What changed in this filing

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Item 1. Financial Statements

2021-11-04 compared with 2021-05-06 · 100 added, 185 removed, 450 unchanged (39% of the section changed)

3 unchanged sentences

(Amounts in Thousands, Except for Share Data)

September 30,

2021 June 30,

44 unchanged sentences

(Amounts in Thousands, Except for Per Share Data)

Three Months Ended Nine Months Ended

March 31 March 31

Three Months Ended

(Unaudited) 2021 2020

24 unchanged sentences

Three Months Ended Three Months Ended

March 31, 2021 March 31, 2020

(Unaudited) Pre-tax Tax Net of Tax Pre-tax Tax Net of Tax

Net income $ 10,472 $ 6,259

Other comprehensive income (loss):

Foreign currency translation adjustments $ ( 5,177 ) $ — $ ( 5,177 ) $ ( 1,802 ) $ — $ ( 1,802 )

Postemployment actuarial change 18 ( 5 ) 13 44 ( 14 ) 30

Derivative gain (loss) ( 1,108 ) 254 ( 854 ) ( 5,171 ) 1,164 ( 4,007 )

Reclassification to (earnings) loss:

Derivatives 5 18 23 ( 124 ) 25 ( 99 )

Amortization of actuarial change ( 77 ) 20 ( 57 ) ( 100 ) 24 ( 76 )

Other comprehensive income (loss) $ ( 6,339 ) $ 287 $ ( 6,052 ) $ ( 7,153 ) $ 1,199 $ ( 5,954 )

Total comprehensive income $ 4,420 $ 305

Nine Months Ended Nine Months Ended

March 31, 2021 March 31, 2020

September 30, 2021 September 30, 2020

(Unaudited) Pre-tax Tax Net of Tax Pre-tax Tax Net of Tax

8 unchanged sentences

Other comprehensive income (loss) $ ( 4,642 ) $ 376 $ ( 4,266 ) $ 4,423 $ ( 39 ) $ 4,384

Total comprehensive income $ 46,578 $ 12,198

Total comprehensive income (loss) $ ( 1,702 ) $ 21,195

See Notes to Condensed Consolidated Financial Statements .

2 unchanged sentences

(Amounts in Thousands)

Nine Months Ended

Three Months Ended

(Unaudited) 2021 2020

1 unchanged sentence

Net income $ 2,564 $ 16,811

Adjustments to reconcile net income to net cash provided by operating activities:

Adjustments to reconcile net income to net cash (used for) provided by operating activities:

Depreciation and amortization 8,908 8,314

Loss on sales of assets 10 20

Deferred income tax and other deferred charges ( 3,682 ) 5

Deferred tax valuation allowance ( 320 ) 356

Deferred income taxes 820 ( 3,149 )

Stock-based compensation 1,128 937

7 unchanged sentences

Accrued expenses and taxes payable ( 13,550 ) 3,047

Net cash provided by operating activities 103,755 51,318

Net cash (used for) provided by operating activities ( 8,187 ) 20,701

Cash Flows From Investing Activities:

5 unchanged sentences

Cash Flows From Financing Activities:

Payments on credit facilities ( 34,500 ) —

Net change in revolving credit facilities 6,536 ( 7,973 )

Settlements on previous year acquisition — 2,957

Repurchases of common stock ( 2,996 ) ( 8,794 )

Payments related to tax withholding for stock-based compensation ( 1,571 ) ( 771 )

Net cash used for financing activities ( 58,729 ) ( 13,489 )

Net cash provided by (used for) financing activities 4,965 ( 5,787 )

Effect of Exchange Rate Change on Cash and Cash Equivalents ( 1,028 ) 1,793

Net Increase in Cash and Cash Equivalents 24,661 9,036

Net (Decrease) Increase in Cash and Cash Equivalents ( 17,118 ) 8,385

Cash and Cash Equivalents at Beginning of Period 106,442 64,990

4 unchanged sentences

Interest expense $ 349 $ 1,046

Non-cash investing activity:

Unpaid purchases of property and equipment at the end of the period $ 2,606 $ 1,012

See Notes to Condensed Consolidated Financial Statements .

2 unchanged sentences

(Amounts in Thousands, Except for Share Data)

Three Months Ended

Retained Earnings Accumulated Other Comprehensive Income (Loss) Treasury Stock Total Share Owners’ Equity

(Unaudited) Additional Paid-In Capital

Amounts at December 31, 2020 $ 306,120 $ 184,051 $ ( 266 ) $ ( 70,267 ) $ 419,638

Net income 10,472 10,472

Other comprehensive income (loss) ( 6,052 ) ( 6,052 )

Compensation expense related to stock compensation plans 907 907

Deferred share issuance ( 3,000 shares)

Amounts at March 31, 2021 $ 306,997 $ 194,523 $ ( 6,318 ) $ ( 70,237 ) $ 424,965

Amounts at December 31, 2019 $ 305,041 $ 147,192 $ ( 8,945 ) $ ( 66,450 ) $ 376,838

Net income 6,259 6,259

Other comprehensive income (loss) ( 5,954 ) ( 5,954 )

Compensation expense related to stock compensation plans 908 908

Performance share issuance ( 3,000 shares)

Deferred share issuance ( 3,000 shares)

Repurchase of Common Stock ( 214,000 shares)

( 2,686 ) ( 2,686 )

Amounts at March 31, 2020 $ 305,906 $ 153,451 $ ( 14,899 ) $ ( 69,070 ) $ 375,388

