SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, ~~2021~~2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 0-3279


KIMBALL INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o Accelerated filer x

Non-accelerated filer o Smaller reporting company ☐

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

The number of shares outstanding of the Registrant’s common stock as of January ~~27, 2022~~29, 2023 was:

Class A Common Stock - ~~181,067~~166,789 shares

Class B Common Stock - ~~36,610,869~~36,245,269 shares

KIMBALL INTERNATIONAL, INC.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

KIMBALL INTERNATIONAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

Class A - Shares authorized: 50,000,000

Shares issued: 181,000 and 188,000, respectively

Class B - Shares authorized: 100,000,000

Shares issued: 42,842,000 and 42,835,000, respectively

Class A - Shares authorized: 50,000,000

Shares issued: 167,000 for both periods

Class A - Shares authorized: 50,000,000

Shares issued: 167,000 for both periods

Class B - Shares authorized: 100,000,000

Shares issued: 42,856,000 for both periods

Class B - Shares authorized: 100,000,000

Shares issued: 42,856,000 for both periods

KIMBALL INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF ~~INCOME (LOSS)~~OPERATIONS

(Amounts in Thousands, Except for Per Share Data)

KIMBALL INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Amounts in Thousands)

KIMBALL INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in Thousands)

Net Decrease in Cash, Cash Equivalents, and Restricted Cash (1)

Net Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash (1)

Cash, Cash Equivalents, and Restricted Cash at Beginning of Period (1)

Cash, Cash Equivalents, and Restricted Cash at End of Period (1)

(1) The following table reconciles cash and cash equivalents in the balance sheets to cash, cash equivalents, and restricted cash per the statements of cash flows. The restricted cash included in other assets on the balance sheet represents amounts pledged as collateral for a long-term financing arrangement as contractually required by a lender. The restriction will lapse when the related long-term debt is paid off. Restricted cash also included customer deposits held due to a foreign entity being classified as a restricted entity by a government agency subsequent to our receipt of the ~~deposit~~deposit. In addition, the restricted cash balance for periods June 30, 2022 and prior included cash held in escrow for repayment of the Payment Protection Program loan that Poppin, Inc. obtained prior to its ~~acquisition.~~acquisition and amounts pledged as collateral for a long-term financing arrangement as contractually required by a lender and the restriction lapsed when the related debt was paid.


(Amounts in Thousands)	(Amounts in Thousands)	December 31, 2021		June 30, 2021		December 31, 2020		June 30, 2020		(Amounts in Thousands)	December 31, 2022		June 30, 2022		December 31, 2021		June 30, 2021
Cash and Cash Equivalents	Cash and Cash Equivalents	$	16,323	$	24,336	$	39,720	$	91,798	Cash and Cash Equivalents	$	14,067	$	10,934	$	16,323	$	24,336
Restricted cash included in Other Assets	Restricted cash included in Other Assets	1,062		1,391		3,927		646		Restricted cash included in Other Assets	486		1,062		1,062		1,391
Total Cash, Cash Equivalents, and Restricted Cash at end of period	Total Cash, Cash Equivalents, and Restricted Cash at end of period	$	17,385	$	25,727	$	43,647	$	92,444	Total Cash, Cash Equivalents, and Restricted Cash at end of period	$	14,553	$	11,996	$	17,385	$	25,727

KIMBALL INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

KIMBALL INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements of Kimball International, Inc. (the “Company,” “Kimball International,” “we,” “us,” or “our”) have been prepared in accordance with the instructions to Form 10-Q. As such, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted, although we believe that the disclosures are adequate to make the information presented not misleading. Intercompany transactions and balances have been eliminated. Management believes the financial statements include all adjustments (consisting only of normal recurring adjustments) considered necessary to present fairly the financial statements for the interim periods. The results of operations for the interim periods shown in this report are not necessarily indicative of results for any future interim period or for the entire fiscal year. It is suggested that these financial statements be read in conjunction with the financial statements and the notes thereto included in our latest annual report on Form 10-K. ~~Additionally, based~~

Prior Period Reclassification:

We combined the Long-term earn-out liability line with the Other long-term liabilities line on our June 30, 2022 balance sheet as the duration and severity of the current global situation involving the COVID-19 pandemic and related supply chain disruptions, the extent to which COVID-19 will impact our business and our consolidated financial results will depend on future developments, which are highly uncertain and cannot be predicted.balance no longer requires separate presentation.

Note 2. Recent Accounting Pronouncements and Supplemental Information

Recently Issued Accounting Pronouncements Not Yet Adopted:

In October 2021, the Financial Accounting Standards Board issued guidance on accounting for contract assets and contract liabilities, related to revenue contracts with customers, during a business combination by the acquiring business entity. The acquirer is to measure the contract asset and contract liability as of the acquisition date as if the acquirer had originated the contracts. This is a departure from the current practice under U.S. GAAP of recognizing contract assets and contract liabilities at fair value as of the acquisition date. The guidance will be effective ~~for the Company~~ in our first quarter of fiscal year 2024, though early adoption is permitted. Management is unable to predict whether the adoption of this guidance will have a material impact on ~~the Company’s~~our financial statements.

Goodwill and Other Intangible Assets:

Goodwill represents the difference between the purchase price and the related underlying tangible and intangible net asset fair values resulting from business acquisitions. Goodwill is assigned to and the fair value is tested at the reporting unit level. Annually, or if conditions indicate an earlier ~~assessment~~review is necessary, we may assess qualitative factors to determine if it is more likely than not that the fair value is less than its carrying amount. We also have the option to bypass the qualitative assessment and proceed directly to performing the quantitative goodwill impairment test which compares the carrying value of the reporting unit to the reporting unit’s fair value to identify impairment. Under the quantitative assessment, if the fair value of the reporting unit is less than the carrying value, goodwill is written down to its fair value. The fair value is established primarily using a discounted cash flow analysis and secondarily a market approach utilizing current industry information. The calculation of the fair value of the reporting unit considers current market conditions existing at the assessment date and reporting unit specific scenarios weighted on probability of outcome.

Application of the goodwill impairment test requires judgment, including the identification of reporting units, assignment of assets and liabilities to reporting units, assignment of goodwill to reporting units, and determination of the fair value of each reporting unit. This analysis requires significant judgments, including estimation of future cash flows, which is dependent on internal forecasts, estimation of the long-term rate of growth for our business, and determination of our weighted average cost of capital. The estimates used to calculate the fair value of a reporting unit change from year to year based on operating results, market conditions, and other factors. Changes in these estimates and assumptions could materially affect the determination of fair value and goodwill impairment for each reporting unit. While we have historically performed goodwill impairment testing annually during the second fiscal quarter, changes in circumstances may require an interim ~~assessment~~assessments of the carrying amounts of ~~the Company’s~~our reporting units relative to their fair values.

In connection with our annual goodwill impairment test and the preparation of our financial statements, we assessed goodwill at the reporting unit level for impairment during our second quarter of fiscal year ~~2022~~2023 and based on our analysis our Poppin

reporting unit had a carrying amount that exceeded its fair value. ~~A forecast revision to delay future sales~~Lower revenue and earnings growth of

projections in the Poppin reporting unit drove the decline in the fair value of the reporting ~~unit, which was primarily attributable to changes in demand due to the ongoing COVID-19 pandemic and supply chain constraints.~~unit. As a result, we recorded a goodwill impairment loss of ~~$34.1~~$36.7 million during the second quarter of fiscal year ~~2022,~~2023, as further discussed in Note ~~13.~~12 - Fair Value of Notes to Condensed Consolidated ~~Financial Statement.~~

~~The changes in the carrying amount~~Statements of ~~goodwill are summarized as follows:~~

(Amounts in Thousands) Gross Goodwill Accumulated Impairment Net Carrying Amount
June 30, 2020 $ 12,893 $ (1,733) $ 11,160
Additions 70,802 — 70,802
June 30, 2021 83,695 (1,733) 81,962
Impairment — (34,118) (34,118)
December 31, 2021 $ 83,695 $ (35,851) $ 47,844

~~See~~ Operations.~~Note 3 - Acquisition~~ ~~of Notes to Condensed Consolidated Financial Statements for more information on this acquisition.~~



The changes in the carrying amount of goodwill are summarized as follows:
(Amounts in Thousands)	Gross Goodwill		Accumulated Impairment		Net Carrying Amount
June 30, 2021	$	83,695	$	(1,733)	$	81,962
Additions / (Impairments)	—		(34,118)		(34,118)
June 30, 2022	83,695		(35,851)		47,844
Additions / (Impairment)	—		(36,684)		(36,684)
December 31, 2022	$	83,695	$	(72,535)	$	11,160

Other Intangible Assets reported on the Condensed Consolidated Balance Sheets consist of capitalized software, customer relationships, trade names, acquired technology, patents and trademarks, and non-compete agreements. Intangible assets are ~~assessed~~reviewed for impairment when events or circumstances indicate that the carrying value may not be recoverable over the remaining lives of the assets. As a result of the downward revision in the forecasted operations of Poppin, management identified that a triggering event had occurred, indicating that certain ~~long lived~~long-lived assets may not be recoverable. The intangible assets of the Poppin reporting unit were assessed for ~~impairment~~recoverability during the second quarter of fiscal year ~~2022,~~2023, and the recoverability assessment indicated no ~~impairment was identified.~~ impairment.

A summary of intangible assets subject to amortization is as follows:


	December 31, 2022						June 30, 2022
(Amounts in Thousands)	Cost		Accumulated Amortization		Net Value		Cost		Accumulated Amortization		Net Value
Capitalized Software	$	47,841	$	36,114	$	11,727	$	46,246	$	35,521	$	10,725
Customer Relationships	12,000		4,320		7,680		19,050		10,518		8,532
Trade Names	36,570		8,640		27,930		36,570		6,811		29,759
Acquired Technology	7,000		2,065		4,935		7,000		1,563		5,437
Patents and Trademarks	354		63		291		354		47		307
Non-Compete Agreements	100		100		—		100		93		7
Other Intangible Assets	$	103,865	$	51,302	$	52,563	$	109,320	$	54,553	$	54,767

December 31, 2021 June 30, 2021
(Amounts in Thousands) Cost Accumulated
Amortization Net Value Cost Accumulated
Amortization Net Value
Capitalized Software $ 44,629 $ 34,617 $ 10,012 $ 43,200 $ 34,058 $ 9,142
Customer Relationships 19,050 5,323 13,727 19,050 3,936 15,114
Trade Names 36,570 4,983 31,587 36,570 3,154 33,416
Acquired Technology 7,000 1,061 5,939 7,000 559 6,441
Patents and Trademarks 354 32 322 354 16 338
Non-Compete Agreements 100 83 17 100 73 27
Other Intangible Assets $ 107,703 $ 46,099 $ 61,604 $ 106,274 $ 41,796 $ 64,478

~~Amortization expense related to~~A summary of the useful lives of intangible assets was, in thousands, $2,415 and $4,854 during the quarter and year-to-date period ended December 31, 2021, and was, in thousands, $1,049 and $1,702 during the quarter and year-to-date period ended December 31, 2020. Amortization expense in future periodssubject to amortization is expected to be, in thousands, $4,755 for the remainder of fiscal year 2022, and $8,878, $8,272, $8,038, and $7,687 in the four years ending June 30, 2026, and $23,974 thereafter. The estimated useful life of capitalized software ranges from 2 years to 13 years. The estimated useful life of acquired technology is 7 years. The amortization period for customer relationship intangible assets ranges from 10 years to 20 years. The estimated useful life of trade names is 10 years. The estimated useful life of non-compete agreements is 5 years. The estimated useful life of patents is 14 years and the estimated useful life of trademarks is 15 years.as follows:


						Years
Capitalized Software						3 to 13
Customer Relationships						10
Trade Names						10
Acquired Technology						7
Patents						14
Trademarks						15
Non-Compete Agreements						5


Amortization expense incurred and future expected expenses related to intangible assets were:
	Three months ended				Six Months Ended
	December 31				December 31				Remainder			Future Fiscal Years
(Amounts in Thousands)	2022		2021		2022		2021		2023			2024		2025		2026		2027		Thereafter
Amortization Expense	$	2,219	$	2,415	$	4,414	$	4,854		$	5,186	$	9,446	$	9,227	$	8,829	$	6,481	$	13,394

Capitalized 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 re-engineering costs are expensed in the period in which they are incurred.

Trade names, non-compete agreements, acquired technology, patents and trademarks are amortized on a straight-line basis over their estimated useful lives. Customer relationships are amortized based on estimated attrition rates of customers. We have no intangible assets with indefinite useful lives which are not subject to amortization.

Non-operating Income (Expense), net:

Non-operating income and expense include the impact of such items as fair value adjustments on Supplemental Employee Retirement Plan (“SERP”) investments, amortization of actuarial income, foreign currency rate movements, bank charges, and other miscellaneous non-operating income and expense items that are not directly related to operations. The gain or loss on SERP investments is offset by a change in the SERP liability that is recognized in selling and administrative expenses.

Components of the Non-operating income, ~~(expense),~~ net line, were:

Three Months Ended Six Months Ended
December 31 December 31
(Amounts in Thousands) 2021 2020 2021 2020
Gain on Supplemental Employee Retirement Plan Investments $ 680 $ 1,381 $ 587 $ 2,139
Other 29 (1) (64) (16)
Non-operating income, net $ 709 $ 1,380 $ 523 $ 2,123

~~Note 3. Acquisition~~

On December 9, 2020, we acquired Poppin, Inc. (“Poppin”), a tech-enabled, market-leading B2B commercial furniture design company headquartered in New York City, New York. Poppin designs commercial-grade furniture that is made to mix, match, and scale in today’s modern office and work-from-home environments. The acquisition purchase price totaled $110.4 million in initial cash consideration plus $31.8 million in contingent earn-out consideration.

The contingent earn-out is payable on annual revenue and profitability milestones achieved through June 30, 2024. As of December 31, 2021 and June 30, 2021, the fair value of the contingent earn-out liability was $2.3 million and $20.2 million, respectively.

~~A summary of the final purchase price allocation is as follows:~~


~~Purchase Price Allocation~~
~~(Amounts in Thousands)~~
~~Cash~~	$	~~5,768~~
~~Receivables~~	~~2,814~~
~~Inventories~~	~~15,718~~
~~Other current assets~~	~~700~~
~~Net property and equipment~~	~~975~~
~~Other intangible assets~~	~~52,394~~
~~Goodwill~~	~~70,801~~
~~Right-of-use operating lease assets~~	~~5,103~~
~~Other long-term assets~~	~~4,161~~
~~Deferred tax assets~~	~~5,836~~
~~Total Assets~~	$	~~164,270~~

~~Current maturities of long-term debt~~	~~1,252~~
~~Accounts payable~~	~~7,715~~
~~Customer deposits~~	~~2,045~~
~~Current portion of operating lease liability~~	~~1,937~~
~~Accrued expenses~~	~~5,260~~
~~Long-term debt, less current maturities~~	~~1,252~~
~~Long-term operating lease liability~~	~~2,565~~
~~Other long-term liabilities~~	80
~~Total Liabilities~~	$	~~22,106~~
~~Net Assets~~	$	~~142,164~~


~~Consideration~~
~~(Amounts in Thousands)~~
~~Cash~~	$	~~110,374~~
~~Contingent earn-out — fair value at acquisition date~~	~~31,790~~
~~Fair value of total consideration~~	$	~~142,164~~
~~Less: Acquired cash~~	~~5,768~~
~~Total consideration less acquired cash~~	$	~~136,396~~

Goodwill is primarily attributable to the anticipated supply chain and revenue synergies including cross selling initiatives expected from the operations of the combined company. The goodwill is not deductible for tax purposes. See ~~Note 2 - Recent Accounting Pronouncements and Supplemental Information~~ of Notes to Condensed Consolidated Financial Statements for more information on goodwill and other intangible assets, including the goodwill impairment charge recognized during the quarter ended December 31, 2021. The purchase price allocation was final as of September 30, 2021.

The operating results of this acquisition are included in our consolidated financial statements beginning on December 9, 2020. For the second quarter of fiscal year 2022, net sales and net loss related to Poppin were $13.5 million of net sales and $3.8 million of net loss. For the year-to-date period ending December 31, 2021, net sales and net losses related to Poppin were $28.7 million of net sales and $7.1 million of net loss. The aforementioned net losses include amortization on acquired intangibles and exclude earn-out adjustments related to operating performance and goodwill impairment after the acquisition date. There were no direct acquisition costs during the quarter and year-to-date periods ended December 31, 2021.

