Item 1 - Business
General
	As used herein, the term "Company" refers to Kimball International, Inc., 	the Registrant, and its subsidiaries and reference to a year relates to a 	fiscal year, ended June 30 of the year indicated, rather than a calendar 	year unless the context indicates otherwise. Additionally, references to the 	first, second, third, and fourth quarters refer to those respective quarters 	of the fiscal year indicated.
The Company was incorporated in Indiana in 1939. The corporate 	headquarters is located at 1600 Royal Street, Jasper, Indiana.
The Company 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 to a 	variety of industries globally. The EMS segment, formerly named the 	Electronic Contract Assemblies segment, was renamed during fiscal year 2008 	to more accurately reflect the focus of the segment. The Furniture segment 	provides furniture for the office and hospitality industries, sold under the 	Company's family of brand names. Production currently occurs in 	Company-owned or leased facilities located in the United States, Mexico, 	Thailand, China, Poland, Ireland, and the United Kingdom. In the United 	States, the Company has facilities and showrooms in ten states and the 	District of Columbia.
Sales by Product Line and Segment
Sales from continuing operations by segment, after elimination of 	intersegment sales, for each of the three years in the period ended June 30, 	2008 were as follows:
(Amounts in Thousands)
Furniture Segment
Branded Furniture Product Line
			$ 624,836
$ 			602,903
$ 			573,759
Contract Private Label Furniture Product Line
			
11,059
38,830
Total Furniture Segment
			$ 624,836
$ 			613,962
$ 			612,589
Electronic Manufacturing Services Segment
			727,149
672,968
496,706
Unallocated Corporate
			
			
Kimball International, Inc.
			$1,351,985
			$1,286,930
			$1,109,549
Sales of contract private label products decreased in conjunction with 	the planned exit of this product line.
Financial information by segment and geographic area for each of the 	three years in the period ended June 30, 2008 is included in 	 	Note 14 - Segment and Geographic Area Information of Notes to 	Consolidated Financial Statements and is incorporated herein by reference. 	
Segments
Electronic Manufacturing Services
Overview
The Company entered the electronic manufacturing services market in 1985 	with knowledge acquired from the production of electronic organs, which were 	first produced in 1963. The Company's focus is on electronic assemblies that 	have high durability requirements such as automotive, medical, industrial, 	and public safety applications. Electronics and electro-mechanical products 	(electronic assemblies) are sold globally on a contract basis and produced 	to customers' specifications. The Company's engineering and manufacturing 	services primarily entail the insertion and attachment of microchips and 	other electronic capacitors and conductors in ever more complex and smaller 	designs onto multi-layered circuit boards, the production of wiring 	harnesses and other electronic equipment, assembling such into subassemblies 	or final products, testing of products under a series of harsh conditions, 	and assembly and packaging of electronic and other related products, all to 	the specifications and designs of customers. Integrated throughout this 	segment is customer program management over the life cycle of the product 	along with supply chain management, which affords customers the opportunity 	to focus their attention and resources to sales, marketing, and product 	development as they sell their unique end products under their brand name 	into various markets and industries.
In an effort to improve profitability and increase Share Owner value 	while remaining committed to its business model of being market driven and 	customer centered, during the third quarter of fiscal year 2008, the Company 	approved a restructuring plan designed to more appropriately align its 	workforce in a changing business environment. Within the Company's EMS 	segment, the restructuring activities included realigning engineering and 	technical resources closer to the customer and streamlining administrative 	and sales processes. The plan also included reducing corporate personnel 	costs to more properly align with the overall sales mix change within the 	Company. This plan was substantially complete as of the end of fiscal year 	2008.
During the third quarter of fiscal year 2007, the Company acquired 	Reptron Electronics, Inc. ("Reptron"), a U.S. based electronics 	manufacturing services company which provided engineering services, 	electronics manufacturing services, and display integration services. 	Reptron had four manufacturing operations located in Tampa, Florida; 	Hibbing, Minnesota; Gaylord, Michigan; and Fremont, California. The 	acquisition increased the Company's capabilities and expertise in support of 	the Company's long-term strategy to grow business in the medical electronics 	and high-end industrial sectors. With the acquisition, the Company 	recognized it would have excess capacity in North America. Management 	developed a plan as of the acquisition date to consolidate capacity within 	the acquired facilities. Based on a review of future growth potential in 	various geographies and input from existing customers regarding future 	capacity needs, during the fourth quarter of fiscal year 2007, the Company 	finalized a restructuring plan within the EMS segment to exit the 	manufacturing facility located in Gaylord, Michigan. Production ceased 	during the second quarter of fiscal year 2008, and the facility is currently 	held for sale. During the second quarter of fiscal year 2008, the Company 	approved a restructuring plan to further consolidate its EMS facilities that 	resulted in the exit of the manufacturing facility located in Hibbing, 	Minnesota. Production at the Hibbing facility ceased in the fourth quarter 	of fiscal year 2008, and the Company's lease of the Hibbing facility ends in 	December 2008. A majority of the Gaylord and Hibbing business transferred to 	several of the Company's other worldwide EMS facilities.
During the fourth quarter of fiscal year 2006, the Company acquired an 	operation in Wales, United Kingdom, which currently provides manufacturing 	services for medical diagnostic systems such as assembling and packaging 	medical test strips and assembling and testing of electronic diagnostic 	testers. This facility is FDA certified and was acquired to support the 	Company's efforts to capitalize on growth opportunities in the medical 	market. The Company also acquired a printed circuit board assembly operation 	in Longford, Ireland, during the fourth quarter of fiscal year 2006. 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. As part of the plan, 	the Company will consolidate its EMS facilities located in Longford, 	Ireland; Wales, United Kingdom; and Poznan, Poland; into a new, larger 	facility in Poznan, which is expected to improve margins in the very 	competitive EMS market. The plan includes the sale of the existing Poland 	building at a gain which will partially fund the consolidation activities. 	The plan is to be executed in stages with a projected completion date of 	December 2011.
During the third quarter of fiscal year 2006, the Company approved a 	restructuring plan within the EMS segment to exit a manufacturing facility 	located in Northern Indiana. As part of this restructuring plan, the 	production for select programs was transferred to other locations within 	this segment. Operations at this facility ceased in the Company's first 	quarter of fiscal year 2007, and the facility was sold during fiscal year 	2008. The decision to exit this facility was a result of excess capacity in 	North America.
	Late in fiscal year 2007, the Company began production in a new 	manufacturing facility built in Nanjing, China.
The acquisitions are discussed in further detail in "Management's 	Discussion and Analysis of Financial Condition and Results of Operations" in 	 	Item 7 and in 	 	Note 2 - Acquisitions of Notes to Consolidated Financial Statements. 	Additional information regarding the Company's restructuring activities is 	located in "Management's Discussion and Analysis of Financial Condition and 	Results of Operations" in 	 	Item 7 and in 	 	Note 17 - Restructuring Expense of Notes to Consolidated Financial 	Statements.
Sales revenue of the EMS segment is generally not affected by seasonality 	with the exception of the buying patterns of automotive industry customers 	whose purchases of the Company's product are generally lower in the first 	quarter of the Company's fiscal year. Fiscal year 2008 net sales to 	automotive industry customers approximated one-third of the Company's EMS 	segment net sales.
Locations
As of June 30, 2008, the Company's EMS segment consisted of ten 	manufacturing facilities with two located in Indiana and one in each of 	Florida, California, China, Mexico, Thailand, Poland, Ireland, and the 	United Kingdom. During fiscal year 2008, the Company ceased production in 	one facility in Michigan and one facility in Minnesota pursuant to 	restructuring plans. The contract electronics manufacturing industry in 	general has been faced with excess capacity. The Company has not been immune 	to the economic slowdown and continually evaluates its operations as to the 	most optimum capacity and service levels by geographic region. A plan was 	approved to consolidate the Company's EMS facilities located in Ireland, 	Wales, and Poland into a new, larger facility in Poland over the next 	several fiscal years. Operations located outside of the United States 	continue to be an integral part of the Company's EMS segment. See 	 	Item 1A
Item 1A - Risk Factors for information regarding financial and 	operational risks related to the Company's international operations.
Marketing Channels
Manufacturing and engineering services are marketed by the Company's 	business development team. Contract electronic assemblies are manufactured 	based on specific orders, generally resulting in a small amount of finished 	goods consisting primarily of goods awaiting shipment to specific customers. 	
Major Competitive Factors
Key competitive factors in the EMS market are competitive pricing, 	quality and reliability, engineering design services, production 	flexibility, on-time delivery, customer lead time, test capability, and 	global presence. Growth in the EMS industry is created through the 	proliferation of electronic components in today's advanced products along 	with the continuing trend of original equipment manufacturers in the 	electronics industry to subcontract the assembly process to companies with a 	core competence in this area. The nature of the EMS 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. The segment continues to experience margin 	pressures related to an overall excess capacity position in the EMS industry 	and more specifically this segment's new program launches and 	diversification efforts. The continuing success of this segment is dependent 	upon its ability to replace expiring customers/programs with new 	customers/programs.
The Company does not believe that it, or the industry in general, has any 	special practices or special conditions affecting working capital items that 	are significant for understanding the EMS segment other than fluctuating 	inventory levels which may increase in conjunction with transfers of 	production among facilities.
Competitors
The EMS industry is very competitive as numerous manufacturers compete 	for business from existing and potential customers. The Company's 	competition includes EMS companies such as Benchmark Electronics, Inc., 	Jabil Circuit, Inc., and Plexus Corp. The Company does not have a 	significant share of the EMS market and was ranked the 16th 	largest EMS provider for calendar year 2007 by Manufacturing Market Insider 	in their March 2008 edition.
Raw Material Availability
Raw materials utilized in the manufacture of contract electronic products 	are generally readily available from both domestic and foreign sources, 	although from time to time the industry experiences shortages of certain 	components due to supply and demand forces, combined with rapid product life 	cycles of certain components. Raw materials are normally acquired for 	specific customer orders and may or may not be interchangeable among 	products. Inherent risks associated with rapid technological changes within 	this contract industry are mitigated by procuring raw materials, for the 	most part, based on firm orders. The Company may also purchase additional 	inventory to support transfers of production between manufacturing 	facilities.
Customer Concentration
While the total electronic assemblies market has broad applications, the 	Company's customers are concentrated in the automotive, medical, industrial, 	and public safety industries. Included in this segment are a significant 	amount of sales to Bayer AG affiliates and TRW Automotive, Inc. Sales to 	these two customers accounted for the following portions of consolidated net 	sales and EMS segment net sales:
The fiscal year 2008 reduction in sales to Bayer AG as compared to fiscal 	year 2007 is related to two factors. First, in January 2007, Bayer AG sold 	its diagnostics unit to Siemens AG, and thus a portion of the Company's net 	sales which were formerly to Bayer AG affiliates in fiscal year 2007 are now 	to Siemens AG. Second, net sales to Bayer AG affiliates were impacted as a 	result of the Company's selling price reduction effective January 2007 to 	Bayer AG affiliates which was offset by an equal reduction in the cost of 	raw materials purchased from Bayer AG affiliates. The fiscal year 2007 	increase in sales to Bayer AG as compared to fiscal year 2006 resulted from 	the acquisition of Bayer Diagnostics Manufacturing Limited which occurred 	during the fourth quarter of fiscal year 2006. The Company also continues 	to focus on diversification of the EMS segment customer base. The reduced 	TRW Automotive, Inc. percentages of segment and consolidated net sales were 	a result of certain TRW Automotive, Inc. products reaching end of life in 	addition to the higher total net sales base resulting from the acquisitions.
Furniture
Overview
Since 1950, the Company has produced wood furniture and 	cabinets. During fiscal year 2007, the Company ceased manufacturing contract 	private label products as it increased focus on core markets. These core 	markets include office furniture sold under the Kimball Office and National 	Office Furniture brand names and hospitality furniture sold under the 	Kimball Hospitality brand name. Kimball Office and National Office Furniture 	provide office furniture solutions for private offices, open floor plan 	areas, conference rooms, training rooms, lobby, and lounge areas with a vast 	mix of wood, metal, laminate, paint, and fabric options. Products include 	desks, credenzas, seating, tables, systems/dividers, filing and storage 	units, and accessories such as audio visual boards and task lighting. 	Kimball Office products tend to focus on the more complex customer 	solutions, and National Office Furniture products are geared more to the 	mid-market/less complex/lower cost aspect of the office furniture market. 	Kimball Hospitality provides furniture solutions for hotel properties, 	condominiums, and mixed use developments. Products include headboards, 	desks, tables, dressers, entertainment centers, chests, wall panels, 	upholstered seating, task seating, and vanities. Also included in this 	segment are the Company's trucking fleet and customer fulfillment centers, 	which handle primarily product of this segment; but certain logistics 	services, such as backhauls, are sold on a contract basis.
Sales revenue of the Furniture segment is generally not 	affected by seasonality with the exception of certain product lines which 	are impacted by the buying patterns of customers such as the U.S. Federal 	Government whose purchases of the Company's product are generally higher in 	the first half of the Company's fiscal year.
As part of the workforce reduction restructuring activities discussed in 	the EMS segment above, within the Company's Furniture segment, the 	restructuring activities included realigning information technology and 	procurement resources closer to the customer and streamlining administrative 	and sales processes to drive further synergies afforded by the alignment of 	the sales and manufacturing functions within this segment. Related 	expenditures are primarily for employee severance and transition costs. This 	plan was substantially complete as of the end of fiscal year 2008 with a few 	activities expected to occur in the first half of fiscal year 2009 in the 	Furniture segment.
In conjunction with the cessation of manufacturing contract private label 	products, during fiscal year 2007 the Company approved a plan to exit the 	production of wood rear projection television ("PTV") cabinets and stands 	within the Furniture segment, which resulted in the exit of the Company's 	Juarez, Mexico, operation. For some time, the market demand for wood rear 	PTV cabinets had been declining due to the market shift to plasma and LCD 	large-screen televisions. As a result of ceasing operations at this 	facility, financial results associated with the Mexican operations in the 	Furniture segment were classified as discontinued operations beginning in 	the quarter ended December 31, 2006, and all prior periods were restated. 	The discontinued operations are discussed in further detail in "Management's 	Discussion and Analysis of Financial Condition and Results of Operations" in 	 	Item 7 and in 	 	Note 18 - Discontinued Operations of Notes to Consolidated Financial 	Statements.
As part of the Company's plan to sharpen focus and simplify business 	processes within the Furniture segment, the Company announced during the 	first quarter of fiscal year 2006, a plan which included consolidation of 	administrative, marketing, and business development functions to better 	serve the segment's primary markets. Expenses related to this plan include 	software impairment, accelerated amortization, employee severance, and other 	consolidation costs. This plan was complete as of June 30, 2008.
	Additional information regarding the Company's restructuring activities is 	located in "Management's Discussion and Analysis of Financial Condition and 	Results of Operations" in 	 	Item 7 and in 	 	Note 17 - Restructuring Expense of Notes to Consolidated Financial 	Statements.
Locations
The Company's furniture products as of June 30, 2008 were primarily 	produced at twelve plants: nine located in Indiana, two in Kentucky, and one 	in Idaho. In addition, select finished goods are purchased from external 	sources. The Company continually assesses manufacturing capacity and has 	adjusted such capacity in recent years.
A facility in Indiana houses an Education Center for dealer and employee 	training, a Research and Development Center, and a Corporate Showroom for 	product display. Office space is leased in Dongguan, Guangdong, China, to 	facilitate sourcing of product from Pacific Rim countries. Office furniture 	showrooms are maintained in ten cities in the United States.
Marketing Channels
Kimball Office and National brands of office furniture are marketed 	through Company salespersons to end users, office furniture dealers, 	wholesalers, rental companies, and catalog houses throughout North America 	and on an international basis. Hospitality furniture is marketed to end 	users using independent manufacturers' representatives.
Major Competitive Factors
The Company's furniture is sold in the office furniture and hospitality 	furniture industries. These industries have similar major competitive 	factors which include price in relation to quality and appearance, the 	utility of the product, supplier lead time, reliability of on-time delivery, 	and the ability to respond to requests for special and non-standard 	products. The Company offers payment terms similar to industry standards and 	in unique circumstances may allow alternate payment terms.
Certain industries are more price sensitive than others, but all expect 	on-time, damage-free delivery. The Company maintains sufficient finished 	goods inventories to be able to offer prompt shipment of certain lines of 	Kimball Office and National office furniture as well as most of the 	Company's own lines of hospitality furniture. The Company also produces 	contract hospitality furniture to customers' specifications and shipping 	timelines. Many office furniture products are shipped through the Company's 	delivery system, which the Company believes offers it the ability to reduce 	damage to product, enhance scheduling flexibility, and improve the 	capability for on-time deliveries.
The Company does not believe that it, or the industry in general, has any 	special practices or special conditions affecting working capital items that 	are significant for understanding the Company's business. The Company does 	receive advance payments on select furniture projects primarily in the 	hospitality industry.
Competitors
There are numerous manufacturers of office and hospitality furniture 	competing within the marketplace, with a significant number of competitors 	offering similar products. The Company believes, however, that there are a 	limited number of relatively large manufacturers of wood office and 	hospitality furniture. 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 office 	furniture market.
The Company's competition includes office furniture manufacturers such as 	Steelcase, Inc., Herman Miller, Inc., Knoll, Inc., Haworth, Inc., and HNI 	Corporation and hospitality furniture manufacturers such as American of 	Martinsville, Fleetwood Fine Furniture, Inc., Thomasville Furniture 	Industries, Inc., and Fairmont Designs.
Raw Material Availability
Certain components used in the production of furniture are manufactured 	internally within the segment and are generally readily available, as are 	other raw materials used in the production of wood furniture. With the 	exception of rolled steel, raw materials used in the manufacture of metal 	office furniture have been readily available in the global market. While the 	Company has been able to maintain an appropriate supply of rolled steel to 	meet demand, general supply limitations in the market are impacting costs. 	Certain fabricated seating components and wood frame assemblies as well as 	finished furniture products, which are generally readily available, are 	sourced on a global scale in an effort to provide a quality product at the 	lowest total cost.
Other Information
Backlog
	At June 30, 2008, the aggregate sales price of production pursuant to 	worldwide open orders, which may be canceled by the customer, was $306.8 	million as compared to $287.3 million at June 30, 2007. Open orders as of 	June 30, 2007 have been adjusted to be consistent with the calculation of 	open orders as of June 30, 2008.
(Amounts in Millions)
June 30, 2008
June 30, 2007
Furniture
$ 101.0
			
$ 95.3
EMS
205.8
			
192.0
Total Backlog of Continuing Operations
$ 306.8
			
$ 287.3
Substantially all of the open orders as of June 30, 2008 are expected to 	be filled within the next fiscal year. Open orders generally may not be 	indicative of future sales trends.
Research, Patents, and Trademarks
	Research and development activities include the development of manufacturing 	processes, major process improvements, new product development and product 	redesign, information technology initiatives, and electronic and wood 	related technologies.
Research and development costs were approximately:
The Company owns the Kimball (registered trademark) trademark, which it 	believes is significant to its office furniture, hospitality furniture, and 	electronics businesses, and owns the following patent and trademarks which 	it believes are significant to the Furniture segment only:
Registered Trademarks: National. Furniture with 	Personality, Cetra, Footprint, Traxx, Interworks, Xsite, Definition, Skye, 	WaveWorks, Senator, and Prevail.
Trademark: President, Hum. Minds at Work, 	Integra Clear, Pura
Patent: Traxx
The Company also owns certain patents and other trademarks and has 	certain other trademark and patent applications pending, which in the 	Company's opinion are not significant to its business. Patents owned by the 	Company expire at various times depending on the patent's date of issuance. 	
Environment and Energy Matters
	The Company's operations are subject to various foreign, 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. Reinforcing the Company's commitment to the environment, 	five of the Company's showrooms have been designed under the guidelines of 	the U.S. Green Building Council's LEED (Leadership in Energy and 	Environmental Design) for Commercial Interiors program. The Company believes 	that continued compliance with foreign, 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, 2010, 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, a portion of energy requirements 	are satisfied internally by the use of the Company's own wood waste 	products.
Employees
			
June 30, 2008
June 30, 2007
			United States
			4,955
			
			5,540
			Foreign Countries
			2,240
			
			2,020
			 Total Full-Time Employees of Continuing Operations
			7,195
			
			7,560
All of the Company's foreign operations are subject to collective 	bargaining arrangements, many mandated by government regulation or customs 	of the particular countries. The Company believes that its employee 	relations are good.
Available Information
We make available free of charge through our website, www.ir.kimball.com, 	our annual report on Form 10-K, quarterly reports on Form 10-Q, current 	reports on Form 8-K, proxy statements, and all amendments to those reports 	as soon as reasonably practicable after such material is electronically 	filed with, or furnished to, the Securities and Exchange Commission (SEC). 	All reports we file with the SEC are also available via the SEC website, 	www.sec.gov, or may be read and copied at the SEC Public Reference Room 	located at 100 F Street, N.E., Washington, D.C. 20549. Information on the 	operation of the Public Reference Room may be obtained by calling the SEC at 	1-800-SEC-0330. The Company's Internet website and the information contained 	therein or incorporated therein are not intended to be incorporated into 	this Annual Report on Form 10-K.
Forward-Looking Statements
This document may contain certain forward-looking statements. These are 	statements made by management, using their best business judgment based upon 	facts known at the time of the statements or reasonable estimates, about 	future results, plans, or future performance and business of the Company. 	Such statements involve risk, uncertainty, and their ultimate validity is 	affected by a number of factors, both specific and general. They should not 	be construed as a guarantee that such results or events will, in fact, occur 	or be realized. The statements may be identified by the use of words such as 	"believes", "anticipates", "expects", "intends", "projects", "estimates," 	and similar expressions. It is not possible to foresee or identify all 	factors that could cause actual results to differ from expected or 	historical results. Additional information regarding risk factors is 	available in "Item 	1A - Risk Factors" of this report. The Company makes no commitment to 	update these factors or to revise any forward-looking statements for events 	or circumstances occurring after the statement is issued, except as required 	in current and quarterly periodic reports filed with the SEC or otherwise by 	law.
At any time when the Company makes forward-looking statements, it desires 	to take advantage of the "safe harbor" which is afforded such statements 	under the Private Securities Litigation Reform Act of 1995 where factors 	could cause actual results to differ materially from forward-looking 	statements.
Item 1A - Risk Factors
The following important risk factors, among others, 	could affect future results and events, causing results and events to differ 	materially from those expressed or implied in forward-looking statements 	made in this report and presented elsewhere by management from time to time. 	Such factors, among others, may have a material adverse effect on the 	Company's business, financial condition, and results of operations and 	should be carefully considered. It is not possible to predict or identify 	all such factors. Consequently, any such list should not be considered to be 	a complete statement of all the Company's potential risks or uncertainties. 	Because of these and other factors, past performance should not be 	considered an indication of future performance.
Unfavorable macroeconomic and industry conditions could adversely impact 	demand for the Company's products and adversely affect operating results. 	Market demand for the Company's products, which impacts revenues and gross 	profit, is influenced by a variety of economic and industry factors such as:
general corporate profitability of the Company's end 			markets;
profitability of financial institutions to whom the 			Company sells office furniture which are being impacted by the 			credit market issues;
new office construction and refurbishment rates;
new hotel and casino construction and refurbishment rates;
automotive industry fluctuations, specifically variation 			in the performance and market share of U.S. based auto 			manufacturers;
changes in the medical device industry;
demand for end-user products which include electronic 			assembly components produced by the Company;
excess capacity in the industries in which the Company 			competes; and
changes 			in customer order patterns, including changes in product quantities, 			delays in orders or cancellation of orders.
