Company Overview - Kimball Electronics, Inc. is a global provider of electronics and diversified contract manufacturing services, operating in the United States, China, Mexico, Poland, Romania, and Thailand [7] - The company is recognized for its commitment to quality, reliability, value, speed, and ethical behavior, fostering a high-performance culture [7] Conference Participation - Kimball Electronics will attend the 2024 Annual Gateway Conference on September 4-5, 2024, at the Four Seasons Hotel in San Francisco, CA [1] - Jana Croom, the Chief Financial Officer, is scheduled to present on September 5, 2024, at 9:00 a.m. Pacific Time [1] Webcast and Meetings - A webcast of the presentation will be available on the company's Investor Relations website, with an archive accessible for those unable to attend live [2] - Executives from Kimball Electronics will be available for one-on-one meetings throughout the conference [2] Gateway Conference Details - The Gateway Conference connects leading growth-stage companies with prospective investors, analysts, and partners, celebrating 25 years of fostering impactful industry connections [4] - The event showcases a diverse array of companies across various sectors, including technology, cleantech, consumer, industrials, financial services, and healthcare [5]

600 new employees will be based in Asia and the U.S., with offices in Vietnam, China, India, Japan and Silicon Valley. MONTREAL, Aug. 1, 2024 /PRNewswire/ -- Averna, a leading global test & quality solutions provider, announced the acquisition of Global Equipment Services, Inc. (GES), a division of Kimball Electronics, Inc. (Nasdaq: KE) specialized in automation, test and measurement solutions for industries such as consumer electronics, semiconductor and medical devices. Averna Expands its Asian and North ...

PART I FINANCIAL INFORMATION This section provides the unaudited condensed consolidated financial statements and related notes for Kimball Electronics, Inc [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents Kimball Electronics' unaudited condensed consolidated financial statements and detailed notes for the periods ended March 31, 2024, and June 30, 2023 [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets and share owners' equity slightly increased, while liabilities remained stable, with notable shifts in cash, receivables, and borrowings Condensed Consolidated Balance Sheet Highlights (Amounts in Thousands) | Item | March 31, 2024 | June 30, 2023 | Change | % Change | | :----------------------------------- | :------------- | :------------ | :----- | :------- | | **ASSETS** | | | | | | Cash and cash equivalents | $65,208 | $42,955 | $22,253 | 51.8% | | Receivables, net | $277,894 | $308,167 | $(30,273) | -9.8% | | Inventories | $396,199 | $450,319 | $(54,120) | -12.0% | | Assets held for sale | $29,619 | — | $29,619 | N/A | | Total Assets | $1,260,828 | $1,259,719 | $1,109 | 0.1% | | **LIABILITIES** | | | | | | Current portion of borrowings | $84,618 | $46,454 | $38,164 | 82.2% | | Accounts payable | $248,174 | $322,274 | $(74,100) | -23.0% | | Liabilities held for sale | $9,369 | — | $9,369 | N/A | | Total current liabilities | $437,881 | $475,148 | $(37,267) | -7.8% | | Long-term debt under credit facilities | $235,000 | $235,000 | $0 | 0.0% | | Total Liabilities | $721,767 | $735,725 | $(13,958) | -1.9% | | **SHARE OWNERS' EQUITY** | | | | | | Total Share Owners' Equity | $539,061 | $523,994 | $15,067 | 2.9% | | Total Liabilities and Share Owners' Equity | $1,260,828 | $1,259,719 | $1,109 | 0.1% | - The company reported Assets held for sale of **$29.6 million** and Liabilities held for sale of **$9.4 million** as of March 31, 2024, which were not present at June 30, 2023, indicating a significant operational change[11](index=11&type=chunk) [Condensed Consolidated Statements of Income (Loss)](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income%20(Loss)) For Q3 FY2024, Kimball Electronics reported a net loss of $6.1 million, a significant decline due to decreased sales, goodwill, and asset impairment charges Condensed Consolidated Statements of Income (Loss) Highlights (Amounts in Thousands, Except Per Share Data) | Item | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | % Change (3M) | Nine Months Ended March 31, 2024 | Nine Months Ended March 31, 2023 | % Change (9M) | | :--------------------------------- | :-------------------------------- | :-------------------------------- | :------------ | :------------------------------- | :------------------------------- | :------------ | | Net Sales | $425,036 | $484,703 | -12.3% | $1,284,352 | $1,327,288 | -3.2% | | Gross Profit | $33,544 | $42,972 | -21.9% | $103,519 | $106,484 | -2.8% | | Operating Income (Loss) | $(6,431) | $25,220 | -125.5% | $29,669 | $56,280 | -47.3% | | Income (Loss) Before Taxes | $(12,753) | $21,876 | -158.3% | $11,734 | $48,237 | -75.7% | | Net Income (Loss) | $(6,076) | $16,400 | -137.0% | $12,968 | $36,629 | -64.6% | | Basic EPS | $(0.24) | $0.66 | -136.4% | $0.52 | $1.47 | -64.6% | | Diluted EPS | $(0.24) | $0.65 | -136.9% | $0.51 | $1.46 | -65.0% | | Goodwill Impairment | $5,820 | — | N/A | $5,820 | — | N/A | | Asset Impairment | $16,564 | — | N/A | $16,564 | — | N/A | | Restructuring Expense | $1,622 | — | N/A | $1,622 | — | N/A | - The company incurred significant non-recurring charges in the three and nine months ended March 31, 2024, including **$5.8 million** in goodwill impairment, **$16.6 million** in asset impairment, and **$1.6 million** in restructuring expense, heavily impacting operating and net income[13](index=13&type=chunk) [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) Total comprehensive income for Q3 FY2024 was a loss of $9.5 million, a significant decrease driven by net loss and negative foreign currency translation adjustments Condensed Consolidated Statements of Comprehensive Income (Loss) Highlights (Amounts in Thousands) | Item | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | Nine Months Ended March 31, 2024 | Nine Months Ended March 31, 2023 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | :------------------------------- | :------------------------------- | | Net income (loss) | $(6,076) | $16,400 | $12,968 | $36,629 | | Other comprehensive income (loss) | $(3,423) | $3,714 | $(2,018) | $8,494 | | Total comprehensive income (loss) | $(9,499) | $20,114 | $10,950 | $45,123 | | Foreign currency translation adjustments (net of tax) | $(3,871) | $2,094 | $(1,617) | $5,427 | | Derivative gain (loss) (net of tax) | $1,686 | $2,502 | $4,775 | $5,453 | | Reclassification to (earnings) loss: Derivatives (net of tax) | $(1,248) | $(818) | $(4,745) | $(2,103) | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash provided by operating activities significantly improved to $24.7 million for the nine months ended March 31, 2024, while investing and financing cash flows decreased Condensed Consolidated Statements of Cash Flows Highlights (Amounts in Thousands) | Cash Flow Category | Nine Months Ended March 31, 2024 | Nine Months Ended March 31, 2023 | Change | | :------------------------------------ | :------------------------------- | :------------------------------- | :----- | | Net cash provided by (used for) operating activities | $24,717 | $(57,885) | $82,602 | | Net cash used for investing activities | $(37,702) | $(66,497) | $28,795 | | Net cash provided by financing activities | $36,571 | $107,148 | $(70,577) | | Net Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash | $23,473 | $(17,528) | $41,001 | | Cash, Cash Equivalents, and Restricted Cash at End of Period | $67,337 | $32,323 | $35,014 | - Operating cash flow improved significantly, driven by net income adjusted for non-cash items and changes in operating assets and liabilities, including a decrease in accounts payable and an increase in advances from customers[127](index=127&type=chunk)[128](index=128&type=chunk) - Capital expenditures decreased from **$65.5 million** in 2023 to **$37.1 million** in 2024, reflecting a reduction in investment for facility expansions[18](index=18&type=chunk)[130](index=130&type=chunk) [Condensed Consolidated Statements of Share Owners' Equity](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Share%20Owners'%20Equity) Total Share Owners' Equity increased to $539.1 million, primarily due to net income and stock compensation, partially offset by other comprehensive loss Condensed Consolidated Statements of Share Owners' Equity Highlights (Amounts in Thousands) | Item | Nine Months Ended March 31, 2024 | Nine Months Ended March 31, 2023 | | :------------------------------------ | :------------------------------- | :------------------------------- | | Balance at June 30 / July 1 | $523,994 | $453,971 | | Net income | $12,968 | $36,629 | | Other comprehensive income (loss) | $(2,018) | $8,494 | | Compensation expense related to stock compensation plans | $5,138 | $5,183 | | Performance and restricted share issuance | $(1,478) | $(1,416) | | Balance at March 31 | $539,061 | $503,186 | - The company's total share owners' equity increased by **$15.1 million** from June 30, 2023, to March 31, 2024, primarily due to net income and stock compensation, despite an accumulated other comprehensive loss[21](index=21&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures for the condensed consolidated financial statements, covering various accounting policies and financial instruments [Note 1. Business Description and Summary of Significant Accounting Policies](index=10&type=section&id=Note%201.