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KIMBALL INTERNATIONAL, INC.
(Exact name of registrant as specified in
its charter) Securities registered pursuant to Section
12(b) of the Act: Securities registered pursuant to Section
12(g) of the Act: DOCUMENTS INCORPORATED BY REFERENCE KIMBALL INTERNATIONAL, INC. 2 10 17
Item 1B - Unresolved Staff
Comments
None. The location and number of the Company's major
manufacturing, warehousing, and service facilities, including the executive and
administrative offices, as of June 30, 2010, are as follows: Number of Facilities The listed facilities occupy approximately
4,977,000 square feet in aggregate, of which approximately 4,733,000 square feet
are owned and 244,000 square feet are leased. Square footage of these facilities
is summarized by segment as follows: Approximate Square Footage Within the EMS segment,
the Company plans to exit the United Kingdom facility in fiscal year 2012 as
part of the Company's plan to consolidate this facility and the current Poland
facility into a new, larger facility in Poland. Construction of the new facility in
Poland is complete and limited production has begun.
During the third
quarter of fiscal year 2010, the Company completed the sale of the existing Poland facility and
land. The Company is leasing back the recently sold Poland facility until all
production is moved to the new facility in Poland, and the leased square
footage is included above on the Leased line. The Poland facility lease expires
during the Company's fiscal year 2011. Included in Unallocated Corporate are executive,
national sales and administrative offices, and a recycling facility. 18 Generally, properties are utilized at normal
capacity levels on a multiple shift basis. At times, certain facilities utilize a reduced second
or third shift. Due to sales fluctuations, not all facilities were utilized at
normal capacity during fiscal year 2010. Significant loss of income resulting from a
facility catastrophe would be partially offset by business interruption
insurance coverage. Operating leases for all facilities and related
land, including
ten leased showroom facilities which are not included in the tables above, total
331,000 square feet and expire from fiscal year 2011
to 2056
with many of the leases subject to renewal options. The
leased showroom facilities are in six states
and the District of Columbia. See
Note 5 - Commitments
and Contingent Liabilities of Notes to Consolidated Financial Statements for
additional information concerning leases. The Company owns approximately 500 acres of
land which includes land where various Company facilities reside, including approximately
180 acres of land in the Kimball Industrial Park, Jasper, Indiana (a site for
certain production and other facilities, and for possible future expansions).
The Registrant and its subsidiaries are not
parties to any pending legal proceedings, other than ordinary routine
litigation incidental to the business, which individually, or in aggregate, are
not expected to be material. Item 4 - (Removed and Reserved)
Executive
Officers of the Registrant Executive officers are elected annually by the
Board of Directors. All of the executive officers unless otherwise noted have
been employed by the Company for more than the past five years in the principal
occupation
shown or some other executive capacity. Donald W. Van Winkle was appointed to
Vice President, President-Office Furniture Group in February 2010. He had
previously served as Vice President, General Manager of National Office
Furniture from October 2003 until February 2010, and prior to that served as
Vice President, Chief Finance and Administrative Officer for the Furniture
Brands Group as well as other key finance roles within the Furniture segment
since joining the Company in January 1991. Stanley C.
Sapp was appointed to Vice President, President-Kimball Hospitality in February
2010. He had previously served as Vice President and General Manager of Kimball
Hospitality from February 2005 until February 2010, and prior to that served in
other key roles within the Furniture segment since joining the Company in June
2002. 19 PART II Market Prices There is no established public trading market for the Company's Class A
Common Stock. However, Class A shares are convertible on a one-for-one
basis to Class B shares. Dividends 20 Share Owners Securities Authorized for Issuance Under
Equity Compensation Plans The information required by this item concerning
securities authorized for issuance under equity compensation plans is incorporated by reference to
Item 12 - Security Ownership of Certain Beneficial Owners and Management and
Related Share Owner Matters of Part III. Issuer Purchases of Equity Securities 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 fourth quarter of fiscal year 2010. At June 30, 2010, two
million shares remained available under the repurchase program. 21 Performance Graph The following performance graph is
not deemed to be "soliciting material" or to be "filed" with the SEC or subject
to Regulation 14A or 14C under the Securities Exchange Act of 1934 or to the
liabilities of Section 18 of the Securities Exchange Act of 1934 and will not
be deemed to be incorporated by reference into any filing under the Securities
Act of 1933 or the Securities Exchange Act of 1934, except to the extent the
Company
specifically incorporates it by reference into such a filing. The graph below compares the cumulative total
return to Share Owners of the Company's Class B Common Stock from June 30,
2005, through June 30, 2010, the last business day in the respective fiscal
years, to the cumulative total return of the NASDAQ Stock Market (U.S. and Foreign)
and a peer group index for the same period of time. Due to the diversity
of its operations, the Company is not aware of any public companies that are
directly comparable to it. Therefore, the peer group index
is comprised of publicly traded companies in both of the Company's segments, as
follows: EMS Segment: Benchmark Electronics,
Inc., Jabil Circuit, Inc., Plexus Corp. In order to reflect the segment allocation of
Kimball International, Inc., a market capitalization-weighted index was first computed
for each segment group, then a composite peer group index was calculated based
on each segment's proportion of net sales to total consolidated sales for each
fiscal year. The public companies included in the peer group have a larger
revenue base than each of the Company's business segments. The graph assumes $100 is
invested in the Company's stock and each of the two indexes at the closing
market quotations on June 30, 2005 and that dividends are reinvested. The
performances shown on the graph are not necessarily indicative of future price
performance. Comparison of Cumulative Five Year Total
Return
22 Item 6 -
Selected
Financial Data This information should be read in conjunction
with Item 8 -
Financial Statements and Supplementary Data and
Item 7 - Management's Discussion and Analysis of Financial Condition and Results
of Operations. Year Ended June 30 The preceding table excludes all income statement activity of
the discontinued operations. Fiscal year 2010 income from continuing
operations included $1.2 million ($0.03 per diluted share) of after-tax
restructuring expenses, $2.0 million ($0.05 per diluted share) of after-tax income
resulting from settlement proceeds related to an antitrust lawsuit of which the
Company was a class member, and $7.7 million ($0.20 per diluted share) of after-tax income
from the sale of the facility and land in Poland. Fiscal year 2009 income from continuing
operations included $1.8 million ($0.04 per diluted share) of after-tax
restructuring expenses, $9.1 million ($0.24 per diluted share) of after-tax
non-cash goodwill impairment, $1.6 million ($0.04 per diluted share) of after-tax income from earnest money
deposits retained by the Company resulting from the termination of a contract
to sell the Company's Poland facility and land, and $18.9 million ($0.51
per diluted share) of after-tax gains on the sale of undeveloped land holdings
and timberlands. Fiscal year
2008 income from continuing operations included $14.6 million ($0.39 per diluted
share) of after-tax restructuring expenses and $0.7 million ($0.02 per diluted
share) of after-tax income received as part of a Polish offset credit program
for investments made in the Company's Poland operation. Fiscal year 2007 income from continuing operations included $0.9 million
($0.02 per diluted share) of after-tax restructuring expenses. Fiscal year 2006 income from continuing operations
included $2.8 million
($0.07 per diluted share) of after-tax restructuring expenses and $1.3
million ($0.03 per diluted share) of after-tax income received as part of a
Polish offset credit program for investments made in the Company's Poland operation. Earnings per share for fiscal years prior to fiscal year 2010
have been recalculated as a result of FASB guidance on determining whether
instruments granted in share-based payment transactions are participating
securities. The impact on fiscal year 2009 Class A basic earnings per share was
a reduction from $0.47 as originally reported to $0.46, and the impact on fiscal
year 2007 Class A basic earnings per share was a reduction from $0.60 as
originally reported to $0.59. All other prior year
earnings per share calculations were not impacted significantly enough to cause
a change in the earnings per share result. See
Note 1 - Summary
of Significant Accounting Policies of Notes to Consolidated Financial
Statements for further discussion. 23
Item 7 -
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Item 7A - Quantitative and Qualitative Disclosures About Market
Risk
Interest Rate Risk: As of June 30, 2010 and
2009, the Company had an investment portfolio of fixed income securities,
excluding those classified as cash and cash equivalents, of $2 million and $25
million, respectively. These securities are classified as available-for-sale securities
and are stated at fair value. Unrealized losses on debt securities are
recognized in earnings when a company has an intent to sell or is likely to be
required to sell before recovery of the loss, or when the debt security has
incurred a credit loss. Otherwise, unrealized gains and losses are recorded net
of the tax related effect 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 an annual
period in market interest
rates from levels at June 30, 2010 and 2009 would cause the fair value of these
short-term investments to decline by an immaterial amount. Further
information on short-term investments is provided in
Note 13 - Short-Term Investments
of Notes to Consolidated Financial Statements. The Company is exposed to interest rate risk on
credit facilities which bear interest at
variable rates based on prevailing short-term interest rates. The Company
had no outstanding balance of variable rate obligations at June 30,
2010, and at June 30, 2009 had a $13 million outstanding balance. The Company estimates that a hypothetical 100 basis point change in
interest rates from levels at June 30, 2009 would not have a material effect on annual interest expense. Further information on debt balances is provided
in Note 6 - Long-Term
Debt and Credit Facility of Notes to Consolidated Financial Statements. Foreign Exchange Rate Risk: The Company operates
internationally and thus is subject to potentially adverse movements in foreign
currency rate changes. The Company's risk management strategy includes the
use of derivative financial instruments to hedge certain foreign currency
exposures. Derivatives are used only to manage underlying exposures of the
Company and are not used in a speculative manner. Further information on
derivative financial instruments is provided in
Note 12 - Derivative Instruments
of Notes to Consolidated Financial Statements. The Company
estimates that a hypothetical 10% adverse change in foreign currency exchange
rates from levels at June 30, 2010 and 2009 relative to non-functional currency balances of monetary instruments, to
the extent not hedged by derivative instruments, would not have a material
impact on profitability in an annual period. 41
Item 8 - Financial Statements and Supplementary
Data 42
MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING The management of Kimball International, Inc. is responsible
for establishing and maintaining adequate internal control over financial
reporting and for the preparation and integrity of the accompanying financial statements and
other related information in this report. The consolidated financial
statements of the Company and its subsidiaries, including the footnotes, were
prepared in accordance with accounting principles generally accepted in the
United States of America and include judgments and estimates, which in the
opinion of management are applied on an appropriately conservative basis. The Company maintains a system of internal and disclosure
controls intended to provide reasonable assurance that assets are safeguarded
from loss or material misuse, transactions are authorized and recorded properly,
and that the accounting records may be relied upon for the preparation of the
financial statements. This system is tested and evaluated regularly for
adherence and effectiveness by employees who work within the internal control
processes, by the Company's staff of internal auditors, as well
as by the independent registered public accounting firm in connection with their annual audit.
