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 March 31, 2010
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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes __ 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 April 21, 2010 was: |
| Class A Common Stock - 10,733,475 shares | |
| Class B Common Stock - 26,875,706 shares | |
| 1 | |
KIMBALL INTERNATIONAL, INC.
FORM 10-Q
INDEX
2
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)
3
KIMBALL INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Amounts in Thousands, Except for Per Share Data)
4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
5
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 fiscal 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 Accounting Policy:
During the third quarter of fiscal year 2010, the Company changed its classification of interest and penalties related to unrecognized tax benefits, reflected in the Condensed Consolidated Statements of Income. Interest related to unrecognized tax benefits was previously classified on either the Interest income line or the Interest expense line. Penalties related to unrecognized tax benefits were previously classified as Non-operating expense. In accordance with the guidance for accounting for uncertainty in income taxes, based on an accounting policy election, interest related to unrecognized tax benefits may either be classified as income taxes or interest, and penalties related to unrecognized tax benefits may either be classified as income taxes or another expense classification. Beginning January 1, 2010, the Company revised its accounting policy and now classifies interest and penalties related to unrecognized tax benefits in the Provision (Benefit) for Income Taxes line of the Condensed Consolidated Statements of Income. The Company believes that the classification of interest and penalties in the Provision (Benefit) for Income Taxes line is preferable because it is management's belief that interest and penalties related to unrecognized tax benefits are costs of managing taxes payable (as opposed to, for example, interest as a cost of debt). Also, this presentation is more consistent with the practice followed by most of the Company's competitors. As a result of reclassifying interest related to unrecognized tax benefits, the Company's interest coverage ratio, which is a debt covenant in its revolving credit facility, will change. This change does not impact the Company's compliance with this debt covenant. Interest income and penalties related to unrecognized tax benefits during the third quarter of fiscal year 2010, in thousands, was ($21) and $3, respectively. Prior periods were not adjusted retrospectively due to immateriality. This change had no impact on Operating Income, Net Income, or Earnings Per Share. This change had an impact on Income Before Taxes on Income, however the impact was not material.
Change in Estimates:
The Company periodically performs assessments of the useful lives of assets. In evaluating useful lives, the Company considers how long assets will remain functionally efficient and effective, given levels of technology, competitive factors, and the economic environment. If the assessment indicates that the assets will continue to be used for a longer period than previously anticipated, the useful life of the assets are revised, resulting in a change in estimate. Changes in estimates are accounted for on a prospective basis by depreciating the assets' current carrying values over their revised remaining useful lives.
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Effective July 1, 2009, the Company revised the useful lives of Surface Mount Technology (SMT) production equipment from 5 years to 7 years. Additionally, effective October 1, 2008, the Company revised the useful lives of Enterprise Resource Planning (ERP) software from 7 years to 10 years. The effect of these changes in estimates, compared to the original depreciation and amortization, for the three and nine months ended March 31, 2010 was a pre-tax reduction in depreciation and amortization expense of, in thousands, ($537) and ($1,611), respectively. The pre-tax reduction in amortization expense for both the three and nine months ended March 31, 2009 was, in thousands, ($460) and ($942), respectively. The pre-tax (decrease) increase to depreciation and amortization expense in future periods is expected to be, in thousands, ($537) for the remaining three months of fiscal year 2010, and ($1,010), $141, $1,052, and $1,272 in the four years ending June 30, 2014, and $1,756 thereafter.
