of the larger in
net sales. In many instances wood office furniture competes in the market with
metal office furniture. Based on available industry statistics, metal office
furniture has a larger share of the total office furniture market. The Company
has positioned Harpers and Transwall as vehicles to strengthen its market share
in the non-wood segment of the industry.
There are many manufacturers of both home furniture and store fixtures and
the Company does not have a significant share of either of these markets.
The Company believes that it is one of the largest independent domestic
manufacturers of television and audio speaker cabinets, but certain
manufacturers of televisions and audio speakers, including some customers of the
Company, produce cabinets for their own use.
For furniture and cabinet components, the Company competes with many
integrated forest and specialty hardwood product companies and does not have a
significant share of the market for such products.
The high-end acoustical piano industry is characterized by a limited number
of competitors, including one major competitor.
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Raw Material Availability
Many components used in the production of furniture and cabinets are
manufactured internally within the segment, including processed wood parts,
stamped metal components and certain polyurethane and polyester molded plastics,
all of which are generally readily available. Other raw materials used in the
production of wood furniture and cabinets are generally readily available.
Certain metal components, such as precision slide mechanisms, used in various
wood office furniture products are purchased in a pre-fabricated stage with
additional fabrication and finishing performed by the Company. Raw materials
used in the manufacture of metal office furniture, primarily rolled steel and
aluminum, are readily available in the world market. The Company purchases
certain component parts for home furniture from Asia. Certain fabricated
seating components and wood frame assemblies are currently sourced from Europe
and Asia and are readily available. Raw materials used in the manufacture of
store fixtures are readily available. Certain pre-fabricated components used in
the company's piano line are available from a limited number of sources,
although no interruptions in supplies have been experienced.
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ELECTRONIC CONTRACT ASSEMBLIES
The Company entered the electronic contract assemblies market in 1985 with
knowledge acquired from the production of electronic keyboards for musical
instruments, which were first produced in 1963. Electronics and
electro-mechanical products (electronic assemblies) are sold on a contract
basis and produced to customers' specifications. The Company expanded its
capabilities to include semiconductor DIE processing, design, testing and
packaging through an acquisition in 1996.
The Company's Electronic Contract Assemblies Segment consists of six
manufacturing facilities with two located in Indiana and one each in California,
Mexico, France and a newly opened facility in Laem Chabang, Thailand. One
additional facility located in Texas is utilized to receive inbound materials
and distribute finished goods for the Mexican facility. The fully automated
Thailand facility offers board level assembly as well as box-build capability
of products for sale to outside customers in the global market. One facility
in Indiana, formerly utilized for warehousing space, has recently been
converted to a high-flexibility production facility. Both Indiana facilities
manufacture electronic assemblies and assemble products for sale to outside
customers. The facility located in Mexico provides services similar to those
provided from the Indiana facilities. The California facility assembles product
and also provides semiconductor DIE processing, design, testing and packaging
services. In June 2000, the Company broke ground on a new manufacturing
facility located in Valencia, California to replace the current leased
facility in Burbank, California. The new facility will increase capacity and
expand manufacturing capabilities. The facility in France provides DIE
processing and assembly services for the European market. Engineering design
and support services are provided to the manufacturing facilities within this
segment and to outside customers through the Kimball Electronics Design Services
company, which is based in Indiana.
Manufacturing and design services are marketed primarily by Company
salespersons. Contract electronic assemblies are manufactured based on specific
orders, generally resulting in a small amount of finished goods consisting
primarily of goods awaiting shipment to specific customers. Raw materials
are normally acquired for specific customer orders and may or may not be
interchangeable among products. Inherent risks associated with rapid
technological changes within this contract industry are mitigated by
procuring raw materials, for the most part, based on firm orders.
Key competitive factors in the electronic contract assemblies market are
competitive pricing on a global basis, quality, engineering design services,
production flexibility, reliability of on-time delivery, customer lead time,
test capability, and global presence. Growth in the electronic contract
assemblies industry is created through the proliferation of electronic
components in today's advanced products along with the continuing trend of
OEM's in the electronic industry to subcontract the assembly process to
companies with a core competence in this area. The electronics industry is very
competitive as numerous manufacturers of contract electronic assemblies compete
for business from existing and potential customers. The Company does not have a
significant share of the market for such products.
Raw materials utilized in the manufacture of contract electronic products
are generally readily available from both domestic and foreign sources,
although from time to time the industry experiences allocations of certain
components due to supply and demand forces, combined with rapid product life
cycles of certain components.
While the total electronic assemblies market has broad applications, the
Company's customers are concentrated in the transportation (automobiles and
light trucks), industrial, telecommunications, computer, and medical industries.
Included in this segment are sales of electronic assemblies to one customer,
TRW Inc., which accounted for approximately 17% of consolidated net sales in
fiscal year 2000, compared to 16% in fiscal years 1999 and 1998. The success of
this segment is contingent on the success of our customers' products.
This segment's investment capital carries a higher degree of risk than the
Company's other segment due to rapid technological changes, component
availability, the contract nature of this industry and the importance of
sales to one customer.
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OTHER INFORMATION
BACKLOG
<TABLE>
At June 30, 2000, the aggregate sales price of production pursuant
to worldwide open orders, which may be canceled by the customer, were
$324 million as compared to $272 million at June 30, 1999.
BACKLOG BY SEGMENT
<CAPTION>
(dollars in millions)
June 30, 2000 June 30, 1999
<S> <C> <C>
Furniture and Cabinets $140 $113
Electronic Contract Assemblies 184 159
--- ---
Total Backlog $324 $272
Open orders as of June 30, 2000 are expected to be filled within the next
fiscal year. Open orders generally may not be indicative of future sales
trends.
</TABLE>
<TABLE>
RESEARCH, PATENTS, AND TRADEMARKS
Research and development activities include the development of manufacturing
processes, major process improvements, new product development, information
technology initiatives and electronic, wood and plastic technologies.
<CAPTION>
(dollars in millions)
Fiscal Years Ended June 30,
2000 1999 1998
<S> <C> <C> <C>
Research and Development Costs $13.5 $11.6 $13.1
</TABLE>
The Company owns the Kimball (registered trademark) trademark, which it
believes is significant to its office, electronic, lodging, healthcare and
home furniture businesses, and owns the following trademarks which it believes
are significant to its furniture business only: National (registered
trademark), Cetra (registered trademark), Footprint (registered trademark),
Artec (registered trademark), Traxx (registered trademark), Harpers
(registered trademark) and Interworks (registered trademark); and to the piano
business only: Bosendorfer (registered trademark). The Company also owns
certain patents and other trademarks and has certain other patent applications
pending, which in the Company's opinion are not significant to its business.
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ENVIRONMENT AND ENERGY MATTERS
The Company's operations are subject to various foreign, federal, state and
local laws and regulations with respect to environmental matters. The Company
believes that it is in substantial compliance with present laws and regulations
and that there are no material liabilities related to such items.
The Company is dedicated to excellence, leadership and stewardship in
matters of protecting the environment and communities in which the Company has
operations. The Company believes that continued compliance with foreign,
federal, state and local laws and regulations which have been enacted relating
to the protection of the environment will not have a material effect on its
capital expenditures, earnings or competitive position. Management believes
capital expenditures for environmental control equipment during the two fiscal
years ending June 30, 2002, will not represent a material portion of total
capital expenditures during those years.
The Company's manufacturing operations require significant amounts of
energy, including natural gas and oil. Federal and state statutes and
regulations control the allocation of fuels available to the Company, but to
date the Company has experienced no interruption of production due to such
regulations. In its wood processing plants, significant energy requirements
are satisfied internally by the use of the Company's own wood waste products.
<TABLE>
EMPLOYEES
<CAPTION>
June 30, 2000 June 30, 1999
<S> <C> <C>
United States 8,261 7,765
Foreign Countries 2,222 2,138
------ -----
Total Full Time Employees at June 30 10,483 9,903
</TABLE>
The Company has no collective bargaining agreements with respect to its
domestic employees. All of the Company's foreign operations are subject to
collective bargaining arrangements. The Company believes that its employee
relations are good.
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Item 2. - Properties
<TABLE>
The location and number of the Company's major manufacturing,
warehousing, and service facilities, including the executive and
administrative offices, as of June 30, 2000, are as follows:
<CAPTION>
-------------- Number of Facilities -------------
Furniture Electronic
and Contract Unallocated
Cabinets Assemblies Corporate Total
<S> <C> <C> <C> <C>
Indiana 31 2 7 40
Kentucky 5 5
Tennessee 3 3
California 1 1 2
Pennsylvania 1 1
North Carolina 1 1
Florida 1 1
Idaho 1 1
Mississippi 1 1
Texas 1 1
Austria 2 2
France 1 1
Mexico 2 1 3
Thailand 1 1
-- -- -- --
Total Facilities 49 7 7 63
These facilities occupy approximately 8,454,000 square feet in aggregate,
of which approximately 7,840,000 square feet are owned and 614,000 square
feet are leased. Square footage of these facilities are summarized as follows:
<CAPTION>
------------- Approximate Square Footage -------------
Furniture Electronic
and Contract Unallocated
Cabinets Assemblies Corporate Total
<S> <C> <C> <C> <C>
Owned 7,045,000 470,000 325,000 7,840,000
Leased 481,000 106,000 27,000 614,000
--------- ------- ------- ---------
Total 7,526,000 576,000 352,000 8,454,000
Including certain leased furniture showroom areas excluded from the above
listing, total facilities approximate 8.6 million square feet. (See Note 5 -
Lease Commitments of the Notes to Consolidated Financial Statements in Item 8,
for additional information concerning leases.)
</TABLE>
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Included in Unallocated Corporate are executive, national sales and
administrative offices, an energy center for the Kimball Industrial Park
consisting of 3 trifuel boilers, and a child development facility for employees'
children.
Properties are generally utilized at normal capacity levels on a single
shift basis, with certain facilities operating a second shift, while other
facilities utilize a reduced second or third shift to meet increased demand
levels. At times, certain facilities were not utilized at normal capacity
levels during the fiscal year, because of declines in sales. The energy
center is not operating at full capacity.
Significant loss of income resulting from a facility catastrophe would be
partially offset by business interruption insurance coverage.
Operating leases totaling 614,000 square feet expire from fiscal year
2001-2008, with all leases subject to renewal options. In addition to the above
production, warehouse and office properties, the Company has 14 leased showroom
facilities totaling 116,000 square feet, in 9 states in the United States, one
location in London, England, one location in Vienna, Austria, and one location
in Toronto, Canada.
The Company owns approximately 27,778 acres of land which includes land
where various Company facilities reside, including approximately 26,826 acres
generally for hardwood timber reserves, approximately 183 acres of land in the
Kimball Industrial Park, Jasper, Indiana (a site for certain production and
other facilities, and for possible future expansions), and approximately 60
acres in Post Falls, Idaho, where the Harpers plant is located. The Company
leases approximately six acres of land in Laem Chabang, Thailand for possible
future expansion of production facilities with the lease expiring in 2030.
Item 3. - Legal Proceedings
The Registrant and its subsidiaries are not parties to any material
pending legal proceedings, other than ordinary routine litigation incidental
to the business.
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Item 4. - Submission of Matters to Vote of Security Holders
None to report in the 4th quarter of fiscal year 2000
<TABLE>
Executive Officers of the Registrant
The executive officers of the Registrant as of August 31, 2000 are as
follows: (Age as of August 31, 2000)
<CAPTION>
Office and Officer
Name Age Area of Responsibility Since
<S> <C> <C> <C>
Douglas A. Habig 53 Chairman of the Board of Directors, 1975
and Chief Executive Officer
Thomas L. Habig 72 Vice Chairman of the Board of Directors 1955
James C. Thyen 56 President and Director 1974
Ronald J. Thyen 63 Senior Executive Vice President, 1966
Operations Officer, Furniture and
Cabinets Segment, and Director
John T. Thyen 62 Senior Executive Vice President, 1978
Strategic Marketing, and Director
Gary P. Critser 63 Senior Executive Vice President, 1967
Corporate Secretary, Treasurer,
and Director
Robert F. Schneider 39 Executive Vice President, Chief Financial 1992
Officer, Assistant Treasurer
Donald D. Charron 37 Executive Vice President, and President, 1999
Kimball Electronics, Electronics Segment
Executive officers are elected annually by the Board of Directors.