~~Pro Forma Information~~

The following unaudited pro forma financial information summarizes the combined results of operations for Kimball International, Inc. and Poppin, Inc. as if the companies were combined as of the beginning of fiscal year 2020:
(unaudited) (unaudited)
Three months ended Six month ended
December 31 December 31
(Amounts in Thousands, Except Per Share Data) 2020 2020
Net Sales $ 143,500 $ 304,290
Net Income (Loss) (1,640) 1,342
Diluted Earnings (Loss) Per Share of Common Stock $ (0.04) $ 0.04

This pro forma financial information is based on historical results of operations, adjusted for the allocation of the purchase price and other acquisition accounting adjustments. This pro forma information is not necessarily indicative of what our results would have been had we operated the businesses since the beginning of the periods presented. The pro forma adjustments reflect the income statement effects of amortization of intangibles related to the fair value adjustments of the assets acquired, acquisition-related costs, incremental interest expense, and the related tax effects.


	Three Months Ended				Six Months Ended
	December 31				December 31
(Amounts in Thousands)	2022		2021		2022		2021

Gain on Supplemental Employee Retirement Plan Investments	$	619	$	680	$	160	$	587


Other	51		29		20		(64)
Non-operating income, net	$	670	$	709	$	180	$	523

Note 4.3. Restructuring

We recognized pre-tax restructuring expense of ~~$1.0~~$1.7 million and ~~$2.5~~$2.0 million in the three and six months ended December 31, ~~2021,~~2022, and recognized ~~$1.6~~$1.0 million and ~~$5.9~~$2.5 million for the three and six months ended December 31, ~~2020.~~2021.

We utilized available market prices and management estimates to determine the fair value of impaired assets. Restructuring is included in the Restructuring Expense line item on our Condensed Consolidated Statements of ~~Income.~~Operations.

Transformation Restructuring Plan:

~~Included in the current phase of~~Current actions under our transformation restructuring plan are focused on activities such as the streamlining of manufacturing facilities, ~~voluntary retirement incentive programs, and~~ the consolidation of ~~showrooms.~~showrooms, and the closure of our manufacturing facility in Tijuana, Mexico which was completed during the year-to-date period of fiscal year 2023. This phase of the transformation restructuring plan began in the first quarter of our fiscal year 2021, and we expect a substantial majority of the restructuring actions to be completed by the end of fiscal year 2023.

~~In addition to the savings already generated from first~~This phase of the transformation restructuring plan ~~the efforts of this second phase of the transformation restructuring plan are~~is expected to generate annualized pre-tax savings of approximately ~~$16.0~~$19.0 million when it is fully implemented. We currently estimate this phase of the transformation restructuring plan will incur total pre-tax restructuring charges of approximately ~~$16.0~~$22.7 million to ~~$18.0~~$23.3 million, with approximately ~~$5.5~~$1.8 million expected to be recorded in remainder of fiscal year ~~2022, and approximately $3.0 million thereafter.~~2023. The restructuring charges are expected to consist of approximately ~~$5.0~~$7.3 million ~~to $5.5 million~~ for

severance and other employee-related costs, ~~$5.5~~$6.0 million to ~~$6.5~~$6.2 million for facility costs, and ~~$5.5~~$9.4 million to ~~$6.0~~$9.8 million for lease and other asset impairment. Approximately ~~65%~~60% of the total cost estimate is expected to be cash expense.

A summary of the charges recorded in connection with the second phase of the transformation restructuring plan is as follows:


		Three Months Ended				Six Months Ended				Charges Incurred to Date			Three Months Ended				Six Months Ended				Charges Incurred to Date
		December 31				December 31							December 31				December 31
(Amounts in Thousands)	(Amounts in Thousands)	2021		2020		2021		2020				(Amounts in Thousands)	2022		2021		2022		2021
Cash-related restructuring charges:	Cash-related restructuring charges:											Cash-related restructuring charges:
Severance and other employee related costs	Severance and other employee related costs	$	87	$	621	$	233	$	3,511	$	5,315	Severance and other employee related costs	$	284	$	87	$	474	$	233	$	7,309
Facility exit costs and other cash charges	Facility exit costs and other cash charges	434		109		890		236		2,477		Facility exit costs and other cash charges	363		434		1,296		890		5,244
Total cash-related restructuring charges	Total cash-related restructuring charges	$	521	$	730	$	1,123	$	3,747	$	7,792	Total cash-related restructuring charges	$	647	$	521	$	1,770	$	1,123	$	12,553
Non-cash charges:	Non-cash charges:											Non-cash charges:
Impairment of assets and accelerated depreciation	Impairment of assets and accelerated depreciation	489		525		1,342		985		3,498		Impairment of assets and accelerated depreciation	1,032		489		279		1,342		8,810

Total charges	Total charges	$	1,010	$	1,255	$	2,465	$	4,732	$	11,290	Total charges	$	1,679	$	1,010	$	2,049	$	2,465	$	21,363

A summary of the current period activity in accrued restructuring related to the second phase of the transformation restructuring plan is as follows:

(Amounts in Thousands)

Severance and other employee related costs

Balance at June 30, ~~2021~~2022

~~1,386~~974

Additions charged to expense

~~233~~466

Cash payments charged against reserve

~~(1,521)~~(1,393)

Non-cash adjustments

(47)

Balance at December 31, ~~2021~~2022

98—

Disaggregation of Revenue

The following table provides information about revenue by operating segment:

~~We report~~For the three and six months ended December 31, 2021, the Workplace and Health categories have been combined based on our reassessment of disaggregation of revenue ~~under a single aggregated reportable segment consisting~~based on our current method of ~~4 operating segments which have similar products and services in nature, utilize similar production and distribution processes, and share similar long-term economic characteristics.~~

evaluating our business.

Receivables in the Condensed Consolidated Balance Sheets represent the amount of consideration to which we are entitled in exchange for the goods or services sold to our customers, net of allowances for doubtful accounts. Receivables are recorded when the right to consideration from the customer becomes unconditional, which is generally upon billing or upon satisfaction of a performance obligation, whichever is earlier.

We also receive deposits from certain customers before revenue is recognized, resulting in the recognition of a contract liability reported as Customer Deposits in the Condensed Consolidated Balance Sheets. Customer deposits are typically utilized within a year of the receipt of the deposit. The amount of revenue recognized during the six months ended December 31, ~~2021~~2022 that was included in the June 30, ~~2021~~2022 customer deposit balance was ~~$21.9~~$27.5 million.

~~We have~~Our operating ~~leases for~~lease portfolio is primarily comprised of showrooms, ~~manufacturing facilities, warehouses, certain offices, and other facilities to support our operations in addition to select equipment that~~which expire at various dates through fiscal year ~~2027.~~2030. We have no financing leases. Certain operating lease agreements include rental payments adjusted periodically for inflationary indices. Additionally, some leases include options to renew or terminate the leases which can be exercised at our discretion. Lease terms include the noncancellable portion of the underlying leases along with any reasonably certain lease periods associated with available renewal periods.

Certain leases have terms that are dependent upon the occurrence of events, activities, or circumstances in lease agreements and incur variable lease expense driven by warehouse square footage utilized, property taxes assessed, and other non-lease component charges. Variable lease expense is presented as operating expense in our Condensed Consolidated Statements of ~~Income and Comprehensive Income~~Operations in the same line item as expense arising from fixed lease payments for operating leases. For all classes of assets, we do not separate non-lease components of a contract from the lease components to which they relate. We do not recognize a right-of-use asset or lease liability for short-term leases that have a lease term of twelve months or less.

The components of our lease expenses are as follows:

Right-of-use assets for operating leases are tested for impairment in the same manner as long-lived assets used in operations as explained in Note 1312 - Fair Value of Notes to Condensed Consolidated Financial Statements. During the first ~~half~~six months of fiscal ~~years~~year 2023 we had no lease impairment, however for the first six months of fiscal year 2022 ~~and 2021,~~ we recorded $0.7 ~~million and $0.2~~ million of right-of-use asset and associated leasehold improvement ~~impairments, respectively.~~impairments. The impairment ~~charges are~~charge is included in the Restructuring Expense line item on our Condensed Consolidated Statements of ~~Income. See~~ Operations.~~Note 4 - Restructuringof Notes to Condensed Consolidated Financial Statements for more information on the impairments.~~

Supplemental cash flow and other information related to leases are as follows:


		Six Months Ended							Six Months Ended
		December 31							December 31
(Amounts in Millions)	(Amounts in Millions)	2021			2020			(Amounts in Millions)	2022			2021
Cash flow information:	Cash flow information:							Cash flow information:
Operating lease payments impacting lease liability	Operating lease payments impacting lease liability	$	3.4		$	2.5		Operating lease payments impacting lease liability	$	3.2		$	3.4
Non-cash impact of obtaining new right-of-use assets	Non-cash impact of obtaining new right-of-use assets	$	0.8		$	5.1		Non-cash impact of obtaining new right-of-use assets	$	2.7		$	0.8

		As of							As of
		December 31							December 31
		2021			2020				2022			2021
Other information:	Other information:							Other information:
Weighted-average remaining term (in years)	Weighted-average remaining term (in years)	4.0			4.6			Weighted-average remaining term (in years)	4.3			4.0
Weighted-average discount rate	Weighted-average discount rate	4.7		%	4.5		%	Weighted-average discount rate	4.6		%	4.7		%

The following table summarizes the future minimum lease payments as of December 31, ~~2021:~~2022:


		Fiscal Year Ended			Fiscal Year Ended
(Amounts in Millions)	(Amounts in Millions)	June 30 (1)		(Amounts in Millions)	June 30 (1)
2022		$	3.2
2023	2023	5.7		2023	$	3.1
2024	2024	3.6		2024	5.4
2025	2025	2.9		2025	4.0
2026	2026	1.9		2026	2.8
2027				2027	2.1
Thereafter	Thereafter	1.1		Thereafter	2.1
Total lease payments	Total lease payments	$	18.4	Total lease payments	$	19.5
Less interest	Less interest	1.4		Less interest	1.8
Present value of lease liabilities	Present value of lease liabilities	$	17.0	Present value of lease liabilities	$	17.7

(1) Lease payments include options to extend lease terms that are reasonably certain of being exercised. The payments exclude legally binding minimum lease payments for leases signed but not yet commenced. At December 31, ~~2021,~~2022, we ~~had~~have additional operating leases that have not yet ~~commenced.~~commenced for which we will record both right-of-use assets and lease liabilities of $9.6 million. The first lease ~~related to a new showroom location,~~ is expected to commence in our third quarter of fiscal year ~~2022~~2023 with a term of approximately 10 years at $5.7 million, while a second lease is expected to commence in our fourth quarter of fiscal year 2023 with a lease term of approximately ~~five~~12 years ~~and we will record both a right-of-use asset and lease liability of $0.6~~at $3.9 million. The second lease, related to expanded showroom and office space, is expected to commence in our third quarter of fiscal year 2022 with a lease term of approximately eight years and we will record both a right-of-use asset and lease liability of $4.7 million. The third lease, related to additional office space, is expected to commence in our third quarter of fiscal year 2022 with a lease term of approximately three years and we will record both a right-of-use asset and lease liability of $0.2 million. The fourth lease, related to office space in China is expected to commence in our third quarter of fiscal year 2022 with a lease term of approximately three years and we will record both a right-of-use asset and lease liability of $0.1 million.

In fiscal year 2021 we executed a contract to sell a warehouse with control passing to the buyer at a future date and the transaction was accounted for as a failed sale leaseback. A gain of approximately $4.3 million is anticipated upon settlement of the transaction during our third quarter of fiscal year 2022.

Note 7.6. Earnings Per Share

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 for all potentially dilutive securities.


		Three Months Ended				Six Months Ended					Three Months Ended				Six Months Ended
		December 31				December 31					December 31				December 31
(Amounts in Thousands, Except for Per Share Data)	(Amounts in Thousands, Except for Per Share Data)	2021		2020		2021		2020		(Amounts in Thousands, Except for Per Share Data)	2022		2021		2022		2021
Net Income (Loss)	Net Income (Loss)	$	(21,314)	$	(838)	$	(26,363)	$	4,548	Net Income (Loss)	$	(36,063)	$	(21,314)	$	(29,507)	$	(26,363)

Average Shares Outstanding for Basic EPS Calculation	Average Shares Outstanding for Basic EPS Calculation	36,749		36,962		36,785		36,968		Average Shares Outstanding for Basic EPS Calculation	36,539		36,749		36,647		36,785
Dilutive Effect of Average Outstanding Compensation Awards	Dilutive Effect of Average Outstanding Compensation Awards	—		—		—		497		Dilutive Effect of Average Outstanding Compensation Awards	—		—		—		—
Average Shares Outstanding for Diluted EPS Calculation	Average Shares Outstanding for Diluted EPS Calculation	36,749		36,962		36,785		37,465		Average Shares Outstanding for Diluted EPS Calculation	36,539		36,749		36,647		36,785

Basic Earnings (Loss) Per Share	Basic Earnings (Loss) Per Share	$	(0.58)	$	(0.02)	$	(0.72)	$	0.12	Basic Earnings (Loss) Per Share	$	(0.99)	$	(0.58)	$	(0.81)	$	(0.72)
Diluted Earnings (Loss) Per Share	Diluted Earnings (Loss) Per Share	$	(0.58)	$	(0.02)	$	(0.72)	$	0.12	Diluted Earnings (Loss) Per Share	$	(0.99)	$	(0.58)	$	(0.81)	$	(0.72)

All stock compensation awards were antidilutive as a result of the net ~~loss~~losses for the ~~quarter~~second quarters and year-to-date periods ended December 31, 2022 and December 31, 2021. For the year-to-date period ended December 31, 2022, 831,000 average restricted stock units, 131,000 average relative total shareholder return awards, and 103,000 average performance unit awards were excluded from the dilutive calculation. For the year-to-date period ended December 31, 2021, 741,000 average restricted stock units and 173,000 average relative total shareholder return awards were excluded from the dilutive calculation. Stock compensation awards were also antidilutive as a result of the net loss for the quarter ended December 31, 2020 and were excluded from the dilutive calculation, including 681,000 average restricted stock units and 164,000 average relative total shareholder return awards.

Note 8.7. Income Taxes

In determining the quarterly provision for income taxes we use an estimated annual effective tax rate which is based on expected annual income, statutory tax rates, and available tax planning opportunities in the various jurisdictions in which we operate. Unusual or infrequently occurring items are separately recognized in the quarter in which they occur. Our effective tax rates for the three and six months ended December 31, 2022 were negative tax rates of (24.6%) and (40.3%), respectively, which were lower than the combined federal and state statutory tax rates primarily due to the book versus tax treatment of nondeductible goodwill impairment, earn-out valuation adjustments, and sale of Mexican subsidiary stock. Our effective tax rates for the three

and six months ended December 31, 2021 were negative tax rates of ~~(21.0)%~~(21.0%) and ~~(4.7)%~~(4.7%), respectively, driven by the book versus tax treatment of nondeductible goodwill impairment and earn-out valuation adjustments. Our effective tax rate for the three months ended December 31, 2020 was a negative tax rate of (34.1)%, as nondeductible costs outweighed the tax benefit from the pre-tax loss during the quarter. Our effective tax rate for the six months ended December 31, 2020 of 31.3% was higher than the combined federal and state statutory tax rate due to nondeductible acquisition expenses related to the Poppin acquisition and nondeductible officer compensation which was not fully offset by tax credits.

Note 9.8. Inventories

Inventory components were as follows:


(Amounts in Thousands)	(Amounts in Thousands)	December 31, 2021		June 30, 2021		(Amounts in Thousands)	December 31, 2022		June 30, 2022
Finished products	Finished products	$	47,296	$	37,787	Finished products	$	74,364	$	66,890
Work-in-process	Work-in-process	1,742		1,320		Work-in-process	1,581		1,974
Raw materials	Raw materials	45,019		33,428		Raw materials	52,347		52,878
Total FIFO inventory	Total FIFO inventory	94,057		72,535		Total FIFO inventory	128,292		121,742
LIFO reserve	LIFO reserve	(21,920)		(18,244)		LIFO reserve	(23,480)		(23,773)
Total inventory	Total inventory	$	72,137	$	54,291	Total inventory	$	104,812	$	97,969

For interim reporting, LIFO inventories are computed based on quantities as of the end of the quarter and interim changes in price levels. Changes in quantities and price levels are reflected in the interim financial statements in the period in which they occur, except in cases where LIFO inventory liquidations are expected to be reinstated by fiscal year end. LIFO impact including the effect of changes in quantities, price levels, and inventory liquidations during the three and six-month periods ended December 31, 2022 were income of $0.7 million and $0.3 million, respectively and during the three and six-month periods ended December 31, 2021 were expense of $1.3 million and $3.7 million, respectively. The earnings impact of LIFO inventory liquidations during the three and ~~six month~~six-month periods ended December 31, 2022 and December 31, 2021 ~~and 2020 was~~were immaterial.

