UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2020 OR o 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) Indiana 35-2047713 (State or other ju ...

Financial Results First Quarter Fiscal Year 2021 Quarter Ended September 30, 2020 Supplementary Information to November 4, 2020 Earnings Conference Call Kimball Electronics (Nasdaq: KE) Safe Harbor Statement Certain statements contained within this supplementary information and any statements made during our earnings conference call today may be considered forward-looking under the Private Securities Litigation Reform Act of 1995 and are subject to risks and uncertainties including, but not limited to, succ ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended June 30, 2020 incorporation or organization) 1205 Kimball Boulevard, Jasper, Indiana 47546 (Address of principal executive of ices) (Zip Code) OR o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to (State or other jurisdiction of (I. ...

Financial Results Fourth Quarter Fiscal Year 2020 Quarter Ended June 30, 2020 Supplementary Information to August 19, 2020 Earnings Conference Call KIMBALL ELECTRONICS (Nasdaq: KE) // Safe Harbor Statement Certain statements contained within this supplementary information and any statements made during our earnings conference call today may be considered forward-looking under the Private Securities Litigation Reform Act of 1995 and are subject to risks and uncertainties including, but not limited to, succes ...

Financial Performance - For the nine months ended March 31, 2020, net sales increased by 6% to $914.4 million compared to $863.2 million for the same period in 2019[128]. - In the third quarter of fiscal year 2020, consolidated net sales decreased by 6% to $293.9 million from $313.5 million in the same quarter of fiscal year 2019[127]. - Gross profit for the third quarter of fiscal year 2020 was $20.2 million, representing 6.9% of net sales, down from $26.6 million or 8.5% of net sales in the prior year[127]. - Net income for the third quarter of fiscal year 2020 was $6.3 million, a decrease of 47% compared to $11.8 million in the same quarter of fiscal year 2019[127]. - The automotive segment experienced a year-to-date sales increase of 11% to $383.7 million, while the medical segment saw a 3% increase to $274.1 million[129]. - The company reported a diluted earnings per share of $0.25 for the third quarter of fiscal year 2020, down 46% from $0.46 in the same quarter of fiscal year 2019[127]. Orders and Demand - Open orders increased by 35% to $511.0 million as of March 31, 2020, compared to $379.5 million in the same period of the previous year[127]. - Sales to customers in the automotive market decreased in Q3 FY2020 compared to Q3 FY2019, largely due to lower demand and COVID-19 impacts, partially offset by electric vehicle programs and new product introductions[130]. - Open orders increased by 35% as of March 31, 2020, compared to March 31, 2019, driven by significant demand in the medical market related to respiratory care due to COVID-19[131]. - The company anticipates growth in sales to customers in the medical market due to increased demand for medical assemblies, particularly for respiratory care and patient monitoring products[157]. Financial Position - The company maintains a strong balance sheet with a current ratio of 2.1 and a debt-to-equity ratio of 0.3 as of March 31, 2020[121]. - The debt-to-equity ratio remained stable at 0.3 as of March 31, 2020, consistent with June 30, 2019[141]. - As of March 31, 2020, the company had $115.8 million in borrowings under the primary credit facility, with $91.5 million classified as long-term[154]. - As of March 31, 2020, the unused borrowings under all credit facilities totaled $64.1 million, indicating sufficient liquidity for working capital needs[158]. Cash Flow and Investments - Net cash provided by operating activities for the first nine months of FY2020 was $51.3 million, a significant improvement from a cash usage of $19.0 million in FY2019[145]. - The company invested $27.8 million in capital expenditures during the first nine months of FY2020, primarily for machinery and equipment[149]. - Capital expenditure commitments as of March 31, 2020, were approximately $2.2 million, primarily for capacity and replacement purposes[160]. - The company expects to increase capital investments in the upcoming quarters to expand capacities to meet increased