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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, 2010

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, 2010 was:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |

|   | Class A Common Stock - 10,595,085 shares |
|--------|------------------------------------------|
|   | Class B Common Stock - 27,116,280 shares |
| 1      |

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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, 2010	(Unaudited) and June 30, 20103  Condensed Consolidated Statements of	Income (Unaudited)        - Three	Months Ended September 30, 2010 and 20094  Condensed Consolidated Statements of	Cash Flows (Unaudited)        -	Three Months Ended September 30, 2010 and 20095  Notes to Condensed Consolidated	Financial Statements (Unaudited)6-25Item 2. Management's Discussion and	Analysis of Financial        Condition and Results of Operations	25-40Item 3. Quantitative and Qualitative	Disclosures About Market Risk	41Item 4. Controls and Procedures41 PART II    OTHER INFORMATION    Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	41Item 6. Exhibits42 SIGNATURES43 EXHIBIT INDEX44**

2 

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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,                                                               |
|                                                                                                                                                                           |   | 2010                                                                               |   | 2010                                                                   |
| ASSETS                                                                                                                                                                    |   |                                                                               |   |                                                                   |
| Current Assets:                                                                                                                                                           |   |                                                                               |   |                                                                   |
|     Cash and cash equivalents                                                                                                                              |   |  $     50,699                                        |   |  $   65,342                                        |
|     Short-term investments                                                                                                                                 |   |  2,596                                                                   |   |  2,496                                                       |
|     Receivables, net of allowances of $3,472 and $3,349,			respectively                                                                                    |   |  146,269                                                                 |   |  154,343                                                     |
|     Inventories                                                                                                                                            |   |  167,391                                                                 |   |  146,406                                                     |
|     Prepaid expenses and other current assets                                                                                                              |   |  45,926                                                                  |   |  43,776                                                      |
|     Assets held for sale                                                                                                                                   |   |  1,160                                                                   |   |  1,160                                                       |
|         Total current assets                                                                                                           |   |  414,041                                                                 |   |  413,523                                                     |
| Property and Equipment, net of accumulated depreciation of $344,744			and                                                                                                 |   |                                                                               |   |                                                                   |
|     $337,251, respectively                                                                                                                                 |   |  192,717                                                                 |   |  186,999                                                     |
| Goodwill                                                                                                                                                                  |   |  2,567                                                                   |   |  2,443                                                       |
| Other Intangible Assets, net of accumulated amortization of $63,936			and                                                                                                 |   |                                                                               |   |                                                                   |
|     $63,595, respectively                                                                                                                                  |   |  7,896                                                                   |   |  8,113                                                       |
| Other Assets                                                                                                                                                              |   |  25,439                                                                  |   |  25,673                                                      |
|         Total Assets                                                                                                                   |   |  $   642,660                                                   |   |  $ 636,751                                                   |
| LIABILITIES AND SHARE OWNERS' EQUITY                                                                                                                                  |   |                                                                               |   |                                                                   |
| Current Liabilities:                                                                                                                                                      |   |                                                                               |   |                                                                   |
|     Current maturities of long-term debt                                                                                                                   |   |  $            62  |   |  $          61  |
|     Accounts payable                                                                                                                                       |   |  180,205                                                                 |   |  178,693                                                     |
|     Dividends payable                                                                                                                                      |   |  1,833                                                                   |   |  1,828                                                       |
|     Accrued expenses                                                                                                                                       |   |  53,310                                                                  |   |  52,923                                                      |
|         Total current liabilities                                                                                                      |   |  235,410                                                                 |   |  233,505                                                     |
| Other Liabilities:                                                                                                                                                        |   |                                                                               |   |                                                                   |
|     Long-term debt, less current maturities                                                                                                                |   |  286                                                                     |   |  299                                                         |
|     Other                                                                                                                                                  |   |  23,646                                                                  |   |  25,519                                                      |
|         Total other liabilities                                                                                                        |   |  23,932                                                                  |   |  25,818                                                      |
| 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                                                                                                                             |   |  144                                                                     |   |  119                                                         |
|     Retained earnings                                                                                                                                      |   |  451,872                                                                 |   |  454,800                                                     |
|     Accumulated other comprehensive loss                                                                                                                   |   |  (2,540)                                                                      |   |  (9,775)                                                          |
|     Less: Treasury stock, at cost:                                                                                                                         |   |                                                                               |   |                                                                   |
|         Class A - 3,771,000 and 3,834,000 shares, respectively                                                                         |   |  (48,311)                                                                     |   |  (49,415)                                                         |
|         Class B - 1,543,000 and 1,579,000 shares, respectively                                                                         |   |  (19,998)                                                                     |   |  (20,452)                                                         |
|             Total Share Owners' Equity                                                                         |   |  383,318                                                                 |   |  377,428                                                     |
|                 Total Liabilities and Share Owners' Equity                                 |   |  $   642,660                                                   |   |  $ 636,751                                                   |
| See			Notes to Condensed Consolidated Financial Statements                                                                                                                |   |                                                                               |   |                                                                   |

3 

**KIMBALL INTERNATIONAL, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF INCOME****(Amounts in Thousands, Except for Per ShareData)**
			(Unaudited)			Three Months Ended			September 30			2010 			2009			Net Sales			 $    294,676  			 $      274,659 			Cost of Sales			 247,529  			 227,475 			Gross Profit			 47,147  			 47,184 			Selling and Administrative Expenses			 47,340  			 46,066 			Restructuring Expense			 117  			 486 			Operating Income (Loss)			 (310) 			 632 			Other Income (Expense):   			    Interest income			 220  			 277 			    Interest expense			 (20) 			 (15)			    Non-operating income			 602  			 1,724 			        Other income, net			 802  			 1,986 			Income Before Taxes on Income			 492  			 2,618 			Provision for Income Taxes			 36  			 844 			Net Income 			 $          456  			 $          1,774 
			Earnings Per Share of Common Stock:   			    Basic Earnings Per Share:   			        Class A			  $         0.01   			  $           0.04  			        Class B			  $         0.01   			  $           0.05  			    Diluted Earnings Per Share:   			        Class A			  $         0.01   			  $           0.04  			        Class B			  $         0.01   			  $           0.05     			Dividends Per Share of Common Stock:   			    Class A			  $       0.045   			  $         0.045  			    Class B			  $       0.050   			  $         0.050     			Average Number of Shares Outstanding:   			    Class A and B Common Stock:   			        Basic			37,680  			37,313 			        Diluted			37,764  			37,508 			See Notes to Condensed Consolidated Financial Statements   

