8-K
Kimball Electronics, Inc. (KE)
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) August 16, 2023
KIMBALL ELECTRONICS, INC.
________________________________________________________________________________________________________
(Exact name of registrant as specified in its charter)
| Indiana | 001-36454 | 35-2047713 | |||
|---|---|---|---|---|---|
| (State or other jurisdiction of | (Commission File | (IRS Employer Identification No.) | |||
| incorporation) | Number) | 1205 Kimball Boulevard, Jasper, Indiana | 47546 | ||
| --- | --- | ||||
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code (812) 634-4000
| Not Applicable |
|---|
| (Former name or former address, if changed since last report) |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
| Securities registered pursuant to Section 12(b) of the Act: | ||
|---|---|---|
| Title of each Class | Trading Symbol | Name of each exchange on which registered |
| Common Stock, no par value | KE | The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (Section 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (Section 240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition
On August 16, 2023, the Company issued an earnings release for the fourth quarter ended June 30, 2023. The earnings release is attached as Exhibit 99.1.
The information in Item 2.02 of this Form 8-K, including Exhibit 99.1, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section. The information in this Form 8-K shall not be incorporated by reference into any filing under the Securities Act of 1933, as amended, or under the Securities Exchange Act of 1934, as amended, except as shall otherwise be expressly set forth by specific reference in such filing.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits
| Exhibit | |
|---|---|
| Number | Description |
| 99.1 | Earnings Release datedAugust 16, 2023 |
| 104 | Cover Page Interactive Data File (formatted in Inline XBRL) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| KIMBALL ELECTRONICS, INC. | |
|---|---|
| By: | /s/ Jana T. Croom |
| JANA T. CROOM<br>Chief Financial Officer |
Date: August 16, 2023
3
Document
Exhibit 99.1
KIMBALL ELECTRONICS REPORTS Q4 AND FULL YEAR FISCAL 2023 RESULTS WITH RECORD SALES AND OPERATING INCOME; COMPANY PROVIDES GUIDANCE FOR FISCAL 2024
Fourth Quarter Fiscal 2023 Highlights
•Net sales totaled $496.1 million, a 33% increase compared to Q4 fiscal 2022, and completing a fiscal year with top-line growth of 35%.
•Operating income of $31.4 million, or 6.3% of net sales, a record high for the Company. For fiscal year 2023, operating income was 4.8% of net sales.
•Net income of $19.2 million, or $0.76 per diluted share. In fiscal year 2023, the Company earned $2.22 per diluted share, a 79% increase compared to the prior year.
•Cash flow generated from operating activities of $44.1 million in Q4.
•Company provides guidance for fiscal 2024 with expected top-line growth of 4%-7% and operating income in the range of 4.7%-5.2% of net sales.
JASPER, Ind., August 16, 2023 -- (BUSINESS WIRE) -- Kimball Electronics, Inc. (Nasdaq: KE) today announced financial results for the fourth quarter and fiscal year ended June 30, 2023.
| Three Months Ended | Fiscal Year Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| June 30, | June 30, | |||||||||||
| (Amounts in Thousands, except EPS) | 2023 | 2022 | 2023 | 2022 | ||||||||
| Net Sales | $ | 496,141 | $ | 373,497 | $ | 1,823,429 | $ | 1,349,535 | ||||
| Operating Income | $ | 31,449 | $ | 20,578 | $ | 87,729 | $ | 52,549 | ||||
| Adjusted Operating Income (non-GAAP) (1) | $ | 31,480 | $ | 19,419 | $ | 88,218 | $ | 49,602 | ||||
| Operating Income % | 6.3 | % | 5.5 | % | 4.8 | % | 3.9 | % | ||||
| Adjusted Operating Income (non-GAAP) % | 6.3 | % | 5.2 | % | 4.8 | % | 3.7 | % | ||||
| Net Income | $ | 19,202 | $ | 9,938 | $ | 55,831 | $ | 31,253 | ||||
| Adjusted Net Income (non-GAAP) (1) | $ | 19,041 | $ | 9,938 | $ | 55,949 | $ | 30,203 | ||||
| Diluted EPS | $ | 0.76 | $ | 0.40 | $ | 2.22 | $ | 1.24 | ||||
| Adjusted Diluted EPS (non-GAAP) (1) | $ | 0.76 | $ | 0.40 | $ | 2.23 | $ | 1.20 |
(1) A reconciliation of GAAP and non-GAAP financial measures is included below.
