Kimball Electronics, Inc. (Nasdaq: KE), a leading global
electronics manufacturing services provider of high-quality,
durable electronic products, today announced financial results for
its third quarter ended March 31, 2019.
|
Three Months Ended |
|
Nine Months Ended |
|
March 31, |
|
March 31, |
(Amounts in Thousands, except
EPS) |
2019 (1) |
|
2018 |
|
2019 (1) |
|
2018 |
Net Sales |
$ |
313,454 |
|
|
$ |
283,938 |
|
|
$ |
863,223 |
|
|
$ |
795,293 |
|
Operating Income (2) |
$ |
14,497 |
|
|
$ |
11,130 |
|
|
$ |
31,741 |
|
|
$ |
30,772 |
|
Adjusted Operating Income
(non-GAAP) (2) (3) |
$ |
14,497 |
|
|
$ |
11,130 |
|
|
$ |
31,649 |
|
|
$ |
30,772 |
|
Operating Income % |
4.6 |
% |
|
3.9 |
% |
|
3.7 |
% |
|
3.9 |
% |
Net Income |
$ |
11,849 |
|
|
$ |
10,835 |
|
|
$ |
24,033 |
|
|
$ |
10,968 |
|
Adjusted Net Income (non-GAAP)
(3) |
$ |
11,849 |
|
|
$ |
10,705 |
|
|
$ |
23,712 |
|
|
$ |
27,418 |
|
Diluted EPS |
$ |
0.46 |
|
|
$ |
0.40 |
|
|
$ |
0.92 |
|
|
$ |
0.41 |
|
Adjusted Diluted EPS
(non-GAAP) (3) |
$ |
0.46 |
|
|
$ |
0.40 |
|
|
$ |
0.90 |
|
|
$ |
1.01 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) As of the beginning of fiscal year 2019, the Company
adopted the new accounting standard on Revenue from Contracts with
Customers on a modified retrospective basis. For the three
months ended March 31, 2019, the adoption increased Net Sales $2.6
million, Net Income increased $0.4 million, and Diluted EPS
increased by $0.01. For the nine months ended March 31, 2019,
the adoption increased Net Sales $9.0 million, Net Income increased
$0.6 million, and Diluted EPS increased $0.03. The prior
periods were 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 delivered record sales, operating income, net income, and
diluted EPS in our third quarter. Strong double-digit organic
growth in our Medical and Industrial end market verticals helped us
exceed our 8% organic growth goal and set the new quarterly sales
record. New program launches and ramp-ups more than offset
continued softness in certain other programs primarily caused by
global macro-economic conditions and trade uncertainties.”
Mr. Charron continued, “We made excellent progress optimizing
the business as we were successful expanding our operating margin
by 70 basis points when compared to the third quarter of fiscal
year 2018, helping us exceed our goal of 4.5% operating
income. Our acquisition integration work with GES continues
as we remain focused on our strategy to become a multifaceted
manufacturing solutions company. We have good momentum, and
we are cautiously optimistic that we can begin to consistently
achieve our goals of 8% organic growth and 4.5% operating
income.”
Third Quarter Fiscal Year 2019 Overview:
- Consolidated net sales increased 10% compared to the third
quarter of fiscal year 2018. Net sales in the third quarter
were impacted by:○ Unfavorable foreign currency movements
decreased net sales by approximately 3% compared to the prior year
third quarter.○ Net sales during the quarter were up 2% as a
result of the GES acquisition and 1% as a result of the adoption of
new revenue recognition accounting standards.
- Operating income, as a percent of net sales, of 4.6% represents
our best quarter since the second quarter of fiscal year 2017.
- The Romania facility continued its progress with achieving the
milestone of generating net income for the quarter.
- Interest expense was $1.2 million in the current year quarter
compared to $0.1 million in the prior year quarter as a result of
increased borrowings on the credit facilities and is included in
Other Income (Expense), net on the Condensed Consolidated
Statements of Income.
- Operating activities used cash of $14.6 million during the
quarter largely related to increased accounts receivable on the
higher sales volumes, which compares to cash provided by operating
activities of $9.5 million in the third quarter of fiscal year
2018.
- Cash conversion days (“CCD”) for the quarter ended
March 31, 2019 were 75 days, up from 62 days in the same
quarter last year primarily related to an increase in raw material
inventories to maintain appropriate buffer stock levels in the
current tight supply environment. CCD is calculated as the
sum of days sales outstanding plus contract asset days plus
production days supply on hand less accounts payable days.
