Kimball Electronics, Inc. Reports Second Quarter Fiscal Year 2018 Results
February 07 2018 - 4:34PM
Kimball Electronics, Inc. (Nasdaq:KE), a leading global electronic
manufacturing services provider of high-quality, durable electronic
products, today announced financial results for its second quarter
ended December 31, 2017.
|
Three Months Ended |
|
Six Months Ended |
|
December 31, |
|
December 31, |
(Amounts in Thousands,
except EPS) |
2017 |
|
2016 |
|
2017 |
|
2016 |
Net Sales |
$ |
258,151 |
|
|
$ |
230,265 |
|
|
$ |
511,355 |
|
|
$ |
456,716 |
|
Operating Income |
$ |
10,193 |
|
|
$ |
12,241 |
|
|
$ |
19,783 |
|
|
$ |
25,063 |
|
Adjusted Operating
Income (non-GAAP)* |
$ |
10,193 |
|
|
$ |
12,241 |
|
|
$ |
19,783 |
|
|
$ |
21,058 |
|
Operating Income % |
3.9 |
% |
|
5.3 |
% |
|
3.9 |
% |
|
5.5 |
% |
Adjusted Operating
Income (non-GAAP) % |
3.9 |
% |
|
5.3 |
% |
|
3.9 |
% |
|
4.6 |
% |
Net Income (Loss) |
$ |
(8,347 |
) |
|
$ |
7,812 |
|
|
$ |
133 |
|
|
$ |
17,934 |
|
Adjusted Net Income
(non-GAAP)* |
$ |
8,233 |
|
|
$ |
7,812 |
|
|
$ |
16,713 |
|
|
$ |
14,510 |
|
Diluted EPS |
$ |
(0.31 |
) |
|
$ |
0.28 |
|
|
$ |
0.00 |
|
|
$ |
0.65 |
|
Adjusted Diluted EPS
(non-GAAP)* |
$ |
0.31 |
|
|
$ |
0.28 |
|
|
$ |
0.62 |
|
|
$ |
0.52 |
|
* A reconciliation of GAAP and non-GAAP financial measures is
included below.
Donald D. Charron, Chairman and Chief Executive Officer, stated,
“Double-digit growth in our automotive and medical end market
verticals helped us set a new quarterly sales record for the eighth
consecutive quarter and kept us on a course to exceed our long-time
stated goal of $1 billion in annual sales in fiscal year 2018.”
Mr. Charron continued, “We are pleased to see our margins
improve sequentially from the first quarter of this fiscal year,
and we continue to focus on yield and throughput improvements on
recently launched new programs and further progress on the ramp-up
in Romania to help us make sequential, incremental improvement and
achieve our new goal of 4.5% operating income.”
Second Quarter Fiscal Year 2018 Overview:
- Consolidated net sales increased 12% compared to the second
quarter of fiscal year 2017, which included a 3% favorable impact
from foreign currency movements. This represents the eighth
consecutive quarterly sales record.
- Income tax expense includes a $16.6 million provisional
discrete charge in the quarter ended December 31, 2017 related
to the U.S. Tax Cuts and Jobs Act (“Tax Reform”) enacted in
December 2017, which includes $12.8 million of tax expense for the
deemed repatriation of foreign unremitted earnings and $3.8 million
for the revaluation of net deferred tax assets at the new
applicable tax rates. These discrete tax items are excluded
in arriving at Adjusted Net Income and Adjusted Diluted EPS for the
three and six months ended December 31, 2017. See below for
additional information and a reconciliation of non-GAAP financial
measures.
- Return on invested capital (“ROIC”) was 9.6% for the first six
months of fiscal year 2018, which compares to 10.7% for the same
period of the prior year (see reconciliation of non-GAAP financial
measures for ROIC calculation).
- Operating activities provided cash flow of $11.6 million during
the quarter, which compares to cash flow provided by operating
activities of $12.1 million in the second quarter of fiscal year
2017.
