Item 1. - Business
As used herein, the term "Company" refers to Kimball International, Inc., the Registrant, and its subsidiaries unless the context indicates otherwise. The Company was incorporated in Indiana in 1939, and present management assumed control in 1950. The corporate headquarters is located at 1600 Royal Street, Jasper, Indiana. The Company operates in three principal business segments: Furniture and Cabinets, Electronic Contract Assemblies, and Processed Wood Products and Other. The Company utilizes a substantial degree of vertical integration, as approximately 50% of the final products of the Processed Wood Products and Other Segment are used in the manufacturing processes in the Furniture and Cabinets Segment. The Company does not consider seasonal fluctuations to be significant. Production is carried on in facilities located in the United States, Mexico, England, Austria and France. In the U.S., the Company has facilities and showrooms in 15 states.
Financial information by industry segment and geographic area for each of the three years in the period ended June 30, 1996, is included in Note 14, Business Segment and Geographic Area Information, of the Notes to Consolidated Financial Statements, which can be found in Item 8, and is incorporated herein by reference.
Segments
FURNITURE AND CABINETS
Historical Overview Since 1950, the Company has produced wood furniture and cabinets, which continue to be a significant part of the business. Products in this segment include cabinets for televisions, audio speakers and audio components, television stands, furniture and other wood related products produced on a contract basis and sold to leading manufacturers in the home entertainment and home furniture industries. Office furniture has been manufactured and sold under the Kimball (registered trademark) trade name since 1970. In 1992, the Company expanded its product offering with the acquisition of Harpers, a metal office furniture manufacturer. Harpers has marketed metal office furniture under the Harpers (registered trademark) trade name since 1982. Kimball and Harpers office furniture systems have broad market application, while the Kimball and National casegoods and seating lines are more focused to the wood segment of the office furniture industry. The Cetra (registered trademark) and Footprint (registered trademark) lines of Kimball office furniture systems provide flexible configurations and help architects and designers optimize space planning by utilizing Traxx (registered trademark), which increases space efficiency and eliminates the need for a secondary support structure by using existing walls. The Company has expanded its sales and manufacture of furniture over the years to include lodging-hospitality furniture, healthcare furniture designed for long-term care, and residential furniture. Through a predecessor acquired in 1966, L. Bosendorfer of Vienna, Austria, the Company has been engaged in acoustical piano manufacturing and sales since 1828. Due to the continued decline in the domestic piano market, a decision was reached in 1996 to cease sales and production of the Company's domestic piano product line, which the Company had previously been engaged in since 1857 through a predecessor, W. W. Kimball Co., acquired in 1959. The Company continues to offer the prestigious Bosendorfer line of high-end pianos for sale worldwide.
Locations Office, home, hospitality and healthcare furniture, T.V. cabinets and related products, which make up the largest part of this segment, are produced at sixteen plants, thirteen located in Indiana and one each in Kentucky, Alabama and Idaho. Included in these locations is one Indiana facility which previously manufactured domestic pianos up until the exit of this product line during 1996; this facility continues to expand its manufacture and sale of Original Equipment Manufacturer (OEM) wood related products on a contract basis, including wood piano cabinets to the international piano industry. Nine of the sixteen plants presently producing furniture and cabinets could interchange production between these two basic products if needed. Acoustical pianos are produced at a facility located in Austria. One facility located in England primarily produces piano components and also produces kitchen and bathroom wood products. A facility in Jasper, Indiana houses an Education Center for dealer and employee training, the Product Design and Research Center, and a Corporate showroom for product display. In the United States, showrooms are maintained in eleven cities for office furniture and four cities for home furniture. In certain cities there are separate office and home furniture showrooms. In addition, office furniture is maintained in showrooms in London, England and Toronto, Canada. Piano showrooms are located in London, England and Vienna, Austria. In certain showrooms other Company products are also on display.
Marketing Channels Kimball and National office furniture is marketed through Company salespersons to independent dealers throughout North America and England. Harpers office furniture is marketed through Company salespersons to independent dealers in North America. Cabinets and contract furniture are generally marketed through Company salespersons, while hospitality and healthcare furniture is marketed through independent manufacturers' representatives. The Company's channel marketing strategy facilitates the sale of related office furniture and upholstery within the hospitality and healthcare channels. Period Reproduction furniture and residential furniture are generally marketed through independent sales representatives to independent furniture dealers throughout the United States. Bosendorfer (registered trademark) pianos are marketed through Company salespersons and agents to independent dealers.
Major Competitive Factors The major competitive factors in the office furniture industry are price in relation to quality and appearance with certain low-priced product lines more price sensitive, the utility of the product, reduced customer lead time, on-time damage-free delivery to the customer, and ability to respond to requests for special non-standard products. The Company maintains sufficient finished good inventories to be able to offer to domestic dealers prompt shipment of certain lines of Kimball, National and Harpers office furniture, thereby permitting dealers to maintain smaller inventories. Many products are shipped through the Company's delivery system. The Company believes that its trucking capability enables it to reduce damage to shipments, enhance scheduling flexibility, and improve the capability for on-time deliveries, which are all key competitive factors in the office furniture industry. The major competitive factors in the cabinet, home furniture and OEM product markets are quality, performance history, price, on-time delivery and reduced customer lead time. Television, audio speaker and audio component cabinets, television stands and contract home furniture are produced to customer specifications from specific orders and finished goods inventories are generally small, consisting of goods awaiting shipment to a specific customer. The Company's own line of home furniture is offered for sale on an immediate ship basis. Competitive factors in the hospitality and healthcare furniture markets are quality, performance history, on-time delivery, reduced customer lead time and price. The Company offers its own line of hospitality and healthcare furniture as well as producing custom hospitality and healthcare furniture to customers' specifications. Certain finished goods in the hospitality and healthcare furniture lines are carried for immediate shipment. The major competitive factors in the high-end acoustical piano industry are quality, acoustical tone and appearance.