4
**KIMBALL INTERNATIONAL, INC. AND SUBSIDIARIES****CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(Amounts in Thousands)** 			(Unaudited)			Three Months Ended			September 30			2010 			2009			Cash Flows From Operating Activities:   			    Net income			 $       456  			 $   1,774 			    Adjustments to reconcile net income to net cash			(used for) provided by			operating activities:   			        Depreciation and amortization			 7,804  			 9,046 			        Gain on sales of assets			 (22) 			 (20)			        Deferred income tax and other deferred charges			 1,467  			 (720)			        Stock-based compensation			 348  			 359 			        Other, net			 (94) 			 -0- 			        Change in operating assets and liabilities:   			            Receivables			 7,189  			 3,172 			            Inventories			 (21,368) 			 (17,616)			            Prepaid expenses and other current assets			 (2,541) 			 296 			            Accounts payable			 (96) 			 22,012 			            Accrued expenses			 (3,511) 			 (5,796)			                Net cash (used for) provided by operating activities			 (10,368) 			 12,507 			Cash Flows From Investing Activities:   			    Capital expenditures			 (6,359) 			 (13,505)			    Proceeds from sales of assets			 276  			 463 			    Purchase of capitalized software and other assets			 (377) 			 (44)			    Purchases of available-for-sale securities			 -0-  			 (918)			    Sales and maturities of available-for-sale securities			 -0-  			 1,825 			    Other, net			 40  			 -0- 			        Net cash used for investing activities			 (6,420) 			 (12,179)			Cash Flows From Financing Activities:   			    Payments on capital leases and long-term debt			 (12) 			 (10)			    Dividends paid to Share Owners			 (1,828) 			 (1,811)			    Repurchase of employee shares for tax withholding			 (228) 			 (115)			        Net cash used for financing activities			 (2,068) 			 (1,936)			Effect of Exchange Rate Change on Cash and Cash Equivalents			 4,213  			 1,897 			Net (Decrease) Increase in Cash and Cash Equivalents			 (14,643) 			 289 			Cash and Cash Equivalents at Beginning of Period			 65,342  			 75,932 			Cash and Cash Equivalents at End of Period			 $  50,699  			 $ 76,221 			Supplemental Disclosure of Cash Flow Information   			    Cash paid during the period for:   			        Income taxes			 $       258  			 $   3,211 			        Interest expense			 $         42  			 $        29 			See Notes to Condensed Consolidated Financial Statements   

5

**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. and	subsidiaries (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.

***Non-operating Income:***

Non-operating income 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 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, net:
 
**Three Months Ended** 
**September 30**
**(Amounts in Thousands)**
**2010**
**2009**
			Foreign Currency/Derivative Gain (Loss)
			 $     (476) 
			 $       327  
			Gain on Supplemental Employee Retirement Plan Investments
			 1,221  
			 1,517  
			Other  
			 (143) 
			 (120) 
			Non-operating income, net
			 $       602  
			 $    1,724  
6
 
***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.

	The Company's effective tax rate was 7.3% for the three months ended September 30,	2010, as compared to 32.2% for the three months ended September 30, 2009.	Relatively low pre-tax income coupled with a foreign deferred tax valuation	allowance adjustment of $0.1 million in the current quarter drove the effective tax rate	decline in the first quarter of fiscal year 2011. 

***New Accounting Standards:***

	In July 2010, the Financial Accounting Standards Board (FASB) issued guidance expanding disclosures about the	credit quality of financing receivables and the allowance for credit losses.	The additional disclosures are intended to facilitate the evaluation of 1)	the nature of credit risk inherent in the Company's portfolio of financing	receivables, 2) how that risk is analyzed and assessed in arriving at the	allowance for credit losses, and 3) the changes and reasons for those	changes in the allowance for credit losses. Financing receivables include	loans and notes receivable, long-term trade accounts receivable, and certain	other contractual rights to receive money on demand or on fixed or	determinable dates. The expanded disclosures, disaggregated by portfolio	segment or class of financing receivable, include a roll-forward of the	allowance for credit losses as well as impaired, nonaccrual, restructured	and past due loans, and credit quality indicators. The guidance will be	effective for the Company's second quarter fiscal year 2011 financial	statements, as it relates to disclosures required as of the end of a	reporting period. Disclosures that relate to activity during a reporting	period will be required for the Company's third quarter fiscal year 2011	financial statements. The Company does not expect the adoption of this	guidance to have a material impact on its financial statements.

7

	In January 2010, the FASB issued guidance to improve disclosures about fair	value instruments. The guidance requires additional disclosure about	significant transfers between levels 1, 2, and 3 of the fair value hierarchy	and requires disclosure of level 3 activity on a gross basis. In	addition, the guidance clarifies existing requirements regarding the	required level of disaggregation by class of assets and liabilities and also	clarifies disclosures of inputs and valuation techniques. The guidance	became effective beginning in the Company's third quarter of fiscal year	2010, except for the requirement to disclose level 3 activity on a gross	basis, which will be effective as of the beginning of the Company's fiscal	year 2012. The adoption did not have a material impact on the Company's	consolidated financial statements.

	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 was effective as of the beginning	of the Company's fiscal year 2011. The adoption did not have an impact on	the Company's consolidated financial statements. Required disclosures have	been provided in		Note 13 - Variable Interest Entities 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)****2010****2010**Finished Products				$  38,869   				$  33,177    Work-in-Process				13,712   				13,209    Raw Materials				127,717   				112,897      Total FIFO		Inventory				$180,298   				$159,283    LIFO Reserve				(12,907)  				(12,877)     Total Inventory				$167,391   				$146,406    
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, 2010 and 2009, LIFO inventory liquidations increased net	income by, in thousands, $438 and $596, respectively.

8

**Note 3. Comprehensive Income**

Comprehensive income includes all changes in equity during a period	except those resulting from investments by and distributions to Share	Owners. Comprehensive income, shown net of tax if applicable, for the	three-month periods ended September 30, 2010 and 2009 was as follows:
 				Three Months Ended				September 30, 2010 				Three Months Ended				September 30, 2009				(Amounts in Thousands)				Pre-tax				 				Tax				 				Net of Tax 				Pre-tax				 				Tax				 				Net of Tax				Net income    				 $      456      				 $   1,774 				Other comprehensive income (loss):           				    Foreign currency translation adjustments				 $    8,935  				 $  (1,960) 				 $   6,975  				 $   3,363  				 $   (785) 				 $   2,578 				    Postemployment severance actuarial change				 370  				 (148) 				 222  				 (1,190) 				 475  				 (715)				    Other fair value changes:           				        Derivatives				 84  				 (53) 				 31  				 (315) 				 210  				 (105)				    Reclassification to (earnings) loss:           				        Available-for-sale securities				 -0-  				 -0-  				 -0-  				 (26) 				 10  				 (16)				        Derivatives				 (239) 				 74  				 (165) 				 1,445  				 (460) 				 985 				        Amortization of prior service costs				 71  				 (28) 				 43  				 71  				 (28) 				 43 				        Amortization of actuarial change				 215  				 (86) 				 129  				 152  				 (61) 				 91 				Other comprehensive income				 $    9,436  				 $(2,201) 				 $   7,235  				 $   3,500  				 $   (639) 				 $   2,861 				Total comprehensive income    				 $   7,691      				 $   4,635 
				Accumulated other comprehensive loss, net				of tax effects, was as follows: 				September 30, 				June 30, 				2010 				2010				(Amounts in Thousands)   				Foreign currency translation adjustments				  $       4,412   				  $     (2,563) 				Unrealized loss from:   				    Derivatives				  (4,141)  				  (4,007) 				Postemployment benefits:   				    Prior service costs				  (764)  				  (807) 				    Net actuarial loss				  (2,047)  				  (2,398) 				Accumulated other comprehensive loss				  $      (2,540)  				  $     (9,775) 