Thomas L. Habig and Douglas A. Habig are brothers. James C. Thyen, Ronald J.
Thyen and John T. Thyen are brothers. All of the executive officers unless
otherwise noted have been employed by the Company for more than the past five
years in the capacity shown or some other executive capacity. Robert F.
Schneider was appointed to his current position in July 1997, having
previously served the company as Vice President and Director of Accounting.
Donald D. Charron was employed with Rockwell Automation/Allen Bradley from
December 1992 to April 1999, as Operations Manager, Director of Operations,
and General Business Manager Electronic Operator Interface.
</TABLE>
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PART II
Item 5. - Market for the Registrant's Common Stock and Related Share Owner
Matters
<TABLE>
Market Prices: The Company's Class B Common Stock trades on the Nasdaq
Stock Market under the symbol: KBALB. High and low price ranges by quarter
for the last two fiscal years as quoted by the National Association of
Security Dealers (NASDAQ) are as follows:
<CAPTION>
------- 2000 ------ ------- 1999 ------
High Low High Low
<S> <C> <C> <C> <C>
First Quarter. . . . . . . $21.0000 $16.7500 $20.3750 $14.8750
Second Quarter . . . . . . $19.9375 $15.1250 $21.5000 $14.9375
Third Quarter. . . . . . . $16.7500 $10.7500 $20.0625 $14.7500
Fourth Quarter . . . . . . $17.5000 $11.0000 $18.8125 $14.5625
There is no active trading market for the Company's Class A Common Stock.
</TABLE>
<TABLE>
Dividends: There are no restrictions on the payment of dividends except
charter provisions that require on a fiscal year basis, shares of Class B
Common Stock are entitled to an additional $0.02 per share dividend more
than the dividends paid on Class A Common Stock, provided that dividends
are paid on the Company's Class A Common Stock. During fiscal year 2000
dividends declared were $25.4 million or $.62 per share on Class A Common
Stock and $.64 per share on Class B Common Stock. Dividends by quarter
for 2000 compared to 1999 are as follows:
<CAPTION>
------ 2000 ------ ------ 1999 -----
Class A Class B Class A Class B
<S> <C> <C> <C> <C>
First Quarter. . . . . . . $ .155 $ .16 $ .155 $ .16
Second Quarter . . . . . . $ .155 $ .16 $ .155 $ .16
Third Quarter. . . . . . . $ .155 $ .16 $ .155 $ .16
Fourth Quarter . . . . . . $ .155 $ .16 $ .155 $ .16
----- ---- ----- ----
Total Dividends. . . . . . $ .620 $ .64 $ .620 $ .64
</TABLE>
Recent Sales of Unregistered Securities: On November 2, 1999 the Company issued
350,000 shares of unregistered restricted Class B Common Stock to five
individual investors in connection with the acquisition of 100% of the Capital
Stock of Jackson Furniture of Danville. On July 15, 1999 5,925 shares of
unregistered restricted Class B Common Stock were issued to one individual
investor as part of the August 1998 agreement to purchase substantially all of
the assets of Transwall, Inc. The Common Stock in these transactions were
issued in reliance on the private placement exemption under Section 4(2) of the
Securities Act of 1933, as amended.
Share Owners: On July 31, 2000, the Company's Class A Common Stock was
owned by approximately 640 Share Owners of record and the Company's Class
B Common Stock by approximately 2,390 Share Owners of record, of which
approximately 380 also owned Class A Common Stock.
-16-
<PAGE>
<PAGE>
<TABLE>
Item 6. - Selected Financial Data
(dollars in thousands, except per share amounts)
<CAPTION>
------------------ Year Ended June 30, -------------------
2000 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C>
Net Sales $1,200,945 $1,106,967 $1,032,317 $992,049 $923,636
Net Income $ 48,462 $ 59,725 $ 55,027 $ 57,745 $ 45,095
Earnings Per Share
Basic:
Class A $1.19 $1.46 $1.32 $1.39 $1.08
Class B $1.21 $1.48 $1.33 $1.40 $1.08
Diluted:
Class A $1.19 $1.45 $1.31 $1.38 $1.07
Class B $1.21 $1.47 $1.32 $1.38 $1.08
Total Assets $ 723,651 $ 661,386 $ 629,638 $581,583 $538,225
Long Term Debt, Less
Current Maturities $ 2,599 $ 1,730 $ 1,856 $ 2,313 $ 3,016
Cash Dividends Per Share:
Class A $ .62 $ .62 $ .58875 $ .530 $ .470
Class B $ .64 $ .64 $ .60500 $ .535 $ .475
</TABLE>
Fiscal year 1999 results include a $1,337,000 after tax gain ($0.03 per diluted
share) on the sale of a stock investment of which the Company held a minor
interest and a $2,674,000 after tax gain ($0.06 per diluted share) on the
disposition of two non-core operating facilities.
Fiscal year 1998 results include a $1,008,000 after tax gain ($0.02 per diluted
share) on the sale of real estate and a $616,000 after tax gain ($0.01 per
diluted share) on the sale of a stock investment of which the Company held a
minor interest.
Fiscal year 1996 net income was reduced by $1,870,000, or $0.05 per share, for
estimated costs associated with exiting sales and production of the Company's
domestic wholesale piano product line.
- 17 -
<PAGE>
Item 7. - Management's Discussion and Analysis
of Financial Condition and Results of Operations
OVERVIEW
Net sales of $1,200,945,000 reached record levels in fiscal year 2000, topping
the prior year by 8%. Net income and Class B diluted earnings per share were
$48,462,000 and $1.21, respectively, a decrease of 13% and 12%, respectively,
from fiscal year 1999, excluding non-operating gains recorded in fiscal year
1999. Fiscal year 1999 non-operating items include a $1,337,000 after tax gain
($0.03 per diluted share) on the sale of a stock investment of which the Company
held a minor interest and a $2,674,000 after tax gain ($0.06 per diluted share)
on the disposition of two non-core operating facilities within the Furniture and
Cabinets Segment. Including fiscal year 1999 non-operating gains, net income
decreased 19% and Class B diluted earnings per share decreased 18% in fiscal
year 2000 when compared to the year earlier.
RESULTS OF OPERATIONS
2000 DISCUSSION
Net sales for fiscal year 2000 surpassed 1999 net sales on increases by both of
the Company's segments -- the Furniture and Cabinets Segment and the Electronic
Contract Assemblies Segment. Net income for fiscal year 2000 declined from
fiscal year 1999 in both segments.
<TABLE>
Sales and Net Income by Segment
(Amounts in millions)
<CAPTION>
----------- Year Ended June 30 ---------
2000 1999 1998
<S> <C> <C> <C>
Net Sales:
Furniture and Cabinets. . . . . . . . . . . . $833.8 $771.5 $706.7
Electronic Contract Assemblies. . . . . . . . 367.1 335.4 325.6
Net Income:
Furniture and Cabinets. . . . . . . . . . . . $ 27.7 $ 34.6 $ 27.9
Electronic Contract Assemblies. . . . . . . . 14.2 18.2 18.1
</TABLE>
FURNITURE AND CABINETS
Product line offerings included in the Furniture and Cabinets Segment are office
furniture, home furniture, lodging and healthcare furniture, store fixtures,
original equipment manufacturer (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.
In fiscal year 2000, 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 fiscal year 2000 consolidated
operating results.
The Furniture and Cabinets Segment set a new annual net sales record in fiscal
year 2000 with an increase of 8% from the prior year. Sales increased over
fiscal year 1999 for all product lines, except lodging and healthcare, within
this segment.
-18-
<PAGE>
<PAGE>
Increased volumes in the office furniture product line resulted in record sales
in fiscal year 2000. Sales of casegoods, systems, and seating products within
the office furniture line all increased over fiscal year 1999. Office furniture
sales growth, excluding prior year acquisitions, outpaced the 5% growth in
shipments reported by the Business and Institutional Furniture Manufacturer's
Association (BIFMA) for the Company's fiscal year ending June 2000.
Net sales of the lodging and healthcare product line decreased in fiscal year
2000 from the previous year. Sales of both the Company's custom-made products
and standard product offerings declined in fiscal year 2000 when compared to
fiscal year 1999. Product mix continued to shift toward lower margin
custom-made products in fiscal year 2000. Lodging and healthcare sales are
expected to improve beginning with the first quarter of fiscal year 2001 as
evidenced by an increase in open orders as of June 30, 2000 compared with open
orders at June 30, 1999. 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, a downturn in the lodging and healthcare markets, loss of key
customers, availability of raw materials, or a natural disaster or similar
unforeseen event.
Fiscal year 2000 outside net sales of OEM furniture and cabinets, excluding the
acquisition of Jackson of Danville, experienced double-digit growth when
compared to 1999. Increased volume of OEM large-screen projection television
cabinets, including those produced at the Company's Juarez, Mexico facility, was
the largest single contributor to the sales growth.
Outside net sales of furniture components increased in fiscal year 2000
primarily as a result of increased sales of lumber products.
Net income in the Furniture and Cabinets Segment decreased in fiscal year 2000
from fiscal year 1999 despite increased sales. Fiscal year 1999 net income
includes an after tax gain of $2.7 million from the sale of two non-core
operating facilities. Gross profit, as a percent of sales, declined from 1999
primarily due to an increase in material costs, as a percent of sales. Lower
sales margins on the furniture components and lodging and healthcare product
lines contributed to the decline in gross profit in fiscal year 2000 when
compared to fiscal year 1999. Also contributing to the reduced gross
profitability in fiscal year 2000 were start up costs and inefficiencies early
in fiscal year 2000 related to the Company's Juarez, Mexico facility that was
acquired in fiscal year 1999. The Company, however, has seen continued
improvement in gross profitability in each quarter of fiscal year 2000 from the
Juarez facility and is expecting continued improvement in gross profitability
from this facility in fiscal year 2001. 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, material price changes,
unexpected manufacturing inefficiencies, a downturn in the economy or similar
unforeseen event. Selling, general and administrative expenses increased in
dollars in fiscal year 2000 but decreased as a percent of sales partially
resulting from efforts to manage costs. Incentive compensation costs, which are
linked to company profitability, decreased in both dollars and as a percent of
sales also contributing to the lower selling, general and administrative costs,
as a percent of sales.
ELECTRONIC CONTRACT ASSEMBLIES
Net sales for fiscal year 2000 surpassed the prior year by 9% in the Electronic
Contract Assemblies Segment. Sales of electronic transportation products and
medical components increased while sales of computer related products declined
when compared to the prior year. -19-
<PAGE>
In fiscal year 2000, the Company embarked on a number of strategic expansion
opportunities in the Electronic Contract Assemblies Segment. In April 2000, the
Company announced the opening of a new manufacturing facility in the export zone
of Laem Chabang, Thailand. This fully automated facility will serve the global
requirements of its customers and includes future expansion possibilities. In
May 2000, the Company announced the opening of a new high-flexibility
manufacturing facility located in Jasper, Indiana that will allow the
manufacture of high mix/low volume assemblies as well as test capabilities to
meet the needs of its customers. The Company also broke ground for a new
microelectronics facility located in Valencia, California during June 2000. The
new Valencia facility will replace a current facility located in Burbank,
California and will increase capacity and expand manufacturing capabilities.
Net income in fiscal year 2000 decreased from the prior year despite higher
sales. Gross profits were lower in fiscal year 2000, compared to historic
margins that were achieved on more mature product lines, resulting from a
planned diversification of its customer base into a variety of new products as
well as production of the next generation of anti-lock braking components.
Start up costs associated with the new manufacturing facilities in Jasper,
Indiana and Laem Chabang, Thailand also contributed to the lower gross
profitability in fiscal year 2000. Selling, general and administrative expenses
increased in dollars but decreased as a percent of sales in fiscal year 2000
driven by lower incentive compensation which is linked to company profitability.
