8-K
Kimball Electronics, Inc. (KE)
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) February 5, 2020
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):
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o 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 o
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. o
1
Item 2.02 Results of Operations and Financial Condition
On February 5, 2020, the Company issued an earnings release for the second quarter ended December 31, 2019. The earnings release is attached as Exhibit 99.1 and supplementary information provided for the Company’s earnings conference call is attached as Exhibit 99.2.
The information in Item 2.02 of this Form 8-K, including Exhibit 99.1 and Exhibit 99.2, 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
The following exhibits are filed as part of this report:
| Exhibit | |
|---|---|
| Number | Description |
| 99.1 | Earnings Release dated February 5, 2020 |
| 99.2 | Supplementary Information |
2
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/ Michael K. Sergesketter |
| MICHAEL K. SERGESKETTER<br><br>Vice President,<br><br>Chief Financial Officer |
Date: February 5, 2020
3
Exhibit
Exhibit 99.1
KIMBALL ELECTRONICS, INC. REPORTS SECOND QUARTER FISCAL YEAR 2020 RESULTS
| • | Second quarter net sales were $307 million, up 8% year-over-year |
|---|---|
| • | Net income of $6.6 million and diluted earnings per share of $0.26 |
| --- | --- |
| • | Returned $2.6 million to Share Owners in stock repurchases during the quarter |
| --- | --- |
JASPER, IN (February 5, 2020) - 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:
| Three Months Ended | ||||||
|---|---|---|---|---|---|---|
| December 31, | ||||||
| (Amounts in Millions) | 2019 | 2018 | Percent Change | |||
| 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 Statements
Certain 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 Measures
This 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, <br>2019 | June 30, <br>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.
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Exhibit 99.2 Financial Results Second Quarter Fiscal Year 2020 Quarter Ended December 31, 2019 Supplementary Information to February 6, 2020 Earnings Conference Call LastingLasting relationships. relationships. Global Global success. success.
Safe Harbor Statement Certain statements contained within this supplementary information and any statements made during our earnings conference call today may be 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 and new operations, global economic conditions, geopolitical environment, global health emergencies, significant reductions in volumes and order patterns 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 Kimball Electronics, Inc. (the “Company”) are contained in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2019, our earnings release, and other filings with the Securities and Exchange Commission (the “SEC”). This supplementary information 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 EBITDA, and Return on Invested Capital (ROIC), which have been adjusted for proceeds from lawsuit settlements and adjustments to provision for income taxes due to the U.S. Tax Cuts and Jobs Act (“Tax Reform”) enacted in December 2017. Management believes it is useful for investors to understand how its core operations performed without the effects of the lawsuit proceeds and adjustments to provision for income taxes due to Tax Reform. 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 use these and other non-GAAP measures to enable meaningful trending of core operating metrics. 2 LastingLasting relationships. relationships. Global Global success. success.
(Unaudited) Net Sales $350 +8% from Q2'19 $325 $319 $313 $313 $307 $300 $284 $284 s n $277 o i l l i $275 M $266 n I $250 $225 $200 Q3'18 Q4'18 Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 3 LastingLasting relationships. relationships. Global Global success. success.
(Unaudited) Net Sales Mix by Vertical Market 100% 1% 1% 1% 2% 1% 2% 2% 2% 5% 6% 6% 6% 5% 5% 5% 5% 90% 19% 21% 22% 22% 21% 21% 21% 80% 22% 70% 60% 27% s 31% 28% e 32% 32% 32% l 31% 30% a S 50% f o % 40% 30% 48% 44% 20% 41% 40% 40% 40% 40% 40% 10% 0% Q3'18 Q4'18 Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Automotive Medical Industrial Public Safety Other 4 LastingLasting relationships. relationships. Global Global success. success.
(Unaudited) Gross Margin % 10.0% 9.0% 8.5% 8.1% 8.2% 8.0% 7.3% 7.2% 7.1% 7.0% 6.8% 6.7% 6.0% s e l a S 5.0% f o % 4.0% 3.0% 2.0% 1.0% 0.0% Q3'18 Q4'18 Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 5 LastingLasting relationships. relationships. Global Global success. success.
