Kimball Electronics, Inc. Reports Third Quarter Fiscal Year 2020 Results
May 04 2020 - 4:05PM
Kimball Electronics, Inc. (NASDAQ: KE) today announced financial
results for its third quarter ended March 31, 2020.
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
March 31, |
|
March 31, |
(Amounts in Thousands, except EPS) |
2020 |
|
2019 |
|
2020 |
|
2019 |
Net Sales |
$ |
293,925 |
|
|
$ |
313,454 |
|
|
$ |
914,394 |
|
|
$ |
863,223 |
|
Operating Income |
$ |
10,588 |
|
|
$ |
14,497 |
|
|
$ |
30,387 |
|
|
$ |
31,741 |
|
Adjusted Operating Income (non-GAAP) (1) |
$ |
10,588 |
|
|
$ |
14,497 |
|
|
$ |
30,387 |
|
|
$ |
31,649 |
|
Operating Income % |
3.6 |
% |
|
4.6 |
% |
|
3.3 |
% |
|
3.7 |
% |
Net Income |
$ |
6,259 |
|
|
$ |
11,849 |
|
|
$ |
19,469 |
|
|
$ |
24,033 |
|
Adjusted Net Income (non-GAAP) (1) |
$ |
6,259 |
|
|
$ |
11,849 |
|
|
$ |
19,469 |
|
|
$ |
23,712 |
|
Diluted EPS |
$ |
0.25 |
|
|
$ |
0.46 |
|
|
$ |
0.76 |
|
|
$ |
0.92 |
|
Adjusted Diluted EPS (non-GAAP) (1) |
$ |
0.25 |
|
|
$ |
0.46 |
|
|
$ |
0.76 |
|
|
$ |
0.90 |
|
|
(1) A
reconciliation of GAAP and non-GAAP financial measures is included
below. |
Donald D. Charron, Chairman and Chief Executive Officer, stated,
“We are pleased with the results we delivered in the third quarter
of fiscal year 2020 despite the interruptions and challenges caused
by the COVID-19 pandemic. The safety and health of our
employees, customers, suppliers, and our communities are
paramount. We are making every effort to keep our facilities
safe, following current guidelines suggested by applicable country
authorities. Because of the variety of critical medical
device assemblies we manufacture around the world, our facilities
are classified as “essential businesses” and so all are currently
operational, but have been affected to varying degrees by
COVID-19.”
Mr. Charron continued, “We serve a diversified portfolio of
markets, geographies, and customers. In our third quarter, we
experienced a double-digit decline in sales to customers in our
medical vertical, which was primarily unrelated to COVID-19.
However, we are seeing a significant increase in demand for medical
assemblies for the near future, specifically those related to
respiratory care and patient monitoring products. We have customers
whose products are essential to the health and safety of people
around the globe. We are proud of what we do for the world, and we
are proud of our people and their extraordinary efforts and
contributions during this challenging time. I feel honored and
privileged that our Company can play such an important role to help
in this pandemic. In our automotive vertical, we started to see the
impact of COVID-19 in our third quarter results, although the
severity of the impact from the extensive automotive plant
shutdowns in North America and Europe will not be reflected in our
results until our fiscal fourth quarter.”
Michael K. Sergesketter, Vice President and Chief Financial
Officer, stated, “We ended the third quarter with $58.3 million in
cash and cash equivalents and debt on our credit facilities of
$122.4 million, of which $91.5 million is considered long-term. We
had $64.1 million in borrowings available under our credit
facilities at March 31, 2020, and we have the ability to increase
the borrowing capacity on our primary credit facility by an
additional $75 million upon request, subject to consent of the
participating lenders, as well as other options to enhance our
liquidity. We believe we are in a solid financial position and
expect to be able to weather the impact of COVID-19, based on what
we know today.”
Third Quarter Fiscal Year 2020 Overview:
- Consolidated net sales decreased 6% compared to the third
quarter of fiscal year 2019. Foreign currency headwinds had
an unfavorable 1% impact on net sales in the current quarter.