demand for medical assemblies due to COVID-19[160]. - The company has repurchased $76.7 million of common stock under its stock repurchase plan through March 31, 2020, with a total authorized amount of $80 million[163]. Tax and Regulatory Matters - The effective tax rate for the first nine months of FY2020 was 25.8%, compared to 19.3% in FY2019, influenced by lower profit before tax and discrete adjustments[138]. - The remaining provision for the one-time deemed repatriation tax was $9.8 million as of March 31, 2020, expected to be paid with available liquidity[161]. Acquisitions and Integration - The company completed the acquisition of GES Holdings, Inc. on October 1, 2018, to enhance its capabilities in automation, test, and inspection equipment[119]. - Goodwill increased by $1.8 million due to purchase accounting adjustments associated with the GES acquisition[140]. - The GES acquisition completed on October 1, 2018, had a net adjusted purchase price of $42.4 million, including a working capital adjustment of $7.6 million[159]. Market Risks and Uncertainties - The company is actively monitoring the impact of COVID-19 on its operations, supply chain, and workforce availability, which poses significant uncertainties[116]. - The company acknowledges that forward-looking statements are subject to various risks and uncertainties, including integration of acquisitions and changes in global economic conditions[174]. - 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, 2019[175]. - The interest rate on certain borrowings is based on LIBOR, which may be affected by the discontinuation of LIBOR reporting after 2021[175]. - The company is actively monitoring developments regarding LIBOR and its potential impact on financial operations[175]. - Comprehensive disclosures regarding market risk can be found in the Annual Report on Form 10-K for the year ended June 30, 2019[176].

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 2019 OR o 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) Indiana 35-2047713 incorporation or or ...

PART I FINANCIAL INFORMATION [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Presents unaudited condensed consolidated financial statements for Q1 FY20 and FY19, with notes on accounting policies and key events [Condensed Consolidated Financial Statements](index=3&type=section&id=Condensed%20Consolidated%20Financial%20Statements) Kimball Electronics reported Q1 FY20 net sales of **$313.4 million** (18% increase) and net income of **$6.6 million** Condensed Consolidated Statements of Income (Q1 FY20 vs Q1 FY19) | (Amounts in Thousands) | Three Months Ended September 30, 2019 ($ Thousands) | Three Months Ended September 30, 2018 ($ Thousands) | | :--- | :--- | :--- | | **Net Sales** | **$313,385** | **$265,620** | | Gross Profit | $22,193 | $18,186 | | Operating Income | $11,115 | $7,032 | | **Net Income** | **$6,598** | **$5,069** | | **Diluted EPS** | **$0.26** | **$0.19** | Condensed Consolidated Balance Sheets Highlights | (Amounts in Thousands) | September 30, 2019 (Unaudited) ($ Thousands) | June 30, 2019 ($ Thousands) | | :--- | :--- | :--- | | Total current assets | $528,052 | $555,313 | | **Total Assets** | **$739,895** | **$764,111** | | Total current liabilities | $249,577 | $274,910 | | **Total Liabilities** | **$370,642** | **$394,257** | | **Total Share Owners' Equity** | **$369,253** | **$369,854** | Condensed Consolidated Statements of Cash Flows Highlights | (Amounts in Thousands) | Three Months Ended September 30, 2019 ($ Thousands) | Three Months Ended September 30, 2018 ($ Thousands) | | :--- | :--- | :--- | | **Net cash provided by (used for) operating activities** | **$39,619** | **$(10,013)** | | Net cash used for investing activities | $(11,725) | $(4,646) | | Net cash (used for) provided by financing activities | $(20,588) | $43,714 | | **Net Increase in Cash and Cash Equivalents** | **$6,075** | **$28,541** | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Details accounting policies, revenue disaggregation by market, the GES acquisition, new lease accounting standards, and share repurchases - The company is a global manufacturing solutions provider for the automotive, medical, industrial, and public safety end markets, specializing in durable electronics and diversified manufacturing services[22](index=22&type=chunk) Revenue from Contracts with Customers by Vertical Market (Q1 FY20 vs Q1 FY19) | (Amounts in Millions) | 