Good morning, ladies and gentlemen. My name is [Bree], and I will be your conference call facilitator today. At this time, I would like to welcome everyone to the Kimball International First Quarter Fiscal 2014 Financial Results Conference Call. All lines have been placed on listen-only mode to prevent any background noise. After the Kimball speakers' opening remarks, there will be a question-and-answer period where Kimball will respond to questions from analysts. (Operator Instructions) As with prior conference calls, today's call, November 5, 2013, will be recorded and may contain forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. Risk factors that may influence the outcome of forward-looking statements can be seen in the Kimball Form 10-K and today's release. The panel for today's call is Jim Thyen, President and Chief Executive Officer of Kimball International; and Bob Schneider, Executive Vice President and Chief Financial Officer. I would like to turn today’s call over to Mr. Jim Thyen. Mr. Thyen, you may begin.

Thank you, [Bree]. Welcome everyone to our first quarter conference call. Our earnings release was issued this morning on the results of the first quarter which ended September 30, 2013. We have posted a financial summary presentation to our website to accompany this conference call. The presentation can be found on our Investor Relations website along side the Webcast link. I will start with my overview comments followed by Bob's financial review. We will then open the call to your questions. We had an excellent start to the fiscal year 2014 with increased sales and net income in the first quarter in both of our segments when compared to last year. We were especially pleased with the improved operating performance in our furniture segment. During the last couple of conference calls, we acknowledge the disappointment with our furniture segment operating results and reaffirmed our commitment to returning this segment to profitability. We have very talented and innovative teams within our furniture group that are customer focused, process disciplined and perform exceptionally well. I would like to remind all that the issues we encountered were not widespread throughout the segment. The issues were isolated within certain parts of the segment where the effects of the slow economic recovery have been more pronounced. I will take a few minutes to give you some perspective on where the focus of our efforts has been. First, one area of our business is very heavily weighted toward sales of the furniture to the federal government. As we've seen throughout the industry, sales of the federal government have declined more than most of the other sectors. Since the void left by lower government sales was so deep in certain areas of our business, it is taking a little longer to fill that void. We have made…

Thanks, Jim. Our first quarter consolidated net sales were $317.4 million, which is an increase of 10% from the first quarter of last year. Net sales in our EMS segment increased 7% compared to the first quarter of last year with double-digit sales increases in the automotive and industrial markets. Sales to customers in the public safety industry declined compared to last year, while sales to the medical industry remained flat. Sales in the Furniture segment increased 14% in the first quarter compared to last year on increases of both, hospitality, furniture and office furniture. We experienced growth in all of our office furniture vertical markets except for a slight decline in the federal and state government markets. It was good to see such broad-based increases over most of our vertical markets. And sequentially Furniture segment sales for the first quarter increased 13% over the fourth quarter of last year. We have spoken a lot in prior calls of the challenges in the government sales area. We were very happy to see that while government sales were down slightly compared to year ago, first quarter government sales were actually up compared to the fourth quarter of fiscal ‘13. So we are hopeful we have seen the bottom of this market. First quarter consolidated gross profit as a percent of sales increased slightly compared to last year. Gross profit as a percent of sales declined slightly in both of our segments. However, we ended up the quarter over the prior year on a consolidated basis because of the shift in sales mix between our two segments. We had greater furniture sales which carries a higher gross profit. First quarter gross profit as a percent of sales in the EMS segment declined one-tenth of a percentage point compared to the first quarter…

(Operator Instructions) And the first question comes from Josh Borstein of Longbow Research. Mr. Borstein, please go ahead with your question.

Thanks, Jim and Bob. Thank you for taking my questions. In the furniture segment, you grew in both office and hospitality, was there a big difference between the two?

The largest part of the increase was in hospitality side of the business.

Okay. Thanks. And you mentioned, you saw growth in all office furniture verticals except in the federals and state government? Can you discuss in a bit more details which verticals are we extending right now for you?

