What changed in this filing

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Item 1. Financial Statements

2022-02-08 compared with 2021-11-04 · 136 added, 61 removed, 489 unchanged (29% 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

Three Months Ended Six Months Ended

December 31 December 31

(Unaudited) 2021 2020 2021 2020

24 unchanged sentences

Three Months Ended Three Months Ended

September 30, 2021 September 30, 2020

December 31, 2021 December 31, 2020

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

9 unchanged sentences

Total comprehensive income (loss) $ 3,385 $ 20,963

Six Months Ended Six Months Ended

December 31, 2021 December 31, 2020

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

Net income $ 7,677 $ 31,873

Other comprehensive income (loss):

Foreign currency translation adjustments $ ( 5,480 ) $ — $ ( 5,480 ) $ 9,439 $ — $ 9,439

Postemployment actuarial change ( 100 ) 26 ( 74 ) ( 526 ) 164 ( 362 )

Derivative gain (loss) ( 915 ) 169 ( 746 ) 878 ( 318 ) 560

Reclassification to (earnings) loss:

Derivatives 436 ( 32 ) 404 1,042 ( 193 ) 849

Amortization of actuarial change ( 129 ) 31 ( 98 ) ( 264 ) 63 ( 201 )

Other comprehensive income (loss) $ ( 6,188 ) $ 194 $ ( 5,994 ) $ 10,569 $ ( 284 ) $ 10,285

Total comprehensive income $ 1,683 $ 42,158

See Notes to Condensed Consolidated Financial Statements .

2 unchanged sentences

(Amounts in Thousands)

Three Months Ended

Six Months Ended

(Unaudited) 2021 2020

3 unchanged sentences

Depreciation and amortization 15,955 16,762

Loss on sales of assets 10 20

(Gain) loss on sales of assets ( 27 ) 61

Deferred income taxes ( 8 ) ( 4,505 )

16 unchanged sentences

Cash Flows From Financing Activities:

Proceeds from credit facilities 25,000 —

Payments on credit facilities — ( 20,000 )

Net change in revolving credit facilities 12,036 ( 12,623 )

Settlements on previous year acquisition — 2,957

Repurchases of common stock — ( 2,996 )

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

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

Net income 5,113 5,113

Other comprehensive income (loss) ( 1,728 ) ( 1,728 )

Issuance of non-restricted stock ( 5,000 shares)

Compensation expense related to stock compensation plans 1,843 1,843

Amounts at December 31, 2021 $ 307,996 $ 216,646 $ ( 10,877 ) $ ( 68,598 ) $ 445,167

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

Net income 15,062 15,062

Other comprehensive income (loss) 5,901 5,901

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

Compensation expense related to stock compensation plans 894 894

Repurchase of Common Stock ( 193,000 shares)

( 2,996 ) ( 2,996 )

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

Six 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) ( 5,994 ) ( 5,994 )

Issuance of non-restricted stock ( 5,000 shares)

Compensation expense related to stock compensation plans 2,959 2,959

1 unchanged sentence

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

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

Amounts at December 31, 2021 $ 307,996 $ 216,646 $ ( 10,877 ) $ ( 68,598 ) $ 445,167

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

1 unchanged sentence

Other comprehensive income (loss) 10,285 10,285

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

Compensation expense related to stock compensation plans 1,817 1,817

1 unchanged sentence

( 2,524 ) 1,753 ( 771 )

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

Repurchase of Common Stock ( 193,000 shares)

( 2,996 ) ( 2,996 )

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

See Notes to Condensed Consolidated Financial Statements .

10 unchanged sentences

Basis of Presentation:

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

6 unchanged sentences

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

Change in Estimates:

The Company reviews the estimated useful lives of its fixed assets on an ongoing basis.

In evaluating useful lives, the Company considers how long assets will remain functionally efficient and effective, given levels of technology, competitive factors, and the economic environment.

If the assessment indicates that the assets will continue to be used for a longer period than previously anticipated, the useful life of the assets is revised, resulting in a change in estimate.