2019 ($ Millions) | 2018 ($ Millions) | | :--- | :--- | :--- | | Automotive | $124.4 | $105.9 | | Medical | $101.3 | $82.2 | | Industrial | $64.7 | $57.4 | | Public Safety | $17.1 | $17.1 | | Other | $5.9 | $3.0 | | **Total net sales** | **$313.4** | **$265.6** | - The acquisition of GES was completed on October 1, 2018, with a net adjusted purchase price of **$42.4 million**, including a disputed **$7.6 million** net working capital adjustment, primarily funded by the company's credit facility[44](index=44&type=chunk)[47](index=47&type=chunk)[48](index=48&type=chunk) - On July 1, 2019, the company adopted the new lease accounting standard, recognizing **$2.6 million** of right-of-use assets and lease liabilities on the balance sheet[38](index=38&type=chunk)[41](index=41&type=chunk) - During Q1 FY20, the company repurchased **$3.5 million** of common stock at an average price of **$15.10** per share, bringing the total repurchased since inception to **$71.4 million**[99](index=99&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management analyzes Q1 FY20 financial performance, highlighting 18% net sales growth, improved margins, strong liquidity, and operational strategies [Business Overview](index=25&type=section&id=Business%20Overview) Kimball Electronics focuses on automotive, medical, industrial, and public safety markets, targeting 8% annual organic growth - The company's strategic focus is on four key vertical markets: automotive, medical, industrial, and public safety, with a stated goal of an **8%** annual organic growth rate[105](index=105&type=chunk) - In the first half of calendar year 2019, the company's revenue grew **12.7%** compared to the industry average of **4.9%** for the top 20 contract manufacturers[104](index=104&type=chunk) - The company maintains strong, long-term customer relationships, with **76%** of net sales in Q1 FY20 coming from customers served for more than 10 years, an increase from **66%** in the prior year[111](index=111&type=chunk) [Financial Overview and Results of Operations](index=27&type=section&id=Financial%20Overview) Q1 FY20 net sales increased 18% to **$313.4 million**, operating income surged 58% to **$11.1 million**, driven by strong demand Financial Highlights (Q1 FY20 vs Q1 FY19) | (Amounts in Millions) | 2019 ($ Millions) | 2018 ($ Millions) | % Change | | :--- | :--- | :--- | :--- | | **Net Sales** | **$313.4** | **$265.6** | **18%** | | Gross Profit | $22.2 | $18.2 | 22% | | Operating Income | $11.1 | $7.0 | 58% | | **Net Income** | **$6.6** | **$5.1** | **30%** | | Diluted EPS | $0.26 | $0.19 | 37% | | Open Orders | $389.5 | $278.2 | 40% | - Sales growth was driven by the ramp-up of new programs, new product introductions, and increased demand, with the GES acquisition contributing **2%** to sales growth, offset by a **2%** unfavorable currency impact[113](index=113&type=chunk) - Three key customers, Philips, Nexteer Automotive, and ZF, accounted for **14%**, **14%**, and **10%** of net sales, respectively, for the quarter[116](index=116&type=chunk) [Liquidity and Capital Resources](index=29&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintained strong liquidity with **$132.2 million** available and improved Cash Conversion Days to **73** days - Short-term liquidity available was **$132.2 million** at September 30, 2019, up from **$110.7 million** at June 30, 2019[124](index=124&type=chunk) Cash Conversion Days (CCD) Trend | | Sep 30, 2019 (Days) | Jun 30, 2019 (Days) | Sep 30, 2018 (Days) | | :--- | :--- | :--- | :--- | | DSO | 50 | 59 | 55 | | CAD | 16 | 15 | 15 | | PDSOH | 65 | 64 | 67 | | APD | 58 | 61 | 69 | | **CCD** | **73** | **77** | **68** | - Net cash from operating activities was a positive **$39.6 million**, a significant improvement from a negative **$10.0 million** in the prior year, mainly due to a **$38.9 million** cash inflow from decreased receivables[128](index=128&type=chunk)[129](index=129&type=chunk)[130](index=130&type=chunk) - The company has repurchased **$71.4 million** of common stock under its **$80 million** authorization plan since its inception[147](index=147&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=35&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes in market risk exposure, including foreign currency and interest rates, were reported for the quarter - No material changes in market risk exposure related to foreign currency exchange rates and interest rates were reported for the quarter[161](index=161&type=chunk) [Controls and Procedures](index=35&type=section&id=Item%204.