Kimball Electronics(KE) - 2020 Q3 - Quarterly Report

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].