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EX-99.1 - KIMBALL ELECTRONICS, INC. EXHIBIT 99.1 - Kimball Electronics, Inc. | a8kexhibit99112312017q210q.htm |
8-K - KIMBALL ELECTRONICS, INC. FORM 8-K - Kimball Electronics, Inc. | keform8-kearningsrelease12.htm |
Lasting relationships. Global success.Lasting relationships. Global success.
Financial Results
Second Quarter Fiscal Year 2018
Quarter Ended December 31, 2017
Supplementary Information to February 8,
2018 Earnings Conference Call
Exhibit 99.2
Lasting relationships. Global success.Lasting relationships. Global success.
Safe Harbor Statement
Certain statements contained within this supplementary information and any statements made during our earnings
conference call today may be considered forward-looking under the Private Securities Litigation Reform Act of 1995
and are subject to risks and uncertainties including, but not limited to, successful integration of acquisitions and new
operations, global economic conditions, geopolitical environment, significant reductions in volumes and order patterns
from key contract customers, loss of key customers or suppliers, financial stability of key customers and suppliers,
availability or cost of raw materials, and increased competitive pricing pressures reflecting excess industry capacities.
Additional cautionary statements regarding other risk factors that could have an effect on the future performance of
Kimball Electronics, Inc. (the “Company”) are contained in the Company’s Annual Report on Form 10-K for the fiscal
year ended June 30, 2017, our earnings release, and other filings with the Securities and Exchange Commission (the
“SEC”).
This supplementary information contains non-GAAP financial measures. A non-GAAP financial measure is a numerical
measure of a company’s financial performance that excludes or includes amounts so as to be different than the most
directly comparable measure calculated and presented in accordance with Generally Accepted Accounting Principles
(GAAP) in the United States in the statement of income, statement of comprehensive income, balance sheet, statement
of cash flows, or statement of equity of the company. The non-GAAP financial measures contained herein include
Adjusted Operating Income, Adjusted Net Income, Adjusted EBITDA, and Return on Invested Capital (ROIC), which
have been adjusted for spin-off expenses, proceeds from a lawsuit settlement, a bargain purchase gain, and discrete
tax expense related to Tax Reform. Management believes it is useful for investors to understand how its core
operations performed without the effects of incremental costs related to the spin-off, the lawsuit proceeds, the bargain
purchase gain, and discrete tax expense related to Tax Reform. Excluding these amounts allows investors to
meaningfully trend, analyze, and benchmark the performance of the Company’s core operations. Many of the
Company’s internal performance measures that management uses to make certain operating decisions use these and
other non-GAAP measures to enable meaningful trending of core operating metrics.
2
Lasting relationships. Global success.Lasting relationships. Global success.
Net Sales
(Unaudited)
$270
$260
$250
$240
$230
$220
$210
$200
In
M
illi
on
s
Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18
$214
$220
$226
$230
$233
$241
$253
$258
+12%
from Q2'17
3
Lasting relationships. Global success.Lasting relationships. Global success.
Net Sales Mix by Vertical Market
(Unaudited)
Automotive Medical Industrial Public Safety Other
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
%
of
Sa
le
s
Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18
40% 39% 41% 42% 40% 40% 40%
45%
31% 30% 28% 28% 26% 28% 30%
28%
21% 22% 23% 21%
23% 22%
22% 20%
7% 7% 6% 7% 9% 8% 7%
6%
1% 2% 2% 2% 2% 2% 1% 1%
4
Lasting relationships. Global success.Lasting relationships. Global success.
Gross Margin %
(Unaudited)
10.0%
9.0%
8.0%
7.0%
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
%
of
Sa
le
s
Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18
7.6% 7.7%
8.1%
8.9%
8.0%
7.5% 7.7%
8.1%
5
Lasting relationships. Global success.Lasting relationships. Global success.
Selling & Administrative Expense (%)
(Unaudited)
5.0%
4.5%
4.0%
3.5%
3.0%
%
of
Sa
le
s
Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18
4.3%
3.7%
4.2%
3.6%
3.9%
4.0%
3.9%
4.2%
6
Lasting relationships. Global success.Lasting relationships. Global success.
Adjusted Operating Income
(Excludes lawsuit settlement proceeds)
(Unaudited)
Adj Op Income % of Net Sales
$14.0
$12.0
$10.0
$8.0
$6.0
$4.0
$2.0
$0.0
In
M
illi
on
s
6.0%
5.5%
5.0%
4.5%
4.0%
3.5%
3.0%
2.5%
2.0%
%
of
Sa
le
s
Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18
$7.1
$8.8 $8.8
$12.2
$9.5
$8.5
$9.6
$10.2
3.3%
4.0% 3.9%
5.3%
4.1%
3.5%
3.8% 3.9%
Note: Adjusted Operating Income is a Non-GAAP measure – refer to Reconciliation of Non-GAAP Results
on the final slide of this supplementary information 7
Lasting relationships. Global success.Lasting relationships. Global success.
Adjusted Net Income
(Excludes lawsuit settlement proceeds,
bargain purchase gain, and discrete tax expense due to Tax Reform)
(Unaudited)
$10.0
$9.0
$8.0
$7.0
$6.0
$5.0
$4.0
$3.0
$2.0
$1.0
$0.0
In
M
illi
on
s
Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18
$7.5
$5.8
$6.7
$7.8
$8.1 $8.1
$8.5
$8.2
Notes: Q3'16 includes a $1.8 million discrete foreign tax benefit related to the capitalization of our Romania subsidiary;
Adjusted Net Income is a Non-GAAP measure - refer to Reconciliation of Non-GAAP Results on the final slide of this
supplementary information
8
Lasting relationships. Global success.Lasting relationships. Global success.