- Operating activities provided cash of $12.0 million during the
quarter, which compares to cash used by operating activities of
$14.6 million in the third quarter of fiscal year 2019.
- Cash conversion days (“CCD”) for the quarter ended
March 31, 2020 were 81 days, up from 75 days in the quarter
ended March 31, 2019 and 76 days in the second 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 $5.7 million during
the quarter.
- $2.7 million was returned to Share Owners during the quarter in
the form of common stock repurchases. The stock repurchase
plan has been temporarily suspended as a result of the COVID-19
environment.
- Return on invested capital (“ROIC”), calculated for the
trailing twelve months, was 7.1% and 9.0% for the twelve months
ended March 31, 2020 and 2019, respectively (see
reconciliation of non-GAAP financial measures for ROIC
calculation).
Net Sales by Vertical Market:
|
Three Months Ended |
|
|
|
March 31, |
|
|
(Amounts in Millions) |
2020 |
|
2019 |
|
Percent Change |
Automotive |
$ |
124.4 |
|
|
$ |
127.3 |
|
|
(2 |
)% |
Medical |
87.1 |
|
|
99.1 |
|
|
(12 |
)% |
Industrial |
65.6 |
|
|
68.0 |
|
|
(3 |
)% |
Public Safety |
12.5 |
|
|
15.1 |
|
|
(18 |
)% |
Other |
4.3 |
|
|
4.0 |
|
|
8 |
% |
Total Net Sales |
$ |
293.9 |
|
|
$ |
313.5 |
|
|
(6 |
)% |
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 including the COVID-19 pandemic, 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, the ability of the supply
chain to react successfully to the significant increase in demand
for certain medical components, 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 and other filings with the Securities and Exchange
Commission (the “SEC”).
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 nine months
ended March 31, 2019 related to proceeds from a class action
lawsuit settlement and adjustments to the provision for income
taxes resulting from the U.S. Tax Cuts and Jobs Act (“Tax
Reform”). 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 and tax
adjustments resulting from Tax Reform. Excluding these
amounts allows investors to meaningfully trend, analyze, and
benchmark the performance of the Company’s core operations.
Conference
Call / Webcast |
|
|
Date: |
May 5, 2020 |
Time: |
10:00 AM Eastern Time |
Live Webcast: |
investors.kimballelectronics.com/events-and-presentations |
Dial-In #: |
800-992-4934 (International
Calls - 937-502-2251) |
Conference ID: |
2576287 |
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 third quarter ended March 31,
2020 are as follows:
Condensed
Consolidated Statements of Income |
|
|
|
|
|
|
(Unaudited) |
Three Months Ended |
(Amounts in Thousands, except
Per Share Data) |
March 31, 2020 |
|
March 31, 2019 |
Net Sales |
$ |
293,925 |
|
|
100.0 |
% |
|
$ |
313,454 |
|
|
100.0 |
% |
Cost of Sales |
273,713 |
|
|
93.1 |
% |
|
286,900 |
|
|
91.5 |
% |
Gross Profit |
20,212 |
|
|
6.9 |
% |
|
26,554 |
|
|
8.5 |
% |
Selling and Administrative
Expenses |
9,624 |
|
|
3.3 |
% |
|
12,057 |
|
|
3.9 |
% |
