Kimball Electronics, Inc. Reports Fourth Quarter and Fiscal Year 2017 Results
August 02 2017 - 4:05PM
Kimball Electronics, Inc. (Nasdaq:KE), a leading global electronic
manufacturing services provider of high-quality, durable electronic
products, today announced financial results for its fourth quarter
and fiscal year ended June 30, 2017.
|
Three Months Ended |
|
June 30, |
(Amounts in Thousands,
except EPS) |
2017 |
|
2016 |
Net Sales |
$ |
241,268 |
|
|
$ |
220,402 |
|
Operating Income |
$ |
8,455 |
|
|
$ |
8,790 |
|
Operating Income % |
3.5 |
% |
|
4.0 |
% |
Net Income |
$ |
8,128 |
|
|
$ |
5,771 |
|
Diluted EPS |
$ |
0.30 |
|
|
$ |
0.20 |
|
|
Fiscal Year Ended |
|
June 30, |
(Amounts in Thousands,
except EPS) |
2017 |
|
2016 |
Net Sales |
$ |
930,914 |
|
|
$ |
842,060 |
|
Operating Income |
$ |
43,057 |
|
|
$ |
29,722 |
|
Adjusted Operating
Income(non-GAAP)* |
$ |
39,052 |
|
|
$ |
29,859 |
|
Operating Income % |
4.6 |
% |
|
3.5 |
% |
Adjusted Operating
Income(non-GAAP) % |
4.2 |
% |
|
3.5 |
% |
Net Income |
$ |
34,179 |
|
|
$ |
22,287 |
|
Adjusted Net Income
(non-GAAP)* |
$ |
30,755 |
|
|
$ |
22,372 |
|
Diluted EPS |
$ |
1.24 |
|
|
$ |
0.76 |
|
Adjusted Diluted EPS
(non-GAAP)* |
$ |
1.12 |
|
|
$ |
0.77 |
|
* A reconciliation of GAAP and non-GAAP financial measures is
included below.
Donald D. Charron, Chairman and Chief Executive Officer, stated,
“Growth in all four of our end market verticals, including
double-digit growth in two of our end market verticals, helped us
set a new quarterly sales record for the sixth consecutive quarter
and provided a strong finish to a record setting fiscal year
2017. New program launch and ramp-up activity combined with
successes of our recent acquisitions have created significant
momentum and positioned us well to achieve our goal of $1 billion
in annual sales in fiscal year 2018.”
Mr. Charron continued, “We continue to face margin pressure as
we absorb the costs associated with the next phase of the ramp-up
in our new Romania operation and another large wave of new program
launches. In our fiscal fourth quarter, we experienced higher
than expected healthcare costs in the U.S. that negatively impacted
our margins while favorable foreign exchange tailwinds assisted the
bottom line. Although we made good progress in fiscal year
2017, we still have some work to do to achieve our goal of 12.5%
ROIC. Margin improvement and capital efficiency will continue
to be priorities of focus for us in fiscal year 2018.”
Fourth Quarter Fiscal Year 2017 Overview:
- Consolidated net sales increased 9% compared to the fourth
quarter of fiscal year 2016, the sixth consecutive quarterly sales
record.
- Cash flow provided by operating activities was $12.0 million
for the quarter, which compares to $8.8 million in the prior year
fourth quarter.
- Cash conversion days (“CCD”) for the quarter ended
June 30, 2017 were 60 days, which compares to 59 days in the
same quarter last year. CCD is calculated as the sum of days
sales outstanding plus production days supply on hand less accounts
payable days.
- Investments in capital expenditures were $8.3 million during
the quarter.
- $5.1 million was returned to Share Owners during the quarter in
the form of common stock repurchases.
- Cash and cash equivalents were $44.6 million and borrowings
outstanding on credit facilities were $10.0 million at
June 30, 2017.
Net Sales by Vertical Market:
|
Three Months Ended |
|
|
|
June 30, |
|
|
(Amounts in
Millions) |
2017 |
|
2016 |
|
PercentChange |
Automotive |
$ |
95.9 |
|
|
$ |
86.5 |
|
|
11 |
% |
Medical |
68.3 |
|
|
65.2 |
|
|
5 |
% |
Industrial |
51.9 |
|
|
48.6 |
|
|
7 |
% |
Public Safety |
20.5 |
|
|
14.7 |
|
|
39 |
% |
Other |
4.7 |
|
|
5.4 |
|
|
(14 |
)% |
Total Net
Sales |
$ |
241.3 |
|
|
$ |
220.4 |
|
|
9 |
% |
Fiscal Year 2017 Overview:
- Net sales increased 11% from the prior fiscal year, setting a
new annual net sales record of $930.9 million.