%20Business%20Description%20and%20Summary%20of%20Significant%20Accounting%20Policies) Kimball Electronics is a global manufacturing solutions provider, with revenue primarily recognized over time, and is evaluating new accounting standards - Kimball Electronics is a global, multifaceted manufacturing solutions provider specializing in electronics manufacturing services (EMS) for automotive, medical, and industrial end markets, also offering contract manufacturing for non-electronic components, medical disposables, precision molded plastics, and production automation equipment[24](index=24&type=chunk) - The majority of the company's revenue (approximately **96-97%**) is recognized over time as manufacturing services are performed, with an enforceable right to payment for performance completed to date[28](index=28&type=chunk)[50](index=50&type=chunk) - The company recorded **$1.6 million** in restructuring expense for employee-related costs in the three and nine months ended March 31, 2024, to align its cost structure with reduced end market demand, with an expectation of **$1.0 million to $2.0 million** in additional charges[38](index=38&type=chunk) Components of Non-operating income (expense), net (Amounts in Thousands) | Item | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | Nine Months Ended March 31, 2024 | Nine Months Ended March 31, 2023 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | :------------------------------- | :------------------------------- | | Foreign currency/derivative gain (loss) | $(536) | $1,328 | $(864) | $2,581 | | Gain (loss) on SERP investments | $277 | $353 | $584 | $458 | | Other | $(271) | $(248) | $(679) | $(380) | | Non-operating income (expense), net | $(530) | $1,433 | $(959) | $2,659 | - New accounting standards on Improvements to Reportable Segment Disclosures (effective after Dec 15, 2023) and Improvements to Income Tax Disclosures (effective after Dec 15, 2024) are being evaluated for their impact on consolidated financial statements[45](index=45&type=chunk)[46](index=46&type=chunk) [Note 2. Revenue from Contracts with Customers](index=13&type=section&id=Note%202.%20Revenue%20from%20Contracts%20with%20Customers) Revenue is primarily from manufacturing services across automotive, medical, and industrial markets, with most recognized over time, and contract assets/liabilities reflecting timing differences Net Sales by End Market Vertical (Amounts in Millions) | Vertical Markets | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | Nine Months Ended March 31, 2024 | Nine Months Ended March 31, 2023 | | :--------------- | :-------------------------------- | :-------------------------------- | :------------------------------- | :------------------------------- | | Automotive | $202.0 | $221.9 | $614.7 | $615.3 | | Medical | $113.0 | $135.5 | $323.5 | $377.1 | | Industrial | $110.0 | $127.3 | $346.2 | $334.9 | | Total net sales | $425.0 | $484.7 | $1,284.4 | $1,327.3 | - Approximately **97%** and **96%** of net sales for the three months ended March 31, 2024 and 2023, respectively, were recognized over time as manufacturing services were performed[50](index=50&type=chunk) - Contract assets, representing unbilled receivables for services performed, were **$76.1 million** at March 31, 2024, and contract liabilities (advances from customers) were **$49.6 million**[51](index=51&type=chunk)[52](index=52&type=chunk) [Note 3. Assets and Liabilities Held for Sale](index=14&type=section&id=Note%203.%20Assets%20and%20Liabilities%20Held%20for%20Sale) The company decided to divest its automation, test, and measurement business unit (GES), classifying it as held for sale and incurring significant impairment charges - Kimball Electronics decided to divest its automation, test, and measurement business unit (GES) in Q3 FY2024 to increase focus on EMS operations, classifying it as held for sale[53](index=53&type=chunk) - The company recognized impairment charges of **$5.8 million** on goodwill and **$16.6 million** on assets held for sale due to the carrying value exceeding the fair value less costs to sell for the disposal group[54](index=54&type=chunk)[55](index=55&type=chunk) Assets and Liabilities Held for Sale (Amounts in Thousands) | Item | March 31, 2024 | | :-------------------------------- | :------------- | | **Assets held for sale:** | | | Receivables, net | $8,599 | | Inventories | $7,217 | | Property and Equipment, net | $5,822 | | Other Intangible Assets, net | $8,010 | | Valuation Allowance | $(16,264) | | Total Assets held for sale | $29,619 | | **Liabilities held for sale:** | | | Accounts payable | $4,239 | | Accrued expenses | $2,302 | | Total Liabilities held for sale | $9,369 | Disposal Group Net Sales and Income (Loss) Before Taxes (Amounts in Thousands) | Item | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | Nine Months Ended March 31, 2024 | Nine Months Ended March 31, 2023 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | :------------------------------- | :------------------------------- | | Net Sales | $8,105 | $16,755 | $30,903 | $40,577 | | Income (Loss) Before Taxes on Income | $(25,691) | $1,352 | $(25,141) | $(976) | [Note 4. Inventories](index=15&type=section&id=Note%204.%20Inventories) Total inventory decreased to $396.2 million, with $44.1 million in long-term raw materials related to a customer recall, partially offset by customer deposits Inventory Components (Amounts in Thousands) | Item | March 31, 2024 | June 30, 2023 | | :---------------- | :------------- | :------------ | | Finished products | $391 | $432 | | Work-in-process | — | $3,117 | | Raw materials | $395,808 | $446,770 | | Total inventory | $396,199 | $450,319 | - The company has **$44.1 million** of raw materials inventory classified as long-term, associated with a customer remediating a recall, and has received **$29.1 million** in related customer deposits[58](index=58&type=chunk) [Note 5. Accumulated Other Comprehensive Income (Loss)](index=16&type=section&id=Note%205.%20Accumulated%20Other%20Comprehensive%20Income%20(Loss)) Accumulated Other Comprehensive Income (Loss) shifted to $(13.1) million, primarily due to negative foreign currency translation adjustments and reclassifications of derivative gains Changes in Accumulated Other Comprehensive Income (Loss) (Amounts in Thousands) | Item | Balance at June 30, 2023 | Net current-period other comprehensive income (loss) (9M FY24) | Balance at March 31, 2024 | | :------------------------------------ | :----------------------- | :---------------------------------------------------------- | :------------------------ | | Foreign Currency Translation Adjustments | $(11,832) | $(1,617) | $(13,449) | | Derivative Gain (Loss) | $1,368 | $30 | $1,398 | | Post Employment Benefits Net Actuarial Gain (Loss) | $(582) | $(431) | $(1,013) | | Total Accumulated Other Comprehensive Income (Loss) | $(11,046) | $(2,018) | $(13,064) | Reclassifications from Accumulated Other Comprehensive Income (Loss) to Income (Net of Tax, Amounts in Thousands) | Item | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | Nine Months Ended March 31, 2024 | Nine Months Ended March 31, 2023 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | :------------------------------- | :------------------------------- | | Derivative gain (loss) | $1,248 | $818 | $4,745 | $2,103 | | Amortization of actuarial gain | $(28) | $14 | $(16) | $119 | | Total reclassifications | $1,220 | $832 | $4,729 | $2,222 | [Note 6. Commitments and Contingent Liabilities](index=16&type=section&id=Note%206.%20Commitments%20and%20Contingent%20Liabilities) The company provides assurance-type warranties for workmanship and product specifications, with associated liability and expense being immaterial - Kimball Electronics provides assurance-type warranties for workmanship and product compliance, with product warranty liability and expense being immaterial for the nine months ended March 31, 2024 and 2023[61](index=61&type=chunk) [Note 7. Credit Facilities](index=17&type=section&id=Note%207.%20Credit%20Facilities) Total borrowings outstanding increased to $319.6 million with a weighted-average interest rate of 6.9%, and the company remains in compliance with all financial covenants Credit Facilities Summary (Amounts in Millions, in U.S. Dollar Equivalents) | Credit Facility | Available Borrowing Capacity at March 31, 2024 | Borrowings Outstanding at March 31, 2024 | Borrowings Outstanding at June 30, 2023 | | :-------------------------------- | :--------------------------------------- | :--------------------------------------- | :-------------------------------------- | | Primary credit facility | $— | $299.7 | $272.1 | | Secondary credit facility | $89.4 | $10.6 | $— | | Foreign credit facilities (Thailand, China, Netherlands, Poland, Vietnam) | $22.0 | $9.3 | $9.4 | | Total credit facilities | $117.4 | $319.6 | $281.5 | | Less: current portion | | $(84.6) | $(46.5) | | Long-term debt under credit facilities | | $235.0 | $235.0 | - The weighted-average interest rate on borrowings outstanding under the credit facilities increased slightly to **6.9%** at March 31, 2024, from **6.8%** at June 30, 2023[66](index=66&type=chunk) - Financial covenants for the primary and secondary credit facilities require a consolidated total indebtedness to adjusted consolidated EBITDA ratio not greater than **3.0 to 1.0** (or **3.5 to 1.0** after a material acquisition) and an interest coverage ratio not less than **3.5 to 1.0**[64](index=64&type=chunk)[65](index=65&type=chunk) [Note 8. Fair Value](index=19&type=section&id=Note%208.%20Fair%20Value) Fair value measurements are categorized into three levels, with recurring measurements primarily in Level 1 and 2, and a non-recurring Level 3 measurement for assets held for sale - Fair value measurements are categorized into three levels: Level 1 for active market quoted prices, Level 2 for observable inputs other than Level 1, and Level 3 for unobservable inputs reflecting management's assumptions[68](index=68&type=chunk) Recurring Fair Value Measurements (Amounts in Thousands) | Item | March 31, 2024 (Level 1) | March 31, 2024 (Level 2) | March 31, 2024 (Total) | June 30, 2023 (Level 1) | June 30, 2023 (Level 2) | June 30, 2023 (Total) | | :------------------------------------ | :----------------------- | :----------------------- | :--------------------- | :---------------------- | :---------------------- | :-------------------- | | **Assets** | | | | | | | | Derivatives: foreign exchange contracts | $— | $4,712 | $4,712 | $— | $6,320 | $6,320 | | Trading securities: mutual funds (SERP) | $5,318 | $— | $5,318 | $8,668 | $— | $8,668 | | Total assets at fair value | $5,318 | $4,712 | $10,030 | $8,668 | $6,320 | $14,988 | | **Liabilities** | | | | | | | | Derivatives: foreign exchange contracts | $— | $794 | $794 | $— | $1,245 | $1,245 | | Total liabilities at fair value | $— | $794 | $794 | $— | $1,245 | $1,245 | - A non-recurring Level 3 fair value measurement was established for the automation, test, and measurement business unit classified as held for sale, resulting in a **$16.3 million** valuation allowance based on expected proceeds and estimated carrying value[71](index=71&type=chunk) [Note 9. Derivative Instruments](index=21&type=section&id=Note%209.