KIMBALL INTERNATIONAL, INC. | ||
(Exact name of registrant as specified in its charter) | ||
| Indiana | 35-0514506 | |
| (State or other jurisdiction of | (I.R.S. Employer Identification No.) | |
| incorporation or organization) | ||
| 1600 Royal Street, Jasper, Indiana | 47549-1001 | |
| (Address of principal executive offices) | (Zip Code) |
| (812) 482-1600 | ||
| Registrant's telephone number, including area code | ||
| Securities registered pursuant to Section 12(b) of the Act: | ||
| Title of each Class | Name of each exchange on which registered | |
| Class B Common Stock, par value $0.05 per share | The NASDAQ Stock Market LLC | |
Securities registered pursuant to Section 12(g) of the Act: | ||
| Class A Common Stock, par value $0.05 per share | ||
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes |
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes |
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 |
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o |
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this chapter) 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. |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. Large accelerated filero xNon-accelerated filer o Smaller reporting company o (Do not check if a smaller reporting company) |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes |
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Page No. | |||
| PART I | |||
| PART II | |||
| PART III | |||
| PART IV | |||
(Amounts in Thousands) 2008 2007 2006 Furniture Segment Branded Furniture Product Line $ 624,836 $ 602,903 $ 573,759 Contract Private Label Furniture Product Line -0- 11,059 38,830 Total Furniture Segment $ 624,836 $ 613,962 $ 612,589 Electronic Manufacturing Services Segment 727,149 672,968 496,706 Unallocated Corporate -0- -0- 254 Kimball International, Inc. $1,351,985 $1,286,930 $1,109,549GeneralAs used herein, the term "Company" refers to Kimball International, Inc., the Registrant, and its subsidiaries and referencesubsidiaries. Reference to a year relates to a fiscal year, ended June 30 of the year indicated, rather than a calendar year unless the context indicates otherwise. Additionally, references to the first, second, third, and fourth quarters refer to those respective quarters of the fiscal year indicated.The Company was incorporated in Indiana in 1939. The corporate headquarters is located at 1600 Royal Street, Jasper, Indiana.The Company provides a variety of products from its two business segments: the Electronic Manufacturing Services (EMS) segment and the Furniture segment. The EMS segment provides engineering and manufacturing services which utilize common production and support capabilities globally to a variety of industries globally. The EMS segment, formerly named the Electronic Contract Assemblies segment, was renamed during fiscal year 2008 to more accurately reflect the focus of the segment.medical, automotive, industrial control, and public safety industries. The Furniture segment provides furniture for the office and hospitality industries, sold under the Company's family of brand names. Production currently occurs in Company-owned or leased facilities located in the United States, Mexico, Thailand, China, Poland, Ireland, and theWales, United Kingdom. In the United States, the Company has facilities and showrooms in ten11 states and the District of Columbia.Sales by Product Line and SegmentSales from continuing operations by segment, after elimination of intersegment sales, for each of the three years in the period ended June 30, 20082011 were as follows:Sales of contract private label products decreased in conjunction with the planned exit of this product line.(Amounts in Thousands) 2011 2010 2009 Electronic Manufacturing Services segment $ 721,419 60 % $ 709,133 63 % $ 642,802 53 % Furniture segment 481,178 40 % 413,611 37 % 564,618 47 % Unallocated Corporate and Eliminations — — % 64 — % — — % Kimball International, Inc. $ 1,202,597 100 % $ 1,122,808 100 % $ 1,207,420 100 % Financial information by segment and geographic area for each of the three years in the period ended June 30, 20082011 is included in Note 1415 - Segment and Geographic Area Information of Notes to Consolidated Financial Statements and is incorporated herein by reference.SegmentsElectronic Manufacturing ServicesOverviewThe Company entered thebegan producing electronic manufacturing services market in 1985 with knowledge acquired from the production ofassemblies, circuit boards, and wiring harnesses for electronic organs which were first producedand keyboards in 1963.1961 and has since grown and evolved with the EMS industry. The Company's current focus is on electronic assemblies that have high durability, quality, reliability, and regulatory compliance requirements such asprimarily in medical, automotive, medical, industrial control, and public safety applications. The Company's business development managers work to build long-term relationships that create value for customers, suppliers, employees and Share Owners, and this quest is supported globally from locations in six countries through prototype, new product development and introduction, supply chain management, test development, complete system assembly, and repair and reverse logistics services.Electronics and electro-mechanical products (electronic assemblies) are sold globally on a contract basis and produced to customers' specifications. The Company's engineering and manufacturing services primarily entailentail:production and testing of printed circuit board assemblies (PCBAs);industrialization and automation of the insertionmanufacturing processes;product and attachment of microchipsprocess validation and other electronic capacitors and conductors in ever more complex and smaller designs onto multi-layered circuit boards, the production of wiring harnesses and other electronic equipment, assembling such into subassemblies or final products, qualification;testing of products under a series of harsh conditions, and conditions;assembly and packaging of electronic and other related products, all to the specificationsproducts; and designs of customers. complete product life cycle management.Integrated throughout this segment is customer program management over the life cycle of the product along with supply chain3management, which affords customers the opportunity to focus their attention and resources to sales, marketing, and product development as they sell their unique end products under their brand name into various markets and industries.
In an effort to improve profitability and increase Share Owner value while remaining committed to its business model of being market driven and customer centered, during the third quarter of fiscal year 2008, the Company approved a restructuring plan designed to more appropriately align its workforce in a changing business environment. Within the Company's EMS segment, the restructuring activities included realigning engineering and technical resources closer to the customer and streamlining administrative and sales processes. The plan also included reducing corporate personnel costs to more properly align with the overall sales mix change within the Company. This plan was substantially complete as of the end of fiscal year 2008.
During the third quarter of fiscal year 2007, the Company acquired Reptron Electronics, Inc. ("Reptron"), a U.S. based electronics manufacturing services company which provided engineering services, electronics manufacturing services, and display integration services. Reptron had four manufacturing operations located in Tampa, Florida; Hibbing, Minnesota; Gaylord, Michigan; and Fremont, California. The acquisition increased the Company's capabilities and expertise in support of the Company's long-term strategy to grow business in the medical electronics and high-end industrial sectors. With the acquisition, the Company recognized it would have excess capacity in North America. Management developed a plan as of the acquisition date to consolidate capacity within the acquired facilities. Based on a review of future growth potential in various geographies and input from existing customers regarding future capacity needs, during the fourth quarter of fiscal year 2007, the Company finalized a restructuring plan within the EMS segment to exit the manufacturing facility located in Gaylord, Michigan. Production ceased during the second quarter of fiscal year 2008, and the facility is currently held for sale. During the second quarter of fiscal year 2008, the Company approved a restructuring plan to further consolidate its EMS facilities that resulted in the exit of the manufacturing facility located in Hibbing, Minnesota. Production at the Hibbing facility ceased in the fourth quarter of fiscal year 2008, and the Company's lease of the Hibbing facility ends in December 2008. A majority of the Gaylord and Hibbing business transferred to several of the Company's other worldwide EMS facilities.
During the fourth quarter of fiscal year 2006,2011, the Company acquired an operation in Wales, United Kingdom, which currently provides manufacturing services for medical diagnostic systems such as assembling and packaging medical test strips and assembling and testing of electronic diagnostic testers. This facility is FDA certified and was acquiredapproved a plan to support the Company's efforts to capitalize on growth opportunities in the medical market. The Company also acquiredexit a printed circuit board35,000 square feet leased assembly operation located in Longford, Ireland, duringFremont, California. A majority of the fourthbusiness will be transferred to an existing Jasper, Indiana facility by mid-fiscal year 2012.
During the third quarter of fiscalmid-fiscal year 2006, the Company approved a restructuring plan within the EMS segment to exit a manufacturing facility located in Northern Indiana. As part of this restructuring plan, the production for select programs was transferred to other locations within this segment. Operations at this facility ceased in the Company's first quarter of fiscal year 2007, and the facility was sold during fiscal year 2008. 2012.
The acquisitions areGenesis acquisition is discussed in further detail in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Item 7 and in
Marketing Channels
facilities and start-up of new programs.
| Year Ended June 30, | ||||
| 2008 |
| 2007 |
| 2006 |
Bayer AG affiliated sales as a percent of consolidated net sales | 11% |
| 15% |
| 6% |
TRW sales as a percent of consolidated net sales | 7% |
| 8% |
| 12% |
Bayer AG affiliated sales as a percent of EMS segment net sales | 21% |
| 30% |
| 13% |
TRW sales as a percent of EMS segment net sales | 13% |
| 14% |
| 27% |
| Year Ended June 30 | |||||
| 2011 | 2010 | 2009 | |||
| Bayer AG affiliated sales as a percent of consolidated net sales | 11% | 15% | 12% | ||
| Bayer AG affiliated sales as a percent of EMS segment net sales | 19% | 24% | 23% | ||
Furniture
OverviewSince 1950, the Company has produced wood furniture and cabinets.furniture. During fiscal year 2007, the Company ceased manufacturing contract private label products as it increased focus on core markets. These core markets include office furniture sold under the Kimball Office and National Office Furniture brand names and hospitality furniture sold under the Kimball Hospitality brand name. Kimball Office and National Office Furniture provide office furniture solutions for private offices, open floor plan areas, conference rooms, training rooms, lobby, and lounge areas with a vast mix of wood, metal, laminate, paint, and fabric options. Products include desks, credenzas, seating, tables, systems/dividers,collaborative workstations, contemporary cubicle systems, filing and storage units, and accessories such as audio visual boards and task lighting. Kimball Office products tend to focus on the more complex customer solutions, and National Office Furniture products are geared more to the mid-market/less complex/lower cost aspect of the office furniture market. Kimball Hospitality provides furniture solutions for hotel properties, condominiums, and mixed use developments. Products include headboards, desks, tables, dressers, entertainment centers, chests, wall panels, upholstered seating, task seating, and vanities. Also included in this segment are the Company's trucking fleet and customer fulfillment centers, which handle primarily product of this segment; but certain logistics services, such as backhauls, are sold on a contract basis.Sales revenue of the Furniture segment is generally not affected by seasonality with the exception of certain product lines which are impacted by the buying patterns of customers such as the U.S. Federal Government whose purchases of the Company's product are generally higher in the first half of the Company's fiscal year.As part of the workforce reduction restructuring activities discussed in the EMS segment above, within the Company's Furniture segment, the restructuring activities included realigning information technology and procurement resources closer to the customer and streamlining administrative and sales processes to drive further synergies afforded by the alignment of the sales and manufacturing functions within this segment. Related expenditures are primarily for employee severance and transition costs. This plan was substantially complete as of the end of fiscal year 2008 with a few activities expected to occur in the first half of fiscal year 2009 in the Furniture segment.In conjunction with the cessation of manufacturing contract private label products, during fiscal year 2007 the Company approved a plan to exit the production of wood rear projection television ("PTV") cabinets and stands within the Furniture segment, which resulted in the exit of the Company's Juarez, Mexico, operation. For some time, the market demand for wood rear PTV cabinets had been declining due to the market shift to plasma and LCD large-screen televisions. As a result of ceasing operations at this facility, financial results associated with the Mexican operations in the Furniture segment were classified as discontinued operations beginning in the quarter ended December 31, 2006, and all prior periods were restated. The discontinued operations are discussed in further detail in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Item 7 and in Note 18 - Discontinued Operations of Notes to Consolidated Financial Statements.As part of the Company's plan to sharpen focus and simplify business processes within the Furniture segment, the Company announced duringDuring the first quarter of fiscal year 2006,2009, the Company approved a restructuring plan which includedto consolidate production of select office furniture manufacturing departments. The consolidation of administrative, marketing,was substantially completed during fiscal year 2009 with the remaining items completed during fiscal year 2010. The consolidation has reduced manufacturing costs and business development functions to better serve the segment's primary markets. Expenses related to this plan include software impairment, accelerated amortization,excess capacity by eliminating redundant property and equipment, processes, and employee severance, and other consolidation costs. This plan was complete as of June 30, 2008.5Additional information regarding the Company's restructuring activities is located in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Item 7 and in Note 1718 - Restructuring Expense of Notes to Consolidated Financial Statements.LocationsThe Company's furniture products as of June 30, 20082011 were primarily produced at twelveeleven plants: nineseven located in Indiana, two in Kentucky, and one each in Idaho.Idaho and Virginia. The facility in Virginia was opened during fiscal year 2011 and houses a showroom and production operations to make upholstered seating, headboards, and other products for the Company's custom, program, and catalog offerings for hospitality guest rooms and public spaces. In addition, select finished goods are purchased from external sources. The Company continually assesses manufacturing capacity and has adjusted such capacity in recent years.AIn addition, a facility in Indiana houses an Education Centereducation center for dealer and employee training, a Researchresearch and Development Center,development center, and a Corporate Showroom for product display.showroom. Office furniture showrooms are maintained in nine additional cities in the United States. Office space is leased in Dongguan, Guangdong, China, to facilitate sourcing of productselect finished goods and components from the Asia Pacific Rim countries. Office furniture showrooms are maintained in ten cities in the United States.Region.
Marketing Channels
manufacturers.
| (Amounts in Millions) | June 30 2011 | June 30 2010 | |||||
| EMS | $ | 165.1 | $ | 199.1 | |||
| Furniture | 90.4 | 70.6 | |||||
| Total Backlog | $ | 255.5 | $ | 269.7 | |||
(Amounts in Millions) | June 30, 2008 |
| June 30, 2007 |
Furniture | $ 101.0 |
| $ 95.3 |
EMS | 205.8 |
| 192.0 |
Total Backlog of Continuing Operations | $ 306.8 |
| $ 287.3 |
lower orders from Bayer AG. Substantially all of the open orders as of
June 30,
| Year Ended June 30 | ||||
(Amounts in Millions) | 2008 |
| 2007 |
| 2006 |
Research and Development Costs of Continuing Operations | $16 |
| $17 |
| $15 |
| Year Ended June 30 | |||||
| (Amounts in Millions) | 2011 | 2010 | 2009 | ||
| Research and Development Costs | $13 | $12 | $14 | ||
Trademark: President,Prevail, Eloquence, Hum. Minds at Work, Integra Clear, Pura,
Patent: Traxx
and Fluent
Environment and Energy Matters
| June 30, 2008 |
| June 30, 2007 |
United States | 4,955 |
| 5,540 |
Foreign Countries | 2,240 |
| 2,020 |
Total Full-Time Employees of Continuing Operations | 7,195 |
| 7,560 |
| June 30 2011 | June 30 2010 | ||||
| United States | 3,787 | 3,831 | |||
| Foreign Countries | 2,575 | 2,356 | |||
| Total Full-Time Employees | 6,362 | 6,187 | |||
We make
The above risks could have a material adverse effect on the Company's financial position, resultscurrent shareholders;
undisclosed liabilities; and
Our
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The EMS segment depends on industries that utilize technologically advanced electronic components which often have short life cycles. The Company must continue to invest in advanced equipment and product development to remain competitive in this area.
There are inherent uncertainties involved in estimates, judgments, and assumptions used in the preparation of financial statements in accordance with generally accepted accounting principles in the United States (U.S. GAAP). Any changes in estimates, judgments, and assumptions could have a material adverse effect on the Company's financial position, results of operations, or cash flows. The Company's financial statements filed with the SEC are prepared in accordance with U.S. GAAP, and the preparation of such financial statements includes making estimates, judgments, and assumptions that affect
The Company is subject to extensive environmental regulation and significant potential environmental liabilities.The past and present operation and ownership by the Company of manufacturing plants and real property are subject to extensive and changing federal, state, local, and foreign environmental laws and regulations, including those relating to discharges in air, water, and land, the handling and disposal of solid and hazardous waste, and the remediation of contamination associated with releases of hazardous substances. In addition, the increased prevalence of global climate issues may result in new regulations that may negatively impact the Company. The Company cannot predict what environmental legislation or regulations will be enacted in the future, how existing or future laws or regulations will be administered or interpreted or what environmental conditions may be found to exist. Compliance with more stringent laws or regulations, or stricter interpretation of existing laws, may require additional expenditures by the Company, some of which could be material. In addition, any investigations or remedial efforts relating to environmental matters could involve material costs or otherwise result in material liabilities.
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Number of Facilities Approximate Square Footage Virginia which houses hospitality furniture production and a showroom.Item 2 - PropertiesThe location and number of the Company's major manufacturing, warehousing, and service facilities, including the executive and administrative offices, as of June 30, 2008,2011, are as follows:Furniture Electronic
Manufacturing
ServicesUnallocated
CorporateTotal Indiana 15 2 5 22 Kentucky 2 2 Florida 1 1 California 1 1 2 Idaho 1 1 Mexico 1 1 Thailand 1 1 Poland 1 1 China 1 1 2 United Kingdom 1 1 Ireland 1 1 Total Facilities 20 10 5 35 Number of Facilities ElectronicManufacturingServices Furniture UnallocatedCorporate Total North America California 1 1 Florida 1 1 Idaho 1 1 Indiana 1 13 4 18 Kentucky 2 2 Virginia 1 1 Mexico 1 1 Asia China 1 1 2 Thailand 1 1 Europe Poland 1 1 United Kingdom 1 1 Total Facilities 8 18 4 30 The listed facilities occupy approximately 5,224,0004,949,000 square feet in aggregate, of which approximately 5,015,0004,733,000 square feet are owned and 209,000216,000 square feet are leased. Square footage of these facilities is summarized by segment as follows: Furniture Electronic
Manufacturing
ServicesUnallocated
CorporateTotal Owned 3,736,000 936,000 343,000 5,015,000 Leased 21,000 168,000 20,000 209,000 Total 3,757,000 1,104,000 363,000 5,224,000 During fiscal year 2008, within Approximate Square Footage ElectronicManufacturingServices Furniture UnallocatedCorporate Total Owned 1,011,000 3,491,000 231,000 4,733,000 Leased 129,000 67,000 20,000 216,000 Total 1,140,000 3,558,000 251,000 4,949,000 Within the EMS segment, the Company ceased production at a Gaylord, Michigan, facility and a Hibbing, Minnesota, facility. The Gaylord facility is currently held for sale. The lease on the Hibbing facility expires on December 31, 2008. The Company plans to exit within the EMS segment, the Ireland facility during fiscal year 2009 and the United Kingdom facility in fiscal year 2012. As of June 30, 2011, as part of the Company's plan to consolidate these facilities andCompany is no longer leasing back the Poland facility intothat was sold during fiscal year 2010.During the fourth quarter of fiscal year 2011, the Company approved a new, largerplan to exit the small leased EMS assembly facility located in California. A majority of the business will be transferred to an existing Indiana EMS facility by mid-fiscal year 2012.During fiscal year 2011, the Company opened a leased facility in Poland.Included in Unallocated Corporate are executive, national sales and administrative offices, and a recycling facility, and a training and education center and corporate showroom. The Company sold its child development facility during the first quarter of fiscal year 2008.facility.
Generally, properties are utilized at normal capacity levels on a multiple shift basis. At times, certain facilities utilize a reduced second or third shift. Due to sales fluctuations, not all facilities were utilized at normal capacity during fiscal year 2008.
2011.
have a material adverse impact on the Company. Item 3 - Legal ProceedingsThe Registrant and its subsidiaries are not parties to any pending legal proceedings, other than ordinary routine litigation incidental to the business, whichbusiness. The outcome of current routine pending litigation, individually orand in the aggregate, areis not expected to be material.Item 4 - Submission of Matters to a Vote of Security HoldersNo matters were submitted to a vote of the Company's security holders during the fourth quarter of fiscal year 2008.
Kimball Hospitality from February 2005 until February 2010, and prior to that served in other key roles within the Furniture segment since joining the Company in June 2002. Item 12 - Security Ownership of Certain Beneficial Owners and Management and Related Share Owner Matters of Part III.Executive Officers of the RegistrantThe executive officers of the Registrant as of September 2, 2008August 29, 2011 are as follows: (Age as of September 2, 2008)August 29, 2011)
Name Age Office and
Area of Responsibility Executive Officer
SinceJames C. Thyen 64 President, Chief Executive Officer, Director 1974 Douglas A. Habig 61 Chairman of the Board 1975 Robert F. Schneider 47 Executive Vice President,
Chief Financial Officer 1992 Donald D. Charron 44 Executive Vice President, President-Kimball
Electronics Group 1999 P. Daniel Miller 60 Executive Vice President, President-Furniture 2000 Michelle R. Schroeder 43 Vice President, Corporate Controller
(functioning as Principal Accounting Officer) 2003 John H. Kahle 51 Executive Vice President, General Counsel, Secretary 2004 Gary W. Schwartz 60 Executive Vice President, Chief Information Officer 2004 Name Age Office andArea of Responsibility Executive OfficerSinceJames C. Thyen 67 President, Chief Executive Officer, Director 1974 Douglas A. Habig 64 Chairman of the Board 1975 Robert F. Schneider 50 Executive Vice President, Chief Financial Officer 1992 Donald D. Charron 47 Executive Vice President, President-Kimball Electronics Group 1999 John H. Kahle 54 Executive Vice President, General Counsel, Secretary 2004 Gary W. Schwartz 63 Executive Vice President, Chief Information Officer 2004 Donald W. Van Winkle 50 Vice President, President-Office Furniture Group 2010 Stanley C. Sapp 50 Vice President, President-Kimball Hospitality 2010 Michelle R. Schroeder 46 Vice President, Chief Accounting Officer 2003 Executive officers are elected annually by the Board of Directors. All of the executive officers unless otherwise noted have been employed by the Company for more than the past five years in the capacityprincipal occupation shown or some other executive capacity. Michelle R. SchroederDonald W. Van Winkle was appointed to Vice President, President-Office Furniture Group in December 2004 and Corporate Controller in August 2002, havingFebruary 2010. He had previously served as Vice President, General Manager of National Office Furniture from October 2003 until February 2010, and prior to that served as Vice President, Chief Finance and Administrative Officer for the Furniture Brands Group as well as other key finance roles within the Furniture segment since joining the Company in January 1991. Stanley C. Sapp was appointed to Vice President, President-Kimball Hospitality in February 2010. He had previously served as Assistant Corporate ControllerVice President and DirectorGeneral Manager of Financial Analysis.16PART IIItem 5 - Market for Registrant's Common Equity, Related Share Owner Matters and Issuer Purchases of Equity SecuritiesMarket PricesThe Company's Class B Common Stock trades on the NASDAQ Global Select Market of The NASDAQ Stock Market LLC under the symbol: KBALB. High and low sales prices by quarter for the last two fiscal years as quoted by the NASDAQ system arewere as follows:2008 2007 High Low High Low First Quarter $14.38 $10.94 $20.20 $16.00 Second Quarter $15.35 $11.35 $25.95 $18.72 Third Quarter $13.96 $ 9.51 $25.72 $18.51 Fourth Quarter $11.52 $ 8.28 $20.04 $12.85 2011 2010 High Low High Low First Quarter $ 6.50 $ 4.81 $ 8.36 $ 5.75 Second Quarter $ 7.17 $ 5.51 $ 9.25 $ 7.16 Third Quarter $ 7.73 $ 6.09 $ 9.59 $ 6.10 Fourth Quarter $ 7.89 $ 5.92 $ 8.65 $ 5.48 There is no established public trading market for the Company's Class A Common Stock. However, Class A shares are convertible on a one-for-one basis to Class B shares.
DividendsDividends
There are no restrictions on the payment of dividends except charter provisions that require on a fiscal year basis, that shares of Class B Common Stock are entitled to $0.02$0.02 per share dividend more than the annual dividends paid on Class A Common Stock, provided that dividends are paid on the Company's Class A Common Stock. DuringDividends declared totaled $7.3 million for both fiscal year 2008, dividends declared were $23.7 million, or $0.62 per share on Class A Common Stockyears 2011 and $0.64 per share on Class B Common Stock.2010. Included in these figures for fiscal year 2010 are dividends computed and accrued on unvested Class A and Class B restricted share units, which will bewere paid by a conversion to the equivalent value of common shares after a specifiedon the vesting period.date. Dividends declared by quarter for fiscal year 20082011 compared to fiscal year 2007 are2010 were as follows:2008 2007 Class A Class B Class A Class B First Quarter $0.155 $0.16 $0.155 $0.16 Second Quarter $0.155 $0.16 $0.155 $0.16 Third Quarter $0.155 $0.16 $0.155 $0.16 Fourth Quarter $0.155 $0.16 $0.155 $0.16 Total Dividends $0.620 $0.64 $0.620 $0.64 2011 2010 Class A Class B Class A Class B First Quarter $ 0.045 $ 0.05 $ 0.045 $ 0.05 Second Quarter 0.045 0.05 0.045 0.05 Third Quarter 0.045 0.05 0.045 0.05 Fourth Quarter 0.045 0.05 0.045 0.05 Total Dividends $ 0.180 $ 0.20 $ 0.180 $ 0.20 Share OwnersOn August 15, 2008,2011, the Company's Class A Common Stock was owned by 541567 Share Owners of record, and the Company's Class B Common Stock was owned by 1,7001,549 Share Owners of record, of which 275304 also owned Class A Common Stock. Securities Authorized for Issuance Under Equity Compensation PlansSee Item 12 of Part III forThe information onrequired by this item concerning securities authorized for issuance under equity compensation plans.plans is incorporated by reference to Issuer Purchases of Equity SecuritiesThe following table presents a summary of share repurchases made by the Company during the fourth quarter of fiscal year 2008:Period Total Number
of Shares Purchased [1]Average
Price Paid
per ShareTotal Number of Shares Purchased as Part of
Publicly Announced
Plans or ProgramsMaximum Number of
Shares that May Yet Be Purchased Under the
Plans or Programs [2]Month #1 (April 1 - April 30, 2008) -0- $ -0- -0- 2,000,000 Month #2 (May 1 - May 31, 2008) 6,022 $10.29 -0- 2,000,000 Month #3 (June 1 - June 30, 2008) -0- $ -0- -0- 2,000,000 Total 6,022 $10.29 -0- [1] Shares were withheld from employees to satisfy tax withholding obligations due in connection with stock issued under the 2003 Stock Option and Incentive Plan.[2] TheA share repurchase program authorized by the Board of Directors was announced on October 16, 2007.2007. The program allows for the repurchase of up to two million shares of any combination of Class A and Class B shares and will remain in effect until all shares authorized have been repurchased. The repurchases shown in this table were not pursuant to this program and thereforeCompany did not reduce the two millionrepurchase any shares authorized for repurchase under the repurchase program during the fourth quarter of fiscal year 2011. At June 30, 2011, two million shares remained available under the repurchase program.
The performance graph also includes the S&P Midcap 400 Index, which, in years prior to fiscal year 2008, had been an index of companies with market capitalization levels similar to the Company. However, this index is no longer comparable. The S&P Midcap 400 index is provided in the graph below to show the impact of the transition between this index and the new peer group index and will not be provided in future years.
| 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | |
| Kimball International, Inc. | $100.00 | $ 98.85 | $ 92.56 | $144.82 | $106.55 | $ 66.83 |
| NASDAQ Stock Market (U.S. & Foreign) | $100.00 | $127.18 | $127.04 | $135.21 | $162.10 | $142.32 |
| Peer Group Index | $100.00 | $130.23 | $150.28 | $146.50 | $142.02 | $102.45 |
| S&P Midcap 400 Index | $100.00 | $127.98 | $145.94 | $164.88 | $195.40 | $181.07 |
| 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | ||||||||||||||||||
| Kimball International, Inc. | $ | 100.00 | $ | 73.57 | $ | 46.15 | $ | 36.63 | $ | 33.30 | $ | 39.92 | |||||||||||
| NASDAQ Stock Market (U.S. & Foreign) | $ | 100.00 | $ | 122.33 | $ | 108.31 | $ | 86.75 | $ | 100.42 | $ | 132.75 | |||||||||||
| Peer Group Index | $ | 100.00 | $ | 96.94 | $ | 69.93 | $ | 46.46 | $ | 68.78 | $ | 93.12 | |||||||||||
Year Ended June 30 years ended June 30, 2008 and 2007.Item 6 - Selected Financial DataThis information should be read in conjunction with Item 8 - Financial Statements and Supplementary Data and Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations. 2008 2007 2006 2005 2004 (Amounts in Thousands, Except for Per Share Data) Net Sales $1,351,985 $1,286,930 $1,109,549 $1,004,386 $ 992,823 Income from Continuing Operations $ 78 $ 23,266 $ 28,613 $ 18,342 $ 28,253 Earnings Per Share from Continuing Operations Basic: Class A $ 0.00 $ 0.60 $ 0.74 $ 0.48 $ 0.73 Class B $ 0.00 $ 0.61 $ 0.75 $ 0.48 $ 0.75 Diluted: Class A $ 0.00 $ 0.58 $ 0.74 $ 0.47 $ 0.72 Class B $ 0.00 $ 0.60 $ 0.75 $ 0.48 $ 0.74 Total Assets $ 722,667 $ 694,741 $ 679,021 $ 600,540 $ 614,069 Long-Term Debt, Less Current Maturities $ 421 $ 832 $ 1,125 $ 350 $ 395 Cash Dividends Per Share: Class A $ 0.62 $ 0.62 $ 0.62 $ 0.62 $ 0.62 Class B $ 0.64 $ 0.64 $ 0.64 $ 0.64 $ 0.64 Year Ended June 30 (Amounts in Thousands, Except for Per Share Data)2011 2010 2009 2008 2007 Net Sales $ 1,202,597 $ 1,122,808 $ 1,207,420 $ 1,351,985 $ 1,286,930 Income from Continuing Operations $ 4,922 $ 10,803 $ 17,328 $ 78 $ 23,266 Earnings Per Share from Continuing Operations: Basic: Class A $ 0.12 $ 0.27 $ 0.46 $ — $ 0.59 Class B $ 0.14 $ 0.29 $ 0.47 $ — $ 0.61 Diluted: Class A $ 0.12 $ 0.27 $ 0.46 $ — $ 0.58 Class B $ 0.14 $ 0.29 $ 0.47 $ — $ 0.60 Total Assets $ 626,312 $ 636,751 $ 642,269 $ 722,667 $ 694,741 Long-Term Debt, Less Current Maturities $ 286 $ 299 $ 360 $ 421 $ 832 Cash Dividends Per Share: Class A $ 0.18 $ 0.18 $ 0.40 $ 0.62 $ 0.62 Class B $ 0.20 $ 0.20 $ 0.42 $ 0.64 $ 0.64 The income statement activity of discontinued operations in each of the years ended June 30, 2011, 2010, and 2009 was zero. The preceding table excludes all income statement activity of discontinued operations in the discontinued operations.Fiscal year 20082011 income from continuing operations included $14.6$0.6 million ($ ($0.01 per diluted share) of after-tax restructuring expenses.Fiscal year 2010 income from continuing operations included $1.2 million ($0.03 per diluted share) of after-tax restructuring expenses, $2.0 million ($0.05 per diluted share) of after-tax income resulting from settlement proceeds related to an antitrust lawsuit of which the Company was a class member, and $7.7 million ($0.20 per diluted share) of after-tax income from the sale of the facility and land in Poland.Fiscal year 2009 income from continuing operations included $1.8 million ($0.04 per diluted share) of after-tax restructuring expenses, $9.1 million ($0.24 per diluted share) of after-tax non-cash goodwill impairment, $1.6 million ($0.04 per diluted share) of after-tax income from earnest money deposits retained by the Company resulting from the termination of a contract to sell the Company's Poland facility and land, and $18.9 million ($0.51 per diluted share) of after-tax gains on the sale of undeveloped land holdings and timberlands.Fiscal year 2008 income from continuing operations included $14.6 million ($0.39 per diluted share) of after-tax restructuring expenses and $0.7$0.7 million ($ ($0.02 per diluted share) of after-tax income received as part of a Polish offset credit program for investments made in the Company's Poland operation.Fiscal year 2007 income from continuing operations included $0.9$0.9 million ($ ($0.02 per diluted share) of after-tax restructuring expenses.Fiscal year 2006 income from continuing operations also included $2.8 million ($0.07 per diluted share) of after-tax restructuring expenses and $1.3 million ($0.03 per diluted share) of after-tax income received as part of a Polish offset credit program for investments made in the Company's Poland operation.Fiscal year 2005 income from continuing operations included $0.2 million ($0.01 per diluted share) of after-tax restructuring expenses.Fiscal year 2004 income from continuing operations included $0.7 million ($0.02 per diluted share) of after-tax restructuring expenses and $1.3 million ($0.03 per diluted share) of after-tax income received as part of a Polish offset credit program for investments made in the Company's Poland operation.
Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations
Management
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To address theseThe Company does not have operations located in Japan and other trendsthus has had no production facilities directly impacted by the effects of the March 2011 earthquake and events,tsunami. The Company continues to monitor EMS customers and suppliers who were affected either by physical damage to production facilities or indirect production impacts caused by electricity blackouts or aftershocks. There has been minimal disruption in the supply chain up to this point, but customers could still be impacted with part shortages unrelated to electronic components, and their production schedule reductions could cause the Company to have delayed or canceled orders. The Company has taken, ormaintained close communications with customers and suppliers.
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Company's capabilities and diversification while providing an opportunity for growth and improved profitability.
