Kimball Electronics, Inc. Reports Fourth Quarter and Fiscal Year 2018 Results
August 01 2018 - 4:26PM
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, 2018.
|
Three Months Ended |
|
Fiscal Year Ended |
|
June 30, |
|
June 30, |
(Amounts in
Thousands, except EPS) |
2018 |
|
2017 |
|
2018 |
|
2017 |
Net
Sales |
$ |
276,768 |
|
|
$ |
241,268 |
|
|
$ |
1,072,061 |
|
|
$ |
930,914 |
|
Operating
Income |
$ |
11,354 |
|
|
$ |
8,455 |
|
|
$ |
42,348 |
|
|
$ |
43,057 |
|
Adjusted
Operating Income (non-GAAP)* |
$ |
11,354 |
|
|
$ |
8,455 |
|
|
$ |
42,348 |
|
|
$ |
39,052 |
|
Operating
Income % |
4.1 |
% |
|
3.5 |
% |
|
4.0 |
% |
|
4.6 |
% |
Adjusted
Operating Income (non-GAAP) % |
4.1 |
% |
|
3.5 |
% |
|
4.0 |
% |
|
4.2 |
% |
Net
Income |
$ |
5,784 |
|
|
$ |
8,128 |
|
|
$ |
16,752 |
|
|
$ |
34,179 |
|
Adjusted
Net Income (non-GAAP)* |
$ |
7,193 |
|
|
$ |
8,128 |
|
|
$ |
34,611 |
|
|
$ |
30,755 |
|
Diluted
EPS |
$ |
0.22 |
|
|
$ |
0.30 |
|
|
$ |
0.62 |
|
|
$ |
1.24 |
|
Adjusted
Diluted EPS (non-GAAP)* |
$ |
0.27 |
|
|
$ |
0.30 |
|
|
$ |
1.28 |
|
|
$ |
1.12 |
|
* A reconciliation of GAAP and non-GAAP financial measures is
included below.
Donald D. Charron, Chairman and Chief Executive Officer, stated,
“Very strong growth in our automotive and medical end market
verticals helped us achieve double-digit year-over-year growth for
the fourth consecutive quarter and exceed our long-time stated goal
of $1 billion in annual sales in fiscal year 2018.”
Mr. Charron continued, “We are pleased to have improved our
operating income margin by 60 basis points from the prior year
quarter and 20 basis points sequentially when compared to the third
quarter. Partially offsetting the improved operating
performance in the fourth quarter were expenses directly associated
with our pending acquisition of GES, which we believe is still on
track to close in this first quarter of fiscal year 2019. The
much-anticipated progress in Romania came through in the fourth
quarter helping to drive the improved overall performance, and we
look forward to their continued growth and positive contributions
in fiscal year 2019. We remain focused on achieving our
mid-range goal of 4.5% operating income.”
Fourth Quarter Fiscal Year 2018 Overview:
- Consolidated net sales increased 15% compared to the fourth
quarter of fiscal year 2017. Net sales for the quarter
includes a 4% favorable impact from foreign currency movements
compared to the prior year quarter.
- Costs incurred and included in operating income during the
quarter related to the pending acquisition of GES were
approximately $0.6 million, $0.4 million net of tax, or $0.01 per
diluted share.
- The current quarter results include non-operating expense of
$1.1 million related to pre-tax net losses from foreign currency
movements, which was a fluctuation of $2.1 million from pre-tax net
gains related to foreign currency movements of $1.0 million
recognized in the same quarter of the prior year.
- Adjusted Net Income excludes income tax expense of $1.4 million
($0.05 per diluted share) in the fourth quarter for measurement
period adjustments to estimated provisions related to the U.S. Tax
Cuts and Jobs Act (“Tax Reform”) and subsequent guidance issued by
the Internal Revenue Service. See below for additional
information and a reconciliation of non-GAAP financial
measures.
- Operating activities provided cash flow of $19.3 million during
the quarter, which compares to cash flow provided by operating
activities of $12.0 million in the fourth quarter of fiscal year
2017.
- Cash conversion days (“CCD”) for the quarter ended
June 30, 2018 were 63 days, up from 60 days in the same
quarter last year, and up sequentially from 62 days in the prior
quarter. 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 $4.4 million during
the quarter.