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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 Electronic Manufacturing	Services (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 were	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, 2010.
 **Three Months Ended**  **September 30** **(Amounts in Thousands) ****2010** **2009** Net Sales:     Electronic Manufacturing		Services$177,867  $165,486   Furniture			116,809  109,166   Unallocated			Corporate and Eliminations-0- 7 			  Consolidated$294,676 
 $274,659       Net Income (Loss):     Electronic Manufacturing		Services$     (248)			
 $     (219)			  Furniture			589 
 1,780 			  Unallocated      Corporate and Eliminations115 
 213 			  Consolidated$       456 
(1)$   			1,774 
(2)
(1) Net Income (Loss) included after-tax	restructuring charges, in thousands, of $70 in the three months ended	September 30, 2010. The EMS segment and Unallocated Corporate and Eliminations recorded, respectively, in thousands, $59 and $11 of after-tax restructuring	charges. See	Note 6 - Restructuring Expenseof Notes to Condensed Consolidated Financial Statements for further discussion. (2) Net Income (Loss) included after-tax	restructuring charges, in thousands, of $292 in the three months ended	September 30, 2009. The EMS segment, the Furniture segment, and	Unallocated Corporate and Eliminations recorded, respectively, in thousands, $276,	$8, and $8 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)****2010****2010**Total Assets: Electronic		Manufacturing Services$403,870 $384,491  Furniture			182,701 182,396  Unallocated      Corporate and Eliminations56,089 69,864  Consolidated			$642,660 
 $636,751 
 
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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, 2010, the Company had a maximum financial exposure	from unused standby letters of credit totaling $5.2 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, 2010 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, 2010 and 2009 were as follows:
**Three Months Ended		September 30****(Amounts in Thousands)**
**2010** **2009**Product Warranty Liability at the			beginning of the period$ 1,818 $ 2,176 			Additions to warranty accrual (including		changes in estimates)738  192  Settlements made (in cash or in kind)(571)(324)Product Warranty Liability at the end of the period$			1,985 			 $ 2,044 			
11

**Note 6. Restructuring Expense**

	The Company recognized consolidated pre-tax restructuring expense of $0.1	million and $0.5 million in the three months ended September 30, 2010 and	2009, respectively. The action discussed below represents the majority of	the restructuring costs during the period presented in the summary table on	the following page. The EMS Gaylord restructuring plan, which is	substantially complete and did not have significant expense during the	period presented, is included in the summary table on the following page	under the Other Restructuring Plan caption.

	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 near Poznan, Poland. The Company	previously had one operation in Poznan. Construction of a new, larger	facility in Poland is complete and production has begun. The Company	successfully completed the move of production from Longford, Ireland, into	the existing Poznan facility during fiscal year 2009. As	part of the plan, the Company is also consolidating its EMS facilities	located in Wales, United Kingdom, and Poznan, Poland, into the new facility	near Poznan, which is expected to improve the Company's margins in the very	competitive EMS market. The plan is being executed in stages with a	projected final completion date of mid-fiscal year 2012. The Company sold	the existing Poland facility and land during fiscal year 2010 and the	Company is leasing back a portion of the facility until it completes the	transfer of production to the new facility. The Company currently estimates	that the total pre-tax charges related to the consolidation activities will	be approximately, in millions, $21.3 consisting of $19.7 of severance and	other employee costs, $0.5 of property and equipment asset impairment, $0.6	of lease exit costs, and $0.5 of other exit costs.

12
				Summary of All Plans				   				  				   				   				   				   				  				 				Accrued				June 30,				2010 (2) 				Three Months Ended September 30, 2010				 				Accrued				September 30,				2010 (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				  $9,181   				  $     63   				  $      -0-   				  $     -0-   				  $       533  (4)				  $  9,777   				  $         19,337   				  $19,683  				        Asset Write-downs				  -0-   				  -0-   				  -0-   				  -0-   				  -0-   				  -0-   				  522   				  522  				        Plant Closure and Other Exit Costs				  -0-   				  35   				  -0-   				  (35)  				  -0-   				  -0-   				  692   				  1,129  				    Total EMS Segment				  $9,181   				  $     98   				  $      -0-   				  $     (35)  				  $       533   				  $  9,777   				  $         20,551   				  $21,334  				Unallocated Corporate               				    Other Restructuring Plan (1)				  -0-   				  19   				  -0-   				  (19)  				  -0-   				  -0-   				  680   				  751  				Consolidated Total of All Plans				  $9,181   				  $   117   				  $      -0-   				  $     (54)  				  $       533   				  $  9,777   				  $         21,231   				  $22,085                 				(1) Other Restructuring Plan represents the Gaylord				restructuring plan initiated in fiscal year 2007.				(2) Accrued restructuring at September 30, 2010 and June 30,				2010 was $9.8 million and $9.2 million, respectively. The				balances include $6.2 million and $2.5 million recorded in				current liabilities and $3.6 million and $6.7 million recorded				in other long-term liabilities at September 30, 2010 and June				30, 2010, respectively. 				(3) These columns include restructuring plans that were active				during the three months ended September 30, 2010, including the				EMS segment European Consolidation Plan initiated in fiscal year				2008 and the Gaylord restructuring plan initiated in fiscal year				2007.				(4) The effect of changes in foreign currency exchange rates				within the EMS segment primarily due to revaluation of the				restructuring liability is included in this amount.

13

**Note		7. Fair Value**

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 inputs or 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, 2010.