Changes in estimates are accounted for on a prospective basis by depreciating the assets’ current carrying values over their revised remaining useful lives.

The most recent review indicated that Surface Mount Technology production equipment had actual lives that were longer than previously estimated.

As a result of these findings, the Company changed its estimates of useful lives on these assets to 10 years, from lives of 5 or 7 years.

The change was effective and accounted for prospectively beginning on November 1, 2021.

The effects of this change in useful life estimate for the three and six months ended December 31, 2021 were a decrease in depreciation expense of $ 1.7 million, an increase in net income of $ 1.3 million, and an increase to basic and diluted earnings per share by $ 0.05 .

Revenue Recognition:

3 unchanged sentences

Customer purchase orders primarily have a single performance obligation.

Generally, the prices stated in the customer purchase orders are agreed upon prices for the manufactured product and do not vary over the term of the order, and therefore, the majority of our contracts do not contain variable consideration.

Generally, the prices stated in the customer purchase orders are agreed upon prices for the

manufactured product and do not vary over the term of the order, and therefore, the majority of our contracts do not contain variable consideration.

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;

25 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 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.

In the six months ended December 31, 2021 and 2020, we sold, without recourse, $ 125.3 million and $ 186.0 million of accounts receivable, respectively.

Factoring fees were $ 0.3 million for the three months ended December 31, 2021 and 2020, and $ 0.5 million and $ 0.7 million during the six months ended December 31, 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 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.

We did not hold any drafts at December 31, 2021, and the drafts totaled less than $ 0.1 million at June 30, 2021.

These drafts were reflected in Receivables on the Condensed Consolidated Balance Sheets until the banker’s drafts were sold at a discount, transferred in settlement of current accounts payable, or cash was received at maturity.

Banker’s acceptance drafts sold at a discount or transferred in settlement of current accounts payable during the six months ended December 31, 2021 and 2020 were less than $ 0.1 million and $ 1.7 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 September 30, 2021, the Company determined there have been no indicators of impairment for goodwill and other intangible assets.

As of December 31, 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 $ 3.4 million at September 30, 2021 and $ 1.6 million at June 30, 2021.

Lease right-of-use assets and lease liabilities each totaled $ 3.6 million at December 31, 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 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.

Other General Income in the six months ended December 31, 2021 and 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.

3 unchanged sentences

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

Three Months Ended

Three Months Ended Six Months Ended

December 31 December 31

(Amounts in Thousands) 2021 2020 2021 2020

Foreign currency/derivative gain (loss) $ ( 128 ) $ 2,545 $ ( 700 ) $ 4,967

Gain (loss) on SERP investments ( 87 ) 550

Gain on SERP investments 402 811 315 1,361

Adjustments after measurement period of GES acquisition — ( 282 ) — ( 282 )

Other ( 21 ) ( 73 ) ( 240 ) ( 94 )

17 unchanged sentences

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.

As of December 31, 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 December 31, 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:

4 unchanged sentences

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

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

Three Months Ended Six Months Ended

December 31 December 31

(Amounts in Millions) 2021 2020 2021 2020

6 unchanged sentences

Total net sales $ 315.3 $ 320.6 $ 608.0 $ 652.4

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.

For the three months ended December 31, 2021 and 2020, approximately 95 % and 85 % 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 six months ended December 31, 2021 and 2020, approximately 95 % and 86 % of our net sales, respectively, were recognized over time.

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 $ 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 $ 10.7 million and $ 7.6 million as of September 30, 2021 and June 30, 2021, respectively.

Contract assets were $ 57.2 million and $ 45.9 million as of December 31, 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, material price variances, 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 $ 13.4 million and $ 7.6 million as of December 31, 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.