- Cash and cash equivalents were $46.4 million and borrowings
outstanding on credit facilities were $8.3 million at June 30,
2018.
Net Sales by Vertical Market:
|
Three Months Ended |
|
|
|
June 30, |
|
|
(Amounts in
Millions) |
2018 |
|
2017 |
|
Percent Change |
Automotive |
$ |
114.7 |
|
|
$ |
95.9 |
|
|
20 |
% |
Medical |
86.4 |
|
|
68.3 |
|
|
26 |
% |
Industrial |
57.0 |
|
|
51.9 |
|
|
10 |
% |
Public
Safety |
15.9 |
|
|
20.5 |
|
|
(22 |
)% |
Other |
2.8 |
|
|
4.7 |
|
|
(41 |
)% |
Total Net Sales |
$ |
276.8 |
|
|
$ |
241.3 |
|
|
15 |
% |
Fiscal Year 2018 Overview:
- Net sales increased 15% from the prior fiscal year, setting a
new annual net sales record of $1.072 billion, which includes a 4%
favorable impact from foreign currency movements compared to fiscal
year 2017.
- Adjusted net income in fiscal year 2018 of $34.6 million ($1.28
per diluted share), adjusted for the recording of estimated
provisions related to Tax Reform, compares to adjusted net income
in fiscal year 2017 of $30.8 million ($1.12 per diluted share),
adjusted for proceeds from a lawsuit settlement and a bargain
purchase gain. See below for additional information and a
reconciliation of non-GAAP financial measures.
- Cash flow provided by operating activities for fiscal year 2018
was $40.2 million, which compares to $46.8 million for fiscal year
2017.
- Capital expenditures were $26.5 million in fiscal year 2018,
which were down from prior year expenditures of $34.3 million.
- Return on invested capital (“ROIC”) was 10.3% for fiscal year
2018, down slightly from 10.4% for the prior year (see
reconciliation of non-GAAP financial measures for ROIC
calculation).
- During the year, $9.4 million was returned to Share Owners in
the form of common stock repurchases.
Outlook
- Net sales goal of 8% annual organic growth rate.
- Operating income percent goal remains 4.5%.
- ROIC long-term goal remains 12.5%.
- Fiscal year 2019 capital expenditures, excluding acquisitions,
are expected to approximate between $25 and $30 million.
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, impact related to tariffs
and other trade barriers, 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 months and fiscal year
ended June 30, 2018 for the provisional tax items related to
the U.S. Tax Cuts and Jobs Act (“Tax Reform”) enacted in December
2017 and adjustments in the fiscal year ended June 30, 2017
related to proceeds from a lawsuit settlement and a bargain
purchase gain on the acquisition of Aircom Manufacturing,
Inc. 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 provisional tax items 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: |
August 2,
2018 |
Time: |
10:00 AM
Eastern Time |
Dial-In
#: |
800-992-4934 (International Calls - 937-502-2251) |
Conference
ID: |
8598535 |
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, 2018 are as follows:
Condensed Consolidated Statements of
Income |
|
|
|
|
|
|
(Unaudited) |
Three Months Ended |
(Amounts in
Thousands, except Per Share Data) |
June 30, 2018 |
|
June 30, 2017 |
Net
Sales |
$ |
276,768 |
|
|
100.0 |
% |
|
$ |
241,268 |
|
|
100.0 |
% |
Cost of
Sales |
253,945 |
|
|
91.8 |
% |
|