Note ~~10.~~9. Accumulated Other Comprehensive Income

During the three months ended December 31, ~~2021~~2022 and ~~2020,~~2021, the changes in the balances of each component of Accumulated Other Comprehensive Income, net of tax, were as follows:
Accumulated Other Comprehensive Income
(Amounts in Thousands) Unrealized Investment Gain (Loss) Postemployment Benefits Net Actuarial Gain (Loss) Interest Rate Swap Gain (Loss) Accumulated Other Comprehensive Income
Balance at September 30, 2021 $ — $ 2,075 $ (218) $ 1,857
Other comprehensive income (loss) before reclassifications — 222 336 558
Reclassification to (earnings) loss — (100) 56 (44)
Net current-period other comprehensive income (loss) — 122 392 514
Balance at December 31, 2021 $ — $ 2,197 $ 174 $ 2,371
Balance at September 30, 2020 $ 14 $ 2,154 $ — $ 2,168
Other comprehensive income (loss) before reclassifications (10) 92 — 82
Reclassification to (earnings) loss — (81) — (81)
Net current-period other comprehensive income (loss) (10) 11 — 1
Balance at December 31, 2020 $ 4 $ 2,165 $ — $ 2,169

~~During the six months ended December 31, 2021 and 2020, the changes in the balances of each component of Accumulated Other Comprehensive Income, net of tax, were as follows:~~


During the six months ended December 31, 2022 and 2021, the changes in the balances of each component of Accumulated Other Comprehensive Income, net of tax, were as follows:
Accumulated Other Comprehensive Income
(Amounts in Thousands)	Postemployment Benefits Net Actuarial Gain (Loss)		Interest Rate Swap Gain (Loss)		Accumulated Other Comprehensive Income
Balance at June 30, 2022	$	2,291	$	1,475	$	3,766
Other comprehensive income (loss) before reclassifications	277		791		1,068
Reclassification to (earnings) loss	(247)		(310)		(557)
Net current-period other comprehensive income (loss)	30		481		511
Balance at December 31, 2022	$	2,321	$	1,956	$	4,277

Balance at June 30, 2021	$	1,980	$	—	$	1,980
Other comprehensive income (loss) before reclassifications	418		75		493
Reclassification to (earnings) loss	(201)		99		(102)
Net current-period other comprehensive income (loss)	217		174		391
Balance at December 31, 2021	$	2,197	$	174	$	2,371

The following reclassifications were made from Accumulated Other Comprehensive Income to the Condensed Consolidated Statements of ~~Income (Loss):~~Operations:

Postemployment Benefits Amortization of Actuarial Gain~~(1)~~

Interest Rate Swap Gain (Loss)~~(2)~~

Amounts in parentheses indicate reductions to income.

~~(1) See~~ ~~Note 16 - Postemployment Benefits~~ ~~of Notes to Condensed Consolidated Financial Statements for further information on postemployment benefit plans.~~

~~(2) See~~ ~~Note 15 - Derivative Instruments~~ ~~of Notes to Condensed Consolidated Financial Statements for further information on derivative instruments.~~

Note ~~11.~~10. Long-Term Debt and Revolving Credit Facility

Short-term borrowings and long-term debt consisted of the following obligations:
(Amounts in Thousands) December 31,
2021 June 30,
2021
Long-term debt under revolving credit facility due October 2024; 1.88% variable interest rate at December 31, 2021 $ 40,000 $ 40,000
Other debt maturing August 2024; 9.25% fixed interest rate 79 109
Total Debt $ 40,079 $ 40,109

~~Aggregate maturities of long-term debt for the next three years through maturity are, in thousands, $33, $36 and $40,010, respectively.~~


(Amounts in Thousands)	December 31, 2022		June 30, 2022
Long-term debt under revolving credit facility due December 2025; 5.88% variable interest rate at December 31, 2022	$	60,000	$	68,000

Other debt matured August 2022; 9.25% fixed interest rate	—		79

Total Debt	$	60,000	$	68,079

As of December 31, ~~2021~~2022 we had a $125.0 million revolving credit facility with a maturity date of ~~October 2024~~December 2025 that allowed for both issuances of letters of credit and cash borrowings. We also have an option to request an increase of the amount available for borrowing to $200.0 million, subject to participating banks’ consent. The revolving loans under the Credit Agreement could consist of, at our election, advances in U.S. dollars or advances in any other currency that was agreed to by the lenders. The proceeds of the loans are to be used for general corporate purposes including acquisitions. A portion of the revolving credit facility, not to exceed $10.0 million of the principal amount, was available for the issuance of letters of credit. At December 31, ~~2021,~~2022, we had ~~$1.7~~$1.8 million in letters of credit outstanding, which reduced our borrowing capacity on the revolving credit facility. Total availability to borrow under the revolving credit facility was ~~$83.3~~$63.2 million at December 31, ~~2021.~~2022. The commitment fee on the unused portion of principal amount of the revolving credit facility is payable at a rate that ranges from 20 to 30 basis points per annum as determined by our ratio of consolidated total indebtedness to adjusted consolidated EBITDA.

During the second quarter of fiscal year 2023, we entered into a Third Amendment to Amended and Restated Credit Agreement which provides, among other items, amendments to the Credit Agreement to extend the maturity date of the Credit Facility from October 24, 2024 to December 21, 2025, and establish SOFR (“Secured Overnight Financial Rate”) as a pricing benchmark for dollar borrowings in replacement of LIBOR.

We were in compliance with all debt covenants of the revolving credit facility during the six-month period ended December 31, ~~2021.~~2022.

During the first quarter of fiscal year 2022, we entered into a Second Amendment to Credit Agreement which amended our credit agreement by adding content to facilitate a transition to a base interest rate index other than the London Interbank Offered Rate and to define the provisions by which an overpayment or erroneous payment may be requested and returned to us.

We have an interest rate swap agreement with a bank with a notional value of $40.0 million. The interest rate swap became effective in July 2021 and is accounted for using hedge accounting. See Note 14 - Derivative Instruments of Notes to Condensed Consolidated Statements of Operations for information regarding modification of our swap agreement which occurred during January 2023.

Note ~~12.~~11. Commitments and Contingent Liabilities

Guarantees:

Standby letters of credit were issued to lessors and insurance institutions and can only be drawn upon in the event of our failure to pay our obligations to a beneficiary. As of December 31, ~~2021,~~2022, we had a maximum financial exposure from unused standby letters of credit totaling ~~$1.7~~$1.8 million.

We are not aware of circumstances that would require us to perform under these arrangements and believe that the resolution of any claims that might arise in the future, either individually or in the aggregate, would not materially affect our Condensed Consolidated Financial Statements. Accordingly, no liability has been recorded as of December 31, ~~2021~~2022 with respect to the standby letters of credit. We also enter into commercial letters of credit to facilitate payments to vendors and from customers.

Product Warranties:

We provide an assurance-type warranty that guarantees our product complies with agreed-upon specifications. This warranty is not sold separately and does not convey any additional services to the customer. We estimate product warranty liability at the time of sale based on historical repair or replacement cost trends in conjunction with the length of the warranty offered. Management refines the warranty liability periodically based on changes in historical cost trends and in certain cases where specific warranty issues become known. The product warranty liability is included on the Accrued Expenses and Other lines of our Condensed Consolidated Balance Sheets.

Changes in the product warranty accrual for the six months ended December 31, ~~2021~~2022 and ~~2020~~2021 were as follows:
Six Months Ended
December 31
(Amounts in Thousands) 2021 2020
Product Warranty Liability at the beginning of the period $ 2,861 $ 3,190
Additions to warranty accrual (including changes in estimates) 178 867
Settlements made (in cash or in kind) (912) (1,025)
Product Warranty Liability at the end of the period $ 2,127 $ 3,032


	Six Months Ended
	December 31
(Amounts in Thousands)	2022		2021
Product Warranty Liability at the beginning of the period	$	2,530	$	2,861
Additions to warranty accrual (including changes in estimates)	2,687		178
Settlements made (in cash or in kind)	(2,132)		(912)
Product Warranty Liability at the end of the period	$	3,085	$	2,127

Note ~~13.~~12. Fair Value

We categorize 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.

Our policy is to recognize transfers between these levels as of the end of each quarterly reporting period. There were no transfers between these levels during the six months ended December 31, ~~2021~~2022 and ~~2020.~~2021.

There were no changes in the inputs or valuation techniques used to measure fair values compared to those disclosed in our Annual Report on Form 10-K for the fiscal year ended June 30, ~~2021.~~2022.

In connection with the acquisition of Poppin, we entered into an earn-out arrangement with remaining contingent ~~earn-out~~ payments up to ~~$65.0~~$45.0 million ~~may be paid~~ based on revenue and profitability milestones achieved through June 30, ~~2024, with the expected~~2024. We do not currently expect to have any earn-out payments ~~to be in the range of $0 to $5 million. As~~under this arrangement, therefore our contingent earn-out liability as of December 31, ~~2021 and~~2022 was zero. As of June 30, ~~2021,~~2022 the fair value of the contingent earn-out liability was ~~$2.3 million and $20.2 million, respectively.~~$3.2 million. The liability is carried at fair value and is classified in Level 3 of the fair value ~~hierarchy.~~hierarchy and is included in Other long-term liabilities line on our Condensed Consolidated Balance Sheet. During the three and six months ended December 31, 2022, the recurring revaluation to fair value resulted in a gain of $0.0 million and $3.2 million, respectively. During the three and six months ended December 31, 2021, the ~~earn-out was revalued due~~recurring revaluation to fair value resulted in a ~~lower likelihood of Poppin achieving targeted milestones during the earn-out period, resulting in decreases~~gain of $22.5 million and $17.9 million,~~, respectively,~~ ~~in the contingent liability which was recognized as income.~~ respectively.

~~The recurring Level 3 fair value measurements of our contingent consideration liability include the following significant unobservable inputs:~~
Contingent Consideration Liability Fair Value Valuation Technique Unobservable Inputs Range Selected
Revenue and EBITDA Based Payments $ 2.3 million Discounted Cash Flow Revenue Discount Rate 5.0% to 7.0% 5.8 %
EBITDA Volatility 40.0% to 50.0% 47.5 %
Revenue Volatility 8.0% to 11.0% 10.5 %

Financial Instruments Recognized at Fair Value:

The following methods and assumptions were used to measure fair value:

Financial Instrument

Level

Valuation Technique/Inputs Used

Cash Equivalents: Money market funds

Market - Quoted market prices

Trading securities: Mutual funds held in nonqualified SERP

Market - Quoted market prices

Derivative Assets: Stock warrants

Market - ~~The privately-held company is in a start-up phase.~~ The pricing of recent purchases or sales of the investment are considered, if any, as well as positive and negative qualitative evidence, in the assessment of fair value. The value of the stock warrants fluctuates primarily in relation to the value of the privately-held company's underlying securities.

Derivative Asset: Interest Rate Swap

Market - Based on observable market inputs using standard calculations, such as time value, forward interest rate yield curves, and current spot rates adjusted for Kimball International's non-performance risk.

Contingent earn-out liability

Income - Based on a valuation model that measures the present value of the probable cash payments based upon the forecasted operating performance of the acquisition and a discount rate that captures the risk associated with the liability.

Recurring Fair Value Measurements:

As of December 31, ~~2021~~2022 and June 30, ~~2021,~~2022, the fair values of financial assets that are measured at fair value on a recurring basis using the market or income approach are categorized as follows:


											December 31, 2022
(Amounts in Thousands)										(Amounts in Thousands)	Level 1		Level 2		Level 3		Total
Assets										Assets
Cash equivalents: Money market funds										Cash equivalents: Money market funds	$	8,308	$	—	$	—	$	8,308

Derivatives: Interest rate swap contract										Derivatives: Interest rate swap contract	—		2,635		—		2,635

Trading Securities: Mutual funds in nonqualified SERP										Trading Securities: Mutual funds in nonqualified SERP	10,533		—		—		10,533
Derivatives: Stock warrants										Derivatives: Stock warrants	—		—		1,500		1,500
Total assets at fair value										Total assets at fair value	$	18,841	$	2,635	$	1,500	$	22,976

		December 31, 2021									June 30, 2022
(Amounts in Thousands)	(Amounts in Thousands)	Level 1		Level 2		Level 3		Total		(Amounts in Thousands)	Level 1		Level 2		Level 3		Total
Assets	Assets									Assets
Cash equivalents: Money market funds	Cash equivalents: Money market funds	$	544	$	—	$	—	$	544	Cash equivalents: Money market funds	$	5,508	$	—	$	—	$	5,508

Derivatives: Interest rate swap contract	Derivatives: Interest rate swap contract	—		232		—		232		Derivatives: Interest rate swap contract	—		1,986		—		1,986

Trading Securities: Mutual funds in nonqualified SERP	Trading Securities: Mutual funds in nonqualified SERP	14,312		—		—		14,312		Trading Securities: Mutual funds in nonqualified SERP	10,517		—		—		10,517
Derivatives: Stock warrants	Derivatives: Stock warrants	—		—		1,500		1,500		Derivatives: Stock warrants	—		—		1,500		1,500
Total assets at fair value	Total assets at fair value	$	14,856	$	232	$	1,500	$	16,588	Total assets at fair value	$	16,025	$	1,986	$	1,500	$	19,511
Liabilities	Liabilities									Liabilities

Contingent earn-out liability	Contingent earn-out liability	—		—		2,290		2,290		Contingent earn-out liability	—		—		3,160		3,160
Total liabilities at fair value	Total liabilities at fair value	$	—	$	—	$	2,290	$	2,290	Total liabilities at fair value	$	—	$	—	$	3,160	$	3,160


		June 30, 2021
(Amounts in Thousands)		Level 1		Level 2		Level 3		Total
Assets
Cash equivalents: Money market funds		$	18,762	$	—	$	—	$	18,762

Trading Securities: Mutual funds in nonqualified SERP		14,049		—		—		14,049
Derivatives: Stock warrants		—		—		1,500		1,500
Total assets at fair value		$	32,811	$	—	$	1,500	$	34,311
Liabilities

Contingent earn-out liability		—		—		20,190		20,190
Total liabilities at fair value		$	—	$	—	$	20,190	$	20,190

Non-Recurring Fair Value Measurements:

Certain assets are measured at fair value on a non-recurring basis. These assets are not measured at fair value on an ongoing basis but are subject to fair value adjustments when events or circumstances indicate a significant adverse effect on the fair value of the asset. Assets that are written down to fair value when impaired are not subsequently adjusted to fair value unless further impairment occurs.

Non-recurring Fair Value Adjustment

Level

Valuation Technique/Inputs Used

Impairment of Right of Use Lease Assets and Related Asset Groups

Income - Based on a valuation model that measures the present value of remaining lease payments less estimated sublease income at a discount rate that captures the risk associated with the future cash flows.

Impairment of Goodwill

Income - Based on a valuation model that determines fair value based on estimated discounted future cash flows of each reporting unit, requiring the use of significant estimates and assumptions, including revenue growth rates and EBITDA margins, future market conditions and discount rates that capture the risk associated with future cash flows.

During the year-to-date period of fiscal ~~years~~year 2022, ~~and 2021,~~ we recorded $0.7 million ~~and $0.2 million, respectively~~ of right-of-use asset and associated leasehold improvement impairment resulting from closure offrom our leased Pennsylvania and Maryland facilities as part of our transformation restructuring plan. The impairment loss is included as a component of the Restructuring

Expense line item on our Condensed Consolidated Statements of ~~Income.~~Operations. The asset groups used to calculate impairment included the right-of-use lease assets, leasehold improvements, and lease liabilities.

During the second quarter of fiscal ~~year~~years 2023 and 2022, we recorded $36.7 million and $34.1 million, respectively, of goodwill impairment related to our Poppin business. Annual goodwill ~~impairment~~ testing in both years determined the carrying value of the Poppin reporting unit exceeded its relative fair ~~value, most notably driven by~~value. No goodwill remains on the ~~impact of COVID-19 and supply chain disruptions on our sales growth models. The impairment loss is included in the Goodwill Impairment line item on our Condensed Consolidated Statements of Income.~~Poppin goodwill reporting unit.

Financial Instruments Not Carried At Fair Value:

Financial instruments that are not reflected in the Condensed Consolidated Balance Sheets at fair value that have carrying amounts which approximate fair value include the following:

Financial Instrument

Level

Valuation Technique/Inputs Used

Notes receivable

Market - Price approximated based on the assumed collection of receivables in the normal course of business, taking into account the customer’s non-performance risk.

Equity securities without readily determinable fair value

Cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. Impairment is assessed qualitatively.

The carrying value of our cash deposit accounts, trade accounts receivable, trade accounts payable, customer deposits, ~~debt,~~ and dividends payable approximates fair value due to their relatively short maturity and immaterial non-performance risk. Based upon variable interest rates currently available to the Company, the fair value of our debt approximates the carrying value.

Note ~~14.~~13. Investments

Supplemental Employee Retirement Plan Investments:

We maintain a self-directed supplemental employee retirement plan (“SERP”) in which executive employees are eligible to participate. The SERP utilizes a rabbi trust, and therefore assets in the SERP portfolio are subject to creditor claims in the event of bankruptcy. We recognize SERP investment assets on the Condensed Consolidated Balance Sheets at current fair value. A SERP liability of the same amount is recorded on the Condensed Consolidated Balance Sheets representing an 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 the Other Income (Expense) section of the Condensed Consolidated Statements of ~~Income.~~Operations. Adjustments made to revalue the SERP liability are also recognized in income or expense as selling and administrative expenses

and offset valuation adjustments on SERP investment assets. Net unrealized holding gains (losses) for the six months ended December 31, ~~2021~~2022 and ~~2020~~2021 were, in ~~thousands, $163~~millions, $(0.2) and ~~$1,747,~~$0.2, respectively.