Discontinued
| Segment Net Sales as a % of Consolidated Net Sales | Year Ended | ||
| June 30 | |||
| 2011 | 2010 | ||
| EMS segment | 60% | 63% | |
| Furniture segment | 40% | 37% | |
| At or For the Year | ||||||||||
| Ended June 30 | ||||||||||
| (Amounts in Millions) | 2011 | 2010 | % Change | |||||||
| Net Sales | $ | 721.4 | $ | 709.1 | 2 | % | ||||
| Operating Income | $ | 5.5 | $ | 15.3 | (64 | )% | ||||
| Net Income | $ | 4.1 | $ | 15.7 | (74 | )% | ||||
| Poland Land/Facility Gain, net of tax | $ | — | $ | 7.7 | ||||||
| Restructuring Expense, net of tax | $ | 0.5 | $ | 1.2 | ||||||
| Open Orders | $ | 165.1 | $ | 199.1 | (17 | )% | ||||
During fiscal year 2006, the Company sold a forest products hardwood lumber business unit, a business unit which produced and sold fixed-wall furniture systems, and an operation that manufactured polyurethane and polyester molded components. All three business units were part of the Furniture segment. The cessation of these non-core operations did not impact any of the remaining operations of the Company. The results of the above-mentioned operations are reported as discontinued operations in the Company's Consolidated Financial Statements.
See Note 18 - Discontinued Operations of Notes to Consolidated Financial Statements for more information on the discontinued operations.
Financial results of the discontinued operations were as follows:
| Year Ended June 30 | ||||||
(Amounts in Thousands, Except for Per Share Data) | 2008 |
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Net Sales of Discontinued Operations | $ -0- |
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| $ 8,744 |
| $ 62,110 |
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Operating Loss of Discontinued Operations, Net of Tax | $ (124) |
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| $ (3,068) |
| $ (6,639) |
Loss on Disposal of Discontinued Operations, Net of Tax | -0- |
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| (1,046) |
| (6,911) |
Loss from Discontinued Operations, Net of Tax | $ (124) |
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| $ (4,114) |
| $ (13,550) |
| Loss from Discontinued Operations per Class B Diluted Share | $ (0.00) |
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| $ (0.11) |
| $ (0.36) |
Related Party Disclosure
During fiscal year 2006, the Company's forest products hardwood lumber operation which was accounted for as a discontinued operation was sold to Indiana Hardwoods, Inc. Barry L. Cook, President of Indiana Hardwoods, Inc. was formerly employed by the Company as a Vice President of Kimball International, Inc. and had responsibility for this hardwoods lumber operation. The transaction prices were negotiated between the Company and Indiana Hardwoods, Inc. The Company also considered offers from other interested outside parties, but determined that it was in the Company's best interest financially to sell this operation to Indiana Hardwoods, Inc. The purchase price totaled $25.5 million, of which $23.5 million was collected at closing and $2.0 million was a note receivable. The Company recorded an allowance on this note receivable at the time of sale since there was uncertainty as to whether the entire balance was collectable. In fiscal year 2008, $0.3 million of expense was recorded as an additional allowance for this receivable and final payment was received for the net amount. The Company has no ongoing commitments resulting from the sales agreement.
Fiscal Year 2008 Results of Operations
The following discussions are based on income from continuing operations and therefore exclude all income statement activity of the discontinued operations.Financial Overview - ConsolidatedFiscal year 2008 consolidated net sales were $1.35 billion compared to fiscal year 2007 net sales of $1.29 billion, a 5% increase over fiscal year 2007. The higher net sales resulted from increased EMS segment net sales related to the third quarter fiscal year 2007 Reptron acquisition within the EMS segment which contributed net sales of $144 million in fiscal year 2008 and $55 million in fiscal year 2007 as well as increased organic Furniture and EMS segment net sales. In addition, in mid-fiscal year 2007, the Company reduced the price of finished product sold to a customer in the EMS segment which carried forward through fiscal year 2008. Fiscal year 2008 had a full-year impact of this pricing reduction while fiscal year 2007 only had the impact for half of the year and thus resulted in a $65 million net sales reduction in fiscal year 2008 when compared to fiscal year 2007, which partially offset the EMS sales increase.
The Company recorded income from continuing operations for fiscal year 2008 of $0.1 million, or less than $0.01 per Class B diluted share, inclusive of after-tax restructuring charges of $14.6 million, or $0.39 per Class B diluted share. The fiscal year 2008 restructuring charges were primarily related to the European consolidation plan, a workforce reduction plan, and the exit of two domestic EMS facilities. Fiscal year 2007 income from continuing operations was $23.3 million, or $0.60 per Class B diluted share, inclusive of after-tax restructuring charges of $0.9 million, or $0.02 per Class B diluted share. Information regarding the acquisition and restructurings is included in the segment discussions below.
Consolidated gross profit as a percent of sales in fiscal year 2008 was 18.4% compared to 20.3% in fiscal year 2007. Both the EMS segment and the Furniture segment contributed to the decline as discussed in more detail in the segment discussions below. Gross profit was also negatively impacted as the Company's sales mix continued to shift toward the EMS segment, which operates at a lower gross profit percentage than the Furniture segment. Partially offsetting the fiscal year 2008 gross profit as a percent of net sales decline, the EMS customer pricing adjustment discussed above increased gross margin as a percent of net sales approximately 1 percentage point compared to fiscal year 2007 gross margin. This EMS customer pricing adjustment had no impact on the gross margin dollars for either fiscal year 2008 or fiscal year 2007 as the reduction in sales was offset by an equal reduction in material cost purchased from the same customer.
The fiscal year 2008 consolidated selling, general and administrative (SG&A) expense level in absolute dollars approximated the fiscal year 2007 level and declined as a percent of net sales. The decline in consolidated SG&A costs as a percent of net sales was primarily due to the leverage of the higher net sales level and the shift in sales mix toward the EMS segment, which has a lower SG&A percentage than the Furniture segment.
Fiscal year 2008 other income totaled $3.2 million compared to fiscal year 2007 other income of $9.9 million. Fiscal year 2008 interest expense was $0.9 million higher due to higher average outstanding debt balances, and fiscal year 2008 interest income was $1.9 million lower than fiscal year 2007 as the Company's average cash and short-term investment balances were lower. In addition, a $3.5 million decline in the market value of the Company's Supplemental Employee Retirement Plan (SERP) investments for fiscal year 2008 as compared to fiscal year 2007 contributed to the decline in other income. The loss on the SERP investment that was recognized in other income was exactly offset by a reduction in the SERP liability which was recognized in SG&A expense in accordance with U.S. GAAP. Fiscal year 2008 other income also included $1.3 million pre-tax income relating to funds received as part of a Polish offset credit program for investments made in the Company's Poland operation.As a result of various tax benefits in fiscal year 2008, such as tax-exempt interest income and the research and development credit, coupled with the tax benefit recorded related to the pre-tax loss, the Company recorded an overall income tax benefit greater than the pre-tax loss. The fiscal year 2007 effective tax rate was 36%. For further detail see Note 9 - Income Taxes of Notes to Consolidated Financial Statements.
Comparing the balance sheets as of June 30, 2008 to June 30, 2007, the decline in the Company's cash and short-term investment balances was primarily a result of the Company repurchasing 1.7 million Class B shares during fiscal year 2008 under a previously authorized share repurchase program. The Company's inventory balance has increased since June 30, 2007 primarily in support of the transfer of production related to the consolidation of facilities. The Company's accounts payable balance increased since June 30, 2007 due to an agreement with select customers from which the Company also purchases materials that allows the Company to extend accounts payable terms if those customers extend the timeframe in which they pay the Company. The Company's accounts receivable balance thus likewise increased, but to a lesser extent due to offsetting declines in accounts receivable elsewhere in the Company. The Company's borrowings under credit facilities increased as the Company opted to borrow to fund short-term cash needs rather than sell debt securities in its investment portfolio which have favorable yields.
Electronic Manufacturing Services Segment
In an effort to improve profitability and increase Share Owner value while remaining committed to its business model of being market driven and customer centered, during the third quarter of fiscal year 2008, the Company approved a restructuring plan designed to more appropriately align its workforce in a changing business environment. Within the Company's EMS segment, the restructuring activities included realigning engineering and technical resources closer to the customer and streamlining administrative and sales processes. The plan also included reducing corporate personnel costs to more properly align with the overall sales mix change within the Company. Expenditures were primarily for employee severance and transition costs. This plan was substantially complete as of the end of fiscal year 2008.
During the third quarter of fiscal year 2007, the Company acquired Reptron, a U.S. based electronics manufacturing services company which provided engineering services, electronics manufacturing services, and display integration services. Reptron had four manufacturing operations located in Tampa, Florida; Hibbing, Minnesota; Gaylord, Michigan; and Fremont, California. The acquisition increased the Company's capabilities and expertise in support of the Company's long-term strategy to grow business in the medical electronics and high-end industrial sectors. The operating results of this acquisition are included in the Company's consolidated financial statements beginning on the acquisition date. With the acquisition, the Company recognized it would have excess capacity in North America. Management developed a plan as of the acquisition date to consolidate capacity within the acquired facilities. Based on a review of future growth potential in various geographies and input from existing customers regarding future capacity needs, during the fourth quarter of fiscal year 2007 the Company finalized a restructuring plan within the EMS segment to exit thesmall assembly facility located in Gaylord, Michigan, and transfer the business to several of the Company's other EMS facilities. The Company ceased production at the facility during the second quarter of fiscal year 2008. Excess equipment was sold during the third quarter of fiscal year 2008, and the Gaylord facility is classified as held for sale. Expenditures included employee severance and transition costs which were recognized as part of the purchase price allocation, not impacting earnings. Expenditures also included losses on the sale of equipment, impairment on the facility, and an immaterial amount related to other closure activities which impacted earnings as the costs were incurred. The Company expects to recognize minimal future charges related to ongoing facility maintenance expenses. During the second quarter of fiscal year 2008, the Company approved a separate restructuring plan to further consolidate its EMS facilities that resulted in the exit of the manufacturing facility located in Hibbing, Minnesota, which was also one of the acquired Reptron facilities. Production at the Hibbing facility ceased in the fourth quarter of fiscal year 2008, and the Company's lease of the Hibbing facility will end in December 2008.Fremont, California. A majority of the Hibbing business will be transferred to several ofan existing Jasper, Indiana facility by mid-fiscal year 2012. The pre-tax restructuring charges related to the Company's worldwide EMS facilities. Expenditures, most of which were recognizedFremont restructuring plan recorded during fiscal year 2008, included employee severance and transition costs, asset and goodwill impairment, lease exit costs, and other plant closure and exit costs.
During the fourth quarter of fiscal year 2006,2011 totaled $0.3 million. As the Company acquired the Bridgend, Wales, United Kingdom, manufacturing operation of Bayer Diagnostics Manufacturing Limited ("BDML") from BDML andcontinues to execute its parent company, Bayer HealthCare LLC, a member of the worldwide group of companies headed by Bayer AG. The Wales, United Kingdom, facility provides manufacturing services for medical diagnostic systems such as assembling and packaging medical test strips and assembling and testing of electronic diagnostic testers. This facility is FDA certified and was acquired to support the Company's efforts to capitalize on growth opportunities in the medical market. Also during the fourth quarter of fiscal year 2006, the Company acquired a printed circuit board assembly operation in Longford, Ireland, from Magna Donnelly Electronics Longford Limited. Both of these acquisitions emphasized the Company's strategic expansion of global capabilities and responsiveness in serving the Company's customers. During the fourth quarter of fiscal year 2008, the Company approved a plan to expand its European automotive electronics capabilities and to establish a European Medical Center of Expertise innear Poznan, Poland. As partPoland, the consolidation of the plan, the Company will consolidate its EMS facilities located in Longford, Ireland; Wales, United Kingdom; and Poznan, Poland; intohas a new, larger facility in Poznan, whichfinal completion target of mid-fiscal year 2012. The consolidation is expected to improve the Company's margins in the very competitive EMS market. The plan includespre-tax restructuring charges recorded during fiscal year
During the third quarter of fiscal year 2006, the Company approved a restructuring plan within the EMS segment to exit a manufacturing facility located in Northern Indiana. As part of this restructuring plan, the production for select programs was transferred to other locations within this segment. Operations at this facility ceased in the Company's first quarter of fiscal year 2007, and the facility was sold during fiscal year 2008. The plan included employee transition costs, accelerated software amortization costs, accelerated asset depreciation, and other restructuring costs which were partially offset by gains on the sale of equipment net of other asset impairment. The decision to exit this facility and land, the after-tax gain was a result of excess capacity in North America.The acquisitions are discussed in further detail in Note 2 - Acquisitions of Notes to Consolidated Financial Statements. The restructuring plans are discussed in further detail in Note 17 - Restructuring Expense of Notes to Consolidated Financial Statements.
EMS segment net sales and open orders were as follows:
| At or For the Year Ended |
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| 2008 |
| 2007 |
| % Change |
(Amounts in Millions) |
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Net Sales: |
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EMS Segment | $727.1 |
| $673.0 |
| 8% |
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Open Orders: |
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EMS Segment | $205.8 |
| $192.0 |
| 7% |
Fiscal year 2008 EMS segment net sales increased $54
Fiscal year 2008 gross profit as2011.
Beginning in the third quarter ofclass action lawsuit.
Fiscal year 2008 SG&A increased in both dollars and as a percent of net sales when compared to fiscal year 2007. The inclusion of the SG&A expenses of the mid-third quarter fiscal year 2007 acquisition for the entire fiscal year 2008 was the primary driver of the increase in SG&A in absolute dollars. The customer pricing adjustment mentioned above increased SG&A as a percent of net sales, and the leverage of higher sales volume decreased SG&A as a percent of net sales. In addition, increased investments in business development resources contributed to the SG&A increase as a percent of net sales and in absolute dollars.
tax planning strategy. The fiscal year 2008 and 2007 earnings were unfavorably2010 EMS segment income tax was also favorably impacted by pre-tax costs, in millions,the mix of $2.3earnings between U.S. and $3.5, respectively, related to the start-up of anforeign EMS manufacturing facility in China. Fiscal year 2008 income from continuing operations included $1.3 million of pre-tax income relating to funds received as part of the Polish offset credit program for investments made in the Company's Poland operation.
operations.
| Year Ended June 30 | ||
| 2008 |
| 2007 |
| Bayer AG affiliated sales as a percent of consolidated net sales | 11% |
| 15% |
Bayer AG affiliated sales as a percent of EMS segment net sales | 21% |
| 30% |
| Year Ended June 30 | |||
| 2011 | 2010 | ||
| Bayer AG affiliated sales as a percent of consolidated net sales | 11% | 15% | |
| Bayer AG affiliated sales as a percent of EMS segment net sales | 19% | 24% | |
| At or For the Year | ||||||||||
| Ended June 30 | ||||||||||
| (Amounts in Millions) | 2011 | 2010 | % Change | |||||||
| Net Sales | $ | 481.2 | $ | 413.6 | 16 | % | ||||
| Operating Income (Loss) | $ | 1.1 | $ | (9.4 | ) | 111 | % | |||
| Net Income (Loss) | $ | 0.5 | $ | (5.8 | ) | 108 | % | |||
| Open Orders | $ | 90.4 | $ | 70.6 | 28 | % | ||||
As part of the Company's plansegment compared to sharpen focus and simplify business processes within the Furniture segment, the Company announced during the first quarter of fiscal year 2006, a plan which included consolidation of administrative, marketing, and business development functions to better serve the segment's primary markets. Expenses related to this plan included software impairment, accelerated amortization, employee severance, and other consolidation costs. This plan was complete as of June 30, 2008.
Furniture segment net sales and open orders were as follows:
| At or For the Year Ended |
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| 2007 |
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Net Sales: |
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Furniture Segment |
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Branded Furniture | $624.8 |
| $602.9 |
| 4% |
Contract Private Label Furniture | -0- |
| 11.1 |
| (100%) |
Total | $624.8 |
| $614.0 |
| 2% |
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Open Orders: |
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Furniture Segment |
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Branded Furniture | $ 101.0 |
| $ 95.3 |
| 6% |
Total | $ 101.0 |
| $ 95.3 |
| 6% |
Increased net sales volumes of both office and hospitality furniture contributed to the increased branded furniture net sales level. Price increases net of higher discounting contributed approximately $4 million to the
The
fiscal year
2011 and (2.3)% for fiscal year 2010.share, related to the sale of the Company's undeveloped land holdings and timberlands; a $9.1 million after-tax non-cash goodwill impairment charge, or $0.24 per Class B diluted share; and $1.6 million of after-tax income, or $0.04 per Class B diluted share, for earnest money deposits retained by the Company resulting from the termination of a contract to sell the Company's Poland facility and land. sales and order trends during fiscal year 2009 as well as the increased disparity between the Company's market capitalization and the carrying value of its Share Owners' equity. The goodwill was related to prior acquisitions in both of the Company's segments. See At or For the Year Ended 2007 2006 % Change (Amounts in Millions) Net Sales $673.0 $496.7 35% Open Orders $192.0 $130.6 47% foreign EMS operations. The fiscal year rate. Year Ended June 30 2007 2006 15% 6% 8% 12% Bayer AG affiliated sales as a percent of EMS segment net sales 30% 13% TRW sales as a percent of EMS segment net sales 14% 27% Furniture segment At or For the Year Ended 2007 2006 % Change (Amounts in Millions) Net Sales: Furniture Segment Branded Furniture $602.9 $573.8 5% Contract Private Label Furniture 11.1 38.8 (71%) Total $614.0 $612.6 0% Open Orders: Furniture Segment Branded Furniture $ 95.3 $ 94.7 1% Contract Private Label Furniture -0- 2.0 (100%) Total $ 95.3 $ 96.7 (1%) plan to consolidate production of select office furniture manufacturing departments. The consolidation reduced manufacturing costs and excess capacity by eliminating redundant property and equipment, processes, and employee costs. Most of the consolidation activities occurred during fiscal year 2009, and the remaining activities were completed during fiscal year 2010. 2010 more detail below. The Company Fiscal Year 20072010 Results of OperationsThe following discussions are based on income from continuing operations and therefore exclude all income statement activity of the discontinued operations and the cumulative effect of the accounting change. See Note 1 - Summary of Significant Accounting Policies of Notes to Consolidated Financial Statements for additional information related to the cumulative effect of the accounting change.Financial Overview - ConsolidatedFiscal year 20072010 consolidated net sales were $1.29$1.12 billion compared to fiscal year 20062009 net sales of $1.11$1.21 billion, a 16%7% decrease, due to a 27% net sales decrease in the Furniture segment, which more than offset a 10% net sales increase overin the EMS segment. Fiscal year 2010 net income was $10.8 million, or $0.29 per Class B diluted share, inclusive of $1.2 million, or $0.03 per Class B diluted share, of after-tax restructuring costs primarily related to the European consolidation plan. The fiscal year 2006. Acquisitions completed2010 results also included the following items: a $7.7 million after-tax gain, or $0.20 per Class B diluted share, related to the sale of the facility and land in Poland, and $2.0 million of after-tax income, or $0.05 per Class B diluted share, resulting from settlement proceeds related to an antitrust class action lawsuit of which the fourth quarter of fiscal year 2006 and in the third quarter of fiscal year 2007 within the EMS segment contributedCompany was a class member. The Company recorded net sales of $319.3 million in fiscal year 2007 and $61.5 million in fiscal year 2006. Income from continuing operationsincome for fiscal year 2007 was $23.32009 of $17.3 million, or $0.60$0.47 per Class B diluted share, inclusive of after-tax restructuring charges of $0.9$1.8 million, or $0.02 per Class B diluted share. Fiscal year 2006 income from continuing operations was $28.6 million, or $0.75$0.04 per Class B diluted share, inclusive ofprimarily related to the European consolidation plan. The fiscal year 2009 results also included the following items: an $18.9 million after-tax restructuring charges of $2.8 million,gain, or $0.07$0.51 per Class B diluted share.Consolidated gross profit as a percent of net sales declined to 15.7% for fiscal year 2010 from 16.8% in fiscal year 2007 was 20.3% compared2009 due to 22.4%a shift in fiscal year 2006. With the fiscal year 2007 and 2006 acquisitions, the Company's sales mix continued to shift(as depicted in the table below) toward the EMS segment. Since the EMS segment operatedwhich operates at a lower gross profit percentage than the Furniture segment. The EMS segment this contributed to the consolidated gross profit downward trend. The fiscal year 2007 EMSand Furniture segment gross profit percentage declinedas a percent of net sales both improved in24fiscal year 2010 as compared to fiscal year 2006 while2009. Gross profit is discussed in more detail in the fiscalsegment discussions below.Segment Net Sales as a % of Consolidated Net Sales Year Ended June 30 2010 2009 EMS segment 63% 53% Furniture segment 37% 47% Fiscal year 2007 Furniture segment gross profit percentage improved compared to fiscal year 2006.Consolidated2010 consolidated selling general and administrative (SG&A) expenses increased in absolute dollars but decreasedslightly as a percent of net sales compared to fiscal year 2006. The decline in consolidated SG&A costs as a percent of net sales was2009, due to the leverage of the additional net sales from the acquisitions and the shift in sales mix toward the EMS segment, which hasvolumes declining at a lower SG&A percentagequicker rate than the Furniture segment.Fiscalselling and administrative expenses. Consolidated selling and administrative expenses for fiscal year 2007 other income decreased2010 declined in absolute dollars by 6% compared to fiscal year 20062009 primarily due to $2.2 million pre-tax income relatingdecreased labor expense, lower bad debt expense, lower depreciation and amortization expense, and other comprehensive cost reduction efforts throughout the Company. Partially offsetting these reductions, the Company experienced increased employee benefit costs primarily related to funds receivedthe reinstatement of the Company's retirement plan contribution, increased advertising and marketing costs, and increased incentive compensation costs at select business units during fiscal year 2010 as compared to fiscal year 2009.In addition, in fiscal year 20062010, the Company recorded $1.5 million of expense compared to $2.8 million of income in fiscal year 2009 related to the normal revaluation to fair value of its Supplemental Employee Retirement Plan (SERP) liability. The result was an unfavorable variance in selling and administrative expenses of $4.3 million. As the general equity markets improved, the value of the SERP investments increased, causing additional selling and administrative expense related to the SERP liability. The SERP expense recorded in selling and administrative expenses was exactly offset by an increase in SERP investment income which was recorded in Other Income (Expense) as partan investment gain; therefore, there was no effect on net earnings. The SERP investment is comprised of approximately 90% employee contributions.Fiscal year 2010 Other General Income included a Polish offset credit program$6.7 million pre-tax gain within the EMS segment related to the sale of the facility and land in Poland. Fiscal year 2010 Other General Income also included $3.3 million of pre-tax income recorded in the EMS segment resulting from settlement proceeds related to an antitrust class action lawsuit of which the Company was a class member. The class action alleged the defendant sellers illegally conspired to fix prices for investments madeelectronic components purchased by a business unit within the EMS segment. Other General Income in fiscal year 2009 included a $31.5 million pre-tax gain on the sale of undeveloped land holdings and timberlands. The gain on the sale of land holdings and timberlands was included in Unallocated Corporate in segment reporting. In addition, during fiscal year 2009, the Company had a conditional agreement to sell and lease back the facility that housed its Poland operations. However, the buyer was unable to close the transaction within the terms of the agreement. As a result, the Company was entitled to retain approximately $1.9 million of the deposit funds held by the Company which was recorded as pre-tax income in Other General Income in the EMS segment. In fiscal year 2009, the Company recorded non-cash pre-tax goodwill impairment charges of $14.6 million as a result of interim goodwill impairment testing which was completed due to the uncertainty associated with the economy and the significant decline in the Company's Poland operation.Other Income (Expense) included other income of $3.3 million for fiscal year 2010 compared to other expense of $0.4 million for fiscal year 2009. The $4.3 million favorable variance in SERP investments was the primary driver of the increased other income for fiscal year 2010. Interest expense for fiscal year 2010 was lower than fiscal year 2009 due to lower average outstanding debt balances coupled with lower interest rates. Interest income was likewise lower for fiscal year 2010 compared to fiscal year 2009 due to lower interest rates and lower average investment balances.The fiscal year 2007 effective income tax rate was 36% as compared to a 27% effective income tax rate in fiscal year 2006. The increased effective income tax rate was related to a higher mix of income being generated by domestic operations in fiscal year 2007, which carry a higher effective tax rate, coupled with the negative effect of losses generated by select foreign operations which have a lower effective tax rate. For fiscal year 2006, in addition to the positive impact of a higher mix of income being generated at foreign operations, the fiscal year 20062010 effective tax rate was also driven down by $1.6 million(81.0)% compared to the effective tax rate for adjustmentsfiscal year 2009 of 31.6%. Relatively low pre-tax income coupled with a tax benefit due to incomethe Company's tax accruals resulting fromplanning strategy related to the sale of its Poland facility and land and the favorable closureimpact of several priorthe Company's earnings mix resulted in a tax benefit in fiscal year 2010 despite the Company's pre-tax income. The mix of earnings between U.S. and foreign jurisdictions largely contributed to the overall tax audits.benefit due to losses in the U.S. which have a higher statutory tax rate than the Company's foreign operations which were profitable in fiscal year 2010. In fiscal year 2009, the Company's foreign operations experienced losses while income was generated in the U.S. See Note 9 - Income Taxes of Notes to Consolidated Financial Statements for more information.25Electronic Manufacturing Services SegmentEMS segment results follow: At or For the Year Ended June 30 (Amounts in Millions) 2010 2009 % Change Net Sales $ 709.1 $ 642.8 10 % Operating Income (Loss) $ 15.3 $ (22.0 ) 170 % Net Income (Loss) $ 15.7 $ (11.8 ) 234 % Poland Land/Facility Gain, net of tax $ 7.7 $ — Goodwill Impairment, net of tax $ — $ 8.0 Restructuring Expense, net of tax $ 1.2 $ 1.5 Open Orders $ 199.1 $ 156.9 27 % Fiscal year 2010 EMS segment net sales and open orders were as follows:
June 30Fiscal year 2007 EMS segment net sales increased $176.3 million, or 35%, from fiscal year 2006 due to the acquisitions. Acquisitions completed in the fourth quarter of fiscal year 2006 and in the third quarter of fiscal year 2007 within the EMS segment contributed sales of $319.3 million in fiscal year 2007 and $61.5 million in fiscal year 2006. The selling price change to Bayer AG and affiliates reduced fiscal year 2007 net sales by approximately $64 million. Increased sales to customers in the medical and industrial control industries more than offset decreased sales to customers in the automotive, industry driven by declines in the domestic automotive market. Excluding acquisitions, salesmedical, industrial control, and public safety industries all increased compared to customers in the medical industry would have declined.Thefiscal year 2009. While open orders increase was driven by the acquisitions. Open orderswere up 27% as of June 30, 2007 have been adjusted2010 compared to be consistent with the calculation of open orders as of June 30, 2008. Due to the contract nature of the Company's business,2009, open orders at a point in time may not be indicative of future sales trends.EMS segment fiscal year 2007 income from continuing operations totaled $1.0 million, inclusive of after-tax restructuring charges of $0.1 million, as compared to fiscal year 2006 income from continuing operations of $6.5 million, inclusive of after-tax restructuring charges of $0.5 million. The restructuring charges were relatedtrends due to the exit of a North American manufacturing facility as discussed in more detail in Note 17 - Restructuring Expense of Notes to Consolidated Financial Statements.Beginning in the third quarter of fiscal year 2007, gross profit as a percent of sales was favorably impacted by a reduction in the pricing of select raw material which is purchased from Bayer AG and affiliates. The selling pricecontract nature of the finished product back to Bayer AG and affiliates was likewise reduced by an amount equal to the material price reduction. While there was no impact to gross profit dollars, net income, or net cash flows related to this pricing change,Company's business.Fiscal year 2010 EMS segment gross profit as a percent of net sales improved 1.5 percentage points when compared to fiscal year 2009. The improvement was primarily driven by labor efficiency improvements and fixed cost leverage associated with the increased sales.EMS segment selling and SG&Aadministrative expenses in absolute dollars decreased 1% in fiscal year 2010 as compared to fiscal year 2009 and also declined as a percent of net sales increased by a similar percentage. This relationship with Bayer AG and affiliates was part of an acquisition completed in the fourth quarter of fiscal year 2006.Fiscal2010 compared to fiscal year 2007 gross profit as2009 primarily because of the higher sales volumes. The reduction in selling and administrative expenses for fiscal year 2010 compared to fiscal year 2009 was primarily related to a decrease in overall salary expense, benefits realized from restructuring actions, lower depreciation/amortization expense, and other overall cost reduction efforts which were partially offset by higher incentive compensation costs.EMS segment Other General Income for fiscal year 2010 included a $6.7 million pre-tax gain from the sale of the existing Poland facility and land. Including the tax benefit related to the sale of this facility and land, the after-tax gain was $7.7 million. In addition, Other General Income in fiscal year 2010 included $3.3 million of pre-tax income, or $2.0 million after-tax, resulting from settlement proceeds related to the antitrust class action lawsuit. EMS segment Other General Income for fiscal year 2009 included the $1.9 million pre-tax, or $1.6 million after-tax, amount retained by the Company resulting from the termination of a contract to sell the Company's Poland facility and land.The restructuring expenses recorded in fiscal years 2010 and 2009 were primarily related to the European consolidation plan.The fiscal year 2009 EMS segment earnings were also impacted by the recording of non-cash pre-tax goodwill impairment of $12.8 million, or $8.0 million after-tax.As a percent of net sales, declined fromoperating income (loss) was 2.2% for fiscal year 2006 as net sales2010 and (3.4)% for fiscal year 2009.During fiscal year 2010, the EMS segment recorded $1.0 million of higher margin mature products, primarily automotive products, reached end of life and were replaced with net sales of lower margin new products including certain assemblies produced attax income related to the acquired business units, which more than offset the positive gross profit percentage impactsale of the above-mentioned Bayer AG selling price change. While the above-mentioned Bayer pricing change negatively impacted SG&Afacility and land in Poland instead of tax expense normally associated with a gain, as a percentresult of net sales, the SG&A as a percent of net sales for this segment declined overall in part due to lower incentive compensation costs.tax planning strategy. The fiscal year 20072010 EMS segment income tax was also favorably impacted by the mix of earnings between U.S. and 2006 acquisitions also had the effect of lowering this segment's gross profit and SG&A as a percent of net sales. The acquisitions positively contributed to this segment's earnings.2007 and 2006 earnings were unfavorably2009 EMS effective income tax rate was favorably impacted by after-tax costs, in millions, of $3.5 and $0.4, respectively,a tax benefit related to its European operations which was primarily offset by the start-upimpact of a manufacturing facilitylosses in China. There were minimal sales recorded for the China facility during fiscal year 2007. Fiscal year 2006 income from continuing operations included $1.3 million of after-tax income relating to funds received as part of the Polish offset credit program for investments made in the Company's Poland operation. Fiscal year 2006 EMS segment earnings also benefited fromselect foreign jurisdictions which have a lower effective tax rate due to adjustments to income tax accruals.26Included in this segment wereare a significant amount of sales to Bayer AG affiliates and TRW Automotive, Inc. Sales to these two customerswhich accounted for the following portions of consolidated net sales and EMS segment net sales:Bayer AG affiliated sales as a percent of consolidated net sales TRW sales as a percent of consolidated net sales Year Ended June 30 2010 2009 Bayer AG affiliated sales as a percent of consolidated net sales 15% 12% Bayer AG affiliated sales as a percent of EMS segment net sales 24% 23% Furniture SegmentFurniture segment results follow: At or For the Year Ended June 30 (Amounts in Millions) 2010 2009 % Change Net Sales $ 413.6 $ 564.6 (27 )% Operating Income (Loss) $ (9.4 ) $ 13.8 (168 )% Net Income (Loss) $ (5.8 ) $ 8.3 (169 )% Goodwill Impairment, net of tax $ — $ 1.1 Restructuring (Income) Expense, net of tax $ (0.1 ) $ 0.1 Open Orders $ 70.6 $ 70.2 1 % The reduced TRW Automotive, Inc. percentages of segment and consolidatedfiscal year 2010 net sales were a result of certain TRW Automotive, Inc. products reaching end of life in addition to the higher total net sales base resulting from the acquisitions which likewise drove the higher percentages of net sales to Bayer AG affiliates compared to the prior year. In January 2007, Bayer AG sold its diagnostics unit to Siemens AG, and thus a portion of the Company's net sales which were formerly to Bayer AG affiliates are now to Siemens AG. Net sales to Bayer AG affiliates were also impacteddecline in the third and fourth quarters of fiscal year 2007 as a result of the Company's aforementioned selling price reduction to Bayer AG affiliates which was offset by an equal reduction in the material cost. The Company also continues to focus on diversification of the EMS segment customer base.Furniture Segment net sales and open orders were as follows:
June 30Price increases net of higher discounting increased fiscal year 2007 net sales of branded furniture, which includes office and hospitality furniture, by approximately $2.3 million as compared to fiscal year 2006. Increased2009 resulted from decreased net sales of both office furniture and hospitality furniture. The decline in office furniture sales was primarily due to decreased sales volumes, with higher discounting net of hospitality furniture also contributedprice increases contributing to the increased branded furniture net sales level.a lesser extent. Fiscal year 20072010 sales of newly introduced office furniture products which the Company began selling during fiscal year 2007had been sold for less than twelve months approximated $24.0$20.9 million. BrandedOpen orders of furniture products open orders at June 30, 2007 were 1% higher than2010 approximated the open orders atlevels as of June 30, 2006,2009 as higher hospitality furnitureincreased open orders offset lowerfor office furniture open orders. Net sales of contract private label products decreased in conjunction with the planned exit of this product line.The Furniture segment income from continuing operations was $17.8 million in fiscal year 2007, inclusive of after-tax restructuring charges of $0.8 million, compared to income from continuing operations of $17.3 million in fiscal year 2006, which included $2.3 million of after-tax restructuring charges. The fiscal year 2007 and fiscal year 2006 restructuring charges were primarily related to the consolidation and standardizationoffset by decreased orders for hospitality furniture. Open orders at a point in time may not be indicative of administrative, marketing, and business development functions within this segment. future sales trends.Fiscal year 20072010 Furniture segment gross profit as a percent of net sales increased 0.4improved 0.3 percentage pointpoints when compared to fiscal year 2006.2009. Items which positively impactedcontributing to the improved gross profit during fiscal year 2007 included price increases on select furniture products, lower workers compensation expense, and a sales mix shift away from lower margin contract private label products. Conversely, fiscal year 2007 gross profit was negatively impacted by higher discounting on select furniture products and a shift in sales mix among branded furniture products. As compared to fiscal year 2006, fiscal year 2007 SG&A expenses increased in absolute dollars and as a percent of net sales asincluded: price increases on select product, lower incentive compensationcommodity costs, werea sales mix shift to higher margin product, lower employee benefit costs, and other overall cost reduction efforts. These improvements more than offset by increases in other SG&Athe negative impact of the lower absorption of fixed costs includingassociated with the lower net sales, increased investments for product marketingdiscounting resulting from competitive pricing pressures, and promotion and for additional sales staff in supportincreased costs related to the reinstatement of the Company's retirement plan contribution for fiscal year 2010. Due to the significant decline in sales growth strategy.See Note 17 - Restructuring Expensevolume, the fiscal year 2010 gross profit dollars declined as compared to fiscal year 2009.Fiscal year 2010 selling and administrative expenses decreased in absolute dollars by 11%, but increased as a percent of Notesnet sales on the lower sales volumes, when compared to Consolidated Financial Statementsfiscal year 2009. The fiscal year 2010 selling and administrative expense decline resulted from lower overall salary expense realized from past restructurings and the salary reduction plan implemented by the Company in fiscal year 2009, lower commission costs related to the lower sales volumes, lower bad debt expense, and other improvements resulting from the focus on managing all costs. Partially offsetting the lower costs were higher advertising and product marketing expenses, increased costs related to the reinstatement of the Company's retirement plan contribution, and higher severance costs due to scaling operations.The Furniture segment earnings for more information onfiscal year 2009 were impacted by the recording of non-cash pre-tax goodwill impairment of $1.8 million, which equated to $1.1 million after-tax.During the first quarter of fiscal year 2009, the Company approved a restructuring charges.As a percent of net sales, operating income (loss) was (2.3)% for fiscal year 2010 and 2.4% for fiscal year 2009.27Liquidity and Capital ResourcesWorking capital at June 30, 20082011 was $163$178.0 million compared to working capital of $199$180.0 million at June 30, 2007.2010. The current ratio was 1.51.8 at both June 30, 20082011 and 1.8 at June 30, 2007.The Company's internal measure of Accounts Receivableaccounts receivable performance, also referred to as Days Sales Outstanding (DSO), for fiscal year 2008 increased2011 of 48.5 days was comparable to 46.6 from 44.0the 47.8 days for fiscal year 2007. The DSO increase was primarily due to certain customers extending the timeframe in which they pay the Company. The Company also purchases materials from these customers and has an agreement that likewise allows the Company to extend accounts payable terms.2010. The Company defines DSO as the average of monthly accounts and notes receivable divided by an annual average day's net sales. The Company's Production Days Supply on Hand (PDSOH) of inventory measure for fiscal year 20082011 increased to 59.964.4 days from 55.763.0 days for fiscal year 2007. The increased PDSOH was driven by EMS segment increased average inventory balances primarily in support of transfers of production between manufacturing facilities within the EMS segment.2010. The Company defines PDSOH as the average of the monthly gross inventory divided by an annual average day's cost of sales.The Company's short-term liquidity available, represented as cash and cash equivalents plus the unused amount of the Company's revolving credit facility, totaled $146.2 million at June 30, 2011 compared to $161.1 million at June 30, 2010.The Company's cash and cash equivalents position decreased from $65.3 million at June 30, 2010 to $51.4 million at June 30, 2011. The Company does not disclose discontinued operations separately from continuing operations in the Consolidated Statements of Cash Flows. However, for clarity purposes, the Company does separately disclose the adjustment to net income for the loss on disposal of discontinued operations in cash flows from operating activities and the proceeds from disposal of discontinued operations in cash flows from investing activities.The Company's net cash position from an aggregate of cash, cash equivalents, and short-term investments lesshad no short-term borrowings under credit facilities decreased from $80 million at outstanding as of 2007 to $30 million at 2011 or June 30, 2008, as cash flow generated from operations was more than offset by cash payments during the fiscal year for capital expenditures, share repurchases, and dividends.2010. Operating activities generated $43$21.3 million of cash flow in fiscal year 20082011 compared to $44the $13.4 million of cash generated by operating activities in fiscal year 2007. The Company's repurchase of Class B shares under a previously authorized share repurchase program utilized $25 million of cash. The2010. During fiscal year 2011, the Company reinvested $51$33.2 million into capital investments for the future, primarily for manufacturing equipment and facility improvements.in the EMS segment. The Company also paid $7.3 million of dividends in fiscal year 2011. Consistent with the Company's historical dividend policy, the Company's Board of Directors will evaluate the appropriate dividend payment on a quarterly basis. During fiscal year 2009,2012, the Company expects to continue to invest in manufacturing equipmentcapital expenditures prudently, particularly for projects including potential acquisitions that would enhance the Company's capabilities and also plans to construct a new EMS manufacturing facility in Polanddiversification while providing an opportunity for growth and improved profitability as part of the consolidation of the European manufacturing footprint. The land and new facility are expected to cost approximately $35 million,economy and the Company has a conditional agreement to sell the current Poland facility for approximately $24 million. During fiscal year 2009,Company's markets recover.At June 30, 2011, the Company intends to sell approximately 27,300 acres of timber and farm land that it currently owns. Fiscal year 2008 financing cash flow activities included $24had no short-term borrowings outstanding under its $100 million credit facility described in dividend payments, which remained flat with fiscal year 2007.previously maintained a $75also has several smaller foreign credit facilities available described in more detail below and likewise had no borrowings outstanding under these facilities as of At June 30, 2011, the Company had $5.2 million committed in letters of credit against the $100 million credit facility. Total availability to borrow under the $100 million credit facility was $94.8 million at June 30, 2011.The Company maintains the $100 million credit facility with an expiration date in May 2009April 2013 that allowedallows for both issuances of letters of credit and cash borrowings. During the fourth quarter of fiscal year 2008, the Company replaced the $75The $100 million credit facility with a $100 million credit facility which expires in April 2013. The $75 million credit facility provided an option to increase the amount available for borrowing to $125 million at the Company's request, subject to participating banks' consent. Similarly, the $100 million credit facility provides an option to increase the amount available for borrowing to $150$150 million at the Company's request, subject to the consent of the participating banks' consent. Similar to the previous $75banks. The $100 million credit facility, the $100 million credit facilityupon which there were no borrowings at June 30, 2011, requires the Company to comply with certain debt covenants, includingthe most significant of which are the interest coverage ratio and minimum net worth, and other terms and conditions.worth. The Company was in compliance with thesethe debt covenants at during the fiscal year ended June 30, 2008.At June 30, 2008,2011.The table below compares the actual net worth and interest coverage ratio with the limits specified in the credit agreement.Covenant At or For the Period Ended June 30, 2011 Limit As Specified in Credit Agreement Excess Minimum Net Worth $387,399,000 $362,000,000 $25,399,000 Interest Coverage Ratio 46.0 3.0 43.0 The Interest Coverage Ratio is calculated on a rolling four-quarter basis as defined in the credit agreement.In addition to the $100 million credit facility, the Company had $52.6 million of short-term borrowings outstanding. The outstanding balance consisted of $17.3 million for a Euro currency borrowingcan opt to utilize foreign credit facilities which provides a natural currency hedge against Euro denominated intercompany notes between the U.S. parent and the Euro functional currency subsidiaries, and an additional $33.6 million borrowing fundedare available to satisfy short-term cash needs. In addition,needs at June 30, 2008, thea specific foreign location rather than funding from intercompany sources. The Company had $1.7 million of short-term borrowings outstanding undermaintains a separate Thailandforeign credit facility for its EMS segment operation in Thailand which is backed by the $100$100 million revolving credit facility. The Company also had letters of credit against the credit facility. Total availability to borrow under the $100 million credit facility was $44.2 million at June 30, 2008. At June 30, 2007, the Company had $18.9 million of short-term borrowings outstanding under the $75 million credit facility.The Company also has a credit facility for which the expiration date has been extended to November 2008 for its electronicsEMS segment operation in Wales, United Kingdom,Poland, which allows for multi-currency borrowings up to 2 Sterling Euro equivalent (approximately $4$8.7 million U.S. dollars at currentJune 30, 2011 exchange rates) and is available to cover. These foreign credit facilities can be canceled at any time by either the bank overdrafts. Bank overdrafts may be deemed necessary to satisfy short-term cash needs rather than funding from intercompany sources. At June 30, 2007, as collateral subject to lien, this facility required 3 million Euro (approximately $4 million U.S. dollars) to be held as restricted cash which was classified as other long-term assets onor the Company's balance sheet. The restricted cash is no longer required as collateral and was reclassified to cash and cash equivalents on the Company's balance sheet. At June 30, 2008, the Company had no borrowings outstanding under the overdraft facility. At June 30, 2007, the Company had $3.0 million U.S. dollar equivalent of Sterling-denominated short-term borrowings outstanding under the overdraft facility. See Note 6 - Long-Term Debt and Credit Facility of Notes to Consolidated Financial Statements for more information on the credit facilities.At June 30, 2007, the Company's outstanding balance in senior secured notes was $4.5 million. These notes represented the remaining portion of notes originally held by Reptron which was not tendered as of the date of the acquisition. The Company redeemed the notes during fiscal year 2008. The notes were classified as Current Liabilities on the Consolidated Balance Sheets. See Note 2 - Acquisitions of Notes to Consolidated Financial Statements for information on the Reptron acquisition.
Company.The Company believes its principal sources of liquidity from available funds on hand, cash generated from operations, and the availability of borrowing under the Company's credit facilities will be sufficient infor fiscal year 20092012 and the foreseeable future for working capital needs, dividends, and for funding investments infuture. One of the Company's future, including potential acquisitions. The Company's primary sourcesources of funds ishas been its ability to generate cash from operations to meet its liquidity obligations, which during fiscal year 2011 was hampered by working capital variations which negatively impacted cash balances, and could be adversely affected in the future by factors such as general economic and market conditions, lack of availability of raw material components in the supply chain, a decline in demand for the Company's products, loss of key contract customers, the28ability of the Company to generate profits, and other unforeseen circumstances. TheIn particular, should demand for the Company's secondaryproducts decrease significantly over the next 12 months, the available cash provided by operations could be adversely impacted. Another source of funds is itsthe Company's credit facilities. The $100$100 million credit facility is contingent on complying with certain debt covenants. The Company does not expect the covenants to limit or restrict its ability to borrow on the facility in fiscal year 2009. The Company anticipates maintaining a strong liquidity position for the next twelve months. The Company does not expect the absence of cash flows from discontinued operations to have a material effect on future liquidity and capital resources.The preceding statements are forward-looking statements under the Private Securities Litigation Reform Act of 1995. Certain factors could cause actual results to differ materially from forward-looking statements.
| Payments Due During Fiscal Years Ending June 30, | ||||||||
| (Amounts in Millions) | Total |
| 2009 |
| 2010-2011 |
| 2012-2013 |
| Thereafter |
| Recorded Contractual Obligations: |
|
|
|
|
|
|
|
|
|
| Long-Term Debt Obligations (a) | $ 0.5 |
| $ 0.1 |
| $ 0.1 |
| $ 0.0 |
| $ 0.3 |
| Capital Lease Obligations (a) | 0.4 |
| 0.4 |
| 0.0 |
| 0.0 |
| 0.0 |
| Other Long-Term Liabilities Reflected on the Balance Sheet (b) (c) (d) | 34.8 |
| 10.9 |
| 13.4 |
| 1.6 |
| 8.9 |
|
|
|
|
|
|
|
|
|
|
| Unrecorded Contractual Obligations: |
|
|
|
|
|
|
|
|
|
| Operating Leases (d) | 18.9 |
| 3.8 |
| 6.6 |
| 4.3 |
| 4.2 |
| Purchase Obligations (e) | 298.0 |
| 272.0 |
| 16.3 |
| 9.5 |
| 0.2 |
| Other | 2.5 |
| 0.0 |
| 2.5 |
| 0.0 |
| 0.0 |
| Total | $355.1 |
| $287.2 |
| $38.9 |
| $15.4 |
| $13.6 |
2011.
(a) Refer toNote 6 - Long-Term Debt and Credit Facilityof Notes to Consolidated Financial Statements for more information regarding Long-Term Debt and Capital Lease Obligations. The $0.1 million long-term debt obligations and $0.4 million capital lease payments due in fiscal year 2009 are recorded as current liabilities.
| Payments Due During Fiscal Years Ending June 30 | ||||||||||||||||||||||
| (Amounts in Millions) | Total | 2012 | 2013-2014 | 2015-2016 | Thereafter | |||||||||||||||||
| Recorded Contractual Obligations (a): | ||||||||||||||||||||||
| Long-Term Debt Obligations (b) | $ | 0.3 | $ | — | $ | — | $ | 0.1 | $ | 0.2 | ||||||||||||
Other Long-Term Liabilities Reflected on the Balance Sheet (c) (d) (e) | 33.0 | 16.1 | 3.2 | 2.9 | 10.8 | |||||||||||||||||
| Unrecorded Contractual Obligations: | ||||||||||||||||||||||
| Operating Leases (e) | 11.0 | 3.3 | 4.7 | 2.3 | 0.7 | |||||||||||||||||
| Purchase Obligations (f) | 226.0 | 212.9 | 7.6 | 5.5 | — | |||||||||||||||||
| Other | 0.3 | 0.1 | 0.1 | — | 0.1 | |||||||||||||||||
| Total | $ | 270.6 | $ | 232.4 | $ | 15.6 | $ | 10.8 | $ | 11.8 | ||||||||||||
| (a) | As of June 30, 2011, the Company had no Capital Lease Obligations. |
| (b) | Refer to Note 6 - Long-Term Debt and Credit Facility of Notes to Consolidated Financial Statements for more information regarding Long-Term Debt Obligations. Accrued interest is also included on the Long-Term Debt Obligations line. The fiscal year 2012 amount includes less than $0.1 million of long-term debt obligations due in fiscal year 2012 which was recorded as a current liability. The estimated interest not yet accrued related to debt is included in the Other line item within the Unrecorded Contractual Obligations. |
| (c) | The timing of payments of certain items included on the "Other Long-Term Liabilities Reflected on the Balance Sheet" line above is estimated based on the following assumptions:
|
| (d) | Excludes $4.3 million of long-term unrecognized tax benefits and associated accrued interest and penalties along with deferred tax liabilities and miscellaneous other long-term tax liabilities which are not tied to a contractual obligation and for which the Company cannot make a reasonably reliable estimate of the period of future payments. |
| (e) | Refer to Note 5 - Commitments and Contingent Liabilities of Notes to Consolidated Financial Statements for more information regarding Operating Leases and certain Other Long-Term Liabilities. |
| (f) | Purchase Obligations are defined as agreements to purchase goods or services that are enforceable and legally binding and that specify all significant terms. The amounts listed above for purchase obligations include contractual commitments for items such as raw materials, supplies, capital expenditures, services, and software acquisitions/license commitments. Cancellable purchase obligations that the Company intends to fulfill are also included in the purchase obligations amount listed above through fiscal year |
(c) Excludes $2.2 million of long-term unrecognized tax benefits associated with the adoption of Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48), and associated accrued interest and penalties along with miscellaneous other long-term liabilities which are not tied to a contractual obligation and for which the Company cannot make a reasonably reliable estimate of the period of future payments.
(d) Refer toNote 5 - Commitments and Contingent Liabilitiesof Notes to Consolidated Financial Statements for more information regarding Operating Leases and certain Other Long-Term Liabilities.
(e) Purchase Obligations are defined as agreements to purchase goods or services that are enforceable and legally binding and that specify all significant terms. The amounts listed above for purchase obligations include contractual commitments for items such as raw materials, supplies, capital expenditures, services, and software acquisitions/license commitments. Cancellable purchase obligations that the Company intends to fulfill are also included in the purchase obligations amount listed above. In certain instances, such as when lead times dictate, the Company enters into contractual agreements for material in excess of the levels required to fulfill customer orders. In turn, agreements with the customers cover a portion of that exposure for the material which was purchased prior to having a firm order.
Off-Balance Sheet Arrangements
The preceding statements are forward-looking statements under the Private Securities Litigation Reform Act of 1995. Certain factors could cause actual results to differ materially from forward-looking statements.
The higher reserve was driven by increased risk created by deteriorating market conditions during that time.
Income taxesTaxes - Deferred income tax assets and liabilities are recognized for the estimated future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. These assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to reverse. The Company evaluates the recoverability of its deferred tax assets each quarter by assessing the likelihood of future profitability and available tax planning strategies that could be implemented to realize its deferred tax assets. If recovery is not likely, the Company provides a valuation allowance based on its best estimate of future taxable income in the various taxing jurisdictions and the amount of deferred taxes ultimately realizable. Future events could change management's assessment.FIN 48, which clarifies the accounting for uncertainty in tax positions, requires financial statement recognition of the impact of a tax position if a position is more likely than not of being sustained on audit, based on the technical merits of the position. Additionally, FIN 48 provides guidance on measurement, derecognition, classification, interest and penalties, accounting in interim periods, transition, and disclosure requirements for uncertain tax positions. The provisions of FIN 48 were effective as of the beginning of the Company's fiscal year 2008.
Goodwill - Goodwill represents the difference between the purchase price and the related underlying tangible and intangible net asset values resulting from business acquisitions. Annually, or if conditions indicate an earlier review is necessary, the Company compares the carrying value of the reporting unit to an estimate of the reporting unit's fair value. If the estimated fair value is less than the carrying value, goodwill is impaired and will be written down to its estimated fair value. At those positions, was
2010
.Foreign Exchange Rate Risk: The Company operates internationally and thus is subject to potentially adverse movements in foreign currency rate changes. The Company's risk management strategy includes the use of derivative financial instruments to hedge certain foreign currency exposures. Derivatives are used only to manage underlying exposures of the Company and are not used in a speculative manner. Further information on derivative financial instruments is provided in Note 1112 - Derivative Instruments of Notes to Consolidated Financial Statements. The Company estimates that a hypothetical 10% adverse change in foreign currency exchange rates from levels at June 30, 2011 and 2010 relative to non-functional currency balances of monetary instruments, to the extent not hedged by derivative instruments, would not have a material impact on profitability in an annual period.
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201133MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTINGThe management of Kimball International, Inc. is responsible for establishing and maintaining adequate internal control over financial reporting and 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 accounting principles generally accepted in the United States of America and include judgments and estimates, which in the opinion of management are applied on an appropriately conservative basis. The Company maintains a system of internal and disclosure 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 employees who work within the internal control processes, by the Company's staff of internal auditors, as well as by the independent registered public accounting firm 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 registered public accounting firm to review the Company's financial policies and procedures, its internal control structure, the objectivity of its financial reporting, and the independence of the Company's independent registered public accounting firm. The internal auditors and the independent registered public accounting firm have free and direct access to the Audit Committee, and they meet periodically, without management present, to discuss appropriate matters.Because of inherent limitations, a system of internal control over financial reporting may not prevent or detect misstatements and even when determined to be effective, can only provide reasonable assurance with respect to financial statement preparation and presentation.These consolidated financial statements are subject to an evaluation of internal control over financial reporting conducted under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer. Based on that evaluation, conducted under the criteria established in Internal Control --— Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, management concluded that its internal control over financial reporting was effective as of June 30, 2008.Deloitte & Touche LLP, the Company's independent registered public accounting firm, has issued an audit report on the Company's internal control over financial reporting which is included herein./s/ JAMES C. THYEN James C. Thyen President, Chief Executive Officer August 29, 2011 /s/ ROBERT F. SCHNEIDER /s/ James C. ThyenJAMES C. THYENPresident,Chief Executive OfficerSeptember 2, 2008/s/ Robert F. Schneider ROBERT F. SCHNEIDER
Executive Vice President,Chief Financial Officer September 2, 2008August 29, 2011
Research and Development: The costs of research and development are expensed as incurred. Research and development costs Note 12 - Derivative Instruments of Notes to Consolidated Financial Statements for more information on derivative instruments and hedging activities. New Accounting statements. In 2008 2007 2008 Operating leases 2011 Product Warranties: June 30, 2011 and 2010, was, in thousands, $286 and $299, respectively, and current maturities of long-term debt were, in thousands, $12 and $61, respectively. Long-term debt consists of a long-term following: The Company also maintains a Severance Plans: Unrestricted Share Grants: 1996 Stock Incentive Program. income taxes were, in thousands, Interest and penalties recognized for fiscal years If Derivative instruments are only utilized for risk management purposes and are not used for speculative or trading purposes. . Gains on foreign exchange contracts are generally offset by losses in operating costs in the income statement when the underlying hedged transaction is recognized in earnings. privately-held company's underlying securities, either providing an appreciation in value or potentially expiring with no value. The stock warrants expire in June 2017. The cost of each individual security was used in computing the realized gains and losses. brand names. Each segment's product line offerings consist of similar products and services sold within various industries. During the Property & Equipment Impairment and Losses on Sales Transition and Other Employee Costs Lease and Other Exit Costs Total Total Total Total 2008 2007 2006 The information required by this item with respect to Directors is incorporated by reference to the material contained in the Company's Proxy Statement for its annual meeting of Share Owners to be held October The information required by this item with respect to the Audit Committee and its financial expert and with respect to the Compensation and Governance Committee's responsibility for establishing procedures by which Share Owners may recommend nominees to the Board of Directors is incorporated by reference to the material contained in the Company's Proxy Statement for its annual meeting of Share Owners to be held October Individually and as Attorney-In-Fact Balance at Beginning Additions/(Reductions) Charged to Write-offs Balance34REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Board of Directors and Share Owners of Kimball International, Inc.:We have audited the accompanying consolidated balance sheets of Kimball International, Inc. and subsidiaries (the "Company") as of June 30, 20082011 and 2007,2010, and the related consolidated statements of income, share owners' equity, and cash flows for each of the three years in the period ended June 30, 2008.2011. Our audits also included the financial statement schedulesschedule listed in the Index at Item 15. We also have audited the Company's internal control over financial reporting as of June 30, 2008,2011, based on criteria established in Internal Control -— Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company's management is responsible for these financial statements and financial statement schedules,schedule, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on these financial statements and financial statement schedulesschedule and an opinion on the Company's internal control over financial reporting based on our audits.We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (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 and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.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, 20082011 and 2007,2010, and the results of their operations and their cash flows for each of the three years in the period ended June 30, 2008,2011, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedules,schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presentpresents fairly, in all material respects, the information set forth therein. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June 30, 2008,2011, based on the criteria established in Internal Control -— Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission./s/ Deloitte & Touche LLP DELOITTE & TOUCHE LLP Indianapolis, Indiana September 2, 2008August 29, 2011 35CONSOLIDATED BALANCE SHEETS(Amounts in Thousands, Except for Share and Per Share Data)KIMBALL INTERNATIONAL, INC.CONSOLIDATED STATEMENTS OF INCOME(Amounts in Thousands, Except for Per Share Data)KIMBALL INTERNATIONAL, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(Amounts in Thousands)KIMBALL INTERNATIONAL, INC.CONSOLIDATED STATEMENTS OF SHARE OWNERS' EQUITY
(Amounts in Thousands, Except for Share and Per Share Data)Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income Deferred Stock-Based Compensation Treasury Stock Total Share Owners' Equity Class A Class B Amounts at June 30, 2005 $ 718 $1,433 $ 4,625 $495,557 $ 901 $ (7,812) $(67,196) $ 428,226 Comprehensive income: Net income 15,362 15,362 Net change in unrealized gains and losses on securities (166) (166) Foreign currency translation adjustment 468 468 Net change in derivative gains and losses (317) (317) Comprehensive income 15,347 Issuance of non-restricted stock ( 19,000 shares) (146) 349 203 Net exchanges of shares of Class A and Class B common stock ( 869,000 shares) (3,307) 3,307 -0- Reclassification of restricted share units relating to adoption of FAS 123(R), Share-Based Payment ( 614,000 shares) 2,441 7,812 (10,253) -0- Vesting of restricted share units ( 1,000 shares) (31) 21 (10) Compensation expense related to stock incentive plans, including cumulative effect adjustment 3,247 3,247 Exercise of stock options ( 8,000 shares) (108) 134 26 Performance share issuance ( 38,000 shares) (702) 646 (56) Dividends declared: Class A ( $0.62 per share) (8,330) (8,330) Class B ( $0.64 per share) (16,071) (16,071) Amounts at June 30, 2006 $ 718 $1,433 $ 6,019 $486,518 $ 886 $ -0- $(72,992) $ 422,582 Comprehensive income: Net income 19,152 19,152 Net change in unrealized gains and losses on securities 76 76 Foreign currency translation adjustment 3,182 3,182 Net change in derivative gains and losses 574 574 Postemployment severance prior service cost (1,323) (1,323) Comprehensive income 21,661 Issuance of non-restricted stock ( 8,000 shares) 73 118 191 Net exchanges of shares of Class A and Class B common stock ( 1,138,000 shares) 5,940 (5,940) -0- Vesting of restricted share units (29) (29) Compensation expense related to stock incentive plans 4,745 4,745 Exercise of stock options ( 469,000 shares) 28 7,242 7,270 Performance share issuance ( 101,000 shares) (2,208) 1,667 (541) Share repurchases ( 266,000 shares) (3,624) (3,624) Dividends declared: Class A ( $0.62 per share) (7,609) (7,609) Class B ( $0.64 per share) (17,198) (17,198) Amounts at June 30, 2007 $ 718 $1,433 $ 14,568 $480,863 $ 3,395 $ -0- $(73,529) $ 427,448 Comprehensive income: Net loss (46) (46) Net change in unrealized gains and losses on securities 433 433 Foreign currency translation adjustment 9,090 9,090 Net change in derivative gains and losses (714) (714) Postemployment severance prior service cost 172 172 Postemployment severance net actuarial loss (68) (68) Comprehensive income 8,867 Issuance of non-restricted stock ( 13,000 shares) (31) 204 173 Net exchanges of shares of Class A and Class B common stock ( 91,000 shares) (326) 326 -0- Vesting of restricted share units ( 12,000 shares) (220) 188 (32) Compensation expense related to stock incentive plans 3,763 3,763 Performance share issuance ( 139,000 shares) (3,223) 2,173 (1,050) Share repurchases ( 1,733,000 shares) (22,298) (22,298) Cumulative effect of adoption of FIN 48, Accounting for Uncertainty in Income Taxes (712) (712) Dividends declared: Class A ( $0.62 per share) (7,476) (7,476) Class B ( $0.64 per share) (16,216) (16,216) Amounts at June 30, 2008 $ 718 $1,433 $ 14,531 $456,413 $ 12,308 $ -0- $(92,936) $ 392,467 See Notes to Consolidated Financial Statements 44 June 30
2011 June 30
2010ASSETS Current Assets: Cash and cash equivalents $ 51,409 $ 65,342 Short-term investments — 2,496 Receivables, net of allowances of $1,799 and $3,349, respectively 149,753 154,343 Inventories 141,097 146,406 Prepaid expenses and other current assets 50,215 43,776 Assets held for sale 2,807 1,160 Total current assets 395,281 413,523 Property and Equipment, net of accumulated depreciation of $360,105 and $337,251, respectively 196,682 186,999 Goodwill 2,644 2,443 Other Intangible Assets, net of accumulated amortization of $65,514 and $63,595, respectively 7,625 8,113 Other Assets 24,080 25,673 Total Assets $ 626,312 $ 636,751 LIABILITIES AND SHARE OWNERS' EQUITY Current Liabilities: Current maturities of long-term debt $ 12 $ 61 Accounts payable 149,107 178,693 Dividends payable 1,835 1,828 Accrued expenses 66,316 52,923 Total current liabilities 217,270 233,505 Other Liabilities: Long-term debt, less current maturities 286 299 Other 21,357 25,519 Total other liabilities 21,643 25,818 Share Owners' Equity: Common stock-par value $0.05 per share: Class A - 49,826,000 shares authorized; 14,368,000 shares issued 718 718 Class B - 100,000,000 shares authorized; 28,657,000 shares issued 1,433 1,433 Additional paid-in capital 230 119 Retained earnings 450,172 454,800 Accumulated other comprehensive income (loss) 1,618 (9,775 ) Less: Treasury stock, at cost: Class A - 3,945,000 and 3,834,000 shares, respectively (49,437 ) (49,415 ) Class B - 1,330,000 and 1,579,000 shares, respectively (17,335 ) (20,452 ) Total Share Owners' Equity 387,399 377,428 Total Liabilities and Share Owners' Equity $ 626,312 $ 636,751 36KIMBALL INTERNATIONAL, INC.CONSOLIDATED STATEMENTS OF INCOME(Amounts in Thousands, Except for Per Share Data) Year Ended June 30 2011 2010 2009 Net Sales $ 1,202,597 $ 1,122,808 $ 1,207,420 Cost of Sales 1,008,005 946,275 1,004,901 Gross Profit 194,592 176,533 202,519 Selling and Administrative Expenses 191,167 181,771 192,711 Other General Income — (9,980 ) (33,417 ) Restructuring Expense 1,009 2,051 2,981 Goodwill Impairment — — 14,559 Operating Income 2,416 2,691 25,685 Other Income (Expense): Interest income 820 1,188 2,499 Interest expense (121 ) (142 ) (1,565 ) Non-operating income 4,542 2,980 2,663 Non-operating expense (3,220 ) (749 ) (3,956 ) Other income (expense), net 2,021 3,277 (359 ) Income Before Taxes on Income 4,437 5,968 25,326 Provision (Benefit) for Income Taxes (485 ) (4,835 ) 7,998 Net Income $ 4,922 $ 10,803 $ 17,328 Earnings Per Share of Common Stock: Basic Earnings Per Share: Class A $ 0.12 $ 0.27 $ 0.46 Class B $ 0.14 $ 0.29 $ 0.47 Diluted Earnings Per Share: Class A $ 0.12 $ 0.27 $ 0.46 Class B $ 0.14 $ 0.29 $ 0.47 Average Number of Shares Outstanding: Basic: Class A 10,493 10,694 11,036 Class B 27,233 26,765 26,125 Totals 37,726 37,459 37,161 Diluted: Class A 10,639 10,791 11,121 Class B 27,234 26,770 26,151 Totals 37,873 37,561 37,272 37KIMBALL INTERNATIONAL, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(Amounts in Thousands) Year Ended June 30 2011 2010 2009 Cash Flows From Operating Activities: Net income $ 4,922 $ 10,803 $ 17,328 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 31,207 34,760 37,618 Gain on sales of assets (35 ) (6,771 ) (32,796 ) Restructuring and exit costs — 176 278 Deferred income tax 3,658 (2,023 ) (8,860 ) Goodwill impairment — — 14,559 Stock-based compensation 1,284 1,824 2,129 Excess tax benefits from stock-based compensation — (263 ) (297 ) Other, net 963 (392 ) — Change in operating assets and liabilities: Receivables 2,975 (17,629 ) 31,386 Inventories 3,243 (26,229 ) 36,667 Prepaid expenses and other current assets (5,004 ) (8,269 ) 7,994 Accounts payable (28,524 ) 26,700 (5,142 ) Accrued expenses 6,660 695 (16,705 ) Net cash provided by operating activities 21,349 13,382 84,159 Cash Flows From Investing Activities: Capital expenditures (31,371 ) (34,791 ) (47,679 ) Proceeds from sales of assets 941 12,900 49,942 Payments for acquisitions — — (5,391 ) Purchase of capitalized software (1,839 ) (624 ) (632 ) Purchases of available-for-sale securities — (7,193 ) (8,032 ) Sales and maturities of available-for-sale securities — 29,702 34,572 Other, net (1,458 ) 198 (320 ) Net cash provided by (used for) investing activities (33,727 ) 192 22,460 Cash Flows From Financing Activities: Proceeds from revolving credit facility 88,750 — 60,620 Payments on revolving credit facility (88,750 ) (12,248 ) (63,349 ) Additional net change in credit facilities — — (35,805 ) Payments on capital leases and long-term debt (62 ) (60 ) (527 ) Dividends paid to Share Owners (7,330 ) (7,264 ) (19,410 ) Excess tax benefits from stock-based compensation — 263 297 Repurchase of employee shares for tax withholding (278 ) (1,212 ) (1,209 ) Net cash used for financing activities (7,670 ) (20,521 ) (59,383 ) Effect of Exchange Rate Change on Cash and Cash Equivalents 6,115 (3,643 ) (2,109 ) Net (Decrease) Increase in Cash and Cash Equivalents (13,933 ) (10,590 ) 45,127 Cash and Cash Equivalents at Beginning of Year 65,342 75,932 30,805 Cash and Cash Equivalents at End of Year $ 51,409 $ 65,342 $ 75,932 38KIMBALL INTERNATIONAL, INC.CONSOLIDATED STATEMENTS OF SHARE OWNERS' EQUITY(Amounts in Thousands, Except for Share and Per Share Data) Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Treasury Stock Total Share Owners' Equity Class A Class B Amounts at June 30, 2008 $ 718 $ 1,433 $ 14,531 $ 456,413 $ 12,308 $ (92,936 ) $ 392,467 Comprehensive income: Net income 17,328 17,328 Net change in unrealized gains and losses on securities 211 211 Foreign currency translation adjustment (6,034 ) (6,034 ) Net change in derivative gains and losses (5,151 ) (5,151 ) Postemployment severance prior service cost 171 171 Postemployment severance actuarial change (2,006 ) (2,006 ) Comprehensive income 4,519 Issuance of non-restricted stock (29,000 shares) (484 ) 447 (37 ) Net exchanges of shares of Class A and Class B