The Audit Committee of the Board of Directors, which is
comprised of directors who are not employees of the Company, meets regularly
with management, the internal auditors, and the independent registered public
accounting firm to review
the Company's financial policies and procedures, its internal control structure,
the objectivity of its financial reporting, and the independence of the
Company's independent registered public accounting firm. The internal auditors and the independent
registered public accounting firm have free and direct access to the Audit Committee, and they meet
periodically, without management present, to discuss appropriate matters. Because of inherent limitations, a system of internal control
over financial reporting may not prevent or detect misstatements and even when
determined to be effective, can only provide reasonable assurance with respect
to financial statement preparation and presentation. These consolidated financial statements are subject to an
evaluation of internal control over financial reporting conducted under the
supervision and with the participation of management, including the Chief
Executive Officer and Chief Financial Officer. Based on that evaluation,
conducted under the criteria established in Internal Control -- Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission,
management concluded that its internal control over financial reporting was
effective as of June 30, 2010. Deloitte & Touche LLP, the Company's independent registered public accounting firm,
has issued an audit report on the Company's internal control over financial
reporting which is included herein.
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM To the Board of Directors and Share Owners of Kimball
International, Inc.: We have audited the accompanying consolidated balance sheets of
Kimball International, Inc. and subsidiaries (the "Company") as of June 30, 2010
and 2009, and the related consolidated statements of income, share owners'
equity, and cash flows for each of the three years in the period ended June 30,
2010. Our audits also included the financial statement schedule listed in the
Index at Item 15. We also have audited the Company's internal control over
financial reporting as of June 30, 2010, based on criteria established in
Internal Control - Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission. The Company's management is
responsible for these financial statements and financial statement schedule,
for maintaining effective internal control over financial reporting, and for its
assessment of the effectiveness of internal control over financial reporting,
included in the accompanying Management's Report on Internal Control over
Financial Reporting. Our responsibility is to express an opinion on these
financial statements and financial statement schedule and an opinion on the
Company's internal control over financial reporting based on our audits. We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement and whether
effective internal control over financial reporting was maintained in all
material respects. Our audits of the financial statements included examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
Our audit of internal control over financial reporting included obtaining an
understanding of internal control over financial reporting, assessing the risk
that a material weakness exists, and testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk. Our audits also
included performing such other procedures as we considered necessary in the
circumstances. We believe that our audits provide a reasonable basis for our
opinions. A company's internal control over financial reporting is a
process designed by, or under the supervision of, the company's principal
executive and principal financial officers, or persons performing similar
functions, and effected by the company's board of directors, management, and
other personnel to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles. A
company's internal control over financial reporting includes those policies and
procedures that (1) pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and dispositions of the
assets of the company; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles and that receipts and
expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company's assets that could have a
material effect on the financial statements. Because of the inherent limitations of internal control over
financial reporting, including the possibility of collusion or improper
management override of controls, material misstatements due to error or fraud
may not be prevented or detected on a timely basis. Also, projections of any
evaluation of the effectiveness of the internal control over financial reporting
to future periods are subject to the risk that the controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate. In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial position of
Kimball International, Inc. and subsidiaries as of June 30, 2010 and 2009, and
the results of their operations and their cash flows for each of the three years
in the period ended June 30, 2010, in conformity with accounting principles
generally accepted in the United States of America. Also, in our opinion, such
financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein. Also, in our opinion, the
Company maintained, in all material respects, effective internal control over
financial reporting as of June 30, 2010, based on the criteria established in
Internal Control - Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission. 44 KIMBALL INTERNATIONAL, INC.
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 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
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
Title of each Class
Name of each exchange on
which registered
Class B Common Stock, par
value $0.05 per share
The NASDAQ Stock Market
LLC
Class A Common Stock, par
value $0.05 per share
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes __
No X
Indicate by check mark if the
registrant is not required to file reports pursuant to Section 13 or
15(d) of the Act. Yes __
No X
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 Website, 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 if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K (Section 229.405 of this chapter) is
not contained herein, and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K.
X
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
Class A Common Stock is not publicly traded and, therefore, no
market value is available, but it is convertible on a one-for-one basis for Class B
Common Stock. The aggregate market value of the Class B
Common Stock held by non-affiliates, as of December 31, 2009 (the last business
day of the Registrant's most recently completed second fiscal quarter) was
$218.7 million, based on 95.7% of Class B Common Stock
held by non-affiliates.
The number of shares outstanding of the Registrant's common
stock as of August 16, 2010 was:
Class A Common Stock -
10,610,882 shares
Class B Common Stock -
27,100,483 shares
Portions of the Proxy
Statement for the Annual Meeting of Share Owners to be held on October 19,
2010, are incorporated by reference into Part III.