The Company must make decisions based on order volumes in order to 	achieve efficiency in manufacturing capacities. These decisions include 	determining what level of additional business to accept, production 	schedules, component procurement commitments, and personnel requirements, 	among various other considerations. The Company must constantly 	monitor the changing economic landscape and may modify its strategic 	direction based upon the changing business environment. If the Company does 	not react quickly enough to the changes in market or economic conditions, it 	could result in lost customers, decreased market share, and increased 	operating costs.
The Company operates in a highly competitive environment and may not be 	able to compete successfully. The electronic manufacturing services 	industry is very competitive as numerous manufacturers compete globally for 	business from existing and potential customers. The office and hospitality 	furniture industries are also competitive due to numerous global 	manufacturers competing in the marketplace. The high level of competition in 	these industries impacts the Company's ability to implement price increases 	or, in some cases, even maintain prices, which could lower profit margins. 	
The Company faces pricing pressures that could adversely affect the 	Company's financial position, results of operations, or cash flows. The 	Company faces pricing pressures in both of its segments, especially the EMS 	segment, as a result of intense competition from large EMS providers, 	emerging products, or over-capacity. While the Company works toward reducing 	costs to respond to pricing pressures, if the Company cannot achieve the 	proportionate reductions in costs, profit margins may suffer. As end 	markets dictate, the Company is continually assessing excess capacity and 	developing plans to better utilize manufacturing operations, including 	consolidating and shifting manufacturing capacity to lower cost venues as 	necessary.
Reduction of purchases by or the loss of one or more key customers 	could reduce revenues and profitability. Losses of key contract 	customers within specific industries or significant volume reductions from 	key contract customers are both risks. If a current customer of the Company 	merges with or is acquired by a party that currently is aligned with a 	competitor, the Company could lose future revenues. In addition, continuing 	success of the Company is dependent upon replacing expiring contract 	customers/programs with new customers/programs. One of the Company's 	customers, TRW Automotive, Inc., accounted for approximately 7%, 8%, and 12% 	of consolidated net sales in fiscal years 2008, 2007, and 2006, 	respectively. As a result of the acquisition of the Bridgend, Wales, United 	Kingdom, manufacturing operations of Bayer Diagnostics Manufacturing Limited 	in the Company's fourth quarter of fiscal year 2006, sales to Bayer are also 	significant and accounted for 11%, 15%, and 6% of consolidated net sales in 	fiscal years 2008, 2007, and 2006, respectively. Significant declines in the 	level of purchases by these customers within the EMS segment or other key 	customers in either of the Company's segments, or the loss of a significant 	number of customers, could have a material adverse effect on business. In 	addition, the nature of the contract electronics manufacturing industry is 	such that the start-up of new customers and new programs to replace expiring 	programs occurs frequently, and new customer and program start-ups generally 	cause losses early in the life of a program. Furthermore, the Company is 	exposed to the credit risk of customers, including risk of bankruptcy, and 	is subject to losses from accounts receivable.
The Company's future operating results depend on the ability to purchase 	a sufficient amount of materials, parts, and components at competitive 	prices. The Company depends on suppliers globally to provide timely 	delivery of materials, parts, and components for use in the Company's 	products. Maintaining strong relationships with key suppliers of components 	critical to the manufacturing process is essential. The Company also 	purchases select finished goods. If suppliers fail to meet commitments to 	the Company in terms of price, delivery, or quality, it could interrupt the 	Company's operations and negatively impact the Company's ability to meet 	commitments to customers.
The Company could be adversely affected by increased commodity costs or 	availability of raw materials. Price increases of commodity components 	could have an adverse impact on profitability if the Company cannot offset 	such increases with other cost reductions or by price increases to 	customers. In recent years, the Company has experienced increases in the 	prices of key commodities used in Furniture segment products, such as steel 	and wood composite sheet stock. Raw materials utilized by the Company are 	generally available, but future availability is unknown and could impact the 	Company's ability to meet customer order requirements.
The Company's operating results are impacted by the cost of fuel and 	other energy sources. The cost of energy is a critical component of 	freight expense and the cost of operating manufacturing facilities. If the 	cost of energy continues to increase, it could reduce profitability of the 	Company.
The Company could be impacted by manufacturing inefficiencies at certain 	locations. At times the Company may experience labor or other 	manufacturing inefficiencies due to factors such as new product 	introductions, transfers of production among the Company's manufacturing 	facilities, a new operating system, or turnover in personnel. Manufacturing 	inefficiencies could have an adverse impact on the Company's financial 	position, results of operations, or cash flows.
A change in the Company's sales mix among various products could have a 	negative impact on the gross profit margin. Changes in product sales mix 	could negatively impact the gross margin of the Company as margins of 	different products vary. The Company strives to improve the margins of all 	products, but certain products have lower margins in order to price the 	product competitively or in connection with the start-up of a new program. 	An increase in the proportion of sales of products with lower margins could 	have an adverse impact on the Company's financial position, results of 	operations, or cash flows.
The Company's restructuring efforts may not be successful. 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. As part of the plan, 	the Company will consolidate its EMS facilities located in Longford, 	Ireland; Wales, United Kingdom; and Poznan, Poland; into a new, larger 	facility in Poznan, which is expected to improve margins in the very 	competitive EMS market. The plan includes the sale of the existing Poland 	building at a gain which will partially fund the consolidation 	activities. The Company continually evaluates its manufacturing capabilities 	and capacities in relation to current and anticipated market conditions. The 	successful execution of restructuring initiatives is dependent on several 	factors and may not be accomplished as quickly or effectively as 	anticipated.
Acquisitions by their nature may present risks to the Company. The 	Company's sales growth plans may occur through both organic growth and 	acquisitions. Acquisitions involve many risks, including:
difficulties in identifying suitable acquisition candidates and in 			negotiating and consummating acquisitions on terms attractive to the 			Company;
difficulties in the assimilation of the operations of the acquired 			company;
the 			diversion of resources, including diverting management's attention 			from current operations;
risks 			of entering new geographic or product markets in which the Company 			has limited or no direct prior experience;
the 			potential loss of key employees of the acquired company;
the 			potential incurrence of indebtedness to fund the acquisition;
the 			potential issuance of common stock for some or all of the purchase 			price, which could dilute ownership interests of the Company's 			current shareholders;
the 			acquired business not achieving anticipated revenues, earnings, cash 			flow, or market share;
excess 			capacity;
the 			assumption of undisclosed liabilities; and
dilution of earnings.
The above risks could have a material adverse effect on the Company's 	financial position, results of operations, or cash flows.
Start-up operations could present risks to the Company's current 	operations. The Company is committed to growing its business, and 	therefore from time to time the Company may determine that it would be in 	its best interests to start up a new operation. Start-up operations involve 	a number of risks and uncertainties, such as funding the capital 	expenditures related to the start-up operation, developing a management team 	for the new operation, diversion of management focus away from current 	operations, and creation of excess capacity. Any of these risks could have a 	material adverse effect on the Company's financial position, results of 	operations, or cash flows. Continued success of the EMS segment start-up 	operation in China is critical for securing additional customers for this 	operation. Production at this new facility occurred throughout fiscal year 	2008 and is expected to continue ramping up.
Our international operations involve financial and operational risks. 	The Company has operations outside the United States, primarily in China, 	Thailand, Poland, Ireland, the United Kingdom, and Mexico. The Company's 	international operations are subject to a number of risks, which may include 	the following:
economic 			and political instability;
changes 			in foreign regulatory requirements and laws;
tariffs 			and other trade barriers;
potentially adverse tax consequences; and
foreign 			labor practices.
These risks could have an adverse effect on the Company's financial 	position, results of operations, or cash flows. In addition, fluctuations in 	exchange rates could impact our operating results. The Company's risk 	management strategy includes the use of derivative financial instruments to 	hedge certain foreign currency exposures. Any hedging techniques the Company 	implements contain risks and may not be entirely effective. Exchange rate 	fluctuations could also make the Company's products more expensive than 	competitor's products not subject to these fluctuations, which could 	adversely affect the Company's revenues and profitability in international 	markets.
If the Company's efforts to introduce new products are not successful, 	this could limit sales growth or cause sales to decline. The EMS segment 	depends on industries that utilize technologically advanced electronics 	components which often have short life cycles. The Company must continue to 	invest in advanced equipment and product development to remain competitive 	in this area. The Furniture segment regularly introduces new products to 	keep pace with workplace trends and evolving regulatory and industry 	requirements, including environmental, health, safety standards such as 	ergonomic considerations, and similar standards for the workplace and for 	product performance. The introduction of new products requires the 	coordination of the design, manufacturing, and marketing of such products. 	The design and engineering of certain new products can take nine to eighteen 	months or more, and further time may be required to achieve customer 	acceptance. Accordingly, the launch of any particular product may be delayed 	or be less successful than originally anticipated by the Company. 	Difficulties or delays in introducing new products or lack of customer 	acceptance of new products could limit sales growth or cause sales to 	decline.
If customers do not perceive the Company's products 	to be of high quality, the Company's brand and name recognition could 	suffer. The Company believes that establishing and maintaining brand and 	name recognition is critical to business. Promotion and enhancement of the 	Company's brands will depend on the effectiveness of marketing and 	advertising efforts and on successfully providing high quality products and 	superior services. If customers do not perceive our products and services to 	be of high quality, the Company's brand and name recognition could suffer, 	which could have a material adverse effect on the Company's business.
A loss of independent manufacturing representatives, dealers, or other 	sales channels could lead to a decline in sales of the Company's Furniture 	segment products. The Company's office furniture is marketed primarily 	through Company salespersons to end users, office furniture dealers, 	wholesalers, rental companies, and catalog houses. The Company's hospitality 	furniture is marketed to end users using independent manufacturing 	representatives. A significant loss within any of these sales channels could 	result in a sales decline and thus have an adverse impact on the Company's 	financial position, results of operations, or cash flows.
The Company must effectively manage working capital. The Company has 	historically had positive operating cash flows, but effective management of 	working capital is key to continuing that trend. The Company closely 	monitors inventory and receivable efficiencies and continuously strives to 	improve these measures of working capital but customer financial 	difficulties, transfers of production among the Company's manufacturing 	facilities, or Company manufacturing delays could cause deteriorating 	working capital trends.
The Company's assets could become impaired. As business conditions 	change, the Company must continually evaluate and work toward the optimum 	asset base. It is possible that certain assets such as, but not limited to, 	facilities, equipment, intangible assets, or goodwill could be impaired at 	some point in the future depending on changing business conditions. If 	assets of the Company become impaired the result could be an adverse impact 	on the Company's financial position and results of operations.
There are inherent uncertainties involved in estimates, judgments, and 	assumptions used in the preparation of financial statements in accordance 	with generally accepted accounting principles in the United States (U.S. 	GAAP). Any changes in estimates, judgments, and assumptions could have a 	material adverse effect on the Company's financial position, results of 	operations, or cash flows. The Company's financial statements filed with 	the SEC are prepared in accordance with U.S. GAAP, and the preparation of 	such financial statements includes making estimates, judgments, and 	assumptions that affect reported amounts of assets, liabilities, and related 	reserves, revenues, expenses, and income. Estimates are inherently subject 	to change in the future, and such changes could result in corresponding 	changes to the amounts of assets, liabilities, income, or expenses and 	likewise could have an adverse effect on the Company's financial position, 	results of operations, or cash flows.
Fluctuations in the Company's effective tax rate could have a significant 	impact on the Company's financial position, results of operations, or cash 	flows. The mix of pre-tax income among the tax jurisdictions in which 	the Company operates that have varying tax rates could impact the Company's 	effective tax rate. The Company is subject to income taxes as well as 	non-income based taxes, in both the United States and various foreign 	jurisdictions. Judgment is required in determining the worldwide provision 	for income taxes, other tax liabilities, interest, and penalties. 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. The Company has also made assumptions 	about the realization of deferred tax assets. Changes in these assumptions 	could result in a valuation allowance for these assets. Final determination 	of tax audits or tax disputes may be different from what is currently 	reflected by the Company's income tax provisions and accruals.
A failure to successfully implement information technology solutions 	could adversely affect the Company. The Company's business depends on 	effective information technology systems. Information systems require an 	ongoing commitment of significant resources to maintain and enhance existing 	systems and develop new systems in order to keep pace with changes in 	information processing technology and evolving industry standards. 	Implementation delays or poor execution of information technology systems 	could disrupt the Company's operations and increase costs.
An inability to protect the Company's intellectual property could have a 	significant impact on business. The Company attempts to protect its 	intellectual property rights, both in the United States and in foreign 	countries, through a combination of patent, trademark, copyright and trade 	secret laws, as well as licensing agreements and third-party nondisclosure 	and assignment agreements. Because of the differences in foreign laws 	concerning proprietary rights, the Company's intellectual property rights do 	not generally receive the same degree of protection in foreign countries as 	they do in the United States, and therefore in some parts of the world the 	Company has limited protections, if any, for its intellectual property. 	Competing effectively depends, to a significant extent, on maintaining the 	proprietary nature of the Company's intellectual property. The degree of 	protection offered by the claims of the various patents and trademarks may 	not be broad enough to provide significant proprietary protection or 	competitive advantages to the Company, and patents or trademarks may not be 	issued on pending or contemplated applications. In addition, not all of the 	Company's products are covered by patents. It is also possible that the 	Company's patents and trademarks may be challenged, invalidated, cancelled, 	narrowed, or circumvented.
A third party could claim that the Company has infringed on their 	intellectual property rights. The Company could be notified of a claim 	regarding intellectual property rights which could lead to the Company 	spending time and money to defend or address the claim. Even if the claim is 	without merit, it could result in substantial costs and diversion of 	resources.
The Company's insurance may not adequately protect the Company from 	liabilities related to product defects. The Company maintains product 	liability and other insurance coverage that the Company believes to be 	generally in accordance with industry practices. However, our insurance 	coverage may not be adequate to protect the Company fully against 	substantial claims and costs that may arise from liabilities related to 	product defects, particularly if the Company has a large number of defective 	products or if the root cause is disputed.
The Company's failure to maintain Food and Drug Administration (FDA) 	registration of one or more of its registered manufacturing facilities could 	negatively impact the Company's ability to produce products for customers in 	the medical industry. The Company is diversifying the EMS segment which 	includes increasing sales to customers in the regulated medical industry. 	To maintain FDA registration, the Company is subject to FDA audits of the 	manufacturing process. FDA audit failure could result in a partial or total 	suspension of production, fines, or criminal prosecution. Failure or 	noncompliance could have an adverse effect on the Company's reputation in 	addition to an adverse impact on the Company's financial position, results 	of operations, or cash flows.
The Company is subject to extensive environmental regulation and 	significant potential environmental liabilities. The past and present 	operation and ownership by the Company of manufacturing plants and real 	property are subject to extensive and changing federal, state, local, and 	foreign environmental laws and regulations, including those relating to 	discharges in air, water, and land, the handling and disposal of solid and 	hazardous waste, and the remediation of contamination associated with 	releases of hazardous substances. The Company cannot predict what 	environmental legislation or regulations will be enacted in the future, how 	existing or future laws or regulations will be administered or interpreted 	or what environmental conditions may be found to exist. Compliance with more 	stringent laws or regulations, or stricter interpretation of existing laws, 	may require additional expenditures by the Company, some of which could be 	material. In addition, any investigations or remedial efforts relating to 	environmental matters could involve material costs or otherwise result in 	material liabilities.
The Company's failure to retain the existing management team and continue 	to attract qualified personnel could adversely affect the Company's 	business. The Company's culture and guiding principles focus on 	continuous training, motivating, and development of employees, and it 	strives to attract, motivate, and retain qualified managerial personnel. 	Failure to retain and attract qualified personnel could adversely affect the 	Company's business.
Turnover in personnel could cause manufacturing inefficiencies. The 	demand for manufacturing labor in certain geographic areas makes it 	difficult to retain experienced production employees. Turnover could result 	in additional training and inefficiencies that could impact the Company's 	operating results.
Natural disasters or other catastrophic events may impact the 	Company's production schedules and, in turn, negatively impact 	profitability. Natural disasters or other catastrophic events, including 	severe weather, terrorist attacks, power interruptions, and fires, could 	disrupt operations and likewise the ability to produce or deliver the 	Company's products. The Company's manufacturing operations require 	significant amounts of energy, including natural gas and oil, and 	governmental regulations control the allocation of such fuels to the 	Company. In the event the Company experiences a temporary or permanent 	interruption in its ability to produce or deliver product, revenues could be 	reduced, and business could be materially adversely affected. In addition, 	catastrophic events, or the threat thereof, can adversely affect U.S. and 	world economies, and could result in delayed or lost sales of the Company's 	products. In addition, any continuing disruption in the Company's computer 	system could adversely affect the ability to receive and process customer 	orders, manufacture products, and ship products on a timely basis, and could 	adversely affect relations with customers, potentially resulting in 	reduction in orders from customers or loss of customers. The Company 	maintains insurance to help protect the Company from costs relating to these 	matters but such may not be sufficient or paid in a timely manner to the 	Company in the event of such an interruption.
The requirements of being a public company may strain the Company's 	resources and distract management. The Company is subject to the 	reporting requirements of federal securities laws, including the 	Sarbanes-Oxley Act of 2002. Among other requirements, the Sarbanes-Oxley Act 	requires that the Company maintain effective disclosure controls and 	procedures and internal control over financial reporting. The Company has, 	and expects to continue to, expend significant management time and resources 	maintaining documentation and testing internal control over financial 	reporting. While management's evaluation as of June 30, 2008 resulted in the 	conclusion that the Company's internal control over financial reporting was 	effective as of that date, the Company cannot predict the outcome of testing 	in future periods. If the Company concludes in future periods that its 	internal control over financial reporting is not effective, or if its 	independent registered public accounting firm is not able to render the 	required attestations, it could result in lost investor confidence in the 	accuracy, reliability, and completeness of the Company's financial reports. 	
The value of the Company's common stock may experience substantial 	fluctuations for reasons over which the Company has little control. The 	value of common stock could fluctuate substantially based on a variety of 	factors, including, among others:
actual 			or anticipated fluctuations in operating results;
announcements concerning the Company, competitors, or industry;
overall 			volatility of the stock market;
changes 			in government regulations;
changes 			in the financial estimates of securities analysts or investors 			regarding the Company, the industry, or competitors; and
general 			market or economic conditions.
Furthermore, stock prices for many companies fluctuate widely for reasons 	that may be unrelated to their operating results. These fluctuations, 	coupled with changes in results of operations and general economic, 	political, and market conditions, may adversely affect the value of the 	Company's common stock.
Item 1B
Item 1B - Unresolved Staff Comments None.
Item 2
Item 2 - Properties
The location and number of the Company's major manufacturing, warehousing, and service facilities, including the executive and administrative offices, as of June 30, 2008, are as follows:
The listed facilities occupy approximately 5,224,000 square feet in aggregate, of which approximately 5,015,000 square feet are owned and 209,000 square feet are leased. Square footage of these facilities is summarized by segment as follows:
During fiscal year 2008, within the EMS segment, the Company ceased production at a Gaylord, Michigan, facility and a Hibbing, Minnesota, facility. The Gaylord facility is currently held for sale. The lease on the Hibbing facility expires on December 31, 2008. The Company plans to exit, within the EMS segment, the Ireland facility during fiscal year 2009 and the United Kingdom facility in fiscal year 2011 as part of the Company's plan to consolidate these facilities and the Poland facility into a new, larger facility in Poland.
Included in Unallocated Corporate are executive, national sales and administrative offices, a recycling facility, and a training and education center and corporate showroom. The Company sold its child development facility during the first quarter of fiscal year 2008.
Generally, properties are utilized at normal capacity levels on a multiple shift basis. At times, certain facilities utilize a reduced second or third shift. Due to sales fluctuations, not all facilities were utilized at normal capacity during fiscal year 2008.
Significant loss of income resulting from a facility catastrophe would be partially offset by business interruption insurance coverage.
Operating leases for all facilities and related land, including idle facilities and nine leased showroom facilities, total 402,000 square feet and expire from fiscal year 2009 to 2056 with many of the leases subject to renewal options. The leased showroom facilities are in six states and the District of Columbia. (See Note 5 - Commitments and Contingent Liabilities of Notes to Consolidated Financial Statements for additional information concerning leases.)
The Company owns approximately 27,800 acres of land which includes land where various Company facilities reside, including approximately 27,300 acres generally for hardwood timber reserves and approximately 180 acres of land in the Kimball Industrial Park, Jasper, Indiana (a site for certain production and other facilities, and for possible future expansions). During fiscal year 2009, the Company intends to sell approximately 27,300 acres of timber and farm land that it currently owns.
Item 3
Item 3 - Legal Proceedings
The Registrant and its subsidiaries are not parties to any pending legal proceedings, other than ordinary routine litigation incidental to the business, which individually, or in aggregate, are not expected to be material.
Item 4
Item 4 - Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the Company's security holders during the fourth quarter of fiscal year 2008.
Executive Officers of the Registrant
The executive officers of the Registrant as of September 2, 2008 are as follows:
(Age as of September 2, 2008)
Executive officers are elected annually by the Board of Directors. All of the executive officers unless otherwise noted have been employed by the Company for more than the past five years in the capacity shown or some other executive capacity. Michelle R. Schroeder was appointed to Vice President in December 2004 and Corporate Controller in August 2002, having previously served the Company as Assistant Corporate Controller and Director of Financial Analysis.
PART II
Item 5
Item 5 - Market for Registrant's Common Equity, Related Share Owner Matters and Issuer Purchases of Equity Securities
Market Prices
The Company's Class B Common Stock trades on the NASDAQ Global Select Market of The NASDAQ Stock Market LLC under the symbol: KBALB. High and low sales prices by quarter for the last two fiscal years as quoted by the NASDAQ system are as follows:
There is no established public trading market for the Company's Class A Common Stock. However, Class A shares are convertible on a one-for-one basis to Class B shares.
Dividends
There are no restrictions on the payment of dividends except charter provisions that require on a fiscal year basis, that shares of Class B Common Stock are entitled to $0.02 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. During fiscal year 2008, dividends declared were $23.7 million, or $0.62 per share on Class A Common Stock and $0.64 per share on Class B Common Stock. Included in these figures are dividends computed and accrued on unvested Class A and Class B restricted share units, which will be paid by a conversion to the equivalent value of common shares after a specified vesting period. Dividends by quarter for fiscal year 2008 compared to fiscal year 2007 are as follows:
Share Owners
On August 15, 2008, the Company's Class A Common Stock was owned by 541 Share Owners of record, and the Company's Class B Common Stock was owned by 1,700 Share Owners of record, of which 275 also owned Class A Common Stock.
Securities Authorized for Issuance Under Equity Compensation Plans
See Item 12 of Part III for information on securities authorized for issuance under equity compensation plans.
Issuer Purchases of Equity Securities
The following table presents a summary of share repurchases made by the Company during the fourth quarter of fiscal year 2008:
Period Total Number 	
	of Shares Purchased [1] Average
	Price Paid
	per Share Total Number of Shares Purchased as Part of
	Publicly Announced
	Plans or Programs Maximum Number of 	
	Shares that May Yet Be Purchased Under the
	Plans or Programs [2]
Month #1 (April 1 - April 30, 2008) $ -0- 2,000,000
Month #2 (May 1 - May 31, 2008) 6,022 	
$10.29 2,000,000
Month #3 (June 1 - June 30, 2008)
$ -0- 2,000,000
Total
6,022
$10.29
[1] Shares were withheld from employees to satisfy tax withholding obligations due in connection with stock issued under the 2003 Stock Option and Incentive Plan.
