Kimball Electronics(US:KE)2023-05-05 20:04Financial Performance - The company reported record quarterly net sales of $484.7 million for the third quarter of fiscal year 2023, a 32% increase from $368.1 million in the same quarter of fiscal year 2022[97]. - Gross profit for the third quarter of fiscal year 2023 was $43.0 million, representing 8.9% of net sales, compared to $33.9 million or 9.2% of net sales in the prior year[102]. - Net income for the third quarter of fiscal year 2023 was $16.4 million, a 20% increase from $13.6 million in the same quarter of fiscal year 2022[102]. - The automotive market experienced a 34% increase in sales to $216.0 million in the third quarter of fiscal year 2023, and a 40% increase to $600.5 million year-to-date compared to the prior year[102]. - Sales to customers in the medical market increased by 30% in the third quarter of fiscal year 2023 compared to the same quarter in fiscal year 2022, and by 34% year-to-date[109]. Expenses and Cost Management - Selling and administrative expenses increased by 30% to $17.8 million in the third quarter of fiscal year 2023 compared to $13.6 million in the same quarter of fiscal year 2022[102]. - Selling and administrative expenses increased in absolute dollars in the third quarter of fiscal year 2023, driven by higher liability fair value for the supplemental employee retirement plan, increased factoring fees, and wage inflation[106]. - The company is focused on cost control while managing growth prospects and has made investments to expand capabilities in Mexico and Thailand[98]. Balance Sheet and Liquidity - The company maintained a strong balance sheet with a current ratio of 1.9 and a debt-to-equity ratio of 0.6 as of March 31, 2023[99]. - Working capital at March 31, 2023 was $441.8 million, up from $352.3 million at June 30, 2022, with a current ratio of 1.9[113]. - The debt-to-equity ratio increased to 0.6 at March 31, 2023, compared to 0.4 at June 30, 2022[113]. - The company had $279.0 million in borrowings under the primary credit facility as of March 31, 2023, an increase from $171.4 million at June 30, 2022[126]. - The company maintained unused borrowings totaling $98.1 million under all credit facilities as of March 31, 2023, including a $50 million secondary credit facility expiring in February 2024[134]. Cash Flow and Investments - Net cash used for operating activities was $(57.9) million for the first nine months of fiscal year 2023, an improvement from $(84.7) million in the prior year[117]. - Net cash used for investing activities was $66.5 million in the first nine months of fiscal year 2023, primarily for expansions in Mexico, Thailand, and Poland[121]. - Capital expenditure commitments were approximately $16 million as of March 31, 2023, primarily for equipment related to facility expansions in Mexico and Thailand, and commitments for the Poland facility[136]. Market Outlook and Challenges - The EMS industry is projected to grow at a compound annual growth rate (CAGR) of 5.5% through 2026, indicating a positive market outlook[93]. - The company faced challenges with component shortages and shipping delays, particularly with semiconductors, impacting operational efficiency[95]. - Open orders decreased by 5% to $882 million as of March 31, 2023, driven by improved component availability[103]. Future Plans and Commitments - The company expects to complete its Poland facility expansion in early fiscal year 2024, following recent expansions in Thailand and Mexico[135]. - The company has a financial covenant requiring the ratio of consolidated total indebtedness to adjusted consolidated EBITDA to not exceed 3.0 to 1.0, increasing to 3.5 to 1.0 following a material permitted acquisition[130]. - The company anticipates that available funds, cash generated from operations, and borrowing capacity will be sufficient to meet working capital needs for at least the next 12 months[134]. Foreign Operations - As of March 31, 2023, foreign entities held cash totaling $30.1 million, with plans to permanently reinvest these funds outside the United States[138]. - The company has entered into various foreign credit facilities, including a $10.1 million overdraft facility in Thailand and a $7.5 million facility for its EMS operation in China, with no borrowings under these facilities as of March 31, 2023[137].