FORM 10-K
INDEX
Furniture
Electronic
Manufacturing
Services
Unallocated
CorporateTotal
Indiana
13
1
4
18
Kentucky
2
2
Florida
1
1
California
1
1
Idaho
1
1
Mexico
1
1
Thailand
1
1
Poland
2
2
China
1
1
2
United Kingdom
1
1
Total Facilities
17
9
4
30
Furniture
Electronic
Manufacturing
Services
Unallocated
CorporateTotal
Owned
3,491,000
1,011,000
231,000
4,733,000
Leased
7,000
217,000
20,000
244,000
Total
3,498,000
1,228,000
251,000
4,977,000
The executive officers of the Registrant as of August 30, 2010 are as follows:
(Age as of August 30, 2010)
Name
Age
Office and
Area of Responsibility
Executive Officer
Since
James C. Thyen
66
President, Chief Executive Officer, Director
1974
Douglas A. Habig
63
Chairman of the Board
1975
Robert F. Schneider
49
Executive Vice President, Chief Financial Officer
1992
Donald D. Charron
46
Executive Vice President, President-Kimball Electronics Group
1999
John H. Kahle
53
Executive Vice President, General Counsel, Secretary
2004
Gary W. Schwartz
62
Executive Vice President, Chief Information Officer
2004
Donald W. Van Winkle
49
Vice President, President-Office Furniture Group
2010
Stanley C. Sapp
49
Vice President, President-Kimball Hospitality
2010
Michelle R. Schroeder
45
Vice President, Chief Accounting Officer
2003
The Company's Class B Common Stock trades on the NASDAQ Global Select Market of
The NASDAQ Stock Market LLC under the
symbol: KBALB. High and low sales prices by quarter for the last two
fiscal years as quoted by the NASDAQ
system were as follows:
2010
2009
High
Low
High
Low
First Quarter
$ 8.36
$ 5.75
$12.75
$ 8.00
Second Quarter
$ 9.25
$ 7.16
$10.74
$ 4.05
Third Quarter
$ 9.59
$ 6.10
$ 9.14
$ 5.22
Fourth Quarter
$ 8.65
$ 5.48
$ 7.54
$ 5.02
There are no restrictions on the payment of dividends except charter provisions
that require on a fiscal year basis, that shares of Class B Common Stock are
entitled to $0.02 per share dividend more than the annual dividends paid on Class A
Common Stock, provided that dividends are paid on the Company's Class A Common
Stock. Dividends declared totaled $7.3 million and $15.6 million for fiscal
years 2010 and 2009, respectively. Included in these figures are dividends computed and accrued on
unvested Class A and Class B restricted share units, which were paid by a
conversion to the equivalent value of common shares on the vesting date. Dividends
declared by quarter for
fiscal year 2010 compared to fiscal year 2009 were as follows:
2010
2009
Class A
Class B
Class A
Class B
First Quarter
$0.045
$0.05
$0.155
$0.16
Second Quarter
$0.045
$0.05
$0.155
$0.16
Third Quarter
$0.045
$0.05
$0.045
$0.05
Fourth Quarter
$0.045
$0.05
$0.045
$0.05
Total Dividends
$0.180
$0.20
$0.400
$0.42
On August 16, 2010, the Company's Class A Common Stock was owned by 566 Share
Owners of record, and the Company's Class B Common Stock was owned by 1,600 Share Owners of record, of which
304 also
owned Class A Common Stock.
Furniture Segment: HNI Corp., Knoll Inc., Steelcase, Inc., Herman
Miller, Inc.
2005
2006
2007
2008
2009
2010
Kimball International, Inc.
$100.00
$156.47
$115.11
$ 72.21
$ 57.31
$ 52.10
NASDAQ Stock Market (U.S. & Foreign)
$100.00
$107.08
$130.99
$114.02
$ 90.79
$105.54
Peer Group Index
$100.00
$ 97.48
$ 94.50
$ 68.17
$ 45.28
$ 67.04
(Amounts in Thousands, Except for Per Share
Data)
2010
2009
2008
2007
2006
Net Sales
$1,122,808
$1,207,420
$1,351,985
$1,286,930
$1,109,549
Income from Continuing
Operations
$
10,803
$
17,328
$
78
$
23,266
$
28,613
Earnings Per Share from
Continuing Operations:
Basic:
Class A
$ 0.27
$ 0.46
$
(0.00)
$ 0.59
$ 0.74
Class B
$ 0.29
$ 0.47
$ 0.00
$ 0.61
$ 0.75
Diluted:
Class A
$ 0.27
$ 0.46
$ 0.00
$ 0.58
$ 0.74
Class B
$ 0.29
$ 0.47
$ 0.00
$ 0.60
$ 0.75
Total Assets
$ 636,751
$ 642,269
$ 722,667
$ 694,741
$ 679,021
Long-Term Debt, Less Current
Maturities
$
299
$
360
$
421
$ 832
$
1,125
Cash Dividends Per Share:
Class A
$ 0.18
$ 0.40
$ 0.62
$ 0.62
$ 0.62
Class B
$ 0.20
$ 0.42
$ 0.64
$ 0.64
$ 0.64
/s/ James C. Thyen
JAMES C. THYEN
President,
Chief Executive Officer
August 30, 2010
/s/ Robert F. Schneider
ROBERT F. SCHNEIDER
Executive Vice President,
Chief Financial Officer
August 30, 2010
43
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Indianapolis, Indiana
August 30, 2010
CONSOLIDATED BALANCE SHEETS
45
KIMBALL INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in Thousands, Except for Per Share Data)
46
KIMBALL INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
47
KIMBALL INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF SHARE OWNERS' EQUITY
(Amounts in Thousands, Except for Share and Per Share Data)
KIMBALL INTERNATIONAL, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 Summary of Significant Accounting Policies
56
During 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. Direct costs of the acquisition were not material. Goodwill was allocated to the EMS segment of the Company. The operating results of this acquisition are included in the Company's consolidated financial statements beginning on September 1, 2008 and excluding goodwill impairment recorded during fiscal year 2009, had an immaterial impact on the fiscal year 2010 and 2009 financial results. See Note 1 - Summary of Significant Accounting Policies of Notes to Consolidated Financial Statements for more information on goodwill impairment. The purchase price allocation is final.
Inventories are valued using the lower of last-in, first-out (LIFO) cost or market value for approximately 9% and 14% of consolidated inventories at June 30, 2010 and June 30, 2009, respectively, including approximately 78% and 83% of the Furniture segment inventories at June 30, 2010 and June 30, 2009, respectively. The EMS segment inventories and the remaining inventories in the Furniture segment are valued using the lower of first-in, first-out (FIFO) cost or market value.
Had the FIFO method been used for all inventories, income from continuing operations would have been $0.8 million lower in fiscal year 2010, $2.4 million lower in fiscal year 2009, and $1.1 million higher in fiscal year 2008. Certain inventory quantity reductions caused liquidations of LIFO inventory values, which increased income from continuing operations by $1.3 million in fiscal year 2010, $2.5 million in fiscal year 2009, and $0.1 million in fiscal year 2008.
Inventory components at June 30 are as follows:
(Amounts in Thousands) 2010
2009
Finished products $ 33,177 $ 35,530 Work-in-process 13,209 11,752 Raw Materials 112,897 93,999 Total FIFO inventory $ 159,283 $ 141,281 LIFO Reserve (12,877) (14,277) Total inventory $ 146,406 $ 127,004 57
Major classes of property and equipment at June 30 consist of the following:
(Amounts in Thousands) 2010
2009 Land $ 13,705 $ 9,399 Buildings and improvements 180,810 167,997 Machinery and equipment 320,576 331,139 Construction-in-progress 9,159 29,940 Total $ 524,250 $ 538,475 Less: Accumulated depreciation (337,251) (338,001) Property and equipment, net $ 186,999 $ 200,474
The useful lives used in computing depreciation are based on the Company's estimate of the service life of the classes of property, as follows:
Years Buildings and improvements 5 to 50 Machinery and equipment 2 to 20 Leasehold improvements Lesser of Useful Life or Term of Lease
Depreciation and amortization of property and equipment from continuing operations, including asset write-downs associated with the Company's restructuring plans, totaled, in millions, $32.5 for fiscal year 2010, $33.9 for fiscal year 2009, and $34.0 for fiscal year 2008.
At June 30, 2010, in thousands, assets totaling $1,160 were classified as held for sale and consisted of a facility and land related to the Gaylord, Michigan, exited operation within the EMS segment. These assets were reported as unallocated corporate assets for segment reporting purposes. The Company expects to sell these assets during the next 12 months. During fiscal year 2010, the Company sold held for sale 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.
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Note 5 Commitments and Contingent Liabilities
Leases:
Operating leases for certain office, showroom, manufacturing facilities, land, and equipment, which expire from fiscal year 2011 to 2056, contain provisions under which minimum annual lease payments are, in millions, $3.7, $3.0, $2.0, $1.8, and $1.5 for the five years ended June 30, 2015, respectively, and aggregate $1.5 million from fiscal year 2016 to the expiration of the leases in fiscal year 2056. The Company is obligated under certain real estate leases to maintain the properties and pay real estate taxes. Certain leases include renewal options and escalation clauses. Total rental expenses amounted to, in millions, $5.4, $6.1, and $7.8 in fiscal years 2010, 2009, and 2008, respectively, including certain leases requiring contingent lease payments based on warehouse space utilized, which amounted to expense of, in millions, $0.4, $1.1, and $0.7 in fiscal years 2010, 2009, and 2008, respectively.
As of June 30, 2010 and 2009, the Company had no capitalized leases.
Guarantees:
As of June 30, 2010 and 2009, the Company had no guarantees issued which were contingent on the future performance of another entity. 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. The Company had a maximum financial exposure from unused standby letters of credit totaling $4.2 million as of June 30, 2010 and approximately $5.0 million as of June 30, 2009. 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 June 30, 2010 and 2009 with respect to the standby letters of credit. The Company also enters into commercial letters of credit to facilitate payments to vendors and from customers.