Competitors There are many manufacturers of office, home, hospitality, and healthcare furniture. The Company believes, however, that there are a limited number of relatively large producers of wood office, hospitality and healthcare furniture, of which the Company believes that it is one of the larger in net sales. In many instances wood office furniture competes in the market with metal office furniture. Based on available industry statistics, metal office furniture has a larger share of the total market than does wood. The Company has positioned Harpers as a vehicle to strengthen its market share in the non-wood segment of the industry. The Company believes that it is one of the largest independent domestic manufacturers of television and audio speaker cabinets, but certain manufacturers of televisions and audio speakers, including some customers of the Company, produce cabinets for their own use. The high-end of the acoustical piano industry is characterized by a limited number of competitors, including one major competitor. There are many manufacturers of residential furniture. The Company does not have a significant share of this market.
Raw Material Availability Many components used in the production of furniture, cabinets and pianos are manufactured internally within the group or by other groups of the Company, including processed wood parts, and on a limited basis, metal stamped parts and certain polyurethane molded plastics. Raw materials used in the production of wood furniture and cabinets are generally readily available. Certain metal components used in various wood office furniture products, predominately Cetra and seating, are purchased in a pre-fabricated stage with additional fabrication and finishing performed by the Company. Raw materials used in the manufacture of metal office furniture, primarily rolled steel, is readily available in the world market. Certain pre-fabricated components used in the Company's piano lines are available from a limited number of sources, although no interruptions in supplies have been experienced.
ELECTRONIC CONTRACT ASSEMBLIES
The Company entered the electronic contract assemblies market in 1985 with knowledge acquired from the production of electrical keyboards for musical instruments, which were first produced in 1963. Electronic and electro-mechanical products (electronic assemblies) are sold on a contract basis and produced to customers' specifications. The Company expanded its capabilities to include semiconductor DIE processing, design, testing and packaging through an acquisition in 1996. Production takes place at four manufacturing facilities located in Indiana, California, Mexico and France. An additional facility located in Indiana is utilized for warehousing space. The Indiana facility assembles electronic components and products for sale to outside customers. The facility in Mexico assembles electronic components, electronic cable harnesses and other electronic products for sale to outside customers. Products from the Mexico facility are accumulated at, and shipped from, a Texas warehouse. The facility in California provides semiconductor DIE processing, design, testing and packaging, in addition to assembly services. The French facility provides assembly services for the European market. Products are marketed by Company salespersons and independent sales representatives on a contract basis. As contract electronic assemblies are manufactured based on specific orders, finished goods inventories are generally small consisting of goods awaiting shipment to a specific customer. Raw materials are acquired for specific customer orders and may not be interchangeable among products. Working capital in this segment carries a higher degree of risk than the Company's other business segments, due to the rapid technological changes and contract nature of this industry. The competitive factors in the electronic contract assemblies market are price, quality, production flexibility, reliability of on-time delivery and reduced customer lead time. The trend of OEM's in the electronic industry to subcontract the assembly process to companies with a core competence in this area, combined with the proliferation of electronic components in today's technologically advanced products has created growth in the electronic contract assemblies industry. The Electronics industry is very competitive, with many manufacturers of contract electronic assemblies, as well as in-house capabilities of existing and potential customers. The Company does not have a significant share of the market for such products. Raw Materials for contract electronic products are generally readily available from both domestic and foreign sources, although from time to time the industry experiences allocations of certain components due to supply and demand forces, combined with rapid product life cycles of certain components. While the total electronic assemblies market has broad applications, the Company's customers are concentrated in the automotive (automobiles and light trucks), computer and telecommunications industries. Included in this segment are sales to three customers which account for 24%, 23% and 22% of consolidated net sales in 1996, 1995 and 1994, respectively. Included in sales to these three customers are sales of electronic assemblies to Kelsey-Hayes Company, Inc. which accounted for approximately 14% of consolidated net sales in the year ended June 30, 1996, compared to 14% in the year ended June 30, 1995 and 12% in the year ended June 30, 1994. The success of this segment is dependent on the success of our customers' products.
PROCESSED WOOD PRODUCTS AND OTHER
The Company's manufacture and sale of processed wood products includes unprocessed lumber, dimension lumber, plywood and veneer. The Company owns and operates four sawmills, three lumber yards, three dimension lumber plants, a plant which manufactures contract wood products, a sliced veneer plant and two facilities which process plywood and related products. The Company reduced its production capacity during the year, related to products which are sold to outside customers. Processed wood and other products manufactured by the Company are used internally as well as sold to others. For fiscal year 1996, an estimated 50% of the total production of these operations was for products used internally in the Furniture and Cabinets segment. Products sold to others are marketed principally to furniture manufacturers, primarily through Company personnel. The competitive factors in the processed wood products market are price, quality, availability, on-time delivery and reduced customer lead time. In processed wood materials, the Company competes with many integrated forest and specialty hardwood product companies and does not have a significant share of the market for such products. Raw materials used in this business segment are generally readily available. Various miscellaneous products are manufactured by the Company for sales to unaffiliated customers as well as for its own use. These include polyurethane and polyester molded products, stamped metal parts, carbide cutting tools and related services on cutting tools. Services of the Company's trucking fleet are also sold to unaffiliated customers.
OTHER INFORMATION BACKLOG At June 30, 1996, the aggregate sales price of production pursuant to worldwide open orders, which may be canceled by the customer, were $193 million as compared to $230 million at June 30, 1995.
RESEARCH, PATENTS, AND TRADEMARKS Research and development costs for the fiscal years ended June 30 were approximately, in millions, $10.5 in 1996, $9.4 in 1995 and $8.6 in 1994. Research and development activities include the development of manufacturing processes, major process improvements, new product development, and wood, electronic and plastic technology. The Company owns the Kimball (registered trademark) trademark, which it believes is significant to its office, electronic, hospitality, healthcare and home furniture businesses, and owns the following trademarks which it believes are significant to its furniture business only: National (registered trademark), Cetra (registered trademark), Footprint (registered trademark), Artec (registered trademark), Traxx (registered trademark) and Harpers (registered trademark); and to the piano business only: Bosendorfer (registered trademark). The Company also owns certain patents and other trademarks and has certain other patent applications pending, which in the Company's opinion are not significant to its business.
