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Kimball announces 2nd quarter sales down 1% - Government sales decline.

Tuesday 5 February 2013

Kimball International, Inc. today reported net sales of $295.1 million and net income of $4.2 million, or $0.11 per Class B diluted share, for the second quarter of fiscal year 2013 which ended December 31, 2012.
Consolidated net sales in the second quarter of fiscal year 2013 decreased 1% from the prior year second quarter as increased net sales in the Electronic Manufacturing Services (EMS) segment were more than offset by lower net sales in the Furniture segment. The Furniture segment saw growth in several market verticals offset by a double digit decline in office furniture sales to the federal government and a decline in hospitality furniture sales due to the prior year including sales from two unusually large projects.
Second quarter gross profit as a percent of net sales improved 0.4 percentage points from the prior year second quarter on improved margins in both the EMS segment and the Furniture segment. The Company recorded a $1.1 million inventory reserve in the EMS segment in the second quarter of fiscal year 2013 relating to a customer that notified the Company they are going out of business. Sales to this customer were immaterial.
James C. Thyen, President and Chief Executive Officer, stated, "We were very pleased with the strong second quarter results in spite of the earnings charges for the customer that notified us they are going out of business and the impaired investment in a start-up company. These two charges had an after-tax impact of 4 cents per share and offset nice progress in the EMS segment. During the second quarter, our EMS segment continued its trend of gaining traction with double-digit sales growth and improved margins. We again saw sales growth to customers in the automotive market during the quarter as the overall U.S. automotive industry experienced steady growth in calendar year 2012. Sales to the industrial and public safety vertical markets also increased compared to last year partially resulting from the ramp up of sales to new customers. Quote activity in this segment has been strong, and we are optimistic in this segment going into the second half of our fiscal year."
Mr. Thyen concluded, "Sales in the Furniture segment declined compared to last year primarily due to lower office furniture sales to the federal government, and the effect of higher sales in hospitality furniture last year resulting from two unusually large projects. We were encouraged, though, by a 7% increase in orders received during the quarter over last year. This increase is in spite of a continued decline in orders from the federal government and continued fiscal uncertainty in Washington, D.C. which has caused customers to delay implementation of planned projects. We are heading into the normal seasonal slowdown within the office furniture industry and anticipate our third quarter to again be challenging. We continue to aggressively manage our costs to align with the fluctuating volumes within this segment."
Fiscal year 2013 second quarter net sales in the EMS segment increased 11% compared to the second quarter of the prior year related to sales growth to customers in the automotive, industrial and public safety industries. Sales to customers in the medical industry declined in the second quarter compared to the prior year.
Fiscal year 2013 second quarter net sales in the Furniture segment declined 12% compared to the prior year on decreased net sales of both hospitality and office furniture. Sales of hospitality product were lower in the second quarter of the current year primarily due to two unusually large projects that began shipping in the second quarter of last year. Sales of office furniture product to the federal and state governments lagged prior year with the largest decline to the federal government.

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