[2] The 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 repurchases shown in this table were not pursuant to this program and therefore did not reduce the two million shares authorized for repurchase under the program.
Performance Graph
The following performance graph is not deemed to be "soliciting material" or to be "filed" with the SEC or subject to Regulation 14A or 14C under the Securities Exchange Act of 1934 or to the liabilities of Section 18 of the Securities Exchange Act of 1934 and will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent the Company specifically incorporates it by reference into such a filing.
The graph below compares the cumulative total return to Share Owners of the Company's Class B Common Stock from June 30, 2003, through June 30, 2008, the last business day in the respective fiscal years, to the cumulative total return of the NASDAQ Stock Market (U.S. and Foreign) and a peer group index for the same period of time. Due to the diversity of its operations, the Company is not aware of any public companies that are directly comparable to it. Therefore, the peer group index is comprised of publicly traded companies in both of the Company's segments, as follows:
EMS Segment: Benchmark Electronics, 	Inc., Jabil Circuit, Inc., Plexus Corp.
	Furniture Segment: HNI Corp., Knoll Inc., Steelcase, Inc., Herman 	Miller, Inc.
In order to reflect the segment allocation of Kimball International, Inc., a market capitalization-weighted index was first computed for each segment group, then a composite peer group index was calculated based on each segment's proportion of net sales to total consolidated sales for each fiscal year. The public companies included in the peer group have a larger revenue base than each of the Company's business segments.
The performance graph also includes the S&P Midcap 400 Index, which, in years prior to fiscal year 2008, had been an index of companies with market capitalization levels similar to the Company. However, this index is no longer comparable. The S&P Midcap 400 index is provided in the graph below to show the impact of the transition between this index and the new peer group index and will not be provided in future years.
The graph assumes $100 is invested in the Company's stock and each of the three indexes at the closing market quotations on June 30, 2003 and that dividends are reinvested. The performances shown on the graph are not necessarily indicative of future price performance.
2006
Kimball International, Inc. $100.00 $ 98.85 $ 92.56 $144.82 $106.55 $ 66.83
NASDAQ Stock Market (U.S. & Foreign) $100.00 $127.18 $127.04 $135.21 $162.10 $142.32
Peer Group Index $100.00 $130.23 $150.28 $146.50 $142.02 $102.45
S&P Midcap 400 Index $100.00 $127.98 $145.94 $164.88 $195.40 $181.07
Item 6
Item 6 - Selected Financial Data
This information should be read in conjunction with Item 8 - Financial Statements and Supplementary Data and
Item 7
Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations.
The preceding table excludes all income statement activity of the discontinued operations.
Fiscal year 2008 income from continuing operations included $14.6 million ($0.39 per diluted share) of after-tax restructuring expenses and $0.7 million ($0.02 per diluted share) of after-tax income received as part of a Polish offset credit program for investments made in the Company's Poland operation.
Fiscal year 2007 income from continuing operations included $0.9 million ($0.02 per diluted share) of after-tax restructuring expenses.
Fiscal year 2006 income from continuing operations also included $2.8 million ($0.07 per diluted share) of after-tax restructuring expenses and $1.3 million ($0.03 per diluted share) of after-tax income received as part of a Polish offset credit program for investments made in the Company's Poland operation.
Fiscal year 2005 income from continuing operations included $0.2 million ($0.01 per diluted share) of after-tax restructuring expenses.
Fiscal year 2004 income from continuing operations included $0.7 million ($0.02 per diluted share) of after-tax restructuring expenses and $1.3 million ($0.03 per diluted share) of after-tax income received as part of a Polish offset credit program for investments made in the Company's Poland operation.
Item 7 - Management's Discussion and Analysis of Financial Condition and 	Results of Operations
Business OverviewKimball International, Inc. provides a variety of 	products from its two business segments: the Furniture segment and the 	Electronic Manufacturing Services (EMS) segment. The Furniture segment 	provides furniture for the office and hospitality industries, sold under the 	Company's family of brand names. The EMS segment provides engineering and 	manufacturing services which utilize common production and support 	capabilities to a variety of industries globally. The EMS segment, formerly 	named the Electronic Contract Assemblies segment, was renamed during the 	first quarter of fiscal year 2008 to more accurately reflect the focus of 	the segment. There was no financial statement impact from this name change. 	
Management currently considers the following events, trends, and 	uncertainties to be most important to understanding the Company's financial 	condition and operating performance:
Globalization continues to reshape not 				only the industries in which the Company operates but also its 				key customers.
The Company is continually assessing its 				strategies in relation to the instability in the U.S. economic 				environment and the volatility of the U.S. financial markets. A 				portion of the Company's office furniture sales are to financial 				institutions which are being impacted by the credit market 				issues. The Company is closely monitoring market changes in 				order to proactively adjust discretionary spending in 				anticipation of the impact those market changes may have on its 				sales and operations.
Competitive pricing within the EMS segment 				and on select projects within the Furniture segment continues to 				put pressure on the Company's operating margins.
Increased upward pressure on commodity and 				fuel prices is expected to be a challenge the Company will 				continue to address in the near term.
The Company currently has excess capacity 				at select operations.
The Business and Institutional Furniture 				Manufacturer Association (BIFMA International) lowered its 				projection for growth in the office furniture industry and is 				currently projecting a year-over-year decline in the office 				furniture industry for the remainder of calendar years 2008 and 				2009.
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, and the new programs often carry lower margins. 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.
The Company continues its strategy of 				diversification within the EMS segment customer base as it 				focuses on four key market verticals: medical, automotive, 				industrial control, and public safety. With the Company's fiscal 				year 2007 acquisition of Reptron Electronics, Inc. (Reptron), 				sales to customers in the medical industry are now the largest 				portion of the Company's EMS segment with sales to customers in 				the automotive industry being the second largest.
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. A critical component of the restructuring initiatives is 				transfer of production among facilities which during fiscal year 				2008 contributed to some manufacturing inefficiencies and excess 				working capital. The Company's restructuring plans are discussed 				in the segment discussions below.
The EMS segment's new operation in China 				started production in June 2007. The continued success of this 				start-up operation is critical for securing additional customers 				and increasing facility utilization.
Beginning in the third quarter of fiscal 				year 2007, the EMS segment was impacted by a reduction in the 				pricing of select raw material which is purchased from a major 				customer, Bayer AG and affiliates. The selling price of the 				finished product back to that customer has likewise been reduced 				by an amount equal to the material price reduction. Fiscal year 				2008 had a full-year impact of this pricing reduction while 				fiscal year 2007 only had the impact for half of the year and 				thus resulted in a $65 million net sales reduction in fiscal 				year 2008 when compared to fiscal year 2007. Gross profit 				dollars were not impacted, but the consolidated fiscal 				year-to-date 2008 gross profit as a percent of net sales measure 				increased approximately 1 percentage point as a result of this 				pricing change compared to fiscal year 2007. Selling, general 				and administrative (SG&A) costs as a percent of net sales 				increased by a similar percentage. There was no impact to net 				income and net cash flows.
The Company continues to have a strong 				balance sheet which includes a net cash position from an 				aggregate of cash, cash equivalents, and short-term investments, 				less short-term borrowings under credit facilities totaling 				$29.8 million at June 30, 2008.
The increasingly competitive marketplace 				mandates that the Company continually re-evaluate its business 				models.
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'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. 				
To address these and other trends and events, the Company has taken, or 	continues to consider and take, the following actions:
As end markets dictate, the Company is 				continually assessing excess capacity and developing plans to 				better utilize manufacturing operations, including shifting 				manufacturing capacity to lower cost venues as necessary. 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. As part of the plan, the Company will consolidate its 				EMS facilities located in Longford, Ireland; Bridgend, Wales; 				and Poznan into a new, larger facility in Poznan. In fiscal year 				2008, the Company also completed the consolidation of U.S. 				manufacturing facilities within the EMS segment due to excess 				capacity resulting in the exit of two facilities. These 				activities are discussed in more detail in the fiscal year 2008 				EMS segment discussion below.
As part of the Company's diversification 				plan for the EMS segment, during the third quarter of fiscal 				year 2007, the Company acquired Reptron. This acquisition is 				discussed in more detail in the fiscal year 2008 EMS segment 				discussion below.
The Company exited the manufacture of 				contract private label products to further sharpen its focus on 				primary markets in the Furniture segment. As part of this 				planned exit, during the second quarter of fiscal year 2007, the 				Company exited the production of wood rear projection television 				(PTV) cabinets and stands resulting in the closure of the 				Company's Juarez, Mexico, manufacturing facility.
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.
Discontinued Operations
During the first quarter of fiscal year 2007, the Company approved a plan 	to exit the production of PTV cabinets and stands within the Furniture 	segment, which resulted in the exit of the Company's Juarez, Mexico, 	operation. Production ceased at the Juarez facility during the second 	quarter of fiscal year 2007, and all inventory has been sold. Miscellaneous 	wrap-up activities including disposition of remaining equipment were 	complete as of June 30, 2007. During the fourth quarter of fiscal year 2008 	the Company bought out the remaining term of the building lease. As a result 	of ceasing operations at this facility, the financial results associated 	with the Mexican operations in the Furniture segment were classified as 	discontinued operations beginning in the quarter ended December 31, 2006, 	and all prior periods were restated.
During fiscal year 2006, the Company sold a forest products hardwood 	lumber business unit, a business unit which produced and sold fixed-wall 	furniture systems, and an operation that manufactured polyurethane and 	polyester molded components. All three business units were part of the 	Furniture segment. The cessation of these non-core operations did not impact 	any of the remaining operations of the Company. The results of the 	above-mentioned operations are reported as discontinued operations in the 	Company's Consolidated Financial Statements.
	See 	 	Note 18 - Discontinued Operations of Notes to Consolidated Financial 	Statements for more information on the discontinued operations.
Financial results of the discontinued operations were as follows:
Related Party Disclosure
During fiscal year 2006, the Company's forest products hardwood lumber 	operation which was accounted for as a discontinued operation was sold to 	Indiana Hardwoods, Inc. Barry L. Cook, President of Indiana Hardwoods, Inc. 	was formerly employed by the Company as a Vice President of Kimball 	International, Inc. and had responsibility for this hardwoods lumber 	operation. The transaction prices were negotiated between the Company and 	Indiana Hardwoods, Inc. The Company also considered offers from other 	interested outside parties, but determined that it was in the Company's best 	interest financially to sell this operation to Indiana Hardwoods, Inc. The 	purchase price totaled $25.5 million, of which $23.5 million was collected 	at closing and $2.0 million was a note receivable. The Company recorded an 	allowance on this note receivable at the time of sale since there was 	uncertainty as to whether the entire balance was collectable. In fiscal year 	2008, $0.3 million of expense was recorded as an additional allowance for 	this receivable and final payment was received for the net amount. The 	Company has no ongoing commitments resulting from the sales agreement.
Fiscal Year 2008 Results of Operations
The following discussions are based on income from continuing operations 	and therefore exclude all income statement activity of the discontinued 	operations.
Financial Overview - Consolidated
Fiscal year 2008 consolidated net sales were $1.35 billion compared 	to fiscal year 2007 net sales of $1.29 billion, a 5% increase over fiscal 	year 2007. The higher net sales resulted from increased EMS segment net 	sales related to the third quarter fiscal year 2007 Reptron acquisition 	within the EMS segment which contributed net sales of $144 million in fiscal 	year 2008 and $55 million in fiscal year 2007 as well as increased organic 	Furniture and EMS segment net sales. In addition, in mid-fiscal year 2007, 	the Company reduced the price of finished product sold to a customer in the 	EMS segment which carried forward through fiscal year 2008. Fiscal year 	2008 had a full-year impact of this pricing reduction while fiscal year 2007 	only had the impact for half of the year and thus resulted in a $65 million 	net sales reduction in fiscal year 2008 when compared to fiscal year 2007, 	which partially offset the EMS sales increase.
The Company recorded income from continuing operations for fiscal year 	2008 of $0.1 million, or less than $0.01 per Class B diluted share, 	inclusive of after-tax restructuring charges of $14.6 million, or $0.39 per 	Class B diluted share. The fiscal year 2008 restructuring charges were 	primarily related to the European consolidation plan, a workforce reduction 	plan, and the exit of two domestic EMS facilities. Fiscal year 2007 income 	from continuing operations was $23.3 million, or $0.60 per Class B diluted 	share, inclusive of after-tax restructuring charges of $0.9 million, or 	$0.02 per Class B diluted share. Information regarding the acquisition and 	restructurings is included in the segment discussions below.
Consolidated gross profit as a percent of sales in fiscal year 2008 was 	18.4% compared to 20.3% in fiscal year 2007. Both the EMS segment and the 	Furniture segment contributed to the decline as discussed in more detail in 	the segment discussions below. Gross profit was also negatively impacted as 	the Company's sales mix continued to shift toward the EMS segment, which 	operates at a lower gross profit percentage than the Furniture segment. 	Partially offsetting the fiscal year 2008 gross profit as a percent of net 	sales decline, the EMS customer pricing adjustment discussed above increased 	gross margin as a percent of net sales approximately 1 percentage point 	compared to fiscal year 2007 gross margin. This EMS customer pricing 	adjustment had no impact on the gross margin dollars for either fiscal year 	2008 or fiscal year 2007 as the reduction in sales was offset by an equal 	reduction in material cost purchased from the same customer.
	The fiscal year 2008 consolidated selling, general and administrative (SG&A) 	expense level in absolute dollars approximated the fiscal year 2007 level 	and declined as a percent of net sales. The decline in consolidated SG&A 	costs as a percent of net sales was primarily due to the leverage of the 	higher net sales level and the shift in sales mix toward the EMS segment, 	which has a lower SG&A percentage than the Furniture segment.
Fiscal year 2008 other income totaled $3.2 million compared to fiscal 	year 2007 other income of $9.9 million. Fiscal year 2008 interest expense 	was $0.9 million higher due to higher average outstanding debt balances, and 	fiscal year 2008 interest income was $1.9 million lower than fiscal year 	2007 as the Company's average cash and short-term investment balances were 	lower. In addition, a $3.5 million decline in the market value of the 	Company's Supplemental Employee Retirement Plan (SERP) investments for 	fiscal year 2008 as compared to fiscal year 2007 contributed to the decline 	in other income. The loss on the SERP investment that was recognized in 	other income was exactly offset by a reduction in the SERP liability which 	was recognized in SG&A expense in accordance with U.S. GAAP. Fiscal year 	2008 other income also included $1.3 million pre-tax income relating to 	funds received as part of a Polish offset credit program for investments 	made in the Company's Poland operation.
	As a result of various tax benefits in fiscal year 2008, such as tax-exempt 	interest income and the research and development credit, coupled with the 	tax benefit recorded related to the pre-tax loss, the Company recorded an 	overall income tax benefit greater than the pre-tax loss. The fiscal year 	2007 effective tax rate was 36%. For further detail see 	 	Note 9 - Income Taxes of Notes to Consolidated Financial Statements.
Comparing the balance sheets as of June 30, 2008 to June 30, 2007, the 	decline in the Company's cash and short-term investment balances was 	primarily a result of the Company repurchasing 1.7 million Class B shares 	during fiscal year 2008 under a previously authorized share repurchase 	program. The Company's inventory balance has increased since June 30, 2007 	primarily in support of the transfer of production related to the 	consolidation of facilities. The Company's accounts payable balance 	increased since June 30, 2007 due to an agreement with select customers from 	which the Company also purchases materials that allows the Company to extend 	accounts payable terms if those customers extend the timeframe in which they 	pay the Company. The Company's accounts receivable balance thus likewise 	increased, but to a lesser extent due to offsetting declines in accounts 	receivable elsewhere in the Company. The Company's borrowings under credit 	facilities increased as the Company opted to borrow to fund short-term cash 	needs rather than sell debt securities in its investment portfolio which 	have favorable yields.
Electronic Manufacturing Services Segment
In an effort to improve profitability and increase Share Owner value 	while remaining committed to its business model of being market driven and 	customer centered, during the third quarter of fiscal year 2008, the Company 	approved a restructuring plan designed to more appropriately align its 	workforce in a changing business environment. Within the Company's EMS 	segment, the restructuring activities included realigning engineering and 	technical resources closer to the customer and streamlining administrative 	and sales processes. The plan also included reducing corporate personnel 	costs to more properly align with the overall sales mix change within the 	Company. Expenditures were primarily for employee severance and transition 	costs. This plan was substantially complete as of the end of fiscal year 	2008.
During the third quarter of fiscal year 2007, the Company acquired 	Reptron, a U.S. based electronics manufacturing services company which 	provided engineering services, electronics manufacturing services, and 	display integration services. Reptron had four manufacturing operations 	located in Tampa, Florida; Hibbing, Minnesota; Gaylord, Michigan; and 	Fremont, California. The acquisition increased the Company's capabilities 	and expertise in support of the Company's long-term strategy to grow 	business in the medical electronics and high-end industrial sectors. The 	operating results of this acquisition are included in the Company's 	consolidated financial statements beginning on the acquisition date. With 	the acquisition, the Company recognized it would have excess capacity in 	North America. Management developed a plan as of the acquisition date to 	consolidate capacity within the acquired facilities. Based on a review of 	future growth potential in various geographies and input from existing 	customers regarding future capacity needs, during the fourth quarter of 	fiscal year 2007 the Company finalized a restructuring plan within the EMS 	segment to exit the facility located in Gaylord, Michigan, and transfer the 	business to several of the Company's other EMS facilities. The Company 	ceased production at the facility during the second quarter of fiscal year 	2008. Excess equipment was sold during the third quarter of fiscal year 	2008, and the Gaylord facility is classified as held for sale. Expenditures 	included employee severance and transition costs which were recognized as 	part of the purchase price allocation, not impacting earnings. Expenditures 	also included losses on the sale of equipment, impairment on the facility, 	and an immaterial amount related to other closure activities which impacted 	earnings as the costs were incurred. The Company expects to recognize 	minimal future charges related to ongoing facility maintenance expenses. 	During the second quarter of fiscal year 2008, the Company approved a 	separate restructuring plan to further consolidate its EMS facilities that 	resulted in the exit of the manufacturing facility located in Hibbing, 	Minnesota, which was also one of the acquired Reptron facilities. Production 	at the Hibbing facility ceased in the fourth quarter of fiscal year 2008, 	and the Company's lease of the Hibbing facility will end in December 2008. A 	majority of the Hibbing business transferred to several of the Company's 	worldwide EMS facilities. Expenditures, most of which were recognized during 	fiscal year 2008, included employee severance and transition costs, asset 	and goodwill impairment, lease exit costs, and other plant closure and exit 	costs.
During the fourth quarter of fiscal year 2006, the Company acquired the 	Bridgend, Wales, United Kingdom, manufacturing operation of Bayer 	Diagnostics Manufacturing Limited ("BDML") from BDML and its parent company, 	Bayer HealthCare LLC, a member of the worldwide group of companies headed by 	Bayer AG. The Wales, United Kingdom, facility provides manufacturing 	services for medical diagnostic systems such as assembling and packaging 	medical test strips and assembling and testing of electronic diagnostic 	testers. This facility is FDA certified and was acquired to support the 	Company's efforts to capitalize on growth opportunities in the medical 	market. Also during the fourth quarter of fiscal year 2006, the Company 	acquired a printed circuit board assembly operation in Longford, Ireland, 	from Magna Donnelly Electronics Longford Limited. Both of these acquisitions 	emphasized the Company's strategic expansion of global capabilities and 	responsiveness in serving the Company's customers. 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. As part of the plan, the Company will 	consolidate its EMS facilities located in Longford, Ireland; Wales, United 	Kingdom; 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. The plan includes the sale of the existing Poland building at a gain 	which will partially fund the consolidation activities. The plan is to be 	executed in stages with a projected completion date of December 2011.
During the third quarter of fiscal year 2006, the Company approved a 	restructuring plan within the EMS segment to exit a manufacturing facility 	located in Northern Indiana. As part of this restructuring plan, the 	production for select programs was transferred to other locations within 	this segment. Operations at this facility ceased in the Company's first 	quarter of fiscal year 2007, and the facility was sold during fiscal year 	2008. The plan included employee transition costs, accelerated software 	amortization costs, accelerated asset depreciation, and other restructuring 	costs which were partially offset by gains on the sale of equipment net of 	other asset impairment. The decision to exit this facility was a result of 	excess capacity in North America.
	The acquisitions are discussed in further detail in 	 	Note 2 - Acquisitions of Notes to Consolidated Financial Statements. 	The restructuring plans are discussed in further detail in 	 	Note 17 - Restructuring Expense of Notes to Consolidated Financial 	Statements.
EMS segment net sales and open orders were as follows:
Fiscal year 2008 EMS segment net sales increased $54 million, or 8%, from 	fiscal year 2007. The acquisition completed midway through the third 	quarter of fiscal year 2007 within the EMS segment contributed sales of $144 	million in fiscal year 2008 and $55 million in fiscal year 2007. In 	addition, in mid-fiscal year 2007, the Company reduced the price of finished 	product sold to a customer in the EMS segment which carried forward through 	fiscal year 2008. Fiscal year 2008 had a full-year impact of this pricing 	reduction while fiscal year 2007 only had the impact for half of the year 	and thus resulted in a $65 million net sales reduction in fiscal year 2008 	when compared to fiscal year 2007. See the discussion below for more 	information on this selling price change. Increased sales to customers in 	the medical, industrial control, and public safety industries more than 	offset decreased sales to customers in the automotive industry driven by 	declines in the domestic automotive market. Due to the contract nature of 	the Company's business, open orders at a point in time may not be indicative 	of future sales trends.
	The EMS segment recorded a loss from continuing operations of $15.3 million 	for fiscal year 2008, inclusive of after-tax restructuring charges of $12.8 	million primarily related to the European consolidation plan, the workforce 	reduction plan, and the exit of two domestic EMS facilities. EMS segment 	fiscal year 2007 income from continuing operations totaled $1.0 million, 	inclusive of after-tax restructuring charges of $0.1 million.
Fiscal year 2008 gross profit as a percent of net sales declined 1.2 	percentage points compared to fiscal year 2007. Fiscal year 2008 gross 	profit was negatively impacted by excess capacity costs and inefficiencies 	some of which were associated with the closure of two domestic facilities 	and the related transfer of production to other facilities within this 	segment. Gross profit was also negatively impacted by a shift in product mix 	to lower margin product.
Beginning in the third quarter of fiscal year 2007, gross profit as a 	percent of sales was favorably impacted by a reduction in the pricing of 	select raw material which is purchased from Bayer AG and affiliates, a major 	customer within the EMS segment. The selling price of the finished product 	back to Bayer AG and affiliates was likewise reduced by an amount equal to 	the material price reduction. While there was no impact to gross profit 	dollars, net income, or net cash flows related to this pricing change, gross 	profit as a percent of net sales increased approximately 1 percentage point, 	and SG&A as a percent of net sales increased by a similar percentage for 	fiscal year 2008 as compared to fiscal year 2007.
Fiscal year 2008 SG&A increased in both dollars and as a percent of net 	sales when compared to fiscal year 2007. The inclusion of the SG&A expenses 	of the mid-third quarter fiscal year 2007 acquisition for the entire fiscal 	year 2008 was the primary driver of the increase in SG&A in absolute 	dollars. The customer pricing adjustment mentioned above increased SG&A as a 	percent of net sales, and the leverage of higher sales volume decreased SG&A 	as a percent of net sales. In addition, increased investments in business 	development resources contributed to the SG&A increase as a percent of net 	sales and in absolute dollars.