%20Derivative%20Instruments) The company uses foreign exchange forward contracts to manage currency risks, with outstanding notional amounts of $25.6 million and 67.2 million Euro, and expects $3.5 million in pre-tax derivative gain reclassification - As of March 31, 2024, the company had outstanding foreign exchange contracts with aggregate notional amounts of **$25.6 million** (hedging against USD) and **67.2 million Euro** (hedging against EUR)[75](index=75&type=chunk) Fair Value of Derivative Instruments on Condensed Consolidated Balance Sheets (Amounts in Thousands) | Item | March 31, 2024 (Assets) | June 30, 2023 (Assets) | March 31, 2024 (Liabilities) | June 30, 2023 (Liabilities) | | :------------------------------------ | :---------------------- | :--------------------- | :--------------------------- | :-------------------------- | | Derivatives Designated as Hedging Instruments | $4,345 | $4,772 | $742 | $844 | | Derivatives Not Designated as Hedging Instruments | $367 | $1,548 | $52 | $401 | | Total derivatives | $4,712 | $6,320 | $794 | $1,245 | - Approximately **$3.5 million** of pre-tax derivative gain deferred in Accumulated Other Comprehensive Loss is estimated to be reclassified into earnings within the next 12 months[78](index=78&type=chunk) Effect of Derivative Instruments on Condensed Consolidated Statements of Income (Pre-Tax Gain/(Loss) in Thousands) | Item | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | Nine Months Ended March 31, 2024 | Nine Months Ended March 31, 2023 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | :------------------------------- | :------------------------------- | | Reclassified from Accumulated OCI (Cost of Sales) | $1,600 | $1,111 | $6,092 | $2,596 | | Recognized in Income (Non-operating income (expense)) | $650 | $(286) | $(223) | $171 | | Total Derivative Pre-Tax Gain (Loss) Recognized in Income | $2,250 | $825 | $5,869 | $2,767 | [Note 10. Employee Benefit Plans](index=22&type=section&id=Note%2010.%20Employee%20Benefit%20Plans) The company maintains defined contribution and Supplemental Employee Retirement Plans, with total defined benefit postemployment obligations increasing to $7.4 million - Total expense for employer contributions to domestic defined contribution retirement plans was **$3.7 million** for the nine months ended March 31, 2024, down from **$4.2 million** in the prior-year period[84](index=84&type=chunk) - The Supplemental Employee Retirement Plan (SERP) for executives had total investments and obligations of **$5.4 million** at March 31, 2024, with realized and unrealized gains/losses recognized in Other Income (Expense)[85](index=85&type=chunk) - Total obligations under defined benefit postemployment plans (severance and other benefits) were **$7.4 million** at March 31, 2024, an increase from **$6.6 million** at June 30, 2023[86](index=86&type=chunk) [Note 11. Stock Compensation Plans](index=23&type=section&id=Note%2011.%20Stock%20Compensation%20Plans) The 2023 Equity Incentive Plan allows for up to 2.0 million shares, with various stock compensation awards granted during the first nine months of fiscal year 2024 - The Kimball Electronics, Inc. 2023 Equity Incentive Plan, approved by shareholders on November 17, 2023, supersedes the 2014 Plan and allows for the issuance of up to **2.0 million** shares[87](index=87&type=chunk) Stock Compensation Granted (First Nine Months of FY2024) | Stock Compensation Granted | Quarter Granted | Shares/Units | Grant Date Fair Value | | :-------------------------------- | :-------------- | :----------- | :-------------------- | | Long-Term Performance Shares | 1st Quarter | 172,079 | $29.19 | | Restricted Shares | 1st Quarter | 71,422 | $29.19 | | Long-Term Performance Shares | 2nd Quarter | 35,650 | $25.21 | | Restricted Shares | 2nd Quarter | 23,768 | $25.21 | | Unrestricted Shares | 2nd Quarter | 18,128 | $25.24 | | Deferred Share Units | 2nd Quarter | 26,347 | $25.24 | - Performance share awards vest based on profitability (operating income) and growth (three-year CAGR compared to EMS industry), with potential for **0% to 125%** of targeted shares[91](index=91&type=chunk) [Note 12. Goodwill and Other Intangible Assets](index=24&type=section&id=Note%2012.%20Goodwill%20and%20Other%20Intangible%20Assets) Goodwill, net, decreased to $6.2 million due to a $5.8 million impairment and reclassification to held for sale, with other intangible assets also significantly reduced Goodwill Summary (Amounts in Thousands) | Item | Amount | | :------------------------------------ | :----- | | Goodwill, net at June 30, 2023 | $12,011 | | Impairment recorded | $(5,820) | | Goodwill classified as held for sale | $(13,745) | | Accumulated impairment classified as held for sale | $13,745 | | Goodwill, net at March 31, 2024 | $6,191 | Other Intangible Assets, Net (Amounts in Thousands) | Item | March 31, 2024 (Net Value) | June 30, 2023 (Net Value) | | :-------------------- | :------------------------- | :------------------------ | | Capitalized Software | $3,197 | $3,482 | | Customer Relationships | $— | $5,094 | | Technology | $— | $244 | | Trade Name | $— | $3,515 | | Total Other Intangible Assets | $3,197 | $12,335 | - Amortization expense for other intangible assets was **$0.5 million** for the three months and **$2.0 million** for the nine months ended March 31, 2024[92](index=92&type=chunk) [Note 13. Share Owners' Equity](index=25&type=section&id=Note%2013.%20Share%20Owners'%20Equity) The company has a Board-authorized stock repurchase plan for up to $100 million, with $88.8 million repurchased since inception, but no repurchases in the current period - Kimball Electronics has a Board-authorized stock repurchase plan for up to **$100 million** of common stock, with **$88.8 million** repurchased since inception through March 31, 2024[94](index=94&type=chunk)[95](index=95&type=chunk) - No share repurchases were made under the plan during the nine months ended March 31, 2024, or 2023[95](index=95&type=chunk) [Note 14. Earnings Per Share](index=25&type=section&id=Note%2014.%20Earnings%20Per%20Share) Basic and diluted EPS for Q3 FY2024 were $(0.24) due to a net loss, with all stock compensation awards considered antidilutive and excluded from the calculation Earnings Per Share of Common Stock (Amounts in thousands, except per share data) | Item | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | Nine Months Ended March 31, 2024 | Nine Months Ended March 31, 2023 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | :------------------------------- | :------------------------------- | | Net Income (Loss) allocated to common Share Owners | $(6,076) | $16,376 | $12,952 | $36,576 | | Basic weighted average common shares outstanding | 25,118 | 24,898 | 25,084 | 24,868 | | Dilutive weighted average shares outstanding | 25,118 | 25,067 | 25,263 | 25,031 | | Basic EPS | $(0.24) | $0.66 | $0.52 | $1.47 | | Diluted EPS | $(0.24) | $0.65 | $0.51 | $1.46 | - For the three months ended March 31, 2024, all **434,000** outstanding stock compensation awards were considered antidilutive and excluded from the diluted EPS calculation due to the net loss[96](index=96&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations, covering performance, liquidity, and accounting policies [Forward-Looking Statements](index=25&type=section&id=Forward-Looking%20Statements) This section cautions readers that forward-looking statements are subject to various risks and uncertainties, including global economic conditions and geopolitical conflicts - Forward-looking statements are identified by words such as 'believes,' 'anticipates,' 'expects,' and are subject to risks including global economic conditions, geopolitical conflicts, raw material costs, foreign exchange fluctuations, and new business conversion[97](index=97&type=chunk) [Business Overview](index=26&type=section&id=Business%20Overview) Kimball Electronics operates in the competitive EMS industry, facing softening demand, leading to a strategic divestiture and restructuring efforts while maintaining a strong balance sheet - Kimball Electronics operates as a global, multifaceted manufacturing solutions provider in the highly competitive EMS industry, positioned between smaller agile players and larger scale competitors[98](index=98&type=chunk)[99](index=99&type=chunk) - The EMS industry is experiencing softening demand due to global macroeconomic headwinds, including inflation, higher interest rates, and geopolitical uncertainty, leading to elevated inventory levels for the company[102](index=102&type=chunk) - In Q3 FY2024, the company decided to divest its automation, test, and measurement business unit (GES) to increase focus on EMS operations and undertook restructuring efforts to align its cost structure with reduced end-market demand[105](index=105&type=chunk) - The company maintains a strong balance sheet with a current ratio of **2.0** and a debt-to-equity ratio of **0.6** at March 31, 2024, and has invested in capacity expansions in Mexico, Thailand, and Poland[106](index=106&type=chunk) Customer Service Years (% of Net Sales and of Customers) | Customer Service Years | Nine Months Ended March 31, 2024 (% of Net Sales) | Nine Months Ended March 31, 2024 ( of Customers) | Nine Months Ended March 31, 2023 (% of Net Sales) | Nine Months Ended March 31, 2023 ( of Customers) | | :------------------- | :---------------------------------------------- | :------------------------------------------------ | :---------------------------------------------- | :------------------------------------------------ | | More than 10 Years | 75% | 35 | 78% | 31 | | 5 to 10 Years | 20% | 18 | 17% | 19 | | Less than 5 Years | 5% | 12 | 5% | 12 | | Total | 100% | 65 | 100% | 62 | [Results of Operations](index=27&type=section&id=Results%20of%20Operations) Consolidated net sales decreased by 12% in Q3 FY2024, leading to significant declines in gross profit, operating income, and net income due to lower sales and impairment charges Consolidated Results of Operations (Amounts in Millions, Except for Per Share Data) | Item | Three Months Ended March 31, 2024 | % of Net Sales (2024) | Three Months Ended March 