UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2008
OR
[ ] 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) |
Indiana | 35-0514506 | |
(State or other jurisdiction of | (I.R.S. Employer Identification No.) | |
incorporation or organization) | ||
1600 Royal Street, Jasper, Indiana | 47549-1001 | |
(Address of principal executive offices) | (Zip Code) |
(812) 482-1600 |
Registrant's telephone number, including area code |
Not Applicable |
Former name, former address and former fiscal year, if changed since last report |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No __ |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. Large accelerated filer ___ Accelerated filer X Non-accelerated filer (Do not check if a smaller reporting company) Smaller reporting company |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes __ No X |
The number of shares outstanding of the Registrant's common stock as of January 22, 2009 was: |
Class A Common Stock - 10,867,452 shares | |
Class B Common Stock - 26,200,347 shares |
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KIMBALL INTERNATIONAL, INC.
FORM 10-Q
INDEX
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
KIMBALL INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands, Except for Share and Per Share Data)
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KIMBALL INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Amounts in Thousands, Except for Per Share Data)
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
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Note 1. Summary of Significant Accounting Policies
Basis of Presentation:
The accompanying unaudited Condensed Consolidated Financial Statements of Kimball International, Inc. (the "Company") 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 the Company believes that the disclosures are adequate to make the information presented not misleading. All significant 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 year. It is suggested that these financial statements be read in conjunction with the financial statements and the notes thereto included in the Company's latest annual report on Form 10-K.
Change in Estimate:
During the second quarter of fiscal year 2009, the Company performed an assessment of the useful lives of Enterprise Resource Planning (ERP) software. In evaluating useful lives, the Company considered how long assets would remain functionally efficient and effective, given current levels of technology and competitive factors, and considered the current economic environment. This assessment indicated that the assets will continue to be used for a longer period than previously anticipated. As a result, effective October 1, 2008, the Company revised the useful lives of ERP software from 7 years to 10 years. Changes in estimates are accounted for on a prospective basis, by amortizing assets' current carrying values over their revised remaining useful lives. The effect of this change in estimate, compared to the original amortization, for both the three and six months ended December 31, 2008 was a pre-tax reduction in amortization expense of, in thousands, $482. The pre-tax (decrease) increase to amortization expense in future periods is expected to be, in thousands, ($920) for the remainder of fiscal year 2009, and ($1,227), ($299), $451, and $911 in the four years ending June 30, 2013, and $1,566 thereafter.
Goodwill and Other Intangible Assets:
A summary of goodwill by segment is as follows:
December 31, June 30, (Amounts in Thousands) 2008 2008 Electronic Manufacturing Services $15,430 $ 13,622 Furniture 1,733 1,733 Consolidated $17,163 $ 15,355 6
In the Electronic Manufacturing Services (EMS) segment, goodwill increased in the aggregate by, in thousands, $1,808 during the six months ended December 31, 2008 due to a $1,965 increase for the acquisition of Genesis Electronics Manufacturing. See Note 2 - Acquisition of Notes to Condensed Consolidated Financial Statements for further discussion. Goodwill was offset by, in thousands, a $157 reduction due to the effect of changes in foreign currency exchange rates.
Goodwill represents the difference between the purchase price and the related underlying tangible and intangible net asset values resulting from business acquisitions. Annually, or if conditions indicate an earlier review is necessary, the Company compares the carrying value of the reporting unit to an estimate of the reporting unit's fair value. If the estimated fair value is less than the carrying value, goodwill is impaired and will be written down to its estimated fair value. Goodwill is assigned to and the fair value is tested at the reporting unit level. During the Company's second quarter of fiscal year 2009, the annual impairment tests were performed for several of the Company's reporting units. Goodwill was also reviewed on an interim basis during the second quarter of fiscal year 2009 due to the disparity between the Company's market capitalization and the carrying value of its stockholders' equity and the uncertainty associated with the economy. The results of the analyses indicated that the Company did not have an impairment of goodwill for any reporting units. The calculation of the fair value of the reporting units considers current market conditions existing at the assessment date. The Company will continue to monitor circumstances and events in future periods to determine whether additional goodwill impairment testing is warranted. The Company can provide no assurance that a material impairment charge will not occur in future periods as a result of these analyses.