The fiscal year 2008 and 2007 earnings were unfavorably impacted by 	pre-tax costs, in millions, of $2.3 and $3.5, respectively, related to the 	start-up of an EMS manufacturing facility in China. Fiscal year 2008 income 	from continuing operations included $1.3 million of pre-tax income relating 	to funds received as part of the Polish offset credit program for 	investments made in the Company's Poland operation.
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:
The reduction in year-to-date sales to Bayer AG is related to two 	factors. First, in January 2007, Bayer AG sold its diagnostics unit to 	Siemens AG, and thus a portion of the Company's net sales which were 	formerly to Bayer AG affiliates in fiscal year 2007 are now to Siemens AG. 	Second, net sales to Bayer AG affiliates were also impacted as a result of 	the Company's aforementioned selling price reduction effective January 2007 	to Bayer AG affiliates which was offset by an equal reduction in the 	material cost. The Company also continues to focus on diversification of the 	EMS segment customer base.
	
	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. New business awards for projects in the 	automotive industry are extremely competitive.
Risk factors within this segment include, but are not limited to, general 	economic and market conditions, increased globalization, foreign currency 	exchange rate fluctuations, rapid technological changes, component 	availability, the contract nature of this industry, unexpected integration 	issues with acquisitions, and the importance of sales to large customers. 	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 	located within 	 	Item 1A - Risk Factors.
Furniture Segment
As part of the workforce reduction restructuring activities 	discussed in the EMS segment above, within the Company's Furniture segment, 	the restructuring activities included realigning information technology and 	procurement resources closer to the customer and streamlining administrative 	and sales processes to drive further synergies afforded by the alignment of 	the sales and manufacturing functions within this segment. Related 	expenditures were primarily for employee severance and transition costs. 	This plan was substantially complete as of the end of fiscal year 2008 with 	a few activities expected to occur in the first half of fiscal year 2009 in 	the Furniture segment.
As part of the Company's plan to sharpen focus and simplify business 	processes within the Furniture segment, the Company announced during the 	first quarter of fiscal year 2006, a plan which included consolidation of 	administrative, marketing, and business development functions to better 	serve the segment's primary markets. Expenses related to this plan included 	software impairment, accelerated amortization, employee severance, and other 	consolidation costs. This plan was complete as of June 30, 2008.
Furniture segment net sales and open orders were as follows:
Increased net sales volumes of both office and hospitality furniture 	contributed to the increased branded furniture net sales level. Price 	increases net of higher discounting contributed approximately $4 million to 	the increased net sales of branded furniture during fiscal year 2008 when 	compared to fiscal year 2007. Fiscal year 2008 sales of newly introduced 	office furniture products which the Company began selling during fiscal year 	2008 approximated $57 million. Branded furniture products open orders at 	June 30, 2008 were 6% higher than open orders at June 30, 2007 as higher 	hospitality furniture open orders more than offset lower office furniture 	open orders. The absence of net sales and open orders of contract private 	label products was a result of the planned exit of this product line. Open 	orders at a point in time may not be indicative of future sales trends.
The Furniture segment income from continuing operations was $13.4 million 	in fiscal year 2008, inclusive of after-tax restructuring charges of $1.3 	million, compared to income from continuing operations of $17.8 million in 	fiscal year 2007, which included $0.8 million of after-tax restructuring 	charges. The fiscal year 2008 restructuring charges were primarily related 	to the workforce reduction plan, and the fiscal year 2007 restructuring 	charges were primarily related to the consolidation and standardization of 	administrative, marketing, and business development functions within this 	segment. Fiscal year 2008 gross profit as a percent of net sales declined 	2.1 percentage points when compared to fiscal year 2007. Gross profit was 	negatively impacted by supply chain cost increases, increased fuel expense, 	a sales mix shift to lower margin product, and competitive pricing 	pressures. Price increases on select office furniture products partially 	offset the higher costs.
	As compared to fiscal year 2007, fiscal year 2008 SG&A expenses decreased in 	both absolute dollars and as a percent of net sales as the Furniture segment 	incurred lower advertising and product promotion expenses and lower 	incentive compensation costs. Increased investments in the segment's sales 	force partially offset the other SG&A savings. The leverage of the segment's 	higher sales volumes also contributed to the SG&A as a percent of net sales 	improvement. The Furniture segment earnings were also positively impacted by 	savings realized through various cost reduction initiatives.
	See 	 	Note 17 - Restructuring Expense of Notes to Consolidated Financial 	Statements for more information on restructuring charges.
Risk factors within this segment include, but are not limited to, general 	economic and market conditions, increased global competition, 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 located within 	 	Item 1A - Risk Factors.
Fiscal Year 2007 Results of Operations
The following discussions are based on income from continuing operations 	and therefore exclude all income statement activity of the discontinued 	operations and the cumulative effect of the accounting change. See 	 	Note 1 - Summary of Significant Accounting Policies of Notes to 	Consolidated Financial Statements for additional information related to the 	cumulative effect of the accounting change.
Financial Overview - Consolidated
Fiscal year 2007 consolidated net sales were $1.29 billion compared 	to fiscal year 2006 net sales of $1.11 billion, a 16% increase over fiscal 	year 2006. Acquisitions completed in the fourth quarter of fiscal year 2006 	and in the third quarter of fiscal year 2007 within the EMS segment 	contributed net sales of $319.3 million in fiscal year 2007 and $61.5 	million in fiscal year 2006. Income from continuing operations for fiscal 	year 2007 was $23.3 million, or $0.60 per Class B diluted share, inclusive 	of after-tax restructuring charges of $0.9 million, or $0.02 per Class B 	diluted share. Fiscal year 2006 income from continuing operations was $28.6 	million, or $0.75 per Class B diluted share, inclusive of after-tax 	restructuring charges of $2.8 million, or $0.07 per Class B diluted share. 	
Consolidated gross profit as a percent of sales in fiscal year 2007 was 	20.3% compared to 22.4% in fiscal year 2006. With the fiscal year 2007 and 	2006 acquisitions, the Company's sales mix continued to shift toward the EMS 	segment. Since the EMS segment operated at a lower gross profit percentage 	than the Furniture segment, this contributed to the consolidated gross 	profit downward trend. The fiscal year 2007 EMS segment gross profit 	percentage declined compared to fiscal year 2006 while the fiscal year 2007 	Furniture segment gross profit percentage improved compared to fiscal year 	2006.
	Consolidated selling, general and administrative (SG&A) expenses increased 	in absolute dollars but decreased as a percent of net sales compared to 	fiscal year 2006. The decline in consolidated SG&A costs as a percent of net 	sales was due to the leverage of the additional net sales from the 	acquisitions and the shift in sales mix toward the EMS segment, which has a 	lower SG&A percentage than the Furniture segment.
	Fiscal year 2007 other income decreased compared to fiscal year 2006 	primarily due to $2.2 million pre-tax income relating to funds received in 	fiscal year 2006 as part of a Polish offset credit program for investments 	made in the Company's Poland operation.
The fiscal year 2007 effective income tax rate was 36% as compared to a 	27% effective income tax rate in fiscal year 2006. The increased effective 	income tax rate was related to a higher mix of income being generated by 	domestic operations in fiscal year 2007, which carry a higher effective tax 	rate, coupled with the negative effect of losses generated by select foreign 	operations which have a lower effective tax rate. For fiscal year 2006, in 	addition to the positive impact of a higher mix of income being generated at 	foreign operations, the fiscal year 2006 effective tax rate was also driven 	down by $1.6 million for adjustments to income tax accruals resulting from 	the favorable closure of several prior year tax audits. 	
Electronic Manufacturing Services Segment
	EMS segment net sales and open orders were as follows:
	Fiscal year 2007 EMS segment net sales increased $176.3 million, or 35%, 	from fiscal year 2006 due to the acquisitions. Acquisitions completed in the 	fourth quarter of fiscal year 2006 and in the third quarter of fiscal year 	2007 within the EMS segment contributed sales of $319.3 million in fiscal 	year 2007 and $61.5 million in fiscal year 2006. The selling price change to 	Bayer AG and affiliates reduced fiscal year 2007 net sales by approximately 	$64 million. Increased sales to customers in the medical and industrial 	control industries more than offset decreased sales to customers in the 	automotive industry driven by declines in the domestic automotive market. 	Excluding acquisitions, sales to customers in the medical industry would 	have declined.
The open orders increase was driven by the acquisitions. Open orders as 	of June 30, 2007 have been adjusted to be consistent with the calculation of 	open orders as of June 30, 2008. Due to the contract nature of the 	Company's business, open orders at a point in time may not be indicative of 	future sales trends.
	EMS segment fiscal year 2007 income from continuing operations totaled $1.0 	million, inclusive of after-tax restructuring charges of $0.1 million, as 	compared to fiscal year 2006 income from continuing operations of $6.5 	million, inclusive of after-tax restructuring charges of $0.5 million. The 	restructuring charges were related to the exit of a North American 	manufacturing facility as discussed in more detail in 	 	Note 17 - Restructuring Expense of Notes to Consolidated Financial 	Statements.
	Beginning in the third quarter of fiscal year 2007, gross profit as a 	percent of sales was favorably impacted by a reduction in the pricing of 	select raw material which is purchased from Bayer AG and affiliates. The 	selling price of the finished product back to Bayer AG and affiliates was 	likewise reduced by an amount equal to the material price reduction. While 	there was no impact to gross profit dollars, net income, or net cash flows 	related to this pricing change, gross profit as a percent of net sales 	increased, and SG&A as a percent of net sales increased by a similar 	percentage. This relationship with Bayer AG and affiliates was part of an 	acquisition completed in the fourth quarter of fiscal year 2006.
Fiscal year 2007 gross profit as a percent of net sales declined from 	fiscal year 2006 as net sales of higher margin mature products, primarily 	automotive products, reached end of life and were replaced with net sales of 	lower margin new products including certain assemblies produced at the 	acquired business units, which more than offset the positive gross profit 	percentage impact of the above-mentioned Bayer AG selling price change. 	While the above-mentioned Bayer pricing change negatively impacted SG&A as a 	percent of net sales, the SG&A as a percent of net sales for this segment 	declined overall in part due to lower incentive compensation costs. The 	fiscal year 2007 and 2006 acquisitions also had the effect of lowering this 	segment's gross profit and SG&A as a percent of net sales. The acquisitions 	positively contributed to this segment's earnings.
The fiscal year 2007 and 2006 earnings were unfavorably impacted by 	after-tax costs, in millions, of $3.5 and $0.4, respectively, related to the 	start-up of a manufacturing facility in China. There were minimal sales 	recorded for the China facility during fiscal year 2007. Fiscal year 2006 	income from continuing operations included $1.3 million of after-tax income 	relating to funds received as part of the Polish offset credit program for 	investments made in the Company's Poland operation. Fiscal year 2006 EMS 	segment earnings also benefited from a lower effective tax rate due to 	adjustments to income tax accruals.
Included in this segment were a significant amount of sales to Bayer AG 	affiliates and TRW Automotive, Inc. Sales to these two customers accounted 	for the following portions of consolidated net sales and EMS segment net 	sales:
	The reduced TRW Automotive, Inc. percentages of segment and consolidated net 	sales were a result of certain TRW Automotive, Inc. products reaching end of 	life in addition to the higher total net sales base resulting from the 	acquisitions which likewise drove the higher percentages of net sales to 	Bayer AG affiliates compared to the prior year. In January 2007, Bayer AG 	sold its diagnostics unit to Siemens AG, and thus a portion of the Company's 	net sales which were formerly to Bayer AG affiliates are now to Siemens AG. 	Net sales to Bayer AG affiliates were also impacted in the third and fourth 	quarters of fiscal year 2007 as a result of the Company's aforementioned 	selling price reduction to Bayer AG affiliates which was offset by an equal 	reduction in the material cost. The Company also continues to focus on 	diversification of the EMS segment customer base.
Furniture Segment
Furniture segment net sales and open orders were as follows:
Price increases net of higher discounting increased fiscal year 2007 net 	sales of branded furniture, which includes office and hospitality furniture, 	by approximately $2.3 million as compared to fiscal year 2006. Increased net 	sales volumes of hospitality furniture also contributed to the increased 	branded furniture net sales level. Fiscal year 2007 sales of newly 	introduced office furniture products which the Company began selling during 	fiscal year 2007 approximated $24.0 million. Branded furniture products open 	orders at June 30, 2007 were 1% higher than open orders at June 30, 2006, as 	higher hospitality furniture open orders offset lower office furniture open 	orders. Net sales of contract private label products decreased in 	conjunction with the planned exit of this product line.
The Furniture segment income from continuing operations was $17.8 million 	in fiscal year 2007, inclusive of after-tax restructuring charges of $0.8 	million, compared to income from continuing operations of $17.3 million in 	fiscal year 2006, which included $2.3 million of after-tax restructuring 	charges. The fiscal year 2007 and fiscal year 2006 restructuring charges 	were primarily related to the consolidation and standardization of 	administrative, marketing, and business development functions within this 	segment. Fiscal year 2007 gross profit as a percent of net sales increased 	0.4 percentage point when compared to fiscal year 2006. Items which 	positively impacted gross profit during fiscal year 2007 included price 	increases on select furniture products, lower workers compensation expense, 	and a sales mix shift away from lower margin contract private label 	products. Conversely, fiscal year 2007 gross profit was negatively impacted 	by higher discounting on select furniture products and a shift in sales mix 	among branded furniture products. As compared to fiscal year 2006, fiscal 	year 2007 SG&A expenses increased in absolute dollars and as a percent of 	net sales as lower incentive compensation costs were more than offset by 	increases in other SG&A costs, including increased investments for product 	marketing and promotion and for additional sales staff in support of the 	Company's sales growth strategy.
	See 	 	Note 17 - Restructuring Expense of Notes to Consolidated Financial 	Statements for more information on restructuring charges.
Liquidity and Capital Resources
Working capital at June 30, 2008 was $163 million compared to working 	capital of $199 million at June 30, 2007. The current ratio was 1.5 at June 	30, 2008 and 1.8 at June 30, 2007.
The Company's internal measure of Accounts Receivable performance, also 	referred to as Days Sales Outstanding (DSO), for fiscal year 2008 increased 	to 46.6 from 44.0 for fiscal year 2007. The DSO increase was primarily due 	to certain customers extending the timeframe in which they pay the 	Company. The Company also purchases materials from these customers and has 	an agreement that likewise allows the Company to extend accounts payable 	terms. The Company defines DSO as the average of monthly accounts and notes 	receivable divided by an annual average day's net sales. The Company's 	Production Days Supply on Hand (PDSOH) of inventory measure for fiscal year 	2008 increased to 59.9 from 55.7 for fiscal year 2007. The increased PDSOH 	was driven by EMS segment increased average inventory balances primarily in 	support of transfers of production between manufacturing facilities within 	the EMS segment. The Company defines PDSOH as the average of the monthly 	gross inventory divided by an annual average day's cost of sales.
The Company does not disclose discontinued operations separately from 	continuing operations in the Consolidated Statements of Cash Flows. However, 	for clarity purposes, the Company does separately disclose the adjustment to 	net income for the loss on disposal of discontinued operations in cash flows 	from operating activities and the proceeds from disposal of discontinued 	operations in cash flows from investing activities.
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 $80 million at June 30, 2007 to $30 million 	at June 30, 2008, as cash flow generated from operations was more than 	offset by cash payments during the fiscal year for capital expenditures, 	share repurchases, and dividends. Operating activities generated $43 	million of cash flow in fiscal year 2008 compared to $44 million in fiscal 	year 2007. The Company's repurchase of Class B shares under a previously 	authorized share repurchase program utilized $25 million of cash. The 	Company reinvested $51 million into capital investments for the future, 	primarily for manufacturing equipment and facility improvements. During 	fiscal year 2009, the Company expects to continue to invest in manufacturing 	equipment and also plans to construct a new EMS manufacturing facility in 	Poland as part of the consolidation of the European manufacturing footprint. 	The land and new facility are expected to cost approximately $35 million, 	and the Company has a conditional agreement to sell the current Poland 	facility for approximately $24 million. During fiscal year 2009, the Company 	intends to sell approximately 27,300 acres of timber and farm land that it 	currently owns. Fiscal year 2008 financing cash flow activities included $24 	million in dividend payments, which remained flat with fiscal year 2007.
The Company previously maintained a $75 million credit facility with an 	expiration date in May 2009 that allowed for both issuances of letters of 	credit and cash borrowings. During the fourth quarter of fiscal year 2008, 	the Company replaced the $75 million credit facility with a $100 million 	credit facility which expires in April 2013. The $75 million credit facility 	provided an option to increase the amount available for borrowing to $125 	million at the Company's request, subject to participating banks' consent. 	Similarly, 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 participating banks' consent. Similar to the previous $75 million 	credit facility, 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 June 30, 2008.
	At June 30, 2008, the Company had $52.6 million of short-term borrowings 	outstanding. The outstanding balance consisted of $17.3 million for a Euro 	currency borrowing which provides a natural currency hedge against Euro 	denominated intercompany notes between the U.S. parent and the Euro 	functional currency subsidiaries, and an additional $33.6 million borrowing 	funded short-term cash needs. In addition, at June 30, 2008, the Company had 	$1.7 million of short-term borrowings outstanding under a separate Thailand 	credit facility which is backed by the $100 million credit facility. The 	Company also had letters of credit against the credit facility. Total 	availability to borrow under the $100 million credit facility was $44.2 	million at June 30, 2008. At June 30, 2007, the Company had $18.9 million of 	short-term borrowings outstanding under the $75 million credit facility.
The Company also has a credit facility for which the expiration date has 	been extended to November 2008 for its electronics operation in Wales, 	United Kingdom, which allows for multi-currency borrowings up to 2 million 	Sterling equivalent (approximately $4 million U.S. dollars at current 	exchange rates) and is available to cover bank overdrafts. Bank overdrafts 	may be deemed necessary to satisfy short-term cash needs rather than funding 	from intercompany sources. At June 30, 2007, as collateral subject to lien, 	this facility required 3 million Euro (approximately $4 million U.S. 	dollars) to be held as restricted cash which was classified as other 	long-term assets on the Company's balance sheet. The restricted cash is no 	longer required as collateral and was reclassified to cash and cash 	equivalents on the Company's balance sheet. At June 30, 2008, the Company 	had no borrowings outstanding under the overdraft facility. At June 30, 	2007, the Company had $3.0 million U.S. dollar equivalent of 	Sterling-denominated short-term borrowings outstanding under the overdraft 	facility. See 	 	Note 6 - Long-Term Debt and Credit Facility of Notes to Consolidated 	Financial Statements for more information on the credit facilities.
At June 30, 2007, the Company's outstanding balance in senior secured 	notes was $4.5 million. These notes represented the remaining portion of 	notes originally held by Reptron which was not tendered as of the date of 	the acquisition. The Company redeemed the notes during fiscal year 2008. The 	notes were classified as Current Liabilities on the Consolidated Balance 	Sheets. See 	 	Note 2 - Acquisitions of Notes to Consolidated Financial Statements for 	information on the Reptron acquisition.
	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 2009 	and the foreseeable future for working capital needs, dividends, and for 	funding investments in the Company's future, including potential 	acquisitions. The Company's primary source of funds is its ability to 	generate cash from operations to meet its liquidity obligations, which could 	be affected by factors such as 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. The Company's 	secondary source of funds is its credit facilities. The $100 million credit 	facility is contingent on complying with certain debt covenants. The Company 	does not expect the covenants to limit or restrict its ability to borrow on 	the facility in fiscal year 2009. The Company anticipates maintaining a 	strong liquidity position for the next twelve months. The Company does not 	expect the absence of cash flows from discontinued operations to have a 	material effect on future liquidity and capital resources.
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.
Contractual Obligations
The following table summarizes the Company's contractual obligations as 	of June 30, 2008.
(a) Refer to 		Note 6 - Long-Term Debt and Credit Facility of Notes to Consolidated 	Financial Statements for more information regarding Long-Term Debt and 	Capital Lease Obligations. The $0.1 million long-term debt obligations and 	$0.4 million capital lease payments due in fiscal year 2009 are recorded as 	current liabilities.
(b) The timing of payments of certain items 			included on the "Other Long-Term Liabilities Reflected on the 			Balance Sheet" line above is estimated based on the following 			assumptions:
The timing of Supplemental Employee 				Retirement Plan (SERP) payments is estimated based on an assumed 				retirement age of 62 with payout based on the prior distribution 				elections of participants. The fiscal year 2009 amount includes 				$3.0 million for SERP payments recorded as a current liability.
The timing of employee transition payments 				related to facilities to be exited is estimated based on the 				expected termination in the underlying restructuring plan. The 				fiscal year 2009 amount also includes $6.6 million for 				restructuring employee transition payments recorded as a current 				liability.
The timing of severance plan payments is 				estimated based on the average service life of employees. The 				fiscal year 2009 amount also includes $0.3 million for severance 				payments recorded as a current liability.
The timing of warranty payments is 				estimated based on historical data. The fiscal year 2009 amount 				includes $1.0 million for short-term warranty payments recorded 				as a current liability.
(c) Excludes $2.2 million of long-term unrecognized tax benefits 	associated with the adoption of Financial Accounting Standards Board 	Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48), 	and associated accrued interest and penalties along with miscellaneous other 	long-term liabilities which are not tied to a contractual obligation and for 	which the Company cannot make a reasonably reliable estimate of the period 	of future payments.
(d) Refer to 		Note 5 - Commitments and Contingent Liabilities 		of Notes to Consolidated 	Financial Statements for more information regarding Operating Leases and 	certain Other Long-Term Liabilities.
(e) Purchase Obligations are defined as agreements to purchase goods or 	services that are enforceable and legally binding and that specify all 	significant terms. The amounts listed above for purchase obligations include 	contractual commitments for items such as raw materials, supplies, capital 	expenditures, services, and software acquisitions/license commitments. 	Cancellable purchase obligations that the Company intends to fulfill are 	also included in the purchase obligations amount listed above. In certain 	instances, such as when lead times dictate, the Company enters into 	contractual agreements for material in excess of the levels required to 	fulfill customer orders. In turn, agreements with the customers cover a 	portion of that exposure for the material which was purchased prior to 	having a firm order.
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 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.
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 U.S. GAAP. 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. A summary of the Company's significant accounting policies is 	disclosed in 	 	Note 1 - Summary of Significant Accounting Policies of Notes to 	Consolidated Financial Statements. 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 June 30, 2008 and June 30, 2007, the reserve for returns 		and allowances was $3.3 million and $3.2 million, respectively. Over the 		past two years, the returns and allowances reserve has been 		approximately 2% of gross trade receivables.
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 June 		30, 2008 and June 30, 2007 was $0.8 million and $1.2 million, 		respectively, and over the past two years, this reserve has been less 		than 1% of gross trade accounts receivable.
Excess and obsolete inventory - Inventories were valued using the 	lower of last-in, first-out (LIFO) cost or market value for approximately 	17% and 18% of consolidated inventories at June 30, 2008 and June 30, 2007, 	respectively, including approximately 85% and 86% of the Furniture segment 	inventories at June 30, 2008 and June 30, 2007, respectively. The remaining 	inventories are 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 June 30, 2008 and June 30, 2007, the Company's accrued 	liabilities for self-insurance exposure were $6.6 million and $7.0 million, 	respectively, excluding immaterial amounts held in a voluntary employees' 	beneficiary association (VEBA) trust.
Income 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.