- $4.7 million was returned to Share Owners during the quarter in
the form of common stock repurchases.
- Investments in capital expenditures were $6.9 million during
the quarter.
- Cash and cash equivalents were $47.2 million and borrowings
outstanding on credit facilities were $127.0 million at
March 31, 2019, including $91.5 million classified as
long-term.
- Return on invested capital (“ROIC”), calculated for the
trailing twelve months, was 9.0% and 10.0% for the twelve months
ended March 31, 2019 and 2018, respectively (see
reconciliation of non-GAAP financial measures for ROIC
calculation).
Net Sales by Vertical Market:
|
Three Months Ended |
|
|
|
March 31, |
|
|
(Amounts in Millions) |
2019 |
|
2018 |
|
PercentChange |
Automotive |
$ |
127.3 |
|
|
$ |
136.2 |
|
|
(7 |
)% |
Medical |
99.1 |
|
|
77.8 |
|
|
27 |
% |
Industrial |
68.0 |
|
|
53.3 |
|
|
27 |
% |
Public Safety |
15.1 |
|
|
14.3 |
|
|
5 |
% |
Other |
4.0 |
|
|
2.3 |
|
|
74 |
% |
Total Net Sales |
$ |
313.5 |
|
|
$ |
283.9 |
|
|
10 |
% |
|
|
|
|
|
|
|
|
|
|
|
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, ramp up of 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 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 in the nine months
ended March 31, 2019 and in the three and nine months ended
March 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 nine months ended March 31, 2019, 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 provisional 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. Many of the Company’s internal
performance measures that management uses to make certain operating
decisions excludes these items to enable meaningful trending of
core operating metrics.
|
Conference Call / Webcast |
|
|
Date: |
May 8, 2019 |
Time: |
10:00 AM Eastern Time |
Dial-In #: |
800-992-4934 (International Calls - 937-502-2251) |
Conference ID: |
3073689 |
|
|
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 and further 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 third quarter ended March 31,
2019 are as follows:
|
|
|
|
|
|
|
Condensed
Consolidated Statements of Income |
|
|
|
|
|
|
(Unaudited) |
Three Months Ended |
(Amounts in Thousands, except
Per Share Data) |
March 31, 2019 (1) |
|
March 31, 2018 |
Net Sales |
$ |
313,454 |
|
|
100.0 |
% |
|
$ |
283,938 |
|
|
100.0 |
% |
Cost of Sales (2) |
286,900 |
|
|
91.5 |
% |
|
261,057 |
|
|
91.9 |
% |
Gross Profit (2) |
26,554 |
|
|
8.5 |
% |
|
22,881 |
|
|
8.1 |
% |
Selling and Administrative
Expenses (2) |
12,057 |
|
|
3.9 |
% |
|
11,751 |
|
|
4.2 |
% |
Operating Income (2) |
14,497 |
|
|
4.6 |
% |
|
11,130 |
|
|
3.9 |
% |
Other Income (Expense), net
(2) |
177 |
|
|
0.1 |
% |
|
1,999 |
|
|
0.7 |
% |
Income Before Taxes on
Income |
14,674 |
|
|
4.7 |
% |
|
13,129 |
|
|
4.6 |
% |
Provision for Income
Taxes |
2,825 |
|
|
0.9 |
% |
|
2,294 |
|
|
0.8 |
% |
Net Income |
$ |
11,849 |
|
|
3.8 |
% |
|
$ |
10,835 |
|
|
3.8 |
% |
|
|
|
|
|
|
|
|
Earnings Per Share of Common
Stock: |
|
|
|
|
|
|
|
Basic |
$ |
0.46 |
|
|
|
|
$ |
0.41 |
|
|
|
Diluted |
$ |
0.46 |
|
|
|
|
$ |
0.40 |
|
|
|
|
|
|
|
|
|
|
|
Average Number of Shares
Outstanding: |
|
|
|
|
|
|
|
Basic |
25,479 |
|
|
|
|
26,714 |
|
|
|
Diluted |
25,568 |
|
|
|
|