(Unaudited) Selling & Administrative Expense (%) 5.0% 4.5% 4.2% 4.2% 4.2% 4.1% s e l a S 4.0% f 3.9% 3.9% o % 3.6% 3.6% 3.5% 3.0% Q3'18 Q4'18 Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 6 LastingLasting relationships. relationships. Global Global success. success.
(Unaudited) Adjusted Operating Income(1)(2) (Excludes lawsuit proceeds) $16.0 6.0% $14.5 $14.0 5.5% $12.0 * 5.0% $11.1* $11.3 $11.1 $10.2 $10.1 $10.0 4.6% 4.5% $8.7 s s e n l o a i l l S i $8.0 4.0% 4.1% f M $6.9 o n I 3.9% % $6.0 3.6% 3.5% 3.5% $4.0 3.2% 3.0% 2.8% $2.0 2.6% 2.5% $0.0 2.0% Q3'18 Q4'18 Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Adj Op Income % of Net Sales (1) Adjusted Operating Income is a Non-GAAP measure – refer to Reconciliation of Non-GAAP Results on the final slide of this supplementary information. (2) Prior period amounts denoted by * have been restated to reflect retrospective adoption of new accounting guidance on improving the presentation of net periodic pension cost and net periodic postretirement benefit cost. 7 LastingLasting relationships. relationships. Global Global success. success.
(Unaudited) Adjusted Net Income(1) (Excludes lawsuit proceeds and adjustments to provision for income taxes due to Tax Reform) $11.8 $12.0 $11.0 $10.7 $10.0 $9.0 $8.0 $7.2 $7.4 $6.9 $7.0 $6.6 $6.6 s n o i l l i $6.0 M n $5.0 I $5.0 $4.0 $3.0 $2.0 $1.0 $0.0 Q3'18 Q4'18 Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 (1) Adjusted Net Income is a Non-GAAP measure – refer to Reconciliation of Non-GAAP Results on the final slide of this supplementary information. 8 LastingLasting relationships. relationships. Global Global success. success.
(Unaudited) Adjusted EBITDA(1) (Excludes lawsuit proceeds) $24.0 $23.3 10.0% $22.0 $20.1 $20.0 8.0% $17.6 $18.0 $17.2 $16.9 $17.3 $17.2 7.4% $16.0 7.1% $13.5 6.0% $14.0 s s 6.2% e n 6.0% l o a i 5.7% l l S i $12.0 5.4% 5.5% f M 5.1% o n I % $10.0 4.0% $8.0 $6.0 2.0% $4.0 $2.0 $0.0 0.0% Q3'18 Q4'18 Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Adjusted EBITDA Adjusted EBITDA % of Sales (1) Adjusted EBITDA is a Non-GAAP measure - refer to Reconciliation of Non-GAAP Results on the final slide of this supplementary information. 9 LastingLasting relationships. relationships. Global Global success. success.
(Unaudited) Return on Invested Capital(1)(2)(3) (Excludes lawsuit proceeds) 14.0% 12.0% 10.0% 10.1% 10.0% 9.3% 9.0% 9.0% 8.9% 8.7% 8.2% 8.0% C I O R 6.0% 4.0% 2.0% 0.0% Q3'18 Q4'18 Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 (1) We define ROIC as after-tax adjusted operating income for the trailing twelve months divided by average invested capital for the last five quarters. (2) Prior period amounts have been restated to reflect our calculation change of ROIC from after-tax annualized adjusted operating income divided by average invested capital and 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) ROIC is a Non-GAAP measure - refer to Reconciliation of Non-GAAP Results on the final slide of this supplementary information. 10 LastingLasting relationships. relationships. Global Global success. success.
(Unaudited) Operating Cash Flow $45.0 $39.6 $40.0 $35.0 $30.0 $25.0 $19.3 $20.0 s n o $15.0 i $12.2 l l i $9.5 M $10.0 n I $5.6 $5.0 $0.0 ($0.3) -$5.0 -$10.0 ($10.0) -$15.0 ($14.6) -$20.0 Q3'18 Q4'18 Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 11 LastingLasting relationships. relationships. Global Global success. success.
