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Electronics Production | August 02, 2007

Kimball sales increased 3% in Q4

Net sales for the fourth quarter of fiscal year 2007 were $338.3 million, an increase of 3% over net sales of $328.6 million in the fourth quarter of fiscal year 2006. Fourth quarter fiscal 2007 net sales included $36.5 million of sales from an acquisition in the Company's Electronic Contract Assemblies segment that was completed in February 2007.
The fourth quarter fiscal year 2007 net sales comparison to the prior year was also impacted by a $32 million reduction in the price of finished product sold to a customer in the Electronic Contract Assemblies segment. The cost of raw material which the Company purchases from this same customer was reduced by a similar amount, and therefore, this pricing change had no impact on income from continuing operations. Additionally, the Company had no sales of contract furniture private label products during the fourth quarter of fiscal year 2007 due to a planned exit of this furniture product line, compared to $7.5 million of sales in the same quarter of the prior year. Net sales for the fourth quarter of fiscal year 2007, exclusive of the above changes, increased 4% over the fourth quarter of 2006.

Income from continuing operations in the fourth quarter of fiscal year 2007 was $4.4 million. This was a decrease of $7.1 million from income from continuing operations for the fourth quarter of the prior year of $11.5 million, of after-tax restructuring charges and after-tax income of $1.3 million, relating to funds received as part of a Polish offset credit program for investments made in the Company's Poland operation.

Consolidated gross profit as a percent of net sales was 20.4% in the current year fourth quarter compared to 20.9% in the prior year. Gross profit as a percent of net sales was down in the Furniture segment as competitive discounting in the fourth quarter of the current fiscal year on select office furniture products was greater than in the fourth quarter of last year, while product mix also shifted to lower margin product. Gross profit as a percent of net sales in the Furniture segment in the fourth quarter of fiscal year 2007 improved over the reduced percentage in the fiscal year 2007 third quarter due to leverage gained from higher volume and a change in product sales mix. Gross profit as a percent of net sales for the fourth quarter increased in the Electronic Contract Assemblies segment compared to the prior year due to the February 2007 acquisition and the customer pricing adjustment discussed above, which more than offset a shift in product sales mix to lower-margin products.

Consolidated selling, general and administrative (SG&A) costs for the fourth quarter of fiscal year 2007 increased in dollars and as a percent of net sales due to the incremental SG&A costs of the acquisition in the Electronic Contract Assemblies segment and higher investments in field sales personnel and product marketing in the Furniture segment, offset in part by a decline in incentive compensation costs driven by lower earnings.

Other income was $1.9 million in the fourth quarter of fiscal year 2007 compared to $4.6 million in the same period last year. The decline is primarily the result of the receipt of $2.2 million pre-tax funds in the prior year relating to the Polish offset credit program.

The fiscal year 2007 fourth quarter effective tax rate was 21% compared to 18% in the prior year fourth quarter. The fiscal year 2007 fourth quarter effective tax rate was favorably impacted by $0.8 million of after-tax income for adjustments to income tax accruals resulting from the closure of prior year tax audits and lower than expected state income taxes. The prior year fourth quarter effective tax rate was favorably impacted by $1.8 million of after-tax income for adjustments to income tax accruals resulting from the closure of prior year tax audits.

Operating cash flow for the fourth quarter of fiscal year 2007 was $19.8 million compared to $21.1 million in the fourth quarter of last year. The Company's net cash position from an aggregate of cash and short-term investments less short-term borrowings decreased to $80.4 million at June 30, 2007 compared to $148.6 million at June 30, 2006 primarily related to the cash outflow of $46.4 million for the acquisition completed in the fiscal year 2007 third quarter.

For fiscal year 2007, annual net sales were $1.3 billion, which is an increase of 16% over fiscal year 2006 annual sales of $1.1 billion. Acquisitions completed in the fourth quarter of fiscal year 2006 and in the third quarter of fiscal year 2007 within the Electronic Contract Assemblies segment contributed sales of $319.3 million in fiscal year 2007 and $61.5 million in fiscal year 2006. The fiscal year 2007 net sales comparison to prior year was also impacted by the previously mentioned reduction in the price of finished product sold to a customer, which also had a corresponding reduction to the cost of raw material purchased from this customer. The fiscal year 2007 annual impact of the pricing change was a reduction to both net sales and material cost of $64 million, but had no impact on income from continuing operations. Income from continuing operations for fiscal year 2007 was $23.3 million, or $0.60 per Class B diluted share, inclusive of after-tax restructuring charges of $0.9 million, or $0.02 per Class B diluted share. Fiscal year 2006 income from continuing operations was $28.6 million, or $0.75 per Class B diluted share, including after-tax restructuring charges of $2.8 million, or $0.07 per Class B diluted share. Operating cash flow for the fiscal year 2007 annual period was $44.4 million compared to $76.6 million in the prior fiscal year.
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