Adjusted EBITDA
(Excludes lawsuit settlement proceeds
and bargain purchase gain)
(Unaudited)
Adjusted EBITDA Adjusted EBITDA % of Sales
$18.0
$16.0
$14.0
$12.0
$10.0
$8.0
$6.0
$4.0
$2.0
$0.0
In
M
illi
on
s
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
%
of
Sa
le
s
Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18
$11.9
$13.6
$15.9
$17.0
$16.0 $16.1
$17.3 $17.1
5.5%
6.2%
7.0%
7.4%
6.9% 6.7% 6.8% 6.6%
Note: Adjusted EBITDA is a Non-GAAP measure - refer to Reconciliation of Non-GAAP Results on the final slide
of this supplementary information
9
Lasting relationships. Global success.Lasting relationships. Global success.
Return on Invested Capital
(Excludes spin-off costs and lawsuit settlement proceeds)
14.0%
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
R
O
IC
%
Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18
8.7% 9.0%
9.6%
10.7% 10.7% 10.4%
9.0%
9.6%
Notes: We define ROIC as after tax annualized adjusted operating income divided by average invested capital;
ROIC is a Non-GAAP measure - refer to Reconciliation of Non-GAAP Results on the final slide of this
supplementary information
(Unaudited)
10
Lasting relationships. Global success.Lasting relationships. Global success.
Operating Cash Flow
(Unaudited)
$20.0
$15.0
$10.0
$5.0
$0.0
-$5.0
In
M
illi
on
s
Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18
$11.7
$8.8
$14.0
$12.1
$8.7
$12.0
($0.2)
$11.6
11
Lasting relationships. Global success.Lasting relationships. Global success.
Capital Expenditures and
Depreciation & Amortization
(Unaudited)
Cap Ex Depr & Amort
$15.0
$13.0
$11.0
$9.0
$7.0
$5.0
$3.0
In
M
illi
on
s
Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18
$8.6
$6.5
$10.3
$9.4
$6.3
$8.3
$6.1
$8.7
$4.6
$5.5 $5.7 $5.7
$6.1 $6.4 $6.4 $6.4
Note: Capital Expenditures include purchases of capitalized software.
12
Lasting relationships. Global success.Lasting relationships. Global success.
Reconciliation of Non-GAAP Results
(Unaudited) Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18
Operating Income, as Reported $ 7,078 $ 8,790 $ 12,822 $ 12,241 $ 9,539 $ 8,455 $ 9,590 $ 10,193
Less: Lawsuit Proceeds — — 4,005 — — — — —
Adjusted Operating Income $ 7,078 $ 8,790 $ 8,817 $ 12,241 $ 9,539 $ 8,455 $ 9,590 $ 10,193
Net Income (Loss), as reported $ 7,477 $ 5,771 $ 10,122 $ 7,812 $ 8,117 $ 8,128 $ 8,480 $ (8,347)
Add: Discrete Tax Expense from Tax Reform — — — — — — — 16,580
Less: Lawsuit Proceeds — — 2,499 — — — — —
Less: Bargain Purchase Gain — — 925 — — — — —
Adjusted Net Income $ 7,477 $ 5,771 $ 6,698 $ 7,812 $ 8,117 $ 8,128 $ 8,480 $ 8,233
Adjusted Net Income $ 7,477 $ 5,771 $ 6,698 $ 7,812 $ 8,117 $ 8,128 $ 8,480 $ 8,233
Add(Less) Interest, net 1 19 16 46 41 104 98 95
Add Depreciation & Amortization 4,557 5,533 5,713 5,716 6,072 6,403 6,369 6,386
Add(Less) Taxes (166) 2,294 3,463 3,415 1,754 1,444 2,355 2,353
Adjusted EBITDA $ 11,869 $ 13,617 $ 15,890 $ 16,989 $ 15,984 $ 16,079 $ 17,302 $ 17,067
Operating Income, As Reported (YTD) $ 20,932 $ 29,722 $ 12,822 $ 25,063 $ 34,602 $ 43,057 $ 9,590 $ 19,783
Add: Spin-off Expenses (YTD) $ 137 $ 137 $ — $ — $ — $ — $ — $ —
Less: Lawsuit Proceeds (YTD) $ — $ — $ 4,005 $ 4,005 $ 4,005 $ 4,005 $ — $ —
Adjusted Operating Income (YTD) $ 21,069 $ 29,859 $ 8,817 $ 21,058 $ 30,597 $ 39,052 $ 9,590 $ 19,783
Annualized Adjusted Operating Income $ 28,092 $ 35,268 $ 42,116 $ 40,796 $ 38,360 $ 39,566
Tax Rate 19.5% 20.4% 22.7% 27.0% 24.3% 21.8% 25.7% 23.6%
Tax Effect $ 5,478 $ 6,091 $ 8,006 $ 11,371 $ 9,913 $ 8,513 $ 9,859 $ 9,338
After Tax Annualized Adj. Operating Income $ 22,614 $ 23,768 $ 27,262 $ 30,745 $ 30,883 $ 30,539 $ 28,501 $ 30,228
Average Invested Capital * $ 259,557 $ 263,371 $ 283,490 $ 286,347 $ 289,966 $ 293,516 $ 316,187 $ 316,270
ROIC 8.7% 9.0% 9.6% 10.7% 10.7% 10.4% 9.0% 9.6%
13* Average Invested Capital is computed using the average quarterly Share Owners equity plus current and non-current debt less cash and cash equivalents.