(Unaudited) Capital Expenditures and Depreciation & Amortization(1) $12.0 $10.0 $8.0 $7.7 $7.3 $7.5 $7.4 $7.3 $6.8 $6.8 $6.8 s n o i l l i $6.0 $11.7 M n I $10.4 $9.8 $4.0 $7.2 $6.9 $4.4 $4.8 $2.0 $4.3 $0.0 Q3'18 Q4'18 Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Cap Ex Depr & Amort (1) Capital Expenditures include purchases of capitalized software. 12 LastingLasting relationships. relationships. Global Global success. success.
Reconciliation of Non-GAAP Results (Unaudited) Q3'18 Q4'18 Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Operating Income, as reported (1) $ 11,130 $ 11,266 $ 7,032 $ 10,212 $ 14,497 $ 10,319 $ 11,115 $ 8,684 Less: Lawsuit Proceeds — — 92 — — 215 — — Adjusted Operating Income (1) $ 11,130 $ 11,266 $ 6,940 $ 10,212 $ 14,497 $ 10,104 $ 11,115 $ 8,684 Net Income, as reported $ 10,835 $ 5,784 $ 5,069 $ 7,115 $ 11,849 $ 7,525 $ 6,598 $ 6,612 Add: Tax Adjustments from Tax Reform (130) 1,409 — (251) — — — — Less: Lawsuit Proceeds — — 70 — — 163 — — Adjusted Net Income $ 10,705 $ 7,193 $ 4,999 $ 6,864 $ 11,849 $ 7,362 $ 6,598 $ 6,612 Adjusted Net Income $ 10,705 $ 7,193 $ 4,999 $ 6,864 $ 11,849 $ 7,362 $ 6,598 $ 6,612 Add Interest, net 126 135 383 1,073 1,146 1,405 1,190 1,142 Add Depreciation & Amortization 6,824 6,797 6,755 7,252 7,480 7,386 7,312 7,674 Add Taxes 2,424 3,032 1,387 1,755 2,825 1,137 2,115 2,215 Adjusted EBITDA $ 20,079 $ 17,157 $ 13,524 $ 16,944 $ 23,300 $ 17,290 $ 17,215 $ 17,643 Operating Income (GAAP) (TTM) (1)(3) $ 39,177 $ 42,038 $ 39,547 $ 39,640 $ 43,007 $ 42,060 $ 46,143 $ 44,615 Less: Lawsuit Proceeds (TTM) $ — $ — $ 92 $ 92 $ 92 $ 307 $ 215 $ 215 Adj. Operating Income (non-GAAP) (TTM) (1)(3) $ 39,177 $ 42,038 $ 39,455 $ 39,548 $ 42,915 $ 41,753 $ 45,928 $ 44,400 Tax Effect (TTM) (1)(3) $ 7,642 $ 9,715 $ 9,152 $ 8,982 $ 9,718 $ 7,729 $ 8,920 $ 9,020 After-Tax Adj. Operating Income (TTM) (1)(3) $ 31,535 $ 32,323 $ 30,303 $ 30,566 $ 33,197 $ 34,024 $ 37,008 $ 35,380 Average Invested Capital (2)(3) $ 315,751 $ 319,074 $ 326,168 $ 342,408 $ 366,995 $ 390,528 $ 411,735 $ 431,910 ROIC (1)(3) 10.0% 10.1% 9.3% 8.9% 9.0% 8.7% 9.0% 8.2% (1) Prior period amounts have been restated to reflect the retrospective adoption of new accounting guidance in Q1'19 on improving the presentation of net periodic pension cost and net periodic postretirement benefit cost. (2) Average Invested Capital is computed using the Share Owners equity plus current and non-current debt less cash and cash equivalents averaged for the last five quarters. (3) Prior period amounts have been restated to reflect our calculation change of ROIC in Q1'19 from after-tax annualized adjusted operating income divided by average invested capital to after-tax adjusted operating income for the trailing twelve months (TTM) divided by average invested capital for the last five quarters. 13 LastingLasting relationships. relationships. Global Global success. success.