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Electronics Production | November 06, 2008

Kimball with slight increase in net sales for fiscal 1Q/2009

Kimball's Electronic Manufacturing Services Segment reported net sales of $182.9 million for the first quarter of the companies fiscal year 2009. That represents a 3% increase to the 1Q in fiscal 2008 with $178.0 million.
Net sales to customers in the medical and public safety industries were higher in the first quarter of fiscal year 2009 compared to last year while net sales to customers in the automotive and industrial control industries declined compared to the prior year.

Results of operations in this segment in the fiscal year 2009 first quarter were negatively impacted by excess capacity costs, labor inefficiencies at select locations, and anticipated inefficiencies resulting from the execution of the European consolidation restructuring activities as significant activity occurred in the first quarter to move production from the Company's Longford, Ireland facility to its Poland facility. This initial stage of the overall European consolidation plan is expected to be complete in the Company's fiscal year 2009 second quarter. In addition, contractual customer price reductions on select products went into effect late in fiscal year 2008 which lowered gross margin in the current quarter.

First quarter fiscal year 2009 SG&A costs in this segment declined 17% compared to the prior year primarily related to lower incentive compensation costs and the benefits realized from restructuring activities.

The prior year first quarter included pre-tax income of $1.3 million (or $0.7 million after-tax) relating to funds received as part of a Polish offset credit program for investments made in its Poland operation.

In September 2008, the Company acquired the assets and certain liabilities of Genesis Electronics Manufacturing, located in Tampa, Florida for $5.4 million. The acquisition is being integrated into the Company's EMS segment by consolidating the acquired facility into the Company's current Tampa facility. The acquisition's results of operations are included in the Company's financial statements subsequent to the acquisition date and were immaterial to the Company's first quarter fiscal year 2009 results.

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