Kimball Electronics, Inc. Reports First Quarter Fiscal Year 2019 Results
November 06 2018 - 4:05PM
Kimball Electronics, Inc. (NASDAQ: KE), a leading global
electronics manufacturing services provider of high-quality,
durable electronic products, today announced financial results for
its first quarter ended September 30, 2018.
|
|
|
Three Months Ended |
|
September 30, |
(Amounts in Thousands,
except EPS) |
2018 (1) |
|
2017 |
Net Sales |
$ |
265,620 |
|
|
$ |
253,204 |
|
Operating Income
(2) |
$ |
7,032 |
|
|
$ |
9,523 |
|
Adjusted Operating
Income (non-GAAP) (2) (3) |
$ |
6,940 |
|
|
$ |
9,523 |
|
Operating Income % |
2.6 |
% |
|
3.8 |
% |
Net Income |
$ |
5,069 |
|
|
$ |
8,480 |
|
Adjusted Net Income
(non-GAAP) (3) |
$ |
4,999 |
|
|
$ |
8,480 |
|
Diluted EPS |
$ |
0.19 |
|
|
$ |
0.31 |
|
(1) |
During the three months
ended September 30, 2018, the Company adopted the new accounting
standard on Revenue from Contracts with Customers on a modified
retrospective basis. The adoption was not material to the Condensed
Consolidated Statement of Income for the three months ended
September 30, 2018. The prior period was not restated. |
(2) |
Prior period
amounts have been restated to reflect the retrospective adoption of
new accounting guidance on improving the presentation of net
periodic pension cost and net periodic postretirement benefit
cost. |
(3) |
A
reconciliation of GAAP and non-GAAP financial measures is included
below. |
Donald D. Charron, Chairman and Chief Executive
Officer, stated, “We achieved solid year-over-year organic growth
in three of our four end market verticals as the ramp-up of new
program launches helped to more than offset softness in certain
mature programs.”
Mr. Charron continued, “While this was a
challenging quarter for us, we are cautiously optimistic that our
goals of 8% organic sales growth and 4.5% operating income remain
within our reach for fiscal year 2019.”
First Quarter Fiscal Year 2019 Overview:
- Consolidated net sales increased 5%
organically compared to the first quarter of fiscal year 2018.
- The current quarter includes
non-operating expense of $0.7 million related to pre-tax net losses
from foreign currency movements, which compares to pre-tax net
gains of $1.1 million recognized in non-operating income in the
same quarter of the prior year related to foreign currency
movements.
- The Romania facility continues to
progress in its ramp-up and improved its impact to the consolidated
operating income percent by 30 basis points compared to the prior
year first quarter.
- Operating activities used cash of
$10.0 million during the quarter, which compares to cash used by
operating activities of $0.2 million in the first quarter of fiscal
year 2018.
- Cash conversion days (“CCD”) for
the quarter ended September 30, 2018 were 68 days, up from 59
days in the same quarter last year. CCD is calculated as the
sum of days sales outstanding plus contract asset days plus
production days supply on hand less accounts payable days.
- $5.4 million was returned to Share
Owners during the quarter in the form of common stock
repurchases.
- Investments in capital expenditures
were $4.8 million during the quarter.
- Cash and cash equivalents were
$75.0 million and borrowings outstanding on credit facilities were
$59.3 million at September 30, 2018.
- Return on invested capital
(“ROIC”), calculated for the trailing twelve months, was 9.3% and
10.2% for the twelve months ended September 30, 2018 and 2017,
respectively (see reconciliation of non-GAAP financial measures for
ROIC calculation).
Net Sales by Vertical
Market:
|
|
|
|
|
Three Months Ended |
|
|
|
September 30, |
|
|
(Amounts in
Millions) |
2018 |
|
2017 |
|
Percent Change |
Automotive |
$ |
105.9 |
|
$ |
102.0 |
|
4% |
Medical |
82.2 |
|
76.2 |
|
8% |
Industrial |
57.4 |
|
54.8 |
|
5% |
Public Safety |
17.1 |
|
17.2 |
|
—% |
Other |
3.0 |
|
3.0 |
|
—% |
Total Net Sales |
$ |
265.6 |
|
$ |
253.2 |
|
5% |
|
|
|
|
|
|
|
|
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, 2018.
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, and ROIC. These
measures include adjustments in the three months ended
September 30, 2018 for proceeds from a 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 proceeds from the lawsuit settlement.
Excluding this amount 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
excludes this item to enable meaningful trending of core operating
metrics.
