KIMBALL INTERNATIONAL INC - Quarter Report: 2009 September (Form 10-Q)

Amortization expense related to other intangible assets was, in thousands, $629 and $1,671 during the three-month periods ended September 30, 2009 and 2008, respectively. Amortization expense in future periods is expected to be, in thousands, $1,800 for the remainder of fiscal year 2010, and $2,048, $1,810, $1,474, and $1,110 in the four years ending June 30, 2014, and $1,269 thereafter. The amortization period for product rights is 7 years. The amortization periods for customer relationship intangible assets range from 10 to 16 years.  The estimated useful life of internal-use software ranges from 3 to 10 years.

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Internal-use software is stated at cost less accumulated amortization and is amortized using the straight-line method. During the software application development stage, capitalized costs include external consulting costs, cost of software licenses, and internal payroll and payroll-related costs for employees who are directly associated with a software project. Upgrades and enhancements are capitalized if they result in added functionality which enable the software to perform tasks it was previously incapable of performing. Software maintenance, training, data conversion, and business process reengineering costs are expensed in the period in which they are incurred. 

Product rights to produce and sell certain products are amortized on a straight-line basis over their estimated useful lives, and capitalized customer relationships are amortized based on the estimated attrition rate of customers. The Company has no intangible assets with indefinite useful lives which are not subject to amortization. 

The Company recognized consolidated pre-tax restructuring expense of $0.5 million and $1.0 million in the three months ended September 30, 2009 and 2008, respectively. The action discussed below represents the majority of the restructuring costs during the period presented in the summary table on the following page. Former restructuring plans that are substantially complete and did not have significant expense during the period presented are included in the summary table on the following page under the caption Other Restructuring Plans and include the Furniture segment Office Furniture Manufacturing Consolidation Plan and the Unallocated Corporate Gaylord restructuring plan.

The Company utilizes available market prices and management estimates to determine the fair value of impaired fixed assets. Restructuring charges are included in the Restructuring Expense line item on the Company's Condensed Consolidated Statements of Income.

European Consolidation Plan:

During the fourth quarter of fiscal year 2008, the Company approved a plan to expand its European automotive electronics capabilities and to establish a European Medical Center of Expertise in Poznan, Poland. The Company presently has an operation in Poznan. The Company successfully completed the move of production from Longford, Ireland, into the existing Poznan facility during the fiscal year 2009 second quarter. As part of the plan, the Company is also consolidating its EMS facilities located in Bridgend, Wales, and Poznan, Poland, into a new larger facility in Poznan, which is expected to improve the Company's margins in the very competitive EMS market. Construction of the new, larger facility in Poland is complete and limited production has begun. The Company intends to sell the existing Poland facility and real estate. The plan is being executed in stages with a projected final completion date of December 2011. The Company currently estimates that the pre-tax charges related to the consolidation activities will be approximately, in millions, $20.3 consisting of $18.9 of severance and other employee costs, $0.3 of property and equipment asset impairment, $0.7 of lease exit costs, and $0.4 of other exit costs.

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Note 7. Fair Value of Financial Assets and Liabilities

The Company categorizes assets and liabilities measured at fair value into three levels based upon the assumptions (inputs) used to price the assets or liabilities.  Level 1 provides the most reliable measure of fair value, whereas level 3 generally requires significant management judgment.  The three levels are defined as follows:

Level 1:  Unadjusted quoted prices in active markets for identical assets and liabilities.

Level 2:  Observable inputs other than those included in level 1.  For example, quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in inactive markets.

Level 3:  Unobservable inputs reflecting management's own assumptions about the inputs used in pricing the asset or liability.

There were no changes in the Company's valuation techniques used to measure fair values compared to those disclosed in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2009.

Recurring Fair Value Measurements:

As of September 30, 2009 and June 30, 2009, the fair values of financial assets and liabilities that are measured at fair value on a recurring basis using the market approach are categorized as follows:

	September 30, 2009
(Amounts in Thousands)	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents	$56,620		$       -0-		$     -0-		$56,620
Available-for-sale securities: Municipal Securities	-0-		24,443		-0-		24,443
Derivatives	-0-		824		-0-		824
Nonqualified supplemental employee retirement plan assets	12,702		-0-		-0-		12,702
Total assets at fair value	$69,322		$25,267		$     -0-		$94,589
Liabilities
Derivatives	$       -0-		$ 2,227		$     -0-		$ 2,227
Total liabilities at fair value	$       -0-		$ 2,227		$     -0-		$ 2,227

 

	June 30, 2009
(Amounts in Thousands)	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents	$42,114		$       -0-		$     -0-		$42,114
Available-for-sale securities: Municipal Securities	-0-		25,376		-0-		25,376
Derivatives	-0-		784		-0-		784
Nonqualified supplemental employee retirement plan assets	10,992		-0-		-0-		10,992
Total assets at fair value	$53,106		$26,160		$     -0-		$79,266
Liabilities
Derivatives	$       -0-		$  3,407		$     -0-		$  3,407
Total liabilities at fair value	$       -0-		$  3,407		$     -0-		$  3,407

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Non-Recurring Fair Value Measurements:

During the quarter ended September 30, 2009, the Company had no fair value adjustments applicable to items that are subject to non-recurring fair value measurement after the initial measurement date.

Disclosure of Other Financial Instruments:

Other financial instruments that are not reflected in the Condensed Consolidated Balance Sheets at fair value have carrying amounts that approximate fair value as follows:

Assets		Liabilities
Certain cash and cash equivalents		Accounts payable
Receivables		Borrowings under credit facilities
Other assets not recorded at fair value		Dividends payable
		Accrued expenses

The fair value estimate for long-term debt, excluding capital leases, was estimated using a discounted cash flow analysis based on quoted long-term debt market rates adjusted for the Company's non-performance risk. There was an immaterial difference between the carrying value and estimated fair value of long-term debt as of September 30, 2009 and June 30, 2009.

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Note 8.  Derivative Instruments

The Company operates internationally and is therefore exposed to foreign currency exchange rate fluctuations in the normal course of its business. The Company's primary means of managing this exposure is to utilize natural hedges, such as aligning currencies used in the supply chain with the sale currency. To the extent natural hedging techniques do not fully offset currency risk, the Company uses derivative instruments with the objective of reducing the residual exposure to certain foreign currency rate movements. Factors considered in the decision to hedge an underlying market exposure include the materiality of the risk, the volatility of the market, the duration of the hedge, the degree to which the underlying exposure is committed to, and the availability, effectiveness, and cost of derivative instruments. Derivative instruments are only utilized for risk management purposes and are not used for speculative or trading purposes.

