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Kimball International, Inc. (KBALB)
F4Q2013 Earnings Call
August 1, 2013 11:00 am ET
Jim Thyen - President & CEO
Bob Schneider - EVP & CFO
Josh Borstein - Longbow Research
Todd Schwartzman - Sidoti & Co
Previous Statements by KBALB
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» Kimball International F4Q09 (Qtr End 6/30/09) Earnings Transcript
As with prior conference calls, today's call, August 1, 2013, will be recorded and may contain forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. Risk factors that may influence the outcome of forward-looking statements can be seen in the Kimball Form 10-K and today's release.
The panel for today's call is Jim Thyen, President and Chief Executive Officer of Kimball International; and Bob Schneider, Executive Vice President and Chief Financial Officer.
I would like to turn today’s call over to Mr. Jim Thyen. Mr. Thyen, you may now begin.
Thank you, Caroline. Welcome everyone to our fourth quarter conference call. Our earnings release was issued this morning on the results of our fourth quarter ended June 30, 2013. We have posted a financial summary presentation to our website to accompany this conference call. That presentation can be found on our Investor Relations website along side the webcast link. We will start with my overview comments followed by Bob’s financial review, we will then open the call to questions.
We have a strong finish to fiscal year 2013 with a 10% increase in consolidated sales and higher net earnings in the fourth quarter compared to last year, led by robust performance during the quarter in our EMS segment. As we reflect back on the past year, it was a year filled with significant accomplishments in our EMS segment. As referenced in the press release, heading into fiscal year 2013 one of our top priorities in the EMS segment was growth and continued diversification of our customer base.
We had double-digit sales growth in each of the four quarters in fiscal year 2013 when compared to the prior year quarter. The result in a 14% growth for the entire fiscal year in this segment.
As mentioned in the previous calls, our business development team has been very successful over the last couple of years in landing new customers and new programs with existing customers.
As you know, it can take several quarters for new programs to be launched and reach full production. These efforts are now reflecting in the sales growth we saw in fiscal year 2013. An encouraging fact about this sales growth is that it is very broad-based. It is not the result of a single vertical market or just a handful of customers. We experienced growth in all four of our vertical markets during the quarter.
Our package of value of durable electronics with outstanding customer service and a global footprint is resonating very well in the marketplace. The increased volume drove improved profits in this segment as we were better able to leverage our fixed costs. We also focused on improving our working capital metrics particularly our inventory metric to reduce our cash cycle days in this segment.
Despite the increased sales, our June 30th, inventory level in the EMS segment was actually down compared to June 30th of last year, resulting in a much improved production days inventory supply on hand metric of 59 days for the fourth quarter of this year compared to 66 days for the fourth quarter of last year.
We gained momentum in the EMS segment in fiscal year 2013, with our very capable management team, track record for quality and reliability, and highly integrated global footprint along with excellent process discipline, we are very encouraged about our build it to execute well in fiscal year 2014.
Within the Furniture segment, two key trade shows occurred in the fourth quarter, the Hospitality Design show in Las Vegas and the NeoCon show in Chicago. Both shows were well attended. Our product exhibits garnered a significant attention and excitement as we showcase new seating and case good products, which enhanced our already broad portfolio of offerings.
In addition, both shows affirmed very positive customer feedback on our marketing strategies, our product development and our excellent service levels.
The pace of incoming orders in the Furniture segment improved during the fourth quarter of fiscal year 2013 after a lackluster third quarter. Total Furniture segment fourth quarter new orders were up 15% compared to last year with an increase in all furniture verticals except for the federal government. While orders received from the federal government in the fourth quarter declined compared to last year, we did see a positive trend from the third quarter to the fourth quarter of this year as both sales to the federal government and orders received from the federal government increased.
BIFMA’s most recent outlook for office furniture growth in calendar year 2013 is forecasted at approximately 3.6%. Growth was at a slow pace in the first half of the calendar year with a more aggressive growth forecasted for the latter half of the year.
Market projections for one of the key leading indicators in the hospitality industry RevPAR or revenue per available room show an increase of approximately 6% for the calendar year 2013. This along with increased occupancy rates causes us to be bullish for this industry.