Included in this segment are sales to one customer, TRW, Inc. which accounted
for 17% and 16% of consolidated net sales in fiscal year 2000 and 1999,
respectively. Sales to this customer represent approximately one half of total
sales in the Electronic Contract Assemblies Segment.
This segment's investment capital carries a higher degree of risk than the
Company's other segment due to rapid technological changes, component
availability, 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, 1.1 percentage points in fiscal year 2000 when compared to
fiscal year 1999. This reduction in selling, general, and administrative costs,
as a percent of sales, is primarily due to lower incentive compensation costs
which are linked to company profitability as well as lower selling expenses and
lower administrative employee compensation costs, as a percent of sales.
Other income decreased from the prior year on lower interest income caused by
lower average investment balances. In addition, fiscal year 1999 results
include a $1,337,000 after tax gain ($0.03 per diluted share) on the sale of a
stock investment of which the Company held a minor interest and a $2,674,000
after tax gain ($0.06 per diluted share) on the disposition of two non-core
facilities.
The effective income tax rate decreased 0.4 percentage point in fiscal year 2000
when compared to fiscal year 1999. Decreases in both state and federal
effective tax rates contributed to the lower overall effective income tax rate.
Fiscal year 2000 net income and Class B diluted earnings per share of
$48,462,000 and $1.21, respectively, decreased 13% and 12%, respectively, from
fiscal year 1999 net income of $55,714,000 and Class B diluted earnings per
share of $1.38, excluding fiscal year 1999 non-operating gains. Including
fiscal year 1999 non-operating gains, net income and Class B diluted earnings
per share declined 19% and 18%, respectively, from prior year levels of
$59,725,000 and $1.47, respectively.
-20-
<PAGE>
<PAGE>
1999 DISCUSSION
Net sales for the 1999 fiscal year surpassed 1998 levels on increases by both of
the Company's segments -- the Furniture and Cabinets Segment and the Electronic
Contract Assemblies Segment. Net income for fiscal year 1999 also increased
over the prior year in both segments.
FURNITURE AND CABINETS
In fiscal year 1999, the Company completed a number of acquisitions included
within the Furniture and Cabinets Segment. In September 1998, the Company
acquired the assets and assumed certain liabilities of Transwall, Inc., a
privately held manufacturer of stackable panel office furniture systems and
floor-to-ceiling products, which increased its already extensive office
furniture product offering. In January 1999, the Company purchased the assets
and assumed certain liabilities of Southeast Millwork, a privately held
manufacturer of store display fixtures. This acquisition provided an entry
point for the Company to pursue the store fixtures markets. These two
acquisitions were accounted for as purchases with results of operations included
in the Company's consolidated results from the date of purchase. In April 1999,
the Company purchased a manufacturing facility located in Juarez, Mexico. The
results of these acquisitions were not material to fiscal year 1999 consolidated
operating results.
The Company also completed the sale of two of its non-core facilities in fiscal
year 1999. In May 1999, the Company sold Kimball Furniture Reproductions, a
furniture manufacturing facility located in Montgomery, Alabama. In June 1999,
the Company sold ToolPro, a carbide cutting tools production operation located
in Jasper, Indiana. Proceeds from the divestitures will be used to help fund
future acquisitions and general corporate purposes to support the Company's
growth strategy. An after tax gain of $2,674,000 was recorded on these two
dispositions.
Fiscal year 1999 net sales increased 9% in the Furniture and Cabinets Segment,
including acquisitions, when compared to the prior year. Sales increased for
all product lines within this segment.
Increased volumes in the office furniture product line resulted in record sales
in fiscal year 1999. Casegoods and systems products within the office furniture
line both increased over fiscal year 1998, while sales of seating products
declined slightly. Excluding acquisitions, office furniture sales growth
outpaced the 2% growth in shipments reported by the Business and Institutional
Furniture Manufacturer's Association (BIFMA) for the twelve-month period ending
May 1999.
The lodging and healthcare product line experienced increased net sales in
fiscal year 1999 over the prior year. Increased sales of the Company's
custom-made products more than offset sales declines of standard product
offerings. The latter part of the fiscal year showed a general slowing in
orders from the lodging industry.
Fiscal year 1999 outside net sales of OEM furniture and cabinets experienced
double-digit growth when compared to 1998. Increased volume of OEM large-screen
projection television cabinets was the major contributor to the sales growth.
Fiscal year 1998 sales of these cabinets were lower due to the relocation of a
large customer and its longer than anticipated start up time.
Outside net sales of furniture components increased in fiscal year 1999
primarily as a result of volume increases in furniture component parts, mainly
kitchen cabinet doors.
-21-
<PAGE>
<PAGE>
Net income in the Furniture and Cabinets Segment increased in 1999 when compared
to 1998. Gross profit, as a percent of sales, decreased from 1998 primarily due
to deeper discounting and increased material costs, as a percent of sales.
Selling, general and administrative expenses increased in dollars in 1999 but
decreased as a percent of sales as focused cost reductions resulted in lower
freight, sales incentives and people costs, as a percent of sales.
ELECTRONIC CONTRACT ASSEMBLIES
Net sales for fiscal year 1999 in the Electronic Contract Assemblies Segment
exceeded the prior year by 3%. Sales of electronic transportation products
increased while sales of computer related products declined when compared to the
prior year. The Company continued to expand its product line offering in the
Electronic Contract Assemblies Segment including components for consumer
electronics, appliances, and industrial controls.
Net income in fiscal year 1999 increased slightly over the prior year, primarily
due to higher sales volumes. Gross profit, as a percent of net sales, remained
relatively consistent in 1999 when compared to 1998. Selling, general and
administrative costs increased in dollars but decreased slightly, as a percent
of sales, in fiscal year 1999. Net income was also affected by a higher
effective state income tax rate.
Included in this segment are sales to one customer, TRW, Inc. which accounted
for 16% of consolidated net sales in both fiscal year 1999 and 1998. Sales to
this customer represented approximately one half of total sales in the
Electronic Contract Assemblies Segment.
This segment's investment capital carries a higher degree of risk than the
Company's other segment due to rapid technological changes, component
availability, 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, 0.2 percentage point in fiscal year 1999 when compared to
1998. The Company focused on reducing costs and continued to review activities
and processes to assess where costs could further be reduced in fiscal year 1999
while providing quality products and services to the marketplace.
Other income decreased from the prior year on lower interest income caused by
lower average investment balances and 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. Partially offsetting the decline in interest
income was an increase in miscellaneous income. In fiscal year 1999 the Company
recorded a $1,337,000 after tax gain ($0.03 per diluted share) on the sale of a
stock investment of which the Company held a minor interest and a $2,674,000
after tax gain ($0.06 per diluted share) on the disposition of two non-core
facilities. Fiscal year 1998 results include a $1,008,000 after tax gain ($0.02
per diluted share) on the sale of real estate and a $616,000 after tax gain
($0.01 per diluted share) on the sale of a stock investment of which the Company
held a minor interest.
The effective income tax rate decreased 1.8 percentage points in fiscal year
1999 in comparison to 1998. An increase in state tax rates was more than offset
by a decrease in the federal effective tax rate as the Company utilized
available capital loss carryforwards to offset capital gains.
Net income and Class B diluted earnings per share of $59,725,000 and $1.47,
respectively, in fiscal year 1999 increased 9% from the prior year levels of
$55,027,000 and $1.32, respectively.
-22-
<PAGE>
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's aggregate of cash, cash equivalents, and short-term investments
decreased from $132 million at the end of fiscal year 1999 to $85 million at the
end of fiscal year 2000 due primarily to cash outlays for strategic capital
investments and repurchases of the Company's Class B Common Stock. Working
capital at June 30, 2000 was $190 million with a current ratio of 1.9, compared
to working capital of $218 million and a current ratio of 2.3 at June 30, 1999.
Operating activities generated $41 million of cash flow in fiscal year 2000
compared to $98 million in fiscal year 1999. Net income and non-cash charges to
net income were partially offset by increases in receivables of $46 million and
inventories of $17 million. The Company reinvested $71 million into capital
investments for the future, including new manufacturing facilities in Chandler,
Indiana and Laem Chabang Thailand, computer equipment, production equipment, and
office facilities. Financing cash flow activities were primarily in the form of
$26 million in dividend payments and $24 million of Class B Common Stock
repurchases. Net cash flow, excluding the purchases and maturities of
short-term investments was an outflow of $47 million.
At June 30, 2000, the Company had $35 million of short-term borrowings
outstanding under its $100 million revolving credit facility that allows for
both issuance of letters of credit and cash borrowings. The Company did not
have any debt outstanding under this credit facility at June 30, 1999. The
credit facility requires the Company to comply with certain debt covenants
including debt-to-total capitalization, interest coverage ratio, minimum net
worth, and other terms and conditions. The Company is in compliance with these
covenants at June 30, 2000 and does not expect these covenants to limit or
restrict the Company's ability to borrow from the credit facility in fiscal year
2001. 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 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.
The Company anticipates maintaining a strong liquidity position for the 2001
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 for funding 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 DISCLOSURE
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. The Company has not experienced any major
interruptions or malfunctions in its operations related to the Year 2000 issue
but will continue to monitor throughout the remainder of the calendar year. In
addition, the 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.
The total gross cost of Year 2000 compliance approximated $8.1 million which
favorably compares to estimated costs disclosed in the Company's Form 10-K
filing for its fiscal year ended June 30, 1999 of $9 million to $11 million.
Existing information technology resources were redeployed, which accounted for
approximately 50% of the total gross costs above. Approximately 30% of the
-23-
<PAGE>
<PAGE>
above 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.
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 did not have any derivative instruments at June 30,
2000, however the Company periodically engages in limited forward purchases of
foreign currency and 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.
In July 2000, the Emerging Issues Task Force (EITF) reached a consensus on Issue
00-10 "Accounting for Shipping and Handling Fees and Costs." EITF Issue 00-10
requires that all amounts billed to a customer in a sale transaction for
shipping and handling be classified as revenue. The EITF did not reach a
consensus with respect to the classification of costs related to shipping and
handling. The Company currently classifies most all shipping and handling
revenues and costs, on a net basis, in selling and administrative expense.
Accordingly, the Company has determined that EITF Issue 00-10 will require
reclassification of shipping and handling revenues and costs, but does not
believe EITF Issue 00-10 will impact its financial position or net income. The
effective date of this standard is the fourth quarter of the Company's fiscal
year 2001.
-24-
<PAGE>
<PAGE>
Item 7a - Quantitative and Qualitative Disclosures About Market Risk
As of June 30, 2000 and 1999, the Company had an investment portfolio of fixed
income securities, excluding those classified as cash and cash equivalents, of
$79 million and $115 million respectively. 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. A hypothetical 100 basis point increase in market interest rates from
levels at June 30, 2000 and 1999 would cause the fair value of these short-term
investments to decline by an immaterial amount.
The Company's earnings are also affected by changes in short-term interest rates
as a result of borrowings under its line of credit facility. Based on the
outstanding balance of the Company's credit facility at June 30, 2000, a
hypothetical 100 basis point increase in interest rates prevailing at this date
would not affect the consolidated operating results of the Company by a material
amount.
The Company operates internationally, and thus is subject to potentially adverse
movements in foreign currency rate changes. The effect of movements in the
exchange rates were not material to the consolidated operating results of the
Company in fiscal years 2000 and 1999. The Company estimates that a
hypothetical 10% adverse change in foreign currency exchange rates would not
affect the consolidated operating results of the Company by a material amount.
-25-
<PAGE>
<PAGE>
<TABLE>
Item 8. - Financial Statements and Supplementary Data
<CAPTION>
INDEX TO FINANCIAL STATEMENTS
Page
<S> <C>
Report of Management . . . . .. . . . . . . . . . . . . . . . . 27
Report of Independent Public Accountants . . . . . . . . . . . 28
Consolidated Balance Sheets
as of June 30, 2000 and 1999 . . . . . . . . . . . . . . . . 29
Consolidated Statements of Income
for the Three Years Ended June 30, 2000. . . . . . . . . . . 30
Consolidated Statements of Cash Flows
for the Three Years Ended June 30, 2000. . . . . . . . . . . 31
Consolidated Statements of Share Owners' Equity
for the Three Years Ended June 30, 2000. . . . . . . . . . . 32
Notes to Consolidated Financial Statements. . . . . . . . . . . 33-48
</TABLE>
-26-
<PAGE>
<PAGE>
REPORT OF MANAGEMENT
To the Share Owners of Kimball International, Inc.
