Market Overview

Kimball Electronics, Inc. Reports Second Quarter Fiscal Year 2020 Results

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  • Second quarter net sales were $307 million, up 8% year-over-year
  • Net income of $6.6 million and diluted earnings per share of $0.26
  • Returned $2.6 million to Share Owners in stock repurchases during the quarter

JASPER, Ind., Feb. 05, 2020 (GLOBE NEWSWIRE) -- Kimball Electronics, Inc. (NASDAQ:KE) today announced financial results for its second quarter ended December 31, 2019.

       
  Three Months Ended   Six Months Ended
  December 31,   December 31,
(Amounts in Thousands, except EPS) 2019   2018   2019   2018
Net Sales $ 307,084     $ 284,149     $ 620,469     $ 549,769  
Operating Income $ 8,684     $ 10,212     $ 19,799     $ 17,244  
Adjusted Operating Income (non-GAAP) (1) $ 8,684     $ 10,212     $ 19,799     $ 17,152  
Operating Income % 2.8 %   3.6 %   3.2 %   3.1 %
Net Income $ 6,612     $ 7,115     $ 13,210     $ 12,184  
Adjusted Net Income (non-GAAP) (1) $ 6,612     $ 6,864     $ 13,210     $ 11,863  
Diluted EPS $ 0.26     $ 0.27     $ 0.52     $ 0.46  
Adjusted Diluted EPS (non-GAAP) (1) $ 0.26     $ 0.26     $ 0.52     $ 0.45  


(1) A reconciliation of GAAP and non-GAAP financial measures is included below.
   

Donald D. Charron, Chairman and Chief Executive Officer, stated, "We are very pleased with the solid growth results we delivered in the second quarter of fiscal year 2020 despite significant headwinds, including the impact from the strike at General Motors and continued softness in the overall market.  We expect softness and fluctuations in the overall demand to continue near term as our customers revise their outlook over the next few quarters, however, we remain cautiously optimistic that we will achieve our goal of 8% organic growth for fiscal year 2020."

Mr. Charron continued, "We are also pleased with our efforts to minimize the operating margin impact of the strike at GM and we are working diligently to respond to the volatility in demand and change in the mix of our overall business.  The signing of the phase one China trade agreement and USMCA provide us with renewed optimism as we further develop our long-term business plans for those geographies."

Second Quarter Fiscal Year 2020 Overview:

  • Consolidated net sales increased 8% compared to the second quarter of fiscal year 2019.
  • Operating activities used cash of $0.3 million during the quarter, which compares to cash provided by operating activities of $5.6 million in the second quarter of fiscal year 2019.
  • Cash conversion days ("CCD") for the quarter ended December 31, 2019 were 76 days, flat to the quarter ended December 31, 2018, and up from 73 days in the first quarter of fiscal year 2020.  CCD is calculated as the sum of days sales outstanding plus contract asset days plus production days supply on hand less accounts payable days.
  • Investments in capital expenditures were $10.4 million during the quarter.
  • $2.6 million was returned to Share Owners during the quarter in the form of common stock repurchases.
  • Cash and cash equivalents were $52.2 million and borrowings outstanding on credit facilities were $119.4 million at December 31, 2019, including $91.5 million classified as long-term.
  • Return on invested capital ("ROIC"), calculated for the trailing twelve months, was 8.2% and 8.9% for the twelve months ended December 31, 2019 and 2018, respectively (see reconciliation of non-GAAP financial measures for ROIC calculation).

Net Sales by Vertical Market:

                     
  Three Months Ended
   
  December 31,
   
(Amounts in Millions) 2019
  2018
  Percent
Change
Automotive $ 134.9     $ 112.4     20 %
Medical 85.7     85.7     %
Industrial 66.4     62.2     7 %
Public Safety 14.6     17.9     (18 )%
Other 5.5     5.9     (7 )%
Total Net Sales $ 307.1     $ 284.1     8 %
                     

Forward-Looking Statements
Certain statements contained within this release are considered forward-looking under the Private Securities Litigation Reform Act of 1995 and are subject to risks and uncertainties including, but not limited to, successful integration of acquisitions, ramp up of new operations, global economic conditions, geopolitical environment, global health emergencies, significant volume reductions from key contract customers, loss of key customers or suppliers, financial stability of key customers and suppliers, availability or cost of raw materials, impact related to tariffs and other trade barriers, and increased competitive pricing pressures.  Additional cautionary statements regarding other risk factors that could have an effect on the future performance of the Company are contained in its Annual Report on Form 10-K for the year ended June 30, 2019.

