- Quarterly records for net sales, operating income, net income, and diluted EPS
- Net sales up 10% year-over-year to $313 million
- Record quarterly operating income of $14.5 million
- New quarterly records for net income of $11.8 million and diluted earnings per share of $0.46
- Returned $4.7 million to Share Owners in stock repurchases during the quarter
JASPER — Kimball Electronics, Inc. (Nasdaq: KE), a leading global electronics manufacturing services provider of high-quality, durable electronic products, today announced financial results for its third quarter ended March 31, 2019.
1) As of the beginning of fiscal year 2019, the Company adopted the new accounting standard on Revenue from Contracts with Customers on a modified retrospective basis. For the three months ended March 31, 2019, the adoption increased Net Sales $2.6 million, Net Income increased $0.4 million, and Diluted EPS increased by $0.01. For the nine months ended March 31, 2019, the adoption increased Net Sales $9.0 million, Net Income increased $0.6 million, and Diluted EPS increased $0.03. The prior periods were not restated.
(2) Prior period amounts have been restated 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) A reconciliation of GAAP and non-GAAP financial measures is included below.
Donald D. Charron, Chairman and Chief Executive Officer, stated, “We delivered record sales, operating income, net income, and diluted EPS in our third quarter. Strong double-digit organic growth in our Medical and Industrial end market verticals helped us exceed our 8% organic growth goal and set the new quarterly sales record. New program launches and ramp-ups more than offset continued softness in certain other programs primarily caused by global macro-economic conditions and trade uncertainties.”
Mr. Charron continued, “We made excellent progress optimizing the business as we were successful expanding our operating margin by 70 basis points when compared to the third quarter of fiscal year 2018, helping us exceed our goal of 4.5% operating income. Our acquisition integration work with GES continues as we remain focused on our strategy to become a multifaceted manufacturing solutions company. We have good momentum, and we are cautiously optimistic that we can begin to consistently achieve our goals of 8% organic growth and 4.5% operating income.”
Third Quarter Fiscal Year 2019 Overview:
- Consolidated net sales increased 10% compared to the third quarter of fiscal year 2018. Net sales in the third quarter were impacted by:
○ Unfavorable foreign currency movements decreased net sales by approximately 3% compared to the prior year third quarter.
○ Net sales during the quarter were up 2% as a result of the GES acquisition and 1% as a result of the adoption of new revenue recognition accounting standards.
- Operating income, as a percent of net sales, of 4.6% represents our best quarter since the second quarter of fiscal year 2017.
- The Romania facility continued its progress with achieving the milestone of generating net income for the quarter.
- Interest expense was $1.2 million in the current year quarter compared to $0.1 million in the prior year quarter as a result of increased borrowings on the credit facilities and is included in Other Income (Expense), net on the Condensed Consolidated Statements of Income.
- Operating activities used cash of $14.6 million during the quarter largely related to increased accounts receivable on the higher sales volumes, which compares to cash provided by operating activities of $9.5 million in the third quarter of fiscal year 2018.
- Cash conversion days (“CCD”) for the quarter ended March 31, 2019 were 75 days, up from 62 days in the same quarter last year primarily related to an increase in raw material inventories to maintain appropriate buffer stock levels in the current tight supply environment. CCD is calculated as the sum of days sales outstanding plus contract asset days plus production days supply on hand less accounts payable days.
- $4.7 million was returned to Share Owners during the quarter in the form of common stock repurchases.
- Investments in capital expenditures were $6.9 million during the quarter.
- Cash and cash equivalents were $47.2 million and borrowings outstanding on credit facilities were $127.0 million at March 31, 2019, including $91.5 millionclassified as long-term.
- Return on invested capital (“ROIC”), calculated for the trailing twelve months, was 9.0% and 10.0% for the twelve months ended March 31, 2019 and 2018, respectively (see reconciliation of non-GAAP financial measures for ROIC calculation).