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, 2000 __ 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 incorporation or organization) Identification No.) 1600 Royal Street, Jasper, Indiana 47549-1001 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (812) 482-1600 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___ The number of shares outstanding of the Registrant's common stock as of May 8, 2000 were: Class A Common Stock - 14,279,155 shares Class B Common Stock - 25,917,572 shares - 1 - KIMBALL INTERNATIONAL, INC. FORM 10-Q INDEX PAGE NO. PART I FINANCIAL INFORMATION: Item 1. Financial Statements Condensed Consolidated Balance Sheets - March 31, 2000 (Unaudited) and June 30, 1999. . . . . . . . . 3 Consolidated Statements of Income (Unaudited) - Three and Nine Months Ended March 31, 2000 and 1999 . . . . . 4 Consolidated Statements of Cash Flows (Unaudited) - Nine Months Ended March 31, 2000 and 1999 . . . . . . . . . . 5 Notes To Consolidated Financial Statements (Unaudited). . . . . 6-7 Item 2. Management's Discussion and Analysis Of Financial Condition and Results of Operations . . . . . . . . . 8-12 Item 3. Quantitative & Qualitative Disclosures about Market Risk. . . . 13 PART II OTHER INFORMATION: Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . 14 Signatures. . . . . . . . . . . . . . . . . . . . . . . . . 14 Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . 15 - 2 - PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS KIMBALL INTERNATIONAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (amounts in thousands) (unaudited) March 31, June 30, 2000 1999 Assets Current Assets: Cash and cash equivalents $ 4,625 $ 16,775 Short-term investments 100,395 114,996 Receivables, less allowances of $4,244 and $3,816, respectively 153,499 132,284 Inventories 112,245 96,157 Other 25,417 26,129 Total current assets 396,181 386,341 Property And Equipment - net of accumulated depreciation of $284,314 and $265,141, respectively 235,690 221,498 Other Assets 58,768 53,547 Total assets $690,639 $661,386 Liabilities And Share Owners' Equity Current Liabilities: Loans payable $ 9,312 $ 3,518 Current maturities of long-term debt 798 1,185 Accounts payable 85,357 77,976 Dividends payable 6,386 6,380 Accrued expenses 79,684 79,505 Total current liabilities 181,537 168,564 Other Liabilities: Long-term debt, less current maturities 2,389 1,730 Deferred income taxes and other 26,980 26,815 Total other liabilities 29,369 28,545 Share Owners' Equity: Common stock 2,151 2,151 Additional paid-in capital 8,111 6,379 Retained earnings 515,121 498,962 Accumulated other comprehensive income 335 1,312 Less: Treasury stock, at cost (45,985) (44,527) Total Share Owners' Equity 479,733 464,277 Total liabilities and Share Owners' equity $690,639 $661,386 See Notes to Consolidated Financial Statements - 3 - KIMBALL INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (amounts in thousands except for per share data) (unaudited) (unaudited) Three Months Ended Nine Months Ended March 31, March 31, 2000 1999 2000 1999 Net Sales $309,495 $288,054 $882,172 $832,780 Cost of Sales 228,693 201,621 642,127 584,737 Gross Profit 80,802 86,433 240,045 248,043 Selling, General and Administrative Expenses 63,755 64,241 192,390 190,938 Operating Income 17,047 22,192 47,655 57,105 Other Income (Expense): Interest expense (128) (102) (365) (375) Interest income 1,114 1,530 3,788 5,064 Other - net 510 744 2,956 4,896 Other income - net 1,496 2,172 6,379 9,585 Income Before Taxes on Income 18,543 24,364 54,034 66,690 Taxes on Income 6,992 9,175 18,697 24,003 Net Income $ 11,551 $ 15,189 $ 35,337 $ 42,687 Earnings Per Share of Common Stock: Basic: Class A $ .28 $ .37 $ .87 $1.04 Class B $ .29 $ .38 $ .88 $1.06 Diluted: Class A $ .28 $ .37 $ .86 $1.03 Class B $ .29 $ .38 $ .88 $1.05 Dividends Per Share of Common Stock: Class A $ .155 $ .155 $ .465 $ .465 Class B $ .160 $ .160 $ .480 $ .480 Average Total Number of Shares Outstanding Class A and B Common Stock: Basic 40,416 40,536 40,389 40,721 Diluted 40,476 40,710 40,527 40,952 See Notes to Consolidated Financial Statements - 4- KIMBALL INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (amounts in thousands) (unaudited) Nine Months Ended March 31, 2000 1999 Cash Flows From Operating Activities: Net income $ 35,337 $ 42,687 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 32,741 29,276 Gain on sales of assets (821) (424) Deferred income tax and other deferred charges (122) 3,242 Change in current assets and liabilities: Receivables (18,413) (23,017) Inventories (11,987) (2,648) Other current assets 390 (55) Accounts payable 5,896 (1,961) Accrued expenses (3,723) 6,546 Net cash provided by operating activities 39,298 53,646 Cash Flows From Investing Activities: Capital expenditures (40,725) (43,482) Proceeds from sales of assets 2,183 1,204 Increase in other assets (5,398) (21,612) Purchases of