JASPER, Ind., Jan. 31, 2018 (GLOBE NEWSWIRE) -- Kimball International, Inc. (NASDAQ:KBAL) today announced the following results for the quarter ended December 31, 2017:
Bob Schneider, Chairman and CEO, stated, “Our office-related verticals were generally challenged during the second quarter in a highly competitive market, while our hospitality furniture vertical had record sales. While our net sales were up 2%, I’m encouraged with strengthening consolidated orders during the quarter, which were up 8% with increases in all verticals except healthcare, which had a slight decline. We were disappointed in our operating performance this quarter with profits impacted by discounting and a shift to lower margin products. We are actively focused on improving profitability.”
Mr. Schneider continued, “The business climate continues to be strong with a strengthening U.S. economy, along with worldwide growth. Accordingly, we will stay the course to achieve our long-term strategic direction and will continue to invest in key initiatives rather than manage to short-term quarterly results. An important driver of the strong U.S. economic outlook is the recently passed tax act. The impact in our second quarter, however, was net-negative although we expect significant positive earnings impact in coming years.”
Overview
Financial Highlights (Amounts in Thousands, Except Per Share Data) | Three Months Ended | |||||||||
December 31, 2017 | December 31, 2016 | Percent Change | ||||||||
Net Sales | $ | 173,674 | $ | 169,887 | 2 | % | ||||
Gross Profit | $ | 53,936 | $ | 55,758 | (3 | %) | ||||
Gross Profit % | 31.1 | % | 32.8 | % | ||||||
Selling and Administrative Expenses | $ | 41,931 | $ | 42,728 | (2 | %) | ||||
Selling and Administrative Expenses % | 24.2 | % | 25.1 | % | ||||||
Operating Income | $ | 12,005 | $ | 13,030 | (8 | %) | ||||
Operating Income % | 6.9 | % | 7.7 | % | ||||||
Net Income | $ | 7,378 | $ | 8,717 | (15 | %) | ||||
Diluted Earnings Per Share | $ | 0.20 | $ | 0.23 | ||||||
Return on Capital | 16.7 | % | 21.1 | % | ||||||
EBITDA * | $ | 16,142 | $ | 16,916 |
* The item indicated represents a Non-GAAP measurement. See “Reconciliation of Non-GAAP Financial Measures” below.
Non-GAAP Financial Measures
This press release contains non-GAAP financial measures. A non-GAAP financial measure is a numerical measure of a company's financial performance that excludes amounts so as to be different than the most directly comparable measure calculated and presented in accordance with Generally Accepted Accounting Principles (“GAAP”) in the United States in the statement of income, statement of comprehensive income, balance sheet, or statement of cash flows of the Company. The non-GAAP financial measure used within this release is EBITDA, which is defined as net income before interest expense, income taxes, depreciation expense, and amortization expense. A reconciliation of the reported GAAP numbers to the non-GAAP financial measure is included in the Reconciliation of Non-GAAP Financial Measures table below. Management believes that EBITDA is a useful measurement to assist investors in comparing our performance over various reporting periods on a consistent basis by removing from operating results the impact of items that do not reflect our core operating performance.
The orders received metric is a key performance indicator used to evaluate general sales trends and develop future operating plans. Orders received represent firm orders placed by our customers during the current quarter which are expected to be recognized as revenue during current or future quarters. The orders received metric is not intended to be presented as an alternative measure of revenue recognized in accordance with GAAP.
Forward-Looking Statements
Certain statements contained within this release are considered forward-looking under the Private Securities Litigation Reform Act of 1995 and are subject to risks and uncertainties including, but not limited to, the risk that any projections or guidance, including revenues, margins, earnings, or any other financial results are not realized, uncertainties related to the future impact of federal tax reform, the outcome of a governmental review of our subcontractor reporting practices, adverse changes in the global economic conditions, significant volume reductions from key contract customers, significant reduction in customer order patterns, financial stability of key customers and suppliers, and availability or cost of raw materials. Additional cautionary statements regarding other risk factors that could have an effect on the future performance of the Company are contained in the Company's Form 10-K filing for the fiscal year ended June 30, 2017 and other filings with the Securities and Exchange Commission.
Conference Call / Webcast | ||
Date: | February 1, 2018 | |
Time: | 11:00 AM Eastern Time | |
Dial-In #: | 844-602-5643 (International Calls - 574-990-3014) | |
Pass Code: | Kimball |
A webcast of the live conference call may be accessed by visiting Kimball International's Investor Relations website at www.ir.kimballinternational.com.
For those unable to participate in the live webcast, the call will be archived at www.ir.kimballinternational.com within two hours of the conclusion of the live call.
About Kimball International, Inc.
Kimball International, Inc. creates design driven, innovative furnishings sold through our family of brands: Kimball, National, and Kimball Hospitality. Our diverse portfolio offers solutions for the workplace, learning, healing, and hospitality environments. Dedicated to our Guiding Principles, our values and integrity are evidenced by public recognition as a highly trusted company and an employer of choice. “We Build Success” by establishing long-term relationships with customers, employees, suppliers, share owners and the communities in which we operate. To learn more about Kimball International, Inc. (NASDAQ: KBAL), visit www.kimballinternational.com.