SERP asset and liability balances were as follows:


(Amounts in Thousands)	(Amounts in Thousands)	December 31, 2021		June 30, 2021		(Amounts in Thousands)	December 31, 2022		June 30, 2022
SERP investments - current asset	SERP investments - current asset	$	3,860	$	3,905	SERP investments - current asset	$	3,191	$	3,284
SERP investments - other long-term asset	SERP investments - other long-term asset	10,452		10,144		SERP investments - other long-term asset	7,342		7,233
Total SERP investments	Total SERP investments	$	14,312	$	14,049	Total SERP investments	$	10,533	$	10,517

SERP obligation - current liability	SERP obligation - current liability	$	3,860	$	3,905	SERP obligation - current liability	$	3,191	$	3,284
SERP obligation - other long-term liability	SERP obligation - other long-term liability	10,452		10,144		SERP obligation - other long-term liability	7,342		7,233
Total SERP obligation	Total SERP obligation	$	14,312	$	14,049	Total SERP obligation	$	10,533	$	10,517

Equity securities without readily determinable fair value:

We hold a total investment of $2.0 million in a privately-held company, including $0.5 million in equity securities without readily determinable fair value. The investment in equity securities without readily determinable fair value is included in the Other Assets line of the Condensed Consolidated Balance Sheets. See Note 1312 - Fair Value of Notes to Condensed Consolidated Financial Statements for more information on the valuation of these securities. We do not hold a majority voting interest and are not the variable interest primary beneficiary of the privately-held company, thus consolidation is not required.

Note ~~15.~~14. Derivative Instruments

Interest Rate Swap:

We are subject to interest rate risk related to the revolving credit facility and we ~~enter~~historically have entered into interest rate swap agreements that are based on LIBOR to manage this exposure. The interest rate swap agreements are designated as cash flow hedges that qualify for hedge accounting under the hypothetical derivative method. Fair value adjustments are recorded as a component of Accumulated Other Comprehensive Income (“AOCI”), net of tax ~~(“AOCI”)~~ in the Condensed Consolidated Balance Sheets. Balances in AOCI are reclassified into earnings when transactions related to the underlying risk are settled. As of December 31, ~~2021~~2022 we held an interest rate ~~swaps~~swap with a notional ~~values~~value totaling $40.0 million and a weighted average LIBOR fixed rate of 0.834%. ~~See~~ ~~Note 13 - Fair Value~~ ~~of Notes to Condensed Consolidated Financial Statements for information regarding the fair value of our interest rate swap.~~

At December 31, ~~2021,~~2022, our interest rate swap was recorded at fair value in current assets and non-current assets at $1.4 million and $1.2 million, respectively. At June 30, 2022, our interest rate swap was recorded in current assets and non-current assets at ~~$0.1~~$0.9 million and ~~$0.1~~$1.1 million, respectively.

The pre-tax balance of interest rate swap gains in AOCI as of December 31, ~~2021~~2022 was ~~$0.2~~$2.6 million. See Note 109 - Accumulated Other Comprehensive Income of Notes to Condensed Consolidated Financial Statements for information regarding activity recorded as a component of AOCI during the three and six months ended December 31, ~~2021.~~2022. As of December 31, ~~2021,~~2022, we have ~~$0.1~~$1.4 million of interest rate swap gains recorded in AOCI which are expected to be reclassified into earnings within the next twelve months.

Subsequent to our second quarter of fiscal year 2023, we modified our interest rate swap agreement to be based on SOFR to align with the rate in our Third Amendment to Amended and Restated Credit Agreement that we entered into during December 2022.

Stock Warrants:

We hold a total investment of $2.0 million in a privately-held company, including $1.5 million in stock warrants. The investment in stock warrants is accounted for as a derivative instrument and is included in the Other Assets line of the Condensed Consolidated Balance Sheets. The stock warrants are convertible into equity shares of the privately-held company upon achieving certain milestones. The value of the stock warrants will fluctuate primarily in relation to the value of the privately-held company's underlying securities, either providing an appreciation in value or potentially expiring with no value. During the quarter ended December 31, ~~2021,~~2022, the change in fair value of the stock warrants was not significant. See Note 1312 - Fair Value of Notes to Condensed Consolidated Financial Statements for more information on the valuation of these securities.

~~Note 16. Postemployment Benefits~~

~~Our domestic employees participate in severance plans which provide severance benefits to eligible employees meeting the plans’ qualifications, primarily for involuntary termination without cause.~~

~~The components of net periodic postemployment benefit cost applicable to our severance plans were as follows:~~
Three Months Ended Six Months Ended
December 31 December 31
(Amounts in Thousands) 2021 2020 2021 2020
Service cost $ 129 $ 121 $ 265 $ 243
Interest cost 13 10 28 21
Amortization of actuarial income (134) (109) (270) (221)
Net periodic benefit cost $ 8 $ 22 $ 23 $ 43

The benefit cost in the above table includes only normal recurring levels of severance activity, as estimated using an actuarial method. Unusual or non-recurring severance actions, such as restructuring actions, are not estimable using actuarial methods and are expensed in accordance with the applicable U.S. GAAP.

Note ~~17.~~15. Stock Compensation

Stock-based compensation expense during the quarter and year-to-date periods ended December 31, 2022, was $1.3 million and $2.5 million, respectively, and during the quarter and year-to-date periods ended December 31, 2021, was $1.5 million and $2.6 million, ~~respectively, and during the quarter and year-to-date periods ended December 31, 2020, was $1.3 million and $2.3 million,~~ respectively. The total income tax benefit for stock compensation arrangements during the quarter and year-to-date ~~period~~periods ended December 31, 2022, was $0.2 million and $0.5 million, respectively, and during the quarter and year-to-date periods ended December 31, 2021, was $0.3 million and $0.6 million, ~~respectively, and during the quarter and year-to-date period ended December 31, 2020 was $0.3 million and $0.6 million,~~ respectively.

During fiscal year ~~2022,~~2023, the following stock compensation was awarded to officers and other key employees and to members of the Board of Directors who are not employees. All awards were granted under the 2017 Stock Incentive Plan. For more information on stock compensation awards, refer to our Annual Report on Form 10-K for the fiscal year ended June 30, ~~2021.~~2022.


Type of Award	Type of Award	Quarter Awarded	Targeted Shares or Units	Grant Date Fair Value (4)			Type of Award	Quarter Awarded	Targeted Shares or Units	Grant Date Fair Value (4)

Relative Total Shareholder Return Performance Units (1)		1st Quarter	63,110	$15.54

Performance Units (1)							Performance Units (1)	1st Quarter	152,034	$7.33
Performance Units (1)							Performance Units (1)	2nd Quarter	6,160	$6.52
Restricted Stock Units (2)	Restricted Stock Units (2)	1st Quarter	214,330	$12.57	-	$13.02	Restricted Stock Units (2)	1st Quarter	379,087	$7.83
Restricted Stock Units (2)	Restricted Stock Units (2)	2nd Quarter	42,142	$10.42	-	$11.05	Restricted Stock Units (2)	2nd Quarter	10,415	$6.59	-	$7.39

Unrestricted Shares (3)	Unrestricted Shares (3)	1st Quarter	8,966	$13.11	-	$13.25	Unrestricted Shares (3)	1st Quarter	21,318	$7.77
Unrestricted Shares (3)	Unrestricted Shares (3)	2nd Quarter	9,246	$11.58			Unrestricted Shares (3)	2nd Quarter	17,940	$7.41

(1) Performance units were awarded to key ~~officers under the Company’s Relative Total Shareholder Return program.~~officers. Vesting occurs at June 30, ~~2024.~~2025. Participants will earn from 0% to 200% of the target award depending upon ~~how~~ the compound annual growth rate of Kimball ~~International common stock ranks within the peer group~~International’s adjusted earnings per share at the end of the performance period. The maximum number of units that can be issued under these awards ~~excluding forfeited awards,~~ is ~~121,298.~~316,388.

(2) Restricted stock units were awarded to officers and key employees. Vesting occurs at June 30, ~~2022, June 30,~~ 2023 and June 30, ~~2024.~~2025. Upon vesting, the outstanding number of restricted stock units and the value of dividends accumulated over the vesting period are converted to shares of common stock.

(3) Unrestricted shares were awarded to non-employee members of the Board of Directors ~~and key employees~~ as consideration for service to Kimball International and do not have vesting periods, holding periods, restrictions on sale, or other restrictions.

(4) The grant date fair value of the ~~Relative Total Shareholder Return awards~~performance units was ~~calculated using a Monte Carlo simulation. This valuation technique includes estimating~~based on the ~~movement~~stock price at the date of ~~stock prices and~~ the ~~effects~~award, reduced by the present value of ~~volatility, interest rates, and dividends.~~dividends normally paid over the vesting period which are not payable on outstanding performance units. The grant date fair value of the restricted stock units ~~that receive dividends~~ and unrestricted shares was based on the stock price at the date of the award.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Business Overview

Kimball International (the “Company,” “Kimball International,” “we,” “us,” or “our”) is a leading omnichannel commercial furnishings company with deep expertise in the Workplace, Health, and Hospitality markets. We combine our bold entrepreneurial spirit, a history of craftsmanship and today’s design-driven thinking alongside a commitment to our culture of caring and lasting connections with our customers, shareholders, employees, and communities. For over 70 years, our brands have seized opportunities to customize solutions into personalized experiences, turning ordinary spaces into meaningful places. Our family of brands includes Kimball, National, Etc., Interwoven, Poppin, Kimball Hospitality, ~~D’style~~ and ~~Poppin.~~D’style.

Management currently considers the following events, trends, and uncertainties to be most important to understanding our financial condition and operating performance:

•~~COVID-19~~Operating Environment - While we are mindful of the challenging macroeconomic environment and ~~Operational Impacts~~ heightened recessionary risks, through our focused set of strategic choices we are successfully delivering in-demand products and solutions to end markets and geographies with higher growth, resiliency and favorable return-to-office dynamics.

•Goodwill Impairment- ~~The COVID-19 pandemic continued to adversely impact our financial performance during~~During the second quarter of fiscal year 2023 we recorded goodwill impairment of $36.7 million as the carrying value of Poppin exceeded its fair value as of the October 31, 2022 ~~as shipping and manufacturing disruptions related to supply chain and labor constraints have driven delays. While total orders received during~~testing date. No goodwill remains on the second quarter of fiscal year 2022 increased 28% compared to the same quarter of fiscal year 2021 with increases in workplace and health more than offsetting a decline in hospitality orders received, supply and labor constraints may delay conversion of orders to shipments. We continue to believe our principal sources of liquidity from available funds on hand, cash generated from operations, and the availability of borrowing under our revolving credit facility will be sufficient to meet our working capital and other operating needs for at least the next twelve months. The following are key uncertainties related to the COVID-19 pandemic:

◦Labor constraints - A shortage of manufacturing labor is a limiting factor for our production. In addition to limiting the volume of production, the labor shortage also may drive increased labor costs driven by both increased wages and overtime expenses.

◦Supply constraints - We are experiencing inflationary pressure on our materials coupled with supplier volatility as certain suppliers are also experiencing material and labor shortages. We are working to offset these issues through price increases on our products, supplier negotiations, global sourcing initiatives, product re-engineering and parts standardization. To avoid future gross margin compression, timely adjustments to customer prices in conjunction with inflationary pressure on our manufacturing inputs may be necessary.

◦Shipping disruptions - We expect to continue to be exposed to fluctuations in both domestic freight and ocean freight costs. Transportation costs are managed by optimizing logistics and supply chain planning, but the current freight rate levels are elevated such that significant year-over-year increases occurred during the second half of our fiscal year 2021 and first half of 2022 and are expected to remain elevated. We intend to adjust customer pricing as necessary to mitigate increased freight costs.

◦Vaccine mandates – The Biden administration had proposed a vaccine mandate on federal contractors. As a federal contractor, we took steps to comply with the requirements of Executive Order 14042, which is currently pending the outcome of ongoing litigation. To incentivize employee compliance, during December 2021 we offered a one-time incentive to employees who complied with the requirements of Executive Order 14042 which totaled $2.7 million in the second quarter of fiscal year 2022.

Poppin goodwill reporting unit.

•Transformation Restructuring Plan - ~~Included in the current phase of~~Current actions under our transformation restructuring plan are focused on activities such as the streamlining of manufacturing facilities, ~~voluntary retirement incentive programs, and~~ the consolidation of ~~showrooms.~~showrooms, and the closure of our manufacturing

facility in Tijuana, Mexico which was completed during the first quarter of fiscal year 2023. This phase of the transformation restructuring plan began in the first quarter of our fiscal year 2021, and we expect a substantial majority of the restructuring actions to be completed by the end of fiscal year 2023. In addition to the savings already generated from the first phase of the transformation restructuring plan, the efforts of this second phase of the transformation restructuring plan are expected to generate annualized pre-tax savings of approximately ~~$16.0~~$19.0 million when it is fully implemented. See Note 43 - Restructuring of Notes to Condensed Consolidated Financial Statements in Item 1 of this Form 10-Q for additional information.

•During the second quarter of fiscal year 2021, we acquired Poppin, Inc. (“Poppin”), a tech-enabled, market-leading B2B commercial furniture design company headquartered in New York City, New York. Poppin designs commercial-grade furniture that is made to mix, match, and scale in today’s modern office and work-from-home environments. In addition to the cash consideration paid at acquisition date, the acquisition purchase price included contingent payments based on revenue and profitability milestones achieved through June 30, 2024. As of the acquisition date the fair value of the contingent earn-

out was $31.8 million. As of the end of our second quarter of fiscal year 2022 the fair value of the contingent earn-out liability was $2.3 million. During the second quarter of fiscal year 2022 we recorded goodwill impairment of $34.1 million as the carrying value of Poppin exceeded its fair value as of the October 31, 2022 testing date. See ~~Note 3 - Acquisition~~ ~~of Notes to Condensed Consolidated Financial Statements in Item 1 of this Form 10-Q for additional information.~~

•In connection with the $40.0 million of borrowings on our revolving credit facility, during the first half of fiscal year 2022 we entered into an interest rate swap agreement with a bank with a notional value of $40.0 million. The interest rate swap agreement exchanges the variable interest rate on the revolving line of credit with a fixed interest rate and is used to hedge our exposure to interest rate risk.

•Due to the contract and project nature of furniture markets, fluctuation in the demand for our products and variation in the gross margin on those projects is inherent to our business, which in turn impacts our operating results. Effective management of our manufacturing capacity is and will continue to be critical to our success. See below for further details regarding current sales and order backlog trends.

•We expect to continue to invest in capital expenditures prudently, particularly for projects that will enhance our capabilities and diversification while providing an opportunity for growth and improved profitability.

•We continue to maintain a strong balance sheet. Our short-term liquidity available, represented as cash and cash equivalents plus the unused amount of our revolving credit facility, was ~~$99.6~~$77.3 million at December 31, ~~2021.~~2022.