Operating Income |
10,588 |
|
|
3.6 |
% |
|
14,497 |
|
|
4.6 |
% |
Other Income (Expense),
net |
(1,893 |
) |
|
(0.6 |
)% |
|
177 |
|
|
0.1 |
% |
Income Before Taxes on
Income |
8,695 |
|
|
3.0 |
% |
|
14,674 |
|
|
4.7 |
% |
Provision for Income
Taxes |
2,436 |
|
|
0.9 |
% |
|
2,825 |
|
|
0.9 |
% |
Net Income |
$ |
6,259 |
|
|
2.1 |
% |
|
$ |
11,849 |
|
|
3.8 |
% |
|
|
|
|
|
|
|
|
Earnings Per Share of Common
Stock: |
|
|
|
|
|
|
|
Basic |
$ |
0.25 |
|
|
|
|
$ |
0.46 |
|
|
|
Diluted |
$ |
0.25 |
|
|
|
|
$ |
0.46 |
|
|
|
|
|
|
|
|
|
|
|
Average Number of Shares
Outstanding: |
|
|
|
|
|
|
|
Basic |
25,181 |
|
|
|
|
25,479 |
|
|
|
Diluted |
25,287 |
|
|
|
|
25,568 |
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
Nine Months Ended |
(Amounts in Thousands, except
Per Share Data) |
March 31, 2020 |
|
March 31, 2019 |
Net Sales |
$ |
914,394 |
|
|
100.0 |
% |
|
$ |
863,223 |
|
|
100.0 |
% |
Cost of Sales |
851,478 |
|
|
93.1 |
% |
|
798,039 |
|
|
92.4 |
% |
Gross Profit |
62,916 |
|
|
6.9 |
% |
|
65,184 |
|
|
7.6 |
% |
Selling and Administrative
Expenses |
32,529 |
|
|
3.6 |
% |
|
33,535 |
|
|
3.9 |
% |
Other General Income |
— |
|
|
— |
% |
|
(92 |
) |
|
— |
% |
Operating Income |
30,387 |
|
|
3.3 |
% |
|
31,741 |
|
|
3.7 |
% |
Other Income (Expense),
net |
(4,152 |
) |
|
(0.4 |
)% |
|
(1,970 |
) |
|
(0.3 |
)% |
Income Before Taxes on
Income |
26,235 |
|
|
2.9 |
% |
|
29,771 |
|
|
3.4 |
% |
Provision for Income
Taxes |
6,766 |
|
|
0.8 |
% |
|
5,738 |
|
|
0.6 |
% |
Net Income |
$ |
19,469 |
|
|
2.1 |
% |
|
$ |
24,033 |
|
|
2.8 |
% |
|
|
|
|
|
|
|
|
Earnings Per Share of Common
Stock: |
|
|
|
|
|
|
|
Basic |
$ |
0.77 |
|
|
|
|
$ |
0.92 |
|
|
|
Diluted |
$ |
0.76 |
|
|
|
|
$ |
0.92 |
|
|
|
|
|
|
|
|
|
|
|
Average Number of Shares
Outstanding: |
|
|
|
|
|
|
|
Basic |
25,308 |
|
|
|
|
25,993 |
|
|
|
Diluted |
25,466 |
|
|
|
|
26,181 |
|
|
|
Condensed Consolidated
Statements of Cash Flows |
Nine Months Ended |
(Unaudited) |
March 31, |
(Amounts in Thousands) |
2020 |
|
2019 |
Net Cash Flow provided by (used for) Operating Activities |
$ |
51,318 |
|
|
$ |
(18,980 |
) |
Net Cash Flow used for
Investing Activities |
(27,602 |
) |
|
(59,464 |
) |
Net Cash Flow (used for)
provided by Financing Activities |
(13,489 |
) |
|
80,315 |
|
Effect of Exchange Rate Change
on Cash and Cash Equivalents |
(1,191 |
) |
|
(1,149 |
) |
Net Increase in Cash and Cash
Equivalents |
9,036 |
|
|
722 |
|
Cash and Cash Equivalents at
Beginning of Period |
49,276 |
|
|
46,428 |
|
Cash and Cash Equivalents at
End of Period |
$ |
58,312 |
|
|
$ |
47,150 |
|
|
(Unaudited) |
|
|
Condensed Consolidated
Balance Sheets |
March 31, 2020 |
|
June 30, 2019 |
(Amounts in Thousands) |
ASSETS |
|
|
|
Cash and cash equivalents |
$ |
58,312 |
|
|
$ |
49,276 |
|
Receivables, net |
191,343 |
|
|
225,555 |
|
Contract assets |
69,474 |
|
|
51,929 |
|
Inventories |
198,961 |
|
|
203,840 |
|
Prepaid expenses and other current assets |
25,374 |
|
|
24,713 |
|
Property and Equipment, net |
145,958 |
|
|
143,629 |
|
Goodwill |