14
 
***Recurring Fair Value Measurements:***

				As of September 30, 2010 and June 30, 2010, 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, 2010**
**(Amounts in Thousands)** 
**Level 1**
**Level 2**
**Level 3**
**Total**
**Assets**     
						    Cash equivalents 
						 $  21,455  
						 $       -0-  
						 $       -0-  
						 $  21,455  
						    Available-for-sale securities: Convertible debt						securities 
						 -0-  
						 -0-  
						 2,596  
						 2,596  
						    Derivatives: Foreign exchange contracts 
						 -0-  
						 799  
						 -0-  
						 799  
						    Derivatives: Stock warrants 
						 -0-  
						 -0-  
						 389  
						 389  
						    Trading Securities: Mutual funds held by						nonqualified 						        supplemental employee retirement plan 
						 13,998  
						 -0-  
						 -0-  
						 13,998  
						        Total assets at fair value 
						 $  35,453  
						 $       799  
						 $    2,985  
						 $  39,237  
**Liabilities**     
						    Derivatives: Foreign exchange contracts 
						 $       -0-  
						 $    2,195  
						 $       -0-  
						 $    2,195  
						        Total liabilities at fair value 
						 $       -0-  
						 $    2,195  
						 $       -0-  
						 $    2,195                
**June 30, 2010**
**(Amounts in Thousands)** 
**Level 1**
**Level 2**
**Level 3**
**Total**
**Assets**     
						    Cash equivalents 
						 $  32,706  
						 $       -0-  
						 $       -0-  
						 $  32,706  
						    Available-for-sale securities: Convertible debt						securities 
						 -0-  
						 -0-  
						 2,496  
						 2,496  
						    Derivatives: Foreign exchange contracts 
						 -0-  
						 2,223  
						 -0-  
						 2,223  
						    Derivatives: Stock warrants 
						 -0-  
						 -0-  
						 395  
						 395  
						    Trading Securities: Mutual funds held by						nonqualified 						        supplemental employee retirement plan 
						 13,071  
						 -0-  
						 -0-  
						 13,071  
						        Total assets at fair value 
						 $  45,777  
						 $    2,223  
						 $    2,891  
						 $  50,891  
**Liabilities**     
						    Derivatives: Foreign exchange contracts 
						 $       -0-  
						 $       392  
						 $       -0-  
						 $       392  
						        Total liabilities at fair value 
						 $       -0-  
						 $       392  
						 $       -0-  
						 $       392  
The changes in fair value of Level 3 investment assets during				the quarter ended September 30, 2010 were immaterial, and no				purchases or sales of Level 3 assets occurred during the period.				

The nonqualified supplemental employee retirement plan (SERP)				assets consist of equity funds, balanced funds, a bond fund, and				a money market fund. The SERP investment assets are exactly				offset by a SERP liability which represents the Company's				obligation to distribute SERP funds to participants. See								Note 9 - Short-Term Investments of Notes to Condensed				Consolidated Financial Statements for further information				regarding the SERP.

15
 
***Non-Recurring Fair Value Measurements:***

During the quarter ended September 30, 2010, 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 payable
Receivables
 
Dividends payable
Other						assets not recorded at fair value
 
Accrued						expenses
The fair value of 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, 2010 and June 30, 2010.

**Note 8. 	Derivative Instruments**
***Foreign Exchange Contracts:***
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. 

16
 
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. Foreign		exchange contracts are also used to hedge against foreign currency		exchange rate risks related to intercompany balances denominated in		currencies other than the functional currencies. As of September 30,		2010, the Company had outstanding foreign exchange contracts to hedge		currencies against the U.S. dollar in the aggregate notional amount of		$12.6 million and to hedge currencies against the Euro in the aggregate		notional amount of 43.8 million EUR. The notional amounts are indicators		of the volume of derivative activities but are not indicators 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 derivative 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 are not designated as		hedging instruments or 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, 2010, the Company estimates that $0.3 million of		pre-tax derivative gains 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. Gains on foreign exchange contracts are		generally offset by losses in operating costs in the income statement		when the underlying hedged transaction is recognized in earnings.		Because gains or losses on foreign exchange 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 11		months as of both September 30, 2010 and June 30, 2010. 

17
 
***Stock Warrants:***

In conjunction with the		Company's investments in convertible debt securities of a privately-held		company during fiscal year 2010, the Company received common and		preferred stock warrants which provide the right to purchase the		privately-held company's equity securities at a specified exercise		price. Specifically, the Company received stock warrants to purchase		2,750,000 shares of common stock at a $0.15 per share exercise price and		received stock warrants to purchase a number of shares of preferred		stock based on the latest preferred stock offering price (1,833,000		shares of preferred stock at a $1.50 per share exercise price, based on		the last offering price of outstanding preferred stock). The value of		the stock warrants will fluctuate primarily in relation to the value of		the privately-held company's underlying securities, either providing an		appreciation in value or potentially expiring with no value. Gains and		losses on the revaluation of stock warrants are recognized in the		Non-operating income (expense) line item on the Condensed Consolidated		Statements of Income. 

See				Note 7 - Fair Value of Notes to Condensed Consolidated Financial		Statements for further information regarding the fair value of		derivative assets and liabilities and				Note 3 - Comprehensive Income 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,				2010 				June 30,				2010 				Balance Sheet Location 				September 30,				2010 				June 30,				2010				Derivatives designated as hedging instruments:				   Foreign exchange contracts 				Prepaid expenses and 				other current assets				  $    682   				  $    525   				Accrued expenses 				  $    184   				  $    339              				Derivatives not designated as hedging instruments:          				   Foreign exchange contracts 				Prepaid expenses and 				other current assets				  117   				  1,698   				Accrued expenses 				  2,011   				  53  				   Stock warrants 				Other assets				(long-term)				  389   				  395        				Total derivatives   				  $ 1,188   				  $ 2,618     				  $ 2,195   				  $    392  

18
				The Effect of Derivative Instruments on				Other Comprehensive Income (Loss)          				Three Months Ended				September 30				(Amounts in Thousands)     				2010				 				2009				Amount of Pre-Tax Gain or (Loss) Recognized in Other				Comprehensive 				Income (Loss) (OCI) on Derivatives (Effective Portion):				 				 				  				        Foreign exchange contracts   				  $        84   				  $      (315)         				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)  				2010				 				2009				Amount of Pre-Tax Gain or (Loss) Reclassified from Accumulated				OCI into Income (Effective Portion):				 				 				 				        Foreign exchange contracts 				Net Sales 				  $      -0-   				  $          11  				        Foreign exchange contracts 				Cost of Sales 				  261   				  (1,216) 				        Foreign exchange contracts 				Non-operating income  				  (22)  				  (283) 				        Total     				  $      239   				  $   (1,488)         				Amount of Pre-Tax Gain or (Loss) Reclassified from Accumulated				OCI into Income (Ineffective Portion):				 				 				 				        Foreign exchange contracts 				Non-operating income  				  $      -0-   				  $          43          				Derivatives Not Designated as Hedging Instruments				 				 				 				     				Amount of Pre-Tax Gain or (Loss) Recognized in Income on				Derivatives:				 				 				 				 				        Foreign exchange contracts 				Non-operating income 				  $ (2,420)  				  $      (837) 				        Stock warrants 				Non-operating income 				  (6)  				  -0-  				        Total     				  $ (2,426)  				  $      (837)         				Total Derivative Pre-Tax Gain (Loss) Recognized in Income   				  $ (2,187)  				  $   (2,282) 

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**Note 9.  Short-Term	Investments**

***Municipal Securities:***

The Company's short-term investment portfolio		included available-for-sale securities which are comprised of exempt		securities issued by municipalities ("Municipal Securities") which can		be in the form of General Obligation Bonds, Revenue Bonds, Tax		Anticipation Notes, Revenue Anticipation Notes, Bond Anticipation Notes,		pre-refunded (by U.S. Government or State and Local Government) bonds,		and short-term putable bonds. The Company's investment policy dictates		that municipal securities must be investment grade quality. During		fiscal year 2010, the Company sold all of its municipal securities and		thus had no municipal securities at September 30, 2010 or June 30, 2010.