common stock (1,188,000 shares) (10,038 ) 10,038 — Vesting of restricted share units (219,000 shares) (4,210 ) 3,460 (750 ) Compensation expense related to stock incentive plans 2,129 2,129 Performance share issuance (76,000 shares) (1,585 ) 1,172 (413 ) Dividends declared: Class A ($0.40 per share) (4,617 ) (4,617 ) Class B ($0.42 per share) (10,944 ) (10,944 ) Amounts at June 30, 2009 $ 718 $ 1,433 $ 343 $ 458,180 $ (501 ) $ (77,819 ) $ 382,354 Comprehensive income: Net income 10,803 10,803 Net change in unrealized gains and losses on securities (463 ) (463 ) Foreign currency translation adjustment (10,384 ) (10,384 ) Net change in derivative gains and losses 1,724 1,724 Postemployment severance prior service cost 173 173 Postemployment severance actuarial change (324 ) (324 ) Comprehensive income 1,529 Issuance of non-restricted stock (20,000 shares) (209 ) (66 ) 258 (17 ) Net exchanges of shares of Class A and Class B
common stock (460,000 shares) (490 ) (2,567 ) 3,057 — Vesting of restricted share units (209,000 shares) (274 ) (3,435 ) 3,157 (552 ) Compensation expense related to stock incentive plans 1,824 1,824 Performance share issuance (97,000 shares) (1,075 ) (784 ) 1,480 (379 ) Dividends declared: Class A ($0.18 per share) (1,955 ) (1,955 ) Class B ($0.20 per share) (5,376 ) (5,376 ) Amounts at June 30, 2010 $ 718 $ 1,433 $ 119 $ 454,800 $ (9,775 ) $ (69,867 ) $ 377,428 Comprehensive income: Net income 4,922 4,922 Foreign currency translation adjustment 10,313 10,313 Net change in derivative gains and losses (458 ) (458 ) Postemployment severance prior service cost 171 171 Postemployment severance actuarial change 1,367 1,367 Comprehensive income 16,315 Issuance of non-restricted stock (39,000 shares) (556 ) (107 ) 499 (164 ) Net exchanges of shares of Class A and Class B
common stock (215,000 shares) (551 ) (728 ) 1,279 — Compensation expense related to stock incentive plans 1,284 1,284 Performance share issuance (99,000 shares) (66 ) (1,378 ) 1,317 (127 ) Dividends declared: Class A ($0.18 per share) (1,889 ) (1,889 ) Class B ($0.20 per share) (5,448 ) (5,448 ) Amounts at June 30, 2011 $ 718 $ 1,433 $ 230 $ 450,172 $ 1,618 $ (66,772 ) $ 387,399 39KIMBALL INTERNATIONAL, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSA summary of the goodwill by segment is as follows:June 30, June 30, 2008 2007 (Amounts in Thousands) Furniture $ 1,733 $ 1,733 Electronic Manufacturing Services 13,622 13,785 Consolidated $15,355 $15,518 In(Amounts in Thousands) Electronic Manufacturing Services Furniture Consolidated Balance as of June 30, 2009 Goodwill $ 15,434 $ 1,733 $ 17,167 Accumulated impairment losses (12,826 ) (1,733 ) (14,559 ) Goodwill, net 2,608 — 2,608 Effect of Foreign Currency Translation (165 ) — (165 ) Balance as of June 30, 2010 Goodwill 15,269 1,733 17,002 Accumulated impairment losses (12,826 ) (1,733 ) (14,559 ) Goodwill, net 2,443 — 2,443 Effect of Foreign Currency Translation 201 — 201 Balance as of June 30, 2011 Goodwill 15,470 1,733 17,203 Accumulated impairment losses (12,826 ) (1,733 ) (14,559 ) Goodwill, net $ 2,644 $ — $ 2,644 During fiscal year 2011 and 2010, no goodwill impairment loss was recognized. During fiscal year 2009, goodwill was reviewed on an interim basis due to the continued uncertainty associated with the economy and liquidity crisis and the significant decline in the Company's sales and order trends as well as the increased disparity between the Company's market capitalization and the carrying value of its Share Owners' equity. Interim testing resulted in the recognition of goodwill impairment of, in thousands, $12,826 within the Electronic Manufacturing Services (EMS) segment goodwill decreased inand $1,733 within the aggregate by, in thousands, $163 during fiscal year 2008 due to a $172 decrease forFurniture segment. The impairment related to terminated business in conjunction withwas recorded on the consolidation of a Hibbing, Minnesota, operation, a $165 decrease due to an adjustment to estimated employee transition pay related to the consolidation of a Gaylord, Michigan, operation, and a $123 decrease to adjust the fair value of assets and liabilities estimated asGoodwill Impairment line item of the dateCompany's Consolidated Statements of Income.In addition to performing the required annual testing, the Company will continue to monitor circumstances and events in future periods to determine whether additional goodwill impairment testing is warranted on an interim basis. The Company can provide no assurance that an impairment charge for the remaining goodwill balance, which approximates only 0.4% of the Reptron acquisition, partially offset byCompany's total assets, will not occur in future periods as a $96 increase related to tax provision adjustments for activity prior toresult of these analyses.Other Intangible Assets reported on the Reptron acquisition and a $201 increase due to the effect of changes in foreign currency exchange rates. Goodwill impairment was calculated based upon the cessation of cash flows for the business activities not continuing after the facility consolidation. The goodwill related to the Hibbing business activities continuing after the facility consolidation was transferred to the EMS reporting units which are receiving the business.Other intangible assetsConsolidated Balance Sheets consist of capitalized software, product rights, and customer relationships and are reported as Other Intangible Assets on the Consolidated Balance Sheets.relationships. Intangible assets are reviewed for impairment when events or circumstances indicate that the carrying value may not be recoverable over the remaining lives of the assets. 41A summary of other intangible assets subject to amortization by segment is as follows: June 30, 2011 June 30, 2010 (Amounts in Thousands) Cost AccumulatedAmortization Net Value Cost AccumulatedAmortization Net Value Electronic Manufacturing Services: Capitalized Software $ 28,676 $ 25,700 $ 2,976 $ 27,519 $ 24,807 $ 2,712 Customer Relationships 1,167 744 423 1,167 614 553 Other Intangible Assets 29,843 26,444 3,399 28,686 25,421 3,265 Furniture: Capitalized Software 36,375 33,064 3,311 36,053 32,399 3,654 Product Rights 1,160 606 554 1,160 470 690 Other Intangible Assets 37,535 33,670 3,865 37,213 32,869 4,344 Unallocated Corporate: Capitalized Software 5,761 5,400 361 5,809 5,305 504 Other Intangible Assets 5,761 5,400 361 5,809 5,305 504 Consolidated $ 73,139 $ 65,514 $ 7,625 $ 71,708 $ 63,595 $ 8,113 During fiscal years 2011, 2010, and 2009, amortization expense of other intangible assets was, in thousands, $2,367, $2,484, and $3,931, respectively. Amortization expense in future periods is expected to be, in thousands, $2,378, $2,009, $1,393, $875, and $391 in the five years ending June 30, 2016, and $579 thereafter. The amortization period for product rights is 7 years. The amortization period for the customer relationship intangible asset ranges from 10 to 16 years. The estimated useful life of internal-use software ranges from 3 to 10 years.Internal-use software is stated at cost less accumulated amortization and is amortized using the straight-line method. During the software application development stage, capitalized costs include external consulting costs, cost of software licenses, and internal payroll and payroll-related costs for employees who are directly associated with a software project. Upgrades and enhancements are capitalized if they result in added functionality which enable the software to perform tasks it was previously incapable of performing. Software maintenance, training, data conversion, and business process reengineering costs are expensed in the period in which they are incurred. Product rights to produce and sell certain products are amortized on a straight-line basis over their estimated useful lives, and capitalized customer relationships are amortized on estimated attrition rate of customers. The Company has no intangible assets with indefinite useful lives which are not subject to amortization. A summary of other intangible assets subject to amortization by segment is as follows:June 30, June 30, 2008 2007 (Amounts in Thousands) Cost Accumulated
Amortization Net Value Cost Accumulated
Amortization Net Value Furniture: Capitalized Software $ 43,868 $ 37,895 $ 5,973 $ 44,631 $ 35,048 $ 9,583 Product Rights 1,160 210 950 1,160 210 950 Other Intangible Assets $ 45,028 $ 38,105 $ 6,923 $ 45,791 $ 35,258 $ 10,533 Electronic Manufacturing Services: Capitalized Software $ 27,228 $ 22,531 $ 4,697 $ 26,919 $ 18,887 $ 8,032 Customer Relationships 937 247 690 937 65 872 Other Intangible Assets $ 28,165 $ 22,778 $ 5,387 $ 27,856 $ 18,952 $ 8,904 Unallocated Corporate: Capitalized Software $ 6,267 $ 5,204 $ 1,063 $ 5,839 $ 4,691 $ 1,148 Other Intangible Assets $ 6,267 $ 5,204 $ 1,063 $ 5,839 $ 4,691 $ 1,148 Consolidated $ 79,460 $ 66,087 $13,373 $ 79,486 $ 58,901 $ 20,585 During fiscal years 2008, 2007, and 2006, amortization expense of other intangible assets from continuing operations, including asset write-downs associated with the Company's restructuring plans, was, in thousands, $8,036, $8,756, and $7,735, respectively. Amortization expense in future periods is expected to be, in thousands, $5,194, $3,473, $2,174, $1,253, and $569 in the five years ending June 30, 2013, and $710 thereafter. When placed in service, the product rights intangible asset life is expected to be five years. The amortization period for the customer relationship intangible asset is 16 years. The estimated useful life of internal-use software ranges from three to seven years.from continuing operations were approximately, in millions, $16, $17,$13, $12, and $15$14 in fiscal years 2008, 2007,2011, 2010, and 2006,2009, respectively.Advertising: Advertising costs are expensed as incurred. Advertising costs, from continuing operations, included in selling general and administrative expenses were, in millions, $6.2, $8.3,$4.3, $5.5, and $5.6,$4.5, in fiscal years 2008, 2007,2011, 2010, and 2006,2009, respectively. Insurance and Self-insurance:The Company is self-insured up to certain limits for auto and general liability, workers' compensation, and certain employee health benefits including medical, short-term disability, and dental, with the related liabilities included in the accompanying financial statements. The Company's policy is to estimate reserves based upon a number of factors including known claims, estimated incurred but not reported claims, and other analyses, which are based on historical information along with certain assumptions about future events. Approximately 68%59% of the workforce is covered under self-insured medical and short-term disability plans.The Company carries external medical and disability insurance coverage for the remainder of its eligible workforce not covered by self-insured plans. Insurance benefits are not provided to retired employees.Income Taxes:Unremitted earnings Deferred income tax assets and liabilities are recognized for the estimated future tax consequences attributable to temporary differences between the financial statement carrying amounts of foreign subsidiaries have been includedexisting assets and liabilities and their respective tax bases. These assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the consolidated financial statements without giving effectyears in which the temporary differences are expected to reverse. The Company evaluates the United States taxesrecoverability of its deferred tax assets each quarter by assessing the likelihood of future profitability and available tax planning strategies that maycould be payable on distributionimplemented to the United States because itrealize its deferred tax assets. If recovery is not anticipated such earnings will be remitted tolikely, the United States. DeterminationCompany provides a valuation allowance based on its best estimate of future taxable income in the various taxing jurisdictions and the amount of unrecognized deferred tax liability on unremitted earnings is not practicable.taxes ultimately realizable.42Future events could change management's assessment.The Company operates within multiple taxing jurisdictions and is subject to tax audits in these jurisdictions. These audits can involve complex uncertain tax positions, which may require an extended period of time to resolve. A tax benefit from an uncertain tax position may be recognized only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. The Company maintains a liability for uncertain income tax and other tax positions, including accrued interest and penalties on those positions. As tax periods are effectively settled, the liability is adjusted accordingly. The Company recognizes interest and penalties related to unrecognized tax benefits in the Provision (Benefit) for Income Taxes line of the Consolidated Statements of Income.Off-Balance Sheet Risk and Concentration of Credit Risk:The Company has business and credit risks concentrated in the medical, automotive, medical, and furniture industries. Two customers, Bayer AG and Siemens AG,TRW Automotive, Inc., represented 16%18% and 15%10%, respectively, of consolidated accounts receivable at June 30, 2008. TRW Automotive, Inc. and Bayer AG, represented 14% and 16%, respectively,2010. These customers did not have a material concentration of consolidated accounts receivable at June 30, 2007.2011. Additionally, the Company currently has notes receivable with an electronics engineering services firm and a note receivable related to the sale of an Indiana facility, and formerly had a loan agreement with a contract customer. At June 30, 2011 and 2010, $2.8 million and $4.2 million, respectively, was outstanding under the notes receivables. The Company currently does not foresee a credit risk associated with the current balance of these receivables.The Company's off-balance sheet arrangements are limited to operating leases entered into in the normal course of business as described in Note 5 - Commitments and Contingent Liabilities of Notes to Consolidated Financial Statements.Other General Income: No Other General Income was recorded in fiscal year 2011. Other General Income in fiscal year 2010 included a gain on the sale of the Company's Poland facility and land and settlement proceeds related to a class action lawsuit of which the Company was a class member. Other General Income in fiscal year 2009 included a gain related to the sale of undeveloped land and timberland holdings, as well as earnest money deposits retained by the Company resulting from the termination of the contract to sell and lease back the Company's Poland facility and land.Components of Other General Income: Year Ended June 30 (Amounts in Thousands) 2011 2010 2009 Gain on Sale of Poland Facility and Land $ — $ 6,724 $ — Settlement Proceeds Related to Antitrust Class Action Lawsuit — 3,256 — Gain on Sale of Undeveloped Land and Timberland Holdings — — 31,489 Earnest Money Deposits Retained — — 1,928 Other General Income $ — $ 9,980 $ 33,417 Non-operating Income and Expense: Non-operating income and expense include the impact of such items as foreign currency rate movements and related derivative gain or loss, fair value adjustments on Supplemental Employee Retirement Plan (SERP) investments, non-production rent income, bank charges, and other miscellaneous non-operating income and expense items that are not directly related to operations.Foreign Currency Translation:The Company uses the U.S. dollar and Euro predominately as its functional currencies. Foreign currency assets and liabilities are remeasured into functional currencies at end-of-period exchange rates, except for nonmonetary assets and equity, which are remeasured at historical exchange rates. Revenue and expenses are remeasured at the weighted average exchange rate during the fiscal year, except for expenses related to nonmonetary assets, which are remeasured at historical exchange rates. Gains and losses from foreign currency remeasurement are reported in the Other Income (Expense) category ofNon-operating income or expense line item on the Consolidated Statements of Income.For businesses whose functional currency is other than the U.S. dollar, the translation of functional currency statements to U.S. dollar statements uses end-of-period exchange rates for assets and liabilities, weighted average exchangesexchange rates for revenue and expenses, and historical rates for equity. The resulting currency translation adjustment is recorded in Accumulated Other Comprehensive Income (Loss), as a component of Share Owners' Equity.Derivative Instruments and Hedging Activities: Derivative financial instruments are recognized on the balance sheet as assets and liabilities and are measured at fair value. Changes in the fair value of derivatives are recorded each period in earnings or Accumulated Other Comprehensive Income (Loss), depending on whether a derivative is designated and effective as part of a hedge transaction, and if it is, the type of hedge transaction. Hedge accounting is utilized when a derivative is expected to be highly effective upon execution and continues to be highly effective over the duration of the hedge transaction. Hedge accounting permits gains and losses on derivative instruments to be deferred in Accumulated Other Comprehensive Income43(Loss) and subsequently included in earnings in the periods in which earnings are affected by the hedged item, or when the derivative is determined to be ineffective. The Company's use ofCompany uses derivatives is generally limited toprimarily for forward purchases of foreign currency to manage exposure to the variability of cash flows, primarily related to the foreign exchange rate risks inherent in forecasted transactions denominated in foreign currency. Additionally, the Company has an investment in stock warrants which is accounted for as a derivative instrument. See Stock-Based Compensation:As described in Note 8 - Stock Compensation Plans of Notes to Consolidated Financial Statements, the Company maintains stock-based employee compensation plans which allow for the issuance of restricted stock, restricted share units, unrestricted share grants, incentive stock options, nonqualified stock options, performance shares, performance units, and stock appreciation rights for grant to officers and other key employees of the Company and to members of the Board of Directors who are not employees. Effective July 1, 2005,The Company recognizes the Company adopted thecost resulting from share-based payment transactions using a fair-value-based method. The estimated fair value recognition provisions of FASB Statement No. 123(R), Share-Based Payment (FAS 123(R)). Underoutstanding performance shares is based on the modified prospective methodstock price at the date of adoption selectedthe grant. For performance shares, the price is reduced by the Company, compensation expense related to stock options is recognized in the income statement beginning in fiscal year 2006. Additionally, aspresent value of the effective date, the Company eliminated its balance of Deferred Stock-Based Compensation, which represented unrecognized compensation cost for restricted share unit awards, and reclassified it to Treasury Stock and Additional Paid-In Capital, in accordance with the modified prospective transition method.FAS 123(R) requires that forfeitures be estimateddividends normally paid over the vesting period of an award, rather than being recognized as a reduction ofwhich are not payable on outstanding performance share awards. Stock-based compensation expense whenis recognized for the forfeiture actually occurs. FAS 123(R) also requires that liability awards be revalued to fair value, which, upon the adoption of FAS 123(R), had the effect of a reduction of a liability for outstanding stock appreciation rights. The impactportion of the revaluation of stock appreciation rights and the use of the estimated forfeiture method for prior periods have been presented on the Consolidated Statements of Income as a Cumulative Effect of Change in Accounting Principle, as required by FAS 123(R). The cumulative effect recorded in fiscal year 2006 totaled $0.3 million of income, net of taxes. The earnings per share impact can be found in Note 15 - Earnings Per Share of Notes to Consolidated Financial Statements.The Company's stock-based compensation plans allow early vesting when an employee reaches retirement age and ceases continuous service. Under FAS 123(R), awards granted after June 30, 2005 require acceleration of compensation expense through an employee's retirement age, whether or not the employeeaward that is ultimately expected to cease continuous service on that date. For awards granted on or before June 30, 2005,vest. Forfeitures are estimated at the Company accelerates compensation expense onlytime of grant and revised, if necessary, in cases where a retirement eligible employee is expected to cease continuous service prior to an award's vesting date. If the new provisions of FAS 123(R) had been in effect for awards granted prior to June 30, 2005, compensation expense including the pro forma effect of stock options, net of tax, would have been $0.2 million lower, $0.2 million lower, and $0.1 million higher during fiscal years 2008, 2007, and 2006, respectively. Standards:Standards: In June 2008,2011, the Financial Accounting Standards Board (FASB) issued new guidance on the presentation of comprehensive income. This guidance eliminates the option to present the components of other comprehensive income as part of the Statement of Share Owners' Equity. Instead, the Company must report comprehensive income in either a FASB Staff Position (FSP) on Emerging Issues Task Force (EITF) 03-6-1, Determining Whether Instruments Grantedsingle continuous statement of comprehensive income which contains two sections, net income and other comprehensive income, or in Share-Based Payment Transactions Are Participating Securities (FSP EITF 03-6-1). FSP EITF 03-6-1 provides that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid)two separate but consecutive statements. While the new guidance changes the presentation of comprehensive income, there are participating securities and shall be included in the computation of earnings per share pursuantno changes to the two-class method.components that are recognized in net income or other comprehensive income under current accounting guidance. The two-class method is an earnings allocation method for computing earnings per share when an entity's capital structure includes multiple classes of common stock and participating securities. FSP EITF 03-6-1guidance is effective asfor the Company's first quarter fiscal year 2013 financial statements on a retrospective basis. As this guidance only amends the presentation of the beginningcomponents of the Company's fiscal year 2010 and requires that previously reported earnings per share data be recast in financial statements issued in periods after the effective date. The Company is currently evaluating the impact of FSP EITF 03-6-1 on its consolidated financial statements.In May 2008, the FASB issued Statement of Financial Accounting Standard (SFAS) No. 162, The Hierarchy of Generally Accepted Accounting Principles (FAS 162). FAS 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements that are presented in conformity with generally accepted accounting principles in the United States. This statement is not expected to change existing practices but rather reduce the complexity of financial reporting. This statement will go into effect 60 days after the Securities and Exchange Commission approves related auditing rules and is not expected to have a material effect on the Company's consolidated financial statements.In April 2008, the FASB issued FSP No. FAS 142-3, Determination of the Useful Life of Intangible Assets (FSP FAS 142-3). FSP FAS 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS 142, Goodwill and Other Intangible Assets. FSP FAS 142-3 allows an entity to use its own historical experience in renewing or extending similar arrangements, adjusted for entity-specific factors, in developing assumptions about renewal or extension used to determine the useful life of a recognized intangible asset. As a result, the determination of intangible asset useful lives is now consistent with the method used to determine the period of expected cash flows used to measure the fair value of the intangible assets, as described in other accounting principles. The guidance for determining the useful life of a recognized intangible asset is to be applied prospectively to intangible assets acquired after the effective date. Disclosure requirements are to be applied prospectively to all intangible assets recognized as of, and subsequent to, the effective date. The provisions of FSP FAS 142-3 are effective as of the beginning of the Company's fiscal year 2010 and are currently not expected to have a material effect on the Company's consolidated financial statements.In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities (FAS 161). FAS 161 amends and expands the disclosure requirements of SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, and requires entities to provide enhanced qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair values and amounts of gains and losses on derivative contracts, and disclosures about credit-risk-related contingent features in derivative agreements. FAS 161 will be effective as of the Company's third quarter of fiscal year 2009. The Company is currently evaluating the financial statement disclosures required under FAS 161.In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (FAS 141(R)). FAS 141(R) requires that the fair value of the purchase price of an acquisition including the issuance of equity securities be determined on the acquisition date; requires that all assets, liabilities, noncontrolling interests, contingent consideration, contingencies, and in-process research and development costs of an acquired business be recorded at fair value at the acquisition date; requires that acquisition costs generally be expensed as incurred; requires that restructuring costs generally be expensed in periods subsequent to the acquisition date; and requires that changes in deferred tax asset valuation allowances and acquiredcomprehensive income, tax uncertainties after the measurement period impact income tax expense. FAS 141(R) also broadens the definition of a business combination and expands disclosures related to business combinations. FAS 141(R) will be applied prospectively to business combinations occurring after the beginning of the Company's fiscal year 2010, except that business combinations consummated prior to the effective date must apply FAS 141(R) income tax requirements immediately upon adoption. The Company is currently evaluating the impact of FAS 141(R) on its financial position, results of operations, and cash flows.In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements, an Amendment of ARB No. 51 (FAS 160). FAS 160 requires that noncontrolling interests be reported as a separate component of equity, that net income attributable to the parent and to the noncontrolling interest be separately identified in the consolidated statements of income, that changes in a parent's ownership interest be accounted for as equity transactions, and that, when a subsidiary is deconsolidated, any retained noncontrolling equity investment in the former subsidiary and the gain or loss on the deconsolidation of the subsidiary be measured at fair value. FAS 160 will be applied prospectively, except for presentation and disclosure requirements which will be applied retrospectively, as of the beginning of the Company's fiscal year 2010. The Company does not currently have noncontrolling interests, and therefore the adoption of FAS 160 iswill not expected to have an impact on the Company's consolidated financial position, results of operations, or cash flows.In June 2007,May 2011, the FASB ratifiedissued guidance to amend certain measurement and disclosure requirements related to fair value measurements to improve consistency with international reporting standards. The guidance requires additional disclosures, including disclosures related to the EITF consensus on Issue No. 06-11, Accounting for Income Tax Benefitsmeasurement of Dividends on Share-Based Payment Awards (EITF 06-11). EITF 06-11 requires companies to recognize the income tax benefit realized from dividends or dividend equivalents that are charged to retained earnings and paid to employees for nonvested equity-classified employee share-based payment awards as an increase to additional paid-in capital.level 3 assets. The realized income tax benefit recognized in additional paid-in capital should be included in the pool of excess tax benefits available to absorb future tax deficiencies on share-based payment awards. EITF 06-11 will be appliedguidance is effective prospectively for income tax benefits on dividends declared after the beginning of the Company's third quarter fiscal year 2009.2012 financial statements. The Company is currently evaluating this guidance, but does not expect its adoption of EITF 06-11 is not expected towill have a material impacteffect on the Company'sits consolidated financial position, results of operations, or cash flows.In February 2007,July 2010, the FASB issued SFAS No. 159,guidance expanding disclosures about the credit quality of financing receivables and the allowance for credit losses. The Fair Value Optionadditional disclosures are intended to facilitate the evaluation of 1) the nature of credit risk inherent in the Company's portfolio of financing receivables, 2) how that risk is analyzed and assessed in arriving at the allowance for Financial Assetscredit losses, and Financial Liabilities-Including an amendment of FASB Statement No. 115 (FAS 159). FAS 159 expands3) the use of fair value accounting, but does not affect existing standards which require assets or liabilities to be carried at fair value. Under FAS 159, a company may elect to use fair value to measure financial instrumentschanges and reasons for those changes in the allowance for credit losses. Financing receivables include loans and notes receivable, trade accounts receivable, and certain other items, which may reduce the needcontractual rights to apply complex hedge accounting provisions in order to mitigate volatility in reported earnings.receive money on demand or on fixed or determinable dates. The fair value election is irrevocable and is generally made on an instrument-by-instrument basis, even ifexpanded disclosures, disaggregated by portfolio segment or class of financing receivable, include a company has similar instruments that it elects not to measure based on fair value. At the adoption date, unrealized gains and losses on existing items for which fair value has been elected are reported as a cumulative adjustment to beginning retained earnings. Subsequent to the adoption of FAS 159, changes in fair value are recognized in earnings. FAS 159 is effective asroll-forward of the beginning ofallowance for credit losses as well as impaired, nonaccrual, restructured and past due loans, and credit quality indicators. The guidance became effective for the Company's second quarter fiscal year 2009. The Company has determined that2011 financial statements, as it will not electrelates to use fair value accounting for any eligible items, and therefore FAS 159 will have no impact on its financial position, results of operations, or cash flows.In September 2006, the FASB issued SFAS No. 158, Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans-an amendment of FASB Statements No. 87, 88, 106, and 132(R) (FAS 158). FAS 158 requires employers to recognize the overfunded or underfunded status of a defined benefit plan as an asset or liability in its statement of financial position, recognize through comprehensive income changes in that funded status in the year in which the changes occur, and measure a plan's assets and its obligations that determine its funded statusdisclosures required as of the end of the employer's fiscal year. At the end of fiscal year 2007, the Company adopted the provisions of FAS 158 relateda reporting period. Disclosures that relate to recognition of plan assets, benefit liabilities, and comprehensive income. The Company expects to adopt the provisions of this rule that require measurement of plan assets and benefit obligations as of the year end balance sheet date when these provisions becomeactivity during a reporting period became effective at the end of the Company's fiscal year 2009. The change in measurement date is not expected to have a material impact on the Company's financial position, results of operations, or cash flows. This rule impacts the accounting for the Company's unfunded noncontributory postemployment severance plans.In September 2006, the FASB issued FSP AUG AIR-1, Accounting for Planned Major Maintenance Activities. The staff position eliminated the accrue-in-advance method of accounting for planned major maintenance activities. The Company previously used the accrue-in-advance method primarily to reserve for future aircraft maintenance activities required by Federal Aviation Administration regulations. FSP AUG AIR-1 was effective as of the beginning of the Company'sthird quarter fiscal year 2008. As2011 financial statements. These disclosures have been provided in July 1, 2007, the Company adopted the deferral method whereby major maintenance activities are capitalizedSignificant Accounting Policies and depreciated over the useful life.Note 20 - Credit Quality and Allowance for Credit Losses of Notes Receivable of Notes to Consolidated Financial Statements. The adoption of the deferral methodthis guidance did not have a material impact on the Company's financial position, results of operations, or cash flows, thus FSP AUG AIR-1 was not retrospectively applied.statements.September 2006,January 2010, the FASB issued SFAS No. 157, Fair Value Measurements (FAS 157), which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expandsguidance to improve disclosures about fair value measurements. FAS 157 is only applicable to existing accounting pronouncements that require or permitinstruments. The guidance requires additional disclosure about significant transfers between levels 1, 2, and 3 of the fair value measurementshierarchy and does not require any new fair value measurements.requires disclosure of level 3 activity on a gross basis. In addition, the guidance clarifies existing requirements regarding the required level of disaggregation by class of assets and liabilities and also clarifies disclosures of inputs and valuation techniques. The standard, as originally issued, wasguidance became effective beginning in the Company's third quarter of fiscal year 2010, except for the requirement to disclose level 3 activity on a gross basis, which will be effective as of the beginning of the Company's fiscal year 2009. With2012. The Company does not expect the issuance in February 2008adoption of FSP FAS 157-2, Effective Date of FASB Statement No. 157,this guidance to have a material impact on its financial statements.In June 2009, the FASB approvedissued guidance related to variable interest entities (VIEs) which modifies how a one-year deferralcompany determines when VIEs should be consolidated. The guidance clarifies that the determination of whether a company is required to consolidate an entity is based on, among other things, an entity's purpose and design and a company's ability to direct the44activities of the entity that most significantly impact the entity's economic performance. The guidance requires an ongoing reassessment of whether a company is the primary beneficiary of a VIE and requires additional disclosures about a company's involvement in VIEs. The guidance became effective as of the beginning of the Company's fiscal year 2010 for all non-financial assets and liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis at least annually. In addition, the FASB has excluded leases from the scope of FAS 157 with the issuance of FSP FAS 157-1, Application of FASB Statement No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements that Address Fair Value Measurements for Purposes of Lease Classification or Measurement under Statement 13. FAS 157 will be applied prospectively.2011. The fiscal year 2009 adoption of FAS 157, applicable to financial instruments, isdid not expected to have a materialan impact on the Company's consolidated financial position, results of operations, or cash flows. The Company is currently evaluating the effect of applying FAS 157 to non-financial assets and liabilitiesstatements. Required disclosures have been provided in fiscal year 2010.In June 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48), which clarifies the accounting for uncertainty in tax positions. FIN 48 requires financial statement recognition of the impact of a tax position if a position is more likely than not of being sustained on audit, based on the technical merits of the position. Additionally, FIN 48 provides guidance on measurement, derecognition, classification, interest and penalties, accounting in interim periods, transition, and disclosure requirements for uncertain tax positions. In May 2007, the FASB issued FASB Staff Position FIN No. 48-1, Definition of Settlement in FASB Interpretation No. 48 (FSP FIN 48-1). This FSP provides guidance on how a company should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits. The provisions of FIN 48 and FSP FIN 48-1 were effective on July 1, 2007. See 919 - Income TaxesVariable Interest Entities of Notes to Consolidated Financial Statements for information on the adoption of these pronouncements.In February 2006, the FASB issued SFAS No. 155, Accounting for Certain Hybrid Financial Instruments (FAS 155). FAS 155 permitsStatements. Note 2 AcquisitionDuring fiscal year 2009, the Company to elect to measure any hybrid financial instrument at fair value (with changesacquired privately-held Genesis Electronics Manufacturing located in fair value recognized in earnings) if the hybrid instrument contains an embedded derivative that would otherwise be required to be bifurcated and accounted for separately under SFAS 133, Accounting for Derivative Instruments and Hedging Activities. FAS 155 is effective for all instruments acquired, issued, or subject to a remeasurement event occurring after July 1, 2007.Tampa, Florida. The Company does not currently hold any hybrid financial instruments, and therefore the adoption of FAS 155 did not have a material impact onacquisition supports the Company's financial position, resultsgrowth and diversification strategy, bringing new customers in key target markets. The acquisition purchase price totaled $5.4 million. Assets acquired were $7.7 million, which included $2.0 million of operations, or cash flows.Fiscal Year 2007 Acquisition:On February 15, 2007, the Company completedgoodwill, and liabilities assumed were $2.3 million. Direct costs of the acquisition were not material. Goodwill was allocated to the EMS segment of Reptron.the Company. The operating results of this acquisition are included in the Company's consolidated financial statements beginning on the acquisition date.The acquisition is included in the Company's EMS segmentSeptember 1, 2008 and increased the Company's capabilities and expertise in support of the Company's long-term strategy to grow business in the medical electronics and high-end industrial sectors. The acquisition included four manufacturing operations located in Tampa, Florida; Hibbing, Minnesota; Gaylord, Michigan; and Fremont, California. Inexcluding goodwill impairment recorded during fiscal year 2008, pursuant to its restructuring plans,2009, had an immaterial impact on the Company ceased operations at the Gaylord, Michigan, and Hibbing, Minnesota, facilities and transferred a majority of the business to several of the Company's other worldwide EMS facilities. See Note 17 - Restructuring Expense of Notes to Consolidated Financial Statements for additional details of the restructuring plans.The total amount of funds required to consummate the merger and to pay fees related to the merger was $50.9 million. The merger was funded with available cash and short-term investments. Merger funds were used to purchase all outstanding Reptron stock for $3.8 million, repay outstanding indebtedness and accrued interest of $17.6 million, tender senior secured notes for $22.4 million at acquisition date plus $4.8 million of senior secured notes and accrued interest redeemed in fiscal year 2008,2011, 2010 and pay direct acquisition costs of $2.3 million.2009 financial results. See Note 6 - Long-Term Debt and Credit Facility of Notes to Consolidated Financial Statements for further information on the senior secured notes.The following table summarizes the final purchase price allocation to assets acquired, liabilities assumed, and goodwill. The acquisition resulted in $11.9 million of goodwill for the EMS segment of the Company. Goodwill of $10.1 million is deductible for tax purposes. The Company also identified and recorded intangible assets of $0.9 million related to customer relationships. See Note 1 - Summary of Significant Accounting Policies of Notes to Consolidated Financial Statements for further disclosure related tomore information on goodwill and intangible assets. The table shown below reflects revisions made to the purchase price allocation since initially reported.impairment. The purchase price allocation is final.