Nine Months Ended

Retained Earnings Accumulated Other Comprehensive Income (Loss) Treasury Stock Total Share Owners’ Equity

(Unaudited) Additional Paid-In Capital

Amounts at June 30, 2021 $ 308,123 $ 208,969 $ ( 4,883 ) $ ( 70,237 ) $ 441,972

1 unchanged sentence

Other comprehensive income (loss) ( 4,266 ) ( 4,266 )

Issuance of non-restricted stock ( 4,000 shares)

Compensation expense related to stock compensation plans 1,116 1,116

1 unchanged sentence

( 3,153 ) 1,581 ( 1,572 )

Deferred share issuance ( 3,000 shares)

Repurchase of Common Stock ( 193,000 shares)

( 2,996 ) ( 2,996 )

Amounts at March 31, 2021 $ 306,997 $ 194,523 $ ( 6,318 ) $ ( 70,237 ) $ 424,965

Amounts at September 30, 2021 $ 306,086 $ 211,533 $ ( 9,149 ) $ ( 68,656 ) $ 439,814

Amounts at June 30, 2020 $ 306,808 $ 152,178 $ ( 10,551 ) $ ( 69,070 ) $ 379,365

1 unchanged sentence

Other comprehensive income (loss) 4,384 4,384

Issuance of non-restricted stock ( 4,000 shares)

Compensation expense related to stock compensation plans 923 923

1 unchanged sentence

( 2,524 ) 1,753 ( 771 )

Deferred share issuance ( 3,000 shares)

Repurchase of Common Stock ( 623,000 shares)

( 8,794 ) ( 8,794 )

Amounts at March 31, 2020 $ 305,906 $ 153,451 $ ( 14,899 ) $ ( 69,070 ) $ 375,388

Amounts at September 30, 2020 $ 305,207 $ 168,989 $ ( 6,167 ) $ ( 67,317 ) $ 400,712

See Notes to Condensed Consolidated Financial Statements .

7 unchanged sentences

We offer a package of value that begins with our core competency of producing durable electronics and includes our set of robust processes and procedures that help us ensure that we deliver the highest levels of quality, reliability, and service throughout the entire life cycle of our customers’ products.

We further offer diversified contract manufacturing services for non-electronic components, medical disposables, precision molded plastics, and production automation, test, and inspection equipment.

We further offer diversified contract manufacturing services for non-electronic components, medical devices, medical disposables, precision molded plastics, and production automation, test, and inspection equipment.

We are consistently recognized by customers and industry trade publications for our excellent quality, reliability, and innovative service.

Basis of Presentation:

The Condensed Consolidated Financial Statements presented herein reflect the consolidated financial position as of March 31, 2021 and June 30, 2020, results of operations for the three and nine months ended March 31, 2021 and 2020, cash flows for the nine months ended March 31, 2021 and 2020, and share owners’ equity for the three and nine months ended March 31, 2021 and 2020.

The Condensed Consolidated Financial Statements presented herein reflect the consolidated financial position as of September 30, 2021 and June 30, 2021, results of operations for the three months ended September 30, 2021 and 2020, cash flows for the three months ended September 30, 2021 and 2020, and share owners’ equity for the three months ended September 30, 2021 and 2020.

The financial data presented herein is unaudited and should be read in conjunction with the annual Consolidated Financial Statements as of and for the year ended June 30, 2021 and related notes thereto included in our Annual Report on Form 10-K.

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The results of operations for the interim periods shown in this report are not necessarily indicative of results for any future interim period or for the entire fiscal year.

Additionally, t he impacts of the global COVID-19 pandemic on our business are currently not fully known.

Continued related disruptions, including to the supply chain, transportation systems, and demand for our customers products, could adversely impact our results of operations and financial condition.

We continue to actively monitor the situation and take actions that may be required by federal, state, or local authorities or that we determine are in the best interests of our employees, customers, suppliers, and the communities in which we operate.

We cannot predict the duration or severity of the impact COVID-19 could have on our business or on our future financial results.

Certain prior period amounts have been reclassified to conform to current period presentation in the Condensed Consolidated Statements of Cash Flow within the Cash Flows from Operating Activities section.

Deferred tax valuation allowance is now included with Deferred income taxes while the other deferred charges have been reclassified to Other, net.

Revenue Recognition:

Our revenue from contracts with customers is generated primarily from manufacturing services provided for the production of electronic assemblies, electronic and non-electronic components, medical disposables, precision molded plastics, and automation, test, and inspection equipment all built to customer’s specifications.

Our revenue from contracts with customers is generated primarily from manufacturing services provided for the production of electronic assemblies, components, medical disposables, precision molded plastics, and automation, test, and inspection equipment built to customer’s specifications.

Our customer agreements are generally not for a definitive term but continue for the relevant product’s life cycle.

3 unchanged sentences

In limited circumstances, we may enter into a contract which contains minimum quantity thresholds to cover our capital costs, and we may offer our customer a rebate for specific volume thresholds or other incentives;

in these cases, we account for these pricing components as variable consideration.

in these cases, the rebates or incentives are accounted for as variable consideration.

The majority of our revenue is recognized over time as manufacturing services are performed as we manufacture a product to customer specifications with no alternative use and we have an enforceable right to payment for performance completed to date.