Product Warranties:
The Company estimates product warranty liability at the time of sale based on historical repair 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 during fiscal years 2010, 2009, and 2008 were as follows:
(Amounts in Thousands) 2010 2009 2008 Product Warranty Liability at the beginning of the year $ 2,176 $ 1,470 $ 2,147 Accrual for warranties issued 350 1,311 446 Accruals (reductions) related to pre-existing warranties (including changes in estimates) (291) 509 (166) Settlements made (in cash or in kind) (417) (1,114) (957) Product Warranty Liability at the end of the year $ 1,818 $ 2,176 $ 1,470 59
Note 6 Long-Term Debt and Credit Facility
Retirement Plans:
The Company has a trusteed defined contribution retirement plan in effect for substantially all domestic employees meeting the eligibility requirements. The plan includes a 401(k) feature, thereby permitting participants to make additional voluntary contributions on a pre-tax basis. Payments by the Company to the trusteed plan have a five-year vesting schedule and are held for the sole benefit of participants. The Company also maintains a trusteed defined contribution retirement plan for employees of acquired companies.
The Company also maintains a supplemental employee retirement plan (SERP) for executive employees which enable them to defer cash compensation on a pre-tax basis in excess of IRS limitations. The SERP is structured as a rabbi trust, and therefore assets in the SERP portfolio are subject to creditor claims in the event of bankruptcy.
Company contributions for domestic employees are based on a percent of net income with certain minimum and maximum limits as determined annually by the Compensation and Governance Committee of the Board of Directors. Total expense related to employer contributions to the retirement plans was, in millions, $4.5, $0, and $5.8 for fiscal years 2010, 2009, and 2008, respectively.
Employees of certain foreign subsidiaries are covered by local pension or retirement plans. Total expense related to employer contributions to these foreign plans for fiscal years 2010, 2009, and 2008 was, in millions, $0.6, $0.7, and $1.0, respectively.
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Severance Plans:
The Company maintains severance plans for all domestic employees. The plans, which were initiated at the end of fiscal year 2007, provide severance benefits to eligible employees meeting the plans' qualifications, primarily involuntary termination without cause. There are no statutory requirements for the Company to contribute to the plans, nor do employees contribute to the plans. The plans hold no assets. Benefits are paid using available cash on hand when eligible employees meet plan qualifications for payment. Benefits are based upon an employee's years of service and accumulate up to certain limits specified in the plans and include both salary and medical benefits. The components and changes in the Benefit Obligation, Accumulated Other Comprehensive Income (Loss), and Net Periodic Benefit Cost are as follows:
The increase in the benefit obligation was primarily a result of an increase in the historical rate of severance payments used to project future severance eligible terminations. The benefit cost in the above table includes only normal recurring levels of severance activity, as estimated using an actuarial method and management judgment. Unusual or non-recurring severance actions, such as those disclosed in Note 18 - Restructuring Expense of Notes to Consolidated Financial Statements, are not estimable using actuarial methods and are expensed in accordance with the applicable U.S. GAAP.
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The Company amortizes prior service costs on a straight-line basis over the average remaining service period of employees that were active at the time of the plan initiation and amortizes actuarial losses on a straight-line basis over the average remaining service period of employees expected to receive benefits under the plan.
The estimated prior service cost and actuarial net loss for the severance plans that will be amortized from accumulated other comprehensive income (loss) into net periodic benefit cost over the next fiscal year are, pre-tax in thousands, $286 and $700, respectively.
Assumptions used to determine fiscal year end benefit obligations are as follows:
2010 |
2009 |
||
Discount Rate | 5.0% | 6.6% | |
Rate of Compensation Increase | 4.0% | 3.0% |
Weighted average assumptions used to determine fiscal year net periodic benefit costs are as follows:
2010 |
2009 |
2008 |
|||
Discount Rate | 6.2% | 5.9% | 5.5% | ||
Rate of Compensation Increase | 3.3% | 4.5% | 5.0% |
Note 8 Stock Compensation Plans
On August 19, 2003, the Board of Directors adopted the 2003 Stock Option and Incentive Plan (the "2003 Plan"), which was approved by the Company's Share Owners on October 21, 2008. Under the 2003 Plan, 2,500,000 shares of Common Stock were reserved for restricted stock, restricted share units, unrestricted share grants, incentive stock options, nonqualified stock options, performance shares, performance units, and stock appreciation rights for grant to officers and other key employees of the Company and to members of the Board of Directors who are not employees. The 2003 Plan is a ten-year plan. The Company also has stock options outstanding under a former stock incentive plan, which is described below. The pre-tax compensation cost that was charged against income from continuing operations for all of the plans was $1.8 million, $2.1 million, and $4.0 million in fiscal year 2010, 2009, and 2008, respectively. The total income tax benefit from continuing operations for stock compensation arrangements was $0.7 million, $0.9 million, and $1.6 million in fiscal year 2010, 2009, and 2008, respectively. The Company generally uses treasury shares for fulfillment of option exercises, issuance of performance shares, and conversion of restricted share units.
Performance Shares:
The Company awards performance shares to officers and other key employees under the 2003 Plan. Under these awards, a number of shares will be granted to each participant based upon the attainment of the applicable bonus percentage calculated under the Company's profit sharing incentive bonus plan as applied to a total potential share award made and approved by the Compensation and Governance Committee. Performance shares are vested when issued shortly after the end of the fiscal year in which the performance measurement period is complete and are issued as Class A and Class B common shares. Certain outstanding performance shares are applicable to performance measurement periods in future fiscal years and will be measured at fair value when the performance targets are established in future fiscal years. The contractual life of performance shares ranges from one to five years. If a participant is not employed by the Company on the date shares are issued, the performance share award is forfeited, except in the case of death, retirement at age 62 or older, total permanent disability, or certain other circumstances described in the Company's employment policy. Additionally, to the extent performance conditions are not fully attained, performance shares are forfeited.
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A summary of performance share activity under the 2003 Plan during fiscal year 2010 is presented below:
Number
of SharesWeighted Average
Grant Date
Fair ValuePerformance shares outstanding at July 1, 2009 908,035 $10.39 Granted 981,153 6.25 Vested (140,832) 7.62 Forfeited (309,103) 10.17 Performance shares outstanding at June 30, 2010 1,439,253 $ 6.25
As of June 30, 2010, there was approximately $2.5 million of unrecognized compensation cost related to performance shares, based on the latest estimated attainment of performance goals. That cost is expected to be recognized over annual performance periods ending August 2010 through August 2014, with a weighted average vesting period of 1.7 years. The fair value of performance shares is based on the stock price at the date of grant, reduced by the present value of dividends normally paid over the vesting period which are not payable on outstanding performance share awards. The weighted average grant date fair value was $6.25; $10.37; and $12.16 for performance share awards granted in fiscal year 2010, 2009, and 2008, respectively. During fiscal year 2010, 2009, and 2008, respectively, 140,832; 109,197; and 201,598 performance shares vested at a fair value of $1.1 million, $1.3 million, and $3.4 million. The number of shares presented in the above table, the amounts of unrecognized compensation, and the weighted average period include performance shares awarded that are applicable to future performance measurement periods and will be measured at fair value when the performance targets are established in future fiscal years.
Unrestricted Share Grants:
Under the 2003 Plan, unrestricted shares may be granted to participants as consideration for service to the Company. Unrestricted share grants do not have vesting periods, holding periods, restrictions on sale, or other restrictions. The fair value of unrestricted shares is based on the stock price at the date of the award. During fiscal year 2010, 2009, and 2008, respectively, the Company granted a total of 19,662; 29,545; and 13,186 unrestricted shares of Class B common stock at an average grant date fair value of $7.63, $6.45, and $13.16, for a total fair value of $0.2 million in each fiscal year. 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, and to officers of the Company.
Restricted Share Units:
Nonvested Restricted Share Units (RSU) were awarded to officers and other key employees under the 2003 Plan. RSUs vested five years after the date of award and as of June 30, 2010, were fully vested. Upon vesting, the outstanding number of RSUs and the value of dividends accumulated over the vesting period were converted to shares of Class A and Class B common stock. RSUs and accumulated dividends were forfeited if the employment of a holder of an RSU terminated before the RSU had vested for any reason other than death, retirement at age 62 or older, total permanent disability, or certain other circumstances described in the Company's employment policy.