The Company uses forward contracts designated as cash flow hedges to protect against foreign currency exchange rate risks inherent in forecasted transactions denominated in a foreign currency. As of September 30, 2009, the Company had outstanding foreign currency forward contracts to hedge currencies against the U.S. dollar in the aggregate notional amount of $9.8 million and to hedge currencies against the Euro in the aggregate notional amount of 27.0 million EUR. The notional amount is an indicator of the volume of derivative activities but is not an indicator of the potential gain or loss on the derivatives.

In limited cases due to unexpected changes in forecasted transactions, cash flow hedges may cease to meet the criteria to be designated as cash flow hedges. Depending on the type of exposure hedged, the Company may either purchase a forward contract in the opposite position of the undesignated hedge or may retain the hedge until it matures if the hedge continues to provide an adequate offset in earnings against the currency revaluation impact of foreign currency denominated liabilities. 

The fair value of outstanding derivative instruments is recognized on the balance sheet as a derivative asset or liability. When derivatives are settled with the counterparty, the derivative asset or liability is relieved and cash flow is impacted for the net settlement. For derivative instruments that meet the criteria of hedging instruments under FASB guidance, the effective portions of the gain or loss on the derivative instrument are initially recorded net of related tax effect in Accumulated Other Comprehensive Income (Loss), a component of Share Owners' Equity, and are subsequently reclassified into earnings in the period or periods during which the hedged transaction is recognized in earnings. The ineffective portion of the derivative gain or loss is reported in the Non-operating income (expense) line item on the Condensed Consolidated Statements of Income immediately. The gain or loss associated with derivative instruments that cease to meet the criteria for hedging under FASB guidance is also reported in the Non-operating income (expense) line item on the Condensed Consolidated Statements of Income immediately.

Based on fair values as of September 30, 2009, the Company estimates that $6.0 million of pre-tax derivative losses deferred in Accumulated Other Comprehensive Income (Loss) will be reclassified into earnings, along with the earnings effects of related forecasted transactions, within the next 12 months. Losses on forward exchange contracts are generally offset by gains in operating costs in the income statement when the underlying hedged transaction is recognized in earnings. Because gains or losses on forward contracts fluctuate partially based on currency spot rates, the future effect on earnings of the cash flow hedges alone is not determinable, but in conjunction with the underlying hedged transactions, the result is expected to be a decline in currency risk. The maximum length of time the Company had hedged its exposure to the variability in future cash flows was 12 and 15 months as of September 30, 2009 and June 30, 2009, respectively.

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See Note 7 - Fair Value of Financial Assets and Liabilities of Notes to Condensed Consolidated Financial Statements for further information regarding the fair value of derivative assets and liabilities and Note 3 - Comprehensive Income (Loss) of Notes to Condensed Consolidated Financial Statements for the amount and changes in derivative gains and losses deferred in Accumulated Other Comprehensive Income (Loss).

Information on the location and amounts of derivative fair values in the Condensed Consolidated Balance Sheets and derivative gains and losses in the Condensed Consolidated Statements of Income are presented below.

Fair Values of Derivative Instruments on the Condensed Consolidated Balance Sheets

Asset Derivatives

Liability Derivatives

Fair Value As of

Fair Value As of

(Amounts in Thousands)

Balance Sheet Location

September 30, 2009

June 30, 2009

Balance Sheet Location

September 30, 2009

June 30, 2009

Derivatives designated as hedging instruments:

Foreign currency forward contracts

Prepaid expenses and other current assets

$  789

$   742

Accrued expenses

$      706

$   2,581

Derivatives not designated as hedging instruments:

Foreign currency forward contracts

Prepaid expenses and other current assets

35

42

Accrued expenses

1,100

631

Other liabilities (long-term)

421

195

Total derivatives

$  824

$   784

$  2,227

$   3,407

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The Effect of Derivative Instruments on Other Comprehensive Income (Loss)
						Three Months Ended September 30
(Amounts in Thousands)						2009		2008
Amount of Pre-Tax Gain or (Loss) Recognized in Other Comprehensive Income (Loss) (OCI) on Derivative (Effective Portion):
Foreign currency forward contracts						$       (315)		$           56
The Effect of Derivative Instruments on Condensed Consolidated Statements of Income
(Amounts in Thousands)
						Three Months Ended September 30
Derivatives in Cash Flow Hedging Relationships		Location of Gain or (Loss)				2009		2008
Amount of Pre-Tax Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion):
Foreign currency forward contracts		Net Sales				$           11		$         -0-
Foreign currency forward contracts		Cost of Sales				(1,216)		(707)
Foreign currency forward contracts		Non-operating income (expense)				(283)		335
Total						$    (1,488)		$       (372)
Amount of Pre-Tax Gain or (Loss) Reclassified from Accumulated OCI into Income (Ineffective Portion):
Foreign currency forward contracts		Non-operating income (expense)				$           43		$             4
Derivatives Not Designated as Hedging Instruments
Amount of Pre-Tax Gain or (Loss) Recognized in Income on Derivative:
Foreign currency forward contracts		Non-operating income (expense)				$       (837)		$         -0-
Total Derivative Pre-Tax Gain (Loss) Recognized in Income						$    (2,282)		$       (368)

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Note 9.  Short-Term Investments

The Company's short-term investment portfolio consists of available-for-sale securities which is comprised of exempt securities issued by municipalities ("Municipal Securities") which can be in the form of General Obligation Bonds, Revenue Bonds, Tax Anticipation Notes, Revenue Anticipation Notes, Bond Anticipation Notes, pre-refunded (by U.S. Govt. or State and Local Govt.) bonds, and short-term putable bonds. The Company's investment policy dictates that Municipal Securities must be investment grade quality.

Available-for-sale securities are recorded at fair value. See Note 7 - Fair Value of Financial Assets and Liabilities of Notes to Condensed Consolidated Financial Statements for more information on the fair value of available-for-sale securities. The amortized cost basis reflects the original purchase price, with discounts and premiums amortized over the life of the security. Unrealized losses on debt securities are recognized in earnings when a company has an intent to sell or is likely to be required to sell before recovery of the loss, or when the debt security has incurred a credit loss. Otherwise, unrealized gains and losses are recorded net of the tax related effect as a component of Share Owners' Equity. Municipal Securities mature within a four-year period.

There were no investments which were in an unrealized loss position as of September 30, 2009 and June 30, 2009.