The remaining revenue for manufacturing services is recognized when the customer obtains control of the product, typically either upon shipment or delivery of the product dependent on the terms of the contract, and the customer is able to direct the use of and obtain substantially all of the remaining benefits from the asset.

We generally recognize revenue over time using costs based input methods, in which judgment is required to evaluate assumptions including the total estimated costs to determine our progress towards contract completion and to calculate the corresponding amount of revenue to recognize.

Estimated costs include material, direct and indirect labor, and appropriate applied overheads.

Costs based input methods are considered a faithful depiction of our efforts and progress toward satisfying our performance obligations for manufacturing services and for

which we believe we are entitled to payment for performance completed to date.

We generally recognize revenue over time using costs based input methods, in which judgment is required to evaluate assumptions including anticipated margins to estimate the corresponding amount of revenue to recognize.

Costs used as a basis for estimating anticipated margins include material, direct and indirect labor, and appropriate applied overheads.

Anticipated margins are determined based on historical or quoted customer pricing.

Costs based input methods are considered a faithful depiction of our efforts and progress toward satisfying our performance obligations for manufacturing services and for which we believe we are entitled to payment for performance completed to date.

The cumulative effect of revisions to estimates related to net contract revenues or costs are recorded in the period in which the revisions to estimates are identified and the amounts can be reasonably estimated.

5 unchanged sentences

Incidental items that are immaterial in the context of the contract are recognized as expense in the period incurred.

Notes Receivable and Trade Accounts Receivable:

The Company’s notes receivable and trade accounts receivable are recorded per the terms of the agreement or sale, and accrued interest is recognized when earned.

We determine on a case-by-case basis the cessation of accruing interest, the resumption of accruing interest, the method of recording payments received on nonaccrual receivables, and the delinquency status for our limited number of notes receivable.

Our policy for estimating the allowance for credit losses on trade accounts receivable and notes receivable includes analysis of such items as aging, credit worthiness, payment history, and historical bad debt experience.

Management uses these specific analyses in conjunction with an evaluation of the general economic and market conditions to estimate expected credit losses on the trade accounts receivable and notes receivable.

Trade Accounts Receivable:

The Company’s trade accounts receivable are recorded per the terms of the agreement or sale, and accrued interest is recognized when earned.

Our policy for estimating the allowance for credit losses on trade accounts receivable includes analysis of such items as aging, credit worthiness, payment history, and historical bad debt experience.

Management uses these specific analyses in conjunction with an evaluation of the general economic and market conditions to estimate expected credit losses.

Management believes that historical loss information generally provides a basis for its assessment of expected credit losses.

Trade accounts receivable and notes receivable are written off after exhaustive collection efforts occur and the receivable is deemed uncollectible.

See section entitled “New Accounting Standards” below for information on the adoption of the new accounting standard for the measurement of credit losses.

Trade accounts receivable are written off after exhaustive collection efforts occur and the receivable is deemed uncollectible.

Adjustments to the allowance for credit losses are recorded in Selling and Administrative Expenses on our Condensed Consolidated Statements of Income.

4 unchanged sentences

Receivables are considered sold when they are transferred beyond the reach of Kimball Electronics and its creditors, the purchaser has the right to pledge or exchange the receivables, and we have surrendered control over the transferred receivables.

In the nine months ended March 31, 2021 and 2020, we sold, without recourse, $ 246.3 million and $ 202.0 million of accounts receivable, respectively.

Factoring fees were $ 0.2 million and $ 0.4 million for the three months ended March 31, 2021 and 2020, respectively, and $ 1.0 million and $ 1.5 million during the nine months ended March 31, 2021 and 2020, respectively.

In the three months ended September 30, 2021 and 2020, we sold, without recourse, $ 62.1 million and $ 91.1 million of accounts receivable, respectively.

Factoring fees were less than $ 0.2 million and $ 0.4 million for the three months ended September 30, 2021 and 2020, respectively.

Factoring fees are recorded in Selling and Administrative Expenses on our Condensed Consolidated Statements of Income.

2 unchanged sentences

The Company has the ability to sell the drafts at a discount or transfer the drafts in settlement of current accounts payable prior to the scheduled maturity date.

These drafts, which totaled less than $ 0.1 million at March 31, 2021 and $ 7.1 million at June 30, 2020, are reflected in Receivables on the Condensed Consolidated Balance Sheets until the banker’s drafts are sold at a discount, transferred in settlement of current accounts payable, or cash is received at maturity.

Banker’s acceptance drafts sold at a discount or transferred in settlement of current accounts payable during the nine months ended March 31, 2021 and 2020 were $ 1.8 million and $ 6.5 million, respectively.

These drafts, which totaled less than $ 0.1 million at September 30, 2021 and June 30, 2021, are reflected in Receivables on the Condensed Consolidated Balance Sheets until the banker’s drafts are sold at a discount, transferred in settlement of current accounts payable, or cash is received at maturity.

Banker’s acceptance drafts sold at a discount or transferred in settlement of current accounts payable during the three months ended September 30, 2021 and 2020 were less than $ 0.1 million and $ 1.1 million, respectively.

Goodwill and Other Intangible Assets:

3 unchanged sentences

Other Intangible Assets consist of capitalized software, customer relationships, technology, and trade name, and are reviewed for impairment, and their remaining useful lives evaluated for revision, when events or circumstances indicate that the carrying value may not be recoverable over the remaining lives of the assets.

As of March 31,

2021, the Company determined there have been no indicators of impairment for goodwill and other intangible assets.

