Kimball Electronics, Inc. (NASDAQ: KE) today announced financial
results for its fourth quarter and fiscal year ended June 30,
2020.
|
Three Months Ended |
|
Fiscal Year Ended |
|
June 30, |
|
June 30, |
(Amounts in Thousands, except
EPS) |
2020 |
|
2019 |
|
2020 |
|
2019 |
Net Sales |
$ |
286,156 |
|
|
$ |
318,621 |
|
|
$ |
1,200,550 |
|
|
$ |
1,181,844 |
|
Operating Income |
$ |
1,609 |
|
|
$ |
10,319 |
|
|
$ |
31,996 |
|
|
$ |
42,060 |
|
Adjusted Operating Income
(non-GAAP) (1) |
$ |
9,534 |
|
|
$ |
10,104 |
|
|
$ |
39,921 |
|
|
$ |
41,753 |
|
Operating Income % |
0.6 |
% |
|
3.2 |
% |
|
2.7 |
% |
|
3.6 |
% |
Adjusted Operating Income
(non-GAAP) % |
3.3 |
% |
|
3.2 |
% |
|
3.3 |
% |
|
3.5 |
% |
Net Income (Loss) |
$ |
(1,273 |
) |
|
$ |
7,525 |
|
|
$ |
18,196 |
|
|
$ |
31,558 |
|
Adjusted Net Income (non-GAAP)
(1) |
$ |
8,545 |
|
|
$ |
7,362 |
|
|
$ |
28,014 |
|
|
$ |
31,074 |
|
Diluted EPS |
$ |
(0.05 |
) |
|
$ |
0.29 |
|
|
$ |
0.71 |
|
|
$ |
1.21 |
|
Adjusted Diluted EPS
(non-GAAP) (1) |
$ |
0.34 |
|
|
$ |
0.29 |
|
|
$ |
1.10 |
|
|
$ |
1.19 |
|
(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 operating results we delivered in the
fourth quarter of fiscal year 2020 despite the global interruptions
and challenges caused by the COVID-19 pandemic. The health
and safety of our employees remains our number one priority, and we
continue to make every effort to keep our facilities safe,
utilizing protection shields, face masks, body temperature
scanning, social distancing, and proper hygiene. Of our 6,400
employees around the world, approximately 1% have tested positive
for the virus and in each positive test case, our responses
followed our procedures for communication to our employees, contact
tracing, self-quarantining, testing, and sanitization of the
affected work areas. Because of the disciplined response and
extraordinary effort of our people around the world, we were able
to perform our mission as an “essential business” and support the
significant increases from our medical customers for their
respiratory care and patient monitoring products.”
Mr. Charron continued, “In the fourth quarter of fiscal year
2020, sales in our medical vertical increased 23% compared to the
fourth quarter of fiscal year 2019 and were up 42%
sequentially. We expect the momentum in our medical vertical
to continue during the first half of fiscal year 2021. I feel
honored and privileged that our Company can play such an important
role to help in the recovery of people infected by the virus.”
Mr. Charron went on to say, “The sales decline in our automotive
vertical was disappointing, but was not surprising, given the
extensive automotive plant shutdowns across North America and
Europe during the months of April and May. While the
automotive industry restart has been slower than expected, we are
encouraged to see our June-ending run rates start to approach
pre-COVID-19 levels. Lastly, while changes to anticipated
revenues for our GES reporting unit resulted in an impairment
charge in the quarter, we remain optimistic about the long-term
opportunities for GES and continue to make progress on our
integration and diversification plans. During the quarter,
GES realized its strongest net sales and operating performance
since the acquisition in October 2018.”
Fourth Quarter Fiscal Year 2020 Overview:
- Consolidated net sales decreased 10% compared to the fourth
quarter of fiscal year 2019. Foreign currency headwinds had
an unfavorable 1% impact on net sales in the current quarter.
- Non-cash goodwill impairment charge of $7.9 million, $6.9
million net of tax, was recognized in the quarter for the GES
reporting unit as a result of a reduction in future anticipated
revenues. This impairment charge is an adjustment that does
not affect the Company’s cash position, cash flow from operations,
or debt covenants and is excluded for the non-GAAP measures.
- Adjusted net income (non-GAAP) in the current year fourth
quarter also excludes expense of $3.8 million, $2.9 million net of
tax, recorded in Non-operating expense for the final net working
capital adjustment after the measurement period related to the GES
acquisition.
- Operating activities provided cash of $21.5 million during the
quarter, which compares to cash provided by operating activities of
$12.2 million in the fourth quarter of fiscal year 2019.
