Kimball Electronics(KE) - 2019 Q3 - Quarterly Report

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]