Kimball Electronics(US:KE)2023-08-23 21:40Financial Performance - For the fiscal year ended June 30, 2023, Kimball Electronics reported that 45% of net sales came from the automotive sector, 27% from medical, and 26% from industrial markets[40]. - The company reported record sales of $1,823.4 million for fiscal year 2023, a 35% increase from $1,349.5 million in fiscal year 2022[149]. - Gross profit increased by 49% to $156.2 million, with gross profit as a percentage of net sales improving to 8.6% from 7.8%[149][152]. - Net income for fiscal year 2023 was $55.8 million, or $2.22 per diluted share, representing a 79% increase from $31.3 million, or $1.24 per diluted share, in fiscal year 2022[157]. - The automotive market generated $820.1 million in sales, a 41% increase from the previous year, driven by new product launches and improved component availability[150][151]. - Selling and administrative expenses increased by 28% to $68.7 million, driven by higher factoring fees and wage inflation[149][153]. - The company maintained a strong balance sheet with a current ratio of 2.0 and a debt-to-equity ratio of 0.5, with shareholders' equity at $524 million[144]. - Working capital increased to $454.3 million as of June 30, 2023, compared to $352.3 million in the previous year, with a current ratio of 2.0[159]. - Net cash used for operating activities was $(13.8) million in fiscal year 2023, significantly improved from $(83.2) million in fiscal year 2022[163]. - Cash used for investing activities totaled $(90.5) million in fiscal year 2023, primarily for capital investments in Mexico, Thailand, and Poland[167]. Market Position and Customer Base - Major customers included Nexteer Automotive (15% of net sales), Philips (14%), and ZF (12%)[40]. - Kimball Electronics is ranked as the 20th largest global EMS provider for calendar year 2022, indicating a competitive position in the market[36]. - A substantial majority of revenues are derived from international operations, exposing the company to various financial and operational risks[71]. Manufacturing and Operations - The company operates twelve manufacturing facilities across the United States, China, Mexico, Poland, Romania, Thailand, and Vietnam, with recent expansions in Thailand, Mexico, and Poland[37]. - The company has harmonized quality systems to meet industry certifications, enabling cost-effective manufacturing across electronic and non-electronic products[24]. - The company’s manufacturing operations require significant amounts of energy, and disruptions could materially affect production and profitability[108]. - The contract manufacturing business is characterized by frequent start-ups of new programs to replace expiring ones, with customer agreements typically being short-term and subject to cancellation[41]. Supply Chain and Component Shortages - Raw materials for manufacturing are generally available, but the industry can experience shortages due to supply and demand fluctuations and unforeseen global events[42]. - The EMS industry continues to face component shortages, particularly with semiconductors, which may increase component costs and disrupt operations[43]. - Supply chain disruptions may hinder the ability to purchase sufficient materials, particularly semiconductors, leading to production delays and curtailed shipments[66]. - The company has faced shortages due to the COVID-19 pandemic and geopolitical events, which could unpredictably impact the supply chain[67]. - Component shortages may increase the cost of goods sold, potentially harming profitability if price increases cannot be offset[68]. Sustainability and Social Responsibility - Kimball Electronics focuses on sustainability by optimizing manufacturing processes, increasing clean energy usage, and developing low carbon products and technologies[31]. - The company is committed to a socially responsible supply chain, requiring suppliers to conduct due diligence on conflict minerals[47]. - Kimball Electronics' ESG Report, issued in March 2023, highlights its commitment to environmental, social, and governance principles[46]. - The company has committed to significantly reduce greenhouse gas emissions, water usage, electrical usage, and air emissions by 2025 as part of its sustainability strategy[91]. - In fiscal year 2023, Kimball Electronics committed $100,000 to the Southwestern Indiana Child Advocacy Center Coalition and made a final installment of this commitment[55]. - The company has donated $100,000 to refugee-related activities, including aid for Ukrainian refugees, in 2022[55]. Governance and Management - As of June 30, 2023, three of the seven independent members of the Board of Directors are female, reflecting the company's commitment to diversity[58]. - The company’s executive officers were appointed as of August 23, 2023, with Richard D. Phillips serving as CEO[117]. - Management concluded that internal control over financial reporting was effective as of June 30, 2023[200]. Financial Risks and Compliance - The company is exposed to credit risk from customers, with elevated risks of potential bankruptcy affecting accounts receivable[96]. - The company is monitoring working capital closely, as customer financial difficulties and manufacturing delays could adversely affect cash flow from operations[97]. - The company is exposed to foreign currency risk, with fluctuations in exchange rates potentially impacting operating results[102]. - High inflation levels may increase costs and impact pricing and customer demand, affecting revenues and earnings[104]. - Compliance with government legislation and regulations may significantly increase operating costs, impacting profitability[93]. - The company is assessing its obligations under the Corporate Sustainability Reporting Directive (CSRD) and expects significant compliance efforts in future years[89]. Capital Structure and Investments - As of June 30, 2023, the company had $281.5 million in borrowings under its credit facilities and total cash and cash equivalents of $43.0 million[103]. - The company has a stock repurchase plan authorized for up to $100 million, with $88.8 million repurchased through June 30, 2023[179]. - The company expects to continue investing in capital expenditures and potential acquisitions to support growth[175]. - Capital expenditure commitments were approximately $13 million as of June 30, 2023, mainly for equipment related to facility expansions[176]. Financial Statements and Audit - Total assets increased to $1,259,719,000 in June 2023 from $1,035,767,000 in June 2022, representing a growth of approximately 21.6%[217]. - Current assets rose to $929,427,000 in June 2023, up from $761,083,000 in June 2022, reflecting an increase of about 22.1%[217]. - Total liabilities increased to $735,725,000 in June 2023, compared to $581,796,000 in June 2022, marking a rise of approximately 26.4%[217]. - Long-term debt under credit facilities increased to $235,000,000 in June 2023 from $145,000,000 in June 2022, a significant increase of 62.1%[217]. - Shareholders' equity grew to $523,994,000 in June 2023, up from $453,971,000 in June 2022, indicating an increase of about 15.4%[217]. - The company has been audited by Deloitte & Touche LLP since 2014, with the audit conducted in accordance with PCAOB standards[215].