Financial Overview


		At or for the Three Months Ended								For the Six Months Ended									At or for the Three Months Ended								For the Six Months Ended
		December 31								December 31									December 31								December 31
(Amounts in Millions, Except for Per Share Data)	(Amounts in Millions, Except for Per Share Data)	2021			2020			% Change		2021			2020			% Change		(Amounts in Millions, Except for Per Share Data)	2022			2021			% Change		2022			2021			% Change
Net Sales	Net Sales	$	151.4		$	136.2		11	%	$	308.0		$	284.1		8	%	Net Sales	$	183.0		$	151.4		21	%	$	360.8		$	308.0		17	%
Organic Net Sales*		137.9			133.5			3	%	279.3			281.5			(1	%)

Gross Profit	Gross Profit	46.4			45.5			2	%	95.5			97.9			(2	%)	Gross Profit	66.1			46.4			42	%	125.8			95.5			32	%
Gross Profit %																		Gross Profit %	36.2		%	30.7		%			34.9		%	31.0		%

Selling and Administrative Expenses	Selling and Administrative Expenses	51.9			46.0			13	%	102.1			87.7			16	%	Selling and Administrative Expenses	56.8			51.9			9	%	110.2			102.1			8	%

Contingent Earn-out (Gain) Loss	Contingent Earn-out (Gain) Loss	(22.5)			—					(17.9)			—					Contingent Earn-out (Gain) Loss	—			(22.5)					(3.2)			(17.9)
Restructuring Expense	Restructuring Expense	1.0			1.6					2.5			5.9					Restructuring Expense	1.7			1.0					2.0			2.5
Goodwill Impairment	Goodwill Impairment	34.1			—					34.1			—					Goodwill Impairment	36.7			34.1					36.7			34.1
Operating Income (Loss)	Operating Income (Loss)	(18.1)			(2.0)			(790	%)	(25.2)			4.4			(674	%)	Operating Income (Loss)	(29.0)			(18.1)			(60	%)	(20.0)			(25.2)			21	%
Operating Income (Loss) %	Operating Income (Loss) %	(12.0		%)	(1.5		%)			(8.2		%)	1.5		%			Operating Income (Loss) %	(15.9		%)	(12.0		%)			(5.6		%)	(8.2		%)
Adjusted Operating Income (Loss) *	Adjusted Operating Income (Loss) *	$	(0.4)		$	4.9		(108	%)	$	0.2		$	16.5		(99	%)	Adjusted Operating Income (Loss) *	$	11.5		$	(0.4)		2,856	%	$	18.7		$	0.2		10,182	%
Adjusted Operating Income (Loss) % *	Adjusted Operating Income (Loss) % *	(0.3		%)	3.6		%			0.1		%	5.8		%			Adjusted Operating Income (Loss) % *	6.3		%	(0.3		%)			5.2		%	0.1		%
Net Income (Loss)	Net Income (Loss)	$	(21.3)		$	(0.8)		(2,443	%)	$	(26.4)		$	4.5		(680	%)	Net Income (Loss)	$	(36.1)		$	(21.3)		(69	%)	$	(29.5)		$	(26.4)		(12	%)
Net Income (Loss) as a Percentage of Net Sales	Net Income (Loss) as a Percentage of Net Sales	(14.1		%)	(0.6		%)			(8.6		%)	1.6		%			Net Income (Loss) as a Percentage of Net Sales	(19.7		%)	(14.1		%)			(8.2		%)	(8.6		%)
Adjusted Net Income (Loss) *	Adjusted Net Income (Loss) *	$	(5.7)		$	3.3		(272	%)	$	(3.8)		$	11.9		(131	%)	Adjusted Net Income (Loss) *	3.0			(5.7)			152	%	$	7.8		$	(3.8)		307	%
Diluted Earnings (Loss) Per Share	Diluted Earnings (Loss) Per Share	$	(0.58)		$	(0.02)		(2,800	%)	$	(0.72)		$	0.12		(700	%)	Diluted Earnings (Loss) Per Share	$	(0.99)		$	(0.58)		(71	%)	$	(0.81)		$	(0.72)		(13	%)
Adjusted Diluted Earnings (Loss) Per Share*	Adjusted Diluted Earnings (Loss) Per Share*	$	(0.16)		$	0.09		(278	%)	$	(0.10)		$	0.32		(131	%)	Adjusted Diluted Earnings (Loss) Per Share*	$	0.08		$	(0.16)		150	%	$	0.21		$	(0.10)		310	%
Return on Invested Capital **	Return on Invested Capital **	0.9		%	15.9		%			1.5		%	12.4		%			Return on Invested Capital **	24.9		%	0.9		%			22.9		%	1.5		%
Adjusted EBITDA *	Adjusted EBITDA *	$	4.0		$	9.1		(56	%)	$	8.9		$	24.9		(64	%)	Adjusted EBITDA *	$	16.0		$	4.0		297	%	$	27.6		$	8.9		209	%
Adjusted EBITDA % *	Adjusted EBITDA % *	2.7		%	6.7		%			2.9		%	8.8		%			Adjusted EBITDA % *	8.8		%	2.7		%			7.6		%	2.9		%
Order Backlog **	Order Backlog **	$	196.9		$	144.9		36	%									Order Backlog **	$	144.8		$	196.9		(26	%)

* Items indicated represent Non-GAAP (Generally Accepted Accounting Principles) measurements.

** Items indicated represent Key Performance Indicators.

See the “Non-GAAP Financial Measures and Other Key Performance Indicators” section below.

2622


Net Sales by End Market	Net Sales by End Market													Net Sales by End Market
		Three Months Ended						Six Months Ended							Three Months Ended						Six Months Ended
		December 31						December 31							December 31						December 31
(Amounts in Millions)	(Amounts in Millions)	2021		2020		% Change		2021		2020		% Change		(Amounts in Millions)	2022		2021		% Change		2022		2021		% Change
Workplace	Workplace	$	106.1	$	87.4	21	%	$	213.2	$	182.7	17	%	Workplace	$	124.3	$	107.9	15	%	$	256.3	$	216.5	18	%
Health	Health	28.5		27.0		6	%	53.1		47.6		12	%	Health	31.0		26.6		17	%	57.1		49.6		15	%
Hospitality	Hospitality	16.8		21.8		(23	%)	41.7		53.8		(22	%)	Hospitality	27.7		16.9		64	%	47.4		41.9		13	%
Total Net Sales	Total Net Sales	$	151.4	$	136.2	11	%	$	308.0	$	284.1	8	%	Total Net Sales	$	183.0	$	151.4	21	%	$	360.8	$	308.0	17	%

Our Workplace end market includes sales to the commercial, financial, government, and education vertical markets and eBusiness. The revenue of ~~the~~ Poppin ~~acquisition~~ is included in eBusiness.

Second quarter fiscal year ~~2022~~2023 consolidated net sales ~~were $151.4~~increased $31.6 million, or 21% compared to second quarter fiscal year ~~2021~~2022 net sales ~~of $136.2 million, an 11% increase. Organic net sales~~driven by increased ~~$4.4 million, or 3% compared to the second quarter of fiscal year 2021 as increased~~ pricing ~~and increased sales~~ of workplace and health products ~~more than offset a decline~~and higher volume in our hospitality market. Consolidated net sales for the year-to-date period of fiscal year ~~2022~~2023 increased 8%17% compared to the same year-to-date period in fiscal year ~~2021. Organic net sales decreased $2.2 million, or 1% compared to the year-to-date period of fiscal year 2021 as~~2022 driven by increased pricing ~~and increased sales~~ of workplace and health products ~~were offset by a decline in our hospitality market.~~coupled with increased sales volume of workplace products. Each of our end market sales levels can fluctuate depending on overall demand and mix of projects in a given period.

Order backlog at December 31, ~~2021 increased $52.0~~2022 decreased $52.2 million, or ~~36%~~26%, when compared to the backlog level as of December 31, ~~2020,~~2021 as ~~the backlog~~concerns of ~~Poppin coupled with the increased backlog of~~a recession led customers to delay orders which drove declines in workplace and health ~~more than offset a decline~~order rates in ~~our hospitality end market backlog. Increased~~the quarter ended December 31, 2022. Our manufacturing lead times have improved which allowed us to fulfill orders quicker thus also ~~contributed to the increase in~~reducing our ~~backlog levels.~~backlog. Backlog at a point in time may not be indicative of future sales trends.

Gross profit as a percent of net sales ~~decreased 270~~increased 550 basis points to 36.2% for the second quarter of fiscal year 2023 from 30.7% for the second quarter of fiscal year ~~2022 from 33.4% for the second quarter of fiscal year 2021.~~2022. Gross profit as a percent of net sales ~~decreased 350~~increased 390 basis points to 34.9% for the year-to-date period of fiscal year 2023 from 31.0% for the year-to-date period of fiscal year ~~2022 from 34.5% for the year-to-date period of fiscal year 2021. For both the~~2022. The increased second quarter and ~~year-to-date periods,~~year to date gross profit as a percent of net sales was driven by price increases, the impact of LIFO accounting which generated income during the current year compared to expense in the prior year, and savings realized from our operational excellence initiatives ~~and lower healthcare expenses were~~which more than offset by inflationary pressure on materials, increased freight costs, and other manufacturing ~~labor increases,~~expense increases. The prior year second quarter and year to date gross profit also included the ~~cost~~costs associated with the one-time COVID vaccine incentive ~~and~~which did not repeat in the ~~impact of LIFO expense.~~current year.

Selling and administrative (S&A) expenses in the second quarter of fiscal year 2023 compared to the second quarter of fiscal year 2022 increased $4.9 million and decreased 330 basis points as a percent of net sales, due to the leverage of our increased sales. Selling and administrative expenses in the year-to-date period of fiscal year 2023 compared to the year-to-date period of fiscal year 2022 increased $8.1 million and decreased 250 basis points as a percent of net sales. Increased S&A expenses in the second quarter and year-to-date period ~~of fiscal~~were driven by increased incentive compensation costs, increased salary expense driven by inflation, increased advertising and marketing expense, and higher warranty expense. The prior year ~~2022 compared to the~~ second quarter and ~~year-to-date period of fiscal~~ year ~~2021 increased $6.0 million and $14.4 million, respectively, and 60 and 220 basis points as a percent of net sales, respectively, due~~ to date S&A expense also included costs associated with the ~~incremental selling and administrative expenses of our acquired Poppin business~~one-time COVID vaccine incentive which ~~were partially offset by reductions in our selling and administrative expense of our organic business. The consulting costs related to the Poppin acquisition in the prior year second quarter~~ did not repeat in the current year second quarter. We also recorded decreased employee benefit expenses, decreased salary expenses, increased incentive compensation expenses, increased expense for our COVID vaccine incentive, and increased travel and entertainment expenses compared to the second quarter and year-to-date period of the prior year. During the second quarter and year-to-date period of fiscal year 2022 we recorded lower selling and administrative expenses related to the normal revaluation to fair value of our Supplemental Employee Retirement Plan (“SERP”) liability. The impact from the change in the SERP liability that was recognized in selling and administrative expenses was offset with the change in fair value of the SERP investments which was recorded in Other Income (Expense), and thus there was no effect on net income.

We recognized pre-tax restructuring expense of $1.7 million and $2.0 million for the three and six months ended December 31, 2022 and $1.0 million and $2.5 million for the three and six months ended December 31, ~~2021, respectively, and $1.6 million and $5.9 million for the three and six months ended December 31, 2020, respectively.~~2021. See Note 43 - Restructuring of Notes to Condensed Consolidated Financial Statements in Item 1 of this Form 10-Q for additional information.

In connection with our annual goodwill impairment test, we assessed goodwill at the reporting unit level for impairment during our second quarter of fiscal year ~~2022~~2023 and based on our analysis determined our Poppin reporting unit had carrying value in excess of the calculated fair value. The decline in the fair value of the reporting unit was driven by revised sales and profitability forecasts primarily attributable to changes in demand due to uncertainty in the ~~ongoing COVID-19 pandemic and supply chain constraints.~~macroeconomic environment. As a result, we recorded a pre-tax, non-cash charge to reduce the carrying value of goodwill by ~~$34.1~~$36.7 million during the second quarter of fiscal year ~~2022.~~2023. During the second quarter of fiscal year 2022 we also recorded a pre-tax, non-cash charge to reduce the carrying value of goodwill by $34.1 million primarily attributable to changes in demand due to the ongoing COVID-19 pandemic and supply chain constraints. We ~~also~~

recorded a non-cash pre-tax contingent earn-out benefit during the year-to-date period of fiscal year 2023 of $3.2 million and during the second quarter and year-to-date periods of fiscal year 2022, of $22.5 million and $17.9 million,

respectively, which partially offset the goodwill impairment, as there is a lower likelihood of Poppin achieving targeted milestones during the earn-out period.

Other Income (Expense) consisted of the following:


		Three Months Ended				Six Months Ended					Three Months Ended				Six Months Ended
		December 31				December 31					December 31				December 31
(Amounts in Thousands)	(Amounts in Thousands)	2021		2020		2021		2020		(Amounts in Thousands)	2022		2021		2022		2021
Interest Income	Interest Income	$	43	$	87	$	52	$	189	Interest Income	$	112	$	43	$	189	$	52
Interest Expense	Interest Expense	(275)		(58)		(532)		(86)		Interest Expense	(696)		(275)		(1,377)		(532)

Gain on Supplemental Employee Retirement Plan Investments	Gain on Supplemental Employee Retirement Plan Investments	680		1,381		587		2,139		Gain on Supplemental Employee Retirement Plan Investments	619		680		160		587

Other	Other	29		(1)		(64)		(16)		Other	51		29		20		(64)
Other Income (Expense), net	Other Income (Expense), net	$	477	$	1,409	$	43	$	2,226	Other Income (Expense), net	$	86	$	477	$	(1,008)	$	43

Our effective tax rate for the three and six months ended December 31, 2022 were negative tax rates of (24.6%) and (40.3%) which were lower than the combined federal and state statutory tax rate primarily due to the book versus tax treatment of nondeductible goodwill impairment, earn-out valuation adjustment, and the sale of our Mexican subsidiary stock. Our effective tax rate for the three and six months ended December 31, 2021 were negative tax rates of ~~(21.0)%~~(21.0%) and ~~(4.7)%~~(4.7%), respectively, driven by the book versus tax treatment of nondeductible goodwill impairment and earn-out valuation adjustments. Our effective tax rate for the three months ended December 31, 2020 was a negative tax rate of (34.1)%, as nondeductible costs outweighed the tax benefit from the pre-tax loss during the quarter. Our effective tax rate for the six months ended December 31, 2020 of 31.3% was higher than the combined federal and state statutory tax rate due to nondeductible acquisition expenses related to the Poppin acquisition and nondeductible officer compensation which was not fully offset by tax credits.

Comparing the balance sheet as of December 31, ~~2021~~2022 to June 30, ~~2021,~~2022, our accounts receivable decreased as several larger projects were finalized and the payment was received. Our prepaid expenses decline was driven by receipt of prepaid inventory ~~and accounts payable balances increased as~~in transit. As uncertainty in the macroeconomic environment is impacting customer order patterns, we ~~are ramping up~~revised our material purchases and production to fulfill our increased order backlog and to cushion against supply chain disruptions. Our customer deposit balance has also increased in line with our increased order backlog. Finally, due to ~~COVID-19 and supply chain disruptions which have temporarily delayed Poppin’s~~Poppin sales growth expectations weand recognized a goodwill impairment charge which reduced our goodwill balance. Our accounts payable balance ~~and~~has declined as we ~~also reduced our earn-out liability due to the lower likelihood of Poppin achieving targeted milestones during the earn-out period.~~have decelerated inventory purchases.

Liquidity and Capital Resources

Our total cash and cash equivalents was ~~$16.3~~$14.1 million at December 31, ~~2021~~2022 and ~~$24.3~~$10.9 million at June 30, ~~2021.~~2022. Our total debt was ~~$40.1~~$60.0 million at ~~both~~ December 31, ~~2021~~2022 and $68.1 million at June 30, ~~2021. Cash~~2022. During the first six months of fiscal year 2023, cash flows ~~from~~provided by operations of ~~$12.6~~$31.5 million ~~were~~ more than offset by capital expenditures including capitalized software of $11.5 million, ~~and~~ the return of capital to shareholders in the form of dividends ~~totaling~~which totaled $6.6 million and stock repurchases ~~totaling $2.4 million during the first six months of fiscal year 2022.~~which totaled $3.0 million.

Working capital at December 31, ~~2021~~2022 and June 30, ~~2021~~2022 was ~~$28.8~~$58.9 million and ~~$44.1~~$67.7 million, respectively. The current ratio was ~~1.2 and~~ 1.4 at both December 31, ~~2021~~2022 and June 30, ~~2021, respectively.~~2022.

Our short-term liquidity available, represented as cash and cash equivalents plus the unused amount of our revolving credit facility, totaled ~~$99.6~~$77.3 million at December 31, ~~2021.~~2022. At December 31, ~~2021,~~2022, we had ~~$1.7~~$1.8 million in letters of credit outstanding, which reduced our borrowing capacity on the revolving credit facility. We had ~~$40.0~~$60.0 million and $68.0 million of borrowings on our revolving credit facility at December 31, ~~2021~~2022 and June 30, ~~2021.~~2022, respectively. Total availability to borrow under the credit facility totaled ~~$83.3~~$63.2 million at December 31, ~~2021.~~2022.

The following table reflects the major categories of cash flows for the first six months of fiscal years ~~2022~~2023 and ~~2021.~~2022.
Six Months Ended
December 31
(Amounts in Thousands) 2021 2020
Net cash provided by operating activities $ 12,620 $ 24,521
Net cash used for investing activities $ (11,313) $ (105,774)
Net cash (used for) provided by financing activities $ (9,649) $ 32,456

For the first six months of fiscal year 2023 net cash provided by operating activities was $31.5 million inclusive of net loss of $29.5 million which included goodwill impairment of $36.7 million. In the first six months of fiscal year 2022 net cash provided by operating activities was $12.6 million inclusive of a net loss of $26.4 million which included $34.1 million of goodwill impairment and $17.9 million of contingent earn-out liability gains. ~~In the first six months of fiscal year 2021 net cash provided by operating activities was $24.5 million inclusive of $4.5 million of net income.~~ Changes in working capital balances provided ~~$12.8~~$14.4 million of cash in the first six months of fiscal year ~~2022~~2023 and provided ~~$8.9~~$8.1 million of cash in the first six months of fiscal year ~~2021.~~2022.

The ~~$12.8~~$14.4 million of cash provided by changes in working capital balances in the first six months of fiscal year 2023 was driven by a $19.2 million decrease in receivables as several larger projects were finalized and the payment was received and a $14.5 million decrease in prepaid expenses and other current assets as prepaid in-transit inventory was received which were partially offset by a $10.5 million decline in our accounts payable as we decelerated inventory purchases.