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Activity for the Municipal Securities that were classified as available-for-sale was as follows:

Municipal Securities	Three Months Ended September 30
(Amounts in Thousands)	2009		2008
Proceeds from sales	$1,553		$1,658
Gross realized gains from sale of available-for-sale securities included in earnings	26		31
Gross realized losses from sale of available-for-sale securities included in earnings	-0-		-0-
Net unrealized holding gain (loss) included in Accumulated Other Comprehensive Income (Loss)	-0-		35
Net (gains) losses reclassified out of Accumulated Other Comprehensive Income (Loss)	(26)		(31)

Realized gains and losses are reported in Other Income (Expense) category of the Condensed Consolidated Statements of Income. The cost of each individual security was used in computing the realized gains and losses.

Note 10.  Assets Held for Sale

At both September 30, 2009 and June 30, 2009, in thousands, assets totaling $1,358 were classified as held for sale and consisted of $1,160 for a facility and land related to the Gaylord, Michigan, exited operation within the EMS segment and $198 for equipment related to previously held timberlands.  All of the assets were reported as unallocated corporate assets for segment reporting purposes.  The Company expects to sell these assets during the next 12 months.

Note 11. Postemployment Benefits

The Company maintains severance plans for all domestic employees. These plans provide severance benefits to eligible employees meeting the plans' qualifications, primarily involuntary termination without cause. The components of net periodic postemployment benefit cost applicable to the Company's severance plans were as follows:

	Three Months Ended
	September 30
(Amounts in Thousands)	2009		2008
Service cost	$  193		$  114
Interest cost	108		48
Amortization of prior service costs	71		71
Amortization of actuarial change	152		10
Net periodic benefit cost	$  524		$ 243

The benefit cost in the above table includes only normal recurring levels of severance activity, as estimated using an actuarial method. Unusual or non-recurring severance actions, such as those disclosed in Note 6 - Restructuring Expense of Notes to Condensed Consolidated Financial Statements, are not estimable using actuarial methods and are expensed in accordance with the applicable U.S. GAAP.

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Note 12.  Stock Compensation Plan

During the first quarter of fiscal year 2010, the following stock compensation was awarded to officers and key employees. All awards were granted under the 2003 Stock Option and Incentive Plan. For more information on performance share awards, refer to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2009.

Performance Shares		Quarter Awarded		Maximum Potential Shares Issuable		Grant Date Fair Value (3)
Annual Performance Shares - Class A (1)		1st Quarter		240,000		$ 6.24
Long-Term Performance Shares - Class A (2)		1st Quarter		726,350		$ 6.24

 

(1)	Annual performance shares were awarded to officers. Payouts will be based upon the fiscal year 2010 cash incentive payout percentages calculated under the Company's 2005 Profit Sharing Incentive Bonus Plan. The number of shares issued will be less than the maximum potential shares issuable if the maximum cash incentive payout percentages are not achieved. Annual performance shares vest after one year.
(2)	Long-term performance shares were awarded to officers and other key employees. Payouts will be based upon the cash incentive payout percentages calculated under the Company's 2005 Profit Sharing Incentive Bonus Plan. Long-term performance shares are based on five successive annual performance measurement periods, with each annual tranche having a grant date when economic profit tiers are established at the beginning of the applicable fiscal year and a vesting date at the end of each annual period. The number of shares issued will be less than the maximum potential shares issuable if the maximum cash incentive payout percentages are not achieved.
(3)	The grant date fair value of performance shares is based on the stock price at the date of the award, reduced by the present value of dividends normally paid over the vesting period which are not payable on outstanding performance share awards. The grant date fair value shown for long-term performance shares is applicable to the first tranche only.

Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations

Business Overview

Kimball International, Inc. provides a variety of products from its two business segments: the Electronic Manufacturing Services (EMS) segment and the Furniture segment. The EMS segment provides engineering and manufacturing services which utilize common production and support capabilities globally to the medical, automotive, industrial control, and public safety industries.  The Furniture segment provides furniture for the office and hospitality industries, sold under the Company's family of brand names.

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Both of the Company's segments have been adversely impacted by the weakening in the global economy. During the past twelve months, most of the markets in which the Company competes were adversely affected by the global recession and liquidity crisis. The Company experienced declining sales and order trends beginning in the second quarter of fiscal year 2009. Open orders at September 30, 2009 were 48% lower in the Furniture segment and 20% lower in the EMS segment when compared to September 30, 2008.  As compared to June 30, 2009, the September 30, 2009 open orders for the Furniture segment declined 7%, and the EMS segment open orders increased 3%.  While open orders at a point in time are not necessarily indicative of future sales, the increase in open orders from June 30, 2009 for the EMS segment is encouraging.

The EMS industry sales projections (by IDC, iSuppli, and Electronic Trend Publications) show declines in the range of 7% to 13% for calendar year 2009 and show small growth for calendar year 2010. Semiconductor sales, though, are expected to decline approximately 20% in calendar year 2009 with projected growth of 6.5% in calendar year 2010, and although the Company does not directly serve this market, it may be indicative of end market demand for products utilizing electronic components. Generally, as electronics end markets decline, EMS industry sales improve as customers outsource a greater portion of their electronics manufacturing to free up capital for design and marketing programs and to gain cost advantages. However, customers could elect to insource a greater portion of their electronics manufacturing during this economic downturn.

The Company continues its strategy of diversification within the EMS segment customer base as it currently focuses on the four key vertical markets of medical, automotive, industrial control, and public safety. Short-term demand in the automotive market improved in conjunction with the Cash for Clunkers program, but the automotive market is expected to remain depressed due to excess capacity in the U.S. and Europe.  Demand in the medical market appears to be stabilizing as the Company sees signs of growth. The industrial control vertical market is slowly recovering, and the public safety vertical market is likewise stable. Sales to customers in the medical industry are the largest portion of the Company's EMS segment with sales to customers in the automotive industry being the second largest. The Company's sales to customers in the automotive industry are diversified among more than ten domestic and foreign customers and represented approximately 29% of the EMS segment's net sales for the first quarter of fiscal year 2010. The amount of sales of electronic components that relate to General Motors, Ford, and Chrysler automobiles sold in North America were only approximately 8% of the Company's EMS segment net sales during the first quarter of fiscal year 2010.

