- Third quarter net sales were $294 million, down 6% year-over-year
- Net income of $6.3 million and diluted earnings per share of $0.25
- Strong cash flows of $12.0 million were provided from operating activities during the third quarter
JASPER, Ind., May 04, 2020 (GLOBE NEWSWIRE) -- 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 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 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 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 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. Smith
Treasurer
Telephone: 812.634.4000
E-mail: Investor.Relations@kimballelectronics.com