Educational was very, very strong, but actually they all did very, very well, except for federal and state which were just down slightly. But the largest increase was in education.

Okay. Thanks for that. And then, I know, you had mentioned that the slight decline in federal government, I know it was down 10% year-over-year last quarter, so obviously we are seeing some improvement here and then you noted also some sequential improvement which I think now the second quarter in a row? But is it typical to see sequential improvement in 1Q, given the budget flush that normally incurs in the quarter?

Yeah. Typically this quarter and next quarter you see some improvement, but way the federal orders had been the last roughly seven or eight quarters, the normal trends don’t necessarily apply and that’s why we are still very pleased to see this quarter being up over the four quarter of fiscal ’13.

Okay. And did you see any budget flush at all this year?

I don’t know if I call it budget flush, but we -- as I said, we were up over where we were at Q4, so I guess that might imply -- obviously its improvement, so how you describe it, I don’t know.

All right. And do you think the government, work will still be done this year or do you expect sales to turn positive at fiscal ’14?

Well, Josh, I really do not know. With all the government turmoil, it’s very, very difficult to estimate that.

Okay. And just the last one from me, did you notice any orders or drop off in orders the last two weeks in September either in furniture or EMS, I know and I know that was the case in some consumer categories like appliances, but wasn’t sure of similar pattern might showed up in your businesses as well?

We noticed a little uncertainty in our demand across all of our businesses in the last two weeks. There is nothing that there we can put a handle on that we can predict a trend or pattern.

Is it seems just to be kind of a (inaudible) two weeks with bounce back after that or did that trend kind of persist into October?

Well, there is really no pattern we can put to it. There is optimism but it’s cautious and many of our customers seem to want a shot as possible time to make their decisions to commit.

I appreciate it. Thanks for taking the time. Good luck.

Thanks Josh.

The next question comes from Todd Schwartzman of Sidoti & Company. Mr. Schwartzman, please go ahead with your question. Todd Schwartzman - Sidoti & Company: Hi. Good morning Jim. Good morning, Bob. Just like to expand that question -- the last question just a bit and say, it was beyond that last two weeks of September did your uncertainty predate that last couple of weeks in the quarter?

We noticed that many of our customers are managing the balance sheet very well, very closely and focused on liquidity and focused on value. And some times that is causing decisions to move more towards the end of the month to take delivery of products in both segments. And we think it is tied to the general uncertainty of the debates that are going on at government levels about fiscal spending, fiscal debt and other elements of regulation and taxation. But we have not seen a trend that we would say is going negative. So we are optimistic but we are cautious. Todd Schwartzman - Sidoti & Company: Given that that really kind of sounds like the cautiously optimistic bell that you sounded last quarter, it seems that uncertainty, correct me if I am wrong, was more or less prevalent throughout the quarter, was that not the case?

It’s similar except I have flip the words around intentionally, feel a little bit more optimism. But I think volatility and change is normal for our climate and it will vary based upon the vertical that’s being impacted at the moment. Todd Schwartzman - Sidoti & Company: Okay. Just wanted to drill down a little bit on the differential verticals you’ve made on a number of references, both on the call and in the press release too that state and federal governments modest decline or down slightly. Was that in the aggregate or were each federal and state probably down slightly and what was that on a quantifiable basis?

Todd, I thought both were down very, very small on average about, maybe 1.5 to 2 percentage points and both were very close to that. So, I would say they were down about the same. Todd Schwartzman - Sidoti & Company: Okay. That kind of information is most helpful, so thanks for that, Bob. And just to see where we stand now, what either on a percent of Furniture segment sales or consolidated tick or pick, what do you refer for Q1, what did federal GSA represents and what the state, local governments represent?

Both federal and state are in that roughly 10% to 15% range and that’s down considerably obviously from a few years ago. Todd Schwartzman - Sidoti & Company: That’s of this segment?

