Kimball Electronics, Inc. Reports Second Quarter Fiscal Year 2020 Results
February 05 2020 - 4:05PM
Kimball Electronics, Inc. (NASDAQ: KE) today announced financial
results for its second quarter ended December 31, 2019.
| |
|
|
|
| |
Three Months Ended |
|
Six Months Ended |
| |
December 31, |
|
December 31, |
| (Amounts in Thousands, except
EPS) |
2019 |
|
2018 |
|
2019 |
|
2018 |
|
Net Sales |
$ |
307,084 |
|
|
$ |
284,149 |
|
|
$ |
620,469 |
|
|
$ |
549,769 |
|
| Operating Income |
$ |
8,684 |
|
|
$ |
10,212 |
|
|
$ |
19,799 |
|
|
$ |
17,244 |
|
| Adjusted Operating Income
(non-GAAP) (1) |
$ |
8,684 |
|
|
$ |
10,212 |
|
|
$ |
19,799 |
|
|
$ |
17,152 |
|
| Operating Income % |
2.8 |
% |
|
3.6 |
% |
|
3.2 |
% |
|
3.1 |
% |
| Net Income |
$ |
6,612 |
|
|
$ |
7,115 |
|
|
$ |
13,210 |
|
|
$ |
12,184 |
|
| Adjusted Net Income (non-GAAP)
(1) |
$ |
6,612 |
|
|
$ |
6,864 |
|
|
$ |
13,210 |
|
|
$ |
11,863 |
|
| Diluted EPS |
$ |
0.26 |
|
|
$ |
0.27 |
|
|
$ |
0.52 |
|
|
$ |
0.46 |
|
| Adjusted Diluted EPS
(non-GAAP) (1) |
$ |
0.26 |
|
|
$ |
0.26 |
|
|
$ |
0.52 |
|
|
$ |
0.45 |
|
|
(1) |
A reconciliation of GAAP and non-GAAP financial measures is
included below. |
|
|
|
Donald D. Charron, Chairman and Chief Executive Officer, stated,
“We are very pleased with the solid growth results we delivered in
the second quarter of fiscal year 2020 despite significant
headwinds, including the impact from the strike at General Motors
and continued softness in the overall market. We expect
softness and fluctuations in the overall demand to continue near
term as our customers revise their outlook over the next few
quarters, however, we remain cautiously optimistic that we will
achieve our goal of 8% organic growth for fiscal year 2020.”
Mr. Charron continued, “We are also pleased with our efforts to
minimize the operating margin impact of the strike at GM and we are
working diligently to respond to the volatility in demand and
change in the mix of our overall business. The signing of the
phase one China trade agreement and USMCA provide us with renewed
optimism as we further develop our long-term business plans for
those geographies.”
Second Quarter Fiscal Year 2020 Overview:
- Consolidated net sales increased 8% compared to the second
quarter of fiscal year 2019.
- Operating activities used cash of $0.3 million during the
quarter, which compares to cash provided by operating activities of
$5.6 million in the second quarter of fiscal year 2019.
- Cash conversion days (“CCD”) for the quarter ended
December 31, 2019 were 76 days, flat to the quarter ended
December 31, 2018, and up from 73 days in the first quarter of
fiscal year 2020. CCD is calculated as the sum of days sales
outstanding plus contract asset days plus production days supply on
hand less accounts payable days.
- Investments in capital expenditures were $10.4 million during
the quarter.
- $2.6 million was returned to Share Owners during the quarter in
the form of common stock repurchases.
- Cash and cash equivalents were $52.2 million and borrowings
outstanding on credit facilities were $119.4 million at
December 31, 2019, including $91.5 million classified as
long-term.
- Return on invested capital (“ROIC”), calculated for the
trailing twelve months, was 8.2% and 8.9% for the twelve months
ended December 31, 2019 and 2018, respectively (see
reconciliation of non-GAAP financial measures for ROIC
calculation).