- Cash conversion days (“CCD”) for the quarter ended
December 31, 2017 were 60 days, up slightly from 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 $8.7 million during
the quarter.
- $3.0 million was returned to Share Owners during the quarter in
the form of common stock repurchases.
- Cash and cash equivalents were $35.6 million and borrowings
outstanding on credit facilities were $11.0 million at
December 31, 2017.
Net Sales by Vertical Market:
|
Three Months Ended |
|
|
|
December 31, |
|
|
(Amounts in
Millions) |
2017 |
|
2016 |
|
Percent Change |
Automotive |
$ |
116.4 |
|
|
$ |
96.3 |
|
|
21% |
|
Medical |
72.9 |
|
|
63.4 |
|
|
15% |
|
Industrial |
52.0 |
|
|
48.4 |
|
|
7% |
|
Public Safety |
13.8 |
|
|
15.8 |
|
|
(13)% |
|
Other |
3.1 |
|
|
6.4 |
|
|
(52)% |
|
Total Net
Sales |
$ |
258.2 |
|
|
$ |
230.3 |
|
|
12% |
|
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, 2017.
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 include adjusted operating income,
adjusted net income, adjusted diluted EPS, and ROIC. These
measures include adjustments in the three and six months ended
December 31, 2017 for the provisional discrete tax expense
related to Tax Reform of $16.6 million and in the six months ended
December 31, 2016 related to proceeds from a lawsuit
settlement of $4.0 million, $2.5 million net of tax, and a bargain
purchase gain on the acquisition of Aircom Manufacturing, Inc. of
$0.9 million. 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 discrete tax expense related to Tax Reform,
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 items to enable meaningful trending of core
operating metrics.
Conference Call / Webcast |
|
|
Date: |
February 8, 2018 |
Time: |
10:00 AM Eastern
Time |
Dial-In #: |
800-992-4934
(International Calls - 937-502-2251) |
Conference ID: |
9646209 |
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 second quarter ended
December 31, 2017 are as follows:
Condensed Consolidated Statements of Income |
|
|
|
|
|
|
(Unaudited) |
Three Months Ended |
(Amounts in Thousands,
except Per Share Data) |
December 31, 2017 |
|
December 31, 2016 |
Net Sales |
$ |
258,151 |
|
|
100.0 |
% |
|
$ |
230,265 |
|
|
100.0 |
% |
Cost of Sales |
237,189 |
|
|
91.9 |
% |
|
209,712 |
|
|
91.1 |
% |
Gross Profit |
20,962 |
|
|
8.1 |
% |
|
20,553 |
|
|
8.9 |
% |
Selling and
Administrative Expenses |
10,769 |
|
|
4.2 |
% |
|
8,312 |
|
|
3.6 |
% |
Operating Income |
10,193 |
|
|
3.9 |
% |
|
12,241 |
|
|
5.3 |
% |
Other Income (Expense),
net |
393 |
|
|
0.2 |
% |
|
(1,014 |
) |
|
(0.4 |
)% |
Income Before Taxes on
Income |
10,586 |
|
|
4.1 |
% |
|
11,227 |
|
|
4.9 |
% |
Provision for Income
Taxes |
18,933 |
|
|
7.3 |
% |
|
3,415 |
|
|
1.5 |
% |
Net Income (Loss) |
$ |
(8,347 |
) |
|
(3.2 |
)% |
|
$ |
7,812 |
|
|
3.4 |
% |
|
|
|
|
|
|
|
|
Earnings (Loss) Per
Share of Common Stock: |
|
|
|
|
|
|
|
Basic |