The management of Kimball International, Inc. is responsible for the preparation
and integrity of the accompanying financial statements and other related
information in this report. The consolidated financial statements of the
Company and its subsidiaries, including the footnotes, were prepared in
accordance with generally accepted accounting principles in the United States
and include judgements and estimates, which in the opinion of management are
applied on a conservative basis.
The Company maintains a system of internal controls intended to provide
reasonable assurance that assets are safeguarded from loss or material misuse,
transactions are authorized and recorded properly, and that the accounting
records may be relied upon for the preparation of the financial statements.
This system is tested and evaluated regularly for adherence and effectiveness by
the Company's staff of internal auditors, as well as the independent public
accountants in connection with their annual audit.
The Audit Committee of the Board of Directors, which is comprised of directors
who are not employees of the Company, meets regularly with management, the
internal auditors and the independent public accountants to review the work
performed and to ensure that each is properly discharging its responsibilities.
The internal auditors and the independent public accountants have free and
direct access to the Audit Committee, and they meet periodically, without
management present, to discuss appropriate matters.
Douglas A. Habig
Douglas A. Habig
Chairman of the Board,
Chief Executive Officer
James C. Thyen
James C. Thyen
President
Robert F. Schneider
Robert F. Schneider
Executive Vice President,
Chief Financial Officer,
Assistant Treasurer
-27-
<PAGE>
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Share Owners of Kimball International, Inc.
We have audited the accompanying consolidated balance sheets of Kimball
International, Inc. (an Indiana corporation) and subsidiaries as of June 30,
2000 and 1999, and the related consolidated statements of income, cash flows and
share owners' equity for each of the three years in the period ended June 30,
2000. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Kimball
International, Inc. and subsidiaries as of June 30, 2000 and 1999, and the
results of its operations and its cash flows for each of the three years in
the period ended June 30, 2000, in conformity with accounting principles
generally accepted in the United States.
Our audits were made for the purpose of forming an opinion on the consolidated
financial statements taken as a whole. The schedule listed under item 14 is the
responsibility of the Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic consolidated financial statements. This schedule has been subjected
to the auditing procedures applied in the audit of the basic consolidated
financial statements and, in our opinion, fairly states in all material respects
the financial data required to be set forth therein in relation to the basic
consolidated financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Chicago, Illinois
August 2, 2000
-28-
<PAGE>
<TABLE>
<CAPTION>
KIMBALL INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands, Except for Share Data)
June 30
2000 1999
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . $ 5,223 $ 16,775
Short-term investments . . . . . . . . . . . . . . . . . . . . 79,366 114,996
Receivables, less allowances of
$4,713 and $3,816, respectively . . . . . . . . . . . . . . . 180,929 132,284
Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . 117,058 96,157
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,944 26,129
Total current assets . . . . . . . . . . . . . . . . . . . 413,520 386,341
Property and Equipment, net. . . . . . . . . . . . . . . . . . . 248,210 221,498
Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . 61,921 53,547
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . $723,651 $661,386
Liabilities and Share Owners' Equity
Current Liabilities:
Loans payable. . . . . . . . . . . . . . . . . . . . . . . . . $ 37,400 $ 3,518
Current maturities of long-term debt . . . . . . . . . . . . . 1,021 1,185
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . 102,835 77,976
Dividends payable. . . . . . . . . . . . . . . . . . . . . . . 6,205 6,380
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . 75,934 79,505
Total current liabilities. . . . . . . . . . . . . . . . . 223,395 168,564
Other Liabilities:
Long-term debt, less current maturities. . . . . . . . . . . . 2,599 1,730
Deferred income taxes and other. . . . . . . . . . . . . . . . 29,130 26,815
Total other liabilities. . . . . . . . . . . . . . . . . . 31,729 28,545
Share Owners' Equity:
Common stock-par value $.05 per share:
Class A- Shares authorized-49,909,000 (49,945,000 in 1999)
Shares issued-14,451,000 (14,486,000 in 1999). . . . 722 724
Class B- Shares authorized-100,000,000
Shares issued-28,574,000 (28,538,000 in 1999). . . . 1,429 1,427
Additional paid-in capital . . . . . . . . . . . . . . . . . . 8,056 6,379
Retained earnings. . . . . . . . . . . . . . . . . . . . . . . 522,041 498,962
Accumulated other comprehensive income . . . . . . . . . . . . 326 1,312
Less: Treasury stock-at cost:
Class A- 172,000 shares (156,000 in 1999) . . . . . . . . . . (3,144) (2,877)
Class B- 3,621,000 shares (2,542,000 in 1999) . . . . . . . . (60,903) (41,650)
Total Share Owners' Equity . . . . . . . . . . . . . . . . 468,527 464,277
Total Liabilities and Share Owners' Equity . . . . . . . . . . . $723,651 $661,386
See Notes to Consolidated Financial Statements.
</TABLE>
-29-
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
KIMBALL INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in Thousands, Except for Per Share Data)
Year Ended June 30
2000 1999 1998
<S> <C> <C> <C>
Net Sales. . . . . . . . . . . . . . . . . . . . . . . $1,200,945 $1,106,967 $1,032,317
Cost of Sales. . . . . . . . . . . . . . . . . . . . . 873,954 778,551 723,378
Gross Profit . . . . . . . . . . . . . . . . . . . . . 326,991 328,416 308,939
Selling, General and Administrative Expenses . . . . . 259,864 250,839 236,463
Operating Income . . . . . . . . . . . . . . . . . . . 67,127 77,577 72,476
Other Income (Expense):
Interest expense . . . . . . . . . . . . . . . . . . (536) (476) (424)
Interest income. . . . . . . . . . . . . . . . . . . 4,709 6,554 9,458
Other, net . . . . . . . . . . . . . . . . . . . . . 3,102 8,719 5,917
Other income, net . . . . . . . . . . . . . . . . . 7,275 14,797 14,951
Income Before Taxes on Income. . . . . . . . . . . . . 74,402 92,374 87,427
Taxes on Income. . . . . . . . . . . . . . . . . . . . 25,940 32,649 32,400
Net Income . . . . . . . . . . . . . . . . . . . . . . $ 48,462 $ 59,725 $ 55,027
Earnings Per Share of Common Stock
Basic:
Class A. . . . . . . . . . . . . . . . . . . . . . . $1.19 $1.46 $1.32
Class B. . . . . . . . . . . . . . . . . . . . . . . $1.21 $1.48 $1.33
Diluted:
Class A. . . . . . . . . . . . . . . . . . . . . . . $1.19 $1.45 $1.31
Class B. . . . . . . . . . . . . . . . . . . . . . . $1.21 $1.47 $1.32
Average Number of Shares Outstanding
Basic:
Class A. . . . . . . . . . . . . . . . . . . . . . . 14,299 14,338 14,413
Class B. . . . . . . . . . . . . . . . . . . . . . . 25,935 26,286 27,004
Totals. . . . . . . . . . . . . . . . . . . . . . . 40,234 40,624 41,417
Diluted:
Class A. . . . . . . . . . . . . . . . . . . . . . . 14,299 14,338 14,413
Class B. . . . . . . . . . . . . . . . . . . . . . . 26,050 26,501 27,401
Totals. . . . . . . . . . . . . . . . . . . . . . . 40,349 40,839 41,814
See Notes to Consolidated Financial Statements.
</TABLE>
-30-
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
KIMBALL INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
Year Ended June 30
2000 1999 1998
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . $ 48,462 $ 59,725 $ 55,027
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization. . . . . . . . . . . . . 43,801 39,710 33,806
Gain on sales of assets. . . . . . . . . . . . . . . . (1,059) (3,917) (1,986)
Deferred income tax and other deferred charges . . . . (595) 1,964 880
Change in current assets and liabilities:
Receivables . . . . . . . . . . . . . . . . . . . . (45,843) (13,114) (9,028)
Inventories . . . . . . . . . . . . . . . . . . . . (16,800) (4,816) (15,174)
Other current assets. . . . . . . . . . . . . . . . (2,510) (2,529) (1,413)
Accounts payable. . . . . . . . . . . . . . . . . . 23,374 17,069 7,844
Accrued expenses. . . . . . . . . . . . . . . . . . (7,434) 3,936 6,248
Net cash provided by operating activities. . . . 41,396 98,028 76,204
Cash Flows From Investing Activities:
Capital expenditures . . . . . . . . . . . . . . . . . . (61,124) (76,568) (41,313)
Proceeds from sales of assets. . . . . . . . . . . . . . 2,689 820 1,177
Proceeds from sales of divisions/subsidiaries. . . . . . - 7,156 3,150
Increase in other assets . . . . . . . . . . . . . . . . (10,330) (25,973) (7,359)
Purchases of held-to-maturity securities . . . . . . . . - (400) (21,415)
Maturities of held-to-maturity securities. . . . . . . . 400 5,425 46,932
Purchases of available-for-sale securities . . . . . . . (112,101) (23,191) (97,120)
Sales and maturities of available-for-sale securities. . 146,772 57,080 67,517
Net cash used for investing activities . . . . . (33,694) (55,651) (48,431)
Cash Flows From Financing Activities:
Net change in short-term borrowings. . . . . . . . . . . 31,298 (800) 1,846
Net change in long-term debt . . . . . . . . . . . . . . (1,103) 625 (494)
Acquisition of treasury stock. . . . . . . . . . . . . . (24,427) (17,184) (8,323)
Dividends paid to share owners . . . . . . . . . . . . . (25,558) (25,784) (24,280)
Proceeds from exercise of stock options. . . . . . . . . 801 986 1,495
Other-net. . . . . . . . . . . . . . . . . . . . . . . . (284) (176) (63)
Net cash used for financing activities . . . . . (19,273) (42,333) (29,819)
Effect of exchange rate changes on cash
and cash equivalents. . . . . . . . . . . . . . . . . . . 19 (26) (15)
Net (Decrease) Increase in Cash and Cash Equivalents . . . (11,552) 18 (2,061)
Cash and Cash Equivalents at Beginning of Year . . . . . . 16,775 16,757 18,818
Cash and Cash Equivalents at End of Year . . . . . . . . . $ 5,223 $ 16,775 $ 16,757
Total Cash, Cash Equivalents
and Short-Term Investments:
Cash and cash equivalents. . . . . . . . . . . . . . . . $ 5,223 $ 16,775 $ 16,757
Short-term investments . . . . . . . . . . . . . . . . . 79,366 114,996 156,010
Totals . . . . . . . . . . . . . . . . . . . . . . . $ 84,589 $131,771 $172,767
See Notes to Consolidated Financial Statements.