Net Sales by Vertical Market:
|
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|
|
|
|
|
|
|
|
|
|
| |
Three Months Ended |
|
|
| |
December 31, |
|
|
| (Amounts in Millions) |
2019 |
|
2018 |
|
PercentChange |
|
Automotive |
$ |
134.9 |
|
|
$ |
112.4 |
|
|
20 |
% |
| Medical |
85.7 |
|
|
85.7 |
|
|
— |
% |
| Industrial |
66.4 |
|
|
62.2 |
|
|
7 |
% |
| Public Safety |
14.6 |
|
|
17.9 |
|
|
(18 |
)% |
| Other |
5.5 |
|
|
5.9 |
|
|
(7 |
)% |
|
Total Net Sales |
$ |
307.1 |
|
|
$ |
284.1 |
|
|
8 |
% |
| |
|
|
|
|
|
|
|
|
|
|
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, global health
emergencies, 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. 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,
2019.
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 for the three and
six months ended December 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 six months ended
December 31, 2018, for proceeds from a class action 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 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.
| |
| Conference
Call / Webcast |
| Date: |
February 6, 2020 |
| Time: |
10:00 AM Eastern Time |
| Dial-In #: |
800-992-4934 (International
Calls - 937-502-2251) |
| Conference ID: |
5496371 |
| |
|
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.Kimball
Electronics is a multifaceted manufacturing solutions provider of
electronics and diversified contract manufacturing services to
customers around the world. 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. 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. Kimball
Electronics, Inc. (NASDAQ: KE) 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, 2019 are as follows:
| |
|
|
|
|
|
|
|
| Condensed
Consolidated Statements of Income |
|
|
|
|
|
|
|
| (Unaudited) |
Three Months Ended |
| (Amounts in Thousands, except
Per Share Data) |
December 31, 2019 |
|
December 31, 2018 |
|
Net Sales |
$ |
307,084 |
|
|
100.0 |
% |
|
$ |
284,149 |
|
|
100.0 |
% |
| Cost of Sales |
286,573 |
|
|
93.3 |
% |
|
263,705 |
|
|
92.8 |
% |
| Gross Profit |
20,511 |
|
|
6.7 |
% |
|
20,444 |
|
|
7.2 |
% |
| Selling and Administrative
Expenses |
11,827 |
|
|
3.9 |
% |
|
10,232 |
|
|
3.6 |
% |
| Operating Income |
8,684 |
|
|
2.8 |
% |
|
10,212 |
|
|
3.6 |
% |
| Other Income (Expense),
net |
143 |
|
|
0.1 |
% |
|
(1,593 |
) |
|
(0.6 |
)% |
| Income Before Taxes on
Income |
8,827 |
|
|
2.9 |
% |
|
8,619 |
|
|
3.0 |
% |
| Provision for Income
Taxes |
2,215 |
|
|
0.7 |
% |
|
1,504 |
|
|
0.5 |
% |
| Net Income |
$ |
6,612 |
|
|
2.2 |
% |
|
$ |
7,115 |
|
|
2.5 |
% |
| |
|
|
|
|
|
|
|
|
| Earnings Per Share of Common
Stock: |
|
|
|
|
|
|
|
|
|
Basic |
$ |
0.26 |
|
|
|
|
$ |
0.27 |
|
|
|
|
Diluted |
$ |
0.26 |
|
|
|
|
$ |
0.27 |
|
|
|
| |
|
|
|
|
|
|
|
|
| Average Number of Shares
Outstanding: |
|
|
|
|
|
|
|
|
|
Basic |
25,247 |
|
|
|
|
25,993 |
|
|
|
|
Diluted |