- Cash conversion days (“CCD”) for the quarter ended
June 30, 2020 were 81 days, flat sequentially with the third
quarter of fiscal year 2020 and up from 77 days for the prior year
quarter ended June 30, 2019. 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 $11.0 million during
the quarter.
- Cash and cash equivalents were $65.0 million and borrowings
outstanding on credit facilities were $118.1 million at June 30,
2020, including $91.5 million classified as long term.
Net Sales by Vertical Market:
|
Three Months Ended |
|
|
|
June 30, |
|
|
(Amounts in Millions) |
2020 |
|
2019 |
|
Percent Change |
Automotive |
$ |
73.7 |
|
|
$ |
128.7 |
|
|
(43 |
)% |
Medical |
123.7 |
|
|
100.5 |
|
|
23 |
% |
Industrial |
74.3 |
|
|
68.3 |
|
|
9 |
% |
Public Safety |
12.0 |
|
|
16.1 |
|
|
(26 |
)% |
Other |
2.5 |
|
|
5.0 |
|
|
(51 |
)% |
Total Net Sales |
$ |
286.2 |
|
|
$ |
318.6 |
|
|
(10 |
)% |
Fiscal Year 2020 Overview:
- Net sales increased 2% in fiscal year 2020, setting a
new annual record of $1.2 billion.
- Cash flow provided by operating activities for fiscal
year 2020 was $72.8 million, a new annual
record.
- Investments in capital expenditures were $38.7 million during
fiscal year 2020.
- Return on invested capital (“ROIC”) was 6.9% and 8.7% for
fiscal years 2020 and 2019, respectively (ROIC is a non-GAAP
financial measure, see reconciliation of non-GAAP financial
measures for ROIC calculation).
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 three months
and fiscal year ended June 30, 2020 related to goodwill impairment
and a final net working capital adjustment expense after the
measurement period on the GES acquisition, for the three months and
fiscal year ended June 30, 2019 related to proceeds from a
class action lawsuit settlement, and for the fiscal year ended June
30, 2019 related to 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 goodwill impairment, expense of the final net working capital
adjustment, 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: |
|
August 19, 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: |
|
5677104 |
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 fourth quarter and fiscal year
ended June 30, 2020 are as follows:
Condensed
Consolidated Statements of Income |
|
|
|
|
|
|
(Unaudited) |
Three Months Ended |
(Amounts in Thousands, except
Per Share Data) |
June 30, 2020 |
|
June 30, 2019 |
Net Sales |
$ |
286,156 |
|
|
100.0 |
% |
|
$ |
318,621 |
|
|
100.0 |
% |
Cost of Sales |
265,231 |
|
|
92.7 |
% |
|
295,399 |
|
|
92.7 |
% |
Gross Profit |
20,925 |
|
|
7.3 |
% |
|
23,222 |
|
|
7.3 |
% |
Selling and Administrative
Expenses |
11,391 |
|
|
4.0 |
% |
|
13,118 |
|
|
4.2 |
% |
Other General Income |
— |
|
|
— |
% |
|
(215 |
) |
|
(0.1 |
)% |
Goodwill Impairment |
7,925 |
|
|
2.7 |
% |
|
— |
|
|
0.0 |
% |
Operating Income |
1,609 |
|
|
0.6 |
% |
|
10,319 |
|
|
3.2 |
% |
Other Income (Expense),
net |
(2,687 |
) |
|
(1.0 |
)% |
|
(1,605 |
) |
|
(0.5 |
)% |
Income (Loss) Before Taxes on
Income |
(1,078 |
) |
|
(0.4 |
)% |
|
8,714 |
|
|
2.7 |
% |
Provision for Income
Taxes |
195 |
|
|
0.0 |
% |
|
1,189 |
|
|
0.3 |
% |
Net Income (Loss) |
$ |
(1,273 |
) |
|
(0.4 |
)% |
|
$ |
7,525 |
|
|
2.4 |
% |
|
|
|
|
|
|
|
|
Earnings (Loss) Per Share of
Common Stock: |
|
|
|
|
|
|
|
Basic |
$ |
(0.05 |
) |
|
|
|
$ |
0.30 |
|
|
|
Diluted |
$ |
(0.05 |
) |
|
|
|
$ |
0.29 |
|
|
|
|
|
|
|
|
|
|
|
Average Number of Shares
Outstanding: (1) |
|
|
|
|
|
|
|
Basic |
25,049 |
|
|
|
|
25,450 |
|
|
|
Diluted |
25,049 |
|
|
|
|
25,622 |
|
|
|
|
|
|
|
|
|
|
|
(1) For the three months ended June 30, 2020, all outstanding
stock compensation awards were antidilutive, as a result of the net
loss recognized for the period, and were excluded from the dilutive
calculation, including 210,000 average outstanding performance
shares and 30,000 outstanding average deferred stock units.