(Amounts in Thousands)Reptron Acquisition Purchase Price AllocationAccounts Receivable$13,218Inventory24,948Deferred Tax Asset1,130Other Current Assets1,173Property and Equipment18,380Customer Relationship Intangible Asset937Other Long-Term Assets339Goodwill11,876 Total assets acquired$72,001Accounts Payable$16,584Accrued Expenses3,547Accrued Restructuring767Other Liabilities184 Total liabilities assumed$21,082 Net assets acquired$50,919Fiscal Year 2006 Acquisitions:On April 3, 2006, the Company entered into an asset purchase agreement for the acquisition of the Bridgend, Wales, United Kingdom, manufacturing operation of Bayer Diagnostics Manufacturing Limited ("BDML") and its parent company, Bayer HealthCare LLC, a member of the worldwide group of companies headed by Bayer AG. The closing of the purchase was effective April 3, 2006. The operating results of this acquisition are included in the Company's consolidated financial statements beginning on the acquisition date.The acquisition is included in the Company's EMS segment and better positions the Company to capitalize on growth opportunities in the medical market within this segment. The BDML capabilities have added to the Company's package of value that is offered to its medical customers and is a step in the Company's strategy to diversify its markets.The Company paid BDML a sum of $31.5 million. Direct costs of the acquisition totaled $0.5 million.The following table summarizes the assets acquired for the BDML acquisition. The building and land were not part of the assets acquired. The Company is leasing a portion of the facility from a third party. The table shown below reflects revisions made to the purchase price during fiscal year 2007, including liabilities related to involuntary terminations. The purchase price adjustment is final.(Amounts in Thousands)BDML Acquisition Purchase Price AllocationInventory$28,829Property and equipment2,035Software653Deferred Tax Asset826Other63Goodwill1,342 Total assets acquired$33,748Current liabilities1,760 Net assets acquired$31,988For tax purposes, the amount of goodwill recognized was, in thousands, $96 and is fully deductible. The difference between book and tax goodwill, net of deferred taxes, is due to the liabilities for involuntary employee terminations recognized for book purposes that were not part of the purchase price allocation for tax purposes. The entire amount of goodwill was allocated to the EMS segment of the Company.On May 5, 2006, the Company acquired a printed circuit board assembly operation in Longford, Ireland, from Magna Donnelly Electronics Longford Limited. Assets acquired were $3.4 million, liabilities assumed were $3.5 million, and the Company received $0.1 million in the acquisition. Direct costs of the acquisition were $0.3 million. The acquisition resulted in $0.3 million of goodwill for the EMS segment of the Company. There were no material purchased intangible assets included in the acquisition. The operating results of this acquisition are included in the Company's consolidated financial statements beginning on the acquisition date. The purchase price allocation is final.The Company is currently in the process of consolidating its EMS facilities located in Wales, Ireland, and Poland into a new, larger facility in Poland, as part of a restructuring plan to establish a European Medical Center of Expertise in Poland. See Note 17 - Restructuring Expense of Notes to Consolidated Financial Statements for additional information.Note 3 InventoriesInventories are valued using the lower of last-in, first-out (LIFO) cost or market value for approximately 17%11% and 18%9% of consolidated inventories at June 30, 20082011 and June 30, 2007,2010, respectively, including approximately 85%81% and 86%78% of the Furniture segment inventories at June 30, 20082011 and June 30, 2007,2010, respectively. The EMS segment inventories and the remaining inventories in the Furniture 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, income from continuing operations would have been $1.1$0.2 millionhigher in fiscal year 2008, $0.12011, $0.8 million higherlower in fiscal year 2007,2010, and $0.7$2.4 millionlower in fiscal year 2006, and net income, which includes the effect of discontinued operations, would have been $1.1 million higher in fiscal year 2008, $0.1 million higher in fiscal year 2007, and $2.9 million lower in fiscal year 2006. Additionally, inventories would have been, in millions, $18.2 and $16.4 higher at June 30, 2008 and 2007, respectively, if the FIFO method had been used.2009. Certain inventory quantity reductions caused liquidations of LIFO inventory values, which increased income from continuing operations by $0.1$0.9 million in fiscal year 2008, $1.12011, $1.3 million in fiscal year 2007,2010, and $1.3$2.5 million in fiscal year 2006. LIFO liquidations increased net income, which includes the effect of discontinued operations, by $0.1 million in fiscal year 2008, $1.1 million in fiscal year 2007, and $3.6 million in fiscal year 2006.2009.Inventory components at June 30 arewere as follows: (Amounts in Thousands) Finished products $ 42,201 $ 34,577 Work-in-process 14,363 15,162 Raw materials 126,583 102,584 Total FIFO inventory $183,147 $152,323 LIFO Reserve (18,186) (16,422) Total inventory $164,961 $135,901 (Amounts in Thousands) 2011 2010 Finished products $ 33,287 $ 33,177 Work-in-process 11,734 13,209 Raw materials 109,337 112,897 Total FIFO inventory $ 154,358 $ 159,283 LIFO reserve (13,261 ) (12,877 ) Total inventory $ 141,097 $ 146,406 Note 4 Property and EquipmentMajor classes of property and equipment at June 30 consist of the following: 2007 (Amounts in Thousands) Land $ 9,472 $ 9,865 Buildings and improvements 171,249 165,483 Machinery and equipment 326,136 304,531 Construction-in-progress 23,123 14,810 Total $ 529,980 $ 494,689 Less: Accumulated depreciation (340,076) (320,889) Property and equipment, net $ 189,904 $ 173,800 (Amounts in Thousands) 2011 2010 Land $ 12,849 $ 13,705 Buildings and improvements 184,684 180,810 Machinery and equipment 349,489 320,576 Construction-in-progress 9,765 9,159 Total $ 556,787 $ 524,250 Less: Accumulated depreciation (360,105 ) (337,251 ) Property and equipment, net $ 196,682 $ 186,999 45The useful lives used in computing depreciation are based on the Company's estimate of the service life of the classes of property, as follows: Years Buildings and improvements 5 to 50 Machinery and equipment 2 to 20 Leasehold improvements Lesser of Useful Life or Term of Lease Depreciation and amortization of property and equipment, from continuing operations, including asset write-downs associated with the Company's restructuring plans, totaled, in millions, $34.0$29.0 for fiscal year 2008, $31.72011, $32.5 for fiscal year 2007,2010, and $28.5$33.9 for fiscal year 2006.2009.At June 30, 2008,2011, in thousands, assets totaling $1,374$2,807 were classified as held for sale, comprisedincluding $1,647 for a tract of land in Poland and $1,160 for a facility and land related to the Gaylord, Michigan exited operation, both within the EMS operation insegment. The Poland land is reported as an EMS segment asset, and the Gaylord, Michigan. The assets wereMichigan facility and land are reported as unallocated corporate assets for segment reporting purposes. The Company expects to sell the facility and land during the next 12 months. Due to a decline in the market value of the EMS facility, the Company recorded in the Restructuring Expense line of the Company's Consolidated Statements of Income a pre-tax impairment loss, in thousands, of $390 during fiscal year 2008, of which $310 was recorded within the EMS segment and $80 was recorded after the assets were classified as unallocated corporate. The fair value of the assets was determined by prices for similar assets.During fiscal year 2008, the Company sold the facility related to the exited EMS operation in Auburn, Indiana, which totaled, in thousands, $2,534 that was previously classified as held for sale and reported as unallocated corporate assets for segment reporting purposes. The facility was sold with no resulting gain or loss as impairment, in thousands, of $157, had already been recorded during fiscal year 2008 on the Restructuring Expense line of the Company's Consolidated Statements of Income.The Furniture segment recognized, in thousands, a $149 pre-tax loss during fiscal year 2008 due to a decline in the market value of held for sale manufacturing equipment. The pre-tax loss of $149 was the result of impairment charges and losses on the sales of the equipment and was recorded, in thousands, as $109 in the Cost of Sales line and $40 in the Restructuring Expense line of the Company's Consolidated Statements of Income. As of At 2008, no assets were classified as held for sale within the Furniture segment.At June 30, 2007,2010$3,032$1,160 classified as held for sale.Note 5 Commitments and Contingent LiabilitiesLeases:Leases: from continuing operations for certain office, showroom, manufacturing facilities, land, and equipment, which expire from fiscal year 20092012 to 2056, contain provisions under which minimum annual lease payments are, in millions, $3.8, $3.4, $3.2, $2.6,$3.3, $2.8, $1.9, $1.5, and $1.7$0.8 for the five years ended June 30, 2013,2016, respectively, and aggregate $4.2$0.7 million from fiscal year 20142017 to the expiration of the leases in fiscal year 2056.2056. The Company is obligated under certain real estate leases to maintain the properties and pay real estate taxes. Certain of these leases include renewal options and escalation clauses. Total rental expenses from continuing operations amounted to, in millions, $7.8, $6.5,$6.2, $5.4, and $4.7$6.1 in fiscal years 2008, 2007,2011, 2010, and 2006,2009, respectively, including certain leases requiring contingent lease payments based on warehouse space utilized, which amounted to expense of, in millions, $0.5, $0.4, and $1.1 in fiscal years 2011, 2010, and 2009, respectively.As of June 30, 20082011 and 2007,2010, the Company had in millions, $0.4 and $0.8, respectively,no capitalized leases.Guarantees:As of capitalized leases for equipment. Future minimum capital annual lease payments excluding imputed interest are, in millions, $0.4 for the fiscal year ending June 30, 2009, with no payments thereafter.Guarantees:As of June 30, 2008 and 2007,2010, the Company had no guarantees issued which were contingent on the future performance of another entity. Standby letters of credit are issued to third-party suppliers, lessors, and insurance and financial institutions and can only be drawn upon in the event of the Company's failure to pay its obligations to the beneficiary. As of June 30, 2008 and 2007, theThe Company had a maximum financial exposure from unused standby letters of credit totaling $5.1$5.2 million as of June 30, 2011 and $14.5$4.2 million respectively. as of June 30, 2010. The Company is not aware of circumstances that would require it to perform under any of these arrangements and believes that the resolution of any claims that might arise in the future, either individually or in the aggregate, would not materially affect the Company's financial statements. Accordingly, no liability has been recorded as of June 30, 20082011 and 20072010 with respect to the standby letters of credit. The Company also enters into commercial letters of credit to facilitate payments to vendors and from customers.The Company estimates product warranty liability at the time of sale based on historical repair cost trends in conjunction with the length of the warranty offered. Management refines the warranty liability in cases where specific warranty issues become known.Changes in the product warranty accrual during fiscal years 20082011, 2010, and 20072009 were as follows:(Amounts in Thousands) 2008 2007 Product Warranty Liability at the beginning of the year $ 2,147 $ 2,127 Accrual for warranties issued 446 961 Reductions related to pre-existing warranties (including changes in estimates) (166) (47) Settlements made (in cash or in kind) (957) (894) Product Warranty Liability at the end of the year $ 1,470 $ 2,147 (Amounts in Thousands) 2011 2010 2009 Product Warranty Liability at the beginning of the year $ 1,818 $ 2,176 $ 1,470 Additions to warranty accrual (including changes in estimates) 1,060 59 1,820 Settlements made (in cash or in kind) (769 ) (417 ) (1,114 ) Product Warranty Liability at the end of the year $ 2,109 $ 1,818 $ 2,176 46Note 6 Long-Term Debt and Credit FacilityLong-term debt, less current maturities as of notesnote payable, which has an interest rate of 9.25%and capitalized leases.matures in 2025. Aggregate maturities of long-term debt for the next five years are, in thousands, $470, $60, $61, $12,$12, $14, $15, $16, and $14,$18, respectively, and aggregate $274$223 thereafter. Interest rates range from 3.455% to 9.25%. Based upon borrowing rates currently available to the Company, the fair valueCredit facilities consisted of the Company's debt approximates the carrying value. Availability to Borrow at Borrowings Outstanding at Borrowings Outstanding at (Amounts in Millions, in U.S Dollar Equivalents) June 30, 2011 June 30, 2011 June 30, 2010 Primary revolving credit facility (1)$ 94.8 $ — $ — Poland overdraft credit facility (2)8.7 — — Other 0.3 — — Total $ 103.8 $ — $ — (1) The Company's primary revolving credit facility, which expires in April 2013, provides for up to $100 million in borrowings, with an option to increase the amount available for borrowing to $150 million at the Company's request, subject to participating banks' consent. The Company uses this facility for acquisitions and general corporate purposes. A commitment fee is payable on the unused portion of the credit facility which was immaterial to the Company's operating results for fiscal years 2011, 2010, and 2009. The commitment fee on the unused portion of principal amount of the credit facility is payable at a rate that ranges from 12.5 to 15.0 basis points per annum as determined by the Company's leverage ratio. Borrowings under the credit agreement bear interest at a floating rate based, at the Company's option, upon a London Interbank Offered Rate (LIBOR) plus an applicable percentage or the greater of the federal funds rate plus an applicable percentage and the prime rate. The credit facility requires the Company to comply with certain debt covenants including interest coverage ratio and net worth. The Company was in compliance with these covenants during the fiscal year ended June 30, 2011. The Company had $5.2 million in letters of credit against the credit facility at June 30, 2011.At June 30, 2008, the Company had no balances due on senior secured notes. At June 30, 2007, the Company's outstanding balance in senior secured notes was $4.5 million. These notes represented the remaining portion of notes originally held by Reptron which was not tendered as of the date of the acquisition. The notes were valued in the preliminary purchase price allocation at their stated 101% redemption price, which approximated their fair value. As of the acquisition date, the indenture agreement related to the remaining notes was amended to eliminate or modify substantially all of the restrictive covenants in the indenture. The notes were irrevocably and unconditionally guaranteed by the acquired Reptron legal entity and were secured by the assets of this legal entity. The Reptron legal entity was in compliance with all terms and covenants of the notes, as amended, as of June 30, 2007. The maturity date of the notes was February 2009; however, the Company redeemed the notes in the first quarter of fiscal year 2008. The notes were redeemed at the stated redemption price equal to 101% of the principal amount together with interest accrued at a fixed 8% annual interest rate through the redemption date. As of June 30, 2007, the notes were classified as Current Liabilities on the Consolidated Balance Sheets. See Note 2 - Acquisitions of Notes to Consolidated Financial Statements for information on the Reptron acquisition. The Company maintains a revolving credit facility which expires in April 2013 and provides for up to $100 million in borrowings, with an option to increase the amount available for borrowing to $150 million at the Company's request, subject to participating banks' consent. The $100 million credit facility replaced a previous $75 million credit facility, which also provided an option to increase the amount available for borrowing to $125 million at the Company's request, subject to participating banks' consent. The Company uses this facility for acquisitions and general corporate purposes. A commitment fee is payable on the unused portion of the credit facility which was immaterial to the Company's operating results for fiscal years 2008, 2007, and 2006. The commitment fee on the unused portion of principal amount of the credit facility is payable at a rate that ranges from 12.5 to 15.0 basis points per annum as determined by the Company's leverage ratio. Borrowings under the credit agreement bear interest at a floating rate based, at the Company's option, upon a London Interbank Offered Rate (LIBOR) plus an applicable percentage or the greater of the federal funds rate plus an applicable percentage and the prime rate. 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. separate foreign credit facility for its EMS segment operation in Thailand which is backed by the $100$100 million revolving credit facility. The separateThis foreign credit facility is expected toreviewed for renewal annually and can be reviewed in May 2009 for renewal. The interest rate applicable to borrowingscanceled at any time by either the bank or the Company. Interest on borrowing in US dollars under the separate foreign credit facility is charged at 0.75% per annum over the Singapore Interbank Money Market Offered Rate (SIBOR). The interest rate on borrowings in Thai Baht under the separate foreign credit facility is charged at the prevailing market rate.(2) The credit facility for the EMS segment operation in Poland allows for multi-currency borrowings up to a 6 million Euro equivalent (approximately $8.7 million U.S. dollars at June 30, 2011 exchange rates) and is available to cover bank overdrafts. Bank overdrafts may be deemed necessary to satisfy short-term cash needs at the Company's Poland location rather than funding from intercompany sources. This credit facility is reviewed for renewal annually and can be canceled at any time by either the bank or the Company. Interest on the overdraft is charged at 1.75% over the Euro Overnight Index Average (EONIA).At As of both June 30, 2008, the Company had $52.6 million of2011 and 2010, there were no outstanding short-term borrowings outstanding. The outstanding balance consisted of $17.3 million for a Euro currency borrowing which provides a natural currency hedge against Euro denominated intercompany notes between the US parent and the Euro functional currency subsidiaries, and an additional $33.6 million funded short-term cash needs. The Company also had letters of credit against the credit facility. In addition, at June 30, 2008, $1.7 million of short-term borrowings were outstanding under a separate foreign credit facility which is backed by the $100 million credit facility. Total availability to borrow under the $100 million credit facility was $44.2 million at June 30, 2008. At June 30, 2007, the Company had $18.9 million of short-term borrowings outstanding under the credit facility.The Company also has a credit facility for its electronics operation in Wales, United Kingdom. The facility will be reviewed in November 2008 and will expire if not renewed at that time. The facility allows for multi-currency borrowings up to 2 million Sterling equivalent (approximately $4 million US dollars) and is available to cover bank overdrafts. Bank overdrafts may be deemed necessary to satisfy short-term cash needs rather than funding from intercompany sources. The interest rate applicable to the Sterling overdraft facility is charged at 1% per annum over the Bank of England's Sterling Base Rate. At June 30, 2008, the Company had no borrowings outstanding under the overdraft facility. At June 30, 2007, as collateral subject to lien, this facility required 3 million Euro (approximately $4 million US dollars) to be held as restricted cash which was classified as other long-term assets on the Company's balance sheet. The restricted cash is no longer required as collateral and was reclassified to cash and cash equivalents on the Company's balance sheet. At June 30, 2007, the Company had $3.0 million US dollar equivalent of Sterling-denominated short-term borrowings outstanding under the overdraft facility.As of June 30, 2008 and 2007, the weighted average interest rates on the Company's short-term borrowings outstanding under the credit facilities were 4.99% and 4.93%, respectively.borrowings. Cash payments for interest on borrowings were, in thousands, $2,197, $889,$544,$1,807, in fiscal years 2008, 2007,2011, 2010, and 2006,2009, respectively.Note 7 Employee Benefit PlansRetirement Plans:The Company has a trusteed defined contribution retirement plan in effect for substantially all domestic employees meeting the eligibility requirements. The plan includes a 401(k) feature thereby permittingwhich permits participants to make additional voluntary contributions on a pre-tax basis. Payments by the Company to the trusteed plan have a five-year vesting schedule and are held for the sole benefit of participants.The Company also maintains a trusteed defined contribution retirement plan for employees of acquired companies.The Company maintains a supplemental employee retirement plan (SERP) for executive employees which enable them to defer cash compensation on a pre-tax basis in excess of IRS limitations. The SERP is structured as a rabbi trust, and therefore assets in the SERP portfolio are subject to creditor claims in the event of bankruptcy.Company contributions for domestic employees are based on a percent of net income with certain minimum and maximum47limits as determined annually by the Compensation and Governance Committee of the Board of Directors. Total expense related to employer contributions to the retirement plans was, $5.8 millionin millions, $5.0, $4.5, and $0.0 for each of fiscal years 2008, 2007,2011, 2010, and 2006.2009, respectively.Employees of certain foreign subsidiaries are covered by local pension or retirement plans. Total expense related to employer contributions to these foreign plans for 2008, 2007,fiscal years 2011, 2010, and 20062009 was, in millions, $1.0, $0.9,$0.5, $0.6, and $0.2,$0.7, respectively.The Company maintains severance plans for substantially all domestic employees. The plansemployees which provide severance benefits to eligible employees meeting the plans' qualifications, primarily involuntary termination without cause. There are no statutory requirements for the Company to contribute to the plans, nor do employees contribute to the plans. The plans hold no assets. Benefits are paid using available cash on hand when eligible employees meet plan qualifications for payment. Benefits are based upon an employee's years of service and accumulate up to certain limits specified in the plans and include both salary and medical benefits. The components and changes in the Benefit Obligation, Accumulated Other Comprehensive Income (Loss), and Net Periodic Benefit Cost are as follows:(Amounts in Thousands) 2008 2007 Changes and Components of Benefit Obligation: Benefit obligation at beginning of year $ 2,200 $ -0- Service cost 282 -0- Interest cost 120 -0- Actuarial loss for the period 130 -0- Benefits paid (555) -0- Initial actuarial obligation recorded for severance plan -0- 2,200 Benefit obligation at end of year $ 2,177 $ 2,200 Balance in current liabilities $ 283 $ 286 Balance in noncurrent liabilities 1,894 1,914 Total benefit obligation recognized in the Consolidated Balance Sheets $ 2,177 $ 2,200 Changes and Components in Accumulated Other Comprehensive Income (before tax): Accumulated Other Comprehensive Income at beginning of year $ 2,200 $ -0- Change due to unrecognized actuarial loss 113 -0- Change due to unrecognized prior service cost (286) 2,200 Accumulated Other Comprehensive Income at end of year $ 2,027 $ 2,200 Balance in unrecognized actuarial loss 113 -0- Balance in unrecognized prior service cost 1,914 2,200 Total accumulated other comprehensive income recognized in Share Owners' Equity $ 2,027 $ 2,200 Components of Net Periodic Benefit Cost (before tax): Service cost $ 282 $ -0- Interest cost 120 -0- Amortization of prior service cost 286 -0- Amortization of actuarial loss 17 -0- Net periodic benefit cost recognized in the Consolidated Statements of Income $ 705 $ -0- June 30 (Amounts in Thousands) 2011 2010 Changes and Components of Benefit Obligation: Benefit obligation at beginning of year $ 5,900 $ 5,469 Service cost 934 854 Interest cost 264 408 Actuarial (gain) loss for the period (1,501 ) 1,292 Benefits paid (524 ) (2,123 ) Benefit obligation at end of year $ 5,073 $ 5,900 Balance in current liabilities $ 890 $ 1,035 Balance in noncurrent liabilities 4,183 4,865 Total benefit obligation recognized in the Consolidated Balance Sheets $ 5,073 $ 5,900 Changes and Components in Accumulated Other Comprehensive Income (Loss) (before tax): Accumulated Other Comprehensive Income (Loss) at beginning of year $ 5,332 $ 5,078 Change in unrecognized prior service cost (286 ) (285 ) Net change in unrecognized actuarial loss (2,275 ) 539 Accumulated Other Comprehensive Income (Loss) at end of year $ 2,771 $ 5,332 Balance in unrecognized prior service cost $ 1,057 $ 1,343 Balance in unrecognized actuarial loss 1,714 3,989 Total Accumulated Other Comprehensive Income (Loss) recognized in Share Owners' Equity $ 2,771 $ 5,332 Year Ended June 30 Components of Net Periodic Benefit Cost (before tax): 2011 2010 2009 Service cost $ 934 $ 854 $ 432 Interest cost 264 408 205 Amortization of prior service cost 286 285 285 Amortization of actuarial loss 774 753 517 Net periodic benefit cost recognized in the Consolidated Statements of Income $ 2,258 $ 2,300 $ 1,439 The decrease in the benefit obligation primarily resulted from a decrease in the historical rate of severance payments used to project future severance eligible terminations. The benefit cost in the above table includes only normal recurring levels of severance activity, as estimated using an actuarial method and management judgment. Unusual or nonrecurringnon-recurring severance actions, such as those disclosed in Note 1718 - Restructuring Expense of Notes to Consolidated Financial Statements, are not estimable using actuarial methods and are expensed when incurred.in accordance with the applicable U.S. GAAP.48The Company amortizes prior service costs on a straight-line basis over the average remaining service period of employees that were active at the time of the plan initiation and amortizes actuarial losses on a straight-line basis over the average remaining service period of employees expected to receive benefits under the plan.The estimated prior service cost and actuarial net loss and prior service cost for the severance plans that will be amortized from accumulated other comprehensive income (loss) into net periodic benefit cost over the next fiscal year are, pre-tax in thousands, $15$286 and $286,$301, respectively.The following table disclosesAssumptions used to determine fiscal year end benefit obligations are as follows: 2011 2010 Discount Rate 4.8% 5.0% Rate of Compensation Increase 4.0% 4.0% Weighted average assumptions used in actuarial calculations forto determine fiscal years 2008 and 2007:
year net periodic benefit costs are as follows: Discount Rate5.5% Rate of Compensation Increase5.0% 2011 2010 2009 Discount Rate 5.0% 6.2% 5.9% Rate of Compensation Increase 4.0% 3.3% 4.5% Note 8 Stock Compensation PlansOn August 19, 2003, the Board of Directors adopted the 2003 Stock Option and Incentive Plan (the "2003 Plan"), which was approved by the Company's Share Owners on October 21, 2003.2008. Under the 2003 Plan, 2,500,000 shares of Common Stock were reserved for restricted stock, restricted share units, unrestricted share grants, incentive stock options, nonqualified stock options, performance shares, performance units, and stock appreciation rights for grant to officers and other key employees of the Company and to members of the Board of Directors who are not employees. The 2003 Plan is a ten-year plan. The Company also has stock options outstanding under twoa former stock incentive plans,plan, which areis described below. The pre-tax compensation cost that was charged against income from continuing operations for all of the plans was $4.0$1.3 million $4.9, $1.8 million, and $3.8$2.1 million in fiscal year 2008, 2007,2011, 2010, and 2006,2009, respectively. The total income tax benefit from continuing operations for stock compensation arrangements was $1.6$0.5 million $1.9, $0.7 million, and $1.5$0.9 million in fiscal year 2008, 2007,2011, 2010, and 2006,2009, respectively. These compensation expense and tax benefit amounts exclude the impact of the Cumulative Effect of a Change in Accounting Principle recorded in fiscal year 2006, as described in Note 1 - Summary of Significant Accounting Policies of Notes to Consolidated Financial Statements. The Company generally uses treasury shares for fulfillment of option exercises and issuance of performance shares, and conversion of restricted share units.shares.Performance Shares:The Company awards performance shares to officers and other key employees under the 2003 Plan. Under these awards, a number of shares will be grantedissued to each participant based upon the attainment of the applicable bonus percentage calculated under the Company's profit sharing incentive bonus plan as applied to a total potential share award made and approved by the Compensation and Governance Committee. Performance shares are vested when issued shortly after the end of the fiscal year in which the performance measurement period is complete and are issued as Class A and Class B common shares. Certain outstanding performance shares are applicable to performance measurement periods in future fiscal years and will be measured at fair value when the performance targets are established in future fiscal years. The contractual life of performance shares ranges from one to five years. If a participant is not employed by the Company on the date of issuance,shares are issued, the performance share award is forfeited, except in the case of death, retirement at age 62 or older, total permanent disability, or certain other circumstances described in the Company's employment policy. Additionally, to the extent performance conditions are not fully attained, performance shares are forfeited.A summary of performance share activity under the 2003 Plan during fiscal year 20082011 is presented below: Number
of SharesWeighted Average
Grant Date
Fair ValuePerformance shares outstanding at July 1, 2007 683,997 $17.43 Granted 384,282 12.16 Vested (201,598) 16.68 Forfeited (107,629) 16.62 Performance shares outstanding at June 30, 2008 759,052 $12.16 Numberof Shares Weighted AverageGrant DateFair ValuePerformance shares outstanding at July 1, 2010 1,439,253 $ 6.25 Granted 723,788 $ 5.10 Vested (141,049 ) $ 6.25 Forfeited (458,714 ) $ 6.24 Performance shares outstanding at June 30, 2011 1,563,278 $ 5.10 49As of June 30, 2008,2011, there was approximately $3.0$2.0 million of unrecognized compensation cost related to performance shares, based on the latest estimated attainment of performance goals. That cost is expected to be recognized over annual performance periods ending August 20082011 through August 2012,2015, with a weighted average vesting period of 1.71.6 years. The fair value of performance shares is based on the stock price at the date of award,grant, reduced by the present value of dividends normally paid over the vesting period which are not payable on outstanding performance share awards. The weighted average grant date fair value was $12.16, $17.42,$5.10; $6.25; and $12.24$10.37 for performance share awards granted in fiscal year 2008, 2007,2011, 2010, and 2006,2009, respectively. During fiscal year 20082011, 2010, and 2007,2009, respectively, 201,598141,049; 140,832; and 150,651109,197 performance shares vested at a fair value of $3.4$0.9 million, $1.1 million, and $1.8 million.$1.3 million. These shares are the total number of shares vested, prior to the reduction of shares withheld to satisfy tax withholding obligations. The number of shares presented in the above table, the amounts of unrecognized compensation, and the weighted average period include performance shares awarded that are applicable to future performance measurement periods and will be measured at fair value when the performance targets are established in future fiscal years.Restricted Share Units:Nonvested Restricted Share Units (RSU) awarded to officers and other key employees are currently outstanding under the 2003 Plan. RSUs vest five years after the date of award. Upon vesting, the outstanding number of RSUs and the value of dividends accumulated over the vesting period are converted to shares of Class A and Class B common stock. If the employment of a holder of an RSU terminates before the RSU has vested for any reason other than death, retirement at age 62 or older, total permanent disability, or certain other circumstances described in the Company's employment policy, the RSU and accumulated dividends will be forfeited.A summary of RSU activity under the 2003 Plan during fiscal year 2008 is presented below: Number of
Share UnitsWeighted Average
Grant Date
Fair ValueRestricted Share Units outstanding at July 1, 2007 500,100 $15.75 Granted -0- -0- Vested (15,000) 15.50 Forfeited (4,200) 14.79 Restricted Share Units outstanding at June 30, 2008 480,900 $15.77 As of June 30, 2008, there was approximately $1.8 million of unrecognized compensation cost related to nonvested RSU compensation arrangements awarded under the 2003 Plan. That cost is expected to be recognized over a weighted average period of 1.3 years. The fair value of RSU awards is based on the stock price at the date of award. The total fair value of RSU awards vested during fiscal year 2008, 2007, and 2006 was, in thousands, $233, $24, and $31, respectively.Under the 2003 Plan, unrestricted shares may be granted to participantsemployees and members of the Board of Directors as consideration for service to the Company. Unrestricted share grants do not have vesting periods, holding periods, restrictions on sale, or other restrictions. The fair value of unrestricted shares is based on the stock price at the date of the award. During fiscal year 2008, 2007,2011, 2010, and 2006,2009, respectively, the Company granted a total of 13,186, 7,668,46,977; 19,662; and 18,50129,545 unrestricted shares of Class B common stock at an average grant date fair value of $13.16, $24.53,$6.71, $7.63, and $11.22,$6.45, for a total fair value of $0.2$0.3 million $0.2, $0.2 million and $0.2 million.$0.2 million. These shares are the total number of shares granted, prior to the reduction of shares withheld to satisfy tax withholding obligations. These shares were issuedawarded to non-employee members of the Board of Directors as compensation for director's fees, as a result of directors' elections to receive unrestricted shares in lieu of cash payment. Director's fees are expensed over the period that directors earn the compensation. Other unrestricted shares were awarded to officers and other key employees as consideration for their service to the Company.