Richard D. Phillips, Chief Executive Officer, stated, “I am very pleased with the results we reported for the fourth quarter and fiscal year 2023. Q4 was our sixth consecutive quarter with record sales, and operating income and EPS were at all-time highs for the Company. The strong finish to the fiscal year drove net sales above the guidance we provided in May, and contributed to better than expected cash flow generation in the quarter. This performance was achieved with the highest levels of teamwork from our global organization, and many others in the value chain. I would like to thank our employees, our customers and our vendor partners for their passion, commitment, and support.”
Mr. Phillips continued, “In total, fiscal 2023 was an excellent year for Kimball Electronics, highlighted by record top-line growth, margin expansion, a 79% increase in net income, and improved return on invested capital. Each of our three vertical end markets reported strong results, with the sales volume to 48% of our customers reaching all-time highs. The team supported new product introductions at a rate four times above the historic norm, and we continued to leverage our facility expansions in Thailand and Mexico, while navigating a challenging macro environment. While we continue to see a strong pipeline for future growth, fiscal 2024 is tempered by slower sales with a large medical customer. Longer term we are excited by the prospects of our funnel of new business, and the relationship with this customer in particular.”
Fiscal Year 2023 Highlights:
•Net sales for fiscal year 2023 totaled $1,823.4 million, representing constant currency growth of 38% year-over-year when excluding the impact of foreign currency, which had a 3% unfavorable impact on net sales.
•Operating income of $87.7 million, or 4.8% of net sales, an improvement compared to $52.5 million, or 3.9% of net sales, in fiscal 2022.
•Net income of $55.8 million, or $2.22 per diluted share, a significant increase compared to net income of $31.3 million, or $1.24 per diluted share, in fiscal 2022.
•Capital expenditures of $90.7 million, supporting facility expansions in Thailand, Mexico, and Poland.
•Return on invested capital of 9.4%, a 220-basis point improvement compared to fiscal 2022; ROIC is a non-GAAP financial measure, see reconciliation of non-GAAP financial measures.
The Company ended fiscal 2023 with cash and cash equivalents of $43.0 million and borrowings outstanding on credit facilities of $281.5 million, including $235 million classified as long term, and $106.1 million of borrowing capacity available.
Net Sales by Vertical Market for Fiscal 2023:
| Three Months Ended | Fiscal Year Ended | |||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| June 30, | June 30, | |||||||||||||||||||
| (Amounts in Millions) | 2023 | * | 2022 | * | Percent Change | 2023 | * | 2022 | * | Percent Change | ||||||||||
| Automotive | $ | 219.6 | 44 | % | $ | 152.4 | 41 | % | 44 | % | $ | 820.1 | 45 | % | $ | 582.2 | 43 | % | 41 | % |
| Medical | 120.5 | 24 | % | 114.0 | 30 | % | 6 | % | 494.0 | 27 | % | 391.7 | 29 | % | 26 | % | ||||
| Industrial (1) | 141.8 | 29 | % | 102.4 | 28 | % | 38 | % | 474.6 | 26 | % | 358.2 | 27 | % | 33 | % | ||||
| Other | 14.2 | 3 | % | 4.7 | 1 | % | 202 | % | 34.7 | 2 | % | 17.4 | 1 | % | 99 | % | ||||
| Total Net Sales | $ | 496.1 | $ | 373.5 | 33 | % | $ | 1,823.4 | $ | 1,349.5 | 35 | % | ||||||||
| *As a percent of Total Net Sales | ||||||||||||||||||||
| (1) Beginning in fiscal year 2023, Public Safety was combined with Industrial; all prior periods have been recast to conform to current period presentation | ||||||||||||||||||||
| –Automotive includes electronic power steering, body controls, automated driver assist systems, and electronic braking systems | ||||||||||||||||||||
| –Medical includes sleep therapy and respiratory care, image guided therapy, in vitro diagnostics, drug delivery, AED, and patient monitoring | ||||||||||||||||||||
| –Industrial includes climate controls, automation controls, optical inspection, smart metering, and public safety |
Fiscal Year 2024 Guidance:
•Net sales in the range of $1.9 - $1.95 billion, a 4% - 7% increase year-over-year.