</TABLE>
-31-
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
KIMBALL INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF SHARE OWNERS' EQUITY
(Amounts in Thousands, Except for Share Data)
Three Years Ended June 30, 2000
Accumulated Total
Additional Other Share
---Common Stock--- Paid-In Retained Comprehensive Treasury Owners'
Class A Class B Capital Earnings Income Stock Equity
<S> <C> <C> <C> <C> <C> <C> <C>
Amounts at June 30, 1997. . . . . . . . . . . $2,273 $4,450 $1,607 $434,665 $1,648 ($21,817) $422,826
Comprehensive income:
Net income. . . . . . . . . . . . . . . . . 55,027 55,027
Net change in unrealized gains and losses
on securities. . . . . . . . . . . . . . . 2,247 2,247
Foreign currency translation adjustment . . (186) (186)
Comprehensive income. . . . . . . . . . . 57,088
Treasury stock activity (378,000 shares). . 74 (8,213) (8,139)
Shares of Class A Common Stock converted to
Class B Common Stock (36,000 shares) . . . (3) 3 81 (81) ---
Exercise of stock options (117,000 shares). (312) 1,972 1,660
Cash dividends:
Class A ($.58875 per share). . . . . . . . (8,483) (8,483)
Class B ($.605 per share). . . . . . . . . (16,329) (16,329)
Change par value from $.3125 pre stock split
to $.05 post stock split . . . . . . . . . (1,545) (3,027) 4,572 ---
Amounts at June 30, 1998. . . . . . . . . . . $ 725 $1,426 $6,022 $464,880 $3,709 ($28,139) $448,623
Comprehensive income:
Net income. . . . . . . . . . . . . . . . . 59,725 59,725
Net change in unrealized gains and losses
on securities. . . . . . . . . . . . . . . (2,100) (2,100)
Foreign currency translation adjustment . . (297) (297)
Comprehensive income. . . . . . . . . . . 57,328
Treasury stock activity (973,000 shares). . 77 (17,094) (17,017)
Shares of Class A Common Stock converted to
Class B Common Stock (22,000 shares) . . . (1) 1 311 (311) ---
Exercise of stock options (88,000 shares) . (31) 1,017 986
Cash dividends:
Class A ($.62 per share) . . . . . . . . . (8,891) (8,891)
Class B ($.64 per share) . . . . . . . . . (16,752) (16,752)
Amounts at June 30, 1999. . . . . . . . . . . $ 724 $1,427 $6,379 $498,962 $1,312 ($44,527) $464,277
Comprehensive income:
Net income. . . . . . . . . . . . . . . . . 48,462 48,462
Net change in unrealized gains and losses
on securities. . . . . . . . . . . . . . . (560) (560)
Foreign currency translation adjustment . . (426) (426)
Comprehensive income. . . . . . . . . . . 47,476
Treasury stock activity (1,182,000 shares). 1,413 (20,294) (18,881)
Shares of Class A Common Stock converted to
Class B Common Stock (35,000 shares) . . . (2) 2 27 (27) ---
Exercise of stock options (87,000 shares) . 237 801 1,038
Cash dividends:
Class A ($.62 per share) . . . . . . . . . (8,863) (8,863)
Class B ($.64 per share) . . . . . . . . . (16,520) (16,520)
Amounts at June 30, 2000. . . . . . . . . . . $ 722 $1,429 $8,056 $522,041 $ 326 ($64,047) $468,527
See Notes to Consolidated Financial Statements.
</TABLE>
-32-
<PAGE>
<PAGE>
KIMBALL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation: The consolidated financial statements include the
accounts of all domestic and foreign subsidiaries. All significant intercompany
balances and transactions have been eliminated in the consolidation.
Revenue Recognition: Revenue from product sales is recognized when title passes
to the customer which is generally when goods are shipped.
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles in the United States requires
management to make estimates and assumptions that affect the reported amounts
included in the consolidated financial statements and related footnote
disclosures. While efforts are made to assure estimates used are reasonably
accurate based on management's knowledge of current events, actual results could
differ from those estimates.
Cash, Cash Equivalents and Short-Term Investments: Cash equivalents consist
primarily of highly liquid investments with original maturities of three months
or less at the time of acquisition. Cash equivalents are stated at cost, which
approximates market value. Short-term investments are cash investments,
primarily municipal bonds and U.S. Government securities with maturities
exceeding three months at the time of acquisition. Held-to-maturity securities
are stated at amortized cost. Available-for-sale securities are stated at
market value, with unrealized gains and losses excluded from net income and
recorded net of related tax effect, if any, in Accumulated Other
Comprehensive Income, as a component of Share Owners' Equity.
Foreign Currency Translation: Assets and liabilities of foreign subsidiaries
(except for Mexico and Thailand operations, whose functional currency is the
U.S. dollar) are translated into U.S. dollars at fiscal year-end exchange rates,
income statement accounts are translated at the weighted average exchange rate
during the year, and the resulting currency translation adjustments are recorded
in Accumulated Other Comprehensive Income, as a component of Share Owners'
Equity. Financial statements of Mexico and Thailand operations are translated
into U.S. dollars using both current and historical exchange rates, with
translation gains and losses included in net income.
Inventories: Inventories are stated at the lower of cost or market
value. Cost includes material, labor and applicable manufacturing overhead
and is determined using the last-in, first-out (LIFO) method for approximately
45% and 51% of consolidated inventories in 2000 and 1999, respectively.
Cost of the remaining inventories is determined using the first-in, first-out
(FIFO) method.
Property, Equipment and Depreciation: Property and equipment are stated at
cost. Depreciation is provided over the estimated useful life of the assets
using the straight-line method for financial reporting purposes. Maintenance,
repairs and minor renewals and betterments are expensed; major improvements are
capitalized.
Research and Development: The costs of research and development are expensed as
incurred. These costs were approximately, in millions, $13.5 in 2000, $11.6 in
1999, and $13.1 in 1998.
-33-
<PAGE>
<PAGE>
Medical Care and Disability Benefit Plans: The Company is self-insured with
respect to certain medical care and disability benefit plans for approximately
75% of covered domestic employees. The Company carries stop-loss insurance
coverage to mitigate severe losses under these plans. The balance of domestic
employees are covered under fully insured HMO plans. The costs for such plans
are charged against earnings in the year in which the incident occurred. The
Company does not provide benefits under these plans to retired employees.
Employees of foreign subsidiaries are covered by local benefit plans, the cost
of which is not significant to the consolidated financial statements.
Income Taxes: Unremitted earnings of foreign subsidiaries have been included in
the consolidated financial statements without giving effect to the United States
taxes that may be payable on distribution to the United States because it is not
anticipated such earnings will be remitted to the United States. If remitted,
the additional United States taxes paid would not be material.
Off-Balance Sheet Risk and Concentration of Credit Risk: The Company engages in
financing arrangements with customers on a limited basis and has business and
credit risks concentrated in the transportation, computer, telecommunications,
consumer electronics and furniture industries. One customer, TRW, Inc.,
represented a significant portion of consolidated accounts receivable at June
30, 2000. The Company currently does not foresee a credit risk associated with
these receivables.
Reclassifications: Certain prior year amounts have been reclassified to conform
with the current year presentation.
Stock-Based Compensation: The Company continues to account for its employee
stock option plans using Accounting Principles Board Opinion No. 25, Accounting
for Stock Issued to Employees, which results in no charge to earnings when
options are issued at fair market value. The Company has adopted the disclosure
requirements of Financial Accounting Standards Board Statement No. 123,
Accounting for Stock-Based Compensation.
New Accounting Standards: In 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 2001.
In July 2000, the Emerging Issues Task Force (EITF) reached a consensus on Issue
00-10 "Accounting for Shipping and Handling Fees and Costs." EITF Issue 00-10
requires that all amounts billed to a customer in a sale transaction for
shipping and handling be classified as revenue. The EITF did not reach a
consensus with respect to the classification of costs related to shipping and
handling. The Company currently classifies most all shipping and handling
revenues and costs, on a net basis, in selling and administrative expense.
Accordingly, the Company has determined that EITF Issue 00-10 will require
reclassification of shipping and handling revenues and costs, but does not
believe EITF Issue 00-10 will impact its financial position or net income. The
effective date of this standard is the fourth quarter of the Company's fiscal
year 2001.
-34-
<PAGE>
<PAGE>
NOTE 2 ACQUISITIONS AND DISPOSITIONS
Acquisitions of Subsidiaries:
In the second quarter of fiscal year 2000, 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 fiscal year 2000 consolidated financial position and operating
results.
During fiscal year 1999, the Company completed a number of acquisitions related
to its core competencies aimed at penetrating new markets and expanding
existing markets. In the first quarter, the Company acquired the assets and
assumed certain liabilities of Transwall, Inc., a privately held manufacturer of
stackable panel office furniture systems and floor-to-ceiling products. In the
third quarter, the Company acquired the assets and assumed certain liabilities
of Southeast Millwork, a privately held manufacturer of store display fixtures.
These acquisitions were accounted for as purchases with operating results
included in the Company's Consolidated Statements of Income from the date of
acquisition. The results of these acquisitions were not material to fiscal year
1999 consolidated financial position and operating results.
In the fourth quarter of fiscal year 1999, the Company purchased a manufacturing
facility located in Juarez, Mexico. The Juarez facility produces projection
television cabinets and will provide additional capacity for other manufacturing
operations in the future.
Dispositions of Subsidiaries:
The Company sold Kimball Furniture Reproductions, a furniture manufacturing
facility located in Montgomery, Alabama, and ToolPro, a carbide cutting tools
production operation located in Jasper, Indiana in the fourth quarter of fiscal
year 1999. The sale of these subsidiaries generated a $2.7 million after-tax
gain which is included in 1999 consolidated financial position and operating
results.
NOTE 3 INVENTORIES
Inventories are valued using the lower of last-in, first-out (LIFO) cost or
market value for approximately 45% and 51% of consolidated inventories in 2000
and 1999, respectively, including approximately 80% and 85% of the Furniture and
Cabinet Segment inventories in 2000 and 1999, respectively. The cost of
Electronic Contract Assemblies Segment inventories and the remaining inventories
in the Furniture and Cabinet Segment are valued using the lower of first-in,
first-out (FIFO) cost or market value.
Had the FIFO method been used for all inventories, net income would have been
$1.5 million higher in 2000, $0.2 million lower in 1999, and $0.6 million higher
in 1998. Additionally, inventories would have been, in millions, $22.7 and
$20.0 higher at June 30, 2000 and 1999, respectively, if the FIFO method had
been used. During 2000 and 1999, certain inventory quantity reductions caused a
liquidation of LIFO inventory values, which were immaterial.
<TABLE>
Inventory components at June 30 are as follows:
(Amounts in Thousands)
<CAPTION>
2000 1999
<S> <C> <C>
Finished products. . . . . . . . . . . . . $ 31,251 $ 33,262
Work-in-process. . . . . . . . . . . . . . 18,149 14,471
Raw materials. . . . . . . . . . . . . . . 67,658 48,424
Total inventory . . . . . . . . . . . $117,058 $ 96,157
</TABLE> -35-
<PAGE>
NOTE 4 PROPERTY AND EQUIPMENT
<TABLE>
Major classes of property and equipment consist of the following:
(Amounts in Thousands)
<CAPTION>
2000 1999
<S> <C> <C>
Land . . . . . . . . . . . . . . . . . . . $ 7,326 $ 6,931
Buildings and improvements . . . . . . . . 182,587 171,504
Machinery and equipment. . . . . . . . . . 335,396 291,432
Construction-in-progress . . . . . . . . . 15,399 16,772
Total. . . . . . . . . . . . . . . . . . 540,708 486,639
Less: Accumulated depreciation . . . (292,498) (265,141)
Property and equipment, net. . . . . . . $ 248,210 $221,498
</TABLE>
<TABLE>
The useful lives used in computing depreciation are based on the Company's
estimate of the service life of the classes of property, as follows:
<CAPTION>
Years
<S> <C>
Buildings and improvements . . . . . . . . 12 to 50
Machinery and equipment. . . . . . . . . . 2 to 20
Leasehold improvements . . . . . . . . . . Life of Lease
Depreciation and amortization of property and equipment totaled, in millions,
$37.5 for 2000, $33.4 for 1999, and $29.9 for 1998.
</TABLE>
NOTE 5 LEASE COMMITMENTS
Operating leases for certain office, showroom, warehouse and manufacturing
facilities, land and equipment, which expire from fiscal year 2000 to 2030,
contain provisions under which minimum annual lease payments are, in millions,
$5.1, $4.6, $3.9, $3.0, and $1.5 for the five years ended June 30, 2005,
respectively, and aggregate $1.8 million from 2005 to the expiration of the
leases in 2030. The Company is obligated under certain real estate leases to
maintain the properties and pay real estate taxes.
Total rental expenses amounted to, in millions, $7.4, $7.1, and $6.7 in 2000,
1999 and 1998, respectively.
NOTE 6 LONG-TERM DEBT AND CREDIT FACILITY
Long-term debt is principally obligations under long-term capitalized leases.
Aggregate maturities of long-term debt for the next five years are, in
thousands, $1,021, $850, $450, $907, and $37, respectively, and aggregate $355
thereafter. Interest rates range from 0% to 9.74%. Interest paid was
immaterial in the three years ending June 30, 2000. Based upon borrowing rates
currently available to the Company, the fair value of the Company's debt
approximates the carrying value.