%20Controls%20and%20Procedures) CEO and CFO concluded disclosure controls were effective, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the quarter[162](index=162&type=chunk) - No material changes to the company's internal control over financial reporting were identified during the quarter[162](index=162&type=chunk) PART II OTHER INFORMATION [Legal Proceedings](index=36&type=section&id=Item%201.%20Legal%20Proceedings) The company is not a party to any material pending legal proceedings outside the normal course of business - The company is not involved in any material pending legal proceedings outside of the ordinary course of business[165](index=165&type=chunk) [Risk Factors](index=36&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the risk factors previously disclosed in the company's most recent Form 10-K were reported - There have been no material changes to the risk factors disclosed in the company's most recent Form 10-K[166](index=166&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=36&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Details the company's stock repurchase activity for the quarter, including 230,482 shares bought back as part of an $80 million authorization Issuer Purchases of Equity Securities (Q1 FY20) | Period | Total Number of Shares Purchased | Average Price Paid per Share ($) | Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plan ($) | | :--- | :--- | :--- | :--- | | July 1 - 31, 2019 | — | $— | $12,085,191 | | Aug 1 - 31, 2019 | — | $— | $12,085,191 | | Sep 1 - 30, 2019 | 230,482 | $15.10 | $8,604,701 | | **Total** | **230,482** | **$15.10** | | - The Board of Directors has authorized a total of **$80 million** for stock repurchases under the plan, which has no expiration date[169](index=169&type=chunk) [Exhibits](index=37&type=section&id=Item%206.%20Exhibits) Lists all exhibits filed with the Form 10-Q, including CEO and CFO certifications and XBRL Interactive Data Files - Filed exhibits include CEO and CFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act, as well as XBRL data files[171](index=171&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended June 30, 2019 OR o 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) Indiana 35-2047713 (State or other jurisdiction of ...

Financial Performance - Net sales for the three months ended March 31, 2019, increased by 10% to $313.5 million compared to $283.9 million in the same period of 2018[119] - Gross profit for the three months ended March 31, 2019, was $26.6 million, representing 8.5% of net sales, up from $22.9 million or 8.1% in 2018, reflecting a 16% increase[119] - For the nine months ended March 31, 2019, net income surged by 119% to $24.0 million, compared to $11.0 million in the same period of 2018[121] - The automotive market saw a 7% decline in sales to $127.3 million for the three months ended March 31, 2019, while the medical market grew by 27% to $99.1 million[122] Orders and Market Trends - The company experienced a 60% increase in open orders, totaling $379.5 million as of March 31, 2019, compared to $237.0 million in 2018[119] - Open orders increased by 60% as of March 31, 2019, compared to March 31, 2018, with significant growth in automotive, medical, and industrial markets[126] - Automotive market sales declined in Q3 2019 and year-to-date compared to Q3 2018, with significant declines in China and Europe, offsetting stronger demand in North America[125] - Medical market sales experienced double-digit growth in Q3 2019 and year-to-date compared to the same periods in 2018, driven by new product launches and increased demand[125] Strategic Initiatives - The company aims for an 8% annual organic growth rate, focusing on automotive, medical, industrial, and public safety markets[111] - The acquisition of GES Holdings, completed on October 1, 2018, supports the company's strategy for expansion and diversification in manufacturing solutions[114] Financial Position and Liquidity - The company maintains a strong balance sheet with shareholders' equity of $359 million and short-term liquidity of $107.2 million as of March 31, 2019[116] - The company’s working capital increased to $277.5 million as of March 31, 2019, compared to $208.4 million at June 30, 2018[136] - Long-term debt increased significantly by $118.7 million, primarily