•Operating income in the range of 4.7% - 5.2% of net sales.
•Capital expenditures of $70 - $80 million.
Commenting on today’s announcement, Jana T. Croom, Chief Financial Officer, stated, “Our outlook for fiscal 2024 reflects a capital allocation strategy focused on organic growth. We have a solid funnel of new business opportunities and additional capacity from our recent facility expansions, which I’m pleased to announce now includes Poland. We will be ramping-up operations in Poznan throughout the fiscal year. In addition, inventory should normalize as global supply chain disruptions continue to ease, and the resulting cash flow generated will be directed toward reducing our leverage ratio.”
Forward-Looking Statements
Certain statements contained within this release are considered forward-looking, including our fiscal year 2024 guidance, under the Private Securities Litigation Reform Act of 1995. The statements may be identified by the use of words such as “expect,” “should,” “goal,” “predict,” “will,” “future,” “optimistic,” “confident,” and “believe.” Undue reliance should not be placed on these forward-looking statements. These statements are based on current expectations of future events and thus are inherently subject to uncertainty. If underlying assumptions prove inaccurate or known or unknown risks or uncertainties materialize, actual results could vary materially from our expectations and projections. These forward-looking statements are subject to risks and uncertainties including, without limitation, global economic conditions, geopolitical environment and conflicts such as the war in Ukraine, global health emergencies including the COVID-19 pandemic, availability or cost of raw materials and components, foreign exchange rate fluctuations, and our ability to convert new business opportunities into customers and revenue. 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, 2022.
Non-GAAP Financial Measures
This press release contains non-GAAP financial measures. The non-GAAP financial measures contained herein include constant currency growth, adjusted operating income, adjusted net income, adjusted diluted EPS, and ROIC. Reconciliations of the reported GAAP numbers to these non-GAAP financial measures are included in the Reconciliation of Non-GAAP Financial Measures section below. Management believes these measures are useful and allow investors to meaningfully trend, analyze, and benchmark the performance of the company’s core operations. The company’s non-GAAP financial measures are not necessarily comparable to non-GAAP information used by other companies.
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.
| Conference Call / Webcast | |
|---|---|
| Date: | August 17, 2023 |
| Time: | 10:00 AM Eastern Time |
| Live Webcast: | investors.kimballelectronics.com/events-and-presentations/events |
| Dial-In #: | 404-975-4839 (other locations - 833-470-1428) |
| Conference ID: | 941287 |
For those unable to participate in the live webcast, the call will be archived at investors.kimballelectronics.com.
Lasting relationships. Global success.
Financial highlights for the fourth quarter and fiscal year ended June 30, 2023 are as follows:
| Condensed Consolidated Statements of Income | ||||||||
|---|---|---|---|---|---|---|---|---|
| (Unaudited) | Three Months Ended | |||||||
| (Amounts in Thousands, except Per Share Data) | June 30, 2023 | June 30, 2022 | ||||||