31, 2023 | % of Net Sales (2023) | % Change (3M) | | :------------------------------------ | :-------------------------------- | :-------------------- | :-------------------------------- | :-------------------- | :------------ | | Net Sales | $425.0 | | $484.7 | | -12% | | Gross Profit | $33.5 | 7.9% | $43.0 | 8.9% | -22% | | Selling and Administrative Expenses | $16.8 | 3.9% | $17.8 | 3.7% | -5% | | Operating Income | $(6.4) | -1.5% | $25.2 | 5.2% | -125% | | Net Income | $(6.1) | | $16.4 | | -137% | | Diluted Earnings per Share | $(0.24) | | $0.65 | | -137% | | Open Orders | $831 | | $882 | | -6% | Net Sales by Vertical Market (Amounts in Millions) | Vertical Market | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | % Change (3M) | Nine Months Ended March 31, 2024 | Nine Months Ended March 31, 2023 | % Change (9M) | | :-------------- | :-------------------------------- | :-------------------------------- | :------------ | :------------------------------- | :------------------------------- | :------------ | | Automotive | $202.0 | $221.9 | -9% | $614.7 | $615.3 | 0% | | Medical | $113.0 | $135.5 | -17% | $323.5 | $377.1 | -14% | | Industrial | $110.0 | $127.3 | -14% | $346.2 | $334.9 | 3% | | Total Net Sales | $425.0 | $484.7 | -12% | $1,284.4 | $1,327.3 | -3% | - Sales to customers in the automotive market decreased **9%** in Q3 FY2024 due to overall decreased demand, while medical market sales declined **17%** primarily due to decreased sales with a large medical customer remediating a recall[111](index=111&type=chunk) - Non-recurring charges in Q3 FY2024 included a **$4.4 million** after-tax goodwill impairment, a **$9.5 million** after-tax asset impairment, and a **$1.2 million** after-tax restructuring charge, significantly impacting net income and EPS[120](index=120&type=chunk) Other Income (Expense) (Amounts in Thousands) | Item | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | Nine Months Ended March 31, 2024 | Nine Months Ended March 31, 2023 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | :------------------------------- | :------------------------------- | | Interest income | $83 | $45 | $483 | $88 | | Interest expense | $(5,875) | $(4,822) | $(17,459) | $(10,790) | | Foreign currency/derivative gain (loss) | $(536) | $1,328 | $(864) | $2,581 | | Gain (loss) on SERP investments | $277 | $353 | $584 | $458 | | Other income (expense), net | $(6,322) | $(3,344) | $(17,935) | $(8,043) | [Liquidity and Capital Resources](index=30&type=section&id=Liquidity%20and%20Capital%20Resources) Working capital remained stable at $450.1 million, with improved operating cash flow, but Cash Conversion Days increased due to elevated inventory and delayed deliveries - Working capital was **$450.1 million** at March 31, 2024, with a current ratio of **2.0** and a debt-to-equity ratio of **0.6**[122](index=122&type=chunk) Cash Conversion Days (CCD) | Metric | Three Months Ended March 31, 2024 | Three Months Ended December 31, 2023 | Three Months Ended March 31, 2023 | | :-------------------------- | :-------------------------------- | :----------------------------------- | :-------------------------------- | | Days Sales Outstanding | 59 | 64 | 54 | | Contract Asset Days | 17 | 18 | 14 | | Production Days Supply on Hand | 103 | 109 | 101 | | Accounts Payable Days | 58 | 65 | 69 | | Advances from Customers Days | 11 | 9 | 8 | | Cash Conversion Days | 110 | 117 | 92 | - The increase in Cash Conversion Days to **110** is attributed to customers pushing out deliveries and elevated inventory levels, which the company is mitigating through customer negotiations for inventory deposits or consignment[124](index=124&type=chunk) Major Categories of Cash Flows (Amounts in Millions) | Cash Flow Category | Nine Months Ended March 31, 2024 | Nine Months Ended March 31, 2023 | | :------------------------------------ | :------------------------------- | :------------------------------- | | Net cash provided by (used for) operating activities | $24.7 | $(57.9) | | Net cash used for investing activities | $(37.7) | $(66.5) | | Net cash provided by financing activities | $36.6 | $107.1 | - The secondary credit facility was amended on January 5, 2024, increasing the borrowing limit to **$100 million** from **$50 million** and extending the maturity to January 3, 2025, to provide more liquidity[136](index=136&type=chunk) - Capital expenditure commitments were approximately **$14 million** at March 31, 2024, primarily for new program wins, facility expansions, and equipment replacement[138](index=138&type=chunk) [Fair Value](index=33&type=section&id=Fair%20Value) No Level 1 or Level 2 financial instruments were affected by market liquidity issues, and valuation techniques for foreign currency derivatives use observable market inputs - Level 1 financial assets were valued using readily available market pricing, and Level 2 foreign currency derivative assets and liabilities were independently valued using observable market inputs[143](index=143&type=chunk) [Off-Balance Sheet Arrangements](index=33&type=section&id=Off-Balance%20Sheet%20Arrangements) As of March 31, 2024, Kimball Electronics did not have any material off-balance sheet arrangements - The company reported no material off-balance sheet arrangements as of March 31, 2024[144](index=144&type=chunk) [Critical Accounting Policies](index=33&type=section&id=Critical%20Accounting%20Policies) Financial statements rely on estimates and assumptions, and there have been no material changes to critical accounting policies since the Annual Report on Form 10-K for June 30, 2023 - Financial statements rely on estimates and assumptions based on current facts, prior experience, and reasonable assumptions[145](index=145&type=chunk) - There have been no material changes to critical accounting policies since the Annual Report on Form 10-K for the year ended June 30, 2023[146](index=146&type=chunk) [New Accounting Standards](index=34&type=section&id=New%20Accounting%20Standards) Information regarding new accounting standards is provided in Note 1 to the Condensed Consolidated Financial Statements - Refer to Note 1 for information regarding new accounting standards[147](index=147&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=34&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes in market risk exposure for foreign currency exchange rates and interest rates were reported compared to the fiscal year ended June 30, 2023 - No material changes in exposure to market risks for foreign currency exchange rates and interest rates were reported compared to the fiscal year ended June 30, 2023[148](index=148&type=chunk) [Item 4. Controls and Procedures](index=34&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were effective as of March 31, 2024, with no material changes in internal control over financial reporting during the quarter - The Chief Executive Officer and Chief Financial Officer concluded that disclosure controls and procedures were effective as of March 31, 2024[149](index=149&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended March 31, 2024[149](index=149&type=chunk) PART II OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, other information, exhibits, and signatures [Item 1. Legal Proceedings](index=35&type=section&id=Item%201.%20Legal%20Proceedings) Kimball Electronics and its subsidiaries are not parties to any pending legal proceedings expected to have a material adverse impact on the business or financial condition - The company is not involved in any legal proceedings expected to have a material adverse impact on its business or financial condition[152](index=152&type=chunk) [Item 1A. Risk Factors](index=35&type=section&id=Item%201A.%20Risk%20Factors) For a comprehensive disclosure of risk factors related to Kimball Electronics' business, refer to its Annual Report on Form 10-K for the fiscal year ended June 30, 2023 - For a comprehensive disclosure of risk factors, refer to the Annual Report on Form 10-K for the year ended June 30, 2023[153](index=153&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=35&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The Board authorized a stock repurchase plan for up to $100 million, with $11.2 million remaining, and no common stock was purchased during the three months ended March 31, 2024 - The company has a Board-authorized stock repurchase plan for up to **$100 million** of common stock[154](index=154&type=chunk) - No common stock was purchased during the three months ended March 31, 2024[155](index=155&type=chunk) - The maximum value of remaining shares that may be purchased under the Repurchase Plan was **$11.2 million** at March 31, 2024[155](index=155&type=chunk) [Item 5. Other Information](index=35&type=section&id=Item%205.%20Other%20Information) No officers or directors adopted or terminated any Rule 10b5-1(c) trading arrangements during the three months ended March 31, 2024 - No officers or directors adopted or terminated any Rule 10b5-1(c) trading arrangements during the three months ended March 31, 2024[156](index=156&type=chunk) [Item 6. Exhibits](index=36&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including organizational documents, CEO and CFO certifications, and Inline XBRL documents - Exhibits include Amended and Restated Articles of Incorporation and By-Laws, CEO and CFO certifications (Rule 13a-14(a)/15d-14(a) and 18 U.S.C. Section 1350), and various Inline XBRL documents[157](index=157&type=chunk) [SIGNATURES](index=37&type=section&id=SIGNATURES) The report is duly signed on behalf of Kimball Electronics, Inc. by its Chief Executive Officer and Chief Financial Officer on May 8, 2024 - The report was signed by Richard D. Phillips, Chief Executive Officer, and Jana T. Croom, Chief Financial Officer, on May 8, 2024[161](index=161&type=chunk)

• Down 9% compared to Q3 last year • Continued weak demand in Europe NET SALES | --- | --- | --- | |-----------------------------------------------------------------------------------------------------|-------|-------| | | | | | Increase in the rate at which electronic content is being added to vehicles – steering & braking | | | | Content leverages advanced technologies and expanded operating systems | | | | • Align with core manufacturing capabilities | | | | • Proven expertise in safety critical products ...