Conference Call / Webcast |
|
|
Date: |
November 7, 2018 |
Time: |
10:00 AM Eastern
Time |
Dial-In #: |
800-992-4934
(International Calls - 937-502-2251) |
Conference ID: |
7129658 |
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.WHO WE ARE Kimball Electronics is a
leading contract manufacturer of durable electronics serving a
variety of industries on a global scale. The customer is the focus
of everything we do and our touch is felt throughout daily life via
the markets we serve: Automotive, Industrial, Medical, and Public
Safety. 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. Our employees know they are part of a company
culture that is committed to doing the right thing. We build
lasting relationships and global success for customers while
enabling employees to share in the Company’s success through
personal, professional, and financial growth.
WHAT WE DO Kimball Electronics
trades under the symbol “KE” on The NASDAQ Stock Market. Kimball
Electronics is a preeminent Electronics Manufacturing Services
(“EMS”) provider serving customers around the world. Additionally,
Kimball Electronics offers diversified contract manufacturing
services (“DCMS”) for non-electronic components, medical
disposables, and plastics. GES, a Kimball Electronics Company,
specializes in design, production and servicing of automation,
test, and inspection equipment for the semiconductor, electronics,
and life sciences industries. 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 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 first quarter ended
September 30, 2018 are as follows:
|
|
|
|
|
|
|
Condensed Consolidated Statements of
Income |
|
|
|
|
|
|
(Unaudited) |
Three Months
Ended |
(Amounts in Thousands, except Per Share Data) |
September 30, 2018
(1) |
|
September 30,
2017 |
Net Sales |
$ |
265,620 |
|
|
100.0 |
% |
|
$ |
253,204 |
|
|
100.0 |
% |
Cost of Sales (2) |
247,434 |
|
|
93.2 |
% |
|
233,751 |
|
|
92.3 |
% |
Gross Profit (2) |
18,186 |
|
|
6.8 |
% |
|
19,453 |
|
|
7.7 |
% |
Selling and Administrative Expenses (2) |
11,246 |
|
|
4.2 |
% |
|
9,930 |
|
|
3.9 |
% |
Other General Income |
(92 |
) |
|
— |
% |
|
— |
|
|
— |
% |
Operating Income (2) |
7,032 |
|
|
2.6 |
% |
|
9,523 |
|
|
3.8 |
% |
Other Income (Expense), net (2) |
(554 |
) |
|
(0.2 |
)% |
|
1,312 |
|
|
0.5 |
% |
Income Before Taxes on Income |
6,478 |
|
|
2.4 |
% |
|
10,835 |
|
|
4.3 |
% |
Provision for Income Taxes |
1,409 |
|
|
0.5 |
% |
|
2,355 |
|
|
1.0 |
% |
Net Income |
$ |
5,069 |
|
|
1.9 |
% |
|
$ |
8,480 |
|
|
3.3 |
% |
|
|
|
|
|
|
|
|
Earnings Per Share of Common Stock: |
|
|
|
|
|
|
|
Basic |
$ |
0.19 |
|
|
|
|
$ |
0.32 |
|
|
|
Diluted |
$ |
0.19 |
|
|
|
|
$ |
0.31 |
|
|
|
|
|
|
|
|
|
|
|
Average Number of Shares Outstanding: |
|
|
|
|
|
|
|
Basic |
26,507 |
|
|
|
|
26,859 |
|
|
|
Diluted |
26,628 |
|
|
|
|
27,028 |
|
|
|
(1) |
During the three months
ended September 30, 2018, the Company adopted the new accounting
standard on Revenue from Contracts with Customers on a modified
retrospective basis. The adoption was not material to the
Condensed Consolidated Statement of Income for the three months
ended September 30, 2018. The prior period was not
restated. |
(2) |
The
Condensed Consolidated Statement of Income for the three months
ended September 30, 2017 has been retrospectively restated for the
adoption of new accounting guidance on improving the presentation
of net periodic pension cost and net periodic postretirement
benefit cost. |
Condensed
Consolidated Statements of Cash Flows |
Three Months Ended |
(Unaudited) |
September 30, |
(Amounts in
Thousands) |
2018 |
|
2017 |
Net Cash Flow used for
Operating Activities |
$ |
(10,013 |
) |
|
$ |
(169 |
) |
Net Cash Flow used for
Investing Activities |
(4,646 |
) |