A summary of other intangible assets subject to amortization by segment is as follows:
December 31, 2008 June 30, 2008 (Amounts in Thousands) Cost Accumulated
AmortizationNet
ValueCost Accumulated
AmortizationNet
ValueElectronic Manufacturing Services: Capitalized Software $ 27,278 $ 23,775 $ 3,503 $27,228 $ 22,531 $ 4,697 Customer Relationships 1,167 342 825 937 247 690 Other Intangible Assets $ 28,445 $ 24,117 $ 4,328 $28,165 $ 22,778 $ 5,387 Furniture: Capitalized Software $ 37,360 $ 32,233 $ 5,127 $43,868 $ 37,895 $ 5,973 Product Rights 1,160 267 893 1,160 210 950 Other Intangible Assets $ 38,520 $ 32,500 $ 6,020 $45,028 $ 38,105 $ 6,923 Unallocated Corporate: Capitalized Software $ 6,424 $ 5,455 $ 969 $ 6,267 $ 5,204 $ 1,063 Other Intangible Assets $ 6,424 $ 5,455 $ 969 $ 6,267 $ 5,204 $ 1,063 Consolidated $ 73,389 $ 62,072 $11,317 $79,460 $ 66,087 $13,373 The customer relationship intangible asset increased by, in thousands, $230 during the six months ended December 31, 2008 due to the acquisition of Genesis Electronics Manufacturing.
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Amortization expense related to other intangible assets was, in thousands, $872 and $2,543 during the quarter and year-to-date periods ended December 31, 2008, respectively. Amortization expense related to other intangible assets was, in thousands, $2,171 and $4,201 during the quarter and year-to-date periods ended December 31, 2007, respectively. Amortization expense in future periods is expected to be, in thousands, $1,353 for the remainder of fiscal year 2009, and $2,367, $1,974, $1,734, and $1,472 in the four years ending June 30, 2013, and $2,417 thereafter. The amortization period for product rights is 7 years. The amortization periods for customer relationship intangible assets range from 10 to 16 years. The estimated useful life of internal-use software ranges from 3 to 10 years.
Other intangible assets consist of capitalized software, product rights, and customer relationships and are reported as Other Intangible Assets on the Condensed Consolidated Balance Sheets. Intangible assets are reviewed for impairment when events or circumstances indicate that the carrying value may not be recoverable over the remaining lives of the assets.
Internal-use software is stated at cost less accumulated amortization and is amortized using the straight-line method. During the software application development stage, capitalized costs include external consulting costs, cost of software licenses, and internal payroll and payroll-related costs for employees who are directly associated with a software project. Upgrades and enhancements are capitalized if they result in added functionality which enable the software to perform tasks it was previously incapable of performing. Software maintenance, training, data conversion, and business process reengineering costs are expensed in the period in which they are incurred.
Product rights to produce and sell certain products are amortized on a straight-line basis over their estimated useful lives, and capitalized customer relationships are amortized on the estimated attrition rate of customers. The Company has no intangible assets with indefinite useful lives which are not subject to amortization.
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Effective Tax Rate:
In determining the quarterly provision for income taxes, the Company uses 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 the Company operates. Unusual or infrequently occurring items are separately recognized in the quarter in which they occur.Non-Operating Income (Expense):
Non-operating Income (Expense) includes the impact of such items as foreign currency rate movements and related derivative gain or loss, fair value adjustments on Supplemental Employee Retirement Plan (SERP) investments, non-production rent income, bank charges, and other miscellaneous non-operating income and expense items that are not directly related to operations.