held-to-maturity investments -0- (400) Maturities of held-to-maturity investments 400 5,415 Purchases of available-for-sale securities (94,510) (23,799) Sales and maturities of available-for-sale securities 107,969 48,080 Net cash used for investing activities (30,081) (34,594) Cash Flows From Financing Activities: Net change in short-term borrowings 3,210 (201) Net change in long-term debt 272 638 Acquisition of treasury stock, net of sales (6,274) (16,921) Dividends paid to share owners (19,172) (19,403) Proceeds from exercise of stock options 712 940 Other - net (98) 82 Net cash used for financing activities (21,350) (34,865) Effect of Exchange Rate Change on Cash and Cash Equivalents (17) (5) Net Decrease in Cash and Cash Equivalents (12,150) (15,818) Cash and Cash Equivalents-Beginning of Period 16,775 16,757 Cash and Cash Equivalents-End of Period $ 4,625 $ 939 Supplemental Disclosure of Cash Flow Information: Cash paid during the period for: Income taxes $ 22,491 $ 21,617 Interest $ 328 $ 386 Total Cash, Cash Equivalents and Short-Term Investments: Cash and cash equivalents $ 4,625 $ 939 Short-term investments 100,395 125,626 Totals $105,020 $126,565 See Notes to Consolidated Financial Statements - 5 - KIMBALL INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Note 1. Basis of Presentation The accompanying consolidated financial statements of Kimball International, Inc. ("the Company") are unaudited and 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 generally accepted accounting principles 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 of the interim period. 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. Note 2. Inventories Inventory components of the Company are as follows: March 31, June 30, 2000 1999 (in thousands) Finished Products $ 32,462 $33,262 Work-in-Process 17,237 14,471 Raw Materials 62,546 48,424 Total inventory $112,245 $96,157 For interim reporting, LIFO inventories are computed based on estimated year-end quantities and interim changes in price levels. Changes in such estimates will be reflected in the interim financial statements in the period in which they occur. Note 3. Segment Information Effective for the year ended June 30, 1999, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 131, Disclosures about Segments of an Enterprise and Related Information. The adoption of SFAS 131 requires the presentation of segment information that is consistent with information utilized by management for purposes of allocating resources and assessing performance. Management organizes the Company into segments based upon differences in products and services offered in each segment. The Furniture and Cabinets Segment manufactures furniture for the office, residential, lodging and healthcare industries and store display fixtures, all sold under the Company's family of brand names. Other products produced by the Furniture and Cabinets Segment on an original equipment manufactured basis include store fixtures, television cabinets and stands, audio speaker systems, residential furniture and furniture components. The Electronic Contract Assemblies Segment is a global provider of design engineering, manufacturing, packaging and distribution of electronic assemblies, circuit boards, multi-chip modules and semiconductor components on a contract basis to customers in the transportation, industrial controls, telecommunications, computer and medical industries. Intersegment sales are insignificant. Unallocated corporate assets include cash and cash equivalents, short-term investments and other assets not allocated to segments. The basis of segmentation and accounting policies of the segments are consistent with those as disclosed in the Company's Annual Report on Form 10-K for the year ended June 30, 1999. - 6 - Note 3. Segment Information (continued) Three Months Ended Nine Months Ended March 31, March 31, 2000 1999 2000 1999 (in thousands) Net Sales: Furniture and Cabinets $214,736 $200,835 $617,134 $588,199 Electronic Contract Assemblies 94,743 87,204 264,981 244,539 Unallocated Corporate and Eliminations 16 15 57 42 Consolidated $309,495 $288,054 $882,172 $832,780 Net Income: Furniture and Cabinets $ 6,867 $ 9,221 $ 19,998 $ 24,772 Electronic Contract Assemblies 3,350 5,335 9,870 12,110 Unallocated Corporate and Eliminations 1,334 633 5,469 5,805 Consolidated $ 11,551 $ 15,189 $ 35,337 $ 42,687 Total Assets: Furniture and Cabinets $423,657 $373,477 Electronic Contract Assemblies 155,838 141,043 Unallocated Corporate and Eliminations 111,144 121,801 Consolidated $690,639 $636,321 In the nine month period ended March 31, 1999, Unallocated Corporate net income includes, in thousands, a $1,337 gain ($.03 per share) on the sale of a stock investment of which the Company held a minor interest. Note 4. Comprehensive Income Comprehensive income includes all changes in equity during a period except those resulting from investments