As of September 30, 2021, the Company determined there have been no indicators of impairment for goodwill and other intangible assets.

See Note 12 - Goodwill and Other Intangible Assets of Notes to Condensed Consolidated Financial statements for more information on Goodwill and Other Intangible Assets.

1 unchanged sentence

Operating lease costs and cash payments for operating leases are immaterial to the Condensed Consolidated Statements of Income and our Condensed Consolidated Statements of Cash Flows.

Lease right-of-use assets and lease liabilities each totaled $ 1.8 million and $ 2.0 million at March 31, 2021 and June 30, 2020, respectively.

Lease right-of-use assets and lease liabilities each totaled $ 3.4 million at September 30, 2021 and $ 1.6 million at June 30, 2021.

Lease right-of-use assets are included in Other Assets and lease liabilities are included in Accrued expenses and Other long-term liabilities on the Condensed Consolidated Balance Sheets.

Other General Income:

Other General Income in the three and nine months ended March 31, 2021 included $ 0.4 million and $ 0.7 million, respectively, of pre-tax income resulting from payments received related to class action lawsuits in which Kimball Electronics was a class member.

No Other General Income was recorded in the three and nine months ended March 31, 2020.

Other General Income in the three months ended September 30, 2021 and September 30, 2020 included $ 1.4 million and $ 0.3 million, respectively, of pre-tax income resulting from payments received related to class action lawsuits in which Kimball Electronics was a class member.

These lawsuits alleged that certain suppliers to the EMS industry conspired over a number of years to raise and fix the prices of electronic components, resulting in overcharges to purchasers of those components.

Non-operating Income (Expense), net:

Non-operating income (expense), net includes the impact of such items as foreign currency rate movements and related derivative gain or loss, fair value adjustments on supplemental employee retirement plan (“SERP”) investments, amortization of actuarial gains (losses), and other miscellaneous non-operating income and expense items that are not directly related to operations.

The gain on SERP investments is offset by a change in the SERP liability that is recognized in Selling and Administrative Expenses.

The gain (loss) on SERP investments is offset by a change in the SERP liability that is recognized in Selling and Administrative Expenses.

Components of Non-operating income (expense), net:

Three Months Ended Nine Months Ended

March 31 March 31

Three Months Ended

(Amounts in Thousands) 2021 2020

1 unchanged sentence

Gain (loss) on SERP investments ( 87 ) 550

Adjustments after measurement period of GES acquisition 335 — 53 —

Other ( 219 ) ( 21 )

14 unchanged sentences

We recognize interest and penalties related to unrecognized tax benefits in Provision for Income Taxes on the Condensed Consolidated Statements of Income.

Tax Cuts and Jobs Act (“Tax Reform”) was enacted into law on December 22, 2017.

Tax Reform made broad and complex changes to the U.S.

Tax Cuts and Jobs Act (“Tax Reform”) was enacted into law on December 22, 2017, making broad and complex changes to the U.S.

tax code, for which complete guidance may have not yet been issued.

Tax Reform changes included, but were not limited to, (i) reducing the U.S.

corporate statutory tax rate, (ii) requiring a one-time transition tax on certain unremitted earnings of foreign subsidiaries that is payable over an eight-year period, (iii) eliminating U.S.

federal income taxes on dividends from foreign subsidiaries, and (iv) bonus depreciation that will allow for full expensing of qualifying property.

As of both March 31, 2021 and June 30, 2020, the remaining provision recorded for the one-time deemed repatriation tax was $ 9.8 million, payable through fiscal year 2026, with the long-term portion recorded in Long-term income taxes payable on the Condensed Consolidated Balance Sheets.

As of March 31, 2021, $ 0.9 million of the remaining deemed repatriation tax is short term and is recorded in Accrued expenses on the Condensed Consolidated Balance Sheet.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was signed into law making several changes to the Internal Revenue Code.

The changes include but are not limited to:

increasing the limitation on the amount of deductible interest expense, allowing companies to carry back certain net operating losses, and increasing the amount of net operating loss carryforwards the corporations can use to offset taxable income.

The tax law changes in the Act did not have a material impact on the Company’s Provision for Income Taxes for the three and nine months ended March 31, 2021.

Tax Reform, in addition to other changes, required a one-time transition tax on certain unremitted earnings of foreign subsidiaries that is payable over an eight-year period.

As of September 30, 2021 and June 30, 2021, the remaining provision recorded for the one-time deemed repatriation tax was $ 8.9 million and $ 9.8 million, respectively, payable through fiscal year 2026, with the long-term portion recorded in Long-term income taxes payable on the Condensed Consolidated Balance Sheets.

As of September 30, 2021, $ 1.1 million of the remaining deemed repatriation tax is short term and is recorded in Accrued expenses on the Condensed Consolidated Balance Sheet.

New Accounting Standards:

Adopted in fiscal year 2022:

In June 2016, the Financial Accounting Standards Board (“FASB”) issued guidance on the Measurement of Credit Losses on Financial Instruments, which replaces the current incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to estimate credit losses.

We adopted this standard effective July 1, 2020, the beginning of our first quarter of fiscal year 2021, and the adoption did not have a material effect on our Condensed Consolidated Financial Statements.

In August 2018, the FASB issued guidance on Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement.

This new guidance amends the accounting for implementation, setup, and other upfront costs incurred in a cloud computing hosting arrangement.

The amendment aligns the requirement for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software.