Components of Non-operating Income (Expense), net: Three Months Ended Six Months Ended (Amounts in Thousands) December 31, December 31, 2008 2007 2008 2007 Foreign Currency/Derivative Gain (Loss) $(1,499) $ 667 $ (988) $ 752 Loss on Supplemental Employee Retirement Plan Investment (2,234) (354) (3,357) (205) Polish offset credit program 0 0 0 1,324 Other (176) (184) (342) 111 Non-operating Income (Expense), net $(3,909) $ 129 $(4,687) $1,982 Derivative Instruments and Hedging Activities:
The Company uses forward exchange contracts to reduce the effect of currency risk in the financial statements. The fair value of derivative financial instruments recorded on the balance sheet as of December 31, 2008 and June 30, 2008 was, in thousands, $714 and $1,307, recorded in assets, and $14,458 and $2,582 recorded in liabilities, respectively. The fair value of derivative financial instruments recorded on the balance sheet declined by $12.5 million from June 30, 2008 to December 31, 2008, consisting of a $0.6 million decline in derivative assets and a $11.9 million increase in derivative liabilities due to the strengthening of the Company's functional currencies relative to its hedged currencies. The majority of derivative instruments are classified as cash flow hedges and are accounted for such that gains or losses are initially recorded net of related tax effect in Accumulated Other Comprehensive Income (Loss), a component of Share Owners' Equity, and are subsequently reclassified into earnings in the period during which the underlying hedged transaction is recognized in earnings. The derivative losses that are deferred in Accumulated Other Comprehensive Income (Loss) increased from June 30, 2008 to December 31, 2008 by $10.9 million pre-tax, or $7.9 million net of tax. Losses on forward exchange contracts are generally offset by gains in operating costs in the income statement when the underlying hedged transaction is recognized in earnings. Because gains or losses on forward contracts fluctuate based on currency spot rates, the future effect on earnings of the hedges alone is not determinable, but in conjunction with the underlying hedged transactions the result is expected to be a decline in currency risk. See Note 4 - Comprehensive Income (Loss) of Notes to Condensed Consolidated Financial Statements for further detail of the balances and changes in Accumulated Other Comprehensive Income (Loss).
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New Accounting Standards:
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During the first quarter of fiscal year 2009, the Company acquired privately-held Genesis Electronics Manufacturing located in Tampa, Florida. The acquisition supports the Company's growth and diversification strategy, bringing new customers in key target markets. The acquisition purchase price totaled $5.4 million. Assets acquired were $7.7 million, which included $2.0 million of goodwill, and liabilities assumed were $2.3 million. Goodwill was allocated to the EMS segment of the Company. Direct costs of the acquisition were not material. The operating results of this acquisition are included in the Company's consolidated financial statements beginning on September 1, 2008 and had an immaterial impact on the second quarter and year-to-date fiscal year 2009 financial results. The purchase price allocation is final.
Inventory components of the Company were as follows:
December 31, June 30, (Amounts in Thousands) 2008 2008 Finished Products $ 44,879 $ 42,201 Work-in-Process 14,576 14,363 Raw Materials 115,470 126,583 Total FIFO Inventory $174,925 $183,147 LIFO Reserve (18,841) (18,186) Total Inventory $156,084 $164,961 For interim reporting, LIFO inventories are computed based on year-to-date quantities 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.
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Note 4. Comprehensive Income (Loss)
Comprehensive income (loss) includes all changes in equity during a period except those resulting from investments by and distributions to Share Owners. Comprehensive income (loss), shown net of tax if applicable, for the three and six-month periods ended December 31, 2008 and 2007 is as follows:
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Management organizes the Company into segments based upon differences in products and services offered in each segment. The EMS segment provides engineering and manufacturing services which utilize common production and support capabilities to a variety of industries globally. The EMS segment focuses on electronic assemblies that have high durability requirements and are sold on a contract basis and produced to customers' specifications. The EMS segment currently sells primarily to customers in the medical, automotive, industrial controls, and public safety industries. The Furniture segment provides furniture for the office and hospitality industries, sold under the Company's family of brand names. Each segment's product line offerings consist of similar products and services sold within various industries. Intersegment sales are insignificant.
Unallocated corporate assets include cash and cash equivalents, short-term investments, and other assets not allocated to segments. Unallocated corporate income from continuing operations consists of income not allocated to segments for purposes of evaluating segment performance and includes income from corporate investments and other non-operational items. The basis of segmentation and accounting policies of the segments are consistent with those disclosed in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2008.
