Good morning, ladies and gentlemen. My name is (Tania), and I’ll be your conference call facilitator today. At this time, I would like to welcome everyone to the Kimball International Second Quarter Fiscal 2009 Financial Results Conference Call. All lines have been placed on listen-only mode to prevent any background noise. After the Kimball speaker’s opening remarks there will be a question-and-answer period where Kimball will respond to questions from analysts. (Operator instructions) As with prior conference calls, today’s call February 6 2009 will be recorded and may contain forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. Risk factors that may influence the outcome of forward-looking statements can be seen in the Kimball Form 10-K and today’s release. The panel for today’s call, is Jim Thyen, President and Chief Executive Officer of Kimball International; and Bob Schneider, Chief Financial Officer. I will now like to turn today’s call over to Jim Thyen. Mr. Thyen, you may begin.

Thank you, (Tania), and welcome everyone to our second quarter conference call. We hope you had an opportunity to review our earnings release issued this morning, on the results of our second fiscal quarter ended December 31st, 2008. As in our last conference call, our format today will start with my overview comments on the quarter, followed by Bob’s financial review. We will then open the call to your questions. As we know and feel everyday, we are in unprecedented times in the world economy. Financial and housing markets froze during the second fiscal quarter, consumer spending declined dramatically as the U.S. economy along with the other major economies around the world, began an abrupt slowdown in November and December. This trend is continuing today. As the furniture, automotive, and industrial market verticals, in which Kimball competes, were not immune to these forces at work. We began to see noticeable reductions in order trends during the latter weeks of the second fiscal quarter. We took immediate action during the second quarter to conserve cash, improve liquidity and keep our cost structures competitive. We sort and still do to minimize the impact to our customers and sustain our top line sales. The challenges of the credit markets are severe. Burden is broad and deep materially increasing financial and operating risk. Contingency plans have been implemented and are constantly being updated. As it is yet to be determined, how long this economic decline will last, and how deep it will extend given the uncertainty of government intervention. Capital expenditures are being deferred, working capital, particularly trade receivables and inventory is being closely monitored. The expanded processes and procedures for risk assessment of our supply chain to avoid or minimize supply interruptions. Cost structure is a topic that we have discussed in past…

Thanks, Jim. We reported today net sales in the second quarter of $327.6 million, which is a decrease of 6% from the same quarter of the prior year. The Electronics segment and the Furniture segment were each down 6%. Importantly, our gross profit declined $10.4 million or 15.5% that is a significant decline from a year ago, but I want to remind everyone that the drop in our gross profit as a percent of sales occurred mostly between the second and the third quarters of last fiscal year. It was at that time that we saw significant increases in commodity costs, and also a mix shift to lower margin products. Since that time our gross profit percent has been stable and in fact up slightly at 17.2%. This was an important point. I point this out because the immediate trend is important and we had discussed the gross profit - the drop in gross profit several quarters ago. As an update on commodity prices, while we have seen several commodities drop significantly in the second quarter, it will take sometime before we see that positively impact our cost of goods sold. It is also important to note that steel, for example, while it is dropped in price per ton significantly in the second quarter, it is still approximately 40% higher than a year ago. Jim mentioned our reduction in selling and administrative expenses of $11.2 million from Q2 of last year, which is a significant reduction. This led to our selling and administrative expenses for the second quarter, being only 15% of sales beating the much-improved Q1 percent of 15.7%. Recall in March of 2008, we announced a restructuring, involving 150 of our management and administrative staff across the company including at corporate. I had mentioned in previous conference calls…

(Operator Instructions) One moment please for the first question. And your first question will come from Beth Lilly of Woodland Partners. You may ask your question. Elizabeth M. Lilly – Woodland Partners: Good morning everybody, it’s Beth Lilly calling.

Hello Beth. Elizabeth M. Lilly – Woodland Partners: And I have a couple questions. I wanted to just, can you walk me through the cash and then the short-term debt on the balance sheet and so, what is the net cash number? I missed that?

The net cash Beth, net of the revolver is $7.6 million. Elizabeth M. Lilly – Woodland Partners: Okay, so the revolver is how much then?