Activity for the municipal securities classified as available-for-sale		was as follows:

**Municipal Securities** 
**Three Months Ended				September 30**
**(Amounts in Thousands)** 
**2010**
**2009**
				Proceeds from sales 
				 $        -0-  
				 $    1,553  
				Gross realized gains from sale of available-for-sale securities				      included in earnings 
				 -0-  
				 26  
				Gross realized losses from sale of available-for-sale securities								      included in earnings 
				 -0-  
				 -0-  
				Net unrealized holding gain (loss) included in Other				      Comprehensive Income (Loss) 
				 -0-  
				 -0-  
				Net (gains) losses reclassified out of Other 				      Comprehensive Income (Loss) 
				 -0-  
				 (26) 
Realized gains and losses are reported in the 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. No other-than-temporary impairment was		recorded during the three months ended September 30, 2010 and 2009.

20

***Convertible Debt Securities:***

During fiscal year 2010, the Company purchased		secured convertible promissory notes from a privately-held company which		had an aggregate fair value of $2.6 million and $2.5 million at		September 30, 2010 and June 30, 2010, respectively. The Company has been		chosen as a supplier for the privately-held company to produce		EMS products. The convertible notes are accounted for as		available-for-sale debt securities and are recorded at fair value.		Interest accrues on the debt securities at a rate of 8.00% per annum and		is due with the principal during fiscal year 2011. The debt securities		are convertible into the preferred stock of the privately-held company		upon certain events, including a qualified financing, a nonqualified		financing, initial public offering, or a change in control.

In connection with the purchase of the debt		securities, the Company also received stock warrants to purchase the		common and preferred stock of the privately-held company at a specified		exercise price. See				Note 8 - Derivative Instruments of Notes to Condensed Consolidated		Financial Statements for further information regarding the stock		warrants. 

In the aggregate, the investments and security		interest do not rise to the level of a material variable interest or a		controlling interest in the privately-held company which would require		consolidation.

See		Note 7 - Fair Value of Notes to Condensed Consolidated Financial		Statements for more information on the fair value of available-for-sale		securities. Unrealized losses on the debt securities will be recognized		in earnings when there is an intent to sell or is likely to be required		to sell before recovery of the loss, or when the debt securities have		incurred a credit loss. Otherwise, unrealized gains and losses are		recorded net of the tax related effect as a component of Share Owners'		Equity.

21

***Supplemental Employee Retirement Plan		Investments:***

The Company maintains a self-directed supplemental		employee retirement plan (SERP) for executive employees. The SERP		utilizes 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 in the Other Income (Expense) category. Adjustments made to		revalue the SERP liability are also recognized in income as selling and		administrative expenses and exactly offset valuation adjustments on SERP		investment assets. The change in net unrealized holding gains for the		three-month periods ended September 30, 2010 and 2009 was, in thousands,		$1,122, and $1,606, respectively. SERP asset and liability balances were		as follows: 
  
** September 30,** 
**June 30,**
**(Amounts in Thousands)** 
**2010** 
**2010**
				SERP investment - current asset 
				 $         4,811   
				 $         4,822  
				SERP investment - other long-term asset 
				 9,187   
				 8,249  
				    Total SERP investment 
				 $       13,998   
				 $       13,071       
				SERP obligation - current liability 
				 $         4,811   
				 $         4,822  
				SERP obligation - other long-term liability 
				 9,187   
				 8,249  
				    Total SERP obligation 
				 $       13,998   
				 $       13,071  
22

**Note 10.  AssetsHeld for Sale**

At both September 30, 2010 and June 30, 2010, a facility and land related to the		Gaylord, Michigan, exited operation within the EMS segment were	classified as held for sale and totaled, in thousands, $1,160. The assets		were reported as unallocated corporate assets for segment reporting		purposes.

**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)****2010** **2009**Service cost$  242  			 $  193  			Interest cost				69  				 				108  				Amortization of prior service costs				71  				 71  				Amortization of actuarial change				215  				 152  				Net periodic benefit cost$ 				597  				 $ 				524  				
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.

23

**Note 12.  Stock Compensation Plan**

During the first quarter of fiscal year 2011, the following stock		compensation was awarded to officers, key employees, and non-employee		directors. All awards were granted under the 2003 Stock Option and		Incentive Plan. For more information on similar unrestricted shares and performance share awards, refer to the Company's Annual Report on Form		10-K for the fiscal year ended June 30, 2010.
**Performance Shares** 
**Quarter Awarded** **Maximum				Potential Shares Issuable** **Grant Date Fair Value				(4)**Annual Performance Shares - Class A				(1) 1st Quarter 235,710   $ 5.09  Long-Term Performance Shares - Class A				(2) 1st Quarter 483,318   $ 5.09  
 
**Unrestricted Shares** 
**Quarter Awarded** ** Shares** **Grant Date Fair Value				(4)**Unrestricted Shares - Class A				(3) 1st Quarter 1,000   $ 5.27  Unrestricted Shares - Class B				(3) 1st Quarter 500   $ 5.27  (1)Annual performance shares were awarded to officers. Payouts				will be based upon the fiscal year 2011 cash incentive payout percentages				calculated under the Company's 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 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) Unrestricted shares were awarded to officers				as consideration for their service to the Company. Unrestricted				shares do not have vesting periods, holding periods,				restrictions on sale, or other restrictions.(4) 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. The grant date fair value of the				unrestricted shares was based on the stock price at the date of				the award.
24

**Note 13. 	Variable Interest Entities**

The Company's involvement with variable interest entities (VIEs) is		limited to situations in which the Company is not the primary		beneficiary as the Company lacks the power to direct the activities that		most significantly impact the VIE's economic performance. Thus,		consolidation is not required.