As of August 2009, the Business and Institutional Furniture Manufacturer Association (BIFMA International) is projecting an approximate 30% year-over-year decline in the office furniture industry for calendar year 2009 and a slight year-over-year decline for calendar year 2010 with a return to positive growth expected to begin late in calendar year 2010. While the Company's mid-market brand has fared better than its contract office furniture brand due to the project nature of the contract market, it cannot predict future overall office furniture order trends at this time due to the short lead time of orders and the volatility in the global economy. In addition, the hotel industry forecasts for calendar year 2009 (reported by Smith Travel Research and PricewaterhouseCoopers LLP) project occupancy rates to decrease approximately 8% and revenue per available room (RevPAR) to decline approximately 16% to 17% with stabilization in the hotel industry projected for calendar year 2010. The Company expects order rates for hospitality furniture to remain depressed in the near term due to the lower hotel occupancy rates and RevPAR rates.

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Competitive pricing pressures within the EMS segment and on many projects within the Furniture segment continue to put pressure on the Company's operating margins.

The current economic conditions and the tightening of the credit markets have also increased the risk of uncollectible accounts and notes receivables. Accordingly, the Company heightened its monitoring of receivables and related credit risks, and the Company believes its accounts and notes receivables allowance for uncollectible accounts is adequate as of September 30, 2009. If the economic recovery is as slow paced as some economists are predicting, the Company could potentially record additional allowances in the future.

The Company is continually assessing its strategies in relation to the continued unpredictable market conditions. A long-standing component of the Company's profit sharing incentive bonus plan and annual retirement contribution is that they are both linked to the performance of the Company which automatically lowers total compensation expense when profits are down. The Company has also implemented various initiatives in response to the market conditions including reducing operating costs, more closely scrutinizing customer and supply chain risk, and deferring and cancelling capital expenditures that are not immediately required to support customer requirements. The Company will continue to closely monitor market changes and its liquidity in order to proactively adjust its operating costs, discretionary capital spending, and dividend levels as needed.

The Company continues to have a strong balance sheet which includes a minimal amount of long-term debt of $0.4 million and Share Owners' equity of $385.3 million. The Company's short-term liquidity available, represented as cash, cash equivalents, and short-term investments plus the unused amount of the Company's revolving credit facility was $182.5 million at September 30, 2009.

In addition to the above risks related to the current economic conditions, management currently considers the following events, trends, and uncertainties to be most important to understanding the Company's financial condition and operating performance:

The Company will continue its focus on preserving cash and minimizing debt.  Managing working capital levels is key.  In addition, the Company plans to minimize capital expenditures where appropriate but will continue to invest in capital expenditures prudently, particularly for projects that would enhance the Company's capabilities and diversification while providing an opportunity for growth and improved profitability as the economy and the Company's markets recover.

Although the Company has seen recent moderate declines in the cost of some commodities and in fuel prices, these continue to be areas of focus within the Company.

Globalization continues to reshape not only the industries in which the Company operates but also its key customers and competitors.

The nature of the electronic manufacturing services industry is such that the start-up of new programs to replace departing customers or expiring programs occurs frequently. The success of the Company's EMS segment is dependent on the successful replacement of such customers or programs. Such changes usually occur gradually over time as old programs phase out of production while newer programs ramp up. While the margins vary depending on the size of the program and the vertical market being served, replacement programs often carry lower margins.

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Successful execution of the Company's restructuring plans is critical to the Company's future performance. The success of the restructuring initiatives is dependent on accomplishing the plans in a timely and effective manner. The Company's restructuring plans are discussed in the segment discussions below.

The increasingly competitive marketplace mandates that the Company continually re-evaluate its business models.

The Company's employees throughout its business operations are an integral part of the Company's ability to compete successfully, and the stability of its management team is critical to long-term Share Owner value. The Company's career development and succession planning process helps to maintain stability in management.

As end markets dictate, the Company is continually assessing under-utilized capacity and developing plans to grow the Company's customer base and better utilize manufacturing operations, including shifting manufacturing capacity to lower cost venues as necessary. o    During the first quarter of fiscal year 2009, the Company approved a restructuring plan to consolidate production of select office furniture manufacturing departments. The consolidation is complete and has reduced manufacturing costs and excess capacity by eliminating redundant property and equipment, processes, and employee costs. o    During the fourth quarter of fiscal year 2008, the Company approved a plan to expand its European automotive electronics capabilities and to establish a European Medical Center of Expertise in Poznan, Poland. The Company presently has an operation in Poznan. The Company successfully completed the move of production from Longford, Ireland, into the existing Poznan facility during the second quarter of fiscal year 2009. As part of the plan, the Company is also consolidating its EMS facilities located in Bridgend, Wales, and Poznan into a new, larger facility in Poznan, with a projected final completion date of December 2011.  Construction of the new, larger facility in Poland is complete and limited production has begun.

To support diversification efforts, the Company has focused on both organic growth and acquisition activities. Acquisitions allow rapid diversification of both customers and industries served.

The regulatory and business environment for U.S. public companies requires that the Company continually evaluate and enhance its practices in the areas of corporate governance and management practices. The Company has taken a number of steps to conform its corporate governance to evolving national and industry-wide best practices among U.S. public companies, not only to comply with new legal requirements, but also to enhance the decision-making process of the Board of Directors.

The preceding statements could be considered forward-looking statements under the Private Securities Litigation Reform Act of 1995 and are subject to certain risks and uncertainties including, but not limited to, a significant change in economic conditions, loss of key customers or suppliers, or similar unforeseen events.

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Financial Overview - Consolidated

First quarter fiscal year 2010 consolidated net sales were $274.7 million compared to first quarter fiscal year 2009 net sales of $339.5 million, a 19% decrease, driven by a 10% net sales decrease in the EMS segment and a 30% net sales decrease in the Furniture segment. Net income for the first quarter of fiscal year 2010 was $1.8 million, or $0.05 per Class B diluted share, inclusive of after-tax restructuring charges of $0.3 million, or $0.01 per Class B diluted share. Net income for the first quarter of fiscal year 2009 was $2.2 million, or $0.06 per Class B diluted share, inclusive of after-tax restructuring charges of $0.6 million, or $0.02 per Class B diluted share. The first quarter fiscal year 2010 and 2009 restructuring charges were primarily related to the European consolidation plan.   

Consolidated gross profit as a percent of net sales in the first quarters of both fiscal years 2010 and 2009 was 17.2%. Improved gross profit as a percent of net sales for the Furniture segment was primarily offset by the unfavorable impact on gross profit as a percent of net sales resulting from a shift in sales mix toward the EMS segment which operates at a lower gross profit percentage than the Furniture segment.  Gross profit is discussed in more detail in the segment discussions below.