1 unchanged sentence

Inventory components were as follows:

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

(Amounts in Thousands) December 31, 2021 June 30, 2021

Finished products $ 1,030 $ 769

3 unchanged sentences

Accumulated Other Comprehensive Income (Loss)

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:

During the six months ended December 31, 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)

6 unchanged sentences

Net current-period other comprehensive income (loss) ( 5,480 ) ( 342 ) ( 172 ) ( 5,994 )

Balance at September 30, 2021

Balance at December 31, 2021

$ ( 7,703 ) $ ( 2,769 ) $ ( 405 ) $ ( 10,877 )

4 unchanged sentences

Net current-period other comprehensive income (loss) 9,439 1,409 ( 563 ) 10,285

Balance at September 30, 2020

Balance at December 31, 2020

$ 1,545 $ ( 1,845 ) $ 34 $ ( 266 )

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 Affected Line Item in the Condensed Consolidated Statements of Income

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

December 31 December 31

(Amounts in Thousands) 2021 2020 2021 2020

13 unchanged sentences

Commitments and Contingent Liabilities

The Company provides only assurance-type warranties for a limited time period, which cover workmanship and assures the product complies with specifications provided by or agreed upon with the customer.

The Company typically provides only assurance-type warranties for a limited time period, which cover workmanship and assures the product complies with specifications provided by or agreed upon with the customer.

We maintain a provision for limited warranty repair or replacement of products manufactured and sold, which has been established in specific manufacturing contract agreements.

2 unchanged sentences

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

Changes in the product warranty liability for the six months ended December 31, 2021 and 2020 were as follows:

Six Months Ended

(Amounts in Thousands) 2021 2020

6 unchanged sentences

Borrowings at Borrowings Outstanding at Borrowings Outstanding at

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

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

Primary credit facility (1)

13 unchanged sentences

Types of borrowings available on the primary facility include revolving loans, multi-currency term loans, and swingline loans.

The interest rate on borrowings is dependent on the type of borrowings and will be one of the following two options:

• the London Interbank Offered Rate (“LIBOR”) in effect two business days prior to the advance (adjusted upwards to reflect bank reserve costs) for such interest period as defined in the agreement, plus the Eurocurrency Loans spread which can range from 125.0 to 175.0 basis points based on the Company’s ratio of consolidated total indebtedness to adjusted consolidated EBITDA;

On November 8, 2021, the primary facility was amended to provide, among other things, (1) the interest rate calculation method will generally transition from the London Interbank Offered Rate (“LIBOR”) to the Secured Overnight Financing Rate (“SOFR”) on the transition date of December 31, 2021 on applicable borrowings;

(2) the Eurocurrency borrowings are replaced with Term Benchmark borrowings;

(3) if any Term Benchmark borrowing is denominated Euros, the Euro Interbank Offered Rate (“EURIBOR”) shall be utilized;

and (4) all ABR borrowings will be denominated in U.S.

The interest rate on borrowings is dependent on the type and currencies of borrowings and will be one of the following options:

• prior to the transition date of December 31, 2021, any Term Benchmark borrowing denominated in U.S.

Dollars will utilize LIBOR in effect two business days prior to the advance (adjusted upwards to reflect bank reserve costs) for such interest period as defined in the agreement, plus the Term Benchmark Loans spread which can range from 125.0 to 175.0 basis points based on the Company’s ratio of consolidated total indebtedness to adjusted consolidated EBITDA;

• after the transition date of December 31, 2021, any existing or future Term Benchmark borrowing denominated in U.S.

Dollars will utilize SOFR which is a rate per annum equal to the secured overnight financing rate for such business day published by the SOFR Administrator, the Federal Reserve Bank of New York, on the immediately succeeding business day, plus the Term Benchmark Loans spread which can range from 125.0 to 175.0 basis points based on the Company’s ratio of consolidated total indebtedness to adjusted consolidated EBITDA;

• any Term Benchmark borrowing denominated in Euros will utilize the Euro Interbank Offered Rate (“EURIBOR”) in effect two business days prior to the advance (adjusted upwards to reflect bank reserve costs) for such interest period as defined in the agreement, plus the Term Benchmark Loans spread which can range from 125.0 to 175.0 basis points based on the Company’s ratio of consolidated total indebtedness to adjusted consolidated EBITDA;

• the Alternate Base Rate (“ABR”), which is defined as the highest of the fluctuating rate per annum equal to the higher of

7 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 September 30, 2021 and June 30, 2021.