Three Months Ended Six Months Ended December 31, December 31, (Amounts in Thousands) 2008 2007 2008 2007 Net Sales: Electronic Manufacturing Services $166,912 $177,362 $349,833 $355,409 Furniture 160,694 170,432 317,268 326,322 Consolidated $327,606
$347,794 $667,101
$681,731 Income (Loss) from Continuing Operations: Electronic Manufacturing Services $ (709)
$ (2,102) $ (1,477)
$ (1,323) Furniture 4,049
5,801 7,232
10,882 Unallocated Corporate and Eliminations 4,842
541 4,611
1,243 Consolidated $ 8,182 [1]
$ 4,240 [2]
$ 10,366 [1]
$ 10,802 [2]
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December 31, June 30, (Amounts in Thousands) 2008 2008 Total Assets: Electronic Manufacturing Services $379,492 $396,773 Furniture 222,103 240,674 Unallocated Corporate and Eliminations 97,759 85,220 Consolidated $699,354
$722,667
[1] Income (Loss) from Continuing Operations included after-tax restructuring charges, in thousands, of $661 and $1,255 in the three and six months ended December 31, 2008, respectively. The EMS segment recorded, in the three and six months ended December 31, 2008, in thousands, $464 and $899, respectively, of after-tax restructuring charges. The Furniture segment recorded, in the three and six months ended December 31, 2008, in thousands, $143 and $289, respectively, of after-tax restructuring charges. Unallocated Corporate and Eliminations recorded, in the three and six months ended December 31, 2008, in thousands, $54 and $67, respectively, of after-tax restructuring charges. See Note 7 - Restructuring Expense of Notes to Condensed Consolidated Financial Statements for further discussion. Additionally, the EMS segment recorded for both the three and six months ended December 31, 2008, $1.6 million of after-tax income for earnest money deposits retained by the Company resulting from the termination of the contract to sell the Company's Poland building and real estate. Unallocated Corporate and Eliminations also recorded, for both the three and six months ended December 31, 2008, after-tax gains of $4.8 million on the sale of undeveloped land holdings and timberlands which were closed on during the quarter. The Company expects to close the majority of the land and timberland sales during the third quarter of fiscal year 2009.[2] Income (Loss) from Continuing Operations included after-tax restructuring charges, in thousands, of $375 and $568 in the three and six months ended December 31, 2007, respectively. The EMS segment recorded, in thousands, $133 for both the three and six months ended December 31, 2007 of after-tax restructuring charges. The Furniture segment recorded, in the three and six months ended December 31, 2007, in thousands, $151 and $274, respectively, of after-tax restructuring charges. Unallocated Corporate and Eliminations recorded, in the three and six months ended December 31, 2007, in thousands, $91 and $161, respectively, of after-tax restructuring charges. See Note 7 - Restructuring Expense of Notes to Condensed Consolidated Financial Statements for further discussion. The EMS segment also recorded, in the six months ended December 31, 2007, $0.7 million of after-tax income received as part of a Polish offset credit program for investments made in the Company's Poland operation.
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Note 6. Commitments and Contingent Liabilities
Standby letters of credit are issued to third-party suppliers, lessors, and insurance and financial institutions and can only be drawn upon in the event of the Company's failure to pay its obligations to the beneficiary. As of December 31, 2008, the Company had a maximum financial exposure from unused standby letters of credit totaling $5.0 million. The Company is not aware of circumstances that would require it to perform under any of these arrangements and believes that the resolution of any claims that might arise in the future, either individually or in the aggregate, would not materially affect the Company's financial statements. Accordingly, no liability has been recorded as of December 31, 2008 with respect to the standby letters of credit. The Company also enters into commercial letters of credit to facilitate payment to vendors and from customers.
The Company estimates 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 in cases where specific warranty issues become known.
