Kimball Electronics(KE) - 2026 Q2 - Quarterly Report

Financial Performance - Net sales for the second quarter of fiscal year 2026 decreased by 5% to $341.3 million compared to $357.4 million in the same quarter of fiscal year 2025[113] - Gross profit increased by 19% to $27.9 million, representing 8.2% of net sales, compared to 6.6% in the prior year[113] - Selling and administrative expenses rose by 41% to $14.9 million, accounting for 4.4% of net sales, up from 3.0%[113] - Operating income improved by 31% to $10.8 million, or 3.2% of net sales, compared to 2.3% in the previous year[113] - Net income for the second quarter increased by 6% to $3.6 million, with diluted earnings per share rising to $0.15 from $0.14[113] Segment Performance - The automotive vertical experienced a significant decline, with net sales dropping 13% to $162.3 million in the second quarter[113] - Medical segment sales increased by 15% to $96.3 million, while industrial sales decreased by 5% to $82.7 million[113] - Automotive end market sales decreased both quarter over quarter and year-to-date due to the loss of a major program and tariff impacts, while medical end market sales increased driven by new program wins[120] Restructuring and Expenses - The company recorded a pre-tax restructuring expense of $1.8 million in the second quarter due to alignment with reduced market demand[118] Financial Ratios and Liquidity - The current ratio stands at 2.2, and the debt-to-equity ratio is 0.3, indicating a strong balance sheet[109] - As of December 31, 2025, the company had $77.9 million in cash and $285.1 million in unused borrowings under credit facilities, indicating a strong liquidity position[139] Cash Flow and Investments - Net cash provided by operating activities for the first six months of fiscal year 2026 was $14.9 million, a significant decrease from $74.9 million in the same period of fiscal year 2025[127] - Net cash used for investing activities in the first six months of fiscal year 2026 was $24.4 million, primarily for capital investments in a new medical facility and equipment[131] - The company sold $144.1 million of accounts receivable without recourse in the six months ended December 31, 2025, compared to $169.0 million in the same period of 2024[137] Capital Expenditures - Capital expenditure commitments as of December 31, 2025, were approximately $16.0 million, primarily for new program wins and improvements to the medical facility[140] - The company expects proceeds from the sale of the Tampa facility to exceed the total expected restructuring costs and the carrying value of the assets held for sale[141] Currency Impact - Foreign currency fluctuations positively impacted net sales by 2% in the current quarter compared to the same period last year[115] Working Capital - Working capital as of December 31, 2025, was $378.5 million, slightly down from $381.0 million at June 30, 2025, with a current ratio of 2.2[123] Cash Conversion - Cash Conversion Days improved to 91 days in the quarter ended December 31, 2025, down from 107 days in the same quarter of the previous year[125] Stock Repurchase - The company has repurchased $109.5 million of common stock under its Repurchase Plan through December 31, 2025, with a total authorization of up to $120 million[144]