Yeah. Of Furniture -- of office furniture. That’s roughly the make up of those verticals, which we think is actually a nice balanced and planned relatively to the other verticals, so not overlaying in anyone of those. Todd Schwartzman - Sidoti & Company: Okay. So federal and state collectively is about 10% to 15% of office furniture?

No, each is that. Each is roughly about 10% to 15% area. Todd Schwartzman - Sidoti & Company: Okay. Okay. And on the hospitality side, you said that was the biggest driller, how much was that up?

Todd, we haven’t mentioned that percent for competitive reasons but it was up considerably and it was up higher than the office furniture market. Todd Schwartzman - Sidoti & Company: Okay. So, I can’t ask whether it was double-digit?

No. Todd Schwartzman - Sidoti & Company: Okay. As far as -- you’ve talked about the management changes, obviously a lot of the salary increase in the 1Q was going to stick going forward. But can you talk about what remains constant of the incremental G&A from 1Q to 2Q, maybe talk about what if any of the incentive comp dissipates a little bit?

I’m just thinking off my head, Todd. In terms of changes relative to a year ago, the incentive comp is higher because the profitability is higher. So as you look at future quarters, relative to year ago, that comp will be additional costs, outside of that there is not unusual things in the quarter outside of the write-down on the airplane that would not repeat in future quarters.

Only write-down on the inventory would not repeat.

Yes, the $600,000 write-down on inventory that we had in electronics. We certainly hope it would not repeat. Todd Schwartzman - Sidoti & Company: Okay. Where are you now with freight cost, where are they headed?

The freight costs have been running higher than prior year. As how it looks now relative to next quarter I would suggest it’s probably going to be similar to where it was in Q1. Fuel prices are coming down and it may have tendency to be a little bit lower but I don’t see a significant change. Todd Schwartzman - Sidoti & Company: Okay. And with respect to order rates, you gave the number for the segments which sounds very solid. Can you give some color by vertical, by hospitality versus office versus government?

Todd, again, we don’t break that down but the order increase on both markets were very, very strong, bringing us to that 18%, and then also bringing us to a backlog level at the end of the quarter that’s up 39% from a year ago. But we don’t -- for competitive reasons don’t breakout the difference in those markets. Todd Schwartzman - Sidoti & Company: Got it. What percent of your hospitality sales is international, not by customers but yeah I mean just based on the end user if you will?

In terms of the end user, it’s very small. It’s less than 5% of our sales. Todd Schwartzman - Sidoti & Company: Now given that number of your customers have international operations, is there any reason why they prefer to bid that out locally to foreign entities or why would you not get all of the business from some of these large multinationals?

It’s not that we’re not getting any of that business but a lot of that business is in various countries product made near those countries, not always with the same supply base that we have. But that -- our focus has been very much tied of the last few years frankly to grow our business in United States then look internationally. And as we've been doing that, we periodically are doing exactly what you've indicated. But today it’s been a small percentage of the total. Todd Schwartzman - Sidoti & Company: Sounds good. And other then growing the top line for -- sticking with furniture for a second, what additional actions will you take, would you plan to take in let’s say the next 12 months to improve the furniture profitability?

We’re going to stay focused on continuous improvement Lean Sigma, lot of work with our suppliers, our supply chain and just continuously focus on keeping the breakeven low. We will increase our investments in product development and are marketing and our approach to the marketplace to continue to serve those customers better to expand our distribution of our dealer shows. Todd Schwartzman - Sidoti & Company: Jim, with respect to the first quarter results that you just announced, you cited benefits of the -- marketing the increased marketing activities. Are you getting that sudden payoffs or is there something else going on that led to the improvement?

I’m not sure. I understand your question and what’s really going on is the investment in our team talent, sharpening up our listening and our understanding and what our dealers need and want to be successful and just focusing on the basics of delivering that to our selling organization and our dealers. Todd Schwartzman - Sidoti & Company: Got it. Just wanted turn to EMS now, we’re looking at second quarter, do you expect to get that at 4% of our margin goal?