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A summary of RSU activity under the 2003 Plan during fiscal year 2010 is presented below:
Number of
Share UnitsWeighted Average
Grant Date
Fair ValueRestricted Share Units outstanding at July 1, 2009 239,950 $14.25 Granted -0- -0- Vested (236,200) 14.25 Forfeited (3,750) 14.25 Restricted Share Units outstanding at June 30, 2010 -0- $ -0-
As of June 30, 2010, there was no unrecognized
compensation cost related to nonvested RSU compensation arrangements awarded
under the 2003 Plan as all RSU's had vested. The fair value of RSU awards is based on the stock
price at the date of award. The total fair value of RSU awards vested during
fiscal year 2010, 2009, and 2008 was, in thousands, $3,366, $4,137, and $233,
respectively.
Stock Options:
The Company has stock options outstanding under a former stock incentive plan. The 1996 Stock Incentive Program, which was approved by the Company's Share Owners on October 22, 1996, allowed the issuance of incentive stock options, nonqualified stock options, stock appreciation rights, and performance share awards to officers and other key employees of the Company and to members of the Board of Directors who are not employees. The 1996 Stock Incentive Program will continue to have options outstanding through fiscal year 2013. No shares remain available for new grants under the 1996 Stock Incentive Program.
There were no stock option grants awarded during
fiscal years 2010, 2009, and 2008. For outstanding awards, the fair value at the
date of the grant was estimated using the Black-Scholes option pricing
model. Options outstanding are exercisable one to five years after the date of
grant and expire ten years after the date of grant. Stock options are forfeited
when employment terminates, except in the case of retirement at age 62 or older,
death, permanent disability, or certain other circumstances described in the
Company's employment policy.
A summary of stock option activity during fiscal year 2010 is presented below:
Number of
SharesWeighted Average
Exercise
PriceWeighted Average
Remaining
Contractual LifeAggregate
Intrinsic
ValueOptions outstanding at July 1, 2009 747,518 $15.36 Granted -0- -0- Exercised -0- -0- Forfeited (65,845) 15.28 Expired (33,213) 19.81 Options outstanding at June 30, 2010 648,460 $15.13 2.0 years $ -0- Options vested and exercisable at June 30, 2010 648,460 $15.13 2.0 years $ -0-
No options were exercised during fiscal years 2010, 2009, and 2008.
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Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Income tax benefits associated with net operating losses of, in thousands, $6,403 expire from fiscal year 2013 to 2030. Income tax benefits associated with tax credit carryforwards of, in thousands, $4,279, expire from fiscal year 2012 to 2024. A valuation reserve was provided as of June 30, 2010 for deferred tax assets relating to certain foreign and state net operating losses of, in thousands, $1,837, certain state tax credit carryforwards of, in thousands, $3,784, and, in thousands, $156 related to other deferred tax assets that the Company currently believes are more likely than not to remain unrealized in the future.
Foreign unremitted earnings of entities not included in the United States tax return have been included in the consolidated financial statements without giving effect to the United States taxes that may be payable on distribution to the United States because it is not anticipated such earnings will be remitted to the United States. The aggregate unremitted earnings of the Company's foreign subsidiaries for which a deferred income tax liability has not been recorded was approximately $51.3 million as of June 30, 2010. Determination of the amount of unrecognized deferred tax liability on unremitted earnings is not practicable.
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Changes in the unrecognized tax benefit, excluding accrued interest and penalties, during fiscal years 2010, 2009, and 2008 were as follows:
(Amounts in Thousands) | 2010 | 2009 | 2008 | ||
Beginning balance - July 1 | $ 2,165 | $ 1,020 | $ 5,617 | ||
Tax positions related to prior fiscal years: | |||||
Additions | 532 | 341 | 161 | ||
Reductions (1) | (130) | -0- | (4,737) | ||
Tax positions related to current fiscal year: | |||||
Additions | 74 | 985 | 70 | ||
Reductions | -0- | (3) | -0- | ||
Settlements | (36) | (3) | (13) | ||
Lapses in statute of limitations | (139) | (175) | (78) | ||
Ending balance - June 30 | $ 2,466 | $ 2,165 | $ 1,020 | ||
Portion that, if recognized, would reduce tax expense and effective tax rate | $ 2,097 | $ 1,905 | $ 730 | ||
(1) The $4.7 million reduction during fiscal year 2008 was due primarily to the IRS approving a change in accounting method, which eliminated the need for an unrecognized tax benefit liability. The reduction in the liability resulted in a corresponding adjustment to deferred tax assets. |
Beginning January 1, 2010, the Company recognizes interest and penalties related to unrecognized tax benefits in the Provision (Benefit) for Income Taxes line of the Consolidated Statements of Income. See Note 1 - Summary of Significant Accounting Policies of Notes to Consolidated Financial Statements, under the caption Change in Accounting Policy, regarding the change in accounting policy for the classification of interest and penalties. Amounts accrued for interest and penalties were as follows:
(Amounts in Thousands) |
As of June 30, 2010 |
As of June 30, 2009 |
As of June 30, 2008 |
||
Accrued Interest and Penalties: | |||||
Interest | $ 311 | $ 344 | $ 341 | ||
Penalties | 117 | 146 | 159 |
Accrued interest and penalties are not included in the tabular roll forward of unrecognized tax benefits above. Interest and penalties recognized for fiscal years 2010, 2009, and 2008 were, in thousands, income of $72, $10, and $325, respectively.
The Company, or one of its wholly-owned subsidiaries, files U.S. federal income tax returns and income tax returns in various state, local, and foreign jurisdictions. The Company is no longer subject to any significant U.S. federal tax examinations by tax authorities for years before fiscal year 2007. The Company is subject to various state and local income tax examinations by tax authorities for years after June 30, 2002 and various foreign jurisdictions for years after June 30, 2004. The Company does not expect the change in the amount of unrecognized tax benefits in the next 12 months to have a significant impact on the results of operations or the financial position of the Company.
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On a fiscal year basis, shares of Class B Common Stock are entitled to an additional $0.02 per share dividend more than the dividends paid on Class A Common Stock, provided that dividends are paid on the Company's Class A Common Stock. The owners of both Class A and Class B Common Stock are entitled to share pro-rata, irrespective of class, in the distribution of the Company's available assets upon dissolution.
Owners of Class B Common Stock are entitled to elect, as a class, one member of the Company's Board of Directors. In addition, owners of Class B Common Stock are entitled to full voting powers, as a class, with respect to any consolidation, merger, sale, lease, exchange, mortgage, pledge, or other disposition of all or substantially all of the Company's fixed assets, or dissolution of the Company. Otherwise, except as provided by statute with respect to certain amendments to the Articles of Incorporation, the owners of Class B Common Stock have no voting rights, and the entire voting power is vested in the Class A Common Stock, which has one vote per share. The Habig families own directly or share voting power in excess of 50% of the Class A Common Stock of Kimball International, Inc. The owner of a share of Class A Common Stock may, at their option, convert such share into one share of Class B Common Stock at any time.
If dividends are not paid on shares of the Company's Class B Common Stock for a period of thirty-six consecutive months, or if at any time the number of shares of Class A Common Stock issued and outstanding is less than 15% of the total number of issued and outstanding shares of both Class A and Class B Common Stock, then all shares of Class B Common Stock shall automatically have the same rights and privileges as the Class A Common Stock, with full and equal voting rights and with equal rights to receive dividends as and if declared by the Board of Directors.
During fiscal year 2008, cash payments for repurchases of Class B Common Stock were $24.8 million. With these repurchases, the Company completed a previously authorized share repurchase program. Subsequent to the completion of the previously authorized share repurchase program, the Board of Directors authorized a plan which allows for the repurchase of up to an additional 2,000,000 shares of the Company's common stock.
Note 12 Derivative Instruments
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Note 13 Short-Term Investments
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Accrued expenses consisted of:
June 30 (Amounts in Thousands) 2010 2009 Taxes $ 6,799 $ 7,573 Compensation 23,197 20,292 Retirement plan 4,344 -0- Insurance 4,821 7,023 Restructuring 2,500 3,793 Other expenses 11,262 13,745 Total accrued expenses $52,923 $52,426
Note 15 Segment and Geographic Area Information
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Earnings per share are computed using the two-class common stock method due to the dividend preference of Class B Common Stock. Basic earnings per share are based on the weighted average number of shares outstanding during the period. Diluted earnings per share are based on the weighted average number of shares outstanding plus the assumed issuance of common shares and related payment of assumed dividends for all potentially dilutive securities. Earnings per share of Class A and Class B Common Stock are as follows:
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Comprehensive income includes all changes in equity during a period except those resulting from investments by, and distributions to, Share Owners. Comprehensive income consists of net income (loss) and other comprehensive income (loss), which includes the net change in unrealized gains and losses on investments, foreign currency translation adjustments, the net change in derivative gains and losses, net actuarial change in postemployment severance, and postemployment severance prior service cost.