ENVIRONMENT AND ENERGY MATTERS The Company's operations are subject to various Federal, State and Local laws and regulations with respect to environmental matters. The Company believes that it is in substantial compliance with present laws and regulations and that there are no material liabilities related to such items. The Company is dedicated to excellence, leadership and stewardship in matters of protecting the environment and communities in which the Company has operations. The Company believes that continued compliance with Federal, State and Local laws and regulations which have been enacted relating to the protection of the environment will not have a material effect on its capital expenditures, earnings or competitive position. Management believes capital expenditures for environmental control equipment during the two fiscal years ending June 30, 1998, will not represent a material portion of total capital expenditures during those years. The Company's manufacturing operations require significant amounts of energy, including natural gas and oil. Federal and State statutes and regulations control the allocation of fuels available to the Company, but to date the Company has experienced no interruption of production due to such regulations. In its wood processing plants, significant energy requirements are satisfied internally by the use of the Company's own wood waste products.
EMPLOYEES At June 30, 1996, the Company had 8,723 full time employees, of which 7,284 were employed in the United States and 1,439 in foreign countries. The Company has no collective bargaining agreements with respect to its domestic employees. All of the Company's foreign operations are subject to collective bargaining arrangements. The Company believes that its employee relations are good.
Item 2.
Item 2. - Properties
Including certain leased furniture showroom areas excluded from the above listing, total facilities approximate 6.8 million square feet. (See Note 5 - Commitments - Leases of Notes to Consolidated Financial Statements in Item 8, for additional information concerning leases.) Included in Processed Wood Products and Other are executive, national sales and administrative offices, a product design and research center, the production facility for polyurethane and polyester molded plastic, the production facility for stamped metal products, the production and service facility for carbide cutting tools, a facility used in managing the Company's trucking fleet, and an energy center for the Kimball Industrial Park consisting of 3 trifuel boilers. Properties are generally utilized at normal capacity levels on a single shift basis, with certain facilities operating a second shift, while other facilities utilize a reduced second or third shift to meet increased demand levels. At times, certain facilities were not utilized at normal capacity levels during the fiscal year, because of declines in sales. The Energy Center is not operating at full capacity. Any loss of income resulting from a facility catastrophe would be partially offset by business interruption insurance coverage.
Operating leases totaling 294,000 square feet expire 1996-1999, with all leases subject to renewal options. In addition to the above production, warehouse and office properties, the Company has 18 leased showroom facilities totaling 122,000 square feet, in 10 states in the United States, two locations in London, England, one location in Vienna, Austria, and one location in Toronto, Canada. The Company owns approximately 15,128 acres of land which includes land where various Company facilities reside, including approximately 14,249 acres generally for hardwood timber reserves, approximately 196 acres of land in the Kimball Industrial Park, Jasper, Indiana (a site for certain production and other facilities, and for possible future expansions), and approximately 60 acres in Post Falls, Idaho, where the Harpers plant is located.
Item 3.
Item 3. - Legal Proceedings The Registrant and its subsidiaries are not parties to any material pending legal proceedings, other than ordinary routine litigation incidental to the business.
Item 4.
Item 4. - Submission of Matters to Vote of Security Holders None to Report
PART II
Item 5.
Item 5. - Market for the Registrant's Common Stock and Related Share Owner Matters
Share Owners: On July 26, 1996, the Company's Class A Common Stock was owned by approximately 640 Share Owners of record and the Company's Class B Common Stock by approximately 2,430 Share Owners of record, of which approximately 390 also owned Class A Common Stock.
Item 7.
Item 7. - Management's Discussion and Analysis of Financial Condition and Results of Operations
OVERVIEW Fiscal year 1996 net sales set a new record of $923,636,000, an increase of 3% above 1995 sales. Net income and Class B earnings per share set new records of $45,095,000 and $2.16, respectively, increases of 9% above 1995 levels. Cash flow generated from operations was $62,003,000 for the 1996 fiscal year. Open orders were $192,758,000 at June 30, 1996.
RESULTS OF OPERATIONS 1996 DISCUSSION Net sales for the 1996 fiscal year reached a new record of $923,636,000 as sales expanded in the larger two of the Company's three business segments - Furniture and Cabinets, and Electronic Contract Assemblies. Net sales in the Processed Wood Products and Other segment declined from the prior year. Operating income for fiscal year 1996 was $62,511,000.
FURNITURE AND CABINETS Sales in the Company's largest segment, Furniture and Cabinets, increased 2% above the prior year as sales increases on office furniture and lodging product lines were partially offset by lower sales of Original Equipment Manufacturer (OEM) and piano product lines.
Certain systems, casegoods and seating office furniture product lines experienced volume growth, primarily on the Company's established product line offering, including market share gain on several product lines. Leading the increase in office furniture sales were the Company's value-oriented office furniture product lines, which continued to increase at a rate above the general industry. Operating income in the office furniture product line increased from the prior year due primarily to increased volumes, cost reduction initiatives in sales and manufacturing processes, and reduced operating losses on steel office furniture product lines. The effect of material price increases has diminished from the prior year. Administration costs increased during the year, due in part to costs that were incurred to improve processes through information technology. Increased volumes and manufacturing efficiency improvements on steel office furniture product lines were partially offset by increased selling costs incurred to expand this product line into select markets during the year. The Company anticipates overall operating losses to decline further on steel office furniture product lines during the 1997 fiscal year. An existing facility that was redeployed to systems office furniture became operational during the latter half of the 1996 fiscal year. This facility was dedicated to fulfill the long-term growth that management anticipates in this product line. Start-up costs incurred by this facility were expensed during the first part of the fiscal year.
Sales of OEM product lines, primarily television cabinets and stands, audio speaker cabinets, and residential furniture, decreased when compared to the strong sales level achieved during the prior year. Lower product demand was partly attributed to certain cabinet customers requesting scheduling delays in order to adjust inventory levels with less aggressive retail sales forecasts. - 15 -
Rescheduling and production flexibility are inherent in the OEM supplier market and may cause short-term fluctuations in any given period. Operating profits decreased on the lower sales volume. Some production capacity was utilized to assist in the production of certain other product lines within this segment.
The Company reached a strategic decision to exit the domestic wholesale piano product line during the third quarter of 1996, due to the continuing decline in the domestic piano market. This product line accounted for less than 1% of consolidated sales during the 1996 fiscal year and less than 2% during 1995. This production facility will now concentrate its resources on increasing production and sales of OEM wood products, including piano cases to other OEM piano manufacturers, lodging furniture products and home entertainment products.
