Kimball Electronics, Inc. Reports Fourth Quarter And Fiscal Year 2020 Results

• Net sales in the fourth quarter were $286 million, down 10% year-over-year
• Fourth quarter net loss of $1.3 million, which includes a non-cash after-tax goodwill impairment charge of $6.9 million and after-tax non-operating charge of $2.9 million related to the finalization of the net working capital adjustment after the measurement period for the GES acquisition
• Adjusted net income (non-GAAP) of $8.5 million
• Loss per share of $0.05 and adjusted diluted earnings per share (non-GAAP) of $0.34 for the quarter
• Strong cash flows provided by operating activities of $21.5 million during the fourth quarter

JASPER, Ind. – Kimball Electronics, Inc. (NASDAQ: KE)  announced financial results for its fourth quarter and fiscal year ended June 30, 2020.

^{(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:

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).