26,846 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
Nine Months Ended |
(Amounts in Thousands, except
Per Share Data) |
March 31, 2019 (1) |
|
March 31, 2018 |
Net Sales |
$ |
863,223 |
|
|
100.0 |
% |
|
$ |
795,293 |
|
|
100.0 |
% |
Cost of Sales (2) |
798,039 |
|
|
92.4 |
% |
|
732,038 |
|
|
92.0 |
% |
Gross Profit (2) |
65,184 |
|
|
7.6 |
% |
|
63,255 |
|
|
8.0 |
% |
Selling and Administrative
Expenses (2) |
33,535 |
|
|
3.9 |
% |
|
32,483 |
|
|
4.1 |
% |
Other General Income |
(92 |
) |
|
— |
% |
|
— |
|
|
— |
% |
Operating Income (2) |
31,741 |
|
|
3.7 |
% |
|
30,772 |
|
|
3.9 |
% |
Other Income (Expense), net
(2) |
(1,970 |
) |
|
(0.3 |
)% |
|
3,778 |
|
|
0.4 |
% |
Income Before Taxes on
Income |
29,771 |
|
|
3.4 |
% |
|
34,550 |
|
|
4.3 |
% |
Provision for Income
Taxes |
5,738 |
|
|
0.6 |
% |
|
23,582 |
|
|
2.9 |
% |
Net Income |
$ |
24,033 |
|
|
2.8 |
% |
|
$ |
10,968 |
|
|
1.4 |
% |
|
|
|
|
|
|
|
|
Earnings Per Share of Common
Stock: |
|
|
|
|
|
|
|
Basic |
$ |
0.92 |
|
|
|
|
$ |
0.41 |
|
|
|
Diluted |
$ |
0.92 |
|
|
|
|
$ |
0.41 |
|
|
|
|
|
|
|
|
|
|
|
Average Number of Shares
Outstanding: |
|
|
|
|
|
|
|
Basic |
25,993 |
|
|
|
|
26,779 |
|
|
|
Diluted |
26,181 |
|
|
|
|
27,006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) As of July 1, 2018, the Company adopted the new
accounting standard on Revenue from Contracts with Customers on a
modified retrospective basis. For the three months ended
March 31, 2019, the adoption increased Net Sales $2.6 million, Net
Income increased $0.4 million, and Diluted EPS increased by
$0.01. For the nine months ended March 31, 2019, the adoption
increased Net Sales $9.0 million, Net Income increased $0.6
million, and Diluted EPS increased $0.03. The prior periods
were not restated.(2) The Condensed Consolidated Statements
of Income for the three and nine months ended March 31, 2018 have
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 |
Nine Months Ended |
(Unaudited) |
March 31, |
(Amounts in Thousands) |
2019 |
|
2018 |
Net Cash Flow (used for) provided by Operating Activities |
$ |
(18,980 |
) |
|
$ |
20,888 |
|
Net Cash Flow used for
Investing Activities |
(59,464 |
) |
|
(21,823 |
) |
Net Cash Flow provided by
(used for) Financing Activities |
80,315 |
|
|
(1,718 |
) |
Effect of Exchange Rate Change
on Cash and Cash Equivalents |
(1,149 |
) |
|
2,342 |
|
Net Increase (Decrease) in
Cash and Cash Equivalents |
722 |
|
|
(311 |
) |
Cash and Cash Equivalents at
Beginning of Period |
46,428 |
|
|
44,555 |
|
Cash and Cash Equivalents at
End of Period |
$ |
47,150 |
|
|
$ |
44,244 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
|
Condensed Consolidated
Balance Sheets |
March 31, |
|
June 30, |
(Amounts in Thousands) |
2019 |
|
2018 |
ASSETS |
|
|
|
Cash and cash equivalents |
$ |
47,150 |
|
|
$ |
46,428 |
|
Receivables, net |
225,775 |
|
|
173,559 |
|
Contract assets (1) |
52,222 |
|
|
— |
|
Inventories (1) |
213,200 |
|
|
201,596 |
|
Prepaid expenses and other current assets |
23,893 |
|
|
15,405 |
|
Property and Equipment, net |
140,560 |
|
|
137,210 |
|
Goodwill |
11,409 |
|
|
6,191 |
|
Other Intangible Assets, net |
23,038 |
|
|
4,375 |
|
Other Assets (1) |
24,633 |
|
|
23,994 |
|
Total Assets |
$ |
761,880 |
|