Sales of hospitality product lines continued to increase as the result of the Company's strategy to market standard product lines of furniture to the hospitality market for renovated and newly constructed facilities. The Company continues to selectively pursue sales and manufacturing of custom-made furniture, which is produced to a customer's unique specification. Operating income improved over the prior year due to increased volume and production efficiencies associated with producing standardized products. Costs were incurred to expand the standard product offering during the first half of the fiscal year, which allowed additional sales and profits to be generated during the latter half of the year.
A United Kingdom subsidiary sharply reduced their operating loss from the year earlier period, due to benefits derived from combining two production facilities into one facility and other operating efficiency improvements. Costs to combine these two facilities were included in the prior year results.
ELECTRONIC CONTRACT ASSEMBLIES Sales in the Company's second largest segment, Electronic Contract Assemblies, increased 16% during 1996, when compared to 1995 levels. Additional volumes from new computer and telecommunication customers combined with increased volumes from certain existing electronic-automotive and computer customers fueled this growth. Operating profits increased at a slower rate than sales, as competitive pricing pressures continued to impede profit margin growth. However, these additional volumes were produced using less facility square footage when compared to the prior year, as the result of re-engineering assembly and support processes. Additional investments in working capital, primarily inventory and accounts receivable, were required to support this segment. The Company purchased certain assets of California-based ELMO Semiconductor Corporation and all the capital stock of France-based ELMO Semiconductuers, SARL as of March 29, 1996. The design, testing and packaging technologies acquired, including multichip modules, will be combined to enhance and expand the Company's existing core competencies in servicing the contract electronic market. The acquisition was accounted for as a purchase, with results of operations included in consolidated results from the date of acquisition, and are immaterial to the 1996 consolidated results. Included in this segment are sales to three customers which accounted for 24% of consolidated sales in 1996 and 23% in 1995. One of these customers accounted for 14% of consolidated sales in 1996 and 1995. This segment's working capital carries a higher degree of risk than other segments, due to rapid technological changes and the contract nature of this industry. As in other segments, the Company records reserves in response to these risks as they arise based upon estimates derived from available information known at that time.
PROCESSED WOOD PRODUCTS AND OTHER Sales in the Company's smallest segment, Processed Wood Products and Other, declined 27% in 1996, when compared to the prior year, due primarily to reduced volumes of processed wood products as the result of the Company reducing its production capacity of processed wood products sold to outside customers, combined with an industry-wide softening in demand for processed wood products, which management believes to be temporary. Sales of plastic components also declined from the prior year on decreased volumes. Operating profits declined on lower sales volumes. The effect of material price increases has diminished from the prior year. This segment continues to supply a significant portion of its production output for use as production components in the Furniture and Cabinet segment.
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CONSOLIDATED OPERATIONS Consolidated cost of sales as a percent of sales decreased 0.2 percentage point when compared to 1995. A sales mix change within the Company's largest segment, Furniture and Cabinets, resulted in lower labor costs as a percent of sales within this segment. Material costs as a percent of sales increased, as the consolidated sales mix continued to shift towards the Electronic Contract Assemblies segment, which carries higher material costs than other product lines of the Company. A decrement in LIFO inventory layers helped to mitigate the higher material costs. The effect of material component price increases, primarily on wood component products, has diminished when compared to the prior year.
Consolidated selling, administrative and general expenses as a percent of sales continued to decline, down 0.1 percentage point when compared to 1995, due in part to additional sales volumes having little effect on the fixed portion of these costs combined with cost reduction initiatives, which were partially offset by increased costs associated with improving processes through information technology in certain product lines.
A provision of $3,400,000 was established to cover all incremental costs to exit the domestic wholesale piano product line during the third quarter of 1996. Final production related to this product line was completed prior to the end of April 1996 and sales were completed prior to the end of May 1996.
Operating income was $62,511,000 in 1996, a 1% increase over the 1995 amount of $61,826,000, primarily due to increased volumes and operating efficiency improvements on office furniture product lines and lodging product lines, and operating improvements in the Company's European operations.
Other income increased above the prior year due primarily to increased interest income earned on higher average investment balances and gains on the sale of certain assets during the current year.
The effective income tax rate decreased 2.2 percentage points, due primarily to lower operating losses in Europe during 1996. Higher operating losses in Europe during the prior year provided little immediate tax benefit during 1995.
The Company achieved record net income and Class B earnings per share of $45,095,000 and $2.16, respectively, increases of 9% when compared to the prior year levels of $41,439,000 and $1.97 per share. Excluding the product line exit costs, net income and Class B earnings per share would have been $46,965,000 and $2.25, respectively.
1995 DISCUSSION 1995 net sales were $895,912,000, a 9% increase above the prior year sales, as sales increased in all three of the Company's business segments. Net income and Class B earnings per share increased 15% above the prior year to $41,439,000 and $1.97, respectively. The prior year included the impact of adopting FASB Statement No. 109, Accounting for Income Taxes, which increased 1994 net income by $1,200,000 or 5 cents per Class B share.
FURNITURE AND CABINETS Sales in the Furniture and Cabinets segment increased 5% when compared to the prior year, as sales increases on most major product lines were partially offset by declines in steel office furniture product line sales.
Certain systems, casegoods and seating office furniture experienced growth as the result of increases on both new and mature product line offerings, including market share gains in several product lines. Increased volume levels accounted for most of the product line increases, as pricing remained competitive in the office furniture industry. Production capacity constraints in systems office furniture prompted the Company to initiate redeployment of an additional facility, previously utilized by another segment, to this product line. Sales of steel office furniture product lines declined from the prior year level, due to reduced production capacity during the start-up phase at the new Idaho production facility during the 1995 fiscal year. Operating income decreased from the prior year due to material price increases and increased selling costs. Steel office furniture product lines continued to incur operating losses on lower sales volumes. - 17 -
Double digit volume increases were experienced on OEM television and speaker cabinet product lines from existing customers, while volume increases in OEM home furniture product lines resulted from both new and existing customers. Operating income improved on volume increases and re-engineered processes that allowed additional volumes to be produced utilizing existing resources, while improving cost structures.