The Company is involved with VIEs consisting of an investment in		convertible debt securities and stock warrants of a privately-held		company, a loan agreement with a contract customer, and a note		receivable related to the sale of an Indiana facility. For information		related to the Company's investment in the privately-held company, see		Note 9 - Short-Term		Investments and Note 8 -		Derivative Instruments of Notes to Condensed Consolidated Financial		Statements. The aggregate carrying value of the loan agreement and note		receivable is $1.7 million,		net of reserves, as of September 30, 2010, and is recorded on the Other Assets		line of the Company's Condensed Consolidated Balance Sheet. The Company has no		material exposure related to the VIEs in addition to the items recorded		on its Condensed Consolidated Balance Sheet.

The Company has no obligation to provide additional funding to the		VIEs, and thus its risk of loss related to the VIEs is limited to the		original funding amount. The Company did not provide any additional		financial support to the VIEs during the quarter ended September 30,		2010.

**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. 

Overall market conditions in the EMS industry		continue to be favorable. The EMS industry sales projections (by IDC,		InForum, and New Venture Research) show forecasted growth for calendar		year 2010 in the range of 7% to 12% compared to calendar year 2009 and		forecasted growth in the range of 8% to 11% for calendar year 2011		compared to calendar year 2010. In addition, the Semiconductor Industry		Association (SIA) reported that semiconductor sales are projected to		grow approximately 28% in calendar year 2010, and although the Company		does not directly serve this market, it may be indicative of increased		end market demand for products utilizing electronic components. 

25
 
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.		Automotive activity is projected to moderate in fiscal year 2011 as the		impact of the government stimulus programs is now behind us. Demand in		the medical market has remained stable, and the Company sees signs of		growth. The industrial control market is also showing signs of		stability, after benefiting from spending targeted at energy savings		technologies, and the public safety 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 of the four vertical markets. The Company's		sales to customers in the automotive industry are diversified among more		than ten domestic and foreign customers and represented approximately		one-fourth of the EMS segment's net sales for the first quarter of		fiscal year 2011. The EMS segment September 30, 2010 open orders		exceeded the September 30, 2009 level by 29%.

The office furniture and hospitality furniture		markets appear to have stabilized, but are still fragile. The recovery		is expected to be long and slow. As of August 2010, the Business and		Institutional Furniture Manufacturer Association (BIFMA) projected a		1.5% year-over-year increase in the office furniture industry for		calendar year 2010 after a 29% industry decline in calendar year 2009.		BIFMA projects office furniture industry growth of approximately 9% in		calendar year 2011. 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 and the changing U.S. consumption		patterns, the Company cannot predict future overall office furniture		order trends at this time due to the short lead time of orders and the		volatility in this market. In addition, the hotel industry forecasts		(reported by Smith Travel Research and PricewaterhouseCoopers LLP)		project occupancy rates to increase approximately 4% to 5% in calendar		year 2010 after a 9% industry decline in calendar year 2009 and project		revenue per available room to increase 3% to 4% for calendar year 2010		after a 17% industry decline in calendar year 2009. Although the		Company's recent hospitality order rates have improved, the Company		cannot predict if this activity will be sustained in the near-term.		Furniture segment open orders as of September 30, 2010 were 30% higher		than the September 30, 2009 level.

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 Company made great strides over the last two		years in reducing its overall cost structure and thus lowering its		breakeven sales point. In addition, a long-standing component of the		Company's profit sharing incentive bonus plan is that it is linked to		the performance of the Company which automatically lowers total		compensation expense when profits are down. The focus on cost control		continues.  At the same time, the Company has continued making prudent		investments in product development, technology, and marketing and		business development initiatives to drive profitable growth. The Company		also continues to closely monitor market changes and its liquidity in		order to proactively adjust its operating costs, discretionary capital		spending, and dividend levels as needed.

26

The Company continued to maintain a strong balance		sheet as of the end of the first quarter of fiscal year 2011, which		included a minimal amount of long-term debt of $0.3 million and Share		Owners' equity of $383.3 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 $148.1 million at September 30, 2010.

In addition to the above risks related to the		current market 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 in conjunction with fluctuating demand levels is					key. In addition, the Company plans to minimize capital					expenditures where appropriate but has been and will					continue to invest in capital expenditures 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.  
- Commodity price pressure is expected					to continue in the near-term. Mitigating the impact of					commodity and fuel prices continues to be an area of focus					within the Company.  
- Management continues to evaluate the					healthcare reform legislation that was signed into law in					March 2010 to understand the full impact on the Company.					This legislation is expected to increase the Company's					healthcare and related administrative expenses.
- Globalization continues to reshape not					only the industries in which the Company operates but also					its key customers and competitors.
- As demand within the EMS industry					increases, the availability of components used in products					manufactured by the Company is a concern. Suppliers have not					increased their production as rapidly as demand has					increased, and component shortages are occurring.  The					Company's production and shipment schedules could be					negatively impacted if shortages of components continue or					worsen. In addition, pricing premiums associated with part					shortages impacted the Company's fiscal year 2011 first					quarter and remain a concern.  

27
- The nature of the EMS industry is such					that the start-up of new programs to replace departing					customers or expiring programs occurs frequently. The					Company's sales to Bayer AG are expected to begin to decline					in the fourth quarter of fiscal year 2011 as the Company's					manufacturing contract with Bayer AG reaches end-of-life.					Margins on the Bayer AG product are generally lower than the					Company's other EMS products. 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 generally require more					competitive pricing. Thus the Company must strive to					identify cost savings opportunities to offset the lower					pricing. Additional information on the risks related to					contract customers is contained in the Company's Annual					Report on Form 10-K for the fiscal year ended June 30, 2010.
- 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					processes help to maintain stability in management.  
- To support growth and diversification					efforts, the Company focuses on both organic growth and					potential acquisition targets. Acquisitions allow rapid					diversification of both customers and industries served.

Certain 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.

28
 
***Financial Overview - Consolidated***

First quarter fiscal year 2011 consolidated net sales were $294.7		million compared to first quarter fiscal year 2010 net sales of $274.7		million, a 7% increase, due to 7% net sales increases in both the EMS		and Furniture segments. First quarter fiscal year 2011 net income was		$0.5 million, or $0.01 per Class B diluted share, compared to net income		of $1.8 million, or $0.05 per Class B diluted share, for the first		quarter of fiscal year 2010. The decline in net income was primarily		driven by lower net income generated by the Furniture segment.

Consolidated gross profit as a percent of net sales declined to 16.0%		for the first quarter of fiscal year 2011 from 17.2% in the first		quarter of fiscal year 2010 due to lower gross profit within the		Furniture segment.  The first quarter of fiscal year 2011 and 2010 had a		similar mix of sales between the Furniture segment and the EMS segment,		and thus sales mix did not impact the consolidated gross profit as a		percent of net sales comparison. Gross profit is discussed in more		detail in the segment discussions below. 