25,330 |
|
|
|
|
26,036 |
|
|
|
| |
|
|
|
|
|
|
|
| (Unaudited) |
Six Months Ended |
| (Amounts in Thousands, except
Per Share Data) |
December 31, 2019 |
|
December 31, 2018 |
|
Net Sales |
$ |
620,469 |
|
|
100.0 |
% |
|
$ |
549,769 |
|
|
100.0 |
% |
| Cost of Sales |
577,765 |
|
|
93.1 |
% |
|
511,139 |
|
|
93.0 |
% |
| Gross Profit |
42,704 |
|
|
6.9 |
% |
|
38,630 |
|
|
7.0 |
% |
| Selling and Administrative
Expenses |
22,905 |
|
|
3.7 |
% |
|
21,478 |
|
|
3.9 |
% |
| Other General Income |
— |
|
|
— |
% |
|
(92 |
) |
|
— |
% |
| Operating Income |
19,799 |
|
|
3.2 |
% |
|
17,244 |
|
|
3.1 |
% |
| Other Income (Expense),
net |
(2,259 |
) |
|
(0.4 |
)% |
|
(2,147 |
) |
|
(0.4 |
)% |
| Income Before Taxes on
Income |
17,540 |
|
|
2.8 |
% |
|
15,097 |
|
|
2.7 |
% |
| Provision for Income
Taxes |
4,330 |
|
|
0.7 |
% |
|
2,913 |
|
|
0.5 |
% |
| Net Income |
$ |
13,210 |
|
|
2.1 |
% |
|
$ |
12,184 |
|
|
2.2 |
% |
| |
|
|
|
|
|
|
|
| Earnings Per Share of Common
Stock: |
|
|
|
|
|
|
|
|
Basic |
$ |
0.52 |
|
|
|
|
$ |
0.46 |
|
|
|
|
Diluted |
$ |
0.52 |
|
|
|
|
$ |
0.46 |
|
|
|
| |
|
|
|
|
|
|
|
| Average Number of Shares
Outstanding: |
|
|
|
|
|
|
|
|
Basic |
25,371 |
|
|
|
|
26,250 |
|
|
|
|
Diluted |
25,503 |
|
|
|
|
26,404 |
|
|
|
| |
|
| Condensed Consolidated
Statements of Cash Flows |
Six Months Ended |
| (Unaudited) |
December 31, |
| (Amounts in Thousands) |
2019 |
|
2018 |
|
Net Cash Flow provided by (used for) Operating Activities |
$ |
39,282 |
|
|
$ |
(4,394 |
) |
| Net Cash Flow used for
Investing Activities |
(21,974 |
) |
|
(52,481 |
) |
| Net Cash Flow (used for)
provided by Financing Activities |
(13,903 |
) |
|
47,264 |
|
| Effect of Exchange Rate Change
on Cash and Cash Equivalents |
(478 |
) |
|
(954 |
) |
| Net Increase (Decrease) in
Cash and Cash Equivalents |
2,927 |
|
|
(10,565 |
) |
| Cash and Cash Equivalents at
Beginning of Period |
49,276 |
|
|
46,428 |
|
| Cash and Cash Equivalents at
End of Period |
$ |
52,203 |
|
|
$ |
35,863 |
|
| |
|
|
|
| |
(Unaudited) |
|
|
| Condensed Consolidated
Balance Sheets |
December 31, 2019 |
|
June 30, 2019 |
| (Amounts in Thousands) |
| ASSETS |
|
|
|
|
Cash and cash equivalents |
$ |
52,203 |
|
|
$ |
49,276 |
|
|
Receivables, net |
196,323 |
|
|
225,555 |
|
|
Contract assets |
67,007 |
|
|
51,929 |
|
|
Inventories |
202,402 |
|
|
203,840 |
|
|
Prepaid expenses and other current assets |
22,578 |
|
|
24,713 |
|
|
Property and Equipment, net |
147,761 |
|
|
143,629 |
|
|
Goodwill |
19,936 |
|
|
18,104 |
|
|
Other Intangible Assets, net |
20,742 |
|
|
22,188 |
|
|
Other Assets |
29,013 |
|
|
24,877 |
|
|
Total Assets |
$ |
757,965 |
|
|
$ |
764,111 |
|
| |
|
|
|
| LIABILITIES AND SHARE
OWNERS’ EQUITY |
|
|
|
|
Current portion of borrowings under credit facilities |
$ |
27,930 |
|
|
$ |
34,713 |
|
|
Accounts payable |
195,159 |
|
|
197,001 |
|
|
Accrued expenses |
35,979 |
|
|
43,196 |
|
|