|
$ |
608,758 |
|
|
|
|
|
LIABILITIES AND SHARE
OWNERS’ EQUITY |
|
|
|
Current portion of borrowings under credit facilities |
$ |
35,544 |
|
|
$ |
8,337 |
|
Accounts payable |
209,819 |
|
|
187,788 |
|
Accrued expenses (1) |
39,385 |
|
|
32,446 |
|
Long-term debt under credit facilities, less current portion |
91,500 |
|
|
— |
|
Long-term income taxes payable |
10,937 |
|
|
12,361 |
|
Other |
15,220 |
|
|
12,299 |
|
Share Owners’ Equity (1) |
359,475 |
|
|
355,527 |
|
Total Liabilities and Share Owners’ Equity |
$ |
761,880 |
|
|
$ |
608,758 |
|
|
|
|
|
|
|
|
|
(1) 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 |
|
Nine Months Ended |
|
March 31, |
|
March 31, |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Operating Income, as reported (1) |
$ |
14,497 |
|
|
$ |
11,130 |
|
|
$ |
31,741 |
|
|
$ |
30,772 |
|
Less: Pre-tax Settlement
Proceeds from Lawsuit |
— |
|
|
— |
|
|
92 |
|
|
— |
|
Adjusted Operating Income
(1) |
$ |
14,497 |
|
|
$ |
11,130 |
|
|
$ |
31,649 |
|
|
$ |
30,772 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income excluding Tax Reform and Lawsuit Proceeds |
|
Three Months Ended |
|
Nine Months Ended |
|
March 31, |
|
March 31, |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Net Income, as reported |
$ |
11,849 |
|
|
$ |
10,835 |
|
|
$ |
24,033 |
|
|
$ |
10,968 |
|
Add: Adjustments to Provision
for Income Taxes from Tax Reform during measurement period |
— |
|
|
(130 |
) |
|
(251 |
) |
|
16,450 |
|
Less: After-tax Settlement
Proceeds from Lawsuit |
— |
|
|
— |
|
|
70 |
|
|
— |
|
Adjusted Net Income |
$ |
11,849 |
|
|
$ |
10,705 |
|
|
$ |
23,712 |
|
|
$ |
27,418 |
|
|
|
|
|
|
|
|
|
Diluted
Earnings per Share excluding Tax Reform and Lawsuit
Proceeds |
|
Three Months Ended |
|
Nine Months Ended |
|
March 31, |
|
March 31, |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Diluted Earnings per Share, as
reported |
$ |
0.46 |
|
|
$ |
0.40 |
|
|
$ |
0.92 |
|
|
$ |
0.41 |
|
Add: Adjustments to Provision
for Income Taxes from Tax Reform during measurement period |
— |
|
|
— |
|
|
(0.01 |
) |
|
0.60 |
|
Less: Impact of Settlement
Proceeds from Lawsuits |
— |
|
|
— |
|
|
0.01 |
|
|
— |
|
Adjusted Diluted Earnings per
Share |
$ |
0.46 |
|
|
$ |
0.40 |
|
|
$ |
0.90 |
|
|
$ |
1.01 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on Invested
Capital (ROIC) |
|
|
|
|
|
|
|
|
|
|
Twelve Months Ended |
|
|
|
March 31, |
|
|
|
|
|
2019 |
|
2018 |
Operating Income (GAAP)
(1) |
|
|
|
|
$ |
43,007 |
|
|
$ |
39,177 |
|
Less: Pre-tax Settlement
Proceeds from Lawsuit |
|
|
|
|
$ |
92 |
|
|
$ |
— |
|
Adjusted Operating Income
(non-GAAP) (1) |
|
|
|
|
$ |
42,915 |
|
|
$ |
39,177 |
|
Tax Effect (2) |
|
|
|
|
$ |
9,718 |
|
|
$ |
7,642 |
|
After Tax Adjusted Operating
Income |
|
|
|
|
$ |
33,197 |
|
|
$ |
31,535 |
|
Average Invested Capital
(3) |
|
|
|
|
$ |
366,995 |
|
|
$ |
315,751 |
|
ROIC |
|
|
|
|
9.0 |
% |
|
10.0 |
% |
|
|
|
|
|
|
|
|
|
|
(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
adjustments to provision for income taxes 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
Kimball Electronics (NASDAQ:KE)
Historical Stock Chart
From Aug 2024 to Sep 2024
Kimball Electronics (NASDAQ:KE)
Historical Stock Chart
From Sep 2023 to Sep 2024