First quarter fiscal year 2011 consolidated selling		and administrative expenses increased in absolute dollars by 2.8% but		decreased as a percent of net sales compared to the first quarter of		fiscal year 2010, as sales volumes increased at a quicker rate than the		selling and administrative expenses. The consolidated selling and		administrative expense increase in absolute dollars for the first		quarter of fiscal year 2011 compared to the first quarter of fiscal year		2010 was primarily due to increased employee benefits expense, and		higher advertising and product marketing expense which were partially		offset by lower bad debt expense.  

Other Income (Expense) for the first quarter of fiscal year 2011 was		$0.8 million compared to $2.0 million for the first quarter of fiscal		year 2010. The reduction in other income was primarily related to		volatility in the European foreign exchange rates which impact the		Company's EMS segment.  

The first quarter fiscal year 2011 effective tax rate was 7.3%		compared to the effective tax rate for the first quarter of fiscal year		2010 of 32.2%. Relatively low pre-tax income coupled with a foreign		deferred tax valuation allowance adjustment of $0.1 million in the		current quarter drove the effective tax rate decline in the first		quarter of fiscal year 2011.

Comparing the balance sheet as of September 30,		2010 to June 30, 2010, the Company's inventory balance increased		primarily to support production ramp ups at select EMS facilities, to		support the transfer of production to the new EMS facility in Poland		from the other EMS facilities in Europe, and as a result of customer-requested shipping delays. 

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***Electronic Manufacturing Services Segment***

EMS segment results were as follows:
 
**At or for the				Three Months Ended**
 
 				 
**September 30**
** **
** **
**(Amounts in				Millions)**
**2010** 
**2009**
** **
**% Change**
Net Sales 
$				177.9   
$				165.5 
 
7%
Operating Income (Loss)
$     0.2   
$  				(0.7)
 
123%
Net Income (Loss) 
$  				(0.2) 
$  				(0.2)
 
(13)%
Open Orders
$				208.6   
$				161.3 
 
29%
First quarter fiscal year 2011 EMS segment net		sales to customers in the medical, industrial control, and public safety		industries increased compared to the first quarter of fiscal year 2010		which more than offset a decrease in net sales to customers in the		automotive industry. While open orders were up 29% as of September 30,		2010 compared to September 30, 2009, open orders at a point in time may		not be indicative of future sales trends due to the contract nature of		the EMS segment's business. 

First quarter fiscal year 2011 EMS segment gross		profit as a percent of net sales improved 0.3 percentage points when		compared to the first quarter of fiscal year 2010. The improvement was		primarily driven by fixed cost leverage associated with the increased		sales and lower depreciation expense which were partially offset by		higher employee benefit costs and higher component costs and expedited		freight charges related to the rapid ramp up of new customer programs		which resulted from the inventory component shortages and allocations		within the industry.

EMS segment selling and administrative expenses in		the first quarter of fiscal year 2011 compared to the first quarter of		fiscal year 2010 increased in absolute dollars in-line with the higher		sales volumes and remained flat as a percent of net sales. The increase		in selling and administrative expenses for the first quarter of fiscal		year 2011 compared to the first quarter of fiscal year 2010 was		primarily related to an increase in salary expense to support sales		growth and increased employee benefit expenses which were partially		offset by lower bad debt expense. 

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As the Company continues to execute its plan to		expand its European automotive electronics capabilities and to establish		a European Medical Center of Expertise near Poznan, Poland, the		consolidation of its EMS facilities has a final completion target of		mid-fiscal year 2012.  The consolidation is expected to improve the		Company's margins in the very competitive EMS market. While the		restructuring charges recorded during the first quarter of fiscal year		2011 were immaterial, the EMS segment is experiencing inefficiencies		related to the consolidation.

As a percent of net sales, operating income was		0.1% for the first quarter of fiscal year 2011 compared to an operating		loss of (0.5)% for the first quarter of fiscal year 2010. 

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**
 
**2010**
** **
**2009**				Bayer AG affiliated sales as a percent of consolidated net sales
				13%
 
				15%
Bayer AG affiliated sales as a percent of				EMS segment net sales
				22%
 
				26%
The Company's sales to Bayer AG are expected to		begin to decline in the fourth quarter of fiscal year 2011 as the		Company's manufacturing contract with Bayer AG reaches end-of-life. 		Margins on the Bayer AG product are generally lower than the Company's		other EMS products. 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 becomes established and matures.		This segment continues to experience margin pressures related to an		overall excess capacity position in the electronics subcontracting		services market. 

Risk factors within the EMS 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,		supplier stability, the contract nature of this industry, unexpected		integration issues with acquisitions, the concentration of sales to		large customers, and the potential for customers to choose to in-source		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, 2010.

31
 
***Furniture Segment***

Furniture segment results were as follows: 
 
**At or for the				Three Months Ended**
** **
** ** 
**September 30**
** **
** **
**(Amounts in				Millions)**
**2010** 
**2009**
** **
**% Change**
Net Sales 
$  116.8 
$				109.2  
 
7%
Operating Income 
$  				   1.1 
 
$ 				   2.9  
 
(63)%
Net Income 
$  				   0.6  
$     1.8  
 
(67)%
Open Orders
$    84.7 
$  				65.1  
 
30%
The first quarter fiscal year 2011 net sales		increase in the Furniture segment compared to the first quarter of		fiscal year 2010 resulted from increased net sales of office furniture		more than offsetting decreased net sales of hospitality furniture. The		increase in office furniture sales was primarily due to increased sales		volumes which more than offset the impact of higher discounting net of		price increases. First quarter fiscal year 2011 sales of newly		introduced office furniture products which have been sold for less than		twelve months approximated $5.5 million. Open orders of furniture		products at September 30, 2010 increased 30% when compared to the open		orders levels as of September 30, 2009 as open orders for both office		furniture and hospitality furniture increased. Open orders at a point in		time may not be indicative of future sales trends. 

First quarter fiscal year 2011 Furniture segment		gross profit as a percent of net sales declined 3.4 percentage points		from the first quarter of fiscal year 2010. Items contributing to the		decline in gross profit as a percent of net sales included: increased		discounting resulting from competitive pricing pressures, higher		commodity costs, higher freight expense, and higher employee-related		costs. The gross profit decline was partially offset by a sales mix		shift to higher margin product, price increases on select product, and		other overall cost reduction efforts.

First quarter fiscal year 2011 Furniture segment		selling and administrative expenses increased slightly in absolute		dollars but as a percent of net sales decreased 1.6 percentage points		primarily due to the higher sales volumes when compared to the first		quarter of fiscal year 2010. Higher advertising and product marketing		expense and increased employee benefit expense were partially offset by		lower selling and administrative salary expense. 

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As a percent of net sales, operating income was		0.9% for the first quarter of fiscal year 2011 and 2.7% for the first		quarter of fiscal year 2010. 