	FIN 48, which clarifies the accounting for uncertainty in tax positions, 	requires financial statement recognition of the impact of a tax position if 	a position is more likely than not of being sustained on audit, based on the 	technical merits of the position. Additionally, FIN 48 provides guidance on 	measurement, derecognition, classification, interest and penalties, 	accounting in interim periods, transition, and disclosure requirements for 	uncertain tax positions. The provisions of FIN 48 were effective as of the 	beginning of the Company's fiscal year 2008. 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 taxes for all years that are subject to 	audit. As tax periods are effectively settled, the provision will be 	adjusted accordingly. Additional information on income taxes is contained in 	 	Note 9 - Income Taxes of Notes to Consolidated Financial Statements.
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. If the 	estimated fair value is less than the carrying value, goodwill is impaired 	and will be written down to its estimated fair value. At June 30, 2008, 	goodwill was reviewed due primarily to a reduction in the Company's market 	capitalization; however, the interim review resulted in no additional 	goodwill impairment. Goodwill is assigned to and the fair value is tested at 	the reporting unit level. At June 30, 2008 and June 30, 2007, the Company's 	goodwill totaled, in millions, $15.4 and $15.5, respectively. Goodwill 	impairment of $0.2 million pre-tax was recorded during fiscal year 2008 	related to terminated business in conjunction with the consolidation of the 	EMS segment Hibbing, Minnesota, operation.
New Accounting Standards
	See 	 	Note 1 - Summary of Significant Accounting Policies of Notes to 	Consolidated Financial Statements for information regarding New Accounting 	Standards.
Item 7A
Item 7A - Quantitative and Qualitative Disclosures About Market Risk Interest Rate Risk: As of June 30, 2008 and 2007, the Company had an investment portfolio of fixed income securities, excluding those classified as cash and cash equivalents, of $52 million and $67 million, respectively. These securities are classified as available-for-sale securities and are stated at market value with unrealized gains and losses recorded net of tax related effect as a component of Share Owners' Equity. These securities, like all fixed income instruments, are subject to interest rate risk and will decline in value if market interest rates increase. A hypothetical 100 basis point increase in an annual period in market interest rates from levels at June 30, 2008 and 2007 would cause the fair value of these short-term investments to decline by an immaterial amount. Further information on short-term investments is provided in Note 12 - Short-Term Investments of Notes to Consolidated Financial Statements.
The Company is exposed to interest rate risk on certain outstanding debt balances. The outstanding loan balances under the Company's credit facilities bear interest at variable rates based on prevailing short-term interest rates. Based on the $53 million and $22 million outstanding balances of variable rate obligations at June 30, 2008 and 2007, respectively, the Company estimates that a hypothetical 100 basis point change in interest rates would not have a material effect on annual interest expense. Further information on debt balances is provided in Note 6 - Long-Term Debt and Credit Facility of Notes to Consolidated Financial Statements.
Foreign Exchange Rate Risk: The Company operates internationally, and thus is subject to potentially adverse movements in foreign currency rate changes. The Company's risk management strategy includes the use of derivative financial instruments to hedge certain foreign currency exposures. Derivatives are used only to manage underlying exposures of the Company and are not used in a speculative manner. Further information on derivative financial instruments is provided in Note 11 - Derivative Instruments of Notes to Consolidated Financial Statements. The Company estimates that a hypothetical 10% adverse change in foreign currency exchange rates relative to non-functional currency balances of monetary instruments, to the extent not hedged by derivative instruments, would not have a material impact on profitability in an annual period.
Item 8
Item 8 - Financial Statements and Supplementary Data
MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
The management of Kimball International, Inc. is responsible for establishing and maintaining adequate internal control over financial reporting and 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 accounting principles generally accepted in the United States of America and include judgments and estimates, which in the opinion of management are applied on an appropriately conservative basis. The Company maintains a system of internal and disclosure 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 employees who work within the internal control processes, by the Company's staff of internal auditors, as well as by the independent registered public accounting firm 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 registered public accounting firm to review the Company's financial policies and procedures, its internal control structure, the objectivity of its financial reporting, and the independence of the Company's independent registered public accounting firm. The internal auditors and the independent registered public accounting firm have free and direct access to the Audit Committee, and they meet periodically, without management present, to discuss appropriate matters.
Because of inherent limitations, a system of internal control over financial reporting may not prevent or detect misstatements and even when determined to be effective, can only provide reasonable assurance with respect to financial statement preparation and presentation.
These consolidated financial statements are subject to an evaluation of internal control over financial reporting conducted under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer. Based on that evaluation, conducted under the criteria established in Internal Control -- Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, management concluded that its internal control over financial reporting was effective as of June 30, 2008.
Deloitte & Touche LLP, the Company's independent registered public accounting firm, has issued an audit report on the Company's internal control which is included herein.
/s/ James C. Thyen
JAMES C. THYEN
President,
Chief Executive Officer
September 2, 2008
/s/ Robert F. Schneider
ROBERT F. SCHNEIDER
Executive Vice President,
Chief Financial Officer
September 2, 2008
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Share Owners of Kimball International, Inc.:
We have audited the accompanying consolidated balance sheets of Kimball International, Inc. and subsidiaries (the "Company") as of June 30, 2008 and 2007, and the related consolidated statements of income, share owners' equity, and cash flows for each of the three years in the period ended June 30, 2008. Our audits also included the financial statement schedules listed in the Index at Item 15. We also have audited the Company's internal control over financial reporting as of June 30, 2008, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company's management is responsible for these financial statements and financial statement schedules, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on these financial statements and financial statement schedules and an opinion on the Company's internal control over financial reporting based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
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, 2008 and 2007, and the results of their operations and their cash flows for each of the three years in the period ended June 30, 2008, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June 30, 2008, based on the criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Indianapolis, Indiana
September 2, 2008
KIMBALL INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands, Except for Share and Per Share Data)
			June 30,
			June 30,
			ASSETS
			Current Assets:
			 Cash and cash equivalents
			 $ 30,805
			 $ 35,027
			 Short-term investments
			 51,635
			 67,350
			 Receivables, net of allowances of $1,057 and $1,477, 			respectively
			 180,307
			 172,190
			 Inventories
			 164,961
			 135,901
			 Prepaid expenses and other current assets
			 37,227
			 34,348
			 Assets held for sale
			 1,374
			 3,032
			 Total current assets
			 466,309
			 447,848
			Property and Equipment, net of accumulated depreciation of $340,076 			and
			 $320,889, respectively
			 189,904
			 173,800
			Goodwill
			 15,355
			 15,518
			Other Intangible Assets, net of accumulated amortization of $66,087 			and
			 $58,901, respectively
			 13,373
			 20,585
			Other Assets
			 37,726
			 36,990
			 Total Assets
			 $ 722,667
			 $ 694,741
			LIABILITIES AND SHARE OWNERS' EQUITY
			Current Liabilities:
			 Current maturities of long-term debt
			 $ 470
			 $ 5,515
			 Accounts payable
			 174,575
			 150,409
			 Borrowings under credit facilities
			 52,620
			 21,968
			 Dividends payable
			 6,989
			 7,031
			 Accrued expenses
			 69,053
			 64,314
			 Total current liabilities
			 303,707
			 249,237
			Other Liabilities:
			 Long-term debt, less current maturities
			 Other
			 26,072
			 17,224
			 Total other liabilities
			 26,493
			 18,056
			Share Owners' Equity:
			 Common stock-par value $0.05 per share:
			 Class A - Shares authorized 49,826,000 in 2008 and 2007
			 Shares issued 14,368,000 in 2008 and 2007
			 Class B - Shares authorized 100,000,000 in 2008 and 2007
			 Shares issued 28,657,000 in 2008 and 2007
			 1,433
			 1,433
			 Additional paid-in capital
			 14,531
			 14,568
			 Retained earnings
			 456,413
			 480,863
			 Accumulated other comprehensive income
			 12,308
			 3,395
			 Less: Treasury stock, at cost:
			 Class A - 2,691,000 in 2008 and 2,733,000 in 2007
			 (46,517)
			 (47,536)
			 Class B - 3,372,000 in 2008 and 1,761,000 in 2007
			 (46,419)
			 (25,993)
			 Total Share Owners' Equity
			 392,467
			 427,448
			 Total Liabilities and Share Owners' Equity
			 $ 722,667
			 $ 694,741
See 			Notes to Consolidated Financial Statements
KIMBALL INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in Thousands, Except for Per Share Data)
KIMBALL INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
KIMBALL INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF SHARE OWNERS' EQUITY
(Amounts in Thousands, Except for Share and Per Share Data)
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.
Revenue Recognition: Revenue from product sales is recognized 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. 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. Service revenue is recognized as services are rendered. Based on estimated product returns and price concessions, a reserve for returns and allowances is recorded at the time of the sale, resulting in a reduction of revenue. An allowance for doubtful accounts is recorded using 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. Estimates of collectibility result in an increase or decrease in selling expenses.
Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts included in the consolidated financial statements and related footnote disclosures. 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. Cash and cash equivalents consist of bank accounts and money market funds. Cash equivalents are stated at cost, which approximates market value. Short-term investments consist primarily of municipal bonds and U.S. Government securities with maturities exceeding three months at the time of acquisition. Available-for-sale securities are stated at market value, with unrealized gains and losses excluded from net income and recorded net of related tax effect in Accumulated Other Comprehensive Income, as a component of Share Owners' Equity.
Inventories: Inventories are stated at the lower of cost or market value. Cost includes material, labor, and applicable manufacturing overhead. Costs associated with underutilization of capacity are expensed as incurred. The last-in, first-out (LIFO) method was used for approximately 17% and 18% of consolidated inventories at June 30, 2008 and June 30, 2007, respectively, and remaining inventories were valued using the first-in, first-out (FIFO) method. Inventories recorded on the Company's balance sheet are adjusted for excess and obsolete inventory. Evaluation of excess inventory includes such factors as anticipated usage, inventory turnover, inventory levels, and product demand levels. Factors considered when evaluating 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.
Property, Equipment and Depreciation: Property and equipment are stated at cost less accumulated depreciation. Depreciation is provided over the estimated useful life of the assets using the straight-line method for financial reporting purposes. Leasehold improvements are amortized on a straight-line basis over the shorter of the useful life of the improvement or the term of the lease. Major maintenance activities and improvements are capitalized; other maintenance, repairs, and minor renewals and betterments are expensed.
Impairment of Long-Lived Assets: The Company performs reviews for impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. An impairment loss is recognized when estimated future cash flows expected to result from the use of the asset and its eventual disposition are less than its carrying amount. When an impairment is identified, the carrying amount of the asset is reduced to its estimated fair value. Assets to be disposed of are recorded at the lower of net book value or fair market value less cost to sell at the date management commits to a plan of disposal.
Goodwill and Other Intangible Assets: Goodwill represents the difference between the purchase price and the value of tangible and identifiable intangible net assets resulting from business acquisitions. Goodwill is tested annually for impairment using a fair value approach at the reporting unit level, or more often if events or circumstances change that could cause goodwill to become impaired. At June 30, 2008, goodwill was reviewed due primarily to a reduction in the Company's market capitalization; however, the interim review resulted in no additional goodwill impairment. The Company uses discounted cash flows to establish its reporting unit fair values. When all or a portion of a reporting unit is disposed of, goodwill is allocated to the gain or loss on disposition using the relative fair value method. During fiscal year 2006, the sale of a fixed-wall furniture systems business resulted in a pre-tax goodwill impairment loss of $433, in thousands. During fiscal year 2008, the terminated business in conjunction with the consolidation of a Hibbing, Minnesota, operation resulted in a pre-tax goodwill impairment loss of $172, in thousands.
A summary of the goodwill by segment is as follows:
In the Electronic Manufacturing Services (EMS) segment, goodwill decreased 		in the aggregate by, 		in thousands, $163 during fiscal year 2008 due to 		a $172 decrease for impairment related to terminated business in conjunction with 		the consolidation of a Hibbing, Minnesota, operation, a $165 decrease due to an 		adjustment to estimated employee transition pay related to the consolidation 		of a Gaylord, Michigan, operation, and a $123 decrease to adjust the fair value of assets and liabilities 		estimated as of the date of the Reptron acquisition, partially offset by a $96 increase related to 		tax provision adjustments for activity prior to the Reptron acquisition 		and a $201 increase due to the effect of changes in foreign 	currency exchange rates. Goodwill impairment was calculated based upon 		the cessation of cash flows for the business activities not continuing 		after the facility consolidation. The goodwill related to the 		Hibbing business activities continuing after the facility consolidation 		was transferred to the EMS reporting units which are receiving the 		business.
Other intangible assets consist of capitalized software, product rights, and customer relationships and are reported as Other Intangible Assets on the Consolidated Balance Sheets. Intangible assets are reviewed for impairment when events or circumstances indicate that the carrying value may not be recoverable over the remaining lives of the assets.
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 on estimated attrition rate of customers. The Company has no intangible assets with indefinite useful lives which are not subject to amortization.
A summary of other intangible assets subject to amortization by segment is as follows:
During fiscal years 2008, 2007, and 2006, amortization 	expense of other intangible assets from continuing operations, including 	asset write-downs associated with the Company's restructuring plans, was, in thousands, $8,036, $8,756, and 	$7,735, respectively. Amortization expense in future 	periods is expected to be, in thousands, $5,194, $3,473, $2,174, $1,253, and $569 in the five years ending June 30, 	2013, and $710 thereafter. When placed in service, the product rights 	intangible asset life is expected to be five years. The amortization period for the customer 	relationship intangible asset is 16 years. The estimated useful life 	of internal-use software ranges from three to seven years.
Research and Development: The costs of research and development are expensed as incurred. Research and development costs from continuing operations were approximately, in millions, $16, $17, and $15 in fiscal years 2008, 2007, and 2006, respectively.
Advertising: Advertising costs are expensed as incurred. Advertising costs from continuing operations, included in selling, general and administrative expenses were, in millions, $6.2, $8.3, and $5.6, in fiscal years 2008, 2007, and 2006, respectively.
Insurance and Self-insurance: The Company is self-insured up to certain limits for auto and general liability, workers' compensation, and certain employee health benefits including 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. Approximately 68% of the workforce is covered under self-insured medical and short-term disability plans.The Company carries external medical and disability insurance coverage for the remainder of its eligible workforce not covered by self-insured plans. Insurance benefits are not provided to retired employees.
Income Taxes: 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. Determination of the amount of unrecognized deferred tax liability on unremitted earnings is not practicable.
Off-Balance Sheet Risk and Concentration of Credit Risk: The Company has business and credit risks concentrated in the automotive, medical, and furniture industries. Two customers, Bayer AG and Siemens AG, represented 16% and 15%, respectively, of consolidated accounts receivable at June 30, 2008. TRW Automotive, Inc. and Bayer AG, represented 14% and 16%, respectively, of consolidated accounts receivable at June 30, 2007. The Company currently does not foresee a credit risk associated with these receivables. 	The Company's off-balance sheet arrangements are limited to operating leases entered into in the normal course of business as described in Note 5 - Commitments and Contingent Liabilities of Notes to Consolidated Financial Statements.
Non-operating Income and Expense: Non-operating income and expense include the impact of such items as foreign currency rate movements and related derivative gain or loss, fair value adjustments on Supplemental Employee Retirement Plan (SERP) investments, non-production rent income, bank charges, and other miscellaneous non-operating income and expense items that are not directly related to operations.
Foreign Currency Translation: The Company uses the U.S. dollar and Euro predominately as its functional currencies. Foreign currency assets and liabilities are remeasured into functional currencies at end-of-period exchange rates, except for nonmonetary assets and equity, which are remeasured at historical exchange rates. Revenue and expenses are remeasured at the weighted average exchange rate during the fiscal year, except for expenses related to nonmonetary assets, which are remeasured at historical exchange rates. Gains and losses from foreign currency remeasurement are reported in the Other Income (Expense) category of the Consolidated Statements of Income. For businesses whose functional currency is other than the U.S. dollar, the translation of functional currency statements to U.S. dollar statements uses end-of-period exchange rates for assets and liabilities, weighted average exchanges rates for revenue and expenses, and historical rates for equity. The resulting currency translation adjustment is recorded in Accumulated Other Comprehensive Income, as a component of Share Owners' Equity.
Derivative Instruments and Hedging Activities: Derivative financial instruments are recognized on the balance sheet as assets and liabilities and are measured at fair value. Changes in the fair value of derivatives are recorded each period in earnings or Accumulated Other Comprehensive Income, depending on whether a derivative is designated and effective as part of a hedge transaction, and if it is, the type of hedge transaction. Hedge accounting is utilized when a derivative is expected to be highly effective upon execution and continues to be highly effective over the duration of the hedge transaction. Hedge accounting permits gains and losses on derivative instruments to be deferred in Accumulated Other Comprehensive Income and subsequently included in earnings in the periods in which earnings are affected by the hedged item, or when the derivative is determined to be ineffective. The Company's use of derivatives is generally limited to forward purchases of foreign currency to manage exposure to the variability of cash flows, primarily related to the foreign exchange rate risks inherent in forecasted transactions denominated in foreign currency.
Stock-Based Compensation: As described in Note 8 - Stock Compensation Plans of Notes to Consolidated Financial Statements, the Company maintains stock-based employee 	compensation plans which allow for the issuance of restricted stock, 	restricted share units, unrestricted share grants, incentive stock options, 	nonqualified stock options, performance shares, performance units, and stock 	appreciation rights for grant to officers and other key employees of the 	Company and to members of the Board of Directors who are not employees. 	Effective July 1, 	2005, the Company adopted the fair value recognition provisions of FASB 	Statement No.
	123(R), Share-Based Payment (FAS 123(R)). Under the modified prospective method of adoption selected by the Company, compensation expense related to stock options is recognized in the income statement beginning in fiscal year 2006. Additionally, as of the effective date, the Company eliminated its balance of Deferred Stock-Based Compensation, which represented unrecognized compensation cost for restricted share unit awards, and reclassified it to Treasury Stock and Additional Paid-In Capital, in accordance with the modified prospective transition method.
FAS 123(R) requires that forfeitures be estimated over the vesting period 	of an award, rather than being recognized as a reduction of compensation 	expense when the forfeiture actually occurs. FAS 123(R) also requires 	that liability awards be revalued to fair value, which, upon the adoption of 	FAS 123(R), had the effect of a 	reduction of a liability for outstanding stock appreciation rights. 	The impact of the revaluation of stock appreciation rights and the use of the 	estimated forfeiture method for prior periods have been presented on the Consolidated 	Statements of Income as a Cumulative Effect of Change in Accounting 	Principle, as required by FAS 123(R). The cumulative effect recorded in fiscal year 2006 totaled $0.3 million of income, net of taxes. The earnings per share impact can be found in 	Note 15 - Earnings Per Share of 	Notes to Consolidated Financial Statements.
The Company's stock-based compensation plans allow early vesting when an employee reaches retirement age and ceases continuous service. Under FAS 123(R), awards granted after June 30, 2005 require acceleration of compensation expense through an employee's retirement age, whether or not the employee is expected to cease continuous service on that date. For awards granted on or before June 30, 2005, the Company accelerates compensation expense only in cases where a retirement eligible employee is expected to cease continuous service prior to an award's vesting date. If the new provisions of FAS 123(R) had been in effect for awards granted prior to June 30, 2005, compensation expense including the pro forma effect of stock options, net of tax, would have been $0.2 million lower, $0.2 million lower, and $0.1 million higher 	during fiscal years 2008, 2007, and 2006, 	respectively.
New 	Accounting Standards: In June 2008, the Financial Accounting Standards 	Board (FASB) issued a FASB Staff Position (FSP) on Emerging Issues Task 	Force (EITF) 03-6-1, Determining Whether Instruments Granted in Share-Based 	Payment Transactions Are Participating Securities (FSP EITF 03-6-1). FSP 	EITF 03-6-1 provides that unvested share-based payment awards that contain 	nonforfeitable rights to dividends or dividend equivalents (whether paid or 	unpaid) are participating securities and shall be included in the 	computation of earnings per share pursuant to the two-class method. The 	two-class method is an earnings allocation method for computing earnings per 	share when an entity's capital structure includes multiple classes of common 	stock and participating securities. FSP EITF 03-6-1 is effective as of the 	beginning of the Company's fiscal year 2010 and requires that previously 	reported earnings per share data be recast in financial statements issued in 	periods after the effective date. The Company is currently evaluating the 	impact of FSP EITF 03-6-1 on its consolidated financial statements.
In May 2008, the 	FASB issued Statement of Financial Accounting Standard (SFAS) No. 162, The 	Hierarchy of Generally Accepted Accounting Principles (FAS 162). FAS 162 	identifies the sources of accounting principles and the framework for 	selecting the principles used in the preparation of financial statements 	that are presented in conformity with generally accepted accounting 	principles in the United States. This statement is not expected to change 	existing practices but rather reduce the complexity of financial reporting. 	This statement will go into effect 60 days after the Securities and Exchange 	Commission approves related auditing rules and is not expected to have a 	material effect on the Company's consolidated financial statements.
In April 2008, the 	FASB issued FSP No. FAS 142-3, Determination of the Useful Life of 	Intangible Assets (FSP FAS 142-3). FSP FAS 142-3 amends the factors that 	should be considered in developing renewal or extension assumptions used to 	determine the useful life of a recognized intangible asset under SFAS 142, 	Goodwill and Other Intangible Assets. FSP FAS 142-3 allows an entity to use 	its own historical experience in renewing or extending similar arrangements, 	adjusted for entity-specific factors, in developing assumptions about 	renewal or extension used to determine the useful life of a recognized 	intangible asset. As a result, the determination of intangible asset useful 	lives is now consistent with the method used to determine the period of 	expected cash flows used to measure the fair value of the intangible assets, 	as described in other accounting principles. The guidance for determining 	the useful life of a recognized intangible asset is to be applied 	prospectively to intangible assets acquired after the effective date. 	Disclosure requirements are to be applied prospectively to all intangible 	assets recognized as of, and subsequent to, the effective date. The 	provisions of FSP FAS 142-3 are effective as of the beginning of the 	Company's fiscal year 2010 and are currently not expected to have a material 	effect on the Company's consolidated financial statements.
	In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative 	Instruments and Hedging Activities (FAS 161). FAS 161 amends and expands the 	disclosure requirements of SFAS No. 133, Accounting for Derivative 	Instruments and Hedging Activities, and requires entities to provide 	enhanced qualitative disclosures about objectives and strategies for using 	derivatives, quantitative disclosures about fair values and amounts of gains 	and losses on derivative contracts, and disclosures about 	credit-risk-related contingent features in derivative agreements. FAS 161 	will be effective as of the Company's third quarter of fiscal year 2009. The 	Company is currently evaluating the financial statement disclosures required 	under FAS 161.
	In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business 	Combinations (FAS 141(R)). FAS 141(R) requires that the fair value of the 	purchase price of an acquisition including the issuance of equity securities 	be determined on the acquisition date; requires that all assets, 	liabilities, noncontrolling interests, contingent consideration, 	contingencies, and in-process research and development costs of an acquired 	business be recorded at fair value at the acquisition date; requires that 	acquisition costs generally be expensed as incurred; requires that 	restructuring costs generally be expensed in periods subsequent to the 	acquisition date; and requires that changes in deferred tax asset valuation 	allowances and acquired income tax uncertainties after the measurement 	period impact income tax expense. FAS 141(R) also broadens the definition of 	a business combination and expands disclosures related to business 	combinations. FAS 141(R) will be applied prospectively to business 	combinations occurring after the beginning of the Company's fiscal year 	2010, except that business combinations consummated prior to the effective 	date must apply FAS 141(R) income tax requirements immediately upon 	adoption. The Company is currently evaluating the impact of FAS 141(R) on 	its financial position, results of operations, and cash flows.