The $8.1 million of cash provided by changes in working capital balances in the first six months of fiscal year 2022 was driven by a $17.8 million increase in inventory which was more than offset by a $16.7 million increase in our accounts payable and a $12.2 million increase in customer deposits. The inventory and accounts payable increases were due to an increase in material purchases and production to fulfill our increased order backlog and to cushion against supply chain disruptions, and the increase in customer deposits was also related to our increased order backlog.

The $8.9 million of cash provided by changes in working capital balances in the first six months of fiscal year 2021 was driven by a $16.7 million reduction in our accounts receivable balance primarily due to the reduction in our sales volume and a $7.3 million increase in our customer deposits. Our accrued expenses balance decreased in the first six months of fiscal year 2021 as our accrued cash incentive compensation and retirement profit sharing contribution, which together totaled $9.6 million and were related to our fiscal year 2020 performance, were paid out during the first half of fiscal year 2021.

Our measure of accounts receivable performance, also referred to as Days Sales Outstanding (“DSO”), for the six-month periods ended December 31, ~~2021~~2022 and December 31, ~~2020~~2021 were both 32 and 35 days, respectively. The DSO decrease was largely driven by declines in our accounts receivable balances from the elevated levels earlier in the COVID-19 pandemic and the impact of the Poppin business which has lower DSO than our other brands.days. We define DSO as the average of monthly accounts and notes receivable divided by an average day’s net sales. Our Production Days Supply on Hand (“PDSOH”) of inventory measure for the six-month periods ended December 31, ~~2021~~2022 and December 31, ~~2020~~2021 were 6998 and 6369 days, respectively. The increase in PDSOH was driven by increases in average inventory levels ~~primarily in-transit inventory. In addition,~~outpacing the sales ramp up with the majority of the inventory ~~levels of the Poppin acquisition increased~~increase related to made-to-stock inventory in our ~~fiscal year-to-date PDSOH by approximately 2 days compared to the year-to-date period of the prior fiscal year.~~eBusiness segment. We define PDSOH as the average of the monthly net inventory divided by an average day’s cost of sales.

During the first six months of both fiscal years 2023 and 2022, ~~and 2021, we reinvested $11.5 million and $8.9 million, respectively, into~~our capital investments ~~for the future.~~totaled $11.5 million. The ~~current year capital investments includes current construction of a warehouse, and both the~~ current and prior year capital investments include ~~various~~the construction of a warehouse, manufacturing equipment upgrades to increase automation in production facilities, ~~configuration design~~ software upgrades, and facility improvements. We expended $100.9 million of cash for the Poppin acquisition during the first half of fiscal year 2021. During the first six months of fiscal year 2021, we invested $10.0 million in available-for-sale securities, and $13.8 million matured.

During the six months ended December 31, 2022, we had proceeds from borrowings on our revolving credit facility of $86.0 million and during the same period we repaid $94.0 million on our revolving credit facility. During the six months ended December 31, 2021 we had proceeds from borrowings on our ~~revolving~~ credit facility of $10.0 million and ~~during the same period we also~~ repaid $10.0 million on our revolving credit facility. ~~During the six months ended December 31, 2020 we had proceeds from borrowings on our credit facility of $40.0 million which was utilized for the Poppin acquisition.~~ We paid dividends of $6.6 million in both the six-month periods ended December 31, ~~2021~~2022 and December 31, ~~2020, respectively.~~2021. Consistent with our historical dividend policy, our Board of Directors evaluates the appropriate dividend payment on a quarterly basis. We repurchased shares pursuant to a previously announced stock repurchase program, which drove cash outflow of $3.0 million and $2.4 million in the year-to-date ~~period~~periods of fiscal year ~~2022.~~2023 and 2022, respectively. Future debt payments may be paid out of cash flows from operations or from future refinancing of our debt.

During the ~~first~~second quarter of fiscal year ~~2022,~~2023, we entered into a ~~Second~~Third Amendment to Amended and Restated Credit Agreement which ~~amended our credit agreement by adding content~~provides, among other items, amendments to ~~facilitate~~the Credit Agreement to extend the maturity date of the Credit Facility from October 24, 2024 to December 21, 2025, and establish SOFR (“Secured Overnight Financing Rate”) as a ~~transition to a base interest rate index other than the London Interbank Offered Rate and to define the provisions by which an overpayment or erroneous payment may be requested and returned to us.~~pricing benchmark for dollar borrowings in replacement of LIBOR. The complete amended agreement was filed as Exhibit 10.1 to our Current Report on Form 8-K filed on ~~September 24, 2021.~~December 22, 2022.

As of December 31, ~~2021~~2022 we had a $125.0 million revolving credit facility with a maturity date of ~~October 2024~~December 2025 that allowed for both issuances of letters of credit and cash borrowings. We also have an option to request an increase of the amount available for borrowing to $200.0 million, subject to participating banks’ consent. The loans under the Credit Agreement could consist of, at our election, advances in U.S. dollars or advances in any other currency that was agreed to by the lenders. The proceeds are to be used for general corporate purposes including acquisitions. A portion of the revolving credit facility, not to exceed $10 million of the principal amount, was available for the issuance of letters of credit. At December 31, ~~2021,~~2022, we had ~~$1.7~~$1.8 million in letters of credit outstanding, which reduced our borrowing capacity on the revolving credit facility. At December 31, ~~2021~~2022 and June 30, ~~2021~~2022, we had ~~$40.0~~$60.0 million and $68.0 million, respectively, in borrowings outstanding.

The revolving credit facility requires us to comply with certain debt covenants, the most significant of which is the adjusted leverage ratio and the interest coverage ratio. The adjusted leverage ratio is defined as (a) consolidated total indebtedness minus unencumbered U.S. cash equivalents in excess of $15,000,000 provided that the maximum subtraction does not exceed $35,000,000 to (b) adjusted consolidated EBITDA, determined as of the end of each of our fiscal quarters for the then most recently ended four fiscal quarters, to not be greater than 3.00 to 1.00. The interest coverage ratio, for any period, of (a) Consolidated EBITDA for such period to (b) cash interest expense for such period, calculated on a consolidated basis in accordance with GAAP for the trailing four quarter period then ending, to not be less than 3.00 to 1.00. We were in compliance with all debt covenants of the revolving credit facility during the six-month period ended December 31, ~~2021.~~2022.

The table below compares the adjusted leverage ratio and the interest coverage ratio with the limits specified in the credit agreement.

At or For the Period Ended

Limit As Specified in

At or For the Period Ended

Limit As Specified in

Covenant

December 31, 2021

Credit Agreement

Excess

Covenant

December 31, 2022

Credit Agreement

Excess

Adjusted Leverage Ratio

2.08

3.00

0.92

Adjusted Leverage Ratio

1.08

≤ 3.00

1.92

Interest Coverage Ratio

22.00

3.00

19.00

Interest Coverage Ratio

10.00

≥ 3.00

7.00

We believe our principal sources of liquidity from available funds on hand, cash generated from operations, and the availability of borrowing under our revolving credit facility will be sufficient to meet our working capital and other operating needs for at least the next twelve months. Our Board of Directors declared quarterly dividends of $0.09 per share ~~paid~~for payment during our third quarter of fiscal year ~~2022.~~2023. Future cash dividends are subject to approval by our Board of Directors and may be adjusted as business needs or market conditions change.

During the remainder of fiscal year ~~2022~~2023 we expect to invest approximately ~~$18~~$15 million in capital expenditures, particularly for ~~construction of a warehouse, software, and~~ projects such as machinery and equipment upgrades and ~~automation. During the current fiscal year the capital expenditures are expected to be partially offset by $5 million of cash proceeds from the sale of a warehouse property.~~automation, software, and showroom related expenses. As of December 31, ~~2021,~~2022, there have been no material changes to our short-term and long-term contractual obligations as discussed in Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended June 30, ~~2021~~2022 outside the ordinary course of business. We are also assessing the potential of selling unused parcels of land. We continuously monitor for potential acquisitions that would enhance our capabilities and diversification while providing an opportunity for growth and improved profitability.

Our ability to generate cash from operations to meet our liquidity obligations could be adversely affected in the future by factors such as general economic and market conditions, ~~including reduced revenues from the COVID-19 pandemic, lack of availability or cost of manufacturing labor,~~ lack of availability of raw material components in the supply chain, lack of availability or cost of manufacturing labor, loss of key contract customers, and other unforeseen circumstances. In particular, should demand for our products decrease significantly over the next 12 months, the available cash provided by operations could be adversely impacted.

Non-GAAP Financial Measures and Other Key Performance Indicators

This Management’s Discussion and Analysis (“MD&A”) contains non-GAAP financial measures. A non-GAAP financial measure is a numerical measure of a company’s financial performance that excludes or includes amounts so as to be different than the most directly comparable measure calculated and presented in accordance with U.S. GAAP in the statements of ~~income,~~operations, statements of comprehensive income, balance sheets, statements of cash flows, or statements of shareholders’ equity of the company. The non-GAAP financial measures used within this MD&A ~~include (1) organic net sales, defined as net sales excluding acquisition-related net sales; (2)~~ include:

•adjusted operating income (loss), defined as operating income (loss) excluding restructuring expenses, goodwill impairment, ~~CEO transition costs,~~market valuation adjustments related to our SERP liability, acquisition-related amortization and inventory valuation adjustments, ~~costs of acquisition,~~ contingent earn-out gain or loss, and COVID vaccine incentive ~~costs, and market value adjustments related to our SERP liability; (3)~~ costs;

•adjusted operating income (loss) percentage, defined as adjusted operating income as a percentage of net sales; ~~(4)~~

•adjusted net income (loss), defined as net income (loss) excluding restructuring expenses, goodwill impairment, ~~CEO transition costs,~~ acquisition-related amortization and inventory valuation adjustments, ~~costs of acquisition,~~ contingent earn-out gain or loss, and COVID vaccine incentive costs; ~~(5)~~

•adjusted diluted earnings (loss) per share, defined as diluted earnings (loss) per share excluding restructuring expenses, goodwill impairment, acquisition-related amortization and inventory valuation adjustments, ~~costs of acquisition,~~ contingent earn-out gain or loss, and COVID vaccine incentive costs; ~~(6)~~

•adjusted EBITDA, defined as earnings before interest, statutory income tax impacts for taxable after-tax measures, depreciation, and amortization and excluding restructuring expenses, goodwill impairment, ~~CEO transition costs,~~ acquisition-related inventory valuation adjustments, ~~costs of acquisition,~~ contingent earn-out gain or loss, and COVID vaccine incentive costs; and ~~(7)~~

•adjusted EBITDA percentage, defined as adjusted EBITDA as a percentage of net sales.

Reconciliations of the reported GAAP numbers to these non-GAAP financial measures are included in the tables below. Management believes it is useful for investors to understand and to be able to meaningfully trend, analyze and benchmark how our core operations performed without market value adjustments related to our SERP liability, without expenses incurred in executing our transformation restructuring plan, without ~~CEO transition~~goodwill impairment costs, without acquisition-related costs, and without ~~acquisition-related~~COVID vaccine incentive costs. Many of our internal performance measures that management uses to make certain operating decisions exclude these expenses to enable meaningful trending of core operating metrics. These non-GAAP financial measures should not be viewed as an alternative to the GAAP measures and are presented as supplemental information.

Reconciliation of Non-GAAP Financial Measures and Other Key Performance Indicators
(Amounts in Thousands, Except for Per Share Data)
Organic Net Sales Three Months Ended Six Months Ended
December 31, December 31,
2021 2020 2021 2020
Net Sales, as reported $ 151,403 $ 136,197 $ 308,013 $ 284,141
Less: Poppin acquisition net sales 13,494 2,678 28,718 2,678
Organic Net Sales $ 137,909 $ 133,519 $ 279,295 $ 281,463

Adjusted Operating Income (Loss) Three Months Ended Six Months Ended
December 31 December 31
2021 2020 2021 2020
Operating Income (Loss), as reported $ (18,095) $ (2,034) $ (25,222) $ 4,395
Add: Pre-tax Restructuring Expense 1,010 1,616 2,465 5,856
Add: Pre-tax Goodwill Impairment 34,118 — 34,118 —
Add: Pre-tax Expense Adjustment to SERP Liability 680 1,381 587 2,139
Add: Pre-tax CEO Transition Costs — 141 — 282
Add: Pre-tax Acquisition-related Amortization 1,610 395 3,220 395
Add: Pre-tax Acquisition-related Inventory Valuation Adjustment 62 42 205 42
Add: Pre-tax Costs of Acquisition — 3,388 — 3,388
Add: Pre-tax Contingent Earn-Out (Gain) Loss (22,510) — (17,900) —
Add: Pre-tax COVID Vaccine Incentive 2,709 — 2,709 —
Adjusted Operating Income (Loss) $ (416) $ 4,929 $ 182 $ 16,497
Net Sales $ 151,403 $ 136,197 $ 308,013 $ 284,141
Adjusted Operating Income (Loss) % (0.3 %) 3.6 % 0.1 % 5.8 %

Adjusted Net Income (Loss) Three Months Ended Six Months Ended
December 31 December 31
2021 2020 2021 2020
Net Income (Loss), as reported $ (21,314) $ (838) $ (26,363) $ 4,548
Pre-tax Restructuring Expense 1,010 1,616 2,465 5,856
Tax on Restructuring Expense (259) (416) (634) (1,508)
Add: After-tax Restructuring Expense 751 1,200 1,831 4,348
Pre-tax Goodwill Impairment 34,118 — 34,118 —
Tax on Goodwill Impairment — — — —
Add: After-tax Goodwill Impairment 34,118 — 34,118 —
Pre-tax CEO Transition Costs — 141 — 282
Tax on CEO Transition Costs — (36) — (72)
Add: After-tax CEO Transition Costs — 105 — 210
Pre-tax Acquisition-related Amortization 1,610 395 3,220 395
Tax on Acquisition-related Amortization (414) (102) (829) (102)
Add: After-tax Acquisition-related Amortization 1,196 293 2,391 293
Pre-tax Acquisition-related Inventory Valuation Adjustment 62 42 205 42
Tax on Acquisition-related Inventory Valuation Adjustment (16) (11) (53) (11)
Add: After-tax Acquisition-related Inventory Adjustment 46 31 152 31
Pre-tax Costs of Acquisition — 3,388 — 3,388
Tax on Costs of Acquisition — (872) — (872)
Add: After-tax Costs of Acquisition — 2,516 0 2,516
Pre-tax Contingent Earn-Out (Gain) Loss (22,510) — (17,900) —
Tax on Contingent Earn-Out (Gain) Loss — — — —
Add: After-tax Contingent Earn-Out (Gain) Loss (22,510) — (17,900) —
Pre-tax COVID Vaccine Incentive 2,709 — 2,709 —
Tax on COVID Vaccine Incentive (697) — (697) —
Add: After-tax COVID Vaccine Incentive 2,012 — 2,012 —
Adjusted Net Income (Loss) $ (5,701) $ 3,307 $ (3,759) $ 11,946
Adjusted Diluted Earnings (Loss) Per Share Three Months Ended Six Months Ended
December 31 December 31
2021 2020 2021 2020
Diluted Earnings (Loss) Per Share, as reported $ (0.58) $ (0.02) $ (0.72) $ 0.12
Add: After-tax Restructuring Expense 0.02 0.03 0.05 0.12
Add: After-tax Goodwill Impairment 0.93 — 0.93 —
Add: After-tax Acquisition-related Amortization 0.03 0.01 0.07 0.01
Add: After-tax Acquisition-related Inventory Adjustment — — 0.01 —
Add: After-tax Costs of Acquisition — 0.07 — 0.07
Add: After-tax Contingent Earn-Out (Gain) Loss (0.61) — (0.49) —
Add: COVID Vaccine Incentive 0.05 — 0.05 —
Adjusted Diluted Earnings (Loss) Per Share $ (0.16) $ 0.09 $ (0.10) $ 0.32

The order backlog metric is a key performance indicator representing firm orders placed by our customers which have not yet been fulfilled and are expected to be recognized as revenue during future quarters. The timing of shipments can vary, but generally the backlog of orders is expected to ship within a six-month period.

Return on Invested Capital is a key performance indicator calculated as: [(Earnings Before Interest, Taxes, Amortization, Restructuring Expense, ~~CEO Transition Costs,~~Goodwill Impairment, Acquisition-related Inventory Valuation Adjustments, ~~and~~ Contingent Earn-out Gain or ~~Loss)~~Loss, and COVID Vaccine Incentive costs ) multiplied by (1 minus Effective Tax Rate)] divided by (Total Shareholders’ Equity plus Net Debt). Net Debt is defined as current maturities of long-term debt plus long-term debt less cash, cash equivalents, and short-term investments.