First quarter fiscal year 2010 consolidated selling and administrative expenses declined in absolute dollars by 14% as compared to the first quarter of fiscal year 2009. The reduced selling and administrative expenses were primarily related to comprehensive cost reduction efforts throughout the Company including decreased labor; lower employee benefit costs which are linked to Company profitability; lower depreciation and amortization expense; lower advertising and marketing incentive costs; and benefits realized from restructuring actions. Additionally, during the first quarter of fiscal year 2010, the Company recorded $1.5 million of unfavorable fair value revaluation adjustments of the Supplemental Employee Retirement Plan (SERP) liability compared to $1.1 million of favorable adjustments  during the first quarter of fiscal year 2009. The result for the quarter-over-quarter comparison was an unfavorable variance in selling and administrative costs of $2.6 million. The first quarter fiscal year 2010 loss resulting from the increase in the SERP liability that was recognized in selling and administrative expenses was exactly offset by an increase in the SERP investment which was recorded in Other Income (Expense), and thus there was no effect on net earnings. The SERP investment is primarily comprised of employee contributions.  Selling and administrative expense increased as a percent of net sales due to sales volumes declining at a quicker rate than the selling and administrative expenses.

First quarter fiscal year 2010 other income totaled $2.0 million compared to first quarter fiscal year 2009 other expense of $0.8 million. The $2.6 million appreciation in SERP investments was the primary driver of the increased other income. In addition, interest expense for the first quarter of fiscal year 2010 was lower than the first quarter of fiscal year 2009 due to lower average outstanding debt balances coupled with lower interest rates.  Interest income was likewise lower for the first quarter of fiscal year 2010 compared to the first quarter of fiscal year 2009 due to lower interest rates.

The effective tax rate of 32% for the first quarter of fiscal year 2010 was positively impacted by lower tax rates in foreign jurisdictions as compared to the domestic tax rate. The effective tax rate for the first quarter of fiscal year 2009 was 37%.

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Comparing the balance sheets as of September 30, 2009 to June 30, 2009, the Company's inventory balance increased as a result of customers delaying order dates; to support a new program launch; and due to an intentional inventory build-up at a foreign facility to support shipments during a scheduled maintenance shutdown period. The Company's accounts payable balance also increased since June 30, 2009 in relation to the increasing inventory balances and the Company's continued effort to improve cash management.

Electronic Manufacturing Services Segment

During the fourth quarter of fiscal year 2008, the Company approved a plan to expand its European automotive electronics capabilities and to establish a European Medical Center of Expertise in Poznan, Poland. The Company successfully completed the move of production from Longford, Ireland, into the existing Poznan facility during the fiscal year 2009 second quarter. As part of the plan, the Company is also consolidating its EMS facilities located in Bridgend, Wales, and Poznan, Poland, into a new, larger facility in Poznan, which is expected to improve the Company's margins in the very competitive EMS market. Construction of the new, larger facility in Poland is complete and limited production has begun. The plan is being executed in stages with a projected final completion date of December 2011. See Note 6 - Restructuring Expense of Notes to Condensed Consolidated Financial Statements for more information on restructuring charges.

EMS segment results were as follows:

	At or For the Three Months Ended
	September 30
(Amounts in Millions)	2009		2008		% Change
Net Sales	$   165.5		$ 182.9		(10%)
Net Loss	$      (0.2)		$    (0.8)		71%
Restructuring Expense, net of tax	$       0.3		$     0.4
Open Orders	$   161.3		$ 200.6		(20%)

First quarter fiscal year 2010 net sales to customers in the automotive, medical, industrial control, and public safety industries all declined compared to the first quarter of fiscal year 2009. While open orders declined 20%, open orders at a point in time may not be indicative of future sales trends due to the contract nature of the Company's business.

First quarter fiscal year 2010 EMS segment gross profit as a percent of net sales approximated the first quarter fiscal year 2009 but declined in absolute dollars due to the impact of lower sales volumes.  

The EMS segment achieved a 16% reduction in selling and administrative expense in absolute dollars for the first quarter of fiscal year 2010 compared to the first quarter of fiscal year 2009. Selling and administrative costs also decreased 0.6 percentage points as a percent of net sales. The improvement was primarily related to benefits realized from restructuring actions, lower depreciation/amortization expense, lower employee benefit costs which are linked to Company profitability, and a strong focus on managing all costs including labor reductions.

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Included in this segment are a significant amount of sales to Bayer AG affiliates which accounted for the following portions of consolidated net sales and EMS segment net sales:

	Three Months Ended September 30
	2009		2008
Bayer AG affiliated sales as a percent of consolidated net sales	15%		12%
Bayer AG affiliated sales as a percent of EMS segment net sales	26%		23%

The nature of the electronic manufacturing services industry is such that the start-up of new customers and new programs to replace expiring programs occurs frequently. New customer and program start-ups generally cause losses early in the life of a program, which are generally recovered as the program matures and becomes established. This segment continues to experience margin pressures related to an overall excess capacity position in the electronics subcontracting services market.

Risk factors within this segment include, but are not limited to, general economic and market conditions, customer order delays, increased globalization, foreign currency exchange rate fluctuations, rapid technological changes, component availability, the contract nature of this industry, unexpected integration issues with acquisitions, the importance of sales to large customers, and the potential for customers to choose to insource a greater portion of their electronics manufacturing. The continuing success of this segment is dependent upon its ability to replace expiring customers/programs with new customers/programs. Additional risk factors that could have an effect on the Company's performance are contained in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2009.

Furniture Segment

During the first quarter of fiscal year 2009, the Company approved a restructuring plan to consolidate production of select office furniture manufacturing departments. The consolidation reduced manufacturing costs and excess capacity by eliminating redundant property and equipment, processes, and employee costs. The consolidation is complete. See Note 6 - Restructuring Expense of Notes to Condensed Consolidated Financial Statements for more information on restructuring charges.

Furniture segment results were as follows:

	At or For the Three Months Ended
	September 30
(Amounts in Millions)	2009		2008		% Change
Net Sales	$    109.2		$    156.6		(30%)
Net Income	$        1.8		$        3.2		(44%)
Restructuring Expense, net of tax	$        0.0		$        0.1
Open Orders	$      65.1		$    124.1		(48%)

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The net sales decline in the Furniture segment for the first quarter of fiscal year 2010 compared to the first quarter of fiscal year 2009 resulted primarily from decreased net sales of office furniture and to a lesser extent from decreased net sales of hospitality furniture. Price increases net of higher discounting contributed approximately $3.4 million to net sales during the first quarter of fiscal year 2010 when compared to the first quarter of fiscal year 2009 which were more than offset by decreased sales volumes. First quarter fiscal year 2010 sales of newly introduced office furniture products which have been sold for less than twelve months approximated $6.0 million. Furniture products open orders at September 30, 2009 declined when compared to the open orders at September 30, 2008 due to decreased open orders for both office furniture and hospitality furniture. Open orders at a point in time may not be indicative of future sales trends.