Revisions to the Earnings Per Share Calculation:
In June 2008, the Financial Accounting Standards Board (FASB) issued guidance on determining whether instruments granted in share-based payment transactions are participating securities. Under the guidance, unvested share-based payment awards that contain nonforfeitable rights to dividends are considered to be a separate class of securities and are excluded from the common stock EPS calculations. The Company's restricted share unit awards meet the definition of a participating security when held by retirement-age participants. The guidance became effective as of the beginning of the Company's fiscal year 2010 and required that previously reported earnings per share data be recast in financial statements issued in periods after the effective date. The guidance impacted the Company's Class A Common Stock earnings per share results for certain interim periods and the annual period of fiscal year 2009. The impact on Class A basic and diluted earnings per share for the nine months ended March 31, 2009 was a reduction from $0.39 as originally reported to $0.38. The impact on fiscal year 2009 Class A basic earnings per share was a reduction from $0.47 as originally reported to $0.46. Class B Common Stock calculations were not impacted significantly enough to cause a change in the earnings per share result.
Goodwill and Other Intangible Assets:
The Electronic Manufacturing Services (EMS) segment had goodwill net of accumulated impairment losses of, in thousands, $2,554 and $2,608, as of March 31, 2010 and June 30, 2009, respectively. Goodwill decreased by, in thousands, $54 during the nine months ended March 31, 2010 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 fair 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 to identify potential impairment. If the estimated fair value of the reporting unit is less than the carrying value, a second step is performed to determine the amount of potential goodwill impairment. If impaired, goodwill is written down to its estimated implied fair value. Goodwill is assigned to and the fair value is tested at the reporting unit level. 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 units considers current market conditions existing at the assessment date.
No goodwill impairment was recorded in the three and nine months ended March 31, 2010. During the third quarter of fiscal year 2009, goodwill was reviewed on an interim basis due to the continued uncertainty associated with the economy and the significant decline in the Company's sales and order trends during the quarter as well as the increased disparity between the Company's market capitalization and the carrying value of its stockholders' equity. Interim testing resulted in the recognition of goodwill impairment in the prior year third quarter of, in thousands, $12,826 within the EMS segment and $1,733 within the Furniture segment. The impairment was recorded on the Goodwill Impairment line item of the Company's Condensed Consolidated Statements of Income.
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In addition to performing the required annual testing, the Company will continue to monitor circumstances and events in future periods to determine whether additional goodwill impairment testing is warranted on an interim basis. The Company can provide no assurance that an impairment charge for the goodwill balance, which approximates only 0.4% of the Company's total assets, will not occur in future periods as a result of these analyses.
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.
A summary of other intangible assets subject to amortization by segment was as follows:
Amortization expense related to other intangible assets was, in thousands, $631 and $1,898 during the quarter and year-to-date periods ended March 31, 2010, respectively. Amortization expense related to other intangible assets was, in thousands, $726 and $3,269 during the quarter and year-to-date periods ended March 31, 2009, respectively. Amortization expense in future periods is expected to be, in thousands, $347 for the remainder of fiscal year 2010, and $2,102, $1,862, $1,509, and $1,128 in the four years ending June 30, 2014, and $1,524 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.
8
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 based on the estimated attrition rate of customers. The Company has no intangible assets with indefinite useful lives which are not subject to amortization.
Other General Income:
Other General Income in fiscal year 2010 included a gain on the sale of the Company's Poland facility and land and settlement proceeds related to an antitrust class action lawsuit of which the Company was a class member. Other General Income in fiscal year 2009 included a gain related to the sale of undeveloped land and timberland holdings, as well as earnest money deposits retained by the Company resulting from the termination of a contract to sell and lease back the Company's Poland facility and land.
Components of Other General Income: Three Months Ended Nine Months Ended (Amounts in Thousands) March 31 March 31 2010 2009 2010 2009 Gain on Sale of Poland Facility and Land $ 6,724 $ -0- $ 6,724 $ -0- Settlement Proceeds Related to Antitrust Class Action Lawsuit -0- -0- 3,256 -0- Gain on Sale of Undeveloped Land and Timberland Holdings -0- 23,178 -0- 31,156 Earnest Money Deposits Retained -0- -0- -0- 1,928 Other General Income $ 6,724 $ 23,178 $ 9,980 $ 33,084
Non-operating Income (Expense):
Non-operating income (expense) included 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. The gain or loss on SERP investments is exactly offset by a change in the SERP liability that is recognized in selling and administrative expenses.