|
(6,066 |
) |
Net Cash Flow provided
by (used for) Financing Activities |
43,714 |
|
|
(948 |
) |
Effect of Exchange Rate
Change on Cash and Cash Equivalents |
(514 |
) |
|
944 |
|
Net Increase (Decrease)
in Cash and Cash Equivalents |
28,541 |
|
|
(6,239 |
) |
Cash and Cash
Equivalents at Beginning of Period |
46,428 |
|
|
44,555 |
|
Cash and Cash
Equivalents at End of Period |
$ |
74,969 |
|
|
$ |
38,316 |
|
|
(Unaudited) |
|
|
Condensed
Consolidated Balance Sheets |
September 30,
2018 |
|
June 30, 2018 |
(Amounts in
Thousands) |
ASSETS |
|
|
|
Cash and cash
equivalents |
$ |
74,969 |
|
|
$ |
46,428 |
|
Receivables, net |
169,630 |
|
|
173,559 |
|
Contract
assets * |
43,619 |
|
|
— |
|
Inventories * |
188,572 |
|
|
201,596 |
|
Prepaid
expenses and other current assets |
15,587 |
|
|
15,405 |
|
Property
and Equipment, net |
134,831 |
|
|
137,210 |
|
Goodwill |
6,191 |
|
|
6,191 |
|
Other
Intangible Assets, net |
4,713 |
|
|
4,375 |
|
Other
Assets * |
24,764 |
|
|
23,994 |
|
Total
Assets |
$ |
662,876 |
|
|
$ |
608,758 |
|
|
|
|
|
LIABILITIES AND
SHARE OWNERS’ EQUITY |
|
|
|
Borrowings under credit facilities |
$ |
59,271 |
|
|
$ |
8,337 |
|
Accounts
payable |
192,657 |
|
|
187,788 |
|
Accrued
expenses * |
28,134 |
|
|
32,446 |
|
Long-term
income taxes payable |
11,286 |
|
|
12,361 |
|
Other |
12,644 |
|
|
12,299 |
|
Share
Owners’ Equity * |
358,884 |
|
|
355,527 |
|
Total
Liabilities and Share Owners’ Equity |
$ |
662,876 |
|
|
$ |
608,758 |
|
* The Company adopted new accounting guidance
for the recognition of revenue from contracts with customers on a
modified retrospective basis as of July 1, 2018. As a result
of the adoption of this new guidance, on July 1, 2018, the Company
recognized Contract assets of $43.2 million, reduced Inventories by
$39.2 million, reduced Other Assets by $0.9 million, increased
Accrued expenses by $0.2 million, and increased retained earnings
in Share Owners’ Equity by $3.1 million.
Reconciliation of Non-GAAP Financial
Measures(Unaudited)(Amounts in Thousands, except Per Share
Data)
|
Operating Income excluding Lawsuit Proceeds |
|
Three Months Ended |
|
September 30, |
|
2018 |
|
2017 |
Operating Income, as
reported (1) |
$ |
7,032 |
|
|
$ |
9,523 |
|
Less: Pre-tax
Settlement Proceeds from Lawsuit |
92 |
|
|
— |
|
Adjusted Operating
Income (1) |
$ |
6,940 |
|
|
$ |
9,523 |
|
|
|
|
|
|
|
|
|
Net
Income excluding Lawsuit Proceeds |
|
Three Months Ended |
|
September 30, |
|
2018 |
|
2017 |
Net Income, as
reported |
$ |
5,069 |
|
|
$ |
8,480 |
|
Less: After-tax
Settlement Proceeds from Lawsuit |
70 |
|
|
— |
|
Adjusted Net
Income |
$ |
4,999 |
|
|
$ |
8,480 |
|
|
|
|
|
|
|
|
|
Return on
Invested Capital (ROIC) |
|
|
|
|
Twelve Months Ended |
|
September 30, |
|
2018 |
|
2017 |
Operating Income (GAAP)
(1) |
$ |
39,547 |
|
|
$ |
39,568 |
|
Less: Pre-tax
Settlement Proceeds from Lawsuit |
$ |
92 |
|
|
$ |
— |
|
Adjusted Operating
Income (non-GAAP) (1) |
$ |
39,455 |
|
|
$ |
39,568 |
|
Tax Effect (2) |
$ |
9,152 |
|
|
$ |
8,723 |
|
After Tax Adjusted
Operating Income |
$ |
30,303 |
|
|
$ |
30,845 |
|
Average Invested
Capital (3) |
$ |
326,168 |
|
|
$ |
302,721 |
|
ROIC |
9.3 |
% |
|
10.2 |
% |
(1) |
Prior period Operating
Income has been retrospectively restated for the adoption of new
accounting guidance on improving the presentation of net periodic
pension cost and net periodic postretirement benefit cost. |
(2) |
Accumulated tax effect
utilizing the applicable quarterly effective tax rates, excludes
provisional tax adjustments related to the U.S. Tax Cuts and Jobs
Act. |
(3) |
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. SmithTreasurerTelephone:
812.634.4000E-mail: Investor.Relations@kimballelectronics.com
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