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Kimball International, Inc. results for 1st quarter fiscal year 2014

Wednesday 6 November 2013

Kimball International, Inc. today reported net sales of $317.4 million and net income of $9.2 million, or $0.24 per Class B diluted share, for the first quarter of fiscal year 2014 which ended September 30, 2013. Consolidated net sales in the first quarter of fiscal year 2014 increased 10% from the prior year first quarter on increased net sales in both the Electronic Manufacturing Services (EMS) segment and the Furniture segment.
First quarter gross profit as a percent of net sales increased 0.1 of a percentage point from the prior year first quarter. A slight decline in the gross profit percentage in both segments was more than offset by the favorable impact of a sales mix shift towards the Furniture segment which carries a higher margin.
Consolidated selling and administrative expenses in the first quarter of fiscal year 2014 increased 12% in absolute dollars compared to the prior year. The increased costs were primarily due to higher incentive compensation costs, increased salary costs, higher sales and marketing costs, and higher commissions related to increased sales in the Furniture segment. In addition, the Company classified one of its three aircraft as held for sale during the first quarter of fiscal year 2014 and recorded a $1.2 million pre-tax impairment charge ($0.7 million after-tax impact).
James C. Thyen, President and Chief Executive Officer, stated, "Our operating performance in the Furniture segment in the first quarter reflects increased demand, the effective execution of our strategy, and the commitment of our entire Furniture team to improve results. Our Furniture segment returned to profitability in the first quarter, after recording losses for the second half of last fiscal year. Our focus on accelerating top-line growth in the Furniture segment was evident in the first quarter as the orders received during the quarter increased 18% over the prior year first quarter. Overall, we are pleased with the progress being made in the Furniture segment."
Mr. Thyen continued, "In the EMS segment, the automotive end market is benefiting from relative strength in the U.S. market and improvement in the Chinese market which contributed to a double digit increase in our first quarter sales to the automotive market compared to last year. Industrial market demand is also improving. While first quarter sales increased over the prior year first quarter in this segment, sales were down compared to the third and fourth quarters of fiscal year 2013 when we surpassed our 4% operating goal. The lower absorption of our fixed costs as a result of the lower revenue was the primary driver for missing our 4% operating income goal in the first quarter."
Fiscal year 2014 first quarter net sales in the Furniture segment increased 14% compared to the prior year on increased net sales of both office and hospitality furniture. All vertical markets within the office furniture industry increased over the prior year except for a slight decline in the federal and state governments. Sequentially, sales to the federal and state governments increased compared to the fourth quarter of fiscal year 2013. Furniture segment orders increased 18% in the first quarter of fiscal year 2014 when compared to the prior year.
Gross profit as a percent of net sales declined 0.1 of a percentage point in the Furniture segment in the first quarter of fiscal year 2014 when compared to the prior year. The operational improvements achieved in this segment and benefits realized from pricing adjustments were offset by an unfavorable shift in sales mix, higher freight costs and an increase in the LIFO inventory reserve.
Higher incentive compensation costs, increased salary costs, higher sales and marketing costs, and higher commissions resulting from the increased sales contributed to a 9% increase in selling and administrative expenses in the Furniture segment for the first quarter of fiscal year 2014 compared to the prior year. As a percent of sales, selling and administrative costs in the Furniture segment decreased 1.3 percentage points for the first quarter of fiscal year 2014 compared to the prior year.

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