Kimball Electronics, Inc. — Form 10-Q Summary
Reporting period: Quarter and nine months ended March 31, 2024. The request metadata says “2023 Q3,” but the filing is for fiscal 2024 third quarter. The financial statements are unaudited.
Business context and results
Kimball Electronics provides electronics manufacturing and related services to automotive, medical, and industrial customers. In the quarter, the company decided to sell its automation, test and measurement business (GES), aiming to refocus on EMS operations.
| Metric | Three months ended March 31 | Nine months ended March 31 |
|---|---|---|
| Net sales | $425.0 million; down 12% | $1,284.4 million; down 3% |
| Gross profit / margin | $33.5 million / 7.9%, versus $43.0 million / 8.9% | $103.5 million / 8.1%, versus $106.5 million / 8.0% |
| Operating income (loss) | $(6.4) million, versus $25.2 million | $29.7 million, versus $56.3 million |
| Net income (loss) | $(6.1) million, or $(0.24) diluted EPS | $13.0 million, or $0.51 diluted EPS |
| Operating cash flow | Not separately reported for the quarter | $24.7 million, versus $(57.9) million |
Quarterly sales fell across all three markets: automotive 9%, medical 17%, and industrial 14%. Nine-month sales were flat in automotive, down 14% in medical, and up 3% in industrial. The company attributed medical softness mainly to reduced business with a large customer responding to a recall unrelated to Kimball products. Quarterly gross margin declined amid lower revenue and lost absorption; the nine-month margin was broadly stable.
Financial position and cash flows
- At March 31, cash and cash equivalents were $65.2 million; total debt under credit facilities was $319.6 million, including $84.6 million classified current. Weighted-average borrowing cost was 6.9%.
- Working capital was $450.1 million, the current ratio was 2.0, and debt-to-equity was 0.6. Shareholders’ equity totaled $539.1 million.
- Cash from operations of $24.7 million and financing inflows of $36.6 million were offset by $37.7 million of investing outflows, including $37.1 million in capital expenditures. Cash, cash equivalents, and restricted cash ended at $67.3 million.
- Unused borrowing capacity was $117.4 million; management reported total short-term liquidity of $182.6 million, including cash and facility availability. The company stated it expects available liquidity to cover working capital and other operating needs for at least 12 months.
- Cash conversion days were 110, compared with 92 a year earlier. Inventory was $396.2 million on the balance sheet, plus $44.1 million classified as long-term and associated with a customer recall remediation; customer deposits related to that long-term inventory totaled $29.1 million.
Material changes, outlook, and risks
- The GES disposal group was classified as held for sale; the company recorded $5.8 million of goodwill impairment and $16.6 million of asset impairment. It expects a sale within 12 months. The business was not classified as discontinued operations.
- The quarter also included $1.6 million of restructuring expense. Management expects an additional $1.0–$2.0 million of pre-tax restructuring charges over the remainder of calendar 2024 as it adjusts costs to softer demand.
- Reported quarterly results included a $0.9 million class-action settlement receipt. The nine-month effective tax rate was negative 10.5%, reflecting tax impacts of impairment charges.
- Open orders were $831 million, down 6% year over year; the filing cautions that orders can be delayed or canceled and may not predict future sales. Management described macroeconomic demand softness, inflation, higher interest rates, geopolitical uncertainty, and persistent excess inventory as headwinds. It is working with customers on consignment, deposits, and carrying costs to manage inventory.
- The primary credit facility matures May 2027; the $100 million secondary facility matures January 3, 2025. The company said it was in compliance with financial covenants. Risks include lower customer demand, supply-chain constraints, customer/program losses, foreign-exchange movements, and customer delays or cancellations.
Important facts for investors to verify
- Progress, timing, and final proceeds from the planned GES sale, including whether further impairment or transaction costs arise.
- Whether demand, open orders, and gross margins stabilize, particularly in medical and automotive markets.
- Inventory normalization, customer recovery or support related to recall-associated inventory, and the trend in cash conversion days.
- Near-term liquidity and refinancing plans for the secondary facility due January 2025, alongside covenant compliance and borrowing costs.
- Actual restructuring charges compared with the estimated additional $1.0–$2.0 million.