|
|
|
|
|
|
|
|
(Unaudited) |
Fiscal Year Ended |
(Amounts in Thousands, except
Per Share Data) |
June 30, 2020 |
|
June 30, 2019 |
Net Sales |
$ |
1,200,550 |
|
|
100.0 |
% |
|
$ |
1,181,844 |
|
|
100.0 |
% |
Cost of Sales |
1,116,709 |
|
|
93.0 |
% |
|
1,093,438 |
|
|
92.5 |
% |
Gross Profit |
83,841 |
|
|
7.0 |
% |
|
88,406 |
|
|
7.5 |
% |
Selling and Administrative
Expenses |
43,920 |
|
|
3.7 |
% |
|
46,653 |
|
|
3.9 |
% |
Other General Income |
— |
|
|
— |
% |
|
(307 |
) |
|
— |
% |
Goodwill Impairment |
7,925 |
|
|
0.6 |
% |
|
— |
|
|
— |
% |
Operating Income |
31,996 |
|
|
2.7 |
% |
|
42,060 |
|
|
3.6 |
% |
Other Income (Expense),
net |
(6,839 |
) |
|
(0.6 |
)% |
|
(3,575 |
) |
|
(0.3 |
)% |
Income Before Taxes on
Income |
25,157 |
|
|
2.1 |
% |
|
38,485 |
|
|
3.3 |
% |
Provision for Income
Taxes |
6,961 |
|
|
0.6 |
% |
|
6,927 |
|
|
0.6 |
% |
Net Income |
$ |
18,196 |
|
|
1.5 |
% |
|
$ |
31,558 |
|
|
2.7 |
% |
|
|
|
|
|
|
|
|
Earnings Per Share of Common
Stock: |
|
|
|
|
|
|
|
Basic |
$ |
0.72 |
|
|
|
|
$ |
1.22 |
|
|
|
Diluted |
$ |
0.71 |
|
|
|
|
$ |
1.21 |
|
|
|
|
|
|
|
|
|
|
|
Average Number of Shares
Outstanding: |
|
|
|
|
|
|
|
Basic |
25,243 |
|
|
|
|
25,857 |
|
|
|
Diluted |
25,428 |
|
|
|
|
26,082 |
|
|
|
Condensed Consolidated
Statements of Cash Flows |
Fiscal Year Ended |
(Unaudited) |
June 30, |
(Amounts in Thousands) |
2020 |
|
2019 |
Net Cash Flow provided by (used for) Operating Activities |
$ |
72,808 |
|
|
$ |
(6,748 |
) |
Net Cash Flow used for
Investing Activities |
(38,482 |
) |
|
(68,709 |
) |
Net Cash Flow (used for)
provided by Financing Activities |
(17,934 |
) |
|
79,430 |
|
Effect of Exchange Rate Change
on Cash and Cash Equivalents |
(678 |
) |
|
(1,125 |
) |
Net Increase in Cash and Cash
Equivalents |
15,714 |
|
|
2,848 |
|
Cash and Cash Equivalents at
Beginning of Period |
49,276 |
|
|
46,428 |
|
Cash and Cash Equivalents at
End of Period |
$ |
64,990 |
|
|
$ |
49,276 |
|
|
(Unaudited) |
|
|
Condensed Consolidated
Balance Sheets |
June 30, 2020 |
|
June 30, 2019 |
(Amounts in Thousands) |
ASSETS |
|
|
|
Cash and cash equivalents |
$ |
64,990 |
|
|
$ |
49,276 |
|
Receivables, net |
180,133 |
|
|
225,555 |
|
Contract assets |
70,350 |
|
|
51,929 |
|
Inventories |
219,043 |
|
|
203,840 |
|
Prepaid expenses and
other current assets |
23,891 |
|
|
24,713 |
|
Property and Equipment,
net |
154,529 |
|
|
143,629 |
|
Goodwill |
12,011 |
|
|
18,104 |
|
Other Intangible
Assets, net |
19,343 |
|
|
22,188 |
|
Other Assets |
30,539 |
|
|
24,877 |
|
Total Assets |
$ |
774,829 |
|
|
$ |
764,111 |
|
|
|
|
|
LIABILITIES AND SHARE
OWNERS’ EQUITY |
|
|
|
Current portion of
borrowings under credit facilities |
$ |
26,638 |
|
|
$ |
34,713 |
|
Accounts payable |
203,703 |
|
|
197,001 |
|
Accrued expenses |
42,264 |
|
|
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 |
21,594 |
|
|
18,082 |
|
Share Owners’
Equity |
379,365 |
|
|
369,854 |
|
Total Liabilities and Share Owners’ Equity |
$ |
774,829 |
|
|
$ |
764,111 |