Restricted Share Units:Nonvested Restricted Share Units (RSU) were awarded to officers and other key employees under the 2003 Plan in fiscal years prior to fiscal year 2011. As of June 30, 2011, there was no unrecognized compensation cost related to nonvested RSU compensation arrangements awarded under the 2003 Plan as all RSU's had vested. The total fair value of RSU awards vested during fiscal year 2011, 2010, and 2009 was, in thousands, $0, $3,366, and $4,137, respectively.Stock Options:The Company has stock options outstanding under twoa former stock incentive plans.plan. The 1996 Stock Incentive Program, which was approved by the Company's Share Owners on October 22, 1996, allowed the issuance of incentive stock options, nonqualified stock options, stock appreciation rights, and performance share awards 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 will continue to have options outstanding through fiscal year 2013. The 1996 Directors' Stock Compensation and Option Plan, available to all members of the Board of Directors, was approved by the Company's Share Owners on October 22, 1996. Under the terms of that plan, Directors electing to receive all, or a portion, of their fees in the form of Company stock were also granted a number of stock options equal to 50% of the number of shares received for compensation of fees. The Directors' Stock Compensation and Option Plan will continue to have options outstanding through fiscal year 2009. No shares remain available for new grants under the Company's prior stock option plans.There were no stock option grants awarded during fiscal years 2008, 2007,2011, 2010, and 2006.2009. For outstanding awards, the fair value at the date of the grant was estimated using the Black-Scholes option pricing model. Options outstanding are exercisable from onetwo to five 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 the case of retirement at age 62 or older, death, permanent disability, or certain other circumstances described in the Company's employment policy.50The Company also had an immaterial number of stock appreciation rights outstanding under the former 1996 Stock Incentive Program, prior to their expiration in August 2007. As valued by the Black-Scholes valuation model, these awards had no value as of June 30, 2007.A summary of stock option activity under the two former plans during fiscal year 20082011 is presented below: Number of
SharesWeighted Average
Exercise
PriceWeighted Average
Remaining
Contractual LifeAggregate
Intrinsic
ValueOptions outstanding at July 1, 2007 830,043 $15.65 Granted -0- -0- Exercised -0- -0- Forfeited (7,250) 15.06 Expired (43,631) 19.41 Options outstanding at June 30, 2008 779,162 $15.45 3.7 years $ -0- Options vested 779,162 $15.45 3.7 years $ -0- Options exercisable at June 30, 2008 779,162 $15.45 3.7 years $ -0- Number ofShares Weighted AverageExercisePrice Weighted AverageRemainingContractual Life AggregateIntrinsicValueOptions outstanding at July 1, 2010 648,460 $ 15.13 Granted — $ — Exercised — $ — Forfeited (9,375 ) $ 15.09 Expired (19,500 ) $ 16.17 Options outstanding at June 30, 2011 619,585 $ 15.10 1.1 years $ — Options vested and exercisable at June 30, 2011 619,585 $ 15.10 1.1 years $ — The total intrinsic value of options exercised during fiscal year 2007 and 2006 was $5.8 million and $0.2 million, respectively. The value of existing shares held by employees was used to exercise stock options. The actual tax benefit realized for the tax deductions from option exercises totaled $1.9 million and $0.1 million for fiscal year 2007 and 2006, respectively. No options were exercised during fiscal year 2008.years 2011, 2010, and 2009.Note 9 Income TaxesDeferred 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. Income tax benefits net of valuation allowance associated with net operating losses of, in thousands, $2,858$5,749 expire from fiscal year 20122013 to 2028.2031. Income tax benefits net of valuation allowance associated with net tax credit carryforwards of, in thousands, $104,$6,272, expire from fiscal year 20142012 to 2021.2025. A valuation reserve was provided as of June 30, 20082011 for deferred tax assets relating to certain foreign and state net operating losses of, in thousands, $1,308,$1,967, certain state tax credit carryforwards of, in thousands, $3,460,$4,560, and, in thousands, $198$171 related to other deferred tax assets that the Company currently believes are more likely than not to remain unrealized in the future.51 The components of the deferred tax assets and liabilities as of June 30, 2008 and 2007, were as follows: (Amounts in Thousands) 2008 2007 Deferred Tax Assets: Receivables $ 1,680 $ 2,349 Inventory 2,606 3,657 Employee benefits 3,022 3,256 Deferred compensation 8,146 8,716 Restricted share units 2,573 1,944 Other current liabilities 1,443 1,422 Warranty reserve 586 856 Credit carryforwards 3,564 3,230 Restructuring 5,467 438 Goodwill (58) 312 Net operating loss carryforward 4,166 3,307 Miscellaneous 2,201 1,151 Valuation Allowance (4,966) (4,420) Total asset $ 30,430 $ 26,218 Deferred Tax Liabilities: Property & equipment $ 7,298 $ 9,370 Capitalized software 64 174 Miscellaneous 730 493 Total liability $ 8,092 $ 10,037 Net Deferred Income Taxes $ 22,338 $ 16,181 The components of income (loss) from continuing operations before taxes on income are as follows: Year Ended June 30 (Amounts in Thousands) 2008 2007 2006 United States $ (2,605) $ 38,576 $ 32,716 Foreign 241 (2,224) 6,481 Total income (loss) from continuing operations before income taxes on income $ (2,364) $ 36,352 $ 39,197 In 2006,Foreign unremitted earnings of entities not included in the FASB issued FIN 48, which clarifiesUnited States tax return have been included in the accounting for uncertainty in tax positions. FIN 48 requires that the Company recognize in itsconsolidated financial statements without giving effect to the impact of a tax position, ifUnited States taxes that positionmay be payable on distribution to the United States because it is more likely than not of being sustained on audit, based onanticipated such earnings will be remitted to the technical merits of the position.United States. The Company adopted the provisions of FIN 48 on July 1, 2007, the beginningaggregate unremitted earnings of the Company's fiscal year. Upon the adoptionforeign subsidiaries for which a deferred income tax liability has not been recorded was approximately $72.8 million as of FIN 48 on July 1, 2007, the Company recognized a $5.8 million increase in the liability for unrecognized tax benefits including interest and penalties. The increase was accounted for as a reduction to the July 1, 2007 balanceJune 30, 2011. Determination of retained earnings in the amount of $0.7 million and an increase tounrecognized deferred tax assets of $5.1 million. The total liability on unremitted earnings is not practicable.52The provision (benefit) for income taxes is composed of the following items: Year Ended June 30 (Amounts in Thousands) 2011 2010 2009 Currently Payable (Refundable): Federal $ (2,527 ) $ (6,768 ) $ 9,457 Foreign (130 ) 3,474 1,521 State 150 (305 ) 1,713 Total current (2,507 ) (3,599 ) 12,691 Deferred Taxes: Federal 1,090 1,407 (2,554 ) Foreign 1,509 (1,553 ) (1,294 ) State (577 ) (1,090 ) (845 ) Total deferred 2,022 (1,236 ) (4,693 ) Total provision (benefit) for income taxes $ (485 ) $ (4,835 ) $ 7,998 A reconciliation of the statutory U.S. income tax rate to the Company's effective income tax rate follows: Year Ended June 30 2011 2010 2009 (Amounts in Thousands) Amount % Amount % Amount % Tax computed at U.S. federal statutory rate $ 1,553 35.0 % $ 2,089 35.0 % $ 8,864 35.0 % State income taxes, net of federal income tax benefit (277 ) (6.3 ) (907 ) (15.2 ) 565 2.2 Foreign tax effect (1,213 ) (27.3 ) (3,120 ) (52.3 ) 2,093 8.3 Tax-exempt interest income — — (169 ) (2.8 ) (559 ) (2.2 ) Domestic manufacturing deduction — — — — 86 0.3 Research credit (751 ) (16.9 ) (674 ) (11.3 ) (753 ) (3.0 ) Foreign subsidiary bad debt deduction — — — — (2,411 ) (9.5 ) Foreign subsidiary land and building gain — — (2,236 ) (37.5 ) — — Other - net 203 4.6 182 3.1 113 0.5 Total provision (benefit) for income taxes $ (485 ) (10.9 )% $ (4,835 ) (81.0 )% $ 7,998 31.6 % Net cash payments (refunds) for unrecognized tax benefits totaled $6.4 million as of July 1, 2007.53Changes in the unrecognized tax benefit, excluding accrued interest and penalties, during fiscal year 2008years 2011, 2010, and 2009 were as follows:(Amounts in Thousands)Unrecognized Tax BenefitBeginning balance - July 1, 2007$ 5,617 Tax positions related to prior years: Additions161 Reductions(4,737)Tax positions related to current year: Additions70 Reductions -0-Settlements(13)Lapses in statute of limitations(78)Ending balance - June 30, 2008$ 1,020 The $4.7 million reduction for prior year tax positions was due primarily to the IRS approving Form 3115, Application for Change in Accounting Method. The approval of Form 3115 eliminated the need for an unrecognized tax benefit liability. The reduction in the liability resulted in a corresponding adjustment to deferred tax assets. Included in the June 30, 2008 and July 1, 2007 liability for unrecognized tax benefits were, respectively, in millions, $0.7 and $0.6 of unrecognized tax benefits that if recognized would impact the effective tax rate.(Amounts in Thousands) 2011 2010 2009 Beginning balance - July 1 $ 2,466 $ 2,165 $ 1,020 Tax positions related to prior fiscal years: Additions 312 532 341 Reductions (77 ) (130 ) — Tax positions related to current fiscal year: Additions 96 74 985 Reductions (42 ) — (3 ) Settlements (74 ) (36 ) (3 ) Lapses in statute of limitations (182 ) (139 ) (175 ) Ending balance - June 30 $ 2,499 $ 2,466 $ 2,165 Portion that, if recognized, would reduce tax expense and effective tax rate $ 2,125 $ 2,097 $ 1,905 The Company recognizes interest and penalties accrued related to unrecognized tax benefits as Interest expense and Non-operating expense, respectively, under Other Income (Expense) on the Consolidated Statements of Income. Interest and penalties recognized for the period ended June 30, 2008 were, in millions, $0.3 income. The total amount of liability accrued for interest and penalties related to unrecognized tax benefits asin the Provision (Benefit) for Income Taxes line of June 30, 2008 and July 1, 2007, respectively, in millions, werethe Consolidated Statements of Income. Amounts accrued for interest of $0.3 and $0.7 and penalties of $0.1 and $0.1. Interestwere as follows:(Amounts in Thousands) As ofJune 30, 2011 As ofJune 30, 2010 As ofJune 30, 2009Accrued Interest and Penalties: Interest $ 230 $ 311 $ 344 Penalties 86 117 146 Accrued interest and penalties are not included in the tabular roll forward of unrecognized tax benefits above.The Company, or one of its wholly-owned subsidiaries, files U.S. federal income tax returns and income tax returns in various state, local, and foreign jurisdictions. The Company is no longer subject to any significant U.S. federal tax examinations by tax authorities for years before fiscal year 2006. During the Company's fiscal year ended June 30, 2007, the Internal Revenue Service completed an examination of the U.S. federal tax returns for fiscal years ended June 30, 2004 and 2005, which the Company believes effectively settled those years.2008. The Company is subject to various state and local income tax examinations by tax authorities for years after June 30, 20032002 and various foreign jurisdictions for years after June 30, 2002.2004. The Company does not expect the change in the amount of unrecognized tax benefits in the next 12 months to have a significant impact on the results of operations or the financial position of the Company.Note 10 Common StockOn a fiscal year basis, shares of Class B Common Stock are entitled to an additional $0.02$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. 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 families own directly or share 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. 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 with54equal rights to receive dividends as and if declared by the Board of Directors.Note 11 Fair ValueThe Company categorizes assets and liabilities measured at fair value into three levels based upon the assumptions (inputs) used to price the assets or liabilities. Level 1 provides the most reliable measure of fair value, whereas level 3 generally requires significant management judgment. The three levels are defined as follows:Level 1: Unadjusted quoted prices in active markets for identical assets and liabilities.Level 2: Observable inputs other than those included in level 1. For example, quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in inactive markets.Level 3: Unobservable inputs reflecting management's own assumptions about the inputs used in pricing the asset or liability.Financial Instruments Recognized at Fair ValueThe following methods and assumptions were used to measure fair value:Financial Instrument Valuation Technique/Inputs Used Cash Equivalents Market - Quoted market prices Available-for-sale securities: Convertible debt securities Market - Fair value approximated using the amortized cost basis of promissory notes, with the discount amortized to interest income over the term of the notes Derivative Assets: Foreign exchange contracts Market - Based on observable market inputs using standard calculations, such as time value, forward interest rate yield curves, and current spot rates, considering counterparty credit risk Derivative Assets: Stock warrants Market - Based on a Black-Scholes valuation model with the following inputs: risk-free interest rate, volatility, expected life, and estimated stock price Trading securities: Mutual funds held by nonqualified supplemental employee retirement planMarket - Quoted market prices Derivative Liabilities: Foreign exchange contracts Market - Based on observable market inputs using standard calculations, such as time value, forward interest rate yield curves, and current spot rates adjusted for the Company's non-performance risk 55Recurring Fair Value Measurements:As of June 30, 2011 and 2010, the fair values of financial assets and liabilities that are measured at fair value on a recurring basis using the market approach are categorized as follows: June 30, 2011 (Amounts in Thousands) Level 1 Level 2 Level 3 Total Assets Cash equivalents $ 32,021 $ — $ — $ 32,021 Derivatives: Foreign exchange contracts — 1,044 — 1,044 Derivatives: Stock warrants — — 1,437 1,437 Trading Securities: Mutual funds held by nonqualified supplemental employee retirement plan 16,138 — — 16,138 Total assets at fair value $ 48,159 $ 1,044 $ 1,437 $ 50,640 Liabilities Derivatives: Foreign exchange contracts $ — $ 1,684 $ — $ 1,684 Total liabilities at fair value $ — $ 1,684 $ — $ 1,684 June 30, 2010 (Amounts in Thousands) Level 1 Level 2 Level 3 Total Assets Cash equivalents $ 32,706 $ — $ — $ 32,706 Available-for-sale securities: Convertible debt securities — — 2,496 2,496 Derivatives: Foreign exchange contracts — 2,223 — 2,223 Derivatives: Stock warrants — — 395 395 Trading Securities: Mutual funds held by nonqualified supplemental employee retirement plan 13,071 — — 13,071 Total assets at fair value $ 45,777 $ 2,223 $ 2,891 $ 50,891 Liabilities Derivatives: Foreign exchange contracts $ — $ 392 $ — $ 392 Total liabilities at fair value $ — $ 392 $ — $ 392 During fiscal year 2008, cash payments2010, the Company purchased convertible debt securities of $2.3 million and stock warrants of $0.4 million. During fiscal year 2011, the convertible debt securities experienced an other-than-temporary decline in fair market value resulting in a $1.2 million impairment loss and, upon a qualified financing, were subsequently converted to non-marketable equity securities. The investment in non-marketable equity securities is accounted for repurchases of common stock were $24.8 million which included $2.5 million that wasas a cost-method investment and is included in accounts payablethe Disclosure of Other Financial Instruments section that follows. See Note 13 - Investments of Notes to Consolidated Financial Statements for further information regarding the convertible debt securities and non-marketable equity securities. The revaluation of stock warrants resulted in a $1.0 million derivative gain as a result of the qualified financing. See Note 12 - Derivative Instruments of Notes to Consolidated Financial Statements for further information regarding the stock warrants.The nonqualified supplemental employee retirement plan (SERP) assets consist of equity funds, balanced funds, a bond fund, and a money market fund. The SERP investment assets are exactly offset by a SERP liability which represents the Company's obligation to distribute SERP funds to participants. See Note 13 - Investments of Notes to Consolidated Financial Statements for further information regarding the SERP.Non-Recurring Fair Value Measurements:During fiscal year 2011, the Company had no fair value adjustments applicable to items that are subject to non-recurring fair value measurement after the initial measurement date.56Disclosure of Other Financial Instruments:Other financial instruments that are not reflected in the Consolidated Balance Sheets at fair value have carrying amounts that approximate fair value as follows:Assets Liabilities Certain cash and cash equivalents Accounts payable Receivables Dividends payable Other assets not recorded at fair value Accrued expenses The fair value of long-term debt, excluding capital leases, was estimated using a discounted cash flow analysis based on quoted long-term debt market rates adjusted for the Company's non-performance risk. There was an immaterial difference between the carrying value and estimated fair value of long-term debt as of June 30, 2007. With these repurchases,2011 and 2010.Non-marketable equity securities are accounted for under the Company completedcost method of accounting, which carries the shares at cost except in the event of impairment. These securities were received in June 2011 as a previously authorized share repurchase program. Subsequentresult of a conversion of convertible notes, which had been adjusted to fair value prior to the completionconversion. The $1.8 million carrying value of non-marketable securities as of June 30, 2011 is approximately equal to the previously authorized share repurchase program, the Board of Directors authorized a plan which allows for the repurchase of up to an additional 2,000,000 shares of the Company's common stock.fair value.Note 1112 Derivative InstrumentsForeign Exchange Contracts:The Company operates internationally and is therefore exposed to foreign currency exchange rate fluctuations in the normal course of its business. As partThe Company's primary means of itsmanaging this exposure is to utilize natural hedges, such as aligning currencies used in the supply chain with the sale currency. To the extent natural hedging techniques do not fully offset currency risk, management strategy, the Company uses derivative instruments with the objective of reducing the residual exposure to hedge certain foreign currency exposures. Before acquiring a derivative instrument to hedge a specific risk, potential natural hedges are evaluated. Derivative instruments are only utilized to manage underlying exposures that arise from the Company's business operations and are not used for speculative purposes.rate movements. Factors considered in the decision to hedge an underlying market exposure include the materiality of the risk, the volatility of the market, the duration of the hedge, the degree to which the underlying exposure is committed to, and the availability, effectiveness, and cost of derivative instruments.The Company uses forward contracts designated as cash flow hedges to protect against foreign currency exchange rate risks inherent in forecasted transactions denominated in a foreign currency. The maximum lengthForeign exchange contracts are also used to hedge against foreign currency exchange rate risks related to intercompany balances denominated in currencies other than the functional currencies. As of timeJune 30, 2011, the Company had outstanding foreign exchange contracts to hedge currencies against the U.S. dollar in the aggregate notional amount of $16.9 million and to hedge currencies against the Euro in the aggregate notional amount of 27.5 million EUR. The notional amounts are indicators of the volume of derivative activities but are not indicators of the potential gain or loss on the derivatives.In limited cases due to unexpected changes in forecasted transactions, cash flow hedges may cease to meet the criteria to be designated as cash flow hedges. Depending on the type of exposure hedged, its exposurethe Company may either purchase a derivative contract in the opposite position of the undesignated hedge or may retain the hedge until it matures if the hedge continues to provide an adequate offset in earnings against the variability in futurecurrency revaluation impact of foreign currency denominated liabilities.The fair value of outstanding derivative instruments is recognized on the balance sheet as a derivative asset or liability. When derivatives are settled with the counterparty, the derivative asset or liability is relieved and cash flows was 27 and 12 months as of June 30, 2008 and 2007, respectively.flow is impacted for the net settlement. For derivative instruments that meet the criteria of SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended and interpreted,hedging instruments under FASB guidance, the effective portions of the gain or loss on the derivative instrument are initially recorded net of related tax effect in Accumulated Other Comprehensive Income (Loss), a component of Share Owners' Equity, and are subsequently reclassified into earnings in the period or periods during which the hedged transaction is recognized in earnings. The ineffective portion of the derivative gain or loss is reported in otherthe Non-operating income or expense immediately.The fair value of derivative financial instruments recordedline item on the balance sheet as of June 30, 2008 and 2007 was, in thousands, $1,307 and $835, recorded in assets, and $2,582 and $430 recorded in liabilities, respectively. Derivative gains (losses), on a pre-tax basis, were, in thousands, ($3,130), 1,287, and ($405), in fiscal year 2008, 2007, and 2006, respectively. Included in the derivative gain for fiscal year 2007 was $299 pre-tax income, in thousands, related to Thailand hedges which were determined to be ineffective as a result of government currency exchange rate controls. Ineffectiveness was not material during fiscal year 2008 and 2006. Derivative gains and losses are reported in the Cost of Sales and Non-Operating Income lines of the Consolidated Statements of Income andimmediately. The gain or loss associated with derivative instruments that are not designated as hedging instruments or that cease to meet the Net Income (Loss)criteria for hedging under FASB guidance is also reported in the Non-operating income or expense line ofitem on the Consolidated Statements of Cash Flows. TheIncome immediately.Based on fair values as of June 30, 2011, the Company estimates that in thousands, $1,036$0.1 million of pre-tax derivative lossesgains deferred in Accumulated Other Comprehensive Income (Loss) will be reclassified into earnings, along with the earnings effects of related forecasted transactions, within the next fiscal year ending June 30, 2009.Note 12 Short-Term Investments201257Because gains or losses on foreign exchange contracts fluctuate partially based on currency spot rates, the future effect on earnings of the cash flow hedges alone is not determinable, but in conjunction with the underlying hedged transactions, the result is expected to be a decline in currency risk. The maximum length of time the Company had hedged its exposure to the variability in future cash flows was 12 and 11 months as of June 30, 2011 and June 30, 2010, respectively.Stock Warrants:In conjunction with the Company's short-term investment portfolio consistsinvestments in convertible debt securities of available-for-salea privately-held company during fiscal year 2010, the Company received common and preferred stock warrants which provide the right to purchase the privately-held company's equity securities primarily governmentat a specified exercise price.As part of the June 2011 qualified financing related to the convertible debt securities, the latest preferred stock offering price of warrants was modified to a $0.25 per share exercise price (originally based on the previous offering price of $1.50), and municipal obligations. Thesethe number of warrants was modified to 11 million shares (originally 1,833,000 shares). The qualified financing did not impact the common warrants, which remained at a $0.15 per share exercise price (2,750,000 shares). The current market value of the underlying securities are reported at fair value, which iswas estimated based uponon the quoted market values of those, or similar instruments. Carrying costs reflect the original purchase price, with discounts and premiums amortized over the lifeper share valuation of the security. Governmentunderlying privately-held company, using a discounted cash flow method. The revaluation of warrants due to the change in terms and municipal obligations mature withinthe valuation of underlying business resulted in a six-year period.
$1.0 million gain during fiscal year 2011, recognized in the Non-operating income line item on the Consolidated Statements of Income. See Note 13 - Investments of Notes to Consolidated Financial Statements for further information regarding the qualified financing and conversion of debt securities. June 30 2008 2007 (Amounts in Thousands) Carrying cost $51,216 $67,699 Unrealized holding gains 502 21 Unrealized holding losses (83) (321) Other-than-temporary impairment -0- (49) Fair Value $51,635 $67,350 As of June 30, 2008, 24 investments were in an unrealized loss position and the unrealized loss approximated 0.4% of their fair value. The durationvalue of the unrealized loss positions ranges from three to 56 months. The Company has the ability to hold these investments and expects unrealized losses to be recoverable, and therefore, the Company does not consider these investments to be other-than-temporarily impaired. In reaching the conclusion that investments are not impaired, the Company considered the severity of loss, the credit quality of the instrumentstock warrants fluctuates primarily in relation to its yield, whether the external fund manager has discretion to trade at a loss, and the fact that the value of the debt investments is driven by interest rate fluctuations.See Note 11 - Fair Value of Notes to Consolidated Financial Statements for further information regarding the fair value of derivative assets and unrealized lossliabilities and Note 17 - Comprehensive Income of Notes to Consolidated Financial Statements for investmentsthe amount and changes in derivative gains and losses deferred in Accumulated Other Comprehensive Income (Loss).Information on the location and amounts of derivative fair values in the Consolidated Balance Sheets and derivative gains and losses in the Consolidated Statements of Income are presented below. Fair Values of Derivative Instruments on the Consolidated Balance Sheets Asset Derivatives Liability Derivatives Fair Value As of Fair Value As of (Amounts in Thousands) Balance Sheet Location June 30
2011 June 30
2010 Balance Sheet Location June 30
2011 June 30
2010Derivatives designated as hedging instruments: Foreign exchange contracts Prepaid expenses and other current assets $ 644 $ 525 Accrued expenses $ 415 $ 339 Derivatives not designated as hedging instruments: Foreign exchange contracts Prepaid expenses and other current assets 400 1,698 Accrued expenses 1,269 53 Stock warrants Other assets (long-term) 1,437 395 Total derivatives $ 2,481 $ 2,618 $ 1,684 $ 392 58The Effect of Derivative Instruments on Other Comprehensive Income (Loss) June 30 (Amounts in Thousands) 2011 2010 2009 Amount of Pre-Tax Gain or (Loss) Recognized in Other Comprehensive Income (Loss) (OCI) on Derivatives (Effective Portion): Foreign exchange contracts $ 1,063 $ 2,494 $ (13,832 ) The Effect of Derivative Instruments on Consolidated Statements of Income (Amounts in Thousands) Fiscal Year Ended June 30 Derivatives in Cash Flow Hedging Relationships Location of Gain or (Loss) 2011 2010 2009 Amount of Pre-Tax Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion): Foreign exchange contracts Net Sales $ — $ 15 $ (280 ) Foreign exchange contracts Cost of Sales 1,674 143 (5,749 ) Foreign exchange contracts Non-operating income (121 ) 36 (1,878 ) Total $ 1,553 $ 194 $ (7,907 ) Amount of Pre-Tax Gain or (Loss) Reclassified from Accumulated OCI into Income (Ineffective Portion): Foreign exchange contracts Non-operating income $ 2 $ 44 $ 165 Derivatives Not Designated as Hedging Instruments Amount of Pre-Tax Gain or (Loss) Recognized in Income on Derivatives: Foreign exchange contracts Non-operating income $ (4,322 ) $ 1,355 $ 1,274 Stock warrants Non-operating income 1,041 (7 ) — Total $ (3,281 ) $ 1,348 $ 1,274 Total Derivative Pre-Tax Gain (Loss) Recognized in Income $ (1,726 ) $ 1,586 $ (6,468 ) Note 13 InvestmentsMunicipal Securities:The Company's investment portfolio included available-for-sale securities which were in a continuous unrealized loss position for less than 12 months total, in thousands, $18,535comprised of exempt securities issued by municipalities ("Municipal Securities"). During fiscal year 2010, the Company sold all of its municipal securities and ($83), respectively,thus had no municipal securities outstanding as of June 30, 2008. There were no investments which were in a continuous unrealized loss position for 12 months or longer as of June 30, 2008. The fair value2011 and unrealized loss for investments which were in a continuous unrealized loss position for less than 12 months total, in thousands, $42,844 and ($256), respectively, as of June 30, 2007. The fair value and unrealized loss for investments which were in a continuous unrealized loss position for 12 months or longer total, in thousands, $5,888 and ($65), respectively, as of June 30, 2007. Proceeds from sales of available-for-sale securities were, in thousands, $39,126, $13,403, and $13,285Activity for the years ended June 30, 2008, 2007, and 2006, respectively. Gross realized gains and (losses) on the sale ofmunicipal securities that were classified as available-for-sale securities at June 30, 2008 were, in thousands, $305 and ($71), respectively, compared to gross realized gains and (losses) of, in thousands, $17 and ($72), respectively, at June 30, 2007 and $2 and ($91), respectively, at June 30, 2006. The cost was determined on each individual security in computing the realized gains and losses. as follows: For the Year Ended June 30 (Amounts in Thousands) 2011 2010 2009 Proceeds from sales $ — $ 28,937 $ 34,337 Gross realized gains from sale of available-for-sale securities included in earnings — 639 1,114 Gross realized losses from sale of available-for-sale securities included in earnings — — (88 ) Net unrealized holding gain (loss) included in Other Comprehensive Income (Loss) — (131 ) 1,377 Net (gains) losses reclassified out of Other Comprehensive Income (Loss) — (639 ) (1,026 ) Realized gains and losses are reported in the Other Income (Expense) category of the Consolidated Statements of Income.Convertible Debt and Non-marketable Equity Securities:During fiscal year 2010, the Company purchased secured convertible promissory notes from a privately-held company. The convertible notes were accounted for as available-for-sale debt securities and were recorded at fair value, approximated using59the amortized cost basis of the notes. See Note 11 - Fair Value of Notes to Consolidated Financial Statements for more information on the fair value of available-for-sale securities. Available-for-sale securities were included in the Short-Term Investments line of the Consolidated Balance Sheets. At June 30, 2010, the fair value of the convertible notes was $2.5 million, excluding accrued interest. Interest accrued on the debt securities at a rate of 8.00% per annum and was due with the principal in June 2011. In connection with the purchase of the debt securities, the Company also received stock warrants to purchase the common and preferred stock of the privately-held company at a specified exercise price. See Note 12 - Derivative Instruments of Notes to Consolidated Financial Statements for further information regarding the stock warrants.In June 2011, the privately-held company completed a qualified financing, resulting in the conversion of the convertible notes into 12.2 million preferred shares. Prior to the conversion, the Company determined that its investment in convertible notes had experienced an other-than-temporary decline in fair market value. Because there was no active market for the convertible notes, the fair market value of the convertible notes was calculated using a discounted cash flow method, resulting in a new cost basis, including accrued interest, of $1.8 million. The valuation of the convertible notes resulted in a $1.2 million impairment loss recognized in earnings during fiscal year 2011. The subsequent conversion of the convertible notes to shares had no earnings impact. The new shares are classified as non-marketable equity securities accounted for under the cost method of accounting, which carries the shares at cost except in the event of impairment. The new shares had a carrying value of $1.8 million at June 30, 2011, and are included in the Other Assets line of the Consolidated Balance Sheets.In the aggregate, the former investment in convertible notes and the current investment in private equity do not rise to the level of a material variable interest or a controlling interest in the privately-held company which would require consolidation.Supplemental Employee Retirement Plan Investments:The Company maintains a self-directed supplemental employee retirement plan (SERP) for executive employees. The SERP is structured asutilizes a rabbi trust, and therefore assets in the SERP portfolio are subject to creditor claims in the event of bankruptcy. The Company recognizes SERP investment assets on the balance sheet at current fair value. A SERP liability of the same amount is recorded on the balance sheet representing the Company's obligation to distribute SERP funds to participants. The SERP investment assets are classified as trading, and