Kimball International, Inc. (NASDAQ: KBAL) today announced results
for the quarter ended September 30, 2020.
Selected Financial Highlights:
First Quarter FY 2021
- Net sales decreased 27% to $147.9 million
- Gross margin expanded by 50 basis points despite lower
revenue
- Operating income margin of 4.3%, or 7.8% on an adjusted
basis
- Net income of $5.4 million, decreased 53%
- Adjusted EBITDA of $15.8 million, decreased 34%, and adjusted
EBITDA margin of 10.7% decreased 110 basis points on lower
volume
- Diluted EPS of $0.14, or $0.23 on an adjusted basis, a decrease
of 43% compared to adjusted EPS of $0.40 a year ago
- Backlog of $139.5 million
Management Commentary
CEO Kristie Juster commented, “Kimball International continued
to effectively navigate COVID-19 related end market softness and
deliver structural savings from our transformation and
restructuring plans, which will significantly benefit our results
as market conditions improve. We were especially pleased with
the sequential and year-over-year gross margin expansion, which was
achieved despite considerably lower sales volumes. While business
conditions remain challenging, we are beginning to see some areas
of stability in the market. Notably, we experienced a 15%
sequential increase in our order rates; our business with the
Federal Government continues to show resiliency; and overall
quoting activity is strong.
“We remain on-track with Phase 2 of our restructuring program
and other cost reduction initiatives, which are projected to yield
cost savings of approximately $20 million in fiscal 2021. In the
first quarter, initial aspects of the program resulted in
approximately $4.8 million in savings.
“The acquisition of Poppin, which is detailed in a separate
release issued this afternoon, provides Kimball International with
an important growth engine that fully aligns with our Connect 2.0
Strategy, designed to drive increased long-term revenue growth. It
represents an important step toward realizing our long-term vision
to create a leading omnichannel commercial furnishings design
powerhouse supported by a robust manufacturing and sourcing
infrastructure. Specifically, Poppin greatly accelerates our
eBusiness strategy, bringing a digitally native platform that we
can leverage across our portfolio of brands. Additionally, we will
see near-term opportunities to adapt Poppin’s proprietary products
to our target verticals, to develop a complementary Poppin Pro
dealer program, and to scale Poppin’s playbook into secondary
markets, where Kimball International has long-standing
relationships.”
Overview
First Quarter Fiscal 2021 Results
Consolidated net sales were $147.9 million, down 27% from $201.5
million in the year ago quarter. Gross margin expanded by 50 basis
points to 35.4% driven by cost savings from our 2021 transformation
program. Selling and administrative expenses of $41.7 million
declined $9.2 million compared to the prior year, and now account
for 28.2% of net sales, compared to 25.2% in the same quarter a
year ago. Adjusted selling and administrative (S&A) expenses
were $40.8 million or 27.6% of net sales, compared to $50.7 million
or 25.2% of net sales in last year’s first quarter. Savings from
our transformation program led the decline in overall S&A
spending. Net income decreased 53% to $5.4 million, and GAAP
earnings per diluted share were $0.14, compared to $0.31 reported
in the fiscal 2020 first quarter. Adjusted earnings per share,
which excludes restructuring charges, decreased 43% to $0.23,
compared to $0.40 last year. Adjusted EBITDA decreased 34% to $15.8
million, and adjusted EBITDA margin declined 110 basis points to
10.7%.
The Company ended the first quarter in a strong financial
position, with $116.5 million in cash and short-term investments
and minimal debt providing the resources to fund our acquisition of
Poppin along with investing to support future growth.
Net Sales
by End Market |
|
Three Months Ended |
|
|
(Unaudited) |
September 30, |
|
|
(Amounts in Millions) |
2020 |
|
2019 |
|
% Change |
Workplace |
$ |
95.3 |
|
|
$ |
125.8 |
|
|
(24%) |
Health |
20.6 |
|
|
28.9 |
|
|
(29%) |
Hospitality |
32.0 |
|
|
46.8 |
|
|
(32%) |
Total Net Sales |
$ |
147.9 |
|
|
$ |
201.5 |
|
|
(27%) |
Summary and Outlook
“While our first quarter results reflect the challenges our
customers and industry are facing in light of the COVID-19
pandemic, Kimball International is positioning itself financially
and structurally to thrive in the new environment. Our
sustained profitability and strong financial position have enabled
us to move forward with the Poppin acquisition, while maintaining
our capital allocation priorities, which include: continuing to
invest organically and through complementary acquisitions along
with maintaining our dividend and resuming our share repurchase
program during the second quarter fiscal year 2021.