As it was this quarter, the 4% goal is heavily dependent on the top line on the volume. We have excellent cost control and operational excellence. We’re working closely with our customers and will -- that demand will vary month-to-month. So we’re optimistic to get there but we’re not totally positive we will, based upon the top line. Todd Schwartzman - Sidoti & Company: Okay. What can you tell us about new wins for the quarter by sector?

By sector within the electronics that you’re talking about now. Todd Schwartzman - Sidoti & Company: Correct.

The demand in automotive, as I said in my opening comments is remaining strong here in the U.S. and in China. And of course, the new wins there of new programs are consistent, medical is stable. Industrial, we still haven't seen the return of the demand as we saw it a year ago in terms of heating and cooling and ventilating equipment but our customers are continuing to invest in new products and they are growing in their commitment. We’re optimistic about that. Public safety is a little tight to cover in agencies and the spending. So there is variation. There is variation month-to-month and quarter-to-quarter. But we’re positive about our momentum and our ability to perform and our high reputation for quality and service. So we see it as bright and optimistic. Todd Schwartzman - Sidoti & Company: On the medical side for this first quarter, was the flat result due primarily to regulatory issues or concerns or was there -- was the bar set high, the prior year comp pretty much to co-operate?

There is concern in the marketplace, particularly here in the U.S. on the impact of the tax on medical devices. And so there is a lot of work being down by our customers on how to mitigate that and that is I believe, affecting some of their outlook and their investment in R&D. Todd Schwartzman - Sidoti & Company: For the first quarter, what percentage of your EMS sales were represented by new programs and new customers that you guys won in the prior two years?

I don't know that I can give you a figure there. I think it’s important to understand that the whole rhythm and characteristic in EMS is, it’s one of continuous new product launches and continuous existing program wind down. I don’t know that I can give you a precise number on the new products in the first quarter, new programs. Todd Schwartzman - Sidoti & Company: And in terms of reporting on new wins, just going forward Jim, do you ever intend to quantify on a quarterly basis or is it just kind of confusing to talk about such a -- such a small -- short duration?

Well, we certainly report on the large programs, major named account that award us business. But as a ordinary routine, it will be quite confusing if we try to report every new product introduction. As the cycles vary in length in time, automotive probably being the longest. Sometimes medical and public safety are much shorter. It would be pretty hard to have appropriate context and perspective if we did that. Todd Schwartzman - Sidoti & Company: I understand that. I think it's precisely for that reason that I wanted to just take a step back and just say look at the past two years new business won, what -- was that 35% of your total revenue for the segment for the quarter or even on a trailing 12-month basis, just kind of see the aggregate impact of new business won in the last couple of years?

Okay, we understand. Todd Schwartzman - Sidoti & Company: Okay. I guess last question, with regard to EMS, how much business rolls off between now and at the end of fiscal ‘15?

The end of fiscal 15, we’ve got -- there's one contract with our largest customer that rolls off starting a year from now. And note, when that happens, Todd, it doesn't just go to zero, it turns to a service, production levels slowly wind down but beyond that -- that’s a largest obviously. But given JCI, it is listed in our 10-K as our -- one of our largest customers. Beyond that there's -- I’m sure there are minor ones but going to Jim's point with the new product introductions and going into life that such a normal part of portfolio -- I'm not privy to what other amounts that might be after over the next five quarters, eight quarters. Todd Schwartzman - Sidoti & Company: Sounds good. Thank you very much.

Thank you.

(Operator Instruction) There are no further questions at this time. I would like to turn the conference back over to Mr. Thyen.

Okay, Bree. Thank you and that brings us to the end of today's call. We do appreciate your interest and look forward to speaking with you on the next call. Have a great day.

At this time, listeners may simply hang up to disconnect from the call. Thank you and have a nice day.