223,266 |
|
|
92.5 |
% |
Gross
Profit |
22,823 |
|
|
8.2 |
% |
|
18,002 |
|
|
7.5 |
% |
Selling and
Administrative Expenses |
11,469 |
|
|
4.1 |
% |
|
9,547 |
|
|
4.0 |
% |
Operating
Income |
11,354 |
|
|
4.1 |
% |
|
8,455 |
|
|
3.5 |
% |
Other
Income (Expense), net |
(1,129 |
) |
|
(0.4 |
)% |
|
1,117 |
|
|
0.5 |
% |
Income
Before Taxes on Income |
10,225 |
|
|
3.7 |
% |
|
9,572 |
|
|
4.0 |
% |
Provision
for Income Taxes |
4,441 |
|
|
1.6 |
% |
|
1,444 |
|
|
0.6 |
% |
Net
Income |
$ |
5,784 |
|
|
2.1 |
% |
|
$ |
8,128 |
|
|
3.4 |
% |
|
|
|
|
|
|
|
|
Earnings
Per Share of Common Stock: |
|
|
|
|
|
|
|
Basic |
$ |
0.22 |
|
|
|
|
$ |
0.30 |
|
|
|
Diluted |
$ |
0.22 |
|
|
|
|
$ |
0.30 |
|
|
|
|
|
|
|
|
|
|
|
Average
Number of Shares Outstanding: |
|
|
|
|
|
|
|
Basic |
26,642 |
|
|
|
|
26,957 |
|
|
|
Diluted |
26,851 |
|
|
|
|
27,151 |
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
Fiscal Year Ended |
(Amounts in
Thousands, except Per Share Data) |
June 30, 2018 |
|
June 30, 2017 |
Net
Sales |
$ |
1,072,061 |
|
|
100.0 |
% |
|
$ |
930,914 |
|
|
100.0 |
% |
Cost of
Sales |
985,859 |
|
|
92.0 |
% |
|
855,319 |
|
|
91.9 |
% |
Gross
Profit |
86,202 |
|
|
8.0 |
% |
|
75,595 |
|
|
8.1 |
% |
Selling and
Administrative Expenses |
43,854 |
|
|
4.0 |
% |
|
36,543 |
|
|
3.9 |
% |
Other
General Income |
— |
|
|
— |
% |
|
(4,005 |
) |
|
(0.4 |
)% |
Operating
Income |
42,348 |
|
|
4.0 |
% |
|
43,057 |
|
|
4.6 |
% |
Other
Income (Expense), net |
2,427 |
|
|
0.2 |
% |
|
1,198 |
|
|
0.2 |
% |
Income
Before Taxes on Income |
44,775 |
|
|
4.2 |
% |
|
44,255 |
|
|
4.8 |
% |
Provision
for Income Taxes |
28,023 |
|
|
2.6 |
% |
|
10,076 |
|
|
1.1 |
% |
Net
Income |
$ |
16,752 |
|
|
1.6 |
% |
|
$ |
34,179 |
|
|
3.7 |
% |
|
|
|
|
|
|
|
|
Earnings
Per Share of Common Stock: |
|
|
|
|
|
|
|
Basic |
$ |
0.63 |
|
|
|
|
$ |
1.25 |
|
|
|
Diluted |
$ |
0.62 |
|
|
|
|
$ |
1.24 |
|
|
|
|
|
|
|
|
|
|
|
Average
Number of Shares Outstanding: |
|
|
|
|
|
|
|
Basic |
26,745 |
|
|
|
|
27,413 |
|
|
|
Diluted |
27,007 |
|
|
|
|
27,530 |
|
|
|
Condensed Consolidated Statements of Cash
Flows |
Fiscal Year Ended |
(Unaudited) |
June 30, |
(Amounts in
Thousands) |
2018 |
|
2017 |
Net Cash
Flow provided by Operating Activities |
$ |
40,200 |
|
|
$ |
46,754 |
|
Net Cash
Flow used for Investing Activities |
(26,214 |
) |
|
(35,709 |
) |
Net Cash
Flow used for Financing Activities |
(12,603 |
) |
|
(22,034 |
) |
Effect of
Exchange Rate Change on Cash and Cash Equivalents |
490 |
|
|
806 |
|
Net
Increase (Decrease) in Cash and Cash Equivalents |
1,873 |
|
|
(10,183 |
) |
Cash and
Cash Equivalents at Beginning of Year |
44,555 |
|
|
54,738 |
|
Cash and
Cash Equivalents at End of Year |
$ |
46,428 |
|
|
$ |
44,555 |
|
|
(Unaudited) |
|
|
Condensed Consolidated Balance Sheets |
June 30,
2018 |
|
June 30,
2017 |
(Amounts in
Thousands) |
ASSETS |
|
|
|
Cash
and cash equivalents |
$ |
46,428 |
|
|
$ |
44,555 |
|
Receivables, net |
173,559 |
|
|
169,785 |
|
Inventories |
201,596 |
|
|
144,606 |
|
Prepaid expenses and other current assets |
15,405 |
|
|
29,219 |
|
Property and Equipment, net |
137,210 |
|
|
137,549 |
|
Goodwill |
6,191 |
|
|
6,191 |
|