accordingly, realized and unrealized gains and losses are recognized in income.income in the Other Income (Expense) category. Adjustments made to revalue the SERP liability are also recognized in income as selling and administrative expenses and exactly offset valuation adjustments on SERP investment assets. The change in net unrealized holding gains and (losses) at for the fiscal years ended June 30, 2008, 2007,2011, 2010, and 20062009 was, in thousands, ($2,385)$2,611, $2,939,$1,385, and $1,720,$(2,739), respectively. SERP asset and liability balances were as follows: June 30 2008 2007 (Amounts in Thousands) SERP investment - current asset $ 2,958 $ 2,888 SERP investment - other long-term asset 10,009 10,498 Total SERP investment $ 12,967 $ 13,386 SERP obligation - current liability $ 2,958 $ 2,888 SERP obligation - other long-term liability 10,009 10,498 Total SERP obligation $ 12,967 $ 13,386 June 30 (Amounts in Thousands) 2011 2010 SERP investment - current asset $ 5,604 $ 4,822 SERP investment - other long-term asset 10,534 8,249 Total SERP investment $ 16,138 $ 13,071 SERP obligation - current liability $ 5,604 $ 4,822 SERP obligation - other long-term liability 10,534 8,249 Total SERP obligation $ 16,138 $ 13,071 Note 1314 Accrued ExpensesAccrued expenses consisted of: June 30 2008 2007 (Amounts in Thousands) Taxes $ 5,882 $ 3,413 Compensation 24,596 27,332 Retirement plan 5,617 5,575 Insurance 7,376 7,990 Restructuring 6,728 1,098 Other expenses 18,854 18,906 Total accrued expenses $69,053 $64,314 65 June 30 (Amounts in Thousands) 2011 2010 Taxes $ 8,290 $ 6,799 Compensation 26,445 23,197 Retirement plan 4,809 4,344 Insurance 3,598 4,821 Restructuring 7,958 2,500 Other expenses 15,216 11,262 Total accrued expenses $ 66,316 $ 52,923 60Note 1415 Segment and Geographic Area InformationManagement 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 segment provides furniture for the office and hospitality industries, sold under the Company's family of brand names.follows. The EMS segment provides engineering and manufacturing services which utilize common production and support capabilities to a variety of industries globally. The EMS segment focuses on electronic assemblies that have high durability requirements and are sold on a contract basis and produced to customers' specifications. The CompanyEMS segment currently sells primarily to customers in the medical, automotive, industrial controls,control, and public safety industries. The EMSFurniture segment formerly namedprovides furniture for the Electronic Contract Assemblies segment, was renamed to more accurately reflectoffice and hospitality industries, sold under the focusCompany's family of this segment. There was no financial impact from this name change.Included in the EMS segment are sales to twoone major customers.customer. Sales to Bayer AG entities under common control, including Bayer Diagnostics Manufacturing Limited,affiliates totaled, in millions, $149.9, $198.9,$135.7, $169.6, and $66.4$149.5 in fiscal years 2008, 2007,2011, 2010, and 2006,2009, respectively, representing 11%, 15%, and 6%12% of consolidated net sales, respectively, for such periods. Sales to TRW Automotive, Inc., totaled in millions, $97.0, $96.6, and $135.6 in fiscal years 2008, 2007, and 2006, respectively, representing 7%, 8%, and 12% of consolidated net sales, respectively, for such periods.The accounting policies of the segments are the same as those described in Note 1 - Summary of Significant Accounting Policies of Notes to Consolidated Financial Statements with additional explanation of segment allocations as follows. Corporate assets and 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 standalone financial information prepared in accordance with accounting principles generally accepted in the United States of America. Unallocated corporate assets include cash and cash equivalents, short-term investments, and other assets not allocated to segments. Unallocated corporate income from continuing operations consists of income not allocated to segments for purposes of evaluating segment performance and includes income from corporate investments and other non-operational items. Sales between the Furniture segment and EMS segment are not material.The Company evaluates segment performance based upon several financial measures, although the two most common includeincluding economic profit, which incorporates a segment's cost of capital when evaluating financial performance, operating income, and net income. Operating income from continuing operations. Income from continuing operations isand net income are reported for each segment as it isthey are the measuremeasures most consistent with the measurement principles used in the Company's consolidated financial statements.The Company aggregates multiple operating segments into each reportable segment. The aggregated operating segments have similar economic characteristics and meet the other aggregation criteria required by SFAS 131, Disclosure about Segments of an Enterprise and Related Information.U.S. GAAP.Income statement amounts presented are from continuing operations.At or For the Year Ended June 30, 2008 Furniture Electronic Manufacturing Services Unallocated Corporate and Eliminations Consolidated (Amounts in Thousands) Net Sales $ 624,836 $ 727,149 $ -0- $ 1,351,985 Depreciation and Amortization 21,800 17,621 -0- 39,421 Interest Income -0- -0- 3,362 3,362 Interest Expense -0- 1,043 924 1,967 Provision (Benefit) for Income Taxes 8,260 (9,737) (965) (2,442) Income (Loss) from Continuing Operations(1) 13,417 (15,264) 1,925 78 Total Assets 240,674 396,773 85,220 722,667 Goodwill 1,733 13,622 -0- 15,355 Capital Expenditures 21,896 27,846 -0- 49,742 At or For the Year Ended June 30, 2007 Furniture Electronic Manufacturing Services Unallocated Corporate and Eliminations Consolidated (Amounts in Thousands) Net Sales $ 613,962 $ 672,968 $ -0- $ 1,286,930 Depreciation and Amortization 18,093 20,561 -0- 38,654 Interest Income -0- -0- 5,237 5,237 Interest Expense 3 1,025 45 1,073 Provision for Income Taxes 11,283 1,489 314 13,086 Income from Continuing Operations(2) 17,810 981 4,475 23,266 Total Assets 225,555 381,631 87,555 694,741 Goodwill 1,733 13,785 -0- 15,518 Capital Expenditures 22,313 18,568 -0- 40,881 At or For the Year Ended June 30, 2006 Furniture Electronic Manufacturing Services Unallocated Corporate and Eliminations Consolidated (Amounts in Thousands) Net Sales $ 612,589 $ 496,706 $ 254 $ 1,109,549 Depreciation and Amortization 17,901 18,117 -0- 36,018 Interest Income -0- -0- 4,592 4,592 Interest Expense -0- 217 32 249 Provision (Benefit) for Income Taxes 10,728 221 (365) 10,584 Income from Continuing Operations(3) 17,291 6,456 4,866 28,613 Total Assets 228,017 324,284 126,720 679,021 Goodwill 1,733 1,553 -0- 3,286 Capital Expenditures 9,607 19,919 -0- 29,526 At or For the Year Ended June 30, 2011 Electronic Manufacturing Services Furniture Unallocated Corporate and Eliminations Consolidated (Amounts in Thousands) Net Sales $ 721,419 $ 481,178 $ — $ 1,202,597 Depreciation and Amortization 17,153 14,054 — 31,207 Operating Income (Loss) 5,487 1,077 (4,148 ) 2,416 Interest Income — — 820 820 Interest Expense 22 — 99 121 Provision (Benefit) for Income Taxes (452 ) 256 (289 ) (485 ) Net Income (1)4,067 472 383 4,922 Total Assets 377,067 191,275 57,970 626,312 Goodwill 2,644 — — 2,644 Capital Expenditures 24,863 6,508 — 31,371 At or For the Year Ended June 30, 2010 Electronic Manufacturing Services Furniture Unallocated Corporate and Eliminations Consolidated (Amounts in Thousands) Net Sales $ 709,133 $ 413,611 $ 64 $ 1,122,808 Depreciation and Amortization 20,570 14,190 — 34,760 Operating Income (Loss) 15,291 (9,374 ) (3,226 ) 2,691 Interest Income — — 1,188 1,188 Interest Expense 77 — 65 142 Provision (Benefit) for Income Taxes (361 ) (4,104 ) (370 ) (4,835 ) Net Income (Loss) (2)15,731 (5,751 ) 823 10,803 Total Assets 384,491 182,396 69,864 636,751 Goodwill 2,443 — — 2,443 Capital Expenditures 22,455 12,336 — 34,791 At or For the Year Ended June 30, 2009 Electronic Manufacturing Services Furniture Unallocated Corporate and Eliminations Consolidated (Amounts in Thousands) Net Sales $ 642,802 $ 564,618 $ — $ 1,207,420 Depreciation and Amortization 22,181 15,437 — 37,618 Goodwill Impairment 12,826 1,733 — 14,559 Operating Income (Loss) (21,981 ) 13,826 33,840 25,685 Interest Income — — 2,499 2,499 Interest Expense 320 — 1,245 1,565 Provision (Benefit) for Income Taxes (9,150 ) 5,054 12,094 7,998 Net Income (Loss) (3)(11,768 ) 8,285 20,811 17,328 Total Assets 351,506 184,755 106,008 642,269 Goodwill 2,608 — — 2,608 Capital Expenditures 36,958 10,721 — 47,679 (1) Includes consolidated after-tax restructuring charges of $14.6$0.6 million in fiscal year 2008. On a2011. The EMS segment basis,and Unallocated Corporate and Eliminations recorded, respectively, $0.5 million expense and $0.1 million expense. See Note 18 - Restructuring Expense of Notes to the Consolidated Financial Statements for further discussion.(2) Includes after-tax restructuring charges of $1.2 million in fiscal year 2010. The EMS segment, the Furniture segment, recorded a $1.3 million restructuring charge, the EMS segment recorded a $12.8 million restructuring charge, and Unallocated Corporate and Eliminations recorded, a $0.5respectively, $1.2 million restructuring charge. See Note 17 expense, $0.1 million income, and $0.162million expense. See Note 18 - Restructuring Expense of Notes to the Consolidated Financial Statements for further discussion. The EMS segment also recorded $2.0 million of after-tax income resulting from settlement proceeds related to an antitrust lawsuit of which the Company was a class member and a $7.7 million after-tax gain from the sale of the facility and land in Poland.(3) Includes after-tax restructuring charges of $1.8 million in fiscal year 2009. The EMS segment, the Furniture segment, and Unallocated Corporate and Eliminations recorded, respectively, $1.5 million expense, $0.1 million expense, and $0.2 million expense. See Note 18 - Restructuring Expense of Notes to Consolidated Financial Statements for further discussion. The EMS segment also recorded $0.7 million of after-tax incomeAdditionally, in fiscal year 2008, received as part of a Polish offset credit program for investments made in the Company's Poland operation. (2) Includes consolidated after-tax restructuring charges of $0.9 million in fiscal year 2007. On a segment basis, the Furniture segment recorded a $0.8 million restructuring charge,2009, the EMS segment recorded a $0.1$1.6 million restructuring charge, of after-tax income for earnest money deposits retained by the Company resulting from the termination of the contract to sell the Company's Poland facility and land. Unallocated Corporate and Eliminations also recorded a minimal amountin fiscal year 2009$18.9 million of restructuring.after-tax gains on the sale of undeveloped land holdings and timberlands. Also, during fiscal year 2009, the Company recorded $9.1 million of after-tax costs related to goodwill impairment, consisting of $8.0 million in the EMS segment and $1.1 million in the Furniture segment. See the Goodwill and Other Intangible Assets section of Note 171 - Restructuring ExpenseSummary of Significant Accounting Policies of Notes to Consolidated Financial Statements for further discussion.Geographic Area:The following geographic area data includes net sales based on the location where title transfers and long-lived assets based on physical location. Long-lived assets include property and equipment and other long-term assets such as software. At or For the Year Ended June 30 (Amounts in Thousands) 2011 2010 2009 Net Sales: United States $ 817,252 $ 699,620 $ 795,861 Poland (4)132,518 3,877 25 United Kingdom (4)26,723 113,576 211,766 Other Foreign 226,104 305,735 199,768 Total net sales $ 1,202,597 $ 1,122,808 $ 1,207,420 Long-Lived Assets: United States $ 134,639 $ 134,115 $ 142,187 Poland 47,765 40,905 44,807 Other Foreign 21,630 19,563 22,806 Total long-lived assets $ 204,034 $ 194,583 $ 209,800 (3) Includes consolidated after-tax restructuring charges of $2.8 million(4)The increase in Poland net sales and the decline in United Kingdom net sales in fiscal year 2006. On a segment basis, the Furniture segment recorded a $2.3 million restructuring charge, and the EMS segment recorded a $0.5 million restructuring charge. See Note 17 - Restructuring Expense of Notes2011 compared to Consolidated Financial Statements for further discussion. The EMS segment also recorded $1.3 million of after-tax income in fiscal year 2006, received as part2010 are due to the transfer of production between these locations which resulted in a Polish offset credit program for investments madechange in the Company's Poland operation.shipping destination to Poland.Sales by Product Line: The Furniture segment produces and sells a variety of similar products and services. Net sales to external customers by product line within the Furniture segment were as follows: Year Ended June 30 (Amounts in Thousands) 2008 2007 2006 Net Sales: Furniture Branded Furniture $ 624,836 $ 602,903 $ 573,759 Contract Private Label Products(4) -0- 11,059 38,830 Total $ 624,836 $ 613,962 $ 612,589 (4) The Net Sales decline was the result of the planned exit of Contract Private Label Products which was complete as of June 30, 2007. Geographic Area: The following geographic area data includes 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. At or For the Year Ended June 30 (Amounts in Thousands) 2008 2007 2006 Net Sales: United States $ 990,326 $ 921,230 $ 920,724 Foreign 361,659 365,700 188,825 Total net sales $ 1,351,985 $ 1,286,930 $ 1,109,549 Long-Lived Assets: United States $ 166,589 $ 167,579 $ 157,739 Poland 24,097 16,062 17,841 Other Foreign 26,889 24,868 18,302 Total long-lived assets $ 217,575 $ 208,509 $ 193,882 63Note 1516 Earnings Per ShareEarnings 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 and related payment of assumed dividends for all potentially dilutive securities. Earnings per share of Class A and Class B Common Stock are as follows:EARNINGS PER SHARE FROM CONTINUING OPERATIONS Year Ended June 30, 2008 Year Ended June 30, 2007 Year Ended June 30, 2006 (Amounts in Thousands,Except for Per Share Data) Class A Class B Total Class A Class B Total Class A Class B Total Basic Earnings Per Share from Continuing Operations: Dividends Declared $ 7,476 $16,216 $23,692 $ 7,609 $17,198 $24,807 $ 8,330 $16,071 $24,401 Undistributed Earnings (Loss) (7,442) (16,172) (23,614) (478) (1,063) (1,541) 1,455 2,757 4,212 Income from Continuing Operations $ 34 $ 44 $ 78 $ 7,131 $16,135 $23,266 $ 9,785 $18,828 $28,613 Average Basic Shares Outstanding 11,696 25,418 37,114 11,979 26,623 38,602 13,195 25,002 38,197 Basic Earnings Per Share from
Continuing Operations $ 0.00 $ 0.00 $ 0.60 $ 0.61 $ 0.74 $ 0.75 Diluted Earnings Per Share from Continuing Operations: Dividends Declared and Assumed Dividends on Dilutive Shares $ 7,514 $16,224 $23,738 $ 7,708 $17,360 $25,068 $ 8,411 $16,077 $24,488 Undistributed Earnings (Loss) (7,514) (16,146) (23,660) (565) (1,237) (1,802) 1,436 2,689 4,125 Income from Continuing Operations $ -0- $ 78 $ 78 $ 7,143 $16,123 $23,266 $ 9,847 $18,766 $28,613 Average Diluted Shares Outstanding 11,868 25,504 37,372 12,325 26,932 39,257 13,360 25,024 38,384 Diluted Earnings Per Share
from Continuing Operations $ 0.00 $ 0.00 $ 0.58 $ 0.60 $ 0.74 $ 0.75 Reconciliation of Basic and Diluted EPS from Continuing Operations Calculations: �� Income from Continuing Operations Used for Basic EPS Calculation $ 34 $ 44 $ 78 $ 7,131 $16,135 $23,266 $ 9,785 $18,828 $28,613 Assumed Dividends Payable on Dilutive Shares: Stock options -0- -0- -0- -0- 151 151 -0- -0- -0- Performance shares 38 8 46 99 11 110 81 6 87 Reduction of Undistributed Earnings (Loss) - allocated based on Class A and Class B shares (72) 26 (46) (87) (174) (261) (19) (68) (87) Income from Continuing Operations
Used for Diluted EPS Calculation $ -0- $ 78 $ 78 $ 7,143 $16,123 $23,266 $ 9,847 $18,766 $28,613 Average Shares Outstanding for Basic EPS Calculation 11,696 25,418 37,114 11,979 26,623 38,602 13,195 25,002 38,197 Dilutive Effect of Average Outstanding: Stock options -0- -0- -0- -0- 236 236 -0- -0- -0- Performance shares 61 12 73 160 16 176 131 10 141 Restricted share units 111 74 185 186 57 243 34 12 46 Average Shares Outstanding for Diluted
EPS Calculation 11,868 25,504 37,372 12,325 26,932 39,257 13,360 25,024 38,384 Included in dividends declared for the basic and diluted earnings per share computation are dividends computed and accrued on unvested Class A and Class B restricted share units, which will be paid by a conversion to the equivalent value of common shares after a vesting period. In fiscal year 2008, all 792,000 average stock options were antidilutive and were excluded from the dilutive calculation. In addition, 149,000 of the 334,000 average restricted share units and 82,000 of the 155,000 average performance share grants were antidilutive and excluded from the dilutive calculation. In fiscal year 2007, all 1,147,000 stock options outstanding were dilutive and were included in the dilutive calculation. In fiscal year 2006, all 1,944,000 stock options outstanding were antidilutive and were excluded from the dilutive calculation. EARNINGS PER SHARE Year Ended June 30, 2011 Year Ended June 30, 2010 Year Ended June 30, 2009 (Amounts in Thousands, Except for Per Share Data) Class A Class B Total Class A Class B Total Class A Class B Total Basic Earnings Per Share: Dividends Declared $ 1,889 $ 5,448 $ 7,337 $ 1,955 $ 5,376 $ 7,331 $ 4,617 $ 10,944 $ 15,561 Less: Unvested Participating Dividends — — — (9 ) — (9 ) (67 ) — (67 ) Dividends to Common Share Owners 1,889 5,448 7,337 1,946 5,376 7,322 4,550 10,944 15,494 Undistributed Earnings (Loss) (2,415 ) 3,472 1,767 Less: Earnings (Loss) Allocated to Participating Securities — (4 ) (7 ) Undistributed Earnings (Loss) Allocated to Common Share Owners(672 ) (1,743 ) (2,415 ) 990 2,478 3,468 523 1,237 1,760 Income Available to Common Share Owners $ 1,217 $ 3,705 $ 4,922 $ 2,936 $ 7,854 $ 10,790 $ 5,073 $ 12,181 $ 17,254 Average Basic Common Shares Outstanding 10,493 27,233 37,726 10,694 26,765 37,459 11,036 26,125 37,161 Basic Earnings Per Share $ 0.12 $ 0.14 $ 0.27 $ 0.29 $ 0.46 $ 0.47 Diluted Earnings Per Share: Dividends Declared and Assumed Dividends on Dilutive Shares $ 1,916 $ 5,448 $ 7,364 $ 1,972 $ 5,377 $ 7,349 $ 4,632 $ 10,945 $ 15,577 Less: Unvested Participating Dividends — — — (9 ) — (9 ) (67 ) — (67 ) Dividends and Assumed Dividends to Common Share Owners 1,916 5,448 7,364 1,963 5,377 7,340 4,565 10,945 15,510 Undistributed Earnings (Loss) (2,442 ) 3,454 1,751 Less: Earnings (Loss) Allocated to Participating Securities — (4 ) (7 ) Undistributed Earnings (Loss) Allocated to Common Share Owners(686 ) (1,756 ) (2,442 ) 991 2,459 3,450 520 1,224 1,744 Income Available to Common Share Owners $ 1,230 $ 3,692 $ 4,922 $ 2,954 $ 7,836 $ 10,790 $ 5,085 $ 12,169 $ 17,254 Average Diluted Common Shares Outstanding 10,639 27,234 37,873 10,791 26,770 37,561 11,121 26,151 37,272 Diluted Earnings Per Share $ 0.12 $ 0.14 $ 0.27 $ 0.29 $ 0.46 $ 0.47 Reconciliation of Basic and Diluted EPS Calculations: Income Used for Basic EPS Calculation $ 1,217 $ 3,705 $ 4,922 $ 2,936 $ 7,854 $ 10,790 $ 5,073 $ 12,181 $ 17,254 Assumed Dividends Payable on Dilutive Shares: Performance shares 27 — 27 17 1 18 15 1 16 Increase (Reduction) of Undistributed Earnings (Loss) - allocated based on Class A and Class B shares(14 ) (13 ) (27 ) 1 (19 ) (18 ) (3 ) (13 ) (16 ) Income Used for Diluted EPS Calculation $ 1,230 $ 3,692 $ 4,922 $ 2,954 $ 7,836 $ 10,790 $ 5,085 $ 12,169 $ 17,254 Average Shares Outstanding for Basic EPS Calculation10,493 27,233 37,726 10,694 26,765 37,459 11,036 26,125 37,161 Dilutive Effect of Average Outstanding: Performance shares 146 1 147 97 5 102 38 2 40 Restricted share units — — — — — — 47 24 71 Average Shares Outstanding for Diluted EPS Calculation10,639 27,234 37,873 10,791 26,770 37,561 11,121 26,151 37,272 Included in dividends declared for the basic and diluted earnings per share computation for fiscal year 2010 and 2009 are dividends computed and accrued on unvested Class A and Class B restricted share units, which were paid by a conversion to the equivalent value of common shares on the vesting date. Restricted share units held by retirement-age participants had a nonforfeitable right to dividends and were deducted from the above dividends and undistributed earnings figures allocable to common Share Owners. All restricted share units vested during fiscal year 2010.In fiscal year 2011, 2010, and 2009, respectively, all 625,000, 693,000, and 755,000 average stock options outstanding were antidilutive and were excluded from the dilutive calculation.64Note 1617 Comprehensive IncomeComprehensive 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 (loss) and other comprehensive income (loss), which includes the net change in unrealized gains and losses on investments, foreign currency translation adjustments, the net change in derivative gains and losses, net actuarial change in postemployment severance, and postemployment severance prior service cost. Year Ended June 30, 2008 Year Ended June 30, 2007 Year Ended June 30, 2006 (Amounts in Thousands) Pre-tax Tax Net Pre-tax Tax Net Pre-tax Tax Net Net income (loss) $ (46) $19,152 $15,362 Other comprehensive income (loss): Foreign currency translation adjustments $ 9,090 $ -0- $ 9,090 $ 3,182 $ -0- $ 3,182 $ 468 $ -0- $ 468 Postemployment severance actuarial change (130) 52 (78) (2,200) 877 (1,323) -0- -0- -0- Other fair value changes: Investments 953 (379) 574 22 (9) 13 (386) 154 (232) Derivatives (4,396) 1,678 (2,718) 2,044 (637) 1,407 (776) 206 (570) Reclassification to earnings: Investments (234) 93 (141) 104 (41) 63 110 (44) 66 Derivatives 3,130 (1,126) 2,004 (1,287) 454 (833) 405 (152) 253 Amortization of prior service costs 286 (114) 172 -0- -0- -0- -0- -0- -0- Amortization of actuarial change 17 (7) 10 -0- -0- -0- -0- -0- -0- Other comprehensive income (loss) $ 8,716 $ 197 $ 8,913 $ 1,865 $ 644 $ 2,509 $ (179) $ 164 $ (15) Total comprehensive income $ 8,867 $21,661 $15,347 Year Ended June 30, 2011 Year Ended June 30, 2010 Year Ended June 30, 2009 (Amounts in Thousands) Pre-tax Tax Net of Tax Pre-tax Tax Net of Tax Pre-tax Tax Net of Tax Net income $ 4,922 $ 10,803 $ 17,328 Other comprehensive income (loss): Foreign currency translation adjustments $ 13,218 $ (2,905 ) $ 10,313 $ (12,672 ) $ 2,288 $ (10,384 ) $ (4,143 ) $ (1,891 ) $ (6,034 ) Postemployment severance actuarial change 1,501 (599 ) 902 (1,292 ) 515 (777 ) (3,853 ) 1,536 (2,317 ) Other fair value changes: Available-for-sale securities — — — (131 ) 52 (79 ) 1,377 (549 ) 828 Derivatives 1,063 (489 ) 574 2,494 (587 ) 1,907 (13,832 ) 3,962 (9,870 ) Reclassification to (earnings) loss: Available-for-sale securities — — — (639 ) 255 (384 ) (1,026 ) 409 (617 ) Derivatives (1,555 ) 523 (1,032 ) (238 ) 55 (183 ) 7,742 (3,023 ) 4,719 Amortization of prior service costs 286 (115 ) 171 285 (112 ) 173 285 (114 ) 171 Amortization of actuarial change 774 (309 ) 465 753 (300 ) 453 517 (206 ) 311 Other comprehensive income (loss) $ 15,287 $ (3,894 ) $ 11,393 $ (11,440 ) $ 2,166 $ (9,274 ) $ (12,933 ) $ 124 $ (12,809 ) Total comprehensive income $ 16,315 $ 1,529 $ 4,519 Accumulated other comprehensive income, net of tax effects, were as follows: Year Ended June 30 (Amounts in Thousands) 2008 2007 2006 Foreign currency translation adjustments $13,855 $ 4,765 $ 1,583 Unrealized gain (loss) from: Investments 252 (181) (257) Derivatives (580) 134 (440) Postemployment benefits: Net actuarial loss (68) -0- -0- Prior service costs (1,151) (1,323) -0- Accumulated other comprehensive income $12,308 $ 3,395 $ 886 Year Ended June 30 2011 2010 2009 (Amounts in Thousands) Foreign currency translation adjustments $ 7,750 $ (2,563 ) $ 7,821 Unrealized gain (loss) from: Available-for-sale securities — — 463 Derivatives (4,465 ) (4,007 ) (5,731 ) Postemployment benefits: Prior service costs (636 ) (807 ) (980 ) Net actuarial loss (1,031 ) (2,398 ) (2,074 ) Accumulated other comprehensive income (loss) $ 1,618 $ (9,775 ) $ (501 ) Note 1718 Restructuring ExpenseBecauseThe Company recognized consolidated pre-tax restructuring expense of evolving customer preferences for EMS operations$1.0 million, $2.1 million, and $3.0 million in low-cost regions,fiscal years 2011, 2010, and 2009, respectively. The actions discussed below represent the majority of the restructuring costs during the fourth quarter of fiscal year 2008, the Company approved a plan to expand its European automotive electronics capabilities and to establish a European Medical Center of Expertise in Poznan, Poland. As part of the plan, the Company will consolidate its EMS facilities located in Longford, Ireland; Wales, United Kingdom; and Poznan, Poland; into a new, larger facility in Poznan, which is expected to improve marginsyears presented in the very competitive EMS market. The plan includes the sale of an existing Poland building at a gain which will partially fund the consolidation activities. The plan is to be executed in stages with a projected completion date of December 2011. The Company currently estimates that the pre-tax charges related to the consolidation activities will be approximately, in millions, $20.0 consisting of approximately $18.5 of severance and other employee costs, $0.6 of lease exit costs, $0.4 of property and equipment asset impairment, and $0.5 of other exit costs. These estimates exclude the estimated gainsummary table on the sale of the Poland building mentioned above.In an effort to improve profitabilityfollowing page. Former restructuring plans that are substantially complete and increase Share Owner value while remaining committed to its business model of being market driven and customer centered,did not have significant expense during the third quarter of fiscal year 2008,years presented are included in the Company approved asummary table on the following page under the Other Restructuring Plans captions and include the Company-wide workforce restructuring plan, designed to more appropriately align its workforce in a changing business environment. Within the Company's EMS segment, the restructuring activities include realigning engineering and technical resources closer to the customer and streamlining administrative and sales processes. Within the Company's Furniture segment, the restructuring activities include realigning information technology and procurement resources closer to the customer and streamlining administrative and sales processes to drive further synergies afforded by the recent alignment of the sales and manufacturing functions within this segment. The plan also includes reducing corporate personnel costs to more properly align with the overall sales mix change within the Company. The Company expects total pre-tax restructuring expenses of $2.8 million, consisting of employee severance and transition costs of approximately $2.4 million and other restructuring expenses of $0.4 million. On a segment basis, the Company expects total pre-tax restructuring expenses of $1.6 million in the Furniture segment consisting of employee severanceoffice furniture manufacturing consolidation plan, and transition costs of approximately $1.2 million and other restructuring expenses of $0.4 million. The Company expects total pre-tax restructuring expenses for employee severance and transition costs of approximately $0.8 million in the EMS segmentGaylord and $0.4 million in Unallocated Corporate. The plan was substantially complete by June 30, 2008 with a few activities to occur in the first half of fiscal year 2009.With the Reptron acquisition, the Company recognized it would have excess capacity in North America. See Note 2 - Acquisitions of Notes to Consolidated Financial Statements for additional details of the acquisition. Management developed a plan as of the acquisition date to consolidate capacity within the acquired facilities. Based on a review of future growth potential in various geographies and input from existing customers regarding future capacity needs, during the fourth quarter of fiscal year 2007, the Company finalized aHibbing restructuring plan within the EMS segment to exit the facility located in Gaylord, Michigan, and transfer the business to several of the Company's other EMS facilities. The Company ceased production at the facility during the second quarter of fiscal year 2008. Excess equipment was sold during the third quarter of fiscal year 2008, and the Gaylord facility is classified as held for sale. The Company expects to recognize minimal future charges related to ongoing facility maintenance expenses. The Company expects total pre-tax restructuring costs to be approximately $1.8 million, including $0.8 million related to employee severance and transition costs which were recognized as a purchase price allocation adjustment, not impacting earnings, asset impairment of $0.7 million and $0.3 million of other restructuring costs. Subsequent to this decision, during the second quarter of fiscal year 2008, the Company approved a restructuring plan to further consolidate its EMS facilities that will result in the exit of a manufacturing facility located in Hibbing, Minnesota, which was also one of the facilities acquired in the acquisition of Reptron. A majority of the Hibbing business transferred to several of the Company's other worldwide EMS facilities. The leased facility will be exited, and some of the equipment will be sold. The Company ceased production at the facility during the fourth quarter of fiscal year 2008 and will complete all remaining restructuring activities by the second quarter of fiscal year 2009. The Company expects total pre-tax restructuring charges, most of which were recognized during fiscal year 2008, to be approximately $1.6 million, including $0.5 million related to employee severance and transition costs, asset and goodwill impairment of $0.4 million, lease exit costs of $0.3 million, and other restructuring costs of $0.4 million.As a result of excess capacity in North America, during the third quarter of fiscal year 2006, the Company approved a restructuring plan within the EMS segment to exit a manufacturing facility located in Northern Indiana. As part of this restructuring plan, the production for select programs was transferred to other locations within this segment. Operations at this facility ceased in fiscal year 2007, and the facility was sold during fiscal year 2008. Total pre-tax restructuring charges related to this plan were $1.4 million, consisting of employee transition costs of $0.7 million, acceleration of software amortization of $0.4 million, acceleration of plant, property, and equipment depreciation of $0.1 million, and other restructuring costs of $0.4 million partially offset by $0.2 million for gains on the sale of equipment net of other asset impairment.As part of the Company's plan to sharpen focus and simplify business processes within the Furniture segment, the Company announced during the first quarter of fiscal year 2006, a plan which included consolidation of administrative, marketing, and business development functions to better serve the segment's primary markets. The plan includes accelerating amortization through fiscal year 2008 on a portion of the Company's Enterprise Resource Planning (ERP) software. During the first quarter of fiscal year 2006, capitalized software costs related to the ERP software that was not yet placed in service were abandoned and recognized as impaired. Restructuring charges related to ERP software impairment, accelerated amortization, employee severance, and other consolidation costs are recorded on the Restructuring Expense line item of the Company's Consolidated Statements of Income. The plan also included the sale of a forest products hardwood lumber business and a business unit which produced fixed-wall furniture systems. Losses on the sale of these business units were recognized in fiscal year 2006 as discontinued operations. The Company estimates total pre-tax charges under the plan, when complete, to be approximately $17.1 million, including the pre-tax loss on the sale of business operations and other impairment of $11.1 million which was recorded as discontinued operations, and restructuring charges for plant, property, and equipment impairment of $0.6 million, software impairment of $2.8 million, acceleration of software amortization of $2.2 million, and employee severance costs of $0.4 million. This plan was complete as of June 30, 2008.The Company accounts for restructuring cost in accordance with Statement of Financial Accounting Standards No. 146, Accounting for Costs Associated with Exit or Disposal Activities. The Company utilizes available market prices and management estimates to determine the fair value of impaired fixed assets. Restructuring charges are included in the Restructuring Expense line item on the Company's Consolidated Statements of Income.Fiscal Year 200865Fremont Restructuring Charges:As a result of the fiscal year 2008, 2007, and 2006 restructuring plans, the Company recognized consolidated pre-tax restructuring expense of $21.9 million in fiscal year 2008. Within the Furniture segment, the Company recognized pre-tax restructuring expense of $2.2 million in fiscal year 2008, which included restructuring charges of $1.2 million for employee severance costs, $0.8 million for accelerated software amortization, and $0.2 million for plant, property, and equipment impairment. Within the EMS segment, the Company recognized pre-tax restructuring expense of $19.0 million in fiscal year 2008, which included restructuring charges of $17.0 million for employee severance costs, $1.2 million for plant, property, and equipment impairment, $0.2 million for goodwill impairment, and $0.6 million for other restructuring costs. Within Unallocated Corporate, the Company recognized $0.7 million pre-tax restructuring expense in fiscal year 2008, which included restructuring charges of $0.3 million for employee severance costs, $0.2 million for asset impairment, and $0.2 million for other restructuring costs.Fiscal Year 2007 Restructuring Charges:As a result of the fiscal year 2006 restructuring plan, the Company recognized consolidated pre-tax restructuring expense of $1.5 million in fiscal year 2007. Within the Furniture segment, the Company recognized pre-tax restructuring expense of $1.3 million in fiscal year 2007, which included restructuring charges of $0.8 million for accelerated software amortization, $0.4 million for plant, property, and equipment impairment, and $0.1 million for employee transition and other costs. The EMS segment recognized pre-tax restructuring expense of $0.1 million in fiscal year 2007 which included $0.3 million for employee transition costs and $0.1 million for accelerated software amortization which were partially offset by $0.3 million of gains on the sale of equipment net of other asset impairment. Within Unallocated Corporate, the Company recognized pre-tax restructuring expense of $0.1 million in fiscal year 2007 for other exit costs.Fiscal Year 2006 Restructuring Charges:As a result of the fiscal year 2006 restructuring plan, the Company recognized consolidated pre-tax restructuring expense of $4.7 million in fiscal year 2006. Within the Furniture segment, the Company recognized pre-tax restructuring expense of $3.8 million in fiscal year 2006, which included restructuring charges of $0.3 million for employee transition costs, $2.9 million for software impairment, and $0.6 million for accelerated software amortization. Within the EMS segment, the Company recognized pre-tax restructuring expense of $0.9 million in fiscal year 2006, which included restructuring charges of $0.1 million for asset impairment, $0.2 million for accelerated software amortization, $0.1 million for accelerated plant, property, and equipment depreciation, and $0.5 million for employee transition costs. Reserves:At June 30, 2008, there was a $16.3 million restructuring liability relating to continuing operations remaining on the Consolidated Balance Sheet consisting of $6.7 million in current liabilities and $9.6 million in other long-term liabilities. The restructuring charge, utilization, cash paid to date, and ending reserve balances of continuing operations at June 30, 2008 were as follows:Transition
