Kimball Electronics(US:KE)2025-05-07 21:13PART I FINANCIAL INFORMATION Financial Statements This section presents the unaudited Condensed Consolidated Financial Statements for the quarter ended March 31, 2025, detailing financial position, performance, and cash flows Condensed Consolidated Balance Sheet Highlights (Unaudited) | Account | March 31, 2025 ($ in thousands) | June 30, 2024 ($ in thousands) | | :--- | :--- | :--- | | Total Current Assets | 707,303 | 847,006 | | Total Assets | 1,074,555 | 1,207,919 | | Total Current Liabilities | 330,957 | 375,322 | | Total Liabilities | 526,440 | 667,458 | | Total Share Owners' Equity | 548,115 | 540,461 | Condensed Consolidated Statements of Income Highlights (Unaudited) | Metric | Three Months Ended Mar 31, 2025 ($ in thousands) | Three Months Ended Mar 31, 2024 ($ in thousands) | Nine Months Ended Mar 31, 2025 ($ in thousands) | Nine Months Ended Mar 31, 2024 ($ in thousands) | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $374,607 | $425,036 | $1,106,255 | $1,284,352 | | Gross Profit | $26,896 | $33,544 | $73,923 | $103,519 | | Operating Income (Loss) | $11,716 | $(6,431) | $29,061 | $29,669 | | Net Income (Loss) | $3,817 | $(6,076) | $10,403 | $12,968 | | Diluted EPS | $0.15 | $(0.24) | $0.41 | $0.51 | Condensed Consolidated Statements of Cash Flows Highlights (Unaudited) | Cash Flow Category | Nine Months Ended Mar 31, 2025 ($ in thousands) | Nine Months Ended Mar 31, 2024 ($ in thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | 105,870 | 24,717 | | Net cash used for investing activities | (5,160) | (37,702) | | Net cash (used for) provided by financing activities | (126,615) | 36,571 | | Net (Decrease) Increase in Cash | (25,892) | 23,473 | Note 2. Revenue from Contracts with Customers Revenue is disaggregated by end market vertical, showing declines in Automotive and Industrial sectors, with most revenue recognized over time Revenue by End Market Vertical (in millions) | Vertical Markets | Three Months Ended Mar 31, 2025 (in millions) | Three Months Ended Mar 31, 2024 (in millions) | Nine Months Ended Mar 31, 2025 (in millions) | Nine Months Ended Mar 31, 2024 (in millions) | | :--- | :--- | :--- | :--- | :--- | | Automotive | $173.1 | $202.0 | $554.3 | $614.7 | | Medical | $115.2 | $113.0 | $288.9 | $323.5 | | Industrial | $86.3 | $110.0 | $263.1 | $346.2 | | Total net sales | $374.6 | $425.0 | $1,106.3 | $1,284.4 | - For the nine months ended March 31, 2025, approximately 98% of net sales were recognized over time as manufacturing services were performed, consistent with 96% in the prior year period43 Note 3. Sale of GES The company completed the sale of its GES business on July 31, 2024, generating cash proceeds and a pre-tax gain in Q1 FY2025 - The sale of GES was completed on July 31, 2024, for cash proceeds of $18.5 million, resulting in a pre-tax gain of $1.3 million in Q1 FY202546 Note 4. Restructuring Activities The company recorded restructuring expenses for workforce resizing and the Tampa facility closure to align costs with reduced demand - In the nine months ended March 31, 2025, the company recorded restructuring expenses of $5.3 million to align costs with demand and $3.7 million related to the Tampa facility closure plan4849 - Total expected exit costs for the Tampa Closure Plan are estimated to be between $6.5 million and $8.5 million, primarily for employee termination benefits and logistical costs49 Note 8. Credit Facilities Total borrowings under credit facilities significantly reduced to $178.8 million by March 31, 2025, following an amendment to add a term loan and terminate a secondary facility Credit Facilities Summary (in millions) | Facility | Available Borrowing Capacity (Mar 31, 2025, in millions) | Borrowings Outstanding (Mar 31, 2025, in millions) | Borrowings Outstanding (Jun 30, 2024, in millions) | | :--- | :--- | :--- | :--- | | Primary credit facility, revolving | $219.6 | $80.0 | $285.5 | | Primary credit facility, term | $1.2 | $98.8 | $— | | Total credit facilities | $253.2 | $178.8 | $294.8 | - On December 20, 2024, the company amended its primary credit agreement, adding a $100 million term loan facility and terminating its secondary $100 million revolving credit facility5660 Note 14. Share Owners' Equity The company repurchased $8.9 million of common stock at an average price of $18.10 per share under its $120 million repurchase plan - Under its $120 million Repurchase Plan, the company repurchased $8.9 million of common stock in the nine months ended March 31, 20258990 - The average price paid per share for repurchases during the nine months ended March 31, 2025 was $18.1090 