Changes in the product warranty accrual for the six months ended December 31, 2008 and 2007 were as follows:
Six Months Ended
December 31,(Amounts in Thousands) 2008
2007
Product Warranty Liability at the beginning of the period $ 1,470 $ 2,147 Accrual for warranties issued 619 226 Additions (reductions) related to pre-existing warranties (including changes in estimates) (4) 211 Settlements made (in cash or in kind) (498) (597) Product Warranty Liability at the end of the period $ 1,587 $ 1,987 17
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Note 8. Fair Value of Financial Assets and Liabilities
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (FAS 157), which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The provisions of FAS 157 were effective for the Company as of July 1, 2008, however, the FASB deferred the effective date of FAS 157 until the beginning of the Company's fiscal year 2010, as it relates to fair value measurement requirements for non-financial assets and liabilities that are not measured at fair value on a recurring basis. Accordingly, the Company adopted FAS 157 for financial assets and liabilities measured at fair value on a recurring basis at July 1, 2008. The adoption did not have a material impact on the Company's financial statements.
The fair value framework as established in FAS 157 requires the categorization of assets and liabilities 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.
As of December 31, 2008, the fair values of financial assets and liabilities that were valued using the market approach are categorized as follows:
(Amounts in Thousands) Level 1 Level 2 Level 3 Total Assets Cash Equivalents $ 10,083 $ -0- $ -0- $ 10,083 Available-for-sale securities 350 51,608 -0- 51,958 Derivatives -0- 714 -0- 714 Nonqualified supplemental employee retirement plan assets 10,022 -0- -0- 10,022 Total assets at fair value $ 20,455 $ 52,322 $ -0- $ 72,777 Liabilities Derivatives $ -0- $ 14,458 $ -0- $ 14,458 Total liabilities at fair value $ -0- $ 14,458 $ -0- $ 14,458 There were no changes in the Company's valuation techniques used to measure fair values on a recurring basis as a result of adopting FAS 157.
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At December 31, 2008, in thousands, assets totaling $15,081 were classified as held for sale and consisted of $13,707 for undeveloped land holdings and timberlands and $1,374 for a facility and land related to the Gaylord, Michigan, exited operation within the EMS segment. All of the assets were reported as unallocated corporate assets for segment reporting purposes. The Company expects to sell these assets during the next 12 months.
During the quarter ended September 30, 2008, the Company decided to sell its undeveloped land holdings and timberlands using an auction approach. Only a portion of the land qualified for held for sale classification as of September 30, 2008. The auction took place during November 2008. A portion of the land tracts sold via the auction were finalized during December 2008. The remainder of the land tracts sold via the auction have final closings scheduled to be complete in the Company's fiscal year 2009 third quarter and are classified as held for sale as of December 31, 2008.
During the quarter ended September 30, 2008, the Company decided to sell one of its aircraft and replace it with a smaller, more efficient aircraft, and it met the criteria for held for sale classification. As of December 31, 2008, due to inactivity in the aircraft market, the Company's aircraft no longer meets the criteria for held for sale classification. The impact of reclassifying the asset to held and used was immaterial to the Company's results of operations.
No impairment was recorded during the three and six month months ended December 31, 2008 as the net carrying values of the assets held for sale were less than the estimated fair market value less costs to sell.
At June 30, 2008, the Company had, in thousands, assets totaling $1,374 classified as held for sale.
Note 10. Postemployment Benefits
The Company maintains severance plans for substantially all domestic employees which provide severance benefits to eligible employees meeting the plans' qualifications, primarily involuntary termination without cause. The components of net periodic postemployment benefit cost applicable to the Company's severance plans were as follows:
Three Months Ended Six Months Ended December 31, December 31, (Amounts in Thousands) 2008 2007 2008 2007 Service cost $ 48 $ 66 $ 162 $ 148 Interest cost 21 28 69 63 Amortization of prior service costs 72 72 143 143 Amortization of actuarial change (2) (1) 8 12 Net periodic benefit cost $ 139 $ 165 $ 382 $ 366 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 those disclosed in Note 7 - Restructuring Expense of Notes to Condensed Consolidated Financial Statements, are not estimable using actuarial methods and are expensed in accordance with the applicable U.S. GAAP.