During the second quarter and year-to-date period of fiscal year 2022, no financial instruments were affected by a lack of market liquidity. Financial assets classified as level 1 assets were valued using readily available market pricing. We evaluated the inputs used to value the instruments and validated the accuracy of the instrument fair values based on historical evidence. For the interest rate swap classified as a level 2 asset, the fair value is determined based on market data which use observable market inputs using standard calculations, such as time value, forward interest rate yield curves and current spot rates adjusted for Kimball International’s non-performance risk. We evaluated the inputs used to value the interest rate swap and validated the accuracy and hedge effectiveness using a qualitative approach. The investment in stock warrants and equity securities without readily determinable fair value of a privately-held company are classified as level 3 financial assets. The stock warrants are accounted for as a derivative instrument valued on a recurring basis considering the pricing of recent purchases or sales of the investment as well as positive and negative qualitative evidence, while the equity securities without readily determinable fair value are accounted for as a cost-method investment which carries the securities at cost, except in the event of impairment. The contingent earn-out liability is classified as a Level 3 financial liability and is valued based on a valuation model that measures the present value of the probable cash payments based upon the forecasted operating performance of the acquisition and a discount rate that captures the risk associated with the liability.

Goodwill is classified as a Level 3 financial asset and is based on a valuation model that measures the present value of estimated future cash flows of the reporting unit at a discount rate that captures the risk associated with these future cash flows. During the second quarter of fiscal year 2022, we recorded $34.1 million of goodwill impairment related to our Poppin business, as the annual goodwill impairment testing determined the carrying value of the Poppin reporting unit exceeded its relative fair value, most notably driven by the impact of COVID-19 and supply chain disruptions on our sales growth models.

~~See~~ ~~Note 13 - Fair Value~~ ~~of Notes to Condensed Consolidated Financial Statements in Item 1 of this Form 10-Q for additional information.~~

Our Condensed Consolidated Financial Statements have been prepared in accordance with U.S. GAAP. These principles require the use of estimates and assumptions that affect amounts reported and disclosed in the Condensed Consolidated Financial Statements and related notes. Actual results could differ from these estimates and assumptions. Management continually reviews the accounting policies and financial information disclosures. A summary of the more significant accounting policies that require the use of estimates and judgments in preparing the financial statements is provided in our Annual Report on Form 10-K for the fiscal year ended June 30, ~~2021.~~2022. During the first six months of fiscal year ~~2022,~~2023, there were no material changes in the accounting policies and assumptions previously disclosed.

See Note 2 - Recent Accounting Pronouncements and Supplemental Information of Notes to Condensed Consolidated Financial Statements in Item 1 of this Form 10-Q for information regarding New Accounting Standards.

Certain statements contained within this document are considered forward-looking under the Private Securities Litigation Reform Act of 1995. The statements generally can be identified by the use of words or phrases, including, but not limited to “intend,” “anticipate,” “believe,” “estimate,” “project,” “target,” “plan,” “expect,” “setting up,” “beginning to,” “will,” “should,” “would,” “resume,” or similar statements. We caution that forward-looking statements are subject to known and unknown risks and uncertainties that may cause the Company’s actual future results and performance to differ materially from expected results, including, but not limited to, the possibility that any of the anticipated benefits of the Poppin acquisition will not be realized or

will not be realized within the expected time period; ~~the risk that integration of the operations of Poppin with the Company will be materially delayed or will be more costly or difficult than expected;~~ the risk that any projections or guidance by the Company, including revenues, margins, earnings, or any other financial results are not realized; a shortage of manufacturing labor and related cost; disruptions in our supply chain and freight channels including impacts on cost and availability, adverse changes in global economic conditions; successful execution of the second phase of the Company’s restructuring plan; significant reduction in customer order patterns; loss of key suppliers; relationships with strategic customers and product distributors; changes in the regulatory environment; global health ~~concerns (including~~concerns; the ~~impact~~potential for impairment of ~~the COVID-19 pandemic);~~goodwill; or similar unforeseen events. Additional cautionary statements regarding other risk factors that could have an effect on the future performance of the Company

are contained in the Company’s Form 10-K filing for the fiscal year ended June 30, ~~2021~~2022 and other filings with the Securities and Exchange Commission.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risk with respect to commodity price fluctuations for components used in the manufacture of our products, primarily related to wood and wood-related components, steel, aluminum, foam, and plastics. These components are impacted by global pricing pressures, general economic conditions, and changes in tariff rates. We strive to offset increases in the cost of these materials through supplier negotiations, global sourcing initiatives, and product re-engineering and parts standardization. We are also exposed to fluctuations in transportation costs, which ~~may continue to remain at elevated levels depending on~~vary based upon freight carrier capacity and fuel prices. Transportation costs are managed by optimizing logistics and supply chain planning.

During fiscal year ~~2022,~~2023, we have experienced market price increases in certain commodities and transportation costs. Also, during fiscal year 2022, we entered into an interest rate swap agreement with a notional value of $40.0 million to mitigate the interest rate risk related to our variable rate borrowings on our revolving line of credit. There have been no material changes to other market risks, including foreign exchange rate risks and equity rate risk, from the information disclosed in Item 7A “Quantitative and Qualitative Disclosures About Market Risk” of our Annual Report on Form 10-K for the fiscal year ended June 30, ~~2021.~~2022.

(a)Evaluation of disclosure controls and procedures.

(b)Changes in internal control over financial reporting.

There have been no additional material changes from the risk factors disclosed in the “Risk Factors” section of the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, ~~2021.~~2022.


						KIMBALL INTERNATIONAL, INC.



			By:			/s/ KRISTINE L. JUSTER
						Kristine L. Juster Chief Executive Officer
						February ~~4, 2022~~7, 2023




			By:			/s/ TIMOTHY J. WOLFE
						Timothy J. Wolfe Chief Financial Officer
						February ~~4, 2022~~7, 2023


Indiana						35-0514506
(State or other jurisdiction of						(I.R.S. Employer Identification No.)
incorporation or organization)
1600 Royal Street, Jasper, Indiana						47546-2256
(Address of principal executive offices)						(Zip Code)


(812) 482-1600
Registrant’s telephone number, including area code
Not Applicable
Former name, former address and former fiscal year, if changed since last report


Title of each Class	Trading Symbol(s)	Name of each exchange on which registered
Class B Common Stock, par value $0.05 per share	KBAL	The NASDAQ Stock Market LLC


		Page No.

PART I FINANCIAL INFORMATION

	Item 1. Financial Statements
	Condensed Consolidated Balance Sheets -December 3 1 , ~~2021~~ 31, 2022 (Unaudited) and June 30, ~~2021~~2022	3
	Condensed Consolidated Statements of ~~Income (Loss)~~Operations (Unaudited) - Three and Si anx Months ~~d Six~~ ~~Months~~ Ended December 3 1 , 31, 2022 and 2021 ~~and 2020~~	4
	Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) - Three and Six Months Ended December 3 1 ~~, 2021~~ 31, 2022 and ~~2020~~2021	5
	Condensed Consolidated Statements of Cash Flows (Unaudited) - Six Months Ended December 3 1 ~~, 2021~~ 31, 2022 and ~~2020~~2021	6
	Condensed Consolidated Statements of Shareholders’ Equity (Unaudited) - Three and Six Months Ended December 3 1 ,31, 2022 and 2021 ~~and 2020~~	7
	Notes to Condensed Consolidated Financial Statements (Unaudited)	8
	Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	2421
	Item 3. Quantitative and Qualitative Disclosures About Market Risk	3630
	Item 4. Controls and Procedures	3630

PART II OTHER INFORMATION
	Item 1A. Risk Factors	3830
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	3830
	Item 6. Exhibits	3931

	SIGNATURES	4032


		(Unaudited)					(Unaudited)
		December 31, 2021		June 30, 2021			December 31, 2022		June 30, 2022
ASSETS	ASSETS					ASSETS
Current Assets:	Current Assets:					Current Assets:
Cash and cash equivalents	Cash and cash equivalents	$	16,323	$	24,336	Cash and cash equivalents	$	14,067	$	10,934

Receivables, net of allowances of $998 and $1,121, respectively		52,802		58,708
Receivables, net of allowances of $927 and $1,041, respectively						Receivables, net of allowances of $927 and $1,041, respectively	60,073		79,301
Inventories	Inventories	72,137		54,291		Inventories	104,812		97,969
Prepaid expenses and other current assets	Prepaid expenses and other current assets	23,404		22,012		Prepaid expenses and other current assets	15,531		30,937

Total current assets	Total current assets	164,666		159,347		Total current assets	194,483		219,141
Property and equipment, net of accumulated depreciation of $195,681 and $191,757, respectively		91,772		90,623
Property and equipment, net of accumulated depreciation of $189,077 and $188,530, respectively						Property and equipment, net of accumulated depreciation of $189,077 and $188,530, respectively	95,609		96,970
Right-of-use operating lease assets	Right-of-use operating lease assets	12,611		14,654		Right-of-use operating lease assets	13,168		12,839
Goodwill	Goodwill	47,844		81,962		Goodwill	11,160		47,844
Other intangible assets, net of accumulated amortization of $46,099 and $41,796, respectively		61,604		64,478
Other intangible assets, net of accumulated amortization of $51,302 and $54,553, respectively						Other intangible assets, net of accumulated amortization of $51,302 and $54,553, respectively	52,563		54,767
Deferred tax assets	Deferred tax assets	16,229		16,368		Deferred tax assets	16,476		14,472
Other assets	Other assets	17,190		17,163		Other assets	14,742		15,245
Total Assets	Total Assets	$	411,916	$	444,595	Total Assets	$	398,201	$	461,278

LIABILITIES AND SHAREHOLDERS’ EQUITY	LIABILITIES AND SHAREHOLDERS’ EQUITY					LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:	Current Liabilities:					Current Liabilities:

Current maturities of long-term debt	Current maturities of long-term debt	$	33	$	30	Current maturities of long-term debt	$	—	$	33
Accounts payable	Accounts payable	57,722		41,537		Accounts payable	57,249		70,936
Customer deposits	Customer deposits	36,685		24,438		Customer deposits	32,171		29,706
Current portion of operating lease liability	Current portion of operating lease liability	6,237		6,590		Current portion of operating lease liability	5,709		6,096
Dividends payable	Dividends payable	3,620		3,532		Dividends payable	3,715		3,623

Accrued expenses	Accrued expenses	31,563		39,115		Accrued expenses	36,739		41,088
Total current liabilities	Total current liabilities	135,860		115,242		Total current liabilities	135,583		151,482
Other Liabilities:
Long-Term Liabilities:						Long-Term Liabilities:
Long-term debt, less current maturities	Long-term debt, less current maturities	40,046		40,079		Long-term debt, less current maturities	60,000		68,046
Long-term earn-out liability		2,290		20,190

Long-term operating lease liability	Long-term operating lease liability	10,720		12,536		Long-term operating lease liability	12,015		12,150
Other		16,336		16,878
Total other liabilities		69,392		89,683
Other long-term liabilities						Other long-term liabilities	13,402		16,064
Total long-term liabilities						Total long-term liabilities	85,417		96,260
Shareholders’ Equity:	Shareholders’ Equity:					Shareholders’ Equity:
Common stock-par value $0.05 per share:	Common stock-par value $0.05 per share:					Common stock-par value $0.05 per share:
Class A - Shares authorized: 50,000,000 Shares issued: 181,000 and 188,000, respectively		9		9
Class B - Shares authorized: 100,000,000 Shares issued: 42,842,000 and 42,835,000, respectively		2,142		2,142
Class A - Shares authorized: 50,000,000 Shares issued: 167,000 for both periods						Class A - Shares authorized: 50,000,000 Shares issued: 167,000 for both periods	8		8
Class B - Shares authorized: 100,000,000 Shares issued: 42,856,000 for both periods						Class B - Shares authorized: 100,000,000 Shares issued: 42,856,000 for both periods	2,143		2,143
Additional paid-in capital	Additional paid-in capital	6,015		5,298		Additional paid-in capital	7,805		6,304
Retained earnings	Retained earnings	265,924		299,034		Retained earnings	233,556		269,833
Accumulated other comprehensive income	Accumulated other comprehensive income	2,371		1,980		Accumulated other comprehensive income	4,277		3,766
Less: Treasury stock, at cost, 6,243,000 shares and 6,148,000 shares, respectively		(69,797)		(68,793)
Less: Treasury stock, at cost, 6,517,000 shares and 6,179,000 shares, respectively						Less: Treasury stock, at cost, 6,517,000 shares and 6,179,000 shares, respectively	(70,588)		(68,518)
Total Shareholders’ Equity	Total Shareholders’ Equity	206,664		239,670		Total Shareholders’ Equity	177,201		213,536
Total Liabilities and Shareholders’ Equity	Total Liabilities and Shareholders’ Equity	$	411,916	$	444,595	Total Liabilities and Shareholders’ Equity	$	398,201	$	461,278


																	Common Stock				Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income		Treasury Stock		Total Shareholders’ Equity
Three months ended December 31, 2022 (Unaudited)																Three months ended December 31, 2022 (Unaudited)	Class A		Class B
Amounts at September 30, 2022																Amounts at September 30, 2022	$	8	$	2,143	$	7,283	$	272,993	$	4,297	$	(69,353)	$	217,371
Net income (loss)																Net income (loss)							(36,063)						(36,063)
Other comprehensive income (loss)																Other comprehensive income (loss)									(20)				(20)
Issuance of non-restricted stock (17,000 shares)																Issuance of non-restricted stock (17,000 shares)					(185)						185		—
Conversion of Class A to Class B common stock (1,000 shares)																Conversion of Class A to Class B common stock (1,000 shares)	—		—										—
Compensation expense related to stock compensation plans																Compensation expense related to stock compensation plans					1,341								1,341

Restricted stock units issuance (50,000 shares)																Restricted stock units issuance (50,000 shares)					(634)						472		(162)

Repurchase of Common Stock (285,000 shares)																Repurchase of Common Stock (285,000 shares)											(1,892)		(1,892)
Dividends declared ($0.09 per share)																Dividends declared ($0.09 per share)							(3,374)						(3,374)
Amounts at December 31, 2022																Amounts at December 31, 2022	$	8	$	2,143	$	7,805	$	233,556	$	4,277	$	(70,588)	$	177,201
		Common Stock				Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income		Treasury Stock		Total Shareholders’ Equity
Three months ended December 31, 2021 (Unaudited)	Three months ended December 31, 2021 (Unaudited)	Class A		Class B												Three months ended December 31, 2021 (Unaudited)
Amounts at September 30, 2021	Amounts at September 30, 2021	$	9	$	2,142	$	5,628	$	290,618	$	1,857	$	(69,735)	$	230,519	Amounts at September 30, 2021	$	9	$	2,142	$	5,628	$	290,618	$	1,857	$	(69,735)	$	230,519
Net income (loss)	Net income (loss)							(21,314)						(21,314)		Net income (loss)							(21,314)						(21,314)
Other comprehensive income (loss)	Other comprehensive income (loss)									514				514		Other comprehensive income (loss)									514				514
Issuance of unrestricted shares (9,000 shares)						(122)						122		—
Issuance of non-restricted stock (9,000 shares)																Issuance of non-restricted stock (9,000 shares)					(122)						122		—
Conversion of Class A to Class B common stock (7,000 shares)	Conversion of Class A to Class B common stock (7,000 shares)	—		—										—		Conversion of Class A to Class B common stock (7,000 shares)	—		—										—
Compensation expense related to stock compensation plans	Compensation expense related to stock compensation plans					1,433								1,433		Compensation expense related to stock compensation plans					1,433								1,433

Restricted stock units issuance (48,000 shares)	Restricted stock units issuance (48,000 shares)					(924)						622		(302)		Restricted stock units issuance (48,000 shares)					(924)						622		(302)

Repurchase of Common Stock (72,000 shares)	Repurchase of Common Stock (72,000 shares)											(806)		(806)		Repurchase of Common Stock (72,000 shares)											(806)		(806)
Dividends declared ($0.09 per share)	Dividends declared ($0.09 per share)							(3,380)						(3,380)		Dividends declared ($0.09 per share)							(3,380)						(3,380)
Amounts at December 31, 2021	Amounts at December 31, 2021	$	9	$	2,142	$	6,015	$	265,924	$	2,371	$	(69,797)	$	206,664	Amounts at December 31, 2021	$	9	$	2,142	$	6,015	$	265,924	$	2,371	$	(69,797)	$	206,664

Three months ended December 31, 2020 (Unaudited)
Amounts at September 30, 2020		$	10	$	2,141	$	3,681	$	307,177	$	2,168	$	(67,484)	$	247,693
Six months ended December 31, 2022 (Unaudited)																Six months ended December 31, 2022 (Unaudited)
Amounts at June 30, 2022																Amounts at June 30, 2022	$	8	$	2,143	$	6,304	$	269,833	$	3,766	$	(68,518)	$	213,536
Net income (loss)	Net income (loss)							(838)						(838)		Net income (loss)							(29,507)						(29,507)
Other comprehensive income (loss)	Other comprehensive income (loss)									1				1		Other comprehensive income (loss)									511				511
Issuance of unrestricted shares (11,000 shares)						(147)						147		—
Issuance of non-restricted shares (39,000 shares)																Issuance of non-restricted shares (39,000 shares)					(374)						415		41
Conversion of Class A to Class B common stock (1,000 shares)	Conversion of Class A to Class B common stock (1,000 shares)	(1)		1										—		Conversion of Class A to Class B common stock (1,000 shares)	—		—										—
Compensation expense related to stock compensation plans						1,309								1,309
Compensation expense related to stock incentive plans																Compensation expense related to stock incentive plans					2,509								2,509