Contact:
Dennis Gerber
Investor Relations
812-482-8619
Dennis.Gerber@kimball.com
Financial highlights for the second quarter ended December 31, 2017 are as follows:
Condensed Consolidated Statements of Income | |||||||||||||
(Unaudited) | Three Months Ended | ||||||||||||
(Amounts in Thousands, except per share data) | December 31, 2017 | December 31, 2016 | |||||||||||
Net Sales | $ | 173,674 | 100.0 | % | $ | 169,887 | 100.0 | % | |||||
Cost of Sales | 119,738 | 68.9 | % | 114,129 | 67.2 | % | |||||||
Gross Profit | 53,936 | 31.1 | % | 55,758 | 32.8 | % | |||||||
Selling and Administrative Expenses | 41,931 | 24.2 | % | 42,728 | 25.1 | % | |||||||
Operating Income | 12,005 | 6.9 | % | 13,030 | 7.7 | % | |||||||
Other Income, net | 423 | 0.3 | % | 10 | 0.0 | % | |||||||
Income Before Taxes on Income | 12,428 | 7.2 | % | 13,040 | 7.7 | % | |||||||
Provision for Income Taxes | 5,050 | 3.0 | % | 4,323 | 2.6 | % | |||||||
Net Income | $ | 7,378 | 4.2 | % | $ | 8,717 | 5.1 | % | |||||
Earnings Per Share of Common Stock: | |||||||||||||
Basic | $ | 0.20 | $ | 0.23 | |||||||||
Diluted | $ | 0.20 | $ | 0.23 | |||||||||
Average Number of Total Shares Outstanding: | |||||||||||||
Basic | 37,476 | 37,234 | |||||||||||
Diluted | 37,736 | 37,605 |
(Unaudited) | Six Months Ended | ||||||||||||
(Amounts in Thousands, except per share data) | December 31, 2017 | December 31, 2016 | |||||||||||
Net Sales | $ | 343,191 | 100.0 | % | $ | 344,883 | 100.0 | % | |||||
Cost of Sales | 229,666 | 66.9 | % | 230,438 | 66.8 | % | |||||||
Gross Profit | 113,525 | 33.1 | % | 114,445 | 33.2 | % | |||||||
Selling and Administrative Expenses | 85,563 | 25.0 | % | 85,955 | 24.9 | % | |||||||
Restructuring (Gain) Expense | 0 | 0.0 | % | (1,832 | ) | (0.5 | %) | ||||||
Operating Income | 27,962 | 8.1 | % | 30,322 | 8.8 | % | |||||||
Other Income, net | 912 | 0.3 | % | 407 | 0.1 | % | |||||||
Income Before Taxes on Income | 28,874 | 8.4 | % | 30,729 | 8.9 | % | |||||||
Provision for Income Taxes | 10,539 | 3.1 | % | 11,014 | 3.2 | % | |||||||
Net Income | $ | 18,335 | 5.3 | % | $ | 19,715 | 5.7 | % | |||||
Earnings Per Share of Common Stock: | |||||||||||||
Basic | $ | 0.49 | $ | 0.53 | |||||||||
Diluted | $ | 0.49 | $ | 0.52 | |||||||||
Average Number of Total Shares Outstanding: | |||||||||||||
Basic | 37,452 | 37,421 | |||||||||||
Diluted | 37,775 | 37,917 |
(Unaudited) | |||||||
Condensed Consolidated Balance Sheets | December 31, 2017 | June 30, 2017 | |||||
(Amounts in Thousands) | |||||||
ASSETS | |||||||
Cash and cash equivalents | $ | 41,852 | $ | 62,882 | |||
Short-term investments | 37,720 | 35,683 | |||||
Receivables, net | 53,140 | 53,909 | |||||
Inventories | 38,861 | 38,062 | |||||
Prepaid expenses and other current assets | 19,627 | 8,050 | |||||
Assets held for sale | 67 | 4,223 | |||||
Property and Equipment, net | 80,904 | 80,069 | |||||
Goodwill | 8,559 | 0 | |||||
Intangible Assets, net | 13,328 | 2,932 | |||||
Deferred Tax Assets | 9,350 | 14,487 | |||||
Other Assets | 13,997 | 13,450 | |||||
Total Assets | $ | 317,405 | $ | 313,747 | |||
LIABILITIES AND SHARE OWNERS' EQUITY | |||||||
Current maturities of long-term debt | $ | 24 | $ | 27 | |||
Accounts payable | 42,271 | 44,730 | |||||
Customer deposits | 28,236 | 20,516 | |||||
Sale-leaseback financing obligation | 0 | 3,752 | |||||
Dividends payable | 2,721 | 2,296 | |||||
Accrued expenses | 38,312 | 49,018 | |||||
Long-term debt, less current maturities | 161 | 184 | |||||
Other | 17,907 | 17,020 | |||||
Share Owners' Equity | 187,773 | 176,204 | |||||
Total Liabilities and Share Owners' Equity | $ | 317,405 | $ | 313,747 |
Condensed Consolidated Statements of Cash Flows | Six Months Ended | ||||||
(Unaudited) | December 31, | ||||||
(Amounts in Thousands) | 2017 | 2016 | |||||