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses a 12% decrease in Q3 FY2025 net sales, driven by automotive and industrial declines, alongside restructuring efforts and a strong balance sheet with a 0.3 debt-to-equity ratio Results of Operations Net sales for Q3 FY2025 decreased 12% to $374.6 million, primarily due to declines in automotive and industrial sectors, while gross margin contracted to 7.2% Net Sales by Vertical Market (in millions) | Vertical | Q3 2025 (in millions) | Q3 2024 (in millions) | % Change | YTD 2025 (in millions) | YTD 2024 (in millions) | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Automotive | $173.1 | $202.0 | (14)% | $554.3 | $614.7 | (10)% | | Medical | $115.2 | $113.0 | 2% | $288.9 | $323.5 | (11)% | | Industrial | $86.3 | $110.0 | (22)% | $263.1 | $346.2 | (24)% | | Total | $374.6 | $425.0 | (12)% | $1,106.3 | $1,284.4 | (14)% | - Gross profit as a percentage of net sales declined in Q3 FY2025 to 7.2% from 7.9% in Q3 FY2024, primarily due to lost absorption on lower revenue and dilution from a non-recurring consignment inventory sale107109 - Selling and administrative expenses decreased by 22% in Q3 FY2025 compared to the prior year, driven by cost reduction efforts, reclassification of factoring fees, and a lower allowance for credit losses107110 Liquidity and Capital Resources The company maintains a solid financial position with $376.3 million working capital, a 2.1 current ratio, and improved Cash Conversion Days of 99, driven by increased operating cash flow Key Liquidity Metrics | Metric | March 31, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Working Capital (in millions) | $376.3 | $471.7 | | Current Ratio | 2.1 | 2.3 | | Debt-to-Equity Ratio | 0.3 | 0.5 | Cash Conversion Days (CCD) | Period | March 31, 2025 (Days) | March 31, 2024 (Days) | | :--- | :--- | :--- | | Cash Conversion Days | 99 | 110 | - Net cash provided by operating activities increased to $105.9 million for the nine months ended March 31, 2025, compared to $24.7 million in the prior-year period, mainly due to a $32.5 million decrease in accounts receivable and a $39.9 million decrease in inventory120123 Quantitative and Qualitative Disclosures About Market Risk The company reports no material changes in market risk exposure, including foreign currency and interest rates, compared to its prior fiscal year 10-K disclosures - There were no material changes in the company's exposure to market risks for changes in foreign currency exchange rates and interest rates as compared to the fiscal year ended June 30, 2024147 Controls and Procedures The CEO and CFO concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of March 31, 2025148 - No material changes to internal control over financial reporting occurred during the quarter ended March 31, 2025148 PART II OTHER INFORMATION Legal Proceedings The company is not involved in any material legal proceedings, with routine litigation not expected to have a material adverse financial impact - The company is not involved in any material legal proceedings; any existing litigation is routine and not expected to have a material adverse impact150 Risk Factors This section refers to the Annual Report on Form 10-K for comprehensive risk factor disclosure, with no new or updated risks presented in this 10-Q - For a comprehensive disclosure of risk factors, the company refers investors to its Annual Report on Form 10-K for the year ended June 30, 2024151 Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 174,312 shares for $3.0 million during Q3 FY2025 under its $120 million authorized stock repurchase plan Share Repurchases for the Three Months Ended March 31, 2025 | Period | Total Number of Shares Purchased (Shares) | Average Price Paid per Share ($) | Maximum Dollar Value Remaining Under Plan ($) | | :--- | :--- | :--- | :--- | | Jan 2025 | — | $— | $22,294,134 | | Feb 2025 | 58,994 | $18.18 | $21,221,626 | | Mar 2025 | 115,318 | $16.70 | $19,295,851 | | Total | 174,312 | $17.20 | N/A | Other Information No officers or directors adopted or terminated Rule 10b5-1 trading plans or other trading arrangements during Q3 FY2025 - During the quarter ended March 31, 2025, no officers or directors adopted or terminated any contract, instruction, or written plan for the purchase or sale of the Company's securities under Rule 10b5-1(c)155 Exhibits This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and Inline XBRL documents - Key exhibits filed include: * 31.1: CEO Certification (Section 302) * 31.2: CFO Certification (Section 302) * 32.1: CEO Certification (Section 906) * 32.2: CFO Certification (Section 906) * 101 & 104: Inline XBRL and Cover Page Interactive Data files156