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Note 11. Stock Compensation Plans
During the second quarter of fiscal year 2009, the Company granted 27,117 unrestricted shares of Class B common stock to non-employee directors at a grant date fair value of $163,516, which was based on the stock price of $6.03 at the date of the grant. These shares were issued to members of the Board of Directors as compensation for director's fees, as a result of directors' elections to receive unrestricted shares in lieu of cash payment. Director's fees are expensed over the period that directors earn the compensation.
Also during the second quarter of fiscal year 2009, the Company granted 250 unrestricted shares of Class B common stock to one key employee at a grant date fair value of $2,153, which was based on the stock price of $8.61 at the date of the grant.
During the first quarter of fiscal year 2009, the Company awarded annual performance shares and long-term performance shares to officers and other key employees. These awards entitle the employees to receive shares of the Company's Class A common stock. Payouts under these awards are based upon the cash incentive payout percentages calculated under the Company's 2005 Profit Sharing Incentive Bonus Plan. The maximum potential shares issuable are 442,600 shares. The number of shares issued will be less if the maximum cash incentive payout percentages are not achieved. The contractual life of annual performance shares is one year and five years for the long-term performance shares. Annual performance shares are based on an annual performance measurement period and vest after one year. Long-term performance shares are based on five successive annual performance measurement periods, with each annual tranche having a grant date when economic profit tiers are established at the beginning of the applicable fiscal year and a vesting date at the end of the annual period. The grant date fair value for the annual performance share awards and the first tranche of the long-term performance share awards granted August 19, 2008 was $10.41.
Also, during the first quarter of fiscal year 2009, the Company granted 2,178 unrestricted shares of Class B common stock to two key employees at a grant date fair value of $24,982. The grant date fair value of the unrestricted shares was based on the stock price of $11.47 at the date of the grant.
All awards were granted under the 2003 Stock Option and Incentive Plan. For information on similar unrestricted shares and performance share awards, refer to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2008.
Note 12. Subsequent Event
The Company entered into agreements to sell undeveloped land holdings and timberlands which approximate 27,200 acres. The sale was conducted utilizing an auction approach. The auctions began on November 6, 2008, and negotiations concluded on November 13, 2008. These agreements are with numerous buyers, and the combined purchase price for all buyers was $50.6 million for the entire acreage. These agreements are not contingent upon buyers obtaining financing. In addition to the $8 million pre-tax gain recognized in the second quarter of fiscal year 2009 for the closings that occurred during the quarter, the Company expects to record a pre-tax gain of approximately $23 million during the third quarter of fiscal year 2009 for the remainder of the closings. Gains are net of applicable selling and other expenses including the buyer's premium.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market RiskThere have been no material changes to market risks from the information disclosed in Item 7A "Quantitative and Qualitative Disclosures About Market Risk" of the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2008.
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Item 4. Controls and Procedures
(a) Evaluation of disclosure controls and procedures.
The Company maintains controls and procedures designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and that such information is accumulated and communicated to the Company's management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Based upon their evaluation of those controls and procedures performed as of December 31, 2008, the Chief Executive Officer and Chief Financial Officer of the Company concluded that its disclosure controls and procedures were effective.
(b) Changes in internal control over financial reporting.
There have been no changes in the Company's internal control over financial reporting that occurred during the quarter ended December 31, 2008 that have materially affected, or that are reasonably likely to materially affect, the Company's internal control over financial reporting.
PART II. OTHER INFORMATION
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table presents a summary of share repurchases made by the Company:
Period Total Number
of Shares PurchasedAverage 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 [1] Month #1 (October 1-October 31, 2008) -0- $ -0- -0- 2,000,000 Month #2 (November 1-November 30, 2008) -0- $ -0- -0- 2,000,000 Month #3 (December 1-December 31, 2008) -0- $ -0- -0- 2,000,000 Total -0- $ -0- -0- [1] The share repurchase program authorized by the Board of Directors was announced on October 16, 2007. The program allows for the repurchase of up to 2 million of any combination of Class A or Class B shares and will remain in effect until all shares have been repurchased.