Financial Data and Key Metrics Changes - Net sales in Q3 totaled $425 million, a 12% decrease from the prior year, but a sequential increase of nearly 1% from the previous quarter [6][22][40] - Gross margin rate in Q3 was 7.9%, down 100 basis points from 8.9% in Q3 of fiscal 2023, attributed to lower absorption in manufacturing facilities [8][40] - Adjusted net income in Q3 was $8.4 million, or $0.34 per diluted share, compared to $16.4 million, or $0.65 per diluted share in the same quarter last year [40][41] - Cash and cash equivalents at March 31, 2024, were $65.2 million, with cash flow from operating activities of $42.6 million [23] Business Line Data and Key Metrics Changes - Net sales in the automotive vertical were $202 million, down 9% year-over-year, representing 47% of total company sales [37] - Medical vertical sales were $113 million, a 17% decrease compared to Q3 last year, driven by an FDA recall affecting a major customer [20] - Industrial sales were $110 million, a 14% decrease year-over-year, with half of the decline attributed to the AT&M business [38] Market Data and Key Metrics Changes - The decline in sales was observed across all verticals and geographic regions, with notable weakness in Europe, North America, and Asia [46] - The automotive market is experiencing softening demand, particularly in North America and Asia, influenced by inventory levels and consumer demand [47] Company Strategy and Development Direction - The company is divesting its automation, test, and measurement business to sharpen its strategic focus on core EMS operations [4][5] - There is an increased emphasis on the medical solutions business, with a realignment to enhance differentiation [5] - The company aims to balance organic growth with returning cash to shareholders through opportunistic share repurchases [6][41] Management's Comments on Operating Environment and Future Outlook - Management anticipates macroeconomic headwinds to persist into fiscal 2025, affecting demand stability [45][46] - The company is focused on aligning its cost structure with current demand trends while maintaining stable operating margins [19][11] - Management remains optimistic about long-term growth opportunities, particularly in the medical and automotive sectors [7][11] Other Important Information - The company recorded impairment and restructuring charges totaling $14.5 million after-tax in Q3 [22] - Capital expenditures in Q3 were $13.4 million, with an updated estimate for FY 2024 in the range of $55 million to $60 million [9][24] - The company published its annual ESG disclosures, highlighting sustainability efforts and achievements [25] Q&A Session Summary Question: What is the outlook for macro conditions? - Management noted that macro conditions are expected to remain challenging through fiscal 2025, with persistent softness in demand across all verticals and regions [45][46] Question: How is the divestiture of the AT&M business expected to impact the company? - The divestiture is aimed at sharpening strategic focus and is not significantly capital intensive, with expected cost savings to be realized [52][54] Question: What is the status of the automotive market, particularly in North America? - There is softening demand in the North American automotive market, influenced by inventory levels and consumer demand [47] Question: Can you provide more details on the medical vertical's performance? - The medical vertical experienced a decline due to an FDA recall affecting a major customer, but there are growth opportunities with other customers [20][77] Question: What are the expectations for capital expenditures moving forward? - Capital expenditures are expected to be managed tightly, with a focus on maintenance and strategically timed growth investments [76]

Kimball Electronics (KE) came out with quarterly earnings of $0.34 per share, missing the Zacks Consensus Estimate of $0.40 per share. This compares to earnings of $0.65 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of -15%. A quarter ago, it was expected that this electronics manufacturing services company would post earnings of $0.37 per share when it actually produced earnings of $0.33, delivering a surprise of -10.81%.Over ...

Exhibit 99.1 KIMBALL ELECTRONICS REPORTS Q3 RESULTS; COMPANY ANNOUNCES RENEWED STRATEGIC FOCUS, INCLUDING EXPECTED DIVESTITURE OF THE AUTOMATION, TEST & MEASUREMENT BUSINESS JASPER, Ind., May 7, 2024 -- (BUSINESS WIRE) -- Kimball Electronics, Inc. (Nasdaq: KE) today announced financial results for the third quarter of fiscal 2024 with net sales totaling $425.0 million and a net loss of $6.1 million, or $0.24 per share. This result includes the impairment of the Automation, Test & Measurement business, which ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 001-36454 KIMBALL ELECTRONICS, INC. (Exact name of registrant as specified in its charter) incorporation or organization) Indiana ...

• Macro environment likely to remain challenging for some time • Net sales totaled $113 million • Braking systems • Our manufacturing capabilities extend beyond electronics and PCBAs • Sales in Q2 declined compared to the same period last year | --- | --- | --- | |-------|--------------------------------------|-------| | | | | | | neutrality | | | • | Responsible use of natural resources | | | | We specialize in… | | | • | Heating & cooling systems | | | • | Factory automation | | | • | Optical inspection | ...

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents Kimball Electronics, Inc.'s unaudited condensed consolidated financial statements for the quarter ended September 30, 2023, including balance sheets, income statements, comprehensive income statements, cash flow statements, and statements of share owners' equity, along with detailed notes explaining business operations, accounting policies, and specific financial line items [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity as of September 30, 2023, and June 30, 2023 Balance Sheet Data | Metric | September 30, 2023 (Thousands) | June 30, 2023 (Thousands) | | :-------------------------------- | :----------------------------- | :-------------------------- | | **ASSETS** | | | | Cash and cash equivalents | $56,581 | $42,955 | | Receivables, net | $259,419 | $308,167 | | Contract assets | $87,675 | $78,798 | | Inventories | $482,229 | $450,319 | | Total current assets | $931,045 | $929,427 | | Property and Equipment, net | $268,645 | $267,684 | | Goodwill | $12,011 | $12,011 | | Other Intangible Assets, net | $11,603 | $12,335 | | Total Assets | $1,263,166 | $1,259,719 | | **LIABILITIES AND SHARE OWNERS' EQUITY** | | | | Current portion of borrowings | $61,680 | $46,454 | | Accounts payable | $308,912 | $322,274 | | Advances from customers | $41,467 | $33,905 | | Total current liabilities | $478,331 | $475,148 | | Long-term debt | $235,000 | $235,000 | | Total Liabilities | $734,904 | $735,725 | | Total Share Owners' Equity | $528,262 | $523,994 | | Total Liabilities and Share Owners' Equity | $1,263,166 | $1,259,719 | [Condensed Consolidated Statements of Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) This section details the company's financial performance over the three months ended September 30, 2023, including net sales, gross profit, operating income, and net income Income Statement Data | Metric | Three Months Ended September 30, 2023 (Thousands) | Three Months Ended September 30, 2022 (Thousands) | | :-------------------------------- | :------------------------------------------ | :------------------------------------------ | | Net Sales | $438,081 | $405,889 | | Cost of Sales | $402,539 | $376,568 | | Gross Profit | $35,542 | $29,321 | | Selling and Administrative Expenses | $16,052 | $15,750 | | Operating Income | $19,490 | $13,571 | | Other income (expense), net | $(6,279) | $(1,403) | | Income Before Taxes on Income | $13,211 | $12,168 | | Provision for Income Taxes | $2,457 | $2,659 | | Net Income | $10,754 | $9,509 | | Basic Earnings Per Share | $0.43 | $0.38 | | Diluted Earnings Per Share | $0.43 | $0.38 | - Net Sales increased by **8% YoY to $438.1 million** for the three months ended September 30, 2023, compared to $405.9 million in the prior year period. Gross Profit increased by **21% YoY to $35.5 million**, and Operating Income increased by **44% YoY to $19.5 million**. Net Income rose by **13% YoY to $10.8 million**, with Diluted Earnings Per Share also increasing by **13% to $0.43**[13](index=13&type=chunk) [Condensed Consolidated Statements of Comprehensive Income](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) This section outlines the company's total comprehensive income, including net income and other comprehensive income (loss) components, for the three months ended September 30, 2023 Comprehensive Income Data | Metric | Three Months Ended September 30, 2023 (Thousands) | Three Months Ended September 30, 2022 (Thousands) | | :-------------------------------- | :------------------------------------------ | :------------------------------------------ | | Net income | $10,754 | $9,509 | | Other comprehensive income (loss), net of tax | $(6,735) | $(7,417) | | Total comprehensive income | $4,019 | $2,092 | - Total comprehensive income increased by **92% YoY to $4.0 million** for the three months ended September 30, 2023, primarily due to a smaller other comprehensive loss compared to the prior year[14](index=14&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section details the company's cash inflows and outflows from operating, investing, and financing activities for the three months ended September 30, 2023 Cash Flow Data | Metric | Three Months Ended September 30, 2023 (Thousands) | Three Months Ended September 30, 2022 (Thousands) | | :-------------------------------- | :------------------------------------------ | :------------------------------------------ | | Net cash provided by (used for) operating activities | $12,801 | $(60,194) | | Net cash used for investing activities | $(11,302) | $(19,320) | | Net cash provided by financing activities | $13,985 | $50,769 | | Net Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash | $14,935 | $(30,136) | | Cash, Cash