19,936 |
|
|
18,104 |
|
Other Intangible Assets, net |
20,003 |
|
|
22,188 |
|
Other Assets |
28,889 |
|
|
24,877 |
|
Total Assets |
$ |
758,250 |
|
|
$ |
764,111 |
|
|
|
|
|
LIABILITIES AND SHARE
OWNERS’ EQUITY |
|
|
|
Current portion of borrowings under credit facilities |
$ |
30,901 |
|
|
$ |
34,713 |
|
Accounts payable |
191,551 |
|
|
197,001 |
|
Accrued expenses |
39,611 |
|
|
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 |
19,534 |
|
|
18,082 |
|
Share Owners’ Equity |
375,388 |
|
|
369,854 |
|
Total Liabilities and Share Owners’ Equity |
$ |
758,250 |
|
|
$ |
764,111 |
|
|
|
|
|
|
|
|
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, |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
Operating Income, as reported |
$ |
10,588 |
|
|
$ |
14,497 |
|
|
$ |
30,387 |
|
|
$ |
31,741 |
|
Less: Pre-tax Settlement
Proceeds from Lawsuit |
— |
|
|
— |
|
|
— |
|
|
92 |
|
Adjusted Operating Income |
$ |
10,588 |
|
|
$ |
14,497 |
|
|
$ |
30,387 |
|
|
$ |
31,649 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income excluding Tax Reform and Lawsuit Proceeds |
|
Three Months Ended |
|
Nine Months Ended |
|
March 31, |
|
March 31, |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
Net Income, as reported |
$ |
6,259 |
|
|
$ |
11,849 |
|
|
$ |
19,469 |
|
|
$ |
24,033 |
|
Add: Adjustments to Provision
for Income Taxes from Tax Reform |
— |
|
|
— |
|
|
— |
|
|
(251 |
) |
Less: After-tax Settlement
Proceeds from Lawsuit |
— |
|
|
— |
|
|
— |
|
|
70 |
|
Adjusted Net Income |
$ |
6,259 |
|
|
$ |
11,849 |
|
|
$ |
19,469 |
|
|
$ |
23,712 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
Earnings per Share excluding Tax Reform and Lawsuit
Proceeds |
|
Three Months Ended |
|
Nine Months Ended |
|
March 31, |
|
March 31, |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
Diluted Earnings per Share, as
reported |
$ |
0.25 |
|
|
$ |
0.46 |
|
|
$ |
0.76 |
|
|
$ |
0.92 |
|
Add: Adjustments to Provision
for Income Taxes from Tax Reform |
— |
|
|
— |
|
|
— |
|
|
(0.01 |
) |
Less: Impact of Settlement
Proceeds from Lawsuit |
— |
|
|
— |
|
|
— |
|
|
0.01 |
|
Adjusted Diluted Earnings per
Share |
$ |
0.25 |
|
|
$ |
0.46 |
|
|
$ |
0.76 |
|
|
$ |
0.90 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on Invested
Capital (ROIC) |
|
|
|
|
|
|
|
|
|
|
Twelve Months Ended |
|
|
|
March 31, |
|
|
|
|
|
2020 |
|
2019 |
Operating Income |
|
|
|
|
$ |
40,706 |
|
|
$ |
43,007 |
|
Less: Pre-tax Settlement
Proceeds from Lawsuits |
|
|
|
|
$ |
215 |
|
|
$ |
92 |
|
Adjusted Operating Income
(non-GAAP) |
|
|
|
|
$ |
40,491 |
|
|
$ |
42,915 |
|
Tax Effect (1) |
|
|
|
|
$ |
9,195 |
|
|
$ |
9,718 |
|
After-tax Adjusted Operating
Income |
|
|
|
|
$ |
31,296 |
|
|
$ |
33,197 |
|
Average Invested Capital
(2) |
|
|
|
|
$ |
438,634 |
|
|
$ |
366,995 |
|
ROIC |
|
|
|
|
7.1 |
% |
|
9.0 |
% |
|
(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. SmithTreasurerTelephone: 812.634.4000E-mail:
Investor.Relations@kimballelectronics.com
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