Components of Non-operating income (expense), net: Three Months Ended Nine Months Ended (Amounts in Thousands) March 31 March 31 2010 2009 2010 2009 Foreign Currency/Derivative Gain (Loss) $ (454) $ 1,075 $ 329 $ 87 Gain (Loss) on Supplemental Employee Retirement Plan Investments 540 (749) 2,560 (4,106) Other 157 115 (206) (227) Non-operating income (expense), net $ 243 $ 441 $ 2,683 $ (4,246) 9
Effective Tax Rate:
For the third quarter fiscal year 2010 year-to-date period, the Company used the actual effective tax rate for the year-to-date tax provision calculation because a reliable estimate of the full-year effective tax rate could not be made. Relatively low pre-tax income coupled with the mix of operating results in multiple taxing jurisdictions and the difficulty of forecasting in certain markets caused significant uncertainty in the estimate of the annual effective tax rate.
The fiscal 2010 year-to-date actual effective tax rate was (73.3%) compared to the effective tax rate for the same period of fiscal year 2009 of 37.0%. Relatively low pre-tax income coupled with a tax benefit due to a tax planning strategy related to the sale of a facility and land in Poland and a favorable impact of the Company's earnings mix drove the significantly lower effective tax rate compared to the same period of fiscal year 2009. The mix of earnings between U.S. and foreign jurisdictions resulted in an overall tax benefit due to U.S. losses which have a higher statutory tax rate than the Company's foreign operations which were profitable in the first nine months of fiscal year 2010.
New Accounting Standards:
Inventory components of the Company were as follows:
March 31, June 30, (Amounts in Thousands) 2010 2009 Finished Products $ 37,453 $ 35,530 Work-in-Process 13,236 11,752 Raw Materials 112,174 93,999 Total FIFO Inventory $162,863 $141,281 LIFO Reserve (12,427) (14,277) Total Inventory $150,436 $127,004 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. During the three and nine-month periods ended March 31, 2010, LIFO inventory liquidations increased net income by, in thousands, $412 and $1,379, respectively. During the three and nine-month periods ended March 31, 2009, LIFO inventory liquidations increased net income by, in thousands, $764 and $1,764, respectively.
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Note 3. 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 nine-month periods ended March 31, 2010 and 2009 was 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.
14
Unallocated corporate assets include cash and cash equivalents, short-term investments, and other assets not allocated to segments. Unallocated corporate net income 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, 2009.
Three Months Ended Nine Months Ended March 31 March 31 (Amounts in Thousands) 2010 2009 2010 2009 Net Sales: Electronic Manufacturing Services $190,137 $140,630 $522,606 $ 490,463 Furniture 92,181 128,222 309,487 445,490 Unallocated Corporate and Eliminations 29 -0- 74 -0- Consolidated $282,347
$268,852 $832,167
$ 935,953 Net Income (Loss): Electronic Manufacturing Services $ 10,766
$ (9,570) $ 13,212
$ (11,047) Furniture (4,543)
(1,615) (3,759)
5,617 Unallocated Corporate and Eliminations 107
15,299 557
19,910 Consolidated $ 6,330 (1)
$ 4,114 (2)
$ 10,010 (1)
$ 14,480 (2)
(1) Net Income (Loss) included after-tax restructuring charges, in thousands, of $549 and $1,025 in the three and nine months ended March 31, 2010, respectively. The EMS segment recorded, in the three and nine months ended March 31, 2010, in thousands, $529 and $1,034, respectively, of after-tax restructuring charges. The Furniture segment recorded, in the three and nine months ended March 31, 2010, in thousands, $0 and $(51), respectively, of after-tax restructuring income. Unallocated Corporate and Eliminations recorded, in the three and nine months ended March 31, 2010, in thousands, $20 and $42, respectively, of after-tax restructuring charges. See Note 6 - Restructuring Expense of Notes to Condensed Consolidated Financial Statements for further discussion. Additionally, the EMS segment recorded for both the three and nine months ended March 31, 2010, after-tax income of $7.7 million resulting from the gain on the sale of the Poland facility and land. The EMS segment also recorded for the nine months ended March 31, 2010, after-tax income of $2.0 million resulting from settlement proceeds related to an antitrust class action lawsuit of which the Company was a class member.