and Other
Employee Costs Asset and Goodwill
Write-downs Plant Closure and Other
Exit Costs Total (Amounts in Thousands) Reserve June 30, 2005 $ -0- $ -0- $ -0- $ -0- Amounts Charged - Cash 812 -0- -0- 812 Amounts Charged - Non-Cash -0- 3,843 -0- 3,843 Subtotal 812 3,843 -0- 4,655 Amounts Utilized / Cash Paid (435) (3,843) -0- (4,278) Reserve June 30, 2006 $ 377 $ -0- $ -0- $ 377 Amounts Charged - Cash 362 -0- 213 575 Amounts Charged - Non-Cash -0- 953 -0- 953 Subtotal 362 953 213 1,528 Amounts Utilized / Cash Paid (733) (953) (213) (1,899) Amounts Adjusted(1) 1,042 -0- -0- 1,042 Reserve June 30, 2007 $ 1,048 $ -0- $ -0- $ 1,048 Amounts Charged - Cash 18,248 -0- 672 18,920 Amounts Charged - Non-Cash 255 2,736 -0- 2,991 Subtotal 18,503 2,736 672 21,911 Amounts Utilized / Cash Paid (3,133) (2,736) (507) (6,376) Amounts Adjusted(1) (275) -0- -0- (275) Reserve June 30, 2008 $ 16,143 $ -0- $ 165 $ 16,308 (1) A restructuring reserve was established during fiscal year 2007 and adjusted in fiscal year 2008 related to the purchase price allocation of the Reptron acquisition. The $0.8 million adjusted reserve increased the goodwill balance of the acquired entity. Note 18 Discontinued OperationsFiscal Year 2007 Discontinued Operations:firstfourth quarter of fiscal year 2007, the Company approved a plan to exit the production of wood rear projection television (PTV) cabinets and stands within the Furniture segment, which affected the Company's Juarez, Mexico, operation. With the exit, the Company no longer has continuing involvement with the production of PTV cabinets and stands. Production at the Juarez facility ceased during the second quarter of fiscal year 2007, and all inventory has been sold. Miscellaneous wrap-up activities including disposition of remaining equipment were complete as of June 30, 2007. Beginning in the quarter ended December 31, 2006, the year-to-date financial results associated with the Mexican operations in the Furniture segment were classified as discontinued operations, and all prior periods were restated.The Company utilized available market prices and management estimates to determine the fair value of impaired fixed assets. The costs shown below related to the exit of PTV cabinet and stand production at the Juarez facility are included in discontinued operations and those costs related to the building lease and other costs after production of PTV cabinets and stands ceased are included in continuing operations. Pre-tax charges related to exit activities at the Juarez facility were as follows: (Amounts in Thousands) 2008 Exit costs in continuing operations $ -0- $ -0- $ 1,272 $ 1,272 Exit costs in discontinued operations -0- 30 13 43 $ -0- $ 30 $ 1,285 $ 1,315 2007 Exit costs in continuing operations $ -0- $ -0- $ 648 $ 648 Exit costs in discontinued operations 1,623 1,101 994 3,718 $ 1,623 $ 1,101 $ 1,642 $ 4,366 Total Exit costs in continuing operations $ -0- $ -0- $ 1,920 $ 1,920 Exit costs in discontinued operations $ 1,623 $ 1,131 $ 1,007 $ 3,761 $ 1,623 $ 1,131 $ 2,927 $ 5,681 Fiscal Year 2006 Discontinued Operations:On September 15, 2005, in conjunction with its restructuring plan to sharpen its focus on primary markets within the Furniture segment, the Company approved plans to sell the operations of a forest products hardwood lumber business and a business which produced and sold fixed-wall furniture systems. Additionally on November 8, 2005,2011, the Company approved a plan to exit a non-core business that manufactured polyurethane and polyester molded components for usesmall leased EMS assembly facility located in the recreational vehicle, signage, and residential furniture industries. On October 14, 2005, the Company completed the saleFremont, California. A majority of the fixed-wall furniture systems business which included primarily the sale of property and equipment, inventory, accounts receivable, and product rights.will be transferred to an existing Jasper, Indiana EMS facility by mid-fiscal year 2012. The purchase price totaled $1.2Company expects total pre-tax restructuring charges to be approximately of which $0.3, including $0.3 million was received at closing and $0.9 million was a note receivable, which has been collected. The sale resulted in a net loss of $1.4 million. The loss on disposal of the fixed-wall furniture business included an after-tax goodwill impairment loss of $0.3 million recognized in the Furniture segment in fiscal year 2006. The goodwill impairment loss was based upon the cessation of cash flows related to severance and other employee transition costs, and $0.6 million related to lease and other exit costs.European Consolidation Plan:During the fixed-wall furniture systems business. The Company does not have significant continuing cash flows or continuing involvement with this business.On November 30, 2005, the Company completed the salefourth quarter of the forest products hardwood lumber business to Indiana Hardwoods, Inc., which included primarily the sale of property and equipment, inventory, accounts receivable, and timber assets. The president and owner of Indiana Hardwoods, Inc. is Barry L. Cook, who was formerly employed by the Company as a Vice President of Kimball International, Inc. and had responsibility for this hardwoods lumber operation. The transaction prices were negotiated between the Company and Indiana Hardwoods, Inc. The Company also considered offers from other interested outside parties, but ultimately determined that it was in the Company's best interest financially to sell this operation to Indiana Hardwoods, Inc. The purchase price totaled $25.5 million, of which $23.5 million was received at closing and $2.0 million was a note receivable. During fiscal year 2008, the Company optedapproved a plan to acceptexpand its European automotive electronics capabilities and to establish a cash paymentEuropean Medical Center of Expertise near Poznan, Poland. The plan is being executed in stages with a projected final completion date of mid-fiscal year 2012. As part of the plan:The Company successfully completed the move of production from Longford, Ireland, into a former Poznan, Poland facility during the fiscal year 2009 second quarter.Construction of a lesser amount as paymentnew, larger facility in fullPoland was completed.The Company sold the former Poland facility and land during fiscal year 2010 and recorded a $6.7 million pre-tax gain which is included in the Other General Income line on the Company's Consolidated Statements of Income.The former Poland facility was leased back until the transfer of the remaining production to the new facility was completed in fiscal year 2011.The Company is in the process of consolidating its EMS facility located in Wales, United Kingdom into the new facility, which is expected to improve the Company's margins in the very competitive EMS market.The Company currently estimates that the total pre-tax charges, excluding the gain on the sale of the former facility and construction of the new facility, related to the consolidation activities will be approximately, in millions, $21.4 consisting of $20.0 of severance and other employee costs, $0.5 of property and equipment asset impairment, $0.4 of lease exit costs, and $0.5 of other exit costs.Summary of All Plans AccruedJune 30,
2010 (4) Fiscal Year Ended June 30, 2011 AccruedJune 30, 2011 (4) Total ChargesIncurred
Since Plan Announcement (5) Total ExpectedPlan Costs (5)(Amounts in Thousands) AmountsCharged Cash AmountsCharged Non-cash Amounts Utilized/Cash Paid Adjustments EMS Segment FY 2011 Fremont Restructuring Plan Transition and Other Employee Costs $ — $ 246 $ 18 $ — $ — $ 264 $ 264 $ 264 Plant Closure and Other Exit Costs — 20 — (20 ) — — 20 594 Total $ — $ 266 $ 18 $ (20 ) $ — $ 264 $ 284 $ 858 FY 2008 European Consolidation Plan Transition and Other Employee Costs $ 9,181 $ 619 $ — $ (2,776 ) $ 670 (6) $ 7,694 $ 19,894 $ 20,005 Asset Write-downs — — — — — — 522 522 Plant Closure and Other Exit Costs — 2 — (2 ) — — 658 891 Total $ 9,181 $ 621 $ — $ (2,778 ) $ 670 $ 7,694 $ 21,074 $ 21,418 Total EMS Segment $ 9,181 $ 887 $ 18 $ (2,798 ) $ 670 $ 7,958 $ 21,358 $ 22,276 Unallocated Corporate Other Restructuring Plans (1)— 104 — (104 ) — — 765 892 Consolidated Total of All Plans $ 9,181 $ 991 $ 18 $ (2,902 ) $ 670 $ 7,958 $ 22,123 $ 23,168 66 Fiscal Year Ended June 30, 2010 (Amounts in Thousands) AccruedJune 30, 2009 (4) AmountsCharged (Income) Cash AmountsCharged Non-cash Amounts Utilized/Cash Paid Adjustments AccruedJune 30, 2010 (4)EMS Segment FY 2008 European Consolidation Plan Transition and Other Employee Costs $ 12,288 $ 1,673 $ — $ (3,681 ) $ (1,099 ) (6) $ 9,181 Asset Write-downs — — 176 (176 ) — — Plant Closure and Other Exit Costs — 200 — (200 ) — — Total EMS Segment $ 12,288 $ 1,873 $ 176 $ (4,057 ) $ (1,099 ) $ 9,181 Furniture Segment Other Restructuring Plans (2)— (83 ) — 83 — — Unallocated Corporate Other Restructuring Plans (2)— 85 — (85 ) — — Consolidated Total of All Plans $ 12,288 $ 1,875 $ 176 $ (4,059 ) $ (1,099 ) $ 9,181 AccruedJune 30,
2008 (4) Fiscal Year Ended June 30, 2009 AccruedJune 30,
2009 (4)(Amounts in Thousands) AmountsCharged (Income) Cash AmountsCharged (Income)Non-cash Amounts Utilized/Cash Paid Adjustments EMS Segment FY 2008 European Consolidation Plan Transition and Other Employee Costs $ 15,117 $ 1,851 $ — $ (2,498 ) $ (2,182 ) (6) $ 12,288 Asset Write-downs — — (63 ) 63 — — Plant Closure and Other Exit Costs — 394 — (394 ) — — Total $ 15,117 $ 2,245 $ (63 ) $ (2,829 ) $ (2,182 ) $ 12,288 Other Restructuring Plans (3)521 252 (41 ) (732 ) — — Total EMS Segment $ 15,638 $ 2,497 $ (104 ) $ (3,561 ) $ (2,182 ) $ 12,288 Furniture Segment Other Restructuring Plans (3)487 (26 ) 168 (629 ) — — Unallocated Corporate Other Restructuring Plans (3)183 232 214 (629 ) — — Consolidated Total of All Plans $ 16,308 $ 2,703 $ 278 $ (4,819 ) $ (2,182 ) $ 12,288 (1) The Other Restructuring Plan with charges during fiscal year 2011 is the Unallocated Corporate Gaylord restructuring plan initiated in fiscal year 2007.(2) Other Restructuring Plans with charges during fiscal year 2010 include the Furniture segment office furniture manufacturing consolidation plan initiated in fiscal year 2009 and the Unallocated Corporate Gaylord restructuring plan initiated in fiscal year 2007.(3) Other Restructuring Plans with charges during fiscal year 2009 include the Furniture segment office furniture manufacturing consolidation plan initiated in fiscal year 2009, the EMS segment Hibbing plan initiated in fiscal year 2008, the EMS segment and Unallocated Corporate Gaylord restructuring plan initiated in fiscal year 2007, and the company-wide workforce restructuring plan initiated in fiscal year 2008.(4) Accrued restructuring at June 30, 2011 was $8.0 million recorded in current liabilities. At June 30, 2010 accrued restructuring was $9.2 million consisting of $2.5 million recorded in current liabilities and $6.7 million recorded in other long-term liabilities. At June 30, 2009 accrued restructuring was $12.3 million consisting of $3.8 million recorded in current liabilities and $8.5 million recorded in other long-term liabilities.(5) These columns include restructuring plans that were active during fiscal year 2011, including the EMS segment European Consolidation Plan initiated in fiscal year 2008, the EMS segment Fremont Restructuring Plan initiated in fiscal year 2011, and the Unallocated Corporate Gaylord restructuring plan initiated in fiscal year 2007.(6) The effect of changes in foreign currency exchange rates within the EMS segment due to revaluation of the restructuring liability is included in this amount. 67Note 19 Variable Interest EntitiesThe Company's involvement with variable interest entities (VIEs) is limited to situations in which the Company is not the primary beneficiary as the Company lacks the power to direct the activities that most significantly impact the VIE's economic performance. Thus, consolidation is not required.The Company is involved with VIEs consisting of an investment in preferred stock and stock warrants of a privately-held company, a note receivable.receivable related to the sale of an Indiana facility, and notes receivable resulting from loans provided to an electronics engineering services firm during fiscal year 2011. The sale resultedCompany also has a business development cooperation agreement with the electronic engineering services firm. For information related to the Company's investment in a net lossthe privately-held company, see Note 13 - Investments and Note 12 - Derivative Instruments of $5.0 million.Notes to Consolidated Financial Statements. The combined carrying value of the notes receivable is $2.8 million, with no reserve, as of June 30, 2011, with the short-term portion recorded on the Receivables line and the long-term portion recorded on the Other Assets line of the Company's Consolidated Balance Sheet. The Company has no ongoing commitments resulting frommaterial exposure related to the sales agreement. VIEs in addition to the items recorded on its Consolidated Balance Sheet.The Company doeshas no obligation to provide additional funding to the VIEs, and thus its risk of loss related to the VIEs is limited to the carrying value of the investments and notes receivable. The Company did not have significant continuing cash flows or continuing involvementprovide any financial support in addition to the items discussed above to the VIEs during the fiscal year ended June 30, 2011.Note 20 Credit Quality and Allowance for Credit Losses of Notes ReceivableThe Company monitors credit quality and associated risks of notes receivable on an individual basis based on criteria such as financial stability of the party and collection experience in conjunction with this business.On January 20, 2006,general economic and market conditions. The Company holds collateral for the Company completednote receivable from the sale of a non-core business that manufactures polyurethane and polyester molded components for use inan Indiana facility thereby mitigating the recreational vehicle, signage, and residential furniture industries, which included primarily the salerisk of inventories and machinery and equipment. The purchase price totaled $0.6 million. The sale resulted in a net lossloss. As of $0.7 million. The Company does not have significant continuing cash flows or continuing involvement with this business.In accordance with FASB Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, these businesses have been classified as discontinued operations, and their operating results and gains (losses) on disposal are presented on the Loss from Discontinued Operations, Net of Tax lineJune 30, 2011, none of the Consolidated Statements of Income. During fiscal year 2008, the Company did not classify any additional businesses as discontinued operations.Operating results and the loss on sale of the discontinued operations were as follows:outstanding notes receivable are past due.
Year Ended June 30 (Amounts in Thousands) Net Sales of Discontinued Operations $ -0- $ 8,744 $ 62,110 Operating Loss of Discontinued Operations $ (78) $ (5,046) $ (11,671) Benefit (Provision) for Income Taxes (46) 1,978 5,032 Operating Loss of Discontinued Operations, Net of Tax $ (124) $ (3,068) $ (6,639) Loss on Disposal of Discontinued Operations $ -0- $ (1,600) $ (11,495) Benefit for Income Taxes -0- 554 4,584 Loss on Disposal of Discontinued Operations, Net of Tax $ -0- $ (1,046) $ (6,911) Loss from Discontinued Operations, Net of Tax $ (124) $ (4,114) $ (13,550) As of June 30, 2011 (Amounts in Thousands) Unpaid Balance Related Allowance Receivable Net of Allowance Note Receivable from Sale of Indiana Facility $ 1,334 $ — $ 1,334 Notes Receivable from an Electronics Engineering Services Firm 1,420 — 1,420 Total $ 2,754 $ — $ 2,754 68Note 1921 Quarterly Financial Information (Unaudited) Three Months Ended (Amounts in Thousands, Except for Per Share Data) September 30 December 31 March 31 June 30 Fiscal Year 2008: Net Sales(1) $ 333,937 $ 347,794 $ 332,091 $ 338,163 Gross Profit(1) 67,780 66,680 56,073 57,941 Restructuring Expense 321 623 3,958 17,009 Income (Loss) from Continuing Operations(2) 6,562 4,240 (889) (9,835) Net Income (Loss)(2) 6,438 4,240 (889) (9,835) Basic Earnings (Loss) Per Share from Continuing Operations: Class A $ 0.18 $ 0.11 $ (0.02) $ (0.27) Class B $ 0.17 $ 0.12 $ (0.02) $ (0.27) Diluted Earnings (Loss) Per Share from Continuing Operations: Class A $ 0.17 $ 0.11 $ (0.02) $ (0.27) Class B $ 0.17 $ 0.11 $ (0.02) $ (0.27) Basic Earnings (Loss) Per Share: Class A $ 0.17 $ 0.11 $ (0.02) $ (0.27) Class B $ 0.17 $ 0.12 $ (0.02) $ (0.27) Diluted Earnings (Loss) Per Share: Class A $ 0.17 $ 0.11 $ (0.02) $ (0.27) Class B $ 0.17 $ 0.11 $ (0.02) $ (0.27) Fiscal Year 2007: Net Sales(1) $ 309,779 $ 327,268 $ 311,582 $ 338,301 Gross Profit(1) 64,665 67,381 60,355 68,959 Restructuring Expense 334 283 648 263 Income from Continuing Operations 6,283 8,160 4,388 4,435 Net Income 3,671 7,204 3,816 4,461 Basic Earnings Per Share from Continuing Operations: Class A $ 0.16 $ 0.21 $ 0.11 $ 0.11 Class B $ 0.16 $ 0.21 $ 0.12 $ 0.11 Diluted Earnings Per Share from Continuing Operations: Class A $ 0.16 $ 0.20 $ 0.10 $ 0.11 Class B $ 0.16 $ 0.21 $ 0.11 $ 0.11 Basic Earnings Per Share: Class A $ 0.10 $ 0.19 $ 0.09 $ 0.11 Class B $ 0.10 $ 0.19 $ 0.10 $ 0.12 Diluted Earnings Per Share: Class A $ 0.09 $ 0.18 $ 0.09 $ 0.11 Class B $ 0.10 $ 0.18 $ 0.10 $ 0.11 Three Months Ended (Amounts in Thousands, Except for Per Share Data) September 30 December 31 March 31 June 30 Fiscal Year 2011: Net Sales $ 294,676 $ 310,632 $ 314,466 $ 282,823 Gross Profit 47,147 49,576 50,691 47,178 Restructuring Expense 117 368 68 456 Net Income 456 876 3,306 284 Basic Earnings Per Share: Class A $ 0.01 $ 0.02 $ 0.08 $ — Class B $ 0.01 $ 0.02 $ 0.09 $ 0.01 Diluted Earnings Per Share: Class A $ 0.01 $ 0.02 $ 0.08 $ — Class B $ 0.01 $ 0.02 $ 0.09 $ 0.01 Fiscal Year 2010: Net Sales $ 274,659 $ 275,161 $ 282,347 $ 290,641 Gross Profit 47,184 44,141 40,377 44,831 Other General Income (1)— (3,256 ) (6,724 ) — Restructuring Expense 486 291 933 341 Net Income 1,774 1,906 6,330 793 Basic Earnings Per Share: Class A $ 0.04 $ 0.05 $ 0.17 $ 0.02 Class B $ 0.05 $ 0.05 $ 0.17 $ 0.02 Diluted Earnings Per Share: Class A $ 0.04 $ 0.05 $ 0.17 $ 0.02 Class B $ 0.05 $ 0.05 $ 0.17 $ 0.02 (1) Net sales and gross profit are from continuing operations. Operating results from the Reptron acquisition areOther General Income included in the table above as of February 15, 2007.(2)Income from continuing operations and net income$3.3 million, pre-tax, for the quarter ended September 30, 2007 included $0.7December 31, 2009 for the settlement proceeds related to an antitrust class action lawsuit of which the Company was a member and $6.7 million ($0.02 per diluted share) pre-tax gain for the quarter ended March 31, 2010 on the sale of after-tax income received as part of a Polish offset credit program for investments made in the Company's Poland operation.facility and land.None.Item 9A - Controls and Procedures(a) Evaluation of disclosure controls and procedures.The Company maintains controls and procedures designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and that such information is accumulated and communicated to the Company's management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Based upon their evaluation of those controls and procedures performed as of June 30, 2008,2011, the Chief Executive Officer and Chief Financial Officer of the Company concluded that its disclosure controls and procedures were effective.(b) Management's report on internal control over financial reporting.Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 and the rules and regulations adopted pursuant thereto, the Company included a report of management's assessment of the effectiveness of its internal control over financial reporting as part of this report. The effectiveness of the Company's internal control over financial reporting as of June 30, 20082011 has been audited by the Company's independent registered public accounting firm. Management's report and the independent registered public accounting firm's attestation report are included in the Company's Consolidated Financial Statements under the captions entitled "Management's Report on Internal Control Over69Financial Reporting" and "Report of Independent Registered Public Accounting Firm" and are incorporated herein by reference.(c) Changes in internal control over financial reporting.There have been no changes in the Company's internal control over financial reporting that occurred during the quarter ended June 30, 20082011 that have materially affected, or that are reasonably likely to materially affect, the Company's internal control over financial reporting.Item 9B -Other InformationNone.None.PART IIIDirectorsDirectors21, 200818, 2011 under the caption "Election of Directors."
CommitteesCommittees21, 200818, 2011 under the caption "Information Concerning the Board of Directors and Committees."Executive Officers of the RegistrantThe information required 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.Compliance with Section 16(a) of the Exchange ActThe information required by this item with respect to compliance with Section 16(a) of the Securities Exchange Act of 1934 is incorporated by reference to the material contained in the Company's Proxy Statement for its annual meeting of Share Owners to be held October 21, 200818, 2011 under the caption "Section 16(a) Beneficial Ownership Reporting Compliance."Code of EthicsThe Company has a code of ethics that applies to all of its employees, including the Chief Executive Officer, the Chief Financial Officer, and the PrincipalChief Accounting Officer. The code of ethics is posted on the Company's website at www.ir.kimball.com. It is the Company's intention to disclose any amendments to the code of ethics on this website. In addition, any waivers of the code of ethics for directors or executive officers of the Company will be disclosed in a Current Report on Form 8-K.The information required by this item is incorporated by reference to the material contained in the Company's Proxy Statement for its annual meeting of Share Owners to be held October 21, 200818, 2011 under the captions "Information Concerning the Board of Directors and Committees," "Compensation Discussion and Analysis," "Compensation Committee Report," and "Executive Officer and Director Compensation."Item 12 - Security Ownership of Certain Beneficial Owners and Management and Related Share Owner MattersSecurity OwnershipThe information required by this item is incorporated by reference to the material contained in the Company's Proxy Statement for its annual meeting of Share Owners to be held October 21, 200818, 2011 under the caption "Share Ownership Information."70Securities Authorized for Issuance Under Equity Compensation PlansThe following table summarizesinformation required by this item is incorporated by reference to the material contained in the Company's equity compensation plans asProxy Statement for its annual meeting of June 30, 2008:
October 18, 2011 under the Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights Weighted Average Exercise Price of Outstanding Options, Warrants and Rights Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (excluding securities reflected in first column) Equity compensation plans approved by Share Owners 2,019,114 (1) $15.45(2) 877,857 (3) Equity compensation plans not approved by Share Owners -0- -0- -0- Total 2,019,114 $15.45 877,857 (1) Includes 779,162 Class B stock option grants, 703,552 Class A and 55,500 Class B performance share awards, and 375,800 Class A and 105,100 Class B restricted share unit awards. The number of performance shares assumes that performance targets willShare Owners to be met.(2) Performance shares and restricted share units not included as there is no exercise price for these awards.(3) Includes 877,857 Class A and Class B shares available for issuance as restricted stock, restricted share units, unrestricted share grants, incentive stock options, nonqualified stock options, performance shares, performance units, and stock appreciation rightsheld Company's 2003 Stock Optioncaption "Executive Officer and Incentive Plan. No shares remain availableDirector Compensation — Securities Authorized for issuance under the Company's prior stock option plans.Issuance Under Equity Compensation Plans."Item 13 - Certain Relationships and Related Transactions, and Director IndependenceRelationships and Related TransactionsThe information required by this item is incorporated by reference to the material contained in the Company's Proxy Statement for its annual meeting of Share Owners to be held October 21, 200818, 2011 under the caption "Review and Approval of Transactions with Related Persons."Director IndependenceThe information required by this item is incorporated by reference to the material contained in the Company's Proxy Statement for its annual meeting of Share Owners to be held October 21, 200818, 2011 under the caption "Information Concerning the Board of Directors and Committees."Item 14 - Principal Accounting Fees and ServicesThe information required by this item is incorporated by reference to the material contained in the Company's Proxy Statement for its annual meeting of Share Owners to be held October 21, 200818, 2011 under the caption "Independent Registered Public Accounting Firm" and "Approval"Appendix A — Approval Process for Services Performed by the Independent Registered Public Accounting Firm."71PART IVItem 15 - Exhibits, Financial Statement Schedules(a) (a) The following documents are filed as part of this report: (1) Financial Statements: The following consolidated financial statements of the Company are found in Item 8 and incorporated herein. (2) Financial Statement Schedules: (2) Financial Statement Schedules:II. Valuation and Qualifying Accounts for Each of the Three Years in the Period Ended June 30, 2008 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. (3) ExhibitsSee the Index of Exhibits on page 8676 for a list of the exhibits filed or incorporated herein as a part of this report.72SIGNATURESPursuant 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: /s/ ROBERT F. SCHNEIDER By: /s/ Robert F. Schneider ROBERT F. SCHNEIDER
Executive Vice President,Chief Financial Officer September 2, 2008August 29, 2011 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: /s/ JAMES C. THYEN James C. Thyen JAMES C. THYENPresident, President,
Chief Executive OfficerSeptember 2, 2008 August 29, 2011 /s/ ROBERT F. SCHNEIDER Robert F. Schneider ROBERT F. SCHNEIDER
Executive Vice President,Chief Financial OfficerSeptember 2, 2008 Chief Financial Officer August 29, 2011 /s/ MICHELLE R. SCHROEDER Michelle R. Schroeder MICHELLE R. SCHROEDER
Vice President, Corporate Controller(functioning as Principal Accounting Officer)September 2, 2008Signature Chief Accounting Officer August 29, 2011 73Signature Signature Ronald J. ThyenGEOFFREY L. STRINGER *Harry W. Bowman*RONALD J. THYEN HARRY W. BOWMAN * Geoffrey L. Stringer Harry W. Bowman Director Director John T. ThyenTHOMAS J. TISCHHAUSER *JAMES C. THYEN * Thomas J. Tischhauser James C. Thyen *JOHN T. THYENJAMES C. THYENDirector Director CHRISTINE M. VUJOVICH * JACK R. WENTWORTH * Christine M. Vujovich * Jack R. Wentworth *CHRISTINE M. VUJOVICHDirector JACK R. WENTWORTHDirectorDirector* 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 August 29, 2011 /s/ DOUGLAS A. HABIG Douglas A. Habig Director Polly B. Kawalek *Geoffrey L. Stringer *POLLY B. KAWALEKGEOFFREY L. STRINGERDirectorDirector* 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:DateSeptember 2, 2008/s/ Douglas A. HabigDOUGLAS A. HABIGDirector74Schedule II. - Valuation and Qualifying Accounts
Description
of Year
to Expense
Other
Accounts
and
Recoveries
at End
of Year(Amounts in Thousands) Year Ended June 30, 2008 Valuation Allowances: Short-Term Receivable Allowance $ 1,477 $ 48 $ 11 $ (479) $ 1,057 Long-Term Note Receivable Allowance $ 1,400 $ 300 $ -0- $ (1,700) $ -0- Deferred Tax Asset $ 4,420 $ 1,159 $ -0- $ (613) $ 4,966 Year Ended June 30, 2007 Valuation Allowances: Short-Term Receivable Allowance $ 1,282 $ (282) $ 242 $ 235 $ 1,477 Long-Term Note Receivable Allowance $ 1,400 $ -0- $ -0- $ -0- $ 1,400 Deferred Tax Asset $ 3,856 $ 574 $ -0- $ (10) $ 4,420 Year Ended June 30, 2006 Valuation Allowances: Short-Term Receivable Allowance $ 2,142 $ 414 $ 9 $ (1,283) $ 1,282 Long-Term Note Receivable Allowance $ -0- $ 1,400 $ -0- $ -0- $ 1,400 Deferred Tax Asset $ 3,429 $ 1,054 $ -0- $ (627) $ 3,856 Description Balance atBeginningof Year Additionsto Expense Adjustments to OtherAccounts Write-offs andRecoveries Balance atEnd of Year(Amounts in Thousands) Year Ended June 30, 2011 Valuation Allowances: Short-Term Receivables $ 3,349 $ 476 $ 195 $ (2,221 ) $ 1,799 Long-Term Note Receivables $ 69 $ — $ — $ (69 ) $ — Deferred Tax Asset $ 5,777 $ 1,297 $ — $ (376 ) $ 6,698 Year Ended June 30, 2010 Valuation Allowances: Short-Term Receivables $ 4,366 $ 232 $ (45 ) $ (1,204 ) $ 3,349 Long-Term Note Receivables $ — $ 69 $ — $ — $ 69 Deferred Tax Asset $ 5,132 $ 814 $ — $ (169 ) $ 5,777 Year Ended June 30, 2009 Valuation Allowances: Short-Term Receivables $ 1,057 $ 4,137 $ 93 $ (921 ) $ 4,366 Long-Term Note Receivables $ — $ — $ — $ — $ — Deferred Tax Asset $ 4,966 $ 288 $ — $ (122 ) $ 5,132 75KIMBALL INTERNATIONAL, INC.Exhibit No. Exhibit No.Description 3(a) Amended and restated Articles of Incorporation of the Company (Incorporated by reference to Exhibit 3(a) to the Company's Form 10-K for the year ended June 30, 2007) 3(b) Restated By-laws of the Company (Incorporated by reference to Exhibit 3(b) to the Company's Form 8-K filed August 22, 2008)October 23, 2009)10(a)* Summary of Director and Named Executive Officer Compensation 10(b)* Supplemental Bonus Plan (Incorporated by reference to Exhibit 10(a) to the Company's Form 10-K for the year ended June 30, 2004)Discretionary Compensation 10(c)* 2003 Stock Option and Incentive Plan (Incorporated by reference to Appendix A to the Company's Annual Proxy Statement filed September 10, 2003)10(d)*Supplemental Employee Retirement Plan (2006 Revision) (Incorporated by reference to Exhibit 10(a)10(d) to the Company's Form 10-Q for the period ended MarchDecember 31, 2006)2008)10(e)10(d)*1996 Stock Incentive ProgramSupplemental Employee Retirement Plan (2009 Revision) (Incorporated by reference to Exhibit 10(e)10(c) to the Company's Form 10-K10-Q for the yearperiod ended June 30, 2006)December 31, 2008)10(e)* 1996 Stock Incentive Program 10(f)* 1996 Director Stock Compensation and Option Plan (Incorporated by reference to Exhibit 10(f) to the Company's Form 10-K for the year ended June 30, 2006)10(g)*Form of Restricted Stock Unit Award Agreement (Incorporated by reference to Exhibit 10.1 to the Company's Form 8-K/A filed January 24, 2005)10(h)*Form of Annual Performance Share Award Agreement, as amended on August 22, 2006 (Incorporated by reference to Exhibit 10(b) to the Company's Form 10-Q for the period ended September 30, 2006) 10(i)10(g)Credit Agreement, dated as of April 23, 2008, among the Company, the lenders party thereto and JPMorgan Chase Bank, N.A., as Agent and Letter of Credit Issuer (Incorporated by reference to Exhibit 10.1 to the Company's Form 8-K filed April 28, 2008) 10(j)10(h)*Form of Employment Agreement dated March 8, 2010 between the Company and each of Donald W. Van Winkle and Stanley C. Sapp and dated May 1, 2006 between the Company and each of James C. Thyen, Douglas A. Habig, Robert F. Schneider, Donald D. Charron, P. Daniel Miller, John H. Kahle and Gary W. Schwartz (Incorporated by reference to Exhibit 10(c) to the Company's Form 10-Q for the period ended March 31, 2006)10(k)10(i)*Form of Long Term Performance Share Award, as amended on August 22, 2006 (Incorporated by reference to Exhibit 10(c) to the Company's Form 10-Q for the period ended September 30, 2006) 10(l)10(j)*Description of the Company's 20052010 Profit Sharing Incentive Bonus Plan (Incorporated by reference to Exhibit 10.1 to the Company's Form 8-K filed October 18, 2005)25, 2010)11 Computation of Earnings Per Share (Incorporated by reference to Note 1516 - Earnings Per Share of Notes to Consolidated Financial Statements)21 Subsidiaries of the Registrant 23 Consent of Independent Registered Public Accounting Firm 24 Power of Attorney 31.1 31.1Certification filed by Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2 Certification filed by Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1 Certification furnished by the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2 Certification furnished by the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 * = constitutes management contract or compensatory arrangement86*=constitutes management contract or compensatory arrangement76