The amendment also requires companies to expense the capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement, including options to extend the agreement that is in control of the customer.

We adopted this standard prospectively during the first quarter of fiscal year 2021, and the adoption did not have a material effect on our Condensed Consolidated Financial Statements.

Not Yet Adopted:

In December 2019, the FASB issued guidance on Simplifying the Accounting for Income Taxes, intended to simplify various aspects related to the accounting for income taxes.

The guidance is effective for fiscal years beginning after December 15, 2020 and for interim periods within those fiscal years.

We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.

We adopted this standard effective July 1, 2021, the beginning of our first quarter of fiscal year 2022, and the adoption did not have a material effect on our condensed consolidated financial statements.

Revenue from Contracts with Customers

The following table disaggregates our revenue by end market vertical for the three and nine months ended March 31, 2021 and 2020.

Three Months Ended Nine Months Ended

March 31 March 31

Our revenue from contracts with customers is generated primarily from manufacturing services provided for the production of electronic assemblies, electronic and non-electronic components, medical devices, medical disposables, precision molded plastics, and automation, test, and inspection equipment in automotive, medical, industrial, and public safety applications, to the specifications and designs of our customers.

The following table disaggregates our revenue by end market vertical for the three months ended September 30, 2021 and 2020.

Three Months Ended

(Amounts in Millions) 2021 2020

6 unchanged sentences

Total net sales $ 292.7 $ 331.7

For the three months ended March 31, 2021 and 2020, approximately 95 % and 88 % of our net sales, respectively, were recognized over time as manufacturing services were performed under a customer contract on a product with no alternative use and we have an enforceable right to payment for performance completed to date.

For the nine months ended March 31, 2021 and 2020, approximately 89 % and 75 % of our net sales, respectively, were recognized over time.

For the three months ended September 30, 2021 and 2020, approximately 95 % and 88 % of our net sales, respectively, were recognized over time as manufacturing services were performed under a customer contract on a product with no alternative use and we have an enforceable right to payment for performance completed to date.

The remaining sales revenues were recognized at a point in time when the customer obtained control of the products.

1 unchanged sentence

Contract assets on the Condensed Consolidated Balance Sheets relate to unbilled accounts receivable and occur when revenue is recognized over time as manufacturing services are provided and the billing to the customer has not yet occurred as of the balance sheet date, which are generally transferred to receivables in the next fiscal quarter due to the short-term nature of the manufacturing cycle.

Contract assets were $ 53.2 million and $ 70.4 million as of March 31, 2021 and June 30, 2020, respectively.

Contract assets were $ 46.1 million and $ 45.9 million as of September 30, 2021 and June 30, 2021, respectively.

In limited circumstances, the Company may receive payments from customers in advance of the satisfaction of performance obligations primarily for tooling or other miscellaneous services or costs.

These advance payments are recognized as contract liabilities until the performance obligations are completed and are included in Accrued expenses on the Condensed Consolidated Balance Sheets , which amounted to $ 6.0 million and $ 7.1 million as of March 31, 2021 and June 30, 2020, respectively.

These advance payments are recognized as contract liabilities until the performance obligations are completed and are included in Accrued expenses on the Condensed Consolidated Balance Sheets , which amounted to $ 10.7 million and $ 7.6 million as of September 30, 2021 and June 30, 2021, respectively.

Our performance obligations are short term in nature and therefore our contract liabilities are all expected to be settled within twelve months.

Inventories were valued using the lower of first-in, first-out (“FIFO”) cost and net realizable value.

Inventory components were as follows:

(Amounts in Thousands) March 31, 2021 June 30, 2020

(Amounts in Thousands) September 30, 2021 June 30, 2021

Finished products $ 816 $ 769

3 unchanged sentences

Accumulated Other Comprehensive Income (Loss)

During the nine months ended March 31, 2021 and 2020, the changes in the balances of each component of Accumulated Other Comprehensive Income (Loss), net of tax, were as follows:

During the three months ended September 30, 2021 and 2020, the changes in the balances of each component of Accumulated Other Comprehensive Income (Loss), net of tax, were as follows:

Accumulated Other Comprehensive Income (Loss)

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Net current-period other comprehensive income (loss) ( 2,953 ) ( 1,286 ) ( 27 ) ( 4,266 )

Balance at March 31, 2021

Balance at September 30, 2021

$ ( 5,176 ) $ ( 3,713 ) $ ( 260 ) $ ( 9,149 )

4 unchanged sentences

Net current-period other comprehensive income (loss) 4,412 47 ( 75 ) 4,384

Balance at March 31, 2020

Balance at September 30, 2020

$ ( 3,482 ) $ ( 3,207 ) $ 522 $ ( 6,167 )

The following reclassifications were made from Accumulated Other Comprehensive Income (Loss) to the Condensed Consolidated Statements of Income:

Reclassifications from Accumulated Other Comprehensive Income (Loss) Three Months Ended Nine Months Ended Affected Line Item in the Condensed Consolidated Statements of Income

March 31 March 31

Reclassifications from Accumulated Other Comprehensive Income (Loss) Three Months Ended Affected Line Item in the Condensed Consolidated Statements of Income

(Amounts in Thousands) 2021 2020

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Management refines the warranty liability periodically based on changes in historical cost trends and in certain cases where specific warranty issues become known.

Changes in the product warranty accrual for the nine months ended March 31, 2021 and 2020 were as follows:

Nine Months Ended

Product warranty liability is recorded in Accrued expenses and Other long-term liabilities on the Condensed Consolidated Balance Sheets.