(2) Net Income (Loss) included after-tax restructuring charges, in thousands, of $420 and $1,675 in the three and nine months ended March 31, 2009, respectively. The EMS segment recorded, in the three and nine months ended March 31, 2009, in thousands, $178 and $1,077, respectively, of after-tax restructuring charges. The Furniture segment recorded, in the three and nine months ended March 31, 2009, in thousands, $71 and $360, respectively, of after-tax restructuring charges. Unallocated Corporate and Eliminations recorded, in the three and nine months ended March 31, 2009, in thousands, $171 and $238, respectively, of after-tax restructuring charges. See Note 6 - Restructuring Expense of Notes to Condensed Consolidated Financial Statements for further discussion. Additionally, the EMS segment recorded for the nine months ended March 31, 2009, $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 nine months ended March 31, 2009, in millions, $13.9 and $18.7, respectively, of after-tax gains on the sale of undeveloped land holdings and timberlands. Also, for both the three and nine months ended March 31, 2009, the Company recorded $9.1 million of after-tax costs related to goodwill impairment, consisting of $8.0 million in the EMS segment and $1.1 million in the Furniture segment. See the Goodwill and Other Intangible Assets section of Note 1 - Summary of Significant Accounting Policies of Notes to Condensed Consolidated Financial Statements for further discussion.
March 31, June 30, (Amounts in Thousands) 2010 2009 Total Assets: Electronic Manufacturing Services $412,613 $351,506 Furniture 179,349 184,755 Unallocated Corporate and Eliminations 59,892 106,008 Consolidated $651,854
$642,269
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Note 5. 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 March 31, 2010, the Company had a maximum financial exposure from unused standby letters of credit totaling $4.8 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 March 31, 2010 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 nine months ended March 31, 2010 and 2009 were as follows:
Nine Months Ended
March 31(Amounts in Thousands) 2010
2009 Product Warranty Liability at the beginning of the period $ 2,176 $ 1,470 Accrual for warranties issued 493 1,074 Additions (Reductions) related to pre-existing warranties (including changes in estimates) (77) 157 Settlements made (in cash or in kind) (712) (867) Product Warranty Liability at the end of the period $ 1,880 $ 1,834 16
17
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Note 7. Fair Value of Financial Assets and Liabilities
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At March 31, 2010, a facility and land related to the Gaylord, Michigan, exited operation within the EMS segment were classified as held for sale and totaled, in thousands, $1,160. 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 year-to-date period of fiscal year 2010, the Company sold equipment related to previously held timberlands, and the sale had an immaterial effect on the Company's consolidated financial statements. At June 30, 2009, the Company had, in thousands, assets totaling $1,358 classified as held for sale.
Note 11. Postemployment Benefits
The Company maintains severance plans for all domestic employees. These plans 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 Nine Months Ended March 31 March 31 (Amounts in Thousands) 2010 2009 2010 2009 Service cost $ 217 $ 108 $ 595 $ 270 Interest cost 122 46 334 115 Amortization of prior service costs 71 71 214 214 Amortization of actuarial change 310 169 608 177 Net periodic benefit cost $ 720 $ 394 $1,751 $ 776 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 6 - 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 12. Stock Compensation Plan
During fiscal year 2010, the following stock compensation was awarded to officers, key employees, and non-employee directors. All awards were granted under the 2003 Stock Option and Incentive Plan. For more 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, 2009.
