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Electronics Production | May 06, 2010

Sales in the EMS segment increased for Kimball

Net sales in the third quarter of fiscal year 2010 increased 35% in the Electronic Manufacturing Services segment while net sales in the Furniture segment declined 28% when compared with the prior year third quarter.
Sequentially, consolidated net sales in the third quarter of fiscal year 2010 increased 3% over the most recent second quarter as a 14% increase in net sales in the EMS segment was largely offset by a 15% reduction in net
sales in the Furniture segment. With the sales mix changes, the EMS segment represented 67% of consolidated net sales in the third quarter of fiscal year 2010 compared to 52% in the same quarter of the prior year.

Third quarter gross profit as a percent of net sales declined in comparison to the prior year primarily due to the sales mix shift toward the EMS segment which operates at a lower gross profit percentage than the Furniture segment. At the segment level, margin improvement in the EMS segment was partially offset by a decline in gross profit as a percent of net sales in the Furniture segment.

Consolidated third quarter selling and administrative expenses increased 2% compared to the prior year primarily due to increased incentive compensation costs at select business units, higher severance costs due to scaling operations and the reinstatement of the Company's retirement plan contribution for
fiscal year 2010. These costs were partially offset by lower employee salary compensation realized from the salary reduction plan implemented by the Company late in the third quarter of fiscal year 2009 along with lower bad debt expense.

Other General Income in the third quarter of fiscal year 2010 included a $6.7 million pre-tax gain from the sale of the
Company's land and facility that houses its current Poznan, Poland operation. The Company is leasing back a portion of the facility until it completes the transfer of production to its
newly constructed facility in Poznan.

O perating cash flow for the third quarter of fiscal year 2010 was a cash outflow of $6.7 million compared to a cash inflow of $23.7 million in the third quarter of the prior year.

T he Company's net cash position, an aggregate of cash and short-term investments less short-term borrowings, declined to $57.1 million at March 31, 2010 compared to $88.6 million at June 30, 2009 primarily due to an increase in working capital to support increased EMS segment sales.

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