First quarter fiscal year 2010 Furniture segment gross profit as a percent of net sales improved 3.5 percentage points when compared to the first quarter of fiscal year 2009.  Items contributing to the improved gross profit as a percent of net sales included: price increases on select product, labor efficiency improvements at select facilities, lower freight and commodity costs, decreased employee benefit costs which are linked to Company profitability, and a decrease in LIFO inventory reserves resulting primarily from lower inventory levels which positively impacted the first quarter fiscal year 2010 gross profit. These improvements more than offset the negative impact of the lower volumes on the gross profit percentage. Due to the significant decline in sales volume, the gross profit dollars declined as compared to the first quarter of fiscal year 2009.

First quarter fiscal year 2010 selling and administrative expenses decreased in absolute dollars but increased as a percent of net sales on the lower sales volumes, when compared to the first quarter of fiscal year 2009. The selling and administrative expense decline resulted from lower labor costs, lower employee benefit costs which are linked to Company profitability, lower advertising and marketing costs, and other improvements resulting from the focus on managing all costs.

Risk factors within this segment include, but are not limited to, general economic and market conditions, increased global competition, financial stability of customers, supply chain cost pressures, and relationships with strategic customers and product distributors. Additional risk factors that could have an effect on the Company's performance are contained in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2009.

Liquidity and Capital Resources

Working capital at September 30, 2009 was $173.7 million compared to working capital of $176.2 million at June 30, 2009. The current ratio was 1.7 at September 30, 2009 and 1.8 at June 30, 2009.

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The Company's internal measure of Accounts Receivable performance, also referred to as Days Sales Outstanding (DSO), for the first quarter of fiscal year 2010 of 46.2 days increased slightly from the 45.0 days for the first three months of fiscal year 2009. The Company defines DSO as the average of monthly accounts and notes receivable divided by an average day's net sales. The Company's Production Days Supply on Hand (PDSOH) of inventory measure for the first three months of fiscal year 2010 decreased to 62.2 from 64.6 for the first three months of fiscal year 2009 as the Company reduced inventory levels compared to the first quarter of fiscal year 2009 to align with lower sales levels. The Company defines PDSOH as the average of the monthly gross inventory divided by an average day's cost of sales.

The Company's short-term liquidity available, represented as cash, cash equivalents, and short-term investments plus the unused amount of the Company's revolving credit facility, totaled $182.5 million at September 30, 2009 compared to $183.7 million at June 30, 2009. The credit facility provides an option to increase the amount available by an additional $50 million at the Company's request, subject to participating banks' consent.

The Company's net cash position from an aggregate of cash, cash equivalents, and short-term investments less short-term borrowings under credit facilities decreased from $88.6 million at June 30, 2009 to $87.5 million at September 30, 2009. Operating activities generated $12.5 million of cash flow in the first quarter of fiscal year 2010 compared to $14.0 million in the first quarter of fiscal year 2009. During the first quarter of fiscal year 2010, the Company reinvested $13.5 million into capital investments for the future, primarily for the new Poland facility, which is part of the plan to consolidate the European manufacturing footprint, and manufacturing equipment in both segments. First quarter fiscal year 2010 financing cash flow activities included $1.8 million in dividend payments, which was a decrease from the $5.9 million of dividends paid during the first quarter of fiscal year 2009. The approximate 70% decline in dividends paid was a result of reduced dividend rates to preserve cash. The dividend declared to be paid in the second quarter of fiscal year 2010 was comparable to the dividend paid in the Company's first quarter of fiscal year 2010. Consistent with the Company's historical dividend policy, the Company's Board of Directors will evaluate the appropriate dividend payment on a quarterly basis. During fiscal year 2010, the Company expects to minimize capital expenditures where appropriate but will continue to invest in capital expenditures prudently, particularly for projects that would enhance the Company's capabilities and diversification while providing an opportunity for growth and improved profitability as the economy and the Company's markets recover. The Company plans to sell its Poland facility which is being replaced by the newly constructed larger Poland facility.

At September 30, 2009, the Company had $13.2 million of short-term borrowings outstanding under its $100 million credit facility described in more detail below. At June 30, 2009, the Company had $12.7 million of short-term borrowings outstanding. The Company also has several smaller foreign credit facilities available but had no borrowings under these facilities as of September 30, 2009.

The Company maintains a $100 million credit facility with an expiration date in April 2013 that allows for both issuances of letters of credit and cash borrowings. The $100 million credit facility provides an option to increase the amount available for borrowing to $150 million at the Company's request, subject to the group of participating banks' consent. The $100 million credit facility requires the Company to comply with certain debt covenants including interest coverage ratio, minimum net worth, and other terms and conditions. The Company was in compliance with these covenants at September 30, 2009.

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The Company believes the most significant covenants under its $100 million credit facility are minimum net worth and interest coverage ratio. The table below compares the actual net worth and interest coverage ratio with the limits specified in the credit agreement.

Covenant		At or For the Period Ended September 30, 2009		Limit As Specified in Credit Agreement		Excess
Minimum Net Worth		$385,268,000		$362,000,000		$23,268,000
Interest Coverage Ratio		42.1		3.0		39.1

The Interest Coverage Ratio is calculated on a rolling four-quarter basis as defined in the credit agreement.

The outstanding balance under the $100 million credit facility at September 30, 2009 consisted of $13.2 million for a Euro currency borrowing, which provides a natural currency hedge against a Euro denominated intercompany note between the U.S. parent and Euro functional currency subsidiaries. There were also approximately $5.0 million in letters of credit against the credit facility. Total availability to borrow under the $100 million credit facility was $81.8 million at September 30, 2009.