- $4.0 million in Other General Income, $2.5 million net of tax,
was received during the year relating to proceeds from the
settlement of a class action lawsuit of which the Company was a
member.
- Adjusted operating income in fiscal year 2017 of 4.2% surpassed
the Company’s stated goal of 4.0%.
- Acquired Aircom Manufacturing, Inc. during the fiscal year,
which also resulted in a bargain purchase gain included in Net
Income of $0.9 million.
- Set new records for Net Income and Diluted EPS.
- Cash flow provided by operating activities for fiscal year 2017
was $46.8 million, which compares to $36.8 million for fiscal year
2016.
- Capital expenditures were $34.3 million in fiscal year 2017,
flat with prior year expenditures of $34.6 million.
- Return on invested capital (“ROIC”) was 10.4% for fiscal year
2017, which improved from 9.0% for the prior fiscal year (see
reconciliation of non-GAAP financial measures for ROIC
calculation).
- During the year $21.9 million was returned to Share Owners in
the form of common stock repurchases.
Outlook
- Net sales goal remains $1.0 billion for fiscal year 2018.
- Operating income goal is being increased from 4.0% to
4.5%.
- ROIC long-term goal remains 12.5%.
- Fiscal year 2018 capital expenditures expected to decline to a
level approximating depreciation expense.
Forward-Looking StatementsCertain 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 and new operations, global
economic conditions, geopolitical environment, 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, and increased competitive
pricing pressures reflecting excess industry capacities.
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, 2016.
Non-GAAP Financial MeasuresThis 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 equity of the Company. The non-GAAP financial
measures contained herein for the fiscal year ended June 30,
2017 and 2016 include adjusted operating income, adjusted net
income, adjusted diluted EPS, and ROIC. These measures were
adjusted for spin-off expenses, proceeds from a lawsuit settlement,
and a bargain purchase gain. 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 spin-off expenses, proceeds
from the lawsuit settlement, and the bargain purchase gain.
Excluding these amounts allows investors to meaningfully trend,
analyze, and benchmark the performance of the Company’s core
operations. Many of the Company’s internal performance
measures that management uses to make certain operating decisions
exclude these charges to enable meaningful trending of core
operating metrics.
Conference Call / Webcast |
|
|
|
Date: |
|
August 3, 2017 |
Time: |
|
10:00 AM Eastern
Time |
Dial-In #: |
|
800-992-4934
(International Calls - 937-502-2251) |
Conference ID: |
|
58019425 |
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.Recognized with
a reputation for excellence, Kimball Electronics is committed to a
high performance culture that values personal and organizational
commitment to quality, reliability, value, speed, and ethical
behavior. Kimball Electronics employees know they are part of
a company culture that builds lasting relationships and global
success for customers while enabling employees to share in the
Company’s success through personal, professional, and financial
growth.
Kimball Electronics trades under the symbol “KE” on The NASDAQ
Stock Market. Kimball Electronics is a global contract
electronic manufacturing services (“EMS”) company that specializes
in durable electronics for the automotive, medical, industrial, and
public safety end markets. Kimball Electronics is well
recognized by customers and industry trade publications for its
excellent quality, reliability, and innovative service. From
its manufacturing operations in the United States, China, Mexico,
Poland, Romania, and Thailand, Kimball Electronics provides
electronic manufacturing services, including engineering and supply
chain support, which utilize common production and support
capabilities to a variety of industries globally. Kimball
Electronics is headquartered in Jasper, Indiana.
To learn more about Kimball Electronics, visit:
www.kimballelectronics.com.
Lasting relationships. Global
success.