Net Cash Flow provided by Operating Activities | $ | 15,382 | $ | 32,105 | |||
Net Cash Flow used for Investing Activities | (27,322 | ) | (14,184 | ) | |||
Net Cash Flow used for Financing Activities | (9,090 | ) | (12,031 | ) | |||
Net (Decrease) Increase in Cash and Cash Equivalents | (21,030 | ) | 5,890 | ||||
Cash and Cash Equivalents at Beginning of Period | 62,882 | 47,576 | |||||
Cash and Cash Equivalents at End of Period | $ | 41,852 | $ | 53,466 |
Net Sales by End Vertical Market | |||||||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||||||
(Unaudited) | December 31, | December 31, | |||||||||||||||||||
(Amounts in Millions) | 2017 | 2016 | % Change | 2017 | 2016 | % Change | |||||||||||||||
Commercial | $ | 48.6 | $ | 51.7 | (6 | %) | $ | 99.4 | $ | 100.7 | (1 | %) | |||||||||
Education | 16.6 | 14.6 | 14 | % | 47.1 | 41.2 | 14 | % | |||||||||||||
Finance | 17.6 | 16.7 | 5 | % | 30.7 | 33.5 | (8 | %) | |||||||||||||
Government | 21.4 | 17.9 | 20 | % | 46.2 | 36.2 | 28 | % | |||||||||||||
Healthcare | 23.1 | 27.1 | (15 | %) | 43.1 | 52.5 | (18 | %) | |||||||||||||
Hospitality | 46.4 | 41.9 | 11 | % | 76.7 | 80.8 | (5 | %) | |||||||||||||
Total Net Sales | $ | 173.7 | $ | 169.9 | 2 | % | $ | 343.2 | $ | 344.9 | 0 | % |
Orders Received by End Vertical Market | |||||||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||||||
(Unaudited) | December 31, | December 31, | |||||||||||||||||||
(Amounts in Millions) | 2017 | 2016 | % Change | 2017 | 2016 | % Change | |||||||||||||||
Commercial | $ | 55.1 | $ | 54.6 | 1 | % | $ | 103.8 | $ | 105.7 | (2 | %) | |||||||||
Education | 17.1 | 14.3 | 20 | % | 36.6 | 33.6 | 9 | % | |||||||||||||
Finance | 18.8 | 18.7 | 1 | % | 35.1 | 37.7 | (7 | %) | |||||||||||||
Government | 19.2 | 17.3 | 11 | % | 42.8 | 35.7 | 20 | % | |||||||||||||
Healthcare | 23.8 | 24.5 | (3 | %) | 45.2 | 53.2 | (15 | %) | |||||||||||||
Hospitality | 44.9 | 36.6 | 23 | % | 79.5 | 77.3 | 3 | % | |||||||||||||
Total Orders Received | $ | 178.9 | $ | 166.0 | 8 | % | $ | 343.0 | $ | 343.2 | 0 | % |
During the second quarter of fiscal year 2018, vertical market reporting was redefined to better reflect the end markets that the Company serves. The largest shifts among vertical markets were sales to certain government-affiliated medical facilities, which were previously classified in the government vertical market and are now classified in the healthcare vertical market. Prior period information was estimated to reflect the new vertical market definitions on a comparable basis.
Supplementary Information | |||||||||||||||
Components of Other Income (Expense), net | Three Months Ended | Six Months Ended | |||||||||||||
(Unaudited) | December 31, | December 31, | |||||||||||||
(Amounts in Thousands) | 2017 | 2016 | 2017 | 2016 | |||||||||||
Interest Income | $ | 234 | $ | 99 | $ | 468 | $ | 209 | |||||||
Interest Expense | (74 | ) | (5 | ) | (105 | ) | (10 | ) | |||||||
Foreign Currency Loss | (29 | ) | (8 | ) | (12 | ) | (15 | ) | |||||||
Gain on Supplemental Employee Retirement Plan Investment | 413 | 29 | 764 | 396 | |||||||||||
Other Non-Operating Expense | (121 | ) | (105 | ) | (203 | ) | (173 | ) | |||||||
Other Income, net | $ | 423 | $ | 10 | $ | 912 | $ | 407 |
Reconciliation of Non-GAAP Financial Measures | |||
(Unaudited) | |||
(Amounts in Thousands) | |||
Earnings Before Interest, Taxes, Depreciation, and Amortization (“EBITDA”) | |||||||
Three Months Ended | |||||||
December 31, | |||||||
2017 | 2016 | ||||||
Net Income | $ | 7,378 | $ | 8,717 | |||
Provision for Income Taxes | 5,050 | 4,323 | |||||
Income Before Taxes on Income | 12,428 | 13,040 | |||||
Interest Expense | 74 | 5 | |||||
Interest Income | (234 | ) | (99 | ) | |||
Depreciation and Amortization | 3,874 | 3,970 | |||||
EBITDA | $ | 16,142 | $ | 16,916 |