Equivalents, and Restricted Cash at End of Period | $58,799 | $19,715 | - Net cash provided by operating activities significantly improved to a positive **$12.8 million** in Q1 FY2024 from a net cash usage of **$60.2 million** in Q1 FY2023. This was largely driven by a decrease in accounts receivable providing **$45.3 million** in cash, partially offset by an increase in inventory using **$34.0 million**[17](index=17&type=chunk)[109](index=109&type=chunk)[110](index=110&type=chunk) - Net cash used for investing activities decreased to **$11.3 million** in Q1 FY2024 from **$19.3 million** in Q1 FY2023, reflecting reduced capital expenditures[17](index=17&type=chunk)[112](index=112&type=chunk) - Net cash provided by financing activities decreased to **$14.0 million** in Q1 FY2024 from **$50.8 million** in Q1 FY2023, primarily due to lower net borrowings on credit facilities[17](index=17&type=chunk)[113](index=113&type=chunk) [Condensed Consolidated Statement of Share Owners' Equity](index=9&type=section&id=Condensed%20Consolidated%20Statement%20of%20Share%20Owners%27%20Equity) This section presents changes in the company's share owners' equity, including net income, other comprehensive income, and stock compensation, for the period ended September 30, 2023 Share Owners' Equity Data | Metric | September 30, 2023 (Thousands) | June 30, 2023 (Thousands) | | :-------------------------------- | :----------------------------- | :-------------------------- | | Total Share Owners' Equity | $528,262 | $523,994 | | Net income | $10,754 | N/A | | Other comprehensive income (loss) | $(6,735) | N/A | | Compensation expense related to stock compensation plans | $1,613 | N/A | | Performance and restricted share issuance | $(1,364) | N/A | - Total Share Owners' Equity increased to **$528.3 million** as of September 30, 2023, from **$524.0 million** as of June 30, 2023, driven by net income and stock compensation expense, partially offset by other comprehensive loss and share issuance[19](index=19&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements, covering accounting policies, revenue, inventories, and other financial items [Note 1. Business Description and Summary of Significant Accounting Policies](index=10&type=section&id=Note%201.%20Business%20Description%20and%20Summary%20of%20Significant%20Accounting%20Policies) This note describes Kimball Electronics, Inc.'s global manufacturing solutions business and outlines its key accounting policies, including revenue recognition and treatment of non-operating income - Kimball Electronics, Inc. is a global manufacturing solutions provider offering electronics manufacturing services (EMS) and contract manufacturing for non-electronic components, medical disposables, precision molded plastics, and production automation equipment across automotive, medical, and industrial end markets[22](index=22&type=chunk) - The company recognizes revenue primarily over time as manufacturing services are performed for customer-specified products with no alternative use, and an enforceable right to payment exists[26](index=26&type=chunk) - Kimball Electronics sold **$103.0 million** and **$97.6 million** of accounts receivable without recourse in the three months ended September 30, 2023 and 2022, respectively, incurring factoring fees of **$0.9 million** in both periods[31](index=31&type=chunk) - Non-operating income (expense), net, includes foreign currency rate movements, derivative gains/losses, fair value adjustments on SERP investments, government subsidies, and bank charges[34](index=34&type=chunk) [Note 2. Revenue from Contracts with Customers](index=13&type=section&id=Note%202.%20Revenue%20from%20Contracts%20with%20Customers) This note provides a breakdown of net sales by vertical market and details the company's contract assets related to revenue recognition Net Sales by Vertical Market | Vertical Market | Three Months Ended September 30, 2023 (Millions) | Three Months Ended September 30, 2022 (Millions) | | :---------------- | :------------------------------------------ | :------------------------------------------ | | Automotive | $212.5 | $188.2 | | Medical | $102.4 | $116.0 | | Industrial | $123.2 | $101.7 | | Total net sales | $438.1 | $405.9 | - Approximately **97%** of net sales in Q1 FY2024 (**96%** in Q1 FY2023) were recognized over time as manufacturing services were performed[43](index=43&type=chunk) - Contract assets, representing unbilled accounts receivable, increased to **$87.7 million** as of September 30, 2023, from **$78.8 million** as of June 30, 2023[44](index=44&type=chunk) [Note 3. Inventories](index=13&type=section&id=Note%203.%20Inventories) This note details the composition of the company's inventories, including finished products, work-in-process, and raw materials, as of September 30, 2023 Inventory Composition | Inventory Component | September 30, 2023 (Thousands) | June 30, 2023 (Thousands) | | :------------------ | :----------------------------- | :-------------------------- | | Finished products | $54 | $432 | | Work-in-process | $4,347 | $3,117 | | Raw materials | $477,828 | $446,770 | | Total inventory | $482,229 | $450,319 | - Total inventory increased to **$482.2 million** as of September 30, 2023, from **$450.3 million** as of June 30, 2023, primarily driven by an increase in raw materials[46](index=46&type=chunk) [Note 4. Accumulated Other Comprehensive Income (Loss)](index=14&type=section&id=Note%204.%20Accumulated%20Other%20Comprehensive%20Income%20(Loss)) This note provides a breakdown of the components contributing to accumulated other comprehensive income (loss), including foreign currency translation adjustments and derivative gains/losses Accumulated Other Comprehensive Income (Loss) Components | Component | Balance at September 30, 2023 (Thousands) | Balance at June 30, 2023 (Thousands) | | :-------------------------------- | :-------------------------------------- | :----------------------------------- | | Foreign Currency Translation Adjustments | $(16,062) | $(11,832) | | Derivative Gain (Loss) | $(1,154) | $1,368 | | Post Employment Benefits Net Actuarial Gain (Loss) | $(565) | $(582) | | Accumulated Other Comprehensive Income (Loss) | $(17,781) | $(11,046) | - Accumulated Other Comprehensive Loss increased to **$17.8 million** as of September 30, 2023, from **$11.0 million** as of June 30, 2023, primarily due to foreign currency translation adjustments and derivative losses[47](index=47&type=chunk) Reclassification from AOCI to Income | Reclassification from AOCI to Income | Three Months Ended September 30, 2023 (Thousands) | Three Months Ended September 30, 2022 (Thousands) | | :----------------------------------- | :------------------------------------------ | :------------------------------------------ | | Derivative gain (loss), net of tax | $2,213 | $408 | | Postemployment Benefits, net of tax | $5 | $77 | | Total reclassifications for the period, net of tax | $2,218 | $485 | [Note 5. Commitments and Contingent Liabilities](index=14&type=section&id=Note%205.%20Commitments%20and%20Contingent%20Liabilities) This note discusses the company's commitments and contingent liabilities, including warranty provisions, which are deemed immaterial for the reporting period - The Company provides assurance-type warranties for workmanship and product specifications, with related liability and expense being immaterial for the three months ended September 30, 2023 and 2022[49](index=49&type=chunk) [Note 6. Credit Facilities](index=15&type=section&id=Note%206.%20Credit%20Facilities) This note outlines the company's credit facilities, including available borrowing capacity, outstanding borrowings, and weighted-average interest rates Credit Facility Details | Credit Facility | Available Borrowing Capacity at Sep 30, 2023 (Millions) | Borrowings Outstanding at Sep 30, 2023 (Millions) | Borrowings Outstanding at Jun 30, 2023 (Millions) | | :------------------------------ | :------------------------------------------ | :---------------------------------------- | :---------------------------------------- | | Primary credit facility | $12.1 | $287.5 | $272.1 | | Secondary credit facility | $50.0 | — | — | | Foreign credit facilities | $28.4 | $9.2 | $9.4 | | Total credit facilities | $90.5 | $296.7 | $281.5 | | Long-term debt under credit facilities, less current portion | N/A | $235.0 | $235.0 | - The weighted-average interest rate on borrowings outstanding under credit facilities increased to **7.1%** at September 30, 2023, from **6.8%** at June 30, 2023[54](index=54&type=chunk) - The Company maintains a **$300 million** primary credit facility maturing May 4, 2027, and a **$50 million** secondary credit facility maturing February 2, 2024, for working capital and general corporate purposes[50](index=50&type=chunk)[52](index=52&type=chunk) [Note 7. Fair Value](index=17&type=section&id=Note%207.%20Fair%20Value) This note provides fair value measurements for financial instruments, including derivatives and trading securities, categorized by valuation input levels Fair Value of Financial Instruments | Financial Instrument | September 30, 2023 (Thousands) | June 30, 2023 (Thousands) | | :-------------------------------- | :----------------------------- | :-------------------------- | | **Assets** | | | | Derivatives: foreign exchange contracts (Level 2) | $2,642 | $6,320 | | Trading securities: mutual funds held in nonqualified SERP (Level 1) | $6,019 | $8,668 | | Total assets at fair value | $8,661 | $14,988 | | **Liabilities** | | | | Derivatives: foreign exchange contracts (Level 2) | $2,136 | $1,245 | | Total liabilities at fair value | $2,136 | $1,245 | - The fair value of derivative assets (foreign exchange contracts) decreased from **$6.3 million** to **$2.6 million**, while derivative liabilities increased from **$1.2 million** to **$2.1 million** between June 30, 2023, and September 30, 2023[56](index=56&type=chunk) [Note 8. Derivative Instruments](index=18&type=section&id=Note%208.