due to borrowings for the GES acquisition and domestic cash needs[135] - The company expects to maintain sufficient liquidity from available funds, cash generated from operations, and borrowing capacity to meet its working capital needs for at least the next 12 months[154] Cash Flow and Investments - Net cash used for operating activities in the first nine months of fiscal year 2019 was $18.98 million, a decline from $20.89 million provided in the same period of 2018[142] - Cash used from changes in operating assets and liabilities in the first nine months of fiscal year 2019 was $66.2 million, largely due to increased accounts receivable and inventory[144] - In the first nine months of fiscal year 2019, net cash used for investing activities was $59.5 million, compared to $21.8 million in the same period of fiscal year 2018[146] - The GES acquisition accounted for a cash payment of $43.9 million, with a net adjusted purchase price of $40.1 million after accounting for working capital adjustments[155] Expenses and Cost Management - Selling and administrative expenses increased in absolute dollars in Q3 2019 compared to Q3 2018, primarily due to higher salary costs and amortization expenses from the GES acquisition[128] - Gross profit as a percentage of net sales improved in Q3 2019 compared to Q3 2018, primarily due to favorable product mix and higher revenue leverage, despite higher material costs[127] Risk Management - The company is actively managing risks related to component shortages and tariffs that may impact competitiveness and operational efficiency[109] - Forward-looking statements indicate potential risks including integration of acquisitions, changes in global economic conditions, and competitive pricing pressures[174] - The company anticipates potential impacts from tariffs and other trade barriers on its operations[174] - There are risks related to the financial stability of key customers and suppliers, which could affect future performance[174] Compliance and Accounting - The effective tax rate for the first nine months of fiscal year 2019 was 19.3%, favorably impacted by discrete income tax adjustments related to U.S. tax reforms[133] - The company was in compliance with financial covenants under the primary credit facility during the nine-month period ended March 31, 2019[151] - No material changes to critical accounting policies since the Annual Report for the year ended June 30, 2018[172] - The company has adopted new revenue guidance as per the latest accounting standards[173] Foreign Operations and Currency Risks - The company operates internationally and is subject to foreign exchange rate risks, with a hypothetical 10% adverse change estimated to have no material impact on profitability over an entire year[176] - The company uses derivative financial instruments to hedge certain foreign currency exposures, focusing on managing underlying exposures rather than speculative use[176] Stock and Capital Management - The company repurchased $67.9 million of common stock under its stock repurchase plan through March 31, 2019, with a total authorized amount of $80 million[159] - The company sold $191.0 million of accounts receivable without recourse in the nine months ended March 31, 2019, compared to $120.1 million in the same period of 2018[153] - Capital expenditure commitments as of March 31, 2019, were approximately $4.9 million, primarily for capacity purposes in anticipation of future growth[157] Miscellaneous - The company has not disclosed specific user data or performance metrics in the provided content[1] - No new products or technologies were mentioned in the provided content[1] - There are no updates on market expansion or mergers and acquisitions in the provided content[1]

Financial Performance - Net sales for the three months ended December 31, 2018, were $284.1 million, representing a 10% increase compared to $258.2 million in the same period of 2017[119] - Gross profit for the same period was $20.4 million, with a gross margin of 7.2%, down from 8.1% in the prior year[119] - The company reported a net income of $7.1 million for the three months ended December 31, 2018, compared to a net loss of $8.3 million in the same period of 2017[119] Market Performance - The automotive market saw a 3% decline in sales to $112.4 million for the three months ended December 31, 2018, while the medical market grew by 18% to $85.7 million[121] - Automotive market