$ |
(0.31 |
) |
|
|
|
$ |
0.29 |
|
|
|
Diluted |
$ |
(0.31 |
) |
|
|
|
$ |
0.28 |
|
|
|
|
|
|
|
|
|
|
|
Average Number of
Shares Outstanding: |
|
|
|
|
|
|
|
Basic |
26,765 |
|
|
|
|
27,350 |
|
|
|
Diluted |
26,765 |
|
|
|
|
27,455 |
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
Six Months Ended |
(Amounts in Thousands,
except Per Share Data) |
December 31, 2017 |
|
December 31, 2016 |
Net Sales |
$ |
511,355 |
|
|
100.0 |
% |
|
$ |
456,716 |
|
|
100.0 |
% |
Cost of Sales |
470,903 |
|
|
92.1 |
% |
|
417,841 |
|
|
91.5 |
% |
Gross Profit |
40,452 |
|
|
7.9 |
% |
|
38,875 |
|
|
8.5 |
% |
Selling and
Administrative Expenses |
20,669 |
|
|
4.0 |
% |
|
17,817 |
|
|
3.9 |
% |
Other General
Income |
— |
|
|
— |
% |
|
(4,005 |
) |
|
(0.9 |
)% |
Operating Income |
19,783 |
|
|
3.9 |
% |
|
25,063 |
|
|
5.5 |
% |
Other Income (Expense),
net |
1,638 |
|
|
0.3 |
% |
|
(251 |
) |
|
(0.1 |
)% |
Income Before Taxes on
Income |
21,421 |
|
|
4.2 |
% |
|
24,812 |
|
|
5.4 |
% |
Provision for Income
Taxes |
21,288 |
|
|
4.2 |
% |
|
6,878 |
|
|
1.5 |
% |
Net Income |
$ |
133 |
|
|
— |
% |
|
$ |
17,934 |
|
|
3.9 |
% |
|
|
|
|
|
|
|
|
Earnings Per Share of
Common Stock: |
|
|
|
|
|
|
|
Basic |
$ |
— |
|
|
|
|
$ |
0.65 |
|
|
|
Diluted |
$ |
— |
|
|
|
|
$ |
0.65 |
|
|
|
|
|
|
|
|
|
|
|
Average Number of
Shares Outstanding: |
|
|
|
|
|
|
|
Basic |
26,812 |
|
|
|
|
27,714 |
|
|
|
Diluted |
27,007 |
|
|
|
|
27,775 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed
Consolidated Statements of Cash Flows |
Six Months Ended |
(Unaudited) |
December 31, |
(Amounts in
Thousands) |
2017 |
|
2016 |
Net Cash Flow provided
by Operating Activities |
$ |
11,401 |
|
|
$ |
26,091 |
|
Net Cash Flow used for
Investing Activities |
(14,717 |
) |
|
(21,688 |
) |
Net Cash Flow used for
Financing Activities |
(6,968 |
) |
|
(15,032 |
) |
Effect of Exchange Rate
Change on Cash and Cash Equivalents |
1,367 |
|
|
(1,369 |
) |
Net Decrease in Cash
and Cash Equivalents |
(8,917 |
) |
|
(11,998 |
) |
Cash and Cash
Equivalents at Beginning of Period |
44,555 |
|
|
54,738 |
|
Cash and Cash
Equivalents at End of Period |
$ |
35,638 |
|
|
$ |
42,740 |
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
|
Condensed
Consolidated Balance Sheets |
December 31,
2017 |
|
June 30, 2017 |
(Amounts in
Thousands) |
ASSETS |
|
|
|
Cash and cash
equivalents |
$ |
35,638 |
|
|
$ |
44,555 |
|
Receivables,
net |
173,663 |
|
|
169,785 |
|
Inventories |
179,862 |
|
|
144,606 |
|
Prepaid expenses
and other current assets |
26,248 |
|
|
29,219 |
|
Property and
Equipment, net |
140,978 |
|
|
137,549 |
|
Goodwill |
6,191 |
|
|
6,191 |
|
Other Intangible
Assets, net |
4,700 |
|
|
4,581 |
|
Other
Assets |
17,246 |
|
|
18,458 |
|
Total Assets |
$ |
584,526 |
|
|
$ |
554,944 |
|
|
|
|
|
LIABILITIES AND
SHARE OWNERS’ EQUITY |
|
|
|
Borrowings under
credit facilities |
$ |
11,000 |
|
|
$ |
10,000 |
|
