Kimball International, Inc. Reports First Quarter 2021 Results
Kimball International (NASDAQ: KBAL) reported a 27% drop in net sales for Q1 FY 2021, totaling $147.9 million. Despite lower revenues, gross margin improved by 50 basis points to 35.4%, thanks to cost-saving initiatives. Net income fell 53% to $5.4 million, while adjusted EBITDA decreased 34% to $15.8 million. The company ended with a backlog of $139.5 million and is on track with a $20 million cost savings program. Kimball is resuming its share repurchase program and has signed an agreement to acquire Poppin, aligning with its growth strategy.
- Gross margin improvement of 50 basis points to 35.4% despite lower sales.
- 15% sequential increase in order rates.
- $20 million annual cost savings program on track with $4.8 million realized so far.
- Strong financial position with $116.5 million in cash and minimal debt.
- Resuming share repurchase program.
- Net sales decreased 27%, from $201.5 million to $147.9 million.
- Net income decreased 53% year-over-year.
- Adjusted EBITDA decreased 34%, and adjusted EBITDA margin declined by 110 basis points.
--Cost Savings Drive Sequential and Year-over-Year Gross Margin Improvement Amid Lower Sales--
--Launches Interwoven Brand to Drive Market Share Gains in Key Health End Market--
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--Resuming Share Repurchase Program--
Announces Definitive Agreement to Acquire Poppin, Inc., Fast Growing, Digitally-Enabled Commercial Furniture Company
JASPER, Ind., Nov. 04, 2020 (GLOBE NEWSWIRE) -- 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% , or7.8% on an adjusted basis - Net income of
$5.4 million , decreased53% - Adjusted EBITDA of
$15.8 million , decreased34% , and adjusted EBITDA margin of10.7% decreased 110 basis points on lower volume - Diluted EPS of
$0.14 , or$0.23 on an adjusted basis, a decrease of43% 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
“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
“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
The Company ended the first quarter in a strong financial position, with
| Net Sales by End Market | |||||||||
| Three Months Ended | |||||||||
| (Unaudited) | September 30, | ||||||||
| (Amounts in Millions) | 2020 | 2019 | % Change | ||||||
| Workplace | $ | 95.3 | $ | 125.8 | ( | ||||
| Health | 20.6 | 28.9 | ( | ||||||
| Hospitality | 32.0 | 46.8 | ( | ||||||
| Total Net Sales | $ | 147.9 | $ | 201.5 | ( | ||||
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
“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
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 | ( | ||||
| Health | 22.3 | 29.6 | ( | ||||||
| Hospitality | 38.1 | 43.0 | ( | ||||||
| Total Orders | $ | 139.9 | $ | 190.3 | ( | ||||
| * 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
FAQ
What were Kimball International's net sales for Q1 FY 2021?
How did Kimball International's gross margin change in Q1 FY 2021?
What is Kimball International's plan for cost savings?
What is the status of Kimball International's acquisition of Poppin?
What was the net income for Kimball International in Q1 FY 2021?