|
Reconciliation of Non-GAAP Financial Measures |
|
|
|
|
|
|
(Unaudited) |
|
|
|
|
|
|
|
(Amounts in Thousands, except
Per Share Data) |
|
|
|
|
|
|
|
Operating
Income excluding Goodwill Impairment and Lawsuit
Proceeds |
|
Three Months Ended |
|
Fiscal Year Ended |
|
June 30, |
|
June 30, |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
Operating Income, as reported |
$ |
1,609 |
|
|
$ |
10,319 |
|
|
$ |
31,996 |
|
|
$ |
42,060 |
|
Add: Goodwill Impairment |
7,925 |
|
|
— |
|
|
7,925 |
|
|
— |
|
Less: Pre-tax Settlement
Proceeds from Lawsuit |
— |
|
|
215 |
|
|
— |
|
|
307 |
|
Adjusted Operating Income |
$ |
9,534 |
|
|
$ |
10,104 |
|
|
$ |
39,921 |
|
|
$ |
41,753 |
|
|
|
|
|
|
|
|
|
Net
Income excluding Goodwill Impairment, Net Working Capital
Adjustment from GES Acquisition, Tax Reform, and Lawsuit
Proceeds |
|
Three Months Ended |
|
Fiscal Year Ended |
|
June 30, |
|
June 30, |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
Net Income (Loss), as
reported |
$ |
(1,273 |
) |
|
$ |
7,525 |
|
|
$ |
18,196 |
|
|
$ |
31,558 |
|
Add: After-tax Goodwill
Impairment |
6,947 |
|
|
— |
|
|
6,947 |
|
|
— |
|
Add: After-tax Net
Working Capital Adjustment on GES Acquisition |
2,871 |
|
|
— |
|
|
2,871 |
|
|
— |
|
Add: Adjustments to Provision
for Income Taxes from Tax Reform |
— |
|
|
— |
|
|
— |
|
|
(251 |
) |
Less: After-tax Settlement
Proceeds from Lawsuit |
— |
|
|
163 |
|
|
— |
|
|
233 |
|
Adjusted Net Income |
$ |
8,545 |
|
|
$ |
7,362 |
|
|
$ |
28,014 |
|
|
$ |
31,074 |
|
|
|
|
|
|
|
|
|
Diluted
Earnings per Share excluding Goodwill Impairment, Net Working
Capital Adjustment from GES Acquisition, Tax Reform, and Lawsuit
Proceeds |
|
Three Months Ended |
|
Fiscal Year Ended |
|
June 30, |
|
June 30, |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
Diluted Earnings (Loss) per
Share, as reported |
$ |
(0.05 |
) |
|
$ |
0.29 |
|
|
$ |
0.71 |
|
|
$ |
1.21 |
|
Add: Impact of Goodwill
Impairment |
0.28 |
|
|
|
|
0.28 |
|
|
|
Add: Impact of Net Working
Capital Adjustment on GES Acquisition |
0.11 |
|
|
— |
|
|
0.11 |
|
|
— |
|
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 |
$ |
0.34 |
|
|
$ |
0.29 |
|
|
$ |
1.10 |
|
|
$ |
1.19 |
|
|
|
|
|
|
|
|
|
Return on
Invested Capital (ROIC) excluding Goodwill Impairment and Lawsuit
Proceeds |
|
|
|
Fiscal Year Ended |
|
|
|
June 30, |
|
|
|
|
|
2020 |
|
2019 |
Operating Income |
|
|
|
|
$ |
31,996 |
|
|
$ |
42,060 |
|
Add: Goodwill Impairment |
|
|
|
|
$ |
7,925 |
|
|
$ |
— |
|
Less: Pre-tax Settlement
Proceeds from Lawsuits |
|
|
|
|
$ |
— |
|
|
$ |
307 |
|
Adjusted Operating Income
(non-GAAP) |
|
|
|
|
$ |
39,921 |
|
|
$ |
41,753 |
|
Tax Effect (1) |
|
|
|
|
$ |
9,715 |
|
|
$ |
7,729 |
|
After-tax Adjusted Operating
Income |
|
|
|
|
$ |
30,206 |
|
|
$ |
34,024 |
|
Average Invested Capital
(2) |
|
|
|
|
$ |
437,263 |
|
|
$ |
390,528 |
|
ROIC |
|
|
|
|
6.9 |
% |
|
8.7 |
% |
(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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