Kimball reports Q2 results
Feb 06, 2008
Kimball International, Inc. (NASDAQ: KBALB) reported net sales of $347.8 million and income from continuing operations of $4.2 million, or $0.11 per Class B diluted share, for the second quarter of fiscal year 2008, which ended December 31, 2007.
Consolidated second quarter fiscal year 2008 net sales included:
-- $37.5 million of net sales from a fiscal year 2007 acquisition in the Electronic Manufacturing Services (EMS) segment
-- Approximately $32.1 million reduction in net sales due to a change in the price of finished product sold to a customer in the EMS segment (The cost of raw material which the Company purchases from this same customer was reduced by the same amount, and therefore, this pricing change had no impact on income from continuing operations.)
-- No sales of contract furniture private label products during the second quarter of fiscal year 2008 due to a planned exit of this furniture product line, compared to $3.8 million of sales in the same quarter of the prior year
-- Refer to the Non-GAAP net sales numbers disclosed in the above table which adjust for these three items
-- Second quarter fiscal year 2008 net sales increased 4% in the Furniture segment and 8% in the EMS segment when compared to the same quarter a year ago.
-- Consolidated second quarter gross profit as a percent of net sales declined compared to last year due to customer pricing pressures and supply chain cost increases in the Furniture segment; excess capacity costs and inefficiencies in the EMS segment in part resulting from a large number of product transfers from facility closures; and to a lesser extent a shift in sales between the segments as the EMS segment which carries a lower margin was a larger percentage of the overall consolidated sales during the current year second quarter. Partially offsetting these declines, the customer pricing adjustment discussed above favorably impacted the gross margin as a percent of sales, while it had no impact on the gross margin dollars.
-- Consolidated second quarter SG&A increased in dollars over the prior year due primarily to the incremental SG&A costs of the fiscal year 2007 acquisition in the EMS segment. As a percent of sales, SG&A costs were flat in the second quarter of fiscal year 2008 when compared to the prior year due to the leverage of the higher sales volume.
-- Pre-tax restructuring costs in the second quarter of fiscal year 2008 totaled $0.6 million primarily related to costs to exit two facilities within the EMS segment and accelerated software amortization related to the reorganization of business functions in the Furniture segment. This compared to $0.3 million of pre-tax restructuring costs in the second quarter of fiscal year 2007.
-- Other income for the second quarter declined $2.5 million from the prior year primarily as a result of lower pre-tax interest income on lower cash and investment balances and the recording of a loss on investments for the Company's Supplemental Employee Retirement Plan (SERP) resulting from the normal revaluation of the investments to fair value for the quarter. The loss on the SERP investment that was recognized in Other income was exactly offset by a gain on the SERP liability which was recorded in SG&A as compensation expense in accordance with U.S. Generally Accepted Accounting Principles (GAAP) with no effect on net earnings.
-- Company share repurchases of 2.0 million Class B shares in the preceding two quarters had less than $0.01 impact on the current year second quarter diluted Class B earnings per share.
Operating cash flow for the second quarter of fiscal year 2008 was $12.4 million compared to $11.4 million in the second quarter of last year. The Company's net cash position from an aggregate of cash and short-term investments less short-term borrowings decreased to $56.6 million at December 31, 2007 compared to $80.4 million at June 30, 2007 primarily related to Company share repurchases.
James C. Thyen, Chief Executive Officer and President, stated, "Our EMS segment stumbled in the second quarter resulting in a net loss in the segment for the period. During the quarter we completed the move of product from our Gaylord, Michigan facility to other facilities within the segment and ceased operations as part of the restructuring plan announced in June 2007. We experienced some inefficiencies and excess costs related to these actions. In addition, in October we announced the consolidation and exit of a second EMS facility in Hibbing, Minnesota which is scheduled to be complete late in fiscal year 2008. These actions are necessary to reduce excess capacity and in the long term improve our profitability within this segment."