by, and distributions to, Share Owners. Comprehensive income, shown net of tax if applicable, for the three and nine month periods ending March 31, 2000 and 1999 is as follows: Three Months Ended Nine Months Ended March 31, March 31, 2000 1999 2000 1999 (in thousands) Net Income $11,551 $15,189 $35,337 $42,687 Net Change in Unrealized Gains/Losses on Securities (4) (250) (742) (1,088) Foreign Currency Translation Adjustment (212) (87) (235) 74 Comprehensive Income $11,335 $14,852 $34,360 $41,673 Note 5. New Accounting Standard In June, 1998, the Financial Accounting Standards Board issued Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities, which requires the recognition of all derivatives as either assets or liabilities in the balance sheet and the measurement of those instruments at fair value. The Company periodically engages in limited forward purchases of foreign currency and currently does not expect this new standard to have a material effect on the Company's financial condition or results of operations. This standard will be effective for the Company's fiscal year 2001. Note 6. Acquisition In November 1999, the Company purchased Jackson of Danville, a privately held manufacturer of custom and in-line fully upholstered seating products and wood framed chairs. The acquisition was accounted for as a purchase with operating results included in the Company's Consolidated Statements of Income from the date of acquisition, and was financed with available cash on hand and the Company's Class B Common Stock. The acquisition price and operating results of this acquisition are not material to the Company's fiscal year 2000 consolidated operating results. - 7 - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations OVERVIEW Net sales for the third quarter of fiscal year 2000 increased 7% over the prior year to $309,495,000 setting a new quarterly record. Net income and Class B diluted earnings per share were $11,551,000 and $0.29, respectively, for the third quarter of fiscal 2000, both decreasing 24% from the prior year. Net sales for the nine-month period ending March 31, 2000 of $882,172,000 surpassed the prior year sales by 6%. Current year net income and Class B diluted earnings per share for the nine-month period were $35,337,000 and $0.88, respectively, a decrease of 17% and 16%, respectively, from the prior year. Fiscal year 1999 nine-month net income results include a $1,337,000 after tax gain ($0.03 per diluted share) on the sale of a stock investment. RESULTS OF OPERATIONS - THREE AND NINE MONTHS ENDED MARCH 31, 2000 COMPARED TO THREE AND NINE MONTHS ENDED MARCH 31, 1999 Net sales for the Company for the three and nine-month periods of fiscal year 2000 surpassed fiscal year 1999 levels on increases from both of the Company's segments -- the Furniture and Cabinets Segment and the Electronic Contract Assemblies Segment. Net income declined in both segments for the three and nine-month periods when compared to fiscal year 1999. FURNITURE AND CABINETS SEGMENT Product line offerings in the Furniture and Cabinets Segment include office furniture, home furniture, lodging and healthcare furniture, store fixtures, original equipment manufactured (OEM) furniture and cabinets and furniture components. The Company's production flexibility allows it to utilize portions of the available production capacity created by lower volumes within these product lines to support and balance increased production schedules of other product lines within this segment, when necessary. In November 1999, the Company purchased Jackson of Danville, a privately held manufacturer of custom and in-line fully upholstered seating products and wood framed chairs. The acquisition was accounted for as a purchase with operating results included in the Company's consolidated results from the date of acquisition, and was financed with available cash on hand and the Company's Class B Common Stock. The acquisition price and operating results of this acquisition are not material to the Company's fiscal year 2000 consolidated operating results. Fiscal year 2000 third quarter and nine-month net sales increased 7% and 5%, respectively, in the Furniture and Cabinets Segment when compared to the prior year. Sales increased in the office furniture, OEM furniture and cabinets, home furniture and furniture component product lines while sales in the lodging and healthcare product line declined for both periods. Net sales for both the three and nine-month periods of fiscal year 2000 increased in the office furniture product line over the prior year driven by increased sales of casegoods and systems product groups. The Company's office furniture sales, for the two-month period ending February 2000, lagged the industry's estimated growth in shipments. However, for the eight-month period ending February 2000 the Company's office furniture sales, excluding acquisitions, equaled the