Financial highlights for the fourth quarter and fiscal year
ended June 30, 2017 are as follows:
Condensed Consolidated Statements of Income |
(Unaudited) |
Three Months Ended |
(Amounts in Thousands,
except Per Share Data) |
June 30, 2017 |
|
June 30, 2016 |
Net Sales |
$ |
241,268 |
|
|
100.0 |
% |
|
$ |
220,402 |
|
|
100.0 |
% |
Cost of Sales |
223,266 |
|
|
92.5 |
% |
|
203,444 |
|
|
92.3 |
% |
Gross Profit |
18,002 |
|
|
7.5 |
% |
|
16,958 |
|
|
7.7 |
% |
Selling and
Administrative Expenses |
9,547 |
|
|
4.0 |
% |
|
8,168 |
|
|
3.7 |
% |
Operating Income |
8,455 |
|
|
3.5 |
% |
|
8,790 |
|
|
4.0 |
% |
Other Income (Expense),
net |
1,117 |
|
|
0.5 |
% |
|
(725 |
) |
|
(0.3 |
)% |
Income Before Taxes on
Income |
9,572 |
|
|
4.0 |
% |
|
8,065 |
|
|
3.7 |
% |
Provision for Income
Taxes |
1,444 |
|
|
0.6 |
% |
|
2,294 |
|
|
1.1 |
% |
Net Income |
$ |
8,128 |
|
|
3.4 |
% |
|
$ |
5,771 |
|
|
2.6 |
% |
|
|
|
|
|
|
|
|
Earnings Per Share of
Common Stock: |
|
|
|
|
|
|
|
Basic |
$ |
0.30 |
|
|
|
|
$ |
0.20 |
|
|
|
Diluted |
$ |
0.30 |
|
|
|
|
$ |
0.20 |
|
|
|
|
|
|
|
|
|
|
|
Average Number of
Shares Outstanding: |
|
|
|
|
|
|
|
Basic |
26,957 |
|
|
|
|
28,374 |
|
|
|
Diluted |
27,151 |
|
|
|
|
28,641 |
|
|
|
|
(Unaudited) |
Fiscal Year Ended |
(Amounts in Thousands,
except Per Share Data) |
June 30, 2017 |
|
June 30, 2016 |
Net Sales |
$ |
930,914 |
|
|
100.0 |
% |
|
$ |
842,060 |
|
|
100.0 |
% |
Cost of Sales |
855,319 |
|
|
91.9 |
% |
|
777,522 |
|
|
92.3 |
% |
Gross Profit |
75,595 |
|
|
8.1 |
% |
|
64,538 |
|
|
7.7 |
% |
Selling and
Administrative Expenses |
36,543 |
|
|
3.9 |
% |
|
34,816 |
|
|
4.2 |
% |
Other General
Income |
(4,005 |
) |
|
(0.4 |
)% |
|
— |
|
|
— |
% |
Operating Income |
43,057 |
|
|
4.6 |
% |
|
29,722 |
|
|
3.5 |
% |
Other Income (Expense),
net |
1,198 |
|
|
0.2 |
% |
|
(1,746 |
) |
|
(0.2 |
)% |
Income Before Taxes on
Income |
44,255 |
|
|
4.8 |
% |
|
27,976 |
|
|
3.3 |
% |
Provision for Income
Taxes |
10,076 |
|
|
1.1 |
% |
|
5,689 |
|
|
0.7 |
% |
Net Income |
$ |
34,179 |
|
|
3.7 |
% |
|
$ |
22,287 |
|
|
2.6 |
% |
|
|
|
|
|
|
|
|
Earnings Per Share of
Common Stock: |
|
|
|
|
|
|
|
Basic |
$ |
1.25 |
|
|
|
|
$ |
0.77 |
|
|
|
Diluted |
$ |
1.24 |
|
|
|
|
$ |
0.76 |
|
|
|
|
|
|
|
|
|
|
|
Average Number of
Shares Outstanding: |
|
|
|
|
|
|
|
Basic |
27,413 |
|
|
|
|
28,916 |
|
|
|
Diluted |
27,530 |
|
|
|
|
29,176 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed
Consolidated Statements of Cash Flows |
Fiscal Year Ended |
(Unaudited) |
June 30, |
(Amounts in
Thousands) |
2017 |
|
2016 |
Net Cash Flow provided
by Operating Activities |
$ |
46,754 |
|
|
$ |
36,832 |
|
Net Cash Flow used for
Investing Activities |
(35,709 |
) |
|
(42,590 |
) |
Net Cash Flow used for
Financing Activities |
(22,034 |
) |
|
(4,300 |
) |
Effect of Exchange Rate
Change on Cash and Cash Equivalents |
806 |
|
|
(384 |
) |
Net Decrease in Cash
and Cash Equivalents |
(10,183 |
) |
|
(10,442 |
) |
Cash and Cash
Equivalents at Beginning of Year |
54,738 |
|
|
65,180 |
|
Cash and Cash
Equivalents at End of Year |
$ |
44,555 |
|
|
$ |
54,738 |
|
|
(Unaudited) |
|
|
Condensed
Consolidated Balance Sheets |