In fiscal year 1999, the Company established a five year revolving credit
facility that provides for up to $100 million in borrowings. The Company
uses this facility for acquisitions and general corporate purposes. A
commitment fee is payable on the unused portion of the credit facility. The
interest rate applicable to borrowings under the agreement is based on the
London Interbank Offered Rate (LIBOR) plus a margin. The Company is in
compliance with debt covenants requiring it to maintain certain debt-to-total
capitalization, interest coverage ratio, minimum net worth, and other terms and
conditions. At June 30, 2000, the Company had $35.4 million of short-term
borrowings outstanding under this facility. No debt was outstanding under this
agreement at June 30, 1999.
-36-
<PAGE>
<PAGE>
NOTE 7 RETIREMENT PLANS
The Company has a trusteed defined contribution Retirement Plan in effect for
substantially all domestic employees meeting the eligibility requirements.
Company contributions are based on a percent of net income as defined in the
plan; the percent of contribution is determined by the Board of Directors up
to specific maximum limits. The plan includes a 401(k) feature, thereby
permitting participants to make additional voluntary contributions on a pretax
basis. Payments by the Company to the trusteed plan are vested and held for
the sole benefit of participants. Total contributions to the Retirement Plans
for 2000, 1999 and 1998 were approximately, in millions, $9.1, $10.8, and
$10.1, respectively.
Employees of certain foreign subsidiaries are covered by local pension or
retirement plans. Annual expense and accumulated benefits of these foreign
plans are not significant to the consolidated financial statements.
NOTE 8 STOCK OPTIONS
On August 11, 1987, the Board of Directors adopted the 1987 Stock Incentive
Program, which was approved by the Company's Share Owners on October 13, 1987.
Under this plan, 3,600,000 shares of Class B Common Stock were reserved for
incentive stock options, nonqualified stock options, stock appreciation rights,
restricted stock awards, and performance share awards available for grant to
officers and other key employees of the Company, and to members of the Board of
Directors who are not employees. This Stock Incentive Program expired in August
1997, with prior year grants expiring annually through July 2001.
On June 11, 1996, the Board of Directors adopted the 1996 Stock Incentive
Program, which was approved by the Company's Share Owners on October 22, 1996.
Under this plan, 4,200,000 shares of Class B Common Stock were reserved, in
addition to the approximately 2 million remaining shares currently reserved
under the 1987 plan, for incentive stock options, nonqualified stock options,
stock appreciation rights, and performance share awards available for grant to
officers and other key employees of the Company, and to members of the Board of
Directors who are not employees. The 1996 Stock Incentive Program is a ten year
plan. The number of employees participating in the program was 270 in
fiscal year 2000 and 290 in fiscal years 1999 and 1998.
Stock options are priced at the fair market value of the stock at the date of
grant. Options granted under the plans generally are exercisable from six
months to two years after the date of grant and expire five to ten years after
the date of grant. Stock options are forfeited when employment terminates,
except in case of retirement, death or permanent disability.
There are 250,000 additional shares reserved for issuance under the Directors'
Stock Compensation and Option Plan which is available to all members of the
Board of Directors. Under terms of the plan, Directors electing to receive all,
or a portion, of their fees in the form of Company stock will also be granted a
number of stock options equal to 50% of the number of shares received for
compensation of fees. Option prices and vesting are similar to those of the
1996 Stock Incentive Program. The plan is in effect through October 2006.
-37-
<PAGE>
<PAGE>
<TABLE>
Stock option transactions are as follows:
<CAPTION>
Number Weighted Average
of Shares Exercise Price
<S> <C> <C>
Options outstanding June 30, 1997. . . . . . . 1,376,066 $13.37
Granted. . . . . . . . . . . . . . . . . . . . 588,889 21.82
Exercised. . . . . . . . . . . . . . . . . . . (225,769) 13.35
Forfeited. . . . . . . . . . . . . . . . . . . (89,170) 14.89
Options outstanding June 30, 1998. . . . . . . 1,650,016 16.30
Granted. . . . . . . . . . . . . . . . . . . . 551,521 18.20
Exercised. . . . . . . . . . . . . . . . . . . (141,993) 13.78
Forfeited. . . . . . . . . . . . . . . . . . . (180,716) 16.57
Expired. . . . . . . . . . . . . . . . . . . . (20,871) 14.80
Options outstanding June 30, 1999. . . . . . . 1,857,957 17.05
Granted. . . . . . . . . . . . . . . . . . . . 517,418 19.66
Exercised. . . . . . . . . . . . . . . . . . . (179,050) 12.62
Forfeited. . . . . . . . . . . . . . . . . . . (236,383) 18.19
Expired. . . . . . . . . . . . . . . . . . . . (23,386) 12.22
Options outstanding June 30, 2000. . . . . . . 1,936,556 $18.07
Shares available for future options. . . . . . 5,265,511
</TABLE>
<TABLE>
Following is a status of options outstanding at June 30, 2000:
<CAPTION>
Outstanding Options Exercisable Options
--------------------------------------- -----------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Exercise Contractual Exercise Exercise
Price Range Number Life Price Number Price
------------- --------- ----------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
$12.00-$16.00 546,043 1 year $13.38 542,190 $13.38
$16.00-$20.00 924,224 6 years 18.96 157,677 18.96
$20.00-$24.00 466,289 3 years 21.82 461,505 21.82
Total 1,936,556 4 years $18.07 1,161,372 $17.49
</TABLE>
The Company adopted the disclosure requirements of Financial Accounting
Standards Board Statement No. 123, Accounting for Stock-Based Compensation
(FAS 123). The Company has elected to continue to follow the provisions of
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees, and its related interpretations; accordingly, no compensation cost
has been reflected in the financial statements for its incentive stock options.
Had compensation cost for the Company's incentive stock options been determined
based on the fair value at the grant dates for awards under those plans
consistent with the method of FAS 123, the Company's net income and earnings per
share would have been reduced to the pro forma amounts indicated below (in
thousands, except per share amounts):
<TABLE>
<CAPTION>
Year Ended June 30
2000 1999 1998
<S> <C> <C> <C>
Net Income
As Reported . . . . . . . . . . . . . $48,462 $59,725 $55,027
Pro Forma . . . . . . . . . . . . . . $46,001 $57,444 $53,343
Earnings per Share of Common Stock
As Reported:
Basic:
Class A. . . . . . . . . . . . . . $1.19 $1.46 $1.32
Class B. . . . . . . . . . . . . . $1.21 $1.48 $1.33
Diluted:
Class A. . . . . . . . . . . . . . $1.19 $1.45 $1.31
Class B. . . . . . . . . . . . . . $1.21 $1.47 $1.32
Pro Forma:
Basic:
Class A. . . . . . . . . . . . . . $1.13 $1.40 $1.28
Class B. . . . . . . . . . . . . . $1.15 $1.42 $1.29
Diluted:
Class A. . . . . . . . . . . . . . $1.13 $1.40 $1.27
Class B. . . . . . . . . . . . . . $1.15 $1.42 $1.28
</TABLE> -38-
<PAGE>
<PAGE>
The weighted average fair value at date of grant for options granted during the
years ended June 30, 2000, 1999 and 1998 was $5.49, $3.72 and $4.84 per option,
respectively.
The fair value of the options at the date of grant was estimated using the
Black-Scholes option pricing model with the following weighted average
assumptions: expected volatility of 38.5% in 2000, 34.0% in 1999 and 31.7% in
1998; risk-free interest rates of 5.9% in 2000, 5.4% in 1999 and 6.2% in
1998; dividend yield of 3.9% in 2000, 3.7% in 1999 and 2.9% in 1998; and an
expected life of 3.5 years for all years.
NOTE 9 INCOME TAXES
Deferred income taxes reflect the net tax effect of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. A valuation reserve is
provided for deferred tax assets relating to foreign net operating losses and
U.S. capital loss carryforward benefits, due to uncertainty surrounding the
utilization of these deferred tax assets. Income tax benefits associated with
the foreign net operating losses have no expiration period under current tax
laws, while benefits associated with the U.S. capital loss carryforward all
expire during the 2002 fiscal year.
<TABLE>
The components of the deferred tax assets and liabilities as of June 30, 2000
and 1999, are as follows:
(Amounts in Thousands)
<CAPTION>
2000 1999
<S> <C> <C>
Deferred tax assets:
Receivables. . . . . . . . . . . . . . . . . $ 1,899 $ 1,690
Inventory. . . . . . . . . . . . . . . . . . 4,375 2,311
Employee benefits. . . . . . . . . . . . . . 6,568 6,690
Other current liabilities. . . . . . . . . . 6,233 5,920
Miscellaneous. . . . . . . . . . . . . . . . 202 587
Foreign net operating losses . . . . . . . . 1,784 2,253
Capital loss carryforward benefit. . . . . . 199 627
Valuation reserve. . . . . . . . . . . . . (1,983) (2,880)
Total asset. . . . . . . . . . . . . . . $19,277 $17,198
Deferred tax liabilities:
Property & equipment . . . . . . . . . . . . $14,730 $14,366
Miscellaneous. . . . . . . . . . . . . . . . 1,618 339
Total liability. . . . . . . . . . . . . $16,348 $14,705
</TABLE>
-39-
<PAGE>
<PAGE>
<TABLE>
The components of income before taxes on income are as follows:
(Amounts in Thousands)
<CAPTION>
------ Year Ended June 30 -----
2000 1999 1998
<S> <C> <C> <C>
United States . . . . . . . . . . . . . . . $73,717 $90,674 $87,327
Foreign . . . . . . . . . . . . . . . . . . 685 1,700 100
Total income before taxes. . . . . . $74,402 $92,374 $87,427
</TABLE>
<TABLE>
Taxes on income are composed of the following items:
(Amounts in Thousands)
<CAPTION>
------ Year Ended June 30 -----
2000 1999 1998
<S> <C> <C> <C>
Currently payable:
Federal. . . . . . . . . . . . . . . . $22,110 $26,347 $29,363
Foreign. . . . . . . . . . . . . . . . 192 565 224
State. . . . . . . . . . . . . . . . . 4,074 5,333 3,650
Total current. . . . . . . . . . . . 26,376 32,245 33,237
Deferred Federal. . . . . . . . . . . . . . (436) 404 (837)
Total taxes on income. . . . . . . . $25,940 $32,649 $32,400
</TABLE>
<TABLE>
A reconciliation of the statutory U.S. income tax rate to the Company's
effective income tax rate follows:
(Amounts in Thousands)
<CAPTION>
-------------- Year Ended June 30 --------------
2000 1999 1998
Amount % Amount % Amount %
<S> <C> <C> <C> <C> <C> <C>
Taxes computed at statutory rate. . . . . . $26,041 35.0% $32,331 35.0% $30,600 35.0%
State income taxes,
net of Federal income tax benefit . . . . 2,648 3.6 3,466 3.7 2,373 2.7
Foreign tax effect. . . . . . . . . . . . . (240) (0.3) (595) (0.6) (35) --
Capital loss benefit. . . . . . . . . . . . (427) (0.6) (1,586) (1.7) -- --
Tax-exempt interest income. . . . . . . . . (1,448) (2.0) (1,412) (1.5) (454) (0.5)
Other-net . . . . . . . . . . . . . . . . . (634) (0.8) 445 0.4 (84) (0.1)
Total taxes on income. . . . . . . . . $25,940 34.9% $32,649 35.3% $32,400 37.1%
</TABLE>
Cash payments for income taxes, net of refunds, were in thousands, $29,826,
$28,884 and $28,183 in 2000, 1999 and 1998, respectively.
-40-
<PAGE>
<PAGE>
NOTE 10 COMMON STOCK
On a fiscal year basis, shares of Class B Common Stock are entitled to an
additional $.02 per share dividend more than the dividends paid on Class A
Common Stock, provided that dividends are paid on the Company's Class A Common
Stock. The owners of both Class A and Class B Common Stock are entitled to
share pro-rata, irrespective of class, in the distribution of the Company's
available assets upon dissolution.