The Company's domestic piano unit continued to focus on increasing sales and production of OEM wood products to absorb excess production capacity resulting from the continuing decline in the piano market.
Sales of hospitality furniture increased as a result of the Company's market strategy to link its own standardized product lines of furniture to the hospitality renovation market. Operating income improved on the additional volumes and the product mix shift towards standardized products.
Operating losses in Europe widened as costs were incurred during the latter half of the fiscal year to consolidate two production facilities in the United Kingdom into one facility, permanently lowering both fixed costs and future break-even sales levels.
ELECTRONIC CONTRACT ASSEMBLIES Sales in the Electronic Contract Assemblies segment increased 20% above the prior-year level as volume increases were experienced on new product assemblies including computer peripheral and telecommunication assemblies, and existing product assemblies including automotive electronic assemblies. Included in this segment are sales to one customer that accounted for 14% of consolidated net sales in 1995 and 12% in 1994. Operating income increased on additional volumes, due in part to process re-engineering initiatives begun in prior years that allowed additional volumes and additional product assemblies to be added during the 1995 fiscal year. Competitive pricing pressures continued in this segment, as operating margins on these product lines were generally lower than those found on most of the Company's other major product lines.
PROCESSED WOOD PRODUCTS AND OTHER Sales in the Processed Wood Products and Other segment increased by 9%, led by an increase in outside sales of processed wood products and plastic components. Increases in processed wood product lines were primarily volume increases in lumber and to a lesser extent, price increases which were triggered by increased material costs. Increased sales of plastic components were the result of volume increases with new and existing customers. Operating income increased as the result of additional volumes and process improvements. Material cost price increases, particularly on processed wood product lines, were passed along to customers on a delayed basis.
CONSOLIDATED OPERATIONS Consolidated cost of sales as a percent of sales increased 0.5 percentage point due in part to a change in the sales mix. A larger portion of consolidated sales was derived from the Electronic Contract Assemblies segment, which carries a higher cost of sales percentage than most of the Company's other major product lines. Increased material costs resulted from a sales mix change within and among business segments to product lines that require a higher level of material components, and increased material component prices. Labor costs as a percent of sales decreased from a change in sales mix towards products which require less labor content and efficiencies derived from the Company's process improvement initiatives. Overhead costs as a percent of sales decreased as additional production volumes were realized by improving utilization of fixed overhead costs and reduced inventory carrying costs, both resulting from process improvements.
Selling, administrative and general expenses as a percent of sales continued to decline, down 0.8 percentage point, as process improvements allowed additional sales volumes to be supported by moderate additions to the Company's existing overall infrastructure.
Operating income as a percent of sales increased 0.4 percentage point when compared to the prior year.
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Other income increased over the prior year due to increased interest income from higher average investment balances and higher investment yields. The devaluation of the Mexican peso during the 1995 fiscal year had an immaterial effect on earnings, due to the Company's capital and financing structure of its Mexican operations.
The income tax rate for 1995 increased 2.4 percentage points over the prior year, mainly due to the adoption of FASB Statement No. 109, Accounting for Income Taxes, which reduced the prior year's taxes by $1.2 million and reduced the prior year's effective income tax rate by 2.0 percentage points. Increased losses in Europe, due to the facility combination costs, accounted for the remaining increase, as there were no current tax benefits available on these losses.
Net income for 1995 was $41,439,000, or $1.97 per Class B share, up 15% from the 1994 net income level of $36,169,000, or $1.71 per Class B share.
LIQUIDITY AND CAPITAL RESOURCES The Company continued to maintain a strong liquidity position, ending the 1996 fiscal year with cash, cash equivalents and short-term investments of $114 million, as compared to $113 million one year earlier. Working capital and the current ratio continued to be strong at $220 million and 2.8 to 1, respectively, at June 30, 1996 as compared to $202 million and 2.9 to 1, respectively, one year earlier.
The Company generated $62 million of cash flow from operations for the 1996 fiscal year, compared to $78 million generated the year before, as net income and non-cash charges to net income were partially reduced by additional investments in working capital. Increases in accounts receivable of $21 million, inventory of $13 million, and accounts payable of $16 million were primarily attributed to supporting the Electronic Contract Assemblies segment. The Company reinvested $44 million into capital investments for the future, including the acquisition of certain assets of ELMO Semiconductor Corporation and all the capital stock of ELMO Semiconductuers SARL and related technological capabilities, production equipment upgrades, facility conversion costs for planned redeployment, facility upgrades, information technology, and trucking fleet upgrades for product delivery. Financing cash flows of $24 million consisted primarily of dividend payments. Net cash flows, excluding the purchases and maturities of short-term investments, amounted to a positive $1 million for the 1996 fiscal year.
The Company plans to maintain a strong liquidity position for the 1997 fiscal year and believes its available funds on hand and cash generated from operations will be sufficient for working capital needs and to fund investments for the Company's future.
NEW ACCOUNTING STANDARD The Company currently accounts for its employee stock option plans using APB Opinion No. 25, Accounting for Stock Issued to Employees, which results in no charge to earnings when options are issued at market value. During 1995, the Financial Accounting Standards Board issued FASB Statement No. 123, Accounting for Stock-Based Compensation, which considers stock options as compensation expense to the Company. Under this new standard, which is effective for the Company's 1997 fiscal year, the Company has the option of accounting for employee stock option plans as it currently does, or it may use the new method. The Company intends to continue to use the existing method, adopting the disclosure requirements of FASB Statement No. 123 effective with the 1997 fiscal year reporting.
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REPORT OF MANAGEMENT
To the Share Owners of Kimball International, Inc.
The management of Kimball International, Inc. is responsible for the preparation and integrity of the accompanying financial statements and other related information in this report. The consolidated financial statements of the Company and its subsidiaries, including the footnotes, were prepared in accordance with generally accepted accounting principles and include judgement and estimates, which in the opinion of management are applied on a conservative basis.
The Company maintains a system of internal controls intended to provide reasonable assurance that assets are safeguarded from loss or material misuse, transactions are authorized and recorded properly, and that the accounting records may be relied upon for the preparation of the financial statements. This system is tested and evaluated regularly for adherence and effectiveness by the Company's staff of internal auditors, as well as the independent public accountants in connection with their annual audit.