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, raw material availability, 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,		2010.

**Liquidity and Capital Resources**

Working capital at September 30, 2010 was $178.6		million compared to working capital of $180.0 million at June 30, 2010.		The current ratio was 1.8 at both September 30, 2010 and June 30, 2010.

The Company's internal measure of accounts		receivable performance, also referred to as Days Sales Outstanding		(DSO), for the first quarter of fiscal year 2011 of 46.5 days		approximated the 46.2 days for the first quarter of fiscal year 2010.		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 quarter of fiscal year 2011 increased to 69.0 days from 62.2 days		for the first quarter of fiscal year 2010. The increased PDSOH was		primarily due to higher inventory levels associated with customer-requested shipping delays, the ramp up of certain programs, and the		transfer of production among the Company's EMS segment facilities. 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		$148.1 million at September 30, 2010 compared to $163.6 million at June		30, 2010. 

33
 
The Company's cash position from an aggregate of		cash, cash equivalents, and short-term investments decreased from $67.8		million at June 30, 2010 to $53.3 million at September 30, 2010. The		Company had no short-term borrowings as of September 30, 2010 or June		30, 2010.  Operating activities used $10.4 million of cash flow in the		first quarter of fiscal year 2011 compared to the $12.5 million of cash		generated by operating activities in the first quarter of fiscal year		2010. The cash outflow in the first quarter of fiscal year 2011 was		primarily driven by an increase in inventory in the EMS segment due to		higher inventory levels associated with customer-requested shipping		delays, the ramp up of certain programs, and the transfer of production		among the Company's EMS segment facilities. In addition, during the		first quarter of fiscal year 2011, the Company reinvested $6.7 million		into capital investments for the future, primarily for manufacturing		equipment in the EMS segment. The Company also paid $1.8 million in		dividends, which remained flat with the 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 2011, 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. At		September 30, 2010 and June 30, 2010, the Company had no short-term		borrowings outstanding under its $100 million credit facility or the		Company's several smaller foreign credit facilities. 

At September 30, 2010, the Company had $5.2 million		in letters of credit against the $100 million credit facility. Total		availability to borrow under the $100 million credit facility was $94.8		million at September 30, 2010.

The Company maintains the $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		consent of the participating banks. The $100 million credit facility,		upon which there were no borrowings at September 30, 2010, requires the		Company to comply with certain debt covenants, the most significant of		which are the interest coverage ratio and minimum net worth. The Company		was in compliance with the debt covenants at September 30, 2010.

34
 
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, 2010**
 
**Limit As Specified in Credit Agreement**
 
**Excess**
Minimum Net Worth  
 
				$383,318,000
 
				$362,000,000
 
				$21,318,000
Interest Coverage Ratio
 
16.5
 
3.0
 
13.5
The Interest Coverage Ratio is calculated on a		rolling four-quarter basis as defined in the credit agreement.

In addition to the $100 million credit facility,		the Company can opt to utilize foreign credit facilities which are		available to satisfy short-term cash needs at that specific location		rather than funding from intercompany sources. The Company maintains a		foreign credit facility for its EMS segment operation in Thailand which		is backed by the $100 million revolving credit facility. The Company has		a credit facility for its EMS segment operation in Poland, which allows		for multi-currency borrowings up to 6 million Euro equivalent		(approximately $8.2 million U.S. dollars at September 30, 2010 exchange		rates). These foreign credit facilities can be cancelled at any time by		either the bank or the Company. 

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 for fiscal year 2011 and the foreseeable future. One		of the Company's sources of funds has been its ability to generate cash		from operations to meet its liquidity obligations, which during the		first quarter of fiscal year 2011 was hampered by the ramp up in		inventory balances, and could be adversely affected in the future 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 its weakened		markets, 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.

35
 
**Fair Value**

During the first quarter of fiscal year 2011, 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. The Company's foreign currency 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, these		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 the valuation of the foreign		currency derivatives. 

The Company invested in convertible promissory		notes and stock warrants of a privately-held company during fiscal year		2010 and has been chosen by the privately-held company as a supplier to produce EMS products. The convertible promissory notes,		classified as available-for-sale debt securities, were valued using a		recurring market-based method which approximates fair value by using the		amortized cost basis of the promissory notes, with the discount		amortized to interest income over the term. The stock warrants,		classified as derivative instruments, were valued on a recurring basis		using a market-based method which utilizes the Black-Scholes valuation		model. The fair value measurements for the convertible promissory notes		and stock warrants were calculated using unobservable inputs and were		classified as level 3 financial assets. 

See		Note 7 - Fair Value 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, 2010.

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**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.

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.

37
 
*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.
- Sales returns and allowances - At the time			revenue is recognized certain provisions may also be recorded,			including a provision for 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,			2010 and June 30, 2010, the reserve for returns and allowances was			$2.4 million and $2.5 million, respectively. The returns and			allowances reserve approximated 2% to 3% of gross trade receivables			during the past two fiscal years.     
- 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, 2010 and June 30, 2010 was			$1.4 million and $1.3 million, respectively. During the preceding			two-year period, this reserve had approximated 1% of gross trade			accounts receivable except for the period March 2009 through			December 2009 during which time it approximated 2% of gross trade			accounts receivable. The higher reserve was driven by increased risk			created by deteriorating market conditions during that time.

38
 
*Excess and obsolete inventory* - Inventories were valued using		the lower of last-in, first-out (LIFO) cost or market value for		approximately 9% of consolidated inventories at both September 30, 2010		and June 30, 2010, respectively, including approximately 79% and 78% of		the Furniture segment inventories at September 30, 2010 and June 30,		2010, 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, 2010 and June 30, 2010, the Company's accrued liabilities		for self-insurance exposure were $4.1 million and $4.7 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. 

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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, including		accrued interest and penalties on those positions, was $3.7 million at		both September 30, 2010 and June 30, 2010.

**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," "intends,"		"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		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 and		components, increased competitive pricing pressures reflecting excess		industry capacities, successful execution of restructuring plans,		changes in the regulatory environment, 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, 2010.

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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, 2010.

**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, 2010, 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, 2010 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 2011. At September 30, 2010, 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(a))  Summary of Director and Named Executive Officer			Compensation

(10(b))  Description of the Company's 2010 Profit Sharing			Incentive Bonus Plan (Incorporated by reference to Exhibit 10.1 to			the Company's Form 8-K filed October 25, 2010)

(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, 2010             By:/s/ Robert F. Schneider  ROBERT F. SCHNEIDERExecutive Vice President, Chief Financial Officer  November 5, 2010
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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(a) Summary of Director and Named Executive Officer Compensation10(b) Description of the Company's 2010 Profit Sharing Incentive Bonus			Plan (Incorporated by reference to Exhibit 10.1 to the Company's			Form 8-K filed October 25, 2010)11 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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