sales declined slightly in Q2 FY2019 compared to Q2 FY2018, with North America demand partially offsetting declines in China and Europe[125] - Medical market sales experienced double-digit growth in Q2 FY2019 compared to Q2 FY2018, driven by new product launches and increased demand[125] - Industrial market sales also saw double-digit growth in Q2 FY2019, attributed to the GES acquisition and increased demand for climate control products[125] Orders and Growth - Open orders increased by 33% to $321.5 million as of December 31, 2018, compared to $241.7 million in the previous year[119] - Open orders increased by 33% as of December 31, 2018, with significant growth in the automotive and medical markets[126] - The company aims for an 8% annual organic growth rate, focusing on automotive, medical, industrial, and public safety markets[111] - The GES acquisition contributed positively to sales, impacting growth by 2% in the second quarter of fiscal year 2019[122] Financial Position - The company maintains a strong balance sheet with no long-term debt and shareholders' equity of $353 million as of December 31, 2018[116] - Working capital decreased to $179.3 million as of December 31, 2018, from $208.4 million at June 30, 2018[135] - Cash Conversion Days (CCD) increased to 76 days for the quarter ended December 31, 2018, compared to 63 days for the quarter ended June 30, 2018[136] Cash Flow and Investments - Net cash used for operating activities in the first half of FY2019 was $(4.394) million, compared to $11.401 million in FY2018[141] - Cash used from changes in operating assets and liabilities in the first half of FY2019 was $31.0 million, largely due to an increase in inventory[142] - Net cash used for investing activities in the first six months of fiscal year 2019 was $52.5 million, compared to $14.7 million in the same period of fiscal year 2018[145] - The company invested $43.9 million for the GES acquisition during the first six months of fiscal year 2019[145] - Net cash provided by financing activities for the first six months of fiscal year 2019 was $47.3 million, primarily from net borrowings of $78.4 million on the primary credit facility[146] Debt and Equity - As of December 31, 2018, the company had $84.4 million in short-term borrowings under the primary credit facility, used mainly for the GES acquisition[149] - The company has recorded a net adjusted purchase price of $40.1 million for the GES acquisition, including a working capital adjustment of $7.6 million[157] - The total authorized stock repurchases under the stock repurchase plan reached $80 million, with $63.2 million repurchased through December 31, 2018[162] Capital Expenditures - Capital expenditure commitments as of December 31, 2018, were approximately $4.3 million, aimed at capacity expansion and facility improvements[159] - The company expects to continue investing in capital expenditures and acquisitions to develop beyond the EMS market[156] Risk Factors - The overall expectation for the EMS market is moderate growth with mixed demand, particularly influenced by component shortages and tariffs[109] - The company is subject to foreign exchange rate risks due to international operations, with a hypothetical 10% adverse change in foreign currency exchange rates estimated to have no material impact on profitability over an entire year[178] - The company employs derivative financial instruments to hedge certain foreign currency exposures, used solely for risk management and not for speculative purposes[178] - Forward-looking statements are subject to risks including integration of acquisitions, global economic conditions, and competitive pricing pressures[176] - Additional risk factors affecting future performance are detailed in the Annual Report for the year ended June 30, 2018[176] Cost Management - The company has a strong focus on cost control and liquidity management, with short-term liquidity totaling $136.8 million at the end of 2018[116] - Gross profit as a percentage of net sales declined in Q2 FY2019 compared to Q2 FY2018, primarily due to unfavorable product mix and higher material costs[127] - Selling and administrative expenses decreased as a percentage of net sales in Q2 FY2019 compared to Q2 FY2018, mainly due to lower incentive-based compensation[128] Accounting Policies - No material changes to critical accounting policies since the Annual Report for the year ended June 30, 2018[174]