	In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in 	Consolidated Financial Statements, an Amendment of ARB No. 51 (FAS 160). FAS 	160 requires that noncontrolling interests be reported as a separate 	component of equity, that net income attributable to the parent and to the 	noncontrolling interest be separately identified in the consolidated 	statements of income, that changes in a parent's ownership interest be 	accounted for as equity transactions, and that, when a subsidiary is 	deconsolidated, any retained noncontrolling equity investment in the former 	subsidiary and the gain or loss on the deconsolidation of the subsidiary be 	measured at fair value. FAS 160 will be applied prospectively, except for 	presentation and disclosure requirements which will be applied 	retrospectively, as of the beginning of the Company's fiscal year 2010. The 	Company does not currently have noncontrolling interests, and therefore the 	adoption of FAS 160 is not expected to have an impact on the Company's 	financial position, results of operations, or cash flows.
	In June 2007, the FASB ratified the EITF consensus on Issue No. 06-11, 	Accounting for Income Tax Benefits of Dividends on Share-Based Payment 	Awards (EITF 06-11). EITF 06-11 requires companies to recognize the income 	tax benefit realized from dividends or dividend equivalents that are charged 	to retained earnings and paid to employees for nonvested equity-classified 	employee share-based payment awards as an increase to additional paid-in 	capital. The realized income tax benefit recognized in additional paid-in 	capital should be included in the pool of excess tax benefits available to 	absorb future tax deficiencies on share-based payment awards. EITF 06-11 	will be applied prospectively for income tax benefits on dividends declared 	after the beginning of the Company's fiscal year 2009. The adoption of EITF 	06-11 is not expected to have a material impact on the Company's financial 	position, results of operations, or cash flows.
	In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for 	Financial Assets and Financial Liabilities-Including an amendment of FASB 	Statement No. 115 (FAS 159). FAS 159 expands the use of fair value 	accounting, but does not affect existing standards which require assets or 	liabilities to be carried at fair value. Under FAS 159, a company may elect 	to use fair value to measure financial instruments and certain other items, 	which may reduce the need to apply complex hedge accounting provisions in 	order to mitigate volatility in reported earnings. The fair value election 	is irrevocable and is generally made on an instrument-by-instrument basis, 	even if a company has similar instruments that it elects not to measure 	based on fair value. At the adoption date, unrealized gains and losses on 	existing items for which fair value has been elected are reported as a 	cumulative adjustment to beginning retained earnings. Subsequent to the 	adoption of FAS 159, changes in fair value are recognized in earnings. FAS 	159 is effective as of the beginning of the Company's fiscal year 2009. The 	Company has determined that it will not elect to use fair value accounting 	for any eligible items, and therefore FAS 159 will have no impact on its 	financial position, results of operations, or cash flows.
	In September 2006, the FASB issued SFAS No. 158, Employers' Accounting for 	Defined Benefit Pension and Other Postretirement Plans-an amendment of FASB 	Statements No. 87, 88, 106, and 132(R) (FAS 158). FAS 158 requires employers 	to recognize the overfunded or underfunded status of a defined benefit plan 	as an asset or liability in its statement of financial position, recognize 	through comprehensive income changes in that funded status in the year in 	which the changes occur, and measure a plan's assets and its obligations 	that determine its funded status as of the end of the employer's fiscal 	year. At the end of fiscal year 2007, the Company adopted the provisions of 	FAS 158 related to recognition of plan assets, benefit liabilities, and 	comprehensive income. The Company expects to adopt the provisions of this 	rule that require measurement of plan assets and benefit obligations as of 	the year end balance sheet date when these provisions become effective at 	the end of the Company's fiscal year 2009. The change in measurement date 	is not expected to have a material impact on the Company's financial 	position, results of operations, or cash flows. This rule impacts the 	accounting for the Company's unfunded noncontributory postemployment 	severance plans.
	In September 2006, the FASB issued FSP AUG AIR-1, Accounting for Planned 	Major Maintenance Activities. The staff position eliminated the 	accrue-in-advance method of accounting for planned major maintenance 	activities. The Company previously used the accrue-in-advance method 	primarily to reserve for future aircraft maintenance activities required by 	Federal Aviation Administration regulations. FSP AUG AIR-1 was effective as 	of the beginning of the Company's fiscal year 2008. As of July 1, 2007, the 	Company adopted the deferral method whereby major maintenance activities are 	capitalized and depreciated over the useful life. The adoption of the 	deferral method did not have a material impact on the Company's financial 	position, results of operations, or cash flows, thus FSP AUG AIR-1 was not 	retrospectively applied.
	In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements 	(FAS 157), which defines fair value, establishes a framework for measuring 	fair value in generally accepted accounting principles, and expands 	disclosures about fair value measurements. FAS 157 is only applicable to 	existing accounting pronouncements that require or permit fair value 	measurements and does not require any new fair value measurements. The 	standard, as originally issued, was to be effective as of the beginning of 	the Company's fiscal year 2009. With the issuance in February 2008 of FSP 	FAS 157-2, Effective Date of FASB Statement No. 157, the FASB approved a 	one-year deferral to the beginning of the Company's fiscal year 2010 for all 	non-financial assets and liabilities, except those that are recognized or 	disclosed at fair value in the financial statements on a recurring basis at 	least annually. In addition, the FASB has excluded leases from the scope of 	FAS 157 with the issuance of FSP FAS 157-1, Application of FASB Statement 	No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements that 	Address Fair Value Measurements for Purposes of Lease Classification or 	Measurement under Statement 13. FAS 157 will be applied prospectively. The 	fiscal year 2009 adoption of FAS 157, applicable to financial instruments, 	is not expected to have a material impact on the Company's financial 	position, results of operations, or cash flows. The Company is currently 	evaluating the effect of applying FAS 157 to non-financial assets and 	liabilities in fiscal year 2010.
	In June 2006, the FASB issued FASB Interpretation No. 48, Accounting for 	Uncertainty in Income Taxes (FIN 48), which clarifies the accounting for 	uncertainty in tax positions. FIN 48 requires financial statement 	recognition of the impact of a tax position if a position is more likely 	than not of being sustained on audit, based on the technical merits of the 	position. Additionally, FIN 48 provides guidance on measurement, 	derecognition, classification, interest and penalties, accounting in interim 	periods, transition, and disclosure requirements for uncertain tax 	positions. In May 2007, the FASB issued FASB Staff Position FIN No. 48-1, 	Definition of Settlement in FASB Interpretation No. 48 (FSP FIN 48-1). This 	FSP provides guidance on how a company should determine whether a tax 	position is effectively settled for the purpose of recognizing previously 	unrecognized tax benefits. The provisions of FIN 48 and FSP FIN 48-1 were 	effective on July 1, 2007. See 	 	Note 9 - Income Taxes of Notes to Consolidated Financial Statements for 	information on the adoption of these pronouncements.
	In February 2006, the FASB issued SFAS No. 155, Accounting for Certain 	Hybrid Financial Instruments (FAS 155). FAS 155 permits the Company to elect 	to measure any hybrid financial instrument at fair value (with changes in 	fair value recognized in earnings) if the hybrid instrument contains an 	embedded derivative that would otherwise be required to be bifurcated and 	accounted for separately under SFAS 133, Accounting for Derivative 	Instruments and Hedging Activities. FAS 155 is effective for all instruments 	acquired, issued, or subject to a remeasurement event occurring after July 	1, 2007. The Company does not currently hold any hybrid financial 	instruments, and therefore the adoption of FAS 155 did not have a material 	impact on the Company's financial position, results of operations, or cash 	flows.
Note 2 Acquisitions
Fiscal Year 2007 Acquisition:
On February 15, 2007, the Company completed the acquisition of Reptron. The operating results of this acquisition are included in the Company's consolidated financial statements beginning on the acquisition date.
The acquisition is included in the Company's EMS segment and increased the Company's capabilities and expertise in support of the Company's long-term strategy to grow business in the medical electronics and high-end industrial sectors. The acquisition included four manufacturing operations located in Tampa, Florida; Hibbing, Minnesota; Gaylord, Michigan; and Fremont, California. In fiscal year 2008, pursuant to its restructuring plans, the Company ceased operations at the Gaylord, Michigan, and Hibbing, Minnesota, facilities and transferred a majority of the business to several of the Company's other worldwide EMS facilities. See Note 17 - Restructuring Expense of Notes to Consolidated Financial Statements for additional details of the restructuring plans.
The total amount of funds required to consummate the merger and to pay fees related to the merger was $50.9 million. The merger was funded with available cash and short-term investments. Merger funds were used to purchase all outstanding Reptron stock for $3.8 million, repay outstanding indebtedness and accrued interest of $17.6 million, tender senior secured notes for $22.4 million at acquisition date plus $4.8 million of senior secured notes and accrued interest redeemed in fiscal year 2008, and pay direct acquisition costs of $2.3 million. See Note 6 - Long-Term Debt and Credit Facility of Notes to Consolidated Financial Statements for further information on the senior secured notes.
The following table summarizes the final purchase price allocation to assets acquired, liabilities assumed, and goodwill. The acquisition resulted in $11.9 million of goodwill for the EMS segment of the Company. Goodwill of $10.1 million is deductible for tax purposes. The Company also identified and recorded intangible assets of $0.9 million related to customer relationships. See Note 1 - Summary of Significant Accounting Policies 	of Notes to Consolidated Financial Statements for further disclosure related to goodwill and intangible assets. The table shown below reflects revisions made to the purchase price allocation since initially reported. The purchase price allocation is final.
(Amounts in 			Thousands)
			Reptron Acquisition Purchase Price Allocation
Accounts Receivable $13,218
Inventory 24,948
Deferred Tax Asset 1,130
Other Current Assets 1,173
Property and Equipment 18,380
Customer Relationship Intangible 			Asset
Other Long-Term Assets
Goodwill
11,876
Total assets acquired
			$72,001
Accounts Payable $16,584
Accrued Expenses 3,547
Accrued Restructuring
Other Liabilities
Total liabilities 			assumed
			$21,082
Net assets acquired
			$50,919
Fiscal Year 2006 Acquisitions:
On April 3, 2006, the Company entered into an asset purchase agreement for the acquisition of the Bridgend, Wales, United Kingdom, manufacturing operation of Bayer Diagnostics Manufacturing Limited ("BDML") and its parent company, Bayer HealthCare LLC, a member of the worldwide group of companies headed by Bayer AG. The closing of the purchase was effective April 3, 2006. The operating results of this acquisition are included in the Company's consolidated financial statements beginning on the acquisition date.
The acquisition is included in the Company's EMS segment and better positions the Company to capitalize on growth opportunities in the medical market within this segment. The BDML capabilities have added to the Company's package of value that is offered to its medical customers and is a step in the Company's strategy to diversify its markets.
The Company paid BDML a sum of $31.5 million. Direct costs of the acquisition totaled $0.5 million.
The following table summarizes the assets acquired for the BDML acquisition. The building and land were not part of the assets acquired. The Company is leasing a portion of the facility from a third party. The table shown below reflects revisions made to the purchase price during fiscal year 2007, including liabilities related to involuntary terminations. The purchase price adjustment is final.
(Amounts in Thousands)
BDML Acquisition Purchase Price 			Allocation
Inventory $28,829
Property and equipment 2,035
Software
Deferred Tax Asset
Other
Goodwill 1,342
Total assets acquired $33,748
Current liabilities 1,760
Net assets acquired $31,988
For tax purposes, the amount of goodwill recognized was, in thousands, $96 and is fully 	deductible. The difference between book and tax goodwill, net of deferred taxes, is due to the 	liabilities for involuntary employee terminations recognized for book purposes that were not part of the purchase price allocation for tax 	purposes. The entire amount of goodwill was allocated to the EMS segment of the Company.
On May 5, 2006, the Company acquired a printed circuit board assembly operation in Longford, Ireland, from Magna Donnelly Electronics Longford Limited. Assets acquired were $3.4 million, liabilities assumed were $3.5 million, and the Company received $0.1 million in the acquisition. Direct costs of the acquisition were $0.3 million. The acquisition resulted in $0.3 million of goodwill for the EMS segment of the Company. There were no material purchased intangible assets included in the acquisition. The operating results of this acquisition are included in the Company's consolidated financial statements beginning on the acquisition date. The purchase price allocation is final.
The Company is currently in the process of consolidating its EMS facilities located in Wales, Ireland, and Poland into a new, larger facility in Poland, as part of a restructuring plan to establish a European Medical Center of Expertise in Poland. See Note 17 - Restructuring Expense of Notes to Consolidated Financial Statements for additional information.
Note 3 Inventories
Inventories are valued using the lower of last-in, first-out (LIFO) cost or market value for approximately 17% and 18% of consolidated inventories at June 30, 2008 and June 30, 2007, respectively, including approximately 85% and 86% of the Furniture segment inventories at June 30, 2008 and June 30, 2007, respectively. The EMS segment inventories and the remaining inventories in the Furniture segment are valued using the lower of first-in, first-out (FIFO) cost or market value.
Had the FIFO method been used for all inventories, income from continuing operations would have been $1.1 million higher in fiscal year 2008, $0.1 million higher in fiscal year 2007, and $0.7 million lower in fiscal year 2006, and net income, which includes the effect of discontinued operations, would have been $1.1 million higher in fiscal year 2008, $0.1 million higher in fiscal year 2007, and $2.9 million lower in fiscal year 2006. Additionally, inventories would have been, in millions, $18.2 and $16.4 higher at June 30, 2008 and 2007, respectively, if the FIFO method had been used. Certain inventory quantity reductions caused liquidations of LIFO inventory values, which increased income from continuing operations by $0.1 million in fiscal year 2008, $1.1 million in fiscal year 2007, and $1.3 million in fiscal year 2006. LIFO liquidations increased net income, which includes the effect of discontinued operations, by $0.1 million in fiscal year 2008, $1.1 million in fiscal year 2007, and $3.6 million in fiscal year 2006.
Inventory components at June 30 are as follows:
Note 4 Property and Equipment
Major classes of property and equipment at June 30 consist of the following:
The useful lives used in computing depreciation are based on the Company's estimate of the service life of the classes of property, as follows:
Depreciation and amortization of property and equipment from continuing operations, including asset write-downs associated with the Company's restructuring plans, totaled, in millions, $34.0 for fiscal year 2008, $31.7 for fiscal year 2007, and $28.5 for fiscal year 2006.
At June 30, 2008, in thousands, assets totaling $1,374 were 	classified as held for sale, comprised of a facility and land related to the exited EMS operation in Gaylord, Michigan. The assets were reported as unallocated corporate assets for segment reporting purposes. The Company expects to sell the facility and land during the next 12 months. Due to a decline in the market value of the EMS facility, the Company recorded in the Restructuring Expense line of the Company's Consolidated Statements of Income a pre-tax impairment loss, in thousands, of $390 during fiscal year 2008, of which $310 was recorded within the EMS segment and $80 was recorded after the assets were classified as unallocated corporate. The fair value of the assets was determined by prices for similar assets.
During fiscal year 2008, the Company sold the facility related to the exited EMS operation in Auburn, Indiana, which totaled, in thousands, $2,534 that was previously classified as held for sale and reported as unallocated corporate assets for segment reporting purposes. The facility was sold with no resulting gain or loss as impairment, in thousands, of $157, had already been recorded during fiscal year 2008 on the Restructuring Expense line of the Company's Consolidated Statements of Income.
The Furniture segment recognized, in thousands, a $149 pre-tax loss during fiscal year 2008 due to a decline in the market value of held for sale manufacturing equipment. The pre-tax loss of $149 was the result of impairment charges and losses on the sales of the equipment and was recorded, in thousands, as $109 in the Cost of Sales line and $40 in the Restructuring Expense line of the Company's Consolidated Statements of Income. As of June 30, 2008, no assets were classified as held for sale within the Furniture segment.
At June 30, 2007, the Company had, in thousands, assets totaling $3,032 classified as held for sale.
Note 5 Commitments and Contingent Liabilities
Leases:
Operating leases from continuing operations for certain office, showroom, manufacturing facilities, land, and equipment, which expire from fiscal year 2009 to 2056, contain provisions under which minimum annual lease payments are, in millions, $3.8, $3.4, $3.2, $2.6, and $1.7 for the five years ended June 30, 2013, respectively, and aggregate $4.2 million from fiscal year 2014 to the expiration of the leases in fiscal year 2056. The Company is obligated under certain real estate leases to maintain the properties and pay real estate taxes. Certain of these leases include renewal options and escalation clauses. Total rental expenses from continuing operations amounted to, in millions, $7.8, $6.5, and $4.7 in fiscal years 2008, 2007, and 2006, respectively.
As of June 30, 2008 and 2007, the Company had, in millions, $0.4 and $0.8, respectively, of capitalized leases for equipment. Future minimum capital annual lease payments excluding imputed interest are, in millions, $0.4 for the fiscal year ending June 30, 2009, with no payments thereafter.
Guarantees:
As of June 30, 2008 and 2007, the Company had no guarantees issued which were contingent on the future performance of another entity. Standby letters of credit are issued to third-party suppliers, lessors, and insurance and financial institutions and can only be drawn upon in the event of the Company's failure to pay its obligations to the beneficiary. As of June 30, 2008 and 2007, the Company had a maximum financial exposure from unused standby letters of credit totaling $5.1 million and $14.5 million, respectively. The Company is not aware of circumstances that would require it to perform under any of these arrangements and believes that the resolution of any claims that might arise in the future, either individually or in the aggregate, would not materially affect the Company's financial statements. Accordingly, no liability has been recorded as of June 30, 2008 and 2007 with respect to the standby letters of credit. The Company also enters into commercial letters of credit to facilitate payments to vendors and from customers.
Product Warranties:
The Company estimates product warranty liability at the time of sale based on historical repair cost trends in conjunction with the length of the warranty offered. Management refines the warranty liability in cases where specific warranty issues become known.
Changes in the product warranty accrual during fiscal years 2008 and 2007 were as follows:
(Amounts in Thousands)
Product Warranty Liability at the beginning of the year $ 2,147
$ 2,127
Accrual for warranties issued
Reductions related to pre-existing warranties (including changes in estimates)
(166)
(47)
Settlements made (in cash or in kind)
(957)
(894)
Product Warranty Liability at the end of the year $ 1,470
$ 2,147
Note 6 Long-Term Debt and Credit Facility
Long-term debt consists of long-term notes payable and capitalized leases. Aggregate maturities of long-term debt for the next five years are, in thousands, $470, $60, $61, $12, and $14, respectively, and aggregate $274 thereafter. Interest rates range from 3.455% to 9.25%. Based upon borrowing rates currently available to the Company, the fair value of the Company's debt approximates the carrying value.
At June 30, 2008, the Company had no balances due on senior secured notes. At June 30, 2007, the Company's outstanding balance in senior secured notes was $4.5 million. These notes represented the remaining portion of notes originally held by Reptron which was not tendered as of the date of the acquisition. The notes were valued in the preliminary purchase price allocation at their stated 101% redemption price, which approximated their fair value. As of the acquisition date, the indenture agreement related to the remaining notes was amended to eliminate or modify substantially all of the restrictive covenants in the indenture. The notes were irrevocably and unconditionally guaranteed by the acquired Reptron legal entity and were secured by the assets of this legal entity. The Reptron legal entity was in compliance with all terms and covenants of the notes, as amended, as of June 30, 2007. The maturity date of the notes was February 2009; however, the Company redeemed the notes in the first quarter of fiscal year 2008. The notes were redeemed at the stated redemption price equal to 101% of the principal amount together with interest accrued at a fixed 8% annual interest rate through the redemption date. As of June 30, 2007, the notes were classified as Current Liabilities on the Consolidated Balance Sheets. See Note 2 - Acquisitions of Notes to Consolidated Financial Statements for information on the Reptron acquisition.
The Company maintains a revolving credit facility which expires in April 2013 and provides for up to $100 million in borrowings, with an option to increase the amount available for borrowing to $150 million at the Company's request, subject to participating banks' consent. The $100 million credit facility replaced a previous $75 million credit facility, which also provided an option to increase the amount available for borrowing to $125 million at the Company's request, subject to participating banks' consent. The Company uses this facility for acquisitions and general corporate purposes. A commitment fee is payable on the unused portion of the credit facility which was immaterial to the Company's operating results for fiscal years 2008, 2007, and 2006. The commitment fee on the unused portion of principal amount of the credit facility is payable at a rate that ranges from 12.5 to 15.0 basis points per annum as determined by the Company's leverage ratio. Borrowings under the credit agreement bear interest at a floating rate based, at the Company's option, upon a London Interbank Offered Rate (LIBOR) plus an applicable percentage or the greater of the federal funds rate plus an applicable percentage and the prime rate. The Company is in compliance with debt covenants requiring it to maintain certain debt-to-total capitalization, interest coverage ratio, minimum net worth, and other terms and conditions.
The Company also maintains a separate foreign credit facility which is backed by the $100 million revolving credit facility. The separate foreign credit facility is expected to be reviewed in May 2009 for renewal. The interest rate applicable to borrowings in US dollars under the separate foreign credit facility is charged at 0.75% per annum over the Singapore Interbank Money Market Offered Rate (SIBOR). The interest rate on borrowings in Thai Baht under the separate foreign credit facility is charged at the prevailing market rate.
At June 30, 2008, the Company had $52.6 million of short-term borrowings outstanding. The outstanding balance consisted of $17.3 million for a Euro currency borrowing which provides a natural currency hedge against Euro denominated intercompany notes between the US parent and the Euro functional currency subsidiaries, and an additional $33.6 million funded short-term cash needs. The Company also had letters of credit against the credit facility. In addition, at June 30, 2008, $1.7 million of short-term borrowings were outstanding under a separate foreign credit facility which is backed by the $100 million credit facility. Total availability to borrow under the $100 million credit facility was $44.2 million at June 30, 2008. At June 30, 2007, the Company had $18.9 million of short-term borrowings outstanding under the credit facility.
The Company also has a credit facility for its electronics operation in Wales, United Kingdom. The facility will be reviewed in November 2008 and will expire if not renewed at that time. The facility allows for multi-currency borrowings up to 2 million Sterling equivalent (approximately $4 million US dollars) and is available to cover bank overdrafts. Bank overdrafts may be deemed necessary to satisfy short-term cash needs rather than funding from intercompany sources. The interest rate applicable to the Sterling overdraft facility is charged at 1% per annum over the Bank of England's Sterling Base Rate. At June 30, 2008, the Company had no borrowings outstanding under the overdraft facility. At June 30, 2007, as collateral subject to lien, this facility required 3 million Euro (approximately $4 million US dollars) to be held as restricted cash which was classified as other long-term assets on the Company's balance sheet. The restricted cash is no longer required as collateral and was reclassified to cash and cash equivalents on the Company's balance sheet. At June 30, 2007, the Company had $3.0 million US dollar equivalent of Sterling-denominated short-term borrowings outstanding under the overdraft facility.
As of June 30, 2008 and 2007, the weighted average interest rates on the Company's short-term borrowings outstanding under the credit facilities were 4.99% and 4.93%, respectively. Cash payments for interest on borrowings were, in thousands, $2,197, $889, and $544, in fiscal years 2008, 2007, and 2006, respectively.
Note 7 Employee Benefit Plans
Retirement Plans:
The Company has a trusteed defined contribution retirement plan in effect for substantially all domestic employees meeting the eligibility requirements. The plan includes a 401(k) feature, thereby permitting participants to make additional voluntary contributions on a pre-tax basis. Payments by the Company to the trusteed plan have a five-year vesting schedule and are held for the sole benefit of participants. The Company also maintains a trusteed defined contribution retirement plan for employees of acquired companies.
The Company maintains a supplemental employee retirement plan (SERP) for executive employees which enable them to defer cash compensation on a pre-tax basis in excess of IRS limitations. The SERP is structured as a rabbi trust and therefore assets in the SERP portfolio are subject to creditor claims in the event of bankruptcy.
