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Kimball International, Inc. Reports 1st Quarter 2011 results

Friday 5 November 2010

Kimball International, Inc. today reported net sales of $294.7 million and net income of $0.5 million, for the first quarter of fiscal year 2011 which ended September 30, 2010. Net income for the fiscal year 2011 first quarter included $0.1 million of after-tax restructuring expense.
Net sales in the first quarter of fiscal year 2011 increased 7% in both the furniture and electronic manufacturing services segments. Sequentially, consolidated net sales in the first quarter of fiscal year 2011 increased 1% over the most recent fourth quarter as a 12% increase in net sales in the Furniture segment was partially offset by a 5% reduction in net sales in the EMS segment. First quarter gross profit as a percent of net sales declined in comparison to the prior year due to lower margins in the Furniture segment resulting primarily from competitive pricing pressures, commodity and freight cost increases and higher employee benefit costs. Consolidated first quarter selling and administrative expenses increased 3% compared to the prior year primarily due to higher advertising and product marketing costs and increased employee benefit costs. As a percent of sales, fiscal year 2011 first quarter consolidated selling and administrative expenses declined compared to the prior year. Other Income/Expense for the first quarter of fiscal year 2011 was income of $0.8 million compared to income of $2.0 million in the prior year first quarter. The reduction in income from the prior year was primarily related to volatility in the European foreign exchange rates which impact the EMS segment. The Company\'s effective tax rate of 7.3% for the current year first quarter was impacted by relatively low pre-tax income coupled with a favorable foreign deferred tax valuation allowance adjustment of $0.1 million. Operating cash flow for the first quarter of fiscal year 2011 was a cash outflow of $10.4 million compared to a cash inflow of $12.5 million in the first quarter of the prior year. The cash outflow in the current year first quarter was primarily driven by higher inventory levels in the EMS segment associated with customer requested shipping delays, the ramp up of certain programs, and the transfer of production among the Company\'s EMS facilities. The Company\'s cash and short-term investments declined to $53.3 million at September 30, 2010 compared to $67.8 million at June 30, 2010. Long-Term Debt including Current Maturities is $0.3 million. The Company had no short-term borrowings outstanding at September 30, 2010 or June 30, 2010.
James C. Thyen, Chief Executive Officer and President, stated, \"We were pleased to see our Furniture segment return to profitability in the first quarter. We have seen increased momentum in order rates of both office and hospitality furniture during the quarter. In our EMS segment, after posting two very strong quarters at the end of last fiscal year, this segment recorded a small net loss for the first quarter. We had unanticipated sharp demand changes of a few customer programs coupled with supply chain allocation. We chose to sustain our excellent service to our customers and incurred extra charges.” Mr. Thyen concluded, \"There continues to be economic uncertainty, but we are seeing some stability. We are well-positioned in our markets and intend to take advantage of market opportunities as they arise, sharpening our execution, while continuing to make investments for growth.\"

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