| Net Sales | $ | 496,141 | 100.0 | % | $ | 373,497 | 100.0 | % |
| Cost of Sales | 446,460 | 90.0 | % | 339,276 | 90.8 | % | ||
| Gross Profit | 49,681 | 10.0 | % | 34,221 | 9.2 | % | ||
| Selling and Administrative Expenses | 18,444 | 3.7 | % | 13,643 | 3.7 | % | ||
| Other General Expense (Income) | (212) | — | % | — | — | % | ||
| Operating Income | 31,449 | 6.3 | % | 20,578 | 5.5 | % | ||
| Interest Income | 65 | — | % | 15 | — | % | ||
| Interest Expense | (5,473) | (1.1) | % | (1,118) | (0.3) | % | ||
| Non-Operating Income (Expense), net | 466 | 0.1 | % | (4,154) | (1.1) | % | ||
| Other Income (Expense), net | (4,942) | (1.0) | % | (5,257) | (1.4) | % | ||
| Income Before Taxes on Income | 26,507 | 5.3 | % | 15,321 | 4.1 | % | ||
| Provision for Income Taxes | 7,305 | 1.4 | % | 5,383 | 1.4 | % | ||
| Net Income | $ | 19,202 | 3.9 | % | $ | 9,938 | 2.7 | % |
| Earnings Per Share of Common Stock: | ||||||||
| Basic | $ | 0.77 | $ | 0.40 | ||||
| Diluted | $ | 0.76 | $ | 0.40 | ||||
| Average Number of Shares Outstanding: | ||||||||
| Basic | 25,009 | 24,885 | ||||||
| Diluted | 25,161 | 24,989 | ||||||
| (Unaudited) | Fiscal Year Ended | |||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| (Amounts in Thousands, except Per Share Data) | June 30, 2023 | June 30, 2022 | ||||||
| Net Sales | $ | 1,823,429 | 100.0 | % | $ | 1,349,535 | 100.0 | % |
| Cost of Sales | 1,667,264 | 91.4 | % | 1,244,933 | 92.2 | % | ||
| Gross Profit | 156,165 | 8.6 | % | 104,602 | 7.8 | % | ||
| Selling and Administrative Expenses | 68,648 | 3.8 | % | 53,437 | 4.0 | % | ||
| Other General Expense (Income) | (212) | — | % | (1,384) | (0.1) | % | ||
| Operating Income | 87,729 | 4.8 | % | 52,549 | 3.9 | % | ||
| Interest Income | 153 | — | % | 81 | — | % | ||
| Interest Expense | (16,263) | (0.9) | % | (2,655) | (0.2) | % | ||
| Non-Operating Income (Expense), net | 3,125 | 0.2 | % | (6,244) | (0.5) | % | ||
| Other Income (Expense), net | (12,985) | (0.7) | % | (8,818) | (0.7) | % | ||
| Income Before Taxes on Income | 74,744 | 4.1 | % | 43,731 | 3.2 | % | ||
| Provision for Income Taxes | 18,913 | 1.0 | % | 12,478 | 0.9 | % | ||
| Net Income | $ | 55,831 | 3.1 | % | $ | 31,253 | 2.3 | % |
| Earnings Per Share of Common Stock: | ||||||||
| Basic | $ | 2.24 | $ | 1.24 | ||||
| Diluted | $ | 2.22 | $ | 1.24 | ||||
| Average Number of Shares Outstanding: | ||||||||
| Basic | 24,904 | 25,115 | ||||||
| Diluted | 25,076 | 25,221 | ||||||
| Condensed Consolidated Statements of Cash Flows | Fiscal Year Ended | |||||||
| --- | --- | --- | --- | --- | ||||
| (Unaudited) | June 30, | |||||||
| (Amounts in Thousands) | 2023 | 2022 | ||||||
| Net Cash Flow used for Operating Activities | $ | (13,804) | $ | (83,178) | ||||
| Net Cash Flow used for Investing Activities | (90,467) | (74,798) | ||||||
| Net Cash Flow provided by Financing Activities | 99,179 | 103,741 | ||||||
| Effect of Exchange Rate Change on Cash, Cash Equivalents, and Restricted Cash | (895) | (2,356) | ||||||
| Net Decrease in Cash, Cash Equivalents, and Restricted Cash | (5,987) | (56,591) | ||||||
| Cash, Cash Equivalents, and Restricted Cash at Beginning of Period | 49,851 | 106,442 | ||||||
| Cash, Cash Equivalents, and Restricted Cash at End of Period | $ | 43,864 | $ | 49,851 | ||||
| (Unaudited) | ||||||||
| --- | --- | --- | --- | --- | ||||
| Condensed Consolidated Balance Sheets | June 30,<br>2023 | June 30,<br>2022 | ||||||
| (Amounts in Thousands) | ||||||||
| ASSETS | ||||||||