“While we have experienced a recent pickup in order rates, we
remain cautious in our outlook, anticipating a period of subdued
activity before a resumption of growth. We ended the first fiscal
quarter with $139.5 million in backlog, of which approximately $70
million is scheduled to ship in the second quarter of fiscal year
2021. Excluding any benefit from the Poppin acquisition, we
anticipate that the year-over-year second quarter fiscal year 2021
revenue decline will be similar compared to the year-over-year
percentage decline we experienced in the first quarter of this
year.
“Our Connect 2.0 strategy together with the Poppin acquisition
give us great confidence in our ability to achieve significant
long-term revenue growth, and we have identified multiple levers to
drive meaningful revenue synergies and long term value creation,”
Ms. Juster concluded.
Non-GAAP Financial Measures
This press release contains non-GAAP financial measures. A
non-GAAP financial measure is a numerical measure of a company’s
financial performance that excludes amounts so as to be different
than the most directly comparable measure calculated and presented
in accordance with Generally Accepted Accounting Principles
(“GAAP”) in the United States in the statements of income,
statements of comprehensive income, balance sheets, or statements
of cash flows of the Company. The non-GAAP financial measures used
within this release are (1) adjusted selling and administrative
expense; (2) adjusted EBITDA; (3) adjusted operating income; (4)
adjusted net income; and (5) adjusted diluted earnings per share.
Adjusted operating income, adjusted net income, and adjusted
diluted earnings per share each exclude restructuring expense and
CEO transition costs from the GAAP income measure. Adjusted selling
and administrative expense excludes market value adjustments
related to the SERP liability and CEO transition costs from the
GAAP income measure. Additionally, adjusted operating income
excludes market value adjustments related to the SERP liability.
Adjusted EBITDA is defined as earnings before interest, income
taxes, depreciation expense, amortization expense, restructuring
expense, and CEO transition costs. A reconciliation of the reported
GAAP numbers to the non-GAAP financial measures is included in the
Reconciliation of Non-GAAP Financial Measures table below.
Management believes that Adjusted EBITDA and other metrics
excluding restructuring expense, CEO transition expenses, and
market value adjustments related to the SERP liability are useful
measurements to assist investors in comparing our performance over
various reporting periods on a consistent basis by removing from
operating results the impact of items that do not reflect our core
operating performance.
The orders received metric is a key performance indicator used
to evaluate general sales trends and develop future operating
plans. Orders received represent firm orders placed by our
customers during the current quarter which are expected to be
recognized as revenue during current or future quarters. The orders
received metric is not intended to be presented as an alternative
measure of revenue recognized in accordance with GAAP.
Forward-Looking Statements
This document may contain certain forward-looking statements
about the Company and Poppin, Inc. ("Poppin"), such as discussions
of Company’s and Poppin’s pricing trends, liquidity, new business
results, expansion plans, anticipated expenses and planned
schedules. The Company intends such forward-looking statements to
be covered by the safe harbor provisions for forward-looking
statements contained in the Private Securities Litigation Reform
Act of 1995. These statements generally can be identified by the
use of words or phrases, including, but not limited to, “intend,”
“anticipate,” “believe,” “estimate,” “project,” “target,” “plan,”
“expect,” “setting up,” “beginning to,” “will,” “should,” “would,”
“resume” or similar statements. We caution that forward-looking
statements are subject to known and unknown risks and uncertainties
that may cause the Company’s or Poppin’s actual future
results and performance to differ materially from expected results
including, but not limited to, the possibility that any of
the anticipated benefits of the proposed transaction between the
Company and Poppin will not be realized or will not be realized
within the expected time period; the risk that integration of the
operations of Poppin with the Company will be materially delayed or
will be more costly or difficult than expected; the inability to
complete the proposed transaction due to the failure to obtain any
required stockholder approval; the failure to satisfy other
conditions to completion of the proposed transaction, including
receipt of required regulatory and other approvals; the failure of
the proposed transaction to close for any other reason; the effect
of the announcement of the transaction, including on customer
relationships and operating results; the possibility that the
transaction may be more expensive to complete than anticipated,
including as a result of unexpected factors or events; the risk
that any projections or guidance by the Company or Poppin,
including revenues, margins, earnings, or any other financial
results are not realized; adverse changes in global economic
conditions; successful execution of Phase 2 of the Company
restructuring plan; the impact on the Company or Poppin of changes
in tariffs; increased global competition; significant reduction in
customer order patterns; loss of key suppliers; loss of or
significant volume reductions from key contract customers;
financial stability of key customers and suppliers; relationships
with strategic customers and product distributors; availability or
cost of raw materials and components; changes in the regulatory
environment; global health concerns (including the impact of the
COVID-19 outbreak); or similar unforeseen events. Additional
cautionary statements regarding other risk factors that could have
an effect on the future performance of the Company are contained in
the Company’s Form 10-K filing for the fiscal year ended
June 30, 2020 and other filings with the Securities and
Exchange Commission.