Performance Shares Quarter Awarded
Maximum Potential Shares Issuable Grant Date Fair Value (4) Annual Performance Shares - Class A (1) 1st Quarter 240,000 $ 6.24 Long-Term Performance Shares - Class A (2) 1st Quarter 726,350 $ 6.24 Long-Term Performance Shares - Class A (2) 2nd Quarter 1,280 $ 7.22 Annual Performance Shares - Class A (1) 3rd Quarter 1,167 $ 7.32 Long-Term Performance Shares - Class A (2) 3rd Quarter 4,766 $ 7.32
Unrestricted Shares Quarter Awarded
Shares Grant Date Fair Value (4) Unrestricted Shares (Director Compensation) - Class B (3) 2nd Quarter 19,662 $ 7.63
(1) Annual performance shares were awarded to officers. Payouts will be based upon the fiscal year 2010 cash incentive payout percentages calculated under the Company's 2005 Profit Sharing Incentive Bonus Plan. The number of shares issued will be less than the maximum potential shares issuable if the maximum cash incentive payout percentages are not achieved. Annual performance shares vest after one year. (2) Long-term performance shares were awarded to officers and other key employees. Payouts will be based upon the cash incentive payout percentages calculated under the Company's 2005 Profit Sharing Incentive Bonus Plan. 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 each annual period. The number of shares issued will be less than the maximum potential shares issuable if the maximum cash incentive payout percentages are not achieved. (3) Unrestricted shares were awarded to non-employee members of the Board of Directors as compensation for director's fees, as a result of directors' elections to receive unrestricted shares in lieu of cash payment. Director's fees are expensed over the period that directors earn the compensation. Unrestricted shares do not have vesting periods, holding periods, restrictions on sale, or other restrictions. (4) The grant date fair value of performance shares is based on the stock price at the date of the award, reduced by the present value of dividends normally paid over the vesting period which are not payable on outstanding performance share awards. The grant date fair value shown for long-term performance shares is applicable to the first tranche only. The grant date fair value of the unrestricted shares was based on the stock price at the date of the award. 28
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There 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, 2009.
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 March 31, 2010, 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 March 31, 2010 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
A share repurchase program authorized by the Board of Directors was announced on October 16, 2007. The program allows for the repurchase of up to two million shares of any combination of Class A and Class B shares and will remain in effect until all shares authorized have been repurchased. The Company did not repurchase any shares under the repurchase program during the third quarter of fiscal year 2010. At March 31, 2010, two million shares remained available under the repurchase program.
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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 fiscal 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 23, 2009)
(10) Form of Employment Agreement dated March 8, 2010 between the Company and each of Donald W. Van Winkle and Stanley C. Sapp and dated May 1, 2006 between the Company and each of James C. Thyen, Douglas A. Habig, Robert F. Schneider, Donald D. Charron, John H. Kahle and Gary W. Schwartz (Incorporated by reference to Exhibit 10(c) to the Company's Form 10-Q for the period ended March 31, 2006)
(11) Computation of Earnings Per Share
(18) Preferability letter dated May 6, 2010 regarding change in classification of interest and penalties on uncertain tax positions
(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 | ||
| May 6, 2010 | ||
| By: | /s/ Robert F. Schneider | |
| ROBERT F. SCHNEIDER Executive Vice President, Chief Financial Officer | ||
| May 6, 2010 |
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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 fiscal 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 23, 2009) | |
| 10 | Form of Employment Agreement dated March 8, 2010 between the Company and each of Donald W. Van Winkle and Stanley C. Sapp and dated May 1, 2006 between the Company and each of James C. Thyen, Douglas A. Habig, Robert F. Schneider, Donald D. Charron, John H. Kahle and Gary W. Schwartz (Incorporated by reference to Exhibit 10(c) to the Company's Form 10-Q for the period ended March 31, 2006) | |
| 11 | Computation of Earnings Per Share | |
| 18 | Preferability letter dated May 6, 2010 regarding change in classification of interest and penalties on uncertain tax positions | |
| 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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