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Kimball Electronics, Inc. Reports Second Quarter Fiscal 2022 Results; Reiterates Sales Guidance for Fiscal 2022 and Announces Facility Expansion in Poland

02/07/2022
  • Net sales in the second quarter of fiscal 2022 totaled $315.3 million.
  • Net income of $5.1 million, or $0.20 per diluted share.

Kimball Electronics, Inc. (Nasdaq: KE) today announced financial results for the second quarter ended December 31, 2021.

 

Three Months Ended

 

Six Months Ended

 

December 31,

 

December 31,

(Amounts in Thousands, except EPS)

2021

 

2020

 

2021

 

2020

Net Sales

$

315,264

 

 

$

320,604

 

 

$

607,981

 

 

$

652,353

 

Operating Income

$

6,914

 

 

$

16,179

 

 

$

11,694

 

 

$

33,986

 

Adjusted Operating Income (non-GAAP) (1)

$

7,316

 

 

$

16,990

 

 

$

10,625

 

 

$

35,006

 

Operating Income %

 

2.2

%

 

 

5.0

%

 

 

1.9

%

 

 

5.2

%

Adjusted Operating Income (non-GAAP) %

 

2.3

%

 

 

5.3

%

 

 

1.7

%

 

 

5.4

%

Net Income

$

5,113

 

 

$

15,062

 

 

$

7,677

 

 

$

31,873

 

Adjusted Net Income (non-GAAP) (1)

$

5,113

 

 

$

15,195

 

 

$

6,627

 

 

$

31,747

 

Diluted EPS

$

0.20

 

 

$

0.60

 

 

$

0.30

 

 

$

1.26

 

Adjusted Diluted EPS (non-GAAP) (1)

$

0.20

 

 

$

0.60

 

 

$

0.26

 

 

$

1.25

 

(1) A reconciliation of GAAP and non-GAAP financial measures is included below.

Donald D. Charron, Chairman and Chief Executive Officer, stated, “Q2 was another hard fought quarter for our company, as global supply chain issues stemming from the COVID-19 pandemic persisted and adversely impacted our results. Component shortages continued to make it extremely challenging to obtain the materials needed to support customer demand. While conditions improved modestly in December with sales accelerating, the lost absorption was significant once again this quarter, as we remained committed to retaining our highly skilled workforce in anticipation of a strong second half to the fiscal year. We continue to be well positioned with record levels of backlog, and we are reiterating our sales guidance for fiscal 2022, although we expect to finish the year at the lower end of the range. We are revising our operating income margin guidance to reflect the difficult first half and our outlook for the balance of the fiscal year.”

Mr. Charron continued, “We are also excited to announce our plans to expand the facility in Poznan, Poland. This is our third facility expansion in the last 15 months, and representative of the high level of success we’ve experienced in winning new business. Similar to Thailand and Mexico, the additional capacity is needed for programs with new and existing customers. We expect the expansion in Poznan to add approximately 40% to existing production square footage, and will leverage our team in Poland to support our customers based in Europe when the expansion is complete in early fiscal 2024. We are updating our guidance for capital expenditures for fiscal 2022, which will include the early investments in Poznan and additional capital related to a major win in the next generation of electronic braking systems for a longstanding customer.”

Second Quarter Fiscal Year 2022 Overview

  • Net sales decreased 2% compared to the second quarter of fiscal year 2021. Foreign currency had a negligible impact on net sales in the quarter compared to the same period a year ago.
  • Cash flow used for operating activities of $48.3 million during the second quarter of fiscal 2022.
  • Cash conversion days (“CCD”) for the quarter ended December 31, 2021 were 81 days, up from 75 days in the second quarter of fiscal year 2021. 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 $15.1 million during the quarter.
  • Cash and cash equivalents were $56.7 million and borrowings outstanding on credit facilities were $103.0 million at December 31, 2021, including $40.0 million classified as long term.

Facility Expansion in Poznan, Poland

The company also announced its intent to expand the facility in Poznan, Poland. The additional capacity is needed for programs with new and existing customers. The expansion is expected to require approximately $8 million of capital investment, adding approximately 40% to the facility’s existing production square footage, and will leverage the team in Poland to support customers based in Europe when complete in early fiscal 2024.

Fiscal Year 2022 Guidance

The company is reiterating its sales guidance for fiscal year 2022 with net sales in the range of $1.4 - $1.5 billion, an 8% to 16% increase year-over-year, although the final result is expected to be at the lower end of the range. Operating income is estimated to be 3.75% - 4.25% of net sales, compared to the original guidance of 4.5% - 5.0% of net sales. The change in the operating income estimate reflects a difficult first half due to the unavailability of material. Under normal operating conditions, the company expects an annual run rate for operating income in the range of 4.5% - 5.0% of net sales. The second half of fiscal 2022 is expected to ramp up significantly throughout the period, with a very strong finish to the fiscal year and operating income above that range, as the backlog of open orders is worked down. Capital expenditures for fiscal year 2022 are now expected to be in the range of $70 - $80 million compared to the original guidance of $60 - $70 million. This update includes the facility expansions in Thailand, Mexico, and the early investments associated with today’s announcement of the facility expansion in Poland.

Net Sales by Vertical Market for Q2 Fiscal 2022:

 

Three Months Ended

 

 

 

December 31,

 

 

(Amounts in Millions)

2021

 

*

 

2020

 

*

 

Percent Change

Automotive

$

139.0

 

44

%

 

$

151.9

 

48

%

 

(8

)%

Medical

 

89.8

 

29

%

 

 

87.1

 

27

%

 

3

%

Industrial

 

71.8

 

23

%

 

 

67.7

 

21

%

 

6

%

Public Safety

 

10.8

 

3

%

 

 

10.5

 

3

%

 

3

%

Other

 

3.9

 

1

%

 

 

3.4

 

1

%

 

17

%

Total Net Sales

$

315.3

 

 

 

$

320.6

 

 

 

(2

)%

 

* As a percent of Total Net Sales

 

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, and smart metering

Public Safety includes thermal imaging, first responder electronics, and security

Forward-Looking Statements

Certain statements contained within this release are considered forward-looking, including our fiscal year 2022 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, 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, 2021.

Non-GAAP Financial Measures

This press release contains non-GAAP financial measures. The non-GAAP financial measures contained herein include 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:

 

February 8, 2022

Time:

 

10:00 AM Eastern Time

Live Webcast:

 

investors.kimballelectronics.com/events-and-presentations/events

Dial-In #:

 

844-200-6205 (other locations - 929-526-1599)

Conference ID:

 

262854

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 second quarter and year-to-date period ended December 31, 2021 are as follows:

Condensed Consolidated Statements of Income

 

 

 

 

 

 

(Unaudited)

Three Months Ended

(Amounts in Thousands, except Per Share Data)

December 31, 2021

 

December 31, 2020

Net Sales

$

315,264

 

 

100.0

%

 

$

320,604

 

100.0

%

Cost of Sales

 

294,427

 

 

93.4

%

 

 

290,939

 

90.7

%

Gross Profit

 

20,837

 

 

6.6

%

 

 

29,665

 

9.3

%

Selling and Administrative Expenses

 

13,923

 

 

4.4

%

 

 

13,486

 

4.3

%

Operating Income

 

6,914

 

 

2.2

%

 

 

16,179

 

5.0

%

Other Income (Expense), net

 

(209

)

 

(0.1

)%

 

 

2,411

 

0.8

%

Income Before Taxes on Income

 

6,705

 

 

2.1

%

 

 

18,590

 

5.8

%

Provision for Income Taxes

 

1,592

 

 

0.5

%

 

 

3,528

 

1.1

%

Net Income

$

5,113

 

 

1.6

%

 

$

15,062

 

4.7

%

 

 

 

 

 

 

 

 

Earnings Per Share of Common Stock:

 

 

 

 

 

 

 

Basic

$

0.20

 

 

 

 

$

0.60

 

 

Diluted

$

0.20

 

 

 

 

$

0.60

 

 

 

 

 

 

 

 

 

 

Average Number of Shares Outstanding:

 

 

 

 

 

 

 

Basic

 

25,238

 

 

 

 

 

25,101

 

 

Diluted

 

25,282

 

 

 

 

 

25,171

 

 

 

 

 

 

 

 

 

 

(Unaudited)

Six Months Ended

(Amounts in Thousands, except Per Share Data)

December 31, 2021

 

December 31, 2020

Net Sales

$

607,981

 

 

100.0

%

 

$

652,353

 

 

100.0

%

Cost of Sales

 

571,544

 

 

94.0

%

 

 

592,105

 

 

90.8

%

Gross Profit

 

36,437

 

 

6.0

%

 

 

60,248

 

 

9.2

%

Selling and Administrative Expenses

 

26,127

 

 

4.3

%

 

 

26,603

 

 

4.1

%

Other General Expense (Income)

 

(1,384

)

 

(0.2

)%

 

 

(341

)

 

(0.1

)%

Operating Income

 

11,694

 

 

1.9

%

 

 

33,986

 

 

5.2

%

Other Income (Expense), net

 

(1,458

)

 

(0.2

)%

 

 

4,546

 

 

0.7

%

Income Before Taxes on Income

 

10,236

 

 

1.7

%

 

 

38,532

 

 

5.9

%

Provision for Income Taxes

 

2,559

 

 

0.4

%

 

 

6,659

 

 

1.0

%

Net Income

$

7,677

 

 

1.3

%

 

$

31,873

 

 

4.9

%

 

 

 

 

 

 

 

 

Earnings Per Share of Common Stock:

 

 

 

 

 

 

 

Basic

$

0.30

 

 

 

 

$

1.27

 

 

 

Diluted

$

0.30

 

 

 

 

$

1.26

 

 

 

 

 

 

 

 

 

 

 

Average Number of Shares Outstanding:

 

 

 

 

 

 

 

Basic

 

25,201

 

 

 

 

 

25,127

 

 

 

Diluted

 

25,283

 

 

 

 

 

25,265

 

 

 

Condensed Consolidated Statements of Cash Flows

Six Months Ended

(Unaudited)

December 31,

(Amounts in Thousands)

2021

 

2020

Net Cash Flow (used for) provided by Operating Activities

$

(56,463

)

 

$

72,256

 

Net Cash Flow used for Investing Activities

 

(27,805

)

 

 

(14,417

)

Net Cash Flow provided by (used for) Financing Activities

 

35,465

 

 

 

(33,433

)

Effect of Exchange Rate Change on Cash and Cash Equivalents

 

(901

)

 

 

4,222

 

Net (Decrease) Increase in Cash and Cash Equivalents

 

(49,704

)

 

 

28,628

 

Cash and Cash Equivalents at Beginning of Period

 

106,442

 

 

 

64,990

 

Cash and Cash Equivalents at End of Period

$

56,738

 

 

$

93,618

 

(Unaudited)

 

 

Condensed Consolidated Balance Sheets

December 31,
2021

 

June 30,
2021

(Amounts in Thousands)

ASSETS

 

 

 

Cash and cash equivalents

$

56,738

 

$

106,442

Receivables, net

 

186,175

 

 

203,382

Contract assets

 

57,186

 

 

45,863

Inventories

 

304,194

 

 

200,386

Prepaid expenses and other current assets

 

28,469

 

 

27,320

Property and Equipment, net

 

179,046

 

 

163,251

Goodwill

 

12,011

 

 

12,011

Other Intangible Assets, net

 

15,893

 

 

17,008

Other Assets

 

43,513

 

 

38,398

Total Assets

$

883,225

 

$

814,061

 

 

 

 

LIABILITIES AND SHARE OWNERS EQUITY

 

 

 

Current portion of borrowings under credit facilities

$

63,038

 

$

26,214

Accounts payable

 

254,987

 

 

216,544

Accrued expenses

 

49,441

 

 

58,016

Long-term debt under credit facilities, less current portion

 

40,000

 

 

40,000

Long-term income taxes payable

 

7,812

 

 

8,854

Other

 

22,780

 

 

22,461

Share Owners’ Equity

 

445,167

 

 

441,972

Total Liabilities and Share Owners’ Equity

$

883,225

 

$

814,061

Reconciliation of Non-GAAP Financial Measures

 

 

 

 

 

 

(Unaudited)

 

 

 

 

 

 

 

(Amounts in Thousands, except Per Share Data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

December 31,

 

December 31,

 

2021

 

2020

 

2021

 

2020

Operating Income, as reported

$

6,914

 

$

16,179

 

$

11,694

 

 

$

33,986

 

SERP

 

402

 

 

811

 

 

315

 

 

 

1,361

 

Legal Recovery

 

 

 

 

 

(1,384

)

 

 

(341

)

Adjusted Operating Income

$

7,316

 

$

16,990

 

$

10,625

 

 

$

35,006

 

 

 

 

 

 

 

 

 

Net Income, as reported

$

5,113

 

$

15,062

 

$

7,677

 

 

$

31,873

 

Adjustments After Measurement Period on GES Acquisition

 

 

 

133

 

 

 

 

 

133

 

Legal Recovery, After-Tax

 

 

 

 

 

(1,050

)

 

 

(259

)

Adjusted Net Income

$

5,113

 

$

15,195

 

$

6,627

 

 

$

31,747

 

 

 

 

 

 

 

 

 

Diluted Earnings per Share, as reported

$

0.20

 

$

0.60

 

$

0.30

 

 

$

1.26

 

Adjustments After Measurement Period on GES Acquisition

 

 

 

 

 

 

 

 

 

Legal Recovery

 

 

 

 

 

(0.04

)

 

 

(0.01

)

Adjusted Diluted Earnings per Share

$

0.20

 

$

0.60

 

$

0.26

 

 

$

1.25

 

 

 

 

 

 

 

 

 

 

 

 

Twelve Months Ended

 

 

 

December 31,

 

 

 

 

 

2021

 

2020

Operating Income

 

 

 

 

$

43,411

 

 

$

46,183

 

Goodwill Impairment

 

 

 

 

 

 

 

 

7,925

 

SERP

 

 

 

 

 

1,027

 

 

 

1,729

 

Legal Recovery

 

 

 

 

 

(1,415

)

 

 

(341

)

Adjusted Operating Income (non-GAAP)

 

 

 

 

$

43,023

 

 

$

55,496

 

Tax Effect

 

 

 

 

 

9,530

 

 

 

10,859

 

After-tax Adjusted Operating Income

 

 

 

 

$

33,493

 

 

$

44,637

 

Average Invested Capital (1)

 

 

 

 

$

424,854

 

 

$

433,192

 

ROIC

 

 

 

 

 

7.9

%

 

 

10.3

%

(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.

 

Andrew D. Regrut
Head of Investor Relations
812.827.4151
Investor.Relations@kimballelectronics.com

Source: Kimball Electronics, Inc.

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