The Company also maintains a separate foreign credit facility for its EMS segment operation in Thailand which is backed by the $100 million revolving credit facility.  In addition to the $100 million credit facility, the Company has several other foreign credit facilities which are available to cover bank overdrafts to satisfy short-term cash needs at that specific location rather than funding from intercompany sources. The Company has a credit facility for its EMS segment operation in Wales, United Kingdom, which is comprised of an overdraft facility which allows for multi-currency borrowings up to 2 million Sterling equivalent (approximately $3.2 million U.S. dollars at September 30, 2009 exchange rates) and an engagement facility of 3.5 million Sterling equivalent (approximately $5.6 million U.S. dollars at September 30, 2009 exchange rates), which can be used only for payment of customs, duties, or value-added taxes in the event of the Company's failure to pay its obligations. The Company also has a credit facility for its EMS segment operation in Poznan, Poland, which allows for multi-currency borrowings up to 6 million Euro equivalent (approximately $8.8 million U.S. dollars at September 30, 2009 exchange rates). These overdraft facilities can be cancelled at any time by either the bank or the Company. At September 30, 2009, the Company had no borrowings outstanding under these foreign facilities.

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The Company believes its principal sources of liquidity from available funds on hand, cash generated from operations, and the availability of borrowing under the Company's credit facilities will be sufficient in fiscal year 2010 and the foreseeable future. One of the Company's primary sources of funds is its ability to generate cash from operations to meet its liquidity obligations, which could be adversely affected by factors such as general economic and market conditions, a decline in demand for the Company's products, loss of key contract customers, the ability of the Company to generate profits, and other unforeseen circumstances. In particular, should demand for the Company's products decrease significantly over the next 12 months due to the weakened economy, the available cash provided by operations could be adversely impacted. Another source of funds is the Company's credit facilities. The $100 million credit facility is contingent on complying with certain debt covenants

The preceding statements are forward-looking statements under the Private Securities Litigation Reform Act of 1995. Certain factors could cause actual results to differ materially from forward-looking statements.

Fair Value

During fiscal year 2010, no financial assets were affected by a lack of market liquidity. For level 1 financial assets, readily available market pricing was used to value the financial instruments. For available-for-sale securities classified as level 2 assets, the fair values are determined based on observable market inputs which use evaluated pricing models that vary by asset class and incorporate available trade, bid, and other market information. The Company evaluated the inputs used to value the instruments and validated the accuracy of the instrument fair values based on historical evidence. The Company's derivatives, which were classified as level 2 assets/liabilities, were independently valued using a financial risk management software package using observable market inputs such as forward interest rate yield curves, current spot rates, and time value calculations. To verify the reasonableness of the independently determined fair values, the derivative fair values were compared to fair values calculated by the counterparty banks. The Company's own credit risk and counterparty credit risk had an immaterial impact on valuation of derivatives. See Note 7 - Fair Value of Financial Assets and Liabilities of Notes to Condensed Consolidated Financial Statements for more information.

Contractual Obligations

There have been no material changes outside the ordinary course of business to the Company's summary of contractual obligations under the caption, "Contractual Obligations" in Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" of the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2009.

Off-Balance Sheet Arrangements

The Company has no off-balance sheet arrangements other than standby letters of credit and operating leases entered into in the normal course of business. These arrangements do not have a material current effect and are not reasonably likely to have a material future effect on the Company's financial condition, results of operations, liquidity, capital expenditures, or capital resources. See Note 5 - Commitments and Contingent Liabilities of Notes to Condensed Consolidated Financial Statements for more information on standby letters of credit. The Company does not have material exposures to trading activities of non-exchange traded contracts.

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The preceding statements are forward-looking statements under the Private Securities Litigation Reform Act of 1995. Certain factors could cause actual results to differ materially from forward-looking statements.

Critical Accounting Policies

The Company's consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. These principles require the use of estimates and assumptions that affect amounts reported and disclosed in the consolidated financial statements and related notes. Actual results could differ from these estimates and assumptions. Management uses its best judgment in the assumptions used to value these estimates, which are based on current facts and circumstances, prior experience, and other assumptions that are believed to be reasonable. The Company's management overlays a fundamental philosophy of valuing its assets and liabilities in an appropriately conservative manner. Management believes the following critical accounting policies reflect the more significant judgments and estimates used in preparation of the Company's consolidated financial statements and are the policies that are most critical in the portrayal of the Company's financial position and results of operations. Management has discussed these critical accounting policies and estimates with the Audit Committee of the Company's Board of Directors and with the Company's independent registered public accounting firm.

Revenue recognition - The Company recognizes revenue when title and risk transfer to the customer, which under the terms and conditions of the sale may occur either at the time of shipment or when the product is delivered to the customer. Service revenue is recognized as services are rendered. Shipping and handling fees billed to customers are recorded as sales while the related shipping and handling costs are included in cost of goods sold. The Company recognizes sales net of applicable sales tax.

• Allowance for sales returns - At the time revenue is recognized certain provisions may also be recorded, including returns and allowances, which involve estimates based on current discussions with applicable customers, historical experience with a particular customer and/or product, and other relevant factors. As such, these factors may change over time causing the provisions to be adjusted accordingly. At September 30, 2009 and June 30, 2009, the reserve for returns and allowances was $4.2 million and $4.4 million, respectively. The returns and allowances reserve approximated 2% of gross trade receivables during the past two years up until the last three quarters at which time it trended up to 3% primarily due to issues isolated to two furniture projects with unique specifications.
• Allowance for doubtful accounts - Allowance for doubtful accounts is generally based on a percentage of aged accounts receivable, where the percentage increases as the accounts receivable become older. However, management judgment is utilized in the final determination of the allowance based on several factors including specific analysis of a customer's credit worthiness, changes in a customer's payment history, historical bad debt experience, and general economic and market trends. The allowance for doubtful accounts at September 30, 2009 and June 30, 2009 was $3.5 million and $3.1 million, respectively. During the preceding two year period, this reserve had been at or less than 1% of gross trade accounts receivable up until the last three quarters at which point it approximated 2% of gross trade accounts receivable. The higher reserve was driven by increased risk created by the current market conditions.

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Excess and obsolete inventory - Inventories were valued using the lower of last-in, first-out (LIFO) cost or market value for approximately 11% and 14% of consolidated inventories at September 30, 2009 and June 30, 2009, respectively, including approximately 83% of the Furniture segment inventories at both September 30, 2009 and June 30, 2009, respectively. The remaining inventories were valued at lower of first-in, first-out (FIFO) cost or market value. Inventories recorded on the Company's balance sheet are adjusted for excess and obsolete inventory. In general, the Company purchases materials and finished goods for contract-based business from customer orders and projections, primarily in the case of long lead time items, and has a general philosophy to only purchase materials to the extent covered by a written commitment from its customers. However, there are times when inventory is purchased beyond customer commitments due to minimum lot sizes and inventory lead time requirements, or where component allocation or other procurement issues may exist. The Company may also purchase additional inventory to support transfers of production between manufacturing facilities. Evaluation of excess inventory includes such factors as anticipated usage, inventory turnover, inventory levels, and product demand levels. Factors considered when evaluating inventory obsolescence include the age of on-hand inventory and reduction in value due to damage, use as showroom samples, design changes, or cessation of product lines.

