Kimball International, Inc. Reports Second Quarter Results

Sales decreased 4%, in line with expectations
Strong order growth of 13% driven by both Office and Hospitality
Transformation Plan cost savings of $7.1 million exceeded expectations in the quarter
Operating Income margin of 7.4%, or 8.6% on an adjusted basis, increased 220 basis points

Kimball International, Inc. (NASDAQ: KBAL) today announced results for the quarter ended December 31, 2019.

Highlights (Performance is based upon year-over-year comparison):

Second Quarter FY 2020

  • Net sales decreased 4% as expected due to both the Kimball brand realignment plan and lapping strong comps
  • Orders increased 13% driven by growth in all verticals
  • Operating income margin of 7.4%, or 8.6% on an adjusted basis, increased 220 basis points driven by a 170 basis points improvement in gross margin and a 50 basis point reduction in adjusted selling and administrative expenses
  • Transformation savings of $7.1 million realized during the quarter, exceeded expectations
  • Net income of $11.0 million, increased 17%
  • Adjusted EBITDA of $20.9 million, increased 23%, and adjusted EBITDA margin of 10.9%, increased 240 basis points
  • Diluted EPS of $0.30, or $0.33 on an adjusted basis, an increase of 27% compared to $0.26 a year ago

Kimball International CEO Kristie Juster commented, “We continued to exceed expectations in delivery of our transformation savings, resulting in a significant improvement in earnings again this quarter. This delivery of savings increases our confidence in our plan enabling us to increase to our projected full-year savings from $16.0 million to $21.0 million for fiscal year 2020. I am very proud of the organization’s flexibility in embracing this new way of working. The execution of this transformation plan and our recently announced plans to centralize our manufacturing operations pave the way forward for both improved profit and increased investment for growth.”

Ms. Juster continued, “Our sales performance this quarter was in line with our expectations but below our overall expected organic growth rate of 4% to 7%. I am very encouraged by our 13% order growth in the quarter across all verticals. The increase in our order backlog positions us very well for a strong second half of our fiscal year.”

  • Consolidated net sales decreased 4% due to the impact of Kimball brand realignment to higher growth markets and extremely strong comps from our three focused verticals which had growth in the prior year of: Commercial +29%, Hospitality +16%, and Healthcare +20%.
  • Orders during the quarter increased a strong 13%. All verticals reported orders growth in the quarter with hospitality leading at 31%. The growth within the hospitality vertical was attributable to the strong Las Vegas market.  The healthcare vertical grew 10% following 22% growth in the prior year driven by the Kimball brand’s continued investment and strategic shift to this higher growth vertical.
  • Sales of new office products, defined as those introduced in the last three years, continued to excel representing approximately 29% of total office sales compared to 27% in the prior year period and an increase of 2%. The National brand had new product growth of 28% with much of this focused on ancillary products.
  • Gross profit margin of 34.0% increased 170 basis points from the prior year. Increases in product pricing and the savings realized from our transformation plan were partially offset by the loss of operating leverage on lower sales volumes and higher employee healthcare expenses.
  • Selling and administrative expenses of $49.7 million declined $1.8 million compared to the prior year, but increased 30 basis points to 25.9% of net sales. Lower costs during the quarter compared to the prior year included the benefit from the transformation plan of $3.3 million and lower sales commissions of $1.0 million, partially offset by higher Supplemental Employee Retirement Plan expense of $1.8 million and higher healthcare expenses of $0.7 million. On an adjusted basis, selling and administrative dollars were down 50 basis points year over year. The reduction in selling and administrative expenses was achieved while investing $1.8 million in growth initiatives related to our Kimball International Connect strategy. As we gain more confidence in the execution of our transformation savings, we will continue to ramp our growth investments.
  • Restructuring expenses of $1.4 million were incurred related to the continuing execution of our transformation plan, primarily for employee transition costs and lease-related charges. Total estimated restructuring expenses for the transformation plan are expected to be between $9.0 to $10.0 million for the fiscal year.
  • Our effective tax rate was 28.4% for the quarter compared to 25.6% in the prior year period. The increase was primarily driven by nondeductible expenses. We continue to expect our fiscal year tax rate to be within a range of 25% to 28%.
  • Net cash flow provided by operating activities totaled $2.3 million compared to $16.8 million in the prior year. The decrease was driven by a change in payment schedule in the annual incentive program and other working capital changes. Capital expenditures during the quarter were $6.2 million, and we returned $4.6 million to shareholders in the form of dividends and share repurchases.
  • As of December 31, 2019, the Company’s cash, cash equivalents, and short-term investments totaled $97.1 million, down $9.2 million since June 30, 2019. The fiscal year 2020 year to date decline was primarily due to capital expenditures of $13.5 million and the return of $7.6 million in capital to shareholders, including $6.3 million in dividends and $1.3 million in stock repurchases, which more than offset the $13.4 million in cash flows from operations.

Fiscal Year 2020 – 2022 Financial Targets

  • Organic sales growth: 4% to 7% CAGR
  • Adjusted EBITDA: 150 to 250 basis points improvement
  • Adjusted EPS: 10% to 15% CAGR

The full text of Kimball International’s 2Q20 earnings release, including all tables, and an archived replay of the company’s Feb. 5 conference call may be accessed at,

About Kimball International, Inc.

For over 65 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, Kimball Hospitality, David Edward, 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 2019, the Company generated $768 million in revenue and employed over 3,000 people. To learn more about Kimball International, Inc. (KBAL), visit