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Note 19 Discontinued Operation
During the first quarter of fiscal year 2007, the Company approved a plan to exit the production of wood rear projection television (PTV) cabinets and stands within the Furniture segment, which affected the Company's Juarez, Mexico, operation. With the exit, the Company no longer has continuing involvement with the production of PTV cabinets and stands. Production at the Juarez facility ceased during the second quarter of fiscal year 2007, and all inventory has been sold. Miscellaneous wrap-up activities including disposition of remaining equipment were complete as of June 30, 2007. Beginning in the quarter ended December 31, 2006, the year-to-date financial results associated with the Mexican operations in the Furniture segment were classified as discontinued operations, and all prior periods were restated. Their operating results and gains (losses) on disposal are presented on the Loss from Discontinued Operation, Net of Tax line item of the Consolidated Statements of Income.
The Company utilized available market prices and management estimates to determine the fair value of impaired fixed assets. The costs shown below related to the exit of PTV cabinet and stand production at the Juarez facility are classified as a discontinued operation and those costs related to the building lease and other costs after production of PTV cabinets and stands ceased are classified as continuing operations. There were no charges related to exit activities at the Juarez facility during fiscal year 2010 and 2009. Pre-tax charges related to exit activities at the Juarez facility during fiscal year 2008 were as follows:
Year Ended June 30, 2008
(Amounts in Thousands) Transition and Other Employee Costs
Lease and Other Exit Costs
Total
Exit costs in continuing operations $ -0- $ 1,272 $ 1,272 Exit costs in discontinued operation 30 13 43 Total
$ 30 $ 1,285 $ 1,315
During fiscal years 2010 and 2009, the Company did not classify any additional businesses as discontinued operations. Operating results related to the discontinued operation was as follows:
Year Ended June 30 (Amounts in Thousands) 2010
2009
2008
Net Sales of Discontinued Operation $ -0- $ -0- $ -0- Operating Loss of Discontinued Operation $ -0- $ -0- $ (78) Benefit (Provision) for Income Taxes -0- -0- (46) Operating Loss of Discontinued Operation, Net of Tax $ -0- $ -0- $ (124)
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Note 20 Quarterly Financial Information (Unaudited)
(1) | Operating results from the Genesis Electronics Manufacturing acquisition are included in the table above as of September 1, 2008 and had an immaterial impact. |
(2) | Other General Income included $3.3 million, pre-tax, for the quarter ended December 31, 2009 for the settlement proceeds related to an antitrust class action lawsuit of which the Company was a member and $6.7 million pre-tax gain for the quarter ended March 31, 2010 on the sale of the Company's Poland facility and land. |
(3) | Other General Income included $8.0 million, $23.2 million, and $0.3 million for the quarters ended December 31, 2008, March 31, 2009, and June 30, 2009, respectively, pre-tax gain related to the sale of undeveloped land and timberland holdings and $1.9 million, pre-tax, for the quarter ended December 31, 2008 related to the earnest money deposits retained by the Company resulting from the termination of the contract to sell and lease back the Company's Poland facility and land. |
(4) | Earnings per share for interim periods of fiscal year 2009 has been recalculated as a result of FASB guidance on determining whether instruments granted in share-based payment transactions are participating securities. Class A diluted earnings per share for the quarter ended December 31, 2008 was reduced from $0.22 as originally reported to $0.21. All other quarterly earnings per share calculations were not impacted significantly enough to cause a change in the earnings per share result. See Note 1 - Summary of Significant Accounting Policies of Notes to Consolidated Financial Statements for further discussion. |
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Item 9 - Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
None.
Item 9A - - 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 June 30, 2010, the Chief Executive Officer and Chief Financial Officer of the Company concluded that its disclosure controls and procedures were effective.
(b) Management's report on internal control over financial reporting.
Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 and the rules and regulations adopted pursuant thereto, the Company included a report of management's assessment of the effectiveness of its internal control over financial reporting as part of this report. The effectiveness of the Company's internal control over financial reporting as of June 30, 2010 has been audited by the Company's independent registered public accounting firm. Management's report and the independent registered public accounting firm's attestation report are included in the Company's Consolidated Financial Statements under the captions entitled "Management's Report on Internal Control Over Financial Reporting" and "Report of Independent Registered Public Accounting Firm" and are incorporated herein by reference.
(c) 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 June 30, 2010 that have materially affected, or that are reasonably likely to materially affect, the Company's internal control over financial reporting.
None.
PART III
Item 10 - - Directors, Executive Officers and Corporate Governance
Directors
The information required by this item with respect to Directors is incorporated by reference to the material contained in the Company's Proxy Statement for its annual meeting of Share Owners to be held October 19, 2010 under the caption "Election of Directors."
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Committees
The information required by this item with respect to the Audit Committee and its financial expert and with respect to the Compensation and Governance Committee's responsibility for establishing procedures by which Share Owners may recommend nominees to the Board of Directors is incorporated by reference to the material contained in the Company's Proxy Statement for its annual meeting of Share Owners to be held October 19, 2010 under the caption "Information Concerning the Board of Directors and Committees."
Executive Officers of the Registrant
The information required by this item with respect to Executive Officers of the Registrant is included at the end of Part I and is incorporated herein by reference.
Compliance with Section 16(a) of the Exchange Act
The information required by this item with respect to compliance with Section 16(a) of the Securities Exchange Act of 1934 is incorporated by reference to the material contained in the Company's Proxy Statement for its annual meeting of Share Owners to be held October 19, 2010 under the caption "Section 16(a) Beneficial Ownership Reporting Compliance."
Code of Ethics
The Company has a code of ethics that applies to all of its employees, including the Chief Executive Officer, the Chief Financial Officer, and the Chief Accounting Officer. The code of ethics is posted on the Company's website at www.ir.kimball.com. It is the Company's intention to disclose any amendments to the code of ethics on this website. In addition, any waivers of the code of ethics for directors or executive officers of the Company will be disclosed in a Current Report on Form 8-K.
Item 11 - Executive Compensation
The information required by this item is incorporated by reference to the material contained in the Company's Proxy Statement for its annual meeting of Share Owners to be held October 19, 2010 under the captions "Information Concerning the Board of Directors and Committees," "Compensation Discussion and Analysis," "Compensation Committee Report," and "Executive Officer and Director Compensation."
Security Ownership
The information required by this item is incorporated by reference to the material contained in the Company's Proxy Statement for its annual meeting of Share Owners to be held October 19, 2010 under the caption "Share Ownership Information."
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Securities Authorized for Issuance Under Equity Compensation Plans
The information required by this item is incorporated by reference to the material contained in the Company's Proxy Statement for its annual meeting of Share Owners to be held October 19, 2010 under the caption "Executive Officer and Director Compensation - Securities Authorized for Issuance Under Equity Compensation Plans."
Item 13 - Certain Relationships and Related Transactions, and Director Independence
Relationships and Related Transactions
The information required by this item is incorporated by reference to the material contained in the Company's Proxy Statement for its annual meeting of Share Owners to be held October 19, 2010 under the caption "Review and Approval of Transactions with Related Persons."
Director Independence
The information required by this item is incorporated by reference to the material contained in the Company's Proxy Statement for its annual meeting of Share Owners to be held October 19, 2010 under the caption "Information Concerning the Board of Directors and Committees."
Item 14 - Principal Accounting Fees and Services
The information required by this item is incorporated by reference to the material contained in the Company's Proxy Statement for its annual meeting of Share Owners to be held October 19, 2010 under the caption "Independent Registered Public Accounting Firm" and "Appendix A - Approval Process for Services Performed by the Independent Registered Public Accounting Firm."
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PART IV
Item 15 - Exhibits, Financial Statement Schedules
(a) The following documents are filed as part of this report:
(1) Financial Statements:
(2) Financial Statement Schedules:
II. Valuation and Qualifying Accounts for Each of the Three Years in the Period Ended June 30, 2010 Schedules other than those listed above are omitted because they are either not required or not applicable, or the required information is presented in the Consolidated Financial Statements.
(3) Exhibits
See the Index of Exhibits on page 95 for a list of the exhibits filed or incorporated herein as a part of this report.