Company contributions for domestic employees are based on a percent of net income with certain minimum and maximum limits as determined by the Compensation and Governance Committee of the Board of Directors. Total expense related to employer contributions to the retirement plans was $5.8 million for each of fiscal years 2008, 2007, and 2006.
Employees of certain foreign subsidiaries are covered by local pension or retirement plans. Total expense related to employer contributions to these foreign plans for 2008, 2007, and 2006 was, in millions, $1.0, $0.9, and $0.2, respectively.
Severance Plans:
The Company maintains severance plans for substantially all domestic employees. The plans provide severance benefits to eligible employees meeting the plans' qualifications, primarily involuntary termination without cause. There are no statutory requirements for the Company to contribute to the plans, nor do employees contribute to the plans. The plans hold no assets. Benefits are paid using available cash on hand when eligible employees meet plan qualifications for payment. Benefits are based upon an employee's years of service and accumulate up to certain limits specified in the plans and include both salary and medical benefits. The components and changes in the Benefit Obligation, Accumulated Other Comprehensive Income, and Net Periodic Benefit Cost are as follows:
(Amounts in Thousands)
		Changes and Components of Benefit Obligation:
		 Benefit obligation at beginning of year
		 $ 2,200
		 $ -0-
		 Service cost
		 Interest cost
		 Actuarial loss for the period
		 Benefits paid
		 (555)
		 Initial actuarial obligation recorded for severance plan
		 2,200
		 Benefit obligation at end of year
		 $ 2,177
		 $ 2,200
		 Balance in current liabilities
		 $ 283
		 $ 286
		 Balance in noncurrent liabilities
		 1,894
		 1,914
		 Total benefit obligation recognized in the Consolidated 		Balance Sheets
		 $ 2,177
		 $ 2,200
		Changes and Components in Accumulated Other Comprehensive Income (before 		tax):
		 Accumulated Other Comprehensive Income at beginning of year
		 $ 2,200
		 $ -0-
		 Change due to unrecognized actuarial loss
		 Change due to unrecognized prior service cost
		 (286)
		 2,200
		 Accumulated Other Comprehensive Income at end of year
		 $ 2,027
		 $ 2,200
		 Balance in unrecognized actuarial loss
		 Balance in unrecognized prior service cost
		 1,914
		 2,200
		 Total accumulated other comprehensive income recognized in Share 		Owners' Equity
		 $ 2,027
		 $ 2,200
		Components of Net Periodic Benefit Cost (before tax):
		 Service cost
		 $ 282
		 $ -0-
		 Interest cost
		 Amortization of prior service cost
		 Amortization of actuarial loss
		 Net periodic benefit cost recognized in the Consolidated 		Statements of Income
		 $ 705
		 $ -0-
The benefit cost in the above table includes only normal recurring levels of severance activity, as estimated using an actuarial method and management judgment. Unusual or nonrecurring severance actions, such as those disclosed in Note 17 - Restructuring Expense of Notes to Consolidated Financial Statements, are not estimable using actuarial methods and are expensed when incurred.
The Company amortizes prior service costs on a 	straight-line basis over the average remaining service period of employees 	that were active at the time of the plan initiation and amortizes actuarial 	losses on a straight-line basis over the average remaining service period of 	employees expected to receive benefits under the plan.
The estimated actuarial net loss and prior service cost for the severance plans that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year are, pre-tax in thousands, $15 and $286, respectively.
The following table discloses assumptions used in actuarial calculations for fiscal years 2008 and 2007:
			 Discount Rate
			5.5%
			 Rate of Compensation Increase
			5.0%
Note 8 Stock Compensation Plans
On August 19, 2003, the Board of Directors adopted the 2003 Stock Option and Incentive Plan (the "2003 Plan"), which was approved by the Company's Share Owners on October 21, 2003. Under the 2003 Plan, 2,500,000 shares of Common Stock were reserved for restricted stock, restricted share units, unrestricted share grants, incentive stock options, nonqualified stock options, performance shares, performance units, and stock appreciation rights for grant to officers and other key employees of the Company and to members of the Board of Directors who are not employees. The 2003 Plan is a ten-year plan. The Company also has stock options outstanding under two former stock incentive plans, which are described below. The pre-tax compensation cost that was charged against income from continuing operations for all of the plans was $4.0 million, $4.9 million, and $3.8 million in fiscal year 2008, 2007, and 2006, respectively. The total income tax benefit from continuing operations for stock compensation arrangements was $1.6 million, $1.9 million, and $1.5 million in fiscal year 2008, 2007, and 2006, respectively. These compensation expense and tax benefit amounts exclude the impact of the Cumulative Effect of a Change in Accounting Principle recorded in fiscal year 2006, as described in Note 1 - Summary of Significant Accounting Policies of Notes to Consolidated Financial Statements. The Company generally uses treasury shares for fulfillment of option exercises, issuance of performance shares, and conversion of restricted share units.
Performance Shares:
The Company awards performance shares to officers and other key employees under the 2003 Plan. Under these awards, a number of shares will be granted to each participant based upon the attainment of the applicable bonus percentage calculated under the Company's profit sharing incentive bonus plan as applied to a total potential share award made and approved by the Compensation and Governance Committee. Performance shares are vested when issued shortly after the end of the fiscal year in which the performance measurement period is complete and are issued as Class A and Class B common shares. Certain outstanding performance shares are applicable to performance measurement periods in future fiscal years and will be measured at fair value when the performance targets are established in future fiscal years. The contractual life of performance shares ranges from one to five years. If a participant is not employed by the Company on the date of issuance, the performance share award is forfeited, except in the case of death, retirement at age 62 or older, total permanent disability, or certain other circumstances described in the Company's employment policy. Additionally, to the extent performance conditions are not fully attained, performance shares are forfeited.
A summary of performance share activity under the 2003 Plan during fiscal year 2008 is presented below:
Number
of Shares Weighted 		Average
Grant Date
Fair Value
Performance shares outstanding 		at July 1, 2007 683,997 			 $17.43 			
Granted 384,282 		 12.16 			
Vested (201,598) 			 16.68 			
Forfeited (107,629) 			 16.62 			
Performance shares outstanding 		at June 30, 2008
759,052 			 $12.16 			
As of June 30, 2008, there was approximately $3.0 million of unrecognized compensation cost related to performance shares, based on the latest estimated attainment of performance goals. That cost is expected to be recognized over annual performance periods ending August 2008 through August 2012, with a weighted average vesting period of 1.7 years. The fair value of performance shares is based on the stock price at the date of award, reduced by the present value of dividends normally paid over the vesting period which are not payable on outstanding performance share awards. The weighted average grant date fair value was $12.16, $17.42, and $12.24 for performance share awards granted in fiscal year 2008, 2007, and 2006, respectively. During fiscal year 2008 and 2007, respectively, 201,598 and 150,651 performance shares vested at a fair value of $3.4 million and $1.8 million. The number of shares presented in the above table, the amounts of unrecognized compensation, and the weighted average period include performance shares awarded that are applicable to future performance measurement periods and will be measured at fair value when the performance targets are established in future fiscal years.
Restricted Share Units:
Nonvested Restricted Share Units (RSU) awarded to officers and other key employees are currently outstanding under the 2003 Plan. RSUs vest five years after the date of award. Upon vesting, the outstanding number of RSUs and the value of dividends accumulated over the vesting period are converted to shares of Class A and Class B common stock. If the employment of a holder of an RSU terminates before the RSU has vested for any reason other than death, retirement at age 62 or older, total permanent disability, or certain other circumstances described in the Company's employment policy, the RSU and accumulated dividends will be forfeited.
A summary of RSU activity under the 2003 Plan during fiscal year 2008 is presented below:
Number of
Share Units Weighted 		Average
Grant Date
Fair Value
Restricted Share Units 		outstanding at July 1, 2007 500,100 			 $15.75 			
Granted 			
Vested (15,000) 			 15.50 			
Forfeited (4,200) 			 14.79 			
Restricted Share Units 		outstanding at June 30, 2008
480,900 			 $15.77 			
As of June 30, 2008, there was approximately $1.8 million of unrecognized compensation cost related to nonvested RSU compensation arrangements awarded under the 2003 Plan. That cost is expected to be recognized over a weighted average period of 1.3 years. The fair value of RSU awards is based on the stock price at the date of award. The total fair value of RSU awards vested during fiscal year 2008, 2007, and 2006 was, in thousands, $233, $24, and $31, respectively.
Unrestricted Share Grants:
Under the 2003 Plan, unrestricted shares may be granted to participants as consideration for service to the Company. Unrestricted share grants do not have vesting periods, holding periods, restrictions on sale, or other restrictions. The fair value of unrestricted shares is based on the stock price at the date of the award. During fiscal year 2008, 2007, and 2006, respectively, the Company granted a total of 13,186, 7,668, and 18,501 unrestricted shares of Class B common stock at an average grant date fair value of $13.16, $24.53, and $11.22, for a total fair value of $0.2 million, $0.2 million, and $0.2 million. These shares were issued to members of the Board of Directors as compensation for director's fees, as a result of directors' elections to receive unrestricted shares in lieu of cash payment.
Stock Options:
The Company has stock options outstanding under two former stock incentive plans. The 1996 Stock Incentive Program, which was approved by the Company's Share Owners on October 22, 1996, allowed the issuance of incentive stock options, nonqualified stock options, stock appreciation rights, and performance share awards to officers and other key employees of the Company and to members of the Board of Directors who are not employees. The 1996 Stock Incentive Program will continue to have options outstanding through fiscal year 2013. The 1996 Directors' Stock Compensation and Option Plan, available to all members of the Board of Directors, was approved by the Company's Share Owners on October 22, 1996. Under the terms of that plan, Directors electing to receive all, or a portion, of their fees in the form of Company stock were also granted a number of stock options equal to 50% of the number of shares received for compensation of fees. The Directors' Stock Compensation and Option Plan will continue to have options outstanding through fiscal year 2009. No shares remain available for new grants under the Company's prior stock option plans.
There were no stock option grants awarded during fiscal years 2008, 2007, and 2006. For outstanding awards, the fair value at the date of the grant was estimated using the Black-Scholes option pricing model. Options outstanding are exercisable from one to five years after the date of grant and expire five to ten years after the date of grant. Stock options are forfeited when employment terminates, except in the case of retirement at age 62 or older, death, permanent disability, or certain other circumstances described in the Company's employment policy.
The Company also had an immaterial number of stock appreciation rights outstanding under the former 1996 Stock Incentive Program, prior to their expiration in August 2007. As valued by the Black-Scholes valuation model, these awards had no value as of June 30, 2007.
A summary of stock option activity under the two former plans during fiscal year 2008 is presented below:
Number of
Shares
Weighted 		Average
Exercise
Price Weighted 		Average
Remaining
Contractual Life
Aggregate
Intrinsic
Value
Options outstanding at July 1, 830,043 			 $15.65 			
Granted 			 			
Exercised 			 			
Forfeited (7,250) 			 15.06 			
Expired (43,631) 			 19.41 			
Options outstanding at 		June 30, 2008
779,162 			 $15.45 			 3.7 years 			 $ -0- 			
Options vested 779,162 			 $15.45 			 3.7 years 			 $ -0- 			
Options exercisable at June 30, 2008 779,162 			 $15.45 			 3.7 years 			 $ -0- 			
The total intrinsic value of options exercised during 	fiscal year 2007 and 2006 was $5.8 million and $0.2 	million, respectively. The value of existing shares held by 	employees was used to exercise stock options. The actual tax benefit 	realized for the tax deductions from option exercises totaled $1.9 million 	and $0.1 million for fiscal year 2007 and 2006, respectively. 	No options were exercised during fiscal year 2008.
Note 9 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. Income tax benefits net of valuation allowance associated with net operating losses of, in thousands, $2,858 expire from fiscal year 2012 to 2028. Income tax benefits net of valuation allowance associated with net tax credit carryforwards of, in thousands, $104, expire from fiscal year 2014 to 2021. A valuation reserve was provided as of June 30, 2008 for deferred tax assets relating to certain foreign and state net operating losses of, in thousands, $1,308, certain state tax credit carryforwards of, in thousands, $3,460, and, in thousands, $198 related to other deferred tax assets that the Company currently believes are more likely than not to remain unrealized in the future.
	 	
In 2006, the FASB issued FIN 48, which clarifies the accounting for uncertainty in tax positions. FIN 48 requires that the Company recognize in its financial statements the impact of a tax position, if that position is more likely than not of being sustained on audit, based on the technical merits of the position. The Company adopted the provisions of FIN 48 on July 1, 2007, the beginning of the Company's fiscal year. Upon the adoption of FIN 48 on July 1, 2007, the Company recognized a $5.8 million increase in the liability for unrecognized tax benefits including interest and penalties. The increase was accounted for as a reduction to the July 1, 2007 balance of retained earnings in the amount of $0.7 million and an increase to deferred tax assets of $5.1 million. The total liability for unrecognized tax benefits totaled $6.4 million as of July 1, 2007.
Changes in the unrecognized tax benefit 	during fiscal year 2008 were as follows:
			(Amounts in Thousands)
Unrecognized Tax Benefit
Beginning balance - July 			1, 2007 $ 5,617
Tax positions related to 			prior years:
		
			Additions 			
			Reductions (4,737) 			
Tax positions related to 			current year:
			Additions 			
			Reductions
Settlements (13) 			
Lapses in statute of 			limitations (78) 			
Ending balance - June 30,
$ 1,020 			
The $4.7 million reduction for prior year tax 	positions was due primarily to the IRS approving Form 3115, Application 	for Change in Accounting Method. The approval of Form 3115 eliminated 	the need for an unrecognized tax benefit liability. The reduction in 	the liability resulted in a corresponding adjustment to deferred tax assets. Included in the June 30, 2008 and July 1, 	2007 liability for unrecognized tax benefits were, respectively, in 	millions, $0.7 and $0.6 of unrecognized tax benefits that if recognized 	would impact the effective tax rate.
The Company recognizes interest and penalties accrued related to unrecognized tax benefits as Interest expense and Non-operating expense, respectively, under Other Income (Expense) on the Consolidated Statements of Income. Interest and penalties recognized for the period ended June 30, 2008 were, in millions, $0.3 income. The total amount of liability accrued for interest and penalties related to unrecognized tax benefits as of June 30, 2008 and July 1, 2007, respectively, in millions, were interest of $0.3 and $0.7 and penalties of $0.1 and $0.1. Interest and penalties are not included in the tabular roll forward of unrecognized tax benefits above.
The Company, or one of its wholly-owned subsidiaries, files U.S. federal income tax returns and income tax returns in various state, local, and foreign jurisdictions. The Company is no longer subject to any significant U.S. federal tax examinations by tax authorities for years before fiscal year 2006. During the Company's fiscal year ended June 30, 2007, the Internal Revenue Service completed an examination of the U.S. federal tax returns for fiscal years ended June 30, 2004 and 2005, which the Company believes effectively settled those years. The Company is subject to various state and local income tax examinations by tax authorities for years after June 30, 2003 and various foreign jurisdictions for years after June 30, 2002. The Company does not expect the change in the amount of unrecognized tax benefits in the next 12 months to have a significant impact on the results of operations or the financial position of the Company.
Note 10 Common Stock
On a fiscal year basis, shares of Class B Common Stock are entitled to an additional $0.02 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 families own directly or share 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 any dividends are not paid on shares of the Company's Class B Common Stock for a period of thirty-six consecutive months, or if at any time the 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.
During fiscal year 2008, cash payments for repurchases of common stock were $24.8 million which included $2.5 million that was included in accounts payable at June 30, 2007. With these repurchases, the Company completed a previously authorized share repurchase program. Subsequent to the completion of the previously authorized share repurchase program, the Board of Directors authorized a plan which allows for the repurchase of up to an additional 2,000,000 shares of the Company's common stock.
Note 11 Derivative Instruments
The Company operates internationally and is therefore exposed to foreign currency exchange rate fluctuations in the normal course of its business. As part of its risk management strategy, the Company uses derivative instruments to hedge certain foreign currency exposures. Before acquiring a derivative instrument to hedge a specific risk, potential natural hedges are evaluated. Derivative instruments are only utilized to manage underlying exposures that arise from the Company's business operations and are not used for speculative purposes. 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.
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. The maximum length of time the Company had hedged its exposure to the variability in future cash flows was 27 and 12 months as of June 30, 2008 and 2007, respectively. For derivative instruments that meet the criteria of SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended and interpreted, 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, a component of Share Owners' Equity, and are subsequently reclassified into earnings in the period during which the hedged transaction is recognized in earnings. The ineffective portion of the gain or loss is reported in other income or expense immediately.
The fair value of derivative financial instruments recorded on the balance sheet as of June 30, 2008 and 2007 was, in thousands, $1,307 and $835, recorded in assets, and $2,582 and $430 recorded in liabilities, respectively. Derivative gains (losses), on a pre-tax basis, were, in thousands, ($3,130), 1,287, and ($405), in fiscal year 2008, 2007, and 2006, respectively. Included in the derivative gain for fiscal year 2007 was $299 pre-tax income, in thousands, related to Thailand hedges which were determined to be ineffective as a result of government currency exchange rate controls. Ineffectiveness was not material during fiscal year 2008 and 2006. Derivative gains and losses are reported in the Cost of Sales and Non-Operating Income lines of the Consolidated Statements of Income and the Net Income (Loss) line of the Consolidated Statements of Cash Flows. The Company estimates that, in thousands, $1,036 of pre-tax derivative losses deferred in Accumulated Other Comprehensive Income will be reclassified into earnings, along with the earnings effects of related forecasted transactions, within the next fiscal year ending June 30, 2009.
Note 12 Short-Term Investments
The Company's short-term investment portfolio consists of available-for-sale securities, primarily government and municipal obligations. These securities are reported at fair value, which is 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. Government and municipal obligations mature within a six-year period.
As of June 30, 2008, 24 investments were in an unrealized loss position and the unrealized loss approximated 0.4% of their fair value. The duration of the unrealized loss positions ranges from three to 56 months. The Company has the ability to hold these investments and expects unrealized losses to be recoverable, and therefore, the Company does not consider these investments to be other-than-temporarily impaired. In reaching the conclusion that investments are not impaired, the Company considered the severity of loss, the credit quality of the instrument in relation to its yield, whether the external fund manager has discretion to trade at a loss, and the fact that the value of the debt investments is driven by interest rate fluctuations.
The fair value and unrealized loss for investments which were in a continuous unrealized loss position for less than 12 months total, in thousands, $18,535 and ($83), respectively, as of June 30, 2008. There were no investments which were in a continuous unrealized loss position for 12 months or longer as of June 30, 2008. The fair value and unrealized loss for investments which were in a continuous unrealized loss position for less than 12 months total, in thousands, $42,844 and ($256), respectively, as of June 30, 2007. The fair value and unrealized loss for investments which were in a continuous unrealized loss position for 12 months or longer total, in thousands, $5,888 and ($65), respectively, as of June 30, 2007.
Proceeds from sales of available-for-sale securities were, in thousands, $39,126, $13,403, and $13,285 for the years ended June 30, 2008, 2007, and 2006, respectively. Gross realized gains and (losses) on the sale of available-for-sale securities at June 30, 2008 were, in thousands, $305 and ($71), respectively, compared to gross realized gains and (losses) of, in thousands, $17 and ($72), respectively, at June 30, 2007 and $2 and ($91), respectively, at June 30, 2006. The cost was determined on each individual security in computing the realized gains and losses. Realized gains and losses are reported in the Other Income (Expense) category of the Consolidated Statements of Income.
The Company maintains a self-directed supplemental employee retirement plan (SERP) for executive employees. The SERP is structured as a rabbi trust and therefore assets in the SERP portfolio are subject to creditor claims in the event of bankruptcy. The Company recognizes SERP investment assets on the balance sheet at current fair value. A SERP liability of the same amount is recorded on the balance sheet representing the Company's obligation to distribute SERP funds to participants. The SERP investment assets are classified as trading, and accordingly, realized and unrealized gains and losses are recognized in income. Adjustments made to revalue the SERP liability are also recognized in income and exactly offset valuation adjustments on SERP investment assets. The change in net unrealized holding gains and (losses) at June 30, 2008, 2007, and 2006 was, in thousands,
($2,385), $2,939, and $1,720, respectively. SERP asset and liability balances were as follows:
Note 13 Accrued Expenses
Accrued expenses consisted of:
Note 14 Segment and Geographic Area Information
Management organizes the Company into segments based upon differences in products and services offered in each segment. The segments and their principal products and services are as follows: The Furniture segment provides furniture for the office and hospitality industries, sold under the Company's family of brand names. The EMS segment provides engineering and manufacturing services which utilize common production and support capabilities to a variety of industries globally. The EMS segment focuses on electronic assemblies that have high durability requirements and are sold on a contract basis and produced to customers' specifications. The Company currently sells primarily to customers in the medical, automotive, industrial controls, and public safety industries. The EMS segment, formerly named the Electronic Contract Assemblies segment, was renamed to more accurately reflect the focus of this segment. There was no financial impact from this name change.
Included in the EMS segment are sales to two major customers. Sales to Bayer AG entities under common control, including Bayer Diagnostics Manufacturing Limited, totaled, in millions, $149.9, $198.9, and $66.4 in fiscal years 2008, 2007, and 2006, respectively, representing 11%, 15%, and 6% of consolidated net sales, respectively, for such periods. Sales to TRW Automotive, Inc., totaled in millions, $97.0, $96.6, and $135.6 in fiscal years 2008, 2007, and 2006, respectively, representing 7%, 8%, and 12% of consolidated net sales, respectively, for such periods.
The accounting policies of the segments are the same as those described in Note 1 - Summary of Significant Accounting Policies of Notes to Consolidated Financial Statements with additional explanation of segment allocations as follows. Corporate assets and operating costs are allocated to the segments based on the extent to which each segment uses a centralized function, where practicable. However, certain common costs have been allocated among segments less precisely than would be required for standalone financial information prepared in accordance with accounting principles generally accepted in the United States of America. Unallocated corporate assets include cash and cash equivalents, short-term investments, and other assets not allocated to segments. Unallocated corporate income from continuing operations consists of income not allocated to segments for purposes of evaluating segment performance and includes income from corporate investments and other non-operational items. Sales between the Furniture segment and EMS segment are not material.
The Company evaluates segment performance based upon several financial measures, although the two most common include economic profit, which incorporates a segment's cost of capital when evaluating financial performance, and income from continuing operations. Income from continuing operations is reported for each segment as it is the measure most consistent with the measurement principles used in the Company's consolidated financial statements.
The Company aggregates multiple operating segments into each reportable segment. The aggregated operating segments have similar economic characteristics and meet the other aggregation criteria required by SFAS 131, Disclosure about Segments of an Enterprise and Related Information.
Income statement amounts presented are from continuing operations.
			(1) Includes consolidated after-tax restructuring charges of $14.6 			million in fiscal year 2008. On a segment basis, the Furniture 			segment recorded a $1.3 million restructuring charge, the EMS 			segment recorded a $12.8 million restructuring charge, and 			Unallocated Corporate recorded a $0.5 million restructuring charge. See 			Note 17 - 			Restructuring Expense of Notes to Consolidated Financial Statements 			for further discussion. The EMS segment also recorded $0.7 million 			of after-tax income in fiscal year 2008, received as part of a 			Polish offset credit program for investments made in the Company's 			Poland operation.