| Cash and cash equivalents | $ | 42,955 | $ | 49,851 | ||||
| Receivables, net | 308,167 | 222,857 | ||||||
| Contract assets | 78,798 | 64,080 | ||||||
| Inventories | 450,319 | 395,630 | ||||||
| Prepaid expenses and other current assets | 49,188 | 28,665 | ||||||
| Property and Equipment, net | 267,684 | 206,835 | ||||||
| Goodwill | 12,011 | 12,011 | ||||||
| Other Intangible Assets, net | 12,335 | 14,707 | ||||||
| Other Assets | 38,262 | 41,131 | ||||||
| Total Assets | $ | 1,259,719 | $ | 1,035,767 | ||||
| LIABILITIES AND SHARE OWNERS’ EQUITY | ||||||||
| Current portion of borrowings under credit facilities | $ | 46,454 | $ | 35,580 | ||||
| Accounts payable | 322,274 | 300,224 | ||||||
| Advances from customers (1) | 33,905 | 25,942 | ||||||
| Accrued expenses | 72,515 | 46,996 | ||||||
| Long-term debt under credit facilities, less current portion | 235,000 | 145,000 | ||||||
| Long-term income taxes payable | 5,859 | 7,812 | ||||||
| Other long-term liabilities | 19,718 | 20,242 | ||||||
| Share Owners’ Equity | 523,994 | 453,971 | ||||||
| Total Liabilities and Share Owners’ Equity | $ | 1,259,719 | $ | 1,035,767 |
(1) Beginning in fiscal year 2023, the Company changed its presentation that such inventory-related payments from customers are classified as Advances from customers on the Condensed Consolidated Balance Sheets. Prior year periods have been recast to conform to the current year presentation.
| Reconciliation of Non-GAAP Financial Measures | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (Unaudited) | ||||||||||||
| (Amounts in Thousands, except Per Share Data) | ||||||||||||
| Three Months Ended | Fiscal Year Ended | |||||||||||
| June 30, | June 30, | |||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||
| Net Sales Growth (vs. same period in prior year) | 33 | % | 13 | % | 35 | % | 4 | % | ||||
| Foreign Currency Exchange Impact | — | % | (3) | % | (3) | % | (1) | % | ||||
| Constant Currency Growth | 33 | % | 16 | % | 38 | % | 5 | % | ||||
| Operating Income, as reported | $ | 31,449 | $ | 20,578 | $ | 87,729 | $ | 52,549 | ||||
| SERP | 243 | (1,159) | 701 | (1,563) | ||||||||
| Legal Settlements (Recovery) | (212) | — | (212) | (1,384) | ||||||||
| Adjusted Operating Income | $ | 31,480 | $ | 19,419 | $ | 88,218 | $ | 49,602 | ||||
| Net Income, as reported | $ | 19,202 | $ | 9,938 | $ | 55,831 | $ | 31,253 | ||||
| Adjustments After Measurement Period on GES Acquisition | — | — | 279 | — | ||||||||
| Legal Settlements (Recovery), After-Tax | (161) | — | (161) | (1,050) | ||||||||
| Adjusted Net Income | $ | 19,041 | $ | 9,938 | $ | 55,949 | $ | 30,203 | ||||
| Diluted Earnings per Share, as reported | $ | 0.76 | $ | 0.40 | $ | 2.22 | $ | 1.24 | ||||
| Adjustments After Measurement Period on GES Acquisition | — | — | 0.01 | — | ||||||||
| Legal Settlements (Recovery) | — | — | — | (0.04) | ||||||||
| Adjusted Diluted Earnings per Share | $ | 0.76 | $ | 0.40 | $ | 2.23 | $ | 1.20 | ||||
| Operating Income | $ | 87,729 | $ | 52,549 | ||||||||
| SERP | 701 | (1,563) | ||||||||||
| Legal Recovery | (212) | (1,384) | ||||||||||
| Adjusted Operating Income (non-GAAP) | $ | 88,218 | $ | 49,602 | ||||||||
| Tax Effect | 22,235 | 14,417 | ||||||||||
| After-tax Adjusted Operating Income | $ | 65,983 | $ | 35,185 | ||||||||
| Average Invested Capital (1) | $ | 701,364 | $ | 491,252 | ||||||||
| ROIC | 9.4 | % | 7.2 | % |
(1) 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.