91
Pursuant to the requirements of Section 13 or 15(d) 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/ Robert F. Schneider ROBERT F. SCHNEIDER
Executive Vice President,
Chief Financial Officer
August 30, 2010
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:
/s/ James C. Thyen JAMES C. THYEN President,
Chief Executive Officer
August 30, 2010/s/ Robert F. Schneider ROBERT F. SCHNEIDER
Executive Vice President,
Chief Financial Officer
August 30, 2010/s/ Michelle R. Schroeder MICHELLE R. SCHROEDER
Vice President,
Chief Accounting Officer
August 30, 2010
92
Signature Signature Geoffrey L. Stringer * Harry W. Bowman* GEOFFREY L. STRINGER HARRY W. BOWMAN Director Director Thomas J. Tischhauser * James C. Thyen * THOMAS J. TISCHHAUSER JAMES C. THYEN Director Director Christine M. Vujovich * Jack R. Wentworth * CHRISTINE M. VUJOVICH JACK R. WENTWORTH Director Director
* The undersigned does hereby sign this document on my behalf pursuant to powers of attorney duly executed and filed with the Securities and Exchange Commission, all in the capacities as indicated:
Date August 30, 2010 /s/ Douglas A. Habig DOUGLAS A. HABIG Director
Individually and as Attorney-In-Fact
93
KIMBALL INTERNATIONAL, INC.
94
KIMBALL INTERNATIONAL, INC.
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 23, 2009) 10(a)* Summary of Director and Named Executive Officer Compensation 10(b)* Discretionary Compensation 10(c)* 2003 Stock Option and Incentive Plan (Incorporated by reference to Exhibit 10(d) to the Company's Form 10-Q for the period ended December 31, 2008) 10(d)* Supplemental Employee Retirement Plan (2009 Revision) (Incorporated by reference to Exhibit 10(c) to the Company's Form 10-Q for the period ended December 31, 2008) 10(e)* 1996 Stock Incentive Program (Incorporated by reference to Exhibit 10(e) to the Company's Form 10-K for the year ended June 30, 2006) 10(f)* Form of Annual Performance Share Award Agreement, as amended on August 22, 2006 (Incorporated by reference to Exhibit 10(b) to the Company's Form 10-Q for the period ended September 30, 2006) 10(g) Credit Agreement, dated as of April 23, 2008, among the Company, the lenders party thereto and JPMorgan Chase Bank, N.A., as Agent and Letter of Credit Issuer (Incorporated by reference to Exhibit 10.1 to the Company's Form 8-K filed April 28, 2008) 10(h)* 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) 10(i)* Form of Long Term Performance Share Award, as amended on August 22, 2006 (Incorporated by reference to Exhibit 10(c) to the Company's Form 10-Q for the period ended September 30, 2006) 10(j)* Description of the Company's 2005 Profit Sharing Incentive Bonus Plan (Incorporated by reference to Exhibit 10.1 to the Company's Form 8-K filed October 18, 2005) 11 Computation of Earnings Per Share (Incorporated by reference to Note 16 - Earnings Per Share of Notes to Consolidated Financial Statements) 21 Subsidiaries of the Registrant 23 Consent of Independent Registered Public Accounting Firm 24 Power of Attorney 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 * = constitutes management contract or compensatory arrangement
95
SUMMARY OF DIRECTOR AND NAMED EXECUTIVE OFFICER COMPENSATION
This summary sets forth the compensation of the Directors of Kimball International, Inc. (the "Company"). The summary also includes compensation of the Chief Executive Officer, Chief Financial Officer, and three most highly compensated executive officers of the Company as of the fiscal year ended June 30, 2010 (the "Named Executive Officers").
For a detailed description of the compensation arrangements that the Directors and Named Executive Officers participate in, refer to the Company's most recent Proxy Statement filed with the Securities and Exchange Commission.
Director Compensation
All Outside (non-employee) Directors receive annual compensation of $40,000 for
the year for service as Directors. The Chairperson of the Audit Committee of the
Board of Directors receives $5,000 per committee meeting, and other Audit
Committee members receive $3,500 per committee meeting. The Chairperson of the
Compensation and Governance Committee receives $3,500 per committee meeting, and
other members of the Compensation and Governance Committee receive $2,000 per
committee meeting. Members of the Strategic Planning Committee receive $3,500 per committee meeting.
The Directors can elect to receive all of their annual retainer and/or meeting fees in shares of Class B Common Stock under the Company's 2003 Stock Option and Incentive Plan. Directors are also reimbursed for travel expenses incurred in connection with Board and Committee meeting attendance.
An Outside Director is a director who is not an employee of the Company or one of its subsidiaries. James C. Thyen, President and Chief Executive Officer, and Douglas A. Habig, Chairman of the Board, are Directors of the Company but do not receive compensation for their services as Directors.
Named Executive Officers
Base Pay
Periodically,
the Compensation and Governance Committee of the Board of Directors reviews and
approves the salaries that are paid to the Company's executive
officers. The following are the current annualized base salaries for the
Company's Named Executive Officers:
James C. Thyen, President and Chief Executive Officer |
$879,996 | |
Donald D. Charron, Executive Vice President, President-Kimball Electronics Group |
$520,728 | |
Robert F. Schneider, Executive Vice President, Chief Financial Officer |
$421,564 | |
John H. Kahle, Executive Vice President, General Counsel, Secretary |
$354,120 | |
Gary W. Schwartz, Executive Vice President, Chief Information Officer |
$284,180 |
Cash Incentive Compensation
Each of the Named Executive Officers was eligible to participate in the Company's
2005 Profit Sharing Incentive Bonus Plan (the "Plan") for fiscal year
2010. A long-standing component of the Company's profit sharing incentive
bonus plan is that it is linked to the performance of the Company which
automatically lowers total compensation expense when profits are down. Under the
Plan, cash incentives are accrued
annually and paid in five installments over the succeeding fiscal year. Except
for provisions relating to retirement, death, permanent disability, and certain
other circumstances described in a participant's employment agreement,
participants must be actively employed on each payment date to be eligible to
receive any unpaid cash incentive installment. The total amount of cash
incentives accrued and
authorized to be paid to the Named Executive Officers based on the Company's
fiscal year 2010 results is listed below. The Named Executive Officers received
an installment of 50% of the payment in August 2010,
and the remaining portions will be paid in equal installments in September 2010,
January 2011, April 2011, and June 2011.
James C. Thyen, President and Chief Executive Officer |
$ 64,867 | |
Donald D. Charron, Executive Vice President, President-Kimball Electronics Group |
$ 138,239 | |
Robert F. Schneider, Executive Vice President, Chief Financial Officer |
$ 33,159 | |
John H. Kahle, Executive Vice President, General Counsel, Secretary |
$ 27,854 | |
Gary W. Schwartz, Executive Vice President, Chief Information Officer |
$ 22,353 |
Donald D. Charron, Robert F. Schneider, John H. Kahle, and Gary W. Schwartz were awarded additional discretionary cash compensation of $10,000; $33,000; $27,000; and $22,000, respectively, for fiscal year 2010.
Stock Compensation
The Named Executive Officers may also receive a variety of stock incentive
benefits under the 2003 Stock Option and Incentive Plan consisting of: restricted
stock, restricted share units, unrestricted share grants, incentive stock
options, nonqualified stock options, stock appreciation rights, performance
shares, and performance units. The only form of award granted to Named
Executive Officers for fiscal
year 2010 was performance shares. Performance shares include both an
annual performance share ("APS") award and a long-term performance share ("LTPS")
award with one-fifth (1/5) of the LTPS award vesting annually over the succeeding
five-year period. No other form of award has been granted to the Named
Executive Officers
since July 2005.
The following table summarizes the performance shares issued in Class A Common Stock during August 2010 to the Company's Named Executive Officers pursuant to their fiscal year 2010 performance share awards:
APS Award | LTPS Award | ||
(number of
shares issued) (1) |
(number of
shares issued) (1) |
||
James C. Thyen, President and Chief Executive Officer |
11,440 | 20,104 | |
Donald D. Charron, Executive Vice President, President-Kimball Electronics Group |
2,025 | 5,956 | |
Robert F. Schneider, Executive Vice President, Chief Financial Officer |
600 | 4,316 | |
John H. Kahle, Executive Vice President, General Counsel, Secretary |
600 | 4,316 | |
Gary W. Schwartz, Executive Vice President, Chief Information Officer |
600 | 4,316 |
(1) Shares have not been reduced by the number of shares withheld to satisfy tax withholding obligations.