			(2) Includes consolidated after-tax restructuring charges of $0.9 			million in fiscal year 2007. On a segment basis, the Furniture 			segment recorded a $0.8 million restructuring charge, the EMS 			segment recorded a $0.1 million restructuring charge, and 			Unallocated Corporate recorded a minimal amount of restructuring. 			See Note 17 - Restructuring Expense of Notes to Consolidated 			Financial Statements for further discussion.
			(3) Includes consolidated after-tax restructuring charges of $2.8 			million in fiscal year 2006. On a segment basis, the Furniture 			segment recorded a $2.3 million restructuring charge, and the EMS 			segment recorded a $0.5 million restructuring charge. See 			Note 17 - 			Restructuring Expense of Notes to Consolidated Financial Statements 			for further discussion. The EMS segment also recorded $1.3 million of after-tax 			income in fiscal year 2006, received as part of a Polish offset credit program for 			investments made in the Company's Poland operation.
Note 15 Earnings Per Share
Earnings per share are computed using the two-class common stock method due to the dividend preference of Class B Common Stock. Basic earnings per share are based on the weighted average number of shares outstanding during the period. Diluted earnings per share are based on the weighted average number of shares outstanding plus the assumed issuance of common shares and related payment of assumed dividends for all potentially dilutive securities. Earnings per share of Class A and Class B Common Stock are as follows:
	
Note 16 Comprehensive Income
Comprehensive income includes all changes in equity during a period except those resulting from investments by, and distributions to, Share Owners. Comprehensive income consists of net income (loss) and other comprehensive income (loss), which includes the net change in unrealized gains and losses on investments, foreign currency translation adjustments, the net change in derivative gains and losses, net actuarial change in postemployment severance, and postemployment severance prior service cost.
Note 17 Restructuring Expense
Because of evolving customer preferences for EMS operations in low-cost regions, 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. As part of the plan, the Company will consolidate its EMS facilities located in Longford, Ireland; Wales, United Kingdom; and Poznan, Poland; into a new, larger facility in Poznan, which is expected to improve margins in the very competitive EMS market. The plan includes the sale of an existing Poland building at a gain which will partially fund the consolidation activities. The plan is to be executed in stages with a projected completion date of December 2011. The Company currently estimates that the pre-tax charges related to the consolidation activities will be approximately, in millions, $20.0 consisting of approximately $18.5 of severance and other employee costs, $0.6 of lease exit costs, $0.4 of property and equipment asset impairment, and $0.5 of other exit costs. These estimates exclude the estimated gain on the sale of the Poland building mentioned above.
In an effort to improve profitability and increase Share Owner value while remaining committed to its business model of being market driven and customer centered, during the third quarter of fiscal year 2008, the Company approved a restructuring plan designed to more appropriately align its workforce in a changing business environment. Within the Company's EMS segment, the restructuring activities include realigning engineering and technical resources closer to the customer and streamlining administrative and sales processes. Within the Company's Furniture segment, the restructuring activities include realigning information technology and procurement resources closer to the customer and streamlining administrative and sales processes to drive further synergies afforded by the recent alignment of the sales and manufacturing functions within this segment. The plan also includes reducing corporate personnel costs to more properly align with the overall sales mix change within the Company. The Company expects total pre-tax restructuring expenses of $2.8 million, consisting of employee severance and transition costs of approximately $2.4 million and other restructuring expenses of $0.4 million. On a segment basis, the Company expects total pre-tax restructuring expenses of $1.6 million in the Furniture segment, consisting of employee severance and transition costs of approximately $1.2 million and other restructuring expenses of $0.4 million. The Company expects total pre-tax restructuring expenses for employee severance and transition costs of approximately $0.8 million in the EMS segment and $0.4 million in Unallocated Corporate. The plan was substantially complete by June 30, 2008 with a few activities to occur in the first half of fiscal year 2009.
With the Reptron acquisition, the Company recognized it would have excess capacity in North America. See
Note 2 - Acquisitions of Notes to Consolidated Financial Statements for additional details of the acquisition. Management developed a plan as of the acquisition date to consolidate capacity within the acquired facilities. Based on a review of future growth potential in various geographies and input from existing customers regarding future capacity needs, during the fourth quarter of fiscal year 2007, the Company finalized a restructuring plan within the EMS segment to exit the facility located in Gaylord, Michigan, and transfer the business to several of the Company's other EMS facilities. The Company ceased production at the facility during the second quarter of fiscal year 2008. Excess equipment was sold during the third quarter of fiscal year 2008, and the Gaylord facility is classified as held for sale. The Company expects to recognize minimal future charges related to ongoing facility maintenance expenses. The Company expects total pre-tax restructuring costs to be approximately $1.8 million, including $0.8 million related to employee severance and transition costs which were recognized as a purchase price allocation adjustment, not impacting earnings, asset impairment of $0.7 million and $0.3 million of other restructuring costs. Subsequent to this decision, during the second quarter of fiscal year 2008, the Company approved a restructuring plan to further consolidate its EMS facilities that will result in the exit of a manufacturing facility located in Hibbing, Minnesota, which was also one of the facilities acquired in the acquisition of Reptron. A majority of the Hibbing business transferred to several of the Company's other worldwide EMS facilities. The leased facility will be exited, and some of the equipment will be sold. The Company ceased production at the facility during the fourth quarter of fiscal year 2008 and will complete all remaining restructuring activities by the second quarter of fiscal year 2009. The Company expects total pre-tax restructuring charges, most of which were recognized during fiscal year 2008, to be approximately $1.6 million, including $0.5 million related to employee severance and transition costs, asset and goodwill impairment of $0.4 million, lease exit costs of $0.3 million, and other restructuring costs of $0.4 million.
As a result of excess capacity in North America, during the third quarter of fiscal year 2006, the Company approved a restructuring plan within the EMS segment to exit a manufacturing facility located in Northern Indiana. As part of this restructuring plan, the production for select programs was transferred to other locations within this segment. Operations at this facility ceased in fiscal year 2007, and the facility was sold during fiscal year 2008. Total pre-tax restructuring charges related to this plan were $1.4 million, consisting of employee transition costs of $0.7 million, acceleration of software amortization of $0.4 million, acceleration of plant, property, and equipment depreciation of $0.1 million, and other restructuring costs of $0.4 million partially offset by $0.2 million for gains on the sale of equipment net of other asset impairment.
As part of the Company's plan to sharpen focus and simplify business processes within the Furniture segment, the Company announced during the first quarter of fiscal year 2006, a plan which included consolidation of administrative, marketing, and business development functions to better serve the segment's primary markets. The plan includes accelerating amortization through fiscal year 2008 on a portion of the Company's Enterprise Resource Planning (ERP) software. During the first quarter of fiscal year 2006, capitalized software costs related to the ERP software that was not yet placed in service were abandoned and recognized as impaired. Restructuring charges related to ERP software impairment, accelerated amortization, employee severance, and other consolidation costs are recorded on the Restructuring Expense line item of the Company's Consolidated Statements of Income. The plan also included the sale of a forest products hardwood lumber business and a business unit which produced fixed-wall furniture systems. Losses on the sale of these business units were recognized in fiscal year 2006 as discontinued operations. The Company estimates total pre-tax charges under the plan, when complete, to be approximately $17.1 million, including the pre-tax loss on the sale of business operations and other impairment of $11.1 million which was recorded as discontinued operations, and restructuring charges for plant, property, and equipment impairment of $0.6 million, software impairment of $2.8 million, acceleration of software amortization of $2.2 million, and employee severance costs of $0.4 million. This plan was complete as of June 30, 2008.
The Company accounts for restructuring cost in accordance with Statement of Financial Accounting Standards No. 146, Accounting for Costs Associated with Exit or Disposal Activities. 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 Consolidated Statements of Income.
Fiscal Year 2008 Restructuring Charges:
As a result of the fiscal year 2008, 2007, and 2006 restructuring plans, the Company recognized consolidated pre-tax restructuring expense of $21.9 million in fiscal year 2008. Within the Furniture segment, the Company recognized pre-tax restructuring expense of $2.2 million in fiscal year 2008, which included restructuring charges of $1.2 million for employee severance costs, $0.8 million for accelerated software amortization, and $0.2 million for plant, property, and equipment impairment. Within the EMS segment, the Company recognized pre-tax restructuring expense of $19.0 million in fiscal year 2008, which included restructuring charges of $17.0 million for employee severance costs, $1.2 million for plant, property, and equipment impairment, $0.2 million for goodwill impairment, and $0.6 million for other restructuring costs. Within Unallocated Corporate, the Company recognized $0.7 million pre-tax restructuring expense in fiscal year 2008, which included restructuring charges of $0.3 million for employee severance costs, $0.2 million for asset impairment, and $0.2 million for other restructuring costs.
Fiscal Year 2007 Restructuring Charges:
As a result of the fiscal year 2006 restructuring plan, the Company recognized consolidated pre-tax restructuring expense of $1.5 million in fiscal year 2007. Within the Furniture segment, the Company recognized pre-tax restructuring expense of $1.3 million in fiscal year 2007, which included restructuring charges of $0.8 million for accelerated software amortization, $0.4 million for plant, property, and equipment impairment, and $0.1 million for employee transition and other costs. The EMS segment recognized pre-tax restructuring expense of $0.1 million in fiscal year 2007 which included $0.3 million for employee transition costs and $0.1 million for accelerated software amortization which were partially offset by $0.3 million of gains on the sale of equipment net of other asset impairment. Within Unallocated Corporate, the Company recognized pre-tax restructuring expense of $0.1 million in fiscal year 2007 for other exit costs.
Fiscal Year 2006 Restructuring Charges:
As a result of the fiscal year 2006 restructuring plan, the Company recognized consolidated pre-tax restructuring expense of $4.7 million in fiscal year 2006. Within the Furniture segment, the Company recognized pre-tax restructuring expense of $3.8 million in fiscal year 2006, which included restructuring charges of $0.3 million for employee transition costs, $2.9 million for software impairment, and $0.6 million for accelerated software amortization. Within the EMS segment, the Company recognized pre-tax restructuring expense of $0.9 million in fiscal year 2006, which included restructuring charges of $0.1 million for asset impairment, $0.2 million for accelerated software amortization, $0.1 million for accelerated plant, property, and equipment depreciation, and $0.5 million for employee transition costs.
Reserves:
At June 30, 2008, there was a $16.3 million restructuring liability relating to continuing operations remaining on the Consolidated Balance Sheet consisting of $6.7 million in current liabilities and $9.6 million in other long-term liabilities. The restructuring charge, utilization, cash paid to date, and ending reserve balances of continuing operations at June 30, 2008 were as follows:
Note 18 Discontinued Operations
Fiscal Year 2007 Discontinued Operations:
During the first quarter of fiscal year 2007, the Company approved a plan to 	exit the production of wood rear projection television (PTV) cabinets and stands within the Furniture segment, which affected the Company's Juarez, Mexico, operation. With the exit, the Company no longer has continuing involvement with the production of PTV cabinets and stands. Production at the Juarez facility ceased during the second quarter of fiscal year 2007, and all inventory has been sold. Miscellaneous wrap-up activities including disposition of remaining equipment were complete as of June 30, 2007. Beginning in the quarter ended December 31, 2006, the year-to-date financial results associated with the Mexican operations in the Furniture segment were classified as discontinued operations, and all prior periods were restated.
The Company utilized available market prices and management estimates to determine the fair value of impaired fixed assets. The costs shown below related to the exit of PTV cabinet and stand production at the Juarez facility are included in discontinued operations and those costs related to the building lease and other costs after production of PTV cabinets and stands ceased are included in continuing operations. Pre-tax charges related to exit activities at the Juarez facility were as follows:
(Amounts in Thousands)
Property & Equipment Impairment and Losses on Sales
Transition and Other Employee Costs
Lease and Other Exit Costs
		Total
Exit costs in continuing 		operations
$ -0-
$ -0-
$ 1,272
$ 1,272
Exit costs in discontinued 		operations
Total
$ -0-
$ 30
$ 1,285
$ 1,315
Exit costs in continuing 		operations $ -0-
$ -0-
$ 648
$ 648
Exit costs in discontinued 		operations
1,623
		1,101
		 3,718
Total
$ 1,623
$ 1,101
$ 1,642
$ 4,366
Total Exit costs in continuing 		operations $ -0-
$ -0-
$ 1,920
$ 1,920
Exit costs in discontinued 		operations
		$ 1,623
		$ 1,131
		$ 1,007
		$ 3,761
Total
		$ 1,623
		$ 1,131
		$ 2,927
		$ 5,681
Fiscal Year 2006 Discontinued Operations:
On September 15, 2005, in conjunction with its restructuring plan to sharpen its focus on primary markets within the Furniture segment, the Company approved plans to sell the operations of a forest products hardwood lumber business and a business which produced and sold fixed-wall furniture systems. Additionally on November 8, 2005, the Company approved a plan to exit a non-core business that manufactured polyurethane and polyester molded components for use in the recreational vehicle, signage, and residential furniture industries.
On October 14, 2005, the Company completed the sale of the fixed-wall furniture systems business, which included primarily the sale of property and equipment, inventory, accounts receivable, and product rights. The purchase price totaled $1.2 million, of which $0.3 million was received at closing and $0.9 million was a note receivable, which has been collected. The sale resulted in a net loss of $1.4 million. The loss on disposal of the fixed-wall furniture business included an after-tax goodwill impairment loss of $0.3 million recognized in the Furniture segment in fiscal year 2006. The goodwill impairment loss was based upon the cessation of cash flows related to the fixed-wall furniture systems business. The Company does not have significant continuing cash flows or continuing involvement with this business.
On November 30, 2005, the Company completed the sale of the forest products hardwood lumber business to Indiana Hardwoods, Inc., which included primarily the sale of property and equipment, inventory, accounts receivable, and timber assets. The president and owner of Indiana Hardwoods, Inc. is Barry L. Cook, who was formerly employed by the Company as a Vice President of Kimball International, Inc. and had responsibility for this hardwoods lumber operation. The transaction prices were negotiated between the Company and Indiana Hardwoods, Inc. The Company also considered offers from other interested outside parties, but ultimately determined that it was in the Company's best interest financially to sell this operation to Indiana Hardwoods, Inc. The purchase price totaled $25.5 million, of which $23.5 million was received at closing and $2.0 million was a note receivable. During fiscal year 2008, the Company opted to accept a cash payment of a lesser amount as payment in full of the note receivable. The sale resulted in a net loss of $5.0 million. The Company has no ongoing commitments resulting from the sales agreement. The Company does not have significant continuing cash flows or continuing involvement with this business.
On January 20, 2006, the Company completed the sale of a non-core business that manufactures polyurethane and polyester molded components for use in the recreational vehicle, signage, and residential furniture industries, which included primarily the sale of inventories and machinery and equipment. The purchase price totaled $0.6 million. The sale resulted in a net loss of $0.7 million. The Company does not have significant continuing cash flows or continuing involvement with this business.
In accordance with FASB Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, these businesses have been classified as discontinued operations, and their operating results and gains (losses) on disposal are presented on the Loss from Discontinued Operations, Net of Tax line of the Consolidated Statements of Income. During fiscal year 2008, the Company did not classify any additional businesses as discontinued operations.
Operating results and the loss on sale of the discontinued operations were as follows:
Note 19 Quarterly Financial Information (Unaudited)
			(1)
			Net sales and gross profit are from continuing operations. 			Operating results from the Reptron acquisition are included in the 			table above as of February 15, 2007.
			(2)
			Income from continuing operations and net 			income for the quarter ended September 30, 2007 included $0.7 million ($0.02 per diluted 			share) of after-tax income received as part of a Polish offset 			credit program for investments made in the Company's Poland operation.
Item 9
Item 9 -
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
None.
Item 9A
Item 9A - 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 June 30, 2008, the Chief Executive Officer and Chief 	Financial Officer of the Company concluded that its disclosure controls and procedures were effective.
(b) Management's report on internal control over financial reporting.
Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 and the rules and regulations adopted pursuant thereto, the Company included a report of management's assessment of the effectiveness of its internal control over financial reporting as part of this report. The effectiveness of the Company's internal control over 	financial reporting as of June 30, 2008 has been audited by the Company's 	independent registered public accounting firm. Management's report and 	the independent registered public accounting firm's attestation report are included in the Company's Consolidated Financial Statements under the captions entitled "Management's Report on Internal Control Over Financial Reporting" 	and "Report 	of Independent Registered Public Accounting Firm" and 	are incorporated herein by reference.
(c) 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 June 30, 2008 that have materially affected, or that are reasonably likely to materially affect, the Company's internal control over financial reporting.
Item 9B
Item 9B - Other Information
None.
PART III
Item 10
Item 10 -
Directors, Executive Officers and Corporate Governance
Directors
The information required by this item with respect to Directors is incorporated by reference to the material contained in the Company's Proxy Statement for its annual meeting of Share Owners to be held October 21, 2008 under the caption "Election of Directors."
Committees
The information required by this item with respect to the Audit Committee and its financial expert and with respect to the Compensation and Governance Committee's responsibility for establishing procedures by which Share Owners may recommend nominees to the Board of Directors is incorporated by reference to the material contained in the Company's Proxy Statement for its annual meeting of Share Owners to be held October 21, 2008 under the caption "Information Concerning the Board of Directors and Committees."
Executive Officers of the Registrant
The information required 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.
Compliance with Section 16(a) of the Exchange Act
The information required by this item with respect to compliance with Section 16(a) of the Exchange Act is incorporated by reference to the material contained in the Company's Proxy Statement for its annual meeting of Share Owners to be held October 21, 2008 under the caption "Section 16(a) Beneficial Ownership Reporting Compliance."
Code of Ethics
The Company has a code of ethics that applies to all of its employees, including the Chief Executive Officer, Chief Financial Officer, and the Principal Accounting Officer. The code of ethics is posted on the Company's website at www.ir.kimball.com. It is the Company's intention to disclose any amendments to the code of ethics on this website. In addition, any waivers of the code of ethics for directors or executive officers of the Company will be disclosed in a Current Report on Form 8-K.
Item 11
Item 11 - Executive Compensation
The information required by this item is incorporated by reference to the material contained in the Company's Proxy Statement for its annual meeting of Share Owners to be held October 21, 2008 under the captions "Information Concerning the Board of Directors and Committees," "Compensation Discussion and Analysis," "Compensation Committee Report," and "Executive Officer and Director Compensation."
Item 12
Item 12 - Security Ownership of Certain Beneficial Owners and Management and Related Share Owner Matters
Security Ownership
The information required by this item is incorporated by reference to the material contained in the Company's Proxy Statement for its annual meeting of Share Owners to be held October 21, 2008 under the caption "Share Ownership Information."
Securities Authorized for Issuance Under Equity Compensation Plans
The following table summarizes the Company's equity compensation plans as of June 30, 2008:
Number of Securities to be Issued Upon Exercise of 		Outstanding Options, Warrants and Rights
Weighted Average Exercise Price of Outstanding Options, 		Warrants and Rights
Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (excluding securities reflected in first column)
Equity compensation plans approved by Share Owners
2,019,114 (1)
$15.45(2)
877,857 (3)
Equity compensation plans not approved by Share Owners -0-
Total
2,019,114 $15.45
877,857
(1) Includes 779,162 Class B stock option grants, 	703,552 Class A and 55,500 Class B performance share awards, and 375,800 	Class A and 105,100 Class B restricted share unit awards. The number 	of performance shares assumes that performance targets will be met.
(2) Performance shares and restricted share 	units not included as 	there is no exercise price for these awards.
(3) Includes 877,857 Class A and Class B 	shares available for issuance as restricted stock, restricted share units, 	unrestricted share grants, incentive stock options, nonqualified stock 	options, performance shares, performance units, and stock appreciation 	rights under the Company's 2003 Stock Option and Incentive Plan. No 	shares remain available for issuance under the Company's prior stock option 	plans.
Item 13
Item 13 - Certain Relationships and Related Transactions, and Director Independence
Relationships and Related Transactions
The information required by this item is incorporated by reference to the material contained in the Company's Proxy Statement for its annual meeting of Share Owners to be held October 21, 2008 under the caption "Review and Approval of Transactions with Related Persons."
Director Independence
The information required by this item is incorporated by reference to the material contained in the Company's Proxy Statement for its annual meeting of Share Owners to be held October 21, 2008 under the caption "Information Concerning the Board of Directors and Committees."
Item 14
Item 14 - Principal Accounting Fees and Services
The information required by this item is incorporated by reference to the material contained in the Company's Proxy Statement for its annual meeting of Share Owners to be held October 21, 2008 under the caption "Independent Registered Public Accounting Firm" and "Approval Process for Services Performed by the Independent Registered Public Accounting Firm."
PART IV
Item 15
Item 15 - Exhibits, Financial Statement Schedules
(a) The following documents are filed as part of this 	report:
(1) Financial Statements:
(2) Financial Statement Schedules:
II. Valuation and Qualifying Accounts
for Each of the Three Years in the Period Ended June 30, 2008
Schedules other than those listed above are omitted because they are either not required or not applicable, or the required information is presented in the Consolidated Financial Statements.
(3) Exhibits
See the Index of Exhibits 		on page 86 for a list of the exhibits filed or incorporated herein as a part of this report.
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:
/s/ Robert F. Schneider
ROBERT F. SCHNEIDER
Executive Vice President,
Chief Financial Officer
			September 2, 2008
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:
/s/ James C. Thyen
JAMES C. THYEN
President,
Chief Executive Officer
			September 2, 2008
/s/ Robert F. Schneider
ROBERT F. SCHNEIDER
Executive Vice President,
Chief Financial Officer
			September 2, 2008
/s/ Michelle R. Schroeder
MICHELLE R. SCHROEDER
Vice President, Corporate Controller
(functioning as Principal Accounting Officer)
			September 2, 2008
Signature
Signature
Ronald J. Thyen *
Harry W. Bowman*
RONALD J. THYEN
HARRY W. BOWMAN
Director
Director
John T. Thyen *
James C. Thyen *
JOHN T. THYEN
JAMES C. THYEN
Director
Director
Christine M. Vujovich *
Jack R. Wentworth *
CHRISTINE M. VUJOVICH
JACK R. WENTWORTH
Director
Director
Polly B. Kawalek *
Geoffrey L. Stringer *
POLLY B. KAWALEK
GEOFFREY L. STRINGER
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:
KIMBALL INTERNATIONAL, INC.
Schedule II. - Valuation and Qualifying Accounts
Description
Balance at Beginning
of Year
Additions/(Reductions)
to Expense
Charged to
Other
Accounts
Write-offs
and
Recoveries
Balance
at End
of Year
(Amounts in Thousands)
Year Ended June 30, 2008
Valuation Allowances:
		Short-Term Receivable Allowance $ 1,477 $ $ 11
$ (479) 			 $ 1,057
		Long-Term Note Receivable Allowance $ 1,400 $ 300 $ -0-
$ (1,700)
$ -0-
Deferred Tax Asset $ 4,420 $ 1,159 			 $ -0- $ (613) $ 4,966
Year Ended June 30, 2007
Valuation Allowances:
		Short-Term Receivable Allowance $ 1,282 $ (282) $ 242 $ 235 $ 1,477
		Long-Term Note Receivable Allowance $ 1,400 $ -0- $ -0-
$ -0- $ 1,400
Deferred Tax Asset $ 3,856 $ 574 			 $ -0- $ (10) $ 4,420
Year Ended June 30, 2006
Valuation Allowances:
		Short-Term Receivable Allowance $ 2,142 $ 414
$ 9 $ (1,283) $ 1,282
		Long-Term Note Receivable Allowance $ -0- $ 1,400 $ -0- $ -0- $ 1,400
Deferred Tax Asset $ 3,429 $ 1,054 $ -0- $ (627) $ 3,856
KIMBALL INTERNATIONAL, INC.
INDEX OF EXHIBITS