The Company had $ 0.4 million in letters of credit contingently committed against the credit facility at both December 31, 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 September 30, 2021 and June 30, 2021 was 2.1 % and 2.0 %, respectively.

The weighted-average interest rate on borrowings outstanding under the credit facilities at both December 31, 2021 and June 30, 2021 was 2.0 %.

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 three months ended September 30, 2021.

There were no changes in the inputs or valuation techniques used to measure fair values during the six months ended December 31, 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 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

As of December 31, 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:

December 31, 2021

(Amounts in Thousands) Level 1 Level 2 Total

15 unchanged sentences

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

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

We had no level 3 assets or liabilities at December 31, 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 three months ended September 30, 2021.

There were no changes to the inputs and valuation techniques used to assess the fair value of these financial instruments during the six months ended December 31, 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 September 30, 2021, we had outstanding foreign exchange contracts to hedge currencies against the U.S.

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

dollar in the aggregate notional amount of $ 43.8 million and to hedge currencies against the Euro in the aggregate notional amount of 43.0 million Euro.

6 unchanged sentences

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 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.

Based on fair values as of December 31, 2021, we estimate that approximately $ 0.9 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 September 30, 2021 and June 30, 2021.

The maximum length of time we had hedged our exposure to the variability in future cash flows was 12 months as of both December 31, 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.

3 unchanged sentences

Fair Value As of Fair Value As of

(Amounts in Thousands) Balance Sheet Location September 30,

(Amounts in Thousands) Balance Sheet Location December 31,

2021 June 30,

2021 Balance Sheet Location September 30,

2021 Balance Sheet Location December 31,

2021 June 30,

5 unchanged sentences

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

Three Months Ended

Three Months Ended Six Months Ended

December 31 December 31

(Amounts in Thousands) 2021 2020 2021 2020

2 unchanged sentences

The Effect of Derivative Instruments on Condensed Consolidated Statements of Income

Three Months Ended

(Amounts in Thousands) September 30

Three Months Ended Six Months Ended

(Amounts in Thousands) December 31 December 31

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

11 unchanged sentences

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 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.

The change in net unrealized holding gains for the six months ended December 31, 2021 and 2020 was approximately $( 0.2 ) million and $ 0.8 million, respectively.

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

(Amounts in Thousands) September 30,

(Amounts in Thousands) December 31,

2021 June 30,

13 unchanged sentences

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 three months ended September 30, 2021 and 2020.

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

Stock Compensation Plans

7 unchanged sentences

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

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

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

1 unchanged sentence

1st Quarter 287,312 $ 23.41

Unrestricted shares (3)

2nd Quarter 5,027 $ 24.87

Deferred share units (4)

2nd Quarter 34,480 $ 24.87

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

9 unchanged sentences

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

(3) Unrestricted shares were awarded to a non-employee member of the Board as compensation for the portion of their annual retainer fees resulting from their election to be paid in 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 their 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.

Goodwill and Other Intangible Assets

A summary of goodwill is as follows:

(Amounts in Thousands) September 30,

(Amounts in Thousands) December 31,

2021 June 30,

3 unchanged sentences

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

September 30, 2021 June 30, 2021

December 31, 2021 June 30, 2021

(Amounts in Thousands) Cost Accumulated

6 unchanged sentences

Other Intangible Assets $ 53,436 $ 37,543 $ 15,893 $ 52,821 $ 35,813 $ 17,008

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.

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

During the six months ended December 31, 2021 and 2020, amortization expense of other intangible assets was $ 1.7 million and $ 1.6 million, respectively.

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

5 unchanged sentences

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.

During the six months ended December 31, 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.

1 unchanged sentence

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

Three Months Ended

Three Months Ended Six Months Ended

December 31 December 31

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

10 unchanged sentences

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