Changes in the product warranty liability for the three months ended September 30, 2021 and 2020 were as follows:

Three Months Ended

(Amounts in Thousands) 2021 2020

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Borrowings at Borrowings Outstanding at Borrowings Outstanding at

(Amounts in Millions, in U.S Dollar Equivalents) March 31, 2021 March 31, 2021 June 30, 2020

(Amounts in Millions, in U.S Dollar Equivalents) September 30, 2021 September 30, 2021 June 30, 2021

Primary credit facility (1)

$ 81.6 $ 68.0 $ 62.7

Secondary credit facility (2)

Thailand overdraft credit facility 0.1 — —

22 unchanged sentences

• a fixed charge coverage ratio, determined as of the end of each of its fiscal quarters for the then most recently ended four fiscal quarters, to not be less than 1.1 to 1.0.

The Company had $ 0.4 million in letters of credit contingently committed against the credit facility at both March 31, 2021 and June 30, 2020.

(2) The Company also maintains a 364-day multi-currency revolving credit facility (the “secondary credit facility”) among the Company, as borrower, certain subsidiaries of the Company as guarantors, the lenders party thereto, JPMorgan Chase Bank, National Association, as Administrative Agent, and Bank of America, N.A., as Documentation Agent, which allows for borrowings of up to $ 30 million and has a maturity date of May 18, 2021.

This secondary credit facility is to be used for working capital and general corporate purposes.

A commitment fee on the unused portion of principal amount of this secondary credit facility is payable at 50.0 basis points per annum.

The Company had $ 0.4 million in letters of credit contingently committed against the credit facility at both September 30, 2021 and June 30, 2021.

(2) The amount of Long-term debt under credit facilities, less current maturities reflects the borrowings on the primary facility that the Company intends, and has the ability, to refinance for a period longer than twelve months.

The primary credit facility matures on July 27, 2023.

The weighted-average interest rate on borrowings outstanding under the credit facilities at March 31, 2021 and June 30, 2020 was 1.6 % and 2.5 %, respectively.

The weighted-average interest rate on borrowings outstanding under the credit facilities at September 30, 2021 and June 30, 2021 was 2.1 % and 2.0 %, respectively.

The Company categorizes assets and liabilities measured at fair value into three levels based upon the assumptions (inputs) used to price the assets or liabilities.

5 unchanged sentences

Unobservable inputs reflecting management’s own assumptions about the inputs used in pricing the asset or liability.

There were no changes in the inputs or valuation techniques used to measure fair values during the nine months ended March 31, 2021.

There were no changes in the inputs or valuation techniques used to measure fair values during the three months ended September 30, 2021.

For more information on inputs and fair valuation techniques used, refer to our Annual Report on Form 10-K for the year ended June 30, 2021.

Recurring Fair Value Measurements:

As of March 31, 2021 and June 30, 2020, the fair values of financial assets and liabilities that are measured at fair value on a recurring basis using the market approach are categorized as follows:

March 31, 2021

As of September 30, 2021 and June 30, 2021, the fair values of financial assets and liabilities that are measured at fair value on a recurring basis using the market approach are categorized as follows:

September 30, 2021

(Amounts in Thousands) Level 1 Level 2 Total

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Total liabilities at fair value $ — $ 1,702 $ 1,702

We had no level 3 assets or liabilities during the nine months ended March 31, 2021.

We had no level 3 assets or liabilities at September 30, 2021 and June 30, 2021.

The nonqualified supplemental employee retirement plan (“SERP”) assets consist primarily of equity funds, balanced funds, bond funds, and a money market fund.

3 unchanged sentences

Financial instruments that are not reflected in the Condensed Consolidated Balance Sheets at fair value that have carrying amounts which approximate fair value include notes receivable and borrowings under credit facilities.

There were no changes to the inputs and valuation techniques used to assess the fair value of these financial instruments during the nine months ended March 31, 2021.

There were no changes to the inputs and valuation techniques used to assess the fair value of these financial instruments during the three months ended September 30, 2021.

For more information on inputs and fair valuation techniques used, refer to our Annual Report on Form 10-K for the year ended June 30, 2021.

9 unchanged sentences

Foreign exchange contracts are also used to hedge against foreign currency exchange rate risks related to intercompany balances denominated in currencies other than the functional currencies.

As of March 31, 2021, we had outstanding foreign exchange contracts to hedge currencies against the U.S.

As of September 30, 2021, we had outstanding foreign exchange contracts to hedge currencies against the U.S.

dollar in the aggregate notional amount of $ 46.0 million and to hedge currencies against the Euro in the aggregate notional amount of 49.2 million Euro.

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The gain or loss associated with derivative instruments that are not designated as hedging instruments or that cease to meet the criteria for hedging under FASB guidance is reported immediately in Non-operating income (expense), net on the Condensed Consolidated Statements of Income.

Based on fair values as of March 31, 2021, we estimate that approximately $ 1.0 million of pre-tax derivative loss deferred in Accumulated Other Comprehensive Loss will be reclassified into earnings, along with the earnings effects of related forecasted transactions, within the next 12 months.

Based on fair values as of September 30, 2021, we estimate that approximately $ 2.4 million of pre-tax derivative loss deferred in Accumulated Other Comprehensive Loss will be reclassified into earnings, along with the earnings effects of related forecasted transactions, within the next 12 months.