The Audit Committee of the Board of Directors, which is comprised of directors who are not employees of the Company, meets regularly with management, the internal auditors and the independent public accountants to review the work performed and to ensure that each is properly discharging its responsibilities. The internal auditors and the independent public accountants have free and direct access to the Audit Committee, and they meet periodically, without management present, to discuss appropriate matters.
Douglas A. Habig Douglas A. Habig President Chief Executive Officer
Gary P. Critser Gary P. Critser Senior Executive Vice President Chief Accounting Officer Secretary
July 26, 1996
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Share Owners of Kimball International, Inc.
We have audited the accompanying consolidated statement of financial condition of Kimball International, Inc. (an Indiana corporation) and subsidiaries as of June 30, 1996 and 1995, and the related consolidated statements of income, cash flows and share owners' equity for each of the three years in the period ended June 30, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Kimball International, Inc. and subsidiaries as of June 30, 1996 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended June 30, 1996, in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the consolidated financial statements taken as a whole. The schedule listed under Item 14 is the responsibility of the Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic consolidated financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic consolidated financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic consolidated financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Chicago, Illinois July 26, 1996
KIMBALL INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation: The consolidated financial statements include the accounts of all domestic and foreign subsidiaries. All significant intercompany balances and transactions have been eliminated in the consolidation.
On March 29, 1996, the Company acquired with available cash on hand, certain assets of ELMO Semiconductor Corporation of California and all of the outstanding capital stock of ELMO Semiconducteurs SARL of France, providers of semiconductor DIE processing, testing, design and packaging. The acquisition was accounted for as a purchase with operating results included in the Company's Consolidated Statement of Income from the date of acquisition. ELMO's results are not material to the consolidated operating results.
Use of Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. While efforts are made to assure estimates used are reasonably accurate based on management's knowledge of current events, actual results could differ from those estimates.
Cash, Cash Equivalents and Short-Term Investments: Cash equivalents consist primarily of highly liquid investments with original maturities of three months or less at the time of acquisition. Short-term investments are cash investments, primarily U.S. Government securities and municipal bonds with maturities exceeding three months at the time of acquisition and are stated at amortized cost. Cash equivalents are stated at cost, which approximate market value.
Foreign Currency Translation: Foreign financial statements (except for Mexico, whose functional currency is the U.S. Dollar) are translated under the provisions of the Financial Accounting Standards Board Statement No. 52, whereby foreign balance sheet accounts are translated at the exchange rate in effect at year-end, income statement accounts are translated at the average rate of exchange during the year, and translation gains and losses are excluded from net income by being recorded as a component of share owners' equity (foreign currency translation adjustment). This component of share owners' equity reflects the cumulative effect of the translation adjustments which are excluded from net income. Financial statements of Mexican operations are translated into U.S. Dollars using both the current and historical exchange rates, with translation gains and losses included in net income.
Inventory Pricing: Inventories are stated at the lower of cost or market value. Cost includes material, labor and applicable manufacturing overhead and is determined using the last-in, first-out (LIFO) method for approximately half of consolidated inventories and the first-in, first-out (FIFO) method for the remaining inventories.
Property, Equipment and Depreciation: Property and equipment are stated at cost. Depreciation is provided over the estimated useful life of the assets using the straight-line method for financial reporting purposes. Maintenance, repairs and minor renewals and betterments are expensed; major improvements are capitalized.
Research and Development: The costs of research and development are expensed as incurred. These costs were approximately, in millions, $10.5 in 1996, $9.4 in 1995, and $8.6 in 1994.
Medical Care and Disability Benefit Plans: The Company is self-insured with respect to certain medical care and disability benefit plans for substantially all employees. The Company carries stop-loss insurance coverage to mitigate severe losses under these plans. The costs for such plans are charged against earnings in the year in which the incident occurred. The Company does not provide benefits under these plans to retired employees.
Income Taxes: Effective in the 1994 fiscal year, the Company changed its method of accounting for income taxes from the deferred method to the liability method as required by Financial Accounting Standards Board Statement No. 109, Accounting for Income Taxes. Under the new rules, deferred taxes are required to be stated at a net realizable value using current statutory tax rates. The cumulative effect of adopting FASB Statement No. 109 increased net income by $1.2 million in 1994. This cumulative effect is included in 1994 Taxes on Income.
Unremitted earnings of foreign subsidiaries have been included in the consolidated financial statements without giving effect to the United States taxes that may be payable on distribution to the United States because it is not anticipated such earnings will be remitted to the United States. If remitted, the additional United States taxes paid would not be material.
Earnings Per Share: Earnings per share are based on the average number of shares outstanding and are computed using the two-class common stock method because of the dividend preference of Class B Common Stock. In the three years ended June 30, 1996, outstanding stock options, if exercised, would not have had a material dilutive effect on earnings per share.
Off-Balance Sheet Risk: The Company engages in several types of financing arrangements with customers, primarily certain guarantees, and also has business and credit risks concentrated in the automotive, computer, telecommunication, consumer electronic and wood industries.
Reclassifications: Certain prior year amounts have been reclassified to conform with the 1996 presentation.
New Accounting Standard: The Company currently accounts for its employee stock option plans using APB Opinion No. 25, Accounting for Stock Issued to Employees, which results in no charge to earnings when issued at fair market value. During 1995, the Financial Accounting Standards Board issued FASB Statement No. 123, Accounting for Stock-Based Compensation (FAS 123), which considers the stock options as compensation expense to the Company. Under this new standard, the Company has the option of accounting for employee stock option plans as it currently does, or it may use the new method. The Company intends to continue to use the existing method, but will adopt the disclosure requirements of FAS 123 effective with the 1997 fiscal year reporting.
NOTE 2 PRODUCT LINE EXIT COSTS
The Company announced a strategic decision during the 1996 fiscal year to cease production and sales of its domestic wholesale piano product line, due to the continuing decline in the domestic piano market. This product line accounted for less than 2% of consolidated sales in 1995 and 1996. A pretax provision of $3,400,000, which equates to a net income effect of $1,870,000, or $0.09 per share, was established during 1996, to cover all estimated costs associated with exiting this product line. The Company ceased production of domestic wholesale pianos as of April 1996, and has substantially completed the sale of inventory as of May 1996, as planned. $660,000 of costs have been applied against this provision as of June 30, 1996.