industry's estimated growth rate of 2% as reported by the Business and Institutional Furniture Manufacturer's Association (BIFMA) for the same eight-month period ending February 2000 compared to the period ending February 1999. - 8 - Net sales for both the three and nine-month periods in the lodging and healthcare product line declined from the prior year. Sales of custom-made products increased while sales of standard product offerings declined in the third quarter. While sales declined compared to prior year, third quarter sales increased over both the first and second quarters of the current year as projected in the Company's second quarter Form 10Q filing. On a year-to-date basis, sales of both custom-made products and standard product offerings decreased. Gross margins of lodging and healthcare products have declined in the third quarter and for the first nine-months of fiscal year 2000 as lower margin custom-made projects account for a greater percentage of the product mix. Net sales of OEM furniture and cabinets for both the third quarter and nine-month period exceeded the prior year sales. Third quarter and nine-month sales of television cabinets, residential contract furniture, and metal component parts all increased over the prior year. Net sales of furniture components increased in both the third quarter and nine-month period of fiscal year 2000 when compared to the prior year primarily on increased sales of lumber products. Net income in the Furniture and Cabinets Segment decreased in the third quarter of fiscal year 2000 when compared to one year ago. Gross profit in this segment, as a percent of sales, decreased due to pricing competition and increased material and overhead costs, as a percent of sales. Lower labor costs, as a percent of sales, partially offset the increased material and overhead costs. The Company's Juarez, Mexico facility continues to negatively impact the gross profitability in this segment when compared to the prior year third quarter and nine-month periods. However, both sales and gross profit have increased in the third quarter, for the Juarez operation, when compared to the first two quarters of fiscal year 2000. Significant improvements in labor efficiencies and overhead costs, as a percent of sales, were the factors driving the third quarter improvement for the Juarez operation. Higher commodity prices and low yields, at the Juarez operation, prevented improvement in material costs, as a percent of sales. The Company anticipates continued improvement in sales growth and gross profitability at this facility. The preceding statement concerning the Company's Juarez, Mexico facility is a forward-looking statement under the Private Securities Litigation Reform Act of 1995 and is subject to certain risks and uncertainties including, but not limited to, customer order changes, unexpected manufacturing inefficiencies or material price changes. Selling, general and administrative expenses decreased, as a percent of sales, in the third quarter compared to the same period last year on lower incentive compensation costs which are linked to company profitability. Net income for the nine-month period also declined primarily due to the lower sales margins on lodging and healthcare products, lower margins on furniture components, and start-up costs at the recently acquired Juarez, Mexico facility mentioned above. ELECTRONIC CONTRACT ASSEMBLIES SEGMENT Net sales for the third quarter of fiscal year 2000 in the Electronic Contract Assemblies Segment exceeded the prior year by 9%. Third quarter sales of electronic transportation components, telecommunication components and medical components increased while sales of computer related components and industrial controls declined when compared to the prior year. Segment sales for the nine-month period increased 8% compared to one year ago aided partially by the unfavorable impact the General Motors labor strike had on the prior year nine-month results. - 9 - Net income for both the third quarter and nine-month periods decreased from the prior year. Gross profit, as a percent of net sales, decreased for both the quarter and nine-month comparisons. With a planned diversification of its customer base into a variety of new products as well as production of the next generation of anti-locking braking components, the Company's gross profit margins in this segment are lower when compared to historic margins that were achieved on more mature product lines. Start up costs associated with a new manufacturing facility in Laem Chebang, Thailand and a new high flexibility production facility in Jasper, Indiana also contributed to the lower net income. Net income was also impacted during the period due to labor inefficiencies and separation costs associated with the release of approximately 250 employees from Kimball's Reynosa, Mexico manufacturing facility. Selling, general and administrative