Non-GAAP Financial Measures
This press release contains non-GAAP financial measures.  A non-GAAP financial measure is a numerical measure of a company's financial performance that excludes or includes amounts so as to be different than the most directly comparable measure calculated and presented in accordance with Generally Accepted Accounting Principles ("GAAP") in the United States in the statement of income, statement of comprehensive income, balance sheet, statement of cash flows, or statement of share owners' equity of the Company.  The non-GAAP financial measures contained herein include adjusted operating income, adjusted net income, adjusted diluted EPS, and ROIC.  These measures include adjustments for the three and six months ended December 31, 2018 related to adjustments to the provision for income taxes resulting from the U.S. Tax Cuts and Jobs Act ("Tax Reform"), and for the six months ended December 31, 2018, for proceeds from a class action lawsuit settlement.  Reconciliations of the reported GAAP numbers to these non-GAAP financial measures are included in the financial highlights table below.  Management believes it is useful for investors to understand how its core operations performed without the effects of the tax adjustments resulting from Tax Reform and proceeds from the lawsuit settlement.  Excluding these amounts allows investors to meaningfully trend, analyze, and benchmark the performance of the Company's core operations.

 
Conference Call / Webcast
Date: February 6, 2020
Time: 10:00 AM Eastern Time
Dial-In #: 800-992-4934 (International Calls - 937-502-2251)
Conference ID: 5496371
   

The live webcast of the conference call can be accessed at investors.kimballelectronics.com.  For those unable to participate in the live webcast, the call will be archived at investors.kimballelectronics.com.

About Kimball Electronics, Inc.
Kimball Electronics is a multifaceted manufacturing solutions provider of electronics and diversified contract manufacturing services to customers around the world.  From our operations in the United States, China, India, Japan, Mexico, Poland, Romania, Thailand, and Vietnam, our teams are proud to provide manufacturing services for a variety of industries.  Recognized for a reputation of excellence, we are committed to a high-performance culture that values personal and organizational commitment to quality, reliability, value, speed, and ethical behavior.  Kimball Electronics, Inc. (NASDAQ:KE) is headquartered in Jasper, Indiana.

To learn more about Kimball Electronics, visit: www.kimballelectronics.com.

Lasting relationships. Global success.

Financial highlights for the second quarter ended December 31, 2019 are as follows:

               
Condensed Consolidated Statements of Income              
(Unaudited) Three Months Ended
(Amounts in Thousands, except Per Share Data) December 31, 2019   December 31, 2018
Net Sales $ 307,084     100.0 %   $ 284,149     100.0 %
Cost of Sales 286,573     93.3 %   263,705     92.8 %
Gross Profit 20,511     6.7 %   20,444     7.2 %
Selling and Administrative Expenses 11,827     3.9 %   10,232     3.6 %
Operating Income 8,684     2.8 %   10,212     3.6 %
Other Income (Expense), net 143     0.1 %   (1,593 )   (0.6 )%
Income Before Taxes on Income 8,827     2.9 %   8,619     3.0 %
Provision for Income Taxes 2,215     0.7 %   1,504     0.5 %
Net Income $ 6,612     2.2 %   $ 7,115     2.5 %
                 
Earnings Per Share of Common Stock:                
Basic $ 0.26         $ 0.27      
Diluted $ 0.26         $ 0.27      
                 
Average Number of Shares Outstanding:                
Basic 25,247         25,993      
Diluted 25,330         26,036      


               
(Unaudited) Six Months Ended
(Amounts in Thousands, except Per Share Data) December 31, 2019   December 31, 2018
Net Sales $ 620,469     100.0 %   $ 549,769     100.0 %
Cost of Sales 577,765     93.1 %   511,139     93.0 %
Gross Profit 42,704     6.9 %   38,630     7.0 %
Selling and Administrative Expenses 22,905     3.7 %   21,478     3.9 %
Other General Income     %   (92 )   %
Operating Income 19,799     3.2 %   17,244     3.1 %
Other Income (Expense), net (2,259 )   (0.4 )%   (2,147 )   (0.4 )%
Income Before Taxes on Income 17,540     2.8 %   15,097     2.7 %
Provision for Income Taxes 4,330     0.7 %   2,913     0.5 %
Net Income $ 13,210     2.1 %   $ 12,184     2.2 %
               
Earnings Per Share of Common Stock:              
Basic $ 0.52         $ 0.46      
Diluted $ 0.52         $ 0.46      
               
Average Number of Shares Outstanding:              
Basic 25,371         26,250      
Diluted 25,503         26,404      