Owners of Class B Common Stock are entitled to elect, as a class, one member of
the Company's Board of Directors. In addition, owners of Class B Common Stock
are entitled to full voting powers, as a class, with respect to any
consolidation, merger, sale, lease, exchange, mortgage, pledge, or other
disposition of all or substantially all of the Company's fixed assets, or
dissolution of the Company. Otherwise, except as provided by statute with
respect to certain amendments to the Articles of Incorporation, the owners of
Class B Common Stock have no voting rights, and the entire voting power is
vested in the Class A Common Stock, which has one vote per share. The Habig
family owns directly or shares voting power in excess of 50% of the Class A
Common Stock of Kimball International, Inc. The owner of a share of Class A
Common Stock may, at their option, convert such share into one share of Class B
Common Stock at any time.
If any dividends are not paid on shares of the Company's Class B Common Stock
for a period of thirty-six consecutive months, or if at any time the number of
shares of Class A Common Stock issued and outstanding is less than 15% of the
total number of issued and outstanding shares of both Class A and Class B Common
Stock, then all shares of Class B Common Stock shall automatically have the same
rights and privileges as the Class A Common Stock, with full and equal voting
rights and with equal rights to receive dividends as and if declared by the
Board of Directors.
-41-
<PAGE>
<PAGE>
NOTE 11 QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
Quarterly financial information is summarized as follows:
(Amounts in Thousands, Except for Per Share Data)
<CAPTION>
------------------ Three Months Ended --------------
September 30 December 31 March 31 June 30
<S> <C> <C> <C> <C>
2000:
Net Sales. . . . . . . . . . . . . . . . $278,402 $294,275 $309,495 $318,773
Gross Profit . . . . . . . . . . . . . . 76,775 82,468 80,802 86,946
Net Income . . . . . . . . . . . . . . . 11,559 12,227 11,551 13,125
Basic Earnings Per Share:
Class A . . . . . . . . . . . . . . . . $.28 $.30 $.28 $.33
Class B . . . . . . . . . . . . . . . . .29 .30 .29 .33
Diluted Earnings Per Share:
Class A . . . . . . . . . . . . . . . . $.28 $.30 $.28 $.33
Class B . . . . . . . . . . . . . . . . .29 .30 .29 .33
1999:
Net Sales. . . . . . . . . . . . . . . . $264,646 $280,080 $288,054 $274,187
Gross Profit . . . . . . . . . . . . . . 78,557 83,053 86,433 80,373
Net Income . . . . . . . . . . . . . . . 12,563 14,935 15,189 17,038
Basic Earnings Per Share:
Class A . . . . . . . . . . . . . . . . $.31 $.36 $.37 $.42
Class B . . . . . . . . . . . . . . . . .31 .37 .38 .42
Diluted Earnings Per Share:
Class A . . . . . . . . . . . . . . . . $.30 $.36 $.37 $.42
Class B . . . . . . . . . . . . . . . . .31 .37 .38 .42
1998:
Net Sales. . . . . . . . . . . . . . . . $245,857 $264,524 $265,001 $256,935
Gross Profit . . . . . . . . . . . . . . 74,280 79,952 77,732 76,975
Net Income . . . . . . . . . . . . . . . 13,029 15,485 13,702 12,811
Basic Earnings Per Share:
Class A . . . . . . . . . . . . . . . . $.31 $.37 $.33 $.31
Class B . . . . . . . . . . . . . . . . .31 .38 .33 .31
Diluted Earnings Per Share:
Class A . . . . . . . . . . . . . . . . $.31 $.36 $.33 $.30
Class B . . . . . . . . . . . . . . . . .31 .37 .33 .31
Net income in the second quarter of fiscal 1998 was increased by, in thousands, $1,008 or $0.02 per share,
representing the gain on the sale of real estate. Net income in the third quarter of fiscal 1998 was
increased by, in thousands, $616 or $0.01 per share, from the gain on the sale of a stock investment of which
the Company held a minor interest. Net income in the second quarter of fiscal 1999 was increased by, in
thousands, $1,337 or $0.03 per share, representing the gain on the sale of a stock investment of which the
Company held a minor interest. Net income in the fourth quarter of fiscal 1999 was increased by, in
thousands, $2,674 or $0.06 per share, representing the gain on the sale of two subsidiaries.
</TABLE>
NOTE 12 SHORT-TERM INVESTMENTS
The Company's short-term investment portfolio consists of available-for-sale
securities in fiscal year 2000 and both available-for-sale and held-to-maturity
securities in fiscal year 1999. Fair values are estimated based upon the
quoted market values of those, or similar instruments. Carrying costs reflect
the original purchase price, with discounts and premiums amortized over the life
of the security.
Available-for-sale securities are reported at fair value and consist primarily
of government and municipal obligations with fair values and carrying costs of,
in thousands, $79,366 and $79,852 at June 30, 2000, compared to $114,597, and
$114,523 at June 30, 1999, respectively. Unrealized holding gains and losses at
June 30, 2000 were, in thousands, $22 and ($508), compared to $277 and ($203) at
June 30, 1999, respectively. All available-for-sale securities mature within a
four year period.
Proceeds from sales of available-for-sale securities were, in thousands, $73,087
and $17,273 for the years ended June 30, 2000 and 1999, respectively. Gross
realized gains and losses on the sale of available-for-sale securities at
June 30, 2000 were, in thousands, $107 and ($283) respectively, compared to
gross realized gains and losses of, in thousands, $172 and ($2) respectively, at
June 30, 1999. The cost was determined on each individual security in
computing the realized gain.
Held-to-maturity securities are reported at carrying cost and consist primarily
of government obligations with fair value equal to carrying cost. The Company
did not have any held-to-maturity securities at June 30, 2000. At June 30,
1999 held-to-maturity securities were, in thousands, $399. Unrealized holding
gains and losses were immaterial at June 30, 1999.
-42-
<PAGE>
<PAGE>
NOTE 13 ACCRUED EXPENSES
<TABLE>
Accrued expenses at June 30 consist of:
(Amounts in Thousands)
<CAPTION>
------ June 30 -------
2000 1999
<S> <C> <C>
Income taxes . . . . . . . . . . . . . . . . . $ 1,027 $ 2,292
Property taxes . . . . . . . . . . . . . . . . 4,912 4,290
Compensation . . . . . . . . . . . . . . . . . 25,895 31,938
Retirement plan. . . . . . . . . . . . . . . . 8,904 10,529
Other expenses . . . . . . . . . . . . . . . . 35,196 30,456
Total accrued expenses. . . . . . . . . . . . $75,934 $79,505
</TABLE>
NOTE 14 SEGMENT AND GEOGRAPHIC AREA 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 which 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 segments and
their principal products and services are as follows:
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 manufacturer basis
include store fixtures, television cabinets and stands, audio speaker systems,
residential furniture and furniture components. Intersegment sales are
insignificant.
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, telecommunications,
computer, and medical industries. Intersegment sales are insignificant.
Included in the Electronic Contract Assemblies Segment are sales to one customer
totaling in millions, $205.0, $178.9 and $168.2 in 2000, 1999 and 1998,
respectively, representing 17%, 16% and 16% of consolidated net sales.
The accounting policies of the segments are the same as those described in the
"Summary of Significant Accounting Policies" with additional explanation of
segment allocations as follows. Corporate operating costs are allocated to the
segments based on the extent to which each segment uses a centralized function,
where practicable. However, certain common costs have been allocated among
segments less precisely than would be required for stand alone financial
information prepared in accordance with generally accepted accounting
-43-
<PAGE>
<PAGE>
principles. Unallocated corporate assets include cash and cash equivalents,
short-term investments and other assets not allocated to segments.
The Company evaluates segment performance based upon several financial measures,
although the two most common include economic profit, which incorporates a
segment's cost of capital when evaluating financial performance, and net income.
Pursuant to SFAS 131, net income is reported for each segment as it is the
measure most consistent with the measurement principles used in the Company's
consolidated financial statements.
<TABLE>
<CAPTION>
2000
--------------------------------------------------------------
Furniture Electronic Unallocated
and Contract Corporate and
(Amounts in Thousands) Cabinets Assemblies Eliminations Consolidated
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales . . . . . . . . . . . . . $833,801 $367,063 $ 81 $1,200,945
Depreciation and amortization . . . 32,972 10,829 -- 43,801
Interest income . . . . . . . . . . -- -- 4,709 4,709
Interest expense . . . . . . . . . 284 -- 252 536
Taxes on income . . . . . . . . . . 16,237 9,221 482 25,940
Net income. . . . . . . . . . . . . 27,656 14,218 6,588 48,462
Total assets . . . . . . . . . . . 458,946 181,147 83,558 723,651
Capital expenditures . . . . . . . 44,055 17,069 -- 61,124
</TABLE>
<TABLE>
<CAPTION>
1999
--------------------------------------------------------------
Furniture Electronic Unallocated
and Contract Corporate and
(Amounts in Thousands) Cabinets Assemblies Eliminations Consolidated
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales . . . . . . . . . . . . . $771,528 $335,395 $ 44 $1,106,967
Depreciation and amortization . . . 29,763 9,947 -- 39,710
Interest income . . . . . . . . . . -- -- 6,554 6,554
Interest expense . . . . . . . . . 412 -- 64 476
Taxes on income . . . . . . . . . . 19,566 11,856 1,227 32,649
Net income. . . . . . . . . . . . . 34,569 18,185 6,971 59,725
Total assets . . . . . . . . . . . 389,725 140,905 130,756 661,386
Capital expenditures . . . . . . . 67,141 9,427 -- 76,568
</TABLE>
<TABLE>
<CAPTION>
1998
--------------------------------------------------------------
Furniture Electronic Unallocated
and Contract Corporate and
(Amounts in Thousands) Cabinets Assemblies Eliminations Consolidated
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales . . . . . . . . . . . . . $706,679 $325,602 $ 36 $1,032,317
Depreciation and amortization . . . 25,719 8,087 -- 33,806
Interest income . . . . . . . . . . -- -- 9,458 9,458
Interest expense . . . . . . . . . 386 -- 38 424
Taxes on income . . . . . . . . . . 17,917 10,932 3,551 32,400
Net income. . . . . . . . . . . . . 27,904 18,050 9,073 55,027
Total assets . . . . . . . . . . . 331,247 128,165 170,226 629,638
Capital expenditures . . . . . . . 29,000 12,313 -- 41,313
</TABLE>
-44-
<PAGE>
Geographic Area
<TABLE>
The following geographic area data include net sales based on product shipment
destination and long-lived assets based on physical location. Long-lived
assets include property and equipment and other long-term assets such as
software.
(Amounts in Thousands)
<CAPTION>
--------- Year Ended June 30 ---------
2000 1999 1998
<S> <C> <C> <C>
Net Sales:
United States. . . . . . . . . . . . . . . . $1,104,705 $1,022,943 $ 977,716
Foreign. . . . . . . . . . . . . . . . . . . 96,240 84,024 54,601
Total Net Sales . . . . . . . . . . . . . $1,200,945 $1,106,967 $1,032,317
Long-Lived Assets:
United States. . . . . . . . . . . . . . . . $ 261,792 $ 233,132 $ 199,043
Foreign. . . . . . . . . . . . . . . . . . . 27,328 26,172 7,762
Total Long-Lived Assets . . . . . . . . . $ 289,120 $ 259,304 $ 206,805
</TABLE>
-45-
<PAGE>
<PAGE>
NOTE 15 EARNINGS PER SHARE
Effective December 31, 1997, the Company adopted Financial Accounting Standards
Board Statement No. 128, Earnings Per Share. Earnings per share are computed
using the two-class common stock method due to the dividend preference of Class
B Common Stock. Basic earnings per share are based on the weighted average
number of shares outstanding during the period. Diluted earnings per share are
based on the weighted average number of shares outstanding plus the assumed
issuance of common shares for all potentially dilutive securities. Earnings per
share of Class A and Class B Common Stock are as follows:
<TABLE>
<CAPTION>
2000
----------------------------------------------------------
Available Average Earnings Per Share
Income Shares Class A Class B
--------- ------- ------- -------
(Amounts in Thousands, Except Per Share Data)
<S> <C> <C> <C> <C>
Net income . . . . . . . . . . . . . . . . . . $48,462
Distributed earnings:
Class A dividends declared . . . . . . . . . (8,863) $ .620
Class B dividends declared . . . . . . . . . (16,520) $ .640
Undistributed basic earnings . . . . . . . . . $23,079 40,234 .574 .574
Basic Earnings Per Share . . . . . . . . . . . $1.194 $1.214
Basic Earnings Per Share (rounded) . . . . . . $1.19 $1.21
Dilutive effect of stock options . . . . . . . (74) 115
Undistributed diluted earnings . . . . . . . . $23,005 40,349 .570 .570
Diluted Earnings Per Share . . . . . . . . . . $1.190 $1.210
Diluted Earnings Per Share (rounded) . . . . . $1.19 $1.21
1,377,270 of the 2,020,697 average outstanding stock options were antidilutive, and were excluded from the
dilutive computation for this period.