June 30, 2017 |
|
June 30, 2016 |
(Amounts in
Thousands) |
ASSETS |
|
|
|
Cash and
cash equivalents |
$ |
44,555 |
|
|
$ |
54,738 |
|
Receivables, net |
169,785 |
|
|
149,652 |
|
Inventories |
144,606 |
|
|
132,877 |
|
Prepaid
expenses and other current assets |
29,219 |
|
|
24,944 |
|
Property
and Equipment, net |
137,549 |
|
|
120,701 |
|
Goodwill |
6,191 |
|
|
6,191 |
|
Other
Intangible Assets, net |
4,581 |
|
|
4,593 |
|
Other
Assets |
18,458 |
|
|
16,869 |
|
Total
Assets |
$ |
554,944 |
|
|
$ |
510,565 |
|
|
|
|
|
LIABILITIES AND
SHARE OWNERS’ EQUITY |
|
|
|
Borrowings under credit facilities |
$ |
10,000 |
|
|
$ |
9,000 |
|
Accounts
payable |
154,619 |
|
|
142,152 |
|
Accrued
expenses |
34,630 |
|
|
23,651 |
|
Other |
13,423 |
|
|
11,393 |
|
Share
Owners’ Equity |
342,272 |
|
|
324,369 |
|
Total
Liabilities and Share Owners’ Equity |
$ |
554,944 |
|
|
$ |
510,565 |
|
|
|
|
|
|
|
|
|
Reconciliation
of Non-GAAP Financial Measures |
|
|
|
|
(Unaudited) |
|
|
|
|
(Amounts in Thousands,
except Per Share Data) |
|
|
|
|
|
|
|
|
|
Operating Income excluding Spin-off Expenses and Lawsuit
Proceeds |
|
|
Fiscal Year Ended |
|
|
June 30, |
|
|
2017 |
|
2016 |
Operating Income, as
reported |
|
$ |
43,057 |
|
|
$ |
29,722 |
|
Add: Pre-tax Spin-off
Expenses |
|
— |
|
|
137 |
|
Less: Pre-tax
Settlement Proceeds from Lawsuit |
|
4,005 |
|
|
— |
|
Adjusted Operating
Income |
|
$ |
39,052 |
|
|
$ |
29,859 |
|
|
|
|
|
|
|
|
|
|
|
Net
Income excluding Spin-off Expenses, Lawsuit Proceeds, and Bargain
Purchase Gain |
|
|
Fiscal Year Ended |
|
|
June 30, |
|
|
2017 |
|
2016 |
Net Income, as
reported |
|
$ |
34,179 |
|
|
$ |
22,287 |
|
Add: After-tax Spin-off
Expenses |
|
— |
|
|
85 |
|
Less: After-tax
Settlement Proceeds from Lawsuit |
|
2,499 |
|
|
— |
|
Less: Bargain Purchase
Gain |
|
925 |
|
|
— |
|
Adjusted Net
Income |
|
$ |
30,755 |
|
|
$ |
22,372 |
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings per Share excluding Spin-off Expenses,
Lawsuit Proceeds, and Bargain Purchase Gain |
|
|
Fiscal Year Ended |
|
|
June 30, |
|
|
2017 |
|
2016 |
Diluted Earnings per
Share, as reported |
|
$ |
1.24 |
|
|
$ |
0.76 |
|
Add: Impact of Spin-off
Expenses |
|
— |
|
|
0.01 |
|
Less: Impact of
Settlement Proceeds from Lawsuits |
|
0.09 |
|
|
— |
|
Less: Bargain Purchase
Gain |
|
0.03 |
|
|
— |
|
Adjusted Diluted
Earnings per Share |
|
$ |
1.12 |
|
|
$ |
0.77 |
|
|
|
|
|
|
|
|
|
|
|
Return on
Invested Capital (ROIC) |
|
|
|
|
|
|
Fiscal Year Ended |
|
|
June 30, |
|
|
2017 |
|
2016 |
Adjusted Operating
Income |
|
$ |
39,052 |
|
|
$ |
29,859 |
|
Tax Rate |
|
21.8 |
% |
|
20.4 |
% |
Tax Effect |
|
$ |
8,513 |
|
|
$ |
6,091 |
|
After Tax Adjusted
Operating Income |
|
$ |
30,539 |
|
|
$ |
23,768 |
|
Average Invested
Capital * |
|
$ |
293,516 |
|
|
$ |
263,371 |
|
ROIC |
|
10.4 |
% |
|
9.0 |
% |
* Average Invested Capital is computed using the average
quarterly Share Owners’ equity plus current and non-current debt
less cash and cash equivalents.
CONTACT:
Adam W. Smith
Treasurer
Telephone 812.634.4000
E-mail: Investor.Relations@kimballelectronics.com
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