   
Condensed Consolidated Statements of Cash Flows Six Months Ended
(Unaudited) December 31,
(Amounts in Thousands) 2019   2018
Net Cash Flow provided by (used for) Operating Activities $ 39,282     $ (4,394 )
Net Cash Flow used for Investing Activities (21,974 )   (52,481 )
Net Cash Flow (used for) provided by Financing Activities (13,903 )   47,264  
Effect of Exchange Rate Change on Cash and Cash Equivalents (478 )   (954 )
Net Increase (Decrease) in Cash and Cash Equivalents 2,927     (10,565 )
Cash and Cash Equivalents at Beginning of Period 49,276     46,428  
Cash and Cash Equivalents at End of Period $ 52,203     $ 35,863  


       
  (Unaudited)    
Condensed Consolidated Balance Sheets December 31,
 2019
  June 30,
 2019
(Amounts in Thousands)
ASSETS      
Cash and cash equivalents $ 52,203     $ 49,276  
Receivables, net 196,323     225,555  
Contract assets 67,007     51,929  
Inventories 202,402     203,840  
Prepaid expenses and other current assets 22,578     24,713  
Property and Equipment, net 147,761     143,629  
Goodwill 19,936     18,104  
Other Intangible Assets, net 20,742     22,188  
Other Assets 29,013     24,877  
Total Assets $ 757,965     $ 764,111  
       
LIABILITIES AND SHARE OWNERS' EQUITY      
Current portion of borrowings under credit facilities $ 27,930     $ 34,713  
Accounts payable 195,159     197,001  
Accrued expenses 35,979     43,196  
Long-term debt under credit facilities, less current portion 91,500     91,500  
Long-term income taxes payable 9,765     9,765  
Other 20,794     18,082  
Share Owners' Equity 376,838     369,854  
Total Liabilities and Share Owners' Equity $ 757,965     $ 764,111  


             
Reconciliation of Non-GAAP Financial Measures            
(Unaudited)              
(Amounts in Thousands, except Per Share Data)              
               
Operating Income excluding Lawsuit Proceeds
  Three Months Ended   Six Months Ended
  December 31,   December 31,
  2019   2018   2019   2018
Operating Income, as reported $ 8,684     $ 10,212     $ 19,799     $ 17,244  
Less: Pre-tax Settlement Proceeds from Lawsuit             92  
Adjusted Operating Income $ 8,684     $ 10,212     $ 19,799     $ 17,152  
               
Net Income excluding Tax Reform and Lawsuit Proceeds
  Three Months Ended   Six Months Ended
  December 31,   December 31,
  2019   2018   2019   2018
Net Income, as reported $ 6,612     $ 7,115     $ 13,210     $ 12,184  
Add: Adjustments to Provision for Income Taxes from Tax Reform     (251 )       (251 )
Less: After-tax Settlement Proceeds from Lawsuit             70  
Adjusted Net Income $ 6,612     $ 6,864     $ 13,210     $ 11,863  
               
Diluted Earnings per Share excluding Tax Reform and Lawsuit Proceeds
  Three Months Ended   Six Months Ended
  December 31,   December 31,
  2019   2018   2019   2018
Diluted Earnings per Share, as reported $ 0.26     $ 0.27     $ 0.52     $ 0.46  
Add: Adjustments to Provision for Income Taxes from Tax Reform     (0.01 )       (0.01 )
Less: Impact of Settlement Proceeds from Lawsuit              
Adjusted Diluted Earnings per Share $ 0.26     $ 0.26     $ 0.52     $ 0.45  
               
Return on Invested Capital (ROIC)              
      Twelve Months Ended
      December 31,
          2019   2018
Operating Income         $ 44,615     $ 39,640  
Less: Pre-tax Settlement Proceeds from Lawsuits         $ 215     $ 92  
Adjusted Operating Income (non-GAAP)         $ 44,400     $ 39,548  
Tax Effect (1)         $ 9,020     $ 8,982  
After-tax Adjusted Operating Income         $ 35,380     $ 30,566  
Average Invested Capital (2)         $ 431,910     $ 342,408  
ROIC         8.2 %   8.9 %


(1) Accumulated tax effect utilizing the applicable quarterly effective tax rates, excludes tax effect of adjusted items including adjustments related to the U.S. Tax Cuts and Jobs Act.
(2) Average Invested Capital is computed using Share Owners' equity plus current and non-current debt less cash and cash equivalents averaged for the last five quarters.
   

CONTACT:
Adam W. Smith
Treasurer
Telephone: 812.634.4000
E-mail: Investor.Relations@kimballelectronics.com

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