The following table summarizes the maximum number of performance shares awarded in August 2010 to the Company's Named Executive Officers for fiscal year 2011:
APS Award | LTPS Award | ||
(number of shares) | (number of shares) | ||
James C. Thyen, President and Chief Executive Officer |
143,000 | 183,000 | |
Donald D. Charron, Executive Vice President, President-Kimball Electronics Group |
7,500 | 26,300 | |
Robert F. Schneider, Executive Vice President, Chief Financial Officer |
7,500 | 30,300 | |
John H. Kahle, Executive Vice President, General Counsel, Secretary |
7,500 | 29,300 | |
Gary W. Schwartz, Executive Vice President, Chief Information Officer |
7,500 | 28,300 |
The number of shares to be issued will be dependent upon the percentage payout under the Plan. Refer to the Company's Proxy Statement for further details.
The following table summarizes shares issued in Class A Common Stock during January 2010 to the Company's Named Executive Officers pursuant to their Restricted Share Unit Awards (RSU) that were awarded January 21, 2005, and vested January 21, 2010:
RSU Awards |
Accumulated Dividends on RSUs |
||
(number of
shares issued) (1) |
(number of
shares issued) (2) |
||
James C. Thyen, President and Chief Executive Officer |
47,400 | 15,454 | |
Donald D. Charron, Executive Vice President, President-Kimball Electronics Group |
13,400 | 4,369 | |
Robert F. Schneider, Executive Vice President, Chief Financial Officer |
13,400 | 4,369 | |
John H. Kahle, Executive Vice President, General Counsel, Secretary |
13,400 | 4,369 | |
Gary W. Schwartz, Executive Vice President, Chief Information Officer |
13,400 | 4,369 | |
(1) Shares have not been reduced by the number of shares withheld to satisfy tax withholding obligations. |
|||
(2) Represents shares of Class A Common Stock issued pursuant to the RSU Agreement determined by dividing the accumulated phantom cash dividends credited to the RSU by the ten-day average close price ending on the day preceding the vest date. Shares have not been reduced by the number of shares withheld to satisfy tax withholding obligations. |
Retirement Plans
The Named Executive Officers participate in a defined
contribution, participant-directed retirement plan with a 401(k) provision that
all domestic employees are eligible
to participate in (the "Retirement Plan"). The Retirement Plan provides for
voluntary employee contributions as well as a discretionary annual Company
contribution based on a percent of net income with certain minimum and maximum
limits as determined annually by the Board of Directors. Each eligible employee's Company
contribution is defined as a percent of eligible compensation, the percent being
identical for all eligible employees, including Named Executive Officers.
Participant contributions are fully vested immediately, and Company contributions
are fully vested after five years of participation. All Named Executive Officers
are fully vested. The Retirement
Plan is fully funded. For those eligible employees who, under the 1986 Tax
Reform Act, are deemed to be highly compensated, their individual Company
contribution under the Retirement Plan is reduced. For employees who are
eligible, including all Named Executive Officers, there is a nonqualified,
Supplemental Employee Retirement Plan (SERP) in which the Company contributes to
the account of each individual an amount equal to the reduction in the
contribution under the Retirement Plan arising from the provisions of the 1986
Tax Reform Act. The SERP investment is primarily composed of employee
contributions.
Other
The Named Executive
Officers receive nominal benefits such as financial counseling, medical
reimbursement, executive preventive healthcare program, tax
preparation, and other
miscellaneous items. The Named Executive Officers may use the Company
aircraft for transportation related to the executive preventive healthcare
program and for limited personal reasons. The exact amounts received from these benefits are
not predetermined and are disclosed annually in the Company's Proxy Statement.
Exhibit 10(b)
DISCRETIONARY COMPENSATION
Because special situations occur where individual achievement may not be adequately recognized under a single incentive plan, the Compensation and Governance Committee (the "Committee"), at the beginning of each fiscal year, grants authority to the Chairman of the Board ("Chairman") and/or the President/Chief Executive Officer to distribute additional discretionary cash and/or stock compensation up to an aggregate maximum amount to eligible participants for each particular fiscal year. For fiscal year 2011, the aggregate amount of cash compensation approved by the Committee was $500,000, and the maximum number of shares approved by the Committee was 600,000 shares of Class A or Class B Common Stock. The stock compensation may be in the form of performance share award opportunities and/or outright grants of shares of Common Stock, all to be awarded under the Company's 2003 Stock Option and Incentive Plan. Discretionary compensation is awarded based upon individual effort and is paid in amounts and at such times as the Chairman and/or President/Chief Executive Officer determine, in their sole discretion. No employee has a guaranteed right to discretionary compensation in the event that performance targets are not met.
Eligible participants include any employee of the Company, excluding the Chairman and President/Chief Executive Officer for cash or stock compensation, and excluding executive officers of the Company for stock compensation.
Exhibit 21
KIMBALL INTERNATIONAL, INC. AND SUBSIDIARIES
SUBSIDIARIES OF THE REGISTRANT
As of June 30, 2010, the subsidiaries of the Registrant were as follows:
Jurisdiction of |
Percent of |
|||
Kimball International Marketing, Inc. | Indiana | 100% | ||
Kimball Furniture Group, Inc. | Indiana | 100% | ||
Kimball Electronics, Inc. | Indiana | 100% | ||
Kimball International Transit, Inc. | Indiana | 100% | ||
Kimball Electronics - Mexico, S.A. de C.V. | Mexico | 100% | ||
Kimball Electronics (Thailand) Limited | Thailand | 100% | ||
Kimball Electronics Poland Sp. z o.o. | Poland | 100% | ||
Kimball Hospitality, Inc. | Indiana | 100% | ||
Kimball Electronics (Wales) Limited | United Kingdom | 100% | ||
Kimball Electronics (Nanjing) Co., Ltd. | China | 100% | ||
Kimball Electronics Tampa, Inc. | Florida | 100% | ||
National Office Furniture, Inc. | Delaware | 100% | ||
Kimball Electronics Netherlands B.V. | Netherlands | 100% |
Exhibit 23
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration Statement Nos. 333-111744, 333-14591, and 333-56048 of Kimball International, Inc. on Form S-8 of our report dated August 30, 2010, relating to the consolidated financial statements and financial statement schedule of Kimball International, Inc. and the effectiveness of Kimball International, Inc.'s internal control over financial reporting, appearing in this Annual Report on Form 10-K of Kimball International, Inc. for the year ended June 30, 2010.
/s/ Deloitte & Touche LLP | |
DELOITTE & TOUCHE LLP Indianapolis, Indiana August 30, 2010 |
Exhibit 24
POWER OF ATTORNEY
The undersigned does hereby constitute and appoint DOUGLAS A. HABIG, his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, in name, place and stead, to sign the Form 10-K Annual Report of Kimball International, Inc. (and each amendment thereto, if any) pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, for the fiscal year ended June 30, 2010, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto the attorney-in-fact full power and authority to sign such document on behalf of the undersigned and to make such filing, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that the attorney-in-fact, or their substitutes, may lawfully do or cause to be done by virtue hereof.
Date: August 17, 2010
/s/ James C. Thyen James C. Thyen |
/s/ Douglas A. Habig Douglas A. Habig |
|
/s/ Jack R. Wentworth Jack R. Wentworth |
/s/ Christine M. Vujovich Christine M. Vujovich |
|
/s/ Harry W. Bowman Harry W. Bowman |
/s/ Geoffrey L. Stringer Geoffrey L. Stringer |
|
/s/ Thomas J. Tischhauser Thomas J. Tischhauser |
Exhibit 31.1
CERTIFICATION PURSUANT TO
RULE 13a-14(a)/15d-14(a),
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, James C. Thyen, certify that:
1. | I have reviewed this Annual Report on Form 10-K of Kimball International, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and | |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and | |
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
/s/ James C. Thyen | ||
JAMES C. THYEN President, Chief Executive Officer |
||
August 30, 2010 |
Exhibit 31.2
CERTIFICATION PURSUANT TO
RULE 13a-14(a)/15d-14(a),
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Robert F. Schneider, certify that:
1. | I have reviewed this Annual Report on Form 10-K of Kimball International, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and | |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and | |
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
/s/ Robert F. Schneider | ||
ROBERT F. SCHNEIDER Executive Vice President, Chief Financial Officer |
||
August 30, 2010 |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Kimball International, Inc. (the "Company") on Form 10-K for the period ending June 30, 2010 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, James C. Thyen, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
/s/ James C. Thyen | ||
JAMES C. THYEN President, Chief Executive Officer |
||
August 30, 2010 |
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Kimball International, Inc. (the "Company") on Form 10-K for the period ending June 30, 2010 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Robert F. Schneider, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
/s/ Robert F. Schneider | ||
ROBERT F. SCHNEIDER Executive Vice President, Chief Financial Officer |
||
August 30, 2010 |
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