costs for the third quarter decreased as a percent of sales when compared to the prior year. Selling, general and administrative costs for the nine-month period decreased in total dollars and as a percent of sales when compared to the prior year primarily as a result of lower incentive compensation which is linked to company profitability. Included in this segment are sales to one customer, TRW Inc., which accounted for 17% of consolidated net sales in the third quarter of both fiscal year 2000 and 1999, and 16% and 15% of consolidated net sales in the nine-month period ending March 31, 2000 and 1999, respectively. Sales to this customer represent approximately one half of total sales in the Electronic Contract Assemblies Segment, which has historically carried a higher operating income margin than the Company's other business segment. This segment's investment capital carries a higher degree of risk than the Company's other segment due to rapid technological changes, the contract nature of this industry and the importance of sales to one customer. CONSOLIDATED OPERATIONS Consolidated selling, general and administrative expenses decreased in the third quarter from the same period last year in both total dollars ($0.5 million) and as a percent of sales (1.7 percentage points). For the nine-month period ending March 31, 2000 consolidated selling, general, and administrative expenses decreased as a percent of sales by 1.1 percentage points when compared to the prior period. The decreases in consolidated selling, general, and administrative expenses for both the three and nine-month periods are related to continued cost management efforts along with lower incentive compensation costs which are linked to company profitability. Other income decreased from the prior year for the third quarter on lower interest income caused by lower average investment balances. For the first nine-months of the fiscal year other income is down from the prior year on lower interest income. Miscellaneous income in the prior year includes a $2.1 million gain ($1.3 million after-tax effect) relating to the sale of a stock investment. The effective income tax rate remained unchanged in the third quarter compared to one year ago as a decrease in the state tax rate offset an increase in the federal tax rate. The fiscal year 2000 nine-month effective tax rate declined 1.4 percentage points from the prior year. An increase in the state tax rate was more than offset by a decrease in the federal effective tax rate as the Company realized the benefit of research and development tax credits in the current year. - 10 - Net income and Class B diluted earnings per share of $11,551,000 and $0.29, respectively, for the third quarter of fiscal year 2000 both decreased 24% from the prior year levels of $15,189,000 and $0.38. Fiscal 2000 year-to-date net income and Class B diluted earnings per share of $35,337,000 and $0.88, decreased 17% and 16%, respectively, from the prior year levels of $42,687,000 and $1.05. Fiscal year 1999 nine-month net income results include a $1,337,000 after tax gain ($0.03 per diluted share) on the sale of a stock investment. LIQUIDITY AND CAPITAL RESOURCES The Company's aggregate of cash, cash equivalents, and short-term investments decreased from $132 million at June 30, 1999 to $105 million at March 31, 2000. Working capital at March 31, 2000 was $215 million with a current ratio of 2.2, compared to working capital of $218 million and a current ratio of 2.3 at June 30, 1999. Operating activities generated $39 million of cash flow in the first nine months of fiscal year 2000 compared to $54 million in 1999. The Company reinvested $46 million into capital investments for the future, including production equipment, a new, state-of-the-art veneer mill and veneer face operation in Chandler, Indiana, and office facilities. Financing cash flow activities include $25 million in dividend payments and stock repurchases including 401,900 shares of Class B common stock. To meet short-term capital requirements the Company maintains a $100 million revolving credit facility to be used for acquisitions and general corporate purposes. The agreement allows for both issuance of letters of credit and cash borrowings. At March 31, 2000, $5.9 million of short-term cash borrowings were outstanding under the revolving credit facility. The Company anticipates maintaining a strong liquidity position for the 2000 fiscal year and believes its available funds on hand, unused credit line available under the revolving credit facility and cash generated from operations will be sufficient for working capital needs and to fund investments in the Company's future. This statement is a forward-looking statement under the Private Securities Litigation Reform Act of 1995 and is subject to certain risks and uncertainties including, but not limited to a downturn in the economy, loss of key