%20Derivative%20Instruments) This note describes the company's use of derivative instruments, primarily foreign exchange forward contracts, to manage currency risks and their impact on financial statements - The Company uses foreign exchange forward contracts as cash flow hedges to manage foreign currency exchange rate risks in forecasted transactions and non-designated contracts for intercompany balances[60](index=60&type=chunk)[61](index=61&type=chunk) - As of September 30, 2023, outstanding foreign exchange contracts had an aggregate notional amount of **$14.1 million** against the U.S. dollar and **59.8 million Euro** against the Euro[61](index=61&type=chunk) Derivative Gains and Losses in OCI | Derivative Type | Pre-Tax Gain or (Loss) Recognized in OCI (Sep 30, 2023) (Thousands) | Pre-Tax Gain or (Loss) Recognized in OCI (Sep 30, 2022) (Thousands) | | :---------------------- | :---------------------------------------------------------- | :---------------------------------------------------------- | | Foreign exchange contracts | $(387) | $283 | Derivative Reclassifications from AOCI | Derivative Type | Pre-Tax Gain or (Loss) Reclassified from AOCI into Income (Sep 30, 2023) (Thousands) | Pre-Tax Gain or (Loss) Reclassified from AOCI into Income (Sep 30, 2022) (Thousands) | | :---------------------- | :------------------------------------------------------------------- | :------------------------------------------------------------------- | | Foreign exchange contracts | $2,867 | $346 | [Note 9. Employee Benefit Plans](index=20&type=section&id=Note%209.%20Employee%20Benefit%20Plans) This note details the company's employee benefit plans, including defined contribution retirement plans, the Supplemental Employee Retirement Plan (SERP), and other postemployment plans - Employer contributions to domestic defined contribution retirement plans were **$1.6 million** for Q1 FY2024, up from **$1.5 million** in Q1 FY2023[70](index=70&type=chunk) - The Supplemental Employee Retirement Plan (SERP) assets and obligations totaled **$6.0 million** as of September 30, 2023, down from **$8.7 million** as of June 30, 2023[71](index=71&type=chunk) - The Company maintains severance plans for domestic employees and other postemployment plans for certain foreign subsidiaries, with total obligations of **$6.6 million** as of September 30, 2023[73](index=73&type=chunk) [Note 10. Stock Compensation Plans](index=21&type=section&id=Note%2010.%20Stock%20Compensation%20Plans) This note describes the company's stock compensation plans, including the 2014 Stock Option and Incentive Plan and the newly adopted 2023 Equity Incentive Plan, along with details of recent awards - The 2014 Stock Option and Incentive Plan allows for the issuance of up to **4.5 million shares** and expires on October 1, 2024. A new 2023 Equity Incentive Plan was adopted by the Board, subject to shareholder approval[74](index=74&type=chunk) Stock Compensation Granted | Stock Compensation Granted (Q1 FY2024) | Shares/Units | Grant Date Fair Value | | :------------------------------------- | :----------- | :-------------------- | | Long-Term Performance Shares | 172,079 | $29.19 | | Restricted Shares | 71,422 | $29.19 | - Long-term performance share awards granted in Q1 FY2024 will cliff vest at the third anniversary in FY2027, based on profitability and growth metrics[77](index=77&type=chunk) [Note 11. Goodwill and Other Intangible Assets](index=22&type=section&id=Note%2011.%20Goodwill%20and%20Other%20Intangible%20Assets) This note provides a breakdown of goodwill and other intangible assets, including capitalized software, customer relationships, and trade names, as of September 30, 2023 Goodwill and Other Intangible Assets Breakdown | Asset Type | September 30, 2023 (Thousands) | June 30, 2023 (Thousands) | | :---------------------- | :----------------------------- | :-------------------------- | | Goodwill, net | $12,011 | $12,011 | | Capitalized Software, net | $3,284 | $3,482 | | Customer Relationships, net | $4,965 | $5,094 | | Technology, net | — | $244 | | Trade Name, net | $3,354 | $3,515 | | Other Intangible Assets, net | $11,603 | $12,335 | - Goodwill remained stable at **$12.0 million**. Other intangible assets, net, decreased slightly to **$11.6 million** from **$12.3 million**, with amortization expense of **$0.9 million** for both Q1 FY2024 and Q1 FY2023[79](index=79&type=chunk) [Note 12. Share Owners' Equity](index=22&type=section&id=Note%2012.%20Share%20Owners%27%20Equity) This note discusses the company's share owners' equity, including details on the Board-authorized stock repurchase plan and recent repurchase activity - The Company has a Board-authorized stock repurchase plan of up to **$100 million**, with **$88.8 million** repurchased since inception through September 30, 2023. No share repurchases occurred in Q1 FY2024 or Q1 FY2023[81](index=81&type=chunk)[82](index=82&type=chunk)[123](index=123&type=chunk) [Note 13. Earnings Per Share](index=23&type=section&id=Note%2013.%20Earnings%20Per%20Share) This note provides a calculation of basic and diluted earnings per share, along with the weighted average common shares outstanding for the reporting periods Earnings Per Share Metrics | Metric | Three Months Ended September 30, 2023 | Three Months Ended September 30, 2022 | | :-------------------------------- | :------------------------------------ | :------------------------------------ | | Net Income allocated to common Share Owners | $10,738 | $9,496 | | Basic weighted average common shares outstanding | 25,041 | 24,826 | | Dilutive weighted average shares outstanding | 25,238 | 24,955 | | Basic Earnings Per Share | $0.43 | $0.38 | | Diluted Earnings Per Share | $0.43 | $0.38 | - Basic and Diluted Earnings Per Share both increased to **$0.43** in Q1 FY2024 from **$0.38** in Q1 FY2023, reflecting higher net income allocated to common shareholders[83](index=83&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the Company's financial performance, condition, and future outlook for the quarter ended September 30, 2023. It covers business overview, detailed results of operations, liquidity and capital resources, and critical accounting policies, highlighting key drivers of revenue and profitability changes, and strategies for managing working capital and growth [Forward-Looking Statements](index=23&type=section&id=Forward-Looking%20Statements) This section highlights that the document contains forward-looking statements subject to various risks and uncertainties, including global economic conditions and supply chain challenges - The document contains forward-looking statements subject to risks such as global economic conditions, geopolitical conflicts, raw material availability/cost, foreign exchange fluctuations, and the ability to convert new business opportunities[84](index=84&type=chunk) [Business Overview](index=23&type=section&id=Business%20Overview) This section provides an overview of Kimball Electronics' global manufacturing solutions business, its market position, and the industry trends and challenges it faces - Kimball Electronics is a global, multifaceted manufacturing solutions provider specializing in electronics manufacturing services (EMS) for automotive, medical, and industrial markets, also offering contract manufacturing for non-electronic components and medical devices[85](index=85&type=chunk) - The EMS industry is projected to grow at a CAGR of **5.5%** through 2027, while the worldwide assembly market for electronics products is expected to grow at **4.3%**[87](index=87&type=chunk) - The Company faces ongoing challenges from component shortages (especially semiconductors), allocations, shipping delays, and industry-wide inflation, which impact costs and working capital[89](index=89&type=chunk)[90](index=90&type=chunk) Customer Tenure and Net Sales Contribution | Customer Service Years | % of Net Sales (Sep 30, 2023) | of Customers (Sep 30, 2023) | % of Net Sales (Sep 30, 2022) | of Customers (Sep 30, 2022) | | :--------------------- | :---------------------------- | :---------------------------- | :---------------------------- | :---------------------------- | | More than 10 Years | 74 % | 33 | 80 % | 31 | | 5 to 10 Years | 20 % | 20 | 16 % | 18 | | Less than 5 Years | 6 % | 11 | 4 % | 11 | | Total | 100 % | 64 | 100 % | 60 | [Results of Operations](index=26&type=section&id=Results%20of%20Operations) This section analyzes the company's financial performance for the three months ended September 30, 2023, detailing changes in net sales, gross profit, operating income, and net income by vertical market Key Financial Results | Metric | Q1 FY2024 (Millions) | Q1 FY2023 (Millions) | % Change | | :-------------------------------- | :------------------- | :------------------- | :------- | | Net Sales | $438.1 | $405.9 | 8 % | | Gross Profit | $35.5 | $29.3 | 21 % | | Selling and Administrative Expenses | $16.0 | $15.7 | 2 % | | Operating Income | $19.5 | $13.6 | 44 % | | Other Income (Expense) | $(6.2) | $(1.4) | N/A | | Provision for Income Taxes | $2.5 | $2.7 | (8)% | | Net Income | $10.8 | $9.5 | 13 % | | Diluted Earnings per Share | $0.43 | $0.38 | 13 % | | Open Orders | $907 | $1,069 | (15)% | Net Sales by Vertical Market | Vertical Market | Q1 FY2024 Net Sales (Millions) | Q1 FY2023 Net Sales (Millions) | % Change | | :---------------- | :----------------------------- | :----------------------------- | :------- | | Automotive | $212.5 | $188.2 | 13 % | | Medical | $102.4 | $116.0 | (12)% | | Industrial | $123.2 | $101.7 | 21 % | | Total Net Sales | $438.1 | $405.9 | 8 % | - Automotive sales increased **13%** due to program ramp-ups, new product launches, and improved component availability. Industrial sales increased **21%** from program ramp-ups. Medical sales declined **12%** primarily due to decreased sales with a large customer remediating a recall unrelated to the Company's products[99](index=99&type=chunk) - Gross profit as a percentage of net sales improved in Q1 FY2024, reflecting optimized operating performance post-facility expansions. Selling and administrative expenses remained relatively flat in absolute dollars but declined as a percentage of net sales[100](index=100&type=chunk)[101](index=101&type=chunk) - Interest expense increased significantly due to higher interest rates and increased borrowings. Open orders decreased