Long-term debt under credit facilities, less current portion |
91,500 |
|
|
91,500 |
|
|
Long-term income taxes payable |
9,765 |
|
|
9,765 |
|
|
Other |
20,794 |
|
|
18,082 |
|
|
Share Owners’ Equity |
376,838 |
|
|
369,854 |
|
|
Total Liabilities and Share Owners’ Equity |
$ |
757,965 |
|
|
$ |
764,111 |
|
| |
|
|
|
|
|
|
|
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, |
| |
2019 |
|
2018 |
|
2019 |
|
2018 |
|
Operating Income, as reported |
$ |
8,684 |
|
|
$ |
10,212 |
|
|
$ |
19,799 |
|
|
$ |
17,244 |
|
| Less: Pre-tax Settlement
Proceeds from Lawsuit |
— |
|
|
— |
|
|
— |
|
|
92 |
|
| Adjusted Operating Income |
$ |
8,684 |
|
|
$ |
10,212 |
|
|
$ |
19,799 |
|
|
$ |
17,152 |
|
| |
|
|
|
|
|
|
|
| Net
Income excluding Tax Reform and Lawsuit Proceeds |
| |
Three Months Ended |
|
Six Months Ended |
| |
December 31, |
|
December 31, |
| |
2019 |
|
2018 |
|
2019 |
|
2018 |
| Net Income, as reported |
$ |
6,612 |
|
|
$ |
7,115 |
|
|
$ |
13,210 |
|
|
$ |
12,184 |
|
| Add: Adjustments to Provision
for Income Taxes from Tax Reform |
— |
|
|
(251 |
) |
|
— |
|
|
(251 |
) |
| Less: After-tax Settlement
Proceeds from Lawsuit |
— |
|
|
— |
|
|
— |
|
|
70 |
|
| Adjusted Net Income |
$ |
6,612 |
|
|
$ |
6,864 |
|
|
$ |
13,210 |
|
|
$ |
11,863 |
|
| |
|
|
|
|
|
|
|
| Diluted
Earnings per Share excluding Tax Reform and Lawsuit
Proceeds |
| |
Three Months Ended |
|
Six Months Ended |
| |
December 31, |
|
December 31, |
| |
2019 |
|
2018 |
|
2019 |
|
2018 |
| Diluted Earnings per Share, as
reported |
$ |
0.26 |
|
|
$ |
0.27 |
|
|
$ |
0.52 |
|
|
$ |
0.46 |
|
| Add: Adjustments to Provision
for Income Taxes from Tax Reform |
— |
|
|
(0.01 |
) |
|
— |
|
|
(0.01 |
) |
| Less: Impact of Settlement
Proceeds from Lawsuit |
— |
|
|
— |
|
|
— |
|
|
— |
|
| Adjusted Diluted Earnings per
Share |
$ |
0.26 |
|
|
$ |
0.26 |
|
|
$ |
0.52 |
|
|
$ |
0.45 |
|
| |
|
|
|
|
|
|
|
| Return on Invested
Capital (ROIC) |
|
|
|
|
|
|
|
| |
|
|
Twelve Months Ended |
| |
|
|
December 31, |
| |
|
|
|
|
2019 |
|
2018 |
| Operating Income |
|
|
|
|
$ |
44,615 |
|
|
$ |
39,640 |
|
| Less: Pre-tax Settlement
Proceeds from Lawsuits |
|
|
|
|
$ |
215 |
|
|
$ |
92 |
|
| Adjusted Operating Income
(non-GAAP) |
|
|
|
|
$ |
44,400 |
|
|
$ |
39,548 |
|
| Tax Effect (1) |
|
|
|
|
$ |
9,020 |
|
|
$ |
8,982 |
|
| After-tax Adjusted Operating
Income |
|
|
|
|
$ |
35,380 |
|
|
$ |
30,566 |
|
| Average Invested Capital
(2) |
|
|
|
|
$ |
431,910 |
|
|
$ |
342,408 |
|
| ROIC |
|
|
|
|
8.2 |
% |
|
8.9 |
% |
|
(1) |
Accumulated tax effect utilizing the applicable quarterly effective
tax rates, excludes tax effect of adjusted items including
adjustments related to the U.S. Tax Cuts and Jobs Act. |
|
(2) |
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. Smith Treasurer Telephone: 812.634.4000 E-mail:
Investor.Relations@kimballelectronics.com
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