Self-insurance reserves - The Company is self-insured up to certain limits for auto and general liability, workers' compensation, and certain employee health benefits such as medical, short-term disability, and dental with the related liabilities included in the accompanying financial statements. The Company's policy is to estimate reserves based upon a number of factors including known claims, estimated incurred but not reported claims, and other analyses, which are based on historical information along with certain assumptions about future events. Changes in assumptions for such matters as increased medical costs and changes in actual experience could cause these estimates to change and reserve levels to be adjusted accordingly. At September 30, 2009 and June 30, 2009, the Company's accrued liabilities for self-insurance exposure were $6.2 million and $6.5 million, respectively.

Taxes - Deferred income tax assets and liabilities are recognized for the estimated future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. These assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to reverse. The Company evaluates the recoverability of its deferred tax assets each quarter by assessing the likelihood of future profitability and available tax planning strategies that could be implemented to realize its deferred tax assets. If recovery is not likely, the Company provides a valuation allowance based on its best estimate of future taxable income in the various taxing jurisdictions and the amount of deferred taxes ultimately realizable. Future events could change management's assessment.

The Company operates within multiple taxing jurisdictions and is subject to tax audits in these jurisdictions. These audits can involve complex issues, which may require an extended period of time to resolve. However, the Company believes it has made adequate provision for income and other taxes for all years that are subject to audit. As tax periods are effectively settled, the provision will be adjusted accordingly. The liability for uncertain income tax and other tax positions was $3.5 million at both September 30, 2009 and June 30, 2009.

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Goodwill - Goodwill represents the difference between the purchase price and the related underlying tangible and intangible net asset values resulting from business acquisitions. Annually, or if conditions indicate an earlier review is necessary, the Company compares the carrying value of the reporting unit to an estimate of the reporting unit's fair value to identify potential impairment. If the estimated fair value of the reporting unit is less than the carrying value, a second step is performed to determine the amount of potential goodwill impairment. If impaired, goodwill is written down to its estimated implied fair value. Goodwill is assigned to and the fair value is tested at the reporting unit level. The Company uses discounted cash flows to establish its reporting unit fair values. The calculation of the fair value of the reporting units considers current market conditions existing at the assessment date. In addition to performing the required annual testing, the Company will continue to monitor circumstances and events in future periods to determine whether additional goodwill impairment testing is warranted on an interim basis. The Company can provide no assurance that an impairment charge for the Company's remaining goodwill balance will not occur in future periods as a result of these analyses. At September 30, 2009 and June 30, 2009, the Company's goodwill totaled, in millions, $2.7 and $2.6, respectively.

New Accounting Standards

See Note 1 - Summary of Significant Accounting Policies of Notes to Condensed Consolidated Financial Statements for information regarding New Accounting Standards.

Forward-Looking Statements

Certain statements contained within this document are considered forward-looking under the Private Securities Litigation Reform Act of 1995. These statements can be identified by the use of words such as "believes," "estimates," "projects," "expects," "anticipates," "forecasts," and similar expressions. These forward-looking statements are subject to risks and uncertainties including, but not limited to, continuing impacts of the global economic recession, other general economic conditions, significant volume reductions from key contract customers, significant reduction in customer order patterns, loss of key customers or suppliers within specific industries, financial stability of key customers and suppliers, availability or cost of raw materials, increased competitive pricing pressures reflecting excess industry capacities, successful execution of restructuring plans, 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 Annual Report on Form 10-K for the fiscal year ended June 30, 2009.

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Item 3.  Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes to market risks from the information disclosed in Item 7A "Quantitative and Qualitative Disclosures About Market Risk" of the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2009.

Item 4.  Controls and Procedures

(a) Evaluation of disclosure controls and procedures.

The Company maintains controls and procedures designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and that such information is accumulated and communicated to the Company's management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Based upon their evaluation of those controls and procedures performed as of September 30, 2009, the Chief Executive Officer and Chief Financial Officer of the Company concluded that its disclosure controls and procedures were effective.

(b) Changes in internal control over financial reporting.

There have been no changes in the Company's internal control over financial reporting that occurred during the quarter ended September 30, 2009 that have materially affected, or that are reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II.  OTHER INFORMATION

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

A share repurchase program authorized by the Board of Directors was announced on October 16, 2007. The program allows for the repurchase of up to two million shares of any combination of Class A and Class B shares and will remain in effect until all shares authorized have been repurchased. The Company did not repurchase any shares under the repurchase program during the first quarter of fiscal year 2010. At September 30, 2009, two million shares remained available under the repurchase program.

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Item 6.  Exhibits

Exhibits (numbered in accordance with Item 601 of Regulation S-K)

(3(a))  Amended and restated Articles of Incorporation of the Company (Incorporated by reference to Exhibit 3(a) to the Company's Form 10-K for the fiscal year ended June 30, 2007)

(3(b))  Restated By-laws of the Company (Incorporated by reference to Exhibit 3(b) to the Company's Form 8-K filed October 23, 2009)

(10)  Summary of Director and Named Executive Officer Compensation

(11)  Computation of Earnings Per Share

(31.1)  Certification filed by Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

(31.2)  Certification filed by Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

(32.1)  Certification furnished by the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(32.2)  Certification furnished by the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		KIMBALL INTERNATIONAL, INC.
	By:	/s/ James C. Thyen
		JAMES C. THYEN President, Chief Executive Officer
		November 5, 2009
	By:	/s/ Robert F. Schneider
		ROBERT F. SCHNEIDER Executive Vice President, Chief Financial Officer
		November 5, 2009

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Kimball International, Inc.
Exhibit Index

Exhibit No.		Description
3(a)		Amended and restated Articles of Incorporation of the Company (Incorporated by reference to Exhibit 3(a) to the Company's Form 10-K for the fiscal year ended June 30, 2007)
3(b)		Restated By-laws of the Company (Incorporated by reference to Exhibit 3(b) to the Company's Form 8-K filed October 23, 2009)
10		Summary of Director and Named Executive Officer Compensation
11		Computation of Earnings Per Share
31.1		Certification filed by Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification filed by Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Certification furnished by the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2		Certification furnished by the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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