Losses on foreign exchange contracts are generally offset by gains in operating costs in the income statement when the underlying hedged transaction is recognized in earnings.

Because gains or losses on foreign exchange contracts fluctuate partially based on currency spot rates, the future effect on earnings of the cash flow hedges alone is not determinable, but in conjunction with the underlying hedged transactions, the result is expected to be a decline in currency risk.

The maximum length of time we had hedged our exposure to the variability in future cash flows was 12 months as of both March 31, 2021 and June 30, 2020.

The maximum length of time we had hedged our exposure to the variability in future cash flows was 12 months as of both September 30, 2021 and June 30, 2021.

See Note 7 - Fair Value of Notes to Condensed Consolidated Financial Statements for further information regarding the fair value of derivative assets and liabilities and Note 4 - Accumulated Other Comprehensive Income (Loss) of Notes to Condensed Consolidated Financial Statements for the changes in deferred derivative gains and losses.

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Fair Value As of Fair Value As of

(Amounts in Thousands) Balance Sheet Location March 31,

(Amounts in Thousands) Balance Sheet Location September 30,

2021 June 30,

2020 Balance Sheet Location March 31,

2021 Balance Sheet Location September 30,

2021 June 30,

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The Effect of Derivative Instruments on Other Comprehensive Income (Loss)

Three Months Ended Nine Months Ended

March 31 March 31

Three Months Ended

(Amounts in Thousands) 2021 2020

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The Effect of Derivative Instruments on Condensed Consolidated Statements of Income

Three Months Ended Nine Months Ended

(Amounts in Thousands) March 31 March 31

Three Months Ended

(Amounts in Thousands) September 30

Derivatives in Cash Flow Hedging Relationships Location of Gain or (Loss) 2021 2020

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A SERP liability of the same amount is recorded on the balance sheet representing an obligation to distribute SERP funds to participants.

The SERP investment assets are classified as trading, and accordingly, realized and unrealized gains and losses are recognized in Other income (expense), net on our Condensed Consolidated Statements of Income.

The SERP investment assets are classified as trading, and accordingly, realized and unrealized gains and losses are recognized in the Other Income (Expense) category on our Condensed Consolidated Statements of Income.

Adjustments made to revalue the SERP liability are also recognized in income as selling and administrative expenses and offset valuation adjustments on SERP investment assets.

The increase/(decrease) in net unrealized holding gains for the nine months ended March 31, 2021 and 2020 was approximately $ 0.9 million and $( 0.6 ) million, respectively.

The change in net unrealized holding gains for the three months ended September 30, 2021 and 2020 was approximately $( 0.1 ) million and $ 0.2 million, respectively.

SERP asset and liability balances applicable to Kimball Electronics participants were as follows:

(Amounts in Thousands) March 31,

(Amounts in Thousands) September 30,

2021 June 30,

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Benefits are paid using available cash on hand when eligible employees meet plan qualifications for payment.

Net periodic benefit costs were not material for the nine months ended March 31, 2021 and 2020.

Net periodic benefit costs were not material for the three months ended September 30, 2021 and 2020.

Stock Compensation Plans

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The Kimball Electronics, Inc.

2014 Stock Option and Incentive Plan (the “Plan”) allows for the issuance of up to 4.5 million shares and may be awarded in the form of incentive stock options, stock appreciation rights, restricted shares, unrestricted shares, restricted share units, or performance shares and performance units.

2014 Stock Option and Incentive Plan (the “Plan”) allows for the issuance of up to 4.5 million shares and may be granted in the form of incentive stock options, stock appreciation rights, restricted shares, unrestricted shares, restricted share units, or performance shares and performance units.

The Plan is a ten-year plan with no further awards allowed to be made under the Plan after October 1, 2024.

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For more information on the Plan and the Deferral Plan, refer to our Annual Report on Form 10-K for the year ended June 30, 2021.

During the first nine months of fiscal year 2021, the following stock compensation was awarded under the Plan and the Deferral Plan.

Stock Compensation Awarded Quarter Awarded Shares/Units Grant Date Fair Value (2)

During the first three months of fiscal year 2022, the following stock compensation was granted under the Plan.

Stock Compensation Granted Quarter Granted Shares/Units Grant Date Fair Value (2)

Long-Term Performance Shares (1)

1st Quarter 287,312 $ 23.41

Unrestricted shares (3)

2nd Quarter 4,235 $ 15.35

Deferred share units (4)

2nd Quarter 37,132 $ 15.35

Restricted share units (5)

3rd Quarter 3,322 $ 19.63

(1) Long-term performance shares were awarded to officers and other key employees.

Payouts will be based upon the attainment of the applicable bonus percentage calculated under the Company’s profit-sharing incentive bonus plan as applied to a potential share award made and approved by the Compensation and Governance Committee of the Board.

Under these awards granted, a number of shares will be issued to each participant based upon a combination of the bonus attainment percentage component above, adjusted to a three-year average bonus percentage, and a growth attainment component, which is the Company’s growth in sales revenue based on comparison of its three-year compounded annual growth rate (“CAGR”) with the Electronics Manufacturing Services Industry’s three-year CAGR.

The long-term performance shares awarded are based on three successive annual performance measurement periods, with each annual tranche having a grant date when economic profit tiers are established and approved by the Compensation and Governance Committee of the Board near the beginning of the applicable fiscal year and a vesting date shortly after the end of each annual period.