</TABLE>
<TABLE>
<CAPTION>
1999
----------------------------------------------------------
Available Average Earnings Per Share
Income Shares Class A Class B
--------- ------- ------- -------
(Amounts in Thousands, Except Per Share Data)
<S> <C> <C> <C> <C>
Net income . . . . . . . . . . . . . . . . . . $59,725
Distributed earnings:
Class A dividends declared . . . . . . . . . (8,891) $ .620
Class B dividends declared . . . . . . . . . (16,752) $ .640
Undistributed basic earnings . . . . . . . . . $34,082 40,624 .839 .839
Basic Earnings Per Share . . . . . . . . . . . $1.459 $1.479
Basic Earnings Per Share (rounded) . . . . . . $1.46 $1.48
Dilutive effect of stock options . . . . . . . (138) 215
Undistributed diluted earnings . . . . . . . . $33,944 40,839 .831 .831
Diluted Earnings Per Share . . . . . . . . . . $1.451 $1.471
Diluted Earnings Per Share (rounded) . . . . . $1.45 $1.47
981,902 of the 1,901,947 average outstanding stock options were antidilutive, and were excluded from the
dilutive computation for this period.
</TABLE>
-46-
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
1998
----------------------------------------------------------
Available Average Earnings Per Share
Income Shares Class A Class B
--------- ------- ------- -------
(Amounts in Thousands, Except Per Share Data)
<S> <C> <C> <C> <C>
Net income . . . . . . . . . . . . . . . . . . $55,027
Distributed earnings:
Class A dividends declared . . . . . . . . . (8,483) $ .58875
Class B dividends declared . . . . . . . . . (16,329) $ .60500
Undistributed basic earnings . . . . . . . . . $30,215 41,417 .72953 .72953
Basic Earnings Per Share . . . . . . . . . . . $1.31828 $1.33453
Basic Earnings Per Share (rounded) . . . . . . $1.32 $1.33
Dilutive effect of stock options . . . . . . . (240) 397
Undistributed diluted earnings . . . . . . . . $29,975 41,814 .71687 .71687
Diluted Earnings Per Share . . . . . . . . . . $1.30562 $1.32187
Diluted Earnings Per Share (rounded) . . . . . $1.31 $1.32
468,891 of the 1,685,007 average outstanding stock options were antidilutive, and were excluded from the
dilutive computation for this period.
</TABLE>
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<PAGE>
<PAGE>
NOTE 16 COMPREHENSIVE INCOME
Effective July 1, 1998, the Company adopted Financial Accounting Standards Board
Statement No. 130, Reporting Comprehensive Income, which establishes new rules
for the reporting and display of comprehensive income and its components;
however, the adoption had no impact on the Company's net income or Share Owners'
Equity. Comprehensive income includes all changes in equity during a period
except those resulting from investments by, and distributions to, Share Owners.
Comprehensive income consists of net income and other comprehensive income,
which includes the net change in unrealized gains and losses on securities, and
foreign currency translation adjustments. The Company has elected to disclose
comprehensive income in the Consolidated Statements of Share Owners' Equity.
Accumulated balances of other comprehensive income are as follows:
<TABLE>
<CAPTION>
Accumulated Other Comprehensive Income
(Net of tax if applicable)
Foreign Net Change in Accumulated
Currency Unrealized Gains Other
Translation and Losses on Comprehensive
Adjustments Securities Income
------------ ---------------- -------------
<S> <C> <C> <C>
Balance at June 30, 1997. . $1,721 $ (73) $ 1,648
Current year change . . . . (186) 2,247 2,061
Balance at June 30, 1998. . 1,535 2,174 3,709
Current year change . . . . (297) (2,100) (2,397)
Balance at June 30, 1999. . 1,238 74 1,312
Current year change . . . . (426) (560) (986)
Balance at June 30, 2000. . $ 812 $ (486) $ 326
</TABLE>
-48-
<PAGE>
<PAGE>
Item 9. - Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures
None
PART III
Item 10. - Directors and Executive Officers of the Registrant
Directors
The information called for by this item with respect to Directors is
incorporated by reference to the material contained in the Registrant's Proxy
Statement for its annual meeting of Share Owners to be held October 17, 2000
under the captions - "Election of Directors"; "Information Concerning the
Board of Directors and Committees"; and "Compensation of Executive Officers."
Executive Officers of the Registrant
The information called for by this item with respect to Executive Officers
of the Registrant is included at the end of Part I and is incorporated herein
by reference.
Item 11. - Executive Compensation
The information called for by this item is incorporated by reference to
the material contained in the Registrant's Proxy Statement for its annual
meeting of Share Owners to be held October 17, 2000 under the caption
"Compensation of Executive Officers."
Item 12. - Security Ownership of Certain Beneficial Owners and Management
The information called for by this item is incorporated by reference to
the material contained in the Registrant's Proxy Statement for its annual
meeting of Share Owners to be held October 17, 2000 under the caption
"Share Ownership Information."
Item 13. - Certain Relationships and Related Transactions
The information called for by this item is incorporated by reference to
the material contained in the Registrant's Proxy Statement for its annual
meeting of Share Owners to be held October 17, 2000 under the caption
"Compensation Committee Interlocks and Insider Participation."
-49-
<PAGE>
<PAGE>
PART IV
<TABLE>
Item 14. - Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) The following documents are filed as part of this Report:
1. Financial Statements:
The following consolidated financial statements of the Registrant are found
in Item 8 and incorporated herein.
<CAPTION>
Page
<S> <C>
Report of Management . . . . . . . . . . . . . . . . . . . . . . . . 27
Report of Independent Public Accountants . . . . . . . . . . . . . . 28
Consolidated Balance Sheets
as of June 30, 2000 and 1999 . . . . . . . . . . . . . . . . . . 29
Consolidated Statements of Income
for the Three Years Ended June 30, 2000 . . . . . . . . . . . . . 30
Consolidated Statements of Cash Flows
for the Three Years Ended June 30, 2000 . . . . . . . . . . . . . 31
Consolidated Statements of Share Owners' Equity
for the Three Years Ended June 30, 2000 . . . . . . . . . . . . . 32
Notes to Consolidated Financial Statements . . . . . . . . . . . . . 33-48
2. Financial Statement Schedules:
<CAPTION>
Page
<S> <C>
II. Valuation and Qualifying Accounts
for the Three Years Ended June 30, 2000 . . . . . . . . . 53
Schedules other than those listed above are omitted because they are either
not required or not applicable, or the required information is presented in the
Consolidated Financial Statements.
</TABLE>
3. Exhibits
See the Exhibit Index on page 54 for a list of the exhibits filed or
incorporated herein as a part of this report.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the fourth quarter of the 2000
fiscal year.
-50-
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
by Robert F. Schneider
ROBERT F. SCHNEIDER
Executive Vice President,
Chief Financial Officer
and Assistant Treasurer
September 4, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
Douglas A. Habig
DOUGLAS A. HABIG
Chief Executive Officer
September 6, 2000
James C. Thyen
JAMES C. THYEN
President
September 5, 2000
Robert F. Schneider
ROBERT F. SCHNEIDER
Executive Vice President,
Chief Financial Officer
and Assistant Treasurer
September 4, 2000
Roy W. Templin
ROY W. TEMPLIN
Vice President, Finance
Chief Accounting Officer
September 5, 2000
-51-
<PAGE>
<PAGE>
Signature Signature
THOMAS L. HABIG* DOUGLAS A. HABIG*
Director Director
JOHN B. HABIG* JAMES C. THYEN*
Director Director
JOHN T. THYEN* JACK R. WENTWORTH*
Director Director
GARY P. CRITSER* BRIAN K. HABIG*
Director Director
CHRISTINE M. VUJOVICH* POLLY B. KAWALEK*
Director Director
HARRY ("HANK") W. BOWMAN*
Director
* The undersigned does hereby sign this document on my behalf pursuant
to powers of attorney duly executed and filed with the Securities and
Exchange Commission, all in the capacities as indicated:
Date
September 6, 2000 Ronald J. Thyen
RONALD J. THYEN
Director
September 8, 2000 Alan B. Graf, Jr.
ALAN B. GRAF, JR.
Director
Attorneys-In-Fact
-52-
<PAGE>
<TABLE>
KIMBALL INTERNATIONAL, INC.
Schedule II. - Valuation and Qualifying Accounts
(Amounts in Thousands)
<CAPTION>
Additions
Balance at Charged Charged Writeoffs Balance
Beginning to to Other and at End
Description of Year Expense Accounts Recoveries of Year
<S> <C> <C> <C> <C> <C>
YEAR ENDED JUNE 30, 2000:
Valuation Allowances:
Receivables . . . . . . $3,816 $ 1,414 $ 222 $ (739) $4,713
Deferred Tax Asset. . . $2,880 $ (897) --- --- $1,983
YEAR ENDED JUNE 30, 1999:
Valuation Allowance:
Receivables . . . . . . $4,023 $ 662 $ 311 $(1,180) $3,816
Deferred Tax Asset. . . $4,794 $(1,914) $ --- $ --- $2,880
YEAR ENDED JUNE 30, 1998:
Valuation Allowances:
Receivables . . . . . . $4,017 $ 731 $(104) $ (621) $4,023
Deferred Tax Asset. . . $4,438 $ 356 --- --- $4,794
** Fiscal year 1999 reductions to the deferred tax asset valuation allowance relate primarily to the
utilization of capital loss carryforwards and related reversal of the valuation allowance as a result of the
sale of two subsidiaries and the sale of a stock investment of which the Company held a minor interest.
</TABLE>
-53-
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
KIMBALL INTERNATIONAL, INC.
INDEX OF EXHIBITS
<S> <C>
3(a) Amended and restated Articles of Incorporation of the Company.
(Incorporated by reference to the Company's Form 10-Q for
the period ended December 31, 1997.)
3(b) Restated By-laws of the Company.
10(a)* Supplemental Bonus Plan.
(Incorporated by reference to the Company's Form 10-K for the
year ended June 30, 1999.)
10(b)* Agreement with Directors who are also employees of the Company
concerning $25,000 payment to a named beneficiary upon death.
(Incorporated by reference to the Company's Form 10-K for the
year ended June 30, 1997.)
10(c)* 1996 Stock Incentive Program. (Incorporated by reference to the
Company's Schedule 14A Definitive Proxy Statement and Notice of
Annual Meeting of Share Owners held October 22, 1996.)
10(d)* 1996 Director Stock Compensation and Option Plan. (Incorporated
by reference to the Company's Schedule 14A Definitive Proxy
Statement and Notice of Annual Meeting of Share Owners held
October 22, 1996.)
10(e)* Form of Split Dollar Life Insurance Contract.
10(f)* Supplemental Executive Retirement Plan.
10(g) Credit Agreement with NBD Bank, N.A. (Incorporated
by reference to the Company's Form 10-K for the year ended
June 30, 1999.)
11 Computation of Earnings Per Share. (Incorporated by
reference to Note 15, Earnings Per Share, of the Notes
to Consolidated Financial Statements, which can be found
in Item 8.)
21 Significant Subsidiaries of the Company.
23 Consent of Independent Public Accountants.
24 Power of Attorney.
27 Financial Data Schedule.
* = constitutes management contract or compensatory arrangement.
</TABLE>
-54-