Other Intangible Assets, net |
4,375 |
|
|
4,581 |
|
Other Assets |
23,994 |
|
|
18,458 |
|
Total Assets |
$ |
608,758 |
|
|
$ |
554,944 |
|
|
|
|
|
LIABILITIES AND SHARE OWNERS’
EQUITY |
|
|
|
Borrowings under credit facilities |
$ |
8,337 |
|
|
$ |
10,000 |
|
Accounts payable |
187,788 |
|
|
154,619 |
|
Accrued expenses |
32,446 |
|
|
34,630 |
|
Long-term income taxes payable |
12,361 |
|
|
— |
|
Other |
12,299 |
|
|
13,423 |
|
Share Owners’ Equity |
355,527 |
|
|
342,272 |
|
Total Liabilities and Share Owners’ Equity |
$ |
608,758 |
|
|
$ |
554,944 |
|
Reconciliation of Non-GAAP Financial
Measures |
|
|
|
|
|
|
(Unaudited) |
|
|
|
|
|
|
|
(Amounts in
Thousands, except Per Share Data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income excluding Lawsuit
Proceeds |
|
Three Months Ended |
|
Fiscal Year Ended |
|
June 30, |
|
June 30, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Operating
Income, as reported |
$ |
11,354 |
|
|
$ |
8,455 |
|
|
$ |
42,348 |
|
|
$ |
43,057 |
|
Less:
Pre-tax Settlement Proceeds from Lawsuit |
— |
|
|
— |
|
|
— |
|
|
4,005 |
|
Adjusted
Operating Income |
$ |
11,354 |
|
|
$ |
8,455 |
|
|
$ |
42,348 |
|
|
$ |
39,052 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income excluding Tax Reform, Lawsuit Proceeds,
and Bargain Purchase Gain |
|
Three Months Ended |
|
Fiscal Year Ended |
|
June 30, |
|
June 30, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Net Income,
as reported |
$ |
5,784 |
|
|
$ |
8,128 |
|
|
$ |
16,752 |
|
|
$ |
34,179 |
|
Add:
Provisional Tax Adjustments Resulting from Tax Reform |
1,409 |
|
|
— |
|
|
17,859 |
|
|
— |
|
Less:
After-tax Settlement Proceeds from Lawsuit |
— |
|
|
— |
|
|
— |
|
|
2,499 |
|
Less:
Bargain Purchase Gain |
— |
|
|
— |
|
|
— |
|
|
925 |
|
Adjusted
Net Income |
$ |
7,193 |
|
|
$ |
8,128 |
|
|
$ |
34,611 |
|
|
$ |
30,755 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings per Share excluding Tax Reform,
Lawsuit Proceeds, and Bargain Purchase Gain |
|
Three Months Ended |
|
Fiscal Year Ended |
|
June 30, |
|
June 30, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Diluted
Earnings per Share, as reported |
$ |
0.22 |
|
|
$ |
0.30 |
|
|
$ |
0.62 |
|
|
$ |
1.24 |
|
Add:
Provisional Tax Adjustments Resulting from Tax Reform |
0.05 |
|
|
— |
|
|
0.66 |
|
|
— |
|
Less:
Impact of Settlement Proceeds from Lawsuits |
— |
|
|
— |
|
|
— |
|
|
0.09 |
|
Less:
Bargain Purchase Gain |
— |
|
|
— |
|
|
— |
|
|
0.03 |
|
Adjusted
Diluted Earnings per Share |
$ |
0.27 |
|
|
$ |
0.30 |
|
|
$ |
1.28 |
|
|
$ |
1.12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on Invested Capital (ROIC) |
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended |
|
|
|
June 30, |
|
|
|
|
|
2018 |
|
2017 |
Adjusted
Operating Income |
|
|
|
|
$ |
42,348 |
|
|
$ |
39,052 |
|
Tax
Rate |
|
|
|
|
22.7 |
% |
|
21.8 |
% |
Tax
Effect |
|
|
|
|
$ |
9,613 |
|
|
$ |
8,513 |
|
After Tax
Adjusted Operating Income |
|
|
|
|
$ |
32,735 |
|
|
$ |
30,539 |
|
Average
Invested Capital * |
|
|
|
|
$ |
319,074 |
|
|
$ |
293,516 |
|
ROIC |
|
|
|
|
10.3 |
% |
|
10.4 |
% |
* 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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