The number of shares issued will be less than the maximum shares issuable if one or both of the above-mentioned incentive metric maximum thresholds are not obtained.

(2) The grant date fair value is based on the stock price at the date of the award and for long-term performance shares is applicable to the first tranche only.

(3) Unrestricted shares were awarded to a non-employee member of the Board as compensation for the portion of director’s annual retainer fees resulting from their election to receive unrestricted shares in lieu of cash payment or deferred share units.

Director’s fees are expensed over the period that directors earn the compensation.

Unrestricted shares do not have vesting periods, holding periods, restrictions on sales, or other restrictions.

(4) Deferred share units were awarded to non-employee members of the Board as compensation for the portion of director’s annual retainer fees resulting from their elections to receive deferred share units in lieu of cash payment or unrestricted shares.

Director’s fees are expensed over the period that directors earn the compensation.

Deferred share units are participating securities and are payable in common stock in a lump sum or installments in accordance with deferral elections upon a Director’s retirement or termination from the Board or death.

(5) Restricted share units (“RSUs”) were awarded to new key employees.

The contractual life of the RSUs is one year or less, from date of hire.

RSUs are participating securities and upon vesting, the outstanding number of RSUs are converted to shares of common stock.

RSUs are expensed over the contractual vesting period as earned.

If the employment of a holder of an RSU terminates before the RSU has vested for any reason other than death, retirement, or total permanent disability, the RSU will be forfeited.

(1) Long-term performance share awards were granted to officers and other key employees.

These annual performance share awards were approved by the Compensation and Governance Committee of the Board.

Beginning with awards granted in fiscal year 2022 that will vest in fiscal year 2025, awards cliff vest at the third anniversary of the award date.

To avoid a gap in the vesting of awards due to the transition from grants that vested annually in three equal installments to ones that vest after three years , two smaller bridge awards were also granted for fiscal year 2022 and fiscal year 2022-2023 performance periods.

The bridge award for the fiscal year 2022 performance period cliff vests at the first anniversary of the grant.

The bridge award for the fiscal year 2022-2023 performance period cliff vests at the second anniversary of the grant.

The award for the fiscal year 2022-2024 performance period, and future performance share awards, cliff vest at the third anniversary of the grant.

Under these awards, a number of shares will be issued to each participant based upon a combination of a profitability attainment component, based on the Company’s operating income plan, and a growth attainment component, based on the Company’s growth in sales revenue, comparing its three-year compounded annual growth rate (“CAGR”) with the Electronics Manufacturing Services Industry’s three-year CAGR.

The number of shares issued will be less than the targeted shares issuable if the Company does not reach 100 % of one or both of the above-mentioned performance metrics, and could be zero if the Company does not reach the required minimum thresholds of either metric.

The number of shares issued will exceed the number of targeted shares issuable (up to a maximum of 125 %) if the Company exceeds 100 % of one or both of the above-mentioned incentive metrics.

(2) The grant date fair value is based on the stock price at the date of the grant.

Goodwill and Other Intangible Assets

A summary of goodwill is as follows:

(Amounts in Thousands) March 31,

(Amounts in Thousands) September 30,

2021 June 30,

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A summary of other intangible assets subject to amortization is as follows:

March 31, 2021 June 30, 2020

September 30, 2021 June 30, 2021

(Amounts in Thousands) Cost Accumulated

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Other Intangible Assets $ 53,257 $ 36,651 $ 16,606 $ 52,821 $ 35,813 $ 17,008

During the three months ended March 31, 2021 and 2020, amortization expense of other intangible assets was $ 0.9 million and $ 0.8 million, respectively.

During the nine months ended March 31, 2021 and 2020, amortization expense of other intangible assets was $ 2.5 million and $ 2.4 million, respectively.

During the three months ended September 30, 2021 and 2020, amortization expense of other intangible assets was $ 0.9 million and $ 0.8 million, respectively.

The estimated useful life of internal-use software ranges from 3 years to 10 years.

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Share Owners’ Equity

On October 21, 2015, the Board authorized an 18-month stock repurchase plan (the “Plan”) allowing a repurchase of up to $ 20 million worth of common stock.

Then, separately on each of September 29, 2016, August 23, 2017, November 8, 2018, and November 10, 2020, the Board extended and increased the Plan to allow the repurchase of up to an additional $ 20 million worth of common stock with no expiration date, which brought the total authorized stock repurchases under the Plan to $ 100 million.

The Company has a Board-authorized stock repurchase plan (the “Plan”) allowing the repurchase of up to $ 100 million of our common stock.

Purchases may be made under various programs, including in open-market transactions, block transactions on or off an exchange, or in privately negotiated transactions, all in accordance with applicable securities laws and regulations.

The Plan may be suspended or discontinued at any time.

During the nine months ended March 31, 2021, the Company repurchased $ 3.0 million of common stock under the Plan at an average price of $ 15.51 , which was recorded as Treasury stock, at cost in the Condensed Consolidated Balance Sheets.

The Plan has no expiration date but may be suspended or discontinued at any time.

During the three months ended September 30, 2021, the Company had no share repurchases under the Plan.

Since the inception of the Plan, the Company has repurchased $ 79.7 million of common stock at an average cost of $ 14.95 per share.

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Basic and diluted earnings per share were calculated as follows under the two-class method:

Three Months Ended Nine Months Ended

March 31 March 31

Three Months Ended

(Amounts in thousands, except per share data) 2021 2020

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements