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**UNITED STATES**SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549FORM 10-Q****
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(Mark One)[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934

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For the quarterly period ended September 30, 2009

OR
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[  ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934

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For the transition period from              to            
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Commission File Number    0-3279
**KIMBALL INTERNATIONAL, INC.**(Exact name of registrant as specified in	its charter)**
| **Indiana**                              |  | **35-0514506**                       |
|------------------------------------------|--|--------------------------------------|
| (State or other jurisdiction	of          |  | (I.R.S. Employer	Identification No.) |
| incorporation or	organization)           |  |                                      |
|                                          |
| **1600 Royal Street, Jasper,	Indiana**   |  | **47549-1001**                       |
| (Address of principal	executive offices) |  | (Zip Code)                           |

| **(812) 482-1600**                                                                |
|-----------------------------------------------------------------------------------|
| Registrant's telephone number, including		area code                               |
|                                                                                   |
| **Not Applicable**                                                                |
| Former name, former address and former		fiscal year, if changed since last report |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Indicate by check mark whether the registrant (1) has filed all reports	required to be filed by Section 13 or 15(d) of the Securities Exchange Act	of 1934 during the preceding 12 months (or for such shorter period that the	registrant was required to file such reports), and (2) has been subject to	such filing requirements for the past 90 days.  	Yes 	 X     No __                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| Indicate by check mark whether the registrant	has submitted electronically and posted on its corporate Web site, if any,	every Interactive Data File required to be submitted and posted pursuant to	Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such	shorter period that the registrant was required to submit and post such	files).	Yes  __   	No                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| Indicate by check mark whether the registrant is a large accelerated	filer, an accelerated filer, a non-accelerated filer, or a smaller reporting	company.  See	the definitions of "large accelerated filer," "accelerated filer"	and "smaller reporting company" in Rule 12b-2	of the Exchange Act.    Large accelerated filer  ___                                                                                        Accelerated filer  	 X  	Non-accelerated filer         (Do	not check if a smaller reporting company)             	Smaller reporting company         |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| Indicate by check mark whether the registrant is a shell company (as	defined in Rule 12b-2 of the Exchange Act).  	Yes  __   	No   X                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| The number of shares outstanding of the Registrant's common stock as of	October 21, 2009 was:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |

|   | Class A Common Stock - 10,639,862 shares |
|--------|------------------------------------------|
|   | Class B Common Stock - 26,686,515 shares |

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**KIMBALL INTERNATIONAL, INC.FORM 10-QINDEX**

****Page No.** PART I    FINANCIAL INFORMATION Item 1. Financial Statements  Condensed Consolidated Balance Sheets      	 - September 30, 2009	(Unaudited) and June 30, 20093  Condensed Consolidated Statements of	Income (Unaudited)        -	Three Months Ended September 30, 2009 and 20084  Condensed Consolidated Statements of	Cash Flows (Unaudited)        -	Three Months Ended September 30, 2009 and 20085  Notes to Condensed Consolidated	Financial Statements (Unaudited)6-26Item 2. Management's Discussion and	Analysis of Financial        Condition and Results of Operations	26-39Item 3. Quantitative and Qualitative	Disclosures About Market Risk	40Item 4. Controls and Procedures40 PART II    OTHER INFORMATION    Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	40Item 6. Exhibits41 SIGNATURES42 EXHIBIT INDEX43**

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**PART I. FINANCIAL INFORMATIONItem 1. Financial Statements****KIMBALL INTERNATIONAL, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS(Amounts in Thousands, Except forShare andPer Share Data)**

|                                                                                                                                                                           |   | (Unaudited)                                                            |   |                                                                   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------|--------|------------------------------------------------------------------------|
|                                                                                                                                                                           |   | September 30,                                                          |   | June 30,                                                               |
|                                                                                                                                                                           |   | 2009                                                                   |   | 2009                                                                   |
| ASSETS                                                                                                                                                                    |   |                                                                   |   |                                                                   |
| Current Assets:                                                                                                                                                           |   |                                                                   |   |                                                                   |
|     Cash and cash equivalents                                                                                                                              |   |  $    76,221                                  |   |  $   75,932                                        |
|     Short-term investments                                                                                                                                 |   |  24,443                                                      |   |  25,376                                                      |
|     Receivables, net of allowances of $5,086 and $4,366,			respectively                                                                                    |   |  137,915                                                     |   |  143,398                                                     |
|     Inventories                                                                                                                                            |   |  142,832                                                     |   |  127,004                                                     |
|     Prepaid expenses and other current assets                                                                                                              |   |  39,369                                                      |   |  35,720                                                      |
|     Assets held for sale                                                                                                                                   |   |  1,358                                                       |   |  1,358                                                       |
|         Total current assets                                                                                                           |   |  422,138                                                     |   |  408,788                                                     |
| Property and Equipment, net of accumulated depreciation of $342,943			and                                                                                                 |   |                                                                   |   |                                                                   |
|     $338,001, respectively                                                                                                                                 |   |  203,857                                                     |   |  200,474                                                     |
| Goodwill                                                                                                                                                                  |   |  2,657                                                       |   |  2,608                                                       |
| Other Intangible Assets, net of accumulated amortization of $62,542			and                                                                                                 |   |                                                                   |   |                                                                   |
|     $62,481, respectively                                                                                                                                  |   |  9,511                                                       |   |  10,181                                                      |
| Other Assets                                                                                                                                                              |   |  19,198                                                      |   |  20,218                                                      |
|         Total Assets                                                                                                                   |   |  $  657,361                                             |   |  $ 642,269                                                   |
| LIABILITIES AND SHARE OWNERS' EQUITY                                                                                                                                  |   |                                                                   |   |                                                                   |
| Current Liabilities:                                                                                                                                                      |   |                                                                   |   |                                                                   |
|     Current maturities of long-term debt                                                                                                                   |   |  $          61  |   |  $          60  |
|     Accounts payable                                                                                                                                       |   |  180,494                                                     |   |  165,051                                                     |
|     Borrowings under credit facilities                                                                                                                     |   |  13,162                                                      |   |  12,677                                                      |
|     Dividends payable                                                                                                                                      |   |  2,402                                                       |   |  2,393                                                       |
|     Accrued expenses                                                                                                                                       |   |  52,295                                                      |   |  52,426                                                      |
|         Total current liabilities                                                                                                      |   |  248,414                                                     |   |  232,607                                                     |
| Other Liabilities:                                                                                                                                                        |   |                                                                   |   |                                                                   |
|     Long-term debt, less current maturities                                                                                                                |   |  349                                                         |   |  360                                                         |
|     Other                                                                                                                                                  |   |  23,330                                                      |   |  26,948                                                      |
|         Total other liabilities                                                                                                        |   |  23,679                                                      |   |  27,308                                                      |
| Share Owners' Equity:                                                                                                                                                 |   |                                                                   |   |                                                                   |
|     Common stock-par value $0.05 per share:                                                                                                                |   |                                                                   |   |                                                                   |
|         Class A - 49,826,000 shares authorized                                                                                         |   |                                                                   |   |                                                                   |
|                          14,368,000 shares issued |   |  718                                                         |   |  718                                                         |
|         Class B - 100,000,000 shares authorized                                                                                        |   |                                                                   |   |                                                                   |
|                          28,657,000 shares issued |   |  1,433                                                       |   |  1,433                                                       |
|     Additional paid-in capital                                                                                                                             |   |  108                                                         |   |  343                                                         |
|     Retained earnings                                                                                                                                      |   |  457,530                                                     |   |  458,180                                                     |
|     Accumulated other comprehensive income (loss)                                                                                                          |   |  2,360                                                       |   |  (501)                                                            |
|     Less: Treasury stock, at cost:                                                                                                                         |   |                                                                   |   |                                                                   |
|         Class A - 3,639,000 and 3,646,000 shares, respectively                                                                         |   |  (50,018)                                                         |   |  (50,421)                                                         |
|         Class B - 2,059,000 and 2,093,000 shares, respectively                                                                         |   |  (26,863)                                                         |   |  (27,398)                                                         |
|             Total Share Owners' Equity                                                                         |   |  385,268                                                     |   |  382,354                                                     |
|                 Total Liabilities and Share Owners' Equity                                 |   |  $  657,361                                             |   |  $ 642,269                                                   |
| See Notes to Condensed Consolidated Financial Statements                                                                                                                  |   |                                                                   |   |                                                                   |

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**KIMBALL INTERNATIONAL, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF INCOME****(Amounts in Thousands, Except for Per ShareData)**
			(Unaudited) 			Three Months Ended 			September 30, 			2009 			2008 			Net Sales			 $    274,659  			 $      339,495  			Cost of Sales			 227,475  			 280,983  			Gross Profit			 47,184  			 58,512  			Selling and Administrative Expenses			 46,066  			 53,305  			Restructuring Expense			 486  			 963  			Operating Income			 632  			 4,244  			Other Income (Expense):    			    Interest income			 277  			 775  			    Interest expense			 (15)			 (776)			    Non-operating income (expense)			 1,724 			 (778)			        Other income (expense), net			 1,986  			 (779) 			Income Before Taxes on Income			 2,618  			 3,465  			Provision for Income Taxes			 844  			 1,281  			Net Income 			 $       1,774  			 $          2,184  			Earnings Per Share of Common Stock:    			    Basic Earnings Per Share:    			        Class A			  $         0.04   			 $           0.06   			        Class B			  $         0.05   			 $           0.06   			    Diluted Earnings Per Share:    			        Class A			  $         0.04   			  $           0.06   			        Class B			  $         0.05   			  $           0.06       			Dividends Per Share of Common Stock:    			    Class A			  $       0.045   			  $         0.155   			    Class B			  $       0.050   			  $         0.160       			Average Number of Shares Outstanding    			    Class A and B Common Stock:    			        Basic			37,313  			37,014  			        Diluted			37,508  			37,319  			See Notes to Condensed Consolidated Financial Statements    

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**KIMBALL INTERNATIONAL, INC. AND SUBSIDIARIES****CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(Amounts in Thousands)** 			(Unaudited)			Three Months Ended			September 30			2009 			2008			Cash Flows From Operating Activities:   			    Net income 			 $    1,774  			 $   2,184 			    Adjustments to reconcile net income to net cash provided by			operating activities:   			        Depreciation and amortization			 9,046  			 9,727 			        Gain on sales of assets			 (20) 			 (45)			        Restructuring and exit costs			 -0-  			 21 			        Deferred income tax and other deferred charges			 (720) 			 (1,785)			        Stock-based compensation			 359  			 780 			        Excess tax benefits from stock-based compensation			 -0-  			 (2)			        Change in operating assets and liabilities:   			            Receivables			 3,172  			 (9,104)			            Inventories			 (17,616) 			 (8,177)			            Prepaid expenses and other current assets			 296  			 1,734 			            Accounts payable			 22,012  			 28,684 			            Accrued expenses			 (5,796) 			 (10,043)			                Net cash provided by operating activities			 12,507  			 13,974 			Cash Flows From Investing Activities:   			    Capital expenditures			 (13,505) 			 (9,144)			    Proceeds from sales of assets			 463  			 124 			    Payments for acquisitions			 -0-  			 (5,391)			    Purchase of capitalized software and other assets			 (44) 			 (166)			    Purchases of available-for-sale securities			 (918) 			 (3,873)			    Sales and maturities of available-for-sale securities			 1,825  			 2,937 			    Other, net			 -0-  			 4 			        Net cash used for investing activities			 (12,179) 			 (15,509)			Cash Flows From Financing Activities:   			    Proceeds from revolving credit facility			 -0-  			 25,000 			    Additional net change in credit facilities			 -0-  			 (19,952)			    Payments on capital leases and long-term debt			 (10) 			 (192)			    Dividends paid to Share Owners			 (1,811) 			 (5,855)			    Excess tax benefits from stock-based compensation			 -0-  			 2 			    Repurchase of employee shares for tax withholding			 (115) 			 (374)			        Net cash used for financing activities			 (1,936) 			 (1,371)			Effect of Exchange Rate Change on Cash and Cash Equivalents			 1,897  			 (2,150)			Net Increase (Decrease) in Cash and Cash Equivalents			 289  			 (5,056)			Cash and Cash Equivalents at Beginning of Period			 75,932  			 30,805 			Cash and Cash Equivalents at End of Period			 $  76,221  			 $ 25,749 			Supplemental Disclosure of Cash Flow Information   			    Cash paid (refunded) during the period for:   			        Income taxes			 $    3,211  			 $  (5,691)			        Interest expense			 $         29  			 $      268 			See Notes to Condensed Consolidated Financial Statements   

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**KIMBALL INTERNATIONAL, INC. AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)**

**Note 1.Summary of Significant Accounting Policies**

***Basis of Presentation:***

The accompanying unaudited Condensed Consolidated Financial Statements of	Kimball International, Inc. (the "Company") have been prepared in accordance	with the instructions to Form 10-Q.  As such, certain information and	footnote disclosures normally included in financial statements prepared in	accordance with accounting principles generally accepted in the United	States of America (U.S. GAAP) have been condensed or omitted, although the Company	believes that the disclosures are adequate to make the information presented	not misleading. All significant intercompany transactions and balances have	been eliminated. Management believes the financial statements include all	adjustments (consisting only of normal recurring adjustments) considered	necessary to present fairly the financial statements for the interim	periods. The results of operations for the interim periods shown in this	report are not necessarily indicative of results for any future interim	period or for the entire fiscal year. It is suggested that these financial	statements be read in conjunction with the financial statements and the	notes thereto included in the Company's latest annual report on Form 10-K.

***Change in Estimates:***

The Company periodically performs assessments of the useful lives of	assets. In evaluating useful lives, the Company considers how long assets	will remain functionally efficient and effective, given levels of	technology, competitive factors, and the economic environment. If the	assessment indicates that the assets will continue to be used for a longer	period than previously anticipated, the useful life of the assets are	revised, resulting in a change in estimate. Changes in estimates are	accounted for on a prospective basis by depreciating assets' current	carrying values over their revised remaining useful lives. 

Effective July 1, 2009, the Company revised the useful lives of Surface	Mount Technology (SMT) production equipment from 5 years to 7 years.	Additionally, effective	October 1, 2008, the Company revised the useful lives of Enterprise Resource	Planning (ERP) software from 7	years to 10 years. The effect of these changes in estimates, compared to the	original depreciation and amortization, for the three months ended September 30,	2009 was a pre-tax reduction in depreciation and amortization expense of, in thousands,	($537). The pre-tax	(decrease) increase to depreciation and amortization expense in future periods	is expected to be, in thousands, ($1,611) for the remaining nine months of fiscal year	2010, and ($1,010), $141, $1,052, and $1,350 in the four years ending June	30, 2014, and $2,017 thereafter.

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***Revisions to the Earnings Per Share Calculation:***

In June 2008, the Financial Accounting Standards Board (FASB) issued	guidance on determining whether instruments granted in share-based payment	transactions are participating securities. Under the guidance, unvested	share-based payment awards that contain nonforfeitable rights to dividends	are considered to be a separate class of securities and are excluded from	the common stock EPS calculations. The Company's restricted share unit	awards meet the definition of a participating security when held by	retirement-age participants. The guidance became effective as of the	beginning of the Company's fiscal year 2010 and required that previously	reported earnings per share data be recast in financial statements issued in	periods after the effective date. The guidance impacted the Company's Class	A Common Stock earnings per share results for certain interim periods and	the annual period of fiscal year 2009. There was no impact on the earnings	per share result for the quarter ended September 30, 2008. The impact on	fiscal year 2009 Class A basic earnings per share was a reduction from $0.47	as originally reported to $0.46. Class B Common Stock calculations were not	impacted significantly enough to cause a change in the earnings per share	result. 

***Goodwill and Other Intangible Assets:***

The Electronic Manufacturing Services (EMS) segment had goodwill of, in thousands, $2,657 and $2,608, as		of September 30, 2009 and June 30, 2009, respectively. Goodwill		increased by, in thousands, $49 in the first quarter of fiscal year 2010		due to the effect of changes in foreign currency exchange rates. 

Goodwill represents the difference between the purchase price and the		related underlying tangible and intangible net asset values resulting		from business acquisitions. Annually, or if conditions indicate an		earlier review is necessary, the Company compares the carrying value of		the reporting unit to an estimate of the reporting unit's fair value to		identify potential impairment. If		the estimated fair value of the reporting unit is less than the carrying value,		a second step is performed to determine the amount of potential goodwill		impairment. If impaired, goodwill is		written down to its estimated implied fair value. Goodwill		is assigned to and the fair value is tested at the reporting unit level.		The Company uses discounted cash flows to establish its reporting unit		fair value. The calculation of the fair value of the reporting units		considers current market conditions existing at the assessment date.

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In addition to performing the required annual testing, the Company		will continue to monitor circumstances and events in future periods to		determine whether additional goodwill impairment testing is warranted on		an interim basis. The Company can provide no assurance that		an impairment charge for the goodwill balance,		which approximates only 0.4% of the Company's total assets, will not occur in future periods as a result of these analyses. 

Other intangible assets consist of capitalized software,		product rights, and customer relationships and are reported as Other		Intangible Assets on the Condensed 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.  

A summary of other intangible assets subject to amortization by segment is as follows:
 				September 30, 2009 				June 30, 2009				(Amounts in Thousands) 				Cost 				Accumulated				Amortization 				Net Value 				Cost 				Accumulated				Amortization 				Net Value				Electronic Manufacturing Services:            				    Capitalized Software 				  $27,291   				  $       24,302   				  $    2,989   				  $27,455   				  $       24,217   				  $    3,238  				    Customer Relationships 				  1,167   				  493   				  674   				  1,167   				  448   				  719  				        Other Intangible Assets 				  $28,458   				  $       24,795   				  $    3,663   				  $28,622   				  $       24,665   				  $    3,957              				Furniture:            				    Capitalized Software 				  $36,662   				  $       32,334   				  $    4,328   				  $37,107   				  $       32,533   				  $    4,574  				    Product Rights 				  1,160   				  368   				  792   				  1,160   				  334   				  826  				        Other Intangible Assets 				  $37,822   				  $       32,702   				  $    5,120   				  $38,267   				  $       32,867   				  $    5,400              				Unallocated Corporate:            				    Capitalized Software 				  $  5,773   				  $         5,045   				  $       728   				  $  5,773   				  $         4,949   				  $       824  				        Other Intangible Assets 				  $  5,773   				  $         5,045   				  $       728   				  $  5,773   				  $         4,949   				  $       824   				  				  				  				  				  				 				Consolidated 				  $72,053   				  $       62,542   				  $    9,511   				  $72,662   				  $       62,481   				  $  10,181  

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

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Internal-use software is stated at cost lessaccumulated amortization and is amortized using the straight-line method. Duringthe software application development stage, capitalized costs include externalconsulting costs, cost of software licenses, and internal payroll andpayroll-related costs for employees who are directly associated with a softwareproject. Upgrades and enhancements are capitalized if they result in addedfunctionality which enable the software to perform tasks it was previouslyincapable of performing. Software maintenance, training, data conversion,and business process reengineering costs are expensed in the period in whichthey are incurred.  

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

***Non-operating Income (Expense): ***

Non-operating income (expense) includes 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. The gain or loss on SERP investments is exactly offset by a	change in the SERP liability that is recognized in selling and	administrative expenses.
Components of Non-operating income (expense), net: **Three Months Ended****(Amounts in Thousands)****September 30** **2009** **2008**Foreign Currency/Derivative Gain$    327   $    511  Gain (Loss) on Supplemental Employee Retirement Plan			Investments1,517   (1,123)Other			(120) 			(166)Non-operating income (expense), net			$ 1,724   			$  (778)
***Effective Tax Rate:***

In determining the quarterly provision for income taxes,		the Company uses an estimated annual effective tax rate which is based		on expected annual income, statutory tax rates, and available tax		planning opportunities in the various jurisdictions in which the Company		operates. Unusual or infrequently occurring items are separately		recognized in the quarter in which they occur.

***Subsequent Events:***
The Company	has evaluated the impact of subsequent events through November 5, 2009,	which is the date these financial statements were issued.*** ***
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***New Accounting Standards:***
		In June 2009, the FASB established the FASB Accounting Standards		Codification (Codification) as the single official source of		authoritative U.S. GAAP recognized by the FASB (other than guidance		issued by the SEC). The Codification does not change current U.S. GAAP		but is intended to simplify user access to all authoritative U.S. GAAP		by providing all literature related to a particular topic in one place.		All existing FASB accounting standard documents have been superseded. 		During the first quarter of fiscal year 2010, the Company began to		utilize the Codification and revised its financial statements to no		longer refer to specific U.S. GAAP standards.

		In June 2009, the FASB issued guidance related to variable interest		entities (VIEs) which modifies how a company determines when VIEs should		be consolidated. The guidance clarifies that the determination of		whether a company is required to consolidate an entity is based on,		among other things, an entity's purpose and design and a company's		ability to direct the activities of the entity that most significantly		impact the entity's economic performance. The guidance requires an		ongoing reassessment of whether a company is the primary beneficiary of		a variable interest entity and requires additional disclosures about a		company's involvement in variable interest entities. The guidance will		be effective as of the beginning of the Company's fiscal year 2011. The		Company is currently evaluating the impact, if any, of adoption of the		guidance on its consolidated financial statements.

In		April 2009, the FASB issued guidance for interim disclosures about fair		value of financial instruments. This guidance expands to interim periods		the existing annual requirement to disclose the fair value of financial		instruments that are not reflected on the balance sheet at fair value.		The guidance became effective for interim periods beginning in the		Company's first quarter of fiscal year 2010, and the required disclosure		has been provided in				Note 7 - Fair Value of Financial Assets and Liabilities of Notes to		Condensed Consolidated Financial Statements.

In June 2008, the		FASB issued guidance for determining whether instruments granted in		share-based payment transactions are participating securities. This		guidance 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. This guidance became		effective as of the beginning of the Company's fiscal year 2010 and		required that previously reported earnings per share data be recast in		financial statements issued in periods after the effective date. The		effect of adopting the guidance is disclosed in				Note 1 - Summary of Significant Accounting Policies of Notes to		Condensed Consolidated Financial Statements.

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In April 2008, the		FASB issued guidance for determination of the useful life of intangible		assets. This guidance 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 the goodwill and other		intangible assets accounting principles. This new guidance 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. 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 this guidance were adopted prospectively as of		the beginning of the Company's fiscal year 2010 and did not have an		effect on the Company's consolidated financial statements.

		In December 2007, the FASB issued  guidance on business combinations		which 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. This guidance also		broadens the definition of a business combination and expands		disclosures related to business combinations. Additionally, in April		2009, the FASB issued further guidance which requires that acquired		contingent assets and liabilities be recognized at fair value if fair		value can be reasonably estimated. If the fair value cannot be		reasonably estimated, the asset or liability will be recognized in		accordance with existing accounting principles for accounting for		contingencies and reasonable estimation of the amount of a loss. This		new guidance became effective for business combinations occurring after		the beginning of the Company's fiscal year 2010. The impact, if any, of		this guidance on the Company's financial position, results of		operations, and cash flows will depend on the extent of business		combinations completed in the future.

		In December 2007, the FASB issued guidance on noncontrolling interests		in consolidated financial statements. This guidance 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. This guidance became effective as of the		beginning of the Company's fiscal year 2010. The Company does not		currently have noncontrolling interests, and therefore the adoption of		this guidance did not have an impact on the Company's financial		position, results of operations, or cash flows.

11

In September 2006,		the FASB issued guidance on fair value measurements, which defines fair		value, establishes a framework for measuring fair value in generally		accepted accounting principles, and expands disclosures about fair value		measurements. This guidance is only applicable to existing accounting		pronouncements that require or permit fair value measurements and does		not require any new fair value measurements. The guidance, as originally		issued, was to be effective as of the beginning of the Company's fiscal		year 2009. In February 2008, the FASB issued additional guidance on fair		value measurements, approving 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. The		Company adopted the provisions of fair value measurement guidance		applicable to financial instruments as of July 1, 2008. The Company		adopted the provisions of fair value measurement guidance applicable to		non-financial assets and liabilities as of July 1, 2009 which did not		 have a material effect on the Company's consolidated financial		statements. Required disclosures have been provided in				Note 7 - Fair Value of Financial Assets and Liabilities of Notes to		Condensed Consolidated Financial Statements.

**Note 2. Inventories**

Inventory components of the Company were as follows:
**September		30,****June 30,****(Amounts in Thousands)****2009****2009**Finished Products				$  34,694   				$  35,530    Work-in-Process				15,024   				11,752    Raw Materials				106,118   				93,999      Total FIFO		Inventory				$155,836   				$141,281    LIFO Reserve				(13,004)  				(14,277)     Total Inventory				$142,832   				$127,004    
For interim reporting, LIFO inventories are computed based on quantities	as of the end of the quarter and interim changes in price levels. Changes in quantities and	price levels are reflected in the interim financial statements in the period	in which they occur, except in cases where LIFO inventory liquidations are	expected to be reinstated by fiscal year end. During the three-month periods ended	September 30, 2009 and 2008, LIFO inventory liquidations increased net	income by, in thousands, $596 and $82, respectively.

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**Note 3. Comprehensive Income(Loss)**

Comprehensive income (loss) includes all changes in equity during a period	except those resulting from investments by and distributions to Share	Owners. Comprehensive income (loss), shown net of tax if applicable, for the	three-month periods ended September 30, 2009 and 2008 was as follows:
 				Three Months Ended 				September 30, 2009 				Three Months Ended				September 30, 2008				(Amounts in Thousands)				Pre-tax				 				Tax				 				Net 				Pre-tax				 				Tax				 				Net				Net income    				 $       1,774      				 $     2,184 				Other comprehensive income (loss):           				    Foreign currency translation adjustments				 $     3,363  				 $       (785) 				 $       2,578  				 $    (5,292) 				 $     -0-  				 $    (5,292)				    Postemployment severance actuarial change				 (1,190) 				 475  				 (715) 				 (196) 				 78  				 (118)				    Other fair value changes:           				        Available-for-sale securities				 -0-  				 -0-  				 -0-  				 35  				 (11) 				 24 				        Derivatives				 (315) 				 210  				 (105) 				 56  				 76  				 132 				    Reclassification to (earnings) loss:           				        Available-for-sale securities				 (26) 				 10  				 (16) 				 (31) 				 12  				 (19)				        Derivatives				 1,445  				 (460) 				 985  				 368  				 (242) 				 126 				        Amortization of prior service costs				 71  				 (28) 				 43  				 71  				 (28) 				 43 				        Amortization of actuarial change				 152  				 (61) 				 91  				 10  				 (4) 				 6 				Other comprehensive income (loss)				 $     3,500  				 $       (639) 				 $       2,861  				 $    (4,979) 				 $   (119) 				 $    (5,098)				Total comprehensive income (loss)    				 $       4,635      				 $    (2,914)
				Accumulated other comprehensive income				(loss), net of tax effects, was as follows: 				September 30,				2009 				June 30,				2009				(Amounts in Thousands)   				Foreign currency translation adjustments				  $      10,399   				  $       7,821  				Unrealized gain (loss) from:   				    Available-for-sale securities				  447   				  463  				    Derivatives				  (4,851)  				  (5,731) 				Postemployment benefits:   				    Prior service costs				  (937)  				  (980) 				    Net actuarial loss				  (2,698)  				  (2,074) 				Accumulated other comprehensive income (loss)				  $        2,360   				  $         (501)  
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**Note 4. Segment Information**

Management organizes the Company into segments based upon differences in	products and services offered in each 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	focuses on electronic assemblies that have high durability requirements and	are sold on a contract basis and produced to customers' specifications. The	EMS segment currently sells primarily to customers in the medical,	automotive, industrial controls, and public safety industries. The Furniture	segment provides furniture for the office and hospitality industries, sold	under the Company's family of brand names. Each segment's product line	offerings consist of similar products and services sold within various	industries. Intersegment sales are	insignificant.

Unallocated corporate assets include cash and cash equivalents, short-term	investments, and other assets not allocated to segments. Unallocated	corporate net income consists of income not	allocated to segments for purposes of evaluating segment performance and	includes income from corporate investments and other non-operational items.	The basis of segmentation and accounting policies of the segments are	consistent with those disclosed in the Company's Annual Report on Form	10-K for the fiscal year ended June 30, 2009.
 **Three Months Ended**  **September 30** **(Amounts in Thousands) ****2009** **2008** Net Sales:     Electronic Manufacturing		Services$165,486  $182,921   Furniture			109,166  156,574   Unallocated			Corporate and Eliminations7  -0-  Consolidated$274,659 
 $339,495       Net Income (Loss):     Electronic Manufacturing		Services$     (219)			
 $    			(768)			  Furniture			1,780 
 3,183 			  Unallocated      Corporate and Eliminations213 
      (231)  Consolidated$    1,774 
(1)$   			2,184 
(2)
(1) Net Income (Loss) included after-tax	restructuring charges, in thousands, of $292 in the three months ended	September 30, 2009. The EMS segment recorded, in the three monthsended September 30, 2009, in thousands, $276 of after-tax restructuring	charges. The Furniture segment recorded, in	the three months ended September 30, 2009, in thousands, $8 of after-tax	restructuring charges. Unallocated Corporate and Eliminations recorded, in the three months	ended September 30, 2009, in thousands, $8	of after-tax restructuring charges. SeeNote 6 - Restructuring Expenseof Notes to Condensed Consolidated Financial Statements for further discussion. (2) Net Income (Loss) includedafter-tax restructuring charges, in thousands, of  $594 in the	three months	ended September 30, 2008. The EMS segment recorded, inthousands, $435 in the three months ended September 30, 2008 ofafter-tax restructuring charges. The Furniture segment	recorded, in the three months ended September 30, 2008, in thousands,	$146 of after-tax restructuring charges. Unallocated Corporate and Eliminations recorded,in the three months ended September 30, 2008, in	thousands, $13 of after-tax restructuring charges.See	Note 6 - Restructuring Expense of	Notes to Condensed Consolidated Financial Statements for further discussion. 
 **September 30,** **June 30,** **(Amounts in Thousands)****2009****2009**Total Assets: Electronic		Manufacturing Services$375,755 $351,506  Furniture		176,817 184,755  Unallocated      Corporate and Eliminations104,789 106,008  Consolidated		$657,361 
 $642,269 
 
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**Note5. Commitmentsand Contingent Liabilities**

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 September 30, 2009, the Company had a maximum financial exposure	from unused standby letters of credit totaling $4.8 million. 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 September 30, 2009 with respect to the standby letters of	credit. The Company also enters into commercial letters of credit to	facilitate payment to vendors and from customers.

The Company estimates product warranty liability at the time of sale based  on historical repair or replacement 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 for the three months ended	September	30, 2009 and 2008 were as follows:
**Three Months Ended		September 30****(Amounts in Thousands)**
**2009** 
**2008**Product Warranty Liability at the			beginning of the period$ 2,176 $ 1,470 			Accrual for warranties issued210  357  Reductions related to pre-existing warranties (including      changes in estimates)		(18)  		(10)Settlements made (in cash or in kind)		(324)		(127)Product Warranty Liability at the end of the period		$			2,044 			 		$ 1,690 			
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**Note 6. Restructuring Expense**

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

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

***European Consolidation Plan:***

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

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Summary of All Plans				   				  				   				   				   				   				  				 				  				Accrued				June 30,				2009 (2) 				Three Months Ended September 30, 2009				 				Accrued				September 30,				2009 (2)				 				Total Charges				Incurred Since Plan Announcement (3)				 				Total Expected				Plan Costs (3) 				 				(Amounts in Thousands) 				Amounts				Charged  Cash 				Amounts				Charged  				Non-cash 				Amounts Utilized/				Cash Paid 				Adjustments    				EMS Segment                				    FY 2008 European Consolidation Plan             				        Transition and Other Employee Costs				  $  12,288   				  $    430   				  $      -0-   				  $     -0-   				  $      (416) (4)				  $12,302   				  $         18,031   				  $18,842   				        Asset Write-downs				  -0-   				  -0-   				  -0-   				  -0-   				  -0-   				  -0-   				  346   				  346   				        Plant Closure and Other Exit Costs				  -0-   				  29   				  -0-   				  (29)  				  -0-   				  -0-   				  486   				  1,065   				    Total EMS Segment				  $  12,288   				  $     459   				  $      -0-   				  $     (29)  				  $      (416)  				  $12,302   				  $         18,863   				  $20,253   				Furniture Segment                				    Other Restructuring Plans (1)				  -0-   				  14   				  -0-   				  (14)  				  -0-   				  -0-   				  249  
**(5)**				  152  
**(5)**				Unallocated Corporate                				    Other Restructuring Plans (1)				  -0-   				  13   				  -0-   				  (13)  				  -0-   				  -0-   				  589   				  706   				Consolidated Total of All Plans				  $  12,288   				  $     486   				  $      -0-   				  $     (56)  				  $      (416)  				  $12,302   				  $         19,701   				  $21,111                   				(1) Other Restructuring Plans with charges during the three				months ended September 30, 2009 include the Office Furniture				Manufacturing Consolidation Plan initiated in fiscal year 2009				and the Unallocated Corporate Gaylord restructuring plan				initiated in fiscal year 2007. 				(2) Accrued restructuring at both September 30, 2009 and June				30, 2009 was $12.3 million. The balances include $9.9 million				and $3.8 million recorded in current liabilities and $2.4				million and $8.5 million recorded in other long-term liabilities				at September 30, 2009 and June 30, 2009, respectively.  				(3) These columns include restructuring plans that were active				during the three months ended September 30, 2009, including the				EMS segment European Consolidation Plan initiated in fiscal year				2008, the Furniture segment Office Furniture Manufacturing				Consolidation Plan initiated in fiscal year 2009, and the				Unallocated Corporate Gaylord restructuring plan initiated in				fiscal year 2007. 				(4) The effect of changes in foreign currency exchange rates				within the EMS segment due to revaluation of the restructuring				liability is included in this amount. 				(5) The Office Furniture Manufacturing Consolidation Plan				resulted in more efficient use of manufacturing space and				enabled the Company to sell an Indiana facility, resulting in a				gain on sale during fiscal year 2009. An additional gain of $0.1				million is expected in the second quarter of fiscal year 2010				upon the sale of additional land. 
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**Note		7. Fair Value of FinancialAssets and Liabilities**

The Company categorizes		assets and liabilities measured at fair value into three levels based upon the assumptions		(inputs) used to price the assets or liabilities.  Level 1 provides the		most reliable measure of fair value, whereas level 3 generally requires		significant management judgment.  The three levels are defined as		follows:
-  Level 1:  Unadjusted quoted prices in active markets				for identical assets and liabilities.-  Level 2:  Observable inputs other than those included				in level 1.  For example, quoted prices for similar assets or				liabilities in active markets or quoted prices for identical				assets or liabilities in inactive markets. -  Level 3:  Unobservable inputs reflecting management's				own assumptions about the inputs used in pricing the asset or				liability. 	There were no changes in the Company's valuation techniques used to measure	fair values compared to those disclosed in the Company's Annual Report on	Form 10-K for the fiscal year ended June 30, 2009.		
***Recurring			Fair Value Measurements:***

As of September 30, 2009			and June 30, 2009,		the fair values of financial assets and liabilities that are measured at		fair value on a recurring basis		using the market approach are categorized as follows: 
 
**September 30, 2009**
** (Amounts in Thousands)**
**Level 1**
** **
**Level 2**
** **
**Level 3**
 
**Total**
**Assets**
 
 
 
 
 
 
 
Cash equivalents$56,620  			
 $      				-0-  
 $    				-0-  
 $56,620   
Available-for-sale securities: Municipal Securities-0- 					
 24,443   
 -0- 					
 24,443   
Derivatives-0- 					
 824  					
 -0- 					
 824  					
Nonqualified supplemental employee retirement plan assets12,702  			
 -0- 					
 -0- 					
 12,702   
Total assets at fair value$69,322  					 $25,267  					 $     -0- 					 $94,589  					
**Liabilities** 
  
 
  
  
 
 
Derivatives$       -0- 					 $ 2,227    $     -0- 					
 $ 2,227   
Total liabilities at fair value$       -0- 					 $ 2,227  					 $     -0- 					 $ 2,227  					
 
 
**June 30, 2009**
** (Amounts in Thousands)**
**Level 1**
** **
**Level 2**
** **
**Level 3**
 
**Total**
**Assets**
 
 
 
 
 
 
 
Cash equivalents$42,114  					
 $      				-0-  
 $    				-0-  
 $42,114  					
Available-for-sale securities: Municipal Securities-0- 					
 25,376  					
 -0- 					
 25,376  					
Derivatives-0- 					
 784  					
 -0- 					
 784  					
Nonqualified supplemental employee retirement plan assets10,992  					
 -0- 					
 -0- 					
 10,992  					
Total assets at fair value$53,106  			 $26,160  			 $     -0- 					 $79,266  			
**Liabilities** 
 
 
 
 
 
 
Derivatives$       -0- 					  $  3,407  					 $     -0- 					
 $  3,407  					
Total liabilities at fair value$       -0- 					 $  3,407  			 $     -0- 					 $  3,407  			
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***Non-Recurring			Fair Value Measurements:***

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

***Disclosure of Other Financial Instruments:***

Other	financial instruments that are not reflected in the Condensed Consolidated Balance Sheets	at fair value have	carrying amounts that approximate fair value as follows:
**Assets** **Liabilities**Certain cash and cash equivalents Accounts payableReceivables Borrowings under credit facilitiesOther assets not recorded at fair value Dividends payable  Accrued expenses
The fair value estimate for long-term debt, excluding capital leases, was	estimated using a discounted cash flow analysis based on quoted long-term	debt market rates adjusted for the Company's non-performance risk. There was	an immaterial difference between the carrying value and estimated fair value	of long-term debt as of September 30, 2009 and June 30, 2009.

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**Note 8. 	Derivative Instruments**

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

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

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

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

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

20

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

			Information on the location and amounts of derivative fair values in			the Condensed Consolidated Balance Sheets and derivative gains and			losses in the Condensed Consolidated Statements of Income are			presented below.
Fair Values of Derivative Instruments					on the Condensed Consolidated Balance Sheets  					Asset Derivatives 					Liability Derivatives 					 					 					Fair Value As of 					 					 					Fair Value As of					(Amounts in Thousands) 					Balance Sheet Location 					September 30,					2009 					June 30,					2009 					Balance Sheet					Location 					September 30,					2009 					June 30,					2009					Derivatives designated as 					hedging instruments:          					   Foreign currency forward contracts 					Prepaid expenses and 					other current assets 					  $  789   					  $   742   					Accrued expenses 					  $      706   					  $   2,581              					Derivatives not designated as 					hedging instruments:          					   Foreign currency forward contracts 					Prepaid expenses and 					other current assets 					  35   					  42   					Accrued expenses 					  1,100   					  631         					Other liabilities (long-term)					  421   					  195  					Total derivatives   					  $  824   					  $   784     					  $  2,227   					  $   3,407  

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

22

**Note 9.  Short-Term	Investments**

The Company's short-term investment portfolioconsists of available-for-sale securities which is comprised of exemptsecurities issued by municipalities ("Municipal Securities") which canbe in the form ofGeneral Obligation Bonds, Revenue Bonds, Tax Anticipation Notes, RevenueAnticipation Notes, Bond Anticipation Notes, pre-refunded (by U.S. Govt. orState and Local Govt.) bonds, and short-term putable bonds. The Company's investment policydictates that Municipal Securities must be investment grade quality.

Available-for-sale securities are recorded at	fair value. See		Note	7 - Fair Value of Financial Assets and Liabilities of Notes to Condensed Consolidated Financial	Statements for more information on the fair value of available-for-sale	securities. The amortized cost basis reflects the original purchase price,	with discounts and premiums amortized over the life of the security.	Unrealized losses on debt securities are recognized in earnings when a	company has an intent to sell or is likely to be required to sell before	recovery of the loss, or when the debt security has incurred a credit loss.	Otherwise, unrealized gains and losses are recorded net of the tax related	effect as a component of Share Owners' Equity. Municipal Securities mature within a		four-year	period.
**Municipal Securities****September 30,			2009** **June 30,			2009****(Amounts in Thousands)** Amortized cost			basis$23,699        		 $24,606        		Unrealized holding gains744        		 770        		Unrealized holding losses						-0-       		 			-0-       		Other-than-temporary impairment			-0-       		 			-0-       		Fair Value $24,443        		 $25,376        		
There were no investments which were in an unrealized loss	position as of September 30, 2009 and June 30, 2009.

23

Activity for the Municipal Securities that were classified as	available-for-sale was as follows:
**Municipal Securities**
**Three Months EndedSeptember 30**
** (Amounts in Thousands)**
**2009**
** **
**2008**
Proceeds from sales$1,553  				
 $1,658  				
Gross realized gains from sale of				available-for-sale securities included in earnings				26  				
 				31  				
Gross realized losses from sale of				available-for-sale securities included in earnings				-0- 				
 				-0- 				Net unrealized holding gain (loss) included in			Accumulated Other Comprehensive Income (Loss)				-0- 				 				35  				Net (gains) losses reclassified out of Accumulated				Other Comprehensive Income (Loss)(26)				 (31)				
Realized gains and losses are reported in	Other Income (Expense) category of the Condensed Consolidated Statements of Income.	The cost of each individual security was used in computing the	realized gains and losses. 
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) for the three-month periods ended September 30, 2009 and 2008 was, in thousands,$1,606and	($1,135), respectively. SERP asset and liability balances were	as follows: 
**September 30,2009** **June 30,2009****(Amounts in Thousands)** SERP investment - current asset$    4,134    			 $    3,536        		SERP investment - other long-term asset			8,568    			 7,456        		Total SERP investment$ 			12,702      $ 			10,992        		SERP obligation - current liability$    4,134    			 $    3,536        		SERP obligation - other long-term liability			8,568    			 7,456        		Total SERP obligation$ 			12,702    			 $  10,992    			
24

**Note 10.  AssetsHeld for Sale**

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

**Note 11. Postemployment Benefits**

The Company maintains severance plans for all	domestic employees. These plans provide severance benefits to eligible employees	meeting the plans' qualifications, primarily involuntary termination without	cause. The components of net periodic postemployment benefit cost	applicable to the Company's severance plans were as follows:
 **Three Months Ended**  **September 30** **(Amounts in Thousands)****2009** **2008** Service cost$  193  			 $  114  			 Interest cost				108  				 				48  				 Amortization of prior service costs				71  				 71  				 Amortization of actuarial change				152  				 				10  				 Net periodic benefit cost$ 				524  				 $				243  				 
The benefit cost in the above table includes only normal recurring levels	of severance activity, as estimated using an actuarial method. Unusual	or non-recurring severance actions, such as those disclosed in		Note 6 - Restructuring Expense	of Notes to Condensed Consolidated Financial Statements, are not estimable	using actuarial methods and are expensed in accordance with the applicable		U.S. GAAP.

25

**Note 12.  Stock Compensation Plan**

During the first quarter of fiscal year 2010, the following stock		compensation was awarded to officers and key employees. All awards were granted under the 2003 Stock Option and		Incentive Plan. For more information on performance share awards, refer to the Company's Annual Report on Form		10-K for the fiscal year ended June 30, 2009.
**Performance Shares** 
**Quarter Awarded** **Maximum				Potential Shares Issuable** **Grant Date Fair Value				(3)**Annual Performance Shares - Class A				(1) 1st Quarter 240,000   $ 6.24  Long-Term Performance Shares - Class A				(2) 1st Quarter 726,350   $ 6.24  
 
(1)Annual performance shares were awarded to officers. Payouts				will be based upon the fiscal year 2010 cash incentive payout percentages				calculated under the Company's 2005 Profit Sharing Incentive				Bonus Plan. The				number of shares issued will be less than the maximum potential				shares issuable if the maximum cash incentive payout percentages				are not achieved. Annual performance shares vest after one year.				(2)Long-term performance shares were awarded to officers and				other key employees. Payouts will be based upon the cash				incentive payout percentages calculated under the Company's 2005				Profit Sharing Incentive Bonus Plan. Long-term performance				shares are based on five successive annual performance				measurement periods, with each annual tranche having a grant				date when economic profit tiers are established at the beginning				of the applicable fiscal year and a vesting date at the end of				each annual period. The number of shares issued will be less than				the maximum potential shares issuable if the maximum cash				incentive payout percentages are not achieved. (3) The grant				date fair value of performance shares is based on the stock				price at the date of the award, reduced by the present value of				dividends normally paid over the vesting period which are not				payable on outstanding performance share awards. The grant date				fair value shown for long-term performance shares is applicable				to the first tranche only.
**Item 2.  Management's Discussion and Analysis ofFinancial Condition and Results of Operations**
**Business Overview**
Kimball International, Inc. provides a		variety of products from its two business segments: the Electronic		Manufacturing Services (EMS) segment and the Furniture segment. The EMS		segment provides engineering and manufacturing services which utilize		common production and support capabilities globally to the medical,		automotive, industrial control, and public safety industries.  The		Furniture segment provides furniture for the office and hospitality		industries, sold under the Company's family of brand names. 

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

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

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

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

27

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

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

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

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

In addition to the above risks related to the		current economic conditions, management currently considers the		following events, trends, and uncertainties to be most important to		understanding the Company's financial condition and operating		performance:
- The Company will continue its focus on					preserving cash and minimizing debt.  Managing working					capital levels is key.  In addition, the Company plans to					minimize capital expenditures where appropriate but will					continue to invest in capital expenditures prudently,					particularly for projects that would enhance the Company's					capabilities and diversification while providing an					opportunity for growth and improved profitability as the					economy and the Company's markets recover.  
- Although the Company has seen recent					moderate declines in the cost of some commodities and in					fuel prices, these continue to be areas of focus within the					Company.  
- Globalization continues to reshape not					only the industries in which the Company operates but also					its key customers and competitors.
- The nature of the electronic					manufacturing services industry is such that the start-up of					new programs to replace departing customers or expiring					programs occurs frequently. The success of the Company's EMS					segment is dependent on the successful replacement of such					customers or programs. Such changes usually occur gradually					over time as old programs phase out of production while					newer programs ramp up. While the margins vary depending on					the size of the program and the vertical market being					served, replacement programs often carry lower margins.					 