NOTE 3 INVENTORIES
Approximately half of consolidated inventories are valued using the lower of last-in, first-out (LIFO) cost or market value. The remaining inventories, valued using the lower of first-in, first-out (FIFO) cost or market value, represent approximately 48% of consolidated inventories at June 30, 1996, and 38% at June 30, 1995.
Had the FIFO method been used for all inventories, net income would have been, in millions, $0.7 lower in 1996, $0.9 higher in 1995, and $1.2 higher in 1994. Additionally, inventories would have been, in millions, $19.5 and $21.1 higher at June 30, 1996 and 1995, respectively, if the FIFO method had been used. During 1996, certain inventory quantity reductions caused a liquidation of LIFO inventory values. This liquidation increased net income by $1.5 million, or $0.07 per share.
NOTE 4 PROPERTY AND EQUIPMENT
Depreciation and amortization of property and equipment totaled, in millions, $30.8 for 1996, $27.7 for 1995 and $26.9 for 1994. Imputed interest costs of $345,000, related to the financing of certain construction projects, were capitalized during 1994. No interest costs were capitalized during 1996 or 1995.
NOTE 5 COMMITMENTS - LEASES
Operating leases for certain office, showroom, warehouse and manufacturing facilities, and equipment, which expire 1997-2005, contain provisions under which minimum annual lease payments are, in millions, $4.2, $3.3, $2.4, $1.4 and $1.3 for the five years ended June 30, 2001, respectively, and aggregate $3.6 million from 2002 to the expiration of the leases in 2005. The Company is obligated under certain of the real estate leases to maintain the properties and pay real estate taxes.
Total rental expenses amounted to, in millions, $5.5, $6.6 and $6.9 in 1996, 1995 and 1994, respectively.
NOTE 6 LONG-TERM DEBT
Long-Term Debt is principally obligations under long term capitalized leases. Aggregate maturities of long-term debt for the next five years are in millions, $0.5, $0.5, $0.5, $1.0, and $0.3, respectively, and $0.7 thereafter. Interest rates range from 3.5% to 10.375%. Based upon borrowing rates currently available to the Company, the fair value of the Company's debt approximates the carrying value.
NOTE 7 RETIREMENT PLAN
The Company has a trusteed defined contribution Retirement Plan in effect for substantially all domestic employees meeting the eligibility requirements. Company contributions are based on a percent of net income as defined in the plan; the percent of contribution is determined by the Board of Directors up to specific maximum limits. The plan includes a 401(k) feature, thereby permitting participants to make additional voluntary contributions on a pretax basis. Payments by the Company to the trusteed plan are vested and held for the sole benefit of participants. Total contributions to the Retirement Plan for 1996, 1995 and 1994 were approximately, in millions, $8.6, $9.0 and $9.0, respectively.
Employees of certain foreign subsidiaries are covered by local pension or retirement plans. Annual expense and accumulated benefits of these foreign plans are not significant to the consolidated financial statements.
NOTE 8 INCENTIVE STOCK OPTIONS
On August 11, 1987, the Board of Directors adopted the 1987 Stock Incentive Program, which was approved by the Company's Share Owners on October 13, 1987. Under this plan, 1,800,000 shares of Class B Common Stock were reserved for incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock awards, and performance share awards available for grant to officers and other key employees of the Company, and to members of the Board of Directors who are not employees. Stock options are priced at the fair market value of the stock at the date of grant and are exercisable beginning two years after the date of grant and expire five years after the date of grant. Shares of stock issued under the incentive stock option plan, when exercised, must be held for a five year period before being sold. Stock options are forfeited when employment terminates, except in certain situations. No shares were exercisable during 1995 or 1994. Approximately 275 employees were eligible to participate in the program during 1996 and approximately 110 employees during 1995 and 1994. Approximately 275 employees are expected to be eligible to participate in the program during 1997.
The current Stock Incentive Program will expire in August 1997, prior to the 1997 Annual Share Owners Meeting. As such, a new 1996 Stock Incentive Program has been approved by the Board of Directors and will be presented for approval at the 1996 Annual Share Owners Meeting. If approved, the 1996 plan will reserve 2,100,000 shares of Class B Common Stock, in addition to remaining shares reserved under the 1987 plan, for incentive stock options, nonqualified stock options, stock appreciation rights, and performance share awards available for grant to officers and other key employees of the Company, and to members of the Board of Directors who are not employees. The plan's duration will extend through the year 2005.
NOTE 9 INCOME TAXES
As stated in Note 1, the Company adopted Financial Accounting Standards Board Statement No. 109, Accounting for Income Taxes, effective with the 1994 fiscal year, and therefore uses the liability method to account for income taxes. Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation reserve is provided for deferred tax assets relating to foreign net operating losses, due to uncertainty surrounding the utilization of these deferred tax assets.
NOTE 10 COMMON STOCK
On a fiscal year basis, shares of Class B Common Stock are entitled to an additional $.01 per share dividend more than the dividends paid on Class A Common Stock, provided that dividends are paid on the Company's Class A Common Stock. The owners of both Class A and Class B Common Stock are entitled to share pro-rata, irrespective of class, in the distribution of the Company's available assets upon dissolution.
Owners of Class B Common Stock are entitled to elect, as a class, one member of the Company's Board of Directors. In addition, owners of Class B Common Stock are entitled to full voting powers, as a class, with respect to any consolidation, merger, sale, lease, exchange, mortgage, pledge, or other disposition of all or substantially all of the Company's fixed assets, or dissolution of the Company. Otherwise, except as provided by statute with respect to certain amendments to the Articles of Incorporation, the owners of Class B Common Stock have no voting rights, and the entire voting power is vested in the Class A Common Stock, which has one vote per share. The Habig family owns directly or shares voting power in excess of 50% of the Class A Common Stock of Kimball International, Inc. The owner of a share of Class A Common Stock may, at their option, convert such share into one share of Class B Common Stock at any time.
If cash dividends are not paid on shares of the Company's Common Stock for a period of thirty-six consecutive months, or if at any time the total number of shares of Class A Common Stock issued and outstanding is less than 15% of the total number of issued and outstanding shares of both Class A and Class B Common Stock, then all shares of Class B Common Stock shall automatically have the same rights and privileges as the Class A Common Stock, with full and equal voting rights and with equal rights to receive dividends as and if declared by the Board of Directors.