Conference
Call / Webcast |
|
|
Date: |
November 4, 2020 |
Time: |
5:00 PM Eastern Time |
Dial-In #: |
844-602-5643 (International
Calls - 574-990-3014) |
Pass Code: |
Kimball |
A webcast of the live conference call may be accessed by
visiting Kimball International’s Investor Relations website at
www.ir.kimballinternational.com.
For those unable to participate in the live webcast, the call
will be archived at www.ir.kimballinternational.com within two
hours of the conclusion of the live call.
About Kimball International, Inc.
For 70 years, Kimball International has created design driven
furnishings that have helped our customers shape spaces into
places, bringing possibility to life by enabling collaboration,
discovery, wellness and relaxation. We go to market through our
family of brands: Kimball, National, Interwoven, Etc., Kimball
Hospitality, and D’style by Kimball Hospitality. Our values and
high integrity are demonstrated daily by living our Purpose and
Guiding Principles that establish us as an employer of choice. We
build success by growing long-term relationships with customers,
employees, suppliers, shareholders, and the communities in which we
operate. In fiscal year 2020, the company generated $728 million in
revenue and employed over 2,800 people. To learn more about Kimball
International, Inc. (KBAL), visit www.kimballinternational.com.
Financial highlights for the first quarter ended
September 30, 2020 are as follows:
Condensed Consolidated
Statements of Income |
|
|
|
|
|
|
|
|
(Unaudited) |
|
Three Months Ended |
(Amounts in Thousands, except
per share data) |
|
September 30, 2020 |
|
September 30, 2019 |
Net Sales |
|
$ |
147,944 |
|
|
100.0 |
% |
|
$ |
201,452 |
|
|
100.0 |
% |
Cost of Sales |
|
95,586 |
|
|
64.6 |
% |
|
131,082 |
|
|
65.1 |
% |
Gross Profit |
|
52,358 |
|
|
35.4 |
% |
|
70,370 |
|
|
34.9 |
% |
Selling and Administrative
Expenses |
|
41,689 |
|
|
28.2 |
% |
|
50,914 |
|
|
25.2 |
% |
Restructuring Expense |
|
4,240 |
|
|
2.9 |
% |
|
4,350 |
|
|
2.2 |
% |
Operating Income |
|
6,429 |
|
|
4.3 |
% |
|
15,106 |
|
|
7.5 |
% |
Other Income, net |
|
817 |
|
|
0.6 |
% |
|
585 |
|
|
0.3 |
% |
Income Before Taxes on
Income |
|
7,246 |
|
|
4.9 |
% |
|
15,691 |
|
|
7.8 |
% |
Provision for Income
Taxes |
|
1,860 |
|
|
1.3 |
% |
|
4,307 |
|
|
2.1 |
% |
Net Income |
|
$ |
5,386 |
|
|
3.6 |
% |
|
$ |
11,384 |
|
|
5.7 |
% |
|
|
|
|
|
|
|
|
|
Earnings Per Share of Common
Stock: |
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.15 |
|
|
|
|
$ |
0.31 |
|
|
|
Diluted |
|
$ |
0.14 |
|
|
|
|
$ |
0.31 |
|
|
|
|
|
|
|
|
|
|
|
|
Average Number of Total Shares
Outstanding: |
|
|
|
|
|
|
|
|
Basic |
|
36,974 |
|
|
|
|
36,937 |
|
|
|
Diluted |
|
37,220 |
|
|
|
|
37,247 |
|
|
|
|
(Unaudited) |
|
|
|
|
|
|
Condensed Consolidated
Balance Sheets |
September 30, |
|
June 30, |
(Amounts in Thousands) |
2020 |
|
2020 |
ASSETS |