Accounts
payable |
178,366 |
|
|
154,619 |
|
Accrued
expenses |
29,578 |
|
|
34,630 |
|
Long-term income
taxes payable |
11,786 |
|
|
— |
|
Other |
12,720 |
|
|
13,423 |
|
Share Owners’
Equity |
341,076 |
|
|
342,272 |
|
Total Liabilities and Share Owners’ Equity |
$ |
584,526 |
|
|
$ |
554,944 |
|
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, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Operating Income, as
reported |
$ |
10,193 |
|
|
$ |
12,241 |
|
|
$ |
19,783 |
|
|
$ |
25,063 |
|
Less: Pre-tax
Settlement Proceeds from Lawsuit |
— |
|
|
— |
|
|
— |
|
|
4,005 |
|
Adjusted Operating
Income |
$ |
10,193 |
|
|
$ |
12,241 |
|
|
$ |
19,783 |
|
|
$ |
21,058 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income excluding Tax Reform, Lawsuit Proceeds, and
Bargain Purchase Gain |
|
Three Months Ended |
|
Six Months Ended |
|
December 31, |
|
December 31, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Net Income (Loss), as
reported |
$ |
(8,347 |
) |
|
$ |
7,812 |
|
|
$ |
133 |
|
|
$ |
17,934 |
|
Add: Discrete Tax
Expense Resulting from Tax Reform Act |
16,580 |
|
|
— |
|
|
16,580 |
|
|
— |
|
Less: After-tax
Settlement Proceeds from Lawsuit |
— |
|
|
— |
|
|
— |
|
|
2,499 |
|
Less: Bargain Purchase
Gain |
— |
|
|
— |
|
|
— |
|
|
925 |
|
Adjusted Net
Income |
$ |
8,233 |
|
|
$ |
7,812 |
|
|
$ |
16,713 |
|
|
$ |
14,510 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings per Share excluding Tax Reform, Lawsuit
Proceeds, and Bargain Purchase Gain |
|
Three Months Ended |
|
Six Months Ended |
|
December 31, |
|
December 31, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Diluted Earnings (Loss)
per Share, as reported |
$ |
(0.31 |
) |
|
$ |
0.28 |
|
|
$ |
0.00 |
|
|
$ |
0.65 |
|
Add: Impact of Discrete
Tax Expense Resulting from Tax Reform Act |
0.62 |
|
|
— |
|
|
0.62 |
|
|
— |
|
Less: Impact of
Settlement Proceeds from Lawsuits |
— |
|
|
— |
|
|
— |
|
|
0.09 |
|
Less: Bargain Purchase
Gain |
— |
|
|
— |
|
|
— |
|
|
0.04 |
|
Adjusted Diluted
Earnings per Share |
$ |
0.31 |
|
|
$ |
0.28 |
|
|
$ |
0.62 |
|
|
$ |
0.52 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on
Invested Capital (ROIC) |
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
December 31, |
|
|
|
|
|
2017 |
|
2016 |
Adjusted Operating
Income |
|
|
|
|
$ |
19,783 |
|
|
$ |
21,058 |
|
Annualized Adjusted
Operating Income |
|
|
|
|
$ |
39,566 |
|
|
$ |
42,116 |
|
Tax Rate |
|
|
|
|
23.6 |
% |
|
27.0 |
% |
Tax Effect |
|
|
|
|
$ |
9,338 |
|
|
$ |
11,371 |
|
After Tax Annualized
Adjusted Operating Income |
|
|
|
|
$ |
30,228 |
|
|
$ |
30,745 |
|
Average Invested
Capital * |
|
|
|
|
$ |
316,270 |
|
|
$ |
286,347 |
|
ROIC |
|
|
|
|
9.6 |
% |
|
10.7 |
% |
* 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. SmithTreasurerTelephone 812.634.4000E-mail:
Investor.Relations@kimballelectronics.com
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