NOTE 11 QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
NOTE 12 SHORT-TERM INVESTMENTS
The Company classifies its short-term investments in accordance with Financial Accounting Standards Board Statement No. 115, Accounting for Certain Investments in Debt and Equity Securities. Fair values are estimated based upon the quoted market values of those, or similar instruments. Carrying costs reflect the original purchase price, with discounts and premiums amortized over the life of the security.
Held-to-maturity securities consist of U.S. Government and federal agency obligations with fair values and carrying costs of, in thousands, $45,648 and $45,542 at June 30, 1996 compared to $91,395 and $91,005 at June 30, 1995, respectively, and tax-advantaged municipal bonds with fair values and carrying costs of, in thousands, $2,066 and $2,061 at June 30, 1996, compared to $6,561 and $6,529 at June 30, 1995, respectively. Unrealized holding gains and (losses) were, in thousands, $140 and $(29) at June 30, 1996, and $550 and $(128) at June 30, 1995, respectively. All held-to-maturity securities mature within a period of 0-12 months.
Available-for-sale securities consist of U.S. Government and federal agency obligations with fair values and carrying costs of, in thousands, $44,812 and $45,101 at June 30, 1996, and tax-advantaged municipal bonds with fair values and carrying costs of, in thousands, $15,638 and $15,721 at June 30, 1996. Unrealized holding gains and (losses) were, in thousands, $4 and $(376) at June 30, 1996. All available-for-sale securities mature within a period of 13-29 months.
NOTE 13 ACCRUED EXPENSES
NOTE 14 BUSINESS SEGMENT AND GEOGRAPHIC AREA INFORMATION
The Company has three business segments which are listed below.
Furniture and Cabinets: Sales include office, hospitality, healthcare and home furniture; television and stereo cabinets; pianos and piano cases, keys and actions; and other miscellaneous products. Intersegment sales are insignificant.
Electronic Contract Assemblies: Sales include electronic and electro-mechanical products (electronic assemblies) manufactured on a contract basis to customers' specifications. Effective in 1996, this segment began offering semiconductor DIE processing, testing, design and packaging services. There are no intersegment sales. Included in the Electronic Contract Assemblies segment are sales to three customers which accounted for 24%, 23% and 22% of consolidated net sales in 1996, 1995 and 1994, respectively. One customer accounted for 14% of consolidated net sales in 1996 and 1995, and 12% in 1994.
Processed Wood Products and Other: Processed Wood Products include the sales of lumber, dimension lumber, plywood, veneer, and other miscellaneous wood product sales. "Other" sales include plastic components, stamped metal products, carbide cutting tools and related services on cutting tools, and other miscellaneous services, totaling approximately 34% in 1996, 31% in 1995 and 22% in 1994, of the total customer sales of this segment. Intersegment sales include these same basic wood products, assembled components and miscellaneous products, which are used in the final production of office, home, hospitality and healthcare furniture, cabinets and piano cabinets; thus, intersegment sales consist of sales to the Furniture and Cabinets segment.
Intersegment sales are generally priced at cost plus a percentage mark-up, and are generally thought to be marginally less than prices which would be charged for the same product to unaffiliated customers. The eliminations from operating income are various transactions including intercompany profit in inventories. Identifiable assets eliminated generally consist of intercompany profit in inventories and intercompany accounts receivable.
Item 9.
Item 9. - Changes in and Disagreements with Accountants on Accounting and Financial Disclosures None
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PART III
Item 10.
Item 10. - Directors and Executive Officers of the Registrant
Directors The information called for by this item with respect to Directors is incorporated by reference to the material contained in the Registrant's Proxy Statement for its annual meeting of share owners to be held October 22, 1996 under the captions - "Election of Directors"; "Information Concerning the Board of Directors and Committees"; and "Compensation of Executive Officers".
Executive Officers of the Registrant The information called for by this item with respect to Executive Officers of the Registrant is included at the end of Part I and is incorporated herein by reference.
Item 11.
Item 11. - Executive Compensation The information called for by this item is incorporated by reference to the material contained in the Registrant's Proxy Statement for its annual meeting of share owners to be held October 22, 1996 under the caption "Compensation of Executive Officers".
Item 12.
Item 12. - Security Ownership of Certain Beneficial Owners and Management The information called for by this item is incorporated by reference to the material contained in the Registrant's Proxy Statement for its annual meeting of share owners to be held October 22, 1996 under the caption "Share Ownership Information".
Item 13.
Item 13. - Certain Relationships and Related Transactions The information called for by this item is incorporated by reference to the material contained in the Registrant's Proxy Statement for its annual meeting of share owners to be held October 22, 1996 under the caption "Compensation Committee Interlocks and Insider Participation".
PART IV
3. Exhibits See the Exhibit Index on page 42 for a list of the exhibits filed or incorporated herein as a part of this report.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the fourth quarter of the 1996 fiscal year.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 Gary P. Critser GARY P. CRITSER Senior Executive Vice President, Chief Accounting Officer and Secretary September 4, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:
James C. Thyen JAMES C. THYEN Senior Executive Vice President, Chief Financial and Administrative Officer and Treasurer September 4, 1996
Douglas A. Habig DOUGLAS A. HABIG President and Chief Executive Officer September 4, 1996
Gary P. Critser GARY P. CRITSER Senior Executive Vice President, Chief Accounting Officer and Secretary September 4, 1996
Signature Signature
THOMAS L. HABIG* DOUGLAS A. HABIG* Director Director
JOHN B. HABIG* JAMES C. THYEN* Director Director
JOHN T. THYEN* CHRISTINE M. VUJOVICH* Director Director
GARY P. CRITSER* BRIAN K. HABIG* Director Director
* The undersigned does hereby sign this document on my behalf pursuant to powers of attorney duly executed and filed with the Securities and Exchange Commission, all in the capacities as indicated:
Date
September 5, 1996 Ronald J. Thyen RONALD J. THYEN Director
September 6, 1996 Jack R. Wentworth JACK R. WENTWORTH Director
Attorneys-In-Fact