The revolver is $72.3 million and the cash and short-term investments is $79.9. Elizabeth M. Lilly – Woodland Partners: Okay. Okay great. And then just so I can understand in terms of the land sale. So, if my math is correct you’re going to get - you generated $50.6 million in total brokerage right for all 27,200 plus okay.

That’s correct. Elizabeth M. Lilly – Woodland Partners: And you have received so far $11 million of that 50.6?

That is correct. The $39 million to come in Q3. Elizabeth M. Lilly – Woodland Partners: Okay so, and what will be the gain on that $39.6 then?

The pretax gain in the third quarter will be $23 million, and the net income effect of that is in the neighborhood of $13 million Elizabeth M. Lilly – Woodland Partners: Okay Great. Okay. Okay terrific. The other thing I wanted you to talk about and we’ve spoken on the several different conference calls and I just want to congratulate you on your – on the expense reduction. It’s significant and just I want to spend a little bit of time on that, and just talk about additional expense reductions. Do you see them over in the next coming quarters? And if so, by how much, and then ultimately as a percentage of sales what’s your goal for SG&A? :

Beth I’ll have to explain that a little bit better. Starting at a higher level, our strategies in each one of our markets have not changed due to this economic climate, but our priorities have. And clearly our first priority goes to what you and Bob are just been talking about liquidity, age preservation, and how we deploy our capital - the utilization of our capital. The second priority is our cost structure and that is the focus of your question and it really goes to maintaining our financial health and being competitive in the marketplace. We have a goal of 8% operating income for Furniture, and 4% operating income for Electronics. We set that goal before this economic decline started and we intend to keep that goal although we’ve recognized this economic crisis causes us to evaluate whether we should extend the timeline from the date that we are originally said it. So, the SG&A and the cost of goods, all has to be reduced continuously, before going to hit those operating income goals. Elizabeth M. Lilly – Woodland Partners: And so would you remind me Jim of what’s your target date to hit those goals in those two businesses?

Originally, we said the fourth quarter of ‘10 fiscal year ‘10, but that was before this severe economic climate and financial crisis came upon the world, our nation. And we are going to do what we need to do to remain healthy and stay committed to our strategies. Our fourth priority - our third priority is to retain our core. Liquidity, cost structure, retain our core, and that goes to both our capability in our people, as we go through these very severe economic times. So, we are going to remain true to those and I think that’s going to mean that, quarter four of fiscal year ’010, which was a very realistic goal before this economic crisis came on us. It’s probably going to have to be extended a little bit. Elizabeth M. Lilly – Woodland Partners: So, maybe 2011?

We haven’t decided yet. Elizabeth M. Lilly – Woodland Partners: Yeah. Okay, so do you think there is additional costs that can come out your - out of the SG&A line?

I think it’s a continuous journey. It’s a daily journey. I think we have to be relentless in eliminating bureaucracy, complexity, and try to keep that cost moving down. On the flip side, and on today’s world we seem to be, we don’t quite know, which way we are tipping between deflation and inflation. And lack of clarity that we have with this uncertainty and anxiety is going to make determination between deflation and inflation, very hard to determine in the short-term. Let me clearly, if you look at just fuel price declines what have you the spending power of the dollar has gone up, but I don’t know that it will sustain and that’s pretty important to our cost ratios.

Beth I would just add in terms of the SG&A percent. Part of the challenge is just estimating what sales will be going forward and as we’ve indicated the backorder levels being down going into Q3, bakes it for a difficult sales quarter and consequently goes to the matter of - to what degree might sales be down relative to what we do with our cost structure.

It varies with sales, as you know on the administrative we view as discretionary, just having different timelines of discretionary spending, but we believe it’s a controllable expense. We must continuously focus on reducing, continuously collaborate with all our supply partners to get - keep that cost going down. Elizabeth M. Lilly – Woodland Partners: Can we have a - let’s shift gears for a second and just talk about the two businesses and, EMS and the Furniture segments. The Furniture segment earns money in the quarter and if you look out, do you think that Furniture, the Furniture business will earn money for the year as well as do you think EMS can earn money for the year? I think that both be profitable?

Well everything we do is aimed at try and achieve profitability. The economic climate as you know, and as I tried to articulate in my opening comments, it’s pretty uncertain right now for calendar year 2009. Elizabeth M. Lilly – Woodland Partners: So you’re not willing to say, I mean, if the present environment continues, do you think Furniture can earn money?

As we generally – we do not provide earnings guidance. We try to provide you with appropriate information. Allow you to translate that into what you think future results might be. And I mean, the global economic turmoil is dramatically affected. Order patterns, it’s affected all of our markets. The patterns are little bit more volatile. It’s a lot more challenging to manage. We see the challenging continuing. We don’t see the clarity coming. What - right at this time, in the nation or the world. And so, we’re going to - our priorities is to focus on that liquidity, our cash preservation and number two is our cost structure and all of that is designed to string and return to our shareholder. But we honestly, we don’t give guidance for the future outlook. Elizabeth M. Lilly – Woodland Partners: Okay, last question is, as the cash comes in from the land sales and I want to congratulate you on that on selling that the excess lands. Could you talk about the priorities and is share repurchase is an option?

Share repurchase, I guess is always an option. We do have the authority given from the board. And certainly, the Board really has the first choice on, I guess how cash is used, firms are deployed in the business. We are going to we intend to stay focused on our four strategies of a barrier a little bit based upon the vertical markets, because we believe strongly and being market-driven and customer-centered and so the demands of customers in the automotive market are little bit different than the medical, little bit different than the mid-market office furniture, and the hospitality. We intend to preserve our balance sheet strength, and then focus on continuing to grow and diversify our business. We want to keep our operational excellence very high. So, we are going continue to invest in tools like Lean and Kaizen and Six Sigma, to keep our quality and reliability and our service to our customers are very high. We believe the scorecards we get from our customers are very important to going through this economic storm and I have indicated that in my opening comments that we have seen some of our customers recognize that value and as they have chosen to lower their cost structure and consolidate, and perhaps choosing a little bit different risk threshold on suppliers. Several of them are consolidating with Kimball as their choice. I think that’s a result of our high quality or high reliability, our high service package. It comes from our people. Finally, we intend to continue invest in our people, in our information systems, and all the tools that enable our people up to succeed for our shareholders. And we are going to try to do that and return to profit. Now the water if you will for everybody in this competitive landscape has gotten a lot lower, there are more rocks sticking up. It takes greater skill to navigate through these. And I believe unless the unemployment rate starts to head the other way, so that consumers can start consuming, so our residential market starts to turn. All that has to be start to move in that direction if this credit crisis is going to enthrone and give all of us maybe a little bit easier competitive landscape to grow and produce profitability. I'm not telling you anything you don’t already know, it's a very precarious time that we’re at, and all of our markets are right there in that economic turmoil.

Yeah. Elizabeth M. Lilly – Woodland Partners: So it sounds like buying back stock is not a priority right now and more, it's more about just a preservation of the cash and reinvesting into the business. Is that a fair statement. Jim?

We’re focused on the long-term health, this company and operating it in the best interest of the shareholders that are long-term holders Elizabeth M. Lilly – Woodland Partners: Okay. Thank you.

Thank you for your questions. They are excellent questions.

Thank you.

Have a great day. Elizabeth M. Lilly – Woodland Partners: You too.

(Operator Instructions) There are no further questions at this time. This concludes the question and answer session. I will now like to turn the call over to Mr. James Thyen for closing comments.

Okay, Tania. Thank you. That brings us to the end of today’s call. We also have no questions that came in through the Internet on e-mail. Couple closing comments, volatility in the financial markets is driving tremendous uncertainty around the world. It has changed the priorities of all companies including ours. Our strategies for each market remains, as we have reviewed them. The tactics driven by our priorities have changed. Maintaining liquidity is most important followed by cost competitiveness and general financial health of the company, and retaining our core. We are well positioned with strong brands. We have strong business units, a very capable committed organization and a strong balance sheet. To take advantage of market opportunities as they rise, arise in this period of uncertainty. We are required to remain flexible, very agile, and constantly adjust priorities in this climate, and we will do that. We appreciate your interest in Kimball, and we look forward to speaking with you on our next call. Thank you, and have a great day.

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