|
|
|
Cash and cash equivalents |
$ |
102,931 |
|
|
$ |
91,798 |
|
Short-term investments |
13,519 |
|
|
5,294 |
|
Receivables, net |
51,208 |
|
|
68,365 |
|
Inventories |
42,145 |
|
|
49,857 |
|
Prepaid expenses and other current assets |
14,772 |
|
|
16,869 |
|
Assets held for sale |
0 |
|
|
215 |
|
Property and Equipment, net |
90,341 |
|
|
92,041 |
|
Right of use operating lease assets |
15,325 |
|
|
16,461 |
|
Goodwill |
11,160 |
|
|
11,160 |
|
Other Intangible Assets, net |
14,870 |
|
|
13,949 |
|
Deferred Tax Assets |
8,454 |
|
|
7,485 |
|
Other Assets |
12,998 |
|
|
12,773 |
|
Total Assets |
$ |
377,723 |
|
|
$ |
386,267 |
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS’ EQUITY |
|
|
|
Current maturities of long-term debt |
$ |
30 |
|
|
$ |
27 |
|
Accounts payable |
36,553 |
|
|
40,229 |
|
Customer deposits |
21,724 |
|
|
19,649 |
|
Current portion of operating lease liability |
4,873 |
|
|
4,886 |
|
Dividends payable |
3,506 |
|
|
3,454 |
|
Accrued expenses |
32,096 |
|
|
41,076 |
|
Long-term debt, less current maturities |
79 |
|
|
109 |
|
Long-term operating lease liability |
15,416 |
|
|
16,610 |
|
Other |
15,753 |
|
|
15,431 |
|
Shareholders’ Equity |
247,693 |
|
|
244,796 |
|
Total Liabilities and Shareholders’ Equity |
$ |
377,723 |
|
|
$ |
386,267 |
|
|
|
|
|
|
|
|
|
Condensed Consolidated
Statements of Cash Flows |
Three Months Ended |
(Unaudited) |
September 30, |
(Amounts in Thousands) |
2020 |
|
2019 |
Net Cash Flow provided by Operating Activities |
$ |
26,959 |
|
|
$ |
11,056 |
|
Net Cash Flow used for
Investing Activities |
(12,248 |
) |
|
(510 |
) |
Net Cash Flow used for
Financing Activities |
(3,578 |
) |
|
(3,806 |
) |
Net Increase in Cash, Cash
Equivalents, and Restricted Cash |
11,133 |
|
|
6,740 |
|
Cash, Cash Equivalents, and
Restricted Cash at Beginning of Period |
92,444 |
|
|
73,837 |
|
Cash, Cash Equivalents, and
Restricted Cash at End of Period |
$ |
103,577 |
|
|
$ |
80,577 |
|
Orders
Received by End Market |
|
Three Months Ended |
|
|
(Unaudited) |
September 30, |
|
|
(Amounts in Millions) |
2020 |
|
2019 |
|
% Change |
Workplace * |
$ |
79.5 |
|
|
$ |
117.7 |
|
|
(32%) |
Health |
22.3 |
|
|
29.6 |
|
|
(25%) |
Hospitality |
38.1 |
|
|
43.0 |
|
|
(11%) |
Total Orders |
$ |
139.9 |
|
|
$ |
190.3 |
|
|
(26%) |
|
|
|
|
|
|
|
|
|
|
|
* Workplace end
market includes education, government, commercial, and financial
vertical markets |
Supplementary
Information |
|
|
|
Components of Other
Income (Expense), net |
Three Months Ended |
(Unaudited) |
September 30, |
(Amounts in Thousands) |
2020 |
|
2019 |
Interest Income |
$ |
102 |
|
|
$ |
607 |
|
Interest Expense |
(28 |
) |
|
(23 |
) |
Gain on Supplemental Employee
Retirement Plan Investments |
758 |
|
|
58 |
|
Other Non-Operating
Expense |
(15 |
) |
|
(57 |
) |
Other Income, net |
$ |
817 |
|
|
$ |
585 |
|
Reconciliation of Non-GAAP Financial