customers or suppliers, availability or increased costs of raw materials, or a natural disaster or similar unforeseen event. YEAR 2000 DISCLOSURE The Company implemented a plan to alleviate any potential problems which may have been caused by the Year 2000 which included inventory assessment, remediation and testing. The Company has not experienced any major interruptions or malfunctions in its operations related to the Year 2000 issue, or the leap year date of February 29, 2000, and does not anticipate any. In addition, the Company has currently not experienced any interruptions caused by a lack of Year 2000 readiness by any of its key suppliers, distributors, customers, public infrastructure suppliers and other vendors. The total gross cost of Year 2000 compliance approximated $8.1 million which favorably compares to estimated costs disclosed in the Company's Form 10-K filing for its fiscal year ended June 30, 1999 of $9 million to $11 million. Existing information technology resources were redeployed, which accounted for approximately 50% of the total gross costs above. Approximately 30% of the - 11 - above total gross costs relate to machinery and other fixed assets which were capitalized or in certain situations leased, with the remaining costs being expensed as incurred. This Year 2000 disclosure contains forward-looking statements under the Private Securities Litigation Reform Act of 1995 and is subject to risks and uncertainties including, but not limited to such factors as the unexpected hidden problems relating to the Year 2000 that may not have surfaced to this point. ACCOUNTING STANDARDS In June 1998, the Financial Accounting Standards Board issued Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities, which requires the recognition of all derivatives as either assets or liabilities in the balance sheet and the measurement of those instruments at fair value. The Company periodically engages in limited forward purchases of foreign currency and currently does not expect this new standard to have a material effect on the Company's financial condition or results of operations. This standard will be effective for the Company's fiscal year 2001. ------------------------------------------------------------------------ This document contains certain statements which could be considered forward-looking under the Private Securities Litigation Reform Act of 1995. Cautionary statements regarding these statements have been included in this document, when appropriate. Additional cautionary statements regarding these types of statements and other 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 period ending June 30, 1999. - 12 - Item 3 - Quantitative and Qualitative Disclosures About Market Risk As of March 31, 2000, the Company had an investment portfolio of fixed income securities, excluding those classified as cash and cash equivalents, of $100 million. The Company classifies its short-term investments in accordance with Financial Accounting Standards Board Statement No. 115, Accounting for Certain Investments in Debt and Equity Securities. Available-for-sale securities are stated at market value with unrealized gains and losses being recorded net of tax related effect, if any, as a component of Share Owners' Equity. These securities, like all fixed income instruments, are subject to interest rate risk and will decline in value if market interest rates increase. A hypothetical 100 basis point increase in market interest rates from levels at March 31, 2000 would cause the fair value of these short-term investments to decline by an immaterial amount. The Company operates internationally, and thus is subject to potentially adverse movements in foreign currency rate changes. As of the latest fiscal year-end, foreign subsidiaries' sales, operating income and assets each comprised less than 3% of consolidated amounts. Historically, the effect of movements in the exchange rates have been immaterial to the consolidated operating results of the Company. - 13 - PART II. OTHER INFORMATION Item 6. - Exhibits and Reports on Form 8-K (a) Exhibits (numbered in accordance with Item 601 of Regulation S-K) (3b) Restated By-laws of the Company (11) Computation of Earnings Per Share (27) Financial Data Schedule (b) Reports on Form 8-K Form 8-K dated March 20, 2000, was filed pursuant to Item 5 (Other Events) which contained the Company's news release dated March 16, 2000, announcing that earnings for the third quarter of fiscal 2000 would not meet analysts' estimates. 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. Douglas A. Habig DOUGLAS A. HABIG (Chairman, Chief Executive Officer) Roy W. Templin ROY W. TEMPLIN (Vice President, Corporate Controller) Date: May 10, 2000 - 14 - Kimball International, Inc Exhibit Index Exhibit No. Description 3b Restated By-laws of the Company 11 Computation of Earnings Per Share 27 Financial Data Schedule - 15 -