Restricted stock units issuance (50,000 shares)																Restricted stock units issuance (50,000 shares)					(634)						472		(162)

Repurchase of Common Stock (62,000 shares)												(751)		(751)
Dividends declared ($0.09 per share)								(3,402)						(3,402)
Amounts at December 31, 2020		$	9	$	2,142	$	4,843	$	302,937	$	2,169	$	(68,088)	$	244,012
Repurchase of Common Stock (427,000 shares)																Repurchase of Common Stock (427,000 shares)											(2,957)		(2,957)
Dividends declared ($0.18 per share)																Dividends declared ($0.18 per share)							(6,770)						(6,770)
Amounts at December 31, 2022																Amounts at December 31, 2022	$	8	$	2,143	$	7,805	$	233,556	$	4,277	$	(70,588)	$	177,201

Six months ended December 31, 2021 (Unaudited)	Six months ended December 31, 2021 (Unaudited)															Six months ended December 31, 2021 (Unaudited)
Amounts at June 30, 2021	Amounts at June 30, 2021	$	9	$	2,142	$	5,298	$	299,034	$	1,980	$	(68,793)	$	239,670	Amounts at June 30, 2021	$	9	$	2,142	$	5,298	$	299,034	$	1,980	$	(68,793)	$	239,670
Net income (loss)	Net income (loss)							(26,363)						(26,363)		Net income (loss)							(26,363)						(26,363)
Other comprehensive income (loss)	Other comprehensive income (loss)									391				391		Other comprehensive income (loss)									391				391
Issuance of unrestricted shares (18,000 shares)						(242)						239		(3)
Issuance of non-restricted shares (18,000 shares)																Issuance of non-restricted shares (18,000 shares)					(242)						239		(3)
Conversion of Class A to Class B common stock (7,000 shares)	Conversion of Class A to Class B common stock (7,000 shares)	—		—										—		Conversion of Class A to Class B common stock (7,000 shares)	—		—										—
Compensation expense related to stock incentive plans	Compensation expense related to stock incentive plans					2,555								2,555		Compensation expense related to stock incentive plans					2,555								2,555

Restricted stock units issuance (78,000 shares)	Restricted stock units issuance (78,000 shares)					(1,492)						1,014		(478)		Restricted stock units issuance (78,000 shares)					(1,492)						1,014		(478)
Relative total shareholder return performance units issuance (5,000 shares)	Relative total shareholder return performance units issuance (5,000 shares)					(104)						72		(32)		Relative total shareholder return performance units issuance (5,000 shares)					(104)						72		(32)

Repurchase of Common Stock (196,000 shares)	Repurchase of Common Stock (196,000 shares)											(2,329)		(2,329)		Repurchase of Common Stock (196,000 shares)											(2,329)		(2,329)
Dividends declared ($0.18 per share)	Dividends declared ($0.18 per share)							(6,747)						(6,747)		Dividends declared ($0.18 per share)							(6,747)						(6,747)
Amounts at December 31, 2021	Amounts at December 31, 2021	$	9	$	2,142	$	6,015	$	265,924	$	2,371	$	(69,797)	$	206,664	Amounts at December 31, 2021	$	9	$	2,142	$	6,015	$	265,924	$	2,371	$	(69,797)	$	206,664

Six months ended December 31, 2020 (Unaudited)
Amounts at June 30, 2020		$	10	$	2,141	$	3,770	$	305,024	$	2,137	$	(68,286)	$	244,796
Net income								4,548						4,548
Other comprehensive income (loss)										32				32
Issuance of unrestricted shares (24,000 shares)						(315)						315		—
Conversion of Class A to Class B common stock (1,000 shares)		(1)		1										—
Compensation expense related to stock incentive plans						2,258								2,258

Restricted stock units issuance (15,000 shares)						(284)						204		(80)
Relative total shareholder return performance units issuance (32,000 shares)						(586)						430		(156)
Cumulative effect of change in accounting principle								134						134
Repurchase of Common Stock (62,000 shares)												(751)		(751)
Dividends declared ($0.18 per share)								(6,769)						(6,769)
Amounts at December 31, 2020		$	9	$	2,142	$	4,843	$	302,937	$	2,169	$	(68,088)	$	244,012


Accumulated Other Comprehensive Income
(Amounts in Thousands)	Unrealized Investment Gain (Loss)		Postemployment Benefits Net Actuarial Gain (Loss)		Interest Rate Swap Gain (Loss)		Accumulated Other Comprehensive Income
Balance at September 30, 2021	$	—	$	2,075	$	(218)	$	1,857
Other comprehensive income (loss) before reclassifications	—		222		336		558
Reclassification to (earnings) loss	—		(100)		56		(44)
Net current-period other comprehensive income (loss)	—		122		392		514
Balance at December 31, 2021	$	—	$	2,197	$	174	$	2,371

Balance at September 30, 2020	$	14	$	2,154	$	—	$	2,168
Other comprehensive income (loss) before reclassifications	(10)		92		—		82
Reclassification to (earnings) loss	—		(81)		—		(81)
Net current-period other comprehensive income (loss)	(10)		11		—		1
Balance at December 31, 2020	$	4	$	2,165	$	—	$	2,169


Reclassifications from Accumulated Other Comprehensive Income	Reclassifications from Accumulated Other Comprehensive Income	Three Months Ended				Six Months Ended				Affected Line Item in the Condensed Consolidated Statements of Income (Loss)	Reclassifications from Accumulated Other Comprehensive Income	Three Months Ended				Six Months Ended				Affected Line Item in the Condensed Consolidated Statements of Operations
		December 31				December 31						December 31				December 31
(Amounts in Thousands)	(Amounts in Thousands)	2021		2020		2021		2020			(Amounts in Thousands)	2022		2021		2022		2021

Postemployment Benefits Amortization of Actuarial Gain~~(1)~~	Postemployment Benefits Amortization of Actuarial Gain~~(1)~~	$	134	$	109	$	270	$	221	Non-operating income (expense), net	Postemployment Benefits Amortization of Actuarial Gain~~(1)~~	$	166	$	134	$	332	$	270	Non-operating income (expense), net
		(34)		(28)		(69)		(57)		Benefit (Provision) for Income Taxes		(42)		(34)		(85)		(69)		Benefit (Provision) for Income Taxes
		$	100	$	81	$	201	$	164	Net Income (Loss)		$	124	$	100	$	247	$	201	Net Income (Loss)

Interest Rate Swap Gain (Loss)~~(2)~~	Interest Rate Swap Gain (Loss)~~(2)~~	$	(75)	$	—	$	(133)	$	—	Interest expense	Interest Rate Swap Gain (Loss)~~(2)~~	$	281	$	(75)	$	417	$	(133)	Interest expense
		19		—		34		—		Benefit (Provision) for Income Taxes		(72)		19		(107)		34		Benefit (Provision) for Income Taxes
		$	(56)	$	—	$	(99)	$	—	Net Income (Loss)		$	209	$	(56)	$	310	$	(99)	Net Income (Loss)

Total Reclassifications for the Period	Total Reclassifications for the Period	$	44	$	81	$	102	$	164	Net Income (Loss)	Total Reclassifications for the Period	$	333	$	44	$	557	$	102	Net Income (Loss)


Reconciliation of Non-GAAP Financial Measures and Other Key Performance Indicators
(Amounts in Thousands, Except for Per Share Data)

Adjusted Operating Income (Loss)	Three Months Ended						Six Months Ended
	December 31						December 31
	2022			2021			2022			2021
Operating Income (Loss), as reported	$	(29,021)		$	(18,095)		$	(20,024)		$	(25,222)
Add: Pre-tax Restructuring Expense	1,679			1,010			2,049			2,465
Add: Pre-tax Goodwill Impairment	36,684			34,118			36,684			34,118

Add: Pre-tax Expense Adjustment to SERP Liability	619			680			160			587
Add: Pre-tax Acquisition-related Amortization	1,502			1,610			3,004			3,220
Add: Pre-tax Acquisition-related Inventory Valuation Adjustment	—			62			—			205
Add: Pre-tax Contingent Earn-Out (Gain) Loss	—			(22,510)			(3,160)			(17,900)
Add: Pre-tax COVID Vaccine Incentive	—			2,709			—			2,709
Adjusted Operating Income (Loss)	$	11,463		$	(416)		$	18,713		$	182
Net Sales	$	182,947		$	151,403		$	360,758		$	308,013
Adjusted Operating Income (Loss) %	6.3		%	(0.3		%)	5.2		%	0.1		%



Adjusted Net Income (Loss)	Three Months Ended				Six Months Ended
	December 31				December 31
	2022		2021		2022		2021
Net Income (Loss), as reported	$	(36,063)	$	(21,314)	$	(29,507)	$	(26,363)
Pre-tax Restructuring Expense	1,679		1,010		2,049		2,465
Tax on Restructuring Expense	(431)		(259)		(527)		(634)
Add: After-tax Restructuring Expense	1,248		751		1,522		1,831
Pre-tax Goodwill Impairment	36,684		34,118		36,684		34,118
Tax on Goodwill Impairment	—		—		—		—
Add: After-tax Goodwill Impairment	36,684		34,118		36,684		34,118



Pre-tax Acquisition-related Amortization	1,502		1,610		3,004		3,220
Tax on Acquisition-related Amortization	(386)		(414)		(773)		(829)
Add: After-tax Acquisition-related Amortization	1,116		1,196		2,231		2,391
Pre-tax Acquisition-related Inventory Valuation Adjustment	—		62		—		205
Tax on Acquisition-related Inventory Valuation Adjustment	—		(16)		—		(53)
Add: After-tax Acquisition-related Inventory Adjustment	—		46		—		152
Pre-tax Contingent Earn-Out (Gain) Loss	—		(22,510)		(3,160)		(17,900)
Tax on Contingent Earn-Out (Gain) Loss	—		—		—		—
Add: After-tax Contingent Earn-Out (Gain) Loss	—		(22,510)		(3,160)		(17,900)
Pre-tax COVID Vaccine Incentive	—		2,709		—		2,709
Tax on COVID Vaccine Incentive	—		(697)		—		(697)
Add: After-tax COVID Vaccine Incentive	—		2,012		—		2,012
Adjusted Net Income (Loss)	$	2,985	$	(5,701)	$	7,770	$	(3,759)

Adjusted Diluted Earnings (Loss) Per Share	Three Months Ended				Six Months Ended
	December 31				December 31
	2022		2021		2022		2021
Diluted Earnings (Loss) Per Share, as reported	$	(0.99)	$	(0.58)	$	(0.81)	$	(0.72)
Add: After-tax Restructuring Expense	0.04		0.02		0.05		0.05
Add: After-tax Goodwill Impairment	1.00		0.93		1.00		0.93

Add: After-tax Acquisition-related Amortization	0.03		0.03		0.06		0.07
Add: After-tax Acquisition-related Inventory Adjustment	—		—		—		0.01
Add: After-tax Contingent Earn-Out (Gain) Loss	—		(0.61)		(0.09)		(0.49)
Add: COVID Vaccine Incentive	—		0.05		—		0.05
Adjusted Diluted Earnings (Loss) Per Share	$	0.08	$	(0.16)	$	0.21	$	(0.10)


Reconciliation of Non-GAAP Financial Measures and Other Key Performance Indicators
(Amounts in Thousands, Except for Per Share Data)

Organic Net Sales	Three Months Ended				Six Months Ended
	December 31,				December 31,
	2021		2020		2021		2020
Net Sales, as reported	$	151,403	$	136,197	$	308,013	$	284,141
Less: Poppin acquisition net sales	13,494		2,678		28,718		2,678
Organic Net Sales	$	137,909	$	133,519	$	279,295	$	281,463


Adjusted EBITDA	Adjusted EBITDA													Adjusted EBITDA
		Three Months Ended						Six Months Ended							Three Months Ended						Six Months Ended
		December 31						December 31							December 31						December 31
		2021			2020			2021			2020				2022			2021			2022			2021
Net Income (Loss)	Net Income (Loss)	$	(21,314)		$	(838)		$	(26,363)		$	4,548		Net Income (Loss)	$	(36,063)		$	(21,314)		$	(29,507)		$	(26,363)
Provision for Income Taxes	Provision for Income Taxes	3,696			213			1,184			2,073			Provision for Income Taxes	7,128			3,696			8,475			1,184
Income (Loss) Before Taxes on Income	Income (Loss) Before Taxes on Income	(17,618)			(625)			(25,179)			6,621			Income (Loss) Before Taxes on Income	(28,935)			(17,618)			(21,032)			(25,179)

Interest Expense	Interest Expense	275			58			532			86			Interest Expense	696			275			1,377			532
Interest Income	Interest Income	(43)			(87)			(52)			(189)			Interest Income	(112)			(43)			(189)			(52)
Depreciation	Depreciation	3,623			3,536			7,185			7,128			Depreciation	3,806			3,623			7,440			7,185
Amortization	Amortization	2,415			1,049			4,854			1,702			Amortization	2,219			2,415			4,414			4,854
Pre-tax Restructuring Expense	Pre-tax Restructuring Expense	1,010			1,616			2,465			5,856			Pre-tax Restructuring Expense	1,679			1,010			2,049			2,465
Pre-Tax Goodwill Impairment	Pre-Tax Goodwill Impairment	34,118			—			34,118			—			Pre-Tax Goodwill Impairment	36,684			34,118			36,684			34,118
Pre-tax CEO Transition Costs		—			141			—			282

Pre-tax Acquisition-related Inventory Valuation Adjustment	Pre-tax Acquisition-related Inventory Valuation Adjustment	62			42			205			42			Pre-tax Acquisition-related Inventory Valuation Adjustment	—			62			—			205
Pre-tax Costs of Acquisition		—			3,388			—			3,388
Pre-tax Contingent Earn-Out (Gain) Loss	Pre-tax Contingent Earn-Out (Gain) Loss	(22,510)			—			(17,900)			—			Pre-tax Contingent Earn-Out (Gain) Loss	—			(22,510)			(3,160)			(17,900)
Pre-tax COVID Vaccine Incentive	Pre-tax COVID Vaccine Incentive	2,709			—			2,709			—			Pre-tax COVID Vaccine Incentive	—			2,709			—			2,709
Adjusted EBITDA	Adjusted EBITDA	$	4,041		$	9,118		$	8,937		$	24,916		Adjusted EBITDA	$	16,037		$	4,041		$	27,583		$	8,937

Net Income (Loss) %														Net Income (Loss) %	(19.7		%)	(14.1		%)	(8.2		%)	(8.6		%)
Adjusted EBITDA %	Adjusted EBITDA %	2.7		%	6.7		%	2.9		%	8.8		%	Adjusted EBITDA %	8.8		%	2.7		%	7.6		%	2.9		%



Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
Month #1 (October 1-October 31, 2021)	68,796	$	11.20	68,796	2,036,413
Month #2 (November 1-November 30, 2021)	3,148	$	11.28	3,148	2,033,265
Month #3 (December 1-December 31, 2021)	—	$	—	—	2,033,265
Total	71,944	$	11.20	71,944


~~3(a)~~10			Third Amendment to Amended and Restated ~~Articles of Incorporation of the Company (Incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K filed October 29, 2021)~~
~~3(b)~~			~~Amended and Restated By-Laws of the Company, effective~~Credit Agreement, dated as of ~~October 27, 2021 (Incorporated by reference to Exhibit 3.2 to~~December 2 1 , 202 2 , among Kimball International, Inc., the ~~Company’s Form 8-K filed October 29, 2021)~~
~~10(a)~~			~~Amended~~lender parties thereto, JPMorgan Chase Bank, National Association, as administrative agent, and ~~Restated 2017 Stock Incentive Plan~~the guarantors named therein (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed ~~October 29, 2021)~~Dec ember 2 2 , 202 2 )
31.1			Certification 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
101			The following materials from Kimball International, Inc.’s Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, ~~2021~~2022 are formatted in Inline XBRL (eXtensible Business Reporting Language) and filed electronically herewith: (i) Condensed Consolidated Balance Sheets; (ii) Condensed Consolidated Statements of ~~Income;~~Operations; (iii) Condensed Consolidated Statements of Comprehensive Income; (iv) Condensed Consolidated Statements of Cash Flows; (v) Condensed Consolidated Statements of Shareholders’ Equity; and (vi) Notes to Condensed Consolidated Financial Statements
104			The cover page from the Company’s Quarterly Report on Form 10-Q for the quarterly period ended December 31, ~~2021,~~2022, formatted in Inline XBRL and contained in Exhibit 101