Measures(Unaudited)(Amounts in Thousands, except per share
data) |
|
|
Adjusted
Selling and Administrative Expense |
|
Three Months Ended |
|
September 30, |
|
2020 |
|
2019 |
Selling and Administrative Expense, as reported |
$ |
41,689 |
|
|
|
$ |
50,914 |
|
|
Less: Pre-tax Expense
Adjustment to SERP Liability |
(758 |
) |
|
|
(58 |
) |
|
Less: Pre-tax CEO Transition
Costs |
(141 |
) |
|
|
(175 |
) |
|
Adjusted Selling and
Administrative Expense |
$ |
40,790 |
|
|
|
$ |
50,681 |
|
|
Adjusted Selling and
Administrative Expense % |
27.6 |
|
% |
|
25.2 |
|
% |
|
|
|
|
Adjusted
Operating Income |
|
Three Months Ended |
|
September 30, |
|
2020 |
|
2019 |
Operating Income, as
reported |
$ |
6,429 |
|
|
|
$ |
15,106 |
|
|
Add: Pre-tax Restructuring
Expense |
4,240 |
|
|
|
4,350 |
|
|
Add: Pre-tax Expense
Adjustment to SERP Liability |
758 |
|
|
|
58 |
|
|
Add: Pre-tax CEO Transition
Costs |
141 |
|
|
|
175 |
|
|
Adjusted Operating Income |
$ |
11,568 |
|
|
|
$ |
19,689 |
|
|
Adjusted Operating Income
% |
7.8 |
|
% |
|
9.8 |
|
% |
|
|
|
|
Adjusted
Net Income |
|
Three Months Ended |
|
September 30, |
|
2020 |
|
2019 |
Net Income, as reported |
$ |
5,386 |
|
|
|
$ |
11,384 |
|
|
Pre-tax CEO Transition
Costs |
141 |
|
|
|
175 |
|
|
Tax on CEO Transition
Costs |
(36 |
) |
|
|
(45 |
) |
|
Add: After-tax CEO Transition Costs |
105 |
|
|
|
130 |
|
|
Pre-tax Restructuring
Expense |
4,240 |
|
|
|
4,350 |
|
|
Tax on Restructuring
Expense |
(1,092 |
) |
|
|
(1,120 |
) |
|
Add: After-tax Restructuring Expense |
3,148 |
|
|
|
3,230 |
|
|
Adjusted Net Income |
$ |
8,639 |
|
|
|
$ |
14,744 |
|
|
|
|
|
|
Adjusted
Diluted Earnings Per Share |
|
Three Months Ended |
|
September 30, |
|
2020 |
|
2019 |
Diluted Earnings Per Share, as
reported |
$ |
0.14 |
|
|
|
$ |
0.31 |
|
|
Add: After-tax CEO Transition
Costs |
0.00 |
|
|
|
0.01 |
|
|
Add: After-tax Restructuring
Expense |
0.09 |
|
|
|
0.08 |
|
|
Adjusted Diluted Earnings Per
Share |
$ |
0.23 |
|
|
|
$ |
0.40 |
|
|
|
|
|
|
Earnings
Before Interest, Taxes, Depreciation, and Amortization excluding
Restructuring Expense and CEO Transition Costs (“Adjusted
EBITDA”) |
|
Three Months Ended |
|
September 30, |
|
2020 |
|
2019 |
Net Income |
$ |
5,386 |
|
|
|
$ |
11,384 |
|
|
Provision for Income
Taxes |
1,860 |
|
|
|
4,307 |
|
|
Income Before Taxes on
Income |
7,246 |
|
|
|
15,691 |
|
|
Interest Expense |
28 |
|
|
|
23 |
|
|
Interest Income |
(102 |
) |
|
|
(607 |
) |
|
Depreciation |
3,592 |
|
|
|
3,610 |
|
|
Amortization |
653 |
|
|
|
521 |
|
|
Pre-tax CEO Transition
Costs |
141 |
|
|
|
175 |
|
|
Pre-tax Restructuring
Expense |
4,240 |
|
|
|
4,350 |
|
|
Adjusted EBITDA |
$ |
15,798 |
|
|
|
$ |
23,763 |
|
|
Adjusted EBITDA % |
10.7 |
|
% |
|
11.8 |
|
% |
|
|
|
|
|
|
|
|
Investor Contacts: Lynn Morgen
lynn.morgen@advisiry.com Eric Prouty eric.prouty@advisiry.com
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