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Item 4. Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting of Share Owners was held on October 21, 2008. The Board of Directors was elected in its entirety, based on the following election results: Nominees as Directors by Holders of Class A Common Stock Votes For* Votes Withheld Douglas A. Habig 10,509,346 418,426 James C. Thyen 10,036,445 891,327 Christine M. Vujovich 10,508,274 419,498 Polly B. Kawalek 10,505,274 422,498 Harry W. Bowman 10,506,346 421,426 Geoffrey L. Stringer 10,505,274 422,498 Thomas J. Tischhauser 10,505,274 422,498
There were no broker non-votes for the above nominees as Directors. *Votes for nominees as Directors by holders of Class A Common Stock represented an average of 89% of the total 11,673,845 Class A shares outstanding and eligible to vote.
Nominee as Director by Holders of Class B Common Stock Votes For** Votes Withheld Dr. Jack R. Wentworth 21,321,583 1,625,847 There were no broker non-votes for the above nominee as Director. **Votes for nominee as Director by holders of Class B Common Stock represented 84% of the total 25,291,736 Class B shares outstanding and eligible to vote.The appointment of the Deloitte Entities, an independent registered public accounting firm, as the Company's independent auditors for the fiscal year ended June 30, 2009 was approved by holders of Class A Common Stock based on the following voting results: Votes for***: 10,849,436 Votes Against: 61,800 Votes Abstaining: 16,536 There were no broker non-votes for the appointment of the Deloitte Entities proposal. ***Votes for the appointment of the Deloitte Entities as the Company's independent auditors represented 93% of the total 11,673,845 Class A shares outstanding and eligible to vote.The 2003 Stock Option & Incentive Plan was approved and affirmed by holders of Class A Common Stock based on the following voting results: Votes for****: 10,106,479 Votes Against: 331,733 Votes Abstaining: 414,952 Broker non-votes totaled 74,608 shares for the 2003 Stock Option & Incentive Plan proposal. ****Votes for the 2003 Stock Option & Incentive Plan proposal represented 87% of the total 11,673,845 Class A shares outstanding and eligible to vote.
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Exhibits (numbered in accordance with Item 601 of Regulation S-K)
(3(a)) Amended and restated Articles of Incorporation of the Company (Incorporated by reference to Exhibit 3(a) to the Company's Form 10-K for the year ended June 30, 2007)
(3(b)) Restated By-laws of the Company (Incorporated by reference to Exhibit 3(b) to the Company's Form 8-K filed October 21, 2008)
(10(a)) Summary of Director and Named Executive Officer Compensation
(10(b)) Contract to Purchase Real Estate at Public Auction (Incorporated by reference to Exhibit 10.1 to the Company's Form 8-K filed November 14, 2008)
(10(c)) Supplemental Employee Retirement Plan (2009 Revision)
(10(d)) 2003 Stock Option and Incentive Plan
(11) Computation of Earnings Per Share
(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
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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
KIMBALL INTERNATIONAL, INC. | ||
By: | /s/ James C. Thyen | |
JAMES C. THYEN President, Chief Executive Officer | ||
February 6, 2009 | ||
By: | /s/ Robert F. Schneider | |
ROBERT F. SCHNEIDER Executive Vice President, Chief Financial Officer | ||
February 6, 2009 |
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Kimball International, Inc.
Exhibit Index
Exhibit No. | Description | |
3(a) | Amended and restated Articles of Incorporation of the Company (Incorporated by reference to Exhibit 3(a) to the Company's Form 10-K for the year ended June 30, 2007) | |
3(b) | Restated By-laws of the Company (Incorporated by reference to Exhibit 3(b) to the Company's Form 8-K filed October 21, 2008) | |
10(a) | Summary of Director and Named Executive Officer Compensation | |
10(b) | Contract to Purchase Real Estate at Public Auction (Incorporated by reference to Exhibit 10.1 to the Company's Form 8-K filed November 14, 2008) | |
10(c) | Supplemental Employee Retirement Plan (2009 Revision) | |
10(d) | 2003 Stock Option and Incentive Plan | |
11 | Computation of Earnings Per Share | |
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 |
42