28

 
- Successful execution of the Company's					restructuring plans is critical to the Company's future					performance. The success of the restructuring initiatives is					dependent on accomplishing the plans in a timely and					effective manner. The Company's restructuring plans are					discussed in the segment discussions below.  
- The increasingly competitive					marketplace mandates that the Company continually					re-evaluate its business models.
- The Company's employees throughout its					business operations are an integral part of the Company's					ability to compete successfully, and the stability of its					management team is critical to long-term Share Owner value.					The Company's career development and succession planning					process helps to maintain stability in management.  
- As end markets dictate, the Company is					continually assessing under-utilized capacity and developing					plans to grow the Company's customer base and better utilize					manufacturing operations, including shifting manufacturing					capacity to lower cost venues as necessary. 
				o    During the first quarter of fiscal year 2009, the Company				approved a restructuring plan to consolidate production of				select office furniture manufacturing departments. The				consolidation is complete and has reduced manufacturing costs				and excess capacity by eliminating redundant property and				equipment, processes, and employee costs. 

				o    During the fourth quarter of fiscal year 2008, the Company				approved a plan to expand its European automotive electronics				capabilities and to establish a European Medical Center of				Expertise in Poznan, Poland. The Company presently has an				operation in Poznan. The Company successfully completed the move				of production from Longford, Ireland, into the existing Poznan				facility during the second quarter of fiscal year 2009. As part				of the plan, the Company is also consolidating its EMS				facilities located in Bridgend, Wales, and Poznan into a new,				larger facility in Poznan, with a projected final completion				date of December 2011.  Construction of the new, larger facility				in Poland is complete and limited production has begun.  - To support diversification efforts,					the Company has focused on both organic growth and					acquisition activities. Acquisitions allow rapid					diversification of both customers and industries served.
- The regulatory and business					environment for U.S. public companies requires that the					Company continually evaluate and enhance its practices in					the areas of corporate governance and management practices.					The Company has taken a number of steps to conform its					corporate governance to evolving national and industry-wide					best practices among U.S. public companies, not only to					comply with new legal requirements, but also to enhance the					decision-making process of the Board of Directors.  

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

29

***Financial Overview - Consolidated***

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

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

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

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

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

30

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

***Electronic Manufacturing Services Segment***

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

EMS segment results were as follows:
 
**At or For the				Three Months Ended**
** **
** ** 
**September 30**
** **
** **
**(Amounts in Millions)**
**2009** 
**2008**
** **
**% Change**
Net Sales 
$   165.5  
$ 182.9 
				 
(10%)
Net Loss
$      (0.2) 
$    (0.8)
				 
71%
Restructuring				Expense, net of tax
$       0.3  
$     0.4 
				 
				 
Open Orders
$   161.3  
$ 200.6 
				 
(20%)
First quarter fiscal year 2010 net sales to		customers in the automotive, medical, industrial control, and public		safety industries all declined compared to the first quarter of fiscal		year 2009. While open orders declined 20%, open orders at a point in		time may not be indicative of future sales trends due to the contract		nature of the Company's business. 

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

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

31

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

  
**Three Months Ended September 30**
 
**2009**
** **
**2008**Bayer AG affiliated sales as a percent of consolidated net sales
15%
 
12%
Bayer AG affiliated sales as a percent of				EMS segment net sales
26%
 
23%
The nature of the electronic manufacturing services		industry is such that the start-up of new customers and new programs to		replace expiring programs occurs frequently. New customer and program		start-ups generally cause losses early in the life of a program, which		are generally recovered as the program matures and becomes established.		This segment continues to experience margin pressures related to an		overall excess capacity position in the electronics subcontracting		services market. 

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

***Furniture Segment***

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

Furniture segment results were as follows: 
 
**At or For the				Three Months Ended**
** **
** ** 
**September 30**
** **
** **
**(Amounts in Millions)**
**2009** 
**2008**
** **
**% Change**
Net Sales 
$    109.2  
$    156.6 
				 
(30%)
Net Income
$        1.8  
$        3.2 
				 
(44%)
Restructuring				Expense, net of tax
$        0.0  
$        0.1 
				 
				 
Open Orders
$      65.1  
$    124.1 
				 
(48%)
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The net sales decline in the Furniture segment for		the first quarter of fiscal year 2010 compared to the first quarter of		fiscal year 2009 resulted primarily from decreased net sales of office		furniture and to a lesser extent from decreased net sales of hospitality		furniture. Price increases net of higher discounting contributed		approximately $3.4 million to net sales during the first quarter of		fiscal year 2010 when compared to the first quarter of fiscal year 2009		which were more than offset by decreased sales volumes. First quarter		fiscal year 2010 sales of newly introduced office furniture products		which have been sold for less than twelve months approximated $6.0		million. Furniture products open orders at September 30, 2009 declined		when compared to the open orders at September 30, 2008 due to decreased		open orders for both office furniture and hospitality furniture. Open		orders at a point in time may not be indicative of future sales trends.		

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

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

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

**Liquidity and Capital Resources**

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

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

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

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

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

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

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

**Covenant**
 
**At or For the Period Ended September 30, 2009**
 
**Limit As Specified in Credit Agreement**
 
**Excess**
Minimum Net Worth  				
 
$385,268,000
 
$362,000,000
 
$23,268,000
Interest Coverage Ratio
 
42.1
 
3.0
 
39.1
The Interest Coverage Ratio is calculated on a		rolling four-quarter basis as defined in the credit agreement.

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

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

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

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

**Fair Value**

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

**Contractual Obligations**

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

**Off-Balance Sheet Arrangements**

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

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

**Critical Accounting Policies**

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

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

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

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

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

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

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

**New Accounting Standards**

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

**Forward-Looking Statements**

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

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**Item 3.  Quantitative and Qualitative DisclosuresAbout Market Risk**

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

**Item 4.  Controls and Procedures**

(a) Evaluation of disclosure controls and procedures.

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

(b) Changes in internal control over financial reporting.

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

**PART II.  OTHER INFORMATION**

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

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

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**Item 6.  Exhibits**

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

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

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

(10)  Summary of Director and Named Executive Officer Compensation			

(11)  Computation of Earnings Per Share

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

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

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

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

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**SIGNATURES**

Pursuant to the requirements of the Securities Exchange Act of 1934, theregistrant has duly caused this report to be signed on its behalf by theundersigned thereunto duly authorized. 
     KIMBALL INTERNATIONAL, INC.       By:/s/ James C. Thyen  JAMES C. THYENPresident,Chief Executive Officer  November 5, 2009             By:/s/ Robert F. Schneider  ROBERT F. SCHNEIDERExecutive Vice President, Chief Financial Officer  November 5, 2009
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**Kimball International, Inc.Exhibit Index**
Exhibit No. Description3(a) Amended and restated Articles of Incorporation of the Company    (Incorporated by reference to Exhibit 3(a) to the Company's Form 10-K for the			fiscal year ended    June 30, 2007)3(b) Restated By-laws of the Company (Incorporated by reference to Exhibit	3(b) to the    Company's Form 8-K filed October 23, 2009)10 Summary of Director and Named Executive Officer Compensation11 Computation of Earnings Per Share31.1 Certification filed by Chief Executive Officer pursuant to    Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the    Sarbanes-Oxley Act of 200231.2 Certification filed by Chief Financial Officer pursuant to    Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the    Sarbanes-Oxley Act of 200232.1 Certification furnished by the Chief Executive Officer    pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of    the Sarbanes-Oxley Act of 200232.2 Certification furnished by the Chief Financial Officer    pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of    the Sarbanes-Oxley Act of 2002
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