by **15% YoY**, mainly driven by reduced orders from a large medical customer[101](index=101&type=chunk)[103](index=103&type=chunk) [Liquidity and Capital Resources](index=27&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's financial liquidity, capital management, and ability to meet short-term and long-term obligations, including cash flows, credit facilities, and working capital metrics - Working capital was **$452.7 million** at September 30, 2023, compared to **$454.3 million** at June 30, 2023. The current ratio was **1.9**, and the debt-to-equity ratio was **0.6** at September 30, 2023[104](index=104&type=chunk) Working Capital and Efficiency Metrics | Metric | Sep 30, 2023 | Jun 30, 2023 | Sep 30, 2022 | | :-------------------------- | :----------- | :----------- | :----------- | | Days Sales Outstanding | 58 | 56 | 54 | | Contract Asset Days | 17 | 14 | 14 | | Production Days Supply on Hand | 108 | 97 | 106 | | Accounts Payable Days | 71 | 65 | 73 | | Advances from Customers Days | 9 | 8 | 7 | | Cash Conversion Days | 103 | 94 | 94 | - Cash Conversion Days (CCD) increased to **103** at September 30, 2023, from **94** at June 30, 2023, primarily due to strategic inventory builds to mitigate parts shortages, which adversely impacted Production Days Supply on Hand[106](index=106&type=chunk) [Cash Flows](index=28&type=section&id=Cash%20Flows) This subsection analyzes the company's cash generation and usage from operating, investing, and financing activities, highlighting key changes and their drivers Summary Cash Flows | Cash Flow Category | Q1 FY2024 (Millions) | Q1 FY2023 (Millions) | | :-------------------------------- | :------------------- | :------------------- | | Net cash provided by (used for) operating activities | $12.8 | $(60.2) | | Net cash used for investing activities | $(11.3) | $(19.3) | | Net cash provided by financing activities | $14.0 | $50.8 | - Operating cash flow significantly improved to a positive **$12.8 million** in Q1 FY2024, compared to a negative **$60.2 million** in Q1 FY2023, mainly due to a decrease in accounts receivable and a smaller increase in inventory[109](index=109&type=chunk)[110](index=110&type=chunk) - Investing activities used **$11.3 million** in Q1 FY2024, down from **$19.3 million** in Q1 FY2023, reflecting lower capital expenditures for new business awards and facility expansions[112](index=112&type=chunk) - Financing activities provided **$14.0 million** in Q1 FY2024, primarily from net borrowings on credit facilities, a decrease from **$50.8 million** in Q1 FY2023[113](index=113&type=chunk) [Credit Facilities](index=29&type=section&id=Credit%20Facilities) This subsection details the company's credit facilities, including their purpose, maturity dates, and compliance with financial covenants - The Company maintains a **$300 million** primary credit facility (maturing May 4, 2027) and a **$50 million** secondary credit facility (maturing February 2, 2024) for working capital and general corporate purposes[114](index=114&type=chunk) - The Company was in compliance with all financial covenants of its primary and secondary credit facilities as of September 30, 2023[114](index=114&type=chunk) - Foreign credit facilities are also maintained for working capital at specific international locations (Thailand, China, Netherlands, Poland, Vietnam)[115](index=115&type=chunk) [Factoring Arrangements](index=29&type=section&id=Factoring%20Arrangements) This subsection explains the company's use of non-recourse accounts receivable factoring arrangements to manage customer payment terms and cash flow - The Company utilizes non-recourse accounts receivable factoring arrangements, selling **$103.0 million** and **$97.6 million** of receivables in Q1 FY2024 and Q1 FY2023, respectively, to extend customer terms without impacting cash flow[117](index=117&type=chunk) [Future Liquidity](index=29&type=section&id=Future%20Liquidity) This subsection outlines management's assessment of future liquidity, including expected sufficiency of funds, capital expenditure commitments, and foreign cash holdings - Management believes current liquidity sources (cash, operations, credit facilities) are sufficient for the next 12 months. Unused borrowing capacity totaled **$90.5 million** at September 30, 2023[118](index=118&type=chunk) - Capital expenditure commitments were approximately **$12 million** at September 30, 2023, primarily for new program wins and facility expansions[120](index=120&type=chunk) - Foreign operations held **$54.1 million** in cash, with accumulated unremitted foreign earnings intended for permanent reinvestment outside the U.S.[122](index=122&type=chunk) [Fair Value](index=30&type=section&id=Fair%20Value) This section discusses the fair value of financial instruments and the impact of market liquidity on their valuation during the reporting period - No Level 1 or Level 2 financial instruments were affected by a lack of market liquidity in Q1 FY2024. Foreign currency derivative assets and liabilities were valued using observable market inputs[125](index=125&type=chunk) [Off-Balance Sheet Arrangements](index=30&type=section&id=Off-Balance%20Sheet%20Arrangements) This section confirms the absence of any material off-balance sheet arrangements as of September 30, 2023 - As of September 30, 2023, the Company did not have any material off-balance sheet arrangements[126](index=126&type=chunk) [Critical Accounting Policies](index=30&type=section&id=Critical%20Accounting%20Policies) This section states that there have been no material changes to the company's critical accounting policies since the last annual report - There have been no material changes to the Company's critical accounting policies since the Annual Report on Form 10-K for the year ended June 30, 2023[128](index=128&type=chunk) [New Accounting Standards](index=31&type=section&id=New%20Accounting%20Standards) This section indicates that no newly issued accounting standards are expected to have a material impact on the company's financial statements - There are no issued but not yet adopted accounting standards expected to have a material impact on the Company[129](index=129&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=31&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section states that there were no material changes in the Company's exposure to market risks related to foreign currency exchange rates and interest rates compared to the fiscal year ended June 30, 2023 - No material changes in exposure to market risks for foreign currency exchange rates and interest rates were reported compared to the fiscal year ended June 30, 2023[130](index=130&type=chunk) [Item 4. Controls and Procedures](index=31&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of the Company's disclosure controls and procedures as of September 30, 2023, and reports no material changes in internal control over financial reporting during the quarter - The Chief Executive Officer and Chief Financial Officer concluded that disclosure controls and procedures were effective as of September 30, 2023[131](index=131&type=chunk) - There were no material changes in internal control over financial reporting during the quarter ended September 30, 2023[131](index=131&type=chunk) [PART II. OTHER INFORMATION](index=32&type=section&id=PART%20II%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=32&type=section&id=Item%201.%20Legal%20Proceedings) This section states that the Company is not a party to any material legal proceedings beyond ordinary routine litigation incidental to its business, and the outcome of current litigation is not expected to have a material adverse impact - The Company is not involved in any legal proceedings expected to have a material adverse impact on its business or financial condition, beyond routine litigation[133](index=133&type=chunk) [Item 1A. Risk Factors](index=32&type=section&id=Item%201A.%20Risk%20Factors) This section refers to the comprehensive disclosure of risk factors in the Company's Annual Report on Form 10-K for the year ended June 30, 2023 - A comprehensive disclosure of risk factors is available in the Company's Annual Report on Form 10-K for the year ended June 30, 2023[134](index=134&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=32&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the Company's stock repurchase plan, which authorizes up to $100 million in common stock repurchases. No shares were purchased during the quarter ended September 30, 2023, leaving $11.2 million remaining under the plan - The Board-approved stock repurchase plan authorizes up to **$100 million** in common stock repurchases[135](index=135&type=chunk) - No common stock was purchased under the Repurchase Plan during the three months ended September 30, 2023[136](index=136&type=chunk) - The maximum value of remaining shares that may be purchased under the plan was **$11.2 million** as of September 30, 2023[136](index=136&type=chunk) [Item 5. Other Information](index=32&type=section&id=Item%205.%20Other%20Information) This section confirms that no officers or directors adopted or terminated any Rule 10b5-1 trading arrangements during the quarter ended September 30, 2023 - No officers or directors adopted or terminated Rule 10b5-1 trading arrangements during the three months ended September 30, 2023[137](index=137&type=chunk) [Item 6. Exhibits](index=33&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the 10-Q report, including articles of incorporation, by-laws, CEO/CFO certifications, and Inline XBRL documents - The report includes certifications from the Chief Executive Officer and Chief Financial Officer (Exhibits 31.1, 31.2, 32.1, 32.2) and Inline XBRL documents (Exhibits 101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104)[138](index=138&type=chunk) [SIGNATURES](index=34&type=section&id=SIGNATURES) This section contains the signatures of the Chief Executive Officer and Chief Financial Officer, certifying the filing of the report on November 7, 2023 - The report was signed by Richard D. Phillips (